Commission file number: 1-3330

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

ANNUAL REPORT

PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2012

PT Indosat Tbk

(Exact name of Registrant as specified in its charter)

REPUBLIC OF INDONESIA

(Jurisdiction of incorporation or organization)

Indosat Building

Jalan Medan Merdeka Barat No. 21

Jakarta 10110—Indonesia

(62-21) 30442615

(Address and telephone number of principal executive offices)

Name:	Bayu Hanantasena
Telephone:	+62-21-30442615
Email:	investor@indosat.com
Facsimile:	+62-21-30003757
Address:	Jalan Medan Merdeka Barat No. 21
	Jakarta 10110
	Indonesia

Securities registered pursuant to Section 12(b) of the Act.

Title of each Class	Name of each exchange on which registered
American Depositary Shares, each representing 50 Series B shares, par value Rp100 per share		New York Stock Exchange
Series B shares, par value Rp100 per share		New York Stock Exchange	*

Securities registered or to be registered pursuant to Section 12(g) of the Act.

None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

Series A shares, par value Rp100 per share	1
Series B shares, par value Rp100 per share	5,433,933,499

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes  x    No   ¨

If this report is annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of the Securities Exchange Act of 1934.

Yes  ¨    No    x

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes  ¨    No   ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  x    Accelerated filer  ¨    Non-accelerated filer  ¨

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP  ¨    International Financial Reporting Standards as issued by the International Accounting Standards Board  x    Other  ¨

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

Item 17  ¨    Item 18  ¨

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  ¨    No   x

* The Series B shares were registered in connection with the registration of the American Depositary Shares and are not listed for trading on the New York Stock Exchange.

TABLE OF CONTENTS

		Page
CERTAIN DEFINITIONS, CONVENTIONS AND GENERAL INFORMATION			ii
FORWARD-LOOKING STATEMENTS			ii
GLOSSARY			iii
PART I
Item 1:	IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS		1
Item 2:	OFFER STATISTICS AND EXPECTED TIMETABLE		1
Item 3:	KEY INFORMATION		1
Item 4:	INFORMATION ON THE COMPANY		25
Item 4A:	UNRESOLVED STAFF COMMENTS		64
Item 5:	OPERATING AND FINANCIAL REVIEW AND PROSPECTS		64
Item 6:	DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES		102
Item 7:	MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS		111
Item 8:	FINANCIAL INFORMATION		113
Item 9:	THE OFFER AND LISTING		118
Item 10:	ADDITIONAL INFORMATION		121
Item 11:	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		136
Item 12:	DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES		140
PART II
Item 13:	DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES		142
Item 14:	MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS		142
Item 15:	CONTROLS AND PROCEDURES		142
Item 16A:	AUDIT COMMITTEE FINANCIAL EXPERT		145
Item 16B:	CODE OF ETHICS		145
Item 16C:	PRINCIPAL ACCOUNTANT FEES AND SERVICES		145
Item 16D:	EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES		146
Item 16E:	PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS		146
Item 16F:	CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT		147
Item 16G:	CORPORATE GOVERNANCE		147
PART III
Item 17:	FINANCIAL STATEMENTS		149
Item 18:	FINANCIAL STATEMENTS		149
Item 19:	EXHIBITS		149

i

CERTAIN DEFINITIONS, CONVENTIONS AND GENERAL INFORMATION

Unless the context otherwise requires, references in this Form 20-F to the “Company,” “Indosat,” “we,” “us,” and “our” are to PT Indosat Tbk and its consolidated subsidiaries. All references to “Indonesia” are references to the Republic of Indonesia. All references to the “Government” herein are references to the Government of the Republic of Indonesia. References to “United States” or “U.S.” are to the United States of America. References to “United Kingdom” are to the United Kingdom of Great Britain and Northern Ireland. References to “Indonesian rupiah” or “Rp” are to the lawful currency of Indonesia and references to “U.S. dollars” or “US$” are to the lawful currency of the United States. Certain figures (including percentages) have been rounded for convenience, and therefore indicated and actual sums, quotients, percentages and ratios may differ.

Our consolidated financial statements as of January 1, 2011 and December 31, 2011 and 2012, and for the years ended December 31, 2010, 2011 and 2012 included in this annual report have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). Our consolidated financial statements as of January 1, 2011 and December 31, 2011, included in this annual report contains the restatement of our consolidated statement of financial position, consolidated statement of comprehensive income and consolidated statement of changes in stockholders’ equity for the years ended December 31, 2010 and 2011, to correct the identified historical accounting errors in the accounting treatments of leasing and service concession arrangements, which is detailed in Note 2d to our consolidated financial statements included elsewhere in this annual report. In 2010 and 2011, the Company engaged in a number of tower leasing transactions, including those where slots on its towers were leased to other telecommunications operators (“lease-outs”) and where the Company leased tower slots from others for its own use (“lease-ins”). The conclusions reached by the Company after the consultation and pre-clearance process in connection with the sale and leaseback transaction with PT Tower Bersama Infrastructure Tbk on the proposed accounting treatment for such transaction with the U.S. Securities and Exchange Commission caused the Company to reconsider its historical accounting treatment for such lease transactions. As a result, the historical financial statements for 2010 and 2011 were restated to correct the accounting for lease transactions, along with other accounting corrections.

Solely for the convenience of the reader, certain Indonesian rupiah amounts have been translated into U.S. dollars at specified rates. Unless otherwise indicated, U.S. dollar equivalent information for amounts in Indonesian rupiah is translated at the Indonesian Central Bank Rate for December 31, 2012, which was Rp9,670 to US$1.00. The exchange rate of Indonesian rupiah for U.S. dollars on April 24, 2013 was Rp9,727 to US$1.00. The Federal Reserve Bank of New York does not certify for customs purposes a noon buying rate for cable transfers in Indonesian rupiah. No representation is made that the Indonesian rupiah or U.S. dollar amounts shown herein could have been or could be converted into U.S. dollars or Indonesian rupiah, as the case may be, at any particular rate or at all. See “Item 3: Key Information—Exchange Rate Information” for further information regarding rates of exchange between Indonesian rupiah and U.S. dollars.

FORWARD-LOOKING STATEMENTS

This Form 20-F contains “forward-looking statements,” as defined in Section 27A of the Securities Act, Section 21E of the U.S. Securities Exchange Act of 1934, as amended, or the Exchange Act, and within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our expectations and projections for our future operating performance and business prospects. The words “believe,” “expect,” “anticipate,” “estimate,” “project,” and similar words identify forward-looking statements. In addition, all statements other than statements of historical facts included in this Form 20-F are forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements herein are reasonable, we can give no assurance that such expectations will prove to be correct. These forward-looking statements are subject to a number of risks and uncertainties, including changes in the economic, social and political environments in Indonesia. This Form 20-F discloses, under “Item 3: Key Information—Risk Factors” and elsewhere, important factors that could cause actual results to differ materially from our expectations.

ii

GLOSSARY

The explanations of technical terms set forth below are intended to assist you to understand such terms, but are not intended to be technical definitions.

“2G” second generation of wireless telephone technology that includes GSM, Interim Standard-95 (IS-95) and personnel digital cellular (PDC) technology

“3G” third generation of mobile telecommunications standards, including Wideband Code Division Multiple Access/Universal Mobile Telecommunication System (WCDMA/UMTS)

“active cellular subscriber” a cellular subscriber who: (i) in the case of a postpaid cellular subscriber, has no outstanding balance remaining due more than 120 days after the last statement date, or (ii) in the case of a prepaid cellular subscriber, is either a “new active prepaid cellular subscriber” or a “recharging active prepaid cellular subscriber.” A “new active prepaid cellular subscriber” is a subscriber who has, as of the relevant date, activated a new prepaid SIM card within the last 63 days of the relevant date (such period is defined as the “new prepaid cellular subscriber life cycle”). The “new prepaid cellular subscriber life cycle” includes a 30-day “active period,” a 30-day “grace period” and a 3-day expiry period. A “recharging active prepaid cellular subscriber” is an existing prepaid cellular subscriber who recharges the SIM card within a 33-day “grace period” immediately following the SIM card’s expiry date by adding certain minimum amounts to the SIM card

“ADS” American Depository Share, a security that represents an ownership interest in the shares of a foreign private issuer. Each of our ADSs represents 50 shares of our common stock.

“analog” a signal, whether voice, video or data, which is transmitted in similar, or analogous, signals; commonly used to describe telephone transmission and/or switching services that are not digital

“ARPM” the average monthly revenue per minute (in Indonesian rupiah), computed by dividing revenues from monthly recurring prepaid and postpaid cellular services, excluding non-recurring revenues such as activation fees and special auctions of telephone numbers, for the relevant period, by the total minutes (billed and unbilled) of outgoing call usage of prepaid and postpaid cellular subscribers for such period

“ARPU” Average Revenue Per User, an evaluation statistic for a network operator’s subscriber base. ARPU is computed by dividing monthly recurring prepaid and postpaid cellular services revenues (usage charges, value-added services, interconnection revenues and monthly subscription charges), excluding non-recurring revenues such as activation fees and special auctions of telephone numbers, for the relevant period by the average number of prepaid and postpaid cellular subscribers. The average number of prepaid and postpaid cellular subscribers is the sum of the total number of active cellular subscribers at the beginning and end of each month divided by two.

iii

“ATM” Asynchronous Transfer Mode, the standard packet-switching protocol for transmitting and receiving data via cell relay (uniform 53-byte cells), wherein information for multiple service types, such as voice, video or data is conveyed in small, fixed-size cells

“attenuation” gradual loss in intensity of radio frequency signals by absorption and scattering

“backbone” the highest level in hierarchical network and designed to carry the heaviest traffic. Backbones are either switched (using ATM, frame relay or both) or routed (using only routers and no switches). The transmission links between nodes or switching facilities consist of microwave, submarine cable, satellite, optical fiber or other transmission technology

“bandwidth” the capacity of a communication link

“base station controller” the controlling equipment in a 2G network that coordinates the operation of multiple BTSs

“BTS” Base Transceiver Station, a mobile phone base station comprised of radio transmitter and receiver units used for transmitting and receiving voice and data to and from mobile phones in a particular cell area

“CDMA” Code Division Multiple Access, a transmission technology where each transmission is sent over multiple frequencies and a unique code is assigned to each data or voice transmission, allowing multiple users to share the same frequency spectrum

“cellular backhaul” the transmission lines that connect base station controllers, BTSs and mobile switching centers

“churn rate” the subscriber disconnections for a given period, determined by dividing the sum of voluntary and involuntary deactivations during the period by the average number of cellular subscribers for the same period. The average number of cellular subscribers is the sum of the total number of active cellular subscribers at the beginning and end of each month divided by two

“dBW” decibel referencing one watt

“digital” a method of storing, processing and transmitting information through the use of distinct electronic or optical pulses that represent the binary digits 0 and 1. Digital transmission and switching technologies employ a sequence of these pulses to represent information as opposed to the continuously variable analog signal. Compared to analog networks, digital networks allow for greater capacity, lower interference, protection against eavesdropping and automatic error correction

“DLD” Domestic Long-Distance, long-distance telecommunications services within a country

iv

“EDGE” Enhanced Data GSM Environment, a faster version of the global system for GSM wireless service designed to deliver data at rates of up to 384 Kbps, thereby enabling the delivery of multimedia and other broadband applications to mobile users

“fiber optic cable” a transmission medium constructed from extremely pure and consistent glass through which digital signals are transmitted as pulses of light. Fiber optic cables offer greater transmission capacity and lower signal distortion than traditional copper cables

“Fixed telecommunication” also referred to as “fixed voice service” and includes IDD, DLD and fixed local service. This service also includes fixed wireless access service

“frame relay” a form of packet switching protocol which breaks data stream into small data packets called “frames,” equipped with more sophisticated error detection and correction checking, compared to traditional forms of packet switching (also referred to as “frame net” in our audited consolidated financial statements included elsewhere in this annual report)

“fixed wireless access” or “FWA” fixed wireless access service, a limited mobility service that links to an area code

“GSM” Global System for Mobile Communications, a digital cellular telecommunications system standardized by the European Telecommunications Standards Institute based on digital transmission and cellular network architecture with roaming in use throughout Europe, Japan and in various other countries

“GPRS” General Packet Radio Service, a standard for cellular communications which supports a wide range of bandwidths and is particularly suited for sending and receiving data, including e-mail and other high bandwidth applications

“HSDPA” High Speed Downlink Packet Access, a packet-based data service or protocol in the 3G (WCDMA/UMTS) standard which provides downlink transmission data at speeds of up to 14.4 Mbps

“HSPA+” High Speed Packet Access +, a packet-based data service or protocol in the 3G (WCDMA/UMTS) standard which provides higher downlink and uplink transmission data speeds by enhancing higher order modulation and utilizing multiple-input and multiple-output (MIMO) and multicarrier technologies, reaching downlink speed of up to 42Mbps and uplink speed of up to 11.6Mbps

“IDD” International Direct Dialing, a telecommunications service that allows a user to make international long-distance calls without using an operator

“interconnection” practice of allowing a competing telecommunications operator to connect its network to the network or network elements of other

v

telecommunications operators to enable the termination of traffic originated by customers of the competing telecommunications operator’s network to the customers of the other telecommunications operator’s network

“IPLC” an international private line circuit

“IP VPN” Internet Protocol Virtual Private Network, a packet-based IP routing service that provides economic data transaction facilities between customer locations while maintaining the level of privacy, reliability and service quality dictated by rapidly evolving businesses. IP VPN service provides flexible any-to-any connectivity using Internet Protocol and allows businesses to communicate privately with branch offices, to exchange corporate network traffic, and to establish communication with trusted external partners at low-wide area networking costs

“ISP” Internet Service Provider, a company that provides access to the Internet by providing the interface to the Internet backbone

“Kbps” kilobits per second, a measure of digital transmission speed

“LAN” Local Area Network, a short-distance network designed to connect computers within a localized environment to enable the sharing of data and other communication

“Mbps” megabits per second, a measure of digital transmission speed

“media gateway” a translation unit between telecommunications networks using different standards, such as PSTN, next generation networks and radio access networks

“MIDI” Fixed data services, which include multimedia, data communications and Internet services

“Minutes of Usage” the minutes of usage per cellular subscriber, computed by dividing the total minutes of outgoing and incoming call usage of prepaid and postpaid cellular subscribers for each month by the average number of active prepaid and postpaid cellular subscribers. The average number of prepaid and postpaid cellular subscribers is the sum of the total number of active cellular subscribers at the beginning and end of each month divided by two.

“MMS” Multimedia Messaging Services, a cellular telecommunications system that allows SMS messages to include graphics, audio or video components

“MPLS” Multi-Protocol Label Switching, a data packet forwarding technology with improved forwarding speed of routers using labels to make data-forwarding decisions that increase the efficiency of data traffic flow through a traffic management pattern that classifies data based on its application

vi

“network infrastructure” the fixed infrastructure equipment consisting of fiber optic cables, copper cables, transmission equipment, multiplexing equipment, switches, radio transceivers, antennas, management information systems and other equipment that receives, transmits and processes signals to and from subscriber equipment and/or between wireless networks and fixed networks

“Node B” a BTS for a 3G network

“PSTN” Public Switched Telephone Network, a fixed telephone network operated and maintained by PT Telekomunikasi Indonesia Tbk

“RIO” Reference Interconnect Offer, a regulatory term that refers to the document that covers technical, operational, economical and other aspects of interconnection access by one telecommunications network operator in favor of other telecommunications operators

“roaming” the cellular telecommunications feature that permits subscribers of one network to use their mobile handsets and telephone numbers when in a region with cellular network coverage provided by another provider

“SIM” or “SIM card” Subscriber Identity Module, the “smart” card designed to be inserted into a mobile handset containing all subscriber-related data such as phone numbers, service details and memory for storing messages

“SMS” Short Message Service, a means to send or receive alphanumeric messages to or from mobile handsets

“VoIP” Voice over Internet Protocol, a means of sending voice information using Internet protocol. The voice information is transmitted in discrete packets in digital form rather than the traditional circuit-committed protocols of the PSTN, thereby avoiding the tolls charged by conventional long-distance service providers

“VSAT” Very Small Aperture Terminal, a relatively small satellite dish, typically 1.5 to 3.8 meters in diameter, placed at users’ premises and used for two-way data communications through satellite

“WAP” Wireless Application Protocol, an open and global standard of technology platform that enables mobile users to access and interact with mobile information services such as e-mail, websites, financial information, online banking information, entertainment (infotainment), games and micro-payments

“x.25” a widely used data packet-switching standard that has been partially replaced by frame relay services

vii

PART I

Item 1: IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

Item 2: OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

Item 3: KEY INFORMATION

Selected Financial and Other Data

The following tables present our selected consolidated financial information and operating statistics as of the dates and for each of the periods indicated. The selected financial information as of and for the years ended December 31, 2008, 2009, 2010, 2011 and 2012 presented below is based upon our audited consolidated financial statements prepared in conformity with IFRS as issued by IASB. The selected consolidated financial information as of and for the years ended December 31, 2010 and 2011 presented below has been adjusted to reflect the restatement of our consolidated statement of financial position and consolidated statement of comprehensive income for the years ended December 31, 2010 and 2011, as more fully described under “Certain Definitions, Conventions and General Information” of this annual report and in Note 2d to our consolidated financial statements included elsewhere in this annual report. The selected financial information as of and for the years ended December 31, 2008, 2009, 2010, 2011 and 2012 should be read in conjunction with, and is qualified in its entirety by reference to, our audited consolidated financial statements, including the notes thereto, and the other information included elsewhere in this annual report. The audited consolidated financial statements as of and for the years ended December 31, 2008 and 2009 have been audited by Purwantono, Sarwoko & Sandjaja and the audited consolidated financial statements as of and for the years ended December 31, 2010, 2011 and 2012 have been audited by Purwantono, Suherman & Surja, the Indonesian member firm of Ernst & Young Global.

1

	As of December 31,
	2008 Rp		2009 Rp		2010 Rp		2011 Rp		2012 Rp		2012 US$(1)
					(Restated)		(Restated)
	(Rp in billions and US$ in millions, except for number of outstanding shares)
Financial Position Data:
Assets
Cash and cash equivalents		5,737.9		2,836.0		2,075.3		2,224.2		3,917.2		405.1
Other current assets (other than cash and cash equivalents)—net		3,953.9		4,302.9		3,380.6		3,543.4		4,391.6		454.1
Due from related parties—net		42.5		7.2		8.4		10.7		10.4		1.1
Deferred tax assets—net		70.7		88.0		94.7		113.8		100.7		10.4
Long-term investments		3.4		3.2		2.7		2.7		1,369.7		141.6
Property and equipment—net		38,333.6		44,358.1		43,980.4		43,413.0		41,860.8		4,328.9
Goodwill and other intangible assets—net		2,060.7		2,042.8		2,063.2		2,056.0		2,062.8		213.3
Other non-current assets		1,659.7		1,796.8		2,327.3		2,465.6		2,097.0		217.0
Total assets		51,862.4		55,435.0		53,932.6		53,829.4		55,810.2		5,771.5
Liabilities
Current liabilities		10,719.7		13,067.3		12,029.7		11,970.4		11,016.4		1,139.2
Due to related parties		14.7		13.8		22.1		15.5		42.8		4.4
Obligation under finance lease		—		—		416.6		770.1		3,101.9		320.8
Deferred tax liabilities—net		1,348.7		1,651.8		1,961.2		2,126.9		1,855.1		191.8
Loans payable (net of current maturities)		10,812.2		12,715.5		7,666.8		6,425.8		3,703.8		383.0
Bonds payable (net of current maturities)		10,315.6		8,472.2		12,114.1		12,138.4		13,986.5		1,446.4
Other non-current liabilities		871.9		939.5		1,032.5		989.8		2,294.6		237.4
Total liabilities		34,082.8		36,860.1		35,243.0		34,436.9		36,001.1		3,723.0
Net assets (total assets—total liabilities)		17,779.6		18,574.9		18,689.6		19,392.5		19,809.1		2,048.5
Capital stock		543.4		543.4		543.4		543.4		543.4		56.2
Stockholders’ equity		17,779.6		18,574.9		18,689.6		19,392.5		19,809.1		2,048.5
Total liabilities and stockholders’ equity		51,862.4		55,435.0		53,932.6		53,829.4		55,810.2		5,771.5
Number of outstanding shares		5,433,933,500		5,433,933,500		5,433,933,500		5,433,933,500		5,433,933,500

2

	For the years ended December 31,
	2008 Rp			2009 Rp			2010 Rp			2011 Rp			2012 Rp			2012 US$(1)
							(Restated)			(Restated)
	(Rp in billions and US$ in millions, except per Share and per ADS data)
Comprehensive Income Data:
Operating revenues:
Cellular		14,460.8			14,331.3			15,882.1			16,587.4			18,489.3			1,912.0
MIDI		2,733.4			2,712.6			2,591.8			2,694.2			2,909.8			300.9
Fixed telecommunication		2,021.8			1,803.0			1,278.2			1,250.0			1,021.5			105.6
Total operating revenues		19,216.0			18,846.9			19,752.1			20,531.6			22,420.6			2,318.5
Total operating expenses		14,487.7			15,650.7			16,106.5			17,373.5			19,240.0			1,989.7
Operating income		4,728.3			3,196.2			3,645.6			3,158.1			3,180.6			328.8
Other income (expense):
Interest income		460.1			139.0			146.2			92.6			133.5			13.8
Gain (loss) on foreign exchange—net		(885.7	)		1,656.4			318.2			(54.2	)		(789.4	)		(81.6	)
Gain (loss) on change in fair value of derivatives—net		136.6			(486.9	)		(448.8	)		57.9			4.9			0.5
Financing cost		(1,858.3	)		(1,873.0	)		(2,338.1	)		(1,929.3	)		(2,077.4	)		(214.8	)
Share of loss in associated companies		(25.6	)		(87.5	)		—			—			(0.1	)		0.0
Total other expense—net		(2,172.9	)		(652.0	)		(2,322.5	)		(1,833.0	)		(2,728.4	)		(282.1	)
Income tax expense—net		(485.3	)		(783.9	)		(432.6	)		(269.3	)		25.5			2.6
Profit for the year		2,070.0			1,760.2			890.5			1,055.9			477.7			49.3
Attributable to owners of the Company		2,043.8			1,704.0			812.6			958.1			365.6			37.8
Attributable to non-controlling interests		26.2			56.3			77.9			97.8			112.1			11.5
Weighted average number of shares outstanding		5,433,933,500			5,433,933,500			5,433,933,500			5,433,933,500			5,433,933,500
Basic and diluted earnings per share attributable to owners of the Company (in full amounts)(2)		376.1			313.6			149.5			176.3			67.3			6.9
Dividends declared per share (in full amounts)(2)		172.85			137.86			59.5			76.8			—			—
Dividends declared per share (in full amounts) (in US$)(2)(4)		0.02			0.015			0.006			0.008			—			—
Dividends declared per ADS (in full amounts) (in US$)(2)(3)(4)		0.96			0.77			0.31			0.40			—			—

3

	As of and for the years ended December 31,
	2008 Rp			2009 Rp			2010 Rp			2011 Rp			2012 Rp			2012 US$(1)
							(Restated)			(Restated)
	(Rp in billions and US$ in millions, except for number of outstanding shares, EBITDA margin and financial ratios)
Cash Flow Statement Data
Net cash provided by (used in):
Operating activities		6,513.3			4,106.1			6,848.6			7,320.1			6,989.4			722.8
Investing activities		(10,286.9	)		(10,670.7	)		(5,970.7	)		(6,037.9	)		(2,688.9	)		(278.1	)
Financing activities		1,458.5			3,724.7			(1,629.7	)		(1,135.4	)		(2,647.5	)		(273.8	)
Net Foreign Exchange differences from cash and cash equivalent		—			(54.9	)		(9.7	)		2.2			40.0			4.1
Other Financial Data (unaudited)
EBITDA(5)		9,293.6			8,767.8			9,652.7			9,666.4			10,541.8			1,090.1
EBITDA margin(6)		48.4	%		46.5	%		48.9	%		47.1	%		47.0	%		11.9	%
Other Financial Data
Capital expenditures(7)		12,341.9			11,584.5			5,986.0			6,519.8			8,407.5			869.4
Financial Ratios (unaudited)
Total Debt to EBITDA(8)		2.38			2.94			2.50			2.45			2.11			2.11
Net Debt to EBITDA(9)		1.76			2.62			1.11			2.42			2.08			2.08
EBITDA to Interest Expense		5.23			4.85			4.69			5.72			6.70			6.70

Footnotes to Selected Financial Information and Other Data:

⁽¹⁾ Translated into U.S. dollars based on a conversion rate of Rp9,670 = US$1.00, the Indonesian Central Bank Rate on December 31, 2012. See “—Exchange Rate Information” below.

⁽²⁾ Basic earnings per share/ADS, and dividends declared per share/ADS are reported in whole Indonesian rupiah and U.S. dollars. Basic earnings per share/ADS and dividends declared per share/ADS for all periods presented have been computed based upon the weighted average number of shares outstanding, after considering the effect of the stock option where applicable.

⁽³⁾ The basic earnings and dividends declared per ADS data is calculated on the basis that each ADS represents fifty shares of common stock and does not make allowance for withholding tax to which the holders of the ADSs will be subject.

⁽⁴⁾ Calculated using the Indonesian Central Bank Rate on each dividend payment date.

⁽⁵⁾ We have defined EBITDA as earnings before interest, non-operating income and expense, income tax expense, depreciation and minority interest in net income of subsidiaries as reported in the consolidated financial statements included in this annual report prepared under IFRS. EBITDA is not a standard measure under IFRS. As the telecommunications business is capital intensive, capital expenditure requirements and levels of debt and interest expenses may have a significant impact on the net income of companies with similar operating results. Therefore, we believe that EBITDA provides a useful reflection of our operating results and that net income is the most directly comparable financial measure to EBITDA as an indicator of our operating performance. We also present EBITDA because it is used by some investors as a way to measure a company’s ability to incur and service debt, make capital expenditures and meet working capital requirements. You should not consider our definition of EBITDA in isolation or as an indicator of operating performance, liquidity or any other standard measure under IFRS, or other companies’ definition of EBITDA. Our definition of EBITDA does not account for taxes and other non-operating cash expenses. Funds depicted by this measure may not be available for debt service due to covenant restrictions, capital expenditure requirements and other

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commitments. The following table reconciles profit attributable to owners of the Company under IFRS to our definition of EBITDA for the periods indicated:

	For the years ended December 31,
	2008 Rp			2009 Rp			2010 Rp			2011 Rp			2012 Rp			2012 US$
							(Restated)			(Restated)
	(Rp in billions and US$ in millions, except for number of outstanding shares, EBITDA margin and financial ratios)
EBITDA		9,293.6			8,767.8			9,652.7			9,666.4			10,541.8			1,090.1
Adjustments:
Gain (loss) on foreign exchange—net		(885.7	)		1,656.4			492.4			36.7			(744.6	)		(77.0	)
Interest income		460.1			139.0			146.2			92.6			133.5			13.8
Financing cost (including interest expense)		(1,858.3	)		(1,873.0	)		(2,338.1	)		(1,929.3	)		(2,077.4	)		(214.8	)
Gain (loss) on change in fair value of derivatives—net		136.6			(486.9	)		(448.8	)		57.9			4.9			0.5
Others—net (in 2010, 2011 and 2012 presented as part of operating expense)		(25.6	)		(87.5	)		(79.2	)		29.8			(306.0	)		(31.6	)
Gain on tower sale		—			—			—			—			1,184.0			122.4
Income tax benefit (expense)—net		(485.3	)		(783.9	)		(432.6	)		(269.3	)		25.5			2.6
Depreciation and amortization		(4,565.4	)		(5,571.6	)		(6,102.1	)		(6,569.3	)		(8,284.0	)		(856.6	)
Profit attributable to non controlling interest		(26.2	)		(56.3	)		(77.9	)		(97.8	)		(112.1	)		(11.5	)
Profit attributable to owners of the Company		2,043.8			(1,704.0	)		812.6			958.1			365.6			37.8

⁽⁶⁾ EBITDA margin is computed by dividing EBITDA as defined in note (5) above by total operating revenues recorded under IFRS.

⁽⁷⁾ Capital expenditures is computed by adding total additions of property and equipment and total additions of goodwill and other intangible assets recorded under IFRS.

⁽⁸⁾ We define total debt as total loans payable and bonds payable (current and non-current maturities), unamortized issuance cost (loans, bonds and notes), unamortized consent solicitation fees (loans and bonds) and unamortized discounts (loans and notes) recorded under IFRS.

⁽⁹⁾ We define net debt as total debt less unamortized issuance cost (bond, loans and notes), unamortized consent solicitation fees (loans and bonds) and unamortized discounts (loans and notes) recorded under IFRS.

Exchange Rate Information

	Exchange Rates of Indonesian Rupiah Per U.S. Dollar
	Period end		Average(1)(2)		Low		High
Period
2008		10,950		9,761		12,400		9,051
2009		9,400		10,398		12,065		9,293
2010		8,991		9,085		9,413		8,888
2011		9,068		8,779		9,185		8,460
2012		9,670		9,384		9,707		8,892
October		9,615		9,597		9,615		9,583
November		9,605		9,628		9,643		9,603
December		9,670		9,646		9,707		9,598
2013
January		9,698		9,687		9,635		9,740
February		9,667		9,687		9,634		9,725
March		9,719		9,709		9,678		9,745
April (through April 24, 2013)		9,727		9,725		9,756		9,688

Source: Bank Indonesia

⁽¹⁾ The annual average exchange rates are calculated as averages of the exchange rate on the last day of each month during the year.

⁽²⁾ The monthly average exchange rates are calculated as averages of each daily closing exchange rate.

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Bank Indonesia is the sole issuer of Indonesian rupiah and is responsible for maintaining its stability. Since 1970, Indonesia has implemented three exchange rate systems: (i) a fixed rate system between 1970 and 1978; (ii) a managed floating exchange rate system between 1978 and 1997; and (iii) a free-floating exchange rate system since August 14, 1997. Under the floating exchange rate system, Bank Indonesia maintained stability of the Indonesian rupiah through a trading band policy, pursuant to which Bank Indonesia would enter the foreign currency market and buy or sell Indonesian rupiah, as required, when trading in the Indonesian rupiah exceeded bid and offer prices announced by Bank Indonesia on a daily basis. On August 14, 1997, Bank Indonesia terminated the trading band policy and permitted the exchange rate for the Indonesian rupiah to float without an announced level at which it would intervene, which resulted in a substantial decrease in the value of the Indonesian rupiah relative to the U.S. dollar. Under the current system, the exchange rate of the Indonesian rupiah is determined by the market, reflecting the interaction of supply and demand in the market. However, Bank Indonesia may take measures to maintain a stable exchange rate. The exchange rate was Rp8,991 = US$1.00 as of December 31, 2010, Rp9,068 = US$1.00 as of December 31, 2011 and Rp9,670 = US$1.00 as of December 31, 2012, respectively. On April 24, 2013, the exchange rate was Rp9,727 per U.S. dollar. The Federal Reserve Bank of New York does not certify for customs purposes a noon buying rate for cable transfers in Indonesian rupiah.

The Indonesian rupiah has been and in general is freely convertible or transferable. Bank Indonesia has introduced regulations to restrict the movement of Indonesian rupiah from banks within Indonesia to offshore banks without underlying trade or investment reasons, thereby limiting offshore trading to existing sources of liquidity. In addition, Bank Indonesia has the authority to request information and data concerning the foreign exchange activities of all people and legal entities that are domiciled, or plan to reside, in Indonesia for at least one year.

Foreign Exchange

Foreign exchange controls were abolished in 1971, and Indonesia now maintains a liberal foreign exchange system that permits the free flow of foreign exchange. Capital transactions, including remittances of capital, profits, dividends and interests, are free from exchange controls. A number of regulations, however, have an impact on the exchange system. Bank Indonesia recently introduced regulations to restrict the movement of Indonesian rupiah from banks within Indonesia to offshore banks without underlying trade or investment reasons, thereby limiting offshore trading to existing sources of liquidity. In addition, Bank Indonesia has the authority to request information and data concerning the foreign exchange activities of all people and legal entities that are domiciled in Indonesia or plan to domicile in Indonesia for at least one year.

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RISK FACTORS

Risks Relating to Indonesia

We are incorporated in Indonesia and substantially all of our operations, assets and customers are located in Indonesia. As a result, future political, economic, legal and social conditions in Indonesia, as well as certain actions and policies which the Government may, or may not, take or adopt may have a material adverse effect on our business, financial condition, results of operations and prospects.

Domestic, regional or global economic changes may adversely affect our business

The economic crisis which affected Southeast Asia, including Indonesia, from mid-1997 was characterized in Indonesia by, among other things, currency depreciation, negative economic growth, high interest rates, social unrest and extraordinary political events. These conditions had a material adverse effect on Indonesian businesses, including a material adverse effect on the quality and growth of our subscriber base and service offerings, which depend on the health of the overall Indonesian economy. In addition, the economic crisis resulted in the failure of many Indonesian companies to meet their debt obligations. Many Indonesian companies have not fully recovered from the economic crisis, and many such companies are still in the process of restructuring their debt obligations or are engaged in disputes arising from defaults under their debt obligations.

Beginning in 2008, the global financial crisis which was triggered in part by the subprime mortgage crisis in the United States, caused failures of large U.S. financial institutions and rapidly evolved into a global credit crisis. U.S. bank failures were followed by failures in a number of European banks and declines in various stock indexes, as well as large reductions in the market value of equities and commodities worldwide, including in Indonesia. In addition, since 2010, the European sovereign debt crisis, has created concerns about the ability of a number of European countries, including Greece, Ireland, Italy, Portugal and Spain, to continue to service their sovereign debt obligations. These conditions may result in worsening economic conditions in Europe and globally. The world economic downturn has adversely affected the economic performance of Indonesia, resulting in declining economic growth, slowing household consumption and weakening investment due to loss of external demand and increased uncertainty in the world economy. These conditions have had and may continue to have a negative impact on Indonesian businesses and consumers, which may result in reduced demand for telecommunication services.

Volatility in oil prices and potential food shortages may also cause an economic slowdown in many countries, including Indonesia. An economic downturn in Indonesia could also lead to additional defaults by Indonesian borrowers and could have a material adverse effect on our business, financial condition and results of operations and prospects. The Government continues to have a large fiscal deficit and a high level of sovereign debt. Its foreign currency reserves are modest and the banking sector is weak and suffers from relatively high levels of non-performing loans. The current high inflation rate in Indonesia may also result in less disposable income available to consumers to spend or cause consumer purchasing power to decrease, which may reduce consumer demand for telecommunication services, including our services.

A loss of investor confidence in the financial systems of emerging and other markets, or other factors, including the deterioration of the global economic situation, may cause increased volatility in the Indonesian financial markets and a slowdown in economic growth or negative economic growth in Indonesia. Any such increased volatility or slowdown or negative growth could have a material adverse effect on our business, financial condition and results of operations and prospects.

Political and social instability may adversely affect us

Since 1998, Indonesia has experienced a process of democratic change, resulting in political and social events that have highlighted the unpredictable nature of Indonesia’s changing political landscape. These events

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have resulted in political instability as well as general social and civil unrest on certain occasions in the past few years. As a relatively new democratic country, Indonesia continues to face various socio-political issues and has, from time to time, experienced political instability and social and civil unrest.

Since 2000, thousands of Indonesians have participated in demonstrations in Jakarta and other Indonesian cities both for and against former President Wahid, former President Megawati, and current President Yudhoyono, as well as in response to specific issues, including fuel subsidy reductions, privatization of state assets, anti-corruption measures, the bailout of PT Bank Century in 2008, decentralization and provincial autonomy and the American-led military campaigns in Afghanistan and Iraq.

In June 2001, demonstrations and strikes affected at least 19 cities after the Government mandated a 30.0% increase in fuel prices. Similar demonstrations in response to fuel subsidy reductions occurred in 2003, 2005 and 2008. Similar demonstrations also occurred in 2012 in response to the Government’s proposal in the first quarter of 2012 to reduce fuel subsidies that would have resulted in a up to 33% increase in fuel prices. Although past demonstrations were generally peaceful, some turned violent. We cannot assure you that any future fuel subsidy reductions will not lead to further political and social instability.

Regional political instability and clashes between religious and ethnic groups remain problematic. Separatist movements and clashes between religious and ethnic groups have resulted in social and civil unrest in parts of Indonesia. In the provinces of Aceh and Papua (formerly Irian Jaya), there have been clashes between supporters of those separatist movements and the Indonesian military, although there has been little conflict in Aceh since a memorandum of understanding was signed in August 2005. In recent years, political instability in Maluku and Poso, a district in the province of Central Sulawesi, has intensified and clashes between religious groups in these regions have resulted in thousands of casualties and displaced persons. In recent years, the Government has made limited progress in negotiations with these troubled regions, except in the Province of Aceh where peaceful local elections were held in April 2012, which resulted in former separatists winning the election and becoming the governors of the province.

In 2004 and in 2009, elections were held in Indonesia to elect the President, Vice-President and representatives in the Parliament. Although the 2004 and 2009 elections were conducted peacefully, political campaigns in Indonesia may bring a degree of political and social uncertainty to Indonesia. Increased political activity can be expected in Indonesia, in part due to the upcoming presidential election in 2014.

Political and related social developments in Indonesia have been unpredictable in the past, and we cannot assure you that social and civil disturbances will not occur in the future and on a wider scale, or that any such disturbances will not, directly or indirectly, have a material adverse effect on our business, financial condition, results of operations and prospects.

Indonesia is located in an earthquake zone and is subject to significant geological risks which could lead to social unrest and economic loss

Many parts of Indonesia are vulnerable to natural disasters such as earthquakes, tsunamis, floods, volcanic eruptions as well as droughts, power outages or other events beyond our control. In recent years, several natural disasters have occurred in Indonesia (in addition to the Asian tsunami in 2004), including volcanic eruptions of Mount Lokon in North Sulawesi in 2011, Mount Merapi in southern Java near Yogyakarta, and Mount Bromo in East Java in 2010, tsunamis in Mentawai in West Sumatera in 2010 and in Pangandaran in West Java in 2006, an earthquake off the coast of Sumatra in January 2012, separate earthquakes in Papua, West Java, Sulawesi and Sumatra in 2009, an earthquake in Jogyakarta in Central Java in 2006, and a hot mud eruption and subsequent flooding in East Java in 2006. Indonesia also experienced significant flooding in Wasior district, West Papua in 2010, in Jakarta in January 2013 and in 2009 and 2007 and in Solo in Central Java in 2008.

As a result of these natural disasters, the Government has had to spend significant amounts on emergency aid and resettlement efforts. Most of these costs have been underwritten by foreign governments and

8

international aid agencies. We cannot assure you that such aid will continue to be forthcoming, or that it will be delivered to recipients on a timely basis. If the Government is unable to timely deliver foreign aid to affected communities, political and social unrest could result. While the Government has implemented various measures to mitigate the losses caused by natural disasters, such as establishing a national board for disaster mitigation and installing tsunami early warning systems, recovery and relief efforts are likely to continue to impose a strain on the Government’s finances, and may affect its ability to meet its obligations on its sovereign debt. Any such failure on the part of the Government, or declaration by it of a moratorium on its sovereign debt, could trigger an event of default under numerous private-sector borrowings including those of our Company, thereby materially and adversely affecting our business.

We cannot assure you that our insurance coverage will be sufficient to protect us from potential losses resulting from such natural disasters and other events beyond our control. In addition, we cannot assure you that the premium payable for these insurance policies upon renewal will not increase substantially, which may materially and adversely affect our financial condition and results of operations. We also cannot assure you that future geological or meteorological occurrences will not have more of an impact on the Indonesian economy. A significant earthquake, other geological disturbance or weather-related natural disaster in any of Indonesia’s more populated cities and financial centers could severely disrupt the Indonesian economy and undermine investor confidence, thereby materially and adversely affecting our business, financial condition, results of operations and prospects.

Terrorist activities in Indonesia could destabilize the country, thereby adversely affecting our business, financial condition, results of operations and prospects

Several bombing incidents have taken place in Indonesia, most significantly in October 2002 in Bali, a region of Indonesia previously considered safe from the unrest affecting other parts of the country. Other bombing incidents, although on a lesser scale, have also been committed in Indonesia on a number of occasions over the past few years, including at shopping centers and places of worship. In April 2003, a bomb exploded outside the main United Nations building in Jakarta and in front of the domestic terminal at Soekarno Hatta International Airport. In August 2003, a bomb exploded at the JW Marriott Hotel in Jakarta, and in September 2004, a bomb exploded in front of the Australian embassy in Jakarta. In May 2005, bomb blasts in Central Sulawesi killed at least 21 people and injured at least 60 people. In October 2005, bomb blasts in Bali killed at least 23 people and injured at least 101 others. Indonesian, Australian and U.S. government officials have indicated that these bombings may be linked to an international terrorist organization. Demonstrations have taken place in Indonesia in response to plans for and subsequent to U.S., British and Australian military action in Iraq. In January 2007, sectarian terrorists conducted bombings in Poso. In July 2009, bomb blasts in the JW Marriott and Ritz Carlton hotels in Jakarta killed six people and injured at least 50 people. Further terrorist acts may occur in the future and may be directed at foreigners in Indonesia. Violent acts arising from, and leading to, instability and unrest could destabilize Indonesia and the Government and have had, and may continue to have, a material adverse effect on investment and confidence in, and the performance of, the Indonesian economy, and may have a material adverse effect on our business, financial condition, results of operations and prospects.

Our operations may be adversely affected by an outbreak of Severe Acute Respiratory Syndrome (“SARS”), avian influenza, Influenza A (H1N1) virus or other epidemics

In 2003, certain countries in Asia including, Indonesia, the China, Vietnam, Thailand and Cambodia, experienced an outbreak of SARS, a highly contagious form of atypical pneumonia, which seriously interrupted the economic activities in, and the demand for goods plummeted in, the affected regions.

During recent years, large parts of Asia experienced unprecedented outbreaks of avian influenza. As of February 1, 2013, the World Health Organization (“WHO”) had confirmed a total of 364 fatalities in a total number of 615 cases reported to the WHO, which only reports laboratory confirmed cases of avian influenza. Of these, the Indonesian Ministry of Health reported to the WHO 160 fatalities in a total number of 192 cases of

9

avian influenza in Indonesia. In addition, the WHO announced in June 2006 that human-to-human transmission of avian influenza had been confirmed in Sumatra, Indonesia. According to the United Nations Food and Agricultural Organization, avian influenza virus is entrenched in 31 of Indonesia’s 33 provinces and efforts to contain avian influenza are failing in Indonesia, increasing the possibility that the virus may mutate into a deadlier form. No fully effective avian influenza vaccines have been developed and an effective vaccine may not be discovered in time to protect against a potential avian influenza pandemic.

In April 2009, there was an outbreak of the Influenza A (H1N1) virus, which originated in Mexico but has since spread globally, including confirmed reports in Hong Kong, Indonesia, Japan, Malaysia, Singapore and elsewhere in Asia. The Influenza A (H1N1) virus is believed to be highly contagious and may not be easily contained.

An outbreak of SARS, avian influenza, Influenza A (H1N1) virus or a similar epidemic, or the measures taken by the governments of affected countries, including Indonesia, against such an outbreak, could severely disrupt the Indonesian and other economies and undermine investor confidence, thereby materially and adversely affecting our financial condition or results of operations.

Labor activism and unrest may adversely affect our business

The liberalization of regulations permitting the formation of labor unions, combined with weak economic conditions, has resulted, and will likely continue to result, in labor unrest and activism in Indonesia. In 2000, the Government issued a labor regulation allowing employees to form unions without employer intervention. In March 2003, the Government enacted a manpower law, Law No. 13/2003 (the “Labor Law”), which, among other things, increased the amount of required severance, service and compensation payments to terminated employees, and required employers with 50 or more employees to establish bipartite forums with the participation of employers and employees. To negotiate a collective labor agreement with such a company, a labor union’s membership must consist of more than 50.0% of the company’s employees. In response to a challenge to its validity, the Indonesian Constitutional Court declared the Labor Law to be mostly valid, except for certain provisions relating to, among others, (i) the right of an employer to terminate its employee who committed a serious mistake; (ii) the imprisonment of, or imposition of a monetary penalty on, an employee who instigates or participates in an illegal labor strike or persuades other employees to participate in a labor strike; (iii) the requirement to allow outsourcing or subcontracting arrangements with a temporary employment contract that does not stipulate for the transfer of undertakings protection of employment provision; and (iv) the requirement that a labor union obtain the presentation of at least 50.0% of employees (for a company that has more than one labor union) to be eligible to conduct negotiations with an employer. The Government proposed to amend the Labor Law in a manner which, in the view of labor activists, would result in reduced pension benefits, the increased use of outsourced employees and prohibitions on unions to conduct strikes. The proposal has been suspended and the new Government regulation addressing lay-offs of workers has not yet become effective.

Labor unrest and activism could disrupt our operations and could adversely affect the financial condition of Indonesian companies in general and the value of the Indonesian rupiah relative to other currencies, which could have a material adverse effect on our business, financial condition, results of operations and prospects.

Depreciation in the value of the Indonesian rupiah may adversely affect our business, financial condition, results of operations and prospects

One of the most important immediate causes of the economic crisis which began in Indonesia in mid-1997 was the depreciation and volatility of the value of the Indonesian rupiah, as measured against other currencies, such as the U.S. dollar. Although the Indonesian rupiah has appreciated considerably from its low point of approximately Rp17,000 per U.S. dollar in 1998, it may experience volatility again in the future. During the period between January 1, 2010 through December 31, 2012, the Indonesian rupiah/U.S. dollar exchange rate ranged from a low of Rp9,707 per U.S. dollar to a high of Rp8,460 per U.S. dollar. We cannot assure you that

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future depreciation or volatility of the Indonesian rupiah against other currencies, including the U.S. dollar, will not occur. To the extent the Indonesian rupiah depreciates further from the exchange rates at December 31, 2012, our obligations under our accounts payable, procurements payable and our foreign currency-denominated loans payable and bonds payable would increase in Indonesian rupiah terms. Such depreciation of the Indonesia rupiah would result in additional losses on foreign exchange translation and significantly impact our other income and net income.

In addition, while the Indonesian rupiah has generally been freely convertible and transferable (except that Indonesian banks may not transfer Indonesian rupiah to persons outside of Indonesia who lack a bona fide trade or investment purpose), from time to time, Bank Indonesia has intervened in the currency exchange markets in furtherance of its policies, either by selling Indonesian rupiah or by using its foreign currency reserves to purchase Indonesian rupiah. We cannot assure you that the current floating exchange rate policy of Bank Indonesia will not be modified or that the Government will take additional action to stabilize, maintain or increase the value of the Indonesian rupiah, or that any of these actions, if taken, will be successful. Modification of the current floating exchange rate policy could result in significantly higher domestic interest rates, liquidity shortages, capital or exchange controls or the withholding of additional financial assistance by multinational lenders. This could result in a reduction of economic activity, an economic recession, loan defaults or declining usage of our subscribers, and as a result, we may also face difficulties in funding our capital expenditures and in implementing our business strategy. Any of the foregoing consequences could have a material adverse effect on our business, financial condition, results of operations and prospects.

Downgrades of credit ratings of the Government or Indonesian companies could adversely affect our business

Beginning in 1997, certain recognized statistical rating organizations, including Moody’s, Standard & Poor’s, and Fitch, downgraded Indonesia’s sovereign rating and the credit ratings of various credit instruments of the Government and a large number of Indonesian banks and other companies. As of April 24, 2013, Indonesia’s sovereign foreign currency long-term debt was rated “Baa3” by Moody’s, “BB+” by Standard & Poor’s, and “BBB-” by Fitch. These ratings reflect an assessment of the Government’s overall financial capacity to pay its obligations and its ability or willingness to meet its financial commitments as they become due.

Even though the recent trend in Indonesian sovereign ratings has been positive, we cannot assure you that Moody’s, Standard & Poor’s, Fitch or any other statistical rating organization will not downgrade the credit ratings of Indonesia or Indonesian companies, including us. Any such downgrade could have an adverse impact on liquidity in the Indonesian financial markets, the ability of the Government and Indonesian companies, including us, to raise additional financing and the interest rates and other commercial terms at which such additional financing is available. Interest rates on our floating rate Indonesian rupiah-denominated debt would also likely increase. Such events could have material adverse effects on our business, financial condition, results of operations and prospects.

We are subject to corporate disclosure and reporting requirements that differ from those in other countries

As we are a public company listed in the Indonesia Stock Exchange and New York Stock Exchange, we are subject to corporate governance and reporting requirements in Indonesia and the United States that differ, in significant respects, from those applicable to companies in certain other countries. The amount of information made publicly available by issuers in Indonesia may be less than that made publicly available by comparable companies in certain more developed countries, and certain statistical and financial information of a type typically published by companies in certain more developed countries may not be available. As a result, investors may not have access to the same level and type of disclosure as that available in other countries, and comparisons with other companies in other countries may not be possible in all respects.

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We are incorporated in Indonesia, and it may not be possible for investors to effect service of process, or enforce judgments, on us within the United States, or to enforce judgments of a foreign court against us in Indonesia

We are a limited liability company incorporated in Indonesia, operating within the framework of Indonesian laws relating to foreign capital invested companies, and all of our significant assets are located in Indonesia. In addition, several of our Commissioners and substantially all of our Directors reside in Indonesia and a substantial portion of the assets of such persons is located outside the United States. As a result, it may be difficult for investors to effect service of process, or enforce judgments, on us or such persons within the United States, or to enforce against us or such persons in the United States, judgments obtained in U.S. courts.

We have been advised by our Indonesian legal advisor that judgments of U.S. courts, including judgments predicated upon the civil liability provisions of the U.S. federal securities laws or the securities laws of any state within the United States, are not enforceable in Indonesian courts, although such judgments could be admissible as non-conclusive evidence in a proceeding on the underlying claim in an Indonesian court. There is doubt as to whether Indonesian courts will enter judgments in original actions brought in Indonesian courts predicated solely upon the civil liability provisions of the U.S. federal securities laws or the securities laws of any state within the United States. As a result, the claimant would be required to pursue claims against us or such persons in Indonesian courts.

Risks Relating to Our Business

We operate in a legal and regulatory environment that has been undergoing significant reforms. These reforms have been resulting in increased competition, which may result in reduced margins and operating revenues, among other things, all of which may have a material adverse effect on us

The regulatory reform of the Indonesian telecommunications sector, which was initiated by the Government in 1999, has to a certain extent resulted in the liberalization of the telecommunications industry, including facilitation of new market entrants and changes to the competitive structure of the telecommunications industry. However, in recent years, the volume and complexity of regulatory changes has created an environment of considerable regulatory uncertainty. In addition, as the reform of the Indonesian telecommunications sector continues, competitors, potentially with greater resources than us, may enter the Indonesian telecommunications sector and compete with us in providing telecommunications services. For example, since January 2007, the Government, through the Ministry of Communication and Information Technology (“MOCIT”), has been responsible for setting reference tariffs for interconnection services. See “Item 3: Key Information—Risk Factors—Risks Relating to Our Business—We depend on interconnection agreements relating to the use of our competitors’ cellular and fixed-line telephone networks.” The MOCIT sets interconnection tariffs for dominant service providers on a “cost” basis, based on RIOs submitted by the dominant service providers. In contrast, telecommunications operators which are not designated as dominant operators may simply notify the MOCIT regarding their interconnection tariffs and may implement such tariffs for its customers without MOCIT approval. The disparity in the treatment of dominant and non-dominant telecommunications operators may create opportunities for new entrants in the telecommunications industry, providing them with increased flexibility to establish lower tariffs and offer lower pricing terms to their customers.

In addition, the tariffs in our RIOs have been decreasing in the past few years, and we expect this downward trend to continue. Any decrease in the amount of interconnection costs might reduce our revenue and also our costs for inter-operator traffic. In addition, on December 12, 2011, the Government, through the Indonesian Telecommunication Regulatory Body (“ITRA”) issued letter No.262/BRTI/XII/2011 under which SMS fees changed from a “sender-keeps all” scheme to a cost-based scheme, effective June 1, 2012. Under the current cost-based scheme, we record revenues from interconnection fees payable by other operators whenever one of our subscribers receives an SMS from a subscriber on another network. If one of our subscribers sends an SMS to a recipient on another network, we record revenues for the SMS charge payable by our subscriber and record expenses for interconnection charges payable to the operator of the other network. We cannot assure you that we

12

will be able to fully recoup all interconnection charges we may be required to pay, and as a result, we could experience a decrease in our operating revenues from cellular services. In the future, the Government may announce or implement other regulatory changes, such as changes in interconnection or tariff policies, which may adversely affect our business or our existing licenses. We cannot assure you that we will be able to compete successfully with other domestic and foreign telecommunications operators or that regulatory changes, amendments or interpretations of current or future laws and regulations promulgated by the Government will not have a material adverse effect on our business, financial condition, results of operations and prospects.

We operate under an uncertain law enforcement environment, which may affect our business and competitiveness

On January 13, 2012, the former President Director of IM2, a subsidiary of the Company, was accused of corruption by the Attorney General’s Office (“AGO”). According to the AGO, a state loss amounting to IDR 1.3 trillion was caused by an agreement between IM2 and the Company, which relates to the alleged illegal use by IM2 of the Company’s 2.1 GHz frequency band. The Ministry of Communication and Information Technology (“MOCIT”) issued letter No. 65/M.KOMINFO/02/2012 on February 24, 2012 stating that there was no breach of law, crime committed, and no state loss resulting from the agreement between the Company and IM2. Moreover the MOCIT has also sent a letter to the AGO directly which states that neither the Company nor its subsidiary, IM2, has violated any regulation and the collaboration between Indosat and IM2 is lawful under the prevailing laws and regulations, and also common practices in the telecommunication industry. In addition, ITRA publicly stated that IM2 had not breached any laws or prevailing rules. However, the AGO ignored the letters from the MOCIT and, on November 30, 2012, accused the former President Director of Indosat of similar corruption charges. Furthermore, on January 3, 2013, the AGO also filed corruption charges against IM2 and Indosat as corporate suspects for the alleged illegal use of Indosat’s 2.1 GHz frequency band without proper permission from the Government. IM2, Indosat and their respective former President Directors are seeking to nullify the charges that have been filed against them by arguing that the AGO’s charges under the Corruption Law are baseless; violation (if any) of practices in the telecommunication sector should be subject to the Telecommunication Law, including the relevant sanctions thereto. IM2 and the Company are also seeking to nullify charges against their respective former President Directors by arguing that the agreement between IM2 and the Company was an agreement between two companies and was executed in accordance with all applicable laws and regulations, including the prevailing regulations in the telecommunication and the non-tax state revenue sectors. Indosat and IM2 are also stating that IM2 was lawfully using Indosat’s cellular telecommunication network, and was not unlawfully using the 2.1 GHz frequency band detached of the cellular telecommunication network, as alleged. The court proceeding against the former President Director of IM2 commenced at the Corruption Court in January 2013. As one of the efforts to contest the allegation of corruption, the former President Director of IM2, together with IM2 and the Company, has been seeking for an annulment of the determination of the state loss by the Finance and Development Supervisory Agency or BPKP before the Jakarta Administrative Court. On February 7, 2013, the Jakarta Administrative Court rendered an interim decision to stay the implementation of BPKP’s decision pending its final decision on the annulment request. As of April 24, 2013, the Corruption Court has examined 17 witnesses, including expert witnesses, 15 of whom have testified that the cooperation agreement between IM2 and the Company does not breach the prevailing laws and regulations, and there is no sharing of the 2.1GHz frequency band as alleged, with only two expert witnesses having testified that the agreement is unlawful. The Company cannot assure you that the corruption case that has been filed against the Company or IM2 or their respective former President Directors will be decided in our favor. An unfavorable court decision relating to these matters may result in fines to restore alleged state losses. Moreover, we have similar agreements with other internet service providers in Indonesia and there can be no assurance that similar cases will be filed against us in relation to those agreements. A decision adverse to us in this case or others that may be filed against us in the future could have a material adverse effect on our business, results of operations, financial condition, reputation and competitiveness.

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We may be unable to fund the capital expenditures needed for us to remain competitive in the telecommunications industry in Indonesia

The delivery of telecommunications services is capital intensive. In order to be competitive, we must continually expand, modernize and update our telecommunications infrastructure technology, which involves substantial capital investment. For the years ended December 31, 2010, 2011 and 2012, our actual consolidated capital expenditures totaled Rp5,986.0 billion, Rp6,519.8 billion and Rp8,407.5 billion (US$869.4 million), respectively. During 2013, we intend to allocate Rp8,627.5 billion (US$892.2 million) for new capital expenditures, which, taken together with estimated actual capital expenditures expended for 2013 for capital expenditure commitments in prior periods, will result in approximately Rp11,358.7 billion (US$1,174.6 million) total actual capital expenditures for 2013. Our ability to fund capital expenditures in the future will depend on our future operating performance, which is subject to prevailing economic conditions, levels of interest rates and financial, business and other factors, many of which are beyond our control, and upon our ability to obtain additional external financing. We cannot assure you that additional financing will be available to us on commercially acceptable terms, or at all. In addition, we can only incur additional financing in compliance with the terms of our debt agreements. Accordingly, we cannot assure you that we will have sufficient capital resources to improve or expand our telecommunications infrastructure technology or update our other technology to the extent necessary to remain competitive in the Indonesian telecommunications market. Our failure to do so could have a material adverse effect on our business, financial condition, results of operations and prospects.

We depend on interconnection agreements relating to the use of our competitors’ cellular and fixed-line telephone networks

We are dependent on interconnection agreements relating to the use of our competitors’ cellular and fixed-line telephone networks and associated infrastructure for the successful operation of our business. If any disputes involving such interconnection arrangements arise, whether due to a failure by a counterparty to perform its contractual obligations or for any other reason, the delivery of one or more of our services may be delayed, interrupted or stopped, the quality of our services may be lowered, our subscriber churn rates may increase or our interconnection rates may increase. Any disputes involving our current interconnection agreements, as well as our failure to enter into or renew interconnection agreements, could have a material adverse effect on our business, financial condition, results of operations and prospects.

We may become subject to limitations on foreign ownership in the telecommunication services business

Presidential Regulation No. 36 of 2010 (the “Presidential Regulation”) sets out the industries and business fields in which foreign investment is prohibited, restricted or subject to the fulfillment of certain conditions as stipulated by the applicable Governmental authorities (the “Negative List”). The telecommunication industry is one of the industries set out in the Negative List, and foreign investment in the Indonesian telecommunication industry is accordingly subject to applicable restrictions and conditions. The Negative List is implemented by the Capital Investment Coordinating Board (“BKPM”). Restrictions applicable to the telecommunication industry are dependent upon the type of telecommunication business undertaken. Different limitation thresholds are applicable depending upon whether the business pertains to telecommunication networks or services. The limitation on foreign holdings in companies engaging in the telecommunication network business ranges from 49.0%—65.0%, and the limitation on foreign shareholdings in Indonesian companies engaged in the provision of multimedia services (including data communication such as broadband wireless services), from 49.0%—95.0%. Pursuant to Article 8 of the Presidential Regulation, the restrictions set forth therein shall not apply to investments that have been approved prior to the effectiveness of the Presidential Regulation pursuant to investment approval issued by BKPM unless such restrictions are more favorable to the investments. The Presidential Regulation does not change the limitation of foreign shareholding in our business.

On June 22, 2008, Qatar Telecom (Qtel) Q.S.C. (“Qtel”), through its subsidiary, Qatar South East Asia Holding S.P.C. purchased all of the issued and outstanding shares of capital stock of each of Indonesia Communications Limited (“ICLM”), and Indonesia Communications Pte. Ltd. (“ICLS”) from Asia Mobile

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Holdings Pte. Ltd. (“AMH”), a company incorporated in Singapore. Following this acquisition, a change of control occurred in the Company, requiring Qtel to conduct a mandatory tender offer. In connection with the tender offer, on December 23, 2008, the Capital Market and Financial Institution Supervisory Agency of the Ministry of Finance of the Republic of Indonesia (“Bapepam-LK”) issued a letter (i) noting that it had received a letter from BKPM dated December 19, 2008, pursuant to which BKPM confirmed that the maximum amount of foreign capital ownership in the Company shall be 65.0%, and that the Company may still conduct its cellular network operation and local fixed network business and (ii) permitting Qtel to conduct the tender offer. Following the issuance of such letter, Qtel conducted a mandatory tender offer to acquire up to 1,314,466,775 Series B Shares, representing approximately 24.19% of our total issued and outstanding Series B Shares (including Series B Shares represented by ADSs).

As we are a publicly listed company, we believe that the Negative List restrictions do not apply to us. Article 4 of the Negative List stipulates that the provisions of the Negative List do not apply to indirect or portfolio investments conducted through the domestic capital market. To date, to the best of our knowledge, no further clarification has been formally issued by the government specifically to address whether the Negative List applies to us. If the relevant regulatory authorities determine that our foreign ownership still exceeds the Negative List restriction, the regulatory authorities may prohibit us from participating in bidding for or obtaining further licenses or additional spectrum. If this occurs, our business, prospects, financial condition and results of operations would be adversely affected.

A failure in the continuing operations of our network, certain key systems, gateways to our network or the networks of other network operators could adversely affect our business, financial condition, results of operations and prospects

We depend to a significant degree on the uninterrupted operation of our network to provide our services. For example, we depend on access to the PSTN for termination and origination of cellular telephone calls to and from fixed-line telephones, and a significant portion of our cellular and international long-distance call traffic is routed through the PSTN. The limited interconnection facilities of the PSTN available to us have adversely affected our business in the past and may adversely affect our business in the future.

Because of interconnection capacity constraints, our cellular subscribers have at times experienced blocked calls. We cannot assure you that these interconnection facilities can be increased or maintained at current levels.

We also depend on certain technologically sophisticated management information systems and other systems, such as our customer billing system, to enable us to conduct our operations. In addition, we rely to a certain extent on interconnection to the networks of other telecommunications operators to carry calls from our subscribers to the subscribers of fixed-line operators and other cellular operators, both within Indonesia and overseas. Our network, including our information systems, information technology and infrastructure and the networks of other operators with whom our subscribers interconnect, are vulnerable to damage or interruptions in operation from a variety of sources including earthquake, fire, flood, power loss, equipment failure, network software flaws, transmission cable disruption or similar events. For example, our telecommunications control and information technology back-up facilities are highly concentrated within our headquarters and our principal operating and tape back-up storage facilities are located at two sites in Jakarta. Any failure that results in an interruption of our operations or of the provision of any service, whether from operational disruption, natural disaster or otherwise, could damage our ability to attract and retain subscribers, cause significant subscriber dissatisfaction and adversely affect our business, financial condition, results of operations and prospects.

Our failure to react to rapid technological changes could adversely affect our business

The telecommunications industry is characterized by rapid and significant changes in technology. We may face increasing competition due to technologies currently under development or which may be developed in the future. Future development or application of new or alternative technologies, services or standards could require

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significant changes to our business model, the development of new products, the provision of additional services and substantial new investments by us. For example, the development of fixed-mobile convergence technology, which allows a call that originates on a cellular handset to bypass a cellular network and instead be carried over a fixed-line telephone network, could adversely affect our business. New products and services may be expensive to develop and may result in the introduction of additional competitors into the marketplace. We cannot accurately predict how emerging and future technological changes will affect our operations or the competitiveness of our services. We cannot assure you that our technologies will not become obsolete, or be subjected to competition from new technologies in the future, or that we will be able to acquire new technologies necessary to compete in changed circumstances on commercially acceptable terms. Our failure to react to rapid technological changes could adversely affect our business, financial condition, results of operations and prospects.

Security breaches on network or information technology could have an adverse effect on our business

Cyber attacks or other security breaches on network or information technology may cause network failures or service disruptions. Such failures or disruptions of support service to subscribers, even for a limited period of time, may result in significant potential revenue loss and/or loss of market share. In particular, both unsuccessful and successful cyber attacks on companies have increased in frequency, scope and potential harm in recent years. The costs associated with a major cyber attack on us could include expenses associated with incentives offered to existing customers and business partners to retain their business, increased expenditures on cyber security measures, lost revenues from business interruption, litigation and damage to our reputation.

Cyber attacks may also result in fraudulent use of our services. Unauthorized users may obtain access to critical systems, financial data, the private data of customers, and services. This risk has increased in recent years as cyber attacks and their perpetrators become more sophisticated. In addition, a high dependency on third parties for system maintenance may also lead to access to critical systems notwithstanding our supervision of the system maintenance. Such fraudulent access to critical revenue generators or billing systems may result in significant revenue losses.

Cyber attacks may exploit system vulnerability that hold sensitive information such as private subscriber data that could be disclosed or published without the prior consent of our subscribers. This occurrence could adversely impact customer and investor confidence in us, expose us to possible liability suits from subscribers, damage our reputation and could result to business loss.

The Government is the majority shareholder of our major competitors, Telkom and Telkomsel. The Government may give priority to Telkom’s or Telkomsel’s businesses over ours

As of December 31, 2012, the Government had a 14.29% equity stake in us, including the Series A share, which has special voting rights and veto rights over certain strategic matters under our Articles of Association, including decisions on dissolution, liquidation and bankruptcy, and also permits the Government to nominate one Director to our Board of Directors and one Commissioner to our Board of Commissioners.

As of December 31, 2012, the Government also had a 53.90% equity stake in Telkom, which is our foremost competitor in fixed IDD telecommunications services. As of the same date, Telkom owned a 65.0% interest in Telkomsel, one of our two main competitors in the provision of cellular services. The percentage of the Government’s ownership interest in Telkom is significantly greater than its ownership interest in us. We cannot assure you that significant Government policies and plans will support our business or that the Government will treat us equally with Telkom and Telkomsel when implementing future decisions, or when exercising regulatory power over the Indonesian telecommunications industry. If the Government were to give priority to Telkom’s or Telkomsel’s business over ours, our business, financial condition, and results of operations and prospects could be materially and adversely affected.

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Our controlling shareholders’ interests may differ from those of our other shareholders

As of December 31, 2012, Ooredoo Asia Pte. Ltd. (previously known as Qatar Telecom (Qtel Asia) Pte. Ltd.) (“Ooredoo Asia”), owned approximately 65.0% of our issued and outstanding share capital. Ooredoo Asia is currently wholly owned and controlled by Qtel, which is majority-owned by the State of Qatar and its affiliated entities. Ooredoo Asia and its controlling shareholder have the ability to exercise a controlling influence over our business and may cause us to take actions that are not in, or may conflict with, our or our other shareholders’ best interests, including matters relating to our management and policies. Although nominees of Ooredoo Asia hold positions on our Board of Commissioners and Board of Directors, we cannot assure you that our controlling shareholder will elect directors and commissioners or influence our business in a way that benefits our other shareholders.

We rely on key management personnel, and our business may be adversely affected by any inability to recruit, train, retain and motivate our key employees

We believe that our current management team contributes significant experience and expertise to the management of our business. The continued success of our business and our ability to execute our business strategies in the future will depend in large part on the efforts of our key personnel. There is a shortage of skilled personnel in the telecommunications industry in Indonesia and this shortage is likely to continue. As a result, competition for certain specialist personnel is intense. In addition, as new market entrants begin or expand operations in Indonesia, certain of our key employees may leave their current positions. Our inability to recruit, train, retain and motivate key employees could have a material adverse effect on our business, financial condition, results of operations and prospects.

If we are found liable for price fixing by the Indonesian Anti-Monopoly Committee and for class action allegations, we may be subject to substantial liability which could lead to a decrease in our revenue and affect our business, reputation and profitability

On November 1, 2007, the Indonesian Supervising Committee for Business Competition (the “KPPU”) issued a decision regarding a preliminary investigation involving us and eight other telecommunication companies based on allegations of price-fixing for SMS services and breach of Article 5 of the Law No.5/1999 on Prohibition Against Monopolistic Practice and Unfair Business Competition (“Anti-monopoly Law” or “Law No. 5 / 1999”). On June 18, 2008, the KPPU determined that PT Telekomunikasi Indonesia Tbk (“Telkom”), PT Telekomunikasi Selular (“Telkomsel”), PT XL Axiata Tbk. (“XL”), PT Bakrie Telecom Tbk (“Bakrie Telecom”), PT Mobile-8 Telecom Tbk (“Mobile-8,” and subsequent to March 2011, “Smartfren”) and PT Smart Telecom (“Smart Telecom”) had jointly breached Article 5 of the Anti-monopoly Law. Mobile-8 appealed this ruling to the Central Jakarta District Court, where Telkomsel, XL, Telkom, Indosat, PT Hutchison CP Telecommunication (“Hutchison”), Bakrie Telecom, Smart Telecom, PT Natrindo Telepon Selular (“Natrindo”) were summoned to appear as co-defendants in the hearing, while Telkomsel appealed this ruling to the South Jakarta District Court. Although the KPPU decided in our favor with respect to the allegations of price-fixing of SMS, we cannot assure you that the District Court will affirm the KPPU decision. In 2011, the Supreme Court issued a ruling appointing the Central Jakarta District Court jurisdiction to examine the objections filed in the appeal of the KPPU decision. The District Court will consider objections against the KPPU decision based on a re-examination of the KPPU decision and case files submitted by KPPU. If the District Court issues a verdict against us, we could be subjected to the payment of a fine, the amount of which will be subject to the discretion of the District Court, which could have an adverse effect on our business, reputation and profitability.

In addition, a series of class action lawsuits were filed against us and Telkomsel during 2007 and 2008, which alleged we engaged in price fixing violations. These lawsuits have all been either withdrawn by the plaintiffs or the relevant courts have ruled that such cases were unacceptable, meaning the courts, without ruling on the merits of the case, found that the plaintiffs did not have proper legal standing, there were formal defects in the lawsuit or the allegations were too vague. However, we cannot assure you that other subscribers will not file

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similar cases in the future, which may subject us to legal damages or other liabilities which could have an adverse effect on our business, reputation and profitability.

We are exposed to interest rate risk

Our debt includes bank borrowings to finance our operations. Where appropriate, we seek to minimize our interest rate risk exposure by entering into interest rate swap contracts to swap floating interest rates for fixed interest rates over the duration of certain of our borrowings. However, our hedging policy may not adequately cover our exposure to interest rate fluctuations and this may result in a large interest expense and an adverse effect on our business, financial condition and results of operations.

We are exposed to counter-party risk

We may enter into various transactions from time to time which will expose us to the credit of our counter-parties and their ability to satisfy the terms of contracts with us. For example, we may enter into swap arrangements, which expose us to the risk that counter-parties may default on their obligations to perform under the relevant contract. In the event a counter-party, including a financial institution, is declared bankrupt or becomes insolvent, this may result in delays in obtaining funds or us having to liquidate our position, potentially leading to losses.

We may not be able to successfully manage our foreign currency exchange risk

Changes in exchange rates have affected and may continue to affect our financial condition and results of operations. Our U.S. dollars-denominated debt obligations higher than those which are denominated in Indonesian rupiah. Furthermore, majority of our capital expenditures are denominated in U.S. dollars and we may also incur additional long-term indebtedness in currencies other than the Indonesian rupiah, including the U.S. dollar, to finance further capital expenditures. While a portion of our operating revenues are also U.S. dollar-denominated or U.S. dollar-linked, a substantial portion of our revenues are denominated in Indonesian rupiah.

We hedge a portion of our foreign currency exposure principally because our annual U.S. dollar-denominated operating revenues are less than the sum of our U.S. dollar-denominated operating obligations, such as our U.S. dollar-denominated expenses and our U.S. dollar-denominated principal and interest payments. In 2005, in an effort to manage our foreign currency exposure and lower our overall funding costs, we entered into several foreign currency swap contracts with three separate international financial institutions. From 2006 to 2009, we also entered into several foreign currency swap contracts with six international financial institutions in an effort to reduce our foreign currency risk exposure. For these contracts, we pay either an upfront or fixed rate premium. In 2011, we entered into a number of foreign currency forward contracts with nine financial institutions to reduce our foreign currency exchange risk exposure. In 2012, we entered into a number of foreign currency forward and option contracts with eight financial institutions to reduce our foreign currency exchange risk exposure. We cannot assure you that we will be able to manage our exchange rate risk successfully in the future or that our business, financial condition or results of operations will not be adversely affected by our exposure to exchange rate risk. See “Item 11: Quantitative and Qualitative Disclosures about Market Risk.”

We have identified material weaknesses in our internal controls over financial reporting and cannot assure you that additional material weaknesses will not be identified in the future.

As discussed in “Item 15—Controls and Procedures,” we identified a material weakness in our internal controls over financial reporting relating to the determination of the accounting treatment for lease arrangements.

This resulted in misstatements which have been corrected through the restatement of our 2010 and 2011 financial statements as covered by this annual report. Our management likewise concluded that our disclosure controls and procedures were not effective as of December 31, 2012. In addition, Purwantono, Suherman &

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Surja, a member firm of Ernst & Young Global Limited, the independent registered public accounting firm, also has opined that we have not maintained effective internal control over financial reporting as of December 31, 2012, because of the same material weakness.

In response to our study and analysis, management plans to dedicate resources and take steps to remediate control processes and procedures in order to prevent a recurrence of the circumstances that resulted in the material weakness and the need to restate our consolidated financial statements.

We cannot assure you that these steps will be successful in preventing material weaknesses or significant deficiencies in our internal controls over financial reporting in the future. In addition, any such failure could adversely affect our ability to report financial results on a timely and accurate basis, which could have other material effects on our business, reputation, results of operations, financial condition or liquidity. Material weaknesses in internal controls over financial reporting or disclosure controls and procedures could also cause investors to lose confidence in our reported financial information, which could have an adverse effect on the trading price of our securities.

Risks Relating to our Cellular Services Business

Competition from industry incumbents and new market entrants may adversely affect our cellular services business

The Indonesian cellular services business is highly competitive. Competition among cellular service providers in Indonesia is based on various factors, including pricing, network quality and coverage, the range of services, features offered and customer service. Our cellular services business competes primarily against Telkomsel and XL. Several other smaller GSM and CDMA operators also provide cellular services in Indonesia, including Hutchison, PT Axis Telekom Indonesia and PT Smartfren Telecom Tbk. In addition to current cellular service providers, the MOCIT may license additional cellular service providers in the future, and such new entrants may compete with us. Moreover, licenses for additional bandwidth may be granted to any existing cellular service providers. For example, in March 2013, the MOCIT announced that Telkomsel and XL were winners of the tender process for an additional 5 Mhz bandwidth at 2.1 GHz radio frequency for the provision of 3G cellular services using IMT-2000 technology, resulting in each of Telkomsel and XL being licensed for an aggregate of 15 Mhz bandwidth at 2.1 Ghz radio frequency. We also participated in the tender process, but were not awarded additional frequency. We are currently licensed to use 10 Mhz bandwidth at 2.1 Ghz radio frequency. We cannot predict with accuracy the effect on our business of the frequency spectrum allocation to our competitors.

The competitive landscape in the cellular services business may also be affected by industry consolidation. In March 2010, Smart Telecom and Mobile-8 announced that they entered into a strategic alliance, pursuant to which Mobile-8 (now, “Smartfren”) acquired a significant number of shares in Smart Telecom and both companies agreed to use the “Smartfren” logo and brand. Other cellular service providers may form strategic alliances or otherwise consolidate in the future. In recent years, the continuing competition from industry incumbents and new market entrants in the cellular services market has led to aggressive pricing campaigns by cellular service providers. The decrease in prices for cellular usage also led to an increase in the number of subscribers and in network traffic, resulting in increased network congestion among operators, which has required us to incur additional capital expenditures to continue to expand our network.

In addition to traditional competition from other carrier operators, the widespread use of over-the top (“OTT”) service providers, such as Skype, Viber and WhatsApp could also affect our competitive position, cellular services business and results of operations. As basic services such as voice and messaging are being replaced by the widespred use of OTT, we face risks relating to a phenomenon in which, with unlimited data plans, users are able to download unlimited amounts of data resulting in a low rate of data monetization. Carrier operators are beginning to implement strategies to combat any loss in revenue, such as by replacing unlimited data plans with quota-based pricing or tiered-based content pricing, with special packages to access specific content.

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We expect competition in the cellular services business to further intensify. New and existing cellular service providers may offer more attractive product and service packages or new technologies, such as mobile money services, or the convergence of various telecommunication services, resulting in higher churn rates, lower ARPU or a reduction of, or slower growth in, our cellular subscriber base. While we expect mobile money to become an important factor in the growth of cellular services by creating new revenue streams to leverage or maintain ARPU and reduce churn rates, we cannot assure you that our assessments will turn out to be accurate. To provide attractive mobile money services, we will need to collaborate with financial institutions to provide cash-in and cash-out points, as well as with other industry players for merchant sharing and infrastructure sharing, among others. There is no assurance that we will be able to successfully execute strategies to take advantage of opportunities presented by new technologies or that we will be able to provide equally or more attractive service packages as compared to existing or new competitors.

Since the market is already highly saturated in most areas of existing coverage, cellular service operators are focusing on expanding coverage into rural areas. Although we plan to expand our coverage into rural areas, there can be no assurance that we will be able to set up the infrastructure support needed for such a coverage expansion.

Competition from providers of new technology, together with new entrants, incumbents, almost saturated market and consolidated providers could adversely affect our competitive position, cellular services business, financial condition, results of operations and prospects.

Cellular network congestion and limited spectrum availability could limit our cellular subscriber growth and cause reductions in our cellular service quality

We expect to continue to offer promotional plans to attract subscribers and increase usage of our network by our cellular subscribers. We also expect to continue to promote our data services, including our BlackBerry™ and wireless broadband services. As a result, we may experience increased network congestion, which may affect our network performance and damage our reputation with our subscribers. In addition, higher cellular usage in dense urban areas may require us to use radio frequency engineering techniques, including a combination of macro, micro and indoor cellular designs, to maintain cellular network quality despite radio frequency interference and tighter radio frequency re-use patterns. However, if our cellular subscriber base or usage of our voice and data services should grow significantly in high-density areas, we cannot assure you that these efforts will be sufficient to maintain and improve service quality.

Moreover, the recent increase of smartphone applications that rely on data services has resulted in the huge amount of data traffic and cellular network congestion. In order to combat network congestion and improve network quality, we may be required to combine cellular and fixed networks and deploy Wi-Fi hotspots and 3G900. Indosat through IM2 has been actively deploying Wi-fi hotspot technology under the SuperWifi project. We have also been granted the license to use 900 MHz for 3G services, which we expect will improve and expand our 3G coverage to 3G900. We cannot assure you that these efforts will be sufficient to maintain and improve service quality. To ensure the smooth operation of our upgraded 3G900 network and Wi-Fi access points, we will need to upgrade our backhaul capacity, especially to fiber. “Long Term Evolution” is believed to be a newer technology that can be used to improve network quality, but we are limited by spectrum availability to deploy such services, as well as the higher capital expenditures required to deploy such infrastructure. To support such additional demands on our network, we may be required to make significant capital expenditures to improve our network coverage. Such additional capital expenditures, together with the possible degradation of our cellular services, could adversely affect our competitive position, business, financial condition, results of operations and prospects.

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Our ARPU from voice services has been decreasing and there is no assurance that we will be successful in extending or launching existing or new products and services, including data services, to offset such decrease

Our ARPU from voice services has been decreasing mainly due to a competitive market for voice services as well as technological changes, especially new technologies in network, devices and applications that has been causing a shift in the demand for basic services (voice services and SMS) in the telecommunications industry. Although demand for data services has been increasing, margins from data services has been lower compared to margins from the provision of basic services due to a competitive market for data services. As part of our strategy, we intend to introduce and continue to develop data products and services for a deeper and wider market segment and to invest heavily on data services because we believe that data services will be a source of future revenue growth. However, there is no assurance that we will be successful in capturing the growth in data services and maintaining our revenue and profit margins.

The Government suspension of premium SMS services could adversely affect the revenues from our cellular services business and result in sanctions against us

We have derived significant revenue from premium SMS services in previous years. These services include the delivery of music and ringtones, smartphone wallpapers and other graphics, voting in contests and polls and content including horoscopes, Qur’an quotes and news alerts. In 2011, the ITRA asked telecommunications companies to deactivate premium SMS services and give users a notice of the deactivations with the option to resubscribe. These companies were also asked to cease promoting premium SMS services, provide summaries of premium SMS service charges for users, return amounts charged to user accounts for premium SMS services, and report weekly to ITRA regarding such actions. The ITRA based its action on complaints from consumers that they were charged for services for which they were not aware they had or inadvertently subscribed and from which they had substantial difficulty unsubscribing. Other consumers complained that charges were unclear and difficult to monitor, particularly consumers of prepaid services. The ITRA has clarified that it does not intend to prohibit premium SMS services but to effectively reset such services and give consumers the option to deregister from them. The MOCIT has expressed support for the ITRA’s action.

The disruption to our premium SMS services due to the ITRA’s action has resulted in a substantial reduction of our revenues from these services. Similar action by the ITRA or the MOCIT in the future may likewise reduce or restrict the growth of our revenues from these services or other related or new products. The ITRA or the MOCIT may also take more aggressive action that may lead to disruptions in the delivery of our products or fines or other administrative sanctions. Any of these factors may materially and adversely affect our results of operations and financial condition. ITRA currently still prohibits SMS broadcast promotions for premium SMS services, which is one of the most effective promotions used by content providers to promote their premium SMS services. The continued prohibition of SMS broadcast promotions could adversely affect the revenues from our cellular services business and our business prospects, financial condition and results of operations.

Despite expending significant financial resources to increase our cellular subscriber base, the number of our cellular subscribers may increase without a corresponding increase in our operating revenues

We have expended significant financial resources to develop and expand our cellular network and add to our cellular subscriber base. However, the uncertain economic situation in Indonesia and increasing prices of primary goods may decrease our cellular subscribers’ purchasing power. Moreover, a continued decline in effective tariffs for voice usage resulting from “free-talk” campaigns and recent tariff discount promotions, increasing SMS usage, the Government mandated deregistration of users from premium SMS services in 2011, and greater cellular penetration in the lower-income segment of the market has led to a decrease in ARPU in 2011. Our cellular subscribers (including wireless broadband subscribers) increased from approximately 44.3 million as of December 31, 2010 to approximately 51.7 million as of December 31, 2011, to approximately 58.5 million as of December 31, 2012. For the years ended December 31, 2010, 2011 and 2012, our ARPU was Rp34,712, Rp28,381 and Rp27,384 respectively. While we intend to continue to expend significant financial resources to expand our cellular subscriber base and expand our cellular network to support the requirements of such as

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expanded cellular subscriber base, we cannot assure you that such expenditures will be accompanied by a corresponding increase in our ARPU or operating revenues. Accordingly, our subscriber acquisition costs and the capital expenditures required to expand our network capacity could increase without a corresponding increase in our revenue or profitability, which would materially and adversely affect our business, financial condition, results of operations and prospects.

We experience a high churn rate

We experience a high churn rate, as is common for Indonesian telecommunication operators providing prepaid cellular services. We believe that our high churn rate is due to the fact that many of our prepaid subscribers own multiple SIM cards from various cellular providers, allowing them to choose the cheapest package available. Our high churn rates may result in loss of revenue, which could have a material adverse effect on our business, financial condition, results of operations and prospects. At the beginning of the second quarter of 2012, we launched a sales program which changed the incentive scheme extended to our dealers as a means of attracting new subscribers. We believe that this program contributed to the decrease in our churn rate to 14.2% in 2012, compared to 14.3% in 2011, but we cannot assure you that our churn rate will not increase in future years as a result of aggressive promotional programs launched by other operators.

We depend on the availability of telecommunications towers

We are highly dependent on our and others’ telecommunications tower infrastructure to provide GSM, fixed wireless access and 3G network and mobile cellular telecommunications services, as we typically install transmitter and transceiver and receiver antennas and other BTS supporting facilities on such towers. The availability and installation of such telecommunication towers require licenses from the relevant central and regional authorities. A number of regional authorities have implemented regulations which limit the number and location of telecommunication towers and established requirements for operators to share in the utilization of telecommunications towers. In addition, on March 17, 2008, the MOCIT issued a regulation on the sharing of telecommunications towers. See “Item 4: Information on the Company—The Telecommunications Law—Tower Sharing Obligation.” Under the regulation, the construction of telecommunications towers requires permits from the relevant governmental institution, while the local government determines the placement and location at which telecommunications towers can be constructed. Moreover, a joint regulation promulgated on March 30, 2009 by the Minister of Home Affairs, the Minister of Public Works, the MOCIT and the Head of the Indonesia Investment Coordinating Board requires a tower construction permit for every tower built and used for telecommunications services, which would demonstrate compliance with certain technical specifications. If a tower owner fails to obtain such a permit, the appropriate regional authorities will be entitled to impose penalties on the tower owner. Moreover, a telecommunications provider which owns telecommunication towers or tower owner is obligated to allow other telecommunication operators to utilize its telecommunication towers (other than the towers used for its main network), without any discrimination.

Such regulatory requirements may require us to adjust our telecommunications tower construction and leasing plans, relocate our existing telecommunications towers, allow other operators access to our telecommunications towers and perform other measures which may result in the increase of telecommunications tower construction costs, delays in the construction process and potential service disruption for our subscribers. If we cannot fulfill the regulatory requirements for telecommunications towers or meet our own network capacity needs for telecommunications towers, we may face difficulties in developing and providing cellular GSM, fixed wireless access and 3G telecommunications services. Our dependency on our own or others’ telecommunications tower infrastructure, combined with the burden of installing our telecommunications towers in certain instances, may also adversely affect our competitive advantage relative to other operators. Any of these events could result in a material adverse effect on our network capacity, the performance and quality of our networks and services, our reputation, business, results of operations and prospects.

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Our ability to maintain and expand our cellular network or conduct our business may be affected by disruptions of supplies and services from our principal suppliers

We rely upon a few principal vendors to supply a substantial portion of the equipment we require to maintain and expand our cellular network, including our microwave backbone, and upon other vendors in relation to other supplies necessary to conduct our business. We depend on equipment and other supplies and services from such vendors to maintain and replace key components of our cellular network and to operate our business. If we are unable to obtain adequate supplies or services in a timely manner or on commercially acceptable terms, or if there are significant increases in the cost of such supplies or services, our ability to maintain and to expand our cellular network and our business, financial condition, results of operations and prospects may be adversely affected.

We depend on our licenses to provide cellular services, and our licenses could be cancelled if we fail to comply with their terms and conditions

We rely on licenses issued by the MOCIT for the provision of our cellular services as well as for the utilization of our allocated spectrum frequencies. The MOCIT, with due regard to prevailing laws and regulations, may amend the terms of our licenses at its discretion. Any breach of the terms and conditions of our licenses or failure to comply with applicable regulations could result in our licenses being cancelled. Any revocation or unfavorable amendment of the terms of our licenses, or any failure to renew them on comparable terms, could have a material adverse effect on our business, financial condition, results of operations and prospects.

A significant increase in frequency fees could adversely affect our business, financial condition and results of operations

Starting on December 15, 2010, the government changed the basis of computing frequency fees to a new formula based on the bandwidth of allocated spectrum occupied by operators. Previously, we were required to pay frequency fees for 800 MHz, 900 MHz and 1800 MHz bands based on the number of radio stations. In 2010, 2011 and 2012, we paid frequency fees amounting to Rp1.6 trillion, Rp1.8 trillion and Rp2.1 trillion (US$217.2 million), respectively. As one of the largest holders of spectrum in Indonesia, we expect to continue to pay a large amount of frequency fees going forward. Future increases in frequency fees are expected to mainly be based on increases in the consumer price index and the population of Indonesia. As a result, changes in macroeconomic conditions in Indonesia could result in increases in frequency fees which, if significant, could adversely affect our business, financial condition and results of operations.

Allegations of health risks from the electromagnetic fields generated by BTSs and cellular handsets, and the lawsuits and publicity relating to them, regardless of merit, could adversely affect our operations

There has been public speculation about possible health risks to individuals from exposure to electromagnetic fields from BTSs and from the use of cellular handsets. We cannot assure you that future studies of these health risks will not suggest a link between electromagnetic fields and adverse health effects which may subject us to legal action from individuals alleging personal injuries or otherwise adversely affect our business.

Risks Relating to Our Fixed Data (“MIDI”) Services Business

Our MIDI services are facing increasing competition, and we may experience declining margins from such services as such competition intensifies

Our MIDI services are facing increased competition from new and established operators, which may have wider customer bases and greater financial resources than us, such as Telkom, with its regional international reach and developed domestic infrastructure. In addition, operators such as XL, First Media, PT Indonesia Comnet Plus (“Icon+”) and PT NAP Info Lintas Nusa (“Matrix Cable System”), some of which have alliances with foreign telecommunications operators, compete with us in this business segment.

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Our satellite business also faces increasing competition as new and more powerful satellites are launched by our competitors and as companies acquire exclusive licenses to provide broadcast services in Indonesia. Our Palapa-C2 and Palapa-D satellite transponder capacity agreements generally involve terms of between one and five years, and we estimate the remaining useful life of such satellites to be approximately one and seven years, respectively. As additional satellites become operational and our transponder leases expire or are terminated and price competition intensifies, our transponder lessees may utilize other satellites, thereby adversely affecting our operating margins and operating revenues from such services.

Our satellites have limited operational life and may be damaged or destroyed during in-orbit operation. The loss or reduced performance of our satellites, whether caused by equipment failure or its license being revoked, may adversely affect our financial condition, results of operations and ability to provide certain services

Our Palapa-C2 and Palapa-D satellites have a limited operational life, currently estimated to end in March 2014 and April 2020, respectively. A number of factors affect the operational lives of satellites, including the quality of their construction, the durability of their systems, subsystems and component parts, on-board fuel reserves, accuracy of their launch into orbit, exposure to micrometeorite storms, or other natural events in space, collision with orbital debris, or the manner in which the satellite is monitored and operated. We currently use satellite transponder capacity on our satellites in connection with many aspects of our business, including direct leasing of such capacity and routing for our international long-distance and cellular services. We note, that based on the factors identified above, our Palapa-C2 satellite could fail prior to 2014 and our Palapa-D satellite could fail prior to 2020, and in-orbit repairs would not be feasible with the exception of repairs that may be addressed through ground-based software or operational fixes. Moreover, International Telecommunication Union (“ITU”) regulations specify that a designated satellite slot has been allocated for Indonesia, and the Government has the right to determine which party is licensed to use such slot. While we currently hold a license to use the designated satellite slot, in the event our Palapa-D satellite experiences technical problems or failure, the Government may determine that we have failed to optimize the existing slot under our license, which may result in the Government withdrawing our license and granting it to one of our competitors. We cannot assure you that we will be able to maintain use of the designated satellite slot in a manner deemed satisfactory by the Government.

We maintain in-orbit insurance on our Palapa-C2 and Palapa-D satellites on terms and conditions consistent with industry practice. As of December 31, 2012, we had an insurance policy with a total coverage limit of US$117.7 million for total loss of our Palapa D satellites. If damage or failure renders our satellites unfit for use, we may elect to cease our satellite operations or lease transponder capacity from a third-party provider rather than acquiring a new satellite. The termination of our satellite business could increase operating expenses associated with our provision of other telecommunications services and could adversely affect our business, financial condition and results of operations.

Risks Relating to Our Fixed Telecommunications Services Business

The entry of additional Indonesian telecommunications operators as providers of international long-distance services could adversely affect our fixed telecommunications services operating margins, market share and results of operations

Telkom, a well-established Indonesian telecommunications incumbent with significant political and financial resources, obtained a license to provide international long-distance services and launched its commercial service in 2004. As a result of Telkom’s entry into the international long-distance market, we lost market share and experienced other adverse effects relating to our fixed telecommunications services business. By the end of 2006, Telkom had acquired significant market share for IDD services. In addition, in 2009, the Government issued Bakrie Telecom an international long-distance license in an effort to encourage greater competition in the international long-distance services market. The operations of incumbents and the entrance of

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new operators into the international long-distance market, including the VoIP services provided by such operators, continue to pose a significant competitive threat to us. We cannot assure you that such adverse effects will not continue or that such increased competition will not continue to erode our market share or adversely affect our fixed telecommunications services operating margins and results of operations.

We face risks related to the opening of new long distance access codes

In an attempt to liberalize DLD services, the Government has issued regulations requiring each provider of DLD services to implement a three-digit access code to be dialed by customers making DLD calls. In 2005, the MOCIT announced that three-digit access codes for DLD calls will be implemented gradually within five years and that it would assign us the “011” DLD access code for five major cities, including Jakarta, and allow us to progressively extend it to all other area codes within five years. Telkom was assigned “017” as its DLD access code. In December 2007, the Government issued new regulations opening DLD access codes in the first city in Balikpapan in April 2008. Following the implementation, Balikpapan residents are able to choose from options “0”, “011” or “017” in connecting their long distance calls.

In April 2008, we and Telkom agreed to open DLD access from our respective subscribers in Balikpapan. Whether the opening of the DLD access code will be implemented in other cities will be based on a study by the Indonesian Telecommunication Regulatory Board. The implementation of any new DLD access codes can potentially increase competition by offering our subscribers more options for DLD services. In addition, the opening of new DLD access codes is expected to result in increased competition and less cooperation among industry incumbents, which may result in reduced margins and operating revenue, among other things, all of which may have a material adverse effect on us. We cannot assure you that our access codes will remain intact or be successful in increasing our revenues from DLD services.

Item 4: INFORMATION ON THE COMPANY

History and Development of the Company

PT Indosat Tbk was established in Indonesia on November 10, 1967 as a foreign investment company to provide international telecommunications services in Indonesia and began commercial operations in September 1969 to build, transfer and operate an International Telecommunications Satellite Organization (“Intelsat”) earth station in Indonesia to access Intelsat’s Indian Ocean Region satellites for a period of 20 years.

In 2001, as part of the Government’s initiative to restructure the telecommunications industry, we entered into an agreement with Telkom to eliminate our respective cross-shareholdings in several operating subsidiaries, including:

• our acquisition of Telkom’s 22.5% ownership interest in Satelindo (at the time the second largest cellular operator in Indonesia);

• Telkom’s acquisition of our 35.0% ownership interest in Telkomsel; and

• our acquisition of Telkom’s 37.2% ownership interest in Lintasarta and the purchase of Lintasarta’s convertible bonds held by Telkom.

Subsequent to the agreement with Telkom, we completed the acquisition of the remaining minority interests in Satelindo in June 2002. Since entering the Indonesian cellular market through our acquisition of Satelindo and establishment of IM3 and the subsequent integration of such companies in 2003, cellular services have become the largest contributor to our operating revenues.

In August 2002, we entered the domestic fixed line telecommunications sector by obtaining a license to provide local fixed network services in the Jakarta and Surabaya areas.

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In 2002, the Government divested 517.5 million shares, representing approximately 50.0% of our outstanding Series B shares at the time, in two stages. In May 2002, the Government sold 8.1% of our outstanding shares through an accelerated global tender. In December 2002, the Government divested 41.9% of our outstanding Series B shares to a former subsidiary of STT Communications Ltd. (“STT”).

In June 2008, Qtel acquired STT’s interest in us, triggering a mandatory tender offer by Qtel to acquire up to 1,314,466,775 Series B Shares, representing approximately 24.19% of our total issued and outstanding Series B Shares, at a purchase price of the U.S. dollar equivalent of Rp369,400 per ADS and Rp7,388 per Series B Share. Qtel is a publicly held corporation which is majority-owned by the State of Qatar and its affiliated entities. Qtel is organized under the laws of the State of Qatar with shares listed on the Doha Securities Market, as well as the Abu Dhabi Securities Market, and Global Depository Receipts traded on the London Stock Exchange.

As of December 31, 2012, the Government owned 14.29% of our outstanding shares, including 1 Series A share, Ooredoo Asia owned approximately 65.00% of our outstanding Series B shares and SKAGEN AS owned approximately 5.51% of our outstanding Series B shares. Ooredoo Asia (previously known as Qatar Telecom (Qtel Asia) Pte. Ltd.) is owned by Qtel. The remaining 15.20% of our outstanding Series B shares was owned by public shareholders as of December 31, 2012. See “Item 6: Directors, Senior Management and Employees—Share Ownership.”

For a description of our principal capital expenditures since January 1, 2010 and principal capital expenditures currently in progress, including the amount invested and method of financing, see “Item 5. Operating and Financial Review and Prospects—Liquidity and Capital Resources—Capital Expenditures.”

Our registered office is located at Indosat Building, Jalan Medan Merdeka Barat, No. 21, Jakarta 10110, Republic of Indonesia, and our telephone number is +62-21-30442615. Our corporate website may be accessed through the URL http://www.indosat.com. The information found on our corporate website does not, however, form part of this annual report and is not incorporated by reference herein. Our agent for service of process in the United States with respect to our ADSs is Bank of New York Mellon, Depository Receipt Division, 101 Barclay Street, New York, New York 10286, U.S.A.

Business Overview

We are a fully integrated Indonesian telecommunications network and service provider and we offer a full complement of national and international telecommunications services in Indonesia. We are the second-largest cellular operator as measured by number of cellular subscribers, and a leading provider of international long-distance services in Indonesia. We also provide MIDI services for domestic and regional corporate and wholesale customers as well as domestic retail customers. For the years ended December 31, 2010, 2011 and 2012, our operating revenues totaled Rp19,752.1 billion, Rp20,531.6 billion and Rp22,420.6 billion (US$2,318.5 million), respectively.

Our principal products and services include:

• Cellular services. We provide GSM 900 and 1800 and 3G cellular services to approximately 58.5 million cellular subscribers (including wireless broadband subscribers) throughout Indonesia, as of December 31, 2012. We also commenced providing wireless broadband services using our 3G platform in 2006 and, as of December 31, 2012, had approximately 500,000 subscribers.

• MIDI services. We provide broadband and narrowband MIDI services consisting of Internet services and data communication services, such as International and Domestic Leased Circuit, and MPLS-based services. We also offer satellite-based services such as transponder leasing and VSAT services and IT services, such as Disaster Recovery Center, Data Center services, and Indosat Cloud Services (Iaas). We provide these services directly and through our subsidiaries, Lintasarta and IM2. We offer this suite

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of products and services primarily to our valued corporate and wholesale customers in an attempt to be their information and telecommunication solution provider.

• Fixed telecommunications (voice) services. We are one of the leading providers of international long-distance services in Indonesia, as measured by aggregate incoming and outgoing call minutes for 2012. To complement our cellular services and to enhance our access to domestic and international long-distance customers, we also provide fixed wireless access services using CDMA 2000 1x technology. We have also provided DLD services since 2003 and local fixed telephony services since 2002.

Our business does not experience significant seasonality. Our principal shareholders are Ooredoo Asia, with an ownership interest of approximately 65.00% of our common stock, the Government, through the Ministry of State-Owned Enterprises, with an ownership interest of 14.29% of our common stock, including the one Series A share and SKAGEN AS, with an ownership of interest of approximately 5.51% of our common stock, in each case as of December 31, 2012. Ooredoo Asia is wholly owned by Qtel.

As a fully integrated Indonesian telecommunications network and service provider, we offer our customers a full complement of national and international telecommunications services in Indonesia, including cellular services and international long-distance services. As of December 31, 2012, our postpaid cellular subscribers could roam internationally in 185 countries. In addition, for our international long-distance services, we maintain direct connections with 64 foreign telecommunications operators in 40 countries.

As part of the global coverage we offer to our customers, we offer international calling services to Iran and to Cuba, Sudan, and Syria. There are roaming arrangements between Indosat and each of Mobile Company of Iran (“MCI”), C Com, Syriatel Mobile Telecom SA (“Syriatel”) and Sudanese Mobile Telephone Co. (“Mobitel”) for Iran, Cuba, Syria and Sudan, respectively. We consider the business between Indosat and Telecommunications Company of Iran (“TCI”), MCI, C Com, Syriatel and Mobitel, as well as business in Iran, Cuba, Syria and Sudan, as being insignificant relative to our size.

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	As of and for the years ended December 31,
	2010		2011		2012
	(unaudited)
Operating Data:
Cellular:
Number of cellular subscribers (excluding wireless broadband):
Prepaid (in millions)		43.2		50.6		57.4
Postpaid (Matrix) (in millions)		0.6		0.7		0.6
Total cellular subscribers (in millions)		43.8		51.2		58.0
Number of wireless broadband subscribers:(1)
Prepaid (in thousands)		448.1		466.7		451.0
Postpaid (in thousands)		88.6		65.4		49.2
Total wireless broadband subscribers (in thousands)		536.7		532.1		500.2
Total cellular subscribers (in millions):		44.3		51.7		58.5
ARPU (Rp)(2)		34,712		28,381		27,384
Minutes of Usage(3)		113		95		104
ARPM (Rp)(4)		163		157		127
Number of base transceiver stations		18,108		19,253		21,930
Number of base station controllers		330		353		351
Number of mobile switching centers		87		75		67
MIDI:
International High Speed Leased Circuit (’000s)		218		366		480
Domestic High Speed Leased Circuit (’000s)		251		296		527
Fixed telecommunications:
Incoming traffic (in millions of minutes)		1,559		1,679		1,824.9
Outgoing traffic (in millions of minutes)		502		463		408.5
Incoming/outgoing call ratio		3.1		3.6		4.5

⁽¹⁾  The number of wireless broadband subscribers only includes those who exclusively subscribe to our wireless broadband services, and does not include those who use our “broadband on demand” services.

⁽²⁾  The average monthly revenue (in Indonesian rupiah) per cellular subscriber, or ARPU, is computed by dividing monthly recurring prepaid and postpaid cellular services revenues (usage charges, value-added services, interconnection revenues and monthly subscription charges), excluding non-recurring revenues such as activation fees and special auctions of telephone numbers recorded under Indonesia Financial Accounting Standard (“IFAS”), for the relevant period by the average number of prepaid and postpaid cellular subscribers. The average number of prepaid and postpaid cellular subscribers is the sum of the total number of active cellular subscribers at the beginning and end of each month divided by two.

⁽³⁾  The Minutes of Usage per cellular subscriber is computed by dividing the total minutes of outgoing and outgoing call usage of prepaid and postpaid cellular subscribers for each month by the average number of active prepaid and postpaid cellular subscribers. The average number of prepaid and postpaid cellular subscribers is the sum of the total number of active cellular subscribers at the beginning and end of each month divided by two.

⁽⁴⁾  ARPM (in Indonesian rupiah) is computed by dividing revenues from monthly recurring prepaid and postpaid cellular services, excluding non-recurring revenues such as activation fees and special auctions of telephone numbers recorded under IFAS, for the relevant period, by the total minutes (billed and unbilled) of outgoing call usage of prepaid and postpaid cellular subscribers for such period.

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The following table sets forth the breakdown of our operating revenues for each of the periods indicated and the percentage contribution of each of our services to our operating revenues:

	For the years ended December 31,
	2010				2011				2012
	Rp		%		Rp		%		Rp		%
	(Restated)				(Restated)
	(Rp in billions, except percentages)
Cellular services		15,882.1		80.4		16,587.4		80.8		18,489.3		82.5
MIDI services		2,591.8		13.1		2,694.2		13.1		2,909.8		13.0
Fixed telecommunications		1,278.2		6.5		1,250.0		6.1		1,021.5		4.5
Total operating revenues		19,752.1		100.0		20,531.6		100.0		22,420.6		100.0

Cellular Services

Cellular services contributed revenues of Rp18,489.3 billion (US$1,912.0 million) for the year ended December 31, 2012, representing 82.5% of our total consolidated operating revenues in 2012. We are the second-largest cellular provider in Indonesia, as measured by the number of cellular subscribers, with 58.5 million subscribers (including wireless broadband subscribers) as of December 31, 2012. For 2012, we had an estimated subscriber market share of 25.1% of the total GSM market share held by the three major GSM operators, which figure is based on our estimates based on available market data. Our cellular network currently provides network coverage in all major cities and population centers across Indonesia. We provide our cellular services using GSM 900 and GSM 1800 technology and, for our 3G platform, IMT-2000 technology. We are also one of the leading providers of prepaid and postpaid wireless broadband services in Indonesia. As of December 31, 2012, we had approximately 500,000 prepaid and postpaid wireless broadband subscribers.

Services

Our principal cellular services are the provision of voice and data services, which we sell through postpaid and prepaid plans. Our prepaid and postpaid subscribers are able to make and receive “on-net” voice calls to and from other Indosat subscribers (including our Matrix, Mentari and IM3 subscribers) on our telecommunication network, as well as “off-net” voice calls to and from subscribers of other telecommunication operators on their fixed and cellular telecommunication networks.

We offer prepaid cellular service plans under the “IM3,” and “Mentari,” brand names (we no longer communicate and campaign for prepaid cellular services plan under the “Indosat Mobile” brand). We have differentiated our two prepaid brands based on market segments. Such differentiation allows us to target the usage and spending patterns of different consumer segments through our promotional plans. Our IM3 brand is marketed toward the younger generation, with very attractive voice, SMS and data packages and toward mid-low subscribers. Our Mentari brand is marketed towards a more mature market, professional and corporate users, especially the smart phone users, offering integrated packages comprising voice, SMS, and data services and providing subscribers with packages suitable for their smart phones. We continue to develop our IM3 and Mentari brands, offer promotions and engage in advertising tailored for those specific market segments. We offer postpaid plans, designed for high-end professional and corporate users, under the “Matrix” brand name (we no longer communicate and campaign for postpaid cellular services plan under the “Indosat Mobile” brand). Matrix is a service package with a postpaid payment plan that provides the ability to register with numerous other supplementary plans, value-added services and corporate-based services. We offer various Matrix packages with different features and benefits to suit the needs of our subscribers, competitively priced integrated packages, consisting of voice, SMS, and data services.

Prepaid and postpaid subscribers have access to local, DLD and international direct long-distance dialing. In addition, we offer a variety of value-added services, functions and features to our subscribers. Such services,

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functions and features, which, in certain cases, are free of charge, can be purchased individually or bundled according to the package selected, include:

• SMS: allows subscribers to send short text messages to other cellular users’ mobile phone display screens;

• MMS: allows subscribers of GSM service to send pictures, text and sound/voice in a single packet message;

• Voice SMS: allows subscribers to send audible messages;

• Ring-back tone: allows subscribers to choose their favorite song as the ringtone that is heard by callers for incoming calls;

• GPRS: provides mobile data communications with GSM-based technology, including mobile Internet, data transfer and push e-mail (BlackBerry™ services);

• Mobile data and broadband services: allows subscribers to browse and download sports, news, horoscope, movies, music and finance content to their mobile handsets, connect to a computer as modem, send and receive using GPRS and 3G network for broadband quality;

• Facsimile services: allows subscribers to send and receive faxes;

• BlackBerry™ services: allows subscribers to register and use a full suite of BlackBerry™ services, including email, chat, browsing, GPS, and many other BlackBerry™ based applications;

• Voicemail: enables callers to leave voice messages that can be retrieved by subscribers;

• Caller identification: displays the incoming call number on a subscriber’s mobile phone display screen;

• Call holding: allows subscribers to place an incoming or outgoing call on hold while making or receiving other calls;

• Call waiting: signals subscribers that they have an incoming call while the line is engaged. Upon hearing such a signal, subscribers can answer the second call and place the original call on hold;

• Call forwarding: enables subscribers to forward incoming calls to other cellular or fixed-line numbers;

• Detailed billing: provides subscribers with detailed billing statements indicating the duration and cost of calls made to and from a particular mobile phone;

• Direct debit payment: provides a payment option that automatically deducts billed amounts from the subscriber’s bank account or credit card;

• Recharge via SMS and automated teller machines: enables subscribers to recharge their prepaid airtime plans via SMS and automated teller machines automatically deducting billed amounts from the subscriber’s bank account; and

• International roaming: allows prepaid and postpaid subscribers to send/receive SMS, voice and data (GPRS/3G) services while roaming on foreign cellular networks.

Facsimile services, detailed billing and direct debit payments are only available to postpaid subscribers. Since 2009, postpaid subscribers have been able to request delivery of printed billing statements or billing statements by e-mail, which minimizes the number of unreceived bills. We offer certain services free of charge, including caller identification, call holding, call waiting and call forwarding, while others, such as SMS, mobile data, broadband, BlackBerry™, facsimile services and detailed billing, carry additional fees.

We offer a VoIP Service, under the brand name “FlatCall 01016,” aimed at our most price-sensitive customers. This service is only available to our cellular, fixed wireless and fixed line subscribers. The “FlatCall 01016” service offers discounted tariff rates for certain top destination countries.

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We provide our SMS service to prepaid and postpaid cellular subscribers. Usage levels have increased from an average of approximately 467.7 million text messages (excluding value-added service SMSs, such as SMSs related to promotions by content providers and advertisers) per day in 2010 to a daily average of approximately 732.7 million text messages (excluding value-added service SMSs) in 2012. In 2010, 2011 and 2012, SMS usage fees represented a substantial portion of our operating revenues. For 2012, this was primarily due to the change in tariffs for SMS from a “sender-keeps all scheme” to a cost-based scheme effective June 1, 2012. See “Item 5: Operating and Financial Review and Prospects—Operating Results—Factors Affecting our Results of Operations and Financial Condition—Tariff and Pricing Levels. However, we have recently seen an increase in revenues from mobile data services. We expect a continuing increase in revenues from mobile data services, including GPRS, 3G, BlackBerry™ and other mobile data services in the future.

We have entered into interconnection agreements with other Indonesian telecommunications operators to allow our cellular networks to interconnect with the PSTN operated by Telkom, our international gateways and the networks of each of the other Indonesian cellular and fixed wireless access operators, thereby allowing our cellular subscribers to communicate with customers of other telecommunications service providers.

We offer international roaming services to our cellular subscribers to enable them to make and receive calls and to send and receive SMS text messages and use data services (on GPRS or 3G) when outside Indonesia. We have entered into roaming agreements with operators of GSM cellular networks in Africa, Europe, North and South America and Asia. As of December 31, 2012, our postpaid cellular subscribers could roam internationally on 473 networks, owned by 360 operators in 185 countries, and our prepaid cellular subscribers could roam internationally on 80 networks, owned by 77 operators in 54 countries.

On December 12, 2006, we became a member of the largest international telecommunications operator alliance in Asia, CONEXUS, which was formed to increase each member’s competitive value in providing international telecommunication services in its respective country and across the Asia-Pacific region. To support current roaming services through GSM, GPRS and wideband code division multiple access (“W-CDMA”), the members of the alliance are cooperating to provide roaming with HSDPA technology. This alliance has expanded service coverage to more than 320 million customers in ten countries, including Indonesia. Our postpaid and prepaid subscribers can enjoy a single tariff scheme for voice and SMS, and flat unlimited schemes for data/internet/BlackBerry™ usage.

Mobile Data Services

We launched our portfolio of mobile data services in 2000. Mobile data services can be accessed through, among others, SMS, direct dial-up connection to a WAP server or wireless broadband, where subscribers can access a variety of information, including movie listings, stock quotes, exchange rates, sports and business news and astrological predictions, and recharge their prepaid SMS cards. In addition, subscribers can send and receive e-mail and conduct mobile banking services with several leading banks through their mobile handsets.

We provide GPRS service with EDGE technology in most large cities in Java, Bali, Sumatra, Kalimantan, Sulawesi and Papua. We were the first telecommunications provider to launch the BlackBerry™ service in Indonesia. In cooperation with Research-In-Motion (“RIM”), we introduced BlackBerry™ Enterprise Service to our Postpaid/Matrix corporate customers in December 2004 and BlackBerry™ services for personal Postpaid/Matrix users in March 2005. In June 2008, to differentiate ourselves from other BlackBerry™ service operators, we launched I-GPS and I-Stock applications which allow our BlackBerry™ customers to access a navigation system and real-time stock prices. In January 2009, we launched a BlackBerry™ service subscription via our prepaid brands, Mentari and IM3. In October 2011, we increased the link capacity to RIM to 2 x 3 GBPs, providing our BlackBerry™ subscribers with faster access. This increase means that we have the largest link capacity to RIM in Indonesia. In November 2011, we launched BlackBerry App World Billing Carrier, the first Blackberry App World Billing Carrier in Asia. In December 2012, we launched Starter Pack Blackberry, a card suitable for a Blackberry device. We have approximately 2.1 million BlackBerry™ subscribers as of December 31, 2012. Indonesia is one of the largest growth markets in Southeast Asia for BlackBerry™ devices.

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On February 8, 2006, the Government conducted an open bidding process for 3G spectrum licenses and, following satisfactory completion of the bidding process, we were awarded one 3G spectrum license for 5 MHz of paired spectrum. In the same bidding, Telkomsel and XL were also awarded 3G spectrum licenses. In 2007, we began offering an enhanced 3G (“3.5G”) broadband service using HSDPA technology, a mobile wireless telecommunication service with enhanced 3G technology. In August 2009, we were granted additional spectrum under our existing license, which will allow us to double our network capacity to serve our broadband subscribers. In 2009, we started to deploy the new 3.5G network using HSPA+ technology, with downlink speeds of up to 42Mbps and uplink speeds up of to 5.6Mbps, and we began offering such services in 2010. In October 2012, we launched 3G900 Telecommunication Network in Padang and Bukit Tinggi, West Sumatra. We are the first operator in Indonesia to implement this technology and to launch it commercially to the public.

In May 2012, we launched Indosat Internet Broom 25, a card with flexible package options for Internet users. In October 2012, we launched Indosat Super 3G+, the Internet package with a quota up to 7.5 GB and speed of up to 7.2 Mbps for customers. We also launched Indosat Supergadget, a card suitable for any type of gadget.

To strengthen our position as one of the leading telecommunications operators in Indonesia, in September 2012, we launched Indosat Superwifi, the latest wifi technology that allows Indosat subscribers to access the internet on handsets or tablets via Indosat wifi hotspot networks using Indosat SIM Cards. These services are provided to customers who want convenient and faster internet access. We no longer communicate and campaign for data services plan under the “Indosat Internet” brand.

Subscribers and Marketing

We segment the Indonesian population by location, disposable income and other factors we believe indicate the desire and ability of individuals and corporations to purchase our products and services. We then target areas that are generally more prosperous as these areas tend to yield a higher density of potential cellular subscribers. Through this approach, we have achieved a diversified cellular subscriber base spread throughout Indonesia’s major population centers. We implemented this strategy to adapt to competition from new entrants and pricing pressures in major urban areas.

Our prepaid subscriber base has grown significantly over the past three years relative to our postpaid subscriber base. As of December 31, 2010, we had 0.6 million postpaid (Matrix) and 43.2 million prepaid cellular subscribers. As of December 31, 2011, we had 0.7 million postpaid (Matrix) and 50.6 million prepaid cellular subscribers. As of December 31, 2012, we had 0.6 million postpaid (Matrix) and 57.4 million prepaid cellular subscribers. We conduct nationwide marketing and promotional activities, as well as regional or local campaigns, in an attempt to retain our existing valued cellular subscribers and to acquire new cellular subscribers. We believe Indonesian cellular subscribers tend to favor the convenience, ease of activation, avoidance of fixed commitments and lack of credit checks associated with prepaid cellular plans. Accordingly, we have focused on this particular subscriber base in our marketing efforts.

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The following table presents certain information regarding our cellular subscriber base, ARPU, Minutes of Usage and ARPM as of the dates indicated:

	As of or for the years ended December 31,
	2010		2011		2012
Number of cellular subscribers (excluding wireless broadband)(1) :
Prepaid (in millions)		43.2		50.6		57.4
Postpaid (Matrix) (in millions)		0.6		0.7		0.6
Total cellular subscribers (in millions)		43.8		51.2		58.0
Number of wireless broadband subscribers(2) :
Prepaid (in thousands)		448.1		466.7		451.0
Postpaid (in thousands)		88.6		65.4		49.2
Total wireless broadband subscribers (in thousands)		536.7		532.1		500.2
Total cellular subscribers (in millions):		44.3		51.7		58.5
ARPU (Rp)(3)		34,712		28,381		27,384
Minutes of Usage(4)		113		95		104
ARPM (Rp)(5)		163		157		127

⁽¹⁾  Cellular subscribers means total registered and active cellular subscribers, excluding wireless broadband, at the end of the relevant period.

⁽²⁾  The number of wireless broadband subscribers only includes those who exclusively subscribe to our wireless broadband services, and does not include those who use our “broadband on demand” services.

⁽³⁾  The average monthly revenue (in Indonesian rupiah) per cellular subscriber, or ARPU, is computed by dividing monthly recurring prepaid and postpaid cellular services revenues (usage charges, value-added services, interconnection revenues and monthly subscription charges), excluding non-recurring revenues such as activation fees and special auctions of telephone numbers recorded under IFAS, for the relevant period by the average number of prepaid and postpaid cellular subscribers. The average number of prepaid and postpaid cellular subscribers is the sum of the total number of active cellular subscribers at the beginning and end of each month divided by two.

⁽⁴⁾  The Minutes of Usage per cellular subscriber is computed by dividing the total minutes of outgoing and outgoing call usage of prepaid and postpaid cellular subscribers for each month by the average number of active prepaid and postpaid cellular subscribers. The average number of prepaid and postpaid cellular subscribers is the sum of the total number of active cellular subscribers at the beginning and end of each month divided by two.

⁽⁵⁾  ARPM (in Indonesian rupiah) is computed by dividing revenues from monthly recurring prepaid and postpaid cellular services, excluding non-recurring revenues such as activation fees and special auctions of telephone numbers recorded under IFAS, for the relevant period, by the total minutes (billed and unbilled) of outgoing call usage of prepaid and postpaid cellular subscribers for such period.

As of December 31, 2012, we had approximately 58.5 million subscribers, including approximately 500,000 subscribers to our wireless broadband services.

To consolidate our marketing channels for cellular services, we have opened integrated walk-in centers, under the names “Galeri Indosat,” which we operate, and “Griya Indosat,” which are operated by our exclusive distributors. These walk-in centers function as sales outlets and provide potential and existing cellular subscribers with customer service and product information. We also have a dedicated team of employees who coordinate sales and services to Indonesian corporations.

To supplement our direct marketing channels, we maintain a network of approximately 540 independent dealers, to whom we offer various incentives for the promotion and sale of our services. These independent regional and multi-regional dealers have their own distribution networks throughout Indonesia and promote our

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cellular services, primarily to individuals. These dealers include major distributors of mobile handsets and typically have their own retail networks, direct sales forces and sub-dealers in Indonesia. These outlets serve as additional branch outlets for us and offer a broad range of services, including product and service information, customer service and bill payment processing. Existing and new cellular subscribers can activate and register and pay for all of our prepaid cellular services at these outlets. We continue to maintain our relationships with our dealers in an attempt to generate higher sales volume through better product placement, an integrated dealer network and enhanced dealer loyalty.

Tariff Structure and Pricing

The MOCIT establishes a tariff formula that determines the ceiling tariffs, or maximum amounts that operators may charge for prepaid and postpaid cellular services. Cellular service providers are permitted to offer promotional programs that offer lower prices than the ceiling tariffs. We currently price our prepaid cellular services under a variety of ongoing promotional programs to provide incentives to attract new subscribers, stimulate demand and improve our competitive position. We may charge different rates for prepaid and postpaid cellular services, depending on various factors that apply to a particular type of service. For instance, the billing expenses we incur to serve our postpaid subscribers are typically higher and accordingly, our rates for postpaid cellular services tend to be higher than those for prepaid cellular services.

The Indonesian cellular telecommunications market uses a “calling party pays” system, which requires the originators of telephone calls to pay for calls. If one of our subscribers makes a call to another network, we incur interconnection charges. Previously, the tariff for SMS (including value-added SMS) was based on a “sender-keeps-all” scheme, under which we earned revenues whenever one of our cellular subscribers sends an SMS, but not when a customer of another telecommunications operator sent an SMS to one of our cellular subscribers. On December 12, 2011, the Government, through the ITRA, issued letter No.262/BRTI/XII/2011, under which tariffs for SMS changed from a “sender-keeps all” scheme to a cost-based scheme, effective June 1, 2012. Under the current cost-based scheme, we record revenues from interconnection fees payable by other operators whenever one of our cellular subscribers receives an SMS from a subscriber on another network. If one of our subscribers sends an SMS to a recipient on another network (an “off-network SMS”), we record revenues for the SMS charge payable by our subscriber and we record expenses from interconnection charges payable to the operator of the other network. For our GPRS service, we charge cellular subscribers Rp1 per kilobyte of data downloaded for the first 300k and Rp0.5/kB up to Rp2/kB (excluding tax) thereafter, depending on the time of download (i.e. off peak versus peak times). We receive roaming settlements from foreign telecommunications operators when their cellular subscribers roam on our network. For our wireless broadband services, we offer various pricing packages depending on the payment method (i.e. prepaid or postpaid), transmission speed and monthly quotas.

Activation Fees and Monthly Charges. Activation fees represent the initial connection fees charged to new prepaid subscribers when subscribing to a cellular network. Monthly charges are fixed amounts charged to postpaid subscribers, particularly Corporate BlackBerry™ Enterprise Service users that require new BlackBerry™ software. Since 1998, we have not charged our postpaid subscribers an activation fee. In 2011, we offered several programs for postpaid subscribers, including the “Indosat Mobile” package plan which gives subscribers the choice of daily, weekly or monthly usage plans of Rp2,000, Rp12,000 and Rp50,000, respectively, under which the subscriber pays for all calls and data usage at applicable rates, the “IM3 Nonstop” package offers free SMS, voice and data after certain usage levels are met and full track music download through Indosat backstage.

Usage charges. There are three types of calls: local, domestic long distance, and international calls. Calls are charged on different charging blocks, from per second up to per minute blocks, depending on the package plan chosen by the subscriber. Calls may terminate on any of the cellular, fixed or satellite networks. For on-net calls, our subscribers are charged favorable rates because of our ability to offer bundled products, such as cellular and international long-distance services. For off-net calls, the usage charges of subscribers are greater because of interconnection, domestic long-distance, and international long-distance charges.

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Value-added Services. Prior to 2008, tariffs for value-added services were not regulated by the Government. Since April 2008, the MOCIT has been responsible for setting the tariff formula for SMS. As with voice services, we offer promotional discounts for SMS and mobile data services for both postpaid and prepaid subscribers.

Interconnection

Prior to 2007, the charges for postpaid subscription services consist of monthly subscription and interconnection-based usage charges. Charges for prepaid subscription services likewise include interconnection-based usage charges. The interconnection-based usage charges for both prepaid and postpaid cellular services are calculated by considering three interconnection costs: originating, transit and terminating costs.

Since January 2007, the MOCIT has set a tariff formula for interconnection services. The MOCIT sets this tariff formula on a “cost” basis and publishes the industry reference interconnection tariffs. Interconnection agreements are based on RIOs and for dominant players, their RIOs must be submitted and approved by ITRA. The MOCIT approved the RIOs we submitted in 2007 and 2008, which have not been adjusted for 2009 and 2010. In 2012, we were not considered a dominant service provider in 2012 and as such our RIOs were not subject to approval from the ITRA.

On December 31, 2010, ITRA issued letter No. 227/BRTI/XII/2010 which set a new set of interconnection tariffs. The new interconnection tariffs took effect on January 1, 2011 and have been reflected by an adjustment to our RIOs for 2011. We will apply the charges in our RIOs to the interconnection agreements we have with other operators. The charges under our RIOs have been decreasing in the past few years, and we expect the downward trend to continue.

We currently interconnect with fixed line and cellular networks operated by all network operators at numerous locations throughout Indonesia. To minimize our interconnection expenses, we utilize our own backbone transmission facilities whenever possible and in compliance with applicable regulations. For example, routing a long-distance call from a customer in Surabaya to a destination customer in Jakarta through our fiber optic or microwave transmission lines allows us to avoid the use of another operator’s network, thereby lowering our interconnection expenses associated with routing our intra-network usage.

Activation, Billing and Collection

Prepaid cellular subscribers can purchase starter packs from our sales and distribution points or through our various independent dealers or outlets. To activate service, a new prepaid cellular subscriber must register with us by following the instructions using the interactive menu. Potential postpaid subscribers can apply for our cellular services at our sales and distribution points or through our independent dealers. Many of our independent dealers, however, can only receive new applications for postpaid cellular services, which are then forwarded to us for processing. A potential subscriber for our postpaid service is required to provide proof that such subscriber meets our minimum credit requirements. If a potential subscriber does not meet our postpaid requirements, our sales representative recommends our prepaid services. Once approved, postpaid service SIM cards are activated within 24 hours.

We bill our postpaid subscribers on a monthly basis through our centralized billing division. In the case of prepaid subscribers, the wireless billing system automatically reduces the value of each prepaid subscriber’s account as originating, transit and terminating charges are assessed. Our postpaid subscribers have a variety of payment options in paying their monthly bills. Payments may be made by cash and major credit cards through Indosat galleries, bank tellers or post office branches. In addition, subscribers can also make payment via automatic debit through banks or participating credit card companies, bank transfers, automated teller machines, Electronic Data Capture, mobile banking, Internet banking, and phone banking. Payments are due 20 days after the account statement date. Twenty-seven days after the statement date, we remind subscribers who have not paid

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their outstanding balance and block their ability to make outgoing calls. We block a subscriber’s ability to make or receive calls 40 days after the statement date if he or she still has not paid his or her balance. We suspend the service for accounts that are more than 50 days past due and remove such subscriber’s data from our network and permanently disconnect the number and SIM card after 120 days from the statement date.

We have taken a number of steps to prevent subscriber fraud and to minimize losses. We deliver prepaid vouchers to our independent dealers only on a cash-on-delivery basis and we do not collect payments for our services from cellular subscribers through our independent dealers. In addition, depending on usage levels, we may require refundable deposits from subscribers. We also review accounts of our high-usage subscribers at regular intervals to ensure that the deposit levels continue to be adequate.

Competition

The cellular services business in Indonesia has become more competitive during recent years due to high cellular penetration rates, mainly in urban areas. Competition in the cellular communications industry is based principally on network coverage, technical quality, price plan, the attractiveness of mobile data services and special features, and quality and responsiveness of customer service. Based on our internal estimates, the three major providers of wireless services in Indonesia, Telkomsel (which is majority-owned by Telkom), us and XL (which is indirectly majority-owned by Axiata Group Bhd. of Malaysia), accounted for almost 75% of the 2012 wireless subscriber base in Indonesia.

We also compete with other fixed wireless access service providers. In May 2003, Telkom introduced TelkomFlexi, a CDMA 2000-1X service in the Jakarta area. Currently, Telkom offers this service nationwide. Telkom offers this service as a fixed wireless access service, but the service has expanded mobility and value-added features similar to cellular services. After receiving requests from industry associations, the MOCIT issued a decree stating that the service area of the fixed wireless access networks must be limited to an area equal to one area code of the local fixed network service. Fixed wireless access service operators are therefore prohibited from extending their roaming services to other area codes, but CDMA operators still have the ability to achieve similar results by giving subscribers a new number when they move to other cities. In addition to Telkom, Bakrie Telecom and Smartfren have each been granted nationwide fixed wireless access service licenses, allowing them to offer their services nationwide, further intensifying competition.

From time to time, Indonesian telecommunications operators conduct aggressive subscriber acquisition programs with the goal of increasing individual market share. By offering discounts, bonuses and special rates, operators attempt to differentiate their services from those of other operators, primarily based on price. This competition has caused tariffs to decline and, as a result, we believe cellular subscriber ARPU has continued to decline for most Indonesian telecommunications operators.

We believe competition for 3G services will be intense as telecommunications operators continue to deploy their networks in major population centers. Currently, there are five telecommunications operators holding 3G licenses: Telkomsel, Hutchison, Natrindo, XL and us. We commenced providing wireless broadband services using our 3.SG platform in 2009 and, as of December 31, 2012, we offered 3.SG services in 204 cities nationwide.

Our main competitors for mobile broadband services are Telkomsel, and XL with its 3G Hotrod campaign. Other operators, such as Smartfren also provide mobile broadband service using EVDO-CDMA technology.

We believe barriers to entry in the Indonesian cellular and fixed wireless access services industry are currently comparatively high due to the limited availability of frequency spectrum, a capital intensive operating environment, difficulties in acquiring tower sites for network expansion and the established market presence of the three incumbents, us, Telkomsel and XL. Nevertheless, we are anticipating continued intense competition within the Indonesian cellular and fixed wireless access services industry generally. In response to this, we intend

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to dedicate a substantial portion of our future capital expenditures to our cellular business in an effort to increase network capacity and service quality and to provide various value-added services.

MIDI Services

The products and services that we offer in this business segment include high-speed point-to-point international and domestic leased line with broadband and narrowband capacity, MPLS-based services, satellite transponder leasing, Internet services and IT services such as disaster recovery and data center services. Recently, we launched Indosat Cloud Infrastructure as a service (IaaS). Indosat Cloud IaaS is provided via the internet or private network in a scalable, package model built using industry leading hardware and software. Recognizing the significant growth potential of data and other network services, including Internet-based services, and their increasing importance to our overall business strategy, we have placed considerable emphasis on this business segment. The growing emphasis on reliable data transmission and interconnectivity by our corporate customers, especially those with multiple branches or locations, presents an excellent opportunity for us. MIDI services represented Rp2,909.8 billion (US$300.9 million), or 13.0% of our total consolidated operating revenues for the year ended December 31, 2012.

	For the years ended December 31,
	2010		2011		2012
MIDI:
International High Speed Leased Circuit (’000s)		218		366		480
Domestic High Speed Leased Circuit (’000s)		251		296		527

Services

World Link, Direct Link and Domestic Link. World Link is an IPLC that provides international connection of high-speed digital data circuits on a point-to-point basis via submarine and terrestrial cables and offers line speeds from 64 Kbps and multiples thereof up to 2 Mbps for narrowband or 45 Mbps and above for broadband. Direct Link is a leased line service through satellite / VSAT connections which provides high-speed digital data circuits on point-to-multipoint basis and offers line speeds from 64 Kbps and multiples thereof up to 2 Mbps for narrowband. Domestic Link is a domestic private leased circuits service that provides high-speed digital data circuits on a point-to-point basis and offers line speeds from 64 Kbps and multiples thereof up to 2 Mbps for narrowband or 45 Mbps and above for broadband. Most of our broadband World Link customers are telecommunications providers who require dedicated broadband international data links, and our narrowband World Link customers consist primarily of corporate users who subscribe to our World Link service for their own internal use. Direct Link is used for international connections and other leased line users located in areas that are not covered by terrestrial domestic networks. Our broadband Domestic Link customers in the domestic market include telecommunications providers that need dedicated domestic broadband data links, and our narrowband Domestic Link customers mostly are corporate users who use the service for their own internal use. We recorded operating revenues of Rp314.9 billion (US$32.6 million), from World Link and Domestic Link operations, representing 10.8% of our consolidated MIDI services operating revenues for the year ended December 31, 2012.

IP VPN. We provide both international and domestic IP VPN services through Indosat, Lintasarta, and IM2, which provide customers with multi-point connectivity for data communication through our robust IP network cloud. These services support flexibility, scalability, and accommodate complex distributed computing applications, while maintaining the quality of service, security, and reliability close to that of private leased circuit. As of December 31, 2012, Indosat’s, Lintasarta’s, and IM2 domestic IP VPN services were available in approximately 100 cities in Indonesia, and Indosat’s international IP VPN services have a strong presence in South East Asia, with coverage extensions to North Asia, Europe, Japan, and the United States, in cooperation with several global service providers such as AT&T, C&W, BT, and NTT. We recorded operating revenue of

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Rp711.4 billion (US$73.6 million) from IP VPN operations, representing 24.4% of our consolidated MIDI services operating revenues for the year ended December 31, 2012.

MPLS and Metro Ethernet. MPLS and Metro Ethernet are domestic and international leased line services provided through our robust Internet Protocol network cloud. MPLS is a technology platform that has an ability to provide various classes of services on an Internet Protocol network, resulting in a flexible, scalable, reliable and secure data communication link, both for point-to-point or multipoint domestic inter-city and international connections. Our MPLS-based services consist of Premium Ethernet Point to Point, Premium Ethernet Multi Point, and IP VPN, and offer line speeds from 64 Kbps and multiples thereof up to 2 Mbps for narrowband or 45 Mbps and 155 Mbps for broadband. Metro Ethernet provides high-speed domestic inner-city bandwidth connections with line port speeds of 10 Mbps, 100 Mbps and 1 Gbps and an Ethernet base with an incremental guaranteed bandwidth of 1 Mbps. We recorded operating revenue of Rp304.9 billion (US$31.5 million) from MPLS and Metro Ethernet services, representing 10.5% of our consolidated MIDI services operating revenue for the year ended December 31, 2012.

Frame Relay and ATM. We provide both international and domestic Frame Relay and ATM services, a high-speed leased packet switch technology, primarily through Indosat and Lintasarta, supplying customers with multilateral connectivity, reliable LAN interconnections and the power to support complex distributed computing applications. We recorded operating revenue of Rp135.8 billion (US$14.0 million) from Frame Relay and ATM services, representing 4.7% of our consolidated MIDI services operating revenue for the year ended December 31, 2012.

We offer our various data connectivity services—World Link, Direct Link, Domestic Link, IP VPN, MPLS and Metro Ethernet to our various corporate customers, including multinational corporations, that are tailored to fit their specific information and telecommunications requirements, pricing parameters, speed requirements and security concerns.

Satellite Services. We lease transponder capacity on our Palapa-D satellite, which is positioned in an orbital slot located over the Asia-Pacific region, to broadcasters and telecommunications operators. Indonesia has a large television market in which a number of privately-owned domestic broadcasters and international programmers compete with the state-owned broadcaster and many of these domestic and international broadcasters lease capacity on our satellite. We have entered into lease arrangements governing transponders on our Palapa-D satellite that vary in duration but generally terminate within two to five years of the effective date of the lease. Transponder leases may be terminated for breach of the lease agreement and most of the leases provide that the lessee may terminate the lease with notice (generally six to 12 months) subject to the payment by the lessee of a termination fee equal to a percentage of the lease payments that would have been due had the lease not been terminated. Apart from our own use, we also lease transponder capacity on our Palapa-C2 satellite, with a maximum lease term of one year, to other telecommunications operators.

We also provide a variety of other satellite derivative services, including occasional use for TV services (including Indosat TV link, “Satellite News Gathering” and transportable uplink station services), private network services, Internet access and multimedia and video conferencing. We expect demand for satellite services to continue to grow, mainly driven by accelerating growth of satellite derivative services. Pressure on pricing is expected to ease as a consequence of improved demand. Satellite services represented Rp213.0 billion (US$22.0 million) or 7.3% of our MIDI services operating revenues for the year ended December 31, 2012.

Internet Services. We provide international IP transit services for ISPs via Jakabare and SMW3 cable systems and domestic IP transit via our MPLS backbone. Dedicated internet access services for end users and corporate customers are delivered by Indosat, IM2 and Lintasarta. As part of our strategy to expand our Internet business, we leverage our infrastructure assets through connections to Tier-1 upstream providers, such as AT&T, PCCW Global, STIX and Tata and establishing bilateral peering with major service providers in the region and dominant content providers, such as Google and Microsoft. The total capacity of our international backbone is 160 Gbps, part of which is allocated to support our Internet services, and it is upgradable to up to 640 Gbps. In

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anticipation of increased competition in the Internet business, we have formulated a strategy to expand our business by developing Internet protocol backbone processes in potential growth areas, deploying public hotspot services and improving our business processes.

Lintasarta offers its Internet subscribers Internet Dedicated (Lintasarta Dedicated Internet) and Internet Broadband (Lintasarta Broadband Service) service for corporate subscribers. We derived Rp422.1 billion (US$43.7 million) or 14.5% of our consolidated MIDI services operating revenues from Internet services for the year ended December 31, 2012.

Internet services represented Rp422.1 billion (US$43.7 million) or 14.5% of our MIDI services operating revenues for the year ended December 31, 2012.

VSAT Net/IP and VSAT Link. Lintasarta’s VSAT Net/IP and VSAT Link services are satellite-based data networking systems. VSAT Net/IP connects and controls data traffic among remote locations, allowing for quick development of data for network customers with low-to-medium traffic in such sectors as financial services, transportation, trading and distribution. VSAT Link provides point-to-point digital transmission for remote locations by businesses with medium-to-heavy traffic such as those in the manufacturing, mining and financial services industries.

Disaster Recovery Center (DRC) and Data Center. We provide DRC and Data Center services through Indosat and Lintasarta. We offer co-location, rack, cage, power, and other supporting facilities as value added services to corporate customers. We also provide backbone or domestic leased line services from our DRC or Data Center locations to customer headquarters, as part of our total telecommunications solutions. We received ISO 27001 on Information Security Management System covering our Data Center and Disaster Recovery Center.

IT Services. We launched Indosat Cloud Services in December 2012, with Infrastructure-As-A-Service (IaaS) as the first service offered in our cloud portfolio under joint venture with PT Dimension Data Indonesia.

Customers and Marketing

Our customers for MIDI services are primarily corporate clients and small-to medium-size enterprises (“SME”), although we also have wholesale and retail customers for certain services, such as our Internet services. Our marketing activities for MIDI services include exhibitions, participation in events, group presentations, seminars, direct mail, partner promotions, customer retention programs and advertisements in publications and printed media. Also, through our Indosat Corporate Solutions Micro site, we provide corporate customers with convenient access to information about Indosat Corporate Solutions products and services and increase brand awareness of these services. Each business unit seeks to maintain existing customer relationships through activities such as user forums, training seminars, courtesy visits and informal gatherings. In addition, during 2012, Indosat had been selected by the government of Republic of Indonesia as one of the providers to support the national electronic identification card (also known as E-KTP) program. In this program, we had been given trust to deploy infrastructure throughout sub-districts level across Indonesia.

Lintasarta is focused on expanding its market share in segments outside of its core competencies of banking and finance, in light of the anticipated consolidation and restructuring of those industries in Indonesia. Lintasarta is expanding the existing geographic coverage of its products and services to address the increasing demand for telecommunications infrastructure in outlying regions as a result of Indonesian political developments, including increased regional autonomy.

We support our subscribers through local area staff, a 24-hour help desk and integrated real-time network management. In April 2000, Lintasarta achieved ISO 9002 certification for its frame relay, digital data network and VSAT services. In January 2002, we obtained ISO 9001 certification for our frame relay, digital data network and VSAT services, evidencing our commitment to customer satisfaction and continuous service quality improvement. As a result of these activities, Frontier and Marketing Magazine awarded us the “Top Brand

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Award” in the ISP category for the years 2005 through 2010 and the “Best Contact Center Award” for 2007, 2008 and 2009. As appreciation of our commitment to operational excellence, in June 2010, Cable and Wireless awarded Indosat as “Best Partner” in the Maintain and Achieve Operational Excellent in Asia category in the Cable and Wireless Global partner Gathering in Singapore. Recently in 2012, we achieved ISO-27001 for our Data Center services, and received the MEF certification for our Metro-Ethernet services. We also received the “Indonesia Data-Center Services Provider of the Year 2012” from Frost & Sullivan. In 2012, Lintasarta was awarded Grand Champion1 in the customer Service Championship and was also awarded the Corporate Image Award among data communication companies.

Tariff Structure and Pricing

Customers of our various MIDI services are charged based on the type of product and service provided, the capacity leased, their industry sector, geographic location and the length of service contracts with us (which generally range from one to three years). Service charges generally include the following components: initial installation; monthly service charges (based on location and access speed); transactional charges (based on the volume, duration and/or distance traveled for network traffic); and other charges for services such as consultancy and project management.

Satellite transponder lease rates to international lessees are negotiated individually with customers and depend on the supply and demand for services in the areas covered by our Palapa-C2 and Palapa-D satellites. Our offshore leases average US$0.92 million per annum for a full transponder. Almost all offshore lease payments are payable quarterly in advance in U.S. dollars and other widely used currencies.

Competition

Data communications service providers in Indonesia compete principally on the basis of price, range of services provided and customer service quality. During the last few years, competition among data communications service providers has intensified principally due to the issuance of new licenses resulting from the deregulation of the Indonesian telecommunications industry. We expect competition to continue to intensify. We believe that our major competitors are Citra Sari Makmur, Tangara Mitracom, Satkomindo and Primacom with respect to our VSAT services, Telkom, XL, Icon+, and Citra Sari Makmur, with respect to our domestic leased line services, and Telkom, XL, and to a lesser extent, Matrix Cable System, PT Mora Telematika Indonesia (“Moratel”) and Icon+, with respect to our international leased line services. Telkom enjoys dominance in the MIDI business sector, we believe due in part to its extensive last mile coverage, whereas we are particularly strong in serving the financial, oil and gas, and mining industry segments.

ISPs in Indonesia compete on the basis of network quality, price and network coverage. With respect to Internet-related value-added services, we compete against Telkom and other existing ISPs, such as First Media, Biznet, CBN, Berca and Indonet. We also face significant competition from any new ISPs whose licenses are approved by the MOCIT.

As corporate markets demand greater speed at affordable prices, many bandwidth suppliers have begun making significant investments toward building superior infrastructure using new technology, such as “Dense Wavelength Division Multiplexing,” or DWDM technology. DWDM technology offers more bandwidth capacity and better quality of service with better cost efficiency. This market demand is also leading to the expansion of Ethernet-based services, which offer simplicity of service, affordable prices and wide bandwidth.

The bandwidth industry has been facing recent challenges from the emergence of new operators and the expansion of existing operators, such as Moratel and Matrix Cable System, which set up international cables linking Indonesia and Singapore in 2008. In December 2011, XL and Moratel completed deploying their Batam-Dumai-Malaka Cable System.

Companies in the satellite business compete principally on the basis of coverage, transponder power, product offerings and cost. Generally, the cost of service depends upon the combination of power and coverage.

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In recent years, competition within the satellite business in the Asia-Pacific region has been intense. Our satellite operations have primarily consisted of leasing transponders to broadcasters and telecommunications operators of VSAT, cellular and IDD services and ISPs. We face competition from foreign and domestic service providers in each of these areas. In leasing our transponders on the Palapa-D satellite, we compete most closely in Indonesia with Telkom and PT Pasifik Satelit Nusantara (“Pasifik Satelit Nusantara”). Pasifik Satelit Nusantara also owns transponders on the Mabuhay Philippines Satellite. Telkom currently operates its own satellites (Telkom-1 and Telkom-2) and earth stations primarily to provide backbone transmission links for its network. Telkom also leases satellite transponder capacity and provides earth station satellite uplinking and downlinking service to domestic and international users. Other private satellites serving the broadcast market within the coverage area of the Palapa satellites include AsiaSat-4, AsiaSat-3S, Apstar-2R, Apstar-5, Apstar-6, Chinasat 10/Sinosat 5, Chinasat 6B, ThaiCom4, ThaiCom5, Measat-3, Measat-3a, Intelsat 7, Intelsat 8, Intelsat 10 and Intelsat 12. APT Satellite, which operates the Apstar satellites, China Satellite Communication Co. Ltd which operates Chinasat satellites, ThaiCom Public Company Ltd, which operates the ThaiCom satellites, Measat Sdn. Bhd, which operates the Measat satellites and Intelsat S.A., which operates the Intelsat Satellites, also compete directly with us in the Asian regional market. Moreover, with the increasing popularity of Direct-To-Home television (“DTH”), our satellite business will face increasing competition as new and more powerful regional satellites are launched. DTH is the reception of satellite programs with a personal dish in an individual home. National broadcasters are seeking DTH licenses to provide nationwide broadcast services in Indonesia. DTH television will enable broadcasters to distribute their program content without utilizing our telecommunication network support. In addition, because of the growing popularity of DTH, we face the possible loss of customers because DTH uses a satellite platform that we do not provide.

Fixed Telecommunications Services

Our fixed telecommunication services include international and domestic long distance as well as fixed wireless access services. For the year ended December 31, 2012, we recorded operating revenues of Rp1,021.5 billion (US$105.6 million) from our fixed telecommunications services, representing 4.5% of our total consolidated operating revenues. Except with respect to payments from our cellular, fixed wireless and fixed line subscribers, we do not receive any payments directly from the end users of our international long-distance services.

Services

International Long-Distance Services. We provide a variety of international voice telecommunications services and both international switched and non-switched telecommunications services. Switched services require interconnection with either the PSTN or another mobile cellular operator’s facilities; non-switched services can be completed through our transmission facilities without the need for interconnection. Within our international long-distance services, we offer a premium IDD service through our “001” and “008 access code. Our premium IDD service can be accessed by any operator in Indonesia. We also offer a budgeted international call services under the brand name “FlatCall 01016,” which offers affordable tariff rates targeting mass and budget oriented customers for certain top destination countries, and is only available to our subscribers. “FlatCall 01016” become a unique selling point to our GSM products differentiating us from our competitors. In 2012, approximately 22% of our outgoing international long-distance call minutes (including calls placed through “Flatcall 01016”) originated from the Eastern Java area, followed by 18% originating from Western Java, and 14% originating from the greater Jakarta area. Our outgoing international long-distance calls are routed through three of our six international gateways. From these gateways, international long-distance services are transferred via submarine cable based on predetermined routing plans developed in collaboration with foreign telecommunications operators. The foreign carriers receiving calls through the international gateways are responsible for terminating the calls to their recipients. Similarly, international long-distance calls received at our gateways are switched from the gateway to their destinations domestically through Telkom’s local network, our cellular network, our fixed local network or one of the other cellular operators with which we maintain interconnection arrangements. In 2010, we began offering international interconnection services to foreign

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operators whereby we route call traffic that both originates and terminates overseas through our international gateways. This traffic accounted for 2.6%, 7.5% and 9% of our incoming paid minutes for 2010, 2011 and 2012, respectively. For the year ended December 31, 2012, our revenues from international long-distance services amounted to Rp801.4 billion (US$82.9 million).

The following table sets forth certain operating data for our international direct dialing services for the periods indicated:

	For the years ended December 31,
	2010				2011				2012
	minutes		% change		minutes		% change		minutes		% change
	(in millions, except percentages)
Incoming paid minutes		1,678.7		10.6		1,841.7		9.7		1,824.9		–0.9
Outgoing paid minutes		463.0		–7.8		445.3		–3.8		408.5		–8.3
Incoming and outgoing paid minutes		2,141.7		3.9		2,287.0		6.8		2,233.3		–2.3
Ratio of incoming to outgoing traffic		3.6		—		4.1		—		4.05		—

During 2010, 2011 and 2012, our international outgoing calls measured by paid minutes decreased by 7.8%, decreased by 3.8% and decreased by 8.3% respectively, while our international incoming calls measured by paid minutes increased by 10.6% in 2010, increased by 9.7% in 2011 and decreased by 0.9% in 2012. Combined outgoing and incoming calls, also measured by paid minutes, increased by 3.9%, 6.8% and decreased by 2.3% during 2010, 2011 and 2012, respectively. We believe that increased competition from Telkom and VoIP operators, some of which are unlicensed, caused a decline in international outgoing and incoming calls traffic.

Fixed Wireless Access Services. We launched our fixed wireless access services in 2004 to expand our fixed telecommunications business segment and to complement our cellular services. Using CDMA 2000 1x technology, our fixed wireless access services offer a cost-effective alternative to our cellular services to subscribers who have limited mobility requirements. As of December 31, 2012, our fixed wireless access service, “StarOne,” had a total subscriber base of 174,339 subscribers with 53,105 postpaid subscribers and 127,374 prepaid subscribers. For the year ended December 31, 2012, revenues from fixed wireless access services totaled Rp98.3 billion (US$10.2 million). On December 12, 2006, the Government granted us a license for two channels of nationwide fixed wireless access in the 800 MHz frequency. This license replaced our previous 1900 MHz fixed wireless access license and by the end of 2007, we migrated our CDMA frequency from 1900 MHz to the new 800 MHz frequency in the greater Jakarta area. Our Store One services were available in 77 cities as of December 31, 2012.

Local and Domestic Long Distance Services. We launched local and domestic long distance service from Indosat access points such as “StarOne” and “INDOSAT phone” in October 2005. We currently have local and domestic long-distance coverage of 152 major cities in Indonesia.

Customers and Marketing

The principal customers of our fixed telecommunications services are corporate clients, our own cellular, fixed telecommunications and fixed wireless access customers, and the customers of other telecommunications operators.

We employ a specialized sales force, including a sales group, which focuses on our 500 largest customers, including hotels, large corporate customers, government offices and embassies. We have also implemented a customer loyalty program, which provides incentives to regular users. In addition, we seek to broaden our customer base by conducting joint promotions with other international telecommunications companies to promote our services. We strive to deliver high-quality services that maximize customer satisfaction.

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We have undertaken a variety of marketing initiatives to improve our services to fixed telecommunications customers. Our marketing strategy focuses on expanding our market share while retaining our customers through bundling initiatives, and establishing volume commitments for incoming traffic from foreign telecommunications operators. We have traditionally maintained a nationwide advertising campaign, using television, newspapers, magazines, websites and radio to increase brand awareness among business and retail customers. We also maintain regional sales offices in eight locations throughout Indonesia.

We maintain a proprietary database of customer information, which allows us to analyze consumer preferences and usage patterns and to develop tailored marketing and products. We conduct our own market research and also engage consultants to perform broader research on customer behavior and needs.

Tariff Structure, Universal Service Obligations and Pricing

Rates. Prior to 2008, the MOCIT set tariffs for fixed telecommunications services, which were based on the division of all destinations into six zones. On April 30, 2008, the MOCIT established a tariff formula for basic services on fixed networks and required operators to calculate prices using a cost-based formula, which are then submitted to the Government for approval. However, our international long-distance rates have not changed, and so we intend to continue applying international long-distance rates based on the previous regulations which base tariffs on six zones for call destinations.

The provision of international long-distance services between two countries is normally established between telecommunications carriers on a bilateral basis. We typically apply a market termination rate-based pricing system, pursuant to which we agree on asymmetric rates for incoming and outgoing calls. We maintain direct connections with 64 foreign telecommunications operators in 40 countries. Our agreements with these carriers set the terms of payment by us to the foreign telecommunications operators for use of their facilities in connecting international long-distance services billed in Indonesia and by the foreign telecommunications operators to us for use of our facilities (and the local Indonesian networks) in connecting international long-distance services billed abroad. The practice among telecommunications carriers is for charges due in respect of the use of overseas networks to be recorded, collected and forwarded by the telecommunications carrier from the country in which the call is billed. Based on the rates negotiated with each foreign telecommunications operator, we make payments to carriers for outgoing traffic billed in Indonesia, and we receive payments from such carriers for inbound traffic billed outside of Indonesia. Settlements among carriers are normally made quarterly on a net-based method. Our largest correspondent carriers are those located in Malaysia, Singapore, Taiwan, the Middle East and Hong Kong.

VoIP service providers may determine their own collection charges, and each service provider must negotiate with the applicable network provider for interconnection charges. We have entered into an agreement for Telkom to be our network provider for VoIP interconnection.

Interconnection with Domestic Networks. Although we provide international gateways for outgoing calls from and incoming calls to Indonesia, all international long-distance services, except for international transit services, must terminate on one of the domestic fixed or cellular networks. The MOCIT sets interconnection tariffs for international long-distance services which traverse the domestic fixed-line and fixed wireless access networks. We have separate interconnection agreements, which reflect these tariffs, with those operators that interconnect directly with our international gateways.

Universal Service Obligations. The Government imposes a Universal Service Obligation (“USO”) tariff, which from 2005 through 2009 was 0.75% of annual gross revenues less interconnection expenses paid to other telecommunication carriers and bad debts. In January 2009, the Government increased USO tariffs from 0.75% of annual gross revenue to 1.25% of annual gross revenue (after deducting interconnection charges and bad debts).

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Customer Billing and Interconnection Charges

Domestic operators maintain control over the billing and collection process for international long-distance services, which are initiated on the domestic networks. Domestic operators retain the appropriate interconnection charges owed to them from the amounts collected and remit the balance (without interest) in Indonesian rupiah to us within not less than 25 days of collection from the customer in Indonesia. The collection cycle for most of the domestic operators is approximately 30 days. We are responsible for generating and delivering such billing information to the domestic operators, through a module known as the System Online Clearing Interconnection service, every twelfth day of the month, which is then billed by the domestic operators approximately five days after receipt from us, resulting in a collection cycle of approximately 50 to 80 days. For purposes of financial reporting, we recognize revenues on a monthly basis based upon our own traffic records. We bill our domestic cellular operators in the middle of the following month and require payment by the end of the month. Accordingly, the normal collection cycle with respect to domestic cellular operators is approximately 20 to 60 days.

We remit the appropriate interconnection charge to the relevant operator for incoming calls terminating on the domestic networks. We generally remit such charges in 20 to 60 days by netting the receivables for outgoing calls. The settlements from foreign telecommunications operators are typically paid in U.S. dollars, which are deposited in Indonesia, and amounts representing interconnection payments payable by us to the domestic network operators are remitted in Indonesian rupiah.

Customer usage of fixed wireless access and domestic long-distance services is calculated starting from the beginning of the month until the end of the month. Customer billing is generated at the beginning of the following month and completed by the fifth day of that month. Billing statements are generally received by customers no later than the tenth of the month and payments are due by the twentieth of the month. For fixed wireless access service, we block the subscribers’ ability to make calls when they have not paid their balance due by the twenty-second day of the month. We block a customer’s ability to make or receive calls 40 days after the statement date if he or she still has not paid his or her balance. We permanently disconnect service and cancel accounts for customers whose bills are more than 60 days past due from the first day of the generated bill. For domestic long-distance services, by the end of the month, we block customers from making calls if they have not paid their balance. For customers who have not paid their balance due by the end of the second month, we block the customers’ ability to make or receive calls. We permanently disconnect service and cancel accounts for customers whose bills are 90 days past due from the first day of the generated bill.

Competition

We are no longer the only authorized provider of traditional IDD (i.e., non-VoIP) call services in Indonesia. The MOCIT has granted operational licenses to provide IDD services to Telkom, which includes the right to use the IDD access code “007” to enter the international long-distance market, and Bakrie Telecom. The Government may also issue new licenses for IDD services to other telecommunications operators, which will increase competition. In addition, Telkom no longer operates a monopoly for DLD services. The traditional IDD market has become even more competitive with the increased usage of VoIP technology. Our VoIP business has increased significantly from 411.7 million minutes, 396.1 million minutes and 321.2 million minutes in 2010, 2011 and 2012, respectively.

In April 2008, we and Telkom agreed to open DLD access from our respective customers in Balikpapan, pursuant to which Telkom’s fixed network customers can dial “011” to access our DLD network while our local fixed network customers can dial “017” to access Telkom’s network. In addition, in 2008, BakrieTelecom was issued a license as a new DLD operator. The opening of DLD access among competitors and the commencement of operations of new DLD operators is expected to increase competition by providing customers with more options for DLD services.

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We also compete with other fixed wireless access service providers. In May 2003, Telkom introduced TelkomFlexi, a CDMA 2000-1X service in the Jakarta area. Currently, Telkom offers this service nationwide. Telkom offers this service as a fixed wireless access service, but the service has expanded mobility and value-added features similar to cellular services. After receiving requests from industry associations, the MOCIT issued a decree stating that the service area of the fixed wireless access networks must be limited to an area equal to one area code of the local fixed network service. Fixed wireless access service operators are therefore prohibited from extending their roaming services to other area codes, but CDMA operators still have the ability to achieve similar results by giving subscribers a new number when they move to other cities. Telkom, Bakrie Telecom and Smartfren have each been granted nationwide fixed wireless access services licenses, allowing them to offer their services nationwide, further intensifying competition.

Facilities and Infrastructure

The discussion below relates to our cellular network, fixed telecommunications network (including IDD network), and other communications facilities and infrastructure, including that of our significant operating subsidiaries.

Cellular Network

The principal components of our cellular network are:

• base transceiver/Node B stations: consisting of a transmitter and receiver and serving as a bridge between mobile users in one cell and the mobile switching center via base station controllers and radio network controllers;

• base station controllers/radio network controller: devices that connect to and control the base station within each cell site;

• mobile switching centers: centers that control the base station controllers and the routing of telephone calls; and

• transmission lines: lines that link the mobile switching centers, base station controllers, base stations and the PSTN.

Our cellular network currently operates using 10 MHz x 2 uplink and downlink of radio frequency bandwidth in the GSM 900 spectrum, 20 MHz x 2 uplink and downlink of frequency bandwidth in the DCS 1800 spectrum and 10 MHz x 2 uplink and downlink in the IMT-2000 spectrum. The following table sets forth selected information regarding the composition of our cellular network as of the dates indicated:

	As of December 31,
	2010		2011		2012
Base transceiver stations		15,216		15,816		17,334
Node B Stations (3G BTS)		2,892		3,437		4,596
Total BTS (including 2G and 3G)		18,108		19,253		21,930
Base station controllers		330		302		292
Mobile switching centers		87		75		67
Radio network controllers		34		51		59
Media gateways		79		79		79

We purchase our cellular telecommunications equipment primarily from European and Chinese suppliers. Our network is an integrated system employing switching equipment, cell site equipment and a transmission network of point-to-point microwave radio. Most of our cell sites and radio base stations are located in or on buildings or on vacant lots, which we own, or for which leases have been individually negotiated by us for terms typically varying from five to 20 years.

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As a result of operating three legacy networks using equipment from numerous suppliers, our capital expenditures have historically been higher than would be the case if we were operating a single network using fewer suppliers. Commencing in 2010, as part of our functional management strategy, we began to rationalize our capital expenditure and procurement planning through our then newly-established investment committee. We have focused our procurement on fewer suppliers and have adopted a framework agreement approach with such suppliers, which we believe has significantly increased the efficiency of our capital expenditure program.

On February 7, 2012, we signed transaction documents with PT Tower Bersama Infrastructure Tbk. (“TBIG”) and its subsidiary PT Solusi Menara Indonesia (together, “Tower Bersama”) for the sale and leaseback of 2,500 towers, approximately 25% of our existing tower assets, for a total potential consideration of US$541.5 million, comprising upfront consideration of cash and newly issued TBIG shares and a maximum potential deferred payment of US$112.5 million (the “Tower Sale Transaction”). The consideration paid at closing was US$429.4 million consisting of cash of US$326.3 million and 5% share ownership in TBIG, which has a fair value of US$103.1 million.

Under the terms of the Tower Sale Transaction, we will lease the towers sold for a minimum period of 10 years at fixed rates that are in line with current market rates. By transferring ownership of the towers, we believe we will enjoy significant ongoing maintenance capital expenditure and operational expenditure savings. In addition, we have concluded preferential terms with Tower Bersama in line with its anchor tenant position that imply meaningful additional value to us in the form of realized savings over the term of the lease. Cash proceeds from the transaction will be applied towards repayment of outstanding debt, on-going capital investment and general corporate purposes. The Tower Sale Transaction was completed on August 2, 2012.

The Tower Sale Transaction forms part of our strategy to monetize or increase productivity of non-core assets and we are continuing to consider various options in connection with the operation, ownership and use of our other tower assets to optimize the value of such assets.

Fixed Telecommunications Network

We have built a fixed telecommunications network consisting of six international gateways served by satellite circuits, submarine cables and microwave transmission. By the end of 2010, we offered fixed wireless access services across 82 cities in Indonesia.

International Gateways. For our international long-distance business, we operate through six gateways, four gateways in Jakarta, and two gateways in Surabaya, which provide all of the connections for our services to our international long-distance network. The gateway-switching equipment was purchased from Lucent Technologies, Inc. (which has since merged with Alcatel) and Siemens.

As of December 31, 2012, we had available international bandwidth capacity of 3,000 Mbps for voice and 108,500 Mbps for data transmission. All of our destinations are digitally connected. The bandwidth available to us is significantly higher than the utilized capacity to allow for anticipated growth in traffic. It is our policy to maintain average utilization at less than 80.0% of capacity to allow for increased usage during peak hours.

Each international gateway is linked to the other international gateways, which permits multiple routing options for each call and provides the system with backup capability in case of equipment failure or overcrowding at any gateway. We have placed interconnection equipment at the facilities of Telkom and certain other cellular operators to connect our international long-distance network to the domestic telecommunications network.

International transmission of voice and data between international gateways occurs across either satellite circuits or submarine cables. Satellite circuits are unaffected by distance and offer broadcast services making them flexible with regard to call destinations. Submarine cables, especially fiber optic digital cables, can offer

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less expensive high-quality services. However, cable costs increase with distance and destinations are fixed. Satellite circuits can be degraded by atmospheric conditions, while submarine cables can suffer damage from human or natural causes. In general, we use submarine cables with cable-to-cable backup for medium-distance links in Asia and satellite links backup for longer-distance transmission. We use microwave and fiber optic links for connections between gateways and earth stations, as well as for the Batam gateway, which has microwave links to Singapore. It is our policy to maintain 100% redundancy for all of our international long-distance links (which may require routing through a third country) in an effort to provide high-quality services to our customers.

Submarine Cables. We have ownership interests in and access to capacity in submarine cables interconnecting the Asia-Pacific region, North Africa and Europe, as well as those linking the Asia-Pacific region with North America. The table below sets forth the geographic coverage and allocated capacity of our cable network as of December 31, 2012:

Submarine Cable Network	Geographic Coverage	Capacity
		(in Mbps)
APCN-2	China, Japan, Malaysia, Philippines, Singapore, Hong Kong South Korea and Taiwan		310.00
SEA-ME-WE 3	Australia, Austria, Belgium, Brunei, Canada, China, Egypt, France, Germany, Greece, Hong Kong, India, Iran, Italy, Japan, Macau, Malaysia, Myanmar, Netherlands, Oman, Pakistan, Portugal, Saudi Arabia, Qatar, Singapore, South Korea, Spain, Sri Lanka, Taiwan, Thailand, Turkey, United Arab Emirates, United States and United Kingdom		109,920.12
China-US	China, Taiwan, South Korea and United States		1,414.00
Asia America Gateway	Singapore, Malaysia, Thailand, Vietnam, Brunei, Hong Kong, the Philippines, and United States		9,157.47
Jakabare	Java—Singapore		80,000.00
Jakabare	Java—Kalimantan		80,000.00
Jakabare	Kalimantan—Batam		80,000.00
Jakabare	Batam—Singapore		80,000.00
Jakasusi	Java—Kalimantan		80,000.00
Jakasusi	Kalimantan—Sulawesi		40,000.00
Jasutra	Java, Sumatera		120,000.00
Jakarta—Surabaya	Java		50,000.00
Javali	Java-Bali		90,000.00
Total			820,801.59

To support the operations of our gateway in Surabaya, we have operated the Jakarta-Surabaya submarine fiber optic cable link since January 1997. This link enhances network reliability and improves the quality of our services in the Surabaya region.

We, along with the Telecommunications Company of Iran (“TCI”), are among more than 80 companies that have an ownership interest in, and access to capacity in the SEA-ME-WE 3 submarine cable. Our ownership interest in the SEA-ME-WE 3 submarine cable stands at approximately 3.4% while TCI’s ownership interest stands at approximately 0.3%. The SEA-ME-WE 3 submarine cable does not have any landing point in Iran. The connection to Iran is through the UAE-Iran submarine cable system that lands at Fujairah Cable Landing Station (UAE).

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Other Communication Facilities

Our Palapa-C2 and Palapa-D satellite communication systems and fiber optic links to major commercial centers as well as remote areas of Indonesia are used in the provision of our MIDI services and for cellular backhaul.

Satellite Communication System. Communications satellites are of varying use, depending on features such as their footprint, or coverage areas, transponder power (typically stated in dBW), and transponder bandwidth. Transponder bandwidth, expressed in terms of megahertz, varies between C-band and Ku-band transponders. C-band is used worldwide as a standard for satellite communications to transmit signals with minimum atmospheric interference. They can provide very broad coverage over most of the Asian continent, making them very popular for applications such as television broadcasting and VSAT applications. Ku-band transponders operate at a frequency of approximately 11-14 gigahertz. While Ku-band frequencies are more prone to moisture and rain attenuation than C-band frequencies, they are more suitable for IP VSAT applications involving very small antenna applications. Ku-band is generally used for the same purposes as C-band, as well as for satellite news-gathering (truck-mounted antennas) and some VSAT applications. Ku-band is especially prevalent in areas with dense ground-based microwave systems. To compensate for loss of signal strength caused by moisture and rain attenuation, Ku-band transponders are generally of higher-power than C-band transponders and their footprints are smaller.

On August 31, 2009, we launched a new satellite, Palapa-D, to replace Palapa-C2 at orbital slot 113E, which significantly increased our transponder capacity and provided wider satellite coverage. The increased transponder capacity our Palapa-D satellite provided allowed us to meet both our own satellite transponder requirements as well as those of customers who lease transponder capacity from us. As of December 31, 2012, approximately 82.68% of Palapa-D’s standard C-band transponder capacity, 25.71% of its Ext. C transponder capacity and 99.44% of its Ku-Band transponder capacity were being leased to third parties. As of December 31, 2012, we were using 15.13% of Palapa-D’s Standard C-Band transponder and 73.46% of Palapa-D’s Extended C-Band capacity and 0.24% of its Ku-Band transponder capacity to meet our own bandwidth requirements and the remaining 2.18% Standard C-Band transponder capacity, 0.83% Extended C-Band capacity and 0.31% Ku-Band transponder capacity was available for lease.

After a successful traffic transfer from Palapa-C2 to Palapa-D in early November 2009, Palapa-C2 moved to the orbital slot at 150.5E.L. and will operate in inclined orbit carrying our cellular backhaul until approximately March 2014. As of December 31, 2012, we were using 40.61% of our Palapa-C2 Standard C-Band transponder capacity to meet our own bandwidth requirements, we were leasing 18.75% of our capacity to third parties and the remaining 40.64% of our capacity was available for lease.

The Palapa-D satellite has eleven 36-megahertz extended C-band transponders, twenty-four 36-megahertz standard C-band transponders, and five 36-megahertz Ku-band transponders wholly owned by us. The maximum power on each of the C-band and Ku-band transponders is 43 dBW and 53 dBW, respectively. The Palapa-D satellite provides C-band coverage to substantially all of Asia with a footprint stretching from the Arabian Peninsula to Japan and China to New Zealand, including central and eastern parts of Australia. Its dBW levels range from a beam edge of 32 dBW to a beam center of 43 dBW. With this power, the Palapa-D satellite has the capability to provide uplink and downlink services from any location within the satellite footprint. The five Ku-band transponders provide coverage over Indonesia and some of ASEAN Countries with peak transponder power of 53 dBW.

The Palapa-C2 satellite has six 36-megahertz extended C-band transponders owned by Pasifik Satelit Nusantara, and twenty-four 36-megahertz Standard C-band transponders and four 72-megahertz Ku-band transponders owned by us. The maximum power on each of the C-band transponders is 40 dBW. Since the new location of Palapa-C2 is close to another satellite with the same Ku-band frequency plan, we, consistent with the rules and regulations of the International Telecommunication Union and our license, do not operate Ku-band

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transponders to avoid harmful interference from the other satellite. The Palapa-C2 satellite provides C-band coverage to substantially all of Asia, with a footprint stretching from Central Asia to Japan and southern China to New Zealand, including parts of Australia. Its dBW levels range from a beam edge of 32 dBW to a beam center of 40 dBW. With this power, the Palapa-C2 satellite has the capacity to provide uplink and downlink services from any location within the satellite footprint.

Fiber Optic and Microwave Terrestrial Links. Our optical fiber backbone based on DWDM technology connects all provincial cities in Sumatera, Java, Kalimantan, and part of Sulawesi. The optical fiber backbone conveys cellular traffic within and between the cities at 40-60 gigabits per second and facilitates our progressive growth of Internet broadband through 3.5 HSDPA and fixed broadband wireless access. Due to capacity and technology considerations, the existing microwave terrestrial system has been shifted to cover remote spur route areas. As of December 31, 2012, we had fiber optic and microwave terrestrial links to most major cities in Sumatra, Java, Kalimantan and Sulawesi. These links are primarily used to deliver Internet and other MIDI services to our corporate customers.

In December 2010, we entered into a purchase order with Alcatel Lucent Submarine Networks to upgrade the capacity of existing JAKASUSI submarine cable system, which required us to spend approximately US$ 2.6 million in capital expenditure. The upgraded system increased inter-island capacity from/to Banyu Urip—Katesung (120 Gbps) and Takesung—Aeng Batu Batu (90 Gbps). The upgraded system was ready for service in July 2011.

In December 2010, we entered into a purchase order with IFactor Sdn Bhd, Malaysia to construct the JAVALI submarine cable system, a new submarine cable system which links Java (East Java) island and Bali island and provide high capacity bandwidth, and which involved a total project cost of US$10.8 million. The JAVALI submarine cable system is wholly-owned by us and is designed with 24 optical fiber cores (unrepeated system). The system is initially equipped with 50 gigabits per second capacity with its ultimate capacity at 160 gigabits per second capacity per fiber pairs. The construction of this new cable system was completed in December 2011.

IP/MPLS Backbone and Metro Ethernet Network. As of December 31, 2012, we had completed our Metro Ethernet Network deployment project in more than 520 points of presence in Indonesia with fiber optic connectivity. Through this network, we provide virtual leased lines offering point-to-point Ethernet access, virtual private LAN service offering multipoint-to-multipoint Ethernet access and virtual private routed networks offering locally linked IP VPN and Internet. We also use our Metro Ethernet Network for backhauling our 2G and 3G cellular traffic. Dual redundant routers for IP-MPLS backbone have also been deployed in 40 cities and are connected through our fiber optic backbone. A Metro Ethernet network has also been deployed in 44 major Indonesian cities to provide broadband access to the corporate market in high-rise buildings and cellular backhaul for 3.5 HSDPA service. Internet access, broadcasting service and data center connectivity are among the services used by our customers.

As the technology moves towards “all IP” and the demand of IP-based services is increasing due to its advantages over legacy networks, we aim to deploy a future network to allow IP-based services to be widely available in the region. In 2008, we completed construction of a Disaster Recovery Center (“DRC”) in Jatiluhur for corporate customers to allow them to have a data back-up center to secure and protect their business information and in 2011 we upgraded this DRC to include “meet-me-room” facilities. Also, in 2011 we completed construction of a data center in Jakarta to provide the basic infrastructure for our cloud computing service.

Organizational Structure

The following chart illustrates our simplified corporate structure as of December 31, 2012, including our direct and indirect equity ownership in major subsidiaries, together with the jurisdiction of incorporation or

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organization of each entity. A complete list of our significant subsidiaries and investments in associated companies, and our ownership percentage of each entity, as of December 31, 2012 is contained in Note 1b to our consolidated financial statements included elsewhere in this annual report.

PT Aplikanusa Lintasarta was established in 1988. Pursuant to its articles of association, Lintasarta engages in the business of providing system data telecommunication and information technology services and network application services, which include providing physical infrastructure and software application and consultation services in data communication and information system for banking, finance and other industries.

PT Indosat Mega Media (“IM2”) was established in 1996 to engage in the business of providing Internet and television services.

Indosat Singapore PTE Ltd (“ISPL”) was established on December 21, 2005 to engage in telecommunication data services.

Indosat Palapa Company B.V. (“IPBV”) and Indosat Mentari Company B.V. (“IMBV”) were incorporated in Amsterdam on April 28, 2010 to engage in treasury activities, to lend and borrow money, whether in the form of securities or otherwise, to finance enterprises and companies, and to grant security in respect of their respective obligations or those of their group companies and third parties.

PT Starone Mitra Telekomunikasi (“SMT”) was established in 2006 to provide telecommunication services and develop telecommunication infrastructure, including multimedia.

PT Artajasa Pembayaran Elektronis (“Artajasa”) was established in 2000 to provide general trade and application services to industries, particularly the banking industry, information technology consultation services, and telecommunication services.

PT Lintas Media Danawa was established on July 28, 2008 to provide information and communication services, such as data center services, e-learning and distant learning for public education services, and content services based on Internet Protocol (e.g., IPTV, internet game and internet payment gateway).

PT Interactive Vision Media (“IVM”) was established on April 21, 2009 to engage in the Pay TV business. As of April 24, 2013, IVM had not commenced commercial operations.

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PT Citra Bhakti Indonesia (“PT CBI”), is a subsidiary of Artajasa, was established on May 14, 2012 to engage in the business of issuing formal certification to all chip technology based payment products to support the national implementation of standard chips on ATM and debit cards.

Insurance

As of December 31, 2012, we carried insurance on our property and equipment (except submarine cables and land rights), We maintain in-orbit insurance on the Palapa-D satellite on terms and conditions consistent with industry practice. As of December 31, 2012, we had an insurance policy coverage with a total coverage limit of US$117.7 million, for total loss of our Palapa-D satellite.

Intellectual Property

We have registered trademarks and copyrights for our corporate name, logo and certain services with the Ministry of Law and Human Rights of Indonesia (formerly the Ministry of Justice and Human Rights of Indonesia). We believe that our trademarks are important to our success. We have never had to defend any of our trademarks, but we would vigorously do so if necessary.

Properties

Except for ownership rights granted to individuals in Indonesia, the title to land rests with the Indonesian State under the Basic Agrarian Law No. 5/1960. Land use is accomplished through land rights whereby the holder of the land right enjoys the full use of the land for a stated period of time, subject to renewal and extensions. In most instances, the land rights are freely tradable and may be pledged as security under loan agreements. Our most important properties are located in Jakarta (approximately 12,050 sq.m. used for international gateways and head office), Ancol (approximately 12,679 sq.m. used as a cable station and switching center), Tanjung Pakis, Karawang (approximately 1,850 sq.m. used as a cable station), Daan Mogot (approximately 134,925 sq.m. used as a satellite earth station complex), Jatiluhur (approximately 135,800 sq.m. used as a satellite earth station complex), Medan (approximately 9,780 sq.m. used for international gateways), Pantai Cermin (approximately 48,567 sq.m. used as an earth station and a cable station), Batam Sekupang (approximately 19,989 sq.m. used for international gateways and an earth station), Tanjung Bemban (approximately 3,500 sq.m. used as a cable station), Surabaya (approximately 11,359sq.m. used as a regional office) and Banyu Urip-Gresik (approximately 130,234 sq.m. used as an earth station, for international gateways and as a cable station), Takisung—Banjarmasin (approximately 12,533 sq.m. used as a cable station), Aeng Batu-batu-Makasar (approximately 2,000 sq.m. used as a cable station) and Sei Kakap Pontianak (approximately 5,394 sq.m. used as a cable station). Except for our property in Daan Mogot, which we lease from Telkom, we hold registered land rights to some of our properties, the initial period of which are for approximately 30 years. We expect that our land rights will be renewed at nominal costs for the foreseeable future. None of our properties are mortgaged or otherwise encumbered.

Principal Registered Offices

Headquarters:	Jl. Medan Merdeka Barat No. 21 Jakarta 10110, Indonesia Tel: (62-21) 3044 2615 Fax: (62-21) 3000 3754, 3000 3757
Jakarta Area Office	Jl. Medan Merdeka Selatan No. 17 Jakarta 10110, Indonesia Tel: (62-21) 3000 7001 Fax: (62-21) 3000 5702

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Bogor Tangerang Bekasi Area Office	Jl. Veteran No. 40 Bekasi selatan 17141, Indonesia Tel: (62-21) 3017 7075, 3017 7076 Fax: (62-21) 3000 0811
West Java Area Office	Jl. Asia Afrika No. 141-147 Bandung 40112, Indonesia Tel: (62-22) 3000 0900 Fax: (62-22)3000 5702
Northern Sumatera Area Office	Jl. Perintis Kemerdekaan No. 39 Medan 20236, Indonesia Tel: (62-61) 4567 001 Fax: (62-61) 4531 031
Southern Sumatera Area Office	J1. Angkatan 45 No. 222 Palembang 30137, Indonesia
	Tel: (62-711) 605 9999 Fax: (62-711) 605 9966, 605 9977
Central Java Area Office	Jl. Pandanaran No. 131 Semarang 50243, Indonesia Tel: (62-24) 3300 2000 Fax: (62-24) 3300 1001
East Java Area Office	Jl. Kayoon No. 72 Surabaya 60271, Indonesia Tel: (62-31) 6000 6001 Fax: (62-31) 5456 001, 5464 392
Bali Nusra Area Office	Jl. Raya Bay Pass Ngurah Rai No. 88 Kuta Bali 80361, Bali, Indonesia Tel: (62-361) 300 5000 Fax: (62-361) 300 5005
Kalimantan Area Office	Jl. MT Haryono No. 69 Balikpapan 76114, Indonesia Tel: (62-542) 741 001, 3030 001 Fax: (62-542) 7514 001, 7206 750
Sulampapua Area Office	Jl. Slamet Riyadi No. 4 Makassar 90111, Indonesia Tel: (62-411) 326 808 Fax: (62-411) 326 828

Indonesian Telecommunications Industry

Background

Since 1961, telecommunications services in Indonesia have been provided by a succession of state-owned companies. As in other developing economies, the expansion and modernization of telecommunications infrastructure is instrumental to Indonesia’s general economic development. In addition, Indonesia’s large population and economic growth have led to increased demand for telecommunications services.

Indonesia had an estimated population of approximately 244.47 million people as of 2012, ranking it the fourth most-populated country in the world based on International Monetary Fund (“IMF”) estimates.

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Indonesia’s gross domestic product, or GDP, has grown significantly from US$510.3 billion in 2008 to US$894.9 billion in 2012 in current U.S. dollars according to the IMF, which represents a growth rate of 15,1%. This growth rate compares favorably against the approximately 8.4% and approximately 7.4% GDP growth experienced by Thailand and Malaysia, respectively, estimated by the IMF, during the same period.

The Government, through the MOCIT, has extensive regulatory authority and supervisory control over the telecommunications sector. While the Government has historically maintained a monopoly over telecommunications services in Indonesia, recent reforms, the majority of which came into effect on September 8, 2000, have attempted to create a regulatory framework to promote competition and accelerate infrastructure investment in telecommunications facilities.

In Indonesia, fixed-line services are mostly provided by Telkom, a majority state-owned company, which owns and operates the country’s primary PSTN and fixed wireless access points. Before the implementation of the new interconnection regime, telecommunications operators interconnected with Telkom’s network to access all fixed-line and cellular users. Telkom’s local fixed-line monopoly ceased on August 1, 2002, and we have since commenced our build-out of a separate fixed-line network. According to the new interconnection regime, telecommunications operators may enter into bilateral agreements which enable them to interconnect directly with other telecommunications operators.

Although cellular penetration is relatively low compared to its regional peers, based on International Telecommunications Union estimates, Indonesia’s cellular penetration rates have increased from approximately 69.86% in 2009 to approximately 107.30% in 2012, a compound annual growth rate of 15.1% Indonesia’s GDP growth profile and relatively low penetration rates suggest the potential for increased cellular customer demand in Indonesia. Moreover, in 2012, the number of fixed lines, including fixed wireless access, was approximately 41.93 million, representing a fixed-line penetration of 17.15%, among the lowest in the region and a result of stagnant fixed-line growth under previous regulatory systems. The table below summarizes certain information regarding Indonesian and regional cellular and fixed-line penetration in 2012:

	For the year ended December 31, 2012
	Population(1)		Fixed-line penetration(2)			Cellular penetration(2)(3)			GDP per capita
	(millions)								(US$)(1)
Hong Kong		7.17		61.23	%		224.01	%		35,961
Singapore		5.37		38.56	%		151.43	%		49,936
South Korea		50.01		61.74	%		108.47	%		23,021
Malaysia		29.04		14.35	%		135.90	%		10,578
Thailand		64.46		9.91	%		132.97	%		5,848
Philippines		97.74		3.19	%		96.81	%		2,462
China		1,353.82		19.88	%		82.25	%		6,094
India		1,233.17		2.50	%		84.66	%		1,592
Indonesia		244,47		17.15	%		107.30	%		3,660

⁽¹⁾ Source: IMF 2012.

⁽²⁾ International Telecommunications Union (ITU 2012)

⁽³⁾ Cellular penetration is the number of cellular subscribers as a percentage of the population.

Cellular Services Market

The telecommunications industry in Indonesia has experienced significant growth in cellular telecommunications services in recent years. Based on International Telecommunications Union estimates, the total number of cellular subscribers in Indonesia increased from approximately 163.68 million as of December 31, 2009 to approximately 262.31 million as of December 31, 2012, representing an increase in cellular penetration from approximately 69.86% to approximately 107.30%.

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The following table contains information relating to the cellular telecommunications industry in Indonesia as of and for the periods indicated:

	As of December 31,
	2009			2010			2011			2012			Compound Annual Growth Rate 2009 –2012
	(in millions, except percentages)
Indonesian population(1)		243.30			237.64			241.03			244.47			1.43	%
Cellular subscribers(2)		163.68			211.29			236.80			262.31			17.02	%
Cellular penetration(2) (3)		69.86	%		88.91	%		98.24	%		107.30	%		15.38	%

⁽¹⁾ Source: IMF 2012.

⁽²⁾ International Telecommunications Union (ITU 2012)

⁽³⁾ Cellular penetration is the number of cellular subscribers as a percentage of the population.

The wireless market in Indonesia is currently dominated by three major GSM operators: Telkomsel, us and XL.As of December 31, 2012, these nationwide GSM operators collectively held almost 87% share of the Indonesian wireless market based upon our estimates and the public statements of such companies. As of the same date, Telkomsel was the largest national licensed cellular services provider in Indonesia, with approximately 142 million cellular subscribers (including mobile broadband) and more than 54% GSM market share. We were the second largest cellular provider with approximately 58.5 million cellular subscribers (including wireless broadband subscribers) and approximately 22.3% GSM market share as of the same date. XL, the third-largest provider, had approximately 45.8 million cellular subscribers and an approximately 17.5% GSM market share as of the same date. Starting in 2002, the Government issued new cellular licenses for using CDMA technology to Mobile-8 and fixed wireless access services licenses using CDMA technology to Telkom, Indosat, and Bakrie Telecom. Fixed wireless access service is dominated by Telkom under the brand Flexi with 17.9 million subscribers, as of December 31, 2012. There are other smaller players in Indonesian wireless market, such as Bakrie Telecom, HCPT, Axis, Smartfren and STI. Our fixed wireless access is 0.23 million subscribers under the brand StarOne. In part, wireless subscriber growth in Indonesia has been driven by the “calling party pays” system, the launch of prepaid service, as well as the introduction of SMS. The calling party pays system requires the originators of telephone calls to pay for calls. Based on international experience, countries that implement a calling party pays system typically experience higher wireless penetration rates because wireless subscribers are more likely to give out their telephone numbers and keep their handsets switched on.

Since its introduction in 1998, prepaid service has been popular in Indonesia, as in other Asian countries, because it permits customers to register for wireless service without undergoing a credit review. Prepaid service also gives customers more control over monthly expenditures. SMS has proven to be popular in Indonesia, particularly on the prepaid platform, as it provides a convenient and cost-efficient alternative to voice and e-mail communications. Competition in the Indonesian wireless services industry is based primarily on service quality, pricing, availability of data services and value-added features such as voice mail and text messaging.

International Long-Distance Market

International long-distance providers in Indonesia generate revenues from both inbound and outbound international long-distance traffic. The three international long-distance service providers are Telkom, which offers its “007” service, BakrieTelecom with its “009” IDD access code and us with our “001” and “008” access codes. Outgoing tariffs are based on rates set by the MOCIT while incoming tariffs are settled at the applicable accounting rates. Outgoing traffic is generated by fixed-line and mobile subscribers and delivered to the three international service providers directly through international gateways or indirectly through Telkom’s PSTN. Incoming international traffic is received at international gateways and either routed directly to its intended destination from the gateways or indirectly through Telkom’s PSTN network through which it is ultimately switched to its intended destination.

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In Indonesia, as in many emerging market countries, inbound communications traffic has exceeded outbound traffic as more developed countries generate a disproportionate amount of international long-distance traffic.

Historically, inter-operator traffic has been settled based on a concept of accounting rates which provide a common method of compensating the originating and terminating carrier. In general, international long-distance carriers negotiate per minute accounting rates on a route-by-route basis with a single rate used by all carriers on that route. During 2003, we began to replace the accounting rate system with a market termination rate-based pricing system with several of our largest foreign telecommunications counterparts, pursuant to which we agreed on asymmetric rates for incoming and outgoing calls. Under the market termination rate-based system, we are able to reduce the rates we pay for outgoing calls to most international destinations by a greater amount than the reduction in prices for calls from such destinations to Indonesia. While this pricing has reduced the prices we receive for incoming calls, we believe that, overall, it will improve our margins on international long-distance services, in particular for outgoing calls.

Competition from VoIP providers offering services, including budget calls such as “01017” provided by Telkom and “FlatCall 01016” provided by us, and prepaid calling cards has adversely affected and is expected to continue to adversely impact revenues from traditional international long-distance calling services. Moreover, the rise of VoIP providers on applications basis such as Skype, Yahoo, MSN, which offer free long distance communication services is adversely affecting revenues of the international gateway operators.

As the data communications infrastructure expands in Indonesia, demand for VoIP services may increase. VoIP uses data communications connections to transfer voice traffic over the Internet, which usually provides substantial cost savings to subscribers.

Although the Government has implemented a licensing system to limit the number of VoIP operators in Indonesia, the Government does not presently control the rates charged to end users of VoIP services. However, the Government has indicated that it intends to regulate such rates in the future, and it is expected that such regulations would limit VoIP tariffs to amounts that represent a maximum discount of approximately 40.0% from the then-current PSTN tariffs.

Data Communications Market

Historically, data services in Indonesia primarily consisted of narrow bandwidth leased line services, x.25 service, digital data network service and integrated service digital network service. Digital data network services are digital leased line services for data transmission. Integrated service digital network is a protocol which offers high capacity dial-in access for public networks. This protocol allows simultaneous handling of digitized voice and data traffic on the same digital links via integrated switches across the public network. x.25 is an open standard packet switching protocol that allows low- to medium-speed terminals to have either dial-in or permanent access to a network from a user’s premises and operate on a network. Charges for these services have been declining in recent years.

The rise of the Internet and the wider adoption of multimedia applications are expected to increase demand for sophisticated broadband data services. Operators in Indonesia are deploying advanced broadband networks to provide high-end data services such as frame relay, asynchronous transfer mode and Internet protocol service. In particular, virtual private network services, utilizing ATM, Internet protocol technologies, deploying Wi-Fi technology to reduce cellular network congestion may capture a larger portion of the market share as they provide a reliable and cost-effective alternative to private networks that rely on dedicated leased lines.

The MOCIT reopened the licensing for interconnection of internet service provision or the Network Access Point (NAP) after previously temporarily closing licensing since 2010. The MOCIT viewed that it was necessary to reopen this licensing to fulfill the high needs of the internet service provider (ISP) for bandwidth. As the number of data communication service providers are increasing, the pricing offered to the market becomes more competitive.

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Satellite Services Market

In recent years, competition in the Asia-Pacific satellite market has been intense. Companies in this business compete primarily on coverage power, product offerings and price. On September 6, 2005 through MD No.13/2005, the Government issued regulations requiring all telecommunications operators using satellites in connection with the provision of telecommunications services to possess both earth station and space station operating licenses. These operating licenses will be granted only to telecommunications operators with a landing right and on the condition that the radio frequency spectrum used does not cause harmful interference to existing operators. Foreign satellites are allowed to operate in Indonesia if Indonesian telecommunications operators have reciprocal operating rights in such satellite’s country of origin.

Industry Trends

We believe that the trends driving the telecommunications industry in Indonesia include:

Wireless Services

• Continued growth in wireless telecommunications. We expect that the wireless telecommunications industry and demand for wireless telecommunications services will continue to grow at a steady rate of around 6-7% as Indonesia develops and modernizes. A significant amount of this growth will still come from the “traditional core” markets.

• In addition to the growth in core markets, there are sizable emerging segments of strong growth, primarily in consumer broadband and mobile towers. Indosat believes that the competition for 3G services will be increasingly stringent as telecommunications operators began to move its network to the location of highly populated area. Currently, there are five telecom operators that hold licenses for 3G services, namely: Telkomsel, Hutchison, Natrindo, XL and Indosat. Indosat started to provide wireless broadband services using 3G platform in 2009, and as of December 31, 2012, has been providing 3G services in 152 cities across Indonesia.

• Data service will be the source of growth in the telecommunications industry with the higher contributions to total revenue. This is in line with the trend of the increase in people’s need for the data supported by cellular phones with internet capabilities and is also aligned with the plan of operators to focus on providing the infrastructure for data services.

• Significant growth in wireless penetration rates in regions outside Java. The relatively low wireless penetration rates in regions outside Java offer growth potential for wireless services providers in Indonesia as the population residing outside Java becomes more affluent.

• Growing use of value-added services. The growth in usage for value-added services such as OTT, IP Messaging, Cloud service are expected to increase in coming years, thereby helping to stabilize the decrease in usage rates and ARPU for voice services.

• Today, there are multiple mobile operators and many companies are aggressively pushing for subscribers and traffic to quickly gain scale and earn market share. We expect consolidation to continue, especially beyond the three large players (Telkomsel, Indosat, XL). One of the major threats to the market is further price deterioration. Service offering and innovation will become the major driver in the competition.

International Long-Distance Services

• Increased competition in international long-distance services. We expect further governmental deregulation and service quality improvements for VoIP services to increase competition for international long-distance services.

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• Moderate growth in call volumes. We believe continued domestic economic growth and increase in cellular voice usage will stimulate incremental volume growth for international long-distance services. In addition, the growth of VoIP services is also expected to increase demand for international long-distance services.

MIDI Services

• Increasing demand for advanced data communication services. We believe increasing Internet usage and the broadening market for multimedia applications will boost demand for sophisticated data communication services.

• Intensified competition in the ISP, Network Access Point (“NAP”) market. As a result of market liberalization and the continued issuance of new licenses, we anticipate competition in the ISP and NAP market will increase. We believe competition will be based primarily on price, quality of service and network coverage.

• Increasing demand for broadband services for both fixed and wireless. We believe the expected increase in customer preference and demand for high-speed Internet access will stimulate growth of domestic broadband service.

Regulation of the Indonesian Telecommunications Industry

The Government of the Republic of Indonesia, through the MOCIT, exercises both policy making and regulatory authority and is responsible for the implementation of policies that govern the telecommunications industry in Indonesia. The legal framework for the telecommunications industry is based on specific laws as well as government, ministerial and directorate general regulations that are promulgated from time to time. Prior to March 1998, the Ministry of Tourism, Post and Telecommunications regulated the telecommunications industry in Indonesia. Following the 1999 general elections and a change of government in 2001, the Ministry of Communication assumed responsibility for regulating the telecommunications industry. In February 2005, the authority to regulate the telecommunications industry was transferred from the Ministry of Communication to the MOCIT.

Through the MOCIT, the Government regulates telecommunications network operations and the provision of telecommunications services. In addition, the MOCIT regulates the radio frequency spectrum allocation for all telecommunications operators, each of whom must be licensed by the DGPT in order to utilize the radio frequency spectrum. In addition to radio frequency spectrum fees, the Government requires all telecommunications operators to pay a concession license fee equal to 0.5% of gross revenues, less interconnection expenses and provisions for bad debt, for each fiscal year, payable in equal quarterly installments.

The Government’s telecommunications reform policy is set out in its “Blueprint of the Indonesian Government’s Policy on Telecommunications” dated September 17, 1999. The policies, as stated in the blueprint, are to:

• increase the telecommunications sector’s performance;

• liberalize the telecommunications sector with a competitive structure by removing monopolistic controls;

• increase transparency and predictability of the regulatory framework;

• create opportunities for national telecommunications operators to form strategic alliances with foreign partners; and

• create business opportunities for small-and medium-size enterprises and facilitate new job opportunities.

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The recent regulatory reforms of the Indonesian telecommunications sector have their foundation in the Telecommunications Law.

Negative List

Presidential Regulation No. 36 of 2010 (the “Presidential Regulation”) sets out the industries and business fields in which foreign investment is prohibited, restricted or subject to the fulfillment of certain conditions as stipulated by the applicable Governmental authorities (the “Negative List”). The telecommunication industry is one of the industries set out in the Negative List, and foreign investment in the Indonesian telecommunication industry is accordingly subject to applicable restrictions and conditions. The Negative List is implemented by the BKPM. Restrictions applicable to the telecommunication industry are dependent upon the type of telecommunication business undertaken. Different limitation thresholds are applicable depending upon whether the business pertains to telecommunication networks or services. The limitation on foreign holdings in companies engaging in the telecommunication network business ranges from 49.0% – 65.0%, and the limitation on foreign shareholdings in Indonesian companies engaged in the provision of multimedia services (including data communication such as broadband wireless services), from 49.0% – 95.0%. Pursuant to Article 8 of the Presidential Regulation, the restrictions set forth therein shall not apply to investments that have been approved prior to the effectiveness of the Presidential Regulation pursuant to investment approval issued by BKPM unless such restrictions are more favorable to the investments. The Presidential Regulation does not change the limitation of foreign shareholding in our business.

The Telecommunications Law

The Telecommunications Law became effective on September 8, 2000 and provides key guidelines for industry reforms, including industry liberalization, facilitation of new entrants and enhanced competition. The Government implements such guidelines through Government regulations, ministerial decrees or regulations and other directives by Government bodies. The Telecommunications Law grants the Government, through the Ministry of Communication, the power to make policies, and to regulate, supervise and control the telecommunications industry. Until 2005, the Ministry of Communication, the former regulatory body of the telecommunications industry, had authority over the telecommunications sector in Indonesia and could issue regulations, policies and licenses, and formulate tariffs.

Government Regulation No. 52/2000 on Telecommunications Operations (the “Telecommunications Operations Regulation”) and Government Regulation No. 53/2000 on Radio Frequency Spectrum and Satellite Orbits, were the initial implementing regulations of the Telecommunications Law. The Ministry of Communication also promulgated various decrees, including (i) Ministry of Communication Decree No. KM 20 Year 2001, which was revoked by MOCIT Decree No. 01/PER/M.KOMINFO/01/2010 on Telecommunications Network Operation (the “Telecommunications Network Regulation”), (ii) Ministry of Communication Decree No. KM 21 Year 2001, which was amended by MOCIT Decree No. 31/PER/M.KOMINFO/09/2008 on Telecommunications Services Operation (the “Telecommunications Services Regulation”), and (iii) Ministry of Communication Decree No. KM 31 TAHUN 2003, which was revoked by MOCIT Decree No. 36/PER/M.KOMINFO/2008 and most recently amended by MOCIT Decree No. 01/PER/M.KOMINFO/02/2011 on the Establishment of an Indonesian Telecommunications Regulatory Body (the “Telecommunications Regulatory Body Regulation”).

Under MOCIT Regulation No. 17/PER/M.KOMINFO/11/2010 on Organization and Administration of the Ministry of Communications and Information, the duties and responsibilities of the DGPT were divided and assigned to the Directorate General of Post and Informatics Management and the Directorate General of Post and Informatics Resources and Facilities.

On July 11, 2003, the Ministry of Communication promulgated the Telecommunications Regulatory Body Regulation, pursuant to which it delegated its authority to regulate, supervise and control the Indonesian telecommunications sector to the ITRA, while maintaining the authority to formulate policies for the industry.

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Pursuant to MOCIT Decree No. 01/PER/M.KOMINFO/02/2011 on the Establishment of an Indonesian Telecommunications Regulatory Body, the ITRA consists of the Telecommunications Regulatory Committee and the Directorate General of Post and Telecommunication. The Telecommunications Regulatory Committee consists of nine members, six of which are from the community and three of which are from the Government. The position of chairman in the Telecommunications Regulatory Committee is held by the Director General of Telecommunication. Members of the Telecommunications Regulatory Committee, who hold government posts, consist of the Director General of Telecommunication, the Director General of Resources and Equipment of Post and Information and a Government representative as appointed by the MOCIT.

All members of the Telecommunications Regulatory Committee must:

(i) be Indonesian citizens;

(ii) not be older than 65 years old when he/she registers to be a member of the Telecommunications Regulatory Committee;

(iii) be physically and mentally healthy;

(iv) be an expert or a professional in telecommunications/information technology, law, economics or public policy related to telecommunications;

(v) have experiences in his/her area of expertise;

(vi) not have direct share ownership and/or have direct business relations with the telecommunication network providers and/or telecommunication services providers;

(vii) not serve as a director, commissioner or employee of any of the telecommunications operators;

(viii) not be a member of any political parties when he/she is determined as member of the Telecommunications Regulatory Committee; and

(ix) be willing not to become a member of any political parties during his/her tenure of service as member of the Telecommunications Regulatory Committee.

As part of its regulatory function, the ITRA shall prepare and determine regulations regarding telecommunications network operation and telecommunications services provision, which are (i) licensing for telecommunications networks operation and telecommunication services provision, (ii) standard operating performance, (iii) service quality standards, (iv) interconnection expenses/charges, and (v) telecommunications equipment standards. ITRA is authorized to monitor: (i) the implementation of operation performance; (ii) competition among services operators; and (iii) compliance with set industry standards. As part of its supervision function, the ITRA shall supervise the operating performance, business competition and utilization of telecommunications tools and devices in telecommunications network operation and telecommunications services provision. The controlling function of the ITRA consists of (i) settlement of any dispute resolution among network and service operators; (ii) the control of the use of telecommunications equipment and (iii) the implementation of service quality standards.

Classification of Telecommunications Providers

The Telecommunications Law classifies telecommunications providers into (i) network operators, (ii) services providers and (iii) special providers. Network operators are further classified as (i) fixed telecommunications network operators and (ii) mobile telecommunications network operators. Under the Telecommunications Law, licenses are required for each category of telecommunications operators. A telecommunications network operator is licensed to own and/or operate a telecommunications network. By contrast, a telecommunications service provider license allows a service provider to provide services, but does not require such provider to own a network. Special telecommunications licenses are required for providers of private telecommunications services or for purposes relating to broadcasting and national security interests. The

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Telecommunications Network Regulation provides that telecommunications network operating licenses must be issued by the MOCIT. The Telecommunications Services Regulation differentiates the basic telephony service operating license to be issued by the MOCIT from the other value-added telephony and some multimedia service operating licenses issued by the DGPT.

Termination of Exclusivity Rights

In 1995, Telkom was granted a monopoly to provide local fixed-line telecommunications services until December 31, 2010, and DLD services until December 31, 2005. Indosat and Satelindo (which has subsequently merged with Indosat) were granted a duopoly for provision of basic international telecommunications services until 2004.

As a consequence of the Telecommunications Law and MOCIT Decree No. 21 (2001), the Government terminated the exclusive rights of Telkom and the duopoly rights of Indosat and Satelindo. The Government instead adopted a duopoly policy with Telkom and us competing as full network and service providers.

The market for provision of IDD services was liberalized in August 2003 with the termination of Indosat’s and Satelindo’s exclusive rights. We began operating fixed line services in 2002 and fixed wireless access and DLD services in 2003 after receiving our DLD services license. Telkom subsequently received an IDD services license and began offering IDD services under the international access code “007” in 2004 in direct competition with us.

In an attempt to liberalize DLD services, the Government issued regulations requiring each provider of DLD services to implement a three-digit access code to be dialed by customers making DLD calls. On April 1, 2005, the MOCIT announced that three-digit access codes for DLD calls will be implemented gradually within five years of such date and that it would assign us the “011” DLD access code for five major cities, including Jakarta, and allow us to progressively expand to all other area codes within five years. Telkom was assigned “017” as its DLD access code. On December 3, 2007, MOCIT promulgated regulation No. 43/P/M.KOMINFO/12/2007, amended subsequently, which delayed the implementation of the DLD access code until April 3, 2008 and also set forth a schedule on implementing “01X” long distance access. In January 2007, the Government implemented new interconnection regulations and a five-digit access code system for VoIP services. In April 2008, these access codes were implemented in Balikpapan. Balikpapan residents are able to choose from options “0”, “01016” or “01017” to connect their long distance calls. Whether the DLD access code will be implemented in other cities will be based on a study by the Indonesian Telecommunication Regulatory Board of Indosat and Telkom’s fixed phone service customers.

Tariff for Fixed and Cellular Services

The MOCIT is responsible for setting and adjusting tariff formulas. In 2006, the MOCIT promulgated a number of ministerial decrees/regulations, such as (i) No. 8/Per/M.Kominfo/02/2006 on cost-based interconnection, (ii) No.1/PER/M.Kominfo/1/2006, No. 2/PER/M.Kominfo/1/2006, No. 4/Per/M.Kominfo/1/2006, No. 7/PER/M.Kominfo/2/2006, and No. 29/PER/M.Kominfo/3/2006 on 3G Service Provision, (iii) No. 5/Per/M.Kominfo/1/2006 on Telecommunication Kiosk, (iv) No. 09/PER/M.Kominfo/02/2006, which was replaced by No. 15/Per/M.Kominfo/4/2008 on Fixed Telecommunications Tariff, (v) No. 11/Per/M.Kominfo/02/2006 on Lawful Interception, (vi) No. 12 Per/M.Kominfo/02/2006, which was replaced by MOCIT Regulation No. 09/PER/M.Kominfo/09/2008 on Cellular Tariffs, and (vii) MOCIT Decree No. 181/2006 on Migration of fixed wireless access Network to 800MHz Allocated Frequency.

In 2007, the MOCIT promulgated new ministerial decrees, including No. 162/2007 on the 800 MHz radio frequency channel allocation for operating FWA-CDMA and cellular networks (amendment of MOCIT decree No. 181/2006), MOCIT Regulation No. 05/PER/M.Kominfo/2/2007 on Guidance For Tariff Implementation on USO Contributions, No. 03/PER/M.KOMINFO/1/2007 on Leased Circuits, No. 11/Per/M.Kominfo/4/2007 (now

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No. 38/2007) on the implementation of infrastructure development using USO funds and MOCIT Regulation No. 43/P/M.Kominfo/12/2007 on changes to all four FTPs (Fundamental Technical Plans)—2000, which delayed the date of implementation of the long distance access code in Balikpapan to April 3, 2008.

In April 2008, the MOCIT promulgated ministerial regulation No. 9/PER/M.Kominfo/04/2008 on tariff determination for cellular services, which determines the type and structure of cellular retail tariffs based on a formula, and No. 15/Per/M.Kominfo/04/2008 on tariff determination for basic telephony services through fixed networks. The tariff covers basic telephony, roaming and multimedia services. The tariff for basic telephony services includes activation fees, monthly fees, usage fees and value-added service fees. Ceiling tariffs for retail cellular services differ between operators due to the use of different calculation methods. Based on the new regulation, the tariff value of basic telephony services through fixed networks and SMS as an additional facility must be calculated by the operator using a cost-based formula with the calculation results stated as ceiling tariffs. The Government is expected to change the fixed telecommunications tariff formulations in the near future. The Government regulates the tariff formulations for Leased Circuit businesses through MOCIT Regulation No. 03/PER/M.Kominfo/1/2007.

In 2012, in connection with the utilization of 2.1GHz radio frequency band for cellular services, MOCIT promulgated a number of ministerial regulations, such as (i) No. 31 of 2012 (as amendment to the MOCIT Regulation No 1/PER/M.Kominfo/1/2006), (ii) No. 32 of 2012 (as amendment to the MOCIT Regulation No. 7/PER/M.Kominfo/2/2006), and (iii) MOCIT Regulation No. 43 of 2012.

Consumer Protection

Under the Telecommunications Law, each operator must meet certain service levels. In the event of losses caused by a telecommunication operator’s fault or negligence, the aggrieved party may file claims for damages against the telecommunications operator. MOCIT Regulations on service level standards can be found in: (i) MOCIT Regulation No. 11/Per/M.Kominfo/09/2008 dated April 21, 2008, which was later replaced by MOCIT Regulation No. 24 Year 2012 dated September 7, 2012 on the Service Level for Basic Telephony Service in Local Fixed Network, (ii) MOCIT Regulation No. 12/Per/M.Kominfo/09/2008 dated April 21, 2008, which was later replaced by MOCIT Regulation No. 28 Year 2012 dated September 7, 2012 on the Service Level for Basic Telephony Service in the Cellular Mobile Network, and (iii) MOCIT Regulation No. 13/Per/M.Kominfo/4/2008 on the Service Level for Basic Telephony Service in Fixed Networks with Limited Mobility.

Public Telephone

Based on MOCIT Regulation No. 01/PER/M.KOMINFO/01/2010 on Telecommunication Network Operation, we have an obligation to provide public telephone lines consisting of 3.0% of the installed network capacity for fixed telecommunications networks that we build.

Universal Service Obligations

Under the Telecommunications Law, all telecommunications network and service operators are bound by Universal Service Obligations (“USO”), which require participation by all operators in the provision of telecommunications facilities and infrastructure in MOCIT USO-designated areas. The USO is a measure intended to provide telecommunication access and/or services to areas that previously lacked access or service.

Pursuant to Government Regulation No. 7/2009 and MOCIT Regulation No. 05/PER/M.Kominfo/2/2007, the Government determined the USO tariff to be 1.25% of an amount equal to gross revenues less interconnection expenses paid to other telecommunication carriers and bad debts.

In March 2004, the MOCIT promulgated Decree No. KM 34 year 2004, which included specifications for USO implementation program zones, technical requirements, operation, financing and monitoring (“KM 34/2004”). KM 34/2004 has been replaced with MOCIT Regulation No. 11/Per/M.Kominfo/4/2007, which, in

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turn, has been amended by MOCIT Regulation No. 38/Per/M.Kominfo/09/2007, which regulates the procedure for utilizing USO funds to develop network and telecommunication services in areas with no telecommunication network. In 2008, the Government promulgated MOCIT Regulation No. 32/Per/M.Kominfo/10/2008 (as amended by MOCIT Regulation No. 03/Per/M.Kominfo/02/2010), which replaced MOCIT Regulation No. 11/Per/M.Kominfo/4/2007. According to this decree, a telecommunication network provider which has won tender to provide telecommunication services in areas with no telecommunication network (a “USO Zone”) will use the funds collected through the USO tariff to provide telecommunication access and services, including telephony service, SMS and internet access. While providing such telecommunication service in USO Zones, a telecommunications provider has the right to: (i) use technology, (ii) enter into interconnection arrangement with other telecommunication providers, and (iii) use a frequency spectrum of 2.390-2.400 MHz.

Interconnection Arrangements

In accordance with the express prohibitions in the Telecommunications Law on activities that may create monopolistic practices and unfair business competition, the Telecommunications Law requires network providers to allow users on one network to access users or services on other networks by paying fees agreed upon by each network operator. The Telecommunications Operations Regulation provides that interconnection charges between two or more network operators shall be transparent, mutually agreed on and fair.

On February 8, 2006, through MOCIT Regulation No. 8/PER/M.KOMINFO/02/2006, the Government issued new interconnection provisions setting out a cost-based interconnection regime, which replaced the previous revenue-sharing interconnection regime. As required under this regulation, the Government set a formula as guidance for calculating the interconnection cost for every operator. The results of the calculation are evaluated and used by the Government as a reference point.

Operators must include the result of the government’s formula in all RIO proposals, together with the proposals for call scenarios, traffic routing, point of interconnection, procedure for requesting and providing interconnection, and other matters. RIO proposals must also disclose the type of interconnection services and tariffs charged for each service offered. Interconnection access providers must implement a queuing system on a First-in-First-Serve basis. Additionally, the interconnection mechanism must also be transparent and without any discrimination.

Dominant IDD telecommunications operators and non-dominant operators submitted RIOs in September 2006. The RIOs of dominant operators were approved by the Government in October 2006 and the implementation of the new regime began in January 2007 through bilateral agreements among operators. Based on current regulations, RIOs can be amended every year. On April 11, 2008, the Government approved RIO proposals from dominant operators to replace the previous RIOs.

The Government’s National Fundamental Technical Plan sets out technical requirements for routing plans, numbering, and technical aspects for interconnection of the networks of telecommunications operators, which allows all network operators to interconnect directly without rather than through the PSTN.

Fee Regime

Under the Telecommunications Law, in conjunction with other regulations, each telecommunications operator is required to pay the Government a license concession fee, a frequency fee and a satellite orbit fee, as applicable. The concession license fee for each telecommunications operator is approximately 0.5% of gross revenues, consisting of revenues from leasing of networks, interconnection charges, activation of new customers, usage charges, roaming charges and SIM card charges. In addition to these fees, the Government requires all telecommunications operators to pay a USO tariff equal to 1.25% of gross revenues less interconnection expenses and provisions for bad debt for each fiscal year, payable in equal quarterly installments. The frequency fee for CDMA 800 MHz, GSM 900 MHz, DCS 1800 MHz and 3G 2100 MHz is based on its bandwidth allocated frequency. In addition, certain users must pre-pay a one-time satellite orbital connection fee while their satellites are in operation.

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Prepaid Cellular Subscriber Registration

On October 28, 2005, the Government began requiring telecommunications operators to register prepaid cellular subscribers. The regulations specified that such registration process must be completed no later than April 28, 2006, which deadline was later extended to September 28, 2006. We instituted procedures in order to complete the required registration at the initial point of sale and finalized the mandatory registrations by the deadline through the cancellation of 1.3 million unregistered accounts. As stated in MOCIT Regulation No. 23/PER/M.KOMINFO/10/2005 on Registration of Telecommunication Service Customers, all operators have an ongoing duty to register their new prepaid cellular subscribers.

Satellite Regulation

The international satellite industry is highly regulated. In addition to domestic licensing and regulation in Indonesia, both the in-orbit placement and operation of our satellites are subject to registration with the Radio Regulation Bureau. Following the World Radiocommunication Conference, which took place from October 22, 2007 to November 16, 2007, some of Indonesia’s satellite characteristics at orbital slots 113E.L. and 150.5E.L. have been reinstated by the International Telecommunication Union. To facilitate utilization of the 150.5E.L. orbital slot, the DGPT promulgated Decree No. 79/DIRJEN/2009 on March 12, 2009, which created a working group consisting of the DGPT, Telkom and us. In conjunction, on March 16, 2009, the MOCIT issued Letter No. 110/M. Kominfo/03/2009 agreeing to work with us and Telkom to facilitate prompt utilization of the orbital slot.

On December 17, 2011, the MOCIT issued Letter No. 460/M.KOMINFO/12/2011 approving the utilization of the Indonesian satellite filings for the 150.5E.L. Orbital Slot by Indosat as a closed fixed network provider.

Frequency of Fixed Wireless Access-CDMA

Through MOCIT Decree No. 181/2006, as amended, the Government reallocated 800 MHz frequency to fixed wireless access operators as part of a frequency clearance for 3G services (IMT-2000) to Bakrie Telecom, Telkom, Mobile-8, and us. We had previously been granted 5 MHz in uplink and downlink in the following frequencies: uplink frequency 1880-1885 MHz and downlink 1960-1965 MHz in Jakarta, Banten and West Java and uplink and downlink frequency 830-835 MHz and downlink 875-880 MHz in other parts of Indonesia. According to the new regulation, we have been granted 2x1.23 MHz in frequency (uplink 842.055-844.515 MHz and downlink 887.055-889.515 MHz) nationwide. The migration of the frequency was successfully implemented as of December 31, 2007.

Tower Sharing Obligation

On March 17, 2008, the MOCIT issued MOCIT Regulation No. 02/Per/M. Kominfo/3/2008 on the Guidelines on Construction and Utilization of Sharing Telecommunication Towers (“Tower Decree”). Under the Tower Decree, the construction of telecommunications towers requires permits from the relevant governmental institution, while the local government determines the placement and location at which telecommunications towers can be constructed. In addition, telecommunications providers that own telecommunication towers and tower owners are obligated to allow other telecommunication operators to utilize their telecommunication towers (other than the tower used for its main network), without any discrimination.

Moreover, on March 30, 2009 the Minister of Home Affairs, the Minister of Public Works, the MOCIT and the Head of the Indonesia Investment Coordinating Board promulgated the Joint Regulation No. 19/Per/M. Kominfo/03/2009 on the Guidelines on Construction and Utilization of Sharing Telecommunication Towers. (the “Joint Regulation”) requires a tower construction permit for every tower built and used for telecommunications services demonstrating compliance with certain technical specifications. However, through the enactment of this Joint Regulation, the Tower Decree prevails as long as any provision contemplated therein is not contrary with the provisions regulated under the Joint Regulation.

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Other than the Joint Regulation and the Tower Decree, several regional authorities have implemented regulations limiting the number and location of telecommunication towers and require operators to share in the utilization of telecommunications towers.

On September 9, 2009, parliament passed Act No. 28 Year 2009 regarding local and regional taxes which took effect on January 1, 2010 and which imposes a new kind of tax that may add regulatory costs to the operation of our towers. The new tax is limited to a maximum of 2% of the tax object’s selling value, which refers to the resale value of the tower determined by the relevant tax authorities. The implementation of the new tax will be largely influenced by regional government policies.

Item 4A: UNRESOLVED STAFF COMMENTS

Not applicable.

Item 5: OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following discussion should be read in conjunction with our audited consolidated financial statements and the related notes thereto as of December 31, 2010, 2011 and 2012. The audited consolidated financial statements have been prepared in accordance with IFRS. Certain amounts (including percentage amounts) have been rounded for convenience. This discussion contains forward-looking statements that reflect our current views with respect to future events and our future financial performance. These statements involve risks and uncertainties, and our actual results may differ materially from those anticipated in these forward-looking statements as a result of particular factors such as those set forth under “Forward-Looking Statements” and Item 3. “Key Information—Risk Factors” and elsewhere in this report.

A. OPERATING RESULTS

We are a fully integrated Indonesian telecommunications network and service provider and provide a full complement of national and international telecommunications services in Indonesia. As of December 31, 2012, we were the second-largest cellular operator in Indonesia in terms of number of cellular subscribers based on available market data. We provide MIDI services to Indonesian and regional corporate and retail customers as well as international long-distance services in Indonesia.

Factors Affecting our Results of Operations and Financial Condition

Our results of operations and financial condition have been affected and will continue to be affected by a number of factors, including the following:

Cellular Subscriber Base and Usage Patterns

Our number of cellular subscribers and their usage of our cellular services directly affects our cellular operating revenues as well as our operating expenses, including interconnection expenses and depreciation and amortization expenses. In order to meet increasing demand for our services, we may be required to expand our cellular network coverage and capacity, which requires additional capital expenditures. Increases in our capital expenditures affects our cash flows, interest expense and depreciation expense.

We are the second-largest cellular provider in Indonesia, as measured by the number of cellular subscribers, with 58.5 million subscribers (including wireless broadband subscribers) as of December 31, 2012.

In 2009, we implemented a strategy to minimize lower-value “calling card” type subscribers, whom we believed were short-term subscribers and were not likely to recharge their SIM cards. Our total subscribers increased by approximately 16.8% from 44.3 million in 2010 to 51.7 million in 2011 and by approximately 13.1% to 58.5 million in 2012.

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Competition

We face intense competition in all of our business segments. Among other things, such competition affects the tariffs we are able to charge for our services, demand for and usage of our services and our operating margins and results of operations.

The cellular services business in Indonesia has become increasingly competitive, as demonstrated by the aggressive subscriber acquisition programs of Indonesian cellular operators in recent years. Competition in the cellular communications industry has historically been based on network coverage, technical quality, price, the availability of data services and special features, and the quality and responsiveness of customer service. Commencing in 2007, competition became more focused on pricing as many operators, including ourselves, began to offer significant promotional discounts to attract subscribers, which we believe to have resulted in high customer churn rates. The high Indonesian customer churn rate can be attributed to the high price sensitivity of subscribers, especially prepaid users and the low switching costs for postpaid subscribers, due to limited contractual lock-ins. Beginning in late 2009, we believe that the market focus on pricing as the key determinant in customers’ product selection has declined and that subscribers are again focused on the historical drivers of network coverage, technical quality, price, the availability of data services and special features.

Based on our internal estimates, the three major providers of wireless services in Indonesia, Telkomsel, us and XL, accounted for almost 94% of the wireless subscriber base in Indonesia in 2012. We compete with Telkomsel and XL primarily on the basis of network coverage, quality of service and price. We believe that the size of our subscriber base provides us with a significant competitive advantage over the smaller cellular providers, since we have a larger base of “on net” subscribers and we are able to provide more attractive pricing for on net calls, since we do not pay any interconnection charges to third parties.

Competition in our MIDI services has also continued to increase. During the last few years, competition among data communications service providers has intensified principally due to the issuance of new licenses after the deregulation of the Indonesian telecommunications industry. In addition, our satellite operations, which primarily consist of leasing transponders to broadcasters and telecommunications operators of VSAT, cellular and IDD services and ISPs, face competition from foreign and domestic service providers serving the same customer base.

We are no longer the only authorized provider of traditional IDD (i.e., non-VoIP) call services in Indonesia. The Government may issue more licenses for IDD services to other telecommunications operators, which will increase competition in our fixed telecommunications operations.

We expect competition in our three business segments to continue to be intense. Competition has had, and is expected to have, an impact on our results of operations and financial condition.

Tariff and Pricing Levels

Under existing regulations, the MOCIT establishes a tariff formula that determines the maximum amounts that operators may charge for cellular and fixed telecommunications services. However, the MOCIT allows cellular and fixed telecommunications operators, including us, to offer promotional packages that offer prices lower than the ceiling tariff determined by MOCIT in accordance with the tariff formula. We currently price our cellular services under a variety of ongoing promotional programs intended to attract new subscribers, stimulate demand and improve our competitive position. Any changes in our pricing structure, either as a result of Government tariff policies or in response to competition, could affect our revenues, operating results and financial condition.

For example, on December 12, 2011, the Government, through the ITRA, issued letter No.262/BRTI/XII/2011, under which tariffs for SMS changed from a “sender-keeps all” scheme to a cost-based scheme, effective June 1, 2012. Previously, the tariff for SMS (including SMS and value-added SMS) was based on a “sender-keeps-all” scheme, under which we earned revenues whenever one of our cellular subscribers sent an SMS, but not when a customer of another telecommunications operator sent an SMS to one of our cellular subscribers.

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Under the current cost-based scheme, we record revenues from interconnection fees payable by other operators whenever one of our cellular subscribers receives an SMS from a subscriber on another network. If one of our subscribers sends an SMS to a recipient on another network (an “off-network SMS”), we record revenues for the SMS charge payable by our subscriber and we record expenses for interconnection charges payable to the operator of the other network.

We expect to recoup any interconnection charges we incur when one of our subscribers sends an off-network SMS through charging higher fees to such subscribers for sending off-network SMSs, while maintaining our current pricing practices with respect to SMSs that terminate on our network. We anticipate that the increase in off-network SMS fees we charge our subscribers may cause a shift in SMS traffic from off-network traffic to on-network traffic, which in turn will reduce the amount of interconnection charges we will incur. We cannot assure you that we will be able to fully recoup all interconnection charges we may be required to pay, or that the revenue recorded from interconnection fees we receive from other operators will fully offset the any interconnection charges we may be required to pay, and as a result, we could experience a decrease in our operating revenues from cellular services.

The Indonesian Economy

We believe that the growth in the Indonesian telecommunications industry has been driven in part by recent growth of the Indonesian economy, and that demand for such services should continue, as the Indonesian economy continues to develop and modernize. Our performance and the quality and growth of our customer base and service offerings are necessarily dependent on the health of the overall Indonesian economy.

Tower Sale Transaction

On February 7, 2012, the Company entered into an Asset Purchase Agreement with Tower Bersama, whereby the Company agreed to sell 2,500 of its telecommunication towers to Tower Bersama for a total consideration of US$541.5 million, consisting of upfront consideration with a fair value of US$429.4 million and a maximum potential deferred payment of US$112.5 million. The upfront payment includes cash and newly issued TBIG shares of not less than 5% of the increase in TBIG’s capital stock (upon the rights issue of TBIG). Based on the agreement, the Company also agreed to lease back the spaces in the 2,500 telecommunication towers for a 10-year period with a fixed monthly lease rate of US$1,300 per tower.

On August 2, 2012, the Company and Tower Bersama closed the sale and leaseback transaction of 2,500 telecommunication towers. The consideration paid at closing was US$429.4 million consisting of cash of US$326.3 million and 5% share ownership in TBIG, which has a fair value of US$103.1 million.

The total consideration received at closing of US$429.4 million (equivalent to approximately Rp4,070,187 million) is allocated for the sale of property and equipment amounting to Rp3,870,600 million and the remainder is allocated for prepaid land lease and existing tower lease contracts from the 2,500 towers. The total carrying amount of the separately identifiable components of the transaction as of the closing date amounted to Rp1,534,494 million, which includes the carrying amount of the property and equipment sold as of the closing date of the transaction that amounted to Rp1,372,674 million. As of the closing date, the Company recorded the excess of the selling price over the carrying amounts amounting to Rp2,535,693 million (including the Rp2,497,926 million from the sale of property and equipments) as “Gain on Sale of Towers” of Rp1,125,192 million, and “Deferred Gain on Sales and Leaseback” of Rp1,410,501 million. As of December 31, 2012, the Company recorded a total gain on the sale of the towers amounting to Rp1,183,963 million (US$122.4 million) as “Gain on Tower Sale”. The sale and leaseback transaction has been accounted for as resulting in a finance lease. Rp58,771 million (US$6.1 million) of the deferred gain was amortized to the income statement in 2012. As of December 31, 2012, the balance of the deferred gain from the sale and leaseback transaction amounted to Rp1,351,730.0 million. The deferred gain will be amortized over the term of the lease period of 10 years.

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Capital Expenditures

The delivery of telecommunications services is capital intensive. In order to be competitive, we must continually expand, modernize and update our technology, which involves substantial capital investment. For the years ended December 31, 2010, 2011 and 2012, our actual consolidated capital expenditures totaled Rp5,986.0 billion, Rp6,519.8 billion and Rp8,407.5 billion (US$869.4 million), respectively. During 2013, we intend to allocate approximately Rp8,627.5 billion (US$898.7 million) for new capital expenditures, which, taken together with estimated actual capital expenditures expended for 2013 for capital expenditure commitments in prior periods, will result in approximately Rp11,358.7 billion (US$1,174.6 million) total actual capital expenditures for 2013, which we intend to use for the development of fixed assets in our cellular, fixed data and fixed telecommunications business lines. See “—Capital Expenditures.”

Historically, we have funded our capital expenditures through internal resources and cash flow from operations, as well as debt financings through bank loans and the capital markets. We expect to continue to finance our capital expenditures through such sources. In addition, we also applied a portion of the cash proceeds from the Tower Sale Transaction completed in 2012 towards funding our capital expenditures. We face liquidity risk if certain events occur, including but not limited to, slower than expected growth in the Indonesian economy, downgrading of our debt ratings or deterioration of our financial performance or financial ratios. If we cannot raise the amounts needed to support our planned capital expenditures for 2013, we may be unable to improve or expand our cellular telecommunications infrastructure or update our other technology to the extent necessary to remain competitive in the Indonesian telecommunications market, which would affect our financial condition, results of operations and prospects.

In addition, unexpected changes in technology, demand for increased network capacity from our subscribers and responses to the operations and product innovation of our competitors may require us to increase our capital expenditures, which could affect our revenues, operating results and financial condition.

Foreign Exchange Volatility

The Indonesian rupiah has appreciated considerably over the last decade from its low point of approximately Rp17,000 per U.S. dollar during the Asian financial crisis. During the period between January 1, 2010 through December 31, 2012, the Indonesian rupiah/U.S. dollar exchange rate ranged from a low of Rp9,707 per U.S. dollar to a high of Rp8,460 per U.S. dollar, and, during the year 2012, the Indonesian rupiah/U.S. dollar exchange rate ranged from a low of Rp9,707 per U.S. dollar to a high of Rp8,892 per U.S. dollar. The prevailing Bank Indonesia exchange rate was Rp9,670 U.S. dollar on December 31, 2012. While a substantial portion of our operating revenues is denominated in Indonesian rupiah, a portion of our operating revenues is U.S. dollar-denominated. In addition, a substantial portion of our borrowings, capital expenditures and operating expenses, including interest payments on our Guaranteed Notes due 2020 and ING/DBS Syndicated Loan Facility, are denominated in currencies other than Indonesian rupiah, principally the U.S. dollar. As of December 31, 2012, 50.0% of our borrowings were denominated in Indonesian rupiah, with the balance in U.S. dollars. A depreciation in the value of the Indonesian rupiah against the U.S. dollar affects our financial condition and results of operations because, among other things, the Indonesia rupiah value of expenses payable in U.S. dollars will increase by the same factor, thereby requiring us to convert more Indonesian rupiah to pay our U.S. dollar obligations. Conversely, an appreciation in the value of the Indonesian rupiah against the U.S. dollar affects our financial condition and results of operations because, among other things, it causes a decrease in revenue from foreign carriers for inbound international calls, roaming by foreign carriers’ subscribers in Indonesia and operating revenues from our MIDI services and satellite operations. For the year ended December 31, 2010, we recorded a gain on foreign exchange-net of Rp318.3 billion; for the year ended December 31, 2011, we recorded a loss on foreign exchange-net of Rp54.2 billion; and for the year ended December 31, 2012, we recorded a loss on foreign exchange-net of Rp744.6 billion (US$77.0 million). In addition, certain of our monetary assets and liabilities are subject to foreign currency exposure. These monetary assets primarily consist of cash, cash equivalents and accounts receivable from foreign telecommunications carriers, as well as our foreign currency-

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denominated accounts receivable. Our monetary liabilities subject to foreign currency exposure consist of procurements payable, loans payable and bonds payable which were incurred for capital expenditure-related liabilities. The level of our net monetary assets is influenced by the extent to which incoming calls exceed outgoing calls in our IDD business and our foreign currency denominated source of revenues. In an effort to manage our foreign currency exposure and lower our overall funding costs, we have entered into several foreign currency swap and forward contracts. We cannot assure you that we will be able to manage our exchange rate risk successfully in the future or that we will not continue to be adversely affected by our exposure to exchange rate risk. Our exposure to foreign exchange fluctuations, particularly as against the U.S. dollar, may increase if we incur additional U.S. dollar-denominated debt to finance our capital expenditure plans.

In February and March 2009, we obtained consents to amendments to certain of our debt instruments and agreements in order to provide additional flexibility in our debt to equity, debt to EBITDA and EBITDA to interest payment ratio maintenance covenants. While we believe that such amendments will provide us with sufficient cushion in the event of volatility in the Indonesian rupiah / U.S. dollar exchange rates, we cannot assure you that further and more intense volatility than that experienced in the past 12 months will not occur, which could cause us to breach our financial covenants. See “—Liquidity and Capital Resources—Cash Flows—Principal Indebtedness.”

Overview of Operations

Operating Revenues

We generate operating revenues primarily by providing cellular, MIDI and fixed telecommunications (principally international long-distance) services. The following table sets forth the breakdown of our total operating revenues and the percentage contribution of each of our services to our total operating revenues for each of the periods indicated:

	For the years ended December 31,
	2010				2011				2012
	Rp (Restated)		%		Rp (Restated)		%		Rp		US$		%
	(Rp in billions, US$ in millions, except percentages)
Cellular services		15,882.1		80.4		16,587.4		80.8		18,489.3		1,912.0		82.5
MIDI services		2,591.8		13.1		2,694.2		13.1		2,909.8		300.9		13.0
Fixed telecommunications		1,278.2		6.5		1,250.0		6.1		1,021.5		105.6		4.5
Total operating revenues		19,752.1		100.0		20,531.6		100.0		22,420.6		2,318.5		100.0

The principal drivers of our operating revenues for all of our services are our subscriber base, usage levels and the rates for services. Usage levels for our services are affected by several factors, including continued growth in demand for telecommunications services in Indonesia, the continued development of the Indonesian economy, and competition.

Cellular Services. We derive our cellular services operating revenues from charges for cellular usage, value-added features, monthly subscriptions, sales of wireless broadband modems and cellular handsets, and connection fees, as well as interconnection charges from other telecommunications providers and tower leasing fees.

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The following table sets forth the components of our cellular services operating revenues for the periods indicated:

	For the years ended December 31,
	2010					2011					2012
	Rp (Restated)			%		Rp (Restated)			%		Rp			US$			%
	(Rp in billions, US$ in millions, except percentages)
Usage charges		7,944.0			50.0		8,203.8			49.5		8,629.7			892.4			46.7
Value-added services		7,106.8			44.7		7,502.1			45.2		7,868.4			813.7			42.6
Interconnection revenues		1,252.7			7.9		1,182.4			7.1		2,175.0			224.9			11.8
Tower leasing		252.0			1.6		419.7			2.5		504.9			52.2			2.7
Monthly subscription charges		133.0			0.8		134.0			0.8		136.4			14.1			0.7
Connection fee		8.1			0.1		14.2			0.1		12.6			1.3			0.0
Sale of Blackberry handsets		35.0			0.2		1.7			0.0		0.2			0.0			0.0
Others		184.1			1.2		245.9			1.5		184.4			19.1			1.0
Up front discount and customer loyalty program		(1,033.6	)		–6.5		(1,116.4	)		–6.7		(1,022.3	)		(105.7	)		–5.5
Total cellular services operating revenues		15,882.1			100.0		16,587.4			100.0		18,489.3			1,912.0			100.0

A substantial proportion of our cellular subscribers, approximately 98.9% as of December 31, 2012, are prepaid subscribers. We offer a variety of value-added services to our prepaid subscribers, which have increased cellular services operating revenues from value-added services, particularly SMS and value-added SMS, which allows subscribers to access a variety of information, such as politics, sports and business news. Revenues from value-added services (including SMS) represented 44.7%, 45.2% and 42.6% of our cellular services operating revenues for the years ended December 31, 2010, 2011 and 2012 respectively. We expect the revenues derived from SMS and other value-added services to increase, which we believe will be primarily driven by our wireless broadband services, the popularity of social networking sites and the development of other popular online content.

We recognize cellular revenues as follows:

• cellular revenues arising from airtime and roaming calls are recognized based on the duration of successful calls made through our cellular network;

• for post-paid subscribers, monthly service fees are recognized as the service is rendered;

• for prepaid subscribers, the activation component of starter package sales is deferred and recognized as revenue over the expected average period of the customer relationship. Sales of initial/reload vouchers are recorded as deferred revenue and recognized as revenue upon usage of the airtime or upon expiration of the airtime;

• sales of wireless broadband modems and cellular handsets are recognized upon delivery to the customers;

• revenues from wireless broadband data communications are recognized based on the duration of usage or fixed monthly charges depending on the arrangement with the customers;

• cellular revenues are presented on a net basis, after compensation to value added service providers;

• revenues from network interconnection with other domestic and international telecommunications carriers are recognized monthly on the basis of the actual recorded traffic for the month.

MIDI Services. Our MIDI services operating revenues consist primarily of revenues from (i) Internet services provided by us, Indosat Mega Media (“IM2”) and PT Aplikanusa Lintasarta (“Lintasarta”), (ii) IP VPN services, high-speed leased lines and frame relay services provided by us and Lintasarta, (iii) digital data network services provided by Lintasarta, (iv) satellite services, and (v) World link and Direct link.

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We deferred installation service revenues for Internet services, frame net, World link and Direct line services, upon the completion of the installation or connection of equipment, and recognized as revenue over the expected customer relationship. We recognize revenues from monthly service fees and other MIDI services as the services are rendered. Revenues from usage charges for Internet services are recognized monthly based on the duration of Internet usage or based on the fixed amount of charges depending on the arrangement with the customers. We record satellite revenues on a straight-line basis over the lease period for the transponder. Monthly rent for satellite transponder capacity is based primarily on leased capacity.

A substantial portion of our MIDI services operating revenues is denominated in U.S. dollars and is thus affected by fluctuations in the Indonesian rupiah/U.S. dollar exchange rate. Our MIDI services operating revenues have also been affected recently by a number of other factors, including competition from domestic and international providers, declining tariffs and a migration from legacy services to IP-based services. We expect such trends to continue but believe that the effects on our operating revenues will be offset by increased volume of services leased by our corporate customers and increased demand for our customized services.

Fixed Telecommunications Services. Fixed telecommunications services include international long-distance, fixed wireless access services, and fixed line services. International long-distance services, which are comprised of our “001” and “008” IDD services, “Flatcall 01016” as well as operator-assisted and value-added services, represented 78.5% of our operating revenues from fixed telecommunications services for the year ended December 31, 2012. Fixed wireless access and fixed line services represented the remaining balance.

International Long-distance Services. Our international long-distance services operating revenues have two primary sources, incoming call revenues and outgoing call revenues. We have negotiated volume commitments and accounting rates with foreign telecommunications operators or have implemented a market termination rate-based pricing system, and receive net settlement payments from such carriers. Net settlement payments and accounting rates are generally denominated and paid in currencies other than the Indonesian rupiah, principally the U.S. dollar; accordingly, incoming call revenues are affected by fluctuations in exchange rates between the Indonesian rupiah and other currencies.

Fixed Wireless Access Services. As of December 31, 2012, we had 174,339 fixed wireless access subscribers in 77 cities in Indonesia. By the end of 2010, we expanded our fixed wireless access services to several additional cities in order to create capacity for approximately four million fixed wireless access subscribers.

Fixed wireless access revenues arising from usage charges are recognized based on the duration of successful calls made through our fixed network. For postpaid subscribers, monthly service fees are recognized as the service is provided. For prepaid subscribers, the activation component of starter package sales is deferred and recognized as revenue over the estimated life of the customer relationship. Sale of initial or reload vouchers is recorded as unearned revenue and recognized as revenue upon usage of the airtime or upon expiration of the airtime.

Fixed Line Services. We currently have local and domestic long-distance coverage of 152 major cities in Indonesia. Revenues from fixed line installations are recognized as revenue over the estimated life of customer relationship. Revenues from usage charges are recognized based on the duration of successful calls made through our fixed network.

Operating Expenses

Our principal operating expenses include cost of services, depreciation and amortization, personnel expenses, marketing expenses, general and administration expenses. Starting in 2012, we reclassified several portions of our other income (expenses) to operating expense (including gain from foreign exchange, gain on tower sales and others—net) to conform with the presentation of financial statements under OJK—Bapepam rules.

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Certain of our expenses are denominated in U.S. dollars or currencies other than the Indonesian rupiah. Such expenses may include those for international interconnection settlements, certain maintenance agreements and consultancy fees.

Cost of Services. Costs of services expenses include radio frequency fee, interconnection expenses, maintenance, utilities, rents, Blackberry access fee, leased circuits, the cost of SIM cards and pulse reload vouchers, USO, installation and concession fee.

Depreciation and Amortization. We use the straight-line depreciation method for our property, facilities and equipment over their estimated useful lives. A significant portion of our depreciation expenses relate to our cellular services assets. As we continue to expand and enhance the coverage, capacity and quality of our networks, we expect expenses for depreciation to increase. On August 2, 2012, the Company and Tower Bersama closed the sale and leaseback transaction of 2,500 telecommunication towers. Since the sale and leaseback transaction has been accounted for as resulting in a finance lease, we recognize the leased assets on our balance sheet and recognize depreciation expense on the leased assets.

Marketing. Marketing expenses primarily include exhibition, promotion, customer loyalty and advertisement expenses associated with our marketing programs.

Personnel. Personnel expenses primarily include severance benefit under the voluntary separation scheme, which scheme ended in June 2011 for us and in January 2012 for Lintasarta, salaries, incentives and other employee benefits, employee income tax, bonuses, medical expense and pension.

General and Administration. General and administration expenses primarily include rent, professional fees, utilities, transportation, provision for impairment of receivables and office.

Gain on Tower Sale. Gain on tower sale consists of the gain amounting to Rp1,125,192 million (US$116.3 million) that we recognized from the sale of tower slots not leased back by us from the tower sales and leaseback transaction with Tower Bersama and the amortization of deferred gain amounting to Rp58,771 million (US$6.1 million) from the tower slots that we leased back from August 2012 to December 2012. Operating expenses for the year ended December 31, 2012 decreased by the amount of the gain on the tower sale in 2012.

Gain (loss) on Foreign Exchange. Gain (loss) on foreign exchanges consists of gains (losses) incurred from accounts other than long-term debt, such as cash and cash equivalents, account receivables and procurement payables, as part of operating expense.

Others—net. Others—net expenses primarily includes the gain from sales of asset (other than towers), the tax expense from penalty or tax assessment from tax offices for income taxes other than corporate income taxes, dividend income from our investment in cost method and professional fees relating to the tower sale and leaseback transaction in 2012.

Other Income (Expense)

The major components of our other income (expense) are interest income, gain (loss) on foreign exchange—net, financing cost and gain (loss) on change in the fair value of derivatives—net. Foreign exchange gain or loss primarily includes the gain (loss) on foreign exchanges incurred from our long term debts as part of financing items in our statement of comprehensive income. We currently hedge a portion of our ING/DBS Syndicated Loan Facility. See “Item 11: Quantitative and Qualitative Disclosures About Market Risk.” Financing cost primarily includes interest on loans and finance charges under finance leases.

Taxation

Current tax expense is provided based on the estimated taxable income for the year. Deferred tax assets and liabilities are recognized for temporary differences between the financial and the tax bases of assets and liabilities

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at each reporting date. Future tax benefits, such as the carryover of unused tax losses, are also recognized to the extent that realization of such benefits is probable. The tax effects for the year are allocated to current operations, except for the tax effects from transactions which are directly charged or credited to stockholders’ equity.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. Changes in the carrying amount of deferred tax assets and liabilities due to a change in tax rates are credited or charged to current period operations, except to the extent that they relate to items previously charged or credited to stockholders’ equity.

For each of the consolidated entities, the tax effects of temporary differences and tax loss carryover, which individually are either assets or liabilities, are shown at the applicable net amounts.

Profit Attributable to Owners of the Company

Our profit attributable to owners of the Company for the years ended December 31, 2010, 2011 and 2012 is not necessarily commensurate to our operating revenues and operating income during such periods, in part due to large fluctuations in several non-operating items, which have impacted our profit attributable to owners of the Company over such periods. Such non-operating items include, among others, fluctuations in income tax deferred, gain or loss on foreign exchange-net, and gain or loss on change in the fair value of derivatives-net. We expect this trend to continue.

Results of Operations

The following table sets forth selected comprehensive income data expressed as a percentage of total operating revenues for the periods indicated:

	For the years ended December 31,
	2010			2011			2012
	(Restated)			(Restated)
Operating revenues:
Cellular		80.4	%		80.8	%		82.5	%
MIDI		13.1	%		13.1	%		13.0	%
Fixed telecommunications		6.5	%		6.1	%		4.5	%
Total operating revenues		100.0	%		100.0	%		100.0	%
Operating expenses:
Cost of services		36.9	%		36.8	%		39.7	%
Depreciation and amortization		30.9	%		32.0	%		36.9	%
Personnel		7.3	%		9.3	%		6.4	%
Marketing		3.9	%		4.2	%		4.1	%
General and administration		3.0	%		2.7	%		2.8	%
Gain on tower sale		—			—			(5.3	)%
Gain on foreign exchange		(0.9	)%		(0.5	)%		(0.2	)%
Others—net		0.4	%		0.1	%		1.4	%
Total operating expenses		81.5	%		84.6	%		85.8	%
Net Profit:
Operating income		18.5	%		15.4	%		14.2	%
Other expense—net		(11.8	)%		(8.9	)%		(12.2	)%
Profit before income tax		6.7	%		6.5	%		2.0	%
Income tax benefit (expense)—net		(2.2	)%		(1.3	)%		0.1	%
Profit attributable to Owners of the Company		4.1	%		4.7	%		1.6	%
Profit attributable to Non-controlling interest		0.4	%		0.5	%		0.5	%

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The following table sets forth our operating revenues from our various business segments for the periods indicated:

	For the years ended December 31,
	2010					2011					2012
	Rp			%		Rp			%		Rp			US$			%
	(Restated)					(Restated)
	(Rp in billions, US$ in millions, except percentages)
Cellular Services
Usage charges		7,944.0			50.0		8,203.8			49.5		8,629.7			892.4			46.7
Value-added services		7,106.8			44.7		7,502.1			45.2		7,868.4			813.7			42.6
Interconnection revenues		1,252.7			7.9		1,182.4			7.1		2,175.0			224.9			11.8
Tower leasing		252.0			1.6		419.7			2.5		504.9			52.2			2.7
Monthly subscription charges		133.0			0.8		134.0			0.8		136.4			14.1			0.7
Connection fee		8.1			0.1		14.2			0.1		12.6			1.3			0.0
Sale of Blackberry handsets		35.0			0.2		1.7			0.0		0.2			0.0			0.0
Others		184.1			1.2		245.9			1.5		184.4			19.1			1.0
Up front discount and customer loyalty program		(1,033.6	)		–6.5		(1,116.4	)		–6.7		(1,022.3	)		(105.7	)		–5.5
Subtotal		15,882.1			100.0		16,587.4			100.0		18,489.3			1,912.0			100.0
MIDI
IP VPN		605.7			23.4		695.9			25.8		711.4			73.6			24.4
Internet		519.6			20.0		375.8			13.9		422.1			43.7			14.5
World link and direct link		278.8			10.8		295.0			10.9		314.9			32.6			10.8
Leased line		200.9			7.8		263.7			9.8		150.4			15.6			5.2
Application services		168.2			6.5		192.6			7.1		251.9			26.0			8.7
Satellite lease		136.0			5.2		150.9			5.6		213.0			22.0			7.3
Value-added Service		159.0			6.1		264.6			9.8		173.9			18.0			6.0
Frame net		227.1			8.8		123.2			4.6		135.8			14.0			4.7
Digital data network		94.7			3.7		103.1			3.8		112.6			11.6			3.9
TV link		5.1			0.2		6.1			0.2		6.0			0.6			0.2
MPLS		66.5			2.6		89.9			3.3		304.9			31.5			10.5
Others		130.2			5.0		133.5			5.0		112.9			11.7			3.9
Subtotal		2,591.8			100.0		2,694.3			100.0		2,909.8			300.9			100.0
Fixed Telecommunications
International Calls		993.2			77.7		934.0			74.7		801.5			82.8			78.5
Fixed Wireless		110.8			8.7		192.8			15.4		98.3			10.2			9.6
Fixed Line		174.2			13.6		123.2			9.9		121.7			12.6			11.9
Subtotal		1,278.2			100.0		1,250.0			100.0		1,021.5			105.6			100.0
Total		19,752.1					20,531.7					22,420.6			2,318.5

Operating Revenues

Year ended December 31, 2011 compared to Year ended December 31, 2012

Total operating revenues increased from Rp20,531.6 billion in 2011 to Rp22,420.6 billion (US$2,318.5 million) in 2012, or 9.2%, primarily as a result of an increase in our cellular services revenue and our MIDI services revenue. During 2012, operating revenues from cellular services increased by Rp1,901.9 billion, or 11.5%, from Rp16,587.4 billion in 2011. Operating revenues from MIDI services increased by Rp215.6 billion, or 8.0%, from Rp2,694.2 billion in 2011. Operating revenues from fixed telecommunications services in 2012 decreased by Rp228.5 billion, or 18.3%, from Rp1,250.0 billion in 2011.

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Cellular Services. In 2012, we recorded cellular services operating revenues of Rp18,489.3 billion (US$1,912.0 million), an increase of 11.5% from Rp16,587.4 billion in 2011. The increase was primarily a result of an increase in the number of subscribers, SMS interconnection revenue and in the revenue from tower leasing. Operating revenues from cellular services represented 82.5% of our total operating revenues for 2012, which is higher than the percentage for 2011.

Usage charges increased by Rp425.9 billion, or 5.2%, from 2011, and represented 46.7% of our total cellular services operating revenues. This increase in usage was primarily due to an increase in the total Minutes of Usage by our subscribers.

MIDI Services. In 2012, operating revenues from MIDI services increased by Rp215.5 billion from Rp2,694.3 billion in 2011 to Rp2,909.8 billion (US$300.9 million) in 2012. IP VPN operating revenues represent the largest component of MIDI services operating revenue. IP VPN operating revenues increased by Rp15.5 billion from Rp695.9 billion in 2011 to Rp711.4 billion in 2012. The increase in MIDI services operating revenues, including those from international and domestic leased line services, was primarily due to an increase in usage by consumers despite a decline in prices of our services as a result of competitive pressure.

Fixed Telecommunications Services. There was a decrease in fixed telecommunications services operating revenues from Rp1,250.0 billion in 2011 to Rp1,021.5 billion (US$105.6 million) in 2012. Operating revenues from international calls and fixed wireless access services represented 78.5% and 9.6%, respectively, of fixed telecommunications services operating revenues in 2012. The remaining 11.9% of fixed telecommunications services operating revenues in 2012 was generated by fixed line. Revenues from international calls decreased from Rp934.0 billion in 2011 to Rp801.5 billion (US$82.9 million) in 2012 due to a decrease in outgoing IDD traffic from Indosat and non-Indosat subscribers.

Operating Expenses

Operating expenses increased by Rp1,866.5 billion, or 10.7%, from Rp17,373.5 billion in 2011 to Rp19,240.0 billion (US$1,989.7 million) in 2012, primarily due to increases in cost of services expenses, depreciation and amortization expenses, marketing expenses, general and administration expenses and others—net expenses. This increase was offset in part by a decrease in personnel expenses, as well as by the gain on tower sale of Rp1,184.0 billion (US$122.4 million) recognized in 2012 as a result of the sale and leaseback transaction on August 2, 2012.

Personnel expenses decreased by Rp485.5 billion, or 25.4%, from Rp1,912.6 billion in 2011 to Rp1,427.2 billion (US$147.6 million) in 2012, primarily due to the decrease in compensation expense related to the severance packages provided to participants in the VSS program, which was launched in January 2011 and completed in June 2011 for the Company and launched in December 2011 and completed in January 2012 for Lintasarta.

Cost of services expenses increased by Rp1,358.3 billion, or 18.0%, from Rp7,547.4 billion in 2011 to Rp8,905.7 billion (US$921.0 million) in 2012, primarily as a result of the implementation of the new SMS interconnection scheme, increased Governmental levies on frequency fees and 3G spectrum fees and increases in BlackBerry^TM license fees.

Depreciation and amortization expenses increased by Rp1,714.7 billion or 26.1%, from Rp6,569.3 billion in 2011 to Rp8,284.0 billion (US$856.7 million) in 2012, primarily as a result of the decrease in the useful lives of our cellular technical equipment from 10 years to eight years, with effect from September 2012, based on our review of the estimated useful life of those assets and continued growth of our fixed asset base. The total cost of our property and equipment increased from Rp83,056.2 billion in 2011 to Rp88,417.6 billion (US$9,143.5 million) in 2012.

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Marketing expenses increased by Rp64.6 billion, or 7.6%, from Rp855.7 billion in 2011 to Rp920.3 billion (US$95.2 million) in 2012, driven primarily by an increase in advertising expenses and expenses relating to market research.

General and administration expenses increased by Rp76.0 billion, or 13.8%, from Rp549.5 billion in 2011 to Rp625.5 billion (US$64.7 million) in 2012, primarily due to a increase in professional fees mainly relating to legal expenses in connection with litigation relating to the misuse of 3G license.

Gain on tower sale. We recorded a gain on tower sales amounting to Rp1,183,963 million (US$122.4 million) from the tower sale and leaseback transaction with Tower Bersama that closed in August 2012.

Gain on foreign exchange. We recorded a decrease in gain on foreign exchange from Rp90.9 billion in 2011 to Rp44.8 billion (US$4.6 million) in 2012 primarily due to additional realized loss on foreign exchange from the payment of our U.S.dollar-denominated procurement payable in 2012.

Others—net. Others—net expense increased by Rp276.2 billion or 927.0% from Rp29.8 billion in 2011 to Rp306.0 billion (US$31.6 million) in 2012 mainly due to additional consultancy fees to arrange and negotiate the tower sale and leaseback transaction and additional income tax article 23 paid to tax offices related to the tower sale and leaseback transaction in 2012.

Operating Income

As a result of the above factors, operating income increased by Rp22.4 billion, or 0.7%, from Rp3,158.2 billion in 2011 to Rp3,180.6 billion (US$328.9 million) in 2012.

Other Expenses-Net

Other expenses-net increased by Rp895.5 billion, from Rp1,833.0 billion in 2011 to Rp2,728.4 billion (US$282.1 million) in 2012, primarily due to an increase in loss on foreign exchange and in financing costs.

Loss on foreign exchange-net of Rp57.9 billion in 2011 increased to Rp789.4 billion (US$81.6 million) in 2012. The exchange rate increased from Rp9,068 : US$1 as of December 31, 2011 to Rp9,670 : US$1 as of December 31, 2012, compared to the increase from Rp8,991 : US$1 as of December 31, 2010 to Rp9,068 : US$1 as of December 31, 2011.

We recorded a gain on change in fair value of derivatives-net of Rp5.0 billion (US$0.5 million), representing a decrease of Rp53.0 billion, over a gain on change in fair value of derivatives-net of Rp57.9 billion in 2011 due to an increase in currency forward contracts entered into by the Company in 2012.

We recorded an increase in interest income of Rp133.5 billion (US$13.8 million) in 2012, which represented an increase of Rp40.9 billion, or 44.1%, from Rp92.6 billion in 2011, due to higher cash balance mainly from the sale and leaseback transaction in 2012.

We recorded an increase in financing cost of Rp2,077.4 billion (US$214.8 million) in 2012, which represented an increase of Rp148.0 billion, or 7.7%, from Rp1,929.4 billion in 2011 as a result of an increase in interest expense from our finance lease obligations under the sale and leaseback transaction in 2012.

Income Tax Expense-Net

We recorded income tax benefit—net of Rp25.5 billion (US$2.6 million) in 2012 compared to income tax expenses of Rp269.3 billion in 2011. The decrease in income tax expense-net was primarily due to a decrease in income before tax resulting from a decrease in operating income and gain on foreign exchange.

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Profit attributable to Owners of the Company

Our net profit decreased by Rp592.5 billion, or 61.8%, from Rp958.1 billion in 2011 to Rp365.6 billion (US$37.8 million) in 2012 due to the foregoing factors.

Year ended December 31, 2010 compared to Year ended December 31, 2011

Total operating revenues increased from Rp19,752.1 billion in 2010 to Rp20,531.6 billion in 2011, or 3.9%, primarily as a result of an increase in our cellular services revenue and our MIDI services revenue. During 2011, operating revenues from cellular services increased by Rp766.3 billion, or 4.6%, from Rp15,882.1 billion in 2010. Operating revenues from MIDI services increased by Rp102.4 billion, or 3.9%, from Rp2,591.8 billion in 2010. Operating revenues from fixed telecommunications services in 2011 decreased by Rp28.2 billion, or 2.2%, from Rp1,278.2 billion in 2010.

Cellular Services. In 2011, we recorded cellular services operating revenues of Rp16,587.4 billion, an increase of 4.4% from Rp15,882.1 billion in 2010. We believe that the increase was primarily a result of an increase in the number of subscribers and in the revenue from tower leasing. Operating revenues from cellular services represented 80.8% of our total operating revenues for 2011, which is slightly higher than the percentage for 2010.

Usage charges increased by Rp259.8 billion, or 3.3%, from 2010, and represented 49.5% of our total cellular services operating revenues. This increase in usage was primarily due to an increase in the total Minutes of Usage by our subscribers.

In 2011, cellular services operating revenues generated by value-added services increased by Rp395.3 billion, or 5.6%, compared to 2010. The contribution of value-added services to cellular services operating revenues increased by 0.5% from 44.7% in 2010 to 45.2% in 2011. The increase in operating revenues from value-added services, as well as the increase in the contribution of revenues from value-added services to our overall cellular operating revenues, was driven by an increase in SMS usage. The revenue from value added services still increased despite pressure arising from Government’s regulations relating to the restrictions on premium SMS services. See “Item 3: Key Information—Risk Factors—Risks Relating to our Cellular Services Business—The Government suspension of premium SMS services could adversely affect the revenues from our cellular services business and result in sanctions against us.”

MIDI Services. In 2011, operating revenues from MIDI services increased by Rp102.4 billion from Rp2,591.8 billion in 2010 to Rp2,694.2 billion in 2011. IP VPN operating revenues represent the largest component of MIDI services operating revenue. IP VPN operating revenues increased by Rp90.2 billion or 14.9% from Rp605.7 billion in 2010 to Rp695.9 billion in 2011. The increase in MIDI services operating revenues was primarily generated from the “Desa Pinter” Projects (presented as part of “Value Added Service”) that was entered in 2010 between Lintasarta and MOCIT.

Fixed Telecommunications Services. There was a decrease in fixed telecommunications services operating revenues from Rp1,278.2 billion in 2010 to Rp1,250.0 billion in 2011. Operating revenues from international calls and fixed wireless access services represented 74.7% and 15.4%, respectively, of fixed telecommunications services operating revenues in 2011. The remaining 9.9% of fixed telecommunications services operating revenues in 2011 was generated by fixed line. Revenues from international calls decreased from Rp993.2 billion in 2010 to Rp934.0 billion in 2011 due to a decrease in outgoing IDD traffic from Indosat and non-Indosat subscribers. The total volume of international calls from our “001” and “008” gateways increased by 11.4% from 2,186.9 million minutes in 2010 to 2,437.0 million minutes in 2011. Total incoming traffic increased by 15.5% from 1,723.9 million minutes in 2010 to 1,991.7 million minutes in 2011, primarily due to volume commitments from foreign telecommunications operators. Outgoing traffic decreased by 3.8% from 463.0 million minutes in 2010 to 445.3 million minutes in 2011 due to the decrease in volume commitments from foreign telecommunications operators.

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Operating Expenses

Operating expenses increased by Rp1,267.0 billion, or 7.9%, from Rp16,106.5 billion in 2010 to Rp17,373.5 billion in 2011, primarily due to increases in personnel expenses, cost of services expenses, depreciation and amortization expenses and marketing expenses. This increase was offset in part by a decrease in administration and general expenses, gain on foreign exchange and others—net.

Personnel expenses increased by Rp476.9 billion, or 33.2%, from Rp1,435.7 billion in 2010 to Rp1,912.6 billion in 2011, primarily due to an increase in compensation expense related to the severance packages provided to participants in the VSS program, which was launched in January 2011 and completed in June 2011 for the Company and which was launched in December 2011 by Lintasarta, a subsidiary.

Cost of services expenses increased by Rp248.1 billion, or 3.4%, from Rp7,299.3 billion in 2010 to Rp7,547.4 billion in 2011, primarily as a result of increased Governmental levies on frequency fees and 3G spectrum fees, increases in BlackBerry^TM license fees and the cost of SIM cards and pulse reload vouchers.

Depreciation and amortization expenses increased by Rp467.2 billion or 7.7%, from Rp6,102.1 billion in 2010 to Rp6,569.3 billion in 2011, primarily as a result of the continued growth of our fixed asset base. The total cost of our property and equipment increased from Rp78,537.6 billion in 2010 to Rp83,056.2 billion.

Marketing expenses increased by Rp76.5 billion, or 9.8%, from Rp779.2 billion in 2010 to Rp855.7 billion in 2011, driven primarily by an increase in advertising and promotional expenses in large part related to our “50 Million Customer” campaign, a promotional campaign launched in October 2011 celebrating our attainment of over 50 million customers.

General and administration expenses decreased by Rp35.6 billion, or 6.1%, from Rp585.1 billion in 2010 to Rp549.5 billion in 2011, primarily due to a decrease in provision for the impairment of receivables.

We recorded a lower gain on foreign exchange from Rp174.1 billion in 2010 to Rp90.9 billion in 2011 primarily due to a decrease in our cash and U.S. dollar-denominated cash and cash equivalents due to payment of loans and procurement payable. Our U.S. dollar-denominated cash and cash equivalents significantly decreased from US$111.8 million as of December 31, 2010 to US$53.3 million as of December 31, 2011.

We recorded others—net expenses of Rp29.8 billion in 2011, a decrease of Rp49.4 billion compared to Rp79.2 billion in 2010, primarily due to a decrease in tax expense and related penalties, which was partially offset by a decrease in both submarine cable restoration revenue and dividend income from our investment in equity ASEAN Cableship Pte Ltd.

Operating Income

As a result of the above factors, operating income decreased by Rp487.5 billion, or 13.4%, from Rp3,645.6 billion in 2010 to Rp3,158.1 billion in 2011.

Other Expenses-Net

Other expenses-net decreased by Rp489.5 billion, from Rp2,322.5 billion in 2010 to Rp1,833.0 billion in 2011, primarily due to an increase gain on foreign exchange gains on changes in fair value of derivatives and a decrease in financing costs.

Gain on foreign exchange-net of Rp318.2 billion in 2010 decreased to a loss of Rp54.2 billion in 2011. The exchange rate decreased from Rp8,991 : US$1 as of December 31, 2010 to Rp9,068 : US$1 as of December 31, 2011.

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We recorded a gain on change in fair value of derivatives-net of Rp57.9 billion, representing an increase of Rp506.7 billion, over a loss on change in fair value of derivatives-net of Rp448.8 billion in 2010 due to the depreciation of the Indonesian rupiah against the U.S. dollar.

We recorded a decrease in interest income to Rp92.6 billion in 2011, which represented a decrease of Rp53.6 billion, or 36.6%, from Rp146.2 billion in 2010, due to our lower average cash balance.

We recorded a decrease in financing cost to Rp1,929.3 billion in 2011, which represented a decrease of Rp408.8 billion, or 17.5%, from Rp2,338.1 billion in 2010 as a result of lower interest rate for our debt in 2011 and a decrease in total debt overall.

Income Tax Expense-Net

We recorded income tax expense—net of Rp269.3 billion in 2011 compared to Rp432.6 billion in 2010. The decrease in income tax expense-net was primarily due to a decrease in income before tax resulting from a decrease in operating income and gain on foreign exchange.

Profit attributable to Owners of the Company

Our net profit increased by Rp145.5 billion, or 17.9%, from Rp812.6 billion in 2010 to Rp958.1 billion in 2011 due to the foregoing factors.

Segment Results

	For the years ended December 31,
	2010						2011						2012
	Rp			%			Rp			%			Rp			US$			%
	(Restated)						(Restated)
	(Rp in billions, US$ in millions, except percentages)
Segmented Operating Revenues
Cellular services		15,821.1			80.4			16,587.4			80.8			18,489.3			1,912.0			82.5
MIDI services		2,591.8			13.1			2,694.2			13.1			2,909.8			300.9			13.0
Fixed telecommunications		1,278.2			6.5			1,250.0			6.1			1,021.5			105.6			4.5
Total operating revenues		19,752.1			100.0			20,531.6			100.0			22,420.6			2,318.5			100.0
Segmented Operating Expenses
Cellular services		12,895.1			79.6			13,794.2			79.1			16,481.7			1,704.4			81.7
MIDI services		1,989.6			12.3			2,301.7			13.2			2,384.5			246.6			11.8
Fixed telecommunications		1,316.7			8.1			1,338.7			7.7			1,296.6			134.1			6.5
Total operating expenses		16,201.4			100.0			17,434.6			100.0			20,162.8			2,085.1			100.0
Segmented Operating Income
Cellular services		2,987.0			84.1			2,793.2			90.2			2,007.6			207.6			88.9
MIDI services		602.2			17.0			392.5			12.6			525.3			54.3			23.3
Fixed telecommunications		(38.5	)		(1.1	)		(88.7	)		(2.8	)		(275.1	)		(28.5	)		(12.2	)
Total operating income		3,550.7			100.0			3,097.0			100.0			2,257.8			233.4			100.0

Cellular Services

Cellular services operating income decreased by Rp785.6 billion from Rp2,793.2 billion in 2011 to Rp2,007.6 billion (US$207.6 million) in 2012 mainly due to a significant increase in depreciation of cellular equipment resulting from the decrease in useful lives of such equipment from 10 years to eight years, an increase

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in SMS interconnection charges as a result of the implementation of the new SMS interconnection scheme, an increase in Governmental levies on frequency fees and 3G spectrum fees and an increase in BlackBerry license fees. Such increases were offset by the increase in cellular services operating revenues mainly due to an increase in usage from a higher number of subscribers, revenues from value-added services driven by higher SMS usage, and SMS interconnection revenues.

Cellular services operating income decreased by Rp193.8 billion from Rp2,987.0 billion in 2010 to Rp2,793.2 billion in 2011 mainly due to the increase in BlackBerry license fees, the additional personnel expenses under the VSS program in 2011, and increased Government levies on frequency fees. These increased expenses offset the increase in cellular services operating revenues which were mainly due from the increase in the number of subscribers and from tower leasing activities.

MIDI Services

MIDI services operating income increased by Rp132.8 billion from Rp392.5 billion in 2011 to Rp525.3 billion (US$54.3 million) in 2012 mainly due to higher revenue from IP VPN and increased value-added services coming from “Desa Pinter” projects entered between Lintasarta and MOCIT. These increased revenues offset the increase in operating expenses from MIDI services, which were mainly due to increased leased circuit and installation expenses related to the “Desa Pinter” projects, which are projects relating to public internet provision in rural areas or villages.

MIDI services operating income decreased by Rp209.7 billion from Rp602.2 billion in 2010 to Rp392.5 billion in 2011 mainly due to the additional personnel expenses under the VSS program in 2011 and an increase in Government levies on concession fees. These increased expenses offset the increase in operating revenues from MIDI services, which were mainly due to an increase in the number of customers.

Fixed Telecommunication Services

Fixed telecommunications services operating losses increased by Rp186.4 billion from Rp88.7 billion in 2011 to Rp275.1 billion (US$28.5 million) in 2012, mainly due to the decrease in fixed telecommunications services operating revenue of Rp228.5 billion, netted with the decrease in fixed telecommunications services operating expenses due to lower interconnection fees that we pay to overseas telecommunication operators.

Fixed telecommunications services operating losses increased by Rp50.2 billion from Rp38.5 billion in 2010 to Rp88.7 billion in 2011, mainly due to the decrease in fixed telecommunications services operating revenue of Rp28.2 billion and the increase in fixed telecommunications services operating expenses, which were, in turn, driven by higher interconnection fees that we pay to overseas telecommunication operators.

B. LIQUIDITY AND CAPITAL RESOURCES

Our liquidity requirements have historically arisen from the need to finance investments and capital expenditures related to the expansion of our telecommunications business. Our telecommunications business requires substantial capital expenditures to construct and expand mobile and data network infrastructure and to fund operations, particularly during the network development stage. Although we have substantial existing network infrastructure, we expect to incur additional capital expenditures in order to focus cellular network development in areas that we anticipate to be high-growth areas, as well as to enhance the quality and coverage of our existing network.

We believe our current cash and cash equivalents, cash flow from operations and available sources of financing, as well as a portion of cash proceeds from the Tower Sale Transaction completed in 2012, will be sufficient to meet our anticipated cash needs, including our cash needs for working capital and planned capital expenditures, for the foreseeable future. Nonetheless, if global or Indonesian economic conditions worsen, competition or product substitution accelerates beyond current expectations or the value of the Indonesian rupiah

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depreciates significantly against the U.S. dollar, our net cash flow from operating activities may decrease and the amount of required capital expenditures in Indonesian rupiah terms may increase, any of which may negatively impact our liquidity.

Cash Flows

The following table sets forth certain information regarding our historical cash flows:

	For the years ended December 31,
	2010			2011			2012
	Rp			Rp			Rp			US$
	(Restated)			(Restated)
	(Rp in billions, US$ in millions)
Net cash flows:
Provided by operating activities		6,848.6			7,320.1			6,989.4			722.8
Used in investing activities		(5,970.7	)		(6,037.9	)		(2,688.9	)		(278.1	)
Used in financing activities		(1,629.7	)		(1,135.4	)		(2,647.5	)		(273.8	)
Net Foreign Exchange differences from cash and cash equivalent		(9.7	)		2.2			40.0			4.1

Net Cash Provided by Operating Activities

Net cash provided by operating activities amounted to Rp6,848.6 billion, Rp7,320.1 billion and Rp6,989.4 billion (US$722.8 million) for 2010, 2011 and 2012, respectively. In 2012, net cash provided by operating activities decreased primarily due to an increase in cash paid to authorities, other operators and suppliers and others and an increase in financing costs.

Net Cash Used in Investing Activities

Net cash used in investing activities amounted to Rp5,970.7 billion, Rp6,037.9 billion and Rp2,688.9 billion (US$278.1 million) for 2010, 2011 and 2012, respectively. Net cash used in investing activities for 2010, 2011 and 2012 has been driven primarily by acquisitions of property and equipment, totaling Rp6,495.1 billion, Rp6,048.0 billion and Rp5,765.9 billion (US$596.3 million), respectively, as we expanded our network coverage and capacity during those years. In 2012, cash proceeds from the Tower Sale Transaction amounted to US$326.3 million (equal to approximately Rp3,092.9 billion), which was offset by acquisitions of property and equipment of Rp5,765.9 billion (US$596.3 million). The property and equipment purchased consisted primarily of exchange and network assets, subscribers’ apparatus and other equipment and buildings and improvements to building leased property.

Net Cash Used in Financing Activities

Net cash used in financing activities amounted to Rp1,629.7 billion, Rp1,135.4 billion and Rp2,647.5 billion (US$273.8 million) in 2010, 2011 and 2012, respectively. Net cash used in financing activities in 2012 related primarily to repayment of short-term and long-term debts which was partially offset by proceeds from long-term loans and bonds payable.

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Principal Indebtedness

The following table sets forth our outstanding borrowings as of December 31, 2010, 2011 and 2012:

	As of December 31,
	2010		2011		2012
	Rp		Rp		Rp		US$
	(Restated)		(Restated)
	(Rp in billions, US$ in millions)
Short term loan (net of unamortized issuance costs)		—		1,499.3		299.5		31.0
Loans payable (net of unamortized issuance costs and unamortized consent fees, and current maturities)		7,666.8		6,425.8		3,703.8		383.0
Bonds payable (net of unamortized issuance costs, unamortized discount, unamortized consent fees, and current maturities)		12,114.1		12,138.4		13,986.5		1,446.4
Current maturities of loans payable		3,184.1		3,300.5		2,669.2		276.0
Current maturities of bonds payable		1,098.1		42.0		1,329.2		137.5

The decrease in loans payable (net of unamortized issuance cost, unamortized consent fee and current maturities) to Rp3,703.8 billion (US$383.0 million) as of December 31, 2012 from Rp6,425.8 billion as of December 31, 2011 was primarily due to installment payments made with respect to debt during 2012.

Certain of our debt instruments (other than the Guaranteed Notes due 2020) obligate us to maintain a specified maximum ratio of debt (or loans) to equity, or the debt to equity ratio, which, prior to February 2009, was 1.75 to 1.0, or 175%. As a result of amendments we requested to such instruments and agreements, and agreed with our lenders and the trustee for bondholders in February and March 2009, the debt to equity ratio required by such debt instruments is now 2.50 to 1.0, or 250%. We also requested and were granted consents to amendments to certain defined terms in the debt to equity ratios so that the definition is uniform across all such instruments and agreements. The Guaranteed Notes due 2020 do not contain a debt to equity ratio requirement.

Because a portion of our liabilities are U.S. dollar-denominated, we were exposed to fluctuations in the Indonesian rupiah. Depreciation in the Indonesian rupiah and an increase in foreign exchange volatility exposed us to short-term accounting adjustments which impacted our financial ratios. To help address the impact of such currency fluctuations in 2009, we amended the debt to equity ratio covenants in all of our applicable debt instruments and agreements to increase the ratio from 1.75 to 2.50, in order to provide us with additional “cushion” in the event of adverse foreign exchange movements. We also amended the debt to equity ratio covenants in order to better reflect the effect of our hedging policies on this ratio, and amended the definitions of “Debt” and “Equity” in such debt instruments and agreements in order to provide additional headroom under these line items. The Guaranteed Notes due 2020 do not contain a debt to equity requirement.

As part of the amendments approved in 2009, we obtained consents to the following amendments to defined terms in certain of our applicable debt instruments and agreements: (i) excluding non-cash items, including foreign exchange gains or losses, from the definition of “EBITDA”; (ii) excluding interest-bearing procurement payables from the definition of “Debt” unless their maturities are in excess of six months from the invoice date; and (iii) including in “Equity” (a) minority interests, for entities the debt of which is 100% consolidated by us, and (b) subordinated shareholder loans.

While we believe that the foregoing amendments provide us with sufficient cushion in the event of volatility in the U.S. dollar—Indonesian rupiah exchange rates, we cannot assure you that further and more intense volatility than that experienced in the past 12 months will not occur, which could cause us to breach our financial covenants.

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Set forth below are calculations of our historical financial ratios that are contained in our financial covenants under IFAS as required by our debt agreements.

			As of and for the years ended December 31,
	Ratio Required		2010		2011		2012
			Rp		Rp		Rp		US$
			(Restated)		(Restated)
			(Rp in billions, US$ in millions)
Financial Position and Comprehensive Income Data:
Short term loan				—		1,499.3		299.5		31.0
Current maturities from:
Loans payable				3,184.1		3,300.5		2,669.2		276.0
Bonds payable				1,098.1		42.0		1,329.2		137.5
Loans payable—net of current maturities:
Related party				997.0		—		—		—
Third parties				6,669.8		6,425.8		3,703.8		383.0
Bonds payable—net of current maturities				12,114.1		12,138.4		13,986.5		1,446.4
Unamortized issuance cost, consent solicitation fees and discounts				336.1		266.1		235.2		24.3
Total Debt(1)				24,399.2		23,672.1		22,223.4		2,298.2
Total Assets				53,325.1		53,233.0		55,225.1		5,711.0
Total Liabilities				35,069.7		34,263.9		35,829.7		3,705.2
Total Equity(2)				18,255.4		18,969.1		19,395.4		2,005.8
Operating Income				3,645.6		3,158.2		3,180.6		328.9
Depreciation and Amortization				6,102.1		6,569.3		8,284.0		856.7
EBITDA(3)				9,747.6		9,727.5		11,464.6		1,185.6
Interest Expense(4)				2,080.3		1,700.1		1,709.9		176.8
Financial Ratios:
Debt to Equity ratio(5)		<2.50x		1.31x		1.22x		1.32x		1.32x
Debt to EBITDA ratio(6)		<3.50x		2.50x		2.43x		2.43x		2.43x
EBITDA to Interest Expense ratio(7)		>3.00x		4.69x		5.72x		6.16x		6.16x

⁽¹⁾ We define total debt as total loans payable and bonds payable (current and non-current maturities), unamortized issuance cost (loans, bonds and notes), unamortized consent solicitation fees (loans and bonds) and unamortized discounts (loans and notes).

According to the amended definition, “Debt” means, with respect to any person on any date of determination (without duplication):

(a) the principal of and premium (if any) in respect of debt of such person for money borrowed and debt evidenced by notes, debentures, bonds or other similar instruments for the payment of which such person is responsible or liable which in any such case, bears interest or on which interest accrues; and

(b) all obligations of such person in relation to procurement payables constituting accounts payable to such person’s suppliers which bear interest or on which interest accrues and payment for such accounts payable is due more than six (6) months after the relevant invoice date, but, in relation to any member of the Company or its subsidiaries (together the “Group”), or the Group, deducting all indebtedness advanced by any (direct or indirect) shareholder of the Company to such member of the Group which is subordinated to any indebtedness falling under paragraph (a) above or this paragraph (b).

⁽²⁾ We define equity as total stockholders’ equity and minority interest. According to the amended definition, “Equity” means total assets less total liabilities, where total liabilities exclude all indebtedness advanced by any (direct or indirect) shareholder of the Company to any member of the Group which is subordinated to any Debt.

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⁽³⁾ We have defined EBITDA as earnings before interest, amortization of goodwill, non-operating income and expense, income tax expense, depreciation and minority interest in net income of subsidiaries as reported in the consolidated financial statements prepared under IFAS. EBITDA is not a standard measure under either IFAS or IFRS. As the telecommunications business is capital intensive, capital expenditure requirements and levels of debt and interest expenses may have a significant impact on the net income of companies with similar operating results. Therefore, we believe that EBITDA provides a useful reflection of our operating results and that net income is the most directly comparable financial measure to EBITDA as an indicator of our operating performance. You should not consider our definition of EBITDA in isolation or as an indicator of operating performance, liquidity or any other standard measure under either IFAS or IFRS, or other companies’ definition of EBITDA. Our definition of EBITDA does not account for taxes and other non-operating cash expenses. Funds depicted by this measure may not be available for debt service due to covenant restrictions, capital expenditure requirements and other commitments. According to the amended definition, “EBITDA” means, for any period, an amount equal to the sum of operating income (calculated before finance costs, taxes, non-operating income or expenses and extraordinary and exceptional items) plus depreciation and amortization and, in the case of any testing or calculation of the ratio of aggregate Debt of the Group, to EBITDA of the Group after giving pro forma effect to any material acquisition or disposal of assets or businesses as if such acquisition or disposal had occurred on the first day of such period. The following table reconciles our net income under IFAS to our definition of EBITDA for the periods indicated:

	For the years ended December 31,
	2010			2011			2012
	Rp			Rp			Rp			US$
	(Restated)			(Restated)
	(Rp in billions, US$ in millions)
EBITDA under IFAS		9,635.7			9,664.0			10,540.0			1,090.0
Amortization of goodwill		(226.4	)		—			—			—
Interest income		146.2			92.6			133.5			13.8
Financing cost (including interest expense)		(2,338.1	)		(1,929.4	)		(2,077.3	)		(214.8	)
Gain (loss) on change in fair value of derivatives—net		(418.1	)		57.9			5.0			0.5
Others—net		(85.2	)		(39.1	)		878.0			90.8
Gain on foreign exchange—net		492.4			36.7			(744.6	)		(77.0	)
Income tax expense—net		(378.4	)		(264.6	)		25.8			2.7
Depreciation and amortization		(6,091.1	)		(6,558.2	)		(8,272.8	)		(855.5	)
Equity in net loss of associated company		—			—			0.1			0.0
Profit attributable to non controlling interest		(76.5	)		(98.1	)		(112.2	)		(11.6	)
Profit for the year attributable to owners of the Company under IFAS		666.2			968.7			375.1			38.1

The following table reconciles our EBITDA under IFAS to IFRS for the periods indicated:

	For the years ended December 31,
	2010		2011		2012
	Rp		Rp		Rp		US$
	(Restated)		(Restated)
	(Rp in billions, US$ in millions)
EBITDA under IFAS		9,635.7		9,664.0		10,540.0		1,090.0
Deferred connection fees		17		2.4		1.8		0.1
EBITDA under IFRS*		9,652.7		9,666.4		10,541.8		1,090.1

* See “Item 3: Key Information—Selected Financial and Other Data” for reconciliation of our EBITDA under IFRS to our profit attributable to owners of the Company under IFRS.

⁽⁴⁾ “Interest Expense” means, for any period, interest expense on Debt.

⁽⁵⁾  Using IFRS results, Total Debt would be Rp24,399.2 billion, Rp23,672.1 billion and Rp22,223.4 billion (US$2,298.2 million) as of December 31, 2010, 2011 and 2012, respectively, and Total Stockholders’

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Equity would be Rp18,680.2 billion, Rp19,392.5 billion and Rp19,809.1 billion (US$2,048.5 million) as of December 31, 2010, 2011 and 2012, respectively, resulting in a Debt to Equity ratio of 131%, 122% and 112% as of December 31, 2010, 2011, and 2012, respectively.

⁽⁶⁾  Using IFRS results, Total Debt would be Rp24,399.2 billion, Rp23,672.1 billion and Rp22,223.4 billion (US$2,298.2 million) as of December 31, 2010, 2011 and 2012, respectively, and EBITDA would be Rp9,652.7 billion, Rp9,666.4 billion and Rp10,541.8 billion (US$1,090.1 million) for the year ended December 31, 2010, 2011 and 2012, respectively, resulting in a Debt to EBITDA ratio of 250%, 243% and 194% as of December 31, 2010, 2011 and 2012, respectively.

⁽⁷⁾  Using IFRS results, EBITDA would be Rp9,652.7 billion, Rp9,666.4 billion and Rp10,541.8 billion (US$1,090.1 million) for the year ended December 31, 2010, 2011 and 2012, respectively, and Interest Expense would be Rp2,080.3 billion, Rp1,700.1 billion and Rp1,709.9 billion (US$176.8 million) for the year ended December 31, 2010, 2011 and 2012, respectively, resulting in an EBITDA to Interest Expense ratio of 469%, 572% and 616% as of December 31, 2010, 2011, and 2012 respectively.

From time to time, we may repurchase a portion of our debt securities through open-market transactions based on general market conditions.

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The following table summarizes our primary long-term indebtedness (including short term loans) and bonds payable as of December 31, 2010, 2011 and 2012.

	As of December 31,
	2010		2011		2012
	Rp		Rp		Rp		US$
	(Restated)		(Restated)
	(Rp in billions, US$ in millions)
Bonds Payable:
Guaranteed Notes Due 2020—net of unamortized discount and unamortized notes issuance cost		5,749.6		5,809.6		6,188.9		640.0
Eighth Indosat Bonds—net of unamortized bonds issuance cost		—		—		2,691.5		278.3
Fifth Indosat Bonds—net of unamortized bonds issuance cost		2,589.0		2,590.9		2,592.9		268.1
Seventh Indosat Bonds—net of unamortized bonds issuance cost		1,294.6		1,295.6		1,296.6		134.1
Sixth Indosat Bonds—net of unamortized bonds issuance cost		1,074.6		1,076.4		1,078.4		111.5
Indosat Sukuk Ijarah III—net of unamortized bonds issuance cost and consent solicitation fees		567.4		568.5		569.6		58.9
Indosat Sukuk Ijarah II—net of unamortized bonds issuance cost and consent solicitation fees		398.5		398.9		399.3		41.3
Indosat Sukuk Ijarah V—net of unamortized bonds issuance cost and consent solicitation fees		—		—		299.1		30.9
Indosat Sukuk Ijarah IV—net of unamortized bonds issuance cost		199.1		199.2		199.4		20.6
Second Indosat Bonds—net of unamortized consent solicitation fees		199.3		199.4		—		—
Limited Bonds II issued by Lintasarta		25.0		25.0		—		—
Limited Bonds I issued by Lintasarta		17.0		17.0		—		—
Fourth Indosat Bonds—net of unamortized bonds issuance cost		813.6		—		—		—
Indosat Syari’ah Ijarah Bonds—net of unamortized bonds issuance cost and consent solicitation fees		284.5		—		—		—
Total bonds payable		13,212.2		12,180.4		15,315.7		1,583.7
Less current maturities—net of unamortized bonds issuance cost and consent solicitation fees		1,098.1		42.0		1,329.2		137.5
Bonds Payable: Non-current portion		12,114.1		12,138.4		13,986.5		1,446.2
Loans Payable (including short term loans):
Related Party—net of unamortized debt issuance cost and consent solicitation fees		1,297.0		2,498.1		299.5		31.0
Third parties—net of unamortized debt issuance cost and consent solicitation fee and unamortized debt discount		9,553.9		8,727.5		6,373.0		659.1
Total loans payable		10,851.0		11,255.6		6,672.5		690.1
Less current maturities		3,184.1		4,829.8		2,968.7		307.1
Loans payable: Non-current portion		7,666.8		6,425.8		3,703.8		383.0

Indosat Bonds

The specific terms of each of our Second Indosat Bonds, Third Indosat Bonds, Fourth Indosat Bonds, Fifth Indosat Bonds, Sixth Indosat Bonds, Seventh Indosat Bonds and Eighth Indosat Bonds (the “Indosat Bonds”), are discussed below. The Indosat Bonds are not secured by any specific assets or guaranteed by other parties and rank pari-passu with our other unsecured debt. We agreed to certain covenants in connection with the issuance of the Indosat Bonds, including but not limited to agreeing to maintain:

• equity capital of at least Rp5,000.0 billion;

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• a ratio of total debt to EBITDA of less than 3.5 to 1.0, as reported in each annual consolidated financial report, except for the Eighth Indosat Bonds in connection with the issuance of which we agreed to maintain the ratio of total net debt to EBITDA of less than 4.0 to 1.0;

• a debt to equity ratio of 2.5 to 1.0, as reported in each quarterly consolidated financial report, except for the Eighth Indosat Bonds in connection with the issuance of which we agreed to maintain the ratio of total net debt to equity of 2.5 to 1.0; and

• a ratio of EBITDA to interest expense, as reported in each annual consolidated financial report of at least 3.0 to 1.0. On March 24, 2009, we held meetings with holders of our Indonesian rupiah-denominated bonds, including holders of our Indosat Bonds, and obtained consents to amend the definitions of “Debt” “EBITDA”, to include new definitions for “Equity” and “Group” and to change the ratio of Debt to Equity from 1.75 to 1.0 to 2.5 to 1.0 in the trustee agreement governing these bonds, pursuant to the terms of the deed of amendment for the Second, Third, Fourth, Fifth and Sixth Indosat Bonds.

Second Indosat Bonds. On November 6, 2002, we issued our Indosat Bonds II (the “Second Indosat Bonds”), with fixed and/or floating rates, the only outstanding series of which are the Series B bonds. The Series B bonds, with an original face value of Rp200.0 billion, bear interest at a fixed rate of 16.0% per annum and are payable quarterly for 30 years beginning February 6, 2003. We have the right to redeem the Series B bonds, in whole but not in part, on each of the 10th, 15th, 20th and 25th anniversaries of the issuance of the Series B bonds at a price equal to 101% of the Series B bonds’ nominal value. Holders of the Series B bonds have a put right that allows such holders to demand early repayment from us at a price equal to 100% of the Series B bonds’ nominal value at (i) any time, if the rating of such bonds is reduced to “AA-” or lower or (ii) upon the occurrence of any of the 15th, 20th and 25th anniversaries of the issuance of the Series B bonds. The Series B bonds mature on November 6, 2032. On November 6, 2012, we exercised our right to redeem in full the remaining outstanding aggregate principal amount of Second Indosat Bonds at the redemption price of 101%.

Third Indosat Bonds. On October 22, 2003, we issued our Indosat Bonds III (the “Third Indosat Bonds”). As of January 1, 2010, the only outstanding series of these bonds were the Series B bonds. The Series B bonds had a maturity date of October 22, 2010, a total face value of Rp640.0 billion, bore interest at a fixed rate of 12.875% per annum. Interest on the Third Indosat Bonds was payable on a quarterly basis. On October 22, 2010, we repaid in full the remaining outstanding Third Indosat Bonds.

Fourth Indosat Bonds. On June 21, 2005, we issued our Indosat Bonds IV (the “Fourth Indosat Bonds”). The Fourth Indosat Bonds had a total face value of Rp815.0 billion and matured on June 21, 2011. The Fourth Indosat Bonds bear interest at a fixed rate of 12.0% per annum, payable on a quarterly basis. On June 21, 2011, we repaid in full the remaining outstanding Fourth Indosat Bonds.

Fifth Indosat Bonds. On May 29, 2007, we issued our Indosat Bonds V (the “Fifth Indosat Bonds”), in two series with a total face value of Rp2,600.0 billion. The Series A bonds, which have a face value of Rp1,230.0 billion, will mature on May 29, 2014 and the Series B bonds, which have a face value of Rp1,370.0 billion, will mature on May 29, 2017. The Series A bonds bear interest at a fixed rate of 10.20% per annum and the Series B bonds bear interest at a fixed rate of 10.65% per annum. After the first anniversary of the issuance of the bonds, we have the right to buy back part or all of the bonds at the market price, either temporarily or for the purpose of early settlement.

Sixth Indosat Bonds. On April 9, 2008, we issued our Indosat Bonds VI (the “Sixth Indosat Bonds”), in two series with a total face value of Rp1,080.0 billion. The Series A bonds, which have a face value of Rp760.0 billion, will mature on April 9, 2013 and the Series B bonds, which have a face value of Rp320.0 billion will mature on April 9, 2015. The Series A bonds bear interest at a fixed rate of 10.25% per annum and the Series B bonds bear fixed interest rate of 10.80% per annum. After the first anniversary of the issuance of the bonds, we have the right to buy back part or all of the bonds at market price, either temporarily or for the purpose of early settlement. On April 9, 2013, the Series A Sixth Indosat Bonds were paid in full.

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Seventh Indosat Bonds. On December 8, 2009, we issued our Indosat Bonds VII (the “Seventh Indosat Bonds”), in two series with a total face value of Rp1,300.0 billion. The Series A bonds, which have a face value of Rp700.0 billion, will mature on December 8, 2014 and the Series B bonds, which have a face value of Rp600.0 billion, will mature on December 8, 2016. The Series A bonds bear interest at a fixed rate of 11.25% per annum and the Series B bonds bear interest at a fixed rate of 11.75% per annum. After the first anniversary of the issuance of the bonds, we have the right to buy back part or all of the bonds at market price, either temporarily or for the purpose of early settlement.

Eighth Indosat Bonds. On June 28, 2012, we issued our Indosat Bonds VIII (the “Eighth Indosat Bonds”), in two series with a total face value of Rp2,700.0 billion. The Series A bonds, which have a face value of Rp1,200.0 billion, will mature on June 27, 2019 and the Series B bonds, which have a face value of Rp1,500.0 billion, will mature on June 27, 2022. The Series A bonds bear interest at a fixed rate of 8.625% per annum and the Series B bonds bear interest at a fixed rate of 8.875% per annum. After the first anniversary of the issuance of the bonds, we have the right to buy back part or all of the bonds at market price, either temporarily or for the purpose of early settlement.

Guaranteed Notes Due 2020

On July 29, 2010 we, through Indosat Palapa Company B.V. (“Indosat Palapa”) issued our Guaranteed Notes due 2020 with a total face value of US$650.0 million. The notes were issued at 99.478% of their principal amount and mature on July 29, 2020. The notes bear interest at the fixed rate of 7.375% per annum payable in semi-annual installment due on January 29 and July 29 of each year, commencing January 29, 2011. The notes will be redeemable at the option of Indosat Palapa, in whole or in part, at any time on or after July 29, 2015 at prices equal to 103.6875%, 102.4583%, 101.2292% and 100% of the principal amount during the 12-month period commencing July 29, 2015, 2016, 2017 and 2018 and thereafter, respectively, plus accrued and unpaid interest and additional amounts, if any. In addition, prior to July 29, 2013, Indosat Palapa may redeem up to a maximum of 35% of the original aggregate principal amount, with the proceeds of one or more public equity offerings of us at a price equal to 107.375% of the principal amount thereof, plus accrued and unpaid interest and additional amounts, if any. The notes are also redeemable at option of Indosat Palapa or us, in whole but not in part, at any time, at a price equal to 100% of principal amount thereof, plus any accrued and unpaid interest to (but not including) the redemption date any additional amounts, in the event of certain changes effecting withholding taxes in Indonesia and the Netherlands. Upon a change in control of Indosat (including sale, transfer, assignment, lease, conveyance or other disposition of all or substantially all of our assets), holders of the notes have the right to require Indosat Palapa to repurchase all or any part of such holders’ notes at a purchase price equal to 101% of principal amount thereof, plus accrued and unpaid interest and additional amounts, if any, to the purchase date.

The net proceeds, after deducting the underwriting fees and offering expenses, were received on July 29, 2010 and used (i) to fund the purchase of the outstanding guaranteed notes due 2010 and guaranteed notes due 2012 and any consent solicitation relating to, or redemption of, such notes and (ii) to refinance part of our other existing indebtedness. The notes are unconditionally and irrevocably guaranteed by Indosat.

Based on the notes indenture, we are required to comply with certain conditions, such as maintaining certain financial ratios. On June 5, 2012, Indosat Palapa amended the indenture governing the Guaranteed Notes due 2020 in accordance with the consent solicitation statement and related materials, dated May 21, 2012, upon its receipt and acceptance of the requisite number of consents from holders of record of the notes. On February 7, 2012, Indosat entered into an Asset Purchase Agreement with PT Tower Bersama Infrastructure Tbk and its subsidiary, PT Solusi Menara Indonesia, for the sale and leaseback of 2,500 wireless telecommunications towers. The amendments amended the existing exceptions in the indenture governing the Guaranteed Notes due 2020 with respect to qualified tower sales to permit Indosat to consummate the transactions contemplated by the Asset Purchase Agreement and add additional exceptions for dispositions of active infrastructure assets, such as fiber, transmission equipment and radio access network, to joint venture entities with which Indosat may enter into network sharing arrangements, without seeking the consent of holders.

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Export Credit Facility

On May 12, 2006, we entered into a term facility agreement with Finnish Export Credit Ltd as the original lender, and The Royal Bank of Scotland, N.V. (formerly known as ABN Amro Bank, N.V.) as the facility agent, for an export credit facility (the “Export Credit Facility”) in the aggregate principal amount of US$38.0 million. The Export Credit Facility tenor is 60 months from the date of the agreement and payments must be made in ten equal installments distributed evenly over the life of the facility. The Export Credit Facility has an interest rate of 4.15% per annum, which was calculated with reference to the commercial interest reference rate for U.S. dollars. Once amounts under the Export Credit Facility have been drawn down and repaid, such amounts do not become available for borrowing on a revolving basis. The Export Credit Facility contains certain financial covenants. During 2009 and 2010, we paid installments on this facility in the amount of US$7.6 million and US$7.6 million, respectively and in May 2011, we repaid the remaining outstanding balance under this facility.

Syari’ah Ijarah Bonds (Sukuk Ijarah)

The specific terms of each of our First Syari’ah Ijarah Bonds, Second Syari’ah Ijarah Bonds, Third Syari’ah Ijarah Bonds, Fourth Syari’ah Ijarah Bonds and Fifth Fyari’ah Ijarah Bonds (the “Syari’ah Ijarah Bonds”), are discussed below. The Syari’ah Ijarah Bonds are not secured by any specific assets or guaranteed by other parties and rank pari passu with our other unsecured debt.

In connection with the issuance of the Syari’ah Ijarah Bonds, we agreed to maintain certain covenants which are similar to the covenants contained in our Indosat Bonds. In addition, we are also prohibited from performing activities which contravene Syari’ah principles. Aside from these prohibitions, there are no material differences in the covenants between the Syari’ah Ijarah Bonds and the Indosat Bonds. On March 24, 2009, we held meetings with holders of our Indonesian rupiah-denominated bonds, including holders of our Syari’ah Ijarah Bonds, and obtained consents to amend to the definitions of “Debt” and “EBITDA”, to add new definitions for “Equity” and “Group” and to change the ratio of Debt to Equity from 1.75 to 1 to 2.5 to 1 in the trustee agreement governing these bonds.

First Syari’ah Ijarah Bonds. On June 21, 2005, we issued our Sukuk Ijarah Indosat I (the “First Syari’ah Ijarah Bonds”), which contain terms customary for Islamic financing facilities, with Bank Rakyat Indonesia acting as trustee. The First Syari’ah Ijarah Bonds had a total face value of Rp285.0 billion and matured on June 21, 2011. Holders of the First Syari’ah Ijarah Bonds received an Ijarah installment fee, payable on a quarterly basis. The total Ijarah installment fee be paid to the holders of the First Syari’ah Ijarah Bonds was Rp34.2 billion per annum. On June 21, 2011, these bonds were paid in full.

Second Syari’ah Ijarah Bonds. On May 29, 2007, we issued our Sukuk Ijarah Indosat II (the “Second Syari’ah Ijarah Bonds”), which contain terms customary for Islamic financing facilities, with Bank Rakyat Indonesia acting as trustee. The Second Syari’ah Ijarah Bonds have a total face value of up to Rp400.0 billion and mature in May 29, 2014. Holders of the Second Syari’ah Ijarah Bonds receive an Ijarah installment fee, payable on a quarterly basis. The total Ijarah installment fee to be paid to the holders of the Second Syari’ah Ijarah Bonds is Rp40.8 billion per annum. After the first anniversary of issuance of the Second Syari’ah Ijarah Bonds, we have the right to buyback part or all of such bonds at the then-prevailing market price.

Third Syari’ah Ijarah Bonds. On April 9, 2008, we issued our Sukuk Ijarah Indosat III (the “Third Syari’ah Ijarah Bonds”), which contain terms customary for Islamic financing facilities, with Bank Rakyat Indonesia acting as trustee. The Third Syari’ah Ijarah Bonds have a total face value of up to Rp570.0 billion and mature in April 9, 2013. Holders of the Third Syari’ah Ijarah Bonds receive an Ijarah installment fee, payable on a quarterly basis. The total Ijarah installment fee expected to be paid to the holders of the Third Syari’ah Ijarah Bonds is Rp58.4 billion per annum. After the first anniversary of the issuance of the Third Syari’ah Ijarah Bonds, we have the right to buyback part or all of such bonds at the then-prevailing market price. On April 9, 2013, these bonds were paid in full.

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Fourth Syari’ah Ijarah Bonds. On December 8, 2009, we issued our Sukuk Ijarah Indosat IV (the “Fourth Syari’ah Ijarah Bonds”), which contain terms customary for Islamic financing facilities, with Bank Rakyat Indonesia acting as trustee. The Fourth Syari’ah Ijarah Bonds have a total face value of Rp200.0 billion. The Series A Syari’ah Ijarah Bonds, which have a face value of Rp28.0 billion, will mature on December 8, 2014 and the Series B Syari’ah Ijarah Bonds, which have a face value of Rp172.0 billion, will mature on December 8, 2016. Holders of the Fourth Syari’ah Ijarah Bonds receive an Ijarah installment fee, payable on a quarterly basis. The total Ijarah installment fee expected to be paid to the holders of the Fourth Syari’ah Ijarah Bonds is Rp3.2 billion per annum for the Series A Fourth Syari’ah Ijarah Bonds and Rp20.2 billion per annum for the Series B Fourth Syari’ah Ijarah Bonds. After the first anniversary of the issuance of the Fourth Syari’ah Ijarah Bonds, we have the right to buyback part or all of such bonds at the then-prevailing market price.

Fifth Syari’ah Ijarah Bonds. On June 28, 2012, we issued our Sukuk Ijarah Indosat V (the “Fifth Syari’ah Ijarah Bonds”), which contain terms customary for Islamic financing facilities, with Bank Rakyat Indonesia acting as trustee. The Fifth Syari’ah Ijarah Bonds have a total face value of up to Rp300.0 billion and will mature on June 27, 2019. Holders of the Fifth Syari’ah Ijarah Bonds receive an Ijarah installment fee, payable on a quarterly basis. The total Ijarah installment fee expected to be paid to the holders of the Fifth Syari’ah Ijarah Bonds is Rp25.9 billion per annum. After the first anniversary of the issuance of the Fifth Syari’ah Ijarah Bonds, we have the right to buyback part or all of such bonds at the then-prevailing market price.

Goldman Sachs International Loan Facility

On May 30, 2007, we received from Goldman Sachs International (“GSI”) a loan amounting to Rp434.3 billion, which was received in U.S. dollars amounting to US$50.0 million, for the purchase of telecommunications equipment. The loan will mature on May 30, 2013. The loan bears interest at a fixed annual rate of 8.75%, which is payable quarterly every February 28, May 30, August 30 and November 30, commencing August 30, 2007, up to May 30, 2012.

The loan agreement provides an option for GSI to convert the loan into a U.S. dollar loan of US$50.0 million on May 30, 2012 (the “Conversion Option”). The fair value of the Conversion Option is presented as part of long-term debt. If GSI exercises such option, starting May 30, 2012, the loan will bear interest at the fixed annual rate of 6.45% on the principal amount of US$50.0 million. On May 30, 2012, GSI exercised the Conversion Option to convert the loan into a U.S. dollar loan of US$50.0 million as a result of which the loan bears interest at the fixed annual rate of 6.45% on the principal amount of US$50.0 million. The principal amount in U.S. dollars and interest thereon will be due on May 30, 2013.

We are required to notify GSI regarding of certain events which can result in loan termination, such as (i) certain changes affecting withholding taxes in the United Kingdom or Indonesia, (ii) default under our guaranteed notes due 2012, (iii) default under any notes issued or guaranteed by us where the settlement is in U.S. dollars or default under any notes issued or guaranteed by us where the settlement is in Indonesian rupiah, (iv) redemption, purchase or cancellation of the guaranteed notes due 2012 and there being no other U.S. dollar indebtedness outstanding upon such redemption, purchaser or cancellation and (v) a change of control. On June 24, 2008, GSI waived its rights to terminate the loan as a result of the change of control triggered by Qtel’s acquisition of a 40.81% interest in our issued and outstanding share capital in June 2008.

Bank Central Asia Loan Facilities

On August 28, 2007, we obtained a five-year Rp1,600.0 billion unsecured credit facility from Bank Central Asia (“BCA”) for the repayment of our Syndicated Loan Facility II and the purchase of telecommunications equipment. The loan bears (i) fixed annual interest rates for the first two years (9.75% on the first year and 10.5% on the second year) and (ii) floating interest rates for the remaining years based on the prevailing annual rate of three-month JIBOR plus 1.5% per annum; all interest is payable quarterly. On September 20, 2007, we obtained

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an additional credit facility of Rp400.0 billion from BCA. As a result, the aggregate principal amount under our credit facility with BCA is Rp2,000.0 billion. The repayment of the loan drawdowns will be made annually, as follows: (a) 10.0% of the total loan drawdowns in the first and second years after the first drawdown; (b) 15.0% of the total loan drawdowns in the third and fourth years after the first drawdown; and (c) 50.0% of the total loan drawdowns in the fifth year after the first drawdown. On September 27, October 26 and December 27, 2007, we made the first, second and third loan drawdowns totaling Rp2,000.0 billion. Under the loan agreement, we have agreed to certain covenants, including maintenance covenants, which are similar to the covenants contained in the Indosat Bonds. On September 27, 2008, September 25, 2009, September 27, 2010, and September 27, 2011, we paid the first, second, third and fourth semi-annual installment amounting to Rp200.0 billion, Rp200.0 billion, Rp300.0 billion and Rp300.0 billion, respectively. On September 27, 2012, we repaid in full the remaining outstanding amount under this facility amounting to Rp1,000.0 billion.

On September 17, 2008, we entered into a three-year unsecured credit facility agreement with BCA amounting to Rp500.0 billion for the purchase of, and/or the refinancing of debt incurred to purchase, telecommunications equipment. The loan bore interest at 3-month JIBOR plus 2.25% per annum. The repayment of the loan drawdowns were payable annually, as follows: (a) 20% of the total loan drawdowns in the first year, (b) 30% of the total loan drawdowns in the second year, and (c) 50% of the total loan drawdowns in the third year. On March 16, 2009, we made the loan drawdown amounting to Rp500.0 billion. Voluntary early repayment (in whole or for any part of the loan) was permitted with a penalty of 1% of the prepaid amount. Based on the loan agreement, we were required to comply with certain covenants, such as maintaining certain financial ratios. On March 16, 2010, we paid the first annual installment amounting to Rp100.0 billion. On October 19, 2010, we made an early repayment of this credit facility, amounting to Rp400.0 billion.

On February 12, 2009, we amended our five-year and three-year BCA credit facility agreements, based on the consent letter received on February 6, 2009, to change the definitions of “EBITDA”, to insert definitions for “Debt”, “Equity”, and “Group” and to change the ratio of Debt to Equity from 1.75 to 1 to 2.5 to 1 in the loan agreement governing this loan facility. On June 8, 2009, we entered into a five-year unsecured credit facility agreement with BCA amounting to Rp1,000.0 billion for the procurement of, and/or the refinancing of debt incurred to purchase, telecommunications equipment. The loan bore interest at 3-month JIBOR plus 4.00% per annum. The repayment of the loan drawdowns were payable annually, as follows: (a) 10% of the total loan drawdowns in the first and second years, (b) 15% of the total loan drawdowns in the third and fourth years, and (c) 50% of the total loan drawdowns in the fifth year. On June 25, 2009, we made the loan drawdown amounting to Rp1,000.0 billion. On June 25, 2010, we paid the first annual installment amounting to Rp100.0 billion. Voluntary early repayment (in whole or for any part of the loan) is permitted, subject to a 1% penalty of the prepaid amount, except for prepayment to refinance this credit facility. Based on the loan agreement, we are required to comply with certain covenants, such as maintaining certain financial ratios. On April 28, 2010, we received a letter from BCA regarding the change of interest rate from 3-month JIBOR plus 4.00% per annum to 3-month JIBOR plus 2.25% per annum, effective on June 25, 2010. On October 19, 2010, we made an early repayment of this credit facility, amounting to Rp900.0 billion.

On February 10, 2011, the Company entered into a credit agreement with BCA for a revolving credit facility with a maximum principal amount of Rp1,000.0 billion to fund the Company’s capital expenditures and general corporate expenditures. This facility is available from February 10, 2011 to February 10, 2014. On December 1, 2011, we entered into an amendment to our credit agreement with BCA to (i) increase the total principal amount available under the revolving credit facility to Rp1,500.0 billion, (ii) change the interest rate for drawdowns to 1-month JIBOR plus 1.25% per annum, from 1-month JIBOR plus 1.40% per annum, and (iii) to provide that the maturity date of loans made under the revolving credit facility shall be no later than February 10, 2014. Based on the credit agreement, we are required to comply with certain covenants, such as maintaining certain financial ratios. On June 17, 2011, we made our first drawdown of Rp500.0 billion and on July 15, 2011, we repaid Rp300.0 billion of the loan. On December 9, 2011, we made a drawdown of the remaining Rp1,300.0 billion available under the facility.

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On February 17, 2012 and March 17, 2012, we repaid an amount of Rp200.0 billion each. On March 30, 2012 and June 21, 2012, we made drawdowns of Rp200.0 billion and Rp400.0 billion, respectively. On May 30, 2012, June 29, 2012, July 5, 2012 and August 2, 2012, we repaid outstanding amounts of Rp200.0 billion, Rp200.0 billion, Rp650.0 billion and Rp650.0 billion, respectively. On September 26, 2012, September 28, 2012, December 12, 2012 and December 26, 2012, we made drawdowns of Rp200,0 billion, Rp500.0 billion, Rp150.0 billion and Rp150.0 billion, respectively.

Bank Mandiri Loan Facilities

On September 18, 2007, we obtained a five-year unsecured credit facility from Bank Mandiri amounting to Rp2,000.0 billion for the purchase of telecommunications equipment. The loan bears interest at (i) fixed annual rates for the first two years (9.75% on the first year and 10.5% on the second year), and (ii) floating rates for the remaining years based on the prevailing annual rate of average three-month JIBOR plus 1.5% per annum; all interest is payable quarterly. The repayment of the loan drawdowns will be made annually, as follows: (a) 10.0% of the total loan drawdowns in the first and second years after the first drawdown; (b) 15.0% of the total loan drawdowns in the third and fourth years after the first drawdown; and (c) 50.0% of the total loan drawdowns in the fifth year after the signing date of the agreement. On September 27 and December 27, 2007, we made the first and second loan drawdowns totaling Rp2,000.0 billion. Based on the loan agreement, we have agreed to certain covenants, including maintaining certain financial ratios. On September 27, 2008, September 25, 2009, September 27, 2010 and September 27, 2011, we paid the first, second, third and fourth annual installments, amounting to Rp200.0 billion, Rp200 billion, Rp300 billion and Rp300.0 billion, respectively. On March 23, 2009, we entered into an agreement with Bank Mandiri to amend the definitions of “EBITDA”, to insert new definitions for “Debt”, “Equity”, and “Group” and to change the ratio of Debt to Equity in the loan agreement governing this loan facility. On September 14, 2012, we repaid in full the remaining outstanding amount under this facility amounting to Rp1,000.0 billion.

On July 28, 2009, we entered into a five-year unsecured credit facility agreement with Mandiri amounting to Rp1,000.0 billion for general corporate purposes. The loan bears interest at an average rate of 3-month JIBOR plus 4.00% per annum. On July 31, 2009, the Company drew down Rp1,000.0 billion from this credit facility. The repayment of the loan drawdowns are made annually, as follows: (a) 10% of the total loan drawdowns in the first and second years from the first drawdown, (b) 15% of the total loan drawdowns in the third and fourth years from the first drawdown, and (c) 50% of the total loan drawdowns in the fifth year after the signing of the agreement. Voluntary early repayment (in whole or for any part of the loan) is permitted, subject to a 2% penalty of the prepaid amount. Based on the loan agreement, we were required to comply with certain covenants, such as maintaining certain financial ratios. On May 20, 2010, we received a letter from Mandiri regarding the change of interest rate from average 3-month JIBOR plus 4.00% per annum to average 3-month JIBOR plus 2.25% per annum, effective on May 31, 2010. On July 30, 2010, we paid the first annual installment amounting to Rp100.0 billion. On November 15, 2010, we made an early repayment of Rp900.0 billion representing the remaining outstanding balance of loan drawdowns under this credit facility.

On June 21, 2011, we entered into a credit agreement providing for a three-year unsecured revolving credit facility from Bank Mandiri in a maximum principal amount of Rp1,000.0 billion for working capital, capital expenditures and refinancing purposes. On December 5, 2011, we entered into an amendment of the credit agreement with Bank Mandiri to (i) increase the maximum amount available under the loan facility to Rp1,500.0 billion and (ii) change the interest rate for drawdowns to 1-month JIBOR plus 1.25% per annum, from 1-month JIBOR plus 1.40% per annum. This facility is available from June 21, 2011 to June 20, 2014. Each drawdown under this facility has a term of three months, which may be extended a further three months upon the submission of a written application for such an extension by Indosat to Bank Mandiri. Based on the credit agreement, we are required to comply with certain covenants, such as maintaining certain financial ratios. On August 2, 2011, we made our first drawdown of Rp300.0 billion and on December 14, 2011, we made a drawdown of the remaining Rp1,200.0 billion available under the facility.

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On February 2, 2012, we repaid an amount of Rp200.0 billion outstanding under this facility. On March 28, 2012, we made a drawdown of Rp200.0 billion. On May 14, 2012, we repaid an amount of Rp200.0 billion outstanding under this facility. On June 21, 2012, we made a drawdown of Rp.200.0 billion. On June 29, 2012, July 5, 2012 and August 2, 2012, we repaid an amount of Rp200.0 billion, Rp650.0 billion and Rp650.0 billion, respectively. On December 12, 2012 and December 26, 2012, we made a drawdown of Rp150,0 billion each.

Bank DBS Indonesia Loan Facility

On November 1, 2007, we obtained a five-year credit facility from Bank DBS Indonesia for Rp500.0 billion for the purchase of telecommunications equipment. The loan bears interest at (i) fixed annual rates for the first two years (9.7% on the first year and 10.4% on the second year), and (ii) floating rates for the remaining years based on the prevailing annual interest rate of three-month certificates of Bank Indonesia plus 1.5% per annum; all interest is payable quarterly. The repayment of the loan drawdowns will be made annually, as follows: (a) 10.0% of the total loan drawdowns in the first and second years after the first drawdown; (b) 15.0% of the total loan drawdowns in the third and fourth years after the first drawdown; and (c) 50.0% of the total loan drawdowns in the fifth year after the first drawdown. Based on the loan agreement, we have agreed to certain covenants, including maintaining certain financial ratios. On January 31, 2008, we drew down Rp500.0 billion from the facility. On March 25, 2009, we entered into an agreement with Bank DBS Indonesia to insert new definitions for “Debt”, “EBITDA”, “Equity”, and “Group” and to change the ratio of Debt to Equity in the loan agreement governing this loan facility. On January 30, 2009, we paid the first annual installment amounting to Rp50.0 billion, On March 25, 2009, the Company amended the credit facility agreement based on the consent letter received on February 27, 2009. The amendment included changes in the definition of certain terms and the financial ratios required to be maintained. On February 1, 2010, we paid the second annual installment amounting to Rp50.0 billion. On October 30, 2010, we made an early repayment of this credit facility amounting to Rp400.0 billion.

HSBC Satellite Financing and Loan Facility

On November 27, 2007, we signed two unsecured facility agreements with HSBC France and one unsecured facility agreement with The Hongkong and Shanghai Banking Corporation Limited, Jakarta Branch (“HSBC Jakarta”) to finance our new telecommunications satellite. These combined export credit and commercial financing facilities consist of the following:

• a 12-year term facility agreement amounting to US$157.2 million to finance the payment of 85.0% of the French Content under the Palapa-D satellite contract, plus 100% of the COFACE Premium, as such terms are defined in the facility agreement. The loan bears fixed annual interest at a fixed rate of 5.69% per annum, which is payable semi-annually. On March 29, 2010, September 29, 2010, March 29, 2011, September 29, 2011, March 29, 2012 and September 28, 2012, we paid the first, second, third, fourth, fifth and sixth semi-annual installments amounting to US$7.9 million each;

• a 12-year term facility agreement amounting to US$44.2 million to finance the payment of 85.0% of the amounts payable under the Launch Service Contract (as defined in the term facility agreement) with respect to our Palapa D Satellite. The loan bears floating interest rate based on U.S. dollars at LIBOR plus 0.35% per annum, which is payable semi-annually. On March 29, 2010, September 29, 2010, March 29, 2011, September 29, 2011, March 29, 2012 and September 28, 2012, we paid the first, second, third fourth, fifth and sixth semi-annual installments amounting to US$2.2 million each; and

• a nine-year Commercial Facility Agreement amounting to US$27.0 million to finance the construction and launch of the satellite and the payment of the premium associated with the medium-long term buyer credit insurance policy issued in connection with the Sinosure Facility. The loan bears floating interest rate based on U.S. dollars at LIBOR plus 1.45% per annum, which is payable semi-annually. On March 10, 2008, HSBC Jakarta transferred its rights and obligations under the Commercial Facility

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Agreement to PT Bank CIMB Niaga Tbk and Bank of China Limited, Jakarta Branch. On November 27, 2009, May 27, 2010, November 29, 2010, May 26, 2011 and November 28, 2011, we paid the first, second, third, fourth and fifth semi-annual installments, respectively, amounting to US$1.4 million each. On May 29, 2012 and November 27, 2012 we paid the sixth and seventh semi-annual installments, respectively, amounting to US$2.0 million each.

The facilities contain certain financial covenants. On March 18, 2009, we entered into agreements with HSBC France and HSBC Jakarta to amend the definitions of “Debt”, “EBITDA”, and “Equity” and the ratio of Debt to Equity in our COFACE Term Facility Agreement, Sinosure Term Facility Agreement and Commercial Facility Agreement, as applicable. According to the agreement, we are required to maintain: (i) equity capital in excess of Rp5,000.0 billion, (ii) a debt to equity ratio not to exceed 2.5:1, (iii) an EBITDA to interest ratio not to be less than 2.5:1, and (iv) a Debt to EBITDA ratio not to exceed 3.5:1.

In addition, on July 20, 2005, the Company entered into a Corporate Facility Agreement with HSBC, which has subsequently been amended several times, to finance our short term working capital needs. The facility consists of a combined limit in the amount of US$30.0 million, comprising a revolving loan facility with a limit of US$30.0 million (including revolving loans denominated in rupiah of up to Rp255.0 billion) and an overdraft facility with a limit of US$2.0 million (including a Rupiah-denominated overdraft facility of up to Rp17.0 billion). The expiration date of the facility is April 30, 2013. We have not drawn on this facility as of December 31, 2012.

ING/DBS Syndicated Loan Facility

On June 12, 2008, we entered into a US$450.0 million syndicated loan facility with 13 banks and financial institutions, with ING Bank N.V., Singapore Branch and DBS Bank Ltd. serving as arrangers. The amount of interest to be paid on the outstanding amount of the loan will be the aggregate of (i) the applicable margin of 1.85% per annum for non-Indonesian lenders or 1.90% per annum for lenders resident in Indonesia and (ii) LIBOR. The repayment of the loan drawdowns will be made in semi-annual installments commencing June 12, 2011. On June 10, 2011 and December 12, 2011, we made our first and second semi-annual repayments amounting to US$112.5 million and US$108.0 million, respectively. On February 24, 2009, we entered into an agreement with the majority lenders to amend the definitions of “Debt”, “EBITDA”, and “Equity” and the ratio of Debt to Equity in our ING/DBS Syndicated Loan Facility. Pursuant to the terms of the ING/DBS Syndicated Loan Facility agreement, as amended by the deed of amendment, we have agreed to certain covenants, including but not limited to the following maintenance covenants:

• a ratio of total debt to EBITDA of less than 3.5 to 1;

• a total debt to equity ratio of 2.5 to 1; and

• a ratio of EBITDA to interest expense, as reported as at the end of each financial year and as at the end of each of the first three quarters of our financial year, of at least 2.5 to 1.

The repayment of the loan drawdowns will be made semi-annually, as follows: (a) 25% of the total loan drawdowns in the third year after the signing date of the agreement (first repayment date), (b) 24% of the total loan drawdowns on the sixth month after the first repayment date, (c) 8% each of the total loan drawdowns on the 12^th and 18^th months after the first repayment date, and (d) 35% of the total loan drawdowns on the 24^th month after the first repayment date.

On September 26 and October 30, 2008, the Company received the first and second drawdowns from this credit facility totaling US$450.0 million. As of December 31, 2012, the outstanding balance owed on this facility totaled US$157.5 million.

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AB Svensk Exportkredit (“SEK”) Loan Facility Guaranteed by Export Kredit Namnden (“EKN”)

On August 18, 2009, we obtained credit facilities from SEK, guaranteed by EKN, an export credit agency of the Kingdom of Sweden, for the maximum total amount of US$315,000,000 to be used for the purchase of Ericsson telecommunication equipment, with The Hongkong and Shanghai Banking Corporation Limited (“HSBC”), Hong Kong and The Royal Bank of Scotland N.V. (formerly known as ABN AMRO Bank N.V.), Hong Kong Branch as the original lenders and arrangers, while HSBC Bank PLC, London, United Kingdom acted as the facility agent and EKN agent. On September 2, 2009, the original lenders transferred such rights and obligations to SEK, pursuant to the terms of the agreement.

The credit facilities consist of facilities A, B and C with maximum amounts of US$100.0 million, US$155.0 million and US$60.0 million, respectively. Facility A bears interest at LIBOR plus 0.25% per annum, together with SEK funding costs and an EKN premium margin. Facility B and Facility C bear interest at 0.05% per annum plus 2.60% per annum plus the EKN Premium Margin. The repayment of each of facilities A, B and C shall be made in fourteen installments starting six months after May 31, 2009, February 28, 2010 and November 30, 2010, respectively. Based on the agreement, we are required to comply with certain covenants, such as maintaining certain financial ratios, which are substantially the same as the covenants under the ING/DBS Syndicated Loan Facility. In addition, we are required to maintain a minimum consolidated equity of at least Rp5,000.0 billion. As of December 31, 2011, we have drawn US$100.0 million, US$155.0 million and US$60.0 million from facilities A, B and C, respectively.

On November 30, 2009, May 27, 2010, November 30, 2010, May 27, 2011, November 30, 2011, May 30, 2012 and November 30, 2012 the Company paid the first, second, third, fourth, fifth , sixth and seventh semi-annual installments, respectively, for Facility A amounting to US$7.1 million each. On August 28, 2010, February 28, 2011, August 25, 2011, February 28, 2012 and August 28, 2012 the Company paid the first, second, third, fourth and fifth semi-annual installment for Facility B amounting to US$11.1 million each. On May 27, 2011, November 30, 2011, May 27, 2012 and November 30, 2012 we paid the first, second, third and fourth semi-annual installment for Facility C amounting to US$4.3 million each.

Bank Sumitomo Mitsui Indonesia Loan Facilities

On December 26, 2012, we entered into a credit agreement providing for a three-year unsecured revolving credit facility from PT Bank Sumitomo Mitsui Indonesia in a maximum principal amount of Rp650.0 billion for working capital, capital expenditures and refinancing purposes. The interest rate for drawdowns is 1-month or 3-months JIBOR plus 1.25% per annum. This facility is available from December 26, 2012 to December 26, 2015. Each drawdown under this facility has a term of one or three months, which may be extended a further one or three months upon the submission of a written application for such an extension by Indosat to PT Bank Sumitomo Mitsui Indonesia. Based on the credit agreement, we are required to comply with certain covenants, such as maintaining certain financial ratios. On December 27, 2012, we made our first drawdown of Rp100.0 billion.

Lintasarta

Lintasarta’s long-term debt comprises of certain investment credit facilities from CIMB Niaga Tbk, formerly PT Bank Niaga Tbk and unsecured limited bonds. As of December 31, 2012, the investment credit facility from CIMB Niaga was fully repaid.

Investment Credit Facility V. On July 10, 2007, Lintasarta obtained a credit facility from CIMB Niaga amounting to Rp50.0 billion for the purchase of telecommunications equipment, computers and other supporting facilities. The loan bears interest at the prevailing annual rate for one-month certificates of Bank Indonesia plus 2.25% per annum. We commenced quarterly repayment of the principal on October 10, 2008 in the amount of Rp5.0 billion. On January 10, 2011, this facility was fully repaid.

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Investment Credit Facility VI. On February 24, 2009, Lintasarta obtained a credit facility from CIMB Niaga amounting to Rp75.0 billion for the purchase of telecommunications equipment, computers and other supporting facilities. The loan bears fixed annual interest at a fixed rate of 14.50% per annum (subject to change by CIMB Niaga based on market conditions), which is payable quarterly. The maturity date of the loan is August 24, 2012. The total outstanding principal amount of the loan as of December 31, 2012 was Rp22.5 billion, which is scheduled to be repaid in three installments on February 24, May 24, and August 24, 2012. On August 24, 2012, this facility was fully repaid.

Limited Bonds I. On June 2, 2003, Lintasarta agreed with its stockholders to issue limited bonds to stockholders totaling Rp40.0 billion, including our portion of Rp9.6 billion. Such limited bonds are unsecured and had an initial maturity date of June 2, 2006. The bonds bear interest at the fixed rate of 16.0% per annum for the first year and floating interest rates for the following years based on the average three-month time deposit rates of PT Bank Mandiri (Persero) Tbk, PT Bank Negara Indonesia (Persero) Tbk, PT Bank Rakyat Indonesia (Persero) Tbk and PT Bank Tabungan Negara (Persero) plus a 3.0% margin, with a maximum rate of 19.0% per annum and a minimum rate of 11.0% per annum. Interest is payable quarterly from September 2, 2003. On June 14, 2006, Lintasarta agreed with the holders to extend the maturity date from June 2, 2006 to June 2, 2009 and the nominal value of the limited bonds became Rp34.9 billion, including our portion of Rp9.6 billion. On June 2, 2009, Lintasarta repaid a portion of the limited bonds amounting to Rp8,303 million. On August 25, 2009, the agreement governing the Limited Bonds I was amended to amend the face value of the bonds to become Rp26.6 billion, including our portion of Rp9.6 billion, extend the maturity date to June 2, 2012 and to amend the floating interest rate to be based on JIBOR plus 4%, not to exceed 19%, with a minimum floating interest rate of 12.75%. On December 28, 2011, Lintasarta repaid a portion of the limited bonds amounting to Rp9.6 billion, which is our portion. On January 31, 2012, Lintasarta repaid the remaining Rp17.0 billion outstanding under these bonds.

Limited Bonds II. On June 14, 2006, Lintasarta entered into an agreement with its stockholders for the former to issue Limited Bonds II amounting to Rp66.2 billion, including our portion of Rp35.0 billion. The limited bonds represent unsecured bonds which were originally set to mature on June 14, 2009 and bore interest at the floating rates determined using the average 3 month rupiah time deposit rates with PT Bank Mandiri (Persero) Tbk, PT Bank Negara Indonesia (Persero) Tbk, PT Bank Rakyat Indonesia (Persero) Tbk and PT Bank Tabungan Negara (Persero) plus a fixed premium of 3.0%. The maximum limit of the floating rates was 19.0% per annum and the minimum limit was 11.0% per annum. The interest is payable on a quarterly basis starting September 14, 2006. The proceeds of the limited bonds were used for capital expenditure to expand Lintasarta’s telecommunications peripherals.

On July 17, 2006, Lintasarta obtained approval from CIMB Niaga on the issuance of the limited bonds.

On June 14, 2009, Lintasarta paid a portion of the Limited Bonds amounting to Rp6.2 billion. Based on the Minutes of the Joint Meeting of Lintasarta’s Boards of Commissioners and Directors held on May 20, 2009, the representatives of Lintasarta’s stockholders agreed to extend the maturity date of the remaining Limited Bonds II of Rp60.0 billion, including our portion of Rp35.0 billion, to June 14, 2012 and to increase the minimum limit of the floating interest rates 12.75%. On August 25, 2009, the Limited Bonds II agreement, after being amended to accommodate the changes in maturity date and minimum limit of floating interest rates, was finalized. On December 28, 2011, Lintasarta repaid a portion of the Limited Bonds II amounting to Rp35.0 billion, which is our portion. Subsequently, on February 29, 2012, Lintasarta repaid the remaining Rp25.0 billion outstanding under these bonds.

Dividend Practice

Our shareholders determine dividend payouts at the Annual General Meeting of Shareholders pursuant to recommendations from our Board of Directors. At our 2010, 2011 and 2012 Annual General Meetings of Shareholders, our shareholders declared final cash dividends amounting to 50.0% of our net income for each of

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the years ended December 31, 2009, 2010 and 2011, respectively. We intend to continue to recommend paying dividends in such amounts to allow us to meet sound financial governance and investor expectations.

Capital Resources

We believe that our cash flow from operations and drawings from our existing credit facilities, as well as a portion of the cash proceeds from the Tower Sale Transaction completed in 2012, will provide sufficient financing for our anticipated capital expenditures, anticipated debt repayment and interest obligations and other operating needs under our current business plan. However, we face liquidity risks if certain events occur, including but not limited to, slower than expected growth in the Indonesian economy, downgrading of our debt ratings or deterioration of our financial performance or financial ratios.

In the event we cannot finance our planned capital expenditures with internally generated cash flows, we may seek external sources of funding. Our ability to raise additional debt financing will be subject to certain covenants in our existing indebtedness. We cannot assure you that we will be able to obtain suitable financing arrangements (including vendor or other third-party financing) for our planned capital expenditures. In the event that we are unable to find such additional external funding sources, we may elect to reduce our planned capital expenditures. Such reduction in planned capital expenditures may have an adverse effect on our operating performance and our financial condition.

Capital Expenditures

Historical Capital Expenditures

From January 1, 2010 through December 31, 2012, we had capital expenditures totaling Rp20,913.3 billion (US$2,162.7 million), which were primarily used to purchase equipment and services from foreign suppliers in connection with the development of our cellular network. We had capital expenditures of Rp8,407.5 billion (US$869.4 million) during the year ended December 31, 2012, with such investment predominantly focused on optimizing and enhancing the capacity and quality of our existing cellular, fixed and MIDI network and telecommunications infrastructure.

Capital Expenditures for 2013

Under our capital expenditure program for our various businesses, our planned capital expenditures are slightly more than the amounts spent in 2010, 2011 and 2012. Our capital expenditure program currently focuses on optimizing and enhancing the capacity and quality of our existing cellular, fixed and MIDI network and telecommunications infrastructure. For the years ended December 31, 2010, 2011 and 2012, our actual consolidated capital expenditures totaled Rp5,986.0 billion, Rp6,519.8 billion and Rp8,407.5 billion (US$869.4 million), respectively. During 2013, we intend to allocate approximately Rp8,627.5 billion (US$898.7 million) for new capital expenditures, which, taken together with estimated actual capital expenditures expended for 2013 for capital expenditure commitments in prior periods, will result in approximately Rp11,358.7 billion (US$1,174.6 million) total actual capital expenditures for 2013. We intend to allocate our capital expenditures for 2013 as follows:

• Cellular network investment: We plan to apply a large majority of our capital expenditures to finance the continued enhancement and expansion of the capacity and coverage of our cellular network.

• Other investment: We plan to invest the remainder of our capital expenditures budget in non-cellular network areas and continue to provide them with voice, long-distance and MIDI services and make improvements to our backbone.

The foregoing amounts represent our budgeted investment plans; actual expenditures on a cash basis will vary depending on several factors, including the method of financing and timing of completion of delivery of

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equipment and services purchased. Historically, expenditure on a cash basis trails budgeted expense by approximately at least 20.0% of our budget. As of December 31, 2012, we had commitments for capital expenditures of Rp11,358.7 billion (US$1,183.2 million), primarily relating to the enhancement and expansion of the capacity and coverage of our cellular network.

The foregoing capital expenditure plan is based on our understanding of current market and regulatory conditions and we may amend our plans in response to changes in such conditions. In particular, depending on the regulatory framework for other wireless services, we may decide to increase our investment in fixed wireless access networks and services, either through increased capital expenditures, reallocation of our existing planned expenditures, through revenue-sharing schemes or a combination of the foregoing. Revenue-sharing schemes would include partnerships with private investors under which such investors would finance construction of a project in exchange for revenues from the project, similar to a build-operate-transfer structure.

Historically, we have funded our capital expenditures through internal resources and cash flow from operations, as well as debt financings through bank loans and the capital markets. We expect to continue to finance our capital expenditures through such sources. In addition, we also applied a portion of the cash proceeds from the Tower Sale Transaction completed in 2012 towards funding capital expenditures. We face liquidity risk if certain events occur, including but not limited to, slower than expected growth in the Indonesian economy, downgrading of our debt ratings or deterioration of our financial performance or financial ratios. If we cannot raise the amounts needed to support our planned capital expenditures for 2013, we may be unable to improve or expand our cellular telecommunications infrastructure or update our other technology to the extent necessary to remain competitive in the Indonesian telecommunications market, which would affect our financial condition, results of operations and prospects.

Critical Accounting Policies

Our consolidated financial statements have been prepared in accordance with IFRS. References to IFRS include the application of International Financial Reporting Standards, International Accounting Standards (“IAS”), Interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”) and its predecessor the former Standards Interpretation Committee (“SIC”).

The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as well as the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management bases its estimates and assumptions on historical experience and other factors that are believed to be reasonable under the circumstances. We continually evaluate such estimates and assumptions. Actual results could differ from those estimates under different assumptions or actual conditions. We believe that, of our significant accounting policies, the following may involve a higher degree of judgment or complexity.

Goodwill and Other Intangible Assets

The consolidated financial statements and results of operations reflect acquired businesses after the completion of the respective acquisition. We account for the acquired businesses using the acquisition method of accounting which requires extensive use of accounting estimates and judgments to determine the fair market values of the acquiree’s identifiable assets and liabilities at the acquisition date. Any excess in the purchase price over the fair market values of the net assets acquired is recorded as goodwill in the consolidated statements of financial position. Thus, the numerous judgments made in estimating the fair market value to be assigned to the acquiree’s assets and liabilities can materially affect our financial performance.

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Estimating Useful Lives of Property and Equipment and Intangible Assets

We estimate the useful lives of our property and equipment and intangible assets based on expected asset utilization as anchored on business plans and strategies that also consider expected future technological developments and market behavior. The estimation of the useful lives of property and equipment is based on our collective assessment of industry practice, internal technical evaluation and experience with similar assets. The estimated useful lives are reviewed periodically and are updated if expectations differ from previous estimates due to physical wear and tear, technical or commercial obsolescence and legal or other limitations on the use of the assets. It is possible, however, that future results of operations could be materially affected by changes in the estimates brought about by changes in the factors mentioned above.

The amounts and timing of recorded expenses for any period will be affected by changes in these factors and circumstances. A reduction in the estimated useful lives of our property and equipment will increase the recorded operating expenses and decrease non-current assets. An extension in the estimated useful lives will decrease the recorded operating expenses and increase non-current assets.

Impairment of non-financial assets

An impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs to sell and its value in use. The fair value less costs to sell calculation is based on available data from binding sales transactions in arm’s length transactions of similar assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a discounted cash flow model. The cash flows are derived from the budget for the next five years and do not include restructuring activities that we are not yet committed to or significant future investments that will enhance the asset’s performance of the cash generating unit being tested. The recoverable amount is most sensitive to the discount rate used for the discounted cash flow model as well as the expected future cash-inflows and the growth rate used for extrapolation purposes.

Estimation of Pension Cost and Other Employee Benefits

The cost of our defined benefit plan and present value of our pension obligation are determined using the projected-unit-credit method. Actuarial valuation includes making various assumptions which consist of, among other things, discount rates, expected rates of return on plan assets, rates of compensation increases and mortality rates. Actual results that differ from our assumptions are recognized as income or expense when the net cumulative unrecognized actuarial gains and losses at the end of the previous reporting year exceed 10% of the higher of the present value of the defined benefit obligation and the fair value of plan assets at that date. Due to the complexity of valuation, the underlying assumptions and their long-term nature, a defined benefit obligation is highly sensitive to changes in assumptions.

While we believe that our assumptions are reasonable and appropriate, significant differences in our actual experience or significant changes in our assumptions may materially affect the costs and obligations of pension and other long-term employee benefits. All assumptions are reviewed at each reporting date.

Further details about the assumptions are given in Note 29 to our audited consolidated financial statements.

Recoverability of Deferred Income Tax Assets

We review the carrying amounts of deferred income tax assets at the end of each reporting period and reduce these to the extent that it is no longer probable that sufficient taxable income will be available to allow all or part of the deferred income tax assets to be utilized. Our assessment on the recognition of deferred income tax assets on deductible temporary differences is based on the level and timing of forecasted taxable income of the subsequent reporting periods. This forecast is based on our past results and future expectations on revenues and expenses as well as future tax planning strategies. However, there is no assurance that sufficient taxable income will be generated to allow all or part of deferred income tax assets to be utilized.

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Estimating Allowance for Impairment Losses on Receivables

If there is objective evidence that an impairment loss has been incurred in trade receivables, we estimate the allowance for impairment losses related to their trade receivables that are specifically identified as doubtful for collection. The level of allowance is evaluated by management on the basis of factors that affect the collectability of the accounts. In these cases, we use judgment based on the best available facts and circumstances, including but not limited to, the length of our relationship with the customers and the customers’ credit status based on third-party credit reports and known market factors, to record specific reserves for customers against amounts due in order to reduce our receivables to amounts that they expect to collect. These specific reserves are re-evaluated and adjusted as additional information received affects the amounts estimated.

In addition to specific allowance against individually significant receivables, we also assess a collective impairment allowance against credit exposure of our customers which are grouped based on common credit characteristic, which, although not specifically identified as requiring a specific allowance, have a greater risk of default than when the receivables were originally granted to customers. This collective allowance is based on historical loss experience using various factors such as historical performance of the customers within the collective group, deterioration in the markets in which the customers operate, and identified structural weaknesses or deterioration in the cash flows of debtors.

Determination of Fair Values of Financial Assets and Financial Liabilities

We carry certain financial assets and liabilities at fair values, which require extensive use of accounting estimates and judgments for the fair values of financial assets and liabilities. Where the fair value of financial assets and financial liabilities recorded in the statements of financial position cannot be derived from active markets, their fair value is determined using valuation techniques including the discounted cash flow model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. The judgments include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments. Further details about the fair value measurement are given in Note 2f11 to our audited consolidated financial statements included elsewhere in this annual report.

Exchange of asset transactions

During 2010 to 2012, we entered into several contracts for the exchange of assets for certain of our existing cellular technical equipment with third party suppliers. For the exchange of assets transactions, we evaluate whether the transactions contain commercial substance based on IAS 16, which requires us to make judgments and estimates of the future cash flow and the fair value of the assets received and given up as a result of the transactions. Management considered the exchange of assets transactions to have met the criteria of commercial substance. However, the fair values of neither the assets received nor the assets given up could be measured reliably, hence, their values were measured at the carrying amounts of the assets given up plus any cash consideration paid.

Leases

We are a party to various lease agreements either as a lessee or a lessor in respect of certain property and equipment. As provided in IAS 17, “Leases,” a lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership and as an operating lease if it does not.

As a lessee, our finance leases are capitalized at the commencement of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Finance lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognized in finance costs in profit or loss.

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An asset subject to a finance lease is depreciated over its useful life. However, if there is no reasonable certainty that we will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of its estimated useful life and the lease term. The current portion of obligations under finance leases are presented as part of Other Current Financial Liabilities. In contrast, operating lease payments are recognized as an operating expense in profit or loss on a straight-line basis over the lease term.

During the year ended December 31, 2012, following the evaluation of a sale and leaseback transaction, we reassessed the classification of all of our lease arrangements. Accordingly, we determined that the majority of our historical lease-in transactions were finance leases and that our historical lease-out transactions should have been classified as operating leases. See Note 2d—Summary of Significant Accounting Policies to our consolidated financial statements included elsewhere in this annual report for the restatement relating to leases.

We have classified a number of our tower leases as finance leases due to the fact that these leases meet at least one of the eight factors set out in IAS 17 to be considered when determining whether substantially all the risks and rewards incidental to ownership have been transferred. All of our other leases are classified as operating leases.

The classification of leases under which we are either a lessee or a lessor requires that we make judgments and estimates in determining whether substantially all of the risks and rewards incidental to ownership of the leased assets have been transferred. While we believe our classification of certain of our tower leases as finance leases is reasonable and appropriate, we continue to evaluate the most appropriate treatment of these tower leases.

Determining whether a lease transaction is a finance lease or an operating lease is a complex issue and requires substantial judgment as to whether the lease agreement transfers substantially all the risks and rewards of ownership to or from us. Careful and considered judgment is required on various complex aspects that include, but are not limited to, the fair value of the leased asset, the economic life of the leased asset, whether renewal options are included in the lease term and determining an appropriate discount rate to calculate the present value of the minimum lease payments.

Classification as a finance lease or operating lease determines whether the leased asset is capitalized and recognized in the consolidated statement of financial position. In sale-and-leaseback transactions, the classification of the leaseback arrangements determines how the gain or loss on the sale transaction is recognized. It is either deferred and amortized (finance lease) or recognized in the consolidated statement of comprehensive income immediately (operating lease).

New Accounting Standards and Interpretations to Existing Standards Effective Subsequent to December 31, 2012

Please see Note 2e—Summary of Significant Accounting Policies to the accompanying consolidated financial statements in Item 19 for a discussion of new accounting standards that became effective subsequent to December 31, 2012 and their anticipated impact on our consolidated financial statements for the current and future periods.

C. RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.

For the three years ended December 31, 2010, 2011 and 2012, we did not conduct significant research and development activities. In 2012, we obtained the license to use 900MHz for 3G services, which we expect will improve our data services quality as well as our capital expenditure and operational expenditure in the long run.

D. TREND INFORMATION

Please refer to the introductory discussion to “—Operating and Financial Review and Prospects—Operating Results” above for a detailed discussion of significant trends impacting our operating results and financial

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condition. See also “Item 3: Key Information—Risk Factors” for more information regarding why reported financial information may not necessarily be indicative of future operating results.

In January and December 2011, the Company and Lintasarta, respectively, each introduced an organizational restructuring which forms part of our transformation program that began in 2009 to increase our productivity and improve our longer-term operating results. We and Lintasarta each offered special compensation packages to employees who meet certain criteria as determined by us and Lintasarta respectively, and who opted to end their employment relationship with us or Lintasarta, respectively, as part of such organizational restructuring under our and Lintasarta’s voluntary separation scheme (“VSS Program”). As of December 31, 2011, there were 944 and 54 employees of the Company and Lintasarta, respectively, who participated in the VSS Program.

E. OFF-BALANCE SHEET ARRANGEMENTS

As of December 31, 2012, we had no off-balance sheet arrangements that were reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

F. TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS

As of December 31, 2012, we had contractual obligations in the amount of US$2,111.5 million in foreign currency denominated contracts and Rp17,556.7 billion in Indonesian rupiah-denominated contracts. The foreign currency denominated contractual obligations require payments totaling US$520.3 million in 2013, US$322.7 million from 2014 to 2015, US$275.3 million from 2016 to 2017 and US$993.1 million from 2018 and thereafter. The Indonesian rupiah-denominated contractual obligations require payments totaling Rp3,762.7 billion in 2013, Rp5,752.4 billion from 2014 to 2015, Rp3,556.8 billion from 2016 to 2017 and Rp4,484.9 billion from 2018 and thereafter. The table below sets forth information relating to certain of our contractual obligations as of December 31, 2012:

	Payments due by the periods ending December 31
	Total				2013				2014-2015				2016-2017				2018 and thereafter
	Rp		US$		Rp		US$		Rp		US$		Rp		US$		Rp		US$
	(Rp in billions and US$ in millions)
Contractual obligations:
Short-term loan		300.0		—		300.0		—		—		—		—		—		—		—
Loans payable		1,100.0		557.2		—		276.7		1,100		138.4		—		101.8		—		40.3
Bonds payable		9,150.0		650.0		1,330.0		—		2,678.0		—		2,142.0		—		3,000.0		650.0
Interest payable on loans and bonds		4,811.9		532.7		1,140.2		84.8		1,602.2		146.8		1,093.4		129.5		976.1		171.6
Obligations under finance lease		1,155.8		229.4		111.2		16.6		214.5		37.5		321.3		44.0		508.8		131.3
Purchase obligations		881.3		142.2		881.3		142.2		—		—		—		—		—		—
Other non-current liabilities and non-current financial liabilities		157.7		—		—		—		157.7		—		—		—		—		—
Total contractual cash obligations		17,556.7		2,111.5		3,762.7		520.3		5,752.4		322.7		3,556.8		275.3		4,484.9		993.1

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Item 6: DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

Directors and Senior Management

In accordance with Indonesian law, we have a Board of Commissioners and a Board of Directors. The two boards are separate, and no individual may be a member of both boards.

Board of Commissioners

Our Board of Commissioners consists of ten members, one of whom is designated the President Commissioner. The members of the Board of Commissioners are elected and dismissed by shareholders’ resolutions at a general meeting of shareholders, provided that one member of the Board of Commissioners shall be nominated by the holder of the one Series A share. In accordance with regulations of the Indonesian Capital Market and Financial Institution Supervisory Agency, or BAPEPAM-LK, and Indonesia Stock Exchange rules, five commissioners have been designated as Independent Commissioners: George Thia Peng Heok, Rudiantara, Soeprapto S.IP, Chris Kanter and Richard Farnsworth Seney. As of April 24, 2013, our Board of Commissioners consisted of 10 members as listed below:

Name	Age	Commissioner Since		Position
Abdulla Mohammed S.A. Al Thani	53		2008	President Commissioner
Dr. Nasser Mohammed Marafih	52		2008	Commissioner
Richard Farnsworth Seney	58		2009	Independent Commissioner
Rachmat Gobel	50		2008	Commissioner
Rionald Silaban	47		2008	Commissioner
Beny Roelyawan	56		2012	Commissioner
George Thia Peng Heok	64		2008	Independent Commissioner
Rudiantara	53		2010	Independent Commissioner
Soeprapto S.IP	66		2005	Independent Commissioner
Chris Kanter	61		2010	Independent Commissioner

Set forth below is a brief biography of each of our Commissioners.

Sheikh Abdulla Mohammed S.A Al Thani has been the President Commissioner since August 2008. Sheikh Abdulla is currently the Chairman of the Board of Directors of Qatar Telecom (Qtel) and the Qtel Group. In his capacity as Chairman, Sheikh Abdullah represents a wide range of business skills, experience and knowledge. He has helped enhance Qtel’s corporate governance system to ensure Qtel is directed and controlled in line with international practices, thereby reinforcing both corporate accountability and the sustained creation of shareholder wealth. Sheikh Abdulla has previously held several high profile positions in Qatar including the Chief of the royal Court (Amiri Diwan), a role he filled from 2000 to 2005. His Excellency enjoys the status of a minister, and he is also a member of the Qatari Planning Council. He graduated as a Pilot in the British Army Air Corps and completed his studies at the Senior Military War College for the Armed Forces in the United States of America.

Dr. Nasser Mohammed Marafih has been a Commissioner at Indosat since August 2008 and is the Chairman of the Remuneration Committee and the Budget Committee. Dr. Marafih is the Chief Executive Officer (CEO) of the Qtel Group. He began his career at Qatar Telecom (Qtel) in 1992 as an expert advisor from the University of Qatar and was involved in the introduction of the first GSM service in the Middle East in February 1994. Dr. Marafih has spearheaded Qtel’s global growth in recent years, including Qtel’s acquisition of Wataniya Telecom, its strategic deal with AT&T to gain an equity stake in NavLink, Qtel’s strategic partnership with ST Telemedia in Singapore, as well as the company’s purchase of a controlling stake in Indosat. Dr. Nasser sits on the board of Directors of the GSM Association, which represents the interests of the worldwide mobile communications. Dr. Marafih holds a Bachelor of Science in Electrical Engineering, a Master of Science and a Ph.D. in Communication Engineering, all from George Washington University in the United States.

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Richard Farnsworth Seney has been an Independent Commissioner since 2012. Mr. Seney has served as Chief Operating Officer of Qtel International (QI) from 2007 to 2011, President and Chief Executive Officer of MCT Corp. (including predecessors) from 1992 to 2007, Executive Vice President and General Manager of MCT Investors, L.P. from 1987 to 2002, and Executive Vice President and Chief Financial Officer of Charisma Communications Corporation from 1985 to 1987. Mr. Seney received a Bachelor degree in Commerce from the University of Virginia McIntire School of Commerce.

Rachmat Gobel has been a Commissioner since 2008. Currently he is the Chairman of the Gobel Group of companies that has operations in manufacturing, trading, services, integrated logistics management as well as food and hospitality, including industrial catering. In 1960, Gobel Group entered into a technical assistance agreement with Panasonic Corporation (formerly Matsushita Electric Industrial Co., Ltd.), one of the world’s leaders in electronics and electrical goods. Since 1970 Gobel Group has been the Indonesian joint venture partner of Panasonic. Mr. Gobel also holds other high level positions, including as a Commissioner of PT Smart Tbk., the Vice Chairman of the Board of Advisors of the Indonesian Chamber of Commerce and Industry (KADIN Indonesia/Kamar Dagang dan Industri Indonesia), the Vice Chairman of the Employers Association of Indonesia (APINDO/Asosiasi Pengusaha Indonesia), and the Chairman of the Federation of Electronic & Telematics Association (FGABEL). He has also been appointed as a member of the National Innovation Committee (KEN/Komite Inovasi Nasional) by President Susilo Bambang Yuhoyono. Mr. Gobel graduated with a Bachelor of Science degree in International Trade from Chuo University, Tokyo in 1987 and was awarded an Honorary Doctorate Degree from Takushoku University, Tokyo, Japan in 2002. In 2009, he received the prestigious “Distinguished Engineering Award in Manufacturing Technology” in the Field of Manufacturing Technology” (“Perekayasa Utama Kehormatan dalam Bidang Teknologi Manufaktur”) from the Agency for the Assessment and Application Technology (BPPT/Badan Pengkajian dan Penerapan Teknologi). In 2009, he also received the “BNSP-Competency Award” from the National Agency for Certification of Professions (BNSP/Badan Nasional Sertifikasi Profesi), Ministry of Manpower and Transmigration of the Republic of Indonesia. In 2011, he received the prestigious “Asian Productivity Organization Regional Award”, for his contributions to improving productivity in Indonesia’s industry sector and demonstrating the significant role of private-sector leaders in introducing sustainable development through Green Productivity and forging strategic partnerships with the rest of Asia and the Pacific, from the Asian Productivity Organization, Tokyo, Japan. Mr. Gobel is also actively involved in numerous social activities, including the Indonesian Red Cross.

Rionald Silaban has been a Commissioner since June 2008 and was appointed as a member of the Risk Management Committee in the same year. He currently serves as Senior Advisor to the Minister of Finance and, since 2008, as the Director of the Center for Policy Analysis and Harmonization of the Ministry of Finance in Indonesia. In the past he held several positions including Director of Fiscal Risk Management of the Ministry of Finance from 2006 to 2008, Senior Advisor at the World Bank in Washington D.C., U.S. from 2004 to 2006, Division Head in Secretariat General of the Ministry of Finance from 2002 to 2004, Head of the Assets Monitoring Division of the Indonesian Banking Restructuring Agency from 2000 to 2002, Division Head for Financial Service of the Legal Bureau of the Ministry of Finance from 1998 to 2000, Deputy Director for Privatization of Directorate General State-Owned Enterprise of the Ministry of Finance from 1997 to 1998, Head of Section of the Legal Bureau of the Ministry of Finance from 1994 to 1997 and Head of Secretariat for Privatization Committee of Ministry of Finance from 1994 to 1997. Mr. Silaban received a law degree from the University of Indonesia in 1989 and a LL.M. degree from the Georgetown University Law Center, Washington D.C. in the United States, in 1993.

Beny Roelyawan has been a Commissioner since June 2012. Since January 2006, Mr. Roelyawan has been serving as Deputy III in the State Intelligence Agency, Republic of Indonesia. He received Honorary Award of Satyalancana Karya Satya X in 2001 and Satyalancana Karya Satya XX in 2005. He holds a Bachelor degree in Economy Enterprises from the University of Diponegoro in Indonesia.

George Thia Peng Heok has been an Independent Commissioner since June 2008 and Chairman of the Audit Committee since July 2008. Mr. Thia currently serves as Director/Consultant in Asiainc Private Limited. In the

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past he has held several positions including as Consultant/Director, Strategic Advisory Private Limited from 2003 to 2006, Executive Chairman, MediaStream Limited from 1999 to 2003, Director/Consultant, Phoenix Capital Private Limited from 1995 to 1998, Executive Chairman, Asia Matrix Limited from 1993 to 1995, Managing Director, Lum Chang Securities Private Limited from 1991 to 1993, Managing Director, Sun Hung Kai Securities Private Limited from 1989 to 1991, Managing Director, Merrill Lynch International Bank Limited from 1987 to 1989, Executive Director/Partner, Kay Hian Private Limited from 1985 to 1987 and Managing Director, Morgan Grenfell (Asia) Limited from 1975 to 1985. Mr. Thia is a Certified Public Accountant and a Fellow Member of both the Chartered Association of Certified Accountants (United Kingdom) and the Singapore Institute of Directors.

Rudiantara has been an Independent Commissioner since November, 2012. Currently, Mr. Rudiantara is the Chief Executive Officer of PT. Bukitasam Transpacific Railways and PT. Rajawali Asia Resources. Mr. Rudiantara previously held various positions, including Independent Commissioner and Chairman of the Audit Committee of PT. Telekomunikasi Indonesia Tbk from 2011 to 2012, Deputy Chief Executive Officer of PT. PLN (Persero), Deputy Chief Executive Officer PT. Semen Gresik (Persero), Tbk., Director PT Excelcomindo Pratama Tbk, COO PT Telekomindo Primabhakti, Commissioner PT. Excelcomindo Pratama, Commissioner Bank Pos and Director PT. Telekomunikasi Seluler Indonesia-Telkomsel. He received an MBA degree from IPPM (Institut Pendidikan dan Pembinaan Manajemen) and Bachelor degree in Statistic from the University of Padjadjaran in Indonesia.

Soeprapto S.IP has been an Independent Commissioner and a member of the Audit Committee since June 2005. In the past, Mr. Soeprapto has held several positions, including as Assistant Personnel to the Army Chief of Staff of the Republic of Indonesia from 2000 to 2001, and currently serves as a Commissioner of each of PT Padangbara Sukses Makmur, since 2008, and PT Sawit Kaltim Lestari since 2010. Mr. Soeprapto earned a degree in Political Science from the Terbuka University, Jakarta and participant of the Regular Course (KRA 29) in 1996 at the Indonesian National Resiliance Institute (LEMHANAS).

Chris Kanter has been Independent Commissioner since January 2010. Mr. Kanter is an Indonesian businessman and business community leader, who is at the forefront of the national economic reform agenda in Indonesia. A trained engineer, he is the Chairman and Founder of Sigma Sembada Group, a major turnkey contractor, with operations in the transportation and logistics segments as well. In 2011 he was appointed by the President of Indonesia to serve as a member of National Economic Council. Mr. Kanter also serves as Chairman of the Board of Founders of the Swiss German University, Vice Chairman of National Board of the Employers Association of Indonesia (APINDO), Chairman of Board of Founders of the Global Entrepreneurship Program Indonesia and Vice President Commissioner of PT. Bank BNP Paribas Indonesia. Mr. Kanter also served as a member of the Peoples Consultative Congress (MPR) of the Republic of Indonesia from 1998 to 2002. Mr. Kanter is a graduate of the Faculty of Engineering, Trisakti University, Indonesia.

The term of each of the Commissioners concludes at the close of the fourth annual general meeting of shareholders after the date of appointment, expiring in 2016 for the current Commissioners. A Commissioner may be removed prior to the expiration of his term of office at a general meeting of the shareholders. The Commissioners’ business address is Jalan Medan Merdeka Barat 21, Jakarta, 10110, Republic of Indonesia.

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Board of Directors

Our Board of Directors is responsible for our overall management and day-to-day operations under the supervision of the Board of Commissioners. The Board of Directors consists of at least three members, including one President Director. The members of the Board of Directors are elected and dismissed by shareholders’ resolutions at a general meeting of shareholders, provided that one member of the Board of Directors shall be nominated by the holder of the one Series A share. As of April 24, 2013, our Board of Directors consisted of five members as listed below:

Name	Age	Director Since		Position
Alexander Rusli	42		2012	President Director & Chief Executive Officer
Fadzri Sentosa	49		2007	Director & Chief Wholesale and Infrastructure Officer
Curt Stefan Carlsson	42		2011	Director & Chief Financial Officer
Hans Christiaan Moritz	59		2011	Director & Chief Technology Officer
Frederik Johannes Meijer	42		2012	Director & Chief Commercial Officer

Set forth below is a brief biography of each of our Directors:

Alexander Rusli assumed the role of President Director and CEO as of November 2012 after serving as an Independent Commissioner since January 2010. Before November 2012, Mr. Rusli was a Managing Director in Northstar Pacific, a Private Equity fund which focuses on Indonesian opportunities. Prior to his role in Northstar Pacific, Mr Rusli served the Government of Indonesia for nine years. In his first six years in government, he was an Expert Advisor to the Minister of Communications and Information Technology, where he was involved in the formulation of policy and regulation in the Telecommunication, Media and Postal industries. In his last three years in government services, he was an Expert Staff to the Minister of State-Owner Enterprises, overseeing 140 State-owned enterprises with more than 500 subsidiaries. During that period, he also held numerous state-owned corporate positions including: Commissioner of PT Krakatau Steel (Persero) - a state-owned steel producer, PT Geodipa Energi – A state-owned geothermal Company and PT Kertas Kraft Aceh – a state-owned kraft paper manufacturer. Prior to his posts in government, Mr. Rusli has held a position as a Principal Consultant for Pricewaterhouse Coopers Management Consulting, Indonesia. Mr. Rusli completed all his formal tertiary education in Curtin University, Western Australia. He holds a Doctor of Philosophy degree in Information.

Fadzri Sentosa was appointed as a Director in June 2007 and as Director & Chief Wholesale and Infrastructure Officer in June 2009. Currently, Mr. Sentosa is a member of the Board of Commissioners of PT Aplikanusa Lintasarta. Mr. Sentosa has previously held various positions with us, including as member of the Board of Commissioners of PT Indosat Mega Media from 2005 to 2009, Group Head of National Card and Channel Management from 2006 to 2007, Senior Vice President of Commerce, Jabotabek Region from 2005 to 2006 and Senior Vice President of Cellular Sales from 2003 to 2004, member of the Board of Directors of Satelindo in 2003 and a member of the Board of Director of IM3 from 2002 to 2003. Mr. Sentosa received a Master degree in International Business Management from the University of Technology, Sydney in 2001 and a Bachelor degree in Telecommunications Engineering from the Bandung Institute of Technology in 1986.

Curt Stefan Carlsson was appointed as Director & Chief Financial Officer in September 2011. Mr. Carlsson has previously held various positions, including Chief Operations Advisor at wi-tribe Philippines since January 2011, he held a transitional advisory role at Telenor Asia from August 2010 to December 2010, Chief Financial Officer at DiGi.Com Bhd and at DiGi Telecommunications Sdn Bhd, Selangor, Malaysia from November 2006 to July 2010, Chief Financial Officer at Telenor Pakistan Pvt. Ltd (TP) from June 2004 to October 2006, Chief Financial Officer at Telenor Mobile Sverige (TMS), Sweden, from August 2001 to May 2004, Chief Financial Officer at Mobyson, Norway from May 2000 to July 2001 and an Auditor at Pricewaterhouse Coopers, Sweden, from September 1997 to April 2000. He holds a MSc degree in Business and Economics from the University of Uppsala, Sweden in 1997.

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Hans Christiaan Moritz was appointed as Director & Chief Technology Officer in February 2011 and assumed his duties on May 1, 2011. Mr. Moritz has 25 years experience in the Mobile Telecom industry and has previously held various positions, including Head Corporate Project Officer at Vodafone India from 2009 to 2011, Group Operations Director Africa/Chief Technology Officer at Zain from 2006 to 2009, Chief Technology Officer at Zain Uganda from 2004 to 2006, Chief Operating Officer at KPN Internet, from 2003 to 2004, General Manager of the Business Unit Broadband Network at KPN Telecom from 2001 to 2003, Chief Operating Officer at BASE and from 1998 to 2000, Operations Director Asia (based in Indonesia) at KPN Asia from 1994 to 1997. Mr. Moritz received a Master degree in Mathematics in 1986 and various Bachelor degrees, i.e Electronics in 1978, Feedback and Control Systems in 1984 and Water Management in 1984, all from Hoger Beroeps Onderwijs (HBO) University, the Netherlands.

Frederik Johannes Meijer was appointed as Director and Chief Commercial Officer in May 2012. He has a total of approximately 20 years of telecommunication industry experience. After his initial start at KPN royal Dutch Telecom, he spent 12 years working at Telkomsel in progressively senior roles in the commercial area up to the level of Vice President (Marketing and CRM), as well as leading the 3G initiative for Telkomsel when it was introduced in 2006. In the subsequent five years, he worked at Bakrie Telecom in the roles of Deputy President Director, as well as President Director of a wireless broadband company, Bakrie Connectivity, CEO of one of Indonesia’s largest portals, VIVAnews, and Director at a media company, VIVA. Mr. Meijer is or also has been active in the Indonesia Marketing Association (IMA), the Indonesian Advertisers Association (APPINA; Asosiasi Perusahaan Pengiklan Indonesia), and others. He was awarded a Lifetime Achievement Award at the Indonesia Cellular Awards 2007, and is a regular guest lecturer at several universities and a speaker at seminars and conferences. Mr. Meijer completed International Business Studies at Hanzehogeschool Groningen, the Netherlands, from 1987 to 1991. In 1992, he studied International Marketing at Middlesex Polytechnic-University, London, United Kingdom and, in 1999, he completed a Marketing Telecommunications Executive Course in INSEAD, France.

The Directors’ terms of appointment end at the close of the fifth annual general meeting after the date of their appointment. At a general meeting of shareholders, the shareholders may remove any Director before the expiration of his term of office. A Director’s term of office will automatically terminate upon bankruptcy, if he is put under custody by court order, upon his resignation or death or in the event that the Director is prohibited by law from holding such position. In the event any member of the Board of Directors resigns, a written notice of such resignation must be submitted by the resigning Director to us, for the attention of the Board of Commissioners and Board of Directors. We are required to convene a general meeting of shareholders to resolve such resignation within 60 days after we receive the resignation letter. Within 45 days after a vacancy is created on the Board of Directors that causes the number of members of the Board of Directors to be less than the minimum required number of Directors as stipulated in our Articles of Association, a general meeting of shareholders must be convened to fill the vacancy. A member of the Board of Directors may not assume a concurrent position, which may cause a conflict of interest, directly or indirectly, with our interests. A member of the Board of Directors may assume a concurrent position that does not cause a conflict of interest, subject to the approval of the Board of Commissioners and notification to a general meeting of shareholders. Should the President Director want to assume a concurrent position of this type, the approval of a general meeting of shareholders is also required. The business address of the Board of Directors is Jalan Medan Merdeka Barat 21, Jakarta, 10110, Republic of Indonesia.

None of our Commissioners or Directors has a service contract with us, nor are any such contracts proposed or under consideration. There is no family relationship between or among any of the Commissioners or Directors listed above.

Compensation of Commissioners and Directors

For their services, our Commissioners and Directors are entitled to remuneration, which is determined by the annual general meeting of shareholders. The net amount of remuneration paid to our Commissioners and

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Directors for the year ended December 31, 2012, including basic compensation and short and long-term incentives, was Rp16.8 billion (US$1.7 million).

The remuneration of our Directors is determined by the Board of Commissioners, pursuant to a delegation of authority by the shareholders in a general meeting. In making its determination, the Board of Commissioners must consider any recommendations provided by our Remuneration Committee and must report the determination to our shareholders at the annual general meeting of shareholders. Since 2006, semi-annual incentives were eliminated and we introduced a Restricted Share Unit Plan as a long-term incentive for Commissioners and an Economic Profit Sharing Plan for Directors which is divided into cash bonus payment as short-term incentive and Restricted Share Unit Plan as long-term incentive.

Pension, Retirement and Other Benefits

We and Lintasarta have defined benefit and contribution pension plans that cover substantially all of our qualified permanent employees. PT Asuransi Jiwasraya, a state-owned life insurance company, manages the plans and the amount of pension benefits to be paid upon retirement is based on the employees’ most recent basic salary and their number of years of service.

For the year ended December 31, 2012, we, Lintasarta and IM2 incurred a total benefit of Rp1,126.2 billion for pension, post-retirement benefits (i.e., benefits under Labor Law 13) and post-retirement healthcare for our employees. As of December 31, 2012, we and Lintasarta also recognized total prepaid pension costs of Rp90.3 billion, while we, Lintasarta and IM2 recognized total accrued liability of post-retirement benefits and post-retirement healthcare of Rp902.3 billion. For more information about our pension plan, including the total amount set aside to provide pension, retirement or similar benefits, see Note 21 and Note 29 to our audited consolidated financial statements.

Board Practices

Our Board of Commissioners acts as our overall supervisory and monitoring body with principal functions including reviewing our development plan, monitoring the performance of our work plan and reviewing and approving our budget. It is required to perform its duties, authorities and responsibilities in accordance with the provisions of our Articles of Association and resolutions of the shareholders’ general meeting. Decisions above certain monetary thresholds must be referred by our Board of Directors to our Board of Commissioners or shareholders for their review and approval. In carrying out its supervisory activities, the Board of Commissioners represents the interests of our Company.

Meetings of our Board of Commissioners must be held at least once every three months, or when deemed necessary by the President Commissioner or upon request of at least one-third of the total members of the Board of Commissioners. A meeting of the Commissioners may make lawful and binding decisions only if a majority of the Commissioners are present or represented. At any meeting each Commissioner is entitled to one vote and, in addition, may cast one vote for each Commissioner he is representing. A Commissioner may be represented at a meeting of the Commissioners only by another Commissioner appointed pursuant to a power of attorney. Except as otherwise provided in our Articles of Association, resolutions of the Board of Commissioners must be adopted by deliberation and consensus. If no agreement is reached through this method, resolutions must be passed by a simple majority of the Commissioners. In the event of a tie vote, the proposal is deemed rejected unless the matter concerns an individual, in which case the President Commissioner may cast the deciding vote. The Board of Commissioners may adopt lawful and binding decisions without convening a meeting of the Commissioners if all of the members of the Board of Commissioners approve and sign the decision.

Our Board of Directors is generally responsible for managing our business in accordance with applicable laws, our Articles of Association and the policies and directives issued by the general meeting of shareholders and the Board of Commissioners. The President Director alone has the authority to represent and act on behalf of

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the Board of Directors and us. However, if the President Director is absent or unavailable, then one of the Directors designated by the President Commissioner shall have such authority to represent the Directors.

The Board of Directors must obtain written approval from the Board of Commissioners to: (i) purchase and/or sell shares of other companies in the capital markets; (ii) enter into, commit to enter into, amend and/or terminate a license agreement or cooperation, joint venture, management and similar agreement with other enterprises or parties; (iii) purchase, dispose, sell, pledge or encumber all or part of the business, title to or the fixed or other assets of the Company (including any interest therein); (iv) cease to collect and write-off accounts receivable from the books as well as supplies of goods; (v) bind the Company as guarantor (borg or avalist) or in any other way in which the Company becomes liable to another party’s debt obligation, whether by an agreement to take over another party’s debt, an agreement to grant financing to another party to purchase goods or services, or by the purchase of shares, capital participation, advance payment or loan to pay in full another party’s debt; (vi) accept or grant or commit to grant medium/long-term loans and accept or grant non-operational short-term loans (except for granting loans to a subsidiary and/or employees of the Company which have been approved pursuant to applicable internal procedures); (vii) conduct the expenditure of capital goods in 1 (one) transaction or an inter-related transaction with a nominal value higher than the permitted value determined by the Board of Commissioners from time to time; (viii) issue bonds or other securities than can be converted into shares; (ix) propose the issuance of new shares of the Company; (x) provide an indemnity to or otherwise guarantee the obligation of any person; (xi) determine and/or change the Company’s management structure; (xii) make a new business plan or change the business plan; (xiii) change the accounting, financial, or tax practice and system of the Company or its subsidiary; (xiv) change the Company’s name; (xv) approve the financial statement provided to the shareholders in the GMS; (xvi) determine the annual budget of the Company and the annual budget of a subsidiary; (xvii) carry out capital participation or dispose capital participation of the Company in other enterprises that are not carried out through the capital markets; (xviii) establish a subsidiary or approve the relinquishment or the reduction of its interest, whether directly or indirectly, in each of the subsidiaries, or take over the shares in any company or relinquish any shares in any company; (xix) take any corporate action or investments related to any subsidiary of the Company; (xx) use any right of the shareholders in a Company’s subsidiary, or any other company in which the Company has a share participation; (xxi) approve the payment of any bonus or similar payment to the Company’s employees or change the remuneration structure of employees; (xxii) undertake a merger, consolidation, acquisition or separation, each as defined under the law No. 40 of 2007 on Limited Liability (as amended from time to time); (xxiii) establish or change the Company’s asset liability management policy; (xxiv) establish or change standing delegations among members of the Board of Directors relating to signing authority limits for expenditures, assets purchases and sales, loans and other commitments; and (xxv) engage in any other material transaction or matters as may be determined by the Board of Commissioners from time to time having a value of the lower of 5.0% (five percent) or more of total revenue or 2.5% (two and half percent) or more of our non-current assets on a consolidated basis as set out in our audited consolidated financial statements. The Board of Commissioners shall be obligated to determine thresholds in respect of the actions referenced to in (i) to (viii), (x) and (xxi) above and shall be entitled to change such thresholds from time to time. In the event actions are taken within the applicable threshold, then the approval from the Board of Commissioners’ is not required. In granting a written approval for the actions above, the Board of Commissioners must observe prevailing capital markets regulations.

Meetings of the Board of Directors are convened when called by the President Director, or when requested by more than one-third of the total members of the Board of Directors. A meeting of the Directors is valid and entitled to adopt binding decisions only if a majority of the Directors are present or represented. A Director may be represented at a meeting of the Board of Directors only by another Director appointed pursuant to a power of attorney issued for that particular purpose. At any meeting of the Board of Directors each Director is entitled to one vote and, in addition, one vote for each other Director he is representing. Resolutions of the Board of Directors must be adopted by deliberation and consensus. If no agreement is reached by deliberation and consensus, the resolutions must be passed by a majority vote, and, in the event of a tie vote, the President Director has a deciding vote. The Board of Directors may adopt valid and binding resolutions without convening a meeting of the Directors if all of the Directors approve and sign the resolutions in writing.

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Individual Directors are charged with specific responsibilities. In the event that a vacancy occurs in the Board of Directors, so long as the position remains vacant, one of the other Directors will be nominated by the Board of Commissioners to perform the work of the absentee Director. If, for any reason, we cease to have any Directors, the Board of Commissioners is to assume the ongoing obligations of the Board of Directors and must convene a general meeting of shareholders to elect a new Board of Directors within 45 days.

Our Articles of Association provide that if there is a conflict between our interests and those of a Director, then with the approval of the Board of Commissioners, we shall be represented by another member of the Board of Directors. If all Directors have a conflict, we shall be represented by the Board of Commissioners or one Commissioner designated by the President Commissioner. If the entire Board of Commissioners has a conflict, the shareholders may appoint one or more persons to represent us at the general meeting of shareholders.

Audit Committee

In accordance with BAPEPAM-LK, Indonesia Stock Exchange and New York Stock Exchange regulations, we have formed an independent Audit Committee, consisting of five persons and chaired by one of the Independent Commissioners. The duties of the Audit Committee include providing professional, independent advice to the Board of Commissioners and identifying matters that require the attention of the Board of Commissioners, including a review of the following: our financial information (including financial reports and projections); the independence and objectivity of our public accountant; the adequacy of our public accountant’s audits that all material risks have been considered; the adequacy of our internal controls; our compliance as a listed company with the prevailing capital markets regulations and other regulations related to our business and our internal auditors’ duties. The Audit Committee also examines and reports complaints to the Board of Commissioners, maintains the confidentiality of documents, data and information relating to us, conducts an audit of any alleged mistake in the resolutions of a Board of Directors’ meeting or deviations in the implementation of the resolutions of such meeting and maintains the Audit Committee charter.

On June 5, 2008, George Thia Peng Heok was appointed as Chairman of the Audit Committee. As of December 31, 2012, the members of our Audit Committee were George Thia Peng Heok (Chairman), Richard Farnsworth Seney, Chris Kanter, Kanaka Puradiredja and Unggul Saut Marupa Tampubolon. BAPEPAM-LK regulations require at least two outside persons to serve as members of the Audit Committee. As of December 31, 2012, two of the members of our Audit Committee, Kanaka Puradiredja and Unggul Saut Marupa Tampubolon, were independent outside Commissioners. We have posted the written charter of the Audit Committee on our website at www.indosat.com, where it is publicly available.

Such charter is reviewed annually and a revised charter has been approved by our Board of Commissioners and is attached hereto as Exhibit 15.14.

Remuneration Committee

Our Remuneration Committee is responsible for providing recommendations to our Board of Commissioners regarding remuneration, bonuses and other benefits for members of our Board of Commissioners and Board of Directors as well as employees, including the structure, terms and issuance of stock options. As of December 31, 2012, the members of our Remuneration Committee were Dr. Nasser Mohammed Marafih (Chairman), Soeprapto S.IP., and Rudiantara. We have posted the written charter of the Remuneration Committee on our website at www.indosat.com, where it is publicly available.

Risk Management Committee

On October 26, 2005, we established a Risk Management Committee, which reports to our Board of Commissioners. Our Risk Management Committee evaluates potential risks regarding our business and provides recommendations to our Board of Commissioners regarding our policies regarding risk assessment and risk

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management, including making recommendations for improvements to our existing procedures as necessary. As of December 31, 2012, the members of our Risk Management Committee were Rachmat Gobel (Chairman), George Thia Peng Heok, and Rionald Silaban. We have posted the written charter of the Risk Management Committee on our website at www.indosat.com, where it is publicly available.

Budget Committee

Our Budget Committee assists the Board of Commissioners in performing the Board’s supervisory and advisory duties by reviewing and giving its recommendations to the Board in relation to the Company’s strategic plans, the annual work plan and budget (which includes the capital expenditure plan). As of December 31, 2012, the members of our Budget Committee were Dr. Nasser Mohammed Marafih (Chairman), George Thia Peng Heok and Richard Farnsworth Seney.

Employees

As of December 31, 2012, on a consolidated basis, we employed 4,540 employees, 3,827 of whom were permanent employees and 713 of whom were non-permanent employees. As of December 31, 2012, excluding seconded employees, our subsidiaries employed approximately 860 permanent employees. As of December 31, 2012, our permanent employees included 957 managerial-level employees (employees with the rank of manager or higher) and 2,010 non-managerial employees, compared to 900 managerial-level employees and 1,948 non-managerial employees as of December 31, 2011, and 787 managerial and 3,046 non-managerial employees as of December 31, 2010. Our turnover rate for employees during 2012 was 5.60% per annum, representing a decrease from 25.66% in 2011 (due to the implementation of voluntary separation scheme (“VSS”) Program which was introduced in January and December 2011 by the Company and Lintasarta, respectively. This VSS Program was an organizational restructuring program to increase our productivity and improve our longer-term operating results. We and Lintasarta each offered special compensation packages to employees who met certain criteria as determined by us and Lintasarta respectively, and who opted to end their employment relationship with the us or Lintasarta, respectively, as part of such organizational restructuring. As a result, as of December 31, 2012, our employees had worked for us for an average of 12.35 years.

We provide a number of benefits to our employees, including a pension plan, medical benefits, life insurance, income tax allowances and access to a cooperative established by the employees.

On August 25, 1999, our employees established a union called the Serikat Pekerja Indosat, or SPI (Union). On September 15, 2006, our management and SPI signed a collective labor agreement covering general terms of employment, including working hours, payroll, employee development and competency, occupational safety and health, employees’ welfare, social allowances, employees’ code of conduct and mechanisms for handling disputes. This collective labor agreement was renewed on January 1, 2013 valid until December 31, 2014. We believe we maintain a good relationship with the union. As stipulated by Article 7.3 of the collective labor agreement, we conduct meetings with the union at least once every 3 months.

Some of our employees are entitled to a pension under a defined benefit plan, pursuant to which they receive both a lump sum payment and a monthly benefit through an insurance program managed by PT Asuransi Jiwasraya (Persero), a state-owned insurance company. As of December 31, 2012, we insured 1,505 permanent employees through a fully-funded pension program. In this program, an employee who resigns at 56 years of age will receive a pension benefit. In addition, we established a defined contribution pension plan for our employees in May 2001. Following the merger of Satelindo and IM3 into Indosat, we combined the defined contribution plans established for our legacy subsidiaries’ employees with our plan. Under the defined contribution plan, employees contribute 10.0% to 13.33% of their base salaries to the plan. We then make a contribution to the plan equivalent to 50% of each employee’s contribution.

Our employees have also established a cooperative, Koperasi Pegawai Indosat (“Kopindosat”). Kopindosat provides various benefits, such as consumer loans, principally to our employees, and car and equipment rental,

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principally to us. The management of Kopindosat is elected by our employees every three years at a members’ meeting. Kopindosat has a minority stake in some of our affiliates. We have also temporarily seconded several of our employees to support Kopindosat and its subsidiaries in conducting their business, as well as to provide job training for its employees.

Share Ownership

One of our directors beneficially owns less than one percent of our common stock and his beneficial share ownership in us has been recorded in our special register.

Item 7: MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

As of December 31, 2012, our issued and fully paid capital was divided into 1 Series A share and 5,433,933,499 Series B shares, each with a par value of Rp100. The Government, through the Ministry of State-Owned Enterprises, owns the 1 Series A share and has special voting rights, and owns 776,624,999 Series B shares representing 14.29% of our shares. Ooredoo Asia owns 3,031,528,000 Series B shares and 500,528,600 Series B shares underlying our American Depositary Shares, or a total of 3,532,056,600 Series B shares representing 65.0% of our shares. SKAGEN AS owns 196,662,750 Series B shares and 102,719,750 Series B shares underlying our American Depositary Shares, or a total of 299,382,400 Series B shares representing 5.51% of our shares. As of December 31, 2012, 34,894,850 of our ordinary shares underlying our American Depositary Shares, (excluding those owned by Ooredoo Asia and SKAGEN), representing in aggregate approximately 0.60% of our outstanding shares, and 790,974,651 Series B shares (excluding those owned by Ooredoo Asia and SKAGEN) representing 14.60% of our shares were held by the public. Because many of our Series B shares and American Depositary Shares were held by brokers and other institutions on behalf of security holders in street name, we believe that the number of beneficial holders of our ordinary shares is higher.

The following table sets forth information as of December 31, 2012 regarding (i) persons known to us to own more than 5.0% of our common stock (whether directly or beneficially through American Depositary Shares) and (ii) the total amount of any class of our common stock owned by individual members of the Board of Commissioners and the Board of Directors:

Title of class	Name	Number of Shares Held		Percentage of Total Outstanding Shares of Class
Series A	Government		1		100.00	%
Series B	Ooredoo Asia(1)		3,532,056,600		65.00
Series B	Government		776,624,999		14.29
Series B	SKAGEN AS		299,382,400		5.51
Series B	Fadzri Sentosa		10,000		0.00	*

* Less than 1.0%

⁽¹⁾ Ooredoo Asia is wholly owned by Qtel.

The Government

Prior to our initial public offering in 1994, the Government owned 100% of our outstanding common stock. As of the beginning of 2002, the Government owned 65.0% of our outstanding common stock. By virtue of its common stock ownership, the Government had retained control over us and had the power to elect all of our Board of Commissioners and our Board of Directors and to determine the outcome of substantially all actions requiring the approval of our shareholders. In addition, pension plans, insurance funds and other Indonesian investors owned or controlled, directly or indirectly, by the Government, purchased shares of common stock in the initial public offering.

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On May 16, 2002, the Government sold 8.1% of our outstanding common stock through an accelerated global tender, reducing the Government’s shareholding to 56.9%. On December 20, 2002, the Government sold 41.9% of our outstanding common stock to ICLM (described below), further reducing the Government’s shareholding to 15.0%. Although Government’s ownership has been reduced, the Government retains a significant degree of influence over us through the 1 Series A share.

As the holder of the 1 Series A share, the Government has special voting rights. The material rights and restrictions which are applicable to our common stock are also applicable to the 1 Series A share, except that the Government may not transfer the Series A share. In addition, through the Series A share, the Government has veto rights with respect to: (i) increases in our share capital without pre-emptive rights; (ii) mergers, consolidations, acquisitions and demerger involving us; (iii) dissolution, liquidation and bankruptcy; (iv) amendments to our Articles of Association related to our purposes and objectives and the Series A holder’s veto rights.

ICLM and Ooredoo Asia

On December 15, 2002, ICLM, which, at the time was a subsidiary of STT, entered into a share purchase agreement and a shareholders’ agreement with the Government, acting through the Ministry of State-Owned Enterprises in its capacity as our shareholder. STT is 100% owned by ST Telemedia, which is indirectly owned by Temasek Holdings (Private) Limited. Pursuant to the share purchase agreement, the Government sold to ICLM 434,250,000 Series B Shares representing 41.9% of the total outstanding Series B Shares. After consummation of this sale and purchase, the Government held 155,324,999 Series B Shares, representing 15.0% of the total outstanding Series B Shares. As of May 4, 2006, ICLM owned 2,171,250,000 (39.96%) of our Series B shares, the Government owned 1 Series A share and 776,624,999 of our Series B shares (14.29%) and ICLS, an affiliate of ICLM, owned 46,340,000 (0.85%) of our Series B shares.

On January 17, 2007, ICLM notified us regarding the intention of Qtel to make an equity investment of approximately 25.0% in AMH which, at the time, was wholly owned by STT, which we understand closed on March 1, 2007. Upon the closing of the transaction, STT effectively controlled approximately 75.0% of AMH, which directly owns ICLM and ICLS.

On June 22, 2008, following negotiations with ST Telemedia, Qtel purchased all of the issued and outstanding shares of capital stock of each of ICLM and ICLS. Pursuant to the share purchase agreement, Qtel, through its subsidiary Qatar South East Asia Holding S.P.C., acquired all of the capital stock of ICLM and ICLS from AMH, which is 75.0% indirectly owned by STT and 25.0% indirectly owned by Qtel. Following this acquisition, pursuant to Indonesian law requirements, Qtel conducted a mandatory tender offer to acquire up to 24.19% of our outstanding Series B Shares (including Series B Shares underlying ADSs) and now owns 65.0% of our shares. On June 4, 2009, ICLM sold its 39.96% ownership in Indosat to ICLS and, pursuant thereto, ICLS became the legal owner of 3,532,056,600 shares representing 65.0% of our shares. On September 11, 2009, ICLS changed its name to Qatar Telecom (Qtel Asia) Pte. Ltd. and on March 7, 2013, Qatar Telecom (Qtel Asia) Pte. Ltd. changed its name to Ooredoo Asia Pte. Ltd. Qtel is 68%-owned by the Qatar government.

Qtel provides significant financial expertise, procurement, legal, operational, network build and maintenance, marketing, human resources, business development and technical support to us. Qtel has management representation in us and actively participates in business strategy formulation. We intend to take advantage of synergies existing and created by membership in the Qtel group of companies, thereby enhancing our position in the Indonesian telecommunications market.

SKAGEN AS

In September 2010, we were informed by SKAGEN AS, a Norwegian investment company with eleven mutual funds under management, that through certain purchases of our ADSs, it owns more than 5% of our shares. As of December 31, 2012, SKAGEN AS owned approximately 5.51% of our shares.

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Related Party Transactions

We are a party to certain agreements and engage in transactions with a number of entities that are related to us, including joint venture companies, cooperatives and foundations, as well as our controlling shareholders, the Government and Ooredoo Asia, and entities that are related to or owned or controlled by the Government and Ooredoo Asia. As of December 31, 2012, the most significant of these transactions include cash and cash equivalents in the amount of Rp1,534.1 billion (US$158.6 million) deposited in state-owned banks, operating revenues from Telkom amounting to Rp1,043.6 billion (US$107.9 million) and a short-term loan to Mandiri amounting to Rp299.5 billion (US$31.0 million). For further information on interest rate in relation to our outstanding loans, see “Item 5: Operating and Financial Review and Prospects—Liquidity and Capital Resources—Cash Flows—Principal Indebtedness.” In addition, we are a party to various agreements with other state-owned entities such as insurance companies, banks and various suppliers. For a discussion of some of significant transactions entered into with related parties, see Note 30 of our consolidated financial statements included elsewhere in this annual report.

Item 8: FINANCIAL INFORMATION

Consolidated Financial Statement and Other Financial Information

See “Item 17: Financial Statements” for our audited consolidated financial statements filed as part of this annual report. No significant changes have occurred since the date of our audited consolidated financial statements.

Legal Proceedings

From time to time, we are involved in legal proceedings concerning matters arising in connection with the conduct of our business. We are not currently involved in, and have not recently been involved in, any legal or arbitration proceedings that we believe would be likely to have a material effect on our financial condition or results of operations other than as disclosed in this annual report.

On May 5, 2004, we received the Supreme Court’s verdict No. 1610K/PDT/2003 in favor of Primer Koperasi Pegawai Kantor Menteri Negara Kebudayaan dan Pariwisata (known as Primkopparseni), regarding a disputed foreign currency exchange transaction. The court’s judgment required us to pay Rp13.7 billion plus 6.0% interest per annum from February 16, 1998 until the final settlement date and on December 22, 2004, we satisfied the judgment through payment of Rp19.3 billion to the Central Jakarta District Court. Furthermore, in January 2005, we filed a motion for reconsideration against the Supreme Court’s verdict. As of April 24, 2013, the Supreme Court has not issued a verdict for the reconsideration.

On November 1, 2007, the KPPU issued a decision regarding a preliminary investigation involving us and eight other telecommunication companies based on allegations of price-fixing for SMS services and breach of Article 5 of the Anti-monopoly Law. On June 18, 2008, the KPPU determined that Telkom, Telkomsel, XL, Bakrie Telecom, Mobile-8 and Smart Telecom (as of March 2011, Mobile-8 had changed its name to PT Smartfren Telecom Tbk) had jointly breached Article 5 of the Anti-monopoly Law. Mobile-8 appealed this ruling to the Central Jakarta District Court, where Telkomsel, XL, Telkom, Indosat, Hutchison, Bakrie Telecom, Smart Telecom, Natrindo were summoned to appear as co-defendants in the hearing, while Telkomsel appealed this ruling to the South Jakarta District Court. Although the KPPU decided in our favor with respect to the allegations of price-fixing of SMS, we cannot assure you that the District Court will affirm the KPPU decision. In 2011, the Supreme Court issued a ruling appointing the Central Jakarta District Court jurisdiction to examine the objections filed in the appeal of the KPPU decision. The District Court will consider objections against the KPPU decision based on a re-examination of the KPPU decision and case files submitted by KPPU.

On January 13, 2012, the former President Director of IM2, a subsidiary of the Company, was accused of corruption by the Attorney General’s Office (“AGO”). According to the AGO, a state loss amounting to IDR 1.3

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trillion was caused by an agreement between IM2 and the Company, which relates to the alleged illegal use by IM2 of the Company’s 2.1 GHz frequency band. The Ministry of Communication and Information Technology (“MOCIT”) issued letter No. 65/M.KOMINFO/02/2012 on February 24, 2012 stating that there was no breach of law, crime committed, and no state loss resulting from the agreement between the Company and IM2. Moreover the MOCIT has also sent a letter to the AGO directly which states that neither the Company nor its subsidiary, IM2, has violated any regulation and the collaboration between Indosat and IM2 is lawful under the prevailing laws and regulations, and also common practices in the telecommunication industry. In addition, ITRA publicly stated that IM2 had not breached any laws or prevailing rules. However, the AGO ignored the letters from the MOCIT and, on November 30, 2012, accused the former President Director of Indosat of similar corruption charges. Furthermore, on January 3, 2013, the AGO also filed corruption charges against IM2 and Indosat as corporate suspects for the alleged illegal use of Indosat’s 2.1 GHz frequency band without proper permission from the Government. IM2, Indosat and their respective former President Directors are seeking to nullify the charges that have been filed against them by arguing that the AGO’s charges under the Corruption Law are baseless; violation (if any) of practices in the telecommunication sector should be subject to the Telecommunication Law, including the relevant sanctions thereto. IM2 and the Company are also seeking to nullify charges against their respective former President Directors by arguing that the agreement between IM2 and the Company was an agreement between two companies and was executed in accordance with all applicable laws and regulations, including the prevailing regulations in the telecommunication and the non-tax state revenue sectors. Indosat and IM2 are also stating that IM2 was lawfully using Indosat’s cellular telecommunication network, and was not unlawfully using the 2.1 GHz frequency band detached of the cellular telecommunication network, as alleged. The court proceeding against the former President Director of IM2 commenced at the Corruption Court in January 2013. As one of the efforts to contest the allegation of corruption, the former President Director of IM2, together with IM2 and the Company, has been seeking for an annulment of the determination of the state loss by the Finance and Development Supervisory Agency or BPKP before the Jakarta Administrative Court. On February 7, 2013, the Jakarta Administrative Court rendered an interim decision to stay the implementation of BPKP’s decision pending its final decision on the annulment request. As of April 24, 2013, the Corruption Court has examined 17 witnesses, including expert witnesses, 15 of whom have testified that the cooperation agreement between IM2 and the Company does not breach the prevailing laws and regulations, and there is no sharing of the 2.1GHz frequency band as alleged, with only two expert witnesses having testified that the agreement is unlawful.

During tax audits and assessments of our tax payments for 2004 and 2005 by the Tax Office for State-Owned Enterprises (the “Tax Office”), on December 4, 2006 and March 27, 2007, respectively, we were notified that our withholding tax for interest paid on intercompany loans for Indosat Finance Company B.V. and Indosat International Finance Company B.V. relating to our US$300.0 million principal amount guaranteed notes 2010 and US$250.0 million principal amount guaranteed notes 2012, respectively, should be 20.0%, rather than 10.0%. Based on advice from our tax advisors and our understanding of Indonesian law, we believe that our original calculations of withholding tax are accurate and submitted objection letters to the Tax Office regarding these assessments. On February 18, 2008 and June 4, 2008, we received Decision Letters from the Directorate General of Taxation rejecting our objections to our assessed tax payments for 2004 and 2005 in the amount of Rp60,493 million and Rp82,126 million, respectively. On May 14, 2008 and September 2, 2008, the Company submitted an appeal letter to the Tax Court concerning the Company’s objection to the correction of the income tax article 26 for fiscal year 2004 and 2005, respectively. On May 25, 2010, the Company received the Decision Letter from the Tax Court which declined the Company’s objection to the correction of the 2004 and 2005 income tax article 26. The Company charged the tax correction to current operations, which was presented as part of “Other Income (Expenses)—Others—Net”.

We are also currently disputing an assessment of tax overpayment for fiscal year 2005 with the Tax Office. On March 27, 2007, we received an assessment letter for tax overpayment, indicating that the Directorate General of Taxation approved the refund of an overpayment of 2005 corporate income tax amounting to Rp135,766 million, which amount is lower than the amount of Rp176,645 million that we recognize. We filed an objection with the Tax Office on June 22, 2007 and claimed for the difference amounting to Rp40,879 million.

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On May 27, 2008, we received a Decision Letter from the Directorate General of Taxation which partially accepted our objection, but only for the amount of Rp2,725 million. On August 21, 2008, the Company submitted an appeal letter to the Tax Court concerning the Company’s remaining objection on the 2005 corporate income tax. On October 29, 2010, the Company received the Decision Letter from the Tax Court which accepted the Company’s objection to the correction of the 2005 corporate income tax amounting to Rp38,155 million, which was offset against the underpayment of the Company’s 2008 and 2009 income tax article 26 based on Tax Collection Letters (“STPs”) received by the Company on September 17, 2010. On February 24, 2011, we received a copy of a memorandum for reconsideration request from the Tax Court to the Supreme Court on the Tax Court’s Decision Letter dated October 29, 2010, regarding our 2005 corporate income tax. On March 25, 2011, the Company submitted a counter memorandum for reconsideration request to the Supreme Court. As of April 24, 2013, the Company has not received any decision from the Supreme Court with respect to such request.

On December 24, 2008, we received a Decision Letter from the Directorate General of Taxation which increased the overpayment amount by Rp84,650 million in the assessment letter on tax overpayment for fiscal year 2004, which amount was lower than the amount stated in an earlier Decision Letter received on July 4, 2008. On January 21, 2009, we filed suit objecting to the discrepancy in the amount of tax overpayment during fiscal year 2004. With respect thereto, on December 4, 2009, the Tax Court revoked the Directorate General of Taxation’s assessment letter No. KEP-539/WPJ.19/BD.05/2008, dated December 24, 2008. On March 17, 2010, the Directorate General of Taxation issued a decision favorable to the Company, informing it that the tax overpayment for fiscal year 2004 should be Rp126,403 million instead of Rp84,650 million, which would entitle the Company to get a refund of the difference, amounting to Rp41,753 million. The Company then subsequently received the payment of such tax refund amounting to Rp41,753 million from Directorate General of Taxation on April 13, 2010. On March 5, 2012, the Company received a Tax Court’s Decision Letter accepting the Company’s request for interest compensation related to the issuance of assessment of tax overpayment for fiscal year 2004 amounting to Rp60,674 million. Based on the Company’s evaluation, the realization of income related with the interest compensation was only probable, instead of virtually certain. Therefore, the interest compensation was not recognized in the Company’s financial statements. On June 29, 2012, the Company received a copy of a memorandum for reconsideration request from the Tax Court to the Supreme Court on the Tax Court’s Decision Letter dated March 5, 2012 for the interest compensation related to the issuance of such assessment of tax overpayment for fiscal year 2004. On July 27, 2012, the Company submitted a counter-memorandum for reconsideration request to the Supreme Court. As of April 24, 2013, the Company has not received any decision from the Supreme Court on such request.

On June 8, 2009, the Company received an assessment letter on tax underpayment (“assessment letter”) from the DGT for Satelindo’s corporate income tax for fiscal year 2002 amounting to Rp105,809 million (including penalties and interest). The Company accepted a part of the correction of the 2002 corporate income tax amounting to Rp2,646 million which was charged to current operations in 2009. Under Indonesian Tax Law, a taxpayer is required to pay the tax underpayment amount as stated in the assessment letter within one month from the date of the assessment letter. The taxpayer can reclaim the tax paid through an objection or appeal process. On August 28, 2009, the Company submitted an objection letter to the Tax Office regarding the remaining correction on Satelindo’s 2002 corporate income tax. On July 15, 2010, the Company received the Decision Letter No.KEP-357/WPJ.19/BD.05/2010 from the DGT declining the Company’s objection to the correction on Satelindo’s corporate income tax for fiscal year 2002. On October 14, 2010, the Company submitted an appeal letter to the Tax Court concerning the Company’s objection to the correction on Satelindo’s corporate income tax for fiscal year 2002. On June 25, 2012, the Company received the Decision Letter from the Tax Court rejecting the Company’s appeal on Satelindo’s corporate income tax for fiscal year 2002. The Company charged the related claim for tax refund amounting to Rp103,163 million to current operations as part of “Current Income Tax Expense”.

On June 8, 2009, the Company also received assessment letters from the DGT for Satelindo’s 2002 and 2003 income tax article 26 amounting to Rp51,546 million and Rp40,307 million (including penalties and interests), respectively. On August 27, 2009, the Company submitted an objection letter to the Tax Office for the

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correction of the Satelindo’s 2002 and 2003 income tax article 26. On July 16, 2010, the Company received the Decision Letters No.KEP-367/WPJ.19/BD.05/2010 and KEP-368/WPJ.19/BD.05/2010 from the DGT declining the Company’s objection to the correction of the Satelindo’s 2002 and 2003 income tax article 26. On October 12, 2010, the Company submitted appeal letters to the Tax Court concerning the Company’s objection to the correction of Satelindo’s 2002 and 2003 income tax article 26. On November 6, 2012, the Company received the Decision Letter from the Tax Court receiving the Company’s appeal on Satelindo’s 2002 and 2003 income tax article 26 amounting to Rp87,198 million, which amount is lower than the amount recognized by the Company in its financial statements. The Company accepted the corrections amounting to Rp4,655 million which was charged to current operations as part of “Others-net”. On January 28, 2013, the Company has received the restitution.

On September 7, 2009, the Company received the Decision Letter No.KEP-335/WPJ.19/BD.05/2009 from the DGT which declined the Company’s objection to the remaining corrections of the 2006 corporate income tax. On December 2, 2009, the Company submitted an appeal letter to the Tax Court regarding the remaining corrections of the Company’s 2006 corporate income tax. On April 26, 2011, the Company received the Tax Court’s Decision Letter which accepted the Company’s appeal on the remaining correction of the 2006 corporate income tax. On June 21, 2011, the Company received a tax refund amounting to Rp82.6 billion. On August 22, 2011, the Company received a copy of a memorandum for reconsideration request from the Tax Court to the Supreme Court on the Tax Court’s Decision Letter dated April 26, 2011 for the 2006 corporate income tax. On September 21, 2011, the Company submitted a counter-memorandum for reconsideration request to the Supreme Court. As of April 24, 2013, the Company has not received any decision from the Supreme Court on such request.

On September 17, 2010, the Company received STPs from the DGT for the underpayment of the Company’s 2008 and 2009 income tax article 26 totaling Rp80,018 million (including interest). On October 13, 2010, the Company submitted cancellation letters to the Tax Office regarding such STPs. Subsequently, on November 16, 2010, the Company was required to pay a certain portion of these STPs by using the approved tax refund claim for the Company’s corporate income tax for fiscal year 2005 amounting to Rp38,155 million. On January 7, 2011, the Company paid the remaining amount of Rp41,863 million. On April 11, 2011, the Company received a letter from the Tax Office which declined the request for cancellation of such STPs. On May 5, 2011, the Company submitted an appeal letter to the Tax Court concerning these STPs. On July 30, 2012, the Company received the Tax Court’s Decision Letter accepting the Company’s appeal. On September 11, 2012, the Company submitted a request for restitution to the Tax Office to transfer the tax overpayment related to these STPs. On December 26, 2012 the Company received a copy of a memorandum for reconsideration request from the Tax Court to the Supreme Court’s decision letter dated July 30, 2012 for the underpayment of the Company’s 2008-2009 income tax article 26. On February 6, 2013, the Company submitted a counter-memorandum for reconsideration request to the Supreme Court. As of April 24, 2013, the restitution has not been received.

On April 21, 2011, the Company received the assessment letter on tax underpayment from the DGT for the Company’s VAT for the period from January to December 2009, totaling Rp182.8 billion (including penalties). The Company accepted a part of the corrections amounting to Rp4.2 billion, which was charged to current operations. On July 15, 2011, the Company paid the remaining underpayment, amounting to Rp178.6 billion of the VAT for the period from January to December 2009. On July 19, 2011, the Company submitted an objection letter to the Tax Office regarding the remaining correction on the Company’s VAT for such period. On June 4, 2012, the Company received the decision letter from the DGT that declined the Company’s objection and, based on its audit, the DGT charged the Company for additional underpayment for the period January, March, April, June, August to December 2009 totalling Rp57,166 million and overpayment for the period February, May and July 2009 totalling Rp4,027 million. On July 4, 2012, the Company paid the additional underpayment amounting to Rp57,166 million. On August 24, 2012 and August 31, 2012, the Company received the overpayment amounting to Rp3,839 million and Rp188 million, respectively. On September 3, 2012, the Company submitted an appeal letter to the Tax Court regarding the remaining correction on the Company’s VAT for the period

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January to December 2009. As of April 24, 2013, the Company has not yet received any decision from the Tax Court on such objection letter.

On April 21, 2011, the Company received the assessment letter on tax overpayment from the DGT for the Company’s 2009 corporate income tax amounting to Rp29.3 billion, which amount is lower than the amount recognized by the Company in its financial statements. The Company accepted a part of the corrections amounting to Rp0.8 billion, which was charged to current operations. On May 31, 2011, the Company received a tax refund of Rp23.7 billion, (net of the amount of the VAT correction for the period from January to December 2009 that the Company accepted). On July 20, 2011, the Company submitted an objection letter to the Tax Office regarding the remaining correction on the Company’s 2009 corporate income tax. On June 29, 2012, the Company received the Decision Letter from the DGT which declined the Company’s objection. On September 21, 2012, the Company submitted an appeal letter to the Tax Court concerning the Company’s objection to the correction on corporate income tax for fiscal year 2009. As of April 24, 2013, the Company has not received any decision from the Tax Court on such letter.

On July 3, 2012, the Company received the assessment of tax overpayment from the DGT for the Company’s 2010 corporate income tax amounting to Rp89,381 million, which amount is lower than the amount recognized by the Company in its financial statements. The Company accepted all of the corrections amounting to Rp61 million, which were charged to current operations. On August 24, 2012, the Company received the tax refund of its claim for 2010 corporate income tax amounting to Rp89,381 million. Based on this assessment of tax overpayment, the tax loss carry forward amounting to Rp1,040,083 million, which amount is lower than the amount recognized by the Company in its financial statements. The Company accepted all of the corrections amounting to Rp101,978 million.

On July 3, 2012, the Company received the assessment of tax overpayment from the DGT for the Company’s VAT for the period March 2010 amounting to Rp28,545 million, which amount is lower than the amount recognized by the Company in its financial statements, and the assessments of tax underpayment for the Company’s VAT for the period January, February and April to December 2010 totalling Rp98,011 million (including penalties). On August 2, 2012, the Company paid the underpayment amounting to Rp98,011 million. On August 24, 2012, the Company received the overpayment amounting to Rp28,545 million from DGT. On October 1 and 2, 2012, the Company submitted an objection letter to the Tax Office regarding the assessment of tax overpayment and the assessment of tax underpayment on the Company’s VAT for the period January to December 2010 totalling Rp106,619 million. As of April 24, 2013, the Company has not received any decision from the Tax Office on such objection.

We are not involved in any other material cases, including civil, criminal, bankruptcy, state administration cases or arbitration cases in the Indonesian National Board of Arbitration or labor cases in Industrial Relation Court which may materially affect our performance.

Dividend Policy

Our shareholders determine dividend payouts in the Annual General Meeting of Shareholders pursuant to recommendations from our Board of Directors. At our 2010, 2011 and 2012 Annual General Meetings of Shareholders, our shareholders declared final cash dividends amounting to 50.0% of our net income for each of the years ended December 31, 2009, 2010 and 2011, respectively. We intend to continue paying dividends in such amount to allow us to meet sound financial governance and investor expectations.

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Item 9: THE OFFER AND LISTING

Offer and Listing Details

The table below sets forth, for periods indicated, the reported high and low quoted prices for our common stock on the Indonesian Stock Exchange, or the IDX:

	Price per Share
	High		Low
	(Rp)
Calendar Year
2008		8,750		3,950
2009		5,950		4,200
2010		6,300		4,400
2011		6,000		4,700
2012		7,000		3,425
Financial Quarter
First Quarter 2011		5,650		4,800
Second Quarter 2011		5,050		5,450
Third Quarter 2011		6,000		5,050
Fourth Quarter 2011		5,900		4,700
First Quarter 2012		5,950		4,975
Second Quarter 2012		5,250		3,425
Third Quarter 2012		6,400		4,225
Fourth Quarter 2012		7,000		5,200
Month
October 2012		6,700		5,200
November 2012		7,000		5,300
December 2012		6,600		5,500
January 2013		7,150		6,250
February 2013		7,200		6,000
March 2013		6,900		5,850
April 2013 (through April 24, 2013)		6,850		6,100

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The table below sets forth, for the periods indicated, the reported high and low quoted prices of the ADSs on the New York Stock Exchange, or the NYSE.

	Price per ADS
	High		Low
	(in US$)
Calendar Year
2008		47 1/64		16
2009		30 47/128		16 189/256
2010		35 37/64		24 7/32
2011		34 7 /16		25 63/64
2012		35 31/64		27 23/32
Financial Quarter
First Quarter 2011		31 3/32		27 3/64
Second Quarter 2011		31 15/64		29 39/64
Third Quarter 2011		34 7 /16		28 9/16
Fourth Quarter 2011		31 11 /16		25 63/64
First Quarter 2012		31 47/64		27 23/32
Second Quarter 2012		28 3/8		18 15/32
Third Quarter 2012		31 23/32		22 17/32
Fourth Quarter 2012		35 31/64		27 21/64
Month
October 2012		33 7/64		27 21/64
November 2012		33 31/64		30 19/32
December 2012		33 11/16		31 17/64
January 2013		35 53/64		33 13/64
February 2013		37 25/64		31 61/64
March 2013		34 7/64		29 59/64
April 2013 (through April 24, 2013)		34 49/64		30 23/32

On April 22, 2013, we announced that we intend to delist the ADRs from the NYSE and the ADRs will not be listed or quoted on another national securities exchange in the U.S. We intend to file a Form 25 with the U.S. SEC and expect the delisting to be effective on or about May 16, 2013. Following the delisting, investors will continue to be able to buy and sell shares through the IDX. The ADR programme will be terminated in accordance with its terms.

Markets

Our common stock is listed on the IDX. The IDX is the principal non-U.S. trading market for our common stock. Our ADSs, each representing 50 shares of our common stock, are listed on the NYSE. After the stock split, which became effective on March 10, 2004, each ADS represents 50 Series B shares (as compared to the ten Series B shares previously represented thereby).

The Indonesian Securities Market

Changes to BAPEPAM-LK

On November 22, 2012, with the enactment of Law No. 21 of 2011 regarding Financial Services Authority (“OJK Law”), the Government has effectively created a new integrated and independent financial authority called the Financial Services Authority or Otoritas Jasa Keuangan (“OJK”). By the authority given under the OJK Law, OJK has taken over the supervision and regulation of capital markets, insurance, pension funds, and multi finance companies from Bapepam-LK as of December 31, 2012 and will take over the supervision and regulation of banks from Bank Indonesia as of December 31, 2013. OJK Law stipulates that all existing licenses,

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approvals, and decisions issued before the transfer of duties and authorities of Bapepam-LK to OJK will continue to be valid, while applications for licenses and approvals and other decisions made or outstanding after December 31, 2012 will be processed by OJK.

Overview of the IDX

On November 30, 2007, the Jakarta Stock Exchange and the Surabaya Stock Exchange merged to become the IDX. The IDX began operations on December 3, 2007 and in 2007, had a market capitalization of Rp2,539,041 billion, in which Rp1,982 billion of it came from equities, Rp79,065 billion and US$105 million came from corporate bonds and Rp477 trillion came from government bonds.

There are currently two daily trading sessions for regular and negotiable markets from Monday to Thursday:

a. For regular market: 9:00 a.m. to 12:00 noon, and 1:30 p.m. to 3:49:59 p.m.; and

b. For negotiable market: 9:00 a.m. to 12:00 noon, and 1:30 p.m. to 4:15 p.m.

There are two trading sessions for regular and negotiable market on Friday:

a. For regular market: 9:00 a.m. to 11:30 a.m., and 2:00 p.m. to 3:49:59 p.m.; and

b. For negotiable market: 9:00 a.m. to 11:30 a.m., and 2:00 p.m. to 4:15 p.m.

There is only one cash market trading session from Monday to Thursday, 9:00 a.m. to 12:00 noon and Friday, 9:00 a.m. to 11:30 a.m.

Trading on the IDX is based on an order-driven market system. Investors must contact brokerage companies, or IDX members, that will execute their orders through the IDX trading system. Trading on the IDX can only be done by IDX members who are registered as members of the Indonesian Clearing and Guarantee Corporation, or KPEI. A brokerage company may also buy and sell securities for its own account. No limitation of share ownership by foreign investors or foreign institutions exists through direct placement or through trading on the IDX, except for banking institutions, which may only be 99.0% foreign owned.

Trading is divided into three market segments: regular market, negotiable market, and cash market. The regular market is the mechanism for trading stock in standard lots on a continuous auction market during exchange hours. With respect to the trading of stock, a round lot consists of 500 shares. The price movements are limited as follows: (i) if the share price is below Rp200, then the price moves in increments of Rp1 with the aggregate daily price movement limited to Rp10; (ii) if the share price is equal to Rp200 or more, but less than Rp500, then the price moves in increments of Rp5 with the aggregate daily price movement limited to Rp50; (iii) if the share price is equal to Rp500 or more, but less than Rp2,000, then the price moves in increments of Rp10 with the aggregate daily price movement limited to Rp100; (iv) if the share price is equal to Rp2,000 or more, but less than Rp5,000, then the price moves in increments of Rp25 with the aggregate daily price movement limited to Rp250; and (v) if the share price is equal to or exceeds Rp5,000, then the price moves in increments of Rp50 with the aggregate daily price movement limited to Rp500. Orders are processed by computers that carry out matching processes of the outstanding “bids” and “asks” according to price and time priority. Price priority gives priority to buying orders at a lower price or selling orders at a higher price. If buying or selling orders are placed at the same price, priority is given to the buying or selling order placed first (time priority).

Trades in the negotiated market can be completed without using the round lot system and price step rule. IDX members can advertise selling or buying orders through the IDX trading system and amend their order by negotiating with another member. The ultimate price is based on agreement, but it is recommended to be based on the stock price on the regular market.

Transactions on the IDX regular market and non-regular market are required to be settled no later than the third trading day after the transactions. In case of a default by an exchange member on settlement upon the due date, they are liable to pay 125.0% of the highest price of the same securities or the same trading day.

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The IDX board of directors may cancel a transaction if proof exists of fraud, manipulation or the use of insider information. The board of directors may also suspend trading if there are indications of bogus transactions or jacking up of share prices, misleading information, use of insider information, counterfeit securities or securities blocked from trading, or other important events.

IDX members may charge fees for their services based on an agreement with their clients. When conducting stock transactions on the IDX, exchange members are required to pay a transaction fee equal to 0.018% of the cumulative transaction value of each transaction plus an additional 0.01% for cash and regular market transactions guaranteed by KPEI (subject to a minimum transaction fee of Rp20,000,000). The commissions and transaction fees do not include the 10.0% value-added tax and the 0.1% transaction tax levied on the cumulative value of the sales of the shares.

The Indonesian capital markets are generally less liquid than those in countries with more developed capital markets. This illiquidity is especially pronounced for large blocks of securities. Also, prices in the Indonesian capital markets are typically more volatile than in such other markets. Accordingly, we cannot assure you that a holder of common stock will be able to dispose of common stock at prices or at times at which such holder would be able to do so in more liquid markets or at all. Further, we cannot assure you that a holder of common stock will be able to dispose of common stock at or above such holder’s purchase price.

Trading on the NYSE

The Bank of New York serves as depositary, or the Depositary, with respect to our ADSs, which are traded on the NYSE. After the stock split, which became effective on March 10, 2004, each ADS represents 50 shares of our common stock (as compared to the ten Series B shares previously represented thereby). As of December 31, 2012, 12,762,864 ADSs, representing 11.70% of our common stock, were outstanding in the United States and there were 47 registered owners of our ADSs.

Item 10: ADDITIONAL INFORMATION

Description of Articles of Association and Capital Stock

As of December 31, 2012, the authorized capital of Indosat is Rp2,000,000,000,000, divided into 20,000,000,000 shares consisting of one Series A share and 19,999,999,999 Series B shares, each share of par value Rp100. Of the authorized capital, 5,433,933,500 shares were subscribed to and fully paid up in cash, consisting of one Series A share and 5,433,933,499 Series B shares, or with a total nominal value of Rp543,393,350,000 by:

a. the Republic of Indonesia, one Series A share and 776,624,999 Series B shares with a total nominal value of Rp77,662,500,000;

b. Ooredoo Asia, 3,532,056,600 Series B shares with a total value of Rp353,205,660,000; and

c. the Public, 1,125,251,900 Series B shares with a total nominal value of Rp112,525,190,000.

On March 8, 2004, we held an Extraordinary General Meeting of Shareholders which approved the split of nominal value of Series A share and Series B shares from Rp500 to Rp100 per share, which increased our authorized shares to 20,000,000,000 shares and our issued shares to 5,177,500,000 shares. After the stock split, the authorized capital of Indosat is Rp2,000,000,000,000 divided into 20,000,000,000 shares consisting of one Series A share and 19,999,999,999 Series B shares, each share of par value Rp100. Of our authorized capital, 5,177,500,000 shares were subscribed to and fully paid up in cash, consisting of one Series A share and 5,177,499,999 Series B shares, or with a total nominal value of Rp517,750,000,000 by:

a. the Republic of Indonesia, one Series A share and 776,624,999 Series B shares with a total nominal value of Rp77,662,499,900;

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b. ICLM, 2,171,250,000 Series B shares with a total value of Rp217,125,000,000; and

c. the Public, 2,229,625,000 Series B shares with a total nominal value of Rp222,962,500,000.

The amendment to the Articles of Association of Indosat, necessitated by the stock split, has been reported to and accepted by the Minister of Justice and Human Rights of Indonesia under number C-05582 HT.01.04.TH.2004, dated March 8, 2004. Such amendment has been registered in the Central Jakarta Company Register Office under number 0540 / RUB.09.05 / III / 2004, dated March 9, 2004. On October 20, 2004, the Ministry of Justice and Human Rights of Indonesia changed its name to the Ministry of Law and Human Rights of Indonesia.

On January 28, 2010, Indosat convened an Extraordinary General Meeting of Shareholders to approve, among others, an amendment to Article 3 of Indosat’s Articles of Association, covering its purposes and objective. Such amendment was required in compliance with Rule of Bapepam dan LK No. IX.J.1.

Our Articles of Association, or the Articles, state that any transaction involving a conflict of interest as defined in prevailing capital market regulations should obtain the approval of the independent shareholders in a general meeting of shareholders especially convened for such purpose.

Each Director receives an annual bonus as well as other incentives in the event we surpass certain financial and operating targets, the amounts of which are determined by our Board of Commissioners and reported at our annual general meeting of shareholders. Bonuses are budgeted annually and are based on the recommendation of our Board of Directors, whose recommendation must be approved by our Board of Commissioners prior to submission to our shareholders. Each Commissioner is granted a monthly honorarium and certain other allowances, the amounts of which are determined by our shareholders at our annual general meeting of shareholders.

Our Board of Directors are responsible for leading and managing us in accordance with our objectives and purposes as well as to control, preserve and manage our assets. To complete these responsibilities, our Board of Directors are authorized to cause us to borrow such sums as required from time to time subject to the limitations set forth in the Articles. The borrowing powers of our Board of Directors may only be varied through an amendment to the Articles. The Articles do not contain any requirement for the Directors to retire by a specified age or to own any or a specified number of our common shares.

Common Stock

The following is a summary of the material rights and restrictions related to the common stock of Indosat based upon applicable provisions of Indonesian law and provisions of our Articles of Association, which were amended on January 28, 2010 and approved by the Minister of Law and Human Rights of Indonesia on February 25, 2010. This description does not purport to be complete and is qualified by reference to the Articles of Association and the laws of Indonesia relating to companies, which may in certain instances differ from provisions contained in the Articles of Association.

All of the shares of common stock are registered shares and are issued in the name of the owner of the common stock registered in the register of shareholders of Indosat. The Board of Directors keeps a register of shareholders of Indosat, and Indosat must treat the person whose name is entered in such register of shareholders as the only person entitled to exercise any rights conferred by law with respect to such common stock.

All transfers of common stock must be evidenced by an instrument of transfer signed by or on behalf of the transferor and by or on behalf of the transferee or based on other letters, which give satisfactory evidence of such transfer in the opinion of the Board of Directors. Transfers of common stock take effect only after the transfer is registered in the register of shareholders. The transferor of any common stock will be treated as the owner of such common stock until the name of the transferee has been entered in the register of shareholders.

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The holders of common stock are entitled to pre-emptive rights if Indosat issues common stock, convertible bonds, warrants or similar securities. Such pre-emptive rights may be transferred or assigned to third parties subject to the restrictions set forth in the stipulations in the Articles, prevailing capital markets regulations and Indonesian law. Any rights issue shall be first approved by Indosat’s general meeting of shareholders and an announcement of such a plan shall be made by the Board of Directors in two daily newspapers (one in the English language and one in the Indonesian language). If the holders of common stock do not exercise their pre-emptive rights within the period fixed by the Board of the Directors in accordance with the relevant regulations, the Board of Directors may issue such common stock, convertible bonds, warrants or similar securities to third parties at a price and on terms at least the same as that offered previously to the existing shareholders and as determined by the Board of Directors.

Indosat’s authorized capital stock may be increased or decreased only by a resolution of an extraordinary general meeting of shareholders and an amendment of the Articles. Any such Amendment will be effective only after it receives approval from the Minister of Law and Human Rights of Indonesia.

As an exception to the above provisions, Indosat, with the approval of a general meeting of shareholders at which the holder of the Series A share attends and approves the resolution, may issue new shares without conducting a limited public offer to shareholders. This issuance may be done provided that this issue is made for a specified number of shares and such shares are issued within a specified period of time in compliance with the Indonesian capital market regulations or under any exemption Indosat may receive therefrom, and the said shares may be sold by Indosat to any person at a price and upon such conditions as may be determined by the Board of Directors, provided that the price is not lower than par value. There are no limitations on the rights of foreign investors to own our common stock if such stock is acquired through capital markets.

These provisions also apply mutatis mutandis in the event Indosat issues convertible bonds and/or warrants and/or other similar securities, provided that any new share issued resulting from convertible bonds and/or warrants and/or other similar securities shall be for a specified number of shares and within a specified period of time in compliance with the Indonesian capital market regulations or any exemption as Indosat may receive therefrom.

Series A Share

The material rights and restrictions which are applicable to the common stock are also applicable to the one Series A share, except that the Government may not transfer the Series A share and it has veto rights with respect to: (i) amendment to the objective and purposes of the Company; (ii) increase of capital without pre-emptive rights; (iii) merger, consolidation, acquisition and demerger; and (iv) amendment to the provisions regarding the rights of “A” share as stipulated in the Articles of Association; and (v) dissolution, bankruptcy and liquidation of the Company.

Purpose and Duration

Pursuant to Article 3 of our Articles of Association, as amended on January 28, 2010, in order to comply with the Capital Market and Financial Institution Supervisory Board (Badan Pengawas Pasar Modal dan Lembaga Keuangan/“Bapepam dan LK”) Rule No. IX.J.1 on guidelines of articles of association of a company who conduct public offering on equity securities and public companies, Indosat’s purposes, objectives and business activities are as follows:

1. The purposes and objectives of the Company are to provide telecommunications networks, telecommunication services as well as information technology and/or convergence technology services.

2. In order to achieve the abovementioned purposes and objectives, the Company may carry out activities including the main business as follows:

a. To provide telecommunication networks, telecommunication services as well as information technology and/or convergence technology services, including but not limited to provision of

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basic telephony services, multimedia services, internet telephony services, network access point services, internet services, mobile telecommunication networks and fixed telecommunication networks; and

b. To engage in the payment transaction and money transfer service through telecommunication networks as well as information technology and/or convergence technology.

3. In order to achieve the abovementioned purposes and objectives and in order to support the main business of the Company as mentioned above, the Company can conduct supporting business activities, as follows:

a. To plan, to procure, to modify, to build, to provide, to develop and to operate, to lease, to rent, to maintain infrastructure/facilities including resources to support the Company business in providing telecommunication networks, telecommunication services as well as information technology and/or convergence technology services;

b. To conduct business and operating activities (including development, marketing and sales of telecommunication networks, telecommunication services as well as information technology and/or convergence technology services by the Company), including research, customer services, education and courses both domestic and overseas; and

c. To conduct other activities necessary to support and/or related with the provision of telecommunication networks, telecommunication services as well as information technology and/or convergence technology services including but not limited to electronic transactions and provision of hardware, software, content as well as telecommunication managed services.

We were established on November 10, 1967 with no time limit on our establishment.

Voting Rights

Each share of common stock entitles the registered holder thereof to one vote at any general meeting of shareholders of Indosat. Shareholders appoint members of the Board of Directors for a period commencing from the date of the general meeting of shareholders that appointed them and ending at the closing of the 5th annual general meeting of shareholders subsequent to the date of their appointment.

An annual general meeting of shareholders must be held, at the latest, on June 30 of each year. At such annual general meeting, the Directors must (i) report on the affairs and management of Indosat and the results for the most recent financial year; (ii) submit the audited balance sheet and audited profit and loss statement for such financial year to the meeting for approval; (iii) determine the plan for use of profit and the amount of dividend for such financial year; (iv) submit a request for the appointment of a public accountant; and (v) submit all other matters to be addressed at the meeting. In addition, the Board of Commissioners should also report their supervisory activities during the proceeding fiscal year as stipulated in the annual report. All materials described in (i) through (v) will be made available at Indosat for inspection by shareholders from the date of the invitation for the annual general meeting of shareholders until the date of the annual general meeting of shareholders. Proposals duly submitted by shareholders representing at least 10.0% of Indosat’s subscribed shares may be included in the agenda of such meeting, provided that such proposals are received by the Board of Directors at least 21 days prior to such meeting.

The Board of Directors or the Board of Commissioners may convene an extraordinary general meeting of shareholders and must convene such a meeting upon receipt of written notice from a shareholder or shareholders representing at least 10.0% of the subscribed shares of Indosat. Upon receipt of such written notice, within 22 days of the date such written notice is accepted, the Board of Directors shall discuss, resolve, and if the Board of Directors have resolved to convene such extraordinary meeting of shareholders, the Board of Directors shall announce notice of the extraordinary meeting of shareholders at the latest 14 days prior to the invitation of the

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extraordinary meeting of shareholders without counting the announcement date and the invitation date. No later than 14 days prior to the extraordinary meeting of shareholders, without counting the invitation date and the meeting date, the Board of Directors shall announce invitation to the extraordinary meeting of shareholders. If the Directors fail to provide notice of such a meeting, the shareholders concerned can re-submit their notice to the Board of Commissioners. Upon receipt of such notice, within 22 days of the date such notice is accepted, the Board of Commissioners shall discuss, resolve, and if the Board of Commissioners have resolved to convene such extraordinary meeting of shareholders, the Board of Commissioners shall announce notice to the extraordinary meeting of shareholders at the latest 14 days (excluding notification date and invitation date) prior to the invitation of the extraordinary meeting of shareholders. No later than 14 days prior to the extraordinary meeting of shareholders, without counting the invitation date and the meeting date, the Board of Commissioners shall announce invitation to the extraordinary meeting of shareholders. If the Board of Commissioners fails to make notice of the extraordinary meeting of shareholders within 22 days as of the receipt of such request, the shareholders concerned may call such meeting at the expense of Indosat after obtaining approval from the Chairman of District Court.

Announcement of a general meeting is given to shareholders at least 14 days (excluding notification date and invitation date) prior to the notice for the general meeting by an advertisement in at least two daily newspapers (one in the Indonesian language and one in the English language), one of which has a wide circulation in Indonesia. Notice must be given by placement of advertisement in at least two daily newspapers, one of which is in the Indonesian language and has a wide circulation in Indonesia and one of which is in the English language at least 14 days before the date of the annual general meeting or extraordinary general meeting, excluding the date of the notice and the date of the meeting.

If all shareholders are present and/or represented, notice requirements may be waived and the general meeting of shareholders may adopt binding resolutions.

Generally, the quorum for a general meeting of shareholders requires shareholders representing more than 50.0% of the issued shares of common stock to be represented in person or by a power of attorney at such meeting.

Shareholders may be represented at a general meeting of shareholders by a person holding a power of attorney, but no Commissioner, Director or employee of Indosat may act in such capacity. Unless otherwise provided in the Articles, and subject to the special voting rights of the Special Share, resolutions in order to be adopted must receive the affirmative vote of the holders of more than 50.0% of the shares of common stock which are present and being voted at the meeting (simple majority votes).

Fiscal Year and Accounts

Our fiscal year commences on January 1 and ends on December 31.

No later than 90 days from the closing of the fiscal year, the Board of Directors must submit the balance sheet, profit and loss account and other financial statements audited by a public accountant to the Board of Commissioners, who must review these statements and report on this review to the general meeting of shareholders. Copies of such documents must be available at the head office of Indosat from the date of notice for the annual general meeting of shareholders up to the date of closing of the annual general meeting of shareholders.

The annual general meeting of shareholders will consider and decide whether or not the balance sheet and profit and loss account of Indosat is approved. Such approval fully discharges the Board of Directors and the Board of Commissioners from their responsibilities during the fiscal year concerned to the extent that such actions are reflected in such balance sheet and profit and loss account.

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Utilization of Profit and Dividends

The profit of Indosat, as determined by the annual general meeting of shareholders, after deduction of corporate tax, must be used as a reserve fund, for dividends and for other purposes, the percentage of which must be determined annually by a general meeting of shareholders.

Dividends are paid in accordance with a resolution adopted at a general meeting of shareholders, upon the recommendation of the Board of Directors, which resolution also determines the time and manner of payment of the dividends. All shares of common stock which are fully paid and outstanding at the time a dividend or other distribution is declared are entitled to share equally in such dividends or other distribution. Dividends are payable to the persons whose names are entered in the register of shareholders of Indosat, on a business day determined by the general meeting of shareholders at which the resolution for the distribution of dividends is adopted.

The Board of Directors and the Board of Commissioners may, by resolutions of both, declare interim dividends if the financial condition of Indosat so permits, provided that such interim dividends are offset against the dividends to be declared at the subsequent annual general meeting.

Dividends unclaimed after five years from the date of which they are payable cease to be payable and are to be credited to the reserve fund of Indosat. Notices concerning dividends and interim dividends must be announced in at least two daily newspapers in the Indonesian language with wide or national circulation in Indonesia, in one daily newspaper in the English language and on the stock exchange where the shares are listed.

If the profit and loss account in one fiscal year shows a loss which cannot be covered by the reserve fund referred to below, the loss remains recorded as such in the profit and loss account and for the succeeding years Indosat is deemed not to have made a profit if the loss recorded as such in the profit and loss account has not been fully covered.

To cover future losses, a reserve fund may be created and the amount of the reserve fund will be determined by a general meeting of shareholders. The reserve fund may be used for capital outlays or other purposes as determined at the annual general meeting of shareholders. However, it must only be used for the benefit of Indosat. Any profits earned from such reserve fund shall be entered in the profit and loss account of Indosat.

Liquidation

In the event that we go into liquidation, the Board of Directors will act as liquidator if required by the prevailing regulations. The balance of any liquidation account which is set up, after payment of all our debts and obligations, will be used to pay all of our shares. If possible, payment on these shares shall be made at a price written on the share certificates. The remaining balance of the liquidation account shall be distributed according to resolutions of the general meeting of shareholders.

Amendments to the Articles of Association

Amendments to our Articles of Association may be made only by a resolution of an extraordinary general meeting of shareholders attended by at least two-thirds of the shareholders and approved by more than two-thirds of the shareholders with voting rights, provided that (i) increases in our share capital without pre-emptive rights, (ii) merger, consolidation, acquisition and demerger involving us, (iii) dissolution and liquidation, (iv) amendments to the Articles of Association related to our purposes and objectives and the Series A holder’s veto rights can be affected only if the meeting is attended and the action approved by the holder of the Series A share.

A resolution regarding a reduction of the authorized or subscribed capital must be published by the Board of Directors in at least two daily newspapers, one of which is in the Indonesian language having a national

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circulation, and the other in the English language, for the benefit of creditors within the period at the latest of seven days after the date of the general meeting of shareholders. In case a quorum for the extraordinary general meeting is not reached, within ten to twenty-one days from the original extraordinary general meeting a second meeting may be held to decide on matters which were not resolved at the first meeting. The second meeting can result in a valid and binding decision if attended by at least three-fifths of the shareholders and be approved by more than half of the shareholders with voting rights. Amendments related to a reduction of capital only become effective upon the approval of the Ministry of Law and Human Rights of Indonesia.

Transactions with Affiliates

It is the policy of Indosat not to enter into transaction with affiliates unless the terms thereof are no less favorable to Indosat than those which could be obtained by Indosat on an arm’s length basis from an unaffiliated third party.

Under BAPEPAM-LK regulations and Article 19 of our Articles of Association, any transaction in which there is a conflict of interest (as defined below) must be approved by a majority of the shareholders of common stock who do not have a conflict of interest in the proposed transaction, unless the conflict existed before Indosat was listed and was fully disclosed in the offering documents. A conflict of interest is defined in BAPEPAM-LK Rule No. IX.E.1 to mean the difference between Indosat’s common interests, on the one hand, and the personal economic interests of the members of our Board of Commissioners, Board of Directors or our majority shareholders (a holder of 20.0% or more of our issued shares) of Indosat in one transaction which may impose losses on us. A conflict of interest also exists under BAPEPAM-LK rules when members of the Board of Commissioners, Board of Directors or a controlling shareholder of Indosat is involved in a transaction in which their personal interests may be in conflict with the interest of Indosat, unless otherwise excepted by BAPEPAM-LK regulations.

We expect, in light of the substantial presence which enterprises owned or controlled by the Government or Ooredoo Asia or one of their affiliates have in Indonesia, that it may be desirable, in connection with the development and growth of our business, for us to enter into joint ventures or other arrangements or transactions with such enterprise from time to time. Under such circumstances, we may seek to consult OJK in determining whether the proposed joint venture, arrangement or transaction would require a vote of disinterested shareholders under the terms of the BAPEPAM-LK rule. If OJK were of the view that the proposed joint venture, arrangement or transaction would not require a vote of disinterested shareholders under its rule, we would proceed without seeking disinterested shareholder approval. If, however, OJK were to take the position that the proposal would require a vote of disinterested shareholders under its rule, we would either seek to obtain the requisite disinterested shareholder approval or abandon the proposal.

Material Contracts

On July 30, 2007, we entered into a cooperation agreement with Telkomsel to set up network interconnection between our fixed local telecommunications network and Telkomsel’s cellular mobile network. Pursuant to this agreement, we and Telkomsel agreed to enable each party’s customers to make local, long-distance and international calls between our fixed local telecommunications network and Telkomsel’s cellular mobile network. We amended this agreement through the first amendment No. Telkomsel: AMD.2283/LG.05/PD-00/XII/2007—No Indosat: 029/C00-CC0/LG/07 dated December 19, 2007, the second amendment No. Telkomsel: AMD.339/LG.05/PD-00/III/2008—No. Indosat: 004/C00-CC0/LGL/08 dated March 3, 2008, the third amendment No. Telkomsel: 1762/LG.05/PD-00/XI/2010 and No. Indosat: 011/C00-C0AA/LGL/10 dated November 1, 2010, the fourth amendment No. Telkomsel: 459/LG.05/PD-00/IV/2011—No. Indosat: 042/C00-C0H/LGL/11 dated April 7, 2011, the fifth amendment No. Telkomsel: 741/LG.05/PD-00/VII/2011—No. Indosat: 84/C00-C0HA/LGL/2011 dated July 19, 2011, the sixth amendment No. Telkomsel: Amd.684/LG.05/PD-00/V/2012—No. Indosat: 06/C00-C0HA/LGL/2012 dated May 28, 2012 and the latest addendum as set forth in the mutual office minutes No. Telkomsel: 005/IC.01/MO-01/III/2013 – No. Indosat: 004/C00-COH/LGL/2013 dated March 8, 2013.

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On August 28, 2007, we entered into a five-year unsecured credit facility agreement with BCA, amounting to Rp1,600 billion. Furthermore, on September 20, 2007, we obtained an increase in the credit facility by Rp400,000. As a result, the credit facility has become Rp2,000,000. On February 10, 2011, we entered into a credit agreement with BCA providing for a three-year unsecured time loan revolving facility amounting to up to Rp1,000 billion. This agreement was amended on December 1, 2011 to increase the amount available under the facility to a maximum of Rp1,500 billion. On December 19, 2012, we entered into a second amendment of this unsecured time loan revolving facility agreement. For further information on these agreements, see “Item 5: Operating and Financial Review and Prospects—Liquidity and Capital Resources—Cash Flows—Principal Indebtedness.”

On December 18, 2007, we entered into an interconnection agreement with Telkom to set up network interconnection between our cellular wireless network and Telkom’s fixed telecommunications network. Under this agreement, we and Telkom agreed to open prefixes and access codes belonging to the other party, which enable each party’s customers to make interconnection calls of various types between our cellular wireless network and Telkom’s fixed telecommunications network. The agreement sets forth the interconnection tariffs for providing interconnection services based upon a cost-based regime and is valid for two years, but can be extended or terminated based upon mutual agreement of the parties. We amended this agreement as stipulated in first amendment No. Telkom 47/HK.820/DCI-A1000000/2008—No. Indosat 021/C00-CC0/LGL/2008 dated March 31, 2008 and second amendment No. Telkom 123/HK.820/DCI-A1000000/2009—No. Indosat 007/C00-C0A/LGL/2009 dated December 30, 2009, the third amendment as stipulated in the form of mutual office minutes No. Telkom Tel.024/YN.000/DCI-A1050000/2011—No. Indosat 003/C00-C0H/LGL/2011 dated January 31, 2011, which has been restated in the amendment No Telkom: Tel.185/HK 820/DCI-A1000000/2011—No. Indosat: 032/C00-C0H/LGL/2011 dated July 20, 2011, the fourth amendment No. Telkom: Tel. 259/HK 820/DCI-A1000000/2011 – No. Indosat: 043/C00-C0H/LGL/2011 dated December 20, 2011 and the latest amendment as stipulated in the form of mutual office minutes No. Telkom: Tel.35/YN000/DWS-C1010000/2012 – No. Indosat: 014/C00-C0HA/LGL/2012 dated May 30, 2012.

On December 18, 2007, we entered into an interconnection agreement with Telkom to set up network interconnection between our fixed telecommunications network and Telkom’s fixed telecommunications network. Under this agreement, we and Telkom agreed to open prefixes and access codes belonging to the other party which enable each party’s customers to make local, long-distance and international calls between our fixed telecommunications network and Telkom’s fixed telecommunications network. The agreement sets forth the interconnection tariffs for providing interconnection services based upon a cost-based regime and is valid for two years, but can be extended or terminated based upon mutual agreement of the parties. We amended this agreement through the first amendment No Telkom 48/HK.820/DCI-A1000000/2008—No Indosat 020/C00-CC0/LGL/2008 dated March 31, 2008, the second Amendment No Telkom 125/HK.820/DCI-A1000000/2009—No Indosat 006/C00-COA/LGL/2009 dated December 30, 2009, the third amendment as stipulated in the form of mutual office minutes No Telkom Tel.025/YN.000/DCI-A1050000/2011—No Indosat 002/C00-C0H/LGL/2011 dated January 31, 2011, the third amendment No. Telkom: Tel.186/HK 820/DCI-A1000000/2011 – No. Indosat: 033/C00-C0H/LGL/2011 dated July 20, 2011, the fourth amendment No. Telkom: Tel. 260/HK 820/DCI-A1000000/2011 – No. Indosat: 044/C00-C0H/LGL/2011 dated December 20, 2011 and the latest amendment as stipulated in the form of mutual office minutes No. Telkom: Tel.036/YN000/DWS-C1010000/2012 – No. Indosat: 0134/C00-C0HA/LGL/2012 dated May 30, 2012.

On December 19, 2007, we entered into a cooperation agreement with Telkomsel to set up network interconnection between our cellular mobile network and Telkomsel’s cellular mobile network. Pursuant to this agreement, we and Telkomsel agreed to enable each party’s customers to make or receive interconnection calls of various types between our cellular mobile network and Telkomsel’s cellular mobile network. The agreement is automatically renewed every two years but can be unilaterally terminated by either party upon three month’s written notice. We amended the agreement through the first amendment No. Telkomsel: AMD.233/LG.05/PD-00/II/2008 and No. Indosat: 003/C00-CC0/LGL/08 dated February 18, 2008 and through the second amendment No. Telkomsel: 1392/LG.05/PD-00/IX/2010 and No. Indosat: 009/C00-C0AA/LGL/10 dated September 7, 2010,

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through the third amendment No. Telkomsel : 458/LG.05/PD-00/IV/2011 and No. Indosat: 041/C00-C0H/LGL/11 dated April 7, 2011, the fourth amendment No.Telkomsel:Amd.682/LG.05/PD-00/V/2012 – No. Indosat: 05/C00-C0HA/LGL/2012 dated May 28, 2012 and the latest addendum as set forth in the mutual office minutes No. Telkomsel: 004/IC.01/MO-01/III/2013 – No. Indosat: 003/C00-C0H/LGL/2013 dated March 8, 2013.

On March 24, 2009, we held meetings with holders of our Series B Second Indosat Bonds, Third Indosat Bonds, Fourth Indosat Bonds, Fifth Indosat Bonds, Sixth Indosat Bonds, First Syari’ah Ijarah Bonds, Second Syari’ah Ijarah Bonds and Third Syari’ah Ijarah Bonds, and obtained consents to, among other things, amendments to the definitions of “Debt,” “EBITDA,” and “Equity” and to change the ratio of Debt to Equity from 1.75 to 1 to 2.5 to 1 in the trustee agreements to these bonds. For further information on these amendments, see “Item 5: Operating and Financial Review and Prospects—Liquidity and Capital Resources—Cash Flows—Principal Indebtedness.”

On July 28, 2009, we entered into a five-year unsecured credit facility agreement with Bank Mandiri amounting to Rp1,000 billion and on August 18, 2009, we obtained an export credit facility from EKN totaling US$315.0 million. On June 21, 2011 we entered into a credit agreement with Bank Mandiri providing for a three-year unsecured revolving credit facility amounting to up to Rp1,000 billion. This agreement was amended on December 5, 2011 to, among other things, increase the amount available under the facility to a maximum of Rp1,500 billion. For further information on these agreements, see “Item 5: Operating and Financial Review and Prospects—Liquidity and Capital Resources—Cash Flows—Principal Indebtedness.”

On November 25, 2009, we entered into two trustee agreements with PT Bank Rakyat Indonesia (Persero) Tbk, as trustee, in connection with our Seventh Indosat Bonds and our Fourth Syari’ah Ijarah Bonds. The Seventh Indosat Bonds were issued on December 8, 2009 and have total face value of Rp1,300.0 billion. The Fourth Syari’ah Ijarah Bonds were issued on December 8, 2009 and have a total face value of Rp200.0 billion. For further information on this agreement, see “Item 5: Operating and Financial Review and Prospects—Liquidity and Capital Resources—Cash Flows—Principal Indebtedness.”

On July 29, 2010 we, through Indosat Palapa Company B.V. (“Indosat Palapa”) issued guaranteed notes due 2020 with a total face value of US$650.0 million. The notes were issued at 99.478% of their principal amount and mature on July 29, 2020. The notes bear interest at the fixed rate of 7.375% per annum payable in semi-annual installment due on January 29 and July 29 of each year, commencing January 29, 2011. For further information on these notes, see “Item 5: Operating and Financial Review and Prospects—Liquidity and Capital Resources—Cash Flows—Principal Indebtedness.”

On February 7, 2012, we signed transaction documents with Tower Bersama for the sale and leaseback of 2,500 towers, approximately 25% of our existing tower assets, for a total potential consideration of US$541.5 million, comprising upfront consideration of cash and newly issued TBIG shares and a maximum potential deferred payment of US$112.5 million.

On June 13, 2012, we entered into two trustee agreements with PT Bank Rakyat Indonesia (Persero) Tbk, as trustee, in connection with our Eighth Indosat Bonds and our Fifth Syari’ah Ijarah Bonds. The Eighth Indosat Bonds were issued on June 27, 2012 and have total face value of Rp2,700.0 billion. The Fifth Syari’ah Ijarah Bonds were issued on June 27, 2012 and have a total face value of Rp300.0 billion. For further information on this agreement, see “Item 5: Operating and Financial Review and Prospects—Liquidity and Capital Resources—Cash Flows—Principal Indebtedness.”

On December 14, 2012, we entered into a Pico Sharing Agreement with PT XL Axiata Tbk (“XL”) to mutually share each parties, pico cell capacity. Pursuant to this agreement, Indosat and XL agree to mutually share pico cell capacity at certain buildings.

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On December 26, 2012, we entered into a three-year unsecured revolving credit facility agreement with PT Bank Sumitomo Mitsui Indonesia, amounting to Rp650 billion. This agreement was amendend on March 19, 2013.

Tower Lease Agreements

To comply with the Minister of Communication and Information Regulation No. 02/PER/M.KOMINFO/2008 in conjunction with The Joint Decree of Minister of Communication and Information, Minister of Internal Affairs, Minister of Public Work and Head of Coordination Investment Board concerning Guidelines For Construction And Utilization Of Joint Telecommunication Towers, we have entered into tower lease agreements with several tenants, as follows:

On January 29, 2010 we entered into a tower lease agreement with PT Hutchison CP Telecommunications (“HCPT”), pursuant to which HCPT intends to lease the towers of Indosat at basic service (without civil, mechanical and electrical components). The term of this agreement is 12 years and can be extended for a minimum of six years thereafter, unless HCPT intends to terminate the agreement with prior written notice submitted within one month before the end of the agreement. We amended this agreement on August 18, 2011.

On April 15, 2010 we entered into a tower lease agreement with PT Natrindo Telepon Seluler (“NTS”), pursuant to which NTS intends to lease the towers of Indosat at basic service (without civil, mechanical and electrical components). The term of this agreement is 10 years and can be extended automatically for the same period of the initial term, unless NTS intends to terminate the agreement with prior written notice submitted within 90 days before the end of the agreement.

On May 24, 2010 we entered into a tower lease agreement with PT XL Axiata (“XL”), pursuant to which XL intends to lease towers of Indosat at basic service (without civil, mechanical and electrical components). The term of this agreement is 10 years and can be extended for a minimum of five years unless XL intends to terminate the agreement with prior written notice submitted within 120 days before the end of the agreement. We amended this agreement on February 1, 2012.

On June 3, 2010 we entered into a tower lease agreement with PT Berca Global Access (“BERCA”), pursuant to which BERCA intends to lease the towers of Indosat at basic service (without civil, mechanical and electrical components). The term of this agreement is 10 years and can be extended for a minimum of six years unless BERCA intends to terminate the agreement with prior written notice submitted within one month before the end of the agreement.

On February 4, 2011, we entered into a tower lease agreement with PT Daya Mitra Telekomunikasi (“Mitratel”), pursuant to which Mitratel intends to lease the towers of Indosat at basic service (without civil, mechanical and electrical components) and reserves the right to re-lease it to PT Telekomunikasi Indonesia Tbk Group with full services (including civil, mechanical and electrical components). The term of this agreement shall be 10 years period and can be extended for a minimum of five years based on mutual consent of the parties.

On February 10, 2011, we entered into a memorandum of agreement with PT First Media Tbk (“FM”), pursuant to which FM leased Indosat’s tower with full services (including civil, mechanical and electrical components). The term of this memorandum of agreement is five years and can be extended for a minimum of five years period based on mutual consent of the parties.

On August 2, 2012, we signed a Master Lease Agreement with Tower Bersama, in substantially the same form of the agreement that we had filed as an exhibit to our annual report on Form 20-F for the year ended December 31, 2011, for the lease of 2,500 towers, to implement the Tower Sale Transaction. The term of this agreement shall be for a 10-year period and can be extended for a subsequent 10 years.

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A copy, summary and/or translation of the above agreements are filed as Exhibits 4.2 through 4.12, 15.2, 15.11, 15.15 through 15.21, 15.26 and 15.31 attached hereto.

Exchange Controls

See “Item 3: Key Information—Foreign Exchange” included elsewhere in this annual report.

Taxation

The following summary contains a description of the principal Indonesian and U.S. federal tax consequences of the purchase, ownership and disposition of ADSs or shares of common stock. This summary does not purport to be a competitive description of all of the tax considerations that may be relevant to a decision to purchase, own or dispose of ADSs or shares of common stock. PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR TAX ADVISORS ABOUT THE INDONESIAN AND U.S. FEDERAL, STATE AND LOCAL TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF ADSs OR SHARES OF COMMON STOCK.

The following is a summary of the principal Indonesian tax consequences of the ownership and disposition of common stock or ADSs to a non-resident individual or non-resident entity that holds common stock or ADSs (a “Non-Indonesian Holder”). As used in the preceding sentence, a “non-resident individual” is a foreign national individual who is not physically present in Indonesia for 183 days or more during any twelve-month period or present for any period with the intent to reside in Indonesia, during which period such non-resident individual receives income in respect of the ownership or disposition of common stock or ADSs, and a “non-resident entity” is a corporation or a non-corporate body that is established, domiciled or organized under the laws of a jurisdiction other than Indonesia and does not have a fixed place of business or otherwise conducts business or carries out activities through a permanent establishment in Indonesia during an Indonesian tax year in which such non-Indonesian entity receives income in respect of the ownership or disposition of common stock or ADSs. In determining the residency of an individual or entity, consideration will be given to the provisions of any applicable double taxation treaty to which Indonesia is a party.

Dividends. Dividends declared by us out of retained earnings and distributed to a Non-Indonesian Holder in respect of common stock or ADSs are subject to Indonesian withholding tax, currently at the rate of 20.0%, on the amount of the distribution (in the case of cash dividends) or on the shareholders’ proportional share of the value of the distribution. A lower rate provided under double taxation treaties may be applicable provided the recipient is the beneficial owner of the dividend and has provided to us (with a copy to the Indonesian Office of Tax Services where we are registered) a certificate of tax domicile issued by the competent authority, or its designee, of the jurisdiction where the Non-Indonesian Holder is domiciled. Indonesia has concluded double taxation treaties with over 50 countries, including Australia, Belgium, Canada, France, Germany, Japan, Malaysia, The Netherlands, Singapore, Sweden, Switzerland, the United Kingdom and the United States of America. Under the U.S.-Indonesia tax treaty, the withholding tax on dividends is generally, in the absence of a 20.0% voting interest, reduced to 15.0%.

Capital Gains. The sale or transfer of common stock listed on an Indonesian stock exchange is subject to tax at the rate of 0.1% of the value of the transaction. The broker handling the transaction is obligated to withhold such tax. The holding, sale or transfer of founder shares listed on an Indonesian stock exchange may, under current Indonesian tax regulations, be subject to an additional 0.5% final income tax. The estimated net income received or accrued from the sale of movable assets in Indonesia, which may include common stock not listed on an Indonesian stock exchange or ADSs, by a Non-Indonesian holder (with the exception of the sale of assets under Article 4 paragraph (2) of the Indonesian income tax law) may be subject to Indonesian withholding tax at the rate of 20.0%.

In cases where a purchaser or Indonesian broker will be required under Indonesian tax laws to withhold tax on payment of the purchase price for common stock or ADSs, that payment may be exempt from Indonesian

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withholding or other Indonesian income tax under applicable double taxation treaties to which Indonesia is a party (including the U.S.-Indonesia double taxation treaty). However, current Indonesian tax regulations do not provide specific procedures for removing the purchaser’s or Indonesian broker’s obligation to withhold tax from the proceeds of such sale. To take advantage of the double taxation treaty relief, Non-Indonesian Holders may have to seek a refund from the Indonesian Tax Office by making a specific application accompanied by a Certificate of Domicile issued by the competent tax authority, or its designee, of the jurisdiction in which the Non-Indonesian Holder is domiciled.

Stamp Duty. Transactions in common stock in Indonesia are subject to stamp duty payable at the rate of Rp6,000 on transactions with a total value of more than Rp1,000,000 and Rp3,000 on transactions with a total value of up to Rp1,000,000.

U.S. Federal Income Taxation

The following discussion addresses the principal U.S. federal income tax consequences to a U.S. Holder (as defined below), of owning ADSs or shares of our common stock. The description below is based on the Internal Revenue Code of 1986, as amended, or the Code, Treasury Regulations promulgated thereunder, the income tax convention between the United States and Indonesia and judicial and administrative interpretations thereof, all as in effect on the date hereof and all of which are subject to change, possibly retroactively. The tax treatment of a holder of ADSs or shares of our common stock may vary depending upon the holder’s particular situation. Certain holders (including, but not limited to, insurance companies, tax-exempt organizations, financial institutions, persons subject to the alternative minimum tax, broker-dealers, persons that have a “functional currency” other than the U.S. dollar, persons that received ADSs or shares of our common stock as compensation for services, persons owning, directly or indirectly, 10.0% or more of our voting shares, and persons who hold ADSs or shares of our common stock as part of a “hedge,” “straddle” or “conversion transaction” within the meaning of Sections 1221, 1092 and 1258 of the Code and the Treasury Regulations thereunder) may be subject to special rules not discussed below. Except as discussed below with regard to persons who are not U.S. Holders (as defined below), the following summary is limited to U.S. Holders (as defined below) who will hold ADSs or shares of our common stock as “capital assets”, within the meaning of Section 1221 of the Code. The discussion below does not address the effect of any state or local tax law on a holder of ADSs or shares of our common stock.

As used herein, the term “U.S. Holder” means a holder of ADSs or shares of our common stock that is for U.S. federal income tax purposes (i) a citizen or resident of the United States; (ii) a corporation (including any entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia; (iii) an estate whose income is subject to U.S. taxation regardless of its source; (iv) a trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust; or (v) a holder whose income in respect of the ADSs or shares of our common stock is subject to U.S. federal income tax on a net income basis.

If a partnership or other entity or arrangement treated as a partnership for U.S. federal income tax purposes holds ADSs or shares of our common stock, the tax treatment of a partner will generally depend upon the status of the partner and the activities of the partnership. A U.S. Holder that is a partner in a partnership holding ADSs or shares of our common stock is urged to consult its own tax advisor.

The summary below does not discuss all aspects of U.S. federal income taxation that may be relevant to a particular holder of ADSs or shares of our common stock in light of the holder’s particular circumstances and income tax situation. Prospective holders should consult their own tax advisors as to the specific tax consequences to them of the purchase, ownership and disposition of ADSs or shares of our common stock, including the application and the effect of state, local, foreign and other tax laws and the possible effects of changes in United States or other tax laws.

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Taxation of Distributions. Subject to the discussion under “Passive Foreign Investment Company Status” below, for U.S. federal income tax purposes, the amount of a distribution with respect to ADSs or shares of our common stock (including any withholding tax deemed to be imposed with respect to such distributions) will be treated as a dividend taxable as ordinary income on the date of receipt by the Depositary or the holder, respectively, to the extent of our current and accumulated earnings and profits, as determined for U.S. federal income tax purposes. Distributions, if any, in excess of such current and accumulated earnings and profits will first constitute a non-taxable return of capital to the extent thereof, and then as a capital gain realized on the disposition of the ADSs or shares of our common stock. The portion of any distribution treated as a non-taxable return of capital will reduce such holder’s adjusted tax basis in such ADSs or shares of our common stock. Such capital gain will be long-term if the ADSs or shares of our common stock have been held longer than one year. U.S. Holders will not be eligible for the dividends received deduction otherwise allowable under the Code for distributions to domestic corporations in respect of distributions on the ADSs or share of our common stock.

“Qualified dividend income” received by an individual is subject to federal income taxation at rates lower than those applicable to other types of ordinary income. Based upon our existing and anticipated future operations and current assets, we believe that we are a “qualified foreign corporation” and that our dividends paid to U.S. Holders who are individuals will be eligible to be treated as “qualified dividend income” provided that applicable holding period requirements with respect to the ADSs or shares of our common stock and other applicable requirements are satisfied by such U.S. Holders. Dividends paid by a foreign corporation that is classified as a passive foreign investment company, or PFIC, are not “qualified dividend income.” See “—Passive Foreign Investment Company Status” below.

If a distribution is paid in any currency other than U.S. dollars, the amount of the distribution will be translated into U.S. dollars at the spot rate on the date the distribution is received (which for holders of ADSs, would be the date such dividend is received by the Depositary), regardless of whether the distributions are in fact converted into U.S. dollars on that date. Any gain or loss in respect of such non-U.S. currency arising from exchange rate fluctuations after that date will be ordinary income or loss.

Taxation of Capital Gains and Losses. Subject to the discussion under “Passive Foreign Investment Company Status” below, a U.S. Holder will generally recognize a taxable gain or loss on the sale, exchange or other disposition of ADSs or shares of our common stock in an amount equal to the difference between the amount realized on the sale, exchange or other disposition and such holder’s adjusted tax basis in such ADSs or shares of our common stock. This will result in a long-term or short-term capital gain or loss, depending on whether the ADSs or shares of our common stock have been held for more than one year. For non-corporate U.S. Holders, the U.S. income tax rate applicable to the net long-term capital gain recognized for a year upon a sale, exchange or other disposition of ADSs or shares of our common stock is currently 20.0%. Deposit and withdrawal of shares of our common stock in exchange for ADSs by a U.S. Holder will not result in a realization of gain or loss for U.S. federal income tax purposes.

Passive Foreign Investment Company Status. Special U.S. federal income tax rules apply to a U.S. Holder that holds an equity interest in a PFIC. In general, a foreign corporation will constitute a PFIC for any taxable year for United States federal income tax purposes if 75.0% or more of its gross income for such taxable year consists of passive income (generally, interest, dividend, rents, royalties and net gain from the disposition of assets that give rise to such income) or 50.0% or more of its average assets held during such taxable year consist of assets that produce or are held for the production of passive income.

Based upon our existing and anticipated future operations and current assets, we believe that we are not, and anticipate that we will not become in the foreseeable future, a PFIC. If we are not operated in the manner currently anticipated, however, we may be considered a PFIC for the current or for a subsequent year depending upon our actual activities. Furthermore, because PFIC status is determined on a year-by-year basis and depends upon the composition of a company’s income and assets and the market value of its assets from time to time, there can be no assurance that we will not be considered a PFIC for any taxable year.

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If we are a PFIC for any taxable year during which a U.S. Holder holds ADSs or shares of our common stock, such U.S. Holder will be subject to special tax rules with respect to any “excess distribution” received and any gain realized from a sale or other disposition, including a pledge, of ADSs or shares of our common stock. Distributions received in a taxable year that are greater than 125% of the average annual distributions received during the shorter of the three preceding taxable years or such U.S. Holder’s holding period for ADSs or shares of our common stock will be treated as excess distributions. Under these special tax rules: (a) the excess distribution or gain will be allocated rateably over such U.S. Holder’s holding period for ADSs or shares of our common stock, (b) the amount allocated to the current taxable year, and any taxable year prior to the first taxable year in which we were a PFIC, will be treated as ordinary income, and (c) the amount allocated to each other year will generate an additional tax that is due for the current taxable year and that is equal to the total, for each such other year, of (i) the amount allocated to such year multiplied by the highest tax rate in effect for such year and (ii) an amount equal to the interest charge that would have been imposed for underpaying that amount of tax for such year.

An election may be available to avoid these adverse tax consequences if certain conditions are met and the U.S. Holder elects to annually mark-to-market the ADSs or shares of common stock. Furthermore, although a PFIC shareholder may mitigate the rules described above by electing to treat a PFIC as a “qualified electing fund” under Section 1295 of the Code, this option is not available to U.S. Holders because we do not intend to comply with the requirements necessary to permit a U.S. Holder to make this election.

U.S. Holders are advised to consult their tax advisors concerning the U.S. federal income tax consequences of holding the ADSs or shares of our common stock and of making the mark-to-market election if we are considered a PFIC in any taxable year. A U.S. Holder who owns ADSs or shares of our common stock during any year that we are a PFIC must file with the Internal Revenue Service, or IRS, Form 8621.

Foreign Tax Credit Considerations. For United States federal income tax purposes, U.S. Holders will be treated as having received the amount of any Indonesian tax withheld upon the payment of a dividend and as then having paid over the withheld taxes to Indonesia. As a result of this rule, the amount of dividend included in a U.S. Holder’s gross income may be greater than the amount of cash actually received (or receivable) by the U.S. Holder.

Subject to the limitations and conditions set forth in the Code, U.S. Holders may elect to claim a credit against their U.S. federal income tax liability for Indonesian tax withheld from dividends or Indonesian tax imposed on capital gains, if any, or, if they do not elect to credit any foreign tax for the taxable year, they may deduct such tax. For purposes of the foreign tax credit limitation, dividends and capital gains will, depending on a U.S. Holder’s particular circumstances, generally constitute “passive” or “general” income. Furthermore, dividends will generally constitute foreign source income and currency gains and capital gains will generally constitute U.S. source income. Capital loss will generally be allocated against U.S. source income. Because capital gains will generally constitute U.S. source income, as a result of the U.S. foreign tax credit limitation, any Indonesian or other foreign tax imposed upon capital gains in respect of ADSs or shares of our common stock may not be currently creditable unless a U.S. Holder had other foreign source income for the year in the appropriate foreign tax credit limitation basket or an election to treat such gain as foreign source income is available. Investors are urged to consult their tax advisors regarding the availability of the foreign tax credit under their particular circumstances.

Non-U.S. Holders. Except for the possible imposition of U.S. backup withholding tax (see “—U.S. Backup Withholding and Information Reporting”), payments of any dividend on an ADS or share of our common stock to a holder who is not a U.S. Holder (a “non-U.S. Holder”) will not be subject to U.S. federal income tax and gain from the sale, redemption or other disposition of an ADS or a shares of our common stock, provided that:

a. the non-U.S. Holder shall not be or have been engaged in a trade or business in the United States;

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b. there is no present or former connection between such non-U.S. Holder and the United States, including, without limitation, such non-U.S. Holder’s status as a former citizen thereof or former resident thereof; and

c. in the case of a gain from the sale, redemption or other disposition of an ADS or shares of our common stock by an individual, the non-U.S. Holder is not present in the United States for 183 days or more in the taxable year of the sale or certain other conditions are met.

If dividends, gain or income with respect to an ADS or shares of our common stock of a non-U.S. Holder is effectively connected with the conduct of such trade or business (or attributable to a permanent establishment in the United States, in the case of a holder who is a resident of a country which has an income tax treaty with the United States), the non-U.S. Holder may be subject to U.S. income taxes on such dividend, gain or income at the statutory rates provided for U.S. Holders after deduction of deductible expenses allocable to such effectively connected income. In addition, if such a non-U.S. Holder is a foreign corporation, it may be subject to a branch profits tax currently equal to 30.0% of its effectively connected earnings and profits for the taxable year, as adjusted for certain items, unless a lower rate applies under a United States income tax treaty with the non-U.S. Holder’s country of residence. For this purpose, dividends, gain or income in respect of an ADS or shares of our common stock will be included in earnings and profits subject to the branch profits tax if the dividend, gain or income is effectively connected with the conduct of the United States trade or business of the non-U.S. Holder.

U.S. Backup Withholding and Information Reporting. Payments made by a U.S. paying agent or other U.S. intermediary broker in respect of ADSs or shares of our common stock may be subject to information reporting to the IRS and to a backup withholding tax. Backup withholding will not apply, however, (i) to a holder who furnishes a correct taxpayer identification number and makes any other required certification or (ii) to a holder who is otherwise exempt from backup withholding.

Any amounts withheld under the backup withholding rules from a payment to a holder will be allowed as a refund or a credit against such holder’s U.S. federal income tax, provided that the holder has complied with applicable reporting obligations.

Information with Respect to Foreign Financial Assets. Under recently enacted legislation, the Hiring Incentives to Restore Employment Act (the “HIRE Act”), individuals that (i) are either (a) a U.S. citizen, (b) a resident alien for any part of the year, (c) a nonresident alien that has made an election to be treated as a resident alien for purposes of filing a joint U.S. federal income tax return or (d) a nonresident alien who is a bonafide resident of American Samoa or Puerto Rico and (ii) own “specified foreign financial assets” with an aggregate value in excess of US$50,000 on the last day of the taxable year (or with an aggregate value in excess of $75,000 at any time during the taxable year), will generally be required to file an information report on IRS Form 8938 with respect to such assets with their U.S. federal tax returns. “Specified foreign financial assets” include any financial accounts maintained by foreign financial institutions, as well as any of the following, but only if they are held for investment and not held in accounts maintained by financial institutions: (i) stocks and securities issued by non-United States persons, (ii) financial instruments and contracts that have non-United States issuers or counterparties, and (iii) interests in foreign entities. Holders that are individuals are urged to consult their tax advisors regarding the application of this legislation to their ownership of ADSs or shares of our common stock.

Documents on Display

Any material which is filed as an exhibit to this annual report on Form 20-F with the U.S. Securities and Exchange Commission is available for inspection at our offices. See “Item 4: Information on the Company—Principal Registered Offices.”

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Item 11: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Quantitative and Qualitative Disclosure about Market Risk

We are exposed to market risks primarily from changes in interest rates, changes in foreign currency exchange rates, and equity price risk on the value of our long-term investments. To manage our foreign exchange and interest rate risks, we have entered into interest rate swap contracts, cross currency swap contracts and other transactions aimed at reducing and/or managing the adverse impact of changes in foreign exchange and interest rates on our operating results and cash flows. We enter into such transactions to minimize risk without engaging in speculative practices. We account for these instruments as transactions not designated as hedges, wherein changes in the fair value are charged or credited directly as expenses or income for the relevant year. We also convert surplus Indonesian rupiah funds to U.S. dollars on a regular basis in amounts necessary to meet our U.S. dollar expenses.

Interest Rate Sensitivity

As of December 31, 2012, most of our outstanding debt was subject to fixed interest rates. In addition, as of December 31, 2012, we held U.S. dollar-denominated and Indonesian rupiah-denominated deposits, which also have exposure to interest rate fluctuations. The following table sets forth information regarding our financial instruments that are sensitive to changes in interest rates. For long-term debt and bonds payable, the table sets forth principal cash flows and related interest rates according to their expected maturity dates. The information set forth in the table has been determined based on the following assumptions: (i) variable interest rates in time deposits denominated in U.S. dollar and Indonesian rupiah are based on the available interest rate in 2012; (ii) interest rates for long-term deposits denominated in Indonesian rupiah are based on one-month Certificate of Bank Indonesia and one or three month JIBOR on December 2012 plus a margin; and (iii) interest rates for long-term debts denominated in U.S. dollars are based on provisions in the various agreements. However, we cannot assure you that such assumptions will be correct for future periods. Such assumptions and the information described in the table may be influenced by a number of factors, including increases in interest rates in Indonesia resulting from continued tight liquidity and other monetary and macroeconomic factors affecting Indonesia.

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		Outstanding Balance as at December 31, 2012						Expected Maturity Date as of December 31
	Interest Rate	Foreign Currency			Rupiah Equivalent			2013			2014			2015			2016			2017			2018 and Thereafter			Total
		(US$ million)			(Rp billion)			(Rp billion)
Assets
Variable rate
Time deposits and deposits on call
Rp	2.0% - 9.5%		—			1,209.5			1,209.5			—			—			—			—			—			1,209.5
US$	0.01% - 3.00%		236.2			2,284.0			—			—			—			—			—			—			2,284.0
Total Assets			236.2			3,493.5			3,493.5			—			—			—			—			—			3,493.5
Liabilities
Loans payable
Fixed rate
Rp
Principal			—			—			—			—			—			—			—			—			—
Interest	Fixed rates								—			—			—			—			—			—			—
US$
Principal			302.5			2,925.5			932.5			449.0			449.0			449.0			341.9			304.0			2,925.5
Interest	Fixed rates, ranging from 4.24% p.a. - 6.45% p.a.								145.8			93.1			71.7			50.3			28.7			21.6			411.2
Variable rate
Rp
Principal			—			1,400.0			300.0			1,000.0			100.0			—			—			—			1,400.0
Interest	Floating rates of 1-month JIBOR + 1.25%								80.0			15.6			5.8			—			—			—			101.4
Rp
Principal			—			—			—			—			—			—			—			—			—
Interest	Floating rates of 3-month JIBOR + 1.5% - 2.25%								—			—			—			—			—			—			—
US$
Principal			254.7			2,462.6			1,743.1			220.1			220.1			151.0			42.7			85.5			2,462.6
Interest	Floating rates of 6-months LIBOR + 0.35% - 2.87%								39.1			15.3			10.2			4.7			2.5			3.1			74.8
Bonds payable
Fixed rate
Rp
Principal			—			9,150.0			1,330.0			2,358.0			320.0			772.0			1,370.0			3,000.0			9,150.0
Interest	Fixed rates, ranging from 8.625% p.a. - 16.0% p.a.								850.0			698.7			516.4			499.1			335.5			793.1			3,692.8
US$
Principal			650.0			6,285.5			—			—			—			—			—			6,285.5			6,285.5
Interest	7.375%								463.6			463.6			463.6			463.6			463.6			1,390.7			3,708.4
Variable rate
Rp
Principal			—			—			—			—			—			—			—			—			—
Interest	Maximum of 19% p.a. and minimum of 12.75% p.a.								—			—			—			—			—			—			—
Total Liabilities			1,207.2			22,223.6			5,884.0			5,313.4			2,156.8			2,389.6			2,584.9			11,883.5			30,212.2
Net Cash Flows			(971.0	)		(18,730.1	)		(2,390.5	)		(5,313.4	)		(2,156.8	)		(2,389.6	)		(2,584.9	)		(11,883.5	)		(26,718.8	)

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In addition, as of December 31, 2012, we held U.S. dollar-denominated and Indonesian rupiah-denominated deposits, which also have exposure to interest rate fluctuations.

Exchange Rate Sensitivity

Our exposure to exchange rate fluctuations results primarily from U.S. dollar-denominated long-term debt obligations, bonds payable and accounts receivable and payable.

Our accounts payable are primarily foreign currency-denominated net settlement payments to foreign telecommunications operators, while most of our accounts receivable are Indonesian rupiah-denominated payments from domestic operators. During the period from January 1, 2010 through December 31, 2012, the Indonesian rupiah/U.S. dollar exchange rate ranged from a low of Rp9,707 per U.S. dollar to a high of Rp8,460 per U.S. dollar, and, during 2012, ranged from a low of Rp9,384 per U.S. dollar to a high of Rp8,892 per U.S. dollar. On December 31, 2012, the prevailing Bank Indonesia exchange rate was Rp9,670 per U.S. dollar. As a result, we recorded a gain of Rp318.3 billion in 2010, a loss of Rp54.2 billion in 2011 and a loss of Rp700.0 billion (US$72.4 million) in 2012.

The following table sets forth information about our financial instruments by functional currency and presents such information in Indonesian rupiah equivalents, which is our reporting currency. The table summarizes information on instruments and transactions that are sensitive to foreign exchange rates, including term deposits, accounts payable and receivable, and our financial instruments including term deposits, account receivable and account payable, and their long term debt. The table presents principal cash flows by expected maturity dates.

The information presented in the table has been determined based on the prevailing Bank Indonesia exchange rate on December 31, 2012 of Rp9,670 per US$1.00. However, we cannot assure you that such assumption will be correct for future periods. Such assumption and the information described in the table may be influenced by a number of factors, including depreciation or appreciation of the Indonesian rupiah in future periods.

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	Expected Maturity Date as of December 31,
	Foreign Currency			2013			2014			2015			2016			2017			2018 and Thereafter			Total
	(US$ in millions)												(Rp in billion)
Assets:
Cash and cash equivalents US$ denominated		249.3			2,410.5			—			—			—			—			—			2,410.5
Accounts receivable US$ denominated		111.6			1,079.3			—			—			—			—			—			1,079.3
Derivative assets US$ denominated		7.2			69.7			—			—			—			—			—			69.7
Other current financial assets US$ denominated		0.5			4.7			—			—			—			—			—			4.7
Due from related parties US$ denominated		0.1			1.0			—			—			—			—			—			1.0
Other non-current financial assets US$ denominated		1.1			—			11.1			—			—			—			—			11.1
Total Assets		369.8			3,565.2			11.1			—			—			—			—			3,576.3
Liabilities:
Accounts payable—trade US$ denominated		9.3			90.3			—			—			—			—			—			90.3
Procurement payable US$ denominated		141.1			1,364.5			—			—			—			—			—			1,364.5
Accrued expenses US$ denominated		46.4			448.9			—			—			—			—			—			448.9
Deposits from customers US$ denominated		2.4			24.0			—			—			—			—			—			24.0
Derivative liabilities US$ denominated		8.4			81.2			—			—			—			—			—			81.2
Other current financial liabilities US$ denominated		16.7			161.3			—			—			—			—			—			161.3
Due to related parties US$ denominated		2.7			—			26.0			—			—			—			—			26.0
Loans payable including current maturities US$ denominated		557.2			2,675.6			669.1			669.1			600.0			384.7			389.5			5,388.0
Bonds payable including current maturities US$ denominated		650.0			—			—			—			—			—			6,285.5			6,285.5
Obligation under capital lease US$ denominated		212.8			—			173.8			188.4			204.1			221.2			1,269.8			2,057.3
Total Liabilities		1,647.0			4,845.8			868.9			857.5			804.1			605.9			7,944.8			15,927.0
Net Cash Flows		(1,277.2	)		(1,280.6	)		(857.8	)		(857.5	)		(804.1	)		(605.9	)		(7,944.8	)(		12,350.7	)

⁽¹⁾  Cash and cash equivalents consist of cash on hand, cash in banks and time deposits.

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Equity Price Risk

Our long-term investments consist primarily of minority investments in the equity of private Indonesian companies and equity of foreign companies. With respect to the Indonesian companies in which we have investments, the financial performance of such companies may be adversely affected by economic conditions in Indonesia.

Foreign Currency Swap Derivatives Contracts

As of December 31, 2012, we maintained foreign currency swap contracts that we entered into in 2008. In 2012, we settled three of our structured currency forward swap contracts with one international financial institution. As of December 31, 2012, we had hedging facilities amounting to US$17.5 million of foreign currency swap contracts, representing 1.4% of our U.S. dollar-denominated bonds and loans as of December 31, 2012.

As of December 31, 2012, we had outstanding foreign currency contracts under which we agreed to pay Indonesian rupiah in exchange for the counterparty’s obligation to pay U.S dollars, based upon agreed spot rates. In the event that the Indonesian rupiah appreciates against the U.S dollar, we would recognize losses on such transactions, which could have a material and adverse effect on our financial condition.

Interest Rate Swap Contracts

As of December 31, 2012, we maintained interest rate swap contracts that we entered into between 2008 to 2009 with respect to an aggregate amount of US$204.9 million under which we agreed to make fixed interest rate payments in exchange for a six-month U.S dollar LIBOR-linked floating rate plus either 0.35%, 1.45%, and 1.85% or 1.90% per year in order to hedge the interest rate risks on our HSBC Sinosure and HSBC Commercial satellite financing agreements and our ING/DBS Syndicated Loan, respectively.

Item 12: DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Fees and Charges Our American Depositary Shares (ADS) Holders May Have to Pay

The Bank of New York Mellon, the depositary of our ADS program, charges the following to any party depositing or withdrawing ordinary shares or any party surrendering ADRs or to whom ADRs are issued, whichever applicable, pursuant to the deposit agreement with the depositary: (1) taxes and other governmental charges, (2) registration fees as may from time to time be in effect for the registration of transfers of shares, (3) cable, telex and facsimile transmission expenses as are expressly provided in the deposit agreement to be at the expense of persons depositing shares or owners, (4) expenses incurred by the depositary in the conversion of foreign currency pursuant to the deposit agreement, (5) a fee not in excess of $5.00 per 100 ADSs (or portion thereof) for the execution and delivery of ADSs and the surrender of ADSs and, (6) a fee for the distribution of proceeds of sales of securities or rights pursuant to the deposit agreement, respectively, in an amount equal to the fee for the issuance of ADSs referred to above which would have been charged as a result of the deposit by owners of shares received in exercise of rights distributed to them pursuant to the deposit agreement, respectively, but which securities or rights are instead sold by the depositary and the net proceeds distributed. Under the deposit agreement, the depositary collects such fees by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees.

Fees to be made by the Depositary to Us

The depositary has agreed to reimburse certain of our expenses related to our ADS program and incurred by us in connection with the program. The depositary has reimbursed to us, or paid amounts on our behalf to third parties, or waived its fees and expenses, in the total amount of US$118,140.81 for the year ended December 31, 2012.

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The table below sets forth the types of expenses that the depositary has agreed to reimburse, and the invoices relating to the year ended December 31, 2012 that were reimbursed:

Type of Fees	Amount
Printing costs	$	—
New York Stock Exchange Listing Fee	$	—
Costs related to ADS program	$	—
Total	$	—

The depositary has also agreed to waive fees for standard costs associated with the administration of the ADS program and has paid certain expenses directly to third parties on our behalf. The table below sets forth those expenses that the depositary has waived or paid directly to third parties relating to the year ended December 31, 2012:

Type of Fees	Amount
Mailing, printing and service fees and expenses	$	—
Meeting-related expenses	$	3,055.07
Fees and expenses related to the administration of the ADS program	$	115,085.74
Total	$	118,140.81

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PART II

Item 13: DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

Following the Asian financial crisis and the related devaluation of the Indonesian rupiah against the U.S. dollar in late 1997, Satelindo defaulted on its debt obligations in 1998. Satelindo restructured its debt obligations in 2000. Immediately prior to the restructuring, Satelindo had a total principal amount of indebtedness of US$530.5 million, of which US$519.1 million was restructured. As of December 31, 2012, neither we nor our subsidiaries had a material default relating to our outstanding indebtedness.

Item 14: MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

None.

Item 15: CONTROLS AND PROCEDURES

Background

On February 7, 2012, we entered into an Asset Purchase Agreement with Tower Bersama, pursuant to which we agreed to sell our right, title and interest in a portfolio of 2,500 telecommunication towers and other assets to Tower Bersama for a total potential consideration of US$541.5 million. We also entered into a Master Lease Agreement with Tower Bersama to lease back tower slots on the 2,500 towers for a period of 10 years. We closed the transaction on August 2, 2012.

In early 2012, as part of discussions on how we should account for the tower sale-leaseback transaction with Tower Bersama once completed, we commenced discussions with our Board of Commissioners, Audit Committee and external auditor on our proposed approach to analyze and evaluate the correct accounting treatment of the leases.

We also engaged external consultants to assist us in (i) assessing the future prospects of the towers and/or slots, (ii) estimating the fair value of a tower slot using the Discounted Cash Flow (DCF) approach; (iii) identifying and researching the information required for evaluating an appropriate methodology to apply; and (iv) assisting us in analyzing the accounting treatment of slot leases in accordance with IAS 17 Paragraph 10 (d). This exercise led to our initial classification of the majority of the tower slots leased back as operating leases.

In October, 2012, to comply with Indonesia Stock Exchange regulations, we submitted to the Indonesia Stock Exchange our interim financial statements for the nine-month period ending on September 30, 2012 prepared in accordance with Indonesian Financial Accounting Standards (IFAS) and furnished the same information to U.S. investors. Based on the review by our external auditor of such financial statements under the standards for reviews established by the Indonesian Institute of Certified Public Accountants, they indicated that they are not aware of any material modifications that should be made to such interim financial statements. On April 19, 2013, the Company disclosed on Form 6-K that the September 30, 2012 interim financial statements prepared under IFAS should no longer be relied upon due to the impact of the revised accounting treatment for the sale and leaseback transaction.

For purposes of preparing the Company’s consolidated financial statements for the year ended December 31, 2012 under IFRS, in November 2012, following discussions with our audit committee and external auditors, and in order to conclude on the appropriate accounting treatment of the sale and leaseback transaction with Tower Bersama, we submitted a pre-clearance letter to the U.S. Securities and Exchange Commission (“SEC”).

After extensive study, analysis, consultation with third parties, including our external auditors, and the result of the pre-clearance process, we reconsidered our accounting treatment for the sale and leaseback transaction with Tower Bersama.

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In the past, and independent of the sale and leaseback transaction with Tower Bersama, we engaged in a number of leasing transactions including those where slots were leased to other telecommunication operators (“lease-outs”) and where we leased tower slots from others for our own use (“lease-ins”). The conclusions we reached after the consultation and pre-clearance process in connection with the sale and leaseback transaction with Tower Bersama caused us to reconsider our historical accounting treatment of these lease transactions in 2010 and 2011 as adopted in the audited financial statements on which our external auditor expressed unqualified opinions at the time. Hence, as a consequence, as reported in our Form 6-K furnished to the SEC on April 19, 2013, we concluded that our assessments relating to internal control over financial reporting as of December 31, 2011 and 2010 could no longer be relied upon. Our external auditor also withdrew their audit reports on the Company’s financial statements based on IFRS as of and for each of the two years ended December 31, 2010 and 2011 and their reports on internal control over financial reporting as of December 31, 2011 and 2010.

As a result of this reconsideration of our historical accounting treatment for lease transactions in the 2010 and 2011 consolidated financial statements, we have restated the historical financial statements for 2011 and 2010 to correct the accounting for lease transactions, along with other accounting corrections.

Notwithstanding the matters described below, the consolidated financial statements included in this Form 20-F comply with IFRS.

Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our SEC reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only a reasonable level of assurance of achieving the desired control objectives, and, in reaching a reasonable level of assurance, management may be required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As of December 31, 2012, or the Evaluation Date, the management, including our President Director and Director & Chief Financial Officer, carried out an evaluation of the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15(d)-15(e) under the Exchange Act.

As discussed below, a material weakness was identified in our internal controls over financial reporting relating to the determination of the accounting treatment for lease arrangements, primarily due to the revision to the accounting for the sale-and-leaseback transaction and the restatement of previous years financial statements based on Commission Guidance Regarding Management’s Report on Internal Control Over Financial Reporting section B.1.

Based on such evaluation, our management concluded that our disclosure controls and procedures were not effective as of December 31, 2012.

As discussed below, our external auditor also has opined that we have not maintained effective internal control over financial reporting as of December 31, 2012, because of the same material weakness.

Management’s Annual Report on Internal Control over Financial Reporting

As required by section 404 of the Sarbanes-Oxley Act of 2002, our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) and 15(d)-15(f) under the Exchange Act. Our system of internal control over financial reporting was designed to provide reasonable assurance to our management and Audit Committee of the reliability of our financial reporting and the preparation of published financial statements in accordance with IFRS. Management conducted

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an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2012 based on the framework in Internal Control—Integrated Framework, which is issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO. Internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit the preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorizations of our Board of Directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. All internal control systems, no matter how well designed, have inherent limitations, including the possibility of human error and the circumvention or overriding of the controls and procedures which may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process, and it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

As a result of management’s evaluation of our internal control over financial reporting, management identified a material weakness in our internal control over financial reporting described below. Exchange Act Rule 12b-2 (17 CFR 240.12b-2) and Rule 1-02 of Regulation S-X (17 CFR 210.1-02) defines a material weakness as a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

Management did not maintain effective controls over the analysis and evaluation necessary to determine the appropriate accounting treatment of lease arrangements since 2010. The impact of the material weakness on our financial reporting resulted in misstatements which have been corrected through the restatement of our 2010 and 2011 financial statements as covered by this annual report.

As discussed below, our external auditors also has opined that we have not maintained effective internal control over financial reporting as of December 31, 2012, because of the same material weakness.

Remediation Measures to Address the Material Weakness Identified

In response to our study and analysis, management plans to dedicate resources and take steps to remediate control processes and procedures in order to prevent a recurrence of the circumstances that resulted in the material weakness and the need to restate our consolidated financial statements. The key steps include the enhancement of the capability of the accounting team to address complex accounting issues by implementing additional training programs in 2013. We have begun to implement this initiative.

Report of Independent Registered Public Accounting Firm on Internal Controls

Purwantono, Suherman & Surja, a member firm of Ernst & Young Global Limited, the independent registered public accounting firm, has audited our consolidated financial statements included in this annual report and has issued an attestation report on internal control over financial reporting as of December 31, 2012. This attestation report is set forth on page 3 of our consolidated financial statements attached hereto.

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Because of the material weakness in the design and operation of controls over the analysis and evaluation necessary to determine the appropriate accounting treatment of lease arrangements, our external auditor has opined that we have not maintained effective internal control over financial reporting as of December 31, 2012.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the period covered by this annual report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 16A: AUDIT COMMITTEE FINANCIAL EXPERT

The Board of Commissioners has determined that each of George Thia Peng Heok and Kanaka Puradiredja constitute an “audit committee financial expert,” as defined in Item 16A of Form 20-F, and that such person is also “independent,” as defined in Rule 10A-3 under the Exchange Act. For more information about George Thia Peng Heok, see “Item 6: Directors, Senior Management and Employees—Directors and Senior Management—Board of Commissioners.”

Item 16B: CODE OF ETHICS

We have adopted a Code of Ethics that applies to all employees, including our Board of Directors. We have posted this Code of Ethics on our website at www.indosat.com, where it is publicly available. A copy of our Code of Ethics was filed as Exhibit 11.1 to our annual report on Form 20-F for the fiscal year ended December 31, 2009. We have issued a Guide to the implementation of PT Indosat Tbk’s Code of Ethics on November 20, 2010 as a reiteration of the Board of Directors Decree No.002/DIREKSI/2007 on the Code of Ethics.

Item 16C: PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following table contains a summary of the fees paid to Purwantono, Suherman & Surja, the Indonesian member firm of Ernst & Young Global, our independent external auditors for the years ended December 31, 2011 and 2012:

	2011		2012
	(in US$)
Audit fees(1)		857,724		805,206
Audit-related fees(2)		448,848		762,219
Tax fees(3)		—		—
All other fees(4)		—		—
Total Fees		1,306,572		1,567,425

⁽¹⁾ Audit fees represent fees for professional services provided for the financial audit of our financial statements and of our subsidiaries, PT Indosat Mega Media, PT Aplikanusa Lintasarta, PT Starone Mitra Telekomunikasi and PT Artajasa Pembayaran Elektronis and our internal control audit and attestation services in compliance with Section 404 of the Sarbanes-Oxley Act of 2002.

⁽²⁾ Audit-related fees in 2011 and 2012 primarily consist of fees for performing limited reviews of our interim financial information including those of our subsidiaries and for performing services in connection with our bonds issuance in 2012.

⁽³⁾ Tax fees represent fees for professional services related to tax compliance and tax planning / advisory consultation.

⁽⁴⁾ All other fees represent professional services provided for services not directly supporting financial statement audits.

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These professional services are covered within the scope of audit services as defined by the Commission’s regulations.

In June 2004, the Audit Committee adopted a policy pursuant to which all audit and non-audit services must be pre-approved by the Audit Committee. Under no circumstances may our principal external auditors provide services that are prohibited by the Sarbanes-Oxley Act of 2002 or rules issued thereunder. Non-prohibited audit-related services may be provided to us, subject to such pre-approval process and prohibitions. The pre-approval policy relates to all services provided by our principal external auditor and does not include any pre-set fee limits that do not require pre-approval or any de minimis exception.

Item 16D: EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

In accordance with Indonesian law, we have a two-tier board structure, consisting of a Board of Commissioners and a Board of Directors. The executive management functions are carried out by our Board of Directors, while our Board of Commissioners is principally responsible for supervising and advising our Board of Directors in the operation and management of the Company.

Under Indonesia Stock Exchange rules, our Audit Committee must consist of at least three members, one of whom must be an independent commissioner and concurrently the chairman of the Audit Committee, while the other two members must be external independent parties of whom at least one such party shall have accounting and/or finance expertise. Our Audit Committee is composed of five members and is chaired by one of our Independent Commissioners. Members of our Audit Committee are appointed and dismissed by our Board of Commissioners.

Listing rules adopted pursuant to Rule 10A-3 under the Exchange Act require a foreign private issuer with securities listed on the NYSE to have an audit committee comprised of independent directors. The rules became effective on July 31, 2005. Under Rule 10A-3(c)(3), foreign private issuers are exempt from such independence requirements if (i) the home country government or stock exchange requires the company to have an audit committee; (ii) the audit committee is separate from the board of directors or has members from both inside and outside the board of directors; (iii) the audit committee members are not elected by the management and no executive officer of the company is a member of the audit committee; (iv) the home country government or stock exchange has requirements for an audit committee independent from the management of the company; and (v) the audit committee is responsible for the appointment, retention and oversight of the work of external auditors. We rely on the general exemption under Rule 10A-3(c)(3) of the Exchange Act with respect to the composition of our Audit Committee as set forth in our Section 303A.11 website disclosure, which is made publicly available on our website, www.indosat.com.

We believe our reliance on the exemption would not materially or adversely affect the ability of our Audit Committee to act independently. We also believe the intent of such provisions are meant to ensure that the Audit Committee is independent from influence by management and would provide a forum separate from management in which auditors and other interested parties can candidly discuss concerns. The Indonesia Stock Exchange rules require that each member of the Audit Committee be independent. The rules also require that at least two of the members of the Audit Committee be external independent members, which means that they must be independent of not only the Board of Directors but also the Board of Commissioners and us as a whole. Accordingly, we believe the standard established by the Indonesia Stock Exchange rules are at least equally effective in ensuring the ability of our Audit Committee to act independently.

Item 16E: PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

Not applicable.

146

Item 16F: CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT

There were no changes in or disagreements with our accountants on any matter of accounting principle, practice or financial disclosure during the last two fiscal years.

Item 16G: CORPORATE GOVERNANCE

We are incorporated under the laws of the Republic of Indonesia and the principal trading market for our ordinary shares is the IDX. Our ordinary shares are registered with the U.S. Securities and Exchange Commission and are listed on the NYSE. As such, we are subject to certain corporate governance requirements.

Our home country requirements for corporate governance are embodied primarily in Law No. 40 of 2007 on Limited Liability Companies, Law No. 8 of 1995 on Capital Markets, the Regulations of the Indonesian Capital Market and Financial Institution Supervisory Board, or the BAPEPAM-LK Regulations, and the rules issued by the Indonesian stock exchanges, namely the IDX. In addition to these statutory requirements, our Articles of Association incorporate provisions directing certain corporate governance practices.

However, many of the corporate governance rules contained in the NYSE Listed Company Manual, or the NYSE listing standards, are not required for “foreign private issuers” and we are permitted to follow our home country corporate governance practices in lieu of most corporate governance standards contained in the NYSE listing standards. Although we have complied voluntarily with most of the corporate governance rules contained in the NYSE listing standards, there are certain important differences between our corporate governance standards and those standards applicable to U.S. companies listed on the NYSE which are described below.

Audit Committee

The NYSE listing standards require NYSE-listed companies to maintain an audit committee comprised of at least three members satisfying the requirements for independence set forth in Section 303A.02. Pursuant to BAPEPAM-LK Regulations, public companies in Indonesia must maintain audit committees comprised of at least one independent commissioner and two members from outside the company. Our Audit Committee consists of five members, three of whom are Independent Commissioners and two of whom are independent outsiders, as required by BAPEPAM-LK Regulations.

In addition, our Audit Committee’s written charter does not require our Audit Committee to review earnings guidance prior to filing to ensure compliance with the prevailing capital market laws and regulations as required under Section 303A.07(c)(iii)(C), although the written charter does require review of press releases containing financial information. Unlike the requirements set forth in the NYSE listing standards, our Audit Committee does not have direct responsibility for the appointment, retention and compensation of our external auditor. Our Audit Committee can only recommend the appointment of the external auditor to the Board of Commissioners, and the Board of Commissioner’s decision is subject to shareholder approval as required by Indonesian law. A copy of our Audit Committee’s written charter can be found on our website at www.indosat.com and is attached as Exhibit 15.16 to our Form 20-F filed on June 1, 2010.

Composition of Board of Directors; Nominating Committee

The NYSE listing standards require that the board of directors of an NYSE-listed company consist of a majority of independent directors and that a nominating committee be established. We have a dual board structure, with a separate Board of Directors and Board of Commissioners, separating the powers of management (exercised by the Board of Directors) from those of supervision (exercised by the Board of Commissioners). As such, when the NYSE listing standards apply corporate governance principles to the directors of a NYSE-listed company, we evaluate our practices with reference to our Commissioners. As required by BAPEPAM-LK Regulations and IDX rules, our ten-member Board of Commissioners maintains a minimum of at least three

147

independent members. Further, we do not have a nominating committee. At meetings of our shareholders, our shareholders nominate and elect persons to our Board of Commissioners.

Pursuant to the NYSE listing standards, directors of NYSE-listed companies must meet at regularly-scheduled executive sessions without management. Neither the BAPEPAM-LK Regulations nor IDX rules require us to hold such executive sessions where the Board of Commissioners meets without any Directors present. In the past, our Board of Commissioners, which is entirely composed of non-management persons, has met in executive session periodically, in addition to the customary presentation of information by our Board of Directors to the Board of Commissioners. In early 2005, we instituted procedures by which our Board of Commissioners started meeting in executive sessions at the end of each regularly-scheduled meeting, which currently occur at least on a quarterly basis.

Compensation Committee

The NYSE listing standards require NYSE-listed companies to maintain a compensation committee composed entirely of independent directors with a written charter addressing the committee’s performance and responsibilities as well as requiring an annual performance evaluation. Our Remuneration Committee currently has three members from our Board of Commissioners and has the responsibilities contained in the NYSE listing standards. However, only two of the three committee members are independent and its written charter does not provide for an annual performance evaluation of the Remuneration Committee. A copy of our Remuneration Committee’s written charter can be found on our website at www.indosat.com.

148

PART III

Item 17: FINANCIAL STATEMENTS

The financial statements listed in Item 19(a) of this annual report, together with the reports of our independent auditors thereon, are filed as part of this annual report.

Item 18: FINANCIAL STATEMENTS

Not applicable. See Item 17.

Item 19: EXHIBITS

(a)	Index to Consolidated Financial Statements
	Report of Independent Registered Public Accounting Firm	F-2-F-4
	Consolidated Statements of Financial Position as of January 1, 2011 and December 31, 2011 and 2012	F-5-F-8
	Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2010, 2011 and 2012	F-9-F-10
	Consolidated Statements of Changes in Equity for the Years Ended December 31, 2010, 2011 and 2012	F-11-F-13
	Consolidated Statements of Cash Flows for the Years Ended December 31, 2010, 2011 and 2012	F-14-F-15
	Notes to Consolidated Financial Statements for the Years ended December 31, 2010, 2011 and 2012	F-16-F-152

(b)	Index to Exhibits
1.1	Notarial Deed No. 118 Relating to the Amendment and Restatement of the Articles of Association, dated June 11, 2009(3)
1.2	Notarial Deed No. 123, Relating to the Amendment of the Articles of Association, dated January 28, 2010(3)
4.1	Form of Non-Compete Agreement(6)
4.2	Agreement for Network Interconnection for Indosat’s Fixed Local Telecommunication Network and Telkomsel’s Cellular Mobile Network, between Indosat and Telkomsel, dated July 30, 2007 and its Amendments dated December 19, 2007(4), March 3, 2008(3), November 1, 2010(2), April 7, 2011(1), July 19, 2011(1) , May 28, 2012 and March 8, 2013
4.3	Agreement for Network Interconnection for Cellular Mobile Network between Indosat and Telkomsel, dated December 19, 2007 and its Amendments dated February 18, 2008(3), September 7, 2010(2), April 7, 2011(1), May 28, 2012 and March 8, 2013
4.4	Agreement for Network Interconnection for Indosat’s Cellular Mobile Network and Telkom’s Fixed Local Telecommunication Network, between Indosat and Telkom, dated December 18, 2007 and its Amendments dated March 31, 2008(3), December 30, 2009(2), January 31, 2011(2), July 20, 2011(1), December 20, 2011(1) and May 30, 2012
4.5	Agreement for Network Interconnection for Fixed Telecommunication Network between Indosat and Telkom, dated December 18, 2007 and Amendments dated March 31, 2008(3), December 30, 2009(2), January 31, 2011(2), July 20, 2011(1), December 20, 2011(1) and May 30, 2012
4.6	Tower Lease Agreement between Indosat and PT Hutchison CP Telecommunications dated January 29, 2010(2) and its Amendment dated August 18, 2011(1)

149

4.7	Tower Lease Agreement between Indosat and PT Natrindo Telepon Seluler dated April 15, 2010(2)
4.8	Tower Lease Agreement between Indosat and PT XL Axiata dated May 24, 2010(2) and its Amendment dated February 1, 2012
4.9	Tower Lease Agreement between Indosat and PT Berca Global Access dated June 3, 2010(2)
4.10	Tower Lease Agreement between Indosat and PT Daya Mitra Telekomunikasi dated February 4, 2011(2)
4.11	Memorandum of Agreement between Indosat and PT First Media Tbk dated February 10, 2011(2)
4.12	Pico Sharing Agreement between Indosat and PT XL Axiata Tbk dated December 14, 2012
7.1	Operating and Financial Ratios
8.1	List of Our Subsidiaries
12.1	Certification by the Chief Executive Officer in accordance with Section 302 of the Sarbanes-Oxley Act of 2002
12.2	Certification by the Chief Financial Officer in accordance with Section 302 of the Sarbanes-Oxley Act of 2002
13.1	Certification by the Chief Executive Officer Required by 18 U.S.C. §1350
13.2	Certification by the Chief Financial Officer Required by 18 U.S.C. §1350
15.1	Term Facility Agreement, dated May 12, 2006, among PT Indosat Tbk, as borrower, arranged by ABN Amro Bank N.V., Jakarta Branch, with Finnish Export Credit Ltd, as original lender, and ABN Amro Bank N.V., Stockholm Branch, acting as facility agent in connection with a US$38,000,000 export credit facility(6) and its Amendment on March 20, 2009(4)
15.2	Trustee Agreement for the Fifth Indosat Bonds, dated May 9, 2007(5) and its Amendment on May 4, 2009(3)
15.3	Credit Agreement with Goldman Sachs International dated May 30, 2007(5)
15.4	Trustee Agreement for the Second Syari’ah Ijarah Bonds, dated May 9, 2007(5) and its Amendment on May 4, 2009(3)
15.5	Credit Agreement with Bank Central Asia, dated August 28, 2007(5), its Amendment on October 30, 2007(5) and on February 12, 2009(4)
15.6	Credit Agreement with Bank Mandiri, dated September 18, 2007(5) and its Amendment on March 23, 2009(4)
15.7	Credit Agreement with Bank DBS Indonesia, dated November 1, 2007(5) and its Amendment on March 25, 2009(4)
15.8	Sinosure Term Facility Agreement with HSBC France, dated November 27, 2007(4) and its Amendment on March 18, 2009(4)
15.9	COFACE Term Facility Agreement with HSBC France, dated November 27, 2007(4) and its Amendment on March 18, 2009(4)
15.10	Commercial Facility Agreement with the Hongkong Shanghai Corporation Limited, Jakarta Branch, dated November 27, 2007(4) and its Amendment on March 18, 2009(4)
15.11	Trustee Agreement for the Sixth Indosat Bonds, dated March 17, 2008(5) and its Amendment on May 4, 2009(3)
15.12	Trustee Agreement for the Third Syari’ah Ijarah Bonds, dated March 17, 2008(5) and its Amendment on May 4, 2009(3)

150

15.13	Syndicated Loan Facility with ING/DBS, dated June 12, 2008(4) and its Amendment on February 24, 2009(4)
15.14	Revised Audit Committee Charter, dated October 31, 2012
15.15	Credit Agreement with Bank of Central Asia, dated September 17, 2008(4)
15.16	Deed of Amendment of Trustee Agreement for the Second Indosat Bonds, dated May 4, 2009(3)
15.17	Deed of Amendment of Trustee Agreement for the Third Indosat Bonds, dated May 4, 2009(3)
15.18	Deed of Amendment of Trustee Agreement for the Fourth Indosat Bonds, dated May 4, 2009(3)
15.19	Deed of Amendment of Trustee Agreement for the Syariah Ijarah Bonds, dated May 4, 2009(3)
15.20	Credit Agreement with Bank Central Asia, dated June 8, 2009(3)
15.21	Credit Agreement with Bank Mandiri, dated July 28, 2009(3)
15.22	EKN Facility Agreement with HSBC Hongkong and ABN Amro Bank Hongkong, dated August 18, 2009(3)
15.23	Trustee Agreement for the Seventh Indosat Bonds, dated November 25, 2009(3)
15.24	Trustee Agreement for the Fourth Syari’ah Ijarah Bonds, dated November 25, 2009(3)
15.25	Indenture dated July 29, 2010 covering our Guaranteed Notes due 2020(2) and its Supplement dated June 5, 2012
15.26	Time Loan Revolving Credit Facility Agreement with Bank Central Asia, dated February 10, 2011(2) and its Amendment on December 1, 2011(1)
15.27	Credit Agreement with Bank Mandiri, dated June 21, 2011 and its Amendment on December 5, 2011(1)
15.28	Asset Purchase Agreement, dated February 7, 2012, by and among Indosat, PT Tower Bersama Infrastructure Tbk and PT Solusi Menara Indonesia(1)
15.29	Credit Agreement with PT Bank Sumitomo Mitsui Indonesia, dated December 26, 2013 and its Amendment on March 19, 2013
15.30	Trustee Agreement for the Eighth Indosat Bonds, dated June 13, 2012
15.31	Trustee Agreement for the Fifth Syari’ah Ijarah Bonds, dated June 13, 2012

* Portions of this exhibit have been redacted pursuant to a request for confidential treatment filed separately with the Secretary of the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

⁽¹⁾  Incorporated by reference to our annual report on Form 20-F for the fiscal year ended December 31, 2011 (File No.001-13330) filed with the U.S. Securities and Exchange Commission on April 30, 2012.

⁽²⁾  Incorporated by reference to our annual report on Form 20-F for the fiscal year ended December 31, 2010 (File No.001-13330) filed with the U.S. Securities and Exchange Commission on May 18, 2011.

⁽³⁾ Incorporated by reference to our annual report on Form 20-F for the fiscal year ended December 31, 2009 (File No.001-13330) filed with the U.S. Securities and Exchange Commission on June 1, 2010.

⁽⁴⁾ Incorporated by reference to our annual report on Form 20-F for the fiscal year ended December 31, 2008 (File No. 001-13330) filed with the U.S. Securities and Exchange Commission on April 15, 2009.

⁽⁵⁾ Incorporated by reference to our annual report on Form 20-F for the fiscal year ended December 31, 2007 (File No. 001-13330) filed with the U.S. Securities and Exchange Commission on May 5, 2008.

⁽⁶⁾ Incorporated by reference to our annual report on Form 20-F for the fiscal year ended December 31, 2005 (File No. 001-13330) filed with the U.S. Securities and Exchange Commission on June 28, 2006.

We have not included as exhibits certain instruments with respect to our long-term debt, the total amount of debt authorized under each of which does not exceed 10.0% of our total consolidated assets. We agree to furnish a copy of any such instrument to the Commission upon request.

151

SIGNATURE

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

Date: April 30, 2013

PT INDOSAT TBK
By:	/s/ Alexander Rusli
Name:	Alexander Rusli
Title:	President Director and Chief Executive Officer

PT INDOSAT Tbk AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

WITH REPORT OF INDEPENDENT

REGISTERED PUBLIC ACCOUNTING FIRM

JANUARY 1, 2011 (RESTATED), DECEMBER 31, 2011 (RESTATED) AND DECEMBER 31, 2012

AND YEARS ENDED DECEMBER 31, 2010 (RESTATED), 2011 (RESTATED) AND 2012

Table of Contents

	Page
Report of Independent Registered Public Accounting Firm		F-2
Consolidated Statements of Financial Position		F-5
Consolidated Statements of Comprehensive Income		F-9
Consolidated Statements of Changes in Equity		F-11
Consolidated Statements of Cash Flows		F-14
Notes to Consolidated Financial Statements		F-16

***************************

F-1

Report of Independent Registered Public Accounting Firm

Report No. RPC-3932/PSS/2013

The Stockholders and Boards of Commissioners and Directors

PT Indosat Tbk

We have audited the accompanying consolidated statements of financial position of PT Indosat Tbk (“the Company”) and its subsidiaries as of January 1, 2011 and December 31, 2011 and 2012, and the related consolidated statements of comprehensive income, changes in equity and cash flows for each of the three years in the period ended December 31, 2012. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial positions of PT Indosat Tbk and its subsidiaries as of January 1, 2011 and December 31, 2011 and 2012, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2012 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

As discussed in Note 2d to the consolidated financial statements, the 2010 and 2011 consolidated financial statements have been restated.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2012, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated April 29, 2013 expressed an adverse opinion thereon.

Purwantono, Suherman & Surja

Jakarta, Indonesia

April 29, 2013

F-2

Report of Independent Registered Public Accounting Firm

Report No. RPC-3933/PSS/2013

The Stockholders and Boards of Commissioners and Directors

PT Indosat Tbk

We have audited the internal control over financial reporting of PT Indosat Tbk (“the Company”) as of December 31, 2012, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). The Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on PT Indosat Tbk and its subsidiaries’ internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company, (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS as issued by the IASB, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company, and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. The following material weakness has been identified and included in management’s annual report on internal control over financial reporting. Management has identified a material weakness originating in 2010 in the design and operation of controls over the analysis and evaluation necessary to determine the appropriate accounting treatment of lease arrangements.

In our opinion, because of the effect of the material weakness described above on the achievement of the objectives of the control criteria, PT Indosat Tbk has not maintained effective internal control over financial reporting as of December 31, 2012, based on the COSO criteria.

We also have audited, in accordance with standards of the Public Company Accounting Oversight Board (United States), the consolidated statements of financial position of PT Indosat Tbk and its subsidiaries as of

F-3

January 1, 2011 and December 31, 2011 and 2012, and the related consolidated statements of comprehensive income, changes in equity and cash flows for the years ended December 31, 2010, 2011 and 2012. This material weakness was considered in determining the nature, timing and extent of audit tests applied in our audit of the 2012 financial statements, and this report does not affect our report dated April 29, 2013, which expressed an unqualified opinion on those financial statements.

Purwantono, Suherman & Surja

Jakarta, Indonesia

April 29, 2013

F-4

PT INDOSAT Tbk AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

(Expressed in millions of rupiah, except share data)

	Notes	January 1, 2011 (Restated)		December 31,
				2011 (Restated)		2012
		Rp		Rp		Rp
ASSETS
CURRENT ASSETS
Cash and cash equivalents	2f8,4,20 30,36		2,075,270		2,224,206		3,917,236
Accounts receivable	2f8,3b,5
Trade—net of allowance for impairment of Rp496,110 as of January 1, 2011, Rp536,651 as of December 31, 2011 and Rp564,630 as of December 31, 2012	20,30,36		1,536,276		1,500,096		2,038,719
Others—net of allowance for impairment of Rp15,281 as of January 1, 2011, Rp16,702 as of December 31, 2011 and Rp18,748 as of December 31, 2012			10,031		5,660		22,441
Inventories—net of allowance for obsolescence of Rp13,961 as of January 1, 2011, Rp18,401 as of December 31, 2011 and Rp14,613 as of December 31, 2012	2f20		105,885		75,890		52,556
Derivative assets	2f8,2f15 20,33,36		69,334		159,349		69,654
Advances	34d,34f		28,166		40,485		36,057
Prepaid frequency fee and licenses	2f19,2f21 29,30		1,202,009		1,353,819		1,528,215
Prepaid expenses—other	2f19,2f21 29,30		325,245		351,833		335,815
Other current assets	7		50,605		31,437		294,735
Other current financial assets—net	2d,2f8,6,20 30,36		53,119		24,790		13,382
Total Current Assets			5,455,940		5,767,565		8,308,810

The accompanying notes form an integral part of these consolidated financial statements.

F-5

PT INDOSAT Tbk AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION—(Continued)

January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

(Expressed in millions of rupiah, except share data)

	Notes	January 1, 2011 (Restated)		December 31,
				2011 (Restated)		2012
		Rp		Rp		Rp
NON-CURRENT ASSETS
Due from related parties—net of allowance for impairment of Rp646 as of January 1, 2011, Rp15 as of December 31, 2011 and Rp15 as of December 31, 2012	2f8,20,30,36		8,421		10,654		10,358
Deferred tax assets—net	2f6,3b,16		94,659		113,812		100,693
Property and equipment—net	2f16,2f17,2f18, 2f22,3b,8		43,980,426		43,412,937		41,860,846
Goodwill and other intangible assets—net	2f1,2f2,2f22, 3b,9		2,063,177		2,055,971		2,062,825
Long-term prepaid rentals—net of current portion	10,30		750,472		766,349		755,237
Long-term prepaid licenses—net of current portion	2f19,2f21		397,708		331,868		266,027
Long-term advances	11,30,34d,34f		213,975		161,649		40,994
Long-term prepaid pension—net of current portion	2f7,3b,29,30		111,344		103,181		88,845
Long-term receivables	2f8		45,911		20,677		17,959
Other non-current financial assets—net	2d,2f8,12,20, 30,36		150,604		212,270		1,543,140
Other non-current assets—net	2d,13,30		659,998		872,436		754,498
Total Non-current Assets			48,476,695		48,061,804		47,501,422
TOTAL ASSETS			53,932,635		53,829,369		55,810,232

The accompanying notes form an integral part of these consolidated financial statements.

F-6

PT INDOSAT Tbk AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION—(Continued)

January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

(Expressed in millions of rupiah, except share data)

	Notes	January 1, 2011 (Restated)		December 31,
				2011 (Restated)		2012
		Rp		Rp		Rp
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Short-term loan	2f9,14,20,30,36		—		1,499,256		299,529
Accounts payable—trade	2f9,20,30,36		645,505		319,058		231,737
Procurement payable	2f9,15,20,30,36		3,642,002		3,475,862		2,737,850
Taxes payable	2f6,16		23,789		28,294		34,025
Accrued expenses	2f9,17,20,29,30,36		1,796,335		1,895,613		1,961,285
Unearned income	2f5		1,111,338		1,034,797		1,073,706
Deposits from customers	20,36		50,279		37,265		43,825
Derivative liabilities	2f9,2f15,20,33,36		215,403		138,189		81,241
Current maturities of:
Loans payable	2f9,18,20,30,36		3,184,147		3,300,537		2,669,218
Bonds payable	2f9,19,20,36		1,098,131		41,989		1,329,175
Other current financial liabilities	2f9,20,34h,36		52,413		71,828		289,164
Other current liabilities	30,36		210,335		127,761		265,614
Total Current Liabilities			12,029,677		11,970,449		11,016,369
NON-CURRENT LIABILITIES
Due to related parties	2f9,20,30,36		22,099		15,480		42,789
Obligation under finance lease	2f9,20,34h		416,587		770,081		3,101,910
Deferred tax liabilities—net	2f6,16		1,961,181		2,126,930		1,855,129
Loans payable—net of current maturities	2f9,18,20,30,36		7,666,804		6,425,779		3,703,822
Bonds payable—net of current maturities	2f9,19,20,36		12,114,104		12,138,353		13,986,507
Employee benefit obligations—net of current portion	2f7,21		872,407		787,313		926,224
Other non-current financial liabilities	2f9,20,36		45,815		107,433		69,273
Other non-current liabilities	30,36		114,360		95,054		1,299,131
Total Non-current Liabilities			23,213,357		22,466,423		24,984,785
TOTAL LIABILITIES			35,243,034		34,436,872		36,001,154

The accompanying notes form an integral part of these consolidated financial statements.

F-7

PT INDOSAT Tbk AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION—(Continued)

January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

(Expressed in millions of rupiah, except share data)

	Notes	January 1, 2011 (Restated)		December 31,
				2011 (Restated)		2012
		Rp		Rp		Rp
EQUITY
EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY
Capital stock—Rp100 par value per A share and B share Authorized—1 A share and 19,999,999,999 B shares Issued and fully paid—1 A share and 5,433,933,499 B shares	22		543,393		543,393		543,393
Premium on capital stock	22		1,546,587		1,546,587		1,546,587
Retained earnings
Appropriated			134,446		134,446		134,446
Unappropriated			15,679,724		16,314,201		16,262,361
Other components of equity	2b,2f		401,377		401,778		790,222
Total Equity Attributable to Owners of the Company			18,305,527		18,940,405		19,277,009
Non-controlling Interests			384,074		452,092		532,069
TOTAL EQUITY			18,689,601		19,392,497		19,809,078
TOTAL LIABILITIES AND EQUITY			53,932,635		53,829,369		55,810,232

The accompanying notes form an integral part of these consolidated financial statements.

F-8

PT INDOSAT Tbk AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Years Ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah, except share data)

	Notes	2010 (Restated)			2011 (Restated)			2012
		Rp			Rp			Rp
REVENUES	2f5,3b,23, 30,35
Cellular			15,882,097			16,587,385			18,489,329
Multimedia, Data Communication, Internet (“MIDI”)			2,591,801			2,694,271			2,909,798
Fixed telecommunications			1,278,171			1,249,982			1,021,450
Total Revenues			19,752,069			20,531,638			22,420,577
EXPENSES	2f5.5
Cost of services	24,30		7,299,263			7,547,407			8,905,736
Depreciation and amortization	2f2,2f16,8, 9		6,102,083			6,569,328			8,284,012
Personnel	2f7,25,29,30		1,435,735			1,912,647			1,427,194
Marketing	2f5.5,30		779,192			855,686			920,296
General and administration	2d,26,30		585,139			549,530			625,540
Gain on tower sale	28		—			—			(1,183,963	)
Gain on foreign exchange			(174,143	)		(90,919	)		(44,793	)
Others—net	2d,8,16,35		79,236			29,790			305,955
Net Expenses			16,106,505			17,373,469			19,239,977
OPERATING PROFIT			3,645,564			3,158,169			3,180,600
Interest income	2f5.2,30,35		146,219			92,646			133,544
Gain (loss) on change in fair value of derivatives—net	2f11,2f15,33,35		(448,831	)		57,944			4,964
Financing cost	27,30,35		(2,338,130	)		(1,929,354	)		(2,077,350	)
Gain (loss) on foreign exchange—net	2f4,5,35		318,258			(54,188	)		(789,438	)
Share of loss of associated companies			—			—			(125	)
Other Expenses—Net			(2,322,484	)		(1,832,952	)		(2,728,405	)
PROFIT BEFORE INCOME TAX			1,323,080			1,325,217			452,195
INCOME TAX BENEFIT (EXPENSE)	2f6,3b,16,35
Current			(128,171	)		(122,842	)		(234,429	)
Deferred			(304,401	)		(146,462	)		259,947
Income Tax Benefit (Expense)—net			(432,572	)		(269,304	)		25,518
PROFIT FOR THE YEAR			890,508			1,055,913			477,713
OTHER COMPREHENSIVE INCOME
Differences in foreign currency translation	2f4		(6,795	)		534			(36	)
Income tax effect			1,699			(133	)		(1,238	)
Unrealized changes in fair value of available for sale assets	12		—			—			389,718
Other Comprehensive income—net of tax	2f4, 2f8		(5,096	)		401			388,444
NET COMPREHENSIVE INCOME			885,412			1,056,314			866,157

The accompanying notes form an integral part of these consolidated financial statements.

F-9

PT INDOSAT Tbk AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME—(Continued)

Years Ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah, except share data)

	Notes		2010 (Restated)			2011 (Restated)		2012
			Rp			Rp		Rp
PROFIT FOR THE YEAR ATTRIBUTABLE TO:
Owners of the Company				812,588			958,068		365,649
Non-controlling interests				77,920			97,845		112,064
Total				890,508			1,055,913		477,713
OTHER COMPREHENSIVE INCOME—NET OF TAX ATTRIBUTABLE TO:
Owners of the Company				(5,096	)		401		388,444
Non-controlling interests				—			—		—
Total				(5,096	)		401		388,444
TOTAL COMPREHENSIVE INCOME—NET OF TAX ATTRIBUTABLE TO:
Owners of the Company				807,492			958,469		754,093
Non-controlling interests				77,920			97,845		112,064
Total				885,412			1,056,314		866,157
BASIC AND DILUTED EARNINGS PER SHARE ATTRIBUTABLE TO OWNERS OF THE COMPANY		2f25,22,31		149.54			176.31		67.29
BASIC AND DILUTED EARNINGS PER AMERICAN DEPOSITARY SHARE (ADS) (50 B SHARES PER ADS) ATTRIBUTABLE TO OWNERS OF THE COMPANY		2f25,22,31		7,476.98			8,815.60		3,364.50

The accompanying notes form an integral part of these consolidated financial statements.

F-10

PT INDOSAT Tbk AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Years Ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah, except share data

		Equity Attributable to the Owners of the Company
	Notes	Capital Stock— Issued and Fully Paid		Premium on Capital Stock		Retained Earnings					Share of Equity Changes in Associated Companies		Difference in Foreign Currency Translation(*)			Unrealized changes in fair value on available for sale assets		Total			Non- controlling Interests			Total Equity
Description						Appropriated		Unappropriated
Balance as of January 1, 2010			543,393		1,546,587		119,464		15,631,240			404,104		2,369			—		18,247,157			327,752			18,574,909
Profit for the year			—		—		—		812,588			—		—			—		812,588			77,920			890,508
Other comprehensive income			—		—		—		—			—		(5,096	)		—		(5,096	)		—			(5,096	)
Net comprehensive income			—		—		—		812,588			—		(5,096	)		—		807,492			77,920			885,412
Resolution during the Annual Stockholders’ General Meeting on June 22, 2010	32
Declaration of cash dividend			—		—		—		(749,122	)		—		—			—		(749,122	)		—			(749,122	)
Appropriation for reserve fund			—		—		14,982		(14,982	)		—		—			—		—			—			—
Dividends paid to non-controlling interests			—		—		—		—			—		—			—		—			(21,598	)		(21,598	)
Balance as of December 31, 2010			543,393		1,546,587		134,446		15,679,724			404,104		(2,727	)		—		18,305,527			384,074			18,689,601

* This reserve arose from the translation of the financial statements of Indosat Finance B.V. and Indosat International Finance Company B.V. from euro, and Indosat Palapa Company B.V. and Indosat Singapore Pte. Ltd. from U.S. dollar to rupiah, net of applicable taxes.

The accompanying notes form an integral part of these consolidated financial statements.

F-11

PT INDOSAT Tbk AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY—(Continued)

Years Ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah, except share data)

		Equity Attributable to the Owners of the Company
	Notes	Capital Stock— Issued and Fully Paid		Premium on Capital Stock		Retained Earnings					Share of Equity Changes in Associated Companies		Difference in Foreign Currency Translation(*)			Unrealized changes in fair value on available for sale assets		Total			Non- controlling Interests			Total Equity
Description						Appropriated		Unappropriated
Balance as of January 1, 2011 previously reported			543,393		1,546,587		134,446		15,691,773			404,104		(2,727	)		—		18,317,576			384,387			18,701,963
Restatement			—		—		—		(12,049	)		—		—			—		(12,049	)		(313	)		(12,362	)
Balance as of January 1, 2011 after restatement			543,393		1,546,587		134,446		15,679,724			404,104		(2,727	)		—		18,305,527			384,074			18,689,601
Profit for the year			—		—		—		958,068			—		—			—		958,068			97,845			1,055,913
Other comprehensive income			—		—		—		—			—		401			—		401			—			401
Net comprehensive income			—		—		—		958,068			—		401			—		958,469			97,845			1,056,314
Resolution during the Annual Stockholders’ General Meeting on June 24, 2011	32
Declaration of cash dividend			—		—		—		(323,591	)		—		—			—		(323,591	)		—			(323,591	)
Dividends paid to non-controlling interests			—		—		—		—			—		—			—		—			(29,827	)		(29,827	)
Balance as of December 31, 2011			543,393		1,546,587		134,446		16,314,201			404,104		(2,326	)		—		18,940,405			452,092			19,392,497

* This reserve arose from the translation of the financial statements of Indosat Finance B.V. and Indosat International Finance Company B.V. from euro, and Indosat Palapa Company B.V. and Indosat Singapore Pte. Ltd. from U.S. dollar to rupiah, net of applicable taxes.

The accompanying notes form an integral part of these consolidated financial statements.

F-12

PT INDOSAT Tbk AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY—(Continued)

Years Ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah, except share data)

			Equity Attributable to the Owners of the Company
	Notes		Capital Stock— Issued and Fully Paid		Premium on Capital Stock		Retained Earnings					Share of Equity Changes in Associated Companies		Difference in Foreign Currency Translation(*)			Unrealized changes in fair value on available for sale assets		Total			Non- controlling Interests			Total Equity
Description							Appropriated		Unappropriated
Balance as of January 1, 2012 previously reported				543,393		1,546,587		134,446		16,377,262			404,104		(2,326	)		—		19,003,466			451,842			19,455,308
Restatement				—		—		—		(63,061	)		—		—			—		(63,061	)		250			(62,811	)
Balance as of January 1, 2012 after restatement				543,393		1,546,587		134,446		16,314,201			404,104		(2,326	)		—		18,940,405			452,092			19,392,497
Profit for the year				—		—		—		365,649			—		—			—		365,649			112,064			477,713
Other comprehensive income				—		—		—		—			—		(1,274	)		389,718		388,444			—			388,444
Net comprehensive income				—		—		—		365,649			—		(1,274	)		389,718		754,093			112,064			866,157
Resolution during the Annual Stockholders’ General Meeting on May 14, 2012		32
Declaration of cash dividend				—		—		—		(417,489	)		—		—			—		(417,489	)		—			(417,489	)
Dividends paid to non-controlling interests				—		—		—		—			—		—			—		—			(32,087	)		(32,087	)
Balance as of December 31, 2012				543,393		1,546,587		134,446		16,262,361			404,104		(3,600	)		389,718		19,277,009			532,069			19,809,078

* This reserve arose from the translation of the financial statements of Indosat Finance B.V. and Indosat International Finance Company B.V. from euro, and Indosat Palapa Company B.V. Indosat Singapore Pte. Ltd. from U.S. dollar to rupiah, net of applicable taxes.

The accompanying notes form an integral part of these consolidated financial statements.

F-13

PT INDOSAT Tbk AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31, 2010, 2011 and 2012

(Expressed in millions of rupiah)

	Notes	2010			2011			2012
		Rp			Rp			Rp
CASH FLOWS FROM OPERATING
ACTIVITIES
Cash received from:
Customers			19,678,609			20,620,790			21,960,377
Refund of taxes			41,753			141,271			179,478
Interest income			145,067			81,336			131,804
Settlement from currency forward contracts	33ae-cx		—			55,371			116,147
Settlement from derivative contracts	33a-k		—			20,626			34,410
Cash paid to/for:
Authorities, other operators, suppliers and others			(9,051,275	)		(9,102,182	)		(11,607,302	)
Financing cost			(2,175,997	)		(1,739,810	)		(2,026,450	)
Employees			(1,310,556	)		(2,003,642	)		(1,252,470	)
Income taxes			(215,874	)		(563,320	)		(424,538	)
Interest rate swap contracts	33an-ad		(117,231	)		(119,521	)		(82,306	)
Swap cost from cross currency swap contracts	33b-o		(121,449	)		(70,838	)		(39,697	)
Settlement from derivative contract	33b,33g		(24,431	)		—			—
Net Cash Provided by Operating Activities			6,848,616			7,320,081			6,989,453
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property and equipment	8		7,741			6,708			3,100,109
Acquisitions of property and equipment	8		(6,495,146	)		(6,047,958	)		(5,765,942	)
Acquisition of intangible assets	9		(40,052	)		(10,452	)		(23,073	)
Cash dividend received from other long-term investment	12a		19,281			13,790			—
Proceeds of Palapa D-Satellite insurance claim	8		537,657			—			—
Purchase of investment in an associated company			(194	)		—			—
Net Cash Used in Investing Activities			(5,970,713	)		(6,037,912	)		(2,688,906	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bonds payable	19		5,851,301			—			3,000,000
Proceeds from long-term loans	18		1,092,059			2,322,900			1,700,000
Proceeds from short-term loan	14		—			1,500,000			700,000
Repayment of long-term loans	18		(4,098,277	)		(3,505,063	)		(5,455,925	)
Repayment of short-term loan	14		—			—			(1,900,000	)
Cash dividend paid by the Company	32		(749,122	)		(323,591	)		(417,489	)
Repayment of bonds payable	19		(3,720,815	)		(1,100,000	)		(241,989	)
Cash dividend paid by subsidiaries to non-controlling interest			(21,436	)		(29,692	)		(32,085	)
Settlement from derivative contract	33a		59,925			—			—
Decrease in restricted cash and cash equivalents			2,846			—			—
Swap cost from cross currency swap contract	33a		(46,136	)		—			—
Net Cash Used in Financing Activities			(1,629,655	)		(1,135,446	)		(2,647,488	)

The accompanying notes form an integral part of these consolidated financial statements.

F-14

PT INDOSAT Tbk AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS—(Continued)

Years Ended December 31, 2010, 2011 and 2012

(Expressed in millions of rupiah)

	Notes	2010			2011		2012
		Rp			Rp		Rp
Net Foreign Exchange Differences from Cash and Cash Equivalents			(9,732	)		2,213		39,971
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			(761,484	)		148,936		1,693,030
CASH AND CASH EQUIVALENTS OF ACQUIRED SUBSIDIARY	1b		755			—		—
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR			2,835,999			2,075,270		2,224,206
CASH AND CASH EQUIVALENTS AT END OF YEAR	4		2,075,270			2,224,206		3,917,236
DETAILS OF CASH AND CASH EQUIVALENTS:
Time deposits with original maturities of three months or less and deposits on call			1,791,783			1,919,227		3,493,467
Cash on hand and in banks			283,487			304,979		423,769
Cash and cash equivalents as stated in the consolidated statements of financial position			2,075,270			2,224,206		3,917,236

The accompanying notes form an integral part of these consolidated financial statements.

F-15

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

1. GENERAL

a. Company’s Establishment

PT Indosat Tbk (“the Company”) was established in the Republic of Indonesia on November 10, 1967 within the framework of the Indonesian Foreign Investment Law No. 1 of 1967 based on the notarial deed No. 55 of Mohamad Said Tadjoedin, S.H. The deed of establishment was published in Supplement No. 24 of State Gazette No. 26 dated March 29, 1968 of the Republic of Indonesia. In 1980, the Company was sold by American Cable and Radio Corporation, subsidiary of International Telephone & Telegraph Corporation, to the Government of the Republic of Indonesia (“the Government”) and became a State-owned Company (Persero).

On February 7, 2003, the Company received the approval from the Capital Investment Coordinating Board (BKPM) in its letter No. 14/V/PMA/2003 for the change of its legal status from a State-owned Company (Persero) to a Foreign Capital Investment Company. Subsequently, on March 21, 2003, the Company received the approval from the Ministry of Justice and Human Rights of the Republic of Indonesia on the amendment of its Articles of Association to reflect the change of its legal status.

The Company’s Articles of Association has been amended from time to time. The latest amendment was covered by notarial deed No. 123 dated January 28, 2010 of Aulia Taufani, S.H., (as a substitute notary of Sutjipto, S.H.) as approved in the Stockholders’ Extraordinary General Meeting held on January 28, 2010, in order to comply with the Indonesian Capital Market and Financial Institutions Supervisory Agency (BAPEPAM-LK) Rule No. IX.J.1 dated May 14, 2008 on the Principles of Articles of Association of Limited Liability Companies that Conduct Public Offering of Equity Securities and Public Companies and Rule No. IX.E.1 on Affiliate Transactions and Certain Conflict of Interests Transactions. The latest amendment of the Company’s Articles of Association has been approved by and reported to the Ministry of Law and Human Rights of the Republic of Indonesia based on its letters No. AHU-09555.AH.01.02 Year 2010 dated February 22, 2010 and No. AHU-AH.01.10-04964 dated February 25, 2010. The amendments relate to, among others, the changes in the Company’s purposes, objectives and business activities, appointment of acting President Director if the incumbent President Director is unavailable and definition of conflict of interests.

The address of the Company’s registered office is at Jl. Medan Merdeka Barat 21 Jakarta and it has 2 regional offices located in Jakarta and Medan.

According to article 3 of its Articles of Association, the Company’s purposes and objectives are to provide telecommunications networks, telecommunications services as well as information technology and/or convergence technology services by carrying out the following main business activities:

a. To provide telecommunications networks, telecommunications services as well as information technology and/or convergence technology services, including but not limited to providing basic telephony services, multimedia services, internet telephony services for public use, interconnection internet services, internet access services, mobile telecommunications networks and fixed telecommunications networks; and

b. To engage in payment transactions and money transfer services through telecommunications networks as well as information technology and/or convergence technology.

The Company can provide supporting business activities in order to achieve the purposes and objectives, and to support its main businesses, as follows:

a. To plan, to procure, to modify, to build, to provide, to develop, to operate, to lease, to rent, and to maintain infrastructures/facilities including resources to support the Company’s business in

F-16

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

providing telecommunications networks, telecommunications services as well as information technology and/or convergence technology services;

b. To conduct business and operating activities (including development, marketing and sales of telecommunications networks, telecommunications services as well as information technology and/or convergence technology services by the Company), including research, customer services, education and courses (both domestic and overseas); and

c. To conduct other activities necessary to support and/or related to the provision of telecommunications networks, telecommunications services as well as information technology and/or convergence technology services including but not limited to electronic transactions and provision of hardware, software, content as well as telecommunications-managed services.

The consolidated financial statements of the Company and its subsidiaries (collectively referred to hereafter as “the Group”) as of January 1, 2011 and December 31, 2011 and 2012 and for each of the three years in the period ended December 31, 2012 were approved and authorized for issue by the Board of Directors on April 29, 2013, as reviewed and recommended for approval by the Audit Committee.

The consolidated statement of financial position as of January 1, 2011 is consistent to the December 31, 2010 consolidated statement of financial position.

b. Structure of the Company’s Subsidiaries

As of January 1, 2011 and December 31, 2011 and 2012, the Company has direct and indirect ownership in the following subsidiaries:

Name of Subsidiary	Location	Principal Activity	Start of Commercial Operations		Percentage of Ownership (%)
					January 1, 2011		December 31, 2011		December 31, 2012
Indosat Palapa Company B.V. (“IPBV”) (1)	Amsterdam	Finance		2010		100.00		100.00		100.00
Indosat Mentari Finance Company B.V. (“IMBV”)  (1)	Amsterdam	Finance		2010		100.00		100.00		100.00
Indosat Finance Company B.V. (“IFB”)	Amsterdam	Finance		2003		100.00		100.00		100.00
Indosat International Finance Company B.V. (“IIFB”)	Amsterdam	Finance		2005		100.00		100.00		100.00
Indosat Singapore Pte. Ltd. (“ISPL”)	Singapore	Telecommunication		2005		100.00		100.00		100.00
PT Indosat Mega Media (“IMM”)	Jakarta	Multimedia		2001		99.85		99.85		99.85
PT Interactive Vision Media (“IVM”) (3)	Jakarta	Pay TV		2011		—		99.83		99.83
PT Starone Mitra Telekomunikasi (“SMT”)	Semarang	Telecommunication		2006		72.54		72.54		72.54
PT Aplikanusa Lintasarta (“Lintasarta”)	Jakarta	Data Communication		1989		72.36		72.36		72.36
PT Lintas Media Danawa (“LMD”) (3)	Jakarta	Information and Communication Services		2008		50.65		50.65		50.65
PT Artajasa Pembayaran Elektronis (“APE”)(3) (Note 2b)	Jakarta	Telecommunication		2000		39.80		39.80		39.80

F-17

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

	Total Assets (Before Eliminations)
Name of Subsidiary	January 1, 2011		December 31, 2011		December 31, 2012
IPBV ( 1)		5,966,764		6,015,894		6,442,367
IMBV ( 1)		5,946,885		6,010,359		6,436,524
IFB		21,876		20,923		21,963
IIFB		9,635		8,688		8,853
ISPL		54,353		78,264		99,519
IMM		808,720		739,516		805,942
IVM ( 2)		—		5,198		5,448
SMT		155,207		209,541		250,726
Lintasarta		1,710,780		1,868,382		2,034,858
LMD(3)		2,671		5,199		3,760
APE ( 3)		221,297		258,745		372,556

⁽¹⁾  IPBV and IMBV were incorporated in Amsterdam on April 28, 2010 to engage in treasury activities, to lend and borrow money, whether in the form of securities or otherwise, to finance enterprises and the Group, to grant security in respect of their obligation or those of their Group and third parties.

⁽²⁾  IVM, a subsidiary of IMM, was established on April 21, 2009 to engage in Pay TV services. IMM made capital injections to IVM on March 9 and 30, 2011 totalling Rp4,999. On July 12, 2011, IVM got the license to conduct its Pay TV services. However, as of December 31, 2012, IVM has not started its commercial operations.

⁽³⁾  Lintasarta has direct 55% and 70% ownership in APE and LMD, respectively.

c. Merger of the Company, Satelindo, Bimagraha and IM3

Based on Merger Deed No. 57 dated November 20, 2003 (“merger date”) of Poerbaningsih Adi Warsito, S.H., the Company, PT Satelit Palapa Indonesia (“Satelindo”), PT Bimagraha Telekomindo (“Bimagraha”) and PT Indosat Multi Media Mobile (“IM3”) agreed to merge, with the Company as the surviving entity. All assets and liabilities owned by Satelindo, Bimagraha and IM3 were transferred to the Company on the merger date. These three companies were dissolved by operation of law without the need to undergo the regular liquidation process.

The names “Satelindo” and “IM3” in the following notes refer to these entities before they were merged with the Company, or as the entities that entered into contractual agreements that were taken over by the Company as a result of the merger.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies applied consistently in the preparation of the consolidated financial statements are as follows:

a. Basis of Consolidated Financial Statements

The consolidated financial statements have been prepared using the historical cost basis of accounting, except for derivative financial instruments and available for sale financial assets which are stated at fair value.

F-18

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

The consolidated statements of cash flows classify cash receipts and payments into operating, investing and financing activities. The cash flows from operating activities are presented using the direct method.

The consolidated financial statements are presented in Indonesian rupiah, which is the Company’s functional and presentation currency.

b. Principles of Consolidation

The consolidated financial statements include the Company’s accounts and those of its subsidiaries (Note 1b).

In accordance with IAS 27 (Revised 2008), the Company prepares and presents the consolidated financial statements for a group of entities under its control.

Control is presumed to exist when the parent owns, directly or indirectly through subsidiaries, more than half of the voting power of an entity. Control also exists when the parent owns half or less of the voting power of an entity when there is:

a) power over more than half of the voting rights by virtue of an agreement with other investors;

b) power to govern the financial and operating policies of the entity under a statute or an agreement;

c) power to appoint or remove the majority of the members of the board of directors or equivalent governing body and control of the entity is by that board or body; or

d) power to cast the majority of votes at meetings of the board of directors or equivalent governing body and control of the entity is by that board or body.

The financial statements of the subsidiaries are prepared for the same reporting period as the Company, using consistent accounting policies. All intra-group balances, transactions, unrealized gains and losses resulting from intra-group transactions and dividends are eliminated in full.

Total comprehensive income within a subsidiary is attributed to the non-controlling interest even if that results in a deficit balance.

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it:

• Derecognizes the assets (including goodwill) and liabilities of the subsidiary

• Derecognizes the carrying amount of any non-controlling interest

• Derecognizes the cumulative translation differences recorded in equity

• Recognizes the fair value of the consideration received

• Recognizes the fair value of any investment retained

• Recognizes any surplus or deficit in profit or loss

• Reclassifies the parent’s share of components previously recognized in other comprehensive income to profit or loss or retained earnings, as appropriate.

The consolidated financial statements also include the accounts of APE (Lintasarta’s subsidiary). The accounts of APE in 2010, 2011 and 2012 were consolidated because its financial and operating policies were controlled by Lintasarta.

F-19

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

The accounts of IPBV, IMBV, IFB, IIFB, and ISPL were translated into rupiah amounts at the middle rates of exchange prevailing at balance sheet date for balance sheet accounts and the average rates during the year for profit or loss accounts. The resulting differences arising from the translations of the financial statements of IPBV, IMBV, IFB, IIFB, and ISPL are presented as part of Other Comprehensive Income in the consolidated statements of comprehensive income.

Non-controlling interest in subsidiaries represents the minority stockholders’ proportionate share in the equity (including net income) of the subsidiaries which are not wholly-owned.

c. Statement of Compliance

The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

d. Restatement

During the year ended December 31, 2012, the Company identified historical accounting errors in the accounting treatment of its leasing and service concession arrangements. The accounting errors have resulted in the misstatement of certain balance sheet and income statement items and the cumulative net earnings since 2010. The Company has no evidence that the errors resulted from any fraud or intentional misconduct. The Company undertook a review to determine the total amount of the errors and the accounting periods in which the errors occurred. The impact of these errors was material and accordingly, the Company has performed a restatement of its financial statements as of December 31, 2010 and December 31, 2011 and for each of the two years ended December 31, 2010 and December 31, 2011.

The restatement corrects the following historical accounting errors identified:

Lease transactions

The Company engages in leasing transactions where slots on the Company’s towers are leased to other telecommunications operators (“lease-outs”) and where the Company leases tower slots from others for its own use (“lease-ins”).

During the year ended December 31, 2012, following the evaluation of a sale and leaseback transaction, the Company reassessed the classification of all of its lease arrangements. Accordingly, the Company determined that the majority of its historical lease-in transactions were finance leases and that its historical lease-out transactions should have been classified as operating leases. The revised accounting treatment for these historical lease transactions results in the recognition of finance leased assets and lease liabilities (for lease-in transactions) and reinstatement of derecognized property and equipment and reversal of gains on finance leases (for lease-out transactions), and additional disclosures in the consolidated financial statements.

The Company also identified an error in the calculation of the annual radio frequency fee between 2006 and 2010. This error resulted in an under accrual of the annual radio frequency fee as of December 31, 2010 of Rp83,342 which has been corrected as part of the restatement.

F-20

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

The impact of the restatement of lease transactions on key financial statement line items is as follows:

	Increase/(Decrease)
	2010			2011
	Rp			Rp
Other current financial assets—net		—			(5,043	)
Finance lease receivable		—			(81,966	)
Property and equipment—net		527,858			62,676
Accrued expenses		83,342			—
Other current liabilities		29,286			—
Other current financial liabilities		—			(1,373	)
Obligation under finance lease		416,587			77,174
Deferred tax liabilities—net		20,497			(25,033	)
Profit for the year		(21,854	)		(53,247	)

Service concessions

In 2010, the Company’s subsidiary, Lintasarta, contracted with the Ministry of Communications and Information Technology-Balai Telekomunikasi dan Informatika Pedesaan (MOCIT-BTIP) to provide telecommunication and network services to remote rural areas. The Company historically treated these contracts as a service agreement. In 2012, the Company reassessed the accounting treatment of these agreements and determined that these arrangements should be accounted for in accordance with IFRIC 12 Service Concession Arrangements.

The correction in the accounting treatment of this transaction had an immaterial impact to the reported profit but impacted the consolidated statement of financial position with a decrease in assets and liabilities of Rp21,776 and Rp22,660 respectively in 2010 and an increase in assets and liabilities of Rp90,621 and Rp89,877 respectively in 2011. This error has been corrected as part of the restatement.

The impact of the restatement of service concessions on key financial statement line items is as follows:

	Increase/(Decrease)
	2010			2011
	Rp			Rp
Accounts receivable		(15,217	)		60,706
Advances		(39,107	)		(8,380	)
Deferred tax assets—net		(359	)		(302	)
Property and equipment—net		(34,624	)		(35,108	)
Long-term advances		(2,668	)		(48,149	)
Other non-current financial assets—net		70,199			121,854
Current liabilities		4,067			3,681
Deferred tax liabilities—net		195			164
Other non-current financial liabilities		45,815			107,433
Other non-current liabilities		(72,737	)		(21,401	)
Profit for the year		884			(140	)

F-21

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

Previously Known Uncorrected Adjustments

The Company has also corrected previously known immaterial errors pertaining to the 2010 and 2011 consolidated financial statements. The net impact of these adjustments is an increase in the Company’s previously reported consolidated profit after income tax for the year ended December 31, 2010 and December 31, 2011 by Rp8,608 and Rp2,938, respectively.

The Company has restated its financial statements as of December 31, 2010 and December 31, 2011 and for each of the two years ended December 31, 2010 and December 31, 2011. The following discloses each line item on the Company’s financial statements as originally reported in the Company’s annual report on Form 20-F for the year ended December 31, 2011 filed with the Securities and Exchange Commission on April 30, 2012, the increase (decrease) in each line item on the Company’s consolidated financial statements as a result of the restatement and each line item on the Company’s consolidated financial statements as restated.

F-22

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

Consolidated Statements of Financial Position

	As of December 31, 2010*									As of December 31, 2011
	Previously Reported		Previously Reported After Reclassifications **		Adjustments			Restated		Previously Reported		Previously Reported After Reclassifications **		Adjustments			Restated
ASSETS
Accounts receivable		1,558,457		1,558,457		(12,150	)		1,546,307		1,446,729		1,442,407		63,349			1,505,756
Advances		67,273		67,273		(39,107	)		28,166		48,865		48,865		(8,380	)		40,485
Taxes receivable		479,786		—		—			—		514,934		—		—			—
Prepaid expenses		1,527,254		—		—			—		1,705,652		—		—			—
Prepaid frequency fee and licenses		—		1,202,009		—			1,202,009		—		1,353,819		—			1,353,819
Prepaid expenses—other		—		352,245		—			352,245		—		351,833		—			351,833
Other current assets		222,476		50,605		—			50,605		379,024		31,437		—			31,437
Other current financial assets		53,119		53,119		—			53,119		29,833		29,833		(5,043	)		24,790
Finance lease receivable		—		—		—			—		81,966		81,966		(81,966	)		—
Deferred tax assets—net		95,018		95,018		(359	)		94,659		114,114		114,114		(302	)		113,812
Property and equipment—net		43,489,401		43,489,401		491,025			43,980,426		43,385,369		43,385,369		27,568			43,412,937
Long-term advances		216,643		216,643		(2,668	)		213,975		209,798		209,798		(48,149	)		161,649
Other non-current financial assets—net		80,405		80,405		70,199			150,604		90,416		90,416		121,854			212,270
Other non-current assets		8,341		659,998		—			659,998		5,593		872,436		—			872,436
Total Assets		53,425,695		53,425,695		506,940			53,932,635		53,760,438		53,760,438		68,931			53,829,369
LIABILITIES
Procurement payable		3,644,467		3,644,467		(2,465	)		3,642,002		3,429,921		3,429,921		45,941			3,475,862
Accrued expenses		1,710,885		1,710,885		85,450			1,796,335		1,891,477		1,891,477		4,136			1,895,613
Unearned income		1,106,914		1,106,914		4,424			1,111,338		1,081,193		1,081,193		(46,396	)		1,034,797
Other current financial liabilities		23,127		23,127		29,286			52,413		73,201		73,201		(1,373	)		71,828
Other current liabilities		207,268		207,268		3,067			210,335		125,118		125,118		2,643			127,761
Obligation under finance lease		—		—		416,587			416,587		692,907		692,907		77,174			770,081
Deferred tax liabilities—net		1,951,306		1,951,306		9,875			1,961,181		2,163,345		2,163,345		(36,415	)		2,126,930
Other non-current financial liabilities		—		—		45,815			45,815		—		—		107,433			107,433
Other non-current liabilities		187,097		187,097		(72,737	)		114,360		116,455		116,455		(21,401	)		95,054
Total Liabilities		34,723,732		34,723,732		519,302			35,243,034		34,305,130		34,305,130		131,742			34,436,872
EQUITY
Retained earnings—Unappropriated		15,691,773		15,691,773		(12,049	)		15,679,724		16,377,262		16,377,262		(63,061	)		16,314,201
Non-controlling Interests		384,387		384,387		(313	)		384,074		451,842		451,842		250			452,092
Total Equity		18,701,963		18,701,963		(12,362	)		18,689,601		19,455,308		19,455,308		(62,811	)		19,392,497

* The consolidated statement of financial position as of December 31, 2010 is consistent to that of January 1, 2011.

** Certain accounts were reclassified in the prior years for consistency and comparability to December 31, 2012.

F-23

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

Consolidated Statements of Comprehensive Income

	For the year ended December 31, 2010												For the year ended December 31, 2011
	Previously Reported			Previously Reported After Reclassifications **			Adjustments			Restated			Previously Reported			Previously Reported After Reclassifications **			Adjustments			Restated
REVENUES
Cellular		15,867,091			15,882,097			—			15,882,097			16,560,966			16,560,966			26,419			16,587,385
Multimedia, Data Communication, Internet (“MIDI”)		2,488,110			2,488,110			103,691			2,591,801			2,578,378			2,578,378			115,893			2,694,271
Fixed telecommunications		1,293,177			1,278,171			—			1,278,171			1,249,982			1,249,982			—			1,249,982
Total Revenues		19,648,378			19,648,378			103,691			19,752,069			20,389,326			20,389,326			142,312			20,531,638
EXPENSES
Cost of services		7,113,410			7,196,361			102,902			7,299,263			7,383,021			7,475,478			71,929			7,547,407
Depreciation and amortization		6,162,851			6,162,851			(60,768	)		6,102,083			6,495,968			6,495,968			73,360			6,569,328
Personnel		1,411,244			1,435,735			—			1,435,735			1,891,940			1,912,647			—			1,912,647
General and administration		692,581			585,139			—			585,139			662,694			549,530			—			549,530
Gain on foreign exchange		—			(174,143	)		—			(174,143	)		—			(90,919	)		—			(90,919	)
Others-net		—			79,236			—			79,236			—			(52,049	)		81,839			29,790
Net Expenses		16,159,278			16,064,371			42,134			16,106,505			17,289,309			17,146,341			227,128			17,373,469
Interest income		143,402			143,402			2,817			146,219			100,717			100,717			(8,071	)		92,646
Financing cost		(2,271,628	)		(2,271,628	)		(66,502	)		(2,338,130	)		(1,925,445	)		(1,925,445	)		(3,909	)		(1,929,354	)
Gain (loss) on foreign exchange—net		492,401			318,258			—			318,258			36,731			(54,188	)		—			(54,188	)
Others—net		(79,236	)		—			—			—			52,049			—			—			—
Other Expenses—net		(2,163,892	)		(2,258,799	)		(63,685	)		(2,322,484	)		(1,678,004	)		(1,820,972	)		(11,980	)		(1,832,952	)
INCOME TAX BENEFIT (EXPENSE)
Deferred		(294,167	)		(294,167	)		(10,234	)		(304,401	)		(192,809	)		(192,809	)		46,347			(146,462	)
Income Tax Benefit (Expense)—net		(422,338	)		(422,338	)		(10,234	)		(432,572	)		(315,651	)		(315,651	)		46,347			(269,304	)
Profit for the Year		902,870			902,870			(12,362	)		890,508			1,106,362			1,106,362			(50,449	)		1,055,913

** Certain accounts were reclassified in the prior years for consistency and comparability to the year ended December 31, 2012.

F-24

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

e. Adoption of New and Revised Accounting Standards

New and amended standards

The accounting policies adopted are consistent with those of the previous financial year, except for the following new and amended IFRS for financial years beginning on or after January 1, 2012:

• IAS 12 Income Taxes: effective January 1, 2012

Standards issued but not yet effective

Standards issued but not yet effective up to the date of issuance of the Group financial statements are listed below.

IAS 1 Presentation of Items of Other Comprehensive Income—Amendments to IAS 1

The amendments to IAS 1 change the grouping of items presented in other comprehensive income (OCI). Items that could be reclassified (or ‘recycled’) to profit or loss at a future point in time (for example, net gain on hedge of net investment, exchange differences on translation of foreign operations, net movement on cash flow hedges and net loss or gain on available-for-sale financial assets) would be presented separately from items that will never be reclassified (for example, actuarial gains and losses on defined benefit plans). The amendment affects presentation only and has no impact on the Group’s financial position or performance. The amendment becomes effective for annual periods beginning on or after 1 July 2012, and will therefore be applied in the Group’s 2013 annual report.

IAS 19 Employee Benefits (Revised)

The IASB has issued numerous amendments to IAS 19. These range from fundamental changes such as removing the corridor method for recognizing actuarial gains and losses and the concept of expected returns on plan assets to simple clarifications and re-wording. The amendments require the recognition of changes in defined benefit obligations and in the fair value of plan assets when they occur, and hence eliminate the “corridor approach’ permitted under the previous version of IAS 19 and accelerate the recognition of past service cost. The amendments require all actuarial gains and losses to be recognized immediately through other comprehensive income in order for the net pension assets or liability recognized in the consolidated statements of financial position to reflect the full value of the plan deficit or surplus.

The Company previously recognized only the net cumulative unrecognized actuarial gains and losses of the previous period, which exceeded 10% of the greater of the defined benefit obligation and the fair value of the plan assets in accordance with IAS 19.93. As a consequence, the Company’s statement of financial position did not reflect a significant part of the unrecognized net actuarial gains and losses. With the effective date of IAS 19 (Revised 2011) as of January 1, 2013, IAS 19R will be applied retrospectively from January 1, 2011. As a result, expected returns on plan assets of defined benefit plans are not recognized in profit or loss. Instead, interest on net defined benefit obligation (net of the plan assets) is recognized in profit or loss, calculated using the discount rate used to measure the net pension obligation or asset. Also, unvested prior service cost can no longer be deferred and recognized over the future vesting period. Instead, all past service costs are recognized at the earlier of when the amendment occurs and when the Company recognizes related restructuring or termination costs. Until 2012, the Company’s unvested past

F-25

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

service costs were recognized as an expense on a straight-line basis over the average period until the benefit becomes vested. Upon transition to IAS 19R, past service costs are recognized immediately if the benefits have vested immediately following the introduction of, or change to, a pension plan.

Impact of transition to IAS 19R on the Company’s statements of financial position as of and comprehensive income for the years ended:

January 1, 2011

Increase in defined benefit obligation of Rp200,600

Decrease in deferred tax liabilities of Rp50,150

Net decrease in opening retained earnings of Rp23,440

December 31, 2011

Increase in defined benefit obligation of Rp144,797

Pension profit with old policy reclassified to other comprehensive income of Rp66,037

Net effect on defined benefit obligation of Rp78,942

Net decrease in deferred tax liabilities of Rp19,736

Net expense recognized in other comprehensive income of Rp59,207

Net decrease in tax expense of Rp16,509

Net increase in profit after tax of Rp49,528

December 31, 2012

Increase in defined benefit obligation of Rp304,777

Pension profit with old policy reclassified to other comprehensive income of Rp10,782

Net effect in defined benefit obligation of Rp293,996

Net decrease in deferred tax liabilities of Rp73,499

Net expense recognized in other comprehensive income of Rp220,497

Net decrease in tax expense of Rp2,695

Net increase in profit after tax of Rp8,086

IAS 28 Investments in Associates and Joint Ventures (as revised in 2011)

As a consequence of the new IFRS 11 and IFRS 12, IAS 28 has been renamed IAS 28 Investments in Associates and Joint Ventures, and describes the application of the equity method to investments in joint ventures in addition to associates. The revised standard becomes effective for annual periods beginning on or after January 1, 2013. It is not expected to have a material impact on the consolidated financial statements.

F-26

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

IAS 32 Financial Instruments (Amended)

These amendments clarify the meaning of “currently has a legally enforceable right to set-off”. The amendments also clarify the application of the IAS 32 offsetting criteria to settlement systems (such as central clearing house systems) which apply gross settlement mechanisms that are not simultaneous. These amendments are not expected to impact the Group’s financial position or performance and become effective for annual periods beginning on or after 1 January 2014.

IFRS 7 Disclosures—Offsetting Financial Assets and Financial Liabilities—Amendments to IFRS 7

These amendments require an entity to disclose information about rights to set-off and related arrangements (e.g., collateral agreements). The disclosures would provide users with information that is useful in evaluating the effect of netting arrangements on an entity’s financial position. The new disclosures are required for all recognised financial instruments that are set off in accordance with IAS 32 Financial Instruments: Presentation. The disclosures also apply to recognised financial instruments that are subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are set off in accordance with IAS 32. These amendments will not impact the Group’s financial position or performance and become effective for annual periods beginning on or after 1 January 2013. The amendments are not expected to have any impact on the consolidated financial statements.

IFRS 9 Financial Instruments: Classification and Measurement

IFRS 9, as issued, reflects the first phase of the IASB’s work on the replacement of IAS 39 and applies to classification and measurement of financial assets and financial liabilities as defined in IAS 39. The standard was initially effective for annual periods beginning on or after 1 January 2013, but Amendments to IFRS 9 Mandatory Effective Date of IFRS 9 and Transition Disclosures, issued in December 2011, changed the mandatory effective date to 1 January 2015. In subsequent phases, the IASB will address hedge accounting and impairment of financial assets. The adoption of the first phase of IFRS 9 will have an effect on the classification and measurement of the Group’s financial assets, but will not have an impact on classification and measurements of financial liabilities. The Group will quantify the effect in conjunction with the other phases, when the final standard including all phases is issued.

IFRS 10 Consolidated Financial Statements, IAS 27 Separate Financial Statements

IFRS 10 replaces the portion of IAS 27 Consolidated and Separate Financial Statements that addresses the accounting for consolidated financial statements. It also addresses the issues raised in SIC-12 Consolidation—Special Purpose Entities. IFRS 10 establishes a single control model that applies to all entities including special purpose entities. The changes introduced by IFRS 10 will require management to exercise significant judgement to determine which entities are controlled and therefore are required to be consolidated by a parent, compared with the requirements that were in IAS 27. Based on the preliminary analyses performed, IFRS 10 is not expected to have any material impact on the Group’s consolidated financial statements. This standard becomes effective for annual periods beginning on or after 1 January 2013.

IFRS 11 Joint Arrangements

IFRS 11 replaces IAS 31 Interests in Joint Ventures and SIC-13 Jointly-controlled Entities—Non-monetary Contributions by Venturers. IFRS 11 removes the option to account for jointly controlled entities

F-27

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

(JCEs) using proportionate consolidation. Instead, JCEs that meet the definition of a joint venture must be accounted for using the equity method. This standard becomes effective for annual periods beginning on or after January 1, 2013. Based on preliminary analyses, no material impact is expected on the consolidated financial position and performance of the Group.

IFRS 12 Disclosure of Interests in Other Entities

IFRS 12 includes the disclosures that were previously in IAS 27 related to consolidated financial statements, as well as the disclosures that were previously included in IAS 31 and IAS 28. These disclosures relate to an entity’s interests in subsidiaries, joint arrangements, associates and structured entities. A number of new disclosures are also required, but has no impact on the Group’s financial position or performance. This standard becomes effective for annual periods beginning on or after 1 January 2013.

IFRS 13 Fair Value Measurement

IFRS 13 establishes a single source of guidance under IFRS for all fair value measurements. IFRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under IFRS when fair value is required or permitted. Based on the preliminary analyses, no material impact is expected on the Group’s financial position and performance. This standard becomes effective for annual periods beginning on or after 1 January 2013.

f. Significant Accounting Policies and Practices

f1. Business combinations and goodwill

Business combinations

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. For each business combination, the acquirer measures the non-controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition costs incurred are expensed and included in administrative expenses.

When the Group acquires a business, they assess the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.

If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss.

Any contingent consideration to be transferred by the acquirer will be recognized at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability, will be recognized in accordance with IAS 39 either in profit or loss or in other comprehensive income. If the contingent consideration is classified as equity, it should not be remeasured. In instances where the contingent consideration does not fall within the scope of IAS 39, it is measured in accordance with the appropriate IFRS.

F-28

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

Goodwill is initially measured at cost being the excess of the aggregate of the consideration transferred and the amount recognized for non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognized in profit or loss.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units (“CGUs”) that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those CGUs.

Where goodwill forms part of a CGU and part of the operation within that CGU is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the CGU retained.

f2. Intangible assets

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is its fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and accumulated impairment losses, if any.

The useful lives of intangible assets are assessed as either finite or indefinite.

Intangible assets with finite lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization method for an intangible asset with a finite useful life is reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortization period or method, as appropriate, and are treated as changes in accounting estimates. The amortization expense on intangible assets with finite lives is recognized in profit or loss in the expense category consistent with the function of the intangible assets.

Intangible assets with indefinite useful lives are not amortized, but are tested for impairment annually, either individually or at the cash-generating unit level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis.

At the time of acquisition of a subsidiary, any intangible assets recognized are amortized using the straight-line method based on the estimated useful lives of the assets as follows:

	Years
Customer base
—Prepaid		6
—Post-paid		5
Spectrum license		5
Brand		8
Patent		10

F-29

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

Internally generated intangible assets, excluding capitalized development costs, are not capitalized and expenditure is reflected in profit or loss in the year in which the expenditure is incurred.

Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the profit or loss when the asset is derecognized.

Computer Software

Software that is not an integral part of the related hardware is amortized using the straight-line method over 5 years and assessed for impairment whenever there is indication of impairment. The Company reviews the amortization period and the amortization method for the software at least at each financial year end. Residual value of software is assumed to be zero.

f3. Investments in associated Companies

The Group’s investment in its associate is accounted for using the equity method. An associate is an entity over which the Group has significant influence.

Under the equity method, the investment in the associate is carried in the consolidated statements of financial position at cost plus post acquisition changes in the Group’s share of net assets of the associate. Goodwill relating to the associate is included in the carrying amount of the investment and is neither amortized nor individually tested for impairment.

The consolidated statements of comprehensive income reflect the share of the results of operations of the associate. Where there has been a change recognized directly in the equity of the associate, the Group recognizes its share of any changes and discloses this, when applicable, in the consolidated statements of changes in equity. Unrealized gains and losses resulting from transactions between the Group and the associate are eliminated to the extent of the interest in the associate.

The Group’s share of profit of an associate is shown on the face of the consolidated statements of comprehensive income. This is the profit attributable to equity holders of the associate and therefore is profit after tax and non-controlling interests in the subsidiaries of the associate.

The financial statements of the associate are prepared for the same reporting period as the Group. Where necessary, adjustments are made to bring the accounting policies in line with those of the Group.

After application of the equity method, the Group determines whether it is necessary to recognize an additional impairment loss on its investment in its associate. The Group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. If this is the case the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognizes the amount in the ‘share of profit of an associate’ in the consolidated statements of comprehensive income.

Upon loss of significant influence over the associate, the Group measures and recognizes any retained investment at its fair value. Any difference between the carrying amount of the associate upon loss of significant influence and the fair value of the retained investment and proceeds from disposal is recognized in profit or loss.

F-30

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

f4. Foreign currency translation

The consolidated financial statements are presented in rupiah, which is the Company’s functional currency and the Group’s presentation currency. Transactions involving foreign currencies are initially recorded at the functional currency rate prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rate of exchange prevailing at the end of the reporting period. All differences are taken to the statements of comprehensive income, except for foreign exchange differences that qualify as capitalizable borrowing costs for qualifying properties under construction and installation. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined.

The functional currency and presentation currency of IFB and IIFB are in Euro, while IPBV, IMBV and ISP are in U.S. dollar. As at the end of the reporting period, the assets and liabilities of these subsidiaries are translated into the presentation currency of the Company at the spot rate which is the exchange rate prevailing at the end of the reporting period and their statements of comprehensive income are translated at the average rate during the period. The resulting differences arising from the translations of the financial statements of IPBV, IMBV, IFB, IIFB and ISP are included in other comprehensive income and presented as part of “Difference in Foreign Currency Translation” in the consolidated statements of changes in equity.

f5. Revenue recognition and expense recognition

f5.1 Service Revenues

Cellular

Cellular revenues arising from airtime and roaming calls are recognized based on the duration of successful calls made through the Company’s cellular network and presented on gross basis.

For post-paid subscribers, monthly service fees are recognized as the service is provided.

The activation component of starter package sales is deferred and recognized as revenue over the expected average period of the customer relationship. Sales of initial/reload vouchers are recorded as unearned income and recognized as revenue upon usage of the airtime or upon expiration of the airtime.

Sales of wireless broadband modems and cellular handsets are recognized upon delivery to the customers.

Revenues from wireless broadband data communications are recognized based on the duration of usage or fixed monthly charges depending on the arrangement with the customers.

Cellular revenues are presented on a net basis, after compensation to value added service providers.

Customer Loyalty Program

The Company operates a customer loyalty program called “Poin Plus Plus”, which allows customers to accumulate points for every reload and payment by the Company’s prepaid and post-paid subscribers, respectively. The points can then be redeemed for free telecommunication and non-telecommunication

F-31

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

products, subject to a minimum number of points being obtained. Starting July 29, 2011, the “Poin Plus Plus” program has been replaced with the “Indosat Senyum” program. Both programs have similarity in nature and scheme to redeem the points, except that, under the new program, the Company no longer includes the subscription period as a variable item in calculating the points.

Customer loyalty credits are accounted for as a separate component of the sales transaction in which they are granted. The consideration received at the time of reload and payment by the Company’s prepaid and post-paid subscribers, respectively, is allocated between the cellular products sold and the points issued, with the consideration allocated to the points equal to their fair value. Fair value of the points issued is deferred and recognized as revenue when the points are redeemed or when the redemption period expires.

Dealer Commissions

Consideration in the form of sales discount given by the Company to a dealer is recognized as a reduction of revenue.

If the Company receives, or will receive, an identifiable benefit in exchange for a consideration given by the Company to a dealer, and the fair value of such benefit can be reasonably estimated, the consideration will be recorded as a marketing expense.

Tower Leasing

Revenue from tower leasing classified as operating leases is recognized on a straight-line basis over the lease term based on the amount stated in the agreement between the Company and the lessee.

MIDI

• Internet

Revenues arising from installation service are deferred and recognized over the expected average period of the customer relationship. Revenues from monthly service fees are recognized as the services are provided. Revenues from usage charges are recognized monthly based on the duration of internet usage or based on the fixed amount of charges depending on the arrangement with the customers.

• Frame Net, World Link and Direct Link

Revenues arising from installation service are deferred and recognized over the expected average period of the customer relationship. Revenues from monthly service fees are recognized as the services are provided.

• Satellite Operating Lease

Revenues are recognized on the straight-line basis over the lease term.

Revenues from other MIDI services are recognized when the services are rendered.

Fixed Telecommunications

• International Calls

Revenues from outgoing international call traffic are recognized on the basis of the actual recorded traffic for the year and have been reported on a gross basis.

F-32

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

• Fixed Wireless

Fixed wireless revenues arising from usage charges are recognized based on the duration of successful calls made through the Company’s fixed network.

For post-paid subscribers, monthly service fees are recognized as the services are provided.

For prepaid subscribers, the activation component of starter package sales is deferred and recognized as revenue over the expected average period life of the customer relationship.

Sale of initial/reload vouchers is recorded as unearned income and recognized as income upon usage of the airtime or upon expiration of the airtime.

• Fixed Line

Revenues from fixed line installations are deferred and recognized as revenue over the expected average period of the customer relationship. Revenues from usage charges are recognized based on the duration of successful calls made through the Company’s fixed network.

Interconnection Revenue

Revenues from network interconnection with other domestic and international telecommunications carriers are recognized monthly on the basis of the actual recorded traffic for the month.

f5.2 Interest Income

Interest income is recognized as it accrues on a time proportion basis taking into account the principal amount outstanding and the effective interest rate. Majority of interest income represents interest earned from cash and cash equivalents.

f5.3 Agency Relationship

Revenues from an agency relationship are recorded based on the gross amount billed to the customer when the Company and subsidiaries act as a principal in the sale of services.

When the Company and subsidiaries act as an agent and earn commission from the suppliers of the services, revenues are recorded based on the net amount retained (the amount paid by the customer less the amount paid to the suppliers).

f5.4 Dividends

Dividend income is recognized when the Company’s right to receive the payment is established.

f5.5 Expenses

Expenses are recognized when incurred.

F-33

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

f6. Income tax

Current income tax

Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date in the countries where the Group operate and generate taxable income.

Current income tax relating to items recognized directly in equity is recognized in equity. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.

Deferred tax

Deferred tax is provided using the balance sheet liability method on all temporary differences at the end of the reporting year between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognized for all taxable temporary differences except: (1) where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss and (2) in respect of taxable temporary differences associated with investments in subsidiaries and associates, where the timing of the reversal of the temporary differences can be controlled and it is possible that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognized for all deductible temporary differences and carryforward of unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and carryforward of unused tax losses can be utilized except: (1) where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss and (2) in respect of deductible temporary differences associated with investments in subsidiaries and associates, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are reassessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.

Deferred tax relating to items recognized outside profit or loss is recognized outside profit or loss. Deferred tax items are recognized in correlation to the underlying transaction either in other comprehensive income or directly in equity.

F-34

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

Sales tax

Revenues, expenses and assets are recognized net of the amount of sales tax.

The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the consolidated statements of financial position.

f7. Pensions and other post-employment benefits

Funded Plans

The Group has defined benefit pension plans which require contributions to be made to separately administered funds. Pension costs under the Group’s defined benefit pension plans are determined by periodic actuarial calculation using the projected-unit-credit method and applying the assumptions on discount rate, expected return on plan assets and annual rate of increase in compensation. Actuarial gains or losses are recognized as income or expense when the net cumulative unrecognized actuarial gains or losses for each individual plan at the end of the previous reporting year exceed 10% of the present value of the defined benefit obligation or fair value of plan assets, whichever is greater, at that date. These gains or losses in excess of the 10% corridor are recognized on a straight-line basis over the expected average remaining working lives of the employees.

The past service costs are recognized as an expense on a straight-line basis over the average period until the benefits become vested. If the benefits have already vested, immediately following the introduction of or changes to a pension plan, past service costs are recognized immediately.

Actuarial gains or losses and past service costs from other long-term employee benefits are recognized immediately in the current year’s consolidated statement of comprehensive income within personnel expenses.

The defined benefit asset or liability comprises the present value of the defined benefit obligation (using a discount rate based on government bonds), less unrecognized past service costs and actuarial gains and losses not yet recognized and less the fair value of plan assets out of which the obligations are to be settled. Plan assets are assets that are held in qualifying insurance policies. Fair value is based on market price information and in the case of quoted securities, it is the published bid price. The value of any defined benefit asset recognized is restricted to the sum of any past service costs and actuarial gains and losses not yet recognized and the present value of any economic benefits available in the form of refunds from the plan or reductions in the future contributions to the plan.

The Group recognizes gains or losses on the curtailment of a defined benefit plan when the curtailment occurs (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 the defined benefit plan terms such 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). The gain or loss on curtailment comprises any resulting change in the fair value of plan assets, change in the present value of defined benefit obligation and any related actuarial gains and losses and past service cost that had not previously been recognized.

F-35

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

Unfunded Plans

The Group also provide other post-employment benefits to their employees, such as benefits under Labor Law No.13/2003 (“Labor Law”) and post-retirement healthcare benefits. These benefits are unfunded. The accounting treatment for the unfunded plans is the same as that of the funded plans above.

f8. Financial assets

Initial recognition

Financial assets within the scope of IAS 39 are classified as financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, available-for-sale financial assets, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Group determines the classification of their financial assets at initial recognition.

All financial assets are recognized initially at fair value plus transaction costs, except in the case of financial assets which are recorded at fair value through profit or loss.

Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the marketplace (regular way trades) are recognized on the trade date, i.e., the date that the Group commit to purchase or sell the assets.

The Group’s financial assets include cash and cash equivalents, trade and other accounts receivable, due from related parties, derivative financial instruments and other current and non-current financial assets (quoted and unquoted financial instruments).

Subsequent measurement

The subsequent measurement of financial assets depends on their classification as follows:

• Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss include financial assets held for trading and financial assets designated upon initial recognition at fair value through profit or loss.

Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchase in the near term. Derivatives, including separated embedded derivatives, are also classified as held for trading unless they are designated as effective hedging instruments.

Financial assets at fair value through profit or loss are carried in the consolidated statements of financial position at fair value with changes in fair value recognized in profit or loss.

Derivatives embedded in host contracts are accounted for as separate derivatives and recorded at fair value if their economic characteristics and risks are not closely related to those of the host contracts and the host contracts are not held for trading or designated at fair value thorugh profit or loss. These embedded derivatives are measured at fair value with changes in fair value recognized in profit or loss. Reassessment only occurs if there is a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required.

F-36

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

• Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such financial assets are subsequently measured at amortized cost using the effective interest rate (EIR) method, less impairment. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included in profit or loss. The losses arising from impairment are recognized in profit or loss.

The Group’s cash and cash equivalents, trade and other accounts receivables, due from related parties, other current financial assets and other non-current financial assets are included in this category.

Cash and cash equivalents comprises cash on hand and in banks and all unrestricted time deposits (including deposits on call) with an original maturities of three months or less at the time of placement.

Time deposits which are pledged as collateral for bank guarantees are not classified as part of “Cash and Cash Equivalents”. These are presented as part of either “Other Current Financial Assets” or “Other Non-current Financial Assets”.

• Held-to-maturity (HTM) investments

Non-derivative financial assets with fixed or determinable payments and fixed maturities are classified as HTM when the Group have the positive intention and ability to hold them to maturity. After initial measurement, HTM investments are measured at amortized cost using the EIR method, less impairment. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included in profit or loss. The losses arising from impairment are recognized in profit or loss.

The Group did not have any HTM investments during the years ended December 31, 2010, 2011 and 2012.

• Available-for-sale (AFS) financial assets

AFS financial assets are non-derivative financial assets that are designated as available-for-sale or are not classified in any of the three preceding categories. After initial measurement, AFS financial assets are measured at fair value with unrealized gains or losses recognized in other comprehensive income until the investment is derecognized, at which time the cumulative gain or loss is recognized, or determined to be impaired, and is reclassified from other comprehensive income to profit or loss. Interest earned on AFS financial investments is reported as interest income using the EIR method.

The Group has the following investments classified as AFS:

- Investments in shares of stock that do not have readily determinable fair value in which the equity interest is less than 20%. These are carried at cost less allowance for impairment.

- Investments in equity shares that have readily determinable fair value in which the equity interest is less than 20% and which are classified as available-for-sale, are recorded at fair value.

F-37

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

f9. Financial liabilities

Initial recognition

Financial liabilities within the scope of IAS 39 are classified as financial liabilities at fair value through profit or loss, loans and borrowings, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Group determines the classification of its financial liabilities at initial recognition.

All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings, inclusive of directly attributable transaction costs.

The Group’s financial liabilities include trade accounts payables, procurement payable, accrued expenses, loans and bonds payable, due to related parties, obligation under finance lease, derivative financial instruments and other current financial liabilities.

Subsequent measurement

The measurement of financial liabilities depends on their classification as follows:

• Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss.

Financial liabilities are classified as held for trading if they are acquired for the purpose of selling or repurchase in the near term. This category includes derivative financial instruments entered into by the Company that are not designated as hedging instruments in hedge relationships as defined by IAS 39. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments.

Gains or losses on liabilities held for trading are recognized in profit or loss.

• Loans and borrowings

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortized cost using the EIR method. The EIR amortization is included in financing cost in profit or loss.

Gains and losses are recognized in the profit or loss when the liabilities are derecognized, as well as through the EIR amortization process.

f10. Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statements of financial position if, and only if, there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the assets and settle the liabilities simultaneously.

F-38

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

f11. Fair value of financial instruments

The fair value of financial instruments that are traded in active markets at each reporting date is determined by reference to quoted market prices or dealer price quotations (bid price for long positions and ask price for short positions), without any deduction for transaction costs. For financial instruments where there is no active market, fair value is determined using valuation techniques. Such techniques may include using recent arm’s length market transactions, reference to the current fair value of another instrument that is substantially the same, discounted cash flow analysis or other valuation models.

Credit risk adjustment

The Company adjusts the price in the most advantageous market to reflect any differences in counterparty credit risk between instruments traded in that market and the ones being valued for financial asset positions. In determining the fair value of financial liability positions, the Company’s own credit risk associated with the instrument is taken into account.

f12. Amortized cost of financial instruments

Amortized cost is computed using the EIR method less any allowance for impairment and principal repayment or reduction. The calculation takes into account any premium or discount on acquisition and includes transaction costs and fees that are an integral part of the EIR.

f13. Impairment of financial assets

The Group assess at the end of each reporting period whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtors or a group of debtors are experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

• Financial assets carried at amortized cost

For loans and receivables carried at amortized cost, the Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, they include the asset in a group of financial assets with similar credit risk characteristics and collectively assess them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognized are not included in a collective assessment of impairment.

F-39

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

If there is objective evidence that an impairment loss has occurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at the financial asset’s original EIR. If a loan has a variable interest rate, the discount rate for measuring impairment loss is the current EIR.

The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognized in profit or loss. Interest income continues to be accrued on the reduced carrying amount based on the rate of interest used to discount future cash flows for the purpose of measuring impairment loss. Loans and receivables, together with the associated allowance, are written off when there is no realistic prospect of future recovery and all collateral has been realized or has been transferred to the Group. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognized, the previously recognized impairment loss is increased or reduced by adjusting the allowance account. If a future write-off is later recovered, the recovery is recognized in profit or loss.

• AFS financial assets

In the case of equity investments classified as an AFS financial asset, objective evidence would include a significant or prolonged decline in the fair value of the investment below its cost.

Where there is objective evidence of impairment, the cumulative loss—measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognized in profit or loss—is recycled from other comprehensive income to profit or loss. Impairment losses on equity investments are not reversed through the profit or loss; increases in their fair value after impairment are recognized directly in other comprehensive income.

In the case of debt instruments classified as available-for-sale, impairment is assessed based on the same criteria as financial assets carried at amortized cost. Future interest income is based on the reduced carrying amount and is accrued based on the rate of interest used to discount future cash flows for the purpose of measuring impairment loss. Such accrual is recorded as part of “Interest income” account in profit or loss. If, in a subsequent year, the fair value of a debt instrument increases and the increase can be objectively related to an event occurring after the impairment loss was recognized in profit or loss, the impairment loss is reversed through profit or loss.

f14. Derecognition of financial assets and liabilities

Financial assets

A financial asset (or where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognized when: (1) the rights to receive cash flows from the asset have expired; or (2) the Group have transferred their rights to receive cash flows from the asset or have assumed an obligation to pay the received cash flows in full without material delay to a third party under a “pass-through” arrangement; and either (a) the Group have transferred substantially all the risks and rewards of the asset, or (b) the Group have neither transferred nor retained substantially all the risks and rewards of the asset, but have transferred control of the asset.

F-40

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

Financial liabilities

A financial liability is derecognized when the obligation under the liability is discharged or cancelled or has expired.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in profit or loss.

f15. Derivative financial instruments

The Company enters into and engages in cross currency swap, interest rate swap, currency forward and other permitted instruments, if considered necessary, for the purpose of managing its foreign exchange and interest rate exposures emanating from the Company’s loans and bonds payable in foreign currencies. These derivative financial instruments, while providing effective economic hedges of specific interest rate and foreign exchange risks under the Company’s financial risk management objectives and policies, do not meet the criteria for hedge accounting as provided in IAS 39 and are initially recognized at fair value on the date the derivative contract is entered into and are subsequently re-measured at fair value. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative.

Any gains or losses arising from changes in fair value on derivatives during the year, which are entered into as economic hedges that do not qualify for hedge accounting, are taken directly to profit or loss.

Derivative assets and liabilities are presented under current assets and liabilities, respectively. Embedded derivatives are presented with the host contract on the consolidated statements of financial position which represents an appropriate presentation of overall future cash flows for the instrument taken as a whole.

The net changes in fair value of derivative instruments, swap cost or income, termination cost or income, and settlement of derivative instruments are credited (charged) to “Gain (Loss) on Change in Fair Value of Derivatives—Net”, which is presented under Other Income (Expenses) in the consolidated statements of comprehensive income.

f16. Property and equipment

Property and equipment are stated at cost (which includes certain capitalized borrowing costs incurred during the construction phase), less accumulated depreciation, amortization and impairment in value. Depreciation and amortization of property and equipment is computed using the straight-line method based on the estimated useful lives of the assets.

Property and equipment acquired in exchange for a non-monetary asset or for a combination of monetary and non-monetary assets are measured at fair values unless:

(i) the exchange transaction lacks commercial substance, or

(ii) the fair value of neither the assets received nor the assets given up can be measured reliably.

The acquired assets are measured this way even if the Group cannot immediately derecognize the assets given up. If the acquired assets cannot be reliably measured at fair value, their value is measured at the carrying amount of the assets given up plus cash consideration.

F-41

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

An item of property and equipment is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss when the asset is derecognized.

The estimated useful lives of the assets are as follows:

	Years
Land rights		50
Exchange and network assets		3 to 15
Subscribers’ apparatus and other equipment		3 to 5
Buildings and building & leasehold improvements		40 and 3 to 25

Personnel costs which are directly related to the development, construction and installation of property and equipment are capitalized as part of the cost of such assets.

The cost of maintenance and repairs is charged to income as incurred. Significant renewals and betterments which enhance the asset’s condition on its initial performance are capitalized. When properties are retired or otherwise disposed of, their costs and the related accumulated depreciation are derecognized from the accounts, and any resulting gains or losses are recognized in the profit or loss for the year.

Properties under construction and installation are stated at cost. This includes cost of construction, equipment, capitalizable borrowing costs and other direct costs. Property under construction is not depreciated until such time that the relevant asset is completed and available for its intended use.

The residual values, useful lives and methods of depreciation and amortization of property and equipment are reviewed and adjusted prospectively, if appropriate, at each financial year end.

f17. Borrowing costs

Borrowing costs are capitalized if they are directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use. Capitalization of borrowing costs commences when the activities necessary to prepare the asset for its intended use are in progress and expenditures and borrowing costs are being incurred. Borrowing costs include interest charges and other costs incurred in connection with the borrowing of funds, as well as exchange differences arising from foreign currency borrowings used to finance these projects, to the extent that they are regarded as an adjustment to interest costs (estimated quarterly by capping the exchange differences taken as borrowing costs at the amount of borrowing costs on the functional currency equivalent borrowings).

f18. Decommissioning liabilities

The Group is legally required under various lease agreements to dismantle installations in leased sites and restore such sites to their original condition at the end of the lease contract term.

The amount of asset retirement obligations is accreted, and such accretion is recognized as interest expense.

F-42

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

f19. Leases

The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at the inception date. The arrangement is assessed for whether fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement.

Group as a lessee

A finance lease that transfers to the Group substantially all the risks and benefits incidental to ownership of the leased item, is capitalized at the commencement of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognized in financing cost in profit or loss.

A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.

The current portion of obligations under finance lease is presented as part of Other Current Financial Liabilities.

Operating lease payments are recognized as an operating expense in profit or loss on a straight-line basis over the lease term.

Group as a lessor

A lease in which the Group does not transfer substantitally all the risks and benefits of the ownership of an asset is classified as an operating lease. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognized over the lease term on the same basis as rental income. Contingent rents are recognized as revenue in the period which they are earned.

A lease in which the Group transfers substantially all the risks and benefits of the ownership of an asset is classified as a finance lease. Leased asset is recognized as asset held under a finance lease in the consolidated statements of financial position and presented as a receivable at an amount equal to the net investment in the lease. Selling profit or loss is recognized in the period, in accordance with the policy followed by the Group for outright sales. Costs incurred by the Group in connection with negotiating and arranging a lease are recognized as an expense when the selling profit is recognized.

Sale and leaseback transactions

When the Group enters into a sale and leaseback transaction, the Group analyzes if the leaseback arrangement meets the criteria of a finance lease or operating lease. Where the classification results in a finance lease, any excess of sales proceeds over the carrying value of the asset sold is deferred and amortised over the lease term. Where the transaction is classified as an operating lease and it is clear that the transaction is established at fair value, any profit or loss is recognised immediately.

F-43

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

f20. Inventories

Inventories, which mainly consist of SIM cards, broadband modems, starter packs, cellular handsets and pulse reload vouchers are valued at the lower of cost or net realizable value. Cost is determined using the weighted-average method. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs necessary to make the sale.

f21. Prepaid Frequency Fee and Licenses and Other Prepaid Expenses

Prepaid frequency fee and licenses and other prepaid expenses, which mainly consist of rentals insurance and advertising, are expensed as the related asset is utilized. The non-current portions of prepaid rentals and upfront fee of 3G and BWA licenses are shown as part of “Long-term Prepaid Rentals—Net of Current Portion” and “Long-term Prepaid Licenses—Net of Current Portion”, respectively.

f22. Impairment of non-financial assets

Property and equipment

The Group assess, at each reporting date, whether there is an indication that an asset may be impaired. If any such indication exists or when annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of such asset’s or cash-generating unit’s fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent from those of other assets or groups of assets. When the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing the value in use, the estimated future cash flows 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. In determining the fair value less costs to sell, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators. Impairment losses of continuing operations are recognized in profit or loss.

For assets, excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the Group estimates the assets or cash-generating unit recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in profit or loss.

The following assets have specific characteristics for impairment testing:

Goodwill and other intangible assets

Goodwill is tested for impairment annually as at December 31 and when circumstances indicate that the carrying value may be impaired. Impairment is determined for goodwill by assessing the recoverable

F-44

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

amount of each cash-generating unit (or group of cash-generating units) to which the goodwill related. When the recoverable amount of the cash-generating unit is less than its carrying amount, an impairment loss is recognized. Impairment losses relating to goodwill cannot be reversed in future periods.

Intangible assets with indefinite useful lives are tested for impairment annually either individually or at the cash-generating unit level, as appropriate, and when circumstances indicate that the carrying value may be impaired.

f23. Provisions

Provisions are recognized when the Group have a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. When the Group expect some or all of provisions to be reimbursed, for example under an insurance contract, the reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is recognized in profit or loss net of any reimbursement.

f24. Operating segment

An operating segment is a component of entity that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity), whose operating results are reviewed regularly by the entity’s chief operating decision maker (Board of Directors) to make decisions about resources to be allocated to the segment and assess its performance and for which discrete financial information is available.

f25. Basic and diluted earnings per share / ADS

Basic earnings per share is computed by dividing profit for the year attributable to ordinary owners of the Company by the weighted-average number of ordinary shares outstanding during the year (Note 31).

Basic earnings per ADS attributable to owners of the company is computed by multiplying basic earnings per share attributable to owners of the company by 50, which is equal to the number of shares per ADS.

Diluted earnings per share is computed by dividing profit for the year attributable to ordinary owners of the Company (after adjusting for the profit or loss effect related to dilutive potential ordinary shares) by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all potentially dilutive ordinary shares.

f26. Concession financial assets

The Group constructs or upgrades infrastructure (construction or upgrade services) used to provide a public service and operates and maintains that infrastructure (operation services) for a specified period of time. These arrangements may include infrastructure used in a public-to-private service concession arrangement for its entire useful life.

These arrangements are accounted for based on the nature of the consideration and using the financial asset model as the Group has an unconditional contractual right to receive cash or another financial asset from or at the direction of the grantor for the construction services.

F-45

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

In the financial asset model, the amount due from the grantor meets the definition of a receivable which is measured at fair value. It is subsequently measured at amortised cost. The amount initially recognized plus the cumulative interest on that amount is calculated using the effective interest method.

The consideration received or receivable is allocated by reference to the relative fair values of the services provided; typically a construction component and a service element for operating and maintenance services performed. Revenue from the concession arrangements earned under the financial asset model consists of the (i) fair value of the amount due from the grantor; and (ii) interest income related to the capital investment in the project.

Any asset carried under concession arrangements is derecognised on disposal or when no future economic benefits are expected from its future use or disposal or when the contractual rights to the financial asset expire.

3. MANAGEMENT’S USE OF JUDGMENTS, ESTIMATES AND ASSUMPTIONS

The preparation of the Group’s consolidated financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the end of the reporting period. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future years.

a. Judgments

In the process of applying the Company’s accounting policies, management has made the following judgments, apart from those including estimations and assumptions, which have the most significant effect on the amounts recognized in the consolidated financial statements:

• Determination of functional currency

The functional currencies of the entities under the Company are the currency of the primary economic environment in which each entity operates. It is the currency that mainly influences the revenue and cost of rendering services.

• Leases

The Group has various lease agreements whereas the Group acts as lessor or lessee in respect of certain property and equipment. The Group evaluates whether significant risks and rewards of ownership of the leased assets are transferred based on IAS 17, “Leases”, which requires the Group to make judgments and estimates of transfer of risks and rewards related to the ownership of the assets.

Tower leases

For tower leases, the unit of account is considered at the level of the slot or site space because the lease is dependent on the use of a specific space in the tower where the Company places its equipment.

F-46

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

Licenses

In 2006, the Company was granted a license to use 2.1 GHz radio frequency spectrum by the Ministry of Communications and Information and Technology (“MOCIT”). The Company was obliged to, among others, pay an upfront fee and annual radio frequency fee for 10 years (Note 34i). The upfront fee is recorded as part of Long-term Prepaid Licenses for the non-current portion and Prepaid Expenses for the current portion, and amortized over the 10-year license term using the straight-line method.

In 2009, the Company received additional 3G license, and IMM was granted an operating license for “Packet Switched” local telecommunications network using 2.3 GHz radio frequency spectrum of Broadband Wireless Access (“BWA”). The Company and IMM were obliged to, among others, pay an upfront fee and annual radio frequency fee for 10 years (Note 34i). The upfront fee is recorded as part of Long-term Prepaid Licenses for the non-current portion and Prepaid Expenses for the current portion, and amortized over the 10-year license term using the straight-line method.

Management believes, as supported by written confirmation from the DGPT, that the 3G and BWA licenses may be returned at any time without any financial obligation to pay the remaining outstanding annual radio frequency fees (i.e., the license arrangement does not transfer substantially all the risks and rewards incidental to ownership). Accordingly, the Company and IMM recognize the prepaid annual radio frequency fee as operating lease expense, amortized using the straight-line method over the term of the rights to operate the 3G and BWA licenses. Management evaluates its plan to continue to use the licenses on an annual basis.

• Impairment of non-financial assets

An impairment exists when the carrying value of an asset or cash-generating unit exceeds its recoverable amount, which is the higher of its fair value less costs to sell and its value in use. The fair value less costs to sell calculation is based on available data from binding sales transactions in arm’s length transactions of similar assets or observable market prices less incremental costs for disposing of the assets. The value in use calculation is based on a discounted cash flow model. The cash flows are derived from the budget for the next five years and do not include restructuring activities that the Group is not yet committed to or significant future investments that will enhance the performance of the CGU being tested. The recoverable amount is most sensitive to the discount rate used for the discounted cash flow model as well as the expected future cash-inflows and the growth rate used for extrapolation purposes.

• Exchange of asset transactions

During 2010—2012, the Group entered into several contracts for the exchange of assets for certain of its existing cellular technical equipment with third party supplier. For the exchange of assets transactions, the Group evaluates whether the transactions contain commercial substance based on IAS 16, which requires the Group to make judgments and estimates of the future cash flow and the fair value of the assets received and given up as a result of the transactions. Management considered the exchange of assets transactions to have met the criteria of commercial substance, however the fair values of neither the assets received nor the assets given up could be measured reliably, hence, their values were measured at the carrying amounts of the assets given up plus any cash consideration paid.

F-47

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

• Sale and leaseback transactions

The Group classifies leases into finance leases or operating leases in accordance with the accounting policies stated in Note 2f19. Determining whether a lease transaction is a finance lease or an operating lease is a complex issue and requires substantial judgement as to whether the lease agreement transfers substantially all the risks and rewards of ownership to or from the Group. Careful and considered judgment is required on various complex aspects that include, but are not limited to, the fair value of the leased asset, the economic life of the leased asset, whether renewal options are included in the lease term and determining an appropriate discount rate to calculate the present value of the minimum lease payments.

Classification as a finance lease or operating lease determines whether the leased asset is capitalized and recognized in the consolidated statement of financial position. In sale-and-leaseback transactions, the classification of the leaseback arrangements as described above determines how the gain or loss on the sale transaction is recognized. It is either deferred and amortized (finance lease) or recognized in the consolidated statement of comprehensive income immediately (operating lease).

• Provision for legal contingency

The Group is currently involved in one significant legal proceeding. Management’s judgment of the probable cost for the resolution of the claim has been developed in consultation with the Company’s counsel handling the defense in this matter and is based upon their analysis of potential result. Management currently do not believe this proceeding could materially reduce the Company’s revenues and profitability. It is possible, however, that future financial performance could be materially affected by changes in their judgment or effectiveness of their strategy relating to this proceeding. See Note 34c—Significant Agreements, Commitments and Contingency.

• Allowance for impairment of receivables

If there is objective evidence that an impairment loss has been incurred in trade receivables, the Group will recognize an allowance for impairment losses related to their trade receivables that are specifically identified as doubtful for collection.

In addition to specific allowance against individually significant receivables, the Group also assesses a collective impairment allowance against credit exposure of their debtors which are grouped based on common credit characteristics, which, although not specifically identified as requiring a specific allowance, have a greater risk of default than when the receivables were originally granted to debtors.

b. Estimates and Assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the end of the reporting period that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:

• Determination of fair values of financial assets and financial liabilities

Where the fair value of financial assets and financial liabilities recorded in the statements of financial position cannot be derived from active markets, their fair value is determined using valuation techniques including the discounted cash flow model. The inputs to these models are

F-48

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. The judgments include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments. See Note 20 for further discussion.

• Estimating useful lives of property and equipment and intangible assets

The Group estimates the useful lives of their property and equipment and intangible assets based on expected asset utilization as anchored on business plans and strategies that also consider expected future technological developments and market behavior. The estimation of the useful lives of property and equipment is based on the Group’s collective assessment of industry practice, internal technical evaluation and experience with similar assets. The estimated useful lives are reviewed periodically and are updated if expectations differ from previous estimates due to physical wear and tear, technical or commercial obsolescence and legal or other limitations on the use of the assets. It is possible, however, that future results of operations could be materially affected by changes in the estimates brought about by changes in the factors mentioned above.

The amounts and timing of recorded expenses for any year will be affected by changes in these factors and circumstances. A reduction in the estimated useful lives of the Group’s property and equipment will increase the recorded operating expenses and decrease non-current assets. An extension in the estimated useful lives of the Group’s property and equipment will decrease the recorded operating expenses and increase non-current assets.

• Goodwill and intangible assets

The Company accounts for the acquired businesses using the acquisition method which requires extensive use of accounting estimates and judgments to determine the fair market values of the acquiree’s identifiable assets and liabilities at the acquisition date. Any excess in the purchase price over the fair market values of the net assets acquired is recorded as goodwill in the consolidated statements of financial position. Thus, the numerous judgments made in estimating the fair market value of the acquiree’s assets and liabilities can materially affect the Company’s financial performance.

• Recoverability of deferred income tax assets

The Group reviews the carrying amounts of deferred income tax assets at the end of each reporting date and reduces these to the extent that it is no longer probable that sufficient taxable income will be available to allow all or part of the deferred income tax assets to be utilized. The Group’s assessment on the recognition of deferred income tax assets on deductible temporary differences is based on the level and timing of forecasted taxable income of the subsequent reporting periods. This forecast is based on the Group’s past results and future expectations on revenues and expenses as well as future tax planning strategies. However, there is no assurance that sufficient taxable income will be generated to allow all or part of deferred income tax assets to be utilized.

F-49

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

• Estimating allowance for impairment of receivables

The level of a specific allowance is evaluated by management on the basis of factors that affect the collectibility of the accounts. In these cases, the Group uses judgment based on the best available facts and circumstances, including but not limited to, the length of the Group’s relationship with the customers and the customers’ credit status based on third-party credit reports and known market factors, to record specific reserves for customers against amounts due in order to reduce the Group’s receivables to amounts that they expect to collect. These specific reserves are re-evaluated and adjusted as additional information received affects the amounts estimated.

Any collective allowance recognised is based on historical loss experience using various factors such as historical performance of the debtors within the collective group and judgments on the effect of deterioration in the markets in which the debtors operate and identified structural weaknesses or deterioration in the cash flows of debtors.

• Estimation of pension cost and other employee benefits

The cost of defined benefit plan and present value of the pension obligation are determined using the projected-unit-credit method. Actuarial valuation includes making various assumptions which consist, among other things, discount rates, expected rates of return on plan assets, rates of compensation increases and mortality rates. Actual results that differ from the Group’s assumptions are recognized as income or expense when the net cumulative unrecognized actuarial gains and losses at the end of the previous reporting year exceed 10% of the higher of the present value of defined benefit obligation and the fair value of plan assets at that date. Due to complexity of valuation and their long-term nature, a defined benefit obligation is highly sensitive to changes in assumptions.

While the Group believes that their assumptions are reasonable and appropriate, significant differences in the Group’s actual experience or significant changes in their assumptions may materially affect the costs and obligations of pension and other long-term employee benefits. All assumptions are reviewed at each reporting date.

Further details about the assumptions used, including a sensitivity analysis, are given in Note 29.

• Decommissioning liabilities

Decommissioning liabilities are recognized in the year in which they are incurred. The recognition of the obligations requires an estimation of the cost to restore / dismantle on a per location basis and is based on the best estimate of the expenditure required to settle the obligation at the future restoration/dismantlement date, discounted using a pre-tax rate that reflects the current market assessment of the time value of money and, where appropriate, the risk specific to the liability.

• Revenue recognition

The Company’s revenue recognition policies require the use of estimates and assumptions that may affect the reported amounts of revenues and receivables.

The Company’s agreements with domestic and foreign carriers for inbound and outbound traffic subject to settlements require traffic reconciliations before actual settlement is done, which may not be the actual volume of traffic as measured by Company. Initial recognition of revenues is

F-50

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

based on observed traffic adjusted by normal experience adjustments, which historically are not material to the consolidated statements of comprehensive income.

Differences between the amounts initially recognized and the actual settlements are taken up in the account upon reconciliation. However, there is no assurance that the use of such estimates will not result in material adjustments in future periods.

The Group recognizes revenues from installation and activation related fees and the corresponding costs over the expected average periods of customer relationship for cellular, MIDI and fixed telecommunication services. The Group estimate the expected average period of customer relationship based on the most recent churn-rate analysis.

• Uncertain tax exposure

In certain circumstances, the Group may not be able to determine the exact amount of their current or future tax liabilities due to ongoing investigations by, or negotiations with, the taxation authority. Uncertainties exist with respect to the interpretation of complex tax regulations and the amount and timing of future taxable income. In determining the amount to be recognized in respect of an uncertain tax liability, the Group apply similar considerations as they would use in determining the amount of a provision to be recognized in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets. The Group makes an analysis of all tax positions related to income taxes to determine if a tax liability for uncertain tax benefit should be recognized.

As of December 31, 2012, the Company is undergoing a tax audit for year 2011.

The Group presents interest and penalties for the underpayment of income tax, if any, in Income Tax Expense in profit or loss.

F-51

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

4. CASH AND CASH EQUIVALENTS

This account consists of the following:

			December 31,
	January 1, 2011		2011		2012
Cash on hand (including US$12 on January 1, 2011, US$13 on December 31, 2011 and nil on December 31, 2012)		1,792		1,580		1,837
Cash in banks
Related parties (Note 30) (including US$4,726 on January 1, 2011, US$3,805 on December 31, 2011 and US$2,754 on December 31, 2012)		116,107		93,880		115,707
Third parties (including US$12,885 on January 1, 2011, US$13,506 on December 31, 2011 and US$10,332 on December 31, 2012)		165,588		209,519		306,225
		283,487		304,979		423,769
Time deposits and deposits on call
Related parties (Note 30) (including US$81,705 on January 1, 2011, US$11,115 on December 31, 2011 and US$72,701 on December 31, 2012)		1,499,544		884,080		1,418,361
Third parties (including US$12,454 on January 1, 2011, US$24,917 on December 31, 2011 and US$163,492 on December 31, 2012)		292,239		1,035,147		2,075,106
		1,791,783		1,919,227		3,493,467
Total		2,075,270		2,224,206		3,917,236

Time deposits and deposits on call denominated in rupiah earned interest at annual rates ranging from 2.50% to 10.00% in 2010, from 2.50% to 9.75% in 2011 and from 2.00% to 9.50% in 2012, while those denominated in U.S. dollars earned interest at annual rates ranging from 0.05% to 4.75% in 2010, from 0.01% to 2.75% in 2011 and from 0.01% to 3.00% in 2012.

The interest rates on deposits on call and time deposits with related parties are comparable to those offered by third parties.

F-52

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

5. ACCOUNTS RECEIVABLE—TRADE

This account consists of the following:

			December 31,
	January 1, 2011 (Restated)		2011 (Restated)		2012
Related parties (Note 30)
Telkom (including US$55 on January 1, 2011, US$51 on December 31, 2011 and US$436 on December 31, 2012)		56,108		19,977		73,835
Others (including US$7,764 on January 1, 2011, US$8,085 on December 31, 2011 and US$7,318 on December 31, 2012)		198,821		345,373		543,447
Sub-total		254,929		365,350		617,282
Less allowance for impairment		47,640		47,107		42,632
Net		207,289		318,243		574,650
Third parties
Local companies (including US$13,956 on January 1, 2011, US$16,593 on December 31, 2011 and US$24,583 on December 31, 2012)		631,291		791,178		902,013
Overseas international carriers (US$93,755 on January 1, 2011, US$66,532 on December 31, 2011 and US$79,275 on December 31, 2012)		842,954		603,309		766,070
Post-paid subscribers from:
Cellular		255,973		254,565		297,721
Fixed telecommunication		47,239		22,345		20,263
Sub-total		1,777,457		1,671,397		1,986,067
Less allowance for impairment		448,470		489,544		521,998
Net		1,328,987		1,181,853		1,464,069
Total		1,536,276		1,500,096		2,038,719

F-53

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

The aging schedule of the accounts receivable—trade is as follows:

	January 1, 2011 (Restated)				December 31, 2011 (Restated)				December 31, 2012
Number of Months Outstanding	Amount		Percentage (%)		Amount		Percentage (%)		Amount		Percentage (%)
Related parties
0 - 6 months		186,039		72.98		257,348		70.44		477,272		77.32
7 - 12 months		47,973		18.82		35,252		9.65		52,246		8.46
13 - 24 months		6,913		2.71		64,498		17.65		30,390		4.92
Over 24 months		14,004		5.49		8,252		2.26		57,374		9.30
Total		254,929		100.00		365,350		100.00		617,282		100.00
Third parties
0 - 6 months		790,938		44.50		945,410		56.56		1,036,438		52.19
7 - 12 months		279,806		15.74		208,218		12.46		235,844		11.87
13 - 24 months		308,808		17.37		255,648		15.30		259,715		13.08
Over 24 months		397,905		22.39		262,121		15.68		454,070		22.86
Total		1,777,457		100.00		1,671,397		100.00		1,986,067		100.00

As of January 1, 2011 and December 31, 2011 and 2012, the Group has recorded an impairment against all accounts receivable that are past due.

The movements in the allowance for impairment on accounts receivable—trade are as follows:

	Total			Related Parties			Third Parties
January 1, 2011
Balance at beginning of year		461,810			57,538			404,272
Provision (reversal)—net (Note 26)		67,041			(9,712	)		76,753
Write-offs		(23,586	)		—			(23,586	)
Net effect of foreign exchange adjustment		(9,155	)		(186	)		(8,969	)
Balance at end of year		496,110			47,640			448,470
Individual impairment		182,175			37,576			144,599
Collective impairment		313,935			10,064			303,871
Total		496,110			47,640			448,470
Gross amount of receivables, individually impaired, before deducting any individually assessed impairment allowance		405,926			118,486			287,440

F-54

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

	Total			Related Parties			Third Parties
December 31, 2011
Balance at beginning of year		496,110			47,640			448,470
Provision (reversal)—net (Note 26)		41,051			(1,509	)		42,560
Net effect of foreign exchange adjustment		105			976			(871	)
Write-offs		(615	)		—			(615	)
Balance at end of year		536,651			47,107			489,544
Individual impairment		189,486			44,086			145,400
Collective impairment		347,165			3,021			344,144
Total		536,651			47,107			489,544
Gross amount of receivables, individually impaired, before deducting any individually assessed impairment allowance		309,556			117,572			191,984
December 31, 2012
Balance at beginning of year		536,651			47,107			489,544
Provision (reversal)—net (Note 26)		56,163			(6,567	)		62,730
Net effect of foreign exchange adjustment		7,802			2,092			5,710
Write-offs		(35,986	)		—			(35,986	)
Balance at end of year		564,630			42,632			521,998
Individual impairment		208,208			37,852			170,356
Collective impairment		356,422			4,780			351,642
Total		564,630			42,632			521,998
Gross amount of receivables, individually impaired, before deducting any individually assessed impairment allowance		341,363			111,124			230,239

The net effect of foreign exchange adjustment was due to the strengthening or weakening of the rupiah vis-à-vis the U.S. dollar in relation to U.S. dollar accounts previously provided with allowance and was credited or charged to “Gain (Loss) on Foreign Exchange—Net”.

Information about the Group’s exposure to credit risk is disclosed in Note 36.

Management believes the established allowance is sufficient to cover impairment of accounts receivable—trade.

F-55

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

6. OTHER CURRENT FINANCIAL ASSETS—NET

This account consists of the following:

	January  1, 2011 (Restated)		December 31,
			2011 (Restated)		2012
Short-term investment		25,395		25,395		25,395
Less allowance for impairment		25,395		25,395		25,395
Net		—		—		—
Restricted cash and cash equivalents (including US$1,645 on January 1, 2011, US$168 on December 31, 2011 and US$231 on December 31, 2012)		48,165		18,830		5,483
Others (including US$70 on January 1, 2011, US$10 on December 31, 2011 and US$257 on December 31, 2012)		4,954		5,960		7,899
Total		53,119		24,790		13,382

7. OTHER CURRENT ASSETS

This account consists of the following:

	January 1, 2011		December 31,
			2011		2012
Prepayment for taxes:
VAT		47,701		29,677		124,642
Claim for tax refund—2002 and 2003 article 26 (**)		—		—		87,198
Claim for tax refund—2008 and 2009 article 26 (*)		—		—		80,018
Other tax prepayments		2,202		1,018		2,485
Others		702		742		392
Total		50,605		31,437		294,735

* On September 17, 2010, the Company received Tax Collection Letters (“STPs”) from the Directorate General of Taxation (“DGT”) for the underpayment of the Company’s 2008 and 2009 article 26 tax totalling Rp80,018 (including interest). On October 13, 2010, the Company submitted cancellation letters to the Tax Office regarding these STPs. Subsequently, on November 16, 2010, the Company was required to pay a certain portion of these STPs which was performed through an offset against the approved tax refund received on the Company’s corporate income tax for fiscal year 2005 amounting to Rp38,155. On January 7, 2011, the Company paid the remaining amount of Rp41,863 on the underpayment of the Company’s 2008 and 2009 income tax article 26. On April 11, 2011, the Company received a letter from the Tax Office which declined the request for cancellation of such STPs. On May 5, 2011, the Company submitted an appeal letter to the Tax Court concerning these STPs. On July 30, 2012, the Company received the Tax Court’s Decision Letter accepting the Company’s appeal to the cancellation of the underpayment of the Company’s 2008 and 2009 income tax article 26 totalling Rp80,018 (including interest). On September 11, 2012, the Company submitted a request of restitution to the Tax Office to transfer the tax overpayment related to these STPs. On December 26, 2012, the Company received a copy of a Memorandum for Reconsideration Request (Memori Permohonan Peninjauan Kembali) from the Tax Court to the Supreme Court on the Tax Court’s Decision Letter dated July 30, 2012 for the underpayment of the Company’s 2008 and 2009 article 26 tax. On February 6, 2013, the Company submitted a Counter-Memorandum for Reconsideration Request to the Supreme Court. As of April 29, 2013, the restitution has not yet been received.

** On October 12, 2010, the Company submitted appeal letters to the Tax Court concerning the Company’s objection to the correction of Satelindo’s 2002 and 2003 article 26 tax. On November 6, 2012, the Company received the Decision Letter from the Tax Court accepting the Company’s appeal on Satelindo’s 2002 and 2003 income tax article 26 amounting to Rp87,198, which is lower than the

F-56

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

amount recognized by the Company in its financial statements. The Company accepted the corrections amounting to Rp4,655, which was charged to current operations as part of “Operating Expenses—Others-Net”. On January 28, 2013, the Company has received the restitution (Note 37).

8. PROPERTY AND EQUIPMENT

The details of property and equipment are as follows:

	Exchange and network assets			Subscribers’ apparatus and other equipment			Buildings and building & leasehold improvements			Landrights		Properties under construction and installation			Total
Cost
At January 1, 2010		51,160,525			3,869,799			11,576,995			504,620		7,706,513			74,818,452
Additions		322,519			58,735			475,139			15,977		5,039,357	*		5,911,727
Derecognitions		(2,091,220	)		(30,657	)		(70,589	)		—		—			(2,192,466	)
Reclassifications		7,572,859			412,498			1,278,139			20,490		(9,283,986	)		—
At December 31, 2010		56,964,683			4,310,375			13,259,684			541,087		3,461,884			78,537,713
Additions		515,431			37,772			429,760			—		5,517,983	**		6,500,946
Derecognitions		(1,799,943	)		(81,053	)		(101,426	)		—		—			(1,982,422	)
Reclassifications		5,383,034			394,167			391,715			1,975		(6,170,891	)		—
At December 31, 2011		61,063,205			4,661,261			13,979,733			543,062		2,808,976			83,056,237
Additions		460,579			61,291			2,653,360			2,437		5,195,859	***		8,373,526
Derecognitions		(585,370	)		(40,717	)		(2,386,031	)		—		—			(3,012,118	)
Reclassifications		4,194,853			254,660			588,861			—		(5,038,374	)		—
At December 31, 2012		65,133,267			4,936,495			14,835,923			545,499		2,966,461			88,417,645
Accumulated depreciation, amortization and impairment
Accumulated depreciation, amortization and impairment at January 1, 2010		23,241,824			2,911,582			4,236,241			70,669		—			30,460,316
Depreciation and amortization charge for the year		4,780,872			444,514			893,985			10,939		—			6,130,310
Derecognitions		(1,932,935	)		(29,838	)		(70,566	)		—		—			(2,033,339	)
Accumulated depreciation, amortization and impairment at December 31, 2010		26,089,761			3,326,258			5,059,660			81,608		—			34,557,287
Depreciation and amortization charge for the year		5,093,301			466,208			981,010			11,151		—			6,551,670
Derecognitions		(1,283,254	)		(81,054	)		(101,349	)		—		—			(1,465,657	)
Accumulated depreciation, amortization and impairment at December 31, 2011		29,899,808			3,711,412			5,939,321			92,759		—			39,643,300

* including additional property and equipment purchased from Lintasarta amounting to Rp71,423 (net of intercompany loss of Rp11,683)

** including additional property and equipment purchased from Lintasarta amounting to Rp88,371 (net of intercompany loss of Rp27,578)

** including additional property and equipment purchased from Lintasarta amounting to Rp1,345 (net of intercompany loss of Rp384)

F-57

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

	Exchange and network assets			Subscribers’ apparatus and other equipment			Buildings and building & leasehold improvements			Landrights		Properties under construction and installation		Total
Depreciation and amortization charge for the year		6,802,221			364,765			1,089,619			11,188		—		8,267,793
Derecognitions		(311,707	)		(39,850	)		(1,002,737	)		—		—		(1,354,294	)
Accumulated depreciation, amortization and impairment at December 31, 2012		36,390,322			4,036,327			6,026,203			103,947		—		46,556,799
Net Book value
At January 1, 2010		27,918,701			958,217			7,340,754			433,951		7,706,513		44,358,136
At December 31, 2010 / 1 January 2011 (Restated)		30,874,922			984,117			8,200,024			459,479		3,461,884		43,980,426
At December 31, 2011 (Restated)		31,163,397			949,849			8,040,412			450,303		2,808,976		43,412,937
At December 31, 2012		28,742,945			900,168			8,809,720			441,552		2,966,461		41,860,846

Submarine cables (presented as part of exchange and network assets) represent the Company’s proportionate investment in submarine cable circuits jointly constructed, operated, maintained and owned with other countries, based on the respective contracts and/or the construction and maintenance agreements.

The carrying value of property and equipment held under finance leases as of January 1, 2011, December 31, 2011 and December 31, 2012 are Rp419,774, Rp750,544 and Rp3,238,774, respectively. Additions during the year 2010, 2011 and 2012 including Rp471,051, Rp427,242 and Rp2,704,030, respectively of acquisition cost of property and equipment under finance leases.

Depreciation and amortization expense charged to profit or loss amounted to Rp6,130,310, Rp6,551,670 and Rp8,267,793 in 2010, 2011 and 2012, respectively.

Management believes that there is no impairment in asset values or recovery of the impairment reserve as contemplated in IAS 36 for the current year.

On August 31, 2009, the Company launched its Satellite Palapa-D. The Satellite experienced an under-performance of the launch vehicle during the Satellite’s placement to its intended orbital position. Consequently, its orbital lifetime has been reduced. The insurance claim for the partial loss of the Satellite has been made and is recorded as a reduction of the cost of the Satellite. The Satellite has been in operation since November 2009 after going through the process of testing and arranging its orbital position in September and October 2009. On January 4 and 19, 2010, the Company collected the Palapa-D Satellite insurance claim amounting to US$58,008 (equivalent to Rp537,657) as a loss compensation for the decrease in the Satellite’s useful life from 15 years to 10.77 years due to the under-performance of the launch vehicle in the Satellite’s orbital process.

As of December 31, 2012, the Group has no property and equipment pledged as collateral to any credit facilities.

As of December 31, 2012, the Group insured its property and equipment (except submarine cables and landrights) for US$218,481 and Rp35,504,158 including insurance amounting to US$117,700 on the Company’s satellite. Management believes that the sum insured is sufficient to cover possible losses arising from fire, explosion, lightning, aircraft damage and other natural disasters.

F-58

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

The details of the Group’s properties under construction and installation as of January 1, 2011 and December 31, 2011 and 2012 are as follows:

	Percentage of Completion		Cost		Estimated Date of Completion
January 1, 2011
Exchange and network assets		5 - 99		3,158,581		January - December 2011
Subscribers’ apparatus and other equipment		25 - 95		25,853		January - December 2011
Buildings and building & leasehold improvements		6 - 95		277,450		January - December 2011
Total				3,461,884
December 31, 2011
Exchange and network assets		17 - 90		2,574,418		January - June 2012
Subscribers’ apparatus and other equipment		40 - 90		93,535		January - June 2012
Buildings and building & leasehold improvements		20 - 95		141,023		January - June 2012
Total				2,808,976
December 31, 2012
Exchange and network assets		7 - 99		2,438,240		January - March 2013
Subscribers’ apparatus and other equipment		0 - 95		203,441		January - September 2013
Buildings and building & leasehold improvements		10 - 96		324,780		January - December 2013
Total				2,966,461

Borrowing costs capitalized to properties under construction and installation for the years ended December 31, 2010, 2011 and 2012 amounted to Rp18,698, Rp2,933 and Rp nil, respectively.

For the years ended December 31, 2010, 2011 and 2012, exchanges and sales of certain property and equipment were made as follows:

	2010			2011			2012
Exchanges of Assets
Kalimantan Project
Carrying amount of assets received		158,285			400,956			—
Carrying amount of assets given up		(158,285	)		(400,956	)		—
Sumatra and Java Project (Note 34e)
Carrying amount of assets received		—			115,734			273,665
Carrying amount of assets given up		—			(115,734	)		(273,665	)
Sales of 2,500 Towers (Note 28)
Proceeds		—			—			3,870,600
Net book value		—			—			(1,372,674	)
Excess of selling price over carrying amount		—			—			2,497,926
Deferred gain from sales and leaseback		—			—			(1,318,923	)
Recognized gain		—			—			1,179,003
Sales of Assets
Proceeds		7,741			6,708			7,215
Net book value		(841	)		(76	)		(11,487	)
Gain (loss)		6,900			6,632			1,174,731

F-59

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

In the above exchange of assets transaction, the fair value of neither the assets received nor the assets given up can be measured reliably, hence, their values were measured at the carrying amounts of the assets given up plus any cash consideration paid.

In accordance with its policy, the Company reviews the estimated useful lives of its fixed assets on an ongoing basis. As a result, effective January 1, 2010, the Company changed its estimate of the useful lives of its towers to better reflect the estimated periods during which these assets will remain in service. The towers that previously averaged 15 years were increased to an average of 25 years. The effect of this change in estimate was to reduce depreciation expense by Rp108,086 in 2010 and by Rp108,807 in 2011.

Effective September 1, 2012, the Company changed its estimate of the useful lives of its cellular technical equipment from 10 years to 8 years. The changes was made mainly due to the Company’s plan to change its network with new updated equipment that will enable the Company to fully utilize its 900 MHz frequency channel for 3G services. The effect of this change in estimate was to increase 2012 depreciation expense by Rp1,256,941.

The effect of the change in the useful lives of these assets were to increase (decrease) income before income tax as follows:

Period	Amount
Year ended December 31, 2013		(1,323,176	)
Year ended December 31, 2014		(624,964	)
Year ended December 31, 2015		(358,302	)
Year ended December 31, 2016		(206,442	)
Year ended December 31, 2017		667,750

F-60

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

9. GOODWILL AND OTHER INTANGIBLE ASSETS

The changes in the goodwill and other intangible assets account are as follows:

	Non-integrated Software		Other Intangible Assets		Goodwill		Total
Cost:
At January 1, 2010		235,577		597,448		2,944,362		3,777,387
Additions		40,052		—		—		40,052
At December 31, 2010		275,629		597,448		2,944,362		3,817,439
Additions		10,340		112		—		10,452
At December 31, 2011		285,969		597,560		2,944,362		3,827,891
Additions		23,055		18		—		23,073
At December 31, 2012		309,024		597,578		2,944,362		3,850,964
Accumulated Amortization:
At January 1, 2010		215,357		588,351		930,862		1,734,570
Amortization		10,595		9,097		—		19,692
At December 31, 2010		225,952		597,448		930,862		1,754,262
Amortization		17,607		51		—		17,658
At December 31, 2011		243,559		597,499		930,862		1,771,920
Amortization		16,210		9		—		16,219
At December 31, 2012		259,769		597,508		930,862		1,788,139
Net book value:
At January 1, 2010		20,220		9,097		2,013,500		2,042,817
At December 31, 2010		49,677		—		2,013,500		2,063,177
At December 31, 2011		42,410		61		2,013,500		2,055,971
At December 31, 2012		49,255		70		2,013,500		2,062,825

Other intangible assets consist of the following:

	Useful lives (years)		January 1, 2011						December 31, 2011						December 31, 2012
			Gross				Net		Gross				Net		Gross				Net
			Carrying Amount		Accumulated Amortization				Carrying Amount		Accumulated Amortization				Carrying Amount		Accumulated Amortization
Customer base:
Post-paid		5		154,220		154,220		—		154,220		154,220		—		154,220		154,220		—
Prepaid		6		73,128		73,128		—		73,128		73,128		—		73,128		73,128		—
Spectrum license		5		222,922		222,922		—		222,922		222,922		—		222,922		222,922		—
Brand		8		147,178		147,178		—		147,178		147,178		—		147,178		147,178		—
Patent		10		—		—		—		112		51		61		130		60		70
Total				597,448		597,448		—		597,560		597,499		61		597,578		597,508		70

F-61

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

Goodwill

Goodwill arose from the acquisition of ownership in Bimagraha and Satelindo in 2001 and 2002, respectively, and from the acquisition of additional ownership in Lintasarta in 2005, in SMT in 2008 and LMD in 2010, respectively.

Goodwill acquired through business combination has been allocated to the cellular business unit, which is also considered as one of the Group’s operating segments.

Goodwill is tested for impairment annually (as at December 31) and when circumstances indicate the carrying value may be impaired. The Company considers the relationship between its market capitalization and its book value, among other factors, when reviewing for indications of impairment. As of December 31, 2012, the market capitalization of the Company was above the book value of its equity. The recoverable amount of the cellular business unit has been determined based on fair values less cost to sell (“FVLCTS”) calculation that uses the Income Approach (a Discounted Cash Flows Method) and the Market Approach (a Guideline Public Company Method).

Key assumptions used in the FVLCTS calculation at December 31, 2012:

Discount rates—The Company has chosen to use weighted average cost of capital (“WACC”) as the discount rate for the discounted cash flow. The estimated WACC applied in determining the recoverable amount of the cellular business unit is between 11% and 12%.

Compounded Annual Growth Rate (“CAGR”)—The CAGR projection for the 5-year budget period of the cellular business unit revenue based on the market analysts’ forecast is between 5.6% and 7.8%.

Cost to Sell—As the recoverable amount of the cellular business unit is determined using FVLCTS, the estimated cost to sell the business is based on a certain percentage of the equity value. The estimated cost to sell used for this calculation is at approximately 1.0% of the enterprise value.

As a result of the impairment testing, management did not identify an impairment for the cellular business unit to which goodwill of Rp2,013,500 is allocated.

10. LONG-TERM PREPAID RENTALS—NET OF CURRENT PORTION

This account represents mainly the long-term portion of prepaid rentals on sites.

11. LONG-TERM ADVANCES

This account represents advances to suppliers and contractors for the purchase and construction/installation of property and equipment which will be reclassified to the related property and equipment accounts upon the receipt of the property and equipment purchased or after the construction/installation of the property and equipment has reached a certain percentage of completion.

F-62

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

12. OTHER NON-CURRENT FINANCIAL ASSETS—NET

This account consists of the following:

	January 1, 2011 (Restated)		December 31,
			2011 (Restated)		2012
Other long-term investments		102,707		116,307		1,483,317
Less allowance for impairment		99,977		113,577		113,577
Net		2,730		2,730		1,369,740
Restricted cash and cash equivalent (including US$155 on January 1, 2011, US$290 on December 31, 2011 and US$140 on December 31, 2012)		39,595		50,826		83,232
Employee loans receivable		15,679		13,515		11,025
Others (including US$1,272 on January 1, 2011, US$1,288 on December 31, 2011 and US$1,010 on December 31, 2012)		92,600		145,199		79,143
Sub-total		147,874		209,540		173,400
Total		150,604		212,270		1,543,140

Other long-term investments—net consist of the following:

a. Investments in shares of stock accounted under available for sale:

	Location	Principal Activity	Ownership (%)		Cost		Unrealized Changes in Fair Value		Carrying Value
PT Tower Bersama Infrastructure Tbk (“Tower Bersama”) (Note 28)	Indonesia	Telecommunication infrastructure services		5.00		977,292		389,718		1,367,010

On August 2, 2012, the Company received 5% ownership in Tower Bersama as part of compensation from a sale and leaseback transaction of telecommunication towers (Note 28).

F-63

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

b. Investments in shares of stock accounted under the cost method:

December 31, 2011 and 2012

	Location	Principal Activity	Ownership (%)		Cost/Carrying Value
PT First Media Tbk	Indonesia	Cable television and internet network service provider		1.07		50,000
Pendrell Corporation [previously ICO Global Communication (Holdings) Limited*]	United States of America	Satellite service		0.0067		49,977
Asean Cableship Pte. Ltd. (“ACPL”)	Singapore	Repairs and maintenance of submarine cables		16.67		1,265
Others				12.80 - 18.89		14,966
Total						116,208
Less allowance for impairment						113,577
Net						2,631

January 1 2011

PT First Media Tbk	Indonesia	Cable television and internet network service provider	1.07	50,000
ICO Global Communication (Holdings) Limited	United States of America	Satellite service	0.0087	49,977
ACPL**	Singapore	Repairs and maintenance of submarine cables	16.67	1,265
Others			12.80 - 14.29	1,366
Total				102,608
Less allowance for impairment				99,977
Net				2,631

* On March 15, 2011, the Company’s ownership in ICO Global Communication (Holdings) Limited was diluted to 0.0068% since the Company did not exercise its right in relation to a rights issue conducted by ICO Global Communication (Holdings) Limited. On July 21, 2011, ICO Global Communication changed its name to Pendrell Corporation. Furthermore, as of December 31, 2011 and 2012, the Company’s ownership in Pendrell has been diluted to 0.0067%.

** The Company received dividend income from its investment in ACPL totaling US$2,140 (equivalent to Rp19,281), US$1,574 (equivalent to Rp13,790) and US$nil for the years ended December 31, 2010, 2011 and 2012, respectively.

The Company has provided allowance for impairment of its investments in shares of stock accounted for under the cost method amounting to Rp99,977 as of December 31, 2010 and Rp113,577 as of December 31, 2011 and 2012, which the Company believes is adequate to cover impairment losses on the investments.

c. Equity securities in BNI of Rp89 and Telkom of Rp10 are both classified as available for sale as of December 31, 2010, 2011 and 2012.

F-64

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

13. OTHER NON-CURRENT ASSETS—NET

As of January 1, 2011 and December 31, 2011 and 2012, this account consists of the following:

			December 31,
	January 1, 2011 (Restated)		2011 (Restated)		2012
Investment in an associated company (i)		56,300		56,300		57,174
Less allowance for impairment		56,300		56,300		56,300
Net		—		—		874
Claims for tax refund
Corporate income tax
Current year (Note 16)		163,562		181,717		162,647
Previous years (ii)		317,013		333,217		248,509
VAT and others (iii)		171,872		351,909		339,995
		652,447		866,843		751,151
Others		7,551		5,593		2,473
Total		659,998		872,436		754,498

(i) Investment in an associated company—equity accounted

	Location	Principal Activity	Ownership (%)		Cost		Accumulated Equity in Undistributed Net Loss		Carrying Value
PT Citra Bakti Indonesia	Indonesia	Certification service company for chip-based ATM/debit card and related devices and infrastructures		33.33		1,000		126		874

(ii) The claims for tax refund with respect to corporate income tax for previous years include the following:

• Satelindo’s 2002 corporate income tax

On July 15, 2010, the Company received Decision Letter No. KEP-357/WPJ.19/BD.05/2010 from the DGT declining the Company’s objection to the correction on Satelindo’s corporate income tax for fiscal year 2002 amounting to Rp105,809 (including penalties and interest). On October 14, 2010, the Company submitted an appeal letter to the Tax Court concerning the Company’s objection to the correction on Satelindo’s corporate income tax for fiscal year 2002. On June 25, 2012, the Company received the Decision Letter from the Tax Court rejecting the Company’s appeal on Satelindo’s corporate income tax for fiscal year 2002. The Company charged the related claim for tax refund amounting to Rp103,163 to current operations as part of “Current Income Tax Expense” (Note 16).

F-65

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

• The Company and IMM’s 2009 corporate income tax

On April 21, 2011, the Company received the assessment letter on tax overpayment (“SKPLB”) from the DGT for the Company’s 2009 corporate income tax amounting to Rp29,272, which is lower than the amount recognized by the Company in its financial statements. The Company accepted a part of the corrections amounting to Rp836, which was charged to current operations. On May 31, 2011, the Company received the tax refund of its claim for 2009 corporate income tax amounting to Rp23,695, after being offset with the accepted amount of tax correction of VAT for the period January—December 2009 (iii). On July 20, 2011, the Company submitted an objection letter to the Tax Office regarding the remaining correction on the Company’s 2009 corporate income tax. On June 29, 2012, the Company received the Decision Letter from the DGT which declined the Company’s objection. On September 21, 2012, the Company submitted an appeal letter to the Tax Court concerning the Company’s objection to the correction on corporate income tax for fiscal year 2009. As of April 29, 2013, the Company has not received any decision from the Tax Court on such appeal.

On April 25, 2011, IMM received SKPLB from the Tax Office for IMM’s 2009 corporate income tax amounting to Rp34,950, which is lower than the amount recognized by IMM in its financial statements. IMM charged the unapproved 2009 claim for tax refund amounting to Rp597 to current operations. On the same date, IMM also received the assessment letters on tax underpayment (“SKPKBs”) for IMM’s 2009 income tax articles 21, 23 and 26 and VAT totalling Rp4,512 (including penalties and interest). On May 26, 2011, IMM received the refund of its claim for 2009 corporate income tax amounting to Rp30,438, after being offset with above underpayment of IMM’s 2009 income tax articles 21, 23 and 26 and VAT.

• The Company’s 2006 corporate income tax

On April 26, 2011, the Company received the Tax Court’s Decision Letter which accepted the Company’s appeal on the remaining correction of the 2006 corporate income tax. On June 21, 2011, the Company received the tax refund amounting to Rp82,626. On August 22, 2011, the Company received a copy of a Memorandum for Reconsideration Request (Memori Permohonan Peninjauan Kembali) from the Tax Court to the Supreme Court on the Tax Court’s Decision Letter dated April 26, 2011 for the 2006 corporate income tax. On September 21, 2011, the Company submitted a Counter-Memorandum for Reconsideration Request to the Supreme Court. As of April 29, 2013, the Company has not received any decision from the Supreme Court on such request.

• The Company and IMM’s 2010 corporate income tax

On April 26, 2012, IMM received SKPLB from the Tax Office for IMM’s 2010 corporate income tax amounting to Rp68,657, which is lower than the amount recognized by IMM in its financial statements. IMM charged the unapproved 2010 claim for tax refund amounting to Rp6,422 to current operations as part of current income tax expense (Note 16). On the same date, IMM also received SKPKBs for its 2010 income tax articles 21, 23 and 26 and VAT totalling Rp11,132 (including penalties and interest). On June 22, 2012, IMM received the refund of its claim for 2010 corporate income tax amounting to Rp57,525, after being offset with above underpayment of its 2010 income tax articles 21, 23 and 26 and VAT.

F-66

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

• The Company and IMM’s 2010 corporate income tax (continued)

On July 3, 2012, the Company received SKPLB from the DGT for the Company’s 2010 corporate income tax amounting to Rp89,381, which is lower than the amount recognized by the Company in its financial statements. The Company accepted all of the corrections amounting to Rp61, which was charged to current operations (Note 16). On August 24, 2012, the Company received the tax refund of its claim for 2010 corporate income tax amounting to Rp89,381. Based on this SKPLB, the tax loss carry forward was adjusted to became amounting to Rp1,040,083, which is lower than the amount recognized by the Company in its financial statements. The Company accepted all of the corrections amounting to Rp101,978.

(iii) The claims for tax refund with respect to VAT and others include the following:

• The Company’s 2010 and 2011 VAT

On April 21, 2011, the Company received SKPKB from the DGT for the Company’s VAT for the period January—December 2009 totalling Rp182,800 (including penalties). The Company accepted a part of the corrections amounting to Rp4,160 which was charged to current operations (Note 13). On July 15, 2011, the Company paid the remaining underpayment amounting to Rp178,640 of the VAT for the period January—December 2009. On July 19, 2011, the Company submitted an objection letter to the Tax Office regarding the remaining correction on the Company’s VAT for the period January—December 2009. On June 4, 2012, the Company received the decision letter from the DGT that declined the Company’s objection and, based on its audit, the DGT charged the Company for additional underpayment for the period January, March, April, June, August—December 2009 totalling Rp57,166 and overpayment for the period February, May and July 2009 totalling Rp4,027. On July 4, 2012, the Company paid the additional underpayment amounting to Rp57,166. On August 24, 2012 and August 31, 2012, the Company received the overpayment amounting to Rp3,839 and Rp188, respectively. On September 3, 2012, the Company submitted an appeal letter to the Tax Court regarding the remaining correction on the Company’s VAT for the period January—December 2009. As of April 29, 2013, the Company has not received any decision from the Tax Court on such appeal.

On July 3, 2012, the Company received SKPLB from the DGT for the Company’s VAT for the period March 2010 amounting to Rp28,545, which is lower than the amount recognized by the Company in its financial statements, and SKPKBs for the Company’s VAT for the period January, February and April—December 2010 totalling Rp98,011 (including penalties). On August 2, 2012, the Company paid the underpayment amounting to Rp98,011. On August 24, 2012, the Company received the overpayment amounting to Rp28,545 from the DGT. On October 1 and 2, 2012, the Company submitted objection letters to the Tax Office regarding SKPLB and SKPKBs on the Company’s VAT for the period January—December 2010 totalling Rp106,619. As of April 29, 2013, the Company has not received any decision from the Tax Office on such objections.

• As of January 1, 2011 and December 31, 2011, this included the claims for tax refund from the Company’s 2008 and 2009 income tax article 26 and Satelindo’s 2002 and 2003 income tax article 26 which were classified as part of “Other Current Assets” as of December 31, 2012 (Note 7).

F-67

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

14. SHORT-TERM LOAN

The balance of this account amounting to Rp299,529, Rp1,499,256 and Rp nil as of December 31, 2012 and 2011 and January 1, 2011 (net of unamortized loan issuance cost of Rp471 in 2012, Rp744 in 2011 and Rp nil in 2010), respectively represents an unsecured loan from Mandiri, a related party (Note 30).

On June 21, 2011, the Company entered into a Revolving Time Loan Facility agreement with Mandiri covering a maximum amount of Rp1,000,000 to finance the Company’s operational working capital, capital expenditure and/or refinancing requirements. This facility is available from June 21, 2011 to June 20, 2014 and drawdowns bear interest at 1-month Jakarta Inter-Bank Offered Rate (“JIBOR”) plus 1.4% per annum. Each drawdown matures 3 months from the drawdown date and can be extended for further 3-month periods by submitting a written request for such extension to Mandiri.

Subsequently, on December 5, 2011, the Company entered into an amendment of this agreement to cover the increase of the facility amount up to Rp1,500,000 and the change of the interest rate to 1-month JIBOR plus 1.25% per annum.

On August 2 and December 14, 2011, March 28, June 21, December 12 and 26, 2012, the Company has made several drawdowns to this loan facility totaling Rp2,200,000.

On February 2, May 14, June 29, July 5 and August 2, 2012, the Company repaid the drawdowns made previously totalling Rp1,900,000 (Note 37).

Voluntary early repayment is permitted subject to 3 days’ prior written notice. The Company may early repay the whole or any part of the loan.

Based on the facility agreement, the Company is required to comply with certain covenants such as maintaining financial ratios.

The amortization of the loan issuance cost for the years ended December 31, 2010, 2011 and 2012 amounted to Rp nil, Rp1,656 and Rp321, respectively (Note 27).

As of January 1, 2011 and December 31, 2011 and 2012, the Group has complied with all financial ratios required to be maintained under the loan agreements.

15. PROCUREMENT PAYABLE

This account consists of amounts due for capital and operating expenditures procured from the following:

			December 31,
	January 1,  2011 (Restated)		2011 (Restated)		2012
Related parties (Note 30) (including US$404 on January 1, 2011, US$114 on December 31, 2011 and US$78 on December 31, 2012)		68,681		36,073		43,783
Third parties (including US$246,211 on January 1, 2011, US$220,674 on December 31, 2011 and US$141,024 on December 31, 2012)		3,573,321		3,439,789		2,694,067
Total		3,642,002		3,475,862		2,737,850

F-68

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

The billed amount of procurement payable amounted to Rp360,508, Rp555,065 and Rp531,799 as of January 1, 2011 and December 31, 2011 and 2012, respectively. The unbilled amount of procurement payable amounted to Rp3,281,494, Rp2,920,797 and Rp2,206,051 as of January 1, 2011 and December 31, 2011 and 2012, respectively.

16. TAXES PAYABLE

This account consists of the following:

			December 31,
	January 1, 2011		2011		2012
Estimated corporate income tax payable, less tax prepayments of Rp123,281 in 2010, Rp106,847 in 2011 and Rp97,715 in 2012		4,890		13,330		26,137
Income tax article 25		18,899		14,964		7,888
Total		23,789		28,294		34,025

F-69

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

The computation of the income tax expense for the years ended December 31, 2010, 2011 and 2012 is as follows:

	2010 (Restated)			2011 (Restated)			2012
Estimated taxable income (tax loss) of the Company		(1,142,061	)		(266,924	)		375,701
Income tax expense—current (at statutory tax rates)
Company		—			—			—
Tax correction from previous year paid during the year		—			—			103,224
Subsidiaries		128,171			120,177			123,852
Tax correction from previous year paid during the year		—			2,665			7,353
Total income tax expense—current		128,171			122,842			234,429
Income tax expense (benefit)—deferred—effect of temporary differences at enacted maximum tax rates (25% in 2010, 2011 and 2012)
Company
Tax loss		(285,515	)		(66,731	)		93,925
Equity in net income of investees		61,060			33,180			46,636
Amortization of other intangible assets		47,642			43,333			37,629
Net periodic pension cost		(4,253	)		3,847			560
Depreciation—net		450,049			307,104			(214,121	)
Reversal of deferred tax liabilities from tower sale transactions		—			—			(91,938	)
Accrual of employee benefits—net		(3,820	)		28,919			(41,635	)
Loss on sale of property and equipment—net		86,055			(54,348	)		(31,149	)
Charges from leasing transaction		(6,525	)		(12,298	)		(33,733	)
Write-off of accounts receivable (provision for impairment of receivables)—net		(8,685	)		(6,877	)		(12,496	)
Provision for termination, gratuity and compensation benefits of employees		(8,217	)		(232	)		(11,981	)
Amortization of debt and bonds issuance costs, consent solicitation fees and discount (Notes 18 and 19)		(2,580	)		(3,670	)		(6,310	)
Amortization of 3G licenses		8,751			3,314			(858	)
Others		(24,628	)		(213	)		(7,594	)
Net		309,334			275,328			(273,065	)
Deferred income tax benefit—net resulting from reversal of deferred tax liabilities (DTL) on investment in IMM, ISPL, and IPBV		—			(109,497	)		—
Net		309,334			165,831			(273,065	)
Subsidiaries
Depreciation—net		(6,073	)		(11,934	)		5,700
Write-off of accounts receivable (provision for impairment of receivables)—net		533			(3,601	)		4,989
Accrued expenses		(948	)		(3,034	)		1,270
Net periodic pension cost		(500	)		(551	)		128
Others		2,055			(249	)		1,031
Net		(4,933	)		(19,369	)		13,118
Net income tax expense (benefit)—deferred		304,401			146,462			(259,947	)
Income tax benefit (expense)—net		(432,572	)		(269,304	)		25,518

F-70

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

The computation of the estimated income tax payable is as follows:

			December 31,
	January 1, 2011		2011		2012
Income tax expense—current
Company		—		—		—
Tax correction from previous year paid during the year		—		—		103,224
Subsidiaries		128,171		120,177		123,852
Tax correction from previous year paid during the year		—		2,665		7,353
Total income tax expense—current		128,171		122,842		234,429
Prepayments of income tax of the Company
Article 22		52,126		80,935		110,523
Article 23		6,810		14,275		18,563
Article 25		28,795		—		—
Total prepayments of income tax of the Company		87,731		95,210		129,086
Prepayments of income tax of Subsidiaries
Article 22		1,107		—		—
Article 23		3,696		5,880		6,368
Article 25		194,309		187,474		124,908
Total prepayments of income tax of Subsidiaries		199,112		193,354		131,276
Total prepayments of income tax		286,843		288,564		260,362
Estimated income tax payable Subsidiaries		4,890		13,330		26,137
Total estimated income tax payable		4,890		13,330		26,137
Claim for tax refund (Note 13)
The Company		87,731		95,210		129,086
Subsidiaries		75,831		86,507		33,561
Total claim for tax refund		163,562		181,717		162,647

F-71

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

The reconciliation between the income tax expense (benefit) calculated by applying the applicable tax rate of 25% in 2010, 2011 and 2012 to the profit before income tax and the income tax expense as shown in the consolidated statements of comprehensive income for the years ended December 31, 2010, 2011 and 2012 is as follows:

	2010 (Restated)			2011 (Restated)			2012
Profit before income tax		1,323,080			1,323,216			452,195
Income tax expense at the applicable tax rate of 25% in 2010, 2011 and 2012		330,770			331,304			113,049
Company’s equity in Subsidiaries’ income before income tax and reversal of inter-company consolidation eliminations		58,179			42,908			58,657
Tax effect on permanent differences
5% final tax on sale of tower		—			—			46,335
Transaction cost for tower sale subjected to final tax		—			—			14,112
Employee benefits		16,180			18,501			21,070
Assessment for income taxes and VAT (including penalties)		20,634			3,300			2,940
Donation		4,668			9,116			6,037
Gain on tower sale—net already subject to final tax (Note 28)		—			—			(387,928	)
Interest income already subject to final tax		(36,200	)		(21,162	)		(28,362	)
Amortization of land rights		2,735			2,788			2,797
Others		23,712			(20,532	)		5,662
Tax correction from previous year paid during the year		—			2,665			110,577
Adjustment due to tax audit and others		11,894			9,913			9,536
Deferred income tax benefit from the reversal of DTL on investment in IMM, ISPL and IPBV		—			(109,497	)		—
Income tax expense (benefit)—net per consolidated statements of comprehensive income		432,572			269,304			(25,518	)

The tax effects of significant temporary differences between financial and tax reporting of the Company are as follows:

			December 31,
	January 1, 2011 (Restated)		2011 (Restated)		2012
Deferred tax assets
Accrual of employee benefits—net		235,104		206,416		260,033
Tax loss		285,515		352,246		216,784
Allowance for impairment of receivables		118,195		125,073		137,568
Allowance for decline in value of investment in associated company and other long-term investments		39,069		42,469		42,469
Charges from leasing transaction		6,525		18,823		52,556
Pension cost		22,143		18,296		17,736
Allowance for decline in value of short-term investments		6,349		6,349		6,349
Others		4,483		2,146		500
Total		717,383		771,818		733,995

F-72

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

	January 1, 2011 (Restated)		December 31,
			2011 (Restated)		2012
Deferred tax liabilities
Property and equipment		2,247,180		2,499,936		2,122,016
Investments in subsidiaries/associated company—net of amortization of goodwill and other intangible assets		398,769		366,769		442,402
Long-term prepaid licenses		13,562		16,876		16,018
Difference in transactions of equity changes in associated company		1,460		1,460		1,460
Deferred debt and bonds issuance costs, consent solicitation fees and discount		10,526		6,856		547
Others		659		659		463
Total		2,672,156		2,892,556		2,582,906
Deferred tax liabilities—net		1,954,773		2,120,738		1,848,911

The breakdown by entity of the deferred tax assets and liabilities:

	January 1, 2011 (Restated)				December 31, 2011 (Restated)				December 31, 2012
	Deferred Tax Assets		Deferred Tax Liabilities		Deferred Tax Assets		Deferred Tax Liabilities		Deferred Tax Assets		Deferred Tax Liabilities
Company		—		1,954,773		—		2,120,738		—		1,848,911
Subsidiaries
Lintasarta		77,396		—		80,094		—		78,593		—
IMM		17,263		—		33,718		—		22,100		—
APE		—		4,383		—		5,165		—		5,438
ISP		—		428		—		1,027		—		780
SMT		—		1,597		—		—		—		—
LMD		—		—		—		—		—		—
Total		94,659		1,961,181		113,812		2,126,930		100,693		1,855,129

The deferred tax assets of Lintasarta relate mainly to the deferred tax on the temporary difference in the recognition of depreciation of property and equipment.

The significant temporary differences on which deferred tax assets have been computed are not deductible for income tax purposes until the accrued employee benefits are paid, the allowance for impairment of receivables is realized upon the write-off of the receivables after fulfilling certain requirements under the Income Tax Law, the allowance for impairment of investments in associated company and other long-term investments is realized upon sale of the investments and the pension cost is paid.

The significant deferred tax liabilities relate to the differences in the book and tax bases of property and equipment, investments in subsidiaries / associated companies, long-term prepaid licenses, debt and bonds issuance costs, consent solicitation fees and discount.

F-73

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

Prior to 2011, the Company provided for deferred tax liabilities and deferred tax assets relating to the book-versus-tax-basis differences in its investments in subsidiaries as the Company believed that it was probable the investments for certain subsidiaries would be recovered through the sale of the shares which is a taxable transaction, and for certain subsidiaries the differences would be deductible from ordinary income as a result of a merger. In 2011, the Company re-evaluated its investment strategy including the accounting treatment on the recognition of deferred tax liabilities and deferred tax assets relating to the book-versus-tax-basis differences in investments in subsidiaries and the evaluation of “foreseeable future” and the “more likely than not” judgements. Based on the Company’s evaluation, the deferred tax liabilities are not recognized for temporary differences between the tax and book bases in investments in certain subsidiaries (IMM, ISPL and IPBV) since the Company believes the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not be reversed in the foreseeable future. Hence, the balance of the deferred tax liabilities on the taxable temporary differences on the investments in IMM, ISPL and IPBV as of January 1, 2011 totalling Rp109,497 was reversed with a credit to current deferred income tax benefit.

On March 5, 2012, the Company received the Tax Court’s Decision Letter accepting the Company’s request for interest compensation related to the issuance of 2004 SKPLB amounting to Rp60,674. Based on the Company’s evaluation, the realization of income related with the interest compensation was only probable, instead of virtually certain. Therefore, the interest compensation was not recognized in the Company’s financial statements. On June 29, 2012, the Company received a copy of a Memorandum for Reconsideration Request (Memori Permohonan Peninjauan Kembali) from the Tax Court to the Supreme Court on the Tax Court’s Decision Letter dated March 5, 2012 for the interest compensation related to the issuance of 2004 SKPLB. On July 27, 2012, the Company submitted a Counter-Memorandum for Reconsideration Request to the Supreme Court. As of April 29, 2013, the Company has not received any decision from the Supreme Court on such request.

The tax losses carryover of SMT, IMM and the Company as of December 31, 2012 can be carried forward through 2017 based on the following schedule:

Year of Expiration	Amount
2013		26,660
2014		31,901
2015		715,153
2016		289,695
2017		53,106
Total		1,116,515

F-74

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

17. ACCRUED EXPENSES

This account consists of the following:

			December 31,
	January 1, 2011 (Restated)		2011 (Restated)		2012
Interest		339,957		319,880		331,101
Marketing		120,092		214,907		235,957
Network repairs and maintenance		265,428		288,731		229,921
Radio frequency fee		195,686		283,588		214,653
Employee benefits (Notes 21 and 29)		216,732		180,441		200,033
Dealer incentives (Note 2f5.1)		125,836		82,615		170,115
Rental		28,090		59,929		95,200
Universal Service Obligation (“USO”)		59,899		59,716		92,916
Utilities		85,650		58,609		87,669
Link		31,111		55,593		60,646
Blackberry access fee		20,679		79,627		48,666
Consultancy fees		65,288		35,309		44,331
Concession fee		123,455		39,507		41,277
General and administration		27,706		31,119		34,772
Others (each below Rp20,000)		90,726		106,042		74,028
Total		1,796,335		1,895,613		1,961,285

18. LOANS PAYABLE

This account consists of the following:

			December 31,
	January 1, 2011		2011		2012
Third parties—net *		9,553,906		8,727,473		6,373,040
Related party (Note 30)
Mandiri—net **		1,297,045		998,843		—
Total loans payable		10,850,951		9,726,316		6,373,040
Less current maturities—net ***
Third parties		2,884,147		2,301,694		2,669,218
Related party		300,000		998,843		—
Total current maturities		3,184,147		3,300,537		2,669,218
Long-term portion
Third parties		6,669,759		6,425,779		3,703,822
Related party		997,045		—		—
		7,666,804		6,425,779		3,703,822

* net of unamortized debt issuance cost and consent solicitation fee of Rp189,979 on January 1, 2011, Rp146,511 on December 31, 2011 and Rp111,333 on December 31, 2012; and unamortized debt discount of Rp19,267 on January 1, 2011, Rp11,891 on December 31, 2011 and Rp3,682 on December 31, 2012

F-75

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

** net of unamortized debt issuance cost and consent solicitation fee of Rp2,955 on January 1, 2011 and Rp1,157 on December 31, 2011

*** net of unamortized debt issuance cost and consent solicitation fees of Rp373 on January 1, 2011, Rp2,295 on December 31, 2011 and Rp6,415 on December 31, 2012

The loans from third parties consist of the following:

			December 31,
	January 1, 2011		2011		2012
AB Svensk Exportkredit, Sweden with Guarantee from Export Kredit Namnden—net of un amortized debt issuance cost of Rp27,593 in 2010, Rp26,434 in 2011 and Rp21,351 in 2012		1,972,905		2,127,216		1,840,124
Syndicated U.S. Dollar Loan Facility—net of unamortized debt issuance cost and consent solicitation fee of Rp27,122 in 2010, Rp11,621 in 2011 and Rp2,733 in 2012		4,018,828		2,069,484		1,520,292
HSBC France—net of unamortized debt issuance cost and consent solicitation fee of Rp129,167 in 2010, Rp104,536 in 2011 and Rp84,315 in 2012		1,500,434		1,356,403		1,278,872
BCA Revolving Time Loan—net of unamortized debt issuance cost of Rp736 in 2011 and Rp413 in 2012		—		1,499,264		999,587
Goldman Sachs International
Principal, net of unamortized debt discount of Rp19,267 in 2010, Rp11,891 in 2011 and Rp3,682 in 2012		415,033		422,409		479,818
Foreign Exchange (FX) Conversion Option—net of credit risk adjustment		54,595		49,518		—
9-Year Commercial Loan—net of unamortized debt issuance cost and consent solicitation fee of Rp2,821 in 2010, Rp2,046 in 2011 and Rp1,550 in 2012		203,805		181,834		155,318
Bank Sumitomo Mitsui Indonesia (“BSMI”) Revolving Time loan—net of unamortized debt issuance cost of Rp971		—		—		99,029
BCA—net of unamortized debt issuance on cost and consent solicitation fee of Rp2,903 in 2010 and Rp1,138 in 2011		1,297,097		998,862		—
Investment Credit Facility 6 from CIMB Niaga		52,483		22,483		—
Finnish Export Credit Ltd.—net of unamortized debt issuance cost and consent solicitation fee of Rp373		33,793		—		—
Investment Credit Facility 5 from CIMB Niaga		4,933		—		—
Total		9,553,906		8,727,473		6,373,040
Less current maturities (net of unamortized debt Issuance costs and consent solicitation fees totaling Rp373 in 2010 and Rp2,295 in 2011 and Rp6,415 in 2012)		2,884,147		2,301,694		2,669,218
Long-term portion		6,669,759		6,425,779		3,703,822

F-76

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

The details of the loans from a related party and third parties are as follows:

Counterparties	Loan Type	Maturity	Amount	Interest Structure	Remarks
a. Mandiri*	•     5-year unsecured credit facility 1 •     Loan drawdowns are payable annually	September 18, 2012	Rp2,000,000	•     Year 1: 9.75% p.a. •     Year 2: 10.5% p.a. •     Years 3-5: Average 3-month JIBOR + 1.5% p.a. •     Payable quarterly	•     Without penalty if the repayment is made after the 24th month after the agreement date subject to 7 days’ prior written notice •     With penalty of 2% of the prepaid amount for repayment prior to the 24th month after the agreement date •     On June 21, 2012, the Company obtained the consent letter from Mandiri for the sale of asset transaction (Note 28). •     On September 14, 2012, the Company paid the remaining outstanding Mandiri Loan, amounting to Rp1,000,000.
b. AB Svensk Export kredit (“SEK”), Sweden with Guarantee from Export—kreditnamnden (“EKN”)	•     Credit facilities consisting of Facilities A, B and C with maximum amounts of US$100,000, US$155,000 and US$60,000, respectively •     Loan drawdowns are payable semi-annually	May 31, 2016 for Facility A, February 28, 2017 for Facility B and November 30, 2017 for Facility C	US$315,000	•     Facility A: Margin of 0.25%, LIBOR, SEK Funding Cost of 1.05% and EKN Premium Margin of 1.57% •     Facility B: Margin of 0.05%, Commercial Interest Reference Rate (“CIRR”) and EKN Premium Margin of 1.61% •     Facility C: Margin of 0.05%, CIRR and EKN Premium Margin of 1.59% •     Payable semi-annually	•     Permitted only in proportionate amount for each of Facilities A, B and C, after the last day of the availability period and on a repayment date subject to 20 days’ prior written notice •     In minimum amount of US$5,000 and in an amount divisible by US$500 •     Any repayment shall satisfy the obligations of loan repayment in inverse chronological order •     On June 18, 2012, the Company amended its credit facility agreement with HSBC Bank Plc, as facility agent. The amendment included changes in definition of certain terms related to sale of asset transactions (Note 28).

* related party (Note 30)

F-77

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

Counterparties	Loan Type	Maturity	Amount	Interest Structure	Remarks
c. Syndicated U.S. Dollar Loan Facility—12 Financial Institutions **	•     5-year unsecured credit facility •     Loan drawdowns are payable semi-annually	June 12, 2013	US$450,000	•     USD London Inter-Bank Offered Rate (“LIBOR”) + 1.9% p.a. (onshore lenders); USD LIBOR + 1.85% p.a. (offshore lenders) •     Payable semi-annually	•     Permitted only after the 6th month from the date of loan agreement subject to 15 days’ prior written notice (in the minimum amount of US$10,000 and in an amount divisible by US$1,000) •     On June 19, 2012, the Company amended its credit facility agreement with PT Bank DBS Indonesia, as facility agent. The amendment included changes in definition of certain terms related to sale of asset transactions (Note 28).
d. HSBC France	•     12 year -COFACE term facility •     Payable in twenty semi-annual installments	September 30, 2019	US$157,243	•     5.69% p.a. •     Payable semi-annually	•     Permitted with a corresponding proportionate voluntary prepayment under the SINOSURE Facility after the last day of the availability period and on a repayment date subject to 30 days’ prior written notice •     In minimum amount of US$10,000 and in an amount divisible by US$1,000 •     Any repayment shall satisfy the obligations of loan repayment in inverse chronological order •     On June 18, 2012, the Company amended its COFACE credit facility agreement with HSBC France, as facility agent. The amendment included changes in definition of certain terms related to sale of asset transactions (Note 28).

** On October 14, 2011, PT Bank UOB Indonesia (one of lenders under the Syndicated U.S. Dollar Loan Facility) transferred its portion of the loan to UOB Limited (another lender under the Syndicated U.S. Dollar Loan Facility), hence the number of lenders became 12.

F-78

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

Counterparties	Loan Type	Maturity	Amount	Interest Structure	Remarks
d. HSBC France (continued)	•     12 year -SINOSURE term facility •     Payable in twenty semi-annual installments	September 30, 2019	US$44,200	•     USD LIBOR + 0.35% p.a. •     Payable semi-annually	•     Permitted with a corresponding proportionate voluntary prepayment under the COFACE Facility after the last day of the availability period and on a repayment date subject to 30 days’ prior written notice •     In minimum amount of US$10,000 and in an amount divisible by US$1,000 •     Any repayment shall satisfy the obligations of loan repayment in inverse chronological order •     On July 23, 2012, the Company amended its SINOSURE credit facility agreement with HSBC France, as facility agent. The Amendment included changes in definition of certain terms related to sale of asset transaction (Note 28).
e. BCA	•     The revolving time loan with maximum amount of Rp1,000,000 •     Each drawdown matures 1 month from the drawdown date. Subsequently, on August 9, 2011, the Company obtained an approval from BCA to amend the maturity date of each drawdown to become at the latest on February 10, 2014 •     On December 1, 2011, the facility was amended to increase the facility amount up to Rp1,500,000 and change the interest rate	February 10, 2014	Rp1,500,000	•     JIBOR + 1.4% p.a. However, starting December 1, 2011, JIBOR + 1.25% p.a. •     Payable monthly	•     Permitted subject to 1 day prior written notice. •     The Company may repay the whole or any part of the loan •     On June 11, 2012, the Company obtained the consent letter from BCA for the sale of asset transaction (Note 28). •     On December 19, 2012, the Company amended its credit facility agreement with BCA. The Amendment included changes in definition of certain terms related to sale of asset transaction (Note 28).

F-79

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

Counterparties	Loan Type	Maturity	Amount	Interest Structure	Remarks
f. Goldman Sachs International (“GSI”) ***	•     Investment loan •     Provides an “FX Conversion Option” for GSI to convert the loan payable into U.S. dollar loan of US$50,000 on May 30, 2012 (“FX Conversion Option”) •     Fair value of FX Conversion Option as of December 31, 2011 and December 31, 2010 amounting to US$5,460.78 (equivalent to Rp49,518) and US$6,072.20 (equivalent to Rp54,595), respectively (Note 33)	May 30, 2013	US$50,000	•     8.75% p.a. •     Payable quarterly •     If GSI takes FX Conversion Option, starting May 30, 2012, the loan will bear interest at the fixed annual rate of 6.45% applied on the US$50,000 principal	•     Certain changes affecting withholding taxes in the United Kingdom or Indonesia •     Default under Guaranteed Notes due 2012 •     Default under the Company’s USD Notes and IDR Bonds •     Redemption, purchase or cancellation of the Guaranteed Notes Due 2012 and there are no USD Indosat Notes outstanding upon such redemption, purchase or cancellation •     Change of control in the Company.
g. HSBC Jakarta Branch, CIMB Niaga and Bank of China Limited Jakarta Branch	•     9-year unsecured commercial facility •     Payable in fifteen semi-annual payments after 24 months from the date of loan agreement. For the 1st five installments: US$1,351.85 each; and US$2,027.78 each for the remaining installments thereafter	November 28, 2016	US$27,037	•     USD LIBOR + 1.45% p.a. •     Payable semi-annually	•     Permitted only on each repayment date after the first repayment date subject to 30 days’ prior written notice •     In minimum amount of US$5,000 and in an amount divisible by US$1,000 •     Any prepayment shall satisfy the obligations of loan repayment proportionately •     On June 20, 2012, the Company amended its credit facility agreement with HSBC Ltd, as facility agent. The amendment included changes in definition of certain terms related to sale of asset transactions (Note 28).

*** On May 30, 2012, GSI exercised the FX conversion option to convert the loan into U.S. dollar loan of US$50,000. The Company earned gain from the exercise amounting to Rp5,319 and charged the gain to Gain (Loss) on Change in Fair Value of Derivatives—Net.

F-80

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

Counterparties	Loan Type	Maturity	Amount	Interest Structure	Remarks
h. BSMI	•     The revolving time loan with maximum amount of Rp650,000 •     Each drawdown matures maximum 36 months from the drawdown date, but not exceeds December 31, 2015.	December 31, 2015	Rp650,000	•     JIBOR + 1.25% p.a. •     Payable monthly or quarterly	•     Permitted subject to 5 days prior written notice.         The Company may repay the whole or any part of the loan
i. BCA	•     5-year unsecured credit facility 1 •     Loan drawdowns are payable annually	September 27, 2012	Rp2,000,000	•     Year 1: 9.75% p.a. •     Year 2: 10.5% p.a. •     Years 3-5: 3-month JIBOR + 1.5% p.a. •     Payable quarterly	•     Without penalty if the repayment is made after the 24th month after the agreement date subject to 7 days’ prior written notice •     With penalty of 2% of the prepaid amount for repayment prior to the 24th month after the agreement date •     On June 11, 2012, the Company obtained the consent letter from BCA for the sale of asset transaction (Note 28) •     On September 27, 2012, the Company paid the remaining outstanding BCA Loan, amounting to Rp1,000,000.
j. CIMB Niaga	•     Investment credit facility 6 obtained by Lintasarta •     Payable quarterly	August 24, 2012	Rp75,000	•     14.5% p.a., subject to change by CIMB Niaga depending on the market condition •     Payable quarterly	•     Permitted only on interest payment date subject to 15 days’ prior written notice. Lintasarta may repay the whole or any part of the loan before the due date only by using the fund from Lintasarta’s operational activities. Repayment using the fund from loans obtained from other parties is allowed with penalty determined by CIMB Niaga. •     The loan is collateralized by all equipment (Note 8) purchased from the proceeds of credit facility. •     In April 2012, this loan was fully paid.

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PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

Counterparties	Loan Type	Maturity	Amount	Interest Structure	Remarks
k. Finnish Export Credit Ltd.	•     5-year credit facility •     Paid semi-annually	May 12, 2011	US$38,000	•     4.15% p.a. •     Paid semi-annually	•     Permitted only after 60 days of the loan agreement subject to 15 days’ prior written notice (in the minimum amount of US$10,000 and in an amount divisible by US$1,000) •     In May 2011, this loan was fully paid.
l. CIMB Niaga	•     Investment credit facility 5 obtained by Lintasarta •     Paid quarterly	January 10, 2011	Rp50,000	•     1-month SBI + 2.25% p.a. •     Paid quarterly	•     Permitted only on interest payment date subject to 13 days’ prior written notice. Lintasarta may repay the whole or any part of the loan before the due date only by using the fund from Lintasarta’s operational activities. Repayment using the fund from loans obtained from other parties was allowed with 1% penalty of the early repaid amount. •     In January 2011, this loan was fully paid.

F-82

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

The scheduled principal payments from 2013 of all the loans payable as of December 31, 2012 are as follows:

	Twelve months ending December 31,
	2013		2014		2015		2016		2017 and thereafter		Total
In rupiah
BCA—revolving time loan		—		1,000,000		—		—		—		1,000,000
BSMI—revolving time loan		—		—		100,000		—		—		100,000
Sub-total		—		1,000,000		100,000		—		—		1,100,000
In U.S. dollar
SEK, Sweden (US$192,500)		435,150		435,150		435,150		366,079		189,946		1,861,475
Syndicated U.S. Dollar Loan Facility (US$157,500)		1,523,025		—		—		—		—		1,523,025
HSBC France (US$140,970.68)		194,741		194,741		194,741		194,741		584,223		1,363,187
GSI (US$50,000)		483,500		—		—		—		—		483,500
9-Year Commercial Facility (US$16,222.20)		39,217		39,217		39,217		39,217		—		156,868
Sub-total		2,675,633		669,108		669,108		600,037		774,169		5,388,055
Total		2,675,633		1,669,108		769,108		600,037		774,169		6,488,055
Less:
—unamortized debt issuance costs and consent solicitation fees												(111,333	)
—unamortized debt discount												(3,682	)
Net												6,373,040

All loans are neither collateralized by any specific Group assets nor guaranteed by other parties, except for the assets that have been specifically used as security in Note 18j.

The total amortization of debt issuance, discount and consent solicitation fees on the loans for the years ended December 31, 2010, 2011 and 2012 amounted to Rp72,091, Rp63,731 and Rp65,269, respectively (Note 27).

As of December 31, 2010, 2011 and 2012, the Group has complied with all financial ratios required to be maintained under the loan agreements.

F-83

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

19. BONDS PAYABLE

This account consists of the following:

		January 1, 2011		December 31,
				2011		2012
a)	Guaranteed Notes Due 2020—net of unamortized notes issuance cost of Rp64,885 in 2010, Rp58,420 in 2011 and Rp73,454 in 2012, and discount of Rp29,666 in 2010, Rp26,208 in 2011 and Rp23,154 in 2012		5,749,599		5,809,572		6,188,892
b)	Eighth Indosat Bonds in Year 2012 with Fixed Rates—net of unamortized bonds issuance cost and consent solicitation fees of Rp8,478		—		—		2,691,522
c)	Fifth Indosat Bonds in Year 2007 with Fixed Rates—net of unamortized bonds issuance cost and consent solicitation fees of Rp11,041 in 2010, Rp9,102 in 2011 and Rp7,061 in 2012		2,588,959		2,590,898		2,592,939
d)	Seventh Indosat Bonds in Year 2009 with Fixed Rates—net of unamortized bonds issuance cost of Rp5,362 in 2010, Rp4,442 in 2011 and Rp3,454 in 2012		1,294,638		1,295,558		1,296,546
e)	Sixth Indosat Bonds in Year 2008 with Fixed Rates—net of unamortized bonds issuance cost and consent solicitation fees of Rp5,414 in 2010, Rp3,603 in 2011 and Rp1,609 in 2012		1,074,586		1,076,397		1,078,391
f)	Indosat Sukuk Ijarah III in Year 2008—net of unamortized bonds issuance cost and consent solicitation fees of Rp2,625 on 2010, Rp1,545 in 2011 and Rp353 in 2012		567,375		568,455		569,647
g)	Indosat Sukuk Ijarah II in Year 2007—net of unamortized bonds issuance cost and consent solicitation fees of Rp1,517 in 2010, Rp1,124 in 2011 and Rp698 in 2012		398,483		398,876		399,302
h)	Indosat Sukuk Ijarah V in Year 2012—net of unamortized bonds issuance cost and consent solicitation fees of Rp930		—		—		299,070
i)	Indosat Sukuk Ijarah IV in Year 2009—net of unamortized bonds issuance cost of Rp873 in 2010, Rp754 in 2011 and Rp627 in 2012		199,127		199,246		199,373
j)	Second Indosat Bonds in Year 2002 with Fixed and Floating Rates—net of unamortized consent solicitation fees of Rp652 in 2010 and Rp649 in 2011		199,348		199,351		—
k)	Limited Bonds II issued by Lintasarta*		25,000		25,000		—
l)	Limited Bonds I issued by Lintasarta**		16,989		16,989		—
m)	Fourth Indosat Bonds in Year 2005 with Fixed Rate—net of unamortized bonds issuance cost and consent solicitation fees of Rp1,382		813,618		—		—
l)	Indosat Syari’ah Ijarah Bonds in Year 2005—net of unamortized bonds issuance cost and consent solicitation fees of Rp487		284,513		—		—
Total bonds payable			13,212,235		12,180,342		15,315,682
Less current maturities (net of unamortized bonds issuance cost and consent solicitation fees totalling Rp1,869 in 2010 and Rp825 in 2012)			1,098,131		41,989		1,329,175
Long-term portion			12,114,104		12,138,353		13,986,507

* After elimination of Limited Bonds II amounting to Rp35,000 issued to the Company on January 1, 2010 and December 31, 2010. Lintasarta made early repayment of such amount on December 29, 2011.

** After elimination of Limited Bonds I amounting to Rp9,564 issued to the Company on January 1, 2010 and December 31, 2010. Lintasarta made early repayment of such amount on December 29, 2011.

F-84

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

Bond	Nominal Amount	Interest	Maturity	Remarks
a. Guaranteed Notes Due 2020	US$650,000	•     7.375% p.a. •     Payable semi-annually	July 29, 2020	The notes are redeemable at the option of IPBV: •     Prior to July 29, 2013, the Issuer may redeem up to a maximum of 35% of the original aggregate Notes issued with the proceeds of one or more Public Offerings at a redemption price equal to 107.375% of the principal amount. •     Prior to July 29, 2015, the Issuer will be entitled at its option to redeem all or any portion of the Notes at a redemption price equal to 100% of the principal amount of the Notes plus the Applicable Premium. •     On and after July 29, 2015, the issuer may redeem the Notes in whole or in part at any time and from time to time at the certain redemption prices. •     At any time, upon not less than 30 days’ nor more than 60 days’ prior notice, the Issuer may redeem the Notes at a price equal to 100% of the principal amount thereof, plus any accrued and unpaid interest to (but not including) the redemption date and any additional amounts, in the event of certain changes affecting withholding taxes in Indonesia and the Netherlands. •     Upon a change in control of IPBV, the holder of the notes has the right to require IPBV to repurchase all or any part of such holder’s notes. •     Based on latest rating reports (released in July, February and April 2012), the notes have BB+ (stable outlook), Ba1 (stable outlook) and BBB (stable outlook) ratings from Standard & Poor’s (“S&P”), Moody’s Investors Service (“Moody’s) and Fitch Ratings (“Fitch”), respectively.

F-85

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

Bond	Nominal Amount	Interest	Maturity	Remarks
b. Eighth Indosat Bonds in Year 2012
•     Series A	Rp1,200,000	•     8.625% p.a. •     Payable quarterly	June 27, 2019	•     The Company can buy back part or all of the bonds, after the 1st anniversary of the bonds, at market price temporarily or as an early settlement. •     Based on the latest rating report released in June 2012, the bonds have idAA+ rating from PT Pemeringkat Efek Indonesia (“Pefindo”).
•     Series B	Rp1,500,000	•     8.875% p.a. •     Payable quarterly	June 27, 2022
c. Fifth Indosat Bonds in Year 2007
•     Series A	Rp1,230,000	•     10.20% p.a. •     Payable quarterly	May 29, 2014	•     The Company can buy back part or all of the bonds, after the 1st anniversary of the bonds, at market price temporarily or as an early settlement. •     Based on the latest rating report released in June 2012, the bonds have idAA+ rating from Pefindo.
•     Series B	Rp1,370,000	•     10.65% p.a. •     Payable quarterly	May 29, 2017
d. Seventh Indosat Bonds in Year 2009
•     Series A	Rp700,000	•     11.25% p.a. •     Payable quarterly	December 8, 2014	•     The Company can buy back part or all of the bonds, after the 1st anniversary of the bonds, at market price temporarily or as an early settlement. •     Based on the latest rating report released in June 2012, the bonds have idAA+ rating from Pefindo.
•     Series B	Rp600,000	•     11.75% p.a. •     Payable quarterly	December 8, 2016

F-86

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

Bond	Nominal Amount	Interest	Maturity	Remarks
e. Sixth Indosat Bonds in Year 2008
•     Series A	Rp760,000	•     10.25% p.a. •     Payable quarterly	April 9, 2013	•     The Company can buy back part or all of the bonds, after the 1st anniversary of the bonds, at market price temporarily or as an early settlement. •     Based on the latest rating report released in December 2012, the bonds have idAA+ rating from Pefindo.
•     Series B	Rp320,000	•     10.80% p.a. •     Payable quarterly	April 9, 2015
f.  Indosat Sukuk Ijarah III in Year 2008 (“Sukuk Ijarah III”)	Rp570,000	•     Bondholders are entitled to annual fixed Ijarah return (“Cicilan Imbalan Ijarah”) totalling Rp58,425, payable on a quarterly basis starting July 9, 2008 up to April 9, 2013.	April 9, 2013	•     The Company can buy back part or all of the bonds, after the 1st anniversary of the bonds, at market price. •     Based on the latest rating report released in December 2012, the bonds have idAA+ (sy) (stable outlook) rating from Pefindo.
g. Indosat Sukuk Ijarah II in Year 2007 (“Sukuk Ijarah II”)	Rp400,000	•     Bondholders are entitled to annual fixed Ijarah return (“Cicilan Imbalan Ijarah”) totalling Rp40,800, payable on a quarterly basis starting August 29, 2007 up to May 29, 2014.	May 29, 2014	•     The Company can buy back part or all of the bonds, after the 1st anniversary of the bonds, at market price. •     Based on the latest rating report released in June 2012, the bonds have idAA+ (sy) rating from Pefindo.
h. Indosat Sukuk Ijarah V in Year 2012 (“Sukuk Ijarah V”)	Rp300,000	•     Bondholders are entitled to annual fixed Ijarah return (“Cicilan Imbalan Ijarah”) totalling Rp25,875, payable on a quarterly basis starting September 27, 2012 up to June 27, 2019.	June 27, 2019	•     The Company can buy back part or all of the bonds, after the 1st anniversary of the bonds, at market price. •     Based on the latest rating report released in June 2012, the bonds have idAA+ (sy) rating from Pefindo.

F-87

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

Bond	Nominal Amount	Interest	Maturity	Remarks
i. Indosat Sukuk Ijarah IV in Year 2009 (“Sukuk Ijarah IV”)
•     Series A	Rp28,000	•     Bondholders are entitled to annual fixed ijarah return (“Cicilan Imbalan Ijarah”) totalling Rp3,150, payable on a quarterly basis starting March 8, 2010 up to December 8, 2014.	December 8, 2014	•     The Company can buy back part or all of the bonds, after the 1st anniversary of the bonds, at market price. •     Based on the latest rating report released in June 2012, the bonds have idAA+ (sy) rating from Pefindo.
•     Series B	Rp172,000	•     Bondholders are entitled to annual fixed ijarah return (“Cicilan Imbalan Ijarah”) totalling Rp20,210, payable on a quarterly basis starting March 8, 2010 up to December 8, 2016.	December 8, 2016
j. Second Indosat Bonds in Year 2002—Series B	Rp200,000	•     16% p.a. •     Payable quarterly	November 6, 2032	•     The Company had call option on the 10th, 15th, 20th and 25th anniversaries of the bonds at 101% of the bonds’ nominal value and the bondholder had sell option if the rating of the bonds decreased to idAA- or lower or on the 15th, 20th and 25th anniversaries of the bonds. •     Based on the latest rating report released in June 2012, the bonds had idAA+ rating from Pefindo. •     On November 6, 2012, the Company exercised the right to redeem in full the remaining outstanding of Second Indosat Bonds at 101% price.

F-88

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

Bond	Nominal Amount	Interest	Maturity	Remarks
k. Limited Bonds II issued by Lintasarta (amended on August 25, 2009)	Rp66,150, with the remaining amount of Rp60,000 since June 14,2009	•     Average 3-month rupiah time deposit rates with Mandiri, BNI, BRI and BTN, plus a fixed premium of 3% (The maximum limit of floating rates was 19% and the minimum limit was 11% p.a. and starting June 14, 2009, the minimum limit increased to 12.75%.) •      Payable quaterly	June 14, 2009 extended to June 14, 2012	•     On February 29, 2012, Lintasarta paid these bonds in full.
l. Limited Bonds I issued by Lintasarta (amended on August 25, 2009)	Rp34,856, with the remaining amount of Rp26,553 since June 2,2009	•     Average 3-month rupiah time deposit rates with Mandiri, BNI, BRI and BTN, plus a fixed premium of 3% (The maximum limit of floating rates was 19% and the minimum limit was 11% p.a. and starting June 14, 2009, the minimum limit increased to 12.75%.) •      Payable quaterly	June 2, 2009 extended to June 2, 2012	•     On January 31, 2012, Lintasarta paid these bonds in full.
m.Fourth Indosat Bonds in Year 2005	Rp815,000	•     12% p.a. •     Paid quarterly	June 21, 2011	•     The Company had call option on the 4th anniversary of the bonds at 100% of the bonds’ nominal value and could buy back part or all of the bonds after the 1st anniversary of the bonds at market price. •     On June 21, 2011, the Company paid these bonds in full.
n.   Indosat Syari’ah Ijarah Bonds in Year 2005 (“Syari’ah Ijarah Bonds”)	Rp285,000	•     Bondholders were entitled to annual fixed Ijarah return (“Cicilan Imbalan Ijarah”) totalling Rp34,200, paid on a quarterly basis starting September 21, 2005 up to June 21, 2011.	June 21, 2011	•     The Company had call option on the 4th anniversary of the bonds at 100% of the bonds’ nominal value and could buy back part or all of the bonds after the 1st anniversary of the bonds at market price. •     On June 21, 2011, the Company paid these bonds in full.

F-89

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

The scheduled principal payments of all the bonds payable outstanding as of December 31, 2012 are as follows:

	Twelve months ending December 31,
	2013		2014		2015		2016		2017 and thereafter*		Total
In U.S. dollar
Guaranteed Notes Due 2020* (US$650,000)		—		—		—		—		6,285,500		6,285,500
In Rupiah
Eighth Indosat Bonds*		—		—		—		—		2,700,000		2,700,000
Fifth Indosat Bonds*		—		1,230,000		—		—		1,370,000		2,600,000
Seventh Indosat Bonds*		—		700,000		—		600,000		—		1,300,000
Sixth Indosat Bonds*		760,000		—		320,000		—		—		1,080,000
Sukuk Ijarah III*		570,000		—		—		—		—		570,000
Sukuk Ijarah II*		—		400,000		—		—		—		400,000
Sukuk Ijarah V*		—		—		—		—		300,000		300,000
Sukuk Ijarah IV*		—		28,000		—		172,000		—		200,000
Sub-total		1,330,000		2,358,000		320,000		772,000		4,370,000		9,150,000
Total		1,330,000		2,358,000		320,000		772,000		10,655,500		15,435,500
Less:
—unamortized notes issuance cost												(73,454	)
—unamortized bonds issuance costs and consent solicitation fees												(23,210	)
—unamortized notes discount												(23,154	)
Net												15,315,682

* Refer to previous discussion on early repayment options for each bond/note.

All bonds are neither collateralized by any specific Group assets nor guaranteed by other parties. All of the Group’s assets, except for the assets that have been specifically used as security (Note 18j) to its other creditors, are used as pari-passu security to all of the Group’s other liabilities including the bonds.

On June 5, 2012, the Company and IPBV entered into a supplemental indenture with Bank of New York Mellon, as a trustee, for the IPBV Guaranteed Notes Due 2020 based on the consent letter received on May 21, 2012 representing 93.21% of the notesholders. The supplemental indenture included the amendment of certain definitions under the previous Guaranteed Notes Due 2020 indentures and the approval for the sale of asset transaction (Note 28).

On June 8, 2012, the Company received the consent letter from BRI, as a trustee, for the Eighth Indosat Bonds, Seventh Indosat Bonds, Sixth Indosat Bonds, Fifth Indosat Bonds, Second Indosat Bonds and Sukuk Ijarah V, IV, III and II regarding the Company’s sale of asset transaction (Note 28).

The total amortization of bonds issuance cost, consent solicitation fees, notes issuance cost and discount for the years ended December 31, 2010, 2011 and 2012 amounted to Rp18,025, Rp18,057 and Rp23,288, respectively (Note 27).

As of January 1, 2011 / December 31, 2010 and December 31, 2011 and 2012, the Group has complied with all financial ratios required to be maintained under the Notes Indenture and Trustee Agreements.

F-90

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

20. FINANCIAL ASSETS AND LIABILITIES

The Group has various financial assets such as trade and other accounts receivable, cash and cash equivalents and short-term investments, which arise directly from the Group’s operations. The Group’s principal financial liabilities, other than derivatives, consist of loans and bonds payable, procurement payable, and trade and other accounts payable. The main purpose of these financial liabilities is to finance the Group’s operations. The Company also enters into derivative transactions, primarily cross currency swaps and interest rate swaps, for the purpose of managing its foreign exchange and interest rate exposures emanating from the Company’s loans and bonds payable in foreign currencies.

The following table sets forth the Group’s financial assets and financial liabilities as of January 1, 2011 and December 31, 2011 and 2012:

			December 31,
	January 1, 2011 (Restated)		2011 (Restated)		2012
Financial Assets
Held for trading
Derivative assets		69,334		159,349		69,654
Loans and receivables
Cash and cash equivalents		2,075,270		2,224,206		3,917,236
Accounts receivable—trade and others—net		1,546,307		1,505,756		2,061,160
Other current financial assets—net		53,119		24,790		13,382
Due from related parties—net		8,421		10,654		10,358
Other non-current financial assets—others		147,874		209,540		173,400
Available for sale
Other current financial assets—short-term investments—net		—		—		—
Other non-current financial assets—other long-term investments—net		2,730		2,730		1,369,740
Total Financial Assets		3,903,055		4,137,025		7,614,930
Financial Liabilities
Held for trading
Derivative liabilities		215,403		138,189		81,241
Liabilities at amortized cost
Short-term loan		—		1,499,256		299,529
Accounts payable—trade		645,505		319,058		231,737
Procurement payable		3,642,002		3,475,862		2,737,850
Accrued expenses		1,796,335		1,895,613		1,961,285
Deposits from customers		50,279		37,265		43,825
Loans payable—current maturities		3,184,147		3,300,537		2,669,218
Bonds payable—current maturities		1,098,131		41,989		1,329,175
Other current financial liabilities		52,413		71,828		289,164
Due to related parties		22,099		15,480		42,789
Obligation under finance lease		416,587		770,081		3,101,910
Loans payable—net of current maturities		7,666,804		6,425,779		3,703,822
Bonds payable—net of current maturities		12,114,104		12,138,353		13,986,507
Other non-current financial liabilities		45,815		107,433		69,273
Total Financial Liabilities		30,949,624		30,236,723		30,547,325

F-91

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

The following table sets forth the carrying values and estimated fair values of the Group’s financial instruments that are carried in the consolidated statements of financial position:

	Carrying Amount						Fair Value
	January 1, 2011 (Restated)		December 31,				January 1, 2011 (Restated)		December 31,
			2011 (Restated)		2012				2011 (Restated)		2012
Current Financial Assets
Cash and cash equivalents		2,075,270		2,224,206		3,917,236		2,075,270		2,224,206		3,917,236
Accounts receivable—trade and others—net		1,546,307		1,505,756		2,061,160		1,546,307		1,505,756		2,061,160
Derivative assets		69,334		159,349		69,654		69,334		159,349		69,654
Other current financial assets—net		53,119		24,790		13,382		53,119		24,790		13,382
Total current financial assets		3,744,030		3,914,101		6,061,432		3,744,030		3,914,101		6,061,432
Non-current Financial Assets
Due from related parties—net		8,421		10,654		10,358		7,176		8,967		9,539
Other long-term investments—net		2,730		2,730		1,369,740		2,730		2,730		1,369,740
Other non-current financial assets—net		147,874		209,540		173,400		141,380		205,261		171,648
Total non-current financial assets		159,025		222,924		1,553,498		151,286		216,958		1,550,927
Total Financial Assets		3,903,055		4,137,025		7,614,930		3,895,316		4,131,059		7,612,359
Current Financial Liabilities
Short-term loan		—		1,499,256		299,529		—		1,499,256		299,529
Accounts payable—trade		645,505		319,058		231,737		645,505		319,058		231,737
Procurement payable		3,642,002		3,475,862		2,737,850		3,642,002		3,475,862		2,737,850
Accrued expenses		1,796,335		1,895,613		1,961,285		1,796,335		1,895,613		1,961,285
Deposits from customers		50,279		37,265		43,825		50,279		37,265		43,825
Derivative liabilities		215,403		138,189		81,241		215,403		138,189		81,241
Loans payable—current maturities		3,184,147		3,300,537		2,669,218		3,155,634		3,927,062		2,791,147
Bonds payable—current maturities		1,098,131		41,989		1,329,175		1,110,737		43,137		1,343,205
Other current financial liabilities		52,413		71,828		289,164		52,413		71,828		289,164
Total current financial liabilities		10,684,215		10,779,597		9,643,024		10,668,308		11,407,270		9,778,983
Non-current Financial Liabilities
Due to related parties		22,099		15,480		42,789		18,833		13,030		39,405
Obligation under finance lease		416,587		770,081		3,101,910		416,587		770,081		3,101,910
Loans payable—net of current maturities		7,666,804		6,425,779		3,703,822		7,510,510		5,864,354		3,331,132
Bonds payable—net of current maturities		12,114,104		12,138,353		13,986,507		13,228,171		13,334,903		15,318,676
Other non-current financial Liabilities		45,815		107,433		69,273		43,281		101,068		66,433
Total non-current financial liabilities		20,265,409		19,457,126		20,904,301		21,217,382		20,083,436		21,857,556
Total Financial Liabilities		30,949,624		30,236,723		30,547,325		31,885,690		31,490,706		31,636,539

F-92

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

Fair Value Measurement

The fair values of the financial assets and liabilities are presented at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation.

The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate such value:

Short-term financial assets and liabilities:

• Short-term financial instruments with remaining maturities of one year or less (cash and cash equivalents, trade and other accounts receivable, other current financial assets, short-term loan, trade accounts payable, procurement payable, accrued expenses, deposits from customers and other current financial liabilities).

These financial instruments approximate their carrying amounts largely due to their short-term maturities.

• Derivative Financial Instruments

Cross currency swap contracts (including bifurcated embedded derivative)

These derivatives are measured at their fair values using internal valuation techniques as no quoted market prices exist for such instruments. The principal technique used to value these instruments is the use of discounted cash flows. The key inputs include interest rate yield curves, foreign exchange rates, Credit Default Spread (“CDS”), and the spot price of the underlying instruments.

Interest rate swap contracts

These derivatives are measured at their fair values, computed using discounted cash flows based on observable market inputs which include interest rate yield curves and payment dates.

Currency forward contracts

These derivatives are measured at their fair values, computed using discounted cash flows based on observable market inputs which include foreign exchange rates, payment dates and the spot price of the underlying instruments.

Long-term financial assets and liabilities:

• Long-term fixed-rate and variable-rate financial liabilities (unquoted loans and bonds payable)

The fair value of these financial liabilities is determined by discounting future cash flows using applicable rates from observable current market transactions for instruments with similar terms, credit risk and remaining maturities.

• Other long-term financial assets and liabilities (due from / to related parties, finance lease receivable / obligation under finance lease, other long-term investments and other non-current financial assets)

Estimated fair value is based on discounted value of future cash flows adjusted to reflect counterparty risk (for financial assets) and the Group’s own credit risk (for financial liabilities) and using risk-free rates for similar instruments.

F-93

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

• Financial instruments quoted in an active market

The fair value of the bonds issued by the Company which are traded in an active market is determined with reference to their quoted market prices.

For equity investments classified as available-for-sale, the fair value is determined based on the latest market quotation as published by the Indonesia Stock Exchange as of January 1, 2011 and December 31, 2011 and 2012.

Fair Value Hierarchy

Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurements. The assessment of the significance of a particular input to the fair value measurements requires judgment, and may affect the valuation of the assets and liabilities being measured and their placement within the fair value hierarchy.

The best evidence of fair value is quoted prices in an active market. If the market for a financial instrument is not active, an entity establishes fair value by using a valuation technique. The objective of using a valuation technique is to establish what the transaction price would have been on the measurement date in an arm’s length exchange motivated by normal business considerations. Valuation techniques include using recent arm’s length market transactions between knowledgeable, willing parties, if available, reference to the current fair value of another instrument that is substantially the same, discounted cash flow analysis and option pricing models. If there is a valuation technique commonly used by market participants to price the instrument and that technique has been demonstrated to provide reliable estimates of prices obtained in actual market transactions, the entity uses that technique. The chosen valuation technique makes maximum use of market inputs and relies as little as possible on entity-specific inputs. It incorporates all factors that market participants would consider in setting a price and is consistent with accepted economic methodologies for pricing financial instruments. Periodically, the Company calibrates the valuation technique and tests it for validity using prices from any observable current market transactions in the same instrument (i.e., without modification or repackaging) or based on any available observable market data.

The Company’s fair value hierarchy as of January 1, 2011 and December 31, 2011 and 2012 are as follows:

	January 1, 2011
	TOTAL		Quoted prices in active markets for identical assets or liabilities (Level 1)		Significant and observable inputs, directly or indirectly (Level 2)		Significant unobservable inputs (Level 3)
Current Financial Assets
Derivative assets		69,334		—		69,334		—
Total Financial Assets		69,334		—		69,334		—
Current Financial Liabilities
Derivative liabilities		215,403		—		215,403		—
Embedded derivatives		54,595		—		54,595		—
Total Financial Liabilities		269,998		—		269,998		—

F-94

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

	December 31, 2011
	TOTAL		Quoted prices in active markets for identical assets or liabilities (Level 1)		Significant and observable inputs, directly or indirectly (Level 2)		Significant unobservable inputs (Level 3)
Current Financial Assets
Derivative assets		159,349		—		159,349		—
Total Financial Assets		159,349		—		159,349		—
Current Financial Liabilities
Derivative liabilities		138,189		—		138,189		—
Embedded derivatives		49,518		—		49,518		—
Total Financial Liabilities		187,707		—		187,707		—
	December 31, 2012
	TOTAL		Quoted prices in active markets for identical assets or liabilities (Level 1)		Significant and observable inputs, directly or indirectly (Level 2)		Significant unobservable inputs (Level 3)
Current Financial Assets
Derivative assets		69,654		—		69,654		—
Non-Current Financial Assets
Other non-current financial assets—net		1,367,010		1,367,010		—		—
Total Financial Assets		1,436,664		1,367,010		69,654		—
Current Financial Liabilities
Derivative liabilities		81,241		—		81,241		—
Total Financial Liabilities		81,241		—		81,241		—

During the years ended December 31, 2010, 2011 and 2012, there were no transfers between Level 1 and Level 2 fair value measurements.

21. EMPLOYEE BENEFIT OBLIGATIONS

This account consists of the non-current portions of employee benefit obligations as follows:

			December 31,
	January 1, 2011		2011		2012
Post-retirement healthcare (Notes 17 and 29)		639,271		555,752		632,735
Labor Law 13 (Notes 17 and 28)		187,944		194,329		249,313
Service award (Note 17)		43,058		35,071		41,479
Accumulated leave benefits		2,134		2,161		2,697
Total		872,407		787,313		926,224

F-95

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

22. CAPITAL STOCK

The Company’s capital stock ownership as of January 1, 2011 and December 31, 2011 and 2012 are as follows:

Stockholders	Number of Shares Issued and Fully Paid		Amount		Percentage of Ownership (%)
January 1, 2011
A Share
Government		1		—		—
B Shares
Qatar Telecom (Qtel Asia) Pte. Ltd.		3,532,056,600		353,206		65.00
Government		776,624,999		77,662		14.29
SKAGEN Funds (SKAGEN AS)		277,824,400		27,782		5.11
Director:
Fadzri Sentosa		10,000		1		0.00
Others (each holding below 5%)		847,417,500		84,742		15.60
Total		5,433,933,500		543,393		100.00
December 31, 2011
A Share
Government		1		—		—
B Shares
Qatar Telecom (Qtel Asia) Pte. Ltd.		3,532,056,600		353,206		65.00
Government		776,624,999		77,662		14.29
SKAGEN Funds (SKAGEN AS)		305,498,450		30,550		5.62
Director:
Fadzri Sentosa		10,000		1		0.00
Others (each holding below 5%)		819,743,450		81,974		15.09
Total		5,433,933,500		543,393		100.00
December 31, 2012
A Share
Government		1		—		—
B Shares
Qatar Telecom (Qtel Asia) Pte. Ltd.		3,532,056,600		353,206		65.00
Government		776,624,999		77,662		14.29
SKAGEN Funds (SKAGEN AS) (Note 37)		299,382,400		29,938		5.51
Director:
Fadzri Sentosa		10,000		1		0.00
Others (each holding below 5%)		825,859,500		82,586		15.20
Total		5,433,933,500		543,393		100.00

F-96

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

The “A” share is a special share held by the Government and has special voting rights. The material rights and restrictions which are applicable to the “B” shares are also applicable to the “A” share, except that the Government may not transfer the “A” share, which has a veto right with respect to (i) amendment to the objective and purposes of the Company; (ii) increase of capital without pre-emptive rights; (iii) merger, consolidation, acquisition and demerger; (iv) amendment to the provisions regarding the rights of “A” share as stipulated in the Articles of Association; and (v) dissolution, bankruptcy and liquidation of the Company. The “A” share also has the right to appoint one director and one commissioner of the Company.

23. REVENUES

This account consists of the following:

	2010 (Restated)			2011 (Restated)			2012
Cellular
Usage charges		7,943,960			8,203,788			8,629,697
Value-added services		7,106,788			7,502,140			7,868,391
Interconnection services		1,252,751			1,182,384			2,174,964
Tower leasing (Note 34g)		251,981			419,720			504,857
Monthly subscription charges		132,974			134,032			136,429
Connection fee		8,115			14,217			12,588
Sale of blackberry handsets		34,956			1,706			233
Upfront discount and customer loyalty program (Note 2f5.1)		(1,033,588	)		(1,116,471	)		(1,022,262	)
Others		184,160			245,869			184,432
Sub-total		15,882,097			16,587,385			18,489,329
MIDI
Internet Protocol Virtual Private Network (IP VPN)		605,685			695,947			711,427
Internet		519,553			375,743			422,099
World link and direct link		278,788			294,956			314,878
Multiprotocol Label Switching (MPLS)		66,579			89,937			304,868
Application services		168,196			192,562			251,893
Satellite lease		136,008			150,894			213,052
Value-added services		158,984			264,569			173,940
Leased line		200,947			263,723			150,400
Frame net		227,051			123,249			135,761
Digital data network		94,686			103,098			112,597
TV link		5,126			6,127			6,016
Others		130,198			133,466			112,867
Sub-total		2,591,801			2,694,271			2,909,798
Fixed Telecommunications
International Calls		993,165			934,021			801,442
Fixed Line		174,157			123,185			121,735
Fixed Wireless		110,849			192,776			98,273
Sub-total		1,278,171			1,249,982			1,021,450
Total		19,752,069			20,531,638			22,420,577

F-97

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

The details of net revenue received from agency relationships consist of the following:

	2010			2011			2012
Gross revenues		7,806,875			8,081,500			7,966,505
Compensation to value added service provider		(700,087	)		(579,360	)		(98,114	)
Net revenues		7,106,788			7,502,140			7,868,391

Revenues from related parties amounted to Rp1,640,591, Rp1,554,780 and Rp1,812,619 for the years ended December 31, 2010, 2011 and 2012, respectively. These amounts represent 8.31%, 7.57% and 8.08% of total revenues in 2010, 2011 and 2012, respectively (Note 30).

The revenues from interconnection services are presented on a gross basis (Note 2f5.1).

24. EXPENSES—COST OF SERVICES

The balance of this account for the years ended December 31, 2010, 2011 and 2012 consists of the following:

	2010 (Restated)		2011 (Restated)		2012
Interconnection		1,735,942		1,706,521		2,557,775
Radio frequency fee (Note 34i)		1,695,717		1,755,852		1,961,377
Utilities		798,300		822,784		842,963
Maintenance		943,503		921,990		829,757
Rent (Note 34h)		551,569		612,348		726,872
Blackberry access fee		197,434		371,229		519,611
Leased circuits		377,580		331,390		349,114
USO		214,636		228,693		273,943
Cost of SIM cards and pulse reload vouchers		259,323		285,812		234,239
Installation		133,746		141,420		169,440
Concession fee		112,404		122,178		141,111
Delivery and transportation		84,075		83,073		122,348
License		31,543		32,225		54,177
Communication network		12,363		6,221		53,956
Billing and collection		54,816		57,780		41,767
Cost of handsets and modems		74,266		12,500		12,392
Others		22,046		55,391		14,894
Total		7,299,263		7,547,407		8,905,736

Interconnection relates to the expenses for the interconnection between the Company’s telecommunications networks and those owned by Telkom or other telecommunications carriers (Note 2f5).

F-98

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

25. EXPENSES—PERSONNEL

The balance of this account for the years ended December 31, 2010, 2011 and 2012 consists of the following:

	2010			2011			2012
Salaries		492,452			472,826			547,923
Incentives and other employee benefits		301,852			282,860			325,312
Employee income tax		131,630			260,104			167,205
Bonuses		236,950			199,043			127,746
Post-retirement healthcare cost (income) (Note 29)		104,600			(74,253	)		92,656
Separation, appreciation and compensation expense under Labor Law No. 13/2003 (Note 29)		42,833			10,344			57,758
Medical expense		69,509			60,819			56,782
Pension (Note 29)		45,688			15,943			24,719
Severance benefit under Voluntary Separation Scheme (“VSS”) *		—			579,301			6,330
Early retirement **		16,253			15,170			1,210
Outsourcing		60,858			36,264			—
Post-retirement benefit of salary continuation before retirement (Note 21) ***		(96,820	)		—			—
Others		29,930			54,226			19,553
Total		1,435,735			1,912,647			1,427,194

* On January 20 and January 2, 2012, the Company’s and Lintasarta’s Boards of Directors issued Directors’ Decree No. 003/Direksi/2011 and Directors’ Decree No. 015/Direksi/40000/2012, respectively, regarding the Organizational Restructuring Program through an offering scheme on the basis of mutual agreement between the Company/Lintasarta and certain employees (VSS), that became effective on the same date. For the year ended December 31, 2011, there were 994 and 54 employees of the Company and Lintasarta, respectively, who availed themselves of the scheme, and the benefits paid by the Company and Lintasarta amounted to Rp566,034 and Rp13,267, respectively. For the year December 31, 2012, there were 24 employees of Lintasarta, who availed themselves of the scheme and the benefits paid amounted to Rp6,330.

** On June 27, 2006, the Company’s Directors issued Decree No. 051/DIREKSI/2006, “Additional Benefits for Voluntarily Resigned Employees”. Under this decree, employees qualified for early retirement and who voluntarily resigned after the approval from the Board of Directors were given benefits of additional remuneration, traveling and training package. For the years ended December 31, 2011 and 2010, there were 9 and 19 employees, respectively, who took the option.

*** On December 31, 2010, the Company and its employees’ union reached a collective labor agreement (“CLA”) on the revocation of post-retirement benefit of salary continuation before retirement effective January 1, 2011. This revocation eliminated the Company’s legal or constructive obligation for the benefit.

The personnel expenses capitalized to properties under construction and installation during the years ended December 31, 2010, 2011 and 2012 amounted to Rp38,668, Rp46,575 and Rp52,339, respectively.

F-99

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

26. EXPENSES—GENERAL AND ADMINISTRATION

The balance of this account for the years ended December 31, 2010, 2011 and 2012 consists of the following:

	2010 (Restated)		2011 (Restated)		2012
Professional fees		109,374		109,523		186,886
Rent		120,428		113,277		117,845
Transportation		64,485		65,807		61,231
Provision for impairment of receivables (Note 5)		67,041		41,051		56,163
Insurance		39,807		44,539		37,582
Office		48,370		34,956		28,705
Social activities		24,991		16,620		27,683
Training, education and research		18,541		23,371		26,443
Utilities		16,692		14,069		14,636
Public relation		10,465		9,262		13,084
Communications		9,749		10,433		7,589
Others (each below Rp10,000)		55,196		66,622		47,693
Total		585,139		549,530		625,540

27. OTHER EXPENSES—FINANCING COST

The balance of this account for the years ended December 31, 2010, 2011 and 2012 consists of the following:

	2010 (Restated)		2011 (Restated)		2012
Interest on loans		2,080,274		1,700,091		1,709,946
Finance charges under finance lease		64,967		133,322		261,458
Amortization of debt and bonds / notes issuance costs, consent solicitation fees and discount (Notes 14, 18 and 19)		90,116		83,444		88,878
Excess of purchase price over nominal value due to redemption of GN 2010 and GN 2012		96,487		—		—
Bank charges		4,751		6,152		5,812
Interest expenses from Lintasarta’s USO Project		1,535		6,345		11,256
Total		2,338,130		1,929,354		2,077,350

28. GAIN ON TOWER SALE

On February 7, 2012, the Company entered into an Asset Sale Agreement with PT Tower Bersama Infrastructure Tbk and its subsidiary, PT Solusi Menara Bersama (collectively referred to as “Tower Bersama”), whereby the Company agreed to sell 2,500 of its telecommunication towers to Tower Bersama for a total consideration of US$518,500, consisting of US$406,000 to be paid upfront and a maximum potential deferred payment of US$112,500. The upfront payment includes PT Tower Bersama Infrastructure Tbk’s shares of not

F-100

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

less than 5% of the increase in its capital stock (upon the Rights Issue of PT Tower Bersama Infrastructure Tbk). Based on the agreement, the Company also agreed to lease back the spaces in the 2,500 telecommunication towers for 10 years period with fixed monthly lease rate of US$1,300 per tower slot (in full amount). The leases have an option to be renewed for a further 10 years.

On August 2, 2012, the Company and Tower Bersama closed the sale and leaseback transaction of 2,500 telecommunication towers. On the closing date of such transaction, the Company received cash amounting to US$326,289 (equal to Rp3,092,894) and obtained 5% ownership (equal to 239,826,310 shares) in Tower Bersama with the value of US$103,101 (equal to Rp977,292) (Note 12).

The total consideration of US$429,390 (equal to Rp4,070,187) is allocated to the sales of property and equipment amounting to Rp3,870,600 and the remainder is allocated to prepaid land lease and existing tower lease contracts from the 2,500 towers. The total carrying amount of the separately identifiable components of the transaction is Rp1,534,494 which includes the carrying amount of property and equipment amounting to Rp1,372,674. As of closing date, the Company recorded the excess of the selling price over the carrying amounts amounting to Rp2,535,693 (including the Rp2,497,926 from the sale of property and equipments) as “Gain on Sale of Towers” of Rp1,125,192, and “Deferred Gain on Sales and Leaseback” of Rp1,410,501. As of December 31, 2012, the Company recognized total “Gain on Sale of Towers” of Rp1,183,963, which includes the amortization of the “Deferred Gain on Sales and Leaseback” whose outstanding balance as of December 31, 2012 is Rp1,351,730. The deferred gain will be amortized over the term of the lease, being 10 years.

29. PENSION PLAN

The Company, Satelindo and Lintasarta have defined benefit and defined contribution pension plans covering substantially all of their qualified permanent employees.

Defined Benefit Pension Plan

The Company, Satelindo and Lintasarta provide defined benefit pension plans to their respective employees under which pension benefits to be paid upon retirement are based on the employees’ most recent basic salary and number of years of service. PT Asuransi Jiwasraya (“Jiwasraya”), a state-owned life insurance company, manages the plans. Pension contributions are determined by periodic actuarial calculations performed by Jiwasraya.

Based on an amendment dated December 22, 2000 of the Company’s pension plan, which was further amended on March 29, 2001, the benefits and premium payment pattern were changed. Before the amendment, the premium was regularly paid annually until the plan would be fully funded and the benefits consisted of retirement benefit (regular monthly or lump-sum pension) and death insurance. In conjunction with the amendment, the plan would be fully funded after making installment payments up to January 2002 of the required amount to fully fund the plan determined as of September 1, 2000. The amendment also includes an additional benefit in the form of thirteenth-month retirement benefit, which is payable annually 14 days before Idul Fitri (“Moslem Holiday”).

The amendment covers employees registered as participants of the pension plan as of September 1, 2000 and includes an increase in basic salary pension by 9% compounded annually starting from September 1, 2001. The amendment also stipulates that there will be no increase in the premium even in cases of mass employee terminations or changes in marital status.

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PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

The total premium installments based on the amendment amounted to Rp355,000 and were paid on due dates.

On March 1, 2007, the Company entered into an agreement with Jiwasraya to provide defined death insurance plan to 1,276 employees as of January 1, 2007, who are not covered by the defined benefit pension plan as stated above. Based on the agreement, a participating employee will receive:

• Expiration benefit equivalent to the cash value at the normal retirement age, or

• Death benefit not due to accident equivalent to 100% of insurance money plus cash value when the employee dies not due to accident, or

• Death benefit due to accident equivalent to 200% of insurance money plus cash value when the employee dies due to accident.

The premium of Rp7,600 was fully paid on March 29, 2007. Subsequently, in August 2007, February to December 2008, January to December 2009, January to December 2010, January to December 2011 and January to December 2012, the Company made payments for additional premium of Rp275 for additional 55 employees, Rp805 for additional 161 employees, Rp415 for additional 81 employees, Rp120 for additional 14 employees, Rp378 for additional 41 employees and Rp883 for additional 140 employees, respectively.

On June 25, 2003, Satelindo entered into an agreement with Jiwasraya to amend the benefits and premium payment pattern of the former’s pension plan. The amendment covers employees registered as participants of the pension plan as of December 25, 2002 up to June 25, 2003. Other new conditions include the following:

• An increase in pension basic salary at 6% compounded annually starting from December 25, 2002

• Thirteenth-month retirement benefit, which is payable annually 14 days before Idul Fitri

• An increase in periodic payment of retirement benefit at 6% compounded annually starting one year after receiving periodic retirement benefit for the first time

• If the average annual interest rate of time deposits of government banks exceeds 15%, the participants’ retirement benefit will be increased by a certain percentage in accordance with the formula agreed by both parties.

On April 15, 2005, Lintasarta entered into an agreement with Jiwasraya to replace their existing agreement. Based on the new agreement, the benefits and premium payment pattern were changed. This agreement is effective starting January 1, 2005. The total premium installments based on the agreement amount to Rp61,623, which is payable in 10 annual installments starting 2005 until 2015.

The new agreement covers employees registered as participants of the pension plan as of April 1, 2003. The conditions under the new agreement include the following:

• An increase in pension basic salary by 3% (previously was estimated at 8%) compounded annually starting April 1, 2003

• An increase in periodic payment of retirement benefit at 5% compounded annually starting one year after receiving periodic retirement benefit for the first time

• If the average annual interest rate of time deposits of government banks exceeds 15%, the participants’ retirement benefit will be increased by a certain percentage in accordance with the formula agreed by both parties.

F-102

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

On May 2, 2005, Lintasarta entered into an agreement with Jiwasraya to amend the above agreement. The amendment covers employees registered as participants of the pension plan as of April 1, 2003 up to November 30, 2004 with additional 10 annual premium installments totalling Rp1,653 which are payable starting 2005 until 2015.

The contributions made by Lintasarta to Jiwasraya amounted to Rp9,653 each for the years ended December 31, 2010, 2011 and 2012, respectively.

The net periodic pension cost for the pension plans of the Company and Lintasarta for the years ended December 31, 2010, 2011 and 2012 was calculated based on the actuarial valuations as of December 31, 2010, 2011 and 2012, respectively. The actuarial valuations were prepared by an independent actuary, using the projected-unit-credit method and applying the following assumptions:

	2010			2011			2012
Annual discount rate		8.5 - 9.0	%		7.0 - 7.5	%		6.0	%
Expected annual rate of return on plan assets		4.5 - 9.0	%		4.5 - 9.0	%		4.5 - 8.0	%
Annual rate of increase in compensation		3.0 - 9.0	%		3.0 - 9.0	%		3.0 - 9.0	%
Mortality rate (Indonesian Mortality Table—TMI)		TMI 1999			TMI 1999			TMI 2011

a. The composition of the net periodic pension cost for the years ended December 31, 2010, 2011 and 2012 is as follows:

	2010			2011			2012
Interest cost		74,558			47,975			31,936
Service cost		41,749			31,006			28,836
Settlement loss		—			4,655			2,407
Amortization of unrecognized actuarial loss		850			1,194			1,185
Return on plan assets		(71,469	)		(52,213	)		(41,086	)
Curtailment loss (gain)		—			(16,674	)		1,441
Net periodic pension cost (Note 25)		45,688			15,943			24,719

b. The funded status of the plans as of January 1, 2011 and December 31, 2011 and 2012 is as follows:

				December 31,
	January 1, 2011			2011			2012
Plan assets at fair value		852,958			538,902			576,335
Projected benefit obligation		(750,625	)		(463,074	)*		(554,209	)
Excess of plan assets over projected benefit obligation		102,333			75,828			22,126
Unrecognized actuarial loss		10,928			29,464			68,175
Total prepaid pension cost		113,261			105,292			90,301

* net of curtailment effect during 2011 due to VSS (Note 25)

F-103

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

c. Movements in the fair value of plan assets during the years ended December 31, 2010, 2011 and 2012 are as follows:

December 31, 2010	The Company			Lintasarta			Total
Fair value of plan assets at beginning of year		763,244			50,344			813,588
Expected return on plan assets		67,149			4,320			71,469
Actuarial loss on plan assets		(12,283	)		(2,677	)		(14,960	)
Contributions		120			9,653			9,773
Actual benefits paid		(24,566	)		(2,346	)		(26,912	)
Fair value of plan assets at end of year		793,664			59,294			852,958

December 31, 2011	The Company			Lintasarta			Total
Fair value of plan assets at beginning of year		793,664			59,294			852,958
Expected return on plan assets		47,175			5,038			52,213
Actuarial gain (loss) on plan assets		14,651			(610	)		14,041
Contributions		378			9,653			10,031
Actual benefits paid		(378,978	)		(11,363	)		(390,341	)
Fair value of plan assets at end of year		476,890			62,012			538,902
December 31, 2012	The Company			Lintasarta			Total
Fair value of plan assets at beginning of year		476,890			62,012			538,902
Expected return on plan assets		37,479			3,607			41,086
Actuarial gain (loss) on plan assets		7,815			(3,175	)		4,640
Actual benefits paid		(9,751	)		(9,078	)		(18,829	)
Contributions		883			9,653			10,536
Fair value of plan assets at end of year		513,316			63,019			576,335

d. Movements in the present value of the defined benefit obligation during the years ended December 31, 2010, 2011 and 2012 are as follows:

December 31, 2010	The Company			Lintasarta			Total
Benefit obligation at beginning of year		684,611			41,816			726,427
Interest cost		70,279			4,279			74,558
Current service cost		38,375			3,374			41,749
Actuarial loss (gain) on obligation		(156,345	)		2,912			(153,433	)
Actual benefits paid		(24,102	)		(2,166	)		(26,268	)
Effect of changes in actuarial assumptions		87,592			—			87,592
Present value of obligation at end of year		700,410			50,215			750,625

F-104

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

December 31, 2011	The Company			Lintasarta			Total
Benefit obligation at beginning of year		700,410			50,215			750,625
Interest cost		43,786			4,189			47,975
Current service cost		27,167			3,839			31,006
Actuarial loss (gain) on obligation		(12,066	)		4,315			(7,751	)
Effect of settlement		(358,597	)		(9,080	)		(367,677	)
Actual benefits paid		(18,750	)		(1,857	)		(20,607	)
Effect of curtailment		(18,886	)		1,645			(17,241	)
Effect of changes in actuarial assumptions		46,744			—			46,744
Present value of obligation at end of year		409,808			53,266			463,074

December 31, 2012	The Company			Lintasarta			Total
Benefit obligation at beginning of year		409,808			53,266			463,074
Interest cost		28,346			3,590			31,936
Current service cost		25,617			3,219			28,836
Actuarial loss on obligation		2,434			7,632			10,066
Effect of settlement		—			(4,360	)		(4,360	)
Actual benefits paid		(9,751	)		(3,909	)		(13,660	)
Effect of curtailment		—			917			917
Effect of changes in actuarial assumptions		37,400			—			37,400
Present value of obligation at end of year		493,854			60,355			554,209

e. Movements in the prepaid pension cost during the years ended December 31, 2010, 2011 and 2012 are as follows:

December 31, 2010	The Company			Lintasarta			Total
Prepaid pension cost at beginning of year		124,720			25,100			149,820
Net periodic pension cost		(41,505	)		(4,183	)		(45,688	)
Refund from Jiwasraya		(464	)		(180	)		(644	)
Contribution to Jiwasraya		120			9,653			9,773
Prepaid pension cost at end of year		82,871			30,390			113,261
December 31, 2011	The Company			Lintasarta			Total
Prepaid pension cost at beginning of year		82,871			30,390			113,261
Net periodic pension cost		(5,887	)		(10,056	)		(15,943	)
Refund from Jiwasraya		(1,631	)		(426	)		(2,057	)
Contribution to Jiwasraya		378			9,653			10,031
Prepaid pension cost at end of year		75,731			29,561			105,292

F-105

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

December 31, 2012	The Company			Lintasarta			Total
Prepaid pension cost at beginning of year		75,731			29,561			105,292
Contribution to Jiwasraya		883			9,653			10,536
Net periodic pension cost		(16,484	)		(8,235	)		(24,719	)
Refund from Jiwasraya		—			(808	)		(808	)
Prepaid pension cost at end of year		60,130			30,171			90,301

f. Prepaid pension cost consists of:

	January 1, 2011		December 31,
			2011		2012
Current portion (presented as part of “Prepaid Expenses”)
The Company		1,401		1,730		1,224
Lintasarta		516		381		232
		1,917		2,111		1,456
Long-term portion (presented as “Long-termpre paid pension—net of current portion”)
The Company		81,470		74,001		58,906
Lintasarta		29,874		29,180		29,939
		111,344		103,181		88,845
Total prepaid pension cost		113,261		105,292		90,301

The major categories of plan assets as a percentage of the fair value of total plan assets are as follows:

	January 1, 2011			December 31,
				2011			2012
Investment in mutual fund		78.90	%		78.11	%		75.34	%
Investment in time deposits		12.16	%		12.50	%		12.13	%
Investment in shares and properties		3.87	%		4.19	%		7.10	%
Investment in debt securities		5.06	%		5.19	%		5.43	%
Other investments		0.01	%		0.01	%		0.00	%

The overall expected rate of return on assets is determined based on the market expectations prevailing on that date, applicable to the period over which the obligation is to be settled. There has been a significant change in the expected rate of return on assets due to the improved stock market scenario.

Defined Contribution Pension Plan

In May 2001 and January 2003, the Company and Satelindo assisted their employees in establishing their respective employees’ defined contribution pension plans, in addition to the defined benefit pension plan as mentioned above. Starting June 2004, the Company also assisted ex-IM3 employees in establishing their defined contribution pension plan. Under the defined contribution pension plan, the employees contribute 10%—20% of their basic salaries, while the Company does not contribute to the plans. Total contributions of the employees for the years ended December 31, 2010, 2011 and 2012 amounted to Rp46,557, Rp43,709 and Rp49,836, respectively. The plan assets are being administered and managed by seven financial institutions appointed by the Company and Satelindo, based on the choice of the employees.

F-106

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

Labor Law No. 13/2003

The Company, Lintasarta and IMM also accrue benefits under Labor Law No. 13/2003 (“Labor Law”) dated March 25, 2003. Their employees will receive the benefits under either this law or the defined benefit pension plan, depending upon the commencement date of their employment.

The net periodic pension cost under the Labor Law for the years ended December 31, 2010, 2011 and 2012 was calculated based on the actuarial valuations as of December 31, 2010, 2011 and 2012, respectively. The actuarial valuations were prepared by an independent actuary, using the projected-unit-credit method and applying the following assumptions:

	2010			2011			2012
Annual discount rate		8.5 - 9.0	%		7.5	%		6.0 - 6.5	%
Annual rate of increase in compensation		8.0 - 9.0	%		8.0 - 9.0	%		8.0 - 8.5	%

a. The composition of the periodic pension cost under the Labor Law for the years ended December 31, 2010, 2011 and 2012 is as follows:

	2010		2011			2012
Service cost		21,747		29,355			31,632
Interest cost		19,586		15,888			21,717
Amortization of unrecognized actuarial loss		1,500		18			4,602
Amortization of unrecognized past service cost		—		716			681
Immediate recognition of past service cost - vested benefit		—		—			(523	)
Curtailment gain		—		(35,633	)		(351	)
Net periodic pension cost under the Labor Law (Note 25)		42,833		10,344			57,758

b. The composition of the accrued pension cost under the Labor Law as of December 31, 2010, 2011 and 2012 is as follows:

	2010			2011			2012
Projected benefit obligation		217,754			291,135	*		367,641
Unrecognized actuarial loss		(17,245	)		(83,494	)		(105,413	)
Unrecognized past service cost		(9,632	)		(8,612	)		(7,795	)
Accrued pension cost		190,877			199,029			254,433

* net of curtailment effect during 2011 due to VSS (Note 25)

F-107

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

c. Movements in the present value of pension cost obligation under the Labor Law during the years ended December 31, 2010, 2011 and 2012 are as follows:

December 31, 2010	The Company			Lintasarta			IMM			Total
Benefit obligation at beginning of year		159,055			22,173			6,660			187,888
Actuarial loss (gain) on obligation		1,166			(890	)		804			1,080
Current service cost		17,661			1,967			2,119			21,747
Interest cost		16,574			2,319			693			19,586
Actual benefits paid		(2,150	)		(97	)		(102	)		(2,349	)
Effect of changes in actuarial assumption		(9,734	)		(1,132	)		668			(10,198	)
Present value of obligation at end of year		182,572			24,340			10,842			217,754
December 31, 2011	The Company			Lintasarta			IMM			Total
Benefit obligation at beginning of year		182,572			24,340			10,842			217,754
Actuarial loss (gain) on obligation		75,163			(5,182	)		(1,442	)		68,539
Current service cost		24,740			2,003			2,612			29,355
Interest cost		12,855			2,064			969			15,888
Actual benefits paid		(1,826	)		(111	)		(255	)		(2,192	)
Effect of curtailment		(38,828	)		(890	)		—			(39,718	)
Effect of changes in actuarial assumption		(3,688	)		1,936			3,261			1,509
Present value of obligation at end of year		250,988			24,160			15,987			291,135

December 31, 2012	The Company			Lintasarta			IMM			Total
Benefit obligation at beginning of year		250,988			24,160			15,987			291,135
Current service cost		25,711			3,289			2,632			31,632
Interest cost		18,776			1,775			1,166			21,717
Actuarial loss (gain) on obligation		(889	)		16,734			57			15,902
Actual benefits paid		(1,290	)		(186	)		(878	)		(2,354	)
Effect of curtailment		—			(395	)		—			(395	)
Immediate recognition of Past service cost		—			—			(523	)		(523	)
Effect of changes in actuarial assumption		6,114			3,112			1,301			10,527
Present value of obligation at end of year		299,410			48,489			19,742			367,641

F-108

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

d. Movements in the accrued pension cost under the Labor Law during the years ended December 31, 2010, 2011 and 2012 are as follows:

December 31, 2010	The Company			Lintasarta			IMM			Total
Accrued pension cost under the Labor Law at beginning of year		131,416			12,771			6,206			150,393
Periodic Labor Law cost		35,019			4,974			2,840			42,833
Benefit payment		(2,150	)		(97	)		(102	)		(2,349	)
Accrued pension cost under the Labor Law at end of year		164,285			17,648			8,944			190,877
December 31, 2011	The Company			Lintasarta			IMM			Total
Accrued pension cost under the Labor Law at beginning of year		164,285			17,648			8,944			190,877
Periodic Labor Law cost		2,754			3,952			3,638			10,344
Benefit payment		(1,826	)		(111	)		(255	)		(2,192	)
Accrued pension cost under the Labor Law at end of year		165,213			21,489			12,327			199,029
December 31, 2012	The Company			Lintasarta			IMM			Total
Accrued pension cost under the Labor Law at beginning of year		165,213			21,489			12,327			199,029
Periodic Labor Law cost		49,216			5,129			3,413			57,758
Benefit payment		(1,290	)		(186	)		(878	)		(2,354	)
Accrued pension cost under the Labor Law at end of year		213,139			26,432			14,862			254,433

As of January 1, 2011 and December 31, 2011 and 2012, the current portion of pension cost under the Labor Law included in accrued expenses (Note 17) amounted to Rp2,933, Rp4,700 and Rp5,119, respectively, and the non-current portion included in employee benefit obligations (Note 21) amounted to Rp187,944, Rp194,329 and Rp249,313, respectively.

Post-retirement Healthcare

The Company provides post-retirement healthcare benefits to its employees who leave the Company after the employees fulfill the early retirement requirement. The spouse and children who have been officially registered in the administration records of the Company are also eligible to receive benefits. If the employees die, the spouse and children are still eligible for the post-retirement healthcare until the spouse dies or remarries and the children reach the age of 25 or get married.

The utilization of post-retirement healthcare is limited to an annual maximum ceiling that refers to monthly pension from Jiwasraya as follows:

• 16 times the Jiwasraya monthly pension for a pensioner who receives monthly pension from Jiwasraya

F-109

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

• 16 times the equality monthly pension for a pensioner who became permanent employee after September 1, 2000

• 16 times the last monthly pension for a pensioner who retired after July 1, 2003 and does not receive Jiwasraya monthly pension.

The net periodic post-retirement healthcare cost for the years ended December 31, 2010, 2011 and 2012 was calculated based on the actuarial valuations as of December 31, 2010, 2011 and 2012. The actuarial valuations were prepared by an independent actuary, using the projected-unit-credit method and applying the following assumptions:

	2010			2011			2012
Annual discount rate		9.5	%		8.0	%		7.0	%
Ultimate cost trend rate		6.0	%		6.0	%		6.0	%
Next year trend rate		14.0	%		12.0	%		10.0	%
Period to reach ultimate cost trend rate		4 years			3 years			2 years

a. The composition of the periodic post-retirement healthcare cost for the years ended December 31, 2010, 2011 and 2012 is as follows:

	2010		2011			2012
Interest cost		65,919		68,955			54,484
Service cost		28,229		24,149			27,712
Amortization of unrecognized past service cost		10,452		9,096			7,740
Amortization of unrecognized actuarial loss		—		5,369			2,720
Curtailment gain		—		(181,822	)		—
Net periodic post-retirement healthcare cost (income) (Note 25)		104,600		(74,253	)		92,656

b. The composition of the accrued post-retirement healthcare cost as of January 1, 2011 and December 31, 2011 and 2012 is as follows:

				December 31,
	January 1, 2011			2011			2012
Projected benefit obligation		846,636			687,789	*		1,017,673
Unrecognized actuarial loss		(161,443	)		(103,679	)		(362,116	)
Unrecognized past service cost		(31,253	)		(15,401	)		(7,662	)
Accrued post-retirement healthcare cost		653,940			568,709			647,895

* net of curtailment effect during January—June 2011 due to VSS (Note 25)

F-110

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

c. Movements in the present value of defined benefit obligation during the years ended December 31, 2010, 2011 and 2012 are as follows:

	2010			2011			2012
Benefit obligation at beginning of year		605,660			846,636			687,789
Interest cost		65,919			68,955			54,484
Current service cost		28,229			24,149			27,712
Actual benefits paid		(12,465	)		(10,978	)		(13,470	)
Effect of changes in actuarial assumptions		197,867			150,330			239,705
Effect of curtailment		—			(230,600	)		—
Actuarial loss (gain) on obligation		(38,574	)		(160,703	)		21,453
Present value of obligation at end of year		846,636			687,789			1,017,673

d. Movements in the accrued post-retirement healthcare cost during the years ended December 31, 2010, 2011 and 2012 are as follows:

	2010			2011			2012
Beginning balance		561,805			653,940			568,709
Net periodic post-retirement healthcare cost		104,600			(74,253	)		92,656
Benefit payment		(12,465	)		(10,978	)		(13,470	)
Ending balance		653,940			568,709			647,895

As of January 1, 2011 and December 31, 2011 and 2012, the current portion of post-retirement healthcare cost included in accrued expenses (Note 17) amounted to Rp14,669, Rp12,957 and Rp15,160, respectively, and the non-current portion included in employee benefit obligations (Note 21) amounted to Rp639,271, Rp555,752 and Rp632,735, respectively.

e. The effect of a one percentage point change in assumed post-retirement healthcare cost trend rate would result in aggregate service and interest costs for the years ended December 31, 2010, 2011 and 2012 and accumulated post-retirement healthcare benefit obligation as of January 1, 2011 and December 31, 2011 and 2012 as follows:

	2010		2011		2012
Increase
Service and interest costs		116,581		118,454		82,196
			December 31,
	January 1, 2011		2011		2012
Accumulated post-retirement healthcare benefit obligation		1,030,938		844,612		1,270,669
	2010		2011		2012
Decrease
Service and interest costs		76,868		73,626		82,196
			December 31,
	January 1, 2011		2011		2012
Accumulated post-retirement healthcare benefit obligation		702,632		566,627		824,853

F-111

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

Amounts for the current annual period and previous four annual periods of employee benefits:

	Defined Benefit Pension Plan
	December 31,						January 1, 2011			December 31,
	2008			2009						2011			2012
The Company
Plan assets		763,700			763,244			793,664			476,890			513,316
Projected benefit obligation		(512,513	)		(684,611	)		(700,410	)		(409,808	)		(493,854	)
Excess of plan assets over projected benefit obligation		251,187			78,633			93,254			67,082			19,462
Experience gain (loss) adjustment arising on plan liabilities		10,588			(624	)		156,345			12,066			(2,434	)
Experience loss (gain) adjustment arising on plan assets		11,209			(37,546	)		12,283			(14,651	)		(7,815	)
Lintasarta
Plan assets		41,499			50,344			59,294			62,012			63,019
Projected benefit obligation		(28,726	)		(41,816	)		(50,215	)		(53,266	)		(60,355	)
Excess of plan assets over projected benefit obligation		12,773			8,528			9,079			8,746			2,664
Experience gain (loss) adjustment arising on plan liabilities		8,144			(7,808	)		(2,912	)		(4,315	)		(7,632	)
Experience loss (gain) adjustment arising on plan assets		2,026			1,632			2,677			610			3,175
	Labor Law No.13/2003
	December 31,						January 1, 2011			December 31,
	2008			2009						2011			2012
The Company
Projected benefit obligation		(141,316	)		(159,055	)		(182,572	)		(250,988	)		(299,410	)
Experience gain (loss) adjustment arising on plan liabilities		(27,284	)		3,316			(1,166	)		(75,163	)		889
Lintasarta
Projected benefit obligation		(11,464	)		(22,173	)		(24,340	)		(24,160	)		(48,489	)
Experience gain (loss) adjustment arising on plan liabilities		(2,285	)		78			890			5,182			(16,734	)
IMM
Projected benefit obligation		(3,674	)		(6,660	)		(10,842	)		(15,987	)		(19,742	)
Experience gain (loss) adjustment arising on plan liabilities		666			368			(804	)		1,442			(57	)
	Post-retirement Healthcare
	December 31,						January 1, 2011			December 31,
	2008			2009						2011			2012
The Company
Projected benefit obligation		(492,615	)		(605,660	)		(846,636	)		(687,789	)		(1,017,673	)
Experience gain (loss) adjustment arising on plan liabilities		150,730			37,176			38,574			160,703			(21,453	)

F-112

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

30. ACCOUNTS AND TRANSACTIONS WITH RELATED PARTIES

The details of the accounts and the significant transactions entered into with related parties (affiliates, unless otherwise indicated) are as follows:

	Amount						Percentage to Total Assets/ Liabilities (%)
	January 1, 2011 (Restated)		December 31, 2011 (Restated)		December 31, 2012		January 1, 2011 (Restated)		December 31, 2011 (Restated)		December 31, 2012
Cash and cash equivalents (Note 4)
Government-related entities:
State-owned banks		1,615,651		977,960		1,534,068		3.00		1.82		2.75
Accounts receivable—trade (Note 5)
Government-related entities:
State-owned companies		252,102		358,423		593,773		0.47		0.67		1.06
Ultimate parent company:
Qatar Telecom		2,827		6,927		23,509		0.00		0.01		0.05
Total		254,929		365,350		617,282		0.47		0.68		1.11
Less allowance for impairment of accounts receivable		47,640		47,107		42,632		0.09		0.09		0.08
Net		207,289		318,243		574,650		0.38		0.59		1.03
Prepaid frequency fee and licenses and others
Government-related entities:
State-owned companies		11,683		8,222		6,543		0.02		0.01		0.01
Governmental departments		—		205		84		—		0.00		0.00
Entity under significant influence:
Kopindosat		3,294		3,681		2,579		0.01		0.01		0.01
Total		14,977		12,108		9,206		0.03		0.02		0.02
Other current and non-current financial assets
Government-related entities:
State-owned banks		161,430		193,679		162,071		0.30		0.36		0.29
Governmental departments		87		87		87		0.00		0.00		0.00
Total		161,517		193,766		162,158		0.30		0.36		0.29
Due from related parties
Entity under significant influence:
Kopindosat		5,958		6,012		6,188		0.02		0.01		0.02
Government-related entities:
State-owned companies		1,693		1,583		1,870		0.00		0.00		0.00
Key management personnel:
Senior management		1,362		3,020		1,621		0.00		0.01		0.00
Ultimate parent company:
Qatar Telecom		54		54		694		0.00		0.00		0.00
Total		9,067		10,669		10,373		0.02		0.02		0.02
Less allowance for impairment of receivables		646		15		15		0.00		0.00		0.00
Net		8,421		10,654		10,358		0.02		0.02		0.02

F-113

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

	Amount						Percentage to Total Assets/ Liabilities (%)
	January 1, 2011 (Restated)		December 31, 2011 (Restated)		December 31, 2012		January 1, 2011 (Restated)		December 31, 2011 (Restated)		December 31, 2012
Long-term prepaid rentals
Government-related entities:
State-owned companies		24,672		21,587		21,346		0.05		0.04		0.04
Entity under significant influence:
Kopindosat		12,817		9,962		4,275		0.02		0.02		0.01
Total		37,489		31,549		25,621		0.07		0.06		0.05
Advances and long-term advances
Entities under significant influence:
PT Personel Alih Daya		—		12,148		—		—		0.02		—
Kopindosat		1,016		—		—		0.00		—		—
Government-related entities:
State-owned companies		3,705		44		—		0.01		0.00		—
Total		4,721		12,192		—		0.01		0.02		—
Long-term prepaid pension (Note 29)
Jiwasraya		111,344		103,181		88,845		0.21		0.19		0.16
Short-term loan (Note 14)
Government-related entities:
State-owned banks		—		1,499,256		299,529		—		4.35		0.83
Accounts payable—trade
Government-related entities:
State-owned companies		22,260		23,233		22,614		0.06		0.07		0.06
Ultimate parent company:
Qatar Telecom		—		348		36		—		0.00		0.00
Total		22,260		23,581		22,650		0.06		0.07		0.06
Procurement payable (Note 15)
Entities under significant influence:
PT Personel Alih daya		13,210		16,319		17,993		0.04		0.04		0.05
Kopindosat		22,123		9,872		11,875		0.06		0.03		0.03
Government-related entities:
State-owned companies		33,348		9,882		13,915		0.09		0.03		0.04
Total		68,681		36,073		43,783		0.19		0.10		0.12
Accrued expenses
Government-related entities:
State-owned companies		82,641		66,399		56,590		0.23		0.19		0.16
Entities under significant influence:
PT Personel Alih Daya		16,906		18,222		40,420		0.05		0.05		0.11
Kopindosat		13,838		5,817		10,265		0.04		0.02		0.03
Key management personnel:
Senior management		33,553		37,851		43,610		0.10		0.11		0.12
Total		146,938		128,289		150,885		0.42		0.37		0.42

F-114

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

	Amount						Percentage to Total Assets/ Liabilities (%)
	January 1, 2011 (Restated)		December 31, 2011 (Restated)		December 31, 2012		January 1, 2011 (Restated)		December 31, 2011 (Restated)		December 31, 2012
Due to related parties
Ultimate parent company:
Qatar Telecom		—		552		25,968		—		0.00		0.07
Government-related entities:
State-owned companies		20,609		14,928		16,821		0.06		0.04		0.05
Entity under significant influence:
Kopindosat		1,490		—		—		0.00		—		—
Total		22,099		15,480		42,789		0.06		0.04		0.12
Other current and non-current liabilities
Government-related entities:
Governmental departments		3,895		2,141		4,131		0.01		0.00		0.01
State-owned companies		8,118		6,455		—		0.02		0.02		—
Total		12,013		8,596		4,131		0.03		0.02		0.01
Loans payable (Note 18)
Government-related entities:
State-owned banks		1,297,045		998,843		—		3.68		2.90		—
	Amount						Percentage to Respective Income or Expenses (%)
	December 31, 2010 (Restated)		December 31, 2011 (Restated)		December 31, 2012		December 31, 2010 (Restated)		December 31, 2011 (Restated)		December 31, 2012
Revenues
Government-related entities:
State-owned companies		1,572,147		1,459,979		1,509,179		7.97		7.11		6.73
Governmental departments		31,923		24,823		224,219		0.16		0.12		1.00
Ultimate parent company:
Qatar Telecom		36,521		69,978		78,672		0.18		0.34		0.35
Entities under significant influence:
Kopindosat		—		—		549		—		—		0.00
Total		1,640,591		1,554,780		1,812,619		8.31		7.57		8.08
Expenses
Cost of services
Government-related entities:
State-owned companies		1,642,288		1,567,294		1,810,335		10.20		9.02		9.41
Entities under significant influence:
PT Personel Alih Daya		80,902		93,190		70,967		0.50		0.54		0.37
Kopindosat		59,205		121,456		24,298		0.37		0.70		0.13
Ultimate parent company:
Qatar Telecom		27,375		66,619		52,737		0.17		0.38		0.27
Total		1,809,770		1,848,559		1,958,337		11.24		10.64		10.18

F-115

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

	Amount									Percentage to Respective Income or Expenses (%)
	December  31, 2010 (Restated)			December 31, 2011 (Restated)			December 31, 2012			December  31, 2010 (Restated)			December 31, 2011 (Restated)			December 31, 2012
Personnel
Key management personnel:
Senior management Short-term employee benefits		117,282			102,156			147,439			0.73			0.59			0.76
Termination benefit		13,828			46,316			1,210			0.09			0.27			0.01
Other long-term benefits		796			16,481			14,860			0.00			0.09			0.08
Sub-total		131,906			164,953			163,509			0.82			0.95			0.85
Government-related entities:
State-owned companies		45,688			22,185			24,719			0.28			0.13			0.13
Entity under significant influence:
PT Personel Alih Daya		40,139			21,028			—			0.25			0.12			—
Total		217,733			208,166			188,228			1.35			1.20			0.98
Marketing
Entities under significant influence:
PT Personel Alih Daya		49,921			75,905			88,688			0.31			0.44			0.46
Kopindosat		11,725			15,953			21,230			0.07			0.09			0.11
Government-related entities:
State-owned companies		33			62			2			0.00			0.00			0.00
Total		61,679			91,920			109,920			0.38			0.53			0.57
General and administration
Entities under significant influence:
Kopindosat		26,072			24,294			22,676			0.16			0.14			0.12
PT Personel Alih Daya		17,914			17,971			14,838			0.11			0.10			0.08
Government- related entities:
State-owned companies		100,987			100,234			31,023			0.63			0.58			0.16
Total		144,973			142,499			68,537			0.90			0.82			0.36
Other income (expenses)
Government-related entities:
State owned banks		(121,782	)		(53,281	)		(20,491	)		(5.24	)		(2.91	)		(0.75	)

F-116

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

The relationship and nature of account balances/transactions with related parties are as follows:

No	Related Parties	Relationship	Nature of Account Balances/Transactions
1.	State-owned banks	Government— related entities	Cash and cash equivalents, other current and non-current financial and non-financial assets, short-term loan, loan payable and other income (expenses)
2.	State-owned companies	Government— related entities	Accounts receivable—trade, due from related parties, prepaid frequency fee and licenses and others, long-term prepaid rentals, advances and long-term advances, long-term prepaid pension, accounts payable—trade, procurement payable, accrued expenses, due to related parties, other current and non-current financial and non-financial liabilities, revenues, expenses—cost of services, expenses—personnel, expenses—general and administration and expenses—marketing
3.	Qatar Telecom	Ultimate parent company	Accounts receivable—trade, due from related parties, accounts payable—trade, due to related parties, revenues—fixed telecommunication and expenses—cost of services
4.	Governmental departments	Government— related entities	Prepaid frequency fee and licenses and others, other current and non-current financial and non-financial assets, other current and non-current financial and non-financial liabilities, revenues—MIDI
5.	Kopindosat	Entity under common significant influence	Prepaid frequency fee and licenses and others, due from related parties, advances and long-term advances, long-term prepaid rentals, procurement payable, accrued expenses, due to related parties, expenses—cost of services, expenses—general and administration and expenses—marketing
6.	Senior management	Key management personnel	Due from related parties, accrued expenses and expenses—personnel
7.	PT Personnel Alih Daya	Entity under common significant influence	Advances and long-term advances, procurement payable, accrued expenses, expenses—cost of services, expenses—personnel, expenses—general and administration and expenses—marketing

F-117

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

31. BASIC AND DILUTED EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share:

	2010			2011			2012
Numerator for basic and diluted earnings per share—profit for the year attributable to the Owners of the Company, as previously reported		824,637			1,009,080			365,649
Restatement		(12,049	)		(51,012	)		—
Numerator for basic and diluted earnings per share—profit for the year attributable to the Owners of the Company		812,588			958,068			365,649
Denominator for basic and diluted earnings per share—weighted-average number of shares outstanding during the year		5,433,933,500			5,433,933,500			5,433,933,500
Basic and diluted earnings per share		149.54			176.31			67.29
Basic and diluted earnings per ADS (50 B shares per ADS)		7,476.98			8,815.60			3,364.50

There are no potential dilutive outstanding shares as of December 31, 2010, 2011 and 2012.

32. DISTRIBUTION OF INCOME AND APPROPRIATION OF RETAINED EARNINGS

At the Company’s Annual Stockholders’ General Meeting (“ASGM”), the stockholders approved, among others, the appropriation of annual profit for reserve fund and cash dividend distribution, as follows, and the utilization of the remaining amount for reinvestment and working capital.

ASGM Date	Reserve Fund (Rp)		Dividend per Share (Rp)		Dividend Payment Date
2009 Profit
June 22, 2010		14,982		137.86		August 2, 2010
2010 Profit
June 24, 2011		—		59.55		August 5, 2011
2011 Profit
May 14, 2012		—		76.83		June 26, 2012

Dividend for the Government was paid in accordance with the prevailing laws and regulations in Indonesia.

On June 11 and June 26, 2012, the Company paid dividend amounting to Rp59,668 and Rp357,821, respectively, to the Government and other stockholders for the dividend declared on May 14, 2012.

F-118

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

33. DERIVATIVES

The Company entered into several swap and forward contracts. Listed below is the information related to the contracts and their fair values (net of credit risk adjustment) as of January 1, 2011 and December 31, 2011 and 2012:

				Fair Value (Rp)
							December 31,
		Notional Amount (US$)		January 1, 2011			2011			2012
				Receivable (Payable)			Receivable (Payable)			Receivable (Payable)
CrossCurrency Swap Contracts:
a.	Goldman Sach International (“GSI”)(1)		100,000		—			—			—
b.	GSI(1)		25,000		—			—			—
c.	GSI(1)		75,000		50,866			—			—
d.	Standard Chartered (“StandChart”)(7)		25,000		(12,055	)		(6,981	)		—
e.	StandChart(8)		25,000		(1,731	)		1,620			—
f.	StandChart(9)		25,000		9,443			12,608			—
g.	HSBC, Jakarta Branch(2)		25,000		—			—			—
h.	Merrill Lynch International Bank Limited, London Branch (“MLIB”)(2)		50,000		(2,234	)		—			—
i.	MLIB(6)		25,000 with decreasing amount		2,154			3,639			7,919
j.	MLIB(3)		25,000		3,778			—			—
k.	DBS(6)		25,000 with decreasing amount		3,093			4,271			7,962
l.	HSBC, Jakarta Branch		10,000		—			—			2,631
m.	Barclays Bank PLC (“Barclays”)		14,500		—			—			3,295
n.	HSBC, Jakarta Branch		14,000		—			—			4,338
o.	HSBC, Jakarta Branch		11,000		—			—			3,762
p.	GSI(3)		84,000		—			—			—
Sub-total					53,314			15,157			29,907

F-119

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

				Fair Value (Rp)
							December 31,
		Notional Amount (US$)		January 1, 2011			2011			2012
				Receivable (Payable)			Receivable (Payable)			Receivable (Payable)
InterestRate Swap Contracts:
q.	HSBC, Jakarta Branch		27,037 with decreasing amount		(13,100	)		(13,254	)		(11,613	)
r.	HSBC, Jakarta Branch		44,200 with decreasing amount		(29,027	)		(35,370	)		(38,260	)
s.	GSI		100,000		(90,273	)		(60,869	)		(25,287	)
t.	DBS		25,000 with decreasing amount		(9,238	)		(4,174	)		(1,391	)
u.	DBS		25,000 with decreasing amount		(9,343	)		(3,678	)		(1,244	)
v.	Bank of Tokyo MUFJ (“BTMUFJ”)		25,000 with decreasing amount		(6,656	)		(2,649	)		(894	)
w.	BTMUFJ		25,000 with decreasing amount		(5,885	)		(2,347	)		(804	)
x.	BTMUFJ		25,000 with decreasing amount		(5,297	)		(2,118	)		(735	)
y.	StandChart		40,000 with decreasing amount		(6,814	)		(2,692	)		(1,013	)
z.	DBS(11)		26,000 with decreasing amount		(4,966	)		(1,486	)		—
aa.	DBS(12)		26,000 with decreasing amount		(4,303	)		(1,282	)		—
ab.	BTMUFJ(10)		36,500 with decreasing amount		(7,347	)		(1,289	)		—
ac.	International Netherlands Group (“ING”) Bank N.V.(5)		25,000 with decreasing amount		(4,014	)		—			—
ad.	ING Bank N.V.(4)		33,500		(3,120	)		—			—
Sub-total					(199,383	)		(131,208	)		(81,241	)

⁽¹⁾ contract entered into in August 2005 and terminated in June 2011

⁽²⁾ contract entered into in August 2008 and terminated in June 2011

⁽³⁾ contract entered into in September 2008 and terminated in June 2011

⁽⁴⁾ contract entered into in April 2009 and settled in June 2011

⁽⁵⁾ contract entered into in March 2009 and settled in December 2011

⁽⁶⁾ In June 2012 and December 2011, the Company used the option to exercise US$2,000 in June 2012 and US$6,000 in December 2011 of the contract amount.

⁽⁷⁾ contract entered into in January 2006 and settled in June 2012

⁽⁸⁾ contract entered into in March 2006 and settled in June 2012

⁽⁹⁾ contract entered into in May 2006 and settled in June 2012

⁽¹⁰⁾ contract entered into in March 2009 and settled in June 2012

⁽¹¹⁾ contract entered into in December 2008 and settled in December 2012

⁽¹²⁾ contract entered into in January 2009 and settled in December 2012

F-120

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

				Fair Value (Rp)
						December 31,
		Notional Amount (US$)		January 1, 2011		2011		2012
				Receivable (Payable)		Receivable (Payable)		Receivable (Payable)
Currency Forward Contracts:
ae.	JP Morgan (13)		10,000		—		—		—
af.	DBS (13)		20,000		—		—		—
ag.	Deutche Bank (13)		20,000		—		—		—
ah.	Deutche Bank (13)		10,000		—		—		—
ai.	JP Morgan (13)		10,000		—		—		—
aj.	StandChart (13)		5,000		—		—		—
ak.	JP Morgan (13)		10,000		—		—		—
al.	PT Danareksa (Persero) (“Danareksa”) (13)		5,000		—		—		—
am.	JP Morgan (13)		5,000		—		—		—
an.	StandChart (13)		5,000		—		—		—
ao.	JP Morgan (13)		5,000		—		—		—
ap.	HSBC, Jakarta Branch (14)		5,000		—		—		—
aq.	HSBC, Jakarta Branch (15)		5,000		—		—		—
ar.	JP Morgan (14)		5,000		—		—		—
as.	HSBC, Jakarta Branch (14)		1,000		—		—		—
at.	HSBC, Jakarta Branch (14)		3,000		—		—		—
au.	HSBC, Jakarta Branch (16)		10,000		—		5,231		—
av.	JP Morgan (16)		2,000		—		1,011		—
aw.	StandChart (16)		3,000		—		3,902		—
ax.	JP Morgan (16)		9,500		—		4,832		—
ay.	HSBC, Jakarta Branch (17)		6,000		—		3,222		—
az.	HSBC, Jakarta Branch (17)		7,500		—		4,021		—
ba.	JP Morgan (18)		13,750		—		6,771		—
bb.	StandChart (19)		7,000		—		4,542		—
bc.	StandChart (19)		6,600		—		3,666		—
bd.	StandChart (20)		8,000		—		1,486		—
be.	DBS (16)		10,000		—		5,010		—
bf.	ING (16)		7,000		—		3,538		—
bg.	DBS (16)		7,000		—		3,528		—
bh.	DBS (20)		10,000		—		5,497		—
bi.	JP Morgan (20)		10,000		—		5,523		—
bj.	HSBC, Jakarta Branch (20)		10,000		—		4,909		—
bk.	ING (16)		10,000		—		5,330		—
bl.	ING (16)		13,000		—		6,960		—
bm.	DBS (17)		13,000		—		6,859		—
bn.	ING (18)		13,500		—		7,386		—
bo.	ING (16)		10,000		—		5,478		—
bp.	ING (16)		10,000		—		5,508		—
bq.	GSI (16)		8,000		—		4,558		—
br.	GSI (16)		13,000		—		7,550		—
bs.	Royal Bank of Scotland (“RBS”) (17)		12,000		—		6,370		—
bt.	GSI (17)		12,000		—		7,185		—
bu.	GSI (17)		12,500		—		7,338		—
bv.	HSBC (21)		2,000		—		—		—
bw.	HSBC (21)		14,000		—		—		—

F-121

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

				Fair Value (Rp)
							December 31,
		Notional Amount (US$)		January 1, 2011			2011		2012
				Receivable (Payable)			Receivable (Payable)		Receivable (Payable)
bx.	StandChart (22)		20,000		—			—		—
by.	HSBC (22)		18,500		—			—		—
bz.	DBS (21)		2,000		—			—		—
ca.	BNP Paribas (22)		2,000		—			—		—
cb.	GSI (22)		5,000		—			—		—
cc.	ING (22)		5,000		—			—		—
cd.	Barclays (23)		10,000		—			—		—
ce.	Barclays (23)		20,000		—			—		—
cf.	BNP Paribas (23)		20,000		—			—		—
cg.	ING		23,000		—			—		4,137
ch.	GSI		13,000		—			—		3,278
ci.	JP Morgan (23)		10,000		—			—		—
cj.	JP Morgan (24)		10,000		—			—		—
ck.	BNP Paribas		20,000		—			—		2,981
cl.	Barclays		20,000		—			—		3,254
cm.	BNP Paribas		20,000		—			—		3,675
cn.	JP Morgan		20,000		—			—		4,427
co.	ING		15,000		—			—		2,956
cp.	Barclays		15,000		—			—		2,166
cq.	DBS		15,000		—			—		1,983
cr.	DBS		20,000		—			—		2,621
cs.	JP Morgan		25,000		—			—		77
ct.	DBS		15,000		—			—		140
cu.	Barclays		26,000		—			—		1,850
cv.	JP Morgan		30,000		—			—		2,231
cw.	BNP Paribas		25,000		—			—		2,356
cx.	ING		15,000		—			—		1,615
Sub-total					—			137,211		39,747
Total					(146,069	)		21,160		(11,587	)

⁽¹³⁾ Contracts entered into in July 2011 and settled in December 2011

⁽¹⁴⁾ Contracts entered into in August 2011 and settled in November 2011

⁽¹⁵⁾ Contract entered into in August 2011 and settled in December 2011

⁽¹⁶⁾ Contracts entered into in August 2011 and settled in January 2012

⁽¹⁷⁾ Contracts entered into in August 2011 and settled in February 2012

⁽¹⁸⁾ Contracts entered into in August 2011 and settled in March 2012

⁽¹⁹⁾ Contracts entered into in August 2011 and settled in May 2012

⁽²⁰⁾ Contracts entered into in August 2011 and settled in June 2012

⁽²¹⁾ Contracts entered into in August 2012 and settled in November 2012

⁽²²⁾ Contracts entered into in August 2012 and settled in December 2012

⁽²³⁾ Contracts entered into in September 2012 and settled in December 2012

⁽²⁴⁾ Contracts entered into in October 2012 and settled in December 2012

F-122

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

The net changes in fair value of the swap contracts, currency forward contracts and embedded derivative (Note 18f), totaling (Rp448,831), Rp57,944 and Rp4,964 in 2010, 2011 and 2012, respectively, were credited or charged to “Gain (Loss) on Change in Fair Value of Derivatives—Net”, which is presented under Other Income (Expenses) in the consolidated statements of comprehensive income.

The following are the details of the contracts:

Cross Currency Swap Contracts

No.	Counter- parties	Contract Period and Swap Amount	Annual Swap Premium Rate	Swap Premium Payment Date	Amount of Swap Premium Paid/ Amortized (Rp)
					2010		2011		2012
a.	GSI (1)	May 13, 2005—November 5, 2010 Swap Rp832,250 for US$100,000	(i) Fixed rate of 6.96% per annum for US$50,000 and (ii) 6-month U.S. dollar LIBOR plus 2.62% per annum for US$50,000, netted with (a) 6-month U.S. dollar LIBOR per annum multiplied by US$11,750 during the period May 13, 2005 through May 13, 2008 and (b) the amount of US$11,750 on May 13, 2008. On May 14, 2008, the Company received from GSI the fixed amount of US$11,750 (equivalent to Rp109,099) related to the cross currency swap contract.	Every May 5 and November 5		46,136		—		—
b.	GSI (2)	May 13, 2005—November 5, 2010 Swap Rp245,000 for US$25,000	4.30% of US$25,000	Every May 5 and November 5		9,841		—		—

F-123

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

No.	Counter- parties	Contract Period and Swap Amount	Annual Swap Premium Rate	Swap Premium Payment Date	Amount of Swap Premium Paid/ Amortized (Rp)
					2010		2011		2012
c.	GSI (4)	August 22, 2005—June 22, 2012 The Company will swap the following: •   US$75,000 which is equal to US$75,000 multiplied by the lowest IDR/USD exchange rate within the period of August 22, 2005—June 22, 2012 if the IDR/USD spot rate at termination date is less than or equal to the lowest of IDR/USD exchange rate mentioned above plus Rp4,300 (in full amounts) •   US$75,000 which is equal to US$75,000 multiplied by IDR/USD spot rate at termination date minus Rp4,300 (in full amount) if IDR/USD spot rate at termination date is greater than the lowest of IDR/USD exchange rate mentioned above plus Rp4,300 (in full amounts)	3.28% of US$75,000	Every June 22 and December 22		22,866		10,689		—
d.	StandChart  (6)	January 11, 2006—June 22, 2012 Swap Rp236,250 for US$25,000	4.78% of US$25,000	Every June 22 and December 22		11,034		10,672		5,754
e.	StandChart (7)	March 15, 2006—June 22, 2012 Swap Rp228,550 for US$25,000	3.75% of US$25,000	Every June 22 and December 22		8,657		8,372		4,515
f.	StandChart (8)	May 12, 2006—June 22, 2012 Swap Rp217,500 for US$25,000	3.45% of US$25,000	Every June 22 and December 22		7,964		7,702		4,153
g.	HSBC (3)	August 8, 2006—November 5, 2010 Swap Rp225,000 for US$25,000	4.00% of US$25,000	Every May 5 and November 5		9,074		—		—

F-124

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

No.	Counter- parties	Contract Period and Swap Amount	Annual Swap Premium Rate	Swap Premium Payment Date	Amount of Swap Premium Paid/ Amortized (Rp)
					2010		2011		2012
h.	MLIB (5)	August 8, 2008—June 22, 2012 The Company will receive the following: •   zero amount if the IDR/USD spot rate at termination date is less than or equal to Rp8,950 to US$1 (in full amounts) •   certain U.S. dollar amount which is equal to US$50,000 multiplied by (1— Rp8,950 divided by IDR/USD spot rate) (in full amounts) if the IDR/USD spot rate at termination date is greater than Rp8,950 but is less than or equal to Rp11,000 to US$1 (in full amounts) •   certain U.S. dollar amount which is equal to US$50,000 multiplied by (Rp11,000—Rp8,950) divided by IDR/USD spot rate (in full amounts) if the IDR/USD spot rate at termination date is greater than Rp11,000 to US$1 (in full amounts)	4.22% of US$50,000	Every June 22 and December 22		23,965		11,326		—

⁽¹⁾ On November 5, 2010, this contract expired and the Company received settlement gain on the cross currency swap amounting to Rp59,925.

⁽²⁾ On November 5, 2010, this contract expired and the Company paid settlement loss on the cross currency swap amounting to (Rp21,881).

⁽³⁾ On November 5, 2010, this contract expired and the Company paid settlement loss on the cross currency swap amounting to (Rp2,550).

⁽⁴⁾ On June 28, 2011, this contract was terminated and the Company received settlement gain on the cross currency swap amounting to US$3,650 or equivalent to Rp31,379 on July 1, 2011.

⁽⁵⁾ On June 28, 2011, this contract was terminated and the Company paid settlement loss on the cross currency swap amounting to (US$1,456) or equivalent to (Rp12,519) on July 1, 2011.

⁽⁶⁾ On June 22, 2012, this contract expired and the Company received settlement gain on the cross currency swap amounting to Rp575.

⁽⁷⁾ On June 22, 2012, this contract expired and the Company received settlement gain on the cross currency swap amounting to Rp8,275.

⁽⁸⁾ On June 22, 2012, this contract expired and the Company received settlement gain on the cross currency swap amounting to Rp19,325.

⁽⁹⁾ On December 12, 2011, the Company used the option to exercise US$6,000 of the contract amount, and received settlement gain on the cross currency swap amounting to US$189 or equivalent to Rp1,716.

⁽¹⁰⁾ On June 12, 2012, this contract expired and the Company received zero settlement.

⁽¹¹⁾ On December 12, 2012, these contracts expired and the Company received zero settlement.

F-125

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

No.	Counter- parties	Contract Period and Swap Amount	Annual Swap Premium Rate	Swap Premium Payment Date	Amount of Swap Premium Paid/ Amortized (Rp)
					2010		2011		2012
i.	MLIB(9)(10)(11)	September 2, 2008 - June 12, 2013 The Company will receive the following: •    zero amount if the IDR/USD spot rate at termination date is less than or equal to Rp8,800 to US$1 (in full amounts) •    certain U.S. dollar amount as arranged in the contract multiplied by (IDR/USD spot rate - Rp8,800) divided by IDR/USD spot rate (in full amounts) if the IDR/USD spot rate at termination date is greater than Rp8,800 but is less than or equal to Rp12,000 to US$1 (in full amounts) •    certain U.S. dollar amount as arranged in the contract multiplied by (Rp3,200 divided by IDR/USD spot rate) (in full amounts) if the IDR/USD spot rate at termination date is greater than Rp12,000 to US$1 (in full amounts)	4.10% of US$25,000 up to June 12, 2011 , and 4.10% of decreasing U.S. dollar amount as arranged in the contract up to June 12, 2013	Every June 12 and December 12		11,852		9,968		5,806
j.	MLIB (12)	September 8, 2008 - June 22, 2012 The Company will receive the following: •    zero amount if the IDR/USD spot rate at termination date is less than or equal to Rp9,000 to US$1 (in full amounts) •    certain U.S. dollar amount which is equal to US$25,000 multiplied by (1 - Rp9,000 divided by IDR/USD spot rate) (in full amounts) if the IDR/USD spot rate at termination date is greater than Rp9,000 but is less than or equal to Rp11,000 to US$1 (in full amounts) •    certain U.S. dollar amount which is equal to US$25,000 multiplied by (Rp11,000 - Rp9,000) divided by IDR/USD spot rate (in full amounts) if the IDR/USD spot rate at termination date is greater than Rp11,000 to US$1 (in full amounts)	2.52% of US$25,000	Every June 22 and December 22		7,156		3,382		—

F-126

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

No.	Counter- parties	Contract Period and Swap Amount	Annual Swap Premium Rate	Swap Premium Payment Date	Amount of Swap Premium Paid/ Amortized (Rp)
					2010		2011		2012
k.	DBS (13)(14)(15)	September 10, 2008 - June 12, 2013 The Company will receive the following: •    zero amount if the IDR/USD spot rate at the scheduled settlement date is at or less than Rp8,800 to US$1 (in full amounts) •    certain U.S. dollar amount which is equal to U.S. dollar amount at scheduled settlement date multiplied by (IDR/USD spot rate - Rp8,800) divided by IDR/USD spot rate (in full amounts) if the IDR/USD spot rate at settlement date is greater than Rp8,800 and is at or less than Rp12,000 to US$1 (in full amounts) •    certain U.S. dollar amount which is equal to U.S. dollar amount at scheduled settlement date multiplied by (Rp12,000 - Rp8,800) divided by IDR/USD spot rate (in full amounts) if the IDR/USD spot rate at settlement date is greater than Rp12,000 to US$1 (in full amounts)	3.945% of US$25,000 up to June 12, 2011 , and 3.945% of decreasing U.S. dollar amount as arranged in the contract up to June 12, 2013	Every June 12 and December 12		9,044		8,727		4,440
l.	HSBC	August 23, 2012 - January 23, 2013 Swap Rp96,000 for US$10,000	3.00% of US$10,000	Upfront premium of US$300 (equivalent to Rp2,851) which was fully paid on August 27, 2012. The premium is amortized over the contract period.		—		—		2,423
m.	Barclays	August 23, 2012 - January 23, 2013 Swap Rp139,200 for US$14,500	2.94% of US$14,500	Upfront premium of US$426 (equivalent to Rp4,052) which was fully paid on August 27, 2012. The premium is amortized over the contract period.		—		—		3,443

⁽¹²⁾ On June 28, 2011, this contract was terminated and the Company paid settlement loss on the cross currency swap amounting to (US$194) or equivalent to (Rp1,666) on July 1, 2011.

⁽¹³⁾ On December 12, 2011, the Company used the option to exercise US$6,000 of the contract amount and received settlement gain on the cross currency swap amounting to US$189 or equivalent to Rp1,716.

⁽¹⁴⁾ On June 12, 2012 , the Company used the option to exercise US$2,000 of the contract amount and received settlement gain from the exercise amounting to US$140 or equivalent to Rp1,324.

⁽¹⁵⁾ On December 12, 2012, the Company used the option to exercise US$2,000 of the contract amount and received settlement gain from the exercise amounting to US$186 or equivalent to Rp1,793.

F-127

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

No.	Counter- parties	Contract Period and Swap Amount	Annual Swap Premium Rate	Swap Premium Payment Date	Amount of Swap Premium Paid/ Amortized (Rp)
					2010		2011		2012
n.	HSBC	August 23, 2012 - February 25, 2013 Swap Rp134,400 for US$14,000	3.20% of US$14,000	Upfront premium of US$448 (equivalent to Rp4,258) which was fully paid on August 27, 2012. The premium is amortized over the contract period.		—		—		2,976
o.	HSBC	August 23, 2012 - March 25, 2013 Swap Rp105,600 for US$11,000	3.70% of US$11,000	Upfront premium of US$407 (equivalent to Rp3,868) which was fully paid on August 27, 2012. The premium is amortized over the contract period.		—		—		2,350
p.	GSI (16)	December 16, 2008 - November 5, 2010 The Company will receive the following: • zero amount if the IDR/USD spot rate at termination date is less than or equal to Rp11,500 to US$1 (in full amounts) •   certain U.S. dollar amount which is equal to US$84,000 multiplied by (IDR/USD spot rate - Rp11,500 divided by IDR/USD spot rate) (in full amounts) if the IDR/USD spot rate at termination date is greater than Rp11,500 but is less than or equal to Rp15,000 to US$1 (in full amounts) •   certain U.S. dollar amount which is equal to US$84,000 multiplied by (Rp3,500 divided by IDR/USD spot rate) (in full amounts) if the IDR/USD spot rate at termination date is greater than Rp15,000 to US$1 (in full amounts)	Upfront premium of US$9,500 (equivalent to Rp105,212) which was fully paid on December 19, 2008. The premium is amortized over the contract period.	—		47,323		—		—
			Total			214,912		70,838		35,860

⁽¹⁶⁾ On November 5, 2010, this contract expired and the Company received zero settlement on the cross currency swap.

F-128

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

All cross currency swap contracts with GSI (contracts No. a, b and c) are structured to include credit-linkage with the Company as the reference entity and with the Company’s (i) bankruptcy, (ii) failure to pay on certain debt obligations or (iii) restructuring of certain debt obligations as the relevant credit events. Upon the occurrence of any of these credit events, the Company’s obligations and those of GSI under these swap contracts will be terminated without any further payments or settlements being made by or owed to either party, including a payment by either party of any marked-to-market value of the swap contracts.

Interest Rate Swap Contracts

No.	Counter- parties	Contract Period	Annual Interest Swap Rate	Swap Income (Expense) Receipt Date	Amount of Swap Expense Paid (Rp)
					2010		2011		2012
q.	HSBC	April 23, 2008 - November 27, 2016	5.42% of US$27,037, the notional amount of which will decrease based on predetermined schedule, in exchange for 6-month U.S. dollar LIBOR plus 1.45% per annum	Every April 1 and October 1 up to October 2009, and every May 27 and November 27 up to termination date		7,589		7,034		5,949
r.	HSBC	April 23, 2008 - September 29, 2019	4.82% of US$44,200, the notional amount of which will decrease based on predetermined schedule, in exchange for U.S. dollar LIBOR plus 0.35% per annum	Every January 28 and July 28 up to July 2009, and every March 29 and September 29 up to termination date		16,920		13,799		12,439
s.	GSI	September 2, 2008 - June 12, 2013	(8.10% - underlyer return) of US$100,000 per annum, in exchange for 6-month U.S. dollar LIBOR plus 1.85% per annum	Every June 10 and December 10 up to June 2011, and every June 12 and December 12 up to termination date		39,332		38,978		45,178
t.	DBS	September 5, 2008 - June 12, 2013	5.625% of US$25,000 per annum, in exchange for 6-month U.S. dollar LIBOR plus 1.85% per annum	Every June 10 and December 10 up to December 2010, and every June 12 and December 12 up to termination date		7,289		7,463		3,405
u.	DBS	October 23, 2008 - June 12, 2013	5.28% of US$25,000, the notional amount of which will decrease based on predetermined schedule, in exchange for 6-month U.S. dollar LIBOR plus 1.85% per annum	Every March 25 and September 25 up to March 2011, and every June 12 and December 12 up to termination date		6,676		8,426		3,017
v.	BTMUFJ	December 1, 2008 - June 12, 2013	4.46% of US$25,000, the notional amount of which will decrease based on predetermined schedule, in exchange for 6-month U.S. dollar LIBOR plus 1.85% per annum	Every March 25 and September 25 up to March 2011, and every June 12 and December 12 up to termination date		4,778		5,052		2,094

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PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

No.	Counter- parties	Contract Period	Annual Interest Swap Rate	Swap Income (Expense) Receipt Date	Amount of Swap Expense Paid (Rp)
					2010		2011		2012
w.	BTMUFJ	December 4, 2008 - June 12, 2013	4.25% of US$25,000, the notional amount of which will decrease based on predetermined schedule, in exchange for 6-month U.S. dollar LIBOR plus 1.85% per annum	Every March 25 and September 25 up to March 2011, and every June 12 and December 12 up to termination date		4,291		5,000		1,858
x.	BTMUFJ	December 12, 2008 - June 12, 2013	4.09% of US$25,000, the notional amount of which will decrease based on predetermined schedule, in exchange for 6-month U.S. dollar LIBOR plus 1.85% per annum	Every March 25 and September 25 up to March 2011, and every June 12 and December 12 up to termination date		3,921		4,381		1,678
y.	StandChart	December 19, 2008 - June 12, 2013	3.85% of US$40,000, the notional amount of which will decrease based on predetermined schedule, in exchange for 6-month U.S. dollar LIBOR plus 1.85% per annum	Every March 25 and September 25 up to March 2011, and every June 12 and December 12 up to termination date		5,384		6,066		2,252
z.	DBS	December 22, 2008 - December 12, 2012	4.02% of US$26,000, the notional amount of which will decrease based on predetermined schedule, in exchange for 6-month U.S. dollar LIBOR plus 1.85% per annum	Every March 25 and September 25 up to March 2011, and every June 12 and December 12 up to termination date		3,909		5,068		1,663
aa.	DBS (18)	January 21, 2009 - December 12, 2012	3.83% of US$26,000, the notional amount of which will decrease based on predetermined schedule, in exchange for 6-month U.S. dollar LIBOR plus 1.85% per annum	Every March 25 and September 25 up to March 2011, and every June 12 and December 12 up to termination date		3,451		4,510		1,452
ab.	BTMUFJ (17)	March 2, 2009 - June 12, 2012	4.10% of US$36,500, the notional amount of which will decrease based on predetermined schedule, in exchange for 6-month U.S. dollar LIBOR plus 1.85% per annum	Every March 25 and September 25 up to March 2011, and every June 12 and December 12 up to termination date		5,758		6,432		1,321
ac.	ING Bank N.V.	March 3, 2009 - December 12, 2011	4.0094% of US$25,000, the notional amount of which will decrease based on predetermined schedule, in exchange for 6-month U.S. dollar LIBOR plus 1.85% per annum	Every March 25 and September 25 up to March 2011, and every June 12 and December 12 up to termination date		3,734		4,185		—

F-130

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

No.	Counter- parties	Contract Period	Annual Interest Swap Rate	Swap Income (Expense) Receipt Date	Amount of Swap Expense Paid (Rp)
					2010		2011		2012
ad.	ING Bank N.V.	April 14, 2009 - June 12, 2011	3.75% of US$33,500, in exchange for 6-month U.S. dollar LIBOR plus 1.85% per annum	Every March 25 and September 25 up to March 2011, and on June 12, 2011		4,199		3,127		—
			Total			117,231		119,521		82,306

⁽¹⁷⁾ On June 12, 2012, this contract expired and the Company received zero settlement.

⁽¹⁸⁾ On December 12, 2012, these contracts expired and the Company received zero settlement.

F-131

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

Currency Forward Contracts

No.	Counter-parties	Contract Period	IDR/USD Fixing  Rate (in full amounts)		Amount of Settlement Gain / (Loss) (Rp)
					2011		2012
ae.	JP Morgan	July 14, 2011 - December 12, 2011		Rp8,699 to US$1		3,860		—
af.	DBS	July 19, 2011 - December 12, 2011		Rp8,699 to US$1		7,720		—
ag.	Deutsche Bank	July 19, 2011 - December 12, 2011		Rp8,714 to US$1		7,420		—
ah.	Deutsche Bank	July 21, 2011 - December 12, 2011		Rp8,665 to US$1		4,200		—
ai.	JP Morgan	July 21, 2011 - December 12, 2011		Rp8,665 to US$1		4,200		—
aj.	StandChart	July 22, 2011 - December 12, 2011		Rp8,623 to US$1		2,310		—
ak.	JP Morgan	July 22, 2011 - December 12, 2011		Rp8,637 to US$1		4,480		—
al.	Danareksa	July 26, 2011 - December 12, 2011		Rp8,604 to US$1		2,405		—
am.	JP Morgan	July 26, 2011 - December 12, 2011		Rp8,614 to US$1		2,355		—
an.	StandChart	July 26, 2011 - December 12, 2011		Rp8,614 to US$1		2,355		—
ao.	JP Morgan	July 29, 2011 - December 12, 2011		Rp8,568 to US$1		2,585		—
ap.	HSBC	August 1, 2011 - November 30, 2011		Rp8,533 to US$1		3,185		—
aq.	HSBC	August 1, 2011 - December 12, 2011		Rp8,541 to US$1		2,720		—
ar.	JP Morgan	August 2, 2011 - November 30, 2011		Rp8,538 to US$1		3,160		—
as.	HSBC	August 4, 2011 - November 28, 2011		Rp8,547 to US$1		553		—
at.	HSBC	August 4, 2011 - November 30, 2011		Rp8,549 to US$1		1,863		—
ao.	HSBC	August 10, 2011 - January 24, 2012		Rp8,698 to US$1		—		3,200
av.	JP Morgan	August 10, 2011 - January 24, 2012		Rp8,696 to US$1		—		578
aw.	StandChart	August 10, 2011 - January 24, 2012		Rp8,696 to US$1		—		966
ax.	JP Morgan	August 11, 2011 - January 24, 2012		Rp8,693 to US$1		—		2,774
ay.	HSBC	August 11, 2011 - February 28, 2012		Rp8,714 to US$1		—		2,226
az.	HSBC	August 11, 2011 - February 28, 2012		Rp8,715 to US$1		—		2,775
ba.	JP Morgan	August 12, 2011 - March 29, 2012		Rp8,764 to US$1		—		5,830
bb.	StandChart	August 15, 2011 - May 30, 2012		Rp8,785 to US$1		—		5,495
bc.	StandChart	August 15, 2011 - May 30, 2012		Rp8,787 to US$1		—		5,168
bd.	StandChart	August 16, 2011 - June 12, 2012		Rp8,788 to US$1		—		5,280
be.	DBS	August 19, 2011 - January 27, 2012		Rp8,708 to US$1		—		3,173
bf.	ING	August 19, 2011 - January 27, 2012		Rp8,706 to US$1		—		2,235
bg.	DBS	August 19, 2011 - January 27, 2012		Rp8,705 to US$1		—		2,242
bh.	DBS	August 19, 2011 - June 12, 2012		Rp8,819 to US$1		—		6,430
bi.	JP Morgan	August 19, 2011 - June 12, 2012		Rp8,826 to US$1		—		6,365
bj.	HSBC	August 19, 2011 - June 12, 2012		Rp8,832 to US$1		—		6,160
bk.	ING	August 22, 2011 - January 12, 2012		Rp8,662 to US$1		—		5,405
bl.	ING	August 22, 2011 - January 30, 2012		Rp8,679 to US$1		—		4,053
bm.	DBS	August 22, 2011 - February 28, 2012		Rp8,715 to US$1		—		4,786
bn.	ING	August 22, 2011 - March 28, 2012		Rp8,737 to US$1		—		6,070
bo.	ING	August 23, 2011 - January 12, 2012		Rp8,644 to US$1		—		5,585
bp.	ING	August 23, 2011 - January 12, 2012		Rp8,647 to US$1		—		5,555
bq.	GSI	August 23, 2011 - January 12, 2012		Rp8,640 to US$1		—		4,500
br.	GSI	August 24, 2011 - January 27, 2012		Rp8,645 to US$1		—		4,940

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PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

No.	Counter-parties	Contract Period	IDR/USD Fixing Rate (in full amounts)	Amount of Settlement Gain / (Loss) (Rp)
				2011		2012
bs.	RBS	August 24, 2011 - February 10, 2012	Rp8,666 to US$1		—		3,901
bt.	GSI	August 24, 2011 - February 29, 2012	Rp8,663 to US$1		—		6,005
bu.	GSI	August 24, 2011 - February 29, 2012	Rp8,675 to US$1		—		6,107
bv.	HSBC	August 16, 2012 - November 23, 2012	Rp9,647 to US$1		—		(38	)
bw.	HSBC	August 16, 2012 - November 28, 2012	Rp9,654 to US$1		—		(644	)
bx.	StandChart	August 16, 2012 - December 10, 2012	Rp9,681 to US$1		—		(560	)
by.	HSBC	August 16, 2012 - December 10, 2012	Rp9,670 to US$1		—		(407	)
bz.	DBS	August 23, 2012 - November 26, 2012	Rp9,616 to US$1		—		62
ca.	BNP Paribas	August 24, 2012 - December 21, 2012	Rp9,690 to US$1		—		46
cb.	GSI	August 24, 2012 - December 21, 2012	Rp9,694 to US$1		—		95
cc.	ING	August 24, 2012 - December 21, 2012	Rp9,695 to US$1		—		90
cd.	Barclays	September 6, 2012 - December 5, 2012	Rp9,695 to US$1		—		(890	)
ce.	Barclays	September 7, 2012 - December 5, 2012	Rp9,694 to US$1		—		(1,760	)
cf.	BNP Paribas	September 12, 2012 - December 13, 2012	Rp9,653 to US$1		—		1,112
cg.	ING	September 14, 2012 - January 11, 2013	Rp9,631 to US$1		—		—
ch.	GSI	September 17, 2012 - January 11, 2013	Rp9,560 to US$1		—		—
ci.	JP Morgan	September 28, 2012 - December 21, 2012	Rp9,660 to US$1		—		619
cj.	JP Morgan	October 5, 2012 - December 21, 2012	Rp9,642 to US$1		—		618
ck.	BNP Paribas	November 14, 2012 - February 8, 2013	Rp9,683 to US$1		—		—
cl.	Barclays	November 29, 2012 - March 4, 2013	Rp9,697 to US$1		—		—
cm.	BNP Paribas	November 30, 2012 - March 4, 2013	Rp9,669 to US$1		—		—
cn.	JP Morgan	December 3, 2012 - March 5, 2013	Rp9,638 to US$1		—		—
co.	ING	December 4, 2012 - March 6, 2013	Rp9,666 to US$1		—		—
cp.	Barclays	December 5, 2012 - February 5, 2013	Rp9,690 to US$1		—		—
cq.	DBS	December 5, 2012 - February 5, 2013	Rp9,695 to US$1		—		—
cr.	DBS	December 7, 2012 - February 11, 2013	Rp9,702 to US$1		—		—
cs.	JP Morgan	December 10, 2012 - March 13, 2013	Rp9,865 to US$1		—		—
ct.	DBS	December 10, 2012 - March 12, 2013	Rp9,853 to US$1		—		—
cu.	Barclays	December 12, 2012 - February 11, 2013	Rp9,770 to US$1		—		—
cv.	JP Morgan	December 12, 2012 - February 11, 2013	Rp9,765 to US$1		—		—
cw.	BNP Paribas	December 17, 2012 - March 20, 2013	Rp9,775 to US$1		—		—
cx.	ING	December 18, 2012 - March 20, 2013	Rp9,770 to US$1		—		—
		Total			55,371		116,147

34. SIGNIFICANT AGREEMENTS AND COMMITMENTS AND CONTINGENCY

a. As of December 31, 2012, commitments on capital expenditures which are contractual agreements not yet realized relate to the procurement and installation of property and equipment amounting to US$142,195 (Note 37) and Rp881,274.

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PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

The significant commitments on capital expenditures are as follows:

Contract Date	Contract Description	Vendor	Amount of Contract/Purchase Orders (“POs”) Already Issued	Amount of Contract/ POs Not Yet Served
October 1, 2010 & December 10, 2012	Procurement of Telecommunications Equipment and Related Services	PT Ericsson Indonesia and Ericsson AB	US$415,288 and Rp1,361,320	US$72,781 and Rp275,225
June 16, 2010 & December 10, 2012	Procurement of Telecommunications Infrastructure	PT Nokia Siemens Networks and Nokia Siemens Networks Oy	US$359,648 and Rp1,480,234	US$17,863 and Rp141,150
August 2,2010 & December 21, 2012	Procurement of Telecommunications Infrastructure	PT Huawei Tech Investment	USD87,186 and Rp204,746	USD25,673 and Rp92,460

b. In 2012, the Company and Qatar Telecom Q.S.C, the Group’s ultimate parent company, entered into a cooperation agreement, whereas Qatar Telecom agreed to provide the Group with several professional experts to work in the Company, whereas the professional experts will provide the Group with their experience and knowledge to increase the effectiveness of the Group’s operational and business activities. The agreement covers a 10-year period. For the year ended December 31, 2012, the Company recorded the cost for the provision of the professional experts totaling Rp76,596 as part “Expenses—General and Administration Expenses”.

c. On January 18, 2012, the Company and IMM, a subsidiary, were investigated by the Attorney Generals Office in connection with the cooperation agreement between the Company and IMM to provide 3G based broadband internet services. IMM had been accused of illegally using the Company’s 3G license (Note 1a) without paying annual frequency fee, concession fee and tender upfront fee. The MOCIT, as well as the Indonesian Regulatory Body (BRTI), has made a public statement that IMM has not breached any laws / prevailing rules; nevertheless, the case is still being continued to be investigated by the State Attorney General (Note 37).

As of December 31, 2012, the Company did not accrue any liabilities related to the legal case because the Company believes, as supported by the MOCIT, that the cooperation agreement with IMM does not breach any laws.

d. On December 30, 2011, Lintasarta, a subsidiary, entered into agreements with MOCIT-Balai Penyedia dan Pengelola Pembiayaan Telekomunikasi dan Informatika (MOCIT-BPPPTI), whereby Lintasarta agreed to provide Public Access Services for Wireless Fidelity (WiFi) Internet in Kewajiban Pelayanan Umum/ Universal Service Obligation (KPU/USO) Regencies (Kabupaten) (Penyediaan Jasa Akses Publik Layanan Internet WiFi Kabupaten KPU/USO) for Work Packages (Paket Pekerjaan) 3 and 6 that cover the provinces of West Kalimantan, South Kalimantan, Central Kalimantan, East Kalimantan, Bali, West Nusa Tenggara and East Nusa Tenggara. The agreements cover a four year concession period and have contract values of Rp71,992 and Rp44,422 for Work Packages 3 and 6, respectively. In accordance with the contract, advance payments represent 15% of the contract value. Fixed payment for services is received on a quarterly basis based on performance evaluation. At the end of the

F-134

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

concession period, Lintasarta must transfer the asset subject to the concession agreement back to the local government.

Subsequently on January 10, 2012, Lintasarta, also entered into an agreement with MOCIT-BPPPTI for the provision of Public Access Services for Wireless Fidelity (WiFi) Internet in KPU/USO Regencies (Kabupaten KPU/USO) (Penyediaan Jasa Akses Publik Layanan Internet WiFi Kabupaten KPU/USO) for Work Package (Paket Pekerjaan) 4 that covers the provinces of Gorontalo, West Sulawesi, South Sulawesi, Central Sulawesi, South East Sulawesi and North Sulawesi with contract value of Rp91,491. The terms and conditions for this are consistent to the earlier agreement above.

The consideration received or receivable in exchange for Lintasarta’s infrastructure construction services or its acquisition of infrastructure to be used in the arrangements was recognized as a financial asset to the extent that Lintasarta has an unconditional contractual right to receive cash or other financial asset for its construction services from or at the direction of the grantor. As of December 31, 2012, the long-term portion of the outstanding receivables arising from this service concession arrangement amounted to Rp8,974 and was classified as part of “Other Non-current Financial Assets”. Revenue from construction services earned by Lintasarta for the year ended December 31, 2012 amounted to Rp37,175 and is classified as part of “Revenues from MIDI services”.

On February 8, 2012, Lintasarta entered into an agreement with PT Widtech Indonesia, for the procurement of equipment and infrastructure required for the construction of WiFi, as agreed with the MOCIT-BPPPTI above, with total contract value amounting to Rp121,927.

e. In 2011 to March 2012, the Company had issued several POs to PT Nokia Siemens Network and Nokia Siemens Network OY with total amount of US$34,829 and Rp208,948 for the procurement of cellular technical equipment in the Sumatra and Java Areas. Based on the POs, the Company agreed to exchange certain existing cellular equipment with new equipment units and pay US$11,462 and Rp171,844 to Nokia for the installation services and additional equipment. For the year ended December 31, 2012, the carrying amount of the cellular technical equipment units given up amounted to Rp273,665 and the accumulated carrying amount of such equipment up to December 31, 2012 amounted to Rp389,399 (Note 8).

f. On April 15, 2010, Lintasarta, a subsidiary, entered into agreements with MOCIT-BTIP, whereby Lintasarta agreed to provide Pusat Layanan Jasa Akses Internet Kecamatan (Center for Internet Access and Services in Rural Areas) (PLIK) for Work Packages (Paket Pekerjaan) 7, 8 and 9 that cover the provinces of Bali, West Nusa Tenggara, East Nusa Tenggara, West Kalimantan, South Kalimantan, East Kalimantan, Central Kalimantan, Maluku and Papua. On December 22, 2010, the agreements were amended to increase the contract value. The agreements are non cancellable and cover four years starting from October 15, 2010 with contract value amounting to Rp91,895, Rp143,668 and Rp116,721 for Work Packages 7, 8 and 9, respectively. In accordance with the agreements, Lintasarta placed its time deposits totalling Rp18,200 as a performance bond for the four-year contract period, which deposits are classified as part of other non-current financial assets. In accordance with the agreements, Lintasarta received advance payments representing 20% of contract value. Fixed payment for services is received on a quarterly basis based on performance evaluation. At the end of the agreement, Lintasarta and MOCIT BTIP plan to renegotiate the terms and conditions of any new arrangements.

On December 12, 2010, Lintasarta entered into agreements with MOCIT-BTIP to provide Pusat Layanan Jasa Akses Internet Kecamatan Bergerak (Mobile Center for Internet Access and Services in

F-135

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

Rural Areas) (PLIKB) for Work Packages 2, 3, 11, 15, 16 and 18 that cover the provinces of North Sumatra, West Sumatra, East Nusa Tenggara, West Kalimantan, South Kalimantan and East Kalimantan. The agreements are non cancellable and cover four years starting on September 22, 2011 with contract values amounting to Rp79,533, Rp92,003, Rp60,149, Rp71,879, Rp84,583 and Rp69,830 for Work Packages 2, 3, 11, 15, 16 and 18, respectively. On October 19, 2011, the agreements were amended to change the work starting date from September 22, 2011 to December 22, 2011. In accordance with the agreements, Lintasarta received advance payments representing 15% of contract value. Fixed payment for services is received on a quarterly basis based on performance evaluation. At the end of the concession period, Lintasarta must transfer all assets subject to the concession agreement to the local government.

On May 6, 2010, Lintasarta entered into an agreement with PT Wira Eka Bhakti (WEB), for the procurement of equipment and infrastructure required for the construction of PLIK, as agreed with the MOCIT-BTIP above, with total contract value amounting to Rp189,704. The agreement has been amended several times, with the latest amendment dated March 9, 2011 increasing the contract value to Rp208,361.

On March 23, 2011, Lintasarta entered into agreements with WEB and PT Personel Alih Daya (a related party), for the procurement of equipment and infrastructure required for the construction of PLIKB, as agreed with MOCIT-BTIP above, with total contract values amounting to Rp276,274 and Rp60,739, respectively.

As of December 31, 2010, 2011, and 2012 the current portions of outstanding receivables amounting to nil, Rp91,113, and Rp283,945 respectively, are classified as part of “Trade Receivables—Related Parties” while the long-term portions amounting to Rp70,199, Rp121,854, and Rp45,097, respectively, are classified as part of “Other Non-current Financial Assets”. For the years ended December 31, 2010, 2011 and 2012, revenue from construction services, included under Revenue from MIDI services, amounted to Rp128,490, Rp163,264 and Rp33,439, respectively.

g. On January 29, April 15, May 24 and June 3 in 2010, and February 4 and 10 in 2011, the Company agreed to lease part of its telecommunications towers and sites to PT Hutchison CP Telecommunications (“Hutchison”) for a period of 12 years, PT Natrindo Telepon Selular (“NTS”) for a period of 10 years, PT XL Axiata Tbk (“XL Axiata”) for a period of 10 years, PT Berca Global Access (“Berca”) for a period of 10 years, PT Dayamitra Telekomunikasi (“Mitratel”) for a period of 10 years and PT First Media Tbk (“FM”) for a period of 5 years, respectively. Hutchison, NTS, and XL Axiata (on annual basis), Berca and Mitratel (on quarterly basis) and FM (on semi-annual basis) are required to pay the lease and maintenance fees in advance which are recorded as part of unearned income.

On August 18, 2011, the Company and Hutchison amended their tower leasing agreement covering changes in certain arrangements with respect to, among others, amount of compensation paid to landlords or residents around the leased site shouldered by the Company, penalty charged for overdue payments and effective lease period.

F-136

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

Future minimum lease receivables under the agreements as at January 1, 2011 and December 31, 2011 and 2012 are as follows:

	January 1, 2011		December 31,
			2011		2012
Within one year		370,780		471,284		655,894
After one year but not more than five years		1,481,461		1,874,860		2,597,263
More than five years		1,792,424		1,817,218		2,211,422
Total		3,644,665		4,163,362		5,464,579

h. During 2008-2012, the Company entered into several agreements with PT Solusi Menara Indonesia, PT Professional Telekomunikasi Indonesia (“Protelindo”), XL Axiata, PT Solusindo Kreasi Pratama, PT Dayamitra Telekomunikasi, PT Bit Teknologi Nusantara, PT Batavia Towerindo, PT Mitrayasa Sarana Informasi, PT Gihon Telekomunikasi Indonesia and Tower Bersama (Note 28) for the Company to lease part of spaces in their telecommunication towers and sites for an initial period of 10 years. The Company may extend the lease period for another 10 years, with additional lease fees based on the inflation rates in Indonesia.

Future minimum rentals payable under the finance lease agreements as at December 31, 2012 are as follows:

	Minimum payments		Present value of payments
Within one year		622,020		240,349
After one year but not more than five years		2,488,022		1,323,315
More than five years		2,205,538		1,778,595
Total		5,315,580		3,342,259
Less amount representing finance charge		1,973,321		—
Present value of minimum lease payments		3,342,259		3,342,259
Current portion (presented as part of Other Current Financial Liabilities)				240,349
Long-term portion (presented as Obligations under Finance Lease)				3,101,910
Total				3,342,259

i. The Company and IMM have committed to pay annual radio frequency fee over the 3G and BWA licenses period, provided the Company and IMM hold the 3G and BWA licenses. The amount of annual payment is based on the payment scheme set out in Regulations No. 7/PER/M.KOMINFO/2/2006, No. 268/KEP/M.KOMINFO/9/2009 and No. 237/KEP/ M.KOMINFO/7/2009 dated February 8, 2006, September 1, 2009 and July 27, 2009, respectively, of the MOCIT. The Company and IMM paid the annual frequency fee for the 3G and BWA licenses totaling Rp548,154 and Rp442,511 for the years ended December 31, 2012 and 2011, respectively.

j. On July 20, 2005, the Company obtained facilities from HSBC to fund the Company’s short-term working capital needs. The facilities agreement has been amended several times. On September 20,

F-137

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

2011, these facilities were further amended to extend the expiration date up to April 30, 2012 and change the interest rate and certain provisions in the agreement as follows:

• Overdraft facility amounting to US$2,000 (including overdraft facility denominated in rupiah amounting to Rp17,000). Interest is charged on daily balances at 3.75% per annum and 6% per annum below the HSBC Best Lending Rate for the loan portions denominated in rupiah and U.S. dollar, respectively.

• Revolving loan facility amounting to US$30,000 (including revolving loan denominated in rupiah amounting to Rp255,000). The loan matures within a maximum period of 180 days and can be drawn in tranches with minimum amounts of US$500 and Rp500 for loans denominated in U.S. dollar and rupiah, respectively. Interest is charged on daily balances at 2.25% per annum above the HSBC Cost of Fund Rate for the loans denominated either in rupiah or U.S. dollar.

• The facilities are considered uncommitted facility based on guidelines No.12/516/DPNP/DPnP dated September 21, 2010 issued by the Central Bank of Indonesia; consequently, these facilities can be automatically cancelled by HSBC in the event that the Company’s credit collectibility declines to either substandard, doubtful or loss based on HSBC’s assessment pursuant to the general criteria set out by the Central Bank of Indonesia.

On March 27, 2012, the Company received the letter from HSBC to extend these facilities up to April 30, 2013.

k. In 1994, the Company was appointed as a Financial Administrator (“FA”) by a consortium which was established to build and sell/lease Asia Pacific Cable Network (“APCN”) submarine cable in countries in the Asia-Pacific Region. As an FA, the Company collected and distributed funds from the sale of APCN’s Indefeasible Right of Use (“IRU”), Defined Underwritten Capacity (“DUC”) and Occasional Commercial Use (“OCU”).

The funds received from the sale of IRU, DUC and OCU and for upgrading the APCN cable did not belong to the Company and, therefore, were not recorded in the Company’s books. However, the Company managed these funds in separate accounts.

As of December 31, 2012, the balance of the funds (including interest earned) which are under the Company’s custody amounted to US$5,276. Besides receiving their share of the funds from the sale of IRU, DUC and OCU, the members of the consortium also received their share of the interest earned by the above funds.

l. Other agreements made with Telkom are as follows:

• Under a cooperation agreement, the compensation to Telkom relating to leased circuit/channel services, such as world link and bit link, is calculated at 15% of the Company’s collected revenues from such services.

The Company and Satelindo also lease circuits from Telkom to link Jakarta, Medan and Surabaya.

• In 1994, Satelindo entered into a land transfer agreement for the transfer of Telkom’s rights to use a 134,925-square meter land property located at Daan Mogot, West Jakarta, where Satelindo’s earth control station is currently situated. The land transfer agreement enables Satelindo to use the land for a period of 30 years from the date of the agreement, for a price equivalent to US$40,000 less Rp43,220. The term of the agreement may be extended based on mutual agreement.

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PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

The agreement was subsequently superseded by a land rental agreement dated December 6, 2001, generally under the same terms as those of the land transfer agreement.

• In 1999, Lintasarta entered into an agreement with Telkom, whereby Telkom agreed to lease transponder to Lintasarta. This agreement has been amended several times, the latest amendment of which is based on the ninth amendment agreement dated May 24, 2010. Transponder lease expense charged to operations amounting to Rp27,371 for the year ended December 31, 2012 is presented as part of “Expenses—Cost of Services” in the consolidated statement of comprehensive income.

35. OPERATING SEGMENT INFORMATION

The Group manages and evaluates their operations in three major reportable segments: cellular, fixed telecommunications and MIDI. The operating segments are managed separately because each offers different services/products and serves different markets. The Group mainly operates in Indonesia only, so no geographical information on segments is presented.

The cellular segment currently provides the network coverage in all major cities and population centers across Indonesia by using GSM 900 and GSM 1800 technology. Its primary service is the provision of voice and data transfer which is sold through post-paid and prepaid plans.

The fixed telecommunication segment is the provider of international long-distance services, fixed wireless services, DLD services and local fixed telephony services.

The MIDI segment offers products and services which include internet, high-speed point-to-point international and domestic digital leased line broadband and narrowband services, a high-performance packet-switching service and satellite transponder leasing and broadcasting services.

Refer to Notes 2f5 and 23 for the description of type of products and services under each reporting segment.

No operating segments have been aggregated to form the above reportable operating segments.

Segment results and assets include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Expenditures for segment assets represent the total costs incurred during the period to acquire segment assets that are expected to be used for more than one year.

Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss which in certain respects, as explained in the table below, is measured differently from operating profit or loss in the consolidated financial statements. The Group’s financing (including finance costs and finance income) and income taxes are managed on a group basis and are not allocated to operating segments.

Operating segments are reported based on financial information determined in conformity with Indonesian Financial Accounting Standards (“IFAS”), which is also consistent with the internal reporting provided to the chief operational decision maker. The chief operational decision maker is responsible for allocating resources and assessing performance of the operating segments, and has been identified as a steering committee that makes strategic decisions.

F-139

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

Consolidated information by industry segment follows:

	Major Segments							Inter-Segment Eliminations (1)			Total			Adjustments  (2)			Consolidated
	Cellular		Fixed Telecommunications			MIDI
January 1, 2011 (Restated)
Operating revenues
Revenues from external customers		15,876,908		1,278,171			2,579,967		—			19,735,046			17,023			19,752,069
Inter-segment revenues		—		—			563,726		(563,726	)		—			—			—
Total operating revenues		15,876,908		1,278,171			3,143,693		(563,726	)		19,735,046			17,023			19,752,069
Operating Expenses		12,886,843		1,316,072			1,987,558		—			16,190,473			10,939			16,201,412
Operating income		2,990,065		(37,901	)		592,409		—			3,544,573			6,084			3,550,657
Gain on foreign exchange—net		—		—			—		—			174,143			—			174,143
Amortization of goodwill		—		—			—		—			(226,380	)		226,380			—
Others – net		—		—			—		—			(79,236	)		—			(79,236	)
Operating profit		—		—			—		—			3,413,100			232,464			3,645,564
Interest income		—		—			—		—			146,219			—			146,219
Loss on change in fair value of derivatives—net		—		—			—		—			(418,092	)		(30,739	)		(448,831	)
Financing cost		—		—			—		—			(2,338,130	)		—			(2,338,130	)
Gain on foreign exchange—net		—		—			—		—			318,258			—			318,258
Total income tax expense		—		—			—		—			(378,449	)		(54,123	)		(432,572	)
Profit for the year									—			742,906			147,602			890,508
Segment assets		48,795,807		2,111,239			8,264,175		(7,801,729	)		51,369,492			607,507			51,976,999
Unallocated assets																		1,955,636
Assets—net																		53,932,635
Segment liabilities		27,933,214		629,741			3,205,273		(6,219,524	)		25,548,704			173,279			25,721,983
Unallocated liabilities																		9,521,051
Liabilities—net																		35,243,034
Other disclosures
Capital expenditures		4,965,191		209,100			777,488		—			5,951,779			—			5,951,779
Depreciation and amortization		5,010,335		289,571			791,238		—			6,091,144			10,939			6,102,083
Provision for impairment of receivables		217,538		51,973			226,599		—			—			—			496,110

F-140

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

	Major Segments
	Cellular		Fixed Telecommunications			MIDI		Inter-Segment Eliminations  (1)			Total			Adjustments  (2)			Consolidated
December 31, 2011 (Restated)
Operating revenues
Revenues from external customers		16,587,385		1,249,983			2,691,924		—			20,529,292			2,346			20,531,638
Inter-segment revenues		—		—			609,497		(609,497	)		—			—			—
Total operating revenues		16,587,385		1,249,983			3,301,421		(609,497	)		20,529,292			2,346			20,531,638
Operating Expenses		13,785,603		1,338,073			2,299,771		—			17,423,447			11,151			17,434,598
Operating income		2,801,782		(88,090	)		392,153		—			3,105,845			(8,805	)		3,097,040
Gain on foreign exchange—net		—		—			—		—			90,919			—			90,919
Others – net		—		—			—		—			(32,455	)		2,665			(29,790	)
Operating profit		—		—			—		—			3,164,309			(6,140	)		3,158,169
Interest income		—		—			—		—			92,646			—			92,646
Gain on change in fair value of derivatives—net		—		—			—		—			57,944			—			57,944
Financing cost		—		—			—		—			(1,929,354	)		—			(1,929,354	)
Gain on foreign exchange—net		—		—			—		—			(54,188	)		—			(54,188	)
Total income tax expense		—		—			—		—			(264,613	)		(4,691	)		(269,304	)
Profit for the year									—			1,066,744			(10,831	)		1,055,913
Segment assets		48,913,656		2,068,759			8,185,387		(7,929,430	)		51,238,372			596,357			51,834,729
Unallocated assets																		1,994,640
Assets—net																		53,829,369
Segment liabilities		27,073,313		742,444			3,042,387		(6,269,067	)		24,589,077			172,959			24,762,036
Unallocated liabilities																		9,674,836
Liabilities—net																		34,436,872
Other disclosures
Capital expenditures		5,576,208		228,834			706,244		—			6,511,286			—			6,511,286
Depreciation and amortization		5,418,955		292,140			847,082		—			6,558,177			11,151			6,569,328
Provision for impairment of receivables		222,215		53,497			260,939		—			536,651			—			536,651

F-141

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

	Major Segments							Inter-Segment Eliminations (1)			Total			Adjustments  (2)			Consolidated
	Cellular		Fixed Telecommunications			MIDI
December 31, 2012
Operating revenues
Revenues from external customers		18,489,329		1,021,450			2,908,033		—			22,418,812			1,765			22,420,577
Inter-segment revenues		—		—			597,914		(597,914	)		—			—			—
Total operating revenues		18,489,329		1,021,450			3,505,947		(597,914	)		22,418,812			1,765			22,420,577
Operating Expenses		16,473,013		1,296,127			2,382,450		—			20,151,590			11,188			20,162,778
Operating income		2,016,316		(274,677	)		525,583		—			2,267,222			(9,423	)		2,257,799
Gain on tower sale		—		—			—		—			1,183,963			—			1,183,963
Gain on foreign exchange—net		—		—			—		—			44,793			—			44,793
Others—net		—		—			—		—			(305,955	)		—			(305,955	)
Operating profit		—		—			—		—			3,190,023			(9,423	)		3,180,600
Interest income		—		—			—		—			133,544			—			133,544
Gain on change in fair derivatives—net		—		—			—		—			4,964			—			4,964
Financing cost		—		—			—		—			(2,077,350	)		—			(2,077,350	)
Gain on foreign exchange—net		—		—			—		—			(789,438	)		—			(789,438	)
Total income tax benefit		—		—			—		—			25,798			(280	)		25,518
Equity in net loss of associated companies		—		—			—		—			(125	)		—			(125	)
Profit for the year									—			487,416			(9,703	)		477,713
Segment assets		51,599,984		1,417,859			8,460,772		(8,473,482	)		53,005,133			585,171			53,590,304
Unallocated assets																		2,219,928
Assets—net																		55,810,232
Segment liabilities		29,495,439		448,908			2,521,525		(6,640,808	)		25,825,064			171,476			25,996,540
Unallocated liabilities																		10,004,614
Liabilities—net																		36,001,154
Other disclosures
Capital expenditures		7,449,614		123,983			822,984		—			8,396,581			—			8,396,581
Depreciation and amortization		7,078,187		415,410			779,227		—			8,272,824			11,188			8,284,012
Provision for impairment of receivables		274,949		59,092			230,589		—			—			—			564,630

⁽¹⁾  These include inter-segment assets, liabilities and revenues eliminated upon consolidation.

⁽²⁾  These are adjustments to reconcile segment financial information to consolidated IFRS financial statements. Segment financial information, as reported to the chief operation decision maker, is still managed and maintained by the Group under IFAS which differs from IFRS. The adjustments relate primarily to:

a. the accounting for land rights: Under IFAS, land rights are not amortized while under IFRS, land rights are amortized over the lease term.

b. goodwill: Prior to January 1, 2011, under IFAS, goodwill was amortized straight-line over the useful life. Starting January 1, 2011, IFAS 19 (similar to IAS 36) was adopted and goodwill was no longer amortized but subject to annual impairment similar to IFRS. The difference in carrying value relates to the amortization prior to the adoption of IFAS 19.

c. revenue from service connection: Prior to January 1, 2010, revenue from service connection was not deferred while under IFRS, the revenue is deferred and recognized over the expected average period of the customer relationship. With the prospective adoption of IFAS 23 in January 1, 2010, the difference in revenue recognized pertains to the amortization of the outstanding deferred income as of January 1, 2010.

F-142

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

36. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

A. RISK MANAGEMENT

The main risks arising from the Group’s financial instruments are interest rate risk, foreign exchange rate risk, equity price risk, credit risk and liquidity risk. The importance of managing these risks has significantly increased in light of the considerable change and volatility in both Indonesian and international financial markets. The Company’s Board of Directors reviews and approves the policies for managing these risks which are summarized below.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group’s exposure to the risk of changes in market interest rates relates primarily to their loans and bonds payable with fixed and floating interest rates.

The Company’s policies relating to interest rate risk are as follows:

(1) Manage interest cost through a mix of fixed and variable rate debts. The Company evaluates the fixed to floating rate ratio of its loans and bonds payable in line with movements of relevant interest rates in the financial markets. Based on management’s assessment, new financing will be priced either on a fixed or floating rate basis, and

(2) Manage interest rate exposure on its loans and bonds payables by entering into interest rate swap contracts.

As of January 1, 2011 and December 31, 2011 and 2012, more than 60%, 65% and 82%, respectively, of the Group’s debts are fixed-rate.

Several interest rate swap contracts are entered into to hedge floating rate U.S. dollar debts. These contracts are accounted for as transactions not designated as hedges, wherein the changes in the fair value are credited or charged directly to profit or loss for the year.

The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, of the Group’s profit or loss for the years ended December 31, 2010, 2011 and 2012 (through the impact on floating rate borrowings which is based on LIBOR for U.S. dollar borrowings and on JIBOR for rupiah borrowings).

	2010			2011			2012
Increase or (decrease) in basis points:
U.S. dollar		1			(8	)		(11	)
Rupiah		41			(107	)		19
Effect on profit for the year
U.S. dollar		USD(57 (equivalent to Rp(509)	)     )		USD340 (equivalent to Rp3,084	)		USD267 (equivalent to Rp2,584	)
Rupiah		Rp(9,490	)		Rp23,099			Rp(4,535	)

Management conducted a survey among the Group’s banks to determine the outlook of the LIBOR and JIBOR interest rates until the Group’s next reporting date. The outlook is that the LIBOR and JIBOR

F-143

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

interest rates may move 1 basis point higher and 8 and 11 basis point lower and 41 basis points higher, 107 basis point lower and 19 basis point higher, respectively, as compared to the year-end interest rates of 2010, 2011 and 2012, respectively.

If LIBOR interest rates were 1 basis point higher and 8 and 11 basis points lower than the market levels for the years ended December 31, 2010, 2011 and 2012, respectively, with all other variables held constant, the Group’s profit or loss for the years then ended and the consolidated equity would be Rp806,983, Rp961,553 and Rp756,677 and Rp18,305,018, Rp18,943,489 and Rp19,279,593, respectively, which are lower, higher and higher than the actual results for the years ended December 31, 2010, 2011 and 2012, respectively, mainly due to the higher, lower and lower interest expense on floating rate borrowings.

If JIBOR interest rates were 41 basis points higher, 107 basis points lower and 19 basis points higher than the market levels for the years ended December 31, 2010, 2011 and 2012, respectively, with all other variables held constant, the Group’s profit or loss for the years then ended and the consolidated equity would be Rp798,001, Rp981,568 and Rp749,558 and Rp18,296,037, Rp18,963,504 and Rp19,272,474, respectively, which are lower, higher and lower than the actual results for the years ended December 31, 2010, 2011 and 2012, respectively, mainly due to the higher, lower and higher interest expense on floating rate borrowings.

Foreign exchange rate risk

Foreign exchange rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group’s exposure to exchange rate fluctuations results primarily from U.S. dollar-denominated loans and bonds payable, accounts receivable, accounts payable and procurement payable.

To manage foreign exchange rate risks, the Company entered into several cross currency swap and currency forward contracts and other permitted instruments. These contracts are accounted for as transactions not designated as hedges, wherein the changes in the fair value are credited or charged directly to profit or loss for the year.

The Group’s accounts payable are primarily foreign currency net settlement payables to foreign telecommunications operators, while most of the Group’s accounts receivable are Indonesian rupiah-denominated amounts due from domestic operators.

To the extent the Indonesian rupiah depreciated further from the exchange rates in effect at December 31, 2010, 2011 and 2012, the Group’s obligations under such loans and bonds payable, accounts payable and procurement payable would increase in Indonesian rupiah terms. However, the increases in these obligations would be offset in part by increases in the values of foreign currency-denominated time deposits and accounts receivable. As of January 1, 2011 and December 31, 2011 and 2012, 17.90%, 27.33% and 31.81%, respectively, of the Company’s U.S. dollar-denominated debts were protected from exchange rate risk by entering into several cross currency swap and currency forward contracts.

F-144

PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

The following table shows the Group’s consolidated U.S. dollar-denominated assets and liabilities as of January 1, 2011 and December 31, 2011 and 2012:

	January 1, 2011				December 31, 2011				December 31, 2012
	U.S. Dollar		Rupiah *		U.S. Dollar		Rupiah *		U.S. Dollar		Rupiah *
Assets:
Cash and cash equivalents		111,782		1,005,042		53,356		483,835		249,279		2,410,529
Accounts receivable
Trade		115,530		1,038,726		91,260		827,553		111,612		1,079,285
Others		544		4,893		—		—		—		—
Derivative assets		7,711		69,334		17,573		159,349		7,203		69,654
Other current financial
assets—net		1,715		15,418		178		1,613		488		4,719
Other current assets		—		—		15		138		—		—
Due from related parties		117		1,047		317		2,871		106		1,028
Other non-current financial assets—net		1,427		12,833		1,578		14,306		1,150		11,121
Total assets		238,826		2,147,293		164,277		1,489,665		369,838		3,576,336
Liabilities:
Accounts payable—trade		32,788		294,797		13,010		117,971		9,343		90,347
Procurement payable		246,615		2,217,320		220,788		2,002,110		141,102		1,364,458
Accrued expenses		46,263		415,953		45,156		409,476		46,424		448,918
Deposits from customers		1,477		13,275		1,834		16,629		2,478		23,962
Derivative liabilities		23,958		215,403		15,239		138,189		8,401		81,241
Other current financial liabilities		67		602		41		371		16,676		161,255
Due to related parties		—		—		9		83		2,685		25,968
Loans payable (including current maturities)		886,602		7,971,436		653,848		5,929,093		557,193		5,388,055
Bonds payable (including current maturities)		650,000		5,844,150		650,000		5,894,200		650,000		6,285,500
Obligation under finance lease		—		—		—		—		212,757		2,057,362
Total liabilities		1,887,770		16,972,936		1,599,925		14,508,122		1,647,059		15,927,066
Net liabilities position		1,648,944		14,825,643		1,435,648		13,018,457		1,277,221		12,350,730

* The exchange rates used to translate the U.S. dollar amounts into rupiah were Rp8,991 to US$1.00 (in full amounts), Rp9,068 to US$1.00 (in full amounts) and Rp9,670 to US$1.00 (in full amounts) as published by the Indonesian Central Bank as of January 1, 2011 and December 31, 2011 and 2012, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

The following table demonstrates the sensitivity to a reasonably possible change in the U.S. dollar exchange rates, with all other variables held constant, of the Group’s consolidated profit for the years ended December 31, 2010, 2011 and 2012:

	2010			2011			2012
Change in U.S. dollar exchange rate		-3	%		1.24	%		1.83	%
Effect on consolidated profit for the year		336,582			(122,342	)		(169,551	)

Management conducted a survey among the Group’s banks to determine the outlook of the U.S. dollar exchange rate until the Group’s next reporting dates of March 31, 2011, 2012 and 2013. The outlook is that the U.S. dollar exchange rate may weaken by 3% as compared to the exchange rate at December 31, 2010 and strenghten by 1.24% and 1.83% as compared to the exchange rate at December 31, 2011, and 2012, respectively.

If the U.S. dollar exchange rate weakened by 3% as compared to the exchange rate as of December 31, 2010 and strenghtened by 1.24% and 1.83% as compared to the exchange rate as of December 31, 2011 and 2012, respectively, with all other variables held constant, the Group’s profit for the years then ended and the consolidated equity would be Rp1,144,074, Rp836,127 and Rp584,542; and Rp18,642,109, Rp18,818,063 and Rp19,107,458, respectively, which are higher, lower and lower than the actual results as of December 31, 2010, 2011 and 2012, respectively, mainly due to the consolidated foreign exchange gain and loss on the translation of U.S. dollar-denominated net liabilities.

Equity price risk

The Group’s long-term investments consist primarily of minority investment in the equity of private Indonesian entities and equity of foreign entities. With respect to the Indonesian entities in which the Group has investments, the financial performance of such entities may be adversely affected by the economic conditions in Indonesia.

Credit risk

Credit risk is the risk that the Group will incur a loss arising from their customers, clients or counterparties that fail to discharge their contractual obligations. There are no significant concentrations of credit risk. The Group manage and control this credit risk by setting limits on the amount of risk they are willing to accept for individual or collective customers and by monitoring exposures in relation to such limits.

The Group trade only with recognized and creditworthy third parties. It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis to reduce the exposure to bad debts. The Company and subsidiaries place their cash and cash equivalents in a number of different financial institutions, including state-owned and internationally recognized banks because they have the most extensive branch networks in Indonesia and are considered to be financially sound banks.

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PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

The table below shows the maximum exposure to credit risk for the components of the consolidated statements of financial position:

	Maximum Exposure (1)
	January  1, 2011 (Restated)		December  31, 2011 (Restated)		December 31, 2012
Loans and receivables:
Cash and cash equivalents		2,075,270		2,224,206		3,917,236
Accounts receivable
Trade—net		1,536,276		1,500,096		2,038,719
Others—net		10,031		5,660		22,441
Other current financial assets—net		53,119		24,790		13,382
Due from related parties—net		8,421		10,654		10,358
Other non-current financial assets—net		147,874		209,540		173,400
Held-for-trading:
Cross currency swaps		69,334		22,138		29,907
Currency forward		—		137,211		39,747
Available-for-sale investments:
Other non-current financial assets -other long-term investments—net		2,730		2,730		1,369,740
Total		3,903,055		4,137,025		7,614,930

(1) There are no collaterals held or other credit enhancements or offsetting arrangements that affect this maximum exposure.

Liquidity risk

The liquidity risk is defined as a risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset.

The Group’s liquidity requirements have historically arisen from the need to finance investments and capital expenditures related to the expansion of their telecommunications business. The Group’s telecommunications business requires substantial capital to construct and expand mobile and data network infrastructure and to fund operations, particularly during the network development stage. Although the Group have substantial existing network infrastructure, the Group expect to incur additional capital expenditures primarily in order to focus cellular network development in areas they anticipate will be high-growth areas, as well as to enhance the quality and coverage of their existing network.

In the management of liquidity risk, the Group monitor and maintain a level of cash and cash equivalents deemed adequate to finance the Group’s operations and to mitigate the effects of fluctuation in cash flows. The Group also regularly evaluate the projected and actual cash flows, including their loan maturity profiles, and continuously assess conditions in the financial markets for opportunities to pursue fund-raising initiatives. These activities may include bank loans, debt capital and equity market issues.

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PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

The table below summarizes the maturity profile of the Group’s financial liabilities based on contractual undiscounted payments.

	Expected maturity as of January 1,
	2011		2012		2013		2014		2015 and thereafter		Total contractual cash flows		Interest value			Carrying amount
January 1, 2011
Accounts payable—trade		645,505		—		—		—		—		645,505		—			645,505
Procurement payables		3,642,002		—		—		—		—		3,642,002		—			3,642,002
Accrued expenses		1,796,335		—		—		—		—		1,796,335		—			1,796,335
Deposits from customers		50,279		—		—		—		—		50,279		—			50,279
Derivative liabilities		215,403		—		—		—		—		215,403		—			215,403
Other current financial liabilities		113,270		—		—		—		—		113,270		(60,857	)		52,413
Due to related parties		—		22,099		—		—		—		22,099		—			22,099
Obligation under financial lease		—		90,143		90,143		90,143		378,337		648,766		(232,179	)		416,587
Other non-current financial liabilities		—		47,916		3,444		—		—		51,360		(5,545	)		45,815
Loans payable		3,692,378		3,533,927		2,619,642		647,505		1,866,778		12,360,230		(1,509,279	)		10,850,951
Bonds payable		2,290,020		1,163,332		2,380,454		3,257,211		12,231,499		21,322,516		(8,110,281	)		13,212,235
Total		12,445,192		4,857,417		5,093,683		3,994,859		14,476,614		40,867,765		(9,918,141	)		30,949,624

	Expected maturity as of December 31,
	2012		2013		2014		2015		2016 and thereafter		Total contractual cash flows		Interest value			Carrying amount
December 31, 2011
Short-term loan		1,579,092		—		—		—		—		1,579,092		(79,836	)		1,499,256
Accounts payable—trade		319,058		—		—		—		—		319,058		—			319,058
Procurement payables		3,475,862		—		—		—		—		3,475,862		—			3,475,862
Accrued expenses		1,895,613		—		—		—		—		1,895,613		—			1,895,613
Deposits from customers		37,265		—		—		—		—		37,265		—			37,265
Derivative liabilities		138,189		—		—		—		—		138,189		—			138,189
Other current financial liabilities		196,675		—		—		—		—		196,675		(124,847	)		71,828
Due to related parties		—		15,480		—		—		—		15,480		—			15,480
Obligation under financial lease		—		180,602		180,602		180,602		696,670		1,238,476		(468,395	)		770,081
Other non-current financial liabilities		—		84,186		34,631		—		—		118,817		(11,384	)		107,433
Loans payable		3,732,456		2,774,662		2,245,335		706,241		1,396,047		10,854,741		(1,128,425	)		9,726,316
Bonds payable		1,167,023		2,384,195		3,260,902		1,040,592		11,263,104		19,115,816		(6,935,474	)		12,180,342
Total		12,541,233		5,439,125		5,721,470		1,927,435		13,355,821		38,985,084		(8,748,361	)		30,236,723

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PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

	Expected maturity as of December 31,
	2013		2014		2015		2016		2017 and thereafter		Total contractual cash flows		Interest value			Carrying amount
December 31, 2012
Short-term loan		315,736		—		—		—		—		315,736		(16,207	)		299,529
Accounts payable—trade		231,737		—		—		—		—		231,737		—			231,737
Procurement payables		2,737,850		—		—		—		—		2,737,850		—			2,737,850
Accrued expenses		1,961,285		—		—		—		—		1,961,285		—			1,961,285
Deposits from customers		43,825		—		—		—		—		43,825		—			43,825
Derivative liabilities		81,241		—		—		—		—		81,241		—			81,241
Other current financial liabilities		670,834		—		—		—		—		670,834		(381,670	)		289,164
Due to related parties		—		42,789		—		—		—		42,789		—			42,789
Obligation under financial lease		—		622,020		622,020		622,020		2,827,500		4,693,560		(1,591,650	)		3,101,910
Other non-current financial liabilities		—		71,592		4,588		—		—		76,180		(6,907	)		69,273
Loans payable		2,924,722		1,793,139		856,839		654,973		830,089		7,059,762		(686,722	)		6,373,040
Bonds payable		2,643,553		3,520,261		1,299,951		1,734,671		13,638,300		22,836,736		(7,521,054	)		15,315,682
Total		11,610,783		6,049,801		2,783,398		3,011,664		17,295,889		40,751,535		(10,204,210	)		30,547,325

B. CAPITAL MANAGEMENT

The Group aim to achieve an optimal capital structure in pursuit of their business objectives, which include maintaining healthy capital ratios and strong credit ratings, and maximizing stockholder value.

Some of the Group’s debt instruments contain covenants that impose maximum leverage ratios. In addition, the Company’s credit ratings from the international credit ratings agencies are based on its ability to remain within certain leverage ratios. The Group have complied with all externally imposed capital requirements.

Management monitors capital using several financial leverage measurements such as debt-to-equity ratio. The Group’s objective is to maintain its debt-to-equity ratio at a maximum of 2.50 each as of January 1, 2011 and December 31, 2011 and 2012.

The Group continue to manage their debt covenants and capital structure based on financial information determined under IFAS.

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PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

As of January 1, 2011 and December 31, 2011 and 2012, the Group’s debt-to-equity ratio accounts are as follows:

	January 1, 2011 (Restated)				December 31, 2011 (Restated)				December 31, 2012
	Loans and Bonds Payable		Guaranteed Notes Due 2020		Loans and Bonds Payable		Guaranteed Notes Due 2020		Loans and Bonds Payable		Guaranteed Notes Due 2020
Short-term loan—gross		—		—		1,500,000		1,500,000		300,000		300,000
Loans and bonds payable—including current maturities—gross		24,399,291		24,399,291		22,172,064		22,172,064		21,923,555		21,923,555
Obligation under finance lease		—		445,874		—		825,836		—		3,374,139
Total debts		24,399,291		24,845,165		23,672,064		24,497,900		22,223,555		25,597,694
Total equity		18,689,601		18,689,601		19,392,497		19,392,497		19,809,078		19,809,078
Debt to equity ratio		1.31		1.33		1.22		1.26		1.12		1.29

C. COLLATERAL

The loans of Lintasarta, a subsidiary, which were obtained from CIMB Niaga, are collateralized by all equipment (Notes 8, 18j and 18l) purchased by Lintasarta from the proceeds of the credit facilities. There are no other significant terms and conditions associated with the use of collateral.

The Company did not hold any collateral as of January 1, 2011 and December 31, 2011 and 2012.

37. EVENTS AFTER THE REPORTING PERIOD

a. On January 3, 2013, as the continuation of the investigation from the General Attorney Office (AGO) in regard to the allegation of frequency 2.1 Ghz misuse by the Company and IMM due to cooperation agreement on broadband internet services, the AGO released the warrant investigation No.Prin-01/F.2/Fd.1/01/2013 (for the Company) and No.Prin-02/F.2/Fd.1/01/2013 (for IMM) since both of the Company and IMM were determined as suspects in this legal case. Subsequently, on January 10, 2013, the AGO released the letter calling for the witnesses from the Company and IMM in order to come to the AGO on January 14—17, 2013.

b. On January 15, 2013, the Company repaid partially the Revolving Time Loan facility from Mandiri amounting to Rp100,000 (Note 14).

c. On January 22, 2013, the Company entered into 2 currency forward contracts with Standard Chartered and BTMU Ltd with total notional amount of US$25,000.

d. On January 28, 2013, the Company repaid partially the Revolving Time Loan facility from BCA amounting to Rp300,000.

e. On January 28, 2013, the Company received the claim for tax refund on Satelindo’s 2002 and 2003 income tax article 26 amounting to Rp87,198 (Note 7).

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PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

f. On February 4, 6, 8, 11, 21, 25, 27 and 28, 2013, the Company entered into 1 currency forward contract each with Standard Chartered, CIMB, BNP, ING and Barclay, 2 forward currency contracts with DBS and 3 forward currency contracts with BTUMFJ with total notional amount of US$162,000.

g. On February 19, 2013, the Company repaid partially the Revolving Time Loan facility from BCA amounting to Rp300,000.

h. On February 28, 2013, the Company paid the sixth installment of SEK credit facility B amounting to US$11,071.43.

i. On March 6, 11, 13, 14, 15, 19, 20, 22, 26 and 27, the Company entered into 17 currency forward contracts with JP Morgan, Stanchard, DBS Indonesia, BNP Paribas, Barclays, ING, Natixis, CIMB Niaga and Danareksa with total notional amount of US$284,750.

j. On March 7, 2013, the Company’s major stockholder—Qatar Telecom (Qtel Asia) Pte. Ltd officially changed its name into Ooredoo Asia Pte.Ltd (Note 22).

k. On March 27, 2013, the Company drew an amount of Rp300,000 from its Revolving Time Loan with BSMI.

l. On March 27, 2013, the Company paid the seventh semi-annual installment of its COFACE and SINOSURE facilities from HSBC France amounting to US$7,859.34 and US$2,210, respectively.

m. On April 5, 2013, the Company drew an amount of Rp500,000 from its Revolving Time Loan with BCA and Rp250,000 each from the Loan with Mandiri and BSMI, respectively.

n. On April 8, 2013, the Company fully repaid IDR Bond VI Year 2008 Seri A including Sukuk Ijarah III Year 2008 totaling IDR1,330,000.

o. On April 9, 10 and 25, 2013, the Company entered into 3 currency forward contracts with Merrill Lynch International with notional amount of US$12,000, US$14,500 and US$12,000, respectively.

p. On April 22, 2013, the Company made public release on the Company’s plan of delisting from New York Stock Exchange (NYSE). Such delisting has obtained approval from the Board of Commissioners and Directors on April 18 and 17, 2013, respectively.

q. On April 25 and 26, 2013, the Company entered into 1 currency forward contract each with Merrill Lynch International and DBS with total notional amount of US$12,000 and US$25,000.

r. As of April 25, 2013, after going through several changes in its ownership in the Company, SKAGEN Funds owns 5.41% ownership in the Company as stated in its letter dated on the same date which was sent to the BAPEPAM (Note 22).

s. As of April 29, 2013, the prevailing exchange rate of the rupiah to U.S. dollar is Rp9,721 to US$1 (in full amounts), while as of December 31, 2012, the prevailing exchange rate was Rp9,670 to US$1 (in full amounts). Using the exchange rate as of April 29, 2013, the Group suffered from exchange loss amounting to approximately Rp65,138 (excluding the effect of revaluing derivative contracts on April 29, 2013) on the foreign currency liabilities, net of foreign currency assets, as of December 31, 2012 (Note 36).

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PT INDOSAT Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

as of January 1, 2011 (Restated), December 31, 2011 (Restated) and December 31, 2012

and for the Years ended December 31, 2010 (Restated), 2011 (Restated) and 2012

(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)

The translation of the foreign currency liabilities, net of foreign currency assets, should not be construed as a representation that these foreign currency liabilities and assets have been, could have been, or could in the future be, converted into rupiah at the prevailing exchange rate of the rupiah to U.S. dollar as of December 31, 2012 or at any other rate of exchange.

The commitments for the capital expenditures denominated in foreign currencies as of December 31, 2012 as disclosed in Note 34a are approximately Rp1,382,278 if translated at the prevailing exchange rate as of April 29, 2013.

F-152