Form 6-K

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

For the month of November , 20 08

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 þ Form 40-F o

[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 o No þ

[If “yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- ]

Enclosure: 2007 Annual Report of Perusahaan Perseroan (Persero) PT TELEKOMUNIKASI INDONESIA

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED)
SEPTEMBER 30, 2007 AND 2008

(Figures in tables are presented in millions of Rupiah and thousands of United States Dollars)


		2007		2008
	Notes	Rp.		Rp.		US$ (Note 3)
ASSETS

CURRENT ASSETS
Cash and cash equivalents	2c,2e,5,44		6,493,187		7,545,364		800,144
Temporary investments	2c,2f,44		177,879		270,650		28,701
Trade receivables	2c,2g,6,37,44
Related parties — net of allowance for doubtful accounts of Rp.94,989 million in 2007 and Rp.181,774 million in 2008			567,612		393,465		41,725
Third parties — net of allowance for doubtful accounts of Rp.1,031,541 million in 2007 and Rp.1,056,359 million in 2008			2,919,563		2,780,263		294,832
Other receivables — net of allowance for doubtful accounts of Rp.9,668 million in 2007 and Rp.11,969 million in 2008	2c,2g,44		154,610		173,037		18,350
Inventories — net of allowance for obsolescence of Rp.52,840 million in 2007 and Rp.62,462 million in 2008	2h,7,37		202,465		399,916		42,409
Prepaid expenses	2c,2i,8,44		2,430,367		1,860,933		197,342
Claims for tax refund	38		337,855		420,550		44,597
Prepaid taxes	38		3,048		148,010		15,696
Restricted time deposits	2c,9,44		8,460		21,044		2,231

Total Current Assets			13,295,046		14,013,232		1,486,027

NON-CURRENT ASSETS
Long-term investments — net	2f,10		101,924		141,559		15,012
Property, plant and equipment — net of accumulated depreciation of Rp.51,964,900 million in 2007 and Rp.60,527,740 million in 2008	2k,2l,4,11, 19,20,23		58,390,386		66,405,452		7,041,936
Property, plant and equipment under Revenue-Sharing Arrangements — net of accumulated depreciation of Rp.556,057 million in 2007 and Rp.549,620 million in 2008	2m,12, 34,47		753,756		570,878		60,538
Prepaid pension benefit cost	2i,2r,41		99		697		74
Advances and other non-current assets	2c,2o,13, 29,44,49		592,748		1,957,756		207,609
Goodwill and other intangible assets — net of accumulated amortization of Rp.4,495,594 million in 2007 and Rp.5,571,131 million in 2008	2d,2j,4, 14,37		3,649,601		2,889,971		306,466
Escrow accounts	2c,15,44		1,398		43,861		4,651

Total Non-current Assets			63,489,912		72,010,174		7,636,286

TOTAL ASSETS			76,784,958		86,023,406		9,122,313

See accompanying notes to consolidated financial statements, which form an integral part of the consolidated financial statements.

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED) (continued)
SEPTEMBER 30, 2007 AND 2008
(Figures in tables are presented in millions of Rupiah and thousands of United States Dollars)


		2007		2008
	Notes	Rp.		Rp.		US$ (Note 3)
LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES
Trade payables	2c,16,44
Related parties			1,621,089		1,516,110		160,775
Third parties			4,303,484		7,445,795		789,586
Other payables			42,515		20,385		2,162
Taxes payable	2s,38		2,234,461		1,105,281		117,209
Dividends payable			1,443,053		2,855,632		302,824
Accrued expenses	2c,17,35, 44		2,653,744		2,874,725		304,849
Unearned income	18		2,398,869		3,135,568		332,510
Advances from customers and suppliers			192,088		197,090		20,900
Short-term bank loans	2c,19,44		950,152		53,449		5,668
Current maturities of long-term liabilities	2c,20,44		4,108,241		6,450,582		684,049

Total Current Liabilities			19,947,696		25,654,617		2,720,532

NON-CURRENT LIABILITIES
Deferred tax liabilities — net	2s,38		3,392,526		2,950,461		312,880
Unearned income on Revenue-Sharing Arrangements	2m,12,47		557,601		336,534		35,687
Accrued long service awards	2c,2r,42,44		66,743		83,630		8,869
Accrued post-retirement health care benefits	2c,2r,43,44		2,708,854		2,645,150		280,504
Accrued pension and other post-retirement benefits costs	2r,41		1,021,658		1,213,422		128,677
Long-term liabilities — net of current maturities
Obligations under capital leases	2l,11,20		190,883		228,380		24,218
Two-step loans — related party	2c,20,21,44		3,726,622		3,468,125		367,776
Bank loans	2c,20,23,44		2,391,795		6,439,296		682,852
Deferred consideration for business combinations	20,24		2,700,015		1,609,746		170,705

Total Non-current Liabilities			16,756,697		18,974,744		2,012,168

MINORITY INTEREST	25		8,262,080		8,800,782		933,275

See accompanying notes to consolidated financial statements, which form an integral part of the consolidated financial statements.

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED) (continued)
SEPTEMBER 30, 2007 AND 2008
(Figures in tables are presented in millions of Rupiah and thousands of United States Dollars)


		2007			2008
	Notes	Rp.			Rp.			US$ (Note 3)
STOCKHOLDERS’ EQUITY
Capital stock — Rp.250 par value per Series A Dwiwarna share and Series B share
Authorized — 1 Series A Dwiwarna share and 79,999,999,999 Series B shares
Issued and fully paid — 1 Series A Dwiwarna share and 20,159,999,279 Series B shares	1c,26		5,040,000			5,040,000			534,464
Additional paid-in capital	27		1,073,333			1,073,333			113,821
Treasury stock — 222,340,500 shares in 2007 and 480,163,000 shares in 2008	2u,28		(1,945,901	)		(4,202,255	)		(445,626	)
Difference in value arising from restructuring transactions and other transactions between entities under common control	2d,29		180,000			270,000			28,632
Difference due to change of equity in associated companies	2f		385,595			385,595			40,890
Unrealized holding gain from available-for-sale securities	2f		14,992			(2,596	)		(275	)
Translation adjustment	2f		228,024			228,805			24,264
Retained earnings
Appropriated			6,700,879			10,557,985			1,119,617
Unappropriated			20,141,563			19,242,396			2,040,551

Total Stockholders’ Equity			31,818,485			32,593,263			3,456,338

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY			76,784,958			86,023,406			9,122,313

See accompanying notes to consolidated financial statements, which form an integral part of the consolidated financial statements.

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
NINE MONTHS PERIOD ENDED SEPTEMBER 30, 2007 AND 2008

(Figures in tables are presented in millions of Rupiah and thousands of United States Dollars,
except per share and per ADS data)


		2007			2008
	Notes	Rp.			Rp.			US$(Note 3)
OPERATING REVENUES
Telephone	2q,30
Fixed lines			8,465,629			7,452,847			790,334
Cellular			16,716,458			18,280,741			1,938,573
Interconnection	2q,31,44
Revenues			9,378,332			9,022,406			956,777
Expenses			(2,257,468	)		(2,383,169	)		(252,722	)

Net			7,120,864			6,639,237			704,055
Data and internet	2q,32		10,164,051			10,761,163			1,141,163
Network	2q,33,44		601,139			796,160			84,428
Revenue-Sharing Arrangements	2m,12,34,47		320,353			267,518			28,369
Other telecommunications services			258,785			402,548			42,688

Total Operating Revenues			43,647,279			44,600,214			4,729,610

OPERATING EXPENSES
Depreciation	2k,2l,2m, 11,12,13		7,022,770			7,988,460			847,133
Personnel	2r,17,35, 41,42,43		6,188,397			6,490,783			688,312
Operations, maintenance and telecommunication services	2q,36,44		6,840,662			8,738,220			926,641
General and administrative	2g,2h,2q,6, 7,14,37		2,539,008			2,626,768			278,554
Marketing	2q		1,159,873			1,577,315			167,266

Total Operating Expenses			23,750,710			27,421,546			2,907,906

OPERATING INCOME			19,896,569			17,178,668			1,821,704

OTHER (EXPENSES) INCOME
Interest income	44		378,215			495,233			52,517
Equity in net income of associated companies	2f,10		6,919			2,476			263
Interest expense	44		(1,070,206	)		(1,001,438	)		(106,197	)
Loss on foreign exchange — net	2p		(113,642	)		(63,806	)		(6,766	)
Others — net			61,195			326,769			34,652

Other income (expenses) — net			(737,519	)		(240,766	)		(25,531	)

INCOME BEFORE TAX			19,159,050			16,937,902			1,796,173

TAX (EXPENSE) BENEFIT	2s,38
Current			(5,194,590	)		(4,987,058	)		(528,850	)
Deferred			(727,129	)		165,138			17,512

			(5,921,719	)		(4,821,920	)		(511,338	)

INCOME BEFORE MINORITY INTEREST IN NET INCOME OF CONSOLIDATED SUBSIDIARIES			13,237,331			12,115,982			1,284,835

MINORITY INTEREST IN NET INCOME OF CONSOLIDATED SUBSIDIARIES — Net	25		(3,418,276	)		(3,196,094	)		(338,928	)

NET INCOME			9,819,055			8,919,888			945,907

BASIC EARNINGS PER SHARE	2w,39
Net income per share			491.64			451.08			0.05
Net income per ADS
(40 Series B shares per ADS)			19,665.60			18,043.20			2.00

See accompanying notes to consolidated financial statements, which form an integral part of the consolidated financial statements.

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)
NINE MONTHS PERIOD ENDED SEPTEMBER 30, 2007 AND 2008
(Figures in tables are presented in millions of Rupiah)


									Difference
									in value
									arising from
									restructuring
									transactions
									and other				Unrealized
									transactions		Difference		holding
									between		due to change		gain on
				Additional					entities under		of equity		available-for-
		Capital		paid-in		Treasury			common		in associated		sale		Translation		Retained earnings					Stockholders’
Descriptions	Notes	stock		capital		stock			control		companies		securities		adjustment		Appropriated		Unappropriated			equity
		Rp.		Rp.		Rp.			Rp.		Rp.		Rp.		Rp.		Rp.		Rp.			Rp.
Balance, January 1, 2007			5,040,000		1,073,333		(952,211	)		180,000		385,595		8,865		227,669		1,803,397		20,302,041			28,068,689

Unrealized holding gain on available-for-sale securities	2f		—		—		—			—		—		6,127		—		—		—			6,127

Foreign currency translation of associated company	2f,10		—		—		—			—		—		—		355		—		—			355

Cash dividends	2v,40		—		—		—			—		—		—		—		—		(5,082,051	)		(5,082,051	)

Appropriation for general reserve	40		—		—		—			—		—		—		—		4,897,482		(4,897,482	)		—

Treasury stock acquired — at cost	2u,28		—		—		(993,690	)		—		—		—		—		—		—			(993,690	)

Net income for the year			—		—		—			—		—		—		—		—		9,819,055			9,819,055

Balance, September 30, 2007			5,040,000		1,073,333		(1,945,901	)		180,000		385,595		14,992		228,024		6,700,879		20,141,563			31,818,485

See accompanying notes to consolidated financial statements, which form an integral part of the consolidated financial statements.

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED) (continued)
NINE MONTHS PERIOD ENDED SEPTEMBER 30, 2007 AND 2008
(Figures in tables are presented in millions of Rupiah)


									Difference
									in value
									arising from
									restructuring
									transactions				Unrealized
									and other				holding
									transactions		Difference		gain
									between		due to change		(loss) on
				Additional					entities under		of equity		available-for-
		Capital		paid-in		Treasury			common		in associated		sale			Translation			Retained earnings					Stockholders’
Descriptions	Notes	stock		capital		stock			control		companies		securities			adjustment			Appropriated		Unappropriated			equity
		Rp.		Rp.		Rp.			Rp.		Rp.		Rp.			Rp.			Rp.		Rp.			Rp.
Balance, January 1, 2008			5,040,000		1,073,333		(2,176,611	)		270,000		385,595		11,237			230,017			6,700,879		22,214,129			33,748,579

Unrealized holding gain on available-for-sale securities	2f		—		—		—			—		—		(13,833	)		—			—		—			(13,833	)

Foreign currency translation of associated company	2f,10		—		—		—			—		—		—			(1,212	)		—		—			(1,212	)

Cash dividends	2v,40		—		—		—			—		—		—			—			—		(8,034,515	)		(8,034,515	)

Appropriation for general reserve	40		—		—		—			—		—		—			—			3,857,106		(3,857,106	)		—

Treasury stock acquired — at cost	2u,28		—		—		(2,025,644	)		—		—		—			—			—		—			(2,025,644	)
Net income for the year			—		—		—			—		—		—			—			—		8,919,888			8,919,888

Balance, September 30, 2008			5,040,000		1,073,333		(4,202,255	)		270,000		385,595		(2,596	)		228,805			10,557,985		19,242,396			32,593,263

See accompanying notes to consolidated financial statements, which form an integral part of the consolidated financial statements.

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS PERIOD ENDED SEPTEMBER 30, 2007 AND 2008
(Figures in tables are presented in millions of Rupiah and thousands of United States Dollars)


	2007			2008
	Rp.			Rp.			US$ (Note 3)
CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts from operating revenues
Telephone
Fixed lines		8,258,515			6,798,282			720,921
Cellular		16,898,903			19,156,910			2,031,486
Interconnection — net		7,688,569			7,005,844			742,931
Data and internet		9,710,438			10,964,969			1,162,775
Other services		1,019,699			1,054,964			111,873

Total cash receipts from operating revenues		43,576,124			44,980,969			4,769,986
Cash payments for operating expenses		(18,126,913	)		(18,840,674	)		(1,997,951	)
Cash receipt from customers		30,134			55,640			5,900

Cash generated from operations		25,479,345			26,195,935			2,777,935

Interest received		385,972			486,231			51,562
Interest paid		(1,104,136	)		(887,720	)		(94,138	)
Income tax paid		(5,449,458	)		(6,769,770	)		(717,897	)

Net cash provided by operating activities		19,311,723			19,024,676			2,017,462


CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of temporary investments and maturity of time deposits		11,468			18,256			1,936
Purchases of temporary investments and placements in time deposits		(98,770	)		(98,374	)		(10,432	)
Proceeds from sale of property, plant and equipment		21,706			9,919			1,052
Proceeds from insurance claims		—			11,159			1,183
Acquisition of property, plant and equipment		(12,117,416	)		(11,855,306	)		(1,257,190	)
(Increase) decrease in advances for purchases of property, plant and equipment		744,596			(554,005	)		(58,749	)
Decrease in advances and others		124,233			141,261			14,980
Business combinations, net of cash paid		—			(324,327	)		(34,393	)
Acquisition of intangible assets		—			(21,629	)		(2,294	)
Acquisition of long-term investments		(5,453	)		(28,249	)		(2,996	)
Cash dividends received		510			1,020			108
Advance for acquisition of long term investments		—			(674	)		(71	)
Increase in escrow accounts		—			(42,458	)		(4,502	)

Net cash used in investing activities		(11,319,126	)		(12,743,407	)		(1,351,368	)


CASH FLOWS FROM FINANCING ACTIVITIES
Cash dividends paid		(5,083,431	)		(6,105,963	)		(647,504	)
Cash dividends paid to minority stockholders of subsidiaries		(1,904,980	)		(2,802,945	)		(297,237	)
Decrease in escrow accounts		675			—			—
Proceeds from short-term borrowings		1,489,526			29,235			3,100
Repayments of short-term borrowings		(950,659	)		(549,746	)		(58,298	)
Redemption of bonds		(1,000,000	)		—			—
Repayment of medium-term Notes		(465,000	)		—			—
Proceeds from long-term borrowings		1,502,350			6,038,695			640,371
Repayment of long-term borrowings		(2,081,247	)		(3,252,317	)		(344,890	)
Payment for purchases of treasury stock		(993,690	)		(2,025,644	)		(214,808	)
Repayment of promissory notes		(199,365	)		(200,813	)		(21,295	)
Repayment of obligations under capital leases		(20,735	)		(32,188	)		(3,413	)

Net cash used in financing activities		(9,706,556	)		(8,901,686	)		(943,974	)

See accompanying notes to consolidated financial statements, which form an integral part of the consolidated financial statements.

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (continued)
NINE MONTHS PERIOD ENDED SEPTEMBER 30, 2007 AND 2008
(Figures in tables are presented in millions of Rupiah and thousands of United States Dollars)


	2007			2008
	Rp.			Rp.			US$ (Note 3)
NET DECREASE IN CASH AND CASH EQUIVALENTS		(1,713,959	)		(2,620,417	)		(277,880	)

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS		(108,690	)		24,990			2,650

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR		8,315,836			10,140,791			1,075,376

CASH AND CASH EQUIVALENTS AT END OF PERIOD		6,493,187			7,545,364			800,146


SUPPLEMENTAL CASH FLOW INFORMATION

Non-cash investing and financing activities:

Acquisition of property, plant and equipment through incurrence of payables		3,617,441			6,988,865			741,131
Acquisition of property, plant and equipment through capital leases		—			82,001			8,696

See accompanying notes to consolidated financial statements, which form an integral part of the consolidated financial statements.

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2007 AND 2008,
AND NINE MONTHS PERIOD ENDED SEPTEMBER 30, 2007 AND 2008
(Figures in tables are presented in millions of Rupiah, unless otherwise stated)

GENERAL

	a.		Establishment and general information

			Perusahaan Perseroan (Persero) P.T. Telekomunikasi Indonesia Tbk (the “Company”) was originally 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 was published in State Gazette No. 52 dated April 3, 1884.

			In 1991, the status of the Company was changed into a state-owned limited liability corporation (“Persero”) based on the Government Regulation No. 25/1991.

			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 No. 5 dated January 17, 1992, Supplement No. 210. The Articles of Association have been amended several times, the latest amendments were in adjustment to Law No. 40/2007 of the Limited Liability Companies, Law No. 19/2003 of the National State-owned Companies, and Badan Pengawas Pasar Modal dan Lembaga Keuangan Indonesia (“BAPEPAM-LK”) Regulation No. IX.J.1of Main Provisions of the Articles of Association of Company that Make an Equity Public Offering and Public Company and to add the Company’s purposes and objectives based on notarial deed No. 27 dated July 15, 2008 of A. Partomuan Pohan, S.H., LLM. and notification of this amendment was received by the Minister of Justice and Human Rights of the Republic of Indonesia (“MoJHR”) as in his Letter No. AHU.46312.AH.01.02 dated July 31, 2008.

			In accordance with Article 3 of the Company’s Articles of Association, the scope of its activities is to provide telecommunication and information facilities and services, and optimization of the Company’s resources in accordance with prevailing regulations. To achieve this objective, the Company is involved in the following activities:

Planning, building, providing, developing, operating, marketing or selling, leasing and maintaining telecommunications and information networks in accordance with prevailing regulations.

ii.

Planning, developing, providing, marketing or selling and improving telecommunications and information services in accordance with prevailing regulations.

iii.

Providing payment transactions and money transferring services through telecommunications and information networks.

iv.

Performing activities and other undertakings in connection with optimization of the Company’s resources, among others the utilization of the Company’s property, plant and equipment and moving assets, information systems, education and training, and repairs and maintenance facilities.

The Company’s head office is located at Jalan Japati No. 1, Bandung, West Java.

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)
SEPTEMBER 30, 2007 AND 2008,
AND NINE MONTHS PERIOD ENDED SEPTEMBER 30, 2007 AND 2008
(Figures in tables are presented in millions of Rupiah, unless otherwise stated)

GENERAL (continued)

	a.		Establishment and general information (continued)

			Pursuant to Law No. 3/1989 on Telecommunications (effective on April 1, 1989), Indonesian legal entities are allowed to provide basic telecommunications services in cooperation with the Company as the domestic telecommunications organizing body (or “badan penyelenggara”). The Government Regulation No. 8/1993 relating to the provision of the telecommunications services regulates that cooperation to provide basic telecommunications services can be in the form of a joint venture, joint operation or contractual management and that the entities cooperating with the domestic telecommunications organizing body must use the organizing body’s telecommunications networks. If the telecommunications 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. The Minister of Tourism, Post and Telecommunication of the Republic of Indonesia (“MTPT”) reaffirmed the status of the Company as the organizing body for the provision of domestic telecommunication services through two Decision Letters both dated August 14, 1995.

			The provision of domestic telecommunications services of the Company, includes telephone, telex, telegram, satellite, leased lines, electronic mail, mobile communication and cellular services. Pursuant to this, in 1995, the Company entered into agreements with investors to develop, manage and operate telecommunications facilities in five of the Company’s seven regional divisions (“Divre”) under Joint Operation Schemes (known as “Kerja Sama Operasi” or “KSO”), in order to:

	(1)		accelerate the construction of telecommunication facilities,

	(2)		make the Company a world-class operator, and

	(3)		increase the technology as well as knowledge and skills of its employees.

			Historically, the Company had 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 (“Sambungan Langsung Jarak Jauh” or “SLJJ”) telecommunications services for a minimum period of 10 years, effective January 1, 1996. Such exclusive rights also applied to telecommunications services provided for and on behalf of the Company through a KSO. This grant of rights did not affect the Company’s right to provide other domestic telecommunications services.

			In 1999, the Government of the Republic of Indonesia (the “Government”) passed Telecommunications Law No. 36, which took effect in September 2000. This Law states that the telecommunication activities cover:

	(1)		Telecommunications networks,

	(2)		Telecommunications services, and

	(3)		Special telecommunications.

National state-owned companies (“Badan Usaha Milik Negara” or “BUMN”), regional state-owned companies, privately-owned companies and cooperatives are allowed to provide telecommunications networks and services. Special telecommunications can be provided by individuals, Government Agencies and legal entities other than telecommunications networks and service providers. The Telecommunications Law prohibits activities that result in monopolistic practices and unfair competition, and expects to pave the way for market liberalization. In connection with this law, Government Regulation No. 52/2000 was issued, which provides that interconnection fees shall be charged to originating telecommunications network operators where telecommunications service is provided by two or more telecommunications network operators.

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

GENERAL (continued)

	a.		Establishment and general information (continued)

			On press release No. 05/HMS/JP/VIII/2000 dated August 1, 2000 of the Directorate General of Post and Telecommunications (“DGPT”), as corrected by No. 1718/UM/VIII/2000 dated August 2, 2000, the period for exclusive rights granted to the Company to provide local and SLJJ fixed-line telecommunications services, were shortened from the expiration period of December 2010 to August 2002 and from December 2005 to August 2003. In return, the Government was required to pay compensation to the Company (Notes 13 and 29). Further, on press release of the Coordinating Minister of Economics of the Republic of Indonesia dated July 31, 2002, the Government terminated the Company’s exclusive right as a network provider for local and SLJJ services effective August 1, 2002. On August 1, 2002, PT Indonesian Satellite Corporation Tbk (“Indosat”) was granted a license to provide local and SLJJ telecommunications services.

			The Company has a commercial license to provide International Direct Dialing (“IDD”) services based on the Minister of Communications of the Republic of Indonesia (“MoC”) Decree No. KP. 162/2004 dated May 13, 2004.

	b.		Company’s officers and employees

	1.		Officers

			Based on resolutions made at (i) the Annual General Meeting (“AGM”) of Stockholders dated June 24, 2005 as covered by notarial deed No. 36 of A. Partomuan Pohan, S. H., LLM.; (ii) the Extraordinary General Meetings (“EGM”) of Stockholders dated February 28, 2007 as covered by notarial deed No. 16 of the same notary, as amended through the AGM of Stockholders dated June 29, 2007 as covered by notarial deed No. 58 of the same notary and (iii) EGM of Stockholders dated September 19, 2008, the composition of the Company’s Board of Commissioners and Directors as of September 30, 2007 and 2008, respectively, were as follows:


	2007	2008
President Commissioner	Tanri Abeng	Tanri Abeng
Commissioner	Anggito Abimanyu	Bobby A.A Nazief
Commissioner	Mahmuddin Yasin	Mahmuddin Yasin
Independent Commissioner	Arif Arryman	Arif Arryman
Independent Commissioner	Petrus Sartono	Petrus Sartono
President Director	Rinaldi Firmansyah	Rinaldi Firmansyah
Vice President Director/Chief Operating Officer	* (see Note below)	* (see Note below)
Director of Finance	Sudiro Asno	Sudiro Asno
Director of Network and Solution	I Nyoman Gede Wiryanata	Ermady Dahlan
Director of Enterprise and Wholesale	Arief Yahya	Arief Yahya
Director of Consumer	Ermady Dahlan	I Nyoman Gede Wiryanata
Director of Compliance and Risk Management	Prasetio	Prasetio
Chief Information Technology Officer	Indra Utoyo	Indra Utoyo
Human Resources Director/Human Capital and General Affairs	Faisal Syam	Faisal Syam


*		Position is vacant in 2007 and 2008

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

GENERAL (continued)

Company’s officers and employees (continued)

	1.		Officers (continued)

			Based on AGM of Stockholders dated June 29, 2007, the Company’s stockholders agreed to replace Gatot Trihargo as the Company’s Commissioner to Mahmuddin Yasin.

			Based on Board of Commissioners’ Decision Letter dated February 15, 2008, the Board of Commissioners agreed to appoint Ermady Dahlan as Director of Network and Solution and I Nyoman Gede Wiryanata as Director of Consumer effective from March 1, 2008.

			Based on Letter No. S-584/KF/2008 dated June 20, 2008, Anggito Abimanyu resigned from his position as a member of Company’s Board of Commissioners effective from August 20, 2008. Based on EGM of Stockholders dated September 19, 2008, the Company’s stockholders agreed to appoint Bobby A.A. Nazief as the a member of Company’s Board of Commissioners for filling in the vacant position and to extend the term of service of the Company’s Board of Commissioners which should expire on March 10, 2009, to be extended on the date of the AGM of Stockholders in 2009.

	2.		Employees

			As of September 30, 2007 and 2008, the Company and its subsidiaries had 32,448 and 34,426 employees, respectively.

	c.		Public offering of shares of the Company

			The Company’s shares prior to its Initial Public Offering (“IPO”) totaled 8,400,000,000, consisting of 8,399,999,999 Series B shares and 1 Series A Dwiwarna share, and were 100%-owned by the Government. On November 14, 1995, 933,333,000 new Series B shares and 233,334,000 Series B shares owned by the Government were offered to public through IPO at the Indonesia Stock Exchange (“IDX”) (previously the Jakarta Stock Exchange and the Surabaya Stock Exchange) and 700,000,000 Series B shares owned by the Government were offered to the public and listed on the New York Stock Exchange (“NYSE”) and the London Stock Exchange (“LSE”), in the form of American Depositary Shares (“ADS”). There are 35,000,000 ADS and each ADS represents 20 Series B shares at that time.

			In December 1996, the Government had a block sale of its 388,000,000 Series B shares, and in 1997, had distributed 2,670,300 Series B shares as incentive to stockholders who did not sell their shares within one year from the date of the IPO. In May 1999, the Government further sold 898,000,000 Series B shares.

			To comply with Law No. 1/1995 of the Limited Liability Companies, at the AGM of Stockholders on April 16, 1999, the stockholders resolved to increase the Company’s issued share capital through distribution of 746,666,640 bonus shares, to be taken from its additional paid-in capital, which were distributed to stockholders in August 1999.

			On August 16, 2007, the Law No. 1/1995 of the Limited Liability Companies has been amended by the issuing of Law No. 40/2007 of the Limited Liability Companies which become effective at the same date. The Law No. 40/2007 has no effect to the public offering of shares of the Company. The Company has complied with Law No. 40/2007.

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

GENERAL (continued)

	c.		Public offering of shares of the Company (continued)

			In December 2001, the Government had another block sale of 1,200,000,000 shares or 11.9% of the total outstanding Series B shares. In July 2002, the Government had sold 312,000,000 shares or 3.1% of the total outstanding Series B shares.

			At the AGM of stockholders on July 30, 2004, as notarized by deed No. 26 of A. Partomuan Pohan, S.H., LLM., the stockholders approved the Company’s 2-for-1 stock split for Series A Dwiwarna and Series B. For series A Dwiwarna share with par value of Rp.500, the split was into 1 Series A Dwiwarna share with par value of Rp.250 per share and 1 Series B share with par value of Rp.250 per share. The stock split resulted to an increase of the Company’s authorized capital stock from 1 Series A Dwiwarna share and 39,999,999,999 Series B shares into 1 Series A Dwiwarna Share and 79,999,999,999 Series B shares, and the issued capital stock from 1 Series A Dwiwarna share and 10,079,999,639 Series B shares into 1 Series A Dwiwarna share and 20,159,999,279 Series B shares. After the stock split, each ADS represented 40 Series B shares.

			At the EGM on December 21, 2005, the stockholders approved the phase I plan to repurchase up to a maximum of 5% of the Company’s issued Series B shares for a maximum repurchase amount of Rp.5,250,000 million which had expired on June 20, 2007. At the AGM on June 29, 2007, the stockholders approved the phase II plan to repurchase up to 215,000,000 Series B shares for Rp.2,000,000 million which will be expired on December 28, 2008. At the AGM on June 20, 2008, the phase II plan to repurchase the Series B shares has been discontinued on June 19, 2008 and the stockholders approved the phase III plan to repurchase up to 339,443,313 Series B shares for Rp.3,000,000 million which will be expired on December 20, 2009. As of October 30, 2008, the Company had repurchased 490,574,500 shares equivalent to 2.43% of the issued and outstanding Series B shares, for a repurchase price of Rp.4,264,049 million, including broker and custodian fees (Note 28).

			As of September 30, 2008, all of the Company’s Series B shares were listed on the IDX and 46,292,810 ADS shares were listed on the NYSE and LSE.

	d.		Subsidiaries

			As of September 30, 2007 and 2008, the Company has consolidated the following direct or indirectly owned subsidiaries which it controls as a result of majority ownership (Notes 2b and 2d):

(i)

Direct subsidiaries:

Nature of business/

Percentage of

date of incorporation

Date of

effective

Total assets

Subsidiary/place of

or acquisition by

commercial

ownership interest

before elimination

incorporation

the Company

operation

2007

2008

2007

2008

PT Pramindo Ikat Nusantara (“Pramindo”), Medan, Indonesia

Telecommunication construction and services/
August 15, 2002

1995

100

1,241,376

1,212,661

PT Telekomunikasi Indonesia International (“TII”) (formerly PT Aria West International (“AWI”)), Jakarta, Indonesia

Telecommunication/
July 31, 2003

1995

100

686,734

1,367,521

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

GENERAL (continued)

Subsidiaries (continued)

(i)

Direct subsidiaries: (continued)


	Nature of business/			Percentage of
	date of incorporation	Date of		effective				Total assets
Subsidiary/place of	or acquisition by	commercial		ownership interest				before elimination
incorporation	the Company	operation		2007		2008		2007		2008
PT Multimedia Nusantara (“Metra”), Jakarta, Indonesia	Multimedia telecommunication services/May 9, 2003		1998		100		100		114,373		757,659

PT Graha Sarana Duta (“GSD”), Jakarta, Indonesia	Leasing of offices and providing building management and maintenance services, civil consultant and developer/April 25, 2001		1982		99.99		99.99		137,888		166,920

PT Dayamitra Telekomunikasi (“Dayamitra”), Jakarta, Indonesia	Telecommunication/ May 17, 2001		1995		100		100		450,442		409,373

PT Indonusa Telemedia (“Indonusa”), Jakarta, Indonesia	Pay television and content services/May 7, 1997		1997		96.75	100 (including through 1.25% ownership by Metra)			77,458		115,593

PT Telekomunikasi Selular (“Telkomsel”), Jakarta, Indonesia	Telecomunication — provides telecommunication facilities and mobile cellular services using Mobile Global System for Communication (“GSM”) technology/May 26, 1995		1995		65		65		44,205,863		50,600,043

PT Napsindo Primatel Internasional (“Napsindo”), Jakarta, Indonesia	Telecommunication — provides Network Access Point (NAP), Voice Over Data (VOD) and other related services/December 29, 1998	1999; ceased operation on January 13, 2006			60		60		3,862		4,910

PT Infomedia Nusantara (“Infomedia”), Jakarta, Indonesia	Data and information service — provides telecommunication information services and other information services in the form of print and electronic media, and call center services/September 22,1999		1984		51		51		442,056		516,956

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

GENERAL (continued)

Subsidiaries (continued)

(ii)

Indirect subsidiaries:

Nature of business/

Percentage of

date of incorporation

Date of

effective

Total assets

Subsidiary/place of

or acquisition by

commercial

ownership interest

before elimination

incorporation

subsidiary

operation

2007

2008

2007

2008

Aria West International Finance B.V. (“AWI BV”) The Netherlands

Established to engaged in rendering services in the field of trade and finance services/June 3, 1996

1996; ceased
operation on
July 31, 2003

100 (through
100%
ownership by TII)

1,750

1,849

Telekomunikasi Selular Finance Limited (“TSFL”), Mauritius

Finance — establish to raise funds for the development of Telkomsel ’s business through the issuance of debenture stock, bonds, mortgages or any other securities/April 22, 2002

2002

65 (through
100%
ownership by
Telkomsel)

PT Balebat Dedikasi Prima (“Balebat”), Bogor, Indonesia

Printing/October 1, 2003

2000

33.15 (through 65% ownership by Infomedia)

53,165

77,142

Telkomsel Finance B.V., (“TFBV”), Amsterdam The Netherlands

Finance — establish in 2005 for the purpose of borrowing, lending and raising funds including issuance of bonds, promissory notes or debts/February 7, 2005

2005

65 (through
100%
ownership by
Telkomsel)

8,399

8,669

PT Finnet Indonesia (“Finnet”), Jakarta, Indonesia

Banking data and communication/October 31, 2005

2006

60
(through
60%
ownership
by Metra)

25,281

23,494

PT Telkom Indonesia International Pte. Ltd. Singapura

Finance/December
6, 2007

2008

—

100 (through
100%
ownership by
TII)

—

PT Sigma Cipta Caraka (“Sigma”), Tangerang, Indonesia

Information technology service — implementation and integration system service, outsourcing and software lisense maintenance/May 1, 1987

1988

—

80
(through
80%
ownership
by Metra)

—

286,298

	(a)		TII

			On March 6, 2007, based on notarial deed No. 3 of Titien Suwartini, S.H., and as approved by the MoJHR in its Decision Letter No. W8-00573.HT.01.04-TH.2007 and the Capital Investment Coordinating Board in its Decision Letter No. 20/III/PMDN/2007 dated March 1, 2007, PT Aria West International has changed its name to PT Telekomunikasi Indonesia International and its business operation has been expanded to include international businesses.

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

GENERAL (continued)

Subsidiaries (continued)

	(a)		TII (continued)

			On January 25, 2008, pursuant to Second Amendment to Cooperation Agreement between the Company and TII No. K.Tel.21/HK.820/UTA-00/2008 regarding Management and Development of International Business, the Company has agreed to transfer international telecommunications business from the Company to TII.

	(b)		Metra

			Based on Circular Meeting of Metra’s stockholders on December 13, 2007, the stockholders agreed as follows: (1) increase its authorized capital from Rp.200,000 million to Rp.1,000,000 million with a par value of Rp.10,000 per share; (2) increase its issued and fully paid capital from Rp.62,250 million to Rp.412,250 million by issuing 35,000,000 new shares; (3) to limit the maximum additions to issued capital for funding acquisition of Sigma amounting to Rp.335,000 million, and for the acquisition cost as well as Metra’s business development amounting to a maximum of Rp.15,000 million; (4) approve a total of 35,000,000 new shares to be issued and fully paid by the Company; and (5) approval on acquisition of a maximum 80% ownership interest in Sigma, a company engaged in providing information system services.

			On December 18, 2007, Metra entered into a Conditional Sales and Purchase Agreement (CSPA) with Sigma’s stockholders for the acquisition.

			On January 21, 2008, the Company paid Rp.350,000 million for additional capital to Metra pursuant to circular meeting of the Metra’s stockholders on December 13, 2007. The acquisition of Sigma transaction was completed through the signing of an Amendment to the Sales and Purchase of Shares Agreement on February 21, 2008 which became effective from February 22, 2008.

			On July 3, 2008, based on notarial deed No. 6 of Wahyu Nurani, S.H. dated July 3, 2008, Metra entered into a Commitment of Sales and Purchase of Shares Agreement (“Perjanjian Pengikatan Jual Beli Saham” or PPJB) to purchase 6,000,000 Indonusa’s shares or equivalent to 1.25% of Indonusa’s total ownership with transaction value amounted to Rp.6,600 million from PT Datakom Asia (“Datakom”).

			On July 17, 2008, based on notarial deed No. 133 of Sutjipto, S.H. M.Kn. dated July 17, 2008, Metra obtained funding for the purchase through equity call from the addition of Metra’s issued capital from Rp.412,250 million to Rp.418,850 million. On July 17, 2008, based on notarial deed No. 134 of Sutjipto, S.H. M.Kn. dated July 17, 2007, Metra exercised the sales and purchase of share transaction (Note 1d.c).

	(c)		Indonusa

			At Indonusa’s EGM on May 9, 2007, the stockholders revolved to: (1) stock split of Indonusa’s shares par value from Rp.10,000 to Rp.500 per share; (2) increase its issued capital from Rp.200,000 million consists of 20,000,000 shares to Rp.700,000 million consists of 1,400,000,000 shares, as amended by the Decision of Circular Meeting of Indonusa’s stockholders on December 28, 2007. The change increased Company’s paid-in capital from Rp.66,500 million to Rp.237,713 million through payment and debt to equity swap, as follows:

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

GENERAL (continued)

Subsidiaries (continued)

(c)

Indonusa (continued)

	—		The Company had paid for the increase in share capital phase I to Indonusa on June 5, 2007 and August 13, 2007 amounting to Rp.21,624 million and Rp.976.3 million, respectively, thereby as of September 30, 2007, the Company’s ownership in Indonusa has increased to 96.75%.

	—		A payment for the increase in share capital for phase II was made on November 26, 2007 amounting to Rp.65,986 million.

	—		On December 19, 2007, Indonusa’s debt to the Company amounting to Rp.82,627 million was converted into ownership on shares of stock of Indonusa.

			Pursuant to the payment for the additional share capital and debt swap to equity, the Company’s ownership in Indonusa has increased from 96.75% to 98.75%.

			Based on Circular Meeting of Indonusa’s stockholders on July 17, 2008 as covered by notarial deed No. 64 of Dr. Wiratni Ahmadi, S.H. dated August 25, 2008, Indonusa’s stockholders has agreed to transfer the Datakom’s ownership in Indonusa of 6,000,000 shares to Metra (Note 1d.b).

			Pursuant to the transfer of the ownership, the Company’s ownership in Indonusa has increased to 100% (including through 1.25% ownership by Metra).

	(d)		Telkomsel

			On February 14, 2006, Telkomsel was granted the International Mobile Telecommunications-2000 (“IMT-2000” or “3G”) license in the 2.1 Gigahertz (“GHz”) frequency bandwidth for a 10 year period by the Minister of Communication and Information Technology of the Republic of Indonesia (“MoCI”), based on its Decision Letter No. 19/KEP/M.KOMINFO/2/2006. The license is extendable subject to evaluation (Notes 14 and 49c.ii). Telkomsel started its commercial services for 3G in September 2006.

			On October 11, 2006, Telkomsel’s operating licenses were updated by MoCI based on Decision Letter No. 101/KEP/M.KOMINFO/10/2006, granting Telkomsel the rights to provide: (i) Mobile telecommunication services with radio frequency bandwidth in the 900 Megahertz (“MHz”) and 1800 MHz bands; (ii) Mobile telecommunication services IMT-2000 with radio frequency bandwidth in the 2.1 GHz bands (3G); and (iii) Basic telecommunication services.

	e.		Authorization of the financial statements

			The consolidated financial statements were authorized for issue by the Board of Directors on October 30, 2008.

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES


2.		SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements of the Company and its subsidiaries have been prepared in accordance with generally accepted accounting principles in Indonesia (“Indonesian GAAP”). Indonesian GAAP varies in certain significant respects from generally accepted accounting principles in the United States of America (“U.S. GAAP”). Information relating to the nature and effect of such differences is presented in Note 55.

	a.		Basis of preparation of financial statements

			The consolidated financial statements, except for the consolidated statements of cash flows, are prepared on 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 and present the changes in cash and cash equivalents from operating, investing and financing activities.

			Figures in the consolidated financial statements are rounded to and presented in millions of Indonesian Rupiah (“Rp.”), unless otherwise stated.

	b.		Principles of consolidation

			The consolidated financial statements include the financial statements of the Company and its subsidiaries in which the Company directly or indirectly has ownership of more than 50%, or the Company has the ability to control the entity, even though the ownership is less than or equal to 50%. Subsidiaries are consolidated from the date on which every effective control is obtained and are no longer consolidated from the date of disposal.

			All significant inter-company balances and transactions have been eliminated on the consolidated financial statements.

	c.		Transactions with related parties

			The Company and its subsidiaries have transactions with related parties. The definition of related parties used is in accordance with Indonesian Statement of Financial Accounting Standards (“PSAK”) 7, “Related Party Disclosures”.

	d.		Acquisitions of subsidiaries

			The acquisition of a subsidiary from a third party is accounted for using the purchase method of accounting. The cost of an acquisition is allocated to the identifiable assets and liabilities recognized using as reference, their fair values at the date of the transaction. The excess of the acquisition cost over the Company’s interest in the fair value of identifiable assets acquired and liabilities assumed is recorded as goodwill and amortized using the straight-line method over a period of not more than five years.

			The Company continually assesses whether events or changes in circumstances have occurred that would require revision of the remaining estimated useful life of intangible assets and goodwill, or whether there is any indication of impairment. If any indication of impairment exists, the recoverable amount of intangible assets and goodwill is estimated based on the expected future cash flows which are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

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P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES


2.		SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

	d.		Acquisitions of subsidiaries (continued)

			In July 2004, the Indonesian Financial Accounting Standard Board (“Dewan Standar Akuntansi Keuangan di Indonesia” or “DSAK”) issued PSAK 38 (Revised 2004), “Accounting for Restructuring Transactions between Entities under Common Control”, (“PSAK 38R”). Under PSAK 38R, the acquisition transaction with entities under common control is accounted for using book value, in a manner similar to that in pooling of interests accounting (carryover basis). The difference between the consideration paid or received and the related historical carrying amount, after considering income tax effects, is recognized directly in equity and reported as “Difference in value arising from restructuring transactions and other transactions between entities under common control” in the stockholders’ equity section.

			The balance of “Difference in value arising from restructuring transactions and other transactions between entities under common control” is charged to retained earnings when the common control relationship has ceased.

	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 not more than three months from the date of placement.

Investments

	i.		Time deposits

			Time deposits with maturities of more than three months but not more than one year, are presented as temporary investments.

	ii.		Investments in securities

			Investments in available-for-sale securities are stated at fair value. Unrealized holding gains or losses on available-for-sale securities are excluded from income of the current year and are reported as a separate component in the stockholders’ equity section until realized. Realized gains or losses from the sale of available-for-sale securities are recognized in the consolidated statements of income, and are determined on a specific-identification basis. A decline in the fair value of any available-for-sale securities below cost that is deemed to be other-than-temporary is charged to the consolidated statements of income.

	iii.		Investments in associated companies

			Investments in companies where the Company has 20% to 50% of the voting rights, and through which the Company exerts significant influence, but not control, over the financial and operating policies are accounted for using the equity method. Under this method, the Company recognizes the Company’s proportionate share in the income or loss of the associated company from the date that significant influence commences until the date that significant influence ceases. When the Company’s share of loss exceeds the carrying amount of the associated company, the carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that the Company has guaranteed obligations of the associated company or committed to provide further financial support to the associated company.

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P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES


2.		SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Investments (continued)

	iii.		Investments in associated companies (continued)

			On a continuous basis, but no less frequently than at the end of each year, the Company and its subsidiaries evaluate the carrying amount of their ownership interests in associated companies for possible impairment. Factors considered in assessing whether an indication of other-than-temporary impairment exists include the achievement of business plan objectives and milestones including cash flow projections and the results of planned financing activities, the financial condition and prospects of each associated company, the fair value of the ownership interest relative to the carrying amount of the investment, the period of time the fair value of the ownership interest has been below the carrying amount of the investment and other relevant factors. Impairment to be recognized is measured based on the amount by which the carrying amount of the investment exceeds the fair value of the investment. Fair value is determined based on quoted market prices (if any) and projected discounted cash flows, whichever is lower or other valuation techniques as appropriate.

			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 directly in equity and are reported as “Difference due to change of equity in associated companies” in the stockholders’ equity section. Differences previously credited directly to equity as a result of equity transactions in associated companies are released to the consolidated statements of income upon the sale of an interest in the associate in proportion to percentage of the interests sold.

			The functional currency of PT Pasifik Satelit Nusantara (“PSN”) and PT Citra Sari Makmur (“CSM”) is the United States Dollars (“U.S. Dollars”). 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 Indonesian Rupiah using the rates of exchange prevailing at that date, while revenues and expenses are translated into Indonesian Rupiah at the average rates of exchange for the year. The resulting translation adjustments are reported as part of “Translation adjustment” in the stockholders’ equity section.

	iv.		Other investments

			Investments in companies where ownership interests of less than 20% that do not have readily determinable fair values and are held for long-term are carried at cost and are adjusted only for other-than-temporary decline in the value of individual investments. Any write-down is charged directly to income of the current year.

	g.		Trade and other accounts receivable

			Trade and other accounts receivable are recorded net of allowance for doubtful accounts, based upon a review of the collectibility of the outstanding amounts. Accounts are written-off against the allowance during the period in which they are determined to be not collectible.

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES


2.		SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

	g.		Trade and other accounts receivable (continued)

			The allowance for doubtful accounts is the Company and its subsidiaries’ best estimate of the probable credit losses in the accounts receivable. The amount of the allowance is recognized in the consolidated statement of income within operating expenses — general and administrative. The Company and its subsidiaries determine the allowance based on historical write-off experience. The Company and its subsidiaries review the allowance for doubtful accounts every month. Past due balances over 90 days for retail customers are fully provided, and past due balance for non-retail customers over a specified amount are reviewed individually for collectibility. Account balances are written off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

	h.		Inventories

			Inventories consist of components and modules which are expensed or transferred to property, plant and equipment upon use. Inventories also include Subscriber Identification Module (“SIM”) cards, Removable User Identity Module (“RUIM”) cards and prepaid voucher blanks, which are expensed upon sale. Inventories are stated at the lower of costs or net realizable value.

			Cost is determined using the weighted average method for components, SIM card, RUIM card and prepaid voucher blanks, and the specific-identification method for modules.

			Allowance for obsolescence is primarily based on the estimated forecast of future usage of these items.

	i.		Prepaid expenses

			Prepaid expenses are amortized over their future beneficial periods using the straight-line method.

	j.		Intangible assets

			Intangible assets comprised of intangible assets from subsidiaries and business acquisition and licenses. Intangible assets shall be recognized if it is probable that the expected future economic benefits that are attributable to each asset will flow to the Company and its subsidiaries and the cost of the asset can be reliably measured.

			Intangible assets are stated at cost less accumulated amortization and impairment, if any. Intangible assets are amortized over their useful lives. The Company and its subsidiaries shall estimate the recoverable value of their intangible asset. When the carrying amount of an asset exceeds its estimated recoverable amount, the asset is written down to its estimated recoverable amount.

			In 2006, Telkomsel was granted the right to operate the 3G license. Telkomsel is required to pay an up-front fee and annual rights of usage (“Biaya Hak Penggunaan” or “BHP”) fee for the next ten years. The up-front fee is recorded as intangible asset and amortized using the straight-line method over the term of the right to operate the 3G license (10 years). Amortization commenced in 2006 when the assets attributable to the provision of the related services became available for use.

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES


2.		SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

	j.		Intangible assets (continued)

			Based on Telkomsel’s management interpretation of the license conditions and the written confirmation from the DGPT, the license may be returned at any time without any financial obligation to pay the remaining outstanding annual BHP fees. Accordingly, Telkomsel recognizes the annual BHP fees as expense when incurred.

			Telkomsel’s management evaluates its plan to continue to use the license on an annual basis.

	k.		Property, plant and equipment — direct acquisitions

			Property, plant and equipment directly acquired are stated at cost, less accumulated depreciation and impairment losses.

			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 telecommunications peripherals		5
Office equipment		2-5
Vehicles		5-8
Other equipment		5

			The Company and its subsidiaries evaluate their property, plant and equipment whenever events and circumstances indicate that the carrying amount of the assets may not be recoverable.

			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 expensed as incurred. Expenditures, which extend the useful life of the asset or result in increased future economic benefits such as increase in capacity or improvement in the quality of output or standard of performance are capitalized.

			When assets are retired or otherwise disposed of, their carrying values and the related accumulated depreciation are eliminated from the consolidated financial statements, and the resulting gains or losses on the disposal or sale of property, plant and equipment are recognized in the consolidated statement of income.

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES


2.		SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

	k.		Property, plant and equipment — direct acquisitions (continued)

			Computer software used for data processing is included in the value of the associated hardware.

			Property under construction is stated at cost until construction is completed, at which time it is reclassified to the specific property, plant and equipment account to which it relates. During the construction period, borrowing costs, which include interest expense and foreign currency exchange differences incurred to finance the construction of the asset, are capitalized in proportion to the average amount of accumulated expenditures during the year. Capitalization of borrowing cost ceases when the construction has been completed and the asset is ready for its intended use.

			Equipment temporarily unused are reclassified into equipment not used in operation and depreciated over their estimated useful life using straight-line method.

	l.		Property, plant and equipment under capital leases

			Property, plant and equipment acquired under capital leases are stated at the present value of minimum lease payments and the residual values (option price) paid by the Company and its subsidiaries at the end of lease period. At inception of the lease, a corresponding liability, which equals to the present value of minimum lease payments, is also recorded and subsequently reduced by the principal component of each minimum lease payment. The interest component of each minimum lease payment is recognized in the consolidated statement of income.

			Since January 1, 2008, the Company and its subsidiaries has applied PSAK 30 (Revised 2007), “Lease” prospectively. Based on PSAK 30 (Revised 2007), property, plant and equipment under capital lease is recognized if the lease transfers substantially all the risks and rewards incidental to ownership. A lease is classified into capital lease or operating lease based on the substance not the form of the contract.

			Leased assets are depreciated using the same method over the shorter of the lease term and its economic useful life.

	m.		Revenue-Sharing Arrangements (“RSA”)

			Revenues from RSA are recognized based on Company’s share as agreed upon in the contracts.

			The Company records assets under RSA as “Property, plant and equipment under RSA” (with a corresponding initial credit to “Unearned income on RSA” presented in the liabilities section of the consolidated balance sheet) based on the costs incurred by the investors as agreed upon in the contracts entered into between the Company and the investors. Property, plant and equipment are depreciated over their estimated useful lives using the straight-line method (Note 2k).

			Unearned income related to the acquisition of the property, plant and equipment under RSA is amortized over the revenue-sharing period using the straight-line method.

			At the end of the revenue-sharing period, the property, plant and equipment under RSA is reclassified to the “Property, plant and equipment” account.

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES


2.		SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

	n.		KSO

			Revenues from KSO include amortization of unearned initial investor payments, Minimum Telkom Revenues (“MTR”) and the Company’s share of Distributable KSO Revenues (“DKSOR”).

			Unearned initial investor payments received are recorded net of all direct costs incurred in connection with the KSO agreement and amortized using the straight-line method over the KSO period of 15 years starting from January 1, 1996.

			MTR are recognized on a monthly basis, based on the contracted MTR amount for the current year.

			The Company’s share of DKSOR 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 39, “Accounting for Joint Operation Schemes”, which supercedes paragraph 14 of PSAK 35, “Accounting for Telecommunications Services Revenue”, the assets built by the KSO partners under the KSO were recorded in the books of the KSO partners which operate the assets and would be transferred to the Company at the end of the KSO period or upon termination of the KSO agreement.

			As of December 31, 2006, the Company has obtained full control over all of the KSO operations through acquisition of interest of KSO partners and the Company has accelerated the amortization of KSO deferred compensation income per September 30, 2008.

	o.		Deferred charges for land rights

			Costs incurred to process and extend land rights are deferred and amortized using the straight-line method over the term of the land rights.

	p.		Foreign currency translation

			The functional currency of the Company and its subsidiaries is the Indonesian Rupiah and the books of accounts of the Company and its subsidiaries are maintained in Indonesian Rupiah. Transactions in foreign currencies are translated into Indonesian Rupiah at the rates of exchange prevailing at transaction date. At the consolidated balance sheet date, monetary assets and monetary liabilities balances denominated in foreign currencies are translated into Indonesian Rupiah based on the buy and sell rates quoted by Reuters prevailing at the consolidated balance sheet date as follows:


	The Company and its subsidiaries
	2007				2008
	Buy		Sell		Buy		Sell

United States Dollars (“US$”) 1		9,145		9,150		9,425		9,435
Euro1		12,966		12,975		13,546		13,561
Yen1		79.20		79.26		89.91		90.02

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES


2.		SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

	p.		Foreign currency translation (continued)

			The resulting foreign exchange gains or losses, realized and unrealized, are credited or charged to income of the current year, except for foreign exchange differences incurred on borrowings during the construction of qualifying assets which are capitalized to the extent that the borrowings can be attributed to the construction of those qualifying assets (Note 2k).

Revenue and expense recognition

	i.		Fixed line telephone revenues

			Revenues from fixed line installations are recognized at the time the installations are placed in service and ready for use. Revenues from usage charges are recognized as customers incur the charges.

	ii.		Cellular and fixed wireless telephone revenues

			Revenues from postpaid service, which consist of connection fee as well as usage and monthly charges, are recognized as follows:

	•		Connection fees for service connection are recognized as revenues at the time the connection occurs.

	•		Airtime and charges for value added services are recognized based on usage by subscribers.

	•		Monthly subscription charges are recognized as revenues when incurred by subscribers.

Revenues from prepaid card subscribers, which consist of the sale of starter packs (also known as SIM cards in the case of cellular and RUIM in the case of fixed wireless telephone and start-up load vouchers) and pulse reload vouchers, are recognized as follows:

	•		Sale of SIM and RUIM card is recognized as revenue upon delivery of the starter packs to distributors, dealers or directly to customers.

	•		Sale of pulse reload vouchers (either bundled in starter packs or sold as separate items) is recognized initially as unearned income and recognized proportionately as usage revenue based on duration of successful calls made and the value added services by the subscribers or the expiration of the unused stored value of the voucher.

	iii.		Interconnection revenues

			Revenues from network interconnection with other domestic and international telecommunications carriers are recognized as earned in accordance with agreement and are presented net of interconnection expenses.

	iv.		Data and internet revenues

			Revenues from installations (set-up) of internet, data communication and e-Business are recognized upon the completion of installations. Revenues from data communication and internet are recognized based on usage.

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES


2.		SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Revenue and expense recognition (continued)

	v.		Revenues from network

			Revenues from network consist of revenues from leased lines and satellite transponder leases. Revenues are recognized based on subscription fees as specified in the agreements.

	vi.		Expenses

			Expenses are recognized on accrual basis. Unutilized promotional credits are netted against unearned income.

Employee benefits

	i.		Pension and post-retirement health care benefit plans

			The net obligations in respect of the defined pension benefit and post-retirement health care benefit plans are calculated at the present value of estimated future benefits that the employees have earned in return for their service in the current and prior periods, less fair value of plan assets and as adjusted for unrecognized actuarial gains or losses and unrecognized past service cost. The calculation is performed by an independent actuary using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using government bond interest rates that have terms to maturity approximating the terms of the related liability.

			Actuarial gains or losses arising from experience adjustments and changes in actuarial assumptions, when exceeding the greater of 10% of present value defined benefit obligation or 10% of fair value of plan assets, are charged or credited to the consolidated statements of income over the average remaining service lives of the relevant employees. Prior service cost is recognized immediately if vested or amortized over the vesting period.

			For defined contribution plans, the regular contributions constitute net periodic costs for the year in which they are due and as such are included in staff costs.

	ii.		Long Service Awards (“LSA”)

			Employees are entitled to receive certain cash awards based on length of service requirements. The benefits are either paid at the time the employees reach certain anniversary dates during employment, or at the time of termination.

			Actuarial gains or losses arising from experience and changes in actuarial assumptions are charged immediately to the consolidated statements of income.

			The obligation with respect to LSA is calculated by an independent actuary using the projected unit credit method.

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES


2.		SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Employee benefits (continued)

	iii.		Early retirement benefits

			Early retirement benefits are accrued at the time the Company makes a commitment to provide early retirement benefits as a result of an offer made in order to encourage voluntary redundancy. A commitment to a termination arises when, and only when a detailed formal plan for the early retirement cannot be withdrawn.

	iv.		Pre-retirement benefits

			Employees of the Company are entitled to a benefit during a pre-retirement period in which they are inactive for 6 months prior to their normal retirement age of 56 years. During the pre-retirement period, the employees still receive benefits provided to active employees, which include, but are not limited to regular salary, health care, annual leave, bonus and other benefits. Benefits provided to employees which enter pre-retirement period are calculated by an independent actuary using the projected unit credit method.

	v.		Other post-retirement benefits

			Employees are entitled to home leave passage benefits and final housing facility benefits to their retirement age of 56 years. Those benefits are calculated by an independent actuary using the projected unit credit method.

			Gains or losses on curtailment are recognized when there is a commitment to make a material reduction in the number of employees covered by a plan or when there is an amendment of a defined benefit plan terms such as that a material element of future services to be provided by current employees will no longer qualify for benefits, or will qualify only for reduced benefits.

			Gains or losses on settlement are recognized when there is a transaction that eliminates all further legal or constructive obligation for part or all of the benefits provided under a defined benefit plan.

	s.		Income tax

			The Company and its subsidiaries recognize deferred tax assets and liabilities for temporary differences between the financial and tax bases of assets and liabilities at each reporting date. The Company and its subsidiaries also recognize deferred tax assets resulting from the recognition of future tax benefits, such as the benefit of tax loss carry forwards, to the extent their future realization is probable. Deferred tax assets and liabilities are measured using enacted or substantively enacted tax rates and tax laws at each reporting date which are expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

			Income tax is charged or credited to the consolidated statement of income, except to the extent that it relates to items recognized directly in equity, such as the difference in value arising from restructuring transactions and other transactions between entities under common control and the effect of foreign currency translation adjustment for certain investments in associated companies, in which case income tax is also charged or credited directly to equity.

			Current tax assets and liabilities are measured at the amount expected to be recovered or paid, using the tax rates and tax laws that have been enacted or substantively enacted at each reporting date

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES


2.		SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

	s.		Income tax (continued)

			Amendment to taxation obligations are recorded when an assessment is received or if appealed against, when the results of the appeal are determined.

	t.		Derivative instruments

			Derivative transactions are accounted for in accordance with PSAK 55, “Accounting for Derivative Instruments and Hedging Activities” which requires that all derivative instruments be recognized in the financial statements at fair value. To qualify for hedge accounting, PSAK 55 requires certain criteria to be met, including formal documentations at the inception of the hedge.

			Changes in the fair values of derivative instruments that do not qualify for hedge accounting are recognized in the consolidated statements of income. If a derivative instrument is designated and qualifies for hedge accounting the assets or liabilities shall be adjusted. The changes in fair values of derivative instruments are recognized in the consolidated statements of income or consolidated statement of changes in stockholder’s equity depending on the type and effectiveness of hedge transaction.

	u.		Treasury Stock

			Reacquired Company’s stock is accounted for at its reacquisition cost and classified as “Treasury Stock” and presented as deduction in stockholders’ equity. The cost of treasury stock sold is accounted for using the weighted average method. The difference resulting from the cost and the proceeds from the sale of treasury stock is credited to “Paid-in Capital”.

	v.		Dividends

			Dividend distribution to the Company’s stockholders is recognized as liability in the Company’s consolidated financial statements in the period in which the dividends are approved by the Company’s stockholders. For interim dividends, the Company recognized it as liability based on the Board of Director’s decision with the approval from the Board of Commissioners.

	w.		Earnings per share and earnings per ADS

			Basic earnings per share are 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 40, the number of shares represented by each ADS.

	x.		Segment information

			The Company and its subsidiaries’ segment information is presented based upon identified business segments. A business segment is a distinguishable unit that provides different products and services and is managed separately. Business segment information is consistent with operating information routinely reported to the Company’s chief operating decision maker.

	y.		Use of estimates

			The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates and assumptions include the carrying amount of property, plant and equipment and intangible assets, the valuation allowance for receivables and obligations related to employee benefits. Actual results could differ from those estimates.

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES


3.		TRANSLATION OF RUPIAH INTO UNITED STATES DOLLARS

The consolidated financial statements are stated in Indonesian Rupiah (“Rupiah”). The translations of Indonesian Rupiah amounts into U.S. 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 Rp.9,430 to US$1 as published by Reuters on September 30, 2008. The convenience translations should not be construed as representations that the Indonesian Rupiah amounts have been, could have been, or could in the future be, converted into United States Dollars at this or any other rate of exchange.


4.		ACQUISITIONS OF SIGMA

		On February 21, 2008, Metra and Sigma’s stockholders, PT Sigma Citra Harmoni and Trozenin Management Plc signed an Amendment to the Sales and Purchase of Shares Agreement which authorized Metra to acquire 80% of the outstanding common stock of Sigma for US$35.2 million or equivalent to Rp.331,052 million.

		The acquisition of Sigma has been accounted for using the purchase method of accounting, which purchase price were allocated to fair value of the acquired assets and assumed liabilities. The allocation of the acquisition cost was as follows:


	Rp.
Purchase consideration		331,052

Fair value of net assets acquired:
— Current assets		120,369
— Fixed assets		65,511
— Goodwill		37,924
— Intangible assets		256,354
— Other non-current assets		30,935
— Current liabilities		(64,172	)
— Long-term liabilities		(30,308	)
— Deferred tax liabilities		(85,561	)

Fair value of net assets as at February 22, 2008		331,052

		The fair value of acquired assets and recognized liabilities was determined by an independent appraisal. The intangible assets represent long-term contract, software and trademark (Note 14).

		The Company’s consolidated results of operations has included the operating results of Sigma since March 1, 2008 being the nearest convenient consolidated balance sheet date.

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES


5.		CASH AND CASH EQUIVALENTS


	2007		2008
Cash on hand		35,895		37,212

Cash in banks
Related parties
Rupiah
PT Bank Negara Indonesia (Persero) Tbk (“BNI”)		98,413		149,229
PT Bank Mandiri (Persero) Tbk (“Bank Mandiri”)		171,009		142,741
PT Bank Rakyat Indonesia (Persero) Tbk (“BRI”)		28,007		10,183
PT Bank Pos Nusantara		1,367		132
PT Bank Syariah Mandiri (”BSM”)		—		34
PT Bank Tabungan Negara (Persero) Tbk (“BTN”)		—		15

		298,796		302,334

Foreign currencies
Bank Mandiri		38,971		65,251
BNI		18,778		18,483
BRI		621		682
BSM		—		30

		58,370		84,446

Sub-total		357,166		386,780

Third parties
Rupiah
ABN AMRO Bank (“AAB“)		78,798		94,416
Deutsche Bank AG (“DB”)		17,786		40,876
PT Bank Central Asia Tbk (“BCA”)		14,529		22,993
Citibank, N.A. (“Citibank”)		6,349		11,636
PT Bank Bukopin Tbk (“Bank Bukopin”)		6,412		7,085
PT Bank Ekonomi Raharja Tbk (”Bank Ekonomi”)		—		3,790
PT Bank Niaga Tbk (”Bank Niaga”)		1,698		2,987
PT Bank Lippo Tbk (”Bank Lippo”)		2,683		2,235
PT Bank DKI		—		2,077
Others (each below Rp.1 billion)		2,481		1,721

		130,736		189,816


Foreign currencies
AAB		9,316		42,368
DB		12,061		12,979
Citibank		10,368		8,878
Bank Ekonomi		—		3,137
Others (each below Rp.1 billion)		240		556

		31,985		67,918

Sub-total		162,721		257,734

Total cash in banks		519,887		644,514

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES


5.		CASH AND CASH EQUIVALENTS (continued)


	2007		2008
Time deposits
Related parties
Rupiah
BNI		392,580		1,857,597
BRI		247,020		1,383,025
Bank Mandiri		711,229		339,886
BTN		152,192		195,725

		1,503,021		3,776,233

Foreign currencies
BRI		—		140,670
BNI		653,965		126,256
Bank Mandiri		234,013		65,845

		887,978		332,771

Sub-total		2,390,999		4,109,004

Third parties
Rupiah
PT Bank DBS Indonesia (“DBS”)		—		375,970
Bank Bukopin		83,320		219,685
PT Bank Pembangunan Daerah Jawa Barat dan Banten (”Bank Jabar”)		184,400		183,060
PT Bank Mega Tbk (“Bank Mega”)		92,945		167,945
PT Bank Century Tbk		—		120,000
Bank Niaga		177,820		113,407
PT Bank Muamalat Indonesia (“Bank Muamalat”)		73,040		93,550
PT Bank Internasional Indonesia Tbk		156,035		90,000
PT Bank Victoria International Tbk		—		85,000
PT Pan Indonesia Bank Tbk		—		60,000
PT Bank Danamon Indonesia Tbk (“Bank Danamon”)		143,115		49,315
PT Bank Tabungan Pensiunan Nasional Tbk		84,128		45,053
PT Bank Bumiputera Indonesia Tbk (“Bank Bumiputera”)		—		40,000
Bank Artha Graha Internasional Tbk		—		35,000
PT Bank NISP Tbk		—		20,000
Bank Lippo		—		11,000
PT Bank Permata Tbk		102		10,000
Bank Ekonomi		—		8,251
PT Bank Syariah Mega Indonesia (“Bank Syariah Mega”)		—		5,000
Citibank		886,000		—
DB		13,200		—

		1,894,105		1,732,236

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES


5.		CASH AND CASH EQUIVALENTS (continued)


	2007		2008
Time deposits (continued)
Third parties (continued)
Foreign currencies
DBS		—		320,473
Standard Chartered Bank (“SCB”)		696,230		275,230
Bank Muamalat		—		197,925
DB		949,667		193,896
Bank Jabar		—		18,850
Bank Niaga		—		14,138
Bank Bukopin		4,574		1,886
Bank Mega		1,830		—

		1,652,301		1,022,398

Sub-total		3,546,406		2,754,634

Total time deposits		5,937,405		6,863,638

Grand Total		6,493,187		7,545,364

Interest rates per annum on time deposits are as follows:


	2007			2008
Rupiah		2.50% - 10.75	%		2.25% - 12.80	%
Foreign currencies		0.65% - 5.35	%		1.00% - 5.25	%

		The related parties which the Company and its subsidiaries place their funds are Government-owned banks. The Company and its subsidiaries placed a majority of their cash and cash equivalents in these banks because they have the most extensive branch network in Indonesia and are considered to be financially sound banks as they are owned by the Government.

		Refer to Note 44 for details of related party transactions.

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES


6.		TRADE RECEIVABLES

Trade receivables arose from services provided to both retail and non-retail customers, with details as follows:

By debtor

(i)

Related parties


	2007			2008
Government Agencies		580,713			501,175
CSM		40,816			41,639
PT Patra Telekomunikasi Indonesia (“Patrakom”)		16,309			16,614
PT Graha Informatika Nusantara (“Gratika”)		4,718			3,497
PT Aplikanusa Lintasarta (“Lintasarta”)		8,623			3,746
Others		11,422			8,568

Total		662,601			575,239
Allowance for doubtful accounts		(94,989	)		(181,774	)

Net		567,612			393,465

Trade receivables from certain related parties are presented net of the Company and its subsidiaries’ liabilities to such parties due to legal right of offset in accordance with agreements with those parties.

(ii)

Third parties


	2007			2008
Residential and business subscribers		3,625,977			3,731,282
Overseas international carriers		325,127			105,340

Total		3,951,104			3,836,622
Allowance for doubtful accounts		(1,031,541	)		(1,056,359	)

Net		2,919,563			2,780,263

By age

(i)

Related parties


	2007			2008
Up to 6 months		469,438			499,112
7 to 12 months		28,169			33,278
13 to 24 months		93,816			29,131
More than 24 months		71,178			13,718

Total		662,601			575,239
Allowance for doubtful accounts		(94,989	)		(181,774	)

Net		567,612			393,465

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES


6.		TRADE RECEIVABLES (continued)

By age (continued)

(ii)

Third parties


	2007			2008
Up to 3 months		2,924,089			2,808,979
More than 3 months		1,027,015			1,027,643

Total		3,951,104			3,836,622
Allowance for doubtful accounts		(1,031,541	)		(1,056,359	)

Net		2,919,563			2,780,263

By currency

(i)

Related parties


	2007			2008
Rupiah		581,499			566,203
U.S. Dollars		81,102			9,036

Total		662,601			575,239
Allowance for doubtful accounts		(94,989	)		(181,774	)

Net		567,612			393,465

(ii)

Third parties


	2007			2008
Rupiah		3,505,342			3,397,596
U.S. Dollars		445,762			439,026

Total		3,951,104			3,836,622
Allowance for doubtful accounts		(1,031,541	)		(1,056,359	)

Net		2,919,563			2,780,263

Movements in the allowance for doubtful accounts


	2007			2008
Beginning balance		784,789			1,100,456
Additions (Note 37)		369,162			436,929
Bad debts write-off		(27,421	)		(299,252	)

Ending balance		1,126,530			1,238,113

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES


6.		TRADE RECEIVABLES (continued)

	d.		Movements in the allowance for doubtful accounts (continued)

			Management believes that the allowance for doubtful accounts is adequate to cover probable losses on non-collection of the accounts receivable.

			Except for the amounts receivable from the Government Agencies, management believes that there were no significant concentrations of credit risk on these receivables. The Company and its subsidiaries do not have any off-balance sheet credit exposures related to their customers.

			Certain trade receivables of the Company’s subsidiaries have been pledged as collateral for lending agreements (Notes 19 and 23).

			Refer to Note 44 for details of related party transactions.


7.		INVENTORIES


	2007			2008
SIM cards, RUIM cards and prepaid voucher blanks		88,260			174,578
Modules		118,820			146,346
Components		48,225			141,454

Total		255,305			462,378

Allowance for obsolescence
Modules		(46,614	)		(57,083	)
Components		(5,856	)		(5,379	)
SIM cards, RUIM cards and prepaid voucher blanks		(370	)		—

Total		(52,840	)		(62,462	)

Net		202,465			399,916

Movements in the allowance for obsolescence are as follows:


	2007			2008

Beginning balance		48,098			54,701
Additions (Note 37)		8,073			8,050
Inventories write-off		(3,331	)		(289	)

Ending balance		52,840			62,462

		Components and modules represent telephone terminals, cables, transmission installation spare parts and other spare parts.

		Management believes that the allowance is adequate to cover probable losses from decline in inventory value due to obsolescence.

		As of September 30, 2008, certain inventories held by the Company have been insured against fire, theft and other specific risks. Total sum insured as of September 30, 2008 amounted Rp.88,968 million (Note 44d.vii).

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES


7.		INVENTORIES (continued)

		Certain inventories held by a certain subsidiary have been insured against all risk industrial with PT Advis Terapan Proteksindo, an insurance company in association with ATP Insurance, with total sum insured as of September 30, 2008 amounted to Rp.5,557 million.

		Management believes that the insurance coverage is adequate.


8.		PREPAID EXPENSES


	2007		2008
Rental		2,072,300		1,397,238
Salaries		314,691		312,552
Insurance		29,723		106,217
Telephone directory issuance costs		2,914		2,578
Others		10,739		42,348

Total		2,430,367		1,860,933

Refer to Note 44 for details of related party transactions.


9.		RESTRICTED TIME DEPOSITS

This account consists of the Company’s time deposits of US$0.072 million (equivalent to Rp.659 million) and Rp.5,530 million as of September 30, 2007 and US$0.36 million (equivalent to Rp.3,372 million) and Rp.10,502 million as of September 30, 2008, Infomedia’s time deposit of Rp.2,271 million and Rp.5,170 million as of September 30, 2007 and 2008, respectively, and TII’s time deposit of Rp.2,000 million as of September 30, 2008, which were pledged as collateral for bank guarantees to Bank Mandiri (Note 44).


10.		LONG-TERM INVESTMENTS


	2007
	Percentage
	of		Beginning				Share of		Translation		Ending
	ownership		balance		Addition		net income		adjustment		balance
Equity method:
CSM		25.00		53,114		—		2,339		355		55,808
Patrakom		40.00		26,007		—		4,580		—		30,587
PSN		22.38		—		—		—		—		—

				79,121		—		6,919		355		86,395

Cost method:
Bridge Mobile Pte. Ltd. (“BMPL”)		10.00		9,290		5,453		—		—		14,743
PT Batam Bintan Telekomunikasi (“BBT”)		5.00		587		—		—		—		587
PT Pembangunan Telekomunikasi Indonesia (“Bangtelindo”)		3.18		199		—		—		—		199

				10,076		5,453		—		—		15,529

				89,197		5,453		6,919		355		101,924

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES


10.		LONG-TERM INVESTMENTS (continued)


	2008
	Percentage
	of		Beginning							Share of		Translation			Ending
	ownership		balance		Addition		Dividend			net income		adjustment			balance
Equity method:
CSM		25.00		57,240		—		—			1,744		(1,212	)		57,772
Patrakom		40.00		32,892		—		(1,944	)		732		—			31,680
PSN		22.38		—		—		—			—		—			—

				90,132		—		(1,944	)		2,476		(1,212	)		89,452

Cost method:
BMPL		10.00		20,360		—		—			—		—			20,360
BBT		5.00		587		—		—			—		—			587
Bangtelindo		2.11		199		—		—			—		—			199
Scicom (MSC) Berhad (“Scicom”)		9.81		2,712		28,249		—			—		—			30,961

				23,858		28,249		—			—		—			52,107

				113,990		28,249		(1,944	)		2,476		(1,212	)		141,559

	a.		CSM

			CSM is engaged in providing Very Small Aperture Terminal (“VSAT”), network application services and consulting services on telecommunications technology and related facilities.

			As of September 30, 2007 and 2008, the carrying amount of the investment in CSM was equal to the Company’s share in the net assets of CSM.

	b.		Patrakom

			Patrakom is engaged in providing satellite communication system services, related services and facilities to companies in the petroleum industry.

			The increase of ownership in Patrakom in 2007 represents an adjustment arising from the difference between the book value and the initial investment was made in 2005.

			Pursuant to the AGM of Stockholders as stated in notarial deed No. 235 of Sutjipto, S.H. M.Kn. dated April 30, 2008, Patrakom’s stockholders approved the distribution of cash dividends for 2007 amounting to Rp.4,859 million and the appropriation of Rp.607 million for general reserves. The Company’s share of the dividend amounting to Rp.1,944 million.

			As of September 30, 2007 and 2008, the carrying amount of investment in Patrakom was approximate to the Company’s share in the net assets of Patrakom.

	c.		PSN

			PSN is engaged in providing satellite transponder leasing and satellite-based communication services in the Asia Pacific region. The Company’s share in losses in PSN has exceeded the carrying amount of its investment since 2001, accordingly, the investment value has been reduced to Rp.nil.

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES


10.		LONG-TERM INVESTMENTS (continued)

	d.		BMPL

			BMPL (Singapore), an associated entity of Telkomsel, is engaged in providing regional mobile services in the Asia Pacific region.

			Subsequently, on March 7, 2007, it was resolved that each of the stockholders shall subscribe for 1,500,000 additional shares of BMPL, subject to the accession of SK Telecom Co., Ltd as a stockholder of BMPL. However, the additional subscription of 300,000 shares shall be cancelled if SK Telecom Co., Ltd becomes a stockholder of BMPL.

			Based on the Accession Agreement dated June 18, 2007, the stockholders of BMPL agreed to admit SK Telecom Co, Ltd as a stockholder of BMPL. Consequently, the additional subscription of 300,000 shares was cancelled. On the same date, the stockholders of BMPL also agreed to admit Advanced Info Service Public Company Limited as a stockholder of BMPL.

			In April and November 2007, Telkomsel has paid additional subscriptions of US$600,000, respectively (equivalent to Rp.5,453 million and Rp.5,615 million, respectively).

			As of September 30, 2007 and 2008, Telkomsel’s contributions which represent 10.81% and 10% ownership interest are US$1,600,000 (equivalent to Rp.14,743 million) and US$2,200,000 (equivalent to Rp.20,360 million), respectively.

	e.		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.

	f.		Bangtelindo

			Bangtelindo is primarily engaged in providing consultancy services on the installation and maintenance of telecommunications facilities.

			On July 19, 2007, based on decision of the EGM of stockholders as covered on notarial deed No. 38 of Dr. Wiratni Ahmadi, S.H. dated July 19, 2007, the Bangtelindo’s stockholders agreed the addition of paid in capital amounting to Rp.2,000 million from PT Fokus Investama Mondial’s (“FIM”) stockholders. As a result, the Company’s ownership in Bangtelindo has diluted to 2.41%.

			On February 5, 2008, based on decision of the EGM of stockholders as covered on notarial deed No. 85 of Dr. Wiratni Ahmadi, S.H. dated June 30, 2008, the Bangtelindo’s stockholders agreed to convert its reserve to shares of 1,200 shares amounting to Rp.1,200 million by the FIM’s stockholders resulted in dilution of the Company’s ownership in Bangtelindo to 2.11%.

	g.		Scicom

			Scicom is engaged in providing call center services in Malaysia. As of September 30, 2008, TII has purchased additional 26,000,000 Scicom shares or equivalent to 9.81% of TII’s total ownership with transaction value amounted to US$3.42 million (equivalent to Rp.30,961 million).

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

11.

PROPERTY, PLANT AND EQUIPMENT


	January 1,										September 30,
	2007		Additions		Deductions			Reclassifications			2007
At cost:
Direct acquisitions
Land		399,338		74,461		(50	)		(4,746	)		469,003
Buildings		2,758,673		91,808		—			69,679			2,920,160
Switching equipment		21,335,512		464,930		—			1,755,335			23,555,777
Telegraph, telex and data communication equipment		189,701		—		—			—			189,701
Transmission installation and equipment		34,621,302		2,142,427		—			5,418,911			42,182,640
Satellite, earth station and equipment		5,568,809		184,399		—			4,930			5,758,138
Cable network		19,515,317		284,127		—			(21,989	)		19,777,455
Power supply		3,269,686		17,407		—			827,076			4,114,169
Data processing equipment		5,332,847		287,494		—			408,848			6,029,189
Other telecommunications peripherals		626,631		15,127		—			(4,685	)		637,073
Office equipment		759,959		34,397		—			(67,004	)		727,352
Vehicles		171,778		72		(636	)		(10,481	)		160,733
Other equipment		113,093		17		—			—			113,110
Property under construction:
Buildings		35,105		54,846		—			(67,371	)		22,580
Switching equipment		1,334,956		768,980		—			(1,753,798	)		350,138
Transmission installation and equipment		2,987,094		5,330,754		—			(5,335,051	)		2,982,797
Cable network		7,159		14,933		(4,183	)		—			17,909
Power supply		17,644		866,704		—			(846,952	)		37,396
Data processing equipment		16		376,952		—			(333,750	)		43,218
Other telecommunication peripherals		—		928		—			—			928
Leased assets
Transmission installation and equipment		265,820		—		—			—			265,820

Total		99,310,440		11,010,763		(4,869	)		38,952			110,355,286

Accumulated depreciation and impairment:
Direct acquisitions
Buildings		1,290,020		127,424		—			(271	)		1,417,173
Switching equipment		11,195,005		1,748,494		—			(153	)		12,943,346
Telegraph, telex and data communication equipment		185,736		257		—			—			185,993
Transmission installation and equipment		12,163,943		2,900,200		—			(24,186	)		15,039,957
Satellite, earth station and equipment		1,947,875		315,893		—			2,296			2,266,064
Cable network		11,495,878		986,379		—			79,507			12,561,764
Power supply		1,500,435		267,642		—			(5,839	)		1,762,238
Data processing equipment		3,688,200		434,170		—			(34,257	)		4,088,113
Other telecommunications peripherals		587,545		9,825		—			10,636			608,006

Office equipment		593,038		26,169		—			(26,127	)		593,080
Vehicles		161,018		3,198		(614	)		(12,833	)		150,769
Other equipment		101,211		4,855		—			514			106,580
Leased assets
Transmission installation and equipment		133,476		108,341		—			—			241,817

Total		45,043,380		6,932,847		(614	)		(10,713	)		51,964,900

Net Book Value		54,267,060										58,390,386

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

11.

PROPERTY, PLANT AND EQUIPMENT (continued)


	January 1,		Acquisitions										September 30,
	2008		of Sigma		Additions		Deductions			Reclassifications			2008
At cost:
Direct acquisitions
Land		561,348		—		76,163		—			223			637,734
Buildings		2,961,302		38,783		84,977		(345	)		114,533			3,199,250
Switching equipment		24,293,139		—		49,759		—			1,152,934			25,495,832
Telegraph, telex and data communication equipment		156,036		—		959		—			(9,139	)		147,856
Transmission installation and equipment		44,758,386		—		1,226,605		(30,425	)		6,553,929			52,508,495
Satellite, earth station and equipment		5,979,626		—		350,514		—			(20,125	)		6,310,015
Cable network		20,669,529		—		801,735		—			(174,055	)		21,297,209
Power supply		4,416,077		—		60,205		—			760,767			5,237,049
Data processing equipment		6,527,841		14,523		401,966		(3	)		524,261			7,468,588
Other telecommunications peripherals		637,020		2,186		14,983		(757	)		(35,987	)		617,445
Office equipment		706,484		1,345		34,267		(2,147	)		(14,485	)		725,464
Vehicles		156,192		1,161		6,608		(466	)		(26,383	)		137,112
Other equipment		109,784		—		3,312		—			(1,512	)		111,584
Property under construction:
Buildings		86		—		176,005		—			(99,095	)		76,996
Switching equipment		83,740		—		1,073,660		—			(1,143,134	)		14,266
Transmission installation and equipment		2,525,030		—		7,904,033		—			(7,997,149	)		2,431,914
Satellite, earth station and equipment		3,557		—		12,211		—			(3,557	)		12,211
Cable network		381		—		38,291		—			(170	)		38,502
Power supply		37,979		—		749,457		—			(769,726	)		17,710
Data processing equipment		31,351		21,676		653,825		(6	)		(630,722	)		76,124
Leased assets
Vehicles		—		—		44,981		—			—			44,981
Transmission installation and equipment		283,813		—		37,020		—			6,022			326,855

Total		114,898,701		79,674		13,801,536		(34,149	)		(1,812,570	)		126,933,192

Accumulated depreciation and impairment:
Direct acquisitions
Buildings		1,465,078		—		147,025		—			(23	)		1,612,080
Switching equipment		13,562,557		—		1,803,594		—			1,308			15,367,459
Telegraph, telex and data communication equipment		152,427		—		583		—			(9,139	)		143,871
Transmission installation and equipment		16,178,965		—		3,438,437		(18,373	)		(1,423,934	)		18,175,095
Satellite, earth station and equipment		2,373,355		—		328,532		—			(4,068	)		2,697,819
Cable network		12,917,430		—		1,078,182		—			(198,760	)		13,796,852
Power supply		1,864,747		—		342,597		—			(7,758	)		2,199,586
Data processing equipment		4,324,279		—		694,367		—			(77,217	)		4,941,429
Other telecommunications peripherals		575,458		—		9,236		(56	)		(36,057	)		548,581
Office equipment		584,927		—		33,268		—			(11,990	)		606,205
Vehicles		147,055		—		3,466		(466	)		(26,288	)		123,767
Other equipment		100,437		—		2,431		—			(1,511	)		101,357
Leased assets
Vehicles		—		—		22,072		—			—			22,072
Transmission installation and equipment		188,094		—		3,163		—			310			191,567

Total		54,434,809		—		7,906,953		(18,895	)		(1,795,127	)		60,527,740

Net Book Value		60,463,892												66,405,452

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

11.

PROPERTY, PLANT AND EQUIPMENT (continued)

Gain on disposal or exchange of assets


	2007		2008
Proceeds from sale of property, plant and equipment		21,706		9,919
Net book value		72		59,291

(Loss) gain on disposal		21,634		(49,372	)

KSO assets ownership arrangements

	(i)		In accordance with the amended and restated KSO VII agreement with BSI, the ownership rights to the acquired property, plant and equipment in KSO VII are legally retained by BSI until the end of the KSO period which is on December 31, 2010. As of September 30, 2007 and 2008, the net book value of these property, plant and equipment was Rp.1,066,147 million and Rp.954,626 million, respectively.

	(ii)		In accordance with the amended and restated KSO IV agreement with PT Mitra Global Telekomunikasi Indonesia (“MGTI”), the ownership rights to the acquired property, plant and equipment in KSO IV are legally retained by MGTI until the end of the KSO period which is on December 31, 2010. As of September 30, 2007 and 2008, the net book value of these property, plant and equipment was Rp.894,158 million and Rp.587,019 million, respectively.

Assets impairment and related claims

	(i)		In the first quarter of 2005, the Government issued a series of regulations in its efforts to rearrange the frequency spectra utilized by the telecommunications industry. This action has resulted in the Company not being able to utilize certain frequency spectra it had used to support its fixed wireline cable network by the end of 2006. As a result of these regulations, certain of the Company’s cable network facilities within the fixed wireline segment, which comprised primarily of Wireless Local Loop (“WLL”) and Approach Link equipment operating in the affected frequency spectra, could no longer be used by the end of 2006. Hence, the Company had shortened the remaining useful lives for WLL and Approach Link equipment in the first quarter in 2005 and depreciated the remaining net book value of these assets through December 31, 2006.

	(ii)		Further, on August 31, 2005, MoCI issued a press release which announced that in order to conform with the international standards and as recommended by the International Telecommunications Union — Radiocommunication Sector (“ITU-R”), the 1900 MHz frequency spectrum would only be used for IMT-2000 or 3G network. In its press release, the MoCI also announced that the Code Division Multiple Access (“CDMA”)-based technology network which the Company used for its fixed wireless services could only operate in the 800 MHz frequency spectrum. The Company utilizes the 1900 MHz frequency spectrum for its fixed wireless network in Jakarta and West Java areas while for other areas, the Company utilizes the 800 MHz frequency spectrum.

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

11.

PROPERTY, PLANT AND EQUIPMENT (continued)

Assets impairment and related claims (continued)

	(ii)		(continued)

			On January 13, 2006, the MoCI issued MoCI Regulation No. 01/Per/M.KOMINFO/1/2006 which reaffirmed the Government’s decision that the Company’s fixed wireless network could only operate in the 800 MHz frequency spectrum and that the 1900 MHz will be allocated for 3G network. Following the preceding Government’s decisions, the Company reviewed the recoverable amount of cash-generating unit to which the affected fixed wireless asset belongs and in 2005, the Company had written-down Rp.616,768 million for transmission installation and equipment of fixed wireless assets. The recoverable amount was estimated using value in use which represented the present value of estimated future cash flows from cash-generating unit using a pretax discount rate of 16.89%, representing the Company’s weighted average cost of capital as of December 31, 2005. In determining cash-generating unit to which an asset belongs, assets were grouped at the lowest level that included the assets and generated cash inflows that were largely independent of the cash inflows from other assets or group of assets. In addition, the Company recognized a loss relating to non-cancelable contracts for procurement of the 1900 MHz transmission installation and equipment in Jakarta and West Java areas amounting to Rp.79,359 million.

			As a result of this Government’s decision, the Company’s Base Station System (“BSS”) equipment in Jakarta and West Java areas which are part of transmission installation and equipment for fixed wireless network could no longer be used by the end of 2007 with total acquisition cost amounted to Rp.1,330,818 million. The BSS equipment has been completely replaced with BSS equipment operating in 800 MHz by the end of December 2007. In June 2007, the Company has been fully depreciated the assets. Subsequently, in June 2008, the Company reclassified the assets under equipment not used in operation (Note 13).

	(iii)		As of September 30, 2007 and 2008, the Company operated two satellites, Telkom-1 and Telkom-2 primarily providing backbone transmission links for its network and earth station satellite up-linking and down-linking services to domestic and international users. As of September 30, 2008, there were no events or changes in circumstances that would indicate that the carrying amount of the Company’s satellites may not be recoverable.

	(iv)		On February 2, 2007, Jakarta and its surrounding, area of Divre II Jakarta were covered by flood where an insurance claim for the replacement of the assets has been agreed. Buildings and other equipments affected by the flood have been re-operated gradually and with full completion expected to be at the end of November 2008.

	(v)		On March 6, 2007, Padang within Divre I Sumatera experienced an earthquake where an insurance claim for the replacement of the assets has been made. The facilities have been re-operated gradually since September 2007.

	(vi)		On September 12, 2007, South and West Sumatera within Divre I Sumatera experienced an earthquake where an insurance claim for the replacement of the assets has been made. The facilities have been re-operated gradually since September 2007.

	(vii)		On July 9, 2008, Balikpapan and its surrounding, area of Divre VI Kalimantan were covered by flood where an insurance claim for the replacement of the assets has been made. Buildings and other equipments affected by the flood have been re-operated gradually since July 2008.

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

11.

PROPERTY, PLANT AND EQUIPMENT (continued)

Others

	(i)		Interest capitalized to property under construction amounted to Rp.nil for the nine months period ended September 30, 2007 and 2008, respectively.

	(ii)		Foreign exchange loss capitalized as part of property under construction amounted to Rp.nil for the nine months period ended September 30, 2007 and 2008, respectively.

	(iii)		As of September 30, 2008, Telkomsel capitalized Rp.6,608,896 million of its property, plant and equipment which was subject to price adjustment (Note 49a.ii). Part of the capitalized amount of Rp.5,027,080 million has been depreciated with total accumulated depreciation charged to the consolidated statement of income amounting to Rp.223,780 million (Rp.213,570 million of which was charged to current year consolidated statement of income). As of the date of the consolidated financial statements, the new agreements are still under negotiation; it is therefore not possible to determine adjustment, if any, to the property, plant and equipment as of September 30, 2008 and its related depreciation.

	(iv)		The Company and its subsidiaries own several pieces of land located throughout Indonesia with Building Use Rights (“Hak Guna Bangunan” or “HGB”) for a period of 20-30 years, which will expire between 2008 and 2038. Management believes that there will be no difficulty in obtaining the extension of the land rights when they expire.

	(v)		The Company was granted the right to use certain parcels of land by the Ministry of Communications and Information Technology of the Republic of Indonesia (formerly Ministry of Tourism, Post and Telecommunications) where they are still under the name of the Ministry of Tourism, Post and Telecommunications and the Ministry of Transportation of the Republic of Indonesia. The transfer to the Company of the legal title of ownership on those parcels of land is still in progress.

	(vi)		As of September 30, 2008, the Company’s and its subsidiaries’ property, plant and equipment, except for land, were insured with PT Asuransi Jasa Indonesia (“Jasindo”), PT Asuransi Ramayana, PT Asuransi Wahana Tata, PT Asuransi Export Indonesia, PT Asuransi Tugu Pratama, PT Asuransi Central Asia and PT Allianz Utama against fire, theft, earthquake and other specified risks. Total cost of assets being insured amounted to Rp.34,309,353 million and US$522.28 million, which was covered by sum insured basis with a maximum loss claim of Rp.1,354,420 million and on first loss basis of US$386.65 million and Rp.824,000 million including business recovery of Rp.324,000 million with Automatic Reinstatement of Loss Clause. In addition, the Telkom-1 and Telkom-2 were insured separately for US$34.04 million and US$51.26 million respectively. Management believes that the insurance coverage is adequate.

	(vii)		As of September 30, 2008, the completion of assets under construction was around 66.19% of the total contract value with estimated dates of completion to be between December 2008 up to May 2009. Management believes that there is no impediment to the completion of the construction in progress.

	(viii)		Certain property, plant and equipment of the Company’s subsidiaries have been pledged as collateral for lending agreements (Notes 19 and 23).

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

11.

PROPERTY, PLANT AND EQUIPMENT (continued)

Others (continued)

(ix)

The Company has lease commitments for transmission installation, vehicle, data processing and other equipment, with the option to purchase the leased assets at the end of the lease terms. Future minimum lease payments for the assets under capital leases as of September 30, 2007 and 2008 are as follows:


Year	2007			2008
2007		19,541			—
2008		78,373			105,815
2009		78,161			108,743
2010		78,161			100,921
2011		78,161			68,448
2012		48,916			30,143
Later		—			5,445

Total minimum lease payments		381,313			419,515
Interest		(164,405	)		(134,435	)

Net present value of minimum lease payments		216,908			285,080
Current maturities (Note 20a)		(26,025	)		(56,700	)

Long-term portion (Note 20b)		190,883			228,380

12.

PROPERTY, PLANT AND EQUIPMENT UNDER REVENUE-SHARING ARRANGEMENTS (“RSA”)


	January 1,										September 30,
	2007		Additions		Deduction			Reclassifications			2007
At cost:
Land		4,646		—		—			—			4,646
Buildings		5,110		—		—			—			5,110
Switching equipment		365,293		—		—			(46,461	)		318,832
Transmission installation and equipment		296,365		—		(47,106	)		(40,688	)		208,571
Cable network		618,845		—		—			(14,083	)		604,762
Other telecommunications peripherals		168,754		—		—			(862	)		167,892

Total		1,459,013		—		(47,106	)		(102,094	)		1,309,813

Accumulated depreciation:
Land		2,703		174		—			—			2,877
Buildings		2,926		191		—			—			3,117
Switching equipment		172,341		19,115		—			(73	)		191,383
Transmission installation and equipment		103,253		22,431		(16,545	)		(9,566	)		99,573
Cable network		124,740		30,024		—			(1,063	)		153,701
Other telecommunications peripherals		87,418		17,988		—			—			105,406

Total		493,381		89,923		(16,545	)		(10,702	)		556,057

Net Book Value		965,632										753,756

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

12.

PROPERTY, PLANT AND EQUIPMENT UNDER RSA (continued)


	January 1,							September 30,
	2008		Additions		Reclassifications			2008
At cost:
Land		4,646		—		(222	)		4,424
Buildings		3,982		—		(225	)		3,757
Switching equipment		286,688		—		(6,734	)		279,954
Transmission installation and equipment		179,785		—		(44,125	)		135,660
Cable network		583,353		—		(35,850	)		547,503
Other telecommunications peripherals		149,200		—		—			149,200

Total		1,207,654		—		(87,156	)		1,120,498

Accumulated depreciation:
Land		2,935		126		—			3,061
Buildings		2,435		148		(48	)		2,535
Switching equipment		169,663		17,916		(1,880	)		185,699
Transmission installation and equipment		90,141		9,291		(19,865	)		79,567
Cable network		144,603		35,915		(12,657	)		167,861
Other telecommunications peripherals		92,786		18,111		—			110,897

Total		502,563		81,507		(34,450	)		549,620

Net Book Value		705,091							570,878

		In accordance with RSA, the ownership rights to the property, plant and equipment under RSA are legally retained by the investors until the end of the revenue-sharing periods.

		The balances of unearned income on RSA as of September 30, 2007 and 2008, are as follows:


	2007			2008
Gross amount		1,309,814			1,120,498

Accumulated amortization:
Beginning balance		(641,839	)		(704,269	)
Additions (Note 34)		(212,468	)		(166,851	)
Deductions		102,094			87,156

Ending balance		(752,213	)		(783,964	)

Net		557,601			336,534

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES


13.		ADVANCES AND OTHER NON-CURRENT ASSETS

Advances and other non-current assets as of September 30, 2007 and 2008 consist of:


	2007		2008
Prepaid rent — net of current portion (Note 8)		—		863,451
Advances for purchase of property, plant and equipment		233,143		721,648
Deferred land rights charges		82,388		105,122
Security deposits		36,950		50,136
Equipment not used in operations — net		66,113		48,444
Restricted cash		92,280		1,514
Others		81,874		167,441

Total		592,748		1,957,756

		Deferred land rights charges represent costs to extend the contractual life of the land rights which have been deferred and amortized over the contractual life (Note 11d.iv).

		As of September 30, 2008, equipment not used in operations represents Base Transceiver Station (BTS) and other equipment of the Company and Telkomsel temporarily taken out from operations but planned to be reinstalled. Telkomsel’s depreciation charged to the consolidated statement of income for the nine months period ended September 30, 2007 and 2008 amounted to Rp.20,118 million and Rp.9,261 million, respectively.

		As of September 30, 2007 and 2008, certain Telkomsel’s equipment with a net carrying amount of Rp.116,336 million and Rp.1,131 million, respectively, was re-installed and subsequently reclassified to property, plant and equipment (Note 11).

		As of September 30, 2007 and 2008, restricted cash represented cash received from the Government relating to compensation for early termination of exclusive rights to be used for the construction of certain infrastructures (Notes 1a and 29) and time deposits with original maturities of more than one year pledged as collateral for bank guarantees.

		Refer to Note 44 for details of related party transactions.


14.		GOODWILL AND OTHER INTANGIBLE ASSETS

(i)

The changes in the carrying amount of goodwill and other intangible assets for the nine months period ended September 30, 2007 and 2008 are as follows:


				Other
				intangible
	Goodwill			assets			License			Total
Gross carrying amount:

Balance, September 30, 2007		106,348			7,602,847			436,000			8,145,195


Accumulated amortization:
Balance, December 31, 2006		(106,348	)		(3,590,563	)		(11,679	)		(3,708,590	)
Amortization expense for 9 months period (Note 37)		—			(751,968	)		(35,036	)		(787,004	)

Balance, September 30, 2007		(106,348	)		(4,342,531	)		(46,715	)		(4,495,594	)

Net Book Value		—			3,260,316			389,285			3,649,601

Weighted-average amortization period		—			7.58 years			9.50 years

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES


14.		GOODWILL AND OTHER INTANGIBLE ASSETS (continued)


				Other
				intangible
	Goodwill			assets			License			Total
Gross carrying amount:
Balance, December 31, 2007		106,348			7,602,847			436,000			8,145,195
Additions — Sigma		37,924			256,354			—			294,278
Additions — Sigma’s software		—			—			15,030			15,030
Additions — Indonusa		6,599			—			—			6,599

Balance, September 30, 2008		150,871			7,859,201			451,030			8,461,102

Accumulated amortization:
Balance, December 31, 2007		(106,348	)		(4,593,326	)		(58,393	)		(4,758,067	)
Amortization expense for 9 months period (Note 37)		(25,468	)		(752,560	)		(35,036	)		(813,064	)

Balance, September 30, 2008		(131,816	)		(5,345,886	)		(93,429	)		(5,571,131	)

Net Book Value		19,055			2,513,315			357,601			2,889,971

Weighted-average amortization period		5 years			7.58 years			9.50 years

	(ii)		Other intangible assets resulted from the acquisitions of Dayamitra, Pramindo, TII, KSO IV and KSO VII, and represented the rights to operate the business in the KSO areas. Goodwill resulted from the acquisition of GSD in 2001, Sigma in 2008 (Note 4), and Indonusa in 2008 (Notes 1d.b and c). Software license resulted from the acquisition of Sigma in 2008.

	(iii)		In 2006, Telkomsel was granted the right to operate the 3G license. Telkomsel is required to pay an up-front fee and annual BHP fee for the next ten years. The up-front fee is recorded as intangible asset and amortized using the straight-line method over the term of the right to operate the 3G license (10 years) which is extendable subject to evaluation. Amortization commenced in 2006 when the assets attributable to the provision of the related services became available for use.

			The up-front fee paid by Telkomsel in February 2006 for the 3G license amounting to Rp.436,000 million was recognized as intangible asset and is amortized over the term of the 3G license.

			Based on Telkomsel’s management interpretation of the license conditions and written confirmation from the DGPT, the 3G license may be returned at any time without any financial obligation to pay the remaining outstanding annual BHP fees. Accordingly, the annual BHP fees relating to 3G license are expensed when incurred. Telkomsel’s management assesses its plan to continue to use the license on an annual basis.

	(iv)		The estimated annual amortization expense relating to other intangible assets for each of the next three years beginning from October 1, 2008 would be approximately Rp.1,059,856 million per year.

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES


15.		ESCROW ACCOUNTS

Escrow accounts as of September 30, 2007 and 2008 consist of the following:


	2007		2008
Bank Mandiri		—		42,572
Bank Danamon		1,172		1,181
Others (each below Rp.1 billion)		226		108

		1,398		43,861

		The escrow accounts with Bank Mandiri were established in relation with the Palapa Ring Consortium Construction and Maintenance Agreement (“C&MA”) as an initial deposit 5% of the commitment value (Note 49c.iv).

		The escrow accounts with Bank Danamon were established in relation with the RSA in telecommunications equipment in Divre VII East Indonesia.

		Refer to Note 44 for details of related party transactions.


16.		TRADE PAYABLES


	2007		2008
Related parties
Concession fees		1,245,971		1,207,726
Purchases of equipment, materials and services		241,669		229,842
Payables to other telecommunications providers		133,449		78,542

Sub-total		1,621,089		1,516,110

Third parties
Purchases of equipment, materials and services		4,131,557		7,260,856
Payables related to RSA		144,798		97,312
Payables to other telecommunications providers		27,129		87,627

Sub-total		4,303,484		7,445,795

Total		5,924,573		8,961,905

Trade payables by currency are as follows:


	2007		2008
Rupiah		2,946,424		3,322,331
U.S. Dollars		1,787,661		3,435,105
Euro		1,188,029		2,195,718
Singapore Dollars		2,358		8,660
Japanese Yen		—		46
Great Britain Pound sterling		101		—
Others		—		45

Total		5,924,573		8,961,905

Refer to Note 44 for details of related party transactions.

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES


17.		ACCRUED EXPENSES


	2007		2008
Operations, maintenance and telecommunications services		1,029,348		1,300,760
Salaries and benefits		965,078		769,754
General, administrative and marketing		528,371		552,780
Interest and bank charges		130,947		251,431

Total		2,653,744		2,874,725


18.		UNEARNED INCOME


	2007		2008
Prepaid pulse reload vouchers		2,326,959		3,036,452
Other telecommunications services		3,962		28,614
Others		67,948		70,502

Total		2,398,869		3,135,568


19.		SHORT-TERM BANK LOANS


	2007		2008
Bank Niaga		29,002		35,000
Bank Syariah Mega		13,150		18,449
BNI		500,000		—
BCA		200,000		—
Bank Mandiri		200,000		—
Bank Bumiputera		8,000		—

Total		950,152		53,449

	a.		Bank Niaga

			On April 25, 2005, Balebat entered into a Rp.800 million, 12% per annum fixed rate revolving credit facility and Rp.1,600 million investment credit facility agreement with Bank Niaga. These credit facilities are secured by Balebat’s property located in West Java up to a maximum of Rp.3,350 million (Note 11). The applicable fixed interest rate and maturity date of the revolving credit facility was amended on July 26, 2005 from 12% per annum to 12.5% per annum and May 30, 2006, respectively and subsequently on June 13, 2006 to 16.5% per annum and May 30, 2007, respectively. Based on the latest amendment, the revolving credit facility amounting to Rp.800 million was combined with the short-term fixed credit facility of Rp.4,000 million (Note 23h). Additionally, Balebat obtained a credit facility of Rp.500 million with a fixed interest rate of 16.75% per annum, maturing on May 30, 2007. On May 23, 2007, the loan agreement was amended (4^th amendment agreement) to increase the maximum facility amount and interest rate to Rp.15,000 million and 13% per annum respectively, for the period up to May 29, 2008. On April 29, 2008, the loan agreement was amended to change the maturity period to May 29, 2009. As of September 30, 2007 and 2008, the principal outstanding amounted to Rp.14,002 million and Rp.15,000 million, respectively.

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES


19.		SHORT-TERM BANK LOANS (continued)

	a.		Bank Niaga (continued)

			On April 29, 2008, Balebat received an additional Specific Transaction Facility of Rp.5,000 million (Note 23h). The loan bears an interest rate of 11.5% per annum and will mature on May 29, 2009. As of September 30, 2008, the principal outstanding amounted to Rp.5,000 million.

			On October 18, 2005, GSD entered into a short-term loan agreement with Bank Niaga for an original facility of Rp.3,000 million for a one-year term. On November 3, 2006, the agreement was amended to change the interest rate from 16.25% per annum to 15.5% per annum and the maturity period to October 18, 2007. On November 23, 2007, the loan agreement was amended to change the total facility to Rp.15,000 million with an interest rate of 11% per annum and the maturity period to October 18, 2008. This credit facility is secured by GSD’s property, plant and equipment located in Jakarta (Note 11). As of September 30, 2007 and 2008, the principal outstanding amounted to Rp.8,000 million and Rp.8,000 million, respectively.

			In October 2005, GSD entered into a short-term facility agreement with Bank Niaga for an original facility of Rp.12,000 million, as amended on June 7, 2006 to Rp.7,000 million, and maturing on October 18, 2006. The loan agreement was amended twice, the latest on November 3, 2006, to change the interest rate from 16.25% per annum to 15.5% per annum for the period October 18, 2006 to October 18, 2007. The principal outstanding as of September 30, 2007 and 2008 was Rp.7,000 million and Rp.7,000 million, respectively.

	b.		Bank Syariah Mega

			On September 6, 2007, Infomedia entered into a Rp.13,650 million loan agreement with Bank Syariah Mega for financing the collection of call center business. The facility is obtained through sharia principles with the estimated rates on borrowing at 14% per annum, and is secured by the receivables from contact center (Note 6). The loan is payable within 3 months from the signing date. The principle outstanding as of September 30, 2007 was Rp.13,150 million. On December 12, 2007 the loan was fully repaid.

			On December 11, 2007, Infomedia entered into a Rp.10,535 million loan agreement with Bank Syariah Mega for working capital purpose. The facility is obtained through sharia principles with the estimated rates on borrowing at 14% per annum, and is secured by the receivables from contact center (Note 6). The loan is payable within 3 months from the signing date. Based on amendment on June 10, 2008 (2^ndamendment agreement), the maturity period of loan agreement was extended to September 11, 2008. On September 29, 2008 the loan was fully repaid.

			On March 31, 2008, Infomedia entered into Rp.8,812 million loan agreement with Bank Syariah Mega for working capital purpose. The facility is obtained through sharia principles with the estimated rates on borrowing at 14% per annum, and is secured by the receivables from contact center (Note 6). The loan is payable within 3 months from the signing date. Based on amendment on September 25, 2008 (2^nd amendment agreement), the maturity period of loan agreement was extended to December 28, 2008. The principal outstanding as of September 30, 2008 amounted to Rp.8,812 million.

			On June 5, 2008, Infomedia entered into Rp.9,637 million loan agreement with Bank Syariah Mega for working capital purpose. The facility is obtained through sharia principles with the estimated rates on borrowing at 14% per annum, and is secured by the receivables from contact center (Note 6). The loan is payable within 3 months from the signing date. Based on amendment on September 25, 2008, the maturity period of loan agreement was extended to December 11, 2008. The principal outstanding as of September 30, 2008 amounted to Rp.9,637 million.

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES


19.		SHORT-TERM BANK LOANS (continued)

	c.		BNI

			On August 15, 2006, Telkomsel signed a Rp.300,000 million short-term facility agreement with BNI, payable in 3 equal quarterly installments commencing after 3 months from the end of the availability period. The loan bore a floating interest rate of three-month Certificate of Bank Indonesia (“Sertifikat Bank Indonesia” or “SBI”) plus 1.5% per annum (9.33% per annum as of June 30, 2007) which becomes due quarterly in arrears and was unsecured. On June 28, 2007 the loan was fully repaid.

			On June 15, 2007, Telkomsel signed a Rp.300,000 million short-term facility agreement with BNI, payable in 3 equal quarterly installments commencing after 3 months from the end of the availability period. The loan bore a floating interest rate of three-month Jakarta Interbank Offered Rate (“JIBOR”) plus 1.25% per annum which becomes due quarterly in arrears and was unsecured. On July 24, 2007, the loan agreement was amended for additional facilities of Rp.200,000 million. The principal outstanding as of September 30, 2007 amounted to Rp.500,000 million and on March 28, 2008, the loan was fully repaid.

	d.		BCA

			On August 15, 2006, Telkomsel signed a Rp.350,000 million short-term facility agreement with BCA, payable in 3 equal quarterly installments commencing after 3 months from the end of the availability period. The loan bore a floating interest rate of three-month SBI plus 1.5% per annum (9.33% per annum as of June 30, 2007) which becomes due quarterly in arrears and was unsecured. On June 28, 2007, the loan was fully repaid.

			On June 15, 2007, Telkomsel signed a Rp.300,000 million short-term facility agreement with BCA, payable in 3 equal quarterly installments commencing after 3 months from the end of the availability period. The loan bore a floating interest rate of three-month JIBOR plus 1.25% per annum which becomes due quarterly in arrears and was unsecured. The principal outstanding as of September 30, 2007, amounted to Rp.200,000 million and on March 28, 2008, the loan was fully repaid.

	e.		Bank Mandiri

			On August 15, 2006, Telkomsel signed a Rp.350,000 million short-term facility agreement with Bank Mandiri, payable in 3 equal quarterly installments commencing after 3 months from the end of the availability period. The loan bore a floating interest rate of three-month SBI plus 1.5% per annum (9.33% per annum as of June 30, 2007) which becomes due quarterly in arrears and was unsecured. On June 28, 2007, the loan was fully repaid.

			On June 15, 2007, Telkomsel signed a Rp.300,000 million short-term facility agreement with Bank Mandiri, payable in 3 equal quarterly installments commencing 3 months from the end of the availability period. The loan bore a floating interest rate of three-month JIBOR plus 1.25% per annum which becomes due quarterly in arrears and was unsecured. The principal outstanding as of September 30, 2007, amounted to Rp.200,000 million and on March 28, 2008, the loan was fully repaid.

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES


19.		SHORT-TERM BANK LOANS (continued)

	f.		Bank Bumiputera

			On February 15, 2006, GSD entered into a Rp.8,000 million loan agreement with Bank Bumiputera with an interest rate of 17% per annum, unsecured and repayable by monthly installment within 12 months from the signing date to February 15, 2007. On February 27, 2007, the loan agreement was amended to extend the maturity period to February 27, 2008. As of December 31, 2006, the loan was fully drawn-down. The principal outstanding as of September 30, 2007, amounted to Rp.8,000 million and on November 23, 2007, the loan was fully repaid.

	g.		Bank Ekonomi

			On June 11, 2008 Sigma entered into a Rp.7,000 million short-term loan agreement with Bank Ekonomi for working capital purpose. The loan bears interest rate of 12.50% per annum and repayable within 3 months from the signing date to September 11, 2008. This facility is secured by Sigma’s account receivables (Note 6) amounted to Rp.14,000 million. On September 11, 2008 the loan was fully repaid.


20.		MATURITIES OF LONG-TERM LIABILITIES

Current maturities


	Notes		2007		2008
Bank loans		23		2,549,849		4,814,589
Deferred consideration for business combinations		24		1,079,988		1,141,940
Two-step loans		21		452,379		437,353
Obligations under capital leases		11		26,025		56,700

Total				4,108,241		6,450,582

Long-term portion


	(In billions of Rupiah)
	Notes		Total		2009		2010		2011		2012		Later
Bank loans		23		6,439.3		1,193.6		3,521.2		1,170.2		260.4		293.9
Two-step loans		21		3,468.1		89.6		414.7		387.4		389.3		2,187.1
Deferred consideration for business combinations		24		1,609.7		280.0		1,221.6		108.1		—		—
Obligations under capital leases		11		228.4		67.8		73.5		55.4		26.6		5.1

Total				11,745.5		1,631.0		5,231.0		1,721.1		676.3		2,486.1

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

21.

TWO-STEP LOANS

	a.		Two-step loans are unsecured loans obtained by the Government from overseas banks and consortium of contractors, which are then re-loaned to the Company. The loans entered into up to July 1994 were recorded and payable in Rupiah based on the exchange rate at the date of drawdown. 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:


	Interest rate						Outstanding
Creditors	2007			2008			2007			2008
Overseas banks		3.10% - 12.14	%		3.10% - 12.27	%		4,149,278			3,905,478
Consortium of contractors		3.20	%		—			29,723			—

Total								4,179,001			3,905,478
Current maturities (Note 20a)								(452,379	)		(437,353	)

Long-term portion (Note 20b)								3,726,622			3,468,125

The details of two-step loans obtained from overseas banks as of September 30, 2007 and 2008 are as follows:


	Interest rate						Outstanding
Currencies	2007			2008			2007		2008
U.S. Dollars		4.00% - 7.39	%		4.00% - 6.67	%		1,626,333		1,495,692
Rupiah		12.14	%		8.97% - 12.27	%		1,457,832		1,269,205
Japanese Yen		3.10	%		3.10	%		1,065,113		1,140,581

Total								4,149,278		3,905,478

			The loans are intended for the development of telecommunications infrastructure and supporting equipment. The loans are repayable in semi-annual installments and are due on various dates through 2024.

			The two-step loans which are payable in Rupiah bear either fixed interest rates and floating rates based upon the average interest rate on three-month SBI during the six-months preceding the installment due date plus 1% per annum, and floating interest rate offered by the lenders plus 5.25% per annum. Two-step loans which are payable in foreign currencies bear either fixed rate interests and the floating interest rate offered by the lenders, plus 0.5% per annum.

	c.		The two-step loans obtained from a consortium of contractors as of September 30, 2007 consisted of loans in Japanese Yen with an interest rate of 3.20% per annum.

			The consortium of contractors consists of Sumitomo Corporation, PT NEC Nusantara Communications and PT Humpuss Elektronika (SNH Consortium). The loans were obtained to finance the second digital telephone exchange project. The loans are repayable in semi-annual installments and are due on various dates through June 15, 2008.

			On June 15, 2008 the loan was fully repaid.

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

21.		TWO-STEP LOANS (continued)

		As of September 30, 2008, the Company has used all facilities under the two-step loans program and the drawdown period for the two-step loans has expired.

		The Company is required to maintain financial ratios as follows:

	a.		Projected net revenue to projected debt service ratio should exceed 1.5:1 and 1.2:1 for the two-step loans originating from the World Bank and Asian Development Bank (“ADB”), respectively.

	b.		Internal financing (earnings before depreciation and interest expense) should exceed 50% and 20% compared to annual average capital expenditures for loans originating from World Bank and ADB, respectively.

		As of September 30, 2008, the Company complied with the above mentioned ratios.

		Refer to Note 44 for details of related party transactions.

22.

NOTES AND BONDS


	2007
Bonds
Principal		—
Bond issuance costs		—

Net		—

Medium-term Notes
Principal		—
Debt issuance costs		—

Net		—

Total		—
Current maturities (Note 20a)		—

Long-term portion		—

	a.		Bonds

			On July 16, 2002, the Company issued a five-year bonds amounting to Rp.1,000,000 million, at par value. The bonds bore interest at a fixed rate of 17% per annum, payable quarterly beginning October 16, 2002 and secured with all assets owned by the Company. The bonds are traded on the Surabaya Stock Exchange and matured on July 16, 2007. The trustee of the bonds is BRI (effective from January 17, 2006 replacing BNI) and the custodian is PT Kustodian Sentral Efek Indonesia.

			Under the provisions of the bond, the Company is required to comply with all covenants or restrictions including maintaining certain consolidated financial ratios. The Company was also restricted from making any loans to or for the benefit of any person which in aggregate exceed Rp.500,000 million, in which the Company was not able to comply with in 2006. However, the Company has obtained a written waiver from BRI, the trustee of the bonds. The bonds were fully repaid on July 16, 2007.

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

22.

NOTES AND BONDS (continued)

	b.		Medium-term Notes (the “Notes”)

			On December 13, 2004, the Company entered into an agreement with PT ABN AMRO Asia Securities Indonesia, PT Bahana Securities, PT BNI Securities and PT Mandiri Sekuritas (collectively referred as “Initial Purchasers”) to issue Notes for a total principal amount of Rp.1,125,000 million. Proceeds from issuance of the Notes were used to finance the payment of the remaining balance of the borrowings assumed in connection with the TII acquisition amounting to US$123.0 million.

			The Notes consist of four Series with the following maturities and interest rates:


Series	Principal		Maturity	Interest rate
A		290,000	June 15, 2005		7.70	%
B		225,000	December 15, 2005		7.95	%
C		145,000	June 15, 2006		8.20	%
D		465,000	June 15, 2007		9.40	%

Total		1,125,000

			Interest on the Notes is payable semi-annually beginning June 15, 2005 through June 15, 2007. The Notes were unsecured and at all times ranked pari passu with other unsecured debts of the Company. The Company may, at any time, before the maturity dates of the Notes, repurchase the Notes in whole or in part.

			On June 15, 2005, December 15, 2005, June 15, 2006 and June 15, 2007, the Company repaid the Series A, Series B, Series C, and series D Notes, respectively.

23.		BANK LOANS

		The details of long-term bank loans as of September 30, 2007 and 2008 are as follows:


				2007					2008
		2008		Outstanding					Outstanding
				Original					Original
		Total facility		currency		Rupiah			currency		Rupiah
Lenders	Currency	(in millions)		(in millions)		equivalent			(in millions)		equivalent
The Export-Import Bank of Korea	US$		124		94.1		860,610			71		665,560
Bank Mandiri	Rp.		2,400,000		—		1,270,000			—		1,210,000
BCA	Rp.		2,423,000		—		950,000			—		1,450,000
Citibank	US$		113		27.4		250,687			4		37,970
	Euro		73		14.6		189,840			—		—
	Rp.		1,000,000		—		300,000			—		600,000
BNI	Rp.		3,550,000		—		680,000			—		2,960,000
Bank Lippo	Rp.		18,500		—		12,881			—		5,520
Bank Niaga	Rp.		39,300		—		24,140			—		28,064
Bank Bukopin	Rp.		5,300		—		3,486			—		2,409
BRI	Rp.		3,400,000		—		400,000			—		3,240,000
Bank Ekonomi	Rp.		60,000		—		—			—		54,362
Bank Syndication	Rp.		2,400,000		—		—			—		1,000,000

Total							4,941,644					11,253,885
Current maturities of bank loans (Note 20a)							(2,549,849	)				(4,814,589	)

Long-term portion (Note 20b)							2,391,795					6,439,296

Refer to Note 44 for details of related party transactions.

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

23.

BANK LOANS (continued)

	a.		The Export-Import Bank of Korea

			On August 27, 2003, the Company entered into a loan agreement with The Export-Import Bank of Korea for a loan facility of US$124 million, to finance the CDMA procurement from the Samsung Consortium. The facility bears interest, commitment and other fees totaling 5.68% per annum. The loan is unsecured and payable in 10 semi-annual installments on June 30 and December 30 of each year beginning in December 2006. The principal outstanding as of September 30, 2007 and 2008 amounted to US$94.1 million (equivalent to Rp.860,610 million) and US$71 million (equivalent to Rp.665,560 million), respectively.

	b.		Bank Mandiri

	(i)		On March 20, 2006, Telkomsel signed a loan agreement with Bank Mandiri for a facility of Rp.600,000 million, payable in 5 equal semi-annual installments commencing 6 months after the end of the availability period. The loan bears a floating interest rate of three-month SBI plus 1.75% per annum (9.79% per annum and 11.65% per annum as of September 30, 2007 and 2008, respectively) which becomes due quarterly in arrears and is unsecured. The principal outstanding as of September 30, 2007 and 2008 amounted to Rp.360,000 million and Rp.120,000 million, respectively.

	(ii)		On August 15, 2006, Telkomsel signed a medium-term facility loan agreement with Bank Mandiri for Rp.350,000 million, payable in 5 equal semi-annual installments commencing 6 months after the end of the availability period. The loan bears a floating interest rate of three-month SBI plus 1.5% per annum (9.51% per annum and 11.40% per annum as of September 30, 2007 and 2008, respectively) which becomes due quarterly in arrears and is unsecured. The principal outstanding as of September 30, 2007 and 2008 amounted to Rp.210,000 million and Rp.70,000 million, respectively.

	(iii)		On June 15, 2007, Telkomsel signed a medium-term facility loan agreement with Bank Mandiri of Rp.500,000 million. This facility is payable in 5 equal semi-annual installments commencing 6 months after the end of the availability period. The loan bears a floating interest rate of three-month JIBOR plus 1,25% per annum (9.40% per annum and 12.41% per annum as of September 30, 2007 and 2008, respectively) which becomes due quarterly in arrears and is unsecured. On July 24, 2007, the loan agreement has been amended with addition of total facilities provided amounted to Rp.200,000 million. The principal outstanding as of September 30, 2007 and 2008 amounted to Rp.700,000 million and Rp.420,000 million, respectively.

	(iv)		On October 24, 2007, Telkomsel signed a medium-term facility loan agreement with Bank Mandiri of Rp.750,000 million. This facility is payable in 5 equal semi-annual installments commencing 6 months after the end of the availability period. The loan bears a floating interest rate of three-month JIBOR plus 1.17% per annum (10.93% as of September 30, 2008) which becomes due quarterly in arrears and is unsecured. The principal outstanding as of September 30, 2008 amounted to Rp.600,000 million.

BCA

(i)

On April 10, 2002, the Company entered into a Term Loan Agreement HP Backbone Sumatra Project with BCA for a total facility of Rp.173,000 million, to finance the Rupiah portion of the high performance backbone network in Sumatra pursuant to the Partnership Agreement dated November 30, 2001 with PT Pirelli Cables Indonesia (“Pirelli Cables”) and PT Siemens Indonesia (“Siemens Indonesia”).

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

23.

BANK LOANS (continued)

BCA (continued)

	(i)		(continued)

			The amounts drawn from the facility bore interest rate of 4.35% per annum plus the three-month time deposit rate and were unsecured. The loans were payable in twelve unequal quarterly installments beginning in July 2004 and matured in April 2007.

			Based on the loan agreement, the Company is required to comply with all covenants or restrictions including maintaining financial ratios. In 2006, the Company breached a covenant in the loan agreement which stipulates that the Company will not make any loans to or for the benefit of any person which in aggregate exceed Rp.500,000 million. The Company obtained a written waiver from BCA with regard to providing loans to certain subsidiaries which in aggregate exceed Rp.500,000 million. The loan was fully repaid on April 10, 2007.

	(ii)		On March 16, 2006, Telkomsel signed a loan agreement with BCA for a facility of Rp.400,000 million, payable in 5 equal semi-annual installments commencing 6 months after the end of the availability period. The loan bears a floating interest rate of three-month SBI plus 1.75% per annum (9.79% per annum and 11.65% per annum as of September 30, 2007 and 2008, respectively) which becomes due quarterly in arrears and is unsecured. The principal outstanding as of September 30, 2007 and 2008 amounted to Rp.240,000 million and Rp.80,000 million, respectively.

	(iii)		On August 15, 2006, Telkomsel signed a medium-term facility loan agreement with BCA for Rp.350,000 million, payable for 5 equal semi-annual installments commencing 6 months after the end of the availability period. The loan bears a floating interest rate of three-month SBI plus 1.5% per annum (9.54% per annum and 11.40% per annum as of September 30, 2007 and 2008, respectively) which becomes due quarterly in arrears and is unsecured. The principal outstanding as of September 30, 2007 and 2008 amounted to Rp.210,000 million and Rp.70,000 million, respectively.

	(iv)		On June 15, 2007, Telkomsel signed a medium-term facility loan agreement with BCA of Rp.500,000 million, payable in 5 equal semi-annual installments commencing 6 months after the end of the availability period. The loan bears a floating interest rate of three-month JIBOR plus 1.25% per annum (9.40% per annum and 12.41% per annum as of September 30, 2007 and 2008, respectively) which becomes due quarterly in arrears and is unsecured. The principal outstanding as of September 30, 2007 and 2008 amounted to Rp.500,000 million and Rp.300,000 million, respectively.

	(v)		On July 14, 2008, Telkomsel signed a medium-term facility loan agreements with BCA of Rp.1,000,000 million. This facility is in 5 equal semi-annual installments commencing 6 months after the end of the availability period. The loan bears a floating interest rate of one-month JIBOR plus 1.5% per annum (12.24% per annum as of September 30, 2008) which becomes due quarterly in arrears and is unsecured. The principal outstanding as of September 30, 2008 amounted to Rp.1,000,000 million.

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

23.

BANK LOANS (continued)

Citibank

	1.		Hermes Export Facility

			On December 2, 2002, pursuant to the partnership agreement with Siemens Aktiengesellschaft (“AG”) (Note 49a.ii), Telkomsel entered into the Hermes Export Facility Agreement (“Facility”) with Citibank International plc (as “Original Lender” and “Agent”) and Citibank, Jakarta branch (“Arranger”) covering a total facility of Euro76.2 million divided into several tranches. The agreement was subsequently amended on October 15, 2003, amending the Facility amount to Euro73.4 million and the payment dates.

			The Facility bears interest rate based on the Euro Interbank Offered Rate (EURIBOR) plus 0.75% per annum (4.99% per annum as of September 30, 2007) and was unsecured. Interest was payable semi-annually, starting on the utilization date of the Facility (May 29, 2003). As of September 30, 2007 the outstanding balance was Euro14.6 million (equivalent to Rp.189,840 million) and on June 30, 2008, the loan was fully repaid.

			In addition to interest, Telkomsel was also charged an insurance premium for the guarantee given by Hermes in favor of Telkomsel for each loan utilization, 15% of which was paid in cash. The remaining balance was settled through utilization of the facility.

	2.		High Performance Backbone (“HP Backbone”) Loans

	a.		On April 10, 2002, the Company entered into a loan agreement with Citibank (“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$23.4 million. The facility which was unsecured, was obtained to finance 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” dated November 30, 2001, with Pirelli Cables and Siemens Indonesia for the construction and provision of a high performance backbone in Sumatra. The lender required a fee of 8.4% of the total facility, 15% of which was paid in cash and 85% was included in the loan balance.

			As of September 30, 2007 and 2008, the outstanding loan was US$6.3 million (equivalent to Rp.57,526 million) and US$2.1 million (equivalent to Rp.19,773 million), respectively. The loan is payable in 10 semi-annual installments beginning in April 2004 with interest at a rate equal to the six-month London Interbank Offered Rate (LIBOR) plus 0.75% per annum (3.47% per annum and 6.09% per annum as of September 30, 2007 and 2008, respectively).

	b.		On April 10, 2002, the Company entered into a loan agreement with Citibank (“Arranger”) and Citibank International plc (“Agent”), which was supported by an export credit guarantee obtained from Servizi Assicurativi del Commercio Estero (“SACE Italy”) providing a total maximum facility to US$21.0 million. The facility which was unsecured, was used to finance up to 85% of material and services procured in Italy in connection with the design, manufacture, development, installation and testing of Sub-System VI, as part of HP Backbone network.

			The loan bore a fixed interest rate of 4.14% per annum payable in 10 semi-annual installments beginning in December 2003. Total principal outstanding as of September 30, 2007 was US$3.7 million (equivalent to Rp.33,960 million) and on June 30, 2008, the loan was fully repaid.

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

23.

BANK LOANS (continued)

Citibank (continued)

	2.		High Performance Backbone (“HP Backbone”) Loans (continued)

			As stated in the agreements, the Company is required to comply with all covenants or restrictions including maintaining financial ratios as follows, in which the Company has complied with as of September 30, 2007 as follows:

	1.		Debt service coverage ratio should exceed 1.5:1.

	2.		Debt to equity ratio should not exceed:

	a.		3:1 for the period April 10, 2002 to January 1, 2003,

	b.		2.75:1 for the period January 2, 2003 to January 1, 2004,

	c.		2.5:1 for the period January 2, 2004 to January 1, 2005, and

	d.		2:1 for the period January 2, 2005 to the full repayment date of the loans.

Debt to EBITDA ratio should not exceed:

	a.		3.5:1 for the period April 10, 2002 to January 1, 2004, and

	b.		3:1 for the period January 2, 2004 to the full repayment date of the loans.

			In 2005, the Company has breached a covenant in the loan agreements which stipulate that the Company will not make any loans or grant any credit to or for the benefit of any person which in aggregate exceed 3% of stockholders’ equity. On May 12, 2006, the Company obtained a written waiver from Citibank International plc with regard to providing loans to certain subsidiaries which in aggregate exceed 3% of stockholders’ equity. In 2006, the Company has complied with the above covenant.

			As of June 21, 2007, the Company obtained a waiver letter from Citibank International plc with regard to providing loans facility. The waiver letter is intended to be valid until the loans facility have been fully repaid. As of September 30, 2007, the Company has complied with the above covenant.

	3.		EKN-Backed Facility

			On December 2, 2002, pursuant to the partnership agreement with PT Ericsson Indonesia (“Ericsson Indonesia”) (Note 49a.ii), Telkomsel entered into the EKN-Backed Facility agreement (“Facility”) with Citibank International plc (“Original Lender” and “Agent”) and Citibank, Jakarta branch (“Arranger”) covering a total Facility of US$70.5 million, divided into several tranches. The agreement was subsequently amended on December 17, 2004, to reduce the total Facility to US$68.9 million.

			The interest rate per annum on the Facility is determined based on Commercial Interest Reference Rate (CIRR) of 3.52% plus 0.5% per annum (4.02% as of September 30, 2007 and 2008, respectively) and is unsecured. Interest is payable semi-annually, starting on the utilization date of the Facility (July 31, 2003).

			In addition to interest, Telkomsel was also charged an insurance premium for the guarantee given by EKN in favor of Telkomsel for each loan utilization, 15% of which was paid in cash. The remaining balance was settled through utilization of the facility.

			No amounts were drawdown from the Facility in 2007 and 2008. As of September 30, 2007 and 2008, the outstanding balance was US$17.4 million (equivalent to Rp.159,201 million) and US$1.9 million (equivalent to Rp.18,197 million), respectively. This loan will due on December 30, 2008.

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

23.

BANK LOANS (continued)

Citibank (continued)

Medium term loan

	a.		On March 21, 2006, Telkomsel signed a medium term loan agreement with Citibank, Jakarta Branch for a facility of Rp.500,000 million, repayable in 5 equal semi-annual installments commencing 6 months after the end of the availability period. The loan bears a floating interest rate of three-month SBI plus 1.75% per annum (9.79% per annum and 11.65% per annum as of September 30, 2007 and 2008, respectively) which becomes due quarterly in arrears and is unsecured. The principal outstanding as of September 30, 2007 and 2008 amounted to Rp.300,000 million and Rp.100,000 million, respectively.

	b.		On October 24, 2007, Telkomsel signed a medium-term facility loan agreement with Citibank, Jakarta Branch of Rp.500,000 million. This facility is in 5 equal semi-annual installments commencing 6 months after the end of the availability period. The loan bears a floating interest rate of three-month JIBOR plus 1.09% per annum which becomes due quarterly in arrears and is unsecured. The principal outstanding as of September 30, 2008 amounted to Rp.500,000 million.

The following table summarizes the principal outstanding on the various long-term loans from Citibank as of September 30, 2007 and 2008:


		2007					2008
		Foreign					Foreign
		currencies		Rupiah			currencies		Rupiah
		(in millions)		equivalent			(in millions)		equivalent
Hermes Export Facility	Euro		14.6		189,840			—		—
HP Backbone loans	US$		10.0		91,486			2.1		19,773
EKN-Backed Facility	US$		17.4		159,201			1.9		18,197
Medium term loan	Rp.		—		300,000			—		600,000

Total					740,527					637,970
Current maturities					(603,624	)				(337,970	)

Long-term portion					136,903					300,000

BNI

	(i)		On August 15, 2006, Telkomsel signed a medium-term facility loan agreement with BNI for Rp.300,000 million, payable for 5 equal semi-annual installment commencing 6 months after the end of the availability period. The loan bears a floating interest rate of three-month SBI plus 1.5% per annum (9.54% per annum and 11,40% per annum as of September 30, 2007 and 2008, respectively) which becomes due quarterly in arrears and is unsecured. The principal outstanding as of September 30, 2007 and 2008 amounted to Rp.180,000 million and Rp.60,000 million, respectively.

	(ii)		On June 15, 2007, Telkomsel signed a medium-term facility loan agreement with BNI of Rp.500,000 million, payable in 5 equal semi-annual installments commencing 6 months after the end of the availability period. The loan bears a floating interest rate of three-month JIBOR plus 1.25% per annum (9.40% per annum and 12.41% per annum as of September 30, 2007 and 2008, respectively) which becomes due quarterly in arrears and is unsecured. The principal outstanding as of September 30, 2007 and 2008 amounted to Rp.500,000 million and Rp.300,000 million, respectively.

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

23.

BANK LOANS (continued)

BNI (continued)

	(iii)		On October 24, 2007, Telkomsel signed a medium-term facility loan agreement with BNI of Rp.750,000 million. This facility is in 5 equal semi-annual installments commencing 6 months after the end of the availability period. The loan bears a floating interest rate of three-month JIBOR plus 1.17% per annum (10.93% per annum as of September 30, 2008) which becomes due quarterly in arrears and is unsecured. The principal outstanding as of September 30, 2008 amounted to Rp.600,000 million.

	(iv)		On July 14, 2008, Telkomsel signed a medium-term facility loan agreements with BNI of Rp.2,000,000 million. This facility is in 5 equal semi-annual installments commencing 6 months after the end of the availability period. The loan bears a floating interest rate of one-month JIBOR plus 1.5% per annum (12.24% per annum as of September 30, 2008) which becomes due quarterly in arrears and is unsecured. The principal outstanding as of September 30, 2008 amounted to Rp.2,000,000 million.

	f.		Consortium of banks

			On June 21, 2002, the Company entered into a loan agreement with a consortium of banks for a facility of Rp.400,000 million, to finance the Divre V Junction Project. Bank Bukopin, acting as the facility agent, charged interest at the rate of 19% per annum for the first year from the signing date and at the rate of the highest average three-month deposit rate of each creditor plus 4% per annum for the remaining years. The drawdown period expires 19 months from the signing of the loan agreement and the principal is payable in 14 quarterly installments starting from April 2004. The loan facility is secured by project equipment, with a value of not less than Rp.500,000 million.

			Based on an addendum to the loan agreement dated April 4, 2003, the loan facility was reduced to Rp.150,000 million, the drawdown period was amended to expire 18 months from the signing of the addendum, the repayment schedule was amended to 14 quarterly installments starting from May 21, 2004 and ending on June 21, 2007, and the value of the project equipment secured was reduced to Rp.187,500 million. On June 22, 2007, the loan was fully repaid

	g.		Bank Lippo

			On May 29, 2006, Infomedia entered into a loan agreement with Bank Lippo for a facility of Rp.18,500 million, to finance its call center project with Telkomsel. The facility bears interest at 15.5% per annum and is secured by Infomedia’s receivables on the call center contract with Telkomsel amounted to Rp.23,125 million until the due date of the loan within 36 months from the withdrawal date (Note 6). As of September 30, 2007 and 2008, the principal outstanding amounted to Rp.12,881 million and Rp.5,520 million, respectively.

	h.		Bank Niaga

(i)

On December 28, 2004, Balebat entered into a loan agreement with Bank Niaga for a total facility of Rp.7,200 million comprising of Rp.5,000 million to finance the construction of plant (“Investment Facility”) with an interest rate of 13.5% per annum and Rp.2,200 million to finance certain purchases of machinery (“Specific Transaction Facility”) with an interest rate of 12% per annum. Through an amendment on December 1, 2005, the interest rate was subsequently increased to 17% per annum. The Investment Facility is repayable in 36 monthly installments commencing from March 31, 2005. The Specific Transaction Facility is repayable in 60 monthly installments commencing from June 29, 2005. These facilities are secured by Balebat’s property, plant and equipment with a total value of Rp.8,450 million (Note 11). As of September 30, 2007 and 2008, principal outstanding under these facilities amounted to Rp.2,055 million and Rp.770 million, respectively.

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

23.

BANK LOANS (continued)

Bank Niaga (continued)

	(i)		(continued)

			On December 22, 2005, the loan agreement was amended to include a short-term credit facility of Rp.4,000 million with maturity date and interest rate of December 22, 2006 and 12.5% per annum, respectively. On June 13, 2006, the facility was combined with the revolving credit facility of Rp.800 million (Note 19a).

			On June 13, 2006, Balebat also received an additional facility of Rp.2,500 million which consisted a facility of Rp.2,000 million to finance the purchase of a printing machine and Rp.500 million to finance the purchase of operational vehicles with an interest rate of 16.5% per annum. These facilities will be due on October 30, 2011 and November 28, 2009, respectively. Both facilities are secured by Balebat’s property located in West Java (Note 11). As of September 30, 2007, the outstanding loans of the facilities were Rp.1,361 million and Rp.nil, respectively, and as of September 30, 2008 was Rp.1,006 million and Rp.nil.

	(ii)		As discussed in Note 19a, on April 25, 2005, Balebat entered into a loan agreement with Bank Niaga for a total facility of Rp.2,400 million which includes an investment credit facility of Rp.1,600 million with maturity date of October 25, 2009. The investment credit facility loan is payable in 48 unequal monthly installments beginning in November 2005 through October 2009. The investment credit facility bears interest at a rate equal to market rate plus 2% per annum (16.5% per annum and 12% per annum as of September 30, 2007 and 2008). As of September 30, 2007 and 2008, the principal outstanding amounted to Rp.867 million and Rp.468 million respectively.

	(iii)		In March 2007, GSD entered into a loan agreement (2^nd special transaction loan agreement) with Bank Niaga for a total facility of Rp.20,000 million with an interest rate of 13% per annum. The facility is secured by a parcel of land of GSD (Note 11). The facility is payable in 8 years and the principal is payable in 33 quarterly installments and will be due in May 2015. As of September 30, 2007 and 2008, principal outstanding under these facilities amounted to Rp.19,857 million and Rp.19,150 million, respectively.

	(iv)		On November 23, 2007, GSD entered into a loan agreement (3^rd special transaction loan agreement) with Bank Niaga for a total facility of Rp.8,000 million with an interest rate of 11% per annum. The facility is secured by a parcel of land of GSD (Note 11). The facility is payable in 5 years and the principal is payable in 60 monthly installments and will be due on November 23, 2012. As of September 30, 2008, the principal outstanding amounted to Rp.6,670 million.

	i.		Bank Bukopin

			On May 11, 2005, Infomedia entered into loan agreements with Bank Bukopin for various facilities in a maximum of Rp.5,300 million to finance the acquisition of a property. The loan is payable in 60 monthly installments and bears an interest rate of 15.75% per annum and 14.5% per annum as of September 30, 2007 and 2008. A portion of the facilities of Rp.4,200 million will mature in June 2010 and the remainder of Rp.1,100 million will mature in December 2010. The facilities are secured by certain Infomedia’s property (Note 11). As of September 30, 2007 and 2008, the principal outstanding amounted to Rp.3,486 million and Rp.2,409 million, respectively.

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

23.

BANK LOANS (continued)

BRI

	(i)		On June 15, 2007, Telkomsel entered into a medium-term loan agreement with BRI for a facility of Rp.400,000 million. The loan is payable in 5 equal semi-annual installments commencing 6 months after the end of the availability period. The loan bears a floating interest rate of three-month JIBOR plus 1.25% per annum (9.40% per annum and 12.41% per annum as of September 30, 2007 and 2008, respectively) which becomes due quarterly in arrears and is unsecured. The principal outstanding as of September 30, 2007 and 2008 amounted to Rp.400,000 million and Rp.240,000 million, respectively.

	(ii)		On October 24, 2007, Telkomsel entered a medium-term facility loan agreement with BRI of Rp.2,000,000 million. The loan is payable in 5 equal semi-annual installments commencing 6 months after the end of the availability period. The loan bears a floating interest rate of three-month JIBOR plus 1.17% per annum (12.23% per annum as of September 30, 2008) which becomes due quarterly in arrears and is unsecured. The principal outstanding as of September 30, 2008 amounted to Rp.2,000,000 million.

	(iii)		On July 28, 2008, Telkomsel entered a medium-term facility loan agreement with BRI of Rp.1,000,000 million. This facility is in 5 equal semi-annual installments commencing 6 months after the end of the availability period. The loan bears a floating interest rate of one-month JIBOR plus 1.5% per annum (11.16% per annum as of September 30, 2008) which becomes due quarterly in arrears and is unsecured. As of September 30, 2008, the principal outstanding amounted to Rp.1,000,000 million.

Bank Ekonomi

	(i)		On December 7, 2006, Sigma entered into a facility loan agreement with Bank Ekonomi of Rp.14,000 million. The facility bears a floating interest rate from 9.50% per annum to 11.50% per annum (11.50% per annum as of September 30, 2008) and is payable in 63 monthly installments starting from September 12, 2007 and ending on December 12, 2012. As of September 30, 2008, the principal outstanding amounted to Rp.11,878 million.

	(ii)		On March 9, 2007, Sigma entered into a facility loan agreement with Bank Ekonomi of Rp.13,000 million. The facility bears a floating interest rate from 9.50% per annum to 11.50% per annum (11.50% per annum as of September 30, 2008) and is payable in 60 monthly installments starting from December 12, 2007 and ending on December 12, 2012. As of September 30, 2008, the principal outstanding amounted to Rp.9,484 million.

	(iii)		On September 10, 2008, Sigma entered into a facility loan agreement with Bank Ekonomi of Rp.33,000 million. The facility bears a floating interest rate (12.50% per annum as of September 30, 2008) and is payable in 78 monthly installments starting from March 11, 2009 and ending on March 11, 2015. As of September 30, 2008, the principal outstanding amounted to Rp.33,000 million.

These credit facilities are secured by a parcel of land of Sigma located in Surabaya (Note 11) and Sigma’s trade receivables of US$13.6 million (Note 6) and also includes certain restrictive covenants which require Sigma to obtain written consent from Bank Ekonomi prior to acting as guarantor for third party loan, mortgaging the land to other bank or third party, leasing the land to third party leasing the land to third party, withdrawing the facility exceeding the facility limit, and changing Sigma’s legal status.

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

23.

BANK LOANS (continued)

	k.		Bank Ekonomi (continued)

			Based on Sigma’s management opinion, there are no covenants that have not been met as of September 30, 2008.

	l.		Syndication of banks

			On July 29, 2008, the Company entered into a long-term loan agreements with syndication of BNI, BRI and Bank Jabar (syndication of banks) of Rp.2,400,000 million. Bank BNI, acting as the facility agent, charged a floating interest rate of three-month JIBOR plus 1.2% per annum (11.12% per annum as of September 30, 2008) which becomes due semi annually in arrears and is unsecured. As of September 30, 2008, the principal outstanding amounted to Rp.1,000,000 million.

24.		DEFERRED CONSIDERATION FOR BUSINESS COMBINATIONS

		Deferred consideration represent the Company’s obligations to the Selling Stockholders of TII in respect of the Company’s acquisition of 100% of TII, MGTI in respect of the Company’s acquisition of KSO IV, and BSI in respect of the Company’s acquisition of KSO VII, with details as follows:


	2007			2008
TII transaction
PT Aria Infotek		157,214			54,037
The Asian Infrastructure Fund		37,432			12,866
MediaOne International I B.V.		104,809			36,024
Less discount on promissory notes		(12,393	)		(29	)

		287,062			102,898

KSO IV transaction
MGTI		2,410,177			1,765,799
Less discount		(303,229	)		(157,166	)

		2,106,948			1,608,633

KSO VII transaction
BSI		1,752,912			1,226,176
Less discount		(366,919	)		(186,021	)

		1,385,993			1,040,155

Total		3,780,003			2,751,686
Current maturity — net of discount (Note 20a)		(1,079,988	)		(1,141,940	)

Long-term portion — net of discount (Note 20b)		2,700,015			1,609,746

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

24.

DEFERRED CONSIDERATION FOR BUSINESS COMBINATIONS (continued)

	a.		TII transaction

			The outstanding balance relating to TII transaction represents non-interest bearing promissory notes which were included in the purchase consideration, and arose from the acquisition of the 100% outstanding common shares of TII (previously the Company’s KSO III partner) on July 31, 2003. These promissory notes have initial face value of US$109.1 million (equivalent to Rp.927,272 million) and a present value at a discount rate of 5.16% at the closing date of US$92.7 million (equivalent to Rp.788,322 million). The promissory notes are payable in 10 equal semi-annual installment beginning July 31, 2004.

			As of September 30, 2007 and 2008, the outstanding promissory notes, before unamortized discount, amounted to US$32.7 million (equivalent to Rp.299,455 million) and US$10.9 million (equivalent to Rp.102,927 million), respectively.

	b.		KSO IV transaction

			The outstanding balance relating to KSO IV transaction arose from acquisition of KSO IV by the Company, based on amendment and restatement of KSO agreement entered into by the Company and MGTI on January 20, 2004. Based on the agreement, in consideration for the Company’s obtaining legal right to control the financial and operating decision of KSO IV, the Company has agreed to pay MGTI the total purchase price of approximately US$390.7 million (equivalent to Rp.3,285,362 million) which represents the present value of fixed monthly payments (totaling US$517.1 million), payable to MGTI beginning February 2004 through December 2010 at a discount rate of 8.3%, plus the direct cost of the business combination.

			As of September 30, 2007 and 2008, the remaining monthly payments to be made to MGTI, before unamortized discount, amounted to US$263.4 million (equivalent to Rp.2,410,177 million) and US$187.2 million (equivalent to Rp.1,765,799 million), respectively.

	c.		KSO VII transaction

			The outstanding balance relating to KSO VII transaction arose from acquisition of KSO VII by the Company, based on amendment and restatement of KSO agreement entered into by the Company and BSI on October 19, 2006. Based on the agreement, in consideration for the Company’s obtaining legal right to control the financial and operating decision of KSO VII, the Company has agreed to pay BSI the total purchase price of approximately Rp.1,770,925 million which represents the present value of fixed monthly payments (totaling Rp.2,359,230 million), payable to BSI beginning October 2006 through December 2010 at a discount rate of 15%, plus the direct cost of the business combination.

			As of September 30, 2007 and 2008, the remaining monthly payments to be made to BSI, before unamortized discount, amounted to Rp.1,752,912 million and Rp.1,226,176 million, respectively.

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

25.

MINORITY INTEREST


	2007		2008
Minority interest in net assets of subsidiaries:
Telkomsel		8,143,730		8,622,035
Infomedia		117,941		145,857
Metra		404		32,890
GSD		5		—

Total		8,262,080		8,800,782


	2007			2008
Minority interest in net income (loss) of subsidiaries:
Telkomsel		3,395,545			3,158,664
Infomedia		25,907			35,273
Metra		(3,177	)		2,157
GSD		1			—

Total		3,418,276			3,196,094

26.

CAPITAL STOCK


	2007
	Number of		Percentage		Total
Description	shares		of ownership		paid-up capital
Series A Dwiwarna share
Government		1		—		—
Series B shares
Government		10,320,470,711		51.76		2,580,118
JPMCB US Resident (Norbax Inc.)		1,598,757,327		8.02		399,689
The Bank of New York		1,728,090,496		8.67		432,023
Directors (Note 1b):
Ermady Dahlan		17,604		—		4
Indra Utoyo		5,508		—		1
Public (individually less than 5%)		6,290,317,133		31.55		1,572,580

Total		19,937,658,780		100.00		4,984,415
Treasury stock (Note 28)		222,340,500		—		55,585

Total		20,159,999,280		100.00		5,040,000

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

26.

CAPITAL STOCK (continued)


	2008
	Number of		Percentage		Total
Description	Shares		of Ownership		Paid-up Capital
Series A Dwiwarna share
Government		1		—		—
Series B shares
Government		10,320,470,711		52.44		2,580,118
JPMCB US Resident (Norbax Inc.)		1,383,633,901		7.03		345,909
The Bank of New York		1,851,712,416		9.41		462,928
Directors (Note 1b):
Ermady Dahlan		17,604		—		4
Indra Utoyo		5,508		—		1
Public (individually less than 5%)		6,123,996,139		31.12		1,530,999

Total		19,679,836,280		100.00		4,919,959
Treasury stock (Note 28)		480,163,000		—		120,041

Total		20,159,999,280		100.00		5,040,000

The Company only issued 1 Series A Dwiwarna Share which is held by the Government and cannot be transferred to any party, and has a veto in the General Meeting of the Stockholders with respect to election and removal of the Board of Commissioners and Directors and to amend the Company’s Articles of Association.

Series B shares give the same and equal rights to all the Series B stockholders.

27.

ADDITIONAL PAID-IN CAPITAL


	2007			2008
Proceeds from sale of 933,333,000 shares in excess of par value through IPO 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

28.

TREASURY STOCK

Based on the resolution on the EGM of Stockholders on December 21, 2005, the stockholders authorized the phase I plan to repurchase the Company’s issued and outstanding Series B shares. The proposals for a stock repurchase program are under the following terms and conditions: (i) maximum stock repurchase would be 5% of the Company’s issued Series B shares with total cost not to exceed Rp.5,250,000 million; and (ii) the period determined for the acquisition would not be longer than 18 months (December 21, 2005 to June 20, 2007).

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

28.

TREASURY STOCK (continued)

Based on the resolution on the AGM of Stockholders on June 29, 2007, the stockholders authorized to discontinue the phase I plan to repurchase the Series B shares and authorized the phase II plan to repurchase the Company’s issued and outstanding Series B shares. The proposals to undertake a stock repurchase programs, under the following terms and conditions: (i) maximum stock repurchase would be 215,000,000 of the Company’s issued Series B shares with total cost not to exceed Rp.2,000,000 million; and (ii) the period determined for the acquisition would not be longer than 18 months (June 29, 2007 to December 28, 2008).

Based on the resolution on the AGM of Stockholders on June 20, 2008, the stockholders authorized to discontinue the phase II plan to repurchase the Series B shares and authorized the phase III plan to repurchase the Company’s issued and outstanding Series B shares. The proposals to undertake a stock repurchase programs, under the following terms and conditions: (i) maximum stock repurchase would be 339,443,313 of the Company’s issued Series B shares with total cost not to exceed Rp.3,000,000 million; and (ii) the period determined for the acquisition would not be longer than 18 months (June 20, 2008 to December 20, 2009).

As of September 30, 2007 and 2008, the Company has repurchased 222,340,500 and 480,163,000 shares, respectively, of the Company’s issued and outstanding Series B shares, representing 1.10% and 2.38%, respectively, for a total repurchased amount of Rp.1,945,901 million in 2007 and Rp.4,202,255 million in 2008 (including broker’s commissions and custodian fees).

The Company has planned to retain, sell or use the treasury stock for other purposes in accordance with BAPEPAM-LK Regulation No. XI.B.2 and under Law No. 40/2007 on Limited Liability Companies (Note 52a).

The movement of shares held in treasury arising from the programs for repurchase of shares is as follows:

2007

2008

Number

of shares

Rp.

of shares

Rp.

Balance beginning

118,376,500

952,211

244,740,500

2,176,611

Number of shares acquired

103,964,000

993,690

235,422,500

2,025,644

Balance ending

222,340,500

1,945,901

480,163,000

4,202,255

Historical unit cost of repurchase of treasury shares:


	Rp.
	2007		2008
Weighted average		8,752		8,751
Minimum		6,633		6,628
Maximum		10,978		11,200

The acquisition cost per share has included all the cost for the shares repurchase programs (i.e. broker’s commissions and custodian fees). Up to the consolidated balance sheet date, none of the shares acquired were sold.

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

29.

DIFFERENCE IN VALUE ARISING FROM RESTRUCTURING TRANSACTIONS AND OTHER TRANSACTIONS BETWEEN ENTITIES UNDER COMMON CONTROL

The balance of this account amounting to Rp.270,000 million arose from the early termination of the Company’s exclusive rights to provide local and domestic fixed line telecommunication services. As discussed in Note 1a, on December 15, 2005, the Company signed an Agreement on Implementation of Compensation for Termination of Exclusive Rights with the State MoCI — DGPT, which was amended on October 18, 2006. Pursuant to this agreement, the Government agreed to pay Rp.478,000 million, net of tax, to the Company over a five-year period where Rp.90,000 million shall be paid from the 2005 State budget, Rp.90,000 million from the 2006 State budget and the remaining Rp.298,000 million shall be paid gradually or in one lump-sum payment based on the State’s financial ability. In addition, the Company is required by the Government to use the funds received from this compensation for the development of telecommunications infrastructure.

As of September 30, 2007 and 2008, the Company has received an aggregate of Rp.180,000 million and Rp.270,000 million, respectively, in relation to the compensation for the early termination of exclusivity rights, being Rp.90,000 million each paid on December 30, 2005, December 28, 2006 and December 13, 2007, respectively. The Company recorded these amounts in “Difference in value arising from restructuring transactions and other transactions between entities under common control” in the Stockholders’ Equity section. These amounts are recorded as a component of Stockholders’ Equity because the Government is the majority and controlling stockholder of the Company. The Company will record the remaining amount of Rp.208,000 million when received.

As of September 30, 2007 and 2008, the development of the related infrastructures amounted to Rp.190,998 million and Rp.296,872 million, respectively.

30.

TELEPHONE REVENUES


	2007		2008
Fixed lines
Local and SLJJ		5,401,757		4,613,580
Monthly subscription charges		2,783,349		2,756,481
Phone cards		819		7,715
Installation charges		88,785		(39,857	)
Others		190,919		114,928

Total		8,465,629		7,452,847

Cellular
Usage charges		16,242,014		17,267,588
Features		187,686		524,838
Monthly subscription charges		191,659		290,544
Connection fee charges		95,099		197,771

Total		16,716,458		18,280,741

Total Telephone Revenues		25,182,087		25,733,588

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

31.

INTERCONNECTION REVENUES


	2007			2008
Revenues		9,378,332			9,022,406
Expenses		(2,257,468	)		(2,383,169	)

Total — Net		7,120,864			6,639,237

Based on the MoCI Regulation No. 08/Per/M.KOMINFO/02/2006, the implementation of cost-based interconnection tariff is applicable beginning January 1, 2007 (Note 48).

Refer to Note 44 for details of related party transactions.

32.

DATA AND INTERNET REVENUES


	2007		2008
Short Messaging Services (SMS)		8,702,155		8,587,860
Internet		971,384		1,567,268
Data communication		308,058		475,328
Voice over Internet Protocol (“VoIP”)		157,899		108,409
e-Business		24,555		22,298

Total		10,164,051		10,761,163

33.

NETWORK REVENUES


	2007		2008
Leased lines		146,290		484,710
Satellite transponder lease		454,849		311,450

Total		601,139		796,160

Refer to Note 44 for details of related party transactions.

34.

REVENUE-SHARING ARRANGEMENTS (“RSA”) REVENUES


	2007		2008
RSA revenues		107,885		100,667
Amortization of unearned income (Note 12)		212,468		166,851

Total		320,353		267,518

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

35.

PERSONNEL EXPENSES


	2007			2008
Salaries and related benefits		2,065,715			2,154,453
Vacation pay, incentives and other benefits		1,960,950			1,871,994
Employees’ income tax		1,237,895			905,981
Net periodic post-retirement health care benefits costs (Note 43)		543,126			676,227
Net periodic pension costs (Note 41a)		342,965			529,736
Housing		184,314			175,573
Other post-retirement cost (Note 41b)		65,613			62,677
Additional old saving allowance		122,914			45,814
LSA costs (Notes 42a,b)		(379,782	)		14,933
Other employees’ benefits (Note 41c)		7,313			10,882
Medical		11,103			6,150
Others		26,271			36,363

Total		6,188,397			6,490,783

36.

OPERATIONS, MAINTENANCE AND TELECOMMUNICATION SERVICES EXPENSES


	2007		2008
Operations and maintenance		3,888,255		4,467,268
Radio frequency usage charges		792,494		1,718,590
Concession fees and Universal Service Obligation (“USO”) charges		752,713		780,453
Cost of phone, SIM and RUIM cards		430,140		578,705
Electricity, gas and water		356,438		380,249
Insurance		222,883		273,540
Leased lines		185,930		269,583
Vehicles rental and supporting facilities		169,984		163,858
Travelling		36,892		38,911
Others		4,933		67,063

Total		6,840,662		8,738,220

Refer to Note 44 for details of related party transactions.

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

37.

GENERAL AND ADMINISTRATIVE EXPENSES


	2007		2008
Amortization of goodwill and other intangible assets (Note 14)		787,004		813,064
Collection expenses		431,425		446,653
Provision for doubtful accounts and inventory obsolescence (Notes 6d and 7)		377,235		444,979
Security and screening		172,292		196,097
Traveling		193,235		180,748
Training, education and recruitment		155,246		176,863
Professional fees		74,002		77,285
General and social contribution		128,710		73,485
Meetings		65,311		67,308
Vehicles rental		69,346		60,470
Stationery and printing		57,546		48,306
Research and development		4,356		7,188
Others		23,300		34,322

Total		2,539,008		2,626,768

38.

TAXATION

In 2007, Telkomsel recognized a claim for tax refund amounting to Rp.12.5 billion (Note 38g) as a result of its revision to the 2004 and 2005 tax returns and Rp.408 billion as a result of its objection to the 2007 tax assessment (Note 38f).

Prepaid taxes


	2007		2008
Subsidiaries
Corporate income tax		—		73,163
Value Added Tax (“VAT”)		—		48,334
Income tax Article 23 — Services Delivery		3,048		26,513

		3,048		148,010

Taxes payable


	2007		2008
The Company
Income taxes
Article 21 — Individual income tax		181,861		169,344
Article 22 — Withholding tax on goods delivery and Import		3,215		6,458
Article 23 — Withholding tax on services delivery		9,072		19,395
Article 25 — Installment of corporate income tax		5,811		5,790
Article 26 — Withholding tax on non-resident income tax		2,026		6,383
Article 29 — Underpayment of corporate income tax		409,969		363,741
VAT		281,206		253,360

		893,160		824,471

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

38.

TAXATION (continued)

Taxes payable (continued)


	2007		2008
Subsidiaries
Income taxes
Article 21 — Individual income tax		23,724		36,294
Article 22 — Withholding tax on goods delivery and import		1		2
Article 23 — Withholding tax on services delivery		29,344		65,496
Article 25 — Installment of corporate income tax		238,379		419,190
Article 26 — Withholding tax on non-resident income tax		3,956		6,862
Article 29 — (Overpayment) underpayment of corporate income tax		885,268		(327,709	)
VAT		160,629		80,675

		1,341,301		280,810

		2,234,461		1,105,281

The components of income tax expense (benefit) are as follows:


	2007		2008
Current
The Company		1,258,795		1,470,362
Subsidiaries		3,935,795		3,516,696

		5,194,590		4,987,058


Deferred
The Company		417,924		52,968
Subsidiaries		309,205		370,352

		727,129		423,320


Benefits of deferred tax from reduction in tax rate
The Company		—		(167,079	)
Subsidiaries		—		(421,379	)

		—		(588,458	)

		5,921,719		4,821,920

Corporate income tax is computed for each individual company as a separate legal entity (consolidated financial statements are not applicable for computing corporate income tax in Indonesia).

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

38.

TAXATION (continued)

(continued)

The reconciliation between the consolidated income before tax and taxable income attributable to the Company and the consolidated income tax expense are as follows:


	2007			2008
Consolidated income before tax		19,159,050			16,937,902
Add back consolidation eliminations		6,383,151			6,019,451

Consolidated income before tax and eliminations		25,542,201			22,957,353
Less: income before tax of the subsidiaries		(14,046,427	)		(12,681,216	)

Income before tax attributable to the Company		11,495,774			10,276,137
Less: income subject to final tax		(464,792	)		(520,951	)

		11,030,982			9,755,186

Tax calculated at progressive rates		3,309,277			2,926,538
Non-taxable income		(1,917,021	)		(1,806,578	)
Non-deductible expenses		273,834			330,884
Deferred tax assets originating from previously unrecognized temporary differences — net		(47,807	)		10,029
Effect on the Company’s deferred tax liabilities of reduction in tax rate — net		—			(167,079	)

Corporate income tax expense		1,618,283			1,293,794
Final income tax expense		58,436			62,457

Total income tax expense of the Company		1,676,719			1,356,251
Income tax expense of the subsidiaries		4,245,000			3,887,048
Effect on subsidiaries’ deferred tax liabilities of reduction in tax rate — net		—			(421,379	)

Total consolidated income tax expense		5,921,719			4,821,920

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

38.

TAXATION (continued)

(continued)

The reconciliation between income before tax attributable to the Company and the estimated taxable income for the nine months period ended September 30, 2007 and 2008, are as follows:


	2007			2008
Income before tax attributable to the Company		11,495,774			10,276,137
Less: income subject to final tax		(464,792	)		(520,951	)

		11,030,982			9,755,186

Temporary differences:
Amortization of intangible assets		758,962			752,380
Depreciation of property, plant and equipment		204,095			315,463
Allowance for doubtful accounts		149,304			361,521
Accrued employees’ benefits		389,694			(288,081	)
Depreciation of property, plant and equipment under RSA		89,923			81,507
Capital leases		(24,167	)		(1,477	)
Allowance for inventory obsolescence		7,358			7,668
Amortization of land rights		(3,212	)		(2,827	)
Gain on sale of property, plant and equipment		(9,386	)		(7,282	)
Amortization of unearned income RSA		(177,035	)		(143,306	)
Trade receivables written-off		(115,634	)		(247,796	)
Net periodic pension costs and other-post retirement benefits costs		(224,252	)		(260,345	)
LSA		(425,143	)		—
Payments of deferred consideration for business combinations		(667,982	)		(661,956	)
Accrued early retirement benefits		(1,528,429	)		—
Foreign exchange (gain) loss on deferred consideration for business combinations		28,147			(32,089	)
Other provisions		(4,681	)		(16,508	)

Total temporary differences		(1,552,438	)		(143,128	)

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

38.

TAXATION (continued)

(continued)


	2007			2008
Permanent differences:
Net periodic post-retirement health care benefits costs		536,781			668,432
Amortization of goodwill		—			180
Amortization of discounts on promissory notes		18,418			8,753
Equity in net income of associates and subsidiaries		(6,390,070	)		(6,021,928	)
Others		357,581			425,580

Total permanent differences		(5,477,290	)		(4,918,983	)

Taxable income		4,001,254			4,693,075

Corporate income tax expense		1,200,359			1,407,905
Final income tax expense		58,436			62,457

Total current income tax expense of the Company		1,258,795			1,470,362
Current income tax expense of the subsidiaries		3,935,795			3,516,696

Total current income tax expense		5,194,590			4,987,058

Calculation of corporate income tax liability above was in accordance with annual tax return submitted by the Company to the Tax Office.

Tax assessment

In 2006, Telkomsel was assessed for underpayments of withholding taxes and VAT (self assessed) including penalty, covering the fiscal year 2002 totaling Rp.129 billion and overpayment of corporate income tax of Rp.5 billion. The net underpayment of Rp.124 billion was settled through the use of the payment of income tax in 2003 of Rp.24 billion and a cash payment of Rp.100 billion. Of the Rp.100 billion cash payment, Telkomsel has filed an objection for Rp.99 billion. Of the net underpayment of Rp.105 billion, Rp.83 billion was charged to expense in 2006 with the remaining amount of Rp.22 billion recorded as part of its claims for tax refund. In 2007, part the Telkomsel’s objection covering fiscal year 2002 of Rp.185 million was accepted by the Tax Authorities through a cash refund of Rp.176 million and through netting off against the Telkomsel’s tax underpayments during the previous periods amounting to Rp.9 million. The remaining balance was rejected by the Tax Authorities. On October 2, 2007 Telkomsel filed an appeal with the Tax Court for rejection of withholding taxes Article 23 and 26 of Rp.21 billion (Note 52b). Conservatively, the amount was charged to the consolidated statements of income.

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

38.

TAXATION (continued)

Tax assessment (continued)

	b.		In 2007, Telkomsel was assessed for underpayments of withholding taxes, VAT and corporate income tax including penalty covering the fiscal years 2004 and 2005 totaling Rp.478 billion. The underpayments were settled through netting off withholding tax paid in 2006 of Rp.25 billion and cash payments of Rp.453 billion. On January 3, 2008, Telkomsel filed an objection for underpayment of withholding taxes and VAT including a penalty totaling Rp.408 billion (Note 38a). Up to the issuance date of the consolidated financial statements, Telkomsel has not received the Tax Authorities’ decision on the objection. Telkomsel believes that such amount will be refundable, hence, recognized it as part of claim for tax refund. The Tax Authorities might raise similar issues for transactions occurred in subsequent fiscal years.

	c.		Considering the uncertain result of Telkomsel’s filing for judicial review in the Indonesian Supreme Court for claim of Rp.27 billion covering fiscal year 2001, Telkomsel has conservatively charged the amount to the consolidated statements of income.

Deferred tax assets and liabilities

The details of the Company and subsidiaries’ deferred tax assets and liabilities are as follows:


				(Charged)
				credited to the
				consolidated
	December 31,			to statements			September 30,
	2006			of income			2007
The Company
Deferred tax assets:
Deferred consideration for business combinations		1,249,332			(191,951	)		1,057,381
Allowance for doubtful accounts		263,321			45,198			308,519
Net periodic pension and other post-retirement benefits costs		361,839			(77,379	)		284,460
Accrued expenses		57,185			(1,404	)		55,781
Accrued for employees’ benefits		529,662			(341,621	)		188,041
Accrued LSA		117,440			(117,440	)		—
Capital leases		12,408			26,406			38,814
Allowance for inventory obsolescence		14,099			1,181			15,280

Total deferred tax assets		2,605,286			(657,010	)		1,948,276


Deferred tax liabilities:
Difference between book and tax property, plant and equipment’s net book value		(1,947,349	)		23,733			(1,923,616	)
Land rights		(3,800	)		(963	)		(4,763	)
RSA		(47,661	)		(11,373	)		(59,034	)
Intangible assets		(1,205,783	)		227,689			(978,094	)

Total deferred tax liabilities		(3,204,593	)		239,086			(2,965,507	)

Deferred tax liabilities of the Company — net		(599,307	)		(417,924	)		(1,017,231	)
Deferred tax liabilities of the subsidiaries — net		(2,066,090	)		(309,205	)		(2,375,295	)

Total deferred tax liabilities — net		(2,665,397	)		(727,129	)		(3,392,526	)

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES


38.		TAXATION (continued)

Deferred tax assets and liabilities (continued)


				(Charged)
				credited to the
				consolidated						Effect of
	December 31,			to statements			Acquisitions			reduction in			September 30,
	2007			of income			of Sigma			tax rate			2008
The Company
Deferred tax assets:
Deferred consideration for business combinations		1,010,035			(208,213	)		—			(94,293	)		707,529
Allowance for doubtful accounts		306,329			33,999			—			(45,327	)		295,001
Net periodic pension and other post-retirement benefits costs		375,994			(69,720	)		—			(43,996	)		262,278
Accrued expenses		76,686			(27,737	)		—			(9,306	)		39,643
Accrued for employees’ benefits		172,071			(86,424	)		—			(13,320	)		72,327
Capital leases		40,057			(4,590	)		—			(2,528	)		32,939
Allowance for inventory obsolescence		15,891			2,283			—			(2,740	)		15,434

Total deferred tax assets		1,997,063			(360,402	)		—			(211,510	)		1,425,151


Deferred tax liabilities:
Difference between book and tax property, plant and equipment’s net book value		(1,854,350	)		92,960			—			291,986			(1,469,404	)
Land rights		(4,592	)		(849	)		—			786			(4,655	)
RSA		(59,859	)		(10,391	)		—			10,419			(59,831	)
Intangible assets		(902,856	)		225,714			—			75,398			(601,744	)

Total deferred tax liabilities		(2,821,657	)		307,434			—			378,589			(2,135,634	)

Deferred tax liabilities of the Company — net		(824,594	)		(52,968	)		—			167,079			(710,483	)
Deferred tax liabilities of the subsidiaries — net		(2,209,506	)		(370,352	)		(81,499	)		421,379			(2,239,978	)

Total deferred tax liabilities — net		(3,034,100	)		(423,320	)		(81,499	)		588,458			(2,950,461	)

			Realization of the deferred tax assets is dependent upon profitable operations. Although realization is not assured, the Company and its subsidiaries believe that it is probable that these deferred tax assets will be realized through reduction of future taxable income. The amount of deferred tax assets is considered realizable, however, could be reduced if actual future taxable income is lower than their estimates.

			Telkomsel’s claims for overpayment of corporate income tax for fiscal years 2004 and 2005 due to recalculation of depreciation of property, plant and equipment in 2006 for tax purposes amounting to Rp.338 billion were rejected by the Tax Authorities, hence, it was reversed with a corresponding deduction to the deferred tax liability. The rejection of recalculation resulted to a recognition of overpayment of corporate income tax for 2006 of Rp.12.5 billion presented as part of claims for tax refund (Note 38a).

	h.		Administration

			Under the taxation laws of Indonesia, the Company and each subsidiary submit tax returns on the basis of self-assessment. The Tax Authorities may assess or amend taxes within the Statute of Limitations, under the prevailing regulations up to 2007.

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES


38.		TAXATION (continued)

	h.		Administration (continued)

			Based on a new Tax Law No. 28/2007 concerning the General Provision and Procedure of Taxation effective as of January 1, 2008, the Director General of Tax (“DGT”) may assess or amend taxes within ten years of the time the tax becomes due, or until the end of 2013, whichever is earlier. There are new rules applicable to fiscal year 2008 and subsequent years stipulating that the DGT may assess or amend taxes within five years of the time the tax becomes due.

			On September 23, 2008, the President of the Republic Indonesia and MoJHR has signed and enacted the Tax Law No. 36/2008 concerning the Forth Amendment of the Tax Law No. 7/1983 of Income Taxes. This regulation provides that corporate tax rate will be a flat rate of 28% in 2009 (previously calculated using progressive tax rates range from 10% to 30%), and 25% in 2010. A reduction of 5% from the top rate applies for certain companies listed and traded its stock in the IDX which meet the prescribed criteria that the stocks owned by the public are 40% or more of the total of fully paid and traded stocks in IDX, and such stocks are owned by at least 300 parties, each party owning less than 5% of the total paid-up stocks. These requirements should be fulfilled by the publicly-listed companies for a period of six months in one tax year.

			As of September 2008, the Company and certain subsidiaries measure the effect of the enacted tax rate of 28% and 25% for calculating its deferred tax assets and liabilities depending on the realization of its estimates.

			The Company has not been able to predict to meet the required criteria to avail of reduction of 5% from the top rate yet.

			The Company has been audited by the Tax Office up to the fiscal year of 2004, excluding fiscal year 2003, Telkomsel up to fiscal year 2005 excluding fiscal year 2003, GSD up to fiscal year 2002, and Infomedia up to fiscal year 2003. Currently, Telkomsel, PIN, and GSD are being audited by the Tax Office for the fiscal year 2006, 2007 and 2007, respectively.


39.		BASIC EARNINGS PER SHARE

		Basic earnings per share is computed by dividing net income by the weighted average number of shares outstanding during the year, totaling 19,972,103,556 and 19,774,345,563 for the nine months period ended September 30, 2007 and 2008, respectively.

		The Company does not have potentially dilutive ordinary shares.


40.		CASH DIVIDENDS AND GENERAL RESERVE

Pursuant to the AGM of Stockholders as stated in notarial deed No. 58 dated June 29, 2007 of A. Partomuan Pohan, S.H., LLM., the stockholders approved the distribution of cash dividends for 2006 amounting to Rp.6,053,067 million or Rp.303.21 per share (of which Rp.971,017 million or Rp.48.41 per share was distributed as interim cash dividend in December 2006) and the appropriation of Rp.4,897,482 million for general reserves.

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES


40.		CASH DIVIDENDS AND GENERAL RESERVE (continued)

Pursuant to the AGM of Stockholders as stated in notarial deed No. 248 dated June 20, 2008 of A. Partomuan Pohan, S.H., LLM., the stockholders approved the distribution of cash dividends for 2007 amounting to Rp.7,071,360 million or Rp.357.87 per share (of which Rp.965,398 million or Rp.48.45 per share was distributed as interim cash dividend in November 2007), the distribution of special cash dividends amounting to Rp.1,928,553 million and the appropriation of Rp.3,857,106 million for general reserves.


41.		PENSION AND OTHER POST-RETIREMENT BENEFITS

Pension

	1.		The Company

			The Company sponsors a defined benefit pension plan and a defined contribution pension plan.

			The defined benefit pension plan is provided to employees hired with permanent status prior to July 1, 2002. The pension benefits are paid based on the participating employees’ latest basic salary at retirement and the number of years of their service. The plan is managed by Telkom Pension Fund (“Dana Pensiun Telkom” or “Dapen”). The participating employees contribute 18% (before March 2003: 8.4%) of their basic salaries to the plan. The Company’s and subsidiaries’ contributions to the pension fund for the nine months period ended September 30, 2007 and 2008 amounted to Rp.525,121 million and Rp.666,201 million, respectively.

			The defined contribution pension plan is provided to employees hired with permanent status on or after July 1, 2002. The plan is managed by financial institutions pension fund (“DPLK”). The Company’s contribution to DPLK is determined based on certain percentage of the participants’ salaries and amounted to Rp.1,618 million and Rp.2,144 million for the nine months period ended September 30, 2007 and 2008, respectively.

			The following table presents the change in projected benefits obligation, change in plan assets, funded status of the plan and net amount recognized in the Company’s consolidated balance sheets for the nine months period ended September 30, 2007 and 2008, for its defined benefit pension plan:


	2007			2008
Change in projected benefits obligation
Projected benefits obligation at beginning of year		8,121,381			10,727,812
Service costs		152,706			211,601
Interest costs		646,630			807,727
Plan participants’ contributions		32,634			33,378
Actuarial gains		332,612			585,519
Expected benefits paid		(250,932	)		(331,198	)
Benefit changes		698,583			—

Projected benefits obligation at end of period		9,733,614			12,034,839

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES


41.		PENSION AND OTHER POST-RETIREMENT BENEFITS (continued)

Pension (continued)

The Company (continued)


	2007			2008
Change in plan assets
Fair value of plan assets at beginning of year		7,210,748			9,034,392
Expected return on plan assets		583,708			698,126
Employer’s contributions		525,122			666,201
Plan participants’ contributions		32,634			33,378
Actuarial (losses) gains		9,373			(1,444,003	)
Expected benefits paid		(250,932	)		(308,856	)

Fair value of plan assets at end of period		8,110,653			8,679,238

Funded status		(1,622,961	)		(3,355,601	)
Unrecognized prior service costs		1,645,318			1,490,096
Unrecognized net actuarial losses (gain)		(795,703	)		1,022,843

Accrued pension benefit cost		(773,346	)		(842,662	)

			In 2007, the Company provides pension benefit based on uniformulation for both participants prior to and from April 20, 1992 effective for employees retiring beginning February 1, 2009. The change in benefit had increased the Company’s liabilities by Rp.698,583 million, which is amortized over 9.9 years until 2016.

			The actual return on plan assets was Rp.796,090 million and Rp.681,493 million for the nine months period ended September 30, 2007 and 2008, respectively.

			The movement of the accrued pension benefits costs during the nine months period ended September 30, 2007 and 2008, is as follows:


	2007			2008
Accrued pension benefits costs at beginning of year		1,003,000			1,054,097
Net periodic pension cost		295,468			483,213
Employer’s contributions		(525,122	)		(666,201	)
Benefits to be paid by the Company		—			(28,447	)

Accrued pension benefits costs at end of period		773,346			842,662

As of September 30, 2008, plan assets included Series B shares issued by the Company with fair value totaling Rp.257,892 million represents 3.10% of total assets of Dapen as of September 30, 2008 (September 30, 2007: included Series B shares issued by the Company with fair value totaling Rp.267,013 million).

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES


41.		PENSION AND OTHER POST-RETIREMENT BENEFITS (continued)

Pension (continued)

	1.		The Company (continued)

			The actuarial valuation for the defined benefit pension plan and the other post-retirement benefits (Note 41b) was performed based on the measurement date as of December 31, 2006 and 2007, with reports dated April 24, 2007 and March 31, 2008, respectively, by PT Watson Wyatt Purbajaga (“WWP”), an independent actuary in association with Watson Wyatt Worldwide (“WWW”). The principal actuarial assumptions used by the independent actuary as of December 31, 2006 and 2007, are as follows:


	2006			2007
Discount rate		10.5	%		10.25	%
Expected long-term return on plan assets		10.5	%		10	%
Rate of compensation increases		8	%		8	%

The components of net periodic pension costs are as follows:


	2007			2008
Service costs		152,706			211,601
Interest costs		646,630			807,727
Expected return on plan assets		(583,708	)		(698,126	)
Amortization of prior service costs		104,267			165,991
Recognized actuarial losses		(24,427	)		(3,980	)

Total net periodic pension costs (Note 35)		295,468			483,213

	2.		Telkomsel

			Telkomsel provides a defined benefit pension plan to its employees. Under this plan, employees are entitled to pension benefits based on their latest basic salary or take-home pay and the number of years of their service. PT Asuransi Jiwasraya (“Jiwasraya”), a state-owned life insurance company, manages the plan under an annuity insurance contract. Until 2004, the employees contributed 5% of their monthly salaries to the plan and Telkomsel contributed any remaining amount required to fund the plan. Starting 2005, the entire contributions are fully made by Telkomsel.

			Telkomsel’s contributions to Jiwasraya amounted to Rp.38,268 million and Rp.40,634 million for the nine months period ended September 30, 2007 and 2008, respectively.

			The following table reconciles the unfunded status of the plans with the amounts included in the consolidated balance sheets as of September 30, 2007 and 2008:

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES


41.		PENSION AND OTHER POST-RETIREMENT BENEFITS (continued)

Pension (continued)

Telkomsel (continued)


	2007			2008
Projected benefits obligation		(272,701	)		(342,250	)
Fair value of plan assets		67,889			148,114

Unfunded status		(204,812	)		(194,136	)
Unrecognized items in the consolidated balance sheet:
Unrecognized prior service costs		(861	)		(798	)
Unrecognized net actuarial losses		163,929			123,288
Unrecognized net obligation at the date of initial application of PSAK 24		—			1,695

Accrued pension benefits costs		(41,744	)		(69,951	)

The components of the net periodic pension costs are as follows:


	2007			2008
Service costs		24,415			27,971
Interest costs		18,115			22,930
Expected return on plan assets		(1,674	)		(8,450	)
Amortization of past service costs		86			(47	)
Recognized actuarial losses		6,293			3,977
Amortization of net obligation at the date of initial application of PSAK 24		—			133

Net periodic pension costs (Note 35)		47,235			46,514

The net periodic pension cost for the pension plan was calculated based on the measurement date as of December 31, 2006 and 2007, with reports dated February 16, 2007 and March 25, 2008, respectively, by WWP, an independent actuary in association with WWW. The principal actuarial assumptions used by the independent actuary based on the measurement date of December 31, 2006 and 2007 for each of the year, are as follows:


	2006			2007
Discount rate		10.5	%		10.5	%
Expected long-term return on plan assets		7.5	%		10.5	%
Rate of compensation increases		8	%		8	%

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES


41.		PENSION AND OTHER POST-RETIREMENT BENEFITS (continued)

Pension (continued)

	3.		Infomedia

			Infomedia provides a defined benefit pension plan to its employees. The reconciliation of the funded status of the plan with the net amount recognized in the consolidated balance sheets as of September 30, 2007 and 2008, are as follows:


	2007			2008
Projected benefits obligation		(6,597	)		(6,307	)
Fair value of plan assets		6,696			7,004

Funded status		99			697

Prepaid pension benefits costs		99			697

The net periodic pension costs of Infomedia amounted to Rp.262 million and Rp.9 million for the nine months period ended September 30, 2007 and 2008, respectively (Note 35).

	b.		*Other post-retirement benefits*

			The Company provides other post-retirement benefits in the form of cash paid to employees on their retirement or termination. These benefits consist of last housing allowance (“Biaya Fasilitas Perumahan Terakhir” or “BFPT”) and home passage leave (“Biaya Perjalanan Pensiun dan Purnabhakti” or “BPP”). In 2005 and 2006, these benefits presented as part of LSA.

			The movement of the other post-retirement benefits for the nine months period ended September 30, 2007 and 2008, are as follows:


	2007			2008
Accrued other post-retirement benefits costs at beginning of year		131,317			195,061
Other post-retirement benefits costs		65,613			62,677
Other post-retirement benefits paid		(17,090	)		(22,694	)

Accrued other post-retirement benefits costs at end of period		179,840			235,044

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES


41.		PENSION AND OTHER POST-RETIREMENT BENEFITS (continued)

	b.		*Other post-retirement benefits* (continued)

			The components of the net periodic other post-retirement benefits costs for the nine months period ended September 30, 2007 and 2008, are as follows:


	2007		2008
Service costs		17,191		16,969
Interest costs		33,833		31,450
Amortization of past service costs		5,120		5,120
Recognized actuarial losses		9,469		9,138

Net periodic other post-retirement benefits costs (Note 35)		65,613		62,677

	c.		*Obligation under Labor Law*

			Under Law No. 13/2003 concerning labor regulation, the Company and its subsidiaries are required to provide a minimum pension benefits, if not covered yet by the sponsored pension plans, to their employees upon retirement age. The total related obligation recognized as of September 30, 2007 and 2008 amounted to Rp.26,728 million and Rp.65,765 million, respectively. The related employees’ benefits cost charged to expense amounted to Rp.7,313 million and Rp.10,882 million for the nine months period ended September 30, 2007 and 2008, respectively (Note 35).


42.		LONG SERVICE AWARDS (“LSA”)

	a.		*The Company*

			The Company provides certain cash awards to its employees based on length of service requirements. The benefits are either paid at the time the employees reach the anniversary dates during employment, or at the time of termination.

			The movements of the accrued LSA for the nine months period ended September 30, 2007 and 2008, are as follows:


	2007
Accrued LSA at beginning of year		391,467
LSA costs (see Note below and Note 35)		(391,467	)
LSA paid		—

Accrued LSA at end of period		—

In 2007, in relation to the termination of LSA, the Company recorded an actuarial gain of Rp.391,467 million, resulting from LSA obligation as of December 31, 2006.

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES


42.		LONG SERVICE AWARDS (“LSA”) (continued)

	a.		*The Company* (continued)

			The actuarial valuation for the LSA was performed based on the measurement date as of December 31, 2006, with reports dated April 24, 2007 respectively, by WWP, an independent actuary in association with WWW. The principal actuarial assumptions used by the independent actuary as of December 31, 2006 is as follows:


	2006
Discount rate		10.5	%
Rate of compensation increase		8	%

	b.		*Telkomsel*

			Telkomsel provides certain cash awards to its employees based on the employees’ length of service requirements. The benefits are either paid at the time the employees reach the anniversary dates during employment, or at the time of termination.

			The obligation with respect to these awards was determined based on the actuarial valuation using the Projected Unit Credit method, and amounted to Rp.66,743 million and Rp.83,630 million as of September 30, 2007 and 2008, respectively (Note 44). The related benefits cost charged to expense amounted to Rp.11,685 million and Rp.14,933 million for the nine months period ended September 30, 2007 and 2008, respectively (Note 35).


43.		POST-RETIREMENT HEALTH CARE BENEFITS

		The Company provides a post-retirement health care plan to all of its employees hired before November 1, 1995 who have worked for the Company for 20 years or more when they retire, and to their eligible dependents. The requirement of working for over 20 or more years does not apply to employees who retired prior to June 3, 1995. The employees hired by the Company starting from November 1, 1995 no longer be entitled to this plan. The plan is managed by Yayasan Kesehatan Pegawai Telkom (“Yakes”) (Note 44).

		The following table presents the change in the projected benefits obligation, change in plan assets, funded status of the plan and net amount recognized in the Company’s consolidated balance sheets as of September 30, 2007 and 2008:


	2007			2008
Change in projected benefits obligation
Projected benefits obligation at beginning of year		6,985,343			8,925,612
Service costs		84,877			107,986
Interest costs		543,028			677,624
Actuarial losses		111,711			1,052,567
Expected post-retirement health care paid		(134,633	)		(166,496	)
Impact from assumption changes		130,132			—

Projected benefits obligation at end of period		7,720,458			10,597,293

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES


43.		POST-RETIREMENT HEALTH CARE BENEFITS (continued)


	2007			2008
Change in plan assets
Fair value of plan assets at beginning of year		2,253,261			3,376,172
Expected return on plan assets		166,611			257,525
Employer’s contributions		780,000			800,000
Actuarial (losses) gains		69,265			(393,073	)
Expected post-retirement health care paid		(134,633	)		(166,496	)

Fair value of plan assets at end of period		3,134,504			3,874,128

Funded status		(4,585,954	)		(6,723,165	)
Unrecognized net actuarial losses		1,877,100			4,078,015

Accrued post-retirement health care benefits costs		(2,708,854	)		(2,645,150	)

		The actual return on plan assets was Rp.272,503 million and Rp.169,143 million for the nine months period ended September 30, 2007 and 2008, respectively.

		The components of net periodic post-retirement health care benefits cost are as follows:


	2007			2008
Service costs		84,877			107,986
Interest costs		543,028			677,624
Expected return on plan assets		(166,611	)		(257,525	)
Recognized actuarial losses		81,832			148,142

Total net periodic post-retirement health care benefits costs (Note 35)		543,126			676,227

		As of September 30, 2007, plan assets included the Company’s Series B shares with total fair value of Rp.55,770 million. As of September 30, 2008, plan assets included the Company’s Series B shares with total fair value of Rp.59,606 million.

		The movements of the accrued post-retirement health care benefits costs for the nine months period ended September 30, 2007 and 2008, are as follows:


	2007			2008
Accrued post-retirement health care benefits costs at beginning of year		2,945,728			2,768,923
Net periodic post-retirement health care benefits costs (Note 35)		543,126			676,227
Employer’s contributions		(780,000	)		(800,000	)

Accrued post-retirement health care benefits costs at end of period		2,708,854			2,645,150

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

43.

POST-RETIREMENT HEALTH CARE BENEFITS (continued)

The actuarial valuation for the post-retirement health care benefits was performed based on the measurement date as of December 31, 2006 and 2007, with reports dated April 24, 2007 and March 31, 2008, respectively, by WWP, an independent actuary in association with WWW. The principal actuarial assumptions used by the independent actuary as of December 31, 2006 and 2007, are as follows:


	2006			2007
Discount rate		10.5	%		10.25	%
Expected long-term return on plan assets		8.5	%		9	%
Health care costs trend rate assumed for next year		12	%		14	%
Ultimate health care costs trend rate		8	%		8	%
Year that the rate reaches the ultimate trend rate		2011			2011

A 1% change in assumed future health care costs trend rates would have the following effects:


	2006		2007
Service costs and interest costs		1,011,620		1,257,360
Accumulated post-retirement health care benefits obligation		8,327,481		10,569,613

44.

RELATED PARTY TRANSACTIONS

In the normal course of business, the Company and its subsidiaries entered into transactions with related parties. It is the Company’s policy that the pricing of these transactions be the same as those of arms-length transactions.

The following are significant agreements/transactions with related parties:

Government

	i.		The Company obtained two-step loans from the Government, the Company’s majority stockholder (Note 21).

			Interest expense for two-step loans amounted to Rp.230,664 million and Rp.97,853 million for the nine months period ended September 30, 2007 and 2008, respectively. Interest expense for two-step loans represent 21.55% and 9.77% of the total interest expense for each period.

	ii.		The Company and its subsidiaries pay concession fees for telecommunications services provided and radio frequency usage charges to the Ministry of Communications and Information (formerly, Ministry of Tourism, Post and Telecommunications) of the Republic of Indonesia.

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

44.

RELATED PARTY TRANSACTIONS (continued)

Government (continued)

	ii.		(continued)

			Concession fees amounted to Rp.417,078 million and Rp. 446,983 million for the nine months period ended September 30, 2007 and 2008, respectively (Note 36), representing 1.6%, respectively, of the total operating expenses for each period. Radio frequency usage charges amounted to Rp.792,494 million and Rp.1,718,590 million for the nine months period ended September 30, 2007 and 2008, respectively (Note 36), representing 3.1% and 6.3%, respectively, of the total operating expenses for each period.

			Telkomsel paid an up-front fee for the 3G license amounting to Rp.436,000 million and recognized as intangible asset (Note 14).

	iii.		Starting 2005, the Company and its subsidiaries pay USO charges to the Ministry of Communication and Information of the Republic of Indonesia pursuant to MoCI Regulation No.15/Per/M.KOMINFO/9/2005 of September 30, 2005.

			USO charges amounted to Rp.335,635 million and Rp.333,470 million for the nine months period ended September 30, 2007 and 2008, respectively (Note 36), representing 1.3% and 1.2%, respectively, of the total operating expenses for each period.

Commissioners and Directors remuneration

	i.		The Company and its subsidiaries provide honorarium and facilities to support the operational duties of their Board of Commissioners. The total of such benefits amounted to Rp.22,518 million and Rp.40,249 million for the nine months period ended September 30, 2007 and 2008, respectively, representing 0.1% and 0.2% of total operating expenses for each period.

	ii.		The Company and its subsidiaries provide salaries and facilities to support the operational duties of their Board of Directors. The total of such benefits amounted to Rp.65,956 million and Rp.99,779 million for the nine months period ended September 30, 2007 and 2008, respectively, representing 0.3% and 0.4% of total operating expenses for each period.

Indosat

The Company considers Indosat as a related party because the Government can exert significant influence over the financial and operating policies of Indosat by virtue of its right to appoint one Director and one Commissioner of Indosat.

The Company has an agreement with Indosat for the provision of international telecommunications services to the public.

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

44.

RELATED PARTY TRANSACTIONS (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 Telecommunications of the Republic of Indonesia. The international telecommunications services include telephone, telex, telegram, Package Switched Data Network (PSDN), television, teleprinter, Alternate Voice/Data Telecommunications (AVD), hotline and teleconferencing.

	ii.		The Company and Indosat are responsible for their respective telecommunications 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 MoC.

The Company has also entered into an interconnection agreement between the Company’s fixed line network (Public Switched Telephone Network or “PSTN”) and Indosat’s cellular network in connection with implementation of Indosat Multimedia Mobile services and the settlement of the related interconnection rights and obligations.

The Company also has an agreement with Indosat for the interconnection of Indosat’s GSM mobile cellular telecommunications network with the Company’s PSTN, enabling each party’s customers to make domestic calls between Indosat’s GSM mobile network and Telkom’s fixed line network and allowing Indosat’s mobile customers to access Telkom’s IDD service by dialing “007”.

The Company has been handling customer billings and collections 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.

On December 28, 2006, the Company and Indosat signed amendments to the interconnection agreements for the fixed line networks (local, SLJJ and international) and mobile network for the implementation of the cost-based tariff obligations under the MoCI Regulations No. 8/2006 (Note 48). These amendments took effect on January 1, 2007.

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

44.

RELATED PARTY TRANSACTIONS (continued)

	c.		Indosat (continued)

			Telkomsel also entered into an agreement with Indosat for the provision of international telecommunications services to its GSM mobile cellular customers. The principal matters covered by the agreement are as follows:

	i.		Telkomsel’s GSM mobile cellular telecommunications network is interconnected with PT Indosat’s international gateway exchanges to facilitate outgoing and incoming international calls.

	ii.		Telkomsel’s and Indosat’s GSM mobile cellular telecommunications networks are interconnected to allow cross-network communications among their subscribers.

	iii.		In exchange for these interconnections, Indosat is entitled to a certain amount as compensation.

	iv.		Interconnection equipment installed by one of the parties in another party’s premises remain the property of the party installing such equipment. Expenses incurred in connection with the provision of equipment, installation and maintenance are borne by Telkomsel.

The Company and its subsidiaries were charged net interconnection charges from Indosat of Rp.278,231 million and Rp.13,489 million for the nine months period ended September 30, 2007 and 2008, respectively, representing 0.61% and 0.03% of the total operating revenues in each period.

Telkomsel also has an agreement with Indosat on the usage of Indosat’s telecommunications facilities. The agreement, which was made in 1997 and is valid for eleven years, is subject to change based on annual review and mutual agreement by both parties. The charges for the usage of the facilities amounted to Rp.9,077 million and Rp.18,951 million for the nine months period ended September 30, 2007 and 2008, respectively, representing 0.04% and 0.07% of the total operating expenses in each period.

Other agreements between Telkomsel and Indosat are as follows:

	i.		Agreement on Construction and Maintenance for Jakarta-Surabaya Cable System (“J-S Cable System”)

			On October 10, 1996, Telkomsel, Lintasarta, Satelindo and Indosat (the “Parties”) entered into an agreement on the construction and maintenance of the J-S Cable System. The Parties have formed a management committee which consists of a chairman and one representative from each of the Parties to direct the construction and operation of the cable system. The construction of the cable system was completed in 1998. In accordance with the agreement, Telkomsel shared 19.325% of the total construction costs. Operating and maintenance costs are shared based on agreed formula.

			Telkomsel’s share in operating and maintenance costs amounted to Rp.282 million and Rp.353 million for the nine months period ended September 30, 2007 and 2008, respectively.

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

44.

RELATED PARTY TRANSACTIONS (continued)

Indosat (continued)

	ii.		Indefeasible Right of Use Agreement (“IRU”)

			On September 21, 2000, Telkomsel entered into agreement with Indosat on the use of SEA-ME-WE 3 and tail link in Jakarta and Medan. In accordance with the agreement, Telkomsel was granted an IRU for certain capacity of the link starting from September 21, 2000 until September 20, 2015 for an up-front payment of US$2.7 million. In addition to the up-front payment, Telkomsel is also charged annual operating and maintenance costs amounting to US$0.1 million.

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. 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 Rp.43,023 million to the Company for the 30 years right. Satelindo paid Rp.17,210 million in 1994 while the remaining balance Rp.25,813 million was not paid because the Utilization Right (“Hak Pengelolaan Lahan” or “HPL”) on the land could not be delivered as provided in the transfer agreement. In 2000, the Company and Satelindo agreed on an alternative solution resulting in the payment being treated as a lease expense up to 2006. In 2001, Satelindo paid an additional amount of Rp.59,860 million as lease expense up to 2024. As of September 30, 2007 and 2008, the prepaid portion is shown in the consolidated balance sheets as “Advances from customers and suppliers”.

The Company provides leased lines to Indosat and its subsidiaries, namely Indosat Mega Media and Lintasarta. The leased lines can be used by these companies for telephone, telegraph, data, telex, facsimile or other telecommunication services. Revenues earned from these transactions amounted to Rp.134,865 million and Rp.127,271 million for the nine months period ended September 30, 2007 and 2008, respectively, representing 0.3% of the total operating revenues for each period.

Lintasarta utilizes the Company’s satellite transponders or frequency channels. Revenues earned from these transactions amounted to Rp.7,593 million and Rp.15,541 million for the nine months period ended September 30, 2007 and 2008, respectively, representing less than 0.1% of total operating revenues for each period.

Telkomsel has an agreement with Lintasarta (valid until October 31, 2010) and PT Artajasa Pembayaran Elektronis (“Artajasa”) (valid until May 2008) (a 39.8% owned subsidiary of Indosat) for the usage of data communication network system. The charges from Lintasarta and Artajasa for the services amounted to Rp.23,580 million and Rp.25,046 million for the nine months period ended September 30, 2007 and 2008, respectively, representing 0.1% of the total operating expenses for each period.

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

44.

RELATED PARTY TRANSACTIONS (continued)

	d.		Others

			Transactions with all BUMN are considered as related parties transactions:

	(i)		The Company provides telecommunication services to substantially all Government agencies in Indonesia which transactions are treated as that of third parties customers.

	(ii)		The Company has entered into agreements with Government Agencies and associated companies, namely CSM, Patrakom and PSN, for the utilization of the Company’s satellite transponders or frequency channels. Revenues earned from these transactions amounted to Rp.82,508 million and Rp.78,974 million for the nine months period ended September 30, 2007 and 2008, respectively, representing 0.2% of the total operating revenues for each period.

	(iii)		The Company provides leased lines to associated companies, namely CSM, Patrakom and PSN. The leased lines can be used by the associated companies for telephone, telegraph, data, telex, facsimile or other telecommunications services. Revenues earned from these transactions amounted to Rp.46,682 million and Rp.48,940 million for the nine months period ended September 30, 2007 and 2008, respectively, representing 0.1% of the total operating revenues for each period.

	(iv)		The Company purchases property and equipment including construction and installation services from a number of related parties. These related parties include, among others, PT Industri Telekomunikasi Indonesia (“INTI”) and Koperasi Pegawai Telkom (“Kopegtel”). Purchases made from these related parties amounted to Rp.89,047 million and Rp.499,079 million for the nine months period ended September 30, 2007 and 2008, respectively, representing 0.7%, and 4.2% of the total fixed assets purchased in each period.

	(v)		INTI is also a major contractor and supplier of equipment, including construction and installation services of Telkomsel. Purchases from INTI for the nine months period ended September 30, 2007 and 2008 amounted to Rp.83,544 million and Rp.21,422 million, respectively, representing 0.7% and 0.2% of the total fixed assets purchased in each period.

	(vi)		Telkomsel has an agreement with PSN for the lease of PSN’s transmission link. Based on the agreement, which was made on March 14, 2001, the minimum lease period is 2 years since the operation of the transmission link and is extendable subject to agreement by both parties. The agreement was extended until March 13, 2011. The lease charges amounted to Rp.109,692 million and Rp.99,466 million for the nine months period ended September 30, 2007 and 2008, respectively, representing 0.4% of the total operating expenses for each period.

	(vii)		The Company and its subsidiaries insured their property, plant and equipment against property losses, inventories and employees’ social security from Jasindo, PT Asuransi Tenaga Kerja and Jiwasraya, state-owned insurance companies. Insurance premiums amounted to Rp.210,199 million and Rp.250,391 million for the nine months period ended September 30, 2007 and 2008, respectively, representing 0.8% and 0.9% the total operating expenses for each period.

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

44.

RELATED PARTY TRANSACTIONS (continued)

Others (continued)

	(viii)		The Company and its subsidiaries maintain current accounts and time deposits in several state-owned banks. In addition, some of these banks are appointed as collecting agents for the Company. Total placements in the form of current accounts, time deposits and mutual funds in state-owned banks amounted to Rp.3,026,901 million and Rp.4,832,652 million as of September 30, 2007 and 2008, respectively, representing 3.9% and 5.6% of the total assets as of September 30, 2007 and 2008, respectively. Interest income recognized for the nine months period ended September 30, 2007 and 2008 amounted to Rp.206,188 million and Rp.193,485 million, representing 55% and 39%, respectively, of total interest income for each period.

	(ix)		The Company’s subsidiaries obtained loans from state-owned banks. Interest expense on these loans for the nine months period ended September 30, 2007 and 2008 amounted to Rp.157,008 million and Rp.424,022 million, respectively, representing 14.7% and 42.3%, respectively, of the total interest expense for each period.

	(x)		The Company leases buildings, leases vehicles, purchases materials and construction services, and utilizes maintenance and cleaning services of Kopegtel and PT Sandhy Putra Makmur (“SPM”), a subsidiary of Yayasan Sandikara Putra Telkom — a foundation managed by Dharma Wanita Telkom. Total charges from these transactions amounted to Rp.306,207 million and Rp.299,588 million for the nine months period ended September 30, 2007 and 2008, respectively, representing 1.2% and 1.1%, respectively, of the total operating expenses for each period.

	(xi)		The Company and its subsidiaries earned interconnection revenues (expenses) from PSN, with a total of Rp.1,071 million and (Rp.1,717 million) for the nine months period ended September 30, 2007 and 2008, respectively, representing 0.002% and (0.004%), respectively, of the total operating revenues for each period.

	(xii)		The Company has RSA with Kopegtel. Kopegtel’s share in revenues from these arrangements amounted to Rp.16,058 million and Rp.8,410 million for nine months period ended September 30, 2007 and 2008, respectively, representing 0.04% and 0.02% of the total operating revenues for each period.

	(xiii)		Telkomsel has operating lease agreements with Patrakom and CSM for the use of their transmission link for 3 years, subject to extension. Lease charges amounted to Rp.154,749 million and Rp.108,953 million for the nine months period ended September 30, 2007 and 2008, respectively, representing 0.6% and 0.4%, respectively, of the total operating expenses for each period.

	(xiv)		Koperasi Pegawai Telkomsel (“Kisel”) is a cooperative that was established by Telkomsel’s employees to engage in car rental services, printing and distribution of customer bills, collection and other services principally for the benefit of Telkomsel. For these services, Kisel charged Telkomsel Rp.330,761 million and Rp.416,148 million for the nine months period ended September 30, 2007 and 2008, respectively. Telkomsel also has dealership agreements with Kisel for distribution of SIM cards and pulse reload vouchers. Total SIM cards and pulse reload vouchers which were sold to Kisel amounted to Rp.1,273,763 million and Rp.1,575,207 million for the nine months period ended September 30, 2007 and 2008, respectively.

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES


44.		RELATED PARTY TRANSACTIONS (continued)

Others (continued)

	(xv)		The Company has seconded a number of its employees to related parties to assist them in operating their businesses. In addition, the Company provides to certain of its related parties, the right to use its buildings free of charge.

	(xvi)		Telkomsel has procurement agreements with Gratika, a subsidiary of Dapen, for installation and maintenance of equipment. Total procurement for installations of equipment amounted to Rp.123,494 million and Rp.33,481 million for the nine months period ended September 30, 2007 and 2008, respectively, representing 1.02% and 0.28%, respectively, of total acquisition of fixed assets in each period.; and for maintenance of equipment amounted to Rp.29,021 million and Rp.27,329 million for the nine months period ended September 30, 2007 and 2008, respectively, representing 0.11% and 0.10%, respectively, of total operating expenses in each period.

Presented below are balances of accounts with related parties:

2007

2008

% to

Amount

total assets

Amount

total assets

Cash and cash equivalents (Note 5)

2,748,165

3.58

4,495,784

5.23

Temporary investments

177,879

0.23

270,650

0.31

Trade receivables — net (Note 6)

567,612

0.74

393,465

0.46

Other receivables

State-owned banks (interest)

11,154

0.02

28,863

0.03

Patrakom

2,769

0.00

4,713

0.01

Kopegtel

3,857

0.01

3,841

0.00

Government Agencies

2,010

0.00

2,333

0.00

Other

3,175

0.01

354

0.00

Total

22,965

0.04

40,104

0.04

Prepaid expenses (Note 8)

24,522

0.03

116,378

0.14

Restricted time deposits (Note 9)

8,460

0.01

21,044

0.02

Advances and other non-current assets (Note 13)

Kisel

—

1,088

0.00

Perusahaan Umum Percetakan Uang Republik
Indonesia (Peruri)

813

0.01

813

0.00

Bank Mandiri

92,279

0.12

793

0.00

BNI

—

721

0.00

Total

93,092

0.13

3,415

0.00

Escrow accounts (Note 15)

—

42,572

0.05

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES


44.		RELATED PARTY TRANSACTIONS (continued)


		2007				2008
				% to total				% to total
		Amount		liabilities		Amount		liabilities
i.	Trade payables (Note 16)
	Government Agencies		1,294,944		3.53		1,221,004		2.74
	Kopegtel		69,832		0.19		72,148		0.16
	Yakes		2,126		0.01		43,110		0.10
	INTI		—		—		29,214		0.07
	Indosat		56,919		0.16		27,030		0.06
	SPM		11,707		0.03		7,902		0.02
	Gratika		6,714		0.02		5,538		0.01
	PSN		1,473		0.01		4,634		0.01
	Others		177,374		0.48		105,530		0.24

	Total		1,621,089		4.43		1,516,110		3.41

j.	Accrued expenses (Note 17)
	Employees		965,078		2.63		769,754		1.72
	Government Agencies and state-owned banks		83,893		0.23		66,880		0.15
	PT Jaminan Sosial Tenaga Kerja (Persero) (Jamsostek)		—		—		20,310		0.05
	Jasindo		—		—		93		0.00

	Total		1,048,971		2.86		857,037		1.92


k.	Short-term bank loans (Note 19)
	BNI		500,000		1,36		—		—
	Bank Mandiri		200,000		0.54		—		—

	Total		700,000		1.90		—		—

l.	Two-step loans (Note 21)		4,179,001		11.39		3,905,478		8.75

m.	Accrued LSA (Note 42)		66,743		0.18		83,630		0.19

n.	Accrued post-retirement health care benefits (Note 43)		2,708,854		7.38		2,645,150		5.93

o.	Long-term bank loans (Note 23)
	BNI		680,000		1.85		3,460,000		7.75
	BRI		400,000		1.09		3,448,300		7.73
	Bank Mandiri		1,270,000		3.46		1,210,000		2.71

	Total		2,350,000		6.40		8,118,300		18.19

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES


45.		SEGMENT INFORMATION

		The Company and its subsidiaries have three main business segments operating in Indonesia namely: fixed wireline, fixed wireless and cellular. The fixed wireline segment provides local, SLJJ and international telephone services, and other telecommunications services (including among others, leased lines, telex, transponder, satellite and VSAT) as well as ancillary services. The fixed wireless segment provides CDMA-based telecommunication services which offers customers the ability to use a wireless handset with limited mobility (within a local code area). The cellular segment provides basic telecommunication services, particularly mobile cellular telecommunication services. Operating segments that do not individually represent more than 10% of the Company’s revenues are presented as “Others”, comprising of telephone directories and building management businesses.

		Segment revenues and expenses include transactions between business segments and are accounted for at prices that management believes represent market prices.


	2007
	Fixed			Fixed									Total before						Total
	wireline			wireless			Cellular			Others			elimination			Elimination			consolidated
Segment results
External operating revenues		14,999,508			2,542,398			25,711,451			393,922			43,647,279			—			43,647,279
Inter-segment operating revenues		514,950			174,784			735,713			91,908			1,517,355			(1,517,355	)		—

Total segment revenues		15,514,458			2,717,182			26,447,164			485,830			45,164,634			(1,517,355	)		43,647,279

External operating expenses		(11,554,793	)		(1,013,898	)		(10,747,249	)		(434,770	)		(23,750,710	)		—			(23,750,710	)
Inter-segment operating expenses		166,116			(371,296	)		(1,455,028	)		(17,768	)		(1,677,976	)		1,677,976			—

Segment expenses		(11,388,677	)		(1,385,194	)		(12,202,277	)		(452,538	)		(25,428,686	)		1,677,976			(23,750,710	)

Segment results		4,125,781			1,331,988			14,244,887			33,292			19,735,948			160,621			19,896,569

Interest expense																				(1,070,206	)
Interest income																				378,215
Loss on foreign exchange — net																				(113,642	)
Other income — net																				61,195
Income tax expense																				(5,921,719	)
Equity in net income of associated companies																				6,919

Income before minority interest																				13,237,331
Unallocated minority interest																				(3,418,276	)

Net income																				9,819,055

Other information
Segment assets		29,677,581			7,409,661			44,239,242			579,944			81,906,428			(5,223,394	)		76,683,034
Investments in associates		87,180			—			14,744			—			101,924			—			101,924

Total consolidated assets																				76,784,958

Total consolidated liabilities		(19,104,746	)		(1,564,828	)		(20,983,806	)		(274,407	)		(41,927,787	)		5,223,394			(36,704,393	)
Minority interest		(85,137	)		—			—			(8,078	)		(93,215	)		(8,168,865	)		(8,262,080	)
Capital expenditures		(1,084,034	)		(170,601	)		(9,691,381	)		(64,747	)		(11,010,763	)		—			(11,010,763	)

Depreciation and amortization		(2,636,178	)		(146,936	)		(4,222,177	)		(37,757	)		(7,043,048	)		7,126			(7,035,922	)

Amortization of goodwill and other intangible assets		(751,968	)		—			(35,036	)		—			(787,004	)		—			(787,004	)

Other non-cash expenses		(307,552	)		—			(67,931	)		(2,554	)		(378,037	)		—			(378,037	)

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45.		SEGMENT INFORMATION (continued)


	2008
	Fixed			Fixed									Total before						Total
	wireline			wireless			Cellular			Others			elimination			Elimination			consolidated
Segment results
External operating revenues		14,688,906			2,499,110			27,104,103			308,095			44,600,214			—			44,600,214
Inter-segment operating revenues		1,268,727			(43,305	)		249,870			226,338			1,701,630			(1,701,630	)		—

Total segment revenues		15,957,633			2,455,805			27,353,973			534,433			46,301,844			(1,701,630	)		44,600,214

External operating expenses		(12,404,542	)		(1,417,757	)		(13,135,480	)		(463,767	)		(27,421,546	)		—			(27,421,546	)
Inter-segment operating expenses		(289,035	)		—			(1,532,158	)		(18,112	)		(1,839,305	)		1,839,305			—

Segment expenses		(12,693,577	)		(1,417,757	)		(14,667,638	)		(481,879	)		(29,260,851	)		1,839,305			(27,421,546	)

Segment results		3,264,056			1,038,048			12,686,335			52,554			17,040,993			137,675			17,178,668

Interest expense																				(1,001,438	)
Interest income																				495,233
Loss on foreign exchange — net																				(63,806	)
Other income — net																				326,769
Income tax expense																				(4,821,920	)
Equity in net income of associated companies																				2,476

Income before minority interest																				12,115,982
Unallocated minority interest																				(3,196,094	)

Net income																				8,919,888

Other information
Segment assets		31,048,976			7,604,161			51,345,704			682,193			90,681,034			(4,799,187	)		85,881,847
Investments in associates		121,200			—			20,359			—			141,559			—			141,559

Total consolidated assets																				86,023,406

Total consolidated liabilities		(20,751,310	)		(1,644,512	)		(26,729,172	)		(303,553	)		(49,428,547	)		4,799,186			(44,629,361	)
Minority interest		(69,663	)		—			—			(8,182	)		(77,845	)		(8,722,937	)		(8,800,782	)
Capital expenditures		(2,302,901	)		(767,838	)		(10,686,096	)		(44,701	)		(13,801,536	)		—			(13,801,536	)

Depreciation and amortization		(2,714,376	)		(289,827	)		(4,974,782	)		(40,614	)		(8,019,599	)		15,995			(8,003,604	)

Amortization of goodwill and other intangible assets		(778,028	)		—			(35,036	)		—			(813,064	)		—			(813,064	)

Other non-cash expenses		(404,828	)		—			(40,150	)		(899	)		(445,877	)		—			(445,877	)


46.		JOINT OPERATION SCHEMES (“KERJA SAMA OPERASI” OR “KSO”)

		In 1995, the Company and five investors (Pramindo, TII, MGTI, Dayamitra and BSI) entered into agreements for 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 undertook the development and operation of the basic fixed telecommunications facilities and services in five of the Company’s seven Divre.

		Following the Indonesian economics crisis that began in mid-1997, certain KSO partners experienced difficulties in fulfilling their commitment under the KSO agreements. As remedial measures instituted by both the Company and the KSO partners did not fully remedy this situation, the Company acquired and currently controls the related KSO through acquisition of its KSO partners or the businesses. Accordingly, the revenue-sharing percentage in those KSO is no longer relevant as the financial statements of the acquired KSO partners and the related KSO are consolidated into the Company’s consolidated financial statements since the date of acquisition (Note 24).

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47.		REVENUE-SHARING ARRANGEMENTS (“RSA”)

		The Company has entered into agreements with several investors under RSA to develop fixed lines, public card-phone booths (including their maintenance), data and internet network and related supporting telecommunications facilities.

		As of September 30, 2008, the Company has 44 RSA with 38 investors. The RSA are located mainly in Pekanbaru, Jakarta, East Java, Kalimantan, Makassar, Pare-pare, Manado, Denpasar, Mataram and Kupang, with concession periods ranging from 48 to 176 months.

		Under the RSA, the investors finance the costs incurred in developing the telecommunications facilities. Upon completion of the construction, the Company manages and operates the facilities and bears the cost of repairs and maintenance during the revenue-sharing periods. The investors legally retain the rights to the property, plant and equipment constructed by them during the RSA periods. At the end of each the RSA period, the investors transfer the ownership of the facilities to the Company at a nominal price.

		Generally, the revenues earned from the customers in the form of line installation charges are allocated in full to the investors. The revenues from outgoing telephone pulses and monthly subscription charges are shared between the investors and the Company based on certain agreed ratio.

		The net book value of the property, plant and equipment under RSA which have been transferred to property, plant and equipment of the Company amounted to Rp.91,392 million and Rp.52,706 million as of September 30, 2007 and 2008, respectively (Note 12).

		The investors’ share of revenues amounted to Rp.321,306 million and Rp.249,210 million for the nine months period ended September 30, 2007 and 2008, respectively.


48.		TELECOMMUNICATIONS SERVICES TARIFFS

Under Law No. 36/1999 and Government Regulation No. 52/2000, tariffs for the use of telecommunications network and telecommunication services are determined by providers based on the tariffs category, structure and with respect to fixed line telecommunications services, at price cap formula set by the Government.

	a.		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 or minutes and classified as either local or SLJJ. The tariffs depend on call distance, call duration, time of call, day of the week and holidays.

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48.		TELECOMMUNICATIONS SERVICES TARIFFS (continued)

	a.		Fixed line telephone tariffs (continued)

			Tariffs for fixed line telephone are regulated under the MoCI Decree No. 09/Per/M.KOMINFO/02/2006 concerning Procedure for Initial Tariff Establishment and Tariff Change for Basic Telephone Service Through Fixed Line Network dated February 8, 2006, replacing the MoC Decree No. KM. 12 dated January 29, 2002 concerning the addendum of the decree of MTPT No. 79/1995, concerning the Method for Basic Tariff Adjustment on Domestic Fixed Line Telecommunication Services. Based on the Decree, the Company implemented new tariffs for SLJJ charges of PSTN to PSTN and PSTN to cellular which decreased by an average range from 0.4% to 46.2% from the prevailing tariffs for SLJJ charges, effective on April 8, 2008.

			The Government has issued new adjustment tariff formula which is stipulated in the MoCI Decree No. 15/Per/M.KOMINFO/4/2008 dated April 30, 2008 concerning Procedure for Tariff Calculation for Basic Telephone Service which connected through fixed line network. Under the Decree, tariff structure for basic telephone service which connected through fixed line network consists of the following:

	•		Connection fee

	•		Monthly charges

	•		Usage charges

	•		Additional facilities fee

Based on the Decree, the Company adjusted the tariffs effective August 1, 2008 as follows:

	•		Local charges increased by 8.9% and decreased by 2.5%, depending on customer’s segment

	•		SLJJ charges increased by an average of 13.7% and decreased by an average of 16.6% to 36.9%, depending on customer’s segment

	•		SMS charges decreased by an average of 42.8% to 49.7%, depending on customer’s segment

	b.		Mobile cellular telephone tariffs

			Tariffs 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 tariffs consist of activation fees, monthly charges and usage charges.

			The maximum tariff for the activation fee is Rp.200,000 per new subscriber number and Rp.65,000 for monthly charge. Usage charges consist of the following:

	*(i).*		*Airtime*

			The maximum basic airtime tariff charged to the originating cellular subscriber is Rp.325/minute. Charges to the originating cellular subscriber are calculated as follows:


1.	Cellular to cellular	:	2 times airtime rate
2.	Cellular to PSTN	:	1 time airtime rate
3.	PSTN to cellular	:	1 time airtime rate
4.	Card phone to cellular	:	1 time airtime rate plus 41% surcharge

100

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48.		TELECOMMUNICATIONS SERVICES TARIFFS (continued)

Mobile cellular telephone tariffs (continued)

(ii).

Usage tariffs

	1.		The local usage tariffs are charged to cellular subscriber who makes a call to the PSTN. For the use of network, the tariffs per minute are computed at 50% of the prevailing local PSTN tariffs.

	2.		The long-distance usage tariffs between two different service areas charged to cellular subscriber are the same as the prevailing tariffs for SLJJ applied to PSTN subscribers.

			Based on Decree No. KM. 79/1998 of the MoC, the maximum tariff for prepaid customers may not exceed 140% of the peak time tariffs for post-paid subscribers.

			Based on Announcement No. PM.2/2004 of the MoC dated March 30, 2004, Telkomsel adjusted its tariffs by eliminating the tariff subsidy from long-distance calls, resulting to a 9% tariff increase.

			Under Decree No. 12/Per/M.KOMINFO/02/2006 dated February 28, 2006 of the MoCI the cellular tariffs consist of the following:

	•		Connection fee

	•		Monthly charges

	•		Usage charges

	•		Additional facilities fee

			The tariffs are determined based on certain formula with a “floor price”. For usage charges, the floor price should be the originating fee plus termination fee (total interconnection fee) while for connection fee and monthly charges, the floor price depends on the cost structure of each cellular provider.

			The implementation of the new tariff for a dominant operator has to be approved by the Government. A dominant operator is an operator that has operating revenues equal to or more than 25% of total industry revenue for a certain segment.

			On April 7, 2008, the MoCI issued Decree No. 09/PER/M.KOMINFO/04/2008 “Mechanism to Determine Tariff of Telecommunication Services which Connected through Mobile Cellular Network” which provides guidelines to determine cellular tariffs with a formula consisting of network element cost and retail services activity cost. This Decree replaced the previous Decree of No. 12/PER/M.KOMINFO/02/2006.

			Under Decree No. 09/PER/M.KOMINFO/04/2008 dated April 7, 2008 of the MoCI the cellular tariffs consist of the following:

	•		Basic services tariff

	•		Roaming tariff

	•		Multimedia tariff,

with the following structure:

	•		Connection fee

	•		Monthly charges

	•		Usage charges

	•		Additional facilities fee.

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48.		TELECOMMUNICATIONS SERVICES TARIFFS (continued)

Mobile cellular telephone tariffs (continued)

	*(iii).*		*Usage tariffs* (continued)

			The tariffs are determined based on certain formula consisting of:

	•		Network element cost;

	•		Retail service activity cost plus margin.

The network element cost is determined using Long Run Incremental Cost Bottom up Method. The operators are allowed to apply de-average basic telephone service usage cost and bundling tariffs, maximum equal to tariff determined using the above formula.

	c.		Interconnection tariffs

			The Government establishes the percentage of tariffs to be received by each operator in respect of calls that transit to multiple networks. The Telecommunications Law and Government Regulation No. 52/2000 provides for the implementation of a new policy to replace the current revenue-sharing policy. Under the new policy, the operator of the network on which calls terminate would determine the interconnection charge to be received by it based on a formula to be mandated by the Government, which would be intended to have the effect of requiring that operators charge for calls based on the costs of carrying such calls. The MoC issued Decree No. 32/2004, dated March 11, 2004 stated that cost-based interconnection fees shall be applicable beginning January 1, 2005, of which subsequently postponed until January 1, 2007 based on the MoCI Regulation No. 08/Per/M.KOMINFO/02/2006 dated February 8, 2006. On December 28, 2006, the Company and all network operators signed amendments to their interconnection agreements for fixed line networks (local, SLJJ and international) and mobile network for the implementation of the cost-based tariff obligations under the MoCI Regulations No. 08/Per/M.KOMINFO/02/2006. These amendments took effect on January 1, 2007.

	*(i).*		*Interconnection with fixed line network*

			The Government’s National Fundamental Technical Plan set forth in Decree No. KM.4/2001, as amended by Decree No. KM.28/2004, sets out the technical requirements, routing plans and numbering plans for interconnection of the networks of various telecommunications operators among themselves and with the Company’s fixed line network. Under the National Fundamental Technical Plan, all operators are permitted to interconnect with the Company’s fixed line network for access thereto and to other networks, such as international gateways and the networks of other cellular operators. In addition, cellular operators may interconnect directly with other networks without connecting to the Company’s fixed line network. Currently, the fees for interconnection are set forth in Decree No. KU.506/1997, Decree No. KM.46/1998, Decree No. KM.37/1999 and Decree No. KM.30/2000.

			Fixed line Interconnection with Indosat. Currently, the fixed line interconnection between the Company and Indosat is generally based on their agreement signed in 2005. Pursuant to the agreement between the Company and Indosat, for interconnection of local and SLJJ calls, the operator of the network on which the calls terminate receives an agreed amount per minute.

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48.		TELECOMMUNICATIONS SERVICES TARIFFS (continued)

Interconnection tariffs (continued)

	*(i).*		*Interconnection with fixed line network* (continued)

			Other Fixed Wireline Interconnection. Since September 1, 1998, the Company has been receiving a share of the tariffs from Batam Bintan Telekomunikasi (“BBT”), which is a local operator with a special coverage area on Batam Island, for each successful call that transits or terminates on the Company’s fixed line network. Under the interconnection agreement, for local interconnection calls, revenues are shared on a “sender keeps all” basis. For local calls originating on BBT’s network terminating on a cellular network and vice versa which transit through the Company’s fixed line network, the Company receives an agreed percentage of the prevailing tariff for local calls. For interconnection of SLJJ calls, the operator of the network on which the calls terminate or transit receives an agreed percentage of the prevailing long-distance tariff. In addition, BBT is to receive a certain fixed amount for each minute of incoming and outgoing international calls, from and to BBT that transit through the Company’s fixed line network and use the Company’s IDD service and 50% of the prevailing interconnection tariff for incoming and outgoing international calls that transit through the Company’s fixed line network and use Indosat’s IDD service.

			Other Fixed Wireless Interconnection. Fixed wireless networks may interconnect with the Company’s fixed line network at the Company’s gateway. At present, other than the Company and Indosat, PT Bakrie Telecom (“BT”) also operates a fixed wireless network in Indonesia. The fixed wireless interconnection between the Company and BT is currently based on the most recent interconnection agreement signed in 2005. Pursuant to the agreement, for interconnection of local calls, the operator of the network on which the calls terminate receives an agreed amount per minute. For local calls originating on BT’s network terminating on a cellular network and vice versa which transit through the Company’s fixed line network, the Company receives an agreed percentage of the prevailing tariff for local calls. For SLJJ calls that originate on the Company’s fixed line network and terminate on BT’s network, BT receives an agreed amount per minute. In the reverse situation and for transit long-distance calls through the Company’s fixed line network, the Company receives an agreed percentage of the prevailing long-distance tariff. In addition, BT is to receive a certain fixed amount for each minute of incoming and outgoing international calls to and from BT that transit through the Company’s fixed line network and use the Company’s IDD service and 25% of prevailing interconnection tariff of incoming and outgoing international calls that transit through the Company’s fixed line network and use Indosat’s IDD service.

	*(ii).*		*Cellular interconnection*

			In respect of local interconnection calls, including transit calls, between a cellular network and the Company’s fixed line network, the Company receives 50% of the prevailing fixed-line usage tariff for local pulse. For local calls from the Company’s fixed line network to a cellular network, the Company charges its subscribers the applicable local call tariff plus an airtime charge, and pays the cellular operator the airtime charge. For local calls between cellular telecommunications networks, the originating cellular operator pays the terminating cellular operator the airtime charges.

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48.		TELECOMMUNICATIONS SERVICES TARIFFS (continued)

Interconnection tariffs (continued)

	*(ii).*		*Cellular interconnection* (continued)

			The current Interconnection Decree, effective April 1, 1998, assumes that it is possible for long-distance calls to be carried by more than one network. Pursuant to the Interconnection Decree, for long-distance calls which originate on the Company’s fixed line network, the Company is entitled to retain a portion of the prevailing long-distance tariff, which ranges from 40% of the tariff in cases where the entire long-distance portion is carried by a cellular operator up to 85% of the tariff in cases where the entire long-distance portion is carried by the Company’s fixed line network. For long-distance calls that originate from a cellular subscriber, the Company and its subsidiaries are entitled to retain a portion of the prevailing long-distance tariff, which ranges from 25% of the tariff in cases where the call originates from a cellular subscriber, transits the Company’s fixed line network and terminates on another cellular subscriber with the entire long-distance portion carried by a cellular operator, up to 85% of the tariff in cases where the entire long-distance portion is carried by the Company’s fixed line network and terminates on the Company’s fixed line network.

	*(iii).*		*International interconnection*

			Interconnection on the Company’s domestic fixed line network for international calls consists of access charges and usage charges. The following table sets forth the current international interconnection tariff, effective as of December 1, 1998, for IDD calls which are routed through Indosat’s international gateways and which originate, transit or terminate on the Company’s domestic fixed line network and Telkomsel’s cellular network, pursuant to Ministerial Decree No. KM.37/1999:


Description		Tariff
Access charge		Rp850 / successful call
Usage charge		Rp550 / successful paid minute

			In addition, since June 2004, the Company has provided IDD services. Currently, the Company’s IDD service can be accessed by subscribers of all telecommunication operators in Indonesia. Interconnection and access charges for originating calls using the Company’s IDD service or terminating incoming international calls routed through the Company’s international voice telecommunications gateway are negotiated with each respective domestic operator.

	*(iv).*		*Satellite phone interconnection*

			Since the fourth quarter of 2001, the Company has been receiving a share of revenues arising from interconnection transactions with PSN, a national satellite operator. Under the agreement, in respect of the interconnection calls between the Company and PSN, the Company receives Rp.800 per minute for network charges and an additional Rp.300 per minute origination fee if the call originates from the Company’s fixed line network.

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48.		TELECOMMUNICATIONS SERVICES TARIFFS (continued)

	c.		Interconnection tariffs (continued)

			Based on Indonesian Telecommunications Regulatory Body (“Badan Regulasi Telekomunikasi Indonesia“ or “BRTI”) Letters No. 273/BRTI/XII/2006 dated December 6, 2006 about Reference Interconnection Offer (“RIO”) of the Company and No. 297/BRTI/XII/2006 dated December 21, 2006 about Implementation of Cost Based Interconnection, the Director General of Posts and Telecommunications, as Head of BRTI, affirmed the implementation of RIO of the Company as approved in Director General of Posts and Telecommunications Decree No. 279/DIRJEN/2006 dated August 4, 2006.

			The implementation of the Company’s interconnection tariff starting January 1, 2007 based on Director General of Post and Telecommunications Decree No. 279/DIRJEN/2006 dated August 4, 2006. Based on Director General of Post and Telecommunications Decree No. 205/2008 dated April 11, 2008 about Agreement to RIO of the telecommunication network operator with operating revenue of 25% or more from the total revenue of all telecommunication operators in the service segmentation, shall be as follows:

(a)

Fixed line

	1.		Local termination from local fixed line service tariff is Rp.73/minute.

	2.		Local termination from domestic fixed line (local call) service tariff is Rp.73/minute.

	3.		Local termination from domestic fixed line (long distance call) service tariff is Rp.203/minute.

	4.		Long distance termination from domestic fixed line service tariff is Rp.560/minute.

	5.		Local termination from cellular mobile network service tariff is Rp.203/minute.

	6.		Local termination from satellite mobile network service tariff is Rp.204/minute.

	7.		Long distance termination from cellular mobile network service tariff is Rp.626/minute.

	8.		Long distance termination from satellite mobile network service tariff is Rp.613/minute.

	9.		Domestic termination from international network service tariff is Rp.612/minute.

	10.		International origination from domestic fixed line to fixed international network service provider tariff is Rp.612/minute.

	11.		Local origination service for long distance call from domestic fixed line to SLJJ service provider tariff is Rp.203/minute

	12.		Local transit service tariff is Rp.69/minute.

	13.		Long distance transit service tariff is Rp.295/minute.

	14.		International transit service tariff is Rp.316/minute.

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48.		TELECOMMUNICATIONS SERVICES TARIFFS (continued)

Interconnection tariffs (continued)

(b)

Cellular

	1.		Local termination from fixed line service tariff is Rp.261/minute.

	2.		Long distance termination from fixed line service tariff is Rp.380/minute.

	3.		Local termination from cellular mobile network service tariff is Rp.261/minute.

	4.		Long distance termination from cellular mobile network service tariff is Rp.493/minute.

	5.		Local termination from satellite network service tariff is Rp.261/minute.

	6.		Long distance termination from satellite network service tariff is Rp.501/minute.

	7.		Local termination from SLJJ service provider tariff is Rp.261/minute.

	8.		Long distance termination from SLJJ service provider tariff is Rp.380/minute.

	9.		International termination from IDD service provider tariff is Rp.498/minute.

	10.		Local origination to SLJJ service provider tariff is Rp.261/minute.

	11.		Long distance origination to SLJJ service provider tariff is Rp.380/minute.

	12.		International origination to IDD service provider tariff is Rp.498/minute.

	d.		VoIP interconnection tariff

			Previously, the MoC Decree No. KM.23/2002 provided that access charges and network lease charges for the provision of VoIP services were to be agreed between network operators and VoIP operators. On March 11, 2004, the MoC issued Decree No. 31/2004, which stated that interconnection charges for VoIP are to be fixed by the MoC. Currently, the MoCI has not yet determined what the new VoIP interconnection charges will be. Until such time as the new charges are fixed, the Company will continue to receive connection fees for calls that originate or terminate on the Company’s fixed line network at agreed fixed amount per minute.

	e.		Network lease tariff

			The Government regulated the form, type, and tariff structure and tariff formula for services of network lease through MoCI Decree No. 03/Per/M.KOMINFO/1/2007 dated January 26, 2007. Pursuant to the MoCI Decree, the Government released DGPT Decision Letter No. 115/Dirjen/2008 dated March 24, 2008 which stated the agreement on Network Lease Service Type Document, Network Lease Service Tariff, Available Capacity of Network Lease Service, Quality of Network Lease Service, and Procurement Procedure of Network Lease Service in 2008 is in conformity with the Company’s proposal. The minimum tariff for activation fee is Rp.2,400,000. The tariff for monthly usage for local (under 25 km) vary starting from Rp.1,750,000 up to Rp.88,650,000, depending on the speed and the tariff for monthly usage for long distance (over 25 km) starting from Rp.5,600,000 up to Rp.3,893,100,000 depending on the speed.

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48.

TELECOMMUNICATIONS SERVICES TARIFFS (continued)

	f.		Public Phone Kiosk (“warung telekomunikasi” or “wartel”) Tariff

			The MoC issued Decree No. KM. 46/2002 dated August 7, 2002 regarding the operation of phone kiosks as replaced by the MoCI Regulation No. PM.05/Per/M.KOMINFO/I/2006 dated January 30, 2006, which provided the Company the entitlement to retain a maximum of 70% of the phone kiosk basic tariffs for domestic calls and up to 92% of phone kiosk basic tariffs for international calls. It also provides that the airtime from the cellular operators shall generate at a minimum 10% of the kiosk phones’ revenues.

	g.		Tariff for other services

			The tariffs for satellite rental and other telephony and multimedia services are determined by the service provider by taking into account the expenditures and market price. The Government only determines the tariff formula for basic telephony services. There is no stipulation for the tariff of other services.

	h.		USO

			The MoCI issued Regulation No. 15/Per/M.KOMINFO/9/2005 dated September 30, 2005, which sets forth the basic policies underlying the USO program and requires telecommunications operators in Indonesia to contribute 0.75% of their gross revenues (with due consideration for bad debts and interconnection charges) for USO development.

			Based on MoCI Decree No. 11/Per/M.KOMINFO/04/2007 dated April 13, 2007 which has amended by MoCI Decree No. 38/Per/M.KOMINFO/9/2007 dated September 20, 2007, it stipulate that, among others, in providing telecommunication access and services in rural areas (USO Program), the provider is determined through a selection process by Balai Telekomunikasi dan Informatika Pedesaan which was established based on MoCI Decree No. 35/Per/M.KOMINFO/11/2006 dated November 30, 2006.

49.

COMMITMENTS

	a.		Capital expenditures

			As of September 30, 2008, capital expenditures committed under the 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 millions)		in Rupiah
Rupiah		—		5,428,320
U.S. Dollars		575		5,393,488
Euro		23		315,758

Total				11,137,566

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49.

COMMITMENTS (continued)

	a.		Capital expenditures (continued)

			The above balance includes the following significant agreements:

(i)

Company


					Outstanding
					purchase
					commitment as of
Contracting	Date of	Significant provisions of			September 30,
parties	agreement	the agreement		Total contract value	2008
Company and Huawei		Procurement and installation agreements for NSS, BSS and PDN FWA CDMA System Expansion Project in:

	January 6, 2006	a.	Divre I (Sumatra) and IV (Central Java and Daerah Istimewa Yogyakarta), for a period of 3 years (2006-2008) with option to extend for another 2 years (2009-2010)	US$27.6 million and Rp.109,511 million (for the 3 years coverage) and US$12.3 million and Rp.39,972 million (for the 2 years extension)	US$9.3 million and Rp.7,269 million

			Service Level Agreement (“SLA”), whereby Huawei will provide service and maintenance support for 3 years (2006-2008) in relation to the construction above	Rp.10,450 million

	December 8, 2006	b.	Divre II (Jakarta)	US$25.3 million and Rp.131,045 million	US$13.0 million and Rp.64,307 million

			SLA whereby Huawei will provide service and maintenance support for 3 years (2006-2008) in relation to the above agreement	Rp.11,509 million

	December 8, 2006	c.	Divre III (West Java and Banten)	US$9.9 million and Rp.55,262 million	US$3.8 million and Rp.15,381 million

			SLA whereby Huawei will provide service and maintenance support for 3 years (2006-2008) in relation to the above agreement	Rp.4,217 million

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49.

COMMITMENTS (continued)

Capital expenditures (continued)

(i)

Company (continued)


					Outstanding
					purchase
					commitment as of
Contracting	Date of	Significant provisions of			September 30,
parties	agreement	the agreement		Total contract value	2008
Company and Samsung Consortium		Procurement and installation agreements for NSS, BSS and PDN FWA CDMA System Expansion Project in:

	October 13, 2006	a.	Divre V (East Java)	US$59.9 million and Rp.94,759 million	US$31.7 million and Rp.84,033 million

			Samsung Consortium will provide service and maintenance support, pursuant to a SLA for period 3 years (2006-2008) in accordance with above agreement	Rp.29,998 million

	July 10, 2007	b.	Divre VII (Bali-Nusa Tenggara)	US$11.9 million and Rp.34,352 million	US$10.9 million and Rp.37,990 million

			Samsung Consortium will provide service and maintenance support, pursuant to a SLA for period 3 years (2007-2009) in accordance with above agreement	Rp.7,772 million

Company and ZTE Consortium	November 28, 2006	Procurement and Installation agreement for Expansion of NSS, BSS and PDN System in:

		a.	Divre VI (Kalimantan)	US$22.5 million and Rp.57,168 million	US$18.2 million and Rp.61,911 million

			SLA whereby ZTE will provide service and maintenance support for 3 years (2006-2008) in relation to the above agreement	Rp.8,925 million

	July 10, 2007	b.	Divre VII (Sulawesi, Maluku and Papua)	US$19.6 million and Rp.28,030 million	US$15.3 million and Rp.36,555 million

			SLA whereby ZTE will provide service and maintenance support for 3 years (2007-2009) in relation to above agreement	Rp.12,495 million

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49.

COMMITMENTS (continued)

Capital expenditures (continued)

(i)

Company (continued)


					Outstanding
					purchase
					commitment as of
Contracting	Date of	Significant provisions of			September 30,
parties	agreement	the agreement		Total contract value	2008
Company and:		Procurement and installation agreement for Optical Access Network (“OAN”) for the following projects:

a. Huawei Consortium (“Huawei”)	a. November 30, 2006	a.	Project Batch III in Divre IV (Central Java and Daerah Istimewa Yogyakarta)	US$3.2 million and Rp.59,249 million	US$0.02 million and Rp.534 million

b. Alcatel-Inti Consortium	b. December 18, 2006	b.	Project Batch IV in Divre VI (Kalimantan)	US$3.9 million and Rp.64,856 million	US$0.28 million and Rp.679 million

Company and Opnet-Olexindo Consortium	December 29, 2006	Procurement and installation agreements Opnet-Olexindo for OAN Project Batch I in Divre I (Sumatra) and III (West Java and Banten)		US$3 million and Rp.59,310 million	US$0.08 million and Rp.1,004 million

Company and PT Infonet Telekomindo	July 13, 2007	Procurement and installation agreement for Fiber Optic Communication System Metro Junction Regional Expansion Batch 2		Rp.68,629 million	Rp.5,570 million

Company and Huawei	September 28, 2007	a.	Procurement and installation agreement for Speedy Access Batch 2	US$23.7 million and Rp.40,807 million	US$13.35 million and Rp.25,616 million

	September 28, 2007	b.	Procurement and installation agreement for Speedy Access Batch 3	US$17.4 million and Rp.58,337 million	US$7.46 million and Rp.27,996 million

Company and PT Abhitama Citra Abadi	November 9, 2007	Procurement and installation agreement for Metro Ethernet Batch 1		Rp.129,588 million	Rp.52,860 million

Company and PT Lintas Teknologi Indonesia	November 16, 2007	Procurement and installation agreements for OAN Project Batch II in Divre II		Rp.74,753 million	Rp.45,090 miilion

Company and NEC Indonesia	November 20, 2007	Procurement and installation agreement for Fiber Optic Communication System Metro Junction Regional Expansion Batch 3 Kalimantan		Rp.52,738 million	Rp.19,444 million

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49.

COMMITMENTS (continued)

Capital expenditures (continued)

(i)

Company (continued)


					Outstanding
					purchase
					commitment as of
Contracting	Date of	Significant provisions of			September 30,
parties	agreement	the agreement		Total contract value	2008
Company and PT Datacomm Diangraha	November 28, 2007	a.	Procurement and installation agreement for Metro Ethernet Batch 2	Rp.134,563 million	Rp.10,382 million

	March 31, 2008	b.	Procurement and installation agreement for Metro Ethernet Batch 4	Rp.99,838 million	Rp.6,710 million

Company and ZTE Indonesia (“ZTE”)	December 18, 2007	Procurement and installation agreement for Speedy Divre VII		Rp.95,090 million	Rp.74,931 million

Company and ZTE Consortium	February 29, 2008	Procurement and installation agreement for Speedy Access Batch 1		US$1.8 million and Rp.237,255 million	US$1.1 million and Rp.204,683 million

Company and NEC Corporation	March 3, 2008	Procurement and installation agreement for Batam Singapore Cable System (BSCS) Project		US$13.1 million	US$13.1 million

Company and Brimbun Raya Indah	June 10, 2008	Procurement and installation agreement for Outside Plan Fiber Optic Batch 12 Jakarta and West Java		Rp.74,673 million	Rp.71,039 million

Company and ZTE	June 20, 2008	Procurement agreement for Java Backbone Ring Capacity Expansion		Rp.78,760 million	Rp.69,693 million

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49.		COMMITMENTS (continued)

Capital expenditures (continued)

	(ii)		Telkomsel

			The Telkomsel’s agreements with Motorola, Inc. and PT Motorola Indonesia, Ericsson AB and Ericsson Indonesia, Nokia Corporation and PT Nokia Network (“Nokia Network”), and Siemens AG since August 2004, relate to the maintenance and procurement of equipment and related services, involving:

	•		Joint Planning and Process Agreement

	•		Equipment Supply Agreement (“ESA”)

	•		Technical Service Agreement (“TSA”)

	•		Site Acquisition and Civil, Mechanical and Engineering Agreement (“SITAC” and “CME”)

			The agreements contain list of charges to be used in determining the fees payable by Telkomsel for all equipment and related services to be procured during the rollout period upon the issue of Purchase Orders (“PO”).

			The agreements are valid and effective as of the execution date by the respective parties for a period of three years, provided that the suppliers are able to meet the requirements set out in each PO. In the event that the suppliers fail to meet those requirements, Telkomsel may terminate the agreements at its sole discretion with prior written notice.

			In accordance with the agreements, the parties also agreed that the charges specified in the price list would apply to equipment and services (ESA and TSA) and services (SITAC and CME) acquired from the suppliers between May 26, 2004 and the effective date, except for those acquired from Siemens under TSA relating to equipment and maintenance of Telkomsel’s Switching Sub System (“SSS”) and BSS that were acquired between July 1, 2004 and the effective date. Prices are subject to quarterly reviews.

			In August 2007, due to the expiration of the above agreements, based on letters from Ericsson AB and Ericsson Indonesia and Nokia Siemens Networks (which currently represents Nokia Corporation, Nokia Network and Siemens AG), those companies agreed to:

	•		extend the above agreements until new agreements were made between Telkomsel and these other companies, and

	•		prior to the effective date of new agreements, retroactively apply prices under the new agreements (retroactive price adjustment) to PO for the procurement of BSS equipment and services issued by Telkomsel after July 1, 2007 using the previous price list (Note 11d.iii).

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49.		COMMITMENTS (continued)

Capital expenditures (continued)

	(ii)		Telkomsel (continued)

			Subsequently, on April 17, 2008, Telkomsel, Ericsson Indonesia, Ericsson AB, PT Nokia Siemens Networks, Nokia Siemens Network Oy and Nokia Siemens Network Gmbh & Co. KG signed Combined 2G and 3G CS Core Network Rollout Agreements. The Agreements are valid until the later of:

	•		three years after the effective date (April 17, 2008, except for certain POs issued in August 2007 which commenced on August 15, 2007), or

	•		the date on which the last PO under this agreement terminates or expires in respect of any PO issued prior to the expiry of the three years period.

			For the purpose of providing telecommunication services with 3rd Generation technology, in September and October 2006, Telkomsel entered into agreements with Nokia Corporation and Nokia Networks, Ericsson AB and Ericsson Indonesia, and Siemens Networks GmbH & Co.KG for network construction (Rollout Agreement) and Nokia Networks, Ericsson Indonesia and Siemens Networks GmbH & Co.KG for network operations and maintenance (Managed Operations Agreement and Technical Support Agreement). The agreements are valid and effective as of the execution date by the respective parties (the effective date) until the later of December 31, 2008 or the date on which the last PO terminates under the agreements or expires in respect of any PO issued prior to December 31, 2008, providing that the suppliers are able to meet the requirements set out in each PO. Based on letters from Telkomsel, the Managed Operation Agreements with those companies were terminated as of March 31, 2008.

			In July and August 2008, Telkomsel entered into 2G BSS and 3G UTRAN Network Trial Agreements (NTA) with PT Alcatel-Lucent Indonesia, ZTE, and PT Huawei Tech Investment (“Huawei Tech”) (“Trial Participants”). Subsequently, in September 2008, the agreements with ZTE and Huawei Tech were amended. Such agreements contain, among others:

	•		The provision by Trial Participants of the design, supply, delivery, installation, integration and commissioning of 2G GSM BSS and 3G UMTS radio access network and technical support for such subsystem and networks on a trial basis.

	•		At Telkomsel’s election, the purchase by Telkomsel and the transfer of ownership to Telkomsel of certain of those 2G GSM BSS and 3G UMTS radio access networks.

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49.		COMMITMENTS (continued)

Borrowings and other credit facilities

	(i)		Telkomsel has a US$3 million bond and bank guarantee, standby letter of credit facility and foreign exchange facility with SCB, Jakarta. The facilities expire in July 2008 and have been rolled over up to July 2009. Under these facilities, as of September 30, 2008, Telkomsel has issued bank guarantee of Rp.20,000 million (equivalent to US$2.13 million) for a 3G performance bond (Note 49d.ii). Borrowings under the facilities bear interest at Singapore Interbank Offered Rate (“SIBOR”) plus 1% per annum (US$) except a borrowing under the import facility which bears interest at SIBOR plus 1.25% per annum (US$), and at a rate equal to the three-month SBI plus 1.25% per annum (Rupiah). As of September 30, 2007 and 2008, there were no outstanding loans under these facilities.

	(ii)		Telkomsel has not provided any collateral for its bank borrowings, or other credit facilities. The terms of the various agreements with Telkomsel’s lenders and financiers require compliance with a number of pledges and negative pledges as well as financial and other covenants, which include inter alia, certain restrictions on the amount of dividends and other profit distributions which could adversely affect Telkomsel’s capacity to comply with its obligation under the facilities. The terms of the relevant agreements also contain default and cross default clauses. Telkomsel’s management is not aware of any breaches of the terms of these agreements and does not foresee any such breaches occurring in the future.

	c.		Derivative instruments

			Telkomsel is exposed to market risks, primarily changes in foreign currency exchange rates, and uses derivative instruments in connection with its risk management activities. Telkomsel entered into derivative transactions for the purpose of hedging and not for trading purposes. None of the derivative transactions entered into by Telkomsel during 2008 met the PSAK No. 55 criteria for hedge accounting. Therefore, changes in the fair values of the derivative financial instruments were recognized in the consolidated result of operations.

			Telkomsel purchases equipment from several countries and, as a result, is exposed to fluctuation in foreign currency exchange rates. In September 2008, Telkomsel entered into forward foreign exchange contracts with DB to protect against foreign exchange risk relating to its foreign currency denominated purchases. The primary purpose of Telkomsel’s foreign currency hedging activities is to protect against the volatility associated with foreign currency purchases of equipment and other assets in the normal course of business.

			The notional amounts of Telkomsel’s foreign exchange forwards entered into in September 2008 are US$24 million and Euro15 million.

			The contract will be realized on October 24, 2008 and November 24, 2008 with equal proportions, respectively.

			The payable arising from the difference between the contract rates and the rates prevailing as of September 30, 2008, amounted to Rp.2,968 million has been presented as part of accrued liabilities.

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49.		COMMITMENTS (continued)

Others

	(i)		Employee benefits

			On March 24, 2006, Telkomsel and its Labour Union (Serikat Pekerja Telkomsel) signed a collective labour agreement (“Perjanjian Kerja Bersama” or “PKB”) which is valid until March 23, 2008. The agreement was extended on May 26, 2008 which is valid until May 25, 2010. Based on the agreement, Telkomsel shall provide long service leave and post retirement insurance to its employees. These benefits are subject to further agreement between Telkomsel and Labour Union which has not been made until the date the consolidated financial statements. Therefore, it is not possible to determine the amount of the benefits as of September 30, 2008.

	(ii)		3G license

			With reference to the Decision Letter No. 07/Per/M.KOMINFO/2/2006 of the MoCI, as one of the successful bidders, Telkomsel amongst other commitments, is required to:

Pay annual BHP fee which is determined based on a certain formula over license term (10 years). The BHP for the second and third year was paid in March 2007 and 2008, respectively. The commitments as of September 30, 2008 arising from the BHP up to the expiry period of the license using the formula set forth in the Decision Letter are as follows:


			Radio Frequency
Year	BI Rates (%)	Index (multiplier)	Usage Tariff
1	—	—	20% ´ HL
2	R1	I1 = (1 + R1)	40% ´ I1 ´ HL
3	R2	I2 = I1(1 + R2)	60% ´ I2 ´ HL
4	R3	I3 = I2(1 + R3)	100% ´ I3 ´ HL
5	R4	I4 = I3(1 + R4)	130% ´ I4 ´ HL
6	R5	I5 = I4(1 + R5)	130% ´ I5 ´ HL
7	R6	I6 = I5(1 + R6)	130% ´ I6 ´ HL
8	R7	I7 = I6(1 + R7)	130% ´ I7 ´ HL
9	R8	I8 = I7(1 + R8)	130% ´ I8 ´ HL
10	R9	I9 = I8(1 + R9)	130% ´ I9 ´ HL


Notes :

Ri		= average Bank Indonesia rate from previous year

HL (auction price)		= Rp.160,000 million

Index		= adjustment to the bidding price for respective year

The BHP is payable upon receipt of “Surat Pemberitahuan Pembayaran” (notification letter) from the DGPT.

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49.		COMMITMENTS (continued)

Others (continued)

(ii)

3G license (continued)

	2.		Provide roaming access for the existing 3G operators.

	3.		Contribute to USO development.

	4.		Construct a 3G network which covers at least the following provinces:


	Minimum number
Year	of provinces
1		2
2		5
3		8
4		10
5		12
6		14

Issue a performance bond each year amounting to Rp.20,000 million or 5% of the annual fee to be paid for the subsequent year, whichever is higher. This performance bond shall be redeemed by the Government if Telkomsel is not able to meet the requirements set out in the above mentioned Decision Letter or upon cancellation/termination of the license, or if Telkomsel decides to return the license voluntarily.

	(iii)		Asia-America Gateway Consortium (“AAG”)

			On April 27, 2007, the Company became a member of AAG consortium, an undersea cable consortium with 19 companies, by signing a C&MA and an AAG Cable Network Supply Contract and paid US$40 million. Through the AAG Consortium, the Company will acquire 40 Gbps international bandwidth at the end of 2008 in the AAG configuration that will be laid from Malaysia to the United States. As of September 30, 2008, the Company has paid US$30.47 million (equivalent to Rp.282,282 million) and recorded as advances for the purchase of property, plant and equipment (Note 13).

	(iv)		Palapa Ring Consortium

			On November 10, 2007, the Company entered into a C&MA with five other companies for Palapa Ring Consortium. This consortium was formed to build optical fiber network in 32 cities in Eastern Indonesia with total investment of Rp.2,070,336 million. The Company will obtain 4 lambda bandwidth of total capacity of 8.44 lambdas from this consortium (Note 15).

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50.		CONTINGENCIES

	a.		In the ordinary course of business, the Company and its subsidiaries have been named as defendant in various legal actions in relation with land disputes, other disputes involving telecommunication billings. Based on management’s estimate of the probable outcomes of these matters, the Company and its subsidiaries have accrued Rp.34,058 million as of September 30, 2008.

	b.		In December 2005, the West Java Police Department initiated investigations related to an alleged violation of Eradication of Criminal Act of Corruption Law, in particular the provision of interconnection services to Napsindo, the Company’s subsidiary, and Globalcom, a Malaysian company, at an incorrect tariff for the Company’s network for the provision of illegal VoIP services, and misuse of authority in procuring telecommunication equipment. It is also understood that one of the investigations related to the Company’s guarantee of a bank loan obtained by Napsindo. During the investigation, former Directors and employees of the Company were held in custody by the West Java Police Department for further investigation. On May 10, 2006, such individuals were released from police custody after the expiration of the maximum period of 120 days allowed for police custody of suspect for investigation purposes. As of September 30, 2007 and 2008, the police have not found sufficient evidence to properly transfer the case to the High Attorney Office for indictment.

	c.		A former Director of Human Resources and an employee of the Company were indicted under the Eradication of Criminal Act of Corruption Law in Bandung District Court relating to allegations of misuse of authority in procuring consultancy services resulting to a loss of Rp.789 million. On May 2, 2007, the Bandung District Court found the defendants guilty and sentenced each defendant to a one-year prison term and gave Rp.50 million penalty. The defendants have filed and appeal to the West Java High Court, objecting to the District Court ruling. On October 3, 2007, West Java High Court found the defendants not guilty. The Attorney has filed an appeal to Indonesian Supreme Court objecting to the High Court’s ruling. As of the issuance date of the consolidated financial statements, no decision has been reach on the appeal.

	d.		On January 2, 2006, the Office of the Attorney General launched an investigation into allegations of misuse of telecommunications facilities in connection with the provision of VoIP services, whereby one of Company’s former employees and four of the Company’s employees in KSO VII were named suspects. As a result of the investigations, one of Company’s former employees and two of the Company’s employees were indicted in the Makassar District Court, and two other employees were indicted in the Denpasar District Court for their alleged corruption in KSO VII. On January 29, 2008, the Makassar District Court found the defendant not guilty. The Attorney has filed an appeal to Indonesian Supreme Court objecting the District Court ruling. On March 3, 2008, Denpasar District Court fount the defendants guilty and sentenced each defendant to a one-year six-month prison term and a one year prison term and gave Rp.50 million penalty. The defendants have filed an appeal to the Bali High Court objecting to the District Court ruling. As of the issuance date of the consolidated financial statements, no decision has been reach on the appeal.

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50.		CONTINGENCIES (continued)

The Commission for the Supervision of Business Competition (“Komisi Pengawasan Persaingan Usaha” or “KPPU”) on its letter dated December 5, 2007, notified Telkomsel that based on its investigation of case No. 07/KPPU-L/2007 dated November 19, 2007, according to the applied provisions regarding allegation of violating Law No. 5/1999, “Prohibition of Monopolistic Practice and Unfair Business Competition” (the “Law”), related to a cross-ownership by Temasek Holdings and monopoly practices by Telkomsel, it had decided that, among others things :

	•		Telkomsel had violated article 17.1 of the Law,

	•		Telkomsel had not been proven to violate article No. 25.1 of the Law,

	•		Temasek Holdings and certain affiliated companies were instructed to release their ownership either in Indosat or Telkomsel with the following conditions:

	•		Maximum 5% of total shares for each buyer,

	•		The buyer is not associated with Temasek Holdings.

•

Telkomsel was to be charged a penalty of Rp25,000 million and instructed Telkomsel to discontinue the imposition of high tariffs and reduce its tariffs by at least 15%.

On December 19, 2007, Telkomsel’s management filed an objection with the Court. On May 9, 2008 the court has pronounced its verdict and concluded among other things:

	•		Telkomsel had violated article 17.1 of the Law,

	•		Telkomsel had not been proven to violate article 25.1.b of the Law,

	•		Temasek Holdings and certain affiliated companies were instructed to release their ownership in either Indosat or Telkomsel or to decrease its ownership by 50% in each of those companies within twelve months from the date of the decision become final and legally binding at the following conditions:

	•		Maximum 10% of total shares for each buyer,

	•		The buyer is not associated with Temasek Holdings.

	•		Telkomsel was charged a penalty of Rp.15 billion,

	•		The court revoked the decision of KPPU on the instruction to reduce the tariffs because KPPU did not have the authority to determine the tariffs.

			On May 22, 2008, Telkomsel has filed an appeal to Indonesian Supreme Court. On September 12, 2008, the Supreme Court, through its press release, has announced to reject the appeal. As of the issuance date of the consolidated financial statements, no formal decision has been reach on the appeal.

	f.		Certain subscribers of Telkomsel and Indosat which are domiciled in Bekasi and Tangerang and subscribers of PT Excelcomindo Pratama (“Excelcomindo”) which are domiciled in Tangerang, represented by the law firms, have filed class-action lawsuits with the courts against Telkomsel, the Company, Indosat, the Government, Temasek Holdings and certain of its affiliated companies (“Parties”). The Parties are alleged to have had excessive price practices that potentially could have adversely affected those subscribers.

			On July 8, 2008, class-action lawsuits with the Bekasi District Courts against Telkomsel by certain subscribers has been revoked and the case is closed.

			As of the issuance date of the consolidated financial statements, certain of the lawsuits are still being processed by the courts. The Telkomsel’s management believes that Telkomsel has applied tariffs in accordance with prevailing regulations, accordingly, such allegation has no strong basis.

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50.		CONTINGENCIES (continued)

The Company, Telkomsel and seven other local operators are being investigated by the KPPU for allegation of SMS cartel practices. As a result of the investigations, KPPU found that the Company, Telkomsel and certain other local operators had proven to violate Law No. 5/1999 article 55 and gave the Company and Telkomsel Rp.18,000 million penalty and Rp.25,000 million penalty, respectively. Pursuant to the decision of KPPU dated June 17, 2008, the Company and Telkomsel have filed an objection with the Court on July 14, 2008 and July 11, 2008, respectively. As of the issuance date of the consolidated financial statements, no decision has been reach on the appeal.

For the matters and cases stated above, the Company and its subsidiaries do not believe that any subsequent investigation or court decision will have significant financial impact to the Company and its subsidiaries.


51.		ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

The balances of monetary assets and liabilities denominated in foreign currencies are as follows:


	2007				2008
	Foreign				Foreign
	currencies		Rupiah		currencies		Rupiah
	(in millions)		equivalent		(in millions)		equivalent
Assets
Cash and cash equivalents
U.S. Dollars		184.44		1,686,735		98.87		929,660
Euro		72.79		943,733		41.78		574,088
Singapore Dollars		—		—		0.53		3,502
Japanese Yen		2.10		166		3.15		283
Temporary investments
U.S. Dollars		—		—		7.13		67,192
Japanese Yen		—		—		220.04		19,784
Trade receivables
Related parties
U.S. Dollars		8.87		81,102		0.96		9,036
Third parties
U.S. Dollars		48.74		445,762		46.58		439,026
Other receivables
Great Britain Pound sterling		—		—		0.01		210
Euro		—		—		0.01		87
U.S. Dollars		0.80		7,328		0.01		84
Other current assets
U.S. Dollars		0.15		1,386		4.01		37,828
Euro		0.05		644		0.06		874
Advances and other non-current assets
U.S. Dollars		6.79		62,107		21.72		204,638
Escrow accounts
U.S. Dollars		—		—		4.52		42,572

Total assets				3,228,963				2,328,864

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51.		ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES (continued)


	2007					2008
	Foreign					Foreign
	currencies		Rupiah			currencies		Rupiah
	(in millions)		equivalent			(in millions)		equivalent
Liabilities
Trade payables
Related parties
U.S. Dollars		3.42		31,273			19.51		183,975
Singapore Dollars		0.01		21			—		—
Euro		—		—			0.01		86
Third parties
U.S. Dollars		191.95		1,756,388			346.37		3,251,130
Euro		91.57		1,188,029			159.67		2,195,632
Singapore Dollars		0.38		2,337			1.31		8,660
Great Britain Pound sterling		0.01		101			—		—
Japanese Yen		—		—			0.51		46
Swiss Franc		—		—			0.00		14
Myanmar Kyat		—		—			0.01		20
Hongkong Dollars		—		—			0.01		11
Other payables
U.S. Dollars		—		—			0.07		668
Accrued expenses
U.S. Dollars		163.92		1,499,832			11.40		107,554
Euro		87.62		1,136,894			—		—
Japanese Yen		156.49		12,403			144.20		12,980
Singapore Dollars		0.38		2,332			0.61		4,008
Great Britain Pound sterling		0.05		844			—		—
Advances from customers and suppliers
U.S. Dollars		0.49		4,470			11.44		107,964
Current maturities of long-term liabilities
U.S. Dollars		146.04		1,336,251			124.86		1,177,965
Japanese Yen		1,142.91		90,587			767.90		69,126
Euro		14.63		189,840			—		—
Long-term liabilities
U.S. Dollars		414.80		3,795,389			289.64		2,732,788
Japanese Yen		12,670.31		1,004,249			11,902.41		1,071,455

Total liabilities				12,051,240					10,924,082

Net liabilities				(8,822,277	)				(8,595,218	)

		The Company and its subsidiaries’ activities expose them to a variety of financial risks, including the effects of changes in debt and equity market prices, foreign currency exchange rates and interest rates.

		The Company and its subsidiaries’ overall risk management programs focus on the unpredictability of financial markets and seek to minimize potential adverse effects on the financial performance of the Company and its subsidiaries. Management provides written policy for foreign currency risk management mainly through time deposits placements and hedging to cover foreign currency risk exposures for the time range of 3 up to 12 months.

120

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

52.

SUBSEQUENT EVENTS

	a.		On October 13, 2008, based on BAPEPAM-LK Regulation No. XI.B.3 Attachment Decision of the Chairman of BAPEPAM-LK No. Kep-401/BL/2008 dated October 9, 2008 concerning the Stock Repurchase of Stock Issued by the Public Company on Potential Crisis Market Condition, the Company has informed the full disclosure statement in relation with the Company’s plan to conduct stock repurchase program of the Company’s stock which has been issued and listed in IDX up to 20% of its issued and paid up capital with total cost not to exceed Rp.3,000,000 million which will be conduct gradually within the acquisition period that would not be longer than 3 months (October 13, 2008 to January 12, 2009).

	b.		On October 28, 2008, Telkomsel’s appeal to the Tax Court for the remaining balances of rejection of withholding taxes article 23 and 26 (Note 38f.a) was accepted by the Tax Court with a total refund of Rp.114.8 billion.

53.		RECENT ACCOUNTING PRONOUNCEMENTS IN INDONESIA

		The recent accounting pronouncement in Indonesia that relevant to the Company and its subsidiaries are as follow:

	(i)		PSAK 50 (Revised 2006), “Financial Instruments: Presentation and Disclosures”

			In December 2006, the DSAK issued PSAK 50 (Revised 2006), “Financial Instruments: Presentation and Disclosures” which amends PSAK 50, “Accounting for Investments in Certain Securities”. PSAK 50 (Revised 2006) provides guidance on how to disclose and present financial instruments in the financial statements and whether a financial instrument is a financial liability or an equity instrument. This standard applies to the classification of financial instruments, from the perspective of the issuer, into financial assets, financial liabilities and equity instruments; the classification of related interest, dividends, losses and gains; and the circumstances in which financial assets and financial liabilities should be offset. PSAK 50 (Revised 2006) complements the principles for recognizing and measuring financial assets and financial liabilities in PSAK 55 (Revised 2006). PSAK 50 (Revised 2006) shall be effective after January 1, 2009. The Company and its subsidiaries are currently assessing the impact of the application of PSAK 50 (Revised 2006) on the consolidated financial statements.

	(ii)		PSAK 55 (Revised 2006), “Financial Instruments: Recognition and Measurement”

			In December 2006, the DSAK issued PSAK 55 (Revised 2006), “Financial Instruments: Recognition and Measurement” which amends PSAK 55 (Revised 1999), “Accounting for Derivative Instruments and Hedging Activities”. PSAK 55 (Revised 2006) provides guidance on how to recognize, measure and derecognize financial asset and liability including derivative instruments. It also provides guidance on the recognition and measurement of sales and purchase contracts of non-financial items. PSAK 55 (Revised 2006) shall be effective after January 1, 2009. The Company and its subsidiaries are currently assessing the impact of the application of PSAK 55 (Revised 2006) on the consolidated financial statements.

121

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

53.

RECENT ACCOUNTING PRONOUNCEMENTS IN INDONESIA (continued)

	(iii)		Interpretation on Indonesian Statement of Financial Accounting Standards (“ISAK”) 8, “Determining Whether an Arrangement Contains a Lease and Further Discussion on Transitional Provisions of PSAK 30 (Revised 2007)”

			In September 2008, the DSAK issued ISAK 8, “Determining Whether an Arrangement Contains a Lease and Further Discussion on Transitional Provisions of PSAK 30 (Revised 2007)”. ISAK 8 provides guidance on how to determine whether and when an arrangement contains a lease and how to separate the payment for the lease from payments for any other elements in the arrangement. It also provides interpretation on transitional provision of PSAK 30 (Revised 2007). ISAK 8 shall be effective after January 1, 2008. The Company and its subsidiaries are currently assessing the impact of the application of ISAK 8 on the consolidated financial statements.

54.		ACCOUNTS RECLASSIFICATION

		Certain accounts in the consolidated financial statement for the nine months period ended September 30, 2007 has been reclassified to conform with the presentation of accounts of the consolidated financial statement for the nine months period ended September 30, 2008, as follows:


	Before						After
	reclassification			Reclassification			reclassification

Consolidated balance sheet:
Accrued expenses		2,546,973			106,771			2,653,744
Accrued long service awards		246,583			(179,840	)		66,743
Accrued pension and other post-retirement benefits costs		948,589			73,069			1,021,658

Consolidated income statement:
Interconnection revenues		8,760,988			617,344			9,378,332
Interconnection expenses * (see Note below)		(1,640,124	)		(617,344	)		(2,257,468	)


*		Presentation of interconnection expenses account in consolidated financial statements for the nine months period ended September 30, 2007 has been reclassified to operating revenues as a deduction to interconnection revenues in consolidated financial statements for the nine months period ended September 30, 2008.

122

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

55.		SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDONESIAN GAAP AND U.S. GAAP

		The consolidated financial statements of the Company and its subsidiaries have been prepared in accordance with Indonesian GAAP, which differ in certain significant respects from U.S. GAAP. A description of the differences and their effects on net income and stockholders’ equity are set forth below:

(1)

Description of differences between Indonesian GAAP and U.S. GAAP

	a.		Voluntary termination benefits

			Under Indonesian GAAP, voluntary termination benefits are recognized as liabilities when the Company is demonstratively committed to provide termination benefits as a result of an offer made in order to encourage voluntary redundancy.

			Under U.S. GAAP, voluntary termination benefits liabilities are recognized only when the employees have accepted the offer and the related amount can be reasonably estimated.

	b.		Foreign exchange differences capitalized to assets under construction

			Under Indonesian GAAP, foreign exchange gains and losses resulting from borrowings used to finance the construction of the qualifying assets are capitalized as part of the cost of the qualifying assets. Capitalization of foreign exchange gains and losses ceases when the construction of the qualifying asset is substantially completed and the constructed property is ready for its intended use.

			Under U.S. GAAP, foreign exchange gains and losses are credited and charged to the consolidated statement of income as incurred.

	c.		Embedded derivative instrument

			The Company and its subsidiaries entered into contracts with their vendors which require payments denominated in various currencies other than functional currencies of both parties.

			Under Indonesian GAAP, contracts which require payments denominated in foreign currencies other than functional currencies of a party or substantial party to the contracts are not presumed to contain embedded foreign currency derivative instruments if the currencies are commonly used in local business transactions.

			Under U.S. GAAP, the contracts do not qualify for such exception unless they are routinely denominated in a currency commonly used in international commerce. Hence, the foreign currency derivative instruments shall be separated from the host contract and accounted for as embedded foreign currency derivative instruments.

123

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

55.

SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDONESIAN GAAP AND U.S. GAAP (continued)

(1)

Description of differences between Indonesian GAAP and U.S. GAAP (continued)

	d.		Interest capitalized on assets under construction

			Under Indonesian GAAP, qualifying assets, to which interest cost can be capitalized, should be those that take a minimum of 12 months to get ready for their intended use or sale. To the extent that funds are borrowed specifically to finance the construction of a qualifying asset, the amount of the interest cost eligible for capitalization on that asset should be determined based on the actual interest cost incurred on that borrowing during the period of construction less any investment income on the temporary investment of those borrowings.

			Under U.S. GAAP, there is no minimum limit (i.e. a minimum 12-month construction period requirement) on the length of the construction period in which the interest cost could be capitalized. The amount of interest cost to be capitalized for qualifying assets is intended to be that portion of the interest cost incurred during the construction periods that theoretically could have been avoided if expenditures for the assets had not been made. The interest cost need not arise from borrowings specifically made to acquire the qualifying assets. The amount capitalized in a period is determined by applying an interest rate to the average amount of accumulated expenditures for the assets during the period. Interest income arising from any unused borrowings is recognized directly as income in the consolidated statement of income.

	e.		RSA

			Under Indonesian GAAP, property, plant and equipment built by an investor under RSA are recognized as property, plant and equipment under RSA in the accounting records of the party to whom ownership in such properties will 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, net of amounts due to the investors.

			Under U.S. GAAP, the RSA are recorded in a manner similar to capital leases where the property, plant and equipment and obligation under RSA are reflected on the consolidated balance sheet. All the revenues generated from the RSA are recorded as a component of operating revenues, while a portion of the investors’ share of the revenues from the RSA is recorded as interest expense with the balance treated as a reduction of the obligation under RSA.

	f.		Employee benefits

			The Company and its subsidiaries adopted PSAK 24 (Revised 2004) in accounting for the costs of pension benefit, post-retirement health care benefit and other post-retirement benefits for Indonesian GAAP purposes.

124

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

55.

SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDONESIAN GAAP AND U.S. GAAP (continued)

(1)

Description of differences between Indonesian GAAP and U.S. GAAP (continued)

	f.		Employee benefits (continued)

			The differences between the accounting for the pension benefits, post-retirement health care benefits and other post-retirement benefits under Indonesian GAAP and U.S. GAAP are as follows:

	i.		Prior service cost

			Under Indonesian GAAP, the prior service cost is recognized immediately if vested or amortized on a straight-line basis over the average period until the benefits become vested. The amortized amount is recorded as a component of net periodic benefit cost for the year.

			Under U.S. GAAP, the prior service cost (vested and non-vested benefits) is deferred and amortized systematically over the estimated remaining service periods for active employees and the recognized amount is recorded in the consolidated statement of income.

	ii.		Transition obligations relating to pension and post-retirement healthcare benefits

			Under Indonesian GAAP, the transition obligations were recognized on January 1, 2004, the date PSAK 24 (Revised 2004) was adopted.

			Under U.S. GAAP, the transition obligations arising from the adoption of Statement of Financial Accounting Standards (“SFAS”) 87 “Employers’ Accounting for Pensions” on January 1, 1992 and SFAS 106 “Employers’ Accounting for Postretirement Benefits Other Than Pensions” on January 1, 1995, were deferred and amortized systematically over the estimated remaining service periods for active employees and 20 years, respectively. In addition, different adoption dates resulted in significant difference in cumulative unrecognized actuarial gains and losses.

	iii.		Minimum liability

			Under Indonesian GAAP, recognition of a minimum liability for the pension plans is not required.

			Under U.S. GAAP, up to December 31, 2005 the Company and its subsidiaries recognized an additional minimum liability when the accumulated benefits obligation exceeded the fair value of the plan assets with the equal amount recognized as an intangible asset, provided that the asset recognized did not exceed the amount of unrecognized prior service costs. If the additional liability required to be recognized exceeds unrecognized prior service costs, the excess was reported in accumulated other comprehensive income, net of tax.

125

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

55.

SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDONESIAN GAAP AND U.S. GAAP (continued)

(1)

Description of differences between Indonesian GAAP and U.S. GAAP (continued)

	f.		Employee benefits (continued)

			In September 2006, the Financial Accounting Standard Board (“FASB”) issued SFAS 158 “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans — an amendment of FASB Statement No. 87, 88, 106 and 132R”. The requirements of SFAS 158 to recognize the funded status and to provide the required disclosures are effective for fiscal year ending after December 15, 2006. The Company and its subsidiaries have adopted the above recognition and disclosure requirements of SFAS 158 from the year ended December 31, 2006.

			SFAS 158 does not change the determination of net periodic benefit pension costs under SFAS 87, SFAS 106 and SFAS 112. The impacts of the adoption of SFAS 158 are as follows:

	i.		The Company and its subsidiaries no longer report the additional minimum liability and any corresponding intangible asset for the unfunded pension obligation as the funded status for unfunded or underfunded benefit plans is now fully recognized as net pension liability on the balance sheets. This is similar to the Indonesian GAAP requirements.

	ii.		On adoption of SFAS 158, the unrecognized actuarial losses, prior service costs, and transition obligations were recognized, net of tax, in the accumulated other comprehensive income balance. These will continue to be amortized and reported as a component of net periodic benefit costs in the consolidated statements of income in accordance with the requirements of SFAS 87, SFAS 106 and SFAS 112.

	g.		Equity in net income or loss of associated companies

			The Company and its subsidiaries record their equity in net income or loss of their associated companies based on the associated companies’ financial statements that have been prepared under Indonesian GAAP.

			For U.S. GAAP reporting purposes, the Company and its subsidiaries recognize the effect of the differences between U.S. GAAP and Indonesian GAAP at the investee level in the investment accounts and its share of the net income or loss and other comprehensive income or loss of the associated companies.

	h.		Land rights

			In Indonesia, the title of land rests with the State under the Basic Agrarian Law No. 5/1960. 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 collateral for borrowing agreements.

			Under Indonesian GAAP, land ownership is not depreciated unless it can be foreseen that the possibility for the holder to obtain an extension or renewal of the rights is remote.

			Under U.S. GAAP, the cost of land rights is amortized over the economic useful life or the contractual period of the land rights, which ranges from 20 to 30 years.

126

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

55.

SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDONESIAN GAAP AND U.S. GAAP (continued)

(1)

Description of differences between Indonesian GAAP and U.S. GAAP (continued)

	i.		Revenue recognition

			Under Indonesian GAAP, fees from connection of mobile cellular and fixed wireless services are recognized as revenues when connection takes place (for postpaid service). Sales of starter packs are recognized as revenues upon delivery to distributors, dealers, or customers (for pre-paid services). Installation fees for wireline services are recognized at the time of installation. Revenues from calling cards are recognized when the Company sells the cards.

			Under U.S. GAAP, revenues from front-end fees and incremental costs up to, but not exceeding such fees, are deferred and recognized as income over the expected term of the customer relationships. Revenues from calling cards are recognized upon usage or expiration.

	j.		Amortization of goodwill

			Under Indonesian GAAP, goodwill is amortized over its useful life but not exceeding 20 years.

			Under U.S. GAAP, goodwill is not amortized but rather subjected to test for impairment.

	k.		Capital leases

			Under Indonesian GAAP, a leased asset is capitalized only if all of the following criteria are met: (a) the lessee has an option to purchase the leased asset at the end of the lease period at a price agreed upon at the inception of the lease agreement, (b) the sum of periodic lease payments, plus the residual value, will cover the acquisition price of the leased asset and the related interest, and (c) there is a minimum lease period of 2 years.

			Under U.S. GAAP, a leased asset is capitalized when any one of the following criteria is met: (a) there is an automatic transfer of ownership at the end of the lease term, (b) the lease contains a bargain purchase option, (c) the lease term is for 75% or more of the economic life of the asset, and (d) the net present value of the minimum lease payments amounts to at least 90% of the fair value of the asset.

			In June 2007, the DSAK issued PSAK 30 (Revised 2007), “Leases” which replaced PSAK 30, “Accounting for Lease”. The prospective application of PSAK 30 (Revised 2007) by the Company and its subsidiaries results no difference between Indonesian GAAP and U.S. GAAP on all lease contracts with the inception date on and after January 1, 2008.

	l.		Acquisition of Dayamitra

			On May 17, 2001 the Company acquired a 90.32% interest in Dayamitra and contemporaneously acquired a call option to buy the remaining 9.68% interest at a fixed price at a stated future date, and provided to the minority interest holder a put option to sell its 9.68% interest to the Company under those same terms. Therefore, the fixed price of the call equaled the fixed price of the put option.

127

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

55.

SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDONESIAN GAAP AND U.S. GAAP (continued)

(1)

Description of differences between Indonesian GAAP and U.S. GAAP (continued)

	l.		Acquisition of Dayamitra (continued)

			Under U.S. GAAP, the Company accounted for the option contracts on a combined basis together with the minority interest and as a financing arrangement for the purchase of the remaining 9.68% minority interest. As such, under U.S. GAAP, the Company has consolidated 100% of Dayamitra and attributed the stated yield earned under the combined derivative and minority interest position to interest expense since May 17, 2001.

			On December 14, 2004, the Company exercised the call option to acquire the 9.68% interest in Dayamitra.

			Under Indonesian GAAP, prior to December 14, 2004, the Company accounted for the remaining 9.68% interest in Dayamitra as minority interest. In addition, the option price paid by the Company was presented as “Advance payments for investments in shares of stock.” The Company started consolidating the remaining 9.68% interest in Dayamitra only on December 14, 2004 following the exercise of the option.

			The difference in the timing of the recognition of the 9.68% ownership interest gives rise to differences in the timing and amounts of the purchase consideration recognized under Indonesian GAAP and U.S. GAAP.

	m.		Asset retirement obligations

			Prior to 2008, under Indonesian GAAP, costs associated with the retirement of long-lived assets that the Company and its subsidiaries must cover by law as a result from the acquisition, construction, development and/or the normal operation of long-lived assets, are charged to the consolidated statement of income as incurred.

			Effective from January 1, 2008, the obligations are capitalized as cost related long-lived assets and depreciated over the useful lives of the assets. The treatment should be applied retroactively. However, due to the impact to prior periods is insignificant, the cumulative effect is charged to 2008.

			Under U.S. GAAP, the estimated fair value of such obligation is accrued at the time of the acquisition with an equal amount capitalized to the related long-lived assets and depreciated over the useful lives of the assets. The Company and its subsidiaries identified their asset retirement obligations by reviewing their contractual agreements to determine whether the Company and its subsidiaries are required to settle any obligations as a result of the prevailing laws, statute and ordinance, or by legal construction of a contract under the doctrine of promissory estoppel. A present value technique is used to estimate the fair value of the obligations. The cash flows used in the estimates of fair value have incorporated the assumptions relating to the timing and the amount of the possible cash flows. Accretion expense resulting from the passage of time is recognized in the consolidated statement of income. In subsequent periods, changes resulting from the revisions to the timing and the amount of the original estimate of undiscounted cash flows are recognized as an increase or decrease in (a) the carrying amount of the liability, and (b) the related asset retirement cost capitalized as part of the carrying amount of the related long-lived asset.

128

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

55.

SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDONESIAN GAAP AND U.S. GAAP (continued)

(1)

Description of differences between Indonesian GAAP and U.S. GAAP (continued)

	n.		Deferred taxes

			Under Indonesian GAAP, the Company and its subsidiaries do not recognize deferred taxes on temporary differences between the carrying amounts and the tax bases of their equity method investments when it is not probable that these differences will reverse in the foreseeable future. For financial reporting purposes, deferred tax assets and liabilities are presented as non-current accounts.

			Under U.S. GAAP, deferred taxes are recognized in full on temporary differences between the carrying amounts and the tax bases of equity method investments. For financial reporting purposes, deferred tax assets and liabilities are presented either as current or non-current accounts based on the expected realization of the related assets or liabilities.

	o.		Impairment of assets

			Under Indonesian GAAP, an impairment loss is recognized whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. The recoverable amount of a fixed asset is the greater of its net selling price or value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects the current market assessment of the time value of money and the risks specific to the asset. An impairment loss can be reversed if there has been a change in the estimates used to determine the recoverable amount.

			An impairment loss is only reversed to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation, if no impairment loss had been recognized.

			Under U.S. GAAP, an impairment loss is recognized whenever the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset. An impaired asset is written down to its estimated fair value based on its quoted market price in an active market or its discounted estimated future cash flows. Reversals of previously recognized impairment losses are prohibited.

	p.		Gains (losses) on disposals of property, plant and equipment

			Under Indonesian GAAP, the Company and its subsidiaries classify the gains (losses) on disposals of property, plant and equipment as component of other income (expense) which are excluded from determination of operating income.

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PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

55.

SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDONESIAN GAAP AND U.S. GAAP (continued)

(1)

Description of differences between Indonesian GAAP and U.S. GAAP (continued)

	p.		Gains (losses) on disposals of property, plant and equipment (continued)

			Under U.S. GAAP, the gains (losses) on disposals of property, plant and equipment are classified as component of operating expenses and hence included in the determination of operating income. For the nine months period ended September 30, 2007 and 2008, the operating income would have been (lower) higher by Rp.21,634 million and (Rp.49,372) million, respectively, and other (expenses) income would have been lower (higher) by the same amounts due to the inclusion of the (losses) gains on disposals of property, plant and equipment in the determination of operating income.

	q.		Reclassification of difference in value of restructuring transactions and other transactions between entities under common control

			Under Indonesian GAAP, the Company is required to reclassify the difference in value of restructuring transactions and other transactions between entities under common control as of January 1, 2005 as a direct adjustment to retained earnings when the common control relationship between the transacting parties no longer existed as of January 1, 2005.

			Under U.S. GAAP, the difference in value of restructuring transactions between entities under common control remains in stockholders’ equity indefinitely as part of the additional paid-in capital.

	r.		Available-for-sale securities

			Under Indonesian GAAP, available-for-sale securities are carried at fair values and changes in fair values are recognized in “Unrealized holding gain (loss) on available-for-sale securities” under stockholders’ equity section.

			Under U.S. GAAP, available-for-sale securities are carried at fair values and any unrealized gains or losses are reported as a component of accumulated other comprehensive income under stockholders’ equity section.

	s.		Cumulative translation adjustments

			Under Indonesian GAAP, investments in foreign companies using the equity method are reported by translating the assets and the liabilities of these companies as of the balance sheet date using the rate of exchange prevailing at that date. Revenues and expenses are translated using the exchange rates at the date of transaction or the average exchange rate for the year for practical reasons. The resulting translation adjustments are reported as part of “Translation Adjustments” in the stockholders’ equity section.

			Under U.S. GAAP, the resulting translation adjustments are reported in accumulated other comprehensive income under stockholders’ equity section.

130

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

55.

SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDONESIAN GAAP AND U.S. GAAP (continued)

(1)

Description of differences between Indonesian GAAP and U.S. GAAP (continued)

	t.		Amendment and restatement of the KSO VII

			The Company has accounted for the amendment and restatement of the KSO VII agreement as a business combination using the purchase method of accounting.

			Under Indonesian GAAP, the fair value of the unearned income relating to the RSA was deemed to be equal to the fair value of the property, plant and equipment under those RSA based on the accounting treatment of RSA under Indonesian GAAP.

			Under U.S. GAAP, the fair value of the obligation under the RSA has been determined to be Rp.473,754 million based on the present value of the estimated future payments to BSI’s business partners under the RSA.

			Under Indonesian GAAP, the excess of the acquisition cost over the Company’s interest in the fair value of identifiable assets acquired and liabilities assumed is recorded as goodwill. After assigning the purchase consideration to all other identifiable assets and liabilities, the remaining residual amount was allocated to the intangible asset representing the right to operate the business in the KSO VII area, to be amortized over the remaining KSO VII term of 4.3 years. As a result, there was no goodwill recognized under Indonesian GAAP.

			For U.S. GAAP reporting purposes, the right to operate the KSO VII operation represented a reacquired right and was recognized by the Company as a separate intangible asset under Emerging Issues Task Force (“EITF”) 04-1 “Accounting for Preexisting Relationships between the Parties to a Business Combination”. The intangible asset was directly valued to determine its fair value in accordance with the requirements in EITF Topic No. D-108 “Use of the Residual Method to Value Acquired Assets Other Than Goodwill”. The excess of the purchase consideration over the net of the amounts assigned to assets acquired and liabilities assumed of Rp.61,386 million was recognized as goodwill.

	u.		Fair value measurement

			Under Indonesian GAAP, some accounting pronouncements require or permit fair value measurements. The best evidence of fair value is a price in a binding sale agreement in an arm’s length transaction. If there is no binding sale agreement, fair value is based on the best information available to reflect the amount that the Company could obtain at the end of the reporting period. The measurement bases used for determining the fair value shall be disclosed.

			Under U.S. GAAP, the information regarding fair value hierarchy shall be disclosed, segregating fair value measurements using quoted price in active markets for identical assets or liabilities (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3). For assets and liabilities that are measured at fair value on a recurring basis, the Company discloses the total realized gains or losses for the period included in earnings or changes in net assets. For assets and liabilities that are measured at fair value on a nonrecurring basis, such disclosure is not required. As of September 30, 2008, the Company and its subsidiaries have decided to delay the application of SFAS 157 for non financial assets and liabilities under the provisions of FASB Staff Position (FSP) 157-2.

131

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P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

55.

SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDONESIAN GAAP AND U.S. GAAP (continued)

(2)

The significant adjustments to the consolidated net income for the nine months period ended September 30, 2007 and 2008 which would be required if U.S. GAAP have been applied, instead of Indonesian GAAP, in the consolidated financial statements are set forth below:


	Note	2007			2008
Net income according to the consolidated statements of income prepared under Indonesian GAAP			9,819,055			8,919,888

U.S. GAAP adjustments — increase (decrease) due to:
Voluntary termination benefits	(a)		(1,461,149	)		—
Capitalization of foreign exchange differences — net of related depreciation	(b)		57,506			54,852
Foreign exchange gain — net of related depreciation on contracts containing embedded foreign currency derivative instrument	(c)		—			(10,345	)
Interest capitalized on assets under construction — net of related depreciation	(d)		50,905			14,319
RSA	(e)		80,164			111,537
Pension and other post-retirement benefits	(f)		(91,678	)		(61,329	)
Post-retirement health care	(f)		(73,870	)		(70,769	)
Equity in net loss of associated companies	(g)		(241	)		(244	)
Amortization of land rights	(h)		(15,665	)		(23,296	)
Revenue recognition	(i)		32,402			40,397
Amortization of goodwill	(j)		—			—
Capital leases	(k)		(24,409	)		(12,321	)
Adjustment for consolidation of Dayamitra	(l)		8,540			8,540
Assets retirement obligations	(m)		(8,680	)		25,735
Amendment and restatement of the KSO VII	(t)		(53,377	)		12,202

132

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55.

SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDONESIAN GAAP AND U.S. GAAP (continued)

(2)

(continued)


	Note	2007			2008

Deferred income tax:
Deferred income tax on equity method investments	(n)		(2,216	)		(86	)
Deferred income tax effect on U.S. GAAP adjustments			371,387			(48,484	)

			(1,130,381	)		40,708
Minority interest			(10,561	)		(8,886	)

Net adjustments			(1,140,942	)		31,822

Net income in accordance with U.S. GAAP			8,678,113			8,951,710

Net income per share in accordance with U.S.GAAP — in full Rupiah amount			434.51			452.69

Net income per ADS in accordance with U.S.GAAP — in full Rupiah amount (40 Series B shares per ADS)			17,380.47			18,107.73

The significant adjustments to the consolidated stockholders’ equity as of September 30, 2007 and 2008 which would be required if U.S. GAAP have been applied, instead of Indonesian GAAP, in the consolidated financial statements, are set forth below:


	Note	2007			2008
Stockholders’ equity according to the consolidated balance sheets prepared under Indonesian GAAP			31,818,485			32,593,263

U.S. GAAP adjustments — (decrease) increase due to:
Voluntary termination benefits	(a)		—			—
Capitalization of foreign exchange differences — net of related depreciation	(b)		(335,192	)		(255,570	)
Foreign exchange gain — net of related depreciation, on contracts containing embedded foreign currency derivative instrument	(c)		—			46,811
Interest capitalized on assets under construction — net of related depreciation	(d)		277,278			296,755
RSA	(e)		(84,445	)		221,845
Pension and other post-retirement benefits	(f)		(194,210	)		(803,071	)
Post-retirement health care	(f)		(1,704,522	)		(2,631,626	)
Equity in net loss of associated companies	(g)		(19,085	)		(19,413	)
Amortization of land rights	(h)		(116,611	)		(144,723	)
Revenue recognition	(i)		(681,488	)		(629,551	)

133

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

55.

SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDONESIAN GAAP AND U.S. GAAP (continued)

(2)

(continued)


	Note	2007			2008
Amortization of goodwill	(j)		93,937			93,937
Capital leases	(k)		(81,825	)		(101,725	)
Adjustment for consolidation of Dayamitra	(l)		(36,977	)		(25,589	)
Assets retirement obligations	(m)		(22,479	)		—
Amendment and restatement of the KSO VII	(t)		(48,898	)		32,538

Deferred income tax:
Deferred income tax on equity method investments	(n)		36,658			35,838
Deferred income tax effect on U.S. GAAP adjustments			294,529			406,494

			(2,623,330	)		(3,477,050	)
Minority interest			63,004			(27,352	)

Net adjustments			(2,560,326	)		(3,504,402	)

Stockholders’ equity in accordance with U.S. GAAP			29,258,159			29,088,861

The changes in the stockholders’ equity in accordance with U.S. GAAP for the nine months period ended September 30, 2007 and 2008, are as follows:


	2007	2008
Stockholders’ equity at beginning of year	26,308,572		29,817,813
Changes during the year:
Net income under U.S. GAAP	8,678,113		8,951,710
Dividends	(5,082,051)		(8,034,515	)
Accumulated other comprehensive income, net of tax	347,215		379,497
Treasury stock	(993,690)		(2,025,644	)

Stockholders’ equity at end of period	29,258,159		28,088,861

With regard to the consolidated balance sheets, the following significant captions determined under U.S. GAAP would have been:


	2007		2008
Consolidated balance sheets
Current assets		14,187,466		14,943,543
Non-current assets		63,879,242		72,575,167

Total assets		78,066,708		87,518,710

134

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

55.

SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDONESIAN GAAP AND U.S. GAAP (continued)

(2)

(continued)


	2007		2008
Current liabilities		20,463,125		26,056,331
Non-current liabilities		20,146,348		23,545,384

Total liabilities		40,609,473		49,601,715
Minority interest in net assets of subsidiaries		8,199,076		8,828,134
Stockholders’ equity		29,258,159		29,088,861

Total liabilities and stockholders’ equity		78,066,708		87,518,710

(3)

Additional consolidated financial statement disclosures required by U.S. GAAP and U.S. SEC

Income tax

(i).

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:


	2007			2008
Consolidated income before tax in accordance with U.S. GAAP		17,655,805			17,027,182
Income tax in accordance with U.S. GAAP at 30% statutory tax rate		5,296,741			5,108,137

Effect of non-deductible expenses (non-taxable income) at the enacted maximum tax rate (30%):
Net periodic post-retirement health care benefit cost		175,289			212,616
Amortization of discount on promissory notes and other borrowing costs		5,525			91,992
Tax penalty		50,556			169
Employee benefits		19,399			49,675
Permanent differences of the KSO Units		19,102			26,535
Income which was already subject to final tax		(104,775	)		(104,389	)
Effect on the Company’s net deferred tax liabilities of reduction in tax rate		—			(588,460	)
Others		90,711			74,215

Total		255,807			(237,647	)

Income tax expense in accordance with U.S. GAAP		5,552,548			4,870,490

For the nine months period ended September 30, 2007 and 2008, all of the Company and its subsidiaries’ operating revenues were earned in Indonesia, and accordingly, the Company and its subsidiaries have not been subjected to income tax in other countries.

135

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

55.

SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDONESIAN GAAP AND U.S. GAAP (continued)

(3)

Additional consolidated financial statement disclosures required by U.S. GAAP and U.S. SEC (continued)

Income tax (continued)

	(ii).		Deferred tax (continued)

			For the nine months period ended September 30, 2008, the Company and its subsidiaries adopted SFAS 158 and recognized deferred tax assets arising from the transition obligations, the prior service costs and the actuarial losses totaling Rp.704,357 million in the accumulated other comprehensive income.

	(iii).		Accounting for uncertainty in income tax

			The Company and its subsidiaries adopted the provisions of FASB Interpretation (“FIN”) 48, “Uncertainty in Income Tax: an Interpretation of SFAS 109” effective January 1, 2007. FIN 48 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under FIN 48, the tax benefit from an uncertain tax position shall be recognized when it is more likely than not, based on the technical merits of the position, that the position will be sustained on examination by the Tax Authorities. The amount of the tax benefits to be recognized is the largest amount of benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement.

			Based on the analysis of all tax positions of the Company and its subsidiaries related to income taxes subject to SFAS 109, the Company and its subsidiaries determined that there is no material impact on the consolidated financial statements for any years still subject to any tax examination, and that the recognition of unrecognized tax benefits will not have a material impact on the effective income tax rate in any given years. The Company and its subsidiaries do not anticipate that the current position of unrecognized tax benefits will significantly change in the next 12 months.

			For the nine months period ended September 30, 2008, there have been no interest and penalties incurred in relation with corporate income taxes. The Company and subsidiaries record interest and penalties for the underpayment of income taxes, if any, in interest expenses and other expenses account, respectively, in the consolidated financial statements.

			As of September 30, 2008, the Company is subject to tax audits for fiscal years 2003, 2005 and 2006, Telkomsel for fiscal years 2003, GSD for fiscal years 2003 up to 2006, and Infomedia for fiscal years 2004 up to 2006. Currently, Telkomsel, PIN, and GSD are being audited by the Tax Office for the fiscal year 2006, 2007 and 2007, respectively.

136

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

55.

SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDONESIAN GAAP AND U.S. GAAP (continued)

(3)

Additional consolidated financial statement disclosures required by U.S. GAAP and U.S. SEC (continued)

	b.		Fair values of financial instruments

			The following methods and assumptions are used to estimate the fair value of each class of financial instruments:

	(i).		Cash and cash equivalents and temporary investments

			The carrying amounts approximate fair values because of the short-term nature of the financial assets.

	(ii).		Short-term bank loans

			The carrying amounts approximate fair values because of the short-term nature of the financial liabilities.

	(iii).		Long-term liabilities

			The fair values of long-term liabilities other than bonds and guaranteed notes are estimated by discounting the future cash flows of each liability at rates currently offered to the Company and its subsidiaries for similar debts of comparable maturities by the bankers of the Company and its subsidiaries.

			The fair values of bonds and guaranteed notes are based on market prices at balance sheet date.

	(iv).		The estimated fair values of the Company and its subsidiaries’ financial assets and liabilities are as follows:


	Carrying
	amount		Fair value
2007
Cash and cash equivalents		6,493,187		6,493,187
Temporary investments		177,879		177,879
Derivative payable		—		—
Short-term bank loans		950,152		946,030
Long-term liabilities:
Two-step loans		4,179,001		3,825,495
Bank loans		4,941,644		4,848,244
Deferred consideration for business combinations		3,780,003		3,885,812

137

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

55.

SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDONESIAN GAAP AND U.S. GAAP (continued)

(3)

Additional consolidated financial statement disclosures required by U.S. GAAP and U.S. SEC (continued)

Fair values of financial instruments (continued)

(iv).

The estimated fair values of the Company and its subsidiaries’ financial assets and liabilities are as follows: (continued)


	Carrying
	amount		Fair value
2008
Cash and cash equivalents		7,545,364		7,545,364
Temporary investments		270,650		270,650
Derivative payable		47,993		47,993
Short-term bank loans		53,449		53,449
Long-term liabilities:
Two-step loans		3,905,478		3,574,252
Bank loans		11,253,886		11,026,112
Deferred consideration for business combinations		2,751,686		2,811,068

The methods and assumptions followed to determine the fair value estimates are inherently judgmental and involved various limitations, including the following:

	a.		Fair values presented do not take into consideration the effect of future currency fluctuations.

	b.		Estimated fair values are not necessarily indicative of the amounts that the Company and its subsidiaries would record upon disposal/termination of the financial assets and liabilities.

Comprehensive income


	2007		2008
Net income under U.S. GAAP		8,678,113		8,951,710
Unrealized holding (loss) gain on available-for-sale securities		6,127		(13,833	)
Foreign currency translation adjustments of associated companies, net of tax of Rp.107 million and (Rp.363 million), for the nine months period ended September 30, 2007 and 2008, respectively		249		(848	)
Unrecognized actuarial losses prior service costs and transition obligations, net of tax		—		394,178

		8,684,489		9,331,207

138

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES


55.		SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDONESIAN GAAP AND U.S. GAAP (continued)

(3)

Additional consolidated financial statement disclosures required by U.S. GAAP and U.S. SEC (continued)

Employee benefits

(i).

The Company

The disclosures under SFAS 132 (Revised 2003) “Employers’ Disclosures about Pension and Other Postretirement Benefits” and SFAS 106 are as follows:


	Pension						Health care
	2007			2008			2007			2008
Components of net periodic benefits costs
Service costs		152,706			211,601			84,877			107,986
Interest costs		646,630			807,727			543,028			677,624
Expected return on plan assets		(583,708	)		(698,126	)		(166,611	)		(257,525	)
Amortization of transition obligation cost		21,476			21,476			18,244			18,244
Amortization of prior service costs (gains)		150,948			212.673			(275	)		(275	)
Recognized actuarial losses (gains)		—			—			137,734			201,693

Total net periodic benefits costs		388,052			555,351			616,997			747,747

139

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES


55.		SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDONESIAN GAAP AND U.S. GAAP (continued)

(3)

Additional consolidated financial statement disclosures required by U.S. GAAP and U.S. SEC (continued)

Employee benefits (continued)

(i).

The Company (continued)

The following table presents the changes in the benefits obligations, the changes in the plan assets, and the current and non-current portions of the accrued costs recognized in the Company’s U.S. GAAP consolidated balance sheets as of September 30, 2007 and 2008:


	Pension						Health care
	2007			2008			2007			2008
Changes in benefits obligations
Benefits obligation at beginning of year		8,121,381			10,727,812			6,985,343			8,925,612
Service costs		152,706			211,601			84,877			107,986
Interest costs		646,630			807,727			543,028			677,624
Plan participants’ contributions		32,634			33,378			—		—
Actuarial losses		332,612			585,519			111,711			(28,948	)
Benefits paid		(250,932	)		(331,198	)		(134,633	)		(137,548	)
Effects on benefits changes		698,584			—			130,132			1,052,567

Benefits obligation at end of period		9,733,615			12,034,839			7,720,458			10,597,293

Change in plan assets
Fair value of plan assets at beginning of year		7,210,749			9,034,393			2,253,260			3,376,172
Actual return on plan assets		583,708			(766,528	)		166,611			(164,496	)
Asset losses (gains)		9,373			—			69,266		—
Employer’s contributions		525,121			666,201			780,000			800,000
Plan participants’ contributions		32,634			33,378			—		—
Benefits paid		(250,932	)		(288,206	)		(134,633	)		(137,548	)

Fair value of plan assets at end of period		8,110,653			8,679,238			3,134,504			3,874,128

Accrued costs		(1,622,962	)		(3,355,601	)		(4,585,954	)		(6,723,165	)

	c.		The measurement date used to determine pension and health care benefits measures for the pension plans and the health care plan is December 31 for each of the years.

	d.		The assumptions used by the independent actuary to determine the benefits obligation of the plans as of December 31, 2006 and 2007 were as follows:


	Pension						Health care
	2006			2007			2006			2007
Discount rate		10.5	%		10.25	%		10.5	%		10.25	%
Rate of compensation increases		8	%		8	%		—			—

140

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES


55.		SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDONESIAN GAAP AND U.S. GAAP (continued)

(3)

Additional consolidated financial statement disclosures required by U.S. GAAP and U.S. SEC (continued)

Employee benefits (continued)

(i).

The Company (continued)

The assumptions used by the independent actuary to determine the net periodic benefits costs of the plans for the years ended December 31, 2006 and 2007, were as follows:


	Pension						Health care
	2006			2007			2006			2007
Discount rate		10.5	%		10.25	%		10.5	%		10.25	%
Expected long-term return on plan assets		10.5	%		10	%		8.5	%		9	%
Rate of compensation increases		8	%		8	%		—			—

Future health care costs trend rates as of December 31, 2006 and 2007, were assumed as follows:


	2006			2007
Health care costs trend assumed for next year		12	%		14	%
Ultimate health care costs trend rate		8	%		8	%
Year that the rate reaches the ultimate trend rate		2011			2011

	g.		The actuarial valuations for the defined benefit pension plan and post-retirement health care plan as of December 31, 2006 and 2007 were prepared on April 24, 2007 and March 31, 2008, respectively, by an independent actuary.

			The discount rates were based on the Government Bond yields. The rates of compensation increases assumed were based on the long-term inflation rates of between 6% and 7%. The expected long-term returns on the plan assets were based on the average rate of earnings expected on the funds invested or to be invested.

141

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES


55.		SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDONESIAN GAAP AND U.S. GAAP (continued)

(3)

Additional consolidated financial statement disclosures required by U.S. GAAP and U.S. SEC (continued)

Employee benefits (continued)

(i).

The Company (continued)

The investment policies established by management for the pension plans require a minimum of 95% of the fund to be invested in the following asset types and a minimum overall rate of return of 10%:


		Based on
		percentage of fund invested
Time deposits		Up to 100%
Deposits on call		Up to 100%
Certificates of deposit		Up to 100%
Listed shares		Up to 50%
Listed debt securities		Up to 50%
Unlisted shares and debt securities		Up to 20%
Real estates		Up to 15%
Mutual funds		Up to 50%
Certificates by Bank Indonesia		Up to 100%
Securities by the Indonesian Government		Up to 75%

The weighted average asset allocations of the Company’s pension plan as of September 30, 2007 and 2008, by asset category, were as follows:


	Plan assets
	as of September 30,
	2007			2008
Asset category
Debt securities		73	%		72	%
Deposit securities		7	%		2	%
Equity securities		15	%		20	%
Mutual fund		4	%		5	%
Real estates		1	%		1	%

Total		100	%		100	%

142

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES


55.		SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDONESIAN GAAP AND U.S. GAAP (continued)

(3)

Additional consolidated financial statement disclosures required by U.S. GAAP and U.S. SEC (continued)

Employee benefits (continued)

(i).

The Company (continued)

	j.		Equity securities include the Company’s common stock amounting to Rp.267,013 million and Rp.257,892 million (3.3% and 3.1% of the total Company’s pension plan assets) as of September 30, 2007 and 2008, respectively.

			Debt securities include the Company’s bonds amounting to Rp.nil and Rp.nil (0% and 0% of the total Company’s pension plan assets) as of September 30, 2007 and 2008.

	k.		Management has established investment policies for the post-retirement health care benefits plan which require a minimum of 95% of the fund to be invested in the following asset types:


		Based on
		Percentage of fund invested
Time deposits		Up to 100%
Deposits on call		Up to 100%
Listed shares		Not exceeding 50%
Listed debt securities		Not exceeding 50%
Mutual funds		Not exceeding 50%
Certificates by Bank Indonesia		Up to 50%
Securities by the Indonesian Government		Not exceeding 75%

The weighted average asset allocations of the Company’s post-retirement health care plan as of September 30, 2007 and 2008, by asset category, were as follows:


	Plan assets
	as of September 30,
	2007			2008
Asset category

Deposit securities		9	%		4	%
Debt securities		54	%		52	%
Equity securities		5	%		10	%
Mutual fund		32	%		34	%

Total		100	%		100	%

143

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES


55.		SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDONESIAN GAAP AND U.S. GAAP (continued)

(3)

Additional consolidated financial statement disclosures required by U.S. GAAP and U.S. SEC (continued)

Employee benefits (continued)

(i).

The Company (continued)

	m.		Debt securities include the Company’s Notes and bonds amounting to Rp.nil and Rp.nil (0% and 0% of the total Company’s post retirement health care plan assets) as of September 30, 2007 and 2008, respectively.

			Equity securities include the Company’s stock amounting to Rp.55,770 million and Rp.59,605 million (1.8% and 1.6% of the total Company’s post-retirement health care plan assets) as of September 30, 2007 and 2008.

	n.		The Company expected to contribute Rp.889,061 million to its defined benefit pension plan and Rp.1,100 million to its post-retirement health care plan during 2008.

(ii).

Telkomsel

Pension plan


	2007			2008
Service costs		28,513			32,334
Interest costs		20,702			25,927
Expected return on plan assets		(2,022	)		(10,176	)
Amortization of prior service costs		361			361
Recognized actuarial losses (gains)		6,937			3,647

Net periodic benefits costs		54,491			52,093

The following table presents the changes in the benefits obligations, the changes in the plan assets, the funded status of the plan and accrued cost amounts recognized in Telkomsel’s U.S. GAAP balance sheets as of September 30, 2007 and 2008:


	2007		2008
Change in benefits obligation
Benefits obligation at beginning of year		265,336		332,096
Service costs		28,513		32,334
Interest costs		20,702		25,927

Benefits obligation at end of period		314,551		390,357

144

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

55.

SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDONESIAN GAAP AND U.S. GAAP (continued)

(3)

Additional consolidated financial statement disclosures required by U.S. GAAP and U.S. SEC (continued)

Employee benefits (continued)

(ii).

Telkomsel (continued)

(continued)


	2007			2008
Change in plan assets
Fair value of plan assets at beginning of year		29,904			132,081
Employer’s contributions		38,268			40,634

Fair value of plan assets at end of period		68,172			172,715

Accrued costs		(246,379	)		(217,642	)

	c.		The measurement date used to determine pension and health care benefits measures for the pension plans and the health care plan is December 31 for each of the years.

	d.		The assumptions used by the independent actuary to determine the benefits obligation of the plans as of December 31, 2006 and 2007 were as follows:


	2006			2007
Discount rate		10.5	%		10.5	%
Rate of compensation increase		8	%		8	%

The assumptions used by the independent actuary to determine the net periodic benefits costs of the plans for the years ended December 31, 2006 and 2007, were as follows:


	2006			2007
Discount rate		10.5	%		10.5	%
Expected long-term return on plan assets		7.5	%		10.5	%
Rate of compensation increase		8	%		8	%

Telkomsel’s pension plan is managed by PT Asuransi Jiwasraya, a state owned insurance company (see notes 41)

145

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

55.

SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDONESIAN GAAP AND U.S. GAAP (continued)

(3)

Additional consolidated financial statement disclosures required by U.S. GAAP and U.S. SEC (continued)

Employee benefits (continued)

	(iii).		Expected future benefit payments

			The expected benefits payments by the Company and its subsidiaries are as follows:


	Pension		Health care
2008		447,647		221,995
2009		547,783		260,798
2010		523,652		301,815
2011		592,041		342,446
2012		658,624		380,314
2013 - 2017		6,140,830		2,661,371

(iv).

The amounts recognized in accumulated other comprehensive income as of September 30, 2007 and 2008 consisted of:


	2007
			Post-			Other post-
	Pension		retirement			retirement
	benefit		health care			benefits		Total		Deferred tax		Net of tax
Transition obligations		45,016		176,355			—		221,371		13,503		207,868
Prior service costs (gain)		1,308,237		(558	)		45,166		1,352,845		406,021		946,824
Actuarial losses		286,395		2,391,745			159,403		2,837,543		138,975		2,698,568

Total		1,639,648		2,567,542			204,569		4,411,759		558,499		3,853,260


	2008
			Post-			Other post-
	Pension		retirement			retirement
	benefit		health care			benefits		Total		Deferred tax		Net of tax
Transition obligations		16,083		152,030			—		168,113		4,825		163,288
Prior service costs (gain)		1,852,291		(191	)		38,274		1,890,374		567,170		1,323,204
Actuarial losses		267,052		3,248,336			170,750		3,686,138		132,362		3,553,776

Total		2,135,426		3,400,175			209,024		5,744,625		704,357		5,040,268

146

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

55.

SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDONESIAN GAAP AND U.S. GAAP (continued)

(3)

Additional consolidated financial statement disclosures required by U.S. GAAP and U.S. SEC (continued)

	e.		Operating lease

			For the nine months period ended September 30, 2007 and 2008, the Company and its subsidiaries recorded operating lease expenses for land and building, vehicle and office equipment totaling to Rp.628,414 million and Rp.775,368 million.

			Certain subsidiaries entered into a non-cancelable office lease agreements. The minimum lease payment for each of the five succeeding years amounted to Rp.11,003 million, Rp.61,250 million, Rp.60,726 million, Rp.60,726 million and Rp.9,992 million for 2008, 2009, 2010, 2011 and 2012, respectively.

	f.		Fair value measurement

			The table below presents the recorded amount of financial instruments measured at fair value:


	30 September 2008
			Fair value measurement at reporting date using
			Quoted price
			in active market
			for identical				Significant
			assets or		Significant other		unobservable
			liabilities		observable inputs		inputs
	Balance		(*level 1*)		(*level 2*)		(*level 3*)
Assets
Trading securities		6,508		6,508		—		—
Available-for-sale securities		267,110		267,110		—		—

Total		273,618		273,618		—		—


Liabilities
Embedded derivative		47,993		—		47,993		—
Forward contracts		2,968		—		2,968		—

Total		50,961		—		50,961		—

147

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

55.

SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDONESIAN GAAP AND U.S. GAAP (continued)

(3)

Additional consolidated financial statement disclosures required by U.S. GAAP and U.S. SEC (continued)

	g.		Recent accounting pronouncements in the United States of America

			In December 2007, FASB issued SFAS 141 (Revised 2007), “Business Combinations”. The revision provides guidance on recognizing assets and liabilities arising from contingencies in a business combination. It also provides guidance on recording step-by-step acquisition, recognizing and measuring goodwill or a gain from a bargain purchase, equity interest exchange and noncontrolling interest presentation. SFAS 141 (Revised 2007) shall be applied prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Earlier application of SFAS 141 (Revised 2007) is prohibited. Assets and liabilities that arose from business combinations whose acquisition dates preceded the application of SFAS 141 (Revised 2007) shall not be adjusted.

			In December 2007, FASB issued SFAS 160, “Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No.51”. SFAS 160 clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. It also provides guidance on recognizing a gain or loss in net income when a subsidiary is deconsolidated and providing disclosures in the consolidated financial statements. SFAS 160 shall be effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. SFAS 160 shall be applied prospectively except for the presentation and disclosure requirements. Earlier application of SFAS 160 is prohibited. The Company and its subsidiaries are currently assessing the impact of the requirements of SFAS 160 on the consolidated financial statements.

			In March 2008, FASB issued SFAS 161, “Disclosures about Derivative Instruments and Hedging Activities”, which is an amendment of SFAS 133. SFAS 161 changes the disclosure requirements for derivative instruments and hedging activities and requires an entity to provide enhanced disclosures about how and why the entity uses derivative instruments, how derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations, and how derivative instruments and related hedged items affect the financial position, financial performance and cash flows. SFAS 161 shall be effective for the financial statements issued for fiscal years and interim periods beginning after November 15, 2008. Early adoption is encouraged. The Company and its subsidiaries are currently assessing the impact of the application of SFAS 161 on the consolidated financial statements.

			In May 2008, FASB issued SFAS 162, “The Hierarchy of Generally Accepted Accounting Principles” which identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with U.S. GAAP. SFAS 162 shall be effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Boards (PCAOB) amendments to Auditing Standard (AU) Section 411, “The Meaning of Present Fairly in Conformity With General Accepted Accounting Principles”. SFAS 162 will be used as guidance in applying U.S. GAAP by the Company and its subsidiaries.

148

PERUSAHAAN PERSEROAN (PERSERO)
P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

55.

SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDONESIAN GAAP AND U.S. GAAP (continued)

(3)

Additional consolidated financial statement disclosures required by U.S. GAAP and U.S. SEC (continued)

	g.		Recent accounting pronouncements in the United States of America (continued)

			In May 2008, FASB issued SFAS 163, “Accounting for Financial Guarantee Insurance Contract — an Interpretation of FASB Statement No.60” which interprets SFAS 60, “Accounting and Reporting by Insurance Enterprises” and amends existing accounting pronouncements to clarify their application to the financial guarantee insurance contracts that are not accounted for as derivative instruments. SFAS 163 provides guidance on recognizing, measuring and derecognizing unearned premium revenue and claim liability by an insurance enterprise. It also provides guidance on how to provide disclosures in financial statements by an insurance enterprise. SFAS 163 shall be effective for the financial statements issued for fiscal years beginning after December 15, 2008. SFAS 163 will not have impact on the consolidated financial statements.

149


			Perusahaan Perseroan (Persero) PT TELEKOMUNIKASI INDONESIA
			(Registrant)


Date	November 4, 2008		By	/s/ Harsya Denny Suryo
				(Signature)

		Harsya Denny Suryo Vice President Investor Relation & Corporate Secretary


	Page

Consolidated Balance Sheets		1-3

Consolidated Statements of Income		4

Consolidated Statements of Changes in Stockholders’ Equity		5-6

Consolidated Statements of Cash Flows		7-8

Notes to Consolidated Financial Statements		9-149