PERUSAHAAN PERSEROAN PERSERO PT TELEKOMUNIKASI INDONESIA TBK

6-K 1 u93127e6vk.htm PT TELEKOMUNIKASI INDONESIA PT Telekomunikasi Indonesia PAGEBREAK

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13 a-16 OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934

*For the month of* October , 2007****

Perusahaan Perseroan (Persero) PT TELEKOMUNIKASI INDONESIA

(Translation of registrants name into English)

Jalan Japati No. 1 Bandung-40133 INDONESIA

(Address of principal executive office)

[Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F Form 20-F þ Form 40-F o

[Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934 Yes o No þ

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

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SIGNATURES

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link1 "SIGNATURES"

SIGNATURES

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

Perusahaan Perseroan (Persero) PT TELEKOMUNIKASI INDONESIA
(Registrant)

By	/s/ Harsya Denny Suryo
	(Signature)
	Harsya Denny Suryo
Vice President Investor Relation & Corporate Secretary

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PERUSAHAAN PERSEROAN (PERSERO) PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED) AS OF SEPTEMBER 30, 2006 AND 2007 (Figures in table are presented in millions of Rupiah and thousands of United States Dollars)

Notes	Rp	Rp	US$ (Note 3)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	2c,2f,6,47	8,308,894	6,493,187	709,832
Temporary investments	2c,2g,47	45,911	177,879	19,446
Trade receivables	2c,2h,7,47
Related parties net of allowance for doubtful
accounts of Rp101,991 million in 2006
and Rp94,989 million in 2007		695,501	567,612	62,051
Third parties net of allowance for doubtful
accounts of Rp657,172 million in 2006
and Rp1,031,541 million in 2007		3,036,325	2,919,563	319,165
Other receivables net of allowance for
doubtful accounts of Rp2,222 million in 2006
and Rp9,668 million in 2007	2c,2h,47	149,406	154,610	16,902
Inventories net of allowance for obsolescence of
Rp52,346 million in 2006 and Rp52,840
million in 2007	2i,8	187,774	202,465	22,133
Prepaid expenses	2c,2j,9,47	1,531,029	2,430,367	265,686
Claim for tax refund	41a		337,855	36,934
Prepaid taxes	41b	15,768	3,048	333
Other current assets	2c,10,47	276,677	8,460	925
Total Current Assets		14,247,285	13,295,046	1,453,407
NON-CURRENT ASSETS
Long-term investments net	2g,11	101,193	101,924	11,142
Property, plant and equipment net of accumulated
depreciation of Rp43,354,140 million in 2006
and Rp51,964,900 million in 2007	2k,2l,12	48,524,904	58,390,386	6,383,207
Property, plant and equipment under revenue-sharing arrangements net of accumulated
depreciation of Rp522,937 million in 2006
and Rp556,057 million in 2007	2m,13,50	495,481	753,756	82,400
Prepaid pension benefit cost	2r,44c	640	99	11
Advances and other non-current assets	2c,2k,14,47	757,326	592,748	64,799
Goodwill and other intangible assets net of
accumulated amortization of Rp3,474,774
million in 2006 and Rp4,495,594 million in 2007	2x,5,15	4,218,685	3,649,601	398,973
Escrow accounts	2c,16,47	6,446	1,398	153
Total Non-current Assets		54,104,675	63,489,912	6,940,685
TOTAL ASSETS		68,351,960	76,784,958	8,394,092

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

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PERUSAHAAN PERSEROAN (PERSERO) PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED) (continued) AS OF SEPTEMBER 30, 2006 AND 2007 (Figures in table are presented in millions of Rupiah and thousands of United States Dollars)

Notes	Rp		Rp		US$ (Note 3)
LIABILITIES AND STOCKHOLDERS EQUITY
CURRENT LIABILITIES
Trade payables	2c,17,47
Related parties		964,176		1,621,089		177,217
Third parties		3,692,822		4,303,484		470,455
Other payables		41,869		42,515		4,648
Taxes payable	2s,41c	2,496,066		2,234,461		244,270
Dividends payable		1,380		1,443,053		157,754
Accrued expenses	2c,18,47	2,060,715		2,546,973		278,434
Unearned income	19	1,982,159		2,398,869		262,243
Advances from customers and suppliers		222,546		192,088		20,999
Short-term bank loans	2c,20,47	1,021,100		950,152		103,870
Current maturities of long-term liabilities	2c,21,47	4,510,336		4,108,241		449,111
Total Current Liabilities		16,993,169		19,840,925		2,169,001
NON-CURRENT LIABILITIES
Deferred tax liabilities net	2s,41g	2,162,928		3,392,526		370,869
Unearned income on revenue-sharing arrangements	2m,13,50	347,010		557,601		60,957
Unearned initial investor payments under joint
operation scheme	2n,49	4,455
Accrued long service award	2c,2r,45,47	596,096		246,583		26,956
Accrued post-retirement health care benefits	2c,2r,46,47	2,937,396		2,708,854		296,131
Accrued pension and other post-retirement benefits costs	2r,44	1,148,856		948,589		103,699
Long-term liabilities net of current maturities
Obligations under capital leases	2l,12	220,643		190,883		20,867
Two-step loans related party	2c,22,47	4,177,274		3,726,622		407,392
Bank loans	2c,24,47	2,670,250		2,391,795		261,470
Deferred consideration for business combinations	25	2,389,413		2,700,015		295,164
Total Non-current Liabilities		16,654,321		16,863,468		1,843,505
MINORITY INTEREST	26	7,195,424		8,262,080		903,206
STOCKHOLDERS EQUITY
Capital stock Rp250 par value per Series A
Dwiwarna share and Series B share
Authorized one Series A Dwiwarna share and
79,999,999,999 Series B shares
Issued and fully paid one Series A Dwiwarna share
and 20,159,999,279 Series B shares	1b,27	5,040,000		5,040,000		550,970
Additional paid-in capital	28	1,073,333		1,073,333		117,336
Treasury stock (84,786,500 shares in 2006 and
222,340,500 shares in 2007)	2p,29	(611,186	)	(1,945,901	)	(212,725	)
Difference in value of restructuring transactions
between entities under common control	30	90,000		180,000		19,678
Difference due to change of equity in associated
companies	2g	385,595		385,595		42,153
Unrealized holding gain available-for-sale securities	2g	4,724		14,992		1,639
Translation adjustment	2g	233,231		228,024		24,927
Retained earnings
Appropriated		1,803,397		6,700,879		732,537
Unappropriated		19,489,952		20,141,563		2,201,865
Total Stockholders Equity		27,509,046		31,818,485		3,478,380
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY		68,351,960		76,784,958		8,394,092

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

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PERUSAHAAN PERSEROAN (PERSERO) PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) FOR THE NINE MONTHS PERIOD ENDED SEPTEMBER 30, 2006 AND 2007 (Figures in table are presented in millions of Rupiah and thousands of United States Dollars, except per share and per ADS data)

Notes	Rp		Rp		US$ (Note 3)
OPERATING REVENUES
Telephone	2q,31
Fixed lines		8,073,223		8,465,629		925,458
Cellular		14,899,143		16,716,458		1,827,435
Interconnection	2q,32,47	6,366,453		8,760,988		957,747
Joint operation schemes	2n,33,49	485,342
Data and Internet	2q,34	6,369,172		10,164,051		1,111,129
Network	2q,35,47	460,864		601,139		65,716
Revenue-sharing arrangements	2m,36,50	306,347		320,353		35,021
Other telecommunications services		239,400		258,785		28,290
Total Operating Revenues		37,199,944		45,287,403		4,950,796
OPERATING EXPENSES
Personnel	37	4,960,987		6,188,397		676,512
Depreciation	2k,2l,2m,12,13,14	6,633,280		7,022,770		767,726
Interconnection	38			1,640,124		179,298
Operations, maintenance and telecommunication
services	39,47	5,350,590		6,840,662		747,818
General and administrative	40	2,217,373		2,539,008		277,563
Marketing		854,830		1,159,873		126,797
Total Operating Expenses		20,017,060		25,390,834		2,775,714
OPERATING INCOME		17,182,884		19,896,569		2,175,082
OTHER INCOME (CHARGES)
Interest income	47	448,337		378,215		41,346
Interest expense	47	(862,038	)	(1,070,206	)	(116,994	)
Gain (loss) on foreign exchange net	2e	677,754		(113,642	)	(12,424	)
Equity in net income (loss) of associated companies	2g,11	(184	)	6,919		756
Others net		117,923		61,195		6,690
Other income (charges) net		381,792		(737,519	)	(80,626	)
INCOME BEFORE TAX		17,564,676		19,159,050		2,094,456
TAX BENEFIT (EXPENSE)	2s,41d
Current tax		(5,617,263	)	(5,194,590	)	(567,870	)
Deferred tax		230,251		(727,129	)	(79,489	)
		(5,387,012	)	(5,921,719	)	(647,359	)
INCOME BEFORE MINORITY INTEREST IN NET
INCOME OF SUBSIDIARIES		12,177,664		13,237,331		1,447,097
MINORITY INTEREST IN NET INCOME OF
SUBSIDIARIES net	26	(2,955,193	)	(3,418,276	)	(373,684	)
NET INCOME		9,222,471		9,819,055		1,073,413
BASIC EARNINGS PER SHARE	2t,42
Net income per share		458.12		491.64		0.05
Net income per ADS
(40 Series B shares per ADS)		18,324.80		19,665.60		2.00

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

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PERUSAHAAN PERSEROAN (PERSERO) PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY (UNAUDITED) FOR THE NINE MONTHS PERIOD ENDED SEPTEMBER 30, 2006 AND 2007 , (Figures in tables are presented in millions of Rupiah and thousands of United States Dollars)


					value of
					restructuring	Difference
					transactions	due to change	Unrealized
			Additional		between entities	of equity	holding gain (loss)							Total
		Capital	paid-in		under common	in associated	on available-for-sale		Translation		Retained earnings			stockholders
		stock	capital	Treasury stock	control	companies	securities		adjustment		Appropriated	Unappropriated		equity
Description	Notes	Rp	Rp	Rp	Rp	Rp	Rp		Rp		Rp	Rp		Rp
Balance as of January 1, 2006		5,040,000	1,073,333			90,000	385,595	(748	)	233,253		1,803,397	14,667,571		23,292,401
Unrealized holding gain (loss) on
available-for-sale securities	2g							5,472							5,472
Foreign currency translation of associated companies	2g, 11									(22	)				(22	)
Resolved during the Annual General Meeting
of the Stockholders on June
30, 2006
Declaration of cash dividends	2w,43												(4,400,090	)	(4,400,090	)
Treasury stock acquired at cost	29			(611,186	)										(611,186	)
Net income for the year													9,222,471		9,222,471
Balance as of September 30, 2006		5,040,000	1,073,333	(611,186	)	90,000	385,595	4,724		233,231		1,803,397	19,489,952		27,509,046

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

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PERUSAHAAN PERSEROAN (PERSERO) PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY (UNAUDITED) (continued) FOR THE NINE MONTHS PERIOD ENDED SEPTEMBER 30, 2006 AND 2007 (Figures in tables are presented in millions of Rupiah and thousands of United States Dollars)


					value of
					restructuring	Difference
					transactions	due to change	Unrealized
			Additional		between entities	of equity	holding gain (loss)					Total
		Capital	paid-in		under common	in associated	on available-for-sale	Translation	Retained earnings			stockholders
		stock	capital	Treasury stock	control	companies	securities	adjustment	Appropriated	Unappropriated		equity
Description	Notes	Rp	Rp	Rp	Rp	Rp	Rp	Rp	Rp	Rp		Rp
Balance as of January 1, 2007		5,040,000	1,073,333	(952,211	)	180,000	385,595	8,865	227,669	1,803,397	20,302,041		28,068,689
Unrealized holding gain (loss) on
available-for-sale securities	2g							6,127					6,127
Foreign currency translation of associated companies	2g,11								355				355
Resolved during the Annual General Meeting
of the Stockholders on June 29,
2007
Declaration of cash dividends	2w, 43										(5,082,051	)	(5,082,051	)
Appropriation for general reserve	2w, 43									4,897,482	(4,897,482	)
Treasury stock acquired at cost	29			(993,690	)								(993,690	)
Net income for the year											9,819,055		9,819,055
Balance as of September 30, 2007		5,040,000	1,073,333	(1,945,901	)	180,000	385,595	14,992	228,024	6,700,879	20,141,563		31,818,485

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

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

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE NINE MONTHS PERIOD ENDED SEPTEMBER 30, 2006 AND 2007 (Figures in tables are presented in millions of Rupiah and thousands of United States Dollars)

Rp		Rp		US$ (Note 3)
CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts from operating revenues
Telephone
Fixed lines	7,882,107		8,258,515		902,817
Cellular	15,111,876		16,898,903		1,847,379
Interconnection net	6,497,771		7,688,569		840,510
Joint operation schemes	343,261
Data and Internet	6,205,209		9,710,438		1,061,540
Other services	1,179,477		1,019,699		111,473
Total cash receipts from operating revenues	37,219,701		43,576,124		4,763,719
Cash payments for operating expenses	(11,976,811	)	(18,132,366	)	(1,982,221	)
Cash receipt (refund) from/to customers	(2,146	)	30,134		3,294
Cash generated from operations	25,240,744		25,473,892		2,784,792
Interest received	464,712		385,972		42,194
Income tax paid	(5,318,733	)	(5,449,458	)	(595,732	)
Interest paid	(780,379	)	(1,104,136	)	(120,703	)
Net Cash Provided by Operating Activities	19,606,344		19,306,270		2,110,551
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of temporary investments
and placements in time deposits	(18,374	)	(87,302	)	(9,544	)
Proceeds from sale of property, plant and equipment	23,915		21,706		2,373
Acquisition of property, plant and equipment	(10,597,131	)	(12,117,416	)	(1,324,670	)
(Increase) decrease in advances for the purchase of
property, plant and equipment	73,444		744,596		81,399
Decrease (increase) in advances and others	(53,387	)	124,233		13,581
Acquisition of intangible assets	(436,000	)
Proceeds from sale of long-term investments	22,561
Cash dividends received	1,024		510		56
Net Cash Used in Investing Activities	(10,983,948	)	(11,313,673	)	(1,236,805	)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash dividends paid	(4,998,019	)	(5,083,431	)	(555,718	)
Cash dividends paid to minority shareholders of subsidiaries	(1,975,837	)	(1,904,980	)	(208,251	)
(Increase) decrease in escrow accounts	126,051		675		74
Proceeds from short-term borrowings	3,520,000		1,489,526		162,834
Repayments of short-term borrowings	(173,800	)	(950,659	)	(103,926	)
Redemption of bonds			(1,000,000	)	(109,319	)
Repayments of Medium-term Notes	(145,000	)	(465,000	)	(50,834	)
Proceeds from long-term borrowings	69,610		1,502,350		164,236
Repayments of long-term borrowings	(1,422,578	)	(2,081,247	)	(227,521	)
Payment for purchase of treasury stock	(611,186	)	(993,690	)	(108,630	)
Repayments of promissory notes			(199,365	)	(21,793	)
Repayments of obligations under capital leases	(11,743	)	(20,735	)	(2,267	)
Net Cash Used in Financing Activities	(5,622,502	)	(9,706,556	)	(1,061,115	)
NET
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	2,999,894		(1,713,959	)	(187,369	)
EFFECT OF EXCHANGE RATE CHANGES
ON CASH AND CASH EQUIVALENTS	(65,684	)	(108,690	)	(11,882	)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR	5,374,684		8,315,836		909,083
CASH AND CASH EQUIVALENTS AT END OF PERIOD	8,308,894		6,493,187		709,832

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

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

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE NINE MONTHS PERIOD ENDED SEPTEMBER 30, 2006 AND 2007 (Figures in tables are presented in millions of Rupiah and thousands of United States Dollars

Rp	Rp	US$ (Note 3)
SUPPLEMENTAL CASH FLOW INFORMATION
Noncash investing and financing activities:
Acquisition of property, plant and equipment
through incurence of payable and
accrued liability	2,793,328	3,617,441	395,457
Acquisition of property, plant and equipment
through Revenue Sharing Arrangement	92,310

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2006 AND 2007, AND FOR THE NINE MONTHS PERIOD ENDED SEPTEMBER 30, 2006 AND 2007 (Figures in tables are presented in millions of Rupiah, unless otherwise stated)

GENERAL

a. Establishment and General Information

| Perusahaan Perseroan (Persero) P.T. Telekomunikasi Indonesia Tbk (the Company) was
originally part of Post en Telegraafdienst, which was established in 1884 under the
framework of Decree No. 7 dated March 27, 1884 of the Governor General of the Dutch Indies
and published in State Gazette No. 52 dated April 3, 1884. |
| --- |
| In 1991, based on Government Regulation No. 25 year 1991, the status of the Company was
changed into a state-owned limited liability corporation (Persero). The Company was
established based on notarial deed No. 128 dated September 24, 1991 of Imas Fatimah, S.H.
The deed of establishment was approved by the Minister of Justice of the Republic of
Indonesia in his decision letter No. C2-6870.HT.01.01.Th.1991 dated November 19, 1991, and
was published in State Gazette of the Republic of Indonesia No. 5 dated January 17, 1992,
Supplement No. 210. The Articles of Association have been amended several times, the most
recent amendment based on notarial deed No. 4 dated April 6, 2006 of A. Partomuan Pohan,
S.H., LLM. and was published in State Gazette of the Republic of Indonesia No. 51 dated
June 27, 2006, Supplement No. 666, among others, to amend the directors and
commissioners authorities and responsibilities. |
| In accordance with Article 3 of its articles of association, the scope of the Companys
activities is as follows: |

| 1. | The Companys objective is to provide telecommunications and information
facilities and services, in accordance with prevailing regulations. |
| --- | --- |
| 2. | To achieve the above objective, the Company is involved in the following activities: |

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

| ii. | Planning, developing, providing, marketing or selling and
improving telecommunications and information services in accordance with
prevailing regulations. |
| --- | --- |
| iii. | Performing activities and other undertakings in connection with
the utilization
and development of the Companys resources and optimizing the utilization of the
Companys property, plant and equipment, information systems, education and
training, and repairs and maintenance facilities. |

The Companys head office is located at Jalan Japati No. 1, Bandung, West Java.

The Companys business in the provision of domestic telecommunications services including telephone, telex, telegram, satellite, leased lines, electronic mail, mobile communication and cellular services. In order to accelerate the construction of telecommunications facilities, to make the Company a world-class operator, and to increase the technology as well as the knowledge and skills of its employees, in 1995, the Company entered into agreements with investors to develop, manage and operate telecommunications facilities in five of the Companys seven regional divisions under Joint Operation Schemes (known as Kerja Sama Operasi or KSO) (Notes 4 and 5).

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) SEPTEMBER 30, 2006 AND 2007, AND FOR THE NINE MONTHS PERIOD ENDED SEPTEMBER 30, 2006 AND 2007 (Figures in tables are presented in millions of Rupiah, unless otherwise stated)

GENERAL (continued)

a. Establishment and General Information (continued)

| Pursuant to Law No. 3/1989 on Telecommunications which took effect on April 1, 1989,
Indonesian legal entities are allowed to provide basic telecommunications services in
cooperation with the Company as the domestic telecommunications organizing body (or badan
penyelenggara). Government Regulation No. 8/1993, concerning the provision of
telecommunications services, further regulates that cooperation to provide basic
telecommunications services can be in the form of joint venture, joint operation or
contract management and that the entities cooperating with the domestic telecommunications
organizing body must use the organizing bodys telecommunications networks. If the
telecommunications networks are not available, the Government Regulation requires that the
cooperation be in the form of a joint venture that is capable of constructing the necessary
networks. |
| --- |
| The Minister of Tourism, Post and Telecommunications of the Republic of Indonesia (MTPT),
through two decision letters both dated August 14, 1995, reaffirmed the status of the
Company as the organizing body for the provision of domestic telecommunications services. |
| Further, effective from January 1, 1996, the Company was granted the exclusive right to
provide local wireline and fixed wireless services for a minimum period of 15 years and the
exclusive right to provide domestic long-distance telecommunications services for a minimum
period of 10 years. The exclusive rights also applied to telecommunications services
provided for and on behalf of the Company through a KSO. This grant of rights did not
affect the Companys right to provide other domestic telecommunications services. |
| Under Law No. 36/1999 on Telecommunications, which took effect from September 2000,
telecommunications activities cover: |

i.	Telecommunications networks
ii.	Telecommunications services
iii.	Special telecommunications

National state-owned companies, regional state-owned companies, privately-owned companies and cooperatives are allowed to provide telecommunications networks and services. Special telecommunications can be provided by individuals, government agencies and legal entities other than telecommunications networks and service providers.

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GENERAL (continued)

a. Establishment and General Information (continued)

| Under Law No. 36/1999, activities that result in monopolistic practices and unfair
competition are prohibited. In connection with this law, Government Regulation No. 52/2000
was issued, which provides that interconnection fees shall be charged to originating
telecommunications network operators where telecommunications service is provided by two or
more telecommunications network operators. |
| --- |
| Based on press release No. 05/HMS/JP/VIII/2000 dated August 1, 2000 from the Directorate
General of Post and Telecommunications and the correction thereto No. 1718/UM/VIII/2000
dated August 2, 2000, the period of exclusive rights granted to the Company to provide
local and domestic long-distance fixed-line telecommunications services, which initially
would expire in December 2010 and December 2005, respectively, were shortened to expire in
August 2002 and August 2003, respectively. In return, the Government was required to pay
compensation to the Company (Note 30). |
| Based on a press release from the Coordinating Minister of Economics dated July 31, 2002,
the Government decided to terminate the Companys exclusive rights as a network provider
for local and long-distance services with effect from August 1, 2002. On August 1, 2002, PT
Indonesian Satellite Corporation Tbk (Indosat) was granted a license to provide local and
long-distance telecommunications services. |
| On May 13, 2004, pursuant to the Ministry of Communications Decree No. KP. 162/2004, the
Company was granted a commercial license to provide International Direct Dialing (IDD)
services. |
| Based on the resolution of the Annual General Meeting of Stockholders, the minutes of which
have been summarized by deed No. 36 dated June 24, 2005 of A. Partomuan Pohan, S.H., LLM.,
the composition of the Companys Board of Commissioners and Board of Directors as of
September 30, 2006 was as follows: |

President Commissioner	: Tanri Abeng
Commissioner	: Anggito Abimanyu
Commissioner	: Gatot Trihargo
Independent Commissioner	: Arif Arryman
Independent Commissioner	: Petrus Sartono
President Director	: Arwin Rasyid
Vice President Director / Chief Operating Officer	: Garuda Sugardo
Director of Finance	: Rinaldi Firmansyah
Director of Network and Solution	: Abdul Haris
Director of Enterprise and Wholesale	: Arief Yahya
Director of Human Resources	: John Welly
Director of Consumer	: Guntur Siregar

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GENERAL (continued)

a. Establishment and General Information (continued)

Based on the resolution of the Annual General Meeting of Stockholders, the minutes of which have been summarized by deed No. 16 dated February 28, 2007 of A. Partomuan Pohan, S.H., LLM., the composition of the Companys Board of Commissioners and Board of Directors as of February 28, 2007 was as follows:

President Commissioner	: Tanri Abeng
Commissioner	: Anggito Abimanyu
Commissioner	: Gatot Trihargo
Independent Commissioner	: Arif Arryman
Independent Commissioner	: Petrus Sartono
President Director	: Rinaldi Firmansyah
Director of Finance	: Sudiro Asno
Director of Network and Solution	: I Nyoman Gede Wiryanata
Director of Enterprise and Wholesale	: Arief Yahya
Director of Human Capital and General Affairs	: Faisal Syam
Director of Consumer	: Ermady Dahlan
Chief Information Technology Officer	: Indra Utoyo
Director of Compliance and Risk Management	: Prasetio

Subsequently, based on Extraordinary General Meeting of Stockholders, the minutes of which have been summarized by deed No. 213/VI/2007 dated June 29, 2007 of A. Partomuan Pohan, S.H., LLM., the composition of the Companys Board of Commissioners have been change, as a result the composition of the Companys Board of Commissioners and Board of Directors as of September 30, 2007 was as follows:

President Commissioner	: Tanri Abeng
Commissioner	: Anggito Abimanyu
Commissioner	: Mahmuddin Yasin
Independent Commissioner	: Arif Arryman
Independent Commissioner	: Petrus Sartono
President Director	: Rinaldi Firmansyah
Director of Finance	: Sudiro Asno
Director of Network and Solution	: I Nyoman Gede Wiryanata
Director of Enterprise and Wholesale	: Arief Yahya
Director of Human Capital and General Affairs	: Faisal Syam
Director of Consumer	: Ermady Dahlan
Chief Information Technology Officer	: Indra Utoyo
Director of Compliance and Risk Management	: Prasetio

As of September 30, 2006 and 2007, the Company had 27,769 employees and 25,466 employees, respectively, while the subsidiaries had 6,442 employees and 6,982 employees, respectively.

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GENERAL (continued)

b. Public offering of shares of the Company

| The Companys total number of shares immediately prior to its initial public offering was
8,400,000,000, which consisted of 8,399,999,999 Series B shares and 1 Series A Dwiwarna
share, all of which were owned by the Government of the Republic of Indonesia (the
Government). On November 14, 1995, the Government sold the Companys shares through an
initial public offering on the Jakarta Stock Exchange and Surabaya Stock Exchange. The
shares offered consisted of 933,333,000 new Series B shares and 233,334,000 Series B
shares owned by the Government. A share offering was also conducted on the New York Stock
Exchange (NYSE) and London Stock Exchange (LSE) for 700,000,000 Series B shares owned
by the Government, which were converted into 35,000,000 American Depositary Shares (ADS).
Each ADS represented 20 Series B shares at that time. |
| --- |
| In December 1996, the Government completed a block sale of 388,000,000 Series B shares,
and later in 1997, distributed 2,670,300 Series B shares as an incentive to stockholders
who did not sell their shares within one year from the date of the initial public
offering. In May 1999, the Government sold 898,000,000 Series B shares. |
| Under Law No. 1/1995 on Limited Liability Companies, the minimum total par value of the
Companys issued shares of capital stock must be at least 25% of the total par value of
the Companys authorized capital stock, or in the Companys case Rp.5,000,000 million. To
comply with the Law, it was resolved at the Annual General Meeting of Stockholders on
April 16, 1999 to increase the issued share capital by distribution of 746,666,640 bonus
shares through the capitalization of certain additional paid-in capital. The bonus shares
were distributed to the existing stockholders in August 1999. |

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GENERAL (continued)

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

| In December 2001, the Government conducted another block sale of 1,200,000,000 shares or
11.9% of the total outstanding Series B shares. In July 2002, the Government sold
312,000,000 shares or 3.1% of the total outstanding Series B shares. |
| --- |
| On July 30, 2004, the Annual General Meeting of Stockholders, the minutes of which were
notarized by deed No. 26 dated July 30, 2004 of A. Partomuan Pohan, S.H., LLM., resolved
to decrease the par value of the Companys shares from Rp.500 to Rp.250 by means of a
2-for-1 stock split. The Series A Dwiwarna share with par value of Rp.500 was split to one
Series A Dwiwarna share with par value of Rp.250 and one Series B share with par value of
Rp.250. As a result of the stock split, the number of the Companys authorized capital
stock increased from one Series A Dwiwarna share and 39,999,999,999 Series B shares to one
Series A Dwiwarna share and 79,999,999,999 Series B shares, and the number of the
Companys issued capital stock increased from one Series A Dwiwarna share and
10,079,999,639 Series B shares to one Series A Dwiwarna share and 20,159,999,279 Series B
shares. After the stock split, each ADS represented 40 Series B shares. |
| Based on the resolution of the Extraordinary General Meeting of Stockholders on December
21, 2005, the Stockholders authorized the phase I plan to repurchase up to a maximum of 5%
of the Companys issued Series B shares for a total repurchase amount not exceeding
Rp.5,250,000 million. Up to the last transaction of this phase dated June 20, 2007, the
Company has repurchased 211,290,500 shares of the Companys issued and outstanding Series
B shares, representing approximately 1.05% of the Companys issued and outstanding Series
B shares, for a total repurchase amount of Rp.1,829,138 million, including the broker and
custodian fees (Note 29). |
| Based on the resolution of the Annual General Meeting of Stockholders on June 29, 2007,
the stockholders approved the phase II plan to repurchase up to 215,000,000 Series B
shares with the reserved fund amounted to Rp.2,000,000 million. As of October 29, 2007,
the Company has repurchased 11,050,000 shares of the Companys issued and outstanding
series B shares, representing approximately 0.05% of the Companys issued and outstanding
series B series B shares, for a total repurchase amount of Rp116,763 million, including
the broker and custodian fees (Note 29). |
| As of September 30, 2007, all of the Companys Series B shares were listed on the Jakarta
Stock Exchange and Surabaya Stock Exchange and 44,575,362 ADS shares were listed on the
NYSE and LSE. |

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GENERAL (continued)

c. Subsidiaries

The Company has consolidated the following direct subsidiaries in Indonesia which it controls as a result of its majority ownership:

			Percentage of		Start of	Total Assets
			Ownership		Commercial	Before Eliminations
Subsidiaries	Domicile	Nature of Business	2006	2007	Operations	2006	2007
			%	%
PT Pramindo
Ikat Nusantara	Medan	Telecommunications construction & services	100	100	1995	1,362,243	1,241,376
PT Telekomunikasi
Indonesia International
(formerly PT Aria
West International)	Jakarta	Telecommunications	100	100	1995	786,732	686,734
PT Multimedia Nusantara	Jakarta	Multimedia	100	100	1998	60,659	114,373
PT Graha Sarana Duta	Jakarta	Real estate, construction and services	99.99	99.99	1982	121,554	137,888
PT Dayamitra
Telekomunikasi	Jakarta	Telecommunications	100	100	1995	545,090	450,442
PT Indonusa Telemedia	Jakarta	PayTV	96	96	1997	62,387	77,458
PT Telekomunikasi
Selular	Jakarta	Telecommunications	65	65	1995	32,843,776	44,205,863
PT Napsindo
Primatel Internasional	Jakarta	Telecommunications	60	60	1999	5,212	3,862
PT Infomedia Nusantara	Jakarta	Data and information service	51	51	1984	387,158	442,056

The Company has also consolidated the following indirect subsidiaries:

				Ownership
				Percentage by		Start of
			Nature of	Subsidiaries		Commercial
Indirect Subsidiaries	Stockholders	Domicile	Business	2006	2007	Operations
				%	%
Telekomunikasi Selular
Finance Limited	PT Telekomunikasi Selular	Mauritius	Finance	100	100	2002
Telkomsel Finance B.V.	PT Telekomunikasi Selular	Netherlands	Finance	100	100	2005
Aria West International
Finance B.V.	PT Telekomunikasi Indonesia International (formerly PT Aria West International)	Netherlands	Finance	100	100	1996
PT Balebat Dedikasi
Prima	PT Infomedia Nusantara	Indonesia	Printing	65	65	2000
PT Finnet Indonesia	PT Multimedia Nusantara	Indonesia	Banking data and communication	60	60	2006

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GENERAL (continued)

| c. |
| --- |
| PT Pramindo Ikat Nusantara (Pramindo) |
| Pramindo is the investor in KSO I, the joint operating scheme that provides
telecommunications services in Sumatra. On April 19, 2002, the Company entered into a
Conditional Sale and Purchase Agreement (CSPA) (as amended on August 1, 2002) to acquire
100% of the issued and paid-up share capital of Pramindo. The Company acquired control of
Pramindo on August 15, 2002, the date when the Company entered into a Stockholders Voting
Agreement pursuant to which the Company obtained the right to vote all Pramindos shares
and the right to nominate all the members of the Board of Directors and Board of
Commissioners of Pramindo. |
| PT Telekomunikasi Indonesia International (TII) |
| TII (previously PT Aria West International AWI) is the investor in KSO III, the joint
operating scheme that provides telecommunication services in West Java. On May 8, 2002,
the Company entered into a Conditional Sale and Purchase Agreement to acquire 100% of the
issued and paid-up capital of TII. The acquisition was effective on July 31, 2003, the
date when the Company entered into the First Amendment to the Conditional Sale and
Purchase Agreement with the stockholders of TII in which both parties agreed to the
Companys acquisition of TII (Note 4). |
| In 2007, based on notarial deed No. 3 of Titien Suwartini, S.H. dated March 6, 2007 and
approved by Ministry of Justice and Human Rights in its decision letter No.
W8-00573.HT.01.04-TH.2007 in relation to the amendment of the Companys Articles of
Association, the name of PT Aria West International, has been changed to PT Telekomunikasi
Indonesia International. At the same time, its business operation has been expanded to
include international businesses. All changes have been approved by Capital Investment
Coordinating Board in its decision letter No. 20/III/PMDN/2007 dated March 1, 2007. |
| PT Multimedia Nusantara (Metra) |
| Metra is engaged in providing multimedia telecommunications services. |
| On July 21, 2005, the Annual General Meeting of Stockholders of Metra resolved to issue
additional share capital totaling Rp.26,000 million to the Company. The Company paid the
entire amount on October 21, 2005. |
| PT Graha Sarana Duta (GSD) |
| GSD is currently engaged primarily in leasing of offices as well as providing building
management and maintenance services, civil consultant and developer. |
| On April 6, 2001, the Company acquired its 99.99% ownership interest in GSD from Koperasi
Mitra Duta and Dana Pensiun Bank Duta, for a purchase consideration of Rp.119,000 million.
This acquisition resulted in goodwill of Rp.106,348 million which was amortized over a
period of five years (Note 15). |

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GENERAL (continued)

| c. |
| --- |
| PT Dayamitra Telekomunikasi (Dayamitra) |
| Dayamitra is the investor in KSO VI, the joint operating scheme that provides
telecommunications services in Kalimantan. The Companys acquisition of a 90.32% ownership
interest in Dayamitra was effective on May 17, 2001, the date when the Deed of Share
Transfer was signed. The Company also entered into an Option Agreement to acquire the
remaining 9.68% interest from the selling stockholders. On December 14, 2004, the Company
exercised the option to acquire the remaining 9.68% outstanding shares of Dayamitra by
entering into a Sale and Purchase Agreement with TM Communications (HK) Ltd. |
| PT Indonusa Telemedia (Indonusa) |
| Indonusa is engaged in providing pay television and content services. |
| On August 8, 2003, the Company increased its investment in Indonusa from 57.5% to 88.08%
through a share-swap agreement with PT Centralindo Pancasakti Cellular (CPSC) (Note
11c). |
| Pursuant to the extraordinary meeting of stockholders of Indonusa on October 29, 2003,
Indonusa agreed to convert its payable to the Company amounting to Rp.13,500 million into
1,350,000 shares of Indonusa. Following such conversion, the Companys ownership in
Indonusa increased from 88.08% to 90.39%. |
| The Company purchased 5.29% of Indonusas shares from PT Megacell Media for Rp.4,000
million, thereby increasing the Companys ownership interest from 90.39% to 95.68% after
the settlement of payment on November 22, 2005. |
| On May 9, 2007, at the Extraordinary General Meeting of Stockholders of Indonusa, the
stockholders resolved to decrease the par value of the Indonusas shares from Rp.10,000 to
Rp.500 by means of a stock split, to increase its paid capital from Rp.500,000 million to
Rp.700,000, and to issue additional share capital in 2 (two) phase plan, at the latest
May 31, 2007 for the phase I plan and August 2007 for the phase II plan, for Rp.22,600
million and Rp.83,100 million, respectively. |
| On May 31, 2007, the Company had paid for the additional share capital for Rp.21,624
million which represent 95.68% of additional issued share capital for phase I plan. On
August 6, 2007, the Company paid for the remaining additional share for Rp.976.3 million.
This transaction did not affect the Companys ownership in Indonusa. |
| Currently, the Company is evaluating whether it will acquire additional share capital for
the phase II plan. |

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GENERAL (continued)

| c. |
| --- |
| PT Telekomunikasi Selular (Telkomsel) |
| Telkomsel is engaged in providing telecommunications facilities and mobile cellular
services using Global System for Mobile Communication (GSM) technology on a nationwide
basis. |
| The Companys cross-ownership transaction with Indosat in 2001 increased the Companys
ownership interest in Telkomsel to 77.72%. |
| On April 3, 2002, the Company entered into a Conditional Sale and Purchase Agreement with
Singapore Telecom Mobile Pte. Ltd. (Singtel). Pursuant to the agreement, the Company
sold 23,223 ordinary registered shares of Telkomsel, representing 12.72% of the issued and
paid-up capital of Telkomsel for a total consideration of US$429 million (equivalent to
Rp.3,948,945 million). This transaction reduced the Companys ownership in Telkomsel from
77.72% to 65%. |
| Based on Decision Letter No.19/KEP/M.KOMINFO/2/2006 of the Minister of Communication and
Information Technology dated February 14, 2006, the Government granted Telkomsel an
IMT-2000 license in the 2.1 GHz frequency bandwidth for a ten year period (3G license),
extendable subject to evaluation (Note 15 and 52d(ii)). In September 2006, Telkomsel
started its commercial 3G service. |
| Based on the Decision Letter No. 101/KEP/M.KOMINFO/10/2006 dated October 11, 2006 of the
Minister of Communication and Information Technology, Telkomsel operating licenses were
updated granting Telkomsel the rights to provide: |

| a. | Mobile telecommunication services with radio frequency bandwith in the 900
MHz and 1800 MHz bands; |
| --- | --- |
| b. | Mobile telecommunication services IMT-2000 with radio frequency bandwith in
the 2.1 GHz bands (3G); and |
| c. | Basic telecommunication services. |

| PT Napsindo Primatel Internasional (Napsindo) |
| --- |
| Napsindo is engaged in providing Network Access Point (NAP), Voice Over Data (VOD) and
other related services. |
| Based on the notarial deed No. 47 dated December 30, 2002 of H. Yunardi, S.H., the Company
purchased 28% of Napsindos shares from PT Info Asia Sukses Makmur Mandiri for US$4.9
million (equivalent to Rp.43,620 million), thereby increasing the Companys ownership
interest from 32% to 60% after the settlement of payment on January 28, 2003. Starting
January 13, 2006 Napsindos operation has ceased. |
| PT Infomedia Nusantara (Infomedia) |
| Infomedia is engaged in providing telecommunications information services and other
information services in the form of print and electronic media. In 2002, Infomedia
established a new line of business to provide call center services. |

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GENERAL (continued)

| c. |
| --- |
| Telekomunikasi Selular Finance Limited (TSFL) |
| Telkomsel has 100% direct ownership interest in TSFL, a company established in Mauritius
on April 22, 2002. TSFLs objective is to raise funds for the development of Telkomsels
business through the issuance of debenture stock, bonds, mortgages or any other
securities. |
| Telkomsel Finance B.V. (TFBV) |
| TFBV, a wholly owned subsidiary of Telkomsel, was established in Amsterdam, the
Netherlands, on February 7, 2005, for the purpose of borrowing, lending and raising funds,
including issuance of bonds, promissory notes or debt instruments. |
| Aria West International Finance B.V. (AWI BV) |
| AWI BV, a company established in the Netherlands, is a wholly owned subsidiary of TII. AWI
BV is engaged in rendering services in the field of trade and finance service. |
| PT Balebat Dedikasi Prima (Balebat) |
| Balebat is a company engaged in the printing business, domiciled in Bogor, Indonesia. On
July 1, 2006 Infomedia purchased 14% of Balebats shares from other shareholders, thereby
increasing Infomedias ownership interest from 51% to 65%. |
| PT Finnet Indonesia (Finnet) |
| Finnet is a company established in January 2006 that engaged in banking data and
communication. Metra has 60% direct ownership interest in Finnet. |
| PT Pro Infokom Indonesia (PII) |
| On January 29, 2003, the Company together with PT Indonesia Comnets Plus, a subsidiary of
Perusahaan Perseroan (Persero) PT Perusahaan Listrik Negara (PLN) and PT Prima Infokom
Indonesia established PT Pro Infokom Indonesia (PII). The establishment was notarized by
deed of A. Partomuan Pohan, S.H., LLM., notary in Jakarta, under Article of Association
No. 24, dated January 29, 2003. |
| PII was established to develop a national information network system as the back-bone for
the
development of the Indonesian e-Government. PII was intended to maximize the utilization
of both the Companys and PLNs existing infrastructures. |
| On January 20, 2005, the Company sold its entire 51% equity interest in PII to PT Prima
Infokom Indonesia for Rp.471 million. The revenues and expenses of PII as well as the
related loss on the sale of the subsidiary were not significant to the consolidated
statement of income. |

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GENERAL (continued)

d.
The consolidated financial statements were authorized for issue by the Board of Directors
on October 29, 2007 .

| 2. |
| --- |
| The consolidated financial statements of the Company and subsidiaries have been prepared in
accordance with accounting principles generally accepted in Indonesia (Indonesian GAAP).
Indonesian GAAP varies with accounting principles generally accepted in the United States of
America (U.S. GAAP). Information relating to the nature and effect of such differences is
presented in Note 57. |

a.	Basis for preparation of financial statements
	The consolidated financial statements, except for the statements of cash flows, are
prepared on the accrual basis of accounting. The measurement basis used is historical cost,
except for certain accounts recorded on the basis described in the related accounting
policies.
	The consolidated statements of cash flows are prepared using the direct method and present
the changes in cash and cash equivalents from operating, investing and financing
activities.
	Figures in the consolidated statements are rounded and presented in millions of Indonesian
Rupiah (Rp.), unless otherwise stated.
b.	Principles of consolidation
	The consolidated financial statements include the financial statements of the Company and
its subsidiaries in which the Company directly or indirectly has ownership of more than
50%, or the Company has the ability to control the entity, even though the ownership is
less than or equal to 50%. Subsidiaries are consolidated from the date on which every
effective control is obtained and are no longer consolidated from the date of disposal.
	All significant inter-company balances and transactions have been eliminated in
consolidation.
c.	Transactions with related parties
	The Company and subsidiaries have transactions with related parties. The definition of
related parties used is in accordance with Indonesian Statement of Financial Accounting
Standards (PSAK) No.7, Related Party Disclosures.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

d.	Acquisitions of subsidiaries
	The acquisition of a subsidiary from a third party is accounted for by using the purchase
method of accounting. Intangible assets acquired in a purchase business combination are
amortized over their respective contactual lives. The excess of the acquisition cost over
the Companys interest in the fair value of identifiable assets acquired and liabilities
assumed is recorded as goodwill and amortized using the straight-line method over a period
of not more than five years.
	The Company continually assesses whether events or changes in circumtances have ocurred
that would require revision of the remaining useful life of intangible assets and goodwill,
or whether there is any indication of impairment. If any indication of impairment exists,
the recoverable amount of intangible assets and goodwill is estimated based on the expected
future cash flows which are discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money and the risks specific
to the asset.
	In July 2004, the Indonesian Financial Accounting Standard Board issued PSAK No.38 (Revised
2004), Accounting for Restructuring Transactions between Entities under Common Control,
(PSAK 38R). Under PSAK 38R, the acquisition transaction with entities under common
control is accounted for using book value, in a manner similar to that in pooling of
interests accounting (carryover basis). The difference between the consideration paid or
received and the related historical carrying amount, after considering income tax effects,
is recognized directly in equity and reported as Difference in value of restructuring
transactions between entities under common control in the stockholders equity section.
	The balance of Difference in value of restructuring transactions between entities under
common control is reclassified to retained earnings when the common control relationship
has ceased.
e.	Foreign currency translation
	The functional currency of the Company and its subsidiaries is the Indonesian Rupiah and
the books of accounts of the Company and its subsidiaries are maintained in Indonesian
Rupiah. Transactions in foreign currencies are translated into Indonesian Rupiah at the
rates of exchange prevailing at transaction date. At the balance sheet date, monetary
assets and monetary liability balances denominated in foreign currencies are translated
into Indonesian Rupiah based on the buy and sell rates quoted by Reuters prevailing at the
balance date. The Reuters buy and sell rates, applied respectively to translate monetary
assets and monetary liability balances, were Rp.9,215 and Rp.9,225 to US$1, Rp.11,680 and
Rp.11,695 to Euro1 and Rp.78.05 and Rp.78.17 to Japanese Yen1 as of September 30, 2006 and
Rp.9,145 and Rp.9,150 to US$1, Rp.12,966 and Rp.12,975 to Euro1 and Rp.79.20 and Rp.79.26
to Japanese Yen1 as of September 30, 2007. Telkomsel used Bank Indonesia middle rate, which
were Rp.9,235 to US$ 1 and Rp.11,732 to Euro1 as of
September 30, 2006 and Rp.9,137 to US$ 1 and Rp.12,938 to Euro 1 as of September 30, 2007.
Management concludes that the difference of those exchange rates is not material to the
consolidated financial statements.
	The resulting foreign exchange gains or losses, realized and unrealized, are credited or
charged to income of the current year, except for foreign exchange differences incurred on
borrowings during the construction of qualifying assets which are capitalized to the extent
that the borrowings can be attributed to the construction of those qualifying assets (Note
2k).

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

f.	Cash and cash equivalents
	Cash and cash equivalents consist of cash on hand and in banks and all unrestricted time
deposits with maturities of not more than three months from the date of placement.
g.	Investments

i.	Time deposits
	Time deposits with maturities of more than three months are presented as temporary
investments.
ii.	Investments in securities
	Investments in available-for-sale securities are stated at fair value. Unrealized
holding gains or losses from available-for-sale securities are excluded from income of
the current year and are reported as a separate component in the stockholders equity
section until realized. Realized gains or losses from the sale of available-for-sale
securities are recognized in the income of the current year, 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 income of
the current year.
iii.	Investments in associated companies
	Investments in shares of stock in which the Company has 20% to 50% of the voting rights,
and through which the Company exerts significant influence, but not control, over the
financial and operating policies are accounted for using the equity method. Under this
method, the Company recognizes the Companys proportionate share in the income or loss
of the associated company from the date that significant influence commences until the
date that significant influence ceases. When the Companys share of loss exceeds the
carrying amount of the associated company, the carrying amount is reduced to nil and
recognition of further losses is discontinued except to the extent that the Company has
guaranteed obligations of the associated company or committed to provide further
financial support to the associated company.
	On a continuous basis, but no less frequently than at the end of each year, the Company
evaluates the carrying amount of its ownership interests in investee companies for
possible impairment. Factors considered in assessing whether an indication of
other-than-temporary impairment exists include the achievement of business plan
objectives and milestones including cash flow projections and the results of planned
financing activities, the financial condition and
prospects of each investee company, the fair value of the ownership interest relative to
the carrying amount of the investment, the period of time the fair value of the
ownership interest has been below the carrying amount of the investment and other
relevant factors. Impairment to be recognized is measured based on the amount by which
the carrying amount of the investment exceeds the fair value of the investment. Fair
value is determined based on quoted market prices (if any), projected discounted cash
flows or other valuation techniques as appropriate.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

g. Investments (continued)

iii.	Investments in associated companies (continued)
	Changes in the value of investments due to changes in the equity of associated companies
arising from capital transactions of such associated companies with other parties are
recognized directly in equity and are reported as Difference due to change of equity in
associated companies in the stockholders equity section. Differences previously
credited directly to equity as a result of equity transactions in associated companies
are released to the statement of income upon the sale of an interest in the associate in
proportion with percentage of the interest sold.
	The functional currency of PT Pasifik Satelit Nusantara and PT Citra Sari Makmur is the
U.S. Dollar. For the purpose of reporting these investments using the equity method, the
assets and liabilities of these companies as of the balance sheet date are translated
into Indonesian Rupiah using the rates of exchange prevailing at that date, while
revenues and expenses are translated into Indonesian Rupiah at the average rates of
exchange for the year. The resulting translation adjustments are reported as part of
Translation adjustment in the equity section.
iv.	Other investments
	Investments in shares of stock with ownership interests of less than 20% that do not
have readily determinable fair values and are intended for long-term investments are
carried at cost and are adjusted only for other-than-temporary decline in the value of
individual investments. Any such write-down is charged directly to income of the current
period.

h.	Trade and other receivables
	Trade and other receivables are recorded net of an allowance for doubtful accounts, based
upon a review of the collectibility of the outstanding amounts. Accounts are written off
against the allowance during the period in which they are determined to be not collectible.
	Trade and other receivables are recorded at the invoiced amount. The allowance for doubtful
accounts is the Companys best estimate of the amount of probable credit losses in the
Companys existing accounts receivable. The amount of the allowance is recognized in the
consolidated statement of income within operating expenses general and administrative. The
Company determines the allowance based on historical write-off experience. The Company
reviews its allowance for doubtful accounts monthly. Past due balances over 90 days for
retail customers are fully provided, and past due balance for non-retail customers over a
specified amount are reviewed individually for collectibility. Account balances are charged
off against the allowance after all means of collection have been exhausted and the
potential for recovery is considered remote. The Company
does not have any off-balance sheet credit exposure related to its customers.
i.	Inventories
	Inventories consist of components and modules which are expensed and transferred to
property, plant and equipment upon use, respectively. Inventories also include Subscriber
Identification Module (SIM) cards, Removable User Identity Module (RUIM) cards and pulse
reload voucher blanks, which are expensed upon sale. Inventories are stated at the lower of
costs or net realizable value.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

i.	Inventories (continued)
	Cost is determined using the weighted average cost method for components, SIM cards, RUIM
cards and prepaid voucher blanks, and the specific-identification method for modules.
	Allowance for obsolescence is primarily based on the estimated forecast of future usage of
these items.
j.	Prepaid expenses
	Prepaid expenses are amortized over their beneficial periods using the straight-line method.
k.	Property, plant and equipment direct acquisitions
	Property, plant and equipment directly acquired are stated at cost, less accumulated
depreciation and impairment losses.
	Property, plant and equipment, except land, are depreciated using the straight-line method,
based on the estimated useful lives of the assets as follows:

	Years
Buildings	20
Switching equipment	5-15
Telegraph, telex and data communication equipment	5-15
Transmission installation and equipment	5-20
Satellite, earth station and equipment	3-15
Cable network	5-15
Power supply	3-10
Data processing equipment	3-10
Other telecommunications peripherals	5
Office equipment	2-5
Vehicles	5-8
Other equipment	5

| Land is stated at cost and is not depreciated. |
| --- |
| When the carrying amount of an asset exceeds its estimated recoverable amount, the asset is
written down to its estimated recoverable amount, which is determined based upon the greater
of its net selling price or value in use. |
| The cost of maintenance and repairs is expensed as incurred. Expenditures, which extend the
useful
life of the asset or result in increased future economic benefits such as increase in
capacity or improvement in the quality of output or standard of performance, are capitalized
and depreciated in conjunction with the depreciation of the related property, plant and
equipment over their remaining useful lives or their newly estimated useful lives. |

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

k.	Property, plant and equipment direct acquisitions (continued)
	When assets are retired or otherwise disposed of, their carrying values and the related
accumulated depreciation are eliminated from the consolidated financial statements, and the
resulting gains or losses on the disposal or sale of property, plant and equipment are
recognized in the statements of income.
	Computer software used for data processing is included in the value of the associated
hardware.
	Property under construction is stated at cost until construction is complete, at which time
it is reclassified to the specific property, plant and equipment account to which it
relates. During the construction period, borrowing costs, which include interest expense and
foreign exchange differences incurred to finance the construction of the asset, are
capitalized in proportion to the average amount of accumulated expenditures during the
period. Capitalization of borrowing cost ceases when the assets are ready for its intended
use.
	Equipment temporarily unused are reclassified into equipment not used in operation and
depreciated over their estimated useful life using straight line method.
l.	Property, plant and equipment under capital leases
	Property, plant and equipment acquired under capital leases are stated at the present value
of minimum lease payments along with the residual values (option price) paid by the lessee
at the end of lease period. At inception of the lease, a corresponding liability, which
equals to the present value of minimum lease payments, is also recorded and subsequently
reduced by the principal component of each minimum lease payment. The interest component of
each minimum lease payment is recognized in the statements of income.
	Leased assets are capitalized only if all of the following criteria are met: (a) the lessee
has an option to purchase the leased asset at the end of the lease period at a price agreed
upon at the inception of the lease agreement, and (b) the sum of periodic lease payments,
plus the residual value, will cover the acquisition price of the leased asset and related
interest, and (c) there is a minimum lease period of at least 2 years.
	Leased assets are depreciated using the same method and over the same estimated useful lives
used for directly acquired property, plant and equipment.
m.	Revenue-sharing arrangements
	Revenues from revenue-sharing arrangements are recognized based on Companys share as agreed
upon in the contracts.
	The Company records assets under revenue-sharing agreements as Property, plant and
equipment under revenue-sharing arrangements (with a corresponding initial credit to
Unearned income on revenue-sharing arrangements presented in the liabilities section of
the balance sheet) based on the costs incurred by the investors as agreed upon in the
contracts entered into between the Company and the investors. Property, plant and equipment
are depreciated over their estimated useful lives using the straight-line method (Note 2k).

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

m.	Revenue-sharing arrangements (continued)
	Unearned income related to the acquisition of the property, plant and equipment under
revenue-sharing arrangements is amortized over the revenue-sharing period using the
straight-line method.
	At the end of the revenue-sharing period, the respective property, plant and equipment under
revenue-sharing arrangements are reclassified to the Property, plant and equipment
account.
n.	Joint operation schemes
	Revenues from joint operation schemes include amortization of the investors initial
payments, Minimum Telkom Revenues (MTR) and the Companys share of Distributable KSO
Revenues (DKSOR).
	Unearned initial investor payments received as compensation from the KSO Investors were
presented net of all direct costs incurred in connection with the KSO agreement and
amortized using the straight-line method over the KSO period of 15 years starting from
January 1, 1996.
	MTR were recognized on a monthly basis, based upon the contracted MTR amount for the current
year, in accordance with the KSO agreement.
	The Companys share of DKSOR was recognized on the basis of the Companys percentage share
of the KSO revenues, net of MTR and operational expenses of the KSO Units, as provided in
the KSO agreements.
	Under PSAK No. 39, Accounting for Joint Operation Schemes, which supersedes paragraph 14
of PSAK No. 35, Accounting for Telecommunication Services Revenue, the assets built by the
KSO Investors under the joint operation schemes were recorded in the books of the KSO
Investors which operate the assets and would be transferred to the Company at the end of the
KSO period or upon termination of the KSO agreement.
	As of October 19, 2006 the Company has obtained full control over all of the KSO operations
by acquisition of its KSO investors or the businesses.
o.	Deferred charges for landrights
	Costs incurred to process and extend the landrights are deferred and amortized using the
straight-line method over the term of the landrights.
p.	Treasury stock
	The reacquired Companys stocks is accounted for using the reacquisition cost and presented
as Treasury Stock to be deducted against the equity. The cost of reacquired Companys
stocks sold is accounted for using the weighted average method. The difference resulting
from the cost and the proceeds from the sale of treasury stock is credited to Paid-in
Capital.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

q. Revenue and expense recognition

i.	Fixed line telephone revenues
	Revenues from fixed line installations are recognized at the time the installations are
placed in service and ready for use. Revenues from usage charges are recognized as
customers incur the charges.
ii.	Cellular and fixed wireless telephone revenues
	Revenues from post-paid services, which consist of connection fee as well as usage and
monthly charges, are recognized as follows:

| | Connection fees for service connection are recognized as revenues at the time
the connection occurs. |
| --- | --- |
| | Airtime and charges for value added services are recognized based on usage by
subscribers. |
| | Monthly subscription charges are recognized as revenues when incurred by
subscribers. |

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

| | Sale of SIM and RUIM card is recognized as revenue upon delivery of the starter
packs to distributors, dealers or directly to customers. |
| --- | --- |
| | Sale of pulse reload vouchers (either bundled in starter packs or sold as
separate items) is recognized initially as unearned income and recognized
proportionately as usage revenue based on duration of successful calls made and the
value added services used by the subscribers or the expiration of the unused stored
value of the voucher. |

| iii. |
| --- |
| Revenues from network interconnection, with other domestic and international
telecommunications carriers are recognized as incurred in accordance agreement. |
| Prior to 2007, the Company and subsidiaries revenues from network interconnection with
other domestic and international telecommunication carriers are presented net of
interconnection
expenses. |
| Effective January 1, 2007, the Company and subsidiaries have apply cost based
interconnection tariff for local calls. Consequently, interconnection revenues with
other domestic telecommunications carriers are presented at gross amount. Revenues from
network interconnection with other international telecommunication carriers are
presented net of interconnection expenses. |

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

q. Revenue and expense recognition (continued)

iv.	Data and internet revenues
	Revenues from installations (set-up) of internet, data communication and e-Business are
recognized upon the completion of installations. Revenues from data communication and
internet are recognized based on usage.
v.	Revenues from network
	Revenues from network consist of revenues from leased lines and satellite transponder
leases. Revenues are recognized based on subscription fee as specified in the
agreements.
	Expenses are recognized on an accrual basis and unutilized promotional credits and
allowances are netted against unearned income.

r. Employee benefits

i.	Pension and post-retirement health care benefit plans
	The net obligations in respect of the defined pension benefit and post-retirement health
care benefit plans are calculated at the present value of estimated future benefits that
the employees have earned in return for their service in the current and prior periods,
deducted by any plan assets, unrecognized actuarial gains or losses, and unrecognized
past service cost. The calculation is performed by an independent actuary using the
projected unit credit method. The present value of the defined benefit obligation is
determined by discounting the estimated future cash outflows using interest rates of
government bonds that have terms to maturity approximating the terms of the related
liability.
	Actuarial gains or losses arising from experience adjustments and changes in actuarial
assumptions, when exceeding the greater of 10% of present value of the defined benefit
obligation and 10% of fair value of plan assets, are charged or credited to the income
statement over the average remaining service lives of the relevant employees. Prior
service cost is recognized immediately if vested or amortized over the vesting period.
	For defined contribution plans, the regular contributions constitute net periodic costs
for the year in which they are due and as such are included in staff costs.
ii.	Long service awards (LSA)
	Employees are entitled to receive certain cash awards based on length of service
requirement. The benefits are either paid at the time the employee reaches certain
anniversary dates during employment or proportionately upon retirement or at the time of
termination.
	Actuarial gains or losses arising from experience adjustment and changes in actuarial
assumptions are charged immediately to current income statement.
	The obligation with respect to LSA is calculated by an independent actuary using the
projected unit credit method.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

r. Employee benefits (continued)

| iii. |
| --- |
| Early retirement benefits are accrued at the time a commitment to provide early
retirement benefits is made 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. |

| | Gains or losses on curtailment are recognized when there is a commitment to make a material
reduction in the number of employees covered by a plan or when there is an amendment of a
defined benefit plan terms such that a material element of future services by current
employees will no longer qualify for benefits, or will qualify only for reduced benefits. |
| --- | --- |
| | Gains or losses on settlement are recognized when there is a transaction that eliminates all
further legal or constructive obligation for part or all of the benefits provided under a
defined benefit plan. |
| s. | Income tax |
| | The Company and its subsidiaries recognized deferred tax assets and liabilities for
temporary differences between the financial and tax bases of assets and liabilities at each
reporting date. The Company and its subsidiaries recognized deferred tax assets resulting
from the recognition of future tax benefits, such as the benefit of tax loss carryforwards,
to the extent their future realization is probable. Deferred tax assets and liabilities are
measured using enacted tax rates at each reporting date which are expected to apply to
taxable income in the years in which those temporary differences are expected to be
recovered or settled. |
| | Income tax is charged or credited to the statement of income, except to the extent that it
relates to items recognized directly in equity, such as difference in value of restructuring
transactions between entities under common control (Note 2d) and effect of foreign currency
translation adjustment for certain investments in associated companies (Note 2g.iii), in
which case income tax is also charged or credited directly to equity. |
| | Amendments to taxation obligations are recorded when an assessment is received or if
appealed against, when the results of the appeal are determined. |
| t. | Basic earnings per share and earnings per American Depositary Share (ADS) |
| | Basic earnings per share are computed by dividing net income by the weighted average number
of shares outstanding during the period. Net income per ADS is computed by multiplying basic
earnings per share by 40, the number of shares represented by each ADS. |
| u. | Segment information |
| | The Company and its subsidiaries segment information is presented based upon identified
business segments. A business segment is a distinguishable unit that provides different
products and services and is managed separately. Business segment information is consistent
with operating information routinely reported to the Companys chief operating decision
maker. |

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

v.	Derivative instruments
	Derivative transactions are accounted for in accordance with PSAK 55, Accounting for
Derivative Instruments and Hedging Activities which requires that all derivative
instruments be recognized in the financial statements at fair value. To qualify for hedge
accounting, PSAK 55 requires certain criteria to be met, including documentation required to
have been in place at the inception of the hedge.
	Changes in fair value of derivative instruments that do not qualify for hedge accounting are
recognized in the statement of income. If a derivative instrument is designated and
qualifies for hedge accounting, changes in fair value of derivative instruments are recorded
as adjustments to the assets or liabilities being hedged in the income for the current
period or in the stockholders equity, depending on the type of hedge transaction
represented and the effectiveness of the hedge.
w.	Dividends
	Dividend distribution to the Companys shareholders is recognized as liability in the
Companys consolidated financial statements in the period in which the dividends are
approved by the Companys shareholders. For interim dividends, the Company recognized as
liability based on Board of Directors decision with the approval from Board of
Commissioners.
x.	Intangible Assets
	Intangible assets comprised of intangible assets from subsidiaries and business acquisition
(see note 2d) and license. Intangible asset shall be recognized if it is probable that the
expected future economic benefits that are attributable to the asset will flow to the
Company and the cost of the asset can be reliably measured. Intangible asset is stated at
cost less accumulated amortizaton and impairment, if any. Intangible asset is amortized over
its useful life. The Company shall estimate 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.
	In 2006, Telkomsel was granted the right to operate the 3G license. Telkomsel is required to
pay an up-front fee and annual rights of usage (BHP) fee for the next ten years. The
up-front fee is recorded as intangible asset and amortized using the straight line method
over the term of the right to operate the 3G license (10 years). Amortization commences from
the date when the assets attributable to the provision of the related services are available
for use.
	Based on management interpretation of the license conditions and the written confirmation
from the Directorate General of Post and Telecommunication, it is believed that the license
could be returned
at any time without any financial obligation to pay the remaining outstanding BHP fees.
Based on this fact, Telkomsel concluded that it has purchased the right to make annual
operating payments to operate the 3G license. Accordingly, Telkomsel recognizes the BHP fees
as expense when incurred.
	Management of Telkomsel assess its plan to continue to use the license on an annual basis.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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

3.	TRANSLATION OF RUPIAH INTO UNITED STATES DOLLARS
	The consolidated financial statements are stated in Indonesian Rupiah. The translations of
Indonesian Rupiah amounts into United States Dollars are included solely for the convenience
of the readers and have been made using the average of the market buy and sell rates of
Rp.9,147.5 to US$1 published by Reuters on September 30, 2007. The convenience translations
should not be construed as representations that the Indonesian Rupiah amounts have been, could
have been, or could in the future be, converted into United States Dollars at this or any
other rate of exchange.
4.	ACQUISITIONS OF KSO III INVESTORS
	Effective on July 31, 2003 (the closing date), the Company acquired 100% of the outstanding
common stock of TII (previously the Companys KSO III partner), for approximately Rp.1,141,752
million plus the assumption of TIIs debts of Rp.2,577,926 million. The purchase consideration
included non-interest bearing promissory notes with a face value of US$109.1 million
(equivalent to Rp.927,272 million), the present value of which at the discount rate of 5.16%
at the closing date was estimated to be US$92.7 million (equivalent to Rp.788,322 million).
The promissory notes would be paid in 10 equal semi-annual installments beginning July 31,
2004.
	The acquisition of TII has been accounted for using the purchase method of accounting. There
was no goodwill arising from this acquisition. The following table summarizes the final
purchase price allocation of the acquired assets and assumed liabilities based on estimates of
their respective fair values at the closing date:

Distributable KSO revenue receivable	540,267
Property, plant and equipment	1,556,269
Intangible assets	1,982,564
Other assets	34,372
Deferred tax liabilities	(393,794	)
Fair value of net assets acquired	3,719,678
Borrowings assumed	(2,577,926	)
Total purchase consideration	1,141,752

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4.	ACQUISITIONS OF KSO III INVESTORS (continued)
	Intangible assets identified from this acquisition represent the right to operate the business
in the KSO III area and the amount is being amortized over the then remaining term of the KSO
agreement of 7.4 years (Note 15).
	The Companys consolidated results of operations had included the operating results of TII
since July 31, 2003, the date of acquisition.
	The outstanding promissory notes issued for the acquisition of TII are presented as Deferred
consideration for business combinations in the consolidated balance sheets (Note 25). As of
September 30, 2006 and 2007, the outstanding promissory notes, before unamortized discount,
amounted to US$54.5 million (equivalent to Rp.503,182 million) and US$32.7 million (equivalent
to Rp.299,455 million), respectively.
	The allocation of the acquisition cost described above was based on an independent appraisal
report of fair values.
5.	AMENDMENT AND RESTATEMENT OF THE JOINT OPERATION SCHEME IN REGIONAL DIVISIONS IV AND VII

| a. |
| --- |
| On January 20, 2004, the Company and PT Mitra Global Telekomunikasi Indonesia (MGTI),
the investor in KSO IV, entered into an agreement to amend and restate their joint
operation agreement (KSO agreement). The principal provisions in the original KSO
agreement that have been amended are as follows: |

| | The rights to operate fixed-line telecommunications services had been transferred
to the Company, where KSO IV is operated under the management, supervision, control
and responsibility of the Company. |
| --- | --- |
| | Responsibilities for funding construction of new telecommunication facilities and
payments of operating expenses incurred in KSO IV had been assigned to the Company. |
| | Risk of loss from damages or destruction of assets operated by KSO IV is
transferred to the Company. |
| | At the end of the KSO period (December 31, 2010), all rights, title and interest
of MGTI in the existing property, plant and equipment (including new additional
installations) and inventories
will be transferred to the Company at no cost. |
| | The Companys rights to receive Minimum Telkom Revenues (MTR) and share in
Distributable KSO Revenues (DKSOR) under the original KSO agreement were amended so
that MGTI receives fixed monthly payments (Fixed Investor Revenues) beginning in
February 2004 through December 2010 totaling US$517.1 million and the Company is
entitled to the balance of KSO revenues net of operating expenses and payments to
MGTI for Fixed Investor Revenues. In addition, payments for Fixed Investor Revenues
must be made to MGTI before any payments can be made to the Company. |

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AMENDMENT AND RESTATEMENT OF THE JOINT OPERATION SCHEME IN REGIONAL DIVISIONS IV AND VII (continued)

a. Amendment and Restatement of the Joint Operation Scheme in Regional Division IV (KSO IV) (continued)

In the event funds in KSO IV are insufficient to pay Fixed Investor Revenues to MGTI, the Company is required to pay the shortfall to MGTI.

| As a result of the amendment of the KSO agreement, the Company obtained the legal right to
control the financial and operating decisions of KSO IV. Accordingly, the Company has
accounted for this transaction as a business combination using the purchase method of
accounting. |
| --- |
| The purchase price for this transaction was approximately US$390.7 million (equivalent to
Rp.3,285,362 million) which represented the present value of fixed monthly payments
(totaling US$517.1 million) to be paid to MGTI beginning in February 2004 through December
2010 using a discount rate of 8.3% plus the direct cost of the business combination. The
allocation of the acquisition cost was as follows: |

Property, plant and equipment	2,377,134
Intangible assets	908,228
Total purchase consoderation	3,285,362

| | The allocation of the acquisition cost described above was based on an independent
appraisal of fair values. Intangible assets identified from this acquisition represent
right to operate the business in the KSO area and the amount is being amortized over the
remaining term of the KSO agreement of 6.9 years (Note 15). There was no goodwill arising
from this acquisition. |
| --- | --- |
| | The Companys consolidated results of operations has included the operating results of KSO
IV since February 1, 2004 being the nearest convenient balance date. |
| | As of September 30, 2006 and 2007, the remaining monthly payments to be made to MGTI,
before unamortized discount, amounted to US$339.2 million (Rp.3,128,812 million) and
US$263.4 million (Rp.2,410,177 million) and is presented as Deferred consideration for
business combinations (Note 25). |
| b. | Amendment and Restatement of the Joint Operation Scheme in Regional Division VII
(KSO VII) |
| | On October 19, 2006, the Company and PT Bukaka Singtel International (BSI), the investor
in KSO VII, entered into an agreement to amend and restate their joint operation agreement
(KSO agreement). The principal provisions in the original KSO agreement that have been
amended and restated are as follow: |

The rights to operate fixed-line telecommunications services had been transferred to the Company, where KSO VII is operated under the management, supervision, control and responsibility of the Company.

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AMENDMENT AND RESTATEMENT OF THE JOINT OPERATION SCHEME IN REGIONAL DIVISIONS IV AND VII (continued)

b. Amendment and Restatement of the Joint Operation Scheme in Regional Division VII (KSO VII) (continued)

| | The responsibilities for funding construction of new telecommunication facilities
and payments of operating expenses incurred in KSO VII had been assigned to the
Company. |
| --- | --- |
| | The risk of loss from damages or destruction of assets operated by KSO VII will be
transferred to the Company. |
| | At the end of the KSO period (December 31, 2010), all rights, title and interest
of BSI in existing property, plant and equipment (including new additional
installations) and inventories will be transferred to the Company at no cost. |
| | The Companys rights to receive Minimum Telkom Revenues (MTR) and share in
Distributable KSO Revenues (DKSOR) under the original KSO agreement were amended so
that BSI receives fixed monthly payments (Fixed Investor Revenues) amounting to
Rp.55.64 billion beginning in October 2006 through June 2007 and amounting to
Rp.44.25 billion in July 2007 through December 2010. The Company is entitled to the
balance of KSO revenues net of operating expenses and payments to BSI for Fixed
Investor Revenues. In addition, payments for Fixed Investor Revenues must be made to
BSI before any payments could be made to the Company. |
| | In the event funds in KSO VII are insufficient to pay Fixed Investor Revenues to
BSI, the Company is required to pay the shortfall to BSI. |

As a result of the amendment and restatement of the KSO agreement, the Company obtained the legal right to control financial and operating decisions of KSO VII. Accordingly, the Company has accounted for this transaction as a business combination using the purchase method of accounting. As a condition precedent to the coming into effect of the amended KSO agreement, the Company has entered into assignment agreement with BSI and its business partners whereby BSI assigned its revenue sharing agreements with its business partners to the Company. The Company has accounted for these transactions in accordance with the accounting treatment for revenue sharing arrangements.

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AMENDMENT AND RESTATEMENT OF THE JOINT OPERATION SCHEME IN REGIONAL DIVISIONS IV AND VII (continued)

| b. |
| --- |
| The purchase price for this transaction was approximately Rp.1,770,925 million which
represents the present value of fixed monthly payments (totaling Rp.2,359,230 million) to
be paid to BSI beginning in October 2006 through December 2010 using a discount rate of
15% plus the direct cost of the business combination. The allocation of the acquisition
cost was as follows: |

Purchase consideration at present value	1,770,925
Fair value of net assets acquired:
- Cash and cash equivalents	143,648
- Receivables	266,337
- Other current assets	69,960
- Property, plant and equipment	1,288,888
- Deferred tax assets	6,993
- Property, plant and equipment under revenue sharing arrangements	452,205
- Intangible assets	451,736
- Current liabilities	(456,637	)
- Unearned income on revenue sharing arrangements	(452,205	)
Fair value of net assets	1,770,925

| The fair value of the property, plant and equipment and property, plant and equipment
under revenue sharing arrangements described above was determined by an independent
appraisal whereas the fair value of other assets and liabilities was determined by
management. The intangible assets represent right to operate the business in the KSO VII
area and the amount is being amortized over the remaining term of the KSO agreement of 4.3
years (Note 15). There was no goodwill arising from this acquisition. |
| --- |
| The Companys consolidated results of operations has included the operating results of KSO
VII since October 1, 2006 being the nearest convenient balance date. |
| As of September 30, 2007, the remaining monthly payments to be made to BSI, before
unamortized discount, amounted to Rp.1,752,912 million and is presented as Deferred
consideration for business combinations (Note 25). |

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6. CASH AND CASH EQUIVALENTS

Cash on hand	29,033	35,895
Cash in banks
Related parties
Rupiah
Bank Mandiri	76,656	171,009
Bank Negara Indonesia	69,719	98,413
Bank Rakyat Indonesia	4,402	28,007
Bank Pos Nusantara	1,252	1,367
Total	152,029	298,796
Foreign currencies
Bank Mandiri	51,680	38,971
Bank Negara Indonesia	2,420	18,778
Bank Rakyat Indonesia	620	621
Total	54,720	58,370
Total related parties	206,749	357,166
Third parties
Rupiah
ABN AMRO Bank	99,725	78,798
Deutsche Bank	8,293	17,786
Bank Central Asia	19,727	14,529
Bank Bukopin	7,099	6,412
Citibank NA	943	6,349
Lippo Bank	1,116	2,683
Bank Niaga	865	1,698
Bank Mega	2,286	841
Bank Buana Indonesia	1,409	730
Bank Syariah Mega Indonesia		307
Bank Bumiputera Indonesia	355	307
BPD Papua		156
Bank Danamon	498	118
Bank Internasional Indonesia	22	14
Bank Permata		8
Total	142,338	130,736
Foreign currencies
Deutsche Bank	1,218	12,061
Citibank NA	7,744	10,368
ABN AMRO Bank	146	9,316
Standard Chartered Bank	93	92
Bank Internasional Indonesia	47	83
Bank Central Asia	50	35
Bank Daichi	3	30
Total	9,301	31,985
Total third parties	151,639	162,721
Total cash in banks	358,388	519,887

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6. CASH AND CASH EQUIVALENTS (continued)


Time deposits
Related parties
Rupiah
Bank Mandiri	1,776,791	711,229
Bank Negara Indonesia	2,179,661	392,580
Bank Rakyat Indonesia	437,115	247,020
Bank Tabungan Negara	269,590	152,192
Total	4,663,157	1,503,021
Foreign currencies
Bank Negara Indonesia	99	653,965
Bank Mandiri	595,630	234,013
Total	595,729	887,978
Total related parties	5,258,886	2,390,999
Third parties
Rupiah
Citibank NA	484,000	886,000
Bank Jabar	196,795	184,400
Bank Niaga	196,360	177,820
Bank Internasional Indonesia	7,280	156,035
Bank Danamon	59,820	143,115
Bank Mega	95,690	92,945
Bank BTPN	55,100	84,128
Bank Bukopin	93,280	83,320
Bank Muamalat Indonesia	48,515	73,040
Deutsche Bank	3,900	13,200
Bank Permata		102
Bank NISP	40,280
Bank Syariah Mega Indonesia	13,700
Bank Yudha Bhakti	8,045
Bank Nusantara Parahyangan	1,000
Total	1,303,765	1,894,105
Foreign currencies
Deutsche Bank	743,269	949,667
Standard Chartered Bank		696,230
Bank Bukopin	1,844	4,574
Bank Mega	1,844	1,830
The Hongkong and Shanghai
Banking Corporation	611,865
Total	1,358,822	1,652,301
Total third parties	2,662,587	3,546,406
Total time deposits	7,921,473	5,937,405
Total cash and cash equivalents	8,308,894	6,493,187

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6. CASH AND CASH EQUIVALENTS (continued)

Range of interest rates per annum for time deposits is as follows:

Rupiah	4.25% - 13.00 %	3% - 10.25 %
Foreign currencies	2.75% - 5.00 %	3.25% - 4.75 %

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

Refer to Note 47 for details of related party transactions.

7. TRADE RECEIVABLES

Trade receivables from related parties and third parties arise from services provided to both retail and non-retail customers.

a.
Related parties:

Government agencies	480,519		580,713
PT Citra Sari Makmur	31,146		40,816
PT Patra Telekomunikasi Indonesia	10,005		16,309
PT Aplikanusa Lintasarta	3,393		8,623
PT Graha Informatika Nusantara	5,855		4,718
Kopegtel	4,322		538
PT Pasifik Satelit Nusantara	1,549		139
KSO VII	253,293
Others	7,410		10,745
Total	797,492		662,601
Allowance for doubtful accounts	(101,991	)	(94,989	)
Net	695,501		567,612

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) SEPTEMBER 30, 2006 AND 2007, AND FOR THE NINE MONTHS PERIOD ENDED SEPTEMBER 30, 2006 AND 2007

(Figures in tables are presented in millions of Rupiah, unless otherwise stated)

7. TRADE RECEIVABLES (continued)

a.
Third parties:

Residential and business subscribers	3,432,822		3,625,977
Overseas international carriers	260,675		325,127
Total	3,693,497		3,951,104
Allowance for doubtful accounts	(657,172	)	(1,031,541	)
Net	3,036,325		2,919,563

b.
Related parties:

Up to 6 months	620,319		469,438
7 to 12 months	38,516		28,169
13 to 24 months	47,742		93,816
More than 24 months	90,915		71,178
Total	797,492		662,601
Allowance for doubtful accounts	(101,991	)	(94,989	)
Net	695,501		567,612

Third parties:

Up to 3 months	3,008,753		2,924,089
More than 3 months	684,744		1,027,015
Total	3,693,497		3,951,104
Allowance for doubtful accounts	(657,172	)	(1,031,541	)
Net	3,036,325		2,919,563

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7. TRADE RECEIVABLES (continued)

c.
Related parties:

Rupiah	787,461		581,499
United States Dollar	10,031		81,102
Total	797,492		662,601
Allowance for doubtful accounts	(101,991	)	(94,989	)
Net	695,501		567,612

Third parties:

Rupiah	3,419,426		3,505,342
United States Dollar	274,071		445,762
Total	3,693,497		3,951,104
Allowance for doubtful accounts	(657,172	)	(1,031,541	)
Net	3,036,325		2,919,563

d. Movements in the allowance for doubtful accounts

Beginning balance	685,668		784,789
Additions	340,189		369,162
Bad debts write-off	(266,694	)	(27,421	)
Ending balance	759,163		1,126,530

Management believes that the allowance for doubtful accounts is adequate to cover probable losses on uncollectible accounts.

Except for the amounts receivable from the Government agencies, management believes that there were no significant concentrations of credit risk on these receivables.

Refer to Note 47 for details of related party transactions.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) SEPTEMBER 30, 2006 AND 2007, AND FOR THE NINE MONTHS PERIOD ENDED SEPTEMBER 30, 2006 AND 2007

(Figures in tables are presented in millions of Rupiah, unless otherwise stated)

8. INVENTORIES

Components	50,700		48,225
Allowance for obsolescence	(9,092	)	(5,856	)
Net	41,608		42,369
Modules	106,812		118,820
Allowance for obsolescence	(43,064	)	(46,614	)
Net	63,748		72,206
SIM cards, RUIM cards and prepaid voucher blanks	82,608		88,260
Allowance for obsolescence	(190	)	(370	)
Net	82,418		87,890
Total	187,774		202,465

Movements in the allowance for obsolescence are as follows:

Beginning balance	48,347		48,098
Additions	4,048		8,073
Inventory write-off	(49	)	(3,331	)
Ending balance	52,346		52,840

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

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

At September 30, 2007, inventory held by a certain subsidiary was insured against fire, theft and other specified risks to PT Asuransi AIOI Indonesia for US$0.6 million. Management believes that the insurance amount is adequate to cover such risks.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) SEPTEMBER 30, 2006 AND 2007, AND FOR THE NINE MONTHS PERIOD ENDED SEPTEMBER 30, 2006 AND 2007

(Figures in tables are presented in millions of Rupiah, unless otherwise stated)

9. PREPAID EXPENSES

Rent	1,210,750	2,072,300
Salary	263,724	314,691
Telephone directory issuance cost	31,111	2,914
Insurance	9,768	29,723
Others	15,676	10,739
Total	1,531,029	2,430,367

Refer to Note 47 for details of related party transactions.

10. OTHER CURRENT ASSETS

| Restricted time deposits Bank Mandiri (Note
47) | 276,677 | 8,460 |
| --- | --- | --- |

As of September 30, 2006, the balance consists of the Companys time deposits of US$23.4 million (equivalent to Rp.216,118 million) and Rp.60,559 million pledged as collateral for bank guarantees.

As of September 30, 2007, the balance consists of the Companys time deposits of US$0.072 million (equivalent to Rp.659 million) and Rp.5,530 million, and Infomedias time deposit of Rp.2,271 million pledged as collateral for bank guarantees.

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11. LONG-TERM INVESTMENTS


Percentage			Share of
of	Beginning		Net Income		Translation		Ending
Ownership	Balance	Addition	(Loss)		Adjustment		Balance
Equity method:
PT Citra Sari Makmur	25.00	66,253		(1,068	)	(22	)	65,163
PT Patra Telekomunikasi Indonesia	40.00	25,069		884				25,953
PT Pasifik Satelit Nusantara	22.38
		91,322		(184	)	(22	)	91,116
Cost method:
Bridge Mobile Pte. Ltd.	12.5	9,290						9,290
PT Batam Bintan Telekomunikasi	5.00	588						588
PT Pembangunan Telekomunikasi
Indonesia	3.18	199						199
		10,077						10,077
		101,399		(184	)	(22	)	101,193


Percentage			Share of
of	Beginning		Net Income	Translation	Ending
Ownership	Balance	Addition	(Loss)	Adjustment	Balance
Equity method:
PT Citra Sari Makmur	25.00	53,114		2,338	355	55,807
PT Patra Telekomunikasi Indonesia	40.00	26,007		4,580		30,587
PT Pasifik Satelit Nusantara	22.38
		79,121		6,918	355	86,394
Cost method:
Bridge Mobile Pte. Ltd.	12.50	9,290	5,454			14,744
PT Batam Bintan Telekomunikasi	5.00	587				587
PT Pembangunan Telekomunikasi
Indonesia	3.18	199				199
		10,076	5,454			15,530
		89,197	5,454	6,918	355	101,924

a.
CSM is engaged in providing Very Small Aperture Terminal (VSAT), network application
services and consulting services on telecommunications technology and related facilities.
As of September 30, 2006 and 2007, the carrying amount of investment in CSM was equal to
the Companys share in net assets of CSM.

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11. LONG-TERM INVESTMENTS (continued)

b.	PT Patra Telekomunikasi Indonesia (Patrakom)
	Patrakom is engaged in providing satellite communication system services, related services
and facilities to companies in the petroleum industry.
	On August 26, 2005, the Company purchased 10% of Patrakoms outstanding shares
from Indosat for Rp.4,250 million, thereby increasing the Companys ownership
interest from 30% to 40%.
	As of September 30, 2006 and 2007, the carrying amount of investment in Patrakom was
approximate to the Companys share in net assets of Patrakom.
c.	PT Pasifik Satelit Nusantara (PSN)
	PSN is engaged in providing satellite transponder leasing and satellite-based
communication services in the Asia Pacific region.
	As of December 31, 2001, the Companys share of losses in PSN has exceeded the carrying
amount of the investment. Accordingly, the investment value has been reduced to nil.
	On August 8, 2003, as a result of share-swap transaction with PT Centralindo Pancasakti
Cellular, the Companys interest in PSN effectively increased to 43.69%. The Companys
decision to increase its ownership interest in PSN as part of the share-swap transactions
was premised on the Companys assessment that PSNs satellite services would allow it to
capitalize on a government program which called for the provision of telecommunication
services to remote areas of Indonesia.
	In 2005, the Companys ownership interest was diluted to 35.5% as a result of debt to
equity conversions consummated by PSN.
	On January 20, 2006, PSNs stockholders agreed to issue new shares to a new stockholder.
The issuance of new shares resulted in dilution of the Companys interest in PSN to
22.38%.
d.	Bridge Mobile Pte. Ltd
	On November 3, 2004, Telkomsel together with six other international mobile operators in
Asia Pacific established Bridge Mobile Pte. Ltd. (Singapore), a company that is engaged in
providing regional mobile services in the Asia Pacific region.
	Telkomsel contributed US$1.0 million (equivalent to Rp.9,290 million) which represents a
14.286% ownership interest.
	On April 14, 2005, Telkomsels ownership interest was diluted to 12.50% following issuance
of new shares by Bridge Mobile Pte. Ltd to a new stockholder.
	In April 2007, the Company made additional investment of US$0.6 (Rp.5,454 million). There
was no percentage change in Telkomsels ownership interest of Bridge Mobile Pte. Ltd. from
the transaction.

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11. LONG-TERM INVESTMENTS (continued)

e.	PT Batam Bintan Telekomunikasi (BBT)
	BBT is engaged in providing fixed line telecommunication services at Batamindo Industrial
Park in Muka Kuning, Batam Island and at Bintan Beach International Resort and Bintan
Industrial Estate in Bintan Island.
f.	PT Pembangunan Telekomunikasi Indonesia (Bangtelindo)
	Bangtelindo is primarily engaged in providing consultancy services on the installation and
maintenance of telecommunications facilities.
g.	PT Mandara Selular Indonesia (Mobisel)
	Mobisel is engaged in providing mobile cellular services and related facilities. These
services were previously provided by the Company under a revenue-sharing arrangement with
PT Rajasa Hazanah Perkasa (RHP). The capital contribution made by the Company of
Rp.10,398 million represented a 25% equity ownership in Mobisel.
	As of December 31, 2002, the value of investment has been reduced to nil because the
Companys share of loss exceeded the carrying amount of investment in Mobisel.
	In July 2003 and January 2004, Mobisel carried out a series of debt to equity conversions
resulting in dilution of the Companys ownership interest to 6.4%.
	On December 20, 2004, Mobisels stockholders agreed to issue 306,000,000 new Series B
shares to a new stockholder and an existing stockholder. The issuance of 306,000,000 new
Series B shares resulted in dilution of the Companys interest in Mobisel to 3.63%.
	On May 27, 2005, the Companys ownership interest was further diluted to 1.33% following
the issuance of 1,179,418,253 new Series B shares by Mobisel.
	On January 13, 2006, the Company sold its entire ownership interest in Mobisel to Twinwood
Ventures Limited (third party) for Rp.22,561 million. The gain on the sale amounted to
Rp.22,561 million.

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12. PROPERTY, PLANT AND EQUIPMENT

2006	Additions	Deductions		Reclassifications		2006
At cost or revalued amounts:
Direct acquisitions
Land	334,447	54,186	(1,942	)			386,691
Buildings	2,567,559	36,003			94,827		2,698,389
Switching equipment	10,829,881	41,403	(2,762	)	1,963,644		12,832,166
Telegraph, telex and data
communication equipment	215,792		(2,172	)			213,620
Transmission installation and
equipment	31,554,134	1,000,973	(13,824	)	4,338,308		36,879,591
Satellite, earth station and
equipment	4,944,004	24,361			(5,661	)	4,962,704
Cable network	18,697,500	221,311	(6,105	)			18,912,706
Power supply	1,312,395	18,654	(1,682	)	69,250		1,398,617
Data processing equipment	7,842,373	155,577	(18,802	)	580,976		8,560,124
Other telecommunications
peripherals	904,151	35,478	(35	)	(301	)	939,293
Office equipment	649,938	13,431	(1,420	)	504		662,453
Vehicles	186,383	1,771	(1,000	)	(7,221	)	179,933
Other equipment	115,544	2,640					118,184
Property under construction:
Buildings	21,775	87,308			(94,941	)	14,142
Switching equipment	13,172	2,135,628			(1,963,605	)	185,195
Transmission installation and
equipment	714,399	5,440,683			(5,099,357	)	1,055,725
Satellite, earth station and equipment	133	379					512
Cable network	3,771	31,286	(28	)			35,029
Power supply	61	73,873			(67,885	)	6,049
Data processing equipment	1,567,260	589,382			(588,395	)	1,568,247
Other telecommunications
peripherals	3,524						3,524
Leased assets
Vehicles	330						330
Transmission installation and equipment	257,380	8,440					265,820
Total	82,735,906	9,972,767	(49,772	)	(779,857	)	91,879,044
Accumulated depreciation and impairment:
Direct acquisitions
Buildings	1,109,838	128,741			19		1,238,598
Switching equipment	6,472,592	1,362,016	(2,251	)	1,228		7,833,585
Telegraph, telex and data
communication equipment	201,527	976	(2,172	)			200,331
Transmission installation and equipment	11,991,282	2,685,490	(13,408	)	(255,026	)	14,408,338
Satellite, earth station and
equipment	1,306,061	252,065					1,558,126
Cable network	10,331,744	1,136,701	(3,654	)	(33	)	11,464,758
Power supply	1,032,190	64,143	(1,381	)	1,627		1,096,579
Data processing equipment	2,938,131	821,631	(18,802	)	(2,615	)	3,738,345
Other telecommunications
peripherals	793,983	55,495	(7	)	(301	)	849,170
Office equipment	543,138	18,742	(1,420	)	504		560,964
Vehicles	179,601	3,147	(991	)	(7,221	)	174,536
Other equipment	101,564	4,154					105,718
Leased assets
Vehicles	70						70
Transmission installation and equipment	90,942	34,080					125,022
Total	37,092,663	6,567,381	(44,086	)	(261,818	)	43,354,140
Net Book Value	45,643,243						48,524,904

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12. PROPERTY, PLANT AND EQUIPMENT (continued)

2007	Additions	Deductions		Reclassifications		2007
At cost
Direct acquisitions
Land	399,338	74,461	(50	)	(4,746	)	469,003
Buildings	2,758,673	91,808			69,679		2,920,160
Switching equipment	21,335,512	464,930			1,755,335		23,555,777
Telegraph, telex and data
communication equipment	189,701						189,701
Transmission installation and
equipment	34,621,302	2,142,427			5,418,911		42,182,640
Satellite, earth station and equipment	5,568,809	184,399			4,930		5,758,138
Cable network	19,515,317	284,127			(21,989	)	19,777,455
Power supply	3,269,686	17,407			827,076		4,114,169
Data processing equipment	5,332,847	287,494			408,848		6,029,189
Other telecommunications peripherals	626,631	15,127			(4,685	)	637,073
Office equipment	759,959	34,397			(67,004	)	727,352
Vehicles	171,778	72	(636	)	(10,481	)	160,733
Other equipment	113,093	17					113,110
Property under construction:
Buildings	35,105	54,846			(67,371	)	22,580
Switching equipment	1,334,956	768,980			(1,753,798	)	350,138
Transmission installation and
equipment	2,987,094	5,330,754			(5,335,051	)	2,982,797
Cable network	7,159	14,933	(4,183	)			17,909
Power supply	17,644	866,704			(846,952	)	37,396
Data processing equipment	16	376,952			(333,750	)	43,218
Other telecommunications
peripherals		928					928
Leased assets
Transmission installation and
equipment	265,820						265,820
Total	99,310,440	11,010,763	(4,869	)	38,952		110,355,286
Accumulated depreciation and impairment
Direct acquisitions
Buildings	1,290,020	127,424			(271	)	1,417,173
Switching equipment	11,195,005	1,748,494			(153	)	12,943,346
Telegraph, telex and data
communication equipment	185,736	257					185,993
Transmission installation and equipment	12,163,943	2,900,200			(24,186	)	15,039,957
Satellite, earth station and equipment	1,947,875	315,893			2,296		2,266,064
Cable network	11,495,878	986,379			79,507		12,561,764
Power supply	1,500,435	267,642			(5,839	)	1,762,238
Data processing equipment	3,688,200	434,170			(34,257	)	4,088,113
Other telecommunications
peripherals	587,545	9,825			10,636		608,006
Office equipment	593,038	26,169			(26,127	)	593,080
Vehicles	161,018	3,198	(614	)	(12,833	)	150,769
Other equipment	101,211	4,855			514		106,580
Leased assets
Transmission installation and
equipment	133,476	108,341					241,817
Total	45,043,380	6,932,847	(614	)	(10,713	)	51,964,900
Net Book Value	54,267,060						58,390,386

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PROPERTY, PLANT AND EQUIPMENT (continued)

Proceeds from sale of property, plant and equipment	23,915	21,706
Net book value	5,685	72
Gain on disposal	18,230	21,634

| In accordance with the amended and restated KSO VII agreement with BSI (Note 5b) dated October
19, 2006, the ownership rights to the acquired property, plant and equipment in KSO VII are
legally retained by BSI until the end of the KSO period (December 31, 2010). As of September
30, 2007, the net book value of these property, plant and equipment items was Rp.1,066,147
million. |
| --- |
| In accordance with the amended and restated KSO IV agreement with MGTI (Note 5a), the
ownership rights to the acquired property, plant and equipment in KSO IV are legally retained
by MGTI until the end of the KSO period (December 31, 2010). As of September 30, 2006 and
2007, the net book value of these property, plant and equipment was Rp.1,354,454 million and
Rp.894,158 million, respectively. |
| In the first quarter of 2005, the Government of Indonesia issued a series of regulations in
its efforts to rearrange the frequency spectra utilized by the telecommunications industry.
This action has resulted in the Company not being able to utilize certain frequency spectra
it had used to support its fixed wireline cable network by the end of 2006. As a result of
these regulations, certain of the Companys cable network facilities within the fixed wireline
segment, which comprised primarily of Wireless Local Loop (WLL) and Approach Link equipment
operating in the affected frequency spectra, could no longer be used by the end of 2006. The
Company had accordingly shortened its estimate of the remaining useful lives for WLL and
Approach Link equipment in the first quarter in 2005 and depreciated the remaining net book
value of these assets through December 31, 2006. The effect of this change in estimate
increased depreciation expense by Rp170,338 million (Rp119,222 million after tax) for the nine
months period ended September 30, 2006. |
| Further, on August 31, 2005, the Minister of Communication and Information Technology (MoCI)
issued a press release which announced that in order to conform with the international
standards and as recommended by the International Telecommunications Union
Radiocommunication Sector (ITU-R), the 1900 MHz frequency spectrum would only be used for
the International Mobile Telecommunications-2000 (IMT-2000 or 3G) network. In its press
release, the MoCI also announced that the CDMA-based technology network which the Company used
for its fixed wireless services could only operate in the 800 MHz frequency spectrum. The
Company utilizes the 1900 MHz frequency spectrum for its fixed wireless network in Jakarta and
West Java areas while for other areas, the Company utilizes the 800 MHz frequency spectrum.
As a result of this Governments decision, the Companys Base Station System (BSS) equipment
in Jakarta and West Java areas which are part of transmission installation and equipment for fixed wireless network could no longer be used by
the end of 2007. Currently, The Company is in progress of replacing the BSS equipment with BBS
equipment operating in 800 Mhz frequency spectrum and expects the BSS equipment will be
completely replaced by the end of December 2007. On January 13, 2006, the MoCI issued MoCI
Regulation No. 01/PER/M.KOMINFO/1/2006 which reaffirmed the Governments decision that the
Companys fixed wireless network could only operate in the 800 MHz frequency spectrum and that
the 1900 MHz will be allocated to 3G network. |

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PROPERTY, PLANT AND EQUIPMENT (continued)

| Following the preceding Governments decisions, the Company reviewed the recoverable amount of
cash-generating unit to which the affected fixed wireless asset belongs. The recoverable
amount was estimated using value in use which represented the present value of estimated
future cash flows from cash-generating unit using a pretax discount rate of 16.89%,
representing the Companys weighted average cost of capital as of December 31, 2005. In
determining cash-generating unit to which an asset belongs, assets were grouped at the lowest
level that included the asset and generated cash inflows that were largely independent of the
cash inflows from other assets or group of assets. Based on this review, in 2005, the Company
recognized a write-down of Rp.616,768 million related to transmission installation and
equipment of fixed wireless assets and recorded the amount as a component of operating
expenses in the consolidated statements of income. In addition, the Company recognized a loss
relating to non-cancelable contracts for procurement of the 1900 MHz transmission installation
and equipment in Jakarta and West Java areas amounting to Rp.79,359 million. The loss was
included as a component of operating expenses in the consolidated statement of income with a
corresponding liability included in Accrued Expenses in the consolidated balance sheet. In
addition, the Company changed its estimate of the remaining useful lives for the Jakarta and
West Java BSS equipment and depreciates the remaining net book value of these assets through
June 30, 2007. The effect of this change in estimate increased depreciation expense by
Rp.42,194 million (Rp.29,536 million after tax) in the nine months period ended September 30,
2006. In June 2007, the Company has been fully depreciated the assets. |
| --- |
| As of September 30, 2007, the Company operated two satellites, Telkom-1 and Telkom-2 primarily
providing backbone transmission links for its network and earth station satellite up-linking
and down-linking services to domestic and international users. As of September 30, 2007, there
were no events or changes in circumstances that would indicate that the carrying amount of the
Companys satellites may not be recoverable. |
| In 2006, certain accounts related to telecommunication equipments of subsidiaries were
reclassified to a more detail group of assets to conform to the Companys presentation. The
reclassifications have no impact to the economic useful life of the assets. |
| The Company and its subsidiaries own several pieces of land located throughout Indonesia with
Building Use Rights (Hak Guna Bangunan or HGB) for a period of 20-30 years, which will
expire between 2007 and 2036. Management believes that there will be no difficulty in
obtaining the extension of the landrights when they expire. |
| The Company was granted the right to use certain parcels of land by the Ministry of
Communications and Information Technology of the Republic of Indonesia (formerly Ministry of
Tourism, Post and Telecommunications) where they are still under the name of the Ministry of
Tourism, Post and Telecommunications and the Ministry of Transportation of the Republic of
Indonesia. The transfer to the Company of the legal title of ownership on those parcels of
land is still in progress. |

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PROPERTY, PLANT AND EQUIPMENT (continued)

| As of September 30, 2007, property, plant and equipment, of the Company and its subsidiaries,
except for land, were insured with PT Asuransi Jasa Indonesia (Jasindo), PT Asuransi
Ramayana, PT Asuransi Wahana Tata and PT Asuransi Export Indonesia (ASEI) against fire,
theft and other specified risks. Total cost of assets being insured amounted to Rp.30,341,117
million and US$5,014 million, which was covered by Sum Insured Basis with maximum loss claim
of Rp.1,662,604 million and covered by First Loss Basis of US$250 million and Rp.824,000
million including business recovery of Rp.324,000 million with Automatic Reinstatement of Loss
Clausul. In addition, the Telkom-1 and Telkom-2 satellite were insured separately for US$39.2
million and US$55.1 million respectively. Management believes that the insurance coverage is
adequate. |
| --- |
| On May 27, 2006, Yogyakarta within Division Regional IV Central Java experienced an earthquake
where an insurance claim amounting to Rp.14,934 million has been made. Operationally, the
facilities have been re-operated gradually since June 2006. |
| On July 17, 2006, the Pangandaran, area of Division Regional III West Java and Banten
experienced a tsunami with the estimated total loss of Rp.368 million. The Company did not
file a claim since the estimated total loss still below the deductible level. |
| In 2006, Telkomsel exchanged its certain infrastructures equipment with a net book value of
Rp.440,355 million for new equipment with a value of Rp.440,357 million. The resulting gain of
Rp.2 million was charged to current operation. |
| On March 6, 2007, Padang within Division Regional I Sumatera experienced an earthquake where
an insurance claim amounting Rp17,600 million has been made. Operationally, as of September
30, 2007, the building and facilities have been re-operated. |
| On September 12, 2007, South and West Sumatera within Division Regional I Sumatera experienced
an earthquake where an insurance claim amounting Rp41,200 million has been made.
Operationally, as of September 30, 2007, the building and facilities have been re-operated. |
| Certain property, plant and equipment of the Company and subsidiaries have been pledged as
collateral for lending agreements (Notes 20 and 24). |

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| 12. |
| --- |
| The Company has lease commitments for certain transmission installation and equipment with the
option to purchase the leased assets at the end of the lease terms. Future minimum lease
payments for the assets under capital leases as of September 30, 2007 are as follows: |

Year — 2007	19,541
2008	78,373
2009	78,161
2010	78,161
2011	78,161
Later	48,916
Total minimum lease payments	381,313
Interest	(164,405	)
Net present value of minimum lease payments	216,908
Current maturities (Note 21a)	(26,025	)
Long-term portion (Note 21b)	190,883

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PROPERTY, PLANT AND EQUIPMENT UNDER REVENUE-SHARING ARRANGEMENTS

2006	Additions	Deductions		2006
At cost:
Land	3,428		1,218		4,646
Buildings	8,021		(1,218	)	6,803
Switching equipment	275,035	7,956	(39	)	282,952
Transmission installation
and equipment	283,438	5,612			289,050
Cable network	268,413	268	(3,018	)	265,663
Other telecommunications
peripherals	169,304				169,304
Total	1,007,639	13,836	(3,057	)	1,018,418
Accumulated depreciation:
Land	1,771	154	720		2,645
Buildings	4,366	275	(720	)	3,921
Switching equipment	185,689	17,101	(7	)	202,783
Transmission installation
and equipment	83,294	18,916			102,210
Cable network	114,126	15,362	(1,377	)	128,111
Other telecommunications
peripherals	68,988	14,091	188		83,267
Total	458,234	65,899	(1,196	)	522,937
Net Book Value	549,405				495,481

2007	Additions	Deductions		Reclassifications		2007
At cost:
Land	4,646						4,646
Buildings	5,110						5,110
Switching equipment	365,293				(46,461	)	318,832
Transmission installation
and equipment	296,365		(47,106	)	(40,688	)	208,571
Cable network	618,845				(14,083	)	604,762
Other telecommunication
peripherals	168,754				(862	)	167,892
Total	1,459,013		(47,106	)	(102,094	)	1,309,813
Accumulated depreciation:
Land	2,703	174					2,877
Buildings	2,926	191					3,117
Switching equipment	172,341	19,115			(73	)	191,383
Transmission installation
and equipment	103,253	22,430	(16,545	)	(9,565	)	99,573
Cable network	124,740	30,024			(1,063	)	153,701
Other telecommunication
peripherals	87,418	17,988					105,406
Total	493,381	89,922	(16,545	)	(10,701	)	556,057
Net book value	965,632						753,756

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| 13. |
| --- |
| In accordance with revenue-sharing arrangements agreements, the ownership rights to the
property, plant and equipment under revenue-sharing arrangements are legally retained by the
investors until the end of the revenue-sharing period. |
| The balances of unearned income on revenue-sharing arrangements as of September 30, 2006 and
2007 are as follows: |

Gross amount	1,018,418		1,309,814
Accumulated amortization:
Beginning balance	(582,155	)	(641,839	)
Addition (Note 36)	(92,310	)	(212,468	)
Deduction	3,057		102,094
Ending balance	(671,408	)	(752,213	)
Net	347,010		557,601

14.
Advances and other non-current assets as of September 30, 2006 and 2007 consist of:

Advances for purchase of property, plant and equipment	616,060	233,143
Restricted cash	1,887	92,280
Deferred landrights charges	80,834	82,388
Equipment not used in operation-net		66,113
Security deposits	36,823	36,950
Others	21,722	81,874
Total	757,326	592,748

| As of September 30, 2007, equipment not used in operation represented Base Transceiver Station
(BTS) and other equipments of the Company and Telkomsel temporarily taken out from
operations but planned to be reinstalled. |
| --- |
| As of September 30, 2006 and 2007, restricted cash represented cash received from the
Government relating to compensation for early termination of exclusive rights to be used for
construction of certain infrastructures (Note 30) and time deposits with original maturities
of more than one year pledged as collateral for bank guarantees. |
| Deferred landrights charges represented costs to extend the contractual life of the landrights
which have been deferred and amortized over the contractual life. |
| Refer to Note 47 for details of related party transactions. |

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15.
The changes in the carrying amount of goodwill and other intangible assets for the years ended
September 30, 2006 and 2007 are as follows:


		intangible
	Goodwill	assets		License		Total
Gross carrying amount:
Balance as of December 31, 2005	106,348		7,151,111				7,257,459
Addition-3G License Telkomsel					436,000		436,000
Balance as of September 30, 2006	106,348		7,151,111		436,000		7,693,459
Accumulated amortization:
Balance as of December 31, 2005	(97,491	)	(2,666,696	)			(2,764,187	)
Amortization expense for 9
months period in 2006	(8,857	)	(681,520	)	(20,210	)	(710,587	)
Balance as of September 30, 2006	(106,348	)	(3,348,216	)	(20,210	)	(3,474,774	)
Net book value			3,802,895		415,790		4,218,685
Weighted-average amortization period	5 years	8.09 years		9.5 years
Gross carrying amount:
Balance as of September 30, 2007	106,348		7,602,847		436,000		8,145,195
Accumulated amortization:
Balance as of December 31, 2006	(106,348	)	(3,590,563	)	(11,679	)	(3,708,590	)
Amortization expense for 9
months period in 2007			(751,968	)	(35,036	)	(787,004	)
Balance as of September 30, 2007	(106,348	)	(4,342,531	)	(46,715	)	(4,495,594	)
Net book value			3,260,316		389,285		3,649,601
Weighted-average amortization period		7.58 years		9.5 years

| Other intangible assets resulted from the acquisitions of Dayamitra, Pramindo, TII, KSO IV and
KSO VII, and represented the rights to operate the business in the KSO areas (Notes 4 and 5).
Goodwill
resulted from the acquisition of GSD (Note 1c). |
| --- |
| The estimated annual amortization expense relating to other intangible assets for each of the
next four years beginning from January 1, 2007 would be Rp.1,003,071 million per year. |
| In February 2006, Telkomsel obtained a 3G mobile cellular operating license for 2.1 GHz
frequency bandwidth for a 10-year period, which is extendable subject to evaluation. The
upfront fee for the 3G license amounted to Rp.436,000 million was recognized as an intangible
asset and is amortized over the term of the 3G license. |
| As of September 30, 2007, management believed that there was no indication of impairment. |

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16.
Escrow accounts as of September 30, 2006 and 2007 consist of the following:

Bank Danamon		1,172
Bank Negara Indonesia		118
Bank Internasional Indonesia		108
Bank Mandiri	6,446
	6,446	1,398

a.	Bank Danamon, Bank Negara Indonesia, and Bank Internasional Indonesia
	The escrow accounts with Bank Danamon, Bank Internasional Indonesia, and Bank Negara
Indonesia were established in relation with the revenue sharing arrangement in
telecommunications equipment in Divre VII East Indonesia.
b.	Bank Mandiri
	The escrow account with Bank Mandiri was established by Dayamitra in relation with the
credit facilities from Bank Mandiri (Note 24b).
	On September 23, 2006, the Company repaid the entire obligation and the remaining funds
available in the escrow account were transferred to the Company on December 6, 2006.

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TRADE PAYABLES


Related parties
Concession fees	694,727	1,245,971
Purchases of equipment, materials and services	161,424	241,669
Payables to other telecommunications providers	108,025	133,449
Total	964,176	1,621,089
Third parties
Purchases of equipment, materials and services	3,349,455	4,131,557
Payables related to revenue-sharing
arrangements	99,689	144,798
Payables to other telecommunication providers	243,678	27,129
Total	3,692,822	4,303,484
Total	4,656,998	5,924,573

Trade payables by currency are as follows:

Rupiah	3,912,004	5,538,811
U.S. Dollar	500,104	334,501
Euro	243,183	51,135
Great British Pound Sterling	493	101
Singapore Dollar	1,178	25
Australian Dollar	36
Total	4,656,998	5,924,573

Refer to Note 47 for details of related party transactions.

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ACCRUED EXPENSES

Salaries and benefits	673,098	858,307
Operations, maintenance and telecommunications services	625,820	1,029,348
General, administrative and marketing	527,533	528,371
Interest and bank charges	234,264	130,947
Total	2,060,715	2,546,973

UNEARNED INCOME

Prepaid pulse reload vouchers	1,926,348	2,326,959
Other telecommunication services	4,158	3,962
Others	51,653	67,948
Total	1,982,159	2,398,869

SHORT-TERM BANK LOANS

Bank Negara Indonesia	300,000	500,000
Bank Central Asia	350,000	200,000
Bank Mandiri	350,000	200,000
Bank Niaga	13,100	29,002
Bank Syariah Mega Indonesia		13,150
Bank Bumiputera Indonesia	8,000	8,000
Total	1,021,100	950,152

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SHORT-TERM BANK LOANS (continued)

a.	Bank Negara Indonesia (BNI)
	On August 15, 2006, Telkomsel signed a loan agreement with BNI for a Rp.300,000 million
short-term facility. The short-term facility would be repaid in three quarterly
installments commencing after three months from the availability period (i.e the earlier
of November 15, 2006 and the date when the facility had been fully drawn down). The loan
bears a floating interest rate of three-month Certificate of Bank Indonesia plus 1.5% and
is unsecured. The principle outstanding as of September 30, 2006 amounted to Rp300,000
million and on June 28, 2007, the loan has been settled.
	On June 15, 2007, Telkomsel signed a loan agreement with BNI for Rp.300,000 million
short-term facility. The facility would be repaid in three quarterly installments
commencing after three months from the availability period. The loan bears a floating
interest rate of three-month Jakarta Inter Bank Offered Rate plus 1.25% and is unsecured.
On July 24, 2007, the loan agreement has been amended with addition of total facilities
provided amounted to Rp200,000 million. The principal outstanding as of September 30, 2007
amounted to Rp.500,000 million.
b.	Bank Central Asia
	On December 3, 2004, Telkomsel entered into a loan agreement with Deutsche Bank AG,
Jakarta (as Arranger and Agent) and Bank Central Asia (as Lender and Transferor)
with a total facility of Rp170,000 million. Under the agreement, the Lender may transfer
its rights, benefits and obligations to any bank or financial institution by delivering
the Transfer Agreement to the Agent and notifying Telkomsel. The facility bears interest
at a rate equal to the 3-month Certificates of Bank Indonesia plus 1% payable in arrears
and is unsecured. On February 1, 2006, Telkomsel repaid the entire loan balance and the
loan agreement was terminated.
	On August 15, 2006, Telkomsel signed a loan agreement with Bank Central Asia for a
Rp.350,000 million short-term facility. The loan amount under the short-term facility
would be repaid in three quarterly installments commencing after three months from the
availability period (i.e. the earlier of November 15, 2006 and the date when the facility
had been fully drawn down). The loan bears a floating interest rate of three-month
Certificate of Bank Indonesia plus 1.5% and is unsecured. The principle outstanding as of
September 30, 2006 amounted to Rp350,000 million and on June 28, 2007, the loan has been
settled.
	On June 15, 2007, Telkomsel signed a loan agreement with Bank Central Asia for Rp.300,000
million short-term facility. The facility would be repaid in three quarterly installments
commencing after three months from the availability period. The loan bears a floating
interest rate of three-month Jakarta Inter Bank Offered Rate plus 1.25% and is unsecured.
The principal outstanding as of September 30, 2007 amounted to Rp.200,000 million.

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SHORT-TERM BANK LOANS (continued)

c.	Bank Mandiri
	On August 15, 2006, Telkomsel signed a loan agreement with Bank Mandiri for a Rp.350,000
million short-term facility. The short-term facility would be repaid in three quarterly
installment commencing after three months from the availability period (i.e the earlier of
November 15, 2006 or the date when the facility had been fully drawn down). The loan
bears a floating interest rate of three-month Certificate of Bank Indonesia plus 1.5% and
is unsecured. The principle outstanding as of September 30, 2006 amounted to Rp350,000
million and on June 28, 2007 the loan has been settled.
	On June 15, 2007, Telkomsel signed a loan agreement with Bank Mandiri for Rp.300,000
million short-term facility. The facility would be repaid in three quarterly installments
commencing after three months from the availability period. The loan bears a floating
interest rate of three-months Jakarta Inter Bank Offered Rate plus 1.25% and is unsecured.
The principal outstanding as of September 30, 2007 amounted to Rp.200,000 million.
d.	Bank Niaga
	On April 25, 2005, Balebat entered into a loan agreement for a 12% per annum fixed rate
revolving credit facility of Rp.800 million and an investment credit facility of Rp.1,600
million (Note 24g). These credit facilities are secured by Balebats property located in
West Java up to a maximum of Rp.3,350 million.The applicable fixed interest rate and
maturity date of the revolving credit facility was amended on July 26, 2005 to 12.5% per
annum and May 30, 2006, respectively and subsequently on June 13, 2006 to 16.5% per annum
and May 30, 2007, respectively. Based on the amendment on June 13, 2006, the revolving
credit facility amounted to Rp.800 million was combined with the short-term fixed credit
facility of Rp.4,000 million as described in Note 24g. Additionally, Balebat obtained
credit facility of Rp.500 million at a fixed interest rate of 16.75% per annum maturing on
May 30, 2007. On May 23, 2007 the loan agreement was amended (4 th amendment
agreement) to increase the maximum facility amount and interest rate to Rp.15,000 million
and 13% per annum respectively for the period to May 29, 2008. As of September 30, 2006
and 2007, the principal outstanding balance amounted to Rp.1,100 million and Rp.14,002
million, respectively.
	On October 18, 2005, GSD entered into a loan agreement with Bank Niaga for a short-term
facility of Rp.3,000 million for a one-year term. The loan facility was secured by certain
GSDs property, carried interest at 14.5% per annum and would expire on October 18, 2006.
On June 7, 2006, the loan agreement was amended to increase the maximum facility amount
and interest rate to Rp.8,000 million and 16.25% per annum, respectively. On November 3,
2006, the loan agreement was amended (2 nd amendment agreement) to change the
interest rate to 15.5% for the period
October 18, 2006 to October 18, 2007. As of September 30, 2006 and 2007, the principal
outstanding amounted to Rp.8,000 million and Rp.8,000 million, respectively.

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SHORT-TERM BANK LOANS (continued)

d.	Bank Niaga (continued)
	In October 2005, GSD also entered into a loan agreement with the Bank Niaga to obtain a
Rp.12,000 million short-term facility, which would expire on October 18, 2006. The
borrowing under this facility carried interest at 14.5% per annum. On June 7, 2006, the
credit agreement was amended to reduce the maximum facility to Rp.7,000 million and to
change the interest rate to 16.25% per annum. On November 3, 2006, the loan agreement was
amended (2 nd amendment agreement) to change the interest rate to 15.5% for the
period October 18, 2006 to October 18, 2007. The principal outstanding as of September 30,
2006 and 2007 was Rp.4,000 and Rp.7,000 million, respectively.
	The credit facilities of Rp.8,000 million and Rp.7,000 million are secured by GSDs
property located in Jakarta.
e.	Bank Syariah Mega Indonesia
	On September 6, 2007, Infomedia entered into a loan agreement with Bank Syariah Mega
Indonesia (Bank) amounted to Rp.13,650 million for financing the collection of call
center business. The profit sharing (nisbah) between Infomedia and the Bank for the loan
facility is 65% and 35%, respectively, and is secured by the receivables from call center
collection at the minimum of 125% from the loan principal. The loan is payable within 3
months from the signing date. The principal outstanding as of September 30, 2007 was
Rp.13,150 million.
f.	Bank Bumiputera Indonesia
	On February 15, 2006, GSD entered into a loan agreement with Bank Bumiputera Indonesia
amounted to Rp.8,000 million with interest at 17% per annum, unsecured and repayable by
monthly installments. The loan is payable within 12 months from the signing date and will
mature on February 15, 2007. On February 27, 2007 the loan agreement was amended for the
period to February 27, 2008. The principal outstanding as of September 30, 2006 and 2007
was Rp.8,000 and Rp.8,000 million, respectively.

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MATURITIES OF LONG-TERM LIABILITIES

a. Current maturities

Bank loans	24	1,839,079	2,549,849
Notes and Bonds	23	1,460,534
Deferred consideration for business combinations	25	686,831	1,079,988
Two-step loans	22	504,541	452,379
Obligations under capital leases	12	19,351	26,025
Total		4,510,336	4,108,241

b. Long-term portion

Notes	Total	2008	2009	2010	2011	Later
Two-step loans	22	3,726.6	84.7	424.9	401.5	374.1	2,441.4
Bank loans	24	2,391.8	446.2	1,481.3	356.6	107.7
Deferred consideration for
business combinations	25	2,700.0	240.9	1,153.5	1,199.4	106.2
Obligations under capital leases	12	190.9	6.9	34.8	44.2	56.1	48.9
Total		9,009.3	778.7	3,094.5	2,001.7	644.1	2,490.3

| 22. |
| --- |
| Two-step loans are loans, which were obtained by the Government from overseas banks and
consortium of contractors, which are then re-loaned to the Company. The loans entered into up
to July 1994 were recorded and are payable in Rupiah based on the exchange rate at the date of
drawdown. The loans are unsecured. 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. |

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22.
The details of the two-step loans as of September 30, 2006 and 2007 are as follows:

Creditors	Interest Rate — 2006	2007	Outstanding — 2006	2007
Overseas banks	3.10% - 10.36%	3.10% - 12.14%	4,623,185		4,149,278
Consortium of contractors	3.20%	3.20%	58,630		29,723
Total			4,681,815		4,179,001
Current maturities			(504,541	)	(452,379	)
Long-term portion			4,177,274		3,726,622

The details of two-step loans obtained from overseas banks as of September 30, 2006 and 2007 are as follows:

Currencies	Interest Rate — 2006	2007	Outstanding — 2006	2007
U.S. Dollar	4.00% - 6.48%	4.00% - 7.39%	1,865,061	1,626,333
Rupiah	11.64%	11.64%	1,647,633	1,457,832
Japanese Yen	3.10%	3.10%	1,110,491	1,065,113
Total			4,623,185	4,149,278

| The loans are intended for the development of telecommunications infrastructure and supporting
equipment. The loans are repayable in semi-annual installments and are due on various dates
through 2024. |
| --- |
| Details of two-step loans obtained from a consortium of contractors as of September 30, 2006
and 2007 are as follows: |

Currencies	Interest Rate — 2006	2007	Outstanding — 2006	2007
Japanese Yen	3.20 %	3.20 %	58,630	29,723
Total			58,630	29,723

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

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| 22. |
| --- |
| Two-step loans which are payable in Rupiah bear either a fixed interest rate or a floating
rate based upon the average interest rate on three-month Certificates of Bank Indonesia during
the six-months preceding the installment due date plus 1%, or a floating interest rate offered
by the lenders plus 5.25%. Two-step loans which are payable in foreign currencies bear either
a fixed rate interest or the floating interest rate offered by the lenders, plus 0.5%. |
| As of September 30, 2007, the Company has used all facilities under the two-step loans program
and the draw-down period for the two-step loans has expired. |
| The Company is required to maintain financial ratios as follows: |

| a. | Projected net revenue to projected debt service ratio should exceed 1.5:1 and 1.2:1
for the two-step loans originating from World Bank and Asian Development Bank (ADB),
respectively. |
| --- | --- |
| b. | Internal financing (earnings before depreciation and interest expenses) should
exceed 50% and 20% compared to annual average capital expenditures for loans originating
from World Bank and ADB, respectively. |

As of September 30, 2007, the Company complied with the above mentioned ratios.

NOTES AND BONDS

Bonds	995,815
Medium-term Notes	464,720
Total	1,460,535
Current maturities	(1,460,535	)
Long-term portion

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

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NOTES AND BONDS (continued)

a.
As of September 30, 2006 and 2007, the outstanding principal amount of the bonds and the
unamortized bond issuance costs are as follows:

Principal	1,000,000
Bond issuance costs	(4,185	)
Net	995,815

During the period when the bonds are outstanding, the Company is required to comply with all covenants or restrictions including maintaining consolidated financial ratios as follows:

Debt service coverage ratio should exceed 1.5:1
Debt to equity ratio should not exceed:

a.	3:1 for the period January 1, 2002 to December 31, 2002
b.	2.5:1 for the period January 1, 2003 to December 31, 2003
c.	2:1 for the period January 1, 2004 to the redemption date of the bonds

Debt to EBITDA ratio should not exceed 3:1

The Company also covenanted in the bonds indenture that during the periods the bonds are outstanding, the Company would not make any loans to or for the benefits of any person which in the aggregate exceed Rp.500,000 million. On September 30, 2006, the Company breached this covenant with regard to providing loans certain subsidiary which in aggregate exceed Rp.500,000 million. However the Company has obtained a written waiver from PT Bank Rakyat Indonesia Tbk, the trustee of the bonds. The bonds were fully repaid on July 16, 2007.

| b. |
| --- |
| On December 13, 2004, the Company entered into an agreement with PT ABN AMRO Asia
Securities Indonesia, PT Bahana Securities, PT BNI Securities and PT Mandiri Sekuritas
(collectively referred as Initial Purchasers) to issue medium-term notes (the Notes)
for a total principal amount of Rp.1,125,000 million. Proceeds from issuance of the Notes
were used to finance the payment of the remaining balance of the borrowings assumed in
connection with the TII acquisition amounting to US$123.0 million. |
| The Notes consist of four series with the following maturities and interest rates: |

Series		Maturity	Interest rate
A	290,000	June 15, 2005	7.70%
B	225,000	December 15, 2005	7.95%
C	145,000	June 15, 2006	8.20%
D	465,000	June 15, 2007	9.40%
Total	1,125,000

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NOTES AND BONDS (continued)

| b. |
| --- |
| Interest on the Notes is payable semi-annually beginning June 15, 2005 through June 15,
2007. The Notes are unsecured and will at all times rank pari passu with other unsecured
debts of the Company. The Company may at any time, before the maturity dates of the Notes,
repurchase the Notes in whole or in part. |
| On June 15, 2005, December 15, 2005, June 15, 2006 and June 15, 2007, the Company repaid
the Series A, Series B, Series C, and series D Notes. |
| As of September 30, 2006 and 2007, the outstanding principal and unamortized debt issuance
costs are as follows: |

Principal	465,000
Debt issuance costs	(280	)
	464,720
Current maturities	(464,720	)
Long-term portion

During the period when the Notes are outstanding, the Company must comply with all covenants or restrictions including maintaining financial ratios as follows:

Debt service coverage ratio should exceed 1.5:1
Debt to equity ratio should not exceed 2:1
Debt to EBITDA ratio should not exceed 3:1

The Company complied with the covenants for the whole financial periods.
The medium-term notes were fully repaid on June 16, 2007.

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24.
The details of long-term bank loans as of September 30, 2006 and 2007 are as follows:

			2006
			Outstanding		Outstanding
			Original		Original
		Total Facility	Currency	Rupiah	Currency	Rupiah
Lenders	Currency	(in millions)	(in millions)	Equivalent	(in millions)	Equivalent
The Export-Import
Bank of Korea	US$	124.0	117.6	1,084,578	94.1	860,610
Bank Mandiri	Rp	1,692,500.0		950,000		1,270,000
Bank Central Asia	Rp	1,423,000.0		793,047		950,000
Citibank N.A.	US$	113.3	50.8	469,039	27.4	250,687
	Euro	73.4	29.3	344,282	14.6	189,840
	Rp	500,000.0		500,000		300,000
Bank Negara Indonesia	Rp	800,000.0		300,000		680,000
Consortium of banks	Rp	150,000.0		43,177
Lippo Bank	Rp	18,500.0		13,414		12,881
Bank Niaga	Rp	32,100.0		7,377		24,140
Bank Bukopin	Rp	5,300.0		4,415		3,486
Bank Rakyat Indonesia	Rp	400,000.0				400,000
Total				4,509,329		4,941,644
Current maturities of bank loans (Note 21a)				(1,839,079	)	(2,549,849	)
Long-term portion (Note 21b)				2,670,250		2,391,795

a.	The Export-Import Bank of Korea
	On August 27, 2003, the Company entered into a loan agreement with The Export-Import Bank
of Korea for a loan facility of US$124.0 million. The loan was used to finance the CDMA
procurement from the Samsung Consortium and the facility was available until April 2006.
The loan bears interest, commitment and other fees totaling 5.68%. The loan is unsecured
and payable in 10 semi-annual installments on June 30 and December 30 of each year
beginning in December 2006. As of September 30, 2006 and 2007, the principal outstanding
amounted to US$117.6 million (equivalent to Rp.1,084,578 million) and US$94.1 million
(equivalent to Rp.860,610 million), respectively.
b.	Bank Mandiri
	On December 20, 2003, Dayamitra obtained a Rp.40,000 million credit facility from Bank
Mandiri. The loan amount under the facility would be repaid on a quarterly basis
beginning from the end of the third quarter of 2004 until the end of the fourth quarter
of 2006 and carried interest at 14% per annum which would be subject to change to reflect
any changes in the market rate. The loan was obtained to finance the construction of the
Fixed Wireless CDMA project pursuant to the procurement agreement entered into between
Dayamitra and Samsung Electronic Co. Ltd. As of June 30, 2006, the principal outstanding
under this facility was Rp.8,828 million and the loan was fully repaid in July 2006.

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BANK LOANS (continued)

b.	Bank Mandiri (continued)
	The above loan was collateralized by Dayamitras telecommunications equipment/network
with the CDMA technology financed by these facilities, and Dayamitras share in the DKSOR
of KSO VI. In addition, Dayamitra was required to maintain a minimum balance of Rp.6,000
million in an escrow account established to facilitate loan repayments (Note 16b).
	On March 13, 2003, Balebat entered into a loan agreement with Bank Mandiri for a facility
of Rp.2,500 million. This facility was secured by Balebats operating equipment and
matured in July 2006. The principal was repayable by monthly installments and the loan
was fully repaid in July 2006.
	On March 20, 2006, Telkomsel signed a loan agreement with Bank Mandiri for a facility of
Rp.600,000 million. The loan is payable to Bank Mandiri in five (5) equal semi-annual
installments beginning six (6) months after the end of availability period (the earlier
of March 20, 2007 and the date on which the facility has been fully drawn). The loan
bears floating interest rate of three-month Certificate of Bank Indonesia plus 1.75% and
is unsecured. The principal outstanding as of September 30, 2006 and 2007 amounted to
Rp.600,000 million and Rp.360,000 million, respectively.
	On August 15, 2006, Telkomsel signed a medium-term facility loan agreement with Bank
Mandiri of Rp.350,000 million. This facility is in 5 quarterly installments commencing
six months after the end of the availability period (the earlier of August 15, 2007 or
the date when the facility has been fully drawn down). The loan bears floating interest
rate of three-month Certificate of Bank Indonesia plus 1.5% and is unsecured. The
principal outstanding as of September 30, 2006 and 2007 amounted to Rp.350,000 million
and Rp.210,000 million, respectively.
	On June 15, 2007, Telkomsel signed a medium-term facility loan agreement with Bank
Mandiri of Rp.500,000 million. This facility is in 5 quarterly installments commencing
six months after the end of the availability period (the earlier of June 15, 2007 or the
date when the facility has been fully drawn down). The loan bears floating interest rate
of three-month Jakarta Inter Bank Offered Rate plus 1,25% which becomes due quarterly in
arrears and is unsecured. On July 24, 2007, the loan agreement has been amended with
addition of total facilities provided amounted to Rp.200,000 million The principal
outstanding as of September 30, 2007 amounted to Rp.700,000 million.
c.	Bank Central Asia
	On April 10, 2002, the Company entered into a Term Loan Agreement HP Backbone Sumatra
Project with Bank Central Asia, providing a total facility of Rp.173,000 million. The
facility was obtained to finance the Rupiah portion of the high performance backbone
network in Sumatra pursuant to the Partnership Agreement dated November 30, 2001 with
PT Pirelli Cables Indonesia and PT Siemens Indonesia.
	The amounts drawn from the facility bear interest at 4.35% plus the three-month time
deposit rate. The loans would be repaid in twelve unequal quarterly installments
beginning in July 2004. The loan was originally scheduled to mature in October 2006 but
was amended in 2004 to mature in April 2007 instead.

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BANK LOANS (continued)

c.
The loan facility from Bank Central Asia is not collateralized.
During the period when the loan is outstanding, the Company is required to comply with all
covenants or restrictions including maintaining financial ratios as follows:

EBITDA to interest ratio should exceed 4:1
EBITDA to interest and principal ratio should exceed 1.5:1
Debt to EBITDA ratio should not exceed 3:1

In 2006, the Company breached a covenant in the loan agreement which stipulates that the Company will not make any loans to or for the benefit of any person which in aggregate exceed Rp.500,000 million. The Company obtained a written waiver from Bank Central Asia with regard to providing loans to certain subsidiaries which in aggregate exceed Rp.500,000 million. As of September 30, 2006, the principal outstanding under this facility was Rp.43,047 million and the loan was fully repaid in April 10, 2007.

On March 16, 2006, Telkomsel signed a loan agreement with Bank Central Asia for a facility of Rp.400,000 million. The loan is payable to Bank Central Asia in five (5) equal semi-annual installments beginning six (6) months after the end of availability period (the earlier of March 16, 2007 and the date on which the facility has been fully drawn). The loan bears a floating an interest rate of three-month Certificate of Bank Indonesia plus 1.75% and unsecured. The principal outstanding as of September 30, 2006 and 2007 amounted to Rp.400,000 million and Rp.240,000 million.

On August 15, 2006, Telkomsel signed a medium-term facility loan agreement with Bank Central Asia for Rp.350,000 million. This facility is payable for 5 quarterly installments commencing six months after the end of the availability period (the earlier of August 15, 2007 and the date when the facility has been fully drawn down). The loan bears a floating interest rate of three-month Certificate of Bank Indonesia plus 1.5% and unsecured. The principal outstanding as of September 30, 2006 and 2007 amounted to Rp.350,000 million and Rp.210,000 million, respectively.

On June 15, 2007, Telkomsel signed a medium-term facility loan agreement with Bank Central Asia of Rp.500,000 million. This facility is in 5 quarterly installments commencing six months after the end of the availability period (the earlier of June 15, 2007 or the date when the facility has been fully drawn down). The loan bears floating interest rate of three-month Jakarta Inter Bank Offered Rate plus 1.25% which becomes due quarterly in arrears and is unsecured. The principal outstanding as of September 30, 2007 amounted to Rp.500,000 million.

d. Citibank N.A.

| 1. |
| --- |
| On December 2, 2002, pursuant to the partnership agreement with Siemens
Aktiengesellschaft (AG) (Note 52a.i), Telkomsel entered into the Hermes Export
Facility Agreement (Facility) with Citibank International plc (as Original Lender
and Agent) and Citibank N.A., Jakarta branch (Arranger) covering a total facility
of Euro76.2 million divided into several tranches. |

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BANK LOANS (continued)

d. Citibank N.A . (continued)

| 1. |
| --- |
| The agreement was subsequently amended on October 15, 2003, amending the Facility
amount to Euro73.4 million and the payment dates. |
| The interest rate per annum on the Facility is determined based on the EURIBOR plus
0.75% per annum and unsecured. Interest is payable semi-annually, starting on the
utilization date of the Facility (May 29, 2003). As of September 30, 2006 and 2007,
the outstanding balance was Euro29.3 million (equivalent to Rp.344,282 million) and
Euro14.6 million (equivalent to Rp.189,841 million), respectively. |
| The schedule of the principal payments on this long-term loan as of September 30, 2007
is as follows: |

	Amount — Euro	Rupiah
Year	(in millions)	equivalent
2007	7.3	94,920
2008	7.3	94,920
	14.6	189,840

High Performance Backbone (HP Backbone) Loans

| a. |
| --- |
| The facility was obtained to finance up to 85% of the cost of supplies and services
sourced in Germany relating to the design, manufacture, construction, installation
and testing of high performance backbone networks in Sumatra pursuant to the
Partnership Agreement dated November 30, 2001, with PT Pirelli Cables Indonesia
and PT Siemens Indonesia for the construction and provision of a high performance
backbone in Sumatra. The credit facility is unsecured. |
| The lender required a fee of 8.4% of the total facility. This fee was paid twice
during the agreement period, 15% of the fee was required to be paid in cash and 85%
was included in
the loan balance. |
| As of September 30, 2006 and 2007, the outstanding loan was US$10.5 million
(equivalent to Rp.96,663 million) and US$6.3 million (equivalent to Rp.57,526
million), respectively. The loan is payable in ten semi-annual installments
beginning in April 2004. |
| The amounts drawn from the facility bear interest at a rate equal to the six-month
LIBOR plus 0.75%. |

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24. BANK LOANS (continued)

d. Citibank N.A . (continued)

High Performance Backbone (HP Backbone) Loans (continued)

| b. |
| --- |
| The amounts drawn from the facility bear a fixed interest rate of 4.14%. The
loans are payable in ten semi-annual installments beginning in December 2003.
Total principal outstanding as of September 30, 2006 and 2007 was US$7.4 million
(equivalent to Rp.68,477 million) and US$3.7 million (equivalent to Rp.33,960
million), respectively. The credit facility is unsecured. |

During the period when the loans are outstanding, the Company is required to comply with all covenants or restrictions including maintaining financial ratios as follows:

1.	Debt service coverage ratio should exceed 1.5:1
2.	Debt to equity ratio should not exceed:

a.	3:1 for the period April 10, 2002 to January 1, 2003
b.	2.75:1 for the period January 2, 2003 to January 1, 2004
c.	2.5:1 for the period January 2, 2004 to January 1, 2005
d.	2:1 for the period January 2, 2005 to the full repayment
date of the loans

Debt to EBITDA ratio should not exceed:

a.	3.5:1 for the period April 10, 2002 to January 1, 2004
b.	3:1 for the period January 2, 2004 to the full repayment
date of the loans

In 2005, the Company has breached a covenant in the loan agreements which stipulate that the Company will not make any loans or grant any credit to or for the benefit of any person which in aggregate exceed 3% of shareholders equity. On May 12, 2006, the Company obtained a written waiver from Citibank International plc with regard to providing loans to certain subsidiaries which in aggregate exceed 3% of stockholders equity. As of September, 30, 2007, the Company has complied with the above covenant.

| 3. |
| --- |
| On December 2, 2002, pursuant to the partnership agreement with PT Ericsson Indonesia
(Note 52a.i), Telkomsel entered into the EKN-Backed Facility agreement (Facility)
with Citibank International plc (Original Lender and Agent) and Citibank N.A.,
Jakarta branch (Arranger) covering a total facility amount of US$70.5 million,
divided into several tranches. |
| The agreement was subsequently amended on December 17, 2004, to reduce the total
Facility to US$68.9 million. |

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24. BANK LOANS (continued)

d. Citibank N.A. (continued)

| 3. |
| --- |
| The interest rate per annum on the Facility is determined based on CIRR (Commercial
Interest Reference Rate) of 3.52% plus 0.5% per annum and unsecured. Interest is
payable semi-annually, starting on the utilization date of the Facility (July 31,
2003). |
| In addition to the interest, in 2004, Telkomsel was also charged an insurance premium
for the insurance guarantee given by EKN in favor of Telkomsel for the loan
utilization amounting to US$1.5 million, 15% of which was paid in cash. The remaining
balance was settled through utilization of the Facility. |
| No amounts were drawn down from the Facility for the nine months period ended
September 30, 2006 and 2007. As of September 30, 2006 and 2007, the outstanding
balance was US$32.9 million (equivalent to Rp.303,898 million) and US$17.4 million
(equivalent to Rp.159,201 million), respectively. |
| The schedule of the principal payments on this long-term loan as of September 30,
2007 is as follows: |

	Amount — US$	Rupiah
Year	(in millions)	Equivalent
2007	7.7	70,736
2008	9.7	88,465
	17.4	159,201

| 4. |
| --- |
| On March 21, 2006, Telkomsel signed a medium term loan agreement with Citibank, N.A.,
Jakarta Branch for a facility of Rp.500,000 million. The loan is repayable to
Citibank in five (5) equal semi-annual installments beginning six (6) months after
the end of availability period (the earlier of March 21, 2007 and the date on which
the facility has been fully drawn). The loan bears a floating interest rate of
three-month Certificate of Bank Indonesia plus 1.75% and unsecured. The
principal outstanding as of September 30, 2006 and 2007 amounted to Rp.500,000
million and Rp.300,000 million, respectively. |

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24. BANK LOANS (continued)

d.
The following table summarizes the principal outstanding on the various long-term loans
from Citibank N.A. as of September 30, 2006 and 2007:


	Foreign			Foreign
	Currencies	Rupiah		Currencies	Rupiah
	(in millions)	Equivalent		(in millions)	Equivalent
Hermes Export Facility	Euro	29.3	344,282	14.6	189,841
HP Backbone loans	US$	17.8	165,140	10.0	91,486
EKN-Backed Facility	US$	32.9	303,898	17.4	159,201
Medium Term Loan	Rp		500,000		300,000
Total			1,313,320		740,528
Current maturities			(628,034	)	(603,624	)
Long-term portion			685,286		136,904

e.	Bank Negara Indonesia (BNI)
	On August 15, 2006, Telkomsel signed a medium-term facility loan agreement with BNI for
Rp.300,000 million. This facility is payable for 5 quarterly installment commencing six
months after the end of the availability period (the earlier date of August 15, 2007 and
the date when the facility has been fully drawn down). The loan bears a floating
interest rate of three-month Certificate of Bank Indonesia plus 1.5% and unsecured. The
principal outstanding as of September 30, 2006 and 2007 amounted to Rp.300,000 million
and Rp.180,000 million, respectively.
	On June 15, 2007, Telkomsel signed a medium-term facility loan agreement with BNI of
Rp.500,000 million. This facility is in 5 quarterly installments commencing six months
after the end of the availability period (the earlier of
June 15, 2007 or the date when the facility has been fully drawn down). The loan bears floating interest rate of
three-month Jakarta Inter Bank Offered Rate plus 1.25% which becomes due quarterly in
arrears and is unsecured. The principal outstanding as of September 30, 2007 amounted to
Rp.500,000 million.
f.	Consortium of banks
	On June 21, 2002, the Company entered into a loan agreement with a consortium of banks
for a facility of Rp.400,000 million to finance the Regional Division V Junction
Project. Bank Bukopin, acting as the facility agent, charged interest at the rate of 19%
for the first year from the signing date and at the rate of the highest average
three-month deposit rate of each creditors plus 4% for the remaining years. The
draw-down period expires 19 months from the signing of the loan agreement and the
principal is payable in 14 quarterly installments starting from April 2004. The loan
facility is secured by project equipment, with a value of not less than Rp.500,000
million.

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24. BANK LOANS (continued)

| f. |
| --- |
| Subsequently, based on an addendum to the loan agreement dated April 4, 2003, the loan
facility was reduced to Rp.150,000 million, the draw-down period was amended to expire 18
months from the signing of the addendum, the repayment schedule was amended to 14
quarterly installments starting from May 21, 2004 and ending on June 21, 2007, and the
value of the project equipment secured was reduced to Rp.187,500 million. |
| During the period when the loan is outstanding, the Company is required to comply with
all covenants or restrictions including maintaining financial ratios as follows: |

1.	Debt to equity ratio should not exceed 3:1
2.	EBITDA to interest expense should exceed 5:1

| | As of September 30, 2006, the interest rate charge on the loan and principal outstanding
under this facility was 12.94% and Rp.43,177 million, respectively. As of June 22, 2007
the loan was fully repaid. |
| --- | --- |
| g. | Bank Niaga |
| | On December 28, 2004, Balebat entered into a loan agreement with Bank Niaga providing a
total facility of Rp.7,200 million comprising Rp.5,000 million to finance the
construction of plant (Investment Facility) with interest at 13.5% per annum and
Rp.2,200 million to finance certain purchases of machinery (Specific Transaction
Facility) with the interest at 12% per annum. The interest rate was subsequently
increased to 17% per annum on December 1, 2005. The Investment Facility is repayable in
36 monthly installments commencing from March 31, 2005. The Specific Transaction Facility
is repayable in 60 monthly installments commencing from June 29, 2005. These facilities
are secured by Balebats property, plant and equipment with a value of Rp.8,450 million.
As of September 30, 2006 and 2007, principal outstanding under these facilities amounted
to Rp.4,018 million and Rp.2,055 million, respectively. |
| | On December 22, 2005 the loan agreement was amended to include a short term credit
facility of Rp.4,000 million with maturity date and interest rate of December 22, 2006
and 12.5% per annum, respectively. On June 13, 2006, the facility was combined with the
revolving credit facility of Rp.800 million (Note 20d). |
| | On June 13, 2006, Balebat also received additional facility of Rp.2,500 million which
consist of transaction facility of Rp.2,000 million to finance the purchase of printing
machine and Rp.500 million to finance the purchase of operational vehicle with interest
rate 16.5% per annum. These facilities will be due on October 30, 2011 and November 28,
2009, respectively. Both facilities secured by Balebats property located in West Java.
As of September 30, 2006 and 2007, the outstanding loans of the facilities was Rp.2,092
million and Rp.1,361 million, respectively. |
| | As discussed in Note 20d, on April 25, 2005, Balebat entered into a loan agreement with
Bank Niaga for a total facility of Rp.2,400 million which includes an investment credit
facility of Rp.1,600 million with maturity date of October 25, 2009. The investment
credit facility loan is payable in 48 unequal monthly installments beginning in November
2005 through October 2009. |

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24. BANK LOANS (continued)

g.	Bank Niaga (continued)
	The investment credit facility bears interest at a rate equal to market rate plus 2%. As
of September 30, 2006 and 2007, the principal outstanding amounted to Rp.1,267 million
and Rp.867 million, respectively.
	In March 2007, GSD entered into a loan agreement (2 nd special transaction loan
agreement) with Bank Niaga for a total facility of Rp.20,000 million with interest rate
13 % per annum. The facility secured by a parcel of land. The facility is payable in 8
years and the principal is payable in 33 quarterly installments and will be due in May
2015. As of September 30, 2007, the principal outstanding amounted to Rp.19,857 million.
h.	Bank Bukopin
	On May 11, 2005, Infomedia entered into loan agreements with Bank Bukopin for various
facilities totaling Rp.5,300 million. The loans were obtained to finance the acquisition
of a property. The loan is payable in 60 monthly installments. A portion of the
facilities of Rp.4,200 million will mature in June 2010 and the remainder of Rp.1,100
million will mature in December 2010. As of September 30, 2006 and 2007, interest rate
charged on the loan was 15.75% and 15.75%, respectively. The facilities are secured by
certain Infomedias property. As of September 30, 2006 and 2007, the principal
outstanding amounted to Rp.4,415 million and Rp.3,486 million, respectively.
i.	Bank Lippo
	On May 29, 2006, Infomedia entered into a loan agreement with Bank Lippo for a facility
of Rp.18,500 million to finance its Call Center project with Telkomsel. The facility
bears interest at 15.5% per annum and is secured by Infomedias receivables on the Call
Center contract with Telkomsel amounted to Rp.23,125 million until the due date of the
loan within 36 months from the withdrawal date. As of September 30, 2006 and 2007, the
principal outstanding amounted to Rp.13,414 million and Rp.12,881 million, respectively.
j.	Bank BRI
	On June 15, 2007, Telkomsel entered into a loan agreement with Bank BRI for a facility of
Rp.400,000 million. This facility is in 5 quarterly installments commencing six months
after the end of the availability period (the earlier of June 15, 2007 or the date when
the facility has been fully drawn down). The loan bears floating interest rate of
three-month Jakarta Inter Bank Offered Rate plus 1.25% which becomes due quarterly in
arrears and is unsecured. The principal outstanding as of September 30, 2007 amounted to
Rp.400,000 million.

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25. DEFERRED CONSIDERATION FOR BUSINESS COMBINATIONS

These represent the Companys obligation to the Selling Stockholders of TII in respect of the Companys acquisition of 100% of TII, MGTI in respect of the Companys acquisition of KSO IV, and BSI in respect of the Companys acquisition of KSO VII.


TII transaction (Note 4)
PT Aria Infotek	264,170		157,214
MediaOne International I B.V.	176,114		104,809
The Asian Infrastructure Fund	62,898		37,432
Less discount on promissory notes	(36,715	)	(12,393	)
	466,467		287,062
KSO IV transaction (Note 5a)
MGTI	3,128,812		2,410,177
Less discount	(519,035	)	(303,229	)
	2,609,777		2,106,948
KSO VII transaction (Note 5b)
BSI			1,752,912
Less discount			(366,919	)
			1,385,993
Total	3,076,244		3,780,003
Current maturity net of discount (Note 21a)	(686,831	)	(1,079,988	)
Long-term portion net of discount (Note21b)	2,389,413		2,700,015

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MINORITY INTEREST


Minority interest in net assets of subsidiaries:
Telkomsel	7,090,228	8,143,730
Infomedia	103,471	117,941
Metra	1,720	404
GSD	5	5
Total	7,195,424	8,262,080


Minority interest in net income (loss) of subsidiaries:
Telkomsel	2,929,375		3,395,545
Infomedia	28,097		25,907
Metra	(2,280	)	(3,177	)
GSD	1		1
Total	2,955,193		3,418,276

CAPITAL STOCK

	2006	Percentage	Total
Description	Number of Shares	Of Ownership	Paid-up Capital
		%	Rp
Series A Dwiwarna share
Government of the Republic of Indonesia	1
Series B shares
Government of the Republic of Indonesia	10,320,470,711	51.41	2,580,118
JPMCB US Resident (Norbax Inc.)	1,834,347,480	9.14	458,587
The Bank of New York	1,468,624,256	7.32	367,156
Board of Commissioners (Note 1a):
Petrus Sartono	19,116		5
Board of Directors (Note 1a):
Garuda Sugardo	16,524		4
Guntur Siregar	19,980		5
John Welly	4
Abdul Haris	1,000
Public (below 5% each)	6,451,713,708	32.13	1,612,928
Sub total	20,075,212,780	100.00	5,018,803
Treasury stock (Note 29)	84,786,500		21,197
Total	20,159,999,280	100.00	5,040,000

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CAPITAL STOCK (continued)

	2007	Percentage	Total
Description	Number of Shares	Of Ownership	Paid-up Capital
		%	Rp
Series A Dwiwarna share
Government of the Republic of Indonesia	1
Series B shares
Government of the Republic of Indonesia	10,320,470,711	51.76	2,580,118
JPMCB US Resident (Norbax Inc.)	1,598,757,327	8.02	399,689
The Bank of New York	1,728,090,496	8.67	432,023
Board of Directors (Note 1a):
Ermady Dahlan	17,604		4
Indra Utoyo	5,508		1
Public (individually less than 5%)	6,290,317,133	31.55	1,572,580
Total	19,937,658,780	100.00	4,984,415
Treasury Stock (Note 29)	222,340,500		55,585
Total	20,159,999,280	100.00	5,040,000

| | The Company only issued one Series A Dwiwarna Share which is held by the Government and cannot
be transferred to any party, and has a veto in the General Meeting of the Stockholders with
respect to election and removal of Commissioners and Directors and to amend the Companys
article of association. |
| --- | --- |
| | Series B shares give the same and equal rights to all the Series B shareholders. |
| 28. | ADDITIONAL PAID-IN CAPITAL |

| Proceeds from sale of 933,333,000 shares in excess of
par value through initial public offering in 1995 | 1,446,666 | | 1,446,666 | |
| --- | --- | --- | --- | --- |
| Capitalization into 746,666,640 series B shares in 1999 | (373,333 | ) | (373,333 | ) |
| Total | 1,073,333 | | 1,073,333 | |

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| 29. |
| --- |
| Based on the resolution of the Extraordinary General Meeting of Stockholders on December 21,
2005, the Stockholders authorized the phase I plan to repurchase the Companys issued and
outstanding Series B shares. The proposals to a stock repurchase programs, under the following
terms and conditions: (i) maximum stock repurchase would be 5% of the Companys issued Series
B shares with total cost not to exceed Rp.5,250,000 million; (ii) the period determined for
the acquisition would not be longer than 18 months (December 21, 2005 to June 20, 2007), in
accordance with BAPEPAM Regulation No.XI.B.2. |
| Up to the last transaction of this phase dated June 20, 2007, the Company has repurchased
211,290,500 shares of the Companys issued and outstanding Series B shares, representing
approximately 1.05% of the Companys issued and outstanding Series B shares, for a total
repurchase amount of Rp.1,829,138 million, including the broker and custodian fees. |
| Based on the resolution of the Annual General Meeting of Stockholders on June 29, 2007, the
Stockholders authorized the phase II plan to repurchase the Companys issued and outstanding
Series B shares. The proposals to a stock repurchase programs, under the following terms and
conditions: (i) maximum stock repurchase would be 215.000.000 of the Companys issued Series B shares with total cost not to exceed to Rp.2,000,000 million; (ii) the period determined for
the acquisition would not be longer than 18 months (June 29, 2007 to December 28, 2008), in
accordance with BAPEPAM Regulation No.XI.B.2. |
| Up to September 30, 2007, the Company has repurchased 11,050,000 shares, for phase II of the
Companys issued and outstanding series B shares, representing approximately 0.05% of the
Companys issued and outstanding series B series B shares, for a total repurchase amount of
Rp116,763 million, including the broker and custodian fees. |
| The Company has planned to retain, sell or use the treasury stock for other purposes in
accordance with BAPEPAM Regulation No.XI.B.2 and under Law No. 40/2007 on Limited Liability
Companies. |
| The movement of shares held in treasury arising from the programs for repurchase of shares was
the following: |

Number of share	Rp
Balance as of January 1, 2007	118,376,500	952,211
Number of shares acquired	103,964,000	993,690
Balance as of September 30, 2007	222,340,500	1,945,901

Historical unit cost of repurchase of treasury shares:

Weighted average	8,752
Minimum	6,633
Maximum	10,978

The acquisition unit cost has included the total cost for the shares repurchase programs i.e. broker commission and custodian fee. Up to balance sheet date none of the shares acquired were sold.

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| 30. |
| --- |
| Compensation for early termination of exclusive rights |
| As discussed in Note 1a, on July 31, 2002, the Government decided to terminate the Companys
exclusive rights to provide local and domestic long-distance fixed line telecommunications
services taking effect since August 1, 2002. |
| On March 30, 2004, the Minister of Communications issued Announcement No. PM.2 year 2004
regarding the Implementation of Restructuring in the Telecommunications Sector which, among
others, stipulates that the Government shall pay compensation for early termination of
exclusive rights to the Company amounting to Rp.478,000 million, net of tax. |
| On December 15, 2005, the Company signed an agreement on Implementation of Compensation for
Termination of Exclusive Rights with the State Minister of Communication and Information
Directorate General of Post and Telecommunications, which was amended on October 18, 2006.
Pursuant to this agreement, the Government agreed to pay Rp.478,000 million to the Company
over a five-year period where Rp.90,000 million shall be paid from the 2005 and 2006 State
budget and the remaining Rp.298,000 million shall be paid gradually or in one lump-sum payment
based on the States financial ability. In addition, the Company is required by the Government
to use the funds received from this compensation for the development of telecommunications
infrastructure. |
| As of September 30, 2007, the Company has received Rp.180,000 million in relation to the
compensation for the early termination of exclusivity right, being Rp.90,000 million paid by
the Government on December 30, 2005 and Rp.90,000 million on December 28, 2006. The Company
recorded these amounts in Difference in value of restructuring transactions between entities
under common control in the stockholders equity section. These amounts are recorded as a
component of stockholders equity because the Government is the majority and controlling
shareholder of the Company. The Company will record the remaining amount of Rp.298,000 million
when it is received. |

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TELEPHONE REVENUES


Fixed lines
Local and domestic
long-distance usage	5,242,737	5,401,757
Monthly subscription charges	2,565,599	2,783,349
Installation charges	133,499	88,785
Others	131,388	191,738
Total	8,073,223	8,465,629
Cellular
Air time charges	13,803,647	16,242,014
Monthly subscription charges	231,438	191,659
Features	779,064	187,686
Connection fee charges	84,994	95,099
Total	14,899,143	16,716,458
Total Telephone Revenues	22,972,366	25,182,087

INTERCONNECTION REVENUES

Cellular	5,470,957	8,031,987
International-net	717,841	497,933
Others	177,655	231,068
Total	6,366,453	8,760,988

| As of December 31, 2006 interconnection tariff scheme was percentage of revenue sharing
between operators. In 2007, pursuant to Minister Regulation No. 08/Per/M.KOMINFO/02/2006, the
Company recorded interconnection expenses due to implementation of cost allocation based
interconnection tariff. As a result since January 1, 2007 interconnection-domestic expenses
recorded separately from the interconnection revenues (Notes 38 and 51). |
| --- |
| Refer to Note 47 for details of related party transactions. |

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REVENUE UNDER JOINT OPERATION SCHEMES

Minimum Telkom Revenues	207,516
Share in Distributable KSO Revenues	277,040
Amortization of unearned initial investor payments
under Joint Operation Schemes	786
Total	485,342

| | KSO revenues were shares of the Companys revenues under joint operation agreement with the
KSO investors. On October 19, 2006, the Company has amended the KSO VII agreement and as of
that date the Company has obtained the operational control over all of the KSO operations by
acquisition of its KSO investors or the businesses. |
| --- | --- |
| 34. | DATA AND INTERNET REVENUES |

SMS	4,902,279	8,702,155
Internet	654,922	971,384
Data communication	567,905	308,058
VoIP	216,011	157,899
e-Business	28,055	24,555
Total	6,369,172	10,164,051

NETWORK REVENUES

Leased lines	357,061	454,849
Satellite transponder lease	103,803	146,290
Total	460,864	601,139

Refer to Note 47 for details of related party transactions.

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REVENUE-SHARING ARRANGEMENTS REVENUES

Revenue-Sharing Arrangements revenues	214,037	107,885
Amortization of unearned income (Note 13)	92,310	212,468
Total	306,347	320,353

OPERATING EXPENSES PERSONNEL

Salaries and related benefits	1,703,428	2,065,715
Vacation pay, incentives and other benefits	1,610,669	2,283,568
Employee income tax	569,186	909,559
Net periodic post-retirement health care benefit
cost (Note 46)	449,514	543,126
Net periodic pension cost (Note 44)	331,256	465,879
Housing	132,366	184,314
Medical	10,014	11,103
Other employee benefits (Note 44)	7,863	7,313
Long service awards (Note 45)	121,256	(314,169	)
Others	25,435	31,989
Total	4,960,987	6,188,397

INTERCONNECTION EXPENSES

Cellular		1,598,627
Others		41,497
Total		1,640,124

| Pursuant to Minister Regulation No. 08/Per/M.KOMINFO/02/2006, starting from January 1, 2007,
the Company recorded interconnection expenses due to implementation of cost allocation based
interconnection tariff. As a result since January 1, 2007 interconnection-domestic expenses
recorded separately from the interconnection revenues (Notes 32 and 51). |
| --- |
| Refer to Note 47 for details of related party transactions. |

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OPERATING EXPENSES OPERATIONS, MAINTENANCE AND TELECOMMUNICATION SERVICES

Operations and maintenance	2,957,539	3,888,255
Radio frequency usage charges	539,134	792,494
Concession fees and Universal Service Obligation
(USO) charges	643,432	752,713
Cost of phone, SIM and RUIM cards	404,733	430,140
Electricity, gas and water	300,776	356,438
Insurance	110,200	222,883
Leased lines	113,196	185,930
Vehicles and supporting facilities	179,209	169,984
Travelling	27,927	36,892
Call center	70,355
Others	4,089	4,933
Total	5,350,590	6,840,662

	Refer to Note 47 for details of related party transactions.
40.	OPERATING EXPENSES GENERAL AND ADMINISTRATIVE

| Amortization of goodwill and other intangible assets
(Note 15) | 681,520 | 787,004 |
| --- | --- | --- |
| Collection expenses | 357,667 | 431,425 |
| Provision for doubtful accounts and inventory
obsolescence | 344,564 | 378,037 |
| Travelling | 164,610 | 193,235 |
| Security and screening | 137,228 | 172,292 |
| Training, education and recruitment | 149,730 | 155,246 |
| General and social contribution | 182,191 | 128,710 |
| Professional fees | 104,367 | 74,002 |
| Meetings | 40,949 | 65,311 |
| Stationery and printing | 32,454 | 57,546 |
| Research and development | 5,905 | 4,356 |
| Others | 16,188 | 91,844 |
| Total | 2,217,373 | 2,539,008 |

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TAXATION

| a. | In 2006, Telkomsel recognized a claim for tax refund amounting to Rp.337,855 million
as a result of the revision to the 2004 and 2005 tax returns. (Note 41f). |
| --- | --- |
| b. | Prepaid Taxes |


Subsidiaries
Corporate Income Tax	14,289
Article 23 - Witholding tax on services delivery	1,479	3,048
	15,768	3,048

c. Taxes payable

The Company
Income taxes
Article 21 - Individual income tax	69,899	181,861
Article 22 - Witholding tax on goods delivery and import	4,011	3,215
Article 23 - Witholding tax on services delivery	37,597	9,072
Article 25 - Installment of corporate income tax	4,170	5,811
Article 26 - Witholding tax on non-resident income tax	872	2,026
Article 29 - Underpayment of corporate income tax	706,059	409,969
Value added tax	258,845	281,206
	1,081,453	893,160
Subsidiaries
Income taxes
Article 21 - Individual income tax	5,827	23,724
Article 22 - Witholding tax on goods delivery and import	429	1
Article 23 - Witholding tax on services delivery	66,604	29,344
Article 25 - Installment of corporate income tax		238,379
Article 26 - Witholding tax on non-resident income tax	165,680	3,956
Article 29 - Underpayment of corporate income tax	1,169,731	885,268
Value added tax	6,342	160,629
	1,414,613	1,341,301
	2,496,066	2,234,461

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TAXATION (continued)

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


Current
The Company	2,007,789		1,258,795
Subsidiaries	3,609,474		3,935,795
	5,617,263		5,194,590
Deferred
The Company	(283,203	)	417,924
Subsidiaries	52,952		309,205
	(230,251	)	727,129
	5,387,012		5,921,719

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

Consolidated income before tax	17,564,676		19,159,050
Add back consolidation eliminations	5,699,547		6,383,151
Consolidated income before tax and eliminations	23,264,223		25,542,201
Less: income before tax of the subsidiaries	(12,317,167	)	(14,046,427	)
Income before tax attributable to the Company	10,947,056		11,495,774
Less: income subject to final tax	(486,675	)	(464,792	)
	10,460,381		11,030,982
Tax calculated at progressive rates	3,138,097		3,309,277
Non-taxable income	(1,708,723	)	(1,917,021	)
Non-deductible expenses	241,840		273,834
Deferred tax assets originating from previously
unrecognized temporary differences, net	(23,495	)	(47,807	)
Corporate income tax expense	1,647,719		1,618,283
Final income tax expense	76,867		58,436
Total income tax expense of the Company	1,724,586		1,676,719
Income tax expense of the Subsidiaries	3,662,426		4,245,000
Total consolidated income tax expense	5,387,012		5,921,719

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TAXATION (continued)

e.
The reconciliation between income before tax attributable to the Company and estimated
taxable income for the nine months ended September 30, 2006 and 2007 is as follows:

Income before tax attributable to the Company	10,947,056		11,495,774
Less: income subject to final tax	(486,675	)	(464,792	)
	10,460,381		11,030,982
Temporary differences:
Depreciation of property, plant and equipment	685,896		204,095
Gain on sale of property, plant and equipment	(554	)	(9,386	)
Allowance for doubtful accounts	130,165		149,304
Trade receivables written-off	(62,797	)	(115,634	)
Allowance for inventory obsolescence	3,278		7,358
Accrued employee benefits	259,030		(1,528,429	)
Net periodic pension cost	(471,515	)	(224,252	)
Long service awards	62,733		(425,143	)
Amortization of intangible assets	672,662		758,962
Amortization of deferred stock issuance costs	183,127
Amortization of landrights	(3,373	)	(3,212	)
Temporary differences of KSO units	60,633
Depreciation of property, plant and equipment
under revenue-sharing arrangements	65,732		89,923
Amortization of unearned income on revenue-
sharing arrangements	(94,609	)	(177,035	)
Payments of deferred consideration for business
combinations
and the related interest	(495,715	)	(667,982	)
Provision for bonus	37,309		389,694
Foreign exchange loss/(gain) on deferred
consideration for business combinations	(186,673	)	28,147
Capital leases	20,362		(24,167	)
Other provisions			(4,681	)
Total temporary differences	865,691		(1,552,438	)

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TAXATION (continued)

e. (continued)


Permanent differences:
Net periodic post-retirement health care benefit cost	443,411		536,781
Amortization of goodwill	8,858
Amortization of discount on promissory notes	33,274		18,418
Equity in net income of associates and subsidiaries	(5,695,744	)	(6,390,070	)
Others	320,592		357,581
Total permanent differences	(4,889,609	)	(5,477,290	)
Taxable income	6,436,464		4,001,254
Corporate income tax expense	1,930,922		1,200,359
Final income tax expense	76,867		58,436
Total current income tax expense of the Company	2,007,789		1,258,795
Current income tax expense of the Subsidiaries	3,609,474		3,935,795
Total current income tax expense	5,617,263		5,194,590

| | Calculation of corporate income tax liability above was in accordance with annual tax
return submitted by the Company to the Tax Office. |
| --- | --- |
| f. | Tax assessment |
| | In 2006, the Company received a tax assessment letter (SKPKB) from the Tax Office
confirming an underpayment of its corporate income tax for fiscal year 2004 amounting to
Rp.4,363 million. The underpayment was paid in August 2006. |
| | During 2006, Telkomsel was assessed for underpayments of withholding taxes and value
added tax (self assessed) including penalty covering the fiscal year 2002 totaling Rp.129
billion and overpayment of corporate income tax of Rp.5 billion. The net underpayment was
settled through the use of the payment of income tax in 2003 of Rp24 billion and a cash
payment of Rp.100 billion. Of the Rp.100 billion cash payment made, Telkomsel has filed
an objection for Rp.99 billion. Of the net underpayment of Rp.105 billion, Rp.83 billion
was charged to expense in 2006 with the remaining amount of Rp.22 billion recorded as
part of its claims for tax refund (Note 40a). In 2007, the claim for tax refund was
rejected by the tax office. |
| | In 2006, Telkomsel filed revisions of its tax returns for the fiscal years 2004 and 2005
due to a recalculation of the depreciation of property, plant and equipment for tax
purposes. As a result of the recalculation, Telkomsel recognized claims for overpayments
with a corresponding addition to the deferred tax liability of property, plant and
equipment amounting to Rp.338 billion (Note 40a). Currently, Telkomsel is being audited
by the Tax Office for the recalculation of the depreciation . |

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TAXATION (continued)

g.
The details of the Companys and subsidiaries deferred tax assets and liabilities are as
follows:


		Credited
December 31,		to Statements		September 30,
2005		of Income		2006
The Company
Deferred tax assets:
Allowance for doubtful
accounts	205,396		82,330		287,726
Allowance for inventory
obsolescence	13,652		1,088		14,740
Long-term investments	6,666		(3,844	)	2,822
Accrued employee benefits	63,003		11,193		74,196
Accrued long service awards	148,791		18,820		167,611
Net periodic pension cost	384,237		(63,742	)	320,495
Capital leases	6,408		(407	)	6,001
Liabilities of business acquisitions	945,403		(157,054	)	788,349
Accrued expenses	58,265		(1,080	)	57,185
Total deferred tax assets	1,831,821		(112,696	)	1,719,125
Deferred tax liabilities:
Difference between book and
tax property, plant and
equipments net book value	(1,766,217	)	202,903		(1,563,314	)
Landrights	(2,604	)	(1,012	)	(3,616	)
Revenue-sharing arrangements	(37,176	)	(7,791	)	(44,967	)
Intangible assets	(1,345,324	)	201,799		(1,143,525	)
Total deferred tax liabilities	(3,151,321	)	395,899		(2,755,422	)
Deferred tax liabilities of the
Company, net	(1,319,500	)	283,203		(1,036,297	)
Deferred tax liabilities of the
subsidiaries, net	(1,072,310	)	(54,321	)	(1,126,631	)
Total deferred tax liabilities, net	(2,391,810	)	228,882		(2,162,928	)

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TAXATION (continued)

g. Deferred tax assets and liabilities (continued)


		Credited
December 31,		to Statements		September 30,
2006		of Income		2007
The Company
Deferred tax assets:
Allowance for doubtful
accounts	263,321		45,198		308,519
Allowance for inventory
obsolescence	14,099		1,181		15,280
Accrued for employee benefits	529,662		(341,621	)	188,041
Accrued long service awards	177,019		(127,543	)	49,476
Net periodic pension cost	302,260		(67,276	)	234,984
Capital Leases	12,408		26,406		38,814
Deferred consideration for
business combinations	1,249,332		(191,951	)	1,057,381
Accrued expenses	57,185		(1,404	)	55,781
Total deferred tax assets	2,605,286		(657,010	)	1,948,276
Deferred tax liabilities:
Difference between book and
tax property, plant and
equipments net book value	(1,947,349	)	23,733		(1,923,616	)
Landrights	(3,800	)	(963	)	(4,763	)
Revenue-sharing arrangements	(47,661	)	(11,373	)	(59,034	)
Intangible assets	(1,205,783	)	227,689		(978,094	)
Total deferred tax liabilities	(3,204,593	)	239,086		(2,965,507	)
Deferred tax liabilities of the
Company, net	(599,307	)	(417,924	)	(1,017,231	)
Deferred tax liabilities of the
subsidiaries, net	(2,066,090	)	(309,205	)	(2,375,295	)
Total deferred tax liabilities, net	(2,665,397	)	(727,129	)	(3,392,526	)

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

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TAXATION (continued)

| h. |
| --- |
| Under the taxation laws of Indonesia, the Company and each subsidiary submit tax returns
on the basis of self-assessment. The tax authorities may assess or amend taxes within ten
years from the date the tax became payable. |
| The Company has been audited by the Tax Office up to the fiscal year of 2004. |

42.	BASIC EARNINGS PER SHARE
	Basic earnings per share is computed by dividing net income by the weighted average number of shares outstanding during the period, totaling 20,131,126,418 and 19,972,103,556 for the nine
months period ended September 30, 2006 and 2007, respectively. See also Notes 1b and 2t.
	The Company does not have potentially dilutive ordinary shares.
43.	CASH DIVIDENDS AND GENERAL RESERVE
	Pursuant to the Annual General Meeting of Stockholders as stated in notarial deed No. 68 dated
June 30, 2006 of A. Partomuan Pohan, S.H., LLM., the stockholders approved the distribution of
cash dividends for the year 2005 amounting to Rp.4,400,090 million or minimum of Rp.218.86 per
share.
	Pursuant to the Annual General Meeting of Stockholders as stated in notarial resume No.
213/VI/2007 dated June 29, 2007 of A. Partomuan Pohan, S.H., LLM., the stockholders approved
the distribution of cash dividends for the year 2006 amounting to Rp.6,053,067 million or
Rp.303.21 per share (of which Rp.971,017 million or Rp.48.41 per share was distributed as
interim cash dividend in December 2006), and appropriation of Rp.4,897,482 million for general
reserve.
44.	PENSION PLANS

| a. |
| --- |
| The Company sponsors a defined benefit pension plan and a defined contribution pension
plan. |
| The defined benefit pension plan is provided for employees hired with permanent status
prior to July 1, 2002. The pension benefits are paid based on the participating employees
latest basic salary at retirement and the number of years of their service. The plan is
managed by Telkom Pension Fund (Dana Pensiun Telkom). The participating employees
contribute 18% (before March 2003: 8.4%) of their basic salaries to the plan. The
Companys contributions to the pension fund for the nine months period ended September 30,
2006 and 2007 amounted to Rp.520,123 million and Rp.525,121 million, respectively. |
| The defined contribution pension plan is provided for employees hired with permanent
status on or after July 1, 2002. The plan is managed by financial institutions pension
fund (DPLK). The Companys contribution is determined based on a certain percentage of
the participants salaries and amounted to Rp.1,408 million and Rp.1,618 million for the
nine months period ended September 30, 2006 and 2007, respectively. |

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PENSION PLANS (continued)

| a. |
| --- |
| The following table presents the change in projected benefit obligation, the change in
plan assets, funded status of the plan and the net amount recognized in the Companys
balance sheets for the nine months period ended September 30, 2006 and 2007 for its
defined benefit pension plan: |


Change in projected benefit obligation
Projected benefit obligation at beginning of year	7,140,100		8,121,381
Service cost	140,970		152,706
Interest cost	576,440		646,630
Plan participants contributions	32,845		32,634
Actuarial gain (loss)	(581,379	)	332,612
Expected benefits paid	(241,717	)	(250,932	)
Benefit changes			698,583
Projected benefit obligation at end of the year	7,067,259		9,733,614
Change in plan assets
Fair value of plan assets at beginning of year	5,429,954		7,210,749
Expected return on plan assets	508,202		583,708
Employer contribution	520,123		525,121
Plan participants contributions	32,845		32,634
Actuarial gain (loss)			9,373
Expected benefits paid	(241,717	)	(250,932	)
Fair value of plan assets at end of the year	6,249,407		8,110,653
Funded status	(817,852	)	(1,622,961	)
Unrecognized prior service cost	1,085,758		1,645,318
Unrecognized net actuarial gain	(1,340,911	)	(795,703	)
Accrued pension benefit cost	(1,073,005	)	(773,346	)

The actual return on plan assets was Rp638,482 million and Rp816,957 million for the nine months period ended September 30 2006 and 2007, respectively.

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PENSION PLANS (continued)

a.
The movement of the accrued pension benefit cost during the nine months period ended
September 30, 2006 and 2007 is as follows:

Accrued pension benefit cost at beginning of the year	1,283,021		1,002,999
Net periodic pension cost less amounts charged to
KSO Units	294,937		295,468
Amounts charged to KSO Units under contractual
agreement	15,171
Employer contributions	(520,123	)	(525,121	)
Accrued pension benefit cost at end of the year	1,073,006		773,346

| As of September 30, 2006 and 2007, plan assets consisted mainly of Indonesian Government
bonds and corporate bonds. As of September 30, 2007 plan assets included Series B shares
issued by the Company with fair values of Rp.267,013 million, respectively (September 30,
2006: plan assets included bonds and Series B shares issued by the Company with fair
values of Rp.183,284 million and Rp.217,780 million, respectively). |
| --- |
| The actuarial valuation for the defined benefit pension plan September 30, 2006 and 2007
was performed based on measurement date of December 31, 2005 and September 30, 2007 with
the reports prepared on and February 27, 2006 and October 8, 2007, respectively, by PT
Watson Wyatt Purbajaga, an independent actuary in association with Watson Wyatt Worldwide.
The principal actuarial assumptions used by the independent actuary as of September 30,
2006 and 2007 are as follows: |

Discount rate	11 %	10 %
Expected long-term return on plan assets	10.5 %	10 %
Rate of compensation increase	8.8 %	8 %

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PENSION PLANS (continued)

a.
The components of net periodic pension cost are as follows:

Service Cost	140,970		152,706
Interest Cost	576,440		646,630
Expected return on plan assets	(508,202	)	(583,708	)
Amortization of prior service cost	104,267		104,267
Recognized actuarial loss (gain)	(3,367	)	(24,427	)
Net periodic pension cost	310,108		295,468
Amount charged to KSO Units under
contractual agreement	(15,171	)
Total net periodic pension cost less amounts
charged to KSO Units (Note 37)	294,937		295,468

| b. |
| --- |
| Telkomsel provides a defined benefit pension plan for 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. 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. |
| Telkomsels contributions to Jiwasraya amounted to Rp.29,324 million and Rp.38,268 million
for the years ended 2006 and 2007, respectively. |

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PENSION PLANS (continued)

b.
The following table reconciles the unfunded status of the plan with the amounts included
in the consolidated balance sheets as of September 30, 2006 and 2007:

Projected benefit obligation	(175,220	)	(272,701	)
Fair value of plan assets	50,295		67,889
Unfunded status	(124,925	)	(204,812	)
Unrecognized items in the balance sheet:
Unrecognized prior service cost	1,127		(861	)
Unrecognized net actuarial loss	101,072		163,929
Accrued pension benefit cost	(22,726	)	(41,744	)

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

Service cost	15,991		24,415
Interest cost	12,127		18,115
Expected return on plan assets	(1,593	)	(1,674	)
Amortization of past service cost	(47	)	86
Recognized actuarial loss	4,045		6,293
Net periodic pension cost (Note 37)	30,523		47,235

The net periodic pension cost for the pension plan for the nine months period ended September 30, 2006 and 2007 was calculated based on measurement date of December 31, 2005 and December 31, 2006 with the reports prepared on January 13, 2006 and February 16, 2007, respectively, by PT Watson Wyatt Purbajaga, an independent actuary in association with Watson Wyatt Worldwide. The principal actuarial assumptions used by the independent actuary based on measurement date of September 30, 2006 and 2007 for each of the periods are as follows:

Discount rate	11 %	10.5 %
Expected long-term return on plan assets	7.5 %	7.5 %
Rate of compensation increase	8 %	8 %

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PENSION PLANS (continued)

| c. |
| --- |
| Infomedia provides a defined benefit pension plan for its employees. The reconciliation of
the funded status of the plan with the net amount recognized in the balance sheets as of
September 30, 2006 and 2007 are as follows: |

Projected benefit obligation	(5,225	(6,597
Fair value of plan assets	5,865	6,696
Funded status	640	99
Prepaid pension benefit cost	640	99

| | The net periodic pension cost of Infomedia amounted to Rp.23 million and Rp.262 million
for the nine months period ended September 30, 2006 and 2007, respectively (Note 37). |
| --- | --- |
| d. | Obligation Under Labor Law |
| | Under Law No. 13/2003 concerning labor regulation, the Company and its subsidiaries are
required to provide a minimum pension benefit, if not already covered by the sponsored
pension plans, to their employees upon retiring at the age of 55. The total related
obligation recognized as of September 30, 2006 and 2007 amounted to Rp.31,854 million and
Rp.26,728 million, respectively. The total related employee benefit cost charged to
expense amounted to Rp.7,863 million and Rp.7,313 million for the nine months period ended
September 30, 2006 and 2007, respectively (Note 37). |
| e. | Additional THT benefit |
| | Starting January 1, 2005 the Company has increased the pension benefit by using additional
two times of basic salary for pre-1992 employees who will leave the Company due to
reaching normal retirement age, death and disability during year 2005, 2006,2007 and 2008.
This additional benefit will be paid directly from the Company. The total related
obligation recognized as of September 30, 2006 and 2007 amounted to Rp.21,270 and
Rp.106.771 million, respectively. The total related employee benefit cost charged to
expense amounted to Rp.5,797 million and Rp.122,914 million for the nine months period
ended September 30, 2006 and 2007, respectively (Note 37). |

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LONG SERVICE AWARDS

| a. |
| --- |
| The Company provides certain cash awards for its employees who meet certain length of
service requirement. The benefits are either paid at the time the employee reaches certain
anniversary dates during employment, or proportionately upon retirement or termination. |
| The actuarial valuation for the long service awards dated September 30, 2006 and 2007 was
performed based on measurement date of December 31, 2005 and September 30, 2007, with the
reports prepared on February 27, 2006 and October 8, 2007 respectively, by PT Watson Wyatt
Purbajaga, an independent actuary in association with Watson Wyatt Worldwide. The
principal actuarial assumptions used by the independent actuary as of December 31, 2005
and September 30, 2007 are as follows: |

Discount rate	10 %	11 %
Rate of compensation increase		8.8 %

| Assumed rate of compensation increase in 2006 used for measurement of long live allowance
benefits obligation which have been terminated since January 2007. |
| --- |
| The movement of the accrued long service awards during the period ended September 30, 2006
and 2007 is as follows: |

Accrued long service awards at beginning of year	495,969		590,065
Periodic pension cost (Note 37)	112,465		(325,854	)
Benefits paid	(49,684	)	(84,371	)
Accrued long service awards at end of year	558,750		179,840

In relation to the termination of long live allowance program as one of the employee benefits element, the Company recorded actuarial gain amounted to Rp.391,467 million resulted from long service awards obligation for long live allowance as of December 31, 2006.

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LONG SERVICE AWARDS (continued)

| b. |
| --- |
| Telkomsel provides certain cash awards for its employees based on the employees length of
service. The benefits are either paid at the time the employee reaches certain anniversary
dates during employment, or proportionately upon retirement or at the time of termination. |
| The obligation with respect to these awards was determined based on the actuarial valuation using
the Projected Unit Credit Method, and amounted to Rp.37,346 million and Rp.66,743 million as of
September 30, 2006 and 2007, respectively. The related benefit cost charged to expense amounted to
Rp.8,791 million and Rp.11,685 million for the nine months period ended September 30, 2006 and
2007, respectively. |

| 46. |
| --- |
| The Company provides a post-retirement health care plan for all of its employees hired before
November 1, 1995 who have worked for the Company for 20 years or more when they retire, and to
their eligible dependents. The requirement of working for over 20 or more years does not apply
to employees who retired prior to June 3, 1995. However, the employees hired by the Company
starting from November 1, 1995 will no longer be entitled to this plan. The plan is managed
by Yayasan Kesehatan Pegawai Telkom (YKPT). |

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46. POST-RETIREMENT HEALTH CARE BENEFITS (continued)

The following table presents the change in projected benefit obligation, the change in plan assets, funded status of the plan and the net amount recognized in the Companys balance sheets as of September 30, 2006 and 2007:


Change in projected benefit obligation
Projected benefit obligation at beginning of the
period	5,574,489		6,985,343
Service cost	80,635		84,877
Interest cost	454,180		543,028
Actuarial loss	378,549		111,711
Expected benefits paid	(103,925	)	(134,633	)
Impact from assumption changes			130,132
Projected benefit obligation at end of the period	6,383,928		7,720,458
Change in plan assets
Fair value of plan assets at beginning of the period	1,493,897		2,253,261
Expected return on plan assets	108,948		166,611
Employer contributions	570,046		780,000
Actuarial gain (loss)			(134,633	)
Expected benefits paid	(103,925	)	69,265
Fair value of plan assets at end of the period	2,068,966		3,134,504
Funded status	(4,314,962	)	(4,585,954	)
Unrecognized net actuarial loss	1,377,566		1,877,100
Accrued post-retirement health care benefit cost	(2,937,396	)	(2,708,854	)

The actual return on plan assets was Rp139,228 million and Rp272,503 million for the nine months period ended September 30, 2006 and 2007, respectively.

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

Service cost	80,635		84,877
Interest cost	454,180		543,028
Expected return on plan assets	(108,948	)	(166,611	)
Recognized actuarial loss	33,554		81,832
Net periodic post-retirement benefit cost	459,421		543,126
Amounts charged to KSO Units under contractual
agreement	(9,907	)
Total net periodic post-retirement health care
benefits cost less amounts charged to
KSO Units (Note 37)	449,514		543,126

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46. POST-RETIREMENT HEALTH CARE BENEFITS (continued)

As of September 30, 2007, plan assets consisted mainly of Series B shares issued by the Company with fair values of Rp.55,770 million. As of September 30, 2007 plan assets included medium-term notes and bonds issued by the Company with fair values Rp.182,979 million and Rp.65,125, respectively.

The movement of the accrued post-retirement health care benefit cost during the nine months period ended September 30, 2006 and 2007 is as follows:

| Accrued post-retirement health care benefit cost at
beginning of year | 3,048,021 | | 2,945,728 | |
| --- | --- | --- | --- | --- |
| Net periodic post-retirement health care benefit cost
less amounts charged to
KSO Units (Note 37) | 449,514 | | 543,126 | |
| Amounts charged to KSO Units under contractual
agreement | 9,907 | | | |
| Employer contributions | (570,046 | ) | (780,000 | ) |
| Accrued post-retirement health care benefits cost at end of the year | 2,937,396 | | 2,708,854 | |

The actuarial valuation for the post-retirement health care benefits dated September 30, 2006 and 2007 was performed based on the measurement date as of September 30, 2007 and December 31, 2005 with the reports prepared on October 8, 2007 and February 27, 2006 respectively, by PT Watson Wyatt Purbajaga, an independent actuary in association with Watson Wyatt Worldwide. The principal actuarial assumptions used by the independent actuary as of September 30, 2006 and 2007 are as follows:

Discount rate	11 %	10 %
Expected long-term return on plan assets	8 %	9 %
Health care cost trend rate assumed
for next year	9 %	11 %
Ultimate health care cost trend rate	9 %	8 %
Year that the rate reaches the ultimate trend rate	2006	2011

Assumed future health care cost trends have a significant effect on the amounts reported for the health care plan. A one-percentage-point change in the assumed future health care cost trend rates would have the following effects:

point increase	point decrease
Effect on total of service and interest cost components	45,889	(37,780	)
Effect on post-retirement benefit obligation	1,493,111	(1,202,836	)

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47. RELATED PARTY INFORMATION

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

The following are significant agreements/transactions with related parties:

a. Government of the Republic of Indonesia

| i. | The Company obtained two-step loans from the Government of the Republic
of Indonesia, the Companys majority stockholder (Note 22). |
| --- | --- |
| | Interest expense for two-step loans amounted to Rp.298,258 million and Rp.230,664
million for the nine months period ended 30 September 2006 and 2007, respectively,
representing 34.6% and 21.55% of total interest expense for each period. |
| ii. | The Company and its subsidiaries pay concession fees for
telecommunications services provided and radio frequency usage charges to the
Ministry of Communications (formerly, Ministry of Tourism, Post and
Telecommunications) of the Republic of Indonesia. |
| | Concession fees amounted to Rp.363,340 million and Rp.417,078 million for the nine
months period ended September 30, 2006 and 2007, respectively (Note 39),
representing 1.8% and 1.6% of total operating expenses for each period. Radio
frequency usage charges amounted to Rp.243,688 million and Rp.792,494 million for
the nine months period ended September 30, 2006 and 2007, respectively (Note 39),
representing 1.2% and 3.1% of total operating expenses for each period. |
| | Telkomsel paid the upfront fee for the 3G license amounted to Rp.436,000 million and
recognized as an intangible asset (Note 15). |
| iii. | Starting 2005, the Company and its subsidiaries pay Universal Service
Obligation (USO) charges to the MoCI of the Republic of Indonesia pursuant to the
MoCI Regulation No.15/PER/M.KOMINFO/9/2005 of September 30, 2005. |
| | USO charges amounted to Rp.279,699 million and Rp.335,635 million for the nine
months period ended, September 30, 2006 and 2007, respectively (Note 39),
representing 1.4% and 1.3% of total operating expenses in 2006 and 2007,
respectively. |

b. Commissioners and Directors Remuneration

i. The Company and its subsidiaries provide honorarium and facilities to support the operational duties of the Board of Commissioners. The total of such benefits amounted to Rp.15,030 million and Rp.22,518 million for the nine months period ended September 30, 2006 and 2007, respectively, which reflect 0.1% of total operating expenses for each period.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) SEPTEMBER 30, 2006 AND 2007, AND FOR THE NINE MONTHS PERIOD ENDED SEPTEMBER 30, 2006 AND 2007

(Figures in tables are presented in millions of Rupiah, unless otherwise stated)

47. RELATED PARTY INFORMATION (continued)

b. Commissioners and Directors Remuneration (continued)

ii. The Company and its subsidiaries provide salaries and facilities to support the operational duties of the Board of Directors. The total of such benefits amounted to Rp.64,167 million and Rp.65,956 million for the nine months period ended September 30, 2006 and 2007, respectively, which reflect 0.3% of total operating expenses for each period.

c. Indosat

Through December 19, 2002, the Government was the majority and controlling shareholder of Indosat and therefore, Indosat was under the same common control as the Company. Following the sale of the Governments 41.94% ownership interest in Indosat on December 20, 2002, the Governments ownership interest in Indosat was reduced to approximately 15%. The Company still considers Indosat as a related party because the Government can exert significant influence over the financial and operating policies of Indosat by virtue of its right to appoint one director and one commissioner of Indosat.

Following the merger of Indosat, PT Indosat Multimedia Mobile (IM3), Satelindo and PT Bimagraha Telekomindo on November 20, 2003, all rights and obligations arising from the agreements entered by the Company with IM3 and Satelindo were transferred to Indosat.

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

The principal matters covered by the agreement are as follows:

| i. | The Company provides a local network for customers to make or receive
international calls. Indosat provides the international network for the customers,
except for certain border towns, as determined by the Director General of Post and
Telecommunications of the Republic of Indonesia. The international
telecommunications services include telephone, telex, telegram, package switched
data network, television, teleprinter, Alternate Voice/Data Telecommunications
(AVD), hotline and teleconferencing. |
| --- | --- |
| ii. | The Company and Indosat are responsible for their respective
telecommunications facilities. |
| iii. | Customer billing and collection, except for leased lines and public
phones located at the international gateways, are handled by the Company. |
| iv. | The Company receives compensation for the services provided in the first
item above, based on the interconnection tariff determined by the Minister of
Communications of the Republic of Indonesia. |

The Company has also entered into an interconnection agreement between the Companys fixed- line network and Indosats cellular network in connection with implementation of Indosat Multimedia Mobile services and the settlement of the related interconnection rights and obligations.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) SEPTEMBER 30, 2006 AND 2007, AND FOR THE NINE MONTHS PERIOD ENDED SEPTEMBER 30, 2006 AND 2007

(Figures in tables are presented in millions of Rupiah, unless otherwise stated)

47. RELATED PARTY INFORMATION (continued)

c. Indosat (continued)

The Company also has an agreement with Indosat for the interconnection of Indosats GSM mobile cellular telecommunications network with the Companys PSTN, enabling each partys customer to make domestic calls between Indosats GSM mobile network and Telkoms fixed line network and allowing Indosats mobile customer to access Telkoms IDD service by dialing 007.

The Company has been handling customer billings and collections for Indosat. Indosat is gradually taking over the activities and performing its own direct billing and collection. The Company receives compensation from Indosat computed at 1% of the collections made by the Company beginning January 1, 1995, plus the billing process expenses which are fixed at a certain amount per record.

On December 28, 2006, the Company and Indosat signed amendments to the interconnection agreements for the fixed line networks (local, long distance and international) and mobile network for the implementation of the cost-based tariff obligations under the MoCI Regulations No.8/2006 (Note 51). These amendments took effect 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 principal matters covered by the agreement are as follows:

| i. | Telkomsels GSM mobile cellular telecommunications network is connected
to Indosats international gateway exchanges to make outgoing or receive incoming
international calls through Indosats international gateway exchanges. |
| --- | --- |
| ii. | Telkomsels GSM mobile cellular telecommunications network is connected
to Indosats mobile cellular telecommunications network, enabling Telkomsels
cellular subscribers to make outgoing calls to or receive incoming calls from
Indosats cellular subscribers. |
| iii. | Telkomsel receives as compensation for the interconnection, a specific
percentage of Indosats revenues from the related services which are made through
Indosats international gateway exchanges and mobile cellular telecommunications
network. |
| iv. | Billings for calls made by Telkomsels customers are handled by
Telkomsel. Telkomsel is obliged to pay Indosats share of revenue regardless whether
billings to customers have been collected. |
| v. | The provision and installation of the necessary interconnection equipment
is Telkomsels responsibility. Interconnection equipment installed by one of the
parties in another partys locations shall remain the property of the party
installing such equipment. Expenses incurred in connection with the provision of
equipment, installation and maintenance are borne by Telkomsel. |

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) SEPTEMBER 30, 2006 AND 2007, AND FOR THE NINE MONTHS PERIOD ENDED SEPTEMBER 30, 2006 AND 2007

(Figures in tables are presented in millions of Rupiah, unless otherwise stated)

47. RELATED PARTY INFORMATION (continued)

c. Indosat (continued)

Pursuant to the expiration of the agreement between Telkomsel and Indosat with regard to the provision of international telecommunication services to GSM mobile cellular customers, in April 2004 Telkomsel and Indosat entered into an interim agreement. Under the terms of the interim agreement, Telkomsel receives 27% of the applicable tariff for outgoing international calls from Telkomsel subscribers and Rp.800 per minute for incoming international calls to Telkomsel subscribers. The interim agreement is effective from March 1, 2004 until such date that Telkomsel and Indosat have entered into a new agreement.

The Company and its subsidiaries earned revenue (were charged) net interconnection charges from Indosat of Rp.127,300 million and Rp.278,231 million for the nine months period ended 2006 and 2007, respectively, representing 0.34% of the total operating revenues for the nine months period ended 2006 and 1.09% of the total operating expenses for the nine months period ended 2007.

Telkomsel also has an agreement with Indosat on the usage of Indosats telecommunications facilities. The agreement, which was made in 1997 and is valid for eleven years, is subject to change based on an annual review and mutual agreement by both parties. The charges for the usage of the facilities amounted to Rp.13,266 million and Rp.9,077 million for the nine months period ended 2006, and 2007, respectively, representing 0.1% and 0.04% of the total operating expenses in each period, respectively.

Other agreements between Telkomsel and Indosat are as follows:

| i. | Agreement on Construction and Maintenance for Jakarta-Surabaya Cable
System (J-S Cable System). |
| --- | --- |
| | On October 10, 1996, Telkomsel, Lintasarta, Satelindo and Indosat (the Parties)
entered into an agreement on the construction and maintenance of the J-S Cable
System. The Parties have formed a management committee which consists of a chairman
and one representative from each of the Parties to direct the construction and
operation of the cable system. The construction of the cable system was completed
in 1998. In accordance with the agreement, Telkomsel shared 19.325% of the total
construction cost. Operating and maintenance costs are shared based on an agreed
formula. |
| | Telkomsels share in operating and maintenance costs amounted to Rp.218 million and
Rp.282 million for the nine months period ended September 30,2006 and 2007,
respectively. |
| ii. | Indefeasible Right of Use Agreement |
| | On September 21, 2000, Telkomsel entered into agreement with Indosat on the use of SEA ME WE 3 and tail link in Jakarta and Medan. In accordance with the
agreement, Telkomsel was granted an indefeasible right to use certain capacity of
the Link starting from September 21, 2000 until September 20, 2015 in return for an
upfront payment of US$2.7 million. In addition to the upfront payment, Telkomsel is
also charged annual operating and maintenance costs amounting to US$0.1 million. |

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) SEPTEMBER 30, 2006 AND 2007, AND FOR THE NINE MONTHS PERIOD ENDED SEPTEMBER 30, 2006 AND 2007

(Figures in tables are presented in millions of Rupiah, unless otherwise stated)

47. RELATED PARTY INFORMATION (continued)

c. Indosat (continued)

In 1994, the Company transferred to Satelindo the right to use a parcel of Company-owned land located in Jakarta which had been previously leased to Telekomindo. Based on the transfer agreement, Satelindo is given the right to use the land for 30 years and can apply for the right to build properties thereon. The ownership of the land is retained by the Company. Satelindo agreed to pay Rp.43,023 million to the Company for the 30 years right. Satelindo paid Rp.17,210 million in 1994 and the remaining Rp.25,813 million was not paid because the Utilization Right (Hak Pengelolaan Lahan) on the land could not be delivered as provided in the transfer agreement. In 2000, the Company and Satelindo agreed on an alternative solution resulting in the payment being treated as a lease expense up to 2006. In 2001, Satelindo paid an additional amount of Rp.59,860 million as lease expense up to 2024. As of September 30, 2006 and 2007, the prepaid portion is shown in the consolidated balance sheets as Advances from customers and suppliers.

The Company provides leased lines to Indosat and its subsidiaries, namely Indosat Mega Media and Lintasarta. The leased lines can be used by those companies for telephone, telegraph, data, telex, facsimile or other telecommunication services. Revenue earned from these transactions amounted to Rp.123,433 million and Rp.134,865 million for the nine months period ended 2006 and 2007, respectively, representing 0.6% and 0.3% of total operating revenues for each period.

Lintasarta utilizes the Companys satellite transponders or frequency channels. Revenue earned from these transactions amounted to Rp.4,583 million and Rp.7,593 million for the nine months period ended 2006 and 2007, respectively, representing less than 0.1% of total operating revenues for each period.

Telkomsel has an agreement with Lintasarta and PT Artajasa Pembayaran Elektronis (Artajasa which 39.8% shares owned by Indosat) for the usage of data communication network system. The charges from Lintasarta and Artajasa for the services amounted to Rp.26,091 million and Rp.23,580 million for the nine months period ended September 30, 2006 and 2007, respectively, representing 0.1% of total operating expenses for each period.

d. Others

Transactions with all stated owned enterprises are considered as related parties transactions:

| (i) | The Company provides telecommunication services to substantially all
Government agencies in Indonesia which the transaction is treated as well as the transaction with third parties customers. |
| --- | --- |
| (ii) | The Company has entered into agreements with Government agencies and
associated companies, namely CSM, Patrakom and KSO VII (for the period January -
March 2006), for utilization of the Companys satellite transponders or frequency
channels. Revenue earned from these transactions amounted to Rp.64,833 million and
Rp.82,508 million for the nine months period ended 2006 and 2007, respectively,
representing 0.3% and 0.2% of total operating revenues for each period. |

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47. RELATED PARTY INFORMATION (continued)

d. Others (continued)

| (iii) | The Company provides leased lines to associated companies, namely CSM,
Patrakom and PSN. The leased lines can be used by the associated companies for
telephone, telegraph, data, telex, facsimile or other telecommunications services.
Revenue earned from these transactions amounted to Rp.32,350 million and Rp.46,682
million for the nine months period ended 2006 and 2007, respectively, representing
0.2% and 0.1% of the total operating revenues for each period. |
| --- | --- |
| (iv) | The Company purchases property and equipment including construction and
installation services from a number of related parties. These related parties
include PT Industri Telekomunikasi Indonesia (PT INTI) and Koperasi Pegawai
Telkom. Total purchases made from these related parties amounted to Rp.73,868
million and Rp.89,047 million for the nine months period ended September 30, 2006
and 2007, respectively, representing 0.6% and 0.7% of the total fixed asset
purchased in 2006 and 2007, respectively. |
| (v) | PT INTI is also a major contractor and supplier of equipment, including
construction and installation services for Telkomsel. Total purchases from PT INTI
amounted to Rp.54,176 million and Rp.83,544 million, respectively, representing 0.5%
and 0.7% of the total fixed assets purchased for the nine months period ended
September 30, 2006, and 2007, respectively. |
| (vi) | Telkomsel has an agreement with PSN for the lease of PSNs transmission
link. Based on the agreement, which was made on March 14, 2001, the minimum lease
period is 2 years since the operation of the transmission link and is extendable
subject to agreement by both parties. The lease charges amounted to Rp.43,528
million and Rp.109,692 million for the nine months period ended, September 30, 2006
and 2007, respectively, representing 0.2% and 0.4% of the total operating expenses
for each period. |
| (vii) | The Company and its subsidiaries carry insurance on their property,
plant and equipment against property losses, inventory and on employees social
security obtained from PT Asuransi Jasa Indonesia, PT Asuransi Tenaga Kerja and PT
Persero Asuransi Jiwasraya, which are state-owned insurance companies. Insurance
premiums charged amounted to Rp.98,486 million and Rp.210,199 million representing
0.5% and 0.8% of total operating expenses for the nine months period ended September
30, 2006 and 2007, respectively. |
| (viii) | The Company and its subsidiaries maintain current accounts and time deposits in
several state-owned banks. In addition, some of those banks are appointed as collecting agents for the Company. Total placements in form of current accounts and
time deposits, and mutual funds in state-owned banks amounted to Rp.5,463,272
million and Rp.3,026,901 million as of September 30, 2006 and 2007, respectively,
representing 7.9% and 3.9% of the total assets as of September 30, 2006 and 2007,
respectively. Interest income recognized during the nine months period ended
September 30, 2006 and 2007 were Rp.288,157 million and Rp.206,188 million
representing 64.3% and 55% of total interest income for the nine months period
ended September 30, 2006 and 2007, respectively. |

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47. RELATED PARTY INFORMATION (continued)

d. Others (continued)

| (ix) | The Companys subsidiaries have loans from state-owned banks. Interest
expense on the loans for the nine months period ended September 30, 2006 and 2007
amounted to Rp.778 million and Rp.157,008 million, respectively, representing 0.1%
and 14.7% of the total interest expense for each period. |
| --- | --- |
| (x) | The Company leases buildings, purchases materials and construction
services, and utilizes maintenance and cleaning services from Dana Pensiun Telkom,
Koperasi Pegawai Telkom (Kopegtel) and PT Sandhy Putra Makmur, a subsidiary of
Yayasan Sandikara Putra Telkom a foundation managed by Dharma Wanita Telkom. Total
charges from these transactions amounted to Rp.242,910 million and Rp.306,207
million for nine months period ended, September 30, 2006 and 2007, respectively,
representing 1.2% of the total operating expenses for each period. |
| (xi) | The Company and its subsidiaries earned (were charged for)
interconnection revenues from PSN, with a total of Rp.6,900 million and Rp.1.071
million for the nine months period ended September 30, 2006 and 2007, respectively,
representing 0.04% and 0.002% of the total operating revenues for each period. |
| (xii) | In addition to revenues earned under the KSO Agreement (Note 49), the
Company also earned income from building rental, repairs and maintenance services
and training services provided to the KSO Units, amounting to Rp.14,549 million for
nine months period ended, September 30, 2006, representing 0.04% of the total
operating revenues for the period. |
| (xiii) | The Company has revenue-sharing arrangements with Kopegtel. Kopegtels share in
the revenues from these arrangements amounted to Rp.22,242 million and Rp.16,058
million for the nine months periode ended September 30, 2006 and 2007, respectively,
representing 0.06% and 0.04% of the total operating revenues for each period. |
| (xiv) | Telkomsel has operating lease agreements with Patrakom and CSM for the
usage of their transmission link for a period of 3 years, subject to extensions. The
lease charges amounted to Rp.138,270 million and Rp.154,749 million for the nine
months period ended September 30, 2006 and 2007, respectively, representing 0.7% and
0.6% of the total operating expenses for the nine months period ended, September 30,
2006 and 2007, respectively. |
| (xv) | Kisel is a cooperative that was established by Telkomsels employees to
engage in car rental services, printing and distribution of customer bills, collection and
other services principally for the benefit of Telkomsel. For these services, Kisel
charged Telkomsel Rp.103,566 million and Rp.330,761 million for the nine months
period ended, September 30, 2006 and 2007, respectively. Telkomsel also has
dealership agreements with Kisel for distribution of SIM cards and pulse reload
vouchers. Total SIM cards and pulse reload vouchers which were sold to Kisel
amounted to Rp.1,169,343 million and Rp.1,273,763 million for the nine months
period ended,September 30, 2006 and 2007, respectively. |

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RELATED PARTY INFORMATION (continued)

d. Others (continued)

| (xvi) | Infomedia provides electronic media and call center services to KSO Unit
VII (for the years 2004 and 2005, and for the period January September 2006) based
on an agreement dated March 4, 2003. Revenue earned from these transactions in 2006
amounted to Rp.6,874 million representing 0.02% of total operating revenues in 2006. |
| --- | --- |
| (xvii) | Telkomsel has procurement agreements with PT Graha Informatika Nusantara, a
subsidiary of Dana Pensiun Telkom for installation and maintenance of equipment.
Total procurement for installations of equipment amounted to Rp.91,167 million and
Rp.123,494 million for the nine months period ended 2006 and 2007, respectively,
representing 0.80% and 1.02%of total operating expenses for the nine months period
ended 2006 and 2007, respectively, and for maintenance of equipment amounted to
Rp.30,824 million and Rp.29,021 million for the nine months period ended 2006 and
2007, respectively, representing 0.08% and 0.11% and of total operating expenses for
the nine months period ended September 30, 2006 and 2007, respectively. |

Presented below are balances of accounts with related parties:

	% of		% of
Amount	Total Assets	Amount	Total Assets
a. Cash and cash equivalents
(Note 6)	5,463,272	7.99	2,748,165	3.58
b. Temporary investments			177,879	0.23
c. Trade receivables, net (Note 7)	695,501	1.02	567,612	0.74
d. Other receivables
KSO Units	87,427	0.13
State-owned banks (interest)			11,154	0.02
Government agencies			2,010	0.01
Other	12,246	0.02	9,801	0.01
Total	99,673	0.15	22,965	0.04
e. Prepaid expenses (Note 9)	28,389	0.04	24,522	0.03
f. Other current assets (Note 10)	3,275	0.00	8,460	0.01
g. Advances and other non-current
assets (Note 14)
Bank Mandiri	2,680	0.00	92,279	0.12
Peruri	813	0.00	813	0.01
PT Asuransi Jasa Indonesia	2,670	0.00
Total	6,163	0.00	93,092	0.13
h. Escrow accounts (Note 16)	6,446	0.01	118	0.00

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RELATED PARTY INFORMATION (continued)

d. Others (continued)

	% of Total		% of Total
Amount	Liabilities	Amount	Liabilities
i. Trade payables (Note 17)
Government agencies	725,013	2.15	1,294,944	3.53
KSO Units	71,431	0.21
Indosat	32,425	0.10	56,919	0.16
Koperasi Pegawai Telkom	42,241	0.13	69,832	0.19
PSN	57	0.01	1,473	0.01
Others	93,009	0.28	197,921	0.54
Total	964,176	2.88	1,621,089	4.43
j. Accrued expenses (Note 18)
Government agencies and
state-owned banks	111,743	0.33	83,893	0.23
Employees	673,738	2.00	858,307	2.34
PT Asuransi Jasa Indonesia	2,038	0.01
Others
Total	787,519	2.34	942,200	2.57
k. Short-term bank loans (Note 20)
Bank Mandiri	350,000	1.00	200,000	0.54
Bank Negara Indonesia	300,000	0.93	500,000	1.36
Total	650,000	1.93	700,000	1.90
l. Two-step loans (Note 22)	4,681,815	13.91	4,179,002	11.39
m. Accrued long service awards (Note 45)	558,750	1.66	246,583	0.67
n. Accrued post-retirement health care
benefits (Note 46)	2,937,396	8.73	2,708,854	7.38
o. Long-term bank loans (Note 24)
Bank Mandiri	1,250,000	3.71	1,270,000	3.46
Bank Negara Indonesia			680,000	1.85
Bank Rakyat Indonesia			400,000	1.09
Jumlah	1,250,000	3.71	2,350,000	6.40

| 48. |
| --- |
| The Company and its subsidiaries have three main business segments operated in Indonesia:
fixed wireline, fixed wireless and cellular. The fixed wireline segment provides local,
domestic long-distance and international (starting 2004) telephone services, and other
telecommunications services (including among others, leased lines, telex, transponder,
satellite and Very Small Aperture Terminal-VSAT) as
well as ancillary services. The fixed wireless segment provides CDMA-based telecommunication
services which offer customers the ability to use a wireless handset with limited mobility
(within a local code area). The cellular segment provides basic telecommunication services,
particularly mobile cellular telecommunication services. Operating segments that do not
individually represent more than 10% of the Companys revenues are presented as Other
comprising the telephone directories and building management businesses. |
| Segment revenues and expenses include transactions between business segments and are accounted
for at prices that management believes represent market prices. |

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SEGMENT INFORMATION (continued)


Fixed		Fixed						Total Before				Total
Wireline		Wireless		Cellular		Other		Elimination		Elimination		Consolidated
Segment results
External operating revenues	15,103,168		1,751,589		20,090,625		254,562		37,199,944				37,199,944
Inter-segment operating
revenues	376,359		(215,979	)	766,529		90,075		1,016,984		(1,016,984	)
Segment revenue	15,479,527		1,535,610		20,857,154		344,637		38,216,928		(1,016,984	)	37,199,944
Segment expense	(10,958,128	)	(1,010,116	)	(8,896,922	)	(268,632	)	(21,133,798	)	1,116,738		(20,017,060	)
Segment result	4,521,399		525,494		11,960,232		76,005		17,083,130		99,754		17,182,884
Interest expense													(862,038	)
Interest income													448,337
Loss on foreign exchange net													677,754
Other income (expenses) net													117,923
Tax expense													(5,387,012	)
Equity in net income of
associated companies													(184	)
Income before minority
interest													12,177,664
Unallocated minority
interest													(2,955,193	)
Net income													9,222,471
Other information
Segment assets	31,778,720		5,805,314		32,267,789		508,712		70,360,535		(2,109,767	)	68,250,768
Investments in associates	15,052,869				9,290				15,062,159		(14,960,966	)	101,193
Total consolidated assets													68,351,961
Total consolidated liabilities													(33,647,490	)
Capital expenditures	(3,193,945	)	(88,437	)	(7,910,012	)	(19,137	)	(11,211,531	)			(11,211,531	)
Depreciation and
amortization	(3,179,969	)	(336,962	)	(3,110,849	)	(25,321	)	(6,653,101	)	7,437		(6,645,664	)
Amortization of goodwill and
other intangible assets	(681,520	)			(29,067	)			(710,587	)			(710,587	)
Other non-cash expenses	(241,578	)			(100,387	)	(2,598	)	(344,563	)			(344,563	)

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SEGMENT INFORMATION (continued)


Fixed		Fixed						Total Before				Total
Wireline		Wireless		Cellular		Other		Elimination		Elimination		Consolidated
Segment results
External operating revenues	16,294,707		2,542,398		26,056,376		393,922		45,287,403				45,287,403
Inter-segment operating
revenues	2,001,084		174,784		1,605,129		91,908		3,872,905		(3,872,905	)
Segment revenues	18,295,791		2,717,182		27,661,505		485,830		49,160,308		(3,872,905	)	45,287,403
External operating expenses	(12,849,992	)	(1,013,898	)	(11,092,174	)	(434,770	)	(25,390,834	)			(25,390,834	)
Inter-segment operating
expenses	(1,320,017	)	(371,296	)	(2,324,445	)	(17,768	)	(4,033,526	)	4,033,526
Segment expenses	(14,170,009	)	(1,385,194	)	(13,416,619	)	(452,538	)	(29,424,360	)	4,033,526		(25,390,834	)
Segment result	4,125,782		1,331,988		14,244,886		33,292		19,735,948		160,621		19,896,569
Interest expense													(1,070,206	)
Interest income													378,215
Gain (loss) on foreign
exchange net													(113,642	)
Other income (expenses) net													61,195
Tax expense													(5,921,719	)
Equity in net income (loss) of
associated companies													6,919
Income before minority
interest													13,237,331
Unallocated minority
interest													(3,418,276	)
Net income													9,819,055
Other information
Segment assets	29,677,581		7,409,661		44,239,242		579,944		81,906,428		(5,223,394	)	76,683,034
Investments in associates	87,180				14,744				101,924				101,924
Total consolidated assets													76,784,958
Total consolidated liabilities	(19,104,746	)	(1,564,828	)	(20,983,806	)	(274,407	)	(41,927,787	)	5,223,394		(36,704,393	)
Capital expenditures	(1,084,035	)	(170,601	)	(9,691,381	)	(64,747	)	(11,010,764	)			(11,010,764	)
Depreciation and amortization	(2,636,178	)	(146,936	)	(4,222,177	)	(37,757	)	(7,043,048	)	7,126		(7,035,922	)
Amortization of goodwill and
other intangible assets	(751,969	)			(35,036	)			(787,005	)			(787,005	)
Other non-cash expenses	(307,552	)			(67,931	)	(2,554	)	(378,037	)			(378,037	)

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49.	JOINT OPERATION SCHEMES (KSO)
	In 1995, the Company and five investors (PT Pramindo Ikat Nusantara, PT AriaWest
International, PT Mitra Global Telekomunikasi Indonesia, PT Dayamitra Telekomunikasi and PT
Bukaka Singtel International) entered into agreements for Joint Operation Schemes (KSO) and
KSO construction agreements for the provision of telecommunication facilities and services for
the Sixth Five-Year Development Plan (Repelita VI) of the Republic of Indonesia. The five
investors undertook the development and operation of the basic fixed telecommunications
facilities and services in five of the Companys seven regional divisions.
	Following the Indonesian economics crisis that began in mid-1997, certain KSO investors
experienced difficulties in fulfilling their commitment under the KSO agreements. As remedial
measures instituted by both the Company and those KSO investors did not fully remedy this
situation, the Company acquired those KSO investors (Dayamitra in 2001, Pramindo in 2002 and
AWI in 2003) and currently controls the related KSOs through its ownership of such KSO
investors. The Company acquired full operational control of the KSO IV operation in January
2004 (Note 5a) and KSO VII operations in October 2006 (Note 5b). Accordingly, the revenue
sharing percentage in those KSOs is no longer relevant as the financial statements of the
acquired KSO investors and the related KSOs are consolidated into the Companys financial
statements since the date of acquisition.
50.	REVENUE SHARING ARRANGEMENTS
	The Company has entered into separate agreements with several investors under Revenue-Sharing
Arrangements (RSA) to develop fixed lines, public card-phone booths (including their
maintenance), data and internet network and related supporting telecommunications facilities.
	As of September 30, 2007, the Company has 68 RSA with 53 partners. The RSA are located mainly
in Palembang, Pekanbaru, Jakarta, East Java, Kalimantan, Makassar, Pare-pare, Manado,
Denpasar, Mataram and Kupang with concession periods ranging from 24 to 176 months.
	Under the RSA, the investors finance the costs incurred in developing telecommunications
facilities. Upon completion of the construction, the Company manages and operates the
facilities and bears the cost of repairs and maintenance during the revenue-sharing period.
The investors legally retain the rights to the property, plant and equipment constructed by
them during the RSA periods. At the end of each the RSA period, the investors transfer the
ownership of the facilities to the Company at a nominal price.
	Generally, the revenues earned from the customers in the form of line installation charges are
allocated in full to the investors. The revenues from outgoing telephone pulses and monthly
subscription charges are shared between the investors and the Company based on certain agreed
ratio.
	The net book value of property, plant and equipment under RSA which have been transferred to
property, plant and equipment amounted to Rp.1,861 million and Rp.91,393 million on September
30, 2006 and 2007, respectively (Note 13).
	The investors share of revenues amounted to Rp.321,306 million in 2007, respectively.

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| 51. |
| --- |
| Under Law No. 36 year 1999 and Government Regulation No. 52 year 2000, tariffs for the use of
telecommunications network and telecommunication services are determined by providers based on
the tariffs category, structure and with respect to telecommunication services price cap
formula set by the Government. |
| Fixed Line Telephone Tariffs |
| Fixed line telephone tariffs are imposed for network access and usage. Access charges consist
of a one-time installation charge and a monthly subscription charge. Usage charges are
measured in pulses or minute and classified as either local or domestic long-distance. The
tariffs depend on call distance, call duration, the time of day, the day of the week and
holidays. |
| Tariffs for fixed line telephone are regulated under Minister of Communications Decree No.
KM.12 year 2002 dated January 29, 2002 concerning the addendum of the decree of Minister of
Tourism, Post and Telecommunication (MTPT) No. 79 year 1995, concerning the Method for Basic
Tariff Adjustment on Domestic Fixed Line Telecommunication Services. Furthermore, the Minister
of Communications issued Letter No. PK 304/1/3 PHB-2002 dated January 29, 2002 concerning
increase in tariffs for fixed line telecommunications services. According to the letter,
tariffs for fixed line domestic calls would increase by 45.49% over three years. The average
increase in 2002 was 15%. This increase was effective on February 1, 2002. The implementation
of the planned increase in the tariff in 2003, however, was postponed by the Minister of
Communications through letter No. PR.304/1/1/PHB-2003 dated January 16, 2003. |
| Based on the Announcement No. PM.2 year 2004 of the Minister of Communications dated March 30,
2004, the Company adjusted the tariffs effective April 1, 2004 as follows: |

	Local charges increased by an average of 28%
	Direct long distance charges decreased by an average of 10%
	Monthly subscription charges increased by an average of 12% to 25%, depending on
customers segment.

For the subsequent tariff establishment, the Government has issued initial tariff formula and adjustment tariff which are stipulated in Minister Decree No.09/Per/M.KOMINFO/02/2006 concerning Procedure for Initial Tariff Establishment and Tariff Change for Basic Telephone Service Through Fixed Line dated February 8, 2006, replacing Minister of Communications Decree No. KM. 12 year 2002 on January 29, 2002 regarding the addendum of the decree of Minister of Tourism, Post and Telecommunication (MTPT) No. 79 year 1995 concerning Method for Basic Tariff Adjustment on Domestic Fixed Line Telecommunication Services.

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| 51. |
| --- |
| Mobile Cellular Telephone Tariffs |
| Tariffs for cellular providers are set on the basis of the MTPT Decree No.
KM.27/PR.301/MPPT-98 dated February 23, 1998. Under the regulation, the cellular tariffs
consist of activation fees, monthly charges and usage charges. |
| The maximum tariff for the activation fee is Rp.200,000 per new subscriber number. The maximum
tariff for the monthly charges is Rp.65,000. Usage charges consist of the following: |

a.
The maximum basic airtime tariff charged to the originating cellular subscriber is
Rp.325/minute. Charges to the originating cellular subscriber are calculated as follows:

1. Cellular to cellular	:	2 times airtime rate
2. Cellular to PSTN	:	1 time airtime rate
3. PSTN to cellular	:	1 time airtime rate
4. Card phone to cellular	:	1 time airtime rate plus 41% surcharge

b. Usage tariffs

| 1. | Usage local tariffs charged to a cellular subscriber who makes a call to a
fixed line (PSTN). For the use of network, the tariffs per minute are computed at
50% of the prevailing local PSTN tariffs. |
| --- | --- |
| 2. | The long-distance usage tariffs between two different service areas charged
to a cellular subscriber are the same as the prevailing tariffs for domestic
long-distance call (SLJJ) applied to PSTN subscribers. |

Based on the Decree No. KM. 79 year 1998 of the Ministry of Communications, the maximum tariff for prepaid customers may not exceed 140% of the peak time tariffs for post-paid subscribers.

Based on the Announcement No. PM.2 year 2004 of the Minister of Communications dated March 30, 2004, Telkomsel adjusted its tariffs by eliminating the tariff subsidy from long-distance calls. This resulted in a 9% tariff increase.

For the subsequent tariff setting, the Government has issued calculation formula for tariff change on basic telephone service through mobile cellular network which is stipulated in Minister Decree No. 12/Per/M.KOMINFO/02/2006 concerning Procedure for Tariff Change Establishment for Basic Telephone Service Through Mobile Cellular Network dated February 28, 2006, replacing Minister of Communications Decree No. KM.12 year 2002 on January 29, 2002 regarding the addendum of the decree of Minister of Tourism, Post and Telecommunication No. KM.27/PR.301/MPPT-98 date February 23, 1998 concerning Mobile Cellular Telephone Line Tariff.

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51.
Mobile Cellular Telephone Tariffs (continued)

| b. |
| --- |
| Due to the commencing of Minister Decree No. 12/Per/M.KOMINFO/02/2006 concerning the
interconnection charges thereby implemented after Minister Decree No.
08/Per/M.KOMINFO/02/2006 concerning Interconnection. |

Interconnection Tariffs

The Government establishes the percentage of tariffs to be received by each operator in respect of calls that transit multiple networks. The Telecommunications Law and Government Regulation No. 52 of 2000 provides for the implementation of a new policy to replace the current revenue sharing policy. Under the new policy the operator of the network on which calls terminate would determine the interconnection charge to be received by it based on a formula to be mandated by the Government, which would be intended to have the effect of requiring that operators charge for calls based on the costs of carrying such calls. On March 11, 2004, the MoCI issued Decree No. 32/2004, which stated that cost-based interconnection fees shall be applicable beginning January 1, 2005. The effective date of this decree was subsequently postponed until January 1, 2007 based on the Ministry Regulation No. 08/Per/M.KOMINF/02/2006 dated February 8, 2006. On December 28, 2006 the Company and all network operators signed amendments to their interconnection agreements for its fixed line networks (local, domestic long distance and international) and mobile network for the implementation of the cost-based tariff obligations under the MoCI Regulations No. 08/Per/M.KOMINFO/02/2006. These amendments took effect on January 1, 2007.

Based on Indonesian Telecommunications Regulatory Body (BRTI) Letters No. 273/BRTI/XII/2006 dated December 6, 2006 about Reference Interconnection Offer (RIO) of the Company and No. 297/BRTI/XII/2006 dated December 21, 2006 about Implementation of Cost Based Interconnection, Director General of Posts and Telecommunications, as Head of BRTI, affirmed implementation of RIO of the Company as approved in Decree No. 279/DIRJEN/2006 dated August 4, 2006.

Implementation of the Companys interconnection tariff starting January 1, 2007 based on Director General of Posts and Telecommunications Decree No. 279/DIRJEN/2006 dated August 4, 2007 are as follows:

Fixed line

1.	Local termination from fixed line (local call) service tariff is Rp.73/minute.
2.	Local termination from fixed line (long distance call) service tariff is
Rp.174/minute.
3.	Long distance termination from fixed line service tariff is Rp.569/minute.
4.	Long termination from celular mobile network service tariff is Rp.152/minute.
5.	Long distance termination from celular mobile network service tariff is
Rp.850/minute.
6.	Domestic termination from satelite mobil network service tariff is Rp.564/minute.
7.	Domestic termination from international network service tariff is Rp.549/minute.

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51.
Interconnection Tariffs (continued)
Fixed line (continued)

8.	International origination to international network service tariff is Rp.549/minute.
9.	Local transit service tariff is Rp.92/minute.
10.	Long distance transit service tariff is Rp.336/minute.
11.	International transit service tariff is Rp.355/minute.

Cellular

1.	Local termination from fixed line service tariff is Rp.361/minute.
2.	Long termination from fixed line service tariff is Rp.471/minute.
3.	Local termination from cellular network service tariff is Rp.449/minute.
4.	Long termination from cellular network service tariff is Rp.622/minute.
5.	Local termination from satellite network service tariff is Rp.574/minute
6.	Long termination from satellite network service tariff is Rp.851/minute.
7.	Local termination from long distance network service tariff is Rp.361/minute.
8.	Long termination from long distance network service tariff is Rp.471/minute.
9.	International termination from international network service tariff is
Rp.510/minute.
10.	Local origination to long distance network service tariff is Rp.361/minute.
11.	Long distance origination to long distance network service tariff is Rp.471/minute.
12.	International origination to international network service tariff is Rp.510/minute.

VoIP Interconnection Tariff

Previously, Minister of Communications Decree No. KM.23/2002 provided that access charges and network lease charges for the provision of VoIP services were to be agreed between network operators and VoIP operators. On March 11, 2004, the Minister of Communications issued Decree No. 31/2004, which stated that interconnection charges for VoIP are to be fixed by the Minister of Communications. Currently, the Minister of Communications has not yet determined what the new VoIP interconnection charges will be. Until such time as the new charges are fixed, the Company will continue to receive connection fees for calls that originate or terminate on the Companys fixed line network at agreed fixed amount per minute.

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51.	TELECOMMUNICATIONS SERVICES TARIFFS (continued)
	Public Phone Kiosk (Wartel) Tariff
	On August 7, 2002, the Minister of Communications issued Decree No. KM. 46 year 2002 regarding
the operation of phone kiosks. The decree provides that the Company is entitled to retain a
maximum of 70% of the phone kiosk basic tariffs for domestic calls and up to 92% of phone
kiosk basic tariffs for international calls. It also provides that the airtime from the
cellular operators shall generate at a minimum 10% of the kiosk phones revenue.
	The Government issued Ministry Regulation No. PM.05/Per/M.KOMINFO/I/2006 dated January 30,
2006 about Public Phone Kiosk Operation which replace the Minister of Communications Decree
no. KM.46 year 2002. There are no tariff differences between both decrees. This regulation is
effective upon its issuance date.
	Tariff for Other Services
	The tariffs for satellite rental, and other telephony and multimedia services are determined
by the service provider by taking into account the expenditures and market price. The
Government only determines the tariff formula for basic telephony services. There is no
stipulation for the tariff of other services.
	Universal Service Obligation (USO)
	On September 30, 2005, the MoCI issued Regulation No. 15/PER/M.KOMINFO/9/2005, which sets
forth the basic policies underlying the USO program and requires telecommunications operators
in Indonesia to contribute 0.75% of gross revenues (with due consideration for bad debt and
interconnection charges) for USO development.
52.	COMMITMENTS

| a. |
| --- |
| As of September 30, 2007, the amount of capital expenditures committed under contractual
arrangements, principally relating to procurement and installation of switching
equipment, transmission equipment and cable network, are as follows: |

	Amounts in — Foreign Currencies	Equivalent
Currencies	(in millions)	in Rupiah
Rupiah		6,670,557
U.S. Dollar	303	2,767,624
Euro	56	726,386
Total		10,164,567

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COMMITMENTS (continued)

a.
The above balance includes the following significant agreements:

| (i) |
| --- |
| In August 2004, Telkomsel entered into the following agreements with Motorola Inc and
PT Motorola Indonesia, Ericsson AB and PT Ericsson Indonesia, Nokia Corporation and
PT Nokia Network, and Siemens AG, for the maintenance and procurement of equipment
and related services, involving: |

	Joint Planning and Process Agreement
	Equipment Supply Agreement (ESA)
	Technical Service Agreement (TSA)
	Site Acquisition and Civil, Mechanical and Engineering Agreement (SITAC and
CME)

The agreements contain lists of charges to be used in determining the fees payable by Telkomsel for all equipment and related services to be procured during the roll-out period, upon the issuance of Purchase Order (PO).

The agreements are valid and effective as of the execution date by the respective parties for a period of three years, provided that the suppliers are able to meet requirements set out in each PO. In the event that the suppliers fail to meet those requirements, Telkomsel may terminate the agreements at its sole discretion with a prior written notice.

In accordance with the agreements, the parties also agreed that the charges specified in the price list would apply to equipment and services (ESA and TSA) and services (SITAC and CME) acquired from the suppliers between May 26, 2004 and the effective date, except for those acquired from Siemens under TSA relating to equipment and the maintenance of Telkomsels Switching Sub System (SSS) and Base Station Subsystem (BSS) that were acquired between July 1, 2004 and the effective date. Prices are subject to quarterly review.

Subsequently, for the purpose of providing telecommunications services with 3G technology, in September and October 2006, Telkomsel entered into agreements with Nokia Corporation and PT Nokia Network, Ericsson AB and PT Ericsson Indonesia, and Siemens Network GmbH and Co.KG, for network contsruction (Roll-out Agreement) and PT Nokia Network, Ericsson Indonesia; and Siemens Network GmbH and Co.KG for network operations and maintenance (Managed Operations Agreement and Technical Support Agreement). The agreements are valid and effective as of the execution date by the respective parties (the effective date) until the later of December 31, 2008 and the date on which the last PO terminates under the agreement or expires in respect of any PO issued prior to December 31, 2008 providing that the supplier are able to meet requirements set out in each PO.

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COMMITMENTS (continued)

a. Capital Expenditures (continued)

| (ii) | Metro Junction and Optical Network Access Agreement for Regional Division
III with PT INTI |
| --- | --- |
| | On November 12, 2003 which then amended on November 27, 2006, the Company entered
into an agreement with PT INTI for the construction and procurement of optical
network, as well as a network management system and other related services and
equipment, for Regional Division III (West Java) amounting to US$3.2 million and
Rp.130,293 million. As of September 30, 2007, total purchase commitment amounting
Rp.58,575 million. |
| (iii) | Ring JASUKA Backbone with NEC-Siemens Consortium |
| | On June 10, 2005, the Company entered into an agreement with NEC-Siemens Consortium
for the procurement and installation of an optical cable transmission of RING I (link
Jakarta Tanjung Pandan Pontianak Batam Dumai Pekanbaru Palembang
Jakarta) and RING II (link Medan Padang Pekanbaru Medan). The agreement has
been amended several times and the total contract based on the latest amendment dated
7 February 2007 amounting to US$45 million and Rp.156,855 million. This agreement is
based on a turnkey arrangement. As of September 30, 2007, total purchase commitment
amounting Rp.2,444 million. |
| (iv) | Expansion NSS, BSS and PDN FWA CDMA System Project in Regional Division I
and IV with Huawei Consortium |
| | On January 6, 2006, the Company entered into a Partnership Agreement with Huawei
Consortium for FWA CDMA expansion Project NSS, BSS and PDN system in Regional
Division I and IV amounting to US$27.7 million and Rp.150,234 million for period 3
years (2006-2008) with option of 2 years extension (2009-2010) amounting to US$12.3
million and Rp.39,972 million. Huawei consortium will provide service and maintenance
support that it constructs, pursuant to a Service Level Agreement, for period of 3
years (2006-2008) in return for a consideration of Rp.10,450 million. As of September
30, 2007, total purchase commitment amounting US$40 million and Rp.190,206 million. |
| (v) | CDMA 2000 1X in Regional Division V with PT Samsung Telecommunication Indonesia |
| | On June 8, 2006, which was amended on August 1, 2006 and later on December 18, 2006,
the Company entered into an agreement with PT Samsung Telecommunication Indonesia for
Procurement and Installation of CDMA 2000 IX in Regional Division V (East Java)
amounting to US$8.4 million plus Rp.12,008 million. As of September 30, 2007, total
purchase commitment amounting US$0.8 million and Rp.12,008 million. |

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COMMITMENTS (continued)

a. Capital Expenditures (continued)

(vi)	PSTN Interface Expansion and Enhancement in 114 locations with PT Siemens Indonesia
	On September 27, 2006, the Company entered into a procurement and installation
agreement with PT Siemens Indonesia for the PSTN Interface Expansion and Enhancement
in 114 locations amounting to Rp.229,900 million. The payment will be made based on
the completion in each location which is 100% of lump-sum price for the location. As
of September 30, 2007, total purchase commitment amounting Rp.187,144 million.
(vii)	Expansion NSS, BSS and PDN FWA CDMA System Project in Regional Division V
with Samsung Consortium
	On October 13, 2006, the Company entered into a procurement and installation
agreement with Samsung Consortium for Expansion NSS, BSS and PDN FWA CDMA System
Project in Regional Division V (East Java) amounting to US$59.9 million plus
Rp.94,759 million. Samsung Consortium will provide service and maintenance support
that it constructs, pursuant to a Service Level Agreement for period 3 years
(2006-2008) in return for a consideration of Rp.29,998 million. As of September 30,
2007, total purchase commitment amounting US$59.9 million and Rp.124,757 million.
(viii)	Expansion NSS, BSS and PDN System Project in Regional Division VI with ZTE Consortium
	On November 28, 2006, the Company entered into a procurement and installation
agreement with ZTE Consortium for Expansion NSS, BSS and PDN System Project in
Regional Division VI (Kalimantan) amounting to US$22.5 million plus Rp.57,168
million. ZTE Consortium will provide service and maintenance support that it
constructs, pursuant to a Service Level Agreement, for period 3 years (2006-2008) in
return for a consideration of Rp.8,925 million. As of September 30, 2007, total
purchase commitment amounting US$22.5 million and Rp.66,093 million.
(ix)	Optical Access Network (OAN) Project Batch III in Regional Division IV
with Huawei Consortium
	On November 30, 2006, the Company entered into a procurement and installation
agreement with Huawei Consortium for Optical Access Network (OAN) Project Batch III
in Regional Division IV (Central Java and Daerah Istimewa Yogyakarta) amounting to
US$3.2 million plus Rp.64,776 million. As of September 30, 2007, total purchase
commitment amounting US$3.2 million and Rp.64,776 million.

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COMMITMENTS (continued)

a. Capital Expenditures (continued)

| (x) | Expansion NSS, BSS and PDN System Project in Regional Division II with
Huawei Consortium |
| --- | --- |
| | On December 8, 2006, the Company entered into a procurement and installation
agreement with Huawei Consortium for Expansion NSS, BSS and PDN System Project in
Regional Division II (Jakarta) amounting to US$25.3 million plus Rp.131,045 million.
Huawei Consortium will provide service and maintenance support that it constructs,
pursuant to a Service Level Agreement for period 3 years (2006-2008) in return for a
consideration of Rp.11,509 million. As of September 30, 2007, total purchase
commitment amounting US$25.3 million and Rp.142,554 million. |
| (xi) | Expansion NSS, BSS and PDN System Project in Regional Division III with
Huawei Consortium |
| | On December 8, 2006, the Company entered into a procurement and installation
agreement with Huawei Consortium for Expansion NSS, BSS and PDN System Project in
Regional Division III (West Java and Banten) amounting to US$9.8 million plus
Rp.55,261 million. Huawei Consortium will provide service and maintenance support
that it constructs, pursuant to a Service Level Agreement, for period 3 years
(2006-2008) in return for a consideration of Rp.4,217 million. As of September 30,
2007, total purchase commitment amounting US$9.8 million and Rp.59,478 million. |
| (xii) | Optical Access Network (OAN) Project Batch IV in Regional Division VI
with Alcatel Inti Consortium |
| | On December 18, 2006, the Company entered into a procurement and installation
agreement with Alcatel-Inti Consortium for Optical Access Network (OAN) Batch IV in
Regional Division VI (Kalimantan) amounting to US$3.7 million plus Rp.70,022 million.
As of September 30, 2007, total purchase commitment amounting US$3.7 million and
Rp.70,022 million. |
| (xiii) | Optical Access Network (OAN) Project Batch I in Regional Divison I and III with
Opnet-Olexindo Consortium |
| | On December 29, 2006, the Company entered into a procurement and installation
agreement with Opnet Olexindo Consortium for Optical Access Network Project Batch I
in Regional Division I and III amounting to US$3.0 million and Rp.67,288 million. As
of September 30, 2007, total purchase commitment amounting to US$3.0 million and
Rp.67,288 million. |
| (xiv) | Optical Access Network Project Batch II in Regional Division II with
Opnet-Olexindo Consortium |
| | On December 29, 2006, the Company entered into a procurement and installation
agreement with Opnet-Olexindo Consortium for Optical Access Network Project Batch II
in Regional Division II (Jakarta) amounting to US$4.0 million plus Rp.61,355 million.
As of September 30, 2007, total purchase commitment amounting to US$4.0 million and
Rp.61,355 million. |

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COMMITMENTS (continued)

a. Capital Expenditures (continued)

| (xv) |
| --- |
| On December 29, 2006, the Company entered into a procurement and installation
agreement with ZTE Consortium for ring JDCS (Jember-Denpasar Cable System) amounting
to US$10.2 million and Rp.16,136 million. As of September 30, 2007, total purchase
commitment amounting US$10.2 million and Rp.16,136 million. |

| b. |
| --- |
| On June 4, 2007, the Company entered into Principal Only Swap agreement with Standard
Chartered Bank of US$7 million with premium at 3.38% per annum (Rupiah) to mitigate the
foreign exchange risks relating to several payment of FIR obligation to MTI in foreign
currency. The agreement is payable in 7 monthly settlement amounting to US$1 million and
will be due on December 28, 2007. |
| Payment schedule and information regarding agreements on derivative transactions are as
follow: |

Settlement	Company		POS Premium — /Interest Amount	Total payment to — Standard
Date	purchase	Company sell	(3.38% p.a.)	Chartered Bank
(Due Date)	(US$)	(Rp.)	(Rp.)	(Rp.)
29-Jun-07	1,000,000	8,780,000,000	132,719,456	8,912,719,456
31-Jul-07	1,000,000	8,780,000,000	158,274,133	8,938,274,133
31-Aug-07	1,000,000	8,780,000,000	127,773,389	8,907,773,389
28-Sep-07	1,000,000	8,780,000,000	92,326,578	8,872,326,578
31-Oct-07	1,000,000	8,780,000,000	81,610,100	8,861,610,100
30-Nov-07	1,000,000	8,780,000,000	49,460,667	8,829,460,667
28-Dec-07	1,000,000	8,780,000,000	23,081,644	8,803,081,644
	7,000,000	61,460,000,000	665,245,967	62,125,245,967

c. Borrowings and other credit facilities

(i) Telkomsel has a combined US$20 million facility with Standard Chartered Bank, Jakarta for import L/C, bank guarantee, standby L/C and foreign exchange. The credit facility expires in December 2006 and has been rolled over up to December 2007. Under the facility, at September 30, 2007, Telkomsel has issued bank guarantees totaling Rp.20 billion (equivalent to US$2.19 million). The bank guarantees consists of 3G performance bond (Note 52d(ii)), respectively. Borrowings under the facility bear interest at SIBOR plus 2% per annum (US$), and at a rate equal to the three-month Bank Indonesia certificate plus 2% per annum (Rupiah); for other currencies the interest rate is based on the bank cost of funds plus 2%. As of September 30, 2006 and 2007, there were no outstanding loans under this facility.

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COMMITMENTS (continued)

c. Borrowings and other credit facilities (continued)

(ii) Telkomsel has not collateralized any of its assets for its bank borrowings or other credit facilities. The terms of the various agreements with Telkomsels lender and financiers require compliance with a number of pledges and negative pledges as well as financial and other covenants, which include inter alia, certain restrictions on the amount of dividends and other profit distributions which could adversely affect Telkomsels capacity to comply with its obligation under the facility. The terms of the relevant agreements also contain default and cross default clauses. Management of Telkomsel is not aware of any breaches of the terms of these agreements and does not foresee any such breaches occurring in the future.

d. Others

(i)	Employee Benefits
	On March 24, 2006, Telkomsel and its Labour Union (Serikat Pekerja Telkomsel) signed
a collective labour agreement which is valid until March 23, 2008. Based on the
agreement, Telkomsel shall provide Long Service Leave and Post Retirement Insurance
to its employees. Those benefits are subject to further agreement between Telkomsel
and Labour Union which has not been made until the date of this report. Accordingly,
it is not possible to determine the amount of the benefits As of September 30, 2007.
(ii)	3G License
	With reference to Decision Letter No. 07/PER/M.KOMINFO/2/2006 of the Minister of
Communication and Information Technology, as one of the successful bidders,
Telkomsel amongst other requirements, is required to:

Pay an annual right of usage (BHP) fee which is determined based on a certain formula over the license term of 10 years. The BHP for the first and second year was paid in March 2006 and March 2007, respectively. The commitments As of September 30, 2007 arising from the BHP up to the expiry period of the license using the formula set forth in the decision letter are as follow:

Year	BI Rates (%)	Index (multiplier)	Radio Frequency Usage — Tariff
1			20% x HL
2	R1	I1 = (1 + R1)	40% x I1 x HL
3	R2	I2 = I1(1 + R2)	60% x I2 x HL
4	R3	I3 = I2(1 + R3)	100% x I3 x HL
5	R4	I4 = I3(1 + R4)	130% x I4 x HL
6	R5	I5 = I4(1 + R5)	130% x I5 x HL
7	R6	I6 = I5(1 + R6)	130% x I6 x HL
8	R7	I7 = I6(1 + R7)	130% x I7 x HL
9	R8	I8 = I7(1 + R8)	130% x I8 x HL
10	R9	I9 = I8(1 + R9)	130% x I9 x HL

Notes :
Ri	= average Bank Indonesia rate from previous year
HL (auction price)	= Rp 160 billion
Index	= adjustment to the bidding price for respective year

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COMMITMENTS (continued)

d. Others (continued)

(ii) 3G License (continued)

| | The BHP is payable upon receipt of Surat Pemberitahuan Pembayaran (notification
letter) from the Directorate General of Post and Telecommunication. |
| --- | --- |
| 2. | Provide roaming access for the existing 3G operators |
| 3. | Contribute to USO development |
| 4. | Construct a 3G network which cover at least the following
provinces: |

	Minimum number
Year	of provinces
1	2
2	5
3	8
4	10
5	12
6	14

Issue a performance bond each year amounting to Rp.20 billion or 5% of the annual fee to be paid for the subsequent year, whichever is higher. Such performance bond shall be redeemed by the Government if Telkomsel is not able to meet the requirements set out in the above mentioned decision letter or upon cancellation/termination of the license, or if Telkomsel decides to return the license voluntarily.
CONTINGENCIES

| a. | In the ordinary course of business, the Company has been named as a defendant in
various legal actions in relation with land disputes, other disputes involving premium
call billing and telecommunication billing. Based on managements estimate of the
probable outcomes of these matters, the Company accrued Rp.33,116 and Rp.30,478 million
as of September 30, 2006 and 2007 respectively. |
| --- | --- |
| b. | In December 2005, the West Java Police Department initiated investigations related
to an alleged violation of anti-corruption law, in particular the provision of
interconnection services to Napsindo, the Companys subsidiary, and Globalcom, a
Malaysian company, at an incorrect tariff for the Companys network for the provision of
illegal VoIP services, and misuse of authority in
procuring telecommunication equipment. It is also understood that one of the
investigations relates to the Companys guarantee of a bank loan obtained by Napsindo.
During the investigation, former directors and employees of the Company were held in
custody by the West Java Police Department for further investigation. On May 10, 2006,
such individuals were released from police custody after the expiration of the maximum
period of 120 days allowed for police custody of suspects for investigation purposes.
These investigations are on-going. As of the date of the consolidated financial
statements, the police have not found sufficient evidence to properly transfer the case to
the High Attorney Office for indictment. |

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CONTINGENCIES (continued)

b. (continued)

| A former Director of Human Resources and an employee of the Company were indicted under
the anti-corruption law in Bandung District Court relating to allegations of misuse of
authority in producing consultancy services resulting in losses of Rp.789 million. On May
2, 2007, the Bandung District Court found the defendants guilty and sentenced each
defendant to a one-year prison term and given Rp.50 million for penalty. The defendant
have filed and appeal with the West Java High Court objecting to the District Court
ruling. As of the date of the consolidated financial statements, no decision has been
reached on appeal. |
| --- |
| On January 2, 2006, the Office of the Attorney General launched an investigation into
allegations of misuse of telecommunications facilities in connection with the provision
of VoIP services, whereby one of Companys former employees and four of the Companys
employees in KSO VII were named suspects. As a result of the investigations, one of
Companys former employees and two of the Companys employees were indicted in the
Makassar District Court, and two other employees were indicted in the Denpasar District
Court for their alleged corruption in KSO VII. As of the date of the consolidated
financial statements, the District Courts have not issued their verdicts. |

The Company does not believe that any subsequent investigation or court decision will have significant financial impact to the Company.

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ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

The balances of monetary assets and liabilities denominated in foreign currencies are as follows:

Foreign		Foreign
Currencies	Rupiah	Currencies	Rupiah
(in millions)	Equivalent	(in millions)	Equivalent
Assets
Cash and cash equivalents
U.S. Dollar	134.74	1,246,697	182.74	1,671,187
Euro	65.79	771,759	72.79	943,733
Japanese Yen	1.47	115	2.10	166
Temporary investment
U.S. Dollar	2.03	18,707
Trade accounts receivable
Related parties
U.S. Dollar	1.09	10,031	8.87	81,102
Third parties
U.S. Dollar	29.74	274,072	48.74	445,762
Other accounts receivable
U.S. Dollar	102.19	941,670	0.80	7,328
Euro	0.03	304	0.05	644
Japanese Yen	0.01	146
Other current assets
U.S. Dollar	3.78	34,864	0.15	1,386
Advances and other non-current assets
U.S. Dollar	4.21	38,802	6.79	62,107
Total assets		3,337,167		3,213,415

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54. ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES (continued)


Foreign			Foreign
Currencies	Rupiah		Currencies	Rupiah
(in millions)	Equivalent		(in millions)	Equivalent
Liabilities
Trade payables
Related parties
U.S. Dollar			3.42	31,274
Kyat Myanmar			0.01	21
Third parties
U.S. Dollar	54.18	500,104	33.14	303,193
Euro	20.73	243,183	3.94	51,135
Australian Dollar	0.01	36
Singapore Dollar	0.20	1,178	0.01	4
Great Britain Pound Sterling	0.03	493	0.01	101
Accrued expenses
U.S. Dollar	75.15	693,968	163.92	1,499,832
Euro	73.40	861,161	87.62	1,136,894
Japanese Yen	169.04	14,697	156.49	12,403
Singapore Dollar			0.38	2,332
Great Britain Pound Sterling	0.01	41	0.05	844
Advances from customers
and suppliers
U.S. Dollar	0.93	8,544	0.49	4,470
Current maturities
of long-term liabilities
U.S. Dollar	145.79	1,345,036	146.04	1,336,250
Euro	14.67	72,141	14.63	189,841
Japanese Yen	1,142.91	89,341	1,142.91	90,587
Long-term liabilities
U.S. Dollar	558.23	5,149,885	414.80	3,795,389
Euro	14.67	172,141
Japanese Yen	13,813.22	1,079,780	12,670.31	1,004,249
Total liabilities		10,231,729		9,458,819
Net liabilities		(6,894,562	)	(6,245,404	)

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| 54. |
| --- |
| The Company and subsidiaries activities expose it to a variety of financial risks, including
the effects of changes in debt and equity market prices, foreign currency exchange rates and
interest rates. |
| The Company and subsidiaries overall risk management program focused on the unpredictability
of financial markets and seeks to minimize potential adverse effects on the financial
performance of the Company and subsidiaries. Management provides written policy for foreign
currency risk management mainly through time deposits placement and hedging to cover foreign
currency risk exposure for the time range of 3 up to 12 months. |

SUBSEQUENT EVENTS

| a. | On October 5, 2007, Telkomsel received tax assessment letters for all taxes
covering the fiscal year 2004 and 2005. Telkomsel was assessed for underpayments of
withholding tax and Value Added Tax including penalty amounting to Rp.479 billion. Part
of the underpayments will be netted off against subsequent payments of withholding tax
amounting to Rp25 billion. Telkomsel plans to file an objection on Value Added Tax for
Rp.334 billion. The remaining Rp.120 billion was charged to the statements of income in
September 2007. |
| --- | --- |
| b. | On October 24, 2007, Telkomsel entered into loan agreements with Bank Rakyat
Indonesia Tbk, Bank Mandiri Tbk, Bank Negara Indonesia Tbk, Citibank N.A., for total
facilities of Rp4,000,000 million .The loans are repayable in 5 (five) equal semi-annual
installments; the first installment shall be due 6 (six) months after the end of the
availability period (the earlier of 12 (twelve) months after the date of the agreements
and the date on which the facilities have been fully drawn). The loans bear interest at
rate equal to the average rate for three-month Jakarta Inter Bank Offered Rate plus 1.17%
for facilities obtained from Bank Rakyat Indonesia Tbk, Bank Mandiri Tbk, Bank Negara
Indonesia Tbk, and plus 1.09% from Citibank N.A., which becomes due quarterly in arrears. |

| 56. |
| --- |
| PSAK 50 (Revised 2006), Financial Instruments: Presentation and Disclosures. In December
2006, the Financial Accounting Standards Board in Indonesia issued PSAK 50 (Revised 2006),
Financial Instruments: Presentation and Disclosures which amends PSAK 50, Accounting for
Investments in Certain Securities. PSAK 50 (Revised 2006) gives guidance on how to disclose
and present financial instruments in the financial statements and whether a financial
instrument is a financial liability or an equity instrument. This standard applies to the
classification of financial instruments, from the perspective of the issuer, into financial
assets, financial liabilities and equity instruments; the classification of related
interest, dividends, losses and gains; and the circumstances in which financial assets and
financial liabilities should be offset. PSAK 50 (Revised 2006) complements the principles
for recognizing and measuring financial assets and financial liabilities in PSAK 55 (Revised
2006). PSAK 50 (Revised 2006) shall be effective after January 1, 2009. It is not expected
that the adoption of PSAK 50 (Revised 2006) will have material effect on the Companys
consolidated financial statements. |

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| 56. |
| --- |
| PSAK 55 (Revised 2006), Financial Instruments: Recognition and Measurement. In December
2006, the Financial Accounting Standards Board in Indonesia issued PSAK 55 (Revised 2006),
Financial Instruments: Recognition and Measurement which amends PSAK 55 (Revised 1999),
Accounting for Derivative Instruments and Hedging Activities. PSAK 55 (Revised 2006)
provides guidance on how to recognize, measure and derecognize financial asset and liability
including derivative instruments. It also provides guidance on the recognition and
measurement of sales and purchase contracts of non-financial items. PSAK 55 (Revised 2006)
shall be effective after January 1, 2009. It is not expected that the adoption of PSAK 55
(Revised 2006) will have material effect on the Companys consolidated financial statements. |
| PSAK 30 (Revised 2007), Leases. In June 2007, the Financial Accounting Standard Board in
Indonesia issued PSAK 30 (Revised 2007), Leases which replaces PSAK 30, Accounting for
Leases. PSAK 30 (Revised 2007) provides guidance on how to classify leases into operating
leases and capital leases. PSAK 30 (Revised 2007) also provides guidance on how to record
and disclose operating and capital lease transactions in the financial statements of lessors
and lessees.PSAK 30 (Revised 2007) shall be effective after January 1, 2008. It is not
expected that the adoption of PSAK 30 (Revised 2007) will have material effect on the
Companys consolidated financial statements. |
| PSAK 16 (Revised 2007), Property, Plant and Equipment. In May 2007, the Financial
Accounting Standards Board in Indonesia issued PSAK 16 (Revised 2007), Property, Plant and
Equipment which replaces PSAK 16, Fixed Assets and Other Assets. PSAK 16 (Revised 2007)
provides guidance on recognition, measurement at recognition, measurement after recognition,
derecognition and financial statement disclosure requirements. PSAK 16 (Revised 2007)
provides two measurement alternatives, the cost model and revaluation model which shall be
consistently applied. PSAK 16 (Revised 2007) shall be effective after January 1, 2008. The
adoption of PSAK 16 (Revised 2007) will have material effect on the Companys consolidated
financial statements if the Company and its subsidiaries decide to apply the revaluation
model in measuring property, plant and equipment. |
| PSAK 13 (Revised 2007), Investment Property. In May 2007, the Financial Accounting
Standards Board in Indonesia issued PSAK 13 (Revised 2007), Investment Property which
replaces PSAK 13, Accounting for Investment. PSAK 13 (Revised 2007) provides guidance on
recognition, measurement at recognition, measurement after recognition, transfer, disposal
and financial statement disclosure regarding investment property. PSAK 13 (Revised 2007)
provides two measurement alternatives, the cost model and fair value model which shall be
consistently applied. PSAK 13 (Revised 2007) shall be effective after January 1, 2008. It is
not expected that the adoption of PSAK 13 (Revised 2007) will have material effect on the
Companys consolidated financial statements. |

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| 57. |
| --- |
| The Companys consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in Indonesia (Indonesian GAAP), which differ in
certain significant respects from accounting principles generally accepted in the United
States of America (U.S. GAAP). A description of the differences and their effects on net
income and stockholders equity are set forth below: |

(1) Description of differences between Indonesian GAAP and U.S. GAAP

a.	Voluntary Termination Benefits
	Under Indonesian GAAP, voluntary termination benefits are recognized as liabilities
when the Company is demonstratively committed to provide termination benefits as a
result of an offer made in order to encourage voluntary redundancy.
	Under U.S. GAAP, voluntary termination benefits liabilities are recognized only when
the employees have accepted the offer and the related amount can be reasonably
estimated.
b.	Foreign Exchange Differences Capitalized to Assets under Construction
	Under Indonesian GAAP, foreign exchange gains and losses resulting from borrowings
used to finance the construction of the qualifying assets are capitalized as part of
the cost of the qualifying assets. Capitalization of foreign exchange gains and
losses ceases when the construction of the qualifying asset is substantially
completed and the constructed property is ready for its intended use.
	Under U.S. GAAP, foreign exchange gains and losses are credited and charged to the
consolidated statement of income.
c.	Interest Capitalized on Assets under Construction
	Under Indonesian GAAP, qualifying assets, to which interest cost can be capitalized,
should be those that take a minimum of 12 months to get ready for their intended use
or sale. To the extent that funds are borrowed specifically to finance the
construction of a qualifying asset, the amount of the interest cost eligible for
capitalization on that asset should be determined based on the actual interest cost
incurred on that borrowing during the period of construction less any investment
income on the temporary investment of those borrowings.
	Under U.S. GAAP, there is no minimum limit (i.e. a minimum 12-month construction
period requirement) on the length of the construction period in which the interest
cost could be capitalized. The amount of interest cost to be capitalized for
qualifying assets is intended to be that portion of the interest cost incurred during
the construction periods that theoretically could have been avoided if expenditures
for the assets had not been made. The interest cost need not arise from borrowings
specifically made to acquire the qualifying assets. The amount capitalized in a
period is determined by applying an interest rate to the average amount of
accumulated expenditures for the assets during the period. Interest income arising
from any unused borrowings is recognized directly to current operations.

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SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN INDONESIA AND ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA (continued)

(1) Description of differences between Indonesian GAAP and U.S. GAAP (continued)

d.	Revenue-Sharing Arrangements
	Under Indonesian GAAP, property, plant and equipment built by an investor under
revenue-sharing arrangements are recognized as property, plant and equipment under
revenue-sharing arrangements in the accounting records of the party to whom ownership
in such properties will be transferred at the end of the revenue-sharing period, with
a corresponding initial credit to unearned income. The property, plant and equipment
are depreciated over their useful lives, while the unearned income is amortized over
the revenue-sharing period. The Company records its share of the revenues earned net
of amounts due to the investors.
	Under U.S. GAAP, the revenue-sharing arrangements are recorded in a manner similar to
capital leases where the fixed assets and obligation under revenue-sharing
arrangements are reflected on the balance sheet. All the revenues generated from the
revenue-sharing arrangements are recorded as a component of operating revenues, while
a portion of the investors share of the revenues from the revenue-sharing
arrangements is recorded as interest expense with the balance treated as a reduction
of the obligation under revenue-sharing arrangements.
e.	Employee Benefits
	As of January 1, 2005, the Company and its subsidiaries adopted PSAK 24R in
accounting for the costs of pension benefit, post-retirement health care benefit and
long service award benefit and other post-retirement benefits for Indonesian GAAP
purposes. PSAK 24R requires the adoption of its provisions retrospectively as of
January 1, 2004.
	The differences between the accounting by the Company and its subsidiaries for the
pension benefit and post-retirement health care benefit under Indonesian GAAP and
U.S. GAAP for the nine months period ended September 30, 2006 and 2007 are as
follows:

| i. | Under Indonesian GAAP, the prior service cost is recognized
immediately if vested or amortized on a straight line basis over the average
period until the benefits become vested. Under U.S. GAAP, prior service cost
(vested and non-vested benefits) is generally deferred and amortized
systematically over the estimated remaining service period for active employees
and the recognized amount is recorded in the consolidated statement of income. |
| --- | --- |
| ii. | Under Indonesian GAAP, the transition obligations were recognized
on January 1, 2004, the date PSAK 24R was adopted. Under U.S GAAP, the
transition obligations arising from the adoption of SFAS 87 Employers
Accounting for Pensions and SFAS 106 Employers Accounting for Postretirement
Benefits Other Than Pensions are deferred and amortized systematically over the
estimated remaining service period for active employees and 20 years,
respectively. In addition, different adoption dates resulted in significant
difference in cumulative unrecognized actuarial gains and losses. |

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SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN INDONESIA AND ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA (continued)

(1) Description of differences between Indonesian GAAP and U.S. GAAP (continued)

| e. |
| --- |
| Under Indonesian GAAP, recognition of a minimum liability for the pension plans is
not required. Under U.S. GAAP, as of September 30, 2006 and 2007, the Company and its
subsidiaries were required to recognize an additional minimum liability when the
accumulated benefits obligation exceeded the fair value of the plan assets with the
equal amount recognized as an intangible assets, provided that the asset recognized
did not exceed the amount of unrecognized prior service cost. If the additional
liability required to be recognized exceeds unrecognized prior service cost, the
excess was reported in other comprehensive income, net of tax. |
| In addition, there are differences between the accounting by the Company for other
post-retirement benefits under Indonesian GAAP and U.S. GAAP for the nine months
period ended September 30, 2006 and 2007. Under Indonesian GAAP, the prior service
cost is recognized immediately if vested or amortized on a straight line basis over
the average period until the benefits become vested. The amortized amount is recorded
as a component of net periodic pension benefit cost for the year. Under US GAAP, the
obligation for the accumulating post-retirement benefits is measured in accordance
with the guidance in SFAS 87, as permitted by SFAS 112 Employers Accounting for
Post-employment Benefits. The actuarial gains or losses are recognised immediately
in the consolidated statement of income. The prior service cost is deferred and
amortized systematically over the estimated remaining service period for active
employees and the recognized amount is recorded in the consolidated statement of
income. |
| In September 2006, the FASB issued SFAS 158 Employers Accounting for Defined
Benefit Pension and Other Postretirement Plans an amendment of FASB Statements No.
87, 88, 106 and 132R. The requirements of SFAS 158 to recognize the funded status
and to provide the required disclosures are effective as of the end of the year ended
after December 15, 2006. The Company and its subsidiaries have adopted the above
recognition and disclosure requirements of SFAS 158 starting the fiscal year ended
December 31, 2006. |
| SFAS 158 does not change the determination of net periodic benefit cost under SFAS
87, SFAS 106 and SFAS 112. The impacts of the adoption of SFAS 158 as of the period
ended September 30, 2007, are as follow: |

i. The Company and its subsidiaries no longer report the additional minimum liability and any corresponding intangible asset for the unfunded pension obligation as the funded status for unfunded or underfunded benefit plans is now fully recognized as a net pension liability on the balance sheet. This is similar to the Indonesian GAAP requirements.

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SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN INDONESIA AND ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA (continued)

(1) Description of differences between Indonesian GAAP and U.S. GAAP (continued)

e. Employee benefits (continued)

ii. On adoption of SFAS 158, the unrecognised actuarial losses, prior service costs, and transition obligations were recognised, net of tax, in the accumulated other comprehensive income balance. These will continue to be amortised and reported as a component of net periodic benefit cost in the consolidated statement of income in accordance with the requirements of SFAS 87, SFAS 106 and SFAS 112.

f.	Equity in Net Income or Loss of Associated Companies
	The Company records its equity in net income or loss of its associated companies
based on those associated companies financial statements that have been prepared
under Indonesian GAAP.
	For U.S. GAAP reporting purposes, the Company recognizes the effect of the
differences between U.S. GAAP and Indonesian GAAP at the investee level in the
investment accounts and its share of the net income or loss and other comprehensive
income or loss of those associated companies.
g.	Land Rights
	In Indonesia, the title of land rests with the State under the Basic Agrarian Law No.
5 of 1960. Land use is accomplished through land rights whereby the holder of the
right enjoys the full use of the land for a stated period of time, subject to
extensions. The land rights generally are freely tradable and may be pledged as
collateral for borrowing agreements. Under Indonesian GAAP, land rights is amortized
based on the estimated useful lives whilst land ownership is not depreciated unless
it can be foreseen that the possibility for the holder to obtain an extension or
renewal of the rights is remote.
	Under U.S. GAAP, the cost of land rights is amortized over the economic useful life
which represents the contractual period of the land rights.
h.	Revenue Recognition
	Under Indonesian GAAP, fees from connection of mobile cellular and fixed wireless
services are recognized as revenue when connection takes place (for post-paid
service). Sales of starter packs are recognized as revenue upon delivery to
distributors, dealers, or customers (for pre-paid services). Installation fees for
wire line services are recognized at the time of installation. Revenues from calling
cards are recognized when the Company sells the cards.
	Under U.S. GAAP, revenue from front-end fees and incremental costs up to, but not
exceeding such fees, are deferred and recognized as income over the expected term of
the customer relationships.

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SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN INDONESIA AND ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA (continued)

(1) Description of differences between Indonesian GAAP and U.S. GAAP (continued)

i.	Amortisation of Goodwill
	Under Indonesian GAAP, goodwill is amortized over a period not exceeding 20 years.
	Under U.S. GAAP, goodwill is not amortized but rather subjected to an annual test for
impairment.
j.	Capital Leases
	Under Indonesian GAAP, a leased asset is capitalized only if all of the following
criteria are met: (a) the lessee has an option to purchase the leased asset at the
end of the lease period at a price agreed upon at the inception of the lease
agreement, (b) the sum of periodic lease payments, plus the residual value, will
cover the acquisition price of the leased asset and the related interest, and (c)
there is a minimum lease period of 2 years.
	Under U.S. GAAP, a leased asset is capitalized when any one of the following criteria
is met: (a) there is an automatic transfer of ownership at the end of the lease term,
(b) the lease contains a bargain purchase option, (c) the lease term is for 75% or
more of the economic life of the asset, and (d) the net present value of the minimum
lease payments amounts to at least 90% of the fair value of the asset.
k.	Acquisition of Dayamitra
	On May 17, 2001 the Company acquired a 90.32% interest in Dayamitra and
contemporaneously acquired a call option to buy the remaining 9.68% interest at a
fixed price at a stated future date, and provided to the minority interest holder a
put option to sell its 9.68% interest to the Company under those same terms. The
fixed price of the call equaled the fixed price of the put option. Under U.S. GAAP,
the Company accounted for the option contracts on a combined basis together with the
minority interest and as a financing arrangement for the purchase of the remaining
9.68% minority interest. As such, under U.S. GAAP, the Company has consolidated 100%
of Dayamitra and attributed the stated yield earned under the combined derivative and
minority interest position to interest expense since May 17, 2001.
	On December 14, 2004, the Company exercised the call option to acquire the 9.68%
interest in Dayamitra.
	Under Indonesian GAAP, prior to December 14, 2004, the Company accounted for the
remaining 9.68% interest in Dayamitra as minority interest. In addition, the option
price paid by the Company was presented as Advance payments for investments in
shares of stock. The Company started consolidating the remaining 9.68% interest in
Dayamitra only on December 14, 2004 following the exercise of the option.
	The difference in the timing of the recognition of the 9.68% ownership interest gives
rise to differences in the timing and amounts of the purchase consideration
recognized under Indonesian GAAP and U.S. GAAP.

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

SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN INDONESIA AND ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA (continued)

(1) Description of differences between Indonesian GAAP and U.S. GAAP (continued)

l.	Asset Retirement Obligations
	Under Indonesian GAAP, costs associated with the retirement of long-lived assets that
the Company and its subsidiaries must cover by law as a result from the acquisition,
construction, development and/or the normal operation of long-lived assets are
charged to the consolidated statement of income as incurred.
	Under U.S. GAAP, the estimated fair value of such obligation is accrued at the time
of the acquisition with an equal amount capitalized to the related long-lived assets
and depreciated over the useful life of the assets. The Company and its subsidiaries
identified their asset retirement obligations by reviewing their contractual
agreements to determine whether the Company and its subsidiaries are required to
settle any obligations as a result of the prevailing laws, statute and ordinance, or
by legal construction of a contract under the doctrine of promissory estoppel. A
present value technique is used to estimate the fair value of the obligations. The
cash flows used in the estimates of fair value have incorporated the assumptions
relating to the timing and the amount of the possible cash flows. Accretion expense
resulting from the passage of time is recognized in the consolidated statement of
income. In subsequent periods, changes resulting from the revisions to the timing
and the amount of the original estimate of undiscounted cash flows are recognized as
an increase or decrease in (a) the carrying amount of the liability, and (b) the
related asset retirement cost capitalized as part of the carrying amount of the
related long-lived asset.
m.	Deferred Income Taxes
	Under Indonesian GAAP, the Company does not recognize deferred taxes on temporary
differences between the carrying amounts and the tax bases of its equity method
investments when it is not probable that these differences will reverse in the
foreseeable future.
	Under U.S. GAAP, deferred taxes are recognized in full on temporary differences
between the carrying amounts and the tax bases of equity method investments.

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

SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN INDONESIA AND ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA (continued)

(1) Description of differences between Indonesian GAAP and U.S. GAAP (continued)

n.	Impairment of Assets
	Under Indonesian GAAP, an impairment loss is recognized whenever the carrying amount
of an asset or its cash-generating unit exceeds its recoverable amount. The
recoverable amount of a fixed asset is the greater of its net selling price or value
in use. In assessing value in use, the estimated future cash flows are discounted to
their present value using a pre-tax discount rate that reflects the current market
assessment of the time value of money and the risks specific to the asset. An
impairment loss can be reversed if there has been a change in the estimates used to
determine the recoverable amount. An impairment loss is only reversed to the extent
that the assets carrying amount does not exceed the carrying amount that would have
been determined, net of depreciation, if no impairment loss had been recognized.
	Under U.S. GAAP, an impairment loss is recognized whenever the sum of the expected
future cash flows (undiscounted and without interest charges) is less than the
carrying amount of the asset. An impaired asset is written down to its estimated
fair value based on its quoted market price in an active market or its discounted
estimated future cash flows. Reversals of previously recognized impairment losses
are prohibited.
o.	Gains (Losses) on Disposals of Property, Plant and Equipment
	Under Indonesian GAAP, the Company and its subsidiaries classify the gains (losses)
on disposals of property, plant and equipment as a component of other income
(expense) which is excluded from determination of operating income.
	Under U.S. GAAP, the gains (losses) on disposals of property, plant and equipment
are classified as a component of operating expenses and hence included in the
determination of operating income.
	For the nine months period ended September 30, 2006 and 2007, the operating income
would have been higher (lower) by Rp.20,507 million, and Rp.(5,641) million,
respectively, and other income (expenses) would have been lower (higher) by the same
amounts due to the inclusion of the gains (losses) on disposals of property, plant
and equipment in the determination of the operating income.

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

SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN INDONESIA AND ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA (continued)

(1) Description of differences between Indonesian GAAP and U.S. GAAP (continued)

| p. | Reclassification of Difference in Value of Restructuring Transactions
between Entities under Common Control |
| --- | --- |
| | Under Indonesian GAAP, the Company is required to reclassify the difference in value
of restructuring transactions between entities under common control as of January 1,
2005 as a direct adjustment to retained earnings when the common control relationship
between the transacting parties no longer existed as of January 1, 2005. |
| | Under U.S. GAAP, the difference in value of restructuring transactions between
entities under common control remains in equity indefinitely as part of the
additional paid-in capital. |
| q. | Available-For-Sale Securities |
| | Under Indonesian GAAP, available-for-sale securities are carried at fair value and
changes in fair value are recognized in Unrealized holding gain (loss) on
available-for-sale securities under equity. |
| | Under U.S. GAAP, available-for-sale securities are carried at fair value and any
unrealized gains or losses are reported as a component of other comprehensive income. |
| r. | Cumulative Translation Adjustments |
| | Under Indonesian GAAP, investments in foreign companies using the equity method are
reported by translating the assets and the liabilities of these companies as of the
balance sheet date using the rate of exchange prevailing at that date. Revenues and
expenses are translated using the exchange rates at the date of transaction or the
average exchange rate for the year for practical reasons. The resulting translation
adjustments are reported as part of Translation Adjustments in the stockholders
equity section. |
| | Under U.S. GAAP, the resulting translation adjustments are reported in other
comprehensive income. |

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

SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN INDONESIA AND ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA (continued)

(1) Description of differences between Indonesian GAAP and U.S. GAAP (continued)

| s. |
| --- |
| As discussed in Note 5b, the Company has accounted for the amendment and restatement
of the KSO VII agreement as a business combination using the purchase method of
accounting. |
| Under Indonesian GAAP, the fair value of the unearned income relating to the
revenue-sharing arrangements was deemed to be equal to the fair value of the
property, plant and equipment under those revenue-sharing arrangements based on the
accounting treatment of revenue sharing agreements under Indonesian GAAP. Under U.S.
GAAP, the fair value of the obligation under the revenue-sharing arrangements has
been determined to be Rp473,754 million based on the present value of the estimated
future payments to investorss business partners under the revenue-sharing
arrangements. |
| Under Indonesian GAAP, after assigning the purchase consideration to all other
identifiable assets and liabilities, the remaining residual cost was allocated to the
intangible asset representing the right to operate the business in the KSO VII area,
to be amortized over the remaining KSO VII term of 4.3 years. As a result, there was
no goodwill recognized under Indonesian GAAP. For U.S. GAAP reporting purposes, the
right to operate the KSO VII operation represented a reacquired right and was
recognized by the Company as a separate intangible asset under EITF 04-1 Accounting
for Preexisting Relationships between the Parties to a Business Combination. The
intangible asset was directly valued to determine its fair value in accordance with
the requirements in EITF Topic No. D-108 Use of the Residual Method to Value
Acquired Assets Other Than Goodwill. The excess of the purchase consideration over
the net of the amounts assigned to assets acquired and liabilities assumed of
Rp61,386 million was recognized as goodwill. |

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

SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN INDONESIA AND ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA (continued)

(2) The significant adjustments to the consolidated net income for the nine months period ended September 30, 2006 and 2007 and to the consolidated stockholders equity as of September 30, 2006 and 2007 which would be required if U.S. GAAP had been applied, instead of Indonesian GAAP, in the consolidated financial statements are set forth below:

| Net income according to the consolidated
statements of income prepared under
Indonesian GAAP | | | 9,222,471 | | 9,819,055 | |
| --- | --- | --- | --- | --- | --- | --- |
| U.S. GAAP adjustments increase
(decrease) due to: | | | | | | |
| Voluntary termination benefits | (a | ) | | | (1,461,149 | ) |
| Capitalization of foreign exchange losses,
net of related depreciation | (b | ) | 60,994 | | 57,506 | |
| Interest capitalized on assets under construction
net of related depreciation | (c | ) | 41,547 | | 50,905 | |
| Revenue-sharing arrangements | (d | ) | 115,346 | | 80,164 | |
| Pension | (e | ) | (71,841 | ) | (88,834 | ) |
| Post-retirement health care | (e | ) | (75,905 | ) | (73,870 | ) |
| Long service awards | (e | ) | (8,057 | ) | (2,844 | ) |
| Equity in net income (loss) of associated
companies | (f | ) | (135 | ) | (241 | ) |
| Amortization of land rights | (g | ) | (12,532 | ) | (15,665 | ) |
| Revenue recognition | (h | ) | (18,310 | ) | 32,402 | |
| Amortization of goodwill | (i | ) | 8,858 | | | |
| Capital leases | (j | ) | (22,771 | ) | (24,409 | ) |
| Adjustment for consolidation of Dayamitra | (k | ) | 8,280 | | 8,540 | |
| Asset retirement obligations | (l | ) | (3,355 | ) | (8,680 | ) |
| Acquisition of KSO VII | (s | ) | | | (53,377 | ) |
| Deferred income tax: | | | | | | |
| Deferred income tax on equity method
investments | (m | ) | (4,816 | ) | (2,216 | ) |
| Deferred income tax effect on U.S. GAAP
adjustments | | | (41,869 | ) | 371,387 | |
| | | | (24,566 | ) | (1,130,381 | ) |
| Minority interest | | | (9,655 | ) | (10,561 | ) |
| Net adjustments | | | (34,221 | ) | (1,140,942 | ) |
| Net income in accordance with U.S. GAAP | | | 9,188,250 | | 8,678,113 | |
| Net income per share in full Rupiah amount | | | 456.42 | | 434.51 | |
| Net income per ADS in full Rupiah amount
(40 Series B shares per ADS) | | | 18,256.92 | | 17,380.47 | |

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PERUSAHAAN PERSEROAN (PERSERO) P.T TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) SEPTEMBER 30, 2006 AND 2007, AND FOR THE NINE MONTHS PERIOD ENDED SEPTEMBER 30, 2006 AND 2007 (Figures in tables are presented in millions of Rupiah, unless otherwise stated)

SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN INDONESIA AND ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA (continued)

(2) (continued)

| Stockholders equity according to the consolidated
balance sheets prepared under Indonesian GAAP | | | 27,509,046 | | 31,818,485 | |
| --- | --- | --- | --- | --- | --- | --- |
| U.S. GAAP adjustments increase (decrease) due to: | | | | | | |
| Capitalization of foreign exchange differences -
net of related depreciation | (b | ) | (405,079 | ) | (335,192 | ) |
| Interest capitalized on property under construction -
net of related depreciation | (c | ) | 188,181 | | 277,278 | |
| Revenue-sharing arrangements | (d | ) | (107,564 | ) | (84,445 | ) |
| Pension | (e | ) | 1,796,905 | | 25,253 | |
| Post-retirement health care | (e | ) | 962,190 | | (1,704,522 | ) |
| Long service awards | (e | ) | (221,452 | ) | (219,463 | ) |
| Equity in net income (loss) of associated companies | (f | ) | (18,756 | ) | (19,085 | ) |
| Amortization of land rights | (g | ) | (96,532 | ) | (116,611 | ) |
| Revenue recognition | (h | ) | (727,655 | ) | (681,488 | ) |
| Amortization of goodwill | (i | ) | 106,348 | | 93,937 | |
| Capital leases | (j | ) | (52,606 | ) | (81,825 | ) |
| Adjustment for consolidation of Dayamitra | (k | ) | (33,511 | ) | (36,977 | ) |
| Asset retirement obligations | (l | ) | (8,100 | ) | (22,479 | ) |
| Acquisition of KSO VII | (s | ) | | | (48,898 | ) |
| Deferred income tax: | | | | | | |
| Deferred income tax on equity method investments | (m | ) | 75,195 | | 36,658 | |
| Deferred income tax effect on U.S. GAAP
adjustments | | | (142,331 | ) | 294,529 | |
| | | | 1,315,233 | | (2,623,330 | ) |
| Minority interest | | | (33,828 | ) | 63,004 | |
| Net adjustments | | | 1,281,405 | | (2,560,326 | ) |
| Stockholders equity in accordance with U.S. GAAP | | | 28,790,451 | | 29,258,159 | |

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SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN INDONESIA AND ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA (continued)

(2)
The changes in stockholders equity in accordance with U.S. GAAP for the nine months
period ended September 30, 2006 and 2007 are as follows:

Stockholders equity at beginning of period	24,568,488		26,308,572
Changes during the period:
Net income under U.S. GAAP	9,188,250		8,678,113
Dividends	(4,400,090	)	(5,082,051	)
Accumulated other comprehensive income, net of tax	44,989		347,215
Treasury stock	(611,186	)	(993,690	)
Stockholders equity at end of period	28,790,451		29,258,159

With regard to the consolidated balance sheets, the following significant captions determined under U.S. GAAP would have been:


Consolidated balance sheets
Current assets	14,317,287	14,187,466
Non-current assets	54,545,760	63,879,242
Total assets	68,863,047	78,066,708
Current liabilities	17,204,325	20,463,125
Non-current liabilities	15,664,611	20,146,348
Total liabilities	32,868,936	40,609,473
Minority interest in net assets of subsidiaries	7,203,660	8,199,076
Stockholders equity	28,790,451	29,258,159
Total liabilities and stockholders equity	68,863,047	78,066,708

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SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN INDONESIA AND ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA (continued)

(3) Additional financial statement disclosures required by U.S. GAAP and U.S. SEC

| a. |
| --- |
| The reconciliation between the expected income tax provision in accordance with U.S.
GAAP and the actual provision for income tax recorded in accordance with U.S. GAAP is
as follows: |

| Consolidated income before tax in accordance
with U.S. GAAP | 17,540,110 | | 17,655,805 | |
| --- | --- | --- | --- | --- |
| Income tax in accordance with U.S. GAAP
at 30% statutory tax rate | 5,262,033 | | 5,296,741 | |
| Effect of non-deductible expenses (non-taxable income)
at the enacted maximum tax rate (30%) | | | | |
| Net periodic post-retirement health care benefit cost | 155,795 | | 175,289 | |
| Amortization of discount on promissory notes
and other borrowing costs | 9,982 | | 5,525 | |
| Tax penalty | | | 50,556 | |
| Employee benefits | 17,865 | | 19,399 | |
| Permanent differences of the KSO Units | 7,336 | | 19,102 | |
| Income which was already subject to final tax | (143,893 | ) | (104,775 | ) |
| Equity in net (income) loss of associated companies | (1,708,683 | ) | | |
| Others | 1,746,007 | | 90,711 | |
| Total | 84,409 | | 255,807 | |
| Provision for income tax in accordance
with U.S. GAAP | 5,346,442 | | 5,552,548 | |

For the nine months period ended September 30, 2006 and 2007, all of the Companys operating revenues occurred in Indonesia, and accordingly, the Company has not been subject to income tax in other countries.

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SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN INDONESIA AND ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA (continued)

(3) Additional financial statement disclosures required by U.S. GAAP and U.S. SEC (continued)

| b. |
| --- |
| The following methods and assumptions are used to estimate the fair value of each
class of financial instruments: |
| Cash and cash equivalents and temporary investments |
| The carrying amounts approximate fair values because of the short-term nature of the
financial assets. |
| Short-term bank loans |
| The carrying amounts approximate fair values because of the short-term nature of the
financial assets. |
| Long-term liabilities |
| The fair values of long-term liabilities other than bonds and guaranteed notes are
estimated by discounting the future cash flows of each liability at rates currently
offered to the Company and its subsidiaries for similar debts of comparable
maturities by the bankers of the Company and its subsidiaries. |
| The fair values of bonds and guaranteed notes are based on market prices at the
balance sheet date. |

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SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN INDONESIA AND ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA (continued)

(3) Additional financial statement disclosures required by U.S. GAAP and U.S. SEC (continued)

b.
The estimated fair values of the Companys and its subsidiaries financial assets and
liabilities are as follows:

amount	value
2006
Cash and cash equivalents	8,306,350	8,306,350
Short-term bank loans	1,021,100	1,022,932
Long-term liabilities:
Two-step loans	4,681,815	4,257,093
Bonds	995,185	1,029,041
Medium-term notes	464,720	453,683
Bank loans	4,509,328	4,397,313
Liabilities of business acquisitions	3,076,244	3,065,264
2007
Cash and cash equivalents	6,493,187	6,493,187
Temporary investments	177,879	177,879
Short-term bank loans	950,152	946,030
Long-term liabilities:
Two-step loans	4,179,001	3,825,495
Bank loans	4,941,644	4,848,244
Deferred consideration for business combinations	3,780,003	3,885,812

The methods and assumptions followed to determine the fair value estimates are inherently judgmental and involve various limitations, including the following:

i. Fair values presented do not take into consideration the effect of future currency fluctuations.

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SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN INDONESIA AND ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA (continued)

(3) Additional financial statement disclosures required by U.S. GAAP and U.S. SEC (continued)

b. Fair Value of Financial Instruments (continued)

ii. Estimated fair values are not necessarily indicative of the amounts that the Company and its subsidiaries would record upon disposal/termination of the financial assets and liabilities.

c. Comprehensive Income

Net income under U. S. GAAP	9,188,251		8,678,113
Unrealized holding gain (loss) on
available-for-sale securities	5,472		6,127
Foreign currency translation adjustments
of associated companies	(15	)	249
Minimum pension liabilitiy adjustments	39,540
	9,233,248		8,684,489

The foreign currency translation adjustments of associated company are reported net of income tax of Rp(7) million and Rp107 million for the nine months period ended September 30, 2006 and 2007, respectively.

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SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN INDONESIA AND ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA (continued)

(3) Additional financial statement disclosures required by U.S. GAAP and U.S. SEC (continued)

d.
The Company
The disclosures under SFAS 132 (Revised 2003) Employers Disclosures about Pension
and Other Postretirement Benefits and SFAS 106 are as follows:

2006		2007		2006		2007
Components of Net Periodic Benefit Cost
Service cost	140,971		152,706		80,635		84,877
Interest cost	576,440		646,630		454,180		543,028
Expected return on plan assets	(508,202	)	(583,708	)	(108,948	)	(166,611	)
Amortization net and deferred
Amortization of transition obligation cost	21,476		21,476		18,244		18,244
Amortization of prior service cost (revenue)	150,948		150,948		(275	)	(275	)
Amortization of recognized actuarial loss
(gain)					91,490		137,734
Net periodic benefit cost	381,633		388,052		535,326		616,997
NPPC charged to KSO	(15,171	)			(9,907	)
NPPC less amount charged to KSO Units	366,462		388,052		525,419		616,997

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SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN INDONESIA AND ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA (continued)

(3) Additional financial statement disclosures required by U.S. GAAP and U.S. SEC (continued)

| d. |
| --- |
| The Company (continued) |
| The following table presents the changes in the benefit obligations, the changes in
the plan assets, the funded status of the plan and the net amount recognized in the
Companys U.S. GAAP balance sheets as of September 30, 2006 and 2007: |

2006		2007		2006		2007
Change in benefit obligation
Benefit obligation at beginning of year	7,140,100		8,121,381		5,574,489		6,985,343
Service cost	140,970		152,706		80,635		84,877
Interest cost	576,440		646,630		454,180		543,028
Plan participants contributions	32,845		32,634
Actuarial (gain) loss	(581,379	)	332,612		378,549		111,711
Expected Benefits payments	(241,717	)	(250,932	)	(103,925	)	(134,633	)
Effect of benefit changes			698,584				130,132
Benefit obligation at end of year	7,067,259		9,733,615		6,383,928		7,720,458
Change in plan assets
Fair value of plan assets at
beginning of year	5,429,954		7,210,749		1,493,897		2,253,260
Expected return on plan assets	508,202		583,708		108,948		166,611
Asset loss/(gain)			9,373				69,266
Employer contributions	520,123		525,121		570,045		780,000
Plan participants contributions	32,845		32,634
Expected Benefits payments	(241,717	)	(250,932	)	(103,925	)	(134,633	)
Fair value of plan assets at end of year	6,249,407		8,110,653		2,068,965		3,134,504
Funded status	(817,852	)	(1,622,962	)	(4,314,963	)	(4,585,954	)
Unrecognized transition (asset) obligation	70,148		41,514		200,680		176,355
Unrecognized net actuarial loss (gain)	208,534		475,198		2,148,094		2,564,322
Unrecognized past sevice cost of benefit
changes			698,583
Unrecognized past service cost (benefit)	1,509,351		1,308,086		(923	)	(558	)
Prepaid Assets (Accrued Liability)	970,181		900,419		(1,967,112	)	(1,845,835	)

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SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN INDONESIA AND ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA (continued)

(3) Additional financial statement disclosures required by U.S. GAAP and U.S. SEC (continued)

| d. |
| --- |
| The Company (continued) |
| As of September 30, 2007, the accrued cost amounts recognized for pension and health
care benefits of Rp.1,622,962 million and Rp.4,585,954 million, respectively. As of
September 30, 2006, the accrued cost amounts recognized for pension and health care
benefits of Rp.817,852 million and Rp.4,314,963 million, respectively. |
| The measurement date used to determine pension and health care benefit measures for
the pension plan and the health care plan for period September 30, 2006 and 2007 is
December 31, 2005 and September 30, 2007, respectively. |
| The assumptions used by the independent actuary to determine the benefit obligation
of the plans as of December 31, 2005 and September 30, 2007 were as follows: |

2006	2007	2006	2007
Discount rate	11 %	10 %	11 %	10 %
Rate of compensation increase	8.8 %	8 %

The assumption used by the independent actuary to determine the net periodic benefit cost of the plans for the nine months period ended September 30, 2006 and 2007 were as follows:

2006	2007	2006	2007
Discount rate	11 %	10 %	11 %	10 %
Expected long-term return on
plan assets	10.5 %	10 %	8 %	9 %
Rate of compensation increase	8 %	8 %

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SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN INDONESIA AND ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA (continued)

(3) Additional financial statement disclosures required by U.S. GAAP and U.S. SEC (continued)

d.
The Company (continued)
Future health care cost trend rates for the nine months period ended September 30,
2006 and 2007 were assumed as follows:

Health care cost trend assumed for next year	9 %	11 %
Ultimate health care cost trend rate	9 %	8 %
Year that the rate reaches the ultimate
trend rate	2006	2011

| The actuarial valuations for the defined benefit pension plan and post-retirement
health care plan as of December 31, 2005 and September 30, 2007 were prepared on
February 27, 2006 and October 8, 2007 respectively, by an independent actuary. |
| --- |
| The discount rates were based on the Government Bond yields. The rates of
compensation increase assumed were based on the long-term inflation rates in the
order of between 6% and 7%. The expected long-term returns on the plan assets were
based on the average rate of earnings expected on the funds invested or to be
invested. |
| Assumed future health care cost trends have a significant effect on the amounts
reported for the health care plan. A one-percentage-point change in the assumed
future health care cost trend rates would have the following effects: |

point increase	point decrease
Effect on total of service and interest cost components	45,889	(37,780	)
Effect on post-retirement benefit obligation	1,493,111	(1,202,836	)

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) SEPTEMBER 30, 2006 AND 2007, AND FOR THE NINE MONTHS PERIOD ENDED SEPTEMBER 30, 2006 AND 2007 ( Figures in tables are presented in millions of Rupiah, unless otherwise stated)

SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN INDONESIA AND ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA (continued)

(3) Additional financial statement disclosures required by U.S. GAAP and U.S. SEC (continued)

| d. |
| --- |
| The Company (continued) |
| The investment policies established by management for the pension plan require a
minimum of 95% of the fund to be invested in the following asset type and a minimum
overall rate of return of 10%; |

	Based on Percentage
	of Fund Invested
Time deposit	Up to 100%
Deposits on call	Up to 100%
Certificate of deposit	Up to 100%
Listed shares	Up to 50%
Listed debt securities	Up to 50%
Unlisted shares and debt securities	Up to 20%
Real estate	Up to 15%
Mutual funds	Up to 50%
Certificates by Bank Indonesia	Up to 100%
Securities
by the Indonesian Government	Up to 75%

The weighted average asset allocations of the Companys pension plan at September 30, 2006 and 2007, by asset category, were as follows:


as of September 30
2006	2007
Asset Category
Debt securities	81 %	73 %
Deposit securities	6 %	7 %
Equity securities	11 %	15 %
Real estate	1 %	1 %
Others	1 %	4 %
Total	100 %	100 %

Equity securities included the Companys common stock in the amounts of Rp183,284 million (2.93 percent of the total plan assets) and Rp267,013 million (3.29 percent of the total plan assets) at September 30, 2006 and 2007, respectively.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) SEPTEMBER 30, 2006 AND 2007, AND FOR THE NINE MONTHS PERIOD ENDED SEPTEMBER 30, 2006 AND 2007 ( Figures in tables are presented in millions of Rupiah, unless otherwise stated)

SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN INDONESIA AND ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA (continued)

(3) Additional financial statement disclosures required by U.S. GAAP and U.S. SEC (continued)

| d. |
| --- |
| The Company (continued) |
| Debt securities included the Companys bonds in the amounts of Rp217,780 million
(3.48 percent of the total plan assets) and Rp nil at September 30, 2006 and 2007,
respectively. |
| Management has established investment policies for the health care benefit plan which
require a minimum of 95% of the fund to be invested in the following asset type; |

	Based on Percentage
	of Fund Invested
Time deposits	Up to 100%
Deposits on call	Up to 100%
Listed shares	Up to 50%
Listed debt securities	Up to 50%
Mutual funds	Up to 50%
Certificates by Bank Indonesia	Up to 50%
Securities by the Indonesian Government	Up to 75%

The weighted average asset allocations of the Companys post-retirement health care plan at September 30, 2006 and 2007, by asset category, were as follows:


as of September 30
2006	2007
Asset Category
Deposit securities	60 %	54 %
Debt securities	33 %	9 %
Equity securities	1 %	5 %
Others	6 %	32 %
Total	100 %	100 %

Debt securities included the Companys medium-term notes in the amount of Rp248,104 million (11.99 percent of the total plan assets) and Rp. nil at September 31, 2006 and 2007, respectively.

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

SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN INDONESIA AND ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA (continued)

(3) Additional financial statement disclosures required by U.S. GAAP and U.S. SEC (continued)

| d. |
| --- |
| The Company (continued) |
| Equity securities include the Companys stocks amounting to Rp55,770 million (1.80
percent of the total plan assets) and Rp nil at September 30, 2006 and 2007,
respectively. |
| Contributions |
| The Company expected to contribute Rp900,000 million to its post-retirement health
care plan during 2008. |
| Telkomsel |
| Pension plan |

Service cost	19,074		28,513
Interest cost	14,175		20,702
Expected return on plan assets	(1,593	)	(2,022	)
Amortization of prior service cost	18		361
Recognized actuarial loss	4,560		6,937
Amortization of transition obligation	343
Net periodic benefit cost	36,577		54,491

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

SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN INDONESIA AND ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA (continued)

(3) Additional financial statement disclosures required by U.S. GAAP and U.S. SEC (continued)

| d. |
| --- |
| Telkomsel (continued) |
| The following table presents the changes in the benefit obligations, the changes in
the plan assets, the funded status of the plan and the accrued cost amounts
recognized in Telkomsels U.S. GAAP balance sheets as of September 30, 2005 and
2006: |


Change in benefit obligation
Benefit obligation at beginning of period	173,680		265,336
Service cost	19,074		28,513
Interest cost	14,175		20,702
Benefit obligation at end of period	206,929		314,551
Change in plan assets
Fair value of plan assets at beginning of period	20,971		29,904
Employer contributions	29,324		38,268
Fair value of plan assets at end of period	50,295		68,172
Funded status	(156,634	)	(246,379	)
Unrecognized prior service cost	256
Unrecognized net actuarial loss	117,759
Unrecognized transition obligation	5,847
Accrued cost	(32,772	)	(246,379	)

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

SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN INDONESIA AND ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA (continued)

(3) Additional financial statement disclosures required by U.S. GAAP and U.S. SEC (continued)

d.
Telkomsel (continued)
The assumptions used by the independent actuary to determine the benefit obligation
of the plan as of September 30, 2006 and 2007 were as follows:

	2006	2007
Discount rate	11%	10.5%
Rate of compensation increase	8%	8%

The assumptions used by the independent actuary to determine the net periodic pension cost of the plan for the nine months period ended September 30, 2006 and 2007 were as follows:

	2006	2007
Discount rate	11%	10.5%
Expected long-term return on plan assets	7.5%	7.5%
Rate of compensation increase	9%	8%

| Telkomsels pension plan is managed by PT Asuransi Jiwasraya, a state owned insurance
company (see Notes 44). |
| --- |
| Expected Future Benefit Payments |
| The expected benefit payments by the Company and its subsidiaries are as follows: |

2007	4,908
2008	6,269
2009	7,768
2010	8,957
2011	10,302
2012 - 2016	84,958

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

SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN INDONESIA AND ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA (continued)

(3) Additional financial statement disclosures required by U.S. GAAP and U.S. SEC (continued)

d.
Adoption of SFAS 158
The amounts recognized in accumulated other comprehensive income at September 30,
2007 consisted of:

Pension benefit	health care		Long service awards	Total	Deferred tax	Net of tax
Transition obligations	45,016	176,355			221,371	13,503	207,868
Prior service costs	1,308,237	(558	)	45,166	1,352,845	406,021	946,824
Actuarial losses	286,395	2,391,745		159,403	2,837,543	138,975	2,698,568
Total	1,639,648	2,567,542		204,569	4,411,759	558,499	3,853,260

e.	Operating lease
	For the nine months period ended September 30, 2006 and 2007, the Company and its
subsidiaries recorded operating lease expenses for land and building, vehicle and
office equipment totalling to Rp.521,339 million and Rp.628,414 million,
respectively.
	Certain Companys subsidiaries entered into a non-cancelable lease agreement. The
minimum lease payment for each of the five succeeding years amounted to Rp.15,655
million, Rp.62,658 million, Rp.11,561 million, Rp.7,430 million and Rp.7,933 million
for 2007, 2008, 2009, 2010 and 2011.
f.	Recent Accounting Pronouncements
	In September 2006, the FASB issued SFAS 157, Fair Value Measurements which
establishes a framework for measuring fair value in US GAAP. SFAS 157 applies under
other accounting pronouncements that require or permit fair value measurements, the
FASB having previously concluded in those accounting pronouncements that fair value
is the relevant attribute. SFAS 157 shall be effective for financial statements
issued for fiscal years beginning after November 15, 2007, and for an interim period
within that fiscal year. The Company is currently evaluating what effect, if any, the
adoption of SFAS 157 will have on the Companys consolidated financial statements.

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

SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN INDONESIA AND ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA (continued)

(3) Additional financial statement disclosures required by U.S. GAAP and U.S. SEC (continued)

| f. |
| --- |
| In February 2007, FASB issued SFAS 159, The Fair Value Option for Financial Assets
and Financial Liabilities-Including an Amendment of FASB Statement No. 115. In
February 2007, the FASB issued SFAS 159. Under the provisions of SFAS 159, companies
may choose to account for financial assets and financial liabilities (as well as
certain non-financial instruments that are similar to financial instruments) at fair
value on an instrument-by-instrument basis. Changes in fair value shall be recognized
in earnings for each reporting period. SFAS 159 shall be effective as of the
beginning of the fiscal year that begins after November 15, 2007. The Company is
currently evaluating what effect, if any, the adoption of SFAS 159 will have on the
Companys consolidated financial statements. |
| In June 2006, FASB issued FIN 48 Accounting for Uncertainty in Income Taxes An
interpretation of FASB Statement No.109. This interpretation clarifies the
accounting for uncertainty in income taxes recognized in an enterprises financial
statements in accordance with SFAS 109, Accounting for Income Taxes and prescribes
a recognition threshold and the measurement attribute for the financial statement
recognition and measurement of a tax position taken or expected to be taken in a tax
return. It also provides guidance on derecognizing, classification, interest and
penalties, accounting in interim periods, disclosure, and transition. The
requirements in FIN 48 are effective after December 15, 2006. The Company is
currently evaluating what effect, if any, the adoption of FIN 48 will have on the
Companys consolidated financial statements. |

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