PERUSAHAAN PERSEROAN PERSERO PT TELEKOMUNIKASI INDONESIA TBK

6-K 1 pttelkom6-k2011q1.htm PT TELEKOMUNIKASI INDONESIA TBK pttelkom6-k2011q1.htm - Generated by SEC Publisher for SEC Filing

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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 April , 2011

Perusahaan Perseroan (Persero)

PT Telekomunikasi Indonesia Tbk.

(Exact name of Registrant as specified in its charter)

Telecommunications Indonesia

(a state-owned public limited liability company)

(Translation of Registrant’s name into English)

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 ¨

[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 ¨ No þ

[If “yes” is marked, indicate below the file number assigned to the registrant in connection with

Rule 12g3-2(b): 82- ]

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on behalf by the undersigned, thereunto duly authorized.
		Perusahaan Perseroan (Persero) PT TELEKOMUNIKASI INDONESIA,TBK
		(Registrant)
Date	April 29, 2011	By /s/ Agus Murdiyatno
		(Signature)
		Agus Murdiyatno
		Vice President Investor Relation

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk

AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED)

AND THREE MONTHS PERIOD ENDED

MARCH 31, 2010 AND 2011 (UNAUDITED)

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PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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	Page
Consolidated Financial Statements
Consolidated Statements of Financial Position (Balance Sheets)	1-3
Consolidated Statements of Comprehensive Income	4-5
Consolidated Statements of Changes in Stockholders’ Equity	6-7
Consolidated Statements of Cash Flows	8-9
Notes to Consolidated Financial Statements	10-130

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF FINANCIAL POSITION (BALANCE SHEETS)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED)

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

	Notes	December 31, 2010 — Rp.	March 31, 2011 — Rp.	US$ (Note 3)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	2c,2e,5,44	9,119,849	10,645,475	1,222,564
Temporary investments	2c,2f,2s,44	370,433	380,047	43,646
Trade receivables	2c,2g,2s,6, 36,44
Related parties - net of allowance for
doubtful accounts of Rp.151,266 million in 2010 and Rp.88,897 million in
2011		780,043	1,124,366	129,126
Third parties - net of allowance for doubtful
accounts of Rp.1,294,078 million in 2010 and Rp.1,461,089 million in
2011		3,563,666	3,611,144	414,717
Other receivables - net of allowance for
doubtful accounts of Rp.6,304 million in 2010 and Rp.6,164 million in
2011	2c,2g,44	90,140	83,906	9,636
Inventories - net of allowance for
obsolescence Rp.83,286 million in 2010 and Rp.87,730 million in
2011	2h,7,36	515,536	553,137	63,524
Advances and prepaid expenses	2c,2i,8,44	3,441,031	3,298,167	378,773
Claims for tax refund	2r,38	133,056	121,686	13,975
Prepaid taxes	2r,38	715,698	826,223	94,886
Other current assets	2c,9,44	1,175	1,175	135
Total Current Assets		18,730,627	20,645,326	2,370,982
NON-CURRENT ASSETS
Long-term investments - net	2f,10	253,850	251,471	28,880
Property, plant and equipment - net of
accumulated depreciation of Rp.83,712,378 million in 2010 and
Rp. 83,071,756 million in 2011	2k,2l,2p,4,11,18,19, 22,46	75,832,408	74,684,267	8,577,005
Prepaid pension benefit cost	2c,2q,41,44	988	932	107
Advances and other non-current
assets	2c,2k,2n,12, 28,44,48	3,052,695	3,307,615	379,858
Goodwill and other intangible assets - net of
accumulated amortization of Rp.9,094,032 million in 2010 and Rp.9,245,179
million in 2011	2d,2j,4, 13,54	1,784,525	1,705,775	195,897
Escrow accounts	2c,14,44	41,662	40,307	4,629
Deferred tax assets - net	2r,38	61,692	49,785	5,717
Total Non-current Assets		81,027,820	80,040,152	9,192,093
TOTAL ASSETS		99,758,447	100,685,478	11,563,075

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 STATEMENT OF FINANCIAL POSITION (BALANCE SHEETS) (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED)

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

	Notes	December 31, 2010 — Rp.	March 31, 2011 — Rp.	US$ (Note 3)
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES
Trade payables	2c,2p,15,44
Related parties		1,153,874	702,918	80,726
Third parties		6,356,921	5,806,443	666,832
Other payables		20,953	28,187	3,237
Taxes payables	2r,38	735,690	933,993	107,263
Dividend payables	2u	255,545	5,460	627
Accrued expenses	2c,2p,16, 34,44	3,409,260	3,933,530	451,740
Unearned income	2p,17	2,681,483	2,855,948	327,987
Advances from customers and
suppliers		499,705	297,700	34,189
Short-term bank loans	2c,18,44	55,831	66,440	7,630
Current maturities of long-term
liabilities	2c,2l,2p, 19,44	5,303,636	4,373,982	502,324
Total Current Liabilities		20,472,898	19,004,601	2,182,555
NON-CURRENT LIABILITIES
Deferred tax liabilities - net	2r,38	4,073,814	4,043,894	464,415
Unearned income	2p	312,029	295,105	33,891
Accrued long service awards	2c,2q,42,44	242,149	242,177	27,813
Accrued post-retirement health care
benefits	2c,2q,43,44	1,050,030	991,865	113,909
Accrued pension and other post-retirement
benefits costs	2c,2q,41,44	536,990	588,895	67,631
Long-term liabilities - net of current
maturities
Obligations under finance
leases	2l,2p,11,19	408,867	376,041	43,186
Two-step loans - related party	2c,19,20,44	2,741,303	2,531,541	290,731
Bonds and notes	2c,19,21,44	3,249,379	3,280,730	376,771
Bank loans	2c,19,22,44	10,256,205	9,099,750	1,045,047
Total Non-current Liabilities		22,870,766	21,449,998	2,463,394
TOTAL LIABILITIES		43,343,664	40,454,599	4,645,949

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 STATEMENT OF FINANCIAL POSITION (BALANCE SHEETS) (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED)

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

	Notes	December 31, 2010 — Rp.		March 31, 2011 — Rp.		US$ (Note 3)
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY ATTRIBUTABLE TO EQUITY
HOLDERS OF THE PARENT
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,25	5,040,000		5,040,000		578,811
Additional paid-in capital	2t,26	1,073,333		1,073,333		123,265
Treasury stock - 490,574,500 shares in 2010
and 2011	2t,27	(4,264,073	)	(4,264,073	)	(489,701	)
Difference in value arising from
restructuring transactions and other transactions between entities under
common control	2d,28	478,000		478,000		54,895
Difference due to change of equity in
associated companies	2f	385,595		385,595		44,283
Unrealized holding gain from
available-for-sale securities	2f,2s	49,695		46,671		5,360
Translation adjustment	2f	233,378		228,867		26,284
Difference due to acquisition of non-controlling interest in
subsidiaries	1d,2d	(484,629	)	(484,629	)	(55,657	)
Retained earnings
Appropriated		15,336,746		15,336,746		1,761,326
Unappropriated	2p,2s	26,570,697		29,399,000		3,376,285
Total Stockholders' Equity Attributable To
Owners Of The Parent		44,418,742		47,239,510		5,425,151
Non-controlling Interest	24	11,996,041		12,991,369		1,491,975
TOTAL STOCKHOLDERS' EQUITY		56,414,783		60,230,879		6,917,126
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY		99,758,447		100,685,478		11,563,075

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 COMPREHENSIVE INCOME

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

	Notes	2010* — Rp.		2011 — Rp.		US$ (Note 3)
OPERATING REVENUES
Telephone	2p,29
Fixed lines		3,308,062		2,929,579		336,443
Cellular		6,691,220		6,754,777		775,742
Interconnection	2c,2p,30,44	1,050,682		846,083		97,167
Data, internet and information technology
services	2p,31	4,764,426		5,451,873		626,112
Network	2c,2p,32,44	277,470		304,873		35,013
Other telecommunications
services	2p, 33	264,476		418,575		48,071
Total Operating Revenues		16,356,336		16,705,760		1,918,548
OPERATING EXPENSES
Depreciation and amortization	2k,2l,2p,11, 12,13,54	3,739,090		3,447,594		395,935
Personnel	2c,2p,2q,16, 34,41,42, 43,44	1,874,100		1,951,393		224,105
Operations, maintenance and telecommunication
services	2c,2p,35,44	3,737,601		4,069,777		467,387
General and administrative	2g,2h,2p,6, 7,36,54	599,339		511,471		58,739
Interconnection	2c,2p,37,44	670,220		806,101		92,575
Marketing	2p	416,458		725,421		83,310
Total Operating Expenses		11,036,808		11,511,757		1,322,051
OPERATING INCOME		5,319,528		5,194,003		596,497
OTHER (EXPENSES) INCOME
Interest income	2c,44	79,674		120,140		13,797
Equity in net (loss) income of associated
companies	2f,10	437		(1,136	)	(130	)
Interest expense	2c,2p,44	(504,235	)	(405,239	)	(46,539	)
Gain on foreign exchange - net	2o	164,054		152,428		17,505
Others - net	2p	77,005		74,058		8,505
Other expenses - net		(183,065	)	(59,749	)	(6,862	)
INCOME BEFORE TAX		5,136,463		5,134,254		589,635
TAX (EXPENSE) BENEFIT	2p,2r,38
Current		(1,011,852	)	(1,328,635	)	(152,585	)
Deferred		(348,368	)	18,012		2,069
		(1,360,220	)	(1,310,623	)	(150,516	)
INCOME FOR THE PERIOD		3,776,243		3,823,631		439,119
OTHER COMPREHENSIVE (EXPENSE)
INCOME
Foreign currency translation	1d,2b,2f,10	(169	)	(4,511	)	(518	)
Change in fair value of available-for-sale
financial assets - net of tax	2f,2s	16,977		(3,024	)	(347	)
Total Other Comprehensive (Expense)
Income		16,808		(7,535	)	(865	)
TOTAL COMPREHENSIVE INCOME FOR THE
PERIOD		3,793,051		3,816,096		438,254

as restated, refer to Note 2p and 2s

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 COMPREHENSIVE INCOME (continued)

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

	Notes	2010* — Rp.	2011 — Rp.	US$ (Note 3)
Income for the period attributable
to:
Owners of the parent		2,786,263	2,828,303	324,812
Non-controlling interest	24	989,980	995,328	114,307
		3,776,243	3,823,631	439,119
Total comprehensive income attributable
to:
Owners of the parent		2,803,071	2,820,768	323,947
Non-controlling interest	24	989,980	995,328	114,307
		3,793,051	3,816,096	438,254
BASIC EARNINGS PER SHARE	2v,39
Income per share		141.65	143.79	0.02
Income per ADS (40 Series B shares per
ADS)		5,666.00	5,751.60	0.08

as restated, refer to Note 2p and 2s

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

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

(Figures in tables are presented in millions of Rupiah)

| Descriptions | Notes | Capital stock | Additional paid-in capital | Treasury stock | | Difference in value arising from restructuring transactions
and other transactions between entities under common
control | Difference due to change of under equity in
associated companies | Unrealized holding gain on available-for
sale securities | Translation adjustment | | | | | | Stockholders' equity | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | of non- controlling
interest | | Retained earnings | | | | | Non- controlling | | |
| | | | | | | | | | | subsidiaries | | Appropriated | Unappropriated * | | | | interest | Total | |
| | | Rp. | Rp. | Rp. | | Rp. | Rp. | Rp. | Rp. | Rp. | | Rp. | Rp. | | Rp. | | Rp. | Rp. | |
| Balance, January 1, 2010 - as
previously restated | | 5,040,000 | 1,073,333 | (4,264,073 | ) | 478,000 | 385,595 | 18,136 | 230,995 | (439,444 | ) | 15,336,746 | 21,130,459 | | 38,989,747 | | 10,933,347 | 49,923,094 | |
| Adjustment in relation to
implementation of PPSAK 1 “Withdrawal of PSAK 35 (Accounting for
Telecommunication Services)” | 2p | - | - | - | | - | - | - | - | | | - | (337,487 | ) | (337,487 | ) | - | (337,487 | ) |
| Adjustment in relation to implementation of
PSAK No. 55 (Revised 2006) | 2s | - | - | - | | - | - | - | - | - | | - | (91,237 | ) | (91,237 | ) | - | (91,237 | ) |
| Balance, January 1, 2010 - after
adjustment | | 5,040,000 | 1,073,333 | (4,264,073 | ) | 478,000 | 385,595 | 18,136 | 230,995 | (439,444 | ) | 15,336,746 | 20,701,735 | | 38,561,023 | | 10,933,347 | 49,494,370 | |
| Net comprehensive income (loss) for the
period | 2f,2s,10 | - | - | - | | - | - | 16,977 | (169 | ) | | - | 2,786,263 | | 2,803,071 | | 989,980 | 3,793,051 | |
| Balance, March 31, 2010 – as
restated | | 5,040,000 | 1,073,333 | (4,264,073 | ) | 478,000 | 385,595 | 35,113 | 230,826 | (439,444 | ) | 15,336,746 | 23,487,998 | | 41,364,094 | | 11,923,327 | 53,287,421 | |

as restated, refer to Note 2p and 2s

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

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (continued)

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

(Figures in tables are presented in millions of Rupiah)

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

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

	2010* — Rp.		2011 — Rp.		US$ (Note 3)
CASH FLOWS FROM OPERATING
ACTIVITIES
Cash receipts from operating
revenues
Telephone
Fixed lines	3,100,796		2,290,546		263,054
Cellular	6,619,502		6,724,684		772,286
Interconnection	1,115,342		1,086,609		124,790
Data, internet and information technology
services	4,564,935		5,462,912		627,380
Other services	534,639		734,552		84,359
Total cash receipts from operating
revenues	15,935,214		16,299,303		1,871,869
Cash payments for operating
expenses	(6,255,243	)	(5,371,854	)	(616,923	)
Cash payments to employees	(1,824,292	)	(1,906,065	)	(218,899	)
Cash paid (refund) from (to)
customers	143,852		(203,740	)	(23,398	)
Cash generated from operations	7,999,531		8,817,644		1,012,649
Interest received	87,614		122,703		14,092
Interest paid	(439,121	)	(423,474	)	(48,633	)
Income tax paid	(662,922	)	(1,374,517	)	(157,854	)
Net cash provided by operating
activities	6,985,102		7,142,356		820,254
CASH FLOWS FROM INVESTING
ACTIVITIES
Proceeds from sale of temporary investments
and maturity of time deposits	23,236		4,362		501
Purchases of temporary investments and
placements in time deposits	(5,660	)	(17,000	)	(1,953	)
Proceeds from sale of property, plant and
equipment	1,451		3,291		378
Acquisition of property, plant and
equipment	(4,361,856	)	(2,783,315	)	(319,646	)
Increase in advances for purchases of
property, plant and equipment	(647,912	)	(226,935	)	(26,062	)
(Increase) decrease in advances, other assets
and escrow accounts	144,812		(39,010	)	(4,480	)
Business combinations, net of cash
acquired	(111,676	)	-		-
Acquisition of intangible
assets	(19,342	)	(72,397	)	(8,314	)
Acquisition of long-term
investments	(3,905	)	-		-
Net cash used in investing
activities	(4,980,852	)	(3,131,004	)	(359,576	)
CASH FLOWS FROM FINANCING
ACTIVITIES
Cash dividends paid	-		(250,085	)	(28,721	)
Cash dividends paid to minority stockholders
of subsidiaries	(405,585	)	-		-
Proceeds from short-term
borrowings	21,483		27,942		3,209
Repayments of short-term
borrowings	(14,928	)	(17,333	)	(1,991	)
Proceeds from medium-term Notes	35,000		-		-
Repayment of medium-term Notes	-		(3,050	)	(350	)
Proceeds from long-term
borrowings	422,565		434,300		49,876
Repayment of long-term
borrowings	(2,623,094	)	(2,662,172	)	(305,733	)
Proceeds from promissory notes	-		95,317		10,947
Repayment of promissory notes	-		(9,981	)	(1,146	)
Repayment of obligations under finance
leases	(77,110	)	(47,517	)	(5,457	)
Net cash used in financing
activities	(2,641,669	)	(2,432,579	)	(279,366	)
* as restated, refer to Note 2p
See
accompanying notes to consolidated financial statements, which form an
integral part of the consolidated financial statements.

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011

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

	2010 — Rp.		2011 — Rp.		US$ (Note 3)
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS	(637,419	)	1,578,773		181,312
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS	(416,982	)	(53,147	)	(6,104	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD	7,805,460		9,119,849		1,047,356
CASH AND CASH EQUIVALENTS AT END OF
PERIOD	6,751,059		10,645,475		1,222,564
SUPPLEMENTAL CASH FLOW
INFORMATION
Non-cash investing and financing
activities:
Acquisition of property, plant and equipment
through incurrence of payables	5,703,508		4,171,681		479,091
Acquisition of property, plant and equipment
through finance leases	5,967		9,799		1,125

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

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

1. GENERAL

a. Establishment and general information

Perusahaan Perseroan (Persero) P.T. Telekomunikasi Indonesia Tbk (the “Company”) was originally part of “Post en Telegraafdienst” , which was established in 1884 under the framework of Decree No. 7 dated March 27, 1884 of the Governor General of the Dutch Indies and was published in State Gazette No. 52 dated April 3, 1884.

In 1991, the status of the Company was changed into a state-owned limited liability corporation (“Persero”) based on Government Regulation No. 25/1991.

The 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 to comply with Badan Pengawas Pasar Modal dan Lembaga Keuangan Indonesia (“BAPEPAM-LK”) Regulation No. IX.J.1 of Main Provisions of the Articles of Association of Company that Make an Equity Public Offering and Public Company and BAPEPAM-LK Regulation No. IX.E.2 of Material Transaction and Changes of the Core Business Activities, and to add the Company’s purposes and objectives, based on notarial deed No. 37 dated June 24, 2010 of A. Partomuan Pohan, S.H., LLM.. The changes were accepted and approved by the Minister of Justice and Human Rights of the Republic of Indonesia (“MoJHR”) as in his Letter No. AHU-AH.01.10-18476 dated July 22, 2010 and Letter No. AHU-35876.AH.01.02/2010 dated July 19, 2010.

In accordance with Article 3 of the Company’s Articles of Association, the scope of its activities is to provide telecommunication network and services, informatics and optimization of the Company’s resources in accordance with prevailing regulations. To achieve this objective, the Company is involved in the following activities:

a. Main business:

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

ii. Planning, developing, providing, marketing or selling and improving telecommunications and information services in accordance with prevailing regulations.

b. Supporting business:

i. Providing payment transactions and money transferring services through telecommunications and information networks.

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

The Company’s head office is located at Jalan Japati No. 1, Bandung, West Java.

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PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

1. GENERAL (continued)

a. Establishment and general information (continued)

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 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 was expected to pave the way for market liberalization. In connection with this law, Government Regulation No. 52/2000 was issued, which provided 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 domestic long-distance (“Sambungan Langsung Jarak Jauh” or “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 12 and 28). Further, on press release of the Coordinating Minister of Economics of the Republic of Indonesia dated July 31, 2002, the Government terminated the Company’s 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 is granted several telecommunications licenses which are valid for an unlimited period of time as long as the Company complies with prevailing laws and telecommunications regulations and fulfills the obligations stated in those permits. For every license, an evaluation is performed annually and an overall evaluation is performed every 5 (five) years. The Company is obliged to submit reports of services to the Indonesian DGPT annually. The reports comprise information such as network development progress, service quality standard achievement, total customer, license payment and universal service contribution, while for internet telephone services for public purpose (“ITKP”) there are additional information required such as operational performance, customer segmentation, traffic, and gross revenue.

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PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

1. GENERAL (continued)

a. Establishment and general information (continued)

Details of these licenses are as follows:

| License | License No. | Type
of services | Grant date/latest renewal date |
| --- | --- | --- | --- |
| License to operate local fixed line and basic
telephone services network | 381/KEP/M.KOMINFO/10/2010 | Local fixed line and basic telephone services
network | October 28, 2010 |
| License to operate fixed domestic long
distance and basic telephone services network | 382/KEP/M.KOMINFO/10/2010 | Fixed domestic long distance and basic
telephone services network | October 28, 2010 |
| License to operate fixed international and
basic telephone services network | 383/KEP/M.KOMINFO/10/2010 | Fixed international and basic telephone
services network | October 28, 2010 |
| License to operate fixed closed
network | 398/KEP/M.KOMINFO/11/2010 | Fixed closed network | November 12, 2010 |
| License to operate internet telephone
services for public purpose | 384/KEP/DJPT/M.KOMINFO/11/2010 | ITKP | November 29, 2010 |

b. Company’s Board of Commissioners, Directors, Audit Committee, Corporate Secretary and employees

1. Board of Commissioners and Directors

Based on resolutions made at (i) the Annual General Meeting (“AGM”) of Stockholders of the Company dated June 12, 2009 as covered by notarial deed No. 22 of Dr. A. Partomuan Pohan, S.H., LLM.; (ii) the Extraordinary General Meeting (“EGM”) of Stockholders of the Company dated June 11, 2010 as covered by notarial deed no. 18 of the same notary, and (iii) the EGM of Stockholders of the Company dated December 17, 2010 as covered by notarial deed no. 33 of the same notary, the composition of the Company’s Board of Commissioners and Directors as of December 31, 2010 and March 31, 2011, respectively, were as follows:

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PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

1. GENERAL (continued)

b. Company’s Board of Commissioners, Directors, Audit Committee, Corporate Secretary and employees (continued)

1. Board of Commissioners and Directors (continued)

	December 31, 2010	March 31, 2011
President Commissioner	Tanri Abeng	Jusman Syafii Djamal
Commissioner	Bobby A.A Nazief	Bobby A.A Nazief
Commissioner	Mahmuddin Yasin	Mahmuddin Yasin
Independent Commissioner	Arif
Arryman	Rudiantara
Independent Commissioner	Petrus Sartono	Johnny Swandi Sjam
President Director	Rinaldi Firmansyah	Rinaldi Firmansyah
Vice President Director/Chief Operating
Officer (“COO”)	*
(see Note below)	*
(see Note below)
Director of Finance	Sudiro Asno	Sudiro Asno
Director of Network and
Solution	Ermady Dahlan	Ermady Dahlan
Director of Enterprise and
Wholesale	Arief Yahya	Arief Yahya
Director of Consumer	I
Nyoman Gede Wiryanata	I
Nyoman Gede Wiryanata
Director of Compliance and Risk
Management	Prasetio	Prasetio
Chief Information Technology
Officer	Indra Utoyo	Indra Utoyo
Director of Human Capital and General Affairs
(“HCGA”)	Faisal Syam	Faisal
Syam

COO is held by Director of Network and Solution in 2010 and 2011

Based on the EGM of Stockholders of the Company dated December 17, 2010, the Company’s stockholders agreed, among others to:

reappoint Rinaldi Firmansyah as President Director and Arief Yahya as Director of Enterprise and Wholesale with the terms of service effective from the closing of the EGM of Stockholders of the Company and to be ended on the date of the AGM of Stockholders of the Company in 2015;
appoint Jusman Syafii Djamal as President Commissioner, Rudiantara as Independent Commissioner, and Johnny Swandi Sjam as Independent Commissioner with the terms of service effective from January 1, 2011 and to be ended on the date of the AGM of Stockholders of the Company in 2015.

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PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

1. GENERAL (continued)

b. Company’s Board of Commissioners, Directors, Audit Committee, Corporate Secretary and employees (continued)

2. Audit Committee and Corporate Secretary

The composition of the Company’s Audit Committee and Corporate Secretary as of December 31, 2010 and March 31, 2011, respectively, were as follows:

	December 31, 2010	March 31, 2011
Chair	Petrus Sartono	Rudiantara
Secretary	Salam	Salam
Member	Bobby A.A Nazief	Bobby A.A Nazief
Member	Agus
Yulianto	Agus Yulianto
Member	Sahat Pardede	Sahat Pardede
Member	-	Johnny Swandi Sjam
Corporate Secretary	Agus
Murdiyatno	Agus
Murdiyatno

3. Employees

As of December 31, 2010 and March 31, 2011, the Company and its subsidiaries had 26,847 employees (audited) and 26,992 employees (unaudited), respectively.

c. Public offering of securities of the Company

The Company’s shares prior to its Initial Public Offering (“IPO”) totalled 8,400,000,000, consisting of 8,399,999,999 Series B shares and 1 Series A Dwiwarna share, and were 100%-owned by the Government. 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 and listed on 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 the Company’s stockholders who did not sell their shares within one year from the date of the IPO. In May 1999, the Government further sold 898,000,000 Series B shares.

To comply with Law No. 1/1995 of the Limited Liability Companies, at the AGM of Stockholders of the Company on April 16, 1999, the Company’s stockholders resolved to increase the Company’s issued share capital by distribution of 746,666,640 bonus shares through the capitalization of certain additional paid-in capital, which were distributed to the Company’s stockholders in August 1999. On August 16, 2007, the Law No. 1/1995 of the Limited Liability Companies was amended by the issuing of Law No. 40/2007 of the Limited Liability Companies which became effective at the same date. The Law No. 40/2007 has no effect on the public offering of shares of the Company. The Company has complied with Law No. 40/2007.

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PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

1. GENERAL (continued)

c. Public offering of securities of the Company (continued)

In December 2001, the Government had another block sale of 1,200,000,000 shares or 11.9% of the total outstanding Series B shares. In July 2002, the Government sold a further 312,000,000 shares or 3.1% of the total outstanding Series B shares.

At the AGM of Stockholders of the Company dated July 30, 2004, as covered by notarial deed No. 26 of A. Partomuan Pohan, S.H., LLM., the Company’s stockholders approved the Company’s 2-for-1 stock split for Series A Dwiwarna and Series B. For Series A Dwiwarna share with par value of Rp.500, it was split 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 in an increase of the Company’s authorized capital stock from 1 Series A Dwiwarna share and 39,999,999,999 Series B shares to 1 Series A Dwiwarna share and 79,999,999,999 Series B shares, and issued capital stock from 1 Series A Dwiwarna share and 10,079,999,639 Series B shares to 1 Series A Dwiwarna share and 20,159,999,279 Series B shares. After the stock split, each ADS represented 40 Series B shares.

During the EGM of Stockholders of the Company on December 21, 2005, AGM of Stockholders of the Company on June 29, 2007 and the AGM of Stockholders of the Company on June 20, 2008, the Company’s stockholders approved the phase I, II and III plan, respectively, to repurchase the Company’s issued Series B shares (Note 27).

As of March 31, 2011, all of the Company’s Series B shares were listed on the IDX and 72,554,892 ADS shares were listed on the NYSE and LSE (Note 25).

As of March 31, 2011, the Company’s outstanding bonds which was second IDR bond and issued on June 25, 2010 with a nominal amount of Rp.1,005,000 million for a five-year period and Rp.1,995,000 million for a ten-year period for Series A and Series B, respectively, were listed on the IDX (Note 21a).

d. Subsidiaries

As of December 31, 2010 and March 31, 2011, the Company has consolidated the following direct or indirectly owned subsidiaries which it controls as a result of majority ownership (Notes 2b and 2d):

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PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

1. GENERAL (continued)

d. Subsidiaries (continued)

(i) Direct subsidiaries:

| | Nature of business/ — date
of incorporation | Date
of | Percentage of effective ownership
interest | | Total assets before
elimination | |
| --- | --- | --- | --- | --- | --- | --- |
| Subsidiary/place of incorporation | or
acquisition by the
Company | commercial operation | December 31, 2010 | March 31, 2011 | December 31, 2010 | March 31, 2011 |
| PT Telekomunikasi Selular ( “Telkomsel” ), Jakarta, Indonesia | Telecommunication – provides
telecommunication facilities and mobile cellular services using Global
System for Mobile Communication (“GSM”) technology/ May 26,
1995 | 1995 | 65 | 65 | 57,343,376 | 58,349,568 |
| PT Multimedia Nusantara ( “Metra” ), Jakarta, Indonesia | Multimedia and line telecommunication
services/May 9, 2003 | 1998 | 100 | 100 | 1,872,689 | 1,863,144 |
| PT Telekomunikasi Indonesia International ( “TII” ), Jakarta, Indonesia | Telecommunication/ July 31, 2003 | 1995 | 100 | 100 | 1,757,023 | 1,578,309 |
| PT Pramindo Ikat Nusantara ( “Pramindo” ), Jakarta,
Indonesia | Telecommunication construction and services/
August 15, 2002 | 1995 | 100 | 100 | 1,199,394 | 1,169,159 |
| 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 | 100 (including through 49% ownership by
Metra) | 100 (including through 49% ownership by
Metra) | 648,695 | 688,358 |
| PT Dayamitra Telekomunikasi ( “Dayamitra” ), Jakarta,
Indonesia | Telecommunication/ May 17, 2001 | 1995 | 100 | 100 | 433,835 | 550,723 |
| PT Indonusa Telemedia ( “Indonusa” ), Jakarta,
Indonesia | Pay television and content services/ May 7, 1997 | 1997 | 100 (including through 0.8% ownership by
Metra) | 100 (including through 0.54% ownership by
Metra) | 343,192 | 332,363 |
| 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 | 263,057 | 285,015 |
| 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 | 4,910 | 4,910 |

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PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

1. GENERAL (continued)

d. Subsidiaries (continued)

(ii) Indirect subsidiaries:

| | Nature of business — date
of incorporation | Date
of | Percentage of effective ownership
interest | | Total assets before
elimination | |
| --- | --- | --- | --- | --- | --- | --- |
| Subsidiary/place of incorporation | or
acquisition by the
Company | commercial operation | December 31, 2010 | March 31, 2011 | December 31, 2010 | March 31, 2011 |
| PT Sigma Cipta Caraka (“ Sigma ”), Tangerang , Indonesia | Information technology service - system implementation and integration service, outsourcing and
software license maintenance/May 1, 1987 | 1988 | 100 (through100% ownership by
Metra) | 100 (through100% ownership by
Metra) | 503,476 | 508,534 |
| PT Telekomunikasi Indonesia International
Pte. Ltd. Singapore | Telecommunication/ December 6,
2007 | 2008 | 100 (through 100% ownership by TII) | 100 (through 100% ownership by TII) | 256,294 | 257,420 |
| PT Balebat Dedikasi Prima (“ Balebat ”), Bogor, Indonesia | Printing/October 1, 2003 | 2000 | 65 (through 65% ownership by
infomedia) | 65 (through 65% ownership by
infomedia) | 86,068 | 98,449 |
| 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) | 71,922 | 71,921 |
| PT Administrasi Medika(“ Ad
Medika ”), Jakarta, Indonesia | Heatlh insurance administration services/
February 25, 2010 | 2010 | 75 (through 75% ownership by
Metra) | 75 (through 75% ownership by
Metra) | 59,970 | 65,665 |
| PT Metra-Net (“ Metra-Net ”) Jakarta, Indonesia | Multimedia portal service/April 17,
2009 | 2009 | 100 (through 100% ownership by
Metra) | 100 (through 100% ownership by
Metra) | 42,031 | 32,308 |
| Telkomsel Finance B.V., (“ TFBV ”), Amsterdam, The Netherlands | Finance – established in 2005 for the purpose
of borrowing, lending and raising funds including issuance of bonds,
promissory notes or debts/ February 7, 2005 | 2005 | 65 (through100% ownership by
Telkomsel) | 65 (through 100% ownership by
Telkomsel) | 7,687 | 7,461 |
| Telekomunikasi Indonesia International Ltd., Hongkong | Telecommunication/December 8, 2010 | 2010 | 100 (through 100% ownership by TII) | 100 (through 100% ownership by TII) | 2,640 | 7,683 |
| Aria West International Finance B.V.
(“ AWIBV ”), 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) | 311 | 311 |
| Telekomunikasi Selular Finance Limited
(“ TSFL ”), Mauritius | Finance- established to raise funds for
the development of Telkomsel’s business through the issuance of debenture
stock, bonds, mortgages or any other securities/ April 22, 2002 | 2002 | 65 (through 100% ownership by
Telkomsel) | 65 (through 100% ownership by
Telkomsel) | 65 | 63 |

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

1. GENERAL (continued)

Subsidiaries (continued)

(a) Telkomsel

On February 14, 2006, Telkomsel was granted the International Mobile Telecommunications-2000 (“IMT-2000”) or 3 rd Generation technology (“3G”) license in 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 13iii and 48c.i). Telkomsel started its commercial services for 3G in September 2006.

On October 11, 2006, Telkomsel’s operating licenses were updated by the 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 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.

This license stipulates the rights and obligations of Telkomsel, including any relevant sanctions. The license has a perpetual term, which is subject to evaluation on an annual basis.

Based on Decision Letter No. 213/DIRJEN/2008 dated August 4, 2008, the Ministry of Communication and Information Technology through the DGPT granted Telkomsel a principle license to provide Internet Telephony Services (Voice over Internet Protocol or “VoIP”) which provision is subject to an operation acceptance test within one year. Based on Decision Letter No. 226/DIRJEN/2009 dated September 24, 2009, Telkomsel obtained the operating license for providing VoIP services in certain areas. The license has a perpetual term, which is subject to evaluation on an annual basis or every five years.

Based on Bank Indonesia’s (“BI”) letter No. 10/632/DASP dated August 12, 2008, Telkomsel registered as a Money Remitter with register No. 10/12/DASP/10 dated August 12, 2008 to provide remittance service.

Based on Decision Letter No. 268/KEP/M.KOMINFO/9/2009 of the Minister of Communication and Information Technology dated September 1, 2009, the Government granted Telkomsel an additional IMT-2000 license in the 2.1 GHz frequency bandwidth for a 10-year period from the date of the decision letter (Notes 13iii and 48c.i).

Based on Decision Letters No. 39/KEP/M.KOMINFO/01/2010 and No. 41/KEP/M.KOMINFO/01/2010 of the Ministry dated January 25, 2010 and January 28, 2010, respectively, the Government granted Telkomsel operating licenses to provide local fixed-line under the USO program. The licenses are valid until the expiration of the agreements, extendable subject to evaluation (Note 47h).

Based on Decision Letter No. 213/DIRJEN/2010 dated June 17, 2010, which replaced Decision Letter No. 38/DIRJEN/2004, the Ministry of Communication and Information Technology through DGPT granted Telkomsel an operating license for providing internet services. The license has a perpetual term, which is subject to evaluation on an annual basis or every five years.

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

1. GENERAL (continued)

d. Subsidiaries (continued)

(b) Metra

On January 25, 2010, Metra entered into a CSPA with Ad Medika’s stockholders to purchase 75% of Ad Medika’s outstanding shares (Note 4). Subsequently, on February 25, 2010, Metra entered into SPA with Ad Medika’s stockholders for the share purchase transaction amounting to Rp.130,077 million.

On February 2, 2010, based on notarial deed No. 1 of Myra Yuwono, S.H., dated February 2, 2010, Metra’s stockholders agreed to increase its issued and fully paid capital from Rp.1,084,179 million to Rp.1,101,179 million by issuing 1,700,000 additional new shares with a nominal value of Rp.10,000 per share to be issued and fully paid by the Company for additional paid in capital purpose on the Metra-Net.

On March 4, 2010, based on notarial deed No. 5 of Myra Yuwono, S.H., dated March 4, 2010, Metra’s stockholders agreed to increase its issued and fully paid capital from Rp.1,101,179 million to Rp.1,233,179 million by issuing 13,200,000 additional new shares with a nominal value of Rp.10,000 per share to be issued and fully paid by the Company for Ad Medika’s acquisition purpose (Note 4).

On June 22, 2010, based on notarial deed No. 20 of Myra Yuwono, S.H., dated June 22, 2010, Metra’s stockholders agreed to increase its issued and fully paid capital from Rp.1,233,179 million to Rp.1,284,179 million by issuing 5,100,000 additional new shares with a nominal value of Rp.10,000 per share to be issued and fully paid by the Company for purpose of forming a joint venture with SK Telecom (Note 10ii).

On August 30, 2010, based on notarial deed No. 59 of Myra Yuwono, S.H., dated August 30, 2010, Metra’s stockholders agreed to increase its issued and fully paid capital from Rp.1,284,179 million to Rp.1,327,179 million by issuing 4,300,000 additional new shares with a nominal value of Rp.10,000 per share to be issued and fully paid by the Company for additional paid in capital purpose on the Metra-Net.

On August 31, 2010, based on notarial deed No. 60 of Myra Yuwono, S.H., dated August 31, 2010, Metra’s stockholders agreed to increase its issued and fully paid capital from Rp.1,327,179 million to Rp.1,422,901 million by issuing 9,572,206 additional new shares with a nominal value of Rp.10,000 per share to be issued and fully paid by the Company for the purpose of exercising the 20% put option of Sigma’s shares owned by PT Sigma Citra Harmoni (“SCH”).

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

1. GENERAL (continued)

d. Subsidiaries (continued)

(c) TII

Based on the Circular Meeting of Stockholders of TII on January 11, 2010, TII’s stockholder agreed TII’s participation in South East Asia-Japan Cable System (SJC) Sea Cable Consortium and Extended Capacity to United States of America to be a total investment of US$45.2 million. As at March 31, 2011, no payment has been made by TII to the Consortium.

Based on the Circular Meeting of Stockholders of TII on November 10, 2010 as covered by notarial deed No. 28 of Siti Safarijah dated November 30, 2010, TII’s stockholder agreed the conversion of debt of Rp.164,708 million (debt to equity swap) into shares issued and fully paid capital to become Rp.1,066,205 million.

(d) Indonusa

On December 10, 2010, based on notarial deed No. 6 of Dr. A. Partomuan, S.H., dated January 6, 2011, Indonusa’s stockholders agreed to increase its issued and fully paid capital from 481,426,353 shares to 753,426,353 shares by issuing 272,000,000 additional new shares with a nominal value of Rp.500 per share and fully paid by the Company.

On March 8, 2011, based on the Circular Meeting of Stockholders of Indonusa as covered by notarial deed No. 18 of Dr. A. Partomuan Pohan, S.H., LLM., dated March 14, 2011, Indonusa’s stockholder agreed the conversion of debt of Rp.174,824 million (debt to equity swap) into shares issued and fully paid capital to become Rp.551,537 million.

e. Authorization of the consolidated financial statements

The consolidated financial statements were authorized for issue by the Board of Directors on April 28, 2011.

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements of the Company and its subsidiaries have been prepared in accordance with generally accepted accounting principles in Indonesia (“Indonesian GAAP”) and Regulation of the Capital Market Supervisory Board and Financial Institution (“Badan Pengawas Pasar Modal dan Lembaga Keuangan” or Bapepam-LK) No. VIII.G.7 regarding “Financial Statement Presentation Guidelines”, KEP-554/BL/2010 regarding the Amendment of the Regulation of the Capital Market Supervisory Board and Financial Institution No. KEP-06/PM//2000 regarding the Amendment of the Regulation No. VIII.G.7 regarding “Financial Statement Presentation Guidelines” and Circular Letter No. SE-02/PM/2002 regarding “Financial Statements Presentation Guidelines for Issuers or Public Companies in Telecommunication Industry”.

a. Basis of preparation of financial statements

Since January 1, 2011, the Company and its subsidiaries have adopted Indonesian Statement of Financial Accounting Standards (Pernyataan Standar Akuntansi Keuangan or “PSAK”) 1 (Revised 2009), “Presentation of Financial Statements” , PSAK 2 (Revised 2009), “Statements of Cash Flows”, and PSAK 3 (Revised 2010), “Interim Financial Statements”, which became effective for financial statement periods beginning on or after January 1, 2011 and is applied prospectively.

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

Since January 1, 2011, the Company and its subsidiaries have adopted PSAK 4 (Revised 2009), “Consolidated and Separate Financial Statements” , which became effective for financial statement periods beginning on or after January 1, 2011 and is applied retrospectively

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 half of the voting power and has the ability to control the entity unless, in exceptional circumstances, it can be clearly demonstrated that such ownership does not constitute control, or the Company has the ability to control the entity, even though the ownership is less than or equal to half of the voting power. Subsidiaries are consolidated from the date on which effective control is obtained and are no longer consolidated from the date of disposal.

All significant intercompany balances and transactions have been eliminated in the consolidated financial statements.

c. Transactions with related parties

Since January 1, 2011, the Company and its subsidiaries have adopted PSAK 7 (Revised 20 1 0), “Related Party Disclosures” , which became effective for financial statement periods beginning on or after January 1, 2011 and is applied prospectively.

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

c. Transactions with related parties (continued)

The Company and its subsidiaries have transactions with related parties. The definition of related parties used is in accordance with PSAK 7 (Revised 20 1 0) , “Related Party Disclosures”. A related party is a person or entity that is related to the entity that is preparing its financial statements (“reporting entity”).

d. Acquisitions of subsidiaries

Since January 1, 2011, the Company and its subsidiaries have adopted PSAK 22 (Revised 20 1 0), “Business Combinations” , which became effective for financial statement periods beginning on or after January 1, 2011 and is applied prospectively.

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 Company's interest in the fair value of identifiable assets acquired and liabilities assumed is recorded as goodwill. Acquisition-related costs are recognized in the periods in which the costs are incurred and the services are received.

The Company continually assesses 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. Goodwill aroused from business combination which acquisition date prior January 1, 2011 was stopped amortized since the period beginning on or after January 1, 2011.

The acquisition of entities under common control is accounted for using book value, in a manner similar to that of pooling of interests accounting (carryover basis). Any 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 the consolidated statement of comprehensive income when the common control relationship has ceased.

The difference between the consideration paid and the non-controlling interest’s proportionate share of the acquiree’s net identifiable assets debited is recognized directly in equity and reported as “Difference due to acquisition of non-controlling interest in subsidiaries”.

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.

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PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

f. Investments

Since January 1, 2011, the Company and its subsidiaries have adopted PSAK 12 (Revised 2009), “Interests in Joint Ventures” and PSAK 15 (Revised 2009) “Investments in Associates” , which became effective for financial statement periods beginning on or after January 1, 2011 and is applied retrospectively.

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 and trading 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 comprehensive income, and are determined on a specific-identification basis. A decline in the fair value of any available-for-sale securities below cost that is deemed to be other-than-temporary and is charged to the consolidated statements comprehensive of income.

Gains or losses arising from changes in fair value of the trading secuirites are presented in the income statement within other (expenses) income in the period in which they arise.

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 Company's 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 Company’s 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 incurred legal or constructive obligations or made payments on behalf of the associate.

Investment in joint ventures is accounted by using the equity method whereby the participation in a joint venture initially recorded at cost and subsequently adjusted for changes in the shares of the venturer of the joint venture’s net assets that occurred after the acquisition.

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PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

2. 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 according to PSAK 55 (Revised 2006), “Financial Instruments: Recognition and Measurement”. 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 according to PSAK 48 (Revised 2009), “Impairment of Assets”.

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 comprehensive 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”) and the functional currency of Scicom (MSC) Berhad (“Scicom”) is Malaysian Ringgit (“MYR”) . For the purpose of reporting these investments using the equity method, the assets and liabilities of these companies as of the statement of financial position date are translated into Indonesian Rupiah using the 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.

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

g. Trade and other receivables

Trade and other receivables are recognized initially at fair value and subsequently measured at amortized cost, less allowance for doubtful accounts. This allowance for doubtful accounts is made based on management’s evaluation of the collectability of outstanding amounts. Accounts are written off in the period during which they are determined to be uncollectible.

h. Inventories

Inventories consist of components and modules, which are subsequently expensed or transferred to property, plant and equipment upon use. Inventories also include Subscriber Identification Module (“SIM”) cards, Removable User Identity Module (“RUIM”) cards, handsets, set top box, wireless broadband modem and prepaid voucher blanks , which are expensed upon sale. Inventories are stated at the lower of cost and net realizable value.

Cost is determined using the weighted average method for components, SIM cards, RUIM cards and prepaid voucher blanks , and the specific-identification method for modules.

The amount of any write-down of inventories below cost to net realizable value and all losses of inventories shall be recognized as an expense in the period in which the write-down or loss occurs. The amount of any reversal of any write-down of inventories, arising from an increase in net realizable value, shall be recognized as a reduction in the amount of inventories expense in the period in which the reversal occurs.

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

Since January 1, 2011, the Company and its subsidiaries have adopted PSAK 1 9 (Revised 20 1 0), “Intangible Assets” and Financial Accounting Standards Interpretation (Interpretasi Standar Akuntansi Keuangan or “ISAK”) 14 “ Intangible Assets – Website Costs ” , which became effective for financial statement periods beginning on or after January 1, 2011 and is applied prospectively.

Intangible assets comprised of intangible assets from subsidiaries or business acquisitions, licenses and computer software. 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 estimate the recoverable value of their intangible assets. When the carrying amount of an asset exceeds its estimated recoverable amount, the asset is written-down to its estimated recoverable amount.

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

j. Intangible assets (continued)

Intangible assets are depreciated using the straight-line method, based on the estimated useful lives of the assets as follows:

	Years
License	10
Other intangible assets	2-10

In 2006, Telkomsel was granted the right to operate the 3G license (Note 13.iii). Telkomsel is required to pay an up-front fee and annual rights of usage (“Biaya Hak Penggunaan” or “BHP”) fees for the next ten years (Notes 44a.ii and 48c.i). The up-front fee is recorded as an 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.

Based on 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 an expense when incurred. Management evaluates its plan to continue to use the license on an annual basis.

k. Property, plant and equipment - direct acquisitions

The cost of the assets include: (a) purchase price, (b) any costs directly attributable to bringing the asset to its location and condition and (c) the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located. Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item shall be depreciated separately. The residual value and the useful life of an asset should be reviewed at least at each financial year-end.

Property, plant and equipment directly acquired are stated at cost, less accumulated depreciation and impairment losses.

Property, plant and equipment, except land, are depreciated using the straight-line method, based on the estimated useful lives of the assets as follows:

	Years
Buildings	20-40
Leasehold improvements	3-7
Switching equipment	5-15
Telegraph, telex and data communication
equipment	5-15
Transmission installation and
equipment	5-25
Satellite, earth station and
equipment	3-20
Cable network	5-25
Power supply	3-10
Data processing equipment	3-10
Other telecommunications
peripherals	5
Office equipment	2-5
Vehicles	5-8
Other equipment	5

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

k. Property, plant and equipment - direct acquisitions (continued)

Pursuant to PSAK 16R, starting January 1, 2010, the Company has changed the estimated useful lives of office and installation buildings (included in buildings) from 20 years to 40 years, Submarine Cable Communication System/Fiber Optic Communication System (included in transmission installation and equipment) from 20 years to 25 years and antenna and towers (included in transmission installation and equipment, and satellite, earth station and equipment) from 15 years to 20 years, based on the review of the useful lives of the assets in the telecommunications industry that is similar to the Company and the usage expectation based on technical specification. The effect of the changes was accounted for prospectively and resulted in a reduction in the expense charged to the 2010 consolidated statement of comprehensive income (Note 11d.iii).

Since January 1, 2011, the Company and its subsidiaries have adopted PSAK 48 (Revised 2009), “Impairment of Assets” and ISAK 17, “Interim Financial Statements and Impairment of Assets”, which became effective for financial statement periods beginning on or after January 1, 2011, the Company and its subsidiaries have adopted the PSAK and ISAK and applied it prospectively. The Company and its subsidiaries periodically evaluate its property, plant and equipment for impairment, whenever events and circumstances indicate that the carrying amount of the assets may not be recoverable. When the carrying amount of an asset exceeds its estimated recoverable amount, the asset is written-down to its estimated recoverable amount, which is determined based upon the greater of its net selling price or value in use.

Spare parts and servicing equipment are carried as inventory and recognized in profit or loss as consumed. Major spare parts and stand-by equipment that are expected to be used for more than 12 months are recorded as part of property, plant and equipment.

Since January 1, 2011, the Company and its subsidiaries have adopted PSAK 58 (Revised 2009), “Non Current Assets Held for Sale and Discontinued Operations”, which became effective for financial statement periods beginning on or after January 1, 2011, the Company and its subsidiaries have adopted the PSAK and applied it prospectively. When assets are retired or otherwise disposed of, their cost 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 comprehensive income.

Certain computer hardware can not be used without the availability of certain computer software. In such circumstance, the computer software is recorded as part of the computer hardware. If any computer software is independent from its computer hardware, it is recorded as part of intangible assets.

The cost of maintenance and repairs is charged to the consolidated statement of comprehensive income as incurred. Significant renewals and betterments are capitalized.

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 until the property is ready for its intended use or sale, 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 period. Capitalization of borrowing cost ceases when the construction has been completed and the asset is ready for its intended use.

Equipment temporarily unused is reclassified into equipment not used in operation and depreciated over their estimated useful life using straight-line method.

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

l. Property, plant and equipment under finance leases

A lease is classified as a finance lease or operating lease based on the substance not the form of the contract. Property, plant and equipment under finance lease is recognized if the lease transfers substantially all the risks and rewards incidental to ownership.

Finance leases are recognized as assets and liabilities in the statement of financial positions as the amounts equal to the fair value of the leased property or, if lower, the present value of the minimum lease payments. Any initial direct costs of the Company and its subsidiaries are added to the amount recognized as an asset.

Minimum lease payments shall be apportioned between the finance charge and the reduction of the outstanding liability. The finance charge shall be allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent rents shall be charged as expenses in the periods in which they are incurred.

Leased assets are depreciated using the same method over the shorter of the lease term and their economic useful life.

Leasing arrangements that do not meet the above criteria are accounted for as operating leases for which payments are charged as an expense on the straight-line basis over the lease period.

m. Joint Operation Schemes (“Kerja Sama Operasi” or “KSO”)

Revenues from KSO include amortization of unearned initial investor payments, Minimum Telkom Revenues (“MTR”) and the Company's 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 are 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 Company's share of DKSOR is recognized on the basis of the Company's 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”, 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.

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

n. 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.

o. Foreign currency translation

The functional currency of the Company and its subsidiaries is the Indonesian Rupiah and the accounting records 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 statement of financial position 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 statement of financial position date as follows:

| | The
Company and its subsidiaries — December
31, 2010 | | March 31, 2011 | |
| --- | --- | --- | --- | --- |
| | Buy | Sell | Buy | Sell |
| United States Dollars (“US$”) 1 | 9,005 | 9,015 | 8,705 | 8,710 |
| Euro1 | 12,011 | 12,025 | 12,368 | 12,379 |
| Yen1 | 110.68 | 110.82 | 105.12 | 105,22 |

The resulting foreign exchange gains or losses, realized and unrealized, are credited or charged to the consolidated statement of comprehensive 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).

p. Revenue and expense recognition

Since January 1, 2011, the Company and its subsidiaries have adopted PSAK 23 (Revised 2010), “Revenue” and ISAK 10 “Customer Loyalty Program”, which became effective for financial statement periods beginning on or after January 1, 2011 and is applied prospectively.

i. Implementation of PPSAK 1 “Withdrawal of PSAK 35 (Accounting for Telecommunication Services)”

In June 2009, the Indonesian Financial Accounting Standard Board (“DSAK”) issued Statement of Withdrawal of Financial Accounting Standard No. 1 (PPSAK 1), effective for financial statement periods beginning on or after January 1, 2010. PPSAK 1, among other things, revokes PSAK 35 “Accounting for Revenue from Telecommunications Services”. The Company and its subsidiaries adopted PPSAK 1 starting January 1, 2010 and applied retrospectively.The effect of such implementation include:

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

p. Revenue and expense recognition (continued)

i. Implementation of PPSAK 1 “Withdrawal of PSAK 35 (Accounting for Telecommunication Services)” (continued)

· presentation of the interconnection revenues from a “net” to a “gross” basis;

· reclassification of outgoing calls to other operators from interconnection revenues to telephone revenues;

· deferral of the installation and connection revenues including incremental costs and recognized as income over the expected term of the customer relationships (Notes 2p.ii and 2p.iii); and

· recognition of Revenue-Sharing Arrangements (“RSA”) in a manner similar to capital leases where the property, plant and equipment and obligation under RSA are reflected on the consolidated statement of financial position as “Property, plant and equipment” and “RSA liabilities under capital lease”, respectively. All 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.

As a result of the changes, the comparative figures in the consolidated financial statements have been restated as follow :

	Before restatement		Restatement		After restatement
Consolidated STATEMENT OF
COMPREHENSIVE INCOME for thREe MONTHS PERIOD ended MARCH 31 , 2010:
Operating Revenues	16,587,322		(230,986	)	16,356,336
Operating Expenses	(11,265,565	)	228,757		(11,036,808	)
Other Expenses	(182,809	)	(256	)	(183,065	)
Income Before Tax	5,138,948		(2,485	)	5,136,463
Tax Expense	(1,372,379	)	12,159		(1,360,220	)
Net Income	3,766,569		9,674		3,776,243
Basic Earnings Per Share
Net income per share	141.16		0.49		141.65
Net income per ADS (40 Series B shares per
ADS)	5,646.40		19.6		5,666.00

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

p. Revenue and expense recognition (continued)

ii. Fixed line telephone revenues

Revenues from fixed line installations are deferred including incremental costs and recognized as income over the expected term of the customer relationships. Revenues from usage charges are recognized as customers incur the charges. Monthly subscription charges are recognized as revenues when incurred by subscribers.

iii. Cellular and fixed wireless telephone revenues

Revenues from postpaid service, which consist of usage and monthly charges, are recognized as follows:

· Connection fees for service connection are deferred including incremental costs and recognized as income over the expected term of the customer relationships .

· 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 cards are 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) are recognized initially as unearned income and recognized proportionately as usage revenue based on duration and total of successful calls made and the value added services used by the subscribers or the expiration of the unused stored value of the voucher.

· Unutilized promotional credits are netted against unearned income.

Revenues under Universal Service Obligation (“USO“) arrangement are recognized when telecommunication access is ready and the services are rendered.

iv. Interconnection revenues

The revenues from network interconnection with other domestic and international telecommunications carriers are recognized as earned in accordance with contractual agreements. Interconnection revenues consist of revenues derives from other operator’s subscriber call to the Company and its subsidiary operator’s subscribers (incoming) and calls between subscribers of other operators through the Company and its subsidiary’s network (transit).

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

p. Revenue and expense recognition (continued)

v. Data, internet and information technology services revenues

Revenues from data communication and internet are recognized based on usage .

Revenues from sales, installation and implementation of computer software and hardware, computer data network installation service and installation are recognized when the goods rendered to customers or the installation take place.

Revenue from computer software development service is recognized using the percentage of completion method.

vi. Revenues from network

Revenues from network consist of revenues from leased lines and satellite transponder leases which is recognized over the period in which the services are rendered.

vii. Other telecommunications services revenues

Revenues from other telecommunications services consist of RSA and sales of other telecommunication services or goods.

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 statement of financial position . All 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.

Revenues from sales of other telecommunication services or goods are recognized upon completion of services and or delivery of goods to customers.

viii. Expenses

Expenses are recognized on an accruals basis.

q. 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 the 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 considering currently there is no deep market for high quality corporate bonds that have terms to maturity approximating the terms of the related liability.

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

q. Employee benefits (continued)

i. Pension and post-retirement health care benefit plans (continued)

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 comprehensive 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”) and Long Service Leave (“LSL”)

Employees of subsidiary are entitled to receive certain cash awards or certain numbers of days leave benefits based on length of service requirements. LSA are either paid at the time the employees reach certain anniversary dates during employment, or at the time of termination. LSL is either a certain number of days leave benefit or cash, subject to approval by management, provided to employee who has met the requisite number of years of service and with a certain minimum age.

Actuarial gains or losses arising from experience and changes in actuarial assumptions are charged immediately to the consolidated statements of comprehensive income.

The obligation with respect to LSA and LSL is calculated by an independent actuary using the projected unit credit method.

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.

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

q. Employee benefits (continued)

Gains or losses on settlement are recognized when there is a transaction that eliminates all further legal or constructive obligation for part or all of the benefits provided under a defined benefit plan.

r. 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 losses carried forward, to the extent their future realization is probable. Deferred tax assets and liabilities are measured using enacted tax rates and tax laws at each reporting date which are expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

Income tax is charged or credited to the consolidated statement of comprehensive income, except to the extent that it relates to items recognized directly in equity, such as the difference in value arising from restructuring transactions and other transactions between entities under common control and the effect of foreign currency translation adjustment for certain investments in associated companies, in which case income tax is also charged or credited directly to equity.

Current tax assets and liabilities are measured at the amount expected to be recovered or paid using the tax rates and tax laws that have been enacted at each reporting date.

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

Deferred tax assets and liabilities are offset in the consolidated statement of financial positions, except if these are for different legal entities, in the same manner the current tax assets and liabilities are presented.

s. Financial instruments

In 2006, the DSAK issued PSAK 50 (Revised 2006) "Financial Instruments: Presentation and Disclosures" and PSAK 55 (Revised 2006) "Financial Instruments: Recognition and Measurement". These standards amend both PSAK 50 "Accounting for Investments in Certain Securities" and PSAK 55 "Accounting for Derivative Instruments and Hedging Activities". Both standards are applicable for financial statements covering periods beginning on or after January 1, 2010.

The adoption of the standards did not have a material impact on the result of the Company and its subsidiaries. In accordance with the transitional provision of PSAK 55 (Revised 2006), the impact of recalculating the provision for impairment loss of Rp.91,237 million has been adjusted to retained earnings at January 1, 2010.

In implementing PSAK 50 (Revised 2006) and PSAK 55 (Revised 2006), the Company and its subsidiaries classify financial instruments into financial assets and financial liabilities.

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

s. Financial instruments (continued)

i. Financial assets

The Company and its subsidiaries classify their financial assets as (i) financial assets at fair value through profit and loss, (ii) loans and receivables, (iii) held-to-maturity financial assets or (iv) available-for-sale financial assets. The classification depends on the purpose for which the financials assets were acquired. Management determines the classification of its financial assets at initial recognition.

a. Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss are financial assets classified as held for trading. A financial asset is classified as held for trading if it is acquired principally for the purpose of selling or repurchasing it in the near term and for which there is evidence of a recent actual pattern of short term profit taking. Financial assets at fair value through profit or loss consist of trading securities which are recorded as temporary investment.

b. Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables consist of, among other things, trade receivables, other receivables, other current financial assets and other non-current financial assets.

c. Held-to-maturity financial assets

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that management has the positive intention and ability to hold to maturity, other than:

a) those that the Company upon initial recognition designates as at fair value through profit or loss;

b) those that the Company designates as available for sale; and

c) those that meet the definition of loans and receivables.

These are initially recognized at fair value including transaction costs and subsequently measured at amortized cost, using the effective interest method.

No financial assets were classified as held-to-maturity financial assets as of March 31, 2010 and 2011.

d. Available-for-sale financial assets

Available-for-sale investments are non-derivative financial assets that are intended to be held for indefinite period of time, which may be sold in response to needs for liquidity or changes in interest rates, exchange rates or that are not classified as loans and receivables, held-to maturity investments or financial assets at fair value through profit or loss. Available for sale financial assets consist of available for sale securities which are recorded as temporary investment.

The Company and its subsidiaries use settlement date accounting for regular purchases and sales of financial assets.

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

s. Financial instruments (continued)

ii. Financial liabilties

The Company and its subsidiaries classify their financial liabilities as (i) financial liabilities at fair value through profit or loss or (ii) financial liabilities measured at amortized cost.

a. Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss are financial liabilities classified as held for trading. A financial liability is classified as held for trading if it is acquired principally for the purpose of selling or repurchasing it in the near term and for which there is evidence of a recent actual pattern of short term profit taking.

No financial liabilities were categorized as held for trading as of March 31, 2010 and 2011.

b. Financial liabilities measured at amortized cost

Financial liabilities that are not classified as at fair value through profit and loss fall into this category and are measured at amortized cost. Financial liabilities measured at amortized cost are among other things, trade payables, other payables, accrued expenses, loans, bonds and notes.

t. Treasury Stock

Reacquired Company’s stock is accounted for at its reacquisition cost and classified as “Treasury Stock” and presented as a deduction to 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”.

u. Dividends

Dividend distribution to the Company’s stockholders is recognized as liability in the Company’s consolidated financial statements in the period in which the dividends are approved by the Company’s stockholders. For interim dividends, the Company recognized them as liability based on the Board of Director’s decision with the approval from the Board of Commissioners.

v. Earnings per share and earnings per ADS

Basic earnings per share are computed by dividing income for the period attributable to owners of the parent by the weighted average number of shares outstanding during the year. Income per ADS is computed by multiplying basic earnings per share by 40, the number of shares represented by each ADS.

w. Segment information

Since January 1, 2011, the Company and its subsidiaries have adopted PSAK 5 (Revised 2009), “Operating Segments” , which became effective for financial statement periods beginning on or after January 1, 2011 and is applied prospectively.

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

w. Segment information (continued)

The Company and its subsidiaries' segment information is presented based upon identified operating segment. An operating segment is a component of an entity: a) that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity); b) whose operating results are regularly reviewed by the entity's chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and c) for which discrete financial information is available .

x. Use of estimates

Since January 1, 2011, the Company and its subsidiaries have adopted PSAK 57 (Revised 2009), “Provisions, Contingent Liabilities and Contingent Assets” , which became effective for financial statement periods beginning on or after January 1, 2011 and is applied prospectively.

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. In determining some estimates, management utilizes the work of third party specialists as required. In using specialists to assist with models and calculations, management reviews the underlying assumptions and assesses the corresponding calculations for reasonableness in the context of the circumstances of the Company.

3. 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.8,707.50 to US$1 as published by Reuters on March 31, 2011. 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.

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

4. acquisitions OF ad medika

On January 25, 2010, Metra entered into a CSPA with Ad Medika’s stockholders, Ravi Varma Kanason, Sofian Susantio, Arthur Tahya (PT Swadayanusa Kencana Raharja) dan Shia Kok Fat, each of which is a third party, to purchase 75% of Ad Medika’s outstanding shares. Subsequently, on February 25, 2010, Metra entered into SPA with Ad Medika’s stockholders for the share purchase transaction with acquisition cost amounting to Rp.130,077 million (including consultant fee) (Note 1d.b).

Ad Medika is an electronic health care network company. Ad Medika is the largest health service administration management company in Indonesia. Through the acquisition, the Company began providing services through Insure Net as an initial National e-Health program.

The acquisition of Ad Medika has been accounted for using the purchase method of accounting, where the purchase price was allocated to the fair value of the acquired assets and assumed liabilities. The allocation of the acquisition cost was as follows:

	Rp.
The
assets and liabilities arising from the acquisition are as
follows:
Current assets	26,404
Property, plant and equipments	17,110
Intangible assets	45,591
Current liabilities	(22,057	)
Long-term liabilities	(8,143	)
Deferred tax liabilities	(9,919	)
Non-controlling interests	(4,145	)
Fair
value of net assets acquired	44,841
Goodwill	85,236
Total purchase
consideration	130,077
Less:
Cash
and cash equivalents in subsidiary acquired	(13,574	)
Cash
outflow from acquisition	116,503

Metra acquired control of Ad Medika on February 25, 2010 and the valuation was performed by an independent appraisal using the statement of financial position amount as of February 28, 2010, being the nearest convenient statement of financial position date. The Company’s consolidated results of operations have included the operating results of Ad Medika since March 1, 2010. The intangible assets acquired included customer contracts and backlog, non contractual customer relationships, trademarks and tradenames, and a non compete agreement (Note 13).

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

5. CASH AND CASH EQUIVALENTS

	December 31, 2010	March 31, 2011
Cash
on hand	4,213	24,485
Cash
in banks
Related parties
Rupiah
PT
Bank Mandiri (Persero) Tbk (“Bank Mandiri”)	439,348	209,725
PT
Bank Negara Indonesia (Persero) Tbk (“BNI”)	198,680	184,578
PT
Bank Rakyat Indonesia (Persero) Tbk (“BRI”)	6,405	4,863
PT
Bank Syariah Mandiri (“BSM”)	999	1,571
PT
Bank Tabungan Negara (Persero) Tbk (“BTN”)	450	337
	645,882	401,074
Foreign currencies
Bank
Mandiri	169,132	889,157
BRI	891	340,922
BNI	57,005	261,024
BSM	165	28
	227,193	1,491,131
Sub-total	873,075	1,892,205
Third parties
Rupiah
PT Bank Internasional Indonesia Tbk
(“BII”)	21,245	25,325
PT Bank Permata Tbk	7,753	21,396
Deutsche Bank AG (“DB”)	27,556	17,395
PT Bank Central Asia Tbk
(“BCA”)	12,076	10,296
PT Bank Ekonomi Raharja Tbk (“Bank
Ekonomi”)	15,018	7,449
PT Bank CIMB Niaga Tbk (”Bank CIMB
Niaga”)	8,369	6,177
PT Bank Perkreditan Rakyat Karyajatnika
Sadaya	1,326	2,248
PT Bank Bukopin Tbk (“Bank
Bukopin”)	2,529	2,196
PT Bank Pembangunan Daerah Jawa
Timur	2,607	1,427
PT Bank Pembangunan Daerah Jawa Barat dan
Banten (“Bank Jabar”)	818	1,169
PT Bank ICB Bumiputera Tbk (“Bank
Bumiputera”)	1,169	426
The Royal Bank of Scotland N.V. (previously
ABN AMRO Bank)	99,287	52
Others (each below Rp.1
billion)	1,454	1,468
	201,207	97,024

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

5. CASH AND CASH EQUIVALENTS (continued)

	December 31, 2010	March 31, 2011
Cash
in banks (continued)
Third parties (continued)
Foreign currencies
The Hongkong and Shanghai Banking Corporation
Ltd.	38,490	28,522
Bank Ekonomi	17,035	17,057
DB	8,758	8,295
Citibank, N.A. (“Citibank”)	8,513	8,213
Others (each below Rp.1
billion)	2,369	1,298
	75,165	63,385
Sub-total	276,372	160,409
Total cash in banks	1,149,447	2,052,614
Time
deposits
Related parties
Rupiah
BRI	2,223,735	2,572,037
BNI	1,428,191	1,710,828
Bank
Mandiri	1,556,289	1,544,218
BTN	330,000	350,000
BSM	-	40,000
	5,538,215	6,217,083
Foreign currencies
BRI	635,899	571,898
BNI	393,946	5,084
Bank Mandiri	2,317	2,237
	1,032,162	579,219
Sub-total	6,570,377	6,796,302
Third parties
Rupiah
Bank Jabar	495,560	496,560
PT OCBC NISP Tbk	-	200,000
PT Bank Mega Tbk (“Bank Mega”)	176,850	182,850
Bank Bukopin	173,755	171,755
Standard Chartered Bank	-	170,430
PT Bank Tabungan Pensiunan Nasional
Tbk	116,000	142,000
PT Pan Indonesia Bank Tbk	95,000	95,000
Bank CIMB Niaga	165,117	70,117
PT Bank Muamalat Indonesia	10,000	60,000
DB	300	27,900
BII	30,000	25,000
PT Bank Danamon Indonesia Tbk	10,000	10,000

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

5. CASH AND CASH EQUIVALENTS (continued)

	December 31, 2010	March 31, 2011
Time
deposits (continued)
Third parties (continued)
Rupiah (continued)
BCA	-	8,730
PT Bank Yudha Bhakti	10,500	3,000
PT Bank Mutiara Tbk	-	2,000
Bank Bumiputera	1,000	1,000
PT Bank UOB Buana Tbk	25,000	-
PT Bank Capital Indonesia Tbk (“Bank
Capital”)	6,000	-
PT Bank Syariah Mega Indonesia (“Bank Syariah
Mega”)	500	-
	1,315,582	1,666,342
Foreign currencies
BCA	64,921	81,357
Bank Ekonomi	14,408	13,928
Bank Capital	-	8,705
Bank
Bukopin	901	871
DB	-	871
	80,230	105,732
Sub-total	1,395,812	1,772,074
Total time deposits	7,966,189	8,568,376
Grand Total	9,119,849	10,645,475

Interest rates per annum on time deposits are as follows:

	December 31, 2010	March 31, 2011
Rupiah	4.00% - 9.50%	4.00% - 9.25%
Foreign currencies	0.05% - 4.00%	0.05% - 2.00%

The related parties which the Company and its subsidiaries place their funds are state-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 state.

Refer to Note 44 for details of related party transactions.

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

6. TRADE RECEIVABLES

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

a. By debtor

(i) Related parties

Government Agencies	December 31, 2010 — 759,450		March 31, 2011 — 1,019,422
CSM	91,366		107,084
Indosat	33,451		33,897
PT
Patra Telekomunikasi Indonesia (“Patrakom”)	24,279		25,519
PSN	5,098		8,776
PT Graha Informatika Nusantara
(“Gratika”)	6,170		5,102
Koperasi Pegawai Telkom
(“Kopegtel”)	3,049		3,671
PT Aplikanusa Lintasarta
(“Lintasarta”)	1,461		1,562
Others (each below Rp.1
billion)	6,985		8,230
Total	931,309		1,213,263
Allowance for doubtful accounts	(151,266	)	(88,897	)
Net	780,043		1,124,366

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 | December 31, 2010 — 4,480,869 | | March 31, 2011 — 4,742,202 | |
| --- | --- | --- | --- | --- |
| Overseas international carriers | 376,875 | | 330,031 | |
| Total | 4,857,744 | | 5,072,233 | |
| Allowance for doubtful accounts | (1,294,078 | ) | (1,461,089 | ) |
| Net | 3,563,666 | | 3,611,144 | |

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

6. TRADE RECEIVABLES (continued)

b. By age

(i) Related parties

| Up
to 6 months | December 31, 2010 — 559,699 | | March 31, 2011 — 815,095 | |
| --- | --- | --- | --- | --- |
| 7 to
12 months | 157,534 | | 245,312 | |
| More
than 12 months | 214,076 | | 152,856 | |
| Total | 931,309 | | 1,213,263 | |
| Allowance for doubtful accounts | (151,266 | ) | (88,897 | ) |
| Net | 780,043 | | 1,124,366 | |

(ii) Third parties

| Up
to 3 months | December 31, 2010 — 3,148,973 | | March 31, 2011 — 3,450,188 | |
| --- | --- | --- | --- | --- |
| More
than 3 months | 1,708,771 | | 1,622,045 | |
| Total | 4,857,744 | | 5,072,233 | |
| Allowance for doubtful accounts | (1,294,078 | ) | (1,461,089 | ) |
| Net | 3,563,666 | | 3,611,144 | |

c. By currency

(i) Related parties

Rupiah	December 31, 2010 — 902,875		March 31, 2011 — 1,191,563
U.S.
Dollar	28,434		21,700
Total	931,309		1,213,263
Allowance for doubtful accounts	(151,266	)	(88,897	)
Net	780,043		1,124,366

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

6. TRADE RECEIVABLES (continued)

c. By currency (continued)

(ii) Third parties

Rupiah	December 31, 2010 — 4,143,578		March 31, 2011 — 4,367,635
U.S.
Dollars	712,758		703,184
Euro	1,408		1,414
Total	4,857,744		5,072,233
Allowance for doubtful accounts	(1,294,078	)	(1,461,089	)
Net	3,563,666		3,611,144

d. Movements in the allowance for doubtful accounts

Beginning balance	December 31, 2010 — 1,273,550		March 31, 2011 — 1,445,344
Adjustment in relation to implementation of
PSAK No. 55 (Revised 2006) (Note 2s)	91,237		-
Additions (Note 36)	509,415		175,731
Bad
debts write-off	(428,858	)	(71,089	)
Ending balance	1,445,344		1,549,986

Bad debts write-off are write-off for third party’s trade receivables.

Management believes that the allowance for doubtful accounts is adequate to cover losses on non-collection of the accounts receivable.

Certain trade receivables of the Company’s subsidiaries have been pledged as collateral for lending agreements (Notes 18 and 22).

Refer to Note 44 for details of related party transactions.

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

7. INVENTORIES

Modules	December 31, 2010 — 292,924		March 31, 2011 — 297,433
Components	158,479		199,647
SIM
cards, RUIM cards, set top box and prepaid voucher blanks	147,419		143,787
Total	598,822		640,867
Allowance for obsolescence
Modules	(76,264	)	(80,693	)
Components	(6,937	)	(6,952	)
SIM
cards, RUIM cards, set top box and prepaid voucher blanks	(85	)	(85	)
Total	(83,286	)	(87,730	)
Net	515,536		553,137

Movements in the allowance for obsolescence are as follows:

Beginning balance	December 31, 2010 — 72,174		March 31, 2011 — 83,286
Additions (Note 36)	15,345		4,444
Inventories write-off	(4,233	)	-
Ending balance	83,286		87,730

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

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

Certain inventories of the Company’s subsidiaries have been pledged as collateral for lending agreements (Notes 18 and 22).

As of December 31, 2010 and March 31, 2011, modules and components held by the Company have been insured against fire, theft and other specific risks with the total sum insured as of December 31, 2010 and March 31, 2011 is amounting to Rp.128,367 million and Rp.218,237 million, respectively (Note 44d.vii).

Modules and components held by a certain subsidiary have been insured against all industrial risks and loss risk during delivery with the total sum insured as of December 31, 2010 and March 31, 2011 amounting to Rp.15,406 million, respectively.

Management believes that the insurance coverage is adequate to cover potential losses of the insured inventories.

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

8. ADVANCES AND PREPAID EXPENSES

	December 31, 2010	March 31, 2011
Frequency license (Notes 48c.i and
48c.iii)	2,393,639	1,843,729
Rental	741,200	786,883
Salaries	141,712	429,546
Advances	66,127	92,070
Insurance	1,513	46,405
Telephone directory issuance
costs	29,558	42,788
Others	67,282	56,746
Total	3,441,031	3,298,167

Refer to Note 44 for details of related party transactions.

9. OTHER CURRENT ASSETS

Other current assets as of December 31, 2010 and March 31, 2011 consists of restricted time deposits as follows:

	December 31, 2010	March31, 2011
Metra
BNI	593	593
Bank Mandiri	235	235
BRI	347	347
Total	1,175	1,175

The restricted time deposits represent time deposits of the Company’s and certain subsidiaries’ pledged as collateral for bank guarantees to the respective banks.

Refer to Note 44 for details of related party transactions.

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

10. LONG-TERM INVESTMENTS

	December 31, 2010 — Percentage of ownership	Beginning balance	Addition	Share of net (loss) income		Translation adjustment		Ending balance
Long-term investments in associated
companies:
Scicom	29.71	49,721	64,358	(4,920	)	(541	)	108,618
PT Melon Indonesia (“ Melon”)	51.00	-	51,000	124		-		51,124
Patrakom	40.00	36,409	-	3,659		-		40,068
CSM	25.00	44,277	-	(12,485	)	1,102		32,894
PSN	22.38	-	-	-		-		-
		130,407	115,358	(13,622	)	561		232,704
Other long-term
investments:
BMPL	10.00	20,360	-	-		-		20,360
BBT	5.00	587	-	-		-		587
Bangtelindo	2.11	199	-	-		-		199
		21,146	-	-		-		21,146
		151,553	115,358	(13,622	)	561		253,850

	Percentage of ownership	Beginning balance	Share of net (loss) income		Translation adjustment		Ending balance
Long-term investments in associated
companies:
Scicom	29.71	108,618	(1,531	)	(1,243	)	105,844
PT Melon Indonesia(“ Melon”)	51.00	51,124	(405	)	-		50,719
Patrakom	40.00	40,068	800		-		40,868
CSM	25.00	32,894	-		-		32,894
PSN	22.38	-	-		-		-
		232,704	(1,136	)	(1,243	)	230,325
Other long-term
investments:
BMPL	10.00	20,360	-		-		20,360
BBT	5.00	587	-		-		587
Bangtelindo	2.11	199	-		-		199
		21,146	-		-		21,146
		253,850	(1,136	)	(1,243	)	251,471

i. Scicom

Scicom is engaged in providing call center services in Malaysia. On February 3, 2010, TII purchased additional 3,042,400 Scicom shares with a transaction value amounting to US$0.42 million (equivalent to Rp.3,905 million). As a result, TII’s ownership in Scicom increased to 17.01%.

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

10. LONG-TERM INVESTMENTS (continued)

i. Scicom (continued)

On May 6, 2010 and June 16, 2010, TII purchased additional 4,870,000 and 30,000,000 Scicom shares, respectively, with transaction values amounting to US$0.76 million (equivalent to Rp.6,897 million) and US$5.79 million (equivalent to Rp.53,556 million), respectively. As a result, TII’s ownership in Scicom increased to 29.85%.

On August 11, 2010, based on a Circular Meeting of Stockholders of Scicom, Scicom’s stockholders agreed to increase its issued and fully paid capital by 1,260,000 shares which amounted to MYR126,000 million (equivalent to Rp.356 million). As a result of the addition of Scicom issued and fully paid capital, TII’s ownership in Scicom is diluted to 29.71%.

ii. Melon

On August 16, 2010, Metra established a joint venture with SK Telecom called PT Melon Indonesia with 51% ownership (Note 1d.b). As Metra has no ability to control Melon therefore it is accounted for using the equity method. Melon is engaged in providing Digital Content Exchange Hub (“DCEH”) services. The DCEH is a new type of connection to distribute digital content such as music file, games and video clip to be accessed by costumers, online music store and telephone operator cable and cellular.

iii. Patrakom

Patrakom is engaged in providing satellite communication system services, related services and facilities to companies in the petroleum industry.

iv. CSM

CSM is engaged in providing Very Small Aperture Terminal (“VSAT”), network application services and consulting services on telecommunications technology and related facilities.

v. PSN

PSN is engaged in providing satellite transponder leasing and satellite-based communication services in the Asia Pacific region. The Company’s 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.

vi. BMPL

BMPL (Singapore), an associated entity of Telkomsel, is engaged in providing regional mobile services in the Asia Pacific region.

As of December 31, 2010 and March 31, 2011, Telkomsel’s contributions which represent 10% ownership interest amounted to US$2,200,000 (equivalent to Rp.20,360 million).

vii. 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.

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

10. LONG-TERM INVESTMENTS (continued)

viii. Bangtelindo

Bangtelindo is primarily engaged in providing consultancy services on the installation and maintenance of telecommunications facilities.

11. PROPERTY, PLANT AND EQUIPMENT

	January 1, 2010*	Acquisitions of Ad Medika	Additions	Deductions		Reclassifications		December 31, 2010
At cost:
Direct acquisitions assets
Land	781,275	8,104	34,642	-		(8,104	)	815,917
Buildings	2,978,417	6,307	75,255	(701	)	144,534		3,203,812
Leasehold improvements	526,770	31	74,277	-		-		601,078
Switching equipment	28,948,306	-	121,488	(29,892	)	1,085,011		30,124,913
Telegraph, telex and data communication
equipment	20,716	-	-	(959	)	-		19,757
Transmission installation and
equipment	67,228,748	-	2,120,862	(812,180	)	5,461,497		73,998,927
Satellite, earth station and
equipment	6,795,379	-	41,242	-		85,505		6,922,126
Cable network	23,621,586	-	1,166,157	(248,929	)	2,273		24,541,087
Power supply	7,368,721	-	176,926	(16,041	)	738,714		8,268,320
Data processing equipment	7,602,865	1,185	157,904	(615,396	)	749,774		7,896,332
Other telecommunications
peripherals	476,705	-	16,988	-		-		493,693
Office equipment	576,098	1,045	69,578	(8,259	)	5,031		643,493
Vehicles	110,216	438	3,223	(846	)	-		113,031
Other equipment	103,310	-	4,000	-		885		108,195
Property under construction:
Buildings	89,926	-	126,440	-		(158,078	)	58,288
Leasehold improvements	466	-	91,421	-		-		91,887
Switching equipment	48,588	-	1,035,446	-		(1,083,991	)	43
Transmission installation and
equipment	358,562	-	5,537,094	-		(5,606,953	)	288,703
Satellite, earth station and
equipment	-	-	68,559	-		(42,324	)	26,235
Cable network	2,856	-	4,492	-		(828	)	6,520
Power supply	52,167	-	726,252	-		(738,155	)	40,264
Data processing equipment	16,008	-	777,145	-		(725,036	)	68,117
Leased assets
Transmission installation and
equipment	288,766	-	2,542	-		10,801		302,109
Data processing equipment	260,782	-	42,977	-		(6,039	)	297,720
Office equipment	247,897	-	12,003	(220,236	)	(14,365	)	25,299
Vehicles	61,220	-		(8,168	)	-		53,052
CPE assets	21,778	-		-		-		21,778
RSA assets:
Land	1,267	-	-	-		-		1,267
Switching equipment	92,990	-	-	-		(8,976	)	84,014
Transmission installation and
equipment	43,383	-	-	-		(15,682	)	27,701
Cable network	406,570	-	-	-		(9,050	)	397,520
Other telecommunications
peripherals	3,638	-	-	-		(50	)	3,588
Total	149,135,976	17,110	12,486,913	(1,961,607	)	(133,606	)	159,544,786
* as restated, refer to Note 2p

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

11. PROPERTY, PLANT AND EQUIPMENT (continued)

	January 1, 2010*	Acquisitions of Ad Medika	Additions	Deductions		Reclassifications		December 31, 2010
Accumulated depreciation and
impairment:
Direct acquisitions assets
Buildings	1,485,234	-	97,475	(151	)	(5,296	)	1,577,262
Leasehold improvements	381,536	-	60,528	-		565		442,629
Switching equipment	18,425,673	-	2,524,695	(29,892	)	(8,558	)	20,911,918
Telegraph, telex and data communication
equipment	17,391	-	742	(959	)	-		17,174
Transmission installation and
equipment	24,794,959	-	6,321,602	(812,916	)	(114,375	)	30,189,270
Satellite, earth station and
equipment	3,136,685	-	475,860	-		7,500		3,620,045
Cable network	14,688,600	-	1,109,526	(248,928	)	(20,022	)	15,529,176
Power supply	2,932,127	-	937,712	(11,995	)	(2,213	)	3,855,631
Data processing equipment	5,094,420	-	1,315,718	(615,394	)	23,544		5,818,288
Other telecommunications
peripherals	351,875	-	14,594	-		(352	)	366,117
Office equipment	465,291	-	43,169	(8,025	)	8,922		509,357
Vehicles	94,693	-	5,507	(622	)	37		99,615
Other equipment	87,228	-	5,361	-		724		93,313
Leased assets
Transmission installation and
equipment	227,193	-	21,177	-		2,575		250,945
Data processing equipment	116,540	-	52,835	-		1,245		170,620
Office equipment	201,039	-	29,275	(220,236	)	(5,568	)	4,510
Vehicles	29,133	-	16,176	(5,268	)	-		40,041
CPE assets	4,545	-	2,273	-				6,818
RSA assets:
Land	981	-	64	-		-		1,045
Switching equipment	29,759	-	6,976	-		(7,061	)	29,674
Transmission installation and
equipment	26,396	-	5,582	-		(10,135	)	21,843
Cable network	122,085	-	37,194	-		(5,088	)	154,191
Other telecommunications
peripherals	2,696	-	250	-		(50	)	2,896
Total	72,716,079	-	13,084,291	(1,954,386	)	(133,606	)	83,712,378
Net Book Value	76,419,897							75,832,408

*as restated, refer to Note2p

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

11. PROPERTY, PLANT AND EQUIPMENT (continued)

	January 1, 2011	Additions	Deductions		Reclassifications		March 31, 2011
At cost:
Direct acquisitions assets
Land	815,917	4,397	-		-		820,314
Buildings	3,203,812	4,663	(93	)	29,869		3,238,251
Leasehold improvements	601,078	9,041	-		-		610,119
Switching equipment	30,124,913	21,757	(102,704	)	(731,577	)	29,312,389
Telegraph, telex and data communication
equipment	19,757	-	-		(429	)	19,328
Transmission installation and
equipment	73,998,927	408,406	(22,992	)	486,527		74,870,868
Satellite, earth station and
equipment	6,922,126	119	-		35,368		6,957,613
Cable network	24,541,087	247,556	(686,684	)	(1,543,364	)	22,558,595
Power supply	8,268,320	23,438	(129,746	)	167,151		8,329,163
Data processing equipment	7,896,332	26,628	(272,960	)	219,643		7,869,643
Other telecommunications
peripherals	493,693	537	(2,793	)	(13,958	)	477,479
Office equipment	643,493	14,919	(30,030	)	43,094		671,476
Vehicles	113,031	890	(461	)	2,978		116,438
Other equipment	108,195	110	(506	)	8,516		116,315
Property under construction:
Buildings	58,288	23,796	-		(3,284	)	78,800
Leasehold improvements	91,887	323	-		(28,395	)	63,815
Switching equipment	43	206,016	-		(205,788	)	271
Transmission installation and
equipment	288,703	924,914	-		(879,561	)	334,056
Satellite, earth station and
equipment	26,235	27,307	-		(25,481	)	28,061
Cable network	6,520	-	-		(81	)	6,439
Power supply	40,264	162,687	-		(162,410	)	40,541
Data processing equipment	68,117	67,758	-		(110,810	)	25,065
Leased assets
Transmission installation and
equipment	302,109	-	-		-		302,109
Data processing equipment	297,720	9,249	-		-		306,969
Office equipment	25,299	550	-		-		25,849
Vehicles	53,052	-	(1,547	)	-		51,505
CPE assets	21,778	-	-		-		21,778
RSA assets:
Land	1,267	-	-		(1,267	)	-
Switching equipment	84,014	-	-		(3,113	)	80,901
Transmission installation and
equipment	27,701	-	-		-		27,701
Cable network	397,520	-	-		(5,103	)	392,417
Other telecommunications
peripherals	3,588	-	-		(1,833	)	1,755
Total	159,544,786	2,185,061	(1,250,516	)	(2,723,308	)	157,756,023

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

11. PROPERTY, PLANT AND EQUIPMENT (continued)

	January 1, 2011	Additions	Deductions		Reclassifications		March 31, 2011
Accumulated depreciation and
impairment:
Direct acquisitions assets
Buildings	1,577,262	24,057	(93	)	28,889		1,630,115
Leasehold improvements	442,629	16,183	-		189		459,001
Switching equipment	20,911,918	649,957	(102,704	)	(959,416	)	20,499,755
Telegraph, telex and data communication
equipment	17,174	79	-		9,441		26,694
Transmission installation and
equipment	30,189,270	1,646,781	(22,889	)	(389,864	)	31,423,298
Satellite, earth station and
equipment	3,620,045	123,376	-		-		3,743,421
Cable network	15,529,176	271,651	(686,684	)	(1,493,159	)	13,620,984
Power supply	3,855,631	230,680	(127,874	)	(4,205	)	3,954,232
Data processing equipment	5,818,288	281,060	(272,005	)	88,821		5,916,164
Other telecommunications
peripherals	366,117	3,474	(2,793	)	(13,698	)	353,100
Office equipment	509,357	11,792	(30,001	)	41,860		533,008
Vehicles	99,615	1,384	(389	)	2,978		103,588
Other equipment	93,313	1,373	(506	)	8,044		102,224
Leased assets
Transmission installation and
equipment	250,945	5,353	-		121		256,419
Data processing equipment	170,620	12,065	-		776		183,461
Office equipment	4,510	944	-		84		5,538
Vehicles	40,041	3,664	(1,287	)	-		42,418
CPE assets	6,818	568	-				7,386
RSA assets:
Land	1,045	16	-		(1,061	)	-
Switching equipment	29,674	1,579	-		(3,113	)	28,140
Transmission installation and
equipment	21,843	1,186	-		-		23,029
Cable network	154,191	9,277	-		(4,806	)	158,662
Other telecommunications
peripherals	2,896	56	-		(1,833	)	1,119
Total	83,712,378	3,296,555	(1,247,225	)	(2,689,952	)	83,071,756
Net
Book Value	75,832,408						74,684,267

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

11. PROPERTY, PLANT AND EQUIPMENT (continued)

a. Gains on disposal or sale of property, plant and equipment

| Proceeds from sale of property, plant and
equipment | 2010 — 1,451 | | 2011 — 3,700 | |
| --- | --- | --- | --- | --- |
| Net
book value | (1,436 | ) | (3,291 | ) |
| Gains on disposal or sale of property, plant
and equipment | 15 | | 409 | |

b. KSO assets ownership arrangements

(i) In accordance with the amended and restated KSO VII agreement with PT Bukaka Singtel International (“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 December 31, 2010 the net book value of these property, plant and equipment was Rp.710,484 million.

(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 December 31, 2010 the net book value of this property, plant and equipment was Rp.161,212 million.

c. Assets impairment and related claims

(i) As of March 31, 2010 and 2011, 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 March 31, 2011, there were no events or changes in circumstances that would indicate that the carrying amount of the Company’s satellites may not be recoverable.

(ii) On April 7, 2010, Nangroe Aceh Darussalam and the surrounding area experienced an earthquake from which insurance claims for the replacement of the assets has been made. Buildings and other equipments affected by the earthquake have been re-operated gradually since April 2010.

(iii) On June 16, 2010, Papua and the surrounding area experienced an earthquake from which insurance claims for the replacement of the assets has been made. Buildings and other equipments affected by the earthquake have been re-operated gradually since June 2010.

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

11. PROPERTY, PLANT AND EQUIPMENT (continued)

d. Others

(i) Interest capitalized to property under construction amounted to Rp.nil for the years ended December 31, 2010 and for three months period ended March 31, 2011, respectively.

(ii) Foreign exchange loss capitalized as part of property under construction amounted to Rp.nil for the years ended December 31, 2010 and for three months period ended March 31, 2011, respectively.

(iii) In 2010, the useful lives of Company’s office and installation buildings, Submarine Cable Communication System/Fiber Optic Communication System and Antenna and Tower were changed and accounted for prospectively. The impact is a reduction in the amount depreciation expense of Rp.126,025 million recognized to the 2010 consolidated statement of comprehensive income (Note 2k).

(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 18-45 years, which will expire between 2011 and 2052. 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 the legal title of those parcels of land is still under the name of the Ministry of Tourism, Post and Telecommunications and the Ministry of Transportation of the Republic of Indonesia. As the transfer to the Company of the legal title of ownership on those parcels of land is still in progress, the total magnitude of such transfers is yet to be determined.

(vi) As of March 31, 2011, the Company and its subsidiaries’ property, plant and equipment, except for land, were insured with PT Asuransi Jasa Indonesia (“Jasindo”), PT Asuransi Ramayana Tbk, PT Sarana Janesia Utama, PT Asuransi Wahana Tata, PT Asuransi Ekspor Indonesia, PT Asuransi Sinar Mas, PT Asuransi Central Asia, PT Asuransi Allianz Utama Indonesia, HSBC Insurance (Singapore) Pte, Ltd, PT Asuransi Astra Buana and PT Asuransi Mitra Maparya against fire, theft, earthquake and other specified risks. Total cost of assets being insured amounted to Rp.72,054,188 million, which was covered by sum insured basis with a maximum loss claim of Rp.953,618 million, US$12.02 million, EUR0.22 million and SGD9.42 million and on first loss basis of Rp.7,183,445 million including business recovery of Rp.486,000 million with the Automatic Reinstatement of Loss Clause. In addition, Telkom-1 and Telkom-2 were insured separately for US$17.33 million and US$38.27 million, respectively. Management believes that the insurance coverage is adequate to cover potential losses of the insured assets.

(vii) As of March 31, 2011, the completion of assets under construction was around 51.33% of the total contract value, with estimated dates of completion between March 2011 and March 2012. Management believes that there is no impediment to the completion of the construction in progress.

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PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

11. PROPERTY, PLANT AND EQUIPMENT (continued)

d. Others (continued)

(viii) Certain property, plant and equipment of the Company’s subsidiaries have been pledged as collateral for lending agreements (Notes 18 and 22).

(ix) The Company and its subsidiaries have lease commitments for property, plant and equipments under RSA, transmission installation and equipment, data processing equipment, office equipment, vehicles and CPE assets, with the option to purchase certain leased assets at the end of the lease terms. Future minimum lease payments for assets under finance leases as of December 31, 2010 and March 31, 2011 are as follows:

Year — 2011	December 31, 2010 — 286,257		March 31, 2011 — 273,942
2012	203,383		190,361
2013	141,579		136,840
2014	98,374		76,147
201 5	23,665		21,834
Later	56,476		51,896
Total minimum lease payments	809,734		751,020
Interest	(202,805	)	(182,511	)
Net
present value of minimum lease payments	606,929		568,509
Current maturities (Note 19a)	(198,062	)	(192,468	)
Long-term portion (Note 19b)	408,867		376,041

12. ADVANCES AND OTHER NON-CURRENT ASSETS

Advances and other non-current assets as of December 31, 2010 and March 31, 2011 consist of:

	December 31, 2010	March 31, 2011
Advances for purchase of property, plant and
equipment	1,334,639	1,571,174
Prepaid rent - net of current portion (Note
8)	1,052,331	1,008,415
Deferred charges	447,174	427,544
Restricted cash	101,534	169,193
Security deposits	62,469	47,277
Equipment not used in operations -
net	29,675	40,891
Others	24,873	43,121
Total	3,052,695	3,307,615

Deferred charges represent deferred Revenue-Sharing Arrangements (“RSA”) charges, deferred Indefeasible Right of Use (“IRU”) Agreement charges, and deferred land rights charges. As of December 31, 2010 and March 31, 2011, deferred charges amortization amounted to Rp.18,638 million and Rp.19,491 million, respectively.

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PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

12. ADVANCES AND OTHER NON-CURRENT ASSETS (continued)

As of December 31, 2010 and March 31, 2011 restricted cash represent time deposits with original maturities of more than one year pledged as collateral for bank guarantees among others for the USO contract (Note 47h).

As of December 31, 2010 and March 31, 2011, 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. Telkomsel’s depreciation expense charged to the consolidated statements of comprehensive income for the year ended December 2011 and three months ended March 31, 2011 amounted to Rp.303 million and Rp.75 million, respectively.

Refer to Note 44 for details of related party transactions.

13. GOODWILL AND OTHER INTANGIBLE ASSETS

(i) The changes in the carrying amount of goodwill and other intangible assets for the years ended December 31, 2010 and for three months period ended March 31, 2011are as follows:

	Goodwill		Other intangible assets		License		Total
Gross carrying amount:
Balance, December 31, 2009	106,544		9,085,534		806,861		9,998,939
Additions:
The Company’s software	-		174,286		-		174,286
The subsidiaries’ software	-		543,276		-		543,276
The subsidiaries’ license	-		-		5,568		5,568
Acquisitions of Ad Medika	85,236		45,591		-		130,827
Reclassification	-		25,661		-		25,661
Balance, December 31, 2010	191,780		9,874,348		812,429		10,878,557
Accumulated amortization:
Balance, December 31, 2009	(21,373	)	(7,385,950	)	(163,336	)	(7,570,659	)
Amortization expense during the
year	(7,877	)	(1,413,765	)	(86,584	)	(1,508,226	)
Reclassifications	-		(15,147	)	-		(15,147	)
Balance, December 31, 2010	(29,250	)	(8,814,862	)	(249,920	)	(9,094,032	)
Net
Book Value	162,530		1,059,486		562,509		1,784,525
Weighted-average amortization
period	20
years		6.99
years		9.38
years
	Goodwill		Other intangible assets		License		Total
Gross carrying amount:
Balance, December 31, 2010	191,780		9,874,348		812,429		10,878,557
Additions:
The Company’s software	-		32,042		-		32,042
The subsidiaries’ software	-		40,355		-		40,355
Balance, March 31, 2011	191,780		9,946,745		812,429		10,950,954
Accumulated amortization:
Balance, December 31, 2010	(29,250	)	(8,814,862	)	(249,920	)	(9,094,032	)
Amortization expense during the
period	-		(128,810	)	(2,663	)	(131,473	)
Reclassifications			5		(19,679	)	(19,674	)
Balance, March 31, 2011	(29,250	)	(8,943,667	)	(272,262	)	(9,245,179	)
Net
Book Value	162,530		1,003,078		540,167		1,705,775
Weighted-average amortization
period	-		6.79
years		9.09
years

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

13. GOODWILL AND OTHER INTANGIBLE ASSETS (continued)

(ii) Goodwill resulted from the acquisition of Sigma in 2008, Indonusa in 2008 and Ad Medika in 2010 (Note 4). S tarting January 1, 2009, the Company has changed the estimated useful lives of goodwill from 5 years to 20 years (Note 2d). The Company prospectively accounted for the impact of the changes in the estimated useful lives in 2009 consolidated statement of comprehensive income. Other intangible assets also included the acquisitions of Dayamitra, Pramindo, TII, KSO IV and KSO VII, and represented the rights to operate the business in the KSO areas.

(iii) The up-front fee paid by Telkomsel in February 2006 for the 3G license amounting to Rp.436,000 million was recognized as an intangible asset and is amortized over the term of the 3G license. In 2009, Telkomsel obtained an additional 3G license of Rp.320,000 million which is recorded as an intangible assets and amortized over 10 years (Notes 1d.a, 2j, 44a.ii and 48c.i).

(iv) In 2009, the Company was granted a switched based local network provider license using 2.3 GHz radio frequency bandwidth for wireless broadband services. The up-front fee is recorded as an intangible assets and amortized over the license’s useful life of 10 years.

(v) The estimated annual amortization expense relating to other intangible assets from April 1, 2011 is approximately Rp.477,215 million.

(vi) As of March 31, 2011, management believes that there was no indication of impairment.

14. ESCROW ACCOUNTS

Escrow accounts as of December 31, 2010 and March 31, 2011 consist of the following:

	December 31, 2010	March 31, 2011
Bank
Mandiri	41,552	40,197
Others (each below Rp.1
billion)	110	110
	41,662	40,307

The escrow account 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 48c.ii).

Refer to Note 44 for details of related party transactions.

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PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

15. TRADE PAYABLES

	December 31, 2010	March 31, 2011
Related parties
Radio frequency usage charges, Concession fees and Universal Service Obligation charges	393,686	307,505
Purchases of equipment, materials and
services	556,433	261,107
Payables to other telecommunications
providers	203,755	134,306
Sub-total	1,153,874	702,918
Third parties
Purchases of equipment, materials and
services	6,269,253	5,756,066
Payables to other telecommunications
providers	87,668	50,377
Sub-total	6,356,921	5,806,443
Total	7,510,795	6,509,361

Trade payables by currency are as follows:

	December 31, 2010	March 31, 2011
Rupiah	4,378,075	3,551,313
U.S.
Dollars	3,126,144	2,892,704
Euro	2,128	63,334
Malaysian Ringgit	1,624	1,645
Singapore Dollars	1,645	174
Others	1,179	191
Total	7,510,795	6,509,361

as restated, refer to Note 2p

Refer to Note 44 for details of related party transactions.

16. ACCRUED EXPENSES

	December 31, 2010	March 31, 2011
Operations, maintenance and
telecommunications services	1,773,794	1,918,911
Salaries and benefits	894,733	1,059,830
General, administrative and
marketing	514,367	751,732
Interest and bank charges	226,366	203,057
Total	3,409,260	3,933,530

Refer to Note 44 for details of related party transactions.

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

17. UNEARNED INCOME

	December 31, 2010	March 31, 2011
Prepaid pulse reload vouchers	2,419,099	2,546,505
Other telecommunications services	131,220	145,620
Others	131,164	163,823
Total	2,681,483	2,855,948

as restated, refer to Note 2p

18. SHORT-TERM BANK LOANS

		December 31, 2010		March 31, 2011
		Outstanding		Outstanding
Lenders	Currency	Original currency (in millions)	Rupiah equivalent	Original currency (in millions)	Rupiah equivalent
Bank CIMB Niaga	Rp.	-	35,359	-	33,360
Bank Ekonomi	Rp.	-	16,472	-	19,404
	US$	-	-	0.42	3,676
PT Bank Syariah Mandiri (“BSM”)	Rp.	-	4,000	-	10,000
Total			55,831		66,440

Refer to Note 44 for details of related party transactions.

| | Borrower | Currency | Total facility — (in
millions) | Payment — schedule | Interest payment — period | Interest rate — per
annum | Security |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Bank
CIMB Niaga | | | | | | | |
| April 25, 2005 a | Balebat | Rp. | 12,000 | May
29, 2011 | Monthly | 11.50% | Property, plant and equipment (Note
11), inventories (Note 7), and
trade receivables (Note 6) |
| April 29, 2008 a | Balebat | Rp. | 5,000 | May
29, 2011 | Monthly | 11.50% | Property, plant and equipment (Note
11), Inventories (Note 7), and
trade receivables (Note 6) |
| April 29, 2008 a | Balebat | Rp. | 500 | May
29, 2011 | Monthly | 11.50% | Property, plant and equipment(Note
11), inventories(Note 7), and
trade receivables (Note 6) |
| October 18, 2005 b | GSD | Rp. | 19,000 | October 18, 2011 | Monthly | 9.75% | Property, plant and equipment (Note
11) |
| May
14, 2010 | Infomedia | Rp. | 28,000 | May
14, 2011 | Monthly | 12.50% | Trade receivables (Note 6) |

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

18. SHORT-TERM BANK LOANS (continued)

| | Borrower | Currency | Total facility — (in
millions) | Payment — schedule | Interest payment — period | Interest rate — per
annum | Security |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Bank
Ekonomi | | | | | | | |
| February 11, 2009 c | Sigma | US$ | 0.55 | June
13, 2011 | Monthly | 6.00% | Trades receivable (Note 6) |
| August 7, 2009 d | Sigma | Rp. | 35,000 | July
1, 2011 | Monthly | 10.50% | Trade receivables (Note 6) property, plant and equipment (Note 11) |
| January 2, 2011 | Sigma | US$ | 1.00 | July
1, 2011 | Monthly | 6.00% | Property, plant and equipment (Note
11) |
| PT
Bank Syariah Mandiri (“BSM”) | | | | | | | |
| August 20, 2009 | Balebat | Rp. | 15,000 | August 20, 2010 | Monthly | 14.00% | Property, plant and equipment (Note 11),
inventories (Note 7), trade receivables (Note 6) insurance and letter of comfort |
| September 1, 2010 | Balebat | Rp. | 15,000 | August 30, 2011 | Monthly | 14.00% | Property, plant and equipment(Note 11),
inventories (Note 7), trade receivables (Note 6) |

The credit facilities obtained by the Company’s subsidiaries are used for working capital purpose.

a Based on the latest amendment on May 24, 2010.

b Based on the latest amendment on March 31, 2011.

c Based on the latest amendment on July 1, 2010.

d Based on the latest amendment on July 1, 2010.

19. MATURITIES OF LONG-TERM LIABILITIES

a. Current maturities

	Notes	December 31, — 2010	March 31, — 2011
Bank
loans	22	4,478,247	3,631,222
Two-step loans	20	395,363	385,303
Obligations under finance leases	11	198,062	192,468
Bonds and notes	21	126,719	164,989
Deferred consideration for business
combinations	23	105,245	-
Total		5,303,636	4,373,982

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

19. MATURITIES OF LONG-TERM LIABILITIES (continued)

b. Long-term portion

| | Notes | (In
billions of Rupiah) — Total | 2012 | 2013 | 2014 | 2015 | Later |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Bank
loans | 22 | 9,099.8 | 1,920.5 | 3,554.6 | 2,409.2 | 903.6 | 311.9 |
| Bonds and notes | 21 | 3,280.7 | 152.9 | 97.8 | 30.0 | 1,005.0 | 1,995.0 |
| Two-step loans | 20 | 2,531.5 | 264.6 | 312.6 | 315.0 | 317.7 | 1,321.6 |
| Obligations under finance
leases | 11 | 376.1 | 144.3 | 110.9 | 64.3 | 14.5 | 42.1 |
| Total | | 15,288.1 | 2,482.3 | 4,075.9 | 2,818.5 | 2,240.8 | 3,670.6 |

20. TWO-STEP LOANS

Two-step loans are unsecured loans obtained by the Government, which are then re-loaned to the Company. The loans entered into up to July 1994 were recorded and payable in Rupiah based on the exchange rate at the date of drawdown. Loans entered into after July 1994 are payable in their original currencies and any resulting foreign exchange gain or loss is borne by the Company.

		December 31, 2010
		Outstanding		Outstanding
		Original currency	Rupiah	Original currency	Rupiah
Lenders	Currency	(in
millions)	equivalent	(in
millions)	equivalent
Overseas bank	Yen	10,750.57	1,191,378	10,750.57	1,131,174
	US$	120.76	1,088,639	111.32	969,569
	Rp.	-	856,649	-	816,101
Total			3,136,666		2,916,844
Current maturities (Note 19a)			(395,363	)	(385,303	)
Long-term portion (Note 19b)			2,741,303		2,531,541

Lenders	Currency	Payment — schedule	Interest payment — period	Interest rate — per annum
Overseas bank	US$	Semi-annually	Semi-annually	4.00% - 6.67%
	Rp.	Semi-annually	Semi-annually	7.57% - 7.73%
	Yen	Semi-annually	Semi-annually	3.10%

The loans are intended for the development of telecommunications infrastructure and supporting equipment. The loans are payable in semi-annual installments and are due on various dates through 2024.

Since 2008, the Company has used all facilities under the two-step loans program and the drawdown period for the two-step loans has expired.

The Company is required to maintain financial ratios as follows:

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

20. TWO-STEP LOANS (continued)

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 March 31, 2011, the Company complied with the above mentioned ratios.

Refer to Note 44 for details of related party transactions.

21. BONDS AND NOTES

| | | December 31,
2010 | | | | |
| --- | --- | --- | --- | --- | --- | --- |
| | | Outstanding | | Outstanding | | |
| | | Original currency | Rupiah | Original currency | Rupiah | |
| Bonds and
notes | Currency | (in
millions) | equivalent | (in
millions) | equivalent | |
| Bonds | | | | | | |
| Series A | Rp. | - | 1,005,000 | - | 1,005,000 | |
| Series B | Rp. | - | 1,995,000 | - | 1,995,000 | |
| Medium Term Notes (“MTN”
) | | | | | | |
| Metra | Rp. | - | 47,000 | - | 45,000 | |
| Sigma | Rp. | - | 30,000 | - | 30,000 | |
| Finnet | Rp. | - | 23,750 | - | 22,700 | |
| Promissory
Notes | | | | | | |
| PT. ZTE Indonesia
(“ZTE”) | US$ | 7.08 | 63,824 | 6.75 | 58,792 | |
| Huawei Tech | US$ | 23.46 | 211,524 | 33.21 | 289,227 | |
| Total | | | 3,376,098 | | 3,445,719 | |
| Current maturities (Note
19a) | | | (126,719 | ) | (164,989 | ) |
| Long-term
portion (Note 19b) | | | 3,249,379 | | 3,280,730 | |

a. Bonds

Bonds	Principal	Issuer	Listed on	Issuance date	Maturity date	Interest payment method	Interest rate per annum
Series A	1,005,000	The Company	IDX	June 25, 2010	July 6, 2015	Quarterly	9.60%
Series B	1,995,000	The Company	IDX	June 25, 2010	July 6, 2020	Quarterly	10.20%
Total	3,000,000

The bonds are secured by all assets owned by the Company. The underwriter of the bonds are PT Bahana Securities, PT Danareksa Sekuritas and PT Mandiri Sekuritas. And the trustee is PT CIMB Niaga Tbk.

The Company received the proceeds of the issuance of bonds on July 6, 2010.

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PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

21. BONDS AND NOTES (continued)

a. Bonds (continued)

The funds received from public offering of bonds net of issuance costs, are to be used for increasing capital expenditure which consisted of: wave broadband (bandwidth, softswitching, datacom, information technology and others), infrastructure (backbone, metro network, regional metro junction, internet protocol, and satellite system), and optimizing legacy and supporting facilities (fixed wireline and wireless).

As of March 31, 2011, the rating for the bonds issued by PT Pemeringkat Efek Indonesia (Pefindo) is idAAA ( stable outlook ).

Based on indenture trusts agreement, the Company is required to comply with all covenants or restrictions including maintaining financial ratios as follows:

Debt to equity ratio should not exceed 2:1.
EBITDA to interest expenses ratio should not be less than 5:1.
Debt service coverage is 125%

As of March 31, 2011, the Company complied with the above mentioned ratios.

b. MTN

Notes	Principal	Issuance date	Maturity date	Interest payment method
MTN
Metra	30,000	June 9, 2009	June 19, 2012	Quarterly
Phase 1
Phase 2	20,000	February 1,
2010	February 2,
2013	Quarterly
Sigma	30,000	October 16,
2009	November
17,2014	Semi-annually
Finnet
Phase 1	10,000	October 16,
2009	November 17,
2012	Monthly
Phase 2	15,000	March 18, 2010	March 24, 2013	Monthly

The Arranger of the Medium Term Notes is PT Bahana Securities, Bank Mega is acting as Trustee, and PT Kustodian Sentral Efek Indonesia (“KSEI”) acting as Collecting Agent and Custodian.

i. Metra

Proceeds from the issuance of MTN were used to expand the business and as working capital.

The MTN bear floating interest rates for the first year of 15.05% and 12.01% for the first and second phase, respectively. For the second and third years, interest rate for the first and second phase is the average return (yield) of three Government Bonds (“Surat Utang Negara” or SUN) with a remaining period of time equal to the second and third years of MTN plus a 4.02% premium. Repayment of the principal is in increments of 10%, 20% and 70% on the first, second and third anniversary of the Issuance Date, respectively.

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

21. BONDS AND NOTES (continued)

b. MTN (continued)

i. Metra (continued)

Metra secures with a minimum value of 40% of the outstanding MTN principal. The maximum value of 60% of the outstanding MTN principal is unsecured and at all times ranked (pari passu) with other unsecured debts of Metra. Metra may buy back all or part of the MTN at any time before the maturity date of the MTN.

Based on the agreements, Metra is required to comply with all covenants or restrictions including maintaining financial ratios as follows:

Debt to Equity maximum 1.5:1
EBITDA to Interest Ratio minimum 2.5.

As of March 31, 2011, Metra complied with the above mentioned ratios.

ii. Sigma

Proceeds from the issuance of MTN were used to expand the business.

The MTN bear interest rates for the first year of 14.5% and for the second up to the fifth years from the Issuance Date based upon the average interest rate of one-month SBI plus a 800 basis points premium. One-month SBI is calculated based on the average interest rates of one-month SBI in the last 6 months at the time of the determination of the interest of MTN.

The MTN are not secured by a specific collateral, but secured by all of Sigma’s assets. These movable or fixed property, either existing or in the future, are collateral for assets of MTN holders and at all times ranked (pari passu) without any preference with other creditor privileges in accordance with prevailing regulations.

Based on the agreements, Sigma is required to comply with all covenants or restrictions including maintaining financial ratios as follows:

Debt to Equity maximum 2.5:1

2 Funded debt and maximum of five times EBITDA in 2009, three and a half times in 2010 and two and a half times in 2011.

As of March 31, 2011, Sigma complied with the above mentioned ratios.

iii. Finnet

Proceeds from issuance of MTN were used for the investment of hardware and software, project development and bridging loan payments for projects.

Repayment of principal for the first phase MTN are 1% each month on the 7 th until 12 th month, 2% each month on the 13 th until 35 th month, and the remaining 48% will be paid on November 17, 2012.

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

21. BONDS AND NOTES (continued)

b. MTN (continued)

iii. Finnet (continued)

Repayment of principal for the second phase MTN are 2% each month on the following month until 35 th month and the remaining 30% will be paid on March 24, 2013.

The MTN bear interest rates of 16.25% per annum.

MTN are not secured by a specific collateral, but secured by all Finnet’s assets which are movable property or fixed property, either existing or in the future will become collateral for MTN holders and at all times ranked (pari passu) without any preference with other Finnet’s creditor privileges in accordance with prevailing regulations. Finnet may buy back all or part of the MTN at any time before the maturity date of the MTN.

Based on the agreements, Finnet is required to comply with all covenants or restrictions including maintaining financial ratio as follows:

Debt to Equity maximum 2.5:1 (only if MTN is given by Finnet to third party)
EBITDA to Interest Ratio minimum 2.5.

As of March 31, 2011, Finnet complied with the above mentioned ratios.

Refer to Note 44 for details of related party transactions.

c. Promissory Notes

| Supplier | Currency | Principal (in
millions) | Issuance date | Payment schedule | Interest payment method | Interest rate per
annum |
| --- | --- | --- | --- | --- | --- | --- |
| PT. ZTE Indonesia(“ZTE”) | US$ | 100 | August 20, 2009 | Semi-annually (June 10, 2010 - May
25, 2013) | Semi-annually | 6
month LIBOR+2.5% |
| PT Huawei Tech Investment (“Huawei
Tech”) | US$ | 300 | June
19, 2009 | Semi-annually (September 19, 2010 - June 23,
2013) | Semi-annually | 6
month LIBOR+2.5% |

Based on Agreement of Frame Supply and Deferred Payment Arrangement between the Company with ZTE and Huawei Tech, the promissory notes issued by the Company to ZTE and Huawei Tech is an unsecured supplier financing facility covered 85% of Hand Over Report (“Berita Acara Serah Terima” or BAST) projects with ZTE and Huawei Tech.

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

22. BANK LOANS

		December 31, 2010
		Outstanding		Outstanding
		Original currency	Rupiah	Original currency	Rupiah
Lenders	Currency	(in millions)	equivalent	(in millions)	equivalent
The Export-Import Bank of Korea (“Korea Eximbank”)	US$	11.76	105,989	11.76	102,403
Bank Mandiri	Rp.	-	3,075,556	-	2,593,334
BCA	Rp.	-	2,755,556	-	2,333,334
BNI	Rp.	-	1,150,000	-	666,667
Bank CIMB Niaga	Rp.	-	24,215	-	23,129
BRI	Rp.	-	822,000	-	533,000
Bank Ekonomi	Rp.	-	79,378	-	75,682
Syndication of banks	Rp.	-	4,500,000	-	3,862,500
PT Bank OCBC Indonesia (“OCBC
Indonesia”)	Rp.	-	177,600	-	177,600
OCBC NISP	Rp.	-	444,000	-	444,000
ABN Amro Bank N.V. Stockholm Branch and
Standard Chartered Bank	US$	54.18	487,106	54.18	471,828
Industrial and Commercial Bank of China
Limited (“ICBC”)	US$	46.36	416,783	46.36	403,711
Bank of China (“BoC”)	US$	17.68	158,959	18.89	164,481
Finnish Export Credit Ltd	US$	16.58	149,062	60.75	529,106
Japan Bank for International Cooperation
(“JBIC”)	US$	53.90	485,907	53.90	469,467
BTN	Rp.	-	7,084	-	6,601
PT Bank Index Selindo (“Bank
Index”)	Rp.	-	502	-	434
Total			14,839,697		12,857,277
Unamortized debt issue cost			(105,245	)	(126,305	)
			14,734,452		12,730,972
Current maturities (Note 19a)			(4,478,247	)	(3,631,222	)
Long-term portion (Note 19b)			10,256,205		9,099,750

Refer to Note 44 for details of related party transactions.

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

22. BANK LOANS (continued)

| | Borrower | Currency | Total facility — (in
millions) | Payment — schedule | Interest payment — period | Interest rate — per
annum | Security |
| --- | --- | --- | --- | --- | --- | --- | --- |
| The Export-Import Bank of Korea (“Korea
Eximbank”) | | | | | | | |
| August 27, 2003 a | The
Company | US$ | 124 | Semi-annually (December 30, 2006- June 30, 2011) | Semi-annually | 5.68% | None |
| Bank Mandiri | | | | | | | |
| June 15, 2007 b&c | Telkomsel | Rp. | 700,000 | Semi-annually (January 30, 2008 - January 30, 2010) | Quarterly | 3
months JIBOR+1.25% | None |
| October 24, 2007 b | Telkomsel | Rp. | 750,000 | Semi-annually (April 30, 2008 - April 30, 2010) | Quarterly | 3
months JIBOR+1.17% | None |
| December 23, 2008 b | Telkomsel | Rp. | 1,300,000 | Semi-annually (July 30, 2009 - July 30, 2011) | Monthly | 3
month JIBOR+2.25% | None |
| July 3, 2009 b | Telkomsel | Rp. | 2,000,000 | Semi-annually (January 9, 2010 -January 9, 2014) | Quarterly | 3
months JIBOR+1.50% | None |
| July 5, 2010 b | Telkomsel | Rp. | 3,000,000 | Semi-annually (January 7, 2012 - January 7, 2016) | Quarterly | 3
months JIBOR+1.20% | None |
| BCA | | | | | | | |
| July 14, 2008 b | Telkomsel | Rp. | 1,000,000 | Semi-annually (January 21, 2009 - January 21, 2011) | Quarterly | 1
month JIBOR+1.50% | None |
| July 3, 2009 b | Telkomsel | Rp. | 2,000,000 | Semi-annually (January 9, 2010 - January 9, 2014) | Quarterly | 3
months JIBOR+1.50% | None |
| July 5, 2010 b | Telkomsel | Rp. | 2,000,000 | Semi-annually (January 7, 2012 - January 7, 2016) | Quarterly | 3
months JIBOR+1.20% | None |
| December 16, 2010 | TII | Rp. | 200,000 | Semi-annually | Quarterly | 3
months JIBOR+1.25% | None |
| BNI | | | | | | | |
| October 24, 2007 b | Telkomsel | Rp. | 750,000 | Semi-annually (April 30, 2008 - April 30, 2010) | Quarterly | 3
months JIBOR+1.17% | None |
| July 14, 2008 b | Telkomsel | Rp. | 2,000,000 | Semi-annually (January 21, 2009 - January 21, 2011) | Quarterly | 1
month JIBOR+1.50% | None |
| July 3, 2009 b | Telkomsel | Rp. | 750,000 | Semi-annually (January 3, 2011 - January 3, 2015) | Quarterly | 3
months JIBOR+3.00% | None |
| October 13, 2010 h | The
Company | Rp. | 1,000,000 | Semi-annually | Quarterly | 3
months JIBOR+1.25% | None |
| Bank CIMB Niaga | | | | | | | |
| December 28, 2004 d | Balebat | Rp. | 2,200 | Monthly (December 29, 2004 - June 28,
2010) | Monthly | 14% | Property, plants and equipments (Note 11),
inventories (Note 7), and trade receivables (Note 6) |
| March 21, 2007 | GSD | Rp. | 20,000 | Quarterly (April 2007 – July 2015) | Monthly | 13% | Property, plants and equipments (Note
11) |

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

22. BANK LOANS (continued)

	Borrower	Currency	Total facility — (in millions)	Payment — schedule	Interest payment — period	Interest rate — per annum	Security
Bank CIMB Niaga (continued)
November 23, 2007	GSD	Rp.	8,000	Monthly (December 23, 2007 – November 23,
2012)	Monthly	11%	Property, plants and equipments (Note
11)
July 28, 2009 e	Balebat	Rp.	2,743	Monthly (February 28, 2010 - December 28, 2014)	Monthly	11.50%	Property, plants and equipments (Note 11),
inventories (Note 7), and trade receivables (Note 6)
May 24, 2010	Balebat	Rp.	3,000	Monthly (June 9, 2010 - May 27, 2015)	Monthly	11.50%	Property, plants and equipments (Note 11),
inventories (Note 7), and trade receivables (Note 6)
March 31, 2011	GSD	Rp.	47,850	Monthly	Monthly	9.75%	Property, plants and equipments (Note
11)
BRI
October 24, 2007 b	Telkomsel	Rp.	2,000,000	Semi-annually (December 25, 2008 – December 25,
2010)	Quarterly	3 months JIBOR+1.17%	None
July 28, 2008 b	Telkomsel	Rp.	1,000,000	Semi-annually (February 4,2009 - February 4, 2011)	Quarterly	1 month JIBOR+1.50%	None
September 2, 2009 b	Telkomsel	Rp.	800,000	Semi-annually ( March 8, 2010 - March 8, 2014)	Quarterly	3 months JIBOR+1.50%	None
October 13, 2010 h	The Company	Rp.	3,000,000	(Semi-annually	Quarterly	3 months JIBOR+1.25%	None
Bank Ekonomi
December 7, 2006 f	Sigma	Rp.	14,000	Monthly (December 12, 2006 -December 12,
2012)	Monthly	10.50%	Property, plants and equipments (Note 11),
and trade receivables (Note 6)
March 9, 2007 f	Sigma	Rp.	13,000	Monthly (January 2008 - December 2012)	Monthly	10.50%	Property, plants and equipments (Note
11), and trade receivables (Note 6)

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

22. BANK LOANS (continued)

| | Borrower | Currency | Total facility — (in millions) | Payment — schedule | Interest payment — period | Interest rate — per
annum | Security |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Bank Ekonomi (continued) | | | | | | | |
| September 10, 2008 f | Sigma | Rp. | 33,000 | Monthly (April 2009 – March 2015) | Monthly | 10.50% | Property, plants and equipments (Note
11), and
trade receivables (Note 6) |
| August 7,
2009 f&g | Sigma | Rp. | 35.000 | Monthlysome installment (September 4, 2009 - August 25, 2013) | Monthly | 10.50% | Property, plants and equipments (Note
11), and
trade receivables (Note 6) |
| August 7, 2009 f | Sigma | Rp. | 20,000 | Monthlysome installment (November 19, 2009 – August 4,
2014) | Monthly | 10.50% | Property, plants and equipments (Note 11), and trade
receivables (Note 6) |
| February 24, 2011 | Sigma | Rp. | 30,000 | Monthly (March 24, 2011 - February 24,
2015) | Monthly | 10.50% | Property, plants and equipments (Note 11), and
trade receivables (Note 6) |
| Syndication of banks | | | | | | | |
| July 29, 2008 h (BNI, BRI and Bank
Jabar) | The
Company | Rp. | 2,400,000 | Semi-annually (February 25, 2010 - July
28, 2013) | Quarterly | 3
months JIBOR+1.20% | None |
| June 16, 2009 h (BNI and BRI) | The
Company | Rp. | 2,700,000 | Semi-annually (January 25, 2011 - June
15, 2014) | Quarterly | 3
months JIBOR+2.45% | None |
| PT ANZ Panin Bank (“ANZ Panin”) | | | | | | | |
| September 4, 2009 b | Telkomsel | Rp. | 1,000,000 | Semi-annually (March 8, 2010 - March 8, 2014) | Quarterly | 3
months JIBOR+1.75% | None |
| BII | | | | | | | |
| September 15, 2009 b | Telkomsel | Rp. | 500,000 | Semi-annually (March 29, 2010 - March 29, 2014) | Quarterly | 3
months JIBOR+2.06% | None |
| PT Bank OCBC Indonesia(“OCBC
Indonesia”) | | | | | | | |
| November 2, 2009 b | Telkomsel | Rp. | 200,000 | Semi-annually (November 2, 2010 - November 2, 2014) | Quarterly | 3
months JIBOR+3.00% | None |
| OCBC NISP | | | | | | | |
| November 2, 2009 b | Telkomsel | Rp. | 500,000 | Semi-annually (November 2, 2010 - November 2, 2014) | Quarterly | 3
months JIBOR+3.00% | None |
| ABN Amro Bank N.V. Stockholm Branch and
Standard Chartered Bank | | | | | | | |
| December 30,
2009 b&i | Telkomsel | US$ | 318 | Semi-annually (April 2011 – October 2016) | Semi-annually | 6
months LIBOR+0.82% | None |

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

22. BANK LOANS (continued)

| | Borrower | Currency | Total facility — (in millions) | Payment — schedule | Interes payment — period | Interest rate — per
annum | Security |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Industrial and Commercial Bank of China
Limited(“ICBC”) | | | | | | | |
| December 30,
2009 b&j | Telkomsel | US$ | 266 | Semi-annually (April 2011 - October 2016) | Semi-annually | 6
months LIBOR+1.20% | None |
| Bank of China (“BoC”) | | | | | | | |
| December 30, 2009 b | Telkomsel | US$ | 100 | Semi-annually (June 30, 2012- December 30,
2017) | Semi-annually | 6
months LIBOR+2.55% | None |
| Finnish Export Credit Ltd | | | | | | | |
| March 2, 2010 b&k | Telkomsel | US$ | 264 | Semi-annually (Jan
2011 - Juli 2015) | Semi-annually | CIRR+2.50% | None |
| Japan Bank for International Cooperation
(“JBIC”) | | | | | | | |
| March 26,
2010 l&m | The
Company | US$ | 59.89 | Semi-annually (October 26, 2010 – April 26, 2015) | Semi-annually | 4.56% and 6 months LIBOR+0.70% | None |
| BTN | | | | | | | |
| September 10, 2009 | Ad
Medika | Rp. | 9,500 | Monthly (September 10, 2009 -
September10,2014) | Monthly | 13.00% | Property, plants and equipments (Note 11) and
trade receivables (Note 6) |
| Bank Index | | | | | | | |
| May 12, 2010 | Balebat | Rp. | 590 | Monthly (September 2010 - August 2012) | Monthly | 14% | Property plants and Equipments (Note 11) |
| Standard Chartered Bank | | | | | | | |
| December 6, 2010 | TII | US$ | 8.0 | Monthly | Monthly | 2% | None |
| The
credit facilities obtained by the Company and its subsidiaries are used
for working capital purpose. a The credit facility obtained by the Company
is used for financing the Code Division Multiple Acess (“CDMA”)
procurement from the Samsung consortium. b Telkomsel has no collateral for its bank
loans, or other credit facilities. The terms of the various agreements
with Telkomsel’s lenders and financiers require compliance with a number
of pledges and negative pledges as well as financial and other covenants,
which include among other things, certain restrictions on the amount of
dividends and other profit distributions which could adversely affect the
Telkomsel’s capacity to comply with its obligation under the facility. The
terms of the relevant agreements also contain default and cross default
clauses. As of March 31, 2011, Telkomsel has complied with the above
covenants. c Based on the latest amendment on July
24, 2007. d Based on the latest amendment on July
28, 2009. e Based on the latest amendment on May
24, 2010. | | | | | | | |

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

22. BANK LOANS (continued)

f These credit facilities includes certain restrictive covenants which require Sigma to obtain written consent from Bank Ekonomi prior to acting as guarantor for third party loan, mortgaging the land to other bank or third party, leasing the land to third party, withdrawing the facility exceeding the maximum facility limit, changing Sigma’s legal status, distributing or declaring dividend and paying shareholder’s receivables. As of March 31, 2011, Sigma has complied with the above covenants.

g Based on the latest amendment on September 17, 2009.

h 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 March 31, 2011 as follows:

Debt to equity ratio should not exceed 2:1.
Debt service coverage ratio should exceed 125%.

i Pursuant to the agreements with PT Ericsson Indonesia (“Ericsson Indonesia”) and Ericsson AB (Note 48a.ii), Telkomsel entered into an EKN-Backed Facility Agreement (“facility”) with ABN Amro Bank N.V. Stockholm Branch (as “the original lender”) and Standard Chartered Bank (“SCB”) (as “the original lender” , “the arranger”, “the facility agent” and “the EKN agent”), ABN Amro Bank N.V., Hong Kong (as “the arranger”) for the purchase of Ericsson telecommunication equipment and services. The facilities consist of facility 1, 2 and 3 amounting to US$117 million, US$106 million and US$95 million, respectively. The availability period of remaining facility 2 expired in March 2011.

j Pursuant to the agreements with Huawei International Pte.Ltd. (“Huawei International“) and PT Huawei Tech Investment (“Huawei Tech”) (Note 48a.ii), Telkomsel entered into a Sinosure-Backed Facility Agreement with the ICBC for the purchase of Huawei Tech telecommunication equipment and services. The facilities consist of facility 1 and 2 amounting to US$166 million and US$100 million, respectively, including premium of US$16 million. The availability period of remaining facility 1 expired in December 2010.

k Pursuant to agreements with Nokia Siemens Networks Oy, PT Nokia Siemens Networks and Nokia Siemens Networks GmbH & Co.KG (Note 48a.ii). Telkomsel entered into a Finnvera-backed facility agreement with Finnish Export Credit Ltd (“FEC”) (as “the original lender”), Citibank, N.A., Jakarta Branch and Credit Suisse AG, Zurich (as “the arrangers”), The Hongkong and Shanghai Banking Corporation (“HSBC”) limited (as “the arranger” and “the FEC counterparty”), and HSBC Bank Plc (as “the agent”) for the purchase of Nokia Siemens Networks telecommunication equipment and services. The facilities consist of facility 1 and 2 amounting to US$127 million and US$137 million, respectively, including premium of US$14 million. The availability period of remaining facility 1 expired in March 2011.

l In connection with the agreement with NSW-Fujitsu Consortium, the Company entered into a loan agreement with JBIC, the international arm of Japan Finance Corporation for the purchase of NSW-Fujitsu Consortium telecommunication equipment and services. The facilities consist of facility A and B amounting to US$36 million and US$24 million.

m 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 March 31, 2011 as follows:

Debt to equity ratio should not exceed 2:1.
Debt service coverage ratio should exceed 150%.

23. DEFERRED CONSIDERATION FOR BUSINESS COMBINATIONS

Deferred consideration represents the Company's obligations to the Selling Stockholders of MGTI in respect of the Company’s acquisition of KSO IV and BSI in respect of the Company’s acquisition of KSO VII, with details as follows:

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

23. DEFERRED CONSIDERATION FOR BUSINESS COMBINATIONS (continued)

	December 31, 2010		March 31, 2011
KSO
IV transaction
MGTI	61,552		-
Less
discount	-		-
	61,552		-
KSO
VII transaction
BSI	43,693		-
Less
discount	-		-
	43,693		-
Total	105,245		-
Current maturity - net of discount (Note
19a)	(105,245	)	-
Long-term portion - net of discount (Note 19b)	-		-

a. KSO IV transaction

The outstanding balance relating to the KSO IV transaction arose from acquisition of KSO IV by the Company, based on amendment and restatement of KSO agreement entered into by the Company and MGTI on January 20, 2004. Based on the agreement, in consideration for the Company 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 January 2011 at a discount rate of 8.3%, plus the direct cost of the business combination.

As of December 31, 2010 the remaining monthly payments to be made to MGTI, before unamortized discount, amounted to US$6.83 million (equivalent to Rp.61,552 million) and on January 2011 the loan was fully repaid.

b. KSO VII transaction

The outstanding balance relating to the KSO VII transaction arose from acquisition of KSO VII by the Company, based on amendment and restatement of the KSO agreement entered into by the Company and BSI on October 19, 2006. Based on the agreement, in consideration for the Company 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 January 2011 at a discount rate of 15%, plus the direct cost of the business combination.

As of December 31, 2010 the remaining monthly payments to be made to BSI, before unamortized discount, amounted to Rp.43,693 million and on January 2011 the loan was fully repaid.

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

24. NON-CONTROLLING INTEREST

	December 31, 2010	March 31, 2011
Non-controlling interest in net assets of
subsidiaries:
Telkomsel	11,970,890	12,963,221
Metra	17,311	19,873
Infomedia	7,840	8,275
Total	11,996,041	12,991,369

	2010		2011
Non-controlling interest in comprehensive
income (loss) of subsidiaries:
Telkomsel	989,419		992,343
Metra	1,115		2,550
Infomedia	(554	)	435
Total	989,980		995,328

25. CAPITAL STOCK

	December 31, 2010 — 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	52.47	2,580,118
The Bank of New York Mellon
Corporation	2,394,970,656	12.18	598,743
Directors (Note 1b):
Ermady Dahlan	17,604	-	4
Indra Utoyo	5,508	-	1
Public (individually less than
5%)	6,953,960,300	35.35	1,738,490
Total	19,669,424,780	100.00	4,917,356
Treasury stock (Note 27)	490,574,500	-	122,644
Total	20,159,999,280	100.00	5,040,000

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

25. CAPITAL STOCK (continued)

	March 31, 2011 — 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	52.47	2,580,118
The Bank of New York Mellon
Corporation	2,902,195,696	14.75	725,549
Directors (Note 1b):
Ermady Dahlan	17,604	-	4
Indra Utoyo	5,508	-	1
Public (individually less than
5%)	6,446,735,260	32.78	1,611,684
Total	19,669,424,780	100.00	4,917,356
Treasury stock (Note 27)	490,574,500	-	122,644
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 Stockholders of the Company with respect to election and removal of the Board of Commissioners and Directors, issuance of new shares and to amend the Company’s Articles of Association.

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

26. ADDITIONAL PAID-IN CAPITAL

	December 31, 2010		March 31, 2011
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

27. TREASURY STOCK

The Company had repurchased the Series B shares phase I, II and III based on the AGM of Stockholders of the Company (Note 1c) and on the potential crisis market condition based on BAPEPAM-LK Regulation No. XI.B.3 Attachment to the Decision of the Chairman of BAPEPAM-LK No. Kep-401/BL/2008 dated October 9, 2008.

As of December 31, 2010 and March 31, 2011, the Company has repurchased 490,574,500 of the Company’s issued and outstanding Series B shares, respectively, representing 2.43% of the Company’s issued and outstanding Series B shares, for a total repurchase amount of Rp.4,264,073 million up to 2010 and 2011, respectively, (including broker’s commissions and custodian fees).

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

27. TREASURY STOCK (continued)

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

Pursuant to the AGM of Stockholders of the Company dated June 11, 2010, the stockholders approved the changes to the Company’s plan for used of the treasury stock as result of the Share Buy Back I, II and III, as follows: (i) market placement; (ii) cancellation; (iii) equity conversion; and (iv) funding.

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

The balance of this account amounting to Rp.478,000 million arose from the early termination of the Company’s 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. In addition, the Company is required by the Government to use the funds received from this compensation for the development of telecommunication infrastructure. As of December 31, 2010 and March 31, 2011, the development of the related infrastructure amounted to Rp.537,304 million respectively.

As of December 31, 2010 and March 31, 2011, the Company has received an aggregate of Rp.478,000 million, respectively, in relation to the compensation for the early termination of exclusivity rights, made up of annual payments of Rp.90,000 million from 2005 to 2008 and Rp.118,000 million on August 25, 2009, 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.

29. TELEPHONE REVENUES

	2010*	2011
Fixed lines
Usage charges	2,377,753	2,046,020
Monthly subscription charges	849,342	786,546
Installation charges	23,115	35,507
Others	57,852	61,506
Total	3,308,062	2,929,579

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

29. TELEPHONE REVENUES (continued)

	2010*	2011
Cellular
Usage charges	6,352,216	6,424,860
Features	193,653	185,229
Monthly subscription charges	107,575	144,309
Connection fee charges	37,776	379
Total	6,691,220	6,754,777
Total Telephone Revenues	9,999,282	9,684,356

as restated, refer to Note 2p

30. INTERCONNECTION REVENUES

	2010*	2011
Domestic interconnection and
transit	753,499	504,072
International interconnection	297,183	342,011
Total	1,050,682	846,083

as restated, refer to Note 2p

Based on the MoCI Regulation No. 08/Per/M.KOMINFO/02/2006, the implementation of a cost-based interconnection tariff is applicable beginning January 1, 2007 (Note 47).

Refer to Note 44 for details of related party transactions.

31. DATA, INTERNET AND INFORMATION TECHNOLOGY SERVICES REVENUES

	2010*	2011
Short Messaging Services
(“SMS”)	2,786,459	3,077,450
Internet, data communication and information
technology
services	1,925,006	2,304,985
VoIP	38,664	63,927
e-Business	14,297	5,511
Total	4,764,426	5,451,873

as restated, refer to Note 2p

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

32. NETWORK REVENUES

	2010*	2011
Leased lines	159,899	204,165
Satellite transponder lease	117,571	100,708
Total	277,470	304,873

Refer to Note 44 for details of related party transactions.

33. Other telecommunications services

	2010*	2011
Customer Premise Equipment (“CPE”) and
terminal	105,428	191,972
Universal Service Compensation	79,063	81,390
Pay
TV	32,996	49,074
Sales of modem	24,295	32,018
Directory assistance	13,665	21,882
Others	9,029	42,239
Total	264,476	418,575

as restated, refer to Note 2p

34. PERSONNEL EXPENSES

	2010*	2011
Salaries and related benefits	762,827	739,770
Vacation pay, incentives and other
benefits	693,674	718,455
Employees’ income tax	152,030	198,448
Net
periodic pension costs (Notes 41a)	88,061	125,474
Housing	53,174	50,451
Net
periodic post-retirement health care benefits costs (Note
43)	59,736	49,835
Insurance	31,426	32,369
Other post-retirement cost (Note
41b)	16,469	16,136
LSA
(Note 42)	11,188	12,453
Other employees’ benefits (Note
41c)	3,879	6,214
Others	1,636	1,788
Total	1,874,100	1,951,393

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

35. OPERATIONS, MAINTENANCE AND TELECOMMUNICATION SERVICES EXPENSES

	2010*	2011
Operations and maintenance	1,874,333	2,047,250
Radio frequency usage charges (Notes 44a.ii
and 48c.iii)	907,921	946,908
Concession fees and Universal Service
Obligation charges (Notes 44a.ii and 44a.iii)	284,241	289,921
Cost of phone, set top box, SIM and RUIM
cards	196,521	256,840
Electricity, gas and water	161,485	201,834
Insurance	94,570	111,722
Vehicles rental and supporting
facilities	59,084	68,697
Cost of IT services	41,340	49,634
Leased lines and CPE	100,654	38,967
Travelling	13,267	13,603
Others	4,185	44,401
Total	3,737,601	4,069,777

as restated, refer to Note 2p

Refer to Note 44 for details of related party transactions.

36. GENERAL AND ADMINISTRATIVE EXPENSES

	2010*	2011
Provision for doubtful accounts and inventory
obsolescence (Notes 6d and 7)	150,218	180,175
Collection expenses	181,063	75,869
Travelling	56,977	60,279
Training, education and
recruitment	40,699	36,439
Professional fees	38,825	36,063
Security and screening	57,635	31,748
Meetings	18,807	19,998
General and social contribution	18,244	18,767
Vehicle rental	11,053	16,813
Stationery and printing	14,590	11,970
Research and development	2,060	3,808
Others	9,168	19,542
Total	599,339	511,471

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

37. INTERCONNECTION EXPENSES

	2010*	2011
Domestic interconnection and
transit	426,830	529,841
International interconnection	243,390	276,260
Total	670,220	806,101

as restated, refer to Note 2p

Refer to Note 44 for details of related party transactions.

38. TAXATION

a. Claim for tax refund

	December 31, 2010	March 31, 2011
Subsidiaries
Corporate income tax	15,433	4,098
Income tax
Article 23 - Withholding tax on services
delivery	8,073	8,073
Value Added Tax (“VAT”)	109,550	109,515
	133,056	121,686

b. Prepaid taxes

	December 31, 2010	March 31, 2011
Subsidiaries
Corporate income tax	666,467	767,433
VAT	47,023	54,569
Income tax
Article 23 - Withholding tax on services
delivery	2,208	4,221
	715,698	826,223

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

38. TAXATION (continued)

c. Taxes payable

	December 31, 2010	March 31, 2011
The
Company
Income taxes
Article 4 (2) - Final tax	6,979	2,849
Article 21 - Individual income
tax	66,642	48,585
Article 23 - Withholding tax on services
delivery	11,391	12,105
Article 25 - Installment of corporate income
tax	32,385	43
Article 26 - Withholding tax on non-resident
income tax	707	1,153
Article 29 - Underpayment of corporate income
tax	9,225	134,768
VAT	13,434	68,704
	140,763	268,207
Subsidiaries
Income taxes
Article 4 (2) - Final tax	15,081	11,871
Article 21 - Individual income
tax	35,822	36,330
Article 22 - Withholding tax on goods
delivery and imports	2	2
Article 23 - Withholding tax on services
delivery	42,763	22,989
Article 25 - Installment of corporate income
tax	405,478	335,244
Article 26 - Withholding tax on non-resident
income tax	18,348	7,015
Article 29 - Underpayment of corporate income
tax	15,867	38,628
VAT	61,566	213,707
	594,927	665,786
	735,690	933,993

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

	2010*	2011
Current
The
Company	106,728	300,687
Subsidiaries	905,124	1,027,948
	1,011,852	1,328,635
Deferred
The
Company	279,430	12,136
Subsidiaries	68,938	(30,148	)
	348,368	(18,012	)
	1,360,220	1,310,623

as restated, refer to Note 2p

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

38. TAXATION (continued)

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).

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	2010* — 5,136,463		2011 — 5,134,254
Add back consolidation
eliminations	1,806,834		1,917,102
Consolidated income before tax and
eliminations	6,943,297		7,051,356
Less: income before tax of the
subsidiaries	(3,789,597	)	(3,910,724	)
Income before tax attributable to the
Company	3,153,700		3,140,632
Less: income subject to final
tax	(134,879	)	(193,702	)
	3,018,821		2,946,930
Tax calculated at applicable
rates	603,764		589,386
Non-taxable income	(361,454	)	(383,580	)
Non-deductible expenses	73,717		52,801
Deferred tax liabilities (assets) that
cannot be utilized - net	61,829		35,592
Corporate income tax expense	377,856		294,199
Income tax borne by Government	8,302		18,624
Total income tax expense of the
Company	386,158		312,823
Income tax expense of the
subsidiaries	974,062		997,800
Total consolidated income tax
expense	1,360,220		1,310,623

as restated, refer to Note 2p

The reconciliation between income before tax attributable to the Company and the estimated taxable income for three months period ended March 31, 2010 and 2011, are as follows:

| Income before tax attributable to the
Company | 2010* — 3,153,700 | | 2011 — 3,140,632 | |
| --- | --- | --- | --- | --- |
| Less: income subject to final
tax | (134,879 | ) | (193,702 | ) |
| | 3,018,821 | | 2,946,930 | |

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

38. TAXATION (continued)

e. (continued)

	2010*		2011
Temporary differences:
Amortization of intangible
assets	245,741		33,192
Depreciation of property, plant and
equipment	(4,525	)	44,481
Allowance for doubtful accounts	91,933		126,607
Accrued employees’ benefits	112,038		84,764
Finance leases	(15,222	)	(9,618	)
Foreign exchange (gain) loss on deferred
consideration for business combinations	(23,878	)	(268	)
Allowance for inventory
obsolescence	3,343		4,444
Amortization of land rights	(1,059	)	(1,184	)
Gain on sale of property, plant and
equipment	(9,518	)	(7,676	)
Trade receivables written-off	-		(64,491	)
Net periodic pension and other
post-retirement benefits costs	(140,122	)	18, 698
Payments of deferred consideration for
business combinations	(292,548	)	(105,960	)
Accrued early retirement
benefits	(1,028,639	)	-
Deferred installation fee	20,196		(20,292	)
Other provisions	6,539		14,588
Total temporary differences	(1,035,721	)	117,285
Permanent differences:
Net periodic post-retirement health care
benefit costs	57,459		49,834
Equity in net income of associates and
subsidiaries	(1,807,271	)	(1,917,902	)
Others	258,847		214,172
Total permanent differences	(1,490,965	)	(1,653,896	)
Taxable income	492,135		1,410,319
Current corporate income tax
expense	98,426		282,064
Income tax borne by Government (Note
28)	8,302		18,623
Total current income tax expense of the
Company	106,728		300,687
Current income tax expense of the
subsidiaries	905,124		1,027,948
Total current income tax
expense	1,011,852		1,328,635

as restated, refer to Note 2p

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

38. TAXATION (continued)

f. Tax assessment

(i) The Company

Directorate General of Tax (“DGT”) has audited the Company’s corporate income tax overpayment amounting to Rp.255 billion on 2008 fiscal year. On June 16, 2010, DGT issued an Overpaid Tax Assessment Letter (“Surat Ketetapan Pajak Lebih Bayar” or “SKPLB”) on corporate income tax amounting Rp.228 billion. The difference between SKPLB and the Company’s claim for tax refund has been charged to current year consolidated statement of comprehensive income amounting to Rp.27 billion.

The Company received an Underpaid Tax Assessment Letter (“Surat Ketetapan Pajak Kurang Bayar” or “SKPKB”) on VAT amounting to Rp.1.69 billion including a tax penalty of Rp.0.5 billion which has been net off with SKPLB of income taxes. Therefore, the Company received restitution from DGT amounting to Rp.226.5 billion. On July 9, 2010, the Company has received a refund from a claim of SKPLB on 2008 fiscal year corporate income tax.

As of the issuance date of the consolidated financial statements, the audit of withholding income tax for 2008 fiscal year is still in process.

(ii) Telkomsel

Pursuant to its appeal to the Tax Court on February 23, 2009 for rejected objection on VAT covering 2004 and 2005 fiscal years by the Tax Authorities of Rp.215 billion, Telkomsel recognized it as a claim for tax refund. Based on the Tax Court’s verdict in March 2010, Telkomsel’s appeal on VAT was accepted and Telkomsel subsequently received the refund of Rp.215 billion in June 2010 including interest of Rp.103 billion. On August 10, 2010, the Tax Authorities filed a judicial review to the Indonesian Supreme Court (“SC”) on the Tax Court’s verdict. On September 24, 2010, Telkomsel filed a contra-appeal to the SC. As of the issuance date of the consolidated financial statements, it is still in process.

On February 25, 2009, the Tax Authorities filed a judicial review to the SC for the Tax Court’s acceptance of Telkomsel’s appeal for a refund of withholding taxes covering 2002 fiscal year of Rp.115 billion. On April 3, 2009, Telkomsel filed a contra-appeal to the SC. As of the issuance date of the consolidated financial statements , it is still in process.

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

38. TAXATION (continued)

f. Tax assessment (continued)

(ii) Telkomsel (continued)

As a result of assessment, o n January 28 and February 12, 2010, Telkomsel received the refund for overpayment of the 2008 Corporate Income Tax of Rp.439 billion and Rp.4.2 billion, respectively.

On April 21, 2010, Tax Court notified Telkomsel that the Tax Authorities has filed an appeal to the SC on Tax Court’s verdict of cancellation of STP for underpayment of income tax article 25 for the period of December 2008. In May 2010, Telkomsel filed a contra-appeal to the SC. As of the issuance date of the consolidated financial statements , the appeal is still in process.

In 2010 , Telkomsel was assessed for underpayments of corporate income tax, withholding taxes and VAT, for 2006 fiscal year totaling Rp.212 billion (including penalty of Rp.69 billion). On December 23, 2010, Telkomsel filed an objection to the Tax Authorities for underpayments of withholding taxes and VAT amounting to Rp.116 billion (including penalty of Rp.38 billion) and recorded it as claim for tax refund. The accepted portions of Rp.50 billion was previously recognized and charged to 2008 consolidated statement of comprehensive income while the remaining portion of Rp.46 billion were charged to 2010 consolidated statement of comprehensive income. As of the issuance date of the consolidated financial statements , the objection is still in process.

In October and November, 2010, Telkomsel received STPs for underpayment of income tax article 25 for 2010 fiscal year of Rp.229 billion (including penalty of Rp.11 billion). The STPs were paid in November and December 2010. The principal payment of Rp.218 billion was considered as prepayment in calculating the 2010 corporate income tax which at the end resulted in an overpayment of Rp.600 billion. The overpayment and penalty are recognized as prepaid tax as of March 31, 2011. Through its letters in November 2010, Telkomsel requested the Tax Authorities to cancel the STPs. As of the issuance date of the consolidated financial statements , the cancellation request is still in process.

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

38. TAXATION (continued)

g. Deferred tax assets and liabilities

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

| | December 31, 2009* | | (Charged) credited to the consolidated statements — of
comprehensive income | | Acquisition — of
Ad Medika | | December 31, 2010 | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| The
Company | | | | | | | | |
| Deferred tax assets: | | | | | | | | |
| Deferred consideration for business
combinations | 335,409 | | (308,852 | ) | - | | 26,557 | |
| Allowance for doubtful accounts | 268,427 | | 18,172 | | - | | 286,599 | |
| Net
periodic pension and other post-retirement benefits costs | 160,310 | | (74,695 | ) | - | | 85,615 | |
| Accrued expenses | 36,239 | | (30,458 | ) | - | | 5,781 | |
| Early termination expenses | 257,160 | | (257,160 | ) | - | | - | |
| Accrued for employee benefits | 84,719 | | 1,277 | | - | | 85,996 | |
| Allowance for inventory
obsolescence | 17,672 | | 2,774 | | - | | 20,446 | |
| Deferred connection fee | 128,113 | | (21,821 | ) | - | | 106,292 | |
| Total deferred tax assets | 1,288,049 | | (670,763 | ) | - | | 617,286 | |
| Deferred tax liabilities: | | | | | | | | |
| Difference between accounting and tax
property, plant and equipment's net book value | (1,650,200 | ) | (243,024) | | - | | (1,893,224 | ) |
| Land
rights | (5,807 | ) | (1,088 | ) | - | | (6,895 | ) |
| Finance lease | (31,587) | | (7,707) | | - | | (39,294) | |
| Intangible assets | (271,202 | ) | 252,712 | | - | | (18,490 | ) |
| Total deferred tax liabilities | (1,958,796 | ) | 893 | | - | | (1,957,903) | |
| Deferred tax liabilities of the Company - net | (670,747 | ) | (669,870) | | - | | (1,340,617) | |
| Deferred tax liabilities of the subsidiaries - net | (2,549,763 | ) | (173,515 | ) | (9,919 | ) | (2,733,197 | ) |
| Total deferred tax liabilities -
net | (3,220,510 | ) | (843,385 | ) | (9,919 | ) | (4,073,814 | ) |
| Total deferred tax assets -
net | 94,953 | | (33,261 | ) | - | | 61,692 | |

*as restated, refer to Note 2p

	December 31, 2010*	(Charged) credited to the consolidatedstatements — of comprehensive income		March 31 ,2011
The
Company
Deferred tax assets:
Deferred consideration for business
combinations	26,557	(26,557	)	-
Allowance for doubtful accounts	286,599	26,472		313,071
Net
periodic pension and other post-retirement benefits costs	85,615	4,647		90,262
Accrued expenses	5,781	(97	)	5,684
Accrued for employee benefits	85,996	21,191		107,187
Allowance for inventory
obsolescence	20,446	1,173		21,619
Deferred connection fee	106,292	(5,073	)	101,219
Total deferred tax assets	617,286	21,756		639,042

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

38. TAXATION (continued)

g. Deferred tax assets and liabilities (continued)

| | December 31, 2010* | | (Charged) credited to the consolidated statements — of
comprehensive income | | March 31, 2011 | |
| --- | --- | --- | --- | --- | --- | --- |
| Deferred tax liabilities: | | | | | | |
| Difference between accounting and tax
property, plant and equipment's net book value | (1,893,224 | ) | (43,740 | ) | (1,936,964 | ) |
| Land rights | (6,895 | ) | (68 | ) | (6,963 | ) |
| Finance lease | (39,294 | ) | 1,619 | | (37,675 | ) |
| Intangible assets | (18,490 | ) | 8,298 | | (10,192 | ) |
| Total deferred tax liabilities | (1,957,903) | | (33,891 | ) | (1,991,794 | ) |
| Deferred tax liabilities of the Company -
net | (1,340,617 | ) | (12,135 | ) | (1,352,752 | ) |
| Deferred tax liabilities of the subsidiaries
- net | (2,733,197 | ) | 42,055 | | (2,691,142 | ) |
| Total deferred tax liabilities -
net | (4,073,814 | ) | 29,920 | | (4,043,894 | ) |
| Total deferred tax assets -
net | 61,692 | | (11,907 | ) | 49,785 | |

as restated, refer to Note 2p

Realization of the deferred tax assets is dependent upon future 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 the estimates.

h. Administration

Under the taxation laws of Indonesia, the Company and each subsidiary submit tax returns on the basis of self assessment. DGT may assess or amend taxes within ten years of the time the tax becomes due, or until the end of 2013, whichever is earlier. There are new rules applicable to fiscal year 2008 and subsequent years stipulating that the DGT may assess or amend taxes within five years of the time the tax becomes due.

On September 23, 2008, the President of the Republic Indonesia and MoJHR has signed and enacted the Tax Law No. 36/2008 concerning the Fourth Amendment of the Tax Law No. 7/1983 of Income Taxes. This regulation stipulates that the corporate tax rate will be a flat rate of 28% in 2009 (previously calculated using progressive tax rates ranging from 10% to 30%) and 25% in 2010. As of December 31, 2008 and 2009, the Company and its subsidiaries measured the effect of the change of enacted tax rate in calculating its deferred tax assets and liabilities depending on the timing of realization of its estimates.

Other than tariff changes, the Tax Law No. 36/2008 also stipulates a reduction of 5% from the top rate applicable for qualifying companies listed and for whose stock is traded on the IDX which meet the prescribed criteria that the stocks owned by the public are 40% or more of the total fully paid and traded stocks on the IDX, and such stocks are owned by at least 300 parties, each party owning less than 5% of the total paid-up stocks. These requirements should be fulfilled by the publicly-listed companies for a period of 6 months in one tax year. The Company has met all of the required criteria, therefore, for the purposes of calculating income tax expenses and liabilities for the financial reporting periods of December 31, 2010 and March 31, 2011, the Company considers a tax rate decrease of 5%.

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

38. TAXATION (continued)

h. Administration (continued)

No tax audit has been conducted for fiscal year 2003, 2005, 2006, 2007 and 2009 for the Company. A tax audit has been completed for all other fiscal years.

No tax audit has been conducted for fiscal year 2003, 2007 and 2009 for Telkomsel. A tax audit has been completed for all other fiscal years.

In 2008, DGT issued a sunset policy program in the form of an opportunity for the tax payer to make a revision in the prior years for underpaid Annual SPT, which will be granted free tax administration sanction and no assessment in the related fiscal year, unless the DGT find new evidence to perform the assessment and investigation. The Company and Telkomsel have utilized the sunset policy program through SPT revision. The Company settled the tax underpayments for fiscal years 2003, 2005 and 2006 amounting to Rp.1.9 billion, Rp.2.8 billion and Rp.2.4 billion, respectively, and Telkomsel for fiscal year 2003 amounting to Rp.1.9 billion. In addition, the Company received a certificate of tax investigation exemption from DGT for fiscal year 2007, 2008 and 2009, unless the Company files for overpaid Annual SPT then a tax assessment will be performed.

39. BASIC EARNINGS PER SHARE

Basic earnings per share is computed by dividing income for the period attributable to owners of the parent by the weighted average number of shares outstanding during the year, totaling 19,669,424,780 for three months period ended March 31, 2010 and 2011, respectively.

Basic earning per share amounting to Rp.141.65 and Rp.143.79 (full amount) for three months period ended March 31, 2010 and 2011, respectively.

The Company does not have potentially dilutive ordinary shares.

40. CASH DIVIDENDS AND GENERAL RESERVE

Pursuant to the AGM of Stockholders of the Company as stated by the minutes of which have been summarized by deed No. 17 dated June 11, 2010 of A. Partomuan Pohan, S.H., LLM., the stockholders approved the distribution of cash dividends for 2009 amounting to Rp.5,666,070 million or Rp.288.06 per share (of which Rp.524,190 million or Rp.26.65 per share was distributed as an interim cash dividend in November 2009).

On December 1, 2010, the Company decided on the interim distribution of cash dividend for 2010 amounting to Rp.526,157 million or Rp.26.75 per share to its stockholders.

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

41. PENSION AND OTHER POST-RETIREMENT BENEFITS

	December 31, 2010		March 31, 2011
Accrued pension and other post-retirement
benefit costs
Pension
The Company	61,044		69,878
Telkomsel	147,889		175,477
Accrued pension costs	208,933		245,355
Other post-retirement benefits	240,627		250,742
Obligation under Labor Law	87,430		92,798
Accrued pension and other post-retirement
benefit costs	536,990		588,895
Prepaid pension benefit
costs	988		932
Net periodic pension costs
(benefits)
The Company	430,170		96,053
Telkomsel	74,966		29,365
Infomedia	(524	)	56
Net periodic pension costs (Note 34)	504,612		125,474
Other post-retirement cost (Note 34)	65,876		16,136
Other employee benefits (Note 34)	22,920		6,214

a. Pension

The Company

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 Company’s contributions to the pension fund for the years ended December 31, 2010 and three months period ended March 31, 2011 amounted to Rp.485,254 million and Rp.48,089 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 (“Dana Pensiun Lembaga Keuangan” or “DPLK”). The Company’s contribution to DPLK is determined based on certain percentage of the participants’ salaries and amounted to Rp.4,396 million and Rp.1,238 million for the years ended December 31, 2010 and three months period ended March 31, 2011 , respectively.

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

41. PENSION AND OTHER POST-RETIREMENT BENEFITS (continued)

a. Pension (continued)

The Company (continued)

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 Company’s consolidated statement of financial position s as of December 31, 2010 and March 31, 2011, for its defined benefit pension plan:

	December 31, 2010		March 31, 2011
Change in projected benefits
obligation
Projected benefits obligation at beginning of
year	11,753,439		14,019,578
Service costs	330,734		98,946
Interest costs	1,199,971		324,759
Plan
participants' contributions	42,371		11,302
Actuarial (gains) losses	1,174,236		(1,751,524	)
Expected benefits paid	(916,148	)	(172,769	)
Benefits changed	434,975		-
Projected benefits obligation at end of
period	14,019,578		12,530,292
Change in plan assets
Fair
value of plan assets at beginning of year	12,300,181		15,097,688
Expected return on plan assets	1,286,718		360,248
Employer’s contributions	485,254		48,089
Plan participants'
contributions	42,371		11,302
Actuarial (losses) gains	1,603,747		(1,739,159	)
Expected benefits paid	(620,583	)	(145,642	)
Fair
value of plan assets at end of period	15,097,688		13,632,526
Funded status	1,078,110		1,102,234
Unrecognized prior service
costs	1,399,299		1,331,365
Unrecognized net actuarial
gains	(2,538,453	)	(2,503,477	)
Accrued pension benefit
costs	(61,044	)	(69,878	)

In 2007, the Company provides pension benefit based on uniformulation for both participants prior to and from April 20, 1992 effective for employees retiring beginning February 1, 2009. The change in benefit had increased the Company’s liabilities by Rp.698,583 million, which is amortized over 9.9 years until 2016. In 2010, the Company replaced the uniformulation with Manfaat Pensiun Sekaligus (“MPS”). MPS is given to those employees reaching retirement age, death or disabled starting from February 1, 2009. The change in benefit had increased the Company’s liabilities by Rp.434,975 million, which is amortized over 8.63 years until 2018.

The actual return on plan assets was Rp. 2,890,465 million and Rp. 151,760 million for the years ended December 31, 2010 and three months period ended March 31, 2011, respectively.

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

41. PENSION AND OTHER POST-RETIREMENT BENEFITS (continued)

a. Pension (continued)

The Company (continued)

The movement of the accrued pension benefits costs for the years ended December 31, 2010 and three months period ended March 31, 2011, is as follows:

| Accrued pension benefits costs at
beginning of year | December 31, 2010 — 410,209 | | March 31, 2011 — 61,044 | |
| --- | --- | --- | --- | --- |
| Net
periodic pension cost less amounts charged to
subsidiaries | 430,170 | | 96,053 | |
| Amounts charged to subsidiaries under
contractual agreements | 1,484 | | 362 | |
| Employer’s contributions | (780,819 | ) | (48,089 | ) |
| Benefits paid by the Company | - | | (39,492 | ) |
| Accrued pension benefits costs at end of
period | 61,044 | | 69,878 | |

As of December 31, 2010 and March 31, 2011, plan assets consisted mainly of Indonesian Government bonds and corporate bonds. As of December 31, 2010, plan assets included Series B shares and bonds issued by the Company with fair value totaling Rp.268,801 million and Rp.155,700 million, respectively, representing 1.78% and 1.03% of total assets of Dapen as of December 31, 2010, respectively. As of March 31, 2011, plan assets included Series B shares and bonds issued by the Company with fair value totaling Rp.257,587 million and Rp.151,950 million, respectively, representing 1.89% and 1.11% of total assets of Dapen as of March 31, 2011, respectively.

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, 2009 and 2010, with reports dated March 30, 2010 and March 15, 2011, respectively, by PT Towers Watson Purbajaga (“TWP”) (formerly PT Watson Wyatt Purbajaga), an independent actuary in association with Towers Watson (“TW”) (formerly Watson Wyatt Worldwide). The principal actuarial assumptions used by the independent actuary as of December 31, 2009 and 2010, are as follows:

	December 31, 2010	March 31, 2011
Discount rate	10.75%	9.5%
Expected long-term return on plan
assets	10.5%	9.7%
Rate
of compensation increases	8%	8%

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

41. PENSION AND OTHER POST-RETIREMENT BENEFITS (continued)

a. Pension (continued)

The Company (continued)

The components of net periodic pension costs are as follows:

Service costs	December 31, 2010 — 330,734		March 31, 2011 — 98,946
Interest costs	1,199,971		324,759
Expected return on plan assets	(1,286,718	)	(360,248	)
Amortization of prior service
costs	312,074		67,934
Recognized actuarial gain	(124,407	)	(34,976	)
Net
periodic pension costs	431,654		96,415
Amount charged to subsidiaries under
contractual agreements	(1,484	)	(362	)
Total net periodic pension costs less amounts
charged to subsidiaries (Note 34)	430,170		96,053

Telkomsel

Telkomsel provides a defined benefit pension plan to its employees. Under this plan, employees are entitled to pension benefits based on their latest basic salary or take-home pay and the number of years of their service. PT Asuransi Jiwasraya (“Jiwasraya”), a state-owned life insurance company, manages the plan under an annuity insurance contract. Until 2004, the employees contributed 5% of their monthly salaries to the plan and Telkomsel contributed any remaining amount required to fund the plan. Starting 2005, the entire contributions are fully made by Telkomsel.

The following table reconciles the unfunded status of the plans with the amounts included in the consolidated statement of financial position s as of December 31, 2010 and March 31, 2011:

Projected benefits obligation	December 31, 2010 — (662,802	)	March 31, 2011 — (694,538	)
Fair
value of plan assets	245,985		247,762
Unfunded status	(416,817	)	(446,776	)
Unrecognized items in the consolidated statement of financial position :
Unrecognized prior service
costs	639		611
Unrecognized net actuarial
losses	268,289		270,688
Accrued pension benefits
costs	(147,889	)	(175,477	)

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

41. PENSION AND OTHER POST-RETIREMENT BENEFITS (continued)

a. Pension (continued)

Telkomsel (continued)

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

Service costs	December 31, 2010 — 43,507		March 31, 2011 — 16,827
Interest costs	41,914		14,908
Expected return on plan assets	(16,156	)	(5,530	)
Amortization of past service
costs	115		29
Recognized actuarial losses	5,586		3,131
Net
periodic pension costs (Note 34)	74,966		29,365

The net periodic pension cost for the pension plan was calculated based on the measurement date as of December 31, 2009 and 2010, with reports dated February 8, 2010 and February 23, 2011, respectively, by TWP, an independent actuary in association with TW. The principal actuarial assumptions used by the independent actuary based on the measurement date as of December 31, 2009 and 2010 for each of the year, are as follows:

	December 31, 2010	March 31, 2011
Discount rate	10.5%	9%
Expected long-term return on plan
assets	10.5%	9%
Rate
of compensation increases	8%	8%

Infomedia

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 statement of financial position s as of December 31, 2010 and March 31, 2011, are as follows:

Projected benefits obligation	December 31, 2010 — (8,208	March 31, 2011 — (8,528
Fair
value of plan assets	9,196	9,460
Funded status	988	932
Prepaid pension benefits costs	988	932

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

41. PENSION AND OTHER POST-RETIREMENT BENEFITS (continued)

a. Pension (continued)

Infomedia (continued)

The net periodic pension costs (benefits) of Infomedia amounted to (Rp.524) million and Rp.56 million for the years ended December 31, 2010 and for three months period ended March 31, 2011, respectively (Note 34).

b. Other post-retirement benefits

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).

The movement of the other post-retirement benefits for the years ended December 31, 2010 and three months period ended March 31, 2011, are as follows:

| Accrued other post-retirement benefits costs
at beginning of year | December 31, 2010 — 209,183 | | March 31, 2011 — 240,627 | |
| --- | --- | --- | --- | --- |
| Other post-retirement benefits
costs | 65,876 | | 16,136 | |
| Other post-retirement benefits
paid | (34,432 | ) | (6,021 | ) |
| Total accrued other post-retirement benefits
costs at end of period | 240,627 | | 250,742 | |

The components of the net periodic other post-retirement benefits costs for the years ended December 31, 2010 and three months period ended March 31, 2011, are as follows:

	December 31, 2010	March 31, 2011
Service costs	18,690	2,234
Interest costs	35,900	9,205
Amortization of past service
costs	6,826	1,707
Recognized actuarial losses	4,460	2,990
Total net periodic other post-retirement
benefits costs (Note 34)	65,876	16,136

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

41. PENSION AND OTHER POST-RETIREMENT BENEFITS (continued)

c. Obligation under Labor Law

Under Law No. 13/2003 concerning labor regulation, the Company and its subsidiaries are required to provide a minimum pension benefit, if not covered yet by the sponsored pension plans, to their employees upon retirement age. The total related obligation recognized as of December 31, 2010 and March 31, 2011 amounted to Rp.87,430 million and Rp.92,798 million, respectively. The related employees’ benefits cost charged to expense amounted to Rp.22,920 million and Rp.6,214 million for the years ended December 31, 2010 and three months period ended March 31, 2011, respectively (Note 34).

42. LONG SERVICE AWARDS (“LSA”)

Telkomsel provides certain cash awards or certain number of days leave benefits to its employees based on the employees’ length of service requirements, including LSA and LSL. LSA are either paid at the time the employees reach the anniversary dates during employment, or at the time of termination. LSL are either certain number of days leave benefit or cash, subject to approval by management, provided to employees who met the requisite number of years of service and with a certain minimum age.

The obligation with respect to these awards was determined based on an actuarial valuation using the Projected Unit Credit method, and amounted to Rp.242,149 million and Rp.242,177 million as of December 31, 2010 and March 31, 2011 , respectively (Note 44). The related benefits costs charged to expense amounted to Rp.78,323 million and Rp.12,453 million for the years ended December 31, 2010 and three months period ended March 31, 2011 , respectively (Note 34).

43. POST-RETIREMENT HEALTH CARE BENEFITS

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

The defined contribution post retirement health care plan is provided to employees hired with permanent status on or after November 1, 1995 or employees with terms of service less than 20 years on the time of retirement. The Company’s contribution amounted to Rp.20,117 million and Rp.19,047 million for the years ended December 31, 2010 and three months period ended March 31, 2011, respectively.

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 Company’s consolidated statement of financial position s as of December 31, 2010 and March 31, 2011 :

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

43. POST-RETIREMENT HEALTH CARE BENEFITS (continued)

	December 31, 2010		March 31, 2011
Change in projected benefits
obligation
Projected benefits obligation at beginning of
year	7,165,974		8,741,111
Service costs	83,921		10,656
Interest costs	744,551		204,473
Actuarial (gains) losses	1,034,589		(370,466	)
Expected post-retirement health care
paid	(287,924	)	(65,869	)
Projected benefits obligation at end of
year	8,741,111		8,519,905
Change in plan assets
Fair
value of plan assets at beginning of year	6,022,263		8,005,054
Expected return on plan assets	589,530		165,294
Employer’s contributions	990,688		108,000
Actuarial (losses) gains	690,497		(370,466	)
Expected post-retirement health care
paid	(287,924	)	(65,869	)
Fair
value of plan assets at end of year	8,005,054		7,842,013
Funded status	(736,057	)	(677,892	)
Unrecognized net actuarial
gains	(313,973	)	(313,973	)
Accrued post-retirement health care benefits
costs	(1,050,030	)	(991,865	)

The actual return on plan assets was Rp.1,280,027 million and Rp.150,110 million for the years ended December 31, 2010 and three months period ended March 31, 2011 , respectively.

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

Service costs	December 31, 2010 — 83,921		March 31, 2011 — 10,656
Interest costs	744,551		204,473
Expected return on plan assets	(589,530	)	(165,294	)
Net
periodic post-retirement benefits costs	238,942		49,835
Amounts charged to
subsidiaries under contractual
agreements	(688	)	-
Total net periodic post-retirement health
care benefits costs less amounts charged to
subsidiaries (Note 34)	238,254		49,835

As of December 31, 2010 and March 31, 2011 , plan assets included the Company’s Series B shares with total fair value of Rp. 34,419 million and Rp. 41,186 million, respectively.

Table of Contents

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

43. POST-RETIREMENT HEALTH CARE BENEFITS (continued)

The movements of the accrued post-retirement health care benefits costs for the years ended December 31, 2010 and three months period ended March 31, 2011 , are as follows:

| Accrued post-retirement health care benefits
costs at beginning of year | December 31, 2010 — 1,801,776 | | March 31, 2011 — 1,050,030 | |
| --- | --- | --- | --- | --- |
| Net
periodic post-retirement health care benefits costs less amounts charged
to subsidiaries (Note 34) | 238,254 | | 49,835 | |
| Amounts charged to subsidiaries under
contractual agreements | 688 | | - | |
| Employer’s contributions | (990,688 | ) | (108,000 | ) |
| Accrued post-retirement health care benefits
costs at end of year | 1,050,030 | | 991,865 | |

The actuarial valuation for the post-retirement health care benefits was performed based on the measurement date as of December 31, 2009 and 2010, with reports dated March 30, 2010 and March 15, 2011, respectively, by TWP, an independent actuary in association with TW. The principal actuarial assumptions used by the independent actuary as of December 31, 2009 and 2010, are as follows:

	December 31, 2010	March 31, 2011
Discount rate	10.75%	9.5%
Expected long-term return on plan
assets	9.25%	8.21%
Health care costs trend rate assumed for next
year	10%	8%
Ultimate health care costs trend
rate	8%	8%
Year
that the rate reaches the ultimate trend rate	2012	2011

44. RELATED PARTY TRANSACTIONS

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

The following are significant agreements/transactions with related parties:

a. Government

i. The Company obtained two-step loans from the Government, the Company's majority stockholder (Note 20).

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PERUSAHAAN PERSEROAN (PERSERO)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

44. RELATED PARTY TRANSACTIONS (continued)

a. Government (continued)

i. (continued)

Interest expense for two-step loans amounted to Rp.40,850 million and Rp.37,993 million for three months period ended March 31, 2010 and 2011, respectively. Interest expense for two-step loans represent 8.1% and 9.4% 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 of the Republic of Indonesia.

Concession fees amounted to Rp.82,430 million and Rp.85,470 million for three months period ended March 31, 2010 and 2011, respectively (Note 35), representing 0.7% of the total operating expenses for each period. Radio frequency usage charges amounted to Rp.907,921 million and Rp.946,908 million for three months period ended March 31, 2010 and 2011, respectively (Note 35), representing 8.2% of the total operating expenses for each period.

Telkomsel paid an up-front fee for the 3G license amounting to Rp.756,000 million and recognized an intangible asset (Note 13.iii).

iii. Starting 2005, the Company and its subsidiaries pay USO charges to the Ministry of Communications 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.201,811 million and Rp.204,451 million for three months period ended March 31, 2010 and 2011, respectively (Note 35), representing 1.8% 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.11,460 million and Rp.11,538 million for three months period ended March 31, 2010 and 2011, respectively, representing 0.1% of the total operating expenses for each period.

ii. The Company and its subsidiaries provide salaries and facilities to support the operational duties of their Board of Directors. The total of such benefits amounted to Rp.31,220 million and Rp.37,818 million for three months period ended March 31, 2010 and 2011, respectively, representing 0.3% of the total operating expenses for each period.

c. Indosat

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

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

44. RELATED PARTY TRANSACTIONS (continued)

c. Indosat (continued)

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 Company’s fixed line network (Public Switched Telephone Network or “PSTN”) and Indosat’s GSM mobile cellular telecommunications 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 Indosat's GSM mobile cellular telecommunications network with the Company's PSTN, enabling each party’s customers to make domestic calls between Indosat’s GSM mobile network and the Company’s fixed line network and allowing Indosat’s mobile customers to access the Company’s IDD service by dialing “007”.

The Company has been handling customer billings and collections for Indosat. Indosat is gradually taking over the activities and performing its own direct billing and collection. The Company receives compensation from Indosat computed at 1% of the collections made by the Company beginning January 1, 1995, plus the billing process expenses which are fixed at a certain amount per record. On December 11, 2008, the Company and Indosat agreed to implement IDD service charge tariff, the tariff already taken into account the compensation of its billing and collection. The agreement is valid and effective starting on January to December 2011, and can be applied until a new Minutes of Agreement available.

On December 28, 2006, the Company and Indosat signed amendments to the interconnection agreements for the fixed line networks (local, SLJJ and international) and mobile network for the implementation of the cost-based tariff obligations under the MoCI Regulations No. 8/2006 (Note 47). 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. Telkomsel’s GSM mobile cellular telecommunications network is interconnected with PT Indosat’s international gateway exchanges to facilitate outgoing and incoming international calls.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

44. RELATED PARTY TRANSACTIONS (continued)

c. Indosat (continued)

ii. Telkomsel’s and Indosat’s 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 party’s 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 earned interconnection income from Indosat of Rp.257,461 million and Rp.202,703 million for three months period ended March 31, 2010 and 2011, respectively, representing 1.6% and 1.2% of the total operating revenues for each period.

The Company and its subsidiaries were charged interconnection charges from Indosat of Rp.225,474 million and Rp.194,464 million for three months period ended March 31, 2010 and 2011, respectively, representing 2.0% and 1.7% of the total operating expenses for each period.

Telkomsel also has an agreement with Indosat on the usage of Indosat's 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. In 2009, the agreement was renewed for 5 (five) years through April 1, 2014. The charges for the usage of the facilities amounted to Rp.5,561 million and Rp.844 million for three months period ended March 31, 2010 and 2011, respectively, representing 0.05% and 0.01% of the total operating expenses for each period.

Other agreements between Telkomsel and Indosat are as follows:

i. Agreement on Construction and Maintenance for Jakarta-Surabaya Cable System ("J-S Cable System")

On October 10, 1996, Telkomsel, Lintasarta, PT Satelit Palapa Indonesia (“Satelindo”) and Indosat (the “Parties”) entered into an agreement on the construction and maintenance of the J-S Cable System and is valid for 25 years. 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 an agreed formula.

Telkomsel's share of the operating and maintenance cost of the cable system amounted to Rp.106 million and Rp.5 million for three months period ended March 31, 2010 and 2011, respectively.

ii. IRU Agreement

On September 21, 2000, Telkomsel entered into agreement with Indosat on the use of SEA-ME-WE 3 and Tail Link in Jakarta and Medan. In accordance with the agreement, Telkomsel was granted an IRU for certain capacity of the Link starting from September 21, 2000 until September 20, 2015, in return for an up-front payment of US$2.7 million (Note 12). In addition to the up-front payment, Telkomsel is also charged annual operating and maintenance costs amounting to US$0.1 million.

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P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

44. RELATED PARTY TRANSACTIONS (continued)

c. Indosat (continued)

ii. IRU Agreement (continued)

On December 8, 2010, the agreement was terminated with no refund of upfront payment.

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 right to use of 30 years. 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 December 31, 2010 and March 31, 2011, the prepaid portion is shown in the consolidated statement of financial position s as “Advances from customers and suppliers”.

The Company provides leased lines to Indosat and its subsidiaries, namely Indosat Mega Media, Lintasarta and PT Sistelindo Mitralintas. 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.34,671 million and Rp.31,682 million for three months period ended March 31, 2010 and 2011, respectively, representing 0.2% of the total operating revenues for each period.

Lintasarta utilizes the Company’s satellite transponders or frequency channels. Revenues earned from these transactions amounted to Rp.8,761 million and Rp.5,891 million for three months period ended March 31, 2010 and 2011, respectively, representing 0.05% and 0.04% of total operating revenues for each period.

Telkomsel has an agreement with Lintasarta (valid until October 31, 2010, however, the current usage of the system is temporarily based on the agreement) and PT Artajasa Pembayaran Elektronis (“Artajasa”) (valid until May 2011) (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.9,574 million and Rp.7,737 million for three months period ended March 31, 2010 and 2011, respectively, representing 0.1% of the total operating expenses for each period.

d. Others

Transactions with all BUMN are considered as related parties transactions:

(i) The Company provides telecommunication services to substantially all Government Agencies in Indonesia for which transactions are treated as that of third parties customers.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

44. RELATED PARTY TRANSACTIONS (continued)

d. Others (continued)

(ii) The Company has entered into agreements with Government Agencies and associated companies, namely CSM, Patrakom and PSN for the utilization of the Company's satellite transponders or frequency channels. Revenues earned from these transactions amounted to Rp.31,187 million and Rp.29,136 million for three months period ended March 31, 2010 and 2011, respectively, representing 0.2% of the total operating revenues for each period.

(iii) The Company provides leased lines to associated companies, namely CSM, Patrakom, PSN and Gratika. 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.11,275 million and Rp.9,222 million for three months period ended March 31, 2010 and 2011, respectively, representing 0.1% of the total operating revenues for each period.

(iv) The Company purchases property, plant 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 Kopegtel. Purchases made from these related parties amounted to Rp.14,602 million and Rp.30,150 million for three months period ended March 31, 2010 and 2011, respectively, representing 0.3% and 1.1% 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 three months period ended March 31, 2010 and 2011 amounted to Rp.26,055 million and Rp.22,014 million, respectively, representing 0.6% and 0.8% of the total fixed assets purchased in each period.

(vi) Telkomsel has an agreement with PSN for the lease of PSN’s transmission link. Based on the agreement, which was made on March 14, 2001, the minimum lease period is 2 years since the operation of the transmission link and is extendable subject to agreement by both parties. The agreement was extended until March 13, 2011. The lease charges amounted to Rp.45,058 million and Rp.43,175 million for three months period ended March 31, 2010 and 2011, 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.95,327 million and Rp.112,594 million for three months period ended March 31, 2010 and 2011, respectively, representing 1.0% and 0.9% of the total operating expenses for each period.

(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.5,597,554 million and Rp.9,122,587 million as of December 31, 2009 and 2010, respectively, representing 5.8% and 9.1% of the total assets. Interest income recognized for three months period ended March 31, 2010 and 2011 amounted to Rp.23,852 million and Rp.63,753 million, representing 29.9% and 53.1% of the total interest income for each period.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

44. RELATED PARTY TRANSACTIONS (continued)

d. Others (continued)

(ix) The Company and its subsidiaries obtained loans from state-owned banks. Interest expense on these loans for three months period ended March 31, 2010 and 2011 amounted to Rp.238,455 million and Rp.161,841 million, respectively, representing 47.3% and 39.9% 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.97,347 million and Rp.125,823 million for three months period ended March 31, 2010 and 2011, respectively, representing 0.9% and 1.1% of the total operating expenses for each period.

(xi) The Company and its subsidiaries earned interconnection revenues from PSN, with a total of Rp.1,271 million and Rp.1,092 million for three months period ended March 31, 2010 and 2011, respectively, representing less than 0.01% and 0.01% of the total operating revenues for each period. And incurred interconnection expenses from PSN, with a total of Rp.1,306 million and Rp.1,223 million for three months period ended March 31, 2010 and 2011, respectively, representing less than 0.01% and 0.01% of the total operating expenses for each period.

(xii) The Company has RSA with Kopegtel. Kopegtel’s share in revenues from these arrangements amounted to Rp.166 million and Rp.193 million for three months period ended March 31, 2010 and 2011, respectively, representing less than 0.01% 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.50,952 million and Rp.47,249 million for three months period ended March 31, 2010 and 2011, respectively, representing 0.5% and 0.4% of the total operating expenses for each period.

(xiv) Koperasi Pegawai Telkomsel (“Kisel”) is a cooperation that was established by Telkomsel’s employees to engage in car rental services, printing and distribution of customer bills, collection and other services principally for the benefit of Telkomsel. For these services, Kisel charged Telkomsel Rp.168,720 million and Rp.127,978 million for three months period ended March 31, 2010 and 2011, respectively, representing 1.5% and 1.1% of the total operating expenses for each period. 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.539,135 million and Rp.513,810 million for three months period ended March 31, 2010 and 2011, respectively, representing 3.3% and 3.1% of the total operating revenues for each period.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

44. RELATED PARTY TRANSACTIONS (continued)

d. Others (continued)

(xv) Telkomsel has procurement agreements with Gratika, a subsidiary of Dapen, for installation and maintenance of equipment. The agreement was valid initially from February 14, 2006 to December 31, 2009 and has been extended until March 31, 2011. As of the issuance date of the consolidated financial statements , the agreement is in the process of being extended. Total procurement for installations of equipment amounted to Rp.7,743 million and Rp.4,658 million for three months period ended March 31, 2010 and 2011, respectively, representing 0.18% and 0.17% of the total acquisition of fixed assets for each period; and for maintenance of equipment amounted to Rp.7,000 million and Rp.2,538 million for three months period ended March 31, 2010 and 2011, respectively, representing 0.06% and 0.02% of the total operating expenses for each period.

Presented below are balances of accounts with related parties:

		December 31, 2010 — Amount	% of total assets	March 31, 2011 — Amount	% of total assets
a.	Cash and cash equivalents (Note 5)	7,443,452	7.46	8,688,507	8.63
b.	Temporary investments	300,977	0.30	292,250	0.29
c.	Trade receivables - net (Note 6)	780,043	0.78	1,124,366	1.12
d.	Other receivables
	State-owned banks (interest)	13,978	0.01	9,312	0.01
	Patrakom	1,888	0.00	1,888	0.00
	Government Agencies	784	0.00	1,299	0.00
	Kopegtel	32	0.00	490	0.00
	Other	305	0.00	233	0.00
	Total	16,987	0.01	13,222	0.01
e.	Advances and prepaid expenses (Note 8)	2,401,386	2.41	1,877,604	1.86
f.	Other current assets (Note 9)
	BNI	593	0.00	593	0.00
	BRI	347	0.00	347	0.00
	Bank Mandiri	235	0.00	235	0.00
	Total	1,175	0.00	1,175	0.00
g.	Prepaid pension benefit cost (Note 41)	988	0.00	932	0.00
h.	Advances and other non-current assets (Note 12)
	BNI	94,544	0.09	94,481	0.09
	Bank Mandiri	5,020	0.01	5,165	0.01
	Perusahaan Umum Percetakan Uang Republik
Indonesia (Peruri)	813	0.00	813	0.00
	Total	100,377	0.10	100,459	0.10
i.	Escrow accounts (Note 14)	41,552	0.04	40,197	0.04

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

44. RELATED PARTY TRANSACTIONS (continued)

| | | December 31, 2010 — Amount | % of
total liabilities | March 31, 2011 — Amount | % of
total liabilities |
| --- | --- | --- | --- | --- | --- |
| j. | Trade payables (Note 15) | | | | |
| | Government Agencies | 400,238 | 0.92 | 345,778 | 0.86 |
| | Kopegtel | 140,311 | 0.32 | 86,752 | 0.22 |
| | State-owned enterprises | 287,433 | 0.67 | 68,319 | 0.17 |
| | Yakes | 60,562 | 0.14 | 51,918 | 0.13 |
| | Indosat | 62,369 | 0.14 | 45,731 | 0.11 |
| | SPM | 12,446 | 0.03 | 8,374 | 0.02 |
| | Gratika | 33,515 | 0.08 | 5,603 | 0.01 |
| | INTI | 13,917 | 0.03 | 1,412 | 0.00 |
| | Patrakom | 837 | 0.00 | 778 | 0.00 |
| | PSN | 551 | 0.00 | 106 | 0.00 |
| | Others | 141,695 | 0.33 | 88,147 | 0.22 |
| | Total | 1,153,874 | 2.66 | 702,918 | 1.74 |
| k. | Accrued expenses (Note 16) | | | | |
| | Employees | 894,733 | 2.07 | 1,059,830 | 2.62 |
| | Government Agencies and state-owned
banks | 65,522 | 0.15 | 54,262 | 0.13 |
| | PT Jaminan Sosial Tenaga Kerja
(Persero) | 22,649 | 0.05 | 22,633 | 0.06 |
| | Total | 982,904 | 2.27 | 1,136,725 | 2.81 |
| l. | Short-term bank loans (Note 18) | | | | |
| | BSM | 4,000 | 0.01 | 10,000 | 0.02 |
| m. | Accrued LSA (Note 42) | 242,149 | 0.56 | 242,177 | 0.60 |
| n. | Accrued post-retirement health care benefits (Note 43) | 1,050,030 | 2.42 | 991,865 | 2.45 |
| o. | Accrued pension and other post-retirement
benefits costs (Note 41) | 536,990 | 1.24 | 588,895 | 1,46 |
| p. | Two-step loans (Note 20) | 3,136,666 | 7.24 | 2,916,844 | 7.21 |
| q. | Bonds and notes (Note 21) | 100,750 | 0.23 | 97,700 | 0.24 |
| r. | Long-term bank loans (Note 22) | | | | |
| | BNI | 3,748,871 | 8.65 | 2,903,154 | 7.17 |
| | Bank Mandiri | 3,073,387 | 7.09 | 2,591,337 | 6.41 |
| | BRI | 2,197,000 | 5.07 | 1,720,500 | 4.25 |
| | BTN | 7,084 | 0.02 | 6,601 | 0.02 |
| | Total | 9,026,342 | 20.83 | 7,221,592 | 17.85 |

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

45. 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 Company’s revenues are presented as “Others”, comprising of information technology services, 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.

	2010* — Fixed wireline		Fixed wireless		Cellular		Others		Total before elimination		Elimination		Total consolidated
Segment results
External operating revenues	5,199,597		788,272		10,335,513		32,954		16,356,336		-		16,356,336
Inter-segment operating
revenues	1,248,212		9,345		449,891		92,172		1,799,620		(1,799,620	)	-
Total segment revenues	6,447,809		797,617		10,785,404		125,126		18,155,956		(1,799,620	)	16,356,336
External operating expenses	(4,336,411	)	(785,547	)	(5,744,428	)	(170,422	)	(11,036,808	)	-		(11,036,808	)
Inter-segment operating
expenses	(856,917	)	-		(1,001,383	)	(8,274	)	(1,866,574	)	1,866,574		-
Segment expenses	(5,193,328	)	(785,547	)	(6,745,811	)	(178,696	)	(12,903,382	)	1,866,574		(11,036,808	)
Segment results	1,254,481		12,070		4,039,593		(53,570	)	5,252,574		66,954		5,319,528
Interest income													79,674
Equity in net income of associated
companies													437
Interest expense													(504,235	)
Gain on foreign exchange - net													164,054
Other income – net													77,005
Income tax expense													(1,360,220	)
Income for the period													3,776,243
Foreign currency translation													(169	)
Change in fair value of available-for-sale
financial assets - net of tax													16,977
Total comprehensive income for the
period													3,793,051
Other information
Segment assets	33,672,370		5,484,502		58,877,194		805,823		98,839,889		(2,523,229	)	96,316,660
Investments in associates	135,535		-		20,359		-		155,894		-		155,894
Total consolidated assets													96,442,960
Total consolidated liabilities	(18,689,128	)	(1,676,064	)	(25,014,602	)	(328,568	)	(45,708,362	)	2,523,229		(43,185,133	)
Capital expenditures	(574,833	)	(746	)	(2,071,416	)	(5,038	)	(2,652,033	)	-		(2,652,033	)
Depreciation and amortization	(1,165,535	)	(185,541	)	(2,380,364	)	(7,650	)	(3,739,090	)	-		(3,739,090	)
Other non-cash expenses	(118,142	)	-		(29,147	)	(2,929	)	(150,218	)	-		(150,218	)
* as restated, refer to Note 2p

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

45. SEGMENT INFORMATION (continued)

	2011 — Fixed wireline		Fixed wireless		Cellular		Others		Total before elimination		Elimination		Total consolidated
Segment results
External operating revenues	5,211,414		592,251		10,844,783		57,312		16,705,760		-		16,705,760
Inter-segment operating
revenues	1,545,080		(33,643	)	467,999		206,139		2,185,575		(2,185,575	)	-
Total segment revenues	6,756,494		558,608		11,312,782		263,451		18,891,335		(2,185,575	)	16,705,760
External operating expenses	(4,110,650	)	(774,141	)	(6,369,789	)	(257,177	)	(11,511,757	)	-		(11,511,757	)
Inter-segment operating
expenses	(1,114,118	)	24,534		(1,122,196	)	(13,752	)	(2,225,532	)	2,225,532		-
Segment expenses	(5,224,768	)	(749,607	)	(7,491,985	)	(270,929	)	(13,737,289	)	2,225,532		(11,511,757	)
Segment results	1,531,726		(190,999	)	3,820,797		(7,478	)	5,154,046		39,957		5,194,003
Interest income													120,140
Equity in net loss of associated
companies													(1,136	)
Interest expense													(405,239	)
Gain on foreign exchange - net													152,428
Other income – net													74,058
Income tax expense													(1,310,623	)
Income for the period													3,823,631
Foreign currency translation													(4,511	)
Change in fair value of available-for-sale
financial assets - net of tax													(3,024	)
Total comprehensive income for the
period													3,816,096
Other information
Segment assets	38,469,370		4,990,956		58,635,077		984,541		103,079,944		(2,645,937	)	100,434,007
Investments in associates	231,112		-		20,359		-		251,471		-		251,471
Total consolidated assets													100,685,478
Total consolidated liabilities	(20,360,996	)	(721,194	)	(21,613,860	)	(403,876	)	(43,099,926	)	2,645,327		(40,454,599	)
Capital expenditures	(820,731	)	-		(1,348,857	)	(15,473	)	(2,185,061	)	-		(2,185,061	)
Depreciation and amortization	(811,695	)	(186,108	)	(2,440,303	)	(9,488	)	(3,447,594	)	-		(3,447,594	)
Other non-cash expenses	(125,906	)	(6,544	)	(46,259	)	(1,466	)	(180,175	)	-		(180,175	)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

46. 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 March 31, 2011, the Company has 17 RSA’s with 15 investors. The RSA’s are located mainly in Pekanbaru, East Java, Kalimantan, Makassar, Pare-pare, Manado, Denpasar, Mataram and Kupang, with concession periods ranging from 80 to 148 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 RSA period, the investors transfer the ownership of the facilities to the Company at a nominal price.

46. RSA (continued)

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.

In 2009, the Company made amendments to some PBH agreements for extending the PBH period and the PBH ratio between the Company and investors.

The net book value of the property, plant and equipment under RSA which have been transferred to property, plant and equipment of the Company (Note 2p.i) amounted to Rp.11,424 million and Rp.503 million as of December 31, 2010 and March 31, 2011, respectively (Note 11).

47. 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

The Government has issued a new adjustment tariff formula which is stipulated in the MoCI Decree No. 15/Per/M.KOMINFO/4/2008 dated April 30, 2008 concerning Procedure for Tariff Calculation for Basic Telephone Service which connected through fixed line network.

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

· Connection fee

· Monthly charges

· Usage charges

· Additional facilities fee

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

· Local charges decreased by range from 2.5% to increase by 8.9%, depending on service usage and customer’s segment

· SLJJ charges decreased by an average range from 36.9% to an increase by an average of 13.7%, depending on service usage and customer’s segment

· SMS charges decreased by an average range from 42.8% to 49.7%, depending on service usage and customer’s segment

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

47. TELECOMMUNICATIONS SERVICES TARIFFS (continued)

b. Mobile cellular telephone tariffs

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.

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 the Long Run Incremental Cost (LRIC) 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. Interconnection tariffs

On December 28, 2006, the Company and all network operators signed amendments to their interconnection agreements for fixed line (local, SLJJ and international) and mobile networks 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.

The Indonesian Telecommunication Regulatory Body (ITRB), in its letter No. 227/BRTI/XII/2010 dated December 31, 2010, decided to implement new interconnect tariffs effective from January 1, 2011 for cellular, satellite and domestic PSTN and effective from July 1, 2011 for fixed wireless access with a limited mobility, shall be as follows:

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

47. TELECOMMUNICATIONS SERVICES TARIFFS (continued)

c. Interconnection tariffs (continued)

(1) Fixed line

a. Local termination from local fixed line service tariff is Rp.73/minute.

b. Local termination from domestic fixed line (local call) service tariff is Rp.73/minute.

c. Local termination from domestic fixed line (long distance call) service tariff is Rp.202/minute.

d. Long distance termination from domestic fixed line service tariff is Rp.539/minute.

e. Local termination from cellular mobile network service tariff is Rp.202/minute.

f. Local termination from satellite mobile network service tariff is Rp.202/minute.

g. Long distance termination from cellular mobile network service tariff is Rp.608/minute.

h. Long distance termination from satellite mobile network service tariff is Rp.607/minute.

i. Domestic termination from international network service tariff is Rp.594/minute.

j. International origination from domestic fixed line to fixed international network service provider tariff is Rp.594/minute.

k. Local origination service for long distance call from domestic fixed line to SLJJ service provider tariff is Rp.202/minute

l. Local transit service tariff is Rp.67/minute.

m. Long distance transit service tariff is Rp.273/minute.

n. International transit service tariff is Rp.290/minute.

(2) Cellular

a. Local termination and origination service tariff is Rp.251/minute.

b. Long distance termination and origination service tariff is Rp.357/minute.

c. Long distance termination from cellular mobile network service tariff is Rp.461/minute.

d. Long distance termination from satellite network service tariff is Rp.463/minute.

e. International termination and origination service tariff is Rp.453/minute.

As of the issuance date of the consolidated financial statements, the RIO is still in renewal process.

Based on Decree No. 14/PER/M.KOMINFO/02/2009 dated February 25, 2009 of the Ministry of Communication and Information Technology, interconnection among operators is settled through a telecommunication traffic clearing process. The clearing function is undertaken collectively by operators under supervision of the Indonesian Telecommunication Regulatory Body.

On March 2, 2009, 12 operators and PT Pratama Jaringan Nusantara (“PJN”) entered into an agreement for operating Telecommunicating Traffic Clearing System (“Sistem Kliring Trafik Telekomunikasi” or “SKTT”) that appointed PJN to conduct voice interconnect clearing processes. PJN was appointed to conduct voice interconnection clearing processes with the following conditions:

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

47. TELECOMMUNICATIONS SERVICES TARIFFS (continued)

c. Interconnection tariffs (continued)

· Tariff is Rp.0.4 for every call data record,

· To support the process, PJN should provide SKTT within 6 months.

The agreement is valid for ten years, extendable based on agreement by both parties or may be terminated prior to such period, subject to amongst other things, PJN’s ability to:

· Provide the system within the above-mentioned period,

· Change its Articles of Association in compliance with Corporate Law No. 40/2007, within one month.

As of the issuance date of the consolidated financial statements, the operation of voice interconnect clearing by PJN has not been implemented.

d. VoIP interconnection tariff

Previously, the Minister of Communication (“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 Company’s fixed line network at an 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 Director General of Post and Telecommunication 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 Provision Procedure of Network Lease Service in 2008 Owned by Dominant Network Lease Service Provider in conformity with the Company’s proposal.

The Company issued network leased tariffs which were valid starting from January 21, 2010, in a form of:

a. Network leased activation fee starting from Rp.2,400,000.

b. Monthly usage tariff for local end to end (under 25 km) varies starting from Rp.3,800,000 up to Rp.74,400,000 depending on the capacity, and monthly usage tariff for long distance end to end (over 25 km) varies starting from Rp.7,100,000 up to Rp.519,700,000 depending on the capacity.

c. Monthly usage tariff for local point to point (under 25 km) varies starting from Rp.1,500,000 up to Rp.37,200,000 depending on the capacity, and monthly usage tariff for long distance point to point (over 25 km) varies starting from Rp.4,800,000 up to Rp.482,500,000 depending on the capacity.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

47. 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.

g. Tariff for other services

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

On September 27, 2010, the Company reduced the tariff for internet services by an average of 22% depending on the packages subscribe by the customers.

h. Universal Service Obligation (“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 the Government’s Decree No. 7/2009 dated January 16, 2009, the contribution is changed to 1.25% of gross revenues, net of bad debts and/or interconnection charges and/or connection charges.

Based MoCI Decree No. 32/PER/M.KOMINFO/10/2008 dated October 10, 2008 which replaced MoCI Decree No. 11/PER/M.KOMINFO/04/2007 dated April 13, 2007 and MoCI Decree No. 38/Per/M.KOMINFO/9/2007 dated September 20, 2007, it is stipulated that, among others, in providing telecommunication access and services in rural areas (USO Program), the provider is determined through a selection process by Balai Telekomunikasi dan Informatika Pedesaan (“BTIP”) which was established based on MoCI Decree No. 35/Per/M.KOMINFO/11/2006 dated November 30, 2006.

On January 16, 2009 and January 23, 2009, Telkomsel was selected in a tender by the Government through BTIP to provide telecommunication access and services in rural areas (USO Program) for a total amount of Rp.1.66 trillion, covering all Indonesian territories except Sulawesi, Maluku and Papua. Telkomsel will obtain local fixed-line licenses and the right to use radio frequency in 2390 MHz-2400 MHz. Subsequently, the agreements have been amended and latest amendments dated June 2, 2010 was, among other things to change the price to Rp.1.758 trillion.

In January 2010, the Ministry granted Telkomsel operating licenses to provide local fixed-line services under the USO program (Note 1d.a).

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

47. TELECOMMUNICATIONS SERVICES TARIFFS (continued)

h. USO (continued)

On March 12, 2010, the Company was selected in a tender by the Government through BTIP to provide internet access service centers for USO sub-districts for a total amount of Rp.322,355 million, covering Nanggroe Aceh Darussalam, Sumatera Utara, Sulawesi Utara, Gorontalo, Sulawesi Tengah, Sulawesi Barat, Sulawesi Selatan and Sulawesi Tenggara.

On December 23, 2010, the Company was selected in a tender by the Government through BTIP to provide mobile internet access service centers for USO sub-districts for a total amount of Rp.527,630 million, covering Jambi, Riau, Kepulauan Riau, Sulawesi Utara, Sulawesi Tengah, Gorontalo, Sulawesi Barat, Sulawesi Tenggara, Kalimantan Tengah, Sulawesi Selatan, Papua, and Irian Jaya Barat.

48. COMMITMENTS

a. Capital expenditures

As of March 31, 2011, 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 | - | 3,154,618 |
| U.S.
Dollars | 425 | 3,704,245 |
| Euro | 1 | 11,047 |
| Total | | 6,869,910 |

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

48. COMMITMENTS (continued)

a. Capital expenditures (continued)

The above balance includes the following significant agreements:

(i) Company

| Contracting parties | Date of agreement | Significant provisions of the
agreement | Total contract value | Outstanding purchase commitment as of March
31, 2011 |
| --- | --- | --- | --- | --- |
| Company and PT Datacomm
Diangraha | November 28, 2007 | Procurement and installation agreement Metro
Ethernet Batch 2 | Rp.298,096 million | Rp.9,716 million |
| Company and G-Pas Consortium | April 18, 2008 | Procurement and installation agreement for
Outside Plant Fiber Optic 2008 Batch 8 Divre VII | Rp.190,642 million | Rp.58,988 million |
| Company and PT Konsorsium
Jembo-Karteksi-Tridayasa | April 18, 2008 | Procurement and installation agreement for
Outside Plant Fiber Optic 2008 Batch 9 Netre Sumbagut Area | Rp.242,069 million | Rp.19,860 million |
| Company and PT Datacraft
Indonesia | December 12, 2008 | Procurement and installation agreement for
Tera Router 2008 in Divre I, Divre II and Divre V | Rp.219,033 million | Rp.9,682 million |
| Company and ISS Reshetnev | March 2, 2009 | Procurement agreement for Telkom-3 Satellite | US$178.9 million | US$105.0 million |
| Company and APT Satellite Company
Limited | March 23, 2009 | 142E
Degree Orbital Position Cooperation Agreement | US$18.5 million | US$13.3 million |
| Company and Sansaine Huawei
Consortium | May 27, 2009 | a. Cooperation agreement for procurement and
installation of MSAN ALU and Secondary Access 2008 Batch 3 | US$12.3 million and Rp.103,022
million | US$5.9 million and Rp.26,028
million |
| | June 15, 2009 | b. Cooperation agreement for procurement and
installation of MSAN ALU and Secondary Access 2008 Batch 1 | US$15.5 million and Rp.135,632
million | US$8.3 million and Rp.61,921
million |
| Company and ZTE Consortium | June 2, 2009 | Cooperation agreement for procurement and
installation of MSAN ALU and Secondary Access 2008 Batch 2 | US$30.0 million and Rp.151,566
million | US$12.3 million and Rp.60,520
million |

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

48. COMMITMENTS (continued)

a. Capital expenditures (continued)

(i) Company (continued)

| Contracting parties | Date of agreement | Significant provisions of the
agreement | Total contract value | Outstanding purchase commitment as of March
31, 2011 |
| --- | --- | --- | --- | --- |
| Company and PT Aldomaru | June
11, 2009 | Procurement agreement Roll Out Infusion PL
2009 | Rp.123,595 million | Rp.18,706 million |
| Company and PT Dharma Kumala
Utama | July
29, 2009 | Procurement and installation agreement for
Fiber Optic Cable Access & RMJ 2009 in Central Java and East Java
Batch 1 | Rp.75,438 million | Rp.12,829 million |
| Company and Sansaine - Huawei
Consortium | August 3, 2009 | Procurement and installation agreement for
Softswitch and modernization of MSAN Divre I, Divre II, Divre III
and Divre IV | US$20.8 million and Rp.86,280
million | US$6.0 million and Rp.59,630
million |
| Company and Tekken - DMT
Concortium | September 15, 2009 | Procurement and installation agreement for
Fiber Optic Cable Access Divre VI Kalimantan | Rp.107,101 million | Rp.48,420 million |
| Company and Huawei - Sansaine
Consortium | November 24, 2009 | Procurement and installation agreement for
Palapa Ring Mataram-Kupang Cable System Project (MKCS) | US$55.0 million and Rp.123,600
million | US$14.4 million and Rp.71,542
million |
| Company and NEC - NSN
Consortium | December 16, 2009 | Procurement and installation agreement for
Capacity Expansion Ring Jasuka Backbone 2009 | US$20.0 million and Rp.204,390
million | Rp.5.0 million |
| Company and PT ZTE Indonesia | March 5, 2010 | Item
price procurement and installation agreement for Insert Card
IP-DSLAM | Rp.105,425 million | Rp.40,420 million |
| Company and PT Huawei | April 16, 2010 | Procurement and installation agreement for
Insert Card IP DSLAM | Rp.70,132 million | Rp.2,995
million |

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

48. COMMITMENTS (continued)

a. Capital expenditures (continued)

(ii) Telkomsel

In August 2007, based on letters from Ericsson AB and PT Ericsson Indonesia and Nokia Siemens Networks (which currently represents Nokia Corporation, PT Nokia Networks and Siemens AG), those companies agreed to:

· extend the agreements for the maintenance and procurement of equipment and related services entered in August 2004, 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.

Subsequently, on April 17, 2008, Telkomsel, PT 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 year period.

For the purpose of providing telecommunication services with 3G, in September and October 2006, Telkomsel entered into agreements with Nokia Corporation and PT Nokia Networks, Ericsson AB and PT Ericsson Indonesia and Siemens Networks GmbH & Co. KG for network construction (Rollout Agreement) and PT Nokia Networks, PT 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, provided that the suppliers are able to meet the requirements set out in each PO. Based on letters from Telkomsel, the Managed Operation Agreements with those companies were terminated as of June 30, 2008.

On April 17, 2008, Telkomsel, PT Ericsson Indonesia and PT Nokia Siemens Networks also entered into Technical Service Agreements for technical support of Combined 2G and 3G CS Core Network. The agreements commence:

· in respect of the August 2007 Project only, on the date that transition-out services have been completed in accordance with the 3G Managed Operations Agreement;

· in all other respects, on the Effective Date;

and continues until the later of:

· the date which is three years after the Effective Date; and

· 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 3 year period.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

48. COMMITMENTS (continued)

a. Capital expenditures (continued)

(ii) Telkomsel (continued)

In 2008, Telkomsel entered into 2G BSS and 3G UTRAN Network Trial Agreements (NTA) with PT Alcatel-Lucent Indonesia, PT ZTE Indonesia and PT Huawei Tech Investment (“Trial Participants”). Such agreements contain, among other things:

· The provision by Trial Participants of the design, supply, delivery, installation, integration and commissioning of 2G GSM BSS and 3G UMTS radio access network and technical support for such subsystem and networks on a trial basis;

· At Telkomsel’s election, the Trial Participants must transfer ownership to Telkomsel of those 2G GSM BSS and 3G UMTS radio access networks.

Pursuant to expiry of the trial period under 2G BSS and 3G UTRAN Network Trial Agreements with ALU, based on a Settlement Agreement on February 5, 2010, Telkomsel agreed to give compensation to ALU of US$7.2 million (equivalent to Rp.67.68 billion) and Rp.18.4 billion which was charged to the 2009 consolidated statement of comprehensive income.

In March and June 2009, Telkomsel, PT Ericsson Indonesia, Ericsson AB, PT Nokia Siemens Networks, Nokia Siemens Network Oy, Huawei International Pte. Ltd, Huawei Tech Investment and PT ZTE Indonesia entered into 2G BSS and 3G UTRAN Rollout Agreements for the provision of 2G GSM BSS and 3G UMTS Radio Access Network.

In accordance with the agreements, the Vendors should provide equipment and related services, including amongst other things:

· Participate in Joint Planning process

· Provide SITAC and CME works

· Provide software license

Provision of the equipment and services should be aligned with other agreements such as Combined 2G BSS and 3G Core Network Rollout and Technical Support Agreements dated April 17, 2008.

During the period of the agreements, the vendors (excluding Huawei International Pte. Ltd, PT Huawei Tech Investment and PT ZTE Indonesia) agreed to provide vouchers, free of charge equipment and other commercial incentives to Telkomsel. Part of the vouchers totaling US$107.05 million (equivalent to Rp.1,172 billion); were provided by the vendors as an adjustment to prices stated in PO issued since July 1, 2007.

The agreements are valid until the later of:

· Three years after the effective date; and

· The date on which the last PO under these agreements terminates or expires in respect of any purchase order issued prior to the expiry of three year period.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

48. COMMITMENTS (continued)

a. Capital expenditures (continued)

(ii) Telkomsel (continued)

Telkomsel may extend terms of the agreements for a period up to 12 months.

On February 3, 2010, Telkomsel entered into the following agreements for maintenance and procurement of equipment and related services:

· Next Generation Convergence IP RAN Rollout and Technical Support with PT Packet Systems Indonesia and PT Huawei Tech Investment; and

· Next Generation Convergence Core Transport Rollout and Technical Support with PT Datacraft Indonesia and PT Huawei Tech Investment.

The agreements commence on the effective date and continue until the later of:

· The date which is three years after the effective date; and

· The date on which the last PO under the agreements terminate or expire in respect of any PO issued prior to the expiry of the three year period.

Telkomsel may extend the term of the agreements by a period of not more than two years.

On February 8, 2010, Telkomsel entered into an Online Charging System (“OCS”) and Service Control Points (“SCP”) System Solution Development Agreement with Amdocs Software Solutions Limited Liability Company and PT Application Solutions. The latest amendment was made on September 30, 2010. On February 8, 2010, Telkomsel also entered into a Technical Support Agreement with PT Application Solutions to provide technical support services for the OCS and SCP.

The agreements commences on the effective date and continues until the later of:

· The date which is five years after the effective date; and

· 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 five year period.

Telkomsel may extend the term of the agreement by a period of not more than three years.

On January 27, 2011, Telkomsel entered into Soft HLR Roll Out Agreement with PT Nokia Siemens Networks and Nokia Siemens Networks Oy and Soft HLR Technical Support Agreement with PT Nokia Siemens Networks.

The agreements commences on the effective date and continues until the later of:

· The date which is three years after the effective date; and

· 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,

Telkomsel may extend the term of the agreement by a period of not more than two years.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

48. COMMITMENTS (continued)

b. Borrowings and other credit facilities

(i) The Company has Rp.190,000 million and Rp.60,000 million bank guarantee facility with BNI and Bank Mandiri, respectively. The facilities expire on March 31, 2010 and December 23, 2011, respectively. As of the issuance date of the consolidated financial statements, the extension of bank guarantee facility from BNI is still on process. Under these facilities, as of March 31, 2011, the Company has issued a bank guarantee of Rp.118,829 million and US$0.10 million (equivalent to Rp.900 million) from BNI and Rp.46,127 million and US$0.05 million (equivalent to Rp.442 million) from Bank Mandiri for tender guarantee, performance bond, security deposit, and advances for the Company’s project.

(ii) Telkomsel has a US$3 million bond and bank guarantee, standby letter of credit facility and foreign exchange facility with SCB, Jakarta. The facilities expire on July 31, 2011. Under these facilities, as of March 31, 2011, Telkomsel has issued a bank guarantee of Rp.20,000 million (equivalent to US$2.3 million) for a 3G performance bond (Note 48c.i). The bank guarantee is valid until March 24, 2012.

c. Others

(i) 3G license

With reference to the Decision Letter No. 07/Per/M.KOMINFO/2/2006 and No. 268/KEP/M.KOMINFO/9/2009 of the MoCI (Notes 1d.a and 2j), Telkomsel amongst other commitments, is required to:

Pay annual BHP fee which is determined based on a certain formula over the license term (10 years). The BHP for the sixth year of the former license was paid in March 2011 and the BHP for the second year of the additional license was paid in September 2010 (Note 13iii). The commitments arising from the BHP as of March 31, 2011 and up to the expiry period of the license using the formula set forth in the Decision Letter are as follows:

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

48. COMMITMENTS (continued)

c. Others (continued)

(i) 3G license (continued)

(continued)

Notes
Ri	=
average BI rate from previous year
Auction Price (“Harga Lelang” or
HL)	=
Rp.160,000 million
Index	=
adjustment to the bidding price for the respective
year

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

Provide roaming access for the existing 3G operators.
Contribute to USO development.
Construct a 3G network which covers a minimum number of provinces, as follows:

Year	Minimum number 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.

(ii) Palapa Ring Consortium

On November 10, 2007, the Company entered into a C&MA with 5 other companies for Palapa Ring Consortium. This consortium was formed to build optical fiber network in 32 cities in Eastern Indonesia with total initial investment of Rp.2,070,336 million. The Company will obtain 4 lambdas bandwidth of total capacity of 8.44 lambdas from this consortium (Note 14). In 2008, 2 companies draw back from the consortium, hence the total number of Palapa Ring Consortium’s member become 4 companies including the Company.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

48. COMMITMENTS (continued)

c. Others (continued)

(iii) Radio Frequency Usage

Based on the Decree No. 76 dated December 15, 2010 of Government of the Republic of Indonesia, which amended Decree No. 7 dated January 16, 2009, the annual frequency usage fees with a bandwidth of 800 MHz, 900 MHz and 1800 MHz are determined using the following formula:

N x K x I x C X B

| Notes : — N | = | normalizing factor using consumer price
index, subject to change depending on the Government’s non-tax revenue
target |
| --- | --- | --- |
| K | = | adjusting factor based on economic value of
the frequency bandwidth |
| I | = | reserved price |
| C | = | population of the citizens (in
thousands) |
| B | = | bandwidth |

The fee within 5 years is determined by the following formula:

Year	Formula
1	Y 1 = X + {(20% x ∆) –
Z}
2	Y 2 = X + (40% x ∆)
3	Y 3 = X + (60% x ∆)
4	Y 4 = X + (80% x ∆)
5	Y 5 = X + (100% x
∆)

Notes :

| Yn | = | frequency usage fee for each
year |
| --- | --- | --- |
| X | = | frequency usage fee for the period January 1,
2009 up to December 31, 2009 |
| ∆ | = | (N x
K x I x C x B) - X |
| Z | = | remaining annual frequency fee based on
previous regulation as of December 15,
2010 |

As an implementation of the above decree, on December 15, 2010, in a Decision letter No. 456A/KEP/M.KOMINFO/12/2010, the MoCI determined that the first year (Y 1 ) annual frequency usage fee of Telkomsel with licenses in 900 MHz band and 1800 MHz band is Rp.716 billion. The fee was paid on December 30, 2010. Based on the same Decision Letter above and a Decision letter No. 5039/T/DJPT.4/KOMINFO/12/2010 dated December 16, 2010, the MoCI determined that the first year (Y 1 ) annual frequency usage fee of the Company with licenses in 800 MHz band is Rp.51.7 billion. The fee was paid on December 27, 2010

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

48. COMMITMENTS (continued)

c. Others (continued)

(iii) Radio Frequency Usage (continued)

Prior to issuance of the above decree, in accordance with the prevailing laws and telecommunications regulations, the operators are obliged to register their radio stations with the DGPT to obtain frequency usage license, except those stations that use 2.1 GHz frequency bandwidth (Note 48c.i). The frequency usage fees are payable upon receipt of notification letter (“Surat Pemberitahuan Pembayaran”) from DGPT. The fee is determined based on the number of registered carrier (“TX”) for the Company and transceivers (“TRX”) for Telkomsel of the radio stations with a fee ranging from Rp.0.07 million to Rp.17.55 million for each TX and Rp.3.4 million to Rp.15.9 million for each TRX (Note 8).

(iv) Apple, Inc

On January 9, 2009, Telkomsel entered into an agreement with Apple, Inc for the purchase of iPhone products, marketing it to customers using a third party (PT Trikomsel OKE) and providing cellular network services. Cumulative minimum iPhone units that shall be purchased as of December 31, 2009, 2010 and 2011 are 125,000, 300,000 and 500,000 units for each year.

(v) Operating leases

	Minimum lease payment — Total	Less than 1 year	1-5 years	More than 5 years
Operating leases	226,884	72,530	123,238	31,116

Operating leases represent non-cancelable office lease agreements of certain subsidiaries.

49. CONTINGENCIES

a. In the ordinary course of business, the Company and its subsidiaries have been named as defendants in various legal actions in relation with land disputes, monopolistic practice and unfair business competition and SMS cartel practices. Based on management's estimate of the probable outcomes of these matters, the Company and its subsidiaries have accrued Rp.48,406 million as of March 31, 2011.

b. On January 2, 2006, the Office of the Attorney General launched an investigation into allegations of misuse of telecommunication facilities in connection with the provision of VoIP services, whereby one of the Company’s former employees and four of the Company’s employees in KSO VII were named suspects. As a result of the investigations, one of Company’s former employees and two of the Company’s 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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

49. CONTINGENCIES (continued)

b. (continued)

On January 29, 2008, the Makassar District Court found the defendant not guilty. The Attorney has filed an appeal to Indonesian SC objecting the District Court ruling. On May 4, 2010, the Company received SC’s decision that found the defendant guilty and sentenced the defendant to a six-year prison term, Rp.500 million penalty, and indemnity amounting Rp.30,115 million by jointly liability. The defendants filed a judicial review to SC for the decision. As of the issuance date of the consolidated financial statements, no decision has been reached on the judicial review.

On March 3, 2008, Denpasar District Court found the defendants guilty and sentenced each defendant to a one-year six-month prison term and a one year prison term and gave a Rp.50 million penalty. The defendants have filed an appeal to the Bali High Court objecting to the District Court ruling. On November 5, 2008, the Bali High Court found the defendants guilty. On January 16, 2009, one of the defendants in Bali High Court has filed an appeal to the Indonesian SC. On March 22, 2010, SC found the defendants not guilty, and the case is closed.

c. The Company, Telkomsel and seven other local operators are being investigated by the KPPU for allegations of SMS cartel practices. As a result of the investigations on June 17, 2008, KPPU found that the Company, Telkomsel and certain other local operators had proven to violate Law No. 5/1999 article 5 and gave the Company and Telkomsel Rp.18,000 million penalty and Rp.25,000 million penalty, respectively.

Pursuant to the decision of KPPU dated June 17, 2008, the Company and Telkomsel have filed an objection with the Bandung District Court and South Jakarta District Court, respectively, on July 14, 2008 and July 11, 2008, respectively.

Management believes that there are no such cartel practices that led to a breach of prevailing regulations. As of the issuance date of the consolidated financial statements, no decision has been reached on the appeal.

d. On January 6, 2011, Telkomsel was notified by the Industrial Relations Court of Central Jakarta District Court (“the Court”) that the Telkomsel's labor union ("SEPAKAT") has filed a claim against Telkomsel through the Court concerning certain disputes with Telkomsel on the execution of Collective Labor Agreement ("CLA"). The information usually required by PSAK 57: Provisions, Contingent Liabilities and Contingent Assets, is not disclosed as it could lead to a precipitate presumption on the outcome of the litigation. Telkomsel’s management believes that Telkomsel has sufficiently executed the CLA and as such the claim can be successfully resisted by Telkomsel. As of the issuance date of the consolidated financial statements, it is still in process .

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

49. CONTINGENCIES (continued)

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.

50. ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

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

	December 31, 2010 — Foreign		March 31, 2011 — Foreign
	currencies	Rupiah	currencies	Rupiah
	(in
millions)	equivalent	(in
millions)	equivalent
Assets
Cash and
cash equivalents
U.S.
Dollars	138.07	1,242,392	241.25	2,100,310
Euro	12.54	150,121	10.44	128,711
Hongkong Dollars	2.00	2,317	5.47	6,119
Singapore Dollars	2.82	19,799	0.63	4,334
Malaysian Ringgit	0.03	100	0.03	99
Japanese Yen	0.39	43	0.42	44
Temporary investments
U.S.
Dollars	8.84	79,566	8.59	74,754
Trade receivables
Related parties
U.S.
Dollars	3.16	28,434	2.49	21,700
Third parties
U.S.
Dollars	79.19	712,758	80.77	703,184
Euro	0.12	1,408	0.11	1,414
Other receivables
U.S.
Dollars	0.48	4,331	0.52	4,497
Great Britain Pound sterling	0.01	121	0.01	122
Euro	0.00	43	0.00	43
Advances and other non-current
assets
U.S.
Dollars	2.73	24,577	10.48	91,243
Hongkong Dollars	0.27	311	-	-
Escrow accounts
U.S.
Dollars	4.61	41,552	4.62	40,197
Total assets		2,307,873		3,176,771

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

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

	December 31, 2010
	Foreign		Foreign
	currencies	Rupiah	currencies	Rupiah
	(in
millions)	equivalent	(in
millions)	equivalent
Liabilities
Trade payables
Related parties
U.S.
Dollars	5.73	51,559	4.48	39,023
Third parties
U.S.
Dollars	341.80	3,074,585	327.67	2,853,681
Euro	0.18	2,128	5.14	63,334
Malaysian Ringgit	0.56	1,624	0.57	1,645
Singapore Dollars	0.24	1,645	0.03	174
Japanese Yen	0.73	81	0.73	77
Great Britain Pound sterling	0.04	613	0.01	74
Hongkong Dollars	0.01	17	0.02	25
Swiss Franc	0.00	15	0.00	15
Australian Dollars	0.05	453	-
Other payables
U.S.
Dollars	0.07	588	0.11	967
Accrued expenses
U.S.
Dollars	39.72	357,343	49.28	429,193
Euro	0.85	10,136	1.15	14,149
Singapore Dollars	1.38	9,657	1.86	12,847
Japanese Yen	38.35	4,250	120.52	12,682
Short-term bank loans
U.S.
Dollars	-	-	0.42	3,676
Advances from customers and
suppliers
U.S.
Dollars	0.90	8,114	1.08	9,401
Euro	-	-	0.02	241
Current maturities of long-term
liabilities
U.S.
Dollars	78.11	703,474	70.46	613,694
Japanese Yen	767.90	85,099	767.90	80,798
Notes
U.S.
Dollars	30.54	275,348	39.96	348,019
Long-term liabilities
U.S.
Dollars	240.76	2,168,061	275.35	2,398,181
Japanese Yen	9,982.67	1,106,279	9,982.67	1,050,376
Total liabilities		7,861,069		7,932,272
Net
liabilities		(5,553,196	)	(4,755,501	)

As of December 31, 2010, the net monetary liabilities position denominated in foreign currencies of the Company and its subsidiaries is US$500.55 million and JPY10,789.26 million. As of March 31, 2011, the net monetary liabilities position denominated in foreign currencies of the Company and its subsidiaries is US$420.09 million and JPY10,871.40 million.

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.

If the Company and its subsidiaries report monetary assets and liabilities in foreign currencies as of March 31, 2011 using the rates on April 28, 2011, the unrealized foreign exchange gain will increase by the amount of Rp.54.327 million.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

51. FINANCIAL ASSETS AND LIABILITIES

Financial risk management

The Company and its subsidiaries’ activities expose it to a variety of financial risks such as market risks (including foreign exchange risk and interest rate risk), credit risk and liquidity risk. Overall, the Company and subsidiaries’ financial risk management programme is intended for minimizing lossess on the financial assets and liabilities arising from fluctuation of foreign currency exchange rate and the fluctuation of interest rate. 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.

Financial risk management is carried out by the Treasury Management unit under policies approved by the Board of Directors. The Treasury Management unit identifies, evaluates and hedges financial risks.

a. Foreign exchange risk

The Company and its subsidiaries have significant receivables, payables and liabilities balance denominated in foreign currencies which include the United States Dollar, Japanese Yen, Euro, Singapore Dollar and Great Britain Pound sterling. Increasing risks of foreign currency exchange rates on the obligations of the Company and its subsidiaries are expected to be offset by time deposits and receivables in foreign currencies are set at least 25% of the liabilities and will mature in less than 1 (one) year with respect to the tendency of changes exchange rates in the future.

b. Interest rate risk

Interest rate fluctuation is monitored to minimize any negative impact to financial position. Borrowings at variable interest rates expose the Company and its subsidiaries to interest rate risk (Notes 18,20,21 and 22). To measure market risk fluctuations in interest rates, the Company and its subsidiaries primarily use interest margin and maturity profile of the financial assets and liabilities based on changing schedule of the interest rate.

The following table represents a breakdown of the Company and subsidiaries’ financial assets and liabilities which are impacted by interest rates.

| | March 31,
2011 — One
year or less | More
than one year | Non
interest bearing | Total |
| --- | --- | --- | --- | --- |
| Assets | | | | |
| Cash
and cash equivalents | 10,620,990 | - | 24,486 | 10,645,476 |
| Temporary investments | 265,148 | - | 114,899 | 380,047 |
| Other current assets | 1,175 | - | - | 1,175 |
| Other non-current assets | - | 169,193 | 47,277 | 216,470 |
| Total financial assets | 10,887,313 | 169,193 | 186,662 | 11,243,168 |

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

51. FINANCIAL ASSETS AND LIABILITIES (continued)

Financial risk management (continued)

b. Interest rate risk (continued)

| | March 31,
2011 — One
year or less | | More
than one year | Non
interest bearing | Total | |
| --- | --- | --- | --- | --- | --- | --- |
| Liabilities | | | | | | |
| Short-term bank loans | 66,440 | | - | - | 66,440 | |
| Two-step loans | 816,101 | | 2,100,743 | - | 2,916,844 | |
| Bonds and notes | 423,019 | | 3,022,700 | - | 3,445,719 | |
| Bank
loans | 12,472,080 | | 258,892 | - | 12,730,972 | |
| Total financial liabilities | 13,777,640 | | 5,382,335 | - | 19,159,975 | |
| Total interest repricing
gap | (2,890,327 | ) | (5,213,142 | ) | (8,103,469 | ) |

c. Credit risks

The Company and its subsidiaries are exposed to credit risk primarily from trade receivables and other receivables. Credit risk is managed by continuous monitoring outstanding balance and collection of trade and other receivables.

The following table sets out the maximum exposure of credit risk and concentration risk of the Company and its subsidiaries :

	Credit risk concentration — Corporate	Others	Maximum exposure
Trade receivables	2,649,710	3,635,786	6,285,496
Other receivables	71,526	18,544	90,070
	2,721,236	3,654,330	6,375,566

Management is confident in its ability to continue to control and sustain minimal exposure of credit risk given that the Company and its subsidiaries have provided sufficient allowance for doubtful accounts to cover incurred loss arising from uncollectible receivables based on existing historical loss.

d. Liquidity risks

Liquidity risk arises in situations where the Company and its subsidiaries have difficulties in fulfilling financial liabilities when they become due. Prudent liquidity risk management implies maintaining sufficient cash and cash equivalents in order to fullfil the Company and its subsidiaries’ financial liabilities. The Company and its subsidiaries continuously perform an analysis to monitor statement of financial position ratios, such as among other things, liquidity ratios, debt equity ratios against debt covenant requirements.

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PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

51. FINANCIAL ASSETS AND LIABILITIES (continued)

Fair value of financial assets and liabilities

Fair value is the amount for which an asset could be exchanged, or liability settled, in an arms-length transaction.

The table below sets out the carrying amount and fair value of those financial assets and liabilities not presented on the Company’s consolidated statement of financial positions at their fair values:

	March 31, 2011 — Carrying value	Fair value
Two
step loans	2,916,844	2,903,323
Bonds and notes	3,445,719	3,633,605
Bank
loans	12,730,972	12,865,540

The Company and its subsidiaries consider the fair value of current financial assets and liabilities approximates their carrying amount, as the impact of discounting is not significant. The fair values of long-term liabilities 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, except for bonds which are based on market prices.

52. SUBSEQUENT EVENTS

a. On April 19, 2011, the Company has released a full disclosure statement to the public in relation to the Company’s plan to conduct a phase IV stock repurchase program of the Company’s stock which has been issued and listed in IDX up to 2.07% of its paid up capital with total cost not to exceed Rp.3,000,000 million which will be conduct gradually within the acquisition period that would not be longer than 18 months upon approval from the AGM.

b. On April 19, 2011, TII withdrawn Rp.200,000 million from BCA (Note 22).

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PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

53. RECENT ACCOUNTING PRONOUNCEMENTS IN INDONESIA (continued)

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

(i) PSAK 24 (Revised 2010), “Employee Benefits”.

In Februar y 2010 , the DSAK issued PSAK 24 (Revised 2010), “Employee Benefits” which amends PSAK 24 (Revised 2004), “Employee Benefits”. The objective of this Standard is to prescribe the accounting and disclosure for employee benefits. The Standard requires an entity to recognise: (a) a liability when an employee has provided service in exchange for employee benefits to be paid in the future; and, (b) an expense when the entity consumes the economic benefit arising from service provided by an employee in exchange for employee benefits. PSAK 24 (Revised 2010) shall be effective for the reporting period beginning on or after January 1, 2012. Early application is prohibited. The company and its subsidiaries are currently assessing the impact of the requirement of PSAK 24 (Revised 2010), “Employee Benefits” on the consolidated financial statements.

(ii) PSAK 46 (Revised 2010), “Income Tax”.

In August 2010, the DSAK issued PSAK 46 (Revised 2010), “Income Tax” which amends PSAK 46 (Revised 1994), “Accounting for Income Tax”. The objective of this Standard is to prescribe the accounting treatment for income taxes. The principal issue in accounting for income taxes is how to account for the current and future tax consequences of: (a) the future recovery (settlement) of the carrying amount of assets (liabilities) that are recognised in an entity's statement of financial position; and (b) transactions and other events of the current period that are recognised in an entity's financial statements . PSAK 46 (Revised 2010) shall be effective for the reporting period beginning on or after January 1, 2012. Early application is encouraged. However, for entities that do business combination in accordance with the requirements of PSAK 22 (revised 2010), “Business Combination” is required to make early application. The company and its subsidiaries are currently assessing the impact of the requirement of PSAK 46 (Revised 2010), “Income Tax” on the consolidated financial statements.

(iii) PSAK 50 (Revised 2010), “Financial Instruments: Presentation”.

In M ay 2010 , the DSAK issued PSAK 50 (Revised 2010), “Financial Instruments: Presentation” which amends PSAK 50 (Revised 2006), “Financial Instruments: Presentation and Disclosures”. The objective of this Standard is to establish principles for presenting financial instruments as liabilities or equity and for offsetting financial assets and financial liabilities. It applies to the classification of financial instruments, from the perspective of the issuer, into financial assets, financial liabilities and equity instruments; the classification of related interest, dividends, losses and gains; and the circumstances in which financial assets and financial liabilities should be offset. PSAK 50 (Revised 2010) shall be effective for the reporting period beginning on or after January 1, 2012 and prospectively applied. Early application is encouraged. The company and its subsidiaries are currently assessing the impact of the requirement of PSAK 50 (Revised 2010), “Financial Instruments: Presentation” on the consolidated financial statements.

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PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

53. RECENT ACCOUNTING PRONOUNCEMENTS IN INDONESIA (continued)

(iv) PSAK 60 (Revised 2010), “Financial Instruments: Disclosures”.

In May 2010, the DSAK issued PSAK 60 (Revised 2010), “Financial Instruments: Disclosures” which amends PSAK 50 (Revised 2006), “Financial Instruments: Presentation and Disclosures”. The objective of this IFRS is to require entities to provide disclosures in their financial statements that enable users to evaluate: (a) the significance of financial instruments for the entity's financial position and performance; and (b) the nature and extent of risks arising from financial instruments to which the entity is exposed during the period and at the end of the reporting period, and how the entity manages those risks . PSAK 60 (Revised 2010) shall be effective for the reporting period beginning on or after January 1, 2012 and prospectively applied. Early application is encouraged. The company and its subsidiaries are currently assessing the impact of the requirement of PSAK 60 (Revised 2010), “Financial Instruments: Disclosures” on the consolidated financial statements.

(v) ISAK 15, ”PSAK 24 - The Limit on a Defined Benefit Asset”.

In April 2010, the DSAK issued ISAK 15, ”PSAK 24 - The Limit on a Defined Benefit Asset”. This Interpretation applies to all post-employment defined benefits and other long-term employee defined benefits. ISAK 15 shall be effective for the reporting period beginning on or after January 1, 2012. Early application is prohibited. The company and its subsidiaries are currently assessing the impact of the requirement of ISAK 15 (Revised 2010), ”PSAK 24 - The Limit on a Defined Benefit Asset” on the consolidated financial statements.

(vi) ISAK 20, “Income Taxes - Changes in the Tax Status of an Entity or its Shareholders”.

In August 2010, the DSAK issued ISAK 20, “Income Taxes - Changes in the Tax Status of an Entity or its Shareholders”. A change in the tax status of an entity or of its shareholders may have consequences for an entity by increasing or decreasing its tax liabilities or assets. This may, for example, occur upon the public listing of an entity's equity instruments or upon the restructuring of an entity's equity. It may also occur upon a controlling shareholder's move to a foreign country. As a result of such an event, an entity may be taxed differently; it may for example gain or lose tax incentives or become subject to a different rate of tax in the future. ISAK 20 shall be effective for the reporting period beginning on or after January 1, 2012. Early application is encouraged. The company and its subsidiaries are currently assessing the impact of the requirement of ISAK 20, “Income Taxes - Changes in the Tax Status of an Entity or its Shareholders” on the consolidated financial statements.

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PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2010 (AUDITED) AND MARCH 31, 2011 (UNAUDITED) AND

THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 (UNAUDITED)

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

54. ACCOUNTS RECLASSIFICATION

Certain accounts in the consolidated financial statement for three months period ended March 31 , 2010 has been reclassified to conform with the presentation of accounts of the consolidated financial statements for three months period ended March 31 , 2011, with details of significant accounts reclassification are as follows:

	Before — reclassification		Reclassification		After — reclassification
Consolidated STATEMENT OF COMPREHENSIVE INCOME for thRee MONTHS PERIOD ended MARCH 31 , 2010:
Operating Expenses
Depreciation and amortization	(3,354,760	)	(384,330	)	(3,739,090	)
General and administrative	(983,669	)	384,330		(599,339	)

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