PERUSAHAAN PERSEROAN PERSERO PT TELEKOMUNIKASI INDONESIA TBK

6-K 1 u93319e6vk.htm PT TELEKOMUNIKASI INDONESIA PT TELEKOMUNIKASI INDONESIA PAGEBREAK

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

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

For the month of July , 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
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY (UNAUDITED)
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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link1 "SIGNATURES"

SIGNATURES

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

	Perusahaan Perseroan (Persero) PT TELEKOMUNIKASI INDONESIA
	(Registrant)
Date July
31,
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)

JUNE 30, 2007 AND 2008, AND SIX MONTHS PERIOD ENDED JUNE 30, 2007 AND 2008

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

JUNE 30, 2007 AND 2008, AND SIX MONTHS PERIOD ENDED JUNE 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	9-142

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

link1 "CONSOLIDATED BALANCE SHEETS (UNAUDITED)"

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

JUNE 30, 2007 AND 2008 (Figures in tables are presented in millions of Rupiah and thousands of United States Dollars)

Notes	Rp.	Rp.	US$ (Note 3)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	2c,2e,5,44	10,828,433	10,942,829	1,186,858
Temporary investments	2c,2f,44	188,139	182,685	19,814
Trade receivables	2c,2g,6,37,44
Related parties net of allowance
for doubtful accounts of
Rp.93,475 million in 2007 and
Rp.148,797 million in 2008		552,736	536,235	58,160
Third parties net of allowance for
doubtful accounts of
Rp.914,743 million in 2007 and
Rp.1,061,773 million in 2008		3,152,873	2,768,072	300,225
Other receivables net of allowance for
doubtful accounts of
Rp.5,423 million in 2007
and Rp.11,163 million in 2008	2c,2g,44	58,781	189,163	20,517
Inventories net of allowance for
obsolescence of Rp.53,555 million
in 2007 and Rp.58,954 million in 2008	2h,7,37	204,262	295,442	32,044
Prepaid expenses	2c,2i,8,44	1,474,455	1,338,464	145,170
Claims for tax refund	38	359,582	420,550	45,613
Prepaid taxes	38	25,939	84,045	9,115
Restricted time deposits	2c,9,44	8,829	21,244	2,304
Total Current Assets		16,854,029	16,778,729	1,819,820
NON-CURRENT ASSETS
Long-term investments net	2f,10	99,091	137,802	14,946
Property, plant and equipment net of
accumulated depreciation of
Rp.49,603,908 million in 2007 and Rp.57,775,661 million in 2008	2k,2l,4,11, 19,20,23	57,694,609	63,329,530	6,868,712
Property, plant and equipment under
Revenue-Sharing Arrangements net
of accumulated depreciation of
Rp.544,133 million in 2007 and
Rp.540,831 million in 2008	2m,12,34,47	849,683	631,488	68,491
Prepaid pension benefit cost	2i,2r,41	229	398	43
Advances and other non-current assets	2c,2o,13, 29,44,49	605,633	1,811,306	196,454
Goodwill and other intangible assets net
of accumulated amortization of
Rp.4,233,123 million in 2007 and
Rp.5,299,967 million in 2008	2d,2j,4,14,37	3,912,073	3,104,099	336,670
Escrow accounts	2c,15,44	1,394	42,859	4,648
Total Non-current Assets		63,162,712	69,057,482	7,489,964
TOTAL ASSETS		80,016,741	85,836,211	9,309,784

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) JUNE 30, 2007 AND 2008 (Figures in tables are presented in millions of Rupiah and thousands of United States Dollars)

Notes	Rp.	Rp.	US$ (Note 3)
LIABILITIES AND STOCKHOLDERS
EQUITY
CURRENT LIABILITIES
Trade payables	2c,16,44
Related parties		771,959	1,398,689	151,702
Third parties		4,925,415	6,058,388	657,092
Other payables		29,726	35,172	3,815
Taxes payable	2s,38	1,731,773	1,646,401	178,568
Dividends payable		8,420,466	11,751,595	1,274,576
Accrued expenses	2c,17,35
	41,44	2,688,965	2,896,082	314,109
Unearned income	18	2,017,152	1,882,883	204,217
Advances from customers and suppliers		161,885	121,002	13,124
Short-term bank loans	2c,19,44	934,844	70,984	7,699
Current maturities of long-term liabilities	2c,20,44	4,812,499	5,281,675	572,850
Total Current Liabilities		26,494,684	31,142,871	3,377,752
NON-CURRENT LIABILITIES
Deferred tax liabilities net	2s,38	3,223,024	3,106,209	336,899
Unearned income on Revenue-Sharing
Arrangements	2m,12,47	678,878	392,647	42,586
Accrued long service awards	2c,2r,42,44	70,675	79,655	8,639
Accrued post-retirement
health care benefits	2c,2r,43,44	2,737,812	2,719,583	294,966
Accrued pension and other post-retirement benefits costs	2r,41	1,081,003	1,286,572	139,541
Long-term liabilities net of current
maturities
Obligations under capital leases	2l,11,20	199,677	225,764	24,486
Two-step loans related party	2c,20,21,44	3,761,537	3,539,074	383,848
Bank loans	2c,20,23,44	2,926,870	3,247,074	352,177
Deferred consideration for business
combinations	20,24	3,013,103	1,847,389	200,368
Total Non-current Liabilities		17,692,579	16,443,967	1,783,510
MINORITY INTEREST	25	7,092,289	7,863,148	852,836

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) JUNE 30, 2007 AND 2008 (Figures in tables are presented in millions of Rupiah and thousands of United States Dollars)

Notes	Rp.		Rp.		US$ (Note 3)
STOCKHOLDERS EQUITY
Capital
stock Rp.250 par value per Series A Dwiwarna share and Series B share
Authorized 1 Series A Dwiwarna
share and 79,999,999,999 Series B shares
Issued and
fully paid 1 Series A Dwiwarna share and
20,159,999,279 Series B shares	1c,26	5,040,000		5,040,000		546,638
Additional paid-in capital	27	1,073,333		1,073,333		116,413
Treasury stock 211,290,500 shares in
2007 and 426,290,500 shares in 2008	2u,28	(1,829,138	)	(3,798,701	)	(412,007	)
Difference in value arising from
restructuring transactions and
other transactions between
entities under common control	2d,29	180,000		270,000		29,284
Difference due to change of equity in
associated companies	2f	385,595		385,595		41,822
Unrealized holding gain from
available-for-sale securities	2f	10,569		8,981		974
Translation adjustment	2f	228,520		228,914		24,828
Retained earnings
Appropriated		6,700,879		10,557,984		1,145,118
Unappropriated		16,947,431		16,620,119		1,802,616
Total Stockholders Equity		28,737,189		30,386,225		3,295,686
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY		80,016,741		85,836,211		9,309,784

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

link1 "CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)"

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

SIX MONTHS PERIOD ENDED JUNE 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		5,639,074		5,260,686		570,573
Cellular		11,398,521		12,176,568		1,320,669
Interconnection	2q,31,44
Revenues		5,802,820		5,864,545		636,068
Expenses		(1,281,828	)	(1,463,002	)	(158,677	)
Net		4,520,992		4,401,543		477,391
Data and internet	2q,32	6,283,445		7,315,049		793,389
Network	2q,33,44	210,871		500,872		54,325
Revenue-Sharing Arrangements	2m,12,34,47	234,509		184,779		20,041
Other telecommunications services		219,190		338,859		36,753
Total Operating Revenues		28,506,602		30,178,356		3,273,141
OPERATING EXPENSES
Depreciation	2k,2l,2m,
	11,12,13	4,625,808		5,213,718		565,479
Personnel	2r,17,35,
	41,42,43	4,080,124		4,293,842		465,710
Operations, maintenance and
telecommunication services	2q,36,44	4,448,941		5,611,079		608,577
General and administrative	2g,2h,2q,6,
	7,14,37	1,707,377		1,701,589		184,554
Marketing	2q	603,535		890,167		96,547
Total Operating Expenses		15,465,785		17,710,395		1,920,867
OPERATING INCOME		13,040,817		12,467,961		1,352,274
OTHER INCOME (EXPENSES)
Interest income	44	265,579		330,873		35,886
Equity in net (loss) income of
associated companies	2f,10	3,589		(1,390	)	(151	)
Interest expense	44	(730,731	)	(573,805	)	(62,235	)
Gain on foreign exchange net	2p	54,933		35,776		3,880
Others net		133,785		236,159		25,614
Other income (expenses) net		(272,845	)	27,613		2,994
INCOME BEFORE TAX		12,767,972		12,495,574		1,355,268
TAX EXPENSE	2s,38
Current		(3,337,305	)	(3,862,317	)	(418,906	)
Deferred		(557,627	)	(77,065	)	(8,358	)
		(3,894,932	)	(3,939,382	)	(427,264	)
INCOME BEFORE MINORITY INTEREST
IN NET INCOME OF CONSOLIDATED
SUBSIDIARIES		8,873,040		8,556,192		928,004
MINORITY INTEREST IN NET INCOME OF
CONSOLIDATED SUBSIDIARIES Net	25	(2,248,117	)	(2,258,582	)	(244,966	)
NET INCOME		6,624,923		6,297,610		683,038
BASIC EARNINGS PER SHARE	2w,39
Net income per share		331.49		317.83		0.03
Net income per ADS (40 Series B shares per ADS)		13,259.60		12,713.20		1.20

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

link1 "CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)"

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY (UNAUDITED)

SIX MONTHS PERIOD ENDED JUNE 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							1,704					1,704
Foreign currency translation of
associated company	2f,10								851				851
Treasury stock acquired at cost	2u,28			(876,927	)								(876,927	)
Resolved during the Annual General
Meeting of the Stockholders on
June 29, 2007
Declaration of cash dividends	2v,40										(5,082,051	)	(5,082,051	)
Appropriation for general reserve	40									4,897,482	(4,897,482	)
Net income for the year											6,624,923		6,624,923
Balance, June 30, 2007		5,040,000	1,073,333	(1,829,138	)	180,000	385,595	10,569	228,520	6,700,879	16,947,431		28,737,189

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) SIX MONTHS PERIOD ENDED JUNE 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 (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							(2,256	)						(2,256	)
Foreign currency translation of
associated company	2f,10									(1,103	)				(1,103	)
Treasury stock acquired at cost	2u,28			(1,622,090	)										(1,622,090	)
Resolved during the Annual General
Meeting of the Stockholders on
June 20, 2008
Declaration of cash dividends	2v,40												(8,034,515	)	(8,034,515	)
Appropriation for general reserve	40											3,857,105	(3,857,105	)
Net income for the year													6,297,610		6,297,610
Balance, June 30, 2008		5,040,000	1,073,333	(3,798,701	)	270,000	385,595	8,981		228,914		10,557,984	16,620,119		30,386,225

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

link1 "CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)"

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

SIX MONTHS PERIOD ENDED JUNE 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	5,487,250		4,505,592		488,676
Cellular	11,270,892		11,785,579		1,278,262
Interconnection net	4,665,000		4,848,022		525,816
Joint Operation Schemes	6,943		607		66
Data and internet	6,244,605		7,153,888		775,910
Other services	470,705		1,030,296		111,746
Total cash receipts from operating revenues	28,145,395		29,323,984		3,180,476
Cash payments for operating expenses	(12,363,907	)	(11,501,776	)	(1,247,481	)
Cash (refund) receipt from customers	390		(20,653	)	(2,240	)
Cash generated from operations	15,781,878		17,801,555		1,930,755
Interest received	264,676		324,215		35,164
Interest paid	(739,100	)	(569,790	)	(61,799	)
Income tax paid	(4,112,766	)	(4,992,556	)	(541,492	)
Net cash provided by operating activities	11,194,688		12,563,424		1,362,628
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of temporary investments
and maturity of time deposits	3,521		41,890		4,543
Purchases of temporary investments
and placements in time deposits	(105,465	)	(22,236	)	(2,412	)
Proceeds from sale of property, plant and equipment	13,051		5,299		575
Acquisition of property, plant and equipment	(8,554,418	)	(7,606,234	)	(824,971	)
(Increase) decrease in advances for purchases of
property, plant and equipment	790,366		(326,631	)	(35,426	)
Decrease in advances and others	46,579		15,048		1,632
Business combinations, net of cash paid			(323,541	)	(35,091	)
Purchases of intangible assets			(12,638	)	(1,371	)
Acquisition of long-term investments	(5,454	)	(28,249	)	(3,064	)
Cash dividends received	30		645		70
Advance for acquisition of long term investments			(674	)	(73	)
(Increase) decrease in escrow accounts	679		(41,571	)	(4,509	)
Net cash used in investing activities	(7,811,111	)	(8,298,892	)	(900,097	)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash dividends paid to minority stockholders of
subsidiaries	(10,630	)
Proceeds from short-term borrowings	2,823,000		19,210		2,084
Repayments of short-term borrowings	(1,166,667	)	(538,824	)	(58,441	)
Repayment of medium-term Notes	(465,000	)
Proceeds from long-term borrowings	11,282		1,015,449		110,135
Repayment of long-term borrowings	(1,039,782	)	(2,237,826	)	(242,714	)
Payment for purchases of treasury stock	(876,927	)	(1,622,090	)	(175,932	)
Repayment of promissory notes	(99,165	)	(101,355	)	(10,993	)
Repayment of obligations under capital leases	(13,394	)	(19,429	)	(2,107	)
Net cash used in financing activities	(837,283	)	(3,484,865	)	(377,968	)

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

link1 "CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (continued)"

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (continued)

SIX MONTHS PERIOD ENDED JUNE 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 INCREASE IN CASH AND
CASH EQUIVALENTS	2,546,294		779,667	84,563
EFFECT OF EXCHANGE RATE CHANGES
ON CASH AND CASH EQUIVALENTS	(33,697	)	22,371	2,426
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR	8,315,836		10,140,791	1,099,869
CASH AND CASH EQUIVALENTS AT END OF PERIOD	10,828,433		10,942,829	1,186,858
SUPPLEMENTAL CASH FLOW INFORMATION
Non-cash investing and financing activities:
Acquisition of property, plant and equipment
through incurrence of payable and accrued liability	4,103,732		5,448,634	590,958
Acquisition of property, plant and equipment
through capital leases			48,121	1,567

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

link1 "NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)"

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

JUNE 30, 2007 AND 2008, AND SIX MONTHS PERIOD ENDED JUNE 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 concerning among others, the change in terms of service of Board of Commissioners and
Board of Directors based on notarial deed No. 8 and No. 9 dated September 7, 2007 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.
W7-HT.01.10-12858 dated September 14, 2007, and was published in State Gazette No. 31 dated
April 15, 2008, Supplement No. 284. |
| 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 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. | Performing activities and other undertakings in connection with the
utilization and development of the Companys resources and optimizing the utilization
of the Companys property, plant and equipment, information systems, education and
training, and repairs and maintenance facilities. |

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

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

GENERAL (continued)

| a. |
| --- |
| 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. |
| --- |
| 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. |

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GENERAL (continued)

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. and
(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,
the composition of the Companys Board of Commissioners and Directors as of June 30, 2007
and 2008, respectively, were as follows: |

	2007	2008
President Commissioner	Tanri Abeng	Tanri Abeng
Commissioner	Anggito Abimanyu	Anggito Abimanyu
Commissioner	Mahmuddin Yasin	Mahmuddin Yasin
Independent Commissioner	Arif Arryman	Arif Arryman
Independent Commissioner	Petrus Sartono	Petrus Sartono
President Director	Rinaldi Firmansyah	Rinaldi Firmansyah
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

| | 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. |
| 2. | Employees |
| | As of June 30, 2007 and 2008, the Company and its subsidiaries had 32,474 and 33,580
employees, respectively. |

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GENERAL (continued)

| 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. |
| 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 July 28,
2008, the Company had repurchased 453,663,000 shares equivalent to 2.25% of the issued and
outstanding Series B shares, for a repurchase price of Rp.3,998,058 million, including broker
and custodian fees (Note 28). |
| As of June 30, 2008, all of the Companys Series B shares were listed on the IDX and
49,276,437 ADS shares were listed on the NYSE and LSE. |

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GENERAL (continued)

d. Subsidiaries

As of June 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	1,351,221	1,218,404
PT Telekomunikasi Indonesia International ( TII ) (formerly PT Aria West International ( AWI )), Jakarta, Indonesia	Telecommunication/July 31, 2003	1995	100	100	708,098	947,825
PT Multimedia Nusantara ( Metra ), Jakarta, Indonesia	Multimedia
telecommunication
services/May 9, 2003	1998	100	100	110,008	715,167
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	146,429	163,486
PT Dayamitra Telekomunikasi ( Dayamitra ), Jakarta, Indonesia	Telecommunication/May 17, 2001	1995	100	100	449,295	426,275
PT
Indonusa Telemedia ( Indonusa ), Jakarta, Indonesia	Pay television and
content services/May
7, 1997	1997	96	98.75	86,632	127,719
PT
Telekomunikasi Selular ( Telkomsel ), Jakarta, Indonesia	Telecommunication
provides
telecommunication
facilities and mobile
cellular services using
Mobile Global System
for Communication
(GSM) technology/May
26, 1995	1995	65	65	44,880,498	50,400,370
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	5,637	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	487,710	552,706

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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	114
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)	59,511	82,061
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)	8,245	8,748
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)	12,679	21,210
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 license
maintenance/May 1, 1987	1988		80 (through 80% ownership by Metra)		330,156

| (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.
(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:

| | 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. Also, 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 95.68% to 98.75%.

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GENERAL (continued)

d. Subsidiaries (continued)

| (d) |
| --- |
| 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 July 29, 2008.

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| 2. |
| --- |
| The consolidated financial statements of the Company and its subsidiaries have been prepared in
accordance with generally accepted accounting principles in Indonesia (Indonesian GAAP).
Indonesian GAAP varies in certain significant respects from generally accepted accounting
principles in the United States of America (U.S. GAAP). Information relating to the nature
and effect of such differences is presented in Note 55. |

a.	Basis of preparation of financial statements
	The consolidated financial statements, except for the consolidated statements of cash
flows, are prepared on the accrual basis of accounting. The measurement basis used is
historical cost, except for certain accounts recorded on the basis described in the related
accounting policies.
	The consolidated statements of cash flows are prepared using the direct method and present
the changes in cash and cash equivalents from operating, investing and financing
activities.
	Figures in the consolidated financial statements are rounded to and presented in millions
of Indonesian Rupiah (Rp.), unless otherwise stated.
b.	Principles of consolidation
	The consolidated financial statements include the financial statements of the Company and
its subsidiaries in which the Company directly or indirectly has ownership of more than
50%, or the Company has the ability to control the entity, even though the ownership is
less than or equal to 50%. Subsidiaries are consolidated from the date on which every
effective control is obtained and are no longer consolidated from the date of disposal.
	All significant inter-company balances and transactions have been eliminated on the
consolidated financial statements.
c.	Transactions with related parties
	The Company and its subsidiaries have transactions with related parties. The definition of
related parties used is in accordance with Indonesian Statement of Financial Accounting
Standards (PSAK) 7, Related Party Disclosures.
d.	Acquisitions of subsidiaries
	The acquisition of a subsidiary from a third party is accounted for using the purchase
method of accounting. The cost of an acquisition is allocated to the identifiable assets
and liabilities recognized using as reference, their fair values at the date of the
transaction. The excess of the acquisition cost over the 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.	Acquisitions of subsidiaries (continued)
	In July 2004, the Indonesian Financial Accounting Standard Board (Dewan Standar Akuntansi
Keuangan di Indonesia or DSAK) issued PSAK 38 (Revised 2004), Accounting for
Restructuring Transactions between Entities under Common Control, (PSAK 38R). Under PSAK
38R, the acquisition transaction with entities under common control is accounted for using
book value, in a manner similar to that in pooling of interests accounting (carryover
basis). The difference between the consideration paid or received and the related
historical carrying amount, after considering income tax effects, is recognized directly in
equity and reported as Difference in value arising from restructuring transactions and
other transactions between entities under common control in the stockholders equity
section.
	The balance of Difference in value arising from restructuring transactions and other
transactions between entities under common control is charged to retained earnings when
the common control relationship has ceased.
e.	Cash and cash equivalents
	Cash and cash equivalents consist of cash on hand and in banks and all unrestricted time
deposits with maturities of not more than three months from the date of placement.
f.	Investments

i.	Time deposits
	Time deposits with maturities of more than three months but not more than one year, are
presented as temporary investments.
ii.	Investments in securities
	Investments in available-for-sale securities are stated at fair value. Unrealized
holding gains or losses on available-for-sale securities are excluded from income of
the current year and are reported as a separate component in the stockholders equity
section until realized. Realized gains or losses from the sale of available-for-sale
securities are recognized in the consolidated statements of income, and are determined
on a specific-identification basis. A decline in the fair value of any
available-for-sale securities below cost that is deemed to be other-than-temporary is
charged to the consolidated statements of income.
iii.	Investments in associated companies
	Investments in companies where the Company has 20% to 50% of the voting rights, and
through which the Company exerts significant influence, but not control, over the
financial and operating policies are accounted for using the equity method. Under this
method, the Company recognizes the 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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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

f. Investments (continued)

iii.	Investments in associated companies (continued)
	On a continuous basis, but no less frequently than at the end of each year, the Company
and its subsidiaries evaluate the carrying amount of their ownership interests in
associated companies for possible impairment. Factors considered in assessing whether
an indication of other-than-temporary impairment exists include the achievement of
business plan objectives and milestones including cash flow projections and the results
of planned financing activities, the financial condition and prospects of each
associated company, the fair value of the ownership interest relative to the carrying
amount of the investment, the period of time the fair value of the ownership interest
has been below the carrying amount of the investment and other relevant factors.
Impairment to be recognized is measured based on the amount by which the carrying
amount of the investment exceeds the fair value of the investment. Fair value is
determined based on quoted market prices (if any) and projected discounted cash flows,
whichever is lower or other valuation techniques as appropriate.
	Changes in the value of investments due to changes in the equity of associated
companies arising from capital transactions of such associated companies with other
parties are recognized directly in equity and are reported as Difference due to change
of equity in associated companies in the stockholders equity section. Differences
previously credited directly to equity as a result of equity transactions in associated
companies are released to the consolidated statements of income upon the sale of an
interest in the associate in proportion to percentage of the interests sold.
	The functional currency of PT Pasifik Satelit Nusantara (PSN) and PT Citra Sari
Makmur (CSM) is the United States Dollars (U.S. Dollars). For the purpose of
reporting these investments using the equity method, the assets and liabilities of
these companies as of the balance sheet date are translated into Indonesian Rupiah
using the rates of exchange prevailing at that date, while revenues and expenses are
translated into Indonesian Rupiah at the average rates of exchange for the year. The
resulting translation adjustments are reported as part of Translation adjustment in
the stockholders equity section.
iv.	Other investments
	Investments in companies where ownership interests of less than 20% that do not have
readily determinable fair values and are held for long-term are carried at cost and are
adjusted only for other-than-temporary decline in the value of individual investments.
Any write-down is charged directly to income of the current year.

| g. |
| --- |
| Trade and other accounts receivable 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.	Trade and other accounts receivable (continued)
	The allowance for doubtful accounts is the Company and its subsidiaries best estimate of
the probable credit losses in the accounts receivable. The amount of the allowance is
recognized in the consolidated statement of income within operating expenses general and
administrative. The Company and its subsidiaries determine the allowance based on
historical write-off experience. The Company and its subsidiaries review the allowance for
doubtful accounts every month. Past due balances over 90 days for retail customers are
fully provided, and past due balance for non-retail customers over a specified amount are
reviewed individually for collectibility. Account balances are written off against the
allowance after all means of collection have been exhausted and the potential for recovery
is considered remote.
h.	Inventories
	Inventories consist of components and modules which are expensed or transferred to
property, plant and equipment upon use. Inventories also include Subscriber Identification
Module (SIM) cards, Removable User Identity Module (RUIM) cards and prepaid voucher
blanks, which are expensed upon sale. Inventories are stated at the lower of costs or net
realizable value.
	Cost is determined using the weighted average method for components, SIM card, RUIM card
and prepaid voucher blanks, and the specific-identification method for modules.
	Allowance for obsolescence is primarily based on the estimated forecast of future usage of
these items.
i.	Prepaid expenses
	Prepaid expenses are amortized over their future beneficial periods using the straight-line
method.
j.	Intangible assets
	Intangible assets comprised of intangible assets from subsidiaries and business acquisition
and licenses. Intangible assets shall be recognized if it is probable that the expected
future economic benefits that are attributable to each asset will flow to the Company and
its subsidiaries and the cost of the asset can be reliably measured.
	Intangible assets are stated at cost less accumulated amortization and impairment, if any.
Intangible assets are amortized over their useful lives. The Company and its subsidiaries
shall estimate the recoverable value of their intangible asset. When the carrying amount of
an asset exceeds its estimated recoverable amount, the asset is written down to its
estimated recoverable amount.
	In 2006, Telkomsel was granted the right to operate the 3G license. Telkomsel is required
to pay an up-front fee and annual rights of usage (Biaya Hak Penggunaan or BHP) fee for
the next ten years. The up-front fee is recorded as intangible asset and amortized using
the straight-line method over the term of the right to operate the 3G license (10 years).
Amortization commenced in 2006 when the assets attributable to the provision of the related
services became available for use.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

j.	Intangible assets (continued)
	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 direct acquisitions
	Property, plant and equipment directly acquired are stated at cost, less accumulated
depreciation and impairment losses.
	Property, plant and equipment, except land, are depreciated using the straight-line method,
based on the estimated useful lives of the assets as follows:

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.	Property, plant and equipment direct acquisitions (continued)
	Computer software used for data processing is included in the value of the associated
hardware.
	Property under construction is stated at cost until construction is completed, at which
time it is reclassified to the specific property, plant and equipment account to which it
relates. During the construction period, borrowing costs, which include interest expense
and foreign currency exchange differences incurred to finance the construction of the
asset, are capitalized in proportion to the average amount of accumulated expenditures
during the year. Capitalization of borrowing cost ceases when the construction has been
completed and the asset is ready for its intended use.
	Equipment temporarily unused are reclassified into equipment not used in operation and
depreciated over their estimated useful life using straight-line method.
l.	Property, plant and equipment under capital leases
	Property, plant and equipment acquired under capital leases are stated at the present value
of minimum lease payments and the residual values (option price) paid by the Company and
its subsidiaries at the end of lease period. At inception of the lease, a corresponding
liability, which equals to the present value of minimum lease payments, is also recorded
and subsequently reduced by the principal component of each minimum lease payment. The
interest component of each minimum lease payment is recognized in the consolidated
statement of income of the current year.
	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 and over the same estimated useful
lives used for directly acquired property, plant and equipment.
m.	Revenue-Sharing Arrangements (RSA)
	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.	KSO
	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 investors and the Company has accelerated
the amortization of KSO deferred compensation income per June 30, 2008.
o.	Deferred charges for land rights
	Costs incurred to process and extend land rights are deferred and amortized using the
straight-line method over the term of the land rights.
p.	Foreign currency translation
	The functional currency of the Company and its subsidiaries is the Indonesian Rupiah and
the books of accounts of the Company and its subsidiaries are maintained in Indonesian
Rupiah. Transactions in foreign currencies are translated into Indonesian Rupiah at the
rates of exchange prevailing at transaction date. At the consolidated balance sheet date,
monetary assets and monetary liabilities balances denominated in foreign currencies are
translated into Indonesian Rupiah based on the buy and sell rates quoted by Reuters
prevailing at the consolidated balance sheet date as follows:

2007		2008
Buy	Sell	Buy	Sell
United States Dollars (US$) 1	9,045	9,050	9,215	9,225
Euro1	12,176	12,186	14,584	14,603
Yen1	73.26	73.31	87.60	87.72

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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

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

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

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

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

iii.	Interconnection revenues
	Revenues from network interconnection with other domestic and international
telecommunications carriers are recognized as earned in accordance with agreement and
are presented net of interconnection expenses.
iv.	Data and internet revenues
	Revenues from installations (set-up) of internet, data communication and e-Business are
recognized upon the completion of installations. Revenues from data
communication and internet are recognized based on usage.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

q. Revenue and expense recognition (continued)

v.	Revenues from network
	Revenues from network consist of revenues from leased lines and satellite transponder
leases. Revenues are recognized based on subscription fees as specified in the
agreements.
vi.	Expenses
	Expenses are recognized on accrual basis. Unutilized promotional credits are netted
against unearned income.

r. Employee benefits

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

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

r. Employee benefits (continued)

iii.	Early retirement benefits
	Early retirement benefits are accrued at the time the Company makes a commitment to
provide early retirement benefits as a result of an offer made in order to encourage
voluntary redundancy. A commitment to a termination arises when, and only when a
detailed formal plan for the early retirement cannot be withdrawn.
iv.	Pre-retirement benefits
	Employees of the Company are entitled to a benefit during a pre-retirement period in
which they are inactive for 6 months prior to their normal retirement age of 56 years.
During the pre-retirement period, the employees still receive benefits provided to
active employees, which include, but are not limited to regular salary, health care,
annual leave, bonus and other benefits. Benefits provided to employees which enter
pre-retirement period are calculated by an independent actuary using the projected unit
credit method.
v.	Other post-retirement benefits
	Employees are entitled to home leave passage benefits and final housing facility
benefits to their retirement age of 56 years. Those benefits are calculated by an
independent actuary using the projected unit credit method.

| | Gains or losses on curtailment are recognized when there is a commitment to make a material
reduction in the number of employees covered by a plan or when there is an amendment of a
defined benefit plan terms such as that a material element of future services to be
provided by current employees will no longer qualify for benefits, or will qualify only for
reduced benefits. |
| --- | --- |
| | Gains or losses on settlement are recognized when there is a transaction that eliminates
all further legal or constructive obligation for part or all of the benefits provided under
a defined benefit plan. |
| s. | Income tax |
| | The Company and its subsidiaries recognize deferred tax assets and liabilities for
temporary differences between the financial and tax bases of assets and liabilities at each
reporting date. The Company and its subsidiaries also recognize deferred tax assets
resulting from the recognition of future tax benefits, such as the benefit of tax loss
carry forwards, to the extent their future realization is probable. Deferred tax assets and
liabilities are measured using enacted tax rates at each reporting date which are expected
to apply to taxable income in the years in which those temporary differences are expected
to be recovered or settled. |
| | Income tax is charged or credited to the 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. |
| | Amendment to taxation obligations are recorded when an assessment is received or if
appealed against, when the results of the appeal are determined. |

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

t.	Derivative instruments
	Derivative transactions are accounted for in accordance with PSAK 55, Accounting for
Derivative Instruments and Hedging Activities which requires that all derivative
instruments be recognized in the financial statements at fair value. To qualify for hedge
accounting, PSAK 55 requires certain criteria to be met, including formal documentations at
the inception of the hedge.
	Changes in the fair values of derivative instruments that do not qualify for hedge
accounting are recognized in the consolidated statements of income. If a derivative
instrument is designated and qualifies for hedge accounting the assets or liabilities shall
be adjusted. The changes in fair values of derivative instruments are recognized in the
consolidated statements of income or consolidated statement of changes in stockholders
equity depending on the type and effectiveness of hedge transaction.
u.	Treasury Stock
	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.	Dividends
	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.	Earnings per share and earnings per ADS
	Basic earnings per share are computed by dividing net income by the weighted average number
of shares outstanding during the year. Net income per ADS is computed by multiplying basic
earnings per share by 40, the number of shares represented by each ADS.
x.	Segment information
	The Company and its subsidiaries segment information is presented based upon identified
business segments. A business segment is a distinguishable unit that provides different
products and services and is managed separately. Business segment information is consistent
with operating information routinely reported to the Companys chief operating decision
maker.
y.	Use of estimates
	The preparation of the consolidated financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities,
disclosures of contingent assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenues and expenses during the reporting period.
Significant items subject to such estimates and assumptions include the carrying amount of
property, plant and equipment and intangible assets, the valuation allowance for
receivables and obligations related to employee benefits. Actual results could differ
from those estimates.

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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.9,220 to US$1 as published by Reuters on June 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.330,264 million. |
| --- |
| The acquisition of Sigma has been accounted for using purchase method of accounting, which
purchase price were allocated to fair value of the acquired assets and assumed liabilities. As
of the issuance date of the consolidated financial statements, the valuation of fair values of
the assets and liabilities is still being processed, accordingly the difference in purchase
price and book value assets and liabilities are temporarily recorded as intangible assets. The
Company does not believe that any subsequent valuation result will have significant financial
impact to the Company. The following table summarizes the purchase price allocation of the
acquired assets and assumed liabilities at the closing date: |

Current assets	111,467
Fixed assets	50,806
Intangible assets	232,335
Other assets	20,056
Current liabilities	(56,444	)
Long-term liabilities	(27,956	)
Acquisition cost	330,264

The Companys consolidated result of operations had included the operating of Sigma since the date of acquisition.

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CASH AND CASH EQUIVALENTS

Cash on hand	31,795	36,363
Cash in banks
Related parties
Rupiah
PT Bank Negara Indonesia (Persero) Tbk (BNI)	128,400	121,622
PT Bank Mandiri (Persero) Tbk (Bank Mandiri)	171,363	115,722
PT Bank Rakyat Indonesia (Persero) Tbk (BRI)	10,096	10,250
PT Bank Pos Nusantara	911	250
PT Bank Tabungan Negara (Persero) Tbk (BTN)		20
	310,770	247,864
Foreign currencies
Bank Mandiri	32,165	63,449
BNI	2,726	23,115
BRI	613	665
Bank Syariah Mandiri		75
	35,504	87,304
Sub-total	346,274	355,168
Third parties
Rupiah
ABN AMRO
Bank (AAB)	89,663	88,566
Deutsche Bank AG (DB)	7,471	31,601
PT Bank Central Asia Tbk (BCA)	13,719	17,412
PT Bank Bukopin Tbk (Bank Bukopin)	5,659	6,359
PT Bank
Ekonomi Raharja Tbk (Bank Ekonomi)		2,285
PT Bank
Lippo Tbk (Bank Lippo)	11,221	1,679
Bank DKI		1,196
PT Bank
Niaga Tbk (Bank Niaga)	1,069	887
Citibank, N.A. (Citibank)	2,157	777
PT Bank Mega Tbk (Bank Mega)	1,103	446
Others (each below Rp.1 billion)	1,121	2,387
	133,183	153,595
Foreign currencies
DB	9,714	10,334
Citibank	10,241	8,679
Bank Ekonomi		5,948
AAB	9,211	186
Others (each below Rp.1 billion)	258	684
	29,424	25,831
Sub-total	162,607	179,426
Total cash in banks	508,881	514,594

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CASH AND CASH EQUIVALENTS (continued)


Time deposits
Related parties
Rupiah
BNI	1,977,773	2,495,085
Bank Mandiri	1,009,189	2,257,888
BRI	1,047,965	1,275,770
BTN	198,032	250,725
	4,232,959	6,279,468
Foreign currencies
BNI	874,297	262,186
Bank Mandiri	29,903	65,627
	904,200	327,813
Sub-total	5,137,159	6,607,281
Third parties
Rupiah
Citibank	1,142,300	623,600
PT Bank Pembangunan Daerah Jawa Barat
dan Banten (Bank Jabar)	295,865	293,060
Bank Bukopin	31,170	274,680
Bank Niaga	121,370	251,920
PT Bank Internasional Indonesia Tbk	83,890	216,500
PT Bank Danamon Indonesia Tbk
(Bank Danamon)		149,315
Bank Mega	141,952	117,945
PT Bank Victoria International Tbk		72,000
PT Pan Indonesia Bank Tbk		60,000
PT Bank Century Tbk		52,000
PT Bank Tabungan Pensiunan Nasional Tbk	45,808	37,053
PT Bank Bumiputera Indonesia Tbk
(Bank Bumiputera)		30,000
Bank Artha Graha Internasional Tbk		25,000
PT Bank Muamalat Indonesia (Bank Muamalat)	53,740	18,550
Bank Lippo		16,000
PT Bank Permata Tbk	102	5,000
PT Bank NISP Tbk		5,000
PT Bank Yudha Bhakti		2,000
PT Bank Nusantara Parahyangan Tbk		1,000
PT Bank Syariah Mega Indonesia
(Bank Syariah Mega)		1,000
DB	1,425,500
Standard Chartered Bank (SCB)	150,000
	3,491,697	2,251,623

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CASH AND CASH EQUIVALENTS (continued)


Time deposits (continued)
Third parties (continued)
Foreign currencies
DB	1,652,567	901,410
The Hongkong and Shanghai Banking
Corporation Ltd		296,584
Bank Muamalat		156,655
SCB		151,821
Bank Jabar		18,430
Bank Bukopin	4,524	4,610
Bank Mega	1,810	1,844
Bank Ekonomi		1,614
	1,658,901	1,532,968
Sub-total	5,150,598	3,784,591
Total time deposits	10,287,757	10,391,872
Grand Total	10,828,433	10,942,829

Interest rates per annum on time deposits are as follows:

Rupiah	2.75% - 13.62 %	2.25% - 12.50 %
Foreign currencies	3.00% - 5.05 %	1.00% - 4.80 %

| 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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6.
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	544,548		540,457
CSM	47,036		73,966
Indosat	29,921		44,149
PT Patra Telekomunikasi Indonesia (Patrakom)	12,822		13,586
PT Graha Informatika Nusantara (Gratika)	4,650		4,564
PT Aplikanusa Lintasarta (Lintasarta)	3,232		3,843
PSN	1,790		166
Others	2,212		4,301
Total	646,211		685,032
Allowance for doubtful accounts	(93,475	)	(148,797	)
Net	552,736		536,235

| | 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	3,713,589		3,740,350
Overseas international carriers	354,027		89,495
Total	4,067,616		3,829,845
Allowance for doubtful accounts	(914,743	)	(1,061,773	)
Net	3,152,873		2,768,072

b. By age

(i) Related parties

Up to 6 months	455,857		528,961
7 to 12 months	36,161		133,459
13 to 24 months	28,817		12,978
More than 24 months	125,376		9,634
Total	646,211		685,032
Allowance for doubtful accounts	(93,475	)	(148,797	)
Net	552,736		536,235

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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	3,146,451		2,675,129
More than 3 months	921,165		1,154,716
Total	4,067,616		3,829,845
Allowance for doubtful accounts	(914,743	)	(1,061,773	)
Net	3,152,873		2,768,072

c. By currency

(i) Related parties

Rupiah	563,827		666,617
U.S. Dollars	82,384		18,415
Total	646,211		685,032
Allowance for doubtful accounts	(93,475	)	(148,797	)
Net	552,736		536,235

(ii) Third parties

Rupiah	3,659,280		3,474,054
U.S. Dollars	408,336		355,791
Total	4,067,616		3,829,845
Allowance for doubtful accounts	(914,743	)	(1,061,773	)
Net	3,152,873		2,768,072

d. Movements in the allowance for doubtful accounts

Beginning balance	784,789		1,100,456
Additions (Note 37)	233,741		314,105
Bad debts write-off	(10,312	)	(203,991	)
Ending balance	1,008,218		1,210,570

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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. |
| Refer to Note 44 for details of related party transactions. |

INVENTORIES

SIM cards, RUIM cards and prepaid voucher blanks	87,556		148,125
Modules	117,777		137,835
Components	52,484		68,436
Total	257,817		354,396
Allowance for obsolescence
SIM cards, RUIM cards and prepaid voucher blanks	(190	)
Modules	(47,572	)	(52,710	)
Components	(5,793	)	(6,244	)
Total	(53,555	)	(58,954	)
Net	204,262		295,442

Movements in the allowance for obsolescence are as follows:

Beginning balance	48,098		54,701
Additions (Note 37)	5,765		4,425
Inventories write-off	(308	)	(172	)
Ending balance	53,555		58,954

| 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 June 30, 2008, certain inventories held by the Company has been insured against fire,
theft and other specific risks. Total sum insured as of June 30, 2008 amounted Rp.88,968
million (Note 44d.vii). Management believes that the insurance coverage is adequate. |

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

PREPAID EXPENSES

Frequency license	154,308	582,703
Salaries	306,927	312,928
Rental	947,424	307,284
Insurance	26,646	92,158
Telephone directory issuance costs	27,044	20,537
Others	12,106	22,854
Total	1,474,455	1,338,464

	Refer to Note 44 for details of related party transactions.
9.	RESTRICTED TIME DEPOSITS
	This account consists of the Companys time deposits of US$0.03 million (equivalent to Rp.300
million) and Rp.6,417 million as of June 30, 2007 and US$0.90 million (equivalent to Rp.8,326
million) and Rp.8,498 million as of June 30, 2008, and Infomedias time deposit of Rp.2,112
million and Rp.4,420 million as of June 30, 2007 and 2008, respectively, which were pledged as
collateral for bank guarantees to Bank Mandiri (Note 44).
10.	LONG-TERM INVESTMENTS


Percentage			Share of
of	Beginning		net income		Translation	Ending
ownership	balance	Addition	(loss)		adjustment	balance
Equity method:
CSM	25.00	53,114		(330	)	851	53,635
Patrakom	40.00	26,007		3,919			29,926
PSN	22.38
		79,121		3,589		851	83,561
Cost method:
Bridge Mobile Pte. Ltd. (BMPL)	10.81	9,290	5,454				14,744
PT Batam Bintan
Telekomunikasi (BBT)	5.00	587					587
PT Pembangunan Telekomunikasi
Indonesia (Bangtelindo)	3.18	199					199
		10,076	5,454				15,530
		89,197	5,454	3,589		851	99,091

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LONG-TERM INVESTMENTS (continued)


Percentage
of	Beginning		Share of		Translation		Ending
ownership	balance	Addition	net loss		adjustment		balance
Equity method:
CSM	25.00	57,240		(2,021	)	(1,103	)	54,116
Patrakom	40.00	32,892		(1,313	)			31,579
PSN	22.38
		90,132		(3,334	)	(1,103	)	85,695
Cost method:
BMPL	10.00	20,360						20,360
BBT	5.00	587						587
Bangtelindo	3.18	199						199
Scicom (MSC) Berhad (Scicom)	9.85	2,712	28,249					30,961
		23,858	28,249					52,107
		113,990	28,249	(3,334	)	(1,103	)	137,802

a.	CSM
	CSM is engaged in providing Very Small Aperture Terminal (VSAT), network application
services and consulting services on telecommunications technology and related facilities.
	As of June 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
	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.
	As of June 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
	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
	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 2007, Telkomsel has paid additional subscriptions of US$1,200,000 (equivalent to
Rp.11,069 million).
	As of June 30, 2007 and 2008, Telkomsels contributions which represent 10.81% and 10.00%
ownership interest are US$1.6 million (Rp.14,744 million) and US$2.2 million (Rp.20,360
million), respectively.
e.	BBT
	BBT is engaged in providing fixed line telecommunication services at Batamindo Industrial
Park in Muka Kuning, Batam Island and at Bintan Beach International Resort and Bintan
Industrial Estate in Bintan Island.
f.	Bangtelindo
	Bangtelindo is primarily engaged in providing consultancy services on the installation and
maintenance of telecommunications facilities.
g.	Scicom
	Scicom is engaged in providing call center services in Malaysia. As of June 30, 2008, TII
has purchased additional 26,000,000 Scicom shares or equivalent to 9.85% of TIIs total
ownership with transaction value amounted to US$3.42 million (equivalent to Rp.31,891
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	30,613	(994	)	(3,801	)	425,156
Buildings	2,758,673	70,254			69,599		2,898,526
Switching equipment	21,335,512	239,254			1,753,645		23,328,411
Telegraph, telex and data
communication equipment	189,701						189,701
Transmission installation and
equipment	34,621,302	162,311			5,056,918		39,840,531
Satellite, earth station and
equipment	5,568,809	98,162			4,547		5,671,518
Cable network	19,515,317	184,297	(363	)	(20,750	)	19,678,501
Power supply	3,269,686	12,992			525,839		3,808,517
Data processing equipment	5,332,847	83,565			336,388		5,752,800
Other telecommunications
peripherals	626,631	2,491			(2,898	)	626,224
Office equipment	759,959	23,466			4,758		788,183
Vehicles	171,778	2,559	(636	)	(6,224	)	167,477
Other equipment	113,093	3,001					116,094
Property under construction:
Buildings	35,105	54,846			(76,189	)	13,762
Switching equipment	1,334,956	468,275			(1,754,116	)	49,115
Transmission installation and
equipment	2,987,094	5,310,666			(5,004,920	)	3,292,840
Cable network	7,159	11,581			(4,183	)	14,557
Power supply	17,644	866,575			(541,260	)	342,959
Data processing equipment	16	361,367			(333,558	)	27,825
Leased assets
Transmission installation and
equipment	265,820						265,820
Total	99,310,440	7,986,275	(1,993	)	3,795		107,298,517
Accumulated depreciation and
impairment:
Direct acquisitions
Buildings	1,290,020	82,850			(99	)	1,372,771
Switching equipment	11,195,005	1,210,488			(153	)	12,405,340
Telegraph, telex and data
communication equipment	185,736	153					185,889
Transmission installation
and equipment	12,163,943	1,807,445			40,065		14,011,453
Satellite, earth station and
equipment	1,947,875	208,116			2,495		2,158,486
Cable network	11,495,878	737,006	(363	)	(26,427	)	12,206,094
Power supply	1,500,435	168,305			(2,165	)	1,666,575
Data processing equipment	3,688,200	198,024			(9,656	)	3,876,568
Other telecommunications
peripherals	587,545	6,810			5,855		600,210
Office equipment	593,038	26,917			896		620,851
Vehicles	161,018	2,130	(614	)	(6,095	)	156,439
Other equipment	101,211	3,636					104,847
Leased assets
Transmission installation and
equipment	133,476	104,909					238,385
Total	45,043,380	4,556,789	(977	)	4,716		49,603,908
Net Book Value	54,267,060						57,694,609

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PROPERTY, PLANT AND EQUIPMENT (continued)

2008	of Sigma	Additions	Deductions		Reclassifications		2008
At cost:
Direct acquisitions
Land	561,348		32,218					593,566
Buildings	2,961,302		44,017			59,468		3,064,787
Switching equipment	24,293,139		13,420			704,960		25,011,519
Telegraph, telex and data
communication equipment	156,036					(8,180	)	147,856
Transmission installation and
equipment	44,758,386		724,253	(2,516	)	3,021,515		48,501,638
Satellite, earth station and
equipment	5,979,626		124,904			1,935		6,106,465
Cable network	20,669,529		391,994			(195,925	)	20,865,598
Power supply	4,416,077		23,443			495,819		4,935,339
Data processing equipment	6,527,841	14,523	119,208			314,812		6,976,384
Other telecommunications
peripherals	637,020	2,186	12,579	(554	)	(37,485	)	613,746
Office equipment	706,484	1,345	18,348	(2,503	)	(13,229	)	710,445
Vehicles	156,192	1,160	4,793	(466	)	(26,054	)	135,625
Other equipment	109,784		2,281			(1,511	)	110,554
Property under construction:
Buildings	86		109,374			(65,284	)	44,176
Switching equipment	83,740		626,958			(674,241	)	36,457
Transmission installation and
equipment	2,525,030		4,595,801			(4,474,228	)	2,646,603
Satellite, earth station and
equipment	3,557							3,557
Cable network	381		161,753					162,134
Power supply	37,979		504,515			(524,563	)	17,931
Data processing equipment	31,351	27,544	400,346			(387,743	)	71,498
Other equipment			202			(202	)
Leased assets
Vehicles			37,693					37,693
Transmission installation and
equipment	283,813	2,227	25,580					311,620
Total	114,898,701	48,985	7,973,680	(6,039	)	(1,810,136	)	121,105,191
Accumulated depreciation and
impairment:
Direct acquisitions
Buildings	1,465,078		95,958			(103	)	1,560,933
Switching equipment	13,562,557		1,196,448			(673	)	14,758,332
Telegraph, telex and data
communication equipment	152,427		437			(9,140	)	143,724
Transmission installation
and equipment	16,178,965		2,205,057			(1,431,507	)	16,952,515
Satellite, earth station and
equipment	2,373,355		211,096			(3,579	)	2,580,872
Cable network	12,917,430		722,039			(211,194	)	13,428,275
Power supply	1,864,747		224,250			(7,681	)	2,081,316
Data processing equipment	4,324,279		455,705			(76,869	)	4,703,115
Other telecommunications
peripherals	575,458		6,278	(56	)	(35,999	)	545,681
Office equipment	584,927		22,577			(12,542	)	594,962
Vehicles	147,055		2,200	(466	)	(25,993	)	122,796
Other equipment	100,437		1,568			(1,511	)	100,494
Leased assets
Vehicles			13,560					13,560
Transmission installation and
equipment	188,094		887			105		189,086
Total	54,434,809		5,158,060	(522	)	(1,816,686	)	57,775,661
Net Book Value	60,463,892							63,329,530

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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	13,051	5,299
Net book value		34,349
(Loss) gain on disposal	13,051	(29,050	)

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
June 30, 2007 and 2008, the net book value of these property, plant and equipment was
Rp.1,095,325 million and Rp.982,505 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 June 30, 2007 and 2008, the net book value of these
property, plant and equipment was Rp.972,035 million and Rp.663,781 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 June 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 June 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 on July 30, 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.

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PROPERTY, PLANT AND EQUIPMENT (continued)

d. Others

| (i) | Interest capitalized to property under construction amounted to Rp.nil for the
six months period ended June 30, 2007 and 2008, respectively. |
| --- | --- |
| (ii) | Foreign exchange loss capitalized as part of property under construction amounted
to Rp.nil for the six months period ended June 30, 2007 and 2008, respectively. |
| (iii) | In 2007, Telkomsel capitalized Rp.938,296 million of its property, plant and
equipment which was subject to price adjustment (Note 49a.ii). Part of the capitalized
amount of Rp.307,603 million has been depreciated with total depreciation charged to the
consolidated statement of income amounting to Rp.10,210 million. 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 June 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 June 30, 2008, the Companys and its subsidiaries property, plant and
equipment, except for land, were insured with PT Asuransi Jasa Indonesia (Jasindo), PT
Asuransi Tugu Pratama, PT Asuransi Ramayana, PT Asuransi Wahana Tata and PT Asuransi
Central Asia against earthquake, fire, theft and other specified risks. Total cost of
assets being insured amounted to Rp.34,044,145 million and US$507.55 million, which was
covered by sum insured basis with a maximum loss claim of Rp.1,310,105 million and on
first loss basis of US$382.55 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 June 30, 2008, the completion of assets under construction was around
56.64% of the total contract value with estimated dates of completion to be between
April 2008 up to March 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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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 June 30, 2007 and 2008 are as follows:

Year — 2007	34,363
2008	78,161		100,804
2009	78,161		100,543
2010	78,161		92,753
2011	78,161		61,629
2012	24,470		56,198
Later			10,334
Total minimum lease payments	371,477		422,261
Interest	(147,228	)	(148,196	)
Net present value of minimum lease payments	224,249		274,065
Current maturities (Note 20a)	(24,572	)	(48,301	)
Long-term portion (Note 20b)	199,677		225,764

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				(261	)	365,032
Transmission installation
and equipment	296,365		(25,372	)	(36,666	)	234,327
Cable network	618,845				(2,898	)	615,947
Other telecommunications
peripherals	168,754						168,754
Total	1,459,013		(25,372	)	(39,825	)	1,393,816
Accumulated depreciation:
Land	2,703	116					2,819
Buildings	2,926	128					3,054
Switching equipment	172,341	15,179			(73	)	187,447
Transmission installation
and equipment	103,253	15,748	(7,567	)	(9,565	)	101,869
Cable network	124,740	25,251			(1,063	)	148,928
Other telecommunications
peripherals	87,418	12,598					100,016
Total	493,381	69,020	(7,567	)	(10,701	)	544,133
Net Book Value	965,632						849,683

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PROPERTY, PLANT AND EQUIPMENT UNDER RSA (continued)

2008	Additions	Reclassifications		2008
At cost:
Land	4,646				4,646
Buildings	3,982				3,982
Switching equipment	286,688		(1,047	)	285,641
Transmission installation
and equipment	179,785		(33,536	)	146,249
Cable network	583,353		(752	)	582,601
Other telecommunications
peripherals	149,200				149,200
Total	1,207,654		(35,335	)	1,172,319
Accumulated depreciation:
Land	2,935	116			3,051
Buildings	2,435	100			2,535
Switching equipment	169,663	11,863	(269	)	181,257
Transmission installation
and equipment	90,141	7,345	(16,861	)	80,625
Cable network	144,603	24,137	(260	)	168,480
Other telecommunications
peripherals	92,786	12,097			104,883
Total	502,563	55,658	(17,390	)	540,831
Net Book Value	705,091				631,488

| 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 June 30, 2007 and 2008, are as follows: |

Gross amount	1,393,816		1,172,319
Accumulated amortization:
Beginning balance	(641,839	)	(704,269	)
Additions (Note 34)	(138,296	)	(110,738	)
Deductions	65,197		35,335
Ending balance	(714,938	)	(779,672	)
Net	678,878		392,647

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13.
Advances and other non-current assets as of June 30, 2007 and 2008 consist of:

Prepaid rent net of current portion (Note 8)		804,775
Advances for purchase of property, plant and equipment	185,790	531,299
Deferred land rights charges	84,055	102,337
Restricted cash	91,595	92,090
Equipment not used in operations net	150,831	62,028
Security deposits	33,139	47,085
Others	60,223	171,692
Total	605,633	1,811,306

| | 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 June 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. |
| | As of June 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 six months period ended June 30, 2007 and 2008 amounted to Rp.15,053 million and
Rp.6,176 million, respectively. |
| | In 2007 certain Telkomsels equipment with a net carrying amount of Rp.119,773 million was
re-installed and subsequently reclassified to property, plant and equipment. |
| | Refer to Note 44 for details of related party transactions. |
| 14. | GOODWILL AND OTHER INTANGIBLE ASSETS |

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


		intangible
Goodwill		assets		License		Total
Gross carrying amount:
Balance, June 30, 2007	106,348		7,602,848		436,000		8,145,196
Accumulated amortization:
Balance, December 31, 2006	(106,348	)	(3,590,563	)	(11,679	)	(3,708,590	)
Amortization expense for 6 months
period (Note 37)			(501,176	)	(23,357	)	(524,533	)
Balance, June 30, 2007	(106,348	)	(4,091,739	)	(35,036	)	(4,233,123	)
Net Book Value			3,511,109		400,964		3,912,073
Weighted-average amortization period			7.59 years		9.33 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		7,602,848		436,000		8,145,196
Additions Metras software					25,614		25,614
Additions Sigma	233,256						233,256
Balance, June 30, 2008	339,604		7,602,848		461,614		8,404,066
Accumulated amortization:
Balance, December 31, 2007	(106,348	)	(4,593,326	)	(58,393	)	(4,758,067	)
Accumulated Metras Software					(13,072	)	(13,072	)
Amortization expense for 6 months
period (Note 37)	(3,884	)	(501,587	)	(23,357	)	(528,828	)
Balance, June 30, 2008	(110,232	)	(5,094,913	)	(94,822	)	(5,299,967	)
Net Book Value	229,372		2,507,935		366,792		3,104,099
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 and Metra in 2008 (Note 4). 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 June 2008 would be approximately Rp.1,059,496
million per year. |

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15.
Escrow accounts as of June 30, 2007 and 2008 consist of the following:

Bank Mandiri		41,571
Bank Danamon	1,169	1,180
Others (each below Rp.1 billion)	225	108
	1,394	42,859

| | 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. |
| 16. | TRADE PAYABLES |


Related parties
Concession fees	383,851	1,086,418
Purchases of equipment, materials and services	271,256	258,772
Payables to other telecommunications providers	116,852	53,499
Sub-total	771,959	1,398,689
Third parties
Purchases of equipment, materials and services	4,787,757	5,685,923
Payables related to RSA	84,411	298,410
Payables to other telecommunications providers	53,247	74,055
Sub-total	4,925,415	6,058,388
Total	5,697,374	7,457,077

Trade payables by currency are as follows:

Rupiah	3,052,643	4,517,690
U.S. Dollars	1,612,816	1,652,552
Euro	1,025,608	1,280,083
Singapore Dollars	6,184	5,978
Others	123	774
Total	5,697,374	7,457,077

Refer to Note 44 for details of related party transactions.

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ACCRUED EXPENSES

Salaries and benefits	1,413,698	1,266,626
Operations, maintenance and telecommunications services	729,753	1,015,051
General, administrative and marketing	386,487	472,678
Interest and bank charges	159,027	141,727
Total	2,688,965	2,896,082

UNEARNED INCOME

Prepaid pulse reload vouchers	1,953,838	1,784,454
Other telecommunications services	3,992	35,964
Others	59,322	62,465
Total	2,017,152	1,882,883

SHORT-TERM BANK LOANS

Bank Niaga	26,844	35,000
Bank Syariah Mega		28,984
Bank Ekonomi		7,000
BNI	300,000
BCA	300,000
Bank Mandiri	300,000
Bank Bumiputera	8,000
Total	934,844	70,984

| 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 June 30, 2007 and 2008, the
principal outstanding amounted to Rp.11,844 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 June 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 June 30, 2007 and 2008,
the principal outstanding amounted to Rp.8,000 million and Rp.15,000 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 June 30, 2007
and 2008 was Rp.7,000 million and Rp.nil respectively.
b.	Bank Syariah Mega
	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. The loan is payable within 3 months from the signing date.
On March 27, 2008, the loan agreement was amended to extend the maturity period to June
14, 2008. The principal outstanding as of June 30, 2008 amounted to Rp.10,535 million.
	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. The loan is payable within 3 months from the signing date which become due
on June 2008. The principal outstanding as of June 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. The loan is payable within 3 months from the signing date which become due
on September 2008. The principal outstanding as of June 30, 2008 amounted to Rp.9,637
million.
c.	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 12.5% per annum and
repayable within 3 months from the signing date to September 11, 2008. This
facility is secured by Sigmas account receivables amounted to Rp.14,000 million. The
principle outstanding as of June 30, 2008, amounted to Rp.7,000 million.

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SHORT-TERM BANK LOANS (continued)

c.	Bank Ekonomi (continued)
	Sigma is required to comply with all covenants or restrictions including requirement to
obtain written authorization from Bank Ekonomi in condition Sigma obtain other loan
facility, sell or secure Sigmas assets to other party, pay dividend and pay payables to
the stockholders.
	As of June 30, 2008, Sigma has complied with the above covenant
d.	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 June 30, 2007 amounted to
Rp.300,000 million and on March 28, 2008, the loan was fully repaid.
e.	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 June 30, 2007, amounted to Rp.300,000 million and on March 28, 2008, the
loan was fully repaid.
f.	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.

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SHORT-TERM BANK LOANS (continued)

f.	Bank Mandiri (continued)
	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 June 30, 2007, amounted to Rp.300,000 million and on March 28, 2008, the
loan was fully repaid.
g.	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 June
30, 2007, amounted to Rp.8,000 million and on November 23, 2007, the loan was fully repaid.

MATURITIES OF LONG-TERM LIABILITIES

a. Current maturities

Bank loans	Notes — 23	2,294,509	3,602,271
Deferred consideration for business combinations	24	1,049,952	1,199,481
Two-step loans	21	443,686	431,622
Obligations under capital leases	11	24,572	48,301
Notes and bonds	22	999,780
Total		4,812,499	5,281,675

b. Long-term portion

	(In billions of Rupiah) — Notes	Total	2009	2010	2011	2012	Later
Bank loans	23	3,247.1	1,442.1	1,666.2	117.7	10.2	10.9
Two-step loans	21	3,539.1	216.4	409.0	381.5	383.6	2,148.6
Deferred consideration for
business combinations	24	1,847.4	535.4	1,205.3	106.7
Obligations under capital leases	11	225.8	58.0	62.6	47.4	48.2	9.6
Total		8,859.4	2,251.9	3,343.1	653.3	442.0	2,169.1

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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% - 11.64 %	3.10% - 12.27 %	4,177,731		3,970,696
Consortium of contractors	3.20 %		27,492
Total			4,205,223		3,970,696
Current maturities (Note 20a)			(443,686	)	(431,622	)
Long-term portion (Note 20b)			3,761,537		3,539,074

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

Currencies	Interest rate — 2007	2008	Outstanding — 2007	2008
U.S. Dollars	4.00% - 7.39 %	4.00% - 7.39 %	1,694,196	1,549,503
Rupiah	11.43% - 12.18 %	8.97% - 12.27 %	1,498,380	1,309,753
Japanese Yen	3.10 %	3.10 %	985,155	1,111,440
Total			4,177,731	3,970,696

| | 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 June 30, 2007 and
2008 consisted of loans in Japanese Yen with an interest rate of 3.20% and 3.10% per
annum, respectively. |
| | 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. |

As of June 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.

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TWO-STEP LOANS (continued)

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 June 30, 2008, the Company complied with the above mentioned ratios.

NOTES AND BONDS


Bonds
Principal	1,000,000
Bond issuance costs	(220	)
Net	999,780
Total	999,780
Current maturities (Note 20a)	(999,780	)
Long-term portion

a.	Bonds
	On July 16, 2002, the Company issued a five-year bonds amounting to Rp.1,000,000 million,
at par value. The bonds bore interest at a fixed rate of 17% per annum, payable quarterly
beginning October 16, 2002 and secured with all assets owned by the Company. The bonds are
traded on the Surabaya Stock Exchange and matured on July 16, 2007. The trustee of the
bonds is BRI (effective from January 17, 2006 replacing BNI) and the custodian is PT
Kustodian Sentral Efek Indonesia.
	Under the provisions of the bond, the Company is required to comply with all covenants or
restrictions including maintaining certain consolidated financial ratios. The Company was
also restricted from making any loans to or for the benefit of any person which in
aggregate exceed Rp.500,000 million, in which the Company was not able to comply with in
2006. However, the Company has obtained a written waiver from BRI, the trustee of the
bonds. The bonds were fully repaid on July 16, 2007.
b.	Medium-term Notes (the Notes)
	On December 13, 2004, the Company entered into an agreement with PT ABN AMRO Asia
Securities Indonesia, PT Bahana Securities, PT BNI Securities and PT Mandiri Sekuritas
(collectively referred as Initial Purchasers) to issue Notes for a total principal amount
of Rp.1,125,000 million. Proceeds from issuance of the Notes were used to finance the
payment of the remaining balance of the borrowings assumed in connection with the TII
acquisition amounting to US$123.0 million.

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NOTES AND BONDS (continued)

b.
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. |

BANK LOANS

The details of long-term bank loans as of June 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	851,203	71.0	650,747
Bank Mandiri	Rp.	2,400,000		1,260,000		1,540,000
BCA	Rp.	1,423,000		1,100,000		600,000
Citibank	US$	113	27.4	248,241	4.0	37,233
	Euro	73	14.7	178,478
	Rp.	1,000,000		400,000		700,000
BNI	Rp.	1,550,000		740,000		1,020,000
Consortium of banks	Rp.	150,000
Bank Lippo	Rp.	18,500		14,721		7,360
Bank Niaga	Rp.	39,300		24,999		28,978
Bank Bukopin	Rp.	5,300		3,737		2,690
BRI	Rp.	2,400,000		400,000		2,240,000
Bank Ekonomi	Rp.	27,000				22,337
Total				5,221,379		6,849,345
Current maturities of bank loans
(Note 20a)				(2,294,509	)	(3,602,271	)
Long-term portion (Note 20b)				2,926,870		3,247,074

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

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 June 30, 2007 and
2008 amounted to US$94.1 million (equivalent to Rp.851,203 million) and US$71 million
(equivalent to Rp.650,747 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 (9.58% per annum as of June 30, 2007 and 2008,
respectively) which becomes due quarterly in arrears and is unsecured. The principal
outstanding as of June 30, 2007 and 2008 amounted to Rp.480,000 million and Rp.240,000
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 (9.33% per annum as of June 30,
2007 and 2008, respectively) which becomes due quarterly in arrears and is unsecured.
The principal outstanding as of June 30, 2007 and 2008 amounted to Rp.280,000 million
and Rp.140,000 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 (9.23% per
annum as of June 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 June 30, 2007 and 2008 amounted to Rp.500,000 million and Rp.560,000 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 (9.26% as of
June 30, 2008) which becomes due quarterly in arrears and is unsecured. The principal
outstanding as of June 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 (1.9% per annum as of June 30, 2007) 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 (9.58% per annum as of June 30, 2007 and 2008,
respectively) which becomes due quarterly in arrears and is unsecured. The principal
outstanding as of June 30, 2007 and 2008 amounted to Rp.320,000 million and Rp.160,000
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 (9.33% per annum as of June 30, 2007 and 2008,
respectively) which becomes due quarterly in arrears and is unsecured. The principal
outstanding as of June 30, 2007 and 2008 amounted to Rp.280,000 million and Rp.140,000
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 (9.23% per annum as of June 30, 2007 and 2008)
which becomes due quarterly in arrears and is unsecured. The principal outstanding as of
June 30, 2007 and 2008 amounted to Rp.500,000 million and Rp.300,000 million,
respectively.

d. Citibank

| 1. |
| --- |
| 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. |

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BANK LOANS (continued)

d. Citibank (continued)

1.	Hermes Export Facility (continued)
	The Facility bears interest rate based on the Euro Interbank Offered Rate (EURIBOR) plus
0.75% per annum (3.81% per annum as of June 30, 2007) and was unsecured. Interest was
payable semi-annually, starting on the utilization date of the Facility (May 29, 2003).
As of June 30, 2007 the outstanding balance was Euro14.7 million (equivalent to
Rp.178,478 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 June 30, 2007 and 2008, the outstanding loan was US$6.3 million (equivalent to
Rp.56,897 million) and US$2 million (equivalent to Rp.19,333 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 (6.11% per annum as of June 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 June 30,
2007 was US$3.7 million (equivalent to Rp.33,589 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 June 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. In 2007, the Company has complied with the
above covenant. |
| 3. | EKN-Backed Facility |
| | On December 2, 2002, pursuant to the partnership agreement with PT Ericsson Indonesia
(Ericsson Indonesia) (Note 49a.ii), Telkomsel entered into the EKN-Backed Facility
agreement (Facility) with Citibank International plc (Original Lender and Agent)
and Citibank, Jakarta branch (Arranger) covering a total Facility of US$70.5 million,
divided into several tranches. The agreement was subsequently amended on December 17,
2004, to reduce the total Facility to US$68.9 million. |
| | The interest rate per annum on the Facility is determined based on Commercial Interest
Reference Rate (CIRR) of 3.52% plus 0.5% per annum (4.02% as of June 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 June 30, 2007 and
2008, the outstanding balance was US$17.4 million (equivalent to Rp.157,755 million) and
US$2 million (equivalent to Rp.17,900 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 (9.85% per annum and 9.58% per annum as of June 30, 2007 and 2008,
respectively) which becomes due quarterly in arrears and is unsecured. The principal
outstanding as of June 30, 2007 and 2008 amounted to Rp.400,000 million and
Rp.200,000 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 June 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 June 30, 2007 and 2008:


	Foreign			Foreign
	currencies	Rupiah		currencies	Rupiah
	(in millions)	equivalent		(in millions)	equivalent
Hermes Export Facility	Euro	14.7	178,478
HP Backbone loans	US$	10.0	90,486	2	19,333
EKN-Backed Facility	US$	17.4	157,755	2	17,900
Medium term loan	Rp.		400,000		700,000
Total			826,719		737,233
Current maturities			(590,185	)	(437,233	)
Long-term portion			236,534		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 (9.33% per annum as of June 30, 2007 and 2008,
respectively) which becomes due quarterly in arrears and is unsecured. The principal
outstanding as of June 30, 2007 and 2008 amounted to Rp.240,000 million and Rp.120,000
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 (9.23% per annum as of June 30, 2007 and 2008)
which becomes due quarterly in arrears and is unsecured. The principal outstanding as of
June 30, 2007 and 2008 amounted to Rp.500,000 million and Rp.300,000 million,
respectively. |

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

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 (9.26% per annum as of June 30, 2008) which becomes due quarterly in arrears and is unsecured. The principal outstanding as of June 30, 2008 amounted to Rp.600,000 million.

f.	Consortium of banks
	On June 21, 2002, the Company entered into a loan agreement with a consortium of banks for a
facility of Rp.400,000 million, to finance the Divre V Junction Project. Bank Bukopin, acting
as the facility agent, charged interest at the rate of 19% per annum for the first year from
the signing date and at the rate of the highest average three-month deposit rate of each
creditor plus 4% per annum for the remaining years. The drawdown period expires 19 months
from the signing of the loan agreement and the principal is payable in 14 quarterly
installments starting from April 2004. The loan facility is secured by project equipment,
with a value of not less than Rp.500,000 million.
	Based on an addendum to the loan agreement dated April 4, 2003, the loan facility was reduced
to Rp.150,000 million, the drawdown period was amended to expire 18 months from the signing
of the addendum, the repayment schedule was amended to 14 quarterly installments starting
from May 21, 2004 and ending on June 21, 2007, and the value of the project equipment secured
was reduced to Rp.187,500 million. On June 22, 2007, the loan was fully repaid
g.	Bank Lippo
	On May 29, 2006, Infomedia entered into a loan agreement with Bank Lippo for a facility of
Rp.18,500 million, to finance its call center project with Telkomsel. The facility bears
interest at 15.5% per annum and is secured by Infomedias receivables on the call center
contract with Telkomsel amounted to Rp.23,125 million until the due date of the loan within
36 months from the withdrawal date. As of June 30, 2007 and 2008, the principal outstanding
amounted to Rp.14,721 million and Rp.7,360 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 June 30, 2007 and 2008, principal outstanding under these facilities amounted to Rp.2,770 million and Rp.880 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. As of June 30, 2007, the outstanding loans of the facilities were Rp.1,260 million
and Rp.nil, respectively, and as of June 30, 2008 was Rp.1,095 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 as of June
30, 2007 and 2008, respectively). As of June 30, 2007 and 2008, the principal
outstanding amounted to Rp.969 million and Rp.534 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. 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 June 30, 2007 and 2008, principal
outstanding under these facilities amounted to Rp.20,000 million and Rp.19,400 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. 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 June 30, 2008, the principal
outstanding amounted to Rp.7,069 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 as
of June 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. As of June 30, 2007 and 2008, the principal
outstanding amounted to Rp.3,737 million and Rp.2,690 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 (9.38% per
annum as of June 30, 2007 and 2008, respectively) which becomes due quarterly in
arrears and is unsecured. The principal outstanding as of June 30, 2007 and 2008
amounted to Rp.400,000 million and Rp.240,000 million, respectively. |
| --- | --- |
| (ii) | On October 24, 2007, Telkomsel signed 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 (9.26% per
annum as of June 30, 2008) which becomes due quarterly in arrears and is unsecured. The
principal outstanding as of June 30, 2008 amounted to Rp.2,000,000 million. |

| k. |
| --- |
| On December 7, 2006, Sigma signed into a facility loan agreement with Bank ekonomi of
Rp.14,000 million. The loan is payable in 72 monthly installments starting from December 12,
2006 and ending on December 12, 2012. This credit facility is secured by a parcel of land os
Sigma located in Surabaya (Note 11). As of June 30, 2008, the principal outstanding amounted
to Rp.12,420 million. |
| On March 9, 2007, Sigma received an additional facility of Rp.13,000 million. The facility
bears interest at 12% per annum and is payable in 69 monthly installments starting from March
12, 2007 and ending on December 12, 2012. This credit facility is secured by a parcel of
land of Sigma located in Surabaya (Note 11). As of June 30, 2008, the principal outstanding
amounted to Rp.9,917 million, respectively. |

DEFERRED CONSIDERATION FOR BUSINESS COMBINATIONS

Deffered 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	207,327		105,669
The Asian Infrastructure Fund	49,364		25,159
MediaOne International I B.V.	138,218		70,445
Less discount on promissory notes	(16,116	)	(2,623	)
	378,793		198,650
KSO IV transaction
MGTI	2,552,661		1,904,234
Less discount	(344,023	)	(187,305	)
	2,208,638		1,716,929

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

DEFERRED CONSIDERATION FOR BUSINESS COMBINATIONS (continued)


KSO VII transaction
BSI	1,895,944		1,357,803
Less discount	(420,320	)	(226,512	)
	1,475,624		1,131,291
Total	4,063,055		3,046,870
Current maturity net of discount (Note 20a)	(1,049,952	)	(1,199,481	)
Long-term portion net of discount (Note 20b)	3,013,103		1,847,389

a.	TII transaction
	The outstanding balance relating to TII transaction represents non-interest bearing
promissory notes which were included in the purchase consideration, and arose from the
acquisition of the 100% outstanding common shares of TII (previously the 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 June 30, 2007 and 2008, the outstanding promissory notes, before unamortized discount,
amounted to US$43.6 million (equivalent to Rp.394,909 million) and US$21.8 million
(equivalent to Rp.201,273 million), respectively.
b.	KSO IV transaction
	The outstanding balance relating to KSO IV 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 June 30, 2007 and 2008, the remaining monthly payments to be made to MGTI, before
unamortized discount, amounted to US$282.1 million (equivalent to Rp.2,552,661 million) and
US$206.4 million (equivalent to Rp.1,904,234 million), respectively.
c.	KSO VII transaction
	The outstanding balance relating to KSO VII 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 June 30, 2007 and 2008, the remaining monthly payments to be made to BSI, before
unamortized discount, amounted to Rp.1,895,944 million and Rp.1,357,803 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	6,972,059	7,685,358
Infomedia	118,641	143,521
Metra	1,589	34,269
Total	7,092,289	7,863,148


Minority interest in net income (loss) of subsidiaries:
Telkomsel	2,223,869		2,221,987
Infomedia	26,237		32,937
Metra	(1,989	)	3,658
Total	2,248,117		2,258,582

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	51.73	2,580,118
JPMCB US Resident (Norbax Inc.)	1,608,020,833	8.06	402,005
The Bank of New York	1,726,969,800	8.66	431,742
Directors (Note 1b):
Ermady Dahlan	17,604		4
Indra Utoyo	5,508		1
Public (individually less than 5%)	6,293,224,323	31.55	1,573,307
Total	19,948,708,780	100.00	4,987,177
Treasury stock (Note 28)	211,290,500		52,823
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	52.30	2,580,118
JPMCB US Resident (Norbax Inc.)	1,457,976,001	7.39	364,494
The Bank of New York	1,971,057,496	9.99	492,764
Directors (Note 1b):
Ermady Dahlan	17,604		4
Indra Utoyo	5,508		1
Public (individually less than 5%)	5,984,181,459	30.32	1,496,046
Total	19,733,708,780	100.00	4,933,427
Treasury stock (Note 28)	426,290,500		106,573
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 June 30, 2007 and 2008, the Company has repurchased 211,290,500 and 426,290,500 shares,
respectively, of the Companys issued and outstanding Series B shares, representing 1.05% and
2.11%, respectively, for a total repurchased amount of Rp.1,829,138 million in 2007 and
Rp.3,798,701 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 Badan Pengawas Pasar Modal dan Lembaga Keuangan Indonesia (BAPEPAM)
Regulation No. XI.B.2 and under Law No. 40/2007 on Limited Liability Companies. |
| The movement of shares held in treasury arising from the programs for repurchase of shares 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	92,914,000	876,927	181,550,000	1,622,090
Balance ending	211,290,500	1,829,138	426,290,500	3,798,701

Historical unit cost of repurchase of treasury shares:


2008
Weighted average	8,911
Minimum	6,628
Maximum	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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| 29. | DIFFERENCE IN VALUE ARISING FROM RESTRUCTURING TRANSACTIONS AND OTHER TRANSACTIONS BETWEEN
ENTITIES UNDER COMMON CONTROL |
| --- | --- |
| | The balance of this account amounting to Rp.270,000 million arose from the early termination of
the 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 June 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 June 30, 2007 and 2008, the development of the related infrastructures amounted to
Rp.90,702 million and Rp.190,997 million, respectively. |
| 30. | TELEPHONE REVENUES |


Fixed lines
Local and SLJJ	3,653,128	3,340,360
Monthly subscription charges	1,856,685	1,839,933
Installation charges	60,873	17,573
Phone cards	5,605	4,788
Others	62,783	58,032
Total	5,639,074	5,260,686
Cellular
Air time charges	11,091,060	11,569,584
Features	112,473	319,993
Monthly subscription charges	129,321	179,673
Connection fee charges	65,667	107,318
Total	11,398,521	12,176,568
Total Telephone Revenues	17,037,595	17,437,254

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INTERCONNECTION REVENUES

Revenues	5,802,820		5,864,545
Expenses	(1,281,828	)	(1,463,002	)
Total Net	4,520,992		4,401,543

| | Based on the MoCI Regulation No. 08/Per/M.KOMINFO/02/2006, the implementation of cost-based
interconnection tariff is applicable beginning January 1, 2007 (Note 48). |
| --- | --- |
| | Refer to Note 44 for details of related party transactions. |
| 32. | DATA AND INTERNET REVENUES |

Short Messaging Services (SMS)	4,434,209	5,902,608
Internet	613,511	986,722
Data communication	1,116,308	342,388
Voice over Internet Protocol (VoIP)	101,828	69,832
e-Business	17,589	13,499
Total	6,283,445	7,315,049

NETWORK REVENUES

Leased lines	76,853	299,495
Satellite transponder lease	134,018	201,377
Total	210,871	500,872

	Refer to Note 44 for details of related party transactions.
34.	REVENUE-SHARING ARRANGEMENTS (RSA) REVENUES

RSA revenues	96,213	74,041
Amortization of unearned income (Note 12)	138,296	110,738
Total	234,509	184,779

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PERSONNEL EXPENSES

Salaries and related benefits	1,404,836		1,414,405
Vacation pay, incentives and other benefits	1,236,110		1,341,399
Employees income tax	802,460		488,149
Net periodic post-retirement health care
benefits costs (Note 43)	362,084		450,660
Net periodic pension costs (Note 41a)	228,594		353,734
Housing	142,351		136,902
Other post-retirement cost (Note 41b)	43,742		41,785
Additional old saving allowance	158,116		30,543
LSA costs (Notes 42a,b)	(383,677	)	9,955
Other employees benefits (Note 41c)	4,876		7,083
Medical	6,061		4,089
Others	74,571		15,138
Total	4,080,124		4,293,842

OPERATIONS, MAINTENANCE AND TELECOMMUNICATION SERVICES EXPENSES

Operations and maintenance	2,497,300	2,893,076
Radio frequency usage charges	548,513	1,088,792
Concession fees and Universal Service
Obligation (USO) charges	491,996	527,346
Cost of phone, SIM and RUIM cards	311,279	332,272
Electricity, gas and water	220,528	236,067
Insurance	150,327	182,469
Leased lines	88,398	165,898
Vehicles rental and supporting facilities	114,039	102,822
Travelling	23,782	25,520
Others	2,779	56,817
Total	4,448,941	5,611,079

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) | 524,533 | 528,828 |
| --- | --- | --- |
| Provision for doubtful accounts and inventory
obsolescence (Notes 6d and 7) | 239,506 | 318,530 |
| Collection expenses | 276,623 | 289,583 |
| Security and screening | 112,704 | 127,537 |
| Travelling | 126,056 | 114,385 |
| Training, education and recruitment | 100,252 | 105,919 |
| Professional fees | 38,990 | 48,289 |
| Meetings | 39,668 | 42,611 |
| Vehicles rental | 47,286 | 40,165 |
| General and social contribution | 85,190 | 37,092 |
| Stationery and printing | 96,196 | 29,782 |
| Research and development | 2,867 | 4,049 |
| Others | 17,506 | 14,819 |
| Total | 1,707,377 | 1,701,589 |

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		53,493
Value Added Tax (VAT)		4,712
Income tax Article 23 Services Delivery	25,939	25,840
	25,939	84,045

c. Taxes payable


The Company
Income taxes
Article 21 Individual income tax	101,316	83,464
Article 22 Withholding tax on goods delivery and import	2,223	6,814
Article 23 Withholding tax on services delivery	7,719	16,331
Article 25 Installment of corporate income tax	6,493	5,800
Article 26 Withholding tax on non-resident income tax	1,159	330
Article 29 Underpayment of corporate income tax	165,161	460,587
VAT	345,474	265,425
	629,545	838,751

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TAXATION (continued)

c. Taxes payable (continued)


Subsidiaries
Income taxes
Article 21 Individual income tax	16,836	38,165
Article 22 Withholding tax on goods delivery and import	1	1
Article 23 Withholding tax on services delivery	35,280	32,209
Article 25 Installment of corporate income tax	357,629	423,190
Article 26 Withholding tax on non-resident income tax	17,675	35,185
Article 29 Underpayment of corporate income tax	534,169	203,565
VAT	140,638	75,335
	1,102,228	807,650
	1,731,773	1,646,401

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


Current
The Company	723,475	1,156,935
Subsidiaries	2,613,830	2,705,382
	3,337,305	3,862,317
Deferred
The Company	410,368	(76,563	)
Subsidiaries	147,259	153,628
	557,627	77,065
	3,894,932	3,939,382

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.
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	12,767,972		12,495,574
Add back consolidation eliminations	4,247,430		4,219,054
Consolidated income before tax and eliminations	17,015,402		16,714,628
Less: income before tax of the subsidiaries	(9,256,636	)	(9,336,646	)
Income before tax attributable to the Company	7,758,766		7,377,982
Less: income subject to final tax	(302,915	)	(343,443	)
	7,455,851		7,034,539
Tax calculated at progressive rates	2,236,738		2,110,344
Non-taxable income	(1,275,306	)	(1,265,299	)
Non-deductible expenses	184,173		192,704
Deferred tax assets that cannot be utilized net	(54,489	)	1,577
Corporate income tax expense	1,091,116		1,039,326
Final income tax expense	42,727		41,046
Total income tax expense of the Company	1,133,843		1,080,372
Income tax expense of the subsidiaries	2,761,089		2,859,010
Total consolidated income tax expense	3,894,932		3,939,382

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TAXATION (continued)

e.
The reconciliation between income before tax attributable to the Company and the estimated
taxable income for the years ended June 30, 2007 and 2008, are as follows:

Income before tax attributable to the Company	7,758,766		7,377,982
Less: income subject to final tax	(302,915	)	(343,443	)
	7,455,851		7,034,539
Temporary differences:
Amortization of intangible assets	501,176		501,587
Depreciation of property, plant and equipment	131,948		253,938
Allowance for doubtful accounts	52,728		258,417
Accrued employees benefits	524,266		162,626
Depreciation of property, plant and equipment
under RSA	69,019		55,658
Capital leases	(20,673	)	(953	)
Allowance for inventory obsolescence	5,486		4,112
Amortization of land rights	(2,142	)	(1,813	)
Gain on sale of property, plant and equipment	1,937		(7,282	)
Amortization of unearned income RSA	(138,062	)	(98,622	)
Trade receivables written-off	(115,634	)	(174,854	)
Net periodic pension costs and other-post retirement
benefits costs	(150,909	)	(161,296	)
LSA	(425,082	)	27,861
Payments of deferred consideration for business
combinations	(451,772	)	(437,081	)
Accrued early retirement benefits	(1,528,429	)
Loss on purchase commitments	8,561		(55,659	)
Other provisions	(11,943	)	(66,173	)
Total temporary differences	(1,549,525	)	260,466

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TAXATION (continued)

e. (continued)


Permanent differences:
Net periodic post-retirement health care
benefits costs	357,854		445,463
Amortization of discounts on promissory notes	14,317		6,172
Equity in net income of associates and subsidiaries	(4,251,019	)	(4,217,664	)
Others	241,741		190,712
Total permanent differences	(3,637,107	)	(3,575,317	)
Taxable income	2,269,219		3,719,689
Corporate income tax expense	680,748		1,115,889
Final income tax expense	42,727		41,046
Total current income tax expense of the Company	723,475		1,156,935
Current income tax expense of the subsidiaries	2,613,830		2,705,382
Total current income tax expense	3,337,305		3,862,317

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. Conservatively, the amount was charged to the consolidated
statements of income. |
| --- | --- |
| 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. |

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TAXATION (continued)

f. Tax assessment (continued)

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


		credited to the
		consolidated
December 31,		to statements		June 30,
2006		of income		2007
The Company
Deferred tax assets:
Deferred consideration for
business combinations	1,249,332		(134,012	)	1,115,320
Allowance for doubtful accounts	263,321		20,334		283,655
Net periodic pension and other
post-retirement benefits costs	361,839		(104,852	)	256,987
Accrued expenses	57,185		(3,953	)	53,232
Accrued for employees benefits	529,662		(301,249	)	228,413
Accrued LSA	117,440		(67,945	)	49,495
Capital leases	12,408		27,454		39,862
Allowance for inventory obsolescence	14,099		1,525		15,624
Total deferred tax assets	2,605,286		(562,698	)	2,042,588
Deferred tax liabilities:
Difference between book and
tax property, plant and
equipments net book value	(1,947,349	)	5,903		(1,941,446	)
Land rights	(3,800	)	(716	)	(4,516	)
RSA	(47,661	)	(3,581	)	(51,242	)
Intangible assets	(1,205,783	)	150,725		(1,055,058	)
Total deferred tax liabilities	(3,204,593	)	152,331		(3,052,262	)
Deferred tax liabilities of the Company net	(599,307	)	(410,367	)	(1,009,674	)
Deferred tax liabilities of the subsidiaries net	(2,066,091	)	(147,259	)	(2,213,350	)
Total deferred tax liabilities net	(2,665,398	)	(557,626	)	(3,223,024	)

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TAXATION (continued)

g. Deferred tax assets and liabilities (continued)


		credited to the
		consolidated
December 31,		to statements		Acquisitions	June 30,
2007		of income		of Sigma	2008
The Company
Deferred tax assets:
Deferred consideration for
business combinations	1,010,035		(147,822	)		862,213
Allowance for doubtful accounts	306,329		25,684			332,013
Net periodic pension and other
post-retirement benefits costs	375,994		(35,678	)		340,316
Accrued expenses	76,686		(24,527	)		52,159
Accrued for employees benefits	172,071		48,788			220,859
Capital leases	40,057		(3,168	)		36,889
Allowance for inventory obsolescence	15,891		1,172			17,063
Total deferred tax assets	1,997,063		(135,551	)		1,861,512
Deferred tax liabilities:
Difference between book and
tax property, plant and
equipments net book value	(1,854,350	)	73,146			(1,781,204	)
Land rights	(4,592	)	(544	)		(5,136	)
RSA	(59,859	)	(10,965	)		(70,824	)
Intangible assets	(902,856	)	150,477			(752,379	)
Total deferred tax liabilities	(2,821,657	)	212,114			(2,609,543	)
Deferred tax liabilities of the Company net	(824,594	)	76,563			(748,031	)
Deferred tax liabilities of the subsidiaries net	(2,209,506	)	(153,628	)	4,956	(2,358,178	)
Total deferred tax liabilities net	(3,034,100	)	(77,065	)	4,956	(3,106,209	)

| | 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. |
| 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 is being audited
by the Tax Office for the fiscal year 2006. |

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 19,985,416,719 and 19,814,432,934 for six months period ended June 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.

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.

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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 contributions to the pension fund for the six months period
ended June 30, 2007 and 2008 amounted to Rp.350,081 million and Rp.444,531 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.1,038 million and Rp.1,282
million for the six months period ended June 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 six months period ended June 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	101,804		141,067
Interest costs	431,087		538,484
Plan participants contributions	21,911		22,083
Actuarial gains	143,367		390,346
Expected benefits paid	(167,288	)	(222,642	)
Projected benefits obligation at end of year	8,652,262		11,597,150
Change in plan assets
Fair value of plan assets at beginning of year	7,210,749		9,034,392
Expected return on plan assets	389,139		465,418
Employers contributions	350,081		444,531
Plan participants contributions	21,911		22,083
Actuarial gains	335,847		319,760
Expected benefits paid	(167,288	)	(205,904	)
Fair value of plan assets at end of year	8,140,439		10,080,280
Funded status	(511,823	)	(1,516,870	)
Unrecognized prior service costs	981,491		1,529,092
Unrecognized net actuarial gain	(1,319,565	)	(921,240	)
Accrued pension benefit cost	(849,897	)	(909,018	)

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PENSION AND OTHER POST-RETIREMENT BENEFITS (continued)

a. Pension (continued)

1.
The movement of the accrued pension benefits costs during the six months period ended
June 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 less amounts charged to
KSO Units	196,978		322,539
Employers contributions	(350,081	)	(444,531	)
Benefits to be paid by the Company			(23,087	)
Accrued pension benefits costs at end of year	849,897		909,018

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	101,804		141,067
Interest costs	431,087		538,484
Expected return on plan assets	(389,139	)	(465,418	)
Amortization of prior service costs	69,511		110,660
Recognized actuarial gain	(16,285	)	(2,254	)
Total net periodic pension costs less (Note 35)	196,978		322,539

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PENSION AND OTHER POST-RETIREMENT BENEFITS (continued)

a. Pension (continued)

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

Projected benefits obligation	(258,525	)	(325,283	)
Fair value of plan assets	65,625		107,480
Unfunded status	(192,900	)	(217,803	)
Unrecognized items in the consolidated balance sheet:
Unrecognized prior service costs	1,041		(814	)
Unrecognized net actuarial losses	163,596		121,797
Unrecognized net obligation at the date of
initial application of PSAK 24			1,740
Accrued pension benefits costs	(28,263	)	(95,080	)

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

Service costs	16,366		18,647
Interest costs	12,076		15,287
Expected return on plan assets	(1,116	)	(5,634	)
Amortization of past service costs	(32	)	(31	)
Recognized actuarial losses	4,196		2,652
Amortization of net obligation at the date of
initial application of PSAK 24			89
Net periodic pension costs (Note 35)	31,490		31,010

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PENSION AND OTHER POST-RETIREMENT BENEFITS (continued)

a. Pension (continued)

| 2. |
| --- |
| The net periodic pension cost for the pension plan was calculated based on 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 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 %

| 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 June 30, 2007 and 2008, are as follows: |

Projected benefits obligation	(6,188	(5,873
Fair value of plan assets	6,417	6,271
Funded status	229	398
Prepaid pension benefits costs	229	398

The net periodic pension costs of Infomedia amounted to Rp.126 million and Rp.185 million for the six months period ended June 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. |

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PENSION AND OTHER POST-RETIREMENT BENEFITS (continued)

b.
The movement of the other post-retirement benefits for the six months period ended June 30,
2007 and 2008, are as follows:

| Accrued other post-retirement benefits costs
at beginning of year | 198,596 | | 195,061 | |
| --- | --- | --- | --- | --- |
| Other post-retirement benefits costs | 43,742 | | 41,785 | |
| Other post-retirement benefits paid | (10,083 | ) | (13,924 | ) |
| Accrued other post-retirement benefits costs at end of year | 232,255 | | 222,922 | |
| Benefits to be paid for early retirement program | (68,362 | ) | | |
| Accrued other post-retirement benefits costs at end of
year after early retirement benefits | 163,893 | | 222,922 | |

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

Service costs	11,461	11,313
Interest costs	22,556	20,967
Amortization of past service costs	3,413	3,413
Recognized actuarial losses	6,312	6,092
Net periodic other post-retirement benefits costs (Note 35)	43,742	41,785

| 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. The total related obligation recognized as of June
30, 2007 and 2008 amounted to Rp.38,950 million and Rp.59,552 million, respectively. The
related employees benefits cost charged to expense amounted to Rp.4,876 million and Rp.7,083
million for the six months period ended June 30, 2007 and 2008, respectively (Note 35). |

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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 six months period ended June 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 year

| 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. |
| --- |
| 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.70,675 million and Rp.79,655
million as of June 30, 2007 and 2008, respectively. The related benefits cost charged to
expense amounted to Rp.7,790 million and Rp.9,955 million for the six months period ended June
30, 2007 and 2008, respectively (Note 35). |

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| 43. |
| --- |
| 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). |
| 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 June 30, 2007 and 2008: |


Change in projected benefits obligation
Projected benefits obligation at beginning of year	6,985,343		8,925,612
Service costs	56,585		71,991
Interest costs	362,019		451,749
Actuarial gains	418,167		800,974
Expected post-retirement health care paid	(89,755	)	(110,998	)
Projected benefits obligation at end of period	7,732,359		10,139,328
Change in plan assets
Fair value of plan assets at beginning of year	2,253,260		3,376,172
Expected return on plan assets	111,074		169,433
Employers contributions	570,222		500,000
Actuarial gains	18,906		84,268
Expected post-retirement health care paid	(89,755	)	(110,998	)
Fair value of plan assets at end of period	2,863,707		4,018,875
Funded status	(4,868,652	)	(6,120,453	)
Unrecognized net actuarial losses	2,130,840		3,400,870
Accrued post-retirement health care benefits costs	(2,737,812	)	(2,719,583	)

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43.
The components of net periodic post-retirement health care benefits cost are as follows:

Service costs	56,585		71,991
Interest costs	362,019		451,749
Expected return on plan assets	(111,074	)	(171,683	)
Recognized actuarial losses	54,554		98,603
Total net periodic post-retirement health care
benefits costs (Note 35)	362,084		450,660

The movements of the accrued post-retirement health care benefits costs for the six months period ended June 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) | 362,084 | | 450,660 | |
| Employers contributions | (570,000 | ) | (500,000 | ) |
| Accrued post-retirement health care benefits
costs at end of year | 2,737,812 | | 2,719,583 | |

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

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| 44. |
| --- |
| 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.355,852 million and Rp.36,833 million
for the six months period ended June 30, 2007 and 2008, respectively. Interest expense
for two-step loans represent 48.70% and 6.42% 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. |
| | Concession fees amounted to Rp.200,463 million and Rp.302,079 million for the six months
period ended June 30, 2007 and 2008, respectively (Note 36), representing 1.2% and 1.7%,
respectively, of the total operating expenses for each period. Radio frequency usage
charges amounted to Rp.548,513 million and Rp.1,088,792 million for the six months period
ended June 30, 2007 and 2008, respectively (Note 36), representing 3.28% and 6.15%,
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.291,533 million and Rp.225,267 million for the six months
period ended June 30, 2007 and 2008, respectively (Note 36), representing 1.7% and 1.3%,
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.10,688 million and Rp.29,222 million for the six months period ended June 30, 2007 and 2008, respectively, representing 0.1% and 0.2% of total operating expenses for each period.

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RELATED PARTY TRANSACTIONS (continued)

b. Commissioners and Directors remuneration (continued)

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.34,188 million and Rp.78,416 million for the six months period ended June 30, 2007 and 2008, respectively, representing 0.2% and 0.4% of total operating expenses for each period.

| c. |
| --- |
| 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. |
| 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. |

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RELATED PARTY TRANSACTIONS (continued)

| c. |
| --- |
| On December 28, 2006, the Company and Indosat signed amendments to the interconnection
agreements for the fixed line networks (local, domestic long-distance and international) and
mobile network for the implementation of the cost-based tariff obligations under the MoCI
Regulations No. 8/2006 (Note 48). These amendments took effect on January 1, 2007. |
| Telkomsel also entered into an agreement with Indosat for the provision of international
telecommunications services to its GSM mobile cellular customers. The principal matters
covered by the agreement are as follows: |

| i. | Telkomsels GSM mobile cellular telecommunications network is 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 revenues (charges) from
Indosat of (Rp.182,379 million) and Rp.14,348 million for the six months period ended June
30, 2007 and 2008, respectively, representing (0.61%) and 0.05% 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.5,924 million and Rp.11,481 million for the six months
period ended June 30, 2007 and 2008, respectively, representing 0.04% and 0.06% 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.489 million and
Rp.187 million for the six months period ended June 30, 2007 and 2008, respectively. |

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RELATED PARTY TRANSACTIONS (continued)

c. Indosat (continued)

ii. Indefeasible Right of Use Agreement (IRU)

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

| In 1994, the Company transferred to Satelindo the right to use a parcel of Company-owned land
located in Jakarta which had been previously leased to Telekomindo. Based on the transfer
agreement, Satelindo is given the right to use the land for 30 years and can apply for the
right to build properties thereon. The ownership of the land is retained by the Company.
Satelindo agreed to pay Rp.43,023 million to the Company for the 30 years right. Satelindo
paid Rp.17,210 million in 1994 while the remaining balance Rp.25,813 million was not paid
because the Utilization Right (Hak Pengelolaan Lahan or HPL) on the land could not be
delivered as provided in the transfer agreement. In 2000, the Company and Satelindo agreed on
an alternative solution resulting in the payment being treated as a lease expense up to 2006.
In 2001, Satelindo paid an additional amount of Rp.59,860 million as lease expense up to
2024. As of June 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.79,568 million and Rp.82,997 million for the six months period
ended June 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.3,617 million and Rp.9,929 million for the
six months period ended June 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.14,301 million and Rp.17,476 million for the six
months period ended June 30, 2007 and 2008, respectively, representing 0.1% of the total
operating expenses for each period. |

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

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 and Patrakom, for the utilization of the Companys satellite
transponders or frequency channels. Revenues earned from these transactions amounted to
Rp.55,810 million and Rp.51,298 million for the six months period ended June 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.33,416 million and Rp.30,292 million for the six
months period ended June 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.45,571 million
and Rp.208,585 million for the six months period ended June 30, 2007 and 2008,
respectively, representing 0.5%, and 2.7% 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 six months period
ended June 30, 2007 and 2008 amounted to Rp.31,421 million and Rp.18,385 million,
respectively, representing 0.4% 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.75,062 million and Rp.66,686 million for the six months period
ended June 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.133,183 million and Rp.168,122 million for the six months period ended
June 30, 2007 and 2008, respectively, representing 0.8% and 0.9% the total operating
expenses for each period. |

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

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.5,770,032 million and Rp.7,281,950
million as of June 30, 2007 and 2008, respectively, representing 7.2% and 8.5% of the
total assets as of June 30, 2007 and 2008, respectively. Interest income recognized for
the six months period ended June 30, 2007 and 2008 amounted to Rp.146,871 million and
Rp.115,380 million, representing 55% and 35%, 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 six months period ended June 30, 2007 and 2008 amounted
to Rp.75,826 million and Rp.236,468 million, respectively, representing 10.4% and 41.2%,
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.192,174 million and Rp.177,610 million for the six months period ended
June 30, 2007 and 2008, respectively, representing 1.1% and 1.0%, respectively, of the
total operating expenses for each period. |
| (xi) | The Company and its subsidiaries earned interconnection (expense) revenues from
PSN, with a total of Rp.779 million and (Rp.1,279 million) for the six months period
ended June 30, 2007 and 2008, respectively, representing 0.003% 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.10,337 million and Rp.7,237 million for six months period
ended June 30, 2007 and 2008, respectively, representing 0.03% 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.107,803 million and Rp.72,927 million for the six months period ended June 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.187,637 million and Rp.244,657 million
for the six months period ended June 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.801,860 million and Rp.976,003 million for the six months period ended June 30, 2007
and 2008, respectively. |

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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.74,769 million and Rp.31,084 million for the six months
period ended June 30, 2007 and 2008, respectively, representing 0.87% and 0.41%,
respectively, of total acquisition of fixed assets in each period.; and for
maintenance of equipment amounted to Rp.19,421 million and Rp.23,139 million for the
six months period ended June 30, 2007 and 2008, respectively, representing 0.12% and
0.13%, 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)	5,483,433	6.85	6,942,449	8.09
b.	Temporary investments	188,139	0.24	182,685	0.21
c.	Trade receivables net (Note 6)	552,736	0.70	536,235	0.62
d.	Other receivables
	State-owned banks (interest)	19,644	0.03	28,417	0.03
	Patrakom	2,769		4,713	0.01
	Kopegtel	3,797		3,826
	Government Agencies	2,593		2,304
	Other	2,502		404
	Total	31,305	0.03	39,664	0.04
e.	Prepaid expenses (Note 8)	175,539	0.22	603,071	0.70
f.	Restricted time deposits (Note 9)	6,717	0.01	21,244	0.02
g.	Advances
and other non-current assets (Note 13)
	Bank Mandiri	91,595	0.12	91,525	0.11
	Kisel			1,098
	Perusahaan
Umum Percetakan Uang Republik Indonesia
(Peruri)	813		813
	BNI			565
	Total	92,408	0.12	94,001	0.11
h.	Escrow accounts (Note 15)			41,571	0.05

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RELATED PARTY TRANSACTIONS (continued)


		% to total		% to total
	Amount	liabilities	Amount	liabilities
i.	Trade payables (Note 16)
	Government Agencies	513,475	1.17	1,098,802	2.31
	Kopegtel	59,009	0.13	89,888	0.19
	Yakes	1,686		59,093	0.12
	INTI	6,328	0.01	28,006	0.06
	SPM	7,453	0.02	12,302	0.03
	Gratika	8,036	0.02	6,128	0.01
	Jasindo			5,093	0.01
	PSN	62		4,573	0.01
	Indosat	99,916	0.23
	Others	75,994	0.17	94,804	0.20
	Total	771,959	1.75	1,398,689	2.94
j.	Accrued expenses (Note 17)
	Employees	1,413,698	3.20	1,266,626	2.66
	Government Agencies and
state-owned banks	107,360	0.24	68,866	0.14
	PT
Jaminan Sosial Tenaga Kerja (Persero) (Jamsostek)			21,025	0.04
	Jasindo			93
	Others	9,357	0.02
	Total	1,530,415	3.46	1,356,610	2.84
k.	Short-term bank loans (Note 19)
	Bank Mandiri	300,000	0.68
	BNI	300,000	0.68
	Total	600,000	1.36
l.	Two-step loans (Note 21)	4,205,223	9.52	3,970,696	8.34
m.	Accrued LSA (Note 42)	70,675	0.16	79,655	0.17
n.	Accrued post-retirement health care benefits (Note 43)	2,737,812	6.20	2,719,583	5.71
o.	Long-term bank loans (Note 23)
	BRI	400,000	0.91	2,240,000	4.71
	Bank Mandiri	1,260,000	2.85	1,540,000	3.24
	BNI	740,000	1.67	1,020,000	2.14
	Total	2,400,000	5.43	4,800,000	10.09

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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	9,719,260		1,842,530		16,703,731		241,081		28,506,602				28,506,602
Inter-segment operating revenues	686,171		(81,529	)	361,757		128,121		1,094,520		(1,094,520	)
Total segment revenues	10,405,431		1,761,001		17,065,488		369,202		29,601,122		(1,094,520	)	28,506,602
External operating expenses	(7,442,116	)	(830,501	)	(6,975,766	)	(217,402	)	(15,465,785	)			(15,465,785	)
Inter-segment operating expenses	(37,766	)	(81,529	)	(998,929	)	(56,808	)	(1,175,032	)	1,175,032
Segment expenses	(7,479,882	)	(912,030	)	(7,974,695	)	(274,210	)	(16,640,817	)	1,175,032		(15,465,785	)
Segment results	2,925,549		848,971		9,090,793		94,992		12,960,305		80,512		13,040,817
Interest expense													(730,731	)
Interest income													265,579
Gain on foreign exchange net													54,933
Other income net													133,785
Income tax expense													(3,894,932	)
Equity in net income
of associated companies													3,589
Income before minority interest													8,873,040
Unallocated minority interest													(2,248,117	)
Net income													6,624,923
Other information
Segment assets	37,526,060		5,115,819		44,864,380		607,836		88,114,095		(8,196,445	)	79,917,650
Investments in associates	84,347				14,744				99,091				99,091
Total consolidated assets													80,016,741
Total consolidated liabilities	(25,515,311	)	(1,610,501	)	(24,956,929	)	(300,967	)	(52,383,708	)	8,196,445		(44,187,263	)
Minority interest	(70,488	)					(8,499	)	(78,987	)	(7,013,302	)	(7,092,289	)
Capital expenditures	(782,544	)	(48,952	)	(7,114,583	)	(40,296	)	(7,986,375	)			(7,986,375	)
Depreciation and amortization	(1,640,363	)	(221,916	)	(2,754,643	)	(24,421	)	(4,641,343	)	4,751		(4,636,592	)
Amortization of goodwill and
other intangible assets	(501,176	)			(23,357	)			(524,533	)			(524,533	)
Other non-cash expenses	(201,423	)			(37,244	)	(838	)	(239,505	)			(239,505	)

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SEGMENT INFORMATION (continued)


Fixed		Fixed						Total before				Total
wireline		wireless		Cellular		Others		elimination		Elimination		consolidated
Segment results
External operating revenues	9,969,242		1,638,808		18,329,311		240,995		30,178,356				30,178,356
Inter-segment operating revenues	661,836		(34,538	)	298,523		141,865		1,067,686		(1,067,686	)
Total segment revenues	10,631,078		1,604,270		18,627,834		382,860		31,246,042		(1,067,686	)	30,178,356
External operating expenses	(8,355,441	)	(618,979	)	(8,442,962	)	(293,013	)	(17,710,395	)			(17,710,395	)
Inter-segment operating expenses	(169,532	)			(960,765	)	(18,969	)	(1,149,266	)	1,149,266
Segment expenses	(8,524,973	)	(618,979	)	(9,403,727	)	(311,982	)	(18,859,661	)	1,149,266		(17,710,395	)
Segment results	2,106,105		985,291		9,224,107		70,878		12,386,381		81,580		12,467,961
Interest expense													(573,805	)
Interest income													330,873
Gain on foreign exchange net													35,776
Other income net													236,159
Income tax expense													(3,939,382	)
Equity in net income
of associated companies													(1,390	)
Income before minority interest													8,556,192
Unallocated minority interest													(2,258,582	)
Net income													6,297,610
Other information
Segment assets	35,916,094		7,890,983		50,694,415		715,963		95,217,455		(9,519,046	)	85,698,409
Investments in associates	1,331,159				(1,193,357	)			137,802				137,802
Total consolidated assets													85,836,211
Total consolidated liabilities	(26,500,287	)	(1,507,788	)	(28,754,375	)	(343,434	)	(57,105,884	)	9,519,046		(47,586,838	)
Minority interest	1,138,336						(8,611	)	1,129,725		(8,992,873	)	(7,863,148	)
Capital expenditures	(1,509,573	)	(210,369	)	(6,234,077	)	(19,661	)	(7,973,680	)			(7,973,680	)
Depreciation and amortization	(1,811,392	)	(176,165	)	(3,225,909	)	(26,331	)	(5,239,797	)	15,995		(5,223,802	)
Amortization of goodwill and
other intangible assets	(505,471	)			(23,357	)			(528,828	)			(528,828	)
Other non-cash expenses	(290,598	)			(27,931	)	(17	)	(318,546	)			(318,546	)

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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PERUSAHAAN PERSEROAN (PERSERO) 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 June 30, 2008, the Company has 45 RSA with 40 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.29,124 million and Rp.17,945 million
as of June 30, 2007 and 2008, respectively (Note 12). |
| The investors share of revenues amounted to Rp.199,072 million and Rp.158,022 million for the
six months period ended June 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 are 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. |

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

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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PERUSAHAAN PERSEROAN (PERSERO) 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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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.	Public Phone Kiosk (warung telekomunikasi or wartel) Tariff
	The MoC issued Decree No. KM. 46/2002 dated August 7, 2002 regarding the operation of phone
kiosks as replaced by the MoCI Regulation No. PM.05/Per/M.KOMINFO/I/2006 dated January 30,
2006, which provided the Company the entitlement to retain a maximum of 70% of the phone
kiosk basic tariffs for domestic calls and up to 92% of phone kiosk basic tariffs for
international calls. It also provides that the airtime from the cellular operators shall
generate at a minimum 10% of the kiosk phones revenues.
g.	Tariff for other devices
	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 June 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		6,016,003
U.S. Dollars	574	5,294,770
Euro	87	1,262,142
Total		12,572,915

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COMMITMENTS (continued)

a.
The above balance includes the following significant agreements:

(i) Company

					Outstanding
					purchase
Contracting	Date of	Significant provisions of			commitment as of
parties	agreement	the agreement		Total contract value	June 30, 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 and IV,
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$13.5 million
and
Rp.68,435 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$3.9 million and
Rp.22,479 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
Contracting	Date of	Significant provisions of			commitment as of
parties	agreement	the agreement		Total contract value	June 30, 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$35.1 million and
Rp.88,063 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$11.1 million
and
Rp.39,985 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$20.3 million
and
Rp.63,534 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
Contracting		Date of		Significant provisions of		commitment as of
parties		agreement		the agreement	Total contract value	June 30, 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$0.002 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.62,633 million	US$0.5 million and
Rp.3,130 million
Company and
Opnet-Olexindo
Consortium		December 29,
2006		Procurement and
installation
agreements
Opnet-Olexindo for
OAN Project Batch I
in Divre I and III		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.68,736 million	Rp.55,017 million
Company and
Industri
Telekomunikasi
Indonesia		July 17, 2007		Procurement and
installation
agreement for Fiber
Optic Communication
System Metro
Junction Regional
Expansion Batch 1		Rp.60,128 million	Rp.1,463 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.77,977 million	Rp.77,977 million
Company and PT
Datacomm Diangraha		November 28, 2007		Procurement and
installation
agreement for Metro
Ethernet Batch 2		Rp.116,915 million	Rp.5,894 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$1.8 million and
Rp.237,255 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

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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.

b. Borrowings and other credit facilities

| (i) | The Company 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. Under these facilities, as of June 30, 2008, the Company has issued bank
guarantee of Rp.20,000 million (equivalent to US$2.17 million) for a 3G performance
bond (Note 49c.ii). Borrowings under the facilities bear interest at Singapore
Interbank Offered Rate (SIBOR) plus 1% per annum (US$) 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 June 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. |

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COMMITMENTS (continued)

c. 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 June 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 first and second year were paid in March 2006 and 2007, respectively. The commitments as of June 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)	Usage Tariff
1				20% x HL
2	R1	I1 = (1 + R1	)	40% x I1 x HL
3	R2	I2 = I1(1 + R2	)	60% x I2 x HL
4	R3	I3 = I2(1 + R3	)	100% x I3 x HL
5	R4	I4 = I3(1 + R4	)	130% x I4 x HL
6	R5	I5 = I4(1 + R5	)	130% x I5 x HL
7	R6	I6 = I5(1 + R6	)	130% x I6 x HL
8	R7	I7 = I6(1 + R7	)	130% x I7 x HL
9	R8	I8 = I7(1 + R8	)	130% x I8 x HL
10	R9	I9 = I8(1 + R9	)	130% x I9 x HL

Notes :
Ri	= average Bank Indonesia rate from previous year
HL (auction price)	= Rp.160,000 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)

c. 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 bandwith at the end of 2008 in the AAG configuration that will be
laid from Malaysia to the United States. As of June 30, 2008, the Company has paid
US$23,148 million (equivalent to Rp.213,997 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 premium call billings and telecommunication billings. Based on managements
estimate of the probable outcomes of these matters, the Company and its subsidiaries have
accrued Rp.33,958 million as of June 30, 2008. |
| --- | --- |
| b. | In December 2005, the West Java Police Department initiated investigations related to
an alleged violation of Anti-Corruption Law, in particular the provision of
interconnection services to Napsindo, the Companys subsidiary, and Globalcom, a Malaysian
company, at an incorrect tariff for the Companys network for the provision of illegal
VoIP services, and misuse of authority in procuring telecommunication equipment. It is
also understood that one of the investigations 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 June 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 Anti-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. As of the
issuance date of the consolidated financial statements, no 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. |
| | As of the issuance date of the consolidated financial statements, certain of the lawsuits
are still being processed by the courts (Note 52a). 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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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. The Company and Telkomsel are in the process of defending the cases (Note 51c).

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	189.98	1,718,333	129.16	1,190,947
Euro	74.70	909,541	53.63	781,006
Singapore Dollars			0.24	1,591
Japanese Yen	2.10	155	3.15	276
Malaysian Ringgit			0.03	96
Temporary investments
U.S. Dollars			8.64	79,617
Japanese Yen			220.04	19,276
Trade receivables
Related parties
U.S. Dollars	9.15	82,384	2.00	18,415
Third parties
U.S. Dollars	44.52	408,336	38.59	355,791
Other receivables
Great Britain Pound sterling			0.01	227
Euro			0.01	93
U.S. Dollars	0.37	3,390		1
Other current assets
U.S. Dollars	0.09	834	5.39	49,642
Euro		484	0.02	356
Advances and other non-current assets
U.S. Dollars	0.76	6,905	13.70	126,231
Euro		19,052
Escrow accounts
U.S. Dollars			4.51	41,571
Total assets		3,149,414		2,665,136

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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	5.47	49,483	5.72	52,794
Singapore Dollars		20	0.01	72
Euro		9,607		8
Third parties
U.S. Dollars	172.74	1,563,333	173.42	1,599,758
Euro	83.38	1,016,001	87.90	1,280,075
Singapore Dollars	1.04	6,164	0.87	5,906
Great Britain Pound sterling		123	0.04	729
Japanese Yen			0.51	45
Other payables
U.S. Dollars			1.46	13,482
Singapore Dollars				11
Great Britain Pound sterling				2
Accrued expenses
U.S. Dollars	149.40	1,352,093	51.17	472,048
Euro	80.68	983,116	29.81	434,154
Japanese Yen	48.46	3,553	45.20	3,965
Singapore Dollars	0.43	2,549	0.10	699
Great Britain Pound sterling		824
Advances from customers and suppliers
U.S. Dollars	0.27	2,439	1.56	14,431
Current maturities of long-term liabilities
U.S. Dollars	143.80	1,301,400	122.44	1,129,552
Japanese Yen	1,142.91	83,787	767.90	67,360
Euro	14.68	178,478
Long-term liabilities
U.S. Dollars	450.79	4,079,671	327.75	3,023,510
Japanese Yen	12,670.31	928,860	11,902.41	1,044,080
Total liabilities		11,561,501		9,142,681
Net liabilities		(8,412,087	)	(6,477,545	)

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ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES (continued)

| 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. |

SUBSEQUENT EVENTS

| a. | 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 (Note 50f). |
| --- | --- |
| b. | 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. |
| c. | On July 11, 2008, pursuant to the decision of KPPU dated June 17, 2008 (Note 50g),
Telkomsel has filed an objection with the Court. |
| d. | On July 14, 2008, Telkomsel signed a medium-term facility loan agreements with BNI and
BCA for loan facilities of Rp.2,000,000 million and Rp.1,000,000 million, respectively.
The loans bear a floating interest rate of one-month JIBOR plus 1.5% per annum. On July 21,
2008, the loan has been fully drawn-down. |
| e. | On July 17, 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. |
| f. | On July 21, 2008, Telkomsel decided to distribute a portion of the 2007 cash dividends
of Rp.7,935,225 million to the Telkomsels stockholders. |
| g. | On July 28, 2008, Telkomsel signed a medium-term facility loan agreement with BRI for
loan facility of Rp.1,000,000 million. The loan bears a floating interest rate of one-month
JIBOR plus 1.5% per annum. The loan is expected to be drawn-down on August 4, 2008. |
| h. | On July 29, 2008, the Company signed a long-term facility loan agreement with BNI, BRI
and Bank Jabar syndicate for loan facilities of Rp.2,400,000 million. The loans bear a
floating interest rate of three-month JIBOR plus 1.2% per annum. |

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RECENT ACCOUNTING PRONOUNCEMENTS IN INDONESIA

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

(i)	PSAK 13 (Revised 2007), Investment Property
	In May 2007, the DSAK issued PSAK 13 (Revised 2007), Investment Property which replaces
PSAK 13, Accounting for Investment. PSAK 13 (Revised 2007) provides guidance on
recognition, measurement at recognition, measurement after recognition, transfer, disposal
and financial statement disclosures regarding investment property. PSAK 13 (Revised 2007)
provides two measurement alternatives, the cost model and fair value model which shall be
consistently applied. PSAK 13 (Revised 2007) shall be effective after January 1, 2008. The
Company and its subsidiaries have decided to use cost model to measure investment property.
(ii)	PSAK 16 (Revised 2007), Property, Plant and Equipment
	In May 2007, the DSAK issued PSAK 16 (Revised 2007), Property, Plant and Equipment which
replaces PSAK 16, Fixed Assets and Other Assets. PSAK 16 (Revised 2007) provides guidance
on recognition, measurement at recognition, measurement after recognition, derecognition and
financial statement disclosures requirements. PSAK 16 (Revised 2007) provides two
measurement alternatives, the cost model and revaluation model which shall be consistently
applied. PSAK 16 (Revised 2007) shall be effective after January 1, 2008. The Company and
its subsidiaries have decided to use cost model to measure property, plant and equipment
(Note 2k).
(iii)	PSAK 30 (Revised 2007), Leases
	In June 2007, the DSAK issued PSAK 30 (Revised 2007), Leases which replaces PSAK 30,
Accounting for Leases. PSAK 30 (Revised 2007) provides guidance on how to classify leases
into operating lease and capital lease. PSAK 30 (Revised 2007) also provides guidance on how
to record and disclose operating and capital lease transactions in the financial statements
of lessors and lessees. PSAK 30 (Revised 2007) shall be effective after January 1, 2008. The
Company and its subsidiaries have decided to apply PSAK 30 (Revised 2007) prospectively.
	The application of PSAK 30 (Revised 2007) change the guidance used to classify lease into
operating lease and capital lease. Due to prospective application of PSAK 30 (Revised 2007),
the balance of any pre-existing capital lease is deemed to have been properly determined by
the Company and its subsidiaries. In relation with the prospective implementation of PSAK 30
(Revised 2007), since January 1, 2008, lease transaction that meets the requirement stated
in PSAK 30 (Revised 2007) paragraph 10 and 44, will be treated as capital lease by
recognizing assets and corresponding liabilities. The Company and its subsidiaries are
currently assessing the impact of the application of PSAK 30 (Revised 2007) on the
consolidated financial statements. The Company and its subsidiaries are currently assessing
the impact of the application of PSAK 30 (Revised 2007) on the consolidated financial
statements.

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ACCOUNTS RECLASSIFICATION

Certain accounts in the consolidated financial statement for the six months period ended June 30, 2007 has been reclassified to conform with the presentation of accounts of the consolidated financial statement for the six months period ended June 30, 2008, as follows:

reclassification		Reclassification		reclassification
Consolidated balance sheet:
Accrued long service awards	234,568		(163,893	)	70,675
Accrued pension and other
post-retirement benefits costs	917,110		163,893		1,081,003
Consolidated income statement:
Interconnection revenues	5,802,820		(1,281,828	)	4,520,992
Interconnection expenses	(1,281,828	)	1,281,828

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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. |
| --- |
| 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. |
| --- |
| 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. |
| --- |
| 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. |
| --- |
| 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. |
| --- |
| 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. |
| --- |
| 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 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 six months period ended June 30, 2007 and 2008, the
operating income would have been (lower) higher by Rp.13,051 million and (Rp.29,052
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. |
| --- |
| 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. |

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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 six months period ended June 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 | | 6,624,923 | | 6,297,610 | |
| --- | --- | --- | --- | --- | --- |
| 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) | 38,337 | | 36,707 | |
| Foreign exchange gain net of related
depreciation on contracts containing embedded
foreign currency derivative instrument | (c) | | | (7,114) | |
| Interest capitalized on assets under
construction net of related depreciation | (d) | 39,603 | | 11,031 | |
| RSA | (e) | 73,320 | | 98,371 | |
| Pension and other post-retirement
benefits | (f) | (61,718) | | (46,762) | |
| Post-retirement health care | (f) | (49,247) | | (47,180) | |
| Equity in net loss of associated
companies | (g) | (160) | | (163) | |
| Amortization of land rights | (h) | (9,458) | | (15,483) | |
| Revenue recognition | (i) | 19,146 | | 22,910 | |
| Capital leases | (k) | (14,710 | ) | (35,450 | ) |
| Adjustment for consolidation of Dayamitra | (l) | 5,694 | | 5,694 | |
| Assets retirement obligations | (m) | (5,593) | | 25,735 | |
| Amendment and restatement of the
KSO VII | (t) | 8,134 | | 8,134 | |

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

(2) a. (continued)


Deferred income tax:
Deferred income tax on equity method
investments	(n)	(1,539	)	1,049
Deferred income tax effect on
U.S. GAAP adjustments		359,424		(31,396	)
		(1,059,916	)	26,083
Minority interest		(8,127	)	(9,148	)
Net adjustments		(1,068,043	)	16,935
Net income in accordance with U.S. GAAP		5,556,880		6,314,545
Net income per share in accordance with
U.S.GAAP in full Rupiah amount		278.05		318.68
Net income per ADS in accordance with
U.S.GAAP in full Rupiah amount
(40 Series B shares per ADS)		11,121.87		12,747.37

b. The significant adjustments to the consolidated stockholders equity as of June 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 | | 28,737,189 | | 30,386,225 | |
| --- | --- | --- | --- | --- | --- |
| U.S. GAAP adjustments (decrease) increase
due to: | | | | | |
| Capitalization of foreign exchange
differences net of related depreciation | (b) | (354,361) | | (273,715) | |
| Foreign exchange gain net of related
depreciation, on contracts containing
embedded foreign currency derivative
instrument | (c) | | | 50,042 | |
| Interest capitalized on assets under
construction net of related depreciation | (d) | 265,976 | | 293,466 | |
| RSA | (e) | (91,287 | ) | 208,679 | |
| Pension and other post-retirement benefits | (f) | (203,023 | ) | (869,267 | ) |
| Post-retirement health care | (f) | (1,731,801 | ) | (2,681,258 | ) |
| Equity in net loss of associated
companies | (g) | (19,005 | ) | (19,332 | ) |
| Amortization of land rights | (h) | (110,405 | ) | (136,911 | ) |
| Revenue recognition | (i) | (694,745 | ) | (647,038 | ) |

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

(2) b. (continued)

Amortization of goodwill	(j)	93,936		93,936
Capital leases	(k)	(72,125	)	(124,854	)
Adjustment for consolidation of Dayamitra	(l)	(39,823	)	(28,436	)
Assets retirement obligations	(m)	(19,391	)
Amendment and restatement of the
KSO VII	(t)	12,613		28,470
Deferred income tax:
Deferred income tax on equity method
investments	(n)	37,484		36,941
Deferred income tax effect on U.S. GAAP
adjustments		257,555		447,812
		(2,668,402	)	(3,621,465	)
Minority interest		56,173		(28,118	)
Net adjustments		(2,612,229	)	(3,649,583	)
Stockholders equity in accordance with U.S. GAAP		26,124,960		26,736,642

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

Stockholders equity at beginning of year	26,308,572		29,817,815
Changes during the year:
Net income under U.S. GAAP	5,556,880		6,314,545
Dividends	(5,082,051	)	(8,034,515	)
Accumulated other comprehensive income, net of tax	218,486		260,887
Treasury stock	(876,927	)	(1,622,090	)
Stockholders equity at end of year	26,124,960		26,736,642

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	16,943,576	17,896,344
Non-current assets	63,541,838	69,785,724
Total assets	80,485,414	87,682,068

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

(2) d. (continued)

Current liabilities	27,083,560	31,650,828
Non-current liabilities	20,242,105	21,403,331
Total liabilities	47,325,665	53,054,159
Minority interest in net assets of subsidiaries	7,034,789	7,891,267
Stockholders equity	26,124,960	26,736,642
Total liabilities and stockholders equity	80,485,414	87,682,068

(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 | 11,350,171 | | 12,552,005 | |
| --- | --- | --- | --- | --- |
| Income tax in accordance with U.S. GAAP
at 30% statutory tax rate | 3,405,051 | | 3,765,602 | |
| Effect of non-deductible expenses
(non-taxable income) at the enacted
maximum tax rate (30%): | | | | |
| Net periodic post-retirement health care
benefit cost | 116,859 | | 113,389 | |
| Amortization of discount on promissory
notes and other borrowing costs | 4,308 | | 1,852 | |
| Tax penalty | | | 169 | |
| Employee benefits | 10,233 | | 13,442 | |
| Permanent differences of the KSO Units | | | 16,754 | |
| Income which was already subject to final tax | (15,158 | ) | (2,315 | ) |
| Equity in net (income) loss of associated companies | (1,077 | ) | | |
| Others | 16,831 | | 60,837 | |
| Total | 131,996 | | 204,128 | |
| Income tax expense in accordance
with U.S. GAAP | 3,537,047 | | 3,969,730 | |

For the six months period ended June 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). |
| --- |
| 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 six months period ended June 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 June 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 is being
audited by the Tax Office for the fiscal year 2006. |

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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	10,828,433	10,828,433
Temporary investments	188,139	188,139
Short-term bank loans	934,844	934,844
Long-term liabilities:
Two-step loans	4,205,223	3,874,472
Bonds	999,780	1,018,395
Bank loans	6,156,222	6,044,607
Deferred consideration for
business combinations	4,063,056	4,153,115

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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	10,140,791	10,140,791
Temporary investments	159,504	159,504
Short-term bank loans	70,984	70,984
Long-term liabilities:
Two-step loans	3,970,695	3,641,833
Bank loans	6,849,345	6,727,052
Deferred consideration for
business combinations	3,046,870	3,115,543

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. |

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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)

c. Comprehensive income

Net income under U.S. GAAP	5,556,880	6,314,545
Unrealized holding (loss) gain on
available-for-sale securities	1,704	(2,256	)
Foreign currency translation adjustments of
associated companies, net of tax of
Rp.255 million and (Rp.331 million),
for the six months period ended
June 30, 2007 and 2008, respectively	596	(772	)
Unrecognized actuarial losses prior service costs
and transition obligations, net of tax		263,919
	5,559,180	6,575,436

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	101,804		141,067		56,585		71,991
Interest costs	431,087		538,484		362,019		451,750
Expected return on plan assets	(389,139	)	(465,418	)	(111,074	)	(171,684	)
Amortization of prior service
costs (gains)	100,633		141,782		(184	)	(184	)
Recognized actuarial
losses					91,823		134,462
Amortization of transition
obligations	14,317		14,317		12,163		12,163
Total net periodic benefits
costs	258,702		370,232		411,332		498,498

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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)

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 June 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	101,804		141,067		56,585		71,990
Interest costs	431,087		538,484		362,019		451,750
Plan participants contributions	21,911		22,083
Actuarial losses	143,367		68,743		418,167		14,994
Benefits paid	(167,288	)	(220,799	)	(89,755	)	(110,998	)
Effects on benefits changes							701,712
Benefits obligation at end of year	8,652,262		11,277,390		7,732,359		10,055,060
Change in plan assets
Fair value of plan assets at
beginning of year	7,210,749		9,034,392		2,253,260		3,376,172
Expected return on plan assets	389,139		465,417		111,074		169,433
Actual return on plan assets	335,847				18,906
Employers contributions	350,081		444,531		570,222		500,000
Plan participants contributions	21,911		22,083
Benefits paid	(167,288	)	(205,904	)	(89,755	)	(110,998	)
Fair value of plan assets at
end of year	8,140,439		9,760,519		2,863,707		3,934,607
Accrued costs	511,823		1,516,871		4,868,652		6,120,453

| 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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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)

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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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)

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 June 30, 2007 and 2008, by asset category, were as follows:


as of June 30,
2007	2008
Asset category
Debt securities	73 %	70 %
Deposit securities	7 %	4 %
Equity securities	16 %	21 %
Mutual fund	3 %	4 %
Real estates	1 %	1 %
Total	100 %	100 %

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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)

d. Employee benefits (continued)

(i). The Company (continued)

| j. | Equity securities include the Companys common stock
amounting to Rp.nil and Rp.247,429 million (0% and 3.0% of the total Companys
pension plan assets) as of June 30, 2007 and 2008, respectively. |
| --- | --- |
| | Debt securities include the Companys bonds amounting to Rp.nil (0% of the total
Companys pension plan assets) as of June 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 June 30, 2007 and 2008, by asset category, were as follows:


as of June 30,
2007	2008
Asset category
Deposit securities	26 %	4 %
Debt securities	31 %	47 %
Equity securities	12 %	11 %
Mutual fund	31 %	38 %
Total	100 %	100 %

m. Debt securities include the Companys Notes and bonds amounting to Rp.nil (0% of the total Companys post retirement health care plan assets) as of June 30, 2007 and 2008, respectively.

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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)

d. Employee benefits (continued)

(i). The Company (continued)

m.	(continued)
	Equity securities include the Companys stock amounting to Rp.nil and Rp.51,260
juta (0% and 1.0% of the total Companys post-retirement health care plan
assets) as of June 30, 2007 and 2008.
n.	The Company expected to contribute Rp.889,061 million to its
defined benefit pension plan and Rp.1,100,000 million to its post-retirement
health care plan during 2008.

(ii).
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

(iii). The amounts recognized in accumulated other comprehensive income as of June 30, 2008 consisted of:


	Post-		Other post-
Pension	retirement		retirement
benefit	health care		benefits	Total	Deferred tax	Net of tax
Transition obligations	23,316	158,112			181,428	6,995	174,433
Prior service costs
(gain)	1,923,186	(283	)	39,997	1,962,900	588,955	1,373,945
Actuarial losses	265,638	3,315,567		173,797	3,755,002	132,851	3,622,151
Total	2,212,140	3,473,396		213,794	5,899,330	728,801	5,170,529

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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 six months period ended June 30, 2008, the Company and its
subsidiaries recorded operating lease expenses for land and building, vehicle and
office equipment totaling to Rp.634,957 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.26,608 million,
Rp.10,514 million, Rp.5,379 million, Rp.5,379 million and Rp.5,379 million for
2008, 2009, 2010, 2011 and 2012, respectively.
f.	Recent accounting pronouncements in the United States of America
	In February 2007, FASB issued SFAS 159, The Fair Value Option for Financial Assets and
Financial Liabilities including an amendment of FASB Statement No. 115. Under the
provisions of SFAS 159, companies may choose to account for financial assets and
liabilities (as well as certain non-financial instruments that are similar to financial
instruments) at fair value on an instrument-by-instrument basis. Changes in fair value
shall be recognized in earnings for each reporting period. SFAS 159 shall be effective
as of the beginning of the fiscal year that begins after November 15, 2007. The Company
and its subsidiaries do not choose fair value to measure its financial assets and
liabilities.
	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.

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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)

| f. |
| --- |
| 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 Securities and Exchange Commissions (SEC)
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. |
| 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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