PERUSAHAAN PERSEROAN PERSERO PT TELEKOMUNIKASI INDONESIA TBK

6-K 1 u93381e6vk.htm FORM 6-K Form 6-K 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 November , 20 08

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): 82- ]

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

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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)
Date	November 4, 2008	By	/s/ Harsya Denny Suryo
			(Signature)
	Harsya Denny Suryo Vice President Investor Relation & Corporate Secretary

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

CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

SEPTEMBER 30, 2007 AND 2008, AND NINE MONTHS PERIOD ENDED SEPTEMBER 30, 2007 AND 2008

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

SEPTEMBER 30, 2007 AND 2008, AND NINE MONTHS PERIOD ENDED SEPTEMBER 30, 2007 AND 2008

TABLE OF CONTENTS

Consolidated Balance Sheets	1-3
Consolidated Statements of Income	4
Consolidated Statements of Changes in Stockholders Equity	5-6
Consolidated Statements of Cash Flows	7-8
Notes to Consolidated Financial Statements	9-149

/TOC

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

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

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

	Notes	2007 — Rp.	2008 — Rp.	US$ (Note 3)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	2c,2e,5,44	6,493,187	7,545,364	800,144
Temporary investments	2c,2f,44	177,879	270,650	28,701
Trade receivables	2c,2g,6,37,44
Related parties net of allowance
for doubtful accounts of
Rp.94,989 million in 2007 and
Rp.181,774 million in 2008		567,612	393,465	41,725
Third parties net of allowance for
doubtful accounts of
Rp.1,031,541 million in 2007 and
Rp.1,056,359 million in 2008		2,919,563	2,780,263	294,832
Other receivables net of allowance for
doubtful accounts of
Rp.9,668 million in 2007 and
Rp.11,969 million in 2008	2c,2g,44	154,610	173,037	18,350
Inventories net of allowance for
obsolescence of Rp.52,840 million
in 2007 and Rp.62,462 million in 2008	2h,7,37	202,465	399,916	42,409
Prepaid expenses	2c,2i,8,44	2,430,367	1,860,933	197,342
Claims for tax refund	38	337,855	420,550	44,597
Prepaid taxes	38	3,048	148,010	15,696
Restricted time deposits	2c,9,44	8,460	21,044	2,231
Total Current Assets		13,295,046	14,013,232	1,486,027
NON-CURRENT ASSETS
Long-term investments net	2f,10	101,924	141,559	15,012
Property, plant and equipment net of
accumulated depreciation of
Rp.51,964,900 million in 2007 and Rp.60,527,740 million in 2008	2k,2l,4,11, 19,20,23	58,390,386	66,405,452	7,041,936
Property, plant and equipment under
Revenue-Sharing Arrangements net
of accumulated depreciation of
Rp.556,057 million in 2007 and Rp.549,620 million in 2008	2m,12, 34,47	753,756	570,878	60,538
Prepaid pension benefit cost	2i,2r,41	99	697	74
Advances and other non-current assets	2c,2o,13, 29,44,49	592,748	1,957,756	207,609
Goodwill and other intangible assets net
of accumulated amortization of
Rp.4,495,594 million in 2007 and Rp.5,571,131 million in 2008	2d,2j,4, 14,37	3,649,601	2,889,971	306,466
Escrow accounts	2c,15,44	1,398	43,861	4,651
Total Non-current Assets		63,489,912	72,010,174	7,636,286
TOTAL ASSETS		76,784,958	86,023,406	9,122,313

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

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

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

	Notes	2007 — Rp.	2008 — Rp.	US$ (Note 3)
LIABILITIES AND STOCKHOLDERS
EQUITY
CURRENT LIABILITIES
Trade payables	2c,16,44
Related parties		1,621,089	1,516,110	160,775
Third parties		4,303,484	7,445,795	789,586
Other payables		42,515	20,385	2,162
Taxes payable	2s,38	2,234,461	1,105,281	117,209
Dividends payable		1,443,053	2,855,632	302,824
Accrued expenses	2c,17,35, 44	2,653,744	2,874,725	304,849
Unearned income	18	2,398,869	3,135,568	332,510
Advances from customers and suppliers		192,088	197,090	20,900
Short-term bank loans	2c,19,44	950,152	53,449	5,668
Current maturities of long-term liabilities	2c,20,44	4,108,241	6,450,582	684,049
Total Current Liabilities		19,947,696	25,654,617	2,720,532
NON-CURRENT LIABILITIES
Deferred tax liabilities net	2s,38	3,392,526	2,950,461	312,880
Unearned income on Revenue-Sharing
Arrangements	2m,12,47	557,601	336,534	35,687
Accrued long service awards	2c,2r,42,44	66,743	83,630	8,869
Accrued post-retirement
health care benefits	2c,2r,43,44	2,708,854	2,645,150	280,504
Accrued pension and other post-retirement benefits costs	2r,41	1,021,658	1,213,422	128,677
Long-term liabilities net of current
maturities
Obligations under capital leases	2l,11,20	190,883	228,380	24,218
Two-step loans related party	2c,20,21,44	3,726,622	3,468,125	367,776
Bank loans	2c,20,23,44	2,391,795	6,439,296	682,852
Deferred consideration for business
combinations	20,24	2,700,015	1,609,746	170,705
Total Non-current Liabilities		16,756,697	18,974,744	2,012,168
MINORITY INTEREST	25	8,262,080	8,800,782	933,275

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

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

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

	Notes	2007 — Rp.	Rp.		US$ (Note 3)
STOCKHOLDERS EQUITY
Capital stock Rp.250 par value per
Series A Dwiwarna share and
Series B share
Authorized 1 Series A Dwiwarna
share and 79,999,999,999
Series B shares
Issued and fully paid 1 Series A
Dwiwarna share and
20,159,999,279 Series B shares	1c,26	5,040,000		5,040,000		534,464
Additional paid-in capital	27	1,073,333		1,073,333		113,821
Treasury stock 222,340,500 shares in
2007 and 480,163,000 shares in 2008	2u,28	(1,945,901	)	(4,202,255	)	(445,626	)
Difference in value arising from
restructuring transactions and
other transactions between
entities under common control	2d,29	180,000		270,000		28,632
Difference due to change of equity in
associated companies	2f	385,595		385,595		40,890
Unrealized holding gain from
available-for-sale securities	2f	14,992		(2,596	)	(275	)
Translation adjustment	2f	228,024		228,805		24,264
Retained earnings
Appropriated		6,700,879		10,557,985		1,119,617
Unappropriated		20,141,563		19,242,396		2,040,551
Total Stockholders Equity		31,818,485		32,593,263		3,456,338
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY		76,784,958		86,023,406		9,122,313

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

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

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

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

	Notes	2007 — Rp.	Rp.		US$(Note 3)
OPERATING REVENUES
Telephone	2q,30
Fixed lines		8,465,629		7,452,847		790,334
Cellular		16,716,458		18,280,741		1,938,573
Interconnection	2q,31,44
Revenues		9,378,332		9,022,406		956,777
Expenses		(2,257,468	)	(2,383,169	)	(252,722	)
Net		7,120,864		6,639,237		704,055
Data and internet	2q,32	10,164,051		10,761,163		1,141,163
Network	2q,33,44	601,139		796,160		84,428
Revenue-Sharing Arrangements	2m,12,34,47	320,353		267,518		28,369
Other telecommunications services		258,785		402,548		42,688
Total Operating Revenues		43,647,279		44,600,214		4,729,610
OPERATING EXPENSES
Depreciation	2k,2l,2m, 11,12,13	7,022,770		7,988,460		847,133
Personnel	2r,17,35, 41,42,43	6,188,397		6,490,783		688,312
Operations, maintenance and
telecommunication services	2q,36,44	6,840,662		8,738,220		926,641
General and administrative	2g,2h,2q,6, 7,14,37	2,539,008		2,626,768		278,554
Marketing	2q	1,159,873		1,577,315		167,266
Total Operating Expenses		23,750,710		27,421,546		2,907,906
OPERATING INCOME		19,896,569		17,178,668		1,821,704
OTHER (EXPENSES) INCOME
Interest income	44	378,215		495,233		52,517
Equity in net income of
associated companies	2f,10	6,919		2,476		263
Interest expense	44	(1,070,206	)	(1,001,438	)	(106,197	)
Loss on foreign exchange net	2p	(113,642	)	(63,806	)	(6,766	)
Others net		61,195		326,769		34,652
Other income (expenses) net		(737,519	)	(240,766	)	(25,531	)
INCOME BEFORE TAX		19,159,050		16,937,902		1,796,173
TAX (EXPENSE) BENEFIT	2s,38
Current		(5,194,590	)	(4,987,058	)	(528,850	)
Deferred		(727,129	)	165,138		17,512
		(5,921,719	)	(4,821,920	)	(511,338	)
INCOME BEFORE MINORITY INTEREST
IN NET INCOME OF CONSOLIDATED
SUBSIDIARIES		13,237,331		12,115,982		1,284,835
MINORITY INTEREST IN NET INCOME OF
CONSOLIDATED SUBSIDIARIES Net	25	(3,418,276	)	(3,196,094	)	(338,928	)
NET INCOME		9,819,055		8,919,888		945,907
BASIC EARNINGS PER SHARE	2w,39
Net income per share		491.64		451.08		0.05
Net income per ADS
(40 Series B shares per ADS)		19,665.60		18,043.20		2.00

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

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

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


					in value
					arising from
					restructuring
					transactions
					and other		Unrealized
					transactions	Difference	holding
					between	due to change	gain on
			Additional		entities under	of equity	available-for-
		Capital	paid-in	Treasury	common	in associated	sale	Translation	Retained earnings			Stockholders
Descriptions	Notes	stock	capital	stock	control	companies	securities	adjustment	Appropriated	Unappropriated		equity
		Rp.	Rp.	Rp.	Rp.	Rp.	Rp.	Rp.	Rp.	Rp.		Rp.
Balance, January 1, 2007		5,040,000	1,073,333	(952,211	)	180,000	385,595	8,865	227,669	1,803,397	20,302,041		28,068,689
Unrealized holding gain on
available-for-sale securities	2f							6,127					6,127
Foreign currency translation of
associated company	2f,10								355				355
Cash dividends	2v,40										(5,082,051	)	(5,082,051	)
Appropriation for general reserve	40									4,897,482	(4,897,482	)
Treasury stock acquired at cost	2u,28			(993,690	)								(993,690	)
Net income for the year											9,819,055		9,819,055
Balance, September 30, 2007		5,040,000	1,073,333	(1,945,901	)	180,000	385,595	14,992	228,024	6,700,879	20,141,563		31,818,485

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

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

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


					in value
					arising from
					restructuring
					transactions		Unrealized
					and other		holding
					transactions	Difference	gain
					between	due to change	(loss) on
			Additional		entities under	of equity	available-for-
		Capital	paid-in	Treasury	common	in associated	sale		Translation		Retained earnings			Stockholders
Descriptions	Notes	stock	capital	stock	control	companies	securities		adjustment		Appropriated	Unappropriated		equity
		Rp.	Rp.	Rp.	Rp.	Rp.	Rp.		Rp.		Rp.	Rp.		Rp.
Balance, January 1, 2008		5,040,000	1,073,333	(2,176,611	)	270,000	385,595	11,237		230,017		6,700,879	22,214,129		33,748,579
Unrealized holding gain on
available-for-sale securities	2f							(13,833	)						(13,833	)
Foreign currency translation of
associated company	2f,10									(1,212	)				(1,212	)
Cash dividends	2v,40												(8,034,515	)	(8,034,515	)
Appropriation for general reserve	40											3,857,106	(3,857,106	)
Treasury stock acquired at cost	2u,28			(2,025,644	)										(2,025,644	)
Net income for the year													8,919,888		8,919,888
Balance, September 30, 2008		5,040,000	1,073,333	(4,202,255	)	270,000	385,595	(2,596	)	228,805		10,557,985	19,242,396		32,593,263

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

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

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

Rp.		Rp.		US$ (Note 3)
CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts from operating revenues
Telephone
Fixed lines	8,258,515		6,798,282		720,921
Cellular	16,898,903		19,156,910		2,031,486
Interconnection net	7,688,569		7,005,844		742,931
Data and internet	9,710,438		10,964,969		1,162,775
Other services	1,019,699		1,054,964		111,873
Total cash receipts from operating revenues	43,576,124		44,980,969		4,769,986
Cash payments for operating expenses	(18,126,913	)	(18,840,674	)	(1,997,951	)
Cash receipt from customers	30,134		55,640		5,900
Cash generated from operations	25,479,345		26,195,935		2,777,935
Interest received	385,972		486,231		51,562
Interest paid	(1,104,136	)	(887,720	)	(94,138	)
Income tax paid	(5,449,458	)	(6,769,770	)	(717,897	)
Net cash provided by operating activities	19,311,723		19,024,676		2,017,462
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of temporary investments
and maturity of time deposits	11,468		18,256		1,936
Purchases of temporary investments
and placements in time deposits	(98,770	)	(98,374	)	(10,432	)
Proceeds from sale of property, plant and equipment	21,706		9,919		1,052
Proceeds from insurance claims			11,159		1,183
Acquisition of property, plant and equipment	(12,117,416	)	(11,855,306	)	(1,257,190	)
(Increase) decrease in advances for purchases of
property, plant and equipment	744,596		(554,005	)	(58,749	)
Decrease in advances and others	124,233		141,261		14,980
Business combinations, net of cash paid			(324,327	)	(34,393	)
Acquisition of intangible assets			(21,629	)	(2,294	)
Acquisition of long-term investments	(5,453	)	(28,249	)	(2,996	)
Cash dividends received	510		1,020		108
Advance for acquisition of long term investments			(674	)	(71	)
Increase in escrow accounts			(42,458	)	(4,502	)
Net cash used in investing activities	(11,319,126	)	(12,743,407	)	(1,351,368	)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash dividends paid	(5,083,431	)	(6,105,963	)	(647,504	)
Cash dividends paid to minority stockholders of
subsidiaries	(1,904,980	)	(2,802,945	)	(297,237	)
Decrease in escrow accounts	675
Proceeds from short-term borrowings	1,489,526		29,235		3,100
Repayments of short-term borrowings	(950,659	)	(549,746	)	(58,298	)
Redemption of bonds	(1,000,000	)
Repayment of medium-term Notes	(465,000	)
Proceeds from long-term borrowings	1,502,350		6,038,695		640,371
Repayment of long-term borrowings	(2,081,247	)	(3,252,317	)	(344,890	)
Payment for purchases of treasury stock	(993,690	)	(2,025,644	)	(214,808	)
Repayment of promissory notes	(199,365	)	(200,813	)	(21,295	)
Repayment of obligations under capital leases	(20,735	)	(32,188	)	(3,413	)
Net cash used in financing activities	(9,706,556	)	(8,901,686	)	(943,974	)

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

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

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

Rp.		Rp.		US$ (Note 3)
NET DECREASE IN CASH AND
CASH EQUIVALENTS	(1,713,959	)	(2,620,417	)	(277,880	)
EFFECT OF EXCHANGE RATE CHANGES
ON CASH AND CASH EQUIVALENTS	(108,690	)	24,990		2,650
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR	8,315,836		10,140,791		1,075,376
CASH AND CASH EQUIVALENTS AT END OF PERIOD	6,493,187		7,545,364		800,146
SUPPLEMENTAL CASH FLOW INFORMATION
Non-cash investing and financing activities:
Acquisition of property, plant and equipment
through incurrence of payables	3,617,441		6,988,865		741,131
Acquisition of property, plant and equipment
through capital leases			82,001		8,696

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

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

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

GENERAL

| a. |
| --- |
| Perusahaan Perseroan (Persero) P.T. Telekomunikasi Indonesia Tbk (the Company) was
originally part of Post en Telegraafdienst , which was established in 1884 under the
framework of Decree No. 7 dated March 27, 1884 of the Governor General of the Dutch Indies
and was published in State Gazette No. 52 dated April 3, 1884. |
| In 1991, the status of the Company was changed into a state-owned limited liability
corporation (Persero) based on the Government Regulation No. 25/1991. |
| The Company was established based on notarial deed No. 128 dated September 24, 1991 of Imas
Fatimah, S.H.. The deed of establishment was approved by the Minister of Justice of the
Republic of Indonesia in his Decision Letter No. C2-6870.HT.01.01.Th.1991 dated November 19,
1991, and was published in State Gazette No. 5 dated January 17, 1992, Supplement No. 210.
The Articles of Association have been amended several times, the latest amendments were in
adjustment to Law No. 40/2007 of the Limited Liability Companies, Law No. 19/2003 of the
National State-owned Companies, and Badan Pengawas Pasar Modal dan Lembaga Keuangan
Indonesia (BAPEPAM-LK) Regulation No. IX.J.1of Main Provisions of the Articles of
Association of Company that Make an Equity Public Offering and Public Company and to add the
Companys purposes and objectives based on notarial deed No. 27 dated July 15, 2008 of A.
Partomuan Pohan, S.H., LLM. and notification of this amendment was received by the Minister
of Justice and Human Rights of the Republic of Indonesia (MoJHR) as in his Letter No.
AHU.46312.AH.01.02 dated July 31, 2008. |
| In accordance with Article 3 of the Companys Articles of Association, the scope of its
activities is to provide telecommunication and information facilities and services, and
optimization of the Companys resources in accordance with prevailing regulations. To
achieve this 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. Providing payment transactions and money transferring services through telecommunications and information networks.

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

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

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

GENERAL (continued)

| a. |
| --- |
| Pursuant to Law No. 3/1989 on Telecommunications (effective on April 1, 1989), Indonesian
legal entities are allowed to provide basic telecommunications services in cooperation with
the Company as the domestic telecommunications organizing body (or badan penyelenggara).
The Government Regulation No. 8/1993 relating to the provision of the telecommunications
services regulates that cooperation to provide basic telecommunications services can be in
the form of a joint venture, joint operation or contractual management and that the entities
cooperating with the domestic telecommunications organizing body must use the organizing
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
Telecommunication of the Republic of Indonesia (MTPT) reaffirmed the status of the Company
as the organizing body for the provision of domestic telecommunication services through two
Decision Letters both dated August 14, 1995. |
| The provision of domestic telecommunications services of the Company, includes telephone,
telex, telegram, satellite, leased lines, electronic mail, mobile communication and cellular
services. Pursuant to this, in 1995, the Company entered into agreements with investors to
develop, manage and operate telecommunications facilities in five of the Companys seven
regional divisions (Divre) under Joint Operation Schemes (known as Kerja Sama Operasi or
KSO), in order to: |

(1)	accelerate the construction of telecommunication facilities,
(2)	make the Company a world-class operator, and
(3)	increase the technology as well as knowledge and skills of its employees.

| Historically, the Company had exclusive right to provide local wireline and fixed wireless
services for a minimum period of 15 years and the exclusive right to provide domestic
long-distance (Sambungan Langsung Jarak Jauh or SLJJ) telecommunications services for a
minimum period of 10 years, effective January 1, 1996. Such exclusive rights also applied to
telecommunications services provided for and on behalf of the Company through a KSO. This
grant of rights did not affect the Companys right to provide other domestic
telecommunications services. |
| --- |
| In 1999, the Government of the Republic of Indonesia (the Government) passed
Telecommunications Law No. 36, which took effect in September 2000. This Law states that the
telecommunication activities cover: |

(1)	Telecommunications networks,
(2)	Telecommunications services, and
(3)	Special telecommunications.

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

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GENERAL (continued)

a.	Establishment and general information (continued)
	On press release No. 05/HMS/JP/VIII/2000 dated August 1, 2000 of the Directorate General of
Post and Telecommunications (DGPT), as corrected by No. 1718/UM/VIII/2000 dated August 2,
2000, the period for exclusive rights granted to the Company to provide local and SLJJ
fixed-line telecommunications services, were shortened from the expiration period of
December 2010 to August 2002 and from December 2005 to August 2003. In return, the
Government was required to pay compensation to the Company (Notes 13 and 29). Further, on
press release of the Coordinating Minister of Economics of the Republic of Indonesia dated
July 31, 2002, the Government terminated the Companys exclusive right as a network provider
for local and SLJJ services effective August 1, 2002. On August 1, 2002, PT Indonesian
Satellite Corporation Tbk (Indosat) was granted a license to provide local and SLJJ
telecommunications services.
	The Company has a commercial license to provide International Direct Dialing (IDD)
services based on the Minister of Communications of the Republic of Indonesia (MoC) Decree
No. KP. 162/2004 dated May 13, 2004.
b.	Companys officers and employees

| 1. |
| --- |
| Based on resolutions made at (i) the Annual General Meeting (AGM) of Stockholders
dated June 24, 2005 as covered by notarial deed No. 36 of A. Partomuan Pohan, S. H.,
LLM.; (ii) the Extraordinary General Meetings (EGM) of Stockholders dated February 28,
2007 as covered by notarial deed No. 16 of the same notary, as amended through the AGM
of Stockholders dated June 29, 2007 as covered by notarial deed No. 58 of the same
notary and (iii) EGM of Stockholders dated September 19, 2008, the composition of the
Companys Board of Commissioners and Directors as of September 30, 2007 and 2008,
respectively, were as follows: |

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

Position is vacant in 2007 and 2008

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GENERAL (continued)

b. Companys officers and employees (continued)

| 1. |
| --- |
| Based on AGM of Stockholders dated June 29, 2007, the Companys stockholders agreed to
replace Gatot Trihargo as the Companys Commissioner to Mahmuddin Yasin. |
| Based on Board of Commissioners Decision Letter dated February 15, 2008, the Board of
Commissioners agreed to appoint Ermady Dahlan as Director of Network and Solution and
I Nyoman Gede Wiryanata as Director of Consumer effective from March 1, 2008. |
| Based on Letter No. S-584/KF/2008 dated June 20, 2008, Anggito Abimanyu resigned from
his position as a member of Companys Board of Commissioners effective from August 20,
2008. Based on EGM of Stockholders dated September 19, 2008, the Companys stockholders
agreed to appoint Bobby A.A. Nazief as the a member of Companys Board of Commissioners
for filling in the vacant position and to extend the term of service of the Companys
Board of Commissioners which should expire on March 10, 2009, to be extended on the date
of the AGM of Stockholders in 2009. |

2.
As of September 30, 2007 and 2008, the Company and its subsidiaries had 32,448 and
34,426 employees, respectively.

| c. |
| --- |
| The Companys shares prior to its Initial Public Offering (IPO) totaled 8,400,000,000,
consisting of 8,399,999,999 Series B shares and 1 Series A Dwiwarna share, and were
100%-owned by the Government. On November 14, 1995, 933,333,000 new Series B shares and
233,334,000 Series B shares owned by the Government were offered to public through IPO at
the Indonesia Stock Exchange (IDX) (previously the Jakarta Stock Exchange and the Surabaya
Stock Exchange) and 700,000,000 Series B shares owned by the Government were offered to the
public and listed on the New York Stock Exchange (NYSE) and the London Stock Exchange
(LSE), in the form of American Depositary Shares (ADS). There are 35,000,000 ADS and
each ADS represents 20 Series B shares at that time. |
| In December 1996, the Government had a block sale of its 388,000,000 Series B shares, and in
1997, had distributed 2,670,300 Series B shares as incentive to stockholders who did not
sell their shares within one year from the date of the IPO. In May 1999, the Government
further sold 898,000,000 Series B shares. |
| To comply with Law No. 1/1995 of the Limited Liability Companies, at the AGM of Stockholders
on April 16, 1999, the stockholders resolved to increase the Companys issued share capital
through distribution of 746,666,640 bonus shares, to be taken from its additional paid-in
capital, which were distributed to stockholders in August 1999. |
| On August 16, 2007, the Law No. 1/1995 of the Limited Liability Companies has been amended
by the issuing of Law No. 40/2007 of the Limited Liability Companies which become effective
at the same date. The Law No. 40/2007 has no effect to the public offering of shares of the
Company. The Company has complied with Law No. 40/2007. |

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GENERAL (continued)

c.	Public offering of shares of the Company (continued)
	In December 2001, the Government had another block sale of 1,200,000,000 shares or 11.9% of
the total outstanding Series B shares. In July 2002, the Government had sold 312,000,000
shares or 3.1% of the total outstanding Series B shares.
	At the AGM of stockholders on July 30, 2004, as notarized by deed No. 26 of A. Partomuan
Pohan, S.H., LLM., the stockholders approved the Companys 2-for-1 stock split for Series A
Dwiwarna and Series B. For series A Dwiwarna share with par value of Rp.500, the split was
into 1 Series A Dwiwarna share with par value of Rp.250 per share and 1 Series B share with
par value of Rp.250 per share. The stock split resulted to an increase of the Companys
authorized capital stock from 1 Series A Dwiwarna share and 39,999,999,999 Series B shares
into 1 Series A Dwiwarna Share and 79,999,999,999 Series B shares, and the issued capital
stock from 1 Series A Dwiwarna share and 10,079,999,639 Series B shares into 1 Series A
Dwiwarna share and 20,159,999,279 Series B shares. After the stock split, each ADS
represented 40 Series B shares.
	At the EGM on December 21, 2005, the stockholders approved the phase I plan to repurchase up
to a maximum of 5% of the Companys issued Series B shares for a maximum repurchase amount
of Rp.5,250,000 million which had expired on June 20, 2007. At the AGM on June 29, 2007, the
stockholders approved the phase II plan to repurchase up to 215,000,000 Series B shares for
Rp.2,000,000 million which will be expired on December 28, 2008. At the AGM on June 20,
2008, the phase II plan to repurchase the Series B shares has been discontinued on June 19,
2008 and the stockholders approved the phase III plan to repurchase up to 339,443,313 Series
B shares for Rp.3,000,000 million which will be expired on December 20, 2009. As of October
30, 2008, the Company had repurchased 490,574,500 shares equivalent to 2.43% of the issued
and outstanding Series B shares, for a repurchase price of Rp.4,264,049 million, including
broker and custodian fees (Note 28).
	As of September 30, 2008, all of the Companys Series B shares were listed on the IDX and
46,292,810 ADS shares were listed on the NYSE and LSE.
d.	Subsidiaries
	As of September 30, 2007 and 2008, the Company has consolidated the following direct or
indirectly owned subsidiaries which it controls as a result of majority ownership (Notes 2b
and 2d):

(i) Direct subsidiaries:

	Nature of business/ — date of incorporation	Date of	Percentage of — effective		Total assets
Subsidiary/place of	or acquisition by	commercial	ownership interest		before elimination
incorporation	the Company	operation	2007	2008	2007	2008
PT Pramindo Ikat Nusantara ( Pramindo ), Medan, Indonesia	Telecommunication
construction and
services/ August 15, 2002	1995	100	100	1,241,376	1,212,661
PT Telekomunikasi Indonesia International ( TII ) (formerly PT Aria
West International ( AWI )), Jakarta, Indonesia	Telecommunication/ July 31, 2003	1995	100	100	686,734	1,367,521

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GENERAL (continued)

d. Subsidiaries (continued)

(i) Direct subsidiaries: (continued)

	Nature of business/ — date of incorporation	Date of	Percentage of — effective		Total assets
Subsidiary/place of	or acquisition by	commercial	ownership interest		before elimination
incorporation	the Company	operation	2007	2008	2007	2008
PT Multimedia Nusantara ( Metra ), Jakarta,
Indonesia	Multimedia
telecommunication
services/May 9, 2003	1998	100	100	114,373	757,659
PT Graha Sarana Duta ( GSD ), Jakarta, Indonesia	Leasing of offices
and providing building
management and
maintenance services,
civil consultant and
developer/April 25, 2001	1982	99.99	99.99	137,888	166,920
PT Dayamitra Telekomunikasi ( Dayamitra ), Jakarta, Indonesia	Telecommunication/ May 17, 2001	1995	100	100	450,442	409,373
PT Indonusa Telemedia ( Indonusa ), Jakarta, Indonesia	Pay television and content services/May
7, 1997	1997	96.75	100 (including through 1.25% ownership by Metra)	77,458	115,593
PT Telekomunikasi Selular ( Telkomsel ), Jakarta, Indonesia	Telecomunication
provides
telecommunication
facilities and mobile
cellular services using
Mobile Global System
for Communication
(GSM) technology/May 26, 1995	1995	65	65	44,205,863	50,600,043
PT Napsindo Primatel Internasional ( Napsindo ), Jakarta, Indonesia	Telecommunication
provides Network
Access Point (NAP),
Voice Over Data
(VOD) and other
related services/December 29, 1998	1999; ceased operation on January 13, 2006	60	60	3,862	4,910
PT Infomedia Nusantara ( Infomedia ), Jakarta, Indonesia	Data and information
service provides
telecommunication
information services
and other information
services in the form of
print and electronic
media, and call
center services/September
22,1999	1984	51	51	442,056	516,956

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GENERAL (continued)

d. Subsidiaries (continued)

(ii) Indirect subsidiaries:

	Nature of business/ — date of incorporation	Date of	Percentage of — effective		Total assets
Subsidiary/place of	or acquisition by	commercial	ownership interest		before elimination
incorporation	subsidiary	operation	2007	2008	2007	2008
Aria West International
Finance B.V.
( AWI BV ) The Netherlands	Established to engaged
in rendering services
in the field of trade
and finance services/June
3, 1996	1996; ceased operation on July 31, 2003	100 (through 100% ownership by TII)	100 (through 100% ownership by TII)	1,750	1,849
Telekomunikasi Selular Finance Limited ( TSFL ), Mauritius	Finance establish
to raise funds
for the development of
Telkomsel s business
through the issuance
of debenture stock,
bonds, mortgages or
any other securities/April
22, 2002	2002	65 (through 100% ownership by Telkomsel)	65 (through 100% ownership by Telkomsel)	7	29
PT Balebat Dedikasi Prima ( Balebat ) , Bogor, Indonesia	Printing/October 1, 2003	2000	33.15
(through 65%
ownership by
Infomedia)	33.15
(through 65%
ownership by
Infomedia)	53,165	77,142
Telkomsel Finance B.V.,
( TFBV ), Amsterdam
The Netherlands	Finance establish
in 2005 for the
purpose of borrowing,
lending and
raising funds
including issuance
of bonds, promissory
notes or debts/February
7, 2005	2005	65 (through 100% ownership by Telkomsel)	65 (through 100% ownership by Telkomsel)	8,399	8,669
PT Finnet Indonesia ( Finnet ), Jakarta, Indonesia	Banking data and
communication/October
31, 2005	2006	60 (through 60% ownership by Metra)	60 (through 60% ownership by Metra)	25,281	23,494
PT Telkom Indonesia
International Pte. Ltd. Singapura	Finance/December 6, 2007	2008		100 (through 100% ownership by TII)
PT Sigma Cipta Caraka
( Sigma ), Tangerang, Indonesia	Information technology
service implementation
and integration system
service, outsourcing and
software lisense
maintenance/May 1, 1987	1988		80 (through 80% ownership by Metra)		286,298

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

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GENERAL (continued)

d. Subsidiaries (continued)

(a)	TII (continued)
	On January 25, 2008, pursuant to Second Amendment to Cooperation Agreement between the
Company and TII No. K.Tel.21/HK.820/UTA-00/2008 regarding Management and Development of
International Business, the Company has agreed to transfer international
telecommunications business from the Company to TII.
(b)	Metra
	Based on Circular Meeting of Metras stockholders on December 13, 2007, the stockholders
agreed as follows: (1) increase its authorized capital from Rp.200,000 million to
Rp.1,000,000 million with a par value of Rp.10,000 per share; (2) increase its issued
and fully paid capital from Rp.62,250 million to Rp.412,250 million by issuing
35,000,000 new shares; (3) to limit the maximum additions to issued capital for funding
acquisition of Sigma amounting to Rp.335,000 million, and for the acquisition cost as
well as Metras business development amounting to a maximum of Rp.15,000 million; (4)
approve a total of 35,000,000 new shares to be issued and fully paid by the Company; and
(5) approval on acquisition of a maximum 80% ownership interest in Sigma, a company
engaged in providing information system services.
	On December 18, 2007, Metra entered into a Conditional Sales and Purchase Agreement
(CSPA) with Sigmas stockholders for the acquisition.
	On January 21, 2008, the Company paid Rp.350,000 million for additional capital to Metra
pursuant to circular meeting of the Metras stockholders on December 13, 2007. The
acquisition of Sigma transaction was completed through the signing of an Amendment to
the Sales and Purchase of Shares Agreement on February 21, 2008 which became effective
from February 22, 2008.
	On July 3, 2008, based on notarial deed No. 6 of Wahyu Nurani, S.H. dated July 3, 2008,
Metra entered into a Commitment of Sales and Purchase of Shares Agreement (Perjanjian
Pengikatan Jual Beli Saham or PPJB) to purchase 6,000,000 Indonusas shares or
equivalent to 1.25% of Indonusas total ownership with transaction value amounted to
Rp.6,600 million from PT Datakom Asia (Datakom).
	On July 17, 2008, based on notarial deed No. 133 of Sutjipto, S.H. M.Kn. dated July 17,
2008, Metra obtained funding for the purchase through equity call from the addition of
Metras issued capital from Rp.412,250 million to Rp.418,850 million. On July 17, 2008,
based on notarial deed No. 134 of Sutjipto, S.H. M.Kn. dated July 17, 2007, Metra
exercised the sales and purchase of share transaction (Note 1d.c).
(c)	Indonusa
	At Indonusas EGM on May 9, 2007, the stockholders revolved to: (1) stock split of
Indonusas shares par value from Rp.10,000 to Rp.500 per share; (2) increase its issued
capital from Rp.200,000 million consists of 20,000,000 shares to Rp.700,000 million
consists of 1,400,000,000 shares, as amended by the Decision of Circular Meeting of
Indonusas stockholders on December 28, 2007. The change increased Companys paid-in
capital from Rp.66,500 million to Rp.237,713 million through payment and debt to equity
swap, as follows:

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GENERAL (continued)

d. Subsidiaries (continued)

| | The Company had paid for the increase in share capital phase I to
Indonusa on June 5, 2007 and August 13, 2007 amounting to Rp.21,624 million and
Rp.976.3 million, respectively, thereby as of September 30, 2007, the Companys
ownership in Indonusa has increased to 96.75%. |
| --- | --- |
| | A payment for the increase in share capital for phase II was made on
November 26, 2007 amounting to Rp.65,986 million. |
| | On December 19, 2007, Indonusas debt to the Company amounting to
Rp.82,627 million was converted into ownership on shares of stock of Indonusa. |

| | Pursuant to the payment for the additional share capital and debt swap to equity, the
Companys ownership in Indonusa has increased from 96.75% to 98.75%. |
| --- | --- |
| | Based on Circular Meeting of Indonusas stockholders on July 17, 2008 as covered by
notarial deed No. 64 of Dr. Wiratni Ahmadi, S.H. dated August 25, 2008, Indonusas
stockholders has agreed to transfer the Datakoms ownership in Indonusa of 6,000,000
shares to Metra (Note 1d.b). |
| | Pursuant to the transfer of the ownership, the Companys ownership in Indonusa has
increased to 100% (including through 1.25% ownership by Metra). |
| (d) | Telkomsel |
| | On February 14, 2006, Telkomsel was granted the International Mobile
Telecommunications-2000 (IMT-2000 or 3G) license in the 2.1 Gigahertz (GHz)
frequency bandwidth for a 10 year period by the Minister of Communication and
Information Technology of the Republic of Indonesia (MoCI), based on its Decision
Letter No. 19/KEP/M.KOMINFO/2/2006. The license is extendable subject to evaluation
(Notes 14 and 49c.ii). Telkomsel started its commercial services for 3G in September
2006. |
| | On October 11, 2006, Telkomsels operating licenses were updated by MoCI based on
Decision Letter No. 101/KEP/M.KOMINFO/10/2006, granting Telkomsel the rights to provide:
(i) Mobile telecommunication services with radio frequency bandwidth in the 900
Megahertz (MHz) and 1800 MHz bands; (ii) Mobile telecommunication services IMT-2000
with radio frequency bandwidth in the 2.1 GHz bands (3G); and (iii) Basic
telecommunication services. |

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

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

| a. |
| --- |
| The consolidated financial statements, except for the consolidated statements of cash flows,
are prepared on the accrual basis of accounting. The measurement basis used is historical
cost, except for certain accounts recorded on the basis described in the related accounting
policies. |
| The consolidated statements of cash flows are prepared using the direct method and present
the changes in cash and cash equivalents from operating, investing and financing activities. |
| Figures in the consolidated financial statements are rounded to and presented in millions of
Indonesian Rupiah (Rp.), unless otherwise stated. |

| b. |
| --- |
| The consolidated financial statements include the financial statements of the Company and
its subsidiaries in which the Company directly or indirectly has ownership of more than 50%,
or the Company has the ability to control the entity, even though the ownership is less than
or equal to 50%. Subsidiaries are consolidated from the date on which every effective
control is obtained and are no longer consolidated from the date of disposal. |
| All significant inter-company balances and transactions have been eliminated on the
consolidated financial statements. |

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

| d. |
| --- |
| The acquisition of a subsidiary from a third party is accounted for using the purchase
method of accounting. The cost of an acquisition is allocated to the identifiable assets and
liabilities recognized using as reference, their fair values at the date of the transaction.
The excess of the acquisition cost over the 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 circumstances have occurred
that would require revision of the remaining estimated useful life of intangible assets and
goodwill, or whether there is any indication of impairment. If any indication of impairment
exists, the recoverable amount of intangible assets and goodwill is estimated based on the
expected future cash flows which are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of money and the
risks specific to the asset. |

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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

e.
Cash and cash equivalents 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.

f. Investments

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

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

| iii. |
| --- |
| Investments in companies where the Company has 20% to 50% of the voting rights, and
through which the Company exerts significant influence, but not control, over the
financial and operating policies are accounted for using the equity method. Under this
method, the Company recognizes the 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. |

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

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

f. Investments (continued)

| iii. |
| --- |
| On a continuous basis, but no less frequently than at the end of each year, the Company
and its subsidiaries evaluate the carrying amount of their ownership interests in
associated companies for possible impairment. Factors considered in assessing whether an
indication of other-than-temporary impairment exists include the achievement of business
plan objectives and milestones including cash flow projections and the results of
planned financing activities, the financial condition and prospects of each associated
company, the fair value of the ownership interest relative to the carrying amount of the
investment, the period of time the fair value of the ownership interest has been below
the carrying amount of the investment and other relevant factors. Impairment to be
recognized is measured based on the amount by which the carrying amount of the
investment exceeds the fair value of the investment. Fair value is determined based on
quoted market prices (if any) and projected discounted cash flows, whichever is lower or
other valuation techniques as appropriate. |
| Changes in the value of investments due to changes in the equity of associated companies
arising from capital transactions of such associated companies with other parties are
recognized directly in equity and are reported as Difference due to change of equity in
associated companies in the stockholders equity section. Differences previously
credited directly to equity as a result of equity transactions in associated companies
are released to the consolidated statements of income upon the sale of an interest in
the associate in proportion to percentage of the interests sold. |
| The functional currency of PT Pasifik Satelit Nusantara (PSN) and PT Citra Sari Makmur
(CSM) is the United States Dollars (U.S. Dollars). For the purpose of reporting
these investments using the equity method, the assets and liabilities of these companies
as of the balance sheet date are translated into Indonesian Rupiah using the rates of
exchange prevailing at that date, while revenues and expenses are translated into
Indonesian Rupiah at the average rates of exchange for the year. The resulting
translation adjustments are reported as part of Translation adjustment in the
stockholders equity section. |

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

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

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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

| h. |
| --- |
| Inventories consist of components and modules which are expensed or transferred to property,
plant and equipment upon use. Inventories also include Subscriber Identification Module
(SIM) cards, Removable User Identity Module (RUIM) cards and prepaid voucher blanks,
which are expensed upon sale. Inventories are stated at the lower of costs or net realizable
value. |
| Cost is determined using the weighted average method for components, SIM card, RUIM card and
prepaid voucher blanks, and the specific-identification method for modules. |
| Allowance for obsolescence is primarily based on the estimated forecast of future usage of
these items. |

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

| j. |
| --- |
| Intangible assets comprised of intangible assets from subsidiaries and business acquisition
and licenses. Intangible assets shall be recognized if it is probable that the expected
future economic benefits that are attributable to each asset will flow to the Company and
its subsidiaries and the cost of the asset can be reliably measured. |
| Intangible assets are stated at cost less accumulated amortization and impairment, if any.
Intangible assets are amortized over their useful lives. The Company and its subsidiaries
shall estimate the recoverable value of their intangible asset. When the carrying amount of
an asset exceeds its estimated recoverable amount, the asset is written down to its
estimated recoverable amount. |
| In 2006, Telkomsel was granted the right to operate the 3G license. Telkomsel is required to
pay an up-front fee and annual rights of usage (Biaya Hak Penggunaan or BHP) fee for the
next ten years. The up-front fee is recorded as intangible asset and amortized using the
straight-line method over the term of the right to operate the 3G license (10 years).
Amortization commenced in 2006 when the assets attributable to the provision of the related
services became available for use. |

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

| j. |
| --- |
| Based on Telkomsels management interpretation of the license conditions and the written
confirmation from the DGPT, the license may be returned at any time without any financial
obligation to pay the remaining outstanding annual BHP fees. Accordingly, Telkomsel
recognizes the annual BHP fees as expense when incurred. |
| Telkomsels management evaluates its plan to continue to use the license on an annual basis. |

k.
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:

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

| The Company and its subsidiaries evaluate their property, plant and equipment whenever
events and circumstances indicate that the carrying amount of the assets may not be
recoverable. |
| --- |
| When the carrying amount of an asset exceeds its estimated recoverable amount, the asset is
written down to its estimated recoverable amount, which is determined based upon the greater
of its net selling price or value in use. |
| The cost of maintenance and repairs is expensed as incurred. Expenditures, which extend the
useful life of the asset or result in increased future economic benefits such as increase in
capacity or improvement in the quality of output or standard of performance are capitalized. |
| When assets are retired or otherwise disposed of, their carrying values and the related
accumulated depreciation are eliminated from the consolidated financial statements, and the
resulting gains or losses on the disposal or sale of property, plant and equipment are
recognized in the consolidated statement of income. |

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

| k. |
| --- |
| Computer software used for data processing is included in the value of the associated
hardware. |
| Property under construction is stated at cost until construction is completed, at which time
it is reclassified to the specific property, plant and equipment account to which it
relates. During the construction period, borrowing costs, which include interest expense and
foreign currency exchange differences incurred to finance the construction of the asset, are
capitalized in proportion to the average amount of accumulated expenditures during the year.
Capitalization of borrowing cost ceases when the construction has been completed and the
asset is ready for its intended use. |
| Equipment temporarily unused are reclassified into equipment not used in operation and
depreciated over their estimated useful life using straight-line method. |

| l. |
| --- |
| Property, plant and equipment acquired under capital leases are stated at the present value
of minimum lease payments and the residual values (option price) paid by the Company and its
subsidiaries at the end of lease period. At inception of the lease, a corresponding
liability, which equals to the present value of minimum lease payments, is also recorded and
subsequently reduced by the principal component of each minimum lease payment. The interest
component of each minimum lease payment is recognized in the consolidated statement of
income. |
| Since January 1, 2008, the Company and its subsidiaries has applied PSAK 30 (Revised 2007),
Lease prospectively. Based on PSAK 30 (Revised 2007), property, plant and equipment under
capital lease is recognized if the lease transfers substantially all the risks and rewards
incidental to ownership. A lease is classified into capital lease or operating lease based
on the substance not the form of the contract. |
| Leased assets are depreciated using the same method over the shorter of the lease term and
its economic useful life. |

| m. |
| --- |
| Revenues from RSA are recognized based on Companys share as agreed upon in the contracts. |
| The Company records assets under RSA as Property, plant and equipment under RSA (with a
corresponding initial credit to Unearned income on RSA presented in the liabilities
section of the consolidated balance sheet) based on the costs incurred by the investors as
agreed upon in the contracts entered into between the Company and the investors. Property,
plant and equipment are depreciated over their estimated useful lives using the
straight-line method (Note 2k). |
| Unearned income related to the acquisition of the property, plant and equipment under RSA is
amortized over the revenue-sharing period using the straight-line method. |
| At the end of the revenue-sharing period, the property, plant and equipment under RSA is
reclassified to the Property, plant and equipment account. |

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

| n. |
| --- |
| Revenues from KSO include amortization of unearned initial investor payments, Minimum Telkom
Revenues (MTR) and the Companys share of Distributable KSO Revenues (DKSOR). |
| Unearned initial investor payments received are recorded net of all direct costs incurred in
connection with the KSO agreement and amortized using the straight-line method over the KSO
period of 15 years starting from January 1, 1996. |
| MTR are recognized on a monthly basis, based on the contracted MTR amount for the current
year. |
| The Companys share of DKSOR is 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 39, Accounting for Joint Operation Schemes, which supercedes paragraph 14 of
PSAK 35, Accounting for Telecommunications Services Revenue, the assets built by the KSO
partners under the KSO were recorded in the books of the KSO partners which operate the
assets and would be transferred to the Company at the end of the KSO period or upon
termination of the KSO agreement. |
| As of December 31, 2006, the Company has obtained full control over all of the KSO
operations through acquisition of interest of KSO partners and the Company has accelerated
the amortization of KSO deferred compensation income per September 30, 2008. |

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

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

2007		2008
Buy	Sell	Buy	Sell
United States Dollars (US$) 1	9,145	9,150	9,425	9,435
Euro1	12,966	12,975	13,546	13,561
Yen1	79.20	79.26	89.91	90.02

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

| p. |
| --- |
| 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). |

q. Revenue and expense recognition

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

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

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

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

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

| iv. |
| --- |
| 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. |

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

q. Revenue and expense recognition (continued)

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

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

r. Employee benefits

| i. |
| --- |
| The net obligations in respect of the defined pension benefit and post-retirement health
care benefit plans are calculated at the present value of estimated future benefits that
the employees have earned in return for their service in the current and prior periods,
less fair value of plan assets and as adjusted for unrecognized actuarial gains or
losses and unrecognized past service cost. The calculation is performed by an
independent actuary using the projected unit credit method. The present value of the
defined benefit obligation is determined by discounting the estimated future cash
outflows using government bond interest rates that have terms to maturity approximating
the terms of the related liability. |
| Actuarial gains or losses arising from experience adjustments and changes in actuarial
assumptions, when exceeding the greater of 10% of present value defined benefit
obligation or 10% of fair value of plan assets, are charged or credited to the
consolidated statements of income over the average remaining service lives of the
relevant employees. Prior service cost is recognized immediately if vested or amortized
over the vesting period. |
| For defined contribution plans, the regular contributions constitute net periodic costs
for the year in which they are due and as such are included in staff costs. |

| ii. |
| --- |
| Employees are entitled to receive certain cash awards based on length of service
requirements. The benefits are either paid at the time the employees reach certain
anniversary dates during employment, or at the time of termination. |
| Actuarial gains or losses arising from experience and changes in actuarial assumptions
are charged immediately to the consolidated statements of income. |
| The obligation with respect to LSA is calculated by an independent actuary using the
projected unit credit method. |

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

r. Employee benefits (continued)

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

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

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

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

| s. |
| --- |
| The Company and its subsidiaries recognize deferred tax assets and liabilities for temporary
differences between the financial and tax bases of assets and liabilities at each reporting
date. The Company and its subsidiaries also recognize deferred tax assets resulting from the
recognition of future tax benefits, such as the benefit of tax loss carry forwards, to the
extent their future realization is probable. Deferred tax assets and liabilities are
measured using enacted or substantively enacted tax rates and tax laws at each reporting
date which are expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. |
| Income tax is charged or credited to the consolidated statement of income, except to the
extent that it relates to items recognized directly in equity, such as the difference in
value arising from restructuring transactions and other transactions between entities under
common control and the effect of foreign currency translation adjustment for certain
investments in associated companies, in which case income tax is also charged or credited
directly to equity. |
| Current tax assets and liabilities are measured at the amount expected to be recovered or
paid, using the tax rates and tax laws that have been enacted or substantively enacted at
each reporting date |

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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

| t. |
| --- |
| Derivative transactions are accounted for in accordance with PSAK 55, Accounting for
Derivative Instruments and Hedging Activities which requires that all derivative
instruments be recognized in the financial statements at fair value. To qualify for hedge
accounting, PSAK 55 requires certain criteria to be met, including formal documentations at
the inception of the hedge. |
| Changes in the fair values of derivative instruments that do not qualify for hedge
accounting are recognized in the consolidated statements of income. If a derivative
instrument is designated and qualifies for hedge accounting the assets or liabilities shall
be adjusted. The changes in fair values of derivative instruments are recognized in the
consolidated statements of income or consolidated statement of changes in stockholders
equity depending on the type and effectiveness of hedge transaction. |

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

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

| w. |
| --- |
| Basic earnings per share are computed by dividing net income by the weighted average number
of shares outstanding during the year. Net income per ADS is computed by multiplying basic
earnings per share by 40, the number of shares represented by each ADS. |

| x. |
| --- |
| 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. |

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

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TRANSLATION OF RUPIAH INTO UNITED STATES DOLLARS

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

ACQUISITIONS OF SIGMA

| On February 21, 2008, Metra and Sigmas stockholders, PT Sigma Citra Harmoni and Trozenin
Management Plc signed an Amendment to the Sales and Purchase of Shares Agreement which
authorized Metra to acquire 80% of the outstanding common stock of Sigma for US$35.2 million or
equivalent to Rp.331,052 million. |
| --- |
| The acquisition of Sigma has been accounted for using the purchase method of accounting, which
purchase price were allocated to fair value of the acquired assets and assumed liabilities. The
allocation of the acquisition cost was as follows: |

Purchase consideration	331,052
Fair value of net assets acquired:
Current assets	120,369
Fixed assets	65,511
Goodwill	37,924
Intangible assets	256,354
Other non-current assets	30,935
Current liabilities	(64,172	)
Long-term liabilities	(30,308	)
Deferred tax liabilities	(85,561	)
Fair value of net assets as at February 22, 2008	331,052

| The fair value of acquired assets and recognized liabilities was determined by an independent
appraisal. The intangible assets represent long-term contract, software and trademark (Note 14). |
| --- |
| The Companys consolidated results of operations has included the operating results of Sigma
since March 1, 2008 being the nearest convenient consolidated balance sheet date. |

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CASH AND CASH EQUIVALENTS

Cash on hand	35,895	37,212
Cash in banks
Related parties
Rupiah
PT Bank Negara Indonesia (Persero) Tbk (BNI)	98,413	149,229
PT Bank Mandiri (Persero) Tbk (Bank Mandiri)	171,009	142,741
PT Bank Rakyat Indonesia (Persero) Tbk (BRI)	28,007	10,183
PT Bank Pos Nusantara	1,367	132
PT Bank Syariah Mandiri (BSM)		34
PT Bank Tabungan Negara (Persero) Tbk (BTN)		15
	298,796	302,334
Foreign currencies
Bank Mandiri	38,971	65,251
BNI	18,778	18,483
BRI	621	682
BSM		30
	58,370	84,446
Sub-total	357,166	386,780
Third parties
Rupiah
ABN AMRO Bank (AAB)	78,798	94,416
Deutsche Bank AG (DB)	17,786	40,876
PT Bank Central Asia Tbk (BCA)	14,529	22,993
Citibank, N.A. (Citibank)	6,349	11,636
PT Bank Bukopin Tbk (Bank Bukopin)	6,412	7,085
PT Bank Ekonomi Raharja Tbk (Bank Ekonomi)		3,790
PT Bank Niaga Tbk (Bank Niaga)	1,698	2,987
PT Bank Lippo Tbk (Bank Lippo)	2,683	2,235
PT Bank DKI		2,077
Others (each below Rp.1 billion)	2,481	1,721
	130,736	189,816
Foreign currencies
AAB	9,316	42,368
DB	12,061	12,979
Citibank	10,368	8,878
Bank Ekonomi		3,137
Others (each below Rp.1 billion)	240	556
	31,985	67,918
Sub-total	162,721	257,734
Total cash in banks	519,887	644,514

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CASH AND CASH EQUIVALENTS (continued)


Time deposits
Related parties
Rupiah
BNI	392,580	1,857,597
BRI	247,020	1,383,025
Bank Mandiri	711,229	339,886
BTN	152,192	195,725
	1,503,021	3,776,233
Foreign currencies
BRI		140,670
BNI	653,965	126,256
Bank Mandiri	234,013	65,845
	887,978	332,771
Sub-total	2,390,999	4,109,004
Third parties
Rupiah
PT Bank DBS Indonesia (DBS)		375,970
Bank Bukopin	83,320	219,685
PT Bank Pembangunan Daerah Jawa Barat
dan Banten (Bank Jabar)	184,400	183,060
PT Bank Mega Tbk (Bank Mega)	92,945	167,945
PT Bank Century Tbk		120,000
Bank Niaga	177,820	113,407
PT Bank Muamalat Indonesia (Bank Muamalat)	73,040	93,550
PT Bank Internasional Indonesia Tbk	156,035	90,000
PT Bank Victoria International Tbk		85,000
PT Pan Indonesia Bank Tbk		60,000
PT Bank Danamon Indonesia Tbk
(Bank Danamon)	143,115	49,315
PT Bank Tabungan Pensiunan Nasional Tbk	84,128	45,053
PT Bank Bumiputera Indonesia Tbk
(Bank Bumiputera)		40,000
Bank Artha Graha Internasional Tbk		35,000
PT Bank NISP Tbk		20,000
Bank Lippo		11,000
PT Bank Permata Tbk	102	10,000
Bank Ekonomi		8,251
PT Bank Syariah Mega Indonesia
(Bank Syariah Mega)		5,000
Citibank	886,000
DB	13,200
	1,894,105	1,732,236

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CASH AND CASH EQUIVALENTS (continued)


Time deposits (continued)
Third parties (continued)
Foreign currencies
DBS		320,473
Standard Chartered Bank (SCB)	696,230	275,230
Bank Muamalat		197,925
DB	949,667	193,896
Bank Jabar		18,850
Bank Niaga		14,138
Bank Bukopin	4,574	1,886
Bank Mega	1,830
	1,652,301	1,022,398
Sub-total	3,546,406	2,754,634
Total time deposits	5,937,405	6,863,638
Grand Total	6,493,187	7,545,364

Interest rates per annum on time deposits are as follows:

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

| The related parties which the Company and its subsidiaries place their funds are
Government-owned banks. The Company and its subsidiaries placed a majority of their cash and
cash equivalents in these banks because they have the most extensive branch network in Indonesia
and are considered to be financially sound banks as they are owned by the Government. |
| --- |
| Refer to Note 44 for details of related party transactions. |

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

TRADE RECEIVABLES

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

a. By debtor

(i) Related parties

Government Agencies	580,713		501,175
CSM	40,816		41,639
PT Patra Telekomunikasi Indonesia (Patrakom)	16,309		16,614
PT Graha Informatika Nusantara (Gratika)	4,718		3,497
PT Aplikanusa Lintasarta (Lintasarta)	8,623		3,746
Others	11,422		8,568
Total	662,601		575,239
Allowance for doubtful accounts	(94,989	)	(181,774	)
Net	567,612		393,465

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

(ii) Third parties

Residential and business subscribers	3,625,977		3,731,282
Overseas international carriers	325,127		105,340
Total	3,951,104		3,836,622
Allowance for doubtful accounts	(1,031,541	)	(1,056,359	)
Net	2,919,563		2,780,263

b. By age

(i) Related parties

Up to 6 months	469,438		499,112
7 to 12 months	28,169		33,278
13 to 24 months	93,816		29,131
More than 24 months	71,178		13,718
Total	662,601		575,239
Allowance for doubtful accounts	(94,989	)	(181,774	)
Net	567,612		393,465

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

TRADE RECEIVABLES (continued)

b. By age (continued)

(ii) Third parties

Up to 3 months	2,924,089		2,808,979
More than 3 months	1,027,015		1,027,643
Total	3,951,104		3,836,622
Allowance for doubtful accounts	(1,031,541	)	(1,056,359	)
Net	2,919,563		2,780,263

c. By currency

(i) Related parties

Rupiah	581,499		566,203
U.S. Dollars	81,102		9,036
Total	662,601		575,239
Allowance for doubtful accounts	(94,989	)	(181,774	)
Net	567,612		393,465

(ii) Third parties

Rupiah	3,505,342		3,397,596
U.S. Dollars	445,762		439,026
Total	3,951,104		3,836,622
Allowance for doubtful accounts	(1,031,541	)	(1,056,359	)
Net	2,919,563		2,780,263

d. Movements in the allowance for doubtful accounts

Beginning balance	784,789		1,100,456
Additions (Note 37)	369,162		436,929
Bad debts write-off	(27,421	)	(299,252	)
Ending balance	1,126,530		1,238,113

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

TRADE RECEIVABLES (continued)

| d. |
| --- |
| Management believes that the allowance for doubtful accounts is adequate to cover probable
losses on non-collection of the accounts receivable. |
| Except for the amounts receivable from the Government Agencies, management believes that
there were no significant concentrations of credit risk on these receivables. The Company
and its subsidiaries do not have any off-balance sheet credit exposures related to their
customers. |
| Certain trade receivables of the Companys subsidiaries have been pledged as collateral for
lending agreements (Notes 19 and 23). |
| Refer to Note 44 for details of related party transactions. |

INVENTORIES

SIM cards, RUIM cards and prepaid voucher blanks	88,260		174,578
Modules	118,820		146,346
Components	48,225		141,454
Total	255,305		462,378
Allowance for obsolescence
Modules	(46,614	)	(57,083	)
Components	(5,856	)	(5,379	)
SIM cards, RUIM cards and prepaid voucher blanks	(370	)
Total	(52,840	)	(62,462	)
Net	202,465		399,916

Movements in the allowance for obsolescence are as follows:

Beginning balance	48,098		54,701
Additions (Note 37)	8,073		8,050
Inventories write-off	(3,331	)	(289	)
Ending balance	52,840		62,462

| Components and modules represent telephone terminals, cables, transmission installation spare
parts and other spare parts. |
| --- |
| Management believes that the allowance is adequate to cover probable losses from decline in
inventory value due to obsolescence. |
| As of September 30, 2008, certain inventories held by the Company have been insured against
fire, theft and other specific risks. Total sum insured as of September 30, 2008 amounted
Rp.88,968 million (Note 44d.vii). |

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

INVENTORIES (continued)

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

PREPAID EXPENSES

Rental	2,072,300	1,397,238
Salaries	314,691	312,552
Insurance	29,723	106,217
Telephone directory issuance costs	2,914	2,578
Others	10,739	42,348
Total	2,430,367	1,860,933

Refer to Note 44 for details of related party transactions.

RESTRICTED TIME DEPOSITS

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

LONG-TERM INVESTMENTS


Percentage
of	Beginning		Share of	Translation	Ending
ownership	balance	Addition	net income	adjustment	balance
Equity method:
CSM	25.00	53,114		2,339	355	55,808
Patrakom	40.00	26,007		4,580		30,587
PSN	22.38
		79,121		6,919	355	86,395
Cost method:
Bridge Mobile Pte. Ltd. (BMPL)	10.00	9,290	5,453			14,743
PT Batam Bintan
Telekomunikasi (BBT)	5.00	587				587
PT Pembangunan Telekomunikasi
Indonesia (Bangtelindo)	3.18	199				199
		10,076	5,453			15,529
		89,197	5,453	6,919	355	101,924

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

LONG-TERM INVESTMENTS (continued)


Percentage
of	Beginning				Share of	Translation		Ending
ownership	balance	Addition	Dividend		net income	adjustment		balance
Equity method:
CSM	25.00	57,240				1,744	(1,212	)	57,772
Patrakom	40.00	32,892		(1,944	)	732			31,680
PSN	22.38
		90,132		(1,944	)	2,476	(1,212	)	89,452
Cost method:
BMPL	10.00	20,360							20,360
BBT	5.00	587							587
Bangtelindo	2.11	199							199
Scicom (MSC)
Berhad (Scicom)	9.81	2,712	28,249						30,961
		23,858	28,249						52,107
		113,990	28,249	(1,944	)	2,476	(1,212	)	141,559

a.
CSM is engaged in providing Very Small Aperture Terminal (VSAT), network application
services and consulting services on telecommunications technology and related facilities.
As of September 30, 2007 and 2008, the carrying amount of the investment in CSM was equal to
the Companys share in the net assets of CSM.

| b. |
| --- |
| Patrakom is engaged in providing satellite communication system services, related services
and facilities to companies in the petroleum industry. |
| The increase of ownership in Patrakom in 2007 represents an adjustment arising from
the difference between the book value and the initial investment was made in 2005. |
| Pursuant to the AGM of Stockholders as stated in notarial deed No. 235 of Sutjipto, S.H.
M.Kn. dated April 30, 2008, Patrakoms stockholders approved the distribution of cash
dividends for 2007 amounting to Rp.4,859 million and the appropriation of Rp.607
million for general reserves. The Companys share of the dividend amounting to Rp.1,944
million. |
| As of September 30, 2007 and 2008, the carrying amount of investment in Patrakom was
approximate to the Companys share in the net assets of Patrakom. |

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

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LONG-TERM INVESTMENTS (continued)

| d. |
| --- |
| BMPL (Singapore), an associated entity of Telkomsel, is engaged in providing regional mobile
services in the Asia Pacific region. |
| Subsequently, on March 7, 2007, it was resolved that each of the stockholders shall
subscribe for 1,500,000 additional shares of BMPL, subject to the accession of SK Telecom
Co., Ltd as a stockholder of BMPL. However, the additional subscription of 300,000 shares
shall be cancelled if SK Telecom Co., Ltd becomes a stockholder of BMPL. |
| Based on the Accession Agreement dated June 18, 2007, the stockholders of BMPL agreed to
admit SK Telecom Co, Ltd as a stockholder of BMPL. Consequently, the additional subscription
of 300,000 shares was cancelled. On the same date, the stockholders of BMPL also agreed to
admit Advanced Info Service Public Company Limited as a stockholder of BMPL. |
| In April and November 2007, Telkomsel has paid additional subscriptions of US$600,000,
respectively (equivalent to Rp.5,453 million and Rp.5,615 million, respectively). |
| As of September 30, 2007 and 2008, Telkomsels contributions which represent 10.81% and 10%
ownership interest are US$1,600,000 (equivalent to Rp.14,743 million) and US$2,200,000
(equivalent to Rp.20,360 million), respectively. |

| e. |
| --- |
| BBT is engaged in providing fixed line telecommunication services at Batamindo Industrial
Park in Muka Kuning, Batam Island and at Bintan Beach International Resort and Bintan
Industrial Estate in Bintan Island. |

| f. |
| --- |
| Bangtelindo is primarily engaged in providing consultancy services on the installation and
maintenance of telecommunications facilities. |
| On July 19, 2007, based on decision of the EGM of stockholders as covered on notarial deed
No. 38 of Dr. Wiratni Ahmadi, S.H. dated July 19, 2007, the Bangtelindos stockholders
agreed the addition of paid in capital amounting to Rp.2,000 million from PT Fokus Investama
Mondials (FIM) stockholders. As a result, the Companys ownership in Bangtelindo has
diluted to 2.41%. |
| On February 5, 2008, based on decision of the EGM of stockholders as covered on notarial
deed No. 85 of Dr. Wiratni Ahmadi, S.H. dated June 30, 2008, the Bangtelindos stockholders
agreed to convert its reserve to shares of 1,200 shares amounting to Rp.1,200 million by the
FIMs stockholders resulted in dilution of the Companys ownership in Bangtelindo to 2.11%. |

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

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

PROPERTY, PLANT AND EQUIPMENT

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

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

PROPERTY, PLANT AND EQUIPMENT (continued)

2008	of Sigma	Additions	Deductions		Reclassifications		2008
At cost:
Direct acquisitions
Land	561,348		76,163			223		637,734
Buildings	2,961,302	38,783	84,977	(345	)	114,533		3,199,250
Switching equipment	24,293,139		49,759			1,152,934		25,495,832
Telegraph, telex and data
communication equipment	156,036		959			(9,139	)	147,856
Transmission installation and
equipment	44,758,386		1,226,605	(30,425	)	6,553,929		52,508,495
Satellite, earth station and
equipment	5,979,626		350,514			(20,125	)	6,310,015
Cable network	20,669,529		801,735			(174,055	)	21,297,209
Power supply	4,416,077		60,205			760,767		5,237,049
Data processing equipment	6,527,841	14,523	401,966	(3	)	524,261		7,468,588
Other telecommunications
peripherals	637,020	2,186	14,983	(757	)	(35,987	)	617,445
Office equipment	706,484	1,345	34,267	(2,147	)	(14,485	)	725,464
Vehicles	156,192	1,161	6,608	(466	)	(26,383	)	137,112
Other equipment	109,784		3,312			(1,512	)	111,584
Property under construction:
Buildings	86		176,005			(99,095	)	76,996
Switching equipment	83,740		1,073,660			(1,143,134	)	14,266
Transmission installation and
equipment	2,525,030		7,904,033			(7,997,149	)	2,431,914
Satellite, earth station and
equipment	3,557		12,211			(3,557	)	12,211
Cable network	381		38,291			(170	)	38,502
Power supply	37,979		749,457			(769,726	)	17,710
Data processing equipment	31,351	21,676	653,825	(6	)	(630,722	)	76,124
Leased assets
Vehicles			44,981					44,981
Transmission installation and
equipment	283,813		37,020			6,022		326,855
Total	114,898,701	79,674	13,801,536	(34,149	)	(1,812,570	)	126,933,192
Accumulated depreciation and
impairment:
Direct acquisitions
Buildings	1,465,078		147,025			(23	)	1,612,080
Switching equipment	13,562,557		1,803,594			1,308		15,367,459
Telegraph, telex and data
communication equipment	152,427		583			(9,139	)	143,871
Transmission installation
and equipment	16,178,965		3,438,437	(18,373	)	(1,423,934	)	18,175,095
Satellite, earth station and
equipment	2,373,355		328,532			(4,068	)	2,697,819
Cable network	12,917,430		1,078,182			(198,760	)	13,796,852
Power supply	1,864,747		342,597			(7,758	)	2,199,586
Data processing equipment	4,324,279		694,367			(77,217	)	4,941,429
Other telecommunications
peripherals	575,458		9,236	(56	)	(36,057	)	548,581
Office equipment	584,927		33,268			(11,990	)	606,205
Vehicles	147,055		3,466	(466	)	(26,288	)	123,767
Other equipment	100,437		2,431			(1,511	)	101,357
Leased assets
Vehicles			22,072					22,072
Transmission installation and
equipment	188,094		3,163			310		191,567
Total	54,434,809		7,906,953	(18,895	)	(1,795,127	)	60,527,740
Net Book Value	60,463,892							66,405,452

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

PROPERTY, PLANT AND EQUIPMENT (continued)

a. Gain on disposal or exchange of assets

Proceeds from sale of property, plant and equipment	21,706	9,919
Net book value	72	59,291
(Loss) gain on disposal	21,634	(49,372	)

b. KSO assets ownership arrangements

| (i) | In accordance with the amended and restated KSO VII agreement with BSI, the
ownership rights to the acquired property, plant and equipment in KSO VII are legally
retained by BSI until the end of the KSO period which is on December 31, 2010. As of
September 30, 2007 and 2008, the net book value of these property, plant and equipment
was Rp.1,066,147 million and Rp.954,626 million, respectively. |
| --- | --- |
| (ii) | In accordance with the amended and restated KSO IV agreement with PT Mitra
Global Telekomunikasi Indonesia (MGTI), the ownership rights to the acquired
property, plant and equipment in KSO IV are legally retained by MGTI until the end of
the KSO period which is on December 31, 2010. As of September 30, 2007 and 2008, the
net book value of these property, plant and equipment was Rp.894,158 million and
Rp.587,019 million, respectively. |

c. Assets impairment and related claims

| (i) | In the first quarter of 2005, the Government issued a series of regulations in
its efforts to rearrange the frequency spectra utilized by the telecommunications
industry. This action has resulted in the Company not being able to utilize certain
frequency spectra it had used to support its fixed wireline cable network by the end of
2006. As a result of these regulations, certain of the 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. Hence, the Company had shortened
the remaining useful lives for WLL and Approach Link equipment in the first quarter in
2005 and depreciated the remaining net book value of these assets through December 31,
2006. |
| --- | --- |
| (ii) | Further, on August 31, 2005, MoCI issued a press release which announced that
in order to conform with the international standards and as recommended by the
International Telecommunications Union Radiocommunication Sector (ITU-R), the 1900
MHz frequency spectrum would only be used for IMT-2000 or 3G network. In its press
release, the MoCI also announced that the Code Division Multiple Access (CDMA)-based
technology network which the Company used for its fixed wireless services could only
operate in the 800 MHz frequency spectrum. The Company utilizes the 1900 MHz frequency
spectrum for its fixed wireless network in Jakarta and West Java areas while for other
areas, the Company utilizes the 800 MHz frequency spectrum. |

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PROPERTY, PLANT AND EQUIPMENT (continued)

c. Assets impairment and related claims (continued)

(ii)	(continued)
	On January 13, 2006, the MoCI issued MoCI Regulation No. 01/Per/M.KOMINFO/1/2006 which
reaffirmed the 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
for 3G network. Following the preceding Governments decisions, the Company reviewed
the recoverable amount of cash-generating unit to which the affected fixed wireless
asset belongs and in 2005, the Company had written-down Rp.616,768 million for
transmission installation and equipment of fixed wireless assets. The recoverable
amount was estimated using value in use which represented the present value of
estimated future cash flows from cash-generating unit using a pretax discount rate of
16.89%, representing the 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 assets and generated cash inflows that
were largely independent of the cash inflows from other assets or group of assets. In
addition, the Company recognized a loss relating to non-cancelable contracts for
procurement of the 1900 MHz transmission installation and equipment in Jakarta and West
Java areas amounting to Rp.79,359 million.
	As a result of this 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
with total acquisition cost amounted to Rp.1,330,818 million. The BSS equipment has
been completely replaced with BSS equipment operating in 800 MHz by the end of December
2007. In June 2007, the Company has been fully depreciated the assets. Subsequently, in
June 2008, the Company reclassified the assets under equipment not used in operation
(Note 13).
(iii)	As of September 30, 2007 and 2008, the Company operated two satellites,
Telkom-1 and Telkom-2 primarily providing backbone transmission links for its network
and earth station satellite up-linking and down-linking services to domestic and
international users. As of September 30, 2008, there were no events or changes in
circumstances that would indicate that the carrying amount of the Companys satellites
may not be recoverable.
(iv)	On February 2, 2007, Jakarta and its surrounding, area of Divre II Jakarta
were covered by flood where an insurance claim for the replacement of the assets has
been agreed. Buildings and other equipments affected by the flood have been
re-operated gradually and with full completion expected to be at the end of November 2008.
(v)	On March 6, 2007, Padang within Divre I Sumatera experienced an earthquake
where an insurance claim for the replacement of the assets has been made. The
facilities have been re-operated gradually since September 2007.
(vi)	On September 12, 2007, South and West Sumatera within Divre I Sumatera
experienced an earthquake where an insurance claim for the replacement of the assets
has been made. The facilities have been re-operated gradually since September 2007.
(vii)	On July 9, 2008, Balikpapan and its surrounding, area of Divre VI Kalimantan
were covered by flood where an insurance claim for the replacement of the assets has
been made. Buildings and other equipments affected by the flood have been re-operated
gradually since July 2008.

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

PROPERTY, PLANT AND EQUIPMENT (continued)

d. Others

| (i) | Interest capitalized to property under construction amounted to Rp.nil for the
nine months period ended September 30, 2007 and 2008, respectively. |
| --- | --- |
| (ii) | Foreign exchange loss capitalized as part of property under construction
amounted to Rp.nil for the nine months period ended September 30, 2007 and 2008,
respectively. |
| (iii) | As of September 30, 2008, Telkomsel capitalized Rp.6,608,896 million of its
property, plant and equipment which was subject to price adjustment (Note 49a.ii). Part
of the capitalized amount of Rp.5,027,080 million has been depreciated with total
accumulated depreciation charged to the consolidated statement of income amounting to
Rp.223,780 million (Rp.213,570 million of which was charged to current year
consolidated statement of income). As of the date of the consolidated financial
statements, the new agreements are still under negotiation; it is therefore not
possible to determine adjustment, if any, to the property, plant and equipment as of
September 30, 2008 and its related depreciation. |
| (iv) | The Company and its subsidiaries own several pieces of land located throughout
Indonesia with Building Use Rights (Hak Guna Bangunan or HGB) for a period of 20-30
years, which will expire between 2008 and 2038. Management believes that there will be
no difficulty in obtaining the extension of the land rights when they expire. |
| (v) | The Company was granted the right to use certain parcels of land by the
Ministry of Communications and Information Technology of the Republic of Indonesia
(formerly Ministry of Tourism, Post and Telecommunications) where they are still under
the name of the Ministry of Tourism, Post and Telecommunications and the Ministry of
Transportation of the Republic of Indonesia. The transfer to the Company of the legal
title of ownership on those parcels of land is still in progress. |
| (vi) | As of September 30, 2008, the Companys and its subsidiaries property, plant
and equipment, except for land, were insured with PT Asuransi Jasa Indonesia
(Jasindo), PT Asuransi Ramayana, PT Asuransi Wahana Tata, PT Asuransi Export
Indonesia, PT Asuransi Tugu Pratama, PT Asuransi Central Asia and PT Allianz Utama
against fire, theft, earthquake and other specified risks. Total cost of assets being
insured amounted to Rp.34,309,353 million and US$522.28 million, which was covered by
sum insured basis with a maximum loss claim of Rp.1,354,420 million and on first loss
basis of US$386.65 million and Rp.824,000 million including business recovery of
Rp.324,000 million with Automatic Reinstatement of Loss Clause. In addition, the
Telkom-1 and Telkom-2 were insured separately for US$34.04 million and US$51.26 million
respectively. Management believes that the insurance coverage is adequate. |
| (vii) | As of September 30, 2008, the completion of assets under construction was
around 66.19% of the total contract value with estimated dates of completion to be
between December 2008 up to May 2009. Management believes that there is no impediment
to the completion of the construction in progress. |
| (viii) | Certain property, plant and equipment of the Companys subsidiaries have been pledged
as collateral for lending agreements (Notes 19 and 23). |

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

PROPERTY, PLANT AND EQUIPMENT (continued)

d. Others (continued)

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

Year — 2007	19,541
2008	78,373		105,815
2009	78,161		108,743
2010	78,161		100,921
2011	78,161		68,448
2012	48,916		30,143
Later			5,445
Total minimum lease payments	381,313		419,515
Interest	(164,405	)	(134,435	)
Net present value of minimum lease payments	216,908		285,080
Current maturities (Note 20a)	(26,025	)	(56,700	)
Long-term portion (Note 20b)	190,883		228,380

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

2007	Additions	Deduction		Reclassifications		2007
At cost:
Land	4,646						4,646
Buildings	5,110						5,110
Switching equipment	365,293				(46,461	)	318,832
Transmission installation
and equipment	296,365		(47,106	)	(40,688	)	208,571
Cable network	618,845				(14,083	)	604,762
Other telecommunications
peripherals	168,754				(862	)	167,892
Total	1,459,013		(47,106	)	(102,094	)	1,309,813
Accumulated depreciation:
Land	2,703	174					2,877
Buildings	2,926	191					3,117
Switching equipment	172,341	19,115			(73	)	191,383
Transmission installation
and equipment	103,253	22,431	(16,545	)	(9,566	)	99,573
Cable network	124,740	30,024			(1,063	)	153,701
Other telecommunications
peripherals	87,418	17,988					105,406
Total	493,381	89,923	(16,545	)	(10,702	)	556,057
Net Book Value	965,632						753,756

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PROPERTY, PLANT AND EQUIPMENT UNDER RSA (continued)

2008	Additions	Reclassifications		2008
At cost:
Land	4,646		(222	)	4,424
Buildings	3,982		(225	)	3,757
Switching equipment	286,688		(6,734	)	279,954
Transmission installation
and equipment	179,785		(44,125	)	135,660
Cable network	583,353		(35,850	)	547,503
Other telecommunications
peripherals	149,200				149,200
Total	1,207,654		(87,156	)	1,120,498
Accumulated depreciation:
Land	2,935	126			3,061
Buildings	2,435	148	(48	)	2,535
Switching equipment	169,663	17,916	(1,880	)	185,699
Transmission installation
and equipment	90,141	9,291	(19,865	)	79,567
Cable network	144,603	35,915	(12,657	)	167,861
Other telecommunications
peripherals	92,786	18,111			110,897
Total	502,563	81,507	(34,450	)	549,620
Net Book Value	705,091				570,878

| In accordance with RSA, the ownership rights to the property, plant and equipment under RSA are
legally retained by the investors until the end of the revenue-sharing periods. |
| --- |
| The balances of unearned income on RSA as of September 30, 2007 and 2008, are as follows: |

Gross amount	1,309,814		1,120,498
Accumulated amortization:
Beginning balance	(641,839	)	(704,269	)
Additions (Note 34)	(212,468	)	(166,851	)
Deductions	102,094		87,156
Ending balance	(752,213	)	(783,964	)
Net	557,601		336,534

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

ADVANCES AND OTHER NON-CURRENT ASSETS

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

Prepaid rent net of current portion (Note 8)		863,451
Advances for purchase of property, plant and equipment	233,143	721,648
Deferred land rights charges	82,388	105,122
Security deposits	36,950	50,136
Equipment not used in operations net	66,113	48,444
Restricted cash	92,280	1,514
Others	81,874	167,441
Total	592,748	1,957,756

| Deferred land rights charges represent costs to extend the contractual life of the land rights
which have been deferred and amortized over the contractual life (Note 11d.iv). |
| --- |
| As of September 30, 2008, equipment not used in operations represents Base Transceiver Station
(BTS) and other equipment of the Company and Telkomsel temporarily taken out from operations
but planned to be reinstalled. Telkomsels depreciation charged to the consolidated statement
of income for the nine months period ended September 30, 2007 and 2008 amounted to Rp.20,118
million and Rp.9,261 million, respectively. |
| As of September 30, 2007 and 2008, certain Telkomsels equipment with a net carrying amount of
Rp.116,336 million and Rp.1,131 million, respectively, was re-installed and subsequently
reclassified to property, plant and equipment (Note 11). |
| As of September 30, 2007 and 2008, restricted cash represented cash received from the
Government relating to compensation for early termination of exclusive rights to be used for
the construction of certain infrastructures (Notes 1a and 29) and time deposits with original
maturities of more than one year pledged as collateral for bank guarantees. |
| Refer to Note 44 for details of related party transactions. |

GOODWILL AND OTHER INTANGIBLE ASSETS

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


		intangible
Goodwill		assets		License		Total
Gross carrying amount:
Balance, September 30, 2007	106,348		7,602,847		436,000		8,145,195
Accumulated amortization:
Balance, December 31, 2006	(106,348	)	(3,590,563	)	(11,679	)	(3,708,590	)
Amortization expense for 9 months
period (Note 37)			(751,968	)	(35,036	)	(787,004	)
Balance, September 30, 2007	(106,348	)	(4,342,531	)	(46,715	)	(4,495,594	)
Net Book Value			3,260,316		389,285		3,649,601
Weighted-average amortization period			7.58 years		9.50 years

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GOODWILL AND OTHER INTANGIBLE ASSETS (continued)


		intangible
Goodwill		assets		License		Total
Gross carrying amount:
Balance, December 31, 2007	106,348		7,602,847		436,000		8,145,195
Additions Sigma	37,924		256,354				294,278
Additions Sigmas software					15,030		15,030
Additions Indonusa	6,599						6,599
Balance, September 30, 2008	150,871		7,859,201		451,030		8,461,102
Accumulated amortization:
Balance, December 31, 2007	(106,348	)	(4,593,326	)	(58,393	)	(4,758,067	)
Amortization expense for 9 months
period (Note 37)	(25,468	)	(752,560	)	(35,036	)	(813,064	)
Balance, September 30, 2008	(131,816	)	(5,345,886	)	(93,429	)	(5,571,131	)
Net Book Value	19,055		2,513,315		357,601		2,889,971
Weighted-average amortization period	5 years		7.58 years		9.50 years

| (ii) | Other intangible assets resulted from the acquisitions of Dayamitra, Pramindo, TII,
KSO IV and KSO VII, and represented the rights to operate the business in the KSO areas.
Goodwill resulted from the acquisition of GSD in 2001, Sigma in 2008 (Note 4), and
Indonusa in 2008 (Notes 1d.b and c). Software license resulted from the acquisition of
Sigma in 2008. |
| --- | --- |
| (iii) | In 2006, Telkomsel was granted the right to operate the 3G license. Telkomsel is
required to pay an up-front fee and annual BHP fee for the next ten years. The up-front
fee is recorded as intangible asset and amortized using the straight-line method over the
term of the right to operate the 3G license (10 years) which is extendable subject to
evaluation. Amortization commenced in 2006 when the assets attributable to the provision
of the related services became available for use. |
| | The up-front fee paid by Telkomsel in February 2006 for the 3G license amounting to
Rp.436,000 million was recognized as intangible asset and is amortized over the term of the
3G license. |
| | Based on Telkomsels management interpretation of the license conditions and written
confirmation from the DGPT, the 3G license may be returned at any time without any
financial obligation to pay the remaining outstanding annual BHP fees. Accordingly, the
annual BHP fees relating to 3G license are expensed when incurred. Telkomsels management
assesses its plan to continue to use the license on an annual basis. |
| (iv) | The estimated annual amortization expense relating to other intangible assets for
each of the next three years beginning from October 1, 2008 would be approximately
Rp.1,059,856 million per year. |

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ESCROW ACCOUNTS

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

Bank Mandiri		42,572
Bank Danamon	1,172	1,181
Others (each below Rp.1 billion)	226	108
	1,398	43,861

| The escrow accounts with Bank Mandiri were established in relation with the Palapa Ring
Consortium Construction and Maintenance Agreement (C&MA) as an initial deposit 5% of the
commitment value (Note 49c.iv). |
| --- |
| The escrow accounts with Bank Danamon were established in relation with the RSA in
telecommunications equipment in Divre VII East Indonesia. |
| Refer to Note 44 for details of related party transactions. |

TRADE PAYABLES


Related parties
Concession fees	1,245,971	1,207,726
Purchases of equipment, materials and services	241,669	229,842
Payables to other telecommunications providers	133,449	78,542
Sub-total	1,621,089	1,516,110
Third parties
Purchases of equipment, materials and services	4,131,557	7,260,856
Payables related to RSA	144,798	97,312
Payables to other telecommunications providers	27,129	87,627
Sub-total	4,303,484	7,445,795
Total	5,924,573	8,961,905

Trade payables by currency are as follows:

Rupiah	2,946,424	3,322,331
U.S. Dollars	1,787,661	3,435,105
Euro	1,188,029	2,195,718
Singapore Dollars	2,358	8,660
Japanese Yen		46
Great Britain Pound sterling	101
Others		45
Total	5,924,573	8,961,905

Refer to Note 44 for details of related party transactions.

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ACCRUED EXPENSES

Operations, maintenance and telecommunications services	1,029,348	1,300,760
Salaries and benefits	965,078	769,754
General, administrative and marketing	528,371	552,780
Interest and bank charges	130,947	251,431
Total	2,653,744	2,874,725

UNEARNED INCOME

Prepaid pulse reload vouchers	2,326,959	3,036,452
Other telecommunications services	3,962	28,614
Others	67,948	70,502
Total	2,398,869	3,135,568

SHORT-TERM BANK LOANS

Bank Niaga	29,002	35,000
Bank Syariah Mega	13,150	18,449
BNI	500,000
BCA	200,000
Bank Mandiri	200,000
Bank Bumiputera	8,000
Total	950,152	53,449

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

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SHORT-TERM BANK LOANS (continued)

a.	Bank Niaga (continued)
	On April 29, 2008, Balebat received an additional Specific Transaction Facility of Rp.5,000
million (Note 23h). The loan bears an interest rate of 11.5% per annum and will mature on
May 29, 2009. As of September 30, 2008, the principal outstanding amounted to Rp.5,000
million.
	On October 18, 2005, GSD entered into a short-term loan agreement with Bank Niaga for an
original facility of Rp.3,000 million for a one-year term. On November 3, 2006, the
agreement was amended to change the interest rate from 16.25% per annum to 15.5% per annum
and the maturity period to October 18, 2007. On November 23, 2007, the loan agreement was
amended to change the total facility to Rp.15,000 million with an interest rate of 11% per
annum and the maturity period to October 18, 2008. This credit facility is secured by GSDs
property, plant and equipment located in Jakarta (Note 11). As of September 30, 2007 and
2008, the principal outstanding amounted to Rp.8,000 million and Rp.8,000 million,
respectively.
	In October 2005, GSD entered into a short-term facility agreement with Bank Niaga for an
original facility of Rp.12,000 million, as amended on June 7, 2006 to Rp.7,000 million, and
maturing on October 18, 2006. The loan agreement was amended twice, the latest on November
3, 2006, to change the interest rate from 16.25% per annum to 15.5% per annum for the
period October 18, 2006 to October 18, 2007. The principal outstanding as of September 30,
2007 and 2008 was Rp.7,000 million and Rp.7,000 million, respectively.
b.	Bank Syariah Mega
	On September 6, 2007, Infomedia entered into a Rp.13,650 million loan agreement with Bank
Syariah Mega for financing the collection of call center business. The facility is obtained
through sharia principles with the estimated rates on borrowing at 14% per annum, and is
secured by the receivables from contact center (Note 6). The loan is payable within 3
months from the signing date. The principle outstanding as of September 30, 2007 was
Rp.13,150 million. On December 12, 2007 the loan was fully repaid.
	On December 11, 2007, Infomedia entered into a Rp.10,535 million loan agreement with Bank
Syariah Mega for working capital purpose. The facility is obtained through sharia
principles with the estimated rates on borrowing at 14% per annum, and is secured by the
receivables from contact center (Note 6). The loan is payable within 3 months from the
signing date. Based on amendment on June 10, 2008 (2 nd amendment agreement), the
maturity period of loan agreement was extended to September 11, 2008. On September 29, 2008
the loan was fully repaid.
	On March 31, 2008, Infomedia entered into Rp.8,812 million loan agreement with Bank Syariah
Mega for working capital purpose. The facility is obtained through sharia principles with
the estimated rates on borrowing at 14% per annum, and is secured by the receivables from
contact center (Note 6). The loan is payable within 3 months from the signing date. Based
on amendment on September 25, 2008 (2 nd amendment
agreement), the maturity period of loan agreement was extended to December 28, 2008. The
principal outstanding as of September 30, 2008 amounted to Rp.8,812 million.
	On June 5, 2008, Infomedia entered into Rp.9,637 million loan agreement with Bank Syariah
Mega for working capital purpose. The facility is obtained through sharia principles with
the estimated rates on borrowing at 14% per annum, and is secured by the receivables from
contact center (Note 6). The loan is payable within 3 months from the signing date. Based
on amendment on September 25, 2008, the maturity period of loan agreement was extended to
December 11, 2008. The principal outstanding as of September 30, 2008 amounted to Rp.9,637
million.

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SHORT-TERM BANK LOANS (continued)

c.	BNI
	On August 15, 2006, Telkomsel signed a Rp.300,000 million short-term facility agreement
with BNI, payable in 3 equal quarterly installments commencing after 3 months from the end
of the availability period. The loan bore a floating interest rate of three-month
Certificate of Bank Indonesia (Sertifikat Bank Indonesia or SBI) plus 1.5% per annum
(9.33% per annum as of June 30, 2007) which becomes due quarterly in arrears and was
unsecured. On June 28, 2007 the loan was fully repaid.
	On June 15, 2007, Telkomsel signed a Rp.300,000 million short-term facility agreement with
BNI, payable in 3 equal quarterly installments commencing after 3 months from the end of
the availability period. The loan bore a floating interest rate of three-month Jakarta
Interbank Offered Rate (JIBOR) plus 1.25% per annum which becomes due quarterly in
arrears and was unsecured. On July 24, 2007, the loan agreement was amended for additional
facilities of Rp.200,000 million. The principal outstanding as of September 30, 2007
amounted to Rp.500,000 million and on March 28, 2008, the loan was fully repaid.
d.	BCA
	On August 15, 2006, Telkomsel signed a Rp.350,000 million short-term facility agreement
with BCA, payable in 3 equal quarterly installments commencing after 3 months from the end
of the availability period. The loan bore a floating interest rate of three-month SBI plus
1.5% per annum (9.33% per annum as of June 30, 2007) which becomes due quarterly in arrears
and was unsecured. On June 28, 2007, the loan was fully repaid.
	On June 15, 2007, Telkomsel signed a Rp.300,000 million short-term facility agreement with
BCA, payable in 3 equal quarterly installments commencing after 3 months from the end of
the availability period. The loan bore a floating interest rate of three-month JIBOR plus
1.25% per annum which becomes due quarterly in arrears and was unsecured. The principal
outstanding as of September 30, 2007, amounted to Rp.200,000 million and on March 28, 2008,
the loan was fully repaid.
e.	Bank Mandiri
	On August 15, 2006, Telkomsel signed a Rp.350,000 million short-term facility agreement
with Bank Mandiri, payable in 3 equal quarterly installments commencing after 3 months from
the end of the availability period. The loan bore a floating interest rate of three-month
SBI plus 1.5% per annum (9.33% per annum as of June 30, 2007) which becomes due quarterly
in arrears and was unsecured. On June 28, 2007, the loan was fully repaid.
	On June 15, 2007, Telkomsel signed a Rp.300,000 million short-term facility agreement with
Bank Mandiri, payable in 3 equal quarterly installments commencing 3 months from the end of
the availability period. The loan bore a floating interest rate of three-month JIBOR plus
1.25% per annum which becomes due quarterly in arrears and was unsecured. The principal
outstanding as of September 30, 2007, amounted to Rp.200,000 million and on March 28, 2008,
the loan was fully repaid.

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SHORT-TERM BANK LOANS (continued)

f.	Bank Bumiputera
	On February 15, 2006, GSD entered into a Rp.8,000 million loan agreement with Bank
Bumiputera with an interest rate of 17% per annum, unsecured and repayable by monthly
installment within 12 months from the signing date to February 15, 2007. On February 27,
2007, the loan agreement was amended to extend the maturity period to February 27, 2008. As
of December 31, 2006, the loan was fully drawn-down. The principal outstanding as of
September 30, 2007, amounted to Rp.8,000 million and on November 23, 2007, the loan was
fully repaid.
g.	Bank Ekonomi
	On June 11, 2008 Sigma entered into a Rp.7,000 million short-term loan agreement with Bank
Ekonomi for working capital purpose. The loan bears interest rate of 12.50% per annum and
repayable within 3 months from the signing date to September 11, 2008. This facility is
secured by Sigmas account receivables (Note 6) amounted to Rp.14,000 million. On September
11, 2008 the loan was fully repaid.

MATURITIES OF LONG-TERM LIABILITIES

a. Current maturities

Bank loans	23	2,549,849	4,814,589
Deferred consideration for business combinations	24	1,079,988	1,141,940
Two-step loans	21	452,379	437,353
Obligations under capital leases	11	26,025	56,700
Total		4,108,241	6,450,582

b. Long-term portion

Notes	Total	2009	2010	2011	2012	Later
Bank loans	23	6,439.3	1,193.6	3,521.2	1,170.2	260.4	293.9
Two-step loans	21	3,468.1	89.6	414.7	387.4	389.3	2,187.1
Deferred consideration for
business combinations	24	1,609.7	280.0	1,221.6	108.1
Obligations under capital leases	11	228.4	67.8	73.5	55.4	26.6	5.1
Total		11,745.5	1,631.0	5,231.0	1,721.1	676.3	2,486.1

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TWO-STEP LOANS

a.
The details of the two-step loans are as follows:

Creditors	Interest rate — 2007	2008	Outstanding — 2007	2008
Overseas banks	3.10% - 12.14 %	3.10% - 12.27 %	4,149,278		3,905,478
Consortium of contractors	3.20 %		29,723
Total			4,179,001		3,905,478
Current maturities (Note 20a)			(452,379	)	(437,353	)
Long-term portion (Note 20b)			3,726,622		3,468,125

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

Currencies	Interest rate — 2007	2008	Outstanding — 2007	2008
U.S. Dollars	4.00% - 7.39 %	4.00% - 6.67 %	1,626,333	1,495,692
Rupiah	12.14 %	8.97% - 12.27 %	1,457,832	1,269,205
Japanese Yen	3.10 %	3.10 %	1,065,113	1,140,581
Total			4,149,278	3,905,478

| | The loans are intended for the development of telecommunications infrastructure and
supporting equipment. The loans are repayable in semi-annual installments and are due on
various dates through 2024. |
| --- | --- |
| | The two-step loans which are payable in Rupiah bear either fixed interest rates and floating
rates based upon the average interest rate on three-month SBI during the six-months
preceding the installment due date plus 1% per annum, and floating interest rate offered by
the lenders plus 5.25% per annum. Two-step loans which are payable in foreign currencies
bear either fixed rate interests and the floating interest rate offered by the lenders, plus
0.5% per annum. |
| c. | The two-step loans obtained from a consortium of contractors as of September 30, 2007
consisted of loans in Japanese Yen with an interest rate of 3.20% per annum. |
| | The consortium of contractors consists of Sumitomo Corporation, PT NEC Nusantara
Communications and PT Humpuss Elektronika (SNH Consortium). The loans were obtained to
finance the second digital telephone exchange project. The loans are repayable in
semi-annual installments and are due on various dates through June 15, 2008. |
| | On June 15, 2008 the loan was fully repaid. |

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21.
As of September 30, 2008, the Company has used all facilities under the two-step loans
program and the drawdown period for the two-step loans has expired.
The Company is required to maintain financial ratios as follows:

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

As of September 30, 2008, the Company complied with the above mentioned ratios.
Refer to Note 44 for details of related party transactions.

NOTES AND BONDS


Bonds
Principal
Bond issuance costs
Net
Medium-term Notes
Principal
Debt issuance costs
Net
Total
Current maturities (Note 20a)
Long-term portion

| a. |
| --- |
| On July 16, 2002, the Company issued a five-year bonds amounting to Rp.1,000,000 million, at
par value. The bonds bore interest at a fixed rate of 17% per annum, payable quarterly
beginning October 16, 2002 and secured with all assets owned by the Company. The bonds are
traded on the Surabaya Stock Exchange and matured on July 16, 2007. The trustee of the bonds
is BRI (effective from January 17, 2006 replacing BNI) and the custodian is PT Kustodian
Sentral Efek Indonesia. |
| Under the provisions of the bond, the Company is required to comply with all covenants or
restrictions including maintaining certain consolidated financial ratios. The Company was
also restricted from making any loans to or for the benefit of any person which in aggregate
exceed Rp.500,000 million, in which the Company was not able to comply with in 2006.
However, the Company has obtained a written waiver from BRI, the trustee of the bonds. The
bonds were fully repaid on July 16, 2007. |

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NOTES AND BONDS (continued)

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

| Interest on the Notes is payable semi-annually beginning June 15, 2005 through June 15,
2007. The Notes were unsecured and at all times ranked pari passu with other unsecured debts
of the Company. The Company may, at any time, before the maturity dates of the Notes,
repurchase the Notes in whole or in part. |
| --- |
| On June 15, 2005, December 15, 2005, June 15, 2006 and June 15, 2007, the Company repaid the
Series A, Series B, Series C, and series D Notes, respectively. |

23.
The details of long-term bank loans as of September 30, 2007 and 2008 are as follows:

			2007
		2008	Outstanding		Outstanding
			Original		Original
		Total facility	currency	Rupiah	currency	Rupiah
Lenders	Currency	(in millions)	(in millions)	equivalent	(in millions)	equivalent
The Export-Import Bank of Korea	US$	124	94.1	860,610	71	665,560
Bank Mandiri	Rp.	2,400,000		1,270,000		1,210,000
BCA	Rp.	2,423,000		950,000		1,450,000
Citibank	US$	113	27.4	250,687	4	37,970
	Euro	73	14.6	189,840
	Rp.	1,000,000		300,000		600,000
BNI	Rp.	3,550,000		680,000		2,960,000
Bank Lippo	Rp.	18,500		12,881		5,520
Bank Niaga	Rp.	39,300		24,140		28,064
Bank Bukopin	Rp.	5,300		3,486		2,409
BRI	Rp.	3,400,000		400,000		3,240,000
Bank Ekonomi	Rp.	60,000				54,362
Bank Syndication	Rp.	2,400,000				1,000,000
Total				4,941,644		11,253,885
Current maturities of bank loans
(Note 20a)				(2,549,849	)	(4,814,589	)
Long-term portion (Note 20b)				2,391,795		6,439,296

Refer to Note 44 for details of related party transactions.

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BANK LOANS (continued)

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

| (i) | On March 20, 2006, Telkomsel signed a loan agreement with Bank Mandiri for a
facility of Rp.600,000 million, payable in 5 equal semi-annual installments commencing
6 months after the end of the availability period. The loan bears a floating interest
rate of three-month SBI plus 1.75% per annum (9.79% per annum and 11.65% per annum as
of September 30, 2007 and 2008, respectively) which becomes due quarterly in arrears
and is unsecured. The principal outstanding as of September 30, 2007 and 2008 amounted
to Rp.360,000 million and Rp.120,000 million, respectively. |
| --- | --- |
| (ii) | On August 15, 2006, Telkomsel signed a medium-term facility loan agreement with
Bank Mandiri for Rp.350,000 million, payable in 5 equal semi-annual installments
commencing 6 months after the end of the availability period. The loan bears a floating
interest rate of three-month SBI plus 1.5% per annum (9.51% per annum and 11.40% per
annum as of September 30, 2007 and 2008, respectively) which becomes due quarterly in
arrears and is unsecured. The principal outstanding as of September 30, 2007 and 2008
amounted to Rp.210,000 million and Rp.70,000 million, respectively. |
| (iii) | On June 15, 2007, Telkomsel signed a medium-term facility loan agreement with
Bank Mandiri of Rp.500,000 million. This facility is payable in 5 equal semi-annual
installments commencing 6 months after the end of the availability period. The loan
bears a floating interest rate of three-month JIBOR plus 1,25% per annum (9.40% per
annum and 12.41% per annum as of September 30, 2007 and 2008, respectively) which
becomes due quarterly in arrears and is unsecured. On July 24, 2007, the loan agreement
has been amended with addition of total facilities provided amounted to Rp.200,000
million. The principal outstanding as of September 30, 2007 and 2008 amounted to
Rp.700,000 million and Rp.420,000 million, respectively. |
| (iv) | On October 24, 2007, Telkomsel signed a medium-term facility loan agreement
with Bank Mandiri of Rp.750,000 million. This facility is payable in 5 equal
semi-annual installments commencing 6 months after the end of the availability period.
The loan bears a floating interest rate of three-month JIBOR plus 1.17% per annum
(10.93% as of September 30, 2008) which becomes due quarterly in arrears and is
unsecured. The principal outstanding as of September 30, 2008 amounted to Rp.600,000
million. |

c. BCA

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

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BANK LOANS (continued)

c. BCA (continued)

(i)	(continued)
	The amounts drawn from the facility bore interest rate of 4.35% per annum plus the
three-month time deposit rate and were unsecured. The loans were payable in twelve
unequal quarterly installments beginning in July 2004 and matured in April 2007.
	Based on the loan agreement, the Company is required to comply with all covenants or
restrictions including maintaining financial ratios. In 2006, the Company breached a
covenant in the loan agreement which stipulates that the Company will not make any loans
to or for the benefit of any person which in aggregate exceed Rp.500,000 million. The
Company obtained a written waiver from BCA with regard to providing loans to certain
subsidiaries which in aggregate exceed Rp.500,000 million. The loan was fully repaid on
April 10, 2007.
(ii)	On March 16, 2006, Telkomsel signed a loan agreement with BCA for a facility of
Rp.400,000 million, payable in 5 equal semi-annual installments commencing 6 months
after the end of the availability period. The loan bears a floating interest rate of
three-month SBI plus 1.75% per annum (9.79% per annum and 11.65% per annum as of
September 30, 2007 and 2008, respectively) which becomes due quarterly in arrears and
is unsecured. The principal outstanding as of September 30, 2007 and 2008 amounted to
Rp.240,000 million and Rp.80,000 million, respectively.
(iii)	On August 15, 2006, Telkomsel signed a medium-term facility loan agreement
with BCA for Rp.350,000 million, payable for 5 equal semi-annual installments
commencing 6 months after the end of the availability period. The loan bears a floating
interest rate of three-month SBI plus 1.5% per annum (9.54% per annum and 11.40% per
annum as of September 30, 2007 and 2008, respectively) which becomes due quarterly in
arrears and is unsecured. The principal outstanding as of September 30, 2007 and 2008
amounted to Rp.210,000 million and Rp.70,000 million, respectively.
(iv)	On June 15, 2007, Telkomsel signed a medium-term facility loan agreement with
BCA of Rp.500,000 million, payable in 5 equal semi-annual installments commencing 6
months after the end of the availability period. The loan bears a floating interest
rate of three-month JIBOR plus 1.25% per annum (9.40% per annum and 12.41% per annum as
of September 30, 2007 and 2008, respectively) which becomes due quarterly in arrears
and is unsecured. The principal outstanding as of September 30, 2007 and 2008 amounted
to Rp.500,000 million and Rp.300,000 million, respectively.
(v)	On July 14, 2008, Telkomsel signed a medium-term facility loan agreements with
BCA of Rp.1,000,000 million. This facility is in 5 equal semi-annual installments
commencing 6 months after the end of the availability period. The loan bears a floating
interest rate of one-month JIBOR plus 1.5% per annum (12.24% per annum as of September
30, 2008) which becomes due quarterly in arrears and is unsecured. The principal
outstanding as of September 30, 2008 amounted to Rp.1,000,000 million.

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

BANK LOANS (continued)

d. Citibank

1.	Hermes Export Facility
	On December 2, 2002, pursuant to the partnership agreement with Siemens
Aktiengesellschaft (AG) (Note 49a.ii), Telkomsel entered into the Hermes Export
Facility Agreement (Facility) with Citibank International plc (as Original Lender
and Agent) and Citibank, Jakarta branch (Arranger) covering a total facility of
Euro76.2 million divided into several tranches. The agreement was subsequently amended
on October 15, 2003, amending the Facility amount to Euro73.4 million and the payment
dates.
	The Facility bears interest rate based on the Euro Interbank Offered Rate (EURIBOR) plus
0.75% per annum (4.99% per annum as of September 30, 2007) and was unsecured. Interest
was payable semi-annually, starting on the utilization date of the Facility (May 29,
2003). As of September 30, 2007 the outstanding balance was Euro14.6 million (equivalent
to Rp.189,840 million) and on June 30, 2008, the loan was fully repaid.
	In addition to interest, Telkomsel was also charged an insurance premium for the
guarantee given by Hermes in favor of Telkomsel for each loan utilization, 15% of which
was paid in cash. The remaining balance was settled through utilization of the facility.
2.	High Performance Backbone (HP Backbone) Loans

| a. | On April 10, 2002, the Company entered into a loan agreement with
Citibank (Arranger) and Citibank International plc (Agent), which was supported
by an export credit guarantee of Hermes Kreditversicherungs AG (Lender and
Guarantor), providing a total facility of US$23.4 million. The facility which was
unsecured, was obtained to finance up to 85% of the cost of supplies and services
sourced in Germany relating to the design, manufacture, construction, installation
and testing of high performance backbone networks in Sumatra pursuant to the
Partnership Agreement dated November 30, 2001, with Pirelli Cables and Siemens
Indonesia for the construction and provision of a high performance backbone in
Sumatra. The lender required a fee of 8.4% of the total facility, 15% of which was
paid in cash and 85% was included in the loan balance. |
| --- | --- |
| | As of September 30, 2007 and 2008, the outstanding loan was US$6.3 million
(equivalent to Rp.57,526 million) and US$2.1 million (equivalent to Rp.19,773
million), respectively. The loan is payable in 10 semi-annual installments beginning
in April 2004 with interest at a rate equal to the six-month London Interbank
Offered Rate (LIBOR) plus 0.75% per annum (3.47% per annum and 6.09% per annum as of
September 30, 2007 and 2008, respectively). |
| b. | On April 10, 2002, the Company entered into a loan agreement with
Citibank (Arranger) and Citibank International plc (Agent), which was supported
by an export credit guarantee obtained from Servizi Assicurativi del Commercio
Estero ( SACE Italy ) providing a total maximum facility to US$21.0 million. The
facility which was unsecured, was used to finance up to 85% of material and
services procured in Italy in connection with the design, manufacture, development,
installation and testing of Sub-System VI , as part of HP Backbone network. |
| | The loan bore a fixed interest rate of 4.14% per annum payable in 10 semi-annual
installments beginning in December 2003. Total principal outstanding as of September
30, 2007 was US$3.7 million (equivalent to Rp.33,960 million) and on June 30, 2008,
the loan was fully repaid. |

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BANK LOANS (continued)

d. Citibank (continued)

| 2. |
| --- |
| As stated in the agreements, the Company is required to comply with all covenants or
restrictions including maintaining financial ratios as follows, in which the Company has
complied with as of September 30, 2007 as follows: |

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

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

Debt to EBITDA ratio should not exceed:

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

| In 2005, the Company has breached a covenant in the loan agreements which stipulate that
the Company will not make any loans or grant any credit to or for the benefit of any
person which in aggregate exceed 3% of stockholders equity. On May 12, 2006, the
Company obtained a written waiver from Citibank International plc with regard to
providing loans to certain subsidiaries which in aggregate exceed 3% of stockholders
equity. In 2006, the Company has complied with the above covenant. |
| --- |
| As of June 21, 2007, the Company obtained a waiver letter from Citibank International
plc with regard to providing loans facility. The waiver letter is intended to be valid
until the loans facility have been fully repaid. As of September 30, 2007, the Company
has complied with the above covenant. |

| 3. |
| --- |
| On December 2, 2002, pursuant to the partnership agreement with PT Ericsson Indonesia
(Ericsson Indonesia) (Note 49a.ii), Telkomsel entered into the EKN-Backed Facility
agreement (Facility) with Citibank International plc (Original Lender and Agent)
and Citibank, Jakarta branch (Arranger) covering a total Facility of US$70.5 million,
divided into several tranches. The agreement was subsequently amended on December 17,
2004, to reduce the total Facility to US$68.9 million. |
| The interest rate per annum on the Facility is determined based on Commercial Interest
Reference Rate (CIRR) of 3.52% plus 0.5% per annum (4.02% as of September 30, 2007 and
2008, respectively) and is unsecured. Interest is payable semi-annually, starting on the
utilization date of the Facility (July 31, 2003). |
| In addition to interest, Telkomsel was also charged an insurance premium for the
guarantee given by EKN in favor of Telkomsel for each loan utilization, 15% of which was
paid in cash. The remaining balance was settled through utilization of the facility. |
| No amounts were drawdown from the Facility in 2007 and 2008. As of September 30, 2007
and 2008, the outstanding balance was US$17.4 million (equivalent to Rp.159,201 million)
and US$1.9 million (equivalent to Rp.18,197 million), respectively. This loan will due
on December 30, 2008. |

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BANK LOANS (continued)

d. Citibank (continued)

Medium term loan

| a. | On March 21, 2006, Telkomsel signed a medium term loan agreement with
Citibank, Jakarta Branch for a facility of Rp.500,000 million, repayable in 5 equal
semi-annual installments commencing 6 months after the end of the availability
period. The loan bears a floating interest rate of three-month SBI plus 1.75% per
annum (9.79% per annum and 11.65% per annum as of September 30, 2007 and 2008,
respectively) which becomes due quarterly in arrears and is unsecured. The
principal outstanding as of September 30, 2007 and 2008 amounted to Rp.300,000
million and Rp.100,000 million, respectively. |
| --- | --- |
| b. | On October 24, 2007, Telkomsel signed a medium-term facility loan
agreement with Citibank, Jakarta Branch of Rp.500,000 million. This facility is in
5 equal semi-annual installments commencing 6 months after the end of the
availability period. The loan bears a floating interest rate of three-month JIBOR
plus 1.09% per annum which becomes due quarterly in arrears and is unsecured. The
principal outstanding as of September 30, 2008 amounted to Rp.500,000 million. |

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


	Foreign			Foreign
	currencies	Rupiah		currencies	Rupiah
	(in millions)	equivalent		(in millions)	equivalent
Hermes Export Facility	Euro	14.6	189,840
HP Backbone loans	US$	10.0	91,486	2.1	19,773
EKN-Backed Facility	US$	17.4	159,201	1.9	18,197
Medium term loan	Rp.		300,000		600,000
Total			740,527		637,970
Current maturities			(603,624	)	(337,970	)
Long-term portion			136,903		300,000

e. BNI

| (i) | On August 15, 2006, Telkomsel signed a medium-term facility loan agreement with
BNI for Rp.300,000 million, payable for 5 equal semi-annual installment commencing 6
months after the end of the availability period. The loan bears a floating interest
rate of three-month SBI plus 1.5% per annum (9.54% per annum and 11,40% per annum as of
September 30, 2007 and 2008, respectively) which becomes due quarterly in arrears and
is unsecured. The principal outstanding as of September 30, 2007 and 2008 amounted to
Rp.180,000 million and Rp.60,000 million, respectively. |
| --- | --- |
| (ii) | On June 15, 2007, Telkomsel signed a medium-term facility loan agreement with
BNI of Rp.500,000 million, payable in 5 equal semi-annual installments commencing 6
months after the end of the availability period. The loan bears a floating interest
rate of three-month JIBOR plus 1.25% per annum (9.40% per annum and 12.41% per annum as
of September 30, 2007 and 2008, respectively) which becomes due quarterly in arrears
and is unsecured. The principal outstanding as of September 30, 2007 and 2008 amounted
to Rp.500,000 million and Rp.300,000 million, respectively. |

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BANK LOANS (continued)

e. BNI (continued)

| (iii) | On October 24, 2007, Telkomsel signed a medium-term facility loan agreement
with BNI of Rp.750,000 million. This facility is in 5 equal semi-annual
installments commencing 6 months after the end of the availability period. The loan
bears a floating interest rate of three-month JIBOR plus 1.17% per annum (10.93% per
annum as of September 30, 2008) which becomes due quarterly in arrears and is
unsecured. The principal outstanding as of September 30, 2008 amounted to Rp.600,000
million. |
| --- | --- |
| (iv) | On July 14, 2008, Telkomsel signed a medium-term facility loan agreements with
BNI of Rp.2,000,000 million. This facility is in 5 equal semi-annual installments
commencing 6 months after the end of the availability period. The loan bears a floating
interest rate of one-month JIBOR plus 1.5% per annum (12.24% per annum as of September
30, 2008) which becomes due quarterly in arrears and is unsecured. The principal
outstanding as of September 30, 2008 amounted to Rp.2,000,000 million. |

| f. |
| --- |
| On June 21, 2002, the Company entered into a loan agreement with a consortium of banks for a
facility of Rp.400,000 million, to finance the Divre V Junction Project. Bank Bukopin,
acting as the facility agent, charged interest at the rate of 19% per annum for the first
year from the signing date and at the rate of the highest average three-month deposit rate
of each creditor plus 4% per annum for the remaining years. The drawdown period expires 19
months from the signing of the loan agreement and the principal is payable in 14 quarterly
installments starting from April 2004. The loan facility is secured by project equipment,
with a value of not less than Rp.500,000 million. |
| Based on an addendum to the loan agreement dated April 4, 2003, the loan facility was
reduced to Rp.150,000 million, the drawdown period was amended to expire 18 months from the
signing of the addendum, the repayment schedule was amended to 14 quarterly installments
starting from May 21, 2004 and ending on June 21, 2007, and the value of the project
equipment secured was reduced to Rp.187,500 million. On June 22, 2007, the loan was fully
repaid |

g.	Bank Lippo
	On May 29, 2006, Infomedia entered into a loan agreement with Bank Lippo for a facility of
Rp.18,500 million, to finance its call center project with Telkomsel. The facility bears
interest at 15.5% per annum and is secured by 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 (Note 6). As of September 30, 2007 and 2008, the
principal outstanding amounted to Rp.12,881 million and Rp.5,520 million, respectively.
h.	Bank Niaga

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

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BANK LOANS (continued)

h. Bank Niaga (continued)

(i)	(continued)
	On December 22, 2005, the loan agreement was amended to include a short-term credit
facility of Rp.4,000 million with maturity date and interest rate of December 22, 2006
and 12.5% per annum, respectively. On June 13, 2006, the facility was combined with the
revolving credit facility of Rp.800 million (Note 19a).
	On June 13, 2006, Balebat also received an additional facility of Rp.2,500 million which
consisted a facility of Rp.2,000 million to finance the purchase of a printing machine
and Rp.500 million to finance the purchase of operational vehicles with an interest rate
of 16.5% per annum. These facilities will be due on October 30, 2011 and November 28,
2009, respectively. Both facilities are secured by Balebats property located in West
Java (Note 11). As of September 30, 2007, the outstanding loans of the facilities were
Rp.1,361 million and Rp.nil, respectively, and as of September 30, 2008 was Rp.1,006
million and Rp.nil.
(ii)	As discussed in Note 19a, on April 25, 2005, Balebat entered into a loan
agreement with Bank Niaga for a total facility of Rp.2,400 million which includes an
investment credit facility of Rp.1,600 million with maturity date of October 25, 2009.
The investment credit facility loan is payable in 48 unequal monthly installments
beginning in November 2005 through October 2009. The investment credit facility bears
interest at a rate equal to market rate plus 2% per annum (16.5% per annum and 12% per
annum as of September 30, 2007 and 2008). As of September 30, 2007 and 2008, the
principal outstanding amounted to Rp.867 million and Rp.468 million respectively.
(iii)	In March 2007, GSD entered into a loan agreement (2 nd special
transaction loan agreement) with Bank Niaga for a total facility of Rp.20,000 million
with an interest rate of 13% per annum. The facility is secured by a parcel of land of
GSD (Note 11). The facility is payable in 8 years and the principal is payable in 33
quarterly installments and will be due in May 2015. As of September 30, 2007 and 2008,
principal outstanding under these facilities amounted to Rp.19,857 million and
Rp.19,150 million, respectively.
(iv)	On November 23, 2007, GSD entered into a loan agreement (3 rd special
transaction loan agreement) with Bank Niaga for a total facility of Rp.8,000 million
with an interest rate of 11% per annum. The facility is secured by a parcel of land of
GSD (Note 11). The facility is payable in 5 years and the principal is payable in 60
monthly installments and will be due on November 23, 2012. As of September 30, 2008,
the principal outstanding amounted to Rp.6,670 million.

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

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BANK LOANS (continued)

j. BRI

| (i) | On June 15, 2007, Telkomsel entered into a medium-term loan agreement with BRI
for a facility of Rp.400,000 million. The loan is payable in 5 equal semi-annual
installments commencing 6 months after the end of the availability period. The loan
bears a floating interest rate of three-month JIBOR plus 1.25% per annum (9.40% per
annum and 12.41% per annum as of September 30, 2007 and 2008, respectively) which
becomes due quarterly in arrears and is unsecured. The principal outstanding as of
September 30, 2007 and 2008 amounted to Rp.400,000 million and Rp.240,000 million,
respectively. |
| --- | --- |
| (ii) | On October 24, 2007, Telkomsel entered a medium-term facility loan agreement
with BRI of Rp.2,000,000 million. The loan is payable in 5 equal semi-annual
installments commencing 6 months after the end of the availability period. The loan
bears a floating interest rate of three-month JIBOR plus 1.17% per annum (12.23% per
annum as of September 30, 2008) which becomes due quarterly in arrears and is
unsecured. The principal outstanding as of September 30, 2008 amounted to Rp.2,000,000
million. |
| (iii) | On July 28, 2008, Telkomsel entered a medium-term facility loan agreement with
BRI of Rp.1,000,000 million. This facility is in 5 equal semi-annual installments
commencing 6 months after the end of the availability period. The loan bears a floating
interest rate of one-month JIBOR plus 1.5% per annum (11.16% per annum as of September
30, 2008) which becomes due quarterly in arrears and is unsecured. As of September 30,
2008, the principal outstanding amounted to Rp.1,000,000 million. |

k. Bank Ekonomi

| (i) | On December 7, 2006, Sigma entered into a facility loan agreement with Bank
Ekonomi of Rp.14,000 million. The facility bears a floating interest rate from 9.50%
per annum to 11.50% per annum (11.50% per annum as of September 30, 2008) and is
payable in 63 monthly installments starting from September 12, 2007 and ending on
December 12, 2012. As of September 30, 2008, the principal outstanding amounted to
Rp.11,878 million. |
| --- | --- |
| (ii) | On March 9, 2007, Sigma entered into a facility loan agreement with Bank
Ekonomi of Rp.13,000 million. The facility bears a floating interest rate from 9.50%
per annum to 11.50% per annum (11.50% per annum as of September 30, 2008) and is
payable in 60 monthly installments starting from December 12, 2007 and ending on
December 12, 2012. As of September 30, 2008, the principal outstanding amounted to
Rp.9,484 million. |
| (iii) | On September 10, 2008, Sigma entered into a facility loan agreement with Bank
Ekonomi of Rp.33,000 million. The facility bears a floating interest rate (12.50% per
annum as of September 30, 2008) and is payable in 78 monthly installments starting from
March 11, 2009 and ending on March 11, 2015. As of September 30, 2008, the principal
outstanding amounted to Rp.33,000 million. |

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

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BANK LOANS (continued)

k.	Bank Ekonomi (continued)
	Based on Sigmas management opinion, there are no covenants that have not been met as of
September 30, 2008.
l.	Syndication of banks
	On July 29, 2008, the Company entered into a long-term loan agreements with syndication of
BNI, BRI and Bank Jabar (syndication of banks) of Rp.2,400,000 million. Bank BNI, acting as
the facility agent, charged a floating interest rate of three-month JIBOR plus 1.2% per
annum (11.12% per annum as of September 30, 2008) which becomes due semi annually in arrears
and is unsecured. As of September 30, 2008, the principal outstanding amounted to
Rp.1,000,000 million.

| 24. |
| --- |
| Deferred consideration represent the Companys obligations 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, with details
as follows: |


TII transaction
PT Aria Infotek	157,214		54,037
The Asian Infrastructure Fund	37,432		12,866
MediaOne International I B.V.	104,809		36,024
Less discount on promissory notes	(12,393	)	(29	)
	287,062		102,898
KSO IV transaction
MGTI	2,410,177		1,765,799
Less discount	(303,229	)	(157,166	)
	2,106,948		1,608,633
KSO VII transaction
BSI	1,752,912		1,226,176
Less discount	(366,919	)	(186,021	)
	1,385,993		1,040,155
Total	3,780,003		2,751,686
Current maturity net of discount (Note 20a)	(1,079,988	)	(1,141,940	)
Long-term portion net of discount (Note 20b)	2,700,015		1,609,746

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DEFERRED CONSIDERATION FOR BUSINESS COMBINATIONS (continued)

| a. |
| --- |
| The outstanding balance relating to TII transaction represents non-interest bearing
promissory notes which were included in the purchase consideration, and arose from the
acquisition of the 100% outstanding common shares of TII (previously the Companys KSO III
partner) on July 31, 2003. These promissory notes have initial face value of US$109.1
million (equivalent to Rp.927,272 million) and a present value at a discount rate of 5.16%
at the closing date of US$92.7 million (equivalent to Rp.788,322 million). The promissory
notes are payable in 10 equal semi-annual installment beginning July 31, 2004. |
| As of September 30, 2007 and 2008, the outstanding promissory notes, before unamortized
discount, amounted to US$32.7 million (equivalent to Rp.299,455 million) and US$10.9 million
(equivalent to Rp.102,927 million), respectively. |

b.	KSO IV transaction
	The outstanding balance relating to KSO IV transaction arose from acquisition of KSO IV by
the Company, based on amendment and restatement of KSO agreement entered into by the Company
and MGTI on January 20, 2004. Based on the agreement, in consideration for the Companys
obtaining legal right to control the financial and operating decision of KSO IV, the Company
has agreed to pay MGTI the total purchase price of approximately US$390.7 million
(equivalent to Rp.3,285,362 million) which represents the present value of fixed monthly
payments (totaling US$517.1 million), payable to MGTI beginning February 2004 through
December 2010 at a discount rate of 8.3%, plus the direct cost of the business combination.
	As of September 30, 2007 and 2008, the remaining monthly payments to be made to MGTI, before
unamortized discount, amounted to US$263.4 million (equivalent to Rp.2,410,177 million) and
US$187.2 million (equivalent to Rp.1,765,799 million), respectively.
c.	KSO VII transaction
	The outstanding balance relating to KSO VII transaction arose from acquisition of KSO VII by
the Company, based on amendment and restatement of KSO agreement entered into by the Company
and BSI on October 19, 2006. Based on the agreement, in consideration for the Companys
obtaining legal right to control the financial and operating decision of KSO VII, the
Company has agreed to pay BSI the total purchase price of approximately Rp.1,770,925 million
which represents the present value of fixed monthly payments (totaling Rp.2,359,230
million), payable to BSI beginning October 2006 through December 2010 at a discount rate of
15%, plus the direct cost of the business combination.
	As of September 30, 2007 and 2008, the remaining monthly payments to be made to BSI, before
unamortized discount, amounted to Rp.1,752,912 million and Rp.1,226,176 million,
respectively.

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

MINORITY INTEREST


Minority interest in net assets of subsidiaries:
Telkomsel	8,143,730	8,622,035
Infomedia	117,941	145,857
Metra	404	32,890
GSD	5
Total	8,262,080	8,800,782


Minority interest in net income (loss) of subsidiaries:
Telkomsel	3,395,545		3,158,664
Infomedia	25,907		35,273
Metra	(3,177	)	2,157
GSD	1
Total	3,418,276		3,196,094

CAPITAL STOCK

	2007 — Number of	Percentage	Total
Description	shares	of ownership	paid-up capital
Series A Dwiwarna share
Government	1
Series B shares
Government	10,320,470,711	51.76	2,580,118
JPMCB US Resident (Norbax Inc.)	1,598,757,327	8.02	399,689
The Bank of New York	1,728,090,496	8.67	432,023
Directors (Note 1b):
Ermady Dahlan	17,604		4
Indra Utoyo	5,508		1
Public (individually less than 5%)	6,290,317,133	31.55	1,572,580
Total	19,937,658,780	100.00	4,984,415
Treasury stock (Note 28)	222,340,500		55,585
Total	20,159,999,280	100.00	5,040,000

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CAPITAL STOCK (continued)

	2008 — Number of	Percentage	Total
Description	Shares	of Ownership	Paid-up Capital
Series A Dwiwarna share
Government	1
Series B shares
Government	10,320,470,711	52.44	2,580,118
JPMCB US Resident (Norbax Inc.)	1,383,633,901	7.03	345,909
The Bank of New York	1,851,712,416	9.41	462,928
Directors (Note 1b):
Ermady Dahlan	17,604		4
Indra Utoyo	5,508		1
Public (individually less than 5%)	6,123,996,139	31.12	1,530,999
Total	19,679,836,280	100.00	4,919,959
Treasury stock (Note 28)	480,163,000		120,041
Total	20,159,999,280	100.00	5,040,000

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

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

ADDITIONAL PAID-IN CAPITAL

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

TREASURY STOCK

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

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TREASURY STOCK (continued)

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

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

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

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

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

Number		Number
of shares	Rp.	of shares	Rp.
Balance beginning	118,376,500	952,211	244,740,500	2,176,611
Number of shares acquired	103,964,000	993,690	235,422,500	2,025,644
Balance ending	222,340,500	1,945,901	480,163,000	4,202,255

Historical unit cost of repurchase of treasury shares:

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

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

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

The balance of this account amounting to Rp.270,000 million arose from the early termination of the Companys exclusive rights to provide local and domestic fixed line telecommunication services. As discussed in Note 1a, on December 15, 2005, the Company signed an Agreement on Implementation of Compensation for Termination of Exclusive Rights with the State MoCI DGPT, which was amended on October 18, 2006. Pursuant to this agreement, the Government agreed to pay Rp.478,000 million, net of tax, to the Company over a five-year period where Rp.90,000 million shall be paid from the 2005 State budget, Rp.90,000 million from the 2006 State budget and the remaining Rp.298,000 million shall be paid gradually or in one lump-sum payment based on the 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 and 2008, the Company has received an aggregate of Rp.180,000 million and Rp.270,000 million, respectively, in relation to the compensation for the early termination of exclusivity rights, being Rp.90,000 million each paid on December 30, 2005, December 28, 2006 and December 13, 2007, respectively. The Company recorded these amounts in Difference in value arising from restructuring transactions and other transactions between entities under common control in the Stockholders Equity section. These amounts are recorded as a component of Stockholders Equity because the Government is the majority and controlling stockholder of the Company. The Company will record the remaining amount of Rp.208,000 million when received.

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

TELEPHONE REVENUES


Fixed lines
Local and SLJJ	5,401,757	4,613,580
Monthly subscription charges	2,783,349	2,756,481
Phone cards	819	7,715
Installation charges	88,785	(39,857	)
Others	190,919	114,928
Total	8,465,629	7,452,847
Cellular
Usage charges	16,242,014	17,267,588
Features	187,686	524,838
Monthly subscription charges	191,659	290,544
Connection fee charges	95,099	197,771
Total	16,716,458	18,280,741
Total Telephone Revenues	25,182,087	25,733,588

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INTERCONNECTION REVENUES

Revenues	9,378,332		9,022,406
Expenses	(2,257,468	)	(2,383,169	)
Total Net	7,120,864		6,639,237

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

Refer to Note 44 for details of related party transactions.

DATA AND INTERNET REVENUES

Short Messaging Services (SMS)	8,702,155	8,587,860
Internet	971,384	1,567,268
Data communication	308,058	475,328
Voice over Internet Protocol (VoIP)	157,899	108,409
e-Business	24,555	22,298
Total	10,164,051	10,761,163

NETWORK REVENUES

Leased lines	146,290	484,710
Satellite transponder lease	454,849	311,450
Total	601,139	796,160

Refer to Note 44 for details of related party transactions.

REVENUE-SHARING ARRANGEMENTS (RSA) REVENUES

RSA revenues	107,885	100,667
Amortization of unearned income (Note 12)	212,468	166,851
Total	320,353	267,518

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PERSONNEL EXPENSES

Salaries and related benefits	2,065,715		2,154,453
Vacation pay, incentives and other benefits	1,960,950		1,871,994
Employees income tax	1,237,895		905,981
Net periodic post-retirement health care
benefits costs (Note 43)	543,126		676,227
Net periodic pension costs (Note 41a)	342,965		529,736
Housing	184,314		175,573
Other post-retirement cost (Note 41b)	65,613		62,677
Additional old saving allowance	122,914		45,814
LSA costs (Notes 42a,b)	(379,782	)	14,933
Other employees benefits (Note 41c)	7,313		10,882
Medical	11,103		6,150
Others	26,271		36,363
Total	6,188,397		6,490,783

OPERATIONS, MAINTENANCE AND TELECOMMUNICATION SERVICES EXPENSES

Operations and maintenance	3,888,255	4,467,268
Radio frequency usage charges	792,494	1,718,590
Concession fees and Universal Service
Obligation (USO) charges	752,713	780,453
Cost of phone, SIM and RUIM cards	430,140	578,705
Electricity, gas and water	356,438	380,249
Insurance	222,883	273,540
Leased lines	185,930	269,583
Vehicles rental and supporting facilities	169,984	163,858
Travelling	36,892	38,911
Others	4,933	67,063
Total	6,840,662	8,738,220

Refer to Note 44 for details of related party transactions.

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GENERAL AND ADMINISTRATIVE EXPENSES

| Amortization of goodwill and other intangible assets
(Note 14) | 787,004 | 813,064 |
| --- | --- | --- |
| Collection expenses | 431,425 | 446,653 |
| Provision for doubtful accounts and inventory
obsolescence (Notes 6d and 7) | 377,235 | 444,979 |
| Security and screening | 172,292 | 196,097 |
| Traveling | 193,235 | 180,748 |
| Training, education and recruitment | 155,246 | 176,863 |
| Professional fees | 74,002 | 77,285 |
| General and social contribution | 128,710 | 73,485 |
| Meetings | 65,311 | 67,308 |
| Vehicles rental | 69,346 | 60,470 |
| Stationery and printing | 57,546 | 48,306 |
| Research and development | 4,356 | 7,188 |
| Others | 23,300 | 34,322 |
| Total | 2,539,008 | 2,626,768 |

TAXATION

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

b. Prepaid taxes


Subsidiaries
Corporate income tax		73,163
Value Added Tax (VAT)		48,334
Income tax Article 23 Services Delivery	3,048	26,513
	3,048	148,010

c. Taxes payable


The Company
Income taxes
Article 21 Individual income tax	181,861	169,344
Article 22 Withholding tax on goods delivery and
Import	3,215	6,458
Article 23 Withholding tax on services delivery	9,072	19,395
Article 25 Installment of corporate income tax	5,811	5,790
Article 26 Withholding tax on non-resident income tax	2,026	6,383
Article 29 Underpayment of corporate income tax	409,969	363,741
VAT	281,206	253,360
	893,160	824,471

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TAXATION (continued)

c. Taxes payable (continued)


Subsidiaries
Income taxes
Article 21 Individual income tax	23,724	36,294
Article 22 Withholding tax on goods delivery and
import	1	2
Article 23 Withholding tax on services delivery	29,344	65,496
Article 25 Installment of corporate income tax	238,379	419,190
Article 26 Withholding tax on non-resident income tax	3,956	6,862
Article 29 (Overpayment) underpayment of corporate
income tax	885,268	(327,709	)
VAT	160,629	80,675
	1,341,301	280,810
	2,234,461	1,105,281

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


Current
The Company	1,258,795	1,470,362
Subsidiaries	3,935,795	3,516,696
	5,194,590	4,987,058
Deferred
The Company	417,924	52,968
Subsidiaries	309,205	370,352
	727,129	423,320
Benefits of deferred tax from reduction in tax rate
The Company		(167,079	)
Subsidiaries		(421,379	)
		(588,458	)
	5,921,719	4,821,920

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

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TAXATION (continued)

e. (continued)

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

Consolidated income before tax	19,159,050		16,937,902
Add back consolidation eliminations	6,383,151		6,019,451
Consolidated income before tax and eliminations	25,542,201		22,957,353
Less: income before tax of the subsidiaries	(14,046,427	)	(12,681,216	)
Income before tax attributable to the Company	11,495,774		10,276,137
Less: income subject to final tax	(464,792	)	(520,951	)
	11,030,982		9,755,186
Tax calculated at progressive rates	3,309,277		2,926,538
Non-taxable income	(1,917,021	)	(1,806,578	)
Non-deductible expenses	273,834		330,884
Deferred tax assets originating from previously unrecognized
temporary differences net	(47,807	)	10,029
Effect on the Companys deferred tax liabilities
of reduction in tax rate net			(167,079	)
Corporate income tax expense	1,618,283		1,293,794
Final income tax expense	58,436		62,457
Total income tax expense of the Company	1,676,719		1,356,251
Income tax expense of the subsidiaries	4,245,000		3,887,048
Effect on subsidiaries deferred tax liabilities
of reduction in tax rate net			(421,379	)
Total consolidated income tax expense	5,921,719		4,821,920

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

TAXATION (continued)

e. (continued)

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

Income before tax attributable to the Company	11,495,774		10,276,137
Less: income subject to final tax	(464,792	)	(520,951	)
	11,030,982		9,755,186
Temporary differences:
Amortization of intangible assets	758,962		752,380
Depreciation of property, plant and equipment	204,095		315,463
Allowance for doubtful accounts	149,304		361,521
Accrued employees benefits	389,694		(288,081	)
Depreciation of property, plant and equipment
under RSA	89,923		81,507
Capital leases	(24,167	)	(1,477	)
Allowance for inventory obsolescence	7,358		7,668
Amortization of land rights	(3,212	)	(2,827	)
Gain on sale of property, plant and equipment	(9,386	)	(7,282	)
Amortization of unearned income RSA	(177,035	)	(143,306	)
Trade receivables written-off	(115,634	)	(247,796	)
Net periodic pension costs and other-post retirement
benefits costs	(224,252	)	(260,345	)
LSA	(425,143	)
Payments of deferred consideration for business
combinations	(667,982	)	(661,956	)
Accrued early retirement benefits	(1,528,429	)
Foreign exchange (gain) loss on deferred consideration
for business combinations	28,147		(32,089	)
Other provisions	(4,681	)	(16,508	)
Total temporary differences	(1,552,438	)	(143,128	)

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TAXATION (continued)

e. (continued)


Permanent differences:
Net periodic post-retirement health care
benefits costs	536,781		668,432
Amortization of goodwill			180
Amortization of discounts on promissory notes	18,418		8,753
Equity in net income of associates and subsidiaries	(6,390,070	)	(6,021,928	)
Others	357,581		425,580
Total permanent differences	(5,477,290	)	(4,918,983	)
Taxable income	4,001,254		4,693,075
Corporate income tax expense	1,200,359		1,407,905
Final income tax expense	58,436		62,457
Total current income tax expense of the Company	1,258,795		1,470,362
Current income tax expense of the subsidiaries	3,935,795		3,516,696
Total current income tax expense	5,194,590		4,987,058

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

f. Tax assessment

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

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TAXATION (continued)

f. Tax assessment (continued)

| b. | In 2007, Telkomsel was assessed for underpayments of withholding taxes, VAT
and corporate income tax including penalty covering the fiscal years 2004 and 2005
totaling Rp.478 billion. The underpayments were settled through netting off
withholding tax paid in 2006 of Rp.25 billion and cash payments of Rp.453 billion. On
January 3, 2008, Telkomsel filed an objection for underpayment of withholding taxes
and VAT including a penalty totaling Rp.408 billion (Note 38a). Up to the issuance
date of the consolidated financial statements, Telkomsel has not received the Tax
Authorities decision on the objection. Telkomsel believes that such amount will be
refundable, hence, recognized it as part of claim for tax refund. The Tax Authorities
might raise similar issues for transactions occurred in subsequent fiscal years. |
| --- | --- |
| c. | Considering the uncertain result of Telkomsels filing for judicial review in
the Indonesian Supreme Court for claim of Rp.27 billion covering fiscal year 2001,
Telkomsel has conservatively charged the amount to the consolidated statements of
income. |

g. Deferred tax assets and liabilities

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


		credited to the
		consolidated
December 31,		to statements		September 30,
2006		of income		2007
The Company
Deferred tax assets:
Deferred consideration for
business combinations	1,249,332		(191,951	)	1,057,381
Allowance for doubtful accounts	263,321		45,198		308,519
Net periodic pension and other
post-retirement benefits costs	361,839		(77,379	)	284,460
Accrued expenses	57,185		(1,404	)	55,781
Accrued for employees benefits	529,662		(341,621	)	188,041
Accrued LSA	117,440		(117,440	)
Capital leases	12,408		26,406		38,814
Allowance for inventory obsolescence	14,099		1,181		15,280
Total deferred tax assets	2,605,286		(657,010	)	1,948,276
Deferred tax liabilities:
Difference between book and
tax property, plant and
equipments net book value	(1,947,349	)	23,733		(1,923,616	)
Land rights	(3,800	)	(963	)	(4,763	)
RSA	(47,661	)	(11,373	)	(59,034	)
Intangible assets	(1,205,783	)	227,689		(978,094	)
Total deferred tax liabilities	(3,204,593	)	239,086		(2,965,507	)
Deferred tax liabilities of the Company net	(599,307	)	(417,924	)	(1,017,231	)
Deferred tax liabilities of the subsidiaries net	(2,066,090	)	(309,205	)	(2,375,295	)
Total deferred tax liabilities net	(2,665,397	)	(727,129	)	(3,392,526	)

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PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

TAXATION (continued)

g. Deferred tax assets and liabilities (continued)


		credited to the
		consolidated				Effect of
December 31,		to statements		Acquisitions		reduction in		September 30,
2007		of income		of Sigma		tax rate		2008
The Company
Deferred tax assets:
Deferred consideration for
business combinations	1,010,035		(208,213	)			(94,293	)	707,529
Allowance for doubtful accounts	306,329		33,999				(45,327	)	295,001
Net periodic pension and other
post-retirement benefits costs	375,994		(69,720	)			(43,996	)	262,278
Accrued expenses	76,686		(27,737	)			(9,306	)	39,643
Accrued for employees benefits	172,071		(86,424	)			(13,320	)	72,327
Capital leases	40,057		(4,590	)			(2,528	)	32,939
Allowance for inventory obsolescence	15,891		2,283				(2,740	)	15,434
Total deferred tax assets	1,997,063		(360,402	)			(211,510	)	1,425,151
Deferred tax liabilities:
Difference between book and
tax property, plant and
equipments net book value	(1,854,350	)	92,960				291,986		(1,469,404	)
Land rights	(4,592	)	(849	)			786		(4,655	)
RSA	(59,859	)	(10,391	)			10,419		(59,831	)
Intangible assets	(902,856	)	225,714				75,398		(601,744	)
Total deferred tax liabilities	(2,821,657	)	307,434				378,589		(2,135,634	)
Deferred tax liabilities of the Company net	(824,594	)	(52,968	)			167,079		(710,483	)
Deferred tax liabilities of the
subsidiaries net	(2,209,506	)	(370,352	)	(81,499	)	421,379		(2,239,978	)
Total deferred tax liabilities net	(3,034,100	)	(423,320	)	(81,499	)	588,458		(2,950,461	)

| | Realization of the deferred tax assets is dependent upon profitable operations. Although
realization is not assured, the Company and its subsidiaries believe that it is probable
that these deferred tax assets will be realized through reduction of future taxable
income. The amount of deferred tax assets is considered realizable, however, could be
reduced if actual future taxable income is lower than their estimates. |
| --- | --- |
| | Telkomsels claims for overpayment of corporate income tax for fiscal years 2004 and 2005
due to recalculation of depreciation of property, plant and equipment in 2006 for tax
purposes amounting to Rp.338 billion were rejected by the Tax Authorities, hence, it was
reversed with a corresponding deduction to the deferred tax liability. The rejection of
recalculation resulted to a recognition of overpayment of corporate income
tax for 2006 of Rp.12.5 billion presented as part of claims for tax refund (Note 38a). |
| h. | Administration |
| | Under the taxation laws of Indonesia, the Company and each subsidiary submit tax returns on
the basis of self-assessment. The Tax Authorities may assess or amend taxes within the
Statute of Limitations, under the prevailing regulations up to 2007. |

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TAXATION (continued)

| h. |
| --- |
| Based on a new Tax Law No. 28/2007 concerning the General Provision and Procedure of
Taxation effective as of January 1, 2008, the Director General of Tax (DGT) may assess or
amend taxes within ten years of the time the tax becomes due, or until the end of 2013,
whichever is earlier. There are new rules applicable to fiscal year 2008 and subsequent
years stipulating that the DGT may assess or amend taxes within five years of the time the
tax becomes due. |
| On September 23, 2008, the President of the Republic Indonesia and MoJHR has signed and
enacted the Tax Law No. 36/2008 concerning the Forth Amendment of the Tax Law No. 7/1983 of
Income Taxes. This regulation provides that corporate tax rate will be a flat rate of 28%
in 2009 (previously calculated using progressive tax rates range from 10% to 30%), and 25%
in 2010. A reduction of 5% from the top rate applies for certain companies listed and
traded its stock in the IDX which meet the prescribed criteria that the stocks owned by the
public are 40% or more of the total of fully paid and traded stocks in IDX, and such stocks
are owned by at least 300 parties, each party owning less than 5% of the total paid-up
stocks. These requirements should be fulfilled by the publicly-listed companies for a
period of six months in one tax year. |
| As of September 2008, the Company and certain subsidiaries measure the effect of the
enacted tax rate of 28% and 25% for calculating its deferred tax assets and liabilities
depending on the realization of its estimates. |
| The Company has not been able to predict to meet the required criteria to avail of
reduction of 5% from the top rate yet. |
| The Company has been audited by the Tax Office up to the fiscal year of 2004, excluding
fiscal year 2003, Telkomsel up to fiscal year 2005 excluding fiscal year 2003, GSD up to
fiscal year 2002, and Infomedia up to fiscal year 2003. Currently, Telkomsel, PIN, and GSD
are being audited by the Tax Office for the fiscal year 2006, 2007 and 2007, respectively. |

BASIC EARNINGS PER SHARE

| Basic earnings per share is computed by dividing net income by the weighted average number of
shares outstanding during the year, totaling 19,972,103,556 and 19,774,345,563 for the nine
months period ended September 30, 2007 and 2008, respectively. |
| --- |
| The Company does not have potentially dilutive ordinary shares. |

CASH DIVIDENDS AND GENERAL RESERVE

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

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CASH DIVIDENDS AND GENERAL RESERVE (continued)

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

PENSION AND OTHER POST-RETIREMENT BENEFITS

a. Pension

| 1. |
| --- |
| The Company sponsors a defined benefit pension plan and a defined contribution pension
plan. |
| The defined benefit pension plan is provided to employees hired with permanent status
prior to July 1, 2002. The pension benefits are paid based on the participating
employees latest basic salary at retirement and the number of years of their service.
The plan is managed by Telkom Pension Fund (Dana Pensiun Telkom or Dapen). The
participating employees contribute 18% (before March 2003: 8.4%) of their basic
salaries to the plan. The Companys and subsidiaries contributions to the pension fund
for the nine months period ended September 30, 2007 and 2008 amounted to Rp.525,121
million and Rp.666,201 million, respectively. |
| The defined contribution pension plan is provided to employees hired with permanent
status on or after July 1, 2002. The plan is managed by financial institutions pension
fund (DPLK). The Companys contribution to DPLK is determined based on certain
percentage of the participants salaries and amounted to Rp.1,618 million and Rp.2,144
million for the nine months period ended September 30, 2007 and 2008, respectively. |
| The following table presents the change in projected benefits obligation, change in
plan assets, funded status of the plan and net amount recognized in the Companys
consolidated balance sheets for the nine months period ended September 30, 2007 and
2008, for its defined benefit pension plan: |


Change in projected benefits obligation
Projected benefits obligation at beginning of year	8,121,381		10,727,812
Service costs	152,706		211,601
Interest costs	646,630		807,727
Plan participants contributions	32,634		33,378
Actuarial gains	332,612		585,519
Expected benefits paid	(250,932	)	(331,198	)
Benefit changes	698,583
Projected benefits obligation at end of period	9,733,614		12,034,839

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PENSION AND OTHER POST-RETIREMENT BENEFITS (continued)

a. Pension (continued)

The Company (continued)


Change in plan assets
Fair value of plan assets at beginning of year	7,210,748		9,034,392
Expected return on plan assets	583,708		698,126
Employers contributions	525,122		666,201
Plan participants contributions	32,634		33,378
Actuarial (losses) gains	9,373		(1,444,003	)
Expected benefits paid	(250,932	)	(308,856	)
Fair value of plan assets at end of period	8,110,653		8,679,238
Funded status	(1,622,961	)	(3,355,601	)
Unrecognized prior service costs	1,645,318		1,490,096
Unrecognized net actuarial losses (gain)	(795,703	)	1,022,843
Accrued pension benefit cost	(773,346	)	(842,662	)

| In 2007, the Company provides pension benefit based on uniformulation for both
participants prior to and from April 20, 1992 effective for employees retiring
beginning February 1, 2009. The change in benefit had increased the Companys
liabilities by Rp.698,583 million, which is amortized over 9.9 years until 2016. |
| --- |
| The actual return on plan assets was Rp.796,090 million and Rp.681,493 million for the
nine months period ended September 30, 2007 and 2008, respectively. |
| The movement of the accrued pension benefits costs during the nine months period ended
September 30, 2007 and 2008, is as follows: |

Accrued pension benefits costs at beginning of year	1,003,000		1,054,097
Net periodic pension cost	295,468		483,213
Employers contributions	(525,122	)	(666,201	)
Benefits to be paid by the Company			(28,447	)
Accrued pension benefits costs at end of period	773,346		842,662

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

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PENSION AND OTHER POST-RETIREMENT BENEFITS (continued)

a. Pension (continued)

| 1. |
| --- |
| The actuarial valuation for the defined benefit pension plan and the other
post-retirement benefits (Note 41b) was performed based on the measurement date as of
December 31, 2006 and 2007, with reports dated April 24, 2007 and March 31, 2008,
respectively, by PT Watson Wyatt Purbajaga (WWP), an independent actuary in
association with Watson Wyatt Worldwide (WWW). The principal actuarial assumptions
used by the independent actuary as of December 31, 2006 and 2007, are as follows: |

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

The components of net periodic pension costs are as follows:

Service costs	152,706		211,601
Interest costs	646,630		807,727
Expected return on plan assets	(583,708	)	(698,126	)
Amortization of prior service costs	104,267		165,991
Recognized actuarial losses	(24,427	)	(3,980	)
Total net periodic pension costs (Note 35)	295,468		483,213

| 2. |
| --- |
| Telkomsel provides a defined benefit pension plan to its employees. Under this plan,
employees are entitled to pension benefits based on their latest basic salary or
take-home pay and the number of years of their service. PT Asuransi Jiwasraya
(Jiwasraya), a state-owned life insurance company, manages the plan
under an annuity insurance contract. Until 2004, the employees contributed 5% of their
monthly salaries to the plan and Telkomsel contributed any remaining amount required to
fund the plan. Starting 2005, the entire contributions are fully made by Telkomsel. |
| Telkomsels contributions to Jiwasraya amounted to Rp.38,268 million and Rp.40,634
million for the nine months period ended September 30, 2007 and 2008, respectively. |
| The following table reconciles the unfunded status of the plans with the amounts
included in the consolidated balance sheets as of September 30, 2007 and 2008: |

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P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

PENSION AND OTHER POST-RETIREMENT BENEFITS (continued)

a. Pension (continued)

Telkomsel (continued)

Projected benefits obligation	(272,701	)	(342,250	)
Fair value of plan assets	67,889		148,114
Unfunded status	(204,812	)	(194,136	)
Unrecognized items in the consolidated balance sheet:
Unrecognized prior service costs	(861	)	(798	)
Unrecognized net actuarial losses	163,929		123,288
Unrecognized net obligation at the date of
initial application of PSAK 24			1,695
Accrued pension benefits costs	(41,744	)	(69,951	)

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

Service costs	24,415		27,971
Interest costs	18,115		22,930
Expected return on plan assets	(1,674	)	(8,450	)
Amortization of past service costs	86		(47	)
Recognized actuarial losses	6,293		3,977
Amortization of net obligation at the date of
initial application of PSAK 24			133
Net periodic pension costs (Note 35)	47,235		46,514

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

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

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PENSION AND OTHER POST-RETIREMENT BENEFITS (continued)

a. Pension (continued)

| 3. |
| --- |
| Infomedia provides a defined benefit pension plan to its employees. The reconciliation
of the funded status of the plan with the net amount recognized in the consolidated
balance sheets as of September 30, 2007 and 2008, are as follows: |

Projected benefits obligation	(6,597	(6,307
Fair value of plan assets	6,696	7,004
Funded status	99	697
Prepaid pension benefits costs	99	697

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

| b. |
| --- |
| The Company provides other post-retirement benefits in the form of cash paid to employees
on their retirement or termination. These benefits consist of last housing allowance
(Biaya Fasilitas Perumahan Terakhir or BFPT) and home passage leave (Biaya Perjalanan
Pensiun dan Purnabhakti or BPP). In 2005 and 2006, these benefits presented as part of
LSA. |
| The movement of the other post-retirement benefits for the nine months period ended
September 30, 2007 and 2008, are as follows: |

| Accrued other post-retirement benefits costs
at beginning of year | 131,317 | | 195,061 | |
| --- | --- | --- | --- | --- |
| Other post-retirement benefits costs | 65,613 | | 62,677 | |
| Other post-retirement benefits paid | (17,090 | ) | (22,694 | ) |
| Accrued other post-retirement benefits costs at end of
period | 179,840 | | 235,044 | |

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PENSION AND OTHER POST-RETIREMENT BENEFITS (continued)

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

Service costs	17,191	16,969
Interest costs	33,833	31,450
Amortization of past service costs	5,120	5,120
Recognized actuarial losses	9,469	9,138
Net periodic other post-retirement benefits costs (Note 35)	65,613	62,677

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

LONG SERVICE AWARDS (LSA)

| a. |
| --- |
| The Company provides certain cash awards to its employees based on length of service
requirements. The benefits are either paid at the time the employees reach the anniversary
dates during employment, or at the time of termination. |
| The movements of the accrued LSA for the nine months period ended September 30, 2007 and
2008, are as follows: |

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

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

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LONG SERVICE AWARDS (LSA) (continued)

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

Discount rate	10.5 %
Rate of compensation increase	8 %

| b. |
| --- |
| Telkomsel provides certain cash awards to its employees based on the employees length of
service requirements. The benefits are either paid at the time the employees reach the
anniversary dates during employment, or at the time of termination. |
| The obligation with respect to these awards was determined based on the actuarial valuation
using the Projected Unit Credit method, and amounted to Rp.66,743 million and Rp.83,630
million as of September 30, 2007 and 2008, respectively (Note 44). The related benefits cost
charged to expense amounted to Rp.11,685 million and Rp.14,933 million for the nine months
period ended September 30, 2007 and 2008, respectively (Note 35). |

POST-RETIREMENT HEALTH CARE BENEFITS

| The Company provides a post-retirement health care plan to all of its employees hired before
November 1, 1995 who have worked for the Company for 20 years or more when they retire, and to
their eligible dependents. The requirement of working for over 20 or more years does not apply
to employees who retired prior to June 3, 1995. The employees hired by the Company starting
from November 1, 1995 no longer be entitled to this plan. The plan is managed by Yayasan
Kesehatan Pegawai Telkom (Yakes) (Note 44). |
| --- |
| The following table presents the change in the projected benefits obligation, change in plan
assets, funded status of the plan and net amount recognized in the Companys consolidated
balance sheets as of September 30, 2007 and 2008: |


Change in projected benefits obligation
Projected benefits obligation at beginning of year	6,985,343		8,925,612
Service costs	84,877		107,986
Interest costs	543,028		677,624
Actuarial losses	111,711		1,052,567
Expected post-retirement health care paid	(134,633	)	(166,496	)
Impact from assumption changes	130,132
Projected benefits obligation at end of period	7,720,458		10,597,293

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P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

POST-RETIREMENT HEALTH CARE BENEFITS (continued)


Change in plan assets
Fair value of plan assets at beginning of year	2,253,261		3,376,172
Expected return on plan assets	166,611		257,525
Employers contributions	780,000		800,000
Actuarial (losses) gains	69,265		(393,073	)
Expected post-retirement health care paid	(134,633	)	(166,496	)
Fair value of plan assets at end of period	3,134,504		3,874,128
Funded status	(4,585,954	)	(6,723,165	)
Unrecognized net actuarial losses	1,877,100		4,078,015
Accrued post-retirement health care benefits costs	(2,708,854	)	(2,645,150	)

| The actual return on plan assets was Rp.272,503 million and Rp.169,143 million for the
nine months period ended September 30, 2007 and 2008, respectively. |
| --- |
| The components of net periodic post-retirement health care benefits cost are as follows: |

Service costs	84,877		107,986
Interest costs	543,028		677,624
Expected return on plan assets	(166,611	)	(257,525	)
Recognized actuarial losses	81,832		148,142
Total net periodic post-retirement health care benefits costs (Note 35)	543,126		676,227

| As of September 30, 2007, plan assets included the Companys Series B shares with total fair
value of Rp.55,770 million. As of September 30, 2008, plan assets included the Companys Series
B shares with total fair value of Rp.59,606 million. |
| --- |
| The movements of the accrued post-retirement health care benefits costs for the nine months
period ended September 30, 2007 and 2008, are as follows: |

| Accrued post-retirement health care benefits costs at
beginning of year | 2,945,728 | | 2,768,923 | |
| --- | --- | --- | --- | --- |
| Net periodic post-retirement health care benefits costs
(Note 35) | 543,126 | | 676,227 | |
| Employers contributions | (780,000 | ) | (800,000 | ) |
| Accrued post-retirement health care benefits
costs at end of period | 2,708,854 | | 2,645,150 | |

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POST-RETIREMENT HEALTH CARE BENEFITS (continued)

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

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

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

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

RELATED PARTY TRANSACTIONS

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

| i. | The Company obtained two-step loans from the Government, the Companys
majority stockholder (Note 21). |
| --- | --- |
| | Interest expense for two-step loans amounted to Rp.230,664 million and Rp.97,853
million for the nine months period ended September 30, 2007 and 2008, respectively.
Interest expense for two-step loans represent 21.55% and 9.77% of the total interest
expense for each period. |
| ii. | The Company and its subsidiaries pay concession fees for telecommunications
services provided and radio frequency usage charges to the Ministry of Communications
and Information (formerly, Ministry of Tourism, Post and Telecommunications) of the
Republic of Indonesia. |

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RELATED PARTY TRANSACTIONS (continued)

a. Government (continued)

ii.	(continued)
	Concession fees amounted to Rp.417,078 million and Rp. 446,983 million for the nine
months period ended September 30, 2007 and 2008, respectively (Note 36), representing
1.6%, respectively, of the total operating expenses for each period. Radio frequency
usage charges amounted to Rp.792,494 million and Rp.1,718,590 million for the nine
months period ended September 30, 2007 and 2008, respectively (Note 36), representing
3.1% and 6.3%, respectively, of the total operating expenses for each period.
	Telkomsel paid an up-front fee for the 3G license amounting to Rp.436,000 million and
recognized as intangible asset (Note 14).
iii.	Starting 2005, the Company and its subsidiaries pay USO charges to the
Ministry of Communication and Information of the Republic of Indonesia pursuant to
MoCI Regulation No.15/Per/M.KOMINFO/9/2005 of September 30, 2005.
	USO charges amounted to Rp.335,635 million and Rp.333,470 million for the nine months
period ended September 30, 2007 and 2008, respectively (Note 36), representing 1.3% and
1.2%, respectively, of the total operating expenses for each period.

b. Commissioners and Directors remuneration

| i. | The Company and its subsidiaries provide honorarium and facilities to support
the operational duties of their Board of Commissioners. The total of such benefits
amounted to Rp.22,518 million and Rp.40,249 million for the nine months period ended
September 30, 2007 and 2008, respectively, representing 0.1% and 0.2% of total
operating expenses for each period. |
| --- | --- |
| ii. | The Company and its subsidiaries provide salaries and facilities to support
the operational duties of their Board of Directors. The total of such benefits
amounted to Rp.65,956 million and Rp.99,779 million for the nine months period ended
September 30, 2007 and 2008, respectively, representing 0.3% and 0.4% of total
operating expenses for each period. |

c. Indosat

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

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

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RELATED PARTY TRANSACTIONS (continued)

c.
The principal matters covered by the agreement are as follows:

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

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

The Company also has an agreement with Indosat for the interconnection of Indosats GSM mobile cellular telecommunications network with the Companys PSTN, enabling each partys customers to make domestic calls between Indosats GSM mobile network and Telkoms fixed line network and allowing Indosats mobile customers 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, SLJJ and international) and mobile network for the implementation of the cost-based tariff obligations under the MoCI Regulations No. 8/2006 (Note 48). These amendments took effect on January 1, 2007.

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RELATED PARTY TRANSACTIONS (continued)

| c. |
| --- |
| 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 interconnected
with PT Indosats international gateway exchanges to facilitate outgoing and incoming
international calls. |
| --- | --- |
| ii. | Telkomsels and Indosats GSM mobile cellular telecommunications networks are
interconnected to allow cross-network communications among their subscribers. |
| iii. | In exchange for these interconnections, Indosat is entitled to a certain
amount as compensation. |
| iv. | Interconnection equipment installed by one of the parties in another partys
premises remain the property of the party installing such equipment. Expenses incurred
in connection with the provision of equipment, installation and maintenance are borne
by Telkomsel. |

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

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

Other agreements between Telkomsel and Indosat are as follows:

| i. |
| --- |
| On October 10, 1996, Telkomsel, Lintasarta, Satelindo and Indosat (the Parties)
entered into an agreement on the construction and maintenance of the J-S Cable System.
The Parties have formed a management committee which consists of a chairman and one
representative from each of the Parties to direct the construction and operation of the
cable system. The construction of the cable system was completed in 1998. In accordance
with the agreement, Telkomsel shared 19.325% of the total construction costs. Operating
and maintenance costs are shared based on agreed formula. |
| Telkomsels share in operating and maintenance costs amounted to Rp.282 million and
Rp.353 million for the nine months period ended September 30, 2007 and 2008,
respectively. |

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RELATED PARTY TRANSACTIONS (continued)

c. Indosat (continued)

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

In 1994, the Company transferred to Satelindo the right to use a parcel of Company-owned land located in Jakarta which had been previously leased to Telekomindo. Based on the transfer agreement, Satelindo is given the right to use the land for 30 years and can apply for the right to build properties thereon. The ownership of the land is retained by the Company. Satelindo agreed to pay Rp.43,023 million to the Company for the 30 years right. Satelindo paid Rp.17,210 million in 1994 while the remaining balance Rp.25,813 million was not paid because the Utilization Right (Hak Pengelolaan Lahan or HPL) on the land could not be delivered as provided in the transfer agreement. In 2000, the Company and Satelindo agreed on an alternative solution resulting in the payment being treated as a lease expense up to 2006. In 2001, Satelindo paid an additional amount of Rp.59,860 million as lease expense up to 2024. As of September 30, 2007 and 2008, the prepaid portion is shown in the consolidated balance sheets as Advances from customers and suppliers.

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

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

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

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RELATED PARTY TRANSACTIONS (continued)

d.
Transactions with all BUMN are considered as related parties transactions:

| (i) | The Company provides telecommunication services to substantially all
Government agencies in Indonesia which transactions are treated as that of third
parties customers. |
| --- | --- |
| (ii) | The Company has entered into agreements with Government Agencies and
associated companies, namely CSM, Patrakom and PSN, for the utilization of the
Companys satellite transponders or frequency channels. Revenues earned from these
transactions amounted to Rp.82,508 million and Rp.78,974 million for the nine months
period ended September 30, 2007 and 2008, respectively, representing 0.2% of the total
operating revenues for each period. |
| (iii) | The Company provides leased lines to associated companies, namely CSM,
Patrakom and PSN. The leased lines can be used by the associated companies for
telephone, telegraph, data, telex, facsimile or other telecommunications services.
Revenues earned from these transactions amounted to Rp.46,682 million and Rp.48,940
million for the nine months period ended September 30, 2007 and 2008, respectively,
representing 0.1% of the total operating revenues for each period. |
| (iv) | The Company purchases property and equipment including construction and
installation services from a number of related parties. These related parties include,
among others, PT Industri Telekomunikasi Indonesia (INTI) and Koperasi Pegawai
Telkom (Kopegtel). Purchases made from these related parties amounted to Rp.89,047
million and Rp.499,079 million for the nine months period ended September 30, 2007 and
2008, respectively, representing 0.7%, and 4.2% of the total fixed assets purchased in
each period. |
| (v) | INTI is also a major contractor and supplier of equipment, including
construction and installation services of Telkomsel. Purchases from INTI for the nine
months period ended September 30, 2007 and 2008 amounted to Rp.83,544 million and
Rp.21,422 million, respectively, representing 0.7% and 0.2% of the total fixed assets
purchased in each period. |
| (vi) | Telkomsel has an agreement with PSN for the lease of 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 agreement was extended until March 13, 2011. The lease
charges amounted to Rp.109,692 million and Rp.99,466 million for the nine months
period ended September 30, 2007 and 2008, respectively, representing 0.4% of the total
operating expenses for each period. |
| (vii) | The Company and its subsidiaries insured their property, plant and equipment
against property losses, inventories and employees social security from Jasindo, PT
Asuransi Tenaga Kerja and Jiwasraya, state-owned insurance companies. Insurance
premiums amounted to Rp.210,199 million and Rp.250,391 million for
the nine months period ended September 30, 2007 and 2008, respectively, representing
0.8% and 0.9% the total operating expenses for each period. |

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RELATED PARTY TRANSACTIONS (continued)

d. Others (continued)

| (viii) | The Company and its subsidiaries maintain current accounts and time deposits in
several state-owned banks. In addition, some of these banks are appointed as
collecting agents for the Company. Total placements in the form of current accounts,
time deposits and mutual funds in state-owned banks amounted to Rp.3,026,901 million
and Rp.4,832,652 million as of September 30, 2007 and 2008, respectively, representing
3.9% and 5.6% of the total assets as of September 30, 2007 and 2008, respectively.
Interest income recognized for the nine months period ended September 30, 2007 and
2008 amounted to Rp.206,188 million and Rp.193,485 million, representing 55% and 39%,
respectively, of total interest income for each period. |
| --- | --- |
| (ix) | The Companys subsidiaries obtained loans from state-owned banks. Interest
expense on these loans for the nine months period ended September 30, 2007 and 2008
amounted to Rp.157,008 million and Rp.424,022 million, respectively, representing
14.7% and 42.3%, respectively, of the total interest expense for each period. |
| (x) | The Company leases buildings, leases vehicles, purchases materials and
construction services, and utilizes maintenance and cleaning services of Kopegtel and
PT Sandhy Putra Makmur (SPM), a subsidiary of Yayasan Sandikara Putra Telkom a
foundation managed by Dharma Wanita Telkom. Total charges from these transactions
amounted to Rp.306,207 million and Rp.299,588 million for the nine months period ended
September 30, 2007 and 2008, respectively, representing 1.2% and 1.1%, respectively,
of the total operating expenses for each period. |
| (xi) | The Company and its subsidiaries earned interconnection revenues (expenses)
from PSN, with a total of Rp.1,071 million and (Rp.1,717 million) for the nine months
period ended September 30, 2007 and 2008, respectively, representing 0.002% and
(0.004%), respectively, of the total operating revenues for each period. |
| (xii) | The Company has RSA with Kopegtel. Kopegtels share in revenues from these
arrangements amounted to Rp.16,058 million and Rp.8,410 million for nine months period
ended September 30, 2007 and 2008, respectively, representing 0.04% and 0.02% of the
total operating revenues for each period. |
| (xiii) | Telkomsel has operating lease agreements with Patrakom and CSM for the use of their
transmission link for 3 years, subject to extension. Lease charges amounted to
Rp.154,749 million and Rp.108,953 million for the nine months period ended September
30, 2007 and 2008, respectively, representing 0.6% and 0.4%, respectively, of the
total operating expenses for each period. |
| (xiv) | Koperasi Pegawai Telkomsel (Kisel) is a cooperative that was established
by 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.330,761 million and
Rp.416,148 million for the nine months period ended September 30, 2007 and 2008,
respectively. Telkomsel also has dealership agreements with Kisel for distribution of
SIM cards and pulse reload vouchers. Total SIM cards and pulse reload vouchers which
were sold to Kisel amounted to Rp.1,273,763 million and Rp.1,575,207 million for the
nine months period ended September 30, 2007 and 2008, respectively. |

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P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

RELATED PARTY TRANSACTIONS (continued)

d. Others (continued)

| (xv) | The Company has seconded a number of its employees to related parties to
assist them in operating their businesses. In addition, the Company provides to
certain of its related parties, the right to use its buildings free of charge. |
| --- | --- |
| (xvi) | Telkomsel has procurement agreements with Gratika, a subsidiary of Dapen,
for installation and maintenance of equipment. Total procurement for installations of
equipment amounted to Rp.123,494 million and Rp.33,481 million for the nine months
period ended September 30, 2007 and 2008, respectively, representing 1.02% and 0.28%,
respectively, of total acquisition of fixed assets in each period.; and for
maintenance of equipment amounted to Rp.29,021 million and Rp.27,329 million for the
nine months period ended September 30, 2007 and 2008, respectively, representing 0.11%
and 0.10%, respectively, of total operating expenses in each period. |

Presented below are balances of accounts with related parties:


		% to		% to
	Amount	total assets	Amount	total assets
a.	Cash and cash equivalents (Note 5)	2,748,165	3.58	4,495,784	5.23
b.	Temporary investments	177,879	0.23	270,650	0.31
c.	Trade receivables net (Note 6)	567,612	0.74	393,465	0.46
d.	Other receivables
	State-owned banks (interest)	11,154	0.02	28,863	0.03
	Patrakom	2,769	0.00	4,713	0.01
	Kopegtel	3,857	0.01	3,841	0.00
	Government Agencies	2,010	0.00	2,333	0.00
	Other	3,175	0.01	354	0.00
	Total	22,965	0.04	40,104	0.04
e.	Prepaid expenses (Note 8)	24,522	0.03	116,378	0.14
f.	Restricted time deposits (Note 9)	8,460	0.01	21,044	0.02
g.	Advances and other non-current
assets (Note 13)
	Kisel			1,088	0.00
	Perusahaan Umum Percetakan Uang Republik Indonesia (Peruri)	813	0.01	813	0.00
	Bank Mandiri	92,279	0.12	793	0.00
	BNI			721	0.00
	Total	93,092	0.13	3,415	0.00
h.	Escrow accounts (Note 15)			42,572	0.05

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P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

RELATED PARTY TRANSACTIONS (continued)


		% to total		% to total
	Amount	liabilities	Amount	liabilities
i.	Trade payables (Note 16)
	Government Agencies	1,294,944	3.53	1,221,004	2.74
	Kopegtel	69,832	0.19	72,148	0.16
	Yakes	2,126	0.01	43,110	0.10
	INTI			29,214	0.07
	Indosat	56,919	0.16	27,030	0.06
	SPM	11,707	0.03	7,902	0.02
	Gratika	6,714	0.02	5,538	0.01
	PSN	1,473	0.01	4,634	0.01
	Others	177,374	0.48	105,530	0.24
	Total	1,621,089	4.43	1,516,110	3.41
j.	Accrued expenses (Note 17)
	Employees	965,078	2.63	769,754	1.72
	Government Agencies and
state-owned banks	83,893	0.23	66,880	0.15
	PT Jaminan Sosial Tenaga Kerja (Persero) (Jamsostek)			20,310	0.05
	Jasindo			93	0.00
	Total	1,048,971	2.86	857,037	1.92
k.	Short-term bank loans (Note 19)
	BNI	500,000	1,36
	Bank Mandiri	200,000	0.54
	Total	700,000	1.90
l.	Two-step loans (Note 21)	4,179,001	11.39	3,905,478	8.75
m.	Accrued LSA (Note 42)	66,743	0.18	83,630	0.19
n.	Accrued post-retirement health care benefits (Note 43)	2,708,854	7.38	2,645,150	5.93
o.	Long-term bank loans (Note 23)
	BNI	680,000	1.85	3,460,000	7.75
	BRI	400,000	1.09	3,448,300	7.73
	Bank Mandiri	1,270,000	3.46	1,210,000	2.71
	Total	2,350,000	6.40	8,118,300	18.19

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PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

SEGMENT INFORMATION

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


Fixed		Fixed						Total before				Total
wireline		wireless		Cellular		Others		elimination		Elimination		consolidated
Segment results
External operating revenues	14,999,508		2,542,398		25,711,451		393,922		43,647,279				43,647,279
Inter-segment operating revenues	514,950		174,784		735,713		91,908		1,517,355		(1,517,355	)
Total segment revenues	15,514,458		2,717,182		26,447,164		485,830		45,164,634		(1,517,355	)	43,647,279
External operating expenses	(11,554,793	)	(1,013,898	)	(10,747,249	)	(434,770	)	(23,750,710	)			(23,750,710	)
Inter-segment operating expenses	166,116		(371,296	)	(1,455,028	)	(17,768	)	(1,677,976	)	1,677,976
Segment expenses	(11,388,677	)	(1,385,194	)	(12,202,277	)	(452,538	)	(25,428,686	)	1,677,976		(23,750,710	)
Segment results	4,125,781		1,331,988		14,244,887		33,292		19,735,948		160,621		19,896,569
Interest expense													(1,070,206	)
Interest income													378,215
Loss on foreign exchange net													(113,642	)
Other income net													61,195
Income tax expense													(5,921,719	)
Equity in net income
of associated companies													6,919
Income before minority interest													13,237,331
Unallocated minority interest													(3,418,276	)
Net income													9,819,055
Other information
Segment assets	29,677,581		7,409,661		44,239,242		579,944		81,906,428		(5,223,394	)	76,683,034
Investments in associates	87,180				14,744				101,924				101,924
Total consolidated assets													76,784,958
Total consolidated liabilities	(19,104,746	)	(1,564,828	)	(20,983,806	)	(274,407	)	(41,927,787	)	5,223,394		(36,704,393	)
Minority interest	(85,137	)					(8,078	)	(93,215	)	(8,168,865	)	(8,262,080	)
Capital expenditures	(1,084,034	)	(170,601	)	(9,691,381	)	(64,747	)	(11,010,763	)			(11,010,763	)
Depreciation and amortization	(2,636,178	)	(146,936	)	(4,222,177	)	(37,757	)	(7,043,048	)	7,126		(7,035,922	)
Amortization of goodwill and
other intangible assets	(751,968	)			(35,036	)			(787,004	)			(787,004	)
Other non-cash expenses	(307,552	)			(67,931	)	(2,554	)	(378,037	)			(378,037	)

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P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

SEGMENT INFORMATION (continued)


Fixed		Fixed						Total before				Total
wireline		wireless		Cellular		Others		elimination		Elimination		consolidated
Segment results
External operating revenues	14,688,906		2,499,110		27,104,103		308,095		44,600,214				44,600,214
Inter-segment operating revenues	1,268,727		(43,305	)	249,870		226,338		1,701,630		(1,701,630	)
Total segment revenues	15,957,633		2,455,805		27,353,973		534,433		46,301,844		(1,701,630	)	44,600,214
External operating expenses	(12,404,542	)	(1,417,757	)	(13,135,480	)	(463,767	)	(27,421,546	)			(27,421,546	)
Inter-segment operating expenses	(289,035	)			(1,532,158	)	(18,112	)	(1,839,305	)	1,839,305
Segment expenses	(12,693,577	)	(1,417,757	)	(14,667,638	)	(481,879	)	(29,260,851	)	1,839,305		(27,421,546	)
Segment results	3,264,056		1,038,048		12,686,335		52,554		17,040,993		137,675		17,178,668
Interest expense													(1,001,438	)
Interest income													495,233
Loss on foreign exchange net													(63,806	)
Other income net													326,769
Income tax expense													(4,821,920	)
Equity in net income
of associated companies													2,476
Income before minority interest													12,115,982
Unallocated minority interest													(3,196,094	)
Net income													8,919,888
Other information
Segment assets	31,048,976		7,604,161		51,345,704		682,193		90,681,034		(4,799,187	)	85,881,847
Investments in associates	121,200				20,359				141,559				141,559
Total consolidated assets													86,023,406
Total consolidated liabilities	(20,751,310	)	(1,644,512	)	(26,729,172	)	(303,553	)	(49,428,547	)	4,799,186		(44,629,361	)
Minority interest	(69,663	)					(8,182	)	(77,845	)	(8,722,937	)	(8,800,782	)
Capital expenditures	(2,302,901	)	(767,838	)	(10,686,096	)	(44,701	)	(13,801,536	)			(13,801,536	)
Depreciation and amortization	(2,714,376	)	(289,827	)	(4,974,782	)	(40,614	)	(8,019,599	)	15,995		(8,003,604	)
Amortization of goodwill and
other intangible assets	(778,028	)			(35,036	)			(813,064	)			(813,064	)
Other non-cash expenses	(404,828	)			(40,150	)	(899	)	(445,877	)			(445,877	)

JOINT OPERATION SCHEMES (KERJA SAMA OPERASI OR KSO)

| In 1995, the Company and five investors (Pramindo, TII, MGTI, Dayamitra and BSI) entered into
agreements for KSO and KSO construction agreements for the provision of telecommunication
facilities and services for the Sixth Five-Year Development Plan ( Repelita VI ) of the
Republic of Indonesia. The five investors undertook the development and operation of the basic
fixed telecommunications facilities and services in five of the Companys seven Divre. |
| --- |
| Following the Indonesian economics crisis that began in mid-1997, certain KSO partners
experienced difficulties in fulfilling their commitment under the KSO agreements. As remedial
measures instituted by both the Company and the KSO partners did not fully remedy this
situation, the Company acquired and currently controls the related KSO through acquisition of
its KSO partners or the businesses. Accordingly, the revenue-sharing percentage in those KSO is
no longer relevant as the financial statements of the acquired KSO partners and the related KSO
are consolidated into the Companys consolidated financial statements since the date of
acquisition (Note 24). |

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P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

REVENUE-SHARING ARRANGEMENTS (RSA)

| The Company has entered into agreements with several investors under RSA to develop fixed
lines, public card-phone booths (including their maintenance), data and internet network and
related supporting telecommunications facilities. |
| --- |
| As of September 30, 2008, the Company has 44 RSA with 38 investors. The RSA are located mainly
in Pekanbaru, Jakarta, East Java, Kalimantan, Makassar, Pare-pare, Manado, Denpasar, Mataram
and Kupang, with concession periods ranging from 48 to 176 months. |
| Under the RSA, the investors finance the costs incurred in developing the telecommunications
facilities. Upon completion of the construction, the Company manages and operates the
facilities and bears the cost of repairs and maintenance during the revenue-sharing periods.
The investors legally retain the rights to the property, plant and equipment constructed by
them during the RSA periods. At the end of each the RSA period, the investors transfer the
ownership of the facilities to the Company at a nominal price. |
| Generally, the revenues earned from the customers in the form of line installation charges are
allocated in full to the investors. The revenues from outgoing telephone pulses and monthly
subscription charges are shared between the investors and the Company based on certain agreed
ratio. |
| The net book value of the property, plant and equipment under RSA which have been transferred
to property, plant and equipment of the Company amounted to Rp.91,392 million and Rp.52,706
million as of September 30, 2007 and 2008, respectively (Note 12). |
| The investors share of revenues amounted to Rp.321,306 million and Rp.249,210 million for the
nine months period ended September 30, 2007 and 2008, respectively. |

TELECOMMUNICATIONS SERVICES TARIFFS

Under Law No. 36/1999 and Government Regulation No. 52/2000, tariffs for the use of telecommunications network and telecommunication services are determined by providers based on the tariffs category, structure and with respect to fixed line telecommunications services, at price cap formula set by the Government.

| a. |
| --- |
| Fixed line telephone tariffs are imposed for network access and usage. Access charges
consist of a one-time installation charge and a monthly subscription charge. Usage charges
are measured in pulses or minutes and classified as either local or SLJJ. The tariffs
depend on call distance, call duration, time of call, day of the week and holidays. |

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TELECOMMUNICATIONS SERVICES TARIFFS (continued)

| a. |
| --- |
| Tariffs for fixed line telephone are regulated under the MoCI Decree No.
09/Per/M.KOMINFO/02/2006 concerning Procedure for Initial Tariff Establishment and Tariff
Change for Basic Telephone Service Through Fixed Line Network dated February
8, 2006, replacing the MoC Decree No. KM. 12 dated January 29, 2002 concerning the addendum
of the decree of MTPT No. 79/1995, concerning the Method for Basic Tariff Adjustment on
Domestic Fixed Line Telecommunication Services. Based on the Decree, the Company
implemented new tariffs for SLJJ charges of PSTN to PSTN and PSTN to cellular which
decreased by an average range from 0.4% to 46.2% from the prevailing tariffs for SLJJ
charges, effective on April 8, 2008. |
| The Government has issued new adjustment tariff formula which is stipulated in the MoCI
Decree No. 15/Per/M.KOMINFO/4/2008 dated April 30, 2008 concerning Procedure for Tariff
Calculation for Basic Telephone Service which connected through fixed line network. Under
the Decree, tariff structure for basic telephone service which connected through fixed line
network consists of the following: |

	Connection fee
	Monthly charges
	Usage charges
	Additional facilities fee

Based on the Decree, the Company adjusted the tariffs effective August 1, 2008 as follows:

| | Local charges increased by 8.9% and decreased by 2.5%, depending on customers
segment |
| --- | --- |
| | SLJJ charges increased by an average of 13.7% and decreased by an average of 16.6%
to 36.9%, depending on customers segment |
| | SMS charges decreased by an average of 42.8% to 49.7%, depending on customers
segment |

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

| (i). |
| --- |
| 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

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TELECOMMUNICATIONS SERVICES TARIFFS (continued)

b. Mobile cellular telephone tariffs (continued)

(ii). Usage tariffs

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

| Based on Decree No. KM. 79/1998 of the MoC, the maximum tariff for prepaid customers
may not exceed 140% of the peak time tariffs for post-paid subscribers. |
| --- |
| Based on Announcement No. PM.2/2004 of the MoC dated March 30, 2004, Telkomsel adjusted
its tariffs by eliminating the tariff subsidy from long-distance calls, resulting to a
9% tariff increase. |
| Under Decree No. 12/Per/M.KOMINFO/02/2006 dated February 28, 2006 of the MoCI the
cellular tariffs consist of the following: |

	Connection fee
	Monthly charges
	Usage charges
	Additional facilities fee

| The tariffs are determined based on certain formula with a floor price. For usage
charges, the floor price should be the originating fee plus termination fee (total
interconnection fee) while for connection fee and monthly charges, the floor price
depends on the cost structure of each cellular provider. |
| --- |
| The implementation of the new tariff for a dominant operator has to be approved by the
Government. A dominant operator is an operator that has operating revenues equal to or
more than 25% of total industry revenue for a certain segment. |
| On April 7, 2008, the MoCI issued Decree No. 09/PER/M.KOMINFO/04/2008 Mechanism to
Determine Tariff of Telecommunication Services which Connected through Mobile Cellular
Network which provides guidelines to determine cellular tariffs with a formula
consisting of network element cost and retail services activity cost. This Decree
replaced the previous Decree of No. 12/PER/M.KOMINFO/02/2006. |
| Under Decree No. 09/PER/M.KOMINFO/04/2008 dated April 7, 2008 of the MoCI the cellular
tariffs consist of the following: |

	Basic services tariff
	Roaming tariff
	Multimedia tariff,

with the following structure:

	Connection fee
	Monthly charges
	Usage charges
	Additional facilities fee.

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TELECOMMUNICATIONS SERVICES TARIFFS (continued)

b. Mobile cellular telephone tariffs (continued)

(iii).
The tariffs are determined based on certain formula consisting of:

	Network element cost;
	Retail service activity cost plus margin.

The network element cost is determined using Long Run Incremental Cost Bottom up Method. The operators are allowed to apply de-average basic telephone service usage cost and bundling tariffs, maximum equal to tariff determined using the above formula.

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

| (i). |
| --- |
| The Governments National Fundamental Technical Plan set forth in Decree No. KM.4/2001,
as amended by Decree No. KM.28/2004, sets out the technical requirements, routing plans
and numbering plans for interconnection of the networks of various telecommunications
operators among themselves and with the Companys fixed line network. Under the
National Fundamental Technical Plan, all operators are permitted to interconnect with
the Companys fixed line network for access thereto and to other networks, such as
international gateways and the networks of other cellular operators. In addition,
cellular operators may interconnect directly with other networks without connecting to
the Companys fixed line network. Currently, the fees for interconnection are set forth
in Decree No. KU.506/1997, Decree No. KM.46/1998, Decree No. KM.37/1999 and Decree No.
KM.30/2000. |
| Fixed line Interconnection with Indosat. Currently, the fixed line interconnection
between the Company and Indosat is generally based on their agreement signed in 2005.
Pursuant to the agreement between the Company and Indosat, for interconnection of local
and SLJJ calls, the operator of the network on which the calls terminate receives an
agreed amount per minute. |

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P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

TELECOMMUNICATIONS SERVICES TARIFFS (continued)

c. Interconnection tariffs (continued)

(i).	Interconnection with fixed line network (continued)
	Other Fixed Wireline Interconnection. Since September 1, 1998, the Company has been
receiving a share of the tariffs from Batam Bintan Telekomunikasi (BBT), which is a
local operator with a special coverage area on Batam Island, for each successful call
that transits or terminates on the Companys fixed line network. Under the
interconnection agreement, for local interconnection calls, revenues are shared on a
sender keeps all basis. For local calls originating on BBTs network terminating on a
cellular network and vice versa which transit through the Companys fixed line network,
the Company receives an agreed percentage of the prevailing tariff for local calls. For
interconnection of SLJJ calls, the operator of the network on which the calls terminate
or transit receives an agreed percentage of the prevailing long-distance tariff. In
addition, BBT is to receive a certain fixed amount for each minute of incoming and
outgoing international calls, from and to BBT that transit through the Companys fixed
line network and use the Companys IDD service and 50% of the prevailing
interconnection tariff for incoming and outgoing international calls that transit
through the Companys fixed line network and use Indosats IDD service.
	Other Fixed Wireless Interconnection. Fixed wireless networks may interconnect with
the Companys fixed line network at the Companys gateway. At present, other than the
Company and Indosat, PT Bakrie Telecom (BT) also operates a fixed wireless network in
Indonesia. The fixed wireless interconnection between the Company and BT is currently
based on the most recent interconnection agreement signed in 2005. Pursuant to the
agreement, for interconnection of local calls, the operator of the network on which the
calls terminate receives an agreed amount per minute. For local calls originating on
BTs network terminating on a cellular network and vice versa which transit through
the Companys fixed line network, the Company receives
an agreed percentage of the prevailing tariff for local calls. For SLJJ calls that
originate on the Companys fixed line network and terminate on BTs network, BT
receives an agreed amount per minute. In the reverse situation and for transit
long-distance calls through the Companys fixed line network, the Company receives an
agreed percentage of the prevailing long-distance tariff. In addition, BT is to receive
a certain fixed amount for each minute of incoming and outgoing international calls to
and from BT that transit through the Companys fixed line network and use the Companys
IDD service and 25% of prevailing interconnection tariff of incoming and outgoing
international calls that transit through the Companys fixed line network and use
Indosats IDD service.
(ii).	Cellular interconnection
	In respect of local interconnection calls, including transit calls, between a cellular
network and the Companys fixed line network, the Company receives 50% of the
prevailing fixed-line usage tariff for local pulse. For local calls from the Companys
fixed line network to a cellular network, the Company charges its subscribers the
applicable local call tariff plus an airtime charge, and pays the cellular operator the
airtime charge. For local calls between cellular telecommunications networks, the
originating cellular operator pays the terminating cellular operator the airtime
charges.

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TELECOMMUNICATIONS SERVICES TARIFFS (continued)

c. Interconnection tariffs (continued)

(ii).	Cellular interconnection (continued)
	The current Interconnection Decree, effective April 1, 1998, assumes that it is
possible for long-distance calls to be carried by more than one network. Pursuant to
the Interconnection Decree, for long-distance calls which originate on the Companys
fixed line network, the Company is entitled to retain a portion of the prevailing
long-distance tariff, which ranges from 40% of the tariff in cases where the entire
long-distance portion is carried by a cellular operator up to 85% of the tariff in
cases where the entire long-distance portion is carried by the Companys fixed line
network. For long-distance calls that originate from a cellular subscriber, the Company
and its subsidiaries are entitled to retain a portion of the prevailing long-distance
tariff, which ranges from 25% of the tariff in cases where the call originates from a
cellular subscriber, transits the Companys fixed line network and terminates on
another cellular subscriber with the entire long-distance portion carried by a cellular
operator, up to 85% of the tariff in cases where the entire long-distance portion is
carried by the Companys fixed line network and terminates on the Companys fixed line
network.
(iii).	International interconnection
	Interconnection on the Companys domestic fixed line network for international calls
consists of access charges and usage charges. The following table sets forth the
current international interconnection tariff, effective as of December 1, 1998, for IDD
calls which are routed through Indosats international gateways and which originate,
transit or terminate on the Companys domestic fixed line network and Telkomsels
cellular network, pursuant to Ministerial Decree No. KM.37/1999:

Description	Tariff
Access charge	Rp850 / successful call
Usage charge	Rp550 / successful paid minute

| | In addition, since June 2004, the Company has provided IDD services. Currently, the
Companys IDD service can be accessed by subscribers of all telecommunication operators
in Indonesia. Interconnection and access charges for originating calls using the
Companys IDD service or terminating incoming international calls routed through the
Companys international voice telecommunications gateway are negotiated with each
respective domestic operator. |
| --- | --- |
| (iv). | Satellite phone interconnection |
| | Since the fourth quarter of 2001, the Company has been receiving a share of revenues
arising from interconnection transactions with PSN, a national satellite operator.
Under the agreement, in respect of the interconnection calls between the Company and
PSN, the Company receives Rp.800 per minute for network charges and an additional
Rp.300 per minute origination fee if the call originates from the Companys fixed line
network. |

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TELECOMMUNICATIONS SERVICES TARIFFS (continued)

| c. |
| --- |
| Based on Indonesian Telecommunications Regulatory Body (Badan Regulasi Telekomunikasi
Indonesia or BRTI) Letters No. 273/BRTI/XII/2006 dated December 6, 2006 about Reference
Interconnection Offer (RIO) of the Company and No. 297/BRTI/XII/2006 dated December 21,
2006 about Implementation of Cost Based Interconnection, the Director General of Posts and
Telecommunications, as Head of BRTI, affirmed the implementation of RIO of the Company as
approved in Director General of Posts and Telecommunications Decree No. 279/DIRJEN/2006
dated August 4, 2006. |
| The implementation of the Companys interconnection tariff starting January 1, 2007 based
on Director General of Post and Telecommunications Decree No. 279/DIRJEN/2006 dated August
4, 2006. Based on Director General of Post and Telecommunications Decree No. 205/2008 dated
April 11, 2008 about Agreement to RIO of the telecommunication network operator with
operating revenue of 25% or more from the total revenue of all telecommunication operators
in the service segmentation, shall be as follows: |

(a) Fixed line

1.	Local termination from local fixed line service tariff is Rp.73/minute.
2.	Local termination from domestic fixed line (local call) service tariff is
Rp.73/minute.
3.	Local termination from domestic fixed line (long distance call)
service tariff is Rp.203/minute.
4.	Long distance termination from domestic fixed line service tariff is Rp.560/minute.
5.	Local termination from cellular mobile network service tariff is Rp.203/minute.
6.	Local termination from satellite mobile network service tariff is Rp.204/minute.
7.	Long distance termination from cellular mobile network service tariff is
Rp.626/minute.
8.	Long distance termination from satellite mobile network service tariff is
Rp.613/minute.
9.	Domestic termination from international network service tariff is Rp.612/minute.
10.	International origination from domestic fixed line to fixed
international network service provider tariff is Rp.612/minute.
11.	Local origination service for long distance call from domestic fixed
line to SLJJ service provider tariff is Rp.203/minute
12.	Local transit service tariff is Rp.69/minute.
13.	Long distance transit service tariff is Rp.295/minute.
14.	International transit service tariff is Rp.316/minute.

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P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

TELECOMMUNICATIONS SERVICES TARIFFS (continued)

c. Interconnection tariffs (continued)

(b) Cellular

1.	Local termination from fixed line service tariff is Rp.261/minute.
2.	Long distance termination from fixed line service tariff is Rp.380/minute.
3.	Local termination from cellular mobile network service tariff is Rp.261/minute.
4.	Long distance termination from cellular mobile network service tariff is
Rp.493/minute.
5.	Local termination from satellite network service tariff is Rp.261/minute.
6.	Long distance termination from satellite network service tariff is Rp.501/minute.
7.	Local termination from SLJJ service provider tariff is Rp.261/minute.
8.	Long distance termination from SLJJ service provider tariff is Rp.380/minute.
9.	International termination from IDD service provider tariff is Rp.498/minute.
10.	Local origination to SLJJ service provider tariff is Rp.261/minute.
11.	Long distance origination to SLJJ service provider tariff is Rp.380/minute.
12.	International origination to IDD service provider tariff is Rp.498/minute.

d.	VoIP interconnection tariff
	Previously, the MoC Decree No. KM.23/2002 provided that access charges and network lease
charges for the provision of VoIP services were to be agreed between network operators and
VoIP operators. On March 11, 2004, the MoC issued Decree No. 31/2004, which stated that
interconnection charges for VoIP are to be fixed by the MoC. Currently, the MoCI has not
yet determined what the new VoIP interconnection charges will be. Until such time as the
new charges are fixed, the Company will continue to receive connection fees for calls that
originate or terminate on the Companys fixed line network at agreed fixed amount per
minute.
e.	Network lease tariff
	The Government regulated the form, type, and tariff structure and tariff formula for
services of network lease through MoCI Decree No. 03/Per/M.KOMINFO/1/2007 dated January 26,
2007. Pursuant to the MoCI Decree, the Government released DGPT Decision Letter No.
115/Dirjen/2008 dated March 24, 2008 which stated the agreement on Network Lease Service
Type Document, Network Lease Service Tariff, Available Capacity of Network Lease Service,
Quality of Network Lease Service, and Procurement Procedure of Network Lease Service in
2008 is in conformity with the Companys proposal. The minimum tariff for activation fee is
Rp.2,400,000. The tariff for monthly usage for local (under 25 km) vary starting from
Rp.1,750,000 up to Rp.88,650,000, depending on the speed and the tariff for monthly usage
for long distance (over 25 km) starting from Rp.5,600,000 up to Rp.3,893,100,000 depending
on the speed.

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TELECOMMUNICATIONS SERVICES TARIFFS (continued)

| f. |
| --- |
| The MoC issued Decree No. KM. 46/2002 dated August 7, 2002 regarding the operation of phone
kiosks as replaced by the MoCI Regulation No. PM.05/Per/M.KOMINFO/I/2006 dated January 30,
2006, which provided the Company the entitlement to retain a maximum of 70% of the phone
kiosk basic tariffs for domestic calls and up to 92% of phone kiosk basic tariffs for
international calls. It also provides that the airtime from the cellular operators shall
generate at a minimum 10% of the kiosk phones revenues. |

g.	Tariff for other services
	The tariffs for satellite rental and other telephony and multimedia services are determined
by the service provider by taking into account the expenditures and market price. The
Government only determines the tariff formula for basic telephony services. There is no
stipulation for the tariff of other services.
h.	USO
	The MoCI issued Regulation No. 15/Per/M.KOMINFO/9/2005 dated September 30, 2005, which sets
forth the basic policies underlying the USO program and requires telecommunications
operators in Indonesia to contribute 0.75% of their gross revenues (with due consideration
for bad debts and interconnection charges) for USO development.
	Based on MoCI Decree No. 11/Per/M.KOMINFO/04/2007 dated April 13, 2007 which has amended by
MoCI Decree No. 38/Per/M.KOMINFO/9/2007 dated September 20, 2007, it stipulate that, among
others, in providing telecommunication access and services in rural areas (USO Program),
the provider is determined through a selection process by Balai Telekomunikasi dan
Informatika Pedesaan which was established based on MoCI Decree No.
35/Per/M.KOMINFO/11/2006 dated November 30, 2006.

COMMITMENTS

| a. |
| --- |
| As of September 30, 2008, capital expenditures committed under the contractual
arrangements, principally relating to procurement and installation of switching equipment,
transmission equipment and cable network, are as follows: |

	Amounts in — foreign currencies	Equivalent
Currencies	(in millions)	in Rupiah
Rupiah		5,428,320
U.S. Dollars	575	5,393,488
Euro	23	315,758
Total		11,137,566

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COMMITMENTS (continued)

a.
The above balance includes the following significant agreements:

(i) Company

					Outstanding
					purchase
					commitment as of
Contracting	Date of	Significant provisions of			September 30,
parties	agreement	the agreement		Total contract value	2008
Company and Huawei		Procurement and
installation
agreements for NSS,
BSS and PDN FWA
CDMA System
Expansion Project
in:
	January 6,
2006	a.	Divre I
(Sumatra) and IV
(Central Java and
Daerah Istimewa
Yogyakarta), for a
period of 3 years
(2006-2008) with
option to extend
for another 2 years
(2009-2010)	US$27.6 million and
Rp.109,511 million
(for the 3 years
coverage) and
US$12.3 million and
Rp.39,972 million
(for the 2 years
extension)	US$9.3 million and
Rp.7,269 million
			Service Level
Agreement (SLA),
whereby Huawei will
provide service and
maintenance support
for 3 years
(2006-2008) in
relation to the
construction above	Rp.10,450 million
	December 8,
2006	b.	Divre II
(Jakarta)	US$25.3 million and
Rp.131,045 million	US$13.0 million and
Rp.64,307 million
			SLA whereby Huawei
will provide
service and
maintenance support
for 3 years
(2006-2008) in
relation to the
above agreement	Rp.11,509 million
	December 8,
2006	c.	Divre III (West
Java and Banten)	US$9.9 million and
Rp.55,262 million	US$3.8 million and
Rp.15,381 million
			SLA whereby Huawei
will
provide service and
maintenance support
for 3 years
(2006-2008) in
relation to the
above agreement	Rp.4,217 million

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COMMITMENTS (continued)

a. Capital expenditures (continued)

(i) Company (continued)

					Outstanding
					purchase
					commitment as of
Contracting	Date of	Significant provisions of			September 30,
parties	agreement	the agreement		Total contract value	2008
Company and Samsung
Consortium		Procurement and
installation
agreements for NSS,
BSS and PDN FWA
CDMA System
Expansion Project
in:
	October 13,
2006	a.	Divre V (East Java)	US$59.9 million and
Rp.94,759 million	US$31.7 million and
Rp.84,033 million
			Samsung Consortium
will provide
service and
maintenance
support, pursuant
to a SLA for
period 3 years
(2006-2008) in
accordance with
above agreement	Rp.29,998 million
	July 10,
2007	b.	Divre VII (Bali-Nusa Tenggara)	US$11.9 million and
Rp.34,352 million	US$10.9 million and
Rp.37,990 million
			Samsung Consortium
will provide
service and
maintenance
support, pursuant
to a SLA for
period 3 years
(2007-2009) in
accordance with
above agreement	Rp.7,772 million
Company and ZTE
Consortium	November 28,
2006	Procurement and
Installation
agreement for
Expansion of NSS,
BSS and PDN System
in:
		a.	Divre VI (Kalimantan)	US$22.5 million and
Rp.57,168 million	US$18.2 million and
Rp.61,911 million
			SLA whereby ZTE
will provide
service and
maintenance support
for 3 years
(2006-2008) in
relation to the
above agreement	Rp.8,925 million
	July 10,
2007	b.	Divre VII
(Sulawesi, Maluku
and Papua)	US$19.6 million and
Rp.28,030 million	US$15.3 million and
Rp.36,555 million
			SLA whereby ZTE
will provide
service and
maintenance support
for 3 years
(2007-2009) in
relation to above
agreement	Rp.12,495 million

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COMMITMENTS (continued)

a. Capital expenditures (continued)

(i) Company (continued)

					Outstanding
					purchase
					commitment as of
Contracting	Date of	Significant provisions of			September 30,
parties	agreement	the agreement		Total contract value	2008
Company and:		Procurement and
installation
agreement for
Optical Access
Network (OAN) for
the following
projects:
a. Huawei
Consortium
(Huawei)	a. November 30,
2006	a.	Project Batch
III in Divre IV
(Central Java and
Daerah Istimewa
Yogyakarta)	US$3.2 million and
Rp.59,249 million	US$0.02 million and
Rp.534 million
b. Alcatel-Inti
Consortium	b. December 18,
2006	b.	Project Batch IV in Divre VI (Kalimantan)	US$3.9 million and
Rp.64,856 million	US$0.28 million and
Rp.679 million
Company and
Opnet-Olexindo
Consortium	December 29,
2006	Procurement and
installation
agreements
Opnet-Olexindo for
OAN Project Batch I
in Divre I
(Sumatra) and III
(West Java and
Banten)		US$3 million and
Rp.59,310 million	US$0.08 million and
Rp.1,004 million
Company and PT
Infonet Telekomindo	July 13,
2007	Procurement and
installation
agreement for Fiber
Optic Communication
System Metro
Junction Regional
Expansion Batch 2		Rp.68,629 million	Rp.5,570 million
Company and Huawei	September 28,
2007	a.	Procurement and
installation
agreement for
Speedy Access Batch
2	US$23.7 million and
Rp.40,807 million	US$13.35 million
and Rp.25,616
million
	September 28,
2007	b.	Procurement and
installation
agreement for
Speedy Access Batch
3	US$17.4 million and
Rp.58,337 million	US$7.46 million and
Rp.27,996 million
Company and PT
Abhitama Citra
Abadi	November 9,
2007	Procurement and
installation
agreement for Metro
Ethernet Batch 1		Rp.129,588 million	Rp.52,860 million
Company and
PT Lintas Teknologi
Indonesia	November 16,
2007	Procurement and
installation
agreements for OAN
Project Batch II in
Divre II		Rp.74,753 million	Rp.45,090 miilion
Company and NEC
Indonesia	November 20,
2007	Procurement and
installation
agreement for Fiber
Optic Communication
System Metro
Junction Regional
Expansion Batch 3
Kalimantan		Rp.52,738 million	Rp.19,444 million

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COMMITMENTS (continued)

a. Capital expenditures (continued)

(i) Company (continued)

					Outstanding
					purchase
					commitment as of
Contracting	Date of	Significant provisions of			September 30,
parties	agreement	the agreement		Total contract value	2008
Company and PT
Datacomm Diangraha	November 28,
2007	a.	Procurement and
installation
agreement for Metro
Ethernet Batch 2	Rp.134,563 million	Rp.10,382 million
	March 31,
2008	b.	Procurement and
installation
agreement for Metro
Ethernet Batch 4	Rp.99,838 million	Rp.6,710 million
Company and ZTE
Indonesia (ZTE)	December 18,
2007	Procurement and
installation
agreement for
Speedy Divre VII		Rp.95,090 million	Rp.74,931 million
Company and ZTE
Consortium	February 29,
2008	Procurement and
installation
agreement for
Speedy Access Batch
1		US$1.8 million and
Rp.237,255 million	US$1.1 million and
Rp.204,683 million
Company and NEC
Corporation	March 3,
2008	Procurement and
installation
agreement for Batam
Singapore Cable
System (BSCS)
Project		US$13.1 million	US$13.1 million
Company and Brimbun
Raya Indah	June 10,
2008	Procurement and
installation
agreement for
Outside Plan Fiber
Optic Batch 12
Jakarta and West
Java		Rp.74,673 million	Rp.71,039 million
Company and ZTE	June 20,
2008	Procurement
agreement for Java
Backbone Ring
Capacity Expansion		Rp.78,760 million	Rp.69,693 million

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COMMITMENTS (continued)

a. Capital expenditures (continued)

| (ii) |
| --- |
| The Telkomsels agreements with Motorola, Inc. and PT Motorola Indonesia, Ericsson AB
and Ericsson Indonesia, Nokia Corporation and PT Nokia Network (Nokia Network), and
Siemens AG since August 2004, relate to the maintenance and procurement of equipment
and related services, involving: |

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

| The agreements contain list of charges to be used in determining the fees payable by
Telkomsel for all equipment and related services to be procured during the rollout
period upon the issue of Purchase Orders (PO). |
| --- |
| The agreements are valid and effective as of the execution date by the respective
parties for a period of three years, provided that the suppliers are able to meet the
requirements set out in each PO. In the event that the suppliers fail to meet those
requirements, Telkomsel may terminate the agreements at its sole discretion with prior
written notice. |
| In accordance with the agreements, the parties also agreed that the charges specified
in the price list would apply to equipment and services (ESA and TSA) and services
(SITAC and CME) acquired from the suppliers between May 26, 2004 and the effective
date, except for those acquired from Siemens under TSA relating to equipment and
maintenance of Telkomsels Switching Sub System (SSS) and BSS that were acquired
between July 1, 2004 and the effective date. Prices are subject to quarterly reviews. |
| In August 2007, due to the expiration of the above agreements, based on letters from
Ericsson AB and Ericsson Indonesia and Nokia Siemens Networks (which currently
represents Nokia Corporation, Nokia Network and Siemens AG), those companies agreed
to: |

| | extend the above agreements until new agreements were made between Telkomsel
and these other companies, and |
| --- | --- |
| | prior to the effective date of new agreements, retroactively apply prices
under the new agreements (retroactive price adjustment) to PO for the procurement
of BSS equipment and services issued by Telkomsel after July 1, 2007 using the
previous price list (Note 11d.iii). |

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COMMITMENTS (continued)

a. Capital expenditures (continued)

| (ii) |
| --- |
| Subsequently, on April 17, 2008, Telkomsel, Ericsson Indonesia, Ericsson AB, PT Nokia
Siemens Networks, Nokia Siemens Network Oy and Nokia Siemens Network Gmbh & Co. KG
signed Combined 2G and 3G CS Core Network Rollout Agreements. The Agreements are valid
until the later of: |

| | three years after the effective date (April 17, 2008, except for certain POs
issued in August 2007 which commenced on August 15, 2007), or |
| --- | --- |
| | the date on which the last PO under this agreement terminates or expires in
respect of any PO issued prior to the expiry of the three years period. |

| For the purpose of providing telecommunication services with 3rd Generation
technology, in September and October 2006, Telkomsel entered into agreements with
Nokia Corporation and Nokia Networks, Ericsson AB and Ericsson Indonesia, and Siemens
Networks GmbH & Co.KG for network construction (Rollout Agreement) and Nokia Networks,
Ericsson Indonesia and Siemens Networks GmbH & Co.KG for network operations and
maintenance (Managed Operations Agreement and Technical Support Agreement). The
agreements are valid and effective as of the execution date by the respective parties
(the effective date) until the later of December 31, 2008 or the date on which the
last PO terminates under the agreements or expires in respect of any PO issued prior
to December 31, 2008, providing that the suppliers are able to meet the requirements
set out in each PO. Based on letters from Telkomsel, the Managed Operation Agreements
with those companies were terminated as of March 31, 2008. |
| --- |
| In July and August 2008, Telkomsel entered into 2G BSS and 3G UTRAN Network Trial
Agreements (NTA) with PT Alcatel-Lucent Indonesia, ZTE, and PT Huawei Tech Investment
(Huawei Tech) (Trial Participants). Subsequently, in September 2008, the
agreements with ZTE and Huawei Tech were amended. Such agreements contain, among
others: |

| | The provision by Trial Participants of the design, supply, delivery,
installation, integration and commissioning of 2G GSM BSS and 3G UMTS radio
access network and technical support for such subsystem and networks on a trial
basis. |
| --- | --- |
| | At Telkomsels election, the purchase by Telkomsel and the transfer of
ownership to Telkomsel of certain of those 2G GSM BSS and 3G UMTS radio access
networks. |

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COMMITMENTS (continued)

b. Borrowings and other credit facilities

| (i) | Telkomsel has a US$3 million bond and bank guarantee, standby letter of
credit facility and foreign exchange facility with SCB, Jakarta. The facilities expire
in July 2008 and have been rolled over up to July 2009. Under these facilities, as of
September 30, 2008, Telkomsel has issued bank guarantee of Rp.20,000 million
(equivalent to US$2.13 million) for a 3G performance bond (Note 49d.ii). Borrowings
under the facilities bear interest at Singapore Interbank Offered Rate (SIBOR) plus
1% per annum (US$) except a borrowing under the import facility which bears interest
at SIBOR plus 1.25% per annum (US$), and at a rate equal to the three-month SBI plus
1.25% per annum (Rupiah). As of September 30, 2007 and 2008, there were no outstanding
loans under these facilities. |
| --- | --- |
| (ii) | Telkomsel has not provided any collateral for its bank borrowings, or other
credit facilities. The terms of the various agreements with Telkomsels lenders and
financiers require compliance with a number of pledges and negative pledges as well as
financial and other covenants, which include inter alia, certain restrictions on the
amount of dividends and other profit distributions which could adversely affect
Telkomsels capacity to comply with its obligation under the facilities. The terms of
the relevant agreements also contain default and cross default clauses. Telkomsels
management is not aware of any breaches of the terms of these agreements and does not
foresee any such breaches occurring in the future. |

| c. |
| --- |
| Telkomsel is exposed to market risks, primarily changes in foreign currency exchange rates,
and uses derivative instruments in connection with its risk management activities.
Telkomsel entered into derivative transactions for the purpose of hedging and not for
trading purposes. None of the derivative transactions entered into by Telkomsel during 2008
met the PSAK No. 55 criteria for hedge accounting. Therefore, changes in the fair values of
the derivative financial instruments were recognized in the consolidated result of
operations. |
| Telkomsel purchases equipment from several countries and, as a result, is exposed to
fluctuation in foreign currency exchange rates. In September 2008, Telkomsel entered into
forward foreign exchange contracts with DB to protect against foreign exchange risk
relating to its foreign currency denominated purchases. The primary purpose of Telkomsels
foreign currency hedging activities is to protect against the volatility associated with
foreign currency purchases of equipment and other assets in the normal course of business. |
| The notional amounts of Telkomsels foreign exchange forwards entered into in September
2008 are US$24 million and Euro15 million. |
| The contract will be realized on October 24, 2008 and November 24, 2008 with equal
proportions, respectively. |
| The payable arising from the difference between the contract rates and the rates prevailing
as of September 30, 2008, amounted to Rp.2,968 million has been presented as part of
accrued liabilities. |

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COMMITMENTS (continued)

d. Others

(i)	Employee benefits
	On March 24, 2006, Telkomsel and its Labour Union (Serikat Pekerja Telkomsel) signed a
collective labour agreement (Perjanjian Kerja Bersama or PKB) which is valid until
March 23, 2008. The agreement was extended on May 26, 2008 which is valid until May 25,
2010. Based on the agreement, Telkomsel shall provide long service leave and post
retirement insurance to its employees. These benefits are subject to further agreement
between Telkomsel and Labour Union which has not been made until the date the
consolidated financial statements. Therefore, it is not possible to determine the
amount of the benefits as of September 30, 2008.
(ii)	3G license
	With reference to the Decision Letter No. 07/Per/M.KOMINFO/2/2006 of the MoCI, as one
of the successful bidders, Telkomsel amongst other commitments, is required to:

Pay annual BHP fee which is determined based on a certain formula over license term (10 years). The BHP for the second and third year was paid in March 2007 and 2008, respectively. The commitments as of September 30, 2008 arising from the BHP up to the expiry period of the license using the formula set forth in the Decision Letter are as follows:

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

Notes :
Ri	= average Bank Indonesia rate from previous year
HL (auction price)	= Rp.160,000 million
Index	= adjustment to the bidding price for respective year

The BHP is payable upon receipt of Surat Pemberitahuan Pembayaran (notification letter) from the DGPT.

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COMMITMENTS (continued)

d. Others (continued)

(ii) 3G license (continued)

2.	Provide roaming access for the existing 3G operators.
3.	Contribute to USO development.
4.	Construct a 3G network which covers at least the following provinces:

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

Issue a performance bond each year amounting to Rp.20,000 million or 5% of the annual fee to be paid for the subsequent year, whichever is higher. This performance bond shall be redeemed by the Government if Telkomsel is not able to meet the requirements set out in the above mentioned Decision Letter or upon cancellation/termination of the license, or if Telkomsel decides to return the license voluntarily.

(iii)	Asia-America Gateway Consortium (AAG)
	On April 27, 2007, the Company became a member of AAG consortium, an undersea cable
consortium with 19 companies, by signing a C&MA and an AAG Cable Network Supply
Contract and paid US$40 million. Through the AAG Consortium, the Company will acquire
40 Gbps international bandwidth at the end of 2008 in the AAG configuration that will be
laid from Malaysia to the United States. As of September 30, 2008, the Company has paid
US$30.47 million (equivalent to Rp.282,282 million) and recorded as advances for the
purchase of property, plant and equipment (Note 13).
(iv)	Palapa Ring Consortium
	On November 10, 2007, the Company entered into a C&MA with five other companies for
Palapa Ring Consortium. This consortium was formed to build optical fiber network in 32
cities in Eastern Indonesia with total investment of Rp.2,070,336 million. The Company
will obtain 4 lambda bandwidth of total capacity of 8.44 lambdas from this consortium
(Note 15).

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CONTINGENCIES

| a. | In the ordinary course of business, the Company and its subsidiaries have been named
as defendant in various legal actions in relation with land disputes, other disputes
involving telecommunication billings. Based on managements estimate of the probable
outcomes of these matters, the Company and its subsidiaries have accrued Rp.34,058 million
as of September 30, 2008. |
| --- | --- |
| b. | In December 2005, the West Java Police Department initiated investigations related to
an alleged violation of Eradication of Criminal Act of Corruption Law, in particular the
provision of interconnection services to Napsindo, the 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 related 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
suspect for investigation purposes. As of September 30, 2007 and 2008, the police have not
found sufficient evidence to properly transfer the case to the High Attorney Office for
indictment. |
| c. | A former Director of Human Resources and an employee of the Company were indicted
under the Eradication of Criminal Act of Corruption Law in Bandung District Court relating
to allegations of misuse of authority in procuring consultancy services resulting to a
loss of Rp.789 million. On May 2, 2007, the Bandung District Court found the defendants
guilty and sentenced each defendant to a one-year prison term and gave Rp.50 million
penalty. The defendants have filed and appeal to the West Java High Court, objecting to
the District Court ruling. On October 3, 2007, West Java High Court found the defendants
not guilty. The Attorney has filed an appeal to Indonesian Supreme Court objecting to the
High Courts ruling. As of the issuance date of the consolidated financial statements, no
decision has been reach on the appeal. |
| d. | On January 2, 2006, the Office of the Attorney General launched an investigation into
allegations of misuse of telecommunications facilities in connection with the provision of
VoIP services, whereby one of 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. On January 29, 2008, the Makassar District
Court found the defendant not guilty. The Attorney has filed an appeal to Indonesian
Supreme Court objecting the District Court ruling. On March 3, 2008, Denpasar District
Court fount the defendants guilty and sentenced each defendant to a one-year six-month
prison term and a one year prison term and gave Rp.50 million penalty. The defendants have
filed an appeal to the Bali High Court objecting to the District Court ruling. As of the
issuance date of the consolidated financial statements, no decision has been reach on the
appeal. |

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CONTINGENCIES (continued)

e. The Commission for the Supervision of Business Competition (Komisi Pengawasan Persaingan Usaha or KPPU) on its letter dated December 5, 2007, notified Telkomsel that based on its investigation of case No. 07/KPPU-L/2007 dated November 19, 2007, according to the applied provisions regarding allegation of violating Law No. 5/1999, Prohibition of Monopolistic Practice and Unfair Business Competition (the Law), related to a cross-ownership by Temasek Holdings and monopoly practices by Telkomsel, it had decided that, among others things :

	Telkomsel had violated article 17.1 of the Law,
	Telkomsel had not been proven to violate article No. 25.1 of the Law,
	Temasek Holdings and certain affiliated companies were instructed to release their
ownership either in Indosat or Telkomsel with the following conditions:

	Maximum 5% of total shares for each buyer,
	The buyer is not associated with Temasek Holdings.

Telkomsel was to be charged a penalty of Rp25,000 million and instructed Telkomsel to discontinue the imposition of high tariffs and reduce its tariffs by at least 15%.

On December 19, 2007, Telkomsels management filed an objection with the Court. On May 9, 2008 the court has pronounced its verdict and concluded among other things:

	Telkomsel had violated article 17.1 of the Law,
	Telkomsel had not been proven to violate article 25.1.b of the Law,
	Temasek Holdings and certain affiliated companies were instructed to release their
ownership in either Indosat or Telkomsel or to decrease its ownership by 50% in each
of those companies within twelve months from the date of the decision become final and
legally binding at the following conditions:

	Maximum 10% of total shares for each buyer,
	The buyer is not associated with Temasek Holdings.

	Telkomsel was charged a penalty of Rp.15 billion,
	The court revoked the decision of KPPU on the instruction to reduce the tariffs
because KPPU did not have the authority to determine the tariffs.

| | On May 22, 2008, Telkomsel has filed an appeal to Indonesian Supreme Court. On September
12, 2008, the Supreme Court, through its press release, has announced to reject the appeal.
As of the issuance date of the consolidated financial statements, no formal decision has
been reach on the appeal. |
| --- | --- |
| f. | Certain subscribers of Telkomsel and Indosat which are domiciled in Bekasi and
Tangerang and subscribers of PT Excelcomindo Pratama (Excelcomindo) which are domiciled
in Tangerang, represented by the law firms, have filed class-action lawsuits with the
courts against Telkomsel, the Company, Indosat, the Government, Temasek Holdings and
certain of its affiliated companies (Parties). The Parties are alleged to have had
excessive price practices that potentially could have adversely affected those
subscribers. |
| | On July 8, 2008, class-action lawsuits with the Bekasi District Courts against Telkomsel by
certain subscribers has been revoked and the case is closed. |
| | As of the issuance date of the consolidated financial statements, certain of the lawsuits
are still being processed by the courts. The Telkomsels management believes that Telkomsel
has applied tariffs in accordance with prevailing regulations, accordingly, such allegation
has no strong basis. |

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P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

CONTINGENCIES (continued)

g. The Company, Telkomsel and seven other local operators are being investigated by the KPPU for allegation of SMS cartel practices. As a result of the investigations, KPPU found that the Company, Telkomsel and certain other local operators had proven to violate Law No. 5/1999 article 55 and gave the Company and Telkomsel Rp.18,000 million penalty and Rp.25,000 million penalty, respectively. Pursuant to the decision of KPPU dated June 17, 2008, the Company and Telkomsel have filed an objection with the Court on July 14, 2008 and July 11, 2008, respectively. As of the issuance date of the consolidated financial statements, no decision has been reach on the appeal.

For the matters and cases stated above, the Company and its subsidiaries do not believe that any subsequent investigation or court decision will have significant financial impact to the Company and its subsidiaries.

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. Dollars	184.44	1,686,735	98.87	929,660
Euro	72.79	943,733	41.78	574,088
Singapore Dollars			0.53	3,502
Japanese Yen	2.10	166	3.15	283
Temporary investments
U.S. Dollars			7.13	67,192
Japanese Yen			220.04	19,784
Trade receivables
Related parties
U.S. Dollars	8.87	81,102	0.96	9,036
Third parties
U.S. Dollars	48.74	445,762	46.58	439,026
Other receivables
Great Britain Pound sterling			0.01	210
Euro			0.01	87
U.S. Dollars	0.80	7,328	0.01	84
Other current assets
U.S. Dollars	0.15	1,386	4.01	37,828
Euro	0.05	644	0.06	874
Advances and other non-current assets
U.S. Dollars	6.79	62,107	21.72	204,638
Escrow accounts
U.S. Dollars			4.52	42,572
Total assets		3,228,963		2,328,864

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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. Dollars	3.42	31,273	19.51	183,975
Singapore Dollars	0.01	21
Euro			0.01	86
Third parties
U.S. Dollars	191.95	1,756,388	346.37	3,251,130
Euro	91.57	1,188,029	159.67	2,195,632
Singapore Dollars	0.38	2,337	1.31	8,660
Great Britain Pound sterling	0.01	101
Japanese Yen			0.51	46
Swiss Franc			0.00	14
Myanmar Kyat			0.01	20
Hongkong Dollars			0.01	11
Other payables
U.S. Dollars			0.07	668
Accrued expenses
U.S. Dollars	163.92	1,499,832	11.40	107,554
Euro	87.62	1,136,894
Japanese Yen	156.49	12,403	144.20	12,980
Singapore Dollars	0.38	2,332	0.61	4,008
Great Britain Pound sterling	0.05	844
Advances from customers and suppliers
U.S. Dollars	0.49	4,470	11.44	107,964
Current maturities of long-term liabilities
U.S. Dollars	146.04	1,336,251	124.86	1,177,965
Japanese Yen	1,142.91	90,587	767.90	69,126
Euro	14.63	189,840
Long-term liabilities
U.S. Dollars	414.80	3,795,389	289.64	2,732,788
Japanese Yen	12,670.31	1,004,249	11,902.41	1,071,455
Total liabilities		12,051,240		10,924,082
Net liabilities		(8,822,277	)	(8,595,218	)

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

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SUBSEQUENT EVENTS

| a. | On October 13, 2008, based on BAPEPAM-LK Regulation No. XI.B.3 Attachment Decision of
the Chairman of BAPEPAM-LK No. Kep-401/BL/2008 dated October 9, 2008 concerning the Stock
Repurchase of Stock Issued by the Public Company on Potential Crisis Market Condition, the
Company has informed the full disclosure statement in relation with the Companys plan to
conduct stock repurchase program of the Companys stock which has been issued and listed in
IDX up to 20% of its issued and paid up capital with total cost not to exceed Rp.3,000,000
million which will be conduct gradually within the acquisition period that would not be
longer than 3 months (October 13, 2008 to January 12, 2009). |
| --- | --- |
| b. | On October 28, 2008, Telkomsels appeal to the Tax Court for the remaining balances of
rejection of withholding taxes article 23 and 26 (Note 38f.a) was accepted by the Tax Court
with a total refund of Rp.114.8 billion. |

53.
The recent accounting pronouncement in Indonesia that relevant to the Company and its
subsidiaries are as follow:

(i)	PSAK 50 (Revised 2006), Financial Instruments: Presentation and Disclosures
	In December 2006, the DSAK issued PSAK 50 (Revised 2006), Financial Instruments:
Presentation and Disclosures which amends PSAK 50, Accounting for Investments in Certain
Securities. PSAK 50 (Revised 2006) provides guidance on how to disclose and present
financial instruments in the financial statements and whether a financial instrument is a
financial liability or an equity instrument. This standard applies to the classification of
financial instruments, from the perspective of the issuer, into financial assets, financial
liabilities and equity instruments; the classification of related interest, dividends,
losses and gains; and the circumstances in which financial assets and financial liabilities
should be offset. PSAK 50 (Revised 2006) complements the principles for recognizing and
measuring financial assets and financial liabilities in PSAK 55 (Revised 2006). PSAK 50
(Revised 2006) shall be effective after January 1, 2009. The Company and its subsidiaries
are currently assessing the impact of the application of PSAK 50 (Revised 2006) on the
consolidated financial statements.
(ii)	PSAK 55 (Revised 2006), Financial Instruments: Recognition and Measurement
	In December 2006, the DSAK issued PSAK 55 (Revised 2006), Financial Instruments:
Recognition and Measurement which amends PSAK 55 (Revised 1999), Accounting for Derivative
Instruments and Hedging Activities. PSAK 55 (Revised 2006) provides guidance on how to
recognize, measure and derecognize financial asset and liability including derivative
instruments. It also provides guidance on the recognition and measurement of sales and
purchase contracts of non-financial items. PSAK 55 (Revised 2006) shall be effective after
January 1, 2009. The Company and its subsidiaries are currently assessing the impact of the
application of PSAK 55 (Revised 2006) on the consolidated financial statements.

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RECENT ACCOUNTING PRONOUNCEMENTS IN INDONESIA (continued)

| (iii) |
| --- |
| In September 2008, the DSAK issued ISAK 8, Determining Whether an Arrangement Contains a
Lease and Further Discussion on Transitional Provisions of PSAK 30 (Revised 2007). ISAK 8
provides guidance on how to determine whether and when an arrangement contains a lease and
how to separate the payment for the lease from payments for any other elements in the
arrangement. It also provides interpretation on transitional provision of PSAK 30 (Revised
2007). ISAK 8 shall be effective after January 1, 2008. The Company and its subsidiaries are
currently assessing the impact of the application of ISAK 8 on the consolidated financial
statements. |

| 54. |
| --- |
| Certain accounts in the consolidated financial statement for the nine months period ended
September 30, 2007 has been reclassified to conform with the presentation of accounts of the
consolidated financial statement for the nine months period ended September 30, 2008, as
follows: |

reclassification		Reclassification		reclassification
Consolidated balance sheet:
Accrued expenses	2,546,973		106,771		2,653,744
Accrued long service awards	246,583		(179,840	)	66,743
Accrued pension and other
post-retirement benefits costs	948,589		73,069		1,021,658
Consolidated income statement:
Interconnection revenues	8,760,988		617,344		9,378,332
Interconnection expenses * (see Note below)	(1,640,124	)	(617,344	)	(2,257,468	)

Presentation of interconnection expenses account in consolidated financial statements for the nine months period ended September 30, 2007 has been reclassified to operating revenues as a deduction to interconnection revenues in consolidated financial statements for the nine months period ended September 30, 2008.

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| 55. |
| --- |
| The consolidated financial statements of the Company and its subsidiaries have been prepared in
accordance with Indonesian GAAP, which differ in certain significant respects from U.S. GAAP. A
description of the differences and their effects on net income and stockholders equity are set
forth below: |

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

a.	Voluntary termination benefits
	Under Indonesian GAAP, voluntary termination benefits are recognized as liabilities when
the Company is demonstratively committed to provide termination benefits as a result of
an offer made in order to encourage voluntary redundancy.
	Under U.S. GAAP, voluntary termination benefits liabilities are recognized only when the
employees have accepted the offer and the related amount can be reasonably estimated.
b.	Foreign exchange differences capitalized to assets under construction
	Under Indonesian GAAP, foreign exchange gains and losses resulting from borrowings used
to finance the construction of the qualifying assets are capitalized as part of the cost
of the qualifying assets. Capitalization of foreign exchange gains and losses ceases
when the construction of the qualifying asset is substantially completed and the
constructed property is ready for its intended use.
	Under U.S. GAAP, foreign exchange gains and losses are credited and charged to the
consolidated statement of income as incurred.
c.	Embedded derivative instrument
	The Company and its subsidiaries entered into contracts with their vendors which require
payments denominated in various currencies other than functional currencies of both
parties.
	Under Indonesian GAAP, contracts which require payments denominated in foreign
currencies other than functional currencies of a party or substantial party to the
contracts are not presumed to contain embedded foreign currency derivative instruments
if the currencies are commonly used in local business transactions.
	Under U.S. GAAP, the contracts do not qualify for such exception unless they are
routinely denominated in a currency commonly used in international commerce. Hence, the
foreign currency derivative instruments shall be separated from the host contract and
accounted for as embedded foreign currency derivative instruments.

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SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDONESIAN GAAP AND U.S. GAAP (continued)

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

d.	Interest capitalized on assets under construction
	Under Indonesian GAAP, qualifying assets, to which interest cost can be capitalized,
should be those that take a minimum of 12 months to get ready for their intended use or
sale. To the extent that funds are borrowed specifically to finance the construction of
a qualifying asset, the amount of the interest cost eligible for capitalization on that
asset should be determined based on the actual interest cost incurred on that borrowing
during the period of construction less any investment income on the temporary investment
of those borrowings.
	Under U.S. GAAP, there is no minimum limit (i.e. a minimum 12-month construction period
requirement) on the length of the construction period in which the interest cost could
be capitalized. The amount of interest cost to be capitalized for qualifying assets is
intended to be that portion of the interest cost incurred during the construction
periods that theoretically could have been avoided if expenditures for the assets had
not been made. The interest cost need not arise from borrowings specifically made to
acquire the qualifying assets. The amount capitalized in a period is determined by
applying an interest rate to the average amount of accumulated expenditures for the
assets during the period. Interest income arising from any unused borrowings is
recognized directly as income in the consolidated statement of income.
e.	RSA
	Under Indonesian GAAP, property, plant and equipment built by an investor under RSA are
recognized as property, plant and equipment under RSA in the accounting records of the
party to whom ownership in such properties will be transferred at the end of the
revenue-sharing period, with a corresponding initial credit to unearned income. The
property, plant and equipment are depreciated over their useful lives, while the
unearned income is amortized over the revenue-sharing period. The Company records its
share of the revenues earned, net of amounts due to the investors.
	Under U.S. GAAP, the RSA are recorded in a manner similar to capital leases where the
property, plant and equipment and obligation under RSA are reflected on the consolidated
balance sheet. All the revenues generated from the RSA are recorded as a component of
operating revenues, while a portion of the investors share of the revenues from the RSA
is recorded as interest expense with the balance treated as a reduction of the
obligation under RSA.
f.	Employee benefits
	The Company and its subsidiaries adopted PSAK 24 (Revised 2004) in accounting for the
costs of pension benefit, post-retirement health care benefit and other post-retirement
benefits for Indonesian GAAP purposes.

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SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDONESIAN GAAP AND U.S. GAAP (continued)

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

| f. |
| --- |
| The differences between the accounting for the pension benefits, post-retirement health
care benefits and other post-retirement benefits under Indonesian GAAP and U.S. GAAP are
as follows: |

i.	Prior service cost
	Under Indonesian GAAP, the prior service cost is recognized immediately if vested or
amortized on a straight-line basis over the average period until the benefits become
vested. The amortized amount is recorded as a component of net periodic benefit cost
for the year.
	Under U.S. GAAP, the prior service cost (vested and non-vested benefits) is deferred
and amortized systematically over the estimated remaining service periods for active
employees and the recognized amount is recorded in the consolidated statement of
income.
ii.	Transition obligations relating to pension and post-retirement
healthcare benefits
	Under Indonesian GAAP, the transition obligations were recognized on January 1,
2004, the date PSAK 24 (Revised 2004) was adopted.
	Under U.S. GAAP, the transition obligations arising from the adoption of Statement
of Financial Accounting Standards (SFAS) 87 Employers Accounting for Pensions
on January 1, 1992 and SFAS 106 Employers Accounting for Postretirement Benefits
Other Than Pensions on January 1, 1995, were deferred and amortized systematically
over the estimated remaining service periods for active employees and 20 years,
respectively. In addition, different adoption dates resulted in significant
difference in cumulative unrecognized actuarial gains and losses.
iii.	Minimum liability
	Under Indonesian GAAP, recognition of a minimum liability for the pension plans is
not required.
	Under U.S. GAAP, up to December 31, 2005 the Company and its subsidiaries recognized
an additional minimum liability when the accumulated benefits obligation exceeded
the fair value of the plan assets with the equal amount recognized as an intangible
asset, provided that the asset recognized did not exceed the amount of unrecognized
prior service costs. If the additional liability required to be recognized exceeds
unrecognized prior service costs, the excess was reported in accumulated other
comprehensive income, net of tax.

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SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDONESIAN GAAP AND U.S. GAAP (continued)

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

| f. |
| --- |
| In September 2006, the Financial Accounting Standard Board (FASB) issued SFAS 158
Employers Accounting for Defined Benefit Pension and Other Postretirement Plans an
amendment of FASB Statement No. 87, 88, 106 and 132R. The requirements of SFAS 158 to
recognize the funded status and to provide the required disclosures are effective for
fiscal year ending after December 15, 2006. The Company and its subsidiaries have
adopted the above recognition and disclosure requirements of SFAS 158 from the year
ended December 31, 2006. |
| SFAS 158 does not change the determination of net periodic benefit pension costs under
SFAS 87, SFAS 106 and SFAS 112. The impacts of the adoption of SFAS 158 are as follows: |

| i. | The Company and its subsidiaries no longer report the additional
minimum liability and any corresponding intangible asset for the unfunded pension
obligation as the funded status for unfunded or underfunded benefit plans is now
fully recognized as net pension liability on the balance sheets. This is similar to
the Indonesian GAAP requirements. |
| --- | --- |
| ii. | On adoption of SFAS 158, the unrecognized actuarial losses, prior
service costs, and transition obligations were recognized, net of tax, in the
accumulated other comprehensive income balance. These will continue to be amortized
and reported as a component of net periodic benefit costs in the consolidated
statements of income in accordance with the requirements of SFAS 87, SFAS 106 and
SFAS 112. |

g.	Equity in net income or loss of associated companies
	The Company and its subsidiaries record their equity in net income or loss of their
associated companies based on the associated companies financial statements that have
been prepared under Indonesian GAAP.
	For U.S. GAAP reporting purposes, the Company and its subsidiaries recognize the effect
of the differences between U.S. GAAP and Indonesian GAAP at the investee level in the
investment accounts and its share of the net income or loss and other comprehensive
income or loss of the associated companies.
h.	Land rights
	In Indonesia, the title of land rests with the State under the Basic Agrarian Law No.
5/1960. Land use is accomplished through land rights whereby the holder of the right
enjoys the full use of the land for a stated period of time, subject to extensions. The
land rights generally are freely tradable and may be pledged as collateral for borrowing
agreements.
	Under Indonesian GAAP, land ownership is not depreciated unless it can be foreseen that
the possibility for the holder to obtain an extension or renewal of the rights is
remote.
	Under U.S. GAAP, the cost of land rights is amortized over the economic useful life or
the contractual period of the land rights, which ranges from 20 to 30 years.

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SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDONESIAN GAAP AND U.S. GAAP (continued)

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

i.	Revenue recognition
	Under Indonesian GAAP, fees from connection of mobile cellular and fixed wireless
services are recognized as revenues when connection takes place (for postpaid service).
Sales of starter packs are recognized as revenues upon delivery to distributors,
dealers, or customers (for pre-paid services). Installation fees for wireline services
are recognized at the time of installation. Revenues from calling cards are recognized
when the Company sells the cards.
	Under U.S. GAAP, revenues from front-end fees and incremental costs up to, but not
exceeding such fees, are deferred and recognized as income over the expected term of the
customer relationships. Revenues from calling cards are recognized upon usage or
expiration.
j.	Amortization of goodwill
	Under Indonesian GAAP, goodwill is amortized over its useful life but not exceeding 20
years.
	Under U.S. GAAP, goodwill is not amortized but rather subjected to test for impairment.
k.	Capital leases
	Under Indonesian GAAP, a leased asset is capitalized only if all of the following
criteria are met: (a) the lessee has an option to purchase the leased asset at the end
of the lease period at a price agreed upon at the inception of the lease agreement, (b)
the sum of periodic lease payments, plus the residual value, will cover the acquisition
price of the leased asset and the related interest, and (c) there is a minimum lease
period of 2 years.
	Under U.S. GAAP, a leased asset is capitalized when any one of the following criteria is
met: (a) there is an automatic transfer of ownership at the end of the lease term, (b)
the lease contains a bargain purchase option, (c) the lease term is for 75% or more of
the economic life of the asset, and (d) the net present value of the minimum lease
payments amounts to at least 90% of the fair value of the asset.
	In June 2007, the DSAK issued PSAK 30 (Revised 2007), Leases which replaced PSAK
30, Accounting for Lease. The prospective application of PSAK 30 (Revised 2007) by the
Company and its subsidiaries results no difference between Indonesian GAAP and U.S. GAAP
on all lease contracts with the inception date on and after January 1, 2008.
l.	Acquisition of Dayamitra
	On May 17, 2001 the Company acquired a 90.32% interest in Dayamitra and
contemporaneously acquired a call option to buy the remaining 9.68% interest at a fixed
price at a stated future date, and provided to the minority interest holder a put option
to sell its
9.68% interest to the Company under those same terms. Therefore, the fixed price of the
call equaled the fixed price of the put option.

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SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDONESIAN GAAP AND U.S. GAAP (continued)

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

l.	Acquisition of Dayamitra (continued)
	Under U.S. GAAP, the Company accounted for the option contracts on a combined basis
together with the minority interest and as a financing arrangement for the purchase of
the remaining 9.68% minority interest. As such, under U.S. GAAP, the Company has
consolidated 100% of Dayamitra and attributed the stated yield earned under the combined
derivative and minority interest position to interest expense since May 17, 2001.
	On December 14, 2004, the Company exercised the call option to acquire the 9.68%
interest in Dayamitra.
	Under Indonesian GAAP, prior to December 14, 2004, the Company accounted for the
remaining 9.68% interest in Dayamitra as minority interest. In addition, the option
price paid by the Company was presented as Advance payments for investments in shares
of stock. The Company started consolidating the remaining 9.68% interest in Dayamitra
only on December 14, 2004 following the exercise of the option.
	The difference in the timing of the recognition of the 9.68% ownership interest gives
rise to differences in the timing and amounts of the purchase consideration recognized
under Indonesian GAAP and U.S. GAAP.
m.	Asset retirement obligations
	Prior to 2008, under Indonesian GAAP, costs associated with the retirement of long-lived
assets that the Company and its subsidiaries must cover by law as a result from the
acquisition, construction, development and/or the normal operation of long-lived assets,
are charged to the consolidated statement of income as incurred.
	Effective from January 1, 2008, the obligations are capitalized as cost related
long-lived assets and depreciated over the useful lives of the assets. The treatment
should be applied retroactively. However, due to the impact to prior periods is
insignificant, the cumulative effect is charged to 2008.
	Under U.S. GAAP, the estimated fair value of such obligation is accrued at the time of
the acquisition with an equal amount capitalized to the related long-lived assets and
depreciated over the useful lives of the assets. The Company and its subsidiaries
identified their asset retirement obligations by reviewing their contractual agreements
to determine whether the Company and its subsidiaries are required to settle any
obligations as a result of the prevailing laws, statute and ordinance, or by legal
construction of a contract under the doctrine of promissory estoppel. A present value
technique is used to estimate the fair value of the obligations. The cash flows used in
the estimates of fair value have incorporated the assumptions relating to the timing and
the amount of the possible cash flows. Accretion expense resulting from the passage of
time is recognized in the consolidated statement of
income. In subsequent periods, changes resulting from the revisions to the timing and
the amount of the original estimate of undiscounted cash flows are recognized as an
increase or decrease in (a) the carrying amount of the liability, and (b) the related
asset retirement cost capitalized as part of the carrying amount of the related
long-lived asset.

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SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDONESIAN GAAP AND U.S. GAAP (continued)

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

n.	Deferred taxes
	Under Indonesian GAAP, the Company and its subsidiaries do not recognize deferred taxes
on temporary differences between the carrying amounts and the tax bases of their equity
method investments when it is not probable that these differences will reverse in the
foreseeable future. For financial reporting purposes, deferred tax assets and
liabilities are presented as non-current accounts.
	Under U.S. GAAP, deferred taxes are recognized in full on temporary differences between
the carrying amounts and the tax bases of equity method investments. For financial
reporting purposes, deferred tax assets and liabilities are presented either as current
or non-current accounts based on the expected realization of the related assets or
liabilities.
o.	Impairment of assets
	Under Indonesian GAAP, an impairment loss is recognized whenever the carrying
amount of an asset or its cash-generating unit exceeds its recoverable amount. The
recoverable amount of a fixed asset is the greater of its net selling price or value in
use. In assessing value in use, the estimated future cash flows are discounted to their
present value using a pre-tax discount rate that reflects the current market assessment
of the time value of money and the risks specific to the asset. An impairment loss can
be reversed if there has been a change in the estimates used to determine the
recoverable amount.
	An impairment loss is only reversed to the extent that the 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.
p.	Gains (losses) on disposals of property, plant and equipment
	Under Indonesian GAAP, the Company and its subsidiaries classify the gains (losses) on
disposals of property, plant and equipment as component of other income (expense) which
are excluded from determination of operating income.

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SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDONESIAN GAAP AND U.S. GAAP (continued)

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

p.	Gains (losses) on disposals of property, plant and equipment (continued)
	Under U.S. GAAP, the gains (losses) on disposals of property, plant and equipment are
classified as component of operating expenses and hence included in the determination
of operating income. For the nine months period ended September 30, 2007 and 2008, the
operating income would have been (lower) higher by Rp.21,634 million and (Rp.49,372)
million, respectively, and other (expenses) income would have been lower (higher) by
the same amounts due to the inclusion of the (losses) gains on disposals of property,
plant and equipment in the determination of operating income.
q.	Reclassification of difference in value of restructuring transactions and
other transactions between entities under common control
	Under Indonesian GAAP, the Company is required to reclassify the difference in value of
restructuring transactions and other transactions between entities under common control
as of January 1, 2005 as a direct adjustment to retained earnings when the common
control relationship between the transacting parties no longer existed as of January 1,
2005.
	Under U.S. GAAP, the difference in value of restructuring transactions between entities
under common control remains in stockholders equity indefinitely as part of the
additional paid-in capital.
r.	Available-for-sale securities
	Under Indonesian GAAP, available-for-sale securities are carried at fair values and
changes in fair values are recognized in Unrealized holding gain (loss) on
available-for-sale securities under stockholders equity section.
	Under U.S. GAAP, available-for-sale securities are carried at fair values and any
unrealized gains or losses are reported as a component of accumulated other
comprehensive income under stockholders equity section.
s.	Cumulative translation adjustments
	Under Indonesian GAAP, investments in foreign companies using the equity method are
reported by translating the assets and the liabilities of these companies as of the
balance sheet date using the rate of exchange prevailing at that date. Revenues and
expenses are translated using the exchange rates at the date of transaction or the
average exchange rate for the year for practical reasons. The resulting translation
adjustments are reported as part of Translation Adjustments in the stockholders
equity section.
	Under U.S. GAAP, the resulting translation adjustments are reported in accumulated
other comprehensive income under stockholders equity section.

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SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDONESIAN GAAP AND U.S. GAAP (continued)

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

t.	Amendment and restatement of the KSO VII
	The Company has accounted for the amendment and restatement of the KSO VII agreement as
a business combination using the purchase method of accounting.
	Under Indonesian GAAP, the fair value of the unearned income relating to the RSA was
deemed to be equal to the fair value of the property, plant and equipment under those
RSA based on the accounting treatment of RSA under Indonesian GAAP.
	Under U.S. GAAP, the fair value of the obligation under the RSA has been determined to
be Rp.473,754 million based on the present value of the estimated future payments to
BSIs business partners under the RSA.
	Under Indonesian GAAP, 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. After assigning the purchase consideration to all other identifiable
assets and liabilities, the remaining residual amount was allocated to the intangible
asset representing the right to operate the business in the KSO VII area, to be
amortized over the remaining KSO VII term of 4.3 years. As a result, there was no
goodwill recognized under Indonesian GAAP.
	For U.S. GAAP reporting purposes, the right to operate the KSO VII operation
represented a reacquired right and was recognized by the Company as a separate
intangible asset under Emerging Issues Task Force (EITF) 04-1 Accounting for
Preexisting Relationships between the Parties to a Business Combination. The
intangible asset was directly valued to determine its fair value in accordance with the
requirements in EITF Topic No. D-108 Use of the Residual Method to Value Acquired
Assets Other Than Goodwill. The excess of the purchase consideration over the net of
the amounts assigned to assets acquired and liabilities assumed of Rp.61,386 million
was recognized as goodwill.
u.	Fair value measurement
	Under Indonesian GAAP, some accounting pronouncements require or permit fair value
measurements. The best evidence of fair value is a price in a binding sale agreement in
an arms length transaction. If there is no binding sale agreement, fair value is based
on the best information available to reflect the amount that the Company could obtain
at the end of the reporting period. The measurement bases used for determining the fair
value shall be disclosed.
	Under U.S. GAAP, the information regarding fair value hierarchy shall be disclosed,
segregating fair value measurements using quoted price in active markets for identical
assets or liabilities (Level 1), significant other observable inputs (Level 2), and
significant unobservable inputs (Level 3). For assets and liabilities that are
measured at fair value on a recurring basis, the Company discloses the total realized
gains or losses for the period included in earnings or changes in net assets. For
assets and liabilities that are measured at fair value on a nonrecurring basis, such
disclosure is not required. As of September 30, 2008, the Company and its subsidiaries
have decided to delay the application of SFAS 157 for non financial assets and
liabilities under the provisions of FASB Staff Position (FSP) 157-2.

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SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDONESIAN GAAP AND U.S. GAAP (continued)

(2) a. The significant adjustments to the consolidated net income for the nine months period ended September 30, 2007 and 2008 which would be required if U.S. GAAP have been applied, instead of Indonesian GAAP, in the consolidated financial statements are set forth below:

| Net income according to the consolidated
statements of income prepared under
Indonesian GAAP | Note | 9,819,055 | | 8,919,888 | |
| --- | --- | --- | --- | --- | --- |
| U.S. GAAP adjustments increase
(decrease) due to: | | | | | |
| Voluntary termination benefits | (a) | (1,461,149 | ) | | |
| Capitalization of foreign exchange
differences net of related depreciation | (b) | 57,506 | | 54,852 | |
| Foreign exchange gain net of related
depreciation on contracts containing
embedded foreign currency derivative instrument | (c) | | | (10,345 | ) |
| Interest capitalized on assets under
construction net of related depreciation | (d) | 50,905 | | 14,319 | |
| RSA | (e) | 80,164 | | 111,537 | |
| Pension and other post-retirement
benefits | (f) | (91,678 | ) | (61,329 | ) |
| Post-retirement health care | (f) | (73,870 | ) | (70,769 | ) |
| Equity in net loss of associated
companies | (g) | (241 | ) | (244 | ) |
| Amortization of land rights | (h) | (15,665 | ) | (23,296 | ) |
| Revenue recognition | (i) | 32,402 | | 40,397 | |
| Amortization of goodwill | (j) | | | | |
| Capital leases | (k) | (24,409 | ) | (12,321 | ) |
| Adjustment for consolidation of Dayamitra | (l) | 8,540 | | 8,540 | |
| Assets retirement obligations | (m) | (8,680 | ) | 25,735 | |
| Amendment and restatement of the KSO VII | (t) | (53,377 | ) | 12,202 | |

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SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDONESIAN GAAP AND U.S. GAAP (continued)

(2) a. (continued)

	Note
Deferred income tax:
Deferred income tax on equity method
investments	(n)	(2,216	)	(86	)
Deferred income tax effect on
U.S. GAAP adjustments		371,387		(48,484	)
		(1,130,381	)	40,708
Minority interest		(10,561	)	(8,886	)
Net adjustments		(1,140,942	)	31,822
Net income in accordance with U.S. GAAP		8,678,113		8,951,710
Net income per share in accordance with
U.S.GAAP in full Rupiah amount		434.51		452.69
Net income per ADS in accordance with
U.S.GAAP in full Rupiah amount
(40 Series B shares per ADS)		17,380.47		18,107.73

b. The significant adjustments to the consolidated stockholders equity as of September 30, 2007 and 2008 which would be required if U.S. GAAP have been applied, instead of Indonesian GAAP, in the consolidated financial statements, are set forth below:

| Stockholders equity according to
the consolidated balance sheets
prepared under Indonesian GAAP | Note | 31,818,485 | | 32,593,263 | |
| --- | --- | --- | --- | --- | --- |
| U.S. GAAP adjustments (decrease) increase
due to: | | | | | |
| Voluntary termination benefits | (a) | | | | |
| Capitalization of foreign exchange
differences net of related depreciation | (b) | (335,192 | ) | (255,570 | ) |
| Foreign exchange gain net of related
depreciation, on contracts containing
embedded foreign currency derivative
instrument | (c) | | | 46,811 | |
| Interest capitalized on assets under
construction net of related depreciation | (d) | 277,278 | | 296,755 | |
| RSA | (e) | (84,445 | ) | 221,845 | |
| Pension and other post-retirement benefits | (f) | (194,210 | ) | (803,071 | ) |
| Post-retirement health care | (f) | (1,704,522 | ) | (2,631,626 | ) |
| Equity in net loss of associated
companies | (g) | (19,085 | ) | (19,413 | ) |
| Amortization of land rights | (h) | (116,611 | ) | (144,723 | ) |
| Revenue recognition | (i) | (681,488 | ) | (629,551 | ) |

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SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDONESIAN GAAP AND U.S. GAAP (continued)

(2) b. (continued)

Amortization of goodwill	Note — (j)	93,937		93,937
Capital leases	(k)	(81,825	)	(101,725	)
Adjustment for consolidation of Dayamitra	(l)	(36,977	)	(25,589	)
Assets retirement obligations	(m)	(22,479	)
Amendment and restatement of the
KSO VII	(t)	(48,898	)	32,538
Deferred income tax:
Deferred income tax on equity method
investments	(n)	36,658		35,838
Deferred income tax effect on U.S. GAAP
adjustments		294,529		406,494
		(2,623,330	)	(3,477,050	)
Minority interest		63,004		(27,352	)
Net adjustments		(2,560,326	)	(3,504,402	)
Stockholders equity in accordance with U.S. GAAP		29,258,159		29,088,861

c. The changes in the stockholders equity in accordance with U.S. GAAP for the nine months period ended September 30, 2007 and 2008, are as follows:

Stockholders equity at beginning of year	2007 — 26,308,572	29,817,813
Changes during the year:
Net income under U.S. GAAP	8,678,113	8,951,710
Dividends	(5,082,051)	(8,034,515	)
Accumulated other comprehensive income, net of tax	347,215	379,497
Treasury stock	(993,690)	(2,025,644	)
Stockholders equity at end of period	29,258,159	28,088,861

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


Consolidated balance sheets
Current assets	14,187,466	14,943,543
Non-current assets	63,879,242	72,575,167
Total assets	78,066,708	87,518,710

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SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDONESIAN GAAP AND U.S. GAAP (continued)

(2) d. (continued)

Current liabilities	20,463,125	26,056,331
Non-current liabilities	20,146,348	23,545,384
Total liabilities	40,609,473	49,601,715
Minority interest in net assets of subsidiaries	8,199,076	8,828,134
Stockholders equity	29,258,159	29,088,861
Total liabilities and stockholders equity	78,066,708	87,518,710

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

a. Income tax

(i). The reconciliation between the expected income tax provision in accordance with U.S. GAAP and the actual provision for income tax recorded in accordance with U.S. GAAP, is as follows:

| Consolidated income before tax
in accordance with U.S. GAAP | 17,655,805 | | 17,027,182 | |
| --- | --- | --- | --- | --- |
| Income tax in accordance with U.S. GAAP
at 30% statutory tax rate | 5,296,741 | | 5,108,137 | |
| Effect of non-deductible expenses
(non-taxable income) at the enacted
maximum tax rate (30%): | | | | |
| Net periodic post-retirement health care
benefit cost | 175,289 | | 212,616 | |
| Amortization of discount on promissory
notes and other borrowing costs | 5,525 | | 91,992 | |
| Tax penalty | 50,556 | | 169 | |
| Employee benefits | 19,399 | | 49,675 | |
| Permanent differences of the KSO Units | 19,102 | | 26,535 | |
| Income which was already subject to final tax | (104,775 | ) | (104,389 | ) |
| Effect on the Companys net deferred tax liabilities
of reduction in tax rate | | | (588,460 | ) |
| Others | 90,711 | | 74,215 | |
| Total | 255,807 | | (237,647 | ) |
| Income tax expense in accordance
with U.S. GAAP | 5,552,548 | | 4,870,490 | |

For the nine months period ended September 30, 2007 and 2008, all of the Company and its subsidiaries operating revenues were earned in Indonesia, and accordingly, the Company and its subsidiaries have not been subjected to income tax in other countries.

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SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDONESIAN GAAP AND U.S. GAAP (continued)

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

a. Income tax (continued)

(ii).	Deferred tax (continued)
	For the nine months period ended September 30, 2008, the Company and its
subsidiaries adopted SFAS 158 and recognized deferred tax assets arising from the
transition obligations, the prior service costs and the actuarial losses totaling
Rp.704,357 million in the accumulated other comprehensive income.
(iii).	Accounting for uncertainty in income tax
	The Company and its subsidiaries adopted the provisions of FASB Interpretation
(FIN) 48, Uncertainty in Income Tax: an Interpretation of SFAS 109 effective
January 1, 2007. FIN 48 addresses the determination of whether tax benefits claimed
or expected to be claimed on a tax return should be recorded in the financial
statements. Under FIN 48, the tax benefit from an uncertain tax position shall be
recognized when it is more likely than not, based on the technical merits of the
position, that the position will be sustained on examination by the Tax
Authorities. The amount of the tax benefits to be recognized is the largest amount
of benefit that has a greater than fifty percent likelihood of being realized upon
ultimate settlement.
	Based on the analysis of all tax positions of the Company and its subsidiaries
related to income taxes subject to SFAS 109, the Company and its subsidiaries
determined that there is no material impact on the consolidated financial
statements for any years still subject to any tax examination, and that the
recognition of unrecognized tax benefits will not have a material impact on the
effective income tax rate in any given years. The Company and its subsidiaries do
not anticipate that the current position of unrecognized tax benefits will
significantly change in the next 12 months.
	For the nine months period ended September 30, 2008, there have been no interest
and penalties incurred in relation with corporate income taxes. The Company and
subsidiaries record interest and penalties for the underpayment of income taxes, if
any, in interest expenses and other expenses account, respectively, in the
consolidated financial statements.
	As of September 30, 2008, the Company is subject to tax audits for fiscal years
2003, 2005 and 2006, Telkomsel for fiscal years 2003, GSD for fiscal years 2003 up
to 2006, and Infomedia for fiscal years 2004 up to 2006. Currently, Telkomsel, PIN,
and GSD are being audited by the Tax Office for the fiscal year 2006, 2007
and 2007, respectively.

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SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDONESIAN GAAP AND U.S. GAAP (continued)

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

b.
The following methods and assumptions are used to estimate the fair value of each class
of financial instruments:

(i).	Cash and cash equivalents and temporary investments
	The carrying amounts approximate fair values because of the short-term nature of
the financial assets.
(ii).	Short-term bank loans
	The carrying amounts approximate fair values because of the short-term nature of
the financial liabilities.
(iii).	Long-term liabilities
	The fair values of long-term liabilities other than bonds and guaranteed notes
are estimated by discounting the future cash flows of each liability at rates
currently offered to the Company and its subsidiaries for similar debts of
comparable maturities by the bankers of the Company and its subsidiaries.
	The fair values of bonds and guaranteed notes are based on
market prices at balance sheet date.
(iv).	The estimated fair values of the Company and its subsidiaries
financial assets and liabilities are as follows:

amount	Fair value
2007
Cash and cash equivalents	6,493,187	6,493,187
Temporary investments	177,879	177,879
Derivative payable
Short-term bank loans	950,152	946,030
Long-term liabilities:
Two-step loans	4,179,001	3,825,495
Bank loans	4,941,644	4,848,244
Deferred consideration for business
combinations	3,780,003	3,885,812

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

SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDONESIAN GAAP AND U.S. GAAP (continued)

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

b. Fair values of financial instruments (continued)

(iv). The estimated fair values of the Company and its subsidiaries financial assets and liabilities are as follows: (continued)

amount	Fair value
2008
Cash and cash equivalents	7,545,364	7,545,364
Temporary investments	270,650	270,650
Derivative payable	47,993	47,993
Short-term bank loans	53,449	53,449
Long-term liabilities:
Two-step loans	3,905,478	3,574,252
Bank loans	11,253,886	11,026,112
Deferred consideration for business
combinations	2,751,686	2,811,068

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

| a. | Fair values presented do not take into consideration the
effect of future currency fluctuations. |
| --- | --- |
| b. | Estimated fair values are not necessarily indicative of
the amounts that the Company and its subsidiaries would record upon
disposal/termination of the financial assets and liabilities. |

c. Comprehensive income

Net income under U.S. GAAP	8,678,113	8,951,710
Unrealized holding (loss) gain on available-for-sale securities	6,127	(13,833	)
Foreign currency translation adjustments of associated
companies, net of tax of Rp.107 million and
(Rp.363 million), for the nine months period ended
September 30, 2007 and 2008, respectively	249	(848	)
Unrecognized actuarial losses prior service costs
and transition obligations, net of tax		394,178
	8,684,489	9,331,207

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P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDONESIAN GAAP AND U.S. GAAP (continued)

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

d. Employee benefits

(i). The Company

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

2007		2008		2007		2008
Components of net periodic
benefits costs
Service costs	152,706		211,601		84,877		107,986
Interest costs	646,630		807,727		543,028		677,624
Expected return on plan assets	(583,708	)	(698,126	)	(166,611	)	(257,525	)
Amortization of transition
obligation cost	21,476		21,476		18,244		18,244
Amortization of prior service
costs (gains)	150,948		212.673		(275	)	(275	)
Recognized actuarial losses (gains)					137,734		201,693
Total net periodic benefits costs	388,052		555,351		616,997		747,747

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P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDONESIAN GAAP AND U.S. GAAP (continued)

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

d. Employee benefits (continued)

(i). The Company (continued)

b. The following table presents the changes in the benefits obligations, the changes in the plan assets, and the current and non-current portions of the accrued costs recognized in the Companys U.S. GAAP consolidated balance sheets as of September 30, 2007 and 2008:

2007		2008		2007		2008
Changes in benefits obligations
Benefits obligation at
beginning of year	8,121,381		10,727,812		6,985,343		8,925,612
Service costs	152,706		211,601		84,877		107,986
Interest costs	646,630		807,727		543,028		677,624
Plan participants contributions	32,634		33,378
Actuarial losses	332,612		585,519		111,711		(28,948	)
Benefits paid	(250,932	)	(331,198	)	(134,633	)	(137,548	)
Effects on benefits changes	698,584				130,132		1,052,567
Benefits obligation at end of period	9,733,615		12,034,839		7,720,458		10,597,293
Change in plan assets
Fair value of plan assets at
beginning of year	7,210,749		9,034,393		2,253,260		3,376,172
Actual return on plan assets	583,708		(766,528	)	166,611		(164,496	)
Asset losses (gains)	9,373				69,266
Employers contributions	525,121		666,201		780,000		800,000
Plan participants contributions	32,634		33,378
Benefits paid	(250,932	)	(288,206	)	(134,633	)	(137,548	)
Fair value of plan assets at
end of period	8,110,653		8,679,238		3,134,504		3,874,128
Accrued costs	(1,622,962	)	(3,355,601	)	(4,585,954	)	(6,723,165	)

| c. | The measurement date used to determine pension and health
care benefits measures for the pension plans and the health care plan is
December 31 for each of the years. |
| --- | --- |
| d. | The assumptions used by the independent actuary to determine
the benefits obligation of the plans as of December 31, 2006 and 2007 were as
follows: |

2006	2007	2006	2007
Discount rate	10.5 %	10.25 %	10.5 %	10.25 %
Rate of compensation increases	8 %	8 %

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P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDONESIAN GAAP AND U.S. GAAP (continued)

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

d. Employee benefits (continued)

(i). The Company (continued)

e. The assumptions used by the independent actuary to determine the net periodic benefits costs of the plans for the years ended December 31, 2006 and 2007, were as follows:

2006	2007	2006	2007
Discount rate	10.5 %	10.25 %	10.5 %	10.25 %
Expected long-term return
on plan assets	10.5 %	10 %	8.5 %	9 %
Rate of compensation increases	8 %	8 %

f. Future health care costs trend rates as of December 31, 2006 and 2007, were assumed as follows:

Health care costs trend assumed for next year	12 %	14 %
Ultimate health care costs trend rate	8 %	8 %
Year that the rate reaches the ultimate trend rate	2011	2011

| g. |
| --- |
| The discount rates were based on the Government Bond yields. The rates of
compensation increases assumed were based on the long-term inflation rates of
between 6% and 7%. The expected long-term returns on the plan assets were based
on the average rate of earnings expected on the funds invested or to be
invested. |

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P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDONESIAN GAAP AND U.S. GAAP (continued)

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

d. Employee benefits (continued)

(i). The Company (continued)

h. The investment policies established by management for the pension plans require a minimum of 95% of the fund to be invested in the following asset types and a minimum overall rate of return of 10%:

	Based on
	percentage of fund invested
Time deposits	Up to 100%
Deposits on call	Up to 100%
Certificates of deposit	Up to 100%
Listed shares	Up to 50%
Listed debt securities	Up to 50%
Unlisted shares and debt securities	Up to 20%
Real estates	Up to 15%
Mutual funds	Up to 50%
Certificates by Bank Indonesia	Up to 100%
Securities by the Indonesian Government	Up to 75%

i. The weighted average asset allocations of the Companys pension plan as of September 30, 2007 and 2008, by asset category, were as follows:


as of September 30,
2007	2008
Asset category
Debt securities	73 %	72 %
Deposit securities	7 %	2 %
Equity securities	15 %	20 %
Mutual fund	4 %	5 %
Real estates	1 %	1 %
Total	100 %	100 %

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P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDONESIAN GAAP AND U.S. GAAP (continued)

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

d. Employee benefits (continued)

(i). The Company (continued)

| j. | Equity securities include the Companys common stock
amounting to Rp.267,013 million and Rp.257,892 million (3.3% and 3.1% of the
total Companys pension plan assets) as of September 30, 2007 and 2008,
respectively. |
| --- | --- |
| | Debt securities include the Companys bonds amounting to Rp.nil and Rp.nil (0%
and 0% of the total Companys pension plan assets) as of September 30, 2007 and
2008. |
| k. | Management has established investment policies for the
post-retirement health care benefits plan which require a minimum of 95% of
the fund to be invested in the following asset types: |

	Based on
	Percentage of fund invested
Time deposits	Up to 100%
Deposits on call	Up to 100%
Listed shares	Not exceeding 50%
Listed debt securities	Not exceeding 50%
Mutual funds	Not exceeding 50%
Certificates by Bank Indonesia	Up to 50%
Securities by the Indonesian Government	Not exceeding 75%

l. The weighted average asset allocations of the Companys post-retirement health care plan as of September 30, 2007 and 2008, by asset category, were as follows:


as of September 30,
2007	2008
Asset category
Deposit securities	9 %	4 %
Debt securities	54 %	52 %
Equity securities	5 %	10 %
Mutual fund	32 %	34 %
Total	100 %	100 %

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Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDONESIAN GAAP AND U.S. GAAP (continued)

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

d. Employee benefits (continued)

(i). The Company (continued)

| m. | Debt securities include the Companys Notes and bonds
amounting to Rp.nil and Rp.nil (0% and 0% of the total Companys post
retirement health care plan assets) as of September 30, 2007 and 2008,
respectively. |
| --- | --- |
| | Equity securities include the Companys stock amounting to Rp.55,770 million and
Rp.59,605 million (1.8% and 1.6% of the total Companys post-retirement health
care plan assets) as of September 30, 2007 and 2008. |
| n. | The Company expected to contribute Rp.889,061 million to its
defined benefit pension plan and Rp.1,100 million to its post-retirement
health care plan during 2008. |

(ii). Telkomsel

a. Pension plan

Service costs	28,513		32,334
Interest costs	20,702		25,927
Expected return on plan assets	(2,022	)	(10,176	)
Amortization of prior service costs	361		361
Recognized actuarial losses (gains)	6,937		3,647
Net periodic benefits costs	54,491		52,093

b. The following table presents the changes in the benefits obligations, the changes in the plan assets, the funded status of the plan and accrued cost amounts recognized in Telkomsels U.S. GAAP balance sheets as of September 30, 2007 and 2008:


Change in benefits obligation
Benefits obligation at beginning of year	265,336	332,096
Service costs	28,513	32,334
Interest costs	20,702	25,927
Benefits obligation at end of period	314,551	390,357

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Table of Contents

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

SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDONESIAN GAAP AND U.S. GAAP (continued)

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

d. Employee benefits (continued)

(ii). Telkomsel (continued)

b. (continued)


Change in plan assets
Fair value of plan assets at beginning of year	29,904		132,081
Employers contributions	38,268		40,634
Fair value of plan assets at end of period	68,172		172,715
Accrued costs	(246,379	)	(217,642	)

| c. | The measurement date used to determine pension and health care
benefits measures for the pension plans and the health care plan is December 31
for each of the years. |
| --- | --- |
| d. | The assumptions used by the independent actuary to determine
the benefits obligation of the plans as of December 31, 2006 and 2007 were as
follows: |

Discount rate	10.5 %	10.5 %
Rate of compensation increase	8 %	8 %

e. The assumptions used by the independent actuary to determine the net periodic benefits costs of the plans for the years ended December 31, 2006 and 2007, were as follows:

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

Telkomsels pension plan is managed by PT Asuransi Jiwasraya, a state owned insurance company (see notes 41)

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Table of Contents

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

SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDONESIAN GAAP AND U.S. GAAP (continued)

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

d. Employee benefits (continued)

(iii).
The expected benefits payments by the Company and its subsidiaries are as follows:

2008	447,647	221,995
2009	547,783	260,798
2010	523,652	301,815
2011	592,041	342,446
2012	658,624	380,314
2013 - 2017	6,140,830	2,661,371

(iv). The amounts recognized in accumulated other comprehensive income as of September 30, 2007 and 2008 consisted of:


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


	Post-		Other post-
Pension	retirement		retirement
benefit	health care		benefits	Total	Deferred tax	Net of tax
Transition obligations	16,083	152,030			168,113	4,825	163,288
Prior service costs
(gain)	1,852,291	(191	)	38,274	1,890,374	567,170	1,323,204
Actuarial losses	267,052	3,248,336		170,750	3,686,138	132,362	3,553,776
Total	2,135,426	3,400,175		209,024	5,744,625	704,357	5,040,268

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

SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDONESIAN GAAP AND U.S. GAAP (continued)

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

e.	Operating lease
	For the nine months period ended September 30, 2007 and 2008, the Company
and its subsidiaries recorded operating lease expenses for land and building,
vehicle and office equipment totaling to Rp.628,414 million and Rp.775,368 million.
	Certain subsidiaries entered into a non-cancelable office lease agreements. The minimum
lease payment for each of the five succeeding years amounted to Rp.11,003 million,
Rp.61,250 million, Rp.60,726 million, Rp.60,726 million and Rp.9,992 million for
2008, 2009, 2010, 2011 and 2012, respectively.
f.	Fair value measurement
	The table below presents the recorded amount of financial instruments measured at fair
value:


	Fair value measurement at reporting date using
	Quoted price
	in active market
	for identical		Significant
	assets or	Significant other	unobservable
	liabilities	observable inputs	inputs
Balance	( level 1 )	( level 2 )	( level 3 )
Assets
Trading securities	6,508	6,508
Available-for-sale securities	267,110	267,110
Total	273,618	273,618
Liabilities
Embedded derivative	47,993		47,993
Forward contracts	2,968		2,968
Total	50,961		50,961

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

SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDONESIAN GAAP AND U.S. GAAP (continued)

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

| g. |
| --- |
| In December 2007, FASB issued SFAS 141 (Revised 2007), Business Combinations. The
revision provides guidance on recognizing assets and liabilities arising from
contingencies in a business combination. It also provides guidance on recording
step-by-step acquisition, recognizing and measuring goodwill or a gain from a bargain
purchase, equity interest exchange and noncontrolling interest presentation. SFAS 141
(Revised 2007) shall be applied prospectively to business combinations for which the
acquisition date is on or after the beginning of the first annual reporting period
beginning on or after December 15, 2008. Earlier application of SFAS 141 (Revised 2007)
is prohibited. Assets and liabilities that arose from business combinations whose
acquisition dates preceded the application of SFAS 141 (Revised 2007) shall not be
adjusted. |
| In December 2007, FASB issued SFAS 160, Noncontrolling Interests in Consolidated
Financial Statements an amendment of ARB No.51. SFAS 160 clarifies that a
noncontrolling interest in a subsidiary is an ownership interest in the consolidated
entity that should be reported as equity in the consolidated financial statements. It
also provides guidance on recognizing a gain or loss in net income when a subsidiary is
deconsolidated and providing disclosures in the consolidated financial statements. SFAS
160 shall be effective for fiscal years, and interim periods within those fiscal years,
beginning on or after December 15, 2008. SFAS 160 shall be applied prospectively except
for the presentation and disclosure requirements. Earlier application of SFAS 160 is
prohibited. The Company and its subsidiaries are currently assessing the impact of the
requirements of SFAS 160 on the consolidated financial statements. |
| In March 2008, FASB issued SFAS 161, Disclosures about Derivative Instruments and
Hedging Activities, which is an amendment of SFAS 133. SFAS 161 changes the disclosure
requirements for derivative instruments and hedging activities and requires an entity to
provide enhanced disclosures about how and why the entity uses derivative instruments,
how derivative instruments and related hedged items are accounted for under SFAS 133 and
its related interpretations, and how derivative instruments and related hedged items
affect the financial position, financial performance and cash flows. SFAS 161 shall be
effective for the financial statements issued for fiscal years and interim periods
beginning after November 15, 2008. Early adoption is encouraged. The Company and its
subsidiaries are currently assessing the impact of the application of SFAS 161 on the
consolidated financial statements. |
| In May 2008, FASB issued SFAS 162, The Hierarchy of Generally Accepted Accounting
Principles which identifies the sources of accounting principles and the framework for
selecting the principles used in the preparation of financial statements of
nongovernmental entities that are presented in conformity with U.S. GAAP. SFAS 162 shall
be effective 60 days following the SECs approval of the Public Company Accounting
Oversight Boards (PCAOB) amendments to Auditing Standard (AU) Section 411, The Meaning
of Present Fairly in Conformity With General Accepted Accounting Principles. SFAS 162
will be used as guidance in applying U.S. GAAP by the Company and its subsidiaries. |

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

SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDONESIAN GAAP AND U.S. GAAP (continued)

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

| g. |
| --- |
| In May 2008, FASB issued SFAS 163, Accounting for Financial Guarantee Insurance
Contract an Interpretation of FASB Statement No.60 which interprets SFAS 60,
Accounting and Reporting by Insurance Enterprises and amends existing accounting
pronouncements to clarify their application to the financial guarantee insurance
contracts that are not accounted for as derivative instruments. SFAS 163 provides
guidance on recognizing, measuring and derecognizing unearned premium revenue and claim
liability by an insurance enterprise. It also provides guidance on how to provide
disclosures in financial statements by an insurance enterprise. SFAS 163 shall be
effective for the financial statements issued for fiscal years beginning after December
15, 2008. SFAS 163 will not have impact on the consolidated financial statements. |

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