PERUSAHAAN PERSEROAN PERSERO PT TELEKOMUNIKASI INDONESIA TBK

6-K 1 q1eng31032012.htm PT TELEKOMUNIKASI INDONESIA TBK q1eng31032012.htm - Generated by SEC Publisher for SEC Filing

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 , 2012

Perusahaan Perseroan (Persero)

PT TELEKOMUNIKASI INDONESIA, TBK

(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- ]

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 26 , 2012	By	/s/ Agus Murdiyatno
		(Signature)
		Agus Murdiyatno
		Vice President Investor Relation

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk

AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2012 (UNAUDITED) AND DECEMBER 31, 2011 (AUDITED)

AND THREE MONTHS PERIOD ENDED

MARCH 31, 2012 AND 2011

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES

MARCH 31, 2012 (UNAUDITED) AND DECEMBER 31, 2011 (AUDITED)

AND TH REE MONTHS PERIOD ENDED MARCH 31, 2012 AND 2011 (UNAUDITED)

TABLE OF CONTENTS

	Page
Consolidated Financial Statements
Consolidated Statements of Financial Position	F1 - F2
Consolidated Statements of Comprehensive Income	F3
Consolidated Statements of Chagens in Equity	F4 - F5
Consolidated Statements of Cash Flows	F6
Notes to Consolidated Financial Statements	F7 - F110

Table of Content
PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL POSITION MARCH 31, 2012 (UNAUDITED) AND DECEMBER 31, 2011 (AUDITED) (Figures in tables are presented in billions of Rupiah)

	Notes	March 31, 2012	December 31, 2011
ASSETS
CURRENT ASSETS
Cash and cash equivalents	2c,2e,3,36	11,163	9,634
Available-for-sale financial assets	2c,2u,36	373	361
Trade receivables	2c,2g,2u,4, 28,36
Related parties		1,116	932
Third parties		4,147	3,983
Other receivables	2c,2g,36	455	335
Inventories	2h,5,28	1,004	758
Advances and prepaid expenses	2c,2i,6,36	3,129	3,294
Claims for tax refund	2t,30	966	371
Prepaid taxes	2t,30	183	787
Assets held for sale	2j,7	593	791
Other current assets	2c	6	12
Total Current Assets		23,135	21,258
NON-CURRENT ASSETS
Long-term investments - net	2f,8	235	235
Property, plant and equipment	2l,2m,9,15,16,19,38	74,619	74,897
Prepaid pension benefit costs	2c,2s,33,36,46	1,002	991
Advances and other non-current assets	2c,,2n,10,36,40	3,802	3,817
Intangible assets	2d,2k,11	1,760	1,789
Deferred tax assets	2t,30	71	67
Total Non-current Assets		81,489	81,796
TOTAL ASSETS		104,624	103,05 4

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

F-1

Table of Content
PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (continued) MARCH 31, 2012 (UNAUDITED) AND DECEMBER 31, 2011 (AUDITED) (Figures in tables are presented in billions of Rupiah)

	Notes	March 31, 2012		December 31, 2011
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Trade payables	2c,2o,2r,12,36
Related parties		775		838
Third parties		6,439		7,479
Other payables	2w	39		38
Taxes payables	2t,30	2,010		1,039
Accrued expenses	2c,2r,13,26,33,36	5,344		4,790
Unearned income	2r,14	2,638		2,821
Advances from customers and suppliers		325		271
Short-term bank loans	2c,2p,15,36	170		100
Current maturities of long-term liabilities	2c,2m,2p,16,36	4,034		4,813
Total Current Liabilities		21,774		22,189
NON-CURRENT LIABILITIES
Deferred tax liabilities	2t,30	3,612		3,794
Unearned income	2r	229		242
Long service awards provisions	2s,34	284		287
Post-retirement health care benefits provisions	2c,2s,35,36	821		888
Retirement benefits obligation	2c,2s,33,35,46	1,852		1,715
Long-term liabilities - net of current maturities
Obligations under finance leases	2m,9,16	315		314
Two-step loans - related party	2c,2p,16,17,36	1,941		2,012
Bonds and notes	2c,2p,16,18,36	3,423		3,401
Bank loans	2c,2p,16,19,36	5,986		7,231
Total Non-current Liabilities		18,463		19,884
TOTAL LIABILITIES		40,237		42,073
EQUITY
EQUITY ATTRIBUTABLE TO OWNERS 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,21	5,040		5,040
Additional paid-in capital	2v,22	1,073		1,073
Treasury stock	2v,23	(7,477	)	(6,323	)
Difference in value arising from restructuring transactions and other transactions between entities under common control	2d,24	478		478
Difference due to change of equity in associated companies	2f	386		386
Unrealized holding gain from available-for-sale securities	2f,2u	50		47
Translation adjustment	2f	242		240
Difference due to acquisition of non-controlling interest in subsidiaries	1d,2d	(485	)	(485	)
Retained earning
Appropriated		15,337		15,337
Unappropriated	2u	35,039		31,717
Total Equity Attributable To Owners Of The Parent		49,683		47,510
Non-controling Interest	2a,20	14,704		13,471
TOTAL EQUITY		64,387		60,981
TOTAL LIABILITIES AND EQUITY		104,624		103,054
See accompanying notes to consolidated financial statements, which form an integral part of the consolidated financial statements.

F-2

Table of Content
PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME THREE MONTHS PERIOD ENDED MARCH 31, 2012 AND 2011 (UNAUDITED) (Figures in tables are presented in billions of Rupiah, except per share and per ADS data)

REVENUES	Notes — 2c,2r,25,36	2012 — 17,796		2011 — 16,706
Other income	2r	180		100
EXPENSES
Operations, maintenance and telecommunication services	2c,2r,27,36	(3,916	)	(4,070	)
Depreciation and amortization	2l,2m,2r,9,10,11	(3,465	)	(3,448	)
Personnel	2c,2r,2s,13,26,33,34,35,36,46	(2,047	)	(1,909	)
Interconnection	2c,2r,29,36	(995	)	(806	)
Marketing	2r	(635	)	(725	)
General and administrative	2g,2h,2r,4,5,28,36,46	(580	)	(553	)
Gain on foreign exchange - net	2q	16		152
Others expense	2f,2r,8	(134	)	(27	)
Total Expenses		(11,756	)	(11,386	)
PROFIT BEFORE FINANCE (COST) INCOME AND INCOME TAX		6,220		5,420
Finance income	2c,36	129		120
Finance costs	2c,2r,36	(278	)	(405	)
Total Finance Costs - Net		(149	)	(285	)
PROFIT BEFORE INCOME TAX		6,071		5,135
INCOME TAX (EXPENSE) BENEFIT	2r,2t,30
Current		(1,698	)	(1,329	)
Deferred		186		18
		(1,512	)	(1,311	)
PROFIT FOR THE YEAR		4,559		3,824
OTHER COMPREHENSIVE INCOME
Foreign currency translation	1d,2b,2f	2		(5	)
Change in fair value of available-for-sale financial assets	2f,2u	3		(3	)
Total Other Comprehensive Income - net of tax		5		(8	)
TOTAL COMPREHENSIVE INCOME FOR THE YEAR		4,564		3,816
Profit for the year attributable to:
Owners of the parent		3,322		2,828
Non-controlling interest		1,237		996
		4,559		3,824
Total comprehensive income attributable to:
Owners of the parent		3,327		2,820
Non-controlling interest	20	1,237		996
		4,564		3,816
BASIC EARNINGS PER SHARE	2x,31
Income per share		172.20		143.79
Income per ADS (40 Series B shares per ADS)		6,888.00		5,751.60
See accompanying notes to consolidated financial statements, which form an integral part of the consolidated financial statements.

F-3

Table of Content
PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY THREE MONTHS PERIOD ENDED MARCH 31, 2012 AND 2011 (UNAUDITED) (Figures in tables are presented in billions of Rupiah)

Descriptions	Attributable to owners of the parent — 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 equity in associated companies	Unrealized holding gain on available- for-sale securities	Translation adjustment	Difference due to acquisition of non- controlling interest in subsidiaries		Retained earnings		Total		Non- controlling interest		Total equity
												Appropriated	Unappropriated
		Rp.	Rp.	Rp.		Rp.	Rp.	Rp.	Rp.	Rp.		Rp.	Rp.	Rp.		Rp.		Rp.
Balance, January 1, 2012		5,040	1,073	(6,323	)	478	386	47	240	(485	)	15,337	31,717	47,510		13,471		60,981
55% Accuisition of TLT	1d	-	-	-		-	-	-	-	-		-	-	-		(4	)	(4	)
Treasury stock acquired at cost	2t,23	-	-	(1,154	)	-	-	-		-		-		(1,154	)	-		(1,154	)
Total comprehensive income for the period	1d, 2b,2f, 2s,8	-	-	-		-	-	3	2	-		-	3,322	3,327		1,237		4,564
Balance, March 31, 2012		5,040	1,073	(7,477	)	478	`386	50	242	(485	)	15,337	35,039	49,683		14,704		64,387
See accompanying notes to consolidated financial statements, which form an integral part of the consolidated financial statements.

F-4

Table of Content
PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (continued) THREE MONTHS PERIOD ENDED MARCH 31, 2012 AND 2011 (UNAUDITED) (Figures in tables are presented in billions of Rupiah)

Descriptions	Attributable to owners of the parent — 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 equity in associated companies	Unrealized holding gain (loss) on available- for-sale securities		Translation adjustment		Difference due to acquisition of non- controlling interest in subsidiaries		Retained earnings		Total	Non-controlling interest	Total equity
														Appropriated	Unappropriated
		Rp.	Rp.	Rp.		Rp.	Rp.	Rp.		Rp.		Rp.		Rp.	Rp.	Rp.	Rp.	Rp.
Balance, January 1, 2011as reclassified		5,040	1,073	(4,264	)	478	386	50		233		(485	)	15,337	26,571	44,419	11,996	56,415
Net comprehensive income (loss) for the period	1d, 2b,2f, 2s,8	-	-	-		-	-	(3	)	(5	)	-		-	2,828	2,820	996	3,816
Balance, March 31, 2011		5,040	1,073	(4,264	)	478	386	47		228		(485	)	15,337	29,399	47,239	12,992	60,231
See accompanying notes to consolidated financial statements, which form an integral part of the consolidated financial statements.

F-5

Table of Content
PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS THREE MONTHS PERIOD ENDED MARCH 31, 2012 AND 2011 (UNAUDITED) (Figures in tables are presented in billions of Rupiah)

	2012		2011
CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts from:
Customers	16,328		15,212
Other operators	804		1,087
Total cash receipts from revenues	17,132		16,299
Cash payments for expenses	(5,381	)	(5,372	)
Cash payments to employees	(2,087	)	(1,906	)
Advance from (refund to) customers	41		(204	)
Interest income received	127		123
Interest costs paid	(199	)	(423	)
Income tax paid	(858	)	(1,375	)
Net cash provided by operating activities	8,775		7,142
CASH FLOWS FROM INVESTING ACTIVITIES
(Purchase ) proceeds from available-for-sale financial assets and dividends received	(8	)	4
Purchases of available-for-sale financial assets	-		(17	)
Proceeds from sale of property, plant and equipment	17		2
Proceeds from insurance claims	2		-
Acquisition of property, plant and equipment	(4,028	)	(2,783	)
Decrease (increase) in advances for purchases of property, plant and equipment	167		(226	)
Increase in advance and other assets	(46	)	(39	)
Acquisition of intangible assets	(108	)	(72	)
Net cash used in investing activities	(4,004	)	(3,131	)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash dividends paid to the Company’s stockholder	-		(250	)
Proceeds from short-term bank loans	79		28
Repayments of short-term bank loans	(25	)	(17	)
Proceeds from medium-term Notes	10		-
Repayment of medium-term Notes	(6	)	(3	)
Proceeds from two-step loans and bank loans	40		434
Repayment of two-step loans and bank loans	(2,211	)	(2,662	)
Payment for repurchase of shares	(1,154	)	-
Proceeds from promissory notes	101		95
Repayment of promissory notes	(45	)	(10	)
Repayment of obligations under finance leases	(46	)	(47	)
Net cash used in financing activities	(3,257	)	(2,432	)
NET INCREASE IN CASH AND CASH EQUIVALENTS	1,514		1,579
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS	15		(53	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	9,634		9,120
CASH AND CASH EQUIVALENTS AT END OF PERIOD	11,163		10,646
SUPPLEMENTAL CASH FLOWS INFORMATION
Non-cash investing and financing activities:
Acquisition of property, plant and equipment through incurrence of payables	2,947		4,172
Addition of property, plant and equipment through non-monetary exchange	1,553		-
Reclassification of property, plant and equipment to assets held for sale	168		-
Acquisition of property, plant and equipment through finance leases	-		10
See accompanying notes to consolidated financial statements, which form an integral part of the consolidated financial statements.

F-6

Table of Content
PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2012 (UNAUDITED) AND DECEMBER 31, 2011 (AUDITED) AND THREE MONTHS PERIOD ENDED MARCH 31, 2012 AND 2011 (UNAUDITED) (Figures in tables are presented in billions 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 and was published in State Gazette of the Republic of Indonesia No. 63 dated August 9, 2011, Supplement of the Republic of Indonesia No. 23552.

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, which among others includes 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.

F-7

| Table of Content |
| --- |
| PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND
SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) MARCH 31, 2012 (UNAUDITED) AND
DECEMBER 31, 2011 (AUDITED) AND THREE MONTHS PERIOD ENDED
MARCH 31, 2012 AND 2011 (UNAUDITED) (Figures in tables are presented in billions of Rupiah,
unless otherwise stated) |

1. GENERAL (continued)

a. Establishment and general information (continued)

The Company was 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 Directorate General of Post and Telecommunications (“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.

Details of these licenses are as follows:

| License | License No. | Type of
services | Grant date/latest renewal
date |
| --- | --- | --- | --- |
| License to operate local fixed line and basic telephone
services network | 381/KEP/M.KOMINFO/10/2010 | Local
fixed line and basic telephone services network | October
28, 2010 |
| License to operate fixed domestic long distance and basic
telephone services network | 382/KEP/M.KOMINFO/10/2010 | Fixed
domestic long distance and basic telephone services network | October
28, 2010 |
| License to operate fixed international and basic
telephone services network | 383/KEP/M.KOMINFO/10/2010 | Fixed
international and basic telephone services network | October
28, 2010 |
| License to operate fixed closed network | 398/KEP/M.KOMINFO/11/2010 | Fixed
closed network | November
12, 2010 |
| License to operate internet telephone services for public
purpose | 384/KEP/DJPT/M.KOMINFO/11/2010 | ITKP | November
29, 2010 |
| License to operate as internet
service provider | 83/KEP/DJPPI/ KOMINFO/4/2011 | Internet
service provider | April 7,
2011 |
| License to operate data communication system
services | 169/KEP/DJPPI/KOMINFO/6/2011 | Data
communication system services | June 6,
2011 |
| License to operate packet switched based local fixed line
network | 331/KEP/M.KOMINFO/07/2011 | Packet
switched based local fixed line network | July 27,
2011 |

F-8

1. GENERAL (continued)

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 Extraordinary General Meeting (“EGM”) of Stockholders of the Company dated June 11, 2010 as covered by notarial deed no. 18 of Dr. A. Partomuan Pohan, S.H., LLM., and (ii) 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 March 31, 2012 and 2011, respectively, were as follows:

	March 31, 2012	December 31, 2011
President Commissioner	Jusman
Syafii Djamal	Jusman
Syafii Djamal
Commissioner	Bobby A.A
Nazief	Bobby A.A
Nazief
Commissioner	Mahmuddin
Yasin	Mahmuddin
Yasin
Independent Commissioner	Rudiantara	Rudiantara
Independent Commissioner	Johnny
Swandi Sjam	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
Director of Information Technology Solution & Strategic Portofolio**	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

** The change of title is based on Director’s Regulation No.201.04/r.00/PS.150/COP-B0030000/2011 dated November 23, 2011

2. Audit Committee and Corporate Secretary

The composition of the Company’s Audit Committee and Corporate Secretary as of March 31, 2012 and 2011, respectively, were as follows:

| | March 31,
2012 | December
31, 2011 |
| --- | --- | --- |
| Chair | Rudiantara | 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 | Johnny Swandi Sjam |
| Corporate Secretary | Agus
Murdiyatno | Agus
Murdiyatno |

F-9

1. GENERAL (continued)

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

3. Employees

As of March 31, 2012 and December 31, 2011, the Company and its subsidiaries had 25,914 employees (unaudited) and 26,023 employees (audited), 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 of the Republic of Indonesia (the “Government”). On November 14, 1995, 933,333,000 new Series B shares and 233,334,000 Series B shares owned by the Government were offered to 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 the Annual General Meeting (“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.

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.

F-10

1. GENERAL (continued)

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

During the EGM of Stockholders of the Company on December 21, 2005, AGM of Stockholders of the Company on June 29, 2007, the AGM of Stockholders of the Company on June 20, 2008, and AGM of Stockholders of the Company on May 19, 2011, the Company’s stockholders approved the phase I, II, III and IV plan, respectively, to repurchase the Company’s issued Series B shares (Note 23).

As of March 31, 2012, all of the Company’s Series B shares were listed on the IDX and 72,476,785 ADS shares were listed on the NYSE and LSE (Note 21).

As of March 31, 2012, the Company’s outstanding bonds which was second IDR bond and issued on June 25, 2010 with a nominal amount of Rp.1,005 billion for a five-year period and Rp.1,995 billion for a ten-year period for Series A and Series B, respectively, were listed on the IDX (Note 18a).

d. Subsidiaries

As of March 31, 2012 and 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):

(i) Direct subsidiaries:

| Subsidiary/place of incorporation | Nature of
business/date of incorporation or acquisition by the
Company | Date of
commercial operation | Percentage
of effective ownership interest | | Total
assets before elimination | |
| --- | --- | --- | --- | --- | --- | --- |
| | | | March 31,
2012 | December
31, 2011 | March 31,
2012 | December
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 | 60,854 | 58,723 |
| PT Dayamitra Telekomunikasi ( “Dayamitra” ), Jakarta, Indonesia | Telecommunication/ May 17, 2001 | 1995 | 100 | 100 | 3,572 | 3,264 |
| PT Multimedia Nusantara ( “Metra” ), Jakarta,
Indonesia | Multimedia and line telecommunication services/May 9,
2003 | 1998 | 100 | 100 | 2,473 | 1,955 |
| PT Telekomunikasi Indonesia International
( “TII” ) Jakarta,
Indonesia | Telecommunication/ July 31, 2003 | 1995 | 100 | 100 | 2,322 | 2,279 |
| PT Pramindo Ikat Nusantara ( “Pramindo” ), Jakarta,
Indonesia | Telecommunication construction and services/ August 15, 2002 | 1995 | 100 | 100 | 1,563 | 1,601 |

F-11

1. GENERAL (continued)

d. Subsidiaries (continued)

(i) Direct subsidiaries: (continued)

| Subsidiary/place of incorporation | Nature of
business/ date of incorporation or acquisition by the
Company | Date of
commercial operation | Percentage
of effective ownership interest | | Total
assets before elimination | |
| --- | --- | --- | --- | --- | --- | --- |
| | | | March 31,
2012 | December
31, 2011 | March 31,
2012 | December
31, 2011 |
| PT Indonusa Telemedia ( “Indonusa” ), Jakarta,
Indonesia | Pay television and content services/ May 7,
1997 | 1997 | 100
(including through 0.46% ownership by Metra) | 100
(including through 0.8% ownership by Metra) | 842 | 714 |
| 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 | 425 | 384 |
| PT Napsindo Primatel Internasional ( “Napsindo” ) Jakarta,
Indonesia | Telecommunication - provides Network Access Point (NAP),
Voice Over Data (VOD) and other related services/ December 29,
1998 | 1999;
ceased operation on January 13, 2006 | 60 | 60 | 5 | 5 |

(ii) Indirect subsidiaries:

| Subsidiary/place of incorporation | Nature of
business/ date of incorporation or acquisition by the
Company | Date of
commercial operation | Percentage
of effective ownership interest | | Total
assets before elimination | |
| --- | --- | --- | --- | --- | --- | --- |
| | | | March 31,
2012 | December
31, 2011 | March 31,
2012 | December
31, 2011 |
| 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 Company | 100
(including through 51% ownership by Company | 899 | 787 |
| 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 | 100 | 616 | 614 |
| PT Telekomunikasi Indonesia International Pte. Ltd., Singapore | Telecommunication/ December 6, 2007 | 2008 | 100 | 100 | 423 | 431 |
| PT Administrasi Medika (“ Ad
Medika ”), Jakarta,
Indonesia | Heatlh insurance administration services/ February 25,
2010 | 2010 | 75 | 75 | 102 | 83 |
| PT Finnet Indonesia (“ Finnet ”), Jakarta,
Indonesia | Banking data and communication/ October 31,
2005 | 2006 | 60 | 60 | 86 | 83 |

F-12

1. GENERAL (continued)

d. Subsidiaries (continued)

(ii) Indirect subsidiaries: (continued)

| Subsidiary/place of incorporation | Nature of
business/ date of incorporation or acquisition by the
Company | Date of
commercial operation | Percentage
of effective ownership interest | | Total
assets before elimination | |
| --- | --- | --- | --- | --- | --- | --- |
| | | | March 31,
2012 | December
31, 2011 | March 31,
2012 | December
31, 2011 |
| Telekomunikasi Indonesia International
Ltd., Hongkong | Telecommunication/ December 8, 2010 | 2010 | 100 | 100 | 79 | 56 |
| PT Metra-Net (“ Metra-Net ”) Jakarta,
Indonesia | Multimedia portal service/April 17, 2009 | 2009 | 100 | 100 | 39 | 41 |
| 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 | 65 | 8 | 8 |
| Aria West International Finance B.V. (“ AWI
BV ”), The Netherlands | Established to engaged in rendering services in the field
of trade and finance services/ June 3, 1996 | 1996;
ceased operation on July 31, 2003 | 100 | 100 | 0 | 0 |
| 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 | 65 | 0 | 0 |

(a) Indonusa

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, the Company agreed to the conversion of debt of Rp.175 billion (debt to equity swap) into shares issued and fully paid capital to become Rp.552 billion.

On October 20, 2011, based on the Circular Meeting of Stockholders of Indonusa as covered by notarial deed No. 13 of Ashoya Ratam, S.H., LLM., dated October 20, 2011, the Company agreed to increase shares issued and fully paid capital of Rp.96 billion. (b) GSD On December 27, 2011, GSD established a subsidiary with Yayasan Kesehatan (“Yakes”), an affiliated company of the Company, called PT Telkom Landmark Tower (“TLT”) with 55% ownership. TLT will engage in providing construction and trading, services for property development and management. As of March 31, 2012, the deed of establishment was yet to be approved by the Minister of Justice of the Republic of Indonesia. On February 7, 2012, GSD established a subsidiary with Yakes, an affiliated company of the Company, called PT Graha Yasa Selaras (“GYS”) with 51% ownership. GYS will engage in tourism business. As of March 31, 2012, the deed of establishment was yet to be approved by the Minister of Justice of the Republic of Indonesia. For three months period ended March 31, 2012, GYS had no financial and operational activities.

F-13

1. GENERAL (continued)

d. Subsidiaries (continued)

(c) Metra

Based on notarial deed No. 2 dated January 3, 2012 of Sjaaf De Carya Siregar, S.H., Infomedia’s stockholder issued 17,142,857 shares which amounted to Rp 9 billion. Metra, a stockholder of Infomedia, bought all the newly issued shares. As a result, the Company’s ownership in Infomedia is diluted to 49%.

e. Authorization of the consolidated financial statements

The consolidated financial statements were authorized for issue by the Board of Directors on April 25, 2012.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements of the Company and its subsidiaries have been prepared in accordance with Indonesian Financial Accounting Standars (“IFAS”) and Regulation of the Capital Market and Financial Institution Supervisory Board (“Badan Pengawas Pasar Modal dan Lembaga Keuangan” or Bapepam-LK) No. VIII.G.7 regarding “Financial Statements Presentation Guidelines” and Circular Letter No. SE-02/PM/2002 regarding “Financial Statements Presentation Guidelines for Issuers or Public Companies in Telecommunication Industry” and KEP-554/BL/2010 regarding the Amendment Regulation No. VIII.G.7 and Circular Letter No. SE-03/BL/2011 regarding “Financial Statements Presentation and Disclosure Guidelines for Issuers and Public Company”.

a. Basis of preparation of financial statements

The consolidated financial statements, except for the consolidated statements of cash flows, are prepared on the accrual basis of accounting. The measurement basis used is historical cost, except for available-for sale financial assets.

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 billions of Indonesian Rupiah (“Rp.”), unless otherwise stated.

The Company has reclassified non-controlling interest as at December 31, 2010 amounting to Rp.11,996 billion as part of equity and presented the consolidated statement of financial position as at the beginning of the comparative period.

On January 1 , 2012, the Company and its subsidiaries adopted new and revised statements of financial accounting standards (“Pernyataan Standar Akuntansi Keuangan” or “PSAK”) and interpretations of statement of financial accounting standards (“Interpretasi Standar Akuntansi Keuangan” or “ISAK”) that are mandatory for application from that date. Changes to the Company and its subsidiaries’ accounting policies have been made as required, in accordance with the transitional provisions in the respective standards and interpretations.

F-14

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Basis of preparation of financial statements (continued)

The adoption of these new and revised standards and interpretations did not result in substantial changes to the Company and its subsidiaries’ accounting policies and had no material effect on the amounts reported for the current or prior financial periods:

· PSAK 10 (Revised 2010), “The Effects of Changes in Foreign Exchange Rates”

· PSAK 18 (Revised 2010), “Accounting and Reporting by Retirement Benefit Plans”

· PSAK 24 (Revised 2010), “Employee Benefits”

· PSAK 28 (Revised 2010), “Accounting for Loss Insurance”

· PSAK 33 (Revised 2011), “Stripping Activities and Environmental management in General Mining”

· PSAK 34 (Revised 2010), “Construction Contracts”

· PSAK 36 (Revised 2010), “Accounting for Life Insurance”

· PSAK 45 (Revised 2010), “Financial Reporting for Non-Profit Organizations”

· PSAK 46 (Revised 2011), “Income Taxes”

· PSAK 50 (Revised 2010), “Financial Instruments: Presentation”

· PSAK 53 (Revised 2010), “Share-based Payments”

· PSAK 56 (Revised 2011), “Earning per Share”

· PSAK 60, “Financial Instruments: Disclosures”

· PSAK 61, “Accounting for Government Grants and Disclosures of Government Assistance”

· PSAK 62, “Insurance Contracts”

· PSAK 63, “Financial Reporting in Hyperinflationary Economies”

· PSAK 64, “Exploration and Evaluation of Mineral Resources”

· ISAK 13, “Hedges of a Net Investment in a Foreign Operation”

· ISAK 15 - PSAK 24, “The Limit on a Defined Benefit Asset, Minimum Funding

Requirements and their Interaction

· ISAK 16, “Service Concession Arrangements”

· ISAK 18, “Government Assistance - No Specific Relation to Operating Activities”

· ISAK 19, “Applying the Restatement Approach under PSAK 63: Financial Reporting in Hyperinflationary Economies”

· ISAK 20, “Income Taxes - Changes in the Tax Status of an Entity or its Shareholders”

· ISAK 22, “Service Concession Arrangements : Disclosure”

· ISAK 23, “Operating Leases - Incentives”

· ISAK 24, “Evaluating the Substance of Transactions Involving the Legal Form of a lease”

F-15

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Basis of preparation of financial statements (continued)

The withdrawals of these standards and interpretations did not result in significant changes to the Company and its subsidiaries’ accounting policies and had no material effect on the amounts reported for the current or prior financial year:

· PSAK 11, “Translation of Financial Statements in Foreign Currencies”

· PSAK 27, “Accounting for Cooperatives”

· PSAK 29, “Accounting for Oil and Gas”

· PSAK 39, “Accounting for Joint Operations”

· PSAK 52, “Reporting Currencies”

· ISAK 4, “Allowable Alternative Treatment of Foreign Exchange Differences”

The following withdrawals of accounting standards and interpretations have been published and are mandatory for the financial year beginning on or later January 1, 2012:

· ISAK 21, “Real Estate Construction Agreement”

· P PSAK 7, “ Withdrawals of PSAK 44: Accounting for Real Estate Development Activity ”

· PPSAK 10, “Withdrawals of PSAK 51: Accounting for Quasi-Reorganization”

The Company and its subsidiaries are still assessing the impact of withdrawals of those standards and interpretations on the financial statements.

b. Principles of consolidation

The consolidated financial statements include the asset and liabilities 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 govern the financial and operating policy of 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 that are no longer consolidated from the date control ceases.

Intercompany balances and transactions have been eliminated in the consolidated financial statements.

c. Transactions with related parties

The Company and its subsidiaries have transactions with related parties. The definition of related parties used is in accordance with PSAK 7 (Revised 2010), “Related Party Disclosures”. The parties which are considered as a related party are a person or entity that is related to the entity that is preparing its financial statements.

The Company and its subsidiaries have applied the exemption in PSAK 7 (Revised 2010) on disclosing the extent of detail in relation to related party transactions and outstanding balances, including commitments, with government-related entities.

F-16

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

c. Transactions with related parties (continued)

Key management personnel are identified as the persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of the Company and its subsidiaries. The related-party status extends to the key management of the subsidiaries to the extent they direct the operations of subsidiaries with minimal involvement from the Company’s management.

d. Business combinations

The acquisition of businesses is accounted for using the acquisition method of accounting. The consideration transferred is measured at fair value, which is the aggregate of the fair values of the assets transferred, liabilities incurred or assumed and the equity instruments issued in exchange for control of the acquiree. Acquisition related costs are expensed as incurred. The acquirees identi fi able assets and liabilities are recognised at their fair value at the acquisition date.

Goodwill arising on acquisition is recognised as an asset and measured at cost representing the excess of the aggregate of the consideration, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirers previously held equity interest in the acquiree (if any) over the net of the fair values of the identi fia ble assets and liabilities at the date of acquisition.

Non-controlling interests that entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests proportionate share of the recognized amounts of the acquirees identifiable net assets. The choice of measurement basis is made on a transaction by transaction basis.

When the consideration in a business combination includes contingent consideration, it is measured at its acquisition date fair value. Contingent consideration is classified either as equity or a financial liability amounts classified as a financial liability are subsequently remeasured to fair value recognized in profit or loss or when adjustments are recorded outside the measurement period. Changes in the fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the measurement period, which cannot exceed one year from the acquisition date, about facts and circumstances that existed at the acquisition date.

For the purpose of impairment testing, assets are grouped at the lowest levels for which there are separately identifiable cash flows, known as cash-generating unit. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of the asset in the unit. Impairment losses recognised for goodwill are not reversed in a subsequent period.

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 equity section.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing the value in use, the estimated future cash flows are discounted to the present value using a pre-tax discount rate that reflects current market assesments of the time value of money and the risks spesific to the asset for which the estimate of future cash flows have not been adjusted.

F-17

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

e. Cash and cash equivalents

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

f. Investments 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 after initially being recognized at cost. 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.

The Company and its subsidiaries determine at each reporting date whether there is any objective evidence that the investment in the associate is impaired. If in this case, the Company and its subsidiaries calculate the amount of impairment as the difference between the recoverable amount of the associates and its carrying value and recognises the amount adjacent to the share of profit (loss) of associates company in the consolidated statement of comprehensive income.

These assets are included in long-term investments in the consolidated statement of financial position.

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 equity section.

g. Trade and other receivables

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

F-18

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

h. Inventories

Inventories consist of components and modules, which are subsequently expensed or transferred to property, plant and equipment upon use. Components and modules represent telephone terminals, cables, transmission installation spare parts and other spare parts. 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. The costs of inventories comprise of the purchase price, import duties, other taxes, transport, handling and other costs directly attributable to the it’s acquisition. Inventories are stated at the lower of cost and net realizable value. Net realizable value is the estimate of selling price less the costs to sell.

Cost is determined using the weighted average method for components, SIM cards, RUIM cards, handsets, set top box, wireless broadband modem 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 general and administrative expense in the period in which the reversal occurs.

Provision for obsolescence is primarily based on the estimated forecast of future usage of these items.

i. Prepaid expenses

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

j. Assets held for sale

Assets (or disposals groups) are classified as assets held for sale when their carrying amount is to be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable. They are stated at the lower of carrying amount and fair value less costs to sell.

Assets that meet the criteria to be classified as held for sale are reclassified from property, plant and equipment and depreciation on such assets is ceased.

k. Intangible assets

Intangible assets comprised of intangible assets from subsidiaries or business acquisitions, licenses ( 3G and Broadband Wireless Access ) 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.

F-19

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

k. Intangible assets (continued)

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

	Years
Licenses	10
Other intangible assets	2-10

l. Property, plant and equipment - direct acquisitions

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

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.

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
Customer
Premise Equipment (“CPE”)	10
Other
equipment	5

Depreciation or amortization method, useful lives and residual value of an asset should be reviewed at least at each financial year-end and adjusted if appropriate.

F-20

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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

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 fair value less cost to sell 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.

When assets are retired or otherwise disposed of, their cost and the related accumulated depreciation are eliminated from the consolidated statement of financial position, 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.

m. 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 assets 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.

F-21

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

m. Leases (continued)

Leased assets are depreciated using the same method with and based on the useful lives as estimated for directly acquired property, plant and equipment. However, if there is no reasonable certainty that the Company and its subsidiaries will obtain ownership by the end of the lease term, the leased assets are fully depreciated over the shorter of the lease term and their economic useful lives.

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.

n. Deferred charges for land rights

Costs incurred to process and extend land rights held by the Company and its subsidiaries are deferred and amortized using the straight-line method over the term of the land rights.

o. Trade payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade payable s are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities.

Trade payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest menthod.

p. Borrowings

Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the consolidated statement of comprehensive income over the period of the borrowings using the effective interest method.

Fees paid on the establishment of loan facilities are recognized as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be draw n down, the fee is capitalized as a pre-payment for liquidity services and amortized over the period of the facility which it relates.

q. 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:

F-22

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

q. Foreign currency translation (continued)

| | The
Company and its subsidiaries — March 31, 2012 | | December
31, 201 1 | |
| --- | --- | --- | --- | --- |
| | Buy | Sell | Buy | Sell |
| United
States Dollars (“US$”) 1 | 9,139 | 9,149 | 9,060 | 9,075 |
| Euro
1 | 12,195 | 12,210 | 11,706 | 11,727 |
| Yen
1 | 111.23 | 111.38 | 116.69 | 116.96 |

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 2l).

r. Revenue and expense recognition

i. 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. Based on reviews of historical information and customer trends, the Company determined the expected term of the customer relationships in 2011 and 2010 is 10 years, respectively. Revenues from usage charges are recognized as customers incur the charges. Monthly subscription charges are recognized as revenues when incurred by subscribers.

ii. Cellular and fixed wireless telephone revenues

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

· Airtime and charges for value added services are recognized based on usage by subscribers.

· Monthly subscription charges are recognized as revenues when incurred by subscribers.

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

F-23

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

r. Revenue and expense recognition (continued)

iii. Interconnection revenues

The revenues from network interconnection with other domestic and international telecommunications carriers are recognized monthly on the basis of the actual recorded traffic for the month. Interconnection revenues consist of revenues 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).

iv. Data, internet and information technology services revenues

Revenues from data communication and internet are recognized based on service activity and performance which is measured by duration of internet usage or based on the fixed amount charges depending on the arrangement s with customers.

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

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

v. 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.

vi. Other telecommunications services revenues

Revenues from other telecommunications services consist of Revenue-Sharing Arrangements (“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 revenues, while a portion of the investors’ share of the revenues from the RSA is recorded as finance costs with the balance treated as a reduction of the obligation under RSA.

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

vii. Multiple-element arrangements

Where two or more revenue-generating activities or deliverables are sold under a single arrangement, each deliverable that is considered to be a separate unit of accounting is accounted for separately. The total revenue is allocated to each separately identifiable component based on the relative fair value of each component and the appropriate revenue recognition criteria are applied to each component as described above.

viii. Expenses

Expenses are recognized on an accruals basis.

F-24

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

s. Employee benefits

i. Short-term employee benefits

All short term employee benefits which consist of salaries and related benefits, vacation pay, incentives and other short term benefits shall be recognized as expense on undiscounted basis when employees have rendered service to the Company and its subsidiaries.

ii. 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 interest rate s of government bond s that are denominated in the currencies in which the benefits will be paid and that have terms to maturity approximating the terms of the related retirement benefit obligation . Government bonds are used as there is no deep market for high quality corporate bonds.

Plan assets are assets that are held by the pension and post-retirement health care benefit plans. These assets are measured at fair value at the end of the reporting period, which is based on securities quoted market price information. The amount of prepaid pension costs that can be recognized is limited to the total of any unrecognized past service costs, unrecognized actuarial losses and the present value of economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan.

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 as they become payable.

iii. Long Service Awards (“LSA”) and Long Service Leave (“LSL”)

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

F-25

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

s. Employee benefits (continued)

iv. Early retirement benefits

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

v. Pre-retirement benefits

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

vi. Other post-retirement benefits

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

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

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

t. Income tax

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 other comprehensive income.

The 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. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. Where appropriate, it establishes provisions based on the amounts expected to be paid to the tax authorities.

F-26

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

t. Income tax (continued)

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 or substantively enacted tax rates and tax laws at each reporting date which are expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

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

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

u. Financial instruments

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.

The Company and its subsidiaries classify financial instruments into financial assets and financial liabilities. Financial assets and liabilities are recognized initially at fair value including transaction costs. These are subsequently measured either at fair value or amortized cost using the effective interest method in accordance with their classification.

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.

The Company’s financial assets include cash and cash equivalents, available-for sale financial assets, trade receivables, other receivables, other current financial assets and other non-current financial assets.

F-27

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

u. Financial instruments (continued)

i. Financial assets (continued)

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. No financial assets were classified as financial assets at fair value through profit or loss as of March 31, 2012 and 2011.

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, cash and cash equivalents, trade receivables, other receivables, other current financial assets and other non-current financial assets.

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

c. Held-to-maturity financial assets

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities 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.

No financial assets were classified as held-to-maturity financial assets as of March 31, 2012 and December 31, 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 available-for sale financial assets.

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

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 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 of comprehensive income.

F-28

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

u. Financial instruments (continued)

i. Financial assets (continued)

d. Available-for-sale financial assets (continued)

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

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.

The Company’s financial liabilities include trade payables, other payables, accrued expenses , loans, bonds and notes .

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, 2012 and December 31, 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.

iii. Offsetting financial instruments

Financial assets and liabilities are offset and the net amount is reported in the statement of financial position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.

v. Treasury Stock

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

F-29

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

w. 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.

x. Earnings per share and earnings per ADS

Basic earnings per share are computed by dividing income for the year 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.

The Company does not have potentially dilutive ordinary shares.

y. Segment information

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

z. Critical Accounting Estimates and Judgements

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The Company and its subsidiaries make estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.

i. Retirement benefits

The present value of the retirement benefits obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions. The assumptions used in determining the net cost (income) for pensions include the discount rate. Any changes in these assumptions will impact the carrying amount of retirement benefits obligations.

The Company and its subsidiaries determine the appropriate discount rate at the end of each reporting period. This is the interest rate that should be used to determine the present value of estimated future cash outflows expected to be required to settle the obligations. In determining the appropriate discount rate, the Company and its subsidiaries consider the interest rates of government bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating the terms of the related retirement benefit obligation.

F-30

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

z. Critical Accounting Estimates and Judgements (continued)

i. Retirement benefits (continued)

If there is an improvement in the ratings of such government bonds or a decrease in interest rates as a result of improving economic conditions, there could be a material impact on the discount rate used in determining the post-employment benefit obligations.

Other key assumptions for retirement benefit obligations are based in part on current market conditions. Additional information is disclosed in Notes 3 3 , 3 4 and 3 5 .

ii Provision for impairment of receivables

The Company and its subsidiaries assess whether there is objective evidence that trade receivables have been impaired at the end of each reporting period. Provision for impairment of receivables is calculated based on a review of the current status of existing receivables and historical collections experience. Such provisions are adjusted periodically to reflect the actual and anticipated experience.

iii. Income taxes

Significant judgement is required in determining the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain. The Company and its subsidiaries recognize liabilities for anticipated tax audit issues based on estimates whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred tax income tax assets and liabilities in the period in which such determination is made.

iv. Impairment of non-financial assets

The Company and its subsidiaries tests annually whether goodwill is impaired. Other non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset exceeds its recoverable amount. The recoverable amount of an asset or a cash generating unit is determined based on the higher of its fair value less costs to sell and its value in use, calculated on the basis of management’s assumptions and estimates.

In determining value i n use, the Company and its subsidiaries apply management judgement in establishing forecasts of future operating performance, as well as the selection of growth rates and discount rates. These judgements are applied based on our understanding of historical information and expectations of future performance. Changing the key assumptions, including the discount rates or the growth rate assumptions in the cash flow projections, could materially affect the value in use calculations.

For the year ended December 31, 2011, the Company recognized Rp.563 billion, of impairment loss on property, plant and equipment in relation to the fixed wireless services. A 1% increase in the discount rate used would result in an increase in impairment loss of approximately Rp.907 billion. However the recoverable amount of the fixed wireless CGU is most sensitive to whether management will be able to implement its plans, including the full mobility initiative, such that it generates positive cash flows and returns to profitablility as projected. If the performance of the fixed wireless CGU continues to decline or if management’s initiatives are not performing as expected in the next financial year, analysis will be required to assess whether there will be further impairment next year (Note 1 0 c).

F-31

3. CASH AND CASH EQUIVALENTS

| | March 31,
2012 | December
31, 2011 |
| --- | --- | --- |
| Cash on hand | 19 | 6 |
| Cash in banks | | |
| Related parties | | |
| Rupiah | | |
| PT Bank Mandiri (Persero) Tbk (“Bank
Mandiri”) | 435 | 687 |
| PT Bank Negara Indonesia (Persero) Tbk
(“BNI”) | 378 | 302 |
| PT Bank Rakyat Indonesia (Persero) Tbk
(“BRI”) | 136 | 101 |
| Others | 27 | 18 |
| | 976 | 1,108 |
| Foreign currencies | | |
| Bank Mandiri | 242 | 198 |
| BNI | 24 | 48 |
| Others | 1 | 2 |
| | 267 | 248 |
| Sub-total | 1,243 | 1,356 |
| Third parties | | |
| Rupiah | | |
| Others (each below Rp.50 billion) | 150 | 115 |
| | 150 | 115 |
| Foreign currencies (each below Rp.50
billion) | 107 | 69 |
| Sub-total | 257 | 184 |
| Total cash in banks | 1,500 | 1,540 |
| Time deposits | | |
| Related parties | | |
| Rupiah | | |
| BNI | 2,777 | 2,418 |
| BRI | 2,142 | 2,620 |
| PT Bank Tabungan Negara (Persero) Tbk
(“BTN”) | 457 | 446 |
| Bank Mandiri | 211 | 448 |
| PT Bank Pembangunan Daerah Jawa Barat dan Banten (“Bank
Jabar”) | 168 | 145 |
| PT Bank Syariah Mandiri (“BSM”) | 75 | 77 |
| PT Bank BRI Syariah | 30 | 30 |
| PT Bank Pembangunan Daerah Jawa Timur | - | 2 |
| | 5,860 | 6,186 |
| Foreign currencies | | |
| BRI | 303 | 299 |
| Bank Mandiri | 137 | - |
| BNI | 51 | 7 |
| | 491 | 306 |
| Sub-total | 6,351 | 6,492 |

F-32

3. CASH AND CASH EQUIVALENTS (continued)

| | March 31,
2012 | December
31, 2011 |
| --- | --- | --- |
| Time deposits (continued) | | |
| Third parties | | |
| Rupiah | | |
| PT Bank Central Asia Tbk ( “ Bank BCA”) | 1,565 | - |
| PT Bank OCBC NISP Tbk (“OCBC NISP” merge d
with PT Bank OCBC Indonesia) | 300 | - |
| PT Bank Mega Tbk (“Bank Mega”) | 180 | 180 |
| PT Bank Bukopin Tbk (“Bank Bukopin”) | 155 | 181 |
| PT Bank Tabungan Pensiunan Nasional Tbk | 98 | 190 |
| PT Bank Muamalat Indonesia | 95 | 95 |
| PT Pan Indonesia Bank Tbk | 90 | 90 |
| Deutsche Bank AG (“DB”) | 30 | 78 |
| Others (each below Rp.50 billion) | 57 | 65 |
| | 2,570 | 879 |
| Foreign currencies | | |
| PT Bank Standard Chartered Bank | 388 | - |
| OCBC NISP | 278 | 641 |
| BCA | 56 | - |
| Others (each below Rp.50 billion) | 1 | 76 |
| | 723 | 717 |
| Sub-total | 3,293 | 1,596 |
| Total time deposits | 9,644 | 8,088 |
| Grand Total | 11,163 | 9,634 |

| Interest rates per annum on time deposits are as
follows: | March 31,
2012 | December
31, 2011 |
| --- | --- | --- |
| Rupiah | 2.25% -
8.50% | 2.85% -
9.25% |
| Foreign currencies | 0.08 -
3.00% | 0.05% -
3.00% |

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 36 for details of related party transactions.

F-33

4. 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

| The Government | March 31,
2012 — 1,061 | | December
31, 2011 — 810 | |
| --- | --- | --- | --- | --- |
| CSM | 78 | | 86 | |
| PT Indonesian Satellite Corporation Tbk
(“Indosat”) | 26 | | 36 | |
| PT Patra Telekomunikasi Indonesia (“Patrakom”) | 34 | | 31 | |
| Others (each below Rp.30 billion) | 29 | | 52 | |
| Total | 1,228 | | 1,015 | |
| Less p rovision for impairment of
receivables | (112 | ) | (83 | ) |
| Net | 1,116 | | 932 | |

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 | March 31,
2012 — 5,624 | | December
31, 2011 — 5,255 | |
| --- | --- | --- | --- | --- |
| Overseas international carriers | 335 | | 377 | |
| Total | 5,959 | | 5,632 | |
| Less p rovision for impairment of
receivables | (1,812 | ) | (1,649 | ) |
| Net | 4,147 | | 3,983 | |

b. By age

(i) Related parties

| Up to 6 months | March 31,
2012 — 737 | | December
31, 2011 — 726 | |
| --- | --- | --- | --- | --- |
| 7 to 12 months | 292 | | 137 | |
| More than 12 months | 199 | | 152 | |
| Total | 1,228 | | 1,015 | |
| Less p rovision for impairment of
receivables | (112 | ) | (83 | ) |
| Net | 1,116 | | 932 | |

F-34

4. TRADE RECEIVABLES (continued)

b. By age (continued)

(ii) Third parties

| Up to 3 months | March 31,
2012 — 3,615 | | December
31, 2011 — 3, 153 | |
| --- | --- | --- | --- | --- |
| More than 3 months | 2,344 | | 2, 479 | |
| Total | 5,959 | | 5,632 | |
| Less p rovision for impairment of
receivables | (1,812 | ) | (1,649 | ) |
| Net | 4,147 | | 3,983 | |

c. By currency

(i) Related parties

| Rupiah | March 31,
2012 — 1,184 | | December
31, 2011 — 972 | |
| --- | --- | --- | --- | --- |
| U.S. Dollars | 44 | | 43 | |
| Total | 1,228 | | 1,015 | |
| Less p rovision for impairment of
receivables | (112 | ) | (83 | ) |
| Net | 1,116 | | 932 | |

(ii) Third parties

| Rupiah | March 31,
2012 — 5,174 | | December
31, 2011 — 4,829 | |
| --- | --- | --- | --- | --- |
| U.S. Dollars | 784 | | 802 | |
| Euro | 1 | | 1 | |
| Total | 5,959 | | 5,632 | |
| Less p rovision for impairment of
receivables | (1,812 | ) | (1,649 | ) |
| Net | 4,147 | | 3,983 | |

F-35

4. TRADE RECEIVABLES (continued)

d. Movements in the provision for impairment of receivables

| Beginning
balance | March 31,
2012 — 1,732 | | December
31, 2011 — 1,445 | |
| --- | --- | --- | --- | --- |
| Provision
recognized during the year (Note 28) | 193 | | 856 | |
| Receivables written-off | (1 | ) | (569 | ) |
| Ending
balance | 1,924 | | 1,732 | |

Receivables written-off are write-off s of third party’s trade receivables.

Management believes that the provision for impairment of receivables is adequate to cover losses on uncollectible trade receivable s .

Certain trade receivables of the Company’s subsidiaries have been pledged as collateral for lending agreements (Notes 15 and 19).

Refer to Note 36 for details of related party transactions.

5. INVENTORIES

| SIM cards, RUIM cards, set top box and prepaid voucher
blanks | March 31,
2012 — 446 | | December
31, 2011 — 238 | |
| --- | --- | --- | --- | --- |
| Components | 366 | | 329 | |
| Modules | 303 | | 297 | |
| Total | 1,115 | | 864 | |
| Provision for obsolescence | | | | |
| Components | (15 | ) | (15 | ) |
| Modules | (96 | ) | (91 | ) |
| Total | (111 | ) | (106 | ) |
| Net | 1,004 | | 758 | |
| Movements
in the provision for impairment are as
follows: | | | | |
| | March 31,
2012 | | December
31, 2011 | |
| Beginning
balance | 106 | | 83 | |
| Provisions
of inventory recognized during the year (Note 28) | 5 | | 27 | |
| Inventories written-off | (0 | ) | (4 | ) |
| Ending
balance | 111 | | 106 | |

F-36

5. INVENTORIES (continued)

The cost of inventories recognised as expense and included in o perations, maintenance, and telecommunication services expenses (Note 2 7 ) as of March 31, 2012 and December 31, 2011 amounted to Rp.155 billion and Rp.818 billion, respectively.

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

Certain inventories of the Company’s subsidiaries have been pledged as collateral for lending agreements (Notes 15 and 19).

As of March 31, 2012 and December 31, 2011 , modules and components held by the Company and its subsidiaries have been insured against fire, theft, all industrial risks, loss risk during delivery and other specific risks with the total sum insured as of March 31, 2012 and December 31, 2011 is amounting to Rp.228 billion and Rp.235 billion, respectively.

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

6. ADVANCES AND PREPAID EXPENSES

| | March 31,
2012 | December
31, 2011 |
| --- | --- | --- |
| Frequency license (Notes 40c.i and 40c.iii) | 1,921 | 2,211 |
| Rental | 497 | 530 |
| Salaries | 396 | 201 |
| Advances | 175 | 184 |
| Others (each below Rp.50 billion) | 140 | 168 |
| Total | 3,129 | 3,294 |

Refer to Note 36 for details of related party transactions.

7. ASSETS HELD FOR SALE

This account represents the carrying amount of equipment to be exchanged with equipment of Nokia Siemens Network Oy with a total agreed price of US$69 . 97 million. The equipment will be used as a part of the settlement for the exchange of equipment with this Compan y .

F-37

8. LONG-TERM INVESTMENTS

| | March 31, 2012 — Percentage of ownership | Beginning balance | Share of (loss) profit of associated
company | | Dividend | Translation adjustment | Ending balance |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Long-term investments in associated
companies: | | | | | | | |
| Scicom a | 29.71 | 101 | (1 | ) | - | 1 | 101 |
| Patrakom b | 40.00 | 43 | 1 | | - | - | 44 |
| PT Melon Indonesia (“Melon”) c | 51.00 | 44 | (1 | ) | - | - | 43 |
| CSM d | 25.00 | 26 | - | | - | - | 26 |
| PSN e | 22.38 | - | - | | - | - | - |
| | | 214 | (1 | ) | - | 1 | 214 |
| Other long-term investments | | 21 | - | | - | - | 21 |
| | | 235 | (1 | ) | - | 1 | 235 |

| | December 31, 2011 — Percentage of ownership | Beginning balance | Addition | | Share of (loss) profit of associated
company | | Translation adjustment | | Ending balance |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Long-term investments in associated
companies: | | | | | | | | | |
| Scicom a | 29.71 | 109 | (1 | ) | (7 | ) | (0 | ) | 101 |
| Melon c | 51.00 | 51 | (7 | ) | - | | - | | 44 |
| Patrakom b | 40.00 | 40 | 4 | | (1 | ) | - | | 43 |
| CSM d | 25.00 | 33 | (6 | ) | - | | (1 | ) | 26 |
| PSN e | 22.38 | - | - | | - | | - | | - |
| | | 233 | (10 | ) | (8 | ) | (1 | ) | 214 |
| Other long-term investments | | 21 | - | | - | | - | | 21 |
| | | 254 | (10 | ) | (8 | ) | (1 | ) | 235 |

a Scicom is engaged in providing call center services in Malaysia. b Patrakom is engaged in providing satellite communication system services, related services and facilities to companies in the petroleum industry. c Melon is engaged in providing Digital Content Exchange Hub services. As a result of the existence of substantive participating rights held by the other venturer over the significant financial and operating policies of Melon , Metra does not have control over Melon. d CSM is engaged in providing Very Small Aperture Terminal (“VSAT”), network application services and consulting services on telecommunications technology and related facilities. e 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.

F-38

9. PROPERTY, PLANT AND EQUIPMENT

	January 1, 2012	Additions		Deductions	Reclassifications		March 31, 2012
At cost:
Direct acquisitions assets
Land	842	2		-	1		845
Buildings	3,417	1		-	74		3,492
Leasehold improvements	650	5		-	16		671
Switching equipment	25,470	5		693	395		25,177
Telegraph, telex and data communication
equipment	20	-		-	-		20
Transmission installation and equipment	78,58 4	132		740	2,026		80,002
Satellite, earth station and equipment	7,069	3		-	77		7,149
Cable network	26,392	403		12	(254	)	26,529
Power supply	9,33 9	4		-	271		9,614
Data processing equipment	8,082	68		3	(54	)	8,093
Other telecommunications peripherals	472	-		-	(32	)	440
Office equipment	727	6		-	(19	)	714
Vehicles	84	-		-	(9	)	75
Other equipment	111	-		-	(7	)	104
Property under construction:
Buildings	139	44		-	(65	)	118
Leasehold improvements	3	14		-	(16	)	1
Switching equipment	70	(110	)	-	131		91
Transmission installation and Equipment	826	2,511		-	(2,210	)	1,127
Satellite, earth station and equipment	21	38		-	(39	)	20
Cable network	42	3		-	-		45
Power supply	30	135		-	(136	)	29
Data processing equipment	72	177		-	(115	)	134
Leased assets
Transmission installation and equipment	305	-		-	(98	)	207
Data processing equipment	344	-		-	-		344
Office equipment	27	-		-	(1	)	26
Vehicles	48	-		-	-		48
CPE assets	22	-		-	-		22
RSA assets:
Switching equipment	81	-		-	-		81
Transmission installation and equipment	16	-		-	(5	)	11
Cable network	380	-		-	(10	)	370
Other telecommunications peripherals	2	-		-	-		2
Total	163,68 7	3,441		1,448	(79	)	165,601

F-39

9. PROPERTY, PLANT AND EQUIPMENT (continued)

	January 1, 2012	Additions	Deductions	Reclassifications		March 31, 2012
Accumulated depreciation and
impairment:
Direct acquisitions assets
Buildings	1,6 71	34	-	(4	)	1,701
Leasehold improvements	502	18	-	-		520
Switching equipment	17,4 12	342	543	428		17,639
Telegraph, telex and data communication
equipment	17	-	-	-		17
Transmission installation and equipment	35, 169	1,930	-	(13	)	37,086
Satellite, earth station and equipment	4,1 35	129	385	(54	)	3,825
Cable network	16,9 52	238	11	(256	)	16,923
Power supply	4,9 16	313	-	(19	)	5,210
Data processing equipment	6,1 89	248	3	(181	)	6,253
Other telecommunications peripherals	35 3	2	-	(34	)	321
Office equipment	52 3	18	-	(9	)	532
Vehicles	7 4	1	-	(9	)	66
Other equipment	98	1	-	(7	)	92
Leased assets
Transmission installation and equipment	2 70	5	-	(2	)	273
Data processing equipment	217	13	-	-		230
Office equipment	9	1	-	-		10
Vehicles	47	-	-	-		47
CPE assets	9	1	-	-		10
RSA assets:
Switching equipment	33	2	-	-		35
Transmission installation and equipment	18	1	-	(5	)	14
Cable network	175	9	-	(7	)	177
Other telecommunications peripherals	1	-	-	-		1
Total	88,790	3,306	942	(172	)	90,982
Net Book Value	74,89 7					74,619

F-40

9. PROPERTY, PLANT AND EQUIPMENT (continued)

	January 1, 2011	Additions	Deductions		Reclassifications		December 31, 2011
At cost:
Direct acquisitions assets
Land	816	40	(14	)	-		842
Buildings	3,203	149	(66	)	131		3,417
Leasehold improvements	601	12	(5	)	42		650
Switching equipment	30,125	113	(5,565	)	797		25,470
Telegraph, telex and data communication
equipment	20	-	-		(0	)	20
Transmission installation and equipment	73,999	2,2 71	(829	)	3,143		78,58 4
Satellite, earth station and equipment	6,922	72	(0)		75		7,069
Cable network	24,541	1,491	(698	)	1,058		26,392
Power supply	8,269	46 6	(151	)	755		9,33 9
Data processing equipment	7,896	298	(480	)	368		8,082
Other telecommunications peripherals	494	6	(3	)	(25	)	472
Office equipment	644	95	(59	)	47		727
Vehicles	113	3	(3	)	(29	)	84
Other equipment	108	4	(1	)	0		111
Property under construction:
Buildings	58	148	-		(67	)	139
Leasehold improvements	91	82	-		(170	)	3
Switching equipment	1	1,851	-		(1,782	)	70
Transmission installation and equipment	288	6,051	-		(5,513	)	826
Satellite, earth station and equipment	27	164	-		(170	)	21
Cable network	6	38	-		(2	)	42
Power supply	40	704	-		(714	)	30
Data processing equipment	68	510	-		(506	)	72
Leased assets
Transmission installation and equipment	303	11	-		(9	)	305
Data processing equipment	298	68	-		(22	)	344
Office equipment	26	1	-		(0	)	27
Vehicles	53	-	(5	)	-		48
CPE assets	22	-	-		-		22
RSA assets:
Land	1	-	-		(1	)	-
Switching equipment	84	-	-		(3	)	81
Transmission installation and equipment	27	-	-		(11	)	16
Cable network	398	-	-		(18	)	380
Other telecommunications peripherals	4	-	-		(2	)	2
Total	159,546	14,64 8	(7,879	)	(2,628	)	163,68 7

F-41

9. PROPERTY, PLANT AND EQUIPMENT (continued)

	January 1, 2011	Additions	Impairments	Deductions		Reclassifications		December 31, 2011
Accumulated depreciation and
impairment:
Direct acquisitions assets
Buildings	1,576	104	2	(66	)	55		1,6 71
Leasehold improvements	443	64	-	(5	)	-		502
Switching equipment	20,91 2	2,695	-	(5,324	)	(871	)	17,4 12
Telegraph, telex and data communication
equipment	17	0	-	-		(0	)	17
Transmission installation and equipment	30,19 1	6,717	3 20	(511	)	(1,548	)	35, 169
Satellite, earth station and equipment	3,621	486	1 76	(0	)	(148	)	4,1 35
Cable network	15,529	1,075	39	(698	)	1,007		16,9 52
Power supply	3,85 5	1,252	12	(144	)	(59	)	4,9 16
Data processing equipment	5,819	1,079	13	(479	)	(243	)	6,1 89
Other telecommunications peripherals	367	13	1	(3	)	(25	)	35 3
Office equipment	50 9	63	-	(59	)	10		52 3
Vehicles	10 0	6	-	(3	)	(29	)	7 4
Other equipment	93	6	-	(1	)	(0	)	98
Leased assets
Transmission installation and equipment	251	2 3	-	-		(4	)	2 70
Data processing equipment	171	55	-	-		(9	)	217
Office equipment	4	5	-	-		(0	)	9
Vehicles	39	12	-	(4	)	-		47
CPE assets	7	2	-	-		-		9
RSA assets:
Land	1	-	-	-		(1	)	-
Switching equipment	30	6	-	-		(3	)	33
Transmission installation and equipment	22	4	-	-		(8	)	18
Cable network	154	35	-	-		(14	)	175
Other telecommunications peripherals	3	0	-	-		(2	)	1
Total	83,71 4	13,70 2	563	(7,297	)	(1,892	)	88,790
Net Book Value	75,83 2							74,89 7
a. Gains on disposal or sale of property, plant
and equipment

| Proceeds from sale of property, plant and
equipment | 2012 — 17 | | 2011 — 3 | |
| --- | --- | --- | --- | --- |
| Net book value | (1 | ) | (3 | ) |
| Exchange of property, plant and equipment -
net | 12 | | - | |
| Gains on disposal or sale of property, plant and
equipment | 28 | | 0 | |

F-42

9. PROPERTY, PLANT AND EQUIPMENT (continued)

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 were legally retained by BSI until the end of the KSO period which was on December 31, 2010. As of December 31, 2010, the net book value of these property, plant and equipment was Rp.710 billion. As at January 1, 2011, the legal rights on these property, plant and equipment was transferred to the Company , and the property, plant and equipment now reflected in the balances above.

(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 were legally retained by MGTI until the end of the KSO period which was on December 31, 2010. As of December 31, 2010, the net book value of this property, plant and equipment was Rp.161 billion. As at January 1, 2011, the legal rights on these property, plant and equipment was transferred to the Company , and the property, plant and equipment now reflected in the balances above.

c. Assets impairment

(i) As of December 31, 2011, the CGUs that generate cash inflows independently were fixed wireline, fixed wireless, cellular and others. There were indications of impairment in the fixed wireless business segment, including reporting a segment loss of Rp.1,433 billion for the year ended December 31, 2011, which was mainly due to increased competition in the fixed wireless market and that has resulted in lower average tariffs, declining active customers and declining average revenue per user (ARPU). The Company assessed the recoverable value of the assets in the cash generating unit (CGU) and determined that assets for the fixed wireless CGU were impaired at 31 December 2011 resulting in an impairment charge of Rp.563 billion being recognized in the consolidated statement of comprehensive income under ‘Depreciation and Amortisation’. The recoverable amount has been determined based on value-in-use (VIU) calculations. These calculations used pre-tax cash flow projections approved by management covering a five-year period and with cash flows beyond the five-year period extrapolated using a perpetuity growth rate. The cash flow projections reflect management’s expectations of revenue, EBITDA growth and operating cash flows on the basis that the fixed wireless CGU generates positive net cash flows from 2013 and returns to profitability in 2016. Management’s cash flow projection also incorporates management’s reasonable expectations for developments in macro economic conditions and market expectations for the Indonesian telecommunications industry. The projection assumes that management will receive appropriate licenses and effectively implement a full mobility initiative that will remove limitations in the existing service which can only be used by customers within a particular area code. Management applied a pre-tax discount rate of 11.4%, derived from the Company’s post-tax weighted average cost of capital and benchmarked to externally available data. The perpetuity growth rate used of 0% assumes that while subscriber numbers may continue to increase after five years, average revenue per user may decline such that only neglegible long term growth will be achieved in a competitive market.

If the performance of the fixed wireless CGU continues to decline or if management’s initiatives are not performing as expected in the next financial year, analysis will be required to assess whether there will be further impairment next year.

(ii) As of December 31, 201 1 , there were no events or changes in circumstances that would indicate that the carrying amount s of the Company’s fixed wireline business, cellular business and others may not be recoverable.

F-43

9. PROPERTY, PLANT AND EQUIPMENT (continued)

c. Assets impairment (continued)

(iii) As of March 31, 2012 and December 31, 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, 2012, there were no events or changes in circumstances that would indicate that the carrying amount of the Company’s satellites may not be recoverable.

d. Others

(i) Interest capitalized to property under construction amounted to Rp.nil for three months period ended March 31, 2012 and for the years ended December 31, 2011, respectively.

(ii) Foreign exchange loss capitalized as part of property under construction amounted to Rp.nil for three months period ended March 31, 2012 and for the years ended December 31, 2011, respectively.

(iii) In April 2011, Telkomsel decided to replace certain equipment (part of infrastructure) with a cost and net carrying amount of Rp.707 billion and Rp.189 billion, respectively, as part of a modernization program. Accordingly, Telkomsel changed the useful life of such equipment. The impact is an additional depreciation expense of Rp.154 billion charged to the 2011 consolidated statement of comprehensive income. Subsequently, in August 2011 and December 2011, part of the equipment with a cost of Rp.185 billion and Rp.399 billion, respectively, were derecognized. Upon derecognition, the equipment had been fully depreciated.

In 2011, due to the impact of changes in technology, damage and other causes, certain equipment and software (mainly part of infrastructure and supporting facilities) with a cost and a net carrying amount of Rp.4,126 billion and Rp.16 billion, respectively, were derecognized.

(iv) In May 2011, the useful life of Telkomsel’s certain equipment (part of supporting facilities) was changed from 10 years to 6 years to reflect its current economic life. The impact is an additional depreciation expenses of Rp.295 billion charged to the 2011 consolidated statements of comprehensive income.

(v) Exchange of property, plant and equipment:

· On January 24, 2011 and February 25, 2011, the Company and INTI entered into a purchase order of procurement and installation agreement for the Modernization of the Copper Cable Network through Optimization of Asset Copper Cable Network with Trade In Trade Off (TITO) mode for STO Cengkareng, STO Gandaria and STO Injoko amounting to Rp.96 billion and for STO Semanggi amounting to Rp.44 billion. In 2011, the Company has derecognised the copper cable network asset with a net book value of Rp. 0.1 b illion and recorded the fiber optic network asset of Rp.57 billion.

· In 2012, certain equipment (part of infrastructure) with a cost and a net carrying amount of Rp.434 billion and Rp.138 billion, respectively, were exchanged with equipment from Nokia Siemens Network Oy and Huawei with a total price of US$16 million.

· In 2012, certain equipment part of infrastructure) with a cost and a net carrying amount of Rp.412 billion and Rp.168 billion, respectively, are going to be exchanged with equipment from Nokia Siemens Network Oy and Huawei. Accordingly , these were reclassified to non-current assets held for sale (Note 7).

F-44

9. PROPERTY, PLANT AND EQUIPMENT (continued)

c. Others (continued)

(vi) 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 2012 and 2052. Management believes that there will be no difficulty in obtaining the extension of the land rights when they expire.

( vii ) As of March 31, 2012, the Company and its subsidiaries’ property, plant and equipment, except for land, were insured against fire, theft, earthquake and other specified risks. Total cost of assets being insured amounted to Rp.71.483 billion, which was covered by sum insured basis with a maximum loss claim of Rp.1.597 billion, US$28 million, EUR0.14 million and SGD6 million and on first loss basis of Rp.6.754 billion including business recovery of Rp.486 billion with the Automatic Reinstatement of Loss Clause. In addition, Telkom-1 and Telkom-2 were insured separately for US$14 million and US$37 million, respectively. Management believes that the insurance coverage is adequate to cover potential losses of the insured assets.

(v i ii) As of March 31, 2012, the completion of assets under construction was around 49.75% of the total contract value, with estimated dates of completion between April 2012 and June 2013. Management believes that there is no impediment to the completion of the construction in progress.

(ix) Certain property, plant and equipment of the Company’s subsidiaries have been pledged as collateral for lending agreements (Notes 15 and 19).

(x) 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 March 31, 2012 and December 30, 2011 are as follows:

| Year — 2012 | March 31,
2012 — 252 | | December
31, 2011 — 259 | |
| --- | --- | --- | --- | --- |
| 2013 | 172 | | 179 | |
| 2014 | 102 | | 110 | |
| 2015 | 43 | | 33 | |
| 2016 | 30 | | 23 | |
| Later | 33 | | 38 | |
| Total minimum lease payments | 632 | | 642 | |
| Interest | (124 | ) | (132 | ) |
| Net present value of minimum lease payments | 508 | | 510 | |
| Current maturities (Note 16a) | (193 | ) | (196 | ) |
| Long-term portion (Note
16b) | 315 | | 314 | |

F-45

10. ADVANCES AND OTHER NON-CURRENT ASSETS

Advances and other non-current assets as of March 31, 2012 and December 31, 2011 consist of:

| Year | March 31,
2012 | December
31, 2011 |
| --- | --- | --- |
| Advances for purchase of property, plant and
equipment | 1,888 | 2,017 |
| Prepaid rent - net of current portion (Note
6) | 1,231 | 1,143 |
| Deferred charges | 412 | 435 |
| Restricted cash | 212 | 164 |
| Security deposits | 55 | 54 |
| Others (each below Rp.50 billion) | 4 | 4 |
| Total | 3,802 | 3,817 |

Deferred charges represent deferred Revenue-Sharing Arrangements (“RSA”) charges, deferred Indefeasible Right of Use (“IRU”) Agreement charges, and deferred land rights charges. Total deferred charges amortization expense in March 31, 2012 and December 30, 2011 were amounted to Rp.21 billion and Rp.84 billion, respectively.

As of March 31, 2012 and December 30, 2011 restricted cash represents time deposits with original maturities of more than one year and cash pledged as collateral for bank guarantees for the USO contract (Note 40c.vi) and other contracts.

Refer to Note 36 for details of related party transactions.

11. INTANGIBLE ASSETS

(i) The changes in the carrying amount of goodwill, license and other intangible assets for three months period ended March 31, 2012 and for the years ended December 31, 2011 are as follows:

	Goodwill		Other intangible assets		License		Total
Gross carrying amount:
Balance, December 31, 2011	192		2,769		815		3,776
Addition - acquired separately:
The Company’s software	-		16		-		16
The subsidiaries’ software	-		93		-		93
Reclassifications	-		(27	)	-		(27	)
Balance, March 31, 2012	192		2,851		815		3,858
Accumulated amortization:
Balance, December 31, 2011	(29	)	(1,619	)	(339	)	(1,987	)
Amortization expense during the period	-		(117	)	(21	)	(138	)
Reclassifications	-		27		-		27
Balance, March 31, 2012	(29	)	(1,709	)	(360	)	(2,098	)
Net Book Value	163		1.142		455		1.760
Weighted-average amortization period	-		6.10 years		9.62 years

F-46

11. INTANGIBLE ASSETS (continued)

	Goodwill		Other intangible assets		License		Total
Gross carrying amount:
Balance, December 31, 2010	192		9,875		812		10,879
Addition - acquired separately:
The Company’s software	-		293		-		293
The subsidiaries’ software	-		309		-		309
The subsidiaries’ license	-		-		1		1
Reclassifications	-		(105	)	2		(103	)
Deductions	-		(7,603	)	-		(7,603	)
Balance, December 31, 2011	192		2,769		815		3,776
Accumulated amortization:
Balance, December 31, 2010	(29	)	(8,815	)	(250	)	(9,094	)
Amortization expense during the year	-		(429	)	(87	)	(516	)
Reclassifications	-		22		(2	)	20
Deductions	-		7,603		-		7,603
Balance, December 31, 2011	(29	)	(1,619	)	(339	)	(1,987	)
Net Book Value	163		1,150		476		1,789
Weighted-average amortization period	-		6.47 years		9.39 years

(ii) Goodwill resulted from the acquisition of PT Sigma Cipta Caraka (“Sigma”) in 2008, Indonusa in 2008 and Ad Medika in 2010. 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. In accordance with the expiration of KSO agreement term (Note 9b), the carrying amount and the accumulated amortization of the intangible assets has been derecognized.

(iii) In 2006, Telkomsel was granted the right to operate the 3G license. Telkomsel is required to pay an up-front fee amounting to Rp.436 billion (Notes 36c and 40c.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. In 2009, Telkomsel obtained an additional 3G license of Rp.320 billion which is recorded as an intangible assets and amortized over 10 years.

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.

(iv) The estimated annual amortization expense relating to other intangible assets from April 1, 2012 is approximately Rp.489 billion.

F-47

11. INTANGIBLE ASSETS (continued)

(v) The aggregate amounts of goodwill allocated to each cash generating unit (CGU) are as follows:

	December 31, 2011
Sigma	88
Ad Medika	82
Total	170

Metra performed its annual impairment tests of those CGUs based on fair value less cost to sell using discounted cash flow projections. The impairment tests used management approved cash flows projections covering a five-year period, and the following key assumptions:

The key assumptions used in the impairment test are as below:

| | December
31, 2011 — Sigma | Ad
Medika |
| --- | --- | --- |
| Discount
rate | 12.5% | 12.1% |
| Perpetuity
growth rate | 2% | 2% |

As of December 31, 2011, no impairment charge was required for goodwill on acquisition of subsidiaries, with any reasonably possible changes to the key assumptions applied not likely to cause carrying amount of the CGUs to exceed their recoverable amount.

12. TRADE PAYABLES

| | March 31,
2012 | December
31, 2011 |
| --- | --- | --- |
| Related parties | | |
| Purchases of equipment, materials and
services | 408 | 369 |
| Radio frequency usage charges, Concession fees and Universal
Service Obligation charges | 311 | 409 |
| Payables to other telecommunications
providers | 56 | 60 |
| Sub-total | 775 | 838 |
| Third parties | | |
| Purchases of equipment, materials and
services | 6360 | 7,429 |
| Payables to other telecommunications
providers | 79 | 50 |
| Sub-total | 6,439 | 7,479 |
| Total | 7,214 | 8,317 |

| Trade
payables by currency are as follows: | March 31,
2012 | December
31, 2011 |
| --- | --- | --- |
| Rupiah | 3,580 | 4,422 |
| U.S.
Dollars | 3,624 | 3,883 |
| Others | 10 | 12 |
| Total | 7,214 | 8,317 |
| Refer to
Note 36 for details of related party transactions. | | |

F-48

13. ACCRUED EXPENSES

| | March 31,
2012 | December
31, 2011 |
| --- | --- | --- |
| Operations, maintenance and telecommunications
services | 3,201 | 2,917 |
| Salaries and benefits | 1,071 | 900 |
| General, administrative and marketing | 899 | 805 |
| Interest and bank charges | 173 | 168 |
| Total | 5,344 | 4,790 |
| Refer to Note 36 for details of related party
transactions. | | |

14. UNEARNED INCOME

| | March 31,
2012 | December
31, 2011 |
| --- | --- | --- |
| Prepaid pulse reload vouchers | 2,363 | 2,526 |
| Other telecommunications services | 126 | 153 |
| Others (each below Rp.50 billion) | 149 | 142 |
| Total | 2,638 | 2,821 |

15. SHORT-TERM BANK LOANS

| | | March 31,
2012 | | December
31, 2011 | |
| --- | --- | --- | --- | --- | --- |
| | | Outstanding | | Outstanding | |
| | | Original
currency | | Original
currency | |
| Lenders | Currency | (in
millions) | Rupiah
equivalent | (in
millions) | Rupiah
equivalent |
| Bank CIMB
Niaga | Rp. | - | 118 | - | 45 |
| Bank
Danamon | Rp. | - | 39 | - | 40 |
| Others | Rp. | - | 13 | - | 15 |
| Total | | | 170 | | 100 |
| Refer to
Note 36 for details of related party transactions. | | | | | |

Other significant information relating to short-term bank loans as at March 31, 2012 is as follows:

F-49

15. SHORT-TERM BANK LOANS (continued)

| | Borrower | Currency | Total
facility — (in
billions) | Payment
schedule | Interest
payment — period | Interest
rate — per
annum | Security |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Bank CIMB
Niaga (continued) | | | | | | | |
| April 29,
2008 a | Balebat | Rp. | 5 | May 29,
2012 | Monthly | 11.50% | (Note 9),
Property, plant and equipment Inventories (Note 5), and trade receivables
(Note 4) |
| May 14,
2010 | Infomedia | Rp. | 28 | April 28,
2012 | Monthly | 10.50% | Trade
receivables (Note 4) |
| March 9,
2012 | Infomedia | Rp. | 38 | July
19,2012 | Monthly | 9.75% | Trade
receivables (Note 4) |
| March 24,
2012 | Infomedia | Rp. | 38 | July 29,
2012 | Monthly | 9.75% | Trade
receivables (Note 4) |
| Bank
Danamon | | | | | | | |
| August 5,
2011 | Infomedia | Rp. | 40 | April 10,
2012 | Monthly | 11.00% | Trade
receivables (Note 4) |
| Bank
Ekonomi | | | | | | | |
| August 7,
2009 b | Sigma | Rp. | 35 | July 1,
2012 | Monthly | 9.00% | Trade
receivables (Note 4), property, plant and equipment (Note
9) |

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

a Based on the latest amendment on May 25, 2011.

b Based on the latest amendment on November 23, 2011.

16. MATURITIES OF LONG-TERM LIABILITIES

a. Current maturities

| | Notes | March
31, — 2012 | December
31, — 2011 |
| --- | --- | --- | --- |
| Bank loans | 19 | 3,183 | 3,960 |
| Bonds and notes | 18 | 428 | 385 |
| Two-step loans | 17 | 230 | 272 |
| Obligations under finance leases | 9 | 193 | 196 |
| Total | | 4,034 | 4,813 |
| Refer to Note 36 for details of related party
transactions. | | | |

F-50

16. MATURITIES OF LONG-TERM LIABILITIES (continued)

b. Long-term portion

Scheduled principal payments as of March 31, 2012, are as follows:

| | Notes | Total | (In
billions of Rupiah) — 2013 | 2014 | 2015 | 2016 | Later |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Bank loans | 19 | 5,986 | 3,517 | 1,666 | 597 | 152 | 54 |
| Bonds and notes | 18 | 3,423 | 256 | 116 | 1,056 | - | 1,995 |
| Two-step loans | 17 | 1,941 | 171 | 196 | 198 | 201 | 1,175 |
| Obligations under finance leases | 9 | 315 | 142 | 87 | 34 | 23 | 29 |
| Total | | 11,665 | 4,086 | 2,065 | 1,885 | 376 | 3,253 |

17. 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.

| | | March 31,
2012 | | | | |
| --- | --- | --- | --- | --- | --- | --- |
| | | Outstanding | | Outstanding | | |
| | | Original
currency | | Original
currency | | |
| Lenders | Currency | (in
millions) | Rupiah
equivalent | (in
millions) | Rupiah
equivalent | |
| Overseas
bank | Yen | 9,983 | 1,112 | 9,983 | 1,167 | |
| | Rp. | - | 676 | - | 717 | |
| | US$ | 42 | 383 | 44 | 400 | |
| Total | | | 2,171 | | 2,284 | |
| Current
maturities (Note 17a) | | | (230 | ) | (272 | ) |
| Long-term
portion (Note 17b) | | | 1,941 | | 2,012 | |

Lenders	Currency	Payment schedule	Interest payment period	Interest rate per annum
Overseas bank	US$	Semi-annually	Semi-annually	4.00%
	Rp.	Semi-annually	Semi-annually	7.46% - 7.71%
	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.

F-51

17. TWO-STEP LOANS (continued)

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:

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 finance costs) should exceed 50% and 20% compared to annual average capital expenditures for loans originating from World Bank and ADB, respectively.

As of March 31, 2012, the Company complied with the above mentioned ratios.

Refer to Note 36 for details of related party transactions.

18. BONDS AND NOTES

		March 31, 2012		December 31, 2011
		Outstanding		Outstanding
		Original
currency	Rupiah
equivalent	Original
currency	Rupiah
equivalent
Bonds and notes	Currency	(in millions)		(in millions)
Bonds
Series A	Rp.	-	1,005	-	1,005
Series B	Rp.	-	1,995	-	1,995
Medium Term Notes (“MTN”
)
Metra	Rp.	0	65	-	59
Sigma	Rp.	0	30	-	30
PT Finnet Indonesia
(“Finnet”)	Rp.	0	17	-	18
Promissory Notes
Huawei Tech	US$	67	610	60	545
PT. ZTE Indonesia
(“ZTE”)	US$	14	129	15	134
Total			3,851		3,786
Current maturities (Note
16a)			(428)		(385	)
Long-term portion (Note 16b)			3,423		3,401

a. Bonds

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

F-52

18. 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, 2012, 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 finance costs ratio should not be less than 5:1.
Debt service coverage is 125%

As of March 31, 201 2 , the Company complied with the above mentioned ratios.

b. MTN

| Notes | Principal | Issuance date | Maturity date | Interest payment
method |
| --- | --- | --- | --- | --- |
| MTN | | | | |
| Metra I | | | | |
| Phase 1 | 30 | June 9, 2009 | June 19, 2012 | Quarterly |
| Phase 2 | 20 | February 1, 2010 | February 2, 2013 | Quarterly |
| Metra II | | | | |
| Phase 1 | 20 | December 28, 2011 | December 28, 2014 | Quarterly |
| Phase 2 | 1 0 | February 22 , 201 2 | February 2 2 , 201 5 | Quarterly |
| Sigma | 30 | November 17, 2009 | November 17,2014 | Semi-annually |
| Finnet | | | | |
| Phase 1 | 10 | October 16, 2009 | November 17, 2012 | Monthly |
| Phase 2 | 15 | 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”) is acting as Collecting Agent and Custodian. Proceeds from the issuance of MTN among others were used to expand the business and as working capital.

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.

The MTN of Sigma and Finnet are not secured by a specific collateral, but secured by all of Sigma and Finnet’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. Sigma and Finnet may buyback all or part of the MTN at any time before the maturity date of MTN. Based on the agreements, Metra , Sigma, and Finnet are required to comply with required covenants including maintaining financial ratios. As of March 31, 201 2 , Metra , Sigma, and Finnet complied with the ratios. Refer to Note 36 for details of related party transactions.

F-53

18. BONDS AND NOTES (continued)

c. Promissory Notes

| Supplier | Currency | Principal
(in billions) | Issuance
date | Payment
schedule | Interest
payment — method | Interest
rate — per
annum |
| --- | --- | --- | --- | --- | --- | --- |
| PT Huawei
Tech Investment (“Huawei Tech”) | US$ | 0.3 | June 19,
2009 | Semi-annually | Semi-annually | 6 month
LIBOR+2.5% |
| | | | | (January
11, 2012 – June 23, 2014) | | |
| PT. ZTE
Indonesia (“ZTE”) | US$ | 0.1 | August 20,
2009 | Semi-annually | Semi-annually | 6 month
LIBOR+1.5% |
| | | | | (June 10,
2012 – June 10, 2014) | | 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 are unsecured supplier financing facilities covering 85% of Hand Over Report (“Berita Acara Serah Terima” or BAST) projects with ZTE and Huawei Tech.

19. BANK LOANS

		March 31, 2012
		Outstanding		Outstanding
Lenders	Currency	Original currency (in millions)	Rupiah
equivalent	Original currency (in millions)	Rupiah
equivalen t
Syndication of banks	Rp.	-	2,588	-	3,225
BCA	Rp.	-	1,936	-	2,271
Bank Mandiri	Rp.	-	1,763	-	2,111
BRI	Rp.	-	1,131	-	1,131
ABN Amro Bank N.V.Stockholm Branch (“AAB Stockholm”) and
Standard Chartered Bank	US$	85	780	85	771
BNI	Rp.	-	500	-	400
Japan Bank for International Cooperation
(“JBIC”)	US$	42	383	42	381
Bank CIMB Niaga	Rp.	-	77	-	81
PT Bank Ekonomi Raharja Tbk (“Bank
Ekonomi”)	Rp.	-	66	-	69
	US$	0	3	0	4
OCBC NISP	Rp.	-	-	-	466
Industrial and Commercial Bank of China Limited
(“ICBC”)	US$	-	-	39	350
Others	Rp.	-	1	-	1
Total			9,228		11,261
Unamortized debt issue cost			(59	)	(70	)
			9,169		11,191
Current maturities (Note 16a)			(3,183	)	(3,960	)
Long-term portion (Note
16b)			5,986		7,231
Refer to
Note 36 for details of related party transactions.

F-54

19. BANK LOANS (continued)

Other significant information relating to bank loans as at March 31, 2012 is as follows:

| | Borrower | Currency | Total facility (in billions) | Paymen t schedule | Interest payment
period | Interest rate per annum | Security |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Syndication of banks | | | | | | | |
| July 29, 2008 a (BNI, BRI and Bank Jabar) | The Company | Rp. | 2,400 | Semi-annually (2010 - 2013) | Quarterly | 3 months JIBOR+1.20% | None |
| June 16, 2009 a (BNI and BRI) | The Company | Rp. | 2,700 | Semi-annually (2011 - 2014) | Quarterly | 3 months JIBOR+2.45% | None |
| BCA | | | | | | | |
| July 5, 2010 b&c | Telkomsel | Rp. | 2,000 | Semi-annually (2012 - 2016) | Quarterly | 3 months JIBOR+1.20% | None |
| December 16, 2010 a | TII | Rp. | 200 | Semi-annually (2011 - 2015) | Quarterly | 3 months JIBOR+1.25% | None |
| Bank Mandiri | | | | | | | |
| July 5, 2010 b&c | Telkomsel | Rp. | 3,000 | Semi-annually (2012 - 2016) | Quarterly | 3 months JIBOR+1.20% | None |
| BRI | | | | | | | |
| October 13, 2010 a | The Company | Rp. | 3,000 | Semi-annually (2013 - 2015) | Quarterly | 3 months JIBOR+1.25% | None |
| July 20, 2011 a | Dayamitra | Rp. | 1,000 | Semi-annually (2011 - 2017) | Quarterly | 3 months JIBOR+1.40% | Property, plants and equipments (Note 9 ) |
| ABN Amro Bank N.V. Stockholm Branch (“AAB Stockholm”) and
Standard Chartered Bank | | | | | | | |
| December 30, 2009 b& d | Telkomsel | US$ | 0.3 | Semi-annually (2011- 2016) | Semi-annually | 6 months LIBOR+0.82% | None |
| BNI | | | | | | | |
| October 13, 2010 a | The Company | Rp. | 1,000 | Semi-annually (2013 - 2015) | Quarterly | 3 months JIBOR+1.25% | None |
| December 23, 2011 | PIN | Rp | 500 | Semi-annually (201 6 ) | Quarterly | 3 months JIBOR+1.5 0 % | I nventories (Note 5) and trade receivables (Note 4 ) |
| Japan Bank for International Cooperation
(“JBIC”) | | | | | | | |
| March 26, 2010 a &e | The Company | US$ | 0.06 | Semi-annually (2010 - 2015) | Semi-annually | 4.56% and 6 months LIB O R+0.70% | None |

F-55

19. BANK LOANS (continued)

| | Borrower | Currency | Total facility (in billions) | Paymen t schedule | Interest payment
period | Interest rate per annum | Security |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Bank CIMB
Niaga | | | | | | | |
| March 21, 2007 h | GSD | Rp. | 21 | Quarterly (2007 - 2015) | Monthly | 13.00% | Property,
plants and equipments (Note
9) |
| November 23, 2007 h | GSD | Rp. | 9 | Monthly (2007 - 2012) | Monthly | 11.00% | Property,
plants and equipments (Note
9), |
| July 28, 2009 i | Balebat | Rp. | 3 | Monthly (2010 - 2014) | Monthly | 11.50% | Property,
plants and equipments (Note 9),
inventories (Note
5), and trade
receivables (Note
4) |
| May 24, 2010 | Balebat | Rp. | 3 | Monthly (2010 - 2015) | Monthly | 11.50% | Property,
plants and equipments (Note 9),
inventories (Note
5), and trade
receivables (Note
4) |
| March 31, 2011 | GSD | Rp. | 13 | Monthly (2011 - 2019) | Monthly | 9.75% | Property,
plants and equipments (Note
9), and trade
receivables (Note
4) |
| March 31, 2011 | GSD | Rp. | 24 | Monthly (2011 - 2019) | Monthly | 9.75% | Property,
plants and equipments (Note
9), and trade
receivables (Note
4) |
| March 31, 2011 | GSD | Rp. | 12 | Monthly (2011 - 2015) | Monthly | 9.75% | Property,
plants and equipments (Note
9), and
trade receivables (Note
4) |
| September 9, 2011 | GSD | Rp. | 11 | Monthly (2011 - 2015) | Monthly | 9.75% | Property,
plants and equipments (Note
9), and
trade receivables (Note
4) |

F-56

19. BANK LOANS (continued)

	Borrower	Currency	Total facility — (in billions)	Payment schedule	Interest — payment period	Interest — rate per annum	Security
Bank CIMB Niaga (continued)
September 9, 2011	GSD	Rp.	41	Monthly (2011 - 2021)	Monthly	9.75%	Property, plants and equipments (Note 9 ), and trade receivables (Note 4 )
Bank Ekonomi
December 7, 2006 a&j	Sigma	Rp.	14	Monthly (2006 - 2012)	Monthly	9.00% - 10.50%	Property, plants and equipments (Note 9 ), and trade receivables (Note 4 )
March 9, 2007 a&j	Sigma	Rp.	13	Monthly (2008 - 2012)	Monthly	9.00% - 10.50%	Property, plants and equipments (Note 9 ), and trade receivables (Note 4 )
September 10, 2008 a&j	Sigma	Rp.	33	Monthly (2009 - 2015)	Monthly	9.00% - 10.50%	Property, plants and equipments (Note 9 ), and trade receivables (Note 4 )
August 7, 2009 a&j	Sigma	Rp.	35	Monthly some installment (2009 - 2013)	Monthly	9.00% - 10.50%	Property, plants and equipments (Note 9) , and trade receivables (Note 4 )
August 7, 2009 a&j	Sigma	Rp.	20	Monthly some installment (2009 - 2014)	Monthly	9.00% - 10.50%	Property, plants and equipments (Note 9 ), and trade receivables (Note 4 )
February 23, 2011 a&j	Sigma	Rp.	30	Monthly (2011 - 2015)	Monthly	9.00% - 10.50%	Property, plants and equipments (Note 9 ), and trade receivables (Note 4 )
February 23, 2011 a&j	Sigma	US$	0.002	Monthly (2011 - 2015)	Monthly	6.00%	Property, plants and equipments (Note 9 ), and trade receivables (Note 4 )

F-57

19. BANK LOANS (continued)

The credit facilities obtained by the Company and its subsidiaries are used for working capital purpose.

| a. | As stated
in the agreements, the Company and its subsidiaries are required to comply
with all covenants or restrictions including maintaining financial ratios
as follows. As of March 31, 2012, the Company and its subsidiaries has
complied with the ratios. |
| --- | --- |
| 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,
2012, Telkomsel has complied with the above covenants. |
| c. | Pursuant
to expiry of availability periods of facilities from BCA and Bank Mandiri,
those banks have approved extension of the availability periods to January
2012. The approval from BCA and Bank Mandiri for extension of the
availability period was formalized through amendment of loan agreement on
July 20 and 21, 2011. |
| d. | Pursuant
to the agreements with PT Ericsson Indonesia (“Ericsson Indonesia”) and
Ericsson AB (Note 40a.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 Facility 1 expired in
July 2010 with no outstanding loan balance and the availability period of
facility 2 expired in March 2011. Pursuant to expiry of availability
period of Facility 2, EKN agreed to reduce premium of the unused facility
by US$3 million through a cash refund. |
| e. | In
connection with the agreement with NSW-Fujitsu Consortium, the Company
entered into a loan agreement with JBIC, the international arm of Japan
Finance Corporation for the purchase of NSW-Fujitsu Consortium
telecommunication equipment and services. The facilities consist of
facility A and B amounting to US$36 million and US$24
million. |
| f. | Based on
the latest amendment on March 31, 2011. |
| g. | Based on
the latest amendment on May 24, 2010. |
| h. | Based on
the latest amendment on November 23, 2011. |

F-58

20. NON-CONTROLLING INTEREST

| | March 31, | December
31, |
| --- | --- | --- |
| | 2012 | 2011 |
| Non-controlling interest in net assets of
subsidiaries: | | |
| Telkomsel | 14,663 | 13,430 |
| Metra * | 36 | 33 |
| GSD* | 5 | - |
| Infomedia * * | - | 8 |
| Total | 14,704 | 13,471 |

	2012	2011
Non-controlling interest in total comprehensive income of
subsidiaries:
Telkomsel	1,232	992
Metra *	5	3
GSD*	0	-
Infomedia * *	-	1
Total	1,237	996

The amounts represent other third parties’ share of ownership in subsidiaries of Metra , Infomedia and GSD.

** See Note 1d.

21. CAPITAL STOCK

| Description | March 31,
2012 — Number of
shares | Percentage
of ownership | Total
paid-up capital |
| --- | --- | --- | --- |
| Series A Dwiwarna share | | | |
| Government | 1 | - | - |
| Series B shares | 10,320,470,711 | 53.70 | 2,580 |
| Government | | | |
| The Bank of New York Mellon Corporation* | 2,899,071,416 | 15.08 | 725 |
| Directors (Note 1b): | | | |
| Ermady
Dahlan | 17,604 | - | 0 |
| Indra
Utoyo | 5,508 | - | 0 |
| Public (individually less than 5%) | 5,999,828.580 | 31.22 | 1,500 |
| Total | 19,219,393,820 | 100.00 | 4,805 |
| Treasury stock (Note 23) | 940,605,460 | - | 235 |
| Total | 20,159,999,280 | 100.00 | 5,040 |

The Bank of New York Mellon Corporation serves as the Depositary of registered ADS holders for the Company’s ADSs.

F-59

21. CAPITAL STOCK (continued)

| Description | December
31, 2011 — Number of
shares | Percentage
of ownership | Total
paid-up capital |
| --- | --- | --- | --- |
| Series A
Dwiwarna share | | | |
| Government | 1 | - | - |
| Series B
shares | 10,320,470,711 | 53.24 | 2,580 |
| Government | | | |
| The Bank
of New York Mellon Corporation* | 2,952,965,536 | 15.23 | 738 |
| Directors
(Note 1b): | | | |
| Ermady
Dahlan | 17,604 | - | 0 |
| Indra
Utoyo | 5,508 | - | 0 |
| Public
(individually less than 5%) | 6,112,879,960 | 31.53 | 1,529 |
| Total | 19,386,339,320 | 100.00 | 4,847 |
| Treasury
stock (Note 23) | 773,659,960 | - | 193 |
| Total | 20,159,999,280 | 100.00 | 5,040 |

The Bank of New York Mellon Corporation serves as the Depositary of registered ADS holders for the Company’s ADSs.

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.

22. ADDITIONAL PAID-IN CAPITAL

| Proceeds from sale of 933,333,000 shares in excess of par
value through IPO in 1995 | March 31,
2012 — 1,446 | | December
31, 2011 — 1,446 | |
| --- | --- | --- | --- | --- |
| Capitalization into 746,666,640 Series B shares in
1999 | (373 | ) | (373 | ) |
| Total | 1,073 | | 1,073 | |

F-60

23. TREASURY STOCK

| Phase | Basis | Period | Maximum
Purchase — Number of
Shares | Amount |
| --- | --- | --- | --- | --- |
| I | EGM | December 21, 2005 - June 20, 2007 | 1,007,999,964 | Rp.5,250 billion |
| II | AGM | June 29,
2007 - December, 28, 2008 | 215,000,000 | Rp.2,000
billion |
| III | AGM | June 20,
2008 - December 20, 2009 | 339,443,313 | Rp.3,000
billion |
| - | BAPEPAM -
LK | October
13, 2008 - January 12, 2009 | 4,031,999,856 | Rp.3,000
billion |
| IV | AGM | May 19,
2011 -November 20, 2012 | 645,161,290 | Rp.5,000 billion |

Movement in treasury stock as a result of share repurchase is as follow:

	March 31, 2012 — Number of shares	%	Rp.	December 21, 2011 — Number of shares	%	Rp.
Balance beginning	773,659,960	3.84	6,323	490,574,500	2.43	4,264
Number of shares acquired	166,945,500	0.83	1,154	283,085,460	1.41	2,059
Balance ending	940,605,460	4.67	7,477	773,659,960	3.84	6,323

Pursuant to the AGM of Stockholders of the Company dated June 11, 2010, the stockholders approved the changes to the Company’s plan for use 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.

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

The balance of this account amounting to Rp.478 billion arose from the early termination of the Company’s exclusive rights to provide local and domestic fixed line telecommunication services, which the Company is required by the Government to use the funds received from this compensation for the development of telecommunication infrastructure. As of March 31, 2012 and December 31, 2011, the development of the related infrastructure amounted to Rp.537 billion, respectively.

As of March 31, 2012 and December 31, 2011, the Company has received an aggregate of Rp.478 billion, respectively, in relation to the compensation for the early termination of exclusivity rights, made up of annual payments of Rp.90 billion from 2005 to 2008 and Rp.118 billion 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 Equity section. These amounts are recorded as a component of Equity because the Government is the majority and controlling stockholder of the Company.

F-61

25. REVENUES

	2012	2011
Telephone Revenues
Cellular
Usage
charges	6,899	6,425
Features	133	185
Monthly
subscription charges	165	145
	7,197	6,755
Fixed lines
Usage
charges	1,975	2,046
Monthly
subscription charges	702	786
Call
Center	74	42
Installation charges	29	36
Others	25	20
	2,805	2,930
Total Telephone Revenues	10,002	9,685
Interconnection Revenues
Domestic interconnection and transit	489	504
International interconnection	387	342
Total Interconnection Revenues	876	846
Data, Internet and Information Technology Services
Revenues
Internet, data communication and information technology
services	3,295	2,305
Short Messaging Services (“SMS”)	2,752	3,077
VoIP	57	64
e-Business	11	6
Total Data, Internet and Information Technology Services
Revenues	6,115	5,452
Network Revenues
Leased lines	199	204
Satellite transponder lease	107	101
Total Network Revenues	306	305
Other Telecommunications Services
Revenues
Customer Premise Equipment (“CPE”) and
terminal	169	192
Pay TV	89	49
USO Compensation	79	81
Leased	52	22
Sales of modem	46	32
Directory assistance	14	22
Others	48	20
Total Other Telecommunications Services
Revenues	497	418
TOTAL REVENUES	17,796	16,706

Refer to Note 36 for details of related party transactions.

F-62

26. PERSONNEL EXPENSES

	2012	2011
Salaries and related benefits	772	698
Vacation pay, incentives and other benefits	723	719
Employees’ income tax	209	198
Net periodic pension costs (Notes 33)	198	126
Housing	49	50
Insurance	34	32
Net periodic post-retirement health care benefits costs
(Note 35)	23	50
Other post-retirement cost (Note 33c)	16	16
LSA (Note 34)	13	12
Others	10	8
Total	2,047	1,909

2 7 . OPERATIONS, MAINTENANCE AND TELECOMMUNICATION SERVICES EXPENSES

	2012	2011
Operations and maintenance	2,193	2,047
Radio frequency usage charges (Notes 36b and
40c.iii)	701	947
Concession fees and Universal Service Obligation charges
(Note 36b)	337	290
Electricity, gas and water	213	202
Cost of phone, set top box, SIM and RUIM
cards	157	257
Insurance	105	112
Leased lines and CPE	73	39
Vehicles rental and supporting facilities	62	69
Cost of IT services	34	50
Others	41	57
Total	3,916	4,070

Refer to Note 36 for details of related party transactions.

F-63

28. GENERAL AND ADMINISTRATIVE EXPENSES

	2012	2011
Provision
for impairment of receivables and inventory obsolescence (Notes 4d and
5)	198	180
Collection
expenses	78	76
General	74	54
Travelling	53	60
Training,
education and recruitment	47	36
Professional fees	38	36
Security
and screening	15	32
Others	77	79
Total	580	553

Refer to Note 36 for details of related party transactions.

29. INTERCONNECTION EXPENSES

	2012	2011
Domestic
interconnection and transit	728	530
International interconnection	267	276
Total	995	806

Refer to Note 36 for details of related party transactions.

30. TAXATION

a. Claim for tax refund

| | March
31, | December
31, |
| --- | --- | --- |
| | 2012 | 2011 |
| Subsidiaries | | |
| Corporate income tax | 319 | 23 |
| Income tax | | |
| Article 23 - Withholding tax on services
delivery | 8 | 8 |
| Value Added Tax (“VAT”) | 639 | 340 |
| | 966 | 371 |

F-64

30. TAXATION (continued)

b. Prepaid taxes

| | March
31, | December
31, |
| --- | --- | --- |
| | 2012 | 2011 |
| The
Company | | |
| VAT | - | 4 3 |
| Subsidiaries | | |
| Corporate
income tax | 19 | 610 |
| VAT | 159 | 13 1 |
| Income
tax | | |
| Article 23
- Withholding tax on services delivery | 5 | 3 |
| | 183 | 74 4 |
| | 183 | 787 |

c. Taxes payable

| | March
31, | December
31, |
| --- | --- | --- |
| | 2012 | 2011 |
| The
Company | | |
| Income
taxes | | |
| Article 4 (2) - Final tax | 3 | 4 |
| Article 21- Individual income tax | 22 | 68 |
| Article 23- Withholding tax on services
delivery | 8 | 11 |
| Article 25- Installment of corporate income
tax | - | 40 |
| Article 26- Withholding tax on non-resident income
tax | 0 | 1 |
| Article 29- Underpayment of corporate income
tax | 237 | 1 |
| VAT | 236 | - |
| | 506 | 12 5 |
| Subsidiaries | | |
| Income
taxes | | |
| Article 4 (2) - Final tax | 20 | 29 |
| Article 21- Individual income tax | 46 | 75 |
| Article 23- Withholding tax on services
delivery | 15 | 25 |
| Article 25- Installment of corporate income
tax | 334 | 6 |
| Article 26- Withholding tax on non-resident income
tax | 7 | 10 |
| Article 29- Underpayment of corporate income
tax | 1,002 | 682 |
| VAT | 80 | 87 |
| | 1,504 | 91 4 |
| | 2,010 | 1,039 |

F-65

30. TAXATION (continued)

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

	2012		2011
Current
The
Company	361		301
Subsidiaries	1,337		1,028
	1,698		1,329
Deferred
The
Company	(111	)	12
Subsidiaries	(75	)	(30	)
	(186	)	(18	)
	1,512		1,311

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	2012 — 6,071		2011 — 5,135
Add back consolidation eliminations	2,467		1,916
Consolidated income before tax and
eliminations	8,538		7,051
Less: income before tax of the subsidiaries	(4,981	)	(3,910	)
Income before tax attributable to the
Company	3,557		3,141
Less: income subject to final tax	(90	)	(194	)
	3,467		2,947
Tax calculated at applicable rates	693		589
Non-taxable income	(494	)	(383	)
Non-deductible expenses	65		53
Deferred tax liabilities that cannot be utilized -
net	(22	)	35
Corporate income tax expense	242		294
Final income tax expense	8		19
Total income tax expense of the Company	250		313
Income tax expense of the subsidiaries	1,262		998
Total consolidated income tax expense	1,512		1,311

F-66

30. TAXATION (continued)

e. (continued)

The reconciliation between income before tax attributable to the Company and the estimated taxable income for three months period ended March 31, 2012 and 2011, are as follows:

| Income before tax attributable to the
Company | 2012 — 3,557 | | 2011 — 3,141 | |
| --- | --- | --- | --- | --- |
| Less: income subject to final tax | (90 | ) | (194 | ) |
| | 3,467 | | 2,947 | |
| Temporary differences: | | | | |
| Amortization of intangible assets and land
rights | 7 | | 32 | |
| Depreciation and gain on sale of property, plant and
equipment | 39 | | 37 | |
| Provision for impairment and trade receivables
written-off | 139 | | 62 | |
| Foreign exchange gain on deferred consideration for
business combinations | 0 | | 85 | |
| Net periodic pension and other post-retirement benefits
costs | 70 | | 18 | |
| Payments of deferred consideration for business
combinations | 0 | | (106 | ) |
| Accrued early retirement benefits | | | | |
| Deferred installation fee | (19 | ) | (20 | ) |
| Provision for impairment of assets | | | | |
| Other provisions | 207 | | 9 | |
| Total temporary differences | 443 | | 117 | |
| Permanent differences: | | | | |
| Net periodic post-retirement health care benefit
costs | 23 | | 50 | |
| Equity in net income of associates and
subsidiaries | (2,471 | ) | (1,917 | ) |
| Others | 306 | | 214 | |
| Total permanent differences | (2,142 | ) | (1,653 | ) |
| Taxable income | 1,768 | | 1,411 | |
| Current corporate income tax expense | 354 | | 282 | |
| Final income tax expense | 7 | | 19 | |
| Total current income tax expense of the
Company | 361 | | 301 | |
| Current income tax expense of the
subsidiaries | 1,337 | | 1,028 | |
| Total current income tax expense | 1,698 | | 1,329 | |

F-67

30. TAXATION (continued)

e. (continued)

The Tax Law No. 36/2008 stipulates a reduction of 5% from the top rate applicable to qualifying companies listed, and for whose stock is traded on, the IDX which meet the prescribed criteria that the public own 40% or more of the total fully paid and traded stocks on the IDX, and such stocks are owned by at least 300 parties, with each party owning less than 5% of the total paid-up stocks. These requirements must be met by a company 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, 201 1 , the Company has deducted its applicable tax rate by 5%.

The Company applied a tax rate of 20% for the fiscal year 2011. The subsidiaries applied a tax rate of 25% for the fiscal year 2011.

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 2010 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

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 the fiscal year 2002 of Rp.115 billion. On April 3, 2009, Telkomsel filed a contra-appeal to the Indonesian Supreme Court (“SC”). As of the issuance date of the consolidated financial statements, it is still in process.

Based on the Tax Court’s verdict in March 2010, Telkomsel’s appeal on Value Added Tax for the fiscal years 2004 and 2005 was accepted and Telkomsel subsequently received the refund of Rp.215 billion in June 2010 with an interest of Rp.103 billion. On August 10, 2010, the Tax Authorities filed a judicial review to the 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.

As a result of the assessment and tax court verdict, on 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.

F-68

30. TAXATION (continued)

f. Tax assessment (continued)

(ii) Telkomsel (continued)

On April 21, 2010, the Tax Court notified Telkomsel that the Tax Authorities has filed an appeal to the SC on the Tax Court’s verdict of the cancellation of a Tax Collection Letter (STP) for the underpayment of income tax Article 25 for the period of December 2008 of Rp.429 billion (including a penalty of Rp.8 billion). 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 Value Added Tax, for the fiscal year 2006 totalling 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 Value Added Tax amounting to Rp.116 billion (including a penalty of Rp.38 billion) and recorded it as a 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 the 2010 consolidated statement of comprehensive income. Subsequently, in September 2011, the Tax Authorities rejected Telkomsel’s objection. In December 2011, Telkomsel filed an appeal to the Tax Court. As of the issuance date of the consolidated financial statements, the appeal is still in process.

In October and November, 2010, Telkomsel received STPs for the underpayments of income tax Article 25 for the fiscal year 2010 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 a prepayment in calculating the 2010 corporate income tax which at the end resulted in an overpayment of Rp.599.87 billion (Note 45e). Through its letters in November 2010, Telkomsel requested the Tax Authorities to cancel the STPs. Subsequently, in April 2011, Telkomsel received STPs from Tax Authorities which revised the above-mentioned STPs issued in October and November 2010 with an additional penalty of Rp.4.3 billion.

On May 5, 2011, the Tax Authorities rejected Telkomsel’s request for cancellation of those STPs. Subsequently, on May 31, 2011, Telkomsel filed an appeal to the Tax Court. The overpayment and penalty are recognized as claims for tax refund as of December 31, 2011. As of the issuance date of the consolidated financial statements, the appeal is still in process.

In August 2011, Telkomsel was assessed for underpayments of withholding taxes and Value Added Tax for the fiscal year 2008 totaling Rp.235 billion. In November 2011, Telkomsel filed an objection to the Tax Authorities for the underpayments of Value Added Tax amounting to Rp.232 billion and recorded it as a claim for tax refund. The remaining portion of Rp.3 billion was charged to the 2011 consolidated statement of comprehensive income. As of the issuance date of the consolidated financial statements, the objection is still in process.

F-69

30. TAXATION (continued)

f. Tax assessment (continued)

(ii) Telkomsel (continued)

On March 12, 2012, Telkomsel received assessment letters as a result of tax audit for fiscal year 2010 by the Tax Authorities. Based on the letters, Telkomsel overpaid the Corporate Income Tax and underpaid the Value Added Tax amounted to Rp.597.4 billion (Note 30) and Rp.302.7 billion (including a penalty of Rp.73.3 billion), respectively. Telkomsel accepted the overpayment of Corporate Income Tax and Rp.12.1 billion of underpayment of Value Added Tax (including a penalty of Rp.6.3 billion). Considering that the amount is insignificant, the accepted portion was charged to the 2012 consolidated statement of comprehensive income. Telkomsel plans to file an objection to the Tax Authorities for underpayment of Value Added Tax of Rp.290.7 billion (including a penalty of Rp.67 billion) (Note 45c).

g. Deferred tax assets and liabilities

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

| | December
31,2011 | | (Charged)
credited to the Consolidated statements of income | | March 31,
2012 | |
| --- | --- | --- | --- | --- | --- | --- |
| The Company | | | | | | |
| Deferred tax assets: | | | | | | |
| Deferred consideration for business
combinations | - | | | | - | |
| Provision for impairment of receivables | 334 | | 35 | | 369 | |
| Net periodic pension and other post-retirement benefits
costs | 8 6 | | 18 | | 104 | |
| Accrued expenses and provision for inventory
obsolescence | 30 | | 27 | | 57 | |
| Employee benefits provisions | 82 | | 25 | | 107 | |
| Deferred connection fee | 8 5 | | (5 | ) | 80 | |
| Total deferred tax assets | 617 | | 100 | | 717 | |
| Deferred tax liabilities: | | | | | | |
| Difference between accounting and tax property, plant and
equipment's net book value | (1,929 | ) | 9 | | (1,920 | ) |
| Land rights, intangible assets, and others | (21 | ) | 1 | | (20 | ) |
| Finance leases | (33 | ) | 1 | | (32 | ) |
| Total deferred tax liabilities | (1,983 | ) | 11 | | (1,972 | ) |
| Deferred tax liabilities of the Company -
net | (1,366 | ) | 111 | | (1,255 | ) |
| Telkomsel | | | | | | |
| Deferred tax assets: | | | | | | |
| Provision for impairment of receivables | 6 4 | | 12 | | 76 | |
| Employee benefits provisions | 15 1 | | 11 | | 162 | |
| Total deferred tax assets | 215 | | 23 | | 238 | |
| Deferred tax liabilities: | | | | | | |
| Difference between accounting and tax property, plant and
equipment's net book value | (2,529 | ) | 71 | | (2,458 | ) |
| Intangible assets | (49 | ) | 2 | | (47 | ) |
| Total deferred tax liabilities | (2,578 | ) | 73 | | (2,505 | ) |
| Deferred tax liabilities of Telkomsel - net | (2,363 | ) | 96 | | (2,267 | ) |
| Deferred tax liabilities of other subsidiaries -
net | (65 | ) | (25 | ) | (90 | ) |
| Total deferred tax liabilities - net | (3,794 | ) | 182 | | (3,612 | ) |
| Deferred tax assets of other
subsidiaries-net | | | | | | |
| Total deferred tax assets - net | 67 | | 4 | | 71 | |

F-70

30. TAXATION (continued)

g. Deferred tax assets and liabilities (continued)

| | December
31, 2010 | | (Charged)credited to the Consolidated statements of
income | | December
31, 2011 | |
| --- | --- | --- | --- | --- | --- | --- |
| The Company | | | | | | |
| Deferred tax assets: | | | | | | |
| Deferred consideration for business
combinations | 2 7 | | (2 7 | ) | - | |
| Provision for impairment of receivables | 287 | | 47 | | 334 | |
| Net periodic pension and other post-retirement benefits
costs | 8 4 | | 2 | | 8 6 | |
| Accrued expenses and provision for inventory
obsolescence | 26 | | 4 | | 30 | |
| Employee benefits provisions | 86 | | (4 | ) | 82 | |
| Deferred connection fee | 106 | | (2 1 | ) | 8 5 | |
| Total deferred tax assets | 61 6 | | 1 | | 617 | |
| Deferred tax liabilities: | | | | | | |
| Difference between accounting and tax property, plant and
equipment's net book value | (1,893 | ) | (36 | ) | (1,929 | ) |
| Land rights, intangible assets, and others | (25 | ) | 4 | | (21 | ) |
| Finance leases | ( 39 | ) | 6 | | (33 | ) |
| Total deferred tax liabilities | (1,957 | ) | (2 6 | ) | (1,983 | ) |
| Deferred tax liabilities of the Company -
net | (1,341 | ) | (25 | ) | (1,366 | ) |
| Telkomsel | | | | | | |
| Deferred tax assets: | | | | | | |
| Provision for impairment of receivables | 5 0 | | 14 | | 6 4 | |
| Employee benefits provisions | 10 9 | | 42 | | 15 1 | |
| Total deferred tax assets | 159 | | 56 | | 215 | |
| Deferred tax liabilities: | | | | | | |
| Difference between accounting and tax property, plant and
equipment's net book value | (2,783 | ) | 254 | | (2,529 | ) |
| Intangible assets | (48 | ) | (1 | ) | (49 | ) |
| Total deferred tax liabilities | (2,831 | ) | 253 | | (2,578 | ) |
| Deferred tax liabilities of Telkomsel - net | (2,672 | ) | 309 | | (2,363 | ) |
| Deferred tax liabilities of other subsidiaries -
net | (61 | ) | (4 | ) | (65 | ) |
| Total deferred tax liabilities - net | (4,074 | ) | 280 | | (3,794 | ) |
| Deferred tax assets of other
subsidiaries-net | | | | | | |
| Total deferred tax assets - net | 62 | | 5 | | 67 | |

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.

F-71

30. TAXATION (continued)

h. Administration

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.

The taxation laws of Indonesia require that the Company and its subsidiaries located within Indonesia submit individual tax returns on the basis of self assessment. Under prevailing regulations the DGT may assess or amend taxes within a certain period. For the fiscal years of 2007 and before, this period is within ten years of the time the tax become due, but not later than 2013, while for the fiscal years of 2008 and onwards, the period is within five years of the time the tax becomes due.

No tax audit has been conducted for fiscal years 2003, 2005, 2006, 2007, 2009 and 2010 for the Company. A tax audit has been completed for all other fiscal years.

Currently, Telkomsel is under audited by Tax Authorities for an overpayment of its 2010 Corporate Income Tax.

The Company received a certificate of tax investigation exemption from DGT for fiscal year 2007, 2008, 2009 and 2010, which is valid unless the Company files for overpaid Annual SPT then a tax assessment will be performed.

31. BASIC EARNINGS PER SHARE

Basic earnings per share is computed by dividing income for the year attributable to owners of the parent by the weighted average number of shares outstanding during the period, totaling 19,291,349,254 and 19,669,424,780 for three months period ended March 31, 2012 and 2011, respectively.

Basic earning per share amounted to Rp.172.20 and Rp.143.79 (full amount) for three months period ended March 31, 2012 and 2011, respectively.

F-72

32. CASH DIVIDENDS AND GENERAL RESERVE

Pursuant to the AGM of Stockholders of the Company as stated in notarial deed No. 21 dated May 19, 2011 of A. Partomuan Pohan, S.H., LLM., the stockholders approved the distribution of cash dividends for 2010 amounting to Rp.6,345 billion or Rp.322.59 per share (of which Rp.526 billion or Rp.26.75 per share was distributed as an interim cash dividend in December 2010).

33. PENSION AND OTHER POST-RETIREMENT BENEFITS

| | March
31, | December
31, |
| --- | --- | --- |
| | 2012 | 2011 |
| Prepaid pension benefit costs | | |
| The Company | 1,001 | 99 0 |
| Infomedia | 1 | 1 |
| Prepaid pension benefit costs | 1,002 | 99 1 |
| Retirement benefits obligation | | |
| Pension | | |
| The Company | 1,140 | 1,06 7 |
| Telkomsel | 313 | 264 |
| Pension costs provisions | 1,453 | 1,3 31 |
| Other post-retirement benefits | 282 | 273 |
| Obligation under Labor Law | 117 | 111 |
| Retirement benefits obligation | 1,852 | 1,71 5 |
| Net periodic pension costs (benefits) | | |
| The Company | 148 | 384 |
| Telkomsel | 49 | 117 |
| Infomedia | 1 | 0 |
| Net periodic pension costs (Note
26) | 198 | 501 |
| Other post-retirement cost (Note
26) | 16 | 65 |
| Other employee benefits (Note
26) | 7 | 30 |

F-73

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

a. Prepaid pension benefit costs

The Company sponsors a defined pension benefit plan 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 three months period ended March 31, 2012 and the years ended December 31, 2011 amounted to Rp.47 billion and Rp.187 billion respectively.

The following table presents the change in projected benefits obligation, change in plan assets, funded status of the plan and net amount recognized in the Company’s consolidated statement of financial positions as of March 31, 2012 and December 31, 2011, for its defined benefit pension plan:

| | March
31, — 2012 | | December
31, — 2011 | |
| --- | --- | --- | --- | --- |
| Change in projected benefits obligation | | | | |
| Projected benefits obligation at beginning of
year | 16,188 | | 11,924 | |
| Service costs | 93 | | 307 | |
| Interest costs | 288 | | 1,105 | |
| Plan participants' contributions | 11 | | 44 | |
| Actuarial losses | 479 | | 3,391 | |
| Expected benefits paid | (157 | ) | (583 | ) |
| Projected benefits obligation at end of
period | 16,902 | | 16,188 | |
| Change in plan assets | | | | |
| Fair value of plan assets at beginning of
year | 16,597 | | 15,098 | |
| Expected return on plan assets | 379 | | 1,441 | |
| Employer’s contributions | 47 | | 187 | |
| Plan participants' contributions | 11 | | 44 | |
| Actuarial gains | 479 | | 410 | |
| Expected benefits paid | (157 | ) | (583 | ) |
| Fair value of plan assets at end of period | 17,356 | | 16,597 | |
| Funded status | 454 | | 409 | |
| Unrecognized prior service costs | 322 | | 356 | |
| Unrecognized net actuarial losses | 225 | | 22 5 | |
| Prepaid pension benefit costs | 1,001 | | 99 0 | |

F-74

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

a. Prepaid pension benefit costs (continued)

The actual return on plan assets was Rp.681 billion and Rp. 1,851 billion for three months period ended March 31, 2012 and the years ended December 31, 2011, respectively.

The movement of the pension benefit costs (prepaid) provisions during the years ended for three months period ended March 31, 2012 and the years ended December 31, 2011, is as follows:

| | March
31, — 2012 | | December
31, — 2011 | |
| --- | --- | --- | --- | --- |
| Pension benefits prepaid provisions at beginning of
year | (990 | ) | (743 | ) |
| Net periodic pension costs (benefits) less amounts
charged to subsidiaries | 34 | | (6 2 | ) |
| Amounts charged to subsidiaries under contractual
agreements | 2 | | 2 | |
| Employer’s contributions | (47 | ) | (18 7 | ) |
| Pension benefits cost prepaid at end of
period | (1,001 | ) | (99 0 | ) |

As of March 31, 2012 and December 31, 2011, plan assets consisted of :

| | March
31, | December
31, |
| --- | --- | --- |
| | 2012 | 2011 |
| Indonesian equity securities | 29.26% | 22.13% |
| Government bonds | 39.13% | 39.67% |
| Corporate bonds | 16.74% | 17.37% |
| Others | 14.87% | 20.83% |
| Total | 100.00% | 100.00% |

Dapen plan assets also include Series B shares issued by the Company with fair value totaling Rp.222 billion and Rp.234 billion representing 1.28% and 1.41% of total assets as of March 31, 2012 and December 31, 2011 respectively, and bonds issued by the Company with fair value totaling Rp.153 billion and Rp.156 billion representing 0.88% and 0.94% of total assets as of March 31, 2012 and December 31, 2011 respectively.

The actuarial valuation for the defined benefit pension plan and the other post-retirement benefits (Note 33b) was performed based on the measurement date as of December 31, 2011 and 2010, with reports dated March 7, 2012 and March 15, 2011 respectively, by PT Towers Watson Purbajaga (“TWP”), an independent actuary in association with Towers Watson (“TW”). The principal actuarial assumptions used by the independent actuary as of December 31, 2011 and 2010, are as follows:

F-75

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

a. Prepaid pension benefit costs (continued)

	2011	2010
Discount rate	7.25%	9.5%
Expected long-term return on plan assets	9.25%	9.7%
Rate of compensation increases	8%	8%

The components of net periodic pension costs are as follows:

| | March
31, — 2012 | | December
31, — 2011 | |
| --- | --- | --- | --- | --- |
| Service costs | 93 | | 307 | |
| Interest costs | 288 | | 1,105 | |
| Expected return on plan assets | (379 | ) | (1,441 | ) |
| Amortization of prior service costs | 34 | | 139 | |
| Recognized actuarial gain | - | | (17 0 | ) |
| Net periodic pension benefits | 36 | | (60 | ) |
| Amount charged to subsidiaries under contractual
agreements | (2 | ) | (2 | ) |
| Total net periodic pension costs (benefits) less amounts
charged to subsidiaries (Note 26) | 34 | | (62 | ) |

b. Pension benefit costs provisions

The Company

The Company sponsors unfunded defined benefit pension plans and a defined contribution pension plan.

The defined contribution pension plan is provided to employees hired with permanent status on or after July 1, 2002. The plan is managed by Financial Institutions Pension Fund (“Dana Pensiun Lembaga Keuangan” or “DPLK”). The Company’s contribution to DPLK is determined based on a certain percentage of the participants’ salaries and amounted to Rp.1 billion and Rp.5 billion for three months period ended March 31, 2012 and the years ended December 31, 2011, respectively.

Since 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.699 billion, 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.435 billion, which is amortized over 8.63 years until 2018.

F-76

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

b. Pension benefit costs provisions (continued)

The Company (continued)

The Company also provides benefits to employees during a pre-retirement period in which they are inactive for 6 months prior to their normal retirement age of 56 years , known as pre-retirement benefits (“Masa Persiapan Pensiun” or “MPP”). During the pre-retirement period, the employees still receive benefits provided to active employees, which include, but are not limited to regular salary, health care, annual leave, bonus and other benefits.

The following table presents the change in projected benefits obligation of the MPS and MPP for three months period ended March 31, 2012 and the years ended December 31, 2011:

| | March
31, — 2012 | | December
31, — 2011 | |
| --- | --- | --- | --- | --- |
| Change in projected benefits obligation | | | | |
| Unfunded projected benefits obligation at beginning of
year | 2,440 | | 2,096 | |
| Service costs | 26 | | 89 | |
| Interest costs | 43 | | 194 | |
| Actuarial (gains) losses | (17 | ) | 244 | |
| Benefits paid by employer | (25 | ) | (183 | ) |
| Unfunded projected benefits obligation at end of
period | 2,467 | | 2,440 | |
| Unrecognized prior service costs | (738 | ) | (772 | ) |
| Unrecognized net actuarial losses | (589 | ) | (60 1 | ) |
| Pension benefit costs provisions at end of
period | 1,140 | | 1,06 7 | |

The movement of the pension benefit costs provisions during for three months period ended March 31, 2012 and the years ended December 31, 2011, is as follows:

| | March
31, — 2012 | | December
31, — 2011 | |
| --- | --- | --- | --- | --- |
| Pension benefits costs provisions at beginning of
year | 1,067 | | 804 | |
| Net periodic pension | 114 | | 446 | |
| Benefits paid by employer | (41 | ) | (18 3 | ) |
| Pension benefits costs provisions at end of
period | 1,140 | | 1,06 7 | |

F-77

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

b. Pension benefit costs provisions (continued)

The Company (continued)

The components of net periodic pension costs are as follows:

| | March
31, | December
31, |
| --- | --- | --- |
| | 2012 | 2011 |
| Service costs | 26 | 89 |
| Interest costs | 43 | 194 |
| Amortization of prior service costs | 33 | 133 |
| Recognized actuarial losses | 12 | 30 |
| Total net periodic pension costs (Note
26) | 114 | 44 6 |

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 positions as of March 31, 2012 and December 31, 2010:

| | March
31, — 2012 | | December
31, — 2011 | |
| --- | --- | --- | --- | --- |
| Projected benefits obligation | (1,289 | ) | (1,237 | ) |
| Fair value of plan assets | 458 | | 458 | |
| Unfunded status | (831 | ) | (779 | ) |
| Unrecognized items in the consolidated statement of
financial positions: | | | | |
| Unrecognized prior service costs | 0 | | 0 | |
| Unrecognized net actuarial losses | 518 | | 515 | |
| Pension benefits costs provisions | (313 | ) | (264 | ) |

F-78

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

b. Pension benefit costs provisions (continued)

Telkomsel (continued)

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

| | March
31, — 2012 | | December
31, — 2011 | |
| --- | --- | --- | --- | --- |
| Service costs | 30 | | 67 | |
| Interest costs | 21 | | 59 | |
| Expected return on plan assets | (8 | ) | (22 | ) |
| Amortization of past service costs | 0 | | 1 | |
| Recognized actuarial losses | 6 | | 12 | |
| Net periodic pension costs (Note
26) | 49 | | 117 | |

The net periodic pension cost for the pension plan was calculated based on the measurement date as of December 31, 2011 and 2010, with reports dated February 24, 2012 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, 2011 and 2010 for each of the year, are as follows:

	2011	2010
Discount rate	6.75%	9%
Expected long-term return on plan assets	6.75%	9%
Rate of compensation increases	8%	8%

c. 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 three months period ended March 31, 2012 and the years ended December 31, 2011, are as follows:

| | March
31, — 2012 | | December
31, — 2011 | |
| --- | --- | --- | --- | --- |
| Other
post-retirement benefits costs provisions at beginning of
year | 273 | | 241 | |
| Other
post-retirement benefits costs | 16 | | 65 | |
| Other
post-retirement benefits paid | (7 | ) | (33 | ) |
| Total
other post-retirement benefits costs provisions at end of
period | 282 | | 273 | |

F-79

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

c. Other post-retirement benefits (continued)

The components of the net periodic other post-retirement benefits costs for three months period ended March 31, 2012 and the years ended December 31, 20110, are as follows:

| | March
31, | December
31, |
| --- | --- | --- |
| | 2012 | 2011 |
| Service costs | 2 | 9 |
| Interest costs | 8 | 37 |
| Amortization of past service costs | 2 | 7 |
| Recognized actuarial losses | 4 | 12 |
| Total net periodic other post-retirement benefits costs (Note 26) | 16 | 65 |

d. Obligation under Labor Law

Under Law No. 13/2003 concerning labor regulation, the Company and its subsidiaries are required to provide a minimum pension benefit, if not covered yet by the sponsored pension plans, to their employees upon retirement age. The total related obligation recognized as of March 31, 2012 and December 31, 2011 amounted to Rp.117 billion and Rp.111 billion, respectively. The related employees’ benefits cost charged to expense amounted to Rp.7 billion and Rp.30 billion for three months period ended March 31, 2012 and the years ended December 31, 2011, respectively (Note 26).

34. 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. 284 billion and Rp.287 billion as of March 31, 2012 and December 31, 2011 , respectively. The related benefits costs charged to expense amounted to Rp.13 billion and Rp.96 billion for three months period ended March 31, 2012 and the years ended December 31, 2011 , respectively (Note 2 6 ).

F-80

35. POST-RETIREMENT HEALTH CARE BENEFITS

The Company provides a post-retirement health care plan to all of its employees hired before November 1, 1995 who have worked for the Company for 20 years or more when they retire, and to their eligible dependents. The requirement 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.18 billion and Rp.19 billion for three months period ended March 31, 2012 and the years ended December 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 March 31, 2012 and December 31, 2011 :

| | March
31, — 2012 | | December
31, — 2011 | |
| --- | --- | --- | --- | --- |
| Change in projected benefits obligation | | | | |
| Projected benefits obligation at beginning of
year | 10,547 | | 8,741 | |
| Service costs | 14 | | 43 | |
| Interest costs | 189 | | 818 | |
| Actuarial losses | 229 | | 1,208 | |
| Expected post-retirement health care paid | (68 | ) | (263 | ) |
| Projected benefits obligation at end of
period | 10,911 | | 10,547 | |
| Change in plan assets | | | | |
| Fair value of plan assets at beginning of
year | 8,986 | | 8,005 | |
| Expected return on plan assets | 180 | | 662 | |
| Employer’s contributions | 90 | | 361 | |
| Actuarial gains | 229 | | 222 | |
| Expected post-retirement health care paid | (68 | ) | (264 | ) |
| Fair value of plan assets at end of period | 9,417 | | 8,986 | |
| Funded status | (1,494 | ) | (1,561 | ) |
| Unrecognized net actuarial losses (gains) | 673 | | 67 3 | |
| Post-retirement health care benefits costs
provisions | (821 | ) | (88 8 | ) |

The actual return on plan assets was Rp.149 billion and Rp. 884 for three months period ended March 31, 2012 and the years ended December 31, 2011 , respectively.

F-81

35. POST-RETIREMENT HEALTH CARE BENEFITS (continued)

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

| | March
31, — 2012 | | December
31, — 2011 | |
| --- | --- | --- | --- | --- |
| Service costs | 14 | | 43 | |
| Interest costs | 189 | | 818 | |
| Expected return on plan assets | (180 | ) | (662 | ) |
| Net periodic post-retirement benefits costs | 23 | | 199 | |
| Amounts charged to subsidiaries under contractual
agreements | - | | (0 | ) |
| Total net periodic post-retirement health care benefits
costs less amounts charged to subsidiaries (Note
26) | 23 | | 199 | |

As of March 31, 2012 and December 31, 2011, plan assets included the Company’s Series B shares with total fair value of Rp.21 billion and Rp. 24 billion, respectively.

The movements of the post-retirement health care benefits costs provisions for three months period ended March 31, 2012 and the years ended December 31, 2011, are as follows:

	March, 31 — 2012		December 31 — 2011
Post-retirement health care benefits costs provisions at
beginning of year	888		1,050
Net periodic post-retirement health care benefits costs
less amounts charged to subsidiaries (Note 27)	23		199
Amounts charged to subsidiaries under contractual
agreements	-		0
Employer’s contributions	(90	)	(361	)
Post-retirement health care benefits costs provisions at
end of period	821		888

The actuarial valuation for the post-retirement health care benefits was performed based on the measurement date as of December 31, 2011 and 2010, with reports dated March 7, 2012 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, 2011 and 2010, are as follows:

	2011	2010
Discount rate	7.25%	9.5%
Expected long-term return on plan assets	8.00%	8.21%
Health care costs trend rate assumed for next
year	7%	8%
Ultimate health care costs trend rate	7%	8%
Year that the rate reaches the ultimate trend
rate	2012	2011

F-82

36. 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.

a. Nature of relationships and transactions/accounts with related parties

Details of the nature of relationships and transactions/accounts with significant related parties are as follows:

| Related
parties | Nature of
relationships with related
parties | Nature of
transactions/accounts |
| --- | --- | --- |
| The Government | Majority
stockholder | Finance
expense, and investment on financial instruments |
| Government Agencies | Entity
under common control | Network
revenues and operation expenses |
| MoCI | Entity
under common control | Concession
fees, radio frequency usage charges , USO charges and revenue, satellite transponders usage telecommunication services revenue |
| State-owned enterprises Indosat | Entity
under common control Entity under common control | Operation
expenses, purchase of property, plant and equipment, construction and
installation services, insurance expense, finance expense, finance income,
investment on financial instruments Interconnection revenues,
interconnection expenses, telecommunications facilities usage, operating
and maintenance cost leased lines revenue, satellite transponders usage revenues and usage of data communication network
system expenses and lease revenues |
| PT Aplikanusa Lintasarta (“Lintasarta”) | Entity
under significant influence | Network
revenues, usage of data communication
network system expenses and leased lines expenses |
| PT Satelit Palapa Indonesia(“Satelindo”) | Entity
under significant influence | Network
revenues and leased lines
expenses |
| Indosat Mega Media | Entity
under significant influence | Network
revenues |
| PT Sistelindo Mitralintas | Entity
under significant influence | Network
revenues |
| CSM | Associated
company | Satellite
transponders usage revenues , leased
lines revenues and transmission lease expenses |
| Patrakom | Associated
company | Satellite
transponders usage revenues , leased
lines revenues and transmission lease expenses |

F-83

36. RELATED PARTY TRANSACTIONS (continued)

a. Nature of relationships and transactions/accounts with related parties (continued)

| Related parties | Nature of relationships with
related parties | Nature of transactions/accounts |
| --- | --- | --- |
| PSN | Associated company | Satellite transponders usage
revenues , leased lines revenues, transmission lease expenses,
interconnection revenues and interconnection expense |
| PT Industri Telekomunikasi Indonesia
(“INTI”) | Entity under common control | Purchase of property, plant and equipment |
| PT Asuransi Jasa Indonesia (“Jasindo”) | Entity under common control | Insurance of property, plant and equipment |
| PT Jaminan Sosial Tenaga Kerja
(“Jamsostek”) | Entity under common control | Insurance expenses for employees |
| PT Perusahaan Listrik Negara (Persero)
(“PLN”) | Entity under common control | Electricity expenses |
| PT Pos Indonesia | Entity under common control | Cost of SIM cards |
| State-owned banks | Entity under common control | Finance income and finance costs |
| BNI | Entity under common control | Finance income and finance costs |
| Bank Mandiri | Entity under common control | Finance income and finance costs |
| BRI | Entity under common control | Finance income and finance costs |
| BTN | Entity under common control | Finance income and finance costs |
| PT Bahana TCW Investment Management
(“Bahana”) | Entity under common control | Available-for-sale financial assets, bonds and
notes |
| Koperasi Pegawai Telkom (“Kopegtel”) | Entity under significant influence | Purchase of property, plant and equipment, construction
and installation services, leases buildings, leases vehicles, purchases
materials and construction services, and utilizes maintenance, cleaning
services and RSA revenues |
| PT Sandhy Putra Makmur (“SPM”) | Entity under significant influence | leases buildings, leases vehicles, purchases materials
and construction services, and utilizes maintenance and cleaning
services |
| Koperasi Pegawai Telkomsel (“Kisel”) | Entity under significant influence | Car rental services, printing and distribution of
customer bills, collection, other services, distribution of SIM cards and
pulse reload vouchers |
| PT Graha Informatika Nusantara (“Gratika”) | Entity under significant influence | Leased lines revenues, purchase of property, plant and
equipment installation and maintenance expense |
| Directors and commissioners | Key management personnel | Honorarium and facilities |
| Yakes | Entity under significant influence | Medical expenses |

b. Transactions with related parties

The following are significant transactions with related parties:

| | 2012 — Amount | % of total
revenues | 2011 — Amount | % of total
revenues |
| --- | --- | --- | --- | --- |
| REVENUES | | | | |
| Kisel | 713 | 4.01 | 514 | 3.08 |
| Indosat | 184 | 1.03 | 216 | 1.29 |
| Government Agencies | 63 | 0.35 | 63 | 0.38 |
| Others (each below Rp.30 billion) | 61 | 0.34 | 65 | 0.40 |

F-84

36. RELATED PARTY TRANSACTIONS (continued)

b. Transactions with related parties (continued)

	2012 — Amount	% of total expenses	2011 — Amount	% of total expenses
EXPENSES
MoCI	1,059	9.01	1,257	11.04
PLN	215	1.83	169	1.48
Kopegtel	187	1.59	205	1.80
Indosat	183	1.56	195	1.71
Kisel	167	1.42	128	1.12
Jasindo	99	0.84	104	0.91
PSN	43	0.37	44	0.39
Yakes	33	0.28	37	0.32
Others (each below Rp.30 billion)	95	0.82	94	0.90

	2012 — Amount	% of total finance income	2011 — Amount	% of total finance income
Finance income
State-owned banks	49	37.98	64	53.33

	2012 — Amount	% of total finance costs	2011 — Amount	% of total finance costs
Finance costs
State-owned banks	137	49.28	162	40.00
The Government	25	8.99	38	9.38
Total	162	58.27	200	49.38

	2012 — Amount	% of total fixed assets purchased	2011 — Amount	% of total fixed assets purchased
Purchase of property, plant and
equipment
(Note 9)
Kopegtel	34	0.99	27	1.24
State-owned enterprises	9	0.26	23	1.05
SPM	6	0.17	2	0.09
Gratika	24	0.70	5	0.23

F-85

36. RELATED PARTY TRANSACTIONS (continued)

b. Transactions with related parties (continued)

Presented below are balances of accounts with related parties:

		March 31, 2012 — Amount	% of total assets	December 31, 2011 — Amount	% of total assets
a.	Cash and cash equivalents (Note
3)	7,594	7.26	7,848	7. 62
b.	Available-for-sale financial assets
	The Government	142	0.14	140	0.14
	State-owned enterprises	111	0.11	110	0.11
	Bahana	70	0.07	64	0.06
	Total	323	0.32	314	0.31
c.	Trade receivables - net (Note
4)	1,116	1.07	932	0.90
d.	Advances and prepaid expenses (Note
6)
	MoCI	1,921	1.84	2,206	2.1 4
	Others (each below Rp.30 billion)	34	0.03	27	0.03
	Total	1,955	1.87	2,233	2.1 7
e.	Advances and other non-current assets (Note
10)
	BNI	145	0.14	92	0.09
	Others (each below Rp.30 billion)	3	0.00	5	0.00
	Total	148	0.14	97	0.09

		March 31, 2012 — Amount	% of total liabilities	December 31, 2011 — Amount	% of total liabilities
f.	Trade payables (Note 12)
	MoCI	316	0.75	409	0.97
	Kopegtel	70	0.17	92	0.22
	INTI	64	0.15	66	0.16
	Indosat	25	0.06	52	0.12
	Yakes	14	0.03	35	0.08
	State-owned enterprises	0	0.00	41	0. 10
	Others (each below Rp.30 billion)	286	0.30	143	0.34
	Total	775	1.46	838	1.9 9

F-86

36. RELATED PARTY TRANSACTIONS (continued)

b. Transactions with related parties (continued)

		March 31, 2012 — Amount	% of total liabilities	December 31, 2011 — Amount	% of total liabilities
g.	Accrued expenses (Note 13)
	State-owned banks	42	0.10	50	0.1 2
	The Government	35	0.08	22	0.05
	Total	77	0.18	72	0.1 7
h.	Advances from customers and suppliers
	The Government	125	0.30	151	0.36
i.	Short-term bank loans (Note
15)
	S tate-owned banks	8	0.02	7	0.02
j.	Two-step loans (Note 17)
	The Government	2,171	5.14	2,284	5.41
k.	Bonds and notes (Note 18)
	Bahana	112	0.27	107	0.25
l.	Long-term bank loans (Note
19)
	BNI	2,010	4.76	2,273	5. 40
	BRI	1,943	4.60	2,131	5.0 7
	Bank Mandiri	1,763	4.18	2,110	5.0 2
	Bank Jabar	263	0.62	350	0.83
	BTN	-	0	-	-
	Total	5,979	14.16	6,864	16.32

c. Significant agreements with related parties

i. The Government

The Company obtained two-step loans from the Government (Note17).

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.

Telkomsel paid an up-front fee for the 3G license amounting to Rp.756 billion and recognized as intangible asset (Note 11).

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.

F-87

36. RELATED PARTY TRANSACTIONS (continued)

c. Significant agreements with related parties (continued)

ii. Indosat

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

The Company has also entered into an interconnection agreement between the Company’s fixed line network (Public Switched Telephone Network or “PSTN”) and Indosat’s GSM mobile cellular telecommunications network in connection with 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 39). 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 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.

F-88

36. RELATED PARTY TRANSACTIONS (continued)

c. Significant agreements with related parties (continued)

iii. Others

The Company has entered into agreements with associated companies, namely CSM, Patrakom, PSN and Gratika for the utilization of the Company's satellite transponders or frequency channels and leased lines.

Telkomsel has an agreement with PSN for the lease of PSN’s transmission link. Based on the agreement, which was made on March 14, 2001, the minimum lease period is 2 years since the operation of the transmission link and is extendable subject to agreement by both parties. The agreement was extended until March 29, 2013.

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. Telkomsel also has dealership agreements with Kisel for distribution of SIM cards and pulse reload vouchers.

d. Key management personnel remuneration

Key management personnel of the Company are the Board of Commissioners and Directors as detailed in Note 1b.

The Company and its subsidiaries provide honorarium and facilities to support the operational of their Board of Commissioners. The Company and its subsidiaries provide salaries and facilities to support the operational duties of their Directors. The total of such benefits is as follows:

| | 2012 — Amount | % of total
expenses | 2011 — Amount | % of total
expenses |
| --- | --- | --- | --- | --- |
| Directors | 55 | 0.47 | 38 | 0.33 |
| Board of Commissioners | 11 | 0.10 | 12 | 0.10 |

37. SEGMENT INFORMATION

The Company and its subsidiaries have three main operating segments in Indonesia namely: fixed wireline, fixed wireless and cellular. The fixed wireline segment provides local, domestic long distance (“Sambungan Langsung Jarak Jauh” or “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 are not monitored separately by CODM are presented as “Others”, comprising of information technology services, telephone directories and building management businesses.

F-89

3 7 . SEGMENT INFORMATION (continued)

Segment revenues and expenses include transactions between business segments and are accounted for at prices that management believes represent market prices.

| | 201 2 — Fixed wireline | | Fixed wireless | | Cellular | | Others | | Total before
elimination | | Elimination | | Total
consolidated | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Segment results | | | | | | | | | | | | | | |
| Revenues | | | | | | | | | | | | | | |
| External revenues | 4,706 | | 473 | | 12,306 | | 311 | | 17,796 | | - | | 17,796 | |
| Inter-segment revenues | 2,534 | | 27 | | - | | 5 | | 2,566 | | (2,566 | ) | - | |
| Total revenues | 7,240 | | 500 | | 12,306 | | 316 | | 20,362 | | (2,566 | ) | 17,796 | |
| Other income | | | | | | | | | | | | | | |
| External revenues | 41 | | 3 | | 86 | | 50 | | 180 | | - | | 180 | |
| Inter-segment revenues | 54 | | - | | - | | - | | 54 | | (54 | ) | - | |
| Total other income | 95 | | 3 | | 86 | | 50 | | 234 | | (54 | ) | 180 | |
| Expenses | | | | | | | | | | | | | | |
| External expenses | (3,047 | ) | (685 | ) | (7,680 | ) | (344 | ) | (11,756 | ) | - | | (11,756 | ) |
| Inter-segment expenses | (2,591 | ) | (24 | ) | - | | (5 | ) | (2,620 | ) | 2,620 | | - | |
| Total expenses | (5,638 | ) | (709 | ) | (7,680 | ) | (349 | ) | (14,376 | ) | 2,620 | | (11,756 | ) |
| Segment results | 1,697 | | (206 | ) | 4,712 | | 17 | | 6,220 | | - | | 6,220 | |
| Finance income | | | | | | | | | | | | | 129 | |
| Finance costs | | | | | | | | | | | | | (278 | ) |
| Income tax expense | | | | | | | | | | | | | (1,512 | ) |
| Profit for the year | | | | | | | | | | | | | 4,559 | |
| Foreign currency translation - net of tax | | | | | | | | | | | | | 2 | |
| Change in fair value of available-for-sale | | | | | | | | | | | | | | |
| financial assets - net of tax | | | | | | | | | | | | | 3 | |
| Total comprehensive income for the year | | | | | | | | | | | | | 4,564 | |
| Profit for the year attributable to: | | | | | | | | | | | | | | |
| Owners of the parent | | | | | | | | | | | | | 3,322 | |
| Non-controlling interest | | | | | | | | | | | | | 1,237 | |
| Total comprehensive income attributable to: | | | | | | | | | | | | | | |
| Owners of the parent | | | | | | | | | | | | | 3,327 | |
| Non-controlling interest | | | | | | | | | | | | | 1,237 | |
| Other information | | | | | | | | | | | | | | |
| Segment assets | 42,840 | | 3,914 | | 60,520 | | 1,334 | | 108,608 | | (4,812 | ) | 103,796 | |
| Assets held for sale | - | | - | | 593 | | - | | 593 | | - | | 593 | |
| Investments in associates | 215 | | - | | 20 | | - | | 235 | | - | | 235 | |
| Total consolidated assets | | | | | | | | | | | | | 104,624 | |
| Total consolidated liabilities | (24,434 | ) | (671 | ) | (19,237 | ) | (708 | ) | (45,050 | ) | 4,812 | | (40,238 | ) |
| Capital expenditures | 1,148 | | - | | (2,256 | ) | (37 | ) | (3,441 | ) | - | | (3,441 | ) |
| Depreciation and amortization | (837 | ) | (169 | ) | (2,460 | ) | 1 | | (3,465 | ) | - | | (3,465 | ) |
| Other non-cash expenses | (145 | ) | (3 | ) | (48 | ) | (2 | ) | (198 | ) | - | | (198 | ) |

F-90

3 7 . SEGMENT INFORMATION (continued)

		2011
		Fixed
wireline		Fixed
wireless		Cellular		Others		Total
before elimination		Elimination		Total
consolidated
	Segment results
	Revenues
	External revenues	5,211		593		10,845		57		16,706		-		16,706
	Inter-segment revenues	1,545		(34	)	468		206		2,185		(2,185	)	-
	Total revenues	6,756		559		11,313		263		18,891		(2,185	)	16,706
	Other income
	External revenues	58		2		37		3		100		-		100
	Inter-segment revenues	8		-		-		35		43		(43	)	-
	Total other income	66		2		37		38		143		(43	)	100
	Expenses
	External expenses	(4,063	)	(774	)	(6,285	)	(264	)	(11,386	)	-		(11,386	)
	Inter-segment expenses	(1,114	)	25		(1,122	)	(14	)	(2,225	)	2,225		-
	Total expenses	(5,177	)	(749	)	(7,407	)	(278	)	(13,611	)	2,225		(11,386	)
	Segment results	1,647		(188	)	3,943		23		5,423		(3	)	5,420
	Finance income													120
	Finance costs													(405	)
	Income tax expense													(1,311	)
	Profit for the year													3,824
	Foreign currency translation - net of tax													(5	)
	Change in fair value of available-for-sale
	financial assets - net of tax													(3	)
	Total comprehensive income for the year													3,816
	Profit for the year attributable to:
	Owners of the parent													2,828
	Non-controlling interest													996
	Total comprehensive income attributable to:
	Owners of the parent													2,820
	Non-controlling interest													996
	Other information
	Segment assets	38,469		4,991		58,635		985		103,080		(2,646	)	100,434
	Investments in associates	231		-		20		-		251		-		251
	Total consolidated assets													100,685
	Total consolidated liabilities	(20,361	)	(721	)	(21,613	)	(404	)	(43,099	)	2,645		(40,454	)
	Capital expenditures	(821	)	-		(1,349	)	(15	)	(2,185	)	-		(2,185	)
	Depreciation and amortization	(812	)	(186	)	(2,440	)	(9	)	(3,447	)	-		(3,447	)
	Other non-cash expenses	(126	)	(7	)	(46	)	(1	)	(180	)	-		(180	)
38.	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, 2012, the Company has 9 RSA’s with 8 investors. The RSA’s are
located mainly in East Java, Kalimantan, Makassar, Pare-pare, Manado,
Denpasar, Mataram and Kupang, with concession periods ranging from 87 to
148 months.

F-91

38. RSA (continued)

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.

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 ratios.

39. 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.

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,

F-92

39. TELECOMMUNICATIONS SERVICES TARIFFS (continued)

b. Mobile cellular telephone tariffs (continued)

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, which is determined using the Long Run Incremental Cost (LRIC) Bottom up method.

· Retail service activity cost plus margin.

c. Interconnection tariffs

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.

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

d. 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.

e. 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.

F-93

40. COMMITMENTS AND SIGNIFICANT AGREEMENTS

a. Capital expenditures

As of March 31, 2012, capital expenditures committed under the contractual arrangements, principally relating to procurement and installation of switching equipment, transmission equipment and cable network, are as follows:

| Currencies | Amounts in
foreign currencies (in millions) | Equivalent
in Rupiah |
| --- | --- | --- |
| Rupiah | - | 4,069 |
| U.S. Dollars | 460 | 4,224 |
| Euro | 0.2 | 3 |
| Total | | 8,296 |

The above balance includes the following significant agreements:

(i) The Company

| Contracting parties | Date of
agreement | Significant provisions of the agreement |
| --- | --- | --- |
| Company and G-Pas Consortium | April 18,
2008 | Procurement and installation agreement for Outside Plant
Fiber Optic 2008 Batch 8 Divre VII |
| Company and ISS Reshetnev | March 2,
2009 | Procurement agreement for Telkom-3 Satellite |
| Company and APT Satellite Company Limited | March 23,
2009 | 142E
Degree Orbital Position Cooperation Agreement |
| Company and Sansaine Huawei Consortium | May 27,
2009 | a. Cooperation agreement for procurement and installation of
MSAN ALU and Secondary Access 2008 Batch 3 |
| | June 15,
2009 | b. Cooperation agreement for procurement and installation
of MSAN ALU and Secondary Access 2008 Batch 1 |
| Company and ZTE Consortium | June 2,
2009 | Cooperation agreement for procurement and installation of
MSAN ALU and Secondary Access 2008 Batch 2 |
| Company and PT Aldomaru | June 11,
2009 | Procurement agreement for Roll Out Infusion PL
2009 |

F-94

40. COMMITMENTS AND SIGNIFICANT AGREEMENTS (continued)

a. Capital expenditures (continued)

(i) The Company (continued)

| Contracting parties | Date of
agreement | Significant provisions of the agreement |
| --- | --- | --- |
| 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 |
| Company and PT ZTE Indonesia | September
4, 2009 | Procurement and installation agreement for Modernization
MSAN Softswitch Divre VI and Divre VII |
| Company and Tekken - DMT Consortium | September
15, 2009 | Procurement and installation agreement for Fiber Optic
Cable Access Divre VI Kalimantan |
| Company and Huawei - Sansaine Consortium | November
24, 2009 | Procurement and installation agreement for Palapa Ring
Mataram-Kupang Cable System Project (MKCS) |
| Company and PT Industri Telekomunikasi
Indonesia | December
31, 2010 | Procurement and installation agreement for Modernization
of Copper Cable Access Network with TI/TO Pattern |
| Company and PT Lintas Teknologi Indonesia | June 8,
2011 | Procurement and installation for DWDM Alcatel-Lucent
(ALU) |
| Company and PT Datacomm Diangraha | June 30,
2011 | Procurement and installation for Metro Ethernet ALU
expansion |
| Company and PT Bina Nusantara Perkasa | December
9, 2011 | Procurement and installation for Sumatera-Bangka (SBCS)
and SKKL Tarakan-Tanjung Selor (TSCS) |
| Company and PT Ketrosden Triasmitra | March 6,
2012 | Procurement 2 Fiber Pairs (4 Core) SKKL
Jakarta-Bangka_Batam_Bintan with IRU Pattern. |

F-95

40. COMMITMENTS AND SIGNIFICANT AGREEMENTS (continued)

a. Capital expenditures (continued)

(ii) Telkomsel

| Contracting parties | Date of
agreement | Significant provisions of the agreement |
| --- | --- | --- |
| Telkomsel, PT Ericsson Indonesia, Ericsson AB, PT Nokia
Siemens Networks, Nokia Siemens Networks Oy, and Nokia Siemens Network
GmbH & Co. KG | April 17, 2008 | The
c ombined 2G and 3G CS Core Network Rollout
Agreements |
| Telkomsel, PT Ericsson Indonesia, and PT Nokia Siemens
Networks | April 17, 2008 | Technical
Service Agreement (TSA) for Combined
2G and 3G CS Core Network |
| Telkomsel, PT Ericsson Indonesia, Ericsson AB, PT Nokia
Siemens Networks, Nokia Siemens Networks Oy, Huawei International Pte.
Ltd., PT Huawei Tech Investment, and PT ZTE Indonesia | March
and Jun e 2009 | 2G BSS and
3G UTRAN roll o ut agreement
for the provision of 2G GSM BSS and 3G UMTS Radio
Access Network |
| Telkomsel, PT Trikomsel OKE and PT Mitra Telekomunikasi
Selular (MTS) | July , 2009 | Purchase
of iPhone products and provision of cellular network service |
| Telkomsel, PT Packet Systems Indonesia and PT Huawei Tech
Investment | Februar y 3, 2010 | Maintenance and procurement of equipment and related
service agreement for Next Generation Convergence IP RAN Rollout and
Technical Support |
| Telkomsel , PT Datacraft Indonesia and PT Huawei Tech
Investment | Februar y 3, 2010 | Maintenance and procurement of equipment and related
service agreement for Next Generation Convergence Core Transport Rollout
and Technical Support |
| Telkomsel, Amdocs Software Solutions Limited Liability
Company and PT Application Solutions | Februari 8, 2010 | Online
Charging System (“OCS”) and Service Control Points (“SCP”) System Solution
Development Agreement |
| Telkomsel and PT Application Solutions | Februar y 8, 2010 | Technical
Support Agreement to provide technical support services for the OCS and
SCP |
| Telkomsel, PT Nokia
Siemens Networks and Nokia Siemens Networks Oy | Januar y 27, 2011 | Soft HLR
Roll o ut agreement |
| Telkomsel and PT Nokia Siemens Networks | Januar y 27, 2011 | Soft HLR
Technical Support Agreement |
| Telkomsel and PT Application Solutions | July 5,
2011 | Development and roll out agreement for Customer
Relationship Management and Contact Center solutions |
| Telkomsel and Nokia Siemens Networks Oy and Huawei
Investment | July 11,
2011 | Procurement agreement for equipment |
| Telkomsel and PT
Ericsson Indonesia | December
21, 2011 | Development and Rollout of Operation Support System
(OSS) |

F-96

40. COMMITMENTS AND SIGNIFICANT AGREEMENTS (continued)

b. Borrowings and other credit facilities

(i) As of March 31, 2012, the Company has bank guarantee facilities for tender bond, performance bond, maintenance bond, deposit guarantee and advance payment bond for various project of the Company, as follow:

| Lenders | Total
facility | End of the period of the facility | Currency | Facility
utilized — Original
currency (in millions) | Rupiah
equivalent |
| --- | --- | --- | --- | --- | --- |
| BNI* | 120 | March 31,
2012 | Rp. | - | 116 |
| BRI | 250 | March 14,
2014 | Rp. | - | 61 |
| Bank
Mandiri | 60 | December
23, | Rp. | - | 47 |
| Total | 430 | | | | 225 |
| * As of the issuance date of the consolidated financial
statements, the new agreement of BNI facilities is still in
process. | | | | | |

(ii) Telkomsel has a US$3 million bond and bank guarantee and standby letter of credit facilit ies with SCB, Jakarta. The facilities expire on July 31, 2012. Under these facilities, as of March 31, 2012, Telkomsel has issued a bank guarantee of Rp.20 billion (equivalent to US$2.2 million) for a 3G performance bond (Note 40c.i). The bank guarantee is valid until April 7, 2013.

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 (Note 2k), Telkomsel is required, among other things, to:

Pay an annual BHP fee which is determined based on a formula over the license term (10 years) as set forth in the decision letters. The BHP is payable upon receipt of the notification letter (“Surat Pemberitahuan Pembayaran”) from the DGPT. The BHP fee is payable annually up to the expiry period of the license in 2019. Annual BHP fee for 2011 based on notification letter from the DGPT amounted to Rp.495 billion. Such fees amount for each year varies depending on certain variables set in the formula.
Provide roaming access for the existing 3G operators.
Contribute to USO development.
Construct a 3G network which covers at least 14 provinces by the sixth year of holding the 3G license.
Issue a performance bond each year amounting to Rp.20 billion or 5% of the annual fee to be paid for the subsequent year, whichever is higher.

F-97

40. COMMITMENTS AND SIGNIFICANT AGREEMENTS (continued)

c. Others (continued)

(ii) Palapa Ring Consortium

On November 10, 2007, the Company entered into a Construction and Maintenance Agreement (“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 billion. The Company will obtain 4 lambdas bandwidth of total capacity of 8.44 lambdas from this consortium. 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.

On November 22, 2011, based on the letter of management of Palapa Ring Consortium No. 01/PR-MC/IV/2011, the agreement of Palapa Ring Consortium was terminated. Subsequently, based on the letter of management of Palapa Ring Consortium No. 02/PR-MC/IV/2011 dated December 28, 2011, the escrow account is closed and the escrow account balance amounted to US$4.6 million has been returned to the Company.

(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 Megahertz (“MHz”), 900 MHz and 1800 MHz are determined using a formula set forth in the decree. The decree is applicable for 5 years unless further amended.

As an implementation of the above decree, 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 was Rp.716 billion and 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 was Rp.52 billion and was paid on December 27, 2010.

Subsequently, based on Decision letter No. 590/KEP/M.KOMINFO/11/2011 dated November 14, 2011, the Company and Telkomsel were considered over paid for Rp.31 billion and Rp.117 billion, respectively, which will be treated as an prepayment for annual frequency usage fee in the second year.

Based on Decision Letter No. 349/KEP/M.KOMINFO/08/2011 and No. 350/KEP/M.KOMINFO/08/2011 dated August 8, 2011, the MoCI determined that the second year (Y 2 ) annual frequency usage fee of the Company and Telkomsel were Rp.142 billion and Rp.1,834 billion, respectively. The fees were paid in December 2011, net of prepayment.

F-98

40. COMMITMENTS AND SIGNIFICANT AGREEMENTS (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 were 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 40c.i). The frequency usage fees were payable upon receipt of notification letter (“Surat Pemberitahuan Pembayaran”) from DGPT. The fee was 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 6).

(iv) Apple, Inc

On January 9 and July 16, 2009, Telkomsel entered into agreements with Apple, Inc for the purchase of iPhone products, marketing it to customers using third part ies (PT Trikomsel OKE and PT Mitra Tel e komunikasi Selular ) and providing cellular network services over a 3 year term. Cumulative minimum iPhone units to be purchased as of December 31, 2009, 2010 and 2011 were 125,000, 300,000 and 500,000 units for each year.

On January 8, 2012, pursuant to the expiry of agreement with Apple, Telkomsel and Apple agreed to extend the agreement until March 30, 2012. As of the issuance date of the consolidated financial statements, Telkomsel is in the process of obtaining another extension.

(v) Operating leases

| | Minimum
lease payment — Total | Less than
1 year | 1-5
years | More than
5 years |
| --- | --- | --- | --- | --- |
| Operating
leases | 249 | 63 | 184 | 1 |

Operating leases represent non-cancelable office lease agreements of certain subsidiaries.

(vi) 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.

F-99

40. COMMITMENTS AND SIGNIFICANT AGREEMENTS (continued)

c. Others (continued)

(vi) Universal Service Obligation (“USO”) (continued)

Based on 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. Subsequently, b ased on Decree No. 18/PER/M.KOMINFO/11/2010 dated November 19, 2010 of MoCI, BTIP was changed into Balai Penyedia dan Pengelola Pembiayaan Telekomunikasi dan Informatika (“BPPPTI”).

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, in 2011 and 2010, the USO agreements were amended, which amendments cover, among other things, change the price to Rp.1,758 billion and change the term of payment from quarterly to monthly or quarterly.

In January 2010, the Ministry granted Telkomsel operating licenses to provide local fixed-line services under the USO program.

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 billion, 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.528 billion, covering Jambi, Riau, Kepulauan Riau, Sulawesi Utara, Sulawesi Tengah, Gorontalo, Sulawesi Barat, Sulawesi Tenggara, Kalimantan Tengah, Sulawesi Selatan, Papua, and Irian Jaya Barat.

On December 27, 2011, Telkomsel (on behalf of Konsorsium Telkomsel, a consortium which was established with Dayamitra on December 9, 2011) was selected by BPPPTI as provider of USO Program in the border areas for all packages (package 1 to package 13) and USO Program (upgrading) of “Desa Pinter” or “Desa Punya Internet” for 1, 2 and 3 packages with a total price of Rp.830 billion and Rp.261 billion, respectively.

On January 5, 2012 and January 9, 2012, Telkomsel (and on behalf of Konsorsium Telkomsel or) entered into agreements with BPPPTI for providing of the USO programs of Desa Pinter and in the border areas, respectively.

F-100

41. 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.169 billion as of March 31, 2012.

b The Company, Telkomsel and seven other local operators are being investigated by The Commission for the Supervision of Business Competition (“Komisi Pengawasan Persaingan Usaha” or “KPPU”) for allegations of SMS cartel practices. As a result of the investigations on June 17, 2008, KPPU found that the Company, Telkomsel and certain other local operators had proven to violate Law No. 5/1999 article 5 and gave the Company and Telkomsel Rp.18 billion penalty and Rp.25 billion penalty, respectively.

Management believes that there are no such cartel practices that led to a breach of prevailing regulations. Accordingly, the Company and Telkomsel have filed an objection with the Bandung District Court and South Jakarta District Court, on July 14, 2008 and July 11, 2008, respectively.

Due to that the operators filing the case in various courts, subsequently, KPPU requested the SC to consolidate the case into Central Jakarta District Court. Based on SC’s decision letter dated April 12, 2011, SC appointed Central Jakarta District Court to investigate and resolve the case.

As of the issuance date of the consolidated financial statements, the Company and Telkomsel have not received any notification from the court.

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.

42. ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

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

| | March 31,
2012 (in millions) — U.S.
Dollars (in millions) | Japanese
Yen (in millions) | Others*
(in millions) | Rupiah
equivalent (in billions) |
| --- | --- | --- | --- | --- |
| Assets | | | | |
| Cash and
cash equivalents | 164.54 | 1.07 | 8.74 | 1,588 |
| Available-for-sale financial assets | 6.37 | - | - | 58 |
| Trade
receivables | | | | |
| Related parties | 4.80 | - | - | 44 |
| Third parties | 86.04 | - | 0.06 | 785 |
| Other
receivables | 35.42 | - | 0.06 | 325 |
| Advances
and other non-current assets | 10.35 | - | - | 95 |
| Total
assets | 307.52 | 1.07 | 8.86 | 2,895 |

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

| | March 31,
2012 (in millions) — U.S.
Dollars (in millions) | | Japanese
Yen (in millions) | | Others*
(in millions) | | Rupiah
equivalent (in billions) | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Liabilities | | | | | | | | |
| Trade
payables | | | | | | | | |
| Related parties | (0.25 | ) | - | | - | | (2 | ) |
| Third parties | (394.67 | ) | - | | (1.10 | ) | (3,634 | ) |
| Other
payables | (1.26 | ) | - | | - | | (12 | ) |
| Accrued
expenses | (53.84 | ) | (112.76 | ) | (2.63 | ) | (531 | ) |
| Advances
from customers and suppliers | (0.84 | ) | - | | - | | (8 | ) |
| Current
maturities of long-term liabilities | (33.10 | ) | (767.90 | ) | - | | (389 | ) |
| Promissory
notes | (80.85 | ) | - | | - | | (739 | ) |
| Long-term
liabilities - net of current maturities | (138.77 | ) | (9,214.77 | ) | - | | (2,298 | ) |
| Total
liabilities | (703.58 | ) | (10,095.43 | ) | (3.73 | ) | (7,613 | ) |
| Liabilities - net | (396.06 | ) | (10,094.36 | ) | (5.13 | ) | (4,718 | ) |
| * Assets
and liabilities denominated in other foreign currencies are presented as
U.S. Dollars equivalents using the exchange rate prevailing at end of the
reporting period. | | | | | | | | |

| | December
31, 2011 (in millions) — U.S.
Dollars (in millions) | | Japanese
Yen (in millions) | | Others*
(in millions) | | Rupiah
equivalent (in billions) | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Assets | | | | | | | | |
| Cash and cash equivalents | 139.03 | | 1.18 | | 8.81 | | 1,340 | |
| Available-for-sale financial assets | 6.34 | | - | | - | | 57 | |
| Trade receivables | | | | | | | | |
| Related parties | 4.73 | | - | | - | | 43 | |
| Third parties | 88.55 | | - | | 0.06 | | 803 | |
| Other receivables | 24.99 | | - | | 0.06 | | 227 | |
| Other current assets | 0.16 | | - | | - | | 1 | |
| Advances and other non-current assets | 10.20 | | - | | - | | 93 | |
| Total assets | 274.00 | | 1.18 | | 8.93 | | 2,56 4 | |
| Liabilities | | | | | | | | |
| Trade payables | | | | | | | | |
| Related parties | (0.41 | ) | - | | - | | (4 | ) |
| Third parties | (427.73 | ) | (0.51 | ) | (1.35 | ) | (3,891 | ) |
| Other payables | (0.52 | ) | - | | - | | (5 | ) |
| Accrued expenses | (54.84 | ) | (35.61 | ) | (2.53 | ) | (524 | ) |
| Advances from customers and suppliers | (0.86 | ) | - | | - | | (8 | ) |
| Current maturities of long-term liabilities | (66.61 | ) | (767.90 | ) | - | | (694 | ) |
| Promissory notes | (74.75 | ) | - | | - | | (678 | ) |
| Long-term liabilities - net of current
maturities | (140.99 | ) | (9,214.77 | ) | - | | (2,357 | ) |
| Total liabilities | (766.71 | ) | (10,018.79 | ) | (3.88 | ) | (8,161 | ) |
| Liabilities - net | (492.71 | ) | (10,017.61 | ) | 5.05 | | (5,59 7 ) | ) |
| * Assets
and liabilities denominated in other foreign currencies are presented as
U.S. Dollars equivalents using the exchange rate prevailing at end of the
reporting period. | | | | | | | | |

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PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) MARCH 31, 2012 (UNAUDITED) AND DECEMBER 31, 2011 (AUDITED) AND THREE MONTHS PERIOD ENDED MARCH 31, 2012 AND 2011 (UNAUDITED) (Figures in tables are presented in billions of Rupiah, unless otherwise stated)

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

The Company and its subsidiaries’ activities expose them to a variety of financial risks, including the effects of changes in debt and equity market prices, foreign currency exchange rates and interest rates.

If the Company and its subsidiaries report monetary assets and liabilities in foreign currencies as of March 31, 2012 using the rates on April 25, 2012, the unrealized foreign exchange loss will increase by the amount of Rp.22 billion.

43. FINANCIAL RISK MANAGEMENT

Financial risk management

The Company and its subsidiaries’ activities expose them to a variety of financial risks such as market risks (including foreign exchange risk, price 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 financial liabilities arising from fluctuation of foreign currency exchange rate s and the fluctuation of interest rates. 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 t he 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 are exposed to foreign exchange risk on sales, purchases and borrowings transactions that are denominated in foreign currencies. The foreign currencies denominated transactions are primarily in U .S. Dollar s and Japanese Yen . The Company and its subsidiaries’ exposure to other foreign exchange rates is not material.

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 that are equal to at least 25% of the outstanding liabilities.

The following represents the Company and its subsidiaries ’ financial assets and financial liabilities exposure to foreign currency risk:

	March 31, 201 2 — Dolar A.S.		Yen Jepang
	( in billion )		( in billion )
Financial assets6.	0.31		0.00
Financial liabilities	(0.70	)	(10.10	)
Net exposure	(0.39	)	(10.10	)

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PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) MARCH 31, 2012 (UNAUDITED) AND DECEMBER 31, 2011 (AUDITED) AND THREE MONTHS PERIOD ENDED MARCH 31, 2012 AND 2011 (UNAUDITED) (Figures in tables are presented in billions of Rupiah, unless otherwise stated)

43. FINANCIAL RISK MANAGEMENT (continued)

Financial risk management (continued)

a. Foreign exchange risk (continued)

Sensitivity analysis

A strengthening of the U .S. Dollar s and Japanese Yen , as indicated below, against the Rupiah at March 31, 2012 would have decreased equity and profit or loss by the amounts shown below. This analysis is based on foreign currency exchange rate variances that the Company and its subsidiaries considered to be reasonably possible at the reporting date. The analysis assumes that all other variables, in particular interest rates, remain constant.

	Equity/profit (loss)
March 31, 2012
U.S. Dollars (1% strengthening)	(36	)
Japanese Yen (5% strengthening)	(56	)

A weakening of the U.S. Dollars and Japanese Yen against the Rupiah at March 31, 2012 would have had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant.

b. Market price risk

The Company and its subsidiaries are exposed to cha n ges in debt and equity market prices related to available-for-sale investments that carried at fair value. Gain and losses arising from changes in the fair value of available-for-sale investments are recognized in equity.

The performance of the Company and its subsidiaries’ available-for-sale investments are monitored periodically, together with a regular assesment of their relevance to the Company and its subsidiaries’ long term strategic plans.

As at March 31, 2012 management considered the price risk for its available-for-sale investments to be immaterial in terms of the possible impact on profit or loss and total equity from a reasonably possible change in fair value.

c. Interest rate risk

Interest rate fluctuation is monitored to minimize any negative impact to financial position. Borrowings at variable interest rates expose the Company and its subsidiaries to interest rate risk (Notes 15, 16, 1 7, 18 and 19 ). 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.

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PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) MARCH 31, 2012 (UNAUDITED) AND DECEMBER 31, 2011 (AUDITED) AND THREE MONTHS PERIOD ENDED MARCH 31, 2012 AND 2011 (UNAUDITED) (Figures in tables are presented in billions of Rupiah, unless otherwise stated)

43. FINANCIAL RISK MANAGEMENT (continued)

Financial risk management (continued)

c. Interest rate risk (continued)

At reporting date, the interest rate profile of the Company and its subsidiaries’ interest-bearing borrowings was:

	M arch 31, 2012
Fixed rate borrowings	5,336
Variable rate borrowings	10,534

Sensitivity analysis for variable rate borrowings

At March 31, 2012, a change of 25 basis points in interest rates of variable rate borrowings would have increased (decreased) equity and profit or loss by the amounts Rp.26 billion, respectively. This analysis assumes that all other variables, in particular foreign currency rates, remain constant.

d. Credit risk

The following represents the maximum exposure to credit risk of the Company and its subsidiaries financial assets:

	M arch 31, 2012
Cash and cash equivalents	11,163
Available-for-sale financial assets	373
Trade and other receivables, net	5,718
Other current assets	6
Long-term investments	21
Advances and other non-current assets	267
Total	17,548

The Company and its subsidiaries are exposed to credit risk primarily from trade receivables and other receivables. The c redit risk is managed by continuous monitoring outstanding balances and collection of trade and other receivables.

Trade and other receivables do not include any major concentration of credit risk by customer. Each of the top three customers account for less than 1% of the trade receivables as at March 31, 2012.

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 provision for impairment of receivables to cover incurred loss arising from uncollectible receivables based on existing historical loss.

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PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) MARCH 31, 2012 (UNAUDITED) AND DECEMBER 31, 2011 (AUDITED) AND THREE MONTHS PERIOD ENDED MARCH 31, 2012 AND 2011 (UNAUDITED) (Figures in tables are presented in billions of Rupiah, unless otherwise stated)

43. FINANCIAL RISK MANAGEMENT (continued)

Financial risk management (continued)

e. Liquidity risk

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 financial position ratios, among other things, liquidity ratios, debt equity ratios against debt covenant requirements.

The following is the maturity analysis of the Company and its subsidiaries financial liabilities:

	Carrying amount	Contractual cash flows		2012		2013		2014		2015		2016 and thereafter
March 31, 2012
Trade and other payables	7,254	(7,254	)	(7,254	)	-		-		-		-
Accrued expenses	5,344	(5,344	)	(5,344	)	-		-		-		-
Loan and other borrowing
Bank loans	9,169	(9,235	)	(3,884	)	(2,325	)	(1,476	)	(1,168	)	(382	)
Obligations under finance leases	508	(632	)	(252	)	(172	)	(102	)	(43	)	(63	)
Two-step loans	2,171	(2,727	)	(326	)	(249	)	(273	)	(266	)	(1,613	)
Bonds and notes	3,851	(5,939	)	(767	)	(508	)	(470	)	(1,280	)	(2,914	)
Total	28,297	(31,131	)	(17,827	)	(3,254	)	(2,321	)	(2,757	)	(4,972	)

Fair value of financial assets and financial liabilities

a . Fair value measurement

Fair value is the amount for which an asset could be exchanged, or liability settled, in an arms-length transaction.

The Company and its subsidiaries determined the fair value measurement for disclosure purposes of each class of financial assets and financial liabilities based on the following methods and assumptions:

(i) The fair values of short-term financial assets and financial liabilities with maturities of one year or less (cash and cash equivalents, trade receivables, other receivables, other current assets, trade payables, other payables, dividend payables, accrued expenses, advance from customers and suppliers, and short term bank loans) are considered to approximate their carrying amount s as the impact of discounting is not significant .

(ii) Available-for-sale financial assets are primarily comprised of shares, mutual funds and Corporate and Government bonds. Shares and mutual funds actively traded in an established market are stated at fair value using quoted market price or if unquoted, determined using a valuation technique. Corporate and Government bonds are stated at fair value by reference to prices of similar securities at the reporting date.

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PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) MARCH 31, 2012 (UNAUDITED) AND DECEMBER 31, 2011 (AUDITED) AND THREE MONTHS PERIOD ENDED MARCH 31, 2012 AND 2011 (UNAUDITED) (Figures in tables are presented in billions of Rupiah, unless otherwise stated)

43. FINANCIAL RISK MANAGEMENT (continued)

Fair value of financial assets and financial liabilities (continued)

a . Fair value measurement (continued)

(iii) The fair values of long-term financial liabilities are estimated by discounting the future contractual cash flows of each liability at rates offered to the Company and its subsidiaries for similar liabilities of comparable maturities by the bankers of the Company and its subsidiaries, except for bonds which are based on market prices.

The fair value estimates are inherently judgmental and involve various limitations, including:

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

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

b. Classification and fair value

The following represents the carrying value and estimated fair values of the Company and its subsidiaries' financial assets and financial liabilities based on its classifications:

	March 31, 2012 — Trading	Loans and receivables	Available for sale	Other financial liabilities		Total carrying amount		Fair value
Cash and cash equivalents	-	11,163	-	-		11,163		11,163
Available-for-sale financial assets	-	-	373	-		373		373
Trade and other receivables, net	-	5,718	-	-		5,718		5,718
Other current assets	-	6	-	-		6		6
Long-term investments	-	-	21	-		21		21
Advances and other non-current assets	-	267	-	-		267		267
Total financial assets	-	17,154	394	-		17,548		17,548
Trade and other payables	-	-	-	(7,254	)	(7,254	)	(7,254	)
Accrued expenses	-	-	-	(5,344	)	(5,344	)	(5,344	)
Loans and other borrowings
Short-term bank loans	-	-	-	(170	)	(170	)	(170	)
Obligations under finance leases	-	-	-	(508	)	(508	)	(508	)
Two-step loans	-	-	-	(2,171	)	(2,171	)	(2,270	)
Bonds and notes	-	-	-	(3,851	)	(3,851	)	(4,217	)
Bank loans	-	-	-	(9,169	)	(9,169	)	(9,374	)
Total financial liabilities	-	-	-	(28,467	)	(28,467	)	(29,137	)

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PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) MARCH 31, 2012 (UNAUDITED) AND DECEMBER 31, 2011 (AUDITED) AND THREE MONTHS PERIOD ENDED MARCH 31, 2012 AND 2011 (UNAUDITED) (Figures in tables are presented in billions of Rupiah, unless otherwise stated)

43. FINANCIAL RISK MANAGEMENT (continued)

2 Fair value of financial assets and financial liabilities (continued)

c . Fair value hierarchy

The table below presents the recorded amount of financial assets measured at fair value and limited mutual funds participation unit for debt based securities where the Net Asset Value (NAV) per share of the investments information is not published are described below:

	March 31, 2012
		Fair value measurement at reporting date using
	Balance	Quoted prices in active markets for identical assets or liabilities (level 1)	Significant other observable inputs (level 2)	Significant unobservable inputs (level 3)
Financial assets
Available-for-sale financial assets	373	50	253	70

Available-for-sale financial assets are primarily comprised of shares, mutual funds and Corporate and Government bonds. Corporate and Government bonds are stated at fair value by reference to prices of similar securities at the reporting date. As they are not actively traded in an established market, these securities are classified as level 2.

Shares and mutual funds actively traded in an established market are stated at fair value using quoted market price and classified within level 1. The valuation of the mutual funds invested in Corporate and Government bonds require significant management judgment due to the absence of quoted market prices, the inherent lack of liquidity and the long-term nature of such assets. As these investments are subject to restrictions on redemption (such as transfer restrictions and initial lock-up periods) and observable activity for the investments is limited, these investments are therefore classified within level 3 of the fair value hierarchy. Management considers among other assumptions, the valuation and quoted price of the arrangement of the mutual funds.

Reconciliations of the beginning and ending balance for items measured at fair value using significant unobservable inputs (level 3) as of March 31, 2012 are as follows:

	M arch 31, 2012
Mutual funds
Balance at January 1, 2012	64
Transfer to (out of) level 3
Limited mutual funds participation unit for debt based securities	-
Purchase	8
Included in consolidated statement of comprehensive income
Realized (loss)-recognized in profit or loss	-
Unrealized (loss)-recognized in other comprehensive income	-
Redemption	(2	)
Balance at Mar ch 31, 2012	70

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PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) MARCH 31, 2012 (UNAUDITED) AND DECEMBER 31, 2011 (AUDITED) AND THREE MONTHS PERIOD ENDED MARCH 31, 2012 AND 2011 (UNAUDITED) (Figures in tables are presented in billions of Rupiah, unless otherwise stated)

44. CAPITAL MANAGEMENT

The capital structure of the Company and its subsidiaries is as follows:

	March 31, 2012 — Amount	Portion	December 31, 2011 — Amount	Portion
Short-term debts	170	0.26%	10 0	0.15%
Long-term debts	15,699	23.95%	17,771	27.18 %
Total debts	15,869	24.21%	17,871	27. 33 %
Equity attributable to owners	49,683	75.79%	47, 510	72. 67 %
Total	65,552	100.00%	65,381	100.00%

The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to provide returns for stockholders and benefits to other stockholders and to maintain an optimum capital structure to minimize the cost of capital.

Periodically, the Company’s conducts debt valuation to assess possibilities of refinancing existing debts with the new ones which have more efficient cost that will lead to more optimize cost-of-debt. In case of rich idle cash coupled with limited investment opportunities, the Company will consider of buying back its stocks or paying dividend to its stockholders.

In addition to complying with loan covenants, the Company also maintains its capital structure at the level it believes will not risk its credit rating and that is roughly equal with its competitors.

Debt to equity ratio (comparing net interest-bearing-debt to total equity) is a ratio which is monitored by management to evaluate the Company’s capital structure and review the effectiveness of the Company’s debts. The Company monitors its debt levels to ensure the debt to equity ratio complies with or is below the ratio set out in its contractual borrowings and that such ratios are comparable or better than other regional area entities in the telecommunications industry.

The Company debt to equity ratio as of March 31, 2012 and December 31, 2011 are as follows:

Total interest bearing debts	March 31, 2012 — 15.869		December 31, 2011 — 17,871
Less: Cash and cash equivalents	(11.163	)	(9,634	)
Net debts	4.706		8,237
Total equity attributable to owners	49.683		47, 510
Net debt to equity ratio	9.47	%	17.34	%

As stated in Notes 17, 18, 19, the Company is required to maintain a certain debt to equity ratio and debt service coverage ratio by the lenders. During the years ended for three months period ended March 31, 2012 and the years ended December 31, 2011, the Company has complied with the externally imposed capital requirements.

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PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) MARCH 31, 2012 (UNAUDITED) AND DECEMBER 31, 2011 (AUDITED) AND THREE MONTHS PERIOD ENDED MARCH 31, 2012 AND 2011 (UNAUDITED) (Figures in tables are presented in billions of Rupiah, unless otherwise stated)

45. SUBSEQUENT EVENTS

a. On April 2 , 2012, Metra established a subsidiary, called PT Metra Plasa (“Metra Plasa”), subsequently on April 16, 2012, Metra, Ebay International AG (“Ebay”) and Metra Plasa, entered into a purchase agreement of Metra Plasa’s new shares with percentage of 60% ownership by Metra and 40% ownership by Ebay, respectively.

b. On April 3 , 2012, based on notarial Metra’s Sirculer, Metra’s stockholders agreed to increase its issued and fully paid capital from Rp.1, 423 b illion to Rp.1, 533 b illion by issuing 1 1 , 0 00,000 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 Sigma .

c. On April 5, 2012, Telkomsel received a refund for the overpayment of Corporate Income Tax for fiscal year 2010 amounting to Rp 294.7 billion, net of underpayment of Value Added Tax (Note 30f.ii).

d. On April 24, 2012, Indonusa entered in to a facility loan agreement with BRI for Rp.225 billion.

e. On April 25, 2012, Telkomsel received Tax Court’s verdict which approved Telkomsel’s appeal on cancellation of STPs for underpayments of income tax Article 25 for 2010 fiscal year (Note 30f.ii).

f. On April 25, 2012, Based on the Telkomsel’s AGM of shareholders dated April 25, 2012, the shareholders resolved amongst other things, to declare cash dividend of Rp.10,26 which was computed at 80% of the 2011 profit.

g. As of April 25, 2012, the Company had repurchased 947,805,460 shares equivalent to 4.70% of the issued and outstanding Series B shares, for a repurchase price of Rp.7,531 billion, including broker and custodian fees (Notes 1c and 23).

4 6 . ACCOUNTS RECLASSIFICATION

Certain accounts in the consolidated financial statement for three months period ended March 31 , 201 1 has been reclassified to conform with the presentation of accounts of the consolidated financial statements for three months period ended March 31 , 201 2 , with details of significant accounts reclassification are as follows:

	Before reclassification		Reclassification		After reclassification
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THREE MONTHS PERIOD ENDED MARCH 31, 2011
EXPENSES
Personnel	(1,951	)	42		(1,909	)
General and administrative	(511	)	(42	)	(553	)

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