PERUSAHAAN PERSEROAN PERSERO PT TELEKOMUNIKASI INDONESIA TBK

20-F 1 final_20fcleancleanp1.htm PT TELEKOMUNIKASI INDONESIA TBK final_20fcleancleanp1.htm - Generated by SEC Publisher for SEC Filing

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 20-F

*	REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
	OR
R	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2013
*	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	OR
*	SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

Commission file number 1-14406

Perusahaan Perseroan (Persero)

PT Telekomunikasi Indonesia Tbk.

(Exact name of Registrant as specified in its charter)

Telecommunications Indonesia

(a state-owned public limited liability company)

(Translation of Registrant’s name into English)

Republic of Indonesia

(Jurisdiction of incorporation or organization)

Jl. Japati No. 1, Bandung 40133, Indonesia

(Address of principal executive offices)

Investor Relations Unit

Grha Merah Putih , Jl. Gatot Subroto No. 52, 5 th Floor, Jakarta 12710, Indonesia

(62) (22) 452-7101

(62) (21) 521-5109

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

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

Title of Each class — American Depositary Shares representing Series B Shares, par value 50 Rupiah per share		New York Stock Exchange
Series B Shares, par value 50 Rupiah 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 Dwiwarna Share, par value 50 Rupiah per share		1
Series B Shares, par value 50 Rupiah per share		97,100,853,599
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 an 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 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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [ ] No [x]
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. (Check one):
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 checkmark 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 American Depositary Shares (“ADSs”). The Series B Shares are not listed for trading on the New York Stock Exchange.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on behalf by the undersigned, thereunto duly authorized.

Date April 1 , 2014 Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk ----------------------------------------------------- (Registrant) By: /s/ Honesti Basyir ---------------------------------------------------- (Signature) Honesti Basyir Chief of Financial Officer

2013 Annual Report

on Form 20-F

TABLE OF CONTENTS

DEFINITIONS	1
CERTAIN DEFINITIONS, CONVENTIONS AND GENERAL INFORMATION	9
FORWARD-LOOKING STATEMENTS	9

PART I

ITEM 1	IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS	10
ITEM 2	OFFER STATISTICS AND EXPECTED TIMETABLE	10
ITEM 3	KEY INFORMATION	10
ITEM 4	INFORMATION ON THE COMPANY	27
ITEM 4A	UNRESOLVED STAFF COMMENTS	63
ITEM 5	OPERATING AND FINANCIAL REVIEW AND PROSPECTS	63
ITEM 6	DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES	84
ITEM 7	MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS	92
ITEM 8	FINANCIAL INFORMATION	97
ITEM 9	THE OFFER AND LISTING	98
ITEM 10	ADDITIONAL INFORMATION	101
ITEM 11	QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK	107
ITEM 12	DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES	110

PART II

ITEM 13	DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES	112
ITEM 14	MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS	112
ITEM 15	CONTROLS AND PROCEDURES	112
ITEM 16A	AUDIT COMMITTEE FINANCIAL EXPERT	113
ITEM 16B	CODE OF ETHICS	113
ITEM 16C	PRINCIPAL ACCOUNTANT FEES AND SERVICES	113
ITEM 16D	EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES	114
ITEM 16E	PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS	115
ITEM 16F	CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT	116
ITEM 16G	CORPORATE GOVERNANCE	116
ITEM 16H	MINE SAFETY DISCLOSURE	117

PART III

ITEM 17	FINANCIAL STATEMENTS	118
ITEM 18	FINANCIAL STATEMENTS	118
ITEM 19	EXHIBITS	118
	Exhibit 1.1 Articles of Association (as amended on May 8, 2013)
	Exhibit 8.1 Please refer to Item 4 "Information on the Company-Organizational Structure" for a list of subsidiaries of the Registrant
	Exhibit 12.1 CEO Certification pursuant to Section 302
	Exhibit 12.2 CFO Certification pursuant to Section 302
	Exhibit 13.1 CEO Certification pursuant to Section 906
	Exhibit 13.1 CFO Certification pursuant to Section 906
	Exhibit 15.1 Letter of the Company's predecessor auditor to Securities Exchange Commissions in relation to Item 16F. Change in Registrant's Certifying Accountant
SIGNATURES		119-123

DEFINITIONS

Table of Content

The generic term for third generation mobile telecommunications technology. 3G offers high speed connections to cellular phones and other mobile devices, enabling video conference and other applications requiring broadband connectivity to the internet.

3.5G

A grouping of disparate mobile telephony and data technologies designed to provide better performance than 3G systems, as an interim step towards deployment of full 4G capability.

Adjusted EBITDA

Adjusted EBITDA is defined as earnings before interest, tax, depreciation and amortization. Adjusted EBITDA and other related ratios in this Annual Report serve as additional indicators on our performance and liquidity, which is a non - GAAP financial measure.

ADS

American Depositary Share (also known as an American Depositary Receipt, or an “ADR”), a certificate traded on a US securities market (such as New York Stock Exchange) representing a number of foreign shares. Each of our ADS represents 200 of our Series B shares.

ADSL

Asymmetric Digital Subscriber Line, a type of digital subscriber line technology, a data communications technology that enables faster data transmission over copper telephone lines than a conventional voice band modem can provide.

APMK

Alat Pembayaran Menggunakan Kartu or card-based payment instruments, a payment instrument in the form of credit cards, Automated Teller Machine (“ATM”) and/or debit cards.

ARPU

Average Revenue per User, a measure used primarily by telecommunications and networking companies which states how much money we make from the average user. It is defined as the total revenue from specified services divided by the number of consumers for those services.

Backbone

The main telecommunications network consisting of transmission and switching facilities connecting several network access nodes. The transmission links between nodes and switching facilities include microwave, submarine cable, satellite, optical fiber and other transmission technology.

Bandwidth

The capacity of a communication link.

Bapepam-LK

Badan Pengawas Pasar Modal dan Lembaga Keuangan , or the Indonesian Capital Market and Financial Institution Surpervisory Agency, the predecessor to the OJK.

Broadband

A signaling method that includes or handles a relatively wide range (or band) of frequencies.

BSC

Base Station Controller, an equipment responsible for radio resource allocation to mobile station, frequency administration and handover between BTSs controlled by the BSC.

BSS

Base Station Subsystem, the section of a cellular telephone network responsible for handling traffic and signaling between a mobile phone and the network switching subsystem. A BSS is composed of two parts: the BTS and the BSC.

BTS

Base Transceiver Station, equipment that transmits and receives radio telephony signals to and from other telecommunication systems.

BWA

Broadband Wireless Access, a technology that provides high speed wireless internet access or computer networking access over a wide area.

Table of Content

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.

CPE

Customer Premises Equipment, any handset, receiver, set-top box or other equipment used by the consumer of wireless, fixed line or broadband services, which is the property of the network operator and located on the customer premises.

DCS

Digital Communication System, a mobile cellular system using GSM technology operating in the 1800 MHz frequency band.

Defined Benefit Pension Plan

A type of pension plan in which an employer promises a specified monthly benefit on retirement that is predetermined by a formula based on the employee’s earnings history, tenure of service and age, rather than depending on investment returns. It is considered ‘defined’ in the sense that the formula for computing the employer’s contribution is known in advance.

Defined Contribution Pension Plan

A type of retirement plan in which the amount of the employer’s annual contribution is specified. Individual accounts are set up for participants and benefits are based on the amounts credited to these accounts (through employer contributions and, if applicable, employee contributions) plus any investment earnings on the money in the account. Only employer contributions to the account are guaranteed, not the future benefits. In defined contribution plans, future benefits fluctuate on the basis of investment earnings.

Dial-Up

Access to the internet using fixed telephone lines or mobile phone.

DLD Domestic Long Distance, a long distance call service designed for customers who live in different areas but still within one country. These areas normally have different area codes.

Down link

Radio signal frequency emitted by the satellite to earth station.

DSL Digital Subscriber Line, a technology that allows combinations of services including voice, data and one way full motion video to be delivered over existing copper feeder distribution and subscriber lines.

DTH

Direct-to-Home satellite broadcasting, the distribution of television signals from high-powered geostationary satellites to small dish antennas and satellite receivers in homes across the country.

Dual Band

The capability of a mobile cellular network and mobile cellular handsets to operate across two frequency bands, for example GSM 900 and GSM 1800.

e-Business Electronic Business solutions, including electronic payment services, internet data centers and content and application solutions. Refer to “New Economy Business (“NEB”) and Strategic Business Opportunities Portfolio” under Business Overview.

e-Commerce

Electronic Commerce, the buying and selling of products or services over electronic systems such as the internet and other computer networks.

e-Money

Electronic Money, money or script that is only exchanged electronically.

e-Payment

Also known as electronic funds transfer, the electronic exchange or transfer of money from one account to another, either within a single financial institution or across multiple institutions, through computer-based systems.

Table of Content

E1 Link

The backbone transmission unit which operates over two separate sets of wires, usually twisted pair cable. E1 link data rate is 2,048 Mbps (full duplex), which is divided into 32 timeslots.

Earth Station

The antenna and associated equipment used to receive or transmit telecommunication signals via satellite.

EDGE

Enhanced Data rates for GSM Evolution, a digital mobile phone technology that allows improved data transmission rates as a backward-compatible extension of GSM.

Edutainment

Education and Entertainment.

EVDO

Evolution Data Optimize, a standard high speed 3G wireless broadband for CDMA.

Fixed Line

Fixed wireline and fixed wireless.

Fixed Wireless

The local wireless transmission link using a cellular, microwave, or radio technology to connect customers at a fixed location to the local telephone exchange.

Fixed Wireline

A fixed wire or cable path linking a subscriber at a fixed location to a local exchange, usually with an individual phone number.

FTTx Fiber to the “x”, a generic term for any broadband network architecture that uses optical fiber to replace all or part of the usual metal local loop used for last mile telecommunication. The generic term originated as a generalization of several configurations of fiber deployment such as fiber to the home, fiber to the node or fiber to the building.

Gateway

A peripheral that bridges a packet based network (IP) and a circuit based network (PSTN).

Gigabyte, a unit of information used, for example, to quantify computer memory or storage capacity.

Gbps

Gigabyte per second, the average number of bits, characters, or blocks per unit time passing between equipment in a data transmission system. This is typically measured in multiples of the unit bit per second or byte per second.

GHz

Gigahertz. The hertz (symbol Hz), the international standard unit of frequency defined as the number of cycles per second of a periodic phenomenon.

GMS

General Meeting of Shareholders, which may be an Annual General Meeting of Shareholders (“AGMS”) or an Extraordinary General Meeting of Shareholders (“EGMS”).

GPON

Gigabyte-Passive Optical Network, the most widely deployed type of passive optical network system that bring optical fiber cabling and signals all or most of the way to end users.

GPRS

General Packet Radio Service, a data packet switching technology that allows information to be sent and received across a mobile network and only utilizes the network when there is data to be sent.

GSM

Global System for Mobile Telecommunication, a European standard for digital cellular telephone.

Table of Content

homepass

A connection with access to fixed line voice, IPTV and broadband services.

HSPA+

Evolved High Speed Packet Access is defined in the Third Generation Partnership Project Release 7. It introduces a simpler IP-centric architecture for the mobile network bypassing most of the legacy equipment. HSPA+ boosts peak data rates to 42 Mbit/s on the downlink and 22 Mbit/s on the uplink.

IDD

International Direct Dialing, a service that allows a subscriber to make an international call without the assistance or intervention of an operator from any telephone terminal.

IME

Information, Media and Edutainment.

IMT-2000

International Mobile Telecommunications-2000, a body of specifications provided by the International Telecommunication Union. Application services include wide area wireless voice telephone, mobile internet access, video calls and mobile TV, all in a mobile environment.

Installed Lines

Complete lines fully built-out to the distribution point and ready to be connected to subscribers.

Intelligent Network

A service-independent telecommunications network where the logic functions are taken out of the switch and placed in computer nodes distributed throughout the network. This provides the means to develop and control services more efficiently allowing new or advanced telephony services to be introduced quickly.

Interconnection

The physical linking of a carrier’s network with equipment or facilities not belonging to that network.

Internet Protocol, the method or protocol by which data is sent from one computer to another on the internet.

IP Core

A block of logic data that is used in making a field programmable gate array or application-specific integrated circuit for a product.

IP DSLAM

Internet Protocol-Digital Subscriber Line Access Multiplexer, a network device located near the customer’s location that allows telephone lines to make faster connections to the internet by connecting multiple customer Digital Subscriber Lines (DSLs) to a high-speed internet backbone line using multiplexing techniques.

IP VPN

A data communication service using IP Multi Protocol Label Switching (“MPLS”) and based on any to any connection. This service is connected to the data security systems, L2TP and IPSec. The speed depends on the customer’s needs and ranges from 64 Kbps to 2 Mbps.

IPTV

Internet Protocol Television, a system through which television services are delivered using the Internet Protocol suite over a packet-switched network such as the internet, instead of being delivered through traditional terrestrial, satellite signal, and cable television formats.

ISDN

Integrated Services Digital Network, a network that provides end-to-end digital connectivity and allows simultaneous transmission of voice, data and video and provides high speed internet connectivity.

ISP

Internet Services Provider , an organization that provides access to the internet.

Kbps

Kilobyte per second, a measure of speed for digital signal transmission expressed in thousands of bits per second.

Table of Content

Lambda

Lambda indicates the wavelength of any wave, especially in physics, electronics engineering and mathematics.

Leased Line

A dedicated telecommunications transmissions line linking one fixed point to another, rented from an operator for exclusive uses.

Local Exchange Capacity

The aggregate number of lines at a local exchange connected and available for connection to outside plant.

LTE

Long Term Evolution technology, a standard for high-speed wireless data communication for mobile phones and data terminals.

Mbps

Megabyte per second, a measure of speed for digital signal transmission expressed in millions of bits per second.

Metro Ethernet

Bridge or relationship between locations that are apart geographically, this network connects LAN customers at several different locations.

MHz

Megahertz, a unit of measure of frequency equal to one million cycles per second.

Mobile Broadband

The marketing term for wireless internet access through a portable modem, mobile phone, USB Wireless Modem or other mobile devices.

MoCI

The Ministry of Communication and Information, to which regulatory responsibility over telecommunications was transferred from the Ministry of Communication (“MoC”) in February 2005.

MSAN

Multi Service Access Networks, represent the third generation of optical access network technology and are single platforms capable of supporting traditional, widely deployed, access technologies and services as well as emerging ones, while simultaneously providing a gateway to a NGN core. MSAN will enable us to provide triple play services that distribute high speed internet access, voice packet services and IPTV services simultaneously through the same infrastructure.

Network Access Point

A public network exchange facility where ISPs connected with one another in peering arrangements.

NGN

Next Generation Network, a general term that refers to a packet-based network able to provide services, including telecommunication services, and able to make use of multiple broadband, quality of service enabled transport technologies and in which service-related functions are independent from underlying transport related technologies. A NGN is intended to be able to, with one network, transport various services (voice, data, and various media such as video) by encapsulating these into packets, similar to how such packet are transmitted on the internet. NGNs are commonly built around the Internet Protocol.

Node B

A BTS for a 3G W-CDMA/UMTS network.

OBCE

Operational, Business and Customer support system and Enterprise relations management, which is part of our strategic initiatives.

OJK

Otoritas Jasa Keuangan , or the Indonesian Financial Services Authority, the successor of Bapepam-LK, is an independent institution with authority to regulate and supervise financial services activities in the banking sector, capital market sector as well as non-bank financial industry sector.

OLO

Other Licensed Operators, i.e. operators other than our Company.

Table of Content

Optical Fiber

Cables using optical fiber and laser technology through which modulating light beams representing data are transmitted through thin filaments of glass.

Outside Plant

The equipment and facilities used to connect subscriber premises to the local exchange.

Pay TV

Pay Television, premium television, or premium channels, subscription-based television services, usually provided by both analog and digital cable and satellite, but also increasingly via digital terrestrial and internet television.

PDN

Packet Data Network, a digital communications network which breaks a group data to be transmitted into segments called packets, which are then routed independently.

PKLN

Tim Pinjaman Komersial Luar Negeri , or Foreign Commercial Loan Coordinating Team, an inter-agency team of the Government charged with, among others, considering requests of Indonesian State-Owned Enterprises such as us for consent to obtain foreign commercial loans.

POWL

Public Offering Without Listing.

Premium SMS

Premium Short Message Service, a text messaging service component of phone, web, or mobile communication systems, using standardized communications protocols that allow the exchange of short text messages between fixed line or mobile phone devices.

PSTN

Public Switched Telephone Network, a telephone network operated and maintained by us and the KSO Units for us and on our behalf.

Pulse

The unit in the calculation of telephone charge.

Radio Frequency Spectrum

The part of the electromagnetic spectrum corresponding to radio frequencies, i.e. frequencies lower than around 300 GHz (or, equivalently, wavelengths longer than about 1 mm).

RIO

Reference Interconnection Offer, a regulatory term covering all facilities, including interconnection tariffs, technical facilities and administrative issues offered by one telecommunications operator to other telecommunications operator for interconnection access.

RMJ Regional Metro Junction, an inter-city cable network installation service in one regional (region/province).

Roaming

A general term referring to the extension of connectivity service in a location that is different from the home location where the service was registered.

RUIM card

Removable User Identity Module, a smart card designed to be inserted into a fixed wireless telephone that uniquely identifies a CDMA network subscription and that contains subscriber-related data such as phone numbers, service details and memory for storing messages.

Satellite Transponder

Radio relay equipment embedded in a satellite that receives signals from earth and amplifies and transmits the signal back to the earth.

SCCS

Submarine Communications Cable System, a cable laid on the sea bed between land-based stations to carry telecommunication signals across stretches of ocean.

Table of Content

SDP

Service Delivery Platform, a set of components that provide a service delivery architecture (such as service creation, session control and protocols) for a type of service.

SIM card

Subscriber Identity Module, a “smart” card designed to be inserted into cellular phone that uniquely identifies a GSM network subscription and contains subscriber-related data such as phone numbers, service details and memory for storing messages.

SME

Small and Medium Enterprise.

SMS

Short Messaging Service, a technology allowing the exchange of text messages between mobile phones and between fixed wireless phones.

SOE

State-Owned Enterprise, a Government-owned corporation, state-owned company, state-owned entity, state enterprise, publicly owned corporation, Government business enterprise, or parastatal, a legal entity created by a Government to undertake commercial activities on behalf of an owner Government.

Softswitch

A central device in a telephone network that connects calls from one phone line to another, entirely by means of software running on a computer system. This work was formerly carried out by hardware, with physical switchboards to route the calls.

STM-1

Synchronous Transport Module level-1, the SDH ITU-T fiber optic network transmission standard with a bit rate of 155.52 Mbps. The other standards are STM-4, STM-16 and STM-64.

Switch

A mechanical, electrical or electronic device that opens or closes circuits, completes or breaks an electrical path, or selects paths or circuits, used to route traffic in a telecommunications network.

Terra Router

Terra Router or terabit router on the theory allows the network capacity on a scale of terabits (1 terabit = 1 million gigabits).

TIME S

Telecommunication, Information, Media , Edutainment and Service .

TITO

Trade-In, Trade-Off, a conversion scheme to replace copper with optical cable . Refer to “Development and Modernization of Broadband Access through the TITO Scheme” under Network Development.

Trunk Exchange

A switch that has the function of connecting one telephony switch to another telephony switch, which can either be a local or a trunk switch.

UMTS

Universal Mobile Telephone System, one of the 3G mobile systems being developed within the ITU’s IMT-2000 framework.

USO

Universal Service Obligation, the service obligation imposed by the Government on all telecommunications services providers for the purpose of providing public services in Indonesia.

VoIP

Voice over Internet Protocol, a means of sending voice information using the IP.

VPN

Virtual Private Network, a secure private network connection, built on top of publicly-accessible infrastructure, such as the internet or the public telephone network. VPNs typically employ some combination of encryption, digital certificates, strong user authentication and access control to secure the traffic they carry. These provide connectivity to many machines behind a gateway or firewall.

Table of Content

VSAT

Very Small Aperture Terminal, a relatively small antenna, typically 1.5 to 3.0 meters in diameter, placed in the user’s premises and used for two-way communications by satellite.

Wi - MAX

Worldwide Interoperability for Microwave Access, a telecommunications technology that provides wireless transmission of data using a variety of transmission modes, from point-to-point links to portable internet access.

Wireless Access Network

Any type of computer network that is not connected by cables of any kind. It is a method by which homes, telecommunications networks and enterprise (business) installations avoid the costly process of introducing cables into a building, or as a connection between various equipment locations.

Wireless Broadband

Technology that provides high speed wireless internet access or computer networking access over a wide area.

Table of Content

CERTAIN DEFINITIONS, CONVENTIONS AND GENERAL INFORMATION

Unless the context otherwise requires, references in this Form 20-F to the “Company”, “ Telkom ”, “we”, “us”, and “our” are to PT Telekomunikasi Indonesia 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 “US” are to the United States of America. References to “United Kingdom” or “UK” are to the United Kingdom of Great Britain and Northern Ireland. References to “Rupiah” or “Rp” are to the lawful currency of Indonesia. References to “US Dollar” 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, 2012 (Restated), December 31, 2012 (Restated) and December 31, 2013 and for the years ended December 31, 2011 (Restated) , 2012 (Restated) and 2013 included in this Form 20-F (the “Consolidated Financial Statements”) have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

On December 31, 2013, the financial statements of nine of our subsidiaries were consolidated into the Consolidated Financial Statements for 2013. The nine companies are PT Telekomunikasi Indonesia International (“ TII ”, a wholly-owned subsidiary), PT Dayamitra Telekomunikasi (“ Dayamitra ”, a wholly-owned subsidiary), PT Pramindo Ikat Nusantara (“PINs”, a wholly-owned subsidiary), PT Telekomunikasi Selular (“Telkomsel”, in which we own a 65% stake), PT Multimedia Nusantara (“Metra”, a wholly-owned subsidiary), PT Graha Sarana Duta (“ GSD ”, in which we own a 99.99% stake), PT Telkom Akses (“Telkom Akses”, a wholly-owned subsidiary), PT Patra Telekomunikasi Indonesia (“Patrakom”, a wholly-owned subsidiary) and PT Napsindo Primatel Internasional (“Napsindo”, in which we own a 60% stake). See Note 1d to our Consolidated Financial Statements.

Solely for the convenience of the reader, certain Rupiah amounts have been translated into US Dollars at specified rates. Unless otherwise indicated, US Dollars equivalent information for amounts in Rupiah is translated at the Reuters Rate for December 31, 2013 at 04.00 PM Jakarta time, using the average of the market buy and sell rates of Rp12,170 to US$1.00. The average of the market buy and sale on March 20, 2014 was Rp11,445 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 Rupiah. No representation is made that the Rupiah or US Dollar amounts shown herein could have been or could be converted into US Dollar or Rupiah, as the case may be, at any particular rate or at all. See Item 3 “Key Information – Selected Financial Data – Exchange Controls” for further information regarding rates of exchange between the Rupiah and the US Dollar.

FORWARD-LOOKING STATEMENTS

This Form 20-F contains “forward-looking statements” as defined in Section 27A of the US Securities Act of 1933, as amended (“Securities Act”) and Section 21E of the US Securities Exchange Act of 1934, as amended (“Exchange Act”), 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.

Table of Content

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

A. SELECTED FINANCIAL 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, 2010, 2011, 2012 and 2013 presented below is based upon our audited Consolidated Financial Statements prepared in conformity with IFRS as issued by the IASB. The selected financial information as of and for the years ended December 31, 2010, 2011, 2012 and 2013 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 include elsewhere in this Form 20-F and in our previous Form 20-F filed with the SEC on April 1 , 2013. In 2013, we adopted IAS 19 Employee Benefits (Revised 2011 ) on a retrospective basis and the 2011 and 2012 consolidated financial statements have been restated. Moreover, in 2013, our shareholders approved the stock split with a ratio of 1:5, accordingly the historical per share information has been retrospectively adjusted. The selected financial information as of and for the years ended December 31, 2009 is based upon our audited Consolidated Financial Statements prepared in conformity with Indonesian Financial Accounting Standards (“IFAS”), with a reconciliation to US GAAP. The selected financial information as of and for the years ended December 31, 2009 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 our previous Form 20-F filed with the SEC on April 8, 2010. Therefore, financial information for 2010, 2011, 2012 and 2013 are not comparable with financial information for 2009 and are presented separately.

The Public Accountant Firm (“KAP”) Purwantono, Suherman & Surja (a member firm of Ernst & Young Global Limited) audited our Consolidated Financial Statements as of and for the years ended December 31, 2012 and 2013, while, our Consolidated Financial Statements as of and for the years ended December 31, 2009, 2010 and 2011 were audited by KAP Tanudiredja, Wibisana & Rekan, a member firm of the PwC global network (“PwC”).

| | Year s Ended December
31, — 2010 | | 2011 (Restated) | | 2012 (Restated) | | 2013 | | 2013 | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | (Rp
billion) | | (Rp
billion) | | (Rp
billion) | | (Rp
billion) | | (US$
million) | |
| | except for per
share and per ADS amount | | | | | | | | | |
| Key Consolidated
Statements of Comprehensive Income Data | | | | | | | | | | |
| IFRS | | | | | | | | | | |
| Revenues | 68,529 | | 71,238 | | 77,127 | | 82,967 | | 6,817 | |
| Expenses (1) | 46,337 | | 49,880 | | 54,200 | | 57,850 | | 4,753 | |
| Adjusted EBITDA | 37,334 | | 36,857 | | 39,971 | | 43,532 | | 3,577 | |
| Operating Profit | 22,754 | | 22,034 | | 25,497 | | 27,727 | | 2,278 | |
| Profit before Income Tax | 21,264 | | 20,982 | | 24,027 | | 27,030 | | 2,221 | |
| Net Income Tax Expense | (5,512 | ) | (5,437 | ) | (5,886 | ) | (6,900 | ) | (567 | ) |
| Profit for the Year | 15,752 | | 15,545 | | 18,141 | | 20,130 | | 1,654 | |
| Attributable to owners of the parent
company | 11,427 | | 11,043 | | 12,621 | | 14,046 | | 1,154 | |
| Attributable to non-controlling
interests | 4,325 | | 4,502 | | 5,520 | | 6,084 | | 500 | |
| Other Comprehensive Income (Expenses) -
Net | (553 | ) | (1,928 | ) | (2,540 | ) | 5,115 | | 420 | |
| Net Comprehensive Income for the
Year | 15,199 | | 13,617 | | 15,601 | | 25,245 | | 2,074 | |
| Attributable to owners of the parent
company | 10,911 | | 9,183 | | 10,056 | | 19,018 | | 1,562 | |
| Attributable to non-controlling
interests | 4,288 | | 4,434 | | 5,545 | | 6,227 | | 512 | |

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| | Year s Ended December
31, — 2010 | 2011 (Restated) | 2012 (Restated) | 2013 | 2013 |
| --- | --- | --- | --- | --- | --- |
| | (Rp
billion) | (Rp
billion) | (Rp
billion) | (Rp
billion) | (US$
million) |
| | except for per
share and per ADS amount | | | | |
| Weighted average
number of shares outstanding (in millions) | 98,345 | 97,959 | 96,011 | 96,359 | - |
| Basic and
Diluted Earnings per Share (in full amount) | | | | | |
| Net incomeper
share (2) | 116.19 | 112.73 | 131.45 | 145.77 | 0.01 |
| Net income per
ADS (200 Series B shares per ADS) | 23,238.00 | 22,546.00 | 26,290.80 | 29,153.58 | 2.40 |
| Dividend
relating to the period (accrual basis, in full amount) | | | | | |
| Dividends declared per share | 64.52 | 74.21 | 87.24 | - | - |
| Dividends declared per ADS | 12,903.60 | 14,842.17 | 17,447.53 | - | - |
| Dividend paid in
the period (cash basis, in full amount) (3) | | | | | |
| Dividends declared per share | 55.09 | 61.71 | 74.29 | 87.24 | 0.01 |
| Dividends declared per ADS | 11,017.83 | 12,342.57 | 14,858.69 | 17,447.53 | 1.43 |

(1) Expenses are calculated as the sum of the following expenses: operation, maintenance and telecommunication services, depreciation and amortization, personnel, interconnection, marketing, general and administrative, loss (gain) on foreign exchange, share of loss of associated companies and other expenses.

(2) Using IFAS results, our profit attributable to owners of the parent company would be Rp11, 53 7 billion, Rp10,965 billion , Rp12,850 billion and Rp14,205 for 2010, 2011 , 2012 and 2013, and our net income per share would be Rp 117.31 , Rp 111.93, Rp 133.84 and Rp147.42 for 2010, 2011, 2012 and 2013. We distribute dividends based on profit attributable to owners of the parent company and net income per share determined in reliance on IFAS.

(3) In 2010, we paid a cash dividend for 2009 of Rp 55.09 per share and interim cash dividend 2010 of Rp 5.35 per share. In 2011, we paid a cash dividend for 2010 of Rp 61.71 per share. In 2012, we paid a cash dividend for 2011 of Rp 74.29 per share. In 2013, we paid a cash dividend for 2012 of Rp 8 7 . 24 per share.

| | Years Ended
December 31, — 2010 | 2011
(Restated) | 2012
(Restated) | 2013 | 2013 |
| --- | --- | --- | --- | --- | --- |
| | (Rp
billion) | (Rp
billion) | (Rp
billion) | (Rp
billion) | (US$
million) |
| Reconciliation
of Operating Profit to Adjusted EBITDA | | | | | |
| Operating Profit | 22,754 | 22,034 | 25,497 | 27,727 | 2,278 |
| Add: | | | | | |
| Depreciation and Amortization | 14,580 | 14,823 | 14,474 | 15,805 | 1,299 |
| Adjusted
EBITDA (1) | 37,334 | 36,857 | 39,971 | 43,532 | 3,577 |

(1) Adjusted EBITDA is defined as earnings before interest, tax, depreciation and amortization. Adjusted EBITDA and other related ratios in this Annual Report serve as additional indicators on our performance and liquidity, which is a non - GAAP financial measure. Adjusted EBITDA is presented because our management believes that it is widely used by investors in their analysis of our performance and can assist them in their comparison of our performance with those of other companies in the telecommunications, information and media sector. We also present adjusted 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. Companies in the telecommunications, information and media sector have historically reported adjusted EBITDA as a supplement to financial measures in accordance with IFRS or US GAAP. Adjusted EBITDA should not be considered as an alternative to net income as an indicator of our performance, nor should adjusted EBITDA be considered an alternative to cash flows from operating activities as a measure of liquidity or as an alternative to any other measure determined in accordance with IFRS. Unlike net income, adjusted EBITDA does not include depreciation and amortization or financing costs and, therefore, does not reflect current or future capital expenditures or the cost of capital. We compensate for these limitations by using adjusted EBITDA as only one of several comparative tools, together with IFRS-based measurements, to assist in the evaluation of operating performance. Such IFRS-based measurements include profit before income tax, profit for the year, cash flows from operations and cash flow data. We have significant uses of cash flows, including capital expenditures, interest payments, debt principal repayments, taxes and other non-recurring charges, which are not reflected in adjusted EBITDA. Our calculation of adjusted EBITDA may be different from the calculation methods used by other companies and, therefore, comparability may be limited.

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| | As of December
31, — 2010 | | 2011
(Restated) | | 2012
(Restated) | 2013 | 2013 |
| --- | --- | --- | --- | --- | --- | --- | --- |
| | (Rp
billion) | | (Rp
billion) | | (Rp
billion) | (Rp
billion) | (US$
million) |
| | except for
shares | | | | | | |
| Key Consolidated
Statements of Financial Position Data | | | | | | | |
| IFRS | | | | | | | |
| Cash and cash equivalents | 9,120 | | 9,634 | | 13,118 | 14,696 | 1,207 |
| Trade and other
receivables | 4,534 | | 5,393 | | 5,409 | 6,421 | 527 |
| Advances and prepaid
expenses | 3,441 | | 3,294 | | 3,721 | 3,937 | 324 |
| Total Current Assets | 18,830 | | 21,401 | | 27,973 | 33,075 | 2,718 |
| Property and equipment | 75,624 | | 74,638 | | 76,908 | 86,599 | 7,116 |
| Intangible assets | 1,786 | | 1,791 | | 1,443 | 1,508 | 124 |
| Total Non-current Assets | 82,242 | | 80,965 | | 82,238 | 94,721 | 7,783 |
| Total Assets | 101,072 | | 102,366 | | 110,211 | 127,796 | 10,501 |
| Trade and other payables | 7,787 | | 8,355 | | 7,457 | 11,988 | 985 |
| Current income tax
liabilities | 736 | | 729 | | 1,280 | 942 | 77 |
| Accrued expenses | 3,409 | | 4,790 | | 6,163 | 5,264 | 432 |
| Unearned income | 2,681 | | 2,821 | | 2,729 | 3,490 | 287 |
| Short-term loans and other
borrowings | 5,360 | | 4,913 | | 5,658 | 5,525 | 454 |
| Total Current Liabilities | 20,473 | | 22,189 | | 24,108 | 28,437 | 2,336 |
| Deferred tax liabilities | 4,047 | | 3,159 | | 2,252 | 2,908 | 239 |
| Pension benefit
and other post-employment benefit obligations | 2,805 | | 5,372 | | 8,184 | 4,258 | 350 |
| Long-term loans and other
borrowings | 16,655 | | 12,958 | | 13,617 | 14,731 | 1,210 |
| Total Non-current
Liabilities | 24,061 | | 22,018 | | 24,734 | 22,705 | 1,866 |
| Total Liabilities | 44,534 | | 44,207 | | 48,842 | 51,142 | 4,202 |
| Capital
stock (1) | 5,040 | | 5,040 | | 5,040 | 5,040 | 414 |
| Net Equity
Attributable to Owners of the Parent Company | 44,627 | | 44,844 | | 46,055 | 59,753 | 4,910 |
| Non-controlling interests | 11,911 | | 13,315 | | 15,314 | 16,901 | 1,389 |
| Total Equity (Net Assets) | 56,538 | | 58,159 | | 61,369 | 76,654 | 6,299 |
| Net Debt | 12,895 | | 8,237 | | 6,157 | 5,560 | 457 |
| Net Working Capital | (1,643 | ) | (788 | ) | 3,865 | 4,638 | 382 |
| Issued and fully paid shares (in
shares) | 100,799,996,400 | | 100,799,996,400 | | 100,799,996,400 | 100,799,996,400 | 100,799,996,400 |

(1) As of December 31, 2013, our issued and paid-up capital consists of one Series A Dwiwarna share having a par value of Rp50 (the “Dwiwarna Share”) and 100,799,996,399 Series B shares having a par value of Rp50 per share (“common stock”) each from an authorized capital stock comprising one Series A Dwiwarna share and 399,999,999,999 Series B shares.

| | As of and Years
Ended December 31, |
| --- | --- |
| | 2009* |
| | (Rp
billion) |
| Consolidated Income Statement
Data | |
| Indonesian GAAP | |
| Operating Revenues | 67,678 |
| Operating Expenses | |
| Depreciation and
amortization | 13,975 |
| Personnel | 8,371 |
| Operations, maintenance and
telecommunication services | 14,549 |
| General and
administrative | 2,806 |
| Interconnection | 2,929 |
| Marketing | 2,260 |
| Total Operating Expenses | 44,890 |

Table of Content

| | As of and Years
Ended December 31, | |
| --- | --- | --- |
| | 2009* | |
| | (Rp
billion) | |
| Operating Income | 22,788 | |
| Other Income
(Expenses) | | |
| Interest income | 462 | |
| Equity in net (loss) income of
associated companies | (30 | ) |
| Interestexpense | (2,096 | ) |
| Gain(loss) on foreign exchange -
net | 973 | |
| Others - net | 350 | |
| Other expenses - net | (341 | ) |
| IncomeBefore Tax | 22,447 | |
| Income Tax (Expense)
Benefit | (6,404 | ) |
| Income Before Minority Interest in Net
Income of Consolidated Subsidiaries | 16,043 | |
| Minority interest in net income of
consolidated subsidiaries, net | (4,644 | ) |
| NetIncome | 11,399 | |
| Weighted average number of shares
outstanding (in millions) | 19,669 | |
| Basic and Diluted Earnings per Share
(in full amount) | | |
| Net income per share | 579.52 | |
| Net income per ADS | 23,180.80 | |
| US GAAP (1) | | |
| Net income | 12,092 | |
| Operating revenues | 67,677 | |
| Basic and Diluted Earnings per Share
(in full amount) | | |
| Net income per share | 614.78 | |
| Net income per ADS | 24,591.25 | |
| Dividend relating to the period
(accrual basis, in full amount) | | |
| Dividends declared per
share | 288.06 | |
| Dividends declared per
ADS | 11,522.40 | |
| Dividend paid in the period (cash
basis, in full amount) (2) | | |
| Dividends declared per
share | 323.59 | |
| Dividends declared per
ADS | 12,943.60 | |
| Consolidated Balance Sheet
Data | | |
| Indonesian GAAP | | |
| Current assets | 16,095 | |
| Non-current assets | 81,836 | |
| Total assets | 97,931 | |
| Current
liabilities (3) | 26,892 | |
| Non-current liabilities | 21,544 | |
| Total liabilities | 48,436 | |
| Minority interest | 10,933 | |
| Capital stock | 5,040 | |
| Total stockholders’
equity | 38,562 | |
| Total liabilities and stockholders’
equity | 97,931 | |
| US GAAP (1) | | |
| Current assets | 18,381 | |
| Non-current assets | 83,100 | |
| Total assets | 101,481 | |
| Current liabilities | 26,931 | |
| Non-current liabilities | 22,522 | |
| Total liabilities | 49,453 | |
| Non-controlling interest in net assets
of subsidiaries | 11,067 | |
| Total stockholders’
equity | 40,961 | |
| Total liabilities and stockholders’
equity | 101,481 | |

As restated.

(1) US GAAP amounts reflect adjustments resulting from differences in the accounting treatment of voluntary termination benefits, foreign exchange differences capitalized on assets under construction, interest capitalized on assets under construction, revenue-sharing arrangements, employees benefits, equity in net loss (income) of associated companies, amortization of land rights, revenue recognition, amortization of goodwill, finance leases, acquisition of Dayamitra, asset retirement obligations, deferred taxes, available-for-sale securities, amendment and restatement of JOS in Regional Division VII and non-controlling interests.

(2) In 2009, we paid a cash dividend for 2008 of Rp296.94 per share and interim cash dividend 2009 of Rp26.65 per share.

(3) Includes current maturities of long-term debt.

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Exchange Controls

Exchange Rate Information

The following table shows the exchange rate of Rupiah to US Dollar based on the middle exchange rate which is calculated based on the Bank Indonesia buying and selling rates for the periods indicated.

| | at Period
End | Average | Low | High |
| --- | --- | --- | --- | --- |
| Calendar
Year | (Rp Per
US$1) | | | |
| 2009 (1) | 9,400 | 10,356 | 11,980 | 9,400 |
| 2010 (1) | 8,991 | 9,078 | 9,365 | 8,924 |
| 2011 (1) | 9,068 | 8,773 | 9,170 | 8,508 |
| 2012 (1) | 9,670 | 9,419 | 9,670 | 9,000 |
| 2013 | 12,189 | 11,597 | 12,270 | 10,922 |
| September (2) | 11,613 | 11,346 | 11,613 | 10,922 |
| October (2) | 11,234 | 11,367 | 11,593 | 11,018 |
| November (2) | 11,977 | 11,613 | 11,977 | 11,354 |
| December (2) | 12,189 | 12,087 | 12,270 | 11,830 |
| 2014 | 11,634 | 12,057 | 12,267 | 11,620 |
| January (2) | 12,226 | 12,180 | 12,267 | 12,047 |
| February (2) | 11,634 | 11,935 | 12,251 | 11,620 |

Source: Bank Indonesia

(1) Determined based upon the last day middle exchange rate of each month announced by Bank Indonesia applicable for the period.

(2) Determined based upon the daily middle exchange rate announced by Bank Indonesia during the applicable period.

Under the current exchange rate system, the exchange rate of the R upiah 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. For the year 2013, the average rate of Rupiah to the US Dollar was Rp11,597, with the lowest and highest rates being Rp12,270 and Rp10,922, respectively.

The exchange rates used for translation of monetary assets and liabilities denominated in foreign currencies are the buy and sell rates published by Reuters in 2011, 2012 and 2013. The Reuters buy and sell rates, applied respectively to monetary assets and liabilities, were Rp9,060 and Rp9,075 to US$1.00 as of December 31, 2011, Rp9,630 and Rp9,645 to US$1.00 as of December 28 , 2012 and Rp12,160 and Rp12,180 to US$1.00 as of December 31, 2013.

The Consolidated Financial Statements are stated in Rupiah. The translations of Rupiah amounts into US Dollar are included solely for the convenience of the readers and have been made using the average of the market buy and sell rates of Rp12,170 to US$1.00 published by Reuters on December 31, 2013.

On March 20, 2014, the Reuters bid and ask rates were Rp11,440 and Rp11,450 to US$1.00.

Foreign Exchange Controls

Indonesia operates a liberal foreign exchange system that permits the free flow of foreign exchange. Capital transactions, including remittances of capital, profits, dividends and interest, are free of exchange controls. A number of regulations, however, have an impact on the exchange system. For example, only banks are authorized to deal in foreign exchange and execute exchange transactions related to the import and export of goods. In addition, Indonesian banks (including branches of foreign banks in Indonesia) are required to report to Bank Indonesia any fund transfers exceeding US$10,000. As a State-Owned Company, and based on the decree of the Head of PKLN, we are required to obtain an approval from PKLN prior to acquiring foreign commercial loans and must submit periodical reports to PKLN during the term of the loans.

B. CAPITALIZATION AND I NDEBTEDNESS

Not applicable.

C. REASON FOR THE OFFER AND USE OF PROCEEDS

Not applicable.

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D. RISK FACTORS

A. Risks Related to Indonesia

1. Political and Social Risks

Current political and social events in Indonesia may adversely affect our business

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. In 1999, Indonesia conducted its first free elections for parliament and president. Indonesia also has many political parties, without any one party holding a clear majority. Due to these factors, Indonesia has, from time to time, experienced political instability, as well as general social and civil unrest. For example, since 2000, thousands of Indonesians have participated in demonstrations in Jakarta and other Indonesian cities both for and against former President Abdurahman Wahid, former President Megawati, and current President Susilo Bambang Yudhoyono as well as in response to specific issues, including fuel subsidy reductions, privatization of state assets, anti-corruption measures, decentralization and provincial autonomy and the American-led military campaigns in Afghanistan and Iraq. Although these demonstrations were generally peaceful, some turned violent.

Indonesia is facing a couple of critical political events in 2014, namely the legislative election scheduled for April 9, 2014, and the election for President and Vice President scheduled for July 9, 2014. Political tensions are expected to increase during both the legislative and the presidential elections. President Susilo Bambang Yudhoyono is required to step down after having served two terms, thus the presidential election will likely be hotly contested, with an uncertain outcome.

Increased political tensions may cause social and civil disturbances and conflicts to increase. Social conflicts, in particular, may escalate in the lead-up period to the 2014 legislative and presidential election. The dynamics of political maneuvering to win the sympathy of different groups of the public may trigger friction at the grass-root level.

Separatist movements and clashes between religious and ethnic groups have also resulted in social and civil unrest in parts of Indonesia, such as Aceh in the past and in Papua currently, where there have been clashes between supporters of those separatist movements and the Indonesian military, including continued activity in Papua, by separatist rebels that has led to violent incidents. There have also been inter-ethnic conflict, for example in Kalimantan, as well as inter-religious conflict such as in Maluku and Poso.

Labor issues have also come to the fore in Indonesia. In 2003, the Government enacted a new labor law that gave employees greater protections. Occasional efforts to reduce these protections have prompted an upsurge in public protests as workers responded to policies that they deemed unfavorable.

There can be no assurance 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, materially and adversely affect our business, financial condition, results of operations and prospects.

Terrorist activities in Indonesia could destabilize Indonesia, which would adversely affect our business, financial condition and results of operations, and the market price of our securities

There have been a number of terrorist incidents in Indonesia, including the May 2005 bombing in Central Sulawesi, the Bali bombings in October 2002 and 2005 and the bombings at the JW Marriot and Ritz Carlton hotels in Jakarta in July 2009. Although the Government has successfully countered some terrorist activities in recent years and arrested several of those suspected of being involved in these incidents, terrorist incidents may continue and, if serious or widespread, might have a material adverse effect on investment and confidence in, and the performance of, the Indonesian economy and may also have a material adverse effect on our business, financial condition, results of operations and prospects and the market price of our securities.

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2. Macro Economic Risks

Negative changes in global, regional or Indonesian economic activity could adversely affect our business

Changes in the Indonesian, regional and global economies can affect our performance. Two significant events in the past that impacted Indonesia’s economy were the Asian economic crisis of 1997 and the global economic crisis which started in 2008. The 1997 crisis was characterized in Indonesia by, among others, currency depreciation, a significant decline in real gross domestic product, high interest rates, social unrest and extraordinary political developments, while the global economic crisis that arose from the subprime mortgage crisis in the US put Indonesia’s economy under pressure, although not as severely as in 1997. The global financial markets have also experienced volatility as a result of the downgrade of US sovereign debt in 2012 and concerns over the debt crisis in the Eurozone. Uncertainty over the outcome of the Eurozone governments’ financial support programs and worries about sovereign finances generally are ongoing. If the crisis becomes protracted, or extends to Asia and Indonesia, we can provide no assurance that it will not have a material and adverse effect on Indonesia’s economic growth and consequently on our business.

Adverse economic conditions could result in less business activity, less disposable income available for consumers to spend and reduced consumer purchasing power, which may reduce demand for communication services, including our services, which in turn would have an adverse effect on our business, financial condition, results of operations and prospects. There is no assurance that there will not be a recurrence of economic instability in future, or that, should it occur, it will not have an impact on the performance of our business.

Fluctuations in the value of the Rupiah may materially and adversely affect us

Our functional currency is the Rupiah. One of the most important effects of the Asian economic crisis that affected Indonesia was the depreciation and volatility in the value of the Rupiah as measured against other currencies, such as the US Dollar. The Rupiah continues to experience significant volatility . From 200 9 to 201 3 , the Rupiah per US Dollar exchange rate ranged from a high of Rp 8,508 per US Dollar to a low of Rp 12,270 per US Dollar. As a result, we recorded foreign exchange losses of Rp 210 billion in 2011, Rp189 billion in 2012 and Rp249 billion in 2013. T he Rupiah depreciated significantly in 2013. As of December 31, 2013, the Rupiah per US Dollar exchange rate stood at Rp12,170 per US Dollar compared to Rp 9,637.5 per US Dollar as of December 31, 2012.

To the extent that the Rupiah depreciates further from the exchange rate as of December 2013, our US Dollar-denominated obligations under our accounts payable and procurements payable, as well as payments for foreign currency-denominated loans payable and bonds payable, would increase in Rupiah terms. A depreciation of the Rupiah would also increase the Rupiah cost of our capital expenditures as most of our capital expenditures are priced in or with reference to foreign currencies, mainly US Dollars and Euros, while a substantial majority of our revenues are in Rupiah. Such depreciation of the Rupiah would result in losses on foreign exchange translation, significantly affect our total expenses and net income and reduce the US Dollar amounts of dividends received by holders of our ADSs. We can give no assurances that we will be able to control or manage our exchange rate risk successfully in the future or that we will not be adversely affected by our exposure to exchange rate risk.

In addition, while the Rupiah has generally been freely convertible and transferable, from time by time, Bank Indonesia has intervened in the currency exchange markets in furtherance of its policies, either by selling Rupiah or by using its foreign currency reserves to purchase Rupiah. We can give no assurances 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 Rupiah’s value, 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 subscriber usage of our services, 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.

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

As of the date of this Annual Report, Indonesia’s sovereign foreign currency long-term debt is rated “Baa3” by Moody’s (upgraded from “Ba1” on January 18, 2012), “BB+” by Standard & Poor’s (upgraded from “bb” on April 8, 2011) and “BBB” by Fitch Ratings (upgraded from “BB+” on December 15, 2011). Indonesia's short-term foreign currency debt is rated “B1/NP” by Moody’s, “B” by Standard & Poor’s and “B” by Fitch Ratings. On January 18, 2012, Moody’s upgraded Indonesia’s long-term debt rating to investment grade status.

We can give no assurances that Moody’s, Standard & Poor’s or Fitch Ratings, will not change or downgrade the credit ratings of Indonesia. 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 Rupiah-denominated debt would also likely increase. Such events could have material adverse effects on our business, financial condition, results of operations and prospects.

3. Disaster Risks

Indonesia is vulnerable to natural disasters and events beyond our control, which could adversely affect our business and operating results

Many parts of Indonesia, including areas where we operate, are prone to natural disasters such as floods, lightning strikes, typhoons, earthquakes, tsunamis, volcanic eruptions, fires, droughts, power outages and other events beyond our control. The Indonesian archipelago is one of the most volcanically active regions in the world as it is located in the convergence zone of three major lithospheric plates. It is subject to significant seismic activity that can lead to destructive earthquakes, tsunamis or tidal waves. From time to time, natural disasters have killed, affected or displaced large numbers of people and damaged our equipment. These events in the past, and may in the future, disrupt our business activities, cause damage to equipment and adversely affect our financial performance and profit.

In recent years, several natural disasters have occurred in Indonesia (in addition to the Asian tsunami in 2004), including tsunamis in Pangandaran in West Java in 2006 and 2010, an earthquake in Yogyakarta in Central Java in 2006, a hot mud eruption and subsequent flooding in Sidoarjo in East Java in 2006 and separate earthquakes in Papua, West Java, Sulawesi and Sumatra in 2009.

On September 2, 2009, an earthquake in West Java caused damage to our assets. On September 30, 2009, an earthquake in West Sumatra disrupted the provision of telecommunications services in several locations. Although our Crisis Management Team in cooperation with our employees and partners was able to restore services quickly, the earthquake caused severe damage to our assets. There were a number of earthquakes detected in 2010 through 2013, although none of them presented significant risks to our business in general.

Flash floods and more widespread flooding occur regularly during the rainy season from November to April. Cities, especially Jakarta, are frequently subject to severe localized flooding which can result in major disruption, and occasionally fatalities. Jakarta experienced significant floods in February 2007 as did in Solo in Central Java in January. In January 2009, torrential rain caused a dam to burst outside Jakarta, flooding hundreds of homes in a densely populated neighborhood, resulting in the death of approximately 100 people. Landslides regularly occur in rural areas during the wet season.

There are numerous volcanoes in Indonesia, any of which can erupt without warning. In October and November 2010, Mount Merapi in Central Java erupted several times, killing an estimated 140 persons, displacing several hundred thousand others in a 20 km radius, causing billions of dollars of property damage and disrupting air travel. Since April 2008, Mount Soputan in North Sulawesi, Mount Egon in Flores Island, Nusa Tenggara, Mount Ibu in North Maluku and Anak Krakatau in the Sunda Strait have shown significant increased volcanic activity. Mount Sinabung, 60 km (40 miles) southwest of Sumatra's main city Medan, erupted on August 29, 201 3 after lying dormant for 400 years, and erupted again in November 2013. Ash and acrid smoke from the volcano blanketed villages and crops.

In 2010, our submarine cables forming part of our backbone suffered damage due to a tsunami in West Sumatra and an earthquake in Sumbawa. These were repaired.

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Although we have implemented a Business Continuity Plan (“BCP”) and a Disaster Recovery Plan (“DRP”), and test these regularly and we have insured our assets to protect from any losses attributable to natural disasters or other phenomena beyond our control, there is no assurance that the insurance coverage will be sufficient to cover the potential losses, that the premium payable for these insurance policies upon renewal will not increase substantially in the future, or that natural disasters would not significantly disrupt our operations.

There are no assurances that future geological or meteorological occurrences will not have a significant impact on Indonesian and its 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.

Our operations may be adversely affected by an outbreak of avian influenza, Influenza A (H1N1) virus or other epidemics

An outbreak of 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 and the market value of its securities. Moreover, our operations could be materially disrupted if our employees remained at home and away from our principal places of business for extended period of time, which would have a material and adverse effect on our financial condition or results of operations and the market value of its securities.

4. Other Risks

Indonesian Corporate Disclosure Standards differ in significant respects from those applicable in other countries, including the United States

As an IDX, NYSE and LSE listed company, we are subject to regulatory and exchange corporate governance and reporting requirements in multiple jurisdictions. There may be less publicly available information about Indonesian public companies, including us, than is regularly disclosed by public companies in countries with more mature securities markets. 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.

Our financial results are reported herein in conformity with IFRS, however, we report our financial results to OJK (as the successor to Bapepam-LK) in conformity with IFAS, which differs in certain significant respects from IFRS, and we distribute dividends based on profit for the year attributable to owners of the parent company and net income per share determined in reliance on IFAS

In accordance with regulations of OJK and the IDX, we are required to report our financial results to OJK in conformity with IFAS. We have provided to OJK our financial result for the financial year ended December 31, 2013, on March 6 , 2014, which we furnished to the SEC on a Form 6-K dated March 19, 2014, which contains our audited Consolidated Financial Statements as of December 31, 2013 and for the year then ended and prepared in conformity with IFAS. IFAS differs in certain significant respects from IFRS, and, as a result, there are differences between our financial results as reported under IFAS and IFRS, including profit for the year attributable to owners of the parent company and net income per share. We distribute dividends based on profit for the year attributable to owners of the parent company and net income per share determined in reliance on IFAS.

Using IFAS results, our profit for the year attributable to owners of the parent company would be Rp12,850 billion and Rp 14,205 billion for 2012 and 2013, and our net income per share would be Rp 133.84 and Rp 147.42 for 2012 and 2013. Dividends declared per share were Rp 87.2 4 for 2012. The dividends declared per share for the year 2013 will be decided at the 2014 AGMS, scheduled for April 2014.

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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 Indonesian companies with limited liability, and all of our significant assets are located in Indonesia. In addition, our Commissioners and our Directors reside in Indonesia and a substantial portion of the assets of such persons are 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 US, or to enforce against us or such persons in the US, judgments obtained in US courts.

We have been advised by Hadiputranto, Hadinoto & Partners , our Indonesian legal advisor that judgments of US courts, including judgments predicated upon the civil liability provisions of the US federal securities laws or the securities laws of any state within the US, 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. They have also advised that 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 US federal securities laws or the securities laws of any state within the US. As a result, the claimant would be required to pursue claims against us or such persons in Indonesian courts.

Our controlling shareholder’s interest may differ from those of our other shareholders

The Government has a controlling stake of 53.1 % of our issued and outstanding shares of common stock and the ability to determine the outcome of all actions requiring the approval of the shareholders. The Government also holds our one Series A Dwiwarna share, which has special voting rights and veto rights over certain matters, including the election and removal of our Directors and Commissioners. It may also use its powers as majority shareholder or under the Dwiwarna share to cause us to issue new shares, amend our Articles of Association or bring about actions to merge or dissolve us, increase or decrease our authorized capital or reduce our issued capital, or veto any of these actions. One or more of these may result in the delisting of our securities from certain exchanges. Further, through the MoCI, the Government exercises regulatory power over the Indonesian telecommunications industry.

As of December 31, 2013, the Government had a 14. 3 % equity stake in PT Indosat Tbk. ("Indosat") which compete with us, in fixed IDD telecommunications services, and competes with Telkomsel in cellular services . The Government's stake includes the Series A Dwiwarna share which has special voting rights and veto rights over certain strategic matters under Indosat's Articles of Association, including decisions on dissolution, liquidation and bankruptcy, and also permits the Government to nominate one Director to its Board of Directors and one Commissioner to its Board of Commissioners. There may thus be instances where the Government’s interests will conflict with ours. There is no assurance that the Government will not direct opportunities to Indosat or favor Indosat when exercising regulatory power over the Indonesian telecommunications industry. If the Government were to give priority to Indosat’s business over ours or to expand its stake in Indosat, our business, financial condition, and results of operations and prospects could be materially and adversely affected.

B. Risks Related to Our Business

1. Operational Risks

A material 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 our fixed wireline network (“PSTN”) for the operation of our fixed line network and the 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. We also depend on access to an internet and broadband network and a cellular network. Our integrated network includes a copper access network, fiber optic access network, BTSs, switching equipment, optical and radio transmission equipment, an IP core network, satellite and application servers.

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In addition, we also rely on interconnection to the networks of other telecommunications operators to carry calls and data from our subscribers to the subscribers of operators both within Indonesia and overseas. 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. Our network, including our information systems, IT and infrastructure and the networks of other operators with whom our subscribers interconnected, 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.

Although we have a comprehensive BCP and DRP which we test and strive to improve, we cannot guarantee that the implementation of such plans will be completely or partially successful should any portion of network be severely damaged or interrupted. 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 adversely affect our business, financial condition, results of operations and prospects.

Our networks, face both potential physical and cyber security threats, such as theft, vandalism and acts intended to disrupt operations, which could adversely affect our operating results

Our networks and equipment, particularly our wireline access network, face both potential physical and cyber security threats. Physical threats include theft and vandalism of our equipment and organized attacks against key infrastructure intended to disrupt operations. In addition, telecommunications companies worldwide face increasing cyber security threats as businesses become increasingly dependent on telecommunications and computer networks and adopt cloud computing technologies. Cyber security threats include gaining unauthorized access to our systems or inserting computer viruses or malicious software in our systems to misappropriate consumer data and other sensitive information, corrupt our data or disrupt our operations. Unauthorized access may also be gained through traditional means such as the theft of laptop computers, portable data devices and mobile phones and intelligence gathering on employees with access.

Although we have not experienced any material successful cyber attacks to date that have affected our operations, our network and our website are frequently targeted by cyber attacks. A successful cyber attack may lead us to incur substantial costs to repair damage or restore data, implement substantial organizational changes and training to prevent future similar attacks and lost revenues and litigation costs due to misused sensitive information, and cause substantial reputational damage. We take preventive and remedial measures, including enhanced cooperation with the police, particularly in areas prone to criminal activity and regular upgrades of our data security measures. However, there is no assurance that our physical and cyber security measures will be successful. Damage to our network, equipment or data and the need to repair such damage resulting from a physical or cyber attack may materially and adversely affect our business, financial condition and operating results. Our networks face potential security threats, such as theft or vandalism, which could adversely affect our operating results.

We face a number of risks relating to our internet-related services

In addition to cyber security threats, because we provide connections to the internet and host websites for customers and develop internet content and applications, we may be perceived as being associated with the content carried over our network or displayed on websites that we host. We cannot and do not screen all of this content and may face litigation claims due to a perceived association with this content. These types of claims can be costly to defend, divert management resources and attention, and may damage our reputation.

A revenue leakage might occur due to internal weaknesses or external factors and if this happened it could have an adverse effect on our operating results

A revenue leakage is a generic risk for all telecommunications operators. We may face revenue leakage problems, or problems with collecting all the revenues to which we may be entitled, due to the possibility of weaknesses at the transactional level, delay in transaction processing, dishonest customers or other factors.

We have taken some preventive measures against the possibility of revenue leakage by increasing control functions in all of our existing business process, implementing revenue assurance methods, employing adequate policies and procedures as well as implementing information systems applications to minimize revenue leakages. Nonetheless, there is no assurance that in the future there will be no significant revenue leakages or that any such leakages will not have a material adverse affect on our operating results.

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New technologies may adversely affect our ability to remain competitive

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 significant changes to our business model, the development of new products, the provision of additional services and substantial new investments by us. 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. Furthermore, we cannot guarantee that we will be able to effectively integrate new technologies into our existing business model.

As part of our continuing development of our TIMES business, we continue to seek to develop businesses through which we also provide content to our telecommunications subscribers. We do not yet have substantial experience as a content provider therefore we cannot assure you that we will be able to effectively manage the growth of this business.

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.

Our satellites have limited operational life they may be damaged or destroyed during in-orbit operation or suffer launch delays or failures. 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 Telkom-1 and Telkom-2 satellites have a limited operational life, currently estimated to end approximately in 2015 and 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.

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 Telkom-1 and Telkom-2 satellites experience 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. 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.

In anticipation of the growth in demand for satellite services and to support our business strategy with regard to providing TIME services, we signed a contract in 2009 for the procurement of the Telkom-3 Satellite System. However, due to a launch failure in August 2012, the Telkom-3 satellite ended up in an unusable orbit. Although we had fully insured the cost of the satellite, the loss of the Telkom-3 satellite will require us to lease transponder capacity from a third-party provider to fulfill our commitments to our satellite operations customers, with likely lower margins than we would have received from the use of Telkom-3 had it been successfully launched. We are currently in the initial phases for the procurement of a replacement satellite, the Telkom-3S, which is currently planned for launch in 2016. A lthough the Telkom-1 satellite may still be operational for several years after the end of its currently estimated operational lifespan in 2015, if there is any delay in the development and launch of the Telkom-3S , or if the operational life of the Telkom-1 satellite ends before the Telkom-3S is successfully launched, or damage or failure renders our existing satellites unfit for use, we would need to lease additional transponder capacity from a third party, which would likely increase our costs of operations. Failure to lease adequate satellite capacity from a third-party provider may also result in service interruptions and/or a cessation of our satellite operations. The termination of our satellite business could increase expenses associated with our provision of other telecommunications services, particularly in the eastern parts of Indonesia which currently rely largely on satellite coverage for telecommunications services, and could adversely affect our business, financial condition and results of operations.

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2. Financial Risks

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 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.

Changes in the economic situation in the United States, including improvement or expectations of improvement in the U.S. economy, may also have an impact on Southeast Asia and Indonesia. Expectations of the United States Federal Reserve tapering its bond buying program on an improving economy resulted in, among other things, the weakening of equity and bond markets around the world and a number of Asian currencies including the Rupiah since May 2013. In part, in an effort to support the Rupiah, particularly around May and June 2013, Bank Indonesia began raising its benchmark reference rate from a record low of 5.75% which was set in February 2012. The benchmark reference rate has since risen four times between June and November 2013 by an aggregate of 1,175 basis points to 7.5%. The increase of Bank Indonesia reference rate was followed by increases in the JIBOR and Bank Indonesia Certificate (“SBI”) interest rates. It is uncertain how the global markets and the Rupiah may be affected as the United Stated Federal Reserve continues the tapering of its bond buying program. There can be no assurance that the Bank Indonesia reference rate, JIBOR or SBI rate will not continue to rise in the future.

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. Most of our debt obligations are denominated in Rupiah and a majority of our capital expenditures are denominated in US Dollars. Most of our revenues are denominated in Rupiah and a portion is denominated in US Dollars (for example from international services). We may also incur additional long-term indebtedness in currencies other than the Rupiah, including the US Dollars, to finance further capital expenditures.

Overall, our financial risk management program aims to minimize losses on the financial assets and financial liabilities arising from fluctuation of foreign currency exchange rates. We have a written policy for foreign currency risk management, which mainly covers time deposits placements and hedging to cover foreign currency risk exposure for periods ranging from three up to twelve months.

The exchange rate of Rupiah weakened relative to the US Dollar in 2013, and in the future, we can give no assurance that we will be able to manage our exchange rate risk successfully or that our business, financial condition or results of operations will not be adversely affected by our exposure to exchange rate risk.

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, 2011, 2012 and 2013, our actual consolidated capital expenditures totaled Rp 14,603 billion, Rp 17,272 billion and Rp24,898 billion (US$2,046 million), respectively. 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.

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3. Legal and Compliance Risks

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 June 17, 2008, the Commission for the Supervision of Business Competition ("KPPU") determined that our Company, Telkomsel, PT XL Axiata Tbk. (“XL”), PT Bakrie Telecom Tbk. (“Bakrie Telecom”), PT Mobile-8 Telecom Tbk. (“Mobile-8”) and PT Smart Telecom (“Smart Telecom ”) had jointly breached Article 5 of Law No.5/1999. We and Telkomsel appealed the KPPU’s ruling to the Bandung District Court and the South Jakarta District Court, respectively. On April 12, 2011, the Supreme Court ordered a consolidation of the appeals and appointed the Central Jakarta District Court to handle the appeals. Neither we nor Telkomsel has received any notification from the court with respect to the resolution of this case. See Item 8 “Financial Information – Consolidated Statements and Other Financial Information – Material Litigation”. If the District Court issues a verdict against our Company and/or Telkomsel, 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.

Class action lawsuits were filed against Telkomsel and Indosat during 2007 and 2008 in the District Court of Bekasi, the Central Jakarta District Court and the Tangerang District Court, relating to Temasek Holdings (Private) Limited’s prior cross ownership of shares in Telkomsel and Indosat, alleging price fixing of telecommunications services. The plaintiffs withdrew the lawsuit filed with the District Court of Bekasi. On January 27, 2010, the court dismissed the class action filed with the Central Jakarta District Court on the basis that the plaintiffs did not establish their legal standing and that two members of the plaintiff class did not qualify as class representatives. On May 24, 2010, the court dismissed the class action filed with the Tangerang District Court on the basis that the plaintiffs failed to establish their legal standing as class representatives.

There can be no assurance that other subscribers, people, or partners will not file similar cases in the future. If a District Court in any new class action suit, issues a verdict in favor of such plaintiff, it could have an adverse effect on our business, reputation and profitability.

Forward-looking statements may not be accurate

This Annual Report incorporates forward-looking statements that include announcements regarding our current goals and projections of our operational performance and future business prospects. The words “believe”, “expect”, “anticipate”, “estimate”, “project” and similar words identify forward-looking statements. In addition, all statements, other than statements that contain historical facts, are forward-looking statements. While we believe that the expectations contained in these statements are reasonable, we cannot give an assurance that they will be realized. These forward-looking statements are subjected to a number of risks and uncertainties, including changes in the economic, social and political situation in Indonesia and other risks described in "Risk Factors". All forward-looking statements, written or verbal, made by us or by persons on behalf of us are deemed to be subject to those risks.

4. Regulation Risks

We operate in a legal and regulatory environment that is undergoing significant change. These changes may result in increased competition, which may result in reduced margins and operating revenue, among other things. These changes may also directly reduce our margins or reduce the costs of our competitors. These adverse changes resulting from regulation may have a material adverse effect on us

Reformation in Indonesian telecommunications regulation initiated by the Government in 1999 has , to a certain extent, resulted in the industry’s liberalization, including removal of barriers to entry and the promotion of competition. However, in recent years, the volume and complexity of regulatory changes has created an environment of considerable regulatory uncertainty. In addition, as the legal and regulatory environment of the Indonesian telecommunications sector continue s to change, competitors, potentially with greater resources than us, may enter the Indonesian telecommunications sector and compete with us in providing telecommunications services. Furthermore, it is impossible to anticipate the regulatory policies that will be applied to new technologies.

We derive substantial revenue from interconnection services because we have the largest network in Indonesia and our competitors must pay tariffs to connect to our network. As regulated by the MoCI, interconnection rates have decreased in recent years. The current interconnection rates, effective in 2011, reduced rates by an average of 1.5% to 3.0% compared to the previous rates effective in 2008. See Item 4 “Information on the Company – Distribution and Marketing Strategy – Legal Basis and Regulation – Interconnection ” .

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The termination of Telkomsel’s premium SMS services from October 2011 as a result of MoCI Regulation No.1/PER/M.KOMINFO/01/2009 resulted in a substantial reduction in our revenues from these services. These services have been resumed by Telkomsel from August 6, 2013 as allowed under MoCI Regulation No.21 year of 2013 dated July 26, 2013, regarding the Operation of Content Provider Services on Mobile Cellular Network and Local Fixed Wireless Network with Limited Mobility, which replaced MoCI Regulation No.1/PER/M.KOMINFO/01/2009 . However, pursuant to the new decree, premium SMS service providers are required to meet stricter requirements that are more difficult to comply with. Accordingly we do not expect revenues from premium SMS services to return to levels seen prior to October 2011.

In the future, the Government may announce or implement other regulatory changes 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, that regulatory changes will not disproportionately reduce our competitors’ costs or disproportionately reduce our revenues, 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 and operating results.

The entry of additional Indonesian telecommunications operators as providers of international direct dialing services could adversely affect our international telecommunications services operating margins, market share and results of operations

We obtained a license and entered the international long-distance service market in 2004, and acquired a significant market share for IDD services by the end of 2006. Indosat, one of our primary competitors, entered this market prior to us and continues to maintain a substantial market share for IDD services. Bakrie Telecom was awarded an IDD license in 2009 to provide international long distance service using the “009” access code. There is a possibility that other operators will be granted IDD licenses in the future. The operations of incumbents and the entrance of 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 issued regulations assigning each provider of DLD services a three-digit access code to be dialed by customers making DLD calls. In 2005, the MoCI announced that three-digit access codes for DLD calls will be implemented gradually within five years and that it would assign us the “017” DLD access code for five major cities, including Jakarta, and allow us to progressively extend it to all other area codes. Indosat was assigned “011” as its DLD access code. We were required to open DLD access codes in all remaining areas on September 27, 2011, by which date our network was ready to be opened up to the three-digit DLD access codes in all coded areas throughout Indonesia.

However, we believe that the cost for operators who have not upgraded their network infrastructure to open their networks to the three-digit access codes to do so is significant. To date, neither of the OLOs have made a request to us to connect their networks to enable their DLD access codes to be accessible, other than with respect to Balikpapan, and as such, we believe that except with respect to Balikpapan, none of the DLD access codes for any of the licensed operators are usable by customers of other operators. However, if they do so in the future, 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 revenues, among other things, all of which may have a material adverse effect on us.

New regulations for the configuration of BTS towers may delay the set up of new BTS towers or changes in the placement of existing towers, and may erode our leadership position by requiring us to share our towers with our competitors

In 2008 and 2009, the Government issued regulations relating to the construction, utilization and sharing of BTS towers. Pursuant to the regulations, the construction of BTS towers requires permits from the local government. The local government has a right to determine the placement of the towers, the location in which the towers can be constructed, and also to determine a license fees to build tower infrastructure. These regulations also obligate us to allow other telecommunication operators to lease space and utilize our telecommunications towers without any discrimination.

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These regulations may adversely affect in the allocation, development or expansion plan of our new BTS towers as setting up of our new towers will become more complicated. They may also adversely affect our existing BTS towers if local governments required any changes in the placement of the existing towers.

The requirement that we share space on our cellular (Telkomsel) towers and our fixed wireless (Telkom Flexi) towers may also disadvantage us by requiring that we allow our competitors to expand quickly, particularly in urban areas where new space for additional towers may be difficult to obtain.

Effective 2011, local Governments are permitted to assess fees of up to 2.0% of the tax assessed value of towers. Although we do not expect the amount of these fees to be material in 2013, there can be no assurance that they will not be substantial in the future.

5. Risks Related to Our Fixed Telecommunication Business

We may further lose wireline telephone subscribers and revenues derived from our wireline voice services may continue to decline, which may materially adversely affect our results of operations, financial condition and prospects

Revenues derived from our wireline voice services continued to decline during the past several years mainly due to the increasing popularity of mobile voice services and other alternative means of communication, such as VoIP. Tariffs for mobile services have declined in recent years which has further accelerated substitution of mobile for wireline voice services. While the number of our fixed wireline subscribers increased by 4.0% at the end of 2012 and by 4.5% at the end of 2013, revenues from our wireline voice services decreased by 8.2% in 2012 and by 8.3% in 2013. The percentage of revenues derived from our wireline voice services out of our total revenues continued to decrease from 12.2% in 2012 to 10.4% in 2013.

We have been taking various measures in order to stabilize our revenues from wireline voice services. However, we cannot assure you that we will be successful in mitigating the adverse impact of the substitution of mobile voice services and other alternative means of communication for wireline voice services or in reducing the rate of decline in our revenues generated from wireline voice services. Migration from wireline voice services to mobile services and other alternative means of communication may further intensify in the future, which may affect the financial performance of our wireline voice services and thus materially and adversely affect our results of operations, financial condition and prospects as a whole.

Our fixed wireless business is in decline and this decline is likely to continue

Due to competition and the increasing popularity of mobile cellular platforms, our fixed wireless revenues and ARPU has been declining in recent years.

While fixed wireless tariffs historically were generally lower than GSM mobile cellular tariffs, in part due to regulatory changes in December 2010 in how right-of-use fees are calculated, tariff differences between fixed wireless services and GSM mobile cellular services are now generally negligible. In addition, there is limited frequency bandwidth of 5 MHz available for our fixed wireless platform, and the GSM platform is generally able to make more efficient use of frequency bandwidth. As a result, in 2013, we did not further develop our fixed wireless network (other than optimize existing BTSs for our fixed wireless network), and did not conduct any new product launches or promotional campaigns activities for this service. We do not plan to further develop our fixed wireless network in any significant way in the future.

As a result of above factors, and as we also undertook an exercise to remove inactive Telkom Flexi subscribers in late 2013 so that they are no longer recorded on our system as connections in service, the number of our fixed wireless connections in service declined sharply in 2013, from approximately 14.2 million as of December 31, 2011 and 17.9 million as of December 31, 2012 to 6.8 million as of December 31, 2013.

Our fixed wireless business has also seen lower average tariffs due to intense competition from the cellular market which has led to declining ARPU for Telkom Flexi, with blended monthly prepaid and postpaid ARPU decreasing from approximately Rp9,500 in 2011 to Rp8,700 in 2012 and Rp8,400 in 2013. As a result of the above factors, revenue from our fixed wireless revenue has declined, from Rp1,342 billion as of December 31, 2011 to Rp1,225 billion as of December 31, 2012 and Rp1,051 billion as of December 31, 2013. We expect that this declining trend will continue.

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We plan to undertake a strategy to migrate our fixed wireless customers to our mobile cellular platform by offering promotional packages. However, we cannot assure you that we will be successful in this migration, as competition from other mobile cellular providers is intense. If we are not able to successfully migrate our fixed wireless users to our mobile cellular platform as and when they decide to migrate to another platform, it may adversely affect our results of operations, financial condition and prospects as a whole.

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

Our data and internet services are facing increase competition from other data and internet operators as well as mobile operators.

Wireless broadband access operators that received licenses in 2009 for Wi-Max technology began to establish their businesses in the fourth quarter of 2010 (for instance First Media) and in 2012 (Berca). In 2013, the regulator has permitted the Wi-Max operators to deploy the L ong T erm E volution (“LTE”) technology. This will adversely affect our market share and revenues from our Speedy broadband service. The number of broadband mobile subscribers have increased with the Blackberry’s popularity. The increasing use of mobile broadband services also adversely affects our market share and revenues from our fixed data and internet services.

We have been taking various measures in order to mitigate the impact of intense competition in our data and internet businesses. However, we cannot assure you that we will be successful in mitigating such adverse impact. Competition may further intensify in the future, which may affect the financial performance of our data and internet services and thus materially and adversely affect our results of operations, financial condition and prospects as a whole.

6. Competition Risks Related to Our Cellular Business (Telkomsel)

Competition from existing service providers and new market entrants may adversely affect our cellular services business

The Indonesian cellular services business is highly competitive. Competition among cellular services 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, operated through our majority-owned subsidiary, Telkomsel, competes primarily against Indosat and XL. Several other smaller GSM and CDMA operators also provide cellular services in Indonesia, including PT Hutchison CP Telecommunications (“Hutchison”), PT Natrindo Telepon Seluler (“Natrindo” or “AXIS”), Smart Telecom and Bakrie Telecom. In addition to current cellular service providers, the MoCI may license additional cellular service providers in the future, and such new entrants may compete with us.

In March 2010, Smart Telecom and Mobile-8 announced the signing of a cooperation agreement to use the same logo and brand under the brand name "Smartfren". On January 18, 2011, Mobile-8 acquired a significant number of shares in Smart Telecom, and on April 12, 2011 PT Mobile-8 Telecom Tbk. changed its name to PT Smartfren Telecom Tbk. In subsequent developments, XL has plans for the acquisition of Natrindo (Axis). On September 29, 2013, XL-Axiata has signed a CSPA with Axis for the acquisition of Axis’ shareholders. The strategic acquisition will position XL as the second largest operator while also acquiring additional frequency allocations to facilitate the roadmap to LTE (4G) technology. Further operator consolidation is likely in order to ensure that each operator can remain competitive, reduce operational costs, and also to “ rebalance ” the broadband mobile frequency spectrum that require wider frequency bandwidth. The MoCI also supports operator consolidation, as it has been reluctant in recent years to issue new licenses for cellular players.

While operator consolidation may lead to improved conditions in the cellular telecommunication industry, it also present challenges for Telkomsel in maintaining its market position.

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7. Risks Related to Development of New Businesses

We believe that efforts to develop new businesses other than our telecommunication business as well as international expansion are necessary to ensure continuing business growth. We plan to undertake these activities through our subsidiaries, Metra and TII. Risks related to new business development include competition from established players, suitability of business model, the need to acquire new expertise in the new areas of operation , and risks related to online media (such as risks relating to intellectual property, consumer protection and confidentiality of customer data).

Focusing on international expansion is one of our strategic business intiatives . In particular, we have already started expansion into seven countries, namely Hong Kong-Macau, Timor Leste, Australia, Myanmar, Malaysia, Taiwan, and United States of America through our subsidiary, TII . Expanding our operations internationally exposes us to a number of risks associated with operating in new jurisdictions for example, our international operations could be adversely affected by political, or social instability and unrest, by regulatory changes, such as an increase in taxes applicable to our operations , macroeconomic instability, limitations on or controls on the foreign exchange trade, competition from local operators, difference in consumer preferences and a lack of expertise in the local markets in which we will be operation. Any of these factors could cause our expected returns from our expansion to be limited and could have a material and adverse effect on our business, results of operations and financial condition.

ITEM 4. INFORMATION ON THE COMPANY

A. HISTORY AND DEVELOPMENT OF THE COMPANY

We are a limited liability company incorporated under the laws of Indonesia and domiciled in Bandung. We trade under the legal name “Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk” and with the commercial name “Telkom”. We were converted from a state agency to a State-Owned Enterprise on September 24, 1991 and obtained status as a legal entity on November 19, 1991 for an indefinite period of time. Our registered office is located at Jl. Japati No.1, Bandung 40133, Indonesia, and our telephone number is +(62) (21) 521 5109. Our agent for service of process in the United States with respect to our ADSs is Puglisi & Associate at 850 Library Avenue, Suite 204, Newark, DE, 19711. Our corporate website may be accessed at www.telkom.co.id. The information found on our corporate website does not form part of this Form 20-F and is not incorporated by reference herein. Information about the legislation under which we operate is provided elsewhere in this Form 20-F. A description, including the amount invested, of our principal capital expenditures and divestitures (including interests in other companies), since the beginning of our last three financial years and information concerning our principal capital expenditures is contained elsewhere in this Form 20-F.

A description of our principal capital expenditures and divestitures, since the beginning of the last three financial years to the date of this Annual Report is set forth in Item 5 “Operating and Financial Review and Prospects – Liquidity – Capital Expenditures”. Information concerning our principal capital expenditures and divestitures currently in progress is also described in Item 5 “Operating and Financial Review and Prospects – Liquidity – Capital Expenditures”.

We are a State-Owned Enterprise that operates in the telecommunications and network services sector in Indonesia. Our history and certain information required by Item 4 of Form 20-F is as follows:

History of Telkom

1856-1882

On October 23, 1856, the Dutch colonial government deployed the first electromagnetic telegraph in Indonesia, connecting Batavia (Jakarta) with Buitenzorg (Bogor).

1906-1965

The Dutch colonial government established a government agency to operate post and telecommunications services in Indonesia. In 1965, the post and telecommunications services were separated and brought under the control of two state companies, PN Pos and Giro and PN Telekomunikasi.

1974

PN Telekomunikasi was split into two divisions, PT Industri Telekomunikasi Indonesia (“PT INTI”), which manufactured telecommunications equipment, and Perusahaan Umum Telekomunikasi (“Perumtel”), which supplied domestic and international telecommunication services.

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1980

The international telecommunication business was taken over by Indosat.

1991

Perumtel became PT Telekomunikasi Indonesia or Telkom, and operations were organized into twelve regional units (“Witel”). These were later reorganized into seven regional divisions: Division I Sumatra, Division II Jakarta and Surrounding Area, Division III West Java, Division IV Central Java and DI Yogyakarta, Division V East Java, Division VI Kalimantan and Division VII Eastern Indonesia .

1995

We held our Initial Public Offering on November 14, 1995 on the Jakarta Stock Exchange and the Surabaya Stock Exchange. On May 26, 1995, we established Telkomsel, our cellular business subsidiary.

1999

The Telecommunications Law (Law No. 36/1999), which went into effect in September 2000, facilitated the entry of new players, intensifying the competition in the telecommunications industry .

2001

We acquired Indosat’s 35% shareholdings in Telkomsel, making us the majority shareholder with a stake of 77.7%. Indosat then took over our 22.5% shareholding in Satelindo and 37.7% share in PT Aplikanusa Lintasarta. At the same time, we lost our exclusive right to be the sole fixed line telephone operator in Indonesia.

2002

We divested 12.7% of our shares in Telkomsel to Singapore Telecom Mobile Pte Ltd. (“SingTel Mobile”).

2004

We launched our international direct dial fixed line service.

2005

The Telkom-2 Satellite was launched to replace all satellite transmission services previously provided by the Palapa B-4 satellite. This brought our total number of satellites launched to eight, including the Palapa A-1 satellite.

2009

We underwent a transformation from an infocom to a TIME company. The new Telkom was introduced to the public with the new corporate logo and tagline, “the world in your hand”.

2010

The JaKaLaDeMa submarine and fiber optic cable project linking Java, Kalimantan, Sulawesi, Denpasar and Mataram was successfully completed in April 2010.

2011

We commenced the reform of our telecommunications infrastructure through the Telkom Nusantara Super Highway project, which unites the Indonesian archipelago from Sumatra to Papua, and the True Broadband Access project, which will enable customers all over Indonesia to have broadband access to the internet.

2012

We sought to achieve widespread broadband penetration throughout Indonesia through the implementation of the Indonesia Wi-Fi program towards the development of Indonesia Digital Network.

We sought to improve business value creation by reconfiguring our business portfolios from TIME to TIMES (Telecommunications, Information, Media, Edutainment & Services).

Establishment of Telkom Corporate University to develop a globally competitive human capital (“from competence to commerce”).

2013

We commenced operations in seven countries, namely Hong Kong-Macau, Timor Leste, Australia , Myanmar , Malaysia, Taiwan and United States of America .

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BUSINESS OVERVIEW

Business Portfolio

We are a State-Owned Enterprise and currently the largest telecommunication service and network provider in Indonesia. We serve millions of customers throughout Indonesia with a complete range of telecommunications services that include fixed wire line and fixed wireless telephone connections, cellular services , network and interconnection services, as well as internet and data communication services. We also provide services in information, media and edutainment, including cloud-based and server-based managed services, e-Payment and IT enabler services, Pay TV, as well as e-Commerce and other portal services. We posted revenues of Rp77,127 billion and Rp82,967 billion, respectively, for the years ended December 31, 2012 and 2013.

Fixed line telephone services include local, direct long-distance (“DLD”), and international call services, as well as other telecommunications and supporting services. Fixed wireless services include local and direct long-distance CDMA-based telephone connections, and other telecommunication services. Cellular services comprise cellular s telecommunication service. Our telecommunications-related business may experience certain seasonal effects. Cellular tend to increase around the Ramadhan lunar month and the culmination of the Eid festivity, as well as during the December holiday season, while fixed line communications from homes and offices and fixed wireless communications may decrease when there are fewer working days in the period or a greater number of subscribers are on vacation. In 2013 , except for OLOs who use our interconnection services and Telkomsel’s employee cooperative (“Kisel”), none of our customers accounted for more than 1% of our total revenues.

A substantial majority of our revenue has and continues to come from telecommunications-related services, including data and internet services. As a company that provides TIMES, we continue to encourage innovations in sectors other than telecommunications, and capture synergies among all of our products, services and solutions ranging from our legacy business to the new economy business (“NEB”) . Our business portfolio is grouped into the following lines of business:

A. Telecommunications Business

Our telecommunications business portfolio includes (i) fixed wireline services, (ii) fixed wireless services, (iii) cellular services, (iv) broadband and internet services, (v) network services, (vi) interconnection services, and (vii) ancillary services.

1. Fixed Wireline Services

Our fixed wireline services include plain old telephone services (“POTS”) , value-added services (“VAS”) , Intelligent Network (“IN”) services and session initiation protocol (“SIP”) services. IN services are IP-based network services that are connected to our exchange systems and telecommunications network. SIP services are IP multimedia subsystem (“IMS”) services which combines wireless and fixed line technologies for voice and data communications.

We succeeded in improving the performance of our fixed wireline business line through the implementation of a “More for Less” program in 2013 , where, through bundling, subscribers are able to get deeper discounts with greater telephone usage such as unlimited talk time using their home phone . Other features of our “More for Less” program, such as, unlimited broadband access with various bandwidth options and television channels offered as part of program packages , helped promote our fixed wireline business as these products are offered to customers are part of a bundle with our fixed wireline services.

2. Fixed Wireless Services

Our fixed wireless business, which uses limited mobility CDMA technology, is manage d by our Wireless Broadband Division under the trademarks "Telkom Flexi" or "Flexi". In 2013, we optimized existing BTSs for our fixed wireless network, but did otherwise further develop our fixed wireless network or conduct any new product launches or promotional campaigns activities for this service as we have initiated a migration strategy whereby we are encouraging our fixed wireless customers to enter into plans operated by Telkomsel. As we undertook an exercise to remove inactive Telkom Flexi subscribers in late 2013 so that they are no longer recorded on our system as connections in service, the number of our fixed wireless connections in service declined sharply in 2013, from approximately 14.2 million as of December 31, 2011 and 17.9 million as of December 31, 2012 to 6.8 million as of December 31, 2013.

3. Cellular Services

We provide cellular communications services using GSM technology through our subsidiary, Telkomsel . Cellular services (excluding mobile data services ) remained the largest contributor to our consolidated revenues in 2013. We have two primary types of cellular products and services , postpaid services represented by “ kartuHalo ” and prepaid services represented by simPATI and Kartu As.

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In 2013, with the increasing demand for data services from customers, Telkomsel added various data services to its range of products and services to complement its legacy in voice and SMS. In order to accelerate the adoption of 3G mobile devices, Telkomsel also intensified collaboration with device principals and distributors of local and global brands of mobile devices by introducing affordable 3G mobile device bundled packages .

– kartuHalo is a postpaid mobile communications service. As of December 31, 2013, kartuHalo had 2.5 million subscribers, up from 2.1 million subscribers as of December 31, 2012.

– simPATI is a prepaid service that can be purchased at any cellular shop in the form of starter packs and top up vouchers .

– Kartu As is a prepaid service that bi lls customers based on seconds of talk time. Kartu As targets the young customer segment .

In 2013, we introduced a number of marketing programs for cellular services to promote sales and enhance awareness of Telkomsel's brands. For example, kartuHalo. We believe Telkomsel’s promotional programs have succeeded strengthening our mobile cellular business in Indonesia. Our mobile cellular base increased from 125.1 million subscribers at the end of 2012 to 131.5 million by the end of 2013, an increase of 5.1% or 6.4 million subscribers.

4. Broadband and Internet Services

We provide a range of products and services in data communication and internet services as described below:

Broadband internet , our primary non-cellular based broadband internet service, using ADSL and fiber optic technology, is offered under the commercial name “Speedy”. We also provide a prepaid on-demand, “pay as you use” broadband internet service using Speedy or Wi-Fi access under the commercial name of “Speedy Instan ”. We also offer a triple play package combining broadband internet (Speedy), telephone services and content ( UseeTV, home monitoring and music-Melon) under the commercial name “Indihome” .
Cellular data communication, Telkomsel provides internet and mobile data communications services through its mobile cellular network . This service is provided through Blackberry and other smartphone packages, wireless modems and dongles and non-package data services, primarily under the commercial name "Flash".
SMS services are provided to m obile and fixed wireless telephone subscribers .
“ T elkom Net instan ” is our dial-up internet access service .
Wi-Fi/hotspot is a wireless access solution for intranet and mobile internet data services in a particular area by utilizing our and other ISP’s payment facilities, or in bulk using Customer Premises Equipment-based Wi-Fi technology. In 2012, we launched “ Indonesia Wi-Fi ” or @wifi.id to meet the need for Wi - Fi based internet service at public places such as airports, shopping malls, hospitals, universities/schools, cafes, and other public places. Our “Indonesia Wi-Fi” service has a minimum speed of 10 Mbps to accommodate offloading, retail and other uses .
“ FlexiNet ” is our internet access service that uses the Telkom Flexi fixed wireless network. O ur “ Flexi Hotspot ” service provides customers who wish to enjoy high speed internet access through a wireless internet connection that is supported by our hotspot infrastructure. These services can be easily accessed from any device that has Wi-Fi capability by the FlexiNet Unlimited or Flexi Mobile Broadband username and the password in each hotspot.
VPN is a virtual private network service that uses the internet for secure connection to remote sites .
“Astinet” provides high quality internet access using a default internet gateway and public IP address for a dedicated, fixed communication line 24 hours a day .
VoIP. We provide affordable international call services through our premium VoIP service package “Telkom Global-01017” as well as “Telkom Save” for regular international calls. Both services can be accessed by dialing a special prefix for international calls. To provide these services, we cooperate with 79 international wholesale carriers that can support our IDD call services worldwide, to deliver VoIP traffic.
ISDN PR A is a digital network to facilitate multimedia telecommunications services, using wider bandwidth as well as inter-terminal digital systems to accommodate high-speed, high-quality and high-capacity voice, data and video communications through a single channel. We also provide ISDN-based internet access.
DINAccess is a wireless communica t ions service with dedicated access to provide LAN interconnection services and multimedia services at a speed adjusta ble to customer needs .
Global Datacom is a data communications service that lets corporate customers connect their headquarters with branch offices or clients across the globe. We work with global partners through TII, our subsidiary, in providing these services .

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Metro Link is a Metro-network-based connect i vity services that accommodates point-to-point, point-to-multipoint and multipoint-to-multipoint communications .
Metro I-net is a high capacity data network solution based on IP (Internet Protocol) or ethernet that provides flexibility, ease of use and effectiveness as well as quality assurance for corporate and SME customers .
Port Wholesale provides wholesale rental of port remote access servers to internet service providers, content service providers and corporate customers for subsequent sale to their customer s.
V alue-added service Datacom provides additional facilities that offer added value to data communications customers.
Network Services

We directly manage the provision of network services to customers comprising of our business partners, commercial businesses and OLO s . Our network services include satellite transponder leasing, satellite broadcasting, VSAT, audio distribution, as well as satellite-based and terrestrial-based leased lines. Our network services customers may enter into short-term deals for several minutes of broadcasting to longer-term agreement s for one to five year periods.

6. Interconnection Services

We also earn revenue from other telecommunications operators that utilize our extensive network infrastructure in Indonesia, both for calls that end at or transit via our network. Similarly , we also pay interconnection fees to other telecommunications operators when we use their networks to connect a call from our customers. Interconnection services that we provide to other telecommunications operators comprise domestic and international interconnection services. In 2013, we increased our efforts to optimize the capability of Telkom Group through exploiting synergies among Telkom, Telkomsel and TII with respect to interconnection services.

7. Ancillary Services

We have exclusive agreements with some investors under revenue sharing arrangements to expand fixed line phone services, public card phones (including their maintenance), data and i nternet networks, and ancillary facilities related to telecommunications.

See Note 3 7 in the Consolidated Financial Statements of the Company for further details about these revenue sharing arrangements.

We also operate other supporting and ancillary businesses, which include the lease and/or supply of BTS to other cellular operators and the provision of various support facilities. We manage our telecommunications tower business through our subsidiary, Dayamitra.

B. New Economy Business (“NEB”) and Strategic Business Opportunities Portfolio

NEB and Strategic Business Opportunities are a part of our IME portfolio. We have designated our subsidiary, Metra, as a sub-holding company that focus es on our IME business development.

Our information business portfolio includes :

IT Outsourcing or Managed Application which provides c loud-based and server-based management services and IT consulting services.
e-Payment /Payment services , including the following :
Billing payment , a service that allows customers to make payments to service or goods providers such as PLN, Telkom, PDAM, KAI, and others through collecting agents that include banks, cooperatives, BPR, convenience stores, and others .
Remittance is money transfer service where neither the money sender nor the recipient need a bank account to complete a transfer, as transfers can be accomplished using only a mobile device .
e-Money provides services to customers who wish to manage money electronically through certain media (mobile, prepaid card, or a virtual account that can be accessed via the Internet) for use in electronic transactions .
e -Vouchers or Telkom Voucher is a single voucher issued by us that can be used to purchase or recharge any of our services , such as for Kartu As, simPATI , Flexi Trendy, and Speedy Hotspot.
IT enabler services include business process outsourcing and knowledge process outsourcing, which consist of:
Network centric value added services , comprising IT-based value-added services for data and phone, security services, and server and storage services for connectivity customers .
Integration services , comprising integration services for network and hardware associated with CPE , integration services for applications and software, and integration services for computer hardware.

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Our Media and Edutainment business portfolio includes the following :

Television broadcast services comprising the following
Pay TV by satellite , a pay TV service broadcasted over satellite links offering premium-grade contents in news, sports, entertainment, and others.
IPTV , an Internet Protocol-based television ("IPTV") under the commercial name ” UseeTV Cable ” . The service is delivered using the Speedy broadband access network, and offers ” pause and rewind ” features for contents such as video-on-demand programming, FTA TV, p remium TV, internet radio and TV on demand, which allows playback of program content from the last seven days.
OTT TV (Over the Top TV) , an internet TV service under the commercial name ” UseeTV ” that can be accessed from Telkom's internet network, offering free content such as video -on-demand programming, live TV, internet radio , and some pay video programming. Similar to UseeTV Cable, the OTT TV is also capable of allowing play back of program content from the last three days.
Advertising is a commercial service for the promotion of products or services of any third party that are presented in digital or print media, such as radio, television, internet, newspapers, brochures/leaflets and billboards.
Portal Services facilitates content aggregation and distribution. In addition to sales and payments related to our products and services conducted through our e- Commerce portal, our portal e- S tore and on-device portal services also accommodate the sale and distribution of content or applications such as games, applications, news, sports news, educational content, music, ring back tones, SMS content and others, which can be downloaded directly by customer mobile device or internet users. Content or applications can be obtained either at a certain price or free of charge.

Network Infrastructure

We pursue development of our network infrastructure to offer a more efficient and cost-competitive as part of the Government’s Master Plan for the Acceleration and Expansion of Indonesia's Economic Development ( “ MP3EI ” ) in line with our transformation into a TIMES provider under our Indonesia Digital Network ("IDN") program which began in 2012 and is also intended to support the establishment of a National Broadband Network To transform our infrastructure into a high quality, efficient and cost competitive infrastructure to deliver our TIMES services , we have been developing and improving our network infrastructure towards what we previously called the Telkom One network which is intended to be a jointly developed network used by our various units in the Telkom Group .

Our IDN program involves the following three program developments:

id- Convergence (“id-Con”) : convergence of the node service network infrastructure into a multi-service and multi-screen integrated NGN .
id- Ring : development of our transport network infrastructure into an IP-based and optical backbone network .
id- Access : development of our customer access network infrastructure into a high s peed broadband access through fiber optic and Wi-Fi networks.

A. Fixed Line Network and Transmission

1. Fixed Wireline Network

As of December 31, 2013, we managed 9.4 million fixed wireline connections. Our network and infrastructure IDN master plan aims to modernize our legacy network to broadband access infrastructure network.

The following table shows data related to our fixed wireline network from 2009 to 2013:

Operating Statistics	As of and for the year ended December 31, — 2009		2010	2011	2012	2013
Exchange capacity	11,094,063		11,237,229	12,180,214	13,908,003	13,918,369
Installed lines	10,013,565		10,510,048	11,005,208	11,109,156	10,650,652
Lines in service (1)	8,376,793		8,302,818	8,688,526	9,034,010	9,350,806
Subscriber lines	8,038,294		7,980,337	8,323,175	8,672,332	9,080,236
Public telephones	338,499		322,481	278,505	273,929	270,570
Leased lines in service (2)	4,273		3,988	3,662	3,342	2,864
Fixed wireline subscriber pulse production (millions minutes) (3)	54,186	(4)	9,403	8,054	6,770	5,773

(1) Lines in service are subscriber lines and public telephone lines, including the lines in service that we operate under revenue-sharing arrangements.

(2) Excludes leased lines for our network and multimedia businesses.

(3) Consists of pulses generated by local and domestic long distance calls, excluding calls from public pay phones and cellular phones.

(4) In million s of pulse for year 2009 .

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Fixed Wireless Network

Our infrastructure consists of mobile switching centers (“MSC”) that are connected to every other trunk exchange. Each MSC is connected to a base station sub system (“BSS”), which consists of a base station controller (“BSC”) and a base transceiver station (“BTS”). These, in turn, connect the customers’ handheld devices and fixed wireless terminals to our fixed wireless network. The number of fixed wireless connections in service was 6.8 million as of December 31 , 2013.

Transmission Network

Throughout 2013, we continued to primarily focus on the development of our broadband network, which serves as the backbone for our network in frastructure as a whole . Our backbone telecommunications network consists of transmission networks, remote switching facilities and core routers, which connect a number of access node s . The transmission links between nodes and switching facilities comprise a terrestrial transmission network, in particular fiber optic, microwave and submarine cable network s , as well as satellite transmission networks and other transmission technologies .

The following table shows our transmission capacity as of December 31, 2012 and 2013:

Transmission Network	Capacity (number of Transmission medium circuits) — E1	STM-1	STM-4	STM-16	STM-64	STM-256
As of December 31,
2012	131,546	720	92	55	260	3
2013	131,303	736	100	58	337	3

Note: The backbone transmission unit uses E1, STM1 (equivalent to 63 E1), STM4 (equivalent to 4 STM1), STM16 (equivalent to 4 STM4), STM64 (equivalent to 4 STM16), and STM256 (equivalent to 4 STM64). STM or Synchronous Transfer Mode is the unit typically used in backbone transmission networks. Facilitating broadband services requires high capacity transmission networks using nxSTM-1 units. E1 units are used to support legacy services.

We operate the Telkom-1 and Telkom-2 satellites as well as 205 earth stations, including one satellite master control station. The Telkom-1 satellite has 36 transponders, including 12 extended C-band transponders and 24 standard C-band transponders, while the Telkom-2 satellite has 24 standard C-band transponders.

In addition to our Telkom-1 and Telkom-2 satellites , we also lease transponder capacity for 30 TPE (transponder equivalent, @36 MHz), comprising 9 TPE from the JSAT-5A (132 BT) satellite, 10 TPE from the Etuelsat 172A (172 BT) satellite, 8 TPE from the Chinasat-10 (110 BT) satellite, and 3 TPE from the Intelsat-8 (169 BT) satellite.

The Telkom-3 satellite, launched in August 2012, failed to reach its usable orbit. We ha d insurance coverage for the procurement costs of Telkom-3 satellite. We will lease additional satellite transponder capacity from third parties, if required to fulfill internal operational needs and to accomodate the needs of customers. We are currently in the initial phases for the procurement of a replacement satellite, the Telkom-3S, which is currently planned for launch in 2016.

B. Cellular Network

Our cellular services, which are operated by our subsidiary, Telkomsel, have the most extensive network coverage of any cellular operators in Indonesia. Telkomsel currently operates on the GSM/DCS, GPRS, EDGE and 3.5G networks. The GSM/DCS network consists of 7.5 MHz of bandwidth on the 900 MHz frequency and 22.5 MHz of bandwidth on the 1800 MHz frequency. Telkomsel’s 3G network uses 10 MHz of bandwidth on the 2.1 GHz frequency. Telkomsel tendered for and obtained a further 5 MHz of bandwidth on the 2.1 GHz frequency in 2013, which it began to use from October 2013, bringing its total bandwidth allocation on its 3G network to 15 MHz on the 2.1 GHz frequency .

As of December 31, 2013, Telkomsel’s digital network was supported by 69,864 BTS with an overall network capacity capable of facilitating the communication needs of 131.5 million customers.

C. Data and Internet Network

To ensure a high level of reliability, we have built hierarchical and dual homing IP /MPLS -based internet and data networks. Our IP backbone network is now capable of serving all of Indonesia and as of December 31, 2013 covered of PoP locations with primary and secondary PoP which consisted of 22 terra router nodes , 6 core router nodes and 128 PE router nodes.

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We also operate an ethernet carrier metro service as an aggregator for broadband access traffic connecting to IP backbone . As of December 31, 2013, 813 Metro E thernet nodes were in use to support our 163.9 Gbps broadband access services.

We provide fixed line-based broadband internet access using ADSL technology under the brand “Speedy”. As of December 31, 2013, we had capacity for 8.2 million homepass and were serving 3 .0 million Speedy registered subscribers , an increase of 28.7% compared to 2.3 million registered subscribers as of December 31, 2012.

Our wireless broadband network infrastructure consists of w ireless access gateways that are connected to w ireless access connections , which are in turn connected to our access points. Using a variety of wireless broadband terminals such as laptop computers and other handheld personal devices, end users link to these access point s to use our broadband Wi-Fi services. As of December 31 , 2013, we had 75,250 access points .

Our subsidiary , Telkomsel , also provides mobile cellular broadband service under the commercial name “Flash” as well as a dedicated BlackBerry service . As of December 31, 2013, Flash had 17.3 million subscribers, a 56.5% increase compared to 11.0 million registered subscribers as of December 31, 2012. As of December 31, 2013, we had 7.6 million subscribers to our BlackBerry service, a 31.1% increase from 5.8 million subscribers as of December 31, 2012.

D. International Networks

We operate international gateways in Batam, Jakarta, and Surabaya to route outgoing and incoming calls on our IDD service (“007”). Our international network is supported by submarine communications cable systems (“SCCS”) including the Dumai-M a laka Cable System, and the Thailand-Indonesia-Singapore (“TIS”) system, as well as by indefeasible rights of use, and satellite capacity. To consolidate our international network and expand domestic broadband services, our subsidiary, TII, entered into the Asia America Gateway cable consortium in April 2007 to develop the Batam-Singapore Cable System which connects Batam with Singapore and was completed in the first quarter of 2014 . Through TII, we plan in the long-term to enhance international telecommunication access to regions in eastern Indonesia, diversify our services and capture business opportunities in South Asia, the Middle East and Europe.

Furthermore, we have entered into international telecommunications service agreements with a number of overseas operators to facilitate international call interconnections. Moreover, since we do not have agreements with telecommunications operators in all our IDD destinations, we have signed agreements with SingTel, Telekom Malaysia, Verizon, Belgacom, NTT, TIS, France Telecom and other telecommunications operators under which such operators act as hubs and route international calls to certain parts of the world. As of December 31, 2013 , we had agreements with 79 international telecommunication service operators in 26 countries. We have focused on entering into more international telecommunications service agreements with other telecommunication operators to provide direct interconnections services in the top 20 most popular calling destinations for IDD outgoing traffic. In addition to connect with the 20 top countries for IDD outgoing calls, we are also connected to several telecommunications operators in various other countries .

To support the international services both voice and data, TII operates points of presence in various parts of the world, including in Asia (Singapore, Hong Kong, Malaysia, Japan, South Korea and Timor Leste ), Europe (United Kingdom, Germany and Netherland) and the USA (Los Angeles, San Jose and New York).

CUSTOMER SERVICE

We provide a number of value-added services which allow our customers to conveniently access a wide range of our products and services.

A. Personal Customer Segment

In order to facilitate our individual customers' access to our products and services , we operate a network of Plasa Telkom and GraPARI outlets , and contact centers and also provide services through our websites and on-line applications.

1. Plasa Telkom & GraPARI

Plasa Telkom is a walk-in customer service point at which customers can access information on a range of products and services, including billing, payment, account suspension, promotional deals and submit complaint s . As of December 31, 2013 , we maintained 572 outlet Plasa Telkom in Indonesia and we opened an overseas Plasa Telkom in Hong Kong. As of December 31, 2013 Telkomsel’s had 408 customer service outlet s consist ing of 86 GraPARI and 322 GeraiHalo. We also have 268 unit mobile customer service point s under the name Mobile GraPARI.

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2. Contact Center

Our contact center s are call centers that allow customers to make enquiries regarding our products and services , billing, promotional offers and submit complaints by dialing "147" from any phone line . We operate 24-hour contact center facilities in Medan, Jakarta and Surabaya.

For cellular subscribers, Telkomsel operates 24-hour call centers under the brand “ Caroline ” which is the abbreviation of “ Customer Care Online ”. Caroline is accessible through various access numbers, some of which are available 24-hours and some of which are toll-free.

3. Web-in

Web-in is an online facility for to our customers, where customers can access products and services independently through our website through the “MyTelkom” menu. Available services include e- B illing registrations, collective bill registrations, and complaints.

Our cellular customers can access on-line services through Telkomsel website on “MyTelkomsel” menu that launched in 2013. Through “MyTelkomsel”, our customer may purchase service packages for Flash internet , telephone, SMS, MMS, and international roaming conduct phone credit transfers, purchase flash gifts and monitor internet quota usage. The customers can download the application for use on Android and BlackBerry.

B. Corporate Customers

We categorize our corporate customers into business , enterprise, wholesale and international groups based on a numbers of criteria such as contribution to our revenues, our customers' geographic scope of operations and the type and range of products and services procured from us. As part of our strategy to provide streamlined customer service, we operate account management teams to manage our relationships with our corporate clients who are supported by the Telkom Solution House, SME Centers and Contact Centers, as described below .

1. Account Management

Our Business Service Division caters to business customers, which include micro customers, SMEs, local governments, cooperatives and rural credit banks. Our Business Service Division accounts managers and representatives managers manage customers directly by conducting site visits and telephonically. We categorize business customers into three groups based on our customer’s line of business , namely public and general service s , construction and manufacturing service s , and trading and business service s . In addition, we also manage customers through community management, value added resellers, marketing and sales using web-based technology , and tele- account management.

Our Enterprise Service Division serves large enterprise customers including State-Owned Enterprises, national corporations and multinational corporations. Our Enterprise Service Division account managers and representatives primarily manage relationship s by conducting visits to our clients' offices. We categorize enterprise customers into thirteen groups based on our customers ’ line of business, namely bank management services, education management services, energy & resources services, financial management services, government management services, hospitality & business services, healthcare & welfare services, logistic & transport services, manufacturing & agribusiness services, media & communication services, military & police services, property & construction services, and trading & distribution services.

Our Wholesale Service Division caters to wholesale customers which are categorized into the following carrier service groups:

– Group carrier service 1: handling OLO Telkomsel, PT Hutchison CP Telecommunication (“Hutchison”) , AXIS, PT Sampoerna Telekomunikasi Indonesia and PT Pasifik Satelit Nusantara.

– Group carrier service 2: handling OLO Indosat, XL-Axiata, Bakrie Telecom, S mart Telecom, Batam Bintan Telecom and PT Indonesia Comnets Plus (“ICON+”) .

– Group carrier service 3: handling operators within the business scope of ISP, VoIP, closed user group, call center and satellite provider.

Our subsidiary, TII, caters to international carriers who provide TIMES portfolio overseas. The priority of provision of the services is determined in line with the opportunity in every countries where TII operate s . We operate account management teams which are headquartered in Jakarta , in Singapore, Hong Kong and Timor Leste. Beginning in 201 3 , TII commenced operating telecommunication services in Hong Kong-Macau, Timor Leste, Australia, Myanmar, Malaysia, Taiwan and The United States of America .

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2. Telkom Solution Houses and SME Centers

We offer special services to our corporate customers through our Telkom Solution Houses located in Jakarta, Denpasar and Surabaya. We also operate SME Centers in Jakarta, Surabaya, Bandung, Palembang, Balikpapan and Makassar. Our SME Centers function are as a community and business center.

3. Contact Center

We provide a 24-hour contact number “500250” for business customers and a 24-hour toll-free number “08001Telkom” (“08001835566”) for enterprise customers .

Service Level Guarantee Program

We offer service level guarantees , which guarantee a specified minimum level of service to customers in terms of product quality and customer handling.

For individual customers, the program is available for fixed line, Flexi as well as data and internet subscribers. The service level guarantee is applicable to customers applying for new connections, a change in type of service, res o lution of service disruption, resumption of disconnected service and complaints over customer billing. Under this program, we will provide non-cash compensation such as free subscriptions for a limited period, if we fail to meet the minimum standard.

For the corporate customer segment, the service level guarantee is provided under a contract agreed between us and the relevant customers. We offer service level guarantees to OLOs and certain wholesale customers who use our SL Digital, IP Transit and Metro-E products. Our guarantee covers the availability of our services and the time taken to install and repair the equipment we provide. We divide service levels guarantees for such customers into five classes of service (Bronze, Silver, Gold, Platinum and Diamond) which represent different levels of price, products and services offered and technical parameters guarantee.

Customer Satisfaction and Loyalty

We routinely engage independent market analysts to conduct surveys and market research on our customers' levels of satisfaction and loyalty. In 2013, we achieved the following levels of the Customer Satisfaction Index (“CSI”) and Customer Loyalty Index (“CLI”) using the “top two boxes” and “top three boxes with seven scales” method s , whereby survey participants are asked to rate their satisfaction and loyalty on a scale from one to five (or seven). CSI and CLI ratings are based on the percentage of participants which have provided the top two ratings out of five or top three ratings out of seven. Our CSI and CLI ratings are as follows:

– personal customer segment: 80.16 % in CSI and 67.64 % in CLI .

– business customer segment: 91.23 % in CSI and 87.27 % in CLI .

– enterprise customer segment: 94.28 % in CSI and 97.26 % in CLI.

DISTRIBUTION AND MARKETING STRATEGY

The following are the primary distribution marketing channels for our products and services:

Plasa Telkom and GraPARI are outlet s that function as walk-in customer service points, where customers have access to the full range of Telkom and Telkomsel’s respective products and services . Customers can also access GeraiHalo outlets, which are managed by third parties and provide a more limited range of cellular services .
C ontact Centers handle enquiries regarding our products, services and customer transactions. Our contact/call centers currently do not handle payments. Our contact centers also operate our customer care (telecaring) and telemarketing programs .
Partnership Stores are extensions of our distribution channels, in cooperation with a variety of third-party marketing outlets such as computer or electronic stores, banks, and others .
Feet on The Street are sales agents that conduct direct marketing of our products, particularly for our Speedy products , through door-to-door sales, open table discussions , exhibitions, product demonstrations, and other similar activities .
Authorized dealers and retail outlets are sales and distribution outlets for a variety of telecommunication products such as Speedy Instan cards , Flexi subscription cards, starter packs, prepaid SIM cards and top-up vouchers. These dealers are non-exclusive, and they receive a discount on all of the products they receive . Retail outlets also include outlets jointly operated by us, Telkomsel and PT Pos Indonesia, as well as other outlets such as banks .
Account Management Teams who manage relationships with our individual, business, and corporate customers .
Telkom Solution House s are places where an enterprise customer can obtain information on a variety of TIMES solutions, products and services, and the latest technology. At these Telkom Solution Houses, we provide free live demonstrations (such as Speedy, Hotspot, PDN, IP-Phone), live demonstrations for commercial products (such as video conference), enterprise consultation and ecosystem business solutions for customized TIMES for corporations, and simulated demonstrations (such as e-Payment & VPN over GSM and Flexi) .

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SME Center s function as a communication center supported with advanced office facilities, a community center where our customers can interact, and a commerce center especially for e-Commerce solutions .
Our website which provide s customers with information on the entire range of our products and services, multimedia as well as telephony, through the official company website s at www.telkom.co.id and www.telkomsel. com.

Marketing Strategy

Marketing communications and distribution channels are important in ensuring that our product/service offerings are directed at and reach the right customer segment. In addition to marketing using traditional (offline) media such as advertisement placement in television, print media, newspaper, and radio as well as during local events, we have also begun to intensify product marketing through the digital (online) media within various digital communities as well as building popularity in social networks.

Plasa Telkom and GraPARI outlets are our direct distribution channels. In addition to its function as a direct channel for our product distribution, these outlets also handles after-sales service for our customers, and disseminates information on programs, promotions and products to customers and end users. This distribution channel enables us to monitor and improve service quality, complaint handling performance, and customer satisfaction level in general. As of December 31, 2013, we operated 572 Plasa Telkom and 86 GraPARI outlets through Indonesia.

In the distribution of Telkom Flexi and Speedy Instan card (SPIN Card) and mobile cellular products, we engage a partnership of best-performing dealers, giving each of these partners a designated and exclusive sales area ("cluster") to manage. As of December 31, 201 3 , we have partnerships with 53 official dealers that manage more than 83,000 retail outlets in 96 clusters. In addition, we also have partnership arrangements with seven national retail partners and 17 national banking partners.

For kartuHalo, Telkomsel focuses on corporate and professional customers with high usage volumes. Marketing for this segment is undertaken by special corporate account teams, which are also responsible for maintaining long-term relations with our customers through efforts to provide solutions suitable to the needs of the corporate customers.

The simPATI and Kartu As products are designed to appeal towards a much wider target segment and particularly to younger customers. Telkomsel uses above and below the line marketing channels to promote its brands, including campaigns aimed at schools and special interest groups, placing print advertisements, billing insertions, point-of-sale presentations, and events promotion and sponsorship.

In keeping with changes in consumer behavior and lifestyle trends, we consistently develop sales partnerships on a national scale with number of partners. These comprise of sales of bundled products through sales outlets owned by the respective partner, such as Samsung and Intel, among others.

As part of our strategy to promote internet technology to the broader public and to improve customer knowledge about broadband internet products and application, we have engaged in an initiative to develop Broadband Learning Centers ("BLCs"). At our BLCs, we provide facilities including air conditioned rooms, personal computers with internet connections, blackboards, educational materials, and teachers and other speakers from our internal as well as in cooperation with other institutions. The BLC s program primarily targets non- internet users, as well as communities that are interested in deepening their knowledge on internet and information technology topics, such as students and collegues . In addition to facilitate events, the BLC s facilities can also be used by communities for events related to education and information technology development . As of December 31, 2013, we operate a total of 218 BLCs in various locations throughout Indonesia.

Telecommunications Industry in Indonesia

Indonesia's telecommunication industry has shown rapid growth ever since the transformation of the telecommunication sector from monopoly to competitive, enacted by the Government through Law No.36 Year 1999 on Telecommunication. This growth is moreover further accelerated by advances in communication technology using radio frequencies, as alternative telecommunication means to communication through cable networks and satellite.

Compared to the growth of fixed wireline telephony for many decades that eventually stagnated at only around 9.4 million lines, the telecommunication teledensity in Indonesia has since experienced a very significant jump in less than 20 years to more than 310 million lines, driven primarily by the growth of cellular telephony, as well as fixed wireless telephony. The cellular telephony business also continues to grow through a variety of innovations as well as constant adaptation to changes in market demands and consumer preferences. While the growth in voice and Short Messaging Service (“SMS”) has showed signs of declining in recent years, there was at the same time a marked strengthening in the growth of data communication and mobile internet access services.

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There are a number of factors or conditions that point to good growth prospects for Indonesia's telecommunication industry, including:

Indonesia's demographics, with the fourth largest population in the world and a fast growing middle class segment, as well as Indonesia's economy that has shown stable and respectable growth in recent years, are expected to drive further demands for telecommunication and data services.
While internet penetration in the country is still relatively low compared to peer countries in the region, people in Indonesia is becoming increasingly exposed, and are increasingly adopting global trends in digital lifestyle, as shown especially in the marked increase of smartphone usage with more affordable prices as well as higher levels of social networking media activities. We expect that the growth of mobile internet services will continue to be fueled on the back of the increasing popularity of smartphones, tablets and other internet-enabled mobile devices in Indonesia, faster data transmission of wireless networks, and increasingly affordable smart devices and mobile internet services.
The increasingly open and tight competition among telecommunication operators, which is expected to result in improved service quality, higher industry efficiency, and constant innovations in products or services, and will eventually drive more growth in Indonesia's telecommunication industry.

Legal Basis and Regulation

The framework for the telecommunications industry is comprised of specific laws, government regulations, ministerial regulations and ministerial decrees enacted and issued from time to time. The current telecommunications policy was first formulated and articulated in the Government’s “Blueprint of the Indonesian Government’s Policy on Telecommunications”, contained in MoC Decree No.KM.72/1999 dated September 17, 1999 which was intended to:

increase the telecommunication sector’s performance in the era of globalization;
liberalize the 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;
create business opportunities for small and medium enterprises; and
facilitate new job opportunities.

A. Telecommunications Law

The telecommunications sector is primarily governed by Law No.36 year 1999 (“Telecommunications Law”), which became effective on September 8, 2000. The Telecommunications Law sets guidelines for industry reforms, including industry liberalization, facilitation of new entrants and enhanced transparency and competition.

The Telecommunications Law eliminated the concept of “organizing entities” thereby ending our and Indosat’s responsibility for coordinating domestic and international telecommunications services, respectively. To enhance competition, the Telecommunications Law prohibits monopolistic practices and unfair competition among telecommunications operators.

The Telecommunications Law was implemented through several Government Regulations, Ministerial Regulations and Ministerial Decree s . The most important of such regulations include:

Government Regulation No.52/2000 regarding Telecommunications Services ;
MoCI Regulation No.1/PER/M.KOMINFO/01/2010 dated January 25, 2010 regarding Operation of Telecommunications Networks ;
MoC Decree No.KM.21/2001 regarding the Provision of Telecommunications Services that was most recently amended by MoCI Regulation No.31/PER/M.KOMINFO/09/2008 regarding the Third Amendment of Decree of the Minister of Communication No.KM.21/2001 regarding the Provision of Telecommunications Services ;
MoC Decree No.33/2004 regarding Supervision of Healthy Competition in the Provision of Fixed Network and Basic Telephony Services ; and
MoC Decree No.KM.4/2001 dated January 16, 2001 regarding the Determination of Fundamental Technical Plan National 2000 for National Telecommunications Development most recently amended by MoCI Regulation No.09/PER/M.KOMINFO/06/2010 dated June 9, 2010 regarding the sixth amendment of MoC Decree No.KM.4/2001 regarding the Determination of Fundamental Technical Plan National 2000 for National Telecommunications Development.

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B. Telecommunications Regulators

In February 2005, the authority to regulate the telecommunications industry was transferred from the MoC to a newly-established Ministry, the MoCI. Pursuant to authorities assigned to him through Telecommunication Law, the Minister of Communication and Information sets policies, regulates, supervises and controls telecommunications industry in Indonesia. On October 28, 2010, MoCI engaged in certain organizational and administrative reforms that included transferring licensing and regulatory authority to two newly established general directorates, the Directorate General of Posts and Informatics Resources and Equipment (“DGRE”) and Directorate General of Post and Informatics (“DGPI”) pursuant to MoCI Regulation No.17/PER/M.KOMINFO/10/2010 regarding the Organization and Administration of Ministry of Communication and Information . Following the reforms , certain adjustments were made through MoCI Regulation No.15/PER/M.KOMINFO/06/2011 dated June 20, 2011 regarding title adjustments in a number of Decrees and/or MoCI regulations that regulate Special Materials in Post and Telecommunications and/or in Decrees of the Director General of Posts and Telecommunications, which transfer all substances related to the post al and telecommunications sector s to the DGPI including licensing, numbering, interconnection, universal service obligation and business competition. Meanwhile, matters related to radio frequency spectrum and standardization of telecommunications equipment s were transferred to the DGRE.

Following the enactment of the Telecommunications Law, the MoC established an independent regulatory body as stipulated in MoC Decree No.KM.31/2003 dated July 11, 2003 regarding the Establishment of the ITRA which was later revoked by MoC Regulation No.KM.36/PER/M.KOMINFO/10/2008 dated October 31, 2008 and amended by MoCI Regulation No.1/PER/M.KOMINFO/02/2011 dated February 7, 2011 (“MoCI Regulation No.36/2008”). Pursuant to MoCI Regulation No.36/2008, the ITRA was assigned the authority to regulate the Indonesian telecommunication industry , including the provision of telecommunication networks and services. The ITRA which is chaired by the Director General of Post and Informatics Operations and comprises of nine members , including six members of the public, and three members selected from Government institutions (DGRE and Director of DGPI and a government representative appointed by the Minister of Communication and Information). Other regulatory functions of the ITRA include :

licensing of telecommunication networks and services;
implementation of operational and service quality standards;
governance of interconnection charges;
regulating telecommunication equipment standards ; and
settlement of disputes between network operators and service providers.

Finally, oversight authority of the ITRA covers :

operating performance;
competition; and
utilization of telecommunication equipments.

C. Classification and Licensing of Telecommunications Providers

The Telecommunications Law organize d telecommunication services into following three categories:

p rovision of telecommunication network s ;
p rovision of telecommunication services; and
p rovision of special telecommunications services .

Licenses issued by MoCI are required for each category of telecommunications services . MoCI Regulation No.1/2010 and MoC Decree No.KM.21/2001 dated May 31, 2001 regarding the Operation of Telecommunications Services , as amended by MoCI Regulation No.31/PER/M.KOMINFO/09/2008 dated September 9, 2008 , are the principal implementing regulations governing licensing.

MoCI Regulation No.1/2010 classified network operations into fixed and mobile networks. Fixed network operations are grouped into:

l ocal fixed network operations;
f ixed domestic long distance operations;
f ixed international connection operations; and
f ixed closed network operations.

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The mobile network operations were divided into:

t errestrial mobile network operations;
m obile cellular network operations; and
s atellite mobile network operations.

MoC Decree No.KM.21/2001 categorized the provision of services into basic telephony services, value-added telephony services, and multimedia services. The provision of multimedia services is further categorized into provision of internet service s , network access point services, public internet telephony services, and data communication system services. The provision of network services and of telecommunications services requires separate licenses according to the established categories. Special telecommunications license held for private purposes, broadcasting, as well as defense and national security are provided separately.

D. Introduction of Competition in the Indonesian Telecommunications Industry

In 1995, we were 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 subsequently merged with Indosat) were granted a duopoly for provision of basic international telecommunications services until 2004.

As a consequence of the Telecommunications Law, the Government terminated our exclusive rights to provide domestic fixed line telephone and DLD services and Indosat ’s and Satelindo ’s duopoly rights to provide basic international telephone services. Instead , the Government adopted a duopoly policy to create competition between Indosat and us as comprehensive service and network provider s . The market for IDD services was liberalized in August 2003 with the termination of Indosat’s and Satelindo’s exclusive rights. In 2012, Indosat began operating fixed line services and , in 2013, fixed wireless access and DLD services. We subsequently received our IDD services license and began offering IDD services in 2004 in direct competition with Indosat.

E. DLD Services

To liberalize DLD services, the Government amended the National Telecommunications Technical Plan pursuant to MoCI Decree No.6/P/M.KOMINFO/5/2005 dated May 17, 2005 (“MoCI Decree No.6/2005”) to assign each provider of DLD services a three-digit access code that would permit their customers to select an alternative DLD services provider by dialing the three-digit access number. MoCI Decree No.6/2005 did not provide for immediate implementation of the three-digit system for DLD calls, but as the first DLD service provider, we were required to gradually open our network to the three-digit access codes in all coded areas throughout Indonesia by April 1, 2010. We were assigned the “017” DLD access code, while Indosat was assigned “011”. The MoCI thereafter amended the National Telecommunications Plan as provided in MoCI Decree No.43/P/M.KOMINFO/12/2007 dated December 3, 2007, (“MoCI Decree No.43/2007”), which delayed the deadline for the implementation of three- digit access code for DLD calls throughout all the area code in Indonesia until September 27, 2011.

Pursuant to MoCI Decree No.43/2007, we opened our network to the “01X” three-digit DLD access service in Balikpapan by April 3, 2008. Since that date, our customers are able to make DLD calls from Balikpapan by first dialing Indosat’s “011”. As stipulated in MoCI Regulation No.43/2007, we have provided a nation-wide network for three-digit access code for fixed and fixed wireless DLD with “01X” that can be used by Indosat or other licensed operator starting September 27, 2011. To date, no other licensed operator s have submitted a request to us to connect their networks and enable DLD access. If there is another operator that provide the “01X” access code, whether nationally or in certain parts of Indonesia, our customers can cho o se to use such other operator to make DLD calls, whenever available .

On December 16, 2008, the MoCI issued an in-principle DLD license to Bakrie Telecom , incre a sing the number of potential DLD operators to three. However, as of the date of filing of this annual report, Bakrie Telecom has not yet obtained a DLD operating license which would require them to first procure necessary DLD infrastructure.

Our DLD tariffs are regulated by MoCI Regulation No.15/PER/M.KOMINFO/4/2008 dated April 30, 2008 regarding Tariff Calculation Procedures for Basic Telephony Services on Fixed Wireline Networks (“MoCI Regulation No.15/2008”), limits our interconnection tariffs in accordance to a specified cost-based formula . MoCI

Regulation No.15/2008 also provides that our tariff structure be comprised of a connection fee, monthly charges, usage charges and additional facilities fees. We are required by MoCI Regulation No.15/2008 to report our cost-based tariff calculation to the ITRA.

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F. IDD Services

We received our IDD license in May 2004 and began offering IDD fixed line services to customers in June 2004 using the “007” IDD access code. The Indosat IDD access code is “001”. Our December 2005 interconnection agreement with Indosat enables Indosat’s network customers to access our IDD services by dialing “007” and our network customers to access Indosat’s IDD services by dialing “001”.

On February 12, 2009, the MoCI issued a fixed IDD license to Bakrie Telecom, with international access code “009”, which has increased the number of potential IDD operators to three.

Interconnection fees from international network providers to local network providers are determined based on the interconnection offering document for fixed line local network providers. Our fixed line IDD tariff are regulated by MoCI Regulation No.15/2008 in the same manner as our fixed line DLD services.

G. Limited Mobility Wireless Services

MoC Decree No.KM.35/2004 dated March 11, 2004 regarding Implementation of Fixed Wireless Networks with Limited Mobility , as amended by MoCI Decree No.16/PER/M.KOMINFO/06/2011 dated June 27, 2011 , (“MoC Decree No.KM.35/2004”) provides that only local fixed network operators holding licenses issued by the MoC may offer limited mobility wireless (or fixed wireless) access services. In addition, MoC Decree No.35/2004 states that each limited mobility wireless access operator must provide basic telephone services. Under an automated migration feature, customers are able to make and receive calls on their fixed limited mobility wireless access phones using a different number with a different area code.

Indosat, Bakrie Telecom and Mobile-8 also hold limited mobility wireless operating licenses.

Our fixed wireless tariff are regulated by MoCI Regulation No.15/2008 in the same manner as our DLD and IDD fixed line services.

H. Cellular

Cellular telephone service is provided in Indonesia on the radio frequency spectrum of 1 . 8 GHz (DCS technology) , 2.1 GHz (UMTS technology) and 900 MHz (GSM and UMTS technology). The MoCI regulates the use and allocation of the radio frequency spectrum for mobile cellular networks. Telkomsel has obtained frequency allocation for cellular services on the 900 MHz, 1.8 GHz and 2.1 GHz frequency bands. T he Government conducted tender s for the allocation of the 2.1 GHz radio frequency spectrum , and allocated bandwidth, in 2006, the G over n m e nt allocates through the tender prosess for allocation at 5 MHz, while for the allocation of additional radio spectrum allocated th r o u gh an evaluation mechanism was in 2009 and a selection in 2013. The allocation of bandwidth in the 2.1 GHz frequency spectrum is regulated by:

MoCI Decree No.19/KEP/M.KOMINFO/2/2006 dated February 14, 2006 regarding the Determination of Winner of IMT-2000 Mobile Cellular Operator Selection at 2.1 GHz Radio Frequency Band;
MoCI Decree No.268/KEP/M.KOMINFO/9/2009 regarding the Determination of Additional Allocation of Radio Frequency Bandwidth Blocks, Tariffs, and Payment Scheme Radio Frequency Spectrum Right of Usage Fees for IMT-2000 Mobile Cellular Operators at 2.1 GHz Radio Frequency Band; and
MoCI Decree No.191 Year 2013 regarding the Determination of PT Telekomunikasi Selular as Winner in the Selection of Users of Additional Frequency Bandwidth at 2.1 GHz Radio Frequency Band for IMT-2000 Mobile Cellular Operators.

I. Interconnection

The Telecommunications Law expressly prohibits monopolistic and unfair business practices and requires network providers to allow users to access other users or obtain services from other networks by paying interconnection fees agreed upon by each network operator. Government Regulation No.52/2000 dated July 11, 2000 regarding Telecommunications Operations provides that interconnection charges between two or more network operators must be transparent, mutually agreed upon and fair.

On February 8, 2006, the MoCI issued Regulation No.8/PER/M.KOMINFO/02/2006 on Interconnection (“MoCI Regulation No.8/2006”), mandated a cost-based interconnection tariff scheme for all network and services operators replacing the previous revenue-sharing scheme. Under the new scheme , interconnection charges are determined by the network operator on which a call terminates based on a long-run incremental cost formula provided under MoCI Regulation No.8/2006.

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MoCI Regulation No.8/2006 requires operators to submit to the ITRA annual RIO proposals containing proposed interconnection tariffs for the coming year. Operators are required to use the cost-based methodology in preparing RIO proposals, and the ITRA and MoCI are required to use the same methodology in evaluating the RIO proposals and approving interconnection tariffs. The RIO proposals also include call scenarios, traffic routing, point of interconnection, procedure for requesting and providing interconnection, and other matters. RIOs must also disclose the type of interconnection services offered and tariffs charged for each service offered. Interconnection access providers are required to implement a queuing system on a First-in-First-Serve basis. Additionally, network interconnection must be implemented in a transparent and without discrimination.

Pursuant to MoCI Regulation No.8/2006 and ITRA Letter No.246/BRTI/VIII/2007 dated August 6, 2007, we submitted a RIO proposal to the ITRA in October 2007, which covered adjustments for operational, configuration, technical and service offerings. In December 2007, we and all other network operators signed new interconnection agreements that super se ded pr e vious interconnection agreements between us and other network operators which also amended all interconnection agreements signed in December 2006. These agreements temporarily served in lieu of RIOs while the ITRA continued to review the RIO proposals received from ourselves and other operators.

On February 5, 2008, the ITRA required that we and other operators begin implementing the cost-based interconnection tariff regime. On April 11, 2008, pursuant to Directorate General of Post and Telecommunication (“ DGPT ”) Decree No.205/2008, the ITRA and the MoCI approved RIO proposals from all operators to replace previous interconnection agreements. The RIO approved in 2008 was effective until July 29, 2011 when new interconnection charges were implemented as stipulated in ITRA Letter No.227/BRTI/XII/2010 dated December 31, 2010 regarding the Implementation of Interconnection Charges in 2011. This is the result of interconnection charges recalculation conducted in 2010 by MoCI that was agreed on by all operators and outlined in a Memorandum of Understanding. In this process, we were appointed as a default data source for the calculation of fixed wireline and fixed local interconnection tariffs. Our subsidi a ry, Telkomsel, and Indosat were similary appointed as the default data source for the calculation cellular interconection tariffs . Meanwhile, Indosat data is positioned as a benchmark for calculating the cost of cellular mobile network interconnection. The results of this interconnection charges reform caused a slight decrease in interconnection costs .

On December 12, 2011, the ITRA changed the SMS interconnection fee basis from a “Sender Keep All” basis to a cost basis interconnection fee calculation which required certain amendments to RIOs agreed upon in 2011. MoCI Regulation No.8/2006 stipulates that the RIO of telecommunications network operators generating operating revenue that is equal to or more than 25% of the combined revenues of all telecommunication operators that serve the same respective segment, must obtain ITRA’s approval, necessitating changes in our and Telkomsel ’s RIOs which were approved on June 20, 2012. In 2012, we and Telkomsel were confirmed as telecommunication network operators that are capable of posting revenue of 25% or more of total operating revenues of all telecommunication operators combined in the respective segments in 2012, through the Decree of the Director General of PPI No.181A/KEP/DJPPI/KOMINFO/5/2012 dated May 16, 2012. Until this report is published, no recalculation of interconnection fees for 2012 had been done as doing such should have been preceded by an evaluation on interconnection charges in 2011.

J. VoIP

In January 2007, the Government implemented new interconnection regulations and a five-digit access code system for VoIP services pursuant to MoCI Decree No.06/P/M.KOMINFO/5/2005. Under the Decree, the prefix for VoIP, which was originally 01X, was changed to 010XY. On April 27, 2011, the MoCI issued Regulation No.14/PER/M.KOMINFO/04/2011, which imposed quality control standards in relation to VoIP services , which became effective three months thereafter, to which we and other operators must adhere to .

K. IPTV

In August 19, 2009, MoCI issued Ministerial Decree No.30/PER/M.KOMINFO/8/2009 regarding the undertaking of IPTV services in Indonesia, in order to address the convergence of telecommunications services with broadcasting and electronic transactions. In July 2010 , MoCI replaced this regulation with MoCI Regulation No.11/PER/M.KOMINFO/07/2010 (“MoCI Regulation No.11/2010”) which established the legal basis for the licensing and regulates the provision of IPTV services, including the rights and obligations of IPTV providers, technical standards, foreign ownership requirements and the use of domestic independent content providers.

MoCI Regulation No.11/2010 recognizes IPTV as a convergence of telecommunications, broadcasting, multimedia and electronic transactions a nd provides that only a consortium comprising at least two Indonesian entities may be licensed as an IPTV provider. Each consortium must together hold license s as a local fixed network provider, internet services provider and one broadcast services provider. Such consortium may only provide IPTV services in the area covered by all three required licenses. MoCI Regulation No.11/2010 further requires that IPTV services be delivered through a wire network.

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L. Satellite

Our international satellite business is highly regulated. In addition to being subject to domestic licensing requirements and regulation for the use of orbital slots and radio frequencies as stipulated in MoCI Regulation No. 13/P/M.KOMINFO/8/2005 dated September 6, 2004 which is partially amended by MoCI Regulation No.37/P/M.KOMINFO/12/2006 dated December 6, 2006 (“MoCI Regulation No.37/2006”), our satellite operations is also regulated by the Radio Communications Bureau of the International Telecommunications Union.

Furthermore, MoCI Regulation No.37/2006 dated December 6, 2006 requires foreign satellite operators to obtain a landing right license to operate in Indonesia which requires such foreign satellite operators to coordinate with domestic satellite operators, including us, to ensure that no Indonesian satellite and terrestrial systems will be disrupted by their operation.

M. Consumer Protection

Under the Telecommunications Law, each network provider is required to protect consumer rights in relation to , among others, quality of services, tariffs and compensation. Customers injured or damaged by negligent operations may file claims against negligent providers. Telecommunications consumer protection regulations provide service standards for telecommunication operators.

N. USO

All telecommunications operators, whether network or service providers, are bound by a USO regulation that requires them to contribute to providing telecommunication facilities and infrastructure in the interest of opening equal access to telecommunications throughout all regions in Indonesia, which is generally done by way of financial contribution. MoCI Regulation No.32/PER/M.KOMINFO/10/2008 dated October 10 , 2008 regarding the USO (as amended by MoCI Regulation No.03/PER/M.KOMINFO/02/2010 dated February 1, 2010) (“MoCI Regulation No.32/2008”) stipulated, among others, details services that shall be provided in relation to USO regulation, which is providing telephone, SMS and internet access services in remote and other areas of Indonesia that have been classified as USO regions where it is not economical to provide these services.

USO payment requirements are calculated as a percentage of our and Telkomsel’s unconsolidated gross revenues , net of bad debts and /or interconnection charges and/or connection charges . Pursuant to Government Regulation No.7/2009 dated January 16, 2009 , regarding Tariffs for Non-Tax State Revenue that apply to the Ministry of Communication and Information (“GR No.7/2009”) and Decree No.05/PER/M.KOMINFO/2/2007 dated February 28, 2007, the current USO tariff rate is 1.25% of gross revenue , net of bad debts and/or interconnection charges and/or connection charges . Subsequently, in December 2012, Decree No.05/PER/M.KOMINFO/2/2007 was replaced by Decree No.45 year 2012 of the MoCI which was effective from January 22, 2013. The Decree stipulates, among other things, the exclusion of certain revenues that are not considered as part of gross revenues as a basis to calculate the USO charged, and changed the payment period which was previously on a quarterly basis to become quarterly or semi-annually.

O. Telecommunication Regulatory Charges

On January 16, 2009, the Government issued Government Regulation No.7/2009, which sets the types of non-tax state revenues that apply to the MoCI derived from various services, including telecommunications.

We are required to pay right-of-use fees related to the radio frequency spectrum that we use. The right-of-use fees with reference to our BTS licensing were payable annually based on a formula that took into account base prices for both radio frequency spectrum and transmission capacity, as adjusted by fee indices set by the Minister of Communications and Information in consultation with the Minister of Finance. The right-of-use fees calculated with reference to our radio frequency spectrum is determined by tender and comprises of both an upfront fee and radio frequency spectrum (“IPSFR”) annual fees.

On December 13, 2010, the Government issued Government Regulation No.76/2010 amending Government Regulation No.7/2009. Pursuant to Government Regulation No.76/2010, we are no longer required to pay right-of-use fees calculated with reference to the BTSs that we deploy in our network, except for BTSs deployed in our backbone, with effect from December 15, 2010. As a result, our right-of-use fees are now calculated based on the bandwidth of the radio frequency spectrum that we use.

In addition to radio frequency spectrum right-of-use fees, Government Regulation No.7/2009 requires all telecommunications operators to pay an annual license fee for telecommunication operation, which is equal to 0.5% of unconsolidated gross revenues , net of bad debts and /or interconnection charges and/or connection charges .

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Pursuant to Law No.28/2009 regarding Local Taxes and Local Fees, local governments are permitted to impose fees on the sites that we use for telecommunications towers. The fees may not exceed 2% of the site’s assessed tax value. Currently, there are some 525 local (provincial and regency level) governments through out Indonesia that may be authorized to impose these fees to increase in the future.

P. Telecommunications Towers

On March 17, 2008, the MoCI issued MoCI Regulation No.02/PER/M.KOMINFO/3/2008 regarding Guidelines on Construction and Utilization of Sharing Telecommunication Towers (“MoCI Regulation No.02/2008”). Under MoCI Regulation No.02/2008, the construction of telecommunications towers requires permits from the relevant governmental institution, while the local government determines the placement and locations at which telecommunications towers may be constructed. In addition, telecommunications providers that own telecommunication towers and other tower owners are obligated to allow other telecommunication operators to utilize their telecommunication towers without any discrimination, with due regards to the technical capacity of the respective tower.

Since the operations of telecommunication towers involves a number of relevant Government bodies, on March 30, 2009, a joint regulation is issued in the forms of Minister of Home Affairs Regulation No.18/2009, Minister of Public Works Regulation No.07/PRT/M/2009, MoCI Regulation No.19/PER.M.KOMINFO/03/2009 and Head of the Investment Coordinating Board Regulation No.3/P/2009 regarding Guidelines for the Construction and Shared Use of Telecommunications Towers (“Joint Decree”).

The Joint Decree regulates that license for telecommunication tower construction is to be issued by regents or mayors, and for Jakarta Province, its Governor. The Joint Decree also provides for tower construction standards and requires that telecommunications towers be made generally available for shared use by telecommunications service providers. The owner of a telecommunications tower is allowed to collect a fee, which is negotiated with reference to costs associated with investment and operational costs, the return of investment and a profit. Monopolistic practices in the ownership and management of telecommunications towers is prohibited.

In addition to the Joint Decree and MoCI Regulation No.02/2008, 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.

Competition

Measures following the Telecommunications Law’s adoption in 2001 moved the Indonesian telecommunications sector from a duopoly between Indosat and us to one with multiple competing providers. See “Legal Basis and Regulation – Introduction of Competition in the Indonesian Telecommunications Industry”.

Competition Law

The Government currently promotes liberalization, competition and transparency in the telecommunications sector. It does not prevent providers from attaining and capitalizing upon a dominant market position. However, t he Government does prohibit operators from abusing a dominant position. In March 2004, the MoC issued Decree No.33/2004, which prescribes measures to prohibit such abuse by dominant network and service providers. A provider is considered dominant based on factors such as scope of business, service coverage area and control of a particular market. Specifically, Decree No.33/2004 prohibits dumping, predatory pricing, cross-subsidies, mandatory use of a provider’s services (to the exclusion of competitors) and hampering mandatory interconnection (including discrimination against specific providers).

Competition in the telecommunications sector, like all Indonesian business sectors, is also governed more generally by Law No.5/1999 dated March 5, 1999 regarding Prohibition of Monopolistic Practice and Unfair Business Competition (“Competition Law”). The Competition Law bans agreements and activities tending toward unfair business competition, as well as the abuse of a dominant market position. Pursuant to the Competition Law, the Commission for the Supervision of Business Competition (“KPPU”) has been established as Indonesia’s antitrust regulator with the authority to enforce the provisions of the Competition Law.

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The Competition Law is implemented by various regulations, including Government Regulation No.57/2010 dated July 20, 2010 regarding Mergers and Acquisitions Potentially Causing Monopolistic Practices or Unfair Business Practices. Government Regulation No.57/2010 permits voluntary consultation with the KPPU prior to a merger or acquisition, resulting in the KPPU issuing a non-binding opinion. Government Regulation No.57/2010 also requires that a mandatory report be made to the KPPU after a merger or acquisition is completed if the transaction exceeds certain asset or sales value thresholds.

A. Fixed Line, Fixed Wireless an d DLD

Our exclusive right to provide domestic fixed line telecommunications services in Indonesia ended following the Telecommunications Law’s implementation in 2000. The MoC issued licenses to Indosat for domestic fixed line services in August 2002 and for DLD telephone services in May 2004. We entered into an interconnection agreement with Indosat dated September 23, 2005 to allow interconnection between our local fixed line services in Jakarta, Surabaya, Batam, Medan, Balikpapan, Denpasar and certain other areas. By 2006, Indosat was able to provide nationwide DLD services through its CDMA-based fixed wireless network, its fixed line network and these interconnection arrangements with us.

In an attempt to liberalize DLD services, the Government required each DLD provider to implement a three-digit access code to be dialed by customers making DLD calls. These regulations were first implemented in Balikpapan in 2008, with Balikpapan residents given the option to make a normal DLD call or to select a three-digit code assigned to Indosat or to us. Under current regulations, this system is to be applied nationally beginning September 27, 2011. See “Legal Basis and Regulation – Introduction of Competition in the Indonesian Telecommunications Industry”.

Indosat remains our largest competitor with respect to fixed line and DLD services and we also compete against other fixed line service providers such as PT Bakrie Telecom Tbk. (formerly Ratelindo) and PT Batam Bintan Telecom. However, traditional fixed line services have faced and will continue to increasingly face competition from cellular services, particularly as cellular tariffs decrease, and from other alternate services such as fixed wireless, SMS, VoIP and e-mail services.

Telkom Flexi, our fixed wireless network is the largest in Indonesia with coverage of 370 cities offering limited mobility and charging customers based on PSTN tariff that is principally lower than GSM. For comparison, Indosat in 2004 launched its CDMA-based fixed wireless phone service under the brand name “StarOne” in Jakarta and Surabaya. Bakrie Telecom offers fixed wireless services in more than 30 cities and Mobile-8 was granted a nationwide fixed wireless access license in 2009. In general, the technologies employed by CDMA and fixed wireless access operators are less capital-intensive, previously allowing these operators to offer more competitive prices than GSM operators. Furthermore, licensing fees for radio stations of fixed wireless mobile phone connections is lower than cellular.

B. Cellular

We operate our cellular service business through our majority-owned subsidiary, Telkomsel. As of December 31, 2013, Indonesia’s cellular market is dominated by Telkomsel, Indosat and XL Axiata, which collectively account for 80.4 % of the full-mobility cellular market. Other providers include Hutchison, Natrindo, Smart Telecom and Bakrie Telecom.

There were approximately 310 million full-mobility cellular subscribers in Indonesia as of December 31, 2013, a 12.3 % increase from approximately 276 million as of December 31, 2012.

We believe that Telkomsel competes effectively in the Indonesian cellular market on the basis of price, coverage, service quality and value added services. As of December 31, 2013, Telkomsel remained the largest national licensed provider of cellular services in Indonesia, with approximately 131.5 million cellular subscribers and a market share of 42.4 % of the full-mobility cellular market. The second and the third largest providers were Indosat and XL A xiata, which have a market share of 19.2 % and 18.7 % respectively, based on the estimated number of subscribers as of December 31, 2013. In addition to the nationwide GSM operators, a number of smaller regional GSM, analog and CDMA fixed wireless providers operate in Indonesia .

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The following table sets out information as of December 31, 2013 for each of the three leading cellular providers with national coverage:

	Operator — Telkomsel	Indosat	XL Axiata
Launch date	May-1995	Nov-1994 (2)	Oct-1996
2G Licensed frequency bandwidth (GSM 900 & 1800)	30 MHz	30 MHz	30 MHz
3G Licensed frequency bandwidth (2.1 GHz)	15 MHz	10 MHz	15 MHz
Market share (1)	42.4 %	19.2 %	18.7 %
Subscribers (1)	131.5 million	59.6 million	58.1 million

(1) Internal estimate, dated December 31, 2013 based on various statistics compiled by us.

(2) In November 2003, Indosat and Satelindo merged and Indosat took over Satelindo’s cellular operations.

Hutchison and Natrindo also provide cellular services in Indonesia and in 2012 were each awarded an additional 10 MHz of spectrum on the 3G license frequency bandwidth (2.1 GHz). This additional spectrum increased their respective total allocated frequency spectrum to 20 MHz and 25 MHz each. In accordance with the announcement of MoCI No.19/PIH/KOMINFO/2/2013 dated February 25, 2013, Telkomsel has been selected as one of the companies to be granted an additional 3G license with radio frequency in the 2.1 GHz bandwidth.

C. IDD

We compete in traditional IDD services (non-VoIP) in Indonesia primarily with Indosat, as well as Bakrie Telecom. IDD also faces competition with VoIP and other internet-based voice services likes Skype and Google Talk.

D. VoIP

We formally launched our VoIP services in September 2002. VoIP uses data communications to transfer voice traffic over the internet, which usually provides substantial cost savings to subscribers. A number of other companies, including XL Axiata, Indosat, Atlasat Solusindo Pte, Ltd., PT Gaharu Sejahtera, PT Satria Widya Prima, PT Primedia Armoekadata Internet and PT Jasnita Telekomindo also provide licensed VoIP services in Indonesia. Other unlicensed operators also provide VoIP services that may be accessed through websites or through software that allows voice communications through the internet using computers or smartphones.

VoIP operators compete primarily on the basis of price and service quality. VoIP operators, including us, offer budget calls and other products aimed at price sensitive users such as prepaid calling cards. We currently offer our primary VoIP service “Telkom Global-01017” and the lower-cost alternative “Telkom Save”. Telkom Save offers discounted rates for certain countries to which there is heavy traffic from Indonesia while offering regular VoIP tariff rates for other countries. In addition to other VoIP operators, we also compete with internet-based voice services likes Skype and Google Talk.

E. Satellite

The Asia-Pacific region and especially Southeast Asia continues to need satellites for both telecommunications and broadcasting infrastructure. This need is driven by the high demand from services such as cellular backhaul , broadband backhaul , enterprise network , OUTV (Occasional Usage TV) , military and Government network , DTH television , flight c ommunication , and disaster recovery.

At the same time, the supply of available satellite transponders in Southeast Asia is limited. Almost all of the orbital slot positions covering Southeast Asia a re occupied . Of the s atellites currently under construction one is planned to occupy the 118 0 E orbital slot, but it is estimated to enter service only in 2016.

Generally, large global satellite operators can use economies of scales to offer more competitive prices without affecting their financial performance. This may result in a market premium subsidy in very competitive markets.

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There are 18 satellite operators with satellites covering Southeast Asia:

SES Global (Luxembourg)
Eutelsat Asia (France)
APT Satellite (Hong Kong)
AsiaSat (Hong Kong)
JSAT (Japan)
MEASAT (Malaysia)
MCI – Media Citra Indostar (Indonesia)
Indosat (Indonesia)
VinaSat (Vietnam)
SingTel/Optus (Singapore)
Telkom (Indonesia)
ChinaSat (China)
Mabuhay (Philippines)
Thaicom (Thailand)
ABS (Hong Kong)
Lippo Star (Indonesia)
Intelsat (US)
Telesat (Canada)

Our satellite operations primarily consist of leasing satellite transponders capacity to broadcasters and operators of VSAT, cellular and IDD services and ISPs, as well as providing earth station satellite up linking and down linking services to domestic and international users. We face competition from foreign and domestic service providers and compete most closely in Indonesia with Indosat and PSN. Other private satellites serving the broadcasting market within the coverage of the Telkom-1 and Telkom-2 satellites include AsiaSat-2, AsiaSat-4, AsiaSat-3S, Apstar-2R, Apstar-5, Apstar-6, ThaiCom-3, Measat-2, Measat-3, Measat-3a, PanAmSat-4 and PanAmSat-7. Our direct competitors in Asia are Measat Sdn. Bhd, which operates the Measat satellites, APT Satellite which operates the Apstar satellites, and Shin Satellite PCL, which operates the ThaiCom satellites.

The satellite industry in Indonesia is one of the most competitive in Southeast Asia. This is evident from the shift in market structure since 2003 from monopoly to oligopoly. One of the reasons for this shift in market structure is that the domestic satellite industry is not strictly regulated by the Government of Indonesia. Although Ministerial Regulation No.37/P/M.KOMINFO/12/2006 dated December 6, 2006 issued by the MoCI was intended as an entry barrier for foreign satellite operators, the currently applied “open sky” policy has in fact increased competition amongst domestic and foreign satellite operators. Another factor in the shift in market structure is the limited capacity of domestic satellite operators, which are thus unable to benefit from the fast growing market demands in Indonesia.

In view of market opportunities and limited supply, we plan to expand our satellite business with the construction of Telkom-3S satellite through a partnership on acquired orbital slot. The Telkom-3S satellite is currently under development.

The current trend in the satellite business is the development of b roadband s atellite. As the bandwidths in the C-Band and Ku-Band frequencies are fully utilized, utilization of the Ka-Band frequencies will become an option. The technology for Ka-Band frequencies ha s been progressing rapidly in the last decade. Broadband satellite utilize Ka-Band frequencies with a re-use configuration, resulting in capacities of up to 100 Gbps. Currently, we are engaged in design and demand studies for broadband satellite s .

F. BTS

As of December 31, 2013, w e operate d 75,579 BTS located throughout Indonesia. Through our subsidiary, Dayamitra , we lease out space to other operators to place their telecommunications equipment on these towers, for which we receive a fee. Our principal competitors in this business are XL Axiata, Indosat, Bakrie Telecom and PT Tower Bersama Infrastructure Tbk .

G. Others

Deregulation in the Indonesian telecommunications sector has encouraged competition in the multimedia, internet, and data communications services businesses. The diversification of businesses has gained momentum with the result that competition is now intense, particularly in terms of price, range of services offered, quality and network coverage, as well as customer service quality.

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Licensing

To provide national telecommunications services, we have a number of product and service licenses that are consistent with the applicable laws, regulations or decrees.

Following the issuance of MoCI Regulation No.01/PER/M.KOMINFO/01/2010 (“MoCI Decree No.01/2010”) dated January 25, 2010 concerning the Provision of Telecommunication Network, we were required to adjust our telecommunications license to provide telecommunications services. We have secured new licenses that have been adjusted as required of which are as follows:

A. Fixed Network and Basic Telephony Services

Based on the report submitted by us concerning the operation of fixed network and as part of the adjustment to MoCI Decree No.01/2010, we had our licenses adjusted in 2010 for the operation of local fixed network, domestic long distance, international call and closed fixed network, explained as follows:

MoCI Decree No.381/KEP/M.KOMINFO/10/2010 dated October 28, 2010 on the License of Operating Local Fixed Network and Basic Telephony Services of PT Telekomunikasi Indonesia Tbk;
MoCI Decree No.382/KEP/M.KOMINFO/10/2010 dated October 28, 2010 on the License of Operating Fixed Network of Domestic Long Distance and Basic Telephony of PT Telekomunikasi Indonesia Tbk;
MoCI Decree No.383/KEP/M.KOMINFO/10/2010 dated October 28, 2010 on the License of Operating Fixed Network of International Call and Basic Telephony Services of PT Telekomunikasi Indonesia Tbk; and
MoCI Decree No.398/KEP/M.KOMINFO/11/2010 dated November 12, 2010 on the License of Operating Closed Fixed Network of PT Telekomunikasi Indonesia Tbk.

Following the issuance of MoCI Decrees No.381, 382 and 383, our previous licenses for operating a fixed network and basic telephony services previously owned by us based on MoC Decree No.KP.162 of 2004 dated May 13, 2004 ceased to be in effect. The licenses do not have a set expiry date, but are evaluated every five years.

B. Cellular

Telkomsel holds licenses to operate a nationwide mobile cellular telephone network using 7.5 MHz of radio frequency bandwidth in the 900 MHz band, 22.5 MHz of radio frequency bandwidth in the 1800 MHz band, and 15 MHz of radio frequency bandwidth in the 2100 MHz band . The license s do not have a set expiry date, but will be evaluated every five years. Telkomsel also hold licenses from the Indonesian Investment Coordinating Board that permit Telkomsel to develop cellular services with national coverage, including t he expansion of its network capacity. In addition, Telkomsel holds permits and licenses from and registrations with certain regional governments and/or governmental agencies, primarily in connection with its operations in such regions, the properties it owns and/or the construction and use of its BTS .

C. International Calls

We commenced our international call service in 2004. Our license for operating a fixed network to provide international call services was adjusted in 2010 to meet the requirements of MoCI Decree No.01/2010 with the issuance of MoCI Decree No.383/2010. The license does not have a set expiry date, but it will be evaluated in 2015.

We have a license to operate a closed fixed network based on MoCI Decree No.398/KEP/M.KOMINFO/11/2010, which amends the previous license, to meet the provisions in MoCI Decree No.01/2010. The license allows us to lease the installed closed fixed network , to among others , telecommunication network and service operators, including providing an international telecommunication transmission facility through a SCCS directly to Indonesia for overseas telecommunication operators.

According to MoCI Decree No.16/PER/M.KOMINFO/9/2005 dated October 6, 2005 concerning Provision of International Telecommunications Transmission Facilities through SCCS, overseas telecommunications operators wishing to provide an international telecommunications transmission facilities through the SCCS directly to Indonesia are required to set up a partnership with a fixed network of international call services or closed fixed network provider. In line with MoCI Decree No.16/2005, the international telecommunication transmission facilities provided through SCCS are served by us on the basis of landing rights attached to our license to operate fixed network of international call services. We have also secured landing rights based on the landing right Letter No.006-OS/DJPT.6/HLS/3/2010 dated March 2, 2010 from MoCI.

On March 2, 2010, the MoCI issued Decree No.75/KEP/M.KOMINFO/03/2010 granting our subsidiary, TII, a license to operate a closed fixed line network which enables TII to provide international infrastructure services. Separately, TII secured landing rights in Indonesia from the DGPT to provide international telecommunications transmission facilities through SCCS.

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D. VoIP

We are licensed to provide internet telephony services for public needs as stated in DGPT Decree No.384/KEP/DJPT/M.KOMINFO/11/2010 dated November 29, 2010 on Voice over Internet Protocol (" VoIP ") services. This license does not have a set expiry date, but it will be evaluated every five years.

Telkomsel is also licensed to provide public VoIP services based on DGPT Decree No.226/DIRJEN/2009 regarding the provision of ITKP services. This license does not have a set expiry date, but it will be evaluated every five years by the Government.

E. ISP

We are licensed as an ISP under DGPI Decree No.83/KEP/DJPPI/KOMINFO/4/2011 dated April 7, 2011. This license does not have a set expiry date, but it will be evaluated every five years.

Telkomsel is also licensed to provide multimedia i nternet a ccess s ervices with nation - wide coverage under DGPT Decree No.213/DIRJEN/2010. This license does not have a set expiry date, but it will be evaluated annually, with a comprehensive evaluation every five years.

F. Internet Interconnection Service

We hold a license to provide internet interconnection services by referring to DGPI Decree No.331 /KEP/M.KOMINFO/09/2013 dated on September 24, 2013 regarding license for Internet Interconnection Service (Network Access Point) for PT Telekomunikasi Indonesia Tbk. This license does not have a set expiry date, but it will be evaluated every five years.

G. BWA

In July 2009, we won a tender for a BWA license and the right to provide BWA services in twelve zones, comprising eight zones on 3.3 GHz (North Sumatra, South Sumatra, Central Sumatra, West Kalimantan, East Kalimantan, West Java, JABODETABEK and Banten) and five zones on 2.3 GHz (Central Java, East Java, Papua, Maluku, and the northern part of Sulawesi).

In August 2009, the MoCI issued Ministerial Decree No.237/KEP/M.KOMINFO/7/2009 regarding the Appointment of the Winning Bidders for Packet Switched-Based Local Fixed Access Network Operators Using the 2.3 GHz Radio Frequency for Wireless Broadband Services. Because of inadequate implementation by the winning bidders, the MoCI later issued Regulation No.19/PER/M.KOMINFO/09/2011 dated September 14, 2011 (“MoCI Regulation No.19/2011”), which released operators on the 2.3 GHz radio frequency from the obligation to use the particular technology specified in the bid terms for the 2.3 GHz radio frequency, which were set out in MoCI Regulation No.22/PER/M.KOMINF0/04/2009 April 24, 2009 (“MoCI Regulation No.22/2009”). Pursuant to MoCI Regulation No.19/2011, operators on the 2.3 GHz radio frequency are now permitted to freely choose their technology in providing BWA on the 2.3 GHz radio frequency, subject to a requirement that they pay an annual usage rights fee for the third through the tenth year of the license period in which a technology divergent from that specified in MoCI Regulation No.22/2009 is used. On January 9, 2012, MoCI announced that it plans to make available for bidding additional 2.3 GHz radio frequency in the 2300-2360 MHz range for BWA services utilizing neutral technology.

MoCI Regulation No.19/2011 also stipulates domestic component obligations for telecommunications devices and equipment used in providing BWA on the 2.3 GHz radio frequency. Initial domestic component obligations are 30% for subscriber stations and 40% for base stations, to be increased to 50% within five years.

As a result of the switch to neutral technology under MoCI Regulation No.19/2011, we lost vendor support for our preferred technology, which is based on fixed BWA technology. Vendors instead preferred to support the mobile BWA technology selected by other operators. Mobile BWA technology competes with Telkomsel. We therefore returned 4 of the 5 zones, which we had received. We retained our BWA license for Maluku zone so we would continue to qualify as a BWA operator on 2.3 GHz and have the right to access the BWA networks maintained by other operators.

Becoming a broadband wireless access operator is in line with the transformation of our business to TIMES, which requires us to have infrastructure that is capable of responding to an increasingly complex market and the demand for ever more convergent products and services, whether in the consumer, enterprise or wholesale segments.

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H. Data Communication System (“SISKOMDAT”)

We provide SISKOMDAT services under DGPI Decree No. 169/KEP/DJPPI/KOMINFO/6/2011 dated June 6, 2011 regarding License for Data Communications Systems Services Operation for PT Telekomunikasi Indonesia Tbk. This license does not have a set expiry date but will be thoroughly evaluated every five years.

I. Payment Method Using e-Money

Following the implementation of Bank Indonesia’s Regulation No.11/11/PBI/2009 and Circular Letter of Bank Indonesia No.11/10/DASP each dated on May 13, 2009 regarding how to use card-based payment instruments (“APMK”) and Bank Indonesia’s Regulation No.11/12/PBI/2009 and Circular Letter of Bank Indonesia No.11/11/DASP each dated May 13, 2009 on e-money, Bank Indonesia has redefined the meaning of “principal” and “acquirer” in operating APMK and e-money business. In light of these regulations, Bank Indonesia confirmed our status as an issuer of e-money based on letter of Directorate of Accounting and Payment System of Bank Indonesia No.11/13/DASP dated May 25, 2009. We operate our e-money business under the brand names “T-cash” and “ Flexi cash”.

With the issuance of Bank Indonesia Circular Letter No. 9/9/DASP dated January 19, 2007, Telkomsel is also permitted to conduct APMK activities, with the launch of Telkomsel Tunai prepaid card.

J. Remittance Service

Based on a license from Bank Indonesia No.11/23/Bd/8, dated August 5, 2009, we may operate as a money transfer services provider.

K. IPTV

On April 27, 2011, we and TelkomVision together obtained a license to operate IPTV services through MoCI Decree No.MCIT.160/KEP/M.KOMINFO/04/2011 regarding the Telkom and TelkomVision IPTV Service Consortium Agreement. We now provide IPTV services in five locations: Greater Jakarta, Bandung, Semarang, Surabaya and Bali, under the brand “UseeTV”.

L. Construction Services Business License (“IUJK”)

On June 6, 2012, the City Government of Bandung issued a construction services business license to us through IUJK No.1-3273-858971-2-001772 for Telkom. The IUJK is valid for the execution of construction services throughout the domain of the Republic of Indonesia, comprising architecture, civil, mechanical and electrical works. The IUJK is valid until June 5, 2015.

Telecommunications Services Tariffs

We set our telecommunications tariffs in accordance with government regulations. Under Law No.36/1999 and Government Regulation No.52/2000, tariffs for operating telecommunications network and /or services are determined by providers based on the tariff type , structure and with respect to the price cap formula set by the Government.

A. Fixed line telephone tariffs

The Government has issued a new adjustment tariff formula which is stipulated in the Decree No. 15/PER/M.KOMINFO/4/2008 dated April 30, 2008 of the Ministry of Communication and Information (“MoCI”) concerning “Procedure for Tariff Determination for Basic Telephony Services Connected through Fixed Line Network”.

Under the Decree, tariff structure for basic telephony services connected through fixed line network consists of the following:

Activation fee
Monthly subscription charges
Usage charges
Additional facilities fee.

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B. Mobile cellular telephone tariffs

On April 7, 2008, the MoCI issued Decree No. 09/PER/M.KOMINFO/04/2008 regarding “Mechanism to Determine Tariff of Telecommunication Services Connected through Mobile Cellular Network” which provides guidelines to determine cellular tariffs with a formula consisting of network element cost and retail services activity cost. This Decree replaced the previous Decree No. 12/PER/M.KOMINFO/02/2006.

Under MoCI Decree No. 09/PER/M.KOMINFO/04/2008 dated April 7, 2008, the cellular tariffs of operating telecommunication services connected through mobile cellular network consist of the following:

Basic telephony services tariff
Roaming tariff, and/or
Multimedia services tariff,

with the following traffic structure:

Activation fee
Monthly subscription charges
Usage charges
Additional facilities fee.

C. Interconnection ta riffs

The Indonesian Telecommunication Regulatory Body (“ITRB”), in its letter No. 227/BRTI/XII/2010 dated December 31, 2010, decided to implement new interconnection tariffs effective from January 1, 2011 for cellular mobile network, satellite mobile network and fixed local network, and effective from July 1, 2011 for fixed wireless local network with a limited mobility.

Based on Decree No. 201/KEP/DJPPI/KOMINFO/7/2011 dated July 29, 2011 of the Director General of Post and Informatics , ITRB approved the Company’s revision of Reference Interconnection Offer ( “ RIO ” ) regarding the interconnection tariff .

ITRB, in its letter No. 262/BRTI/XII/2011 dated December 12, 2011, decided to change the basis for interconnection SMS tariff to cost basis with a maximum tariff of Rp23 per SMS effective from June 1, 2012, for all telecommunication provider operators.

D. Network l ease tariffs

Through MoCI Decree No. 03/PER/M.KOMINFO/1/2007 dated January 26, 2007 concerning “Network Lease”, the Government regulated the form, type, tariff structure, and tariff formula for services of network lease. Pursuant to the MoCI Decree, the Director General of Post and Telecommunication issued its Letter No. 115 Year 2008 dated March 24, 2008 which stated “The Agreement on Network Lease Service Type Document, Network Lease Service Tariff, Available Capacity of Network Lease Service, Quality of Network Lease Service, and Provision Procedure of Network Lease Service in 2008 Owned by Dominant Network Lease Service Provider”, in conformity with the Company’s proposal.

E. Tariff for other services

The tariffs for satellite lease, telephony services and other multimedia services are determined by the service provider by taking into account the expenditures and market price. The Government only determines the tariff formula for basic telephony services. There is no stipulation for the tariff of other services.

F. IME S tariffs

The tariffs for satellite lease, telephony services, and other multimedia are determined by the service provider by taking into account the expenditures and market price. The Government only determines the tariff formula for basic telephony services. There is no stipulation for the tariff of other services.

Trademarks, Copyrights, Industrial Designs and Patents

We constantly seek to develop product and service innovations in line with a dynamic business portfolio. To provide both protection for and recognition of the creativity involved, we have registered a number of intellectual property rights, including trademarks, copyrights, industrial design and patents, with the Directorate General of Intellectual Property Rights at the Ministry of Law and Human Rights of the Republic of Indonesia.

The intellectual property rights we have registered include: (i) trademarks for our products and services, corporate logo and name; (ii) copyrights on our corporate name and logo, product and service logos, computer programs, research and songs; and (iii) simple and ordinary patents on technological inventions in the form of telecommunications products, systems and methods.

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The following table lists the brands that have been registered by us in 2013 :

No	Title	Application No.	Application Date	Registration Date
1	Speedytrek Xpose Ur Music	J002009011733	April 8, 2009	April 19, 2013
2	Speedy Groovia	J002010035301	October 1 , 2010	December 9 , 2013
3	DELIMA	J002011004453	May 11, 2011	January 7, 2013
4	TELEPON RUMAH	J002011026179	July 1 , 2011	August 19 , 2013
5	Flexi- Lebih Irit kan	J002011026180	July 1 , 2011	August 19 , 2013

The following table lists the brands that we have applied for registration for in 2013 :

No.	Title	Application No.	Application Date
1	U See Zone	J002013014812	April 2, 2013
2	UTV	J002013004813	April 2, 2013
3	U Zone	J002013004814	April 2, 2013
4	U	J002013004815	April 2, 2013
5	U meet me	J002013022833	May 16, 2013
6	Indi Home	J002013057 7 68	December 3, 2013

The following table lists the copyrights that have been registered by us in 2012 and 2013 :

No.	Innovation Title	Application No.	Application Date	Registration Date	Innovation Number
1	Telkom UTV Mobile Primetime	C0020120 5694	December 11, 2012	December 16, 2013	065583
2	Telkom Game Center Application	C00201300509	February 7, 2013	November 15, 2013	065500
3	ART Promo Application	C00201300510	February 7, 2013	November 15, 2013	065501
4	Telkom Store Application	C00201300511	February 7, 2013	November 15, 2013	065502
5	Qonnect Application	C00201300512	February 7, 2013	November 15, 2013	065503
6	Telkom SNS Hub Client	C00201300513	February 7, 2013	November 15, 2013	065504
7	“Transformer” Computer Program	C00201203811	August 8, 2012	July 1 , 2013 , 2013	0 63830
8	“Global Billing Application” Computer Program	C00201203812	August 8, 2012	July 1 , 2013 , 2013	0 63831
9	“Internet Bijak” Logo	C00201203814	August 8, 2012	July 1 7, 2013	0 64136
10	“Telkom Cloud-explore the possibilities” Logo	C00201203815	August 8, 2012	July 1 7, 2013	0 64137
11	“U See TV” Logo	C0020120381 6	August 8 2012	October 29 , 2013	0 65176
12	SIP Client	C00201104855	December 20, 2011	October 12, 2012	0 60930
13	Location Based Social Networking	C00201104856	December 20, 2011	October 12, 2012	0 60931
14	Supply Chain Management Application	C00201200612	February 8, 2012	December 10, 2012	0 61589
15	RBT Advertising	C00201200613	February 8, 2012	December 10, 2012	0 61590
16	Web-based Remote Control Application on Speedy Network	C00201200614	February 8, 2012	December 10, 2012	0 61591
17	Flexi Belajar	C00201200615	February 8, 2012	December 10, 2012	0 61592
1 8	Customized Personal View	C00201200616	February 8, 2012	December 10, 2012	0 61593
1 9	Telkomsel Market	C00201200617	February 8, 2012	December 10, 2012	0 61594

We applied for the following copyrights in 2012 and 2013:

No.	Innovation Title	Type of Intellectual Property Rights	Application No.	Application Date	Registration Date
1	Telkom Telemetering Smart Home	Computer Program	C00201205695	December 11, 2012	-
2	U See Zone	Logo	C00201301288	April 2, 2013	-
3	U Zone	Logo	C00201301289	April 2, 2013	-
4	U	Logo	C00201301290	April 2, 2013	-
5	UTV	Logo	Coo201301291	April 2, 2013	-
6	Firmware Telkom Homegateaway	Computer Program	C00201301292	April 2, 2013	-
7	Indi Home	Logo	C00201305330	December 3 , 2013

We did not file for the registration of any patents in 2013 .

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Network Development

A. Fixed Line Network Development

In 2013, we continued to enhance our network infrastructure and develop our IDN. Our IDN plans represent our commitment to continue developing and improving the quality, efficiency and cost-structure of our network infrastructure. In line with our transformation into a TIMES provider, we are focused on delivering (i) an integrated NGN for the provision of multiple services (“id-Con”), (ii) IP-based optical backbone networks (“id-Ring”) and (iii) high speed broadband access through a fiber optic network and through Wi - Fi (which we term “id-Access”).

Project	Description
Java-Sumatra-Kalimantan Project (“Jasuka”)	We continue to expand the Jasuka submarine infrastructure backbone to support internal needs and demand for domestic and international internet services. During 2013, we expanded capacity by 2 x 100 Gbps. We have now completed three of the five segments of the project, namely Tanjung Pakis - Tanjung Pandan, Cikupa - Dumai and Pontianak - Batam, while the other two segments namely Dumai - Batam and Tanjung pandan – Pontianak, are scheduled to be completed in May 2014 and July 2014, respectively.
Mataram-Kupang Palapa Ring Project	In 2013 we only expanded this project with bearers of 2 x 10 Gbps connecting Mataram and Kupang and Mataram and Maumere. This project was completed in 2013.
Development and Modernization of Broadband Access through the TITO Scheme	In 2013, we successfully migrated an additional 356 , 602 customers to fiber optic access through our broadband access development and modernization program through the application of the TITO method, pursuant to which our existing copper cables are replaced with more modern optical cables that are backed by active device technologies such as MSAN, GPON and FTTx.
Broadband Access Development with MSAN (Multi Service Access Node) Platform	As of December 31, 2013, we had expanded our MSAN broadband network platform to have a capacity of 1,124,080 connections. In 2014, we plan to expand our broadband network by equipping aproximately 70% of it with FTTx technology and the reminder with MSAN technology.
Fiber To The Home Development Project	We deployed our gigabyte passive optical network in 2013 with 1,937,134 homepass as part of the deployment of our fiber to the home development project. In 2014, we plan to continue the expansion of our broadband access infrastructure, prioritizing the utilization of gigabyte passive optical network technology to expand the implementation of our fiber to the home network.
IMS (IP Multimedia Subsystem) Development	IMS development is part of our infrastructure transformation and is intended to modernize our service nodes by providing IP capability, convergence, and enabling new application-based services that will allow us to integrate new customers and migrate existing customers towards multi-services and multi-screen features. In 2013, IMS nodes were built and operated serving 4,846,627 customers.
TSCS (Tarakan Sangata Cable System)	To increase network capacity and build highly reliable transport backbone, we started the construction of the Sumatra-Bangka and Tarakan-Sangata submarine transport systems in 2011. In 2013, we began laying cable commissioning tests for the TSCS project. In 2014 we plan to perform an integration test and load the TSCS network with commercial traffic.
Implementation of the Telkom Cache System	We began the construction of the Telkom Cache System in 2012 in order to increase efficiency in the usage of our international internet bandwidth as well as to improve the quality of our internet service. Measurements conducted in 2013 showed that the implementation of Telkom Cache System can potentially save up to 28% of bandwidth. In 2013, we implemented the Telkom Cache System in 12 locations.
Sulawesi, Maluku, Papua Cable System Project	In 2012, we began the construction of the Sulawesi, Maluku, Papua Cable System Project in order to expand the scope of our fiber-optic-based submarine transport backbone in eastern Indonesia. This project is expected to provide a maximum capacity of 40 x 100 Gbps and an initial capacity of 1 X 100 Gbps during the first phase. The work has been carried out in the year 2013 are: contract signature Package # 1 (Sulawesi & M a luku area) and Package # 2 (Papua area), Kick Off Meeting Telkom and Contractors, Site Survey (Dry and Wet part) and Installation of Out site plan at several locations. The Maluku – Sulawesi segment of the cable system, which is considered the first phase of this project, is expected to be completed in December 2014 – January 2015 .
Jakarta-Batam-Singapore Cable System Project	We continued to improve the capacity and reliability of our network for international broadband internet service through the development of Jakarta-Batam-Singapore cable system with capacities of 1 x 40 Gbps and 9 x 10 Gbps. The Batam-Singapore segment is expected to be completed in 2014. In 2013, we expanded the capacity of this project with the completion of 1 x 40 Gbps and 9 x 10 Gbps.

In order to further strengthen our TIMES services, we plan to:

Continue to improve the capability of our networks to improve our enterprise broadband and broadband anywhere services in Indonesia .

2. Continue to improve the capability of the full-IP data transport network through the following programs: increasing domestic and international internet bandwidth, expanding the Terra IP backbone, expanding IP over lambda with 10 Gbps, 40 Gbps and eventually 100 Gbps per lambda, facilitating convergence and realizing synergies among networks in Telkom Group, continuing the development of Metro Ethernet which function as a single metro transport network to provide IP and multi-play-based services, continuing the development of FTTH, and continuing to replace our existing copper cables with fiber optic cables through the TITO mechanism .

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Expand the capacity of the IMS-based smart core , install and implement new services, continue to implement an integrated customer profile database, and optimize our service delivery platform as a service brokerage and orchestration.
Expand broadband coverage to enterprise and residential customers through a series of programs, including managed enterprise services, managed smart CPE, home automation, surveillance, and home interconnect ion .

Details of our other significant commitments and contracts are presented in Note 38 to the Consolidated Financial Statements.

B. Fixed Wireless Network Development

In 2013, we optimized existing BTSs for our fixed wireless network, but did otherwise further develop our fixed wireless network due to our migration strategy. As of December 31, 2013, we had 5,715 BTSs in our fixed wireless network.

C. Cellular Network Development

GSM-based cellular services operated by our subsidiary, Telkomsel, now cover all cities and regencies in Indonesia. In 2013, Telkomsel deployed an additional 15,567 BTS .

D. Data Network Development

In 2013, we continued to improve the quality of our data network by increasing our capacity and network coverage. During the year, we increased our MSAN-based broadband access by 1,124,080 homepass and fiber to the home-based broadband access by 1,856,119 homepass. As of December 31, 2013, we had 8,196,055 homepass with broadband access. We also expanded the capacity and coverage of our Metro Ethernet and expanded the coverage and capacity of IP Core through the implementation of 10 Gbps and 40 Gbps lambda IP-based network services and the implementation of terra router. In 2013, we added an additional 6 terra router nodes bringing the total number of terra router nodes that we operate to 28 as of December 31, 2013, providing nation-wide coverage in Indonesia.

As part of our IDN program, we improved our IP Core network which supports our TIMES businesses and integrated our NGN core network between with our fixed wireline and fixed wireless businesses. Our IP Core was developed by adding core router nodes, PE (primary edge) router nodes and Ethernet ports. As of December 31, 2013 , our IP core network consisted of 6 core router nodes, 128 PE (primary edge) router nodes, 721 10GB Ethernet ports and 2,650 1GB Ethernet ports .

We expanded our Metro Ethernet network by setting up and upgrading 813 nodes which enables us to provide broadband services throughout Indonesia. The Metro Ethernet network is also used as the main link for the IP DSLAM, MSAN for Speedy broadband service, softswitch, IP VPN and GPON broadband, whether for mobile backhaul, corporate business solutions or triple play services. In 2013 , we added 5,242 node B BTSs, resulting in a total of 9,559 nodes B BTSs.

As of December 31, 2013 , we had expanded our internet gateway capacity to an installed capacity of 292 Gbps . I n order to ensure adequate internet gateway capacity in anticipation of the expected rapid growth in fixed and mobile broadband traffic . In 2013 , we also cooperated with Akamai, Google and Yahoo to operate a content distribution network (“CDN”) with a capacity of 261 Gbps .

Throughout 2013, we continued to expand the coverage of our Indonesia Wi-Fi services by installing additional access points, through our own regular deployment program as well as through the implementation of a variety of partnership schemes. A total of 75,250 access point s were installed as of December 31, 2013.

CORPORATE STRATEGY

Our strategic target to achieve our objectives in 2013 was improving market capitalization. Our strategies consisted broadly of:

Directional strategy: sustainable competitive growth.
Portfolio strategy: converged TIMES portfolio.
Parenting strategy: strategic guidance.

In 2013, we continue d to adapt to the dynamics of the industry by updating our strategic initiatives with a focus on implementing the TIMES business framework and strengthening internal consolidation. We believed that these strategic initiatives support the comprehensive transformation of our organization, business portfolio, infrastructure, systems, and corporate culture that we believed was necessary to realize our vision of becoming a leading TIMES company in the region . Besides providing a new growth stream, we believe d that our TIME S business also help ed to promote the sustainable growth of our traditional telecommunications business.

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T o achieve the objective of these three corporate broad strategies, we have developed the following 10 strategic initiatives:

1. Center of Excellence

In order to improve our business performance and implement a new corporate culture we have established the “ Telkom Corporate University ” , which aims to educate our employees in order to meet international standards in the TIMES industry.

2. Focus on high growth or high value portfolio

We believe that deploying resources to the parts of our portfolio with the highest growth and value potential will ultimately generate the optimum value for Telkom Group. This includes supporting Telkomsel in order to sustain its growth and market position as well as developing broadband through our Indonesia Digital Network program.

3. Accelerate international expansion

We plan to pursue international expansion through partnerships , alliances and acquisitions , giving priority to the Asia Pacific region, the Middle East and North Africa. Our subsidiary TII will be our main vehicle for international expansion.

4. Cost transformation

We aim to improve cost efficiency and infrastructure capability, by utilizing technology (multiplay/multiservice/multiscreen), leverage existing asset (empowerment of the less productive assets) and create a creative business model (through partnerships to shar e costs).

5. IDN (id-Access, id-Ring, id-Con) Development

We plan to support our MP3EI (Government’s Master Plan for the Acceleration and Expansion of Indonesia's Economic Development) target of attaining broadband access to 30% of households in Indonesia by the year 2015. IDN (Indonesia Digital Network) is also intended to bridge the digital divide .

6. Indonesia Digital Solution (“IDS”) – Convergent services in digital ecosystem solution

We developed the IDS strategic initiative to support the Indonesia Digital Network program such as the digital media ecosystem (cooperati on with best partners and differentiation through innovative business models ) and business solution ecosystem (accelerate development of innovative business ecosystem & convergence services for excellent customer experience ) space .

7. Indonesia Digital Platform (“IDP”) – Platform enabler for ecosystem development

Developed IDP strategic initiative to seek enhance overall customer experience and customer engagement through exploration of best technology , development appropriate business model and partnership scheme.

8. Execution of the best subsidiary management system

We believe that providing strategic guidance to our subsidiaries is important for the success of Telkom Group. In general, guidance provided to our subsidiaries will focus on the aspects of planning and optimalization of synergy within the Telkom Group.

9. Managing portfolio through Board of Executives (“BoE”) and Chief Regional Officer (“CRO”)

Manage our subsidiaries subsidiaries through a Board of Executives and CROs. Our BoE compres our Board of Directors and the heads of four businesses, namely, mobile ( represented by Telkomsel), multimedia ( represented by Metra), infrastructure ( represented by Dayamitra) an d international ( represented by TII), and seven CRO s representing Sumatera, DKI Jakarta, West Java & Banten, Central Java, East Java, Kalimantan and East Indonesia area.

10. Increasing synergy within Telkom Group

Optimizing synerg ies at the strategic and operational levels both with in Telkom itself and across our subsidiaries.

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In order to implement our directional strategy of sustainable competitive growth, we plan to seek opportunities for in organic growth through acquisition s & alliance s (“A&A”) and corporate restructuring, as described below :

1. A&A program

A&A implementation is part of our growth strategy objective to mitigate risks, develop capital, increase competency as well as accelerate access to synergy and value contribution. In 2013, we:

– acquired all shares in PT Patra Telekomunikasi Indonesia (“Patrakom”) , enabling us to integrate Pa t rakom’s line of business, namely providing a satellite-based closed fixed telecommunications network , as well as providing communication network and solution s , with a permit as Operator of Micro Earth Stations Communications System ("SKSBM") ;

– entered into a strategic partnership with PT Trans Corpora and PT Trans M edia Corpora by selling shares of Indonusa (“Telkom Vision”) to strengthen Telkom Vision position in Pay TV industry ;

– acqui red 51% of PT Pojok Celebes Mandiri , wh ich engage s in business-ticket booking and online applications through the www.pointer.co.id website which is been connected with the national airline and a large number of hotels in Indonesia; and

– Divestation all of our ownership from Scicom Bhd. Malaysia due to the differences in call center management strategy.

2. Corporate restructuring

We have implemented corporate restructuring through unit business spin-off program, possible initial public offering of subsidiaries , established new subsidiaries and capital injection. In 2013, our corporate restructuring program included :

– business splitting: Metra D i gital Media splitting from our indirect subsidiar y , Infomedia;

– established new subsidiaries through overseas expansion such as in Australia (IT business process outsourcing & solution), Macau (MVNO), Taiwan (MVNO), and United States of America (international network); and

– capital injection into , and increas ing competence and certification of, our subsidiary Telkom Akses which is developing the IDN network to provide customers with a modernized broadband and fiber optic network.

C. ORGANIZATIONAL STRUCTURE

Information on Subsidiaries and Associated Companies

We have experienced continuous organic and inorganic growth. Organic growth is achieved through expansion of our existing operations and creating synergies between our subsidiaries. Inorganic growth is accomplished through acquisition of companies that we deemed were capable to add strategic value to our entire Group and contributing to the long-term revenue growth and sustainability of business.

The following table illustrates our corporate structure as of December 31, 2013 , including our direct and indirect equity ownership in our subsidiaries.

A complete list of our subsidiaries and investments in associated companies, and our ownership percentage of each entity, as of December 31, 2013 , is set forth below and is contained in Note s 1 d and 11 to our Consolidated Financial Statements included elsewhere in this report.

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Direct Subsidiaries

Companies	Percentage of Ownership Interest	Nature of Business	Operational Status	Description
PT Telekomunikasi Selular (“Telkomsel”),
Jakarta	65%	Telecommunication	Operational	Telkomsel, established on May 26, 1995, provides
telecommunication facilities and mobile cellular services.
PT Multimedia Nusantara (“Metra”),
Jakarta	100%	Multimedia and line telecommunication
services	Operational	Metra, acquired on May 9, 2003, is our NEB holding
company. Metra focuses on network construction, development,
maintenance and services, and multimedia services (data communications
systems, portal and online transaction services).
PT Telekomunikasi Indonesia International
(“TII”) , Jakarta	100%	Telecommunication	Operational	Previously known as PT Ariawest International, TII
was established on July 31, 2003 and is a wholly owned subsidiary of
Telkom. Currently, TII has obtained the Jartaptup license and Network
Access Provider license. TII provides network services and international
telecommunication services, as well as international
business.
PT Pramindo Ikat Nusantara (“ PINs ”), Jakarta	100%	Telecommunication construction and
services	Operational	PINs was originally established to operate our KSO in
Sumatra. It was acquired on August 15, 2002.
PT Dayamitra Telekomunikasi (“Dayamitra”),
Jakarta	100%	Telecommunication	Operational	Dayamitra provides fixed line telephone services, supply
of telecommunications facilities and infrastructure and telecommunications
services. Acquired on May 17, 2001, Dayamitra transformed itself by
entering the telecommunications infrastructure supply business, which
includes supplying telecommunications towers to meet the BTS installment
needs of telecommunications operators all over Indonesia.
PT Graha Sarana Duta (“GSD” or “Telkom Property”),
Jakarta	99.99%	Leasing of offices and providing building
management and maintenance services, civil consultant and
developer	Operational	Acquired on April 25, 2001, Telkom Property operates
throughout Indonesia and manages buildings owned by us and third
parties.
PT Napsindo Primatel Internasional (“Napsindo”),
Jakarta	60%	Telecommunication	Ceased operation	Napsindo provided Network Access Point (“NAP”), Voice
Over Data (“VOD”) and other related services. Established on December 29,
1998, Napsindo ceased operation as at January 13, 2006.
PT Telkom Akses (“Telkom Akses”),
Jakarta	100%	Construction services and trade in the field of
telecommunication	Operational	Telkom Akses was established on November 26,
2012.
PT Patra Telekomunikasi Indonesia (“Patrakom”),
Jakarta	100%	Telecommunication and fixed line communication
system	Operational	Patrakom was established on September 28, 1995. On Se p tember 25 and November 29, 2013,
the Company acquired additional interest of 40% and 20%,
respectively, of Patrakom .

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Indirect Subsidiaries

Companies	Percentage of Ownership Interest	Nature of Business	Operational Status	Description
PT Infomedia Nusantara ( “ Infomedia ” ), Jakarta	100% (through a 51% ownership by Metra )	Data and information service – provides
telecommunication information services and other information services in
the form of print and electronic media and call center
services	Operational	Infomedia was acquired on September 22, 1999 to operate
KSO in Sumatra. Infomedia has transformed from focusing on three pillars
of business (directory services, contact center services and content
services) to focus on business process outsourcing and digital media &
rich content services.
PT Sigma Cipta Caraka ( “ T elkomsigma ” ), Tangerang	99.99% ownership by Metra	Information technology service – system
implementation and integration service, outsourcing and software license
maintenance	Operational	Telkomsigma was established on May 1, 1987. It service
focuses on providing IT solutions.
Telekomunikasi Indonesia International Pte. Ltd.
( “ TII Singapore ” ), Singapore	100% ownership by TII	Telecommunication	Operational	TII Singapore was established on December 6, 2007,
pursuant to the laws of Singapore. TII Singapore is a wholly owned
subsidiary of TII. The Company has obtained Facility Based Operator
License. Currently, it provides wholesale voice, wholesale data and
Managed Service.
PT Metra Plasa (“Metra Plasa”), Jakarta	60% ownership by Metra	Website services	Operational	Metra established Metra Plasa with eBay International AG
on April 2 , 2012. Metra Plasa provides e-commerce
service.
PT Administrasi Medika ( “ Ad Medika ” ), Jakarta	75% ownership by Metra	Health insurance and administration
services	Operational	Ad Medika was established on February 25, 2010. Ad Medika
processes online claim services between the hospitals and health insurance
companies.
PT Finnet Indonesia ( “ Finnet ” ), Jakarta	60% ownership by Metra	Banking data and communication	Operational	Finnet was established on October 31, 2005, as a provider
of IT infrastructure, applications and content for information systems and
financial transactions for the banking and financial services
industry.
PT Telkom Landmark Tower (“TLT”), Jakarta	55% ownership by Telkom Property	Service for property development and
management	Operational	Telkom Property established TLT with Yakes Telkom on
February 1, 2012.
Telekomunikasi Indonesia International Ltd., Hong Kong
( “ TII Hong Kong ” ), Hong Kong	100% ownership by TII	Telecommunication	Operational	TII Hong Kong was established in Hong Kong on December 8,
2010 a wholly owned subsidiary of TII. TII Hong Kong obtained Unified
Carrier License on March 1, 2011, Service Based Operator for MVNO on July
27, 2011 and License for Operating Money Service on July 18, 2012.
Currently, it provides wholesale voice, wholesale data and retail mobile
services. The MVNO service was provided under the brand Kartu As 2in1.
PT Metra -Net ( “ Metra-Net ” ), Jakarta	99.99% ownership by Metra	Multimedia portal service	Operational	Metra-Net was established on April 17, 2009 and focuses
on e-commerce (B2C) and portals.
Telekomunikasi Selular Finance Limited
( “ TSFL ” ), Republic of Mauritius	65 % ownership by Telkomsel	Finance	Still in liquidation process	TSFL was established on April 22, 2002 to raise funds for
the development of Telkomsel ’ s business through the issuance of
debenture stock, bonds, mortgages or any other securities.

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Companies	Percentage of Ownership Interest	Nature of Business	Operational Status	Description
Telekomunikasi Indonesia International ("TL") S.A . ( “ TII Timor Leste ” ), Timor Leste	100% ownership by TII	Telecommunication	Operational	TII Timor Leste was a subsidiary
of TII established on October 4, 2012. TII Tim o r Leste has obtained radio spectrum license and general
registration certificate. It provides cellular services with coverage all
over Timor Leste districts and broadband internet with 3G on 850 MHz
frequency, Corporate Solution, as well as Wholesale Voice and
Data .
PT Graha Yasa Selaras ( “ GYS ” ), Bandung	51% ownership by Telkom Property	Tourism service	O perational	Telkom Property established GYS with Yakes Telkom on
April 27, 2012 to focus on hospitality services.
PT Metra Digital Media ( “ MDM ” ), Jakarta	99.99 % ownership by Metra	Telecommunication i nformation s ervices	Operational	MDM was established on January 2 8, 2013 and focuses on digital
advertising services.
PT Pojok Celebes Mandiri ( “ Pointer ” ), Jakarta	51% ownership by Metra	Travel agency/bureau	Operational	Pointer was established on August 30, 2013 and provides
travel booking and purchase service.
PT Satelit Multimedia Indonesia ( “ SMI ” ), Jakarta	99.99% ownership by Metra	Trading and services in telecommunication network,
satellite, and multimedia equipment	Operational	SMI was established on April 17 , 2013 and focuses on commerce and providing network
services, telecommunication, satellite and multimedia
services.
PT Metra Media ( “ MM ” ), Jakarta	99.83% ownership by Metra	Trading, supplier, construction, advertising and
other services	Operational	MM established on January 29 , 2013 and focuses on trading, supplier, construction,
advertising and other services.
Telekomunikasi Indonesia International Pty Ltd.,
( “ TII Australia ” ), Australia	100% ownership by TII	Telecommunication and IT-based
services	Operational	TII Australia wholly owned subsidiary of TII. Established
on February 6, 2013, it engages in Business Process Outsourcing (BPO), Information
Technology Outsourcing (ITO), and IT Services.
PT Metra TV ( “ Metra TV ” ), Jakarta	99 . 83% ownership by
Metra	Subscription broadcasting services	Operational	Metra
TV was established on January 29 , 2013
and provides pay TV services.
Telekomunikasi Indonesia International (USA) Inc.,
USA	100% ownership by TII	Telecommunication	Dormant	Telekomunikasi Indonesia International (USA) Inc. is a
wholly owned subsidiary by TII. It was established on December 11,
2013.

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Associated Companies

Companies	Percentage of Ownership Interest	Nature of Business	Operational Status
PT Integrasi Logistik Cipta Solusi
(“ILCS”) , Jakarta	49% ownership by Metra	e-trade logistic services and other related
services	Operational	Metra established ILCS with Pelindo II on September
2 6 , 2012.
PT Citra Sari Makmur ( “ CSM ” ), Jakarta	25%	Very Small Aperture Terminal (“VSAT”), network
application services and consulting services on telecommunications
technology and related facilities	Operational	CSM was established on February 14, 1986.
PT Pasifik Satelit Nusantara ( “ PSN ” ), Jakarta	22.38%	Satellite transponder leasing and satellite-based
communication services in the Asia Pacific region	Operational	Established on July 2, 1991, PSN held its initial public
offering of its ordinary shares in June 1996, listing them on the National
Association of Securities Dealers Automated Quotations ( “ NASDAQ ” ), but was delisted on November 6,
2001 in connection with its failure to meet certain NASDAQ National Market
Listing conditions.
PT Indonusa Telemedia (“Indonusa” or “TelkomVision”),
Jakarta	20% (including through 0.46% ownership by
Metra)	Pay television and content services	Operational	Established on May 7, 1997, TelkomVision is a multimedia
(pay TV, internet service) service provider. Since 2007, TelkomVision was
the first Pay TV operator in Indonesia to launch DTH Prepaid (Prepaid
Satellite Pay TV), under the “TelkomVision” brand. On October 8, 2013,
company sold Indonusa 1.036.059.483 shares (equivalent with 80% of its
ownership in Indonusa) to PT Trans Corpora and PT Trans Media
Corpora.

Joint Venture Companies

Company	Percentage of Ownership Interest	Nature of Business	Operational Status	Description
PT Melon Indonesia ( “ Melon ” ), Jakarta	51% ownership by Metra	Digital Content Exchange Hub
services (“DCEH”)	Operational	Melon is a joint venture company between Metra and SK
Telecom Korea. Melon was established on August 16, 2010.
Telekomunikasi Indonesia International Malaysia Sdn. Bhd., Kuala
Lumpur	49% Ownership by TII	Telecommunication	Operational	Telekomunikasi Indonesia International Malaysia
Sdn. Bhd. is a Joint Venture Company with Compudyne. Sdn. Bhd. established
on July 10 , 2013,
obtaining Applications Service Provider Class (ASP(C)) on July 23, 2013
and Network Service Provider (NSP) on August 23, 2013. Engaging in the
business of providing a full range of telecommunication services and other
business related to telecommunications systems, data processing, systems
and information systems in Malaysia.

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Telkom’s Subsidiaries Chart

Information on Our Organizational Structure

We have adopted a holding company approach to corporate management, which we believe should provide productive flexibility for all our business entities in accordance with the needs of the respective units .

In implementing this holding company approach :

The role of the corporate office is focused on the Corporate Level Strategy function (i.e. directing overall strategy, portfolio strategy and parenting strategy).
We tailor parenting style to the particular characteristic s of the business entity.
We seek to e mpower each business entity in line with their respective particular chara c teristics.

Accordingly, we have initiated a number of changes in 2013 involving re organization of division s as well as division of duties and authority of the Board of Directors, as follows:

We realigned the division which was formerly under the Director of Enterprise & Wholesale to the Director of Enterprise & Business Service, who focuses on developing the enterprise and small medium enterprise business segments.
We realigned the division which was formerly under the Director of Compliance & Risk Management to the Director of Wholesale & International Service, who focuses on developing the wholesale business segment. We also t ransfer red the duties and authority over the compliance, legal an d risk management functions to the Head of Compliance, Risk Management & General Affairs.
We realigned the division which was formerly under the Director of IT, Solution & Strategic Portfolio (“ITSSP”) to the Director of Innovation & Strategic Portfolio, who focuses on business innovation and business portfolio development.
We realigned the division which was formerly under the Director of NWS to the Director of Network, IT & Solution, who focuses on management and utilization of infrastructure, IT and service operation & management, to provide support for the development of established businesses.

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We realigned the division which was formerly under the Director of Human Capital & General Affair to the Director of Human Capital Management, who focuses on managing human capital. We also t ransfer red of duties and authority over the supply management function to the Head of Compliance, Risk Management & General Affairs.

In addition, we introduced Board of Executive s to improve our parenting mechanism . T he Board’s membership comprises all members of Telkom’s Board of Directors and a number of Chief of Business. The Chief s of Business title is reserved for senior business experts, who are our senior executives and horizontally positioned equivalent to our Directors . Our Chief of Business is meant to serve in formulating corporate level strategy decisions, fostering a harmonious relationship between subsidiaries and the parent.

Telkom’s Organizational Structure

Directorate	Function and Authority
NITS Directorate	Focuses on managing the Infrastructure Strategy &
Governance, IT Strategy & Governance, and Solution, as well as
managing the IT utilization and service operation & management , in order to support the capitalization of established businesses and also controlling infrastructure operations
through the Network of Broadband, Information System Center Division,
Wireless Broadband Division and Broadband Division.
ISP
Directorate	Focuses on managing the functions of c orporate strategic planning, strategic business development,
innovation strategy & s y nergy, as well as the operational management of the Solution
Convergence Division and Innovation & Des Center units.
CONS Directorate	Focuses on managing the c onsumer business segment and the operational management of the
Consumer Services Division .
EBIS Directorate	Focuses on managing the enterprise and small medium enterprise
business segment as well as managing the Enterprise Services Division and
Business Services Division.
WINS Directorate	Focuses on managing the wholesale and international business
segment, and the operational management of the Wholesale Services
Division.
HCM Directorate	Focuses on managing the company’s human resources and the
operational management of human resources centrally through the Human
Capital Center unit , as well as controlling operations of the Telkom Corporate
University Center, Assessment Center Indonesia, and Community Development
Center units .
FIN Directorate	Focuses on the company’s financial management, and managing
financial operations centrally through the Finance, Billing &
Collection Center unit.

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D. PROPERTY AND EQUIPMENT

Our property and equipment is used for telecommunication operations, which mainly consist of transmission installation and equipment, cable network and switching equipment. A description of these is contained elsewhere in Note 12 to our Consolidated Financial Statements.

Except for ownership rights granted to individuals in Indonesia, reversionary rights to land rests with the Republic of Indonesia, pursuant to Agrarian Law No.5/1960. Land title is designated through land rights, including Right to Build ( Hak Guna Bangunan or HGB) and Right of Use ( Hak Guna Usaha or HGU). Land title holders enjoy full use of the land for a specified period, subject to renewal and extensions. In most instances, land rights are freely tradable and may be pledged as security under loan agreements.

We own several pieces of land located throughout Indonesia with right to build and use for a period of 10-45 years, which will expire between 201 4 and 2052. We believe that there will be no difficulty in obtaining the extension of the land rights when they expire.

As of December 31, 2013 , we, including our subsidiaries, had land use rights to 2,995 properties. We hold registered rights to build and use for most of our properties. Pursuant to Government Regulation No.40/1996, the maximum initial period for the right to build is 3 5 years, renewable for an additional 2 5 years. We are not aware of any environmental issues that could affect the utilization of our propert y and equipment . All assets owned by our Company ha s been pledged as collateral for bonds. Certain property and equipment of our subsidiaries with gross carrying value amounting to Rp6,214 billion as of December 31, 2013 have been pledged as collateral for lending agreements. See Notes 18 and 19 of our Consolidated Financial Statements.

Insurance

Our property and equipment, excluding land, are insured against risks arising from force majeure, fire, theft, and other specified risks. Our assets are covered under property all risk insurance policies on a sum insured basis and a first loss basis scheme, which include business recovery with the automatic reinstatement of loss c l ause. Our T elkom -1 and T elkom -2 satellites are insured separately. Our management believes that our insurance coverage is adequate to cover potential losses from the insured risks.

ITEM 4A. UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following discussion and analysis should be read in conjunction with our Consolidated Financial Statements for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013 included elsewhere in this Form 20-F. These Consolidated Financial Statements were prepared in accordance with IFRS as issued by the IASB.

As discussed in Note 2aa to Consolidated Financial Statements, we changed the method of accounting for defined benefit plans on a retrospective basis as a result of adoption of IAS 19 Employee Benefits (Revised 2011), and the 2011 and 2012 Consolidated Financial Statements have been restated.

A. OPERATING RESULTS

We are the principal provider of local, domestic and international telecommunications services in Indonesia, as well as the leading provider of mobile cellular services in Indonesia through our majority-owned subsidiary, Telkomsel. Our objective is to become a leading TIMES player in the region. As of December 31, 2013, we had approximately 175.5 million total subscribers in service, comprising 131.5 million cellular subscribers through Telkomsel, 9.4 million subscribers on our fixed wireline network, 6.8 million subscribers on our fixed wireless network and 27.8 million broadband subscribers. We also provide a wide range of other communication services, including telephone network interconnection services, multimedia, data and internet communication-related services, satellite transponder leasing, leased line, intelligent network and related services, cable television and VoIP services. We also operate multimedia businesses such as providing content and applications. We intend to continue to cope with market and industry challenges that may arise from time to time by leveraging our customer base, network quality, brand name and strategic execution capabilities.

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Growth of the Indonesian economy slowed in 2013 as growth in gross domestic product decreased from an average of 6.3% in the period from 2010-2012 to 5.8% in 2013. Inflation accelerated from an average of 4,5% in the period from 2009-2012 to 8.4% in 2013 (source: Center of Statistic Bureau) and the R upiah depreciated from an average of Rp9,282 in the period from 2009-2012 to Rp12,189 as of December 31, 2013 (source: Bank Indonesia). Though we believe that the exposure of our Company and our subsidiaries to foreign exchange rates is not material, we are exposed to foreign exchange risk on our sales, purchases and borrowings that are primarily denominated in U S Dollar s and Japanese Yen .

See Item 11 “Quantitative and Qualitative Disclosure about Market Risk – Exchange Rate Risk”.

The growth in our revenues in 2013 compare to 2012 was largely driven by increases in revenues from data, internet and information technology services, which increased by 14.8% driven largely by increased mobile phone data usage and mobile broadband subsc ribers , as well as by cellular revenues which increased by 4.6%.

Our expenses also increased in 2013 as compared to 2012. This increase was mainly driven by operation, maintenance and telecommunication services expenses, which increased primarily as a result of an increase in expenses relation to expand our network capacities to better serve our customers especially for internet and data service.

Principal Factors Affecting our Financial Condition and Results of Operations

Increase in Cellular Telephone Revenues with Increase in Subscribers and Stabilizing ARPU

Our cellular telephone revenues increased by 4.6% in 2013 compare to 2012 primarily due to an increase in the number of our cellular subscribers by 5.1% in 2013. Our revenues from cellular phone services (e.g. usage charges, monthly subscription charges and features) accounted for 38.7% of our consolidated revenues in 2013, compared to 39.8% in 2012.

In Indonesia mobile phones have become the primary tool for telecommunication, both for voice calls as well as in terms of internet usage. Over 50% of our combined voice and data cellular revenues in 2013 were derived from voice services, but the growing popularity of smartphones, has contributed to the growth of our data revenues in recent years. We believe that competition in voice tariffs has begun to stabilize, while the increase in data revenue has contributed to a stabilization and slight increase in our ARPU in 2013. Our average monthly ARPU increased slightly from approximately Rp37,000 in 2012 to approximately Rp37,500 in 2013.

We believe that while the competition has become more rational in Indonesia, we still consider it as a major risk to our businesses.

See Item 3 “Key Information – Risk Factors – Risks Related to Our Business – Competition Risks Related to Our Cellular Business (Telkomsel)”.

Increase in Data, Internet and Information Technology Services Revenues

Data, internet and information technology services revenues accounted for 38.2% of our consolidated revenues in 2013, compared to 35. 9 % in 2012. Revenues from our data, internet and information technology services increased by 14.8% in 2013 as compare to 2012. The increase in data, internet and information technology services revenues in 2013 was primarily due to a 23.7% increase in revenues from internet, data communication and information technology services, largely driven by increased mobile phone data usage and mobile broadband subscribers. As part of our transformation into a TIMES provider, and our corporate objective of growing our new wave businesses, we seek to continue to increase such revenues.

Decrease in Fixed Lines Telephone Revenues

Our fixed lines telephone revenues decreased by 9.0% from Rp10,662 billion in 2012 to Rp9,701 billion in 2013 as a result of an 8.3% decrease in fixed wireline revenues and an 14.3% decrease in fixed wireless revenues. We believe that fixed lines telephone revenues have been declining due to the increased usage and more competitive tariffs of mobile cellular services and increased penetration of cellular subscribers in Indonesia. Cellular services provide increased convenience, and in certain cases where subscribers call other subscribers using the same provider’s network, tariffs can be lower than fixed wireline calls that are made to subscribers of another provider. We expect that the trend of declining fixed lines telephone revenues will continue.

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| TELKOM'S CONSOLIDATED COMPREHENSIVE INCOME |
| --- |
| The following
table sets out our Consolidated Comprehensive
Income, for 201 1 through
201 3 . Each item is expressed as a percentage of total revenues or
expenses. |

| | Years Ended
December 31, — 2011
(Restated) | | 2012
(Restated) | | 2013 | | 2013 |
| --- | --- | --- | --- | --- | --- | --- | --- |
| | (Rp
billion) | % | (Rp
billion) | % | (Rp
billion) | % | (US$
million) |
| Revenues | | | | | | | |
| Telephone | | | | | | | |
| Cellular | | | | | | | |
| Usage charges | 27,189 | 38.2 | 29,477 | 38.2 | 30,722 | 37.0 | 2,524 |
| Monthly subscription charges | 569 | 0.8 | 696 | 0.9 | 730 | 0.9 | 60 |
| Features | 838 | 1.2 | 558 | 0.7 | 686 | 0.8 | 56 |
| Connection fee charges | 2 | 0 .0 | - | 0.0 | - | 0.0 | - |
| Total | 28,598 | 40.1 | 30,731 | 39.8 | 32,138 | 38.7 | 2,641 |
| Fixed Lines | | | | | | | |
| Usage charges | 8,213 | 11.5 | 7,323 | 9.5 | 6,453 | 7.8 | 530 |
| Monthly subscription
charges | 3,004 | 4.2 | 2,805 | 3.6 | 2,682 | 3.2 | 220 |
| Call center | 199 | 0.3 | 228 | 0.3 | 324 | 0.4 | 27 |
| Installation charges | 135 | 0.2 | 112 | 0.1 | 12 | 0.0 | 1 |
| Others | 68 | 0.1 | 194 | 0.3 | 230 | 0.3 | 19 |
| Total | 11,619 | 16.3 | 10,662 | 13.8 | 9,701 | 11.7 | 797 |
| Total Telephone | 40,217 | 56.5 | 41,393 | 53.7 | 41,839 | 50.4 | 3,438 |
| Data, Internet
and Information Technology Services | | | | | | | |
| Internet, data communication and
information technology services | 10,548 | 14.8 | 14,857 | 19.3 | 18,373 | 22.1 | 1,510 |
| SMS | 13,093 | 18.4 | 12,631 | 16.4 | 13,134 | 15.8 | 1,079 |
| VoIP | 245 | 0.3 | 81 | 0.1 | 119 | 0.1 | 10 |
| e-Business | 38 | 0.1 | 55 | 0.1 | 83 | 0.1 | 7 |
| Total Data,
Internet and Information Technology Services | 23,924 | 33.6 | 27,624 | 35.8 | 31,709 | 38.2 | 2,606 |
| Interconnection | 3,509 | 4.9 | 4,273 | 5.5 | 4,843 | 5.8 | 398 |
| Network | 1,301 | 1.8 | 1,208 | 1.6 | 1,253 | 1.5 | 103 |
| Other
Telecommunications Services | 2,287 | 3.2 | 2,629 | 3.4 | 3,323 | 4.0 | 273 |
| Total
Revenues | 71,238 | 100.0 | 77,127 | 100.0 | 82,967 | 100.0 | 6,817 |
| Expenses | | | | | | | |
| Operations,
Maintenance and Telecommunication Services Expenses | | | | | | | |
| Operations and
maintenance | 9,184 | 18.4 | 9,012 | 16.6 | 10,667 | 18.4 | 876 |
| Radio frequency
usage charges | 2,846 | 5.7 | 3,002 | 5.5 | 3,098 | 5.4 | 255 |
| Concession fees
and USO charges | 1,235 | 2 .5 | 1,445 | 2.7 | 1,595 | 2.8 | 131 |
| Electricity, gas
and water | 836 | 1.7 | 879 | 1.6 | 1,063 | 1.8 | 87 |
| Cost of phone,
set top boxes, SIM and RUIM cards | 967 | 1.9 | 687 | 1.3 | 752 | 1.3 | 62 |
| Cost of IT
services | 144 | 0.3 | 222 | 0.4 | 677 | 1.2 | 56 |
| Leased lines and
CPE | 406 | 0.8 | 407 | 0.8 | 440 | 0.8 | 36 |
| Vehicles rental
and supporting facilities | 291 | 0.6 | 293 | 0.5 | 439 | 0.8 | 36 |
| Insurance | 431 | 0.9 | 671 | 1.2 | 374 | 0.6 | 31 |
| Project
management | 46 | 0 .1 | 102 | 0.2 | 138 | 0.2 | 11 |
| Traveling
expenses | 54 | 0.1 | 57 | 0.1 | 53 | 0.1 | 4 |
| Others | 13 | 0.0 | 19 | 0.0 | 36 | 0.1 | 3 |
| Total Operations, Maintenance and Telecommunication Services
Expenses | 16,453 | 33.0 | 16,796 | 31.0 | 19,332 | 33.4 | 1,588 |
| Depreciation and
Amortization | 14,823 | 29.7 | 14,474 | 26.7 | 15,805 | 27.3 | 1,299 |
| Personnel
Expenses | | | | | | | |
| Salaries and related benefits | 3,001 | 6.0 | 3,257 | 6.0 | 3,553 | 6.1 | 292 |
| Vacation pay, incentives and other
benefits | 2,814 | 5.6 | 3,400 | 6.3 | 3,252 | 5.6 | 267 |
| Employees’ income tax | 1,043 | 2.1 | 1,022 | 1.9 | 1,160 | 2.0 | 95 |
| Pension benefit cost | 438 | 0.9 | 831 | 1.5 | 988 | 1.7 | 81 |
| Post-employment health care benefit
cost | 158 | 0.3 | 246 | 0.5 | 382 | 0.7 | 31 |
| Housing | 197 | 0.4 | 200 | 0.4 | 220 | 0.4 | 18 |
| Insurance | 70 | 0.1 | 83 | 0.2 | 92 | 0.2 | 8 |
| Other post-employment benefit cost | 46 | 0.1 | 42 | 0.1 | 41 | 0.1 | 3 |
| LSA expense | 96 | 0.2 | 121 | 0.2 | 19 | 0.0 | 2 |
| Other employee benefit s cost | 24 | 0.0 | 35 | 0.1 | 15 | 0.0 | 1 |

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| | Years Ended
December 31, | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | 2011
(Restated) | | | 2012
(Restated) | | | 2013 | | | 2013 | |
| | (Rp
billion) | | % | (Rp
billion) | | % | (Rp
billion) | | % | (US$
million) | |
| Early retirement program | 517 | | 1.0 | 699 | | 1.3 | - | | - | - | |
| Others | 20 | | 0.0 | 24 | | 0.0 | 107 | | 0.2 | 9 | |
| Total Personnel Expenses | 8,424 | | 16.9 | 9,960 | | 18.4 | 9,829 | | 17.0 | 808 | |
| Interconnection
Expenses | 3,555 | | 7.1 | 4,667 | | 8.6 | 4,927 | | 8.5 | 405 | |
| Marketing
Expenses | 3,278 | | 6.6 | 3,094 | | 5.7 | 3,044 | | 5.3 | 250 | |
| General and
Administrative Expenses | 2,935 | | 5.9 | 3,036 | | 5.6 | 4,155 | | 7.2 | 341 | |
| Loss on foreign
exchange - net | 210 | | 0.4 | 189 | | 0.3 | 249 | | 0.4 | 20 | |
| Other
expenses | 192 | | 0.4 | 1,973 | | 3.6 | 480 | | 0.8 | 40 | |
| Total
Expenses (1) | 49,8 80 | | 100.0 | 54,20 0 | | 100.0 | 57, 850 | | 100.0 | 4,7 53 | |
| Other
income | 666 | | | 2,559 | | | 2,581 | | | 212 | |
| Operating
Profit | 22,034 | | | 25,497 | | | 27,727 | | | 2,278 | |
| Finance income | 620 | | | 596 | | | 836 | | | 69 | |
| Finance costs | (1,662 | ) | | (2,055 | ) | | (1,504 | ) | | (124) | |
| Share of loss of associated
companies | (10 | ) | 0.0 | (11 | ) | 0.0 | (29 | ) | 0.1 | (2 | ) |
| Profit before Income Tax | 20,982 | | | 24,027 | | | 27,030 | | | 2,221 | |
| Net Income Tax
Expense | (5,437 | ) | | (5,886 | ) | | (6,900 | ) | | (567 | ) |
| Profit for the Year | 15,545 | | | 18,141 | | | 20,130 | | | 1,654 | |
| Other
Comprehensive Income ( Expense s) - Net | (1,928 | ) | | (2,540 | ) | | 5,115 | | | 420 | |
| Net Comprehensive Income for the
Year | 13,617 | | | 15,601 | | | 25,245 | | | 2,074 | |
| Profit for the
year attributable to owners of the parent company | 11,043 | | | 12,621 | | | 14,046 | | | 1,154 | |
| Net
comprehensive income for the year attributable to owners of the parent
company | 9,183 | | | 10,056 | | | 19,018 | | | 1,56 2 | |
| Basic and
Diluted Earnings per Share (in full amount) | | | | | | | | | | | |
| Net income per
share | 112.73 | | | 131.45 | | | 145.77 | | | 0.01 | |
| Net income per
ADS (200 Series B shares per ADS) | 22,546.00 | | - | 26,290.80 | | - | 29,153.58 | | - | 2.40 | |

(1) Expenses are calculated as the sum of the following expenses: operation, maintenance and telecommunication services, depreciation and amortization, personnel, interconnection, marketing, general and administrative, loss (gain) on foreign exchange, share of loss of associated companies and other expenses.

Financial Overview

Year ended December 31, 2013 compared to year ended December 31, 2012

1. Revenues

Total revenues increased by Rp5,840 billion, or 7.6%, from Rp77,127 billion in 2012 to Rp82,967 billion in 2013. The increase in revenues in 2013 was primarily due to an increase in cellular telephone revenues and data, internet and information technology services revenues and partially offset by a decrease in revenue from fixed lines telephone.

a. Cellular Telephone Revenues

Cellular telephone revenues increased by Rp1,407 billion, or 4.6%, from Rp30,731 billion in 2012 to Rp32,138 billion in 2013 primarily due to increase in usage charge as a result of a 5.1 % increase in our cellular subscriber s.

Usage charges increased by Rp1,245 billion, or 4.2%, from Rp29,477 billion in 2012 to Rp30,722 billion in 2013 due to an increase in the number of both our prepaid and postpaid subscriber s , and due to an increase in our long distance usage. Revenues from features increased by Rp128 billion or 2 2 . 9 %, from Rp558 billion in 2012 to Rp686 billion in 2013 . M onthly subscription charges increased by Rp34 billion, or 4.9%, from Rp696 billion in 2012 to Rp730 billion in 2013 primarily due to 15.8% increase in the number of our postpaid subscriber s .

Our total cellular telephone revenues accounted for 38.7% of our consolidated revenues in 2013, compared to 39.8% in 2012 .

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b. Fixed Lines Telephone Revenues

Fixed lines telephone revenues decreased by Rp96 1 billion, or 9.0%, from Rp10,662 billion in 2012 to Rp9,701 billion in 2013. The decrease in fixed lines telephone revenues was primarily due to a decrease in fixed wireline and fixed wireless revenues of 8.3% and 14.3% , respectively . The decrease in fixed wireline and fixed wireless revenues was primarily due to a decrease in usage charges of Rp870 billion, or 11.9%, and a decrease in monthly subscription charges revenues of Rp123 billion, or 4.4% , which were primarily caused by a decrease in local and domestic long distance usage caused by the trend of shifting usage from fixed lines telephone to cellular telephone services.

c. Data, Internet and Information Technology Services Revenues

Our data, internet and information technology service revenues accounted for 38.2% of our consolidated revenues in 2013, compared to 35. 9 % in 2012 .

Data, internet and information technology services revenues increased by Rp4,085 billion, or 14.8%, from Rp27,624 billion in 2012 to Rp31,709 billion in 2013. This increase was primarily due to an increase in revenues from internet, data communication and information technology services by Rp3,516 billion, or 23.7%, which was driven by the following factors:

a 3 8 . 7 % increase in cellular data communication revenues from Rp7, 491 billion in 2012 to Rp10,393 billion in 2013, which accounted for 32 . 8 % of data, internet and information technology revenues in 2013, resulting from a 56.5 % increase in Flash mobile broadband subscribers, from 11.0 million subscribers in 2012 to 17.3 million subscribers in 2013 ,
a 6. 3 % increase in Speedy monthly subscription revenues from Rp4,150 billion in 2012 to Rp4,413 billion in 2013, which accounted for 13 . 9 % of data, internet and information technology revenues in 2013, resulting from a 28.7% increase in Speedy subscribers , from 2.3 million subscribers in 2012 to 3 .0 million subscribers in 2013,
a 47.4% increase in data communication Ethernet revenue from Rp338 billion in 2012 to Rp49 8 billion in 2013, which accounted for 1 . 6 % of data, internet and information technology revenues in 2013 due to a 39.4% increase in the volume of data which pass ed through Metro Ethernet of, from 240,315 Mbps in 2012 to 334,935 Mbps in 2013 , and
a 7.8% increase in data communication VPN revenue from Rp1,621 billion in to Rp1,748 billion in 2013, which ac c ounted for 5 .5% of data, intenet and information technology revenues in 2013 due to a 14.1% increase in the volume of data which pass ed through our VPN network, from 40,748 M bps in 2012 to 46,505 M bps in 2013.

SMS revenues increased by Rp503 billion, or 4.0%, from Rp12,631 billion in 2012 to Rp13,134 billion in 2013 due to a 25.2 % increase in our SMS volumes from 118.1 billion messages in 2012 to 147.9 billion messages in 2013. Effective June 1, 2012, in line with the cost-based interconnection regime for voice calls, the Government implemented cost-based interconnection for SMS. As Telkomsel historically had more incoming SMS than outgoing SMS, cost-based interconnection for SMS resulted in an overall benefit for Telkomsel.

d. Interconnection Revenues

Interconnection revenues comprise interconnection revenues from our fixed line network and interconnection revenues from Telkomsel’s mobile cellular network. Interconnection revenues include incoming international long-distance revenues from our IDD service (TIC-007).

Interconnection revenues increased by Rp570 billion, or 13.3%, from Rp4,273 billion in 2012 to Rp4,843 billion in 2013. This increase was primarily due to an increase in domestic interconnection and transit revenues of Rp353 billion, or 13.5%, an increase in cellular interconnection revenues of Rp335 billion, or 14.5%, and an increase of Rp21 7 billion, or 13. 1 % in international interconnection revenues, primarily resulting from our promotion rate offers for international calls and the increased number of incoming calls to mobile subscribers.

e. Network Revenues

Network revenues increased by Rp45 billion, or 3.7%, from Rp1,208 billion in 2012 to Rp1,253 billion in 2013 primarily due to an increase in our revenues from leased lines services of Rp37 billion, or 4.5%, from Rp824 billion in 2012 to Rp861 billion in 2013, primarily resulting from the increasing number of subscribers for our leased channel and satellite services by 2 7,078 e1 or 7.0% .

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f. Other Telecommunications Services

Revenues from other telecommunications services increased by Rp694 billion, or 26.4%, from Rp2,629 billion in 2012 to Rp3,323 billion in 2013. The increase was primarily due to an increase of Rp260 billion, or 64.8%, in lease revenue, an increase in revenues from USO compensation of Rp271 billion, or 114.3% , primarily due to an increase in USO projects to establish internet service centers in various provincial capital cities in 2013 and an increase of Rp151 billion, or 14.4%, in CPE and terminal revenue.

The increase was partly offset by a decrease in revenues from pay TV of Rp131 billion, or 32.3% primarily due to the sale of our 80% ownership in Indonusa, which provides pay TV services in October 2013 .

g. Other Income

Other income increased by Rp22 billion, or 0.9%, from Rp2,559 billion in 2012 to Rp2,581 billion in 2013 primarily due to a Rp1,383 billion gain recognized on our sale of 80% of our ownership in PT Indonusa, and was partially offset by the lack of insurance compensation income from Telkom-3 satellite in 2013, compared to insurance compensation revenue of Rp1, 772 billion in 2012.

2. Expenses

Total expenses increased by Rp3, 650 billion, or 6. 7 %, from Rp54,20 0 billion in 2012 to Rp57, 850 billion in 2013. The increase in expenses was attributable primarily to increases in operations, maintenance and telecommunication services, depreciation and amortization and general and administrative expenses.

a. Operations, Maintenance and Telecommunications Services Expenses

Operations, maintenance and telecommunications services expenses increased by Rp2,536 billion, or 15.1%, from Rp16,796 billion in 2012 to Rp19,332 billion in 2013.

The increase in operations, maintenance and telecommunications services expenses was primarily attributable by the following:

An increase in operations and maintenance of Rp1,655 billion, or 18.4% , from Rp9,012 billion in 2012 to Rp10,667 billion in 2013, primarily due to an increase in expenses associated with increasing the capacity of receiver and transmission stations and Telkomsel’s broadband services.
Cost of IT services increased by Rp455 billion, or 205.0%, from Rp222 billion in 2012 to Rp677 billion in 2013. This increase was primarily due to expenses relating to an upgrade in Metra's IT system as well as software license and outsourcing services expenses.
Electricity, gas and water expenses increased by Rp184 billion, or 20.9%, from Rp879 billion in 2012 to Rp1,063 billion in 2013, primarily due to an increase in electricity expenses resulting from the increasing number of our BTS, the expansion of the network for Telkomsel’s broadband services and increase d electricity tariffs.

The increases was partially offset by a decreased in insurance expenses by Rp297 billion, or 44.3%, from Rp671 billion in 2012 to Rp374 billion in 2013 primarily due to the lack of satellite insurance payment for Telkom-3 in 2013 , which we paid in 2012 .

Our total operations, maintenance and telecommunications services expenses accounted for 33.4% of our consolidated expenses in 2013, compared to 31.0% in 2012

b. Depreciation and Amortization

Depreciation and amortization increased by Rp1,33 1 billion, or 9.2%, from Rp14,474 billion in 2012 to Rp15,805 billion in 2013, primarily due to an increase in depreciation expenses of Rp 1, 235 billion, or 8 . 9 % from Rp13, 898 billion in 2012 to Rp 15,133 billion in 2013. The increase in depreciation expenses was primarily due to the increasing number of our BTS, which impacts our depreciation expenses and impairment of assets in our fixed wireless business o f Rp596 billion.

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The impairment indicators on our fixed wireless CGU continued to exist in 201 3 mainly due to increased competition in the fixed wireless market and that has resulted in lower average tariffs, declining active customers and declining ARPU and we conducted an impairment test to determine if further impairment was necessary. See Item 3 “Key Information – Risk Factors – Risks Related to Our Business – Risks Related to Our Fixed Telecommunication Business”. We assessed the recoverable value of the assets in the CGU and determined that assets for the fixed wireless CGU were impaired by Rp596 billion at December 31, 201 3. The recoverable amount was determined based on value in use ("VIU") calculations. These calculations used pre-tax cash flow projections approved by management covering a five-year period and with cash flows beyond the five-year period extrapolated using a perpetuity growth method. The cash flow projections reflect management’s expectations of revenue, Earnings Before Interest, Tax, Depreciation and Amortization (“EBITDA”) growth and operating cash flows on the basis that the fixed wireless CGU generates positive net cash flows starting from 2014. Management’s cash flow projection also incorporates management’s reasonable expectations for developments in macro economic conditions and market expectations for the Indonesian telecommunications industry. As of December 31, 2013, management applied a pre-tax discount rate of 13.5% derived from the Company’s post-tax weighted average cost of capital and benchmarked to externally available data. As of December 31, 2013, the perpetuity growth rate used is 0% and assuming that subscriber numbers and ARPU may continue to decrease after five years.

A 1% increase in the discount rate used would result in an increase in impairment loss to become approximately Rp703 billion in 2013. However, the recoverable amount of the fixed wireless CGU is most sensitive to whether management will be able to implement its plans, including the cost efficiency plan, such that it generates positive cash flows and returns to profitability as projected. If the performance of the fixed wireless CGU continues to decline or if management’s initiatives are not performing as expected in the next financial year, analysis will be required to assess whether there will be further impairment in the future.

c. Personnel Expenses

Personnel expenses decreased by Rp131 billion, or 1.3%, from Rp9,960 billion in 2012 to Rp9,829 billion in 2013 due to no early retirement programs being offered in 2013 which led to a decrease in early retirement program expenses by Rp699 billion or 100.0% in 2013. This decrease was partially offset by an increase in salaries and related benefits by Rp296 billion or 9.1% from Rp3,257 billion in 2012 to Rp3,553 billion in 2013 due to an increase in basic salary and benefits, an increase in pension benefit cost of Rp157 billion , or 18.9%, and an increase in employee’ income tax by Rp138 billion, or 13.5% due to an increase in salary and related benefits.

d. Interconnection Expenses

Interconnection expenses increased by Rp260 billion, or 5.6%, from Rp4,667 billion in 2012 to Rp4,927 billion in 2013 primarily due to an increase of Rp256 billion, or 7.4%, in domestic interconnection and transit interconnection expenses, primarily driven by the increase of 13.5% in domestic interconnection and transit revenues.

e. Marketing Expenses

Marketing expenses decreased by Rp50 billion, or 1.6%, from Rp3,094 billion in 2012 to Rp3,044 billion in 2013 primarily due to a decrease in advertising and promotion expenses by Rp93 billion, or 3.7%, primarily due to our the selective use of media for promotion and increasing group synergy in 2013.

f. General and Administrative Expenses

General and administrative expenses increased by Rp1,119 billion, or 36.9%, from Rp3,036 billion in 2012 to Rp4,155 billion in 2013 due to an increase in provision for impairment of receivables by Rp674 billion, or 73.7%, from Rp915 billion in 2012 to Rp1,589 billion in 2013. The increased was also due to a 59.1% increase in training, education and recruitment expenses, which increased by Rp153 billion primarily due to cost related to our global talent program to provide our employees with international experience as part of our international expansion and a 28.1 % increase in general expenses which increased by Rp 148 billion primarily due to an increase in director and commissioner remuneration .

This increase was partially offset by a 34. 1 % decrease in social contribution expenses, which decreased by Rp44 billion in 2013 .

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g. Loss on Foreign Exchange - net

Loss on foreign exchange - net increased by Rp60 billion , or 31.7% , from Rp189 billion in 2012 to Rp249 billion in 2013. The increase was primarily due to the appreciation of the US Dollar against the Rupiah by 26.3% during 2013.

h. Other expenses

Other expenses decreased by Rp1,493 billion, or 75.7% , from Rp1,973 billion in 2012 to Rp480 billion in 2013. The decrease primarily related to derecognition in 2012 of the carrying value of the Telkom-3 Satellite, which was built and launched, but failed to reach usable orbit, which amounted to Rp1,606 billion.

3. Operating Profit and Operating Profit Margin

As a result of the foregoing, operating profit increased by Rp2,230 billion, or 8.7%, from Rp25,497 billion in 2012 to Rp27,727 billion in 2013. Operating profit margin increased from 33.1% in 2012 to 33.4% in 2013.

4. Profit before Income Tax and Pre-Tax Margin

As a result of the foregoing, profit before income tax increased by Rp3,00 3 billion, or 12.5%, from Rp24,027 billion in 2012 to Rp27,030 billion in 2013. Pre-tax margin slightly increased from 31.2% in 2012 to 32.6% in 2013.

5. Net Income Tax Expense

Net i ncome tax expense increased by Rp1,014 billion, or 17.2%, from Rp5,886 billion in 2012 to Rp6,900 billion in 2013, following the increase in profit before income tax.

6. Other Comprehensive Income (Expenses) - Net

Other comprehensive income increased by Rp 7,655 billion, or 3 01 . 4 %, from expenses by Rp2 ,540 billion in 2012 to income by Rp 5,115 billion in 2013 due to increase in defined benefit plan actuarial gain by Rp7,565, or 294.8%, from losses in 2012 by Rp2,566 billion to gain by Rp4,999 billion in 2013.

7. Net Comprehensive Income for the Year

Net c omprehensive income for the year increased by Rp9,644 billion, or 61.8%, from Rp15,601 billion in 2012 to Rp25,245 billion in 2013.

8. Profit for the Year Attributable to Owners of the Parent Company

Profit for the year attributable to owners of the parent company increased by Rp1,425 billion, or 11.3%, from Rp12,621 billion in 2012 to Rp14,046 billion in 2013.

9. Profit for the Year Attributable to Non-controlling Interest

Profit for the year attributable to non-controlling interest increased by Rp564 billion, or 10.2%, from Rp5,520 billion in 2012 to Rp6,084 billion in 2013.

10. Net Income per Share

Net income per share increased by Rp14 .32 , or 10.9%, from Rp131.45 in 2012 to Rp145.77 in 2013.

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

1. Revenues

Total revenues increased by Rp5,889 billion, or 8.3%, from Rp71,238 billion in 2011 to Rp77,127 billion in 2012. The increase in revenues in 2012 was primarily due to the increase in revenues from cellular telephone, data, internet and information technology services, interconnection and other telecommunications services, partly offset by decreases in revenues from fixed lines telephone and network.

a. Cellular Telephone Revenues

Cellular telephone revenues increased by Rp2,133 billion, or 7.5%, from Rp28,598 billion in 2011 to Rp30,731 billion in 2012 primarily due to increases in usage and monthly subscription charges, partially offset by a decrease in revenues from features.

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Usage charges increased by Rp2,288 billion, or 8.4%, from Rp27,189 billion in 2011 to Rp29,477 billion in 2012 due to an increase in minutes of usage of 184.8 billion minutes, or 11.1% and a 16.9% increase in total subscribers. Monthly subscription charges increased by Rp127 billion, or 22.3%, from Rp569 billion in 2011 to Rp696 billion in 2012 due to increase in Flash and Blackberry subscribers of 93.1% with revenue growth of 21.5%. The increase was partly offset by a decrease in revenues from features, which decreased by Rp280 billion, or 33.4%, from Rp838 billion in 2011 to Rp558 billion in 2012 as a result of MoCI Regulation No. 01/PER/M.KOMINFO/01/2009 regarding the provision of premium messaging service and broadcasting short message to many receivers.

b. Fixed Lines Telephone Revenues

Fixed lines telephone revenues decreased by Rp957 billion, or 8.2%, from Rp11,619 billion in 2011 to Rp10,662 billion in 2012. The decrease in fixed lines telephone revenues was primarily due to a decrease in usage charges, of Rp890 billion, or 10.8%, from Rp8,213 billion in 2011 to Rp7,323 billion in 2012 which was primarily caused by a decrease in local and domestic long distance usage. Further, monthly subscription charges revenues also decreased by Rp199 billion, or 6.6% in 2012. The decrease in fixed lines telephone revenues was primarily due to shifting usage to cellular telephone services.

c. Data, Internet and Information Technology Services Revenues

Data, internet and information technology services revenues increased by Rp3,700 billion, or 15.5%, from Rp23,924 billion in 2011 to Rp27,624 billion in 2012. This increase was primarily due to an increase in revenues from internet, data communication and information technology services by Rp4,309 billion, or 40.9%, from Rp10,548 billion in 2011 to Rp14,857 billion in 2012, which was in turn largely driven by increases in cellular data communication revenues from increased mobile phone data usage and an increase in Flash mobile broadband subscribers of 99.5%, from 5.5 million subscribers in 2011 to 11.0 million subscribers in 2012. The increase in revenues from internet, data communication and information technology services was also due in part to an increase in Speedy subscribers of 30.9%, from 1.8 million subscribers in 2011 to 2.3 million subscribers in 2012, a 41.9% increase in data volumes through our VPN network, from 28,702 mbps in 2011 to 40,748 mbps in 2012, and a 70.8% increase in data volumes through our Metro Ethernet, from 140,733 mbps in 2011 to 240,315 mbps in 2012.

SMS volumes decreased by 47.8% from 226.4 billion messages in 2011 to 118.1 billion messages in 2012, while SMS revenues decreased by a smaller degree, by Rp462 billion, or 3.5%, from Rp13,093 billion in 2011 to Rp12,631 billion in 2012. The decrease in SMS volumes is in line with general increase in usage of internet-based messaging. Revenues declined by a smaller percentage primarily due to the implementation of cost-based interconnection for SMS on June 1, 2012. Prior to June 2012, SMS were sent and received among operators on a "Sender Keep All" basis. Effective June 1, 2012, in line with the cost-based interconnection regime for voice calls, the Government implemented cost-based interconnection for SMS. As Telkomsel historically had more incoming SMS than outgoing SMS, cost-based interconnection for SMS resulted in an overall benefit for Telkomsel’s SMS revenues.

d. Interconnection Revenues

Interconnection revenues comprised interconnection revenues from our fixed line network and interconnection revenues from Telkomsel’s mobile cellular network. Interconnection revenues included incoming international long-distance revenues from our IDD service (TIC-007).

Interconnection revenues increased by Rp764 billion, or 21.8%, from Rp3,509 billion in 2011 to Rp4,273 billion in 2012. This increase was triggered by an increase in domestic interconnection and transit revenues of Rp547 billion, or 26.4%, from Rp2,071 billion in 2011 to Rp2,618 billion in 2012 primarily due to an increase in cellular interconnection revenues of Rp538 billion, or 30.2%, and an increase of Rp217 billion, or 15.1% in international interconnection revenues, due to our promotion rate offers for international calls and the increased number of incoming calls to mobile subscribers.

Our total interconnection revenues accounted for 5.5% of our consolidated revenues for the year ended December 31, 2012, compared to 4.9% for the year ended December 31, 2011.

e. Network Revenues

Network revenues decreased by Rp93 billion, or 7.1%, from Rp1,301 billion in 2011 to Rp1,208 billion in 2012 mainly due to a decrease in our revenues from leased lines services by Rp87 billion, or 9.5%, from Rp911 billion in 2011 to Rp824 billion in 2012. This decrease was due to declining prices for leased lines.

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f. Other Telecommunications Services

Revenues from other telecommunications services increased by Rp342 billion, or 15.0%, from Rp2,287 billion in 2011 to Rp2,629 billion in 2012. The increase was primarily due to an increase of Rp307 billion, or 41.5% in CPE and terminal revenue, an increase of Rp182 billion, or 83.1% in lease revenue, and an increase of Rp146 billion, or 56.4% in revenues from pay TV. The increase in pay TV revenues was primarily due to a 19% increase in the number of subscribers from 1.0 million subscribers in 2011 to 1.2 million subscribers in 2012.

This increase above was partially offset by a decrease in revenues from USO compensation due to a decrease in USO projects to establish internet service centers in various provincial capital cities in 2012 and a decrease in our directory assistance revenues.

g. Other Income

Other income increased by Rp1,893 billion, or 284.2%, from Rp666 billion in 2011 to Rp2,559 billion in 2012. The increase primarily related to insurance compensation received from the insurer amounted to Rp1,772 billion with regards to the insured Telkom-3 Satellite that was built and launched, but failed to reach its orbit on August 7, 2012. See Note 1 2 to our Consolidated Financial Statements.

2. Expenses

Total expenses increased by Rp4,320 billion, or 8.7%, from Rp49,880 billion in 2011 to Rp54,200 billion in 2012. The increase in expenses was attributable primarily due to increases in personnel expenses, interconnection expenses and operations, maintenance and telecommunication services expenses. These expenses are further explained below:

a. Operations, Maintenance and Telecommunications Services Expenses

Operations, maintenance and telecommunications services expenses increased by Rp343 billion, or 2.1%, from Rp16,453 billion in 2011 to Rp16,796 billion in 2012.

The increase in operations, maintenance and telecommunications services expenses was attributable by the following:

Insurance expenses increased by Rp240 billion, or 55.7%, from Rp431 billion in 2011 to Rp671 billion in 2012 due to payment of Telkom-3 satellite insurance.
Concession fees and USO charges increased by Rp210 billion, or 17.0%, from Rp1,235 billion in 2011 to Rp1,445 billion in 2012. This increase was primarily due to the increase in our total revenues, which we use to calculate the amount spent on USO projects, by Rp5,889 billion, or 8.3%.
Radio frequency usage expenses increased by Rp156 billion, or 5.5%, from Rp2,846 billion in 2011 to Rp3,002 billion in 2012, due to an increase in bandwidth used for cellular.

The above increases were offset by the following:

A decrease in the cost of handset phone, set up top box, SIM and RUIM cards of Rp280 billion, or 29.0%, from Rp967 billion in 2011 to Rp687 billion in 2012. This decrease was caused by the use of less expensive packaging for SIM and RUIM cards.
A decrease in operations and maintenance of Rp172 billion, or 1.9%, from Rp9,184 billion in 2011 to Rp9,012 billion in 2012 due to a decrease in expenses associated with increasing the capacity of receiver and transmission stations and Telkomsel’s broadband services.

b. Depreciation and Amortization

Depreciation and amortization decreased by Rp349 billion, or 2.4%, from Rp14,823 billion in 2011 to Rp14,474 billion in 2012, primarily due to lower impairment charge on fixed wireless cash generating unit (“CGU”) by Rp316 billion, or 56.1% , from Rp563 billion in 2011 to Rp247 billion in 2012 and the net impact of the change in the estimated useful lives of towers and certain equipment by Rp101 billion, offset by increases in the depreciation of leased assets.

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The impairment indicators on our fixed wireless CGU continued to exist in 2012 mainly due to increased competition in the fixed wireless market and that has resulted in lower average tariffs, declining active customers and declining ARPU and we conducted an impairment test to determine if further impairment was necessary. See Item 3 “Key Information – Risk Factors – Risks Related to Our Business – Risks Related to Our Fixed Telecommunication Business”. We assessed the recoverable value of the assets in the CGU and determined that assets for the fixed wireless CGU were impaired amounting to Rp247 billion at December 31, 2012. The recoverable amount was determined based on value-in-use ("VIU") calculations. These calculations used pre-tax cash flow projections approved by management covering a five-year period and with cash flows beyond the five-year period extrapolated using a perpetuity growth rate. The cash flow projections reflect management’s expectations of revenue, EBITDA growth and operating cash flows on the basis that the fixed wireless CGU generates positive net cash flows from 2013. Management’s cash flow projection also incorporates management’s reasonable expectations for developments in macro-economic conditions and market expectations for the Indonesian telecommunications industry. As of December 31, 2012, management applied a pre-tax discount rate of 12.3% derived from the Company’s post-tax weighted average cost of capital and benchmarked to externally available data. The perpetuity growth rate used of 0.5% assumes that subscriber numbers may continue to increase after five years, while ARPU may decline such that the long-term growth will not be significant.

A 1% increase in the discount rate used would result in an increase in impairment loss of approximately Rp458 billion. However, the recoverable amount of the fixed wireless CGU is sensitive to whether management will be able to implement its plans, including the cost efficiency plan, such that it generates positive cash flows and returns to profitability as projected. If the performance of the fixed wireless CGU continues to decline or if management’s initiatives are not performing as expected in the next financial year, analysis will be required to assess whether there will be further impairment next year.

In 2012, the useful life of Telkomsel’s towers was changed from 10 years to 20 years for purposes of calculating depreciation to reflect the current expected usage and the physical wear and tear of the towers. The impact is a reduction of depreciation expense by Rp635 billion recognized in the 2012 consolidated statement of comprehensive income. Moreover, Telkomsel decided to replace certain equipment with net carrying amount of Rp1,037 billion, as part of a modernization program. Accordingly, Telkomsel changed the estimated useful lives of such equipment resulting in additional depreciation expense of Rp534 billion that was charged to the 2012 consolidated statement of comprehensive income. The impact of the changes in the estimated useful lives of the towers and equipment to the profit before income tax is fully discussed in Note 1 2 to our Consolidated Financial Statements.

c. Personnel Expenses

Personnel expenses increased by Rp1,536 billion, or 18.2%, from Rp8,424 billion in 2011 to Rp9,960 billion in 2012 due to an increase in vacation pay, incentives and other benefits by Rp586 billion, or 20.8%, from Rp2,814 billion in 2011 to Rp3,400 billion in 2012, an increase by Rp393 billion , or 89.7%, in pension benefit cost from Rp438 billion in 2011 to Rp831 billion in 2012, and an increase in salaries and related benefits by Rp256 billion , or 8.5% , from Rp3,001 billion in 2011 to Rp3,257 billion in 2012.

d. Interconnection Expenses

Interconnection expenses increased by Rp1,112 billion, or 31.3%, from Rp3,555 billion in 2011 to Rp4,667 billion in 2012 primarily due to an increase of 43.5% in domestic interconnection and transit interconnection expenses and an increase of 5.4% in international interconnection fees.

Our total interconnection expenses accounted for 8.7% of our consolidated expenses for the year ended December 31, 2012, compared to 7.1% for the year ended December 31, 2011.

e. Marketing Expenses

Marketing expenses decreased by Rp184 billion, or 5.6%, from Rp3,278 billion in 2011 to Rp3,094 billion in 2012 primarily due to a decrease in advertising and promotion expenses by Rp249 billion, or 9.1% , due to marketing cost optimization.

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f. General and Administrative Expenses

General and administrative expenses increased by Rp101 billion, or 3.4%, from Rp2,935 billion in 2011 to Rp3,036 billion in 2012 due in part to an increase in general expenses by Rp201 billion, or 61.7%, from Rp326 billion in 2011 to Rp527 billion in 2012. The increase in general expenses was primarily due to vehicle facility reimbursement expenses related to changes of our policy and directors’ severance pay due to the Board of Directors changes in 2012. Provision for impairment of receivables increased by Rp32 billion, or 3.6%, from Rp883 billion in 2011 to Rp915 billion in 2012. This increase primarily resulted from current year individual and collective assessment for impairment of receivables.

The increase in provision for impairment of receivables was partially offset by a decrease in social contribution expenses by Rp161 billion, or 55.5%, from Rp290 billion in 2011 to Rp129 billion in 2012. This decrease resulted from our shareholders’ decision to lower the amount of net profit spent on corporate social responsibility from 2.0% in 2011 to 1.0% in 2012.

Professional fees decreased by Rp48 billion, or 20.4%, while security and screening expense decreased by Rp35 billion, or 36.1%, from Rp97 billion in 2011 to Rp62 billion in 2012.

g. (Loss) gain on Foreign Exchange – net

Loss on foreign exchange - net decreased by Rp21 billion, or 10%, from Rp210 billion in 2011 to Rp189 billion in 2012. The decrease was primarily due to the depreciation of the Japanese Yen by 4.3% which was partially offset by the appreciation of the US Dollar by 6.3%.

h. Other expenses

Other expenses increased by Rp1,781 billion, or 927.6%, from Rp192 billion in 2011 to Rp1,973 billion in 2012. The increase primarily related to derecognition of the carrying value of the Telkom-3 Satellite, which was built and launched, but failed to reach usable orbit on August 7, 2012, amounting to Rp1,606 billion. See Note 1 2 to our Consolidated Financial Statements.

3. Operating Profit and Operating Profit Margin

As a result of the foregoing, operating profit increased by Rp3,463 billion, or 15.7%, from Rp22,034 billion in 2011 to Rp25,497 billion in 2012. Operating profit margin increased from 30.9% in 2011 to 33. 1 % in 2012.

4. Profit before Income Tax and Pre-Tax Margin

As a result of the foregoing, profit before income tax increased by Rp3,045 billion, or 14.5%, from Rp20,982 billion in 2011 to Rp24,027 billion in 2012. Pre-tax margin slightly increased from 29.5% in 2011 to 31. 2 % in 2012.

5. Net Income Tax Expense

Net i ncome tax expense increased by Rp449 billion, or 8.3%, from Rp5,437 billion in 2011 to Rp5,886 billion in 2012, following the increase in profit before income tax by 14.5%.

6. Other Comprehensive Income (Expenses) - Net

Other comprehensive expenses increased by Rp612 billion, or 31.7%, from Rp1,928 billion in 2011 to Rp2,540 billion in 2012 due to the increase in defined benefit plan actuarial losses by Rp627 billion, or 32.3%, from Rp1,939 billion in 2011 to Rp2,566 billion in 2012.

7. Net Comprehensive Income for the year

Net c omprehensive income for the year increased by Rp1,984 billion, or 14.6%, from Rp13,617 billion in 2011 to Rp15,601 billion in 2012.

8. Profit for the Year Attributable to Owners of the Parent Company

Profit for the year attributable to owners of the parent company increased by Rp1,578 billion, or 14.3%, from Rp11,043 billion in 2011 to Rp12,621 billion in 2012.

9. Profit for the Year Attributable to Non-controlling Interest

Profit for the year attributable to non-controlling interest increased by Rp1,018 billion, or 22.6%, from Rp4,502 billion in 2011 to Rp5,520 billion in 2012.

10. Net Income per Share

Net income per share increased by Rp18.8, or 16.7%, from Rp112.7 in 2011 to Rp131.5 in 2012.

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Segment Overview

We have four main operating segments, namely corporate, home, personal and others , described in more details as follows :

Our corporate segment provides telecommunications services including interconnection, leased lines, satellite, VSAT, contact center, broadband access, information technology services, data and internet services to companies and institutions.
Our home segment provides fixed wireline telecommunications services, pay TV, data and internet services to home consumers.
Our personal segment provides mobile cellular and fixed wireless telecommunications services including mobile access and information technology services, data and internet services to individual consumers.
Our others segment provides building management services.

Segment performance is evaluated based on operating profit or loss and is measured on the basis of Indonesian Financial Accounting Standards which differ significantly from IFRS primarily in the accounting for land rights and employee benefits.

For more detailed information regarding our segment information, see Note 3 6 to our Consolidated Financial Statements. Our segment results for the year 2012 and 2013 were as follows:

Telkom’s Results of Operations by Segment

| | Years Ended
December 31, | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | 2011 | | 2012 | | 2013 | | | |
| | (Rp
billion) | | (Rp
billion) | | (Rp
billion) | | US$
(million) | |
| Corporate | | | | | | | | |
| Revenues | | | | | | | | |
| External revenues | 14,279 | | 15,579 | | 17,041 | | 1,400 | |
| Inter-segment revenues | 5,289 | | 6,468 | | 8,549 | | 70 2 | |
| Total segment revenues | 19,568 | | 22,047 | | 25,590 | | 2,103 | |
| Total s egment e xpenses | (15,659 | ) | (17,976 | ) | (20,375 | ) | (1,674 | ) |
| Segment r esults | 3,909 | | 4,071 | | 5,215 | | 429 | |
| Depreciation and amortization | (1,890 | ) | (2,079 | ) | (2,423 | ) | (199 | ) |
| Provision for impairment of receivables | (255 | ) | (92 | ) | (994 | ) | (82 | ) |
| Home | | | | | | | | |
| Revenues | | | | | | | | |
| External revenues | 8,171 | | 7,360 | | 6,669 | | 548 | |
| Inter-segment revenues | 1,888 | | 2,223 | | 2,794 | | 230 | |
| Total segment revenues | 10,059 | | 9,583 | | 9,463 | | 778 | |
| Total s egment e xpenses | (8,322 | ) | (7,939 | ) | (8,885 | ) | (730 | ) |
| Segment r esults | 1,737 | | 1,644 | | 578 | | 4 7 | |
| Depreciation and amortization | (1,389 | ) | (1,168 | ) | (1,487 | ) | (122 | ) |
| Provision for impairment of receivables | (454 | ) | (505 | ) | (390 | ) | (32 | ) |
| Personal | | | | | | | | |
| Revenues | | | | | | | | |
| External revenues | 48,733 | | 54,087 | | 59,028 | | 4,850 | |
| Inter-segment revenues | 2,180 | | 2,188 | | 2,358 | | 194 | |
| Total segment revenues | 50,913 | | 56,275 | | 61,386 | | 5,044 | |
| Total s egment e xpenses | (34,679 | ) | (36,372 | ) | (39,463 | ) | (3,243 | ) |
| Segment r esults | 16,234 | | 19,903 | | 21,923 | | 1,801 | |
| Depreciation and amortization | (11,007 | ) | (10,940 | ) | (11,234 | ) | (923 | ) |
| Provision for impairment of
receivables | (174 | ) | (318 | ) | (202 | ) | (17 | ) |
| Others | | | | | | | | |
| Revenues | | | | | | | | |
| External revenues | 70 | | 117 | | 229 | | 19 | |
| Inter-segment revenues | 350 | | 648 | | 909 | | 75 | |
| Total segment revenues | 420 | | 765 | | 1,138 | | 94 | |
| Total s egment e xpenses | (342 | ) | (685 | ) | (1,008 | ) | (83 | ) |
| Segment r esults | 78 | | 80 | | 130 | | 11 | |
| Depreciation and amortization | (14 | ) | (22 | ) | (40 | ) | (3 | ) |
| Provision for impairment of
receivables | - | | - | | (3 | ) | 0 | |

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Year ended December 31, 2013 compared to year ended December 31, 2012.

Corporate Segment

Our corporate segment revenues increased by Rp 3,543.0 billion, or 16.1 %, from Rp 22,047.0 billion in 2012 to Rp 25,590.0 billion in 2013 . The increase was mainly due to an increase of Rp1, 395 . 1 billion, or 27 . 0 %, in revenues from data and internet revenues, reflecting an increase in value added services revenue as well as an increase in Metro Ethernet E-LINE monthly revenue due to the migration from low cap connectivity to high cap connectivity. Revenues from other telecommunications services increased by Rp1,192.4 billion, or 35.7%, as a result of an increase in tower lease revenues in line with the growth in tenancy ratio, and an increase in support CPE revenues. Network revenues increased by Rp516.9 billion, or 16.1%, primarily reflecting an increase in C-band satellite transponder monthly subscription revenue due to higher market demand, and an increase in International Ethernet Private Line (I E PL) revenue. Interconnection revenues increased by Rp347.4 billion, or 6.2%, mainly as a result of an increase in IP transit monthly subscription revenue due to higher demand for internet connectivity from ISPs and corporate customers, and an increase in revenues from wholesale voice. A decline of Rp243.4 billion, or 29.3%, was recorded in IDD 007 retail OLO origin interconnection revenue due to the discontinuance of a promotion which we operated in 2012 which had driven interconnection revenues but which did not provide satisfactory margins and thus was discontinued in 2013.

Our corporate segment expenses increased by Rp 2,399.0 billion, or 13.3 %, from Rp 17,976.0 billion in 2012 to Rp 20,375.0 billion in 2013 , primarily due to an increase of Rp1,985.3 billion, or 26.9%, in operation and maintenance expenses as a result of higher tower rent expenses as well as an increase in hardware system integration expense in line with the growth of solution services provided to our corporate customers. General and administration expenses increased by Rp1,087. 1 billion, or 99.0% reflecting increases in provision expenses for telecommunication services receivables, d irector and commisioner remuneration, and in employee training expenses relating to our g lobal t alent p rogram. Marketing expenses increased by Rp252.7 billion, or 52.6%, reflecting increases in customer education expense and in marketing expenses primarily relating to promoting and educating customers about our new products. A decline of Rp897.6 billion, or 69.2%, was recorded in other expenses due to a decline in other operating expenses primarily relating to loss of Telkom-3 satellite which was built and launched but failed to reach useable orbit in 2012, which was not repeated in 2013, while the decline of Rp6.4 billion, or 0.2%, in personnel expenses reflected a decline in employee severance payment s , partially offset by an increase in p ost-retirement healthcare benefit expenses.

Home Segment

Our home segment revenues decreased by Rp120.0 billion, or 1.3%, from Rp9,583.0 billion in 2012 to Rp9,463.0 billion in 2013, mainly due to a decline of Rp710.9 billion or 13.2%, in fixed wireline revenue, reflecting a decline in local usage revenue and in monthly subscription revenue in line with the shift in customer communication behavior trends. These were partially offset by an increase in other telecommunication services of Rp225.9 billion, or 24.6%, due to increases in CPE lease revenue. Data and i nternet revenues increased by Rp159.3 billion, or 4.7%, due to an increase in monthly subscription revenue for Speedy in line with the 28.7% growth in Speedy customer base to 3.0 million subscribers.

Our home segment expenses increased by Rp946.0 billion, or 11.9%, from Rp7,939.0 billion in 2012 to Rp8,885.0 billion in 2013, primarily due to an increase of Rp1,496.7 billion, or 136.8%, in operation and maintenance expenses . A decline of Rp568.5 billion, or 86.0%, was recorded in other expenses, due to a decline in other operati ng expenses primarily relating to supervising construction.

Personal Segment

Our personal segment revenues increased by Rp5,111.0 billion, or 9.1%, from Rp56,275.0 billion in 2012 to Rp61,386.0 billion in 2013, mainly due to an increase of Rp1,316.8 billion, or 4.3%, in cellular revenues, reflecting an increase in long distance cellular revenue as well as in cellular monthly subscription revenue due to a 5.1% growth in our cellular subscriber base to 131.5 million subscribers. Data and internet revenue increased by Rp3,275.1 billion, or 16.3%, due to an increase in cellular data communication revenue in line with the 10.8% growth in our data services users to 60.5 million users, and an 86.1% growth in data traffic. Cellular SMS revenue also increased due to the promotion of our simPATI and kartu As products. Other telecommunication services revenue increased by Rp270.9 billion, or 114.3%. Network revenues increased by Rp173.5 billion, or 64.8%. Revenue from fixed wireless decreased by Rp 174.0 billion, or 1 4 . 3 %, reflecting a decline of Rp 129.1 billion, or 22 . 2 %, in local prepaid usage in line with our migration strategy for our fixed wireless business.

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Our personal segment expenses increased by Rp3,091.0 billion, or 8.5%, from Rp36,372.0 billion in 2012 to Rp39,463.0 billion in 2013, mainly due to an increase of Rp1,475.5 billion, or 14.6%, in depreciation expense, which reflected an increase in provision for asset impairment loss primarily relating to our fixed wireless business as a result of lower tariffs and declining customers in the fixed wireless market and an increase in depreciation of leased assets. Operation and maintenance expenses increased by Rp1,930.3 billion, or 13.2%, as a result of the increase in operation and maintenance expenses for support facilities, operation and maintenance expenses for antenn a and towers due to accelerated BTS construction by Telkomsel, and in operation and maintenance expenses for building installations.

Other Segment

Our other segment revenues increased by Rp373.0 billion, or 48.8%, from Rp765.0 billion in 2012 to Rp1,138.0 billion in 2013, reflecting an increase of Rp372.0 billion, or 48.6%, in Telkom Property's other telecommunication revenues, mainly as a result of an increase of Rp105.0 billion, or 31.0%, in building maintenance services revenue as well as an increase in security services revenue due to tariff adjustments. Revenue from project management increased by Rp57.5 billion, or 51.3%, reflecting enhanced synergies within the Telkom Group as we implemented a strategy for all our subsidiaries to use Telkom Property for building management in 2013 . Revenue from management transport services a new line of business recorded an increase of Rp56.9 billion, or 100%, from 2012, while revenue from building lease increased by Rp46.2 billion, or 65.0%, due to an increase in rental rates.

Our other segment expenses increased by Rp323.0 billion, or 47.2%, from Rp685.0 billion in 2012 to Rp1,008.0 billion in 2013, mainly reflecting an increase of Rp260.4 billion, or 46.0%, in operation and maintenance expenses, due to increases in project management expenses, electricity bills, and in third-party cooperation expenses. Personnel expenses increased by Rp28.9 billion, or 44.0%, mainly due to an increase in outsourcing expenses.

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

Corporate Segment

Our corporate segment revenues increased by Rp 2,479 billion, or 12.7 %, from Rp 19,568 billion in 2011 to Rp 22,047 billion in 2012 . The increase in corporate segment revenues was primarily due to an increase in interconnection revenue of Rp1,632 billion, or 40.8%, primarily resulting from an increase in IP transit and outgoing IDD revenues. Data and internet revenues increase of Rp705 billion, or 15.8%, primarily due to an increase in revenues from Metro Ethernet and data, internet and telecommunication service in line with an increase of 70.8% in Metro Ethernet data volume from 140,733 Mbps in 2011 to 240,315 Mbps in 2012.

Our corporate segment expenses increased by Rp 2,317 billion, or 14.8 %, from Rp 15,659 billion in 2011 to Rp 17,976 billion in 2012 , primarily due to increase in operation and maintenance expenses by Rp1,763 billion, or 31.4%, primarily resulting from cooperation expense and operating and maintenance expense for antenna and towers. Personnel expense also increased by Rp459 billion, or 15.1%, from 2011.

Home Segment

Our home segment revenues decreased by Rp476 billion, or 4.7%, from Rp10,059 billion in 2011 to Rp9,583 billion in 2012, primarily due to a decrease in fixed wireline telephone revenues of Rp616 billion, or 10.2%, which resulted from both decreased fixed wireline ARPU and usage due to shifting usage to cellular and fixed wireless telephone services.

Our home segment expenses decreased by Rp383 billion, or 4.6%, from Rp8,322 billion in 2011 to Rp7,939 billion in 2012, primarily due to decrease in operation and maintenance expense by Rp1,352 billion, or 55.3%, which was partially offset by increase in depreciation expense by Rp561 billion, or 46.3%, and personnel expenses by Rp382 billion, or 11.7%.

Personal Segment

Our personal segment revenues increased by Rp5,362 billion, or 10.5%, from Rp50,913 billion in 2011 to Rp56,275 billion in 2012, primarily due to an increase in cellular revenues of Rp4,957 billion, or 15.0% , and an increase in interconnection revenue by Rp444 billion, or 14.1% , compared to 2011. The increase in cellular revenues was primarily due to an increase in data and internet revenue by Rp2,553 billion in 2012 as compared to 2011, or 49.1%, and an increase in long distance cellular revenue by Rp1,397 billion in 2012 as compared to 2011, or 20.6%. The increase in interconnection revenue was primarily due to an increase in local cellular revenue.

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Our personal segment expenses increased by Rp1,693 billion, or 4.9%, from Rp34,679 billion in 2011 to Rp36,372 billion in 2012, primarily due to an increase in interconnection expenses of Rp196 billion, or 4.2% and an increase in operation and maintenance expenses of Rp1,025 billion, or 7.6%. The increase in operation and maintenance expense was primarily due to an increase in transport expense and an increase in radio frequency expenses. On the other hand, depreciation expenses decreased by Rp1,066 billion , or 9.9% , due to the changes in the estimated useful lives of towers and certain equipment.

Other Segment

Our other segment revenues increased by Rp345 billion, or 82.1%, from Rp420 billion in 2011 to Rp765 billion in 2012, due to the increase in Telkom Property’s other telecommunication services of Rp273 billion, or 368%, resulting from the increase in management project of Rp57 billion, or 102.8% , and security services of Rp206 billion, or 100%. In addition, lease revenues also increase by Rp71 billion, or 20.5% , due to the increase in building lease of Rp24 billion, or 48.7% , and building maintenance of Rp46 billion, or 15.6%.

Our other segment expenses increased by Rp343 billion, or 100.3%, from Rp342 billion in 2011 to Rp685 billion in 2012, primarily due to an increase in operating and maintenance expenses of Rp154 billion, or 37.4%, primarily resulting from an increase in project management expenses, expenses relating to the operation of buildings and land and electricity, gas and water expenses.

LIQUIDITY

Liquidity Sources

The main source of our corporate liquidity is cash provided by operating activities and long-term debt through the capital markets as well as long-term and short-term loans through bank facilities. We divide our liquidity sources into internal and external liquidity.

A. Internal Liquidity Sources

To fulfill our obligations, we rely primarily on our internal liquidity. As of December 31, 2013, we had Rp14,696 billion in cash and cash equivalents available. In 2013, cash and cash equivalents increased by Rp1,578 billion. In 2013, the increase of cash flow provided by operating activities primarily arise from cash receipts from customers of Rp77,013 billion.

We made net repayments of current indebtedness for borrowed money of Rp7,967 billion in 2011, Rp5,843 billion in 2012 and Rp6,239 billion in 2013. Cash outflows in 2013 reflected payments for short-term loans and other borrowings of Rp407 billion and long-term loans and other borrowings of Rp5,832 billion.

Our internal liquidity strength reflected in our current ratio, which we calculate as current assets divided by current liabilities, increased from 116.0% as of December 31, 2012 to 116.3% as of December 31, 2013.

B. External Liquidity Sources

Our primary external sources of liquidity are short and long-term bank loans, two-step loans, bonds and notes payable. During the year 2013 we used external liquidity bank loans of Rp 3,538 billion .

C. Outstanding Liquidity Sources

We had undrawn loan facilities which include the following sources of unused liquidity:

Bank CIMB Niaga loan facility in the amount of Rp1,077 billion ;
Japan Bank for International Cooperation loan facility in the amount of US $ 31,350,000 ;
BNI loan facility in the amount of Rp531 billion ;
UOB loan facility in the amount of Rp70 billion ;
BRI loan facility in the amount of Rp49 billion ;
Bank Bukopin loan facility in the amount of Rp9 billion ;
BRI Syariah loan facility in the amount of Rp1 .4 b illion ;
Bank Syariah Mandiri loan facility in the amount of Rp1 .3 b illion; and
Syndicated loan facility of BNI, BRI and Bank Mandiri in the amount of Rp749 b illion.

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Net Cash Flows

The following table sets out information concerning our consolidated cash flows, as set out in (and prepared on the same basis as) our Consolidated Financial Statements:

	Years ended December 31,
	2011		2012				2013
	(Rp billion)		( Rp billion)		(Rp billion)		(US$ million)
Net cash flows:
provided by operating activities	30,462		27,941		36,574		3,004
used in investing activities	(14,414	)	(11,311	)	(22,702	)	(1,865	)
used in financing activities	(15,539	)	(13,314	)	(13,327	)	(1,095	)
Net increase in cash and cash equivalents	509		3,316		545		44
Effect of exchange rate changes on cash and cash equivalents	5		168		1,039		85
Cash and cash equivalents at beginning of year	9,120		9,634		13,118		1,078
Ending balance of dispos ed subsidiary	-		-		(6	)	(0	)
Cash and cash equivalents at end of year	9,634		13,118		14,696		1,207

Year ended December 31, 2013 compared to year ended December 31, 2012

Cash Flows from Operating Activities

Net cash provided by operating activities in 2013 was Rp 36,574 billion (US$ 3,004 million) compared to Rp 27,941 billion in 2012. The increase was primarily due to an increase of Rp5,103 billion, or 7.1%, in cash receipts from customers and from other telecommunications operators of Rp528 billion, or 13.2% , due to the increase in our operating revenue, and decrease of Rp 6,211 billion, or 18.5 %, of cash payments for expenses. This was partially offset by an increase of Rp1,809 billion, or 32.4%, in payment for income tax es and cash payment s to employees of Rp1,721 billion , or 21.1% .

Cash Flows from Investing Activities

Net cash flows used in investing activities in 2013 was Rp22,702 billion (US$1,865 million) compared to Rp11,311 billion in 2012. This increase was primarily due to an increase of Rp11,423 billion, or 139.0% in acquisition of property and equipment mainly relating to property under construction, transmission installation and equipment and cable network.

Cash Flows from Financing Activities

Net cash flows used in financing activities totaled Rp13,327 billion (US$1,095 million) in 2013 compared to Rp13,314 billion in 2012. This increase was primarily due to an increase of Rp4,112 billion, or 235.8%, in proceed from sale of treasury stock. This was partially offset by an increase of Rp1,227 billion, or 17.2%, in cash dividends paid to our stockholders due to the increase of our operating profit and a decrease of Rp1,349 billion , or 27.6% , in proceed from loan and other borrowings.

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

Cash Flows from Operating Activities

Net cash provided by operating activities in 2012 was Rp27,941 billion (US$2,898 million) compared to Rp30,462 billion in 2011. The decrease was primarily due to an increase of Rp8,144 billion, or 31.9%, in cash payments for expenses. This was partially offset by an increase of Rp4,441 billion, or 6.6%, in cash receipts from customers due to the increase of our revenues.

Cash Flows from Investing Activities

Net cash flows used in investing activities in 2012 was Rp11,311 billion (US$1,173 million) compared to Rp14,414 billion in 2011. This decrease was primarily due to an increase of Rp3,975 billion, or 12,045.5% in placement in time deposits and a decrease of Rp4,884 billion, or 37.3%, in cash payments for the acquisition of property and equipment. This was partially offset by an increase of Rp1,862 billion , or 14,323.1% in proceeds from insurance claims relating to unsuccessful launch of the Telkom-3 satellite.

Apart from cash on hand and cash in banks, we invest the majority of our excess cash from time to time in time deposits. Since May 14, 2004, we also have been investing a part of our excess cash in Rupiah-based mutual funds and other marketable securities. As of December 31, 2012, other current financial assets totaling Rp4,338 billion (US$450 million) in mutual funds and other marketable securities were outstanding.

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Cash Flows from Financing Activities

Net cash flows used in financing activities totaled Rp13,314 billion (US$1,381 million) in 2012 compared to Rp15,539 billion in 2011. This decrease by Rp2,225 billion, or 14.3%, was primarily due to a decrease of Rp3,075 billion, or 41.9%, in repayment of two-step loans and bank loans and a decrease of Rp315 billion, or 15.3% in payments for treasury stock. This was partially offset by an increase of Rp1,058 billion, or 17.4%, in cash dividends paid to our stockholders.

Current Assets

As of December 31, 2013, our current assets were Rp 33,075 billion (US$ 2,718 million ) compared to Rp 27,973 billion as of December 31, 2012. The increase in current assets was mainly due to the increase of Rp2,534 billion , or 58.4% , in other current financial assets, an increase in cash and cash equivalents of Rp1,578 billion , or 12.0%, and an increase in trade and other receivables of Rp1,012 billion, or 18.7% .

This increase was partially offset by a decrease of Rp279 billion , or 36.9% in prepaid other taxes.

Current Liabilities

Current liabilities were Rp 28,437 billion (US$ 2,336 million ) a s of December 31, 2013 and Rp 24,108 billion a s of December 31, 2012. This increase was primarily due to an increase of Rp4,531 billion , or 60.8% in trade and other payables and an increase of Rp761 billion, or 27.9% in unearned income.

This increase was partially offset by a decrease of Rp899 million, or 14.6% in accrued expenses.

Working Capital

Net working capital, calculated as the difference between current assets and current liabilities, amounted to Rp 3,865 billion as of December 31, 2012 and Rp 4,638 billion (US$ 38 2 million) as of December 31, 2013. The increase in net working capital was primarily due to:

A substantial increase of Rp2,534 billion in other current financial assets (mainly from time deposit);
An increase of Rp 1,578 billion in cash and cash equivalents; and
An increase of Rp 1,012 billion in trade and other receivables .

This was partially offset by:

An increase of Rp4,531 billion in trade and other payables ;
A decrease of Rp899 billion in accrued expense; and
An increase of Rp761 billion in unearned income.

We believe that our working capital is sufficient for our present requirements. We expect that our working capital will continue to be addressed by various funding sources, including cash from operating activities and bank loans.

Capital Structure

Our capital structure as of December 31, 2013 is described as follows:

	Amount (Rp billion)	Portion (%)
Short-term Debt	432	0.5
Long-term Debt	19,824	24.8
Total Debt	20,256	25.3
Equity attributable to owners	59,753	74.7
Total Invested Capital	80,009	100.0

We take a qualitative approach towards our capital structure and debt levels. Under our syndicated loan agreement with BNI, BRI and Bank Mandiri, we are required to maintain a debt to equity ratio of not more than 2.0 and debt service coverage ratio of more than 1.25. As of December 31, 2013, our debt to equity ratio was 0.34 and our debt service coverage ratio was 6. 8, indicating our strong ability to meet our debt obligations. Our debt levels are primarily driven by our plans to develop our existing and new strategic businesses. In determining our optimum debt levels, we also consider our debt ratios with reference to regional peers in the telecommunications industry.

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Indebtedness

Consolidated total indebtedness (consisting of long-term liabilities, current maturities of long-term liabilities, short-term bank loans and deferred consideration for business combinations) as of December 31, 2011, 2012 and 2013 were as follows:

	As of December 31, — 2011	2012	2013	2013
	(Rp billion)	(Rp billion)	(Rp billion)	(US$ million)
Indonesian Rupiah	14,142	16,192	17,543	1,441
US Dollar (1)	2,561	2,052	1,734	142
Japanese Yen (2)	1,168	1,031	979	80
Total	17,871	19,275	20,256	1,663

(1) The amounts as of December 31, 2011, 2012 and 2013 translated into Rupiah at Rp9,075, Rp9,645 and Rp12,180 = US$1, respectively, being the Reuters sell rates for US Dollar at each of those dates.

(2) The amounts as of December 31, 2011, 2012 and 2013 translated into Rupiah at Rp117.0, Rp111.8 and Rp115.9 = Yen 1, respectively, being the Reuters sell rates for Yen at each of those dates.

Of our total indebtedness, as of December 31, 2013, Rp20,256 billion, R p 5,525 billion, Rp6,465 billion, Rp2,853 billion, and Rp5,413 billion were scheduled for repayment in 2014, 2015 to 2016, 2017 to 2018 and thereafter, respectively.

For further information on our Company’s indebtedness, see Notes 18-19 to our Consolidated Financial Statements.

CAPITAL EXPENDITURES

In 2013, we incurred capital expenditures of Rp24,898 billion (US$2,046 million ), which was in line with the realization of the plan to develop of network infrastructure, services node , applications and supporting system .

Our capital expenditures are grouped into four categories of development plan to characterize the network element and asset classification, as follows :

Broadband services , which consist of program development and capacity expansion of broadband access , service provision servers, application s, content and IT system ;
Network infrastructure , which consists of a network of national and regional backbone transmission Metro Junction, M etro E thernet , IP backbone and satellite;
Optimizing legacy, for fixed wireline ; and
Capex supports .

Of our Rp24,898 billion capital expenditure in 2013, Telkom (as parent company) incurred capital expenditures of Rp5,313 billion (US$437 million) , Telkomsel incurred capital expenditures of Rp15,662 billion (US$1,287 million ) and our other subsidiaries incurred capital expenditures of Rp3,923 b illion (US$322 million ) as follows:

Table of realization of our capital expenditure
	Years Ended December 31,
	2011	2012	2013
	(Rp billion)	(Rp billion)	(Rp billion)
Telkom (parent company)
Broadband service	1,875	1,662	3,28 6
Network infrastructure	1,979	2,060	1,674
Optimizing legacy	156	86	191
Support	192	232	162
Subtotal for Telkom	4,202	4,040	5,31 3
Subsidiaries
Telkomsel	8,472	10,656	15,662
Others	1,929	2,576	3,923
Subtotal for subsidiaries	10,401	13,232	19,585
Total for Telkom Group	14,603	17,272	24,898

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Material Commitments for Capital Expenditures

As of December 31, 2013 , we had material commitments for capital expenditures under certain contractual arrangements of Rp 18,461 billion, principally relating to procurement and installation of the broadband network, transmission equipment and fiber optic cable system .

For a more detailed discussion regarding our material commitments for capital expenditures, see Note 38a to our Consolidated Financial Statements.

Source of Funds

We have historically funded our capital expenditures primarily with cash generated from operations and additional fund raised from external sources as well . In 2014, we expect that our capital expenditure to revenue ratio will be approximately in the range of 25%-30%. We expect that of the total increase in amount of capital expenditure in 2014 over 2013, the most significant proportions will be allocated for mobile and broadband services and with a portion of the increase will be synergistically functionalized to our subsidiaries. We expect to fund the above commitments with our internal and external source of funds.

The realization of the future capital expenditures may differ from the amounts indicated above due to various factors, including but not limited to the Indonesian and global economy environments , the Rupiah/US Dollar or other applicable foreign exchange rates, the availability of supply or vendor or other financing on terms acceptable to us, and also any technical or other problems in the implementation .

Critical Accounting Policies, Estimates and Judgments

For a complete discussion of our critical accounting policies, estimates and judgments, see Note 2 ab to our Consolidated Financial Statements.

New Standards and Interpretations

See Note 4 4 to our Consolidated Financial Statements for a discussion of the new standards, amendments to standards and interpretations not yet effective for the year ended December 31, 2013 and have not been applied in preparing the Consolidated Financial Statements.

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

We routinely make investments to improve products and services. Total expenditure reached about Rp13 billion, Rp13 billion and Rp14 billion (US$1 million), in 2011, 2012 and 2013 , respectively. In 2013, we engaged in research and development in the areas of business, products and services to support of the implementation of mobile broadband, cloud computing, and development of ecosystem-based solutions, such as e-tourism, mobile payment, mobile games, and smart home solution s , that are designed to promote a digital lifestyle in Indonesia. We also engaged in research and development relating to telecommunication network infrastructure.

We have developed two business incubators located in the cities of Bandung and Yogyakarta called Bandung Digital Valley ("BDV") and Jogja Digital Valley ("JDV"), respectively. Each incubator is intended to help build a national digital creative industry while strengthening our business portfolio and focuses on innovative ideas which have may or may not been fully market-tested but that we believe have potential.

BDV commenced operations in 2012 and has been involved in the incubation of over a dozen startup companies. We expect JDV to commence incubation activities in 2014.

D. TREND INFORMATION

The significant trends, or developments that have had in recent years, and may have in the future, a material impact on our results of operations, financial condition and capital expenditures, include (i) an increase in cellular telephone revenues with increases in subscribers, minutes of use, ARPU and regulatory aspects (ii) an increase in revenues from data, internet and information technology services revenues, and (iii) a decrease in fixed lines telephone revenues. See “Operating Results”.

We believe favorable external factors, among others, will support our ability to continue to drive revenue growth from data, internet and information technology services as well as from mobile phone services. Indonesia's economy recorded a relatively robust growth in recent years despite a sluggish global economy . With good economic fundamentals, Indonesia’s national economy is expected to continue to grow steadily, with a corresponding increase in consumer purchasing power, which in turn is expected to result in higher demand for telecommunications services, for both basic telecommunications services as well as the more sophisticated value-added services that are part of the increasingly prevalent digital lifestyle in modern societies.

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In the longer term, Indonesia’s economy is also expected to enjoy support from Government initiatives such as the Master Plan for the Acceleration and Expansion of Indonesia’s Economic Development, which was launched in 2011. One of the three pillars of the master plan is development of national connectivity, including development of the information and communication technology sector. This is in line with our IDN program and our strategic initiative on the development of our Nusantara Superhighway project (i.e. the Palapa ring project known as id-Ring), an optical-based network of six interconnected rings which links Indonesia’s main island groups, namely the Sumatra ring, the Java ring, the Kalimantan ring, the Sulawesi ring, the Bali and Nusa Tenggara ring and the Maluku and Papua ring. We expect that the development of this extensive telecommunication network connecting all the six major economic corridors will allow us to offer more value-added services, and to reach more customers in a much larger scale, as well as provide opportunities for our products and services in the IMES areas.

We believe the shift in consumer preferences towards a digital lifestyle will be a key factor that we expect will drive our business in the future. We believe this will lead to continuing increase in broadband demand (including mobile broadband), compensating for the decline of our legacy business (both fixed wireline and cellular telephone revenue s and SMS revenue s ). We expect the increase in demand for data communications and corporate internet to continue next year as we increase our capacity to cover more small and medium enterprises.

E. OFF-BALANCE SHEET ARRANGEMENTS

A s of December 31, 2013, we had no off-balance sheet arrangements that were reasonably likely to have a current or future material effect on our financial position, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

F. TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS

The following table sets forth information on certain of our material contractual obligations as of December 31, 2013.

Contractual Obligations	By Payment Due Dates — Total	Less than 1 year (7)	1-3 years (7)	3-5 years (7)	More than 5 years (7)
	(Rp billion)	(Rp billion)	(Rp billion)	(Rp billion)	(Rp billion)
Long-Term Debts (1)(5)	14,855	4,445	5,405	1,756	3,249
Capital Lease Obligations (2)	4,969	648	1,060	1,097	2,164
Operating Leases Obligation (3)	14,037	1,845	3,270	3,095	5,827
Interest on Long-term Debts and Capital Lease Obligations (6)	5,348	1,424	1,856	1,159	909
Unconditional Purchase Obligations (4)	18,461	18,461	-	-	-
Total	57,670	26,823	11,591	7,107	12,149

(1) See Notes 18-19 to our Consolidated Financial Statements.

(2) Related to the leases of the slot of the tower, property and equipment under RSA, transmission installation and equipment, data processing equipment, office equipment, vehicles and CPE assets.

(3) Related primarily to leases of slot of the tower, leased line, telecommunication equipment and land and building.

(4) Capital expenditures committed under contractual arrangements.

(5) Excludes the related contractually committed interest obligations.

(6) See “Item 3 Key Item Information – Selected Financial Data – Risk Factors – Risks Related to Our Business – Financial Risks – We are exposed to interest rate risk”.

(7) Less than 1 year = 2014, 1-3 years = 2015-2016, 3-5 years = 2017-2018, more than 5 years = 2019 further .

See Note 38 to our Consolidated Financial Statements for further details on our contractual commitments. In addition to the above contractual obligations, as of December 31, 2013, we had long-term liabilities for pension benefit and other post-employment benefits and long service awards. In 2013 , we contributed Rp 471 billion to our other post-employment benefits plan and Rp182 billion to our defined benefit pension plan. See Note 33 to our Consolidated Financial Statements.

G. SAFE HARBOR

All information that is not historical in nature disclosed under “Off-Balance Sheet Arrangements” and “Tabular Disclosure of Contractual Obligations” is deemed to be a forward-looking statement. See “Forward-Looking Statements".

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ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A. DIRECTORS AND SENIOR MANAGEMENT

In accordance with Indonesian law, we have a Board of Commissioners and a Board of Directors. These boards are separate, and no individual may be a member of both boards. The members of the Board of Commissioners and Board of Directors are elected and dismissed by shareholders’ resolutions at a GMS. As stated in the Articles of Association, to be elected, candidates must be nominated by the Government as holder of the Series A Dwiwarna share. The term of office for each Commissioner and Director is five years from the date of his/her election, unless the date of expiration of the term of office falls on a day other than a business day, in which case such term of office shall expire on the following business day. Shareholders, through an AGMS or an EGMS, have the right to discharge a Commissioner or Director at any time before the expiration of his/her term of office.

Board of Commissioners

The Board of Commissioners is responsible for supervising and providing advice to the Board of Directors. The Board of Commissioners consists of six members, one of whom is designated the President Commissioner. In accordance with OJK regulations and IDX rules which require 30% of our Board of Commissioners to be independent, the following Commissioners have been designated as our Independent Commissioners: Johnny Swandi Sjam and Virano Gazi Nasution. The principal duty of such Independent Commissioners, in addition to exercising supervision, is to represent the interests of the minority shareholders.

As of December 31, 2013, the Board of Commissioners consisted of six members as listed below:

Name	Age	Commissioner Since	Position
Jusman Syafii Djamal	59	2011	President Commissioner
Hadiyanto	51	2012	Commissioner
Parikesit Suprapto	62	2012	Commissioner
Gatot Trihargo	53	2013	Commissioner
Johnny Swandi Sjam	53	2011	Independent Commissioner
Virano Gazi Nasution	45	2012	Independent Commissioner

Jusman Syafii Djamal

Jusman Syafii Djamal has served as our President Commissioner since January 1, 2011. Currently, he also serves as President Commissioner (Independent) at PT Cardig Aero Services Tbk, as President Commissioner (Independent) at PT Toba Bara Sejahtera Tbk. , as President Commissioner (Independent) at PT Mandala Airline Tbk, and as Chairman at Matsushita Gobel Foundation. Since May 20, 2011, he is by appointment of the President of the Republic of Indonesia, a member of the National Innovation Committee ( a t hink t ank of the President of the Republic Indonesia on Innovation Policy). Previously, Mr. Djamal was the Minister of Transportation for the “Indonesia Bersatu Pertama” cabinet (2007-2009) and concurrently a member of the National Transportation Safety and Security Evaluation Team (2007) founded to evaluate and find the “ root causes ” of accidents in Shipping/Marine, Railways and Highways transportation. He has vast experience in aircraft industry management due to exposures to a variety of strategic positions: as the President Director of PT Dirgantara Indonesia (2000-2002), as Director of Human Resources of PT IPTN (1999-2000), as Director of Helicopters, Defense Technology and Satellite (1996-1999), as Chairman of PT IPTN’s Restructuring Program Implementation team (1998-2001), and as Chief Project Engineer for N250 Development & Constructional Design (1989-1995). As a professional a erodynamics e ngineer with twenty year s of experience in Computational Aerodynamics and Configuration Development, he holds, an Intellectual Property Right Patent No.ID 0 021 669 for electronic-based Flight Control Systems issued on August 15, 2008 together with the late Bambang Pamungkas. H e was awarded the Nararya Dedicational Award from the Republic of Indonesia on August 17, 1995. He is the co-a uthor of Grand Techno Economic Strategy - Siasat Memicu Produktivitas (Mizan Publishers, 2009). He earned his Bachelor of Mechanical Engineering in Aeronautical Engineering from Institut Teknologi Bandung (1983).

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Hadiyanto

Hadiyanto has served as our Commissioner since May 11, 2012. Currently, he also serves as Director General of State Treasury at the Ministry of Finance of the Republic of Indonesia. He has assumed, among other positions, Head of the Legal Bureau, Secretariat General of the Ministry of Finance and was the Alternate Executive Director at the World Bank, Washington D.C., US. He was the President Commissioner of PT Garuda Indonesia Tbk . (2007-2012) and President Commissioner of PT Bank Export Indonesia (2007-2009). He holds a Bachelor ’s degree in Law from the University of Padjadjaran, Bandung, a Master of Law Degree (“LLM”) from Harvard University Law School, USA, and a PhD. in Law from the University of Padjadjaran, Bandung.

Parikesit Suprapto

Parikesit Suprapto has served as our Commissioner since May 11, 2012. Previously he was the Deputy of Business Services at the Ministry of SOE (2010-2012), Deputy Head of Banking and Finance Industry at the Ministry of SOE (2008-2010) and Advisor to the Minister of SOE for Small Business Sector (2006-2008). He was a Commissioner of PT Indosat Tbk (2011-2012) and a Commissioner of PT Bank Negara Indonesia (Persero) Tbk. He earned a Bachelor ’s degree in Corporate Economics from Sekolah Tinggi Manajemen Industri, Jakarta (1980), a Master ’s degree in Economic Development from Indiana University, Indiana, USA (1990) and a PhD degree in Development Economics from the University of Notre Dame, Indiana, USA (1995).

Johnny Swandi Sjam

Johnny Swandi Sjam has served as our Independent Commissioner since January 1, 2011. Currently he is also the Chairman of the Standing Committee on Infrastructure and Telecommunications Services at the Indonesian Chamber of Commerce and Industry ( “ KADIN ” ). He previously served, among other positions, as a Commissioner at PT Inti Limited (2010-2011), the President Director of PT Indosat Tbk . (2007-2009), the Director of PT Indosat Tbk . (2005-2007), the President Director of Satelindo (2002-2003), and several other important positions at subsidiaries of Indosat like Satelindo, Sisindosat and Intikom (1997-2002). He holds a Diploma III in Computer Engineering from Bandung Institute of Technology, a Diploma IV from Sekolah Tinggi Manajemen Industri of the Department of Industry of Indonesia, a Bachelor ’ s degree in Informatics Management from Gunadarma University, Jakarta, and a Master ’s degree in Business Policy and Administration from the University of Indonesia, Jakarta.

Virano Gazi Nasution

Virano Gazi Nasution has served as our Independent Commissioner since May 11, 2012. He was previously the Commercial Director of PT Indonesia Comnet Plus, a subsidiary of PT PLN (Persero) (2009-2012), Advisor to the Minister of Communications and Informatics (2008-2009), and the President Director of PT Bakrie Telecom Tbk . (2001-2005). He earned his Master of Science degree in Engineering Economics from Stanford University, USA.

Gatot Trihargo

Gatot Trihargo, has serve d as a Commissioner since 19 April 2013. He currently serves as a Deputy of Services Business in the Ministry of State-Owned Enterprises of the Republic of Indonesia. He h olds a degree in accounting from the State College of Accountancy, Jakarta and a Master's degree in Accountancy and Financial Information Systems from Cleveland State University in Ohio, USA. Gatot Trihargo was appointed as a members of Planning and Risk Evaluation and Monitoring Committee (“ KEMPR ”) based on the Decree of the Board of Commissioners No.05/KEP/DK/2013 dated May 14 , 2013 on the Membership Composition of the Planning and Risk Evaluation and Monitoring Committee of Limited Liability Company (Persero) PT Telekomunikasi Indonesia, Tbk. As a member of KEMPR, Gatot Trihargo is responsible for monitoring and supervision of Rencana Jangka Panjang Per sero an (“RJPP”)/Corporate Strategic Scenario (“CSS”) implementations, Rencana Kerja dan Anggaran Pers ero an (“RKAP”) implementations, and enterprise risk management implementations, as well as the development of non-organic business initiative implementations.

Our Board of Commissioners is assisted by a Board Secretary whose main function is to ensure that while performing its tasks, the Board of Commissioners complies with our Articles of Association as well as applicable laws and regulations. The Board of Commissioners’ office address is Grha Merah Putih Building, 5 th Floor, Jl. Gatot Subroto Kav.52, Jakarta , 12710, 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 eight members, including a President Director.

As December 31, 2013, the Board of Directors consisted of eight members as listed below:

Name	Age	Director Since	Position
Arief Yahya	52	2012	President Director (CEO)
Honesti Basyir	45	2012	Director of Finance (CFO)
Indra Utoyo	51	2007	Director of Innovation & Strategic Portfolio (ISP)
Sukardi Silalahi	48	2012	Director of Consumer Service (CONS)
Muhammad Awaluddin	45	2012	Director of Enterprise & Business Service (EBIS)
Rizkan Chandra	44	2012	Director of Network IT & Solution (NITS)
Priyantono Rudito	46	2012	Director of Human Capital Management (HCM)
Ririek Adriansyah	50	2012	Director of Wholesale & International Service (WINS)

Arief Yahya

Arief Yahya has served as our President Director since May 11, 2012. Concurrently , he also serves as President Commissioner of Telkomsel, our subsidiary. Prior to his appointment as President Director, he led a career with Telkom in various positions, including as Director of Enterprise & Wholesale (2005-2012) , Head of Regional Division V East Java (2004-2005) and Head of Regional Division VI Kalimantan (2003-2004). He holds a Bachelor’s degree in Electrical Engineering from Institut Teknologi Bandung (1986) and a Master’s degree in Telematics from University of Surrey, UK (1994).

Honesti Basyir

Honesti Basyir has served as our Director of Finance since May 11, 2012. Prior to his appointment as Director of Finance, he has held a number of key positions with Telkom, including Vice President (“VP”) for Strategic Business Development at ITSS Directorate (2012), VP for Strategic Business Development at SICP (2010-2012), Project Controller of Project Management Office (2009-2010) and Assistan t Vice President (“AVP”) for Business & Finance Analysis (2006-2009). He holds a Bachelor’s degree in Industrial Technology from Institut Teknologi Bandung (1992) and a Master’s degree in Corporate Finance from Sekolah Tinggi Manajemen Bandung (2004).

Indra Utoyo

Indra Utoyo has served as our Director of Innovation & Strategic Portfolio (“ISP”) since February 28 , 2007 . He joined Telkom in 1986 and has held a variety of positions . P rior to his appointment as Director of ISP he served as Director of Information Technology Solution & Supply (2007-2012). He holds a Bachelor’s degree in Electrical Engineering from Institut Teknologi Bandung (1985) and a Master’s degree in Communication & Signal Processing from Imperial College, U K (1994).

Sukardi Silalahi

Sukardi Silalahi has served as our Director of Consumer Service since May 11, 2012. H e joined Telkom in 1991 and, prior to his appointment as Director of Consumer Service, he served in a variety of positions, including Executive General Manager (“EGM”) of Eastern Consumer Service Division (2011-2012), Deputy EGM of Western Consumer Service Division (2010-2011), EGM of Regional Division VI Kalimantan (2008-2010) and Deputy EGM of Fixed Wireless Network Division (2007-2008). He holds a Bachelor’s degree in Civil Engineering from Institut Teknologi Bandung (1989).

Muhammad Awaluddin

Muhammad Awaluddin has served as our Director of Enterprise & Business Service (“ EBI S”) since May 11, 2012. Concurrently , he also serves as President Commissioner of Infomedia, our indirect subsidiary. Prior to his appointment as Director of EBIS, he served, among other position s, as President Director of Infomedia (2010-2012), EGM of Access Network Division (2010) and EGM of Regional Division I Sumatra (2007-2010). He holds a Bachelor’s degree in Electrical Engineering from Universitas Sriwijaya, Palembang (1990) and a Master’s degree in Business Administration from the European University, Antwerp, Belgium (1998).

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Rizkan Chandra

Rizkan Chandra has served as our Director of Network IT & Solution (“N IT S”) since May 11, 2012. Concurrently , he also serves as Commissioner of Telkomsel, our subsidiary, and as Commissioner at Metranet, our indirect subsidiary. Prior to his appointment as Director of NITS, among other positions, he served as President Director of Sigma, our indirect subsidiary (2010-2012), Senior General Manager (“SGM”) of Telkom Learning Center (2008-2010) and VP for Infrastructure & Service Planning, Telkom (2007-2008). He holds a Bachelor’s degree in Informatics from Institut Teknologi Bandung (1992) and a Master’s degree in Management of Technology from the National University of Singapore (2000).

Priyantono Rudito

Priyantono Rudito has served as our Director of Human C apital Management (“HC M ”) since May 11, 2012. Concurrently , he also serves as Commissioner of Telkomsel, our subsidiary. Since he joined Telkom in 1991, he has served in a number of positions, including as VP for Corporate Strategic Planning (2011-2012) and VP for Marketing & Consumer Care (2007-2011). He holds a Bachelor’s degree in Industrial Engineering from Institut Teknologi Bandung (1991) and a Master’s degree in Business (Marketing) (1997) and a Doctoral degree in Management (2011) from the Royal Melbourne Institute of Technology, Australia.

Ririek Adriansyah

Ririek Adriansyah has served as our Director of Wholesale & International Service (“ WINS ”) since May 11, 2012. Concurrently , he also serves as President Commissioner of TII, our subsidiary. He joined Telkom in 1990 and, prior to his appointment as Director of WINS, served as, among other position s, President Director of TII, our subsidiary (2011- 2012 ), Director of Marketing & Sales, TII (2010-2011), Director of International Carrier Service, TII (2008-2010) and Deputy EGM of Infratel Division, Telkom (2004-2008). He holds a Bachelor’s degree in Electrical Engineering from Institut Teknologi Bandung (1989).

B. COMPENSATION

Compensation of Commissioners and Directors

Each Commissioner is entitled to monthly remuneration and benefits. They are also entitled to bonuses based on our business performance and achievements, which amount is determined by shareholders at the GMS. Commissioners are also entitled to a lump sum allowance upon resignation.

Each Director is entitled to a remuneration consisting of a monthly salary and other allowances (including retirement benefit). Directors also receive an annual bonus based on our business performance and achievements, which amount is determined by shareholders at the GMS. The bonus and incentive are budgeted every year based on recommendations of the Directors and confirmation from Board of Commissioners before being considered by shareholders at the GMS.

The Nomination and Remuneration Committee is responsible for formulating the Commissioners’ and Directors’ salaries, which is further discussed in a joint meeting of our Board of Directors and Board of Commissioners for approval. The agreed formula is then submitted to the shareholders at the AGMS for consideration and approval.

The procedure for determining remuneration of our Board of Commissioners is as follows:

The Board of Commissioners requests the Nomination and Remuneration Committee to formulate a proposal for the remuneration of the Board of Commissioners;
The Nomination and Remuneration Committee requests an independent party to formulate the framework for the remuneration of the Board of Commissioners;
The Nomination and Remuneration Committee proposes the remuneration framework to the Board of Commissioners;
The Board of Commissioners proposes the remuneration for the members of the Board of Commissioners to the GMS; and
The GMS determines the remuneration for the members of the Board of Commissioners.

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Bonus and incentives are budgeted every year based on recommendations of the Board of Directors and confirmation from the Board of Commissioners before being considered by the shareholders at the AGMS. The Nomination and Remuneration Committee is responsible for formulating proposed formulae for the salaries of the Board of Directors’ which are further discussed during a joint meeting Board of Directors and Board of Commissioners for approval. The approved formula is then proposed in GMS for final approval. The performance of the Board of Directors and other management is measured through effective performance evaluations, which are conducted comprehensively, systematically and periodically in accordance with a decree of the Board of Commissioners. The criteria used in the assessment on the performance of Board of Directors is based on the balanced scorecard method measuring four main aspects, namely Financial, Customer, Internal Business Process, and Learning and Growth, each comprising three key performance indicators (“KPI”) : Shared KPI, Common KPI and Specific KPI. Shared KPIs are the same in name, target, realization and achievement for all the Board of Directors. Common KPIs have the same name and target, but specify different realization and achievement for each of the Directors. Specific KPIs are different for each of the Directors and represent specific programs as the primary duty and priority for each of the Directors and its Directorate.

The net amount of remuneration paid to our Commissioners and Directors for the year ended December 31, 2013, including basic compensation (honorarium), bonus and other incentives, was Rp 164 billion (US$20 million). There is no management pension plans or contingent compensation in place.

C. BOARD PRACTICES

Our Board of Commissioners acts as our overall supervisory and monitoring body with principal functions including planning and development, operations and budgeting in compliance with our Articles of Association, and to carry out the mandate and resolutions of the AGMS and EGMS. The Board of Commissioners does not have the authority to run or manage our Company, except in the exceptional situation of all members of the Board of Directors having been suspended for any reason. The Board of Commissioners provides advice and opinions to the AGMS with respect to financial reporting, business development, appointment of auditors, and other important and strategic matters related to corporate actions. The Board of Commissioners also reviews our work plan and budget, keeps abreast of our progress, and in case our Company gives an indication of slowing-down, immediately requests the Board of Directors to notify the shareholders and provides recommendations on measures for mitigation. Finally, the Board of Commissioners ensures that our corporate governance program is properly applied and maintained according to the applicable regulations.

The Board of Commissioners is obliged to carry out its duties and responsibilities according to our Articles of Association, decisions from the AGMS and EGMS and applicable laws and regulations.

The Board of Commissioners is assisted by a Board of Commissioners Secretary as well as the Audit Committee, the Nomination and Remuneration Committee and the Planning and Risk Evaluation and Monitoring Committee. As necessary, the Board of Commissioners seeks assistance from professional advisors.

Meetings of the Board of Commissioners are held at least once a month at any time deemed necessary by one or more members of the Board of Commissioners, or at the written request of one or more shareholders holding at least one-tenth of our outstanding shares of common stock. Decisions at Board of Commissioners meetings are taken through a process of deliberation and consensus. If a consensus cannot be reached, decisions are based on a majority vote of the Commissioners in attendance or who are represented at the meeting. In the event of a tie, the proposal in question must be rejected. The quorum for all Board of Commissioners meetings is more than one-half of the total number of Commissioners then represented in person or by proxy granted to another Commissioner at such meeting.

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 GMS and the Board of Commissioners. The Board of Directors also has the right to act for and on our behalf, inside or outside a court of law, on any matter and for any event, with another party.

Meetings of the Board of Directors may be convened at any time deemed necessary at the request of one or more members of the Board of Directors, at the request of the Board of Directors or upon a written request from one or more shareholders representing one-tenth or more of the total number of outstanding shares of common stock.

Meetings of the Board of Directors are chaired by the President Director. In the event that the President Director is unavailable or absent for any reason, the meeting will be chaired by a member of the Board of Directors appointed in the meeting.

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The decisions of the Board of Directors meetings shall be reached by consensus through deliberation. If this method fails, the decision shall be passed by voting based on the majority votes by Board of Director members cast in the meeting. A quorum is reached at a meeting where more than half of the members of the Board of Directors are present or represented legally by proxy in the meeting. Each member of the Board of Directors who is present at the meeting shall be entitled to cast one vote (and one vote for each other member of the Board of Directors whom he represents).

Individual Directors are charged with specific responsibilities.

Audit Committee

The Audit Committee operates under the authority of the Audit Committee Charter, which was promulgated by a Decree of the Board of Commissioners. The Audit Committee Charter is regularly evaluated and, if necessary, amended to ensure compliance with OJK and SEC requirements and other relevant regulations. The Audit Committee charter was stipulated by the Board of Commissioners’ Decree No.11/KEP/DK/2011 dated November 30, 2011 regarding the Charter of the Telkom Group Audit Committee. In 2013, no changes were made to regulations related to our Audit Committee that would require us to amend our Audit Committee Charter.

The Audit Committee Charter outlines the Audit Committee’s purpose, function and responsibilities. It provides that the Audit Committee is responsible for:

Overseeing our financial reporting process on behalf of the Board of Commissioners;
Providing recommendations to the Board of Commissioners regarding the selection of our external auditor, subject to shareholder approval;
Discussing with our internal and external auditors on the overall scope and plans of their respective audits;
Reviewing our Consolidated Financial Statements and the effectiveness of Internal Controls Over Financial Reporting (“ICOFR”);
Convening regular meetings with internal and external auditors, without the presence of management, to discuss the results of their evaluation and audit of our internal controls as well as the overall quality of our financial reporting ; and
Carrying out additional tasks that are assigned by the Board of Commissioners, especially on financial and accounting related matters as well as other obligations required by the Sarbanes Oxley Act of 2002.

The Audit Committee may engage an independent consultant or other professional advisers to assist in carrying out its functions. In addition, the Audit Committee receives and handles complaints.

Audit Committee Independence

Bapepam-LK Audit Committee Rules require that the Audit Committee consist of at least three members, one of whom must be an Independent Commissioner who serves as chairman, while the other two members must be independent. At least one of these two members must have expert knowledge (in the context of Item 16A of Form 20-F) in the field of accountancy or finance. In order to be considered independent under the prevailing Indonesian rules, the external members of the Audit Committee:

May not be an executive officer of a public accountant firm that has provided audit or non-audit services to us within the six months prior to his or her appointment as an Audit Committee member;
May not have been our executive officer within the six months prior to his or her appointment as an Audit Committee member;
May not be affiliated with our majority shareholder;
May not have a family relationship with any member of the Board of Commissioners or Board of Directors;
May not own, directly or indirectly, any of our shares; and
May not have any business relationship that relates to our businesses.

Currently, the Audit Committee consists of five members: (i) Johnny Swandi Sjam (Independent Commissioner and Chairman); (ii) Agus Yulianto (Secretary); (iii) Virano Gazi Nasution (Independent Commissioner); (iv) Parikesit Suprapto (Commissioner); (v) Sahat Pardede.

Audit Committee Financial Expert

See Item 16A “Audit Committee Financial Expert”.

Exemption from US Listing Standards for Audit Committees

See Item 16D “Exemptions from the Listing Standards for Audit Committees”.

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Nomination and Remuneration Committee

Our Nomination and Remuneration Committee was formed pursuant to Board of Commissioner’s decree No.003/KEP/DK/2005 dated April 21, 2005 regarding the Establishment of the Nomination and Remuneration Committee.

The objective of the Nomination and Remuneration Committee is to establish, administer and enforce corporate governance principles in the process of nomination for strategic management positions and the determination of the Board of Directors’ remuneration. The duties of the Nomination and Remuneration Committee are to:

Devise a nomination and selection system for strategic positions within Telkom, referring to corporate governance principles, such as transparency, accountability, responsibility, fairness and independence;
Assist the Board of Commissioners who engaged with the Directors in selecting candidates for strategic positions in Telkom (i.e. one level under the Directors and similarly for Directors and Commissioners of a consolidated subsidiary that contributes 30% or more of our consolidated revenue, such as Telkomsel). Exclusively for Telkomsel, the Committee’s recommendation would be passed on to the holder of the Series A Dwiwarna share; and
Formulate a remuneration system for Directors based on fairness and performance.

As of December 31, 2013, the members of our Nomination and Remuneration Committee were Jusman Syafii Djamal ( President Commissioner ), Hadiyanto, Parikesit Suprapto, Johnny Swandi Sjam, Virano Gazi Nasution and Yuki Indrayadi. To maintain independence in the execution of their tasks, members of the Nomination and Remuneration Committee have no relationship, either directly or indirectly, with us. There are no service contracts or benefits to be provided for Board of Directors of our Company or subsidiaries upon their termination as Board of Directors.

D. EMPLOYEES

We had a total of 25,011 employees as of December 31, 2013, consisting of 17,881 Telkom employees and 7,130 employees of our subsidiaries. This figure represents a decrease 2.6 % compared to the position as of December 31, 2012 , reflecting the continued implementation of our multi exit program initiated in 200 2 which aims to improve efficiency.

The following is our employee profile by position, educational background and age group.

| Position | 2013 — Telkom | Subsidiaries | Telkom
Group | Percentage ( % ) |
| --- | --- | --- | --- | --- |
| Senior Management | 135 | 306 | 441 | 1.8 |
| Middle Management | 2,711 | 1,276 | 3,987 | 15.9 |
| Supervisors | 9,936 | 2,095 | 12,031 | 48.1 |
| Others | 5,099 | 3,453 | 8,552 | 34.2 |
| Total | 17,881 | 7,130 | 25,011 | 100 |

As of December 31, 2013, 25.2 % of our employees did not have a tertiary education (pre university), compared to 45.0 % who had graduated university. This reflects our focus to recruit highly educated candidates with the right qualifications to support our growth.

| Level of
Education | 2013 — Telkom | Subsidiaries | Telkom
Group | Percentage ( % ) |
| --- | --- | --- | --- | --- |
| Pre University | 5,632 | 665 | 6,297 | 25.2 |
| Diploma Graduates | 4,260 | 974 | 5,234 | 20.9 |
| University Graduates | 6,262 | 5,002 | 11,264 | 45.0 |
| Post Graduates | 1,727 | 489 | 2,216 | 8.9 |
| Total | 17,881 | 7,130 | 25,011 | 100 |

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As of December 31, 2013, employees over the age of 45 continued to dominate our workforce, comprising 65.7 % of our total employees , followed by employees in the 31 to 45 age group which comprised 24.7 % and those under 30 age group which comprised 9.6 % .

| Age
Group | 2013 — Telkom | Subsidiaries | Telkom
Group | Percentage ( % ) |
| --- | --- | --- | --- | --- |
| <30 | 756 | 1,644 | 2,400 | 9.6 |
| 31 -
45 | 4,170 | 2,001 | 6,171 | 24.7 |
| >45 | 12,955 | 3,485 | 16,440 | 65.7 |
| Total | 17,881 | 7,130 | 25,011 | 100 |

A pproximately 78.3% of our employees were located in western Indonesia and approximately 21.7% of our employees were located in eastern Indonesia.

Retirement Program

The retirement age for all our employees is 56. We have two pension schemes, which are ( a ) Defined Benefit Pension Plan (“DBPP”) tailored for permanent employees who were hired prior to July 1, 2002, and ( b ) Defined Contribution Pension Plan (“DCPP”) that applies to other permanent employees.

a. Defined Benefit Pension Plan (“ DBPP ”)

DBPP is calculated for participants based on years of service, salary level at retirement and is transferable to dependent families if the respective employee passes away. Telkom Pension Fund Division administers the program while the main source of pension fund comes from us and employee contributions. Employees participate in the program with 18% of their basic salary (before March 2003, employee contribution rate was 8.4%) while we contribute the remaining balance. The minimum monthly pension benefit for retired employees is approximately Rp 425,000 per month. Our contribution to the pension fund reached Rp187 billion, Rp186 billion and Rp 182 billion, respectively, for the years ended December 31, 2011, 2012 and 2013.

Telkomsel operates its own DBPP for its employees. With this program, employees are entitled to retirement benefits calculated based on their latest basic salary or take-home pay and years of services. PT Asuransi Jiwasraya (Persero) manages this program after they secured annual insurance contracts. Up to 2004, employees would contribute 5% of their monthly basic salaries to the program, while Telkomsel would contribute the remaining balance. Since 2005, Telkomsel has contributed the entire amount to the program.

Infomedia also has its own DBPP for its employees.

b. Defined Contribution Pension Plan (“ DCPP ”)

We operate a Defined Contribution Pension Plan for permanent employees who were recruited on or after July 1, 2002. DCPP is managed by several appointed financial institutions pension fund from which employees can choose. Our contribution to the financial institutions pension fund is determined by the portion taken from participating employee’s basic salary, which totalled Rp5 billion, Rp5 billion and Rp 6 billion, respectively, for the years ended December 31, 2011, 2012 and 2013.

To create a more effective and competitive business environment, we also have an Early Retirement Program (“ERP”). The program is run in line with the execution of the 2013-2017 Human Capital Master Plan which is expected to release 1,548 employees. This program is offered to employees who are deemed to have met certain requirements in terms of education, age, position and performance. From 2002 through December 31, 2013 , we spent Rp7.3 trillion as compensation for 14,195 employees who participated in the program. In 2013, we did not execute an early retirement program.

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M anagement of Employee Relations with Management

Pursuant to the Presidential Decree No . 83 / 1998 regarding Ratification of ILO Convention No.87 / 1948 regarding Freedom of Association and Protection of the Right Organize, our employees established the Telkom Employees Union (“ SEKAR” ) . As of December 31, 2013, SEKAR represented a total of 16,283 employees or 91.1 % of our total workforce.

Pursuant to Law No . 13 / 2003 regarding Manpower and Regulation of the Minister of Manpower and Transmigration No.PER.16/2011 concerning Procedures Preparation and Ratification of Company Regulations and Preparation and Registration Collective Work Agreement (“CWA”) , SEKAR is entitled to represent employees in the negotiation of the CWA with management. To renew the expired CWA IV, negotiations for the CWA V were conducted during 2013. These negotiations have resulted in an agreement that was signed by both parties on August 23, 2013, and has been ratified by the Directorate General of Work Requirement, Welfare and Discrimination Analysis of the Ministry of Manpower and Transmigration. CWA V is in effect until August 23, 2015.

Telkomsel and Infomedia also have employees ’ union s . Telkomsel’s employees ’ union, “ SEPAKAT ” , has 3,972 members or representing 93.1 % of Telkomsel’s total employees. Neither we nor our subsidiaries with employees union have experienced material labor action.

E. SHARE OWNERSHIP

As of February 28, 2014, none of our Directors or senior managers beneficially owned more than 1.0% of our outstanding shares of common stock. In addition, no Commissioners beneficially own our shares of common stock. For information regarding share ownership of our directors and senior management, see Item 7 “Major Shareholders and Related Party Transactions – Major Shareholders.”

Employee Stock Ownership Program

The Employee Stock Ownership Program (“ESOP”) is an employee-owner scheme that provides our employee with an ownership interest in our C ompany. At our initial public offering on November 14, 1995, a total of 116,666,475 shares were issued to 43,218 employees. On June 14, 2013, the Company transferred a portion of the treasury stock to its employees as part of the 2012 annual incentives. The 59,811,400 (equal to 299,057,000 shares after stock split) treasury stock transferred to 24,993 employees which had a total fair value of Rp661 billion.

As of February 28, 2014, 228,546,810 of our shares were owned by 23,520 of our employees and our retirees.

Stock Split

At our general shareholders' meeting on April 19, 2013, a stock split with a ratio of 1:5 was approved by our shareholders. New Series B common shares were deposited into shareholders accounts on September 2, 2013, as part of the stock split. In connection with our stock split, effective September 3, 2013, we changed the ratio of our ADSs from one ADS representing 40 Series B common shares, par value Rp250 per share, to one ADS representing 200 Series B common shares, par value Rp50 per share.

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A. MAJOR SHAREHOLDERS

Shareholder Composition

Our authorized capital stock consists of one Series A Dwiwarna share and 399,999,999,999 Series B (common stock) shares. Our authorized shares, 100,799,996,400 of which are issued and fully paid, consists of one Series A Dwiwarna share and 100,799,996,399 shares of Series B common stock. The Series A Dwiwarna share is owned by the Government and carries special voting rights and the right to nominate, and to veto the appointment and removal of, any director or commissioner, the issue of new shares and amendments to our Articles of Association including amendments to merge or dissolve us prior to the expiry of its term of existence, to increase or decrease our authorized capital or to reduce our subscribed capital. The material rights and restrictions placed on the common stock also apply to the Dwiwarna share, except that the Government cannot transfer the Dwiwarna share. The Government’s ownership of the Dwiwarna share gives it effective control over our Company even if it reduces its ownership of our common stock, and its rights with respect to the Dwiwarna share may only be modified by an amendment of our Articles of Association, which the Government may veto.

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Company Shareholders per February 28, 2014

| | Series A
Dwiwarna Share | Series B
Shares (Common
Stock) | Percentage of
Ownership |
| --- | --- | --- | --- |
| Government | 1 | 51,602,353,559 | 53.14 |
| Public | | 45,498,500,040 | 46.86 |
| Capital Subtotal (issued and
outstanding) | 1 | 97,100,853,599 | 100.00 |
| Treasury Stock | | 3,699,142,800 | - |
| Total | 1 | 100,799,996,399 | 100.00 |

Shareholders Owning More Than 5% of Shares (Major Shareholder)

| Title of
Class | Person or
Group | Number of
Shares | Percentage of
Ownership |
| --- | --- | --- | --- |
| Series A | Government | 1 | - |
| Series B | Government | 51,602,353,559 | 53.14 |

During the past three years, the percentage of shares held by Government was 52.8%, 53.9% and 53.1% as of February 28 , 2012, 2013 and 2014 , respectively.

Shares Owned by Directors

| Directors | Number of
Shares | Percentage of
Ownership |
| --- | --- | --- |
| Directors | | |
| Indra Utoyo | 27,540 | <0.01 |
| Honesti Basyir | 540 | <0.01 |
| Priyantono Rudito | 540 | <0.01 |
| Sukardi Silalahi | 540 | <0.01 |
| Total | 2 9 , 160 | <0.01 |

Shareholders Owning Less Than 5% of Shares

| Group | Number of
Shares | Percent age of Ownership |
| --- | --- | --- |
| Foreign | | |
| Business | 37,630,826,424 | 38.75 |
| Individual | 15,345,500 | 0.01 |
| Local | | |
| Business Entities | | |
| Companies | 2,298,992,229 | 2.37 |
| Mutual Funds | 2,441,456,684 | 2.51 |
| Insurance Companies | 1,899,435,600 | 1.96 |
| Pension Funds | 613,687,650 | 0.63 |
| Other Business Entities | 59,213,990 | 0.06 |
| Individuals | 539,541,963 | 0.56 |
| Total | 45,498,500,040 | 46.85 |

Relationship with the Government and Government Agencies

Our relationship with the Government is multi-faceted. The Government is our majority and controlling shareholder. It is also our regulator as it adopts, administers and enforces relevant laws that regulate telecommunications sector, sets tariffs and issues licenses. It is also one of our customers and one of our lenders.

As used in this section, the term “Government” includes the Government of Indonesia and its ministries, directly-owned government departments and agencies, but excludes SOEs.

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The Government as Shareholder

The Government is our majority and controlling shareholder and owned 53.1 % of our common stock as of February 28 , 201 4 . Its ownership of the Series A Dwiwarna share gives it special voting and veto rights. Under relevant laws, the “ownership” of our common stock and the single outstanding Series A Dwiwarna share is vested in the Ministry of Finance (“MoF”). In turn, and under the authority of the MoF, the Minister of State-Owned Enterprise (“MSOE”) exercises the rights vested in these securities as our “controlling shareholder”.

As our majority shareholder and controlling shareholder, the Government has an interest in our performance, both in terms of the service we provide to the nation and our ability to operate on a commercial basis. The material rights and restrictions that apply to our common stock also apply to the Series A Dwiwarna share, except that the Government may not transfer the Series A Dwiwarna share, and has right of veto with regard to: (1) the nomination, appointment and removal of our Directors; (2) the nomination, appointment and removal of our Commissioners; (3) the issuance of new shares and (4) any amendments to our Articles of Association, including with respect to actions to merge or dissolve our Company, increase or reduce our authorized capital stock , or reduce our subscribed capital stock .

Accordingly, the Government effectively has control over these matters even if it owns less than a majority share of the outstanding common stock. The Government’s rights with respect to the Series A Dwiwarna share will not expire unless there is a change that requires the amendment of our Articles of Association, which would require the consent of the Government as the holder of Series A Dwiwarna share.

The Government as Regulator

The Government regulates the telecommunications sector through the MoCI. The MoCI has the authority to issue regulations that implement laws, which are typically broad in scope. Through such decrees the MoCI defines the structure of the industry, determines tariff formulas, establishes our USO, and otherwise controls many factors that could influence our competitive position, operations and financial position. Through the DGPT, the MoCI regulates the allocation of frequencies and sets numbers for fixed telephone lines. We are required to obtain a license from the DGPT for each type of service offered, including for the frequencies we use (as allocated by the MoCI). We and other operators are required to pay frequency usage fees. Telkomsel also holds licenses issued by the MoCI (some of which were previously issued by the Minister of Communications) for the provision of cellular services, and from the Indonesian Investment Coordinating Board in relation to Telkomsel’s investments for the development of cellular phone services with national coverage, including the expansion of network coverage. The Government, through the MoCI as regulator, has the authority to issue new licenses for the establishment of new joint ventures and other new arrangements, particularly in telecommunications.

Certain licenses require us to pay a concession fee to operate. We pay concession fees for telecommunications services provided and radio frequency usage charges to the MoCI. Concession fees amounted to Rp451 billion in 2012 and Rp442 billion (US$ 3 6 million) in 2013. Concession fees as a percentage of total expenses amounted to 0. 8 % in 2012 and 0. 8 % in 2013. Radio frequency usage charges amounted to Rp3,002 billion in 2012 and Rp3,098 billion (US$255 million) in 2013. Radio frequency usage charges as a percentage of total expenses amounted to 5.5% in 2012 and 5.4% in 2013. USO charges to the MoCI amounting to Rp994 billion in 2012 and Rp1,059 billion (US$ 87 million) in 2013. USO charges as a percentage of our total expenses came to 1. 8 % in 2012 and 1. 8 % in 2013.

The Government as Lender

In July 1994, the Government arranged a facility under which certain foreign institutions provided us with a two-step loan for certain expenditures (the “sub-loan borrowings”). The sub-loan borrowings were made through the Government and are guaranteed by it. As of December 31, 2013, we had a total of Rp1,915 billion (US$157 million) in such outstanding two-step loans, including current maturities. We are required to pay the Government interest and repay the principal, which the Government then remits to the respective lenders. As of December 31, 2013, 73.5% of such sub-loan borrowings were denominated in foreign currencies, with the remaining 26.5% denominated in Rupiah. In 2013, the annual interest rates charged 6.79% on loans repayable in Rupiah, 4.0% on those denominated in US Dollar and 3.1% for those denominated in Japanese Yen.

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The Government as Customer

Certain Government departments and agencies purchase services from us as direct customers, the terms of which are negotiated on a commercial basis. No services are provided for free or on an in-kind basis. We deal with these departments and agencies as separate customers. In 2013, the amount of revenues from Government departments and agencies was Rp508 billion, which was approximately 0.61% of our consolidated revenues and did not constitute a material part of our revenues. The Government departments and agencies are treated for tariff purposes with respect to connection charges and monthly charges as “residential”, which tariffs are lower than the business service rates. This does not apply to the tariffs for local, long distance and IDD calls.

It is our policy not to enter into any transactions with affiliates unless the terms are no less favorable to us than they would be with a third party. The MSOE has advised us that it would not cause us to enter into transactions with other entities under its control unless the terms were consistent with our policy as referred to above.

Pursuant to OJK regulations, because we are listed on the IDX, any transaction where there is an inherent conflict of interest (as defined below) with another IDX-listed company must be approved by majority of the holders of our common stock who do not have a conflict of interest in the proposed transaction, unless such conflict of interest existed before listing and was fully disclosed in the offering documents.

OJK regulations define a conflict of interest as a conflict between our economic interests and the shareholders’ interests on the one hand, and on the other, the personal economic interests of members of the Board of Commissioners, Board of Directors or other principal shareholders (defined as a holder of 20% or more of our common stock) or their affiliates, either jointly or individually. A conflict of interest also exists if a member of the Board of Commissioners or Board of Directors or a principal shareholder or their respective affiliates is involved in a transaction in which its personal interests may be in conflict with ours. OJK has the authority to enforce these rules regarding conflicts of interest and holders of our common stock are also entitled to bring a suit to enforce these.

Under OJK regulations, transactions between us and other State-Owned or controlled enterprises may cause a conflict of interest. In such cases, the approval of the disinterested shareholders must be obtained if a conflict of interest arises. We believe that many transactions conducted with State-Owned or controlled enterprises are on an arms-length, commercial basis and do not constitute conflict of interest transactions that would require an independent shareholders vote. Such transactions include our sale of telephone services to State-Owned or controlled enterprises and our purchase of electricity from a State-Owned Enterprise. We expect that from time to time, in connection with the development and growth of our business we would enter into joint ventures, agreements or transactions with such enterprises. Under such circumstances, we may consult OJK to determine whether a proposed joint venture, agreement or transaction would require a vote of independent shareholders under OJK rules. If OJK is of the view that such transaction would not require such a vote, we would proceed without seeking the independent shareholders’ approval. Otherwise, we would seek the requisite approval or abandon the proposed action .

Proportion of Common Stock Held in Indonesia and Abroad

As of February 28, 201 4 , we had 44,518 common stock shareholders, including the Government. This total includes 38,696,301,724 common stock shares owned by 1,821 shareholders outside Indonesia. As of the same date, there were 104 ADS shareholders who owned 56,880,177 ADS (1 ADS is equivalent to 200 common stock shares).

Change in Control

As of the date of this Annual Report, we are not aware of any plans or developments that could result in a change of control over us, including changes that are still at the planning stage.

B. RELATED PARTY TRANSACTIONS

We are party to certain agreements and engage in transactions with certain parties that are related to us, such as cooperatives and foundations. Such parties include the Government and entities related to or owned or controlled by the Government, such as other State-Owned Enterprises. For further details on our related party transactions, see Note 35 to our Consolidated Financial Statements.

C. INTEREST OF EXPERTS AND COUNSEL

Not applicable.

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ITEM 8. FINANCIAL INFORMATION

A. CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

See Item 18 “Financial Statements” for our audited Consolidated Financial Statements filed as part of this Form 20-F.

Material Litigation

In the ordinary course of business, we have been named as defendant in various legal actions related to land disputes, monopolistic practice and unfair business competition, and SMS cartel practices. W e do not believe that subsequent investigations or court decisions regarding those cases will have significant financial impact on us or our subsidiaries. Based on management's estimates on the probable outcomes of those cases, we have made provisions of Rp 49 billion as at December 31, 2013.

For cases involving the Company and cases involving subsidiaries , see N ote 39 to our Company’s Consolidated Financial Statements.

In 2013, there were no legal proceedings involving any serving member of the BoC and BoD.

Dividend Policy

The AGMS has the authority to determine the amount of dividends we pay. Our dividend payout ratio for 2013 will be decided at the AGMS scheduled for 2014.

| Dividend Year | Date
of AGMS | Payout Ratio (%) 1 | Amount of Dividends (Rp
million) | Dividend per Share (Rp) 6 |
| --- | --- | --- | --- | --- |
| 2008 | June
12, 2009 | 55 | 5,840,708 2 | 59.39 |
| 2009 | June
11, 2010 | 50 | 5,666,070 0 | 57.61 |
| 2010 | May
19, 2011 | 55 | 6,345,350 3 | 64.52 |
| 2011 | May
11, 2012 | 65 | 7,127,333 4 | 74.21 |
| 2012 | April
19, 2013 | 65 | 8,352,597 5 | 87.24 |

(1) Represents the percentage of profit attributable to owners of the parent paid to shareholders in dividends.

(2) Including interim cash dividend paid in December 2009 amounting to Rp524,190 million.

(3) Including interim cash dividend paid in December 2010 and January 2011 amounting to Rp276,072 million and Rp250,085 million respectively.

(4) Consists of cash dividend amounting to Rp6,030,820 million and special cash dividend amounting Rp1,096,513 million.

(5) Consists of cash dividend amounting to Rp7,067,582 million and special cash dividend amounting Rp1,285,01 5 million.

(6) After stock split

Telkomsel Dividend

Pursuant to AGMS in April 2013, Telkomsel approved the payment of a cash dividend of Rp13,358 billion, which represented 85% of Telkomsel’s net profit in 2012, Rp4, 675 billion of this dividend was distributed to SingTel Mobile.

In 2011, 2012 and 2013, cash dividends were paid to SingTel Mobile, a non-controlling shareholder of Telkomsel, amounting to Rp2,726 billion, Rp3, 591 billion and Rp4, 675 billion.

B. SIGNIFICANT CHANGES

See Note 43 to our Consolidated Financial Statements.

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ITEM 9. THE OFFER AND LISTING

A. OFFER AND LISTING DETAILS

The table below shows the high, low, closing quoted prices, trading volume, outstanding shares and market capitalization for our common stock on the IDX during the periods indicated:

| Calendar
Year | Price per Share
of Common Stock | | | Volume (shares) | Outstanding
Shares | Market
Capitalization (Rp
billion) * |
| --- | --- | --- | --- | --- | --- | --- |
| | High | Low (in
Rupiah) | Closing | | | |
| 2009 | 2,070 | 1,150 | 1,890 | 20,872,067,500 | 98,347,123,900 | 190,512 |
| 2010 | 1,960 | 1,390 | 1,590 | 28,539,250,000 | 98,347,123,900 | 160,272 |
| 2011 | 1,610 | 1,320 | 1,410 | 22,207,895,000 | 96,931,696,600 | 142,128 |
| 2012 | 1,990 | 1,330 | 1,810 | 23,002,802,500 | 95,745,344,100 | 182,448 |
| First Quarter | 1,430 | 1,330 | 1,400 | 5,197,855,000 | 96,096,969,100 | 141,120 |
| Second Quarter | 1,740 | 1,400 | 1,630 | 6,934,820,000 | 95,921,374,100 | 164,304 |
| Third Quarter | 1,970 | 1,590 | 1,890 | 5,100,152,500 | 95,767,844,100 | 190,512 |
| Fourth Quarter | 1,990 | 1,730 | 1,810 | 5,769,975,000 | 95,745,344,100 | 182,448 |
| 2013 | 2,580 | 1,760 | 2,150 | 27,839,305,000 | 97,100,853,600 | 216,720 |
| First Quarter | 2,230 | 1,760 | 2,200 | 5,993,025,000 | 95,745,344,100 | 221,760 |
| Second Quarter | 2,580 | 1,900 | 2,250 | 8,265,647,500 | 96,044,401,100 | 226,800 |
| Third Quarter | 2,450 | 1,950 | 2,100 | 7,206,438,500 | 97,100,853,600 | 211,680 |
| Fourth Quarter | 2,375 | 1,980 | 2,150 | 6,374,194,000 | 97,100,853,600 | 216,720 |
| September | 2,450 | 1,950 | 2,100 | 2,644,068,500 | 97,100,853,600 | 211,680 |
| October | 2,375 | 2,100 | 2,350 | 2,019,709,500 | 97,100,853,600 | 236,880 |
| November | 2,350 | 2,025 | 2,175 | 2,055,114,500 | 97,100,853,600 | 219,240 |
| December | 2,200 | 1,980 | 2,150 | 2,299,370,000 | 97,100,853,600 | 216,720 |
| 2014 | | | | | | |
| January | 2,275 | 2,060 | 2,275 | 1,758,433,800 | 97,100,853,600 | 229,320 |
| February | 2,420 | 2,170 | 2,325 | 2,015,617,700 | 97,100,853,600 | 234,360 |

Market capitalization is calculated by multiplying the share price by the number of issued and fully paid shares which is 100,799,996,400 shares.

The price per share of the common stock on the table above reflects this two splits for all periods shown :

We conducted a two for one split of our common stock from a nominal value of Rp500 per share to Rp250 per share as resolved by the AGMS on July 30, 2004, effective October 1, 2004.
We conducted a five for one split of our common stock from a nominal value of Rp250 per share to Rp50 per share as resolved by the AGMS on April 19, 2013, effective September 2, 2013.

On December 30, 2013, the last day of trading on the IDX in 2013, the closing price for our common stock was Rp 2,150 per share.

The high, low, closing prices and trading volume for our ADSs on the NYSE and the LSE for the periods indicated are shown in the table below. Trading in ADSs is effected “off exchange” on the LSE. Under LSE rules, off exchange trading means that transactions are carried out on other exchanges and once the transaction has taken place, it is reported to the LSE.

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| Calendar
Year | Price per ADS
(NYSE) — High | Low (in US
Dollars) | Closing | Volume (in
ADS) | Price per ADS
(LSE) — High | Low (in US
Dollars) | Closing | Volume (in
ADS) |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 2009 | 41.55 | 20.19 | 39.95 | 67,767,999 | 40.76 | 25.67 | 41.02 | 3,757 |
| 2010 | 43.80 | 30.33 | 35.65 | 69,803,576 | 42.00 | 30.76 | 34.91 | 19,673 |
| 2011 | 36.96 | 30.29 | 30.74 | 69,279,100 | 35.89 | 21.02 | 30.50 | 1,406,292 |
| 2012 | 41.14 | 29.26 | 36.95 | 88,190,589 | 40.12 | 30.24 | 36.50 | 746,278 |
| First Quarter | 31.69 | 29.26 | 30.36 | 19,265,880 | 31.04 | 30.24 | 30.95 | 236,546 |
| Second Quarter | 37.00 | 30.38 | 34.83 | 32,660,280 | 36.64 | 30.40 | 33.70 | 293,809 |
| Third Quarter | 41.14 | 34.28 | 38.93 | 19,696,121 | 39.78 | 34.30 | 39.10 | 88,412 |
| Fourth Quarter | 41.00 | 36.00 | 36.95 | 16,568,308 | 40.12 | 36.50 | 36.50 | 127,511 |
| 2013 | 50.61 | 33.75 | 35.85 | 67,061,105 | 50.59 | 33.44 | 35.33 | 6,579,103 |
| First Quarter | 45.32 | 36.17 | 45.08 | 13,876,752 | 45.83 | 37.06 | 45.28 | 12,819 |
| Second Quarter | 50.61 | 38.75 | 42.74 | 15,688,290 | 50.59 | 39.31 | 45.34 | 6,465,258 |
| Third Quarter | 47.20 | 34.54 | 36.31 | 18,713,653 | 47.44 | 35.62 | 36.27 | 79,240 |
| Fourth Quarter | 41.69 | 33.75 | 35.85 | 18,782,410 | 41.69 | 33.44 | 35.33 | 21,786 |
| September | 42.39 | 34.54 | 36.31 | 6,791,001 | 42.10 | 35.62 | 36.27 | 44,011 |
| October | 41.69 | 36.95 | 40.76 | 5,975,745 | 41.69 | 37.29 | 41.69 | 20,830 |
| November | 40.90 | 34.70 | 36.54 | 5,866,608 | 40.95 | 34.43 | 36.36 | 0 |
| December | 37.21 | 33.75 | 35.85 | 6,940,057 | 37.38 | 33.44 | 35.33 | 956 |
| 2014 | | | | | | | | |
| January | 37.49 | 33.91 | 36.27 | 5,498,292 | 37.26 | 33.83 | 37.36 | 0 |
| February | 40.53 | 35.19 | 39.23 | 5,149,305 | 38.06 | 35.98 | 38.06 | 0 |

On December 31, 2013, the last day of trading on the NYSE and LSE in 2013, the closing price for one Telkom ADS was US$ 36 and US$ 35 , respectively.

B. PLAN OF DISTRIBUTION

Not applicable.

C. MARKETS

Our common stock is listed and traded on the IDX. Our ADSs are also listed and traded on the NYSE and the LSE as ADSs, where one ADS represents 200 shares of Common Stock. Our shares are also Publicly Offered Without Listing (“POWL”) in Japan.

The Indonesian Stock Market

Indonesia’s stock market, known as the IDX, grew out of the December 1, 2007 merger of two stock exchanges operating in two different locations in Indonesia, the Jakarta Stock Exchange in the capital and the Surabaya Stock Exchange in East Java.

As of December 31, 2013, the IDX had 483 issuers for equity and 114 active brokerage houses. In 2013, IDX recorded a trading volume of 1,343 billion shares. As of December 31, 2013, the total market capitalization was valued at Rp4,219 trillion (US$346.7 billion).

Trading is divided into three segments: the regular market, negotiated market and the cash market (except for rights issues, which can only be traded on the cash market and the negotiated market for the first session) . The regular market is the mechanism for trading stock in standard lots on a continuous auction basis during exchange hours. Auctions on the IDX on regular market and cash market take place according to the price and time priorities. Price priority refers to the giving of priority to buying orders at a higher price or selling orders at a lower price. If buying or selling orders are placed at the same price, priority is given to the earlier placed buying or selling order (time priority). Trading on the negotiated market is conducted through direct negotiation between (i) IDX members, (ii) clients through one IDX member, (iii) a client and an IDX member, or (iv) an IDX member and the PT Kliring Penjaminan Efek Indonesia (“KPEI”). KPEI provides clearing and guarantee services of stock exchange transactions settlement. It also improves efficiency and certainty of transactions settlement in IDX.

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On November 14, 2012 , IDX issued a Decree of BOD No. Kep-00399/BEI/11-2012 regarding the Change of Trading Regulation No. IIA on Equity – Type Securities Trading which changed the IDX’ s trading hours , e ffective January 2, 2013, with trading sessions as follows:

Trading Session	Market	Day	Trading Hours
Pre-opening	Regular	Monday – Friday	08.45.00 – 08.55.00
1 st	Regular	Monday – Thursday	09.00.00 – 12.00.00
	Cash
		Friday	09.00.00 – 11.30.00
	Negotiation
2 nd	Regular	Monday – Thursday	13.30.00 – 15.49.59
		Friday	14.00.00 – 15.49.59
	Negotiation	Monday – Thursday	13.30.00 – 16.15.00
		Friday	14.00.00 – 16.15.00
Pre-closing	Regular	Monday – Friday	15.50.00 – 16.00.00
Post Trading	Regular	Monday – Friday	16.05.00 – 16.15.00

On November 8, 2013 , IDX issued a Decree of BOD No. Kep-00071/BEI/11-2013 regarding the Change of Trading Regulation No. IIA on Equity – Type Securities Trading that change the lot size, tick price and maximum price movement , e ffective January 2 , 2013,

lot size changed from 500 shares to 100 shares and tick price and maximum share price movement changed as follow s :

| Previous — Group
Price | Tick
Price | Maximum Share Price
Movement | New — Group
Price | Tick
Price | Maximum Share Price
Movement |
| --- | --- | --- | --- | --- | --- |
| ≤Rp200 | Rp1 | Rp10 | ≤Rp500 | Rp1 | Rp20 |
| Rp200 – Rp500 | Rp5 | Rp50 | | | |
| Rp500 –
Rp2,000 | Rp10 | Rp100 | Rp500 –
Rp5,000 | Rp5 | Rp100 |
| Rp2,000 –
Rp5,000 | Rp25 | Rp250 | | | |
| ≥Rp5,000 | Rp50 | Rp500 | ≥Rp5,000 | Rp25 | Rp500 |

Transactions on the IDX regular market must be settled no later than the third trading day after the transaction. Transactions on the negotiated market are settled on the basis of the agreement between the selling exchange members and the buying exchange members, on a transaction by transaction basis. Transactions on the IDX cash market must be settled on the day of the transaction and reported to the IDX. If an exchange member defaults on the settlement of a transaction, the securities can be traded by direct negotiation on cash and carry terms. Each exchange member is required to pay a transaction fee as stipulated by the IDX. Any delay in payment of the transaction fee is subject to a fine of 1% of the outstanding amount for each day of delay. The IDX may impose sanctions on its members for any violation of exchange rules, which may include fines, written warnings, suspension or revocation of licenses.

When conducting share transactions on the IDX, each exchange member is required to pay a transaction cost for transactions on the regular market and cash market of 0.03%, guarantee fund of 0.01% of the transaction value and VAT and other tax obligation. For the negotiated market, a transaction cost is 0.03% or depended any other amount stipulated by the IDX is applicable . A minimum monthly transaction fee of Rp2 million is applied as a contribution for the provision of exchange facilities and continues in effect for members who are suspended or Exchange Member Approval (“SPAB”) revoked.

Since the global financial crisis in the last quarter of 2008 that caused a typical share price movements , the IDX has applied a policy of auto rejection, a mechanism whereby share trading can be halted automatically in order to maintain orderly, fair and efficient trading. Following changes made by the IDX in October 2008 and January 2009 the auto rejection trigger levels are 35% above or below the reference price for stocks in the Rp50 - Rp200 price range, 25% for stocks in the Rp200 to Rp5,000 range, and 20% for stocks priced above Rp5,000. The auto rejection level in the case of an IPO is determined at a level which is twice as high as for normal trading. Auto rejection also arises when selling offer or buying request volume reaches of over 5 billion shares or 5% of total shares listed, whichever is smaller.

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Trading on the NYSE and LSE

See Item 12 “Description of Securities Other Than Equity Securities”.

D. SELLING STOCKHOLDERS

Not applicable.

E. DILUTION

Not applicable.

F. EXPENSES OF THE ISSUE

Not applicable.

ITEM 10. ADDITIONAL INFORMATION

A. SHARE CAPITAL

Not applicable.

B. MEMORANDUM AND ARTICLES OF ASSOCIATION

Description of Articles of Association

Our Articles of Association are registered in accordance with the Limited Liability Company Law No.1 of 1995, and approved by Ministerial Decree No.C2-7468.HT.01.04.TH.97 of 1997. Pursuant to the issuance of the Company Law No.40 of 2007 which revoked Limited Liability Companies Law No.1 of 1995, we have amended our Articles of Association which was approved by the Minister of Law and Human Rights of the Republic of Indonesia pursuant to Decree of the Minister of Justice and Human Rights No.AHU.46312.AH.01.02 of 2008 dated July 31, 2008 and registered in State Gazette of the Republic of Indonesia No.84 dated October 17, 2008, Supplement to State Gazette No.20155.

Our Articles of Association ha ve been amended several times, the latest amendment of which primarily related to the change of our capital structure resulting from our 5-for-1 stock split whereby each share with par value of Rp250 split into five shares of par value Rp50 per share, and changes relating to exclusion of the p artnership and c ommunity d evelopment p rogramme (PKBL) from the w ork p lan and c ompany b udgets, based on notarial deed No. 11 dated May 8, 2013 of Ashoya Ratam, S.H., MKn. The latest amendment was accepted and approved by the Ministry of Law and Human Rights of the Republic of Indonesia (“MoLHR”) in its Letter No. AHU-AH.01.10-22500 dated June 7, 2013.

Under Article 3 of the Articles of Association, our business is to provide telecommunications networks and telecommunications and information services, and to optimize our resources, with due attention to the prevailing laws and regulations. To attain the aforementioned objectives, we may undertake business activities that incorporate the following:

1. Main Business

a. To plan, build, deliver, develop, operate, market/sell/lease, and maintain telecommunications and information networks in the broadest sense with respect to provisions of laws and regulations.

b. To plan, develop, deliver, market/sell and improve telecommunications and information services in the broadest sense with respect to provisions of laws and regulations.

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2. Supporting Business

a. To provide payment transaction and remittance services via telecommunications and information networks.

b. To carry out activities and other undertakings in respect of optimizing our resources, among others the utilization of our property and equipment and moveable assets, information system facilities, education and training facilities, and maintenance and repair facilities.

In accordance with the Company 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. Each Director receives a bonus if we surpass certain financial and operating targets, the amounts of which are determined by the shareholders at the AGMS.

The Articles state that any transaction involving a conflict of interest between our Company and our Directors, Commissioners and shareholders should be approved by a shareholders meeting, where approval is required from more than half of the votes of the independent shareholders.

A member of the Board of Directors shall have no right to represent the Company if such member has a conflict of interest with the Company. To take any legal actions in the form of transactions containing conflict of interests between the personal economic interest of members of the Board of Directors, Board of Commissioners or shareholders and the Company’s economic interest, the Board of Directors requires the approval of a General Meeting of Shareholders. Such General Meeting of Shareholders must be attended by independent shareholders (i.e. those shareholders having no conflict of interest) who hold more than one-half of the total number of shares with valid voting rights held by all independent shareholders and the resolution must be passed by the affirmative votes of independent shareholders holding more than one-half of the total number of shares with valid voting rights. In passing any resolutions, the main shareholders, members of the Board of Directors and members of the Board of Commissioners with conflicts of interests with the transaction that is being decided shall not be entitled to give any recommendation or opinion. Any resolution passed by independent shareholders shall be confirmed by the whole meeting quorum to be followed by all shareholders present in the meeting, including those with conflicts of interest.

Compensation of members of the Board of Directors is decided at a General Meeting of Shareholders, although the authority may be delegated to the Board of Commissioners, in which case compensation shall be determined based on a resolution of the Board of Commissioners.

Our Article of Association is not arrange borrowing power exercisable by Board of Director and how such borrowing power can be varied.

The Board of Directors is responsible for leading and managing our Company in accordance with our objectives and purposes and to control, preserve and manage the assets of our Company.

The Articles do not contain any requirement for the Directors to: (i) retire by a specified age, or (ii) to own any or a specified number of shares of our Company. The rights, preferences and restrictions attaching to each class of the shares of our Company in respect of specified matters are set forth below:

Dividend rights . Dividends are to be paid based upon our financial condition and in accordance with the resolution of the shareholders in a general meeting, which will also determine the form of and time for payment of the dividend;
Voting rights . The holder of each voting share is entitled to one vote at a GMS;
Rights to share in our Company’s profits . See dividend rights;
Rights to share in any surplus in the event of liquidation . Stockholders are entitled to surplus in the event of liquidation in accordance with their proportion of shareholding, provided the nominal value of the common stock that they hold is fully paid-up;
Redemption provisions . There are no stock redemption provisions in our Articles. However, based on Article 37 of the Company Law, we may buy back up to 10% of our issued and outstanding shares;
Reserved fund provisions . Retained earnings up to a minimum of 20% of our issued capital are to be set aside to cover potential losses suffered by us. If the amount in the reserved fund exceeds 20% of our issued capital, a GMS may authorize us to utilize such excess funds for the purposes of our Company;
Liability for further capital calls . Our shareholders may be asked to subscribe for new shares in our Company from time to time. Such rights are to be offered to shareholders prior to being offered to third parties and may be transferred at the option of the shareholder. The Board of Directors is authorized to offer the new shares to third parties in the event that an existing shareholder is unable or unwilling to subscribe for such new shares; and
Provisions discriminating against any existing or prospective holder of such securities because of such shareholder owning a substantial number of shares . The Articles do not contain any such provision.

In order to change the rights of shareholders, an amendment to the relevant provisions of the Articles would be required. Any amendment to the Articles requires the holder of the Series A Dwiwarna Share and the other shareholders or their authorized proxies jointly representing at least two thirds (2/3) of the total number of votes cast in the meeting.

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Any GMS may only be convened upon the issuance of the requisite notice by us. In addition, the Board of Directors may issue such notice and convene an EGMS based on a written request by the Board of Commissioners or one or more shareholders holding at least 10% of our shares. The notice is to be published in at least two newspapers in Indonesia having general circulation within Indonesia and other media in accordance with the provisions of Indonesian capital markets rules and regulations. Such announcement/notice of a GMS is required to be given to shareholders at least 14 days (excluding the date of the notice and the date of the invitation) prior to the invitation for the GMS. The invitation for the GMS is also required to be published in at least two newspapers in Indonesia having general circulation within Indonesia and other media in accordance with the provisions of Indonesian capital markets rules and regulations at least 14 days (excluding the date of the invitation and the date of the meeting) prior to the GMS. The quorum for AGMS or EGMS is shareholders representing more than half of the total shares with voting rights issued by us. In case the quorum is not reached, then the invitation to the second meeting can be made without prior announcement/notice that a invitation to a meeting will be made. Such invitation to the meeting is required to be served at least seven days prior to the second meeting (not including the date of the invitation to the meeting and the date of the meeting). The second meeting will be valid and may pass binding resolutions if attended by shareholders representing at least one third of the total shares with valid voting rights. In case the quorum is not reached at the second meeting, a third meeting may be held, at the Company’s request, with the quorum of attendance to be determined by the Chairman of OJK in accordance with the provisions of the laws.

Stockholders may vote by proxy. All resolutions are to be passed by consensus. If consensus cannot be reached, resolutions are passed by simple majority, unless a larger majority is required by the Articles. The Articles do not contain any limitations on the right of any person, to own our shares or to exercise their right to vote. Indonesian capital market regulations do not contain any limitation on the right of any person, whether local or foreign, to own shares in a company listed on the IDX.

Any takeover of our Company is required to be approved by the holder of the Series A Dwiwarna Share and a majority constituting at least three fourths of the total number of shares at a GMS that must be attended by the holder of the Series A Dwiwarna Share. There are no other provisions in the Articles that would have the effect of delaying, deferring or preventing a change in control of our Company.

Each Director and Commissioner has an obligation to report to OJK with regard to their ownership and any changes in their ownership of our Company, and this obligation also applies to shareholders who have an ownership stake of 5% or more in our paid up capital. We believe that the Articles are not significantly different from those generally prevailing in Indonesia in respect of companies listed on the IDX (other than with respect to provisions and rights relating to the Dwiwarna Share, which are common for SOEs listed on the IDX). We also believe that the provisions in the Articles relating to changes in our capital are not more stringent than that required by Indonesian law.

MATERIAL CONTRACTS

In 2013 and 2012, we did not enter into any new material contracts nor did we amend any existing material contracts, other than contracts entered into or amended in the ordinary course of business as disclosed in Note 38 of our Consolidated Financial Statement s .

D. EXCHANGE CONTROLS

See Item 3 “Key Information – Selected Financial Data – Exchange Controls” included elsewhere in this Form 20-F.

TAXATION

The following summary contains a description of the principal Indonesian and US federal tax consequences of the purchase, ownership and disposition of ADSs or shares of common stock. This summary does not purport to be a complete 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.

Investors should consult their tax advisors about the Indonesian and US Federal, state and local tax consequences to them of the purchase, ownership and disposition of ADSs or shares of common stock.

a. Indonesian Taxation

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”). A “non-resident individual” is a foreign national individual who does not reside or intend to reside in Indonesia and is not physically present in Indonesia at the most 183 days within 12 month period, 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-resident 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.

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1. 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, which, as of the date of this Annual Report is at the rate of 20%, 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 able to comply with the following strict requirements: (i) the recipient of the income is the beneficial owner of the dividends, (ii) the recipient of the income must have submitted a specific form set by the Indonesian Tax Office acting as a Certificate of Residency (the “Certificate of Residency”) that is filled in by the recipient of the income and validated by the competent authority of the country where the recipients are resident and (iii) the recipient of the income does not misuse the tax treaty as set out in the provision on the prevention of misuse the tax treaty. Indonesia has concluded double taxation treaties with a number of 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 US-Indonesia double taxation treaty, the withholding tax on dividends is generally, in the absence of a 25% voting interest, reduced to 15%.

2. Capital Gains

The sale or transfer of common stock through the IDX is subject to a final withholding tax at the rate of 0.1% of the value of the transaction. The broker executing the transaction is obligated to withhold such tax. The holding of founder shares or the sale or transfer of founder shares through an IDX may, under current Indonesian tax regulations, be subject to additional 0.5% final income tax.

Subject to the promulgation of implementing regulations, the estimated net income received or accrued from the sale of movable assets in Indonesia, which may include common stock not listed on an IDX 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%. In 1999, the Ministry of Finance issued a decision that stipulates the estimated net income for the sale of shares received by a non-resident taxpayer in a non-public company to be 25% of the sale price, resulting in an effective withholding tax rate of 5% of the sales price. This is a final withholding tax and the obligation to pay lies with the buyer (if it is an Indonesian taxpayer) or our Company (if the buyer is a non-resident taxpayer). Exemption from withholding tax on income from the sale of shares in a non-public company may be available to non-resident sellers of shares depending on the provisions of the relevant double taxation treaties. In order to benefit from the exemption under the relevant double taxation treaty, the non-resident seller must provide a specific form set by the Indonesian Tax Office acting as a Certificate of Residence that is completed by the recipient of the income and validated by the competent authority of the country where the recipients are resident to the buyer or our Company and to the Indonesian Tax Office that has jurisdiction over the buyer or our Company (if the buyer is a non-resident taxpayer).

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 through the IDX, theoretically, that payment may be exempt from Indonesian withholding or other Indonesian income tax under applicable double taxation treaties to which Indonesia is a party (including the US-Indonesia double taxation treaty). However, except for the sale or transfer of shares in a non-public company, the 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 through the IDX by making a specific application accompanied by a specific form set by the Indonesian Tax Office acting as a Certificate of Residency that is filled in by the recipient of the income and validated by the competent authority of the country where the recipients are resident.

3. Stamp Duty

Stock transactions in Indonesia are subject to stamp duty. Pursuant to Government Regulation No. 24/2000 on the amendment and the amount of stamp duty rates Imposing Limits Imposed Price Nominal stamp duty, a transaction of up to Rp1,000,000 needs a stamp duty of Rp3,000, while any transaction of more than Rp1,000,000 needs a stamp duty of Rp6,000.

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b. Considerations Regarding Certain US Federal Income Tax

Pursuant to requirements relating to practice before the Internal Revenue Service, any tax advice in this communication (including any attachments) is not intended to be used and cannot be used, for the purpose of (i) avoiding penalties imposed under the US Internal Revenue Code, or (ii) promoting, marketing, or recommending to another person any tax-related matter.

The following is a summary of certain US federal income tax considerations relating to the acquisition ownership and disposition of ADSs or common stock by US Holders (as defined below) that hold their ADSs or common stock as “capital assets” (generally, property held for investment) under section 1221 of the US Internal Revenue Code (the “Tax Code”). This summary is based upon existing US federal income tax law, which is subject to differing interpretations or change, possibly with retroactive effect.

This summary does not discuss all aspects of US federal income taxation which may be important to particular investors in light of their individual investment circumstances, including investors subject to special tax rules (for example, financial institutions, insurance companies, broker-dealers, partnerships and their partners, and tax-exempt organizations (including private foundations), holders who are not US Holders, investors that will hold ADSs or common stock as part of a straddle, hedge, conversion, constructive sale, or other integrated transaction for US federal income tax purposes, or investors that have a functional currency other than the US Dollar, all of whom may be subject to tax rules that differ significantly from those summarized below. In addition, this summary does not discuss any US federal estate and gift tax considerations, state, local, or non-US tax considerations. Each holder is urged to consult their tax advisors regarding the US federal, state, local and non-US income, and other tax considerations of their investment in the ADSs or common stock.

For purposes of this summary, a “US Holder” is a beneficial owner of ADSs or common stock that is, for US federal income tax purposes, (i) an individual who is a citizen or resident of the US, (ii) a corporation, or other entity treated as a corporation for US federal income tax purposes, created in, or organized under the laws of, the US or any state or the District of Columbia, (iii) any entity created or organized in or under the laws of any other jurisdiction if treated as a domestic corporation pursuant to the Tax Code, (iv) an estate the income of which is includible in gross income for US federal income tax purposes regardless of its source, or (v) a trust (A) the administration of which is subject to the primary supervision of a US court and which has one or more US persons who have the authority to control all substantial decisions of the trust or (B) that has otherwise elected to be treated as a US person under the Tax Code.

If a partnership (or other entity treated as a “tax transparent” entity for US tax purposes) is the beneficial owner of ADSs or common stock, the tax treatment of a partner in the partnership (or interest holder in the “tax transparent” entity) will generally depend upon the status of the partner (or interest holder) and the activities of the partnership (or “tax transparent” entity). For US federal income tax purposes, US Holders of ADSs will be treated as the beneficial owners of the underlying Common Stock represented by the ADSs.

1. Threshold Passive Foreign Investment Company (“PFIC”) Classification Matters

A non-US corporation, such as our Company, will be treated as a PFIC, for US federal income tax purposes, if 75% or more of its gross income consists of certain types of “passive” income or 50% or more of its assets are passive. Based on our 2013 income and assets, we do not believe that we should be classified as a PFIC for 2013. Because PFIC status is a fact-intensive determination made on an annual basis, no assurance can be given that we are not or will not become classified as a PFIC. The discussion below under “Dividends” and “Sale or Other Disposition of ADSs or common stock” is written on the basis that we will not be classified as a PFIC for US federal income tax purposes.

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2. Dividends

Any cash distributions paid by us out of earnings and profits, as determined under US federal income tax principles, will be subject to tax as dividend income and will be includible in the gross income of a US Holder upon receipt. A non-corporate recipient of dividend income will generally be subject to tax on dividend income from a “qualified foreign corporation” at a maximum US federal tax rate of 15% rather than the marginal tax rates generally applicable to ordinary income provided that certain holding period requirements are met. Note that as from January 1, 2011, dividends from a qualified foreign corporation are treated as ordinary income with a maximum tax rate of 39.6% for non-corporate recipients of dividends received after the end of 2010. A non-US corporation (other than a PFIC) generally will be considered to be a qualified foreign corporation (i) if it is eligible for the benefits of a comprehensive tax treaty with the US which the Secretary of Treasury of the US determines is satisfactory for purposes of this provision and which includes an exchange of information program or (ii) with respect to any dividend it pays on stock (or ADSs backed by such stock) which is readily tradable on an established securities market in the US. There is currently a tax treaty in effect between the US and Indonesia which the Secretary of Treasury has determined is satisfactory for these purposes and we believe that we should be eligible for the benefits of the treaty. Additionally, because the ADSs are listed on the NYSE, an established securities market in the US, they are considered readily tradable on that exchange.

The amount of any cash distribution paid in Rupiah should equal the US Dollar value of such Rupiah on the date of receipt of the distribution, regardless of whether the Rupiah are actually converted into US Dollar at that time. Gain or loss, if any, recognized on a subsequent sale, conversion, or other disposition of Rupiah generally will be US source ordinary income or loss. Dividends received on the ADSs or common stock will generally not be eligible for the dividends received deduction allowed to corporations.

Dividends generally will be treated as income from foreign sources for US foreign tax credit purposes. A US Holder may be eligible, subject to a number of complex limitations, to claim a foreign tax credit in respect of any foreign withholding taxes imposed on dividends received on ADSs or common stock. A US Holder who does not elect to claim a foreign tax credit for foreign tax withheld, may instead claim a deduction, for US federal income tax purposes, in respect of such withholdings, but only for a year in which such holder elects to do so for all creditable foreign income taxes.

3. Sale or Other Disposition of ADSs or Common Stock

A US holder will generally recognize capital gain or loss upon the sale or other disposition of ADSs or common stock in an amount equal to the difference between the amount realized upon the disposition and the holder’s adjusted tax basis in such ADSs or common stock. Any capital gain or loss will be long-term if the ADSs or Common Stock have been held for more than one year and will generally be US source gain or loss for US foreign tax credit purposes. The deductibility of a capital loss is subject to limitations.

4. PFIC Considerations

If we were to be classified as a PFIC in any taxable year, a US Holder would be subject to special rules generally intended to reduce or eliminate any benefits from the deferral of US federal income tax that a US Holder could derive from investing in a non-US company that does not distribute all of its earnings on a current basis. In such event, a US Holder may be subject to tax at ordinary income tax rates on (i) any gain recognized on the sale of ADSs or common stock and (ii) any “excess distribution” paid on ADSs or common stock (generally, a distribution in excess of 125% of the average annual distributions paid by us in the three preceding taxable years). In addition, a US Holder will be subject to an interest charge on such gain or excess distribution. Finally, the 15% maximum rate on Company dividends would not apply if we become classified as a PFIC. Each US Holder is urged to consult its tax advisor regarding the potential tax consequences to such holder if we are or become classified as a PFIC, as well as certain elections that may be available to mitigate such consequences.

5. Backup Withholding Tax and Information Reporting Requirements

US backup withholding tax and information reporting requirements generally apply to certain payments to certain non corporate holders of stock. Information reporting generally will apply to payments of dividends on and to proceeds from the sale or redemption of, ordinary shares made within the US or by a US pay or US middleman to a holder of ordinary shares (other than an “exempt recipient,” including a corporation, a payee that is not a US person that provides an appropriate certification and certain other persons). A payor will be required to withhold backup withholding tax from any payments of dividends on, or the proceeds from the sale or redemption of, ADSs or common stock within the US or by a US payor or US middleman to a holder, other than an exempt recipient, if such holder fails to furnish its correct taxpayer identification number or otherwise fails to comply with, or establish an exemption from, such backup withholding tax requirements. The backup withholding tax rate is 25% for years through 2013.

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The backup withholding tax is not an additional tax and may be credited against a US holder’s regular US federal income tax liability or, if in excess of such liability, refunded by the Internal Revenue Service (“IRS”) if a timely refund claim is filed with the IRS. Copies of any information returns or tax returns for claims for refund filed by non-US Holders with the IRS may be made available by the IRS, under the provisions of a specific treaty or other agreement providing for information exchange, to the taxing authorities of the country in which a non-US Holder resides.

F. DIVIDENDS AND PAYING AGENTS

Not applicable.

G. STATEMENT BY EXPERTS

Not applicable.

H. DOCUMENTS ON DISPLAY

Any material which is filed as an exhibit to this Annual Report on Form 20-F with the US Securities and Exchange Commission is available for inspection at our offices. See Item 4 “Information on the Company”.

I. SUBSIDIARY INFORMATION

Not applicable.

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

We are exposed to market risks that arise from changes in exchange rates, interest rates, credit risk and liquidity risk, each of which will have an impact on us. We do not generally hedge our long-term liabilities in foreign currencies but hedge our obligations for the current year. As of December 31, 2013, assets in foreign currencies reached 87.0% against our liabilities denominated in foreign currencies. Our exposure to interest rate risk is managed through a mix of fixed and variable rate liabilities and assets, including short-term fixed rate assets. Our exposure to such market risks fluctuated during 2011, 2012 and 2013 as the Indonesian economy was affected by changes in the US Dollar-Rupiah exchange rate and interest rates themselves. We are not able to predict whether such conditions will continue during 2014 or there after.

Exchange Rate Risk

We are exposed to foreign exchange risk on sales, purchases and borrowings that are denominated in foreign currencies, primarily in U.S. dollar and Japanese yen. Our exposures to other foreign exchange rates are not material. Increasing risks of foreign currency exchange rates on our obligations are expected to be offset by time deposits and receivables in foreign currencies that are equal to at least 25% of the outstanding current liabilities.

The information presented in the following table is based on assumptions of selling and buying rates in US Dollar as well as other currencies, which were quoted by Reuters on December 31, 2013 and applied respectively to monetary assets and liabilities. The buying and selling rates as of December 31, 2013 were Rp12,160 and Rp12,180 to US$1, respectively.

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However, we believe these assumptions and the information described in the following table may be influenced by a number of factors, including a fluctuation and/or depreciation of the Rupiah in the future.

| | Outstanding
Balance as of December
31, 2013 — Foreign
Currency | Rp
Equiv. | Expected
Maturity Date — 2014 | 2015 | 2016 | 2017 | 2018 | There a fter | Fair Value |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | (million) | (Rp
million) | (Rp
million) | | | | | | |
| ASSETS | | | | | | | | | |
| Cash and Cash
Equivalents | | | | | | | | | |
| US Dollar | 394 | 4,801,231 | 4,801,231 | - | - | - | - | - | 4,801,231 |
| Japanese Yen | 1 | 142 | 142 | - | - | - | - | - | 142 |
| Other (1) | 11 | 138,825 | 138,825 | - | - | - | - | - | 138,825 |
| Other Current
Financial Assets | | | | | | | | | |
| US Dollar | 11 | 131,256 | 131,256 | - | - | - | - | - | 131,256 |
| Trade Receivables | | | | | | | | | |
| Related Parties | | | | | | | | | |
| US Dollar | 2 | 29,660 | 29,660 | - | - | - | - | - | 29,660 |
| Third Parties | | | | | | | | | |
| US Dollar | 66 | 806,437 | 806,437 | - | - | - | - | - | 806,437 |
| Other (1) | 0 | 2,030 | 2,030 | - | - | - | - | - | 2,030 |
| Other Receivables | | | | | | | | | |
| US Dollar | 1 | 8,271 | 8,271 | - | - | - | - | - | 8,271 |
| Other (1) | 0 | 1,583 | 1,583 | - | - | - | - | - | 1,583 |
| Advances and
Other Non-current Assets | | | | | | | | | |
| US Dollar | 6 | 70,253 | - | 70,253 | - | - | - | - | 70,253 |
| LIABILITIES | | | | | | | | | |
| Trade Payables | | | | | | | | | |
| Related Parties | | | | | | | | | |
| US Dollar | 1 | 17,014 | 17,014 | - | - | - | - | - | 17,014 |
| Third Parties | | | | | | | | | |
| US Dollar | 275 | 3,356,036 | 3,356,036 | - | - | - | - | - | 3,356,036 |
| Other (1) | 4 | 52,711 | 52,711 | - | - | - | - | - | 52,711 |
| Other Payables | | | | | | | | | |
| US Dollar | 8 | 92,938 | 92,938 | - | - | - | - | - | 92,938 |
| Other (1) | 0 | 1,145 | 1,145 | - | - | - | - | - | 1,145 |
| Accrued Expenses | | | | | | | | | |
| US Dollar | 51 | 626,637 | 626,637 | - | - | - | - | - | 626,637 |
| Japanese Yen | 19 | 2,158 | 2,158 | - | - | - | - | - | 2,158 |
| Other (1) | 0 | 175 | 175 | - | - | - | - | - | 175 |
| Advances from
Customers and Suppliers | | | | | | | | | |
| US Dollar | 2 | 19,526 | 19,526 | - | - | - | - | - | 19,526 |
| Other (1) | 0 | 122 | 122 | - | - | - | - | - | 122 |
| Current
Maturities of Long-term Liabilities | | | | | | | | | |
| US Dollar | 35 | 424,610 | 424,610 | - | - | - | - | - | 465,793 |
| Japanese Yen | 768 | 88,976 | 88,976 | - | - | - | - | - | 116,603 |
| Promissory Notes | | | | | | | | | |
| US Dollar | 29 | 349,169 | 276,022 | 61,995 | 11,152 | - | - | - | 348,665 |
| Long-term
Liabilities (2) | | | | | | | | | |
| US Dollar | 79 | 960,415 | - | 352,264 | 240,707 | 154,036 | 54,317 | 159,091 | 973,557 |
| Japanese Yen | 7,679 | 889,763 | - | 88,976 | 88,976 | 88,976 | 88,976 | 533,859 | 893,355 |

| (1) Assets and liabilities denominated
in other foreign currencies are presented as US Dollars equivalents using
the Reuters buy and sell rates prevailing at end of the reporting
period. |
| --- |
| (2) Long-term liabilities for the
purpose of this table consist of loans denominated in foreign currencies
from two-step loans, obligation under finance leases and long-term bank
loans. |

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Interest Rate Risk

Our exposure to interest rate fluctuations results primarily from changes to the floating rate applied for long-term debt. This risk relates to loans under the Government on-lending program that has been used to finance our capital expenditures. Interest rate fluctuation is monitored to minimize any negative impact to financial position. Borrowings at variable interest rates expose our Company and our subsidiaries to interest rate risk. To measure market risk fluctuations in interest rates, our Company and our subsidiaries primarily use interest margin and maturity profile of the financial assets and liabilities based on changing schedule of the interest rate.

The actual cash flows from our debt are denominated in Rupiah, US Dollar , and Japanese Yen, as appropriate and as indicated in the table. The information presented in the table has been determined based on the following assumptions: (i) fixed interest rates on Rupiah time deposits are based on average interest rates offered for three month placements in effect as of December 31, 2013 by the banks where such deposits were located; (ii) variable interest rates on Rupiah denominated long-term liabilities are calculated as of December 31, 2013 and are based on contractual terms setting interest rates based on average rates for the preceding six months on three month certificates issued by Bank of Indonesia or based on the average three month deposit rate offered by the lenders; (iii) fixed interest rates on US Dollar deposits are based on average interest rates offered for three month placements by the various lending institutions where such deposits are located as of December 31, 2013 and (iv) the value of marketable securities is based on the value of such securities on December 31, 2013 . However, these assumptions may change in the future. These assumptions are different from the rates used in our Consolidated Financial Statements; accordingly, amounts shown in the table may differ from the amounts shown in our Consolidated Financial Statements.

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| | Outstanding
Balance as of December
31, 2013 — Original
Currency (million) | Rp
Equiv. (Rp
million) | Rate (%) | Expected
Maturity Date — 2014 | 2015 | 2016 | 2017 | 2018 | There
after | Fair
Value |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | (Rp
million) | | | | | | |
| ASSETS | | | | | | | | | | |
| Fixed Rate | | | | | | | | | | |
| Cash and Cash
Equivalents | | | | | | | | | | |
| Time deposit | | | | | | | | | | |
| Rupiah | 8,185,170 | 8,185,170 | 1.00-11.50 | 8,185,170 | - | - | - | - | - | 8,185,170 |
| US Dollar | 309 | 3,767,769 | 0.03-3.00 | 3,767,769 | - | - | - | - | - | 3,767,769 |
| Available-for-Sale Financial Assets | | | | | | | | | | |
| Rupiah | 140,781 | ,140,781 | 1.60-10.50 | 140,781 | - | - | - | - | - | 140,781 |
| US Dollar | 11 | 131,256 | 1.00-1.10 | 131,256 | - | - | - | - | - | 131,256 |
| LIABILITIES | | | | | | | | | | |
| Short-term Bank
Loans | | | | | | | | | | |
| Variable Rate | | | | | | | | | | |
| Rupiah | | | | | | | | | | |
| Principal | 431,751 | 431,751 | - | 431,751 | - | - | - | - | - | 431,751 |
| Interest | 8,868 | 8,868 | 8.00-13.00 | 8,868 | - | - | - | - | - | - |
| Long-term Liabilities (1) | | | | | | | | | | |
| Variable Rate | | | | | | | | | | |
| Rupiah | | | | | | | | | | |
| Principal | 9,223,335 | 9,223,335 | - | 3,685,445 | 2,651,044 | 950,368 | 835,399 | 540,934 | 560,145 | 9,026,752 |
| Interest | 1,661,905 | 1,661,905 | 6.58-11.09 | 635,136 | 416,386 | 221,357 | 141,740 | 82,187 | 165,099 | - |
| US Dollar | | | | | | | | | | |
| Principal | 83 | 1,008,691 | - | 473,947 | 264,718 | 175,757 | 94,269 | - | - | 1,034,976 |
| Interest | 2 | 21,332 | 1.17-6.50 | 11,228 | 6,402 | 2,806 | 896 | - | - | - |
| Fixed Rate | | | | | | | | | | |
| Rupiah | | | | | | | | | | |
| Principal | 3,000,000 | 3,000,000 | - | - | 1,005,000 | - | - | - | 1,995,000 | 3,141,774 |
| Interest | 1,471,571 | 1,471,571 | 9.60-10.20 | 299,970 | 253,070 | 203,490 | 203,490 | 203,490 | 308,061 | - |
| US Dollar | | | | | | | | | | |
| Principal | 53 | 643,80 5 | - | 196,624 | 126,357 | 53,911 | 53,911 | 53,911 | 159,091 | 671,332 |
| Interest | 7 | 82,847 | 4.00-4.56 | 24,982 | 16,136 | 12,331 | 10,142 | 7,985 | 11,271 | - |
| Japanese Yen | | | | | | | | | | |
| Principal | 8,447 | 978,739 | - | 88,976 | 88,976 | 88,976 | 88,976 | 88,976 | 533,859 | 1,009,958 |
| Interest | 1,506 | 174,511 | 3.10 | 29,646 | 26,887 | 24,197 | 21,371 | 18,613 | 53,797 | - |
| Finance Leases | | | | | | | | | | |
| Rupiah | | | | | | | | | | |
| Principal | 4,886,957 | 4,886,957 | - | 617,493 | 501,917 | 512,343 | 546,364 | 544,869 | 2,163,971 | 4,886,957 |
| Interest | 1,926,984 | 1,926,984 | 7.70-12.50 | 419,551 | 357,392 | 310,177 | 260,154 | 208,217 | 371,493 | - |
| US Dollar | | | | | | | | | | |
| Principal | 7 | 81,696 | - | 30,061 | 23,183 | 22,191 | 5,855 | 406 | - | 81,696 |
| Interest | 1 | 9,084 | 8.00 | 3,215 | 2,639 | 2,506 | 685 | 39 | - | - |

(1) Long-term liabilities consist of loans which are subject to interest; namely two-step loans, bonds and notes, obligation under finance leases and long-term bank loans, which in each case include their maturities.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

American Depositary Shares

Bank of New York Mellon (previously “The Bank of New York”) serves as the “Depositary” for our ADSs which are traded on the NYSE and LSE.

Investors pay a depositary fee directly or through a broker acting on their behalf for the delivery or surrender of ADSs for the purpose of withdrawal. The Depositary also collects fees for making distributions to investors by deducting the fee from the amount distributed or by selling a portion of the distributable property to pay the fee. The Depositary may collect its annual fee for depositary services by making a deduction from the cash distributions or by directly billing investors or by charging the book-entry system accounts of the parties acting on their behalf. The Depositary may refuse to provide fee-generating services until its bills for such services are paid.

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Costs Related to ADS Issue and Handling

| Shareholders depositing or withdrawing ordinary
shares or ADS must pay: | For: |
| --- | --- |
| US$5 (or less) per 100 ADS (or part of 100
ADS). | Issuance of ADS, including issuance resulting from
a distribution of shares or rights or other property. Cancellation of ADS for the purpose of withdrawal,
including in case of termination of the deposit
agreement. |
| US$0.02 (or less) per ADS. | Any cash payment to registered ADS
shareholders. |
| A fee equivalent to the fee payable if the
securities distributed to shareholders had been shares and those shares
had been deposited for the issuance of ADS. | Delivery of securities by the Depositary to
registered ADS shareholders. |
| US$0.02 (or less) per ADS per calendar
year. | Depositary services. |
| Registration or transfer fees. | Transfer or registration of shares on the share
register to or from the name of the Depositary or its agent when
shareholders deposit or withdraw ordinary shares. |
| Depositary Fees. | Telegram, telex and fax transmissions (if provided
for in the deposit agreement). Converting foreign currency to US
Dollar. |
| Taxes and other duties levied by the government,
the Depositary or the custodian upon payment of the ADS or other shares
underlying the ADS, such as share transfer tax, stamp duty or income
tax. | As necessary. |
| Any costs incurred by the Depositary or its agent
for servicing the securities deposited. | As necessary. |

The Depositary has agreed to reimburse us up to US$400,000 per year until 2015 for certain expenses we incur in relation to the administration and maintenance of the ADS facility, including, but not limited to, direct or indirect investor relations expenses and other ADS program-related expenses. The reimbursement will be evaluated and adjusted if the number of ADSs outstanding falls below a stipulated minimum or if they are delisted from the NYSE. We expect to renegotiate the reimbursement amount for subsequent years after 2015. In 2013, we received US$319,000 in reimbursements from the Depositary.

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PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

There are no defaults, dividend arrearages and delinquencies to which this Item applies.

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

Not applicable.

ITEM 15. CONTROLS AND PROCEDURES

a. Disclosure Controls and Procedures

Management conducted an evaluation on the effectiveness of the company's disclosure controls and procedures u nder the supervision and with the participation of the management, including the President Director, which is of the same level as Chief Executive Officer (“CEO”) and Finance Director, which is of the same level as Chief Financial Officer (“CFO”) (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act ). Based on this evaluation, the C EO and C FO have concluded that, as of December 31, 2013 , the c ompany’s disclosure controls and procedures were effective. D isclosure controls and procedures conducted by the management include controls and procedures that are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including the CEO and CFO , as appropriate, to allow timely decisions regarding required disclosure.

b. Management’s Report on Internal Control over Financial Reporting

The Company's Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). The internal control over financial reporting is a process designed by, or under the supervision of, the CEO and C FO , and e x ec u ted by the B oard of D irectors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of C onsolidated Financial Statements for external purposes in accordance with IFRS as issued by the IASB , and 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 consolidated financial statements in accordance with IFRS , and that receipt s and expenditures of the Company are being made only in accordance with authorizations of the Company’s management and Board of D irectors , 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 C onsolidated F inancial S tatements.

Because of its inherent limitation s , internal control over financial reporting may not prevent or detect all misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that control s may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate .

The management ha s assessed the effectiveness of the c ompany’s internal control over financial reporting as of December 31, 201 3 . In making this assessment the management used the criteria set forth in Internal Control – Integrated Framework issued by the Committee of Sponsoring O rganizations of the Treadway Commission (1992 framework) (“COSO”). Based on this assessment, management concluded that as of December 31, 201 3 , our internal control over financial reporting was effective.

c. Attestation Report of the Registered Public Accounting Firm

The effectiveness of our internal control over financial reporting as of December 31, 201 3 has been audited by KAP Purwantono, Suherman & Surja , an independent registered public accounting firm, as stated in their report which appears on the Consolidated Financial Statements .

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d. Changes in Internal Control over Financial Reporting

There have been no significant changes in our Company’s internal control over financial reporting during the most recently completed fiscal year that would materially affect or are reasonably likely to materially affect, our Company’s internal control over financial reporting.

We are committed to continual improvements in internal control processes, and will continue to review and monitor the control over financial reporting and its procedures in order to ensure compliance with the requirements of Sarbanes-Oxley Act and related regulations as stipulated by COSO. We will also continue to assign significant company resources from time to time to improve its internal control over financial reporting.

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

The Board of Commissioners has determined that Sahat Pardede, as an independent member of our Audit Committee, qualifies as an Audit Committee Financial Expert in accordance with the requirements of Item 16A of Form 20-F and as an “independent” member pursuant to the provisions of Rule 10A-3 of the Exchange Act. Mr. Pardede has been a member of our Audit Committee since February 2004. Prior to his appointment as a member of our Audit Committee, Sahat Pardede practiced and is currently practicing, as a Public Accountant in Indonesia and provided auditing services and other financial services to numerous private companies and public institutions. He is a Certified Public Accountant and is also a member of the Indonesian Institute of Certified Public Accountants.

ITEM 16B. CODE OF ETHICS

In compliance with the Sarbanes-Oxley Act of 2002 Section 406, our code of ethics applies equally to our Commissioners, our President Director and our Finance Director (positions equivalent to Chief Executive Officer and Chief Financial Officer, respectively), Directors and other key officers as well as all of our employees. You may view our code of ethics on our web site at http://www.telkom.co.id/about-telkom/business-ethics. Amendments to or waivers from the code of ethics will be posted on our website as well.

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

In line with existing procedures and taking into consideration the independence and qualifications of independent auditors, our Annual General Meeting of Shareholders (“AGMS”) on April 1 9 , 201 3 appointed the Public Accountant Firm (or “KAP”) Purwantono, Suherman & Surja (a member firm of Ernst & Young Global Limited), a registered KAP with OJK, to perform the audit on our Consolidated Financial Statements for the fiscal year ended December 31 , 201 3 and on the E ffectiveness of I nternal C ontrol on Financial Reporting as of December 31, 2013. The fee for the audit on the Consolidated Financial Statements for fiscal year 201 3 was agreed at Rp2 8 . 6 billion (excluding VAT). The audit fee is excluding consent letter issuance fee to KAP Tanudiredja, Wibisana & Rekan amounted to Rp4.4 billion.

The independent auditor for our Consolidated Financial Statements for fiscal year 2011 was KAP Tanudiredja, Wibisana & Rekan, a member firm of the PwC global network.

KAP Purwantono, Suherman & Surja has been our public accountant firm since 2012.

KAP Purwantono, Suherman & Surja is also assigned to perform an audit on funds utilization of the Partnership and Community Development Program (“PKBL”) for fiscal year 201 3 .

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Fees and Services of the External Auditor

The following table summarizes the fees for audit service in 2011 , 2012 and 2013:

| | For Years Ended
December 31, — 2011 (1) | 2012 (2) | 2013 (2) |
| --- | --- | --- | --- |
| | (Rp
million) | (Rp
million) | (Rp
million) |
| Audit Fees | 40,503 | 26,61 9 | 28,601 |
| Tax Service Fee s | 70 | - | - |
| All other fees | 400 | 326 | 340 |

(1) Audited by KAP Tanudiredja, Wibisana & Rekan.

(2) Audited by KAP Purwantono, Suherman & Surja.

Audit Committee Pre-Approval Policies and Procedures

We have adopted pre-approval policies and procedures under which all non-audit services provided by our independent registered public accounting firm must be pre-approved by our Audit Committee, as set forth in the Audit Committee Charter. Pursuant to the charter, permissible non-audit services may be performed by our independent registered public accounting firm provided that : ( i ) our Board of Directors must deliver to the Audit Committee (through the Board of Commissioners) a detailed description of the non-audit service that is to be performed by the independent public accounting firm , and ( ii ) the Audit Committee will determine whether the proposed non-audit service will affect the independence of our independent public accounting firm or would give rise to any conflict of interest.

Pursuant to Section 10(i)(1)(B) of the Exchange Act and paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X issued there under, Audit Committee Charter waives the pre-approval requirement for permissible non-audit services where: (i) the aggregate amount of the fees for such non-audit services constitutes no more than five percent of the total amount of fees paid by us to our independent registered public accounting firm during the year in which the services are provided , or (ii) the proposed services are not regarded as non-audit services at the time the contract to perform the engagement is signed. In addition to these two requirements, the performance of non-audit services must be approved prior to the completion of the audit by a member of the Audit Committee who has been delegated pre-approval authority by the full Audit Committee or by the full Audit Committee itself .

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

NYSE listing standards require that a US listed company must have an Audit Committee, a nominating/corporate governance committee and a compensation committee. Each of these committees must consist solely of Independent Directors and must have a written charter that addresses certain matters specified in the listing standards.

The Indonesian Company Law does not require Indonesian public companies to form any of the committees described in the NYSE listing standards. However, Bapepam-LK Rule No.IX.I.5 and IDX Regulation I-A require the Board of Commissioners of an IDX-listed company (such as our Company) to establish an Audit Committee, which must consist of at least three members, one of whom must be an Independent Commissioner and serve as chair of the Audit Committee, while the other two members must be independent parties of whom at least one such party must have accounting and/or finance expertise.

Our Audit Committee has six members: two Independent Commissioners, one Commissioner, and three external independent members who are not affiliated with our Company.

The NYSE Listing Standards as required by Rule 10A-3(c)(3) of the Exchange Act require foreign private issuers whose shares are listed on the NYSE to have an Audit Committee comprised of Independent Directors. However, such foreign private issuers may be exempted from the independence requirement 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 and includes non-board members as in our case, members from the Board of Commissioners; (iii) the Audit Committee members are not selected by management and no executive officers of the company is a member of the Audit Committee; (iv) the home country government or stock exchange requires the Audit Committee to be independent of the company’s management and (v) the Audit Committee is responsible for appointment, retention and oversight the work of the external auditor. We avail ourselves of this exemption and document this on our Section 303A Annual Written Affirmations submitted to the NYSE. However, unlike the NYSE Listing Standards requirements, according to the current provisions for Audit Committees in Indonesia, our Audit Committee does not have direct responsibility for the appointment, compensation and retention of the external auditor. Our Audit Committee may only recommend the appointment of the external auditor to the Board of Commissioners and the Board of Commissioner’s decision must have the approval of the shareholders.

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Not all members of our Audit Committee are Independent Directors as required by Rule 10A-3 of the Exchange Act. We rely on the general exemption pursuant to Rule 10A-3(c)(3) regarding the composition of the Audit Committee. We believe that our reliance on this exemption does not materially and adversely affect the ability of the Audit Committee to act independently. We believe that the intent of the provision in requiring that each member of the Audit Committee be an Independent Director is to ensure that the Audit Committee is independent from influence by management and provides a forum separate from management in which auditors and other interested parties can candidly discuss concerns. The Bapepam-LK Audit Committee Rules require each member of the Audit Committee to be independent. The Bapepam-LK Audit Committee Rules also require that at least two of the members, the external independent members, in effect be independent not only of the management but also of the Board of Commissioners and Board of Directors and our Company as a whole. We therefore believe that the standard established by the Bapepam-LK Audit Committee Rules is at least equally effective in ensuring the ability of the Audit Committee to act independently.

ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

| Share Buy Back
Program | Accordance
with | Purchase
Periode | Total Number of
Shares Purchased * | Average Price
Paid per Share in Rp * | Total Number of
Shares Purchased as Part of Publicly Announced Plans * | Maximum Number
of Shares that May Yet Be Purchased Under the Plans * |
| --- | --- | --- | --- | --- | --- | --- |
| SBB I | EGMS December 21, 2005 | May 19, 2006 - June 06,
2007 | 211,290,500 | 8,657 | 211,290,500 | - |
| SBB II | AGMS June 29, 2007 | June 29, 2007 - December 28,
2008 | 215,000,000 | 9,160 | 215,000,000 | - |
| SBB III | AGMS June 20, 2008 | June 20, 2008 - December 20,
2009 | 64,284,000 | 7,238 | 64,284,000 | - |
| SBB IV | AGMS May 19, 2011 | May 19, 2011 - November 20,
2012 | 520 , 355 , 960 | 7,305 | 520 , 355 , 960 | - |

*before stock split

As of December 31, 2012, we had repurchased 1,010,930,460 common stock shares, equivalent to 5. 2 % of our issued and outstanding common stock, at an aggregate repurchase price of Rp8,067 billion, excluding broker and custodian fees. Under our repurchase program, we repurchased 118,376,500 shares in 2006, 126,364,000 shares in 2007, 245,834,000 shares in 2008, 283,085,460 shares in 2011 and 237,270,500 shares in 2012. In 2011 and 2012, we repurchased 520,355,960 common stock shares at an aggregate repurchase price Rp3,803 billion.

On April 19, 2013 in accordance with the Resolution of the AGMS and regard with clause 4 letter a number (3) Bapepam-LK XI.B.2 we executed the transfer of 59,811,400, or after stock split 299,057,000 shares of Series B from Share Buyback Phase III through Employee Stock Ownership Program.

On July 30 , 2013, we have sold 211,290,500 or after stock split 1,056,452,500 shares which are part of Share Buyback Phase I by private placement. The selling price after stock split was R p2 , 280 per share, which is not lower than Rp 1 , 731 per share which is the average repurchase price after stock split of treasury stock , R p2 ,2 58 per share which is the average closing price after stock split for the last 90 (ninety) days before the sale, and Rp 2 , 280 per share after stock split , which is the closing price on the day before the selling date.

As of December 31, 2013, our treasury stock balance is 739,828,560 or after stock split 3,699,142,800 common stock shares, equivalent to 3. 8 % of our issued and outstanding common stock which comprise of Share Buyback Phase II and IV with average repurchase price after stock split were Rp1,832 and Rp1,462, excluding broker and custodian fees. See Note 23 to our Consolidated Financial Statement.

We plan to retain, sell or use repurchased stock for other purposes in accordance with Bapepam-LK Rule No.XI.B.2, Law No.40/2007 regarding Limited Liability Companies and the resolutions of the AGMS on April 19, 2013, that require the Board of Directors to seek prior approval from the Board of Commissioners to undertake any change or transfer of treasury stock and report its utilization or transfer to the AGMS. Before giving its approval, the Board of Commissioners must consult with the holder of the Series A Dwiwarna share.

See Note 2 3 to our Consolidated Financial Statement.

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ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT

Not applicable.

ITEM 16G. CORPORATE GOVERNANCE

The following is a summary of significant differences between the corporate governance practices followed by Indonesian companies and those required by NYSE listing standards for domestic US issuers.

a. Overview of Indonesian Law

Indonesian public companies are required to observe and comply with certain Good Corporate Governance practices. The requirements and the standards for good corporate governance practices for public companies are embodied in the following regulations: Law No.40/2007 on Limited Liability Companies (“Indonesian Company Law”); Law No.8/1995 on Capital Markets (“Capital Markets Law”); Law No.19/2003 on State-Owned Enterprises; Regulation of the Minister of State-Owned Enterprises No.PER-09/MBU/2012 on Amendment of Regulation of the Minister of State-Owned Enterprises No.PER-01/MBU/2011 on the Implementation of Good Corporate Governance to State-Owned Enterprises; the regulations of OJK (“OJK Regulations”) and the rules issued by the IDX. In addition to the above, the articles of association of public companies incorporate provisions directing the implementation of good corporate governance practices.

Similar to the laws of the US, Indonesian laws require public companies to observe and comply with corporate governance standards that are more stringent than those applied to privately-owned companies. In Indonesia, the term “public company” does not necessarily refer to a company whose shares are listed on a securities exchange. Under the Capital Markets Law, a non-listed company may be deemed a public company, and subjected to the laws and regulations governing public companies, if such company meets or exceeds the capital and shareholder requirements applicable to a publicly-listed company.

On November 30, 2004, the National Committee on Governance (“NCG”) was established pursuant to the Decree of the Coordinating Minister for Economic Affairs No.KEP.49/M.EKONOM/1/2004 (“KEP.49”), which was formed to revitalize the former National Committee on Good Corporate Governance established in 1999. The NCG aimed at enhancing comprehension and implementation of good governance in Indonesia and advises the Government on governance issues, both in public and corporate sectors. Furthermore, based on Decree of the Coordinating Minister for Economic Affairs No.KEP-14/M.EKON/03/2008, dated March 18, 2008 (“KEP.14”), KEP.49 was revoked. Therefore, any working results which have been made by the Committee, which was established based on KEP.49, will be delivered and continued by the Committee under KEP.14 .

The NCG formulated the Code for Good Corporate Governance 2006 (“Code”) which recommended setting more stringent corporate governance standards for Indonesian companies, such as the appointment of Independent Commissioners and nomination and remuneration committees by the Board of Commissioners, as well as increasing the scope of disclosure obligations for Indonesian companies. Although the NCG recommended that the Code be adopted by the Government as a basis for legal reform, as of the date of this Annual Report, the Government has not enacted regulations that fully implement the provisions of the Code.

b. Composition of Independent Board of Directors and Board of Commissioners

The NYSE listing standards provide that the Board of Directors of a US listed company must consist of a majority of Independent Directors and that certain committees must consist solely of Independent Directors. A Director qualifies as independent only if the board affirmatively determines that the Director has no material relationship with the company, either directly or indirectly.

Unlike companies incorporated in the US, the management of an Indonesian company consists of two organs of equal stature, the Board of Directors and the Board of Commissioners. Generally, the Board of Directors is responsible for the day-to-day business activities of the company and is authorized to act for and on behalf of the company, while the Board of Commissioners has the authority and responsibility to supervise the Board of Directors and is statutorily mandated to provide advice to the Board of Directors by Indonesian Company Law.

With regard to the Board of Commissioners, the Indonesia Company Law requires a public company Board of Commissioners to have at least two members. Although the Indonesian Company Law is silent as to the composition of the Board of Commissioners , Listing Regulation No. I A in KEP.305/BEJ/07-2004 issued by the IDX (“IDX Regulation I - A”) states that at least 30% of the members of the Board of Commissioners of a public company (such as our Company) must be independent.

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The Indonesian Company Law states that the Board of Directors has the authority to manage the daily operation of the company and must have at least two members, each of whom must meet the minimum qualification requirements set forth in the Indonesian Company Law. In addition, based on IDX Regulation I-A, the Board of Directors of the listed company must consist of at least one unaffiliated director.

Given the difference between the role of the members of the Board of Directors in an Indonesian company and that of their counterparts in a US company, Indonesian law does not require that certain members of the Board of Directors must be independent and neither does it require the creation of certain committees composed entirely of Independent Directors.

c. Committees

See Item 16D “Exemptions from the Listing Standards for Audit Committees”.

d. Disclosure Regarding Corporate Governance

The NYSE listing standards require US companies to adopt, and post on their websites, a set of corporate governance guidelines. The guidelines must address, among other things: director qualification standards, director responsibilities, director access to management and independent advisers, director compensation, director orientation and continuing education, management succession, and an annual performance evaluation itself. In addition, the CEO of a US company must certify to the NYSE annually that he or she is not aware of any violations by the company of the NYSE’s corporate governance listing standards. The certification must be disclosed in our Annual Report to shareholders. Indonesian law does not have disclosure requirements similar to NYSE listing standards. However, the Capital Markets Law generally requires Indonesian public companies to disclose certain types of information to shareholders and to OJK, particularly information relating to changes in the public company’s shareholdings and material facts that may affect the decision of shareholders to maintain their share ownership in such public company.

e. Code of Business Conduct and Ethics

NYSE listing standards require each US listed company to adopt, and post on its web site, a code of business conduct and ethics for its Directors, officers and employees. There is no similar requirement under Indonesian law. However, companies that are required to file or furnish reports to the SEC must disclose in their Annual Reports whether they have adopted a code of ethics for their senior financial officers. Although the requirements as to the contents of the code of ethics under SEC rules are not identical to those set forth in the NYSE listing standards, there are significant similarities in which under SEC rules, the code of ethics must be designed to promote: (a) honest and ethical conduct, including the handling of conflicts of interest between personal and professional relationships; (b) full, fair, accurate and timely disclosure in reports and documents filed with or submitted to the SEC; (c) compliance with applicable laws and regulations; (d) prompt internal reporting of violations of the code and (e) accountability for adherence to the code. Furthermore, shareholders must be given access to physical or electronic copies of the code.

ITEM 16H. MINE SAFETY DISCLOSURE

Not applicable.

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PART III

ITEM 17. FINANCIAL STATEMENTS

We have responded to Item 18 in lieu of this Item.

ITEM 18. FINANCIAL STATEMENTS

See pages F-1 through F-123.

ITEM 19. EXHIBITS

The following exhibits are filed as part of this Form 20-F:

1.1	Articles of Association (as amended on May 8, 2013).
8.1	Please refer to Item 4 “Information on The Company – Organizational Structure” for a list of subsidiaries of the Registrant.
12.1	Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 and 15 U.S.C. Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 .
12.2	Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange act of 1934 and 15 U.S.C. Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 .
13.1	Certification of the Chief Executive Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
13.2	Certification of the Chief Financial Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
15.1	Letter of the Company’s predecessor auditor to the Securities and Exchange Commission dated March 25, 2014 in relation to Item 16F. Change in Registrant’s Certifying Accountant.

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SIGNATURES

Pursuant to the requirements of Section 12 of the Securities Exchange Act 1934, as amended, 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 Form 20-F on its behalf.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA TBK

Jakarta, March 26, 201 4

By: /s/ Arief Yahya

Arief Yahya

President Director / Chief Executive Officer

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Exhibit 12.1

CERTIFICATION PURSUANT TO

15 U.S.C. SECTION 7241,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 200 2

I, Arief Yahya, President Director (Chief Executive Officer) of Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk. (the “Company”), certify that:

I have reviewed this Annual Report on Form 20-F of the Company;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this Report;
The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure control s and procedure s to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Annual Report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the Annual Report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and

The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

Jakarta, March 26, 201 4

By:
Arief Yahya President Director / Chief Executive Officer

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Exhibit 12.2

CERTIFICATION PURSUANT TO

15 U.S.C. SECTION 7241,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 200 2

I, Honesti Basyir, Director of Finance (Chief Financial Officer) of Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk. (the “Company”), certify that:

I have reviewed this Annual Report on Form 20-F of the Company;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;
The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:

The Company other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

Jakarta, March 26, 201 4

By:
Honesti Basyir Director of Finance / Chief Financial Officer

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Exhibit 13.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 200 2
In connection with the Annual Report of Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk. (the “Company”) on Form 20-F for the year ending December 31, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Arief Yahya, President Director, (Chief Executive Officer) of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 200 2 , that, to my knowledge:
(1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
This certification accompanies this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 200 2 and shall not be deemed filed with the Securities and Exchange Commission by the Company as part of the Report or as a separate disclosure document.
Jakarta, March 26, 201 4
By:	/s/ Arief Yahya
	Arief Yahya President Director / Chief Executive Officer

122

Table of Content

Exhibit 13.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 200 2
In connection with the Annual Report of Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk. (the “Company”) on Form 20-F for the year ending December 31, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Honesti Basyir, Director of Finance (Chief Financial Officer) of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 200 2 , that, to my knowledge:
(1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
This certification accompanies this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 200 2 and shall not be deemed filed with the Securities and Exchange Commission by the Company as part of the Report or as a separate disclosure document.
Jakarta, March 26, 2014
By:	/s/ Honesti Basyir
	Honesti Basyir Director of Finance / Chief Financial Officer

123

Perusahaan Perseroan (Persero)

P T Telekomunikasi Indonesia Tbk

and subsidiaries

C onsolidated financial statements with report of

independent registered public accounting firm

as of January 1, 2012 (Restated), December 31,

2012 (Restated) and December 31, 2013 and for the

years ended December 31, 2011 (Restated) ,

2012 (Restated) and 2013

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
CONSOLIDATED FINANCIALSTATEMENTS WITH REPORT OF
INDEPENDENT REGISTEREDPUBLIC ACCOUNTING FIRM
AS OF JANUARY 1, 2012 (RESTATED), DECEMBER 31, 2012 (RESTATED) AND
DECEMBER 31, 2013 AND FOR THE YEARS ENDED
DECEMBER 31, 2011 (RESTATED) , 2012 (RESTATED) AND 2013

TABLE OF CONTENTS
	Page
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Financial Position	1
Consolidated Statements of Comprehensive Income	2
Consolidated Statements of Changes in Equity	3-5
Consolidated Statements of Cash Flows	6
Notes to the Consolidated Financial Statements	7-125

Report of Independent Registered Public Accounting Firm

Report No. RPC-5162/PSS/2014

The Shareholders and the Boards of Commissioners and Directors of

Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk

We have audited the accompanying consolidated statements of financial position of Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk (the “Company”) and subsidiaries as of December 31, 2013 and 2012, and the related consolidated statements of comprehensive income, changes in equity and cash flows for the years then ended. 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 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 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 financial statements referred to above present fairly, in all material respects, the consolidated financial position of Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk and subsidiaries as of December 31, 2013 and 2012, and the consolidated results of their operations and their cash flows for the years then ended, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

As discussed in Note 2aa to the consolidated financial statements, the Company changed its method of accounting for defined benefit plans on a retrospective basis effective January 1, 2013, and the 2012 and 2011 consolidated financial statements have been restated. In addition, we audited the adjustments described in Note 36 that were applied to restate the 2011 reportable segments disclosures to conform with the reportable segments in 2013 and 2012. In our opinion, such adjustments are appropriate and have been properly applied. We were not engaged to audit, review or apply any procedures to the 2011 consolidated financial statements of the Company other than with respect to the adjustments on the reportable segments and, accordingly, we do not express an opinion or any other form of assurance on the 2011 consolidated financial statements taken as a whole.

Report of Independent Registered Public Accounting Firm (continued)

Report No. RPC-5162/PSS/2014 (continued)

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk and subsidiaries' internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 framework) and our report dated March 25, 2014 expressed an unqualified opinion thereon.

/s/ Purwantono, Suherman & Surja

Purwantono, Suherman & Surja Jakarta, Indonesia

March 25, 2014

Report of Independent Registered Public Accounting Firm

Report No. RPC-5163/PSS/2014

The Shareholders and the Boards of Commissioners and Directors of

Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk

We have audited Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk (the “Company”) and subsidiaries’ internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 framework) (the COSO criteria). The Company and subsidiaries’ 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 Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company and 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 as issued by the International Accounting Standards Board. 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 International Financial Reporting Standards, 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.

Report of Independent Registered Public Accounting Firm (continued)

Report No. RPC-5163/PSS/2014 (continued)

In our opinion, Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2013, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated statements of financial position of Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk and subsidiaries as of December 31, 2013 and 2012, and the related consolidated statements of comprehensive income, changes in equity and cash flows for the years then ended and our report dated March 25, 2014 expressed an unqualified opinion thereon.

/s/ Purwantono, Suherman & Surja

Purwantono, Suherman & Surja Jakarta, Indonesia

March 25, 2014

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

TO THE STOCKHOLDERS OF

PERUSAHAAN PERSEROAN (PERSERO) PT TELEKOMUNIKASI INDONESIA Tbk

In our opinion, the consolidated statements of comprehensive income, changes in equity, and cash flows for the year ended 31 December 2011, before the effects of the adjustments to retrospectively reflect the change in the composition of reportable segments described in Note 36, present fairly, in all material respects, the results of operations and cash flows of Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk and its subsidiaries for the year ended 31 December 2011 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board (the 2011 consolidated financial statements before the effects of the adjustments on Note 36 are not presented herein). 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 audit. We conducted our audit, before the effects of the adjustments described above, of these statements, in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provide a reasonable basis for our opinion.

We were not engaged to audit, review, or apply any procedures to the adjustments to retrospectively reflect the change in composition of reportable segments described in Note 36 and accordingly, we do not express an opinion or any other form of assurance about whether such adjustments are appropriate and have been properly applied. Those adjustments were audited by other auditors.

As discussed in Note 2aa to the consolidated financial statements, the Company has changed the manner in which it accounts for defined benefit plans in 2013.

JAKARTA

30 March 2012, except for the change in accounting for defined benefit plans discussed in Note 2aa, and the effects of the stock split discussed in Note 25, as to which the date is 25 March 2014

/s/ Chrisna A. Wardhana, CPA

Chrisna A. Wardhana, CPA

Public Accountant License No. AP.0231

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 2013
(Figures in tables are presented in billions of rupiah and millions of U.S. dollar)

Tabel of Content

				December 31,
		January 1, 2012		201 2
		(Restated)		(Restated)		2013
	Notes	Rp		Rp		Rp		US$ (Note 4)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	2c,2e,2t, 5 ,3 5 , 40	9,634		13,118		14,696		1,207
Other current financial assets	2c,2e,2t, 6 ,3 5 , 40	373		4,338		6,872		565
Trade and other receivables	2c,2g,2t,7,35, 40	5,393		5,409		6,421		527
Inventories	2h, 8	758		579		509		42
Advances and prepaid expenses	2c,2i,2m, 9 ,3 5	3,294		3,721		3,937		324
Prepaid income taxes	2s,3 2	633		52		58		5
Prepaid other taxes	2s,3 2	525		756		477		39
Asset held for sale	2j, 10	791		-		105		9
Total Current Assets		21,401		27,9 73		33,075		2,718
NON-CURRENT ASSETS
Long-term investments	2f,2t,1 1 , 40	235		275		304		25
Property and equipment	2l,2m,2z,1 2 ,3 7	74,638		76,908		86,599		7,116
Prepaid pension benefit cost	2r,3 3	409		-		949		78
Advances and other non-current assets	2c,2g,2i,2m,2s,2t, 1 3 ,3 5 ,3 7 ,3 8 , 40	3,817		3,510		5,294		435
Intangible assets	2d,2k,2z,1 4	1,791		1,443		1,508		124
Deferred tax assets	2s,3 2	75		102		67		5
Total Non-current Assets		8 0 , 965		82,238		94,721		7,783
TOTAL ASSETS		102, 366		1 10 , 211		127 , 796		10, 50 1
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Trade and other payables	2c,2n,2t,1 5 ,3 5 , 40	8,355		7,457		11,988		985
Current income tax liabilities	2s,3 2	729		1,280		942		77
Other tax liabilities	2s,3 2	310		564		756		62
Accrued expenses	2c,2t,1 6 ,3 5 , 40	4,790		6,163		5,264		43 2
Unearned income	2q,17	2,821		2,729		3,490		287
Advances from customers and suppliers	2c,3 5	271		257		472		39
Short-term loans and other borrowings	2c,2m,2o,2t,1 2 ,1 8 ,3 5 , 40	4,913		5,658		5,525		454
Total Current Liabilities		22,189		24,108		28, 437		2 ,33 6
NON-CURRENT LIABILITIES
Deferred tax liabilities	2s,3 2	3, 159		2,252		2,908		239
Other liabilities	2n,2q	242		334		472		39
Long service award provisions	2r,3 4	287		347		336		28
Pension benefit and other post-employment benefit obligations	2c,2r,3 3 ,3 5	5,372		8,184		4,258		350
Long-term loans and other borrowings	2c,2m,2o,2t,1 2 ,1 9 ,3 5 , 40	12,958		13,617		14,731		1,210
Total Non-current Liabilities		2 2,018		24,734		2 2,705		1, 866
TOTAL LIABILITIES		4 4 , 207		48,842		5 1,142		4, 20 2
EQUITY
Capital stock	1c,2 1	5,040		5,040		5,040		414
Additional paid-in capital	2u,2 2	1,073		1,073		1,845		152
Treasury stock	2u,2 3	(6,323	)	(8,067	)	(5,805	)	(477	)
Retained earnings		4 4,998		47,927		58,475		4,805
Other reserves	2f,2t,2 4	56		82		198		16
Net Equity Attributable to Owners of the Parent Company		4 4 , 844		46,055		5 9 , 753		4, 910
Non-controlling interests	2b, 20	13,315		15,314		16,901		1,389
TOTAL EQUITY		5 8 , 159		61,36 9		76,654		6,299
TOTAL LIABILITIES AND EQUITY		102, 366		110,2 11		127,796		10,50 1

The accompanying notes to the consolidated financial statements form an integral part of these consolidated financial statements taken as a whole.

F-1

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years Ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah and millions of U.S. dollar, unless otherwise stated)

Tabel of Content

		2011		201 2
		(Restated)		(Restated)		2013
	Notes	Rp		Rp		Rp		US$ (Note 4)
REVENUES	2c,2q,2 6 ,3 5	71,238		77,127		82,967		6,817
Operations, maintenance and telecommunication service expenses	2c,2q,2 9 ,3 5	(16,453	)	(16,796	)	(19,332	)	(1,588)
Depreciation and amortization	2k,2l,2m,1 2 ,1 3 ,1 4	(14,823	)	(14,474	)	(15,805	)	(1,299)
Personnel expenses	2c,2q,2r,2 8 ,3 3 ,3 4 ,3 5	(8,424	)	(9,960	)	(9,829	)	(808)
Interconnection expenses	2c,2q,3 1 ,3 5	(3,555	)	(4,667	)	(4,927	)	(405)
Marketing expenses	2q	(3,278	)	(3,094	)	(3,044	)	(250)
General and administrative expenses	2c,2q, 30 ,3 5	(2,935	)	(3,036	)	(4,155	)	(341	)
Loss on foreign exchange - net	2p	(210	)	(189	)	(249	)	(20	)
Other income	2b,2q,3,11,12a,1 2 c	666		2,559		2,581		212
Other expenses	2q,1 2 c	(192	)	(1,973	)	(480	)	( 40	)
OPERATING PROFIT		22,034		25,497		27,727		2,27 8
Finance income	2c,3 5	620		596		836		69
Finance costs	2c,2q,3 5	(1,662	)	(2,055	)	(1,504	)	(124)
Share of loss of associated companies	2f,1 1	(10	)	(11	)	(29	)	( 2 )
PROFIT BEFORE INCOME TAX		20,982		24,027		27 , 030		2,22 1
INCOME TAX (EXPENSE) BENEFIT	2s,3 2
Current		(5,673	)	(6,628	)	(6,995	)	(575	)
Deferred		236		742		95		8
Net Income Tax Expense		(5,437	)	(5,886	)	(6,900	)	(5 67	)
PROFIT FOR THE YEAR		15,545		18,141		20,130		1,6 54
OTHER COMPREHENSIVE INCOME (EXPENSES)
Other comprehensive income to be reclassified to profit or loss in subsequent periods:
Foreign currency translation	1d,2f,24	7		31		120		10
Net (loss) gain on available-for-sale financial assets	2t,24	4		(5	)	( 4	)	(1	)
Other comprehensive income not to be reclassified to profit or loss in subsequent periods:
Defined benefit plan actuarial gain (losses), net of tax	2r,3 3	(1,939	)	(2,566	)	4,999		411
Other Comprehensive Income (Expenses) - Net		(1,928	)	(2,540	)	5,11 5		420
NET COMPREHENSIVE INCOME FOR THE YEAR		13,617		15,601		25,24 5		2,0 74
Profit for the year attributable to:
Owners of the parent company		11,043		12,621		14,046		1,1 54
Non-controlling interests		4,502		5,520		6,084		500
		15,545		18,141		20,130		1,6 54
Net comprehensive income for the year attributable to:
Owners of the parent company		9,183		10,056		19,01 8		1,5 62
Non-controlling interests	2b, 20	4,434		5,545		6,227		512
		13,617		15,601		25,245		2,074
BASIC AND DILUTED EARNINGS PER SHARE (in full amount)	2w,2 5
Net income per share		112.73		131.45		145.77		0.01
Net income per ADS ( 20 0 Series B shares per ADS)		22,546.00		26,290.80		29,153.58		2.40

The accompanying notes to the consolidated financial statements form an integral part of these consolidated financial statements taken as a whole.

F-2

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Years Ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah)

Tabel of Content

Description	Notes	Attributable to owners of the parent c ompany — Capital stock	Additional paid-in capital	Treasury stock		Retained earnings		Other reserves		Net		Non-controlling interests		Total equity
Balance, January 1, 2011		5,040	1,073	(4,264	)	42,726		52		44,627		11,911		56,538
Adjustment in relation to implementation of International Accounting Standards (“IAS”) 19, Employee Benefits (Revised 2011)		-	-	-		(1,081	)	-		(1,081	)	-		(1,081	)
Balance, January 1, 2011, restated		5,040	1,073	( 4,264	)	4 1 , 645		5 2		4 3 , 546		1 1,911		5 5 , 457
Net comprehensive income for the year	1d,2b
Profit for the year		-	-	-		11,043		-		11,043		4,502		15, 545
Other comprehensive (expenses) income	2f,2r,2t	-	-	-		(1,8 71	)	11		(1,8 60	)	(68	)	(1,9 28	)
Net comprehensive income for the year		-	-	-		9,172		11		9,183		4,434		13, 617
Gain on investment in securities	2t	-	-	-		-		(7	)	(7	)	-		(7	)
Transactions with owners recorded directly in equity
Cash dividends	2v,21	-	-	-		(5,819	)	-		(5,819	)	(3,030	)	(8,849	)
Treasury stock acquired - at cost	2u	-	-	(2,059	)	-		-		(2,059	)	-		(2,059	)
Total transactions with owners		-	-	(2,059	)	(5,819	)	-		(7,878	)	(3,0 30	)	(10,908	)
Balance, December 31, 2011, restated		5,040	1,073	(6,323	)	4 4 , 998		56		44,844		13,315		58,159

The accompanying notes to the consolidated financial statements form an integral part of these consolidated financial statements taken as a whole.

F-3

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (continued)
Years Ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah)

Tabel of Content

Description	Notes	Attributable to owners of the parent c ompany — Capital stock	Additional paid-in capital	Treasury stock		Retained earnings		Other reserves	Net		Non-controlling interests		Total equity
Balance, January 1 , 201 2, restated		5,040	1,073	(6,323	)	4 4 , 998		56	44,844		13,315		58,159
Net comprehensive income for the year	1d,2b
Profit for the year		-	-	-		12,621		-	12,621		5,520		18,141
Other comprehensive ( expenses) income	2f,2r,2t	-	-	-		(2,591	)	26	(2,565	)	25		(2,540	)
Net comprehensive income for the year		-	-	-		10,030		26	10,056		5,545		15,601
Transactions with owners recorded directly in equity
D istributions to owners
Cash dividends	2 v ,21	-	-	-		(7,127	)	-	(7,127	)	(3,607	)	(10,734	)
Treasury stock acquired - at cost	2 u ,23	-	-	(1,744	)	-		-	(1,744	)	-		(1,744	)
Total d istributions to owners and acquisition of treasury stock		-	-	(1,744	)	(7,127	)	-	(8,871	)	(3,607	)	(12,478	)
Establishment of a subsidiary	1d	-	-	-				-	-		32		32
Acquisition of non-controlling interest s in subsidiaries	1d	-	-	-		(23	)	-	(23	)	(10	)	(33	)
Issuance of new shares of a subsidiary	1d	-	-	-		49		-	49		39		88
Net change in ownership interest s in subsidiaries		-	-	-		26		-	26		61		87
Total transactions with owners		-	-	(1,744	)	(7,101	)	-	(8,845	)	(3,546	)	(12,391	)
Balance, December 31, 2012 , restated		5,040	1,073	(8,067	)	47,927		82	46,055		15,314		61,369

The accompanying notes to the consolidated financial statements form an integral part of these consolidated financial statements taken as a whole.

F-4

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (continued)
Years Ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah)

Tabel of Content

Description	Notes	Attributable to owners of the parent c ompany — Capital stock	Additional paid-in capital	Treasury stock		Retained earnings		Other reserves	Net		Non- c ontrolling interests		Total equity
Balance, January 1, 2013, restated		5,040	1,073	(8,067	)	47,927		82	46,055		15,314		61,369
Net comprehensive income for the year	1d,2b
Profit for the year		-	-	-		14,046		-	14,046		6,084		20,130
Other comprehensive income	2f,2r,2t	-	-	-		4,856		11 6	4,9 72		143		5,11 5
Net comprehensive income for the year		-	-	-		18,902		11 6	19,018		6,227		25,245
Transactions with owners recorded directly in equity
Cash dividends	2 v ,21	-	-	-		(8,354	)	-	(8,354	)	(4,690	)	(13,044	)
Sale of t reasury stock and transfer to employees stock ownership program	2 u , 22, 23	-	772	2,262		-		-	3,034		-		3,034
Acquisition of a business	1d	-	-	-		-		-	-		5		5
Issuance of new shares of subsidiaries	1d	-	-	-		-		-	-		45		45
Total transactions with owners		-	772	2,262		(8,354	)	-	(5,320	)	(4,640	)	(9,960	)
Balance, December 31, 2013		5,040	1,845	(5,805	)	58,475		198	59,753		16,901		76,654

The accompanying notes to the consolidated financial statements form an integral part of these consolidated financial statements taken as a whole.

F-5

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 2011, 2012 and 2013
(Figures in tables are presented in billions of rupiah and millions of U.S. dollar)

Tabel of Content

	Notes	201 1		201 2		2013
		Rp		Rp		Rp		US$ (Note 4 )
CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts from:
Customers		67, 469		71,910		7 7,013		6,328
Other operators		3,586		3,993		4, 521		37 1
Total cash receipts from revenues		71,055		75,903		81,5 34		6,699
Interest income received		599		585		832		68
Advance receipts from (refund to) customers		(226	)	(37	)	18 6		15
Other c ash receipts- net		-		-		216		18
Cash payments for expenses		(25,507	)	(33,651	)	( 27,440	)	(2,255	)
Cash payments to employees		(8,509	)	( 8,162	)	(9, 883	)	(812	)
Payments for i ncome taxes		(5,359	)	( 5,586	)	(7, 395	)	(608	)
Payments for i nterest costs		(1,591	)	(1,111	)	(1, 476	)	(121	)
Net cash provided by operating activities		30,462		27,941		36,5 74		3,004
CASH FLOWS FROM INVESTING ACTIVITIES
Divestment of investment in subsidiary	3	-		-		926		76
Proceeds from sale of property and equipment	1 2	56		360		4 66		38
Divestment of long - term investment	11	-		-		153		13
Proceeds from insurance claims	1 2	13		1,875		6 0		5
Proceeds from sale of available-for-sale financial assets		59		53		49		4
Acquisition of property and equipment	12	(13,105	)	( 8,221	)	(19,644	)	( 1,614	)
Placements in time deposits	6	(33	)	( 4,008	)	(2,288	)	( 188	)
(Increase)decrease in advances and other non-current assets	1 3	34		(134	)	( 791	)	(65	)
Increase in advances for purchases of property and equipment	1 3	(834	)	(487	)	(775	)	(64	)
Acquisition of intangible assets	1 4	(604	)	(437	)	( 637	)	(52	)
Acquisition of business, net of acquired cash	1d,3	-		(230	)	( 201	)	(1 6	)
Acquisition of long-term investments	1 1	-		(49	)	(20	)	(2	)
Acquisition of non-controlling interests in subsidiar ies	1d	-		(33	)	-		-
Net cash used in investing activities		(14,414	)	(11,311	)	(22,7 02	)	(1,86 5	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from loans and other borrowings	1 8 ,1 9	3,589		4,887		3,538		291
Proceeds from sale (payments for acquisition) of treasury stock	2 3	(2,059	)	(1,744	)	2,368		195
Capital contribution of non-controlling interests in subsidiaries	1d	-		120		50		4
Cash dividends paid to the Company’s stockholders	2 1	(6,069	)	(7,127	)	(8,354	)	(68 7	)
Repayments of loans and other borrowings	1 2 ,1 8 ,1 9	(7,967	)	(5,843	)	(6,239	)	(513	)
Cash dividends paid to non-controlling interests of subsidiaries		(3,033	)	(3,607	)	(4,690	)	(385	)
Net cash used in financing activities		(15,539	)	( 13,314	)	(13,3 27	)	(1 , 0 95	)
NET INCREASE IN CASH AND CASH EQUIVALENTS		509		3,316		545		4 4
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS		5		168		1, 039		85
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	5	9,120		9,634		13,118		1,078
ENDING BALANCE OF DISPOSED SUBSIDIARY		-		-		(6	)	(0	)
CASH AND CASH EQUIVALENTS AT END OF YEAR	5	9,634		13,118		14,696		1,207

The accompanying notes to the consolidated financial statements form an integral part of these consolidated financial statements taken as a whole.

F-6

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

1. GENERAL

a. Establishment and general information

Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk (the “Company”) was originally part of “Post en Telegraafdienst” , which was established and operated commercially in 1884 under the framework of Decree No. 7 dated March 27, 1884 of the Governor General of the Dutch Indies. Decree No. 7 was published in State Gazette No. 52 dated April 3, 1884.

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

The Company was established based on notarial deed No. 128 dated September 24, 1991 of Imas Fatimah, S.H. Its deed of establishment was approved by the Ministry of Justice of the Republic of Indonesia in its Decision Letter No. C2-6870.HT.01.01.Th.1991 dated November 19, 1991 and was published in State Gazette No. 5 dated January 17, 1992, Supplement No. 210. The Articles of Association has been amended several times, the latest amendment of which was about, among others, the change of capital structure through the Company’s 5-for-1 stock split whereby each share with par value of Rp250 would be split into Rp50 per share, and the Partnership and Community Development Programme (“PKBL”) was exc luded from the Work Plan and Company Budgets, based on notarial deed No. 11 dated May 8, 2013 of Ashoya Ratam, S.H., MKn. The latest amendment was accepted and approved by the Ministry of Law and Human Rights of the Republic of Indonesia (“MoLHR”) in its Letter No. AHU-AH.01.10-22500 dated June 7, 2013.

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

a. Main business:

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

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

b. Supporting business:

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

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

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

The Company was granted several telecommunications licenses by the Government of the Republic of Indonesia which are valid for an unlimited period of time as long as the Company complies with prevailing laws and telecommunications regulations and fulfills the obligation stated in those licenses. For every license, an evaluation is performed annually and an overall evaluation is performed every five years.

F-7

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

1. GENERAL (continued)

a. Establishment and general information (continued)

The Company is obliged to submit reports of services annually to the Indonesian Directorate General of Post and Informatics (“DGPI”), which replaced the previous Indonesian Directorate General of Post and Telecommunications (“DGPT”). The reports comprise information such as network development progress, service quality standard achievement, total customers, license payment and universal service contribution, while for internet telephone services for public purpose (“ITKP”), there is additional information required such as operational performance, customer segmentation, traffic and gross revenue.

Details of these licenses are as follows:

License	License No.	Type of services	Grant date/latest renewal date
License to operate local fixed line and basic telephone services network	381/KEP/ M.KOMINFO/ 10/2010	Local fixed line and basic telephone services network	October 28, 2010
License to operate fixed domestic long distance and basic telephone services network	382/KEP/ M.KOMINFO/ 10/2010	Fixed domestic long distance and basic telephone services network	October 28, 2010
License to operate fixed international and basic telephone services network	383/KEP/ M.KOMINFO/ 10/2010	Fixed international and basic telephone services network	October 28, 2010
License to operate fixed closed network	398/KEP/ M.KOMINFO/ 11/2010	Fixed closed network	November 12, 2010
License to operate internet telephone services for public purpose	384/KEP/DJPT/ M.KOMINFO/ 11/2010	ITKP	November 29, 2010
License to operate as internet service provider	83/KEP/DJPPI/ KOMINFO/ 4/2011	Internet service provider	April 7, 2011
License to operate data communication system services	169/KEP/DJPPI/ KOMINFO/ 6/2011	Data communication system services	June 6, 2011
License to operate packet switched based local fixed line network	331/KEP/ M.KOMINFO/ 07/2011	Packet switched based local fixed line network	July 27, 2011
License to operate network access point	331/KEP/ M.KOMINFO/ 09/2013	Network Access Point (“NAP”)	September 24, 2013

F-8

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

1. GENERAL (continued)

b. Company’s Board of Commissioners, Board of Directors, Audit Committee and Corporate Secretary

Boards of Commissioners and Directors

Based on resolutions made at the Annual General Meeting (“AGM”) of Stockholders of the Company held on May 11, 2012 as covered by notarial deed No. 14 of Ashoya Ratam, S.H., MKn. and the AGM of Stockholders of the Company held on May 8, 2013 as covered by notarial deed No. 11 of Ashoya Ratam, S.H., MKn., the composition of the Company’s Boards of Commissioners and Directors as of December 31, 201 2 and 201 3 , respectively, was as follows:

	201 2	201 3*
President Commissioner	Jusman Syafii Djamal	Jusman Syafii Djamal
Commissioner	Parikesit Suprapto	Parikesit Suprapto
Commissioner	Hadiyanto	Hadiyanto
Commissioner	-	Gatot Trihargo**
Independent Commissioner	Virano Gazi Nasution	Virano Gazi Nasution
Independent Commissioner	Johnny Swandi Sjam	Johnny Swandi Sjam
President Director	Arief Yahya	Arief Yahya
Director of Finance	Honesti Basyir	Honesti Basyir
Director of Innovation and Strategic Portfolio	Indra Utoyo	Indra Utoyo
Director of Enterprise and Business Service	Muhamad Awaluddin	Muhamad Awaluddin
Director of Wholesale and International Services	Ririek Adriansyah	Ririek Adriansyah
Director of Human Capital Management	Priyantono Rudito	Priyantono Rudito
Director of Network , Information Technology and Solution	Rizkan Chandra	Rizkan Chandra
Director of Consumers Services	Sukardi Silalahi	Sukardi Silalahi

*	The change in nomenclature of the Directors is based on Directors’ Regulation No.202.11/r.00/HK.200/COP-B0400000/2013 dated June 25, 2013 and Directors’ Decree No. SK.2287/PS320/HCC-10/2013 dated June 28, 2013 .
**	Appointed in the General Meeting of Stockholders held on April 19, 2013 .

2 . Audit Committee and Corporate Secretary

The composition of the Company’s Audit Committee and the Corporate Secretary as of December 31, 201 2 and 201 3 , were as follows:

	201 2	201 3
Chair	Johnny Swandi Sjam	Johnny Swandi Sjam
Secretary	Salam	Agus Yulianto
Member	Parikesit Suprapto	Parikesit Suprapto
Member	Agus Yulianto	-
Member	Sahat Pardede	Sahat Pardede
Member	Virano Gazi Nasution	Virano Gazi Nasution
Corporate Secretary	Agus Murdiyatno	Honesti Basyir

F-9

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

1. GENERAL (continued)

c. Public offering of securities of the Company

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

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

To comply with Law No. 1/1995 on Limited Liability Companies, at the AGM of Stockholders of the Company on April 16, 1999, the Company’s stockholders resolved to increase the Company’s issued share capital by the distribution of 746,666,640 bonus shares through the capitalization of certain additional paid-in capital, which were made to the Company’s stockholders in August 1999. On August 16, 2007, Law No. 1/1995 on Limited Liability Companies was amended by the issuance of Law No. 40/2007 on Limited Liability Companies which became effective on the same date. Law No. 40/2007 has no effect on the public offering of shares of the Company. The Company has complied with Law No. 40/2007 .

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

At the AGM of Stockholders of the Company held on July 30, 2004, the minutes of which are covered by notarial deed No. 26 of A. Partomuan Pohan, S.H., LLM., the Company’s stockholders approved the Company’s 2-for-1 stock split for Series A Dwiwarna and Series B share. The Series A Dwiwarna share with par value of Rp500 per share was split into 1 Series A Dwiwarna share with par value of Rp250 per share and 1 Series B share with par value of Rp250 per share. The stock split resulted in an increase of the Company’s authorized capital stock from 1 Series A Dwiwarna share and 39,999,999,999 Series B shares to 1 Series A Dwiwarna share and 79,999,999,999 Series B shares, and the issued capital stock from 1 Series A Dwiwarna share and 10,079,999,639 Series B shares to 1 Series A Dwiwarna share and 20,159,999,279 Series B shares. After the stock split, each ADS represented 40 Series B shares.

During the Extraordinary General Meeting (“EGM”) held on December 21, 2005 and the AGMs held on June 29, 2007, June 20, 2008, and May 19, 2011, the Company’s stockholders approved phase I, II, III and IV plan, respectively, of the Company’s program to repurchase its issued Series B shares (Note 23).

F-10

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

1. GENERAL (continued)

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

At the AGM held on April 19, 2013 as covered by notarial deed No. 38 dated April 19, 2013 of Ashoya Ratam, S.H., MKn., the stockholders approved the changes to the Company’s plan on the treasury stock acquired under phase III .

At the AGM held on April 19, 2013, the minutes of which are covered by notarial deed No.38 dated April 19, 2013 of Ashoya Ratam, S.H., MKn., the stockholders approved the Company’s 5-for-1 stock split for Series A Dwiwarna and Series B shares. Series A Dwiwarna share with par value of Rp250 per share was split into 1 Series A Dwiwarna share with par value of Rp50 per share and 4 Series B shares with par value of Rp50 per share. The stock split resulted in an increase of the Company’s authorized capital stock from 1 Series A Dwiwarna and 79,999,999,999 Series B shares to 1 Series A Dwiwarna and 399,999,999,999 Series B shares, and the issued capital stock from 1 Series A Dwiwarna and 20,159,999,279 Series B shares to 1 Series A Dwiwarna and 100,799,996,399 Series B shares. After the stock split, each ADS represented 200 Series B shares (Notes 21 and 2 3 ).

As of December 31, 2013, all of the Company’s Series B shares are listed on the IDX and 50,155,649 ADS shares are listed on the NYSE and LSE (Note 2 1 ).

As of December 31, 2013, the Company’s outstanding rupiah bonds representing the second rupiah bonds issued on June 25, 2010 with a nominal amount of Rp1,005 billion for a five-year period and Rp1,995 billion for a ten-year period for Series A and Series B, respectively, are listed on the IDX (Note 1 9b ).

d. Subsidiaries

As of December 31, 201 2 and 201 3 , the Company has consolidated the following directly or indirectly owned subsidiaries:

(i) Direct subsidiaries:

Subsidiary/place of incorporation	Nature of business	Start of — commercial operations	Percentage of ownership interest — 2012	2013	Total assets before elimination — 2012	2013
PT Telekomunikasi Selular ( “Telkomsel” ) , Jakarta, Indonesia	Telecommunication – provides telecommunication facilities and mobile cellular services using Global System for Mobile Communication (“GSM”) technology	1995	65	65	62,844	73,245
PT Dayamitra Telekomunikasi ( “Dayamitra” ), Jakarta, Indonesia	Telecommunication	1995	100	100	4,931	7,363
PT Multimedia Nusantara ( “Metra” ), Jakarta, Indonesia	Multimedia and line telecommunication services	1998	100	100	3,394	5,283
PT Telekomunikasi Indonesia International ( “TII” ), Jakarta, Indonesia	Telecommunication	1995	100	100	2,440	3,804

F-11

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

1. GENERAL (continued)

d. Subsidiaries (continued)

(i) Direct subsidiaries: (continued)

Subsidiary/place of incorporation	Nature of business	Start of — commercial operations	Percentage of ownership interest — 2012	2013	Total assets before elimination — 2012	2013
PT Pramindo Ikat Nusantara ( “Pramindo” ), Jakarta, Indonesia	Telecommunication construction and services	1995	100	100	1,202	1,365
PT Graha Sarana Duta ( “GSD” ), Jakarta, Indonesia	Leasing of offices and providing building management maintenance services,and civil consultant and developer	1982	99.99	99.99	622	1,571
PT Indonusa Telemedia ( “Indonusa” ), Jakarta, Indonesia*	Pay television and content services	1997	100 (including 0.46% ownership through Metra)	20 (including 0.46% ownership through Metra)	771	-
PT Telkom Akses ( “Telkom Akses” ), Jakarta, Indonesia	Construction service and trade in the field of telecommunication	2013	100	100	-	946
PT Patra Telekomunikasi Indonesia (“ Patrakom ”) Jakarta, Indonesia**	Telecommunication provides fixed line communication system	1996	40	100	218	254
PT Napsindo Primatel Internasional ( “Napsindo” ), Jakarta, Indonesia	Telecommunication - provides Network Access Point (NAP), Voice Over Data (VOD) and other related services	1999; ceased operations on January 13, 2006	60	60	5	5

*	On October 8, 2013, the Company disposed 80% of its interest in PT Indonusa (Notes 3 and 11).
**	On September 25 and November 29, 2013, the Company acquired additional interest of 40% and 20%, respectively, of Patrakom (Notes 3 and 11 ) .

( ii) Indirect subsidiaries:

Subsidiary/place of incorporation	Nature of business	Start of — commercial operations	Percentage of ownership interest — 2012	2013	Total assets before elimination — 2012	2013
PT Sigma Cipta Caraka ( “Sigma” ), Tangerang, Indonesia	Information technology service – system implementation and integration service, outsourcing and software license maintenance	1988	100	100	1,012	1,886

F-12

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

1. GENERAL (continued)

d. Subsidiaries (continued)

(ii) Indirect subsidiaries: (continued)

Subsidiary/place of incorporation	Nature of business	Start of commercial operations	Percentage of ownership interest — 2012	2013	Total assets before elimination — 2012	2013
PT Infomedia Nusantara ( “Infomedia” ), Jakarta, Indonesia	Data and information service – provides telecommunication information services and other information services in the form of print and electronic media and call center services	1984	100	100	982	1,218
Telekomunikasi Indonesia International (“ TL” ) S.A., Timor Leste	Telecommunication	2012	100	100	149	803
Telekomunikasi Indonesia International Pte. Ltd., Singapore	Telecommunication	2008	100	100	522	785
PT Metra Digital Media (“ MDM ”), Jakarta, Indonesia	Telecommunication information services	2013	-	99.99	-	692
PT Telkom Landmark Tower (“ TLT ”), Jakarta, Indonesia	Service for property development and management	2012	55	55	150	493
PT Finnet Indonesia (“ Finnet ”), Jakarta,Indonesia	Banking data and communication	2006	60	60	113	203
Telekomunikasi Indonesia International Ltd., Hong Kong	Telecommunication	2010	100	100	95	90
PT Administrasi Medika (“ Ad Medika ”), Jakarta, Indonesia	Health insurance administration services	2010	75	75	95	127
PT Metra Plasa (“ Metra Plasa ”), Jakarta, Indonesia	Website services	2012	60	60	95	86
PT Metra-Net (“ Metra-Net ”), Jakarta, Indonesia	Multimedia portal service	2009	100	100	33	40
PT Graha Yasa Selaras (“ GYS ”) Bandung, Indonesia	Tourism service	2013	51	51	7	32
PT Pojok Celebes Mandiri (“ Pointer ”) Jakarta, Indonesia	Tour agent/bureau services	2008	-	51	-	14
Telekomunikasi Indonesia International Pty Ltd. Australia	Telecommunication and IT based services	2013	-	100	-	7
PT Satelit Multimedia Indonesia (“ SMI ”) Jakarta, Indonesia	Commerce and providing network services , Telecommunication satellite and multimedia services	2013	-	99.99	-	6

F-13

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

1. GENERAL (continued)

d. Subsidiaries (continued)

(ii) Indirect subsidiaries: (continued)

Subsidiary/place of incorporation	Nature of business	Start of — commercial operations	Percentage of ownership interest — 2012	2013	Total assets before elimination — 2012	2013
PT Metra Media (“ MM ”) Jakarta, Indonesia	Trade service, construction purveyor / supplier, advertising services	2013	-	99.83	-	-
Telkomsel Finance B.V., (“ TFBV ”), Amsterdam, The Netherlands*	Finance - established in 2005 for the purpose of borrowing, lending and raising funds including issuance of bonds, promissory notes or debts	2005	65	-	8	-
Aria West International Finance B.V. (“ AWI BV ”), The Netherlands**	Established to engage in rendering services in the field of trade and finance services	1996; ceased operations on July 31, 2003	100	-	-	-
Telekomunikasi Selular Finance Limited (“ TSFL ”), Mauritius***	Finance - established to raise funds for the development of Telkomsel’s business through the issuance of debenture stock, bonds, mortgages or any other securities	2002	65	65	0	-
PT Metra TV (“ Metra TV ”) Jakarta, Indonesia	Pay TV services	2013	-	99.83	-	-
Telekomunikasi Indonesia International (USA) Inc. USA	Telecommunication	-	-	100	-	-

*	Based on Decision Letter No. 959/2013 dated November 1, 2013 off the Amsterdam Court, TFBV was liquidated effective from August 22, 2013.
**	On December 2, 2013, AWI BV was liquidated.
***	As of December 31, 2013, TSFL was under liquidation process.

(a) Metra

On April 2, 2012, based on notarial deed No. 03 dated April 2, 2012 of Utiek R. Abdurachman, S.H., MLI., MKn., Metra established PT Metra Plasa with authorized capital of Rp50 million and issued and fully paid capital of Rp12.5 million.

On July 20, 2012, based on the Circular Resolution of Stockholders of Metra Plasa, as covered by notarial deed No. 1 dated October 1, 2012 of Utiek R. Abdurachman, S.H., MLI., MKn. Metra Plasa’s stockholders agreed on the following:

i. to increase Metra Plasa’s authorized capital from Rp50 million to Rp60 billion consisting of 6,000,000 shares with nominal value of Rp10,000 (full amount) per share;

ii. to increase its issued and fully paid capital from Rp12.5 million owned 100% by Metra to Rp15.25 billion by issuing 1,523,750 additional shares with nominal value of Rp10,000 (full amount) per share;

F-14

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

1. GENERAL (continued)

d. Subsidiaries (continued)

(a) Metra (continued)

iii. from the issued new shares, 913,750 shares with total nominal value of Rp9 billion were subscribed by Metra while 610,000 shares with total nominal value of Rp6 billion were subscribed by eBay International AG at a premium totaling Rp78 billion. Metra’s ownership was diluted to 60% with the remaining 40% owned by eBay International AG.

On September 21, 2012, based on notarial deed No. 11 dated September 21, 2012 of N.M. Dipo Nusantara Pua Upa, S.H., MKn., which was approved by the MoLHR in its Letter No. AHU-50211.AH.01.01/2012 dated September 26, 2012, Metra established a company with Pelindo II, a related party of the Company , under the name PT Integrasi Logistik Cipta Solusi (“ILCS”) with Metra obtaining 49% ownership. ILCS is engaged in providing E-trade logistic services and other related services.

On January 8, 2013, based on notarial deed No. 02 dated January 8, 2013 of Utiek R. Abdurachman, S.H., MLI.,MKn., which was approved by the MoLHR through its Letter No. AHU-03276.AH.01.01/2013 dated January 29, 2013, Metra established a subsidiary, PT Metra Media, and obtained 99.83% ownership. MM is engaged in providing trade, construction, advertising and other services.

On January 8, 2013, based on notarial deed No. 03 dated January 8, 2013 of Utiek R. Abdurachman, SH., MLI., MKn., which was approved by the MoLHR through its Letter No. AHU-03261.AH.01.01/2013 dated January 29, 2013, Metra established a subsidiary, PT Metra TV, and obtained 99.83% ownership. Metra TV is engaged in providing subscription-broadcasting services.

On January 22, 2013, based on notarial deed No. 28 dated January 22, 2013 of N.M. Dipo Nusantara Pua Upa, S.H., MKn., which was approved by the MoLHR through its Letter No. AHU-03084.AH.01.01/2013 dated January 28, 2013, Metra established a subsidiary, PT Metra Digital Media, and obtained 99.99% ownership. MDM is engaged in providing telecommunication information and other services.

On March 25, 2013, based on notarial deed No. 38 dated March 25, 2013 of N.M. Dipo Nusantara Pua Upa, S.H., MKn., which was approved by the MoLHR in its Letter No.AHU-20566.AH.01.01/2013 dated April 17, 2013, Metra established PT Satelit Multimedia Indonesia and obtained 99.99% ownership. SMI is engaged in commerce and providing network services, telecommunication, satellite and multimedia devices.

On August 16, 2013, based on notarial deed No. 5 dated August 16, 2013 of N.M. Dipo Nusantara Pua Upa, S.H., MKn. which was approved by the MoLHR in its Letter No. AHU-0081886.AH.01.09/2013 dated August 30, 2013, Metra acquired the ownership of PT Pojok Celebes Mandiri after the signing of Sales and Purchase of Shares Agreement dated June 12, 2013 regarding the purchase of Pointer ’s2,550 shares equivalent to Rp255 million or 51% ownership.

(b) TII

Based on the Circular Resolution of Stockholders of TII dated September 11, 2012, as covered by notarial deed No. 04 dated October 4, 2012 of Siti Safarijah, S.H., TII’s stockholders agreed to establish a subsidiary in Timor Leste under the name Telekomunikasi Indonesia International S.A. to engage in providing telecommunication services.

F-15

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

1. GENERAL (continued)

d. Subsidiaries (continued)

(b) TII (continued)

On January 9, 2013, based on the Circular Resolution of the Stockholders of TII dated January 9, 2013, as covered by notarial deed No. 04 dated February 6, 2013 of Siti Safarijah, S.H., TII’s stockholders agreed to establish a subsidiary, Telekomunikasi Indonesia International Australia Pty Ltd. (“Telkom Australia”). Telkom Australia is engaged in providing telecommunication services and IT-based services.

On May 13, 2013, TII through Telekomunikasi Indonesia International (Hong Kong) Ltd. established a subsidiary in Macau under the name Telkom Macau, Ltd. (“Telkom Macau”). Telkom Macau is engaged in providing telecommunication services.

On June 3, 2013, TII through Telekomunikasi Indonesia International (Hong Kong) Ltd. established a subsidiary in Taiwan under the name Telkom Taiwan, Ltd. (“Telkom Taiwan”). Telkom Taiwan is engaged in providing telecommunication services.

On December 1 1 , 2013, TII established a subsidiary in the United States of America, Telekomunikasi Indonesia International (USA), Inc. Ltd. (“Telkom USA ”). Telkom USA will be engaged in providing telecommunication services. For the year ended December 31, 2013, Telkom USA had no financial and operational activities yet .

Based on notarial deed No. 71 dated December 27, 2011 of Kartono, S.H. which was approved by the MoLHR through its Decision Letter No. AHU-05281.AH.01.01/2012 dated February 1, 2012, GSD and Yayasan Kesehatan (“Yakes”), a related party of the Company, established a subsidiary under the name PT Telkom Landmark Tower, with GSD obtaining 55% ownership. TLT is engaged in property development and management.

Based on notarial deed No.48 dated February 7, 2012 of Sri Ahyani, S.H. which was approved by the MoLHR in its Letter No. AHU-22272.AH.01.01/2012 dated April 27, 2012, GSD and Yakes established a subsidiary under the name PT Graha Yasa Selaras, with GSD obtaining 51% ownership. GYS is engaged in the tourism business.

(d) Telkom Akses

On November 26, 2012, based on notarial deed No. 20 dated November 26, 2012 of Siti Safarijah, S.H. which was approved by the MoLHR in its Letter No.AHU-60691.AH.01.01/2012 dated November 28, 2012, the Company established a wholly owned subsidiary, PT Telkom Akses. Telkom Akses is engaged in providing construction service and trade in the field of telecommunication.

(e) Sigma

On J une 29 , 20 12 , based on notarial deed No. 3 dated August 13 , 20 12 of Utiek R. Abdurachman , S.H. , MLI . , MKn. , Sigma entered into a Sales Purchase Agreement to purchase 150,000 shares of PT Sigma Solusi Integrasi (“ SSI ”) or the equivalent of 30 % of SSI ’s total ownership, with a transaction value of Rp 26 b illion from Marina Budiman , a non-controlling interest. On July 1 9 , 20 12 , Sigma settled the transaction.The difference between the acquisition cost and the carrying amount of the interest acquired amounting to Rp22 b illion is recorded as part of “Difference due to acquisition of non-controlling interests in subsidiaries” which is presented under the equity section of the consolidated statements of financial position.

F-16

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

1. GENERAL (continued)

d. Subsidiaries (continued)

(e) Sigma (continued)

On August 15, 2012, based on a notarial deed dated August 15, 2012 of Ny. Bomantari Julianto, S.H., Sigma entered into a Conditional Sales Purchase Agreement with PT Bina Data Mandiri (“BDM”) to purchase a Data Center Business, with a transaction value of Rp230 billion, from BDM. Based on the closing agreement dated November 30, 2012, the identifiable assets arising from the acquisition consisted of land, buildings, machine and equipment with total fair value amounting to Rp150 billion and intangible assets which included customer contracts and backlog with fair value amounting to Rp3 billion. The acquisition resulted in a goodwill amounting to Rp77 billion.

On September 17, 2012, based on notarial deed No. 10 dated September 17, 2012 of Utiek R. Abdurachman, SH., MLI . ,MKn., Sigma’s stockholders agreed to liquidated its subsidiary, PT Sigma Karya Sempurna (“SKS”), effective from September 17, 2012. The liquidation constituted a process of internal restructuring of Sigma Group’s business. As of the issuance date of the consolidated financial statements, the liquidation process has been carried out to the extent of sales of assets and liabilities settlement .

(f) Infomedia

On October 24, 2012 based on notarial deed No. 15 dated October 24, 2012 of Zulkifli Harahap, S.H., which was approved by the MoLHR through its Decision Letter No. AHU-55715.AH.01.01/2012 dated October 30, 2012, Infomedia established a wholly owned subsidiary under the name PT Infomedia Solusi Humanika (“ISH”). ISH is engaged in the services for distribution and supply of labor.

On December 17, 2012, based on notarial deed No. 231 dated December 17, 2012 of M. Kholid Artha, SH., Infomedia purchased 1,778 and 1,777 shares of Balebat, a subsidiary of Infomedia, or the equivalent of 15.73% each of Balebat’s total ownership, with a transaction value of Rp4.4 billion each from Zikra Lukman and Siti Chadijah, respectively, who are the non-controlling interests. The difference amounting to Rp1 billion between the purchase price and the carrying amount of the interests acquired is recorded as part of “Difference due to acquisition of non-controlling interests in subsidiaries” which is presented under the equity section of the consolidated statements of financial position.

Based on notarial deed No. 04 dated March 7 , 201 3 of Sjaaf De Carya Siregar, S.H. , Infomedia ’s stockholders agreed to distribute dividend amounting to Rp44 billion which was returned as increment of issued and fully paid capital.

Based on notarial deed No. 18 dated July 24, 2013 of Zulkifli Harahap, S.H. Infomedia’s stockholders approved an increase in its paid-in capital by 88,529,790 shares, amounting to Rp44 billion.

On November 20, 2013, Infomedia signed an agreement transferring its Telephone Directory Management business to MD M edia.

F-17

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

1. GENERAL (continued)

d. Subsidiaries (continued)

(g) Dayamitra

On April 5, 2013, based on notarial deed No. 0 02 dated April 5, 2013 of Andi Fatma Hasiah, S.H.,M.Kn. , Dayamitra ’s stockholders agreed to distribute dividend amounting to Rp31 billion which was returned as increment of issued and fully paid capital .

e. Authorization for the issuance of the consolidated financial statements

The consolidated financial statements were prepared and approved for issuance by the Board of Directors on March 25 , 2014.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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 ”) .

a. Basis of preparation of the financial statements

The consolidated financial statements, except for the consolidated statements of cash flows, are prepared on the accrual basis. The measurement basis used is historical cost, except for certain accounts which are measured using the basis mentioned in the relevant notes herein.

The consolidated statements of cash flows are prepared using the direct method and present the changes in cash and cash equivalents from operating, investing and financing activities.

The consolidated financial statements provide comparative information in respect of the previous period. In addition, the Group presents an additional statement of financial position at the beginning of the earliest period presented when there is a retrospective application of an accounting policy, a retrospective restatement, or a reclassification of items in the financial statements. An additional statement of financial position as of January 1, 2012 is presented in these consolidated financial statements due to the retrospective application of IAS 19, Employee Benefits (Revised 2011) (Note 2aa).

b. Principles of consolidation

The consolidated financial statements consist of the financial statements of the Group. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if and only if the Group has the power over the investee, exposure, or rights, to variable returns from its involvement with the investee, and the ability to use its power over the investee to affect its returns.

F-18

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

b. Principles of consolidation (continued)

The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated statements of comprehensive income from the date the Group gains control until the date the Group ceases to control the subsidiary.

Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the Company and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance.

Intercompany balances and transactions have been eliminated in the consolidated financial statements.

In case of loss of control over a subsidiary, the Group:

· derecognizes the assets (including goodwill) and liabilities of the subsidiary at the carrying amounts on the date when it loses control;

· derecognizes the carrying amounts of any non-controling interests of its former subsidiary on the date when it loses control;

· recognizes the fair value of the consideration received (if any) from the transaction, events, or condition that caused the loss of control;

· recognizes the fair value of any investment retained in the subsidiary at fair value on the date of loss of control;

· recognizes any surplus or deficit in profit or loss that is attributable to the Group.

c. Transactions with related parties

The Group has transactions with related parties. The definition of related parties used is in accordance with IAS 24, Related Party Disclosures . The party which is considered a related party is a person or entity that is related to the entity that is preparing its financial statements.

Key management personnel are identified as the persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of the Group. The related party status extends to the key management of the subsidiaries to the extent they direct the operations of subsidiaries with minimal involvement from the Company’s management.

d. Business combinations

Business combination is accounted for using the acquisition method. The consideration transferred is measured at fair value, which is the aggregate of the fair value of the assets transferred, liabilities incurred or assumed and the equity instruments issued in exchange for control of the acquiree. For each business combination, non-controlling interest is measured at fair value or at the proportionate share of the acquiree’s identifiable net assets. The choice of measurement basis is made on a transaction-by-transaction basis. Acquisition-related costs are expensed as incurred. The acquiree’s identifiable assets and liabilities are recognized at their fair values at the acquisition date.

F-19

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

d. Business combinations (continued)

Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognized for non-controlling interests, and any previous interest held, over the net identifiable assets acquired and liabilities assumed. If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the Group re-assesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed and reviews the procedures used to measure the amounts to be recognized at the acquisition date. If the re-assessment still results in an excess of the fair value of net assets acquired over the aggregate consideration transferred, then the gain is recognized in profit or loss.

When the determination of consideration from a business combination includes contingent consideration, it is measured at its fair value on acquisition date. Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fair value recognized in profit or loss when adjustments are recorded outside the measurement period. Changes in the fair value of the contingent consideration that qualify as measurement-period adjustments are adjusted retrospectively, with corresponding adjustments made against goodwill. Measurement-period adjustments are adjustments that arise from additional information obtained during the measurement period, which cannot exceed one year from the acquisition date, about facts and circumstances that existed at the acquisition date.

In a business combination achieved in stages, any previously held equity interest is remeasured at its acquisition-date fair value and the resulting gain or loss, if any, is recognized in profit or loss.

e. Cash and cash equivalents

Cash and cash equivalents consist of cash on hand and in banks and all unrestricted time deposits with original maturities of three months or less at the time of placement.

Time deposits with maturities of more than three months but not more than one year are presented as other current financial assets in the consolidated statements of financial position.

f. Investments in associated companies

An associate is an entity over which the Group (as investor) has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but does not include control or joint control over those operating policies. The considerations made in determining significant influence are similar to those necessary to determine control over subsidiaries.

The Group’s investments in its associates are accounted for using the equity method.

F-20

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

f. Investments in associated companies (continued)

Under the equity method, the investment in an associate is initially recognized at cost. The carrying amount of the investment is adjusted to recognize changes in the investor’s share of the net assets of the associate since the acquisition date. 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 Group’s share of the results of operations of the associate. Any change in the other comprehensive income of the associate is presented as part of other comprehensive income. In addition, when there has been a change recognized directly in the equity of the associate, the Group recognizes its share of the change 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 determine s at each reporting date whether there is any objective evidence that the investment s in the associate d companiesare impaired. If there is , the Group calculate s and recognizes the amount of impairment as the difference between the recoverable amount of the investments in the associate d companies and their carrying value .

These assets are included in long-term investments in the consolidated statements of financial position.

The functional currency of PT Pasifik Satelit Nusantara (“PSN”) and PT Citra Sari Makmur (“CSM”) is the United States dollar (“U.S. dollars”) and the functional currency of Scicom (MSC) Berhad (“Scicom”) and Telin Malaysia is the Malaysian ringgit (“MYR”) . For the purpose of reporting these investments using the equity method, the assets and liabilities of these companies as of the statement of financial position date are translated into Indonesian rupiah using the rate of exchange prevailing at that date, while revenues and expenses are translated into Indonesian rupiah at the average rates of exchange for the year. The resulting translation adjustments are reported as part of other reserves in the equity section of the consolidated statements of financial position.

g. Trade and other receivables

Trade and other receivables are recognized initially at fair value and subsequently measured at amortized cost, less provision for impairment. This provision for impairment is made based on management’s evaluation of the collectibility of the outstanding amounts. Receivables are written off in the year they are determined to be uncollectible.

F-21

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

h. Inventories

Inventories consist of components, which are subsequently expensed or transferred to property and equipment upon use. Components represent telephone terminals, cables and other spare parts. Inventories also include Subscriber Identification Module (“SIM”) cards, Removable User Identity Module (“RUIM”) cards, handsets, set top box es , wireless broadband modems and blank prepaid vouchers, which are expensed upon sale. The costs of inventories consist of the purchase price, import duties, other taxes, transport, handling and other costs directly attributable to their acquisition. Inventories are recognized at the lower of cost and net realizable value. Net realizable value is the estimate of selling price less the costs to sell.

Cost is determined using the weighted average method.

The amount of any write-down of inventories to net realizable value below cost and all losses of inventories are recognized as an expense in the year in which the write-down or loss occurs.

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

i. Prepaid expenses

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

j. Assets held for sale

Assets (or disposal groups) are classified as held for sale when their carrying amount is to be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable. They are stated at the lower of carrying amount and fair value less costs to sell.

Assets that meet the criteria to be classified as held for sale are reclassified from property and equipment and depreciation on such assets is cease d .

k. Intangible assets

Intangible assets consist of goodwill arising from business acquisitions, software and license. Intangible assets are recognized if it is probable that the expected future economic benefits that are attributable to each asset will flow to the Group, and the cost of the asset can be reliably measured.

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

Intangible assets are amortized using the straight-line method, based on the estimated useful lives of the assets as follows:

	Years
Software	3- 6
License	3-20
Other intangible assets	1 - 3 0

F-22

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

k. Intangible assets (continued)

Intangible assets are derecognized when no further economic benefits are expected, either from further use or from disposal. The difference between the carrying amount and the net proceeds received from disposal is recognized in the consolidated statements of comprehensive income.

l. Property and equipment

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

The cost of an item of property and equipment includes: (a) purchase price, (b) any costs directly attributable to bringing the asset to its location and condition, and (c) the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located. Each part of an item of property and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately.

Property and equipment are depreciated and amortized using the straight-line method based on the estimated useful lives of the assets as follows:

	Years
Land rights	50
Buildings	15-40
Leasehold improvements	2-15
Switching equipment	3-15
Telegraph, telex and data communication equipment	5-15
Transmission installation and equipment	3 -25
Satellite, earth station and equipment	3-20
Cable network	5-25
Power supply	3-20
Data processing equipment	3-20
Other telecommunications peripherals	5
Office equipment	2-5
Vehicles	4-8
Asset Customer Premise Equipment (“CPE”)	10
Other equipment	2-5

The depreciation method, useful life and residual value of an asset are reviewed at least at each financial year end and adjusted, if appropriate . The residual value of an asset is the estimate d amount that the Group would currently obtain from disposal of the asset, after deducting the estimated costs of disposal , i f the asset is already of the age and in the condition expected at the end of its useful life .

The Group periodically evaluates its property and equipment for impairment, whenever events and circumstances indicate that the carrying amount of the assets may not be recoverable. When the carrying amount of an asset exceeds its estimated recoverable amount, the asset is written down to its estimated recoverable amount, which is determined based on the higher of its fair value less cost to sell or value in use.

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 asset given up is reliably measurable.

F-23

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

l. Property and equipment (continued)

Major spare parts and standby equipment that are expected to be used for more than 12 months are recorded as part of property and equipment.

When assets are retired or otherwise disposed of, their cost and the related accumulated depreciation are derecognized from the consolidated statements of financial position, and the resulting gains or losses on the disposal or sale of the property and equipment are recognized in the consolidated statements of comprehensive income.

Certain computer hardware can not be used without the availability of certain computer software. In such circumstance, the computer software is recorded as part of the computer hardware. If the computer software is independent from its computer hardware, it is recorded as part of intangible assets.

The cost of maintenance and repairs is charged to the consolidated statements of comprehensive income as incurred. Significant renewals and betterments are capitalized.

Property under construction is stated at cost until the construction is completed, at which time it is reclassified to the specific property and equipment account to which it relates. During the construction period until the property is ready for its intended use or sale, borrowing costs, which include interest expense and foreign currency exchange differences incurred on loans obtained to finance the construction of the asset, as long as it meets the definition of a qualifying asset, are capitalized in proportion to the average amount of accumulated expenditures during the period. Capitalization of borrowing cost ceases when the construction is completed and the asset is ready for its intended use.

Equipment temporarily unused is reclassified to equipment not used in operations and depreciated over its estimated useful life using the straight-line method.

m. Leases

In determining whether an arrangement is, or contains a lease, the Group performs an evaluation over the substance of the arrangement. A lease is classified as a finance lease or operating lease based on the substance, not the form of the contract. Finance lease is recognized if the lease transfers substantially all the risks and rewards incidental to the ownership of the leased asset.

Assets and liabilities under a finance lease are recognized in the consolidated statements of financial position at amounts equal to the fair value of the leased assets or, if lower, the present value of the minimum lease payments. Any initial direct costs of the Group are added to the amount recognized as asset.

Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent rents are charged as expenses in the year in which they are incurred.

Leased assets are depreciated using the same method and based on the useful lives as estimated for directly acquired property and equipment. However, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the leased assets are fully depreciated over the shorter of the lease terms and their economic useful lives.

Lease arrangements that do not meet the above criteria are accounted for as operating leases for which payments are charged as an expense on the straight-line basis over the lease period.

F-24

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

n. Trade payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade payables are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business, if this period is longer). If not, they are presented as non-current liabilities.

Trade payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest rate method.

o. Borrowings

Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortized cost ; any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the consolidated statement s of comprehensive income over the period of the borrowings using the effective interest method.

Fees paid on obtaining loan facilities are recognized as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the drawdown occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalized as a pre-payment for liquidity services and amortized over the period of the facilit ies to which it relates.

p. Foreign currency translations

The functional currency and the reporting currency of the Group are both the Indonesian rupiah, except for the functional currency of Telekomunikasi Indonesia International Pte. Ltd., Hong Kong and Telekomunikasi Indonesia International Pte. Ltd., Singapore and Telekomunikasi Indonesia International S.A., Timor Leste whose accounting records are maintained in U.S.dollars. Transactions in foreign currencies are translated into Indonesian rupiah at the rates of exchange prevailing at transaction date. At the consolidated statements of financial position date, monetary assets and liabilities denominated in foreign currencies are translated into Indonesian rupiah based on the buy and sell rates quoted by Reuters prevailing at the consolidated statements of financial position date, as follows:

	2012 — Buy	Sell	2013 — Buy	Sell
United States dollar (“US$”) 1	9,630	9,645	12,160	12,180
Euro 1	12,721	12,743	16,744	16,774
Yen 1	111.65	111.84	115.67	115.87

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

F-25

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

q. Revenue and expense recognition

i. Fixed line telephone revenues

Revenues from fixed line installations, including incremental costs, are deferred and recognized as revenue and costs over the expected term of the customer relationships. Based on reviews of historical information and customer trends, the Company determined the expected term of the customer relationships in 2012 and 2013 to be 10 years and 18 years, respectively . Revenues from usage charges are recognized as customers incur the charges. Monthly subscription charges are recognized as revenues when incurred by subscribers.

ii. Cellular and fixed wireless telephone revenues

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

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

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

Revenues from prepaid card subscribers, which consist of the sale of starter packs (also known as SIM cards in the case of cellular and RUIM in the case of fixed wireless telephone and start-up load vouchers) and pulse reload vouchers (either bundled in starter packs or sold as separate items), are recognized initially as unearned income and recognized proportionately as usage revenue based on duration and total of successful calls made and the value added services used by the subscribers or the expiration of the unused stored value of the voucher.

iii. Interconnection revenues

The 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 . Interconnection revenues consist of revenues derived from other operators’ subscriber calls to the Group’s subscribers (incoming) and calls between subscribers of other operators through the Group’s network (transit).

iv. Data, internet and information technology services revenues

Revenues from data communication and internet are recognized based on service activity and performance which are measured by the duration of internet usage or based on the fixed amount of charge s depending on the arrangements with customers.

Revenues from sales, installation and implementation of computer software and hardware, computer data network installation service and installation are recognized when the goods are delivered to customers or the installation takes place.

Revenue from computer software development service is recognized using the percentage-of-completion method.

F-26

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

q. Revenue and expense recognition (continued)

v. Revenues from network

Revenues from network consist of revenues from leased lines and satellite transponder leases which are recognized over the period in which the services are rendered.

vi. Other telecommunications service revenues

Revenues from other telecommunications services consist of Revenue-Sharing Arrangement s (“ RSA ”) and sales of other telecommunication services or goods.

The RSA are recorded in a manner similar to capital leases where the property and equipment and obligation under RSA are reflected in the consolidated statements of financial position . All revenues generated from the RSA are recorded as a component of revenues, while a portion of the investors’ share of the revenues from the RSA is recorded as finance costs, with the balance treated as a reduction of the obligation under RSA.

Universal Service Obligation (“USO”) compensation from construction activities is recognized on a stage-of-completion basis. Revenues from operating and maintenance activities in respect of assets under the concession are recognized when the services are rendered.

In concession contracts under USO, the Group recognizes a financial asset to the extent that it has a contractual right to receive cash or other financial assets from the Government for the construction services, where the Government has little, if any, discretion to avoid payment. The Group recognizes an intangible asset to the extent that it receives a license to charge users of the public service.

Revenues from sales of other telecommunication services or goods are recognized upon completion of services and or delivery of goods to customers.

vii. Multiple-element arrangements

Where two or more revenue - generating activities or deliverables are sold under a single arrangement, each deliverable that is considered to be a separate unit of accounting is accounted for separately. The total revenue is allocated to each separately identifiable component based on the relative fair value of each component and the appropriate revenue recognition criteria are applied to each component as described above.

viii. Agency relationship

Revenues from an agency relationship are recorded based on the gross amount billed to the customers when the Group acts as principal in the sale of goods and services. Revenues are recorded based on the net amount retained (the amount paid by the customer less amount paid to the suppliers) when, in substance, the Group has acted as agent and earned commission from the suppliers of the goods and services sold.

i x . Expenses

Expenses are recognized as they are incurred.

F-27

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

r. Employee benefits

i . Short-term employee benefits

All short-term employee benefits which consist of salaries and related benefits, vacation pay, incentives and other benefits are recognized as expense on undiscounted basis when employees have rendered service to the Group.

i i . Pension and post-retirement health care benefit plans

The Company provides a funded defined benefit pension plan for its employees with permanent status prior to July 1, 2002, which calculation is based on the participating employees’ latest basic salary at retirement and the number of years of their service. Defined contribution pension plan is provided for its employees with permanent status on or after July 1, 2002. The Company also provides a funded defined post-employment health care benefit plan for its employees hired before November 1, 1995. Defined contribution post-employement health care benefit plan is provided for its employees with permanent status on or after November 1, 1995.

Telkomsel provides a funded defined benefit pension plan to its employees, which benefit is calculated based on their latest basic salary or take-home pay and the number of years of their service.

Under Law No. 13 Year 2003, the Group is required to provide minimum pension benefits, if not covered yet by the sponsored pension plans, to its employees upon retirement age.

iii. Long Service Awards (“LSA”) and Long Service Leave (“LSL”)

Employees of Telkomsel are entitled to receive certain cash awards or certain numbers of days leave benefits based on length of service requirements. LSA are either paid at the time the employees reach certain anniversary dates during employment, or at the time of termination. LSL is either a certain number of days leave benefit or cash, subject to approval by management, provided to employee s who ha ve met the requisite number of years of service and with a certain minimum age.

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

iv. Early retirement benefits

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

F-28

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

r. Employee benefits (continued)

v. Pre-retirement benefits

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

vi. Other post-employment benefits

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

vi i. Share-based payments

The Company operates an equity-settled, share-based compensation plan. The fair value of the employees’ services rendered which are compensated with the Company’s shares is recognized as an expense in the consolidated statements of comprehensive income and credited to additional paid-in capital at the grant date.

The net obligations in respect of the defined pension benefit and post-retirement health care benefit plans are calculated at the present value of estimated future benefits that the employees have earned in return for their service in the current and prior periods less the fair value of plan assets. The calculation is performed by an independent actuary using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of Government bonds that are denominated in the currencies in which the benefits will be paid and that have terms to maturity approximating the terms of the related retirement benefit obligation. Government bonds are used as there are no deep markets for high quality corporate bonds.

Plan assets are assets that are held by the pension and post-retirement health care benefit plans. These assets are measured at fair value at the end of the reporting period.

A ctuarial gains or losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to OCI . Such actuarial gains and losses are also immediately recognized in retained earnings and are not reclassified to profit or loss in subsequent periods.

P ast service costs are recogni z ed immediately in profit or loss on the earlier of:

· The date of plan amendment or curtailment; and

· The date that the Group recognized restructuring-related costs

Net interest is calculated by applying the discount rate to the net defined benefit liability or assets.

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

F-29

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

r. Employee benefits (continued)

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

For defined contribution plans, the regular contributions constitute net periodic costs for the period in which they are due and, as such, are included in personnel expenses as they become payable.

s. Income tax

Current and deferred tax es are recognized as income or an expense and included in the consolidated statements of comprehensive income, except to the extent that if the tax arises from a transaction or event which is recognized directly in equity, in which case, the tax is recognized directly in equity.

C urrent tax assets and liabilities are measured at the amount expected to be recovered or paid using the tax rates and tax laws that have been enacted at each reporting date. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. Where appropriate, management establishes provisions based on the amounts expected to be paid to the tax authorities.

The Group recognizes deferred tax assets and liabilities for temporary differences between the financial and tax bases of assets and liabilities at each reporting date. The Group also recognizes deferred tax assets resulting from the recognition of future tax benefits, such as the benefit of tax losses carried forward to the extent their future realization is probable. Deferred tax assets and liabilities are measured using enacted or substantively enacted tax rates and tax laws at each reporting date which are expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled, such as tax rates and tax laws which have been enacted or substantially enacted at each reporting date.

The carrying amount of deferred tax asset is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable income will be available to allow the benefit of part or all of that deferred tax asset to be utilized.

Deferred tax assets and liabilities are offset in the consolidated statements of financial position, except if these are for different legal entities, in the same manner the current tax assets and liabilities are presented.

Amendment to taxation obligation is recorded when an assessment letter (“ Surat Ketetapan Pajak ” or “SKP”) is received or if appealed against, when the results of the appeal are determined. The additional taxes and penalty imposed through SKP are recognized in the current year profit or loss, unless objection/appeal is taken. The additional taxes and penalty imposed through SKP are deferred as long as they meet the asset recognition criteria.

t. Financial instruments

The Group classifies financial instruments into financial assets and financial liabilities. Financial assets and liabilities are recognized initially at fair value including transaction costs. These are subsequently measured either at fair value or amortized cost using the effective interest rate method in accordance with their classification.

F-30

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

t. Financial instruments (continued)

i. Financial assets

The Group classifies its financial assets as (i) financial assets at fair value through profit or loss, (ii) loans and receivables, (iii) held-to-maturity financial assets or (iv) available-for-sale financial assets. The classification depends on the purpose for which the financial assets are acquired. Management determines the classification of financial assets at initial recognition.

Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognized on the trade date, i.e., the date that the Group commits to purchase or sell the assets.

The Group ’s financial assets include cash and cash equivalents, other current financial assets, trade and other receivables , long-term investments, advances and other non-current assets.

a. Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss are financial assets classified as held for trading. A financial asset is classified as held for trading if it is acquired principally for the purpose of selling or repurchasing it in the near term and for which there is evidence of a recent actual pattern of short-term profit taking. Gains or losses arising from changes in fair value of the trading securities are presented as other (expenses)/ income in the consolidated statements of comprehensive income in the period in which they arise. Financial asset measured at fair value through profit or loss represents derivative asset - put option which is recognized as part of other current financial assets in the 2013 consolidated statement of financial position.

b. Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables consist of, among other assets, cash and cash equivalents , other current financial assets , trade and other receivables, advances and other non-current assets.

These are initially recognized at fair value including transaction costs and subsequently measured at amortized cost, using the effective interest method.

c. Held-to-maturity financial assets

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities on which management has the positive intention and ability to hold to maturity, other than:

a) those that the Group, upon initial recognition, designates as at fair value through profit or loss;

b) those that the Group designates as available for sale; and

c) those that meet the definition of loans and receivables.

No financial assets were classified as held-to-maturity financial assets as of December 31, 201 2 and 201 3 .

F-31

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

t. Financial instruments (continued)

i. Financial assets (continued)

d. Available-for-sale financial assets

Available-for-sale investments are non-derivative financial assets that are intended to be held for indefinite periods of time, which may be sold in response to needs for liquidity or changes in interest rates, exchange rates or that are not classified as loans and receivables, held-to-maturity investments or financial assets at fair value through profit or loss. Available-for-sale financial assets consist of bonds and mutual funds which are recorded as part of other current financial assets in the consolidated statements of financial position.

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

ii. Financial liabilities

The Group classifies its financial liabilities as (i) financial liabilities at fair value through profit or loss or (ii) financial liabilities measured at amortized cost.

The Group’s financial liabilities include trade and other payables, accrued expenses , loans and other borrowings which consist of short-term bank loans, obligations under finance leases, two-step loans, bonds and notes, and long-term bank loans.

a. Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss are financial liabilities classified as held for trading. A financial liability is classified as held for trading if it is incurred principally for the purpose of selling or repurchasing it in the near term and for which there is evidence of a recent actual pattern of short-term profit taking.

No financial liabilities were categorized as held for trading as of December 31, 201 2 and 201 3 .

b. Financial liabilities measured at amortized cost

Financial liabilities that are not classified as liabilities at fair value through profit or loss fall into this category and are measured at amortized cost. Financial liabilities measured at amortized cost are trade and other payables, accrued expenses , loans and other borrowings which consist of short-term bank loans, obligations under finance leases, two-step loans, bonds and notes, and long-term bank loans.

F-32

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

t. Financial instruments (continued)

iii. Offsetting financial instruments

Financial assets and liabilities are offset and the net amount is reported in the consolidated statements of financial position when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle them on a net basis, or realize the assets and settle the liabilities simultaneously.

iv. Fair value of financial instruments

Fair value is the amount for which an asset could be exchanged, or liability settled, in an arm’s length transaction.

The fair value of financial instruments that are traded in active markets at each reporting date is determined by reference to quoted market prices, without any deduction for transaction costs.

For financial instruments not traded in an active market, the fair value is determined using appropriate 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, a discounted cash flow analysis or other valuation models.

An analysis of fair values of financial instruments and further details as to how they are measured are provided in Note 40 .

v. Impairment of financial assets

The Group assesses the impairment of financial assets if there is objective evidence that a loss event has a negative impact on the estimated future cash flows of the financial assets. Impairment is recognized when the loss event can be reliably estimated. Losses expected as a result of future events, no matter how likely, are not recognized.

Impairment loss of financial assets carried at cost is measured as the difference between the assets’ carrying amount and the present value of estimated future cash flows discounted at the financial assets’ original effective interest rate. Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial.

When a decline in the fair value of an available-for-sale financial asset has been recognized in other comprehensive income and there is objective evidence that the asset is impaired, the cumulative loss that had been recognized in other comprehensive income is recognized in profit or loss as an impairment loss. The amount of the cumulative loss is the difference between the acquisition cost (net of any principal repayment and amortization) and current fair value, less any impairment loss on that financial asset previously recognized.

vi. Derecognition of financial instrument

The Group derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire, or when the Group transfers substantially all the risks and rewards of ownership of the financial asset.

The Group derecognizes a financial liability when the obligation specified in the contract is discharged or cancelled or expired.

F-33

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

u. Treasury stock

Reacquired Company shares of stock are accounted for at their reacquisition cost and classified as “Treasury Stock” and presented as a deduction to equity. The cost of treasury stock sold/ transferred is accounted for using the weighted average method. The portion of treasury stock transferred for employee stock ownership program is accounted for at its fair value at grant date. The difference between the cost and the proceeds from the sale/ transfer of treasury stock is credited to “Additional Paid-in Capital”.

v. Dividends

Dividend for distribution to the stockholders is recognized as a liability in the consolidated financial statements in the year in which the dividend is approved by the stockholders. The interim dividend is recognized as a liability based on the Board of Directors’ decision supported by the approval from the Board of Commissioners.

w. Basic and diluted e arnings per share and earnings per ADS

Basic earnings per share is computed by dividing profit for the year attributable to owners of the parent company by the weighted average number of shares outstanding during the year. Income per ADS is computed by multiplying the basic earnings per share by 200, the number of shares represented by each ADS.

The Company does not have potentially dilutive financial instruments .

x. Segment information

The Group's segment information is presented based upon identified operating segments. An operating segment is a component of an entity: a) 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); b) whose operating results are regularly reviewed by the Group’s chief operating decision maker i.e., the Directors, to make decisions about resources to be allocated to the segment and assess its performance; and c) for which discrete financial information is available .

y. Provisions

Provisions are recognized when the Group has present obligations (legal or constructive) as a result of past events, and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligations and a reliable estimate can be made of the obligations.

z. Impairment of non-financial assets

The Group assesses, at the end of each reporting period, whether there is an indication that an asset may be impaired. If such indication exists, the recoverable amount is estimated for the individual asset. If it is not possible to estimate the recoverable amount of the individual asset, the Group determines the recoverable amount of the Cash-Generating Unit (“CGU”) to which the asset belongs (“the asset’s CGU”).

F-34

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

z. Impairment of non-financial assets (continued)

The recoverable amount of an asset (either individual asset or CGU) is the higher of the asset’s fair value less costs to sell and its value in use. Where the carrying amount of the asset 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 net 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 fair value less costs to sell, recent market transactions are taken into account, if available. If no such transactions can be identified, the Group uses an appropriate valuation model to determine the fair value of the asset. These calculations are corroborated by valuation multiples or other available fair value indicators.

Impairment losses of continuing operations are recognized in profit or loss under “Depreciation and amortization” in the consolidated statements of comprehensive income.

An assessment is made at the end of each reporting period as to whether there is any indication that previously recognized impairment losses for an asset other than goodwill may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognized impairment loss for an asset other than goodwill 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 such that the carrying amount of the asset does not exceed its recoverable amount, nor exceeds the carrying amount that would have been determined, net of depreciation, had no impairment been recognized for the asset in prior periods. Reversal of an impairment loss is recognized in profit or loss.

Goodwill is tested for impairment annually and when circumstances indicate that the carrying value may be impaired. Impairment is determined for goodwill by assessing the recoverable amount of each CGU (or group of CGUs) to which the goodwill relates. When the recoverable amount of the CGU is less than its carrying amount, an impairment loss is recognized. Impairment loss relating to goodwill cannot be reversed in future periods.

aa. Changes in accounting policies and disclosures

Implementation of IAS 19 , Employee Benefit s ( Revised 2011)

The Group applied IAS 19, Employee Benefits (Revised 2011), retrospectively in the current period in accordance with the transitional provisions set out in the revised standard. The opening statement of financial position of the earliest comparative period presented (January 1, 2012) and the comparative figures have been accordingly restated.

IAS 19, Employee Benefits (Revised 2011), changes, among other things, the accounting for defined benefit plans. Some of the key changes that impacted the Group include the following:

· All past service costs are recognized at the earlier of when the amendment/ curtailment occurs or when the related restructuring or termination costs are recognized. As a result, unvested past service costs can no longer be deferred and recognized over the future vesting period.

· The interest cost and expected return on plan assets used in the previous version of IAS 19 are replaced with a net interest amount under IAS 19, Employee Benefits (Revised 2011), which is calculated by applying the discount rate to the net defined benefit liability or asset at the start of each annual reporting period.

F-35

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

aa. Changes in accounting policies and disclosures (continued)

Implementation of IAS 19 , Employee Benefit s ( Revised 2011) (continued)

As a result of the changes, the comparative figures in the consolidated financial statements have been restated as follows :

	Before restatement		Restatement		After restatement
Consolidated statement of financial position as of January 1, 2012
Prepaid pension benefit cost	765		(356	)	409
Total non-current assets	81,321		(356	)	80,965
Total assets	102,722		(356	)	102,366
Deferred tax liabilities	3,448		(289	)	3,159
Pension benefit and other post-employment benefit obligations	4,572		800		5,372
Total non-current liabilities	21,507		511		22,018
Total liabilities	43,696		511		44,207
Retained earning s	45,865		(867	)	44,998
Net equity attributable to o wners of the p arent c ompany	45,711		(867	)	44,844
Total equity	59,026		(867	)	58,159
Total liabilities and equity	102,722		(356	)	102,366
Consolidated statement of comprehensive income for the year ended December 31, 2011
Personnel e xpenses	(8,671	)	247		(8,424	)
Operating p rofit	21,787		247		22,034
Profit before income tax	20,735		247		20,982
I ncome t ax benefit - deferred	288		(52	)	236
Net i ncome t ax e xpense	(5,385	)	(52	)	(5,437	)
Profit f or t he y ear	15,350		195		15,545
Defined benefit plan actuarial losses, net of tax	(1,958	)	19		(1,939	)
Other c omprehensive expenses - net	(1,947	)	19		(1,928	)
Net c omprehensive i ncome f or t he y ear	13,403		214		13,617
Profit for the year attributable to
O wners of the parent company	10,848		195		11,043
Net comprehensive income for the y ear attributable to
O wners of the parent company	8,969		214		9,183
Basic a nd d iluted e arnings p er s hare ( i n full amount)
Net i ncome per share	110.74		1.99		112.73
Net income per ADS	22,148.00		398		22,546.00

F-36

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

aa. Changes in accounting policies and disclosures (continued)

Implementation of IAS 19 Employee Benefit s ( Revised 2011) (continued)

	Before restatement		Restatement		After restatement
Consolidated statement of financial position as of December 31, 2012
Deferred tax liabilities	2,485		(233	)	2,252
Pension benefit and other post-employment benefit obligations	7,306		878		8,184
Total non-current liabilities	2 4 , 089		645		2 4 , 734
Total liabilities	4 8 , 197		645		4 8 , 842
Retained earnings	48,572		( 645	)	47,927
Net equity attributable to o wners of the p arent c ompany	4 6 ,7 00		( 645	)	4 6 , 055
Total equity	62 , 014		( 645	)	61 , 369
Consolidated statement of comprehensive income for the year ended December 31, 2012
Personnel e xpenses	(9,695	)	(265	)	(9,960	)
Operating p rofit	25,762		(265	)	25,497
Profit before income tax	24,292		(265	)	24,027
I ncome t ax benefit - deferred	720		2 2		742
Net i ncome t ax e xpense	(5,908	)	22		(5,886	)
Profit f or t he y ear	18,384		(243	)	18,141
Defined benefit plan actuarial losses, net of tax	(3,031	)	465		(2,566	)
Other c omprehensive expenses - net	(3,005	)	465		(2,540	)
Net c omprehensive i ncome f or t he y ear	15,379		222		15,601
Profit for the year attributable to Owners of the parent company	12,864		(243	)	12,621
Net comprehensive income for the y ear attributable to Owners of the parent company	9,834		222		10,056
Basic a nd d iluted e arnings p er s hare (in full amount)
Net income per share	133.98		(2.53	)	131.45
Net income per ADS	26,796.80		(506	)	26,290.80

IAS 19 (Revised 2011) also requires more extensive disclosures. These have been provided in Note 33.

The implementation of IAS 19, Employee Benefits (Revised 2011), did not have impact on the consolidated statements of cash flows.

Other n ew and amended standards and interpretations

The Group has also applied, for the first time, certain other standards and amendments. The nature and the impact of each of the new standards and amendments are described below:

a) IAS 1, Presentation of Items of Other Comprehensive Income - Amendments to IAS 1

The amendments to IAS 1 introduce a grouping of items presented in OCI. Items that will be reclassified (‘recycled’) to profit or loss at a future point in time have to be presented separately from items that will not be reclassified. The amendments affect presentation only and have no impact on the Group’s financial position, performance or cashflows.

F-37

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

aa. Changes in accounting policies and disclosures (continued)

b) 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 recognized financial instruments that are set off in accordance with IAS 32, Financial Instruments: Presentation. IFRS 7 disclosures are provided in Note 40.

c) IFRS 12, Disclosure of Interests in Other Entities

IFRS 12 sets out the requirements for disclosures relating to an entity’s interests in subsidiaries, joint arrangements, associates and structured entities. The requirements in IFRS 12 are more comprehensive than the previously existing disclosure requirements for subsidiaries. While the Company has a subsidiary with material non-controlling interest, there are no unconsolidated structured entities. IFRS 12 disclosures are provided in Note 20.

Several other amendments also applied for the first time in 2013. However, they do not impact the consolidated financial statements of the Group.

ab. Critical accounting estimates, judgments and assumptions

Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.

i. Retirement benefits

The present value of the pension benefit obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions. The assumptions used in determining the net cost (income) for pensions include the discount rate. Any changes in the assumptions will impact the carrying amount of the retirement benefit obligations.

The Group determines the appropriate discount rate at the end of each reporting period. This is the interest rate that should be used to determine the present value of estimated future cash outflows expected to be required to settle the obligations. In determining the appropriate discount rate, the Group considers the interest rates of government bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating the terms of the related retirement benefit obligations.

F-38

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

ab. Critical accounting estimates, judgments and assumptions (continued)

i. Retirement benefits (continued)

If there is an improvement in the ratings of such government bonds or a decrease in interest rates as a result of improving economic conditions, there could be a material impact on the discount rate used in determining the post-employment benefits obligations.

Other key assumptions for pension benefit obligations are based in part on current market conditions. Additional information is disclosed in Notes 3 3 and 3 4 .

ii. Estimating useful lives of property and equipment and intangible assets

The Group estimates the useful lives of its property and equipment and intangible assets based on expected asset utilization, considering strategic business plans, expected future technological developments and market behavior. The estimates of useful lives of property and equipment are based on the Group’s collective assessment of industry practice, internal technical evaluation and experience with similar assets.

The Group reviews estimates of useful lives at least each financial year end which 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. The amounts and timing of recorded expenses for any year will be affected by changes in these factors and circumstances. A change in the estimated useful lives of the property and equipment is a change in accounting estimate and is applied prospectively in profit or loss in the period of the change and future periods.

Detail of nature and carrying amounts of property and equipment is disclosed in Note 1 2 and intangible assets in Note 1 4 .

iii. Provision for impairment of receivables

The Group assesses whether there is objective evidence that trade and other receivables have been impaired at the end of each reporting period. Provision for impairment of receivables is calculated based on a review of the current status of existing receivables and historical collection experience. Such provisions are adjusted periodically to reflect the actual and anticipated experience. Details of the nature and carrying amount of provision for impairment of receivables are disclosed in Note 7.

iv. Income taxes

Significant judgment is required in determining the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain. The Group recognizes liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the year in which such determination is made. Details of nature and carrying amounts of income tax are disclosed in Note 3 2 .

v. Impairment of non-financial assets

The Group annually assesses whether goodwill is impaired. Other non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset exceeds its recoverable amount. The recoverable amount of an asset or a CGU is determined based on the higher of its fair value less costs to sell and its value in use, calculated on the basis of management’s assumptions and estimations.

F-39

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

ab. Critical accounting estimates, judgments and assumptions (continued)

v. Impairment of non-financial assets (continued)

In determining value i n use, the Group applies management judgment in establishing forecasts of future operating performance, as well as the selection of growth rates and discount rates. These judgments are applied based on our understanding of historical information and expectations of future performance. Changing the key assumptions, including the discount rates or the growth rate assumptions in the cash flow projections, could materially affect the value in use calculations.

For the years ended December 31, 2011, 201 2 and 201 3 , the Company recognized Rp563 billion, Rp 247 billion and Rp596 billion, respectively, of impairment loss on property and equipment pertaining to the fixed wireless services. A 1% increase in the discount rate used would result in an increase in impairment loss to become approximately Rp907 billion, Rp 458 billion and Rp7 0 3 billion in 2011, 2012 and 2013, respectively. However, the recoverable amount of the fixed wireless CGU is most sensitive to whether management will be able to implement its plans, including the cost efficiency plan, such that it generates positive cash flows and returns to profitability as projected. If the performance of the fixed wireless CGU continues to decline or if management’s initiatives are not performing as expected in the next financial year, analysis will be required to assess whether there will be further impairment in the future ( Note 1 2 b ) .

3. BUSINESS COMBINATIONS

a. Acquisition s

Acquisition of PT German Center Indonesia

On January 17, 2013, Sigma signed a sales and purchase of shares and transfer of debt agreement with Landeskreditbank Baden-Wurttemberg-Forderbank (“L-Bank”) and Step Stuttgarter Engineering Park Gmbh (“STEP”) as shareholder s of PT German Centre Indonesia (“GCI”). Based on the agreement, on April 30, 2013 S igma bought shares owned by L-Bank and STEP in GCI. Through the acquisition, Sigma enlarge d its data center capacity that can be o ffered to its customers.

Acquisition of Patrakom

On September 25, 2013, based on notarial deed No. 22 of Ashoya Ratam, S.H.,M.Kn . , the Company entered into a Sales Purchase Agreement (SPA) with PT E lnusa Tbk for th e acquisition of the 40% ownership in PT Patra Telekomunikasi Indonesia for Rp45.6 billion. This SPA result ed in the Company’s ownership in Patrakom to increas e from 40% to 80% (Note 11).

Subsequently , o n November 29 , 2013, based on notarial deed No. 54 dated November 29, 2013 of Ashoya Ratam, S.H., M.Kn . , the Company has signed an SPA with PT Tanjung Mustika Tbk for the acquisition of the remaining 20% ownership in Patrakom for Rp24.8 billion.

Patrakom is a satellite - based closed fixed telecommunications network oper a tor and a provider of communications solutions and network with a permit as Operator of Micro Earth Stations Communications Systems (“SKSBM”) in partnership with manufacturers of telecommunications equipment to serve various companies . Through the acquisition of Patrakom, the Group can integrate Patrakom’s business activities in accordance with the Group’s business development plan.

F-40

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

3. BUSINESS COMBINATIONS (continued)

a. Acquisition s (continued)

The f air values of the assets acquired and liabilit ies transferred at the acquisition dates are as follows :

Cash and cash equivalents	GCI — 3		Patrakom — 39		Total — 42
Other current assets	18		122		140
Property and e quipment (Note 12)	225		171		396
Current liabilities	(15	)	(171	)	(186	)
Non-current liabilities	(16	)	(45	)	(61	)
Fair value of the identifiable net assets acquired	215		116		331
Bargain p urchase	(42	)	-		(42	)
Fair value of previously held equity interests	-		(46	)	(46	)
Fair value of the consideration transferred	173		70		243

The excess amounting to Rp42 billion of fair value of the identifiable net asset acquired over the fair value of the consideration transferred, was recorded as other income in the consolidated statement of comprehensive income of the current year. Transaction costs of Rp4.3 billion were expensed in the current period.

Since the acquisition dates, GCI and Patrakom contributed Rp 23 billion of operating revenues.

b. Di sposal of I ndonusa

On October 8, 2013, the Company sold 80% of its ownership in Indonusa to PT Trans Corpora and PT Trans Media Corpora for Rp926 billion. Further, on the same date, the Company, Metra and PT Trans Corpora signed a Shareholders Agreement that establishes mutual relationship among the shareholders of Indonusa, including the grant of the right to the Company and Metra to sell their 20% remaining ownership in Indonusa to PT Trans Corpora at any time in 24 months after the second year of the closing transaction at a certain price (Put Option).

The Company had received the full payment for the sale transaction.

The Company recogni z ed gain on sale of Indonusa shares as part of other income in the 2013 consolidated statement of comprehensive income , as follows:

	Amount
Fair value of consideration received:
Cash	926
Put O ption	289
Fair value of interest retained in Indonusa (Note 11)	182
Carrying amount of assets and liabilities of Indonusa	(14	)
Gain on sale of shares	1,383

F-41

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

4 . TRANSLATION OF RUPIAH INTO UNITED STATES DOLLAR

The consolidated financial statements are stated in Indonesian rupiah. The translations of the Indonesian rupiah amounts into U.S. dollar amounts are included solely for the convenience of the readers and have been made using the average of the market buy and sell rates of Rp12,170 to US$1 as published by Reuters on December 31, 201 3 . The convenience translations should not be construed as representations that the Indonesian rupiah amounts have been, could have been, or could in the future be, converted into United States dollar at this or any other rate of exchange.

5 . CASH AND CASH EQUIVALENTS

	2012	2013
Cash on hand	7	7
Cash in banks
Related parties
Rupiah
PT Bank Mandiri (Persero) Tbk (“Bank Mandiri”)	913	804
PT Bank Negara Indonesia (Persero) Tbk (“BNI”)	284	409
PT Bank Rakyat Indonesia (Persero) Tbk (“BRI”)	87	70
PT Bank Tabungan Negara (Persero) Tbk (“BTN”)	13	50
Others	9	10
	1,306	1,343
Foreign currencies
Bank Mandiri	222	458
BNI	20	224
BRI	2	75
Others	0	0
	244	757
Sub-total	1,550	2,100
Third parties
Rupiah
Deutsche Bank AG (“DB”)	62	62
Others (each below Rp50 billion)	154	159
	216	221
Foreign currencies
Standard Chartered Bank (“SCB”)	112	313
Others (each below Rp50 billion)	65	102
	177	415
Sub-total	393	636
Total cash in banks	1,943	2,736

F-42

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

5 . CASH AND CASH EQUIVALENTS (continued)

	2012	2013
Time deposits
Related parties
Rupiah
BRI	2,883	2,445
BNI	1,511	1,975
Bank Mandiri	312	1,271
BTN	401	375
PT Bank Pembangunan Daerah Jawa Barat dan Banten Tbk (“Bank Jabar”)	170	245
PT Bank Syariah Mandiri (“BSM”)	23	50
Others	20	-
	5,320	6,361
Foreign currencies
BRI	1,966	3,260
BNI	112	264
Bank Mandiri	222	-
	2,300	3,524
Sub-total	7,620	9,885
Third parties
Rupiah
PT Bank Central Asia Tbk (“BCA”)	-	599
PT Bank Mega Tbk (“Bank Mega”)	335	275
PT Bank Muamalat Indonesia Tbk	153	150
PT Bank Yudha Bhakti	-	145
PT Bank Tabungan Pensiunan Nasional Tbk	167	136
PT Bank Internasional Indonesia Tbk (“BII”)	120	126
PT Bank CIMB Niaga Tbk (”Bank CIMB Niaga”)	225	83
PT Bank Ekonomi Raharja Tbk (“Bank Ekonomi”)	-	73
PT Bank Pan Indonesia Tbk	100	70
PT Bank Bukopin Tbk (“Bank Bukopin”)	160	65
PT Bank OCBC NISP Tbk (“OCBC NISP”)	400	-
Citibank N.A. (“Citibank”)	400	-
PT Bank Danamon Indonesia Tbk (“Bank Danamon”)	61	-
PT Bank UOB Indonesia (“Bank UOB”)	60	-
Others (each below Rp50 billion)	46	102
	2,227	1,824
Foreign currencies
OCBC NISP	517	244
SCB	804	-
	1,321	244
Sub-total	3,548	2,068
Total time deposits	11,168	11,953
Grand Total	13,118	14,696

F-43

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

5 . CASH AND CASH EQUIVALENTS (continued)

Interest rates per annum on time deposits are as follows:

	2012	2013
Rupiah	2.25% - 8.50%	1.00% - 11.50%
Foreign currencies	0.05% - 3.50%	0.03% - 3.00%

The related parties in which the Group places its funds are state-owned banks. The Group placed a majority of its cash and cash equivalents in these banks because they have the most extensive branch networks in Indonesia and are considered to be financially sound banks, as they are owned by the State.

Refer to Note 3 5 for details of related party transactions.

6 . OTHER CURRENT FINANCIAL ASSETS

	201 2	201 3
Time deposits
Related parties
BRI	1,650	1,000
Others	-	22
Sub-total	1,650	1,022
Third parties
SCB	1,350	1,859
Bank CIMB Niaga	-	1,800
OCBC NISP	1,000	1,600
Others	-	7
Sub-total	2,350	5,266
Total time deposits	4,000	6,288
Available-for-sale financial assets
Related parties
Government	123	133
State-owned enterprises	68	74
PT Bahana Securities (“Bahana”)	48	-
Others	19	17
Sub-total	258	224
Third parties	52	48
Total available-for-sale financial assets	310	272
Derivative asset - Put Option	-	297
Others	28	15
Total	4,338	6,872

As of December 31, 201 2 and 201 3 , time deposits denominated in foreign currency amounted to Rp nil and Rp 59 billion, respectively.

The t ime deposits have maturities of more than three months but not more than one year, with interest rates as follows:

	201 2	201 3
Rupiah	6.25% - 6.75%	1.60% - 1 0 .50%
Foreign currency	-	1.00% - 1 . 10 %

Refer to Note 35 for details of related party transactions.

F-44

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

7 . TRADE AND OTHER RECEIVABLES

Trade and other receivables as of December 31 , 201 2 and 201 3 consist of:

Trade receivables	2012 — 7,270		2013 — 8,898
Provision for impairment of receivables	(2,047	)	(2,872	)
Net	5,223		6,026
Other receivables	190		403
Provision for impairment of receivables	(4	)	(8	)
Net	186		395
Total trade and other receivables	5,409		6,421

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

a. By debtor

(i) Related parties

State-owned enterprises	2012 — 549		2013 — 877
Government agencies	683		842
Indonusa	-		180
PT Indosat Tbk (“Indosat”)	55		48
CSM	51		45
Patrakom*	56		-
Others	62		241
Total	1,456		2,233
Provision for impairment of receivables	(72	)	(555	)
Net	1,384		1,678

In 2013, Patrakom became a subsidiary (Notes 1d and 3).

(ii) Third parties

Individual and business subscribers	2012 — 5,494		2013 — 6,168
Overseas international carriers	320		497
Total	5,814		6,665
Provision for impairment of receivables	(1,975	)	(2,317	)
Net	3,839		4,348

Trade receivables from certain parties are presented net of the Group’s liabilities to such parties due to the existence of a legal right of set-off in accordance with the agreements with those parties.

F-45

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

7 . TRADE AND OTHER RECEIVABLES (continued)

b. By age

(i) Related parties

Up to 6 months	2012 — 1,125		2013 — 1,477
7 to 12 months	248		317
More than 12 months	83		439
Total	1,456		2,233
Provision for impairment of receivables	(72	)	(555	)
Net	1,384		1,678

(ii) Third parties

Up to 3 months	2012 — 3,286		2013 — 3,965
More than 3 months	2,528		2,700
Total	5,814		6,665
Provision for impairment of receivables	(1,975	)	(2,317	)
Net	3,839		4,348

(iii) Aging of total trade receivables

	2012	Provision for impairment	2013	Provision for impairment
	Gross	of receivables	Gross	of receivables
Not past due	3,174	140	3,618	10
Past due up to 3 months	1,250	157	1,525	401
Past due more than 3 to 6 months	455	193	703	321
Past due more than 6 months	2,391	1,557	3,052	2,140
Total	7,270	2,047	8,898	2,872

The Group has made provision for impairment of trade receivables based on the collective assessment of historical impairment rates and individual assessment of its customers’ credit history. The Group does not apply a distinction between related party and third party receivables in assessing amounts past due. As of December 31 , 201 2 and 201 3 , the carrying amount of trade receivables of the Group considered past due but not impaired amounted to Rp 2, 189 billion and Rp2, 418 billion, respectively. Management believes that receivables past due but not impaired, along with trade receivables that are neither past due nor impaired, are due from customers with good credit history and are expected to be recoverable.

F-46

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

7. TRADE AND OTHER RECEIVABLES (continued)

c. By currency

(i) Related parties

Rupiah	2012 — 1,369		2013 — 2,203
U.S . d ollar	87		30
Total	1,456		2,233
Provision for impairment of receivables	(72	)	(555	)
Net	1,384		1,678

(ii) Third parties

Rupiah	2012 — 5,087		2013 — 5, 857
U.S. dollar	722		806
Euro	3		1
Hong Kong dollar	2		1
Total	5,814		6,665
Provision for impairment of receivables	(1,975	)	(2,317	)
Net	3,839		4,348

d. Movements in the provision for impairment of receivables

Beginning balance	2012 — 1,732		2013 — 2,047
Provision recognized during the year (Note 30)	848		1,589
Receivables written - off	(533	)	(622	)
Acquisition	-		1
Di vestment	-		(158	)
Re versal	-		15
Ending balance	2,047		2,872

The receivables written off are related-party and third-party trade receivables.

Management believes that the provision for impairment of trade receivables is adequate to cover losses on uncollectible trade receivables.

Certain trade receivables of the subsidiaries amounting to Rp1, 700 billion have been pledged as collateral under lending agreements (Notes 18 and 19 ).

Refer to Note 3 5 for details of related party transactions.

F-47

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

8 . INVENTORIES

Components	2012 — 183		2013 — 272
SIM cards, RUIM cards, set top box es and blank prepaid vouchers	134		102
Others	410		157
Total	727		531
Provision for obsolescence
Components	(5 1	)	(21	)
SIM cards, RUIM cards, set top box es and blank prepaid voucher	(1	)	(1	)
Others	(96	)	-
Total	(148	)	(22	)
Net	579		509

Movements in the provision for obsolescence are as follows:

Beginning balance	2012 — 106		2013 — 148
Divestment	-		(1	)
Provision (reversal) recognized during the year	67		(29	)
Reclassification	-		(96	)
Inventories written-off	(25	)	-
Ending balance	148		22

The inventories recognized as expense and included in operations, maintenance and telecommunication service expenses (Note 2 9 ) for the years ended December 31, 2011, 201 2 and 201 3 amounted toRp818 billion, Rp 633 billion and Rp 752 billion, respectively.

Management believes that the provision is adequate to cover losses from declines in inventory value due to obsolescence.

Certain inventories of the subsidiaries amounting to Rp 53 billion have been pledged as collateral under lending agreements (Notes 1 8 and 1 9 ).

As of December 31, 201 2 and 201 3 , modules and components with book value amounting to Rp272 billion and Rp 280 billon , respectively, which are held by the Group have been insured against fire, theft and other specific risks. Modules are recorded as part of property and equipment. Total sum insured as of December 31, 201 2 and 201 3 amounted to Rp275 billion and Rp2 61 billion, respectively.

Management believes that the insurance coverage is adequate to cover potential losses on inventories arising from the insured risks.

F-48

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

9 . ADVANCES AND PREPAID EXPENSES

	2012	2013
Frequency license (Notes 38c.i and 38c.ii)	2,563	2,330
Prepaid rental	666	744
Advances	120	297
Salaries	165	209
Deferred expense	45	124
Insurance	18	84
Others (each below Rp50 billion)	144	149
Total	3,721	3,937

R efer to Note 3 5 for details of related party transactions.

10 . ASSET HELD FOR SALE

This account represents the carrying amount of Telkomsel’s equipment to be exchanged with equipment of Nokia Siemens Network Oy (“NSN Oy”) and PT Huawei Tech Investment (“PT Huawei”). The equipment will be used as part of the settlement for the exchanges of equipment from these companies.

In 2013, Telkomsel’s equipment with net carrying amount of Rp 105 billion is reclassified to asset held for sale (Note 12c.vi).

Asset held for sale is presented under personal segment (Note 36).

1 1 . LONG-TERM INVESTMENTS

	2012 — Percentage of ownership	Beginning balance	Addition	Share of net (loss) profit of associated companies		Dividend		Translations	Ending balance
Long-term investments in associated companies :
Scicom h	29.71	101	-	(2	)	(8	)	7	98
ILCS c	49.00	-	49	(1	)	-		-	48
Patrakom g	40.00	43	-	5		(2	)	-	46
PT Melon Indonesia (“Melon”) b	51.00	44	-	(2	)	-		-	42
CSM e	25.00	26	-	(11	)	-		5	20
PSN f	22.38	-	-	-		-		-	-
Sub-total		214	49	(11	)	(10	)	12	254
Other long-term investments		21	-	-		-		-	21
Total long-term investments		235	49	(11	)	(10	)	12	27 5

F-49

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

1 1 . LONG-TERM INVESTMENTS (continued)

Summarized financial information of the Group’s investments accounted under the equity method for 2012:

	Scicom		ILCS		Patrakom		Melon		CSM		PSN
Statements of financial position
Current assets	1 81		98		91		69		269		137
Non-current assets	4 2		6		127		20		899		453
Current liabilities	(16	)	(5	)	(76	)	(6	)	(813	)	(932	)
Non-current liabilities	(1	)	(2	)	(26	)	(1	)	(92	)	(580	)
Equity (deficit)	206		97		116		82		263		(922	)
Statements of comprehensive income
Revenue	399		1		226		10		403		292
Cost of r evenues and o perating expenses	(35 9	)	(4	)	(209	)	(21	)	(345	)	(294	)
Other ( expense s) income , including finance costs - net	(1)		0		-		-		(125	)	3
Profit (loss) before tax	3 9		(3	)	17		(11	)	(67	)	1
Net i ncome tax benefit (expense)	1		-		( 5	)	7		23		-
Profit (loss) for the year	40		(3	)	12		(4	)	(44	)	1

	2013 — Percentage of ownership	Beginning balance	Additions (Deduction s )		Share of net (loss) profit of associated companies		Dividend		Translations		Ending balance
Long-term investments in associated companies :
Indonusa a	20.00	-	182		7		-		-		189
Melon b	51.00	42	-		(3	)	-		-		39
ILCS c	49.00	48	-		(11	)	-		-		37
Telin Malaysia d	49.00	-	20		(6	)	-		4		18
CSM e	25.00	20	-		(20	)	-		-		-
PSN f	22.38	-	-		-		-		-		-
Patrakom g	40.00	46	(4 6	)	2		( 2	)	-		-
Scicom h	29.71	98	(88	)	2		(3	)	(9	)	-
Sub-total		254	68		( 29	)	( 5	)	(5	)	283
Other long-term investments		21	-		-		-		-		21
Total long-term investments		275	68		( 29	)	( 5	)	(5	)	304

F-50

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

1 1 . LONG-TERM INVESTMENTS (continued)

Summarized financial information of the Group’s investments accounted under the equity method for 2013:

	Indonusa		Melon		ILCS		Telin Malaysia		CSM		PSN
Statements of financial position
Current assets	124		73		64		33		222		183
Non-current assets	1,426		17		24		4		1,051		634
Current liabilitie s	(662	)	(21	)	(12	)	(1	)	(1,091	)	(1,41 8	)
Non-current liabilities	(7	)	(1	)	(1	)	-		(296	)	(7 30	)
E quity (deficit)	881		68		75		36		(114	)	(1,331	)
Statements of comprehensive income
Revenue	363		73		4		0		306		462
Cost of r evenues and o perating expenses	(517	)	(79	)	(27	)	(11	)	(420	)	(460	)
Other ( expense s) income , including finance costs - net	(9	)	-		1		-		(124	)	(57	)
Loss before tax	(163	)	(6	)	(22	)	(11	)	(238	)	(55	)
Net i ncome tax benefit	39		-		-		-		57		-
Loss for the year	(124	)	(6	)	(22	)	(11	)	(181	)	(55	)

a Indonusa had been the Company’s subsidiary until 2013 when the Company disposed 80% of its interest in Indonusa (Notes 1d and 3).

b Melon is engaged in providing Digital Content Exchange Hub services (“DCEH”). As a result of the existence of substantive participating rights held by the other venturer over the significant financial and operating policies of Melon, Metra does not have control over Melon.

c ILCS is engaged in providing E-trade logistic services and other related services.

d Telin Malaysia is engaged in telecommunication services in Malaysia.

e CSM is engaged in providing Very Small Aperture Terminal (“VSAT”), network application services and consulting services on telecommunications technology and related facilities. The unrecognized share of losses of CSM for the year ended December 31, 2013 is Rp29 billion.

f PSN is engaged in providing satellite transponder leasing and satellite-based communication services in the Asia-Pacific Region. The Company’s share in losses of PSN has exceeded the carrying amount of its investment since 2001; accordingly, the investment value has been reduced to Rp nil. The unrecognized share of losses of PSN for the years ended December 31, 2013 and 2012 are Rp298 billion and Rp 206 billion, respectively.

g Patrakom has been engaged in providing satellite communication system services, related services and facilities to companies in the petroleum industry. Starting in 2013, Patrakom has become a subsidiary (Notes 1d and 3).

h Scicom (MSC) Berhad-Malaysia (Scicom) is engaged in providing call center services in Malaysia. On September 19, 2013, the Company sold its investment in Scicom, with the proceeds of disposal and the carrying amount of the investment on the date of disposal amounting to Rp153 billion and Rp88 billion, respectively, resulting in a gain of Rp65 billion.

F-51

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

12 . PROPERTY AND EQUIPMENT

	January 1, 2012	Additions	Deductions		Reclassifications/ Translations		December 31, 2012
At cost:
Land rights	842	135	-		(0	)	977
Buildings	3,417	98	(0	)	272		3,787
Leasehold improvements	650	6	(3	)	130		783
Switching equipment	25,551	91	(1,438	)	(371	)	23,833
Telegraph, telex and data communication equipment	20	-	-		(1	)	19
Transmission installation and equipment	78,697	3,328	(1, 484	)	7,629		88,170
Satellite, earth station and equipment	7,069	35	-		163		7,267
Cable network	26,772	1,965	(244	)	(469	)	28,024
Power supply	9,285	194	(29	)	984		10,43 4
Data processing equipment	8,426	329	(210	)	(10	)	8,535
Other telecommunications peripherals	474	-	-		(192	)	282
Office equipment	753	60	(47	)	(71	)	695
Vehicles	132	6	(52	)	(15	)	71
CPE assets	22	-	-		-		22
Other equipment	112	1	-		(2	)	111
Property under construction	1,205	11,024	(43	)	(10,874	)	1,312
Total	163,427	17,272	(3,550	)	(2,827	)	174,322

	January 1, 2012	Additions	Impairments	Deductions		Reclassifications/ Translations		Dece mber 3 1 , 201 2
Accumulated depreciation and impairment losses:
Land rights	1 21	1 8	-	-		-		139
Buildings	1, 671	130	-	(0	)	(62	)	1, 739
Leasehold improvements	502	63	-	(3	)	47		609
Switching equipment	17,447	2,071	-	(1,112	)	(1,260	)	17,146
Telegraph, telex and data communication equipment	17	0	-	-		(1	)	16
Transmission installation and equipment	35,377	7,410	153	(909	)	(27	)	42,004
Satellite, earth station and equipment	4,135	517	94	-		(62	)	4,684
Cable network	17,128	1,085	-	(238	)	(485	)	17,490
Power supply	4,873	1,221	-	(18	)	(94	)	5,982
Data processing equipment	6,406	1,052	-	(165	)	(677	)	6,616
Other telecommunications peripherals	354	5	-	-		(99	)	260
Office equipment	531	65	-	(14	)	(27	)	555
Vehicles	120	7	-	(52	)	(14	)	61
CPE assets	9	2	-	-		-		11
Other equipment	98	5	-	-		(1	)	102
Total	88,789	13,6 5 1	247	( 2,511	)	( 2,762	)	97,41 4
Net	74,638							76,908

F-52

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

12 . PROPERTY AND EQUIPMENT (continued)

	January 1, 2013	Business acquisition	Divestment		Additions	Deductions		Reclassifications/ Translations		December 31, 2013
At cost :
Land rights	977	110	-		13	-		(2	)	1,098
Buildings	3,787	120	-		98	(1	)	220		4,224
Leasehold improvements	783	-	-		24	(27	)	32		812
Switching equipment	23,833	-	-		428	(2,896	)	(2,577	)	18,788
Telegraph, telex and data communication equipment	19	-	-		-	-		(13	)	6
Transmission installation and equipment	88,170	-	(30	)	4,947	(1,641	)	10,098		101,544
Satellite, earth station and equipment	7,267	158	(110	)	56	(2	)	87		7,456
Cable network	28,024	-	(601	)	2,084	(117	)	(37	)	29,353
Power supply	10,434	3	(0	)	253	(71	)	1,136		11,755
Data processing equipment	8,535	-	(1	)	973	(283	)	129		9,353
Other telecommunications peripherals	282	-	-		230	-		(10	)	502
Office equipment	695	5	(11	)	138	(9	)	(41	)	777
Vehicles	71	0	(1	)	305	(1	)	(16	)	358
CPE assets	22	-	-		-	-		-		22
Other equipment	111	-	(2	)	-	-		(5	)	104
Property under construction	1,312	-	-		15,349	-		(14,690	)	1,971
Total	174,322	396	(756	)	24,898	(5,048	)	(5,689	)	188,123

	January 1, 201 3	Business acquisition	Divestment		Additions	Impairment	Deductions		Reclassifications/ Translations		De c ember 31, 2013
Accumulated depreciation and impairment losses:
Land rights	1 39	-	-		25	-	-		(2	)	162
Buildings	1 ,739	-	-		163	-	(0	)	(62	)	1,8 40
Leasehold improvements	609	-	-		67	-	( 2 7	)	-		6 49
Switching equipment	17,146	-	-		1,988	-	( 2,718	)	(3, 466	)	1 2 ,950
Telegraph, telex and data communication equipment	16	-	-		-	-	-		(13	)	3
Transmission installation and equipment	42,004	-	(3	)	8,507	321	( 1,535	)	( 1 , 269	)	48,025
Satellite, earth station and equipment	4,684	-	(142	)	663	226	( 2	)	(23 9	)	5 , 19 0
Cable network	17,490	-	(181	)	1,055	49	( 106	)	(3 17	)	17,990
Power supply	5,982	-	(0	)	1,1 71	-	( 67	)	(29 2	)	6, 794
Data processing equipment	6,616	-	(1	)	775	-	( 264	)	( 221	)	6,905
Other telecommunications peripherals	260	-	-		1 8	-	-		( 10	)	2 6 8
Office equipment	555	-	(6	)	7 3	-	( 7	)	( 49	)	56 6
Vehicles	61	-	(1	)	2 6	-	(1	)	(16	)	6 9
CPE asets	11	-	-		2	-	-		-		13
Other equipment	102	-	(1	)	4	-	-		(5	)	10 0
Total	97,414	-	(335	)	14, 5 37	596	( 4,7 27	)	(5, 9 61	)	101 ,524
Net	7 6,908										86,599

a. Gain on disposal or sale of property and equipment

Proceeds from sale of property and equipment	2012 — 360		2013 — 466
Net book value	(144	)	(53	)
Gain on disposal or sale of property and equipment	216		413

F-53

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

12 . PROPERTY AND EQUIPMENT (continued)

b . Assets impairment

(i) As of December 31, 2012 and 2013, the CGUs that independently generate cash inflows were fixed wireline, fixed wireless, cellular and others. As of December 31, 2012 and 2013, there were indications of impairment in the fixed wireless CGU (presented as part of personal segment), which were mainly due to increased competition in the fixed wireless market that resulted in lower average tariffs, declining active customers and declining Average Revenue Per User (“ARPU”). The Company assessed the recoverable value of the assets in the CGU and determined that assets for the fixed wireless CGU were impaired by Rp 247 billion and Rp596 billion at December 31, 201 2 and 201 3 , respectively, which are recognized in the consolidated statements of comprehensive income under “Depreciation and amortization”. The recoverable amount has been determined based on value in use (VIU) calculations. These calculations used pre-tax cash flow projections approved by management covering a five-year period and with cash flows beyond the five-year period extrapolated using a perpetuity growth method. The cash flow projections reflect management’s expectations of revenue, Earnings Before Interest, Tax, Depreciation and Amortization (“EBITDA”) growth and operating cash flows on the basis that the fixed wireless CGU generates positive net cash flows starting from 2014. Management’s cash flow projection also incorporates management’s reasonable expectations for developments in macro economic conditions and market expectations for the Indonesian telecommunications industry. As of December 31, 201 2 and 201 3 , management applied a pre-tax discount rate of 12.3% and 13.5%, respectively, derived from the Company’s post-tax weighted average cost of capital and benchmarked to externally available data. As of December 31, 201 2 and 201 3 , the perpetuity growth rate used is 0.5% and 0%, respectively, and assuming that subscriber numbers and ARPU may continue to decrease after five years.

If the performance of the fixed wireless CGU continues to decline or if management’s initiatives are not performing as expected in the next financial year, analysis will be required to assess whether there will be further impairment next year.

(ii) Management believes that there is no indication of impairment in the assets of other CGUs as of December 31, 201 2 and 201 3 .

c . Others

(i) Interest capitalized to property under construction amounted to Rp44 billion and Rp100 billion for the years ended December 31, 2012 and 2013, respectively, while no interest was capitalized for 2011. The capitalization rate used to determine the amount of borrowing costs eligible for capitalization ranged from 7.72% to 9.75% and from 9.75% to 13.07% for the years ended December 31, 2012 and 2013, respectively.

(ii) No foreign exchange loss was capitalized as part of property under construction for the years ended December 31, 2011, 201 2 and 201 3 .

(iii) On August 7, 2012, Telkom-3 Satellite with a total value of Rp1,606 billion was built and launched, but failed to reach its orbit. The carrying value of the satellite was charged to other expenses in the 2012 consolidated statement of comprehensive income. Telkom-3 Satellite was insured with insurance coverage that was adequate to cover losses from the insured risks such as the event experienced by the Company. Insurance claim was made and the amount of insurance compensation amounting to Rp1,772 billion was agreed and approved by the insurer and recorded as part of other income in the 2012 consolidated statement of comprehensive income. The Company received the proceeds from the insurance claim in November 2012.

F-54

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

12 . PROPERTY AND EQUIPMENT (continued)

c . Others (continued)

(iv) In 2012, Telkomsel decided to replace certain equipment units with net carrying amount of Rp1,037 billion, as part of its modernization program. Accordingly, Telkomsel changed the estimated useful lives of such equipment. In 2013, the effect of the change is the additional depreciation expense amounting to Rp 1 31 billion.

The impact of the change in the estimated useful lives of the equipment for the year ended December 31, 2014 is to decrease the profit before income tax by Rp84 billion.

(v) In 2012, the useful lives of Telkomsel’s towers were changed from 10 years to 20 years to reflect their current economic useful lives. The impact is a reduction of depreciation expense by Rp606 billion recognized in the 2013 consolidated statement of comprehensive income.

The impact of the change in the estimated useful lives of the towers in future periods is to increase the profit before income tax as follows:

Years	Amount
201 4	565
201 5	469
201 6	301
201 7	92

(vi) Exchange of property and equipment

· In 2011, the Company and PT Industri Telekomunikasi Indonesia (“INTI”) signed Purchase Orders of Procurement and Installation Agreement for the Modernization of the Copper Cable Network through Optimization of Asset Copper Cable Network Trade In/Trade Off with total procurement value amounting to Rp1,499 billion up to December 31, 2013.

In 2012 and 2013, the Company derecognized the copper cable network asset with net carrying value of Rp6.2 billion and Rp1.6 billion, respectively, and recorded the fiber optic network asset from the exchange transaction of Rp430 billion and Rp203 billion, respectively.

· In 2013, certain equipment units of Telkomsel with net carrying amount of Rp268 billion were exchanged with equipment from NSN Oy and PT Huawei. As of December 31, 2013, Telkomsel’s equipment units with net carrying amount of Rp105 billion are going to be exchanged with equipment from NSN Oy and PT Huawei; therefore, these equipment units were reclassified as assets held for sale (Note 10 ).

In 2012, certain equipment units of Telkomsel with net carrying amount Rp1,686 billion were exchanged with equipment from NSN Oy and PT Huawei, where Rp791 billion relates to asset held for sale that was recognized in 2011.

The cost of the acquired equipment is measured at the aggregate of the carrying amount of the equipment given up and the amount of cash paid.

F-55

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

12. PROPERTY AND EQUIPMENT (continued)

c. Others (continued)

(vii) The Group owns several pieces of land rights located throughout Indonesia with Building Use Rights (“ Hak Guna Bangunan ” or “HGB”) for a period of 10 - 45 years which will expire between 2014 and 2052. Management believes that there will be no issue in obtaining the extension of the land rights when they expire.

(viii) As of December 31, 2013, the Group’s property and equipment except land rights, with net carrying amount of Rp72,000 billion were insured against fire, theft, earthquake and other specified risks, with a maximum loss claim of Rp4,449 billion, US$52.51 million, EURO0.63 million, SGD16.55 million and HKD8.44 million, and on a first-loss basis of Rp6,815 billion including business recovery of Rp324 billion with the Automatic Reinstatement of Loss Clause. In addition, Telkom-1 and Telkom-2 were insured separately for US$3.41 million and US$28.55 million, respectively. Management believes that the insurance coverage is adequate to cover potential losses from the insured risks.

(ix) As of December 31, 2013, the percentage of completion of property under construction was around 32.69% of the total contract value, with estimated dates of completion between January 2014 and December 2015. The balance of property under construction mainly consists of buildings, transmission installation and equipment, cable network and power supply. Management believes that there is no impediment to the completion of the construction in progress.

(x) All assets owned by the Company have been pledged as collateral for bonds (Note 1 9 b). Certain property and equipment of the Company’s subsidiaries with gross carrying value amounting to Rp 6,214 billion have been pledged as collateral under lending agreements (Notes 1 8 a and 1 9 c) .

(xi) As of December 31, 2013, the cost of fully depreciated property and equipment of the Group that are still used in operations amounted to Rp40,791 billion. The Group is currently performing modernization of network assets to replace the fully depreciated property and equipment.

(xii) As of December 31, 2013, the total fair values of land rights and buildings of the Group, which are determined based on the sale value of the tax object (“ Nilai Jual Objek Pajak ” or “NJOP”) of the related land rights and buildings, amounted to Rp15,307 billion.

(xiii) The Company and Telkomsel entered into several agreements with PT Profesional Telekomunikasi Indonesia, PT Tower Bersama Infrastructure Tbk, PT Solusindo Kreasi Pratama, PT Prima Media Selaras, PT Naragita Dinamika Komunika and other tower providers to lease spaces in telecommunication towers (slot) and sites of the towers for a period of 10 years. The Company and Telkomsel may extend the lease period based on the agreement by both parties. In addition, the Group also has lease commitments for property and equipment under RSA, transmission installation and equipment, data processing equipment, office equipment, vehicles and CPE assets with the option to purchase certain leased assets at the end of the lease terms.

F-56

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

12. PROPERTY AND EQUIPMENT (continued)

c . Others (continued)

Future minimum lease payments for assets under finance lease are as follows:

Year — 2013	2012 — 652		2013 — -
2014	548		1,070
2015	398		885
2016	354		847
2017	334		813
2018	279		754
Thereafter	607		2,535
Total minimum lease payments	3,172		6,904
Interest	(848	)	(1,935	)
Net present value of minimum lease payments	2,324		4,969
Current maturities (Note 18b)	(510	)	(648	)
Long-term portion (Note 19)	1,814		4,321

1 3 . ADVANCES AND OTHER NON-CURRENT ASSETS

A dvances and other non-current assets as of December 31, 201 2 and 201 3 consist of:

	2012	2013
Advances for purchases of property and equipment	775	1 , 550
Prepaid rental - net of current portion (Note 9)	1,367	1 , 403
Frequency license - net of current portion (Note 9 )	279	619
Long-term trade receivables - net of current portion (Note 7)	294	558
Defer r ed charges	471	529
Claim for tax refund - net of current portion (Note 32)	-	4 9 9
Security deposits	103	73
Restricted cash	217	54
Assets not used in operations - net	0	0
Others	4	9
Total	3,510	5,294

P repaid rental covers rent of leased line and telecommunication equipment and land and building under lease agreements of the Group with rental periods ranging from 1 to 33 years.

Long-term trade receivables are measured at amortized cost using the effective interest rate method payable in installments over 4 years, and arose from providing telecommunication access and services in rural areas (USO) (Note 2 7 ).

As of December 31, 2012 and 201 3 , deferred charges represent deferred Revenue-Sharing Arrangement (“ RSA ”) charges and deferred Indefeasible Right of Use (“IRU”) Agreement charges. Total amortization of deferred charges for the years ended December 31, 2011, 201 2 and 201 3 amounted to Rp84 billion, Rp8 7 billion and Rp 91 billion, respectively.

F-57

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

1 3 . ADVANCES AND OTHER NON-CURRENT ASSETS (continued)

As of December 31, 201 2 and 201 3 , restricted cash represents time deposits with original maturities of more than one year and cash pledged as collateral for bank guarantees for the USO contract (Note 2 7 ) and other contracts.

As of December 31, 201 2 and 201 3 , the carrying amount of the Group ’ s temporarily idle property and equipment amounted to Rp0 . 4 billion and Rp nil , respectively.

Refer to Note 3 5 for details of related party transactions.

1 4 . INTANGIBLE ASSETS

(i) The changes in the carrying amount of goodwill, software, license and other intangible assets for the years ended December 31 , 2012 and 201 3 are as follows:

	Goodwill		Software		License		Other intangible assets		Total
Gross carrying amount:
Balance, January 1, 2012	192		2,536		815		236		3,77 9
Addition s	-		431		-		6		437
Acquisition of BDM’s Data Center
(Note 1d)	77		-		-		3		80
Deductions	-		(58	)	-		-		(58	)
Reclassifications	-		-		(749	)	155		(594	)
Balance, December 31, 2012	269		2,909		66		400		3,644
Accumulated amortization:
Balance, January 1, 2012	( 21	)	(1,459	)	(339	)	(169	)	(1,98 8	)
Amortization expense during the year	-		(424	)	(6	)	(36	)	(466	)
Deductions	-		58		-		-		58
Reclassifications	-		-		314		(119	)	19 5
Balance, December 31, 2012	( 21	)	(1,825	)	(31	)	(324	)	(2,201	)
Net Book Value	24 8		1,084		35		76		1,443
Weighted-average amortization period			6.86 years		10.43 years		11.11 years

F-58

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

1 4 . INTANGIBLE ASSETS (continued)

	Goodwill		Software		License		Other intangible assets		Total
Gross carrying amount:
Balance, January 1, 2013	269		2,909		66		400		3,644
Addition s	1		521		1		1 14		63 7
Deductions	-		(8	)	-		(112	)	(120	)
Reclassifications /translations	-		10		-		(1	)	9
Balance, December 31, 2013	2 70		3,432		67		401		4, 170
Accumulated amortization:
Balance, January 1, 2013	(2 1	)	(1,825	)	(31	)	(324	)	(2,201	)
Amortization expense during the year	-		(458	)	(6	)	(114	)	(5 78	)
Deductions	-		8		-		112		120
Reclassifications /translations	-		(3	)	-		-		(3	)
Balance, December 31, 2013	(2 1	)	(2,278	)	(37	)	(326	)	(2,6 6 2	)
Net Book Value	2 49		1,154		30		75		1,508
Weighted-average amortization period			7.51 years		11.30 years		9.78 years

(ii) Goodwill resulted from s ale s-p urchase transaction of D ata C enter B usiness between Sigma and BDM in 2012 (Note 1d) , and from the acquisition s of Ad Medika in 2010 and Sigma in 2008 .

(iii) The estimated annual amortization expense of intangible assets from December 31, 201 3 is approximately Rp 475 billion. The remaining amortization periods of intangible assets, excluding land rights, range from 1 to 20 years.

(iv) As of December 31, 2013, the cost of fully amortized intangible assets that are still used in operations amounted to Rp1,321 billion.

1 5 . TRADE AND OTHER PAYABLES

Trade and other payables as of December 31, 201 2 and 201 3 consist of:

	2012	2013
Trade payables	7,280	11, 600
Other payables	177	388
Total trade and other payables	7,457	1 1,988

F-59

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

1 5 . TRADE AND OTHER PAYABLES (continued)

Trade payables to related parties and third parties as of December 31, 201 2 and 201 3 consist of:

	2012	2013
Related parties
Radio frequency usage charges, concession fees and USO charges	6 07	96 0
Purchases of equipment, materials and services	414	807
Payables to other telecommunications providers	20	21
Sub-total	1,041	1,788
Third parties
Purchases of equipment, materials and services	6,035	9,756
Payables to other telecommunications providers	204	56
Sub-total	6 , 239	9,812
Total	7,280	11, 600

Trade payables by currency are as follows:

	2012	2013
Rupiah	4,146	8,1 74
U.S. d ollar	3,111	3, 373
Others	23	5 3
Total	7,280	11,6 00

Refer to Note 3 5 for details of related party transactions.

1 6 . ACCRUED EXPENSES

	2012	2013
Operations, maintenance and telecommunications services	2,917	2,504
Salaries and benefits	1,491	1,453
General, administrative and marketing expenses	882	1,126
Interest and bank charges	174	181
Early retirement program (Note 28)	699	-
Total	6,163	5,264

F-60

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

1 6 . ACCRUED EXPENSES (continued)

Accruals for early retirement program arose from the Decision Letter No. PR.206.01/r.02/PD000/COP-B0010000/2012 dated November 1, 2012 of the Human Capital and General Affairs Director on early retirement program which was communicated to the employees on the same date. The Company estimated the accrual on the basis of the number of eligible employees that met the criteria stipulated in the Company’s regulation related to this program. Accrued early retirement benefits as of December 31, 2012 amounting to Rp699 billion were charged to the 2012 consolidated statement of comprehensive income (Note 2 8 ). In 2013, the early retirement program had been completed and the related costs had been fully paid to the eligible employees.

Refer to Note 3 5 for details of related party transaction.

1 7 . UNEARNED INCOME

	2012	2013
Prepaid pulse reload vouchers	2,352	3,117
Other telecommunications services	132	46
Others	245	327
Total	2,729	3,490

1 8 . SHORT-TERM LOANS AND OTHER BORROWINGS

Short-term loans and other borrowings consist of short-term bank loans and current maturities portion of long-term borrowings, as follows:

	2012	2013
Short term bank loans	37	432
Current maturities portion of long-term borrowings	5,621	5, 093
Total	5,658	5,5 25

a. Short-term bank loans

		201 2		201 3
		Outstanding		Outstanding
Lenders	Currency	Original currency (in millions )	Rupiah equivalent	Original currency (in millions)	Rupiah equivalent
Bank CIMB Niaga	Rp	-	20	-	155
Bank UOB (Note 43h)	Rp	-	-	-	130
Bank Danamon	Rp	-	-	-	80
BRI	Rp	-	-	-	50
Others	Rp	-	1 3	-	17
	US$	0.42	4	-	-
Total			37		432

Refer to Note 3 5 for details of related party transactions.

F-61

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

1 8 . SHORT-TERM LOANS AND OTHER BORROWINGS (continued)

a. Short-term bank loans (continued)

Other significant information relating to short-term bank loans as of December 31, 201 3 is as follows:

	Borrower	Currency	Total facility (in billions)	Maturity date	Interest payment period	Interest rate annum	Security
Bank CIMB Niaga
April 25, 2005 a	Balebat	Rp	12	October 18, 201 4	Monthly	1 1.00%	Property and equipment (Note 1 2 ), inventories (Note 8 ) and trade receivables (Note 7	)
April 29, 2008 a	Balebat	Rp	10	October 18, 201 4	Monthly	11 .0 0 %	Property and e quipment (Note 1 2 ), inventories (Note 8 ) and trade receivables (Note 7	)
March 21, 2013	Infomedia	Rp	38	October 18, 201 4	Monthly	10.25%	Trade receivables (Note 7	)
March 25, 2013	Infomedia	Rp	38	October 18, 201 4	Monthly	10.25%	Trade receivables (Note 7	)
March 27, 2013	Infomedia	Rp	24	October 18, 201 4	Monthly	10.25%	Trade receivables (Note 7	)
April 28, 2013	GSD	Rp	85	August 18, 201 4	Monthly	9.75%	Property and equipment (Note 1 2	)
September 30, 2013	GSD	Rp	50	August 18, 2014	Monthly	9.75%	Property and equipment (Note 1 2	)
BRI
March 14, 2013	Infomedia	Rp	50	March 14, 2014	Monthly	10.00%	Trade receivables (Note 7	)
Bank Danamon
August 23, 2013	Infomedia	Rp	80	August 23, 2014	Monthly	10.50%	Trade receivables (Note 7	)
Bank UOB
November 22, 2013	Infomedia	Rp	200	November 22, 2014	Monthly	10.60%	Trade receivables (Note 7	)

The credit facilities obtained by the Company’s subsidiaries are used for working capital purposes.

a based on the latest amendment on October 10, 2012

b. Current maturities of long-term borrowings

	Notes	2012	2013
Two-step loans	19a	196	213
Bonds and notes	19 b	440	276
Bank loans	19c	4,475	3 , 956
Obligations under finance lease s	12 c.xiii	510	648
Total		5 ,6 21	5 , 093

Refer to Note 3 5 for details of related party transactions.

F-62

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

1 9 . LONG-TERM LOANS AND OTHER BORROWINGS

Long-term loans and other borrowings consist of long-term bank loans, bonds and notes, two-step loans and obligations under finance leases with balances as of December 31, 201 2 and 201 3 as follows:

	2012	2013
Two-step loans	1,791	1,702
Bonds and notes	3,229	3,073
Bank loans	6,783	5,635
Obligations under finance leases (Note 12c.xiii)	1,814	4,321
Total	13,617	14,731

Scheduled principal payment s as of December 31, 201 3 are as follow s:

	Total	Year — 201 5	201 6	201 7	201 8	Thereafter
Two-step loans	1,702	215	218	220	196	853
Bonds and notes	3,073	1,045	33	-	-	1,995
Bank loans	5,6 35	2,8 5 4	1, 040	85 3	48 7	401
Obligations under finance leases	4,321	525	535	552	545	2,164
Total	14,7 31	4,63 9	1, 826	1, 625	1,22 8	5,413

a. Two-step loans

Two-step loans are unsecured loans obtained by the Government which are then re-loaned to the Company. The loans entered into up to July 1994 are payable in rupiah based on the exchange rate at the date of drawdown. Loans entered into after July 1994 are payable in their original currencies and any resulting foreign exchange gain or loss is borne by the Company.

Lenders	Currency	2012 — Original currency (in millions)	Rupiah equivalent	Original currency (in millions)	Rupiah equivalent
Overseas bank	Yen	9,215	1,031	8,447	979
	Rp	-	574	-	507
	US$	40	382	35	429
Total			1,987		1,915
Current maturities (Note 18b)			(196	)	(213	)
Long-term portion			1,791		1,702

Lenders	Currency	Principal payment schedule	Interest payment period	Interest rate per annum
Overseas banks	Yen	Semi-annually	Semi-annually	3.10%
	Rp	Semi-annually	Semi-annually	6.79%
	US$	Semi-annually	Semi-annually	4.00%

F-63

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

1 9 . LONG-TERM LOANS AND OTHER BORROWINGS (continued)

a. Two-step loans (continued)

The loans were intended for the development of telecommunications infrastructure and supporting telecommunications equipment. The loans are due on various dates through 2024.

Since 2008, the Company had used all facilities under the two-step loans program and the drawdown period for the two-step loans had expired.

Under the loan covenants, the Company is required to maintain financial ratios as follows:

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

b. Internal financing (earnings before depreciation and finance costs) should exceed 20% compared to annual average capital expenditures for loans originating from the ADB.

As of December 31, 201 3 , the Company has complied with the above-mentioned ratios.

Refer to Note 3 5 for details of related party transactions.

b. Bonds and notes

Bonds and notes	Currency	2012 — Original currency (in m illions)	Rupiah equivalent	2013 — Original currency (in m illions)	Rupiah equivalent
Bonds
Series A	Rp	-	1,005	-	1,005
Series B	Rp	-	1,995	-	1,995
Promissory n otes
PT H uawei	US$	46	445	18	213
PT. ZTE Indonesia (“ZTE”)	US$	22	216	11	136
Medium Term Notes (“MTN”)
Finnet	Rp	-	8	-	-
Total			3,669		3,349
Current maturities (Note 18b)			(440)		(276)
Long-term portion			3,229		3,073

Bonds

Bonds	Principal	Issuer	Listed on	Issuance date	Maturity date	Interest payment period	Interest rate per annum
Series A	1,005	The Company	IDX	June 25, 2010	July 6, 2015	Quarterly	9.60%
Series B	1,995	The Company	IDX	June 25, 2010	July 6, 2020	Quarterly	10.20%
Total	3,000

The funds received from the public offering of bonds net of issuance costs, were used to increase capital expenditures which consisted of wave broadband (bandwidth, softswitching, datacom, information technology and others) and infrastructure (backbone, metro network, regional metro junction, internet protocol and satellite system) and to optimize legacy and supporting facilities (fixed wireline and wireless).

The Company received the proceeds from the issuance of bonds on July 6, 2010.

The bonds are secured by all of the Company’s assets, movable or non-movable, either existing or in the future (Note 12c.x). The underwriters of the bonds are Bahana, PT Danareksa Sekuritas and PT Mandiri Sekuritas and the trustee is Bank CIMB Niaga.

F-64

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

1 9 . LONG-TERM LOANS AND OTHER BORROWINGS (continued)

b. Bonds and notes (continued)

Bonds (continued)

As of December 31, 201 3 , the rating of the bonds issued by PT Pemeringkat Efek Indonesia (Pefindo) is idAAA (stable outlook).

Based on the indenture trusts agreement, the Company is required to comply with all covenants or restrictions, including maintaining financial ratios as follows:

Debt to equity ratio should not exceed 2:1 .
EBITDA to finance costs ratio should not be less than 5:1.
Debt service coverage is 125%.

As of December 31, 201 3 , the Company has complied with the above-mentioned ratios.

Promissory n otes

Supplier	Currency	Principal (in m illions)	Issuance date	Interest payment period	Payment schedule	Interest rate per annum
PT Huawei	US$	3 00	June 19, 2009	Semi-annually	Semi-annually (January 11, 2014 - June 2 3 , 2016)	6 month LIBOR+2.5%
ZTE	US$	100	August 20, 2009	Semi-annually	Semi-annually (February 11, 2014 - June 1 5 , 2016)	6 month LIBOR+1.5%

Based on Agreement of Frame Supply and Deferred Payment Arrangement between the Company and each of ZTE and PT Huawei, the promissory notes issued by the Company to each of ZTE and PT Huawei are vendor financing facilities with no collateral covering 85% of Hand-over Report (“ Berita Acara Serah Terima ”) projects with ZTE and PT Huawei.

c. Bank loans

Lenders	Currency	2012 — Original currency (in millions)	Rupiah equivalent	Original currency (in millions)	Rupiah equivalent
BRI	Rp	-	4,011	-	3,035
Syndication of banks	Rp	-	1,950	-	2,426
BNI	Rp	-	1,201	-	1,305
BCA	Rp	-	1,564	-	858
Bank Mandiri	Rp	-	1,417	-	722
ABN Amro Bank N.V. Stockholm (“AAB Stockholm”) and SCB	US$	68	659	55	673
Bank CIMB Niaga	Rp	-	174	-	365
Japan Bank for International Cooperation (“JBIC”)	US$	30	289	18	219
Bank Bukopin	Rp	-	-	-	31
	US$	-	-	1	12
Bank Ekonomi	Rp	-	41	-	-
	US$	0	3	-	-
Others	Rp	-	-	-	1
Total			11,309		9,647
Unamortized debt issuance cost			(51	)	(56	)
			11,258		9,591
Current maturities (Note 18b)			(4,475	)	(3,956	)
Long-term portion			6,783		5,635

Refer to Note 3 5 for details of related party transactions.

F-65

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

1 9 . LONG-TERM LOANS AND OTHER BORROWINGS ( continued )

c. Bank loans (continued)

Other significant information relating to bank loans as of December 31, 201 3 is as follows:

	Borrower	Currency	Total facility (in billions)	Current period payment	Payment schedule	Interest payment period	Interest rate per annum	Security
BRI
October 13, 2010 a	The Company	Rp	3,000	1,000	Semi-annually (2013-2015)	Quarterly	3 months JIBOR+1.25%	None
July 20, 2011 a	Dayamitra	Rp	1,000	160	Semi-annually (2011-2017)	Quarterly	3 months JIBOR+1.40%	Property and equipment (Note 12)
April 26, 2013	GSD	Rp	141	-	Monthly (2014-2018)	Monthly	10.00%	Propety and equipment (Note 12) and lease agreement
October 30, 2013	GSD	Rp	70	-	Monthly (2014-2021)	Monthly	10.00%	Property and equipment (Note 12), trade receivables (Note 7) and lease agreement
October 30, 2013	GSD	Rp	34	-	Monthly (2014-2021)	Monthly	10.00%	Property and equipment (Note 12), trade receivables (Note 7) and lease agreement
Syndication of banks
July 29, 2008 a	The Company	Rp	2,400	600	Semi-annually (2010-2013)	Quarterly	3 months JIBOR+1.20%	None
(BNI, BRI and BJB)
June 16, 2009 a	The Company	Rp	2,700	675	Semi-annually (2011-2014)	Quarterly	3 months JIBOR+2.45%	None
(BNI and BRI)
December 19, 2012	Dayamitra	Rp	2,500	-	Semi annually (2014-2020)	Quarterly	3 months JIBOR + 3.00%	Property and equipment (Note 12) and trade receivables (Note 7)
(BNI, BRI and Bank Mandiri) k
BNI
October 13, 2010 a	The Company	Rp	1,000	286	Semi-annually (2013-2015)	Quarterly	3 months JIBOR+1.25%	None
December 23, 2011 a	PIN	Rp	500	43	Semi-annually (2013-2016)	Quarterly	3 months JIBOR+1.50%	Inventories (Note 8) and trade receivables (Note 7)
November 28, 2012 a	Metra	Rp	44	4	Annually (2013-2015)	Monthly	10.25%	Property and equipment (Note 12) and trade receivables (Note 7)
March 13, 2013 a&h	Sigma	Rp	300	35	Monthly (2013-2015)	Monthly	1 month JIBOR +3.35%	Property and equpment (Note 12) and trade receivables (Note 7)

F-66

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

1 9 . LONG-TERM LOANS AND OTHER BORROWINGS (continued)

c. Bank loans (continued)

	Borrower	Currency	Total facility (in billions)	Current period payment	Payment schedule	Interest payment period	Interest rate per annum	Security
BNI (continued)
March 26, 2013 a	Metra	Rp	60	15	Quarterly (2013-2016)	Quarterly	10.25 %	Property and equpment (Note 12 ) and trade receivables (Note 7 )
May 2, 2013 a	Sigma	Rp	312	-	Monthly (201 5 -2021)	Monthly	1 month JIBOR +3.35%	Property and equpment (Note 12 ) and trade receivables (Note 7 )
November 25, 2013 a	Metra	Rp	90	-	Quarterly (2013-2016)	Monthly	10.25%	Property and equpment (Note 12 ) and trade receivables (Note 7 )
BCA
July 9 , 20 09 b&c and July 5, 2010 b&c	Telkomsel	Rp	4,000	666	Semi-annually (20 09 -2016)	Quarterly	3 months JIBOR+1. 0 0%	None
December 16, 2010 a	TII	Rp	200	40	Semi-annually (2011-2015)	Quarterly	3 months JIBOR+1.25%	None
Bank Mandiri
July 9 , 20 09 b&c and July 5, 2010 b&c	Telkomsel	Rp	5,000	695	Semi-annually (20 09 -2016)	Quarterly	3 months JIBOR+1. 0 0%	None
AAB Stockholm and SCB
December 30, 2009 b&d	Telkomsel	US$	0.3	0	Semi-annually (2011-2016)	Semi-annually	6 months LIBOR+0.82%	None
Bank CIMB Niaga
March 21, 2007 f	GSD	Rp	21	4	Quarterly (2007-2015)	Monthly	9.75%	Property and equipment (Note 12 )
July 28, 2009 g	Balebat	Rp	2	0.6	Monthly (2010-201 5 )	Monthly	11.00%	Property and equipment (Note 12 ), inventories (Note 8 ), and trade receivables (Note 7 )
May 24, 2010 g	Balebat	Rp	1	0.4	Monthly (2010-2015)	Monthly	11.00%	Property and equipment (Note 12 ), inventories (Note 8 ), and trade receivables (Note 7 )
March 31, 2011	GSD	Rp	24	3	Monthly (2011-20 20 )	Monthly	9.75%	Property and equipment (Note 12 ) and l ease agreement

F-67

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

1 9 . LONG-TERM LOANS AND OTHER BORROWINGS (continued)

c. Bank loans (continued)

	Borrower	Currency	Total facility (in billions)	Current period payment	Payment schedule	Interest payment period	Interest rate per annum	Security
Bank CIMB Niaga (continued)
March 31, 2011	GSD	Rp	13	2	Monthly (2011-2019)	Monthly	9.75%	Property and equipment (Note 12) and lease agreement
March 31, 2011	GSD	Rp	12	2	Monthly (2011-2016)	Monthly	9.75%	Property and equipment (Note 12) and lease agreement
September 9, 2011	GSD	Rp	41	4	Monthly (2011-2021)	Monthly	9.75%	Property and equipment (Note 12) and lease agreement
September 9, 2011	GSD	Rp	11	3	Monthly (2011-2015)	Monthly	9.75%	Property and equipment (Note 12) and lease agreement
August 2, 2012 g	Balebat	Rp	4	1	Monthly (2012-2015)	Monthly	11.00%	Property and equipment (Note 12), inventories (Note 8), and trade receivables (Note 7)
September 20, 2012 a	TLT	Rp	1,150	-	Monthly (2015-2030)	Monthly	3 Month JIBOR+3.45%	Property and equipment (Note 12)
September 20, 2012 a	TLT	Rp	118	-	Monthly (2015-2030)	Monthly	9.00%	Property and equipment (Note 12)
October 10, 2012 g	Balebat	Rp	1	0.5	Monthly (2012-2015)	Monthly	11.00%	Property and equipment (Note 12), inventories (Note 8), and trade receivables (Note 7)
August 26, 2013	Balebat	Rp	3.5	0.2	Monthly (2013-2018)	Monthly	11.00%	Property and equipment (Note 12), inventories (Note 8) and trade receivables (Note 7)

F-68

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

19. LONG-TERM LOANS AND OTHER BORROWINGS (continued)

c. Bank loans (continued)

	Borrower	Currency	Total facility (in billions)	Current period payment	Payment schedule	Interest payment period	Interest rate per annum	Security
JBIC
March 26, 2010 a&e	The Company	US$	0.06	0	Semi-annually (2010-2015)	Semi-annually	4.56% and 6 months LIBOR+0.70%	None
March 28, 2013 a&j	The Company	US$	0.03	-	Semi-annually	Semi-annually	2.18% and 6 months LIBOR+1.20%	None
Bank Bukopin
August 4, 2011 i	Patrakom	Rp	9	2	Monthly (2012-2015)	Monthly	11.00%	Property and equipment (Note 12) and trade receivables (Note 7)
June28, 2013	Patrakom	Rp	35	1.5	Monthly (2013-2016)	Monthly	11.00%	Property and equipment (Note 12)
December 18, 2012	Patrakom	US$	0.013	0.0003	Monthly (2013-2016)	Monthly	6.50%	Property and equipment (Note 12 )
Bank Ekonomi
September 10, 2008 a&h	Sigma	Rp	33	15	Monthly (2009-2015)	Monthly	9.00%	Property and equipment (Note 12) and trade receivables (Note 7)
August 7, 2009 a&h	Sigma	Rp	35	3	Monthly for some installments (2009-2013)	Monthly	9.00%	Property and equipment (Note 12) and trade receivables (Note 7 )
August 7, 2009 a&h	Sigma	Rp	20	7	Monthly for some installments (2009-2014)	Monthly	9.00%	Property and equipment (Note 12) and trade receivables (Note 7)
February 23, 2011 a&h	Sigma	Rp	30	16	Monthly (2011-2015)	Monthly	9.00%	Property and equipment (Note 12) and trade receivables (Note 7)
February 23, 2011 a&h	Sigma	US$	0.002	0.0003	Monthly (2011-2015)	Monthly	6.00%	Property and equipment (Note 12) and trade receivables (Note 7)

F-69

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

19. LONG-TERM LOANS AND OTHER BORROWINGS (continued)

c. Bank loans (continued)

The credit facilities obtained by the Group are used for working capital purposes.

a As stated in the agreements, the Group is required to comply with all covenants or restrictions such as dividend distribution, obtaining new loans, including maintaining financial ratios. As of December 31, 2013, the Group has complied with all covenants or restrictions.

b Telkomsel has no collateral for its bank loans, or other credit facilities. The terms of the various agreements with Telkomsel’s lenders and financiers require compliance with a number of pledges and negative pledges as well as financial and other covenants, which include, among other things, certain restrictions on the amount of dividends and other profit distributions which could adversely affect Telkomsel’s capacity to comply with its obligation under the facility. The terms of the relevant agreements also contain default and cross default clauses. As of December 31, 2013, Telkomsel has complied with the above covenants.

c In January 2012, the availability periods of the facilities from BCA and Bank Mandiri expired.

d Pursuant to the agreements with PT Ericsson Indonesia (“Ericsson Indonesia”) and Ericsson AB (Note 38a.ii), Telkomsel entered into an EKN-Backed Facility Agreement (“facility”) with ABN Amro Bank N.V. Stockholm branch (as “the original lender”) and Standard Chartered Bank (as “the original lender” , “the arranger”, “the facility agent” and “the EKN agent”) and ABN Amro Bank N.V., Hong Kong (as “the arranger”) for the purchase of Ericsson telecommunication equipment and services. The facilities consist of facility 1, 2 and 3 amounting to US$117 million, US$106 million and US$95 million, respectively. The availability period of facility 1, 2 and 3 expired in July 2010, March 2011 and November 2011, respectively. In October 2011, EKN agreed to reduce the premium of the unused facility by US$3 million through a cash refund.

e In connection with the agreement with NSW-Fujitsu Consortium, the Company entered into a loan agreement with JBIC, the international arm of Japan Finance Corporation, for the purchase of NSW-Fujitsu Consortium telecommunication equipment and services. The facilities consist of facility A and B amounting to US$36 million and US$24 million, respectively.

f Based on the latest amendment on March 31, 2011

g Based on the latest amendment in 2013

h In March 2013, the bank loan was fully repaid by Sigma through refinancing with BNI.

i In August 2013, the bank loan was rescheduled up to February 2015.

j In connection with the agreement with NEC Corporation Consortium and TE SubCom , the Company entered into a loan agreement with JBIC, for the procurement of goods and services from NEC Corporation Consortium and TE SubCom for the Southeast Asia Japan Cable System Project. The facilities consist of facility A and facility B amounting to US$ 18 . 8 million and US$ 12 . 5 million, respectively.

20. NON-CONTROLLING INTERESTS

	2012	2013
Non-controlling interests in net assets of subsidiaries:
Telkomsel	15,218	16,7 52
Metra	65	8 9
GSD	31	58
Patrakom	-	2
Total	15,314	16 ,901

	201 2		2013
Non-controlling interests in total comprehensive income of subsidiaries:
Telkomsel	5,532		6, 211
Metra	14		2 2
Patrakom	-		0
GSD	(1	)	(6	)
Total	5,545		6, 227

F-70

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

20 . NON-CONTROLLING INTERESTS (continued)

Material partly-owned subsidiary

As of December 31, 2012 and 2013, a non-controlling interest holds 35% ownership interests of Telkomsel (Note 1d) which is considered material to the Company.

The summarized financial information of Telkomsel is provided below. This information is based on amounts before inter-company eliminations.

Summarized statement s of comprehensive income

Revenue	2012 — 54,531		2013 — 60, 03 1
Operating expense s	(33,519	)	(36, 7 61	)
Other expenses	( 22	)	(180	)
Profit before tax	20,990		23,090
Income tax	(5,264	)	(5,74 8	)
Profit for the year from continuing operations	15,726		17,342
Total comprehensive income	15,812		17,74 6
Attributable to non-controlling interest	5,5 32		6,211
Dividend paid to non-controlling interest	3, 591		4, 675

Summarized statements of financial position

Current assets	2012 — 13,582		2013 — 1 6 , 603
Non-current assets	49,262		5 6 , 642
Current liabilities	(13,039	)	(1 6 , 406	)
Non-current liabilities	(6,324	)	(8, 971	)
Total equity	43,481		47,86 8
Attributable to:
Equity holders of parent	28,263		31,11 6
Non-controlling interest	15,21 8		16,75 2

Summarized statements of cash flows

Operating	2012 — 26,229		2013 — 29,602
Investing	(13,527	)	(14,444	)
Financing	(12,191	)	(14,789	)
Net increase in cash and cash equivalent s	511		369

F-71

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

2 1 . CAPITAL STOCK

Description	201 2 — Number of shares **	Percentage of ownership	Total paid-up capital
Series A Dwiwarna share
Government	1	-	0
Series B shares
Government	51,602,353,559	53.90	2,580
The Bank of New York Mellon Corporation*	10,988,441,080	11.48	549
Directors (Note 1b):
Indra Utoyo	27,540	-	0
Honesti Basyir	540	-	0
Priyantono Rudito	540	-	0
Sukardi Silalahi	540	-	0
Public (individually less than 5%)	33,154,520,300	34.62	1,658
Total	95,745,344,100	100.00	4,787
Treasury stock (Note 23)	5,054,652,300	-	253
Total	100,799,996,400	100.00	5,040

Description	201 3 — Number of shares	Percentage of ownership	Total paid-up capital
Series A Dwiwarna share
Government	1	-	0
Series B shares
Government	51,602,353,559	53.14	2,580
The Bank of New York Mellon Corporation*	10,031,129,780	10.33	502
Directors (Note 1b):
Indra Utoyo	27,540	-	0
Honesti Basyir	540	-	0
Priyantono Rudito	540	-	0
Sukardi Silalahi	540	-	0
Public (individually less than 5%)	35,467,341,100	36.53	1,773
Total	97,100,853,600	100.00	4,855
Treasury stock (Note 23)	3,699,142,800	-	185
Total	100,799,996,400	100.00	5,040

The Bank of New York Mellon Corporation serves as the d epositary of the registered ADS holders for the Company’s ADSs.

** After stock split (Note 1c).

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

Pursuant to the AGM of Stockholders of the Company as stated in notarial deed No. 21 dated May 19, 2011 of A. Partomuan Pohan, S.H., LLM., the Company’s stockholders agreed on the distribution of cash dividends for 2010 amounting to Rp6,345 billion or Rp64.52 per share (of which Rp526 billion or Rp5.35 per share was distributed as an interim cash dividend in December 2010).

Pursuant to the AGM of Stockholders of the Company as stated in notarial deed No. 14 dated May 11, 2012 of Ashoya Ratam, S.H., MKn., the Company’s stockholders agreed on the distribution of cash dividend and special cash dividend for 2011 amounting to Rp6,031 billion and Rp1,096 billion, respectively. On June 22, 2012 the Company paid the above-mentioned cash dividend and special cash dividend totaling Rp7,127 billion.

F-72

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

2 1 . CAPITAL STOCK (continued)

Pursuant to the AGM of Stockholders of the Company as stated in notarial deed No.38 dated April 19, 2013 of Ashoya Ratam, S.H.,Mkn. the Company’s stockholders agreed on the distribution of cash dividend and special cash dividend for 2012 amounting to Rp7,068 billion and Rp1,286 billion, respectively. On June 18, 2013, the Company paid the cash dividend and special cash dividend totalling Rp8,354 billion.

2 2 . ADDITIONAL PAID-IN CAPITAL

Proceeds from sale of 933,333,000 shares in excess of par value through IPO in 1995	2012 — 1,446		2013 — 1,446
Excess of value over cost of selling 211,290,500 shares under the treasury stock plan phase I (Note 23)	-		544
Excess of value over cost of treasury stock for employee stock ownership program (Note 23)	-		228
Capitalization into 746,666,640 Series B shares in 1999	(373	)	(373	)
Net	1,073		1 , 84 5

2 3 . TREASURY STOCK

Phase	Basis	Period	Maximum Purchase — Number of Shares	Amount
I	EGM	December 21, 2005 - June 20, 2007	1,007,999,964	Rp5,250
II	AGM	June 29, 2007 - December, 28, 2008	215,000,000	Rp2,000
III	AGM	June 20, 2008 - December 20, 2009	339,443,313	Rp3,000
-	BAPEPAM - LK	October 13, 2008 - January 12, 2009	4,031,999,856	Rp3,000
IV	AGM	May 19, 2011 - November 20, 2012	645,161,290	Rp5,000

Movements in treasury stock as a result of the repurchase of shares are as follows:

	2012 — Number of shares *	%	Rp	2013 — Number of shares		%		Rp
Beginning balance	3,868,299,800	3.84	6,323	5,054,652,300		5.01		8,067
Number of shares acquired	1,186,352,500	1.17	1,744	-		-		-
Transfer to employees stock ownership program	-	-	-	(299,057,000	)	(0.29	)	(433	)
Proceed s from sale of treasury stock	-	-	-	(1,056,452,500	)	(1.05	)	(1,829	)
Ending balance	5,054,652,300	5.01	8,067	3,699,142,800		3.67		5,805

*After stock split (Note 1c)

Pursuant to the AGM of Stockholders of the Company held on June 11, 2010, the stockholders approved the change in the Company's plan for treasury stock phase I, II and III to become (i) for reissuance inside or outside stock exchange, (ii) for retirement of the stock by deducting from equity, (iii) for equity stock conversion and (iv) for funding purposes.

In the AGM on April 19, 2013, the Company's stockholders approved the change to the plan for the treasury stock phase III, which was decided to be used for the implementation of the Employee Stock Ownership Program (“ESOP”) for the year 2013.

F-73

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

2 3 . TREASURY STOCK (continued)

On May 31, 2013, the Company offered to all its eligible employees and those of its subsidiaries (collectively referred to as the “participants”), the right to purchase a fixed number of its shares at a certain price. The shares have become an entitlement of the employees on the transaction dates and are no longer conditional on the satisfaction of any vesting conditions. Shares which are held by employees through the ESOP have a lock-up period that varies from 0 up to 12 months, depending on the position of the employee.

In the lock-up period, participants may not transfer shares or have shares transactions either through or outside the stock exchange.

Price per share offered was Rp10,714 and each participant received allowance (discount) of Rp5,575 per share. At the closing of this program, the Company had transferred a part of the treasury stock phase III to employees totaling 59,811,400 shares (equivalent to 299,057,000 shares after the stock split) with fair value amounting to Rp661 billion. The excess amounting to Rp228 billion in value of treasury stock transferred over their acquisition cost was recorded as additional paid-in capital (Note 22).

The difference amoun ting to Rp353 billion between the fair value of the treasury stock and amount paid by the participants is recorded as part of personnel expenses in the 2013 consolidated statement of comprehensive income.

On July 30, 2013, the Company resold 211,290,500 shares (equal to 1,056,452,500 shares after stock split) of treasury stock phase I with fair value amounting to Rp2,409 billion. The excess amounting to Rp544 billion in value of the treasury stock sold over their acquisition cost was recorded as additional paid-in capital (net of related cost to sell the shares) (Note 22).

2 4 . OTHER RESERVES

Other reserves consist of the translation reserve and fair value reserve. The translation reserve consists of all foreign currency differences arising from the translation of the financial statements of foreign operations (including equity-accounted investees) amounting to Rp 40 billion and Rp160 billion as of December 31, 201 2 and 201 3 , respectively.The amount reclassified to profit or loss for the year ended December 31, 2013 amounted to Rp9 billion.

The fair value reserve consists of the cumulative net change in the fair value of available-for-sale financial assets until the investments are derecognized or impaired amounting to Rp 42 billion and Rp38 billion as of December 31, 201 2 and 2013, respectively.The amounts reclassified to profit or loss for the years ended December 31, 2011, 2012 and 2013 amounted to Rp7 billion, Rp nil and Rp4 billion, respectively.

2 5 . BASIC AND DILUTED EARNINGS PER SHARE

Basic earnings per share is computed by dividing profit for the year attributable to owners of the parent company amounting to Rp 1 1,043 billion, Rp 12 ,621 billion and Rp 14, 046 billion by the weighted average number of shares outstanding during the year totaling 97 , 959 , 362 , 720 shares, 96,011,315,505 shares and 96,358,660,797 shares (after stock split) for the years ended December 31, 201 1 , 201 2 and 201 3 , respectively.

Basic earnings per share amounted to Rp 11 2.73, Rp13 1.45 and Rp14 5 . 77 for the years ended December 31, 201 1 , 201 2 and201 3 , respectively. The Company does not have potentially dilutive financial instruments as of December 31, 201 1 , 201 2 and 201 3 .

The calculation of basic earning per share in 2011 and 2012 has been retrospectively adjusted in connection with the Company’s stock split and initial application of IAS 19, Employee Benefits ( R evised 2011) (Note s 1c and 2aa ) .

F-74

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

26. REVENUES

	2011	201 2	2013
Telephone revenues
Cellular
Usage charges	27,189	29,477	30, 722
Monthly subscription charges	569	696	730
Features	838	558	686
Connection fee charges	2	-	-
	28,598	30,731	32,1 38
Fixed lines
Usage charges	8,213	7,323	6,453
Monthly subscription charges	3,004	2,805	2,682
Call center	199	228	324
Installation charges	135	112	12
Others	68	194	230
	11,619	10,662	9,701
Total telephone revenues	40,217	41,393	41,839
Interconnection revenues
Domestic interconnection and transit	2,071	2,618	2,971
International interconnection	1,438	1,655	1,872
Total i nterconnection r evenues	3,509	4,273	4,843
Data, i nternet and i nformation t echnology service revenues
Internet, data communication and information technology services	10,548	14,857	18,373
Short Messaging Services (“SMS”)	13,093	12,631	13,134
Voice over Internet Protocol (“VoIP”)	245	81	119
E-business	38	55	83
Total data, internet and information technology s ervice r evenues	23,924	27,624	31,709
Network revenues
Leased lines	911	824	861
Satellite transponder lease	390	384	392
Total n etwork r evenues	1,301	1,208	1,253
Other telecommunication s service revenues
CPE and terminal	739	1,046	1,197
Leases	219	401	661
USO compensation	415	237	508
Directory assistance	349	295	308
Pay TV	259	405	274
Others	306	245	375
Total o ther t elecommunications s ervice r evenues	2,287	2,629	3,323
T otal revenues	71,238	77,127	8 2 , 967

Refer to Note 3 5 for details of related party transactions.

F-75

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

2 7 . SERVICE CONCESSION ARRANGEMENT

The Ministry of Communication and Information (“MoCI”) issued Regulation No. 15/PER/M.KOMINFO/9/2005 dated September 30, 2005, which sets forth the basic policies underlying the USO program and requires telecommunications operators in Indonesia to contribute 0.75% of their gross revenues (with due consideration for bad debts and interconnection charges) for USO development. Based on the Government’s Decree No. 7/2009 dated January 16, 2009, and Decree No. 05/PER/M.KOMINFO/2/2007 dated February 28, 2007 the contribution was changed to 1.25% of gross revenues, net of bad debts and/or interconnection charges and/or connection charges. Subsequently, in December 2012, Decree No. 05/PER/M.KOMINFO/2/2007 was replaced by Decree No. 45 year 2012 of the MoCI which was effective from January 22, 2013. The Decree stipulates, among other things, the exclusion of certain revenues that are not considered as part of gross revenues as a basis to calculate the USO charged, and changed the payment period which was previously on a quarterly basis to become quarterly or semi-annually.

Based on MoCI Decree No. 32/PER/M.KOMINFO/10/2008 dated October 10, 2008 (as amended by Decree No. 03/PER/M.KOMINFO/2/2010 dated February 1, 2010) which replaced MoCI Decree No. 11/PER/M.KOMINFO/04/2007 dated April 13, 2007 and MoCI Decree No. 38/PER/M.KOMINFO/9/2007 dated September 20, 2007, it is stipulated that, among others, in providing telecommunication access and services in rural areas (USO Program), the provider is determined through a selection process by Balai Telekomunikasi dan Informatika Pedesaan (“BTIP”) which was established based on MoCI Decree No. 35/PER/M.KOMINFO/11/2006 dated November 30, 2006. Subsequently, based on Decree No. 18/PER/M.KOMINFO/11/2010 dated November 19, 2010 of MoCI, BTIP was changed to Balai Penyedia dan Pengelola Pembiayaan Telekomunikasi dan Informatika (“BPPPTI”).

a. Company

On March 12, 2010, the Company was selected in a tender by the Government through BTIP to provide internet access service centers for USO sub-districts for a total amount of Rp322 billion, covering Nanggroe Aceh Darussalam, North Sumatra, North Sulawesi, Gorontalo, Central Sulawesi, West Sulawesi, South Sulawesi and South East Sulawesi.

On December 23, 2010, the Company was selected in a tender by the Government through BPPPTI to provide mobile internet access service centers for USO sub-districts for a total amount of Rp528 billion, covering Jambi, Riau, Kepulauan Riau, North Sulawesi, Central Sulawesi, Gorontalo, West Sulawesi, South East Sulawesi, Central Kalimantan, South Sulawesi, Papua and West Irian Jaya.

b. Telkomsel

On January 16 and 23, 2009, Telkomsel was selected in a tender by the Government through BTIP to provide telecommunication access and services in rural areas (USO Program) for a total amount of Rp1.66 trillion, covering all Indonesian territories except Sulawesi, Maluku and Papua. Telkomsel will obtain local fixed-line licenses and the right to use radio frequency in the 2390 MHz - 2400 MHz bandwidth.

Subsequently, in 2010 and 2011, the agreements with BTIP were amended, which amendments cover, among other things, changing the price to Rp1.76 trillion and changing the term of payment from quarterly to monthly or quarterly.

In January 2010, the MoCI granted Telkomsel operating license to provide local fixed-line services under the USO program.

F-76

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

2 7 . SERVICE CONCESSION ARRANGEMENT (continued)

b. Telkomsel (continued)

On December 27, 2011, Telkomsel (on behalf of Konsorsium Telkomsel, a consortium which was established with Dayamitra on December 9, 2011) was selected by BPPPTI as a provider of the USO Program in the border areas for all packages (package 1 to package 13) with a total price of Rp830 billion. On such date, Telkomsel was also selected by BPPPTI as a provider of the USO Program (upgrading) “ Desa Pinter ” or “ Desa Punya Internet ” for 1, 2 and 3 packages with a total price of Rp261 billion.

For the years ended December 31, 2011, 201 2 and 2013, the Company and Telkomsel recognized the following amounts:

	201 1		201 2	2013
Revenues
Construction	112		245	67
Operation of telecommunication service centre	255		353	508
Profits (losses)
Construction	(16	)	6	11
Operation of telecommunication service centre	105		83	150

As of December 31, 201 3 , the Company’s and Telkomsel’s trade receivables from the USO programs which are measured at amortized cost using the effective interest rate method amount to Rp 654 billion (Notes 7 and 1 3 ).

28 . PERSONNEL EXPENSES

	2011 (Restated)	2012 (Restated)	2013
Salaries and related benefits	3,001	3,257	3,55 3
Vacation pay, incentives and other benefits	2,814	3,400	3, 252
Employees’ income tax	1,043	1,022	1,160
P ension benefit cost (Note 3 3 )	438	831	988
P ost-employment health care benefit cost (Note 33 )	158	246	382
Housing	197	200	220
Insurance	70	83	92
O ther post-employment benefit cost (Note 3 3 )	46	42	41
LSA expense (Note 34 )	96	121	19
Other employee benefit s cost (Note 33)	2 4	35	15
Early retirement program (Note 1 6 )	517	699	-
Others	2 0	24	107
Total	8,424	9,960	9,82 9

Refer to Note 3 5 for details of related party transactions.

F-77

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

29. OPERATIONS, MAINTENANCE AND TELECOMMUNICATION SERVICE EXPENSES

	201 1	201 2	2013
Operations and maintenance	9,184	9,012	10, 667
Radio frequency usage charges (Notes 3 8c.i and 38c.ii )	2,846	3,002	3,098
Concession fees and USO c harges	1,235	1,445	1,59 5
Electricity, gas and water	836	879	1,063
Cost of phone, set top box es , SIM and RUIM cards	967	687	752
Cost of IT services	144	222	677
Leased lines and CPE	406	407	4 40
Vehicles rental and supporting facilities	291	293	4 3 9
Insurance	431	671	374
Project management	46	102	13 8
Travelling expenses	54	57	53
Others	13	19	3 6
Total	16,453	16,79 6	19,332

Refer to Note 3 5 for details of related party transactions.

30. GENERAL AND ADMINISTRATIVE EXPENSES

	201 1	201 2	2013
Provision for impairment of receivables (Note 7d)	883	915	1,5 89
General expenses	326	527	675
Training, education and recruitment	229	259	4 12
Travelling	256	259	341
Collection expenses	327	341	340
Professional fees	235	187	272
Meetings	86	105	138
Security and screening	97	62	93
Social contribution	290	129	85
Stationery and printing	53	55	7 3
Others	153	197	1 37
Total	2,935	3 , 036	4,155

Refer to Note 3 5 for details of related party transactions.

3 1 . INTERCONNECTION EXPENSES

	201 1	201 2	2013
Domestic interconnection and transit	2,414	3,464	3,720
International interconnection	1,141	1,203	1,207
Total	3,555	4,667	4,92 7

Refer to Note 3 5 for details of related party transactions.

F-78

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

3 2 . TAXATION

a. Prepaid income taxes

Corporate income taxes - s ubsidiaries	2012 — 52		2013 — 96
Current portion	(52	)	(58	)
Non-current portion (Note 13)	-		38

b. Prepaid other taxes

	2012		2013
The Company:
VAT	-		142
S ubsidiaries:
Import duties(Note 43)	10		10
VAT	735		751
Article 23 - Withholding tax on services delivery	11		35
Total	756		938
Current portion	(756	)	(477	)
Non-current portion (Note 13)	-		461

c. Current income tax liabilities

	2012	2013
The Company:
Article 25 - Installment of corporate income tax	30	53
Article 29 - Corporate income tax	198	165
S ubsidiaries:
Article 25 - Installment of corporate income tax	378	440
Article 29 - Corporate income tax	674	284
Total	1,280	942

d. Other tax liabilities

	2012	2013
The Company:
Article 4 (2) - Final tax	6	11
Article 21 - Individual income tax	21	34
Article 22 - Withholding tax on goods delivery and import	-	5
Article 23 - Withholding tax on services	10	12
Article 26 - Withholding tax on non-resident income	3	1
VAT	374	441
Sub-total	414	504

F-79

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

3 2 . TAXATION (continued)

d. Other tax liabilities(continued)

	2012	2013
S ubsidiaries:
Article 4 (2) - Final tax	37	48
Article 21 - Individual income tax	60	82
Article 23 - Withholding tax on services	32	34
Article 26 - Withholding tax on non-resident income	18	16
VAT	3	72
Sub-total	150	252
Total	564	756

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

	2011 (Restated)		2012 (Restated)		2013
Current
The Company	7 77		8 78		909
Subsidiaries	4,896		5,750		6,086
Sub-total	5,673		6,628		6,995
Deferred
The Company	43		(461	)	(113	)
Subsidiaries	(279	)	(281	)	18
Net	(236	)	(742	)	(9 5	)
Total	5,437		5,886		6, 900

f. Reconciliation of income tax expense

The reconciliation between the income tax expense calculated by applying the applicable tax rate of 20% to the profit before income tax less income subject to final tax, and the net income tax expense as shown in the consolidated statements of comprehensive income is as follows:

Profit before income tax	2011 (Restated) — 20, 982		2012 (Restated) — 24,027		2013 — 27,030
Less income subject to final tax	(462	)	(913	)	(1,7 80	)
	20,520		23,114		25,2 50
Tax calculated at the Company’s applicable statutory tax rate of 20%	4, 104		4, 6 23		5,050
Difference in applicable statutory tax rate for subsidiaries	906		1,050		1,213
Non-deductible expenses	32 9		392		567
Final income tax expense	63		52		93
Realization on sale of long - term investment	-		-		(100	)
Others	35		(231	)	77
Net income tax expense	5,437		5,886		6,900

F-80

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

32. TAXATION (continued)

f. Reconciliation of income tax expense (continued)

The computations of the income tax expense for the years ended December 31, 201 1 , 201 2 and 201 3 are as follows:

Estimated taxable income of the Company	2011 (Restated) — 3,568		2012 (Restated) — 4,20 9		2013 — 4,241
Corporate income tax:
The Company	714		842		848
Subsidiaries	4,896		5,750		6,086
Final tax expense - t he Company	63		36		61
Total income tax expense - current	5,673		6,628		6,995
Income tax (benefit) expense - deferred - effect of temporary differences at enacted maximum tax rates
The Company
Accrued early retirement benefits	-		(140	)	140
Valuation of l ong-term investment	-		-		70
Provision for impairment of receivable s and trade receivables written off	(47	)	58		(17 0	)
Finance leases	(6	)	31		(73	)
Depreciation and gain on sale of property and equipment	36		(348	)	(38	)
Net periodic post-employment benefits costs	20		(94	)	(18	)
Deferred installation fee	21		31		(16	)
Accrued expenses and provisions for obsolescence	(4	)	8		(5	)
Amortization of intangible assets, land rights and others	(4	)	(7	)	(3	)
Payments of deferred consideration for business combinations	27		-		-
The Company - net	43		(461	)	(113	)
Telkomsel
Charges from leasing transactions	-		23		98
Amortization of license	-		(5	)	19
Accounts receivable - Government	(17	)	(14	)	6
Depreciation of property and equipment	(238	)	(156	)	(95	)
Provision for employee benefits	(38	)	(49	)	(44	)
Provision for impairment of receivables and trade receivables written off	(14	)	(53	)	(4	)
Telkomsel - net	(307	)	(254	)	(20	)
Subsidiaries - others - net	2 8		(27	)	3 8
Net income tax benefit - deferred	(236	)	(742	)	(95	)
Income tax expense - net	5, 437		5,886		6,900

F-81

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

3 2 . TAXATION (continued)

f. Reconciliation of income tax expense (continued)

Tax Law No. 36/2008, which is further regulated in Government Regulation No. 77/2013 stipulates a reduction of 5% from the top rate applicable to qualifying listed companies, for those whose shares of stock are traded in the IDX which meet the prescribed criteria that the public owns 40% or more of the total fully paid and traded shares, and such shares are owned by at least 300 parties, with each party owning less than 5% of the total paid-up shares. These requirements must be met by a company for a period of 183 days in one tax year . The Company has met all of the required criteria; therefore, for purposes of calculating income tax expense and liabilities for the financial reporting periods ended December 31, 20 11 , 201 2 and 201 3 , the Company has reduced the applicable tax rate by 5%.

The Company applied a tax rate of 20% for the fiscal years 201 1, 201 2 and 2013 . The subsidiaries applied a tax rate of 25% for the fiscal years 201 1, 201 2 and 2013 .

The Company will submit the above corporate income tax computation in its income tax returns (“ Surat Pemberitahuan Tahunan ” or “Annual SPT”) for the fiscal year 201 3 that will be reported to the tax office based on prevailing regulations. The amount of corporate income tax for the year ended December 31, 201 2 agreed with what was reported in the Annual SPT.

g. Tax assessments

(i) The Company

The Directorate General of Tax (“DGT”) assessed the Company for Value Added Tax , withholding income taxes and corporate income tax for fiscal year 2011. The t ax audit for the fiscal year 2008 has been completed with the issuance of Tax Assessment Letter (SKP) No. SPHP-2/WPJ.19/KP.03/2014 regarding notice of workup with no correction for Income Tax Art icle 21/22/23/26 and 4 (2).

In November 2013, the Company received SKPKBs No. 00056/207/07/093/13 to No. 00065/207/07/093/13 dated November 15, 2013, for the underpayment of Value Added Tax (VAT) for the periods January - September and November 2007 of Rp142 billion. In January 2014, the Company filed an objection to the Tax Authorities regarding the underpayment of VAT. As of the issuance date of the consolidated financial statements, the Tax Authorities have not yet issued their decision on the objection.

(ii) Telkomsel

On February 25, 2009, the Tax Authorities filed a judicial review request to the Indonesian Supreme Court (“SC”) for the Tax Court’s acceptance of Telkomsel’s appeal on its 2002 with h olding tax amounting to Rp115 billion. On April 3, 2009, Telkomsel filed a contra-appeal to the SC. In November 2012 , Telkomsel received a favorable verdict from the SC which accepted Telkomsel’s contra-appeal.

On April 21, 2010, the Tax Authorities filed a judicial review request to the SC for the Tax Court’s acceptance of Telkomsel’s request to cancel the Tax Collection Letter (STP) for the underpayment of December 2008 Income Tax Article 25 amounting to Rp429 billion (including a penalty of Rp8 billion). In May 2010, Telkomsel filed a contra-appeal to the SC. As of the date of approval and authorization for issuance of these consolidated financial statements, the judicial review is still in process.

F-82

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

3 2 . TAXATION (continued)

g. Tax assessments (continued)

(ii) Telkomsel (continued)

On August 10, 2010 the Tax Authorities filed a judicial review request to the SC for the Tax Court’s acceptance of Telkomsel’s appeal on its 2004 and 2005 VAT totaling Rp215 billion. In September 2010, Telkomsel filed a contra-appeal to the SC. As of the date of approval and authorization for issuance of these consolidated financial statements, the judicial review is still in process.

In May and June 2012, Telkomsel received the refund of penalty of 2010 Income Tax Article 25 underpayment amounting to Rp15.7 billion based on the Tax Court’s verdict. On July 17, 2012, the Tax Authorities filed a judicial review request to the SC on the Tax Court’s verdict. On September 14, 2012, Telkomsel filed a contra-appeal to the SC. As of the date of approval and authorization for issuance of these consolidated financial statements, the judicial review is still in process.

In August 2012, the Tax Authorities accepted Telkomsel’s objection and refunded the whole claim for 2008 underpayment of VAT amounting to Rp232 billion (including penalty of Rp81.9 billion).

On March 12, 2012, Telkomsel received assessment letters as a result of a tax audit for the fiscal year 2010 by the Tax Authorities. Based on the letters, Telkomsel overpaid corporate income tax and underpaid VAT amounting to Rp597.4 billion and Rp302.7 billion (including penalty of Rp73.3 billion) , respectively . Telkomsel accepted the assessment on the overpayment of corporate income tax and Rp12.1 billion of the underpayment of the VAT (including penalty of Rp6.3 billion). The accepted portion was charged to the 2012 consolidated statement of comprehensive income. On April 5, 2012, Telkomsel received a refund for the overpayment of corporate income tax for fiscal year 2010 amounting to Rp294.7 billion, net of the underpayment of VAT. On May 24, 2012, Telkomsel file d an objection to the Tax Authorities for the underpayment of VAT of Rp290.6 billion (including penalty of Rp67 billion) and recorded it as a claim for tax refund. On May 1, 2013, the T ax A uthorit ies rejected Telkomsel’s objection. Subsequently, on Ju ly 29, 2013, Telkomsel filed an appeal to the Tax Court . As of the date of approval and authorization for the issuance of these consolidated financial statements, the appeal is still in process.

In December 2013, the Tax Court accepted Telkomsel’s appeal on 2006 VAT and withholding taxes totaling Rp116 billion. The amount which was previously presented as part of prepaid other taxes is reclassified to advances and other non-current assets.

F-83

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

3 2 . TAXATION (continued)

h. Deferred tax assets and liabilities

The details of the Group's deferred tax assets and liabilities are as follows:

	January 1, 2012 (Restated)		(Charged) credited to the consolidated statements of comprehensive income		Recognized in other comprehensive incom e		Realized to equity		December 31, 2012 (Restated)
The Company
Deferred tax assets:
Net periodic pension and other post-employment benefit cost	623		3		225		-		851
Provision for impairment of receivables	334		(58	)	-		-		276
Provision for employee benefits	82		91		-		-		173
Provision for early retirement expense	-		140		-		-		140
Deferred connection fee	85		(31	)	-		-		54
Accrued expenses and provision for inventory obsolescence	30		(8	)	-		-		22
Total deferred tax assets	1,154		137		225		-		1,516
Deferred tax liabilities:
Difference between accounting and tax property and equipment net book value	(1,929	)	348		-		-		(1,581	)
Finance leases	(33	)	(31	)	-		-		(64	)
Land rights, intangible assets and others	(21	)	7		-		-		(14	)
Total deferred tax liabilities	(1,983	)	324		-		-		(1,659	)
Net deferred tax liabilities	(829	)	461		225		-		(143	)
Telkomsel
Deferred tax assets:
Provision for employee benefits	277		49		(29	)	-		297
Provision for impairment of receivables	64		53		-		-		117
Recognition of interest under USO arrangements	(8	)	14		-		-		6
Total deferred tax assets	333		116		(29	)	-		420
Deferred tax liabilities:
Difference between accounting and tax property and equipment net book value	(2,519	)	156		-		-		(2,363	)
Finance leases	-		(23	)	-		-		(23	)
License amortization	(48	)	5		-		-		(43	)
Total deferred tax liabilities	(2,567	)	138		-		-		(2,429	)
Net deferred tax liabilities of Telkomsel	(2,234	)	254		(29	)	-		(2,009	)
Net deferred tax liabilities of the other subsidiaries	(96	)	(4	)	0		-		(100	)
Total deferred tax liabilities	( 3,159	)	711		196		-		(2,252	)
Net deferred tax assets of other subsidiaries	75		31		1		( 5	)	102

F-84

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

3 2 . TAXATION (continued)

h. Deferred tax assets and liabilities (continued)

	January 1, 2013 (Restated)		(Charged) credited to the consolidated statement of comprehensive income		Recognized in other comprehensive income		Acquisition / di vestment of subsidiar y		December 31, 201 3
The Company
Deferred tax assets:
Provision for impairment of receivables	276		170		-		-		446
Net periodic pension and other post-employment benefit cost	851		48		(558	)	-		341
Provision for employee benefits	173		(30	)	-		-		143
Deferred connection fee	54		16		-		-		70
Accrued expenses and provision for inventory obsolescence	22		5		-		-		27
Finance leases	( 64	)	73		-		-		9
Provision for early retirement expense	140		(140	)	-		-		-
Total deferred tax assets	1 ,452		142		(558	)	-		1,0 36
Deferred tax liabilities:
Difference between accounting and tax property and equipment net book value	( 1,581	)	38		-		-		(1.543	)
Valuation of Long-term Investment	-		(70	)	-		-		(70	)
Land rights, intangible assets and others	(14	)	3		-		-		(11	)
Total deferred tax liabilities	( 1,595	)	(29	)	-		-		(1,624	)
Net deferred tax liabilities	(143	)	113		(558	)	-		(588	)
Telkomsel
Deferred tax assets:
Provision for employee benefits	297		44		(134	)	-		20 7
Provision for impairment of receivables	117		4		-		-		121
Recognition of interest under USO arrangements	6		(6	)	-		-		-
Total deferred tax assets	420		42		( 134	)	-		3 28
Deferred tax liabilities:
Difference between accounting and tax property and equipment net book value	(2,363	)	95		-		-		( 2,268	)
Finance leases	(23	)	(98	)	-		-		( 121	)
License amortization	(43	)	(19	)	-		-		( 62	)
Total deferred tax liabilities	(2,429	)	(22	)	-				( 2,451	)
Net deferred tax liabilities of Telkomsel	(2,009	)	20		( 134	)	-		( 2,123	)
Net deferred tax liabilities of the other subsidiaries	(100	)	( 8 8	)	(4	)	(5	)	(19 7	)
Total deferred tax liabilities	(2, 252	)	4 5		(696	)	(5	)	(2, 908	)
Net deferred tax assets of other subsidiaries	102		5 0		(5	)	(80	)	6 7

F-85

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

3 2 . TAXATION (continued)

h. Deferred tax assets and liabilities (continued)

As of December 31, 201 2 and 201 3 , the aggregate amounts of temporary differences associated with investments in subsidiaries and associated companies, for which deferred tax liabilities have not been recognized were Rp20,317 billion and Rp 2 4 , 252 billion, respectively.

Realization of the deferred tax assets is dependent upon the Group’s capability in generating future profitable operations. Although realization is not assured, the Group believes that it is probable that these deferred tax assets will be realized through reduction of future taxable income when temporary differences reverse. The amount of deferred tax assets is considered realizable; however, it c an be reduced if actual future taxable income is lower than estimates.

i. Administration

From 2008 to 201 2 , the Company has been consecutively entitled to income tax rate reduction of 5% for meeting the requirements in accordance with the Government Regulation No. 81/2007 in conjunction with the Ministry of Finance Regulation No. 238/PMK.03/2008. On the basis of historical data, for the year 201 3 , the Company calculates the deferred tax using the tax rate of 20%.

The taxation laws of Indonesia require that the Company and its local subsidiaries submit individual tax returns on the basis of self-assessment. Under prevailing regulations, the DGT may assess or amend taxes within a certain period. For fiscal years 2007 and earlier, this period is within ten years from the time the tax became due, but not later than 2013, while for fiscal years 2008 and onwards, the period is within five years from the time the tax bec a me due.

The Ministr y of Finance of the Republic of Indonesia has issued Regulation No. 85/PMK.03/2012 dated June 6, 2012 concerning the appointment of State-Owned Enterprises ("SOEs") to withhold, deposit and report VAT and Sales Tax on Luxury Goods ("PPnBM") according to the procedures outlined in the Regulation which is effective from July 1, 2012. The Ministr y of Finance of the Republic Indonesia also has issued Regulation No. 224/PMK.011/2012 dated December 26, 2012 concerning the appointment of SOEs to withhold income tax article 22 which is effective from February 23, 2013. The Company has withheld, deposited and reported the VAT , PPnBM and income tax article 22 in accordance with the Regulation.

No tax audit has been conducted for fiscal years 2003, 2005, 2006, 2007, 2009 and 2010 on the Company. Tax audits have been completed for all other fiscal years, except for fiscal year 2011.

The Company received a certificate of tax audit exemption from the DGT for fiscal years 2007, 2008, 2009, 2010 and 2012 which is valid unless the Company files for corporate income tax overpayment, in which case a tax audit will be performed.

F-86

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

3 3 . PENSION AND OTHER POST-EMPLOYMENT BENEFITS

The detail of pension and other post - employment benefit liabilities is as follows:

	Notes	2012 (Restated)	2013
Prepaid pension benefit cost
The Company	33a.i.a	-	949
Pension benefit and other post-employment benefit obligations
Pension
The Company
Funded	33a.i.a	1,027	-
Unfunded	33a.i.b	2,437	2,201
Telkomsel	33a.ii	806	460
Total pension		4,270	2,661
Post-employment health care benefit	33b	3,249	993
Other post-employment benefit	33c	508	450
Obligation under the Labor Law	33d	157	154
Total		8,184	4,258

The net benefit expense recognized in the consolidated statements of comprehensive income is as follows:

	Notes	2011 (Restated)	2012 (Restated)	2013
Pension
The Company	33a.i.a,33a.i.b	333	659	809
Telkomsel	33a.ii	105	172	178
Infomedia		0	0	1
Total pension	28	438	831	988
Post-employment health care benefit	28,33b	158	246	382
Other post-employment benefit	28,33c	46	42	41
Obligation under the Labor Law	28,33d	24	35	15
Total		66 6	1,154	1 ,426

The amounts recognized in OCI are as follows:

	Notes	2011 (Restated)		2012 (Restated)		2013
Defined benefit plan actuarial (gain) losses
Pension
The Company - net of asset ceiling limitation	3 3 a.i.a,3 3 a.i.b	892		1,100		(2,71 8	)
Telkomsel	3 3 a.ii	260		(103	)	(52 4	)
Post-employment health care benefit	3 3 b	1,028		1,742		(2,33 6	)
Other post-employment benefit	3 3 c	40		32		(72	)
Obligation under the Labor Law	3 3 d	21		(8	)	(50	)
Sub-total		2, 241		2,763		(5,70 0	)
Deferred tax effect at the applicable tax rates	3 2 h	( 302	)	( 197	)	70 1
Defined benefit plan actuarial (gain) losses, net of tax		1,939		2,566		(4,999	)

F-87

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

3 3 . PENSION AND OTHER POST-EMPLOYMENT BENEFITS (continued)

a. Pension benefit cost

i. The Company

a. Funded pension plan

The Company sponsors a defined benefit pension plan for employees with permanent status prior to July 1, 2002. The pension benefits are paid based on the participating employees’ latest basic salary at retirement and the number of years of their service. The plan is managed by Telkom Pension Fund (“Dana Pensiun Telkom” or “Dapen”). The participating employees contribute 18% (before March 2003: 8.4%) of their basic salaries to the pension fund. The Company’s contributions to the pension fund for the years ended December 31, 201 1 , 201 2 and 201 3 amounted to Rp 187 billion, Rp18 6 billion and Rp182 billion, respectively.

The following table presents the change in projected pension benefit obligations, change in pension plan assets, funded status of the pension plan and net amount recognized in the Company’s consolidated statements of financial position as of December 31 , 201 2 and 2013 , for its defined benefit pension plan:

	2012 (Restated)		2013
Changes in projected pension benefit o bligations
Projected pension benefit obligations at beginning of year	16,188		19,249
Charged to profit or loss
Service costs	372		450
Interest costs	1,151		1,183
Pension plan participants’ contributions	44		44
Actuarial (gains) losses recognized in OCI	2,123		(5,387	)
Expected pension benefits paid	(629	)	(656	)
Projected pension benefit obligations at end of year	1 9,249		1 4 , 883
Changes in pension benefit plan assets
Fair value of pension plan assets at beginning of year	16,597		18,222
Interest income	1,189		1,125
Return on plan assets (excluding amount included in net interest expense)	895		(2,039	)
Employer’s contributions	186		182
Pension plan participants’ contributions	44		44
Expected pension benefits paid	(629	)	(656	)
Administrative expenses paid	(60	)	(75	)
Fair value of pension plan assets at end of year	1 8,222		1 6 , 803
Funded status	(1,027	)	1,920
Unrecoverable surplus (effect of asset ceiling)	-		(971	)
Prepaid (provision for) pension benefit c ost	(1,027	)	949

F-88

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

3 3 . PENSION AND OTHER POST-EMPLOYMENT BENEFITS (continued)

a. Pension benefit cost (continued)

i. The Company (continued)

a. Funded pension plan (continued)

As of December 31, 2012 and 2013, plan assets consisted of:

	2012 — Quoted in active market	Unquoted	2013 — Quoted in active market	Unquoted
Cash and cash equivalent	2,367	-	1,149	-
Equity instruments
Finance	986	-	884	-
Consumer goods	5 77	-	634	-
Infrastructure, utilities and transportation	585	-	625	-
Basic industry and chemical	405	-	421	-
Miscellaneous industry	413	-	373	-
Trading, service and investment	306	-	288	-
Construction, property and real estate	257	-	226	-
Mining	318	-	159	-
Agriculture	128	-	82	-
Equity-based mutual fund	1,156	-	1,0 80	-
Fixed income instruments
Government bonds	6,335	582	6,354	495
Corporate bonds	-	3,136	-	3,516
Mutual funds	123	-	-	-
Non-pub l ic e quity:
Direct placement	-	119	-	121
Limited mutual funds participation unit for share-based securities	-	60	-	-
Property	-	119	-	106
Others	-	250	-	290
Total	13 , 956	4,266	12 , 275	4,528

Pension plan assets also include Series B shares issued by the Company with fair values totaling Rp2 23 billion and Rp 336 billion, representing 1. 23 % and 2 . 00 % of total plan assets as of December 31 , 201 2 and 201 3 , respectively, and bonds issued by the Company with fair value totaling Rp15 9 billion and Rp 151 billion representing 0. 87 % and 0 . 90 % of total assets as of December 31, 201 2 and 201 3 , respectively.

The expected return is determined based on market expectation for returns over the entire life of the obligation by considering the portfolio mix of the plan assets. The actual return on plan assets was Rp2 , 024 billion and ( Rp989 billion ) for the years ended December 31, 201 2 and 2013, respectively. Based on the Company’s policy issued on January 14, 2014 regarding Dapen’s Funding Policy, the Company will not contribute to Dapen when Dapen’s Funding Sufficiency Ratio (FSR) is above 105%. Therefore, the Company expects no contribution to th e plan in 201 4 .

F-89

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

3 3 . PENSION AND OTHER POST-EMPLOYMENT BENEFITS (continued)

a. Pension benefit cost (continued)

i. The Company (continued)

a. Funded pension plan (continued)

The movements of the prepaid pension benefit costs during the years ended December 31, 201 2 and 201 3 are as follows:

Prepaid pension benefit cost at beginning of year	2012 (Restated) — 409		2013 — (1,027	)
Net periodic pension benefit cost	(394	)	(583	)
Actuarial gains (losses) recognized via the OCI	(2,123	)	5,387
Asset ceiling recognized via the OCI	-		(971	)
Return on plan assets (excluding amount included in net interest expense)	895		(2,039	)
Employer’s contributions	186		182
Prepaid (provision for) pension benefit cost at end of year	(1,027	)	949

The components of net periodic pension benefit cost are as follows:

Service costs	2011 (Restated) — 307		2012 (Restated) — 372		2013 — 450
Plan administration cost	57		60		75
Net interest cost	(312	)	(38	)	5 8
Net periodic pension benefit cost	52		394		58 3
Amount charged to subsidiaries under contractual agreements	(2	)	(12	)	(21	)
Net periodic pension benefit cost - net	50		382		56 2

Amounts recognized in OCI are as follows:

Actuarial (gains) losses recognized during the year	2011 (Restated) — 3,391		2012 (Restated) — 2,123		2013 — (5,38 7 )
Asset ceiling limitation	(2,252	)	-		971
Return on plan assets (excluding amount included in net interest expense)	(491	)	(895	)	2,039
Net	648		1,228		( 2,377 )

The actuarial valuation for the defined benefit pension plan and the other post-employment benefits was performed based on the measurement date as of December 31, 2011, 201 2 and 2013 (Note s 33a.i.b and 33c), with reports dated March 7, 2012, February 2 8, 2013 and February 28, 2014 , respectively, by PT Towers Watson Purbajaga (“TWP”), an independent actuary in association with Towers Watson (“TW”) (formerly Watson Wyatt Worldwide). The principal actuarial assumptions used by the independent actuary as of December 31 , 2011, 201 2 and 2013 are as follows:

	201 1	201 2	2013
Discount rate	7.25%	6.25%	9,00 %
Rate of compensation increases	8 .00 %	8.00%	8 .00%
Indonesia n mortality table	1999	2011	2011

F-90

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

33 . PENSION AND OTHER POST-EMPLOYMENT BENEFITS (continued)

a. Pension benefit cost (continued)

i. The Company (continued)

b. Unfunded pension plan

The Company sponsors unfunded defined benefit pension plans and a defined contribution pension plan for its employees.

The defined contribution pension plan is provided to employees hired with permanent status on or after July 1, 2002. The plan is managed by Financial Institutions Pension Fund (“ Dana Pensiun Lembaga Keuangan ” or “DPLK”). The Company’s contribution to DPLK is determined based on a certain percentage of the participants’ salaries and amounted to Rp5 billion and Rp6 billion for the years ended December 31, 201 2 and 2013 , respectively.

The Company also provides additional unfunded defined benefits (known as “ Manfaat Pensiun Sekaligus ” (“MPS”)) to its employees with permanent status prior to June 1, 2002 and employees reaching retirement age, upon death or upon being disabled starting from February 1, 2009. The pension benefits formula is determined based on the period in which the employee obtained the permanent status (before or after April 20, 1992).

The Company also provides benefits to employees during a pre-retirement period in which they are inactive for 6 months prior to their normal retirement age of 56 years, known as pre-retirement benefits (“ Masa Persiapan Pensiun ” or “MPP”). During the pre-retirement period, the employees still receive benefits provided to active employees, which include, but are not limited to, regular salary, health care, annual leave, bonus and other benefits. Since 2012, the Company has issued a new requirement for MPP effective for employees retiring beginning April 1, 2012, whereby the employee is required to file a request for MPP and if the employee does not file the request, he or she is required to work until the retirement date .

The following table presents the changes in projected pension benefits obligation of MPS and MPP for the years ended December 31, 201 2 and 201 3 :

	2012 (Restated)		2013
Changes in projected pension benefit obligation
Unfunded projected pension benefit obligation at beginning of year	2,440		2,437
P eriodic pension benefit cost	277		247
Actuarial gains recognized in OCI	(128	)	(341	)
Benefits paid by employer	(152	)	(142	)
Unfunded projected pension benefit obligation at end of year	2,437		2,201

Amounts recognized in OCI amounted to Rp244 billion , (Rp128 billion) and ( Rp 341 billion) for the years ended December 31, 201 1, 201 2 and 2013 , respectively.

The components of periodic pension benefit cost are as follows:

	2011 (Restated)	2012 (Restated)	2013
Service costs	89	104	97
Net interest costs	194	173	150
Total	283	277	247

F-91

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

3 3 . PENSION AND OTHER POST-EMPLOYMENT BENEFITS (continued)

a. Pension benefit cost (continued)

ii. Telkomsel

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

Telkomsel's contributions to Jiwasraya amounted to Rp 42 billion and Rp nil for the years ended December 31 , 201 2 and 201 3 , respectively.

The following table presents the change in the projected pension benefits obligation, change in pension plan assets, funded status of the pension plan and net amount recognized in the consolidated statements of financial position for defined benefit pension plan:

	2012 (Restated)		2013
Changes in projected pension benefit obligations
Projected benefits obligation at beginning of year	1,237		1,472
Charged to profit or loss
Service costs	120		130
Net i nterest cost	83		88
Actuarial (gains) losses recognized in OCI	37		(789	)
Expected benefits paid	(5	)	(2	)
Projected pension benefit obligations at end of year	1 ,472		899
Changes in pension benefit plan assets
Fair value of plan assets at beginning of year	458		666
Interest income in profit or loss	31		40
Return on plan assets (excluding amount included in net interest expense) in OCI	140		(265	)
Employer’s contributions	42		0
Expected benefits paid	(5	)	(2	)
Fair value of plan assets at end of year	666		439
Funded status	(806	)	(460	)
Provision for pension benefit c ost	(806	)	(460	)

Movements of the pension benefit cost provisions during the years ended December 31, 201 2 and 201 3 :

Pension benefit cost provisions at beginning of year	2012 (Restated) — (779	)	2013 — (806	)
P eriodic pension benefit cost	(172	)	(178	)
Actuarial gains (losses) recognized via the OCI	(37	)	789
Return on plan assets (excluding amount included in net interest expense)	140		(265	)
Employer contributions	42		0
Pension benefit costs provisions at end of year	(806	)	(460	)

F-92

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

3 3 . PENSION AND OTHER POST-EMPLOYMENT BENEFITS (continued)

a. Pension benefit cost (continued)

ii. Telkomsel (continued)

The components of the periodic pension benefit cost are as follows:

	2011 (Restated)	2012 (Restated)	2013
Service costs	67	120	130
Net interest cost	3 8	52	48
Total	10 5	172	178

Amount s recognized in OCI are as follows:

Actuarial (gains) losses recognized during the year	2011 (Restated) — 452		2012 (Restated) — 37		2013 — (789	)
Return on plan assets (excluding amount i ncluded in net interest expense)	(192	)	(140	)	265
Net	260		(103	)	(524	)

The periodic pension cost for the pension plan was calculated based on actuar ial measurement date as of December 31, 2011, 201 2 and 201 3 , with reports dated February 24, 2012, February 1 2, 201 3 and February 20 , 201 4 , respectively, by TWP, an independent actuary in association with TW. The principal actuarial assumptions used by the independent actuary based on the measurement date as of December 31, 2011, 201 2 and 201 3 , are as follows:

	201 1	201 2	2013
Discount rate	6.75%	6.00%	9 .00%
Rate of compensation increases	8.00%	6.50%	6.50%
Indonesian mortality table	1999	2011	2011

b . Post- employment health care benefit provisions

The Company provides post-employment health care benefits to all of its employees hired before November 1, 1995 who have worked for the Company for 20 years or more when they retire, and to their eligible dependents. The requirement to work for 20 years does not apply to employees who retired prior to June 3, 1995. The employees hired by the Company starting from November 1, 1995 are no longer entitled to this plan. The plan is managed by Yakes.

The defined contribution post-employment health care benefit plan is provided to employees hired with permanent status on or after November 1, 1995 or employees with terms of service less than 20 years at the time of retirement. The Company’s contribution amounted to Rp1 8 billion and Rp17 billion for the years ended December 31, 201 2 and 2013 , respectively.

The following table presents the changes in the projected post-employment health care benefit obligation, change in plan assets, funded status of the post-employment health care benefit plan and net amount recognized in the Company’s consolidated statements of financial position as of December 31 , 201 2 and 2013 .

F-93

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

3 3 . PENSION AND OTHER POST-EMPLOYMENT BENEFITS (continued)

b. Post- employment health care benefit provisions (continued)

	201 2 (Restated)		2013
Changes in projected post-employment health care benefit provisions
Projected post-employment health care benefit obligations at beginning of year	10,547		13,162
Service costs	56		70
Interest costs	755		813
Actuarial (gains) losses	2,074		(3,099	)
Expected post-employment health care benefits paid	(270	)	(293	)
Projected post-employment health care benefit provisions at end of year	13,162		10,653
Changes in post-employment health care plan a ssets
Fair value of plan assets at beginning of year	8,986		9,913
Interest income	653		620
Return on plan assets (excluding amount included in net interest expense)	33 2		(763	)
Employer’s contributions	300		302
Expected post-employment health care benefits paid	(270	)	(293	)
Administrative expenses paid	(88	)	(119	)
Fair value of plan assets at end of year	9,913		9,660
Funded status	(3,249	)	( 993	)
P rovision for pension benefit cost	(3,249	)	( 993	)

As of December 31, 2012 and 2013, plan assets consisted of:

	2012 — Quoted in active market	Unquoted	2013 — Quoted in active market	Unquoted
Cash and cash equivalent	1,062	-	355	-
Listed shares:
Manufacturing and consumer	247	-	400	-
Finance industry	180	-	263	-
Infrastructure and telecommunication	81	-	166	-
Construction	52	-	154	-
Wholesale	89	-	139	-
Mining	68	-	63	-
Other industries:
Agriculture	22	-	25	-
Biotech and Pharma Industry	-	-	3	-
Services	10	-	42	-
Others	5	-	15	-
Equity-based mutual funds	1,672	-	1,683	-
Fixed income-based securities:		-		-
Fixed income mutual funds	6,298	-	6,219	-
Unlisted shares:
Private placement	-	48	-	83
Limited mutual funds participation unit for share-based securities	-	60	-	-
Others	-	19	-	50
Total	9,786	127	9,527	133

F-94

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

3 3 . PENSION AND OTHER POST-EMPLOYMENT BENEFITS (continued)

b . Post- employment health care benefit provisions (continued)

Yakes plan assets also include Series B shares issued by the Company with fair value totaling Rp 35 billion and Rp 120 billion representing 0. 35 % and 1.25% of total assets as of December 31, 201 2 and 2013, respectively.

The expected return is determined based on market expectation for returns over the entire life of the obligation by considering the portfolio mix of the plan assets. The actual return on plan assets was Rp8 96 billion and (Rp261 billion ) for the years ended December 31, 201 2 and 2013 , respectively. The Company expects to contribute Rp226 billion to its post-employment health care plan during 201 4 .

The components of net periodic post-employment health care benefit cost for the years ended December 31, 201 1 , 201 2 and 201 3 are as follows:

Service costs	2011 (Restated) — 43		2012 (Restated) — 56		2013 — 70
Plan administration cost	62		88		119
Net interest cost	53		102		19 3
Net periodic post-employment health care benefit cost	158		246		38 2
Amounts charged to subsidiaries under contractual a greements	(0	)	(1	)	( 2	)
Net periodic post-employment health care benefit cost	158		245		38 0

Amounts recognized in OCI are as follows:

Actuarial (gains) losses recognized during the year	2011 (Restated) — 1,208		2012 (Restated) — 2,074		2013 — (3,099	)
Return on plan assets (excluding amount i ncluded in net interest expense)	(180	)	(332	)	76 3
Total	1,028		1,742		(2,33 6	)

The actuarial valuation for the post-employment health care benefits was performed based on the measurement date as of December 31, 2011, 201 2 and 201 3 , with reports dated March 7, 2012, February 28, 2013 and February 28 , 2014, respectively, by TWP, an independent actuary in association with TW. The principal actuarial assumptions used by the independent actuary as of December 31, 2011, 201 2 and 2013 are as follows:

	2011	201 2	2013
Discount rate	7.25%	6.25%	9.00 %
Health care costs trend rate assumed for next year	7.00%	7.00%	7.00 %
Ultimate health care costs trend rate	7.00%	7.00%	7.00 %
Year that the rate reaches the ultimate trend rate	201 2	201 3	201 4
Indonesia n mortality table	1999	2011	2011

F-95

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

3 3 . PENSION AND OTHER POST-EMPLOYMENT BENEFITS (continued)

b . Post- employment health care benefit provisions (continued)

The movements of the projected post-employment health care benefit obligation for the years ended December 31, 201 2 and 201 3 , are as follows:

	201 2 (Restated)		2013
Changes in projected post-employment health care benefit obligation
Defined benefit liability at end of prior fiscal year	1,561		3,249
Net periodic pension cost	246		382
Employer contributions	(300	)	(302	)
Actuarial ( g ain s ) l oss es recognized via the OCI	2,074		(3,099	)
Return on plan assets (excluding amount included in net interest expense)	(332	)	763
Post-employment health care benefit provisions	3,249		993

c. Other post-employment benefits provisions

The Company provides other post-employment benefits in the form of cash paid to employees on their retirement or termination. These benefits consist of final housing allowance (“ Biaya Fasilitas Perumahan Terakhir ” or BFPT) and home passage leave (“ Biaya Perjalanan Pensiun dan Purnabhakti ” or BPP).

The changes in the projected other post-employment benefit obligation for the years ended December 31, 201 2 and 2013 are as follows:

	201 2 (Restated)		2013
Changes in projected other post-employment benefit obligation
Unfunded projected benefits obligation at beginning of year	462		508
Charged to profit or loss
Service costs	10		11
Net i nterest cost	32		30
Actuarial (gain s ) losses recognized in OCI	32		(72	)
Benefits paid by employer	(28	)	(27	)
Unfunded projected benefits obligation at end of year	508		450

Amounts recognized in OCI amounted to Rp40 billion , Rp32 billion and ( Rp 72 billion) for the years ended December 31, 201 1, 201 2 and 2013 , respectively.

The components of the p rojected other post-employment benefit cost for the years ended December 31, 201 1, 201 2 and 2013 are as follows:

	2011 (Restated)	2012 (Restated)	2013
Service costs	9	10	11
Net interest cost	37	32	30
Total	46	42	41

F-96

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

3 3 . PENSION AND OTHER POST-EMPLOYMENT BENEFITS (continued)

d. Obligation under the Labor Law provisions

Under Law No. 13 Year 2003, the Group is required to provide minimum pension benefit s , if not covered yet by the sponsored pension plans, to its employees upon retirement age. The total related obligation recognized as of December 31, 2012 and 201 3 amounted to Rp15 7 billion and Rp154 billion, respectively. The related employee benefits cost charged to expense amounted to Rp 24 billion , Rp3 5 billion and Rp15 billion for the years ended December 31, 201 1, 201 2 and 2013 , respectively. The actuarial losses (gains) recognized in OCI amounted to Rp 21 billion , ( Rp 8 billion ) and (Rp50 billion ) for the year s ended December 31, 201 1, 201 2 and 2013 , respectively.

Maturity Profile of Defined Benefit Obligation (“DBO”)

Weighted Average duration of DBO for the Company and Telkomsel are 19.96 years and 15.14 years, respectively. The timing of benefits payments for 2013 is as follows (in millions of rupiah):

Time Period	Expected Benefits Payment — Funded	Unfunded	Telkomsel	Post-employment health care	Other post- employment benefits
Within next 10 years	13,077	3,207	206	4,670	691
Within 10-20 years	18,562	587	2,340	6,405	197
Within 20-30 years	16,588	26	6,021	6,659	53
Within 30-40 years	9,775	0	6,550	5,337	4
Within 40-50 years	3,188	-	-	2,832	-
Within 50-60 years	465	-	-	430	-
Within 60-70 years	24	-	-	2	-
Within 70-80 years	0	-	-	0	-

Sensitivity Analysis

0.5% change in discount rate and rate of salary would have effect on DBO, as follows:

Sensitivity	Discount Rate — 0.5% Increase		0.5% Decrease	Rate of Compensation — 0.5% Increase	0.5% Decrease
Funded	(722	)	786	113	(123	)
Unfunded	(47	)	48	27	(29	)
Telkomsel	(83	)	94	55	(51	)
Post-employment health care	(679	)	753	1,720	(1,413	)
Other post-employment benefits	(10	)	11	-	-

The sensitivity analyses have been determined based on a method that extrapolates the impact on DBO as a result of reasonable changes in key assumptions occurring at the end of the reporting period.

The sensitivity results above determine the individual impact on the Plan’s end of the year DBO. In reality, the Plan is subject to multiple external experience items which may move the DBO in similar or opposite directions, and the Plan’s sensitivity to such changes can vary over time.

There are no changes in the methods and assumptions used in preparing the sensitivity analys e s from the previous period.

F-97

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

3 4 . LSA

Telkomsel provides certain cash awards or certain number of days leave benefits to its employees based on the employees’ length of service requirements, including LSA and LSL. LSA are either paid at the time the employees reach certain years during employment, or at the time of termination. LSL are either certain number of days leave benefit or cash, subject to approval by management, provided to employees who m ee t the requisite number of years of service and certain minimum age.

The obligation with respect to these awards was determined based on an actuarial valuation using the Projected Unit Credit method, amounted to Rp347 b illion and Rp336 billion as of December 31, 2012 and 2013, respectively . The related benefit costs charged to expense amounted to Rp96 b illion, Rp121 billion and Rp19 billion for the year s ended December 31, 2011, 2012 and 2013, respectively (Note 28) .

35. RELATED PARTY TRANSACTIONS

In the normal course of its business, the Group entered into transactions with related parties. It is the Company’s policy that the pricings of these transactions be the same as those of arm’s length transactions.

a. Nature of relationships and accounts/transactions with related parties

Details of the nature of relationships and accounts/transactions with significant related parties are as follows:

Related parties	Nature of relationships with related parties	Nature of transactions/accounts
The Government Ministr y of Finance	Majority stockholder	Finance costs and investment in financial instruments
Government Agencies	Entity under common control	Network revenues and operating expenses
MoCI	Entity under common control	Concession fees, radio frequency usage charge, USO charges and telecommunication service revenue
State-owned enterprises	Entity under common control	Operating expenses, purchase of property and equipment, construction and installation services, insurance expense, finance income, finance costs, investment in financial instruments
Indosat	Entity under common control	Interconnection revenues, interconnection expenses, telecommunications facilities usage, operating and maintenance cost, leased lines revenue, satellite transponders usage revenues , usage of data communication network system expenses and lease revenues
PT Aplikanusa Lintasarta (“Lintasarta”)	Entity under common control	Network revenues, usage of data communication network system expenses and leased lines expenses
Indosat Mega Media	Entity under common control	Network revenues
CSM	Associated company	Satellite transponders usage revenues, leased lines revenues, transmission lease expenses
Patrakom * )	Associated company	Satellite transponders usage revenues , leased lines revenues, transmission lease expenses
PSN	Associated company	Satellite transponders usage revenues , leased lines revenues, transmission lease expenses, interconnection revenues and interconnection expense
Indonusa**)	Associated company	Leased line revenues, telecommunication services revenue, data telecommunication expense

*) Patrakom became a subsidiary on September 25, 2013 (Note 3).

**) On October 8, 2013, the Company sold its 80% ownership in Indonusa (Notes 3 and 11).

F-98

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

35. RELATED PARTY TRANSACTIONS (continued)

a. Nature of relationships and accounts/transactions with related parties (continued)

Related parties	Nature of relationships with related parties	Nature of transactions/accounts
PT Industri Telekomunikasi Indonesia (“INTI”)	Entity under common control	Purchase of property and equipment
PT Asuransi Jasa Indonesia (“Jasindo”)	Entity under common control	Insurance for property and equipment
PT Jaminan Sosial Tenaga Kerja (“Jamsostek”)	Entity under common control	Insurance for employees
PT Perusahaan Listrik Negara (Persero) (“PLN”)	Entity under common control	Electricity expenses
PT Pos Indonesia	Entity under common control	Cost of SIM cards
State-owned banks	Entity under common control	Finance income and finance costs
BNI	Entity under common control	Finance income and finance costs
Bank Mandiri	Entity under common control	Finance income and finance costs
BRI	Entity under common control	Finance income and finance costs
Bank Jabar	Entity under common control	Finance income and finance costs
BTN	Entity under common control	Finance income and finance costs
BSM	Entity under common control	Finance costs
PT Bank BRI Syariah (“BRI Syariah”)	Entity under common control	Finance costs
Bahana	Entity under common control	Available-for-sale financial assets, bonds and notes
Koperasi Pegawai Telkom (“Kopegtel”)	Entity under significant influence	Purchase of property and equipment, construction and installation services, leases of buildings, leases of vehicles, purchases of materials and construction services, utilites of maintenance and cleaning services and RSA revenues
PT Sandhy Putra Makmur (“SPM”)	Entity under significant influence	Leases of buildings, leases of vehicles, purchases of materials and construction services, utilities maintenance and cleaning services
Koperasi Pegawai Telkomsel (“Kisel”)	Entity under significant influence	Leases of vehicle, printing and distribution of customer bills, collection fee and other services fee, distribution of SIM cards and pulse reload vouchers
PT Graha Informatika Nusantara (“Gratika”)	Entity under significant influence	Leased lines revenues, purchase of property and equipment, installation expense and maintenance expense
Directors and commissioners	Key management personnel	Honorarium and facilities
Yakes	Entity under common control	Medical expenses

b. Transactions with related parties

The following are significant transactions with related parties:

	201 1 — Amount	% of total revenues	2012 — Amount	% of total revenues	201 3 — Amount	% of total revenues
REVENUES
Entity under common control
Indosat	857	1.20	1,033	1.34	1,053	1.27
Government agencies	415	0.58	237	0.31	508	0.61
Lintasarta	93	0.13	85	0.11	64	0 . 08
Sub-total	1,365	1.91	1,355	1.76	1,625	1.96

F-99

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

3 5 . RELATED PARTY TRANSACTIONS (continued)

b. Transactions with related parties (continued)

The following are significant transactions with related parties: (continued)

	201 1 — Amount	% of total revenues	2012 — Amount	% of total revenues	201 3 — Amount	% of total revenues
REVENUES (continued)
Entity under significant influence
Kisel	2,347	3.29	2,351	3.05	2,751	3.32
Gratika	-	-	3	0.00	342	0.41
Sub-total	2,347	3.29	2,354	3.05	3,093	3.73
Associated companies
Indonusa	-	-	-	-	45	0.05
CSM	57	0.08	47	0.06	31	0.04
Patrakom	67	0.09	80	0.10	-	-
Sub-total	124	0.17	127	0.16	76	0. 09
Others	30	0.04	27	0.04	99	0 .12
Total	3,866	5.41	3,863	5.01	4,893	5 . 90

	201 1 (Restated) — Amount	% of total expenses	201 2 (Restated) — Amount	% of total expenses	201 3 — Amount	% of total expenses
EXPENSES
Entity under common control
Government agencies	4,165	8.42	6,539	12.57	4,6 06	8 . 07
Indosat	814	1.65	1,004	1.93	1,008	1 . 77
PLN	1,243	2.51	660	1.27	651	1 . 14
Jasindo	401	0.81	370	0.71	333	0 . 58
Yakes	121	0.24	150	0.29	159	0 . 28
PT Pos Indonesia	54	0.11	51	0.10	64	0. 11
Jamsostek	33	0.07	36	0.07	39	0. 07
Sub-total	6,831	13.81	8,810	16.94	6,86 0	12.0 2
Entity under significant influence
Kisel	745	1.51	825	1.59	743	1.30
Kopegtel	956	1.93	817	1.57	692	1.21
SPM	91	0.18	25	0.05	1 18	0. 21
Sub-total	1,792	3.62	1,667	3.21	1,553	2.72
Associated companies
PSN	170	0.34	165	0.3 2	187	0 . 33
CSM	107	0.22	100	0.19	63	0. 1 1
Patrakom	77	0.16	73	0.14	-	-
Sub-total	354	0.72	338	0.6 5	250	0 . 44
Others (each below Rp30 billion)	47	0.10	36	0.0 7	80	0. 1 4
Total	9,024	18.25	10,851	20.87	8,7 43	15 .32

F-100

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

3 5 . RELATED PARTY TRANSACTIONS (continued)

b. Transactions with related parties (continued)

The following are significant transactions with related parties: (continued)

	2011 — Amount	% of total finance income	201 2 — Amount	% of total finance income	201 3 — Amount	% of total finance income
F INANCE INCOME
Majority stockholder
The Government	74	11.94	13	2.18	13	1.5 6
Entity under common control
State-owned banks	320	51.61	366	61.41	5 30	6 3.40
Others	-	-	-	-	7	0.8 4
Total	394	63.55	379	63.59	550	65. 80

	201 1 — Amount	% of total finance costs	201 2 — Amount	% of total finance costs	201 3 — Amount	% of total finance costs
F INANCE COSTS
Majority stockholder
The Government	169	10.17	82	3.99	84	5 . 59
Entity under common control
State-owned banks	621	37.36	424	20.63	5 18	34 . 44
Others	-	-	-	-	4	0.27
Total	790	47.53	506	24.62	606	40 .30

	2012 — Amount	% of total fixed assets purchased	2013 — Amount	% of total fixed assets purchased
PURCHASE OF PROPERTY AND EQUIPMENT (Note 12)
Entity under common control
State-owned enterprises	98	0.57	126	0.51
Entity under significant influence
Kopegtel	237	1.37	223	0.90
Others (each below Rp30 billion)	47	0.27	59	0.24
Total	382	2.21	408	1.65

Presented below are balances of accounts with related parties:

	2012 — Amount	% of total assets	2013 — Amount	% of total assets
a. Cash and cash equivalents (Note 5)	9,170	8.32	11, 985	9. 3 7
b. Other current financial assets (Note 6)	1,908	1.73	1,2 46	0.9 7

F-101

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

3 5 . RELATED PARTY TRANSACTIONS (continued)

b. Transactions with related parties (continued)

Presented below are balances of accounts with related parties: (continued)

	2012 — Amount	% of total assets	2013 — Amount	% of total assets
c. Trade receivables (Note 7 )	1,384	1.26	1 , 678	1. 31
d. d. Advances and prepaid expenses (Note 9)
Entity under common control
MoCI	2,588	2.35	2,349	1.84
Others (each below Rp30 billion)	18	0.02	82	0.06
Total	2,606	2.37	2,431	1.90
e. e. Advances and other non-current assets (Note 13)
Entities under common control
BNI	-	-	52	0.04
Others	14	0.01	11	0.01
Associated Company Indonusa	-	-	297	0.23
Total	14	0.01	360	0.28

	2012 — Amount	% of total liabilities	2013 — Amount	% of total liabilities
f. Trade payables (Note 1 5 )
Entities under common control
MoCI	609	1.25	960	1.88
INTI	197	0.40	115	0.22
Yakes	39	0.08	43	0.08
Indosat	31	0.06	17	0.03
State-owned enterprises	3	0.01	1	0.00
Sub-total	879	1.80	1,136	2.21
Entity under significant influence
Kopegtel	115	0.24	82	0.16
Others (each below Rp30 billion)	47	0.10	570	1.11
Total	1,041	2.14	1,788	3.48
g. Accrued expenses (Note 16)
Majority stockholder
The Government	17	0.03	17	0.04
Entity under common control
State-owned banks	72	0.15	53	0.10
Total	89	0.18	70	0.14
h. Advances from customers and suppliers
Majority stockholder
The Government	64	0.13	19	0.04
i. Short-term bank loans (Note 1 8 )
Entity under common control
BRI	-	-	50	0.09
BSM	5	0.01	14	0.03
BRI Syariah	-	-	3	0.01
Total	5	0.01	67	0.13

F-102

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

3 5 . RELATED PARTY TRANSACTIONS (continued)

b. Transactions with related parties (continued)

Presented below are balances of accounts with related parties: (continued)

	2012 — Amount	% of total liabilities	2013 — Amount	% of total liabilities
j. Two-step loans (Note 19a)
Majority stockholder
The Government	1,987	4.07	1 ,915	3.74
k. MTN (Note 19b)
Entity under common control
Bahana	8	0.02	-	-
l. Long-term bank loans (Note 1 9c )
Entity under common control
BRI	4,630	9.48	4,043	7.91
BNI	2,349	4.81	2,351	4.60
Bank Mandiri	1,417	2.90	1,069	2.09
Bank Jabar	175	0.36	-	-
Total	8,571	17.55	7,463	14.60

c . Significant agreements with related parties

i. The Government

The Company obtained two-step loans from the Government (Note 1 9 a).

ii. Indosat

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

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

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

The Company has been handling customer billings and collections for Indosat. Indosat is gradually taking over the activities and performing its own direct billing and collection. The Company receives compensation from Indosat computed at 1% of the collections made by the Company beginning January 1, 1995, plus the billing process expenses which are fixed at a certain amount per record. On December 11, 2008, the Company and Indosat agreed to implement IDD service charge tariff which already takes into account the compensation for its billing and collection. The agreement is valid and effective starting on January to December 2012, and can be applied until a new agreement becomes available.

F-103

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

3 5 . RELATED PARTY TRANSACTIONS (continued)

c . Significant agreements with related parties (continued)

ii. Indosat (continued)

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

Telkomsel also entered into an agreement with Indosat for the provision of international telecommunications services to its GSM mobile cellular customers.

The Company provides leased lines to Indosat and subsidiaries, namely PT Indosat Mega Media and Lintasarta. The leased lines can be used by these companies for telephone, telegraph, data, telex, facsimile or other telecommunication services.

iii. Others

The Company has entered into agreements with associated companies, namely CSM, PSN and Gratika for the utilization of the Company's satellite transponders or frequency channels and leased lines.

Telkomsel has an agreement with PSN for the lease of PSN’s transmission link. Based on the agreement, which was made on March 14, 2001, the minimum lease period is 2 years since the operation of the transmission link and is extendable subject to agreement by both parties. As of the issuance date of the consolidated financial statements, the extension is still in process.

Kisel is a cooperative that was established by Telkomsel’s employees to engage in car rental services, printing and distribution of customer bills, collection and other services principally for the benefit of Telkomsel. Telkomsel also has dealership agreements with Kisel for distribution of SIM cards and pulse reload vouchers.

d . Boards of Commissioners and key management personnel remuneration

Boards of Commissioners and key management personnel consist of the Boards of Commissioners and Directors of the Group .

The Group provides honorarium and facilities to support the oversight and governance duties of the Board of Commissioners and short-term employment benefits in the form of salaries and facilities to support the operational duties of the Board of Directors. The total of such benefits is as follows:

	201 1 — Amount	% of total expense	201 2 — Amount	% of total expense	201 3 — Amount	% of total expense
Board of Directors	181	0.36%	252	0.49%	354	0.62%
Board of Commissioners	57	0.11%	61	0.12%	106	0.19%

F-104

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

36 . SEGMENT INFORMATION

In 2012, management decided to change the way it manages the Group's business portfolios from a product-based approach to a customer-centric approach, as part of the Group’s strategy to provide a one-stop solution to its customers. This resulted in a change in the Group’s organizational structure to accommodate decision making and performance assessment based on a customer – centric approach. Consequently, the segment financial information presented to the Group’s Chief Operational Decision Maker was amended facilitate decision making on the new segments. The segment information for the year ended December 31, 2011 has been restated to conform with the presentation of segment information for the year ended December 31, 2012.

The Group has four main operating segments, namely personal, home, corporate and others. The personal segment provides mobile cellular and fixed wireless telecommunications services to individual customers. The home segment provides fixed wireline telecommunications services, pay TV, data and internet services to home customers. The corporate segment provides telecommunications services, including interconnection, leased lines, satellite, VSAT, contact center, broadband access, information technology services, data and internet services to companies and institutions. Operating segments that are not monitored separately by the Chief Operation Decision Maker are presented as "Others", which provides building management services.

Management monitors the operating results of the 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 and is measured on the basis of Indonesian Financial Accounting Standards which differ significantly from IFRS primarily in the accounting for land rights and employee benefits.

However, the financing activities and income taxes are not separately monitored and are not allocated to operating segments.

Segment revenues and expenses include transactions between operating segments and are accounted at prices that Management believes represent market prices .

	2011 — Corporate		Home		Personal		Others		Total before Elimination		Elimination		Total Consolidated		IFRS Reconciliation (Restated)		IFRS Balance (Restated)
Segment results
Revenues
External revenues	14,279		8,171		48,733		70		71,253		-		71,253		(15	)	71,238
Inter-segment revenues	5,289		1,888		2,180		350		9,707		(9,707	)	-		-		-
Total segment revenues	19,568		10,059		50,913		420		80,960		(9,707	)	71,253		(15	)	71,238
Expenses
External expenses	(12,362	)	(6,408	)	(29,999	)	(526	)	(49,295	)	-		(49,295	)	91		(49,204	)
Inter-segment expenses	(3,297	)	(1,914	)	(4,680	)	184		(9,707	)	9,707		-			-	-
Total segment expenses	(15,659	)	(8,322	)	(34,679	)	(342	)	(59,002	)	9,707		(49,295	)	91		(49,204	)
Segment results	3,909		1,737		16,234		78		21,958		-		21,958		76		22,034
Other information
Segment assets	26,842		16,893		62,368		390		106,493		(4,465	)	102,028		(688	)	101,340
Assets held for sale	-		-		791		-		791		-		791		-		791
Long-term investments	214		-		21		-		235		-		235		-		235
Total consolidated assets	27,056		16,893		63,180		390		107,519		(4,465	)	103,054		(688	)	102,366
Capital expenditures	(4,390	)	(1,529	)	(8,684	)	(45	)	(14,648	)	-		(14,648	)	94		(14,554	)
Depreciation and amortization	(1,890	)	(1,389	)	(11,007	)	(14	)	(14,300	)	-		(14,300	)	40		(14,260	)
Impairment of assets	-		-		(563	)	-		(563	)	-		(563	)	-		(563	)
Provision for impairment of receivables	(255	)	(454	)	(174	)	-		(883	)	-		(883	)	-		(883	)

F-105

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

36 . SEGMENT INFORMATION (continued)

	2012 — Corporate		Home		Personal		Others		Total before Elimination		Elimination		Total Consolidated		IFRS Reconciliation (Restated)		IFRS Balance (Restated)
Segment results
Revenues
External revenues	15,579		7,360		54,087		117		77,143		-		77,143		(16	)	77,127
Inter-segment revenues	6,468		2,223		2,188		648		11,527		(11,527	)	-		-		-
Total segment revenues	22,047		9,583		56,275		765		88,670		(11,527	)	77,143		(16	)	77,127
Expenses
External expenses	(13,961	)	(5,646	)	(31,169	)	(669	)	(51,445	)	-		(51,445	)	(185	)	(51,630	)
Inter-segment expenses	(4,015	)	(2,293	)	(5,203	)	(16	)	(11,527	)	11,527		-		-		-
Total segment expenses	(17,976	)	(7,939	)	(36,372	)	(685	)	(62,972	)	11,527		(51,445	)	(185	)	(51,630	)
Segment results	4,071		1,644		19,903		80		25,698		-		25,698		(201	)	25,497
Other information
Segment assets	30,458		17,780		67,216		611		116,065		(4,971	)	111,094		(1,158	)	109,936
Long-term investments	254		-		21		-		275		-		275		-		275
Total consolidated assets	30,712		17,780		67,237		611		116,340		(4,971	)	111,369		(1,158	)	110,211
Capital expenditures	(4,375	)	(2,083	)	(10,664	)	(150	)	(17,272	)	-		(17,272	)	-		(17,272	)
Depreciation and amortization	(2,079	)	(1,168	)	(10,940	)	(22	)	(14,209	)	-		(14,209	)	(18	)	(14,227	)
Impairment of assets	-		-		(247	)		-	(247	)		-	(247	)	-		(247	)
Provision for impairment of receivables	(92	)	(505	)	(318	)	-		(915	)	-		(915	)	-		(915	)

	2013 — Corporate		Home		Personal		Others		Total before Elimination		Elimination		Total Consolidated		IFRS Reconciliation		IFRS Balance
Segment results
Revenues
External revenues	17, 041		6, 669		59,028		229		8 2,967		-		8 2,967		-		82,967
Inter-segment revenues	8,549		2,794		2,358		909		14,610		(14,610	)	-		-		-
Total segment revenues	25 ,590		9, 463		61,386		1,138		97, 577		(14,610	)	8 2,967		-		82,967
Expenses
External expenses	(15,211	)	( 5,9 39	)	(32, 991	)	(980	)	(55,121	)		-	(55,121)		(119	)	(55,240	)
Inter-segment expenses	(5,164	)	(2,946	)	(6,472	)	(28	)	(14,610	)	14,610		-			-	-
Total segment expenses	(20,375	)	( 8, 885	)	(39, 463	)	(1,008	)	( 69, 731	)	14,610		(55,121)		(119	)	( 55,240	)
Segment results	5, 215		578		21,923		130		27, 846		-		27, 846		(119	)	27,727
Other information
Segment assets	39, 718		18,992		75,6 04		1,571		135 , 885		(8,343	)	127, 542		(155	)	127,387
Asset held-for-sale	-		-		105		-		105		-		105		-		105
Long-term investments	182		101		21		-		304		-		304		-		304
Total consolidated assets	39,900		19,093		75,730		1,571		136,294		(8,343	)	127 , 951		( 155	)	127,796
Capital expenditures	(6, 237	)	(2,34 0	)	(1 5 , 662	)	(659	)	(2 4,898	)		-	(2 4,898	)	-		( 24,898	)
Depreciation and amortization	(2,423	)	(1,487	)	(11,234	)	(40	)	(15,184	)	-		(15,184	)	( 25	)	( 15,209	)
Impairment of assets	-		-		(596	)	-		(596	)	-		(596	)		-	( 596	)
Provision for impairment of receivables	(994	)	(390	)	(202	)	(3	)	(1,589	)		-	(1,589	)	-		( 1,5 89	)

The Group predominantly generates revenue and profit within Indonesia. Revenue with respect to international interconnections and assets held by geographical location are disclosed in Note 26 and Note 1, respectively.

F-106

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

37 . RSA

The Company has entered into separate agreements with several investors under RSA to develop fixed lines, public card-phone booths, data and internet network, and related supporting telecommunications facilities.

As of December 31, 2013, the Company has 4 RSA’s with 4 investors. The RSA’s are located in East Java, Makassar, Pare-pare, Manado, Denpasar, Mataram and Kupang, with concession periods ranging from 129 to 14 8 months.

Under the RSA, the investors finance the costs incurred in developing the telecommunications facilities and the Company manages and operates the telecommunications facilities upon the completion of the constructions. Repairs and maintenance costs during RSA period are borne jointly by the Company and investors. The investors legally retain the rights to the property and equipment constructed by them during the RSA periods. At the end of the RSA period, the investors transfer the ownership of the telecommunication facilities to the Company at a nominal price.

Generally, the revenues earned in the form of line installation charges, outgoing telephone pulses and monthly subscription charges are shared between the Company and investors based on certain agreed amount and/or ratio.

3 8 . SIGNIFICANT COMMITMENTS AND AGREEMENTS

a. Capital expenditures

As of December 31, 201 3 , capital expenditures committed under the contractual arrangements, principally relating to procurement and installation of switching equipment, transmission equipment and cable network are as follows:

Currencies	Amounts in foreign currencies (in millions)	Equivalent in rupiah
Rupiah	-	10, 404
U.S. dollar	660	8,04 3
JPY	5 8	7
Euro	0.3	5
SGD	0. 2	2
Total		18,4 61

F-107

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

3 8 . SIGNIFICANT COMMITMENTS AND AGREEMENTS (continued)

a. Capital expenditures (continued)

The above balance includes the following significant agreements:

(i) The Company

Contracting parties	Initial date of agreement	Nature of transaction
The Company and Sansaine Huawei Consortium	August 3, 2009	Procurement and installation agreement for Softswitch and modernization of MSAN Divre I, Divre II, Divre III and Divre IV
The Company and PT ZTE Indonesia	September 4, 2009	Procurement and installation agreement for modernization of MSAN Softswitch Divre VI and Divre VII
The Company and PT ZTE Indonesia	October 6, 2010	Procurement and installation agreement for Gigabit Capable Passive Optical Network (G-PON)
The Company and PT Industri Telekomunikasi Indonesia	December 30, 2010	Procurement and installation agreement for copper wire access modernization through Trade In/Trade Off method
The Company and PT Lintas Teknologi Indonesia	June 8, 2011	Procurement and installation agreement for DWDM Alcatel Lucent (ALU)
The Company and G-Pas Consortium	June 14, 2011	Procurement and installation agreement for Outside Plant Fiber Optic (OSP-FO) Access and RMJ GPAS
The Company and Mandiri Maju Consortium	June 14, 2011	Procurement and installation agreement for OSP-FO Access & RMJ
The Company and PT QDC Technologies	June 14, 2011	Procurement and installation agreement for OSP-FO Access and RMJ
The Company and TEKKEN-DMT Consortium	June 14, 2011	Procurement and installation agreement for OSP-FO Access and RMJ
The Company and DJAFa Consortium	June 14, 2011	Procurement and installation agreement for OSP-FO Access and RMJ
The Company and PT Telekomindo Primakarya	June 14, 2011	Procurement and installation agreement for OSP-FO Access and RMJ
The Company and PT Nasio Karya Pratama	June 14, 2011	Procurement and installation agreement for OSP-FO Access and RMJ
The Company and Jembo Kabel-Tridayasa Consortium	June 14, 2011	Procurement and installation agreement for OSP-FO Access and RMJ
The Company and Pancamas Consortium	June 14, 2011	Procurement and installation agreement for OSP-FO Access and RMJ
The Company and PT Ardhinusa Mitratel	June 14, 2011	Procurement and installation agreement for OSP-FO Access and RMJ
The Company and PT Karya Mitra Nugraha	June 14, 2011	Procurement and installation agreement for OSP-FO Access and RMJ
The Company and PT Merbau Prima Sakti	June 14, 2011	Procurement and installation agreement for OSP-FO Access and RMJ
The Company and PT Huawei Tech Investment	October 11, 2011	Procurement and installation agreement for IMS (IP-Multimedia System)
The Company and PT Bina Nusantara Perkasa	December 9, 2011	Procurement and installation agreement for “Sistem Komunikasi Kabel Laut” (“SKKL”) Sumatera-Bangka (SBCS) and SKKL Tarakan-Tanjung Selor (TSCS)

F-108

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

3 8 . SIGNIFICANT COMMITMENTS AND AGREEMENTS (continued)

a. Capital expenditures (continued)

(i) The Company (continued)

Contracting parties	Initial date of agreement	Nature of transaction
The Company and PT Multipolar Technology	December 29, 2011	Procurement and installation agreement for Telkom Cache System
The Company and PT Huawei Tech Investment	January 5, 2012	Procurement and installation agreement for ISP WDM SBCS JASUKA
The Company and PT Ericsson Indonesia-PT Infracell Nusatama	February 8, 2012	Procurement and installation agreement for IMS
The Company and PT Len Industri (Persero)	March 29, 2012	Procurement and installation agreement for copper wire access modernization through Trade In/Trade Off method
The Company and PT Sisindokom Lintasbuana	July 4, 2012	Procurement and installation agreement for managed WIFI for Program of Indonesia WIFI Package-1
The Company and PT Ketrosden Triasmitra - PT Nautic Maritime Salvage	August 30, 2012	Procurement and installation agreement for SKKL Luwuk-Tutuyan Cable System (LTCS)
The Company and Furukawa and Partners Consortium	November 14, 2012	Procurement and installation of Outside Plant Fiber To The Home (OSP FTTH) DIVA Regional V and VII
The Company and INTI-Huawei Consortium	November 14, 2012	Procurement and installation of OSP FTTH DIVA Regional III, IV and VI
The Company and JF DJAFA Consortium	November 14, 2012	Procurement and installation agreement for OSP FTTH DIVA Regional II
The Company and PT Mastersystem Infotama	December 5, 2012	Procurement and installation agreement for IP Backbone (IPBB) System
The Company and Binainfo Lokatara Consortium	December 7, 2012	Procurement and installation agreement for Wireless Access Gateway (WAG), Policy and Charging Enforcement Function (PCEF) and Policy and Chargingrule Function (PCRF) Platform Ericsson
The Company and PT Huawei Tech Investment	December 20, 2012	Procurement and installation agreement for WAG, PCEF and PCRF Huawei
The Company and PT Infra Karya Pratama	December 28, 2012	Procurement and installation agreement for managed WIFI for Program of Indonesia WIFI Package-2
The Company and ASN - PT Lintas Consortium	May 6, 2013	Procurement and installation agreement of Sulawesi Maluku Papua Cable System (SMPCS) project
The Company and PT Sisindokom Lintasbuana	May 8, 2013	Procurement and installation agreement for expansion of PE-VPN CISCO
The Company and NEC Corp - PT NEC Indonesia Consortium	May 28, 2013	Procurement and installation of SMPCS package-2
The Company and PT Huawei Tech Investment	June 3, 2013	Procurement and installation agreement for expansion of Metro Ethernet Platform Huawei
The Company and PT Datacomm Diangraha	June 26, 2013	Procurement and installation agreement for expansion of Maintenance Support (MS) Service for Metro Ethernet Platform ALU
The Company and PT NEC Indonesia	July 8, 2013	Procurement and installation agreement for expansion of PE-Speedy and redirector
The Company and PT Lintas Teknologi Indonesia	July 22, 2013	Procurement and installation agreement for expansion of DWDN platform ALU
The Company and NEC Corporation	October 2, 2013	Procurement and installation agreement for expansion of Ring Capacity of Surabaya-Ujung Pandang-Banjarmasin Backbone

F-109

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

38 . SIGNIFICANT COMMITMENTS AND AGREEMENTS (continued)

a. Capital expenditures (continued)

(i) The Company (continued)

Contracting parties	Initial date of agreement	Nature of transaction
The Company and PT ZTE Indonesia	October 2, 2013	Procurement and installation agreement of OLT and ONT
The Company and PT Wahana Ciptasinatria	November 7, 2013	Procurement and installation agreement for Policy Control Equipment and Enforcement Function (PCEF)
The Company and PT Cisco Technologies Indonesia	November 14, 2013	The partnership for procurement and installation agreement of WIFI CISCO
The Company and PT Huawei Tech Investment	December 6, 2013	Procurement and installation agreement for IP Radio Equipment for Backhaul Node-B Telkomsel Package-2 Platform Huawei
The Company and PT Huawei Tech Investment	December 6, 2013	Procurement and installation agreement for 10 Gigabyte of Capable Passive Optical Network (XGPON) Platform Huawei
The Company and PT ASB-PT ALU Indonesia-PT GBN-PT Lintas Consortium	December 6 , 2013	Procurement and installation agreement for XGPON Platform ALU

(ii) Telkomsel

Contracting parties	Initial date of agreement	Nature of transaction
Telkomsel, PT Ericsson Indonesia, Ericsson AB, PT Nokia Siemens Networks, N SN Oy and Nokia Siemens Network GmbH & Co. KG	April 17, 2008	The c ombined 2G and 3G CS Core Network Rollout Agreements
Telkomsel, PT Ericsson Indonesia and PT Nokia Siemens Networks	April 17, 2008	Technical Service Agreement (TSA) for c ombined 2G and 3G CS Core Network
Telkomsel, PT Ericsson Indonesia, Ericsson AB, PT Nokia Siemens Networks, N SN Oy, Huawei International Pte. Ltd., PT Huawei and PT ZTE Indonesia	March and Jun e 2009	2G BSS and 3G UTRAN R oll o ut agreement for the provision of 2G GSM BSS and 3G UMTS Radio Access Network
Telkomsel, PT Packet Systems Indonesia and PT Huawei	Februar y 3, 2010	Maintenance and procurement of equipment and related service agreement for Next Generation Convergence IP RAN Rollout and Technical Support
Telkomsel, PT Datacraft Indonesia and PT Huawei	Februar y 3, 2010	Maintenance and procurement of equipment and related service agreement for Next Generation Convergence Core Transport Rollout and Technical Support
Telkomsel, Amdocs Software Solutions Limited Liability Company and PT Application Solutions	Februar y 8, 2010	Online Charging System (“OCS”) and Service Control Points (“SCP”) System Solution Development Agreement
Telkomsel and PT Application Solutions	Februar y 8, 2010	Technical Support Agreement to provide technical support services for the OCS and SCP
Telkomsel, PT Nokia Siemens Networks and NSN Oy	Januar y 27, 2011	Soft HLR Roll o ut agreement
Telkomsel and PT Nokia Siemens Networks	Januar y 27, 2011	Soft HLR Technical Support Agreement
Telkomsel, Amdocs Software Solutions Limited Liability Company and PT Application Solutions	July 5, 2011	Development and Rollout agreement for Customer Relationship Management and Contact Center solutions
Telkomsel and PT Ericsson Indonesia	December 21, 2011	Development and Rollout agreement Operation Support System (“OSS”)
Telkomsel, Apple South Asia Pte. Ltd. and PT Mitra Telekomunikasi Selular (“MTS”)	July 16, 2012	Purchasing of iPhone products and provision of cellular network service

F-110

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

38 . SIGNIFICANT COMMITMENTS AND AGREEMENTS (continued)

a. Capital expenditures (continued)

(ii) Telkomsel (continued)

Contracting parties	Initial date of agreement	Nature of transaction
Telkomsel and Huawei International Pte. Ltd. and PT Huawei	July 17, 2012	CS Core System Rollout and CS Core System Technical Support agreement
Telkomsel and PT Ericsson Indonesia	March 25, 2013	Technical Support Agreement (TSA) for the procurement of Gateway GPRS Support Node (“GGSN”) Service Complex agreement
Telkomsel and Wipro Limited, Wipro Singapore Pte. Ltd. and PT WT Indonesia	April 23, 2013	Development and procurement of OSDSS Solution agreement
Telkomsel and PT Ericsson Indonesia	October 22, 2013	Procurement of GGSN Service Complex Rollout agreement

(iii) GSD

Contracting parties	Initial date of agreement	Nature of transaction
TLT and PT Adhi Karya	November 6, 20 12	Service arrangement structure and main contractor architecture for Telkom Tower Building development project
TLT and PT Indalex	February 1 1, 2013	Procurement agreement for the Facade construction phase I unitized system Tower I and Tower II of Telkom Landmark Tower Building
GSD and PT Pembangunan Perumahan (Persero)	March 5, 2013	Development of Telkomsel’s building agreement
TLT and PT Jaya Kencana	May 14, 2013	Procurement and installation agreement for electrical construction of Telkom Landmark Tower Building

(iii) DMT

Contracting parties	Initial date of agreement	Nature of transaction
DMT and PT M Jusuf & Sons	December 20, 2012	Telecommunication tower development agreement

(iii) TII

Contracting parties	Initial date of agreement	Nature of transaction
TL and Digicel (TL) LDA (Digicel)	August 28, 2012	Trading tower location agreement
TL, Ericsson AB and PT Ericsson Indonesia	November 2, 2012	Operational Supporting System (OSS), Base Sub Station (BSS) and Value Added System (VAS) System Rollout and Radio Access Network (RAN) and Core System Rollout agreement
TL, Ericsson AB and PT Ericsson Indonesia	February 1, 2013	Management service agreement for end-to-end mobile network
TL and PT Cascadiant Indonesia	December 31, 2012 De c ember 31, 2012 November 20, 2013	Installation and maintenance service agreement Purchase of equipment phase I agreement Purchase of equipment phase II agreement

F-111

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

38 . SIGNIFICANT COMMITMENTS AND AGREEMENTS (continued)

b. Borrowings and other credit facilities

(i) As of December 31, 201 3 , the Company has bank guarantee facilities for tender bond, performance bond, maintenance bond, deposit guarantee and advance payment bond for various projects of the Company, as follows:

Lenders	Total facility	Maturity	Currency	Facility utilized — Original currency (in millions)	Rupiah equivalent
BRI	350	March 14, 2014	Rp	-	209
			US$	0	1
BNI	250	March 31, 2014	Rp	-	100
			US$	0	2
Bank Mandiri	150	December 23, 2014	Rp	-	45
Total	750				35 7

(ii) Telkomsel has a US$3 million bond and bank guarantee and standby letter of credit facilit ies with SCB, Jakarta. The facilities expire on July 31, 2014. Under these facilities, as of December 31, 2013, Telkomsel has issued a bank guarantee of Rp20 billion (equivalent to US$1.7 million) for a 3G performance bond (Note 38c.i). The bank guarantee is valid until March 24, 2014.

Telkomsel has a Rp200 billion bank guarantee facility with BRI. The facility will expire on September 25, 2014. Under the facility, as of December 31, 2013, Telkomsel has issued a bank guarantee of Rp20 billion (equivalent to US$1.6 million) as a 3G performance bond (Note 38c.i) valid until May 31, 2014 and Rp111 billion (equivalent to US$9.1 million) as payment commitment guarantee for annual right of usage fee valid until March 31, 2014.

Telkomsel also has a Rp100 billion bank guarantee with BNI. The bank guarantee is valid until December 11, 2014. Telkomsel uses this facility to replace the time deposit required as guaranty for the USO Program amounting to Rp92.653 billion.

(iii) TII has a US$15 million bank guarantee from Bank Mandiri. The facility expires on December 19, 2014. Under this facility, as of December 31, 2013, TII has issued a bank guarantee of Rp9 billion (equivalent to US$0.76 million) for mobile spectrum license performance bond in Timor Leste.

c. Others

(i) 3G license

With reference to the Decision Letter s No. 07/PER/M.KOMINFO/2/2006, No. 268/KEP/M.KOMINFO/9/2009 and No. 191 Year 2013 of the MoCI, Telkomsel is required, among other things, to:

Pay an annual BHP fee which is calculated based on a certain formula over the license term (10 years) as set forth in the Decision Letters. The BHP is payable upon receipt of the notification letter (“ Surat Pemberitahuan Pembayaran ”) from the DGPI. The BHP fee is payable annually up to the expiry date of the license.
Provide roaming access for the existing other 3G operators.
Contribute to USO development.
Construct a 3G network which covers at least 14 provinces by the sixth year of holding the 3G license.
Issue a performance bond each year amounting to Rp20 billion or 5% of the annual fee to be paid for the subsequent year, whichever is higher.

F-112

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

38 . SIGNIFICANT COMMITMENTS AND AGREEMENTS (continued)

c. Others (continued)

(ii) Radio Frequency Usage

Based on the Decree No. 76 dated December 15, 2010 of the Government of the Republic of Indonesia, which amended Decree No. 7 dated January 16, 2009, the annual frequency usage fees for bandwidths of 800 Megahertz (“MHz”), 900 MHz and 1800 MHz are determined using a formula set forth in the Decree. The Decree is applicable for 5 years unless further amended.

As an implementation of the above Decree, the Company and Telkomsel paid the first year and second year annual frequency usage fees in 2010 and 2011, respectively .

Based on Decision Letters No. 495 dated August 29, 2012 and No. 491 dated August 29, 2012, the MoCI determined that the third year (Y 3 ), 2012, annual frequency usage fees of the Company and Telkomsel were Rp174 billion and Rp1,718 billion, respectively. The fees were paid in December 2012.

Based on Decision Letters No. 881 dated September 10, 2013 and No. 884 dated September 10, 2013, the MoCI determined that the fourth year (Y 4 ), 2013, annual frequency usage fees of the Company and Telkomsel were Rp213 billion and Rp1,649 billion, respectively. The fees were paid in December 2013.

(i ii ) Apple, Inc

On July 16, 2012, Telkomsel entered into an agreement with Apple South Asia Pte Ltd (“Apple”) for the purchase of iPhone products and provision of cellular network services in Indonesia. Based on the agreement:

· Telkomsel may authorize Authorized Purchaser (“AP”) to place PO under the agreement provided that a contract of Adherence is signed between Apple, Telkomsel and AP binding such AP to the terms and conditions of the agreement. If any of the AP fails to pay an invoice from Apple or Apple’s affiliate as required by the agreement, after receipt of Apple’s notice, Telkomsel should pay the sums due and the unpaid amount.

· Telkomsel shall order and take delivery or cause its AP to order and take delivery of at least 500,000 iPhone units up to June 2015.

Effective on August 17, 2012, Telkomsel appointed PT Mitra Telekomunikasi Selular (“MTS”), third party, as the AP. In accordance with the agreement with MTS, issuance of PO by MTS is subject to Telkomsel’s approval and required to be covered by a bank guarantee.

(iv) Future Minimum Lease Payments under Operating Lease

The Group entered into non-cancelable lease agreements with both third and related parties. The lease agreements cover leased lines, telecommunication equipment and land and building with terms ranging from 1 to 10 years and with expiry dates between 2014 and 202 3 .

Future minimum lease payments under the operating lease agreements as of December 31, 2013 are as follows:

	Total	Less than 1 year	1-5 years	More than 5 years
As lessee	14 , 037	1 , 845	6,365	5,827
As lessor	4,571	1,025	2,596	950

F-113

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

39 . CONTINGENCIES

In the ordinary course of business, the Group has been named as defendants in various legal actions in connection with land disputes, monopolistic practice and unfair business competition and SMS cartel practices. Based on management's estimate of the probable outcomes of these matters, the Group has recognized provision for losses amounting to Rp49 billion as of December 31, 2013.

a. The Company, Telkomsel and seven other local operators are being investigated by The Commission for the Supervision of Business Competition (“ Komisi Pengawasan Persaingan Usaha ” or “KPPU”) for allegations of SMS cartel practices. As a result of the investigations on June 17, 2008, KPPU found that the Company, Telkomsel and certain other local operators had violated Law No. 5 year 1999 article 5 and charged the Company and Telkomsel penalty in the amounts of Rp18 billion and Rp25 billion, respectively.

Management believes that there are no such cartel practices that led to a breach of prevailing regulations. Accordingly, the Company and Telkomsel filed an appeal with the Bandung District Court and South Jakarta District Court, on July 14, 2008 and July 11, 2008, respectively.

Due to the filing of case s by operators in various courts, the KPPU subsequently requested the Supreme Court (SC) to consolidate the cases into the Central Jakarta District Court. Based on the SC’s decision letter dated April 12, 2011, the SC appointed the Central Jakarta District Court to investigate and resolve the case.

As of the issuance date of the consolidated financial statements, there has not been any notification on the case from the court.

b. The Company is a defendant in a case filed in Makassar District Court by Andi Jindar Pakki and his affiliates over a land property on Jl. A.P. Pettarani. On May 8, 2013, the court pronounced its verdict and ordered the Company to pay fair compensation or to vacate and surrender the disputed land to the plaintiffs.

On May 20, 2013 , the Company filed an appeal to the Makassar High Court, objecting to the District Court ’s ruling. I n December 2013, the Makassar High Court pronounced its verdict that is favorable to the plaintiffs and the Company filed an appeal to the SC. As of the issuance date of the consolidated financial statements, no decision has been reached on the appeal.

40 . FINANCIAL RISK MANAGEMENT

Financial risk management

The Group ’ s activities expose it to a variety of financial risks such as market risks (including foreign exchange risk and interest rate risk), credit risk and liquidity risk. Overall, the Group’s financial risk management program is intended to minimize losses on the financial assets and financial liabilities arising from fluctuation of foreign currency exchange rates and the fluctuation of interest rates. Management has a written policy for foreign currency risk management mainly on time deposit placements and hedging to cover foreign currency risk exposures for periods ranging from 3 up to 12 months.

Financial risk management is carried out by t he Corporate Finance unit under policies approved by the Board of Directors. The Corporate Finance unit identifies, evaluates and hedges financial risks.

F-114

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

40 . FINANCIAL RISK MANAGEMENT (continued)

Financial risk management (continued)

a. Foreign exchange risk

The Group is exposed to foreign exchange risk on sales, purchases and borrowings that are denominated in foreign currencies. The foreign currency denominated transactions are primarily in U.S. d ollars and Japanese y en. The Group’s exposure s to other foreign exchange rates are not material.

Increasing risks of foreign currency exchange rates on the obligations of the Group are expected to be offset by the effects of the exchange rates on time deposits and receivables in foreign currencies that are equal to at least 25% of the outstanding current liabilities.

The following table presents the Group’s financial assets and financial liabilities exposure to foreign currency risk:

	201 2 — U.S. dollar (in billions)		Japanese yen (in billions)		2013 — U.S. dollar (in billions)		Japanese yen (in billions)
Financial assets	0. 5 1		0.00		0.48		0.00
Financial liabilities	(0. 61	)	( 9.25	)	(0.48	)	(8.47	)
Net exposure	(0. 10	)	( 9.25	)	0.00		(8.47	)

Sensitivity analysis

A strengthening of the U .S. d ollar and Japanese y en , as indicated below, against the rupiah at December 31, 2013 would have decreased equity and profit or loss by the amounts shown below. This analysis is based on foreign currency exchange rate variances that the Group considered to be reasonably possible at the reporting date. The analysis assumes that all other variables, in particular interest rates, remain constant.

	Equity/profit (loss)
December 31, 201 3
U.S. dollar (1% strengthening)	0
Japanese yen (5% strengthening)	( 48	)

A weakening of the U .S. d ollar and Japanese y en against the rupiah at December 3 1 , 2013 would have had an equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant.

b. Market price risk

The Group is exposed to cha n ges in debt and equity market prices related to available-for-sale investments carried at fair value. Gain s and losses arising from changes in the fair value of available-for-sale investments are recognized in equity.

F-115

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

40 . FINANCIAL RISK MANAGEMENT (continued)

Financial risk management (continued)

b. Market price risk (continued)

The performance of the Group’s available-for-sale investments is monitored periodically, together with a regular asse s sment of their relevance to the Group’s long - term strategic plans.

As of December 31, 2013, management considered the price risk for the Group’s available-for-sale investments to be immaterial in terms of the possible impact on profit or loss and total equity from a reasonably possible change in fair value.

c. Interest rate risk

Interest rate fluctuation is monitored to minimize any negative impact to financial p erformance . Borrowings at variable interest rates expose the Group to interest rate risk (Notes 18 and 1 9). To measure market risk pertaining to fluctuations in interest rates, the Group primarily use s interest margin and maturity profile of the financial assets and liabilities based on changing schedule of the interest rate.

At reporting date, the interest rate profile of the Group’s interest-bearing borrowings was as follows :

Fixed rate borrowings	2012 — (7,025	)	2013 — (9,591	)
Variable rate borrowings	(12,250	)	(10,665	)

Sensitivity analysis for variable rate borrowings

At December 31, 2013, a decrease (increase) by 25 basis points in interest rates of variable rate borrowings would have increased (decreased) equity and profit or loss by Rp27 billion, respectively. This analysis assumes that all other variables, in particular foreign currency rates, remain constant.

d. Credit risk

The following table presents the maximum exposure to credit risk of the Group’s financial assets:

	2012	2013
Cash and cash equivalents	13,118	14,696
Other current financial assets	4,338	6, 872
Trade and other receivables	5,409	6, 421
Long-term investments	21	21
Advances and other non-current assets	614	6 85
Total	23,500	28 ,695

F-116

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

40 . FINANCIAL RISK MANAGEMENT (continued)

Financial risk management (continued)

d. Credit risk (continued)

The Group is exposed to credit risk primarily from trade and other receivables. The c redit risk is managed by continuous monitoring of outstanding balances and collection .

Trade and other receivables do not have any major concentration of risk whereas no customer receivable balance s exceed 2% of trade receivables a s of December 31, 2013.

Management is confident in its ability to continue to control and sustain minimal exposure to credit risk given that the Group has recognized sufficient provision for impairment of receivables to cover incurred loss arising from uncollectible receivables based on existing historical data on credit losses .

e . Liquidity risk

Liquidity risk arises in situations where the Group has difficulties in fulfilling financial liabilities when they become due.

Prudent liquidity risk management implies maintaining sufficient cash in order to meet the Group ’ s financial obligations . The Group continuously perform s an analysis to monitor financial position ratios, such as liquidity ratios and debt - to - equity ratio , against debt covenant requirements.

The following is the maturity profile of the Group ’ s financial liabilities:

Trade and other payables	Carrying amount — 1 1,988	Contractual cash flows — ( 11,988	)	2014 — (1 1 , 988	)	2015 — -		2016 — -		2017 — -		2018 and thereafter — -
Accrued expenses	5,2 64	(5,2 64	)	(5,2 64	)	-		-		-		-
Loans and other borrowings
Bank loans	10,023	(11,6 18	)	( 5, 02 8	)	(3,26 4)		(1,2 48	)	(9 80	)	(1,09 8	)
Obligations under finance leases	4,96 9	(6,90 4	)	(1,070	)	(885	)	(847	)	(813	)	(3,289	)
Two-step loans	1,915	(2,308	)	(292	)	(285	)	(278	)	(271	)	(1,182	)
Bonds and notes	3,349	(4,81 7	)	(582	)	(1,311	)	(215	)	(203	)	(2,50 6	)
Total	37, 508	(42, 899	)	(24, 224	)	(5,7 45	)	(2, 588	)	(2,26 7	)	(8,07 5	)

The difference between the carrying amount and the contractual cash flows is interest value.

F-117

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

40 . FINANCIAL RISK MANAGEMENT (continued)

Fair value of financial assets and financial liabilities

a . Fair value measurement

Fair value is the amount for which an asset could be exchanged, or liability settled, in an arm’s length transaction.

The Group determined the fair value measurement for disclosure purposes of each class of financial assets and financial liabilities based on the following methods and assumptions:

(i) The fair values of short-term financial assets and financial liabilities with maturities of one year or less (cash and cash equivalents, trade receivables, other receivables, other current assets, trade payables, other payables, dividend payable, accrued expenses, advances from customers and suppliers and short-term bank loans) are considered to approximate their carrying amount s as the impact of discounting is not significant .

(ii) Available-for-sale financial assets primarily consist of shares, mutual funds and c orporate and Government bonds. Shares and mutual funds actively traded in an established market are stated at fair value using quoted market price or, if unquoted, determined using a valuation technique. Corporate and Government bonds are stated at fair value by reference to prices of similar securities at the reporting date.

(iii) The fair values of long-term financial liabilities are estimated by discounting the future contractual cash flows of each liability at rates offered to the Group for similar liabilities of comparable maturities by the bankers of the Group , except for bonds which are based on market prices.

The fair value estimates are inherently judgmental and involve various limitations, including:

a. Fair values presented do not take into consideration the effect of future currency fluctuations.

b. Estimated fair values are not necessarily indicative of the amounts that the Group would record upon disposal/termination of the financial assets and liabilities.

b. Classification and fair value

The following table presents the carrying value and estimated fair values of the Group's financial assets and liabilities based on their classifications:

	2012 — Carrying value	Fair value	2013 — Carrying value	Fair value
Current financial assets
Available-for-sale - Other current financial assets	310	310	272	272
Fair value through profit or loss - Other current financial assets	-	-	297	297
Total	310	310	569	569
Non-current financial liabilities
Financial liabilities measured at amortized cost
Loans and other borrowings
Obligations under finance lease	2,324	2,324	4,969	4,969
Two-step loans	1,987	2,075	1,915	1,921
Bonds and notes	3,669	4,022	3,349	3,490
Long-term bank loans	11,258	11,346	9,591	9,474
Total	19,238	19,767	19,824	19,854

F-118

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

40 . FINANCIAL RISK MANAGEMENT (continued)

Fair value of financial assets and financial liabilities (continued)

c . Fair value hierarchy

The following table provides the fair value measurement hierarchy of the Group’s assets and liabilities.

	Fair value	Fair value measurement at reporting date using — Quoted prices in active markets for identical assets or liabilities (level 1)	Significant other observable inputs (level 2)	Significant unobservable inputs (level 3)
2012
Financial assets measured at fair value
Available-for-sale securities	310	52	210	48
Financial liabilities for which fair values are disclosed (Note 40.2b)
Loans and other borrowings
Obligations under finance lease	2,324	-	-	2,324
Two-step loans	2,075	-	-	2,075
Bonds and notes	4,022	3,355	-	667
Long-term bank loans	11,346	-	-	11,346
Total	19,767	3,355	-	16 , 412
2013
Financial assets measured at fair value
Available-for-sale	272	48	224	-
Fair value through profit or loss	297	-	-	297
Total	569	48	224	297
Financial liabilities for which fair values are d isclosed (Note 40.2b)
Loans and other borrowings
Obligations under finance lease	4,969	-	-	4,969
Two-step loans	1,921	-	-	1,921
Bonds and notes	3,490	3,141	-	349
Long-term bank loans	9,474	-	-	9,474
Total	19,854	3,141	-	16 , 713

Available-for-sale financial assets primarily consist of shares, mutual funds and c orporate and Government bonds. Corporate and Government bonds are stated at fair value by reference to prices of similar securities at the reporting date. As they are not actively traded in an established market, these securities are classified as level 2.

Financial asset at fair value through profit or loss represents the Put Option on the 20% remaining ownership in Indonusa which was received as part of the divestment considerations (Note 3). Since the fair value is not observable and valuation technique is used to determine the fair value , this financial asset is classified as level 3.

F-119

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

40 . FINANCIAL RISK MANAGEMENT (continued)

Fair value of financial assets and financial liabilities (continued)

c . Fair value hierarchy (continued)

Shares and mutual funds actively traded in an established market are stated at fair value using quoted market price and classified within level 1. The valuation of the mutual funds invested in c orporate and Government bonds and Put Option requires significant management judgment due to the absence of quoted market prices, the inherent lack of liquidity and the long-term nature of such assets. As these investments are subject to restrictions on redemption (such as transfer restrictions and initial lock-up periods) and observable activity for the investments is limited, these investments are therefore classified within level 3 of the fair value hierarchy. Management considers among other assumptions, the valuation and quoted price of the arrangement of the mutual funds. The fair value of Put Option is determined using binomial tree model.

Reconciliations of the beginning and ending balances for items measured at fair value using significant unobservable inputs (level 3) as of December 31, 201 2 and 2013 are as follows:

Balance at January 1	2012 — 64		2013 — 48
Purchase	8		-
Put O ption	-		289
Included in consolidated statements o f comprehensive i ncome:
Realized loss - recognized in profit or loss	(1	)	-
Unrealized loss - recognized in other comprehensive income	(2	)	8
Redemption	(21	)	(48	)
Balance at December 3 1	48		297

Offsetting financial assets and financial liabilities

The following represent the recognized financial instruments that are offset:

	2012 — Financial Assets		Financial Liabilities		2013 — Financial Assets		Financial Liabilities
Gross amounts	1,436		(913	)	1,477		(684	)
The amounts that have right of set-off	(781	)	781		(597	)	597
Net amounts presented in the consolidated statements of financial position (Notes 7 and 15)	655		(132	)	880		(87	)

F-120

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

4 1 . CAPITAL MANAGEMENT

The capital structure of the Group is as follows:

	2012 (Restated) — Amount	Portion	2013 — Amount	Portion
Short-term debts	37	0.06%	432	0.54%
Long-term debts	19,238	29.45%	19,824	24.78%
Total debts	19,275	29.51%	20,256	25.32%
Equity attributable to owners	46,055	70.49%	59,753	74.68%
Total	65,330	100.00%	80,009	100.00%

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for stockholders and benefits to other stakeholders and to maintain an optimum capital structure to minimize the cost of capital.

Periodically, the Group conducts debt valuation to assess possibilities of refinancing existing debts with new ones which have more efficient cost that will lead to more optimized cost-of-debt. In case of idle cash with limited investment opportunities, the Group will consider buying back its shares of stock or paying dividend to its stockholders.

In addition to complying with loan covenants, the Group also maintains its capital structure at the level it believes will not risk its credit rating and which is comparable with that of its competitors.

Debt - to - equity ratio (comparing net interest-bearing debt to total equity) is a ratio which is monitored by management to evaluate the Group’s capital structure and review the effectiveness of the Group’s debts. The Group monitors its debt levels to ensure the debt - to - equity ratio complies with or is below the ratio set out in its contractual borrowings and that such ratio is comparable or better than th at of regional area entities in the telecommunications industry.

The Group’s debt-to-equity ratio as of December 31, 201 2 and 201 3 is as follows:

Total interest bearing debts	201 2 (Restated) — 19,275		2013 — 20,256
Less c ash and cash equivalent s	(13,118	)	(14,696	)
Net debt	6,157		5,560
Total equity attributable to owners	46, 055		59, 753
Net debt-to-equity ratio	13. 37 %		9 . 3 0 %

As stated in Note 1 9 , the Group is required to maintain a certain debt - to - equity ratio and debt service coverage ratio by the lenders. During the year s ended December 31 , 201 2 and 2013 , the Group complied with the externally imposed capital requirements.

F-121

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

4 2 . SUPPLEMENTAL CASH FLOW INFORMATION

The non-cash investing activities for the years ended December 31, 2011, 201 2 and 2013 are as follows:

	2011	2012	2013
Acquisition s of property and equipment credited to:
Trade payables	4,900	4,627	6,412
Obligations under finance leases	79	2,588	3,201
Non-monetary exchange	1,226	1,686	268
Acquisition of data center business	-	150	-
Reclassification of property and equipment to asset held for sale	791	-	105

4 3 . SUBSEQUENT EVENTS

a. On January 10, 2014, Sigma entered into short-term and long-term working capital facility agreements involving Rp25 billion and Rp322 billion, respectively, for the development of data center located in Sentul.

b. On January 15, 2014, PT Graha Telkom Sigma (“GTS”) and PT Granary Reka Cipta signed an agreement for the development of utilization, and the development and processing of assets that belong to GTS located in Baturiti, Tabanan Bali. The cooperation is carried out under a revenue-sharing agreement for 10 years.

c. On January 20, 2014, the Company filed an objection to the Tax Underpayment Assessment for VAT for the year 2007 that was received by the Company in November 2013 (Note 32).

d. On January 22, 2014, Telkomsel received a formal verdict from the Tax Court concerning Telkomsel’s claim for tax refund for import duties. Based on its verdict, the Tax Court accepted portion of the claim amounting to Rp8.5 billion (Note 32). As of the issuance date of the consolidated financial statements, Telkomsel has not received the refund.

e. On January 23, 2014, the Company established a subsidiary , PT Infrastruktur Telekomunikasi Indonesia (Telkom Infratel) , whose establishment was legalized based on the Ministry of Law and Human Rights (MoLHR) Decision Letter No. AHU-03196.AH.01.01. Year 2014.

f. On January 29, 2014, the MoCI issued Decision Letter No. 42 Year 2014, granting Telkomsel the license to provide:

a. Mobile telecommunication services with radio frequency bandwidth in the 900 MHz and 1800 MHz bands;

b. Mobile telecommunication services IMT-2000 with radio frequency bandwidth in the 2.1 GHz bands (3G); and

c. Basic telecommunication services.

The license replaced Decision Letter No. 101/KEP/M.KOMINFO/10/2006 dated October 11, 2006.

g. On January 30, 2014, the Indonesian Telecommunication Regulatory Body of Telkomsel, in its letter No. 118/KOMINFO/DJPPI/PI.02.04/01/2014, decided to implement new interconnection tariffs effective from February 2014 until December 2016, subject to evaluation on an annual basis.

h. On February 20, 2014, Infomedia made a drawdown from the credit facility from Bank UOB amounting to Rp70 billion (Note 18a) .

F-122

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

4 4 . NEW ACCOUNTING STANDARDS AND INTERPRETATIONS NOT YET ADOPTED

The accounting standards and interpretations that are issued, but not yet effective for the year ended December 31, 201 3 and which have not been applied in preparing these consolidated financial statements are disclosed below. The Group intends to adopt these standards, if applicable, when they become effective.

Effective for annual periods beginning on or after January 1, 201 4

· IAS 32, Offsetting Financial Assets and Financial Liabilities - Amendments to IAS 32

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 consolidated financial position or performance.

· 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 January 1, 2013, but Amendments to IFRS 9 Mandatory Effective Date of IFRS 9 and Transition Disclosures , issued in December 2011, moved the mandatory effective date to January 1, 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 the 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.

· Amendment s to IAS 36, Impairment of Assets on Recoverable Amount Disclosures

Th ese amendment s address the disclosure of information about the recoverable amount of impaired assets if that amount is based on fair value less costs of disposal. The Group does not expect that th ese amendment s will have material financial impact in future financial statements.

· IFRS Interpretations Committee (“IFRIC”) Interpretation 21 Levies (IFRIC 21)

IFRIC 21 clarifies that an entity recognizes a liability for a levy when the activity that triggers payment, as identified by the relevant legislation, occurs. For a levy that is triggered upon reaching a minimum threshold, the interpretation clarifies that no liability should be anticipated before the specified minimum threshold is reached. The Group does not expect that IFRIC 21 will have material financial impact in future financial statements.

F-123

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

4 4 . NEW ACCOUNTING STANDARDS AND INTERPRETATIONS NOT YET ADOPTED (continued)

Effective for annual periods beginning on or after January 1, 201 4 (continued)

· IAS 39 Novation of Derivatives and Continuation of Hedge Accounting - Amendments to IAS 39

These amendments provide relief from discontinuing hedge accounting when novation of a derivative designated as a hedging instrument meets certain criteria. The Group has not novated any derivatives during the current period. However, these amendments would be considered for future novations.

Effective for annual periods beginning on or after July 1, 201 4

· Amendments to IAS 19 - Defined Benefit Plans: Employee Contribution

This amend s the requirement of the contributions from employees or third parties that are linked to service. If contributions are not linked to service , they will affect remeasurements of the net defined benefit liability (asset). If contributions are linked to service and independent of the number of years of service, an entity is permitted to recogni z e such contributions as reduction in the service cost in the period in which the related service is rendered. If contributions are linked and dependent of the number of years of service, an entity is required to attribute those contributions to periods of service using the same attribution method for the gross benefits (i.e. , either using the plan’s contribution formula or on str a ight-line basis). Based on preliminary analyses, no material impact is expected on the consolidated financial position and performance of the Group.

· Amendments to IAS 24 - Key Management Personnel

These amendments introduce additional criteria for the entity that can be classified as related party to the reporting entity. The additional criteria provides that an entity is related to the reporting entity if that entity, or any member of a group of which it is a part, provides key management personnel services to the reporting entity or to the parent of the reporting entity. These amendments also introduce additional disclosure requirements related to that new related party criteri on . These amendments are not expected to impact the Group’s consolidated financial position or performance.

· Amendments to IFRS 2 - Definition of Vesting Condition

These amendments modify the definitions of “market condition” and “vesting conditions” and add the definitions of “performance condition” and “service condition”. Based on preliminary analyses, these amendments are not expected to impact the Group’s consolidated financial position or performance.

· Amendment s to IAS 16, Property Plant Equipment

These amendments clarify that when an item of property, plant and equipment is revalued, the carrying amount of the asset is adjusted to the revalued amount. The restatement of the accumulated depreciation is not always proportionate to the change in the gross carrying amount but is adjusted in a manner that is consistent with the revaluation of the carrying amount of the asset. The accumulated depreciation at the date of the revaluation is adjusted to equal the difference between the gross carrying amount and the carrying amount of the asset after taking into account accumulated impairment losses. These amendments are not expected to impact the Group’s consolidated financial position or performance.

F-124

PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT S
As of January 1, 2012 (Restated), December 31, 2012 (Restated) and December 31, 201 3
and for the years ended December 31, 2011 (Restated), 2012 (Restated) and 2013
(Figures in tables are presented in billions of rupiah, unless otherwise stated)

Tabel of Content

4 4 . NEW ACCOUNTING STANDARDS AND INTERPRETATIONS NOT YET ADOPTED (continued)

Effective for annual periods beginning on or after July 1, 201 4 (continued)

· Am e ndmends to IAS 38, Intangible Assets

These amendments clarify that when an item of intangible asset is revalued, the carrying amount of the asset is adjusted to the revalued amount. The restatement of the accumulated amorti z ation is not always proportionate to the change in the gross carrying amount but is adjusted in a manner that is consistent with the revaluation of the carrying amount of the asset. The accumulated amorti z ation at the date of the revaluation is adjusted to equal the difference between the gross carrying amount and the carrying amount of the asset after taking into account accumulated impairment losses. These amendments are not expected to impact the Group’s consolidated financial position or performance.

· Amendment to IAS 40, Investment Property

The amendment clarif ies the interrelationship between IFRS 3 and IAS 40 when classifying property as investment property or owner-occupied property. The Group does not expect that this amendment will have material financial impact in future financial statements.

· Amendment s to IFRS 8, Operating Segment

These amendments require an entity to disclose information about the judgments made by management in applying the aggregation criteria of operating segments as a complement of the disclosure required. The amendments also require an entity to provide a reconciliation of the total of the reportable segments’ assets to the entity’s assets if the entity reports a measure of total assets and liabilities for each reportable segment. Based on preliminary analyses, no material impact is expected on the consolidated financial position and performance of the Group .

· Amendment s to IFRS 3 - Accounting for Contingent Consideration in a Business Combination and Scope Exception for Joint Ventures

These amendments require that the acquirer shall classify an obligation to pay contingent consideration that meets the definition of a financial instrument as a financial liability or as equity on the basis of the definitions of an equity instrument and a financial liability in IAS 32, Financial Instruments: Presentation. The amendments also clarify that IFRS 3 does not apply to the accounting for the formation of a joint arrangement in the financial statements of the joint arrangement itself. These amendments are not expected to impact the Group’s consolidated financial position or performance.

· Amendment to IFRS 13 - Portfolio Exception

An entity that manages the group of financial assets and financial liabilities on the basis of its net exposure to either market risks or credit risks is permitted to apply an exception for measuring at fair value. The amendment clarifies that the exception applies only to financial assets, financial liabilities and other contracts within the scope of IAS 39, Financial Instruments: Recognition and Measurement or IFRS 9 Financial Instruments. The amendment is not expected to impact the Group’s consolidated financial position or performance.

F-125

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