PERUSAHAAN PERSEROAN PERSERO PT TELEKOMUNIKASI INDONESIA TBK

6-K 1 telkom_fsq32015.htm PT TELKOM INDONESIA (PERSERO) TBK telkom_fsq32015.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 October, 2015

Perusahaan Perseroan (Persero)

PT Telekomunikasi Indonesia Tbk

(Exact name of Registrant as specified in its charter)

Telecommunications Indonesia

( A state-owned public limited liability Company )

(Translation of registrant’s name into English )

J l. 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 if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

Yes ¨ No þ

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

Yes ¨ No þ

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.

Date October 29, 2015 Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk ----------------------------------------------------- (Registrant) By: /s/ Heri Sunaryadi ---------------------------------------------------- (Signature) Heri Sunaryadi Director of Finance

Perusahaan Perseroan (Persero)

P T Telekomunikasi Indonesia Tbk and its subsidiaries

Consolidated financial statements as of September 3 0 , 2015 (unaudited) and for the nine months period then ended (unaudited)

Statement of the Board of Directors

regarding the Board of Director’s Responsibility for

Consolidated financial statements as of September 3 0 , 201 5

and for nine months period ended (unaudited)

Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk and its S ubsidiaries

On behalf of the Board of Directors, we undersigned:

Name : Alex J. Sinaga

Business address : Jl. Japati No.1 Bandung 40133

Address :Jl. Anggrek Nelimurni B-70 No. 38Kelurahan Kemanggisan

Kecamatan Palmerah, Jakarta Barat

Phone :(022) 452 7101

Position :President Director

Name : Heri Sunaryadi

Business address : Jl. Japati No.1 Bandung 40133

Address : Jl. Graha Taman Blok HC8 No.5 Bintaro Jaya Sektor 9

Kelurahan Pondok Pucung Kecamatan Pondok Aren ,

Tangerang Selatan

Phone :(022) 452 7201 / 021 520 9824

Position :Director of Finance

We hereby state as follows:

We are responsible for the preparation and presentation of the consolidated financial statement of PT Telekomunikasi Indonesia Tbk (the “Company”) and its subsidiaries;
The Company and its subsidiaries’ consolidated financial statement have been prepared and presented in accordance with Indonesianfinancial accounting standards;
All information has been fully and correctly disclosed in the Company and its subsidiaries’consolidated financial statement;
The Company and its subsidiaries’ consolidated financial statement do not contain false material information or facts, nor do they omit any material information or facts;
We are responsible for the Company and its subsidiaries’ internal control system.

This statement is considered to be true and correct.

Jakarta, October , 201 5

/s/ Alex Sinaga	/s/ Heri Sunaryadi
Alex J. Sinaga	Heri Sunaryadi
President Director	Director
of Finance

These consolidated financial statements are originally issued in Indonesian language

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30 , 2015 AND FOR THE NINE MONTHS PERIOD THEN ENDED (UNAUDITED)

TABLE OF CONTENTS

	Page
Consolidated Statement of Financial
Position	1-3
Consolidated Statement of P rofit or L oss and O ther C omprehensive I ncome	4
Consolidated Statement of Changes in
Equity	5-6
Consolidated Statement of Cash Flows	7
Notes to the Consolidated Financial
Statements	8- 131

These consolidated financial statements are originally issued in Indonesian language

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As of September 3 0 , 2015 (unaudited), December 31, 2014 (restated) and January 1, 2014 (restated)

(Figures in tables are expressed in billions of rupiah, unless otherwise stated)

Table of Contents

	Notes	2015	2014 — (Restated)	January 1, 2014 — (Restated)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	2c,2e,2u,4,3 6 ,4 2	26,264	17,672	14,696
Other current financial assets	2c,2d,2e,2u,5,3 6 ,4 2	2,9 97	2,797	6,872
Trade
receivables - net of provision for impairment of receivables	2g,2u , 6,16,19,20,28,42
Related
parties	2c,36	624	873	1,103
Third
parties		8,790	6,124	5,520
Other
receivables - net of provision for impairment of receivables	2g,2u,4 2	456	383	395
Inventories
- net of provision for obsolescence	2h,7,1 6 , 19 ,20	690	474	509
Advances and prepaid expenses	2c,2i,8, 36	4,186	4,733	3,937
Claim for tax refund	2t,3 0	66	291	10
Prepaid taxes	2t, 30	1, 513	890	525
Asset held for sale	2j, 10	-	57	105
Total Current Assets		45,586	34,294	33,672
NON-CURRENT ASSETS
Long-term investments	2f,2u, 9	1, 762	1,767	304
Property
and equipment - net of accumulated depreciation	2d,2l,2m, 2n, 1 0 , 16,19,20	98, 900	94,809	86,761
Prepaid pension benefit costs	2s,3 3	1,0 58	1,170	949
Advances and other non-current assets	2c,2i,2l,2n,2u, 11,36,39,42	7,271	6,479	4,795
Claims
for tax refund - net of current portion	2t,3 0	852	745	499
Intangible
assets - net of accumulated
amortization	2d,2k,2n,12	2, 828	2,463	1,508
Deferred tax assets - net	2t,3 0	137	95	67
Total Non-current Assets		112,808	107,528	94,883
TOTAL ASSETS		15 8,394	141,822	128,555

The accompanying notes to the consolidated financial statements form an integral part ofthese consolidated financial statements taken as a whole.

These consolidated financial statements are originally issued in Indonesian language

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENT OF FINANCIAL POSITION (continued)

As of September 3 0 , 2015 (unaudited), December 31, 2014 (restated) and January 1, 2014 (restated)

(Figures in tables are expressed in billions of rupiah, unless otherwise stated)

Table of Contents

	Notes	2015	2014 — (Restated)	January 1, 2014 — (Restated)
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Trade payables	2o,2r,2u,13,42
Related parties	2c,36	1,195	89 7	1,0 29
Third parties		10,648	11,46 5	11,16 8
Other payables	2u,42	1,657	114	388
Taxes payable	2t,30	3,202	2,376	1,698
Accrued expenses	2c,2r,2u,14,26,33,36,42	8,128	5,211	5,264
Unearned income	2r,15	3, 485	3,963	3,490
Advances from customers and suppliers	2c,36	586	583	472
Short-term bank loans	2c,2p,2u,16,36,42	427	1,810	432
Current maturities of long-term liabilities	2c,2m,2p,2u,17,36,42	4,582	5,899	5,093
Total Current Liabilities		33,910	32,318	29,034
NON-CURRENT LIABILITIES
Deferred tax liabilities - net	2t,30	2,216	2,703	2,908
Other liabilities	2r	306	394	472
Long service award provisions	2s,34	432	410	336
Post-retirement
health care benefit costs provisions	2s,35	624	441	993
Pension and other
post-employment benefits	2s,33	3, 833	3,674	3,265
Long-term
liabilities - net of current maturities	2u,17,42
Obligations under finance leases	2m,10	4, 083	4,218	4,321
Two-step loans	2c,2p,18,36	1, 442	1,408	1,702
Bonds and notes	2c,2p,19,36	9, 507	2,239	3,073
Bank loans	2c,2p,20,36	14, 956	7,878	5,635
Total Non-current Liabilities		37, 399	23,365	22,705
TOTAL LIABILITIES		71, 309	55,683	51,739

The accompanying notes to the consolidated financial statements form an integral part ofthese consolidated financial statements taken as a whole.

These consolidated financial statements are originally issued in Indonesian language

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENT OF FINANCIAL POSITION (continued)

As of September 3 0 , 2015 (unaudited), December 31, 2014 (restated) and January 1 2014 (restated)

(Figures in tables are expressed in billions of rupiah, unless otherwise stated)

Table of Contents

	Notes	2015		2014 — (Restated)		January 1, 2014 — (Restated)
EQUITY
Capital stock -
Rp50 par value per Series A Dwiwarna share and Series B share Authorized
- 1 Series A Dwiwarna share and 399,999,999,999 Series B shares Issued
and fully paid - 1 Series A Dwiwarna share and
100,799,996,399 Series B shares	1c,22	5,040		5,040		5,040
Additional paid-in capital	2d,2v,23	2,899		2,899		2,323
Treasury stock	2v,24	(3,836	)	(3,836	)	(5,805	)
Effect of change in
equity of associated companies	2f	386		386		386
Unrealized holding
gain on available-for-sale securities	2u	35		39		38
Translation
adjustment	2f	632		415		391
Difference due to
acquisition of non-controlling interests in subsidiaries	1d,2d	(508	)	(508	)	(508	)
Other reserves	1d	49		49		49
Retained earnings
Appropriated	32	15,337		15,337		15,337
Unappropriated		50,757		47,995		42,633
Net Equity
Attributable to Owners of the Parent Company		70,791		67,816		59,884
Non-controlling Interests	2b,21	16,294		18,323		16,932
TOTAL EQUITY		87,085		86,139		76,816
TOTAL LIABILITIES AND EQUITY		15 8,394		141,822		128,555

The accompanying notes to the consolidated financial statements form an integral part ofthese consolidated financial statements taken as a whole.

These consolidated financial statements are originally issued in Indonesian language

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For the Nine Months Period Ended September 30 , 2015 and 2014 (unaudited)

(Figures in tables are expressed in billions of rupiah, unless otherwise stated)

Table of Contents

REVENUES	Notes — 2c,2r,2 5 ,3 6	201 5 — 75,719		201 4 — 65,841
Operations,
maintenance and telecommunication service expenses	2c, 2h, 2r, 7, 2 7 ,3 6	( 21,295	)	(16,764	)
Depreciation and
amortization	2k,2l,2m,2r,1 0 ,1 1 ,1 2	(13,504	)	(12,036	)
Personnel expenses	2c,2r,2s,1 4 ,2 6 ,3 3 ,3 4 ,3 5 ,3 6	(9,207	)	(7,398	)
Interconnection
expenses	2c,2r, 29 ,3 6	(2,700	)	(3,680	)
General and
administrative expenses	2c,2g,2r,2t,6,2 8 ,3 6	(3,273	)	(2,390	)
Marketing expenses	2r	(2,170	)	(2,314	)
Gain (l oss ) on foreign exchange
– net	2q	77		( 203	)
Other income	2r,10c	688		1,292
Other expenses	2r,1 0 c	(343	)	(399	)
OPERATING
PROFIT		23,992		21,949
Finance income	2c,3 6	980		928
Finance costs	2c,2r,3 6	(1,658	)	(1,333	)
Share of profit ( loss ) of associated companies	2f, 9	6		(1 2	)
PROFIT BEFORE
INCOME TAX		23,320		21,532
INCOME TAX
(EXPENSE) BENEFIT	2t,3 0
Current		(6,157	)	(5,505	)
Deferred		174		74
		(5,983	)	(5,431	)
PROFIT FOR THE PERIOD		17,337		16,101
OTHER
COMPREHENSIVE INCOME (LOSS)
Other
comprehensive income to be reclassified to profit o r loss in subsequent period:
Foreign currency translation	1d,2b,2f	217		( 13	)
Change in fair value of
available-for-sale financial assets	2u	( 4	)	1
Other
Comprehensive Income – net		213		(12	)
TOTAL
COMPREHENSIVE INCOME FOR THE PERIOD		17,550		16,089
Profit for the period attributable to:
Owners of the
parent company		11,545		11,268
Non-controlling
interests	2b,2 1	5,792		4,833
		17,337		16,101
Total
comprehensive income for the period attributable to:
Owners of the
parent company		11,758		11,256
Non-controlling
interests	2b,2 1	5,792		4,833
		17,550		16,089
BASIC AND
DILUTED EARNINGS PER SHARE
(in full amount)
Net income per
share	2x,3 1	117.60		115.53
Net income per ADS
( 200 Series B shares per ADS)		23,518.21		23,105.79

The accompanying notes to the consolidated financial statements form an integral part ofthese consolidated financial statements taken as a whole.

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the nine months period Ended September 30 , 2015 and 2014 (Unaudited)

(Figures in tables are expressed in billions of rupiah, unless otherwise stated)

Table of Contents

| Descriptions | Notes | Attributable to
owners of the parent company — Capital stock | Additional
paid-in capital | Treasury stock | | Effect of
change in equity of associated companies | Unrealized
holding gain on available - for-sale securities | | Translation adjustment | Difference due to acquisition of non-controlling interests in subsidiaries | | Other reserves | Retained earnings | | | Net | | Non-controlling interests | | Total equity | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | Appropriated | Unappropriated | | | | | | | |
| Balance,
December 31, 201 4 | | 5,040 | 2, 899 | ( 3,836 | ) | 386 | 3 9 | | 415 | (508 | ) | 49 | 15,337 | 4 7,986 | | 6 7 , 807 | | 1 8,318 | | 86,125 | |
| Adjustment in
relation to implementation of
Statement of Financial
Accounting Standards (PSAK) No. 24
Employee benefits (Revised 2013) | 2ab | - | - | - | | - | - | | - | - | | - | - | 9 | | 9 | | 5 | | 14 | |
| Balance,
January 1, 201 5 , restated | | 5,040 | 2,899 | (3,836 | ) | 386 | 39 | | 415 | (508 | ) | 49 | 15,337 | 4 7,995 | | 6 7,816 | | 18,3 23 | | 86,1 39 | |
| Paid in capital for
associated companies | | - | - | - | | - | - | | - | - | | - | - | - | | - | | ( 9 | ) | ( 9 | ) |
| Cash dividends | 2w,32 | - | - | | | - | - | | - | - | | - | - | (8,78 3 | ) | (8,78 3 | ) | (7,830 | ) | (16,613 | ) |
| Comprehensive
income for the period | 1d,2b,2f,2q,2u, 21 | - | - | | | - | ( 4 | ) | 217 | - | | - | - | 11,545 | | 11,758 | | 5,792 | | 17,550 | |
| Balance, June
30, 2015 | | 5,040 | 2,899 | (3,836 | ) | 386 | 3 5 | | 63 2 | (508 | ) | 49 | 15,337 | 50,757 | | 70,791 | | 16,294 | | 87,085 | |

The accompanying notes to the consolidated financial statements form an integral part of these consolidated financial statements taken as a whole.

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the Nine Months Period Ended September 30 , 2015 and 2014 (Unaudited)

(Figures in tables are expressed in billions of rupiah, unless otherwise stated)

Table of Contents

| Descriptions | Notes | Attributable to
owners of the parent company — Capital stock | Additional paid-in capital | Treasury stock | | Effect of
change in equity of associated companies | Unrealized
holding gain on available-for-sale securities | Translation
adjustment | | Difference due to acquisition of non-controlling interest in
subsidiaries | | Other reserves | Retained
earnings | | | Net | | Non-controlling
interests | | Total equity | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | Appropriated | Unappropriated | | | | | | | |
| Balance,
December 31, 2013 | | 5,040 | 2,323 | (5,805 | ) | 386 | 38 | 391 | | (508 | ) | 49 | 15,337 | 43,291 | | 60,542 | | 16,882 | | 77,424 | |
| Adjustment in
relation to implementation of Statement of Financial Accounting Standards (PSAK)
No. 24 Employee benefits (Revised 2013) | 2ab | - | - | - | | - | - | - | | - | | - | - | (658 | ) | (658 | ) | 50 | | (608 | ) |
| Balance,
January 1, 201 4 , restated | | 5,040 | 2,323 | (5,805 | ) | 386 | 38 | 391 | | (508 | ) | 49 | 15,337 | 42,633 | | 59,884 | | 16,932 | | 76,816 | |
| Paid in capital for associated
companies | | - | - | - | | - | - | - | | - | | - | - | - | | - | | 35 | | 35 | |
| Cash dividends | 2w,32 | - | - | - | | - | - | - | | - | | - | - | (9.943 | ) | (9,943 | ) | (5,485 | ) | (15,428 | ) |
| Sales of treasury
stock | 24 | - | 576 | 1,969 | | - | - | - | | - | | - | - | - | | 2,545 | | - | | 2,545 | |
| Comprehensive
income (loss) for the period | 1d,2b,2f,2q,2u, 21 | - | - | - | | - | 1 | ( 13 | ) | - | | - | - | 11,268 | | 11,256 | | 4,833 | | 16,089 | |
| Balance,
June 30, 2014 | | 5,040 | 2,899 | (3,836 | ) | 386 | 39 | 3 78 | | (508 | ) | 49 | 15,337 | 43,958 | | 63,742 | | 16,335 | | 80,077 | |

The accompanying notes to the consolidated financial statements form an integral part of these consolidated financial statements taken as a whole.

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOW

For the Nine Months Period Ended September 30 , 2015 and 2014 (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

	Notes	201 5		201 4
CASH FLOWS FROM
OPERATING ACTIVITIES
Cash receipts from:
Customers		68,888		60,479
Other operators		2,379		3,690
Total cash receipts
from revenues		71,267		64,169
Interest income
received		969		924
Payment for
value added tax – net		88		492
Cash p ayments for expenses		(24,181	)	(24,342	)
Cash p ayments to employees		(8,760	)	(7,381	)
Payments for corporate
and final income
taxes		(6,080	)	(5,939	)
Payments for
interest costs		(1,804	)	(1,293	)
Other cash
receipts – net		(189	)	734
Net cash provided by
operating activities		31,310		27,364
CASH FLOWS FROM
INVESTING ACTIVITIES
Proceeds
from sale of property and equipment	1 0	313		154
Proceeds
from insurance claims	10	88		62
Decrease in
advances and other assets	11	31		126
Cash
dividends receipts from associate entity	9	17		-
Proceeds from time
deposits	5	-		6,200
Business
acquisition net of cash received	3	-		100
Acquisition of
property and equipment	10	(18,136	)	(17,446	)
Acquisition of
intangible assets	12	(1,003	)	(608	)
Increase in advances
for purchases of property and equipment	11	(319	)	(1,774	)
P lacements in time deposit
and assets
available for sale	5	(199	)	(909	)
Increase of
long-term investments	9	(10	)	(1,431	)
Net cash used in investing activities		(19,218	)	(15,726	)
CASH FLOWS FROM
FINANCING ACTIVITIES
Proceeds from bank loans	2 0	8,966		5,982
Proceeds
from bonds	19	6,985		-
Proceeds from
short-term bank loans	1 6	2,099		3,080
Proceeds
from medium term notes	19	3 20		-
Capital contribution of non-controlling
interests in associated companies		9		55
Proceeds
from sales of treasury stock	24	-		2,546
Proceeds from
promissory notes	19	-		21
Cash dividends paid
to the Company’s stockholder	32	(8,78 3	)	(9,943	)
Cash dividends paid
to non-controlling interests of subsidiaries		(6,288	)	( 5,485	)
Repayments of short-term
bank loans	16	(3,571	)	(909	)
Repayments of
two-step and bank loans	1 8 ,2 0	(2,742	)	(3,119	)
Repayments
of bonds	19	(1,005	)	-
Payments of
obligations under finance leases	1 0	(457	)	(514	)
Repayments of
promissory notes	19	(60	)	(213	)
Net cash used in
financing activities		(4,527	)	(8,499	)
NET
INCREASE IN CASH AND CASH EQUIVALENTS		7,565		3,139
EFFECT
OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS		1,027		(1	)
CASH
AND CASH EQUIVALENTS AT BEGINNING OF YEAR	4	17,672		14,696
CASH
AND CASH EQUIVALENTS AT END OF PERIOD	4	26,264		17,834

The accompanying notes to the consolidated financial statements, form an integral part ofthese consolidated financial statements taken as a whole.

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

1. GENERAL

a. Establishment and general information

Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk (the “Company”) was originally part of “Post en Telegraafdienst” , which was established and operated commercially in 1884 under the framework of Decree No. 7 dated March 27, 1884 of the Governor General of the Dutch Indies. Decree No. 7 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 ultimate parent of the Company is the Government of the Republic of Indonesia (the “Government”) (Notes 1c and 2 2 ).

The Company was established based on notarial deed No. 128 dated September 24, 1991 of Imas Fatimah, S.H. Its deed of establishment was approved by the Ministry of Justice of the Republic of Indonesia in its 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 has been amended several times, the latest amendment of which was about, among others, i n compliance with the Financial Services Authority Regulations and the Ministry of State-Owned Enterprises Regulations and Circulation Letters, addition of main and supplementary business activities of the Company, addition of special right of Series A Dwiwarna stockholders, revision regarding the change in authority limitation of the Board of Directors which requires approval from the Board of Commissioners in performing such managing activities of the Company as well as improvement in the editorial and systematic of Articles of Association related to the addition of Articles of Association substance based on notarial deed No. 20 dated May 12, 2015 of Ashoya Ratam, S.H., MKn . The latest amendment was accepted and approved by the Ministry of Law and Human Rights of the Republic of Indonesia (“MoLHR”) in its Letter No. AHU-AH.01 .03 - 0938775 date d June 9, 2015 and MoLHR decision’s No. AHU-0936901.AH.01.02.Th.2015 dated June 9, 2015.

In accordance with Article 3 of the Company’s Articles of Association, the scope of its activities are to provide telecommunication network and services and informatics, and to optimize 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 / selling / leasing , and maintaining telecommunications and information networks in a broad sense in accordance with prevailing regulations .

ii. Planning, developing, providing, marketing / selling , and improving telecommunications and information services in a broad sense in accordance with prevailing regulation s.

iii. Making investments including capital participation in other companies in line with achieving the purposes and objectives of the Company .

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 the optimization of the Company's resources, which, among others, include the utilization of the Company's property and equipment and moving assets, information systems, education and training, and repairs and maintenance facilities.

iii. Collaborat ing with other parties in order to optimize the information, communication or technology resources, owned by other parties as information, communication and technology industry players in line with achieving the purposes and objectives of the Company.

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

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

1. GENERAL (continued)

Establishment and general information (continued)

The Company was granted several networks and/or services licenses by the G overnment which are valid for an unlimited period of time as long as the Company complies with prevailing laws and fulfills the obligation stated in those licenses. 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 networks and/or services annually to the Indonesian Directorate General of Post and Informatics (“DGPI”), which replaced the previous Indonesian Directorate General of Post and Telecommunications (“DGPT”).

The reports comprise information such as network development progress, service quality standard achievement, total customers, license payment and universal service contribution, while for internet telephone services for public purpose, Internet Inter c onnection Service, and Internet Access Service, there are additional information s 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 | Internet
telephone
services
for
public
purposes | 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 |
| License to operate network access point | 331/KEP/M.KOMINFO/09/2013 | Internet
connection
services | September 24, 2013 |

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

1. GENERAL (continued)

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

Boards of Commissioners and Directors

Based on resolutions made at Annual General Meeting (“AGM”) of Stockholders of the Company as covered by notarial deed No. 26 of of Ashoya Ratam, S.H., MKn., dated on April 17, 2015, and the Extraordinary General Meeting (“E GM ”) as covered by notarial deed No. 35 of Ashoya Ratam, S.H., MKn., dated on December 19, 2014 , t he composition of the Company’s Boards of Commissioners and Directors as of September 30 , 2015 and December 31, 2014 , respectively, w ere as follows:

	September 30 , 2015	December 31, 201 4
President Commissioner	Hendri Saparini	Hendri Saparini
Commissioner	Dolfie Othiel Fredric Palit	Dolfie Othiel Fredric Palit
Commissioner	Hadiyanto	Hadiyanto
Commissioner	Margiyono Darsasumarja	Imam Apriyanto Putro
Independent Commissioner	Rinaldi Firmansyah	Virano Gazi Nasution
Independent Commissioner	Parikesit Suprapto	Parikesit Suprapto
Independent Commissioner	Pamiyati Pamela Johana Waluyo	Johnny Swandi Sjam
President Director	Alex Janangkih Sinaga	Alex Janangkih Sinaga
Director of Finance	Heri Sunaryadi	Heri Sunaryadi
Director of Innovation and Strategic Portfolio	Indra Utoyo	Indra Utoyo
Director of Enterprise and Business Service	Muhammad Awaluddin	Muhammad Awaluddin
Director of Wholesale and International Services	Honesti Basyir	Honesti Basyir
Director of Human Capital Management	Herdy Rosadi Harman	Herdy
Rosadi Harman
Director of Network, Information Technology and
Solution	Abdus Somad Arief	Abdus Somad Arief
Director of Consumer Services	Dian Rachmawan	Dian Rachmawan

Audit Committee and Corporate Secretary

The composition of the Company’s Audit Committee and the Corporate Secretary as of September 30 , 2015 and December 31, 2014 , were as follows:

	September 30 , 2015*	December 31, 201 4
Chair	Rinaldi Firmansyah	Johnny Swandi Sjam
Secretary	Tjatur Purwadi	Tjatur Purwadi
Member	Parikesit Suprapto	Parikesit Suprapto
Member	Dolfie Othniel Fredric Palit	Virano Gazi Nasution
Member	Agus Yulianto	Agus Yulianto
Corporate Secretary	Andi Setiawan	Honesti Basyir

The change of Audit Committee is based on Commissioner Regulation No. 06/KEP/DK/2015 dated May 7, 2015

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

1. GENERAL (continued)

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

Employees

As of September 30 , 2015 and December 31, 2014 , the Group had 24,583 employees and 25, 284 employees (unaudited), respectively.

c. Public offering of securities of the Company

The Company’s shares prior to its Initial Public Offering (“IPO”) totalled 8,400,000,000, consisting of 8,399,999,999 Series B shares and 1 Series A Dwiwarna share, and were 100%-owned by the Government. On November 14, 1995, 933,333,000 new Series B shares and 233,334,000 Series B shares owned by the Government were offered to the public through an IPO and listed on the Indonesia Stock Exchange (“IDX”) 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 were 35,000,000 ADS and each ADS represented 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, 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 on Limited Liability Companies, at the AGM of Stockholders of the Company on April 16, 1999, the Company’s stockholders resolved to increase the Company’s issued share capital by the distribution of 746,666,640 bonus shares through the capitalization of certain additional paid-in capital, which were made to the Company’s stockholders in August 1999. On August 16, 2007, Law No. 1/1995 on Limited Liability Companies was amended by the issuance of Law No. 40/2007 on Limited Liability Companies which became effective on the same date. 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 further sold a block of 312,000,000 shares or 3.1% of the total outstanding Series B shares.

At the AGM of Stockholders of the Company held on July 30, 2004, the minutes of which are 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 share. The Series A Dwiwarna share with par value of Rp500 per share was split into 1 Series A Dwiwarna share with par value of Rp250 per share and 1 Series B share with par value of Rp250 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 the 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.

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

1. GENERAL (continued)

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

During the EGM held on December 21, 2005 and the Annual General Meeting (“ AGM ”) held on June 29, 2007, June 20, 2008, and May 19, 2011, the Company’s stockholders approved phase I, II, III and IV plan, respectively, of the Company’s program to repurchase its issued Series B shares (Note 2 4 ).

During the period December 21, 2005 to June 20, 2007, the Company had bought back 211,290,500 shares from the public (stock repurchase program phase I). O n July 30, 2013, the Company has sold all such shares (Note 24).

At the AGM held on April 19, 2013 as covered by notarial deed No. 38 dated April 19, 2013 of Ashoya Ratam, S.H., MKn., the stockholders approved the changes to the Company’s plan on the treasury stock acquired under phase III (Note 2 4 ).

At the AGM held on April 19, 2013, the minutes of which are covered by notarial deed No.38 of Ashoya Ratam, S.H . , MKn . , the stockholders approved the Company’s 5-for-1stock split for Series A Dwiwarna and Series B shares. Series A Dwiwarna share with par value of Rp250 per share was split into 1 Series A Dwiwarna share with par value of Rp50 per share and 4 Series B shares with par value Rp50 per share. The stock split resulted in an increase of the Company’s authorized capital stock from 1 Series A Dwiwarna and 79,999,999,999 Series B shares to 1 Series A Dwiwarna and 399,999,999,999 Series B shares, and the issued capital stock from 1 Series A Dwiwarna and 20,159,999,279 Series B shares to 1 Series A Dwiwarna and 100,799,996,399 Series B shares. After the stock split, each ADS represented 200 Series B shares .

On May 16 and June 5, 2014, the C ompany deregistered from Tokyo Stock Exchange (“TSE”) and delisted from the LSE,respectively.

As of September 3 0 , 2015 , all of the Company’s Series B shares are listed on the IDX and 45,289,150 ADS shares are listed on the NYSE (Note 2 2 ).

As of June 25 , 2015 the Company issued the second rupiah bonds with a nominal amount of Rp 1,005 billion for Series A, a five-year period and Rp 1,995 billion for Series B, a ten-year period, respectively, are listed on the IDX (Note 19 a).

As of June 16, 2015, the Company issued Continuous Bond I Telkom Phase I 2015, with a nominal amount Rp2,200 billion for Series A, a seven-year period, Rp2,100 billion for Series B, a ten-year period, Rp1,200 billion for Series C a fifteen-year period and Rp1,500 billion for Series D a thirty-year period, repectively, are listed on the IDX (Note 19a).

d. Subsidiaries

As of September 30 , 2015 and December 31, 2014 , the Company has consolidated the following directly or indirectly owned subsidiaries (Notes 2b and 2d):

(i) Direct subsidiaries :

| Subsidiary/place of
incorporation | Nature of
business/date of incorporation or
acquisition by the Company | Date of start of commercial
operations | Percentage of
ownership interest — September 30 , 201 5 | December 31, 201 4 | Total assets before
elimination — September 30 , 201 5 | December 31, 201 4 |
| --- | --- | --- | --- | --- | --- | --- |
| PT Telekomunikasi Selular ( “Telkomsel” ) Jakarta, Indonesia | Telecommunication – provides
Telecommunication facilities and mobile cellular services using Global
Systems for Mobile Communication (“GSM”) technology/May 26, 1995 | 1995 | 65 | 65 | 82,756 | 7 8,654 |

1 2

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

1. GENERAL (continued)

d. Subsidiaries (continued)

(i) Direct subsidiaries :

| Subsidiary/place
of incorporation | Nature of
business/ date of incorporation — or
acquisition by the Company | Date of start
of — commercial
operations | Percentage of
ownership interest — September 30 , 201 5 | December 31, 201 4 | Total assets
before elimination — September 30 , 201 5 | December 31, 201 4 |
| --- | --- | --- | --- | --- | --- | --- |
| PT Dayamitra Telekomunikasi ( “Dayamitra” ), Jakarta,
Indonesia | Telecommunication/May 17, 2001 | 1995 | 100 | 100 | 8,740 | 8,836 |
| PT Multimedia Nusantara( “Metra” ), Jakarta,
Indonesia | Multimedia and network telecommunication
services/May 9, 2003 | 1998 | 100 | 100 | 7,528 | 6,256 |
| PT Telekomunikasi Indonesia International ( “TII” ), Jakarta,
Indonesia | Telecommunication/ July 31, 2003 | 1995 | 100 | 100 | 5,529 | 4,549 |
| PT Telkom Akses ( “Telkom Akses” ), Jakarta,
Indonesia | Construction, service and trade in the field of
telecommunication/November 26, 2012 | 2013 | 100 | 100 | 3,594 | 2,089 |
| 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 | 3,487 | 2,310 |
| PT P INS Indonesia ( “P INS ” ) previously PT Pramindo Ikat Nusantara Jakarta,
Indonesia | Telecommunication construction and
services/August 15, 2002 | 1995 | 100 | 100 | 3,208 | 3,129 |
| PT Infrastruktur Telekomunikasi Indonesia (“Telkom Infratel”) Jakarta, Indonesia | Construction, service and trade in the field of
telecommunication/ January 16, 2014 | 2014 | 100 | 100 | 708 | 331 |
| PT Patra Telekomunikasi Indonesia ( “Patrakom” ) Jakarta, Indonesia | Telecomunicatio n- provides satellite communication system, services and
facilities/ September 28, 1995 | 1996 | 100 | 100 | 502 | 345 |
| 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
operations on January 13, 2006 | 60 | 60 | 5 | 5 |

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

1. GENERAL (continued)

d. Subsidiaries (continued)

(ii) Indirect subsidiaries:

| Subsidiary/place
of incorporation | Nature of
business/date of incorporation — or
acquisition by the Company | Date of start
of — commercial
operations | Percentage of
ownership interest — September 30 , 201 5 | December 31, 201 4 | Total assets
before elimination — September 30 , 201 5 | December 31, 201 4 |
| --- | --- | --- | --- | --- | --- | --- |
| 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 | 2,860 | 2,515 |
| Telekomunikasi Indonesia International Pte. Ltd., Singapore | Telecommunication/December 6, 2007 | 2008 | 100 | 100 | 1,654 | 1,058 |
| 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 | 100 | 1,573 | 1,354 |
| PT Telkom Landmark Tower ( “TLT” ), Jakarta,
Indonesia | Service for property development and management/February
1, 2012 | 2012 | 55 | 55 | 1,099 | 828 |
| Telekomunikasi Indonesia International ( “TL” )
S.A., Timor Leste | Telecommunication/September 11, 2012 | 2012 | 100 | 100 | 930 | 832 |
| PT Metra Digital Media ( “MD Media” ), Jakarta,
Indonesia | Directory information services/ January 22, 2013 | 2013 | 99.99 | 99.99 | 702 | 723 |
| PT Finnet Indonesia ( “Finnet” ), Jakarta , Indonesia | Information Technology services/October 31, 2005 | 2006 | 60 | 60 | 462 | 208 |
| Telekomunikasi Indonesia International Ltd., Hong Kong | Telecommunication/December 8, 2010 | 2010 | 100 | 100 | 321 | 242 |
| Telekomunikasi Indonesia Internasional Pty Ltd. (“Telkom, Australia”) Australia | Telecomunication/January 9, 2013 | 2013 | 100 | 100 | 251 | 190 |
| PT Administrasi Medika ( “Ad Medika” ), Jakarta,
Indonesia | Health insurance administration services/February 25,
2010 | 2002 | 75 | 75 | 169 | 136 |
| PT Nusantara Sukses Investasi ( ”NSI” ) Jakarta, Indonesia | Trade and service / September 1, 2014 | 2014 | 99.99 | 99.99 | 168 | 115 |

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

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 start of — commercial operations	Percentage of ownership interest — September 30 , 201 5	December 31, 201 4	Total assets before elimination — September 30 , 201 5	December 31, 201 4
PT Graha Yasa Selaras ( “GYS” ) Jakarta, Indonesia	Tourism service/April 27, 2012	2012	51	51	142	88
PT Metra Plasa ( “Metra Plasa” ), Jakarta,
Indonesia	Network & e-commerce services/April 9, 2012	2012	60	60	76	88
Telekomunikasi Indonesia International ( “Telkom USA ” ) Inc. USA	Telecommunication/December 11, 2013	2014	100	100	68	1
PT Metra-Net ( “Metranet” ), Jakarta, Indonesia	Multimedia portal service/April 17, 2009	2009	99.99	99.99	49	42
PT Pojok Celebes Mandiri ( “PCM” ) Jakarta,
Indonesia	Tour agent/bureau services/August 16, 2013	2008	51	51	18	13
PT Satelit Multimedia Indonesia ( “SMI” ) Jakarta, Indonesia	Satellite services/March 25, 2013	2013	99.99	99.99	10	7
PT Metra Digital Investama ( “MDI” ) previously PT Metra Media Jakarta,
Indonesia	Trade service, information& technology multimedia,
entertainment & investment/ January 8, 2013	2013	99.99	99. 99	1	0
PT Metra TV ( “Metra TV” ) Jakarta, Indonesia	Pay TV services/January 8, 2013	2013	99.83	99.83	-	-
PT Nusantara Sukses Sarana ( ”NSS” ) Jakarta, Indonesia	Hotel and building management services etc/ September
1, 2014 ,	-	99.99	99.99	-	-
PT Nusantara Sukses Realti ( ”NSR” ) Jakarta, Indonesia	Trade and sevice/ September 1, 2014	-	99.99	99.99	-	-

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

1. GENERAL (continued)

d. Subsidiaries (continued)

(a) Metra

On June 5, 2014, based on the Circular Resolution of the Stockholders as covered by notarial deed No. 18 of N.M. Dipo Nusantara Pua Upa, S.H., M.Kn., which was approved by the MoLHR through its Letter No. AHU-03769.40.20.2014 dated June 10, 2014, PT Metra Media’s stockholders approved the change of name from PT Metra Media to PT Metra Digital Investama (“MDI”).

On December 12, 2014, based on the Circular Resolution of the Stockholders of Metra as covered by notarial deed No. 24 dated December 12, 2014 of N.M. Dipo Nusantara Pua Upa , S.H., M.Kn., which has been approved by the MoLHR through its Letter No. AHU-09792.40.21.2014 dated December 17, 2014, Metra’s stockholders approved an increase in its authorized capital to 350,000,000 shares, amounting to Rp3.5 trillion which was taken proportionately by each of the shareholders and approved an increase in its issued and paid capital to 273,307,349 shares amounting to Rp2.7 trillion.

( b ) Sigma

Sigma has amended its Articles of Association several times, the latest amandment of which was notarized by deed No. 02 dated December 4, 2014 of Utiek Rochmuljati Abdurachman, SH., MLI., Mkn., regarding the changes in the authorized capital, stock and the issued and fully paid capital stock. The latest amandment of the Articles of Association was approved by MoLHR through its Letter No. AHU-12707.40.20.2014 dated December 11, 2014.

Regarding the Conditional Shares Exchange Agreement (“CSEA”) with PT Tower Bersama Infrastructure Tbk. (“TBI”), the transaction was terminated by the Company due to nonfulfillment of the terms stated in the CSEA.

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

1. GENERAL (continued)

d. Subsidiaries (continued)

(d) Telkom Infratel

On January 16 , 2014 the Company established a wholly owned subsidiary under the name PT Telkom Infrastruktur Telekomunikasi Indonesia which was approved by the MoLHR through its Decision Letter No. AHU-0 3196 .AH.0 1 .0 1 .201 4 dated January 23 , 201 4 with 100% ownership. Telkom Infratel is engaged in providing construction , service and trade in the field of telecommunication .

(e) GSD

On August 27, 2014, based on notarial deed No. 21 dated August 27, 2014 of Zulkifli Harahap, S.H., which was approved by the MoLHR in its Letter No. AHU-22722.40.10.2014 dated September 1 , 2014, GSD established a subsidiary, PT Nusantara Sukses Sarana (“NSS”) with 99.99% ownership. NSS is engaged in building and hotel service s management and other service s. As of th e date of approval and authorization for the issuance of the consolidated financial statements, NSS has not commenced operational activities.

On August 27, 2014, based on notarial deed No. 22 dated August 27, 2014 of Zulkifli Harahap, S.H., which was approved by the MoLHR in its Letter No. AHU-2272 3 .40.10.2014 dated September 1 , 2014, GSD established a subsidiary, PT Nusantara Sukses Realti (“NSR”) with 99.99% ownership. NSR is engaged in service and trading. As of th e date of approval and authorization for the issuance of the consolidated financial statements, NSR has not commenced operational activities.

On August 27, 2014, based on notarial deed No. 23 dated August 27, 2014 of Zulkifli Harahap, S.H., which was approved by the MoLHR in its Letter No. AHU-2272 4 .40.10.2014 dated September 1 , 2014, GSD established a subsidiary, PT Nusantara Sukses Investasi (“NSI”) with 99.99% ownership. NSI is engaged in service and trading.

e. Authorization for the issuance of the consolidated financial statements

The consolidated financial statements were prepared and approved for issuance by the Board of Directors on October 27, 2015.

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements of t he Company and subsidiaries (collectively referred to as “the Group”) ha s been prepared in accordance with Financial Accounting Standards (“Standar Akuntansi Keuangan” or “SAK”) including Indonesian Financial Accounting Standards (“Pernyataan Standar Akuntansi Keuangan” or “PSAK”) and Interpretation of Financial Accounting Standards (“Interpretasi Standar Akuntansi Keuangan” or “ISAK”) in Indonesia published by Financial Accounting Standard Board of Indonesian Institute of Accountants and Regulation No. VIII.G.7 of the Capital Market and Financial Institution Supervisory Agency (“Bapepam-LK”) regarding the Presentation and Disclosures of Financial Statements of Issuers or Public Companies, enclosed in the decision letter KEP- 347/BL/2012 .

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. The measurement basis used is historical cost, except for certain accounts, which are measured using the basis mentioned in the relevant notes herein.

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 presented and rounded to billions of Indonesian rupiah (“Rp”), unless otherwise stated.

The consolidated financial statements provide comparative information in respect of the previous period. In addition, the Group presents an additional statement of financial position at the beginning of the earliest period presented when there is retrospective application of an accounting policy, a retrospective statement, or a reclassification of items in the financial statements. An additional statement of financial position as of Januari 1, 2014, is presented in these consolidated financial statements due to the retrospective application of PSAK 24, Employee Benefits (Revised 2013) and PSAK 50, Financial Instruments: Presentation (Revised 2014) (Note 2ab).

Changes to PSAKs and ISAKs

On January 1, 201 5 , the Group adopted new and revised PSAKs, which were effective in 201 5 . Changes to t he Group’s accounting policies have been made as required in accordance with the transitional provisions in the respective standards and interpretations.

· PSAK 1 (2013) , “ Presentation of Financial Statements ”

The revised standard requires the entity to change the title of the “Statement of Comprehensive Income” to the “Statement of Profit or Loss and Other Comprehensive Income”. Furthermore, the entity is required to present the other comprehensive income based on the following categories:

i. Items that will never be reclassified to profit or loss

ii. Items that can be reclassified subsequently to profit or loss when certain conditions are met.

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

a. Basis of preparation of financial statements (continued)

Effective beginning on or after January 1, 2015 (continued)

· PSAK 24 (2013) , “ Employee Benefits ”.

The revised standard, changes, among other things, the accounting for defined benefit plans. Some of the key changes that impacted the Group include the following:

· Recognition of actuarial gain (losses) directly to other comprehensive income.

· All past service costs are recognized at the earlier of when the amendment/curtailment occurs or when the related restructuring or termination costs are recognized. As a result, unvested past service costs can no longer be deffered and recognized over the future vesting period.

· The interest cost and expected return on plan assets used in the previous version of PSAK 24 are replaced with a net interest amount, which is calculated by applying the discount rate to the net defined benefit liability or asset at the start of each annual reporting period.

· PSAK 50 (2014), “Financial Instrument: Presentation” .

The revised standard clarifies additional criterias to have a legally enforceable right to offset the amount of financial assets and liabilities, as follows:

i. The right of set-off must not be contingent on a future event; and

ii. M ust be legally enforceable in all of the following circumstances:

a. the normal course of business;

b. the event of default; and

c. the event of insolvency or bankruptcy of the Group and all of the counterparties.

· PSAK 67 , “ Disclosure of Interest in Other Entities ”.

The revised standard requires, for each joint venture and the associates that is material to the reporting entity, the reporting entity shall disclose the financial summary of the joint venture and associate. The financial summary represents the amount presented in the financial statements of those joint venture or associate using the equity method:

i. For each of subsidiaries that have non-controlling interests that are material to the reporting entity, reporting entity discloses the name of the subsidiary, the principle place of business, the proportion of ownership interest held by non-controlling interests, the proportion of voting rights held by non-controlling interests, the profit or loss allocated to non-controlling interests, accumulated non-controlling interests, and summarised financial information about the subsidiary.

ii. The entity shall provide a reconciliation of the summarized financial information presented to the carrying amount of its interest in the joint venture or associate.

The application of standards , new/revised interpretations and revocation of the following standards have no significant implicatian to consolidated financial statements :

· PSAK 4 (2013) ,“ Separate Financial Statements ”

· PSAK 15 (2013) ,“ Investments in Associates and Joint Ventures”

· PSAK 46 (2014), “Income Tax”

· PSAK 48 (2014),” Asset Impairment ”

· PSAK 55 (2014),” Financial Instrument: Measurement and Recognition ”

· PSAK 60 (2014),” Financial Instrument: Disclosure ”

· PSAK 65 ,“ Consolidated Financial Statements ”

· PSAK 66 ,“ Joint Arrangements ”

· PSAK 68 ,“ Fair Value Measurement ”

· ISAK 26 (2014),” Revaluation of Embedded Derivatives ”

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

a. Basis of preparation of financial statements (continued)

Circular Letter of The Financial Services Authority ("FSA")

On September 1, 2015, The FSA published the Financial Services Authority Circular Letter No. 27/SEOJK.04/2015 on "Accounting Treatment of Leased Telecommunication Tower Assets". FSA Circular Letter stated that the leased telecommunications tower assets of the issuers or public company and/or its subsidiaries shall be recognized as an Investment Property. This FSA Circular Letter effective for financial statements covering period ending on or after December 31, 2015. Upon this, The Group is currently assessing the impact of this FSA Circular Letter to the consolidated financial statements.

b. Principles of consolidation

The consolidated financial statements consist of the financial statements of the Company and the subsidiaries over which it has control. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if and only if the Group has the power over the investee, exposure or rights, to variable returns from its involvement with the investee, and the ability to use its power over the investee to affect its returns.

The Group re-assesses whether it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control over the subsidiary. Assets, liabilities, income and expenses, of a subsidiary acquired or disposed of during the year are included in the consolidated statements of comprehensive income from the date the Group gain control until the date the Group ceases to control the subsidiary.

Profit or loss and each component of other comprehensive income (“OCI”) are attributed to the equity holders of the Company and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance.

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

In case of loss of control over a subsidiary, the Group:

· derecognizes the assets (including goodwill) and liabilities of the subsidiary at the carrying amounts on the date when it loses control;

· derecognizes the carrying amounts of any non-controlling interests of its former subsidiary on the date when it loses control;

· recognizes the fair value of the consideration received (if any) from the transaction, events, or condition that caused the loss of control;

· recognizes the fair value of any investment retained in the subsidiary at fair value on the date of loss of control;

· recognizes any surplus or deficit in profit or loss that is attributable to the Group.

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

c. Transactions with related parties

The Group has transactions with related parties. The definition of related parties used is in accordance with the Bapepam-LK’s Regulation No. VIII.G.7 regarding the Presentations and Disclosures of Financial Statements of Issuers or Public companies, enclosed in the decision letter No. KEP-347/BL/2012. The part y which is considered as a related party is a person or entity that is related to the entity that is preparing its financial statements.

Under the Regulation of Bapepam-LK No. VIII.G.7 regarding the Presentations and Disclosures of Financial Statements of Issuers or Public companies , enclosed in the decision letter No.KEP-347/BL/2012, a government-related entity is an entity that is controlled, jointly controlled or significantly influenced by a government. Government in this context is the Minister of Finance or the Local Government, as the shareholder of the entity. Formerly, t he Group in its disclosure applied the definition of related party used based on PSAK 7 “Related Party”.

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 t he Group. 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

Business combination is accounted for using the acquisition method. The consideration transferred is measured at fair value, which is the aggregate of the fair value of the assets transferred, liabilities incurred or assumed and the equity instruments issued in exchange for control of the acquiree. For each business combination, non-controlling interest is measured at fair value or at the proportionate share of the acquiree’s identifiable net assets. The choice of measurement basis is made on a transaction-by-transaction basis. Acquisition-related costs are expensed as incurred. The acquiree’s identifiable assets and liabilities are recognized at their fair values at the acquisition date.

Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognized for non-controlling interests, and any previous interest held, over the net identifiable assets acquired and liabilities assumed. If the fair value of net assets acquired is in excess of the aggregate consideration transferred, the Group re-assess whether it has correctly identified all of the assets acquired and all of the liabilities assumed, and reviews the procedures used to measure the amounts to be recognized at the acquisition date. If the re-assessment still results in an excess of the fair value of net assets acquired over the aggregate consideration transferred, then the gain is recognized in profit and loss.

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

d. Business combinations (continued)

When the determination of consideration from a business combination includes contingent consideration, it is measured at its fair value on acquisition date. Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fair value recognized in profit or loss 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 made 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.

In a business combination achieved in stages, the acquirer remeasures its previously held equity interest in the acquiree at its acquisition-date fair value and recognizes the resulting gain or loss, if any, in profit or loss.

Based on PSAK 38 (Revised 2012), “Common Control Business Combination”, the transfer of assets, liabilities, shares or other ownership instruments among the companies under common control would not result in a gain or loss. Since the restructuring transaction between entities under common control does not result in a change of the economic substance of the ownership of assets, liabilities, shares or other instruments of ownership, which are exchanged, assets or liabilities transferred are recorded at book value using the pooling-of-interests method. In applying the pooling-of-interests method, the components of the financial statements for the period during which the restructuring occurred must be presented in such a manner as if the restructuring has occurred since the beginning of the earliest period presented. The excess of consideration paid or received over the carrying value of interest acquired, net of income tax, is directly recognized to equity and presented as “Additional Paid-in Capital” under the equity section of the consolidated statement of financial position.

At the initial application of PSAK 38 (Revised 2012), all balances of the Difference In Value of r estructuring Transactions of Entities under Common Control was reclassified to “Additional Paid-in Capital” in the consolidated statement of financial position.

e. Cash and cash equivalents

Cash and cash equivalents comprises cash on hand and in banks and all unrestricted time deposits with an original maturity of three months or less at the time of placement.

Time deposits with maturities of more than three months but not more than one year are presented as part of “O ther C urrent F inancial A ssets” in the consolidated statement of financial position .

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

f. Investments in associated companies

An associate is an entity over which the Group (as investor) has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but does not include control or joint control over those operating policies. The considerations made in determining significant influence are similar to those necessary to determine control over subsidiaries.

The Group’s investments in its associates are accounted for using the equity method.

Under the equity method, the investment in an associate is initially recognized at cost. The carrying amount of the investment is adjusted to recognize changes in the investor’s share of the net assets of the associate since the acquisition date. On acquisition of the investment, any difference between the cost of the investment and the entity's share of the net fair value of the investee's identifiable assets and liabilities is accounted for as follows:

a. Goodwill relating to an associate or a joint venture is included in the carrying amount of the investment and is neither amortized nor individually tested for impairment.

b. Any excess of the entity's share of the net fair value of the investee's identifiable assets and liabilities over the cost of the investment is included as income in the determination of the entity's share of the associate or joint venture's profit or loss in the period in which the investment is acquired.

The consolidated statements of comprehensive income reflect the Group’s share of the results of operations of the associate. Any change in the other comprehensive income of the associate is presented as part of other comprehensive income. In addition, when there has been a change recognized directly in the equity of the associate, the Group recognizes it share of the change in the consolidated statements of changes in equity. Unrealized gain and losses resulting from transactions between the Group and the associate are eliminated to the extent of the interest in the associate.

The Group determines at each reporting date whether there is any objective evidence that the investments in associated companies are impaired. If there is, the Group calculates and recognizes the amount of impairment as the difference between the recoverable amount of the investments in the associated companies and their carrying value.

These assets are included in “Long-term Investments” in the consolidated statements of financial position.

The functional currency of PT Citra Sari Makmur (“CSM”) is the United States dollar (“U.S. dollars”), and Telin Malaysia is the 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 rate 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 of the consolidated statements of financial position.

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

g. Trade and other receivables

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

h. Inventories

Inventories consist of components, which are subsequently expensed upon use. Components represent telephone terminals, cables, and other spare parts. Inventories also include Subscriber Identification Module (“SIM”) cards, Removable User Identity Module (“RUIM”) cards, handsets, set top boxes, wireless broadband modems, and blank prepaid vouchers, 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 their acquisition. Inventories are recognized 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.

The amounts of any write-down of inventories below cost to net realizable value and all losses of inventories are recognized as 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, is recognized as a reduction in the amount of general and administrative expenses in the year 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 disposal groups) are classified as 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 and equipment and depreciation on such assets is ceased .

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

k. Intangible assets

Intangible assets mainly consist of software and license. Intangible assets are recognized if it is probable that the expected future economic benefits that are attributable to each asset will flow to the Group, 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 Group estimates the recoverable value of its intangible assets. When the carrying amount of an asset exceeds its estimated recoverable amount, the asset is written down to its estimated recoverable amount.

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

	Years
Software	3-6
License	3-20
Other
intangible assets	1-30

Intangible assets are derecognized when no further economic benefits are expected, either from further use or from disposal. The difference between the carrying amount and the net proceeds received from disposal is recognized in the consolidated s tatement of profit or loss and other comprehensive income.

l. Property and equipment

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

The cost of an item of property and equipment includes: (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 and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately.

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

	Years
Buildings	15-40
Leasehold
improvements	2-15
Switching
equipment	3-15
Telegraph,
telex and data communication equipment	5-15
Transmission
installation and equipment	3-25
Satellite,
earth station and equipment	3-20
Cable
network	5-25
Power
supply	3-20
Data
processing equipment	3-20
Other
telecommunications peripherals	5
Office
equipment	2-5
Vehicles	4-8
Asset
Customer Premise Equipment (“CPE”)	10
Other equipment	2-5

Significant expenditures related to leasehold improvements are capitalized and depreciated over the lease term.

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

l. Property and equipment (continued)

The depreciation method, useful life and residual value of an asset are reviewed at least at each financial year end and adjusted, if appropriate. The residual value of an asset is the estimate d amount that t he Group would currently obtain from disposal of the asset, after deducting the estimated costs of disposal, if the asset is already of the age and in the condition expected at the end of its useful life.

Property and equipment acquired in exchange for a non-monetary asset or for a combination of monetary and non-monetary assets are measured at fair value unless (i) the exchange transaction lacks commercial substance; or (ii) the fair value of neither the asset received nor the asset given up is reliably measurable.

Major spare parts and standby equipment that are expected to be used for more than 12 months are recorded as part of property and equipment.

When assets are retired or otherwise disposed of, their cost and the related accumulated depreciation are derecognized from the consolidated statement of financial position and the resulting gains or losses on the disposal or sale of the property and equipment are recognized in the consolidated s tatement of profit or loss and other 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 the 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 s tatement of profit or loss and other 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 property 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 on loans obtained to finance the construction of the asset, as long as it meets the definition of a qualifying asset are, capitalized in proportion to the average amount of accumulated expenditures during the period. Capitalization of borrowing cost ceases when the construction is completed and the asset is ready for its intended use.

m. Leases

In determining whether an arrangement is, or contains a lease, the Group performs an evaluation over the substance of the arrangement. A lease is classified as a finance lease or operating lease based on the substance, not the form s of the contract. Finance lease is recognized if the lease transfers substantially all the risks and rewards incidental to the ownership of the leased asset.

Assets and liabilities under a finance lease are recognized in the consolidated statement of financial position at 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 Group are added to the amount recognized as assets.

Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is 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 are charged as expenses in the year in which they are incurred.

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

m. Leases (continued)

Leased assets are depreciated using the same method and based on the useful lives as estimated for directly acquired property and equipment. However, if there is no reasonable certainty that t he Group 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.

Lease 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 - land rights

C osts incurred to process the initial legal land rights are recognized as part of the property and equipment and are not amortized . Costs incurred to process the extension or renewal of legal land rights are deferred and amortized over the shorter of the legal term of the land rights or the economic life of the land.

o. Trade payables

Trade payables are obligations to pay for goods or services that have been acquired from suppliers in the ordinary course of business. Trade payables are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business, if this period is 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 rate method.

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 s tatement of profit or loss and other comprehensive income over the period of the borrowings using the effective interest method.

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

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

q. Foreign currency translations

The functional currency and the recording currency of t he Group are both the Indonesian rupiah, except for the functional currency of Telekomunikasi Indonesia International Pte. Ltd., Hong Kong, Telekomunikasi Indonesia International Pte., Singapore, and Telekomunikasi Indonesia International S.A., Timor Leste whose accounting records are maintained in U.S. dollars and Telekomunikasi Indonesia International, Pty.Ltd., Australia whose accounting records is maintained in Australian dollars . 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 liabilities 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:

	September 30 , 2015 — Buy	Sell	December 31, 201 4 — Buy	Sell
U.S . dollar (“US$”) 1	14,645	14,655	12,380	12,390
Australian dollar (“AU$”) 1	10,301	10,311	10,143	10,155
Euro 1	16,439	16,453	15,044	15,059
Yen 1	121.80	121.89	103.53	103.64

The resulting foreign exchange gains or losses, realized and unrealized, are credited or charged to the consolidated s tatement of profit or loss and other 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

R evenue s from fixed line installations including incremental costs, are deferred and recognized as revenue and costs on the straight-line basis 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 201 5 and 201 4 to be 18 years. Starting 2015, revenues from fixed line installation are not deffered, directly recognized to profit or loss when received, since its value is not significant. 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 service, which consist of the sale of starter packs (also known as SIM cards in the case of cellular or RUIM cards in the case of fixed wireless telephone and start-up load vouchers) and pulse reload vouchers (either bundled in starter packs or sold as separate items) , are recognized initially as unearned income and recognized proportionately as 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.

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

r. Revenue and expense recognition (continued)

iii. Interconnection revenues

R evenues 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 derived from other operators’ subscriber calls to t he Group’ s subscribers (incoming) and calls between subscribers of other operators through t he Group’ s network (transit).

iv. Data, internet and information technology service revenues

Revenues from data communication and internet are recognized based on service activity and performance which are measured by the duration of internet usage or based on the fixed amount of charges depending on the arrangements 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 are delivered to customers or the installation takes place.

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

v. Network revenues

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

vi. Other telecommunications service 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 and equipment and obligation under RSA are reflected in the consolidated statement s 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.

Universal Service Obligation (“USO”) compensation from construction activities is recognized on a stage - of - completion basis. Revenues from operating and maintenance activities in respect of assets under the concession are recognized when the services are rendered.

In concession contract s under USO, t he Group recognize s a financial asset to the extent that it has a contractual right to receive cash or other financial assets from the Government for the construction services, where the Government has little, if any, discretion to avoid payment. The Group recognizes an intangible asset to the extent that it receives a license to charge users of the public service.

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

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

r. Revenue and expense recognition (continued)

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. Agency relationship

Revenues from an agency relationship are recorded based on the gross amount billed to the customers when t he Group act s as principal in the sale of goods and services. Revenues are recorded based on the net amount retained (the amount paid by the customer less amount paid to the suppliers) when, in substance, t he Group has act ed as agents and earned commission from the suppliers of the goods and services sold.

ix. Customer loyalty programme

The Group operates a loyalty programme, which allows customers to accumulate points for every certain multiple of the monthly usage for postpaid service or reload vouchers for prepaid services. The points will be accumulated during a certain period and can be rede e med in the future for free or discounted products, provided other qualifying conditions are achieved.

Consideration received is allocated between the telecommunication services and the points issued, with the consideration allocated to the points equal to their fair value. Fair value of the points is determined based on historical information about redemption rate of award points . Fair value of the points issued is deferred and recognized as revenue when the points are redeemed or expired.

x. Expenses

Expenses are recognized as they are incurred.

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 are recognized as expense on undiscounted basis when employees have rendered service to the Group.

i i . Post-employment benefit plans and other long-term employee benefits

Post-employment benefit plans consist of funded and unfunded defined benefit pension plans, defined contribution pension plan, other post-employment benefits, post-employment health care benefit plan, defined contribution health care benefit plan and obligations under the Labor Law.

Other long-term employee benefits consist of Long Service Awards (“LSA”), Long Service Leave (“LSL”), and pre-retirement benefits.

The cost of providing benefits under post-employment benefit plans and other long-term employee benefits calculation is performed by an independent actuary using the projected unit credit method.

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

s. Employee benefits (continued)

i i . Post-employment benefit plans and other long-term employee benefits (continued)

The net obligations in respect of the defined pension benefit plans and post-retirement health care benefit plan 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. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of Government bonds 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 are no deep markets 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.

Remeasurement, comprising of actuarial gain and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability) are recognized immediately in the consolidated statements of financial position with a corresponding debit or credit to retained earnings through OCI in the period in which they occur. Remeasurements are not classified to profit or loss in subsequent periods.

P ast service costs are recogni z ed immediately in profit or loss on the earlier of:

· The date of plan amendment or curtailment; and

· The date that the Group recognized restructuring-related costs

Net interest is calculated by applying the discount rate to the net defined benefit liability or assets.

Gain 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 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.

Gain 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.

For defined contribution plans, the regular contributions constitute net periodic costs for the period in which they are due and, as such, are included in personnel expenses as they become payable.

iii . Share-based payments

The Company operates an equity-settled, share-based compensation plan. The fair value of the employees’ services rendered which are compensated with the Company’s shares is recognized as an expense in the consolidated statements of comprehensive income and credited to additional paid-in capital at the grant date.

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

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 and subsidiaries 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.

t. Income tax

Current and deferred income tax es are recognized as income or an expense and included in the consolidated statement of profit or loss and other comprehensive income, except to the extent that the tax arises from a transaction or event which is recognized directly in equity, in which case, the tax is recognized directly in equity .

Current tax assets and liabilities are measured at the amounts 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, management establishes provisions based on the amounts expected to be paid to the tax authorities.

The Group recognizes deferred tax assets and liabilities for temporary differences between the financial and tax bases of assets and liabilities at each reporting date. The Group also recognizes 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.

The carrying amount of deferred tax asset is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of that deferred tax asset to be utilized.

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 tax obligation is recorded when an assessment letter (“Surat Ketetapan Pajak” or “SKP”) is received or if appealed against, when the results of the appeal are determined. The additional tax es and penalty imposed through an SKP are recogni z ed in the current year profit or loss , unless objection/appeal is taken . The additional tax es and penalty imposed through the SKP are deferred as long as they meet the asset recognition criteria.

u. Financial instruments

The Group classifies 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 rate method in accordance with their classification.

i. Financial assets

The Group classifies its financial assets as (i) financial assets at fair value through profit or 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 financial assets are acquired. Management determines the classification of financial assets at initial recognition.

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

u. Financial instruments (continued)

i. Financial assets (continued)

Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognized on the trade date, i.e., the date that the Group commit to purchase or sell the assets.

The Group’s financial assets include cash and cash equivalents, other current financial assets, trade receivables and other receivables and other non-current financial assets.

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. Gains or losses arising from changes in fair value of the trading securities are presented as other (expenses)/income in consolidated s tatement s of profit or loss and other comprehensive income in the period in which they arise. Financial asset measured at fair value through profit loss consists of derivative asset-put option which is recognized as part of “ O ther C urrent F inancial A ssets” in the consolidated statement of financial position .

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, other current financial assets (time deposits and escrow account), trade receivables, other receivables, and other non-current assets (long-term trade receivables and restricted cash) .

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 Group upon initial recognition designates as assets at fair value through profit or loss;

b) those that the Group 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 September 30 , 2015 and December 31, 2014 .

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 mutual funds, and corporate and government bonds, which are recorded as part of “O ther C urrent F inancial A sset” in the consolidated statements of financial position.

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

u. Financial instruments (continued)

i. Financial assets (continued)

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

Available-for-sale securities are stated at fair value. Unrealized holding gains or losses on available-for-sale securities are excluded from income of the current period and are reported as a separate component in the equity section of the consolidated statements of financial position until realized. Realized gains or losses from the sale of available-for-sale securities are recognized in the consolidated statements of profit or loss and other comprehensive income, and are determined on the specific identification basis.

ii. Financial liabilities

The Group classifies their financial liabilities as (i) financial liabilities at fair value through profit or loss or (ii) financial liabilities measured at amortized cost.

The Group’s financial liabilities include trade payables , other payables, accrued expenses, loans and other borrowings , and other liabilities. Loans and other borrowings consist of short-term bank loans, two step loans, bonds and long-term notes, and bank loans and obligations under capital lease.

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 incurred principally for the purpose of selling or repurchasing them 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 September 30 , 2015 and 2014 .

b. Financial liabilities measured at amortized cost

Financial liabilities that are not classified as liabilities at fair value through profit or loss fall into this category and are measured at amortized cost. Financial liabilities measured at amortized cost are trade payables, other payables, accrued expenses, loans and other borrowing, and other liabilities. Loans and other borrowings consist of short-term bank loans, two-step loans, bonds and notes, long-term bank loans and obligation under finance leases.

iii. Offsetting financial instruments

Financial assets and liabilities are offset and the net amount is reported in the consolidated statement of financial position when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or realize the assets and settle the liabilities simultaneously. The right of set-off must not be contingent on a future event and must be legally enforceable in all of the following circumstances:

a. the normal course of business;

b. the event of default; and

c. the event of insolvency or bankruptcy of the Group and all of the counterparties.

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

u. Financial instruments (continued)

iv. Fair value of financial instruments

Fair value is the amount for which an asset could be exchanged, or liability settled, in an arms’ length transaction. The fair value of financial instruments that are traded in active markets at each reporting date is determined by reference to quoted market prices, without any deduction for transaction costs.

For financial instruments not traded in an active market, the fair value is determined using appropriate valuation techniques. Such techniques may include using recent arm’s length market transactions, reference to the current fair value of another instrument that is substantially the same, a discounted cash flow analysis or other valuation models.

An analysis of fair values of financial instruments and further details as to how they are measured are provided in Note 4 2 .

v. Impairment of financial assets

The Group assesses the impairment of financial assets if there is objective evidence that a loss event has a negative impact on the estimated future cash flows of the financial asset. Impairment is recognized when the loss event can be reliably estimated. Losses expected as a result of future events, no matter how likely, are not recognized.

For financial assets carried at amorti z ed cost, the Group first assesses whether impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recogni z ed are not included in the collective assessment of impairment.

The amount of any impairment loss identified is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account and the loss is recogni z ed in profit or loss.

For available-for-sale financial assets, the Group assesses at each reporting date whether there is objective evidence that an investment or a group of investments is impaired. When a decline in the fair value of an available-for-sale financial asset has been recognized in other comprehensive income and there is objective evidence that the asset is impaired, the cumulative loss that had been recognized in other comprehensive income is recognized in profit or loss as an impairment loss. The amount of the cumulative loss is the difference between the acquisition cost (net of any principal repayment and amortization) and current fair value, less any impairment loss on that financial asset previously recognized.

vi. Derecognition of financial instrument

The Group derecognize s a financial asset when the contractual rights to the cash flows from the financial asset expire, or when t he Group transfer s substantially all the risks and rewards of ownership of the financial asset.

The Group derecognize s a financial liability when the obligation specified in the contract is discharged or cancelled or expired.

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

v. Treasury stock

Reacquired Company shares of stock are accounted for at their reacquisition cost and classified as “Treasury Stock” and presented as a deduction to equity. The cost of treasury stock sold/transferred is accounted for using the weighted average method. The portion of treasury stock transferred for employees ownership program is accounted for at its fair value at grand date . The difference between the cost and the proceeds from the sale/transfer value of treasury stock is credited to “Additional Paid-in Capital”.

w. Dividends

Dividend for distribution to the stockholders is recognized as a liability in the consolidated financial statements in the year in which the dividend is approved by the stockholders. The interim dividend as a liability based on the Board of Directors’ decision supported by the approval from the Board of Commissioners.

x. Basic earnings per share and earnings per ADS

Basic earnings per share is computed by dividing profit for the year attributable to owners of the parent company by the weighted average number of shares outstanding during the year. Income per ADS is computed by multiplying basic earnings per share by 200, the number of shares represented by each ADS.

The Company does not have potentially dilutive financial investments.

y. Segment information

The Group's 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 Group' s chief operating decision maker i.e., the 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. Provision

Provision is recognized when the Group have a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the obligation.

aa. Impairment of non-financial assets

The Group assesses, at the end of each reporting period, whether there is an indication that an asset may be impaired. If such indication exists, the recoverable amount is estimated for the individual asset. If it is not possible to estimate the recoverable amount of the individual asset, the Group determines the recoverable amount of the Cash-Generating Unit (“CGU”) to which the asset belongs (“the asset’s CGU”).

The recoverable amount of an asset (either individual asset or CGU) is the higher of the asset’s fair value less costs to sell and its value in use. Where the carrying amount of the asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing the value in use, the estimated net future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

aa. Impairment of non-financial assets (continued)

In determining fair value less costs to sell, recent market transactions are taken into account, if available. If no such transactions can be identified, the Group uses an appropriate valuation model to determine the fair value of the asset. These calculations are corroborated by valuation multiples or other available fair value indicators.

Impairment losses of continuing operations are recognized in profit or loss under “Depreciation and A mortization” in the consolidated s tatement of profit or loss and other comprehensive income.

An assessment is made at the end of each reporting period as to whether there is any indication that previously recognized impairment losses for an asset , other than goodwill , may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognized impairment loss for an asset , other than goodwill , is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognized. The reversal is limited such that the carrying amount of the asset does not exceed its recoverable amount, nor exceeds the carrying amount that would have been determined, net of depreciation, had no impairment been recognized for the asset in prior periods. Reversal of an impairment loss is recognized in profit or loss.

Goodwill is tested for impairment annually and when circumstances indicate that the carrying value may be impaired. Impairment is determined for goodwill by assessing the recoverable amount of each CGU (or group of CGUs) to which the goodwill relates. When the recoverable amount of the CGU is less than its carrying amount, an impairment loss is recognized. Impairment loss relating to goodwill cannot be reversed in future periods.

a b . Changes in accounting policies and disclosures

Implementation of Offsetting Financial Assets and Financial Liabilities ( PSAK 50 )

The Group applied Offsetting Financial Assets and Financial Liabilities ( PSAK 50) retrospectively in the current period in accordance with the transitional provisions set out in the amendments. The comparative balances are accordingly restated.

These amendments clarify, among others things, that the right to set off must not only be legally enforceable in the normal course of business, but must also be enforceable in the events of default, bankruptcy or insolvency of all of the counterparties to contracts, including the Group itself.

The Group re-assessed its contracts that include an enforceable right to set off in the normal course of business and the prevailing laws and regulations, and concluded that the right to set off would not remain and be exercisable in the event of default, insolvency or bankruptcy. Accordingly, the set-off criterion is not met and the financial asset and liability should not be offset, and the gross amount is presented in the consolidated statement of financial position.

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

a b . Changes in accounting policies and disclosures (continued)

Implementation of Offsetting Financial Assets and Financial Liabilities ( PSAK 50 ) (continued)

As a result of the amendments, the comparative figures in the consolidated statements of financial position have been restated as follows:

	Before restatement	Restatement	After restatement
Consolidated
statement of financial position as of January 1, 2014
Trade receivables
Related
parties	900	203	1,103
Third
parties	5,126	394	5,520
Trade payables
Related
parties	826	203	1,029
Third
parties	10,774	394	11,168

	Before restatement	Restatement	After restatement
Consolidated
statement of financial position as of December 31, 2014
Trade receivables
Related
parties	746	127	873
Third
parties	5,719	405	6,124
Trade payables
Related
parties	770	127	897
Third
parties	11,060	405	11,465

The implementation of PSAK 50 (2014) , did not have impact on the consolidated statements of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows.

Implementation of PSAK 24 , Employee Benefit s ( Revised 2013)

The Group applied PSAK 24 (Revised 2013) retrospectively at the current period in accordance with the requirements of the revised standard. Therefore, the statement of the financial position as at the beginning of the earliest comparative period (January 1, 2014) and the related comparative items have been restated.

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

	Before restatement	Restatement		After restatement
Consolidated
statement of financial position as of January 1, 2014
Prepaid pension benefit
costs	927	22		949
Deferred tax assets – net	82	(15	)	67
Deferred tax payable – net	3,004	(96	)	2,908
Post-retirement health care benefit costs provisions	752	241		993
Pension and other
post-retirement benefits	2,795	470		3,265

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

a b . Changes in accounting policies and disclosures (continued)

Implementation of PSAK 24 , Employee Benefit s ( Revised 2013) (continued)

	Before restatement	Restatement		After restatement
Consolidated statement of financial
position as of Januari 1, 2014 (continued)
Retained earnings
Unappropriated	43,291	(658	)	42,633
Net equity attributable to
owners of
The parent company – net	60,542	(658	)	59,884
Non-controlling
interests	16,882	50		16,932

	Before restatement	Restatement		After restatement
Consolidated
statement of financial position as of December 31, 2014
Prepaid
pension benefit costs	771	399		1,170
Deferred
tax assets – net	99	(4	)	95
Deferred
tax payable – net	2,743	(40	)	2,703
Post-retirement
health care benefit costs provisions	602	(161	)	441
Pension
and other post-retirement benefits	3,092	582		3,674
Retained
earnings
Unappropriated	47,986	9		47,995
Net
equity attributable to owners of
The
parent company – net	67,807	9		67,816
Non-controlling
interests	18,318	5		18,323

	Before restatement		Restatement		After restatement
Consolidated
statement of comprehensive income for the six months period ended September
30, 2014
Personnel expenses	( 7,215	)	( 183	)	(7,398	)
Operating p rofit	22,132		( 183	)	21,949
Profit before income tax	21 ,715		( 183	)	21,532
I ncome t ax benefit - deferred	7 0		4		74
Income t ax e xpense
- net	( 5 ,4 35	)	4		(5,431	)
Profit f or t he y ear	1 6 , 280		(179	)	16,101
Profit
for the year attributable to
O wners of the parent company	11 ,4 46		(178	)	11,268
Non-controlling interests	4 , 834		(1	)	4,833
Net
comprehensive income for the y ear
attributable to
O wners of the parent company	11 , 434		(178	)	11,256
Non-controlling interests	4 , 834		(1	)	4,833
Basic a nd d iluted e arnings p er s hare
( i n full amount)
Net i ncome per share	117 . 36		(2	)	115.53
Net income per ADS	23 , 471 . 7 5		(366	)	23,105 . 79

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

a b . Changes in accounting policies and disclosures (continued)

PSAK 24 (Revised 2013) also requires more extensive disclosures. These have been provided in Note 34.

The implementation of PSAK 24 , Employee Benefits (Revised 201 3 ), have no impact on the consolidated statements of cash flows.

The overall impact of the implementation of those revised standards in the consolidated financial statements are as follows:

	Before restatement	Restatement		After restatement
Consolidated
statement of financial position as of January 1, 2014
Total current assets	33,075	597		33,672
Total non current assets	94,876	7		94,883
Total assets	127,951	604		128,555
Total current liabilities	28,437	597		29,034
Total non current liabilities	22,090	615		22,705
Total liabilities	50,527	1,212		51,739
Total equity	77,424	(608	)	76,816
Total liabilities and equity	127,951	604		128,555

	Before restatement	Restatement	After restatement
Consolidated statement of financial
position as of December 31, 2014
Total current assets	33,762	532	34,294
Total non current assets	107,133	395	107,528
Total assets	140,895	927	141,822
Total current liabilities	31,786	532	32,318
Total non current liabilities	22,984	381	23,365
Total liabilities	54,770	913	55,683
Total equity	86,125	14	86,139
Total liabilities and equity	140,895	927	141,822

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

a c . Critical accounting estimates and judgements (continued)

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 Group 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 benefit 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 benefit obligations.

The Group determines 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 Group considers the interest rates of G overnment 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 obligations.

If there is an improvement in the ratings of such G overnment 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 benefits 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. Useful lives of property and equipment

The Group estimate the useful lives of their property and equipment based on expected asset utilization, considering strategic business plans, expected future technological developments and market behavior. The estimates of useful lives of property and equipment are based on the Group’s collective assessment of industry practice, internal technical evaluation and experience with similar assets.

The Group review estimates of useful lives at least each financial year end and such estimates are updated if expectations differ from previous estimates due to physical wear and tear, technical or commercial obsolescence and legal or other limitations on the use of the assets. The amounts of recorded expenses for any year will be affected by changes in these factors and circumstances. A change in the estimated useful lives of the property and equipment is a change in accounting estimates and is applied prospectively in profit or loss in the period of the change and future periods.

Details of the nature and carrying amount of property and equipment are disclosed in Note 1 0 .

iii. Provision for impairment of receivables

The Group assess es 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 collection experience. Such provisions are adjusted periodically to reflect the actual and anticipated experience. Details of the nature and carrying amount of provision for impairment of receivables are disclosed in Note 6.

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

a c . Critical a ccounting e stimates and j udgments (continued)

iv. 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 Group recognizes liabilities for anticipated tax audit issues based on estimates of 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 income tax assets and liabilities in the year in which such determination is made. Details of the nature and carrying amount of income tax are disclosed in Note 3 0 .

vi. Impairment of non-financial assets

The Group annually assess es 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 estimat e s.

The Group determines the estimated recoverable amount based on the future cash flows projections from the continuing use of the asset and the net cash flows to be received for the disposal of an asset at the end of its useful life. Those projections are estimated for the asset in its current condition and do not include future cash flows that are expected to arise from (a) a future restructuring, to which the Group is not yet committed, and (b) improving or enhancing the asset’s performance.

The assessment of recoverable amount is sensitive to the management’s judgments in estimating future forecasted cash flows, as well as the selection of discount rate, and technological and economic obsolescence rate. These judgments are applied based on management’s understandin g of historical and current information, and expectations of the Group’s future plan and performance. Further details are presented in Note 10.

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

3. BUSINESS COMBINATIONS

Acquisition of Contact Centers Australia Pty. Ltd. (“CCA”)

On June 14, 2014, the shareholders of CCA and Telkom Australia entered into an agreement to purchase 75% ownership in CCA amounting for AU$10,843,000 or equivalent to Rp115 billion. The acquisition was completed on September 25, 2014.

CCA is a private company based in Surry Hills, Sydney and was established in 2002. This company provides comprehensive and integrated Business Process Outsourcing solutions with other services for a complete end-to-end solution.

The fair values of the assets acquired and liabilities assumed at the acquisition date were as follows:

Cash and equivalents	Total — 6
Trade
receivable	20
Other
current assets	17
Property and
equipment	6
Intangibles	78
Lease	4
Current
liabilities	(29	)
Non
current liabilities	(2	)
Fair
value of identifiable net asset acquired	100
Fair
value of non-controlling interest	(39	)
Goodwill	54
Fair
value of consideration transferred	115

The prevailing e xchange rate prevailing at the time of acquisition was Rp10,655/AU$.

Since the acquisition date, CCA has generated operating revenue amounting to Rp147 billion. The net cash flow to acquire control, net of cash acquired, amounting to Rp 110 billion.

The business combination transactions mentioned above ha ve complied to the related Bapepam-LK Regulations.

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

4. CASH AND CASH EQUIVALENTS

Lenders	Currency	September 30, 2015 — Original Currency (in millions)	Rupiah equivalent	December 31, 201 4 — Original currency (in millions)	Rupiah equivalent
Cash on hand	Rp	-	7 8	-	24
Cash in banks
Related parties
PT
Bank Rakyat Indonesia (Persero) Tbk (“BRI”)	Rp	-	1 60	-	213
	US$	117	1,716	8	104
PT
Bank Mandiri (Persero) Tbk (“Bank Mandiri”)	Rp	-	876	-	611
	US$	18	266	18	226
	JPY	8	1	8	1
	EUR	0	7	0	0
	HKD	1	2	2	3
PT
Bank Negara Indonesia (Persero) Tbk (“BNI”)	Rp	-	293	-	384
	US$	1 6	241	19	233
	EUR	5	7 9	7	99
	SGD	0	0	0	0
Others	Rp	-	9	-	15
	US$	0	0	0	0
Sub-total			3 , 650		1,889
Third
parties
Standard
Chartered Bank (“SCB”)	Rp	-	42	-	0
	US$	30	4 37	30	3 6 8
	SGD	3	33	3	30
PT
Bank Muamalat
Indonesia
Tbk (“Bank Muamalat”)	Rp	-	192	-	16
	US$	0	1	-	-
Hong
Kong and Shanghai Banking Corporation Ltd (“HSBC”)	US$	8	1 20	7	88
	HKD	3	7	4	6
	SGD	1	7	0	1
Deutsche
Bank AG (“DB)	Rp	-	1 19	-	60
	US $	0	3	2	28
	EUR	0	0	1	15
PT
Bank CIMB Niaga Tbk (“Bank CIMB Niaga”)	Rp	-	33	-	40
	US $	0	0	0	0
Others (each
below Rp75 billion)	Rp	-	58	-	71
	US$	4	52	2	20
	EUR	1	13	1	15
	AUD	0	3	0	1
	TWD	27	12	21	8
	MYR	0	0	0	0
	HKD	0	0	0	0
	MOP	24	0	22	0
	MMK	0	0	0	0
Sub-total			1, 132		767
Total cash in banks			4 , 782		2,656
Time deposits
Related parties
BRI	Rp	-	3 , 157	-	4,443
	US$	166	2 , 433	138	1,713
BNI	Rp	-	4, 209	-	1,285
	US$	1	9	1	8
Bank Mandiri	Rp	-	2,254	-	852
	US$	40	586	20	248
Others	Rp	-	52	-	26
Sub-total			1 2 , 700		8,575

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

4. CASH AND CASH EQUIVALENTS (continued)

Lenders	Currency	September 30, 2015 — Original currency (in millions)	Rupiah equivalent	December 31, 201 4 — Original currency (in millions)	Rupiah equivalent
Third parties
Rupiah
PT Bank Permata Tbk (“Bank Permata”)	Rp	-	2 ,350	-	1,350
	US$	-	-	58	720
PT Bank Mega Tbk (“Bank Mega”)	Rp	-	954	-	1,057
	US$	113	1,161	26	323
Bank CIMB Niaga	Rp	-	1, 600	-	2,057
PT Bank UOB Indonesia (“UOB”)	Rp	-	500	-	100
PT Bank OCBC NISP Tbk (“OCBC NISP”)	Rp	-	500	-	-
	US$	-	-	36	448
PT Bank BukopinTbk (“Bank Bukopin”)	Rp	-	298	-	50
	US$	1 0	1 4 6	-	-
Bank Panin Tbk (”Bank Panin”)	Rp	-	175	-	28
Bank Muamalat	Rp	-	97	-	66
	US$	5	71	-	-
Bank Tabungan
Pensiun Nasional (“Bank BTPN”)	Rp	-	152	-	1
PT Bank Danamon
Indonesia Tbk (“Bank Danamon”)	Rp	-	130	1	16
PT Bank Ekonomi
Raharja Tbk (“Bank Ekonomi”)	Rp	-	-	-	75
Others (each below Rp75 billion)	Rp	-	70	-	126
Sub-total			8 , 704		6,417
Total time deposits			21, 404		14,992
Grand Total			2 6 ,2 64		17,672

Interest rates per annum on time deposits are as follows:

| | September 30 , 201 5 | December
31, 2014 |
| --- | --- | --- |
| Rupiah | 4 . 2 5%-10.50% | 4.00%-11.50% |
| Foreign currencie s | 0.10%-3.00% | 0.03%-3.00% |

The related parties in which t he Group place s its funds are state-owned banks. The Group placed a majority of its cash and cash equivalents in these banks because they have the most extensive branch networks in Indonesia and are considered to be financially sound banks, as they are owned by the State.

Refer to Note 3 6 for details of related party transactions.

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

5. OTHER CURRENT FINANCIAL ASSETS

Lenders	Currency	September 30, 2015 — Original currency (in millions)	Rupiah equivalent	December 31, 201 4 — Original currency (in millions)	Rupiah equivalent
Time deposits
Related parties
Bank Mandiri	US$	20	294	8	100
Third
parties
SCB	US$	4	56	1	10
Total time deposits			350		110
Available-for-sale
financial assets
Related parties
Government	Rp	-	-	-	1 03
	US$	2	31	2	27
State-owned
enterprises	US$	4	63	4	55
Sub-total	Rp		94		185
Third
parties			69		69
Total
available-for-sale financial assets			163		254
Sinking fund	Rp		2,1 65		2,121
Derrivative	Rp		290	-	290
Others	Rp		25		21
	US$	0	3	0	1
	AUD	0	1	-	-
Total			2,9 97		2,797

Sinking fund mostly represents Telkomsel’s account in BNI in relation to the Conditional Business Transfer Agreement between Telkomsel and the Company (Note 39c.ii).

The t ime deposits have maturities of more than three months but not more than one year, with interest rates as follows:

| | September 3 0 , 2015 | December
31, 2014 |
| --- | --- | --- |
| Foreign currencies | 0. 7 5%- 0 . 93 % | 0.85%-1.00% |

Refer to Note 36 for details of related party transactions.

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

6. TRADE RECEIVABLES

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

a. By debtor

(i) Related parties

State-owned enterprises	September 3 0 , 2015 — 395		December 31, 2014 (Restated) — 458
PT Indosat Tbk (“Indosat”)	299		195
Indonusa	286		290
CSM	62		52
Others	246		28 0
Total	1, 288		1,275
Provision for impairment of
receivables	( 664	)	(402	)
Net	624		873

(ii) Third parties

Individual and business subscribers	September 30 , 2015 — 10 , 051		December 31, 2014 (Restated) — 8,033
Overseas international carriers	1,164		785
Total	1 1 , 215		8,818
Provision for impairment of
receivables	( 2 , 425	)	(2,694	)
Net	8,790		6,124

b. By age

(i) Related parties

Up to 6 months	September 30 , 2015 — 778		December 31, 2014 (Restated) — 712
7 to 12 months	167		125
More than 12 months	343		438
Total	1, 288		1,275
Provision for impairment of
receivables	( 664	)	(402	)
	624		873

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

6. TRADE RECEIVABLES (continued)

b. By age (continued)

(ii) Third parties

Up to 3 months	September 30 , 2015 — 5, 998		December 31, 2014 (Restated) — 5,287
More than 3 months	5 , 217		3,531
Total	1 1 , 215		8,818
Provision for impairment of
receivables	( 2 , 425	)	(2,694	)
Net	8,790		6,124

(iii) Aging of total trade receivables

| | September 30 ,
2015 — Gross | Provision for
impairment of receivables | December 31, 2014 (Restated) — Gross | Provision for impairment of receivables |
| --- | --- | --- | --- | --- |
| Not past due | 3, 812 | 94 | 3,595 | 127 |
| Past due up to 3
months | 2, 838 | 1 48 | 2,294 | 262 |
| Past due more than 3 to 6 months | 1, 330 | 3 10 | 645 | 321 |
| Past due more than 6 months | 4, 52 3 | 2 , 537 | 3,559 | 2,386 |
| Total | 1 2 , 50 3 | 3, 089 | 10,093 | 3,096 |

The Group has made provision for impairment of trade receivables based on the collective assessment of historical impairment rates and individual assessment of its customers’ credit history. The Group does not apply a distinction between related party and third party receivables in assessing amounts past due. As of September 30 , 2015 and December 31,2014 , the carrying amount of trade receivables of the Group considered past due but not impaired amounted to Rp5,696 billion and Rp 3,365 billio n , respectively. Management believes that receivables past due but not impaired, along with trade receivables that are neither past due nor impaired, are due from customers with good credit history and are expected to be recoverable.

c. By currency

(i) Related parties

Rupiah	September 30 , 2015 — 1, 268		December 31, 2014 (Restated) — 1,249
U.S. dollar	2 0		26
Total	1, 288		1,275
Provision for impairment of
receivables	( 664	)	(402	)
Net	624		873

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

6. TRADE RECEIVABLES (continued)

c. By currency (continued)

(ii) Third partie s

| Rupiah | September 30 , 2015 — 9, 605 | | December
31, 2014 (Restated) — 7,730 | |
| --- | --- | --- | --- | --- |
| U.S. dollar | 1, 558 | | 1,053 | |
| Australian
dollar | 50 | | 31 | |
| Euro | 1 | | 3 | |
| Hong Kong dollar | 1 | | 1 | |
| Total | 1 1 , 215 | | 8,818 | |
| Provision for
impairment of receivables | ( 2 , 425 | ) | (2,694 | ) |
| Net | 8,790 | | 6,124 | |

d. Movements in the provision for impairment of receivables

Beginning balance	September 30 , 2015 — 3,096		December 31, 2014 (Restated) — 2,872
Provision recognized during the year
(Note 28)	948		784
Receivables written-off	( 955	)	(560	)
Ending balance	3, 089		3,096

The receivables written off relate to both related party and third party trade receivables.

Management believes that the provision for impairment of trade receivables is adequate to cove r losses on uncollectible receivables.

As of June 3 0 , 2015, certain trade receivables of the subsidiaries amounting to Rp2,571 billion have been pledged as collateral under lending agreements (Notes 16, 19 and 20).

Refer to Note 36 for details of related party transactions.

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

7. INVENTORIES

Components	September 30 , 2015 — 454		December 31, 2014 — 279
SIM
cards, RUIM cards, set top boxes, and blank prepaid vouchers	1 45		105
Others	1 35		133
Total	734		517
Provision for obsolescence
Components	(1 7	)	(15	)
SIM
cards, RUIM cards, set top boxes, and blank prepaid vouchers	(27	)	(28	)
Others	0		0
Total	(4 4	)	(43	)
Net	690		474

Movements in the provision for obsolescence are as follows:

Beginning balance	September 30 , 2015 — 43		December 31, 2014 — 22
Provision recognized during the year	4		39
Inventory write off	( 3	)	(18	)
Ending balance	4 4		43

The inventories recognized as expense and included in operations, maintenance, and telecommunication service expenses as of September 30 , 2015 and December 31, 2014 amounted to Rp 1,450 billion and Rp 1,031 billion, respectively (Note 2 7 ).

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 amounting to Rp 5 2 billion have been pledged as collateral under lending agreements (Notes 1 6 and 2 0 ).

As of September 3 0 , 2015 and December 31, 2014 , modules and components held by the Group has been insured against fire, theft, and other specific risks with book value amounting to Rp 221 billion and Rp2 37 billion, respectively. Modules are recorded as part of property and equipment. Total sum insured as of September 3 0 , 2015 and December 31, 2014 amounted to Rp 291 billion and 266 billion , respectively.

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

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

8. ADVANCES AND PREPAID EXPENSES

	September 30 , 2015	December 31, 2014
Frequency license (Notes 39 c.i and 39 c.ii)	1,304	2 , 699
Prepaid rental	986	983
Advances	732	410
Salaries	444	2 18
Advances to employee	88	15
Others (each below Rp75 billion)	632	408
Total	4,186	4,733

Refer to Note 3 6 for details of related party transactions.

9 . LONG-TERM INVESTMENTS

| | September
30, 2015 — Percentage
of ownership | Beginning
balance | Addition
(Deduction) | Share
of net (loss) profit of associated company | | Dividend | | Translation
adjustment | | Ending
balance |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Long-term
investments in associated companies : | | | | | | | | | | |
| Tiphone a | 25 | 1,392 | - | 23 | | (17 | ) | - | | 1,398 |
| Indonusa b | 20 | 221 | - | - | | - | | - | | 221 |
| Teltra n et c | 51 | 52 | - | (12 | ) | - | | - | | 40 |
| PT
Melon Indonesia (“Melon”) d | 51 | 43 | 0 | 7 | | - | | - | | 50 |
| PT
Integrasi Logistik Cipta Solusi (“ILCS”) e | 49 | 38 | - | (0 | ) | - | | - | | 38 |
| Telin
Malaysia f | 49 | 6 | 10 | (12 | ) | - | | (4 | ) | 0 |
| CSM g | 25 | - | - | - | | - | | - | | - |
| Sub-total | | 1,752 | 10 | 6 | | (17 | ) | (4 | ) | 1,747 |
| Other
long-term investment | | 15 | - | - | | - | | - | | 15 |
| Total
long-term investments | | 1,767 | 10 | 6 | | (17 | ) | (4 | ) | 1,762 |

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

9 . LONG-TERM INVESTMENTS (continued)

Summarized financial information of the Group’s investments accounted under the equity method for 2015:

	Tiphone*		Indonusa		Teltranet		Melon		ILCS		Telin Malaysia		CSM**
Statements of
financial position
Current assets	3, 466		527		77		133		92		8		157
Non-current assets	884		240		26		3 0		1 8		6		933
Current liabilities	( 1,148	)	(5 80	)	( 21	)	(6 4	)	(3 2	)	( 25	)	(1,297	)
Non-current
liabilities	( 2,567	)	(5 45	)	-		(2	)	( 1	)	-		(317	)
Equity (deficit)	2,635		(3 58	)	8 2		9 7		7 7		(11	)	(524	)
Statements of profit
or loss and other comprehensive income
Revenues	9,071		376		-		141		44		5		173
Cost of revenues and
operating expenses	( 8,550	)	( 462	)	( 36	)	( 131	)	(4 4	)	( 28	)	(382	)
Other (expenses)
income, including finance costs – net	( 276	)	( 44	)	13		4		( 1	)	-		13
Profit (loss) before
tax	245		( 130	)	( 23	)	14		( 1	)	( 23	)	(196	)
Income tax expense	( 62	)	-		-		-		-		-		-
Profit (loss) for
the year	183		(1 30	)	( 23	)	14		( 1	)	( 23	)	(196	)

Based on statement of financial position and statement of profit or loss and other comprehensive income as of March, 31 2015 and for the three months period then ended

** Based on statement of financial position and statement of profit or loss and other comprehensive income as of December 31, 2014 and for the year then ended

| | December 31, 201 4 — Percentage of
ownership | Beginning balance | Addition (Deduction) | | Share of net (loss) profit of associated
company | | Translation
adjustment | | Ending balance |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Long-term
investments in associated companies : | | | | | | | | | |
| Tiphone a | 24.92 | - | 1,395 | | (3 | ) | - | | 1,392 |
| Indonusa b | 20.00 | 189 | 32 | | - | | - | | 221 |
| Teltranet c | 51.00 | - | 52 | | (0 | ) | - | | 52 |
| PT Melon Indonesia
(“Melon”) d | 51.00 | 39 | - | | 4 | | - | | 43 |
| PT
Integrasi Logistik Cipta Solusi (“ILCS”) e | 49.00 | 37 | - | | 1 | | - | | 38 |
| Telin Malaysia f | 49.00 | 18 | 8 | | (19 | ) | (1 | ) | 6 |
| CSM g | 25.00 | - | - | | - | | - | | - |
| Total long-term
investments | | 283 | 1,487 | | (17 | ) | (1 | ) | 1,752 |
| Other long-term
investments | | 21 | (6 | ) | - | | - | | 15 |
| Total long-term
investments | | 304 | 1,481 | | (17 | ) | (1 | ) | 1,767 |

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

9 . LONG-TERM INVESTMENTS (continued)

Summarized financial information of the Group’s investments accounted under the equity method for 2014:

	Tiphone		Indonusa		Teltranet	Melon		ILCS		Telin Malaysia		CSM
Statements
of financial position
Current assets	4,469		396		104	101		86		8		157
Non-current assets	1,259		365		0	36		24		4		933
Current liabilities	(2,465	)	(382	)	0	(51	)	(31	)	(1	)	(1,297	)
Non-current
liabilities	(275	)	(605	)	-	(2	)	(2	)	-		(317	)
Equity (deficit)	2,988		(226	)	104	84		77		11		(524	)
Statements
of comprehensive income
Revenues	6,314		281		-	92		73		7		173
Cost of revenues and
operating expenses	( 5,957	)	( 298	)	-	( 8 8	)	( 88	)	( 39	)	(382	)
Other (expenses)
income, including finance costs – net	(1 5 2	)	( 20	)	-	2		2		-		13
Profit (loss) before tax	205		( 37	)	-	6		( 13	)	( 32	)	(196	)
Income tax expense	( 52	)	-		-	-		-		-		-
Profit (loss) for
the year	153		( 37	)	-	6		( 13	)	( 32	)	(196	)

Based on statement of financial position as of December 31, 2014 and statement of profit or loss and other comprehensive income for the three months period ended March 31, 2014

** Based on statement of financial position and statement of profit or loss and other comprehensive income as of December 31, 2014 and for the year then ended

a Tiphone was established on June 25, 2008 as PT Tiphone Mobile Indonesia Tbk. Tiphone is engaged in the telecommunication equipment business, such as for celullar phone including spare parts, accessories, pulse reload vouchers, repair service and content provider through its subsidiaries. On September 18, 2014, the Company through PINS acquired 25% ownership in Tiphone for Rp1,395 billion. As of September 30, 2015, the fair value of the investment is Rp1,255 billion. The fair value is calculated by multiplying the number of shares by the published price quotation as of September 30, 2015 (Rp715 per share).

Reconciliation of financial information to the carrying amount of long-term investment in Tiphone as of December 31, 2014, is as follows:

Assets	Amount — 5 , 728
Liabilities	(2,740	)
Net assets	2,988
Group’s proportionate
share of net asset s (24.92%)	745
Goodwill	647
Carrying amount of
long-term investment	1,392

b Indonusa had been a subsidiary of the Company until 2013 when the Company disposed 80% of its interest in Indonusa. On May 14, 2014, based on the Circular Resolution of the Stockholders of Indonusa as covered by notarial deed No. 57 dated April 23, 2014 of FX Budi Santoso Isbandi, S.H., which was approved by the MoLHR in its Letter No. AHU-02078.40.20.2014 dated April 29, 2014, Indonusa’s stockholders approved an increase in its issued and fully paid capital by Rp80 billion. The Company has waived its right to own the new shares issued and transferred it to Metra and, as a result, Metra’s ownership in Indonusa increased to 4.33%.

c Investment in Teltranet is accounted for under the equity method, which covered on an agreement between Metra and Telstra Holding Singapore Pte. Ltd. on August 29, 2014. Teltranet is engaged in communication system services (note 1d). Metra does not have control as it does not determine the financial and operating policies of Teltranet .

d Melon is engaged in providing Digital Content Exchange Hub services (“DCEH”). Metra does not have control over Melon due to the existence of substantive participating rights held by the other venturer over the financial and operating policies of Melon .

e ILCS is engaged in providing E-trade logistic services and other related services.

f Telin Malaysia is engaged in telecommunication services in Malaysia.

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

9 . LONG-TERM INVESTMENTS (continued)

g CSM is engaged in providing Very Small Aperture Terminal (“VSAT”), network application services and consulting services on telecommunications technology and related facilities. The unrecognized share of losses of CSM for the year ended December 31, 2014 and 201 3 Rp Rp 131 billion and Rp80 billion, respectively.

10. PROPERTY AND EQUIPMENT

| | Januari
1, 201 5 | Additions | Deductions | | Reclassifications/ T ranslations | | September 30, 201 5 |
| --- | --- | --- | --- | --- | --- | --- | --- |
| At cost : | | | | | | | |
| Directly acquired
assets | | | | | | | |
| Land rights | 1 , 184 | 44 | - | | (2 | ) | 1,226 |
| Buildings | 4,571 | 58 | - | | 591 | | 5,220 |
| Leasehold
improvements | 943 | 24 | (23 | ) | 164 | | 1,108 |
| Switching
equipment | 19,208 | 75 | (66 | ) | 393 | | 19,610 |
| Telegraph, telex
and data communication equipment | 6 | - | - | | (2 | ) | 4 |
| Transmission
installation and equipment | 107,573 | 2,295 | ( 772 | ) | 7,342 | | 116,438 |
| Satellite,
earth station and equipment | 7,927 | 46 | - | | 87 | | 8,0 60 |
| Cable network | 33,114 | 2,636 | ( 166 | ) | ( 78 | ) | 35,506 |
| Power supply | 12,776 | 112 | ( 5 0 | ) | 574 | | 13, 412 |
| Data
processing equipment | 10,242 | 136 | ( 8 | ) | 267 | | 10, 637 |
| Other
telecommunications peripherals | 602 | 1 7 | - | | ( 7 | ) | 6 12 |
| Office
equipment | 951 | 62 | ( 4 | ) | ( 2 | ) | 1,00 7 |
| Vehicles | 346 | 100 | (1 | ) | 2 | | 44 7 |
| Other
equipment | 99 | - | - | | - | | 99 |
| Property under
construction | 3,853 | 10,836 | - | | ( 9,429 | ) | 5,260 |
| Assets under finance
lease | | | | | | | |
| Transmission
installation and equipment | 5,882 | 237 | (202 | ) | - | | 5,917 |
| Data
processing equipment | 102 | - | (10 | ) | - | | 92 |
| Office
equipment | 21 | 52 | - | | (4 | ) | 69 |
| Vehicles | 44 | - | - | | - | | 44 |
| CPE assets | 22 | 153 | - | | - | | 175 |
| Power
supply | - | 113 | - | | - | | 113 |
| RSA assets | 252 | - | - | | - | | 252 |
| Total | 209,718 | 16,996 | (1,302 | ) | (104 | ) | 225,308 |

	January 1, 201 5	Additions	Deductions		Reclassifications/ T ranslations		September 30, 201 5
Accumulated depreciation and
impairment losses:
Directly acquired assets
Buildings	1,954	161	-		2		2, 117
Leasehold
improvements	669	72	(23	)	-		71 8
Switching equipment	13,861	1,034	(61	)	( 1 0	)	14, 824
Telegraph, telex and
data communication equipment	4	-	-		(2	)	2
Transmission
installation and equipment	54,764	7,540	( 764	)	23		61,563
Satellite, earth
station and equipment	6,099	5 04	-		2		6, 6 0 5
Cable network	18,762	975	( 164	)	( 97	)	19, 476
Power supply	7,978	909	( 44	)	10		8, 853
Data processing
equipment	7,624	664	( 8	)	( 6	)	8, 274
Other
telecommunications peripherals	322	51	-		(5	)	368
Office equipment	659	8 8	( 3	)	1 6		760
Vehicles	113	44	-		-		157
Other equipment	97	1	-		-		9 8
Assets under finance lease
Transmission
installation and equipment	1,681	720	( 202	)	-		2, 199
Data processing
equipment	79	11	(11	)	-		7 9
Office equipment	6	32	-		-		38
Vehicles	5	-	-		-		5
CPE asets	15	2	-		1 6		33
Power supply	-	12	-		-		12
RSA assets	217	10	-		-		22 7
Total	114,9 09	12,830	(1,280	)	(51	)	126,408
Net Book Value	94,809						98, 900

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

1 0 . PROPERTY AND EQUIPMENT (continued)

| | Januari
1, 2014 | Business
acquisition | Additions | Deductions | | Reclassifications/ Translation | | December
31, 2014 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| At cost : | | | | | | | | |
| Directly acquired
assets | | | | | | | | |
| Land rights | 1,098 | - | 107 | (21 | ) | - | | 1 , 184 |
| Buildings | 4,224 | - | 131 | (19 | ) | 235 | | 4 , 571 |
| Leasehold
improvements | 812 | - | 49 | (52 | ) | 134 | | 943 |
| Switching
equipment | 18,705 | - | 331 | (496 | ) | 668 | | 19 , 208 |
| Telegraph,
telex and data communication e quipmen t | 6 | - | - | - | | - | | 6 |
| Transmission
installation and equipment | 95,853 | - | 2 , 298 | (1 , 235 | ) | 10 , 657 | | 107 , 573 |
| Satellite,
earth station and equipment | 7,456 | - | 312 | (21 | ) | 180 | | 7,927 |
| Cable network | 28,987 | - | 3,025 | (250 | ) | 1, 352 | | 33 , 114 |
| Power supply | 11,755 | - | 225 | (78 | ) | 874 | | 12,776 |
| Data
processing equipment | 9,230 | - | 684 | (53 | ) | 381 | | 10 , 242 |
| Other
telecommunications peripherals | 500 | - | 102 | - | | (0 | ) | 602 |
| Office
equipment | 770 | 4 | 191 | (5 | ) | (9 | ) | 951 |
| Vehicles | 332 | 2 | 18 | (6 | ) | (0 | ) | 346 |
| Other equipment | 104 | - | - | - | | (5 | ) | 99 |
| Property under
construction | 1,971 | - | 16,660 | (15 | ) | (14,763 | ) | 3,853 |
| Assets under finance
lease | | | | | | | | |
| Transmission
installation and equipment | 5,683 | - | 495 | (296 | ) | - | | 5,882 |
| Data
processing equipment | 123 | - | - | (21 | ) | - | | 102 |
| Office
equipment | 7 | - | 15 | (1 | ) | - | | 21 |
| Vehicles | 26 | - | 18 | - | | 0 | | 44 |
| CPE assets | 22 | - | - | - | | - | | 22 |
| RSA assets | 459 | - | - | - | | (207 | ) | 252 |
| Total | 188,123 | 6 | 24,661 | (2,569 | ) | (503 | ) | 209,718 |

	January 1, 2014	Additions	Impairments	Deductions		Reclassifications/ T ranslations		December 31, 2014
Accumulated
depreciation and impairment losses:
Directly acquired
assets
Buildings	1,840	135	-	(16	)	(5	)	1,954
Leasehold
improvements	649	71	-	(52	)	1		669
Switching equipment	12,903	1,549	-	(496	)	(95	)	13,861
Telegraph, telex and
data communication equipment	3	1	-	-		-		4
Transmission
installation and equipment	46,666	9,084	406	(1,161	)	(231	)	54,764
Satellite, earth
station and equipment	5,190	577	332	-		(0	)	6,099
Cable network	17,758	1,101	67	(249	)	85		18,762
Power supply	6,794	1,246	-	(62	)	(0	)	7,978
Data processing
equipment	6,822	869	-	(57	)	(10	)	7,624
Other
telecommunications peripherals	267	55	-	-		0		322
Office equipment	564	109	-	(5	)	(9	)	659
Vehicles	68	46	-	(2	)	1		113
Other equipment	100	2	-	-		(5	)	97
Assets under finance
lease
Transmission
installation and equipment	1,345	632	-	(296	)	-		1,681
Data processing
equipment	83	17	-	(21	)	-		79
Office equipment	2	3	-	(1	)	2		6
Vehicles	1	4	-	-		-		5
CPE asets	13	2	-	-		-		15
RSA assets	294	130	-	-		(207	)	217
Total	101,362	15,633	805	(2,418	)	(473	)	114,909
Net Book Value	86,761							94,809

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

1 0 . PROPERTY AND EQUIPMENT (continued)

a. Gain on disposal or sale of property and equipment

| Proceeds from sale of property and
equipment | September 30, 201 5 — 312 | | September 30, 201 4 — 154 | |
| --- | --- | --- | --- | --- |
| Net book value | (25 | ) | (51 | ) |
| Gain on disposal or sale of property and equipment | 287 | | 103 | |

b . Assets impairment

As of December 31, 201 4 , the CGUs that independently generate cash inflows were fixed wireline, fixed wireless, cellular and others.

In 2014, the Group decided to cease its fixed wireless business no later than December 14, 2015. The Company assessed the recoverable amount to be Rp549 billion as of December 31, 2014 and determined that the assets for fixed wireless CGU were further impaired by Rp805 billion. The recoverable amount has been determined based on VIU calculation using the most recent cash flows projection approved by management. The cash flows projection included cash inflows from the continuing use of the assets during the remaining service period and projected net cash flows to be received for the disposal of the assets for fixed wireless CGU at the end of service period. Projected net cash flows to be received for the disposal of the assets was determined based on cost approach, adjusted for physical, technological and economic obsolescence. Management applied a pre-tax discount rate of 13.5% derived from the Company’s post-tax weighted average cost of capital and benchmarked to externally available data. In addition, management also applied technological and economic obsolescence rate of 30% based on the Company’s internal data, due to the lack of comparable market data because of the nature of the assets. The determination of VIU calculation is most sensitive to technological and economic obsolescence rate assumption. An increase in technological and economic obsolescence rate to 40% would result in a further impairment of Rp70 billion.

Since the Company has decided to restructure its fixed wireless business (Note 39.e.ii), the Company accelerate its fixed wireless business’s assets. As of September 30, 2015, fixed wireless assets has been fully depreciated amounting to Rp545 billion.

Loss on impairment of assets was recognized within “Depreciation and Amortization” in the consolidated statement of profit or loss and other comprehensive income.

Management believes that there is no indication of impairment in the assets of other CGUs as of December 31, 2014 .

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

1 0 . PROPERTY AND EQUIPMENT (continued)

c . Others

(i) Interest capitalized to property under construction amounted to Rp302 billion and Rp251 billion for the nine months period ended September 30, 2015 and for the year ended December 31, 2014, respectively. The capitalization rate used to determine the amount of borrowing costs eligible for capitalization ranged from 9.74% to 18.31% and from 10.14% to 18.31% for the nine months period ended September 30, 2015 and for the year ended December 31, 2014, respectively.

(ii) No foreign exchange loss was capitalized as part of property under construction for the nine months period ended September 30, 2015 and for the year ended December 31, 2014.

(iii) For the nine months period ended September 30, 2015 and 2014, the Group received the proceeds from the insurance claim on the lost and broken property and equipment, with a total value of Rp88 billion and Rp158 billion, respectively. The proceeds were recorded as part of “Other Income” in the consolidated statement of profit or loss and other comprehensive income. As of September 30, 2015 and 2014, the net carrying value of those assets of Rp14 billion and Rp34 billion, respectively, were charged to the consolidated statement of profit or loss and other comprehensive income.

(iv) I n 2012, Telkomsel decided to replace certain equipment units with net carrying amount of Rp1,037 billion, as part of a modernization program. Accordingly, Telkomsel changed the estimated useful lives of such equipment. The impact is an additional depreciation expense amounting to Rp70 billion for 2014 .

(v) In 2012, the useful lives of Telkomsel’s towers were changed from 10 years to 20 years to reflect their current economic useful lives. The impact is a reduction of depreciation expense by Rp352 billion for the nine months period ended September 30, 2015 and 2014 .

The impact of the change in the estimated useful lives of the towers in future periods is to increase the profit before income tax as follows:

Years	Amount
2015 (3 months)	352
2016	301
2017	92

In 2014, the useful lives of Telkomsel’s buildings and transmissions were changed from 20 years to 40 years, and from 10 years to 15 and 20 years, to reflect their current economic useful lives. The impact is a reduction of depreciation expense by Rp198 billion for the nine months period ended September 30, 2015 .

The i mpact of the change in the estimated useful lives of the buildings and transmissions in future periods is to increase the profit before income tax as follows:

Years	Amount
2015 (3 months)	198
2016	244
2017	198
2018	135

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

1 0 . PROPERTY AND EQUIPMENT (continued)

c. Others (continued)

(v i ) Exchange of property and equipment

· In 2012 and 201 0 , the Company entered into a Procurement and Installation Agreement for the Modernization of the Copper Cable Network through Optimization of Asset Copper Cable Network through Trade In/Trade Off method with PT L en Industri (“LEN”) and PT Industri Telekomunikasi Indonesia (“INTI”) , respectively .

In 2015 and 2014, the Company derecognized the copper cable network asset with net carrying value of Rp1.9 billion and Rp1.8 billion, respectively, and recorded the fiber optic network asset from the exchange transaction of Rp384 billion and Rp435 billion.

· For the period ended December 31, 2014, Telkomsel’s equipment with net carrying amount of Rp41 billion will be exchanged with equipment from NSN Oy and PT Huawei, therefore, these equipment units were presented as assets held for sale in the consolidated statement of financial positions, and under personal segment (Note 37) .

· The cost of the acquired equipment is measured at the aggregate of the carrying amount of the equipment given up and the amount of cash paid.

(vii i ) As of September 30, 2015, the Group’s property and equipment except land rights, with net carrying amount of Rp87,529 billion were insured against fire, theft, earthquake and other specified risks, including business interruption, under blanket policies totalling Rp14,158 billion, US$74.03 million, HKD18.71 million and SGD28.92 million. Management believes that the insurance coverage is adequate to cover potential losses from the insured risks.

( ix ) As of September 30, 2015, the percentage of completion of property under construction was around 84% of the total contract value, with estimated dates of completion between October 2015 and December 2017. The balance of property under construction mainly consists of buildings, transmission installation and equipment, cable network and power supply. Management believes that there is no impediment to the completion of the construction in progress.

(x) All assets owned by the Company have been pledged as collateral for bonds (Note 19a). Certain property and equipment of the Company’s subsidiaries with gross carrying value amounting to Rp8,203 billion have been pledged as collateral under lending agreements (Notes 16 and 20).

(x i ) As of September 30, 2015 the cost of fully depreciated property and equipment of the Group that are still used in operations amounted to Rp63,917 billion. The Group is currently performing modernization of network assets to replace the fully depreciated property and equipment.

(x ii ) In 2014, the total fair values of land rights and buildings of the Group, which are determined based on the sale value of the tax object (“Nilai Jual Objek Pajak” or “NJOP”) of the related land rights and buildings, amounted to Rp19,412 billion .

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

1 0 . PROPERTY AND EQUIPMENT (continued)

c . Others (continued)

(xiii) The Company and Telkomsel entered into several tower providers to lease spaces in telecommunication towers (slot) and sites of the towers for a period of 10 years. The Company and Telkomsel may extend the lease period based on the agreement by both parties. In addition, the Group also has lease commitments for property and equipment 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 lease are as follows:

Year — 2015	September 30 , 2015 — 1,011		December 31, 2014 — 975
2016	253		927
2017	971		898
2018	904		830
2019	803		758
Thereafter	2,339		2,147
Total minimum lease payments	6,281		6,535
Interest	(1,587	)	(1,746	)
Net present value of minimum
lease payments	4,694		4,789
Current maturities (Note 1 7 a)	(611	)	(571	)
Long-term portion (Note 1 7 b)	4,083		4,218

Details of obligation under finance lease as of September 30, 2015 and December 31, 2014 are as follows :

	September 30 , 2015	December 31, 2014
PT Tower Bersama
Infrastructure, Tbk	1,611	1,713
PT Profesional
Telekomunikasi Indonesia	1,498	1,596
PT Solusi Tunas Pratama	348	368
PT Putra Arga Binangun	233	244
PT Bali Towerindo Sentra	135	143
PT Naragita Dinamika
Komunika	91	109
Others (each below Rp100
billion)	778	616
Total	4, 694	4,789

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

1 1 . ADVANCES AND OTHER NON-CURRENT ASSETS

Advances and other non-current assets as of September 30, 2015 and December 31, 2014 consist of:

	September 30 , 2015	December 31, 2014
Advances for purchase of property
and equipment	3,687	3 ,354
Prepaid rental - net of current
portion (Note 8)	2,161	1 , 587
Deferred charges	451	484
Frequency license - net of current
portion (Note 8)	429	49 3
Long-term trade receivables - net of
current portion (Note 6)	328	362
Restricted cash	110	112
Security deposit	96	72
Others	9	15
Total	7,271	6,479

Prepaid rental covers rent of leased line and telecommunication equipment and land and building under lease agreements of the Group with rental periods ranging from 1 to 40 years.

As of September 30, 2015 and December 31, 2014, deferred charges represent deferred Revenue-Sharing Arrangement (“RSA”) charges and deferred Indefeasible Right of Use (“IRU”) Agreement charges. Total amortization of deferred charges for the years ended September 30, 2015 and December 31, 2014 amounted to Rp35 billion and Rp86 billion, respectively.

Long-term trade receivables are measured at amortized cost using the effective interest rate method payable in installments over 4 years, and arose from providing telecommunication access and services in rural areas (USO) (Note 39c.iv ).

Refer to Note 36 for details of related party transactions.

1 2 . INTANGIBLE ASSETS

(i) The details of intangible assets are as follows:

| | Goodwill | | Software | | License | | Other Intangible
assets | | Total | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Gross carrying amount: | | | | | | | | | | |
| Balance, December
31, 201 4 | 322 | | 4,771 | | 67 | | 572 | | 5,732 | |
| Additions | - | | 994 | | - | | 9 | | 1,003 | |
| Reclassifications/translations | - | | 21 | | - | | - | | 21 | |
| Balance, September 30,
2015 | 322 | | 5,786 | | 67 | | 581 | | 6,756 | |
| Accumulated
amortization and
impairment
losses : | | | | | | | | | | |
| Balance, December
31, 201 4 | (29 | ) | (2,862 | ) | (43 | ) | (335 | ) | (3,269 | ) |
| Amortization | - | | (617 | ) | (4 | ) | (19 | ) | (640 | ) |
| Reclas s ification/translation | - | | (15 | ) | - | | (4 | ) | (19 | ) |
| Balance, September 30 , 2015 | (29 | ) | (3,494 | ) | (47 | ) | (358 | ) | (3,928 | ) |
| Net Book Value | 293 | | 2,292 | | 20 | | 223 | | 2,828 | |

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

1 2 . INTANGIBLE ASSETS

(i) The details of intangible assets are as follows:

	Goodwill		Software		License	Other Intangible assets		Total
Gross carrying amount:
Balance, December 31, 201 3	270		3,432		67	401		4,170
Additions	-		1,340		0	107		1,447
Acquisition (Note 3)	54		-		-	78		132
Deductions	-		(0	)	-	(13	)	(13	)
Reclassifications/translations	(2	)	(1	)	-	(1	)	(4	)
Balance, December 31,
2014	322		4,771		67	572		5,732

	Goodwill		Software		License		Other intangible assets		Total
Accumulated amortization and impairment losses :
Balance, December 31, 201 3	(29	)	(2,278	)	(37	)	(318	)	(2,662	)
Amortization	-		(583	)	(6	)	(30	)	(619	)
Deductions	-		-		-		13		13
Reclassification/translation	-		(1	)	-		-		(1	)
Balance, December 31,
2014	(29	)	(2,862	)	(43	)	(335	)	(3,269	)
Net Book Value	293		1,909		24		237		2,463

(ii) Goodwill resulted from acquisition of CCA in 2014 (Note 3), sales-purchase transaction of Data Center Business between Sigma and BDM in 2012, and from the acquisitions of Ad Medika in 2010 and Sigma in 2008 .

(iii) The remaining amortization periods of software range from 0 to 17 years.

( i v) As of September 30, 2015 the cost of fully amortized intangible assets that are still used in operations amounted to Rp2,251 billion.

1 3 . TRADE PAYABLES

| | September 30 , 2015 | December
31, 2014 (Restated) |
| --- | --- | --- |
| Related parties | | |
| Purchase of equipment, materials and services | 916 | 723 |
| Payables to other telecommunications providers | 279 | 174 |
| Sub-total | 1,195 | 897 |
| Third parties | | |
| Purchase of equipment, materials and services | 8,453 | 9,471 |
| Radio frequency usage charges, concession fees and
Universal Service Obligation charges | 1,468 | 1,160 |
| Payables to other telecommunications providers | 727 | 834 |
| Sub-total | 10,648 | 11,465 |
| Total | 11,843 | 12,362 |

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

1 3 . TRADE PAYABLES (continued)

	September 30 , 2015	December 31, 2014 (Restated)
Rupiah	9,263	9,479
U.S. dollar	2,511	2,837
Others	69	46
Total	11,843	12,362

Refer to Note 3 6 for details of related party transactions.

1 4 . ACCRUED EXPENSES

	September 30 , 2015	December 31, 2014
Operations, maintenance and
telecommunications services	5,081	2,640
Salaries and benefits	1,275	1,091
General, administrative and
marketing expenses	1,524	1,291
Interest and bank charges	248	189
Total	8,128	5,211

Refer to Note 3 6 for details of related party transactions.

1 5 . UNEARNED INCOME

	September 30 , 2015	December 31, 2014
Prepaid pulse reload vouchers	2,928	3,588
Other telecommunications services	165	78
Others	396	297
Total	3,485	3,963

1 6 . SHORT-TERM BANK LOANS

		September 30 , 2015		December 31, 201 4
		Outstanding		Outstanding
Lenders	Currency	Original currency (in millions)	Rupiah equivalent	Original currency (in millions)	Rupiah equivalent
Citibank N.A	US$	-	-	100	1,244
Bank CIMB Niaga	Rp	-	174	-	234
SCB	Rp	-	91	-	-
UOB	Rp	-	65	-	200
Others	Rp	-	97	-	132
Total			427		1,810

Refer to Note 3 6 for details of related party transactions.

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

1 6 . SHORT-TERM BANK LOANS (continued)

Other significant information relating to short-term bank loans as at September 30, 2015 is as follows:

| | Borrower | Currency | Total facility (in billions) | Maturity date | Interest payment
period | Interest rate per
annum | Security |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Bank CIMB Niaga | | | | | | | |
| April 25, 2005 a | Balebat | Rp | 12 | October 18, 201 5 | Monthly | 13.00 % | Property and equipment (Note 1 0 ), Inventories (Note 7) and trade
receivables (Note 6) |
| April 29, 2008 a | Balebat | Rp | 10 | October 18 , 201 5 | Monthly | 13.00 % | Property and equipment (Note 1 0 ), Inventories (Note 7) and trade
receivables (Note 6) |
| March 21, 2013 b | Infomedia | Rp | 38 | October 18, 2015 | Monthly | 12.00 % | Trade
receivables(Note 6) |
| March 25, 2013 b | Infomedia | Rp | 38 | October 18, 2015 | Monthly | 12.00 % | Trade
receivables(Note 6) |
| March 27, 2013 b | Infomedia | Rp | 24 | October 18, 2015 | Monthly | 12.00 % | Trade
receivables(Note 6) |
| April 28, 2013 c | GSD | Rp | 85 | November 11, 2015 | Monthly | 11.50 % | Property and
equipment (Note 1 0 ) |
| September
22, 201 4 | Balebat | Rp | 25 | October 31 , 201 5 | Monthly | 14.00 % | Property and
equipment (Note 1 0 ),
Inventories
(Note
7) and trade receivables
(Note 6) |
| September
22, 201 4 | Balebat | Rp | 5 | October 18 , 201 5 | Monthly | 13.00 % | Property and equipment (Note 1 0 ), Inventories (Note 7) and trade
receivables (Note 6) |
| October 29 , 201 4 | Infomedia Solusi
Humanika | Rp | 50 | October 29 , 201 5 | Monthly | 1 2 .00 % | Trade
receivables(Note 6) |
| SCB | | | | | | | |
| March 30, 201 5 | GSD | Rp | 100 | December 26, 201 5 | Quarterly | 10.50 % | None |
| UOB | | | | | | | |
| November 22, 2013 | Infomedia | Rp | 200 | November 22, 201 5 | Monthly | 12.00 % | Trade receivables (Note 6) |

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

a Based on the latest amendment on September 22, 2014

b Based on the latest amendment on October 16 , 2014

c Based on the latest amendment on November 11 , 2014

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

1 7 . CURRENT MATURITIES OF LONG-TERM LIABILITIES

a. Current maturities

| | Notes | September 30 , 2015 | December
31, 2014 |
| --- | --- | --- | --- |
| Bank loans | 2 0 | 3,686 | 4,052 |
| Obligations under
finance leases | 19 | 611 | 571 |
| Two-step loans | 10 | 232 | 207 |
| Bonds and notes | 18 | 53 | 1,069 |
| Total | | 4,582 | 5,899 |

Refer to Note 3 6 for details of related party transactions.

b. Long-term portion

Scheduled principal payments as of June 30 , 2015 are as follows:

	Notes	Total	Year — 201 6	2017	2018	2019	Thereafter
Bank loans	20	14,956	1,010	2,784	7,632	1,213	2,317
Bonds and notes	19	9,507	8	32	31	251	9,185
Obligations under finance
leases	10	4,083	162	647	644	600	2,030
Two-step loans	18	1,442	83	235	212	193	719
Total		29,988	1,263	3,698	8,519	2,257	14,251

1 8 . TWO-STEP LOANS

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

		September 30 , 2015
		Outstanding		Outstanding
Lenders	Currency	Original currency (in millions)	Rupiah
equivalent	Original currency (in millions)	Rupiah
equivalent
Overseas banks	Yen	7,295	889	7,679	796
	US$	26	386	31	381
	Rp	-	399	-	438
Total			1,674		1,615
Current
maturities (Note 1 7 a)			(232	)	(207	)
Long-term
portion (Note 1 7 b)			1,442		1,408

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

1 8 . TWO-STEP LOANS (continued)

| Lenders | Currency | Payment
schedule | Interest p ayment period | Interest rate per annum |
| --- | --- | --- | --- | --- |
| Overseas banks | US$ | Semi-annually | Semi-annually | 4.00% |
| | Rp | Semi-annually | Semi-annually | 8. 57 % |
| | Yen | Semi-annually | Semi-annually | 3.10% |

The loans were intended for the development of telecommunications infrastructure and supporting telecommunications equipment. The loans are due on various dates through 2024.

The Company had used all facilities under the two-step loans program since 2008.

Under the loan covenants, the Company is required to maintain financial ratios as follows:

a. Projected net revenue to projected debt service ratio should exceed 1.2:1 for the two-step loans originating from Asian Development Bank (“ADB”).

b. Internal financing (earnings before depreciation and finance costs) should exceed 20% compared to annual average capital expenditures for loans originating from the ADB.

As of September 30, 2015, the Company has complied with the above-mentioned ratios.

Refer to Note 3 6 for details of related party transactions.

19 . BONDS AND NOTES

		September 30, 2015
		Outstanding		Outstanding
Bonds and notes	Currency	Original currency (in millions)	Rupiah equivalent	Original currency (in millions)	Rupiah equivalent
Bonds
2010:
Series A	Rp	-	-	-	1,005
Series B	Rp	-	1,995	-	1,995
2015:
Series A	Rp	-	2,200	-	-
Series B	Rp	-	2,100	-	-
Series C	Rp	-	1,200	-	-
Series D	Rp	-	1,500	-	-
Medium Term Notes
(“MTN”)
GSD
Series A	Rp	-	220	-	220
Series B	Rp	-	120	-	-
Finnet	Rp	-	200	-	-
Promissory Notes
PT Huawei	US$	1	20	4	52
PT ZTE Indonesia (“ZTE”)	US$	1	20	3	36
Total			9,575		3,308
Unamortized debt issuance cost			(15	)	-
			9,560		3,308
Current maturities (Note
17a)			(53	)	(1,069	)
Long-term portion (Note 17b)			9,507		2,239

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

19 . BONDS AND NOTES (continued)

a. Bonds

(i) 2010

| Bonds | Principal | Issuer | Listed on | Issuance date | Maturity date | Interest payment
period | 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 of the Company’s assets, movable or non-movable, either existing or in the future (Note 10c.x). The underwriters of the bonds are PT Bahana Securities (“Bahana”), PT Danareksa Sekuritas and PT Mandiri Sekuritas and the trustee is PT CIMB Niaga Tbk.

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

The funds received from the public offering of bonds net of issuance costs, were used to finance capital expenditures 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 to optimize legacy and supporting facilities (fixed wireline and wireless).

As of September 30, 2015, the rating of the bonds issued by PT Pemeringkat Efek Indonesia (Pefindo) is idAAA (stable outlook).

Based on the 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 September 30, 2015, the Company has complied with the above mentioned ratios.

a. Bonds

(ii) 2015

Bonds	Principal	Issuer	Listed on	Issuance date	Maturity date	Payment period	Rate per annum
Series A	2,200	The Company	IDX	June 16 , 20 15	Ju ne 23 , 20 22	Quarterly	9. 93 %
Series B	2,100	The Company	IDX	June 16 , 20 15	Ju ne 23 , 20 25	Quarterly	10.25 %
Series C	1,200	The Company	IDX	June 16 , 20 15	Ju ne 23 , 20 30	Quarterly	10 .60%
Series D	1,500	The Company	IDX	June 16 , 20 15	Ju ne 23 , 20 45	Quarterly	11.00 %
Total	7,000

The bonds are secured by all of the Company’s assets, movable or non-movable, either existing or in the future.

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

19 . BONDS AND NOTES (continued)

a. Bonds (continued)

(i) 2015 (continued)

As of June 30 , 2015 , the rating of the bonds issued by PT Pemeringkat Efek Indonesia (Pefindo) is idAAA (stable outlook).

Based on the indenture trust s 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%.

The bonds are secured by all of the Company’s assets, movable or non-movable, either existing or in the future.

The underwriters of the bonds are PT Bahana Securities (“Bahana”), PT Danareksa Sekuritas and Mandiri Sekuritas and PT Trimegah Sekuritas, and the trustee is PT Bank Permata Tbk.

The Company received the proceeds from the issuance of bonds on June 23, 2015.

The funds received from the public offering of bonds net of issuance costs, were used to finance capital expenditures which consisted of wave broadband, backbone, metro network, regional metro junction, information technology application, support, and merger and acquisition .

Based on the 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 4:1.
Debt service coverage is 125%.

As of September 30, 2015, the Company has complied with the above mentioned ratios.

b. MTN

(i) GSD

Notes	Currency	Principal	Issuance date	Maturity date	Interest payment period	Interest rate per annum
GSD- Series
A	Rp	220	November 14, 2014	November 14, 2019	Semi-annually	11%
GSD- Series B	Rp	120	March 6, 2015	March 6, 2020	Semi-annually	11%

Based on Agreement of Issuance and Appointment of Monitoring and Insurance Agents of Medium Term Notes (MTN) PT Graha Sarana Duta year 2014 dated November 13, 2014 as covered by notarial deed No. 30 of Arry Supratno, S.H., GSD will issue MTN with the principle amount up to Rp500 billion in series.

PT Mandiri Sekuritas act as the Arranger, Bank Mandiri as the Monitoring and Insurance Agent, and KSEI as Custodian. The Funds obtained from MTN are used for investment projects.

Trade receivables, inventories, land and building related with investment development funded by MTN that has owned or will be owned by GSD, have been pledged as collateral for MTN (Notes 6, 7 and 10).

Under to the agreement, GSD is required to comply with all covenants or restrictions including maintaining financial ratios as follows :

Debt to equity ratio should not exceed 6 . 5:1
EBITDA to interest ratio should not be less than 1 . 2:1
Minimum current ratio is 120%
Maximum leverage ratio is 450%

As of September 30, 2015, GSD has complied with the above mentioned ratios .

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

19 . BONDS AND NOTES (continued)

b. MTN

(ii) Finnet

Notes	Currency	Principal	Issuance date	Maturity date	Interest payment period	Interest rate per annum
MTN I Finnet 2015	Rp	200	July 1, 2015	July 1, 2022	Quarterlyly	11%

Based on Agreement of Debt Acknowledgement of Medium Term Notes (MTN) I Finnet year 2015 dated June 30, 2015 as covered by notarial deed No. 47 of Utiek R. Abdurrachman,SH., MLI., MKn., Finnet will issue MTN through private placement with the principle amount up to Rp200 billion.

PT BNI Asset Management was acting as arranger on the MTN, PT Bank Mega Tbk was acting as trustee and PT Kustodian Sentra Efek Indonesia (KSEI) was acting as payment agent and collective custodian.

The funds obtained from MTN are used to Finnet’s working capital related to Modern Channel Project as Telkomsel’s billing payment aggregator.

The MTN received A (Ind) rating from PT Fitch Rating Indonesia. The MTN is not secured by any collateral nor guaranteed by any party.

Under to the agreement, Finnet is required to comply with all covenants or restrictions including maintaining financial ratios as follows :

Debt to equity ratio should not exceed 3.5:1
EBITDA to interest ratio should not be less than 2.5:1

As of September 30, 2015, Finnet has complied with the above mentioned ratios .

c . Promissory Notes

Supplier	Currency	Principal (in billions)	Issuance date	Payment schedule	Interest payment period	Interest rate per annum
PT Huawei	US$	0.3	June 19, 2009	Semi-annually	Semi-annually	6 month LIBOR+1,5%
		0.2	April 30, 2013	(November 25, 2015 - July 30, 2016)
ZTE	US$	0.1	August 20, 2009 a	Semi-annually (December 15, 2015 - February 4, 2017)	S emi-annually	6 month LIBOR+1.5%
		0. 6

a based on the latest amendment on August 15, 2011

Based on Agreement of Frame Supply and Deferred Payment Arrangement between the Company and ZTE and PT Huawei, the promissory notes issued by the Company to each of ZTE and PT Huawei are vendor financing facilities with no collateral covering 85% of Hand-over Report (“ Berita Acara Serah Terima ”) projects with ZTE and PT Huawei.

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

2 0 . BANK LOANS

| | | September
30, 2015 | | | | |
| --- | --- | --- | --- | --- | --- | --- |
| | | Outstanding | | Outstanding | | |
| Lenders | Currency | Original currency (in millions) | Rupiah equivalent | Original currency (in millions) | Rupiah equivalent | |
| BNI | Rp | - | 6,028 | - | 2,195 | |
| The Bank of
Tokyo-Mitsubishi-UFJ, Ltd. | Rp | - | 1,745 | - | 600 | |
| | US$ | 75 | 1,099 | - | - | |
| BRI | Rp | - | 2,521 | - | 3,398 | |
| | US$ | 0 | 3 | 1 | 6 | |
| Bank Mandiri | Rp | - | 2,375 | - | 1,750 | |
| Syndication of banks | Rp | - | 2,050 | - | 2,200 | |
| Bank ANZ
Indonesia | Rp | - | 90 | - | - | |
| | US$ | 75 | 1,099 | - | - | |
| Bank CIMB Niaga | Rp | - | 709 | - | 567 | |
| ABN Amro Bank N.V. Stockholm (“AAB
Stockholm”) and SCB | US$ | 26 | 382 | 38 | 478 | |
| Japan Bank for International Cooperation
(“JBIC”) | US$ | 22 | 322 | 34 | 424 | |
| Bank
Sumitomo Mitsui
Indonesia | Rp | - | 145 | - | - | |
| BCA | Rp | - | 131 | - | 373 | |
| Others | Rp | | 19 | - | 10 | |
| Total | | | 18,718 | | 12,001 | |
| Unamortized debt
issuance cost | | | (76 | ) | (71 | ) |
| | | | 18,642 | | 11,930 | |
| Current maturities
(Note 1 7 a) | | | (3,686 | ) | (4,052 | ) |
| Long-term portion (Note 17a ) | | | 14,956 | | 7,878 | |

Refer to Note 3 6 for details of related party transactions.

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

2 0 . BANK LOANS (continued)

Other significant information relating to bank loans as of September 30, 2015 is as follows:

| | Borrower | Currency | Total
facility (in
billions) | Current
period payment (in billions) | Payment
schedule | Interest
payment period | Interest
rate per annum | Security |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| BNI (continued) | | | | | | | | |
| January 10, 201 4 a | Sigma | Rp | 247 | - | Monthly (201 6 -20 22 ) | Monthly | 1 months JIBOR+ 3.35 % | Property and
equipment (Note 10) and trade receivables (Note 6 ) |
| J uly 21 , 201 4 a | Metra | Rp | 40 | 13.3 | Semi-annually (2013-2015 ) | Monthly | 10.00% | Property and
equipment (Note 10) and trade receivables (Note 6 ) |
| November 3, 2014 a,i | Telkom Infratel | Rp | 450 | 40.2 | Quarterly (2015-201 8 ) | Monthly | 1 month JIBOR+3.35% | Trade receivables
(Note 6) |
| March 13, 2015 a&j | The Company | Rp | 2,900 | - | Semi-annually (2016-2022) | Quarterly | 3 months JIBOR+2.5% | None |
| March 13, 2015 a&j | GSD | Rp | 100 | - | Semi-annually (2016-2022) | Quarterly | 3 months JIBOR+2.5% | None |
| April 8, 2015 a | Telkomsel | Rp | 1,000 | - | April 14, 2018 | Quarterly | 3 months JIBOR+1.95% | None |
| The
Bank of Tokyo – Mitsubishi UFJ, Ltd. | | | | | | | | |
| October
9, 2014 | Dayamitra | Rp | 600 | - | Quarterly (201 6 -201 9 ) | Quarterly | 3
months JIBOR+2.4% | Property
and equipmen t (Note 1 0 ) and trade receivables (Note 6) |
| March 13 , 201 5 a&j | Metra | Rp | 75 | - | Quarterly (201 6 -20 20 ) | Quarterly | 3
months JIBOR+2. 1 5% | None |
| March 13 , 201 5 a&j | Infomedia | Rp | 70 | - | Quarterly (201 6 -20 20 ) | Quarterly | 3
months JIBOR+2. 1 5% | None |
| April
8, 2015 a | Telkomsel | Rp | 1,000 | - | April
14, 2018 | Quarterly | 3
months JIBOR+ 1.95 % | None |
| April
8, 2015 a | Telkomsel | US$ | 0.075 | - | April
14, 2018 | Quarterly | 3
months JIBOR+ 1 . 20 % | None |
| BRI | | | | | | | | |
| October 13 , 201 0 a | The
Company | Rp | 3,000 | 500 | Semi-annually (201 3 -20 15 ) | Quarterly | 3
months JIBOR+ 1 . 2 5% | None |
| J uly 20 , 201 1 a | Dayamitra | Rp | 1,000 | 200 | Semi-annually (201 1 -201 7 ) | Quarterly | 3
months JIBOR+1.40% and 3
months JIBOR+3.50% | Property
and equipmen t (Note 1 0 ) |
| April 26 , 201 3 | GSD | Rp | 141 | 28.1 | Monthly (201 4 -201 8 ) | Monthly | 10.00% | Property
and equipmen t (Note 1 0 ) and lease
agreement |

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

2 0 . BANK LOANS (continued)

Other significant information relating to bank loans as of September 30, 2015 is as follows (continued):

| | Borrower | Currency | Total
facility (in
billions) | Current
period payment (in billions) | Payment
schedule | Interest
payment period | Interest
rate per annum | Security |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| BRI
(continued) | | | | | | | | |
| October
30 , 201 3 | G SD | Rp | 7 0 | 2.9 | Monthly (20 14 -20 21 ) | Monthly | 10.00% | Property
and equipment (Note
10) and trade receivables (Note 6) and lease agreement |
| October
30 , 201 3 | GSD | Rp | 34 | 2.7 | Monthly (20 14 -20 21 ) | Monthly | 10.00% | Property
and equipment (Note
10) and trade receivables (Note 6) and lease agreement |
| November
20, 2013 | The
Company | Rp | 1500 | 187.5 | Semi-annually
(2015-2018) | Quarterly | 3
months JIBOR+2.65% | None |
| October 1 , 2014 | Patrakom | Rp | 28 | 10.4 | Monthly (20 14 -20 16 ) | Monthly | 10.95% | Property
and equipmen t (Note 1 0 ) and trade receivables (Note 6) |
| October 1 , 2014 | Patrakom | US$ | 0.0007 | 0.0003 | Monthly (20 14 -20 15 ) | Monthly | 6.00 % | Property
and equipmen t (Note 1 0 ) and trade receivables (Note 6) |
| October 1 , 2014 | Patrakom | Rp | 93 | - | Monthly (20 14 -20 17 ) | Monthly | 10.95 % | Property
and equipmen t (Note 1 0 ) and trade receivables (Note 6) |
| Bank Mandiri | | | | | | | | |
| July
9, 2009 b and July 5, 2010 b | Telkomsel | Rp | 5,000 | 250 | Semi-annualy
(2009-2016) | Quarterly | 3
months JIBOR+1.00% | None |
| November
20, 2013 | The
Company | Rp | 1,500 | 187,5 | Semi-annualy
(2015-2018) | Quarterly | 3
months JIBOR+2.65% | None |
| August
11, 2014 | Graha
Yasa Selaras | Rp | 77 | - | Monthly (201 6 -20 21 ) | Monthly | 3
months JIBOR+3.25% | Property
and equipment (Note 10 ) |
| August
11, 2014 | Graha
Yasa Selaras | Rp | 77 | - | Monthly (201 6 -202 1 ) | Monthly | 3
months JIBOR+3.25% | Property
and equipment (Note 1 0 ) |
| April
8, 2015 | Telkomsel | Rp | 1,000 | - | April
14, 2018 | Quarterly | 3
months JIBOR+1.95% | None |
| Syndication of banks | | | | | | | | |
| Desember
19, 2012 (BNI, BRI and Bank Mandiri) a | Dayamitra | Rp | 2,500 | 150 | Semi-annualy
(2014-2020) | Quarterly | 3
months JIBOR+3.00% | Property
and equipment (Note 1 0 )
and trade
receivables (Note 6) |

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

2 0 . BANK LOANS (continued)

Other significant information relating to bank loans as of September 30 , 2015 is as follows (continued):

| | Borrower | Currency | Total facility (in billions) | Current period
payment (in billions) | Payment schedule | Interest payment
period | Interest rate per
annum | Security |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Bank ANZ
Indonesia | | | | | | | | |
| Marc
13, 2015 a&j | GSD | Rp | 90 | - | June 13,
2020 | Quarterly | 3 Months JIBOR+ 2 . 00% | None |
| April
8, 2015 a | Telkomsel | US$ | 0.075 | - | April 14,
2018 | Quarterly | 3 Months JIBOR+ 1 . 20 % | None |
| Bank CIMB
Niaga | | | | | | | | |
| March
21, 2007 e | GSD | Rp | 2 1 | 3.5 | Quarterly (20 07 -2015) | Monthly | 9 . 75 % | Property and
equipment (Note 10) |
| May
24, 2010 f,h | Balebat | Rp | 2 | 0.3 | Monthly (201 0 -201 5 ) | Monthly | 13.00% | Property and
equipment (Note 10), Inventories (Note
7), and trade receivables (Note 6) |
| March
31, 2011 | GSD | Rp | 24 | 2.1 | Monthly
(2011-2020) | Monthly | 9.75% | Property and
equipment (Note 10) and lease agreement |
| March
31, 2011 | GSD | Rp | 13 | 1 . 3 | Monthly
(2011-2019) | Monthly | 9.75% | Property and
equipment (Note 10) and lease agreement |
| March
31, 2011 | GSD | Rp | 12 | 1.4 | Monthly
(2011-2016) | Monthly | 9.75% | Property and
equipment (Note 10) and lease agreement |
| September
9, 2011 | GSD | Rp | 41 | 2.9 | Monthly
(2011-2021) | Monthly | 9.75% | Property and
equipment (Note 10) and lease agreement |
| September
9, 2011 | GSD | Rp | 11 | 0 .8 | Monthly
(2011-2015) | Monthly | 9.75% | Property and
equipment (Note 10) and lease agreement |
| August
2, 2012 f,h | Balebat | Rp | 4 | 1 | Monthly
(2012-2015) | Monthly | 13.00% | Property and equipment
(Note 10), Inventories (Note
7), and trade receivables (Note 6) |
| September
20, 2012 a | TLT | Rp | 1,150 | - | Monthly (20 15 -20 30 ) | Monthly | 3 months JIBOR+ 3 . 45 % | Property and
equipment (Note 10) |

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

2 0 . BANK LOANS (continued)

Other significant information relating to bank loans as of September 30 , 2015 is as follows (continued):

| | Borrower | Currency | Total facility (in billions) | Current period
payment (in billions) | Payment schedule | Interest payment
period | Interest rate per
annum | Security |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Bank CIMB Niaga
(continued) | | | | | | | | |
| September
20, 2012 a | TLT | Rp | 118 | - | Monthly
(2015-2030) | Monthly | 9 . 00% | Property and
equipment (Note 10 ) |
| October
10, 2012 f,h | Balebat | Rp | 1 | 0.3 | Monthly
(2012-2015) | Monthly | 13.00 % | Property and
equipment (Note 10), Inventories (Note
7), and trade receivables (Note 6) |
| August
26, 2013 f,h | Balebat | Rp | 3.5 | 0.5 | Monthly
(2013-2018) | Monthly | 13.00 % | Property and
equipment (Note 10), Inventories (Note
7), and trade receivables (Note 6) |
| AAB
Stockholm and SCB | | | | | | | | |
| December
30, 2009 b&c | Telkomsel | US$ | 0.3 | 0.01 | Semi-annually (201 1 -201 6 ) | Semi-an n ually | 6 months
LIBOR+0.82 % | None |
| JIBC | | | | | | | | |
| March
26, 2010 a&d | The Company | US$ | 0.06 | 0.006 | Semi-annually (201 0 -201 5 ) | Semi-an n ually | 4.56% | None |
| March
28, 2013 a&g | The Company | US$ | 0.03 | 0.006 | Semi-annually (201 4 -201 9 ) | Semi-an n ually | 2.18% and 6
months LIBOR+1.20% | None |
| Bank
Sumitomo Mitsui Indonesia | | | | | | | | |
| March
13, 2015 a&j | Metra | Rp | 75 | - | Quarterly
(2016-2020) | Quarterly | 3 months
JIBOR+2.15% | None |
| March
13, 2015 a&j | Infomedia | Rp | 70 | - | Quarterly
(2016-2020) | Quarterly | 3 months
JIBOR+2.15% | None |
| BCA | | | | | | | | |
| July
9, 2009 b and July 5, 2010 b | Telkomsel | Rp | 4,000 | 222.2 | Semi-annually (20 09 -201 6 ) | Quarterly | 3 months
JIBOR+1.00% | None |
| December
16, 2010 a | TII | Rp | 200 | 20 | Semi-annually (20 11 -201 5 ) | Quarterly | 3 months
JIBOR+1.25% | None |

T he credit facilities obtained by the Group are used for working capital purposes.

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

20. BANK LOANS (continued)

a As stated in the agreements, the Group is required to comply with all covenants or restrictions such as dividend distribution, obtaining new loans, including maintaining financial ratios. As of September 30, 2015 , the Group has complied with all covenants as restrictions.

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 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 September 30, 2015 , Telkomsel has complied with the above covenants.

c Pursuant to the agreements with PT Ericsson Indonesia (“Ericsson Indonesia”) and Ericsson AB (Note 41a.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 (as “the original lender” , “the arranger”, “the facility agent” and “the EKN agent”), and 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, 2 , and 3 expired in July 2010, March 2011 and November 2011, respectively. In October 2011, EKN agreed to reduce the premium on the unused facility by US$3 million through a cash refund.

d 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, respectively.

e Based on the latest amendment on March 31, 2011

f Based on the latest amendment on September 22, 2014

g In connection with the agreement with NEC Corporation Consortium and TE SubCom, the Company entered into a loan agreement with JBIC, for the procurement of goods and services from NEC Corporation Consortium and TE SubCom for the Southeast Asia Japan Cable System project. The facilities consist of facility A and facility B amounting to US$18.8 million and US$12.5 million, respectively

h MD Media’s subsidiary

i Based on the latest amendment on July 13 , 201 5

j O n March 13 , 201 5, Company, GSD Metra and Infomedia signed several credit facilities agreements with PT Bank Sumitomo Mitsui Indonesia, The Bank of Tokyo – Mitsubishi UFJ, Ltd., PT Bank ANZ Indonesia and a syndication of banks (BCA and BNI) amounting to Rp750 billion, Rp750 billion Rp500 billion and Rp3.000 billion, respectively.

2 1 . NON-CONTROLLING INTERESTS

	September 30, 2015	December 31, 2014
Non-controlling interests in net
assets of subsidiaries:
Telkomsel	16,026	18,06 7
GSD	149	125
Metra	65	89
TII	54	42
Total	16,294	18,323

	September 30, 2015		September 30, 2014
Non-controlling interests in total profit or loss and other comprehensive income of subsidiaries:
Telkomsel	5,768		4,821
GSD	15		(5	)
TII	13		-
Metra	(4	)	17
Total	5,792		4,833

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

2 1 . NON-CONTROLLING INTERESTS

Material partly-owned subsidiary

As of September 30 , 201 5 and December 31, 2014, the non-controlling interest holds 35% ownership interest in Telkomsel (Note 1d) which is considered material to the Company.

The summarized financial information of Telkomsel is provided below. This information is based on amounts before inter- group eliminations.

Summarized statements of financial position

| Current
assets | September
30, 2015 — 24,287 | | December
31, 2014 — 19,767 | |
| --- | --- | --- | --- | --- |
| Non-current
assets | 58,568 | | 58,887 | |
| Current
liabilities | (31,739 | ) | (18,573 | ) |
| Non-current
liabilities | (5,324 | ) | (8,457 | ) |
| Total
equity | 45,792 | | 51,624 | |
| Attributable
to: | | | | |
| Equity holders of parent company | 29,766 | | 33,557 | |
| Non-controlling interest | 16,026 | | 18,067 | |

Summarized statement s of profit or loss and other comprehensive income

Revenue s	September 30, 2015 — 55,625		September 30, 2014 — 48,407
Operating expenses	(33,679	)	(30,138	)
Other income	(17	)	26
Profit before tax	21,929		18,295
Income tax expense - net	(5,447	)	(4,519	)
Profit for the year from continuing
operations	16,482		13,776
Other comprehensive income - net	-		-
Net comprehensive income	16,482		13,776
Attributable to non-controlling interest	5,768		4,821
Dividend paid to non-controlling interest	6,112		5,464

Summarized statements of cash flows

Operating activities	September 30, 2015 — 28,095		September 30 , 2014, — 23,442
Investing activities	(9,643	)	(4,208	)
Financing activities	(14,279	)	(14,366	)
Net increase in
cash and cash equivalents	(4,173	)	4,868

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

2 2 . CAPITAL STOCK

Description	September 30, 2015 — Number of shares	Percentage of ownership	Total paid-up capital
Series A Dwiwarna share
Government	1	0	0
Series B shares
Government	51,602,353,559	52.56	2,580
The Bank
of New York Mellon Corporation*	9,057,829,980	9.23	453
Directors
(Note 1b):
Alex
J Sinaga	540	0	0
Indra
Utoyo	27,540	0	0
Honesti
Basyir	540	0	0
Dian
Rachmawan	60,540	0	0
Public
(individually less than 5%)	37,515,580,900	38.21	1,876
Total	98,175,853,600	100.00	4,909
Treasury
stock (Note 2 4 )	2,624,142,800	-	131
Total	100,799,996,400	100 .00	5,040

Description	December 31, 2014 — Number of shares	Percentage of ownership	Total paid-up capital
Series A Dwiwarna share
Government	1	0	0
Series B shares
Government	51,602,353,559	52.56	2,580
The Bank
of New York Mellon Corporation*	9,472,920,180	9.65	474
Directors
(Note 1b):
Indra
Utoyo	27,540	0	0
Honesti
Basyir	540	0	0
Dian
Rachmawan	60,540	0	0
Public
(individually less than 5%)	37,100,491,240	37.79	1,855
Total	98,175,853,600	100.00	4,909
Treasury
stock (Note 2 4 )	2,624,142,800	-	131
Total	100,799,996,400	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 issued only 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 from the Boards of Commissioners and Directors, issuance of new shares, and amendments of the Company’s Articles of Association.

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

2 3 . ADDITIONAL PAID-IN CAPITAL

| Proceeds
from sale of 933,333,000 shares in excess of par value through IPO in 1995 | September 30, 2015 — 1,446 | | December 31, 2014 — 1,446 | |
| --- | --- | --- | --- | --- |
| Excess of
value over cost of selling 21 5 , 000 , 00 0 shares under the treasury stock
plan phase I I (Note 2 4 ) | 576 | | 576 | |
| Excess of
value over cost of selling 211,290,500 shares under the treasury stock plan
phase I (Note 2 4 ) | 544 | | 544 | |
| Difference
in value arising from restructuring transactions and other transactions
between entities under common control (Note 2d) | 478 | | 478 | |
| Excess of
value over cost of treasury stock transferred to employee stock ownership
program (Note 2 4 ) | 228 | | 228 | |
| Capitalization
into 746,666,640 Series B shares in 1999 | (373 | ) | (373 | ) |
| Net | 2,899 | | 2, 899 | |

Difference in value arising from restructuring transactions and other transactions of entities under common control amounting Rp478 billion arose from the early termination of the Company’s exclusive rights to provide local and inter-local fixed line telecommunication services, for which the Company is required by the Government to use the funds received from this compensation for the development of telecommunication infrastructure. As of September 30 , 2015 and December 31, 2014 , the accumulated development of the related infrastructure amounted to Rp537 billion, respectively.

2 4 . TREASURY STOCK

Phase	Basis	Period	Maximum Purchase — Number of Shares	Amount
I	EGM	December 21, 2005 - June 20, 2007	1,007,999,964	Rp5,250
II	AGM	June 29, 2007 - December, 28, 2008	215,000,000	Rp2,000
III	AGM	June 20, 2008 - December 20, 2009	339,443,313	Rp3,000
-	BAPEPAM - LK	October 13, 2008 - January 12, 2009	4,031,999,856	Rp3,000
IV	AGM	May 19, 2011 – November 20, 2012	645,161,290	Rp5,000

Movements in treasury stock as a result of the repurchase of shares are as follows:

| | September 30 , 2015 — Number of
share s | % | Rp | December
31, 201 4 — Number of
shares | | % | | Rp | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Beginning balance | 2,624,142,800 | 2.60 | 3,836 | 3,699,142,800 | | 3.67 | | 5,805 | |
| Proceed s from sale of treasury stock | - | - | - | (1,075,000,000 | ) | (1.07 | ) | (1,969 | ) |
| Ending balance | 2,624,142,800 | 2.60 | 3,836 | 2,624,142,800 | | 2.60 | | 3,836 | |

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

2 4 . TREASURY STOCK (continued)

Pursuant to the AGM of Stockholders of the Company held on June 11, 2010, the stockholders approved the change in the Company’s plan for treasury stock phase I, II, and III to become (i) for reissuance inside or outside stock exchange, (ii) for retirement of the stock by deducting from equity, (iii) for equity stock conversion and (iv) for funding purposes.

Pursuant to the AGM of Stockholders of the Company held on May 19, 2011, the s tockholders approved to execute the repurchase plan for treasury stock p hase IV.

In 2012, the Company bought back 237,270,500 shares (equal to 1,186,352,500 shares after stock split) from the public ( part of stock repurchase program p hase IV) for Rp 1,744 billion.

In the AGM on April 19, 2013, the Company's stockholders approved the change to the plan for the treasury stock phase III, which was decided to be used for the implementation of the Employee Stock Ownership Program (“ESOP”) for the year 2013.

On July 30, 2013, the Company resold 211,290,500 shares (equal to 1,056,452,500 shares after stock split) of treasury stock phase I with fair value amounting to Rp2 ,368 billion (net of related costs to sell the shares) . The excess amounting to Rp544 billion in value of the treasury shares sold over their acquisition cost was recorded as additional paid-in capital (Note 2 3 ).

On June 13 , 2014 , the Company resold 215,000,000 shares (equal to 1,075,000,000 shares after stock split) of treasury stock phase II with fair value amounting to Rp 2,541 billion (net of related cost to sell the shares). The excess amounting to Rp 576 billion in value of the treasury stock sold over their acquisition cost was recorded as additional paid-in capital (Note 2 3 ).

2 5 . REVENUES

	201 5	201 4
Telephone revenues
Cellular
Usage charges	26,367	24,073
Features	761	561
Monthly subscription charges	324	439
	27,452	25,073
Fixed lines
Usage charges	3,466	4,221
Monthly subscription charges	2,171	2,072
Call center	813	473
Others	72	76
	6,522	6,842
Total t elephone r evenues	33,974	31,915
Interconnection r evenues
Domestic interconnection	1,990	2,192
International interconnection	1,403	1,340
Total i nterconnection r evenues	3,393	3,532

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

2 5 . REVENUES (continued)

	201 5	201 4
Data, i nternet, and i nformation t echnology s ervice r evenues
Internet, data communication and information technology
services	23,369	17,308
Short
Messaging Services (“SMS”)	11,154	10,319
E-business	86	105
Voice
over Internet Protocol (“VoIP”)	19	19
Total d ata, i nternet, and i nformation t echnology s ervice r evenues	34,628	27,751
Network r evenues
Leased
lines	429	491
Satellite
transponder lease	423	348
Total n etwork r evenues	852	839
Other t elecommunications s ervice r evenues
Customer
Premise Equipment (“CPE”) and terminal	1.180	252
Leases	604	609
Pay
TV	227	69
E-health revenue	143	120
Directory
assistance	104	196
USO Compensation	20	139
Others	594	419
Total o ther t elecommunications s ervice r evenues	2,872	1,804
Total revenues	75,719	65,841

The details of net revenues received by t he Group from agency relationships for the nine months period ended September 30, 2015 and 2014 are as follow s :

Gross revenues	201 5 — 23,886		201 4 — 17,601
Compensation to value added service
providers	(517	)	(293	)
Net revenues	23,369		1 7 , 308

Refer to Note 3 6 for details of related party transactions.

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

2 6 . PERSONNEL EXPENSES

The breakdown of personnel expenses is as follows:

	201 5	201 4
Salaries and related
benefits	2,952	2,739
Vacation pay,
incentives and other benefits	3,257	2,554
Employees’ income tax	1,277	1,050
Early
retirement program	699	-
Net periodic pension
costs (Note 3 3 )	406	416
Net periodic
post-retirement health care benefit costs (Note 3 5 )	183	224
Housing	161	167
Insurance	103	76
LSA
expenses (Note 34)	67	47
Other
employee benefit (Note 33)	38	24
Other
post-retirement benefit costs (Note 33)	35	36
Others	29	65
Total	9,207	7,398

Refer to Note 3 6 for details of related party transactions.

27. OPERATIONS, MAINTENANCE AND TELECOMMUNICATION SERVICE EXPENSES

The breakdown of operations, maintanance and telecommunication service expeses is as follows:

	201 5	201 4
Operations and
maintenance	12,247	9,765
Radio frequency usage
charges (Notes 39 c.i and 39 c.ii)	2,640	2,392
Concession fees and
Universal Service Obligation charges	1,584	1,375
Cost of phone, set
top box, SIM and RUIM cards	1,450	459
Leased lines and CPE	978	539
Electricity, gas and
water	728	827
Cost of IT services	711	279
Vehicles rental and
supporting facilities	504	438
Insurance	234	249
Management
project	126	123
Others (each below Rp75 billion)	93	318
Total	21,295	1 6 , 764

Refer to Note 3 6 for details of related party transactions.

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

2 8 . GENERAL AND ADMINISTRATIVE EXPENSES

The breakdown of general and administrative expeses is as follows:

	201 5	201 4
Provision for impairment of
receivables (Note
6d)	948	375
General expenses	814	608
Collection expenses	321	78
Training, education and recruitment	288	374
Travelling	239	254
Professional fees	237	220
Meeting	111	126
Others (each below Rp75 billion)	315	355
Total	3,273	2,390

Refer to Note 3 6 for details of related party transactions.

29. INTERCONNECTION EXPENSES

The breakdown of interconnection expeses is as follows:

	201 5	201 4
Domestic interconnection and access	1,814	2,796
International interconnection	886	884
Total	2,700	3,680

Refer to Note 3 6 for details of related party transactions.

3 0 . TAXATION

a. Claims for tax refund

| | September 30 , 2015 | | December
31, 2014 | |
| --- | --- | --- | --- | --- |
| The Company | | | | |
| Value
added tax (“VAT”) | 298 | | 298 | |
| Corporate
income tax | 424 | | 60 | |
| Subsidiaries | | | | |
| Corporate
income tax | 193 | | 363 | |
| Value
tax added (“VAT”) | 3 | | 305 | |
| Income
tax | | | | |
| Article 23 - Withholding tax on service delivery | - | | 10 | |
| Total claims for tax
refund | 918 | | 1,036 | |
| Short-term portion | (66 | ) | (291 | ) |
| Long-term portion | 852 | | 745 | |

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

3 0 . TAXATION (continued)

b. Prepaid taxes

| | September 30 , 2015 | December
31, 2014 |
| --- | --- | --- |
| Subsidiaries | | |
| Corporate
income tax | 72 | 28 |
| VAT | 1,367 | 835 |
| Income
tax | | |
| Article
22 - Withholding tax on goods delivery and imports | 2 | - |
| Article
23 - Withholding tax on service delivery | 72 | 27 |
| | 1,513 | 890 |

c. Taxes payable

	September 30, 2015	December 31, 2014
The Company
Income taxes
Article 4 (2) - Final tax	15	27
Article 21 - Individual income tax	46	25
Article 22 - Withholding tax on
goods delivery and imports	1	2
Article 23 - Withholding tax on
service delivery	20	10
Article 25 - Installment of corporate
income tax	-	61
Article 26 - Withholding tax on
non-resident income	2	2
VAT
VAT	124	197
VAT – Tax collector	178	257
	386	581
Subsidiaries
Income taxes
Article 4 (2) - Final tax	48	81
Article 21 - Individual income tax	103	97
Article 22 - Withholding tax on
goods delivery and imports	2	-
Article 23 - Withholding tax on
service delivery	93	72
Article 25 - Installment of
corporate income tax	567	483
Article 26 - Withholding tax on
non-resident income	176	28
Article 29 - Corporate income tax	1,279	957
VAT	548	77
	2,816	1,795
	3,202	2,376

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

3 0 . TAXATION (continued)

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

| | September
30, 201 5 | | September
30, 201 4 (Restated) | |
| --- | --- | --- | --- | --- |
| Current | | | | |
| The
Company | 128 | | 708 | |
| Subsidiaries | 6,029 | | 4,797 | |
| | 6,157 | | 5,505 | |
| Deferred | | | | |
| The
Company | (6 | ) | (25 | ) |
| Subsidiaries | (168 | ) | (49 | ) |
| | (174 | ) | (74 | ) |
| | 5,983 | | 5,431 | |

The reconciliation between the income tax expense calculated by applying the applicable tax rate of 20% to the profit before income tax less income subject to final tax, and the net income tax expense as shown in the consolidated Statement of profit or loss and other comprehensive income is as follows:

| Profit before income
tax | September
30, 201 5 — 23,320 | | September
30, 201 4 (Restated) — 21,532 | |
| --- | --- | --- | --- | --- |
| Less income subject
to final tax | (1,433 | ) | (1,246 | ) |
| | 21,887 | | 20,286 | |
| Tax calculated at the Company’s applicable statutory tax
rate of 20% | 4,377 | | 4,057 | |
| Difference in
applicable statutory tax rate for subsidiaries | 1,122 | | 951 | |
| Non-deductible
expenses | 235 | | 345 | |
| Final income tax
expenses | 134 | | 72 | |
| Others | 115 | | 6 | |
| Net income tax
expense | 5,983 | | 5,431 | |

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

3 0 . TAXATION (continued)

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

The reconciliation between the profit before income tax and the estimated taxable income of the Company for the year ended September 30, 2015 and 2014 is as follows:

Profit before income tax	September 30, 201 5 — 23,320		September 30, 201 4 (Restated) — 21,532
Add back consolidation eliminations	11,462		9,487
Consolidated profit before income tax and eliminations	34,782		31,019
Less: profit before income tax of
the subsidiaries	(22,813	)	(18,823	)
Profit before income tax attributable to the Company	11,969		12,196
Less : income subject to final tax	(531	)	(507	)
	11,438		11,689
Temporary differences:
Finance lease	252		(8	)
Net periodic pension and other post-retirement benefits
costs	116		220
Provision for impairment of assets	-		190
Provision for impairment an d	(211	)	(183	)
Depreciation and gain on sale of property and equipment trade
receiveables written off	(209	)	270
Deferred installation fee	(25	)	-
Provision for personnel expenses	(5	)	(350	)
Other provisions	(107	)	2
Net temporary differences	(189	)	141
Permanent differences:
Net periodic post-retirement health care benefit costs	183		223
Employee benefits	149		161
Donations	116		167
Equity in net income of associates and subsidiaries	(11,482	)	(9,496	)
Others	108		297
Net permanent differences	(10,926	)	( 8,648	)
Taxable income of the Company	323		3,182
Current corporate income tax expense	64		636
Final income tax expense	64		72
Total current income tax expense of the Company	128		708
Current income tax expense of the subsidiaries	6,029		4,797
Total current income tax expense	6,157		5,505

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

3 0 . TAXATION (continued)

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

Tax Law No. 36/2008 which is futher regulated in Government Regulation No. 77/2013 stipulates a reduction of 5% from the top rate applicable to qualifying listed companies, for those whose stocks are traded in the IDX which meet the prescribed criteria that the public owns 40% or more of the total fully paid and traded shares, and such shares are owned by at least 300 parties, with each party owning less than 5% of the total paid-up shares. These requirements must be met by a company for a period of 183 days in one tax year. The Company has met all of the required criteria; therefore, for the purpose of calculating income tax expense and liabilities for the financial reporting periods ended September 30 , 2015 and 2014 , the Company has reduced the applicable tax rate by 5% .

The Company applied the tax rate of 20% for the nine months period ended September 30, 2015 and 2014. The subsidiaries applied a tax rate of 25% for the nine months period ended September 30 , 2015 and 2014.

e. Tax assessment

(i) The Company

In November 2013, the C ompany received Tax Underpayment Assesment L etters ( “ SKPKBs ” ) No. 00056/207/07/093/13 to No.00065/207/07/093/13 dated November 15, 2013, for the underpayment of VAT for the period Januar y - September and November 2007 amounting to Rp142 billion . On January 20, 2014, the Company filed its objection to the Tax Authorities. The Company has received the rejection of its objection through The Directorate General of Taxation (“DGT”) decision letter No. 2498 to 2504 and 2541 to 2543/WPJ.19/2014 dated December 16 and 18, 2014, respectively. The Company accepted the assessment on the underpayment of VAT amounting to Rp22 billion (including penalty of Rp10 billion). The accepted portion was charged to the 2014 consolidated s tatement of profit or loss and other comprehensive income . The Company has filed an appeal against the refusal of objections VAT Interconnection No. Tel. 59 / KU000 / COP-10000000/2015 to No. Tel. 59 / KU000 / COP-10000000/2015 dated March 12, 2015.

In November 2014, the Company received SKPKBs as the result of tax audit for fiscal year 2011 from the Tax Authorities . Based on the letters , the Company received VATUnderpayment assesment for the tax period January until December 2011 amount ing to Rp182.5 billion (including penalty Rp60 billion) and corporate i ncome tax underpayment assesment amount ing to Rp2.8 billion (including penalty of Rp929 million). The Company has paid the underpayment. The accepted portion on the underpayment VAT. amounting to Rp4.7 billion (including penalty of Rp2 billion) was charged to the 2014 consolidated s tatement of profit or loss and other comprehensive income and the portion of VAT Interconnection amount ing to Rp178 billion (including penalty of Rp58 billion) recognized as tax refund underpayment. The Company filed an objection VAT interconnection transactions in 2011 on January 7, 2015 No. Tel. 03 / KU000 / COP-10000000/2015 to No. Tel. 14 / KU000 / COP-10000000/2015 to the Tax Authority.

(ii) Telkomsel

On April 21, 2010, the Tax Authorities filed a judicial review request to the Indonesian Supreme Court (“SC”) for the Tax Court’s acceptance of Telkomsel’s request to cancel the Tax Collection Letter (STP) for the underpayment of December 2008 Income Tax Article 25 amounting to Rp429 billion (including a penalty of Rp8 billion). In May 2010, Telkomsel fi led a contra-appeal to the SC. As of the date of approval and authorization for issuance of these consolidated financial statements, the judicial review is still in process

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

3 0 . TAXATION (continued)

e. Tax assessment (continued)

(ii) Telkomsel

On August 10, 2010, the Tax Authorities filed a judicial review request to the SC for the Tax Court’s acceptance of Telkomsel’s appeal on 2004 and 2005 assesment for VAT totaling Rp215 billion. In September 2010, Telkomsel filed a contra-appeal to the SC. Based on its verdict which was received in June 2014, the SC decided to reject the request from the Tax Authorities. The SC verdict is legally binding in favour of Telkomsel.

In May and June 2012, Telkomsel received the refund of penalty of 2010 Income Tax Article 25 underpayment amounting to Rp15.7 billion based on the Tax Court’s verdict. On July 17, 2012, the Tax Authorities filed a judicial review request to the SC on the Tax Court’s verdict. On September 14, 2012, Telkomsel filed a contra-appeal to the SC. As of the date of approval and authorization for issuance of these consolidated financial statements, the judicial review is still in process.

On March 12, 2012, Telkomsel received assessment letters as a result of a tax audit for the fiscal year 2010 by the Tax Authorities. Based on the letters, Telkomsel overpaid corporate income tax and underpaid VAT amounting to Rp597.4 billion and Rp302.7 billion (including penalty of Rp73.3 billion), respectively. Telkomsel accepted the assessment on the overpayment of corporate income tax and Rp12.1 billion of the underpayment of the VAT (including penalty of Rp6.3 billion). The accepted portion was charged to the 2012 consolidated Statement of profit or loss and other comprehensive income. On April 5, 2012, Telkomsel received a refund for the overpayment of corporate income tax for fiscal year 2010 amounting to Rp294.7 billion, net of underpayment of VAT. On May 24, 2012, Telkomsel filed an objection to the Tax Authorities for the underpayment of VAT of Rp290.6 billion (including penalty of Rp67 billion) and recorded it as a claim for tax refund. On May 1, 2013, the Tax Authorities rejected Telkomsel’s objection. Subsequently, on July 29, 2013, Telkomsel filed an appeal to the Tax Court. On March 16, 2015, the Tax court received the appeal of 2010 VAT totaling Rp290.6 billion. On May 13, 2015, Telkomsel received VAT refunds Rp290.7 billion (net of Tax Collection Letter Rp3,837 million). In May 2015, Telkomsel requested to cancel the Tax Collection Letter to the Tax Authority. As of the date of approval and authorization for issuance of these consolidated financial statement, the appeal is still in progress, and those amount recorded as a part of tax refund.

In December 2013, the Tax Court accepted Telkomsel’s appeal on 2006 VAT and withholding taxes totaling Rp116 billion. In February 2014, Telkomsel received the refund.

On January 22, 2014, Telkomsel received a formal verdict from the Tax Court concerning the former’s claim for tax refund for import duties. Based on its verdict, Tax Court accepted the portion of Telkomsel’s claim. In February 2014 , Telkomsel submitted a request to refund the accepted portion of the claim amounting to Rp8.5 billion. On September 30, 2014, Telkomsel received a partial refund of the claim for import duties amounting to Rp587 million (including penalty Rp579 million). Subsequently, on October 2, 2014, Telkomsel received a refund for VAT and income tax article 22 amounting to Rp7.92 billion .

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

3 0 . TAXATION (continued)

e. Tax assessment (continued)

(ii) Telkomsel

On November 7, 2014, Telkomsel received assessment letters as a result of a tax audit for the fiscal year 2011 by the Tax Authorities. Based on the letters, Telkomsel underpaid the corporate income tax, value added tax and withholding tax amounting to Rp257.8 billion, Rp2.9 billion and Rp2.2 billion (including penalty of Rp85.3 billion), respectively. Telkomsel accepted the assessment of Rp7.8 billion of the underpayment of corporate income tax, Rp1 billion of the underpayment of the value added tax and Rp2.2 billion of the underpayment of the withholding tax (including penalty of Rp3.5 billion). The accepted portion was charged to the 2014 statement of profit and loss and other comprehensive income. In December 2014, Telkomsel paid the underpayments. In December 2014 and February 2015, Telkomsel filed an objection to the Tax Authorities for the underpayment of corporate income tax of Rp250 billion (including penalty of Rp81.1 billion) and value added tax of Rp1.9 billion (including penalty of Rp670 million), respectively. The underpayments were recorded as part of a claim for tax refund. As of the date of approval and authorization for issuance of these financial statements, the objection on the corporate income tax assessment is still in process.

On July 3, 2015, in response to Telkomsel’s letter for claiming interest income related to VAT and Withholding Tax for fiscal year 2006, Tax Authorities informed that Telkomsel's claim will not be proceeded since the Tax Authorities filed a judicial review to supreme court. As of the date of the report, Telkomsel has not received a formal letter from Tax Court for the judicial review.

In August 2015, Telkomsel received the letter from the Tax Authorities which notified that the Tax Authorities has confirmed that tower should be classified as building and depreciated for 20 years. This letter is based on specific tax ruling on fiscal depreciation of tower issued in July 2015. Subsequently, part of claim for tax refund has been reclassified for principal portion to deferred tax liabilities and penalty charged to profit and loss amounting to Rp125 billion and Rp60 billion, respectively.

In accordance with tax regulation, in September 2015 Telkomsel revised the fiscal depreciation calculation of tower and filed the revised Corporate Income Tax Return for fiscal year 2012, 2013, and 2014. As the impact of the revised, Telkomsel reclassified the deferred tax liabilities to current tax payable and paid the underpayment of Corporate Income Tax amounting to Rp174 billion. Subsequently, on September 11, 2015, The Indonesian Tax Authorities issued Tax Collection Letters (“STPs”) amounting to Rp67 billion for Corporate Income Tax late payment penalty of 2012 to 2014. On September 21, 2015, Telkomsel filed the request for cancellation of such STPs to Tax Authority based on prevailing tax reinventing policy. As of the date of approval and authorization for issuance of these financial statements, the request is still in process.

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

3 0 . TAXATION (continued)

f. Deferred tax assets and liabilities (continued)

The details of the Group's deferred tax assets and liabilities are as follows:

| | December 31, 2014 (Restated) | (Charged) credited to the
consolidated statements of profit or loss | | Reclassification | September 30, 201 5 |
| --- | --- | --- | --- | --- | --- |
| The Company | | | | | |
| Deferred tax assets: | | | | | |
| Provision for
impairment of receivables | 470 | (41 | ) | - | 429 |
| Net periodic pension
and other post-retirement benefits costs | 3 30 | 22 | | - | 352 |
| Accrued expenses and
provision for inventory obsolescence | 76 | (19 | ) | - | 57 |
| Employee benefit
provisions | 72 | (1 | ) | - | 71 |
| Deferred installation
fee | 72 | (5 | ) | - | 67 |
| Finance
leases | 22 | 51 | | - | 73 |
| Total deferred tax assets | 1,042 | 7 | | - | 1,049 |

| Deferred tax
liabilities: — Difference between accounting and tax bases of property
and equipment | ( 1.458 | ) | 2 | | - | (1,456 | ) |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Valuation of long-term investment | (69 | ) | - | | - | (69 | ) |
| Land rights, intangible assets, and others | (14 | ) | (3 | ) | - | (17 | ) |
| Total deferred tax
liabilities | (1,541 | ) | (1 | ) | - | (1,542 | ) |
| Deferred tax
liabilities of the Company - net | (499 | ) | 6 | | - | (493 | ) |
| Telkomsel | | | | | | | |
| Deferred tax assets: | | | | | | | |
| Provisions for e mployee benefit s | 274 | | 36 | | - | 310 | |
| Provision for impairment of receivables | 129 | | 42 | | - | 171 | |
| Recognition of i nterest under USO arrangements | 0 | | 0 | | - | 0 | |
| Total deferred tax
assets | 403 | | 78 | | - | 481 | |
| Deferred tax liabilities: | | | | | | | |
| Difference between accounting and tax bases of property
and equipment | (2,044 | ) | 209 | | 299 | (1,536 | ) |
| Finance leases | (254 | ) | (95 | ) | - | (349 | ) |
| Intangible assets | (61 | ) | 7 | | - | (54 | ) |
| Total deferred tax
liabilities | (2,359 | ) | 121 | | 299 | (1,939 | ) |
| Deferred tax
liabilities of Telkomsel - net | (1,956 | ) | 199 | | 299 | (1,458 | ) |
| Deferred tax
liabilities of other subsidiaries - net | (248 | ) | (17 | ) | - | (265 | ) |
| Deferred tax
liabilities - net | (2,703 | ) | 188 | | 299 | (2,216 | ) |
| Deferred tax
assets - net | 95 | | 42 | | - | 137 | |

| | Desember 31,
2013 (Restated) | (Charged) c redit to the c onsolidated
statement of profit or loss | | (Charged) credit to the
other comprehensive Income | | December 31, 2014 |
| --- | --- | --- | --- | --- | --- | --- |
| The Company | | | | | | |
| Deferred tax assets: | | | | | | |
| Provision
for impairment of receivables | 446 | 24 | | - | | 470 |
| Net
periodic pension and other post-retirement benefits costs | 341 | 74 | | (85 | ) | 330 |
| Accrued
expenses and provision for inventory obsolescence | 27 | 49 | | - | | 76 |
| Employee
benefit provisions | 143 | (71 | ) | - | | 72 |
| Deferred
installation fee | 70 | 2 | | - | | 72 |
| Finance
leases | 9 | 13 | | - | | 22 |
| Total deferred tax
assets | 1,036 | 91 | | (85 | ) | 1,0 42 |

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

3 0 . TAXATION (continued)

f. Deferred tax assets and liabilities (continued)

| | Desember 31, 2013 (Restated) | | (Charged) c redit to
the consolidated statement of profit or loss | | (Charged) credit to the other comprehensive Income | | December 31, 2014 | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Deferred tax liabilities: | | | | | | | | |
| Difference between
accounting and tax bases of property and equipment | (1.543 | ) | 85 | | - | | (1.4 58 | ) |
| Valuation of long-term
investment | (70 | ) | 1 | | - | | (69 | ) |
| Land rights, intangible
assets, and others | (11 | ) | (3 | ) | - | | (14 | ) |
| Total deferred tax liabilities | (1.624 | ) | 83 | | - | | (1.541 | ) |
| Deferred tax liabilities of the Company - net | (588 | ) | 174 | | (85 | ) | (499 | ) |
| Telkomsel | | | | | | | | |
| Deferred tax assets: | | | | | | | | |
| Provisions for employee
benefits | 207 | | 27 | | 40 | | 274 | |
| Provision for impairment of
receivables | 121 | | 8 | | - | | 129 | |
| Recognition of interest
under USO arrangements | 0 | | (0 | ) | 0 | | 0 | |
| Total deferred tax assets | 328 | | 35 | | 40 | | 403 | |
| Deferred tax liabilities: | | | | | | | | |
| Difference between
accounting and tax bases of property and equipment | (2,268 | ) | 224 | | - | | (2,044 | ) |
| Finance leases | (121 | ) | (133 | ) | - | | (254 | ) |
| Intangible assets | (62 | ) | 1 | | - | | (61 | ) |
| Total deferred tax liabilities | (2,451 | ) | 92 | | - | | (2,359 | ) |
| Deferred tax liabilities of Telkomsel - net | (2, 123 | ) | 1 2 7 | | 40 | | (1,95 6 | ) |
| Deferred tax liabilities of other subsidiaries - net | (197 | ) | (51 | ) | - | | (248 | ) |
| Deferred tax liabilities - net | (2,908 | ) | 250 | | (45 | ) | (2,703 | ) |
| Deferred tax assets - net | 67 | | 25 | | 3 | | 95 | |

As of September 30 , 2015 and December 31, 2014 , the aggregate amounts of temporary differences associated with investments in subsidiaries and associated companies, for which deferred tax liabilities have not been recognized were Rp23,532 billion and Rp2 7,112 billion, respectively.

Realization of the deferred tax assets is dependent upon the Group’s capability in generating future profitable operations. Although realization is not assured, the Group believes that it is probable that these deferred tax assets will be realized through reduction of future taxable income when temporary differences reverse. The amount of deferred tax assets is considered realizable; however, it could reduce if actual future taxable income is lower than estimates.

g. Administration

From 2008 to 201 4 , the Company has been consecutively entitled to income tax rate reduction of 5% for meeting the requirements in accordance with the Government Regulation No. 81/2007 in conjunction with the Ministry of Finance Regulation No. 238/PMK.03/2008. On the basis of historical data, for the nine months period ended September 30 , 2015 , the Company calculates the deferred tax using the tax rate of 20%.

The taxation laws of Indonesia require that the Company and its local subsidiaries 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 fiscal years 2007 and earlier, this period is within ten years of the time the tax became due, but not later than 2013, while for fiscal years 2008 and onwards, the period is within five years of the time the tax became due.

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

3 0 . TAXATION (continued)

g. Administration (continued)

The Minist ry of Finance of the Republic of Indonesia has issued Regulation No.85/PMK.03/2012 dated June 6, 2012 concerning the appointment of State-Owned Enterprises ("SOEs") to withhold, deposit and report VAT and Sales Tax on Luxury Goods ("PPnBM") according to the procedures outlined in the Regulation which is effective from July 1, 2012. The Ministry of Finance of the Republic Indonesia also has issued Regulation No.224/PMK.011/2012 dated December 26, 2012 concerning the appointment of SOEs to withhold income tax article 22 which is effective from February 23, 2013. The Company has withheld, deposited, and reported the VAT and PPnBM or VAT and also income tax article 22 in accordance with the Regulation.

The Company received a letter from the Large Tax Office Four No. Pemb-00 427 / WPJ.19 / KP.0405 / RIK.SIS / 2015 dated June 29, 2015 regarding the notice of field examination for the tax period January to December 2014. T here is no tax audit performed for fiscal years 2010, 2012, and 2013.

T he Company received a certificate of tax audit exemption from the DGT for fiscal years 2010 and 2012 which is valid unless the Company files for corporate income tax overpayment, in which case a tax audit will be performed.

3 1 . BASIC AND DILUTED EARNINGS PER SHARE

Basic earnings per share is computed by dividing profit for the year attributable to owners of the parent company amounting to Rp 17,337 billion and Rp 16,101 billion by the weighted average number of shares outstanding during the period totaling 98,175,853,600 and 97,534,003,783 for the nine months period ended September 30 , 2015 and for the year ended 2014 , respectively. The weighted average number of shares takes into account the weighted average effect of changes in treasury stock transaction during the year.

Basic earnings per share amounted to Rp 117.60 and Rp 115.53 (in full amount) for the nine months period ended September 30 , 2015 and 2014 , respectively.

T he Company does not have potentially dilutive financial investments as of September 30 , 2015 and 2014 .

3 2 . CASH DIVIDENDS AND GENERAL RESERVE

Pursuant to the AGM of Stockholders of the Company as stated in notarial deed No. 4 dated April 4 , 201 4 of Ashoya Ratam, S.H., MKn., the Company’s stockholders approved the distribution of cash dividend and special cash dividend for 201 3 amounting to Rp7, 813 billion (Rp80.46 per share) and Rp 2,130 billion (Rp21.94 per share) , respectively. On May 16 , 201 4 , the Company paid the cash dividend and special cash dividend totalling Rp 9,943 billion.

Pursuant to the AGM of Stockholders of the Company as stated in notarial deed No. 26 dated April 17 , 201 5 of Ashoya Ratam, S.H., MKn., the Company’s stockholders approved the distribution of cash dividend and special cash dividend for 201 3 amounting to Rp7, 319 billion (Rp74.55 per share) and Rp 1,463 billion (Rp14.91 per share) , respectively. On May 21 , 201 5 , the Company paid the cash dividend and special cash dividend totalling Rp 8,782 billion.

Appropriation of Retained Earnings

Under the Limited Liability Company Law, the Company is required to establish a statutory reserve amounting to at least 20% of its issued and paid-up capital.

The balance of the appropriated retained earnings of the Company as of September 30 , 2015 and December 31, 2014 amounted to 15,337 billion, respectively .

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

3 3 . PENSION AND OTHER POST-EMPLOYMENT BENEFITS

	September 30,, 2015	December 31, 2014 (Restated)
Prepaid pension benefit cost	1,0 58	1,170
Pension benefit and other post-employment benefit obligations
Pension
The Company
Unfunded	2,33 0	2,326
Telkomsel	7 60	644
Infomedia	1	-
Total pension	3,0 91	2,970
Other
post-employment benefit	48 9	488
Obligation under
the Labor Law	2 53	216
Total	3,8 83	3,674

The breakdown of the benefit expense recognized in the consolidated statements of comprehensive income is as follows:

	September 30, 2015	September 30, 2014 (Restated)
Net periodic pension costs
The
Company	2 9 0	330
Telkomsel	116	86
Infomedia	-	-
Net periodic pension costs (Note 2 6 )	406	416
Other post-retirement benefit costs
(Note 2 6 )	3 5	36
Employee benefit costs under the
Labor Law	38	24

Amounts recognized in OCI amounted to RpNil as of September 30, 2015 and 2014, respectively.

a. Prepaid pension benefit costs

The Company sponsors a defined benefit pension plan for employees 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 pension fund. The Company’s contributions to the pension fund for the nine months period ended September 30, 201 5 and for the year ended December 31, 2014 RpNil , respectively.

The following table presents the changes in projected pension benefit obligations, changes in pension benefit plan assets, funded status of the pension plan and net amount recognized in the consolidated statements of financial position for the nine months period ended September 30, 201 5 and for the year ended December 31, 2014 , on the defined benefit pension plan:

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

3 3 . PENSION AND OTHER POST-EMPLOYMENT BENEFITS (continued)

a. Prepaid pension benefit costs (continued)

| | September
30, 2015 | | December
31, 2014 (Restated) | |
| --- | --- | --- | --- | --- |
| Changes in projected pension benefit o bligations | | | | |
| Projected pension benefit obligations at beginning of
year | 17,402 | | 14,883 | |
| Charged to profit or loss | | | | |
| Service costs | 1 64 | | 188 | |
| Past service cost - plan
am e ndment | - | | 204 | |
| Interest costs | 1,084 | | 1,348 | |
| Pension plan participants’ contributions | 3 4 | | 45 | |
| Actuarial ( losses ) gain recognized in OCI | ( 2, 74 0 | ) | 1,471 | |
| Expected pension benefits paid | ( 6 0 6 | ) | (737 | ) |
| Projected pension benefit
obligations | 1 5 , 338 | | 17,402 | |
| Changes in pension benefit plan assets | | | | |
| Fair value of pension plan assets at beginning of
year | 18,929 | | 16,803 | |
| Interest income | 1,182 | | 1,534 | |
| Return on plan assets
(excluding amount included in net interest expense) | ( 2,7 4 0 | ) | 1,340 | |
| Pension plan participants’ contributions | 3 4 | | 45 | |
| Expected pension benefits paid | ( 6 0 6 | ) | (737 | ) |
| Administrative expenses paid | ( 46 | ) | (56 | ) |
| Fair value of pension plan assets | 1 6 ,7 53 | | 18,929 | |
| Funded status | 1,4 1 5 | | 1,527 | |
| Unrecoverable surplus (effect of asset ceiling) | (357 | ) | (357 | ) |
| Prepaid pension benefit c ost | 1,0 58 | | 1,170 | |

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

3 3 . PENSION AND OTHER POST-EMPLOYMENT BENEFITS (continued)

a. Prepaid pension benefit costs (continued)

As of September 30 , 2015 and December 31, 2014, pension plan assets mainly consisted of :

	September 30, 2015 — Quoted in active market	Unquoted	December 31, 2014 — Quoted in active market	Unquoted
Cash and cash equivalent	1 , 876	-	2,476	-
Equity instruments
Finance	951	-	1,137	-
Consumer goods	768	-	796	-
Infrastructure, utilities and transportation	570	-	724	-
Construction, property and real estate	467	-	508	-
Basic industry and chemical	157	-	409	-
Trading, service and investment	2 06	-	269	-
Mining	64	-	142	-
Agriculture	38	-	62	-
Miscellaneous industr ies	2 21	-	325	-
Equity-based mutual fund	996	-	1,172	-
Fixed income instruments
Corporate
bonds	-	3, 644	-	3,351
Government bonds	5 , 91 9	4 05	6,526	451
Non-public
equity - d irect
placement	-	153	-	153
Property	-	153	-	153
Others	-	165	-	275
Total	1 2 , 233	4 , 520	14,546	4,383

Pension plan assets also include Series B shares issued by the Company with fair values totalling Rp 378 billion and Rp 348 billion, representing 2.26 % and 1.84 % of total plan assets as of September 30, 201 5 and December 31, 2014, respectively, and bonds issued by the Company with fair value totalling Rp 453 billion and Rp 151 billion representing 2.71 % and 0.80 % of total assets as of September 30, 201 5 and December 31, 2014, respectively.

The expected return is determined based on market expectation for returns over the entire life of the obligation by considering the portfolio mix of the plan assets. The actual return on plan assets was Rp (1,604) billion and Rp2 , 817 billion for the nine months period ended September 3 0 , 201 5 and for the year ended December 31, 2014, respectively. Based on the Company’s policy issued on January 14, 2014 regarding Dapen’s Funding Policy, the Company will not contribute to Dapen when Dapen’s Funding Sufficiency Ratio (FSR) is above 105%. Therefore, the Company does not expect to contribute to the defined benefit pension plan in 2015 .

Based on the C ompany policy issued on July 1, 2014, regarding P ension R egulat ion by Dana Pensiun Telkom, there is an increas e in monthly benefits given to the pension ers , widow/widower or the child ren of participants who stop ped working before the end of June 2002.

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

3 3 . PENSION AND OTHER POST-EMPLOYMENT BENEFITS (continued)

a. Prepaid pension benefit costs (continued)

The movements of the prepaid pension benefit cost during the nine months period ended September 30, 201 5 and for the year ended December 31, 2014 are as follows:

| Prepaid pension benefit cost at beginning
of year | September 30, 2015 — 1,170 | | December 31 , 2014 (Restated) — 949 | |
| --- | --- | --- | --- | --- |
| Net periodic pension benefit cost | (112 | ) | (262 | ) |
| Actuarial losses (gain) recognized via the
OCI | 2,740 | | (1,471 | ) |
| Asset ceiling recognized via the OCI | - | | 614 | |
| Return on plan assets (excluding amount
included in net interest expense) | ( 2, 74 0 | ) | 1,340 | |
| Prepaid pension benefit cost at end of year | 1,0 58 | | 1,170 | |

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

Service costs	S S eptember 30, 2015 — 1 64		September 30, 2014 (Restated) — 192
Plan administration cost	46		69
Net interest cost	( 98	)	( 13 7	)
Net periodic pension benefit cost	112		12 4
Cost to subsidiaries by agreement	( 10	)	-
Net periodic pension benefit cost less cost to
subsidiaries by agreement (Note 26)	102		12 4

Amounts recognized in OCI are as follows:

| Actuarial
(losses) gain recognized during the year | September 30, 2015 — ( 2, 74 0 | September 30, 2014 (Restated) — 527 | |
| --- | --- | --- | --- |
| Return
on plan assets (excluding amount included in net interest expense) | 2, 74 0 | ( 52 7 | ) |
| Net | - | - | |

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

3 3 . PENSION AND OTHER POST-EMPLOYMENT BENEFITS (continued)

a. Prepaid pension benefit costs (continued)

The actuarial valuation for the defined benefit pension plan and the other post-employment benefits (Notes 3 3 b and 3 3 c) was performed based on the measurement date as of December 31, 201 4 and 2013, with reports dated February 24, 2015, and February 28, 2014, respectively, by PT Towers Watson Purbajaga (“TWP”), an independent actuary in association with Towers Watson (“TW”) (formerly Watson Wyatt Worldwide). The principal actuarial assumptions used by the independent actuary as of December 31, 2014 and 201 3 are as follows:

	December 31, 2014	December 31, 2013
Discount rate	8.50%	9 . 00 %
Rate of compensation increases	8.00%	8 .00%
Indonesia n mortality table	2011	2011

b. Pension benefit costs provisions

(i) The Company

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

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 Rp5 billion and Rp6 billion as of September 30 , 2015 and December 31, 2014 , respectively.

Since 2007, the Company has provided 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 has increased the Company’s obligations by Rp699 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, upon death or upon becoming disabled starting from February 1, 2009. The change in benefit has increased the Company’s obligations by Rp435 billion, which is amortized over 8.63 years until 2018.

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. Since 2012, the Company has issued a new requirement for MPP effective for employees retiring beginning April 1, 2012, whereby the employee is required to file a request for MPP and if the employee does not file the request, he or she is required to work until the retirement date.

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

3 3 . PENSION AND OTHER POST-EMPLOYMENT BENEFITS (continued)

b. Pension benefit costs provisions (continued)

(i) The Company (continued)

The following table presents the change in projected pension benefits obligation of MPS and MPP for for the nine months period ended September 30 , 2015 and for the year ended December 31, 2014 :

| | September
30, 2015 | | December 31, 2014 (Restated) | |
| --- | --- | --- | --- | --- |
| Changes in projected pension benefit obligations | | | | |
| Unfunded projected pension benefit obligations at
beginning of year | 2,326 | | 2,201 | |
| Charged to profit or loss | | | | |
| Service
costs | 45 | | 80 | |
| Interest
costs | 143 | | 194 | |
| Actuarial losses recognized in OCI | - | | 31 | |
| Benefits paid by employer | (1 84 | ) | (180 | ) |
| Unfunded projected pension benefit obligations at end
of year | 2,33 0 | | 2,326 | |

The components of total periodic pension benefit cost are as follows:

| | September
30, 2015 | September 30 , 2014 (Restated) |
| --- | --- | --- |
| Service costs | 45 | 6 0 |
| Net interest cost | 143 | 146 |
| Total periodic pension
benefit cost | 1 88 | 206 |

Amounts recognized in OCI amounted to RpNil as of September 30, 2015 and 2014, respectively.

The principal actuarial assumptions used by the independent actuary as of December 31, 2014 and 2013 are as follows:

	2014	2013
Discount rate	8.50%	9 . 00 %
Rate of compensation
increases	8.00%	8.00%
Indonesia n mortality table	2011	2011

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

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

b. Pension benefit costs provisions (continued)

(ii) 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 have been fully made by Telkomsel.

Telkomsel’s contributions to Jiwasraya amounted to Rp Nil and Rp 98 billion for the nine months period ended September 30, 2015 and for the year ended December 31, 2014, respectively.

The following table presents the change in projected pension benefits obligation, change in pension plan assets, funded status of the pension plan and net amount recognized in the Company’s consolidated statement of financial position for the nine months period ended September 30 , 2015 and for the year ended 2014 of its defined benefit pension plan:

	September 30 , 2015		December 31, 2014 (Restated)
Changes
in projected pension
benefit
obligation
Projected pension benefit obligation at
beginning of year	1,281		899
Charged to profit or loss
Service costs	76		74
Net i nterest cost	40		81
Actuarial losses recognized in OCI	-		234
Expected benefits paid	-		(7	)
Projected pension benefit obligation at end
of year	1,3 97		1,281
Changes
in pension benefit plan assets
Fair value of plan assets at beginning of
year	637		439
Interest income in profit or loss	-		40
Return on plan assets (excluding amount
included in
net interest expense) in OCI	-		67
Employer’s contributions	-		98
Expected benefits paid	-		(7	)
Fair value of plan assets at end of year	637		637
Funded status	(7 60	)	(644	)
Provision for pension benefit c ost	(7 60	)	(644	)

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

3 3 . PENSION AND OTHER POST-EMPLOYMENT BENEFITS (continued)

b. Pension benefit costs provisions (continued)

(i) Telkomsel (continued)

Movements of the provision for pension benefit cost during the nine months period ended September 30, 2015 and for the year ended December 31, 2014 :

| Provision for pension
benefit cost at beginning of year | September 30, 2015 — (644 | ) | December 31, 2014 (Restated) — (460 | ) |
| --- | --- | --- | --- | --- |
| P eriodic pension benefit cost | ( 116 | ) | (115 | ) |
| Actuarial (losses)
recognized via the OCI | - | | (234 | ) |
| Return on plan assets
(excluding amount included in net interest expense) | - | | 67 | |
| Employer contributions | - | | 98 | |
| Provision for pension
benefit cost at end of year | (7 60 | ) | (644 | ) |

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

	September 30, 2015	September 30 , 2014 (Restated)
Service costs	76	55
Net interest cost	40	31
Total periodic
pension benefit cost	116	86

The net periodic pension costs for the pension plan was calculated based on the measurement date as of December 31, 2014 and 201 3 , with reports dated February 5, 2015 and February 20, 2014, 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, 2014 and 201 3 , are as follows:

	December 31, 2014	December 31, 2013
Discount rate	8. 2 5%	9 . 00 %
Rate of compensation
increases	6.50%	6.50%
Indonesian mortality
table	2011	2011

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

3 3 . PENSION AND OTHER POST-EMPLOYMENT BENEFITS (continued)

c. Other post-employment benefits provisions

The Company provides other post-retirement benefits in the form of cash paid to employees on their retirement or termination. These benefits consist of final housing allowance (“ Biaya Fasilitas Perumahan Terakhir ” or “BFPT”) and home passage leave (“ Biaya Perjalanan Pensiun dan Purnabhakti ” or “BPP”).

The changes of the projected other post-employment benefit obligations for the nine months period ended September 30, 201 5 and for the year ended December 31, 2014 are as follows:

	September 30, 2015		December 31, 2014 (Restated)
Changes
in projected other post-employment benefits provision
Unfunded
projected benefit obligations at beginning of year	488		450
Charged to profit or loss
Service
costs	6		9
Net i nterest
cost	2 9		39
Actuarial
losses recognized in OCI	-		24
Benefits
paid by employer	( 34	)	(34	)
Provision
for other post-employment benefits	48 9		488

The components of the p rojected other post-employment benefit cost as of September 30, 2015 and 2014 are as follows:

	September 30, 2015	September 30 , 2014 (Restated)
Service costs	6	7
Net interest cost	2 9	29
Total	35	36

Amounts recognized in OCI amounted to Rpnil as of September 30, 2015 and 2014 , respectively.

The principal actuarial assumptions used by the independent actuary based on the measurement date as of December 31, 2014 and December 31, 201 3 , are as follows:

| | December 31,
2014 | December 31,
2013 |
| --- | --- | --- |
| Discount rate | 8.50% | 9.00% |
| Rate of compensation
increases | 8.00% | 8.00% |
| Indonesian mortality
table | 2011 | 2011 |

d. Obligation under the Labor Law provisions

Under Law No. 13 Year 2003, the Group is required to provide minimum pension benefit s , if not covered yet by the sponsored pension plans, to its employees upon retirement age. The total related obligation recognized for the nine months period ended September 30 , 2015 and for the year ended December 31, 2014 amounted to Rp 253 billion and Rp216 billion, respectively. The related employee benefits cost charged to expense amounted to Rp38 billion and Rp24 billion for the nine months period ended September 30 , 2015 and 2014 , respectively.

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

3 3 . PENSION AND OTHER POST-EMPLOYMENT BENEFITS (continued)

a. Maturity Profile of Defined Benefit Obligation (“DBO”)

Weighted a verage duration of DBO for the Company and Telkomsel are 1 8 .9 3 years and 15.14 years, respectively. The timing of benefits payments for 201 5 is as follows (in millions of R upiah) :

| | Expected
BenefitsPayment | | | |
| --- | --- | --- | --- | --- |
| | Company | | | |
| Time
Period | Funded | Unfunded | Telkomsel | Other
post-employment benefits |
| Within
next 10 years | 1 3 , 949 | 2 , 968 | 282 | 6 61 |
| Within
10-20 years | 20,361 | 204 | 2,848 | 184 |
| Within
20-30 years | 17,979 | 12 | 6,902 | 54 |
| Within
30-40 years | 10,418 | 0 | 7,434 | 1 |
| Within
40-50 years | 3,347 | - | 4,917 | - |
| Within
50-60 years | 477 | - | 2,024 | - |
| Within
60-70 years | 23 | - | 407 | - |
| Within
70-80 years | 0 | - | 29 | - |

b. Sensitivity Analysis

0.5% change in discount rate and rate of salary would have effect on DBO, as follows:

Sensitivity	Discount Rate — 0.5% Increase		0.5% Decrease	Rate of Compensation — 0.5% Increase	0.5% Decrease
Funded	( 755	)	822	186	( 193	)
Unfunded	(40	)	41	34	(34	)
Telkomsel	(1 31	)	14 7	8 3	(7 5	)
Other
post-employment benefits	(10	)	10	-	-

The sensitivity analyses have been determined based on a method that extrapolates the impact on DBO as a result of reasonable changes in key assumptions occurring at the end of the reporting period.

The sensitivity results above determine the individual impact on the Plan’s end of the year DBO. In reality, the Plan is subject to multiple external experience items which may move the DBO in similar or opposite directions, and the Plan’s sensitivity to such changes can vary over time.

There are no changes in the methods and assumptions used in preparing the sensitivity analyses from the previous period.

3 4 . LONG SERVICE AWARDS (“LSA”)

Telkomsel and Patrakom 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 certain years 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 me e t 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 432 billion and Rp410 billion as of September 30 , 2015 and December 31, 2014 , respectively . The related benefit costs charged to expense amounted to Rp 67 billion and Rp 47 billion for the nine months period ended September 30 , 2015 and 2014, respectively (Note 2 6 ).

100

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

3 5 . POST-EMPLOYMENT HEALTH CARE BENEFITS PROVISIONS

The Company provides post-employment health care benefits 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 are no longer entitled to this plan. The plan is managed by Yakes.

The defined contribution post-employment health care benefit 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 at the time of retirement. The Company’s contribution to the plan amounted to Rp 14 billion and Rp15 billion for the nine months period ended September 30, 201 5 and for the year ended December 31, 2014, respectively.

The following table presents the change in the projected post-employment health care benefits obligation, change in post-employment health care benefits plan assets, funded status of the post- employment health care benefits plan and net amount recognized in the Company’s consolidated statement of financial position as of September 30 , 2015 and December 31, 2014 :

	September 30, 2015		December 31, 2014 (Restated)
Changes
in projected post-employment
health care benefit provision
Projected
post-employment health care benefit obligation at beginning of year	11,505		10,653
Service
costs	37		45
Interest
costs	721		942
Actuarial
(losses) gain	( 1,227	)	238
Expected
post-employment health care benefits paid	( 290	)	(373	)
Projected
post-employment health care benefit provision at end of year	1 0 ,7 46		11,505
Changes
in post-employment
health care plan a ssets
Fair value
of plan assets at beginning of year	11,064		9,660
Interest
income	693		863
Return
on plan assets (excluding amount included in net interest expense)	( 1,227	)	814
Employer’s
contributions	-		226
Expected
post-employment health care benefits paid	( 290	)	(373	)
Administrative
expenses paid	( 118	)	(126	)
Fair
value of plan assets at end of year	10, 122		11,064
Funded
status	( 624	)	(441	)
P rovision for post-employment health
care benefit	( 624	)	(441	)

101

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

3 5 . POST-EMPLOYMENT HEALTH CARE BENEFITS PROVISIONS (continued)

As of June 30 , 2015 and December 31, 2014, plan assets consisted of:

	September 30, 2015 — Quoted in active market	Unquoted	December 31, 2014 — Quoted in active market	Unquoted
Cash and cash equivalent	837	-	794	-
Listed shares:
Manufacturing and consumer	404	-	516	-
Finance industry	470	-	369	-
Construction	2 55	-	271	-
Infrastructure and telecommunication	21 2	-	202	-
Wholesale	52	-	145	-
Mining	1 7	-	69	-
Other industries:
Services	24	-	65	-
Agriculture	27	-	23	-
Biotech and Pharma Industry	78	-	9	-
Others	4	-	38	-
Equity-based mutual funds	1, 02 2	-	1,767	-
Fixed income-based securities:
Fixed income mutual funds	6, 494	-	6,589	-
Unlisted shares:
Private placement	-	1 87	-	177
Others	-	3 9	-	30
Total	9,896	2 26	10,857	207

Yakes plan assets also include Series B shares issued by the Company with fair value totalling Rp 150 billion and Rp 140 billion representing 1.48 % and 1.27% of total assets as of September 30 , 201 5 and December 31, 2014 , respectively .

The movements of the provision for projected post-employment health care benefit for the nine months period ended September 30, 201 5 and for the year ended December 31, 2014 are as follows:

	September 30, 2015		December 31, 2014 (Restated)
Changes
in projected post-employment health care benefit provision
Defined
benefit liability at beginning of year	441		993
Net
periodic pension cost	1 83		250
Employer
contributions	-		(226	)
Actuarial (l oss es) gain recognized via the OCI	( 1,227	)	238
Return on plan assets (excluding amount included in net interest expense)	1,227		(814	)
Provision for post-employment health
care benefit	624		441

102

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

3 5 . POST-EMPLOYMENT HEALTH CARE BENEFITS PROVISIONS (continued)

The components of net periodic post-employment health care benefit cost for the years ended September 30, 2015 and 2014 are as follows:

| Service
costs | September 30, 2015 — 37 | September 30 , 2014 (Restated) — 34 | |
| --- | --- | --- | --- |
| Plan administration cost | 118 | 132 | |
| Net
interest cost | 28 | 59 | |
| Net
periodic post-employment health care benefit cost | 183 | 225 | |
| Cost to subsidiaries by agreement | 0 | (1 | ) |
| Periodic post-employment health care benefit cost Less cost to subsidiaries | 1 83 | 224 | |

Amounts recognized in OCI are as follows:

Actuarial ( losses ) gain recognized during the year	September 30, 2015 — ( 1,227	September 30 , 2014 (Restated) — 636
Return
on plan assets (excluding
amount i ncluded in net interest expense)	1,227	( 636	)
Net	-	-

The actuarial valuation for the post-employment health care benefits was performed based on the measurement date as of December 31, 2014 and 201 3 , with reports dated February 24, 2013 and February 28 , respectively, by TWP, an independent actuary in association with TW. The principal actuarial assumptions used by the independent actuary as of December 31, 201 4 and 2013 are as follows:

	December 31, 2014	December 31, 2013
Discount rate	8.50%	9.00 %
Health care costs
trend rate assumed
for
next year	7.00%	7.00 %
Ultimate health care
costs trend rate	7.00 %	7.00 %
Year that the rate
reaches the ultimate trend rate	2015	201 4
Indonesian mortality
table	2011	2011

The timing of benefits payments for 201 5 is as follows (in millions of rupiah):

| Time Period | Post-Employment
Health Care Benefits |
| --- | --- |
| Within next 10 years | 4, 719 |
| Within 10-20 years | 7,035 |
| Within 20-30 years | 7,519 |
| Within 30-40 years | 6,174 |
| Within 40-50 years | 3,210 |
| Within 50-60 years | 400 |
| Within 60-70 years | 2 |
| Within 70-80 years | 0 |

103

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

3 5 . POST-EMPLOYMENT HEALTH CARE BENEFITS PROVISIONS (continued)

0.5% change in discount rate and rate of salary would have effect on DBO, as follows:

Sensitivity	Discount Rate — 0.5% Increase		0.5% Decrease	Rate of Compensation — 0.5% Increase	0.5% Decrease
	Increase (decrease)
in amounts			Increase (decrease)
in amounts
Post-employment health care	(1, 314	)	1, 61 6	1, 740	(1,430	)

3 6 . RELATED PARTY TRANSACTIONS

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

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

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

| Related parties | Nature of relationships with related parties | Nature of
accounts /transactions |
| --- | --- | --- |
| The Government Ministry of Finance | Majority stockholder | Internet and data revenues,
other telecommunication service
revenues, finance costs and investment in financial instruments |
| State-owned enterprises | Entity under common control | Internet and data service
revenue, other telecommunication services revenue, operating expenses,purchase
of property and
equipment,
construction and installation
services,
insurance expenses, finance
income , finance costs, investment in
financial instruments, insurance for
property equipment,
insurance for
employees, electricity expenses
and cost of SIM cards |
| Indosat | Entity under common control | Interconnection revenue, interconnection expenses,
telecommunication
facilities
usage, operating & maintenance costs, leased line revenue, satellite
transponder usage
revenue, usage
of data communication, network
system expenses
and lease revenue |
| PT Aplikanusa Lintasarta (“Lintasarta”) | Entity under common control | Interconnection revenue,
network revenue, usage
of data communication
network syste m expenses and leased lines expenses |
| Indosat Mega Media | Entity under common control | Network revenues |
| INTI | Entity under common control | Purchase of property and equipment |
| LEN` | Entity under common control | Purchase of property and equipment |

104

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

3 6 . RELATED PARTY TRANSACTIONS (continued)

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

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

| Related parties | Nature of
relationships with related
parties | Nature
of accounts /transactions |
| --- | --- | --- |
| State-owned banks | Entity under common
control | Finance income and
finance costs |
| BNI | Entity under common
control | Internet and
data revenue,
other
telecommunication service revenue, finance income and finance costs |
| Bank Mandiri | Entity under common
control | Internet and
data revenue,
other
telecommunication service revenue, finance income and finance costs |
| BRI | Entity under common
control | Internet and
data revenue,
other
telecommunication service revenue, finance income and finance costs |
| BTN | Entity under common
control | Internet and
data revenue,
other
telecommunication service revenue, finance income and finance costs |
| PT Bank
Syariah Mandiri (“BSM”) | Entity under common
control | Internet and
data revenue,
other
telecommunication service revenue, and finance costs |
| PT Bank BRI Syariah (“BRI Syariah”) | Entity under common
control | Internet and
data revenue,
other
telecommunication service revenue, and finance costs |
| Bahana | Entity under common
control | Available-for-sale
financial assets, bonds and notes |
| CSM | Associated
company | Satelite
transponder usage revenue, leasedline revenue and transmission lease expenses |
| Indonusa | Associated
company | Network
revenue and data communication expense |
| Yakes | Entity under
significant influence | Medical
expenses |
| Koperasi Pegawai
Telkom (“Kopegtel”) | Entity under
significant influence | Purchase of
property and equipment, construction and installation
services,
leases
of buildings, leases of vehicles, purchases of vehicles, purchases of
materials and construction services, utilities and cleaning
service
maintenance
and RSA revenues |
| PT Sandhy Putra
Makmur (“SPM”) | Entity under
significant influence | L eases of
buildings, leases of vehicles, purchases of vehicles, purchases of
materials and construction services, utilities and cleaning
service |
| Koperasi Pegawai
Telkomsel (“Kisel”) | Entity under
significant influence | Leases of vehicles, printing and
distribution of customer bills expenses, collection
fee, and other services fee, distribution of SIM cards and pulse reload voucher |
| PT Graha Informatika Nusantara
(“Gratika”) | Entity under
significant influence | Interconnection
revenue, purchase of
property and equipment, installation
expense, and maintenance
expense |
| PT Pasifik Satelit
Nusantara (“PSN”) | Entity under
significant influence | Interconnection
revenue, transmission leases expenses and interconnection
expenses |
| Directors and
commissioners | Key management
personnel | Honorarium and
facilities |

105

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

3 6 . RELATED PARTY TRANSACTIONS (continued)

b. Transactions with related parties

The following are significant transactions with related parties:

	September 30, 201 5 — Amount	% of total revenues	September 30, 201 4 — Amount	% of total revenues
REVENUES
Entities
under common control
Indosat	724	0.9 6	764	1.1 6
State-owned
enterprises	525	0. 69	599	0. 91
Government	203	0.2 7	127	0.19
BRI	137	0.18	90	0.1 4
Bank
Mandiri	115	0.1 5	90	0.14
BNI	90	0.1 2	70	0.1 1
Lintasarta	65	0.09	63	0.10
BSM	33	0.0 4	48	0.0 7
BTN	22	0.0 3	23	0.0 3
BRI
Syariah	5	0.01	9	0.01
Sub-total	1 , 919	2.54	1 , 883	2.86
Entity
under significant influence
Kisel	2 ,6 28	3.4 7	2 , 238	3. 40
Gratika	298	0.39	28 8	0.4 4
Sub-total	2 , 926	3.8 6	2 ,5 26	3. 84
Associated
compan ies
Indonusa	4 3	0.06	71	0.11
Others	122	0.1 6	118	0.18
Total	5 , 010	6. 62	4 , 598	6. 9 9

	September 30, 201 5 — Amount	% of total expenses	September 30, 201 4 — Amount	% of total expenses
EXPENSES
Entities under common control State-owned
enterprises	834	1.6 0	985	2. 21
Indosat	665	1 . 28	702	1. 57
Sub-total	1, 499	2 . 88	1, 687	3. 78
Entity
under significant influence
Kisel	574	1.1 0	732	1. 64
Kopegtel	306	0.5 9	4 30	0 . 96
PSN	111	0. 2 1	1 07	0. 24
Yakes	4 1	0. 08	168	0. 38
SPM	5	0.01	1 1	0.0 2
Sub-total	1,037	1.99	1,448	3. 24
Associated
company
CSM	9	0.0 2	37	0.08
Others	1 7	0.0 3	2 3	0. 05
Total	2, 562	4 .9 2	3 ,1 9 5	7. 15

106

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

3 6 . RELATED PARTY TRANSACTIONS (continued)

b. Transactions with related parties (continued)

	September 30, 201 5 — Amount	finance income	September 30, 201 4 — Amount	finance income
FINANCE INCOME
Entity under common control
State-owned banks	617	6 2 . 96	565	60 . 8 8

	September 30, 201 5 — Amount	finance costs	September 30, 201 4 — Amount	finance costs
FINANCE COSTS
Majority stockholder
The Government	5 9	3. 56	66	4.95
Entity under common control
State-owned banks	836	50 . 42	521	39.08
Total	89 5	53 . 98	587	44.03

	September 30, 201 5 — Amount	% of total property and equipment purchased	September 30, 201 4 — Amount	% of total property and equipment purchased
Purchase
of property and equipment (Note 1 0 )
Entities
under common control
INTI	173	1 . 02	-	-
LEN	24	0.1 4	-	-
State-owned
enterprises	-	-	372	1.96
Sub-total	197	1 . 16	372	1.96
Entity
under significant influence
Kopegtel	52	0. 31	42	0 .22
Gratika	33	0. 19	-	-
Sub-total	85	0.5 0	42	0.2 2
Others	36	0. 2 1	35	0. 18
Total	318	1. 87	449	2.36

107

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

3 6 . RELATED PARTY TRANSACTIONS (continued)

b. Transactions with related parties (continued)

Presented below are balances of accounts with related parties:

		September 30, 2015 — Amount	% of total assets	D ecember 31, 2014 — Amount	% of total assets
a.	Cash and cash equivalents (Note 4)	16 , 350	1 0 . 32	10,464	7.43
b.	Other current financial assets (Note 5)	2, 509	1. 58	2,406	1.71
c.	Trade receivables - net (Note 6)	624	0. 39	873	0.62
d.	Advances and prepaid expenses (Note 8)	65	0.0 4	24	0.02
e.	Advances and other non-current assets (Note 1 1 )
	Entity under common control BNI	10	0.01	12	0.02
	Others	4 2	0.0 3	6	0.01
	Total	5 2	0.0 4	18	0.03

	`	September 30, 2015 — A mount	% of total liabilities	December 31, 2014 — Amount	% of total liabilities
f.	Trade payables (Note 1 3 )
	Entities under common control
	INTI	299	0.4 2	323	0.58
	Indosat	236	0. 33	146	0.26
	Sub-total	535	0.75	469	0.84
	Entity under significant influence
	Yakes	45	0.06	46	0.08
	Kopegtel	21	0.0 3	55	0. 1 0
	Sub-total	66	0.0 9	101	0.1 8
	Others	594	0. 83	327	0. 59
	Total	1,195	1.67	897	1 . 61

108

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

3 6 . RELATED PARTY TRANSACTIONS (continued)

b. Transactions with related parties (continued)

		September 30, 2015 — Amount	% of total liabilities	December 31, 2014 — Amount	% of total liabilities
g.	Accrued expenses (Note 1 4 )
	Majority stockholder
	The Government	2 7	0.0 4	16	0.03
	Entit ies under common control
	State-owned banks	1 52	0.2 1	84	0.15
	Total	1 79	0.2 5	100	0.18
h.	Advances from customers and suppliers
	Majority stockholder
	The Government	23	0.03	19	0.03
i.	Short-term bank loans (Note 1 6 )
	Entities under common control
	BRI	57	0.08	57	0.10
	BNI	25	0.04	-	-
	BSM	15	0.02	15	0.03
	Total	9 7	0.1 4	72	0.13
j.	Two-step loans (Note 1 8 )
	Majority stockholder
	The Government	1, 674	2. 35	1,615	2. 95
k.	Long-term bank loans (Note 2 0 )
	Entities under common control
	BRI	6 , 740	9 . 45	2,975	5.43
	BNI	3 , 415	4 . 79	4,357	7.96
	Bank Mandiri	2, 776	3 . 89	2,181	3. 98
	Total	12,9 31	18.1 3	9,513	1 7.37

c. Significant agreements with related parties

i. The Government

The Company obtained two-step loans from the Government (Note 1 8 ).

ii. Indosat

The Company has an agreement with Indosat to provide 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 the implementation of Indosat Multimedia Mobile services and the settlement of 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, which enable each party’s customers to make domestic calls between Indosat’s GSM mobile network and the Company’s fixed line network, as well as allowing Indosat’s mobile customers to access the Company’s IDD service by dialing “007”.

109

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

3 6 . RELATED PARTY TRANSACTIONS (continued)

c. Significant agreements with related parties (continued)

ii. Indosat (continued)

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 starting from January 1, 1995, as well as 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 which already took into account the compensation for billing and collection. The agreement is valid and effective starting from January to December 2012, and can be applied until a new agreement becomes available.

On December 28, 2006, the Company and Indosat signed amendments on 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/Year 2006 (Note 38 ). 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 subsidiaries, namely PT Indosat Mega Media and Lintasarta. The leased lines can be used by these companies for telephone, telegraph, data, telex, facsimile or other telecommunication services.

iii. Others

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

Kisel is a co-operative 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 personnels consists of the Boards of Commissioners and Directors of the Company and its subsidiaries.

The Group provides remuneration in the form of honorarium and facilities to support the operational duties of the Board of Commissioners and short-term employment benefits in the form of salaries and facilities to support the operational duties of the Board of Directors. The total of such benefits is as follows:

	2015 — Amount	% of total expenses	2014 — Amount	% of total expenses
Board of Directors	4 8 4	0.93	343	0.78
Board of Commissioners	1 49	0. 29	95	0.22

110

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

3 7 . OPERATING SEGMENT

The Group has four main operating segments, namely personal, home, corporate and others. The personal segment provides mobile cellular and fixed wireless telecommunications services to individual customers. The home segment provides fixed wireline telecommunications services, pay TV, data and internet services to home customers. The corporate segment provides telecommunications services, including interconnection, leased lines, satellite, VSAT, contact center, broadband access, information technology services, data and internet services to companies and institutions. Operating segments that are not monitored separately by the Chief Operation Decision Maker are presented as "Others", which provides building management services.

No operating segments have been aggregated to form the operating segments of personal, home and others, while corporate operating segment is aggregated from business, enterprise, wholesale and international operating segments since they have the similar economic characteristics and similar in other qualitative criteria such as providing similar network services and serving corporate customers.

Management monitors the operating results of the business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss and is measured consistently with operating profit or loss in the consolidated financial statements.

However, the financing activities and income taxes are not separately monitored and are not allocated to operating segments .

Segment revenues and expenses include transactions between operating segments and are accounted at market prices .

	2015 — Corporate		Home		Personal		Others		Total before elimination		Elimination		Total consolidated
Segment results
Revenues
External revenues	16,271		5,507		53,724		217		75,719		-		75,719
Inter-segment revenues	11,085	3,145			1,898		1,540		17,668		(17,668	)	-
Total segment revenues	27,356		8,652		55,622		1,757		93,387		(17,668	)	75,719
Expenses
External expenses	(15,927	)	(5,365	)	(29,000	)	(1,435	)	(51,727	)	-		(51,727	)
Inter-segment expenses	(6,442	)	(3,290	)	(7,566	)	(126	)	(17,424	)	17,424			-
Total segment expenses	(22,369	)	(8,655	)	(36,566	)	(1,561	)	(69,151	)	17,424		(51,727	)
Segment results	4,987		(3	)	19,056		196		24,236		(244	)	23,992
Capital expenditures	(5,452	)	(2,271	)	(8,593	)	(680	)	(16,996	)	-		(16,996	)
Depreciation and amortization	(1,681	)	(977	)	(10,787	)	(59	)	(13,504	)	-		(13,504	)
Provision for impairment of receivables	(559	)	(204	)	(181	)	(4	)	(948	)	-		(948	)

111

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

3 7 . OPERATING SEGMENT (continued)

	201 4 (Restated) — Corporate		Home		Personal		Others		Total before elimination		Elimination		Total c onsolidated
Segment results
Revenues
External revenues	9,656		3,276		30,444		166		43,542		-		43,542
Inter-segment
revenues	4,928		1,217		1,384		654		8,183		(8,183	)	-
Total segment
revenues	14,584		4,493		31,828		820		51,725		(8,183	)	43,542
Expenses
External expenses	(8,001	)	(2,560	)	(18,154	)	(755	)	(29,470)		-		(29,470	)
Inter-segment
expenses	(3,038	)	(1,483	)	(3,656	)	(6	)	(8,183	)	8,183		-
Total segment
expenses	(11,039	)	(4,043	)	(21,810	)	(761	)	(37,653	)	8,183		(29,470	)
Segment results	3,545		450		10,018		59		14,072		-		14,072
Capital
expenditures	(3,545	)	(1,285	)	(6,952	)	(246	)	(11,866	)	-		(11,866)
Depreciation and
amortization	(1,251	)	(704	)	(5,991	)	(27	)	(7,973	)	-		(7,973
Impairment of assets	-		-		(190	)	-		(190	)	-		(190)
Provision for impairment of
receivables	(197	)	(124	)	(8	)	-		(329	)	-		(329	)

Geographic information:

	2015	2014
External revenues
Indonesia	47,939	42,584
Foreign countries	901	958
Sub-total	48,840	43,542

The revenue information above is based on the location of the customers.

	2015	2014
Non-current operating
assets
Indonesia	99,658	96,127
Foreign countries	1,199	1,145
Total	100,857	97,272

Non-current operating assets for this purpose consist of property and equipment and intangible assets.

112

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

38 . TELECOMMUNICATIONS SERVICE TARIFFS

Under Law No. 36 Year 1999 and Government Regulation No. 52 Year 2000, tariffs for operating telecommunications network and/or services are determined by providers based on the tariff type, structure and with respect to the 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 Decree No. 15/PER/M.KOMINFO/4/2008 dated April 30, 2008 of the Ministry of Communication and Information (“MoCI”) concerning “Mechanism to Determine Tariff of Basic Telephony Services Connected through Fixed Line Network”.

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

· Activation fee

· Monthly subscription 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 regarding “Mechanism to Determine Tariff of Telecommunication Services 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 No. 12/PER/M.KOMINFO/02/2006.

Under MoCI Decree No. 09/PER/M.KOMINFO/04/2008 dated April 7, 2008, the cellular tariffs of operating telecommunication services connected through mobile cellular network consist of the following:

· Basic telephony services tariff

· Roaming tariff, and/or

· Multimedia services tariff,

with the following traffic structure:

· Activation fee

· Monthly subscription charges

· Usage charges

· Additional facilities fee.

113

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

38 . TELECOMMUNICATIONS SERVICE TARIFFS (continued)

c. Interconnection tariffs

The Indonesian Telecommunication Regulatory Body (“ITRB”), in its letter No. 262/BRTI/XII/2011 dated December 12, 2011, decided to change the basis for SMS interconnection tariff to cost basis with a maximum tariff of Rp23 per SMS effective from June 1, 2012, for all telecommunication provider operators.

Based on letter No.118/KOMINFO/DJPPI/PI.02.04/01/2014 dated January 30, 2014 of the Director General of Post and Informatics, the Director General of Post and Informatics decided to implement new interconnection tariff effective from February 1, 2014 until December 31, 2016, subject to evaluation on an annual basis. Pursuant to the Director General of Post and Informatics letter, the Company and Telkomsel are required to submit the Reference Interconnection Offer (“RIO”) proposal to ITRB to be evaluated.

Subsequently, ITRB in its letters No. 60/BRTI/III/2014 dated March 10, 2014 and No. 125/BRTI/IV/2014 dated April 24, 2014 approved Telkomsel and the Company’s revision of RIO regarding the interconnection tariff.

d. Network lease tariffs

Through MoCI Decree No. 03/PER/M.KOMINFO/1/2007 dated January 26, 2007 concerning “Network Lease”, the Government regulated the form, type, tariff structure, and tariff formula for services of network lease. Pursuant to the MoCI Decree, the Director General of Post and Telecommunication issued its Letter No. 115 Year 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 lease, telephony services, and other multimedia 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.

114

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

39 . SIGNIFICANT COMMITMENTS AND AGREEMENTS

a. Capital expenditures

As of September 30 , 2015 , 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 (i n millions)	Equivalent Equivalent
Rupiah	-	9,283 ,
U.S. dollar	402	5,895
Euro	0.26	4
Total		15,182

The above balance includes the following significant agreements

(i) The Company (continued)

| Contracting parties | Initial date of
agreement | Significant
provisions of the agreement |
| --- | --- | --- |
| The Company and PT Industri
Telekomunikasi Indonesia | December 30, 2010 | Procurement
and installation agreement for cooper wire access modernization through
Trade In/Trade Off method |
| The Company and PT Len Industri (Persero) | March 29, 2012 | Procurement and installation agreement for
cooper wire access modernization through Trade In/Trade Off method |
| The Company and JF DJAFA Consortium | November 14, 2012 | Procurement and installation agreement of
OSP FTTH DIVA Regional II |
| The Company and ASN-PT Lintas Consortium | May 6, 2013 | Procurement and installation agreement of
Sulawesi Maluku Papua Cable System (SMPCS) project |
| The Company and NEC Corp-PT NEC Indonesia
Consortium | May 28, 2013 | Procurement and installation of SMPCS
package-2 |
| The Company and PT Cisco Technologies
Indonesia | November 14, 2013 | The partnership for procurement and
installation agreement of WIFI CISCO |
| The Company and PT
NEC Indonesia | November 29,
2013 | Procurement and
installation agreement IP Radio for Backhaul Node-B Telkomsel Packet 3
Platform NEC |
| The Company and PT Huawei Tech
Investment | March 1 3 , 201 4 | Telkom-3 Substitution (T3S) Satellite
System |

115

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

39 . SIGNIFICANT COMMITMENTS AND AGREEMENTS (continued)

a. Capital expenditures (continued)

(i) The Company (continued)

| Contracting parties | Initial date of
agreement | Significant
provisions of the agreement |
| --- | --- | --- |
| The Company and Thales Alenia Space France | July 14, 2014 | Telkom-3 Substitution (T3S) Satellite
System |
| The Company and Qnet Indonesia | July 22, 2014 | Procurement and installation of SKKL
Broadband Network Division |
| The Company and PT Huawei Tech
Investment | October 24 , 201 4 | Procurement and
installation Access Point Indonesia WIFI Platform Huawei |
| Telkom Malaysia
Berhad, Telin, Alcatel-Lucent Submarine Networks and NEC
Corporation | January 30,
2015 | Procurement and
installation Southeast Asia – Middle East – Western Europe 5 Cable System
(SEA – ME - WE 5) |

(ii) Telkomsel

| Contracting parties | Initial date of agreement | Significant
provisions of the agreement |
| --- | --- | --- |
| Telkomsel, PT
Ericsson Indonesia, Ericsson AB, PT Nokia Siemens Networks, NSN 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 c ombined 2G
and 3G CS Core Network |
| Telkomsel, PT
Ericsson Indonesia, Ericsson AB, PT Nokia Siemens Networks, NSN Oy, Huawei
International Pte. Ltd., PT Huawei and PT ZTE Indonesia | March and Jun e 2009 | 2G BSS and 3G UTRAN R oll o ut agreement for the
provision of 2G
GSM BSS and 3G UMTS Radio Access Network |
| Telkomsel, PT Packet
Systems Indonesia and PT
Huawei | February 3, 2010 | Maintenance and
procurement of equipment and related service agreement for Next Generation
Convergence IP RAN Rollout and Technical Support |
| Telkomsel, PT Dimension Data Indonesia
and PT
Huawei | February 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 | February 8, 2010 | Online Charging
System (“OCS”) and Service Control Points (“SCP”) System Solution
Development Agreement |
| Telkomsel and PT Application Solutions | February 8,
2010 | Technical Support Agreement to provide
technical support services for the OCS and SCP |
| Telkomsel,
Amdocs Software Solutions Limited Liability Company and PT Application
Solutions | July 5, 2011 | Development
and Rollout agreement for Customer Relationship Management and Contact Center
solutions |

116

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

39 . SIGNIFICANT COMMITMENTS AND AGREEMENTS (continued)

a. Capital expenditures (continued)

(ii) Telkomsel (continued)

| Contracting parties | Initial date of agreement | Significant
provisions of the agreement |
| --- | --- | --- |
| Telkomsel
and PT
Ericsson Indonesia | March 25, 2013 | Technical
Support Agreement (TSA) for the procurement of Gateway GPRS Support Node
(“GGSN”) Service Complex agreement |
| Telkomsel
and Wipro Limited, Wipro Singapore Pte. Ltd. and PT WT Indonesia | April 23, 2013 | Development
and procurement of OSDSS Solution agreement |
| Telkomsel
and PT
Ericsson Indonesia | October 22, 2013 | Procurement
of GGSN Service Complex Rollout agreement |

(iii) GSD

| Contracting parties | Initial date of agreement | Significant
provisions of the agreement |
| --- | --- | --- |
| TLT (Subsidiary of GSD) and PT Adhi Karya | November 6, 20 12 | Service arrangement structure and main contractor
architecture for Telkom Landmark Tower Building development project |

b. Borrowings and other credit facilities

(i) As of September 30 , 2015 , the Company has bank guarantee facilities for tender bond, performance bond, maintenance bond, deposit guarantee and advance payment bond for various projects of the Company, as follows:

| Lenders | Total facility | Maturity | Currency | Facility
utilized — Original currency (in millions) | Rupiah equivalent |
| --- | --- | --- | --- | --- | --- |
| BRI | 350 | March 14, 2016 | Rp | - | 8 7 |
| | | | US$ | 0 | 3 |
| BNI | 250 | March 3 1 , 2016 | Rp | - | 79 |
| | | | US$ | 0 | 2 |
| Bank Mandiri | 150 | December 2 3 , 2015 | Rp | - | 22 |
| | | | US$ | 0 | 3 |
| Total | 750 | | | | 196 |

117

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

39 . SIGNIFICANT COMMITMENTS AND AGREEMENTS (continued)

b. Borrowings and other credit facilities (continued)

(ii) Telkomsel has a US$3 million bond and bank guarantee and standby letter of credit facilit ies with SCB, Jakarta. The facilities will expire on July 31, 201 6 . Under these facilities, as of September 30 , 2015 , Telkomsel has issued a bank guarantee of Rp 20 billion (equivalent to US$ 1.4 million) for a 3G performance bond (Note 39 c.i). The bank guarantee is valid until March 24, 2016 .

Telkomsel has a Rp 5 00 billion bank guarantee facilitiy with BRI. The facility will expire on March 25 , 201 6 . Under this facility, as of September 30 , 2015 , Telkomsel has issued a bank guarantee of Rp 317 billion (equivalent to US $22 million) as payment commitment guarantee for annual right of usage fee valid until March 31, 2016 and Rp 20 billion (equivalent to US $1.4 million) for a 3G performance guarantee.

Telkomsel has a Rp150 billion bank guarantee facility with BCA. The facility will expire on April 15, 2016.

Telkomsel has also a Rp100 billion bank guarantee facility with BNI. The facility will expire on December 11, 201 5 . Telkomsel uses this facility to replace the time deposit required as guaranty for the USO program amounting to Rp 53 billion (Note 39c.v) .

(iii) TII has a US$15 million bank guarantee from Bank Mandiri. The facility expires on December 1 8 , 201 5 . The outstanding bank guarantee facility as of September 30 , 2015 amount ing to US$10 million .

c. Others

(i) 3G license

With reference to the Decision Letters No. 07/PER/M.KOMINFO/2/2006, No. 268/KEP/M.KOMINFO/9/2009 and No. 191 year 2013 of the MoCI (Note 2i), Telkomsel is required, among other things, to:

Pay an annual BHP fee which is calculated based on a certain 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 DGPI. The BHP fee is payable annually up to the expiry date of the license.
Provide roaming access for the existing other 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 Rp20 billion or 5% of the annual fee to be paid for the subsequent year, whichever is higher.

118

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

39 . SIGNIFICANT COMMITMENTS AND AGREEMENTS (continued)

c. Others (continued)

(ii) Radio Frequency Usage

Based on the Decree No. 76 dated December 15, 2010 of the Government of the Republic of Indonesia, which amended Decree No. 7 dated January 16, 2009, the annual frequency usage fees for bandwidths 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, the Company and Telkomsel paid the first , second, third and forth year annual frequency usage fees in 2010 , 2011, 201 2 and 2013 , respectively.

In order to maximize its business opportunities from the group synergy, the Company restructured its fixed wireless business unit by terminating the respective fixed wireless telecommunication network services and transferring the fixed wireless business and subscribers to Telkomsel. On June 27, 2014, the Company signed a Conditional Business Transfer Agreement with Telkomsel to transfer such business and subscribers to Telkomsel (Notes 5 and 3 6 ).

Based on Decision Letter No. 934 dated September 26, 2014, the MoCI approved t he transfer of the Company’s frequency usage license on radio frequency spectrum of 800 MHz, specifically on spectrum of 880-887.5 MHz paired with 925-932.5 MHz, to Telkomsel, Telkomsel can use the radio frequency spectrum from the time the decision letter was issued.

During the trans ition p eriod , the Company is still able to use the radio frequency spectrum of 880-887.5 MHz paired with 925-932.5 MHz until December 14, 2015.

Based on Decision Letters No. 940 dated September 26, 2014, MoCI determined that the fifth year (Y5), 2014, annual frequency usage fee of Telkomsel was Rp2,198 billion. The fee includes frequency usage fee transfe r red from Company to Telkomsel and was paid in December 2014 .

T he Company recorded a restructuring provision of Rp 208 billion as of September 30, 2015 . The provision relates to the benefits provided in “Upgrade Telkomflexi” program that was introduced to encourage Telkom Flexi subscribers to migrate to Telkomsel services. The program was publicly announced on October 3, 2014. The restructuring is expected to be completed not later than December 14, 2015.

On July 6, 2015, Telkomsel received Decision Letter No.644 Year 2015 dated June 30, 2015, of the MoCI, which replaced Decision Letter No.42 Year 2014 dated January 29, 2014, the MoCI granted Telkomsel the rights to provide:

(i) Mobile telecommunication services with radio frequency bandwidth in the 800 MHz, 900 MHz and 1800 MHz bands;

(ii) Mobile telecommunication services IMT-2000 with radio frequency bandwidth in the 2.1 GHz bands (3G); and

(iii) Basic telecommunication services

119

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

39 . SIGNIFICANT COMMITMENTS AND AGREEMENTS (continued)

Others (continued)

(iii ) Future m inimum l ease p ayments of o perating l ease

The Group entered into non-cancelable lease agreements with both third and related parties. The lease agreements cover leased lines, telecommunication equipment and land and building with terms ranging from 1 to 10 years and with expiry dates between 20 1 5 and 20 2 4 . Periods maybe extended based on the agreement by both parties.

Future minimum lease payments under the operating lease agreements as of September 30 , 2015 are as follows:

	Total	Less than 1 year	1-5 years	More than 5 years
As lessee	29,819	3,767	11,384	14,668
As lessor	3,549	994	1,923	632

(iv ) 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 and Decree No.05/PER/M.KOMINFO/2/2007 dated February 28, 2007 , the contribution was changed to 1.25% of gross revenues, net of bad debts and/or interconnection charges and/or connection charges. Subsequently, in December 2012, Decre e No. 05/PER/M.KOMINFO/2/2007 was replaced by Decree No. 45 year 2012 of the MoCi which was effective from January 22, 2013. The latest Decree stipulates, among other things, the exclusion of certain revenues that are not considered as part of gross revenues as a basis to calculate the USO charged, and changed the payment period which was previously on a quarterly basis to become quarterly or semi-annually.

120

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

39 . SIGNIFICANT COMMITMENTS AND AGREEMENTS (continued)

c. Others (continued)

(iv ) USO (continued)

Based on MoCI Decree No. 32/PER/M.KOMINFO/10/2008 dated October 10, 2008 (as amended by Decree No.03/PER/M.KOMINFO/2/2010 dated February 1, 2010) 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 b y 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, based on Decree No. 18/PER/M.KOMINFO/11/2010 dated November 19, 2010 of MoCI, BTIP was changed to Balai Penyedia dan Pengelola Pembiayaan Telekomunikasi dan Informatika (“BPPPTI”)

a. Company

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 Rp322 billion, covering Nanggroe Aceh Darussalam, North Sumatera, North Sulawesi, Gorontalo, Central Sulawesi, South Sulawesi and South East Sulawesi.

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 Rp528 billion, covering Jambi, Riau, Kepulauan Riau, North Sulawesi, Central Sulawesi, Gorontalo, West Sulawesi, South East Sulawesi, Central Kalimantan, South Sulawesi, Papua and West Irian Jaya.

b. Telkomsel

On January 16 and 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 Rp1.66 trillion, covering all Indonesian territories except Sulawesi, Maluku and Papua. Accordingly, Telkomsel obtain local fixed-line licenses and the right to use radio frequency in the 2 , 390 MHz – 2 , 400 MHz bandwith.

Subsequently, in 2010 and 2011, the agreements with BTIP were amended, which amendments cover, among other things, changing the price to Rp1.76 trillion and changing the term of payment from quarterly to monthly or quarterly.

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

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 a provider of the USO Program in the border areas for all packages (package 1 to package 13) with a total price of Rp830 billion. On such date, Telkomsel was also selected by BPPPTI as a provider of the USO Program (upgrading) of “Desa Pinter” or “Desa Punya Internet” for 1, 2 and 3 packages with a total price of Rp261 billion.

On September 30, 201 5 , the USO program for packages 1, 2, 3, 6 and 7 ceased. On September 1 8, 2014, Telkomsel filed an arbitration claim with the Indonesia National Board of Arbitration for the settlement of the outstanding receivable from BPPPTI. As of September 30 , 2015, the outstanding accounts receivable balance from those USO program amounted to Rp107.8 billion. As of the issuance date of approval and authorization for the issuance of the consolidated financial statements, the arbitration claim is still in process. f Arbitration for the settlement of the outstanding receivable from BPPPTI. As of June 30 , 2015, the outstanding accounts receivable balance from those USO program amounted to Rp107.8 billion. As of the issuance date of approval and authorization for the issuance of the consolidated financial statements, the arbitration claim is still in process.

121

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

39 . SIGNIFICANT COMMITMENTS AND AGREEMENTS (continued)

c. Others (continued)

(iv ) USO (continued)

For nine months period ended September 30 , 2015 and 2014, the Company and Telkomsel recognized the following amounts:

	201 5		201 4
Revenues
Construction	-		0
Operation
of telecommunication service centre	20		139
Profits
Construction	0		0
Operation
of telecommunication service centre	( 209	)	(74	)

As of September 30 , 2015 and December 31, 2014 , the Company’s and Telkomsel’s trade receivables from the USO programs which are measured at amortized cost using the effective interest rate method amount to Rp 663 billion and Rp655 billion , respectively (Notes 6 and 1 1 ).

( v) Trademark License Agreement

On June 23, 2014, TII signed an agreement with Mobile Telecommunication Company (Zain Saudi Arabia) for the telecommunications product and service trademark license agreement over a 5-year term has elapsed from the effective date. Subsequently, on November 7, 2014, TII signed an agreement with Al Lama Group for distributions and sales of SIM Card and exploration of other business opportunities in Saudi Arabia.

4 0 . CONTINGENCIES

In the ordinary course of business, the Group has 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 Group has recognized provision for losses amounting to Rp 25 billion as of September 30 , 2015 .

a. 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 violated Law No. 5 year 1999 article 5 and charged the Company and Telkomsel penalty in the amounts of Rp18 billion and Rp25 billion, respectively.

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

Due to the filing of case by operators in various courts, the KPPU subsequently requested the Supreme Court (SC) to consolidate the cases into the Central Jakarta District Court. Based on the SC’s decision letter dated April 12, 2011, the SC appointed the Central Jakarta District Court to investigate and resolve the case. On May 27, 2015 Central Jakarta District Court decided to win the Company, Telkomsel and seven other local operators upon the case. On July 23, 2015 the KPPU filed a cassation to the Supreme Court relating to allegation of SMS Cartel Practices.

As of the date of approval and authorization for the issuance of the consolidated financial statements, there has not been any notification on the case from the SC

122

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

4 0 . CONTINGENCIES (continued)

b. The Company is a defendant in a case filed in Makassar District Court by Andi Jindar Pakki and his affiliates over a land property at Jl. A.P. Pettarani. On May 8, 2013, the court pronounced its verdict and ordered the Company to pay fair compensation or to vacate and surrender the disputed land to the plaintiffs.

On May 20, 2013, the Company filed an appeal to the Makassar High Court, objecting to the District Court’s ruling. In December 2013, the Makassar High Court pronounced its verdict that was favorable to the plaintiffs and the Company filed an appeal to the Supreme Court. On January 9, 2015, the Company received the SC Notice No. 226/Pdt.G/2012/PN.Mks. regarding the case in which rejected the Company’s appeal. On February 5, 2015, the Company requested for a judicial review of the case by the SC .

As of the date of approval and authorization for the issuance of the consolidated financial statements, there has not been any notification on the case from the SC.

4 1 . ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

Assets and liabilities denominated in foreign currencies are as follows

	September 30, 2015 — U.S. dollar (in millions)		Japanese yen (in millions)		Others* (in millions)		Rupiah equivalent (in billions)
Assets
Cash and cash equivalents	528.56		8.38		17.07		7.951
Other current financial assets	30.47		-		-		446
Trade receivables
Related parties	1.40		-		-		20
Third parties	106.32		-		3.49		1, 610
Other receivables	0.32		-		0.11		6
Advances and other non-current assets	3.87		-		0.04		58
Total assets	670.94		8.38		20.71		10.091
Liabilities
Trade payables
Related parties	( 1.61	)	-		(0.1 3	)	( 25	)
Third parties	( 169.72	)	( 16.40	)	( 4.41	)	( 2.555	)
Other payables	( 10.01	)	(0.01	)	(0. 39	)	(1 5 3	)
Accrued expenses	( 35.80	)	(83.02	)	1.20		(5 1 6	)
Advances from customers and suppliers	0. 89		-		(0.05	)	(14)
Current maturities of long-term
liabilities	(28. 71	)	(767.90	)	-		( 515	)
Promissory notes	( 2.68	)	-		-		( 39	)
Long-term liabilities - net of current
maturities	( 196.93	)	(6,527.13	)	-		(3, 682	)
Total liabilities	( 446.35 ,	)	( 7,394.46	)	( 3.78	)	(7, 499	)
Assets ( Liabilities ) - net	224.59		( 7,386.08	)	16. 93		( 2.592	)

Assets and liabilities denominated in other foreign currencies are presented as U.S. dollar equivalents using the buy and sell rates quoted by Reuters prevailing at the end of the reporting period.

123

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

4 1 . ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES (continued)

	December 31, 2014 — U.S. dollar (in millions)		Japanese yen (in millions)		Others* (in millions)		Rupiah equivalent (in billions)
Assets
Cash and cash
equivalents	364.47		8.45		15.59		4,721
Other current financial
assets	15.50		-		-		193
Trade receivables
Related parties	2.05		-		-		26
Third parties	72 . 88		-		2.83		938
Other receivables	0.39		-		0.11		6
Advances and other
non-current assets	4.06		-		0.05		52
Total assets	459.35		8.45		18.58		5,936
Liabilities
Trade payables
Related parties	(0.21	)	-		(0.16	)	(5	)
Third parties	(215.68	)	(19.36	)	(3.41	)	(2,725	)
Other payables	(3.42	)	-		(1.15	)	(57	)
Accrued expenses	(65.91	)	(27.39	)	(1.02	)	(836	)
Short - term bank loan	(100.00	)	-		-		(1,244	)
Advances from
customers and suppliers	(2.41	)	-		(0.07	)	(31	)
Current maturities
of long-term liabilities	(34.60	)	(767.90	)	-		(510	)
Promissory notes	(7.16	)	-		-		(88	)
Long-term
liabilities - net of current maturities	(71.00	)	(6,911.08	)	-		(1,597	)
Total liabilities	(500.39	)	(7,725.73	)	(5.81	)	(7,093	)
Assets ( Liabilities ) - net	(41.04	)	(7,717.28	)	12.77		(1,157	)

Assets and liabilities denominated in other foreign currencies are presented as U.S. dollar equivalents using the buy and sell rates quoted by Reuters prevailing at the end of the reporting period.

The Group’s 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 Group reports monetary assets and liabilities in foreign currencies as of September 30 , 2015 using the exchange rates on October 26 , 2015 , the unrealized foreign exchange loss amounted to Rp172 billion.

4 2 . FINANCIAL RISK MANAGEMENT

Financial risk management

The Group’s activities expose it to a variety of financial risks such as market risks (including foreign exchange risk and interest rate risk), credit risk and liquidity risk. Overall, the Group’s financial risk management program is intended to minimize losses on the financial assets and financial liabilities arising from fluctuation of foreign currency exchange rates and the fluctuation of interest rates. Management has a written policy for foreign currency risk management mainly on time deposit placements and hedging to cover foreign currency risk exposures for periods ranging from 3 up to 12 months.

Financial risk management is carried out by t he Corporate Finance unit under policies approved by the Board of Directors. The Corporate Finance unit identifies, evaluates and hedges financial risks.

124

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

4 2 . FINANCIAL RISK MANAGEMENT (continued)

Financial risk management (continued)

a. Foreign exchange risk

The Group is exposed to foreign exchange risk on sales, purchases and borrowings that are denominated in foreign currencies. The foreign currency denominated transactions are primarily in U.S. dollars and Japanese y en. The Group ’s exposure s to other foreign exchange rates are not material.

Increasing risks of foreign currency exchange rates on the obligations of t he Group are expected to be offset by the effects of the exchange rates on time deposits and receivables in foreign currencies that are equal to at least 25% of the outstanding current foreign currency liabilities.

The following table presents t he Group ’s financial assets and financial liabilities exposure to foreign currency risk:

	September 30 , 2015 — U.S. dollar (in billions)		Japanese yen (in billions)		December 31, 2014 — U.S. dollar (in billions)		Japanese yen (in billions)
Financial assets	0. 67		0.01		0.4 6		0.01
Financial liabilities	(0. 45	)	(7. 40	)	(0.50	)	(7.73	)
Net exposure	0.22		(7.3 9	)	(0.0 4	)	(7.72	)

Sensitivity analysis

A strengthening of the U .S.dollar and Japanese y en , as indicated below, against the rupiah at September 30 , 2015 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 Group considered to be reasonably possible at the reporting date. The analysis assumes that all other variables, in particular interest rates, remain constant..

	Equity/loss
September 30 , 2015
U.S. dollar (1%
strengthening)	32
Japanese yen (5%
strengthening)	(4 5	)

A weakening of the U .S.d ollar and Japanese y en against the rupiah at September 30 , 2015 would have had an 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 Group is exposed to cha n ges in debt and equity market prices related to available-for-sale investments carried at fair value. Gain s and losses arising from changes in the fair value of available-for-sale investments are recognized in equity.

The performance of t he Group ’s available-for-sale investments is monitored periodically, together with a regular asses s ment of their relevance to t he Group ’s long - term strategic plans.

As of September 30 , 2015 , management considered the price risk for the Group’s 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.

125

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

4 2 . FINANCIAL RISK MANAGEMENT (continued)

c. Interest rate risk

Interest rate fluctuation is monitored to minimize any negative impact to financial p erformance . Borrowings at variable interest rates expose t he Group to interest rate risk (Notes 1 6 , 1 7 , 18 , 19 and 2 0). To measure market risk pertaining to fluctuations in interest rates, t he Group primarily use s interest margin and maturity profile of the financial assets and liabilities based on changing schedule of the interest rate.

At reporting date, the interest rate profile of the Group’s interest-bearing borrowings was as follows:

Fixed rate borrowings	September 30, 2015 — ( 16,831	)	December 31, 2014 — (10,113	)
Variable rate borrowings	(1 8 , 16 6	)	(13,339	)

Sensitivity analysis for variable rate borrowings

A s of September 30 , 2015 , a decrease (increase) by 25 basis points in interest rates of variable rate borrowings would have increased (decreased) equity and profit or loss by Rp 45 billion, respectively. This analysis assumes that all other variables, in particular foreign currency rates, remain constant.

d. Credit risk

The following table presents the maximum exposure to credit risk of the Group’s financial assets:

	September 30, 2015	December 31, 2014 (Restated)
Cash and cash equivalents	26 ,2 64	17,6 72
Other current financial assets	2,9 97	2,797
Trade and other receivables, net	9 , 870	7,380
Advances and other non-current assets	535	546
Total	3 9 , 666	28,395

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

Trade and other receivables do not have any major concentration risk whereas no customer r eceivable balances exceed 4 % of trade receivables of September 30, 2015 .

Management is confident in its ability to continue to control and sustain minimal exposure to credit risk given that t he Group ha s recogniz ed sufficient provision for impairment of receivables to cover incurred loss arising from uncollectible receivables based on existing historical data on credit losses .

e. Liquidity risk

Liquidity risk arises in situations where t he Group ha s difficulties in fulfilling financial liabilities when they become due.

126

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

4 2 . FINANCIAL RISK MANAGEMENT (continued)

e. Liquidity risk (continue)

Prudent liquidity risk management implies maintaining sufficient cash in order to meet t he Group’ s financial obligations . The Group continuously perform s an analysis to monitor financial position ratios, such as liquidity ratios and debt -to- equity ratios , against debt covenant requirements.

The following is the maturity profile of the Group’s financial liabilities:

	Carrying amount	Contractual cash flows		201 5		201 6		201 7		201 8		201 9 and thereafter
September 30, 2015
Trade and other payables	13,5 00	(13, 500	)	(13,5 00	)	-		-		-		-
Accrued expenses	8,128	( 8,128	)	( 8,128	)	-		-		-		-
Loans and other borrowings
Bank loans	19,069	(2 3,898	)	( 5,544	)	( 1,340	)	(3, 919	)	(8, 418	)	( 4,677	)
Bonds and notes	9,560	( 21,198	)	(1, 039	)	( 258	)	( 1,017	)	( 1,012	)	(17, 872	)
Obligations unde finance
leases	4,694	( 6,281	)	( 1,011	)	( 253	)	( 971	)	( 904	)	(3,142	)
Two-step loans	1, 674	( 1,986	)	( 307	)	( 109	)	( 293	)	( 258	)	(1,019	)
Total	56, 625	( 74,991	)	(29, 529	)	( 1,960	)	( 6,200	)	(10, 592	)	(26, 710	)

	Carrying amount	Contractual cash flows		201 4		201 5		201 6		201 7		201 8 and thereafter
December 31, 2014 (Restated)
Trade and other payables	12,476	(12,476	)	(12,476	)	-		-		-		-
Accrued expenses	5,211	(5,211	)	(5,211	)	-		-		-		-
Loans and other borrowings
Bank loans	13,740	(16,468	)	(6,830	)	(3,172	)	(2,552	)	(2,099	)	(1,815)
Obligations under finance
leases	4,789	(6,535	)	(975	)	(927	)	(898	)	(830	)	(2,905	)
Bonds and notes	3,308	(4,673	)	(1,370	)	(251	)	(229	)	(228	)	(2,595	)
Two-step loans	1,615	(1,944	)	(282	)	(274	)	(264	)	(230	)	(894	)
Total	41,139	(47,307)		(27,144)		(4,624	)	(3,943	)	(3,387	)	(8,209)

The difference between the carrying amount and the contractual cash flows is interest value.

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 arm’s length transaction.

The Group 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, accrued expenses, and short-term bank loans), long-term investments, advances and other non-current assets are considered to approximate their carrying amount s as the impact of discounting is not significant .

127

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

4 2 . FINANCIAL RISK MANAGEMENT (continued)

Fair value of financial assets and financial liabilities (continued)

a . Fair value measurement (continued)

(ii) The fair values of long-term financial asssets and financial liabilities (other non-current assets (long-term receivables and restricted cash) and liabilities) approximate their carrying amounts as they were measured based on the discounted future contractual cash flows.

(iii) Available-for-sale financial assets primarily consist 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.

(i v ) The fair values of long-term financial liabilities are estimated by discounting the future contractual cash flows of each liability at rates offered to t he Group for similar liabilities of comparable maturities by the bankers of t he Group, 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 Group would record upon disposal/termination of the financial assets and liabilities.

b. Classification and fair value

The following table presents the carrying value and estimated fair values of the Group's financial assets and liabilities based on their classifications , other than those with carrying amounts that are reasonable approximation of fair values :

	September 30 , 2015 — Trading	Loans and receivables	Available for sale	Other financial liabilities		Total carrying amount		Fair value
Cash and cash equivalents	26, 264	-	-	-		26,264		26,264
Other current financial assets	2,834	-	163	-		2,997		2,997
Trade and other receivables,
net	9,870	-	-	-		9,870		9,870
Advances and other non-current
assets	535	-	-	-		535		535
Total financial assets	39,503	-	163	-		39,666		39,666
Trade and other payables	-	-	-	(13,500	)	(13,500	)	(13,500	)
Accrued expenses	-	-	-	(8,128	)	(8,128	)	(8,128	)
Loans and other borrowings
Short-term bank loans	-	-	-	(427	)	(427	)	(427	)
Long-term bank
loans	-	-	-	(18,642	)	(18,642	)	(18,768	)
Obligation under finance lease	-	-	-	(4,694	)	(4,694	)	(4,694	)
Bonds and notes	-	-	-	(9,560	)	(9,560	)	(9,290	)
Two-step loans	-	-	-	(1, 674	)	(1, 674	)	(1, 705	)
Total financial liabilities	-	-	-	(56,625	)	(56,625	)	(56,512	)

| | December 31,
2014 (Restated) — Trading | Loans and receivables | Available for sale | Other financial liabilities | Total carrying amount | Fair value |
| --- | --- | --- | --- | --- | --- | --- |
| Cash and cash equivalents | - | 17,6 7 2 | - | - | 17,6 7 2 | 17,6 7 2 |
| Other current financial assets | - | 2,543 | 254 | - | 2,797 | 2,797 |
| Trade and other receivables,
net | - | 7,380 | - | - | 7,380 | 7,380 |
| Advances and other non-current
assets | - | 546 | - | - | 546 | 546 |
| Total financial assets | - | 28,141 | 254 | - | 28,395 | 28,395 |

128

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

4 2 . FINANCIAL RISK MANAGEMENT (continued)

Fair value of financial assets and financial liabilities (continued)

b. Classification and fair value (continued)

	December 31, 2014 — Trading	Loans and receivables	Available for sale	Other financial liabilities		Total carrying amount		Fair value
Trade and other
payables	-	-	-	(12,476	)	(12,476	)	(12,476	)
Accrued expenses	-	-	-	(5,211	)	(5,211	)	(5,211	)
Loans and other
borrowings
Short-term
bank loans	-	-	-	(1,810	)	(1,810	)	(1,810	)
Long-term
bank loans	-	-	-	(11,930	)	(11,930	)	(11,787	)
Obligation
under finance lease	-	-	-	(4,789	)	(4,789	)	(4,789	)
Bonds
and notes	-	-	-	(3,308	)	(3,308	)	(3,355	)
Two-step
loans	-	-	-	(1,615	)	(1,615	)	(1,650	)
Total financial
liabilities	-	-	-	( 4 1,139	)	(41,139	)	(41,078)

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 as explained below:

| c | September 30 , 2015 | 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
securities | 260 | 55 | 205 | - |
| Fair value to
profit or loss securities | 290 | - | - | 290 |
| Total | 5 5 0 | 55 | 205 | 290 |

| | December 31,
201 4 | | | |
| --- | --- | --- | --- | --- |
| | | 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
securities | 254 | 52 | 202 | - |
| Fair value to
profit or loss securities | 2 90 | - | - | 2 90 |
| Total | 54 4 | 52 | 202 | 2 90 |

129

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

4 2 . FINANCIAL RISK MANAGEMENT (continued)

Fair value of financial assets and financial liabilities (continued)

c. Fair value hierarchy (continued)

Available-for-sale financial assets primarily consist of 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.

Financial asset at fair value through profit or loss represens the Put Option on the 20% remaining ownership in Indonusa which was received as part of the divestment considerations. Since the fair value is not observable and valuation technique is used to determine the fair value, this financial asset is classified as level 3.

M utual 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 and put option 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 balances for items measured at fair value using significant unobservable inputs (level 3) as of September 30 , 2015 and 2014 are as follows:

	201 5	201 4
Balance at January 1	290	297
Purchases	-	-
Included in consolidated statement of
comprehensive Income	-	-
Realized loss - recognized in profit or loss	-	-
Unrealized loss - recognized in other comprehensive income	-	-
Redemption	-	-
Balance at June
30	290	297

4 3 . CAPITAL MANAGEMENT

The capital structure of the Group is as follows:

| | September
3 0 , 2015 — Amount | Portion | December
31, 2014 (Restated) — Amount | Portion |
| --- | --- | --- | --- | --- |
| Short-term debts | 427 | 0.40% | 1,810 | 1.98% |
| Long-term debts | 34,570 | 32.68% | 21,642 | 23.72% |
| Total debts | 34,997 | 33.08% | 23,452 | 25.70% |
| Equity attributable
to owners | 70,791 | 66.92% | 67,816 | 74.30% |
| Total | 105,788 | 100.00% | 91,268 | 100.00% |

130

These consolidated financial statements are originally issued in Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 3 0 , 2015 and for the Nine Months Period Then Ended (Unaudited)

(Figures in tables are expressed in billions of R upiah, unless otherwise stated)

Table of Contents

4 3 . CAPITAL MANAGEMENT (continued)

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

Periodically, the Group conducts debt valuation to assess possibilities of refinancing existing debts with new ones, which have more efficient cost that will lead to more optimized cost-of-debt. In case of idle cash with limited investment opportunities, the Group will consider buying back its shares of stock or paying dividend to its stockholders.

In addition to complying with loan covenants, the Group also maintains its capital structure at the level it believes will not risk its credit rating and which is comparable 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 Group capital structure and review the effectiveness of the Group ’s debts. The Group 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 ratio is comparable or better than that of regional area entities in the telecommunications industry.

The Group ’s debt-to-equity ratio as of September 3 0 , 2015 and December 31, 2014 is as follows:

| Total
interest-bearing debts | September 31, 201 5 — 34,997 | | December 31, 201 4 (Restated) — 23,452 | |
| --- | --- | --- | --- | --- |
| Less : cash and cash equivalents | (26,264 | ) | (17, 67 2 | ) |
| Net debts | 8,733 | | 5,780 | |
| Total equity
attributable to owners | 70,791 | | 67,816 | |
| Net debt-to-equity
ratio | 12.34% | | 8.52% | |

As stated in Note 1 8 , 19 and 2 0 , the Group is required to maintain a certain debt-to-equity ratio and debt service coverage ratio by the lenders. During the six months period ended September 3 0 , 2015 and for the year ended December 31, 2014 , the Company has complied with the externally imposed capital requirements.

4 4 . SUPPLEMENTAL CASH FLOWS INFORMATION

The non-cash investing activities for the years ended September 30 , 2015 and 2014 are as follows:

	September 3 0 , 201 5	September 3 0 , 201 4
Acquisition of
property and equipment credited to:
Trade
payables	4,045	7,523
Obligations
under finance leases	554	372

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