UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form
| REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| OR |
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the fiscal year ended | |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| OR |
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
Date of event requiring this shell company report |
Commission file number
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)
Republic of
(Jurisdiction of incorporation or organization)
(Address of principal executive offices)
(62) (
(62) (
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act.
Title of Each class |
| Trading Symbol(s) |
| Name of each exchange on which registered |
Securities registered or to be registered pursuant to Section 12(g) of the Act.
None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
None
Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the Annual Report:
Series A Dwiwarna Share, par value 50 Rupiah per share | |
Series B Shares, par value 50 Rupiah per share |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Yes ☐
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.:
Accelerated filer ☐ | Non-accelerated filer ☐ Emerging growth company |
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to the extended transition period for complying with any new or revised financial accounting standard provided pursuant to Section 13(a) of the Exchange Act. ☐
The term "new or revised financial accounting standard" refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ¨
Indicate by checkmark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP ¨
If "Other" has been checked in response to the previous question, indicate by checkmark which financial statement item the registrant has elected to follow.
Item 17 ☐ Item 18 ☐
If this is an Annual Report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
*The Series B Shares were registered in connection with the registration of American Depositary Shares ("ADSs"). The Series B Shares are not listed for trading on the New York Stock Exchange
TABLE OF CONTENTS
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DEFINITIONS
3G
The generic term for third generation mobile telecommunications technology. 3G offers high speed connections to cellular phones and other mobile devices, enabling video conference and other applications requiring broadband connectivity to the internet.
3.5G
A grouping of disparate mobile telephony and data technologies designed to provide better performance than 3G systems, as an interim step towards deployment of full 4G/LTE capability.
4G/LTE
A fourth-generation super-fast internet network technology based on IP that makes the process of data transfer much faster and more stable than 3.5G.
5G
A fifth generation of cellular mobile communications which targets high data rate, reduced latency, energy saving, cost reduction, higher system capacity and massive device connectivity.
5G Fixed Wireless Access Technology Roadmap
The strategic plan that outlines the deployment of 5G networks to provide high-speed, reliable wireless internet connectivity directly to homes and businesses.
ADRs
American depositary receipts which, if issued, represents our ADSs.
ADSs
Our American depositary shares, which are certificates traded on the New York Stock Exchange. Each of our ADSs represents 100 shares of common stock.
ADSL
Asymmetric digital subscriber line, a type of digital subscriber line (DSL) technology, a data communications technology that enables faster data transmission over copper telephone lines than a conventional voiceband modem can provide.
AI
Artificial intelligence, intelligence demonstrated by machines, as opposed to intelligence of humans and other animals.
APMK
Alat Pembayaran Menggunakan Kartu or card-based payment instruments, a payment instrument in the form of credit cards, ATM and/or debit cards.
ARPU
Average Revenue per User, a measure used primarily by telecommunications and networking companies which states how much revenue is generated by users on average during the relevant measurement period. It is defined as the total revenue from specified services divided by the number of users of such services.
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ASKALSI
Asosiasi Sistem Komunikasi Kabel Laut Seluruh Indonesia or Indonesian Association of Submarine Cable Communication Systems.
ATM
Automated Teller Machine.
A2P SMS messaging
Application-to-Person SMS messaging, a process by which an SMS message is produced from an application and is sent to a mobile subscriber. Businesses can use it for communicating with consumers, authenticating users of online services, and/or delivering time-sensitive alerts. Typical examples of A2P SMS messaging include marketing and promotional messages (e.g., loyalty programs and marketing notifications) and confirmations and alerts (e.g., banking notifications, critical alerts, SMS-based two factor authentication, automatic booking confirmations and reminders).
B2B
Business-to-business, arrangements and transactions between businesses.
B2C
Business-to-consumers, arrangements and transactions between businesses and consumers.
Backbone
The main telecommunications network consisting of transmission and switching facilities connecting several network access nodes. The transmission links between nodes and switching facilities include microwaves, submarine cables, satellites, fiber optic and other transmission technology.
Bandwidth
The capacity of a communication link.
Bapepam-LK
Badan Pengawas Pasar Modal dan Lembaga Keuangan, or the Indonesian Capital Market and Financial Institution Supervisory Agency, the predecessor to the OJK.
BHP
Biaya Hak Penggunaan or right of use fee, a fee that mobile operators pay to the Government in connection with their use of radio frequencies for their network.
BI
Bank Indonesia, the central bank of the Republic of Indonesia.
Bitstream
A continuous sequence of binary digits, consisting of 1s and 0s, that represents a flow of data being transmitted or stored.
BNG
Broadband Network Gateway, a pivotal device in broadband networks that authenticates users, assigns IP addresses, and manages traffic, ensuring reliable and consistent service delivery by ISPs.
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Broadband
A signaling method that includes or handles a relatively wide range (or band) of frequencies.
BRTI
The Badan Regulasi Telekomunikasi Indonesia, or Indonesian Telecommunications Regulatory Authority, a Government body in charge of regulating Indonesia's telecommunications sector.
BTS
Base Transceiver Station, equipment that transmits and receives radio telephony signals to and from other telecommunications systems.
Business Competition Law
Law No. 5 of 1999 on Prohibition of Monopolistic Practice and Unfair Business Competition, as amended by the Job Creation Law 2022 of the Republic of Indonesia.
BWA
Broadband Wireless Access, a technology that provides high speed wireless internet access or computer networking access over a wide area.
CDN
Content Delivery Network, a geographically distributed network of proxy servers and their data centers, which provides high availability and performance by distributing the service spatially relative to end-users.
CFU
Customer Facing Unit, an organizational unit similar to a strategic business unit that interacts with specific customer segments, has responsibility for their respective profit and loss, and which regroups subsidiaries and business portfolios relevant to the specific customer segments it is in charge of interacting with.
Common stock
Our Series B Shares having a par value of Rp50 per share.
COVID-19
The global 2019 novel coronavirus and its variants.
CPaaS
Communications Platform-as-a-Service, a cloud-based platform that provides the ability to customers to add real-time communication features to their business applications. SMS, voice, or other messaging capabilities are features that can be added to such business applications.
CPE
Customer Premises Equipment, any handset, receiver, set-top box, or other equipment used by the consumer of wireless, fixed line or broadband services, which is the property of the network operator and located on the customer's premises.
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DCS
Digital Communication System, a cellular system using GSM technology operating in the 1.8 GHz frequency.
DBPP
Defined Benefit Pension Plan, a type of pension plan in which an employer promises a specified monthly benefit on retirement that is predetermined by a formula based on the employee's earnings history, tenure of service and age, rather than depending on investment returns. It is considered 'defined' in the sense that the formula for computing the retirement benefits is known in advance.
DCPP
Defined Contribution Pension Plan, a type of retirement plan in which the amount of the employer's annual contribution is specified. Individual accounts are set up for participants and benefits are based on the amounts credited to these accounts (through the employer's contributions and, if applicable, the employee's contributions) plus any investment earnings on the money in the account. Only the employer's contributions to the account, and not future benefits, are guaranteed. In defined contribution plans, future benefits fluctuate on the basis of investment earnings.
Deposit Agreement
The deposit agreement entered by and among our Company, the Depositary for our ADSs and all owners and beneficial owners, from time to time, of ADRs issued under that agreement, dated November 21, 1995, as amended and supplemented, from time to time.
Depositary
Bank of New York Mellon Corporation, which serves as the depositary for our ADSs under the terms of the Deposit Agreement.
DevSecOps
Development-Security-Operations, an approach where developers, security experts, and IT operations teams work closely together from the start of a project to build security into the software at every step of its development and deployment.
DGPIO
The Director General of Post and Informatics Operations of the Republic of Indonesia, an official in MoCI who is responsible for overseeing and certifying the operations of postal services and information technology within Indonesia.
DGT
Directorate General of Taxes, a Government body under the Ministry of Finance of Indonesia that is responsible for developing taxation-related policies.
Digital life
The integration of digital technologies into daily routines and the consequent influence these technologies have on work patterns, communication, and overall lifestyle, facilitating a constant connection with the digital world.
DLD
Domestic Long Distance, a long-distance call service designed for customers who live in different areas within one country. These areas generally have different area codes.
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DTH
Direct-to-Home satellite broadcasting, the distribution of television signals from high-powered geostationary satellites to small dish antennas and satellite receivers in homes across the country.
Dwiwarna Share
The Series A Dwiwarna Share having a par value of Rp50 per share, which is held by the Government and provides special voting rights and veto rights over certain matters related to our corporate governance. For more information, see "Item 7. Major Shareholders and Related Party Transactions — Major Shareholders — Relationship with the Government and Government Agencies."
E-Commerce
Electronic commerce, the buying and selling of products or services over electronic systems such as the internet and other computer networks.
E-Money
Electronic money, money or script that is only exchanged electronically.
E-KYC
Electronic Know your Client, a process by which a customer's identity and address are verified electronically.
Earth Station
The antennae and associated equipment used to receive or transmit telecommunications signals via satellite.
EDGE
Enhanced Data rates for GSM Evolution, a digital mobile phone technology that allows improved data transmission rates as a backward-compatible extension of GSM.
Edge cloud
Cloud computing infrastructure and services that are located closer to the "edge" of the network, i.e., nearer to the devices and end-users who are utilizing them.
Eduvice program
Our Company's Electronic Device Donation for Education program, as part of its ESG initiatives.
ERM Online
Enterprise Risk Management Online, our Company's application for risk management.
ESG
Environmental, Social and Governance.
EU
The European Union.
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FANS
Fixed Access Network Sharing, a framework where multiple service providers share the same fixed network infrastructure to provide telecommunications services to end-users.
Fiber Optic
Cables using optical fiber and laser technology through which modulating light beams representing data are transmitted through thin filaments of glass, silica, or plastic.
Fintech
Products, services, and companies that employ or relate to digital and online technologies in the banking and financial services industries.
Fixed Line
Fixed wireline and fixed wireless.
Fixed Wireless
A local wireless transmission link using a cellular, microwave, or radio technology to connect customers at a fixed location to the local telephone exchange.
Fixed Wireline
A fixed wire or cable path linking a subscriber at a fixed location to a local exchange, usually with an individual phone number.
FLOU Cloud
Our cloud service, which is designed to support the digitalization of Indonesian startups, SMEs, enterprises, and government agencies.
FMC
Fixed-Mobile Convergence, a move in the telecommunications industry towards providing seamless connectivity by integrating fixed and wireless networks to deliver unified services to users.
FRAMES
Our Company's Fraud Management System.
FTTH
Fiber To The Home, the implementation of a fiber optic network that reaches up to the customer point (known as customer premises).
Future State Architecture
A conceptual blueprint that represents an organization's direction for technological development and transformation, planning the evolution of its systems to achieve strategic goals.
Gateway
A peripheral that bridges a packet-based network (IP) and a circuit-based network (PSTN).
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Gb
Gigabit, a unit of information used, for example, to quantify computer memory or storage capacity.
Gbps
Gigabits per second, a measure of speed for digital signal transmission expressed in billions of bits per second passing between equipment in a data transmission system.
GHG
Greenhouse gases.
GHz
Gigahertz, a unit of measure of frequency equal to one billion cycles per second. The hertz (symbol Hz) is the international standard unit of frequency defined as the number of cycles per second of a periodic phenomenon.
GMS
General Meeting of Shareholders, which may be an annual general meeting of shareholders ("AGMS") or an extraordinary general meeting of shareholders ("EGMS").
GPON
Gigabyte-Passive Optical Network, the most widely deployed type of passive optical network system that brings fiber optic cabling and signals all or most of the way to end users.
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GPRS
General Packet Radio Service, a data packet switching technology that allows information to be sent and received across a mobile network and only utilizes the network when there is data to be sent.
GSM
Global System for Mobile Telecommunications, a European standard for digital cellular telephone.
HAP
High Altitude Platform, a system comprising various aerial vehicles, such as balloons or drones, situated in the stratosphere and used for communication and observation purposes.
HDSPA
High-Speed Downlink Packet Access, a mobile telecommunications protocol that enhances 3G networks by enabling faster data transfer rates and improved network capacity.
ICT
Information and communications technology, an area concerned with information technology, telecommunications networking and services and other aspects of managing and processing information.
IDD
International Direct Dialing, a service that allows a subscriber to make an international call without the assistance or intervention of an operator from any telephone terminal.
IGG
Indonesia Global Gateway, a submarine fiber optic cable system covering several cities in Indonesia.
IICD
Indonesian Institute for Corporate Directorship, a non-profit organization founded by 10 highly reputable Indonesian Business Schools and preeminent individuals.
IMS
IP multimedia subsystem, a service which combines wireless and fixed line technologies for voice and data communications.
Indonesia Broadband Plan
A strategic initiative aimed at expanding and enhancing internet connectivity across Indonesia to foster economic growth and improve access to information.
Indonesia Cyber Core
The strategic framework and capabilities developed by the Government to safeguard Indonesia's cyber space, aligning with national interests and political strategies.
Industry 4.0
The transformative phase in manufacturing that emphasizes automation, real-time data, interconnectivity, machine learning, and cyber-physical systems to create smart, interconnected production facilities.
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Information Call Center
A specialized hub staffed by customer service specialists who manage inbound and outbound phone inquiries, providing callers with information and assistance.
Infrastructure virtualization
The process of using software to simulate the functionality of physical hardware systems, thereby creating a flexible, scalable, and efficient IT environment that can be managed and deployed virtually.
Interconnection
The physical linking of a carrier's network with equipment or facilities not belonging to that network.
Internet Access Provider
A provider of equipment and telecommunications line access for points of presence on the internet for the geographical area served, to enable individuals and other internet service providers to access the internet.
IODN
Intelligent Optical Distribution Network, a pioneering technology that augments FTTH networks' efficiency by integrating smart components such as eIDs and tools for the advanced management and operation of fiber optics, streamlining service provisioning and reducing manual errors.
IoT
The Internet of Things, infrastructure which interconnects physical and virtual things using interoperable information and communication technologies.
IP
The Internet Protocol, a set of communications protocols for exchanging data over the internet.
IP Core
A block of logic data that is used in making a field-programmable gate array or application-specific integrated circuit for a product.
IPTV
Internet Protocol Television, a system through which television services are delivered using the Internet Protocol suite over a packet-switched network such as the internet, instead of being delivered through traditional terrestrial, satellite signal, and cable television formats.
Ipv6
Next-generation internet protocol designed to replace Ipv4, offering a significantly larger address space to accommodate the expanding number of devices connected to the internet.
ISO
International Organization for Standardization, an independent, non-governmental international organization with a membership of 168 national standards bodies.
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ISP
Internet Services Provider, an organization that provides access to the internet.
IT
Information Technology.
JATS
Jakarta Automated Trading System, an electronic system used by the Jakarta Stock Exchange to facilitate automated order matching for securities trading.
JIBOR
Jakarta Interbank Offered Rate, a money market benchmark rate.
Job Creation Law 2023
Government Regulation in Lieu of Law of the Republic of Indonesia No. 2 of 2022 on Job Creation which (i) has been enacted into law on March 31, 2023 under Law of the Republic of Indonesia No. 6 of 2023, and (ii) revokes and replaces Law of the Republic of Indonesia No.11 of 2020 on Job Creation (the “Job Creation Law 2020”).
KPPU
Komisi Pengawasan Persaingan Usaha or Commission for the Supervision of Business Competition of the Republic of Indonesia.
KSO
Kerja Sama Operasi or Joint Operations.
KSU
Koperasi Serba Usaha or Multi-Purpose Cooperative.
LAN
Local Area Network, a computer network that interconnects computers within a limited area such as a home, school, computer laboratory, office building, or closely positioned group of buildings.
Leased
A dedicated telecommunications transmissions line linking one fixed point to another, rented from an operator for exclusive use.
LoRa
From "long range," a physical proprietary radio communication technique that is based on spread spectrum modulation techniques derived from chirp spread spectrum (CSS) technology.
LPWAN
Low-Power Wide-Area Network, a wireless telecommunications network technology designed for long-range communications at a low bit rate, optimally powering large-scale IoT deployments.
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Mbps
Megabits per second, a measure of speed for digital signal transmission expressed in millions of bits per second passing between equipment in a data transmission system.
MEC
Multi-access Edge Computing, a network architecture that enhances cloud computing by bringing computational power, data storage, and services closer to the user right at the edge of the network.
Metro Ethernet
Bridge or relationship between locations that are apart geographically. This network connects LAN customers at several different locations.
MHz
Megahertz, a unit of measure of frequency equal to one million cycles per second. The hertz (symbol Hz) is the international standard unit of frequency defined as the number of cycles per second of a periodic phenomenon.
ML
Machine Learning, the technology that enables computers to learn and improve from data and experiences without being directly programmed to do so.
MMS
Multimedia Messaging Service, a standard way to send messages that include multimedia content, such as images, audio, video, and rich text, to and from mobile phones over a cellular network.
MNO
Mobile network operator, sometimes also known as a carrier service provider, mobile phone operator or mobile network carrier, which provides telecommunications services such as wireless voice and data communication to subscribed mobile users.
Mobile Broadband
The marketing term for wireless internet access through a portable modem, mobile phone, USB Wireless Modem, or other mobile devices.
MoCI
The Ministry of Communication and Informatics of the Republic of Indonesia, to which regulatory responsibility over telecommunications was transferred from the Ministry of Communication and Information in February 2005.
MoF
The Ministry of Finance of the Republic of Indonesia.
MOLHR
The Ministry of Law and Human Rights of the Republic of Indonesia.
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MOU
Memorandum of Understanding.
MSME
Micro, Small and Medium Enterprise.
MSOE
Kementerian Badan Usaha Milik Negara or the Ministry of State-Owned Enterprises of the Republic of Indonesia.
MVA
Megavolt-amperes, the unit used to measure the apparent power in an electrical circuit.
MVNO
Mobile virtual network operator, a provider of telecommunications services such as voice and data communication to subscribed mobile users that does not own the wireless network infrastructure over which it provides its services.
NAP
Network Access Point, a key interchange for ISPs to connect and exchange traffic in a high-connectivity facility, which may also serve as a juncture for multiple carriers and content providers.
Network Access Point
A public network exchange facility where ISPs connect with one another in peering arrangements.
Next Generation Network
A packet-based network able to provide multiple services, including telecommunications services, and to make use of multiple broadband and quality-of-service-enabled technologies, in which service-related functions are independent from underlying transport-related technologies. Such a network is able to handle multiple types of traffic (such as voice, data, and multimedia) by encapsulating these into packets, similar to how packets are transmitted over the internet.
NFV
Network Function Virtualization, a technology that decouples network functions, such as routing, load balancing, and firewalls, from proprietary hardware appliances, instead running these functions as software on standardized computing hardware.
NGSO satellite
Non-Geostationary Orbit satellite, satellite orbits where satellites are not stationary relative to the Earth's surface but move across the sky, such as Low Earth Orbit (LEO), Medium Earth Orbit (MEO), and Highly Elliptical Orbit (HEO) satellites.
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NIB
Nomor Induk Berusaha or Business Identification Number, a unique identifier issued by the government to all businesses operating in Indonesia through the Online Single Submission (OSS) system. It is a substitute for various other licenses and permits, including customs duties access rights. The NIB is obligatory for businesses seeking to (i) apply for new business licenses and/or commercial or operational licenses, or (ii) extend or modify existing business licenses and/or commercial or operational licenses.
Open Cable Technology
Submarine cable systems that provide the purchaser or Internet Content Provider (ICP) with the flexibility to select their own Submarine Line Terminating Equipment (SLTE), instead of being limited to pre-installed hardware, which allows for greater freedom in network design and operation.
Optical Access Network
The physical and logical framework consisting of fiber optic cables and associated equipment that facilitate high-speed internet and data services from a central office to end-users, typically in residential and enterprise settings.
OHS
Occupational Health and Safety.
OJK
Otoritas Jasa Keuangan, or the Indonesian Financial Services Authority, the successor of Bapepam-LK, an independent institution with authority to regulate and supervise financial services activities in the banking sector, capital market sector as well as non-bank financial industry sector.
OSS
The Online Single Submission system, an integrated Government service platform designed to streamline business licensing and improve efficiency in regulatory compliance for companies in Indonesia.
OTN
Optical Transport Network, a technology for sending various types of data traffic over fiber optic networks based on optical wavelengths that enables more efficient transmission for multi-service traffic by relying on multiplexing capability.
OTT
Over The Top, a generic term commonly used to refer to the delivery of audio, video, and other media over the internet without the involvement of a multiple-system operator in the control or distribution of the content.
Pajak Bumi dan Bangunan
Land tax in Indonesia, also known as Pajak Bumi dan Bangunan (PBB), which is levied on land ownership and is a key component of Indonesia's taxation system.
Payment switching service
A service that allows members of a particular network to make payments through cards, digital money (for example through the use of digital applications that allow money transfers), and/or fund transfers between different financial institutions. Such payments can be made between members of the same network or between members and non-members.
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Pay TV
Pay Television, premium television, or premium channels, subscription-based television services, usually provided by both analog and digital cable and satellite, but also increasingly via digital terrestrial and internet television.
Point of presence
An access point, location or facility that connects to and helps other devices establish a connection with the internet, which may consist of a router, switches, servers, and other data communication devices. We operate two layers of points of presence, namely main and primary points of presence. A "main point of presence" is the transport backbone that aggregates national traffic. A "primary point of presence" is the aggregate regional transport backbone which has the capability of creating services.
PKLN Team
Tim Pinjaman Komersial Luar Negeri or Foreign Commercial Loan Coordination Team, a Government body that reviewed lending from offshore lenders, which was dissolved in 2020.
PSTN
Public Switched Telephone Network, a telephone network operated and maintained by us that provides infrastructure and services for public telecommunications. Originally only an analog system, the PSTN is now almost entirely digital, even though most subscribers are connected via analog circuits. It now includes mobile phones in addition to fixed-line phones.
Radio frequency spectrum
The part of the electromagnetic spectrum corresponding to radio frequencies, (i.e., frequencies lower than around 300 GHz, or equivalently, wavelengths longer than about 1 millimeter).
Regional Business Unit
Our Company’s organizational units in the form of divisions that are formed on a geographical basis, and each of them is differentiated based on the regional scope of its operations.
Rich Communication Services
A communication protocol designed to enhance messaging with features like high-resolution media sharing, read receipts, and typing indicators, seeking to supersede traditional SMS and MMS standards.
RIO
Reference Interconnection Offer, a regulatory term covering all facilities, including interconnection tariffs, technical facilities and administrative issues offered by one telecommunications operator to other telecommunications operator for interconnection access.
Roaming
A general term referring to the extension of connectivity service in a location that is different from the home location where the service was registered.
Satellite Transponder
Radio relay equipment embedded in a satellite that receives signals from Earth and amplifies and transmits the
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signal back to the Earth.
SBC
Session Border Controller, a specialized device that secures and regulates SIP-based VoIP communications at network borders, ensuring call quality, integrity, interoperability, and efficient traffic management.
SBUJK
Sertifikat Badan Usaha Jasa Konstruksi, the construction services business entity certificate issued by the Indonesian Construction Services Development Institute (Lembaga Pengembangan Jasa Konstruksi), which is legally required for construction service companies that wish to participate in construction projects within Indonesia.
SCCS
Submarine Communications Cable System, a cable laid on the seabed between land-based stations to carry telecommunications signals across the ocean.
SDAN
Software Defined Access Network, the application of SDN principles to the access network, which connects end users' premises to the central network infrastructure of a service provider.
SDG
Sustainable Development Goals, a set of 17 interconnected global objectives adopted by the United Nations to promote sustainable development.
SDN
Software-Defined Networking, an architecture that dynamically manages networks programmatically, enabling centralized, flexible, and efficient control through abstraction of lower-level functionality.
SD-WAN
Software-defined Wide Area Network, an approach that uses software to deploy, operate and manage WAN architectures more easily and with increased connectivity.
Service node technologies
Essential components within a communications network infrastructure designed to manage data delivery, integrating various functionalities, and ensuring optimal service quality and efficiency.
SIM Card
Subscriber Identity Module card, a microchip in a mobile phone that connects it to a particular phone network.
SME
Small and Medium Enterprise.
SMS
Short Messaging Service, a technology allowing the exchange of text messages between mobile phones and between fixed wireless phones.
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SOE
State-Owned Enterprise, a Government-owned corporation, state-owned company, state-owned entity, state enterprise, publicly owned corporation, Government business enterprise, or parastatal, a legal entity created by a Government to undertake commercial activities on behalf of a Government owner.
Softswitch
A central device in a telephone network that connects calls from one phone line to another, entirely by means of software running on a computer system. This work was formerly carried out by hardware, with physical switchboards to route the calls.
Switch
A mechanical, electrical or electronic device that opens or closes circuits, completes or breaks an electrical path, or selects paths or circuits, used to route traffic in a telecommunications network.
TDM
Time Division Multiplexing, a method of transmitting and receiving independent signals over a common signal path by means of synchronized switches that allow multiple data streams to share a single communication channel sequentially.
TIMES
Telecommunication, Information, Media, Edutainment and Service.
TJSL Committee
Environmental and Social Responsibility Committee (Komite Tanggung Jawab Sosial dan Lingkungan) of our Company.
TPE
A normalized way to refer to transponder bandwidth, which means how many transponders would be used if the same total bandwidths used only 36 MHz transponder (1 TPE = 36 MHz).
TRIR
Total recordable incident rate.
UI/UX
User experience design, the process of defining the experience a user would go through when interacting with a company, its services, and its products.
USO
Universal Service Obligation, the service obligation imposed by the Government on all telecommunications services providers for the purpose of providing public services in Indonesia.
Voice-hubbing
A service provided by telecommunications operators that allows for the centralization and management of international voice traffic, offering access to mobile destinations worldwide.
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VoIP
Voice over Internet Protocol, a means of sending voice information using the IP.
vCDN
Virtualized Content Delivery Network, an evolution of traditional CDN technology, leveraging virtualization to make CDN platforms more scalable, flexible, and easier to deploy and manage.
vSTB
Virtual Set-Top Box, a software-based solution that emulates the functionality of a physical set-top box, allowing users to access and manage video content and services over the internet without the need for dedicated hardware.
VPN
Virtual Private Network, a secure private network connection, built on top of publicly accessible infrastructure, such as the internet or the public telephone network. VPNs typically employ some combination of encryption, digital certificates, strong user authentication and access control to secure the traffic they carry. VPNs provide connectivity to many machines behind a gateway or firewall.
VSAT
Very Small Aperture Terminal, a relatively small antenna, typically 1.5 to 3.0 meters in diameter, placed in the user's premises and used for two-way communications by satellite.
WAN
Wide Area Network, a collection of local-area networks (LANs) or other networks that communicate with one another.
XBRL
eXtensible Business Reporting Language, a freely available and global framework for exchanging business information.
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CERTAIN DEFINITIONS, CONVENTIONS AND GENERAL INFORMATION
Unless the context otherwise requires, the terms "Company," "Telkom," "Group," "Telkom Group," "we," "us," and "our" refers to Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk and its subsidiaries. "Indonesia" refers to the Republic of Indonesia. "Government,” except if stated otherwise, refers to the Government of the Republic of Indonesia. "United States," "U.S." or "US" refers to the United States of America. "United Kingdom" or the "UK" refers to the United Kingdom of Great Britain and Northern Ireland. "HK$" refers to the Hong Kong Dollar, the lawful currency of Hong Kong. "MYR" refers to the Malaysian Ringgit, the lawful currency of Malaysia. "Rupiah," "Indonesian Rupiah" or "Rp" refers to the lawful currency of Indonesia. "SG$" refers to the Singapore Dollar, the lawful currency of Singapore. "U.S. Dollar" or "US$" refers to the lawful currency of the United States.
Our audited consolidated financial statements as of and for the years ended December 31, 2022 and 2023 included in this Form 20-F (the “Consolidated Financial Statements") have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB").
Solely for the convenience of the reader, certain Indonesian Rupiah amounts have been converted into U.S. Dollars at the rate of Rp15,398.50 to US$1.00 for December 31, 2023 and Rp15,569.00 to US$1.00 for December 31, 2022 based on the middle exchange rate which is calculated based on the Reuters Refinitiv buying and selling rates. The Federal Reserve Bank of New York does not certify for customs purposes a noon buying rate for cable transfers in Indonesian Rupiah. No representation is made that the Indonesian Rupiah or U.S. Dollar amounts shown herein could have been or could be converted into U.S. Dollars or Indonesian Rupiah, as the case may be, at any particular rate or at all.
Certain numerical figures set out herein, including financial data, have been subject to rounding adjustments and, as a result, the totals of the data disclosed herein may vary slightly from the actual arithmetic totals of such information. Percentages and amounts reflecting changes over time periods relating to financial and other data under "Item 5. Operating and Financial Review and Prospects" are calculated using the rounded numerical data in the narrative description under "Item 5. Operating and Financial Review and Prospects" and not the numerical data in our Consolidated Financial Statements.
FORWARD-LOOKING STATEMENTS
This Form 20-F contains "forward-looking statements" as defined in Section 27A of the U.S. Securities Act of 1933, as amended (the “Securities Act") and Section 21E of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act"), within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our current expectations and projections for our future operating performance, business prospects and events. The words "may," "will," "believe," "expect," "anticipate," "aim," "seek," "intend," "plan," "likely to," "potential," "estimate," "project," "continue" and similar words or expressions identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections of future events that we believe may affect our financial condition, results of operations, business strategy and financial needs.
These forward-looking statements include, but are not limited to, statements about:
· | Our goals and implementation of our strategy; |
· | our expectations regarding demand for our products and services; |
· | growth in the telecommunications sector in Indonesia and of the Indonesian economy in general; |
· | our prospects, projects, results of operations and financial condition; |
· | trends and competition in the telecommunications industry in Indonesia; |
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· | expected technological trends and changes in our industry; |
· | relevant government policies and regulations governing our business and industry; |
· | general economic and business conditions in Indonesia and the countries where we carry out our business; |
· | general macroeconomic conditions, including impacts of political tensions; and |
· | assumptions underlying or related to any of the foregoing. |
In addition, all statements other than statements of historical facts included in this Form 20-F that address activities, events, or developments which we expect or anticipate will or may occur in the future are hereby identified as forward-looking statements for the purpose of the safe harbor provided by Section 27A of the Securities Act and Section 21E of the Exchange Act. Although we believe that the expectations reflected in the forward-looking statements herein are reasonable, such expectations may prove to be incorrect. These forward-looking statements are subject to a number of risks and uncertainties, including changes in the economic, social, and political environments in Indonesia. This Form 20-F discloses, under "Item 3. Key Information — Risk Factors" and elsewhere, important factors that could cause actual results to differ materially from our expectations.
The forward-looking statements made in this Form 20-F relate only to events or information as of the date on which the statements are made herein. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read this Form 20-F and the documents that we refer to herein completely and with the understanding that our actual future results may be materially different from what we expect.
PART I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
Not applicable.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3. KEY INFORMATION
A. [RESERVED]
B. CAPITALIZATION AND INDEBTEDNESS
Not applicable.
C. REASON FOR THE OFFER AND USE OF PROCEEDS
Not applicable.
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D. RISK FACTORS
An investment in our ADSs or shares involves risks. You should carefully consider the risks described below, as well as the other information included or incorporated by reference in this Form 20-F, before making an investment decision. Our business, financial condition or results of operations could be materially and adversely affected by any of these risks. The market or trading price of our ADSs could decline due to any of these risks, and you may lose all or part of your investment. In addition, the risks discussed below also include forward-looking statements and our actual results may differ substantially from those discussed in these forward-looking statements. Please note that additional risks not presently known to us, that we currently deem immaterial or that we have not anticipated may also impair our business and operations.
Summary of Risk Factors:
Risks Related to Our Business
Operational Risks
· | A material failure in the continuing operations of our network, certain key systems, gateways to our network or the networks of other network operators could materially and adversely affect our business, financial condition, results of operations and prospects. |
· | The rapid pace of technological change in the telecommunications industry may adversely affect our ability to remain competitive if we cannot successfully integrate new innovations. |
· | Indonesian regulations require telecommunications service providers such as ourselves to share our network infrastructure and capacity with our competitors, and the enforcement of these regulations remain uncertain. |
· | Revenue leakage might occur due to internal weaknesses or external factors and if this risk were to materialize, it could have a material adverse effect on our operating results. |
· | Expected benefits from partnerships with global technology companies may not be achieved. |
· | Our networks and equipment face potential physical and cybersecurity threats, such as theft, vandalism and acts intended to disrupt our operations, which could materially and adversely affect our operating results. |
· | Damage to our reputation could negatively impact our business, financial condition and results of operations. |
| ● | We face a number of risks relating to our internet-related services. |
· | Expected benefits from investment in new networks and technologies may not be realized. |
· | We rely on third parties to supply and maintain our network infrastructure, and they may be difficult to replace. |
· | Our satellites have limited operational lives and they may be damaged or destroyed during in-orbit operation or suffer launch delays or failures. The loss or reduced performance of a satellite, whether caused by equipment failure or its license being revoked, may adversely affect our financial condition, results of operations and ability to provide certain services. |
| ● | Actual or perceived health risks or other problems relating to radio emissions could lead to litigation or decreased mobile communications usage. |
| ● | Health epidemics or pandemics and the economic disruption caused by various measures to reduce its spread have had and may continue to have adverse consequences of uncertain magnitude and duration on our operations. |
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Risks Related to our Fixed and Cellular Telecommunications Business
· | Competition from existing cellular service providers may adversely affect our cellular services business. |
· | Our data and internet services are facing increasing competition, and we may experience declining margins and/or market share from such services as such competition intensifies. |
· | Cellular network congestion and limited spectrum availability could limit our cellular subscriber growth and cause reductions in our cellular service quality. |
· | Continuing growth in and the converging nature of wireless and broadband services will require us to deploy increasing amounts of capital and require ongoing access to spectrum in order to provide attractive services to customers. |
· | Our continued investments in the construction of our infrastructure network may not adequately address the issues resulting from the substantial increases in data traffic or otherwise achieve the desired economic returns. |
· | We are subject to the control of the Government and its interests may not necessarily align with the interest of our other shareholders or our own interests. |
Financial Risks
· | We are exposed to interest rate risk in relation to our bank borrowings. |
· | We may be unable to fund the capital expenditures needed for us to remain competitive in the telecommunications industry in Indonesia. |
· | Deterioration of the financial condition of our customers could adversely affect our operating results. |
Legal and Compliance Risks
· | If we are found liable for anti-competitive practices, we may be subjected to substantial liability which could have an adverse effect on our reputation, business, financial condition, results of operations and prospects. |
Regulatory Risks
· | Changes to our legal and regulatory environment may result in increased competition, reduced margins and operating revenue, asymmetric reduction in costs incurred by our competitors and increased regulatory and enforcement uncertainty. |
· | Applicable regulations on tariffs and their implementation as supervised by MoCI may affect our revenues and earnings. |
· | Regulations for the configuration of BTS towers may delay the installation of new BTS towers or changes in the placement of existing towers and may erode our leadership position by requiring us to share our towers with our competitors. |
· | We may experience local community opposition to some of our tower sites. |
· | We are subject to numerous non-tax state revenue payments and USO Contribution and any disagreement with the relevant authorities relating to such payments and/or failure to make such payments could subject us to the revocations of certain of our licenses, with limited recourse. |
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· | Our electronic money business is highly regulated. |
Risks Related to the Development of New Businesses and Acquisitions
| ● | We may not succeed in our efforts to develop new businesses. |
· | Due to intense competition for highly skilled personnel, we may fail to attract, recruit, retain and develop qualified employees, which could materially and adversely impact our business, prospects, financial condition and results of operations. |
· | If we are unable to manage our growth effectively, our business and financial results may be adversely affected. |
· | Our acquisition activities expose us to various risks. |
Risks Related to our Corporate Structure
| ● | We are dependent on our subsidiary, PT Telekomunikasi Selular ("Telkomsel"), a cellular telecommunications services and cellular telecommunications networks company. |
| ● | Our effort to streamline our corporate structure may not create expected synergies and efficiency in a timely fashion or at all. |
| ● | Our controlling shareholder's interests may differ from those of our other shareholders. |
· | Our Articles of Association contain certain anti-takeover provisions that could adversely affect the rights of holders of our ordinary shares and ADSs. |
Risks Related to Indonesia
Political and Social Risks
· | Current political and social events in Indonesia may adversely affect our business. |
· | Terrorist activities in Indonesia could destabilize Indonesia, which would adversely affect our business, financial condition and results of operations, and the market price of our securities. |
· | We may be affected by uncertainty in the delineation of the respective prerogatives and responsibilities of, and the balance of power between, local governments and the central government in Indonesia. |
Macroeconomic Risks
· | Negative changes in global, regional or Indonesian economic activity could materially and adversely affect our business. |
· | Fluctuations in the value of the Indonesian Rupiah may materially and adversely affect us. |
· | Rapid and excessive increases in levels of inflation and interest rates in Indonesia could materially and adversely affect our financial condition and results of operations. |
· | Downgrades of credit ratings of the Government or Indonesian companies could materially and adversely affect our business. |
· | Employment legislation in Indonesia could materially and adversely affect our business. |
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Risks relating to Natural Disasters and Climate Change
· | Indonesia is vulnerable to natural disasters and events beyond our control, which could materially and adversely affect our business and operating results. |
· | We are exposed to the potential for financial loss and further non-financial detriments arising from climate change and society's response to it. |
Risks related to our ADSs
· | The trading price of our ADSs may be volatile, which could result in substantial losses to you. |
· | If securities or industry analysts do not publish research reports about us or our business, or if they adversely change their recommendations regarding our ADSs, the market price for our ADSs and trading volume could decline. |
· | The different characteristics of the capital markets in Indonesia and the U.S. may negatively affect the trading prices of our ADSs and shares. |
· | Our financial results are reported to the OJK in conformity with IFAS, which differs in certain respects from IFRS, and we distribute dividends based on profit for the year attributable to owners of the parent company and net income per share determined in reliance on IFAS. |
· | As a foreign private issuer in the U.S., we are permitted to, and we have relied on and will rely on exemptions from certain NYSE corporate governance standards applicable to domestic U.S. issuers. This may afford less protection to holders of our ADSs. |
· | As a foreign private issuer in the U.S., we are exempt from certain disclosure requirements under the Exchange Act, which may afford less protection to holders of our ADSs than they would enjoy if we were a domestic U.S. company. |
· | The voting rights of holders of our ADSs are limited by the terms of the Deposit Agreement. |
· | Holders of our ADSs may be subject to limitations on transfer of their ADSs. |
· | Holders of our ADSs may not receive distributions on our ordinary shares or any value for them if it is illegal or impractical to make them available to the holders. |
· | Holders of our ADSs may experience dilution of their holdings due to their inability to participate in rights offerings. |
· | The time required for the exchange between ADSs and shares might be longer than expected and investors might not be able to settle or effect any sale of their securities during this period. |
· | We are established in Indonesia and it may not be possible for investors to effect service of process or enforce judgments on us, our Commissioners, Directors or officers within the United States, or to enforce judgments of a foreign court against us or any of these persons in Indonesia. |
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Risks Related to Our Business
Operational Risks
A material failure in the continuing operations of our network, certain key systems, gateways to our network or the networks of other network operators could materially and adversely affect our business, financial condition, results of operations and prospects.
We depend to a significant degree on the uninterrupted operation of our network infrastructure, systems, and connections to other networks to provide our services. For example, we depend on access to our fixed wireline network for the operation of our fixed line network and the termination and origination of cellular telephone calls to and from fixed line telephones, as a significant portion of our cellular and international long distance call traffic is routed through the PSTN. We also depend on access to an internet and broadband network and a cellular network, as our integrated network infrastructure includes a copper access network, fiber optic access network, BTSs, switching equipment, optical and radio transmission equipment, an IP Core network, satellites, and application servers. In addition, we also rely on interconnection to the networks of other telecommunications operators to carry calls and data from our subscribers to the subscribers of operators both within Indonesia and overseas. We also depend on certain technologically sophisticated management information systems and other systems, such as our customer billing system, to enable us to conduct our operations.
Our network infrastructure and connected systems, including our information systems, IT and infrastructure and the networks of other operators with whom our subscribers are interconnected, are vulnerable to damage or interruptions in operation due to a variety of causes such as earthquake, fire, flood, power loss, equipment failure, network software flaws, transmission cable disruption or similar events. Past incidents have demonstrated our susceptibility to such damage or interruptions in operation. In 2021, a flood in the Kalimantan Selatan area and Seroja and a cyclone in Nusa Tenggara Timor area damaged certain of our network infrastructure and some submarine cables were cut, including the Sorong-Jayapura, IGG and Batam-Pontianak cables. In 2022, we faced interruptions to some submarine cable communication systems as a result of damage from flood, earthquakes, a ship's anchor and fishing equipment, among other things. As a result, services in east Indonesia were disrupted as we had to redirect affected traffic through satellites until the submarine cables could be restored.
More extensive infrastructure damage could severely hamper service provision across our operations, and our business continuity plan and disaster recovery plan may not fully protect us from damage or interruptions to our operations. Any failure that results in an interruption of our operations or of the provision of any service, whether from operational disruption, natural disaster or otherwise, could adversely and materially affect our business, financial condition, results of operations and prospects.
The rapid pace of technological change in the telecommunications industry may adversely affect our ability to remain competitive if we cannot successfully integrate new innovations.
Emerging technologies such as 5G and future development or application of new or alternative technologies, services or standards could require substantial investments and significant changes to our business model in order for us to remain competitive, as new products and services may be expensive to develop and may result in the introduction of additional competitors into the marketplace. We cannot accurately predict how emerging and future technological changes will affect our operations or the competitiveness of our services. Furthermore, we may not succeed in effectively integrating new technologies into our existing business model. For instance, if our rollout of 5G may not meet expectations for customer adoption or return on investment in terms of magnitude and/or timeline, it may negatively impact our financial condition and results of operations.
One of the main challenges faced by the telecommunications industry in Indonesia is the increasing use of OTT services that have become substitutes for voice and SMS services, in line with the growing number of smartphone users. This has affected the contribution from cellular phone services to our consolidated revenues, which has continued to decline from 10.3% in 2021 to 8.2% in 2022 and 5.5% in 2023, computed as a percentage of our consolidated revenues for the fiscal years ended December 31, 2021, 2022, and 2023, respectively
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In addition, we face a continuing risk of losing market share to new market entrants such as operators and service providers (including non-telecommunications players and OTT players) who use newer or lower cost technologies. In particular, the rapid development of new technologies, services, products, and business models has reduced the distinctions between local, long distance, wireless, cable and internet communication services entry barriers and has brought new competitors into the telecommunications market. For example, the increased availability of high-throughput satellite capacity in Indonesia has increased competition, and adversely affected pricing, for our satellite business. A loss of market share could have a material and adverse effect on our business, prospects, financial condition, and results of operations.
We may also be unable to sufficiently utilize big data and integrate this into our operations. Digital businesses especially benefit from significant data analysis, and we may not be able to innovate as fast as other competitors in this and other areas. As a result, we may fail to successfully transition our existing business models to take advantage of new technologies such as big data analytics and to develop new technologies and services that customers demand.
Our technologies could become obsolete, or be subjected to competition from new technologies in the future, and we may not be able to acquire new technologies necessary to maintain or increase our competitiveness on commercially acceptable terms, or in a timely fashion. Our failure to react to rapid technological changes could materially and adversely affect our business, financial condition, results of operations and prospects.
Indonesian regulations require telecommunications service providers such as ourselves to share our network infrastructure and capacity with our competitors, and the enforcement of these regulations remain uncertain.
Government regulations require telecommunications service providers with passive telecommunications infrastructure (e.g., ducts, towers, poles, or communication manholes, among other things) to give access to such passive telecommunications infrastructure to other telecommunications providers. These regulations require that use of passive telecommunications infrastructure must be based on cooperation and mutual agreements between telecommunications service providers in a fair, reasonable and non-discriminative manner. Further, a telecommunications service provider with active telecommunications and/or broadcasting infrastructure may be mandated to give access to such active infrastructure to other telecommunications providers as mutually agreed and in furtherance of fair business competition. This may involve the leasing of network capacity to other telecommunications providers.
It remains to be seen how these provisions will affect our business and our relations with other telecommunications players in Indonesia. It is possible for the Government to adopt more implementing terms in the future that we may not consider to be commercially reasonable. For example, subsequent or implementing regulations may not allow us to charge competitors who lease our network capacity fees at rates that we will consider to be commercially acceptable. If such regulations were to be implemented, being mandated to share infrastructure and lease capacity at such rates could have a material adverse effect on our revenue, financial condition, results of operations and prospects.
Revenue leakage might occur due to internal weaknesses or external factors and if this risk were to materialize, it could have a material adverse effect on our operating results.
We may face revenue leakage or problems with collecting all the revenues to which we may be entitled due to the possibility of inaccurate billing, delays in transaction processing, dishonest customers or other factors. Further, our services might be susceptible to piracy and unauthorized usage. Such piracy and unauthorized usage may lead to a loss of revenue for our Group. For example, in recent years we have lost revenue as a result of fraudsters' use of simboxes, which are electronic boxes that use cell phone antennae or a BTS on which local operator SIM cards are installed so that international calls can be fraudulently routed to local numbers, enabling fraudsters to bypass interconnection rates in the destination country. Such revenue leakages constitute a loss of potential revenue that is difficult to quantify and may lead to a loss of revenue for our Group, which may affect our financial conditions and results of operations.
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Expected benefits from partnerships with global technology companies may not be achieved.
We partner and collaborate with global technology companies such as Microsoft and Amazon Web Services as part of our strategy of providing digital IT services to businesses. Global technology companies have capabilities and scale that we may not be able to create and develop organically, whether in the near-term or at all, and such partnerships are necessary to achieve some of our strategic goals. Our reliance on global technology companies is especially critical for major projects, such as developing a vertical digital ecosystem in Indonesia, fostering digitalization by providing wider access to digital tools for businesses and government agencies, and generally supporting Indonesia's digital development through our contribution to the One Data Indonesia initiative, the Government's plan for digitizing Government data and facilitating transfers of such data, and the Government's implementation of the National Digital Platform.
However, we may be unable to identify suitable partners for achieving such strategic goals or we may not benefit as expected from our partnerships with selected global technology companies. For example, there may be differences between our interests and our partners' interests as a result of pursuing different strategies, developing competing services, competing for the same customers, or other reasons outside of our control.
As we strategically focus on the development of digital products, services and the development of a digital ecosystem, we may also become increasingly reliant on technology owners with whom we partner, in particular if we are not able to develop certain digital capabilities organically or if we do not develop or attract digital talents.
Delays and failures in the implementation of national strategic plans such as the National Digital Platform, the development of an E-government architectural framework for the central Government, local governments, agencies and state-owned companies, and the successful implementation of the Government's inclusive digital transformation strategy for Indonesia could also negatively impact our own strategic initiatives and partnerships to the extent they rely on the success of such national initiatives.
Ultimately, if we are unable to realize gains from our partnerships with global technology companies, our ability to achieve strategic growth initiatives, provide digital products, and attract and retain customers could be materially and adversely affected.
Our networks and equipment face potential physical and cybersecurity threats such as theft, vandalism and acts intended to disrupt our operations, which could materially and adversely affect our operating results.
Our networks and equipment, particularly our wireline access network, face both potential physical and cybersecurity threats. Physical incidents or threats include facility access issues, energy blackouts, fire, power loss, telecommunications failure, catastrophic events such as landslides and earthquakes, theft and vandalism of our equipment and organized attacks against key infrastructure intended to disrupt operations. For example, our fiber optic cables were cut several times in 2023 because of vandalism, which caused temporary interruptions to our traffic.
In addition, telecommunications companies worldwide face increasing cybersecurity threats as businesses have become more dependent on telecommunications and computer networks, and have adopted or will adopt cloud technologies. Cybersecurity threats include gaining unauthorized access to our systems or inserting computer viruses, malicious and destructive codes, worms, malware, ransomware, or other malicious software in our systems, phishing, or spoofing to misappropriate consumer data and other sensitive information, corrupt our data or disrupt our operations. Unauthorized access may also be gained through traditional means such as the theft of computers, portable data devices or mobile phones and intelligence gathering on employees with access to our systems.
We protect confidential information and personal data on our systems by entering into confidentiality agreements with employees, consultants, customers, suppliers, and service providers, and we design our networks and implement various procedures to restrict unauthorized access and dissemination of such information and data. Nonetheless, we, our service providers and others who may have access to our systems and confidential information are still subject to internal and external cybersecurity threats. For instance, current, departing, or former employees, business partners, consultants, and other individuals which whom we do business could attempt to improperly use or access our computer systems and
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networks, or those of third-party service providers, to copy, obtain and misappropriate our confidential information, including personal data.
A lack of awareness among our employees and service providers of the cybersecurity risks that we face, as well as a lack of cybersecurity skills and capabilities, could contribute to our vulnerability if not adequately addressed in our training and awareness programs. Cyber-attacks may be conducted by sophisticated and organized groups and individuals with a wide range of motives and expertise, including organized criminal groups, "hacktivists", terrorists, nation-states, nation state-supported actors, and others. Our network and website are frequently targeted by cyber-attacks. For example, in August 2022, a hacker leaked what they claimed was personal data from millions of IndiHome users. While our subsequent internal investigation determined that this data was fabricated, we may face reputational damage even from false leaks. Further, the COVID-19 pandemic has increased cybersecurity risk due to increased online and remote activity, including from our employees and service providers. In 2022, as our employees began to return to work in the office due to relaxations in restrictions relating to the COVID-19 pandemic, we detected 40.6 million cyber threats to our servers, down from an unprecedented 53.9 million cyber threats to our servers in 2021. In 2023, we detected 65.9 million cyber-attack threats on our servers, showing an increase from the previous year.
Although almost all of the cybersecurity threats were non-disruptive and none of them rose to the level of requiring us to specifically address them, techniques that computer hackers and others use to access or sabotage networks and computer systems constantly evolve and generally are not recognized until launched against a target. As a result, we and our service providers may be unable to anticipate, detect in a timely manner or at all, react to, counter or ameliorate all of these techniques or remediate any incident as a result therefrom, and our safety procedures and intrusion detection systems may not be fully effective in preventing unauthorized access to our internal data and databases, as well as data of customers, suppliers and other parties that we host on our systems. Therefore, such data could be misappropriated and illegally used, monitored, modified, or disseminated.
Cybersecurity breaches could expose us to significant legal, financial and reputational consequences. Due to applicable laws, regulations and contractual obligations, we may be held responsible for cybersecurity breaches, attacks or other similar incidents, and we may be subject to additional regulatory scrutiny and exposed to civil litigation, fines, damages and injunctions.
A successful cyber-attack may lead us to incur substantial costs and devote increasing resources to repair damage or restore data, implement substantial organizational changes, new safeguards, system improvements, new cybersecurity due diligence procedures and training to prevent future similar attacks and lost revenues and litigation costs due to misused sensitive information, liabilities for information loss, breaches of confidentiality of private information, and cause substantial reputational damage, loss of customer confidence in the adequacy of our threat mitigation and detection processes and procedures, and impact our competitive position. Cyber-attacks may also cause equipment failures, loss of information, including sensitive information or information stored in our customers' computer systems and mobile phone systems, failure or perceived failure to comply with applicable privacy, security or data protection laws, or our failure to make adequate or timely disclosures to the public, regulators, shareholders or law enforcement agencies following any such event, as well as disruption to our operations or our customers' operations. Even a false claim that we were the victim of a cyber-attack may be detrimental to our reputation, and we may face attempts to blackmail us over allegedly or actually stolen data and through ransomware attacks.
Furthermore, it might be difficult to calculate the economic costs caused by potential cybersecurity incidents and maintain sufficient insurance coverage relating to them at commercially reasonable rates and terms. Eliminating computer viruses and other security problems may also require interruptions, delays or suspension of our services, reduce our customer satisfaction and cause us to incur additional costs. Due to the evolving nature of cybersecurity threats, the scope and impact of any future incident cannot be precisely predicted and the physical and cybersecurity measures that we take to protect our network may not be successful.
Damage to our network, equipment or data and the need to repair such damage resulting from a physical or cyber-attack may divert our management attention and resources, expose us to liability and damages, negatively impact our operations, reputation and competitive position, and materially and adversely affect our business, prospects, financial condition and operating results.
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Damage to our reputation could negatively impact our business, financial condition and results of operations.
Our reputation is a critical factor in our relationships with customers, employees, the Government, other SOEs, suppliers and other stakeholders. Incidents involving the quality of our products and services, security, or safety issues, allegations of unethical behavior or misconduct or legal noncompliance, internal control failures, data or privacy breaches, workplace safety incidents, environmental incidents, the use of our communications systems for illegal or objectionable applications, negative media reports, the conduct of our partners or representatives, and other issues or incidents that, whether actual or perceived, may result in adverse publicity and be detrimental to our reputation.
In addition, if we fail to respond quickly and effectively to address such incidents, the ensuing negative public reaction could harm our reputation and lead to litigation or subject us to regulatory actions or restrictions. Damage to our reputation could harm customer relations, reduce demand for our services and products, reduce investor confidence in us, and may also damage our ability to compete for customers and highly skilled employees.
We face a number of risks relating to our internet-related services.
In addition to cybersecurity threats, since we provide connections to the internet and host websites for customers and develop internet content and applications, we may be perceived as being associated with the content carried over our network or displayed on websites that we host. For example, in the past, due to an escalation in spam messages generated from email addresses on the Telkom network, Telkom was placed on certain IP blacklists which blocked all email generated from Telkom addresses for almost a week until remedial measures could be put into place. Measures we have in place, such as administrative and technical preventative measures to identify and combat spam, may not always be effective and we could also be placed on certain IP blacklists again in the future.
In addition, the content carried over our network or the websites that we host may contain materials or information which may be illegal, defamatory, impermissible or infringe on third-party copyrights. We cannot and do not screen all of this content and may face litigation claims due to a perceived association with such content. These types of claims can be costly to defend, divert management resources and attention, and may damage our reputation.
Expected benefits from investment in new networks and technologies may not be realized.
We may pursue new growth opportunities in the communications industry in the future, including introducing services and products employing new technologies, such as next generation network technologies, virtualization, software-defined networking, cloud-based technologies, new video and content delivery platforms, digital marketing, home fiber, fixed-mobile convergence, Wi-Fi 6. The implementation of these new technologies depends on a number of factors, including the development of our network and the launch of new and commercially viable products and services involving these technologies. We may have to incur substantial expenditures to develop our network, services and products and to gain access to related or enabling technologies in order to successfully implement these new technologies.
These service enhancements and product launches may not occur as scheduled or at the cost expected due to many factors, including delays in determining equipment and wireless handset operating standards, supplier delays, increases in network equipment and handset component costs, regulatory permitting delays for tower sites or enhancements, or labor-related delays. We may not be successful in modifying our network infrastructure in a timely and cost-effective manner to facilitate such implementation, which could materially and adversely affect our quality of service, financial condition and results of operations.
Further, we may face the risk of unforeseen complications in the deployment of new technologies. Any newly adopted technology may not perform as expected, and we may not be able to successfully or on a timely basis develop the new technology to effectively and economically deliver services based on such technology. For example, the deployment of our 5G network requires significant initial capital expenditures for network infrastructure.
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Furthermore, we are also reliant on the Government for allocation of relevant spectrum through auctions. Deployment of new technology may also adversely affect the performance of the network for existing services. If we cannot acquire the required spectrum for network technologies or deploy the technologies and services that customers desire on a timely basis and at a reasonable price, then our ability to attract and retain customers, and therefore maintain and improve our operating margins, could be materially and adversely affected.
We rely on third parties to supply and maintain our network infrastructure, and they may be difficult to replace.
We rely on a limited number of leading international telecommunications equipment manufacturers, including Huawei, ZTE Corporation and Ericsson, for equipment and services required to maintain and expand the infrastructure required for our mobile network and 5G deployment. The successful build-out and operation of our networks depends heavily on obtaining adequate supplies of core and transmission telecommunications equipment, fiber, switching equipment, radio access network solutions, base stations and other services and products on a timely basis. Most of this equipment cannot be sourced locally. Our business could be materially impacted by disruptions to our key suppliers’ businesses or supply chains due to factors such as significant geopolitical events, changes in law or regulation, the introduction of restrictions to curb epidemics or pandemics, as seen during the COVID-19 pandemic, trade tensions and direct or indirect export and re-export restrictions. We may experience difficulty in replacing a number of our suppliers in the event that they fail to supply us with the components and/or equipment we require. Failure to obtain adequate supplies or services in a timely manner or on commercially acceptable terms or at all may result in significant increases to the cost of our supplies or services or in our inability to maintain and to expand our mobile network, any of which may have a material and adverse effect on our business, prospects, financial condition and results of operations.
Further, the ability of certain suppliers such as Huawei to ensure the supply of equipment or services provided to us or any entity in our supply chain may be impaired as a result of sanctions imposed on such manufacturers. For instance, the United States Department of Commerce added Huawei and certain of its affiliates to its "Entity List," which prohibits companies globally from directly or indirectly exporting, re-exporting or transferring items subject to U.S. export control jurisdiction to Huawei without authorization and procuring items from Huawei when the companies know or have reason to know that the items were originally procured by Huawei in violation of U.S. export control regulations. If the supply of items we source from Huawei were disrupted by such restrictions, and if we were unable to source similar equipment from other suppliers in a timely fashion and at commercially acceptable conditions, it could negatively impact our operations and prospects. New sanctions, the concerns of customers and business partners, reputational and other reasons could require us to reevaluate our existing supply chains. Difficulty in receiving equipment or services from existing suppliers could require us to find alternative suppliers, which may lead to an increase in our costs or otherwise affect or delay the development and maintenance of our increasingly advanced network infrastructure and negatively affect our operations and financial position.
Our satellites have limited operational lives and they may be damaged or destroyed during in-orbit operation or suffer launch delays or failures. The loss or reduced performance of a satellite, whether caused by equipment failure or its license being revoked, may adversely affect our financial condition, results of operations and ability to provide certain services.
We operate two satellites: Telkom-3S and Telkom-4 (Merah Putih). These satellites have limited operational lives, and their design lives are expected to end in approximately 2032 and 2033, respectively. A number of factors affect the operational lives of satellites, including the quality of their construction, the durability of their systems, sub-systems and component parts, on-board fuel reserves, accuracy of their launch into orbit, exposure to micrometeorite storms, or other natural events in space, collision with orbital debris, and the manner in which the satellite is monitored and operated.
We use satellite transponder capacity on our satellites in connection with many aspects of our business, including direct leasing of such capacity and routing for our international long distance and cellular services. International Telecommunications Union regulations specify that a designated satellite orbital slot has been allocated for Indonesia, and the Government has the right to determine which party is licensed to use such slot. While we hold a license to use the designated satellite orbital slot, in the event any of our satellites experience technical problems or failure, the Government may determine that we have failed to optimize the existing slot under our license, which may result in the Government
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withdrawing our license. In the future, we may not be able to maintain use of the designated satellite orbital slot in a manner deemed satisfactory by the Government, which could significantly impact our business operations.
Actual or perceived health risks or other problems relating to radio emissions could lead to litigation or decreased mobile communications usage.
The effects of, and any damage caused by, exposure to an electromagnetic field were and are the subject of careful evaluations by the international scientific community. While as of the date hereof we are not aware of any substantiated link between exposure to electromagnetic signals at the levels transmitted by our BTS and mobile handsets and long-term damage to health, we cannot rule out that exposure to electromagnetic fields or other emissions originating from BTS or wireless handsets will not be identified as a health risk in the future.
The actual or perceived health risks of mobile communications devices and generally negative public perception could adversely affect us through a reduction in subscribers, reduced usage per subscriber, increased difficulty in the leasing and acquisition of site locations for BTS and base stations, and exposure to potential liability and associated legal proceedings and costs. For instance, there have been health-related lawsuits filed worldwide against wireless carriers and manufacturers of wireless devices. Furthermore, we may not be able to obtain insurance with respect to such liability on commercially reasonable terms or at all.
These factors could have a material adverse effect on our business, prospects, and financial condition.
Health epidemics or pandemics and the economic disruption caused by various measures to reduce its spread have had and may continue to have adverse consequences of uncertain magnitude and duration on our operations.
Health epidemics or pandemics, such as the global outbreak of COVID-19 in early 2020, have in the past and may in the future affect macroeconomic conditions, consumer behavior, labor availability and supply chain management, all of which can adversely affect our business, operations, prospects, and results of operations. For example, COVID-19 caused a decline in purchasing power, which contributed to us having to bolster our allowance for doubtful accounts as some of our customers became unable to pay invoiced amounts that they owe us. Further, our distribution network and retail outlets also experienced significant disruption as physical distancing measures and other containment measures were required.
Governmental responses to health epidemics or pandemics, including operational restrictions, can also affect the foregoing and adversely affect our business, operations, prospects, and results of operations. Further, the duration and scope of a health epidemic or pandemic can be difficult to predict and depends on many factors, including the emergence of new variants and the availability, acceptance, and effectiveness of preventative measures. Finally, the negative impact of health epidemics or pandemics on the global economy may increase counterparty risks or increase difficulties in collecting fees, which may negatively impact our cash flows, delay certain of our projects, and reduce our ability to access capital or increase financing costs.
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Risks Related to our Fixed and Cellular Telecommunications Business
Competition from existing cellular service providers may adversely affect our cellular services business.
The Indonesian cellular service business is highly competitive. Competitors are increasingly making long-term investments to improve network quality and coverage, expand services and enhance customer experience. In recent years, competitors have offered promotions such as bonus data packages, which has generally made the pricing environment in Indonesia less profitable. However, in 2023, the cellular industry saw a trend of gradually raising prices after a period of declines during the COVID-19 pandemic. It is uncertain whether this trend of increasing prices will continue, however, as companies balance long-term profitability with competitive pricing pressures. Further, our ability to compete on price may be limited for certain services. The Job Creation Law 2023 allows the Government to determine upper and lower price limits based on public interest and fair business competition principles, and MoCI Regulation No. 5 of 2021 on Telecommunications Operation ("MoCI Regulation No. 5/2021") also stipulates that implementation of the upper and/or lower limit tariff must be preceded by evaluation by MoCI of factors such as market conditions, cost analysis, public interest, financial performance of The Company, and the continuity of such services. Upper limits may be determined in areas where only one telecommunications operator operates, and lower limits may be determined based on the Government's assessment of prevailing market conditions.
Competition is particularly increasing from OTT providers, as customers accelerate their adoption of data services over legacy communications. Many markets in major cities are saturated, leading cellular companies to expand network coverage and product offerings outside Java in 2022, requiring Telkomsel to defend its market share in such areas. We are also facing increased competition by non-market leader competitors who are targeting specific customer segments. In addition, Starlink, a satellite-based broadband service from SpaceX (“Starlink”), is expected to offer access to broadband internet from satellite constellations to customers in Indonesia through a B2C model upon or anytime after the conclusion of its partnership with Telkomsat in October 2027. Based on media reports and MoCI announcements, Starlink may also provide its services directly to the Indonesian public as any other Indonesian internet operator, subject to adherence with applicable regulations and any requirements the relevant regulators may have. Assuming this is the case and Starlink decides to offer its services independently, the potential coverage of Starlink's services could be extensive and competition in the Indonesian internet market may increase.
As Indonesia's first 5G operator, Telkomsel expects 5G competition to increase, including bidding for spectrum allocation and funding 5G infrastructure deployment. Our 5G strategy increasingly involves IoT (which is mostly enabled by 5G technologies), but customer adoption may not match expectations. Further, insufficient or unavailable spectrum at suitable prices would negatively impact our 5G deployment strategy and prospects, which could have a material and adverse effect on our business, results of operations and financial condition.
Consolidation in our industry could negatively impact our competitive position and business. Competitors with wider spectrum access and integrated networks may expand coverage. For instance, in January 2022, CK Hutchison and Qatar’s Ooredoo merged their respective telecommunications businesses in Indonesia, PT Hutchison 3 Indonesia and PT Indosat Tbk. (“Indosat”), forming Indosat Ooredoo Hutchison ("IOH"). In addition, the Government has tended to encourage consolidation, including through the enactment of the Job Creation Law 2023, which regulates telecommunications clusters, among other matters, in an effort to promote healthier competition among fewer industry players with a better cost-efficiency profile and wider spectrum allocations. Further consolidation among cellular providers may occur, driven by competitive factors as well as efforts to reduce operating costs and obtain wider spectrum allocation to expand their integrated network coverage. Spectrum refarming has provided wider allocations, enabling competitors such as Indosat to improve service quality and network capacity. Additional competitor consolidation may adversely affect our competitive position in the market and our business, results of operations, financial condition, and prospects.
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Furthermore, Government regulations have required cellular providers to share infrastructure and capacity with competitors. According to the Job Creation Law 2020, as fully retained in the Job Creation Law 2023 and implemented by MoCI Regulation No. 5/2021, telecommunications operators are required to grant access for the utilization of passive infrastructure for telecommunications purposes to other telecommunications providers on a B2B basis. MoCI Regulation No. 5/2021 prohibits owners of passive infrastructure from restricting access to its utilization (for example, by reserving the passive infrastructure for services of greater public interest). Additionally, MoCI Regulation No. 5/2021 establishes conditions for the imposition of tariffs for the utilization of passive infrastructure by owners of such infrastructure, and grants MoCI the authority to determine such tariffs if owners of passive infrastructure fail to meet the conditions for tariff imposition. See "— Risk Factors — Risks Related to Our Business — Operational Risks — Indonesian regulations require telecommunications service providers such as ourselves to share our network infrastructure and capacity with our competitors, and the enforcement of these regulations remain uncertain." As the operator with the most extensive infrastructure in Indonesia, mandated sharing not on commercial terms could allow competitors to take advantage of our existing infrastructure without significant capital expenditure, which would have a significant impact on our competitive position.
Any of these developments may present challenges for Telkomsel in maintaining its market position and could materially and adversely affect our results of operations, financial condition and prospects.
Our data and internet services are facing increasing competition, and we may experience declining margins and/or market share from such services as such competition intensifies.
Our data and internet services are facing increasing competition from other data and internet operators, including mobile operators. The number of mobile broadband subscribers has increased with the increasing number of smartphones in Indonesia, which adversely affects our market share and revenues from our fixed wireline data and internet services. Certain geographical markets have become increasingly saturated, such as in major cities in Indonesia.
In addition, with the increasing number of smartphones in Indonesia, data and internet services have become an intense area of competition in our industry. Certain of our smaller competitors increasingly focus on specific market segments, such as the gamer segment or entertainment segment, and develop flanking marketing strategies that may erode our market share in specific market segments. Competition may further intensify in the future, which may affect our market share as well as the financial performance of our data and internet services and thus materially and adversely affect our results of operations, financial condition and prospects as a whole.
Cellular network congestion and limited spectrum availability could limit our cellular subscriber growth and cause reductions in our cellular service quality.
We expect our spectrum needs to continue to increase in the future in line with increased usage of our network, in particular with the increased use of data services as the internet becomes increasingly necessary for achieving productivity gains. As a result, we will need to acquire additional spectrum allocations through Government auctions to accommodate future traffic growth and support our business. The Government occasionally conducts auctions for unused spectrum allocation, such as the auction we won for 5 MHz spectrum in the 2.1 GHz frequency band in November 2022 seek to secure as much of the available spectrum as we expect to need for our operations. However, this is a scarce resource and allocations are subject to regulatory factors which may change over time (such as auction rules) and other considerations. As a result, we may not always be in a position to secure spectrum allocations that are consistent with our expectations or strategic objectives. If we are not able to obtain sufficient spectrum, we may be unable to maintain our ideal utilization level, may face network congestion, and may be unable to support the deployment of new technologies, all of which could affect our network performance and damage our reputation with our subscribers.
Moreover, the increase in the number and use of smartphone applications that rely on data services has resulted in the significant amount of data traffic and cellular network congestion. To support such additional demands on our network, we have been and may in the future be required to make significant capital expenditures to improve our network coverage, such as by investing in our BTS and securing additional spectrum. Such additional capital expenditures, together with the possible degradation of our cellular services due to potential network congestion and limited spectrum availability, could materially and adversely affect our competitive position, results of operations, financial condition and prospects.
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Continuing growth in and the converging nature of wireless and broadband services will require us to deploy increasing amounts of capital and require ongoing access to spectrum in order to provide attractive services to customers.
Telecommunications services are undergoing rapid and significant technological changes and a dramatic increase in usage, in particular, the demand for faster and seamless usage of video and data across mobile and fixed devices. We continually invest in our networks in order to improve our wireless and broadband services to meet this increasing demand and remain competitive. Improvements in these services depend on many factors, including continued access to and deployment of adequate spectrum and the capital needed to expand our network to support tour ability to offer these services. We must maintain and expand our network capacity and coverage for transport of video, data and voice between cell and fixed landline sites. To this end, we have participated in spectrum auctions, at increasing financial cost, and continue to deploy technology advancements in order to further improve our network. Further, we must pay an annual right of usage fee for the license when we win additional spectrum, such as the additional 20 MHz spectrum in the 2.3 GHz frequency band that we won in May 2021 and the additional 5 MHz spectrum in the 2.1 GHz frequency band that we won in November 2022.
If we are unable to win new spectrum allocations or if no such allocations are made available in a timely fashion, our growth strategy will be negatively impacted, which could have a material adverse impact on our competitive position, the quality of our services, results of operations, financial condition and prospects.
Our continued investments in the construction of our infrastructure network may not adequately address the issues resulting from the substantial increases in data traffic or otherwise achieve the desired economic returns.
We regularly review our infrastructure network's capabilities, advantages, and available capacity, and continue to make substantial investments in the development of our infrastructure network, including our 4G/LTE and 5G infrastructure, to carry increasing volumes of data traffic.
The COVID-19 pandemic had an impact on consumption habits with more people working and studying from home, which positively impacted data traffic and shifted traffic from business districts to residential areas. We expect a continued and substantial increase in data traffic not only as a result of changes in consumption habits and consumers' behavior but also as a result of our efforts to make our data services affordable at a time where purchasing power and disposable income have been negatively affected. Since we launched our 4G/LTE services in 2014, the substantial increase in data traffic resulting from the growth of our wireless data traffic business, our 4G/LTE business and the proliferation of smartphones had significantly strained the existing capacity of our telecommunications network infrastructure.
As a result, based on our anticipation of further significant growth in data traffic, we have made and will continue to make substantial investments in the construction of our infrastructure network, including our 4G/LTE infrastructure as well as 5G infrastructure, to carry the increasing data traffic. However, our ability to improve or expand our infrastructure network is subject to various factors, a number of which are not within our control, such as regulations and changes in regulations, changes to the competitive environment or technological developments that could materially and adversely affect our ability to improve or expand our infrastructure network as expected or desired and achieve anticipated returns on our investments.
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We are subject to the control of the Government and its interests may not necessarily align with the interest of our other shareholders or our own interests.
The Government, through the MSOE, owns 52.09% of our issued share capital. Consequently, the Government effectively controls the outcome of matters requiring the vote of our shareholders, including the composition of our boards of Directors and Commissioners, and determining the timing and amount of dividend payments. The Government has historically influenced, and is likely to continue to influence, our strategy and operations. In addition, the Government owns a Dwiwarna Share in our Company which gives the Government, represented by the MSOE, certain rights such as the right to veto with regards to the nomination, appointment and removal of our Directors and Commissioners, the issuance of new shares and any amendments to our Articles of Association. The rights of the Government attached to this Dwiwarna Share limit the ability of public shareholders to influence certain matters relating to our Company. Under our Articles of Association, the Government cannot transfer the Dwiwarna Share. The Government's rights with respect to the Dwiwarna Share will not terminate unless our Articles of Association are amended, which would require the approval of the Government as holder of the Dwiwarna Share. See "Item 7. Major Shareholders and Related Party Transactions — Relationship with the Government and Government Agencies — The Government as Shareholder."
The Government may not always exercise its control and influence to our benefit and its interests may not necessarily be aligned with those of our other shareholders. For example, the Government may request us to enter into transactions which are not in our best interests. In addition, we may never become independent of our Government shareholder or even if we do become independent, we may not be able to exercise such independence effectively in making decisions concerning our business and prospects, including decisions concerning compensation from the Government when we act in the public interest. If we agree to act in the public interest and are not adequately compensated by the Government, our business, prospects, financial condition, liquidity and results of operations may be materially and adversely affected, which would limit our ability to compete effectively and expand our business.
Financial Risks
We are exposed to interest rate risk in relation to our bank borrowings.
Our debt includes bank borrowings used to finance our operations, and we have a mix of our fixed-rate loans and floating-rate loans in our bank borrowings. As of December 31, 2023, approximately 43.7% (based on the aggregate then outstanding principal) of our total bank borrowings were floating-rate loans. Any future increases in interest rates would likely cause our financial expenses to increase as we enter into new loan agreements, including fixed-rate loans and credit facilities.
Worldwide macroeconomic changes driven by military conflicts in Gaza and Ukraine, coupled with a global economic slowdown, have led to rising energy and food prices, resulting in sustained global inflation and supply chain disruptions impacting Southeast Asia, including Indonesia. To support the Indonesian Rupiah and economy, Bank Indonesia ("BI") has adjusted interest rates several times in recent years. In February 2021, the BI benchmark seven-day (reverse) repo rate hit a historic low of 3.50% annually. As of March 6, 2024, this rate stood at 3.75%. Continued interest rate hikes may escalate financial expenses linked to floating rate loans, potentially adversely affecting our financial performance.
We may be unable to fund the capital expenditures needed for us to remain competitive in the telecommunications industry in Indonesia.
The delivery of telecommunications services is capital intensive. In order to be competitive, we must continually expand, modernize and update our telecommunications infrastructure technology, which involves substantial capital investment. For the years ended December 31, 2021, 2022 and 2023, our consolidated capital expenditures totaled Rp30,329 billion, Rp34,146 billion and Rp32,858 billion (US$2,134 million), respectively. Our capital expenditure in 2023 was driven by the expansion of our subsidiaries. Key initiatives undertaken in 2023 included the construction of BTS by Telkomsel, the launch of a high-throughput satellite at the 113 East orbital point by Telkomsat to enhance terrestrial network infrastructure, the development of an international submarine cable system by Telin, and the establishment of HyperScale data centers in Batam and Cikarang by PT Telkom Data Ekosistem ("TDE").
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Our ability to fund capital expenditures in the future may depend on our future operating performance and our ability to select projects that result in the optimal allocation of such capital expenditures, all of which is subject to prevailing economic conditions, levels of interest rates and financial, business and other factors, many of which are beyond our control, and upon our ability to obtain additional external financing. Securing new loan facilities and additional financing may prove more difficult than in the past, and new debt funding may not be available to us in the future on commercially acceptable terms, or at all, particularly if interest rates keep rising in the near future or market sentiment is negative due to challenging macroeconomic conditions. In addition, we can only incur additional financing in compliance with the terms of our debt agreements.
Accordingly, in the future we may not have sufficient capital resources to improve or expand our telecommunications infrastructure technology or update our other technologies to the extent necessary to remain competitive in the Indonesian telecommunications market. Our failure to do so could have a material adverse effect on our business, financial condition, results of operations and prospects.
Deterioration of the financial condition of our customers could adversely affect our operating results.
Deterioration of the financial condition of our enterprise customers and/or of our subscribers could adversely impact our collection of accounts receivable and may also result in fewer purchases or delays in purchases of our products and services. Challenging macroeconomic conditions and financial market volatility due to several factors such as increased interest rates, global inflationary trends, geopolitical tensions, the military conflicts in Gaza and Ukraine, and ongoing trade disputes between China and the United States, could negatively impact the Indonesian economy and our customers, including reducing the purchasing power of our subscribers.
For the years ended December 31, 2022 and 2023, our receivables were approximately Rp8,895 billion and Rp10,948 billion, respectively. We regularly review the collectability and creditworthiness of our customers to determine an appropriate allowance for estimated credit losses. Based on our review of our customers, we currently have only immaterial reserves for uncollectible accounts. If our uncollectible accounts, however, were to exceed our current or future allowance for credit losses, our operating results would be negatively impacted.
Further, recent global inflationary trends and financial market volatility have resulted in funding constraints that may affect the timing and scale of new purchases of our products and services by some of our existing or prospective enterprise customers. The effects of recent macroeconomic uncertainties on our customers have also resulted in delays to contract negotiations or customer orders and may result in further delays. These factors could materially adversely affect our financial condition and operating results.
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Legal and Compliance Risks
If we are found liable for anti-competitive practices, we may be subjected to substantial liability which could have an adverse effect on our reputation, business, financial condition, results of operations and prospects.
We are subject to laws and regulations relating to anti-competitive practices and anti-monopoly. Law No. 5 of 1999 on Prohibition of Monopolistic Practice and Unfair Business Competition, as amended by the Job Creation Law 2022 of the Republic of Indonesia (the "Business Competition Law") prohibits agreements and activities that amount to unfair business competition and an abuse of a dominant market position. Pursuant to the Business Competition Law, the KPPU was established as Indonesia's antitrust regulator, with the authority to enforce the provisions of the Business Competition Law.
In 2016, our Company, Telkomsel, and five other local operators were found to have violated the Business Competition Law for price-fixing practices related to SMS services. We and Telkomsel paid penalties to the treasury fund in the amount of Rp18 billion and Rp25 billion, respectively.
In 2017, allegations surfaced asserting that we had breached the Business Competition Law by offering bundled services of broadband internet, fixed wireline, and IPTV services through our "IndiHome" retail brand. Although the KPPU held that we did not violate the Business Competition Law, this incident underscored potential challenges from customers or regulators to our business strategy.
We have experienced occasional KPPU inquiries into alleged infringements of the Business Competition Law. While none of these inquiries have resulted in rulings adverse to our interests to date, they may divert our management's attention away from our business operations. In the future, if we are found to have violated the Business Competition Law, we may be subject to substantial liability in the form of payments of fines, the amount of which will be subject to the discretion of the courts, and which in turn could have a material adverse effect on our reputation, business, financial condition, results of operations, and prospects.
Regulatory Risks
Changes to our legal and regulatory environment may result in increased competition, reduced margins and operating revenue, asymmetric reduction in costs incurred by our competitors and increased regulatory and enforcement uncertainty.
Since the enactment of Law No. 36 of 1999 on Telecommunications, as later amended by the Job Creation Law 2023 (the “Telecommunications Law”) Indonesia's telecommunications industry has seen significant liberalization, further amplified by Presidential Regulation No. 49 of 2021, which eliminated foreign ownership limitations on various telecommunications business activities, such as fixed and mobile telecommunications networks. Given such changes, foreign investors may increase their ownership of telecommunications companies in excess of 67% or engage in various telecommunications activities independently, without having to establish joint ventures with local partners. This may attract new foreign investors or lead to increased foreign ownership of competitors in Indonesia or new market entrants with potentially larger resources competing for market share. As foreign investors explore opportunities in the Indonesian telecommunications sector, the industry may experience increased competition, placing pressure on profit margins and operating revenues for existing players. The asymmetric reduction in costs incurred by our competitors, coupled with the potential influx of new, well-resourced entrants, may require us to further enhance our operational efficiency, differentiate our service offering, and explore collaborative ventures, which may lead to additional costs and necessitate the implementation of new strategies in response to increased competition.
The introduction of new or modified regulations to keep pace with technological advancements adds a layer of regulatory complexity and uncertainty, which may impact our financial and operational performance. Notable regulatory changes include the MoCI Regulation No. 5/2021 mandating that all interconnection services must be migrated from TDM-based to IP-based platforms by December 31, 2024, posing challenges and potential revenue impacts for incumbents like us. For example, in order to comply with MoCI Regulation No. 5/2021, we had to significantly change our existing infrastructure (which our competitors rely on in providing conventional interconnection services and for which they pay
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tariffs to us) to adopt the new technologies. Consequently, our revenue from interconnection services has increased, but we will need to expend further capital resources to change our infrastructure. MoCI regulation No. 5/2021 also provides that during the transition period, the interconnection costs charged by us must remain the same as those agreed in the existing Interconnection Offering Document (Dokumen Penawaran Interkoneksi) and Interconnection Agreement limiting our ability to pass on the additional costs to those to whom we provide interconnection services.
Additionally, the enactment of the General Data Protection Regulation ("GDPR") in the EU and Indonesia's own Law No. 27 of 2022 on Personal Data Protection (the “PDP Law”), as well as recent amendments to Law No. 11 of 2008 on Electronic Information and Transactions Law as last amended by Law No. 1 of 2024 (the "EIT Law") and the recent MoCI Circular Letter No. 9 of 2023 on AI Ethical Guidelines (“MoCI AI Circular Letter”), underscores the increasing regulatory scrutiny around data protection and ethical AI use, necessitating significant compliance efforts.
Alongside Indonesian regulations, our business operations and services are subject to international laws where we operate or serve customers. Notably, global jurisdictions are intensifying their examination of how businesses handle personal data. This rigorous oversight could lead to new legal obligations, impacting our operations. One prominent example is the EU's GDPR, effective May 25, 2018, which governs the handling of personal data within EU member states, introducing strict compliance requirements and significant penalties for non-compliance. In Indonesia, the primary regulatory framework for personal data protection is the PDP Law addressing both digital and physical personal data management, with detailed implementing regulations yet to be issued. The PDP Law envisages the establishment of a Personal Data Protection Agency and introduces penalties for data protection breaches, including fines up to Rp60,000,000,000, and administrative sanctions for non-compliance, including fines up to 2% of annual revenue or an amount determined by violation variables. including fines up to 2% of annual revenue or an amount determined by violation variables. Additionally, the law stipulates various criminal offenses punishable by fines, with a maximum amount of Rp6,000,000,000, and/or additional sentences (e.g., confiscation of profits and/or assets obtained or proceeds from crimes).
As of the date hereof, the MoCI is in the process of drafting detailed implementing regulations, which are expected to clarify the PDP Law's prescriptions regarding data processing and to become effective in the third quarter of 2024. These implementing regulations are expected to outline obligations for data controllers and processors, including mandatory record-keeping of data processing activities, such as recording the sources, purposes, data types, security protocols, data transfers, and security measures. We have been implementing measures to adapt to the expected new requirements, but full compliance with new requirements and standards may necessitate further investments or delays of specific projects, which could impact our results of operations.
Furthermore, the MoCI AI Circular Letter and the amendments to the EIT Law intend to promote ethical AI utilization and child protection in digital platforms. These regulations requireelectronic system operators (“ESOs”) such as ourselves to incorporate preventive measures against risks to children posed by electronic systems and grant the Government substantial oversight capabilities over electronic systems in Indonesia. For instance, the MoCI AI Circular Letter outlines key responsibilities for businesses involved in AI-based programming and all ESO using AI in both the public and private sectors, such as ensuring that any decisions that may impact human beings will not be left to AI alone and be subject to human oversight and validation.
The recent amendments to the EIT Law significantly increase the responsibilities of ESOs, with a particular focus on child protection online. The amendments address the digital landscape's changing dynamics and aim to protect children from potential harm. To be fully implemented, these amendments will be supported by forthcoming Government, presidential, and ministerial decrees. A critical amendment to the EIT Law, Article 16A, directly targets the safety of children in the digital sphere by mandating ESOs to implement robust child protection mechanisms from the development to the operational stages of their systems. This includes setting age restrictions, verifying user identities, and establishing reporting channels to defend children's rights online. Instances of non-compliance with these requirements could lead to severe administrative penalties, including the possibility of system suspension or shutdown. Furthermore, the amendments emphasize the Government's broader regulatory authority within Indonesia's digital environment and grants the Government the power to compel ESOs to modify their operations, with penalties for non-compliance. While intended to promote a safe, fair, and innovative digital space, the broad scope of these powers has generated concerns over potential Government overreach and its implications for innovation and business growth within the sector.
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The degree of Governmental oversight and the details of the Government's new requirements and standards are uncertain, presenting obstacles to our strategic and financial planning efforts. This evolving regulatory landscape may result in an increase in operational costs and the need for strategic adjustments to comply with stricter legal and regulatory standards, which may in turn have a material adverse effect on our financial condition, results of operations and growth prospects.
Moreover, licenses obtained by us under applicable Indonesian laws and regulations may be subject to conditions, compliance with which may be expensive, difficult or, depending on future regulatory, practically impossible. It is possible that Governmental authorities could take enforcement actions against us for our failure to comply with such regulations, including the aforementioned conditions. These enforcement actions could result, among other things, in the imposition of fines or the revocation of our licenses. Compliance with such regulations could require us to make substantial capital expenditures and consequently divert funds from our planned construction projects. We could also experience delays in our business schedules as a result of such compliance efforts. Each of the above could materially and adversely affect our business, prospects, financial condition, and results of operations.
Applicable regulations on tariffs and their implementation as supervised by the MoCI may affect our revenues and earnings.
MoCI Regulation No. 5/2021 governs tariffs for the provision of access to both telecommunications networks and telecommunications services. Tariffs on provisions of telecommunications networks consist of leased network and interconnection fees, whereas the tariffs on provisions of telecommunications services consist of tariffs for basic telephony, value-added telephony and multimedia services, including internet services for retail customers. MoCI Regulation No. 5/2021 sets out formulas that telecommunications operators like us must refer to in determining the tariff for our services.
Under MoCI Regulation No. 5/2021, the Director General of Post and Informatics Operations ("DGPIO") of MoCI supervises the implementation of tariffs. In its supervisory role, MoCI may take further action as it sees fit if it deems any of our actions to be potentially disruptive to fair competition in the telecommunications market. Accordingly, our promotional tariffs will need to be carefully planned and calculated to avoid any possible "predatory pricing" or anticompetition claim. If we violate the tariff rules, we may be subject to administrative sanctions under MoCI Regulation No. 5/2021.
Changes in regulated tariffs also directly impact our revenue. For instance, we derive substantial revenue from interconnection services, as we have the largest telecommunications network in Indonesia and our competitors must pay tariffs to connect to our network. Regulated SMS interconnection rates have been decreasing in recent years and may decrease further in the future. Such decrease has had and will have, if continued, a negative impact on our revenue.
MoCI Regulation No. 5/2021 also allows the public to participate in the supervision process by providing them the right to submit complaints and take other actions regarding tariffs that they may view as being unfairly charged by us. The MoCI, in its regulatory role of ensuring fair competition in the telecommunications industry and protecting public interest may effectively be able to set ceilings and floors on tariffs that we charge.
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Regulations for the configuration of BTS towers may delay the installation of new BTS towers or changes in the placement of existing towers, and may erode our leadership position by requiring us to share our towers with our competitors.
In accordance with Government regulations, the construction of BTS towers requires permits from local governments. Obtaining these permits may be cumbersome and take an inordinate amount of time and may adversely affect the allocation, development, and expansion of our BTS towers. We may also be prohibited from setting up new BTS towers in certain areas, thereby restricting our expansion. Our existing BTS towers may also be adversely affected if local governments require any changes to their placement.
In addition, Government regulations require us to allow other telecommunications operators to lease space on our telecommunications towers in a manner that provides equal opportunity to and without any discrimination among such other telecommunications operators. These regulations enable our competitors to broaden their networks by using our infrastructure, thus avoiding the cost of constructing their own towers. This advantage is particularly significant in urban areas, where securing new tower locations is challenging, allowing competitors to swiftly expand and grow their operations. Moreover, our subsidiary PT Dayamitra Telekomunikasi Tbk. ("Mitratel") faces network sharing obligations for its passive infrastructure including towers and fiber optics. The implementation of these requirements, coupled with the potential issuance of multiple 5G licenses, could limit the availability of new sites for BTS towers certain regions. Additionally, any mandates for the retrofitting of existing towers to accommodate multiple operators could lead to our incurrence of additional expenses.
In order to operate our telecommunications towers, Indonesian regulations allow local governments to impose three types of fees: property tax (Pajak Bumi dan Bangunan), fees charged in connection with the grant of building approvals (Persetujuan Mendirikan Bangunan Gedung) and telecommunications tower control fees. These fees are determined on a cost basis subject to a formula provided by the MoF and the location of the telecommunications towers. While local governments that have imposed such fees have not charged material amounts as at the date hereof such fees could become material in the future. In addition, there could be material differences in the amount of fees that we would be liable to pay to the relevant local governments. If these risks were to materialize, it could have a material adverse effect on our operating results.
We may experience local community opposition to some of our tower sites.
We have experienced, and may in the future experience, local community opposition to our existing sites or the construction of new towers on new sites for various reasons, including aesthetic and alleged health concerns. As a result of such opposition, we could be required by the local authorities to dismantle and relocate certain towers. Opposition to the construction of new towers could also cause delays in the availability and completion of new towers. In extreme cases, vandalism could result in damaged equipment. In the year ended December 31, 2023, we were involved in 14 community disputes.
Opposition has also materialized regarding the site locations of some of Mitratel’s towers and the acquisition by Mitratel of other existing towers, mainly due to insufficient engagement with nearby residents concerning construction-related issues and the transfer of ownership rights from previous owners to Mitratel. If we are required to relocate a material number of our towers and cannot locate replacement sites that are acceptable to our customers, and/or local communities, or litigation proceedings, production delays or damages to equipment occur, it could materially and adversely affect our business, prospects, results of operations and financial condition.
We are subject to numerous non-tax state revenue payments and USO Contribution and any disagreement with the relevant authorities relating to such payments and/or failure to make such payments could subject us to the revocations of certain of our licenses, with limited recourse.
We are subject to multiple rules and regulations authorizing the Government to collect non-tax state revenue from us. The Government collects non-tax revenue from, among other things, tests for telecommunications devices, telecommunications operations and use of radio frequency spectrum. As a result, every licensed telecommunications
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operator must pay the Telecommunications BHP and USO Contribution. Telecommunications operators that use a communications satellite must also pay a satellite orbit fee.
According to the Telecommunications Law, a telecommunications operator that fails to make the non-tax state revenue payment and participate in USO Contribution may be subject to administrative sanctions; the most adverse sanction is revocation of an operator's telecommunications-related licenses issued by MoCI (though this should be preceded by written warnings). While we have not previously failed to make the requisite payments or disagreed with the computation of such payments, any failure by us to comply with these obligations may cause our licenses to be revoked. In addition, to our knowledge, procedures for challenging the assessment of any such obligations or for challenging sanctions that are assessed against operators with the relevant authorities have not been tested. Any revocation of such licenses could have a material adverse effect on our financial condition, results of operations and liquidity.
Our electronic money business is highly regulated.
We are subject to multiple rules and regulations in respect of our electronic money ("E-Money") business. The specific regulation of E-Money is mainly governed by BI. In 2021, BI introduced new rules allowing parties with payment system business activities to obtain one license for multiple types of payment services, compared to the previous rules requiring parties to obtain one license for each type of payment service they provided (e.g., separate licenses for each E-Money, payment gateway, and e-wallet business).
Any party that wishes to conduct E-Money business activities in Indonesia must first obtain a payment service provider (Penyedia Jasa Pembayaran or “PJP”) license granted by BI which may, depending on its category, cover specific payment system business activities such as E-Money. Our subsidiary Telkomsel has obtained an E-Money license from BI which also covers remittance services held by Finarya, an associate of Telkomsel. However, BI has the authority to take further actions as it sees fit, such as revoking a license, shortening the license period, or limiting the license holder's activity. If BI imposes any such actions on Telkomsel, our ability to conduct our ordinary course E-Money business would be limited, which may adversely affect our business, financial condition, and results of operations. See "Item 4. Information on the Company — Licensing — Payment Method Using E-Money " for more details on BI’s requirements for licensing.
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BI regulations governing payment system providers in Indonesia impose multiple requirements on BI license holders, including certain restrictions on shareholding and corporate governance as well as risk management and information system capability requirements. If we, through Telkomsel, fail to comply with any of these obligations, we will be subject to administrative sanctions. Any sanction imposed on Telkomsel could materially and adversely affect our business, financial condition, results of operations and prospects.
Risks Related to the Development of New Businesses and Acquisitions
We may not succeed in our efforts to develop new businesses.
We believe that efforts to develop new businesses other than in the telecommunications sector, such as in the areas of digital life, smart platforms, and enterprise ICT, as well as efforts to pursue international expansion, are necessary to ensure continuing business growth. Risks related to new business development include competition from established players, suitability of our business model, competition from disruptive new technologies or business models, the need to acquire new expertise in new areas of operation, the inability to successfully organize and streamline our subsidiaries to create value from our multiple businesses, and risks related to online media which include intellectual property, consumer protection and confidentiality of customer data. Further, we have to focus on securing new enterprise customers. If we are unable to secure new contracts, or we are unable to renew our existing contracts with similar contract value, size, or margins to existing ones, this may adversely affect our business, results of operations and financial condition.
Focusing on international expansion is one of our strategic business initiatives. In particular, we have expanded into a number of jurisdictions in telecommunications or data related areas, namely Singapore, Hong Kong, Timor-Leste, Australia, Myanmar, Malaysia, Taiwan, the United States and New Zealand. Expanding our operations internationally exposes us to a number of risks associated with operating in new jurisdictions. For example, our international operations could be adversely affected by political or social instability and unrest, regulatory changes (such as an increase in taxes applicable to our operations), macroeconomic instability, limitations on or controls on the foreign exchange trade, competition from local operators, difference in consumer preference and a lack of expertise in the local markets in which we will operate. Any of these factors could limit our expected returns from our expansion and materially and adversely affect our business, results of operations and financial condition.
Due to intense competition for highly skilled personnel, we may fail to attract, recruit, retain and develop qualified employees, which could materially and adversely impact our business, prospects, financial condition and results of operations.
With our strategic focus on expanding our digital platform and services, achieving better FMC, accompanying and fostering the digitalization of Indonesian businesses and Governmental agencies, developing our offering of B2B services (such as for cybersecurity and cloud and data center services), and big data and IoT services and products, we face significant competition for suitably skilled personnel, such as software engineers, electrical engineers working in digital signal processing, developers and digital talents in general. The Indonesian high-tech and digital industry has experienced significant economic growth, including through the initial public offerings of regional technology companies. This accelerated economic growth of Indonesian and regional technology companies has led to a surplus of job opportunities and intense competition between Indonesia-based employers to attract locally qualified employees. As a result, we may not succeed in recruiting additional experienced or professional personnel, retaining current personnel, or effectively replacing current personnel who may depart with qualified or effective successors. Our effort to retain and develop personnel may also result in significant additional expenses, which could adversely affect our profitability. There can be no assurance that qualified employees will continue to be employed or that we will be able to attract and retain qualified personnel in the future. Failure to retain or attract qualified personnel could have a material adverse effect on the implementation of our business strategies, our business, prospects, financial condition, and results of operations.
If we are unable to manage our growth effectively, our business and financial results may be adversely affected.
To continue to grow sustainably, we must continue to expand our operational, research, sales and marketing efforts, accounting and financial systems, procedures, controls and other internal management systems. This may require substantial managerial and financial resources, and our efforts in this regard may not be successful. Our current systems,
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procedures and controls may not be adequate to support our future operations. Unless our growth results in an increase in our revenues that is proportionate to the increase in our costs associated with this growth, our operating margins and profitability will be adversely affected. If we fail to adequately manage our growth effectively, improve our operational, financial and management information systems, or effectively train, motivate and manage our new and future employees, it could adversely affect our business, financial condition and results of operations.
Our acquisition activities expose us to various risks.
We have in the past pursued, and may continue to pursue, acquisitions of complementary assets and businesses. In 2021, our subsidiary Mitratel acquired 4,000 telecommunications towers from Telkomsel, and in 2022, Mitratel acquired an additional 6,000 telecommunications towers from Telkomsel. In February 2023, Mitratel acquired 997 telecommunications towers from Indosat, and in November 2023, Mitratel further acquired 803 telecommunications towers from PT Gametraco Tunggal.
The success of these acquisitions will depend, in part, on our ability to realize the anticipated growth opportunities and synergies from combining the acquired businesses with our existing businesses. Based on the size and complexity of certain businesses, integrating them into our existing business could require substantial time, expense and effort from our management. The process of integrating an acquired business may also involve unforeseen costs and delays or other operational, technical and financial difficulties that may require a disproportionate amount of management attention as well as financial and other resources. If our management's attention is diverted or there are any difficulties associated with integrating these businesses, our results of operations could be adversely affected.
Even if we are able to successfully integrate these businesses, it may not be possible to realize the full benefits we expect to result from such acquisitions and strategic transactions or realize these benefits within the time frame that we expect. Moreover, such businesses generally remain subject to unforeseeable factors outside of our control. Our acquisitions and strategic transactions, including those entered into in recent periods, may turn out to be unprofitable. Any failure to successfully incorporate the acquired businesses and assets into our existing operations, to enhance operating efficiencies from consolidation savings, minimize any unforeseen operational difficulties and realize the anticipated benefits on time, or at all, could materially and adversely affect our business, financial condition, results of operations, prospects and cash flows.
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Risks Related to our Corporate Structure
We are dependent on our subsidiary, Telkomsel, a cellular telecommunications services and cellular telecommunications networks company.
We derived 61.0%, 58.0% and 76.0% of our revenue in 2021, 2022 and 2023, respectively, from our mobile business through our 69.9% majority-owned subsidiary, Telkomsel. The remaining 30.1% interest in Telkomsel is held by Singapore Telecom Mobile Pte. Ltd. ("Singtel"). In addition, in line with our FMC initiative, we entered into an agreement with Telkomsel to combine our fixed broadband and mobile broadband services into a single business entity, by transferring a portion of our assets and liabilities allocated to the IndiHome business segment to Telkomsel (the "IndiHome Integration"). After the IndiHome Integration, we expect an increase in the contribution from Telkomsel to our consolidated revenue.
Singtel, a telecommunications company based in Singapore, may seek to influence the management, operation, and performance of Telkomsel. In the event that there are differences between us and Singtel regarding the business, strategy, and operations of Telkomsel, these issues may take time to resolve, or may not result in a positive outcome for our Group. These factors could materially and adversely affect our business, financial condition, revenue and operating results.
Our effort to streamline our corporate structure may not create expected synergies and efficiency in a timely fashion or at all.
To foster efficiency and increase synergies, we constantly assess opportunities to streamline our corporate structure, for instance by eliminating duplication of business management processes and internal administrative processes, and also by simplifying our corporate ownership structure. This exercise allows us to rationalize administrative costs and consolidate assets and activities used in the same businesses to use our resources and unlock their value more efficiently. In April 2023, in line with our FMC initiative, we entered into an agreement with Telkomsel to combine our fixed broadband and mobile broadband services into a single business entity, by transferring a portion of our assets and liabilities allocated to the IndiHome business segment to Telkomsel.
As we focus on the development of our digital service offerings, including smart platforms and digital services, we have started regrouping our teams, resources, and assets under one corporate entity. For instance, we are consolidating our data center assets under our subsidiary TDE, and our infrastructure assets under a proposed InfraCo. We also aim to enhance our regional entities to better tailor our service offerings to local market dynamics and respond more effectively to competitive changes in such markets, such as challenges from local competitors or the expansion of the service offerings or networks of national or regional competitors in such markets.
These streamlining efforts, however, have been delayed, and we may experience further delays. In addition, during transition periods, we may incur costs inherent to the implementation of such streamlining efforts without realizing the anticipated benefits to our businesses, competitiveness, costs, and synergies, which could have a negative effect on our financial condition and results of operations.
Our controlling shareholder's interests may differ from those of our other shareholders.
The Government has a controlling equity interest of 52.09% of our issued and outstanding shares of common stock and the ability to determine the outcome of all actions requiring the approval of our shareholders. The Government also holds our one Dwiwarna Share, which has special voting rights and veto rights over certain matters, including the election and removal of our Directors and Commissioners. The Government may also use its powers as a majority shareholder or under the Dwiwarna Share to cause us to issue new shares, amend our Articles of Association or bring about actions to merge or dissolve us, increase, or decrease our authorized capital or reduce our issued capital, or veto any of these actions. One or more of these may result in the delisting of our securities from certain exchanges. In addition, the Government regulates the Indonesian telecommunications industry through MoCI.
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As of December 31, 2023, the Government through PT Perusahaan Pengelola Aset (Persero), held a 9.63% equity interest in IOH, which competes with us in cellular services, data center services, IT solutions, system integration services, and fixed IDD telecommunications services. The Government's equity interest in IOH also includes a Dwiwarna Share which has special voting rights and veto rights over certain strategic matters under IOH's articles of association, including decisions on dissolution, liquidation, and bankruptcy, and also permits the Government to nominate one director to its board of directors and one commissioner to its board of commissioners. As a result, there may be instances where the Government's interests will conflict with ours. The Government may direct opportunities to IOH or favor IOH or any other telecommunications operator when exercising regulatory powers over the Indonesian telecommunications industry. If the Government were to give priority to the business of IOH or any other telecommunications operator over ours, or to expand its equity interest in IOH or acquire an equity interest in any other telecommunications operator, our business, financial condition, and results of operations and prospects could be materially and adversely affected.
Our Articles of Association contain certain anti-takeover provisions that could adversely affect the rights of holders of our ordinary shares and ADSs.
Our Articles of Association contain certain anti-takeover provisions that could adversely affect the rights of holders of our ordinary shares and ADSs. These provisions could have the effect of delaying, preventing or deterring a change in control, and could limit the opportunity for our shareholders to receive a premium for their ADSs and/or shares, and could also materially decrease the price that some investors are willing to pay for our ADSs and/or shares.
Risks Related to Indonesia
Political and Social Risks
Current political and social events in Indonesia may adversely affect our business.
Indonesia has, from time to time, experienced political instability. Indonesia also has many political parties, and securing a clear electoral majority has been proven challenging for any political party to date. These events have heightened political dynamics, contributing to general social and civil unrest on certain occasions in recent years. For example, since 2000, thousands of Indonesians have participated in demonstrations in Jakarta and other cities, expressing both support and opposition to former presidents Abdurrahman Wahid, Megawati Soekarnoputri, Susilo Bambang Yudhoyono, and the current President Joko Widodo, who is currently serving his last term as president.
The demonstrations focused on social and civil responses to specific issues, such as fuel subsidy reductions, privatization of state assets, anti-corruption measures, decentralization and provincial autonomy, and the New Criminal Code. Although these demonstrations have generally been peaceful, some have escalated into violence. After President Joko Widodo won the presidential election in 2019, allegations of electoral fraud prompted a rally against President Joko Widodo in Central Jakarta that resulted in a riot on May 22, 2019. The opposing party also filed a lawsuit alleging fraud to the Constitutional Court of Indonesia to challenge the election result, though the Constitutional Court rejected the lawsuit on July 27, 2019.
The most recent demonstration related to Indonesia’s current political environment occurred on February 7, 2024, with activists calling for the impeachment of President Joko Widodo due to concerns about perceived misuse of President Joko Widodo's power to influence the presidential election held on February 14, 2024 in favor of Prabowo Subianto, and President Joko Widodo's son, Gibran Rakabuming Raka, as presidential and vice-presidential candidates. Following the presidential election in February 2024, Prabowo Subianto emerged victorious with approximately 58% of the vote in the first round, as officially confirmed by the Indonesian Electoral Commission.
This situation, along with potential future sources of discontent, such as the national and regional elections in 2024, may lead to further political and social instability.
Separatist movements and clashes between religious and ethnic groups have also resulted in social and civil unrest in some parts of Indonesia, such as Aceh in the past and Papua more recently. There have been clashes between supporters of those separatist movements and the Indonesian military, including continued activity in West Papua by separatist rebels
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that has led to violent incidents in January 2023. There have also been inter-ethnic conflicts, for example in Kalimantan, as well as inter-religious conflict such as in Maluku and Poso.
In August 2019, after the arrest of Papuan students for allegedly vandalizing the Indonesian flag, riots broke out in Papua. The riots caused a Telkom customer service building to be damaged in 2019, but this did not result in significant issues, service interruption or damages. Should similar unrest occur in the vicinity of our operations in the future, our business and operations may be adversely affected.
Occasional attempts to reduce labor protections have incited public protests. Passage of the Job Creation Law 2020 led to numerous protests across Indonesia into 2021. This law amended more than 70 existing laws with the stated purposes of easing administrative requirements and increasing investments for creating new jobs. However, critics argued that the Job Creation Law 2020 would generally undermine existing labor laws and weaken environmental protections, leading to various controversies among the public. This led to organized demonstrations in major cities, including Jakarta, the central government, as well as other prominent cities such as Yogyakarta, Surabaya, and Malang. Some of these protests escalated into riots.
In response to legal challenges, the Constitutional Court of Indonesia declared the law to be "conditionally unconstitutional" in 2021. This ruling allowed the law to remain valid but required the Government and the House of Representatives to redraft the law within two years. There has been contention (and to a certain extent, political instability) in interpreting this verdict, and labor unrest may continue as subsequent regulations are issued. On December 30, 2022, the Government enacted the Job Creation Law 2022 to revoke and replace the Job Creation Law 2020, though all implementing regulations of the Job Creation Law 2020 will remain enforceable unless directly replaced by the Job Creation Law 2022. With the enactment of this regulation, the regulatory body has fulfilled the requirements to repeal the unconstitutional determination and effectively implemented Job Creation Law 2022.
The Indonesian parliament passed a new criminal code ("New Criminal Code") on December 6, 2022, that replaces the century-old criminal code introduced by the Dutch during the colonial era. The New Criminal Code will come into force after a three-year transition period. The New Criminal Code also requires the Government to promulgate a number of implementing regulations no later than two years after its enactment. One of the significant features of the New Criminal Code is that all criminal offences stipulated under the New Criminal Code can now be attributed to a corporation, unless provided otherwise. In addition, similar to the Job Creation Law 2022, the New Criminal Code takes precedence over and amends sanctions provided under various laws, including anti-money laundering and anti-corruption laws. On December 8, 2022, the United Nations (“UN”) issued a statement on the New Criminal Code, expressing its concern that certain provisions appear to be incompatible with fundamental freedoms and human rights, including equal protection of the law without discrimination and the right to equality before the law, privacy, freedom of religion, belief, freedom of opinion and expression. The UN and other organizations, including Amnesty International, have stated their concerns that several articles in the New Criminal Code contravene Indonesia’s international legal obligations. It is unclear whether the New Criminal Code may result in political, social and civil disturbances, in particular during the transition period and any such disturbances may, directly or indirectly, materially and adversely affect our business, financial condition, results of operations and prospects.
Labor unrest and activism in Indonesia could disrupt our operations or those of our customers and could affect the financial condition of Indonesian companies in general, depressing the prices of Indonesian securities on the IDX and the value of the Rupiah relative to other currencies. Such events could materially and adversely affect our business, prospects, financial condition and results of operations. Social and civil disturbances may occur in the future and on a wider scale, and any such disturbances may, directly or indirectly, materially and adversely affect our business, financial condition, results of operations and prospects.
Terrorist activities in Indonesia could destabilize Indonesia, which would adversely affect our business, financial condition and results of operations, and the market price of our securities.
There have been a number of terrorist incidents in Indonesia in the past two decades, which resulted in deaths and injuries, including a bombing at a Catholic church in Makassar on March 28, 2021 that injured more than 20 people and a bombing in Bandung, West Java on December 7, 2022, that killed one person and injured seven people.
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Although the Government has successfully countered some terrorist activities in recent years and arrested several of those suspected of being involved in these incidents, terrorist incidents may continue and, if serious or widespread, might have a material adverse effect on investment and confidence in, and the performance of, the Indonesian economy and may also have a material adverse effect on our business, financial condition, results of operations and prospects and the market price of our securities.
We may be affected by uncertainty in the delineation of the respective prerogatives and responsibilities of, and the balance of power between, local governments and the central government in Indonesia.
Since 1999, Indonesia has undergone significant reforms in fiscal decentralization, devolution of power to local governments, and regional autonomy. As at the date hereof, there is uncertainty in respect of the responsibilities and the balance of power between the local and central governments regarding several subject matters. Those include procedures for renewing licenses, approvals, and levies imposed by local governments on our telecommunications towers.
For example, in 2023, local governments, including the government of Surabaya City, introduced regulations for calculating lease fees for land used for telecommunications infrastructure, whether on state-owned or public land. This model has been adopted by 59 other regencies/cities, such as Sidoarjo Regency, leading to increased levies on our digital infrastructure. The potential for more local governments to enact similar regulations raises concerns about regulatory inconsistencies and compliance difficulties.
In addition, local governments have from time to time sought to levy additional taxes or obtain new contributions, including for the utilization of certain parcels of land they owned and that are needed for to construct certain of our towers. This ongoing uncertainty could complicate our compliance efforts and raise questions about the legality of new taxes or the authority of local governments to enact further regulations impacting our business. These factors may adversely affect our business operations, financial health, and future growth prospects.
Macroeconomic Risks
Negative changes in global, regional or Indonesian economic activity could materially and adversely affect our business.
Our business performance is susceptible to downturns in the Indonesian, regional and global macroeconomic environment. In the past, Indonesia’s economy has faced major external shocks, such as the Asian economic crisis of 1997 and the global economic crisis in 2008, leading to recession, currency depreciation, high interest rates, and social unrest. More recently, although the Indonesian economy has recovered modestly from COVID-19, the economic situation in Indonesia may nonetheless deteriorate, which could have an adverse effect on our business, financial condition, results of operations and prospects.
Downside risks persist in 2023 that could deteriorate the economic situation in Indonesia, Asia and globally. Key concerns include global trade disputes that disrupt global financial markets, expectations relating to the monetary and interest rate policies of the United States, concerns over China's economic health, economic protectionism, and the military conflicts in Gaza and Ukraine and related geopolitical tensions.
For instance, ongoing trade tensions between major economies such as the United States and China create uncertainty and volatility in the global financial markets, reducing capital inflows and investment in emerging markets such as Indonesia, exert downward pressure on currencies, and raise external financing costs for businesses. As such, we may face higher costs or difficulty accessing foreign capital.
Further, the U.S. Federal Reserve’s raising of interest rates has prompted capital outflows and currency depreciation in emerging markets as investors move towards U.S. dollar-denominated assets and has also resulted in higher inflation rates in Indonesia. Higher inflation rates make borrowing more costly for us, and we may experience lower profitability if we are unable to pass on higher financing expenses.
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Further, in 2023, China has also experienced an economic slowdown as a result of downturns in its property sector and rising defaults in the corporate and shadow banking sector, which has led to the Chinese government reducing interest rates to support economic growth. An acceleration of China’s economic downturn may have an adverse impact on the global sector, including supply chain disruptions, and financial linkages that could spread risk. Slower economic growth in China also dampens business sentiment and the appetite for investment across the region, and we may experience weaker revenue growth as a result.
Since late 2021, tensions between the U.S. and Russia have escalated as Russia amassed large numbers of military forces around Ukraine and, in February 2022, Russia invaded Ukraine. In response, NATO has deployed additional military forces to Eastern Europe, including to Lithuania, and the Biden administration has announced certain sanctions against Russia. Further, the escalating conflict between Israel and militant groups in Gaza beginning on October 7, 2023, brings geopolitical uncertainty that could negatively impact the global economy. Prolonged fighting disrupts economic activity and raises supply chain risks in the Middle East region, which is a critical energy and trade hub. Escalation leading to higher oil prices would put upward pressure on already high inflation worldwide. The conflict also dampens business and consumer confidence globally, especially if unrest spreads across the Middle East. While the macroeconomic impacts may be limited if the conflicts in Gaza and Ukraine are contained, serious regional escalations would pose a significant downside risk to global growth and stability. In particular, the invasion of Ukraine and retaliatory measures that have been taken, or may be taken in the future, by the U.S., NATO, and other countries have created global security concerns that could result in regional conflict and otherwise have a lasting impact on regional and global economies. These negative economic developments have adversely affected and will adversely affect both developed economies and developing markets, including Indonesia and other economies in Southeast Asia.
In 2023, the financial conditions of banking institutions have come under severe pressure and deterioration, as exemplified by the proposed restructuring of Credit Suisse Group AG and the failures of Silicon Valley Bank and Signature Bank in the first quarter of 2023, which caused increased volatility in capital markets.
Adverse economic conditions and protracted global uncertainties could result in less business activity, less disposable income available for consumers to spend and reduced consumer purchasing power, which may reduce demand for communication services, including our services, which in turn would have a material adverse effect on our business, financial condition, results of operations and prospects. Future economic instability in future could have a material and adverse impact on the performance of our business.
Fluctuations in the value of the Indonesian Rupiah may materially and adversely affect us.
Our functional currency is the Indonesian Rupiah. Historically, the Indonesian Rupiah has been subject to significant depreciation and volatility against the U.S. Dollar and other foreign currencies. From a 2021 high of Rp14,219 to US$1.00 on December 24, 2021, the Rupiah depreciated in 2022 to a low of Rp15,893 to US$1.00 on October 31, 2023, (based on the middle exchange rate published by Reuters Refinitiv), due to, among other factors, the slowing global economy and strong U.S. Dollar. The Indonesian Rupiah may continue to soften in the future.
In addition, while the Indonesian Rupiah has generally been freely convertible and transferable, from time to time, BI has intervened in the currency exchange markets in furtherance of its policies, either by selling Indonesian Rupiah or by using its foreign currency reserves to purchase Indonesian Rupiah. The current floating exchange rate policy of BI may be modified, and the Government may take additional action to stabilize, maintain or increase the Indonesian Rupiah's value, and any of these actions, if taken, may not be successful. Modification of the current floating exchange rate policy could result in significantly higher domestic interest rates, liquidity shortages, capital or exchange controls, or the withholding of additional financial assistance by multinational lenders. This could result in a reduction of economic activity, an economic recession, loan defaults or declining subscriber usage of our services, and as a result, we may also face difficulties in funding our capital expenditures and in implementing our business strategy. Any of the foregoing consequences could materially and adversely affect our business, financial condition, results of operations and prospects.
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Rapid and excessive increases in levels of inflation and interest rates in Indonesia could materially and adversely affect our financial condition and results of operations.
Interest rates are affected by the inflation rate. Historically, Indonesia has experienced periods of high inflation. The inflation rate (measured by the year-on-year change in the consumer price index) remains volatile with an annual inflation rate of 5.51% and 2.61% in the years ended December 31, 2022 and 2023, respectively. Based on ongoing economic pressures in the wake of the military conflict in Ukraine, it is anticipated that inflation may continue to rise in the near future. Interest rates have increased rapidly and substantially as central banks in several countries and regional blocks raised interest rates in an effort to subdue inflation. If inflation causes interest rates to further increase significantly and results in a rapid increase in benchmark rates, it could have a material adverse effect on Indonesia’s economy, business climate and consumer confidence.
Even if we have not yet experienced any such impact on our revenues in 2023, higher inflation rates generally lead to a reduction in purchasing power, thus increasing the likelihood of a lower level of demand for our products and services in Indonesia, which would have a negative impact on our revenues. Further, any increase in our costs and expenses due to inflationary pressures that we would not be able to match (partially or fully) by increasing our prices would decrease our profit margin. Eventually, tighter monetary policy and potentially higher long-term interest rates may drive a higher cost of capital for our business. As a result, a high inflation rate in Indonesia could have a material adverse effect on our business, financial condition, results of operations and prospects.
Downgrades of credit ratings of the Government or Indonesian companies could materially and adversely affect our business.
As of the date of this annual report on Form 20-F, Indonesia's sovereign foreign currency long-term debt was rated "Baa2" with stable outlook by Moody's, "BBB" with stable outlook by Standard & Poor's and "BBB" with stable outlook by Fitch.
These ratings reflect an assessment of the Government’s overall financial capacity to pay its obligations and its ability or willingness to meet its financial commitments as they become due. Moody's, Standard & Poor's, Fitch and other statistical rating organizations may change or downgrade the credit ratings of Indonesia or Indonesian companies. In particular, the credit ratings of Indonesia or Indonesian companies, have been and may be downgraded in the future. Any downgrade could have an adverse impact on liquidity in the Indonesian financial markets, the ability of the Government and Indonesian companies, including us, to raise additional financing, and the interest rates and other commercial terms at which such additional financing is available. Interest rates on our floating-rate Rupiah-denominated debt would also likely increase. Such events could materially and adversely affect our business, financial condition, results of operations, prospects and/or the market price of our securities.
Employment legislation in Indonesia could materially and adversely affect our business.
Over the past 10 years, the minimum wage in Indonesia has increased significantly. As national labor laws do not have any specific provisions to determine the amount of minimum wage increases, minimum wage increases can be unpredictable. In addition to directly increasing wages for lower-level employees, these minimum wage increases indirectly apply upward pressure on the wages of higher-level employees over time. As a result, any significant increase in the minimum wage in Indonesia may increase our manpower costs and have a material adverse effect on our cash flows, business, financial condition, results of operations and prospects.
Risks relating to Natural Disasters and Climate Change
Indonesia is vulnerable to natural disasters and events beyond our control, which could materially and adversely affect our business and operating results.
Many parts of Indonesia, including areas where we operate, are prone to natural disasters such as floods, lightning strikes, typhoons, earthquakes, tsunamis, volcanic eruptions, fires, droughts, power outages and other events beyond our control. The Indonesian archipelago is one of the most volcanically active regions in the world as it is located in the
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convergence zone of three major lithospheric plates. It is subject to significant seismic activity that can lead to destructive earthquakes, tsunamis or tidal waves. Flash floods and more widespread flooding also occur regularly during the rainy season from November to April. Cities, especially Jakarta, are frequently subject to severe localized flooding which can result in major disruption and, occasionally, fatalities. Landslides regularly occur in rural areas during the wet season. From time to time, natural disasters have killed, affected or displaced large numbers of people and damaged our equipment. These events in the past have disrupted, and may in the future, disrupt our business activities, cause damage to equipment, and adversely affect our financial performance and profit.
For example, there were incidents of floods, weak tornados (puting beliung), and landslides in various regions in Indonesia between January and April 2021. On December 6, 2021, Mount Semeru, an active volcano, erupted and cut the telecommunications cable network (backbone) of cellular operators, requiring Telkom to reroute traffic to maintain telecommunications services in the area. Further, the island of Java has been impacted by strong earthquakes in November and December 2022, and the region remains prone to heavy rains, flooding, and volcanic eruptions. Given the geography of Indonesia, we are highly reliant on the use of submarine cables to provide services across the Indonesian archipelago. These submarine cables may be damaged by volcanic activity or friction with the ocean floor caused by earthquake tremors or otherwise, which may disrupt our ability to provide services to customers.
To prepare for natural disasters, we have implemented a business continuity plan and a disaster recovery plan, which we test regularly, and we have insured certain of our assets to protect from any losses attributable to natural disasters or other phenomena beyond our control. However, our business continuity and disaster recovery plans may not allow us to immediately recover from resulting damages and disruptions, our insurance coverage may be insufficient to cover potential losses, the premium payable for these insurance policies upon renewal may increase substantially in the future, and natural disasters may significantly disrupt our operations.
Future natural disasters may have a significant impact on us, Indonesia or the Indonesian economy. A significant earthquake, other geological disturbance or weather-related natural disaster in any of Indonesia's more populated cities and financial centers could severely disrupt the Indonesian economy and undermine investor confidence, thereby materially and adversely affecting our business, financial condition, results of operations and prospects.
We are exposed to the potential for financial loss and further non-financial detriments arising from climate change and society's response to it.
This risk consists principally of (i) physical risks, being the risks arising from increasing frequency and severity of acute weather-related events and longer-term chronic shifts in climate patterns, and (ii) transition risks, being the risks arising from the process of adjustment to a low-carbon economy. Together, these are referred to as "Climate Risk."
Climate Risk continues to be a core focus of regulatory policymaking across all jurisdictions in which we operate, including as a result of recent COP26-related initiatives. For example, many countries are incorporating environmental targets into their domestic policies, with increased pressure to set ambitious sustainability goals. We anticipate that the climate-related regulatory environment in which we operate will be subject to further regulatory developments. Such regulatory developments, together with existing guidance and expectations, may increase the potential transition risks for us, by mandating investments of resources for regulatory compliance, potential GHG emission taxes, and additional environmental monitoring and reporting obligations. These developments may raise the costs associated with energy consumption, notably as expenses on electricity represent a substantial portion of our operational costs. In addition, customer and public perceptions of our efforts to mitigate climate change may limit demand for our products and services, particularly if people perceive our efforts to be less effective than those of our competitors.
If governments fail to enact policies that limit the impact of global warming, our operations may be particularly susceptible to the physical risks of climate change such as droughts, floods, sea level change and average temperature change. For example, severe weather events have caused increased volatility in commodity prices, exacerbated disruptions in global supply chains, and impacted regions in which we operate, and may damage our infrastructure by causing failures of our fixed wireline and wireless networks. Should severe natural disasters occur in quick succession, we may not have sufficient resources to repair and restore our infrastructure in a timely and cost-effective manner.
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In addition, rising temperatures could increase our operating costs by intensifying the cooling requirements of our network equipment and heightening the incidence of equipment failures, leading to write-offs and premature replacements. This upsurge in equipment failures could increase the risk of service disruption. The occurrence or continuance of any of the abovementioned risks could have a material adverse effect on our financial condition, results of operations and, if severe or prolonged, our prospects.
Risks Related to our ADSs
The trading price of our ADSs may be volatile, which could result in substantial losses to you.
The trading price of our ADSs may fluctuate widely due to factors beyond our control. As a result of this volatility, investors may not be able to sell their ADSs at or above the price paid for the ADSs or ordinary shares, respectively. In addition to the factors discussed in this “Risk factors” section and elsewhere in this annual report on Form 20-F, these factors include:
· | variations in our revenue, earnings, cash flow and operating data; |
· | regulatory or legal developments in Indonesia, jurisdictions where we carry out our operations or in the United States; |
· | announcements of new investments, acquisitions or strategic partnerships by us or our competitors; |
· | general economic, political, and market conditions and overall fluctuations in the financial markets in Indonesia, the United States, and other countries where we carry out our operations; |
· | sales volumes of our ADSs or ordinary shares, or sales of our ADSs or shares by our senior management, directors or our large shareholders, or the anticipation that such sales may occur in the future; |
· | stock market price and volume fluctuations of comparable companies and, in particular, companies that operate in the telecommunications industry or with most of their operations in Indonesia; |
· | investors’ general perception of us and our business; |
· | announcements of new products, services and expansions by us or our competitors; |
· | changes in financial estimates or recommendations by securities analysts; |
· | detrimental adverse publicity about us, our services or our industry; |
· | additions or departures of key personnel; and |
· | potential litigation or regulatory investigations. |
Any of these factors may result in large and sudden changes in the volume and price at which our ADSs or ordinary shares will trade.
If securities or industry analysts do not publish research reports about us or our business, or if they adversely change their recommendations regarding our ADSs, the market price for our ADSs and trading volume could decline.
The trading market for our ADSs will be influenced by research reports that industry or securities analysts publish about us or our business. If one or more analysts who cover us downgrade our ADSs or ordinary shares, the market price for our ADSs would likely decline. If one or more of these analysts cease to cover us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the market price or trading volume for our ADSs to decline.
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The different characteristics of the capital markets in Indonesia and the U.S. may negatively affect the trading prices of our ADSs and shares.
As a dual-listed company, we are subject to IDX and NYSE listing and regulatory requirements concurrently. The IDX and the NYSE have different trading hours, trading characteristics (including trading volume and liquidity), trading and listing rules, and investor bases (including different levels of retail and institutional participation). As a result of these differences, the trading prices of our ADSs and our shares may not be the same, even allowing for currency differences. Fluctuations in the price of our ADSs due to circumstances peculiar to the U.S. capital markets could materially and adversely affect the price of the shares, or vice versa. Certain events having significant negative impact specifically on the U.S. capital markets may result in a decline in the trading price of our shares notwithstanding that such event may not impact the trading prices of securities listed on the IDX generally or to the same extent, or vice versa.
Our financial results are reported to the OJK in conformity with IFAS, which differs in certain respects from IFRS, and we distribute dividends based on profit for the year attributable to owners of the parent company and net income per share determined in reliance on IFAS.
In accordance with the regulations of the OJK and the Indonesia Stock Exchange ("IDX"), we are required to report our financial results to the OJK in conformity with IFAS. We have provided the OJK with our financial results for the year ended December 31, 2023, on March 22, 2024. We furnished such financial results to the SEC on Form 6-K dated March 25, 2024, which contains our Consolidated Financial Statements as of and for the year ended December 31, 2023, which were prepared in conformity with IFAS. IFAS differs in certain significant respects from IFRS and, as a result, there are differences between our financial results as reported under IFAS and IFRS, including profit for the year attributable to owners of the parent company and net income per share. We distribute dividends based on profit for the year attributable to owners of the parent company and net income per share determined in reliance on IFAS.
Based on IFAS financial statements, our profit for the year attributable to owners of the parent company were Rp24,760 billion in 2021, Rp20,753 billion in 2022 and Rp24,560 billion in 2023, and our net income per share were Rp249.94 in 2021, Rp209.49 billion in 2022 and Rp247.92 billion in 2023. For the fiscal year ended December 31, 2021, dividends declared per share were Rp149.97 and dividends declared per ADS were Rp14,997. For the fiscal year ended December 31, 2022, dividends declared per share were Rp167.59 and dividends declared per ADS were Rp16,759. The dividends for the fiscal year ended December 31, 2023 will be decided at the 2024 AGMS, scheduled for May 3, 2024.
As a foreign private issuer in the U.S., we are permitted to, and we have relied and will rely on exemptions from certain NYSE corporate governance standards applicable to domestic U.S. issuers. This may afford less protection to holders of our ADSs.
We are exempted from certain corporate governance requirements of the NYSE by virtue of being a foreign private issuer in the U.S. We are required to provide a brief description of the significant differences between our corporate governance practices and the corporate governance practices required to be followed by domestic U.S. companies listed on the NYSE. See "Item 16D. Exemptions from the Listing Standards for Audit Committees" and “Item 16G. Corporate Governance.” The standards applicable to us are considerably different than the standards applied to domestic U.S. issuers. For instance, we are not required to: have a majority of the board of be independent (although all of the members of the audit committee must be independent under the Exchange Act), have a compensation committee or a nominating or corporate governance committee consisting entirely of independent directors, have regularly scheduled executive sessions for non-management directors, or have executive sessions of solely independent directors each year.
We have relied on and intend to continue to rely on some of these exemptions. As a result, holders of our ADSs may not be provided with the benefits of certain corporate governance requirements of the NYSE.
As a foreign private issuer in the U.S., we are exempt from certain disclosure requirements under the Exchange Act, which may afford less protection to holders of our ADSs than they would enjoy if we were a domestic U.S. company.
As a foreign private issuer in the U.S., we are exempt from, among other things, the rules prescribing the furnishing and content of proxy statements under the Exchange Act and the rules relating to selective disclosure of material
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non-public information under Regulation FD under the Exchange Act. In addition, our executive officers, directors and principal shareholders are exempt from the reporting and short-swing profit and recovery provisions contained in Section 16 of the Exchange Act. We are also not required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently or as promptly as domestic U.S. companies with securities registered under the Exchange Act. For example, in addition to annual reports with audited financial statements, domestic U.S. companies are required to file with the SEC quarterly reports that include interim financial statements reviewed by an independent registered public accounting firm and certified by the companies’ principal executive and financial officers. By contrast, as a foreign private issuer, we are not required to file such quarterly reports with the SEC or to provide quarterly certifications by our principal executive and financial officers. As a result, holders of our ADSs may be afforded less protection than they would under the Exchange Act rules applicable to domestic U.S. companies.
The voting rights of holders of our ADSs are limited by the terms of the Deposit Agreement.
Holders of our ADSs may exercise their voting rights with respect to the ordinary shares underlying their ADSs only in accordance with the provisions of the Deposit Agreement. Upon receipt of voting instructions from them in the manner set forth in the Deposit Agreement, the depositary for our ADSs will endeavor to vote their underlying ordinary shares in accordance with these instructions. Under our Articles of Association, minimum notice periods apply for convening a general meeting or an extraordinary general meeting of shareholders. When such meetings are convened, holders of our ADSs may not receive sufficient notice of a shareholders’ meeting to permit them to allow them to exercise their voting rights with respect to any specific matter at the meeting. In addition, the Depositary may not be able to send voting instructions to holders of our ADSs or carry out their voting instructions in a timely manner. Furthermore, the Depositary will not be responsible for any failure to carry out any instructions to vote, for the manner in which any vote is cast or for the effect of any vote. If no voting instructions are received by the Depositary from a holder of our ADSs on or before the date specified by the Depositary, subject to certain exceptions, the Depositary shall deem that such holder has instructed the Depositary to give a discretionary proxy to a person designated by us with respect to the shares underlying such holder's ADSs. As a result, holders of our ADSs may not be able to exercise their rights to vote and they may lack recourse if the ordinary shares underlying their ADSs are not voted as they requested.
Holders of our ADSs may be subject to limitations on transfer of their ADSs.
ADSs are transferable on the books of the Depositary. However, the Depositary may close its transfer books at any time or from time to time when it deems expedient in connection with the performance of its duties. In addition, the Depositary may refuse to deliver, transfer or register transfers of ADSs generally when our books or the transfer books of the Depositary are closed, or at any time if we or the Depositary deems it advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the Deposit Agreement, or for any other reason.
Holders of our ADSs may not receive distributions on our ordinary shares or any value for them if it is illegal or impractical to make them available to the holders.
The Depositary of our ADSs has agreed to pay holders of our ADSs the cash dividends or other distributions it receives on our ordinary shares or other deposited securities after deducting its fees and expenses, and subject to certain tax withholdings, as applicable. Holders of our ADSs will receive these distributions in proportion to the number of our ordinary shares that their ADSs represent. However, the Depositary is not responsible for making these payments or distributions if it is unlawful or impractical to make a distribution available to any holders of ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that require registration under the U.S. Securities Act but that are not properly registered or distributed pursuant to an applicable exemption from registration. We have no obligation to take any action to permit the distribution of our ADSs, ordinary shares, rights or anything else to holders of our ADSs. This means that holders of our ADSs may not receive the distributions we make on our ordinary shares or any value for them if it is illegal or impractical for us to make them available. These restrictions may materially reduce the value of the ADSs.
Holders of our ADSs may experience dilution of their holdings due to their inability to participate in rights offerings.
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We may, from time to time, distribute rights to our shareholders, including rights to acquire securities. Under the Deposit Agreement, the Depositary will not distribute rights to holders of ADSs unless the distribution and sale of rights and the securities to which these rights relate are either exempt from registration under the Securities Act with respect to all holders of ADSs or are registered under the provisions of the Securities Act. The Depositary may, but is not required to, attempt to sell these undistributed rights to third parties, and may allow the rights to lapse. We may be unable to establish an exemption from registration under the Securities Act, and we are under no obligation to file a registration statement with respect to these rights or underlying securities or to endeavor to have a registration statement declared effective. Accordingly, holders of ADSs may be unable to participate in our rights offerings and may experience dilution of their holdings as a result.
The time required for the exchange between ADSs and shares might be longer than expected and investors might not be able to settle or effect any sale of their securities during this period.
There is no direct trading or settlement between the NYSE and the IDX on which our ADSs and the shares are respectively traded. In addition, the time differences between Indonesia and New York and unforeseen market circumstances or other factors may delay the deposit of shares in exchange of ADSs or the withdrawal of shares underlying the ADSs. Investors will be prevented from settling or effecting the sale of their securities during such periods of delay. In addition, any exchange of shares into ADSs (and vice versa) may not be completed in accordance with the timeline investors may anticipate.
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We are established in Indonesia and it may not be possible for investors to effect service of process or enforce judgments on us, our Commissioners, Directors or officers within the United States, or to enforce judgments of a foreign court against us or any of these persons in Indonesia.
We are a state-owned limited liability company established in Indonesia, operating within the framework of Indonesian laws governing companies with limited liability, and all of our significant assets are located, and most of our current operations are conducted in Indonesia. In addition, all of our current Commissioners and Directors reside in Indonesia, are nationals of countries other than the United States and a substantial portion of the assets of such persons are located outside the United States. As a result, it may be difficult or impossible for investors to effect service of process, or enforce judgments on us or such persons within the United States, or to enforce against us or such persons in the United States, judgments obtained in United States courts.
We have been advised by our Indonesian legal advisor, that Indonesia is not a party to any bilateral or multilateral treaties for the reciprocal recognition and enforcement of foreign court judgment. Therefore, judgments of courts outside Indonesia are not recognized nor are they enforceable in Indonesia, although such judgments could be admissible as evidence in a proceeding on the underlying claim in an Indonesian court if the Indonesian court, in its sole discretion, deems it appropriate under the circumstances.
Furthermore, there is uncertainty regarding whether Indonesian courts will render judgments in original actions brought in Indonesian courts based solely upon civil liability provisions within the United States or similar claims in other jurisdictions. In the absence of a direct enforcement mechanism for foreign judgments, parties seeking enforcement in Indonesia would need to retry the case on its merits in Indonesia. The prior foreign judgement would be considered admissible as evidence during the subsequent enforcement proceedings in Indonesia. However, it is important to note that the Indonesian courts retain the discretion to assess the appropriateness of a foreign judgment under the given circumstances.
This process essentially requires the successful party in the foreign jurisdiction to initiate a new legal action in Indonesia, presenting their case anew, and relying on the foreign judgment as supporting evidence during the proceedings. There can be no assurance that the claims or remedies available under Indonesian Law will be the same, or as extensive, as those available in other jurisdictions.
As a result, it may be difficult or impossible for you to bring an action against us or against our Commissioners, Directors, or officers in the United States in the event that you believe that your rights have been infringed under the U.S. federal securities laws or otherwise. Even if you are successful in bringing an action of this kind, under the laws of the Republic of Indonesia you may be unable to enforce a judgment against our assets or the assets of our Commissioners, Directors or officers as claimants would be required to pursue claims against us or such persons in Indonesian courts.
ITEM 4. INFORMATION ON THE COMPANY
A. HISTORY AND DEVELOPMENT OF THE COMPANY
Profile of Telkom
Telkom is the largest telecommunications company in Indonesia, in terms of revenue and number of subscribers, as of December 31, 2023. We provide fixed and mobile telecommunications services and solutions and ancillary services. We are innovative and continue to strengthen and optimize our portfolio businesses, services and solutions by creating strategic programs that maximize synergies and active portfolio management. Our existential purpose is to build Indonesia into a more prosperous and competitive nation while delivering the best value to our stakeholders. Our long-term vision is to be the most preferred digital telecommunications company and empower Indonesian society. To achieve this vision, we focus on three missions that cover many aspects of empowering society, including rapidly building sustainable digital infrastructure and smart platforms that are affordable and accessible to a wide range of customers, nurturing best-in-class digital talents to help develop Indonesia's digital capabilities and increase the adoption of digital technologies and services, and orchestrating a comprehensive digital ecosystem to deliver a superior customer experience.
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In order to achieve our vision and missions, we continue to work to transform key aspects of our business: technology, organization, operations, people, and culture.
Company Name | : | Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk. |
Abbreviated Name | : | PT Telkom Indonesia (Persero) Tbk. |
Commercial Name | : | Telkom |
Line of Business | : | Telecommunications and informatics networks and services |
Tax Identification Number | : | 01.000.013.1-093.000 |
Business Identification Number | : | 9120304490415 |
Business License | : | 9120304490415 |
Domicile | : | Bandung, West Java |
Address | : | Jl. Japati No. 1, Bandung 40133, Indonesia |
Telephone | : | +62-22-4521404 |
Facsimile | : | +62-22-7206757 |
Call Center | : | +62-21-147 |
Website | : | www.telkom.co.id The information found on our website does not form part of this Form 20-F and is not incorporated by reference herein. |
: | corporate_comm@telkom.co.id; investor@telkom.co.id | |
Ratings | : | International Ratings: "Baa1 (Stable)" by Moody's, "BBB (Stable)" by Fitch, and "A" by MSCI ESG Ratings for 2023 Domestic Rating: "idAAA" by Pefindo for 2023 |
Date of Legal Establishment | : | November 19, 1991 |
Legal Basis of Establishment | : | Based on Government Regulation No. 25 of 1991, the status of our Company was converted into a state-owned limited liability corporation ("Persero"), based on the Notarial Deed of Imas Fatimah, S.H. No.128 dated September 24, 1991, as approved by the Ministry of Justice of the Republic of Indonesia by virtue of Decision Letter No. C2-6870.HT.01.01.Th.1991 dated November 19, 1991 and as announced in the State Gazette of the Republic of Indonesia No. 5 dated January 17, 1992, Supplement to the State Gazette No.210 |
Ownership | : | – Government of the Republic of Indonesia – 52.09% – Public – 47.91% |
Listing on Stock Exchanges | : | Our shares of common stock were listed on the IDX and the New York Stock Exchange (the “NYSE") on November 14, 1995 |
Stock Codes | : | – "TLKM" on the IDX – "TLK" on the NYSE |
Authorized Capital | : | 1 Dwiwarna Share and 389,999,999,999 shares of common stock |
Issued and Fully Paid Capital | : | 1 Dwiwarna Share and 99,062,216,599 shares of common stock |
Offices | : | – 1 Head Office – 7 Telkom Regional Offices and 61 Telecommunications Areas |
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Service Centers | : | – 387 Plasa Telkom outlets – 9 Global Offices in Australia, Hong Kong, Malaysia, Myanmar, Singapore, Taiwan, Timor-Leste, Dubai, the United States, and a total of 5 Sales Representatives in the United Kingdom, the Philippines, Canada, Vietnam, and India – 309 GraPARI centers in Indonesia – 571 IndiHome sales car units |
Other Information | : | – Public Accountant Public Accounting Firm ("KAP") Indonesia Stock Exchange Building, Tower 2, 7th Floor, Jl. Jend. Sudirman Kav. 52–53, |
– Securities Administration Bureau PT Datindo Entrycom Jl. Hayam Wuruk No.28, 2nd Floor, Jakarta 10120, Indonesia | ||
– Trustee PT Bank Tabungan Negara (Persero) Tbk. Menara BTN, 18th Floor, Jl. Gajah Mada No.1, Jakarta 10130, Indonesia PT Bank Permata Tbk. Gedung WTC II, 28th Floor, Jl. Jend. Sudirman Kav. 29-31, Jakarta 12920, Indonesia | ||
– Custodian PT Kustodian Sentral Efek Indonesia Indonesia Stock Exchange Building, Tower 1, 5th Floor, Jl. Jend. Sudirman Kav. 52–53, Jakarta 12190, Indonesia | ||
– Rating Agencies PT Pemeringkat Efek Indonesia Panin Tower Senayan City, 17th Floor, Jl. Asia Afrika Lot. 19, Jakarta 10270 Moody's Investors Service Singapore Pte. Ltd. 50 Raffles Place #23-06, Singapore Land Tower, Singapore 048623 Fitch Hong Kong Ltd. 19/F Man Yee Building, 68 Des Voeux Rd, Hong Kong | ||
– ADR Depositary The Bank of New York Mellon Corporation 240 Greenwich Street, NY, USA – 10286 | ||
– Authorized Agent for Service of Process in the United States Puglisi and Associates 850 Library Ave # 204, Newark, DE 19711, USA | ||
Employee Union | : | The Telkom Employees Union (Serikat Karyawan Telkom or "SEKAR") |
We are subject to the periodic reporting and other informational requirements of the Exchange Act as applicable to foreign private issuers. Under the Exchange Act, we are required to file reports and other information with the Securities and Exchange Commission ("SEC"). Specifically, we are required to annually file a Form 20-F within four months after the end of each fiscal year. Copies of reports and other information, when so filed with the SEC, can be inspected and
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copied at the public reference facilities maintained by the SEC at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You can request copies of these documents, upon payment of a duplicating fee, by writing to the SEC. The public may obtain information regarding the Washington, D.C. Public Reference Room by calling the Commission at 1-800-SEC-0330. SEC maintains a website (http://www.sec.gov), which contains reports, proxy and information statements, and other information regarding us that are filed electronically with the SEC.
Telkom’s Milestones
In 1965, the Government created the first state-owned company specifically focused on telecommunications services as part of a restructuring of the state-owned telecommunications industry in Indonesia.
In 1974, PN Telekomunikasi became Perusahaan Umum Telekomunikasi Indonesia ("Perumtel"), which provided domestic and international telecommunications services, and subsequently spun-off PT Industri Telekomunikasi Indonesia, which manufactured telecommunications equipment, into an independent company.
In 1991, as a result of a transformation into a state-owned limited liability company and rebranding, we became Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk.
In 1995, we and Indosat established Telkomsel. We completed our initial public offering and our shares were listed on the Jakarta Stock Exchange and the Surabaya Stock Exchange (which have since merged to become the IDX). Our shares were also listed on the NYSE and the LSE in the form of ADSs, and were publicly offered without listing on the Tokyo Stock Exchange.
In 1999, we launched the Telkom-1 satellite. We lost contact with this satellite in 2017, one year ahead of its planned decommissioning and replacement by the Telkom-4 (Merah Putih) satellite which launched in 2018.
In 2001, we and Indosat eliminated joint ownership and cross-ownership in certain companies as part of the restructuring of the telecommunications industry in Indonesia and as a result, we also lost our exclusive rights as the sole operator of fixed line services in Indonesia.
In 2004, we launched an international direct dialing service for fixed lines with the access code of 007.
In 2005, we launched the Telkom-2 satellite. This satellite was retired in 2021 when it reached the end of its operational life.
In 2009, we transformed from an information telecommunications company to a Telecommunications, Information, Media and Edutainment ("TIME") company. We also rebranded, introducing a new corporate logo and the slogan "the world in your hand."
In 2011, we launched the Telkom Nusantara Super Highway project to unite the Indonesian archipelago through the deployment of multiple submarine cables. We also launched the True Broadband Access project to provide internet access with a capacity of between 20 Mbps and 100 Mbps to customers throughout Indonesia.
In 2012, we began installing Wi-Fi access points around Indonesia to create a public wireless network called Indonesia Wi-Fi as part of our "Indonesia Digital Network" program. We also expanded our business portfolio from TIME to TIMES.
In 2014, we became the first cellular operator in Indonesia to commercially launch 4G/LTE service.
In 2015, we launched the retail brand "IndiHome," under which we market fixed voice, fixed broadband, IPTV, and consumer digital services in a bundled package.
In 2017, we launched the Telkom-3S satellite and commenced operations on schedule.
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In 2018, we launched the Telkom-4 (Merah Putih) satellite, which began providing coverage for all of Indonesia, Southeast Asia and South Asia. We also inaugurated The Telkom Hub, a smart office complex for developing digital entrepreneurs and fostering a digital culture in line with digital Government initiatives such as "Making Indonesia 4.0," "2020 Go Digital Vision," and "One Data Indonesia."
In 2019, we reconfigured our business portfolio from TIMES to a five-segment portfolio of mobile, consumer, enterprise, wholesale, international business, and other.
In 2021, Telkomsel became the first cellular operator to commercially launch 5G service in Indonesia. Telkomsel also refreshed its brand and conducted a product simplification. Mitratel, our subsidiary, conducted an initial public offering in November 2021 which provided Rp18,463 billion in proceeds to be used for organic and inorganic business expansion.
In 2022, Telkom launched a cable gateway in Manado, the second international communication gateway that we own. We completed the first stage of our HyperScale data center, in Jakarta, and our subsidiary, PT Telkom Data Ekosistem (“TDE”), began construction of our second HyperScale data center, in Batam. We also established strategic partnerships with several global technology companies such as Microsoft.
In April 2023, in line with our FMC initiative, we entered into an agreement with Telkomsel to combine our fixed broadband and mobile broadband services into a single business entity, by transferring a portion of our assets and liabilities allocated to the IndiHome business segment to Telkomsel. See "Item 10. Additional Information — Material Contracts."
In August 2023, our subsidiary Metranet collaborated with edtech startup PT Cerdas Digital Nusantara (“Cakap”) to provide digital educational content, and in October 2023, we completed the construction of our PATARA-2 submarine cable system connecting multiple islands across eastern Indonesia. In November 2023, we collaborated with KT Corp, a South Korean telecommunications company, to form a joint task force team to generate a business model for the data centers in Nusantara, Indonesia’s new capital.
For the years ended December 31, 2021, 2022, and 2023, our consolidated capital expenditures totaled Rp30,329 billion, Rp34,146 billion and Rp32,858 billion (US$2,134 million), respectively. The capital expenditures were primarily used for purchases of property under construction, cable network and equipment. See also "Item 5. Operating and Financial Review and Prospects — Liquidity and Capital Resources — Capital Expenditures" for more information on our capital expenditures for the year ended December 31, 2023.
Information about the legislation under which we operate and a description, to the extent applicable, of our divestitures (including interests in other companies), since the beginning of our last three financial years, is contained elsewhere in this Form 20-F.
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| B. | BUSINESS OVERVIEW |
Strategy
As the largest telecommunications company in Indonesia in terms of revenue and number of subscribers, we intend to become the preferred digital telecommunications company in Indonesia while also contribute to the prosperity and competitiveness of Indonesia and deliver value to our stakeholders. We intend to rapidly build sustainable digital infrastructure and smart platforms that are affordable and accessible to a wide range of customers. We seek to nurture digital talents to help develop Indonesia's digital capabilities and increase the adoption of digital technologies and services in Indonesia. We also seek to improve our customer experience through the development of a comprehensive digital ecosystem.
Strategic Focus 2023
Our long-term strategy focuses on achieving excellence in the future direction of our three digital business domains (digital connectivity, digital platform, and digital services) and the optimization of our current operations and services to maintain our market position, creating sustainable growth, unlocking value for our stakeholders, and fostering inclusive digitalization in Indonesia. Our corporate theme in 2023 was "Drive transformation agenda to ensure strong business fundamentals and healthy sustainable growth," which we sought to implement through the following three main programs:
| ● | Deliver best customer experience by strengthening data-analytics capability and digitization process. We are committed to comprehensively understanding customers’ needs and behaviors in order to anticipate them, by using data analytics across all touchpoints in the customer journey. We seek to increase the use of digital interfaces to improve the customer experience and the efficiency of our internal processes, and to refine our customer segmentation. We also aim to maximize customer engagement through customer relationship management units called CFUs, which focus on each of our five customer segments. |
| ● | Execute timely business transformation to enhance portfolio performances in B2C-B2B and digital platform-infrastructure. We are continuing our business transformation such as B2C businesses consolidation and our B2B capabilities readiness enhancement as well as strengthening our digital platform infrastructure portfolio (e.g., data centers and B2B IT services) in parallel. For instance, in July 2023, we successfully consolidated our B2C businesses through FMC. Our FMC initiative aims to create a sustainable impact on the community for a more widespread, equitable and reliable broadband services, support the acceleration of digital inclusion and digital economy, increase the level playing field of the Indonesia telecommunication industry, and strengthen the company’s business in the future. Furthermore, by having FMC, we expect to increase revenue from potential commercial synergies and will also help TelkomGroup to be more efficient in operational expenses and capital expenditures. |
| ● | Ensure key assets and business capabilities readiness by smart investment in talent and technology. We seek to build up key operational capabilities through the identification of, and targeted investments in, key talents and technologies. In addition, we seek to foster a digital culture, including by allocating internal resources more efficiently and encouraging and supporting digital talents that we cultivate organically and attract from external sources. We believe such investments and culture will help us to remain competitive and attain higher business performance. |
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The Five Bold Moves
Towards achieving our Strategic Objectives, we articulate our overall corporate intention into key initiatives called the 'Five Bold Moves'. The goal of these moves is to consolidate and build competitive advantages in our three digital business domains (digital connectivity, digital platforms, and digital services) and to support our long-term goal of becoming a world-class digital telecommunications company. Therefore, we expect to have a leaner organization, and to be more focused on our key businesses, more specialized in our capabilities, more efficient in our operations, and be engaged with the right customers, investors, and partners. The Five Bold Moves consist of the following:
| ● | Fixed-Mobile Convergence: we seek to develop our technology and services to optimize interoperability between our fixed and mobile networks to enable customers to switch seamlessly, regardless of location or device. We believe this will improve cost and operational efficiency and customer experience, which will ultimately enhance our market presence and strengthen our company’s business in the future. |
| ● | InfraCo: we seek to unlock potential through the consolidation of our infrastructure assets, including our Optical Access Network infrastructure and portfolio of telecommunications towers. One way in which we do so is by consolidating our telecommunications tower assets under our subsidiary Mitratel. We believe the consolidation of our infrastructure assets will help us optimize asset utility, manage connectivity costs, and accelerate our market penetration, with the ultimate goal of increasing the value of our infrastructure assets and appeal to potential investors. |
| ● | DC Co: we seek to enhance the capacity and capabilities of our data center business by consolidating our data center assets under our subsidiary, TDE and collaborating with other technology companies to accelerate the growth of our data center business and its presence in the region. |
| ● | B2B Digital IT Services Co: we seek to transform PT Sigma Cipta Caraka ("TelkomSigma") to provide industry leading B2B digital IT services through partnerships and collaborations with global technology companies such as Microsoft and Amazon Web Services. |
| ● | DigiCo: we seek to build, scale, and monetize digital services for businesses and consumers in health-tech, edu-tech, and mobile gaming through the consolidation of our digital assets, businesses, and talents under Telkomsel's holding company, PT Telkomsel Ekosistem Digital ("TED"). We will pursue a structured approach for the development of our digital business under TED. |
Further development of 5G services
In 2021, our majority-owned subsidiary, Telkomsel, became the first cellular operator to offer 5G services in Indonesia. Since then, our strategy has been to progressively deploy our 5G network. We determine the pace of such deployment based on multiple factors, including the maturity of the Indonesian 5G ecosystem, our assessment of current and future demand for 5G B2B and B2C services (especially in the manufacturing, infrastructure, and education sectors), and the availability of additional 5G spectrum through future Government auctions. We are developing our 5G services in line with our aim to foster the development of the Indonesian digital ecosystem. To achieve this ambition, we collaborate with several technology companies to expand the development of the 5G Fixed Wireless Access Technology Roadmap in Indonesia. For example, Telkomsel and Huawei plan to collaborate and conduct the Superior City Project to deliver individual and enterprise customers with optimized connectivity experiences and digital services through the adoption of 5G applications, new technologies and the deployment of high-quality 5G networks along with the ecosystem in "smart cities."
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Strategic partnerships
In 2023, we expanded our digital service offerings through partnerships and collaborations. For example, we formed alliances with global technology companies in cloud computing to support our data center business. We also continued to strengthen our digital services ecosystem through strategic partnerships, such as with Telkomsel's US$450 million (Rp 6.4 trillion) investment in PT GoTo Gojek Tokopedia (“GoTo”) from 2020 to 2022, with the goal of creating synergistic value from the inception of our investment. This synergy value has consistently increased year over year, and we continue to hold ownership stakes in GoTo up to the the date hereof. We intend to further collaborate with GoTo on initiatives relating to connectivity, digital platforms, and digital services. Telkomsat and Starlink have also been collaborating since 2022, such that Starlink has been providing backhaul services for Telkomsat in remote regions of Indonesia. Since November 2023, we have also been working with KT Corp, a South Korean telecommunications company, on a joint task force focused on developing a sustainable smart city model for Nusantara, Indonesia's future capital city.
Enhancing our assets through acquisitions and spin-offs
We seek to enhance our assets and digital capabilities through acquisitions and spin-offs. For instance, between 2019 and 2021, our subsidiary Mitratel acquired equity interests in PT Persada Sokka Tama (“PST”) and purchased 2,100 telecommunications towers from Indosat in Indonesia. As part of our efforts to increase the value of our infrastructure assets through consolidation, Mitratel also acquired 16,050 telecommunications towers from Telkomsel between 2019 and 2022 and conducted an initial public offering and listing of its shares on the IDX in November 2021. In 2022 and 2023, Mitratel acquired 6,012 km of Fiber Optic from PT Sumber Cemerlang Kencana Permai & PT Trans Indonesia Superkoridor, and 967 km of Fiber Optic from PT Power Telecom. Furthermore in 2023, Mitratel purchased 54 towers from PT XL Axiata Tbk ("XL Axiata") and 803 towers from PT Gametraco Tunggal.
In April 2023, in line with our FMC initiative, we signed an agreement with Telkomsel to combine our fixed broadband and mobile broadband services into a single business entity, by transferring a portion of our assets and liabilities allocated to the IndiHome business segment to Telkomsel, in order to create new synergies and improve our product and service offerings, customer experience, cost efficiency and revenue.
Environmental, Social and Governance (“ESG”) matters
In facing challenges related to ESG aspects, we implement sustainability policies and strategies guided by the pillars of sustainability: the Right Environmental Approach, the Right People, and the Right Governance.
● | The Right Environmental Approach pillar embodies our commitment to conducting our business in an environmentally responsible manner. By focusing on reducing the negative impact of the business chain, we strive to continue improving electronic waste management, working with vendors in managing waste, implementing energy efficiency and innovating to reduce emissions in Data Centers, building green BTS that use new and renewable energy sources (EBT). Implementation of this pillar is also our effort to mitigate climate challenges and risks. |
● | The Right People pillar signifies our dedication to positively impacting all stakeholders, including employees, customers, and society. The main challenge in the social aspect is related to talent management, including digital talent readiness. Our responses to these challenges are strengthening human resource management, adapting policies supporting diversity, prosperity, and equality, and increasing HR competency to face digital acceleration and our Company's transformation. |
● | The Right Governance pillar includes our commitment to implementing strong sustainability governance, including legal compliance, business ethics, customer privacy, and human rights. The biggest challenges in the telecommunications business are data security and cyber security. Our response in facing these main challenges is to carry out data security governance optimally so that we can protect customer privacy and data. |
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By implementing these three pillars, we aim to achieve balanced and sustainable ESG performance, ensuring that our digital transformation provides sustainable positive benefits for all stakeholders.
SUSTAINABILITY PERFORMANCE ACHIEVEMENTS
We believe that by integrating ESG into all aspects of our business, we can achieve sustainability performance targets and create a positive impact for a better future. Sustainability is a social responsibility and an integral element in our business strategy, creating a positive impact on the environment and society and contributing to sustainable business growth. Our sustainability performance achievements are outlined in each of the following three sustainability pillars:
Right Environmental Approach
In 2023, we implemented various initiatives to support sustainability practices and overcome challenges we face as a digital telecommunications company. Focusing on environmental aspects, we have proactively taken concrete actions, such as reducing carbon emissions through waste management activities, especially by managing our electronic waste, mangrove planting, conducting land revegetation in West Java, and coral reef rehabilitation. We have also used environmentally friendly energy sources such as solar cells, biodiesel, and micro-hydro power. We also seek to promote environmentally friendly transportation by encouraging its employees to use electric vehicles.
Within our offices, we aim to cultivate an environmentally friendly culture by managing resources effectively and efficiently, including by reducing the use of paper, water, and electricity. These efforts also include encouraging employees to reduce their personal waste. We actively involve our employees in electronic waste management by providing electronic boxes at every work location. By collaborating with our partners, we ensure that electronic waste is recycled into value-added goods that can be utilized and distributed to the community. These efforts reflect our commitment to sustainability and ongoing environmental responsibility.
Energy management is also being carried out to reduce energy use every year. One of the initiatives is to reduce electricity usage. We implement programs to reduce electricity usage in our offices and by our equipment. Our program is called "GePEE", which stands for Gerakan Peduli Efisiensi Energi (Energy Efficient Care Movement). Below are Telkom’s initiatives under this program:
| 1. | Room dividing and equipment repositioning; |
| 2. | Regrouping of equipment; |
| 3. | Temperature adjustment; |
| 4. | Replacement of inefficient equipment; |
| 5. | Use of energy saving lamps; |
| 6. | Reducing over capacity and discontinuing air conditioners; and |
| 7. | Dismantling or powering off equipment that is no longer in use. |
In addition, in synergy with the Government's renewable energy objectives, we are currently evaluating the integration of solar cell technology within our operations and initiated a pilot project in 2023. As of the date hereof, the outcome and potential network-wide rolling out of this project are currently under review.
Right Governance
We aim to consistently implement sustainability governance and business ethics, comply with applicable regulations, and carry out supervision to ensure alignment with relevant norms and business ethics. In 2023, we made structural improvements in the Data Protection Officer (DPO)supervised by the Operational Vice President of Cybersecurity, with clearer assignments and functions. We also implemented changes to the Privacy Policy and Company Regulations to align with the provisions imposed by the PDP Law.
We also refer to international standards such as ISO 27001, for which we hold the corresponding certification, to intensify data protection and security. This step was taken to ensure that we met global data management and protection standards. Throughout 2023, there were no data leak incidents. All these efforts are directed at ensuring that we comply
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with applicable regulations and also provide an optimal level of protection and security for the data we manage, while adhering to the principles of business ethics.
Right People
In 2023, we continued to strengthened our efforts to develop the competencies of our employees through increasing training and education programs. Concrete steps have been taken to manage the Digital Talent Readiness Program an initiative aimed at developing employees’ digital capabilities to adapt to digital technology changes. Our focus also involves fair and ethical labor management by prioritizing the values of human rights, gender equality, diversity, and inclusiveness in the company environment. Currently, 36.95% of our employees are women, including 29.96% at the managerial level, and we actively empower individuals with disabilities.
We are not only internally oriented but also committed to providing the best experience to consumers. MyTelkomsel’s transformation is evidence of our efforts to maintain and increase customer loyalty. Integration of end-to-end product services as one more efficient solution. Through these various steps, our net promoter score used to (a commonly used market research metric used to rate the likelihood that customers would recommend a company or its products and services) reached 56.
To contribute to the community, we actively manage capacity building for MSMEs. This effort aims to produce more advanced MSMEs while continuing to empower them through digitalization. The Digital Empowerment for the Nation initiative is our foundation in carrying out a positive role in encouraging economic progress through empowering micro and small enterprises (MSEs).
Business Portfolios
Our business portfolios are organized by business lines that are categorized into Legacy, Digital Connectivity, Digital Platform, and Digital Services. Those businesses lines are operated under five customer base segments (i.e., CFUs):
· | Mobile segment comprises mobile broadband services; mobile digital services that include e-Health, e-Education, financial services, video on demand, music, gaming, IoT solutions, big data analytics, value-added service, digital ads, and mobile legacy services that include mobile voice and mobile SMS; |
· | Consumer segment comprises fixed voice services, fixed broadband services, IPTV, and related consumer digital services; |
· | Enterprise segment mainly comprises ICT and digital platforms, which cover enterprise-grade connectivity services (e.g., satellite), IT services, cloud, business process outsourcing, and other adjacent services; |
· | Wholesale and international business segment comprises wholesale telecommunications network and traffic, international business, wholesale platform and services, telecommunications tower business, data centers, and infrastructure and network management services; and |
· | Other segment comprises digital services offerings such as digital smart platform, digital content, and e-commerce for B2B to support other segments, and property management to leverage our property assets across Indonesia. |
Historically, digital connectivity has generated the largest share of our total revenue. Thus far, our business has not experienced significant seasonality.
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The following is a brief overview of our product portfolios:
1. Mobile Segment
Our mobile segment portfolio comprises legacy services such as voice and SMS, alongside digital products such as data and value-added services, executed through Telkomsel, our majority-owned subsidiary. In 2023, mobile services, especially data, remained the principal driver of our revenue.
Telkomsel's prepaid mobile services, branded as "Telkomsel Prabayar" (introduced in 2021) and "by.U" (introduced in 2019), accounted for 95.3% of the total number of cellular subscribers as of December 31, 2023. Meanwhile, Telkomsel's postpaid mobile services, branded as "Telkomsel Halo," were accounted for 4.7% of the total number of cellular subscribers as of December 31, 2023. The total number of cellular subscribers increased by 1.6% or 2.5 million subscribers, from 156.8 million subscribers (comprising 149.7 million prepaid cellular subscribers and 7.1 million postpaid cellular subscribers), as of December 31, 2022, to 159.3 million subscribers (comprising 151.8 million prepaid cellular subscribers and 7.5 million postpaid cellular subscribers) as of December 31, 2023. The increase in the total number of cellular subscribers was primarily a result of the company's cross-selling and up-selling strategy, which focused on offering better-value packages to capture and retain quality customers, thereby elevating customer experiences. Telkomsel's renewal strategies, which incorporated customer value maximization analysis, resulted in an increase in annual ARPU by 7.5% from 2022 to 2023. Nonetheless, we remain subject to intense competition in this segment.
Our mobile broadband services are supported by 5G/4G/LTE/HSDPA/3G/EDGE/GPRS technology. As of December 31, 2023, we had 127.1 million data users, compared to 120.9 million data users as of December 31, 2022, an increase of 5.1%, or 6.2 million additional data users. We believe this increase in data users primarily resulted from our initiatives to strengthen our digital business portfolio. In 2023, Telkomsel continued to support and incentivize healthier market behavior for strengthening business profitability and industry rationalization through several price adjustments. Major competitors also implemented price rationalization initiatives in 2023.
In addition to our digital connectivity business, we established several digital service offerings within our mobile segment with a specific focus on financial services, video on demand, music, gaming, advertising, and IoT. Our mobile segment comprises a financial payment platform, T-Cash, which pioneered digital payments when it was introduced in 2007 by Telkomsel. In 2019, T-Cash became LinkAja under PT Fintek Karya Nusantara ("Finarya"). As at the date hereof, Telkomsel owns a 24.83% equity interest in Finarya.
We also offer video content on demand under MAXstream, a one-stop video portal that aggregates OTT video applications, linear channels, video on demand and other original content bundled with broadband data packages. We provide music and gaming services that offer a mobile entertainment experience by targeting various consumer segments and leveraging Telkomsel's billing system. We have applications for music (e.g., Langit Musik) and Telkomsel Dunia Games, which provides a comprehensive gaming ecosystem combining media content, distribution, payment facilities, e-sports, and game publishing. We have launched online games and started developing gaming communities to enhance customer experience. With rapidly evolving customer needs and the transformation taking place in the society, we aim to enhance our product offerings and digital capabilities to go beyond connectivity while accelerating and expanding our current digital ecosystem, to continue to focus on customer needs and long-term growth supported by network quality. This initiative includes enriching digital services related to video and games content, augmenting the functionalities of by.U, developing Telkomsel Orbit, and improving the functionality of the MyTelkomsel app and Telkomsel.com.
Following Telkomsel’s investment in GoTo in November 2020 and May 2021, the two companies have strengthened their strategic partnership initiatives to provide users with new benefits and also help to accelerate the digitization of MSMEs.
GoTo has already developed a comprehensive and well-recognized digital ecosystem for users, drivers, and merchants. Our partnership with GoTo is multi-faceted. We have jointly promoted products and services such as SIM card promotions and advertising packages and conducted co-branding activities to better service our respective customers and expand our addressable markets. For instance, we have offered data packages and discounts designed for GoTo drivers. We are also collaborating with GoTo to better understand the consumption habits and behaviors of users and customers in
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order to improve our products and solutions offerings. Following this investment, the two companies have strengthened strategic partnership initiatives to provide users with new benefits and also helped to accelerate the digitalization of MSMEs. These initiatives to increase the number of Telkomsel users within the GoTo ecosystem include creating easy onboarding capabilities for GoTo’s MSME partners to become Telkomsel reseller partners, integrating MyTelkomsel and GoPay, collaborating on loyalty programs, and providing GoTo with a number masking service. We expect additional digital initiatives in collaboration with GoTo in the future.
The Job Creation Law 2023 aims, among other things, to support the acceleration of digitalization and accessibility of broadband services in Indonesia through various means. These include optimizing use of frequency spectrum, limiting passive infrastructure by imposing certain network sharing obligations on non-telecommunications companies and ensuring a sustainable competitive environment through price regulation. To optimize spectrum use, the Government ordered a switch from analog to digital television broadcasting in 2022 (known as the analog switch-off) in the 700 MHz frequency band.
Telkomsel officially launched 5G services in May 2021, becoming the first cellular operator to offer 5G in Indonesia. As of 2023, Telkomsel has made 5G available by deploying 654 BTS towers at selected points in more than 40 cities in Indonesia as part of its strategy to roll out 5G through a demand-based approach for B2C and B2B segments, including in the manufacturing, infrastructure, and education sectors. We intend to maximize the use of 5G and publicize the advantages of the 5G network to further encourage the growth of digital connectivity, digital platforms, and digital services in Indonesia, as well as the development of future technology solutions such as AI, cloud computing and IoT. The deployment of 5G services will be gradual, based on assessable demand, and will be conducted with our partners.
2. Consumer Segment
Our consumer segment portfolio comprises fixed voice, fixed broadband, IPTV, and consumer digital services. We market these service offerings under the retail brand "IndiHome," a product that allows customers to choose one or more of such services in a bundled package.
In April 2023, in line with our FMC initiative, we entered into an agreement with Telkomsel to combine our fixed broadband and mobile broadband services into a single business entity, by transferring a portion of our assets and liabilities allocated to the IndiHome business segment to Telkomsel (the "IndiHome Integration"), in order to create new synergies and improve our product and service offerings, customer experience, cost efficiency and revenue. As part of the implementation of our FMC initiative, Telkomsel also launched "Telkomsel One" in July 2023. This new product aims to encourage equitable distribution of digital connectivity throughout the community through a wide selection of customer-centric packages and a multi-screen approach for content optimization.
Telkomsel is focused on maintaining the business continuity of IndiHome by maximizing synergies between fixed broadband and mobile broadband services, while pursuing revenue growth. This is to be achieved through cross-selling activities, service integration, optimizing platform cost and contents, avoiding investment duplication, and integrating customer touchpoints by closing down more than 290 overlapping stores.
Telkomsel aims to accelerate fixed broadband penetration and meet the demand for reliable high-speed broadband by improving its service offerings and maintaining high quality service standards. Moreover, Telkomsel has accelerated the acquisition of new IndiHome B2C customers by approximately 425 thousands in the first six months following the IndiHome Integration, maintaining a stable ARPU at Rp252.7 thousand.
Telkomsel also offers the wifi.id service to IndiHome customers, which is an add-on service that allows IndiHome customers to enjoy unlimited internet access at all wifi.id access points in Indonesia. Wifi.id stands for Indonesia Wi-Fi, our wireless public internet network that provides public access to high-speed internet services and various other multimedia services.
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3. Enterprise Segment
Our enterprise segment comprises mainly ICT and platform services that cover enterprise-grade connectivity services, satellite services, data center and cloud services, digital IT services, business process outsourcing, devices, and digital adjacent services.
For enterprise connectivity, we offer fixed broadband, Wi-Fi, ethernet, and data communication services, including a SD-WAN ecosystem that enables higher performance of WANs, leased channels such as Metro Ethernet, VPN-IP, high-capacity data network solutions providing point-to-point connection with high-capacity bandwidth, and fixed voice services, among others. We also provide satellite services as part of our enterprise connectivity product offering in some segments, such as aviation, maritime, mining, and plantation, as well as other satellite-based services for domestic and international users while continuing our presence and support in cellular backhaul and government services.
In 2020, we launched FLOU Cloud to foster digital growth for Indonesian startups, SMEs, large corporations, and Government entities by offering services such as cloud computing, data storage, networking, and data security. In 2022, Telkom Sigma upgraded FLOU Cloud's capabilities and performance to increase our market presence and strengthen data safety. We have also obtained the ISO 27000 certification in recognition of our commitment to data safety. In addition, we have implemented Cloud Security Alliance Security, Trust, and Assurance Registry (STAR) measures. In partnership with leading cloud service providers, we primarily target Indonesian customers in sectors we expect to grow, such as customers in the finance, manufacturing, Government, and communications sectors, to whom we offer professional cloud management and consultancy services.
Our connectivity services support critical functions across various industries. Our ICT and industry solutions function as horizontal platforms encompassing IoT, data centers, cloud services, big data, cybersecurity, and payment systems. Our platforms facilitate innovation by providing state-of-the-art solutions for our customers' applications, digital marketing, finance, e-health, and entertainment, among others. For instance, we offer payment services and big data analytics that provide information used by our customers to design more effective marketing initiatives. We assist our customers with customer relationship management and IoT deployments, including to set up smart building, for purposes of energy management and fleet management, backed by consolidated communication systems and enhanced IT security. Our digital and IT services capabilities enhance our e-health offerings, for instance by simplifying healthcare claims processing. In 2023, we focused on our ICT business, delivering specialized solutions for the Government and the logistics, healthcare, education, financial, insurance, agriculture, and mining industries.
4. Wholesale and International Segment
Our wholesale and international business segment includes domestic and international wholesale traffic, wholesale network, wholesale digital platform and services, data centers, telecommunications tower business, and infrastructure services business.
The domestic and international wholesale traffic, wholesale network and wholesale digital platform and services that we offer comprise network services, data, and internet, as well as interconnection services, value-added services, voice-hubbing, A2P SMS, platforms, and solutions.
We earn revenue principally from interconnection services that we provide other telecommunications operators that utilize our network and infrastructure in Indonesia, both for calls that terminate at and calls that transit via our network. Similarly, we also pay interconnection fees to other telecommunications operators when we use their networks to connect a call from our customers. Interconnection services that we provide to other telecommunications operators comprise domestic and international interconnection services. With regards to our telecommunications tower business, we lease out space to other operators to place their telecommunications equipment on these towers, for which we receive a fee. As of December 31, 2023, we had approximately 43,047 towers, comprising approximately 38,014 towers owned by Mitratel, approximately 477 towers owned by Telkom, and approximately 4,556 towers owned by Telkomsel. We aim to consistently expand our telecommunications tower business as we believe this is a strategic business in the telecommunications industry and intend to increase our tower rental revenues. We also seek to improve our operation and maintenance efficiency by digitalizing our internal business processes. Our subsidiary Mitratel has been purchasing towers in the past few years and
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as of December 31, 2023, Mitratel owned 38,014 towers, having purchased 997 telecommunications towers from Indosat in February 2023 and 803 telecommunications towers from PT Gametraco Tunggal in November 2023.
We provide managed infrastructure and network services by performing network construction and maintenance, including laying and maintaining submarine cable, and energy solutions for telecommunications infrastructure ecosystems. We accomplish this by leveraging existing businesses in our portfolio and developing in-house capabilities and innovative solutions. As part of our infrastructure portfolio, we have developed energy management solutions. As such, we completed the delivery and installation of diesel power plants in the Kalimantan and Sulawesi regions in 2017. After completion of this project, we were engaged by an SOE into 2023 to manage the maintenance of some of the diesel engines we had delivered and installed. In 2017, construction was completed for the SEA-US submarine cable which connects California to Manado, Indonesia, and by extension to the IGG submarine cable, which connects major cities in Indonesia as well as the SEA-ME-WE 5 and SEA-US cable systems. In 2023, we completed construction of our PATARA-2 submarine cable system connecting multiple islands across Indonesia, which enhances connectivity among the cities of Waisai, Manokwari and Supiori. We plan to add additional landing points for redundancy and further deploy submarine cables in the future.
Globally, telecommunications tower providers are optimizing value creation by embracing new growth opportunities. They are shifting from providing basic interconnection services to also providing a broad range of support including fiber optic services and mini data centers to customers. Increases in data usage and high bandwidth applications are making it necessary to compute and store data closer to customer premises, which tower providers are taking advantage of by setting up edge computing on tower sites. Further, by deploying micro data centers close to the network edge, telecommunications tower providers may be able to enable ultra-reliable low latency communication in 5G services that could unlock new business opportunities. Demand for and reliance on edge computing technology is also expected to increase with the emergence and development of high-throughput and low-latency applications such as high-speed video services, augmented reality and virtual reality applications, autonomous driving and other communication applications. We expect the future deployment of 5G technology will also provide growth opportunities to our wholesale segment. The deployment of 5G technology in Indonesia is subject to various factors and conditions, but we intend to become leaders in the industry for carrying out such deployment in a cost-efficient and phased approach to offer 5G wholesale services in Indonesia.
In 2022, we continued to consolidate and expand our data center capabilities, including our cloud services and marketplace services. We began consolidating our data center business under our subsidiary, TDE, in 2021 by transferring our then under-construction Cikarang HyperScale data center. In 2022, we transferred our enterprise data center business in Sentul, Serpong and Surabaya from Telkom Sigma. TDE continues to expand the capacity of our HyperScale data center in Cikarang and has begun building a second HyperScale data center, in Batam. We plan to continue consolidating our domestic and international data centers under TDE in the future and to expand our capacity in order to become a market leader in the data center ecosystem.
Our subsidiary, PT Telekomunikasi Indonesia International (“Telin”), continues to strengthen its international business. Telin has developed its NeuAPIX cloud-based CPaaS services to provide small, medium, and large companies and business owners with omni-channel communication features (bots and live chats, real-time voice capabilities, SMS, emails, video calls and messaging services such as Line or Facebook messenger). Telin also offers NeuTrafiX, a web-based public exchange platform for connecting buyers and sellers for wholesale trading of voice, SMS, and virtual numbers. Telin also manages data centers in Singapore, Hong Kong, and Timor-Leste. In 2023, Telin unveiled TNeX, the Telin NeXt Gen Platform which enables businesses to connect their data centers across the globe by allowing customers to select, acquire and monitor provisioning statuses for a range of connectivity products while granting customers the ability to instantaneously fine-tune bandwidths according to their needs.
We also have limited operations and/or interests in a number of jurisdictions outside Indonesia in telecommunications and data-related areas. Our subsidiary, Telin, manages our international operations in the following jurisdictions:
| ● | Singapore, through Telekomunikasi Indonesia International Pte. Ltd. (“Telin Singapore”), where we operate as an end-to-end information and communication technology provider, providing cloud and connectivity, wholesale voice services, data center and manage services; |
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| ● | Hong Kong, through Telekomunikasi Indonesia International Ltd. (“Telin Hong Kong”), where we provide wholesale voice services, wholesale data services, retail mobile services as an MVNO, and where we also operate a GraPARI center and a data center; |
| ● | Timor-Leste, through Telekomunikasi Indonesia International S.A. (“Telkomcel”), where we provide mobile cellular services, enterprise solutions, wholesale and international services and operate a data center; |
| ● | Australia, through Telekomunikasi Indonesia International Pty. Ltd. (“Telin Australia”), where we provide enterprise solutions, wholesale and international services; |
| ● | Taiwan, through Telin Taiwan Limited as an indirect subsidiary of Telin, where we provide retail mobile services as a MVNO, digital retail services and operate a GraPARI center; |
| ● | Malaysia, through Telekomunikasi Indonesia International Sdn. Bhd. (“Telin Malaysia”), where we hold a majority ownership interest in a joint venture that provides international airtime services and support, wholesale voice services, enterprise solutions as well as wholesale and international services; |
| ● | The United States, through Telekomunikasi Indonesia International Inc. (“Telin USA”), where we provide data services, internet connectivity services (including operating Point of Presence, peering and transit services) and wholesale voice services; |
| ● | Myanmar, through a branch office, where we provide data connectivity service; |
| ● | Dubai, through a branch office, where we provide wholesale voice services, wholesale data services and enterprise services; |
| ● | The United Kingdom, through a sales representative, where we provide wholesale data services and enterprise services; |
| ● | The Philippines, through a sales representative, where we provide wholesale data services and enterprise services; |
| ● | Vietnam, through a sales representative, where we provide wholesale data services and enterprise services; |
| ● | Canada, through a sales representative, where we provide wholesale data services and enterprise services; and |
We regularly assess these overseas operations, their profitability, prospects, and strategic positioning in order to optimize our portfolio structure. We may make further investments or divest existing investments from time to time based on such assessments. In Indonesia, we continue to monitor the potential for further consolidation in the telecommunications tower business.
5. Other segments
Digital Services
Our digital services portfolio primarily comprises media and edutainment services targeted to digital consumers. Our diverse digital portfolio is clustered into a smart platform and gives access to digital content and E-Commerce. We also manage a venture capital fund through our subsidiary, PT Metra Digital Investama (also known as “MDI Ventures”) to invest in digital startups. Our smart platform business line consists of digital advertising, intelligent applications, big data, IoT, and financial services. Our financial services offering focuses on creating a digital financial ecosystem by offering digital payment solutions. For example, LinkAja (formerly known as T-Cash) is an E-Money service provided by Telkomsel that enables Telkomsel customers to perform banking activities such as paying bills, transferring funds, and making online and offline retail payments on customers' smartphones and/or feature phones. The comprehensive financial services offered by LinkAja are expected to further accelerate financial inclusion and foster the development of a cashless
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society as envisioned by the Government in its Non-Cash National Movement Program. As at the date hereof, Telkomsel owns a 24.83% equity interest in Finarya, and we expect our strategic partnership with GoTo will allow us to expand our digital ecosystem, benefit from co-branding and joint promotional activities, and bring us closer to customers of digital services.
Telkomsel established TED as a holding company to provide digital services in the edu-tech, health-tech, and gaming sectors. TED intends to collaborate with Indonesian startups, investors, and stakeholders in the digital industry. As an example, TED has partnered with Agate, one of the largest game developers in Indonesia, to expand access to locally made games and so open opportunities for local creators in Indonesia’s gaming ecosystem.
In 2022, we introduced a new brand, Leap, as an umbrella brand for all of our digital transformation products and services. We seek to use Leap to help achieve Indonesia's digital sovereignty by creating technological solutions through collaboration and innovation.
In 2023, our subsidiary, Metranet and Cakap have collaborated to provide Education Digital Content on the Metranet Platform, namely Cazbox Edu. The target market includes public and private schools from various levels across Indonesia.
PT. Telkom Indonesia is a company that operates in the telecommunication sector, but considering the current pace of changes, our company has to innovate to keep innovating, therefore we provides an End-to-End Big Data Platform called BIGBOX which is an analytical big data platform with end-to-end data management and Analytics, designed to help organizations manage and analyze large amounts of data in various environments and various data formats, to provide insights, problem solving, or create value for the business or organization. We currently have three segments namely PRODUCTS (end-to-end Big Data Platform to generate insights that suit client’s operational and business needs), SOLUTIONS (Helping clients turn complex data into actionable insights across various use cases in various Industries), and SERVICES & SUPPORT (Helping clients build data-driven organizations with expert support, training and consulting services).
These three segments are divided into vertical products and horizontal products, where the vertical products consist of BigOne (One Data Platform to help the government to unite scattered data into one data management), BigMarket (E-commerce Analytical Platform for analyzing e-commerce products), BigSosial (Social Media Analytics Platform to help monitor and analyze trends, brands, social, political & economic issues on social media), BigView (Smart Government Dashboard that provides integrated services from various vertical applications to view regional information, regional potential, vision and mission to the regions), BigLegal (Legal Analytic to collect all systematic legal regulations that are accurate, valid and up-to-date), and BigVision (Video Analytics and eKYC to help provide API services related to Video Analytics and eKYC) and supported by seven horizontal products consisting of BigAction, BigSpider, BigLake, BigSearch, BigQuery, BigBuilder, and BigEnvelope.
Our digital content portfolio comprises music and gaming. We manage our digital content portfolio across the Group and also manage the relevant value chains which mainly consist of sourcing content, providing the content platform, dealing with payments, and marketing. Our digital content portfolio focuses on providing consumers with a mobile entertainment experience. It targets different consumer segments and leverages Telkomsel's trusted billing system to facilitate transactions. It offers applications for music (e.g., Langit Musik for music streaming and an application for ringtones called Nada Sambung Pribadi) and games (e.g., Upoint.id and Dunia Games, which combines game content data for several games with game vouchers). We have been developing our gaming portfolio, our E-Commerce business with a specific focus on B2B E-Commerce opportunities, Xooply, a B2B marketplace for our customers, and investing in B2B IT digital services.
Property Management
Consistent with our strategy to accelerate digital ecosystem creation, we prioritize increasing network-related building and equipment asset utilization that expands our digital capacity. We also construct data centers for data intensive areas while leveraging our sizeable property asset portfolio in markets with lower data usage through external partnerships and collaborations. In addition, we seek efficient space allocation for our legacy network equipment and to provide an
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enjoyable office experience for our employees. We execute our leveraging initiatives and space reconditioning through our subsidiary, PT Graha Sarana Duta ("Telkom Property"), which offers services such as property development (planning, development, and construction of property area), property leasing (property rent and leasing), property facilities (business line engaged in retail and leasing, transportation management system) and property management (building management, mall, apartment, and security services). These services contribute to the increase of our property asset utilization and diversification of our digital ecosystem.
In 2023, we took initiatives to develop and face the changing scape, aligning with our commitment to innovate and sustain. Guided by a vision for progress, we undertook Five Bold Moves to support Telkom’s transformation in property management. We intensified our efforts in constructing state-of-the-art buildings designed to facilitate the growth of our data centers. This infrastructure expansion aligns with our mission to speed up the digitalization across high-traffic sectors, ensuring smooth services and product delivery. Expanding on our insight we placed strategic emphasis on the external market, fostering collaborations and partnerships to broaden our impact. This outward focus allowed us to tap into new opportunities and markets, contributing to our sustained growth. As part of our corporate evolution and expansion into the external property management market, our subsidiary focused on property management, PT Graha Sarana Duta (“GSD”) has unveiled a revamped logo, marking a significant step in building a strong corporate brand image. This rebranding effort reflects our commitment to remaining dynamic and relevant in the ever-evolving business, especially in areas focused on digitization. Through our improvement projects to adapt to global challenges, we continue to develop our properties to support the digital business ecosystem by delivering E-Commerce co-warehousing and cold storage collaborations. Furthermore, in our commitment to environmental stewardship, we are making efforts to enhance our services and energy management program.
In addition to leveraging our idle properties through partnerships as described above, we incorporate our digital competence and product solutions into our offerings. For example, we provide network connectivity or internet access to our tenants or their customers as additional amenities. These digital features contribute to the increased value of our asset offerings and help to diversify our digital ecosystem. We also create partnerships with digital workplace enterprises through a co-working space business initiative. In addition to generating income, our property business also serves internal customers as part of our "group synergy projects" by providing efficient space allocation for our network equipment and an enjoyable work environment for our employees, partners, and subsidiaries. Such property assets come in the form of buildings that function as our network nodes, sales points, customer service centers, headquarters and branch offices, other businesses, functions, and land banks. Our goal for these projects is to achieve cost efficiency through economies of scale.
Network Infrastructure and Development
In line with our vision and mission, we classify our network infrastructure into two categories, namely: (i) our national network infrastructure (including IT, cybersecurity, and services), which supports our Indonesia Cyber Core program and (ii) our international network infrastructure, which supports our international expansion program.
National Network
Throughout 2022 and 2023, we further developed our Group IT infrastructure, encouraged internal digitalization initiatives, and enhanced customer services while expanding our Next Generation Network capabilities. We sought to drive digital connectivity service innovation, fortify cybersecurity, enhance network quality, deploy Future State Architecture, optimize capital and operating expenditure, modernize our operating model, and improve talent management. We regularly conduct software and network vulnerability assessments, and we offer cybersecurity training to all employees. Our commitment to network development aligns with the Indonesia Broadband Plan, aiming to improve broadband access nationwide. We expedited our digitalization efforts, alongside the deployment of 5G technology to meet Indonesia's demand for advanced telecommunications infrastructure
Our digital business comprises digital connectivity, digital platforms, and digital services, focusing on innovations that cater to the changing requirements of technology and information services.
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We continue to promote digitalization in Indonesia through our Indonesia Cyber Core program, which comprises three main components, namely id-Service ("id-SEV"), id-Convergence ("id-COV") and id-Network ("id-NET"), and which are further described below:
· | id-SEV: encapsulates our strategy to enhance digital connectivity products, fostering innovation in digital and cybersecurity services for improved customer solutions. Our offerings include broadband internet, data, voice communications, and Wi-Fi for both fixed and mobile customers. We aim to grow our digital portfolio with services such as gaming, media streaming, online education, E-Commerce, mobile payments, travel, crowdsourcing, and healthcare by developing innovative platform infrastructures for applications, data management, GPU farming, in-memory databases, AI, and big data. |
| ● | id-COV: outlines our strategy to bolster our digital platform business by optimizing integration and reliability while expanding our data center facilities and cloud services. This includes developing two HyperScale data centers with capacities of approximately 75 MW each and enhancing the capacities of 19 neuCentrIX data centers nationally in parallel with our cybersecurity platform. We have established a data governance council to strengthen data security compliance. Our smart platform supports digital businesses in providing various services, offering an interconnected platform via cloud management and dedicated cybersecurity platforms, big data processing, and AI innovations. |
Cellular Network
As of December 31, 2023, our subsidiary Telkomsel had the widest cellular network coverage in Indonesia, operating across GSM/DCS, GPRS, EDGE, 3.5G, 4G/LTE, and 5G networks with a diverse spectrum allocation, supporting technologies from GSM to 5G. In 2023, Telkomsel completed the 3G to 4G service upgrade (3G shutdown), resulting in a total of 32,718 additional 4G BTS, including both new and upgraded BTS, along with a total of 370 additional 5G BTS. As at December 31, 2023, the network encompassed 247,472 BTS, including 2G, 3G, 4G, and 5G.
Our subsidiary Mitratel has acquired a significant number of telecommunications towers from Telkomsel and other companies, enhancing its infrastructure portfolio, supporting Telkomsel’s focus on digitalization, and improving the digital offering for its customers across Indonesia. In 2023, Mitratel purchased 997 telecommunications towers from Indosat for Rp1.6 trillion and 803 telecommunications towers from PT Gametraco Tunggal for Rp1.8 trillion.
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Data and Internet Network
In 2023, we continued to improve the quality of our data network by installing additional capacity and expanding coverage. As of December 31, 2023, we provided broadband access through fiber optic cable to more than 38 million homes. As of December 31, 2023, our Metro Ethernet network had an aggregate installed capacity of 167,279 Gbps. We use our Metro Ethernet network both to provide broadband services throughout Indonesia and as the main link for our IndiHome broadband services, softswitches and IMS related to voice services, video services, enterprise VPN services, and GPON broadband services related to mobile backhaul and corporate business solutions.
As of December 31, 2023, we have extended the capacity of our internet gateway to reach an aggregate installed capacity of 9,000 Gbps, in particular to cope with expected peak surges in traffic. In 2023, we operated CDNs with an aggregate content delivery capacity of 26,834 Gbps in collaboration with Google, Facebook, Akamai, EdgeCast, Level3, Yahoo, ChinaNet, VDMS, Conversant, Zenlayer, and OTT video content providers such as iFlix and Catchplay+.
As of December 31, 2023, we had 64 points of presence in 49 cities in Indonesia, including: 12 main points of presence in Batam (at Batam Center and Bukit Dangas), Jakarta (at Jatinegara and Cikupa), Surabaya (at Rungkut and Kebalen), Manado (at Manado Centrum and Manado Paniki), Makasar (at Pettarani and Balaikota) and Banjarmasin (Banjarmasin and Ulin), and 52 primary and secondary points of presence throughout Indonesia. We have also been developing two primary points of presence in Kendari, which are expected to commence operations in the fourth quarter of 2024.
In 2023, we consistently deployed additional access points across Indonesia to enhance our Wi-Fi coverage and business model, while also choosing to dismantle certain access points that provided Wi-Fi services in locations where there was low utilization. Moreover, we expanded our Wi-Fi business by offering Wi-Fi management services using ONT Premium, which allows SMEs to purchase Wi-Fi at various bandwidth levels and with various additional services. As of December 31, 2023, we had installed a total of 394,031 access points (consisting of 123,311 managed access points, 221,000 home spots, and 49,720 ONT Premium access points).
Data Centers
As of December 31, 2023, we operated 32 data centers (27 data centers in Indonesia and five overseas). Telin operated five overseas data centers with a total capacity of 18 MW consisting of three in Singapore, one in Timor-Leste and one in Hong Kong. Our 23 neuCentrIX data centers in Indonesia had an aggregate capacity of 1,942 racks. TDE, through its NeutraDC brand operated three enterprise data centers with a classification of tier 3 or tier 4 in Indonesia (at Serpong, Sentul, and Surabaya) with a total IT load capacity of 15.9 MW (Telkom Sigma transferred these data centers to TDE in 2022 as part of a portfolio consolidation) and one HyperScale data center with a classification of tier 3 or tier 4 in Indonesia (at Cikarang) with a total designed IT load capacity of up to 51 MW across three campuses.
In 2023, we expanded our neuCentrIX data center capacity and services, which target enterprise and wholesale customers, by creating a digital hub experience under the neuCentrIX umbrella brand to provide various connectivity services for digital businesses. We expanded seven of our existing neuCentrIX data centers. As of the date hereof, we are building new neuCentrIX data centers in Indonesia that will provide carrier neutral connectivity and multiple custom-made services for enterprise clients throughout the Asia Pacific region.
In December 2022, TDE conducted the ground breaking ceremony for our second HyperScale data center in Batam. PT Teknologi Data Infrastruktur (“NeutraDC Batam”), in its pursuit of technological excellence, is making remarkable strides in the development of its 51MW data center located on a five hectare site at Kabil Industrial Estate, Batam. A significant achievement was recently marked with the signing of a contract with PLN Batam, securing essential electrical support with total 90MVA capacity for the data center. In our commitment to sustainable practices, we are also actively exploring renewable energy initiatives in collaboration with PLN Batam. Currently in the schematic design stage under the guidance of our expert consultants, the facility is taking shape, emphasizing efficiency and innovation. Envisioned as a three-campus infrastructure, we are thrilled to announce that the first campus is expected to be operational by 2025. This progress underscores NeutraDC Batam's commitment to strengthening digital transformation and digital
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economic development in Indonesia, particularly in Batam and the surrounding region, in response to spillover demand from Singapore.
We are also in the process of consolidating our international data centers by transferring Telin Singapore’s data center business to NeutraDC Singapore, which is an important milestone in our journey to become a leading regional player in the data center industry. NeutraDC also continues to explore data center expansion options at the regional level. Through regional expansion, we aim to identify new opportunities and address market demand in the Asia Pacific region.
Transmission Network
In 2023, we focused on the reinforcement of our domestic backbone network reliability and continued developing our broadband network, which serves as the backbone for our entire network infrastructure. Our backbone telecommunications network consists of transmission networks, switching facilities and core routers, which connect multiple access nodes. The transmission links between nodes and switching facilities comprise a terrestrial transmission network, in particular fiber optic, microwave and submarine cable systems, as well as satellite transmission networks and other transmission technologies. During COVID-19, data traffic significantly increased due to the implementation of various measures for ensuring the health and safety of the public, such as working and studying from home. We took preemptive steps to reinforce the reliability of our network and limit congestion issues, in particular in urban areas. We did so by increasing our network capacity, prioritizing sensitive areas to prevent service disruptions (e.g., certain key Government agencies or ministries and key backbone connection links within our network), allocating more resources to monitor our network, either from our integrated operation centers or by sending teams of technicians on the field for controlling the physical integrity of our systems and the existence of potential intrusions. We have benefited from the enhancements to our network infrastructure in response to COVID-19 and we seek to maintain the reliability of our network.
Communications Cable System
As of December 31, 2023, our transmission network comprised 26 backbone rings in Indonesia with an aggregate installed capacity of 287,260 Gbps and our fiber optic backbone network totaled 111,663 km domestically (compared to 108,566 km as at December 31, 2022). Our domestic fiber optic backbone network is supplemented by an international fiber optic backbone network totaling 64,700 km.
In 2019, we began deployment of several submarine cable systems in order to strengthen our fiber optic backbone. In western Indonesia, we completed the deployment of the 632.12 km long SLM (Sabang-Lhokseumawe-Medan) submarine cable system in 2021, connecting the Sabang-Lhokseumawe cable system with the Lhokseumawe-Medan cable system. In eastern Indonesia, we completed deployment of the 283 km long PATARA (Papua Utara) submarine cable system in 2021, connecting Sentani and Sarmi. In Kalimantan, we completed the deployment of the 673 km long MATANUSA (Mangkajang-Tawao-Nunukan-Sangatta) cable system in 2021. We continue to progress on the deployment of our fiber optic backbone in eastern Indonesia. We completed the deployment of the 1,126 km long PATARA-2 submarine cable in 2022, connecting Sarmi and Waisei. In Sulawesi, we completed the deployment of the 436 km long LUMORI (Luwuk-Morowali-Kendari) submarine cable in 2021, connecting Luwuk, Bonepute, Kolaka and Kendari. When our JASUKA and IGG fiber optic cables were disconnected in the second quarter of 2022 due to an incident with an anchor, we prioritized the repair of these two cables so that we could provide sufficient network bandwidth. In October 2023, we completed the construction of our PATARA-2 submarine fiber optic cable system connecting across North Papua, Indonesia.
We also intend to leverage Indonesia's strategic geographic location and to provide an alternative direct broadband connection between Europe, Asia, and America. The IGG cable system connects two major submarine cable systems, namely SEA-ME-WE 5 and SEA-US. The IGG cable system also connects 12 major cities within Indonesia, including Batam, Jakarta, Surabaya, and Manado, spanning a length of 5,403 km. This cable system increases our domestic traffic capacity and ability to offer broadband services.
Satellites
In 2023, we operated two satellites, Telkom-3S and Telkom-4 (Merah Putih).
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We launched the Telkom-3S satellite in February 2017, and it commenced commercial operations in April 2017. Telkom-3S provides coverage to Indonesia. It has a capacity of 42 transponders (equivalent to an aggregate of 49 TPE) consisting of (i) 24 standard C-band transponders, (ii) 8 extended C-band transponders, and (iii) 10 Ku-band transponders.
We launched the Telkom-4 (Merah Putih) satellite in August 2018 replacing the Telkom-1 satellite which ceased operations in 2017. Telkom-4 began its commercial operations in September 2018 and provides coverage to Indonesia and South Asia. It has a capacity of 60 transponders (equivalent to an aggregate of 60 TPE) consisting of (i) 24 standard C-band transponders for Indonesia, (ii) 24 standard C-band transponders for South Asia, and (iii) 12 extended C-band transponders for Indonesia. We control our satellites from a main control station in Cibinong, Bogor in West Java. To ensure continuity of service, we operate a backup control station in Banjarmasin, South Kalimantan.
We lease capacity of 37.84 TPE from the following satellites: Apstar-5C HTS (138 E) in the amount of 33.6 TPE, Apstar-9 (142 E) in the amount of 1.5 TPE, JCSAT 4B (124 E) in the amount of 1.88 TPE and MySat (142 E) in the amount 0.86 TPE.
In 2022, the MoCI granted Telkomsat Starlink landing rights, enabling Telkomsat to serve backhaul services through Starlink satellite constellation. This will enhance internet broadband connectivity especially 4G celullar broadband connectivity in rural areas throughout Indonesia.
By early 2024, we expect to launch a high-throughput satellite using C-band and Ku-band frequencies with 32 Gbps total capacity in orbital slot 113 E.
International Networks
Through Telin, we continue to develop our international network infrastructure in order to support our international expansion strategy and vision to be the "King of Digital in The Region" We operate international gateways in Batam, Jakarta, and Surabaya to route outgoing and incoming calls on our IDD service ("007" and "01017"). We also operate voice gateways in Singapore and Hong Kong to offer voice services from or to any countries. As of December 31, 2023, we owned and operated an international fiber optic backbone network totaling 64,700 km.
We are a member of multiple submarine cable consortiums, including Thailand-Indonesia-Singapore, two routes of Batam-Singapore, Dumai-Malacca, Asia-America Gateway, Southeast Asia-Japan, Southeast Asia-Middle East-Western Europe 5 (SEA-ME-WE 5), South East Asia-United States (SEA-US) and IGG, which connects major cities in Indonesia with Asia, Europe, and the US. IGG also provides an express connection between the SEA-ME-WE 5 and SEA-US cable systems.
Moreover, we also operate and have rights of use for fiber optic infrastructure totaling 134,040 km in the aggregate under a long-term telecommunications lease agreement with other global submarine cable operators/consortiums. This includes the following submarine cables: 10,000 km of the Japan-U.S. Cable Network (JUS), 9,620 km of the Unity/EAC-Pacific network, 11,629 km of the FASTER network, 2,700 km of the EAC-C2C network, 2,700 km of the APCN-2 network, 6,500 km of the Asia Pacific Gateway (APG) network, 7,000 km of the Asia Submarine-cable Express (ASE)/Cahaya Malaysia network, 2,700 km of the TGN-Intra Asia (TGN-IA) network, 20,000 km of the Southeast Asia-Middle East-Western Europe 4 (SEA-ME-WE-4) network, 20,000 km of the Asia Africa Europe-1 (AAE-1) network, 8,100 km of the Bay of Bengal Gateway (BBG) network, 12,091 km of the Imewe network, 15,000 km of the Europe India Gateway (“EIG”) network, and 6,000 km of the Hibernia Transatlantic network.
In 2020, Telin along with the Southeast Asia-Japan Cable 2 (SJC2) consortium initiated the deployment of 10,500 km of submarine cables laid in intra-Asia, connecting China, Japan, South Korea, Taiwan, Thailand, Vietnam, and Hong Kong SAR. As of the date hereof, these cables are expected to be ready for sale at the latest by the first quarter of 2025.
In 2021, Telin commenced construction of a 15,000 km of submarine cable with the Bifrost Cable System consortium which will connect Singapore, Indonesia, the Philippines, Guam, and the west coast of North America. Construction is expected to be completed in late 2024.
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In 2022, Telin joined the SEA-ME-WE-6 cable consortium, which is constructing a cable to connect Southeast Asia, the Middle East and Europe. The SEA-ME-WE 6 cable will connect Singapore, Malaysia, Bangladesh, Sri Lanka, India, Pakistan, Djibouti, Saudi Arabia, Egypt, and France. This 19,200 km-long cable is expected to be completed in 2025 and will provide additional diversity and resilience for the significant amount of traffic between Asia and Europe. Compared with other options, the SEA-ME-WE 6 will offer one of the lowest latencies available between Southeast Asia, the Middle East and Western Europe and will have a capacity of more than 100 terabytes per second.
In 2023, Telin commenced construction of the Indonesia Cable Express initiative ("ICE"). The ICE initiative aims to develop seven innovative systems that will connect and provide low latency and direct data center-to-data center access.
All of the submarine cables used by Telin are equipped with Open Cable Technology for efficient use of capacity. Telin also has control over the fiber optic infrastructure, including the physical cables and associated bandwidth, allowing it to provide guaranteed bandwidth for each member of the respective cable consortium. These submarine cables are also monitored and supported 24/7 by the Telin World Hub Operation and Command Center.
As of the date hereof, to support our international voice and data services, Telin operates 58 points of presence throughout the world, including 26 points of presence in Asia and the Middle East (11 in Indonesia which are used for supporting the international network, four in Singapore, four in Hong Kong, two in Kuala Lumpur, and one in each of Dili, Tokyo, Taipei, Yangon and Dubai), 19 points of presence in Europe (one in each of London, Amsterdam, Frankfurt, Warsaw, Vienna, St. Petersburg, Bucharest, Prague, Switzerland, Milan, Manchester, Luxemburg, Brussels, Sofia, Marseille, Paris, Moscow, Helsinki, and Madrid), 13 points of presence in the United States and Canada (one in each of Montreal and Toronto, two in Los Angeles and one in each of Palo Alto, Ashburn, San Jose, New York, Guam, Hawaii, Seattle, San Francisco and Atlanta).
Geographic Distribution of Revenues
International expansion has become a necessity for us to be able to maintain and sustain a high growth rate. We are developing and expanding our business outside of Indonesia to broaden and diversify our market. The following table sets forth the distribution of our revenues by geographic markets for the years indicated therein.
Years Ended December 31, | ||||||||
2021 | 2022 | 2023 | ||||||
| (Rp billion) |
| (Rp billion) |
| (Rp billion) |
| (US$ million) | |
External Revenues |
|
|
|
|
|
|
| |
Indonesia |
| 136,482 |
| 139,983 |
| 141,157 |
| 9,167 |
Abroad |
| 6,728 |
| 7,323 |
| 8,059 |
| 523 |
Total |
| 143,210 |
| 147,306 |
| 149,216 |
| 9,690 |
Revenue Controls
As a customer-facing business, we may face revenue leakage as a result of being unable to collect some revenues to which we are entitled. We mitigate such potential revenue leakage by implementing control functions in all of our existing business processes, cooperating with and sharing information between operating units to detect potential fraud, using revenue assurance methods, employing adequate policies and procedures, and implementing certain information system applications.
Overview of Telecommunications Services Rates
Under the Telecommunications Law and Government Regulation No. 52 of 2000 on Telecommunications Operations, as partially revoked by GR No. 46/2021 (GR No. 52/2000, as amended”), tariffs for operating telecommunications services are determined by providers based on the tariff type and structure and with respect to the price cap formula set by the Government. However, the Government may determine the (i) formula to calculate the tariff;
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and (ii) an upper limit tariff or lower limit tariff for the provision of telecommunications services based on public interest and fair competition.
a. Telecommunications Services Tariffs
Under the MoCI Regulation No. 5/2021, telecommunications services tariff consist of basic telephony service tariffs, value-added telephone service tariffs, and multimedia service tariffs, as described below:
· | Basic telephony services tariffs, comprising tariffs for the provision of basic telephony services, which include: |
| (i) | core features, such as telephony, facsimile, SMS, and/or MMS; and |
| (ii) | additional features, including but not limited to Rich Communication Services. |
· | Value-added telephony services tariffs, comprising tariffs for the provision of value-added telephony services, which include but are not limited to Information call center services and premium call services; and |
· | Multimedia services tariffs, comprising tariffs for the provision of multimedia services, which include but are not limited to ISP and NAP services. |
All the aforementioned tariffs follow the below tariff structure:
· | Activation fee; |
· | Monthly subscription charges; and/or |
· | Usage charges. |
b. Telecommunications Network Tariffs
Under the MoCI Regulation No. 5/2021, telecommunications network tariffs consist of basic interconnection tariffs, and network lease tariffs, as described below:
| ● | Interconnection tariffs |
The Indonesian Telecommunications Regulatory Authority (Badan Regulasi Telekomunikasi Indonesia or "BRTI"), in its letter No. 262/BRTI/XII/2011 dated December 12, 2011, mandated a shift to cost-based pricing for SMS interconnection tariffs among telecommunications providers, with a maximum tariff of Rp23 per SMS effective from June 1, 2012, applicable to all telecommunications service operators. In addition, based on Letter No. 118/KOMINFO/DJPPI/PI.02.04/01/2014 of the DGPIO, the DGPIO required our Company and Telkomsel to submit annual Reference Interconnection Offer ("RIO") proposals to the BRTI for evaluation. The subsequent approvals of the RIO adjustments by the BRTI, as indicated in its letters No. 60/BRTI/III/2014 and No. 125/BRTI/IV/2014 approved our Company's and Telkomsel's RIO adjustments, set the SMS interconnection tariff at Rp24 per SMS (the "2014 RIO Proposal"). Furthermore, on January 18, 2017, through its letters No. 20/BRTI/DPI/I/2017 and No. 21/BRTI/DPI/I/2017, BRTI resolved to maintain the interconnection tariffs from the 2014 RIO Proposal between Telkom and Telkomsel, pending the establishment of new interconnection tariffs.
| ● | Network lease tariffs |
MoCI Regulation No. 5/2021 establishes guidelines on the structure and pricing for network lease services, including the form, type, structure, and formula of tariffs for such services, which built upon Decree No.
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115 of 2008 issued by the Director General of Post and Telecommunications in Indonesia on 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 Owned by Dominant Network Lease Service Providers (“DGPT Decree 115/2008”) in agreement with the Telkom proposal.
c. Tariffs for other services
The tariffs for satellite lease, telephony services, and other multimedia are determined by the service providers by taking into account the expenditures and market prices of such services. The Government only determines the tariff formula for basic telephony services. The Government does not determine the tariffs for other services.
Marketing, Sales and Distribution
We have implemented a comprehensive marketing and promotional strategy to bolster our brand and to increase sales, including through digital marketing and the development of our product and service distribution channels. To increase sales, we also use above- and below-the-line marketing channels to promote our services to certain parties and communities. We also continue to place advertisement in printed and electronic media and implement marketing methods such as point of sales broadcasting as well as promotion and sponsorship events.
The following provides a description of our marketing and promotional strategies by customer segment.
Mobile Customers
In 2023, Telkomsel continued to implement and incentivize healthier business practices in the industry through price adjustments after competing intensely on prices in the past. Major competitors also implemented price rationalization initiatives, suggesting that industry prices will remain at more sustainable levels than in recent years.
In 2023, we launched personalized offerings for mobile costumers through dynamic customer segmentation and customer value management by targeting specific groups of customers. This allowed us to conduct targeted marketing campaigns and rely on data analytics. We also improved profitability and ARPU by harmonizing prices across different product portfolios. Telkomsel continues to provide products and services that address customers' needs, including a variety of packages available to customers across all the Telkomsel channels and physical outlets. Telkomsel is generally able to implement strategies conducive of higher data usage, including by enriching its digital products, collaborating with strategic partners, and providing high-quality services designed to give its customers a seamless experience. Other strategic initiatives focused on network optimization, cost optimization, and strengthening of core broadband.
We also enhanced our digital lifestyle related video and games content, including by increasing the market presence of MAXstream in the video streaming industry through expanded partnerships with major content partners and original MAXstream content. We also expanded our footprint in the mobile gaming industry by entering into game publishing through our "Dunia Games" brand.
We have continued to develop Telkomsel Orbit, a home wireless internet service, as an effort to leverage our strong network capacity and to cater to demand in areas where fixed broadband cannot penetrate. As of December 31, 2023, we had 159.3 million cellular subscribers, comprising 151.8 million prepaid cellular subscribers, 7.5 million postpaid cellular subscribers and 127.1 million mobile broadband customers.
Consumer Customers
In 2023, IndiHome remained our flagship consumer product, with our sales strategy centered on value-based pricing attuned to local market dynamics and reinforced by the IndiHome Integration, thus improving customer relations. Telkomsel's strategy to bridge the home and mobile connectivity experience sought to increase fixed broadband adoption, given the low penetration of fixed broadband services in Indonesia, against the backdrop of a nearly saturated cellular service market.
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Despite growing competition, we improved our service quality and customer experience with our "You Are First" program, a customer-centric initiative that relied on activities organized for customers and tailored loyalty programs. We have also implemented network enhancements and improved response times to customers' complaints, for instance in the event service disruptions and other technical issues.
We design our service offerings, which span up to 300Mbps, to deliver on value, aiming to meet the needs of our customers through wide selection of customer-centric offerings which includes bundled contents. The IndiHome Integration has fostered a unified customer strategy, enhancing our ability to cross-sell and up-sell. We offer personalized services through advanced data analytics, which enable us to refine our customer segmentation by utilizing customer data profiles to tailor offerings and pricing strategies. Our problem resolution is supported by an end-to-end traceable customer relationship management process, allowing us to anticipate and address issues before they negatively impact our customers.
Our access points provide wide coverage, with the number of fixed broadband IndiHome B2C subscribers having increased by approximately 0.4 million from the integration of IndiHome B2C into Telkomsel on July 1, 2023 to December 31, 2023 which makes us having 8.7 million IndiHome B2C Subscribers by the end of 2023. As of December 31, 2023, we had a total of 10.1 million fixed broadband IndiHome subscribers including 8.7 million IndiHome B2C subscriber.
Enterprise Customers
In 2023, we refined our enterprise customers approach by targeting high-value enterprise customers through strategic account management. This involved offering tailored solutions to deepen customer relationships.
Our marketing strategy for enterprise customers aims to:
| ● | Spearhead digital transformation for enterprises, including SOEs, to achieve and secure a leading bandwidth share in the digital connectivity market; |
| ● | Empower SMEs with digital platforms to improve market, funding, and technology access, contributing to Indonesia's digital transformation; and |
| ● | Partner with the Government as a trusted ICT provider to support Indonesia’s key digital initiatives, such as "Making Indonesia 4.0" and "One Data Indonesia." |
Our sales approach provides tailored support across various enterprise customers segments:
| ● | Enterprise account managers offer a single point of contact for large enterprises, delivering comprehensive service from relationship initiation to after-sales customer care, utilizing an application-based process for full digitalization; |
| ● | Government account managers cater to the ICT needs of the Government, with support from the Government's relationship officers to enhance service quality and foster contract renewals; and |
| ● | Business account managers and tele account managers cater to the needs of MSME customers, with support from third-party value-added resellers who promote Telkom’s MSME products. Their efforts are supplemented by digital channels and mobile applications that incentivize initial purchases with additional products or services. |
Wholesale and International Business Customers
Our wholesale and international business segment serves a mix of other domestic operators, service providers, digital entities, global wholesalers, carriers, and related enterprises, such as those utilizing overseas data centers and
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international connectivity. Additionally, through our Non Geostationary Orbit satellites, we cater to retail customers internationally.
Our marketing and sales strategy for wholesale and international business customers focuses on:
| ● | Executing compelling business model strategies for voice traffic to increase sales volume, combining competitive pricing and high service quality; |
| ● | Enhancing services for international connectivity and overseas data center customers by improving coverage and quality; |
| ● | Offering a wide range of telecommunications tower services, including built-to-suit tower rentals, co-location, site maintenance, and related services; and |
| ● | Expanding our regional presence with submarine cable laying and maintenance services. |
Digital Service Customers
For our digital service customers, our marketing strategy focuses on strengthening and improving digital innovation, including by:
· | Creating digital services with unique features; |
· | Improving branding, digital platforms, operations, and customer experience; |
· | Building digital business models to support Indonesia's digital economy; |
· | Leveraging our assets and inventory to obtain more insight into digital services and customer experience; and |
· | Growing our digital services portfolio through investment in digital startups. |
We tailor our sales strategy to each particular digital business and our digital customers' needs. We offer customer care and channel management, including through contact centers, dedicated account management for large enterprises, websites, and social media.
Our digital service customers program focuses on improving IndiHome services. For example, we promote the myIndiHome application as a digital touchpoint for IndiHome’s customers, which also offers Disney+ Hotstar in a starter bundle package, Indibox as a source of value-added services (e.g., video content, games, and certain Google applications), GameQoo as a cloud gaming service and also IndiHome Smart as an IoT home service. Customers can enjoy these value-added services by subscribing and paying an additional price.
Distribution Channels
Our primary distribution channels for products and services in 2023 included:
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· | Authorized dealers and modern retail channels distributed Telkomsel products such as starter packs and prepaid top-up vouchers across Indonesia. A shift to modern retail channels was noted, with consumers preferring online transactions over physical stores post-COVID-19; |
· | Partnership stores extended our reach through various third-party marketing outlets, including electronics stores and bank ATMs; |
· | Contact centers supported customer access to our services around the clock, with facilities in key Indonesian cities; |
· | Specialized teams for account management and sales provided tailored solutions to large enterprises, Government agencies, and wholesale customers, enhancing business relationships and technical consultation; |
· | Channel partners, as third-party value-added resellers, met the needs of enterprise customers and facilitated sales of retail packages at events; |
· | Digital touchpoints provided customer service and account management through digital platforms such as myIndiHome, MyTelkomsel, MyTEnS for enterprise customers, MyIndibiz for SMEs, and MyCarrier for wholesale customers, which are equipped with interactive features and digital assistance; |
· | Our websites, www.telkom.co.id, www.telkomsel.com, www.telin.net, and www.indihome.co.id offered e-services such as billing and support; |
· | Social media and instant messaging platforms such as Facebook, Instagram, and WhatsApp provided product interaction and support, such as via our AI chatbot Veronika, which is powered by Microsoft Azure OpenAI; and |
· | LinkAja, our E-Money service, allowed customers to conduct transactions and service purchases digitally. |
Licensing
To provide national telecommunications services, we have product and service licenses that are consistent with applicable laws, regulations, and decrees.
Cellular
Telkomsel holds licenses to operate a nationwide mobile cellular telephone network using 15 MHz of spectrum allocation in the 800/900 MHz frequency bands, 22.5 MHz of spectrum allocation in the 1.8 GHz frequency band, 20 MHz of spectrum allocation in the 2.1 GHz frequency band, and up to (depending on the region) 50 MHz additional spectrum in the 2.3 GHz frequency band, together won at auctions in October 2017, May 2021, and November 2022 as well as gained from PT Berca Indonesia in November 2022. The licenses do not have set expiry dates, but they are evaluated every 10 years. In addition, Telkomsel holds permits and licenses from, and registrations with certain regional governments and/or Government agencies, primarily in connection with its operations in such regions, the properties it owns and/or the construction and use of its BTS.
Fixed Network and Basic Telephony Services
We have the following licenses to operate fixed local networks, fixed long-distance direct line networks, fixed international call networks and fixed closed networks:
· | MoCI Decree No. 073/TEL.01.02/2021 (on licenses to operate fixed long distance direct line); |
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· | MoCI Decree No. 094/TEL.01.02/2021 (on licenses to operate fixed closed networks); |
· | MoCI Decree No. 082/TEL.01.02/2021 (on licenses to operate fixed international networks); and |
· | MoCI Decree No. 095/TEL.01.02/2021 (on licenses to operate circuit switched based local fixed line networks). |
These licenses do not have set expiry dates, but they are evaluated every five years.
International Calls
We have a license to operate a fixed network to provide international call services pursuant to Decree No. 082/TEL.01.02/2021.
We have a license to operate a fixed closed network pursuant to MoCI Decree No. 094/TEL.01.02/2021. This license allows us to lease installed fixed closed network to telecommunications network and service operators, among others, and to provide an international telecommunications transmission facility through a SCCS directly to Indonesia for overseas telecommunications operators.
According to MoCI Regulation No. 5/2021, overseas telecommunications operators who wish to provide international telecommunications facilities through the SCCS directly to Indonesia are required to set up a partnership with a fixed network of international call services or closed fixed network provider. In line with MoCI Regulation No. 5/2021, the international telecommunications transmission facilities provided through SCCS are operated by us on the basis of landing rights we hold within Indonesia and that are attached to our license to operate fixed network of international call services.
DGPIO Decree No. 93 of 2016 on Limited Fixed Network Licenses granted our subsidiary Telin a license to operate a fixed closed line network which enables Telin to provide international infrastructure services. Separately, Telin secured landing rights in Indonesia from the DGPIO to provide international telecommunications transmission facilities through the Submarine Cable System ("SCS").
The foregoing licenses do not have set expiry dates, but they are evaluated every five years.
IDD Services
We have a license to provide IDD services under MoCI Decree No. 082/TEL.01.02/2021. We offer IDD fixed line services to customers using the "007" IDD access code.
VoIP
We are licensed to provide internet telephony services for public utilization for commercial use as provided under DGPIO Decree No. 127 of 2016 (on internet telephony services for public utilization). Telkomsel is also licensed to provide public VoIP services based on DGPIO Decree No. 65 of 2015 (internet telephony services for public utilization). These licenses do not have set expiry dates, but they are evaluated every five years.
ISP
We are licensed as an ISP under MoCI Decree No. 2176 of 2016 (on internet access services). Telkomsel is also licensed to provide multimedia internet access services with nationwide coverage under DGPIO Decree No. 19 of 2016 (on internet access services). These licenses do not have set expiry dates, but they are evaluated every five years.
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Internet Interconnection Service
We hold a license to provide internet interconnection services pursuant to MoCI Decree No. 1004 of 2018 on Internet Interconnection Service (Network Access Points). This license does not have a set expiry date, but it is evaluated every five years.
Data Communication System ("SISKOMDAT")
We have a license to provide data communication system services pursuant to MoCi Decree No. 046/KEP/M.KOMINFO/02/2020 (on data communication system services). This license does not have a set expiry date, but it is evaluated every five years.
Payment Method Using e-Money
Following the implementation of BI's regulations applicable to APMK and E-Money businesses since 2009, BI confirmed our status as an issuer of E-Money in 2018. We operate our E-Money business under the brand name "t-money." We, through Telkomsel, also operate our E-Money business under the brand name "LinkAja" (formerly known as "T-Cash"). With the issuance of BI Circular Letter No. 9/9/DASP, Telkomsel is also permitted to conduct APMK activities and offers Tunai prepaid cards. These permits do not have set expiry dates so long as: (i) we and Telkomsel continue to conduct the relevant businesses in compliance with applicable regulations; and (ii) the Government does not amend or revoke such permits. In addition, BI regulations governing E-Money companies in Indonesia have multiple requirements for BI license holders such as Telkomsel, including certain restrictions on shareholding and corporate governance as well as risk management and information system capability requirements.
In 2021, we expanded E-Money services available to our customers through LinkAja to include electronic toll payments, certain tax payments and the ability to settle certain other transactions in other various use cases. In the midst of digital wallet business competition, LinkAja has a business strategy to not only serve consumers under the B2C business model, but also provide business solution services under the B2B business model. LinkAja's business solution service provides various features such as fund disbursement, cash collection, digital payments through QRIS, merchant applications and others, digital ecosystems, and advertising services. LinkAja is currently targeting MSMEs and corporations in various industries. LinkAja also collaborates on sharia-compliant services with Bank Syariah Indonesia to facilitate convenient sharia-compliant digital transactions, with the aim of achieving financial inclusivity in Indonesia.
Administration of Source of Fund and Remittance Service
We and Telkomsel have licenses to operate as money transfer service providers pursuant to BI License No. 23/587/DKSP/Srt/B. These permits do not have set expiry dates so long as: (i) we and Telkomsel continue to conduct the relevant businesses in compliance with applicable regulations; and (ii) the Government does not amend or revoke such permits. BI re-evaluates the license every three years from the date of license issued, but it may also decide to conduct such evaluation at any time.
IPTV
Since March 5, 2024, after effecting the transfer of the IndiHome business segment into Telkomsel, Telkom no longer holds an IPTV telecommunications service operation license as it is no longer listed in Telkom's NIB.
However, we are able to continue to provide IPTV services by reselling Telkomsel's IPTV products, which Telkomsel offers through its IPTV telecommunications service operation license, obtained on May 27, 2023.
Construction Services Business License
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Certain of our subsidiaries possess SBUJKs, thereby permitting us to provide national telecommunications-related construction services, which primarily consist of installing telecommunications equipment and wiring buildings. Each SBUJK is valid for three years and can be renewed upon expiry.
On February 15, 2023, we obtained an SBUJK for the construction of central telecommunications infrastructure, such as stations for voice connection. While this license has no expiry date, MoCI re-evaluates all such licenses every three years.
Content Service Provider
We obtained a content service provider license in 2017 pursuant to MoCI Decree No. 1040 of 2017 on Content Service Providers dated May 16, 2017. While such license has no set expiry date, MoCI re-evaluates all content service provider licenses every five years.
Trademarks, Copyrights and Patents
We seek to develop product and service innovations in line with a dynamic business portfolio. To provide both protection for and recognition of creativity and innovation, we have registered several intellectual property rights, including trademarks, copyrights, and patents with the Directorate General of Intellectual Property Rights at the MOLHR.
The intellectual property rights we have registered include: (i) trademarks for our products and services, corporate logo and name, (ii) copyrights for our corporate name and logo, product and service logos, computer programs, research, books and songs, and (iii) single patents (generally valid for 10 years from the date of receipt of the single patent submission) and patents (generally valid for 20 years from the date of receipt of the patent submission) on technological inventions in the form of telecommunications products, systems and methods.
Corporate and Social Responsibility and Human Capital Management
We are dedicated to fostering a sustainable business and society. Our efforts encompass enabling connections, generating employment, and driving digital innovation. Our sustainability strategy, grounded in our five pillars of ethics, growth, human capital, societal contribution, and environmental stewardship, is regularly refined to mitigate risks and grasp new opportunities.
Our governance framework demonstrates our ambition to become a partner of choice for customers, suppliers, and communities, backed by a firm commitment to ethical practices. All our employees are required to uphold our ethical standards in their daily work, and we provide by regular training and information to foster a culture of integrity. We are also committed to upholding fair competition, data privacy, and transparent, inclusive procurement practices. We believe that our accolades for excellence in corporate governance and security underscore our achievements in these areas. In 2023, we received multiple accolades: the "Best State-Owned Enterprise" in the BigCap category by the Indonesian IICD, top honors in the "Best Indonesia GCG for Public Company 2023" in the telecommunications industry by the Indonesia GCG Award-VII-2023 Economic Review, and recognition for "Most Excellent Good Corporate Governance Implementation" at the CNBC Indonesia Awards 2023.
We rely on our performance growth pillar to enhance and modernize our business through innovation and digitalization, so that we may operate sustainably and adapt to changes. By digitizing and streamlining our operations, we intend to maintain and promote our business's operational and financial health. We believe that high-quality products and services are central to achieving this goal, as they underpin customer satisfaction and business continuity. In our telecommunications business, we prioritize connectivity, platforms, and services, constantly improving our network and IT systems to preempt or mitigate cybersecurity risks and maintain our infrastructure's integrity. Collaborative initiatives with law enforcement agencies enhance security, and we incorporate customer feedback to refine our offerings.
We prioritize managing human capital because we believe that our employees, managers, and talents are key to becoming and remaining a leading digital telecommunications player. Our human capital management practices focus on equitable recruitment, diversity, positive labor relations, and personal growth. We try and foster an inclusive culture,
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offering equal training and advancement opportunities to attract and retain top talents. This approach is informed by international norms on human rights and gender equality. As of December 31, 2023, women held approximately 30.0% of managerial roles, making up 37.0% of our workforce and 44.8% of the year's new hires. Our efforts to support gender equality include flexible work schedules, harassment-free policies, and adjustments for working mothers, such as remote work options and on-site childcare. We also support the Indonesian Ministry of Manpower's and the International Labor Organization's initiatives toward a child-labor-free Indonesia. We aim to enhance productivity by ensuring a modern, digital, and secure workspace that accommodates flexible work arrangements and health, safety, and environmental standards. We believe that our recognition as a Great Place to Work in 2022 by the Great Place to Work Institute aligns with these values. For more details on our human capital strategy, please reference "Item 6. Directors, Senior Management and Employees — Employees."
Our approach to social impact is proactive and broad, encompassing philanthropy, community empowerment, and infrastructure investment. We aim to maintain rigorous quality standards for our products and contribute positively to the community through various initiatives. In 2023, we committed approximately Rp154.9 billion to corporate social responsibility and environmental efforts throughout Indonesia. Our initiatives included contributing to digital education, improving access to food, water, and healthcare, and enhancing the quality of life for people with disabilities. We further supported MSMEs with training and entrepreneurship programs and fostered rural digital integration through the Smart Village Nusantara project. Our infrastructure projects emphasized sustainable development, featuring the installation of renewable energy street lighting and the expansion of internet connectivity to underserved regions. Additionally, we funded elderly housing, rural suspension bridges, and environmental conservation measures such as reforestation and marine ecosystem restoration. Infrastructure enhancements included renewable energy-powered public lighting and internet access expansion for remote areas, aligning with national development goals. We also invested in housing for the elderly, suspension bridge construction for rural access, and ecological efforts such as reforestation and coral reef rehabilitation.
Our sustainability strategy seeks to mitigate the environmental impact of our operations and businesses. We are committed to building an eco-friendly culture and extending environmental management practices beyond our immediate operations. We aim to lessen the telecommunications industry's footprint by reducing energy use, emissions, and managing electronic waste effectively. We have implemented several practices: enhancing energy efficiency, promoting renewable energy adoption, responsible waste handling, careful water use, and procuring energy-saving hardware. Oversight of environmental policies is centralized under the head of each business unit. Measures to decrease energy consumption include using LED lighting, installing reflective glass to cut down on air conditioning use, managing cooling systems, and optimizing electricity use with devices such as capacitor banks and timers. Plans to install rooftop solar panels are also being assessed as at the date hereof. Our network infrastructure improvements entail AC optimization and replacing old equipment with more energy-efficient alternatives, alongside expanding solar energy usage. Water-saving initiatives feature automatic taps and reusing AC condensation. Transportation is made eco-friendlier by encouraging cycling to work with bike parking facilities. Through digitalization, we are reducing paper trails by encouraging online communication and virtual meetings. Invoicing processes are now paperless, with digital channels in use for customer billings, such as apps (myIndiHome and MyTelkomsel), email, outbound calls, and text notifications on Pay TV services. Our corporate culture is focused on sustainability and responsible practices, integrating ESG principles into business decisions. We engage with communities and within our organization to foster a sense of environmental responsibility.
See "— Business Overview — Strategy — Environmental, Social and Governance ("ESG") matters" above for more information on our ESG strategies.
The Telecommunications Industry in Indonesia
In 2023, Indonesia's GDP grew by 5.05%, with further expansion expected in 2024, according to Government data. In its January World Economic Outlook Update, the IMF forecasts a 5% growth for the Indonesian economy in 2024. The Indonesian telecommunications industry has seen significant advancements, with rising mobile and broadband subscriptions primarily as a result of greater affordability, service improvements, and higher smartphone penetration. The shift from traditional voice and SMS to data services is still ongoing, fueled by the affordability of smartphones and a sizeable youth demographic. OTT applications have supplanted legacy services, causing a notable decline in traditional telecommunications business.
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The industry has also faced intense competition, with operators initiating promotional deals to attract customers sensitive to data pricing, leading to lower operator margins and fervent price competition. The industry, however, saw a return to stability in pricing and competition in late 2021, continuing through 2022 and into 2023, with operators sustaining healthier market conduct amidst rising demand for high-quality data services.
As of December 31, 2023, according to our internal estimates, Indonesia had roughly 315.6 million cellular subscribers, a 0.3% decrease from 316.5 million in 2022, with Telkomsel maintaining a market share of approximately 50.5%. Following the IOH merger, Telkomsel concentrated on initiatives to foster sustainable growth. Data consumption has been increasing, necessitating significant investment in network enhancement. In 2023, Telkomsel finalized the 3G to 4G migration, leading to an extended coverage that supported the growth of digital businesses and improved customer experience.
With the analogue TV bandwidth now available, mobile operators have the opportunity to strengthen their 4G LTE service offerings and explore 5G service offerings, providing enhanced coverage and speed. As data traffic remains a key revenue stream, telecommunications companies face the challenge of expanding their infrastructure to cater to the increasing data traffic, influenced by HD video streaming, gaming, and a surge in network-connected devices.
Economic recovery in Indonesia in 2023 led to higher demand for quality internet connectivity, with the fixed broadband market still led by select companies, including us and XL Axiata. However, high barriers to entry persist due to licensing and infrastructure requirements and limitations. Despite increasing competition and a slightly reduced market share, we continued to lead with approximately 10.1 million fixed broadband subscribers as at December 31, 2023.
Competition
Our cellular services business, operated through our majority-owned subsidiary Telkomsel, competes primarily with IOH and XL Axiata. However, we are also facing increased competition from smaller operators that provide cellular services in Indonesia, such as Smartfren, which is part of the Sinar Mas Group.
Business Competition Law
The Indonesian telecommunications sector is regulated by the Telecommunications Law, which became effective on September 8, 2000. The Telecommunications Law sets guidelines for industry reforms, including industry liberalization, to facilitate the entry of new operators as well as to increase transparency and competition. The Telecommunications Law abolished the concept of "organizing entities" in the industry, which terminated the special status of Telkom and Indosat as the organizing bodies responsible for coordinating telecommunications services domestically and internationally. To increase competition, the Telecommunications Law prohibits monopolistic practices and unfair competition among fellow telecommunications operators.
The Telecommunications Law, as amended by the Job Creation Law 2023, is implemented through various Government regulations and ministerial regulations, including: (i) GR No. 52/2000, as amended, (ii) Government Regulation No. 46/2021, (iii) MoCI Regulation No. 01/PER/M.KOMINFO/01/2010 on Telecommunications Network Operations as last amended by MoCI Regulation No. 5/2021, (iv) MoCI Regulation No. 7 of 2018 on Electronic Integrated Business Licensing Services in the Sector of Communications and Informatics as last amended by MoCI Regulation No. 5/2021 ("MoCI Regulation No. 7/2018, as amended"), (v) Decree of the Ministry of Transportation No. KM33 of 2004 on Monitoring of Fair Competition of The Fixed Network and Basic Telephone Service Operations; and (vi) MoCI Regulation No. 14 of 2018 on Fundamental Technical Plan of National Telecommunications Plan. Along with the Telecommunications Law, MoCI Regulation No. 14/2018 provides the basic vision of the Government for the development of Indonesia's telecommunications sector.
The Government encourages healthy competition and transparency in the telecommunications sector, even though the Government does not prevent operators from obtaining a dominant position or increasing their dominance in the market through specific regulations. Nevertheless, the Government prohibits market leading operators from abusing their dominant position.
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Competition in the telecommunications sector, as with all Indonesian business sectors, is also governed more generally by the Business Competition Law, as amended by the Job Creation Law 2023. The Business Competition Law prohibits agreements and activities which amount to unfair business competition and an abuse of a dominant market position. Pursuant to the Business Competition Law, the KPPU was established as Indonesia's antitrust regulator with the authority to enforce the provisions of the Business Competition Law.
The Business Competition Law is implemented by various regulations, including Government Regulation No. 57 of 2010 on Merger or Consolidation of Business Entities and Acquisition of Company Shares which may result in Monopolistic Practices and Unfair Business Competition ("GR No. 57/2010"). GR No. 57/2010 permits voluntary consultation with the KPPU prior to a merger or acquisition, which will result in the KPPU issuing a non-binding opinion. GR No. 57/2010 also requires that a mandatory report be made to the KPPU after a merger or acquisition is completed if the transaction exceeds certain asset or sales value thresholds. Further, on March 30, 2023, the KPPU issued Regulation No. 3 of 2023 on Assessment of Mergers, Acquisitions, or Stock Takeovers and/or Asset Acquisitions That May Result in Monopoly Practices and/or Unfair Business Competition ("KPPU Regulation No. 3/2023"). Under KPPU Regulation No. 3/2023, asset acquisitions which meet the set regulatory threshold must be reported to the KPPU.
In addition, a new implementing regulation relating to the Business Competition Law, namely Government Regulation No. 44 of 2021 on The Implementation of Monopolistic Practices Prohibition and Unfair Business Competition ("GR No. 44/2021") has been issued following the adoption of the Job Creation Law 2023.
The Job Creation Law 2023 amended the Business Competition Law in the following ways:
· | Assignment of the authority to examine objections to the KPPU's decisions from the District Court to the Commercial Court; |
· | Elimination of the deadline for examining objections at the Commercial Court and cassation at the Supreme Court; |
· | Additional provisions on administrative actions and the elimination of maximum fines of Rp25 billion; and |
· | Elimination of principal and additional criminal provisions. |
The Job Creation Law 2023, as implemented by GR No. 44/2021, regulates the authority of the KPPU, criteria for the imposition of sanctions and types of sanctions for violations of competition law, and the amount of fines as well as procedures for the evaluation of objections and appeals against KPPU decisions.
Furthermore, on May 31, 2021, the KPPU issued KPPU Regulation No. 2 of 2021 on the Guidelines for the Imposition of Fines for the Violation of Monopolistic Practices and Unfair Business Competition (“KPPU Regulation No. 2/2021”) which provides provisions on the calculation of fines, bank guarantees, payment of fines and concessions for payment of fines. According to KPPU Regulation No. 2/2021, the KPPU may impose a fine of between a minimum of Rp1 billion and a maximum of either 50% of the net profit earned by the business in the relevant market or 10% of the total sales of the business in the relevant market during the period when the violation occurred. The fine amount is Rp1 billion plus a calculation based on: (a) the negative impact caused by the violation, (b) the duration of time the violation occurred, (c) mitigating factors, (d) aggravating factors, and/or (e) the ability of business actors to pay the fine.
Additionally, in 2022, the KPPU issued KPPU Regulation No. 1 of 2022 on the Business Competition Compliance Programs which aims to provide a general understanding of compliance for business actors in preventing violations of laws and encouraging the implementation of business activities in accordance with the principle of fair business competition. As an incentive for business actors to register their compliance programs, the KPPU will impose a lower fine if the business actors are later proven to have violated the Business Competition Law. To comply with the Business Competition Law, we obtained certification of our compliance program from the KPPU, as evidenced by the Statement of Compliance Program No. 04/KPPU-PKP/2023 issued by the KPPU.
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Cellular
We operate our cellular service business through Telkomsel.
As of December 31, 2023, Telkomsel remained the largest cellular provider in Indonesia, with approximately 159.3 million cellular subscribers and a market share of approximately 50.5%, based on our internal estimates. According to publicly available data, the next largest providers were IOH and XL Axiata, based on number of subscribers as of December 31, 2023, and information publicly released by each of these companies. The penetration of SIM cards in the cellular industry in Indonesia is high, significantly over 112%, making continued growth in penetration increasingly difficult. There were approximately 315.6 million cellular subscribers in Indonesia as of December 31, 2023, compared to approximately 316.5 million as of December 31, 2022. This 0.3% decrease primarily stems from the current penetration rate being significantly over 100%, suggesting market saturation, as most of the population already possess at least one SIM card. Further growth becomes increasingly difficult as there are fewer potential new subscribers. Additionally, changes in regulations or policies regarding SIM card registration, usage, or distribution could also impact the number of subscribers. The Government's reinforcement of the prepaid SIM registration policy since 2018, as customers no longer have the freedom of accumulating several numbers provided by various operators, has resulted in a better-quality customer base with a higher proportion of active subscribers and more efficient SIM card production costs. Due to a reduction in the number of starter packs, operators can provide better quality services to customers. Additionally, operators now focus more on offering renewal promotions than on new starter pack promotions, as demonstrated by the recent price increase on starter packs within the industry. With the overall current competition landscape being stagnant and highly saturated in the Java region, other operators are adjusting their prices while also aggressively expanding their networks outside the Java region seeking a path towards profitability. We believe the registration policy, assuming continued implementation, will also have positive long-term impact and support the emergence of healthier competition in the industry.
The shifting trend from legacy services (such as voice and SMS) to data services continues to develop, driven by cheaper prices of smartphones as well as the rapidly growing youth customer segment. Data traffic has been growing significantly, while SMS service traffic has been decreasing in the last five fiscal years. Since 2017, Telkomsel has seen a steep decrease in voice usage. Minutes of usage per mobile subscriber also started to decrease in the second half of 2017. These trends persisted in 2023 and are likely to continue in the foreseeable future, as they are attributable to the substitution of traditional voice and SMS services to OTT based calling and messaging services as smartphone penetration in Indonesia has risen.
The following table sets out information as of December 31, 2023, for Telkomsel:
| Unit | Telkomsel |
| ||
Launch date |
| year | 1995 |
| |
Neutral - 2G, 3G and/or 4G spectrum allocation (GSM 900 MHz) |
| MHz | 15 |
| |
Neutral - 2G, 3G and/or 4G spectrum allocation (GSM 1.8 GHz) |
| MHz | 22.5 |
| |
Neutral - 2G, 3G and/or 4G spectrum allocation (2.1 GHz) |
| MHz | 20 |
| |
Time Division Duplex (TDD) technology (2.3 GHz) | MHz | 50 | 1) | ||
Subscribers |
| million | 159.3 |
|
Note:
(1) | Comprises additional spectrum in the 2.3 GHz frequency band that Telkomsel won following an auction process in 2021 |
Fixed Broadband Services
We face competition in the fixed broadband market from major providers such as XL Home, IconNet, Biznet Home, and MyRepublic, with XL Home leading in customer base. The industry is witnessing strategic acquisitions targeting subscriber growth, including IOH's acquisition of MNC Play and XL Axiata's purchase of PT Link Net Tbk, as operators strive for service convergence and new growth engines. Despite increased competition since 2019 and market entry by PT Perusahaan Listrik Negara's subsidiary, IconNet, which leverages wide coverage beyond Java, Telkomsel aims to capture demand by offering high-speed, quality broadband services.
Data Centers
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Companies such as Equinix/NTT Communication, EDGE Connex, Biznet, DCI Indonesia, Elitery, Nexcenter/CBN Nusantara, Pure DC, BDx/IOH provide data center solutions in Indonesia and compete with us. In the Asia Pacific region, our subsidiary, Telin, competes with other major data center providers in Singapore and Hong Kong. We are committed to providing the highest quality of data center solutions to our customers in Indonesia and Asia Pacific. Supported by our proprietary self-owned submarine cable network, our comprehensive co-location services are designed to be flexible, modular, seamless, and scalable in order to meet our customers' business needs.
International Direct Dialing (IDD)
We compete in traditional IDD services (non-VoIP) in Indonesia, primarily with IOH. However, due to the development of digital technology, our IDD services also face competition from VoIP and other OTT voice services such as Telegram, FaceTime (iPhone) and WhatsApp. The presence of these OTT services has affected the use of legacy services, which has resulted in decreasing traffic in recent years.
Voice over Internet Protocol (VoIP)
We have operated our voice service through VoIP technology since 2002. VoIP uses data communications to transfer voice traffic over the internet, which usually provides substantial cost savings to subscribers. Several other companies, including XL Axiata, IOH, PT Atlasat Solusindo, PT Gaharu Sejahtera, PT Telindo Nusantara, PT Quiros Networks, PT Aktif Tengah Malam, PT Jasnita Telekomindo and PT IP Telecom Multimedia Indonesia also provide licensed VoIP services in Indonesia.
Satellite
The Asia Pacific region particularly Southeast Asia, requires satellites on an ongoing basis for telecommunications and broadcasting infrastructure due to the region’s archipelagic nature. The technological capabilities provided by satellites include cellular backhaul, broadband backhaul, enterprise network, military network, government network, video distribution, video contribution, DTH TV, communication on aviation, maritime, mining, plantation, and for disaster recovery scenario, as well as other satellite-based services.
We compete with several other satellite operators with satellites covering Southeast Asia and South Asia, and several operators are in the process of developing satellites with coverage over these regions. Our Telkom-3S satellite began operating in April 2017 and the Telkom-4 (Merah Putih) satellite began operating in September 2018. Our Telkom-3S satellite operates at orbital slot 118 E and our Telkom-4 (Merah Putih) satellite operates at orbital slot 108 E. By early-2024, we expect to launch a high-throughput satellite using C-band and Ku-band frequencies with 32 Gbps total capacity at orbital slot 113 E.
Tower
Within the tower market, we face competition from several other companies, including PT Tower Bersama Infrastructure Tbk, PT Profesional Telekomunikasi Indonesia, and PT Solusi Tunas Pratama Tbk.
From 2018 to 2023, the tower market in Indonesia has seen reduced demand due to industry consolidation and spectrum reallocation within the mobile sector. However, in the past three years, there has been significant activity within the Indonesian mobile and tower sectors, characterized by mergers and acquisitions. MNOs are strategically divesting tower assets to generate capital for network expansion and to enhance service delivery.
Following the IOH merger, despite network optimizations in 2022, the requirement for new tower infrastructure persists, underpinned by continued profitability among mobile operators and the need to extend coverage, particularly outside of Java where market opportunity is substantial. Additionally, investments in complementary services like fiber connectivity for improved mobile services have spurred tower market growth.
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In addition to our 5G deployment and the adoption of newer network technologies in anticipation of future demand for services, we are transitioning our tower business towards fiber optic solutions, aligning with global shifts of tower companies evolving into comprehensive infrastructure providers. We have already initiated this transformation and aim to reinforce our tower operations to support Indonesia's 5G infrastructure development.
As of December 31, 2023, we had approximately 43,047 towers, including 38,014 towers owned by Mitratel, 477 towers owned by Telkom and approximately 4,556 towers owned by Telkomsel.
Legal Basis and Regulation
The regulatory framework for the Indonesian telecommunications industry comprises specific laws, Government regulations, ministerial regulations and ministerial decrees enacted and issued from time to time.
Telecommunications Law
The Indonesian telecommunications sector is primarily governed by the Telecommunications Law, which became effective on September 8, 2000. This law established guidelines for industry reforms, encompassing industry liberalization, the facilitation of new entrants, and enhanced transparency and competition across various business activities.
The Telecommunications Law eliminated the concept of "organizing entities" thereby ending our and Indosat's responsibility for coordinating domestic and international telecommunications services, respectively. To enhance competition, the Telecommunications Law prohibits monopolistic practices and unfair competition among telecommunications operators, aiming to pave the way for market liberalization.
The Telecommunications Law was implemented through several Government Regulations, Ministerial Regulations and Ministerial Decrees. Key regulations include:
· | Law No. 36 of 1999 on Telecommunications, as partially amended by the Job Creation Law 2023; |
· | Law No. 27 of 2022 on Personal Data Protection; |
· | Government Regulation No. 52 of 2000 on Telecommunication Operations, as partially revoked by Government Regulation No. 46 of 2021 on Post, Telecommunications and Broadcasting; |
| ● | Government Regulation No. 53 of 2000 on the Use of Radio Frequency Spectrum and Satellite Orbit, as partially revoked by Government Regulation No. 46 of 2021 on Post, Telecommunications and Broadcasting; |
· | MoCI Regulation No. 01/PER/M.KOMINFO/01/2010 on Telecommunications Network Operations as partially revoked by MoCI Regulation No. 5 of 2021 on Telecommunications Operation; |
· | MoCI Regulation No. 20 of 2016 on Data Protection on Electronic System; |
· | MoCI Regulation No. 13 of 2019 on Telecommunications Services Operation, as last amended by MoCI Regulation No. 14 of 2021 on the Third Amendment to MoCI Regulation No. 13 of 2019 on Telecommunications Services Operation; |
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· | MoCI Regulation No. 14 of 2018 on the Fundamental Technical Plan of National Telecommunications; and |
· | MoCI Regulation No. 11 of 2022 on Governance of Implementation of Electronic Certification. |
Telecommunications Regulators
The authority to regulate the telecommunications industry is held by MoCI. Pursuant to authorities assigned to it under the Telecommunications Law, MoCI establishes policies, regulates, supervises, and controls the telecommunications industry in Indonesia. MoCI comprises several directorate generals, each authorized to set policies, supervise, evaluate, and report on various derivative aspects of telecommunications industry in Indonesia. Specifically, the DGPIO oversees the postal and telecommunications sectors in Indonesia, including with respect to licensing, numbering, interconnection, USO and business competition. Additionally, the Directorate General of Post and Informatics Resources and Equipment of MoCI is responsible for regulating matters related to radio frequency spectrum and standardization of telecommunications equipment in Indonesia.
Classification and Licensing of Telecommunications Providers
The Telecommunications Law organized telecommunications services into following three categories: (i) provision of telecommunications networks, (ii) provision of telecommunications services, and (iii) provision of special telecommunications services.
Licenses issued by MoCI are required for each category of telecommunications services. MoCI Regulation No. 13 of 2019 on Telecommunications Services Operation, as last amended by MoCI Regulation No. 14 of 2021 on the Third Amendment to MoCI Regulation No. 13 of 2019 on Telecommunication Services Operations (“MoCI Regulation No. 13/2019, as amended”) regulates all telecommunications services and requires a permit issued by MoCI for the provision of such services by any person.
Since 2018, MoCI has transferred a significant portion of its licensing responsibilities to the Online Single Submission (“OSS”) through the enactment of Government Regulation No. 24 of 2018 on Electronic Integrated Business Licensing Services (“GR No. 24/2018”). Consequently, the OSS oversees the administration and issuance processes for the majority of telecommunications business licenses. Designed as an online platform, OSS aims to expedite and simplify the acquisition of business licenses, making it accessible at any time, from any location, for businesses across Indonesia.
GR No. 24/2018 also introduces a mandate for any existing or newly established business in Indonesia to obtain a Business Identification Number (Nomor Induk Berusaha or “NIB”) through OSS registration. This NIB serves as a substitute for various other licenses and permits, including customs duties access rights. The NIB is obligatory for businesses seeking to (i) apply for new business licenses and/or commercial or operational licenses, or (ii) extend or modify existing business licenses and/or commercial or operational licenses.
Cellular
Cellular telephone service is provided in Indonesia on radio frequency spectrum in the 1.8 GHz (neutral technology), 2.1 GHz (neutral technology), 900 MHz (neutral technology) and 2.3 GHz (BWA/TDD). The MoCI regulates the use and allocation of radio frequency spectrum for mobile cellular networks. Telkomsel has obtained frequency allocation for cellular services in the 800 MHz, 900 MHz, 1.8 GHz, 2.1 GHz, and 2.3 GHz frequency bands. The allocation of frequency is regulated by:
· | MoCI Decree No. 549 of 2019 (on the determination of Radio Frequency Bands as a Result of Rearrangement of Radio Frequency Bands of 800 MHz and 900 MHz for the Implementation of Cellular Mobile Networks); |
· | MoCI Decree No. 1164 of 2015 (on the Stipulation of the Use of the 1800 MHz Radio Frequency Band in the 1762.5 - 1785 MHz Radio Frequency Range Paired with 1857.5 - 1880 MHz for PT Telekomunikasi Selular); |
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· | MoCI Decree No. 620 of 2020 (on the Correct Amount and Payment Due Date for Radio Frequency Spectrum Usage Fees in the Tenth Year for Radio Frequency Band Licensing for the Operation of Cellular Mobile Networks on the 800 MHz, 900 MHz and 1800 MHz Radio Frequency Bands by PT Telekomunikasi Selular); |
· | MoCI Decree No. 356 of 2018 (on the Determination of Radio Frequency Bands Resulting from the Refarming of 2.1 GHz Radio Frequency Bands for the Implementation of Cellular Mobile Networks); |
· | MoCI Decree No. 806 of 2019 (on the Extension of the Determination of the 2.1 GHz Radio Frequency Band in the 1935 - 1940 MHz Range paired with 2125 - 2130 MHz Range of PT Telekomunikasi Selular); and |
· | MoCI Decree No. 1896 of 2017 (on the Establishment of PT Telekomunikasi Selular as the Winner of 2.3 GHz Radio Frequency Band User Selection in 2017 for the Implementation of Cellular Mobile Networks). |
Interconnection
The Telecommunications Law expressly prohibits monopolistic practices and mandates network providers to facilitate user access across networks on the basis of mutual interconnection agreements. In accordance with GR No. 52/2000, as amended, interconnection fees must be transparent, equitable, and based on mutual consent.
On March 31, 2021, MoCI released MoCI Regulation No. 5/2021 which requires that basic telephony service network operators provide interconnection transparently and without discrimination. This regulation enforces that agreements regarding service levels must uphold the quality standards for operation of telecommunications services established by the Director General of Telecommunications to ensure healthy business competition, maintain service performance, and protect consumer interests. Such operators must also be ready to implement such IP-based interconnections following pursuant to mutual agreements without altering the existing fee determination process. Under this regulation, any adjustments to the Reference Interconnection Offer ("RIO") must be submitted to MoCI.
Further, MoCI Regulation No. 5/2021 empowers the DGPIO to evaluate RIOs from operators with a dominant market position, defined as telecommunications network operators that control 50% or more of the total revenue of all telecommunications network operators of basic telephony services.
MoCI Regulation No. 5/2021 also sets a transition timeline for interconnection services to move from TDM-based to IP-based interconnection services, between July 1, 2021, and December 31, 2024, with the expectation that all interconnection services will utilize IP technology by 2025.
VoIP
In January 2007, the Government implemented interconnection regulations and a five-digit access code system for VoIP services pursuant to MoCI Decree No. 06/P/M.KOMINFO/5/2005 ("MoCI Decree No. 6/2005"). Under MoCI Decree No. 6/2005, the prefix for VoIP, which was originally 01X, was changed to 010XY. On April 27, 2011, MoCI issued Regulation No. 14/PER/M.KOMINFO/04/2011, as partially revoked by MoCI Regulation No. 11/2014 and MoCI Regulation No. 7/2018, as amended, which imposed quality control standards in relation to VoIP services on VoIP providers and this became effective three months thereafter, to which we and other operators must adhere.
IPTV
In Indonesia, the IPTV business is regulated by MoCI Regulation No. 13/2019, as amended. GR No. 52/2005, as amended, provides that subscription-based broadcasting can be conducted using satellites, cables, and terrestrial transmitters. Broadcasting using satellite can have a nationwide range, while cables and terrestrial transmitters can only cover a particular region. As stipulated by MoCI Regulation No. 13/2019, IPTV services entail the delivery of television, video, audio, text, and data via an IP network, ensuring quality, security, and reliability, and facilitating interactive communication between the provider and users.
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Satellite
In Indonesia, the use of radio spectrum frequency for satellites is governed by MoCI Regulation No. 21 of 2014 on the Use of Radio Frequency Spectrum for Satellite Service and Satellite Orbit ("MoCI Regulation No. 21/2014"). MoCI Regulation No. 21/2014 requires foreign satellite operators to obtain a landing right license to operate in Indonesia and coordinate with domestic satellite operators, including us, to prevent the operational disruption of Indonesian satellite and terrestrial systems. Additionally, as per GR No. 46/2021, subject to MoCI's approval, spectrum allocations can be re-assigned to different telecommunications operators, outside of the occurrence of a merger or acquisition.
Consumer Protection
Under the Telecommunications Law, each network provider is required to protect consumer rights in relation to, among other things, quality of services, tariffs, and compensation. Customers injured or damaged by negligent operations may file claims against negligent providers. Telecommunications consumer protection regulations provide service standards for telecommunications operators.
USO
All telecommunications operators, whether network or service providers, are required by USO regulation to provide a financial contribution that is used to provide facilities and infrastructure for telecommunications access to certain underserved and undeveloped regions and citizens in Indonesia. MoCI regulations require, among other things, that when selecting a provider of telecommunications access and services in rural areas (as part of the Government's USO program), the selection process is conducted by the Rural Telecommunications and Informatics Center (Balai Telekomunikasi dan Informatika Pedesaan or "BTIP"). Subsequent regulations renamed BTIP the Telecommunications and Information Accessibility Agency (Badan Aksesibilitas Telekomunikasi dan Informasi or "BAKTI").
USO payment requirements are calculated as a percentage of our and Telkomsel's unconsolidated gross revenues, net of bad debts and/or interconnection charges and/or connection charges. The USO tariff rate as of the date hereof is 1.25% of gross revenue (excluding certain revenues), net of bad debts and/or interconnection charges and/or connection charges.
Regulatory Charges
The Government collects several non-tax state revenues from telecommunications providers. For Government spectrum auctions, the Government collects both an upfront fee (equal to twice the offering price submitted by each of the winning bidders) as well as an annual license fee for telecommunications operations (equal to the lowest offering price submitted by all winning bidders). MoCI also collects regular payments from telecommunications operators that are calculated based on gross revenues while deducting both certain receivables that have been written off as well as interconnection fees.
Further, telecommunications equipment and devices are subject to a certification fee. Telecommunications equipment and devices that are used for research, development, or and disaster response are exempted for an initial period and subsequently only subject to half the commercial certification fee. Telecommunications equipment and devices with local content in excess of 50% are also charged half the certification fee plus a testing fee.
Telecommunications Towers
Operating telecommunications towers involves a number of relevant Government bodies. On March 30, 2009, the Ministry of Home Affairs Regulation No. 18/2009, Ministry of Public Works Regulation No. 07/PRT/M/2009, MoCI Regulation No. 19/PER.M.KOMINFO/03/2009 and Head of the Investment Coordinating Board Regulation No. 3/P/2009 (on Guidelines For The Construction And Shared Use Of Telecommunications Towers) (together, the "Tower Construction Joint Decree") were promulgated with the intention of creating a joint system of regulation of telecommunications towers to be implemented by various Government bodies.
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Based on the Tower Construction Joint Decree, the construction of telecommunications towers requires construction permits from the relevant Governmental authorities. The Tower Construction Joint Decree also stipulates that the construction of telecommunications towers must observe the zoning and spatial planning applicable in the relevant regions of Indonesia. The Tower Construction Joint Decree states that the license for telecommunications tower construction is to be issued by regents or mayors, and for Jakarta Province, its Governor. The Tower Construction Joint Decree also provides for tower construction standards and requires that telecommunications towers be made generally available for shared use by telecommunications service providers. The owner of a telecommunications tower is allowed to collect a fee, which is determined by reference to investment and operational costs, return on investment and profits earned. Monopolistic practices in the ownership and management of telecommunications towers are prohibited. The Tower Construction Joint Decree stipulates that telecommunications providers that own telecommunications towers and other tower owners are obligated to allow other telecommunications operators to utilize their telecommunications towers without discrimination, with due regards to the technical capacity of the respective tower.
Under GR No. 46/2021, a telecommunications service provider who owns passive telecommunications infrastructure (including telecommunications towers) has to grant access to such infrastructure to other telecommunications providers. GR No. 46/2021 states that such use of passive telecommunications infrastructure must be based on cooperation and mutual agreement between the parties involved in a fair, reasonable, and non-discriminative manner. The terms and conditions of any such cooperation agreement to be entered into by telecommunications operators still remain to be seen, pending the issuance of further guidelines by MoCI (if any).
Content Provider Service
Content provider service is regulated by MoCI in accordance with MoCI Regulation No. 13/2019, as amended.
C. ORGANIZATIONAL STRUCTURE
We employ a strategic control framework for the management of our Group, which we believe grants productive flexibility to our subsidiaries based on their business needs and characteristics. Our corporate office outlines the overall corporate strategy, and then delegates the implementation of such strategy to each CFU and Regional Business Unit accordingly. This structure, centered around customer segmentation and geography, allows us to manage emerging business challenges while aligning our operations with our diverse business portfolios. We have five CFUs, with each unit overseeing subsidiary operations within specific customer segments:
· | Our mobile CFU is responsible for managing relationships with mobile customers. |
· | Our consumer CFU is responsible for managing relationships with consumer customers. |
· | Our enterprise CFU is responsible for managing relationships with SMEs, Government institutions, and other enterprise customers. |
· | Our wholesale and international business CFU is responsible for managing relationships with wholesale customers and other licensed telecommunication operators. |
· | Our digital services CFU is responsible for supporting digital services for all of our customers. |
In addition, we have four functional units which perform certain specified internal corporate functions. Our functional units are discussed in greater detail below:
· | Our strategic portfolio functional unit is responsible for creating corporate value through the optimization and harmonization of functional business units and corporate management, realize synergies within each CFU and subsidiary, maximize cross-CFU and subsidiary synergies, optimize synergies among SOEs, and engage in merger and acquisition planning and execution. |
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· | Our network and IT solutions functional unit is responsible for promoting integrated network and IT infrastructure across our CFUs and subsidiaries. |
· | Our finance and risk management functional unit is responsible for our implementation cost and capital efficiency program, maximizing the value of our assets, and managing the overall risk of the Group. |
· | Our human capital management functional unit is responsible for talent management upgrading human resources capabilities; organizational structure and workforce planning, design, and implementation; industrial relations; training; human capital assessment and community development. |
| ● | Our group business development functional unit is responsible for driving business growth including implementing implementing our holding scheme strategy, functional strategy, and business development to improve the interrelation between parent and Group Business Development operations. |
For a list of our subsidiaries and their countries of incorporation, see Exhibit 8.1 to this Form 20-F. A complete list of our subsidiaries and investments in associated companies, and our ownership percentage of each entity, as of December 31, 2023, is contained in Notes [1d] and [11] to our Consolidated Financial Statements included elsewhere in this report.
The following diagram illustrates our current corporate structure of our principal operating entities:
D. PROPERTY, EQUIPMENT AND RIGHT OF USE ASSETS
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Our property and equipment are primarily used for telecommunications operations, which mainly consist of transmission and installation equipment, cable network and in turn consist of (i) switching equipment, (ii) telegraph, telex, and data communication equipment, (iii) transmission installation and equipment, (iv) satellite, earth station, and equipment, (v) cable network, (vi) power supply, (vii) data processing equipment, and (viii) other telecommunication peripherals collectively grouped as 'telecommunication infrastructure'. A description of these is contained in Note 12 to our Consolidated Financial Statements and "— Business Overview — Network Infrastructure and Development." See also "Item 5. Operating and Financial Review and Prospects — Liquidity and Capital Resources — Capital Expenditures" for material plans to construct, expand or improve our property and equipment.
Except for ownership rights granted to individuals in Indonesia, reversionary rights to land rests with the Government, pursuant to Agrarian Law No. 5 of 1960. Land title is designated through land rights, including Right to Build (Hak Guna Bangunan or "HGB") and Right of Use (Hak Guna). Both rights stipulate that title holders enjoy full use of the land for a specified period, subject to renewal and extensions. In most instances, land rights are part of right use of assets, freely tradable and may be placed as security under loan agreements.
We lease several parcels of land located throughout Indonesia together with rights to build and use such land for periods varying from eight to 50 years, which will expire between 2024 and 2071. We hold registered right to build and rights to use for most of our properties. Pursuant to Government Regulation No. 18 of 2021 on Right to Manage, Land Right, Apartment Unit, and Land Registration, the maximum initial period for the right to build is 30 years and is extendable for up to an additional 20 years plus up to another additional period of 30 years. The right to build can further be renewed for an additional period of 30 years. We are not aware of any environmental issues that could affect the utilization of our property and equipment and right of use assets. Please refer to Note 13 to our Consolidated Financial Statements.
All assets owned by our Company have been pledged as collateral for bonds. Please refer to Note 12b to our Consolidated Financial Statements. Certain property and equipment of our subsidiaries with gross carrying value amounting to Rp3,076 billion as of December 31, 2023, have been placed as collateral for loan agreements. Please refer to Notes 19a and 20c to our Consolidated Financial Statements.
Insurance
As of December 31, 2023, our property and equipment (excluding land rights), with net carrying amount of Rp175,519 billion was insured against fire, theft, earthquake and other specified risks, under blanket policies totaling Rp41,045 billion and HK$10 million, and SG$373 million, and first loss basis amounted to Rp2,750 billion. Management believes that the insurance coverage is adequate to cover potential losses from the insured risks.
Additionally, in 2023, we obtained proceeds from an insurance claim on lost and damaged property and equipment, with a total value of Rp199 billion.
Disclosure of Iranian Activities under Section 13(r) of the Exchange Act
Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012 added Section 13(r) to the Exchange Act. Section 13(r) requires an issuer to disclose in its annual or quarterly reports, as applicable, whether it or any of its affiliates knowingly engaged in certain activities, transactions or dealings relating to Iran or with designated natural persons or entities involved in terrorism or the proliferation of weapons of mass destruction. Disclosure is required even where the activities, transactions or dealings are conducted outside the United States by non-United States affiliates in compliance with applicable law, and whether or not the activities are sanctionable under U.S. law.
As of the date of this report, we are not aware of any activity, transaction or dealing by us or any of our affiliates in 2023 that requires disclosure in this report under Section 13(r) of the Exchange Act, except as set forth below.
Telkomsel, our subsidiary, is party to international roaming agreements with Mobile Telecommunication Company of Iran and Irancell Telecommunications Services Company, which are or may be Government-controlled entities. In 2023, we recorded gross revenues of US$442.30 from transactions under these agreements. The amount of our
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net profits earned under these agreements is not determinable, but it does not exceed our gross revenues from these agreements. The purpose of these agreements is to provide Telkomsel's customers with coverage in areas where Telkomsel does not own networks, and for this reason Telkomsel intends to continue the activities covered by these agreements.
We also provide telecommunication services in the ordinary course of business to the Embassy of Iran in Jakarta, Indonesia. We recorded gross revenue of approximately Rp23.33 million from these services in 2023. The amount of our net profits earned under these services is not determinable, but it does not exceed our gross revenues from these services. As one of the primary providers of telecommunication services in Indonesia, we intend to continue providing such services, as we provide to the embassies of many other nations.
ITEM 4A. UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following discussion and analysis should be read in conjunction with our Consolidated Financial Statements included elsewhere in this Form 20-F. These Consolidated Financial Statements were prepared in accordance with IFRS as issued by the IASB.
A discussion of the changes in our financial condition and results of operations for the fiscal years ended December 31, 2022 and 2021 has been omitted from this Form 20-F, but may be found in "Item 5. Operating and Financial Review", of the Telkom 2021 annual report on Form 20-F for the year ended December 31, 2022, filed with the SEC on April 6, 2023, which is available free of charge on the SEC’s website at www.sec.gov and our website at www.telkom.co.id.
KAP Purwantono, Sungkoro & Surja (a member firm of Ernst & Young Global Limited) audited our Consolidated Financial Statements, prepared as of December 31, 2022 and 2023 and our Consolidated Statement of Profit or Loss and Other Comprehensive Income for the years ended December 31, 2021, 2022, and 2023.
The Consolidated Financial Statements are stated in Indonesian Rupiah. The conversion of Indonesian Rupiah amounts into U.S. Dollars are included solely for the convenience of readers and have been made using the middle exchange rate for the Indonesian Rupiah ("Rp") against the U.S. Dollar ("US$") published by Reuters Refinitiv on December 31, 2023, which was Rp15,398.5 to US$1.00.
| A. | OPERATING RESULTS |
Overview
We are the principal provider of local, domestic and international telecommunications services in Indonesia, as well as the leading provider of mobile cellular services through our majority-owned subsidiary, Telkomsel. Our objective is to become the preferred digital telecommunications company in the region. As of December 31, 2023, we had approximately 159.3 million mobile cellular subscribers through Telkomsel and 137.2 million broadband subscribers (consisting of 127.1 million mobile broadband subscribers and 10.1 million fixed broadband IndiHome subscribers). We also provide a wide range of other communication services, including telephone network, interconnection services, multimedia, data and internet communication-related services, satellite transponder leasing, leased line, intelligent network and related services, cable television and VoIP services. We also operate multimedia businesses such as content and applications. We intend to continue to cope with market and industry challenges that may arise from time to time by leveraging our customer base, network quality, brand name and strategic execution capabilities.
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Indonesia's GDP grew by 5.31% in 2022 and in 2023, it grew by 5.05%, according to government data. Meanwhile, inflation decreased from 5.51% in 2022 before decreasing to an average of 2.61% in 2023, according to the Indonesian Central Bureau of Statistics. Decrease in the inflation rate was due to hawkish monetary policy or macroeconomic factors to prevent an erosion of real income for consumers, which in turn may affect our consumer segment. Overall, the decrease in inflation did not materially affect us in 2023. In 2023, according to data from Reuters Refinitiv, the Rupiah appreciated to Rp15,395 to US$1.00 on November 29, 2023, due to, among other factors, the slowing global economy and weakened U.S. Dollar. Though the exposure of our Company and our subsidiaries to foreign exchange rates is not material, we are exposed to foreign exchange risk on sales, purchases and borrowings that are primarily denominated in U.S. Dollars.
See "Item 11. Quantitative and Qualitative Disclosure about Market Risk — Foreign Exchange Rate Risk."
The growth in our revenues in 2023 compared with 2022 was largely driven by increases in data, internet, and information technology service revenue which increased by 5.1%.
Our operating results in 2023 compared with 2022 also reflected a decrease in expenses. This decrease was mainly driven by decreased marketing expenses and depreciation and amortization expenses as the result of the IndiHome integration. See also "Item 5. Operating and Financial Review and Prospects — Liquidity and Capital Resources — Capital Expenditures" for more information on our capital expenditures.
Key Performance Indicators
We use certain key performance indicators to monitor and manage our business. We use these indicators to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans, and make strategic decisions. We believe these indicators provide useful information to investors in understanding and evaluating our operating results in the same manner we do. The key indicators that we use to evaluate the performance of our business are set forth below:
Number of Fixed Broadband B2C Subscribers
We track the number of our home broadband subscribers (e.g., our IndiHome B2C subscribers) as an indicator of our competitiveness and ability to capture increased or new revenue streams in the future, as we expect an increase in the use of broadband internet at home, a further diversification of digital services offered to customers, and the development and continuation of megatrends that favor an increase in the consumption of digital services.
Number of Mobile Broadband Subscribers
We track the number of our mobile cellular subscribers (through Telkomsel) as an indicator of competitiveness and the ability to capture growth opportunities generated by increased consumption of internet data and digital services on cellular phones.
Number of BTS
We track the number of our BTS as an indicator of the strength and the competitiveness of our network. It is also an indicator of our ability to capture growth opportunities.
Operating Profit
Operating profit is equal to total revenues, primarily comprising legacy revenues, broadband revenues, digital service revenues, and IndiHome B2C revenues, and total expenses, mainly comprising operation, maintenance, and telecommunications service expenses, depreciation and amortization expenses, personnel expenses, marketing expenses, general and administrative expenses, interconnection expenses, and other expenses. Changes in those line-items have a direct impact on our operating profit and depend on a variety of factors, as further discussed below under "— Principal Factors Affecting our Financial Condition and Results of Operations."
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Profit for the Year
Profit for the year is equal to operating profit minus finance costs, plus finance income, share of loss of long-term investment in associates, minus income tax and impairment of long-term investments in associated companies.
Principal Factors Affecting our Financial Condition and Results of Operations
Increase in Utilization of Data, Internet, and Information Technology Services
In Indonesia, mobile phones have become the primary tool for telecommunication, both for voice calls as well as in terms of internet usage. The growing popularity of smartphones has contributed to the growth of traffic in 2023. As a result, annual ARPU increased by approximately Rp3,300 from approximately Rp44,200 in 2022 to approximately Rp47,500 in 2023. This increase in annual ARPU was mainly due to increases in the number of products acquired by customers thanks to our upselling and cross-selling initiatives, and existing customers' adoption of premium products and packages.
The share of our revenue generated by digital business revenues has been increasing in the last few years and accounted for 76.7% of Telkomsel revenues for 2023. A key driver of this trend is increases in the number of products acquired by customers thanks to our upselling and cross-selling initiatives, while also focusing on retaining customers or maintaining customer loyalty through a customer-centric approach. Our customer-centric approach focused on catering to our customers' needs with effective and efficient products and services. Telkomsel achieved this through improving consumer analytics and micro-segmentation to improve product offerings.
We expect that revenue from cellular data and internet will continue to increase and contribute to a larger portion of our consolidated revenues in line with an expected continued increase in the prevalence of smartphone usage in Indonesia. We also intend to increase such revenues by focusing our marketing efforts to encourage customers who only utilize mobile voice and SMS services to commence utilizing mobile broadband services. We also intend to continue our promotion of mobile package options in order to encourage existing mobile broadband services customers to increase their usage. In addition, we believe there is opportunity for growth in non-cellular internet, data communication and internet technology revenue, particularly by accelerating the adoption of broadband internet in homes in Indonesia through our IndiHome service, as penetration of broadband internet at homes in Indonesia is still relatively low.
Increase in revenue generated by IndiHome B2C
Since launching in 2015, the number of IndiHome B2C subscribers has increased significantly. The number of IndiHome B2C subscribers reached 8.7 million in 2023. This increase drove an increase in revenue generated by IndiHome B2C subscriptions. Telkomsel successfully accelerated the acquisition of new customers for IndiHome B2C within the second half of 2023, amounting to 0.4 million new subscribers. The rate of acquisition of new customers was higher after theintegration of IndiHome B2C into Telkomsel than before completion of such integration.
We believe there is opportunity for further growth in revenue to be generated by IndiHome, particularly due to an increase in the use of broadband internet at home in Indonesia, as penetration of broadband internet at home in Indonesia is still relatively low. We seek to continue to increase such revenue as we continue to invest in improving our broadband infrastructure. We also continue to have sales events to encourage customers to buy various additional services, such as speed upgrades, additional set-top boxes, minipack add-ons, add-on games, and OTT services. Post integration, IndiHome services are expected to further strengthen Telkomsel's position in the telecommunications and digital industry in Indonesia by ensuring continuity of our service and value creation. This should also allow us to seize new sales opportunities through cross-selling and up-selling initiatives.
Declining Legacy Cellular Telephone Revenues
The rapid development of new technologies, new services and products, and new business models has resulted in distinctions between local, long-distance, wireless, cable and internet communication services being lessened and has brought new competitors into the telecommunications market. Traditional cellular services, such as voice and SMS
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services, are subject to increasing competition from non-traditional telecommunications services, such as OTT products including instant voice, messaging services and other mobile services. As a result, our cellular telephone revenues, which comprise usage charges and monthly subscription charges for mobile voice and SMS services, flattened in recent years, and since 2017 began to decline. We expect that such revenues will continue to decline in the future. Our cellular telephone revenues decreased by 32.0% from Rp12,052 billion in 2022 to Rp8,194 billion in 2023. In addition, we also expect that the contribution of revenues from cellular phone services to our consolidated revenues will continue to decrease in the future, as we expect that the contribution from the digital business will continue to grow and comprise a greater percentage of our consolidated revenues in the future. Our revenues from cellular phone services accounted for 5.5% of our consolidated revenues for 2023 compared to 8.2% for 2022. See "Item 3. Key Information — Risk Factors — Risks Related to Our Business — Risks Related to our Fixed and Cellular Telecommunications Business."
Variations in operation and maintenance expenses
Our operation and maintenance expenses primarily comprise expenses associated with network maintenance to improve our mobile cellular and fixed broadband services. In 2023, our operation and maintenance expenses increased compared to 2022. We expect that our operation and maintenance expenses will remain relatively stable or increase slightly in the future in line with our expected growth in subscribers and traffic as well as the investments that we intend to make to continue developing our network infrastructure, particularly for internet and data service, in order to increase in our network capacities to better serve our customers. Our operation and maintenance expenses increased by 1.4%, from Rp22,746 billion in 2022 to Rp23,057 billion in 2023. In Telkomsel, there is an impact of IndiHome integration which is mainly due to the adoption of a new wholesale agreement. This agreement enables Telkomsel to get optimal access to Telkom’s wide infrastructure to strengthen the digital ecosystem by providing reliable and widespread digital connectivity nationwide. In addition, we expect that the IndiHome Integration will allow for cost optimization and efficiency along with an increase in productivity and improvement in the economies of scale, taking advantage of our large traffic share and potential users.
The telecommunications industry is characterized by rapid and significant changes in technology. Our technology can become obsolete faster than expected. We also need to acquire new technologies necessary to compete under rapidly evolving circumstances on commercially acceptable terms. See Note 12 to our Consolidated Financial Statements.
We expect depreciation and amortization expenses will increase in the future due to the development of our network for improving broadband services we provide for both mobile and fixed broadband.
Telkom's Consolidated Statements of Profit or Loss and Other Comprehensive Income
The following table sets out our Consolidated Statements of Profit or Loss and Other Comprehensive Income for the Years ended December 31, 2021, 2022 and 2023. Each item is expressed as a percentage of total revenues or expenses.
2021 | 2022 | 2023 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(Rp billion) | % | (Rp billion) | % | (Rp billion) | % | (US$ million) | |||||||
REVENUES | |||||||||||||
Telephone revenues | |||||||||||||
Cellular | 14,737 | 10.3 | 12,052 | 8.2 | 8,194 | 5.5 | 532 | ||||||
Fixed line | 1,730 | 1.2 | 1,536 | 1.0 | 899 | 0.6 | 59 | ||||||
Total telephone revenues | 16,467 | 11.5 | 13,588 | 9.2 | 9,093 | 6.1 | 591 | ||||||
Interconnection revenues | 7,787 | 5.4 | 8,472 | 5.8 | 9,067 | 6.1 | 589 | ||||||
Data, internet, and information technology service revenues | |||||||||||||
Cellular data and internet | 64,500 | 45.0 | 69,006 | 46.8 | 73,187 | 49.0 | 4,753 | ||||||
Internet, data communication, and information technology services | 10,272 | 7.2 | 10,286 | 7.0 | 10,899 | 7.3 | 708 | ||||||
Short Messaging Service ("SMS") | 4,754 | 3.3 | 4,309 | 2.9 | 3,380 | 2.3 | 219 | ||||||
Others | 2,698 | 1.9 | 2,809 | 1.9 | 3,354 | 2.2 | 218 | ||||||
Total data, internet, and information technology service revenues | 82,224 | 57.4 | 86,410 | 58.7 | 90,820 | 60.8 | 5,898 | ||||||
Network revenues | 1,880 | 1.3 | 2,378 | 1.6 | 2,482 | 1.7 | 161 | ||||||
IndiHome revenues | 26,325 | 18.4 | 28,020 | 19.0 | 28,785 | 19.3 | 1,869 | ||||||
Other services | |||||||||||||
Call center service | 1,081 | 0.8 | 1,164 | 0.8 | 1,264 | 0.8 | 82 | ||||||
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2021 | 2022 | 2023 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(Rp billion) | % | (Rp billion) | % | (Rp billion) | % | (US$ million) | |||||||
Manage service and terminal | 2,048 | 1.4 | 1,157 | 0.8 | 920 | 0.6 | 60 | ||||||
E-health | 640 | 0.4 | 729 | 0.5 | 761 | 0.5 | 49 | ||||||
E-payment | 487 | 0.3 | 474 | 0.3 | 496 | 0.3 | 32 | ||||||
Others | 1,859 | 1.3 | 2,310 | 1.6 | 2,742 | 1.8 | 178 | ||||||
Total other services | 6,115 | 4.3 | 5,834 | 4.0 | 6,183 | 4.1 | 401 | ||||||
Total revenues from contract with customer | 140,798 | 98.3 | 144,702 | 98.2 | 146,430 | 98.1 | 9,509 | ||||||
Revenues from lessor transaction | 2,412 | 1.7 | 2,604 | 1.8 | 2,786 | 1.9 | 181 | ||||||
Total revenues | 143,210 | 100.0 | 147,306 | 100.0 | 149,216 | 100.0 | 9,690 | ||||||
EXPENSES | |||||||||||||
Operation, maintenance, and telecommunications service expenses | |||||||||||||
Operation and maintenance | 21,467 | 22.4 | 22,746 | 21.1 | 23,057 | 22.0 | 1,497 | ||||||
Radio frequency usage charges | 6,097 | 6.4 | 6,510 | 6.0 | 7,412 | 7.0 | 481 | ||||||
Leased lines and CPE | 5,003 | 5.2 | 3,530 | 3.3 | 3,462 | 3.4 | 225 | ||||||
Concession fees and USO charges | 2,472 | 2.6 | 2,601 | 2.4 | 2,836 | 2.7 | 184 | ||||||
Electricity, gas, and water | 898 | 0.9 | 904 | 0.8 | 877 | 0.8 | 57 | ||||||
Cost of SIM cards, vouchers, and peripherals | 739 | 0.8 | 747 | 0.7 | 797 | 0.8 | 52 | ||||||
Project Management | 519 | 0.5 | 400 | 0.4 | 489 | 0.5 | 32 | ||||||
Vehicles rental and supporting facilities | 305 | 0.3 | 343 | 0.3 | 308 | 0.3 | 20 | ||||||
Insurance | 432 | 0.5 | 230 | 0.2 | 269 | 0.3 | 17 | ||||||
Others | 201 | 0.2 | 173 | 0.2 | 211 | 0.2 | 14 | ||||||
Total operation, maintenance, and telecommunications service expenses | 38,133 | 39.8 | 38,184 | 35.4 | 39,718 | 37.9 | 2,579 | ||||||
Depreciation and amortization | 31,714 | 33.2 | 33,129 | 30.8 | 32,569 | 31.1 | 2,115 | ||||||
Personnel expenses | |||||||||||||
Salaries and related benefits | 8,661 | 9.1 | 9,360 | 8.7 | 9,674 | 9.2 | 628 | ||||||
Vacation pay, incentives, and other benefits | 4,999 | 5.2 | 3,835 | 3.6 | 4,159 | 4.0 | 270 | ||||||
Periodic pension benefit cost | 1,137 | 1.2 | 1,268 | 1.2 | 1,319 | 1.3 | 86 | ||||||
LSA expense | 153 | 0.2 | 92 | 0.1 | 289 | 0.3 | 19 | ||||||
Obligation under the Labor Law | 254 | 0.3 | 78 | 0.1 | 217 | 0.2 | 14 | ||||||
Net periodic post-employment health care benefit cost | 263 | 0.3 | 213 | 0.2 | 205 | 0.2 | 13 | ||||||
Other post-employment benefit cost | 23 | 0.0 | 25 | 0.0 | 22 | 0.0 | 1 | ||||||
Long service employee benefit cost | 3 | 0.0 | 1 | 0.0 | 1 | 0.0 | 0 | ||||||
Others | 31 | 0.0 | 35 | 0.0 | 41 | 0.0 | 3 | ||||||
Total personnel expenses | 15,524 | 16.3 | 14,907 | 13.8 | 15,927 | 15.2 | 1,034 | ||||||
Marketing expenses | 3,633 | 3.8 | 3,929 | 3.6 | 3,530 | 3.4 | 229 | ||||||
General and administrative expenses | |||||||||||||
General expenses | 2,043 | 2.1 | 2,259 | 2.1 | 2,446 | 2.3 | 159 | ||||||
Professional fees | 789 | 0.8 | 1,097 | 1.0 | 996 | 1.0 | 65 | ||||||
Allowance for expected credit losses | 474 | 0.5 | 567 | 0.5 | 513 | 0.5 | 33 | ||||||
Training, education, and recruitment | 284 | 0.3 | 371 | 0.3 | 461 | 0.4 | 30 | ||||||
Travelling | 321 | 0.3 | 421 | 0.4 | 443 | 0.4 | 29 | ||||||
Meeting | 249 | 0.3 | 312 | 0.3 | 334 | 0.3 | 22 | ||||||
Social contribution | 213 | 0.2 | 218 | 0.2 | 232 | 0.2 | 15 | ||||||
Collection expenses | 212 | 0.2 | 173 | 0.2 | 195 | 0.2 | 13 | ||||||
Others | 431 | 0.5 | 436 | 0.4 | 479 | 0.5 | 30 | ||||||
Total general and administrative expenses | 5,016 | 5.2 | 5,854 | 5.4 | 6,099 | 5.8 | 396 | ||||||
Interconnection expenses | 5,181 | 5.4 | 5,440 | 5.1 | 6,363 | 6.1 | 413 | ||||||
Unrealized gain on changes in fair value of investments | 3,432 | 3.6 | (6,438) | (6.0) | (748) | (0.7) | (49) | ||||||
Gains (losses) on foreign exchange - net | 50 | 0.1 | 256 | 0.2 | (36) | (0.0) | (2) | ||||||
Other income - net | 162 | 0.2 | 35 | 0.0 | 259 | 0.2 | 15 | ||||||
Total expenses | 95,635 | 100.0 | 107,677 | 100.0 | 104,730 | 100.0 | 6,802 | ||||||
Operating profit | 47,653 | 39,716 | 44,485 | 2,888 | |||||||||
Finance income | 558 | 878 | 1,061 | 69 | |||||||||
Finance costs | (4,394) | (4,077) | (4,692) | (305) | |||||||||
Share of gain (loss) of long-term investment in associates | (78) | (87) | 1 | 0 | |||||||||
Profit before income tax | 43,739 | 36,430 | 40,855 | 2,652 | |||||||||
Income tax expense | (9,640) | (8,710) | (8,787) | (570) | |||||||||
Profit for the year | 34,099 | 27,720 | 32,068 | 2,082 | |||||||||
Other comprehensive income (losses) - net | 1,980 | 1,767 | (1,454) | (94) | |||||||||
Total comprehensive income for the year | 36,079 | 29,487 | 30,614 | 1,988 | |||||||||
Profit for the year attributable to owners of the parent company | 24,877 | 20,736 | 24,427 | 1,586 | |||||||||
Total comprehensive income for the year attributable to owners of the parent company | 26,884 | 22,449 | 22,949 | 1,490 | |||||||||
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2021 | 2022 | 2023 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(Rp billion) | % | (Rp billion) | % | (Rp billion) | % | (US$ million) | |||||||
Basic earnings per share (in full amount) | |||||||||||||
Profit per share | 251.13 | 209.32 | 246.58 | 0.02 | |||||||||
Profit per ADS (100 Series B Shares per ADS) | 25,112.50 | 20,932.30 | 24,658.24 | 1.60 | |||||||||
Please note that the above table should be read in conjunction with the below discussion on comparability of financial information of and for the financial years ended December 31, 2023, 2022 and 2021. See "— Liquidity and Capital Resources — New Standards and Interpretations."
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Financial Overview
Year ended December 31, 2023, compared to year ended December 31, 2022
Revenues
Total revenues increased by Rp1,910 billion, or 1.3%, from Rp147,306 billion in 2022 to Rp149,216 billion (US$9,690 million) in 2023. This increase was primarily due to an increase in data, internet and information technology service revenues, IndiHome revenues, interconnection revenues, other services, revenues from lessor transaction, and network revenues, but was partially offset by a decrease in cellular telephone revenues and fixed line revenues.
a. Cellular Telephone Revenues
Cellular telephone revenues represented 5.5% of our consolidated revenue in 2023. Cellular telephone revenues decreased by Rp3,858 billion, or 32.0%, from Rp12,052 billion in 2022 to Rp8,194 billion (US$532 million) in 2023. This decrease was primarily due to decrease in usage of voice services as a result of customers increasingly using non-traditional telecommunications services, such as OTT services, as an alternative to voice services.
b. Fixed Line Telephone Revenues
Fixed line telephone revenues decreased by Rp637 billion, or 41.5%, from Rp1,536 billion in 2022 to Rp899 billion (US$58 million) in 2023. This decrease in fixed line telephone revenues was primarily due to a decrease in voice service usage from customers shifting to OTT services, as an alternative to voice services.
c. Interconnection Revenues
Interconnection revenues comprise interconnection revenues from our fixed line network and interconnection revenues from Telkomsel's mobile cellular network, including incoming international long-distance revenues from our IDD service (TIC-007).
Interconnection revenues increased by Rp595 billion, or 7.0%, from Rp8,472 billion in 2022 to Rp9,067 billion (US$589 million) in 2023, primarily due to an increase in voice wholesale traffic between countries and A2P SMS services. The increases in voice wholesale traffic between countries and A2P SMS services were due to increases in demand from customers, growth in the international E-Commerce sector and online services, and the expansion of our international business operations.
d. Data, Internet and Information Technology Service Revenues
Our data, internet, and information technology service revenues accounted for 60.9% of our consolidated revenues in 2023, compared to 58.7% in 2022. Data, internet, and information technology service revenues increased by Rp4,410 billion, or 5.1%, from Rp86,410 billion in 2022 to Rp90,820 billion (US$5,898 million) in 2023. This increase was primarily due to:
| ● | an increase in cellular data and internet revenues by Rp4,181 billion, or 6.1%, from Rp69,006 billion in 2022 to Rp73,187 billion in 2023. This increase was primarily driven by an increase in the number of mobile broadband subscribers from 120.9 million subscribers as of December 31, 2022 to 127.1 million subscribers as of December 31, 2023, and the positive impact on mobile traffic data of changing customers' habits (for instance, increased use of digital services). For additional information on factors driving the growth of our cellular data and internet revenues, see "— Principal Factors Affecting our Financial Condition and Results of Operations — Increase in Data, Internet, and Information Technology Services;” |
| ● | an increase in internet, data communication, and information technology services by Rp613 billion, or 6.0%, from Rp10,286 billion in 2022 to Rp10,899 billion in 2023. This increase was primarily due to customers’ |
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| data usage as they used enriched digital products which require higher bandwidth and wider smartphone penetration in Indonesia; and |
· | an increase in other data and internet revenues by Rp545 billion, or 19.4%, from Rp2,809 billion in 2022 to Rp3,354 billion in 2023, primarily due to an increase in volume of collocation data center and value-added services such as security, consulting and support services and services customized for our customers' specific needs. |
Such increases were partially offset by a decrease in SMS revenues of Rp929 billion, or 21.6%, from Rp4,309 billion in 2022 to Rp3,380 billion in 2023. This decrease was primarily due to increased competition from non-traditional telecommunications services, such as OTT products including instant voice, messaging services, and other mobile services, which decreased demand for SMS.
e. Network Revenues
Network revenues increased by Rp104 billion, or 4.4%, from Rp2,378 billion in 2022 to Rp2,482 billion (US$161 million) in 2023, primarily due to an increase in leased lines and VSAT revenue from the enterprise segment due to higher demand reflecting the overall growth of the Indonesian economy.
f. IndiHome Revenues
IndiHome revenues increased by Rp765 billion, or 2.7%, from Rp28,020 billion in 2022 to Rp28,785 billion (US$1,869 million) in 2023. The increase was primarily due to an increase in the number of fixed broadband subscribers from 9.2 million as of December 31, 2022 to 10.1 million as of December 31, 2023.
g. Other Services
In 2023, revenues from other services increased by Rp349 billion, or 6.0%, from Rp5,834 billion in 2022 to Rp6,183 billion (US$401 million) in 2023. The increase was primarily due to:
| ● | an increase in others revenues by Rp432 billion, or 18.7%, from Rp2,310 billion in 2022 to Rp2,742 billion in 2023 due to higher demand for our other products such as IndiBiz, Enterprise Digital Solution, and services targeted to SMEs through integrated offerings of bundled products and services; |
| ● | an increase in call center services revenue by Rp100 billion, or 8.6%, from Rp1,164 billion in 2022 to Rp1,264 billion in 2023, primarily due to an increase in sales of telecommunication services and supporting facilities services; |
| ● | an increase in e-health revenue by Rp32 billion, or 4.4%, from Rp729 billion in 2022 to Rp761 billion in 2023, primarily due to an increase in enterprise health services sales such as smart platform and ICT services; and |
| ● | an increase in e-payment revenue by Rp22 billion, or 4.6%, from Rp474 billion in 2022 to Rp496 billion in 2023, primarily due to an increase in sales of enterprise payment aggregator services, IoT banking payment devices and platforms. This increase in sale volumes reflected increased demand for e-payment services linked to improving macroeconomic factors and the need for innovation and improved efficiency, particularly for enterprise customers. |
This increase in our revenues from other services was partially offset by a decrease in manage service and terminal revenues by Rp237 billion, or 20.5%, from Rp1,157 billion in 2022 to Rp920 billion in 2023, primarily due to a decrease in manage service revenues from the enterprise segment. This decrease in turn resulted from delays in projects, increased competition, and decrease in Customer Premise Equipment ("CPE") order revenue. The decrease in CPE order revenue is a result of the change in the strategy of our enterprise business, which involved adapting our product mix to increase
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revenue sourced from the sales of services that generate higher margin. As CPE orders generate lower margins, we adapted our product mix accordingly.
h. Revenues from Lessor Transactions
Revenues from lessor transactions increased by Rp182 billion or 7.0% from Rp2,604 billion in 2022 to Rp2,786 billion (US$182 million) in 2023. This increase resulted primarily from increased rental revenues from telecommunication towers, which reflected an increase in the number of tenants.
Expenses
Total expenses decreased by Rp2,947 billion, or 2.7%, from Rp107,677 billion in 2022 to Rp104,730 billion (US$6,800 million) in 2023. This decrease in expenses was attributable primarily to decreases in depreciation and amortization expenses as well as marketing expenses.
a. Operation, Maintenance, and Telecommunications Service Expenses
Operation, maintenance, and telecommunications service expenses increased by Rp1,534 billion, or 4.0%, from Rp38,184 billion in 2022 to Rp39,718 billion (US$2,579 million) in 2023.
This increase in operation, maintenance and telecommunications service expenses was primarily attributable to:
· | an increase in radio frequency usage charges by Rp902 billion, or 13.9%, from Rp6,510 billion in 2022 to Rp7,412 billion in 2023, primarily due to an increase in service usage of data and cellular internet; |
· | an increase in operation and maintenance expenses by Rp311 billion, or 1.4%, from Rp22,746 billion in 2022 to Rp23,057 billion in 2023. This increase was primarily due to an increase in our network maintenance expenses for improving our mobile cellular and IndiHome services; |
· | an increase in concession fees and USO charges by Rp235 billion, or 9.0%, from Rp2,601 billion in 2022 to Rp2,836 billion in 2023, primarily due to an increase in gross revenue from Telkomsel. Increases in gross revenue result in increases in concession fees and USO charges, because concession fees and USO charges are formulated as a percentage of gross revenue; |
| ● | an increase in project management expenses by Rp89 billion, or 22.3%, from Rp400 billion in 2022 to Rp489 billion in 2023, primarily as a result of expenses linked to new selected projects that were initiated in 2023; |
· | an increase in cost of SIM cards, vouchers and peripherals by Rp50 billion, or 6.7%, from Rp747 billion in 2022 to Rp797 billion in 2023, primarily due to an increase in inventory of SIM Cards and prepaid vouchers involving sim cards printing & storage expenses. |
| ● | an increase in insurance expense by Rp39 billion, or 17.0%, from Rp230 billion in 2022 to Rp269 billion in 2023 and an increase in others operation and maintenance expense by Rp38 billion, or 22.0%, from Rp173 billion in 2022 to Rp 211 billion in 2023. This increase reflected the expanded operations and infrastructure that Telkom insured. |
This increase in our operation, maintenance, and telecommunications service expenses was partially offset by:
| ● | a decrease in leased lines and customer premises equipment (such as modems and other equipment that customers keep in their premises) expenses by Rp68 billion, or 1.9%, from Rp3,530 billion in 2022 to Rp3,462 billion in 2023, primarily as a result of the impact of continued implementation of business strategy initiated in 2022. The strategy intended to adapt our product mix to increase the share of our revenue sourced |
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| from bundling of higher margin-generating services; and |
| ● | a decrease in vehicles rental and supporting facilities by Rp35 billion, or 10.2%, from Rp343 billion in 2022 to Rp308 billion in 2023, primarily due to a decrease in our operational mobility as a result of more efficient and sustainable operations. |
b. Depreciation and Amortization
Depreciation and amortization decreased by Rp560 billion, or 1.7%, from Rp33,129 billion in 2022 to Rp32,569 billion (US$2,115 million) in 2023 in line with the integration of our network infrastructure both for our mobile and fixed businesses, whose related assets are subject to depreciation and amortization. This integration involved streamlining operations, consolidating assets and eliminating duplicated resources.
c. Personnel Expenses
Personnel expenses increased by Rp1,020 billion, or 6.8%, from Rp14,907 billion in 2022 to Rp15,927 billion (US$1,034 million) in 2023. This increase was primarily due to:
| ● | an increase in vacation pay, incentives and other benefits to our employees by Rp324 billion, or 8.4%, from Rp3,835 billion in 2022 to Rp4,159 billion in 2023, primarily as a result of an increase in performance-related compensation; |
| ● | an increase in salaries and related benefit by Rp314 billion, or 3.4%, from Rp9,360 billion in 2022 to Rp9,674 billion in 2023, primarily as a result of our policy to increase salaries to offset annual inflation; |
| ● | an increase in long service awards expenses by Rp197 billion, or 214.1%, from Rp92 billion in 2022 to Rp289 billion in 2023, primarily as a result of our employee transfer and mobility program due to the IndiHome integration and related compensation; and |
· | an increase in periodic pension benefits by Rp51 billion, or 4.0%, from Rp1,268 billion in 2022 to Rp1,319 billion in 2023. This increase primarily reflected an increase in payment obligations under the Labor Law (due to the enactment of the Job Creation Law 2022) by Rp139 billion, or 178.2%, from Rp78 billion in 2022 to Rp217 billion in 2023. The increase in payment obligations resulted from employee transfers from Telkom to Telkomsel, as part of effecting the IndiHome Integration. These increases were partially offset by a decrease in other post-employment benefit cost by Rp3 billion, or 12.0%, from Rp25 billion in 2022 to Rp22 billion in 2023. |
d. Marketing Expenses
Marketing expenses decreased by Rp399 billion, or 10.2%, from Rp3,929 billion in 2022 to Rp3,530 billion (US$229 million) in 2023. This decrease was primarily due to a decrease in advertising and promotion expenses, allocated towards more effective and strategic marketing activities including promotions and cross-product marketing campaigns.
e. General and Administrative Expenses
General and administrative expenses increased by Rp245 billion, or 4.2%, from Rp5,854 billion in 2022 to Rp6,099 billion (US$396 million) in 2023, primarily due to a Rp187 billion increase, or 8.3%, in general expenses from Rp2,259 billion in 2022 to Rp2,446 billion (US$159 million) in 2023 as a result of the implementation of our Five Bold Moves corporate initiatives Training, education, and recruitment expense increased by Rp90 billion, or 24.3%, from Rp371 billion in 2022 to Rp461 billion (US$30 million) in 2023, due to increasing recipient number of our scholarships given to our employees to pursue higher education through our Great People Scholarship Program in 2023 and increased digital talent development program. This increase in our general and administrative expenses was partially offset by a decrease of Rp101 billion, or 9.2%, in professional fees (mainly consultant fees related to our fixed-mobile convergence initiative)
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from Rp1,097 billion in 2022 to Rp996 billion in 2023.
f. Interconnection Expenses
Interconnection expenses increased by Rp923 billion, or 17.0%, from Rp5,440 billion in 2022 to Rp6,363 billion (US$413 million) in 2023, reflecting our strategic focus on increasing interconnection revenues (through partnerships, bundling and cross-selling of services, maintenance and technology upgrades and marketing) and which was generally in line with the increase in our interconnection revenues.
g. | Unrealized loss on changes in fair value of investments |
We had a loss on changes in fair value of investments of Rp748 billion (US$49 million) in 2023 compared with a loss on changes in fair value of investments of Rp6,438 billion (US$414 million) in 2022 due to a decrease in unrealized loss based on the valuation of our investment in GoTo and unrealized gain from changes in the fair value of our investment in MDI. See “Item 4. Information on the Company — Business Overview."
h. Gains (Losses) on Foreign Exchange - net
We had a loss on foreign exchange-net of Rp36 billion (US$2 million) in 2023 compared with a gain on foreign exchange-net of Rp256 billion (US$16 million) in 2022. This loss in 2023 primarily originated from decrease in the valuation of financial assets denominated in U.S. Dollars.
i. Other Income - net
Other income increased by Rp224 billion, or 640.0%, from Rp35 billion in 2022 to Rp259 billion (US$18 million) in 2023 due to higher other income primarily related to increased net income from the sale and exchange of fixed assets in 2023.
Operating Profit and Operating Profit Margin
As a result of the foregoing, our operating profit increased by Rp4,769 billion, or 12.0%, from Rp39,716 billion in 2022 to Rp44,485 billion (US$2,888 million) in 2023. Our operating profit margin increased from 27.0% in 2022 to 29.8% in 2023.
Finance Income
Finance income increased by Rp183 billion, or 20.8%, from Rp878 billion in 2022 to Rp1,061 billion (US$69 million) in 2023, due to higher interest rates, which were partially offset by lower cash deposits.
Finance Costs
Finance costs increased by Rp615 billion, or 15.1%, from Rp4,077 billion in 2022 to Rp4,692 billion (US$305 million) in 2023, primarily as a result of an increase in the average balance of long-term bank loans.
Profit before Income Tax and Pre-tax Profit Margin
As a result of the foregoing, our profit before income tax increased by Rp4,425 billion, or 12.1%, from Rp36,430 billion in 2022 to Rp40,855 billion (US$2,652 million) in 2023. Our pre-tax profit margin was 24.7% for 2022 and 27.4% for 2023.
Income Tax (Expense) Benefit
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Our income tax expense decreased by Rp77 billion, or 0.9%, from Rp8,710 billion in 2022 to Rp8,787 billion (US$570 million) in 2023, as a result of decreased deferred tax income of Rp549 billion in 2022 compared to deferred tax expense of Rp9 billion in 2023.
Other Comprehensive Income (Losses)
We recorded other comprehensive loss of Rp1,454 billion (US$94 million) in 2023 compared to other comprehensive income of Rp1,767 billion (US$113 million) for 2022, primarily due to actuarial loss of Rp1,389 billion recognized in 2023 compared to an actuarial gain of Rp1,464 billion recognized in 2022, in each case relating to our Defined Benefit Pension Plan ("DBPP").
Total Comprehensive Income for the Year
As a result of the foregoing, our total comprehensive income for the year increased by Rp1,127 billion or 3.8%, from Rp29,487 billion in 2022 to Rp30,614 billion (US$1,988 million) in 2023.
Profit for the Year Attributable to Owners of the Parent Company
Profit for the year attributable to owners of the parent company increased by Rp3,691 billion, or 17.8%, from Rp20,736 billion in 2022 to Rp24,427 billion (US$1,586 million) in 2023.
Total Comprehensive Income for the Year Attributable to Owners of the Parent Company
Total comprehensive income for the year attributable to owners of the parent company increased by Rp500 billion, or 2.2%, from Rp22,449 billion in 2022 to Rp22,949 billion (US$1,490 million) in 2023.
Profit per Share
Our profit per share increased by Rp37.26, or 17.8%, from Rp209.32 in 2022 to Rp246.58 in 2023.
For a discussion of our statements of operations for the years ended December 31, 2022 and 2021, see the section “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Results of Operations—Comparison of the Years Ended December 31, 2022 and 2021” in our annual report on Form 20-F for the year ended December 31, 2022.
Segment Overview
We have five main operating segments as follows:
· | Our mobile segment includes operating results of customer-facing lines of business that provide cellular services. |
· | Our consumer segment includes operating results of customer-facing lines of business that provide services to individual and residential-based customers. |
· | Our enterprise segment includes operating results of customer-facing lines of business that provide services to corporations and institutional-based customers. |
· | Our wholesale and international business segment includes operating results of customer-facing lines of business that provide interconnection and other types of licensing services for OLO and international customers. |
· | Our other segment includes operating results of customer-facing lines that provide digital services. |
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For more detailed information regarding our segment information, see Note 32 to our Consolidated Financial Statements. Our segment results for 2021, 2022 and 2023 were as follows:
Telkom's Results of Operations by Segment
Years Ended December 31, | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
2021 | 2022 | 2023 | 2023-2022 | |||||||
(Rp billion) | (Rp billion) | (Rp billion) | (US$ million) | (%) | ||||||
Mobile | ||||||||||
Revenues | ||||||||||
External revenues | 84,267 | 85,493 | 85,291 | 5,539 | (0.2) | |||||
Inter-segment revenues | 3,097 | 3,344 | 3,628 | 236 | 8.5 | |||||
Total segment revenues | 87,364 | 88,837 | 88,919 | 5,775 | 0.1 | |||||
Segment results | 34,435 | 26,122 | 28,693 | 1,863 | 9.8 | |||||
Depreciation and amortization | (20,333) | (21,028) | (21,248) | (1,380) | 1.0 | |||||
Provision recognized in current period | (99) | (128) | (231) | (15) | 80.5 | |||||
Consumer | ||||||||||
Revenues | ||||||||||
External revenues | 24,930 | 26,354 | 27,713 | 1,800 | 5.2 | |||||
Inter-segment revenues | 187 | 195 | (1,106) | (72) | (667.2) | |||||
Total segment revenues | 25,117 | 26,549 | 26,607 | 1,728 | 0.2 | |||||
Segment results | 5,894 | 7,579 | 7,971 | 518 | 5.2 | |||||
Depreciation and amortization | (6,566) | (6,738) | (5,828) | (378) | (13.5) | |||||
Provision recognized in current period | (285) | (434) | (463) | (30) | 6.7 | |||||
Enterprise | ||||||||||
Revenues | ||||||||||
External revenues | 19,141 | 19,161 | 18,237 | 1,184 | (4.8) | |||||
Inter-segment revenues | 22,395 | 24,646 | 26,505 | 1,721 | 7.5 | |||||
Total segment revenues | 41,536 | 43,807 | 44,742 | 2,905 | 2.1 | |||||
Segment results | (307) | 831 | 602 | 39 | (27.6) | |||||
Depreciation and amortization | (3,909) | (3,999) | (3,884) | (252) | (2.9) | |||||
Provision recognized in current period | (13) | (45) | 173 | 11 | (484.4) | |||||
Wholesale and International Business | ||||||||||
Revenues | ||||||||||
External revenues | 14,255 | 15,442 | 16,928 | 1,099 | 9.6 | |||||
Inter-segment revenues | 18,072 | 19,658 | 20,333 | 1,320 | 3.4 | |||||
Total segment revenues | 32,327 | 35,100 | 37,261 | 2,419 | 6.2 | |||||
Segment results | 9,192 | 8,925 | 9,386 | 610 | 5.2 | |||||
Depreciation and amortization | (4,702) | (5,805) | (6,135) | (398) | 5.7 | |||||
Provision recognized in current period | 5 | 34 | (11) | (1) | (132.4) | |||||
Others | ||||||||||
Revenues | ||||||||||
External revenues | 205 | 239 | 402 | 26 | 68.2 | |||||
Inter-segment revenues | 2,395 | 2,486 | 2,014 | 131 | (19.0) | |||||
Total segment revenues | 2,600 | 2,725 | 2,416 | 157 | (11.3) | |||||
Segment results | 199 | (1,063) | (1,188) | (77) | 11.8 | |||||
Depreciation and amortization | (20) | (19) | (18) | (1) | (5.3) | |||||
Provision recognized in current period | (33) | (5) | (5) | (0) | — | |||||
Please note that the above table should be read in conjunction with the below discussion on comparability of financial information of and for the financial years ended December 31, 2023 and 2022. See "— New Standards and Interpretation." See also "— Financial Overview — Year ended December 31, 2022 compared to year ended December 31, 2021" in Item 5 to our annual report on Form 20-F for the financial year ended December 31, 2022 filed with the SEC on April 6, 2023, and available free of charge on the SEC’s website at www.sec.gov and our website at www.telkom.co.id.
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Year ended December 31, 2023 compared to year ended December 31, 2022
Mobile Segment
Our mobile segment revenues decreased by Rp202 billion, or 0.2%, from Rp85,493 billion in 2022 to Rp85,291 billion in 2023. The decrease was primarily due to:
· | a decrease in cellular revenues by Rp3,883 billion, or 32.6%, which primarily reflected a decrease in revenue from voice services due to customers shifting to OTT services, as an alternative to voice services; and |
| ● | a decrease in SMS revenues by Rp915 billion, or 21.5%, which primarily reflected a decrease in revenue from messaging services due to customers shifting to OTT services, as an alternative to SMS services. |
The above-mentioned decreases were partially offset by an increase in cellular internet and data service revenue by Rp4,181 billion, or 6.1%, in 2023 compared with 2022. This increase was primarily due to customers choosing to use digital telecommunications services and an increase in the number of mobile broadband subscribers from 120.9 million subscribers as of December 31, 2022 to 127.1 million subscribers as of December 31, 2023. Mobile data traffic increased by 9.1% from 16.4 million terabytes to 17.9 million terabytes.
Consumer Segment
Our consumer segment revenues increased by Rp1,359 billion, or 5.2%, from Rp26,354 billion in 2022 to Rp27,713 billion in 2023, primarily due to an increase in IndiHome revenues by Rp2,031 billion, or 8.0%. This increase reflected growth in the number of IndiHome subscribers from 9.2 million as of December 31, 2022 to 10.1 million as of December 31, 2023.
The increase in our consumer segment revenues was partially offset by a decrease in internet, data communication, and information technology services revenue by Rp223 billion, or 72.4% and a decrease in fixed line telephone revenues by Rp425 billion, or 56.1%, primarily due to a decrease in the usage of voice service as a result of competition from other cellular services and OTT services.
Enterprise Segment
Our enterprise segment revenues decreased by Rp924 billion, or 4.8%, from Rp19,161 billion in 2022 to Rp18,237 billion in 2023, primarily due to:
| ● | a decrease in IndiHome revenues by Rp1,266 billion, or 45.4%, primarily due to a decrease in purchases of IndiHome bundled products by enterprise customers along with the IndiHome integration because IndiHome B2B products were replaced with IndiBiz products; |
| ● | a decrease in fixed line revenues by Rp154 billion, or 25.5%, primarily due to declining demand for voice services; and |
| ● | a decrease in network revenues by Rp226 billion, or 15.7%, primarily due to the decrease in leased lines and VSAT revenue for the enterprise product; |
The above-mentioned decreases were partially offset by:
| ● | an increase in data, internet and information technology service revenues by Rp680 billion, or 7.1%, primarily due to an increase in demand of Enterprise Digital Solution services and IndiBiz product packages; and |
| ● | an increase in other telecommunication services revenues by Rp43 billion, or 0.9%, primarily due to an increase in call center service revenues by Rp125 billion or 11.0%, an increase in e-health service revenues |
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| by Rp32 billion, or 4.4%, an increase in e-payment service revenues by Rp42 billion, or 9.3%, and an increase in revenue from other services by Rp92 billion, or 7.0%, which were partially offset by a decrease in manage service and terminal revenues by Rp248 billion, or 21.5%. |
Wholesale and International Business Segment
Our wholesale and international business segment revenues increased by Rp1,486 billion, or 9.6%, from Rp15,442 billion in 2022 to Rp16,928 billion in 2023, mainly due to:
| ● | an increase in interconnection revenues by Rp587 billion, or 7.2%, primarily due to an increase in voice wholesale traffic between countries and A2P SMS services; |
| ● | an increase in network revenues by Rp329 billion, or 35.1%, primarily due to an increase in leased lines as a result of higher demand; |
| ● | an increase in data, internet and information technology services revenue by Rp389 billion, or 12.6%, primarily due to an increase in internet, data communication and information technology services revenues by Rp151 billion, or 6.8%, from data centers and an increase in revenue from other services by Rp238 billion, or 27.7%, primarily as a result of increased demand for IT management services; and |
| ● | an increase other telecommunications services revenues by Rp24 billion, or 7.8%, which was primarily due to an increase in others revenues by Rp38 billion, or 13.6%, which principally reflected increased sales of devices. The increase was offset by a decrease in call center service revenues by Rp25 billion, or 100%. |
This increase in wholesale and international business segment revenues was partially offset by a decrease in telephone revenues by Rp33 billion, or 10.2%, due to a decrease in fixed line revenues by Rp58 billion, or 33.1%, while international cellular revenues increased by Rp25 billion, or 17.0%. This reflected a shift in demand away from fixed lines to cellular services .
Other Segment
Our other segment revenues increased by Rp163 billion, or 68.2%, from Rp239 billion in 2022 to Rp402 billion in 2023, primarily due to an increase of other telecommunication services revenues by Rp194 billion, or 29.2%, and an increase in data, internet and information technology service revenues resulting from an increase in sales of other services by Rp5 billion, or 2.4%, due to sales related to our digital business. This increase was partially offset by an increase in intercompany transaction eliminations by Rp36 billion, or 5.7%, compared to 2022.
For a discussion of our results of operations per segment for the years ended December 31, 2022 and 2021, see the section “Item 5. Operating and Financial Review and Prospects — A. Operating Results — Results of Operations —Comparison of the Years Ended December 31, 2022 and 2021” in our annual report on Form 20-F for the year ended December 31, 2022.
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| B. | LIQUIDITY AND CAPITAL RESOURCES |
Liquidity Sources
The main source of our corporate liquidity is cash generated by operating activities and long-term and short-term loans under credit facilities available from banks. See "— Internal Liquidity Sources" and "— External Liquidity Sources" below for additional information. We aim to maintain a strong financial position and have enough liquidity for our operations and to support our growth. Our main cash requirements consist of operating expenses, cash payments relating to the acquisition of properties and purchase of equipment, repayment of borrowings from banks, payment of salaries, payment of cash dividends and corporate income tax. See "— Cash Flows" below for additional information. See also our consolidated statement of cash flows included in our Consolidated Financial Statements included in this annual report on Form 20-F. We seek to keep optimizing our balance sheet and financing capabilities.
We divide our liquidity sources into internal and external liquidity sources.
A. Internal Liquidity Sources
To fulfill our obligations, we rely primarily on our internal liquidity. As of December 31, 2023, we had Rp29,007 billion (US$1,884 million) in cash and cash equivalents available. Cash and cash equivalents decreased by Rp2,940 billion, or 9.2%, from Rp31,947 billion as of December 31, 2022.
Cash receipts from revenues primarily comprised cash receipts from revenues from customers, which amounted to Rp148,458 billion (US$9,641 million) in 2023, and which were used for the payment of operating expenses, the acquisition of property and equipment, the payment of cash dividends and the repayment of loans and other borrowings.
Our internal liquidity strength is reflected in our current ratio, which is computed by dividing current assets by current liabilities. As of December 31, 2022 and 2023, our current ratio was 78.4 and 77.9, respectively.
B. External Liquidity Sources
Our primary external sources of liquidity are short and long-term bank loans, bonds and notes, other borrowings and two-step loans. We had external liquidity from loans and other borrowings of Rp68,000 billion as of December 31, 2023.
As of December 31, 2023, we had the following undrawn amounts under our sources of liquidity:
| ● | a credit facility with Bank Mandiri in the amount of Rp8,000 billion; |
| ● | a credit facility with Bank Negara Indonesia in the amount of Rp4,947 billion; |
| ● | a credit facility with MUFG Bank in the amount of Rp4,605 billion; |
| ● | a credit facility with Bank Central Asia in the amount of Rp2,350 billion; |
| ● | a credit facility with Bank Rakyat Indonesia in the amount of Rp2,000 billion; |
| ● | a credit facility with HSBC Bank in the amount of Rp1,561 billion; |
| ● | a credit facility with Bank Syariah Indonesia in the amount of Rp1,500 billion; |
| ● | a credit facility with Bank of China in the amount of Rp1,500 billion; |
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| ● | a credit facility with Maybank in the amount of Rp1,000 billion; |
| ● | a credit facility with Bank CIMB Niaga in the amount of US$76,090,710; |
| ● | a credit facility with Bank DBS Indonesia in the amounts of US$20,000,000 and Rp435 billion; and |
| ● | credit facilities with Citibank, BJB Bank and Maspion Bank in the amounts of Rp500 billion, Rp500 billion and Rp97 billion, respectively. |
As of December 31, 2023, we had no off-balance sheet arrangements that were reasonably likely to have a current or future material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
For a discussion of our sources of liquidity for the year ended December 31, 2022, see “Item 5. Operating and Financial Review and Prospects — B. Liquidity and Capital Resources — Sources of Liquidity” in our annual report on Form 20-F for the year ended December 31, 2022.
Contractual Obligations and Commercial Commitments
The following table sets forth information on certain of our material contractual obligations as of December 31, 2023:
Contractual Obligations | By Payment Due Date | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
Total | Less Than a Year(6) | 1-3 years(6) | 3-5 years(6) | More than 5 years(6) | ||||||
| (Rp billion) | (Rp billion) | (Rp billion) | (Rp billion) | (Rp billion) | |||||
Long-Term Debts(1)(4) | 38,049 | 10,276 | 14,412 | 6,877 | 6,484 | |||||
Lease Liabilities(2) | 20,302 | 5,458 | 5,222 | 3,899 | 5,723 | |||||
Interest on Long-Term Debts and Lease Liabilities(5) | 14,946 | 3,491 | 4,836 | 2,640 | 3,979 | |||||
Unconditional Purchase Obligations(3) | 12,286 | 12,286 | — | — | — | |||||
Total | 85,583 | 31,511 | 24,470 | 13,416 | 16,186 | |||||
Notes:
(1) | See Notes 19 and 20 to our Consolidated Financial Statements. |
(2) | Related to the lease of the slot site of the tower, transmission installation and equipment, power supply, data processing equipment, office equipment, vehicles, and CPE assets. |
(3) | Capital expenditure committed under contractual arrangements. |
(4) | Excludes the related contractually committed interest obligations. |
(5) | See "Item 3. Key Information — Risk Factors — Risks Related to Our Business — Financial Risks — We are exposed to interest rate risk in relation to our bank borrowings." |
(6) | Less than 1 year means 2024, 1-3 years means 2025-2026, 3-5 years means 2027-2028, more than 5 years means Thereafter. |
See Note 33 to our Consolidated Financial Statements for further details on our contractual commitments. In addition to the above contractual obligations, we had long-term liabilities for defined pension benefits and post-employment health care benefit plan. In 2023, we contributed Rp1,635 billion to our Defined Benefit Pension Plan and post-employment health care benefit plan.
Cash Flows
The following table sets out information concerning our consolidated cash flows, as set out in (and prepared on the same basis as) our Consolidated Financial Statements for 2021, 2022 and 2023.
| Years Ended December 31, | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
2021 | 2022 | 2023 | ||||||||
(Rp billion) | (Rp billion) | (Rp billion) | (US$ million) | |||||||
Net cash flows: | ||||||||||
provided by operating activities | 68,353 | 73,354 | 60,581 | 3,934 | ||||||
used in investing activities | (37,914) | (39,122) | (36,911) | (2,397) | ||||||
used in financing activities | (12,775) | (40,965) | (26,565) | (1,725) | ||||||
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| Years Ended December 31, | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
2021 | 2022 | 2023 | ||||||||
(Rp billion) | (Rp billion) | (Rp billion) | (US$ million) | |||||||
Net increase/(decrease) in cash and cash equivalents | 17,664 | (6,733) | (2,895) | (188) | ||||||
Effect of exchange rate changes on cash and cash equivalents | 59 | 370 | (44) | (3) | ||||||
Allowance for expected credit losses | (1) | (1) | (1) | (0) | ||||||
Cash and cash equivalents at beginning of year | 20,589 | 38,311 | 31,947 | 2,075 | ||||||
Cash and cash equivalents at end of year | 38,311 | 31,947 | 29,007 | 1,884 | ||||||
Year ended December 31, 2023 compared to year ended December 31, 2022
As of December 31, 2023, total cash and cash equivalents amounted to Rp29,007 billion, representing a decrease of Rp2,940 billion, or 9.2%, from Rp31,947 billion as of December 31, 2022.
In 2023, operating activities generated the largest cash receipts which amounted to Rp150,781 billion, or 78.2% of total cash receipts, followed by financing activities which generated cash receipts of Rp41,795 billion, or 21.7% of total cash receipts, and investing activities which generated cash receipts of Rp313 billion, or 0.1% of total cash receipts. In total, cash receipts increased by Rp5,602 billion, or 3.0%, compared to 2022.
In 2023, cash used for operating activities amounted to Rp90,200 billion, or 46.1% of total cash disbursements, followed by cash used for financing activities which amounted to Rp68,360 billion, or 34.9% of total cash disbursements, and cash used for investing activities which amounted to Rp37,224 billion, or 19.0% of total cash disbursements. Compared to 2022, cash disbursements increased by Rp1,764 billion, or 0.9%.
Cash Flows from Operating Activities
Net cash generated by operating activities was Rp60,581 billion (US$3,934 million) in 2023 and Rp73,354 billion in 2022, representing a decrease of Rp12,773 billion, or 17.4%.
Cash receipts from operating activities in 2023 amounted to Rp150,781 billion, representing an increase of Rp899 billion, or 0.6%, compared to 2022. Cash receipts principally originated from cash receipts from customers and other operators of Rp148,458 billion, cash receipts from interests of Rp1,049 billion, and cash receipts from tax refund of Rp681 billion. Cash receipts from customers and other operators increased by 1.5% compared to 2022, principally due to increased data, internet and information technology service revenues, IndiHome revenues, and interconnection revenues. Cash receipts from interests increased by 21.3% compared to 2022, mainly as a result of increased transaction volume with government agencies and state-owned banks. Cash receipts from others - net in 2023 amounted to Rp593 billion, representing an increase of 75.4% compared to cash payments for others - net in 2022 which amounted to Rp338 billion, mainly due to vendor and procurement transactions. Cash receipts from tax refund decreased by 71.8% compared to 2022, primary as a result of delays in processing overpayment of domestic VAT for 2021 and administrative fines charged as a result of the corrected VAT amount for 2020.
Cash disbursements from operating activities in 2023 amounted to Rp90,200 billion and increased by Rp13,672 billion, or 17.9%, compared to 2022. This increase primarily resulted from an increase in cash payments for expenses, cash payments for value added taxes – net, and cash payments for corporate and final income taxes, cash payments to employees and was partially offset by decreased and cash payments for short-term lease and low-value lease assets. The cash disbursements were primarily used for:
● | cash payments for expenses of Rp53,410 billion increased by 17.2% compared to 2022, primarily due to increases in operation, maintenance and telecommunication service expenses, personnel expenses, general and administrative expenses, and interconnection expenses; |
● | cash payments to employees of Rp16,116 billion increased by 14.7% compared to 2022, primarily due to increased salaries and benefit expenses in 2023; |
● | cash payments for corporate and final income taxes of Rp10,746 billion increased by 26.9% compared to |
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2022, primarily due to increased income tax expense in 2023;
● | cash payments for finance costs of Rp4,748 billion increased by 16.8% compared to 2022, primarily due to increased costs relating to borrowings; |
● | cash payments for short-term lease and low-value lease assets of Rp3,770 billion decreased by 2.7% compared to 2022, primarily due to decreased interest costs related to lease liabilities; and |
● | cash payments for value added taxes - net of Rp1,410 billion increased by 173.8% compared to 2022, primarily due to increased VAT on prepaid other tax liabilities for our company and our subsidiaries. |
Cash Flows used in Investing Activities
Net cash flows used in investing activities in 2023 amounted to Rp36,911 billion (US$2,397 million), compared to Rp39,122 billion in 2022, representing a decrease of Rp2,211 billion, or 5.7%. Cash flows used in investing activities principally included payments for purchases of property and equipment amounting to Rp33,603 billion, payments for purchases of intangible assets amounting to Rp2,817 billion, addition of long-term investments in financial instruments amounting to Rp340 billion, a placement in other current financial assets - net amounting to Rp315 billion, and a decrease in other assets - net amounting to Rp149 billion. Payments of property and equipment principally reflected the acquisitions of transmission installation and equipment, cable network, and payments related to property under constructions. Purchases of intangible assets primarily reflected purchases of software.
Cash Flows used in Financing Activities
Net cash flows used in financing activities in 2023 amounted to Rp26,565 billion (US$1,725 million), compared to Rp40,965 billion in 2022, representing a decrease of Rp14,400 billion, or 35.2%.
Cash receipts from financing activities amounted to Rp41,795 billion in 2023, an increase of Rp5,792 billion, or 16.1%, compared to 2022. This increase primarily reflected non-recurring cash receipts of Rp2,961 billion received in 2023 from proceeds from the issuances of new shares of subsidiaries and Rp38,834 billion from the withdrawal of loans and other borrowings in 2023. The issuances of new shares of subsidiaries consisted of an issuance of new shares of Telkomsel, to mitigate further dilution of Singtel's share ownership in Telkomsel, and an issuance of shares as part of the establishment of Telkom Data Infrastructure.
Cash disbursements from financing activities amounted to Rp68,360 billion in 2023, a decrease of Rp8,608 billion, or 11.2%, compared to 2022. The cash disbursements were primarily used for the repayments of loans and other borrowings in the amount of Rp35,323 billion representing a decrease of Rp8,981 billion or 20.3%, payments of cash dividends to our shareholders and non-controlling interests of subsidiaries amounting to Rp26,406 billion in aggregate representing an increase of Rp1,447 billion or 5.8%, repayments of principal portion of lease liabilities in the amount of Rp6,600 billion representing a decrease of Rp424 billion or 6.0%, and proceeds from a share buyback of non-controlling interests by our subsidiary in the amount of Rp31 billion.
Current Assets
As of December 31, 2023, our current assets were Rp55,628 billion (US$3,613 billion) compared to Rp55,073 billion as of December 31, 2022, representing an increase of Rp555 billion, or 1.0%. This increase was primarily due to:
· | an increase in trade and other receivables of Rp2,053 billion, or 23.1%, from Rp8,895 billion as of December 31, 2022 to Rp10,948 billion as of December 31, 2023, primarily due to an increase in third parties receivables and related parties receivables by Rp1,685 billion and Rp348 billion, respectively; |
· | an increase in other current assets of Rp964 billion, or 14.2%, from Rp6,766 billion as of December 31, 2022 to Rp7,730 billion as of December 31, 2023 due to an increase in prepaid frequency license fees; |
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· | an increase in our prepaid other taxes of Rp413 billion, or 27.3%, from Rp1,512 billion as of December 31, 2022 to Rp1,925 billion as of December 31, 2023, primarily due to an increase in VAT payable by Telkom and its subsidiaries; |
· | an increase in other current financial assets by Rp312 billion, or 23.1%, from Rp1,349 billion as of December 31, 2022 to Rp1,661 billion as of December 31, 2023, primarily due to an increase in time deposits of Rp465 billion; and |
· | an increase in contract assets by Rp247 billion, or 10.1%, from Rp2,457 billion as of December 31, 2022 to Rp2,704 billion as of December 31, 2023, primarily due to an increase in enterprise segment's contract assets from government customers; |
These increases were primarily and partially offset by:
· | a decrease in our cash and cash equivalents of Rp2,940 billion, or 9.2%, from Rp31,947 billion as of December 31, 2022 to Rp29,007 billion as of December 31, 2023, primarily due to a Rp2,940 billion decrease in cash deposited with banks; |
· | a decrease in prepaid income taxes by Rp329 billion, or 99.1%, from Rp332 billion as of December 31, 2022 to Rp3 billion as of December 31, 2023, primarily due to a decrease in our subsidiaries’ corporate income tax; |
· | a decrease in inventories by Rp147 billion, or 12.8%, from Rp1,144 billion as of December 31, 2022 to Rp997 billion as of December 31, 2023, primarily due to decrease in inventories of components and others; and |
· | a decrease in contract costs of Rp18 billion, or 2.7%, from Rp671 billion as of December 31, 2022 to Rp653 billion as of December 31, 2023. |
Current Liabilities
As of December 31, 2023, our current liabilities were Rp71,451 billion (US$4,640 billion) compared to Rp70,235 billion as of December 31, 2022, representing an increase of Rp1,216 billion, or 1.7%. This increase was primarily due to:
· | an increase in short-term bank loans and current maturities of long-term liabilities of Rp2,877 billion, or 16.9%, from Rp17,049 billion as of December 31, 2022 to Rp19,926 billion as of December 31, 2023, primarily due to an increase in short-term bank loans of Rp1,459 billion and an increase in current maturities of long-term liabilities of Rp1,418 billion. We primarily increased our short-term bank loans to funding working capital. The increase in current maturities of long-term liabilities was primarily due to an increase in the current maturities of bank loans of Rp1,494 billion which was partially offset by a decrease in other borrowings of Rp590 billion; |
· | an increase in current maturities of lease liabilities of Rp686 billion, or 14.4%, from Rp4,772 billion as of December 31, 2022 to Rp5,458 billion as of December 31, 2023; |
· | an increase in contract liabilities of Rp553 billion, or 8.8%, from Rp6,295 billion as of December 31, 2022 to Rp6,848 billion as of December 31, 2023, primarily due to an increase in advances from enterprise customers and wholesale and international business customers amounting to Rp461 billion and Rp103 billion, respectively. This increase was partially offset by a decrease in advances from mobile customers amounting to Rp17 billion, respectively; |
· | an increase in customer deposits of Rp184 billion, or 7.7%, from Rp2,382 billion as of December 31, 2022 to Rp2,566 billion as of December 31, 2023, primarily due to an increase in customer deposits from new |
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IndiHome and IndiBiz customers. Such deposits can be used to deduct billings on the payment date or can be refunded to customers who want to deactivate their services; and
· | an increase in trade and other payables of Rp129 billion, or 0.7%, from Rp18,920 billion as of December 31, 2022 to Rp19,049 billion as of December 31, 2023 due to an increase in trade payables to related parties by Rp1,215 billion. This increase in trade payables to related parties was primarily due to an increase in universal service obligation charges due to the Government. |
These increases were partially offset by:
· | a decrease in accrued expenses of Rp2,366 billion, or 15.3%, from Rp15,445 billion as of December 31, 2022 to Rp13,079 billion as of December 31, 2023, due to a decrease in accrued expenses for operation, maintenance, and telecommunication services of Rp2,370 billion and a decrease in salaries and benefits of Rp73 billion; |
· | a decrease in current income tax liabilities of Rp474 billion, or 16.9%, from Rp2,807 billion as of December 31, 2022 to Rp2,333 billion as of December 31, 2023, mainly due to a decrease in corporate income tax payable by Telkom parent by Rp575 billion; and |
· | a decrease in other tax liabilities of Rp373 billion, or 14.5%, from Rp2,565 billion as of December 31, 2022 to Rp2,192 billion as of December 31, 2023, mainly due to a Rp123 billion decrease in VAT collected by Telkom parent. |
Working Capital
As of December 31, 2023, our working capital, defined as the difference between current assets and current liabilities as of the same date, decreased by Rp661 billion compared to our working capital as of December 31, 2022. As at December 31, 2023, our current assets were lower than our current liabilities, resulting in a current ratio, defined as our current assets divided by our current liabilities, of 0.78 as of December 31, 2023. We closely monitor our working capital and generally try to lower it to maintain it at an optimal level so that we may manage our working capital efficiently, without restricting our ability to meet our current liabilities. This decrease in working capital was primarily due to:
· | an increase in current assets of Rp555 billion, or 1.0%, from Rp55,073 billion as of December 31, 2022 to Rp55,628 billion as of December 31, 2023. See"— Current Assets." |
· | an increase in current liabilities of Rp1,216 billion, or 1.7%, from Rp70,235 billion as of December 31, 2022 to Rp71,451 billion as of December 31, 2023. See"— Current Liabilities." |
We believe that our available cash, working capital, cash generated by future operations, and borrowings from banks and other financial institutions are sufficient for our present requirements. We expect that our working capital requirements will continue to be addressed by various funding sources, including cash from operating activities, bank loans and potential offerings of debt securities in the capital markets.
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Capital Structure
Our capital structure as of December 31, 2023, is described as follows:
| Amount |
| Portion | |
(Rp billion) | (%) | |||
Short-term debt |
| 9,650 | 4.7 | |
Long-term debt |
| 58,351 | 28.7 | |
Total debt |
| 68,001 | 33.4 | |
Equity attributable to owners of the parent company |
| 135,576 | 66.6 | |
Total |
| 203,577 | 100.0 |
As of December 31, 2023, our net debt to equity ratio was 0.29 and our debt service coverage ratio was 1.9 times, indicating our strong ability to meet our debt obligations. Our debt levels are primarily driven by our plans to develop our existing and new strategic businesses. In determining our optimum debt levels, we also consider our debt ratios with reference to regional peers in the telecommunications industry.
For further information on our Company's management policies related to capital, see Note 35 to our Consolidated Financial Statements.
Indebtedness
Consolidated total indebtedness (consisting of short-term bank loans, long-term liabilities, current maturities of long-term liabilities and other borrowings) as of December 31, 2021, 2022 and 2023 were as follows:
|
| As of December 31, | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
2021 |
| 2022 |
| 2023 | ||||||
|
| (Rp billion) |
| (Rp billion) |
| (Rp billion) |
| (US$ million) | ||
Indonesian Rupiah |
| 67,587 | 62,107 | 67,668 | 4,394 | |||||
U.S. Dollar(1) |
| 671 | 531 | 220 | 14 | |||||
Japanese Yen(2) |
| 285 | 181 | 84 | 5 | |||||
Malaysian Ringgit(3) | 36 | 34 | 29 | 2 | ||||||
Total |
| 68,579 | 62,853 | 68,001 | 4,416 | |||||
Notes:
(1) | The amounts as of December 31, 2021, 2022 and 2023 translated into Rupiah at Rp14,252.50, Rp15,569.05 and Rp15,398.5 to US$1, respectively, being the Reuters average rates for U.S. Dollars at each of those dates. |
(2) | The amounts as of December 31, 2021, 2022 and 2023 translated into Rupiah at Rp123.84, Rp118.15 and Rp108.80 to Yen 1, respectively, being the Reuters average rates for Yen at each of those dates. |
(3) | The amount as of December 31, 2021, 2022 and 2023 translated into Rupiah at Rp3,421.97, Rp3,534.06 and Rp3,354.47 to Ringgit 1, being the Reuters average rates for Ringgit at each of those dates. |
Of our total indebtedness, as of December 31, 2023, Rp15,734 billion, Rp19,634 billion, Rp10,776 billion, and Rp12,207 billion were scheduled for repayment in 2024, 2025-2026, 2027-2028, and thereafter, respectively. As of December 31, 2023, approximately 43.7% (based on the aggregate then outstanding principal) of our total bank borrowings were floating-rate loans. We use hedging instruments to cover foreign currency risk exposures for periods ranging from three to 12 months.
For further information on our Company's indebtedness, see Notes 19 and 20 to our Consolidated Financial Statements.
Capital Expenditures
In 2023, we incurred capital expenditures of Rp32,858 billion (US$2,134 million) for not only increasing capacity but also improving the quality of our services. Our capital expenditures are grouped into the following categories for planning
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purposes:
| ● | Broadband services, which consist of mobile (4G and 5G) and fixed broadband access; |
| ● | Network infrastructure, which consists of core transmission network, submarine cable systems, metro-ethernet, optical transport network and IP backbone; |
| ● | Data centers, IT, applications and content, as well as service node; and |
| ● | Capital expenditure supports, such as capital expenditure for the construction or maintenance of telecommunications towers. |
Of our Rp32,858 billion capital expenditure in 2023, Telkom, as the parent company, incurred capital expenditures of Rp14,037 billion (US$912 million), Telkomsel incurred capital expenditures of Rp18,804 billion (US$1,221 million) and our other subsidiaries incurred capital expenditures of Rp17 billion (US$1 million). As our capital expenditures in 2022 were at historically elevated levels, we expect to further reduce our capital expenditures in the future to bring them more in line with our long-term funding capacity. The following table set forth our capital expenditure breakdown between Telkom as a parent company, Telkomsel and our other subsidiaries for the periods indicated.
Years Ended December 31, | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2021 |
| 2022 |
| 2023 | |||
| (Rp billion) |
| (Rp billion) |
| (Rp billion) |
| (US$ million) | |
Telkom (parent company) |
| 15,347 | 15,650 | 14,037 | 912 | |||
Subsidiaries |
| |||||||
Telkomsel |
| 10,540 | 12,343 | 18,804 | 1,221 | |||
Others |
| 4,442 | 6,153 | 17 | 1 | |||
Subtotal for subsidiaries |
| 14,982 | 18,496 | 18,821 | 1,222 | |||
Total for Telkom Group |
| 30,329 | 34,146 | 32,858 | 2,134 | |||
Our capital expenditures in 2023 were mostly expenditures incurred for strengthening our networks and supporting infrastructure as well as enhancing capacity to provide a better customer experience. Our fixed line capital expenditures were primarily related to fiber-based access, submarine backbone infrastructure development and other projects such as towers and data centers. We also used capital expenditures for the improvement of 4G network quality and capacity, 5G rollout, and enhancement of the IT system for our mobile business.
Material Commitments for Capital Expenditures
As of December 31, 2023, we had material commitments for capital expenditures under contractual arrangements totaling Rp12,286 billion (US$798 million), principally relating to transmission installation, cable network, and property under construction. We also have capital expenditure planned for property, equipment and investment outside Indonesia. Our subsidiaries also have capital expenditure plans. Telkomsat plans to launch a satellite in orbit slot 113 East Longitude as part of efforts to strengthen the capacity and quality of connectivity throughout Indonesia. In addition, it plans to fund its expansion strategy, including through organic growth and tower acquisitions, in line with its goal of becoming the largest tower company in Southeast Asia.
The following table sets forth information on our committed capital expenditures under contractual arrangements as of December 31, 2023.
Currencies |
| Amounts in Foreign Currencies |
| Equivalent in Rupiah |
|---|---|---|---|---|
|
| (in millions) |
| (in billions) |
Rupiah | — | 8,596 | ||
U.S. Dollar | 235.00 | 3,619 | ||
Chinese Yuan | 33.00 | 71 | ||
Total | 12,286 |
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For a more detailed discussion regarding our material commitments for capital expenditures, see Note 33a to our Consolidated Financial Statements.
Source of Funds
We have historically funded our capital expenditures primarily with cash generated from operations. In 2024, we expect that our capital expenditure to revenue ratio will range approximately from 25% to 30%. We expect that the most significant proportions of capital expenditure will be allocated to the development of infrastructure to support broadband services, both for mobile and fixed line broadband services A portion of our capital expenditure is allocated to our subsidiaries, primarily to Telkomsel. We expect to fund the above commitments with our internal and external sources of funds.
The realization and use of future capital expenditures may differ from the amounts indicated above due to various factors, including but not limited to changes in the Indonesian and global economy, the Rupiah/U.S. Dollar or other applicable foreign exchange rates, the availability of supply or vendor or other financing on terms acceptable to us, and also any technical or other problems in the implementation.
| C. | CRITICAL ACCOUNTING POLICIES, ESTIMATES, AND JUDGMENTS |
We prepare our financial statements in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). As such, we are required to make certain estimates, judgments and assumptions that management believes are reasonable based upon the information available. For a complete discussion of our critical accounting policies, estimates and judgments, see Note 2x to our Consolidated Financial Statements.
New Standards and Interpretations
For new standards, amendments to standards and interpretations not yet adopted in 2023 which have not been applied in preparing the Consolidated Financial Statements, see Note 38 to our Consolidated Financial Statements. For amendments to standards and interpretations adopted in 2023 which have been applied in preparing the Consolidated Financial Statements, see Note 2a. Such amendments had no material impact on our Consolidated Financial Statements.
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| C. | RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC. |
Our research and development efforts focus on advancing network infrastructure for enhanced data speeds, lower latency, and improved performance through FMC, Wi-Fi 6, and 5G technologies, among others.
Indonesia Telecommunications and Digital Research Institute
Established in 2021, the Indonesia Telecommunications and Digital Research Institute ("ITDRI") within our Telkom Corporate University Center aims to leverage globally adopted technologies for Indonesia's specific market needs, initially targeting the fisheries, agribusiness, and tourism sectors. ITDRI collaborates with various stakeholders such as the Center for Macroeconomic and Financial Research at the National Research and Innovation Agency of Indonesia (Pusris EMK BRIN), which engages in research collaborations, notably in fields of learning, research, and innovation. ITDRI also collaborates with Government ministries and industry research centers across sectors such as palm farming and pharmaceuticals, while exploring revenue-sharing business models with Narasi, an Indonesian multi-platform media and news company, and BKI Academies, which are training centers operated by Biro Klasifikasi Indonesia that offer a range of development programs in maritime, insurance, and other industry sectors.
In 2022, ITDRI shifted its focus towards joint research efforts with academic and research institutions to identify market opportunities for digital products. Critical research areas include digital connectivity, IoT monitoring, blockchain for network validation, and business process solutions. Collaborating with the National Research and Innovation Agency, ITDRI continues to delve into digital technology applications within agriculture, fisheries, and tourism, emphasizing the efficacy of partnership-driven market research.
In 2023, we expanded and deepened our joint experimentation and research initiatives at ITDRI with a renewed focus on the Telkom Group, building upon the foundation laid in 2022. Our focus remains on gaining comprehensive insights into market opportunities for digital products through collaborative efforts. Continued collaboration with research centers, universities, and other relevant partners such as major tech players (Huawei, Google, or MIT). Our collaborative approach enhances our ability to tap into diverse expertise and perspectives, fostering innovation and comprehensive research outcomes. While continuing our research in digital connectivity, IoT device monitoring, network validation using blockchain, and business process solutions, we aim to diversify our research areas. This may involve exploring emerging technologies, industry trends, and new digital frontiers to stay at the forefront of technological advancements. We aspire to forge international collaborations to enrich our research endeavors. Partnering with institutions and experts from around the world will provide a global perspective and contribute to a more holistic understanding of digital market dynamics. As we gain valuable insights from our research initiatives, we aim to facilitate the transfer of technology and knowledge to practical applications. Implementation of research findings will be a key focus, ensuring that the benefits of our work contribute tangibly to industry advancements. Embracing agile methodologies in our research processes, we aim to enhance flexibility and responsiveness. This approach allows us to adapt quickly to changes in technology, market dynamics, and stakeholder needs. Throughout 2023, we conducted regular evaluations of our research initiatives. This included assessing the effectiveness of our collaborative model, the impact of our research, and identifying areas for improvement to refine our approach continually.
Infrastructure Research and Development
Our strategy for 2023 included creating an InfraCo entity to optimize shared Telkom infrastructure in the following ways:
| ● | Exploring FANS via a SDAN roadmap: examining the opportunities and methods for multiple service providers to jointly utilize a single fixed access network infrastructure efficiently, through a strategic plan that guides the implementation of SDAN technologies. This involves utilizing SDN principles to enable the virtualization and abstraction of the access network, allowing for flexible management, optimized operations, and reduced costs in deploying broadband services; and |
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| ● | Testing Bitstream products: evaluating the performance and conformance of video and audio decoders, encoders, or communication systems by using a series of standardized or custom digital data sequences, known as bitstreams, to expedite revenue growth. |
Prioritizing customer needs, we continue to explore the implementation of Wi-Fi 6 to provide high-performance connectivity in dense areas and have implemented dual-band optical network terminals to combat household interference, supporting the surge in IoT and gaming usage.
To facilitate our FMC initiative, our research focuses on infrastructure and service innovation. Implementing traffic separation for high-speed internet B2B and B2C allows for tailored management and monitoring aligned with specific service level agreements. We attained a major service milestone with the introduction of "Unbreakable Wi-Fi," a service that integrates fixed broadband with mobile networks by integrating a home gateway with 4G/5G USB dongles, providing seamless connectivity by automatically switching networks if one fails, thus enhancing the customer experience.
Our research is dedicated to enhancing infrastructure services such as triple play (video, voice, and internet), focusing on the optimal technologies for TV, video platforms, video conferencing, and voice communications including IMS and SBC. By leveraging cloud-native virtual technologies such as edge cloud, vCDN, and vSTB, we aim to elevate service speed, deployment flexibility, and operational efficiency. Additionally, we are exploring infrastructure automation and virtualization, encompassing MEC, SDN/NFV, SD-WAN, and AI/ML, to continually improve network service quality and enrich customer experiences in the rapidly evolving digital telecommunications landscape.
Our pursuit of long-term success is anchored in advancing our expertise and human capital through the evaluation and adoption of emerging technologies such as LPWAN with LoRa, IoT platforms, and 5G technology. This focus is expected to unlock new revenue streams and drive cost efficiencies. Our objective is to facilitate the transition to Industry 4.0 with interconnected smart factories and automated systems. Moreover, recognizing the growing significance of space telecommunications, we are investigating NGSO satellites, HAPs, drones, and balloons to expand our infrastructure capabilities.
Digital Ventures
Our entrepreneurship initiative, Amoeba, fosters internal innovation while our open innovation program, collaborates with Indonesian tech entrepreneurs and digital startups through the Digital Amoeba (for Telkom employees) and Indigo programs (for external collaborations). Amoeba cultivates employees' ideas for new products within integrated task forces across the regions we serve and provides validation through internal competitions. Our open innovation program aims for seamless integration of their developments into our ecosystem. With initiatives such as Digital Amoeba and Indigo (a collaboration with digital startups), we aim to support the growth of Indonesia's digital creative industry and enhance our digital offerings.
In 2022, we evolved Indigo with the launch of the Indigo Social Impact Program to guide startups in creating meaningful social impact. Enhanced mentoring, customer testing in the Indigo Unlock program, and professional development for content creators underpin our commitment to nurturing the startup ecosystem. Notably, the Indigo program was recognized with the AsiaStar 10X10 Launchpad award and the AABI Incubator Presidential Nominee award, with Run System, an Indigo graduate, winning the AABI Torch Best Entrepreneur Award 2022. Through Indigo, startups gain opportunities to collaborate with Telkom and leverage our platforms, such as Verihub’s AI-based E-KYC solutions, Opsigo's business travel management tools, and Educourse's e-learning platform. Our Educourse's e-learning platform has already been used by 33,000 students, and 130 schools with 450,000 affected students. These initiatives demonstrate Indigo's ability to empower startups and enrich various sectors with innovative solutions by leveraging our Group ecosystem.
Our subsidiary MDI Ventures actively invests in promising digital startups to foster synergies and enhance digital customer experiences across a range of sectors. Collaborating with international investors, incubators, and the Indigo Creative Nation program, MDI Ventures aims to support the growth of Indonesia's digital ecosystem and economy. In 2023, it added five new startups to its portfolio, which has grown to over 90 investments since 2016, primarily focusing on early and mid-stage companies both within Southeast Asia and globally. A highlight from its investments is WeBuy, a
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portfolio company from the Centauri Fund, which completed its initial public offering and listing on NASDAQ in December 2023. Other startups in its portfolio have also completed mergers, acquisitions, or initial public offerings.
In collaboration with Indonesian SOEs, MDI Ventures aims to accelerate the digitalization of the Indonesian economy and fostering a broader digital ecosystem. Among its collaborative efforts, MDI Ventures manages several funds, including:
| · | PT Telkomsel Mitra Inovasi ("Telkomsel Ventures"): with investments in 21 startups focusing on sectors like fintech, logistics, edu-tech, healthcare, and agriculture, it aims to create synergies and value for Telkomsel by investing in early to mid-stage startups; |
| · | Centauri Fund: established in 2019 alongside KB Financial Group from South Korea, this fund targets early-growth stage startups in Indonesia, Southeast Asia, and South Korea, facilitating corporate support and bridging regional gaps. In 2023, it completed investments in two companies within the AI and creative industries; |
| · | Arise Fund: initiated in 2021 with Finch Capital Netherlands, it centers on early-stage Indonesian startups innovating in technology. Following its first successful fundraising in August 2021, it made an investment in Slice in 2023, with some portfolio companies attracting term sheets from new investors at higher valuations. |
MDI Ventures' excellence in fostering digital growth and innovation was recognized with two Gold Medals at The 2023 International Business Awards® in the categories of “Corporate & Community - Partner Engagement Event” and “Company of the Year - Financial Services.”
Furthermore, in collaboration with Telkomsel Ventures, MDI Ventures hosted the Nex-BE Fest 2023 alongside HUB.ID, a MoCI initiative. This event aimed at enhancing collaborative synergy and brought together stakeholders from Telkom Group companies, startups, SOEs, private entities, governments, and universities. It focused on creating strong networks to support digital economic growth, offering platforms for business matchmaking, discussions, and networking. The festival successfully united diverse participants, including VIPs and sector representatives, to promote collaboration for future digital advancements and economic prosperity.
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| D. | TREND INFORMATION |
We believe favorable external factors and post-COVID-19 economic recovery will support our ability to continue to drive revenue growth from both cellular and non-cellular data, internet, and IT services. Indonesia's GDP grew by 5.31% in 2022, as all sectors experienced growth, and GDP growth slightly decelarated to 5.05% in 2023, according to Government data (Indonesian Central Bureau of Statistics). In October 2023, the IMF in the World Economic Outlook Update projected that the Indonesian economy would grow by 5.0% in 2024. This projection assumes that Indonesia will implement moderate tax policy and administration reforms, some expenditure realization, and a gradual increase in capital spending over the medium term in line with fiscal space. Indonesia is expected to benefit from a demographic dividend that should have a positive impact on economic growth. In addition, a growing working population should result in an improvement in Indonesia's Purchasing Power Parity (PPP) growth. The transition of the Indonesian economy toward digitalization, the pace of which increased during COVID-19, is expected to continue in the future and spread across multiple sectors of the economy. While Indonesia is expected to benefit from digitalization, it will face key challenges in implementing its digitalization projects across multiple sectors such as logistics, education, healthcare, Government administration, finance, and insurance. The Government expects that the improvement in digital technology will create job opportunities, increase efficiency in business operations, better services and unlock various markets by making them more accessible through digitalization.
The Government has established several national digitalization projects. The five main digitalization projects that have an impact on Telkom are the following:
| ● | Making Indonesia 4.0: this project offers an opportunity for Telkom to partner with IT companies to provide technology-based solutions for manufacturing companies, with a focus on IoT, AI, human-machine interfaces, robotic technologies, and 3D printing. |
| ● | One Data Indonesia: this project involves creating a digital portal for the sharing of Government data, with the goal of enabling the public sector to make data-driven decisions. Therefore, we expect this will provide opportunities for Telkom to propose and provide high volume data storage through data centers as well as cloud solutions using big data and analytics. |
| ● | Presidential Regulation No. 95/2018: this regulation guides the implementation of digital governance tools and services. As part of the Government's goal to expand its provision of digital services, the Government has begun building the first of four national data centers with tier 4 classification, which we believe will provide us with future opportunities to provide network and other services to these data centers. |
| ● | Presidential Direction for Infrastructure Development: the Government's 2020-2024 National Medium-Term Development Plan set out targets for Indonesia's digital transformation, including a target of 60% of districts (kecamatan) having fixed broadband coverage and 95% of villages (desa) having mobile broadband coverage by 2024. Part of this plan is the Government's analog switch-off policy, which supports mobile broadband expansion by providing additional spectrum. |
| ● | Presidential Decree No. 17/2023: this regulation concerns the acceleration of digital transformation in the procurement of government goods/services. Telkom has been assigned by the Government to organize an electronic procurement system and its supporting systems, including funding, planning, construction, development integration, operation and maintenance. Through this regulation, it is expected that the acceleration of digital transformation in the procurement of government goods/services as an effort to increase independence and growth as well as equalization of the national economy can soon be realized. |
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The World Health Organization (WHO) has lifted the Public Health Emergency of International Concern (PHEIC) for COVID-19 in May 2023. As the global economy continues to recover from the impact of COVID-19, and we believe that remote working and learning has been continuing and will continue post-COVID-19, which means that consumers will continue to use fixed and mobile broadband services, we expect a positive impact on our revenue. Moreover, we anticipate that the ending of pandemic-related restrictions in Indonesia will contribute to the overall economic growth moving forward, which should increase consumers' purchasing power. To capture potential increases in consumption of telecommunications services, we are implementing specific measures, such as managing network load and configuration to adapt to changes in traffic patterns, supply chain stabilization to ensure sufficient capacity, and providing support to customers to address their increasing demand for working collaboration, learning activities and entertainment.
| E. | CRITICAL ACCOUNTING ESTIMATES |
See Note 2x to our Consolidated Financial Statements for reference.
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. | DIRECTORS AND SENIOR MANAGEMENT |
In accordance with Law No. 40 of 2007 on Limited Liability Companies (as amended by the Job Creation Law 2023) and OJK Rule No. 33/POJK.04/2014 on the Board of Directors and the Board of Commissioners of Issuers or Public Companies ("OJK Rule No.33/2014"), we have a Board of Commissioners and a Board of Directors. These boards are separate and no individual may be a member of both boards.
The members of the Board of Commissioners and Board of Directors are elected and dismissed by shareholders' resolutions at a GMS. As stated in our Articles of Association, to be elected, candidates must be nominated and approved by the Government as the holder of the Dwiwarna Share. The term of office for each Commissioner and Director commences at the closing of the GMS which appoints such Commissioner or Director or such other time as specified by such GMS, and terminates at the closing of the fifth AGMS held after his/her appointment. Shareholders, through a GMS, have the right to discharge a Commissioner or Director at any time before the expiration of his/her term of office.
Board of Commissioners
Our Board of Commissioners is responsible for supervising and advising the Board of Directors. Our Board of Commissioners consists of ten members, one of whom is designated as the President Commissioner.
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As of December 31, 2023, the Board of Commissioners consisted of ten members as listed below:
Bambang Permadi Soemantri Brojonegoro | 57 | 2021 | President Commissioner/Independent Commissioner | ||||
Ismail | 54 | 2019 | Commissioner | ||||
Marcelino Rumambo Pandin | 58 | 2019 | Commissioner | ||||
Arya Mahendra Sinulingga | 53 | 2021 | Commissioner | ||||
Rizal Mallarangeng | 59 | 2020 | Commissioner | ||||
Isa Rachmatarwata | 57 | 2021 | Commissioner | ||||
Silmy Karim | 49 | 2023 | Commissioner | ||||
Wawan Iriawan | 60 | 2020 | Independent Commissioner | ||||
Bono Daru Adji | 55 | 2021 | Independent Commissioner | ||||
Abdi Negara Nurdin | 55 | 2021 | Independent Commissioner |
Each of our Commissioners was a citizen of and domiciled in Indonesia as of December 31, 2023. In accordance with OJK Rule No. 33/2014 which requires 30% of our Board of Commissioners to be independent, four Commissioners have been designated as Independent Commissioners. Our Independent Commissioners are Bambang Permadi Soemantri Brojonegoro, Wawan Iriawan, Bono Daru Adji and Abdi Negara Nurdin. The principal duty of our Independent Commissioners, in addition to exercising supervision, is to represent the interests of minority shareholders.
As from January 19, 2024, Mr. Abdi Negara Nurdin has ceased to serve as a commissioner of Telkom, pending ratification during our forthcoming 2024 Annual General Meeting of Shareholders.
Set forth below is a brief biography of each of our Commissioners:
Bambang Permadi Soemantri Brojonegoro assumed the role of President Commissioner/Independent Commissioner in June 2021. He also served as President Commissioner of PT Prudential Syariah since 2022, President Commissioner of PT Bukalapak Tbk. since 2021, Independent Commissioner of PT Astra International Tbk. since 2021, Independent Commissioner of TBS Energi Utama Tbk. since 2021, Commissioner of PT Combiphar since 2021, President Commissioner of PT Oligo Infrastruktur since 2021, Independent Commissioner of PT Indofood Tbk. since 2021, and President Commissioner of PT Nusantara Green Energy since 2021.
Previously, Prof. Dr. Bambang P.S. Brodjonegoro served as a Vice Minister of Finance (2013-2014), Minister of Finance (2014-2016), Minister of Planning and National Development/ Head of Bappenas (2016-2019), Minister of Research and Technology / Head of BRIN (2019-2021), and President Commissioner of PT Oligo Infrastruktur (2021-2023) He holds his Ph.D in Urban and Regional Planning from University of Illinois at Urbana-Champaign, United States (1995-1997), Master of Urban Planning, University of Illinois at Urbana-Champaign, United States (1991-1993), and a bachelor's degree in Economic, Universitas Indonesia (1985 -1990).
Ismail assumed the role of Commissioner in May 2019. Dr. Ismail has also served as Director General of Post and IT Devices Resources of MoCI since 2016. Previously, he served as Chairman of Indonesia Telecommunications Regulation Authority (2018-2019), Deputy Chairman of Indonesia Telecommunications Regulation Authority (2016-2018), Director of Broadband Development of MoCI (2014-2016), Director of Telecommunications of MoCI (2012-2014), Director of IT System Operations, Financial Transaction Reports and Analysis Center (2008-2012). Dr. Ismail holds a doctorate in electrical and informatics engineering from the Institut Teknologi Bandung, Bandung (2010), a master's degree in physics engineering from Universitas Indonesia, Jakarta (1999) and a bachelor's degree in physics engineering from the Institut Teknologi Bandung, Bandung (1993).
Marcelino Rumambo Pandin assumed the role of Commissioner in May 2019. Previously, Dr. Marcelino R. Pandin served as a member of the Committee of the World Observatory on Subnational Government Finance and Investment initiative of the OECD, Paris (2018-2019), and Senior Policy Advisor at United City and Local Government (UCLG) Asia Pacific, Jakarta (2017-2019). He holds his Ph.D. in Technology and Innovation from University of
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Queensland, Australia (2007), a master’s degree in philosophy from Judge Business School University of Cambridge, United Kingdom (1999), and a bachelor degree in architecture from the Institut Teknologi Bandung, Bandung (1991).
Arya Mahendra Sinulingga assumed the role of Commissioner in May 2021. Arya Mahendra Sinulingga has also served as Special Staff III to the Minister of State-Owned Enterprises since 2019. Previously, he served as a Drainage & Marine Consultant, Bandung (1995-2001), Expert Staff to the Chairman of the Regional House of Representatives and Spatial Consultant of North Sumatra Province (2001-2004), Member of the Indonesian Broadcasting Commission (2004-2007), Corporate Secretary of PT MNC Sky Vision (2007-2015), Corporate Secretary of PT Global Mediacom Tbk (2008-2014), President Director of PT Hikmat Makna Aksara (Sindo Weekly), Company Secretary of PT MNC Tbk (2010-2014), News Director & Corporate Secretary Global TV (2010-2018), Editor in Chief Global TV (2011-2014), Director PT MNC Investama Tbk and Editor in Chief RCTI (2014-2015), Director of PT MCI (2014-2018), News Director of PT MNC Tbk (2014-2019), President Commissioner of PT Hikmat Makna Aksara (2014-2019), Deputy Director iNews TV (2015-2018), President Commissioner of PT MNC Infotainment Indonesia (2017-2018), President Director of PT IDX Channel (2015-2018), Corporate Secretary Director of PT MNC Tbk (2018-2019), Commissioner of PT INALUM (2019-2021), Member of the Board of Trustees, Universitas Sumatera Utara (2020-now), Head of Public Communication Division of PMO Implementing KPCPEN (2021-2022). He holds a bachelor's degree in civil engineering from the Institut Teknologi Bandung, Bandung (1995).
Rizal Mallarangeng assumed the role of Commissioner in June 2020. He also served as Commissioner of PT. Energi Mega Persada since 2021. Previously, Rizal Mallarangeng served as Executive Director of Freedom Institute (2001-2020), Founder of Freedom Corp. (2016) and Founder of Fox Indonesia (2009). He holds a bachelor degree in communication science, Universitas Gadjah Mada, Yogyakarta (1990), a master degree in comparative politics from Ohio State University, United States (1994), and a doctoral degree in comparative politics, Ohio State University, United States (2000).
Isa Rachmatarwata assumed the role of Commissioner in June 2021. Isa Rachmatarwata has also served as Director General of Budget of Financial Institution, Ministry of Finance since 2021. Previously, he served as the Head of Insurance Bureau at the Capital Market and Financial Institutions Supervisory Agency (BAPEPAM/LK/replaced by OJK) – (2006-2012), Senior at the Fiscal Policy Agency, Ministry of Finance (2013), Expert Staff for Financial Services and Capital Market Policy and Regulation, Ministry of Finance (2013-2017), Director General of State Assets, Ministry of Finance (2017-2021). He holds a master degree in mathematics from the Institut Teknologi Bandung, Bandung (1990), Master of Mathematics (Actuarial Science) from University of Waterloo, Canada (1994).
Silmy Karim assumed the role of Commissioner in May 2023. Silmy Karim has also served as Director General of Immigration at the Ministry of Law and Human Rights since 2023. Previously, he served as the President Director of Krakatau Steel (2018-2023), Commissioner of PT GE Power Solution Indonesia (2016-2019), President Director of PT Barata Indonesia (Persero) (2016-2018), President Commissioner of MAN Diesel & Turbo Indonesia (2015-2016), President Director of PT Pindad (Persero) (2014-2016), Commissioner PT PAL Indonesia (Persero) (2011-2014), held various leadership positions in Ministry of Defense (2007-2014), Advisor on economic issues in Badan Intelijen Negara (BIN) Republik Indonesia (2013-2015), As special advisor in Indonesian Investment Coordinating Board (2010-2011). He holds a Master of Economy from Universitas Indonesia (2007), and a bachelor’s degree of Economy from Trisakti University (1997).
Wawan Iriawan assumed the role of Commissioner in June 2020. Previously, Wawan Iriawan served as Managing Partner at Iriawan & Co Law Firm (1990-2000). He holds a bachelor degree in law from Universitas Jenderal Soedirman, Central Java (1987), a master degree in law from Universitas Padjajaran, Bandung (2005), and a doctoral degree in law from Universitas Padjajaran, Bandung (2018).
Bono Daru Adji assumed the role of Independent Commissioner in May 2021. Previously, Bono Daru Adji served as Head of the Standard Committee (Dewan Standar) of the Indonesian Capital Market Legal Consultants Association (HKHPM) (2018-2021), Member of the Disciplinary Committee (Komite Disiplin) of the Indonesian Stock Exchange (2019-2022), Member of the Management Board, Indonesian Audit Committee Association (IKAI) (2022-2025), Member of Ethics Committee of Football Association of Indonesia (PSSI) (2023-now). He holds a bachelor’s degree in law from Universitas Trisakti (1993), a master’s degree in law from Monash University (1995).
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Abdi Negara Nurdin assumed the role of Commissioner in May 2021. Previously, Abdi Negara Nurdin served as Senior Advisor for Badan Ekonomi Kreatif (2015-2019), Member of Supervisory Board of LMKN (Lembaga Manajemen Kolektif Nasional) (2015-2016). He also served as Co-Founder PT. Hijau Multi Kreatif (2005-now), Founder Maleo Music (2009-now), Commissioner of PT NSA (2015-now), Co-Founder – Producer Give.ID (2019-now), Commissioner of PT Sugih Reksa Indotama (2020-now), Commissioner of PT. Nagara Sains Ekosistem (2021-now), Advisor at Persatuan Artis Penyanyi, Pencipta Lagu dan Pemusik Republik Indonesia (PAPPRI) (2022-now).
Board of Directors
Our Board of Directors is responsible for our overall management and day-to-day operations under the supervision of the Board of Commissioners. The Board of Directors consists of nine members, including a President Director.
The following table sets forth the functions and authority of our Directors.
Role | Functions and Authority | |
|---|---|---|
Director of Enterprise and Business Service | 1. | Responsible for the business strategy to drive disruptive competitive growth through winning competition and growing the enterprise digital segment business portfolio (enterprise, government and business). |
2. | Oversees our holding scheme strategy by implementing strategic control, coordination and subsidiary performance management over the enterprise CFU, in order to create company value through optimizing and harmonizing relations between our Company and our subsidiaries and managing the operations of subsidiaries under the enterprise CFU. | |
Director of Wholesale and International Service | 1. | Responsible for the business strategy to drive disruptive competitive growth through winning competitions and growing the wholesale and international segment business portfolio. |
2. | Oversees our holding scheme strategy by implementing strategic control, coordination and subsidiary performance management over the wholesale and international CFU, in order to create company value through optimizing and harmonizing relations between our Company and our subsidiaries and managing the operations of subsidiaries under the wholesale and international CFU. | |
Director of Digital Business | 1. | Responsible for the formulation and availability of an innovation strategy to optimize the digital services business and explore digital business opportunities. |
Director of Network, IT and Solution | 1. | Responsible for the business strategy to leverage our existing resources in order to develop and exploit our established businesses and services by utilizing infrastructure and IT solutions to support our business portfolio synergistically. |
2. | Oversees our parenting strategy over the network, IT and solutions functional unit in order to create company value through optimizing and harmonizing the functional management of network and IT solutions within our Group. | |
Director of Strategic Portfolio | 1. | Responsible for the formulation and availability of the corporate level strategy, including directional strategy, portfolio strategy and holding scheme strategy, and exploring new sources of growth through alliances and acquisitions and synergies. |
Director of Finance and Risk Management | 1. | Responsible for the formulation and availability of the corporate level strategy, including portfolio strategy and holding scheme strategy with regard to financial operations and procurement in order to encourage optimal financial performance and assets supply in realizing disruptive strategic growth within our Group. |
2. | Unless otherwise stipulated by the Board of Directors, the Director of Finance is acting as Telkom's representative at shareholders' general meeting of Telkom's subsidiaries. |
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Role | Functions and Authority | |
|---|---|---|
3. | Oversees our parent company's strategy over the financial functional unit for controlling asset management and asset leverage by implementing strategic control, coordination and subsidiary performance management, with the ultimate goal of creating company value through optimizing and harmonizing relations between our Company and our subsidiaries. | |
Director of Human Capital Management | 1. | Responsible for disseminating our corporate strategy, including directional strategy, portfolio strategy and holding scheme strategy on aspects related to the development of human capital, employee organization, corporate culture, leadership architecture and industrial relations. |
2. | Oversees human capital management within the TelkomGroup and supervises the Pension Fund and Telkom Foundation (Yayasan Telkom) by implementing strategic control, coordination and foundation performance management in order to create Company value through optimizing and harmonizing relations between our Company and our subsidiaries and managing the operations of subsidiaries under the human capital management functional unit. | |
Director of Group Business Development | 1. | As new member, the Director of Group Business Development has a key role for driving business development and ensuring comprehensive strategic governance. This involves a range of responsibilities, including strategy development, strategy alignment, business planning and business development. By focusing on these areas, the Director is able to help build competitive advantage and drive growth across the business portfolio. |
2. | Oversees TelkomGroup business growth including implementing holding scheme strategy, functional strategy, and business development to improve the interrelation between parent and Group Business Development operations. This is all in an effort to create more value for companies within TelkomGroup. |
As of December 31, 2023, the Board of Directors consisted of nine members as listed below:
Name |
| Age |
|
| Director Since |
| Position |
Ririek Adriansyah | 60 | 2019 | President Director(1) | ||||
Heri Supriadi | 58 | 2020 | Director of Finance and Risk Management(2) | ||||
Herlan Wijanarko | 58 | 2020 | Director of Network, and IT Solution | ||||
F.M. Venusiana R. | 57 | 2022 | Director of Enterprise and Business Service | ||||
Muhamad Fajrin Rasyid | 37 | 2020 | Director of Digital Business | ||||
Budi Setyawan Wijaya | 51 | 2020 | Director of Strategic Portfolio | ||||
Bogi Witjaksono | 56 | 2021 | Director of Wholesale and International Service | ||||
Afriwandi | 52 | 2020 | Director of Human Capital Management | ||||
Honesti Basyir | 55 | 2023 | Director of Group Business Development |
Notes:
(1) | This position is equivalent to Chief Executive Officer ("CEO"). |
(2) | This position is equivalent to Chief Financial Officer ("CFO"). |
Each of our Directors was a citizen of and domiciled in Indonesia as of December 31, 2023. Set forth below is a brief biography of each of our Directors:
Ririek Adriansyah assumed the role of President Director in May 2019. He previously served as President Commissioner of Telkomsel (2019-2021), President Director of Telkomsel (2015-2019), Director of Wholesale and International Service (2014), Director of Compliance and Risk Management (2012-2013), President Director of Telin (2011-2012), Director of Marketing and Sales of Telin (2010-2011), and Director of International Carrier Service of Telin (2008-2010). Mr. Adriansyah holds a bachelor degree in electrical engineering from Institut Teknologi Bandung, Bandung (1989).
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Heri Supriadi assumed the role of Director of Finance and Risk Management in June 2020. He is also served as Commissioner of PT Telekomunikasi Seluler since 2021. He previously served as President Commissioner of PT Graha Sarana Duta (2020-2023), President Commissioner of PT Telekomunikasi Seluler (2020), President Commissioner of PT Fintech Karya Nusantara (2019-2020), President Commissioner of PT Telkomsel Mitra Inovasi (2019-2020), President of Commissioner of PT Fintech Karya Nusantara (2019-2020), and Director of Finance of Telkomsel (2012-2020), and Vice President Subsidiary Performance of PT Telkom Indonesia. Mr. Supriadi holds a bachelor degree in industrial engineering from Institut Teknologi Bandung (1991), master degree in business administration from Saint Mary’s University, Canada (1997), and doctoral degree in business management specialization from Universitas Padjajaran, Bandung (2013).
Herlan Wijanarko assumed the role of Director of Network, IT and Solution in June 2020. He is also served as Commissioner of PT Dayamitra Telekomunikasi, Tbk. since 2023. He previously served as President Commissioner of PT Dayamitra Telekomunikasi, Tbk. (2020-2023), President Commissioner of PT Infrastruktur Indonesia (2022), President Director of PT Dayamitra Telekomunikasi, Tbk. (2018-2020), EGM Service Operation Division (2016-2018), Deputy EGM Infra Operation & Maintenance (2015-2016), Deputy EGM Network Infrastructure & Access (2014-2015), Deputy EGM IP Network & Operation (Jan 2014 – July 2014), GM Northwest West Java (Bekasi) (2013-2014), GM Network Regional West Java Region (2010-2013), GM Central Java Regional, Regional Network (2009-2010), and GM Regional Network for Eastern Indonesia (2007-2009) of PT Telkom Indonesia. Mr. Wijanarko holds a bachelor degree in electrical engineering from Institut Teknologi Bandung (1989), and a master degree in management from Sekolah Tinggi Manajemen Bisnis Telkom, Bandung (2005).
F.M. Venusiana R. assumed the role of Director of Enterprise and Business Service in July 2022. She previously served as Director Consumer Service of Telkom (2020-2023), President Commissioner of Telkom Access (2022-2023), President Commissioner of PINS Indonesia (2022-2023), Director of Network of Telkomsel (Jan 2020 – June 2020), Senior VP Procurement of Telkomsel (2017-2019), Senior VP Consumer Marketing of Telkomsel (2016-2017), and Executive VP Area Jabodetabek West Java of Telkomsel (2013-2016). Mrs. Venusiana holds a bachelor degree in electrical engineering from Universitas Diponegoro, Semarang (1992), and a master degree in management from Universitas Hasanuddin, Makassar (2004).
Muhamad Fajrin Rasyid assumed the role of Director of Digital Business in June 2020. He also served as Commissioner of PT MDI since 2023, and Commissioner of PT Digital Aplikasi Solusi since 2023. He previously served as President Commissioner of PT Metranet (2020-2023), Commissioner of PT Sigma Cipta Caraka (2020-2023), President Commissioner of PT MDI (2020-2023), Co-Founder & President of Bukalapak (2011-2020), President Director of Suitmedia (2011-2014), and Consultant at The Boston Consulting Group (BCG) (2009-2011). Mr. Rasyid holds a bachelor’s degree in informatic engineering from Institut Teknologi Bandung (2009), he completed an executive education program in scaling entrepreneurial ventures from Harvard Business School, United States (2018), and an executive education program in innovations and growth from the Stanford Graduate School of Business, United States (2019).
Budi Setyawan Wijaya assumed the role of Director of Strategic Portfolio in June 2020. He also served as Commissioner of PT Sigma Cipta Caraka since 2023 and Member of the Board of Trustees of Telkom Education Foundation since 2020. He previously served as President Commissioner of PT Multimedia Nusantara (2022), President Commissioner of PT Sigma Cipta Caraka (2020), President Commissioner of PT Jalin Pembayaran Nusantara (2020), President Director of Admedika (2017-2020), President Director of MD Media (2015-2017), and President Director of Melon (2013-2015). Mr. Wijaya holds a bachelor’s degree in industrial engineering from Sekolah Tinggi Teknologi Telkom, Bandung (1995), and a master degree in management from Sekolah Tinggi Manajemen Bisnis Telkom, Bandung (2003).
Bogi Witjaksono assumed the role of Director of Wholesale and International Service in May 2021. He also served as Commissioner of PT Telekomunikasi Indonesia International (TELIN) since 2021, Commissioner of PT Telkom Satelit since 2022, and Commissioner of Telkom Data Ekosistem (NeutraDC) since 2022. He previously served as President Commissioner of PT Telkom Infra (2021-2023), Director of Enterprise and Business Service of PT Telkom Indonesia (2019 - 2020), President Commissioner of Telkomsat (2019-2020), President Commissioner of Telkom Metra (Sep-Nov 2019), Deputy President Director / COO of Telkom Satelite (2018-2019), CEO of Patrakom (2015-2019) and Managing Director of Metrasat (2012-2019). Mr. Bogi holds a bachelor degree in Electrical Engineering from Institut Teknologi
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Surabaya (1985-1989) and a master degree in Telecommunications Engineering (Mobile Communication) from Institut Teknologi Bandung (1993-1995).
Afriwandi assumed the role of Director of Human Capital Management in June 2020. He previously served as Chairman of the Supervisory Board Telkom Pension Fund (2020-2023), President Commissioner of Infomedia (2020-2023), SVP Corporate Secretary (2015-2020), Executive General Manager Regional VII (2014-2015), Deputy EGM Divisi Business Service (2013-2014), and General Manager of National Segment of Welfare Service Unit (2012-2013). Mr. Afriwandi holds a bachelor degree in industrial engineering from Sekolah Tinggi Teknologi Telkom (1995), Bandung, and a master degree in management from Universitas Islam Sumatera Utara, North Sumatra (2011).
Honesti Basyir assumed the role of Director of Group Business Development in May 2023. He previously served as President Director of PT Bio Farma (Persero) (2019-2023), President Director of PT Kimia Farma (2017-2019), Director of Wholesale and International Services of PT Telkom Indonesia (Persero) Tbk (2014-2017), Director of Finance of PT Telkom Indonesia (Persero) Tbk (2012-2014). Mr. Honesti Basyir holds a bachelor’s degree in industrial engineering from Sekolah Tinggi Teknologi Telkom (1992), Bandung, and master degree in corporate finance from Institut Manajemen Telkom (2002).
Other than as provided for under our Articles of Association, none of our Commissioners or Directors has any arrangement or understanding with any major shareholder, customer, supplier or with us pursuant to which such person was selected as a Commissioner or Director, nor are any such arrangements, understanding or contracts proposed or is under consideration. There is no family relationship between or among any of the Commissioners or Directors listed above. The business address of our Commissioners and Directors is Jl. Jend. Gatot Subroto Kav.52 Jakarta - 12710, Indonesia.
B. COMPENSATION
Compensation of Commissioners and Directors
Compensation of Commissioners and Directors are determined by the shareholders at the GMS, who grant authority and authorization to the Board of Commissioners, with prior approval from the holder of the Dwiwarna Share, to decide on the amount of tantiem which will be given to the members of Board of Directors and Board of Commissioners for the fiscal year ended December 31, 2023, and also as to the amount of the salary or honorarium, including facilities and allowances for the members of Board of Directors and Board of Commissioners for the fiscal year ended December 31, 2023. The Nomination and Remuneration Committee is responsible for formulating the honorarium of our Commissioners and Directors, which is further discussed in a joint meeting of our Board of Directors and Board of Commissioners for approval.
Each Commissioner is entitled to monthly remuneration and benefits. They are also entitled to bonuses based on our business performance and achievements.
Each Director is entitled to a remuneration consisting of a monthly salary and other allowances. Directors also receive an annual bonus based on our business performance and achievements. The bonus and incentive are budgeted every year based on a formula prepared by the Nomination and Remuneration Committee and confirmation from the Board of Commissioners before being considered by shareholders at the GMS.
In accordance with regulations relating to SOEs in Indonesia, all of our Commissioners and Directors are entitled to post-employment benefits, including an insurance scheme into which we are required to contribute up to 25% of the salary of our Commissioners and Directors. There are no service contracts providing for benefits to be provided for our Directors or Commissioners upon their termination as Directors or Commissioners. We also provide our Commissioners and Directors with long-term incentives in the form of shares or for our Independent Commissioners in the form of cash.
We budgeted incentives for the current year but will distribute such incentives in the following year after the publication of our Consolidated Financial Statements and having the approval in a GMS. We only distribute cash incentives if we achieve certain performance targets.
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For 2023, the total remuneration paid to the entire Board of Commissioners was Rp103,138,612,368. The table below sets forth the remuneration paid to our Commissioners received in 2023.
Commissioners | Honorarium | Religious Holiday Allowances | Transport Allowances | Tantiem | Total |
(Rupiah) | |||||
Bambang P. S. Brodjonegoro | 2,349,000,000 | 195,750,000 | 469,800,000 | 9,356,163,050 | 12,370,713,050 |
Bono Daru Adji | 2,114,100,000 | 176,175,000 | 422,820,000 | 8,446,270,721 | 11,159,365,721 |
Abdi Negara Nurdin | 2,114,100,000 | 176,175,000 | 422,820,000 | 8,446,174,292 | 11,159,269,292 |
Wawan Iriawan | 2,114,100,000 | 176,175,000 | 422,820,000 | 8,446,237,979 | 11,159,332,979 |
Arya Mahendra Sinulingga | 2,114,100,000 | 176,175,000 | 422,820,000 | 8,446,367,150 | 11,159,462,150 |
Isa Rachmatarwata | 2,114,100,000 | 176,175,000 | 422,820,000 | 8,446,367,150 | 11,159,462,150 |
Ismail | 2,114,100,000 | 176,175,000 | 422,820,000 | 8,446,367,150 | 11,159,462,150 |
Marcelino Rumambo Pandin | 2,114,100,000 | 176,175,000 | 422,820,000 | 8,446,270,721 | 11,159,365,721 |
Rizal Mallarangeng | 2,114,100,000 | 176,175,000 | 422,820,000 | 8,446,045,122 | 11,159,140,122 |
Silmy Karim(1) | 1,244,199,194 | 0 | 248,839,839 | 0 | 1,493,039,033 |
Total | 20,505,999,194 | 1,605,150,000 | 4,101,199,839 | 76,926,263,335 | 103,138,612,368 |
Notes:
(1) | Mr. Silmy Karim has served as Commissioner since May 30, 2023. |
For the fiscal year ended December 31, 2023, the total remuneration paid to the entire Board of Directors was Rp198,197,862,348. The table below sets forth the remunerations paid to our Directors received for the fiscal year ended December 31, 2023:
Directors | Honorarium | Religious Holiday Allowances | Transport Allowances | Tantiem | Total |
(Rupiah) | |||||
Ririek Adriansyah | 5,220,000,000 | 435,000,000 | 300,000,000 | 20,757,628,373 | 26,712,628,373 |
Afriwandi | 4,437,000,000 | 369,750,000 | 300,000,000 | 17,643,984,117 | 22,750,734,117 |
Heri Supriadi | 4,437,000,000 | 369,750,000 | 300,000,000 | 17,643,984,117 | 22,750,734,117 |
FM Venusiana R | 4,437,000,000 | 369,750,000 | 300,000,000 | 17,643,984,117 | 22,750,734,117 |
Herlan Wijanarko | 4,437,000,000 | 369,750,000 | 300,000,000 | 17,643,984,117 | 22,750,734,117 |
Muhamad Fajrin Rasyid | 4,437,000,000 | 369,750,000 | 300,000,000 | 17,643,984,117 | 22,750,734,117 |
Budi Setyawan Wijaya | 4,437,000,000 | 369,750,000 | 300,000,000 | 17,643,984,117 | 22,750,734,117 |
Bogi Witjaksono | 4,437,000,000 | 369,750,000 | 300,000,000 | 17,643,984,117 | 22,750,734,117 |
Honesti Basyir(1) | 2,611,282,258 | 0 | 176,612,903 | 0 | 2,787,895,161 |
Edi Witjara(2) | 0 | 0 | 0 | 9,442,199,995 | 9,442,199,995 |
Total | 38,890,282,258 | 3,023,250,000 | 2,576,612,903 | 153,707,717,187 | 198,197,862,348 |
Notes:
(1) | Mr. Honesti Basyir has served as Director of Group Business Development since May 30, 2023. |
(2) | No longer in charge since July 8, 2022. |
The total accrued remuneration of the Board of Commissioners and the Board of Directors for the year ended December 31, 2023, was Rp301,336,474,716 including tantiem. Neither our Directors nor the directors of our subsidiaries will receive benefits upon the termination of their respective employment with our subsidiaries.
Equity Compensation Plans
On June 22, 2022, our Board of Directors adopted an executive compensation recovery policy (the "Clawback Policy"), which provides for the recovery of certain incentive-based compensation from current and former members of our Board of Commissioners and/or our Board of Directors in the event that we are required to restate any of our financial statements filed with the SEC under the Exchange Act to correct an error that is material to the previously-issued financial statements, or that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period. Adoption of the Clawback Policy was mandated by new Section 303A.14 of the NYSE Listed Company Manual, which was introduced pursuant to Rule 10D-1 of the Exchange Act. The Clawback Policy is in
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addition to Section 304 of the Sarbanes-Oxley Act of 2002, which permits the SEC to order the disgorgement of bonuses and incentive-based compensation earned by a registrant issuer's chief executive officer and chief financial officer in the year following the filing of any financial statement that the issuer is required to restate because of misconduct, and the reimbursement of those funds to the issuer. A copy of the Clawback Policy has been filed herewith as Exhibit 97.1.
C. BOARD PRACTICES
Our Board of Commissioners acts as our overall supervisory and monitoring body with principal functions including planning and development, operations and budgeting in compliance with our Articles of Association, and to carry out the mandate and resolutions of the AGMS and EGMS. The Board of Commissioners does not have the authority to run or manage our Company, except in the exceptional situation when all members of the Board of Directors are suspended for any reason. The Board of Commissioners provides advice and opinions to the AGMS with respect to financial reporting, business development, appointment of auditors, and other important and strategic matters related to corporate actions. The Board of Commissioners also reviews our work plan and budget, keeps abreast of our progress, and in case our Company gives an indication of any decline in the growth of our business immediately requests the Board of Directors to notify the shareholders and provides recommendations on measures for mitigation. Finally, the Board of Commissioners ensures that our corporate governance program is properly applied and maintained in accordance with the applicable regulations.
The Board of Commissioners is obliged to carry out its duties and responsibilities in accordance with our Articles of Association, decisions made during any AGMS and EGMS and applicable laws and regulations.
The Board of Commissioners is assisted by a Board of Commissioners Secretary as well as the Audit Committee, the Nomination and Remuneration Committee and the Planning and Risk Evaluation and Monitoring Committee.
Meetings of the Board of Commissioners are held once every month. The Board of Commissioners must hold joint meetings with the Board of Directors at least once every three months. Decisions at Board of Commissioners meetings are taken through a process of deliberation and consensus. In the absence of consensus, decisions are based on a majority vote of the Commissioners in attendance or who are represented at the meeting. The quorum for all Board of Commissioners meetings requires attendance in person, through electronic media (such as teleconference or video conference) or by proxy granted to another Commissioner, which shall represent more than one-half of the total number of Commissioners.
The Board of Directors is generally responsible for managing our business in accordance with applicable laws, our Articles of Association and the policies and directives issued by the GMS and the Board of Commissioners. The Board of Directors also is authorized to act for and on our behalf, inside or outside a court of law, on any matter and for any event, with another party.
Meetings of the Board of Directors are held at least once a month and may be convened at any time deemed necessary or at the request of one or more members of the Board of Directors, or at the request of the Board of Commissioners.
Meetings of the Board of Directors are chaired by the President Director. In the event that the President Director is unavailable or absent for any reason, the meeting will be chaired by the Vice President Director. If the Vice President Director is unavailable, the meeting will be chaired by any Director appointed by the President Director. In the absence of the President Director and the Vice President Director and no appointment has been made, any director who has the longest tenure will chair the meeting.
Decisions at Board of Directors meetings are taken through a process of deliberation and consensus. If consensus cannot be reached, decisions are based on a majority vote of the Directors in attendance at the meeting. In the event of a tie, the proposed resolution will be decided by a Director who chairs such Board of Directors meeting. The quorum for all Board of Directors meeting requires attendance in person, or through video conference or by proxy granted to another Director, of Directors representing more than one-half of the total number of Directors. Each Director who is present at a Board of Directors meeting is entitled to cast one vote (and one vote for each other Director represented by proxy).
Individual Directors are charged with specific responsibilities. For more detailed information regarding the functions and authority of each of our Directors, see "— Directors and Senior Management — Board of Directors."
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Audit Committee
The Audit Committee operates under the authority of the Audit Committee Charter, which was adopted under a Decree of the Board of Commissioners No. 11/KEP/DK/2021 dated November 29, 2021 in relation to the Charter of the Telkom Group Audit Committee. The Audit Committee Charter is regularly evaluated and, if necessary, amended to ensure compliance with OJK and SEC requirements and other relevant regulations.
The Audit Committee Charter outlines the Audit Committee's purpose, function and responsibilities. It provides that the Audit Committee is responsible for, among other things:
· | conducts studies and discussions with management regarding the Company’s quarterly consolidated financial statements before these financial reports are reported to the Financial Services Authority and the Stock Exchange; |
· | monitoring the effectiveness of risk management and internal control; |
· | monitoring the effectiveness of our internal audit; |
· | conducting oversight of the integrated audit process; |
· | reviewing our Consolidated Financial Statements and the effectiveness of internal controls over financial reporting (ICOFR); |
· | assisting the Board of Commissioners with the appointment of independent auditors; |
· | approving non-audit services to be performed by our independent auditors; |
· | providing an independent opinion in the event of differences of opinion between our management and independent auditors; |
· | monitoring the steps taken by Directors to follow up on the findings of our internal auditors; |
· | monitoring compliance with laws and regulations (including capital market laws) relating to our business; |
· | analyzing and providing advice to the Board of Commissioner relating to potential conflicts of interest; |
· | oversee the audit process of the Social and Environmental Responsibility Program; |
| ● | oversee whistleblowing system called Telkom Integrity Line; |
| ● | maintaining confidentiality of documents, data, and information; |
| ● | carrying out additional tasks that are assigned by the Board of Commissioners, especially on financial and accounting related matters as well as other obligations required by the Sarbanes-Oxley Act of 2002; and |
| ● | subject to the written approval from the Board of Commissioners, the Audit Committee may engage an independent consultant or other professional advisors to assist in carrying out its functions. |
Audit Committee Independence
OJK Rule No. 55/POJK.04/2015 on Establishment and Code of Conduct for Audit Committees ("OJK Audit Committee Regulation") requires the board of commissioners of a public company to establish an audit committee which is chaired by an independent commissioner. In addition, the OJK Audit Committee Regulation requires each member of such audit committee to be either an independent commissioner or external independent member, with the audit committee comprised of at least three members with at least one independent commissioner presiding over the audit committee as chairman and one external independent member and at least one member of the audit committee having expertise in accounting or finance. We also require at least one external independent member to have expert knowledge (in the context of Item 16A of Form 20-F) in the field of accounting or finance.
In order to be considered independent under the prevailing Indonesian rules, the members of the audit committee may not, among other things:
· | be an insider of a public accountant firm, law firm, appraisal firm or other firm that has provided assurance, non-assurance, appraising or consultation services to us within six-month period prior to his or her appointment as an audit committee member; |
· | have been our executive officer within six-month period prior to his or her appointment as an audit committee member; |
· | be affiliated with our principal shareholder (owner of at least 20% of its share capital); |
· | have a family relationship (affiliated) with any member of the board of commissioners or board of directors; |
· | own, directly or indirectly, any of our shares; and |
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· | have any business relationship, directly or indirectly, that relates to our businesses. |
As of December 31, 2023, the Audit Committee consists of six members (including the chairman): (i) Bono Daru Adji (Independent Commissioner and Chairman of the Audit Committee); (ii) Bambang Permadi Soemantri Brojonegoro (Independent Commissioner), (iii) Wawan Iriawan (Independent Commissioner); (iv) Abdi Negara Nurdin (Independent Commissioner); (v) Edy Sihotang (Independent Member and Forensic Audit Expert); and (vi) Emmanuel Bambang Suyitno (Independent Member and Financial Expert).
However on February 6, 2024 there was a change in the Audit Committee members which consists of five members (including the chairman): (i) Bono Daru Adji (Independent Commissioner and Chairman of the Audit Committee); (ii) Bambang Permadi Soemantri Brojonegoro (Independent Commissioner), (iii) Wawan Iriawan (Independent Commissioner); (iv) Edy Sihotang (Independent Member and Forensic Audit Expert); and (v) Emmanuel Bambang Suyitno (Independent Member and Financial Expert).
Committee Financial Expert
See “Item 16A. Audit Committee Financial Expert."
Exemption From U.S. Listing Standards For Audit Committees
See “Item 16D. Exemptions from the Listing Standards for Audit Committees."
Nomination and Remuneration Committee
Our Nomination and Remuneration Committee operates under the authority of the Board of Commissioner's decree No. 08/KEP/DK/2023 dated August 2, 2023, regarding the Charter of Telkom’s Nomination and Remuneration Committee.
The objective of the Nomination and Remuneration Committee is to establish, administer and enforce corporate governance principles in the process of nomination for strategic management positions and the determination of the Board of Directors remuneration. The duties of the Nomination and Remuneration Committee include the following:
· | to establish our organizational structure one level below the Board of Directors, with reference to the principles of good corporate governance. |
· | to assist the Board of Commissioners who are engaged with the Directors in selecting candidates for strategic positions in our Company. |
· | to give recommendations to the Board of Commissioners to be conveyed to the holder of the Dwiwarna Share regarding: |
- | the composition of the Board of Directors. |
- | candidates for the President Director and President Commissioner of all of Company's subsidiaries. |
- | candidates for the Board of Directors and Board of Commissioners of our subsidiaries if the relevant subsidiary’s assets or revenues are equal or in excess of 50% of the consolidated assets or consolidated revenues of Telkom, respectively. |
· | provide recommendations to the Board of Commissioners to be submitted to the General Meeting of Shareholders through the holder of the Dwiwarna Share concerning the policies, amount and / or structure for the remuneration of the Board of Directors and Board of Commissioners. |
· | determine remuneration of the Board of Directors and Board of Commissioners in the form of fixed salary or honorarium, allowances and facilities and variable incentives. |
· | review the employment contract and/or performance statement of each member of the Board of Directors. |
As of December 31, 2023 our Nomination and Remuneration Committee consists of six members (including the chairman): (i) Wawan Iriawan (Independent Commissioner and Chairman of the Nomination and Remuneration Committee), (ii) Rizal Mallarangeng (Commissioner), (iii) Ismail (Commissioner), (iv) Marcelino Rumambo Pandin (Commissioner), (v) Arya Mahendra Sinulingga (Commissioner), and (vi) Silmy Karim (Commissioner) and (vii) Abdi
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Negara Nurdin (Independent Commissioner). In the execution of their tasks, members of the Nomination and Remuneration Committee have to act independently.
However on February 6, 2024 there was a change in the Nomination and Remuneration Committee members which consists of five members (including the chairman): ((i) Wawan Iriawan (Independent Commissioner and Chairman of the Nomination and Remuneration Committee), (ii) Rizal Mallarangeng (Commissioner), (iii) Ismail (Commissioner), (iv) Marcelino Rumambo Pandin (Commissioner), (v) Arya Mahendra Sinulingga (Commissioner), and (vi) Silmy Karim (Commissioner).
D. EMPLOYEES
We manage our human capital resources strategically, in particular as we are moving towards more digitalization throughout the Telkom Group at a pace which has increased since the beginning of COVID-19. We encourage agile working, including by cross-staffing, teaming up with colleagues from different departments and functions and involving team members with different skills and expertise to work creatively on new services and product development. We are committed to offering a professional, safe, and comfortable work environment that foster collaboration, efficiency, and the wellbeing of our employees. We believe in an inclusive and non-discriminatory culture and workplace.
We had a total of 23,064 employees (including 20,605 permanent employees, representing 89.34% of our workforce) as of December 31, 2023, consisting of 7,469 Telkom employees (including 7,170 permanent employees) and 15,595 employees (including 13,435 permanent employees) of our subsidiaries. As of December 31, 2023, 22,863 of our employees were located in Indonesia and 201 of our employees were located overseas. In comparison, we had a total of 23,793 employees as of December 31, 2022, and 23,756 employees as of December 31, 2021.
As of December 31, 2023, we had 307 senior management employees, compared with 322 senior management employees as of December 31, 2022. The total number of middle management employees decreased from 6,209 employees as of December 31, 2022, to 6,155 employees as of December 31, 2023. The number of supervisor level employees decreased from 12,632 employees as of December 31, 2022, to 12,331 employees as of December 31, 2023. Other employees decreased from 4,630 employees as of December 31, 2022, to 4,271 employees as of December 31, 2023. We did not employ a significant number of temporary employees in 2023. The following table shows our employee profile by position.
Position | As of December 31, 2023 | |||||||
| Telkom | Subsidiaries | Telkom Group | Percentage (%) | ||||
Senior Management |
| 122 | 185 | 307 | 1.33 | |||
Middle Management |
| 2,645 | 3,510 | 6,155 | 26.69 | |||
Supervisors |
| 3,653 | 8,678 | 12,331 | 53.46 | |||
Others |
| 1,049 | 3,222 | 4,271 | 18.52 | |||
Total |
| 7,469 | 15,595 | 23,064 | 100.0 | |||
Our employee profile based on educational background as of December 31, 2023, was dominated by university graduates who accounted for 67.74% of our total employees. This reflects our focus on recruiting highly educated candidates with the right qualifications to support our growth. The following table shows our employee profile by educational background.
Level of Education | As of December 31, 2023 | |||||||
| Telkom | Subsidiaries | Telkom Group | Percentage (%) | ||||
Pre University | 779 | 1,284 | 2,063 | 8.94 | ||||
Diploma Graduates | 437 | 1,742 | 2,179 | 9.45 | ||||
University Graduates | 4,628 | 10,996 | 15,624 | 67.74 | ||||
Post Graduates | 1,625 | 1,573 | 3,198 | 13.87 | ||||
Total | 7,469 | 15,595 | 23,064 | 100.0 | ||||
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Digital Talents
We intend to nurture best-in-class digital talents who will be able to help develop our digital capabilities and increase the widespread adoption of digitalization. To reach this goal, we have developed two main strategies.
Our first strategy consists in developing internal digital talents and develop a digital environment and culture. Our talent development programs and also our corporate culture activation programs are designed to accelerate our transformation into a digital telecommunications company and empower our employees internally by offering training sessions and advice.
Our second strategy consists in acquiring digital capabilities from third parties and create a collaborative ecosystem through partnerships with third parties to further accelerate our transformation into a digital telecommunications company.
As of December 31, 2023, we had identified and developed 4,033 digital talents, including 2,833 talents sourced internally and 1,200 talents sourced externally. These digital talents participate in training and development programs and can obtain Telkom certifications delivered internally. In 2023, expenses incurred in connection with our digital training and certification programs amounted to approximately Rp186.99 billion.
Compensation and Benefits
We apply a comprehensive compensation and benefit/reward system which comprises: (i) basic allowances (monthly and non-monthly), including various allowances that may be given in case the employee is located in a disaster or conflict areas, holiday allowances, health, housing and transportation allowances, social security, and pension benefits, (ii) career and development allowances and benefits (training, coaching/mentoring, scholarships, career development opportunities), (iii) performance-based compensation such as sales and marketing incentives and other variable performance-based monetary such as bonuses. Our compensation and benefits policies are stated in a collective labor agreement (Perjanjian Kerja Bersama), which is reviewed every three years.
Retirement Program
The retirement age for all our employees is 56 years. We have two pension schemes: (a) DBPP – Defined Benefit Pension Plan, which is applicable to permanent employees (other than our Directors) who were permanent prior to July 1, 2002 and (b) DCPP – Defined Contribution Pension Plan, which is applicable to permanent employees (other than our Directors) who were permanent on or after July 1, 2002.
a. Defined Benefit Pension Plan
DBPP is calculated for participants based on years of service, salary level at retirement and is transferable to dependent families if the respective employee passes away. Telkom Pension Fund administers the program while the main source of pension fund comes from us and employee contributions. Employees participate in the program with 18% of their basic salary (before March 2003, the employee contribution rate was 8.4%) while we contribute the remaining balance. The minimum monthly pension benefit for retired employees is approximately Rp1,000,000 per month, or minimum Rp750,000 per month for spouses of the retired employees. We did not make any contribution to the DBPP for the fiscal years ended December 31, 2017 and 2018. In the fiscal year ended December 31, 2023, we contributed Rp1,635 billion to the DBPP.
b. Defined Contribution Pension Plan
We operate a DCPP for permanent employees other than Directors who were permanent on or after July 1, 2002. DCPP is managed by several appointed financial institutions pension fund from which employees can choose. Our contribution to the financial institutions pension fund is determined by the portion taken from participating employee's
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basic salary, which totaled Rp44 billion, Rp48 billion and Rp50 billion, for the years ended December 31, 2021, 2022, and 2023 respectively.
Management of Employee Relations
Pursuant to Law No. 13 of 2003 on Manpower (as amended by the Job Creation Law 2023, the "Manpower Law") and Law No. 21 of 2000 on Employee Unions and Labor Unions, our employees established SEKAR (Serikat Karyawan). As of December 31, 2022, SEKAR represented a total of 5,925 employees, which was 79.3% of our total workforce (excluding the employees of our subsidiaries).
Pursuant to the Manpower Law and Regulation of the Minister of Manpower and No. 28 of 2014 on Procedure for Drafting and Ratifying Corporate Regulation also Drafting and Registering Collective Labor Agreement, SEKAR is entitled to represent employees in the negotiation of collective labor agreements with our management. Our Company and SEKAR entered into a 10th collective labor agreement dated January 13, 2024.
The employees of Telkomsel, PT Infomedia Nusantara, Metra Digital Media, Graha Sarana Duta and Telkomsigma have also established employees' unions. Telkomsel employees' union (Serikat Pekerja Telkomsel or "SEPAKAT") represented a total of 4,756 employees (79.7% of Telkomsel's total employees) as at December 31, 2023. Infomedia Nusantara employees' union (Serikat Pekerja Infomedia Nusantara or SPIN) represented a total of 256 employees 83.3% of Infomedia Nusantara's total employees) as at December 31, 2023. Metra Digital Media's and Graha Sarana Duta's employees' union (Serikat Pekerja Metra Digital or "SPMD" and Serikat Karyawan Graha Sarana Duta or "SKATA") respectively represented a total of 106 employees (91% of the total number of employees of Metra Digital Media) and 702 employees (90.1% of the total number of employees of Graha Sarana Duta). Telkomsigma's employees' union (Serikat Karyawan Telkomsigma or "SERASI") represented a total of 450 employees (24% of Telkomsigma's total employees) as at December 31, 2023.
E. SHARE OWNERSHIP
As of February 29, 2024, none of our Commissioners, Directors or senior management beneficially owned more than 5% of our outstanding shares of common stock For information regarding share ownership of our Commissioners, Directors, and senior management, see “Item 7. Major Shareholders and Related Party Transactions — Major Shareholders.”
Employee Stock Ownership Program
Our Employee Stock Ownership Program ("ESOP") is an employee-owner scheme that provides our employee with an ownership interest in our Company. At our initial public offering on November 14, 1995, a total of 116,666,475 shares were issued to 43,218 employees. On June 14, 2013, we transferred a portion of our treasury stock to our employees as part of our 2012 annual incentives. On such date, 59,811,400 shares of common stock (equal to 299,057,000 shares after stock split) were transferred to 24,993 employees with a total fair value of Rp661 billion. As of December 31, 2023, 43,624,510 of our shares were owned by 7,086 of our employees and our retirees. From 2014 through 2023, we did not exercise any ESOP. We also provide our Commissioners (except for Independent Commissioners) and Directors with long-term incentives in the form of shares. See "— Compensation — Compensation of Commissioners and Directors."
Stock Split and Depositary Receipt Ratio
At our GMS on April 19, 2013, a stock split with a ratio of 1:5 was approved by our shareholders. New shares of common stock were deposited into shareholders accounts on September 2, 2013, as part of the stock split. In connection with our stock split, effective September 3, 2013, we changed the ratio of our ADSs from one ADS representing 40 shares of common stock, par value Rp250 per share, to one ADS representing 200 shares of common stock, par value Rp50 per share.
On October 26, 2016, we changed the ratio of our ADSs from one ADS representing 200 shares of common stock, par value Rp50 per share, to one ADS representing 100 shares of common stock, par value Rp50 per share.
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| F. | DISCLOSURE OF A REGISTRANT’S ACTION TO RECOVER ERRONEOUSLY AWARDED COMPENSATION |
As of the date hereof, no actions that have been taken to recover erroneously awarded compensation following an accounting restatement, and we are compliant with the aforementioned guideline.
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A. MAJOR SHAREHOLDERS
Shareholder Composition
Our authorized capital consists of one Dwiwarna Share and 389,999,999,999 shares of common stock. Our authorized shares, 99,062,216,600 of which are issued and fully paid, consists of one Dwiwarna Share and 99,062,216,599 shares of common stock. The Dwiwarna Share is owned by the Government and carries special voting rights, such as the right to nominate, and to veto the appointment and removal of, any director or commissioner, the right to veto the issuance of new shares and amendments to our Articles of Association, including amendments to merge or dissolve us, to increase or decrease our authorized capital or to reduce our subscribed capital. The material rights and restrictions applicable to the common stock also apply to the Dwiwarna Share, except that the Government cannot transfer the Dwiwarna Share. The Government's ownership of the Dwiwarna Share gives it effective control over our Company even if it reduces its ownership of our common stock, and its rights with respect to the Dwiwarna Share may only be modified by an amendment of our Articles of Association, which the Government may veto.
The table below presents information relating to the beneficial ownership of our ordinary shares and Dwiwarna Share as of February 29, 2024.
|
|
| Percentage | |||
Dwiwarna | of | |||||
Share | Common Stock | Ownership | ||||
Government |
| 1 |
| 51,602,353,559 |
| 52.09 |
Public | - |
| 47,459,863,040 |
| 47.91 | |
Total |
| 1 |
| 99,062,216,599 |
| 100.00 |
Shareholders Owning More Than 5% of Shares (Major Shareholder)
The table below sets forth the beneficial ownership of our major shareholder which owns more than 5% of our shares as of February 29, 2024. To our knowledge, no other shareholders beneficially own 5% or more of our shares of common stock.
Title of Class |
| Person or Group |
| Number of Shares |
| Percentage of Ownership |
Dwiwarna Share |
| Government |
| 1 |
| - |
Common Stock |
| Government |
| 51,602,353,559 |
| 52.09 |
The percentage of shares held by the Government was 52.09% as of March 31, 2022, 2023 and February 29 2024, respectively. No other persons beneficially owned 5% or more of our outstanding shares of common stock as of February 29, 2024, based on information available to us.
Shares Owned by Commissioners and Directors
The table below sets forth information regarding persons known to us to own less than 5% of each class of our shares (whether directly or beneficially through the ADSs) as of February 29, 2024.
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Commissioners and Directors |
| Number of |
| Percentage of |
Shares | Ownership | |||
Commissioners | ||||
Arya Mahendra Sinulingga | 2,014,800 |
| <0.01 | |
Marcelino Rumambo Pandin | 1,968,000 | <0.01 | ||
Ismail | 1,968,000 | <0.01 | ||
Rizal Mallarangeng | 1,968,000 | <0.01 | ||
Isa Rachmatarwata | 1,968,000 | <0.01 | ||
Directors | ||||
Ririek Adriansyah |
| 6,016,355 |
| <0.01 |
F.M. Venusiana R. |
| 7,806,900 |
| <0.01 |
Muhamad Fajrin Rasyid |
| 4,130,400 |
| <0.01 |
Budi Setyawan Wijaya |
| 4,585,400 |
| <0.01 |
Afriwandi |
| 4,172,900 |
| <0.01 |
Herlan Wijanarko | 4,172,900 | <0.01 | ||
Heri Supriadi | 4,170,400 | <0.01 | ||
Bogi Witjaksono | 4,130,400 | <0.01 | ||
Honesti Basyir | 370,004 | <0.01 | ||
Total |
| 49,442,459 |
| <0.05 |
Shareholders (by Type) Owning Less Than 5% of Shares
The table below presents information on the shareholding (by type of shareholder) of our shareholders which individually owned less than 5% of our outstanding shares of common stock as of February 29, 2024.
Group |
| Number of |
| |
|---|---|---|---|---|
Shares of | ||||
Common Stock | Percentage of | |||
Owned | Ownership | |||
Foreign | ||||
Business Entities |
| 37,649,109,824 |
| 38.01 |
Individuals |
| 17,349,800 |
| 0.02 |
Local | ||||
Business Entities | ||||
Companies |
| 154,154,060 |
| 0.16 |
Mutual Funds |
| 2,149,252,562 |
| 2.17 |
Insurance Companies |
| 2,344,405,046 |
| 2.37 |
Pension Funds |
| 3,793,584,794 |
| 3.83 |
Others Business Entities |
| 127,735,650 |
| 0.13 |
Individuals |
| 1,224,271,304 |
| 1.24 |
Total |
| 47,459,863,040 |
| 47.91 |
Relationship with the Government and Government Agencies
Our relationship with the Government is multi-faceted. The Government is our majority and controlling shareholder. It is also our regulator as it adopts, administers and enforces relevant laws that regulate the telecommunications sector, sets tariffs and issues licenses. It is also one of our customers and one of our lenders.
As used in this section, the term "Government" includes the Government of Indonesia and its ministries, directly owned governmental departments and agencies, but excludes SOEs.
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The Government as Shareholder
The Government is our majority and controlling shareholder and owned 52.09% of our issued and outstanding common stock as of March 31, 2024. Its ownership of the Dwiwarna Share gives it special voting and veto rights. Under the relevant laws, the "ownership" of our common stock and the single outstanding Dwiwarna Share is vested in the MoF. In turn, and under the authority of the MoF, the MSOE exercises the rights vested in these securities as our "controlling shareholder."
As our majority shareholder and controlling shareholder, the Government has an interest in our performance, both in terms of the service we provide to the nation and our ability to operate on a commercial basis. The material rights and restrictions that apply to our common stock also apply to the Dwiwarna Share, except that the Government may not transfer the Dwiwarna Share, and has right of veto with regard to, among other things: (i) the nomination, appointment and removal of our Directors; (ii) the nomination, appointment and removal of our Commissioners; (iii) the issuance of new shares and (iv) any amendments to our Articles of Association, including with respect to actions to merge or dissolve our Company, increase or reduce our authorized capital, or reduce our subscribed capital.
Accordingly, the Government effectively has control over these matters even if it owns less than a majority share of the outstanding shares of common stock. The Government's rights with respect to the Dwiwarna Share will not expire unless there is a change that requires the amendment of our Articles of Association, which would require the consent of the Government as the holder of the Dwiwarna Share.
The Government as Regulator
The Government regulates the telecommunications sector through MoCI. MoCI has the authority to issue regulations that implement laws, which are typically broad in scope. Through such decrees MoCI defines the structure of the industry, determines tariff formulas, establishes our USO, and otherwise controls many factors that could influence our competitive position, operations, and financial position. Through the DGPIO, MoCI regulates the allocation of frequencies and sets numbers for fixed telephone lines. We are required to obtain a license from the DGPIO for each type of service offered, including licenses for the frequencies we use (as allocated by MoCI). We and other operators are required to pay frequency usage fees. Telkomsel also holds licenses issued by MoCI (some of which were previously issued by the then Ministry of Communications and Information) for the provision of cellular services, and from the Indonesian Investment Coordinating Board in relation to Telkomsel's investments for the development of cellular phone services with national coverage, including the expansion of network coverage. The Government, through MoCI as regulator, has the authority to issue new licenses for the establishment of new joint ventures and other new arrangements, particularly in the telecommunications sector.
Certain licenses require us to pay a concession fee to operate under such licenses. We pay concession fees for our provision of telecommunications services and radio frequency usage charges to MoCI. Concession fees amounted to Rp1,843 billion in 2022 and Rp2,076 billion (US$135 million) in 2023. Concession fees as a percentage of total expenses amounted to 1.7% in 2022 and 2.0% in 2023. Radio frequency usage charges amounted to Rp6,510 billion in 2022 and Rp7,412 billion (US$481 million) in 2023. Radio frequency usage charges as a percentage of total expenses amounted to 6.0% in 2022 and 7.1% in 2023. USO charges to MoCI amounted to Rp744 billion in 2022 and Rp744 billion (US$48 million) in 2023. USO charges as a percentage of our total expenses amounted to 0.7% in 2022 and 0.7% in 2023.
The Government as Lender
In July 1994, the Government arranged a facility under which certain foreign institutions provided us with a two-step loan for certain expenditures ("sub-loan borrowings"). The sub-loan borrowings were made through the Government and are guaranteed by it. As of December 31, 2023, we had a total of Rp84 billion (US$5 million), in such outstanding two-step loans, including current maturities. We are required to pay the interest and the principal to the Government, which the Government then remits to the respective lenders. As of December 31, 2023, 100% of such sub-loan borrowings were denominated in foreign currencies with 100% denominated in Yen and 0% denominated in Rupiah. In 2023, the annual interest rates charged was 2.95% on those denominated in Japanese Yen.
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The Government as Customer
Certain Government departments and agencies purchase services from us as direct customers, the terms of which are negotiated on a commercial basis. No services are provided for free or on an in-kind basis. We deal with these departments and agencies as separate customers. In 2023, the amount of revenues from Government departments and agencies was Rp3,925 billion, which accounted for 2.6% of our consolidated revenues and did not constitute a material part of our revenues. The Government departments and agencies are treated for tariff purposes with respect to connection charges and monthly charges as "residential," which tariffs are lower than the business service rates. This does not apply to the tariffs for local, long distance, and IDD calls. In addition, we provide enterprise digital services and solutions to SOEs, including ATM switching, payment gateway, and E-Commerce platform services.
It is our policy not to enter into any transactions with affiliates unless the terms are on an arm's length basis as though such transactions are made with a third party. The MSOE has advised us that it would not cause us to enter into transactions with other entities under its control unless the terms were consistent with our policy as referred to above.
Pursuant to OJK regulations, because we are listed on the IDX, any transaction where there is an inherent conflict of interest (as defined below) must be approved by a majority of the holders of our shares of common stock who do not have a conflict of interest in the proposed transaction (i.e., the independent shareholders), unless, among other things, such conflict of interest existed before listing and was fully disclosed in the offering documents.
OJK regulations define a conflict of interest as a difference between the economic interests of a public company and the personal economic interests of its Board of Directors, Board of Commissioners, principal shareholder or controlling shareholder that may cause a loss to the relevant public company. Further, a “conflict of interest transaction” is defined as any transaction containing a conflict of interest that is carried out by a public company or a company controlled by the public company with any party, whether or not the other party is an affiliate. In practice, if a transaction obtains a “fair” opinion from an independent appraiser, which is typically strong grounds for showing that the proposed transaction does not involve a conflict of interest, though it would need to be considered and confirmed based on the relevant factual scenario.
Under OJK regulations, transactions between us and other state-owned or state-controlled enterprises may cause a conflict of interest. In such cases, the approval of the independent shareholders must be obtained if a conflict of interest arises, unless exempted. We believe that many transactions conducted with state-owned or state-controlled enterprises are on an arms-length, commercial basis and do not constitute conflict of interest transactions that would require an independent shareholders vote. Such transactions include our sale of telephone services to state-owned or state-controlled enterprises and our purchase of electricity from an SOE. We expect that from time to time, in connection with the development and growth of our business, we would enter into joint ventures, agreements or transactions with such enterprises. Under such circumstances, we may consult with the OJK to determine whether a proposed joint venture, agreement or transaction would require a vote of independent shareholders under OJK rules. If the OJK is of the view that such transaction would not require such a vote, we would proceed without seeking the independent shareholders' approval. Otherwise, we would seek the requisite approval or abandon the proposed action.
Proportion of Common Stock Held in Indonesia and Abroad
As of February 29, 2024, we had 166,737 holders of shares of common stock (including the Government). This total includes 37,666,459,624 shares of common stock held by 2,454 holders of common stock located outside Indonesia. As of the same date, there were 69 ADS shareholders who owned 40,471,818 ADSs.
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Change in Control
As of the date of this Form 20-F, we are not aware of any plans or developments that could result in a change of control over us, including changes that are still at the planning stage. In addition, our articles of association contain certain provisions that could limit the ability of third parties to acquire control of our Company, including a provision that any takeover of our Company shall be approved in a general meeting of shareholders attended by (i) the holder of the Dwiwarna Share and (ii) the shareholders (or their proxies) that represent, in the aggregate, at least 75% of the total number of the shares with valid voting rights issued by our Company. Moreover, the resolution in such meeting must be approved by (i) the holder of the Dwiwarna Share and (ii) the vote of a majority of shareholders constituting, in the aggregate, at least 75% of the total number of shares present (or being represented by a proxy) at the general meeting of shareholders.
B. RELATED PARTY TRANSACTIONS
We are party to certain agreements and engage in transactions with certain parties that are related to us, such as cooperatives and foundations. Such parties include the Government and entities related to or owned or controlled by the Government, such as other SOEs. For further details on our related party transactions, see Note 31 to our Consolidated Financial Statements.
C. INTEREST OF EXPERTS AND COUNSEL
Not applicable.
ITEM 8. FINANCIAL INFORMATION
A. CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION
See "Item 18. Financial Statements" for our Consolidated Financial Statements filed as part of this Form 20-F.
LEGAL PROCEEDINGS
From time to time, we are subjected to legal and arbitration proceedings, investigations and claims incidental to the conduct of our business. For instance, we have in the past been named as defendant in various legal actions in relation with land disputes, monopolistic practice and unfair business competition, and SMS cartel practices. Although the results of litigation and claims cannot be predicted with certainty, we currently believe that the final outcome of these ordinary course matters will not have a material adverse effect on our results of operations, cash flows and financial position. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors. We were not a party to any material litigation or arbitration and did not have material contingency reserves established for any liabilities as of December 31, 2023.
DIVIDENDS
An AGMS has the authority to determine the amount of dividends we pay. Our dividend payout ratio for the fiscal year ended December 31, 2023 will be decided at the AGMS scheduled for May 3, 2024.
Total Dividend | Dividend per | |||||||
Payout Ratio | Payment | Share | ||||||
Dividend Year |
| Payment Date |
| (%)(1) |
| (Rp million) |
| (Rp) |
2018 |
| June 27, 2019 |
| 90.00 |
| 16,228,619 | (2) | 163.82 |
2019 |
| July 23, 2020 |
| 81.78 |
| 15,262,338 | (3) | 154.07 |
2020 |
| July 2, 2021 |
| 80.00 | 16,643,443 | (4) | 168.01 | |
2021 |
| July 1, 2022 |
| 60.00 | 14,855,921 | (5) | 149.97 | |
2022 | July 5, 2023 | 80.00 | 16,602,697 | (6) | 167.60 |
Notes:
(1) | Represents the percentage of profit attributable to owners of the parent paid to shareholders in dividends. |
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(2) | Consists of cash dividend amounting to Rp10,819,080 million and special cash dividend amounting to Rp5,409,540 million. |
(3) | Consists of cash dividend amounting to Rp11,197,606 million and special cash dividend amounting to Rp4,064,730 million. |
(4) | Consists of cash dividend amounting to Rp12,482,582 million and special cash dividend amounting to Rp4,160,860 million. |
(5) | Consists of cash dividend amounting to Rp14,855,921 million. |
(6) | Consists of cash dividend amounting to Rp16,602,697 million. |
TELKOMSEL DIVIDEND
Pursuant to its AGMS held on May 26, 2023, Telkomsel approved the payment of cash dividends in the amount of Rp20.11 trillion, which represented 95% of Telkomsel's net profits in 2022. Based on the Resolution of Shareholders on September 12, 2023, Telkomsel declared additional dividend amounting to Rp7.41 trillion, which represented 35% of Telkomsel’s net profits in 2022. In 2023, total dividend payments were Rp27.52 trillion.
B. SIGNIFICANT CHANGES
See Note 38 to our Consolidated Financial Statements.
ITEM 9. THE OFFER AND LISTING
A. OFFER AND LISTING DETAILS
Our common stock is listed and traded on the IDX under the symbol "TLKM." Our ADSs are listed and traded on the NYSE under the symbol "TLK" with one ADS representing 100 shares of common stock.
Our Articles of Association do not contain any limitations on the right of any person to own our Series B Shares or to exercise their right to vote. Indonesian capital market regulations do not contain any limitation on the right of any person, whether Indonesian or foreign, to own shares in a company listed on the IDX.
B. PLAN OF DISTRIBUTION
Not applicable.
C. MARKETS
Our common stock is listed and traded on the IDX. Our ADSs are listed and traded on the NYSE with one ADS representing 100 shares of common stock. See Exhibit 2.1 to this Form 20-F for a description of our ADSs.
The Indonesian Stock Market
Indonesia Stock Exchange, known as the IDX, emerged out of the December 1, 2007 merger of two stock exchanges operating in two different locations in Indonesia, namely the Jakarta Stock Exchange which was located in Jakarta, the capital city of Indonesia, and the Surabaya Stock Exchange which was located in Surabaya in East Java.
As of December 31, 2023, the IDX had 903 issuers for equity and 90 active brokerage houses. In 2023, IDX recorded a trading volume of around 4.7 billion shares. As of December 31, 2023, the total market capitalization was valued at approximately Rp11.67 trillion (approximately US$758 billion).
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Trading is divided into three segments: the regular market, negotiated market and cash market (except for rights issues, which can only be traded on the cash market and the negotiated market for the first session). The regular market is the mechanism for trading stock in standard lots on a continuous auction basis during exchange hours. Auctions on the IDX on regular market and cash market take place according to the price and time priorities. Price priority refers to giving priority to buying orders at a higher price or selling orders at a lower price. If buy or sell orders are placed at the same price, priority is given to the earlier placed buy or sell order (time priority). Trading on the negotiated market is conducted through direct negotiation between (i) IDX members, (ii) clients through one IDX member, (iii) a client and an IDX member, or (iv) an IDX member and the PT Kliring Penjaminan Efek Indonesia ("KPEI"). KPEI provides clearing and guarantee services of stock exchange transactions settlement. It also improves efficiency and certainty of transactions settlement on the IDX.
IDX Rule No. II A on Trading of Equity Securities as attached to the Decree of the Board of Directors of the IDX No. Kep-00055/BEI/03-2023 ("IDX Trading Rule") provides that as of April 3, 2023, the trading sessions of the IDX are as follows:
Trading Session |
| Market |
| Day |
| Trading Hours |
|---|---|---|---|---|---|---|
Pre-opening | Regular | Monday-Friday | 08.45.00-08.59.59 | |||
1st | Regular | Monday-Thursday | 09.00.00-12.00.00 | |||
Friday | 09.00.00-11.30.00 | |||||
Cash | Monday-Thursday | 09.00.00-12.00.00 | ||||
Friday | 09.00.00-11.30.00 | |||||
Negotiated | Monday-Thursday | 09.00.00-12.00.00 | ||||
Friday | 09.00.00-11.30.00 | |||||
2nd | Regular | Monday-Thursday | 13.30.00-15.49.59 | |||
Friday | 14.00.00-15.49.59 | |||||
Negotiated | Monday-Thursday | 13.30.00-16.30.00 | ||||
Friday | 14.00.00-16.30.00 | |||||
Pre-closing | Regular | Monday-Friday | 15.50.00-16.00.59 | |||
Post Trading | Regular | Monday-Friday | 16.01.00-16.15.00 |
The IDX Trading Rule, changed the group price, tick price and maximum share price movement to the following:
Group Price | Tick Price | Maximum Share Price Movement | ||
<Rp200 |
| Rp1 |
| Rp10 |
Rp200-<Rp500 |
| Rp2 |
| Rp20 |
Rp500-<Rp2,000 |
| Rp5 |
| Rp50 |
Rp2,000-<Rp5,000 |
| Rp10 |
| Rp100 |
≥Rp5,000 |
| Rp25 |
| Rp250 |
Transactions on the IDX regular market must be settled no later than the second trading day (T+2) after the transaction. Transactions on the negotiated market are settled on the basis of the agreement between the selling exchange members and the buying exchange members, on a transaction-by-transaction basis. Transactions on the IDX cash market must be settled on the day of the transaction (T+0) and reported to the IDX. If an exchange member defaults on the settlement of a transaction, the securities can be traded by direct negotiation on cash and carry terms. Each exchange member is required to pay a transaction fee as stipulated by the IDX. Any delay in payment of the transaction fee is subject to a fine of 1.0% of the outstanding amount of the payment for each day of delay. The IDX may impose sanctions on its members for any violation of exchange rules, which may include fines, written warnings, suspension or revocation of licenses.
When conducting share transactions on the IDX, each exchange member is required to pay a transaction cost for transactions on the regular market and cash market of 0.018% of the transaction value and VAT and other tax obligation. For the negotiated market, a transaction cost as stipulated by the IDX is applicable. A minimum monthly transaction fee of Rp20 million is applied as a contribution for the provision of exchange facilities and continues in effect for members who are suspended or whose Exchange Member Approval is revoked.
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Since the global financial crisis in the last quarter of 2008, share price movement has been typical. Hence, the IDX has applied a policy of auto rejection, a mechanism whereby share trading can be halted automatically in order to maintain orderly, fair and efficient trading.
The IDX Trading Rule also stipulates the change of the auto-rejection policy. This policy has changed from time to time, specifically since the Government began relaxing COVID-19-related restrictions on trading activities. Based on the newly issued IDX Trading Rule, the Jakarta Automated Trading System ("JATS") will automatically reject price orders input into the JATS at the Regular and Cash Markets if:
(i) | the buy or sell order is smaller than Rp50 (or Rp1 for rights and warrants); |
(ii) | Through May 31, 2023, the buy or sell orders input into the JATS are: |
a. | more than 35% above or 7% below the reference price for stock prices ranging from Rp50 to Rp200; |
b. | more than 25% above or 7% below the reference price for stock price ranging from more than Rp200 to Rp5,000; and |
c. | more than 20% above or 7% below the reference price for stock price that is more than Rp5,000. |
From June 5, 2023 to September 1, 2023, the selling or buying orders input into the JATS are:
a. | more than 35% above or 15% below the reference price for stock prices ranging from Rp50 to Rp200; |
b. | more than 25% above or 15% below the reference price for stock price ranging from more than Rp200 to Rp5,000; and |
c. | more than 20% above or 15% below the reference price for stock price that is more than Rp5,000. |
From September 4, 2023 onwards, JATS will automatically reject price orders input into the JATS at the Regular and Cash Markets if the selling or buying orders input into the JATS are:
a. | more than 35% above or below the reference price for stock prices ranging from Rp50 to Rp200; |
b. | more than 25% above or below the reference price for stock price ranging from more than Rp200 to Rp5,000; |
c. | more than 20% above or below the reference price for stock price that is more than Rp5,000. |
(iii) | Auto-rejection is triggered when a trade involves more than 50,000 lots of equity securities or exceeds 5% of listed securities, using the lesser amount, and the auto-rejection threshold for post-IPO trading is set at double that percentage. |
Trading on the NYSE
See "Item 12. Description of Securities Other Than Equity Securities."
D. SELLING STOCKHOLDERS
Not applicable.
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E. DILUTION
Not applicable.
F. EXPENSES OF THE ISSUE
Not applicable.
ITEM 10. ADDITIONAL INFORMATION
A. SHARE CAPITAL
Not applicable.
B. MEMORANDUM AND ARTICLES OF ASSOCIATION
Description of Articles of Association
Our Articles of Association are registered in accordance with Law No.1 of 1995 on Limited Liability Companies, and have been approved by Ministerial Decree No. C2-7468.HT.01.04.Th.97 of 1997. Following the enactment of the Law No. 40 of 2007 on Limited Liability Companies (as amended by the Job Creation Law, the "Indonesian Company Law") which revoked Law No. 1 of 1995 on Limited Liability Companies, we amended our Articles of Association which were approved by the MOLHR pursuant to the Decree of the MOLHR No. AHU.46312.AH.01.02 of 2008 dated July 31, 2008 and registered in the State Gazette of the Republic of Indonesia No. 84 dated October 17, 2008, Supplement to State Gazette No. 20155.
Our Articles of Association have been amended several times, the latest amendment of which primarily related to amending our business activities according to the Indonesian Standard Industrial Classification of 2020. The latest amendments were approved by and registered with the MOLHR in its letter No. AHU-0044650.AH.01.02 of 2022 dated June 29, 2022.
In accordance with Article 3 of our Articles of Association, the scope of our business activities is to provide telecommunications network and telecommunications and information services, as well as to optimize our Company's resources in producing high quality and competitive products and services to enhance profitability and increase the value of our Company. In order to achieve the aforementioned objectives, we may undertake business activities that incorporate, among other things, the following:
1. | Main Business | ||
a. | Planning, building, providing, developing, operating, marketing/selling/renting, and maintaining telecommunications and IT networks in the broadest sense with due observance of the laws and regulations. | ||
b. | Planning, developing, providing, marketing/selling, and improving telecommunications and IT services in the broadest sense with due observance of the laws and regulations. | ||
c. | Making investments including equity participation in other companies in line with and to achieve the goals and objectives of the Company. | ||
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d. | In connection with the business activities specified in 1(a) and 1(b) above, the Company’s business activities include but are not limited to construction of telecommunications buildings and equipment, construction of irrigation, communication, and other waste networks, electrical installation, telecommunications installation, installation of air conditioning and ventilation, wholesale trade on the basis of fees or contracts, wholesale trade of computers and computer equipment, wholesale trade of software, wholesale trade of telecommunications equipment, wholesale trade of office and industrial machinery, spare parts and equipment, wholesale trade of other products that cannot be classified, retail trade of software, retail trade of telecommunications equipment, publishing directories and mailing lists, publishing of software, production of film, video and television programs by the private sector, cable telecommunications activities, wireless telecommunications activities, satellite telecommunications activities, premium call services, premium SMS content services, managed calling services, other value-added telephony services, internet service provider, data communication system services, telephony internet service for public purposes (ITKP), internet interconnection services (NAP), content provider services through cellular mobile network, other information services activities that cannot be classified, other multimedia services, video game development activities, development of trading applications through the internet (E-Commerce) activities, immersive media content programming and production activities, blockchain technology development activities, artificial intelligence based programming activities, other computer programming activities, information security consulting activities, digital identity provision activities, electronic certificate provision activities and service using electronic certificates, IoT consulting and designing activities, computer consulting and other computer facilities management activities, other IT and computer services activities, data processing activities, hosting and related activities, web portals and/or digital platforms without commercial purposes, web portals and/or digital platforms for commercial purposes, retail trade on computers and their equipment, retail trade on video game equipment and the like, retail trade on office machines, retail trade specializing in audio and video equipment in stores, other telecommunications activities that cannot be classified, resale of telephony services, calibration/metrology services, and activities of the distribution of film, video and television programs by private parties. | ||
2. | Supporting Businesses | ||
a. | Providing payment transactions and money transfer services through telecommunications and IT networks. | ||
b. | Carrying out other activities and business in the context of optimizing the Company’s resources, including the utilization of fixed and moving assets, information system facilities, education and training facilities, maintenance, and repair facilities. | ||
c. | Cooperating with other parties in order to optimize ICT resources owned by other parties in the ICT industry, in line with and to achieve the goals and objectives of the Company. | ||
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d. | In connection with the business activities specified in 2(a) and 2(b) above, the Company’s business activities include but are not limited to general printing industry, residential building construction, construction of office buildings, construction of other buildings, construction of electrical civil buildings, construction of telecommunications civil buildings for transportation infrastructure, construction of other civil buildings that cannot be classified, sea, river, and air navigation construction installation services, electronic installation, installation of plumbing, heating and geothermal installation, mechanical installation, other unclassified construction installations, interior decoration, wholesale of printing and publishing goods in various forms, wholesale of laboratory equipment, pharmaceutical equipment and medical equipment for humans, wholesale of laboratory equipment, pharmaceutical equipment and medical equipment for animals, retail trade on laboratory equipment, pharmaceutical equipment, and medical devices for humans, special retail trade on pharmaceutical goods and drugs, medical devices, perfumes, and other cosmetics, voice recording activities, special telecommunications activities for security defense purposes, music and music book publishing activities, other monetary intermediaries, payment service provider (PJP), transportation consulting activities, industrial management consulting activities, other management consulting activities, certification services, laboratory testing services, installation engineering inspection services, advertising, other reservation services, tourism information services, call center activities, other business support services activities that cannot be classified, special event organizing services, meetings, incentive travel, conference and exhibition (MICE) organizing services, private tutoring and counseling education, and repair of computers and similar equipment. |
In accordance with the Indonesian Company Law, we have a Board of Commissioners and a Board of Directors. These boards are separate, and no individual may be a member of both boards. Each Director receives a bonus if we surpass certain financial and operating targets, the amounts of which are determined by the shareholders at the AGMS. Each Director receives compensation, the amount of which is determined by the shareholders at the GMS, although such authority may be delegated to the Board of Commissioners, in which case compensation shall be determined based on a resolution of the Board of Commissioners.
Our Articles of Association state that any transaction involving a conflict of interest between our Company and our Directors, Commissioners and principal shareholders which may cause losses to us should be approved by a majority of the independent shareholders through a GMS.
A member of the Board of Directors shall have no right to represent our Company if such member has a conflict of interest with our Company. To take any legal actions in the form of transactions in which a conflict of interests exists between the personal economic interest of a Director, a Commissioner or a principal shareholder and our Company's economic interest, the Board of Directors must obtain the approval of a GMS with due observance of the laws and regulations in the capital markets sector. Such GMS must be attended by independent shareholders (i.e., those shareholders having no conflict of interest) who hold more than one-half of the total number of shares with valid voting rights held by all independent shareholders and the resolution must be passed by the affirmative votes of independent shareholders holding more than one-half of the total number of shares with valid voting rights. In passing any resolutions, the principal shareholders, the Directors, and Commissioners who have conflicts of interest in the transaction that is being decided are not entitled to give any recommendation or opinion. Any resolution passed by independent shareholders shall be confirmed by the entire quorum of the meeting to be followed by all shareholders present in the meeting, including those having conflicts of interest.
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Our Articles of Association require our Board of Directors to obtain the written approval of our Board of Commissioners in order to, among other things:
| a. | Release/transfer and/or pledge the Company’s assets with a value exceeding a certain amount determined by the Board of Commissioners, except for assets recorded as inventory, with due observance of the laws and regulations in the capital market sector; |
| b. | Enter into cooperation with business entities or other parties, in the form of joint operations (KSO), business cooperation (KSU), licensing cooperation, Build, Operate and Transfer (BOT), Build, Operate and Own (BOO) and other agreements of the same nature whose duration or value exceeds that stipulated by the Board of Commissioners; |
152
With regards to the matters referred to in paragraphs (a), (b), (e), (f), (g), (h), (i), (j), (k), and (l) above, the stipulation of limits or criteria by the Board of Commissioners must be approved by the holder of the Dwiwarna Share and the approval by the Board of Commissioners will be granted after being approved by the holder of the Dwiwarna share. Additionally, with regards to matters referred to in paragraph (b), approval from the Board of Commissioners and/or the GMS will not be required if the relevant activity is (i) part of the main business activities of the Company or (ii) is entered into with the subsidiaries or affiliates whose financials are consolidated with the Company's financials provided that this still has to be reported to the Board of Commissioners. The nomination of candidates referred to in paragraph (g) will not require approval from the Board of Commissioners as long as such nominated candidate is also a director of the Company, provided that this is reported to the Board of Commissioners.
Actions of the Board of Directors to transfer or collateralize the assets of the Company (whether in one or a series of transactions) the value of which exceed 50% of the total net assets of our Company (based on our Consolidated Financial Statements) would require approval of an GMS, except for those that are business activities of the Company as stipulated in the Articles of Association.
The Board of Directors is responsible for leading and managing our Company in accordance with our objectives and purposes and to control, preserve and manage the assets of our Company.
Our Articles of Association do not contain any requirement for our Directors to: (i) retire by a specified age; or (ii) to own any or a specified number of shares of our Company. The rights, preferences and restrictions attaching to each class of the shares of our Company in respect of specified matters are set forth below:
| a. | Dividend rights. Dividends are to be paid based upon our financial condition and in accordance with the resolution of the shareholders in a GMS, which will also determine the form of and time of payment of the dividend; |
| b. | Voting rights. The holder of each voting share is entitled to one vote at a GMS; |
| c. | Rights to share in our Company's profits. See "— Dividend rights" above; |
| d. | Rights to share in any surplus in the event of liquidation. Shareholders are entitled to surplus in the event of liquidation in accordance with their proportion of shareholding, provided the nominal value of the common stock that they hold is fully paid-up; |
| e. | Redemption provisions. There are no stock redemption provisions in our Articles of Association. However, based on Article 37 of the Indonesian Company Law, we may buy back up to 10% of our issued and outstanding shares; |
| f. | Reserved fund provisions. We are required to set aside retained earnings in the amount of at least 20% of our issued capital to cover potential losses. If the amount in the reserved fund exceeds 20% of our issued capital, a GMS may authorize us to utilize such excess funds for the purposes of our Company; |
| g. | Liability for further capital calls. Our shareholders may be asked to subscribe for new shares in our Company from time to time. Such rights are to be offered to shareholders prior to being offered to third parties and may be transferred at the option of the shareholder. Our Board of Directors is authorized to offer the new shares to third parties in the event that an existing shareholder is unable or unwilling to subscribe for such new shares; and |
153
| h. | Our Articles of Association do not contain any provisions discriminating against any existing or prospective holder of such securities because of such shareholder owning a substantial number of shares. Additionally, our Articles of Association do not provide for staggered boards, cumulative voting or sinking a fund. |
In order to change the rights of shareholders, an amendment to the relevant provisions of our Articles of Association is required. Any amendment to our Articles of Association requires the approval of the holder of the Dwiwarna Share and the other shareholders or their authorized proxies jointly representing at least two thirds of the total number of votes cast in the meeting.
Any GMS may only be convened upon the issuance of the requisite announcement by us. In addition, the Board of Directors may issue such announcement and convene an EGMS following a written request by the Board of Commissioners or one or more shareholders holding at least 10% of our shares, in the aggregate. The announcement is to be published in at least one newspaper in Indonesia (in Bahasa Indonesia) having general circulation within Indonesia and on the website of our Company (in Bahasa Indonesia and/or other languages as determined by regulations) and the IDX. Such announcement of a GMS is required to be given to shareholders at least 14 days (without counting the notice date and the invitation date) prior to the invitation for the GMS. The invitation for the GMS is also required to be published in the same manner as with the announcement of the notice at least 21 days (without counting the invitation date and the meeting date) prior to the GMS. Unless otherwise specified by law or the Articles of Association, the quorum for AGMS or EGMS requires shareholders representing more than one-half of the total shares with voting rights issued by us and binding resolutions may be passed if approved by more than one-half of the shareholders attending the GMS with valid voting rights. In case the quorum is not reached, then invitation to a second meeting can be made without prior announcement that an invitation to a meeting will be made. Such invitation to the meeting is required to be served at least seven days prior to the second meeting (without counting the invitation date and the meeting date). The second meeting will be valid if attended by shareholders representing at least one-third of the total shares with valid voting rights and may pass binding resolutions if approved by more than one-half of the attended shareholders with valid voting rights. In case the quorum is not reached at the second meeting, a third meeting may be held, at our Company's request, with the quorum of attendance and voting requirements to be determined by the OJK in accordance with the provisions of the laws.
Shareholders may vote by proxy. All resolutions are to be passed by consensus and deliberation. If consensus cannot be reached, resolutions are passed by simple majority, unless a larger majority is required by our Articles of Association. Our Articles of Association do not contain any limitations on the right of any person, to own our shares or to exercise their right to vote. Indonesian capital market regulations do not contain any limitation on the right of any person, whether local or foreign, to own shares in a company listed on the IDX.
Any takeover of our Company is required to be approved by the holder of the Dwiwarna Share and a majority constituting at least three-fourths of the total number of shares at a GMS that must be attended by the holder of the Dwiwarna Share. There are no other provisions in our Articles of Association that would have the effect of delaying, deferring, or preventing a change in control of our Company.
Under OJK Regulation No. 11/POJK.04/2017 of 2017 on Report of Ownership or Any Changes to the Shares Ownership in Public Companies, each. Director and Commissioner has an obligation to report to the OJK with regard to their ownership and any changes in their ownership of our Company, and this obligation also applies to shareholders who, directly and indirectly, have an ownership stake of 5% or more in our paid-up capital. Those shareholders would also have to report to OJK changes in their ownership of or in excess of 0.5% of our paid-up capital.
Differences in the Law
The laws of Indonesia applicable to Indonesian limited liability companies differ from the laws applicable to U.S. corporations and their shareholders in certain respects. Set forth below is a summary of certain differences between the provisions of Indonesian laws applicable to us and the Delaware General Corporation Law relating to shareholders' rights and protections.
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This summary is not intended to be a complete discussion of the respective rights under either Delaware General Corporation law or Indonesian law.
Delaware Law | Indonesian Law |
|---|---|
Mergers and similar arrangements | |
Under the Delaware General Corporation Law, with certain exceptions, a merger, consolidation, sale, lease or transfer of all or substantially all of the assets of a corporation must be approved by the board of directors and a majority of the outstanding shares entitled to vote thereon. A shareholder of a Delaware corporation participating in certain major corporate transactions may, under certain circumstances, be entitled to appraisal rights pursuant to which such shareholder may receive cash in the amount of the fair value of the shares held by such shareholder (as determined by a court) in lieu of the consideration such shareholder would otherwise receive in the transaction. The Delaware General Corporation Law also provides that a parent corporation, by resolution of its board of directors, may merge with any subsidiary, of which it owns at least 90.0% of each class of capital stock without a vote by the shareholders of such subsidiary. Upon any such merger, dissenting shareholders of the subsidiary would have appraisal rights. | Under the Indonesian Company Law, a merger or consolidation may only be completed if a merger/consolidation plan, containing the prescribed elements together with the draft deed of merger or draft deed of consolidation, is approved by a general meeting of shareholders of each of the companies involved. A three-quarters vote cast at the meeting is required at a general meeting of shareholders where a quorum of three-quarters of the shares with valid voting rights is present. Before the transaction is submitted for approval to the general meeting of shareholders, the directors must publish a summary of the merger or consolidation plan in one national newspaper and make an announcement in writing to the employees at least 30 days prior to the “summoning” of the general meeting of shareholders. Shareholders who do not agree with the proposed merger or consolidation will have the right to require the company to purchase their shares at the fair market value (appraisal rights). Additional requirements are applicable for mergers or consolidations involving public companies (e.g., OJK Regulation No. 74/POJK/04/2016 on Business Merger or Business Consolidation of Public Companies, as partially revoked by OJK Regulation No. 58/POJK.04/2017 on Electronic Submission of Registration Statements or Applications for Corporate Actions). |
Shareholder's suits |
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Delaware Law | Indonesian Law |
|---|---|
Class actions and derivative actions generally are available to shareholders of a Delaware corporation for, among other things, breach of fiduciary duty, corporate waste and actions not taken in accordance with applicable law. In such actions, the court has discretion to permit the winning party to recover attorneys' fees incurred in connection with such action. | Under the Indonesian Company Law, any shareholder has a right to file a lawsuit with the district court whose jurisdiction covers the domicile of the company if the company's actions have caused damage to the shareholder on the ground that such actions, undertaken by virtue of a general meeting of shareholders, board of directors' or board of commissioners' resolution, were unfair and with no reasonable ground. Such actions must have resulted from resolutions of a general meeting of shareholders, board of directors' meetings or board of commissioners' meetings. Additionally, one or more shareholders holding at least 10% of the total number of issued shares with lawful voting rights are entitled to file a lawsuit with the relevant district court on behalf of the company against the board of directors or members of the board of directors and the board of commissioners or members of the board of commissioners, whose fault or negligence caused losses to the company. |
Delaware Law | Indonesian Law |
|---|---|
Shareholder vote on board and management compensation | |
Under the Delaware General Corporation Law, the board of directors has the authority to fix the compensation of directors, unless otherwise restricted by the certificate of incorporation or bylaws. | Under the Indonesian Company Law and MSOE Regulation No. 03/MBU/03/2023 on Organs and Humans Resources of State-Owned Enterprises (“MSOE Regulation No. 3/2023”), the salaries and allowances of members of the board of directors are determined by the general meeting of shareholders. The general meeting of shareholders may delegate its authority to approve such salaries and allowances to the board of commissioners. The salaries and allowances of members of the board of commissioners are determined by the general meeting of shareholders. For Indonesian public companies, a remuneration and nomination committee (in practice, a committee under the board of commissioners) can assist the general meeting of shareholders in determining the amount of the remuneration of the members of the board of directors and board of commissioners. If a committee has not been formed for this purpose, the board of commissioners shall determine the remuneration of the board of directors and board of commissioners in accordance with the prevailing capital market rules. Any such amount, however, must be approved by the general meeting of shareholders. |
Annual vote on board renewal |
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Delaware Law | Indonesian Law |
|---|---|
Unless directors are elected by written consent in lieu of an annual meeting, directors are elected in an annual meeting of shareholders on a date and at a time designated by or in the manner provided in the bylaws. Re-election is possible. Classified boards are permitted. | A member of the board of directors or board of commissioners is appointed by a general meeting of shareholders for a fixed duration. If the term of office has lapsed, the relevant director or commissioner can be re-appointed at a general meeting of shareholders Specifically for public companies, directors and commissioners may not be appointed for a term of more than five years. Re-election is possible except that for an independent commissioner who has served two consecutive terms, he/she can only be reappointed if he/she submits a statement of independency to the general meeting of shareholders. |
Delaware Law | Indonesian Law |
|---|---|
Indemnification of directors and executive management and limitation on liability | |
The Delaware General Corporation Law provides that a certificate of incorporation may contain a provision eliminating or limiting the personal liability of directors (but not other controlling persons) of the corporation for monetary damages for breach of a fiduciary duty as a director, except no provision in the certificate of incorporation may eliminate or limit the liability of a director for: ● any breach of a director's duty of loyalty to the corporation or its shareholders; ● acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; ● statutory liability for unlawful payment of dividends or unlawful stock purchase or redemption; or ● any transaction from which the director derived an improper personal benefit. A Delaware corporation may indemnify any person who was or is a party or is threatened to be made a party to any proceeding, other than an action by or on behalf of the corporation, because the person is or was a director or officer, against liability incurred in connection with the proceeding if the director or officer acted in good faith and in a manner reasonably believed to be in, or not opposed to, the best interests of the corporation, and the director or officer, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. | Under the Indonesian Company Law, a member of the board of directors cannot be held liable for the company's losses if he/she can prove that: ● the losses were not caused by his/her own fault or negligence; ● he/she acted in good faith, prudently, and in furtherance of and in accordance with the purposes of the company; ● he/she does not have any direct or indirect conflict of interest in connection with the management action which caused the loss; and ● he/she has taken actions to prevent such losses or the continuation thereof. Under the Indonesian Company Law, the term "take actions to prevent such losses or the continuation thereof" includes obtaining sufficient information with regard to the management action that may cause the losses, including through convening a meeting of the board of directors. |
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Delaware Law | Indonesian Law |
|---|---|
Unless ordered by a court, any foregoing indemnification is subject to a determination that the director or officer has met the applicable standard of conduct: ● by a majority vote of the directors who are not parties to the proceeding, even though less than a quorum; ● by a committee of directors designated by a majority vote of the eligible directors, even though less than a quorum; ● by independent legal counsel in a written opinion if there are no eligible directors, or if the eligible directors so direct; or ● by the shareholders. |
Delaware Law | Indonesian Law |
|---|---|
Moreover, a Delaware corporation may not indemnify a director or officer in connection with any proceeding in which the director or officer has been adjudged to be liable to the corporation unless and only to the extent that the court determines that, despite the adjudication of liability but in view of all the circumstances of the case, the director or officer is fairly and reasonably entitled to indemnity for those expenses which the court deems proper. | |
Directors' fiduciary duties | |
A director of a Delaware corporation has a fiduciary duty to the corporation and its shareholders. This duty has two components: ● the duty of care; and ● the duty of loyalty. The duty of care requires that a director act in good faith, with the care that an ordinarily prudent person would exercise under similar circumstances. Under this duty, a director must inform himself or herself of and disclose to shareholders, all material information reasonably available regarding a significant transaction. The duty of loyalty requires that a director act in a manner he or she reasonably believes to be in the best interests of the corporation. He or she must not use his or her corporate position for personal gain or advantage. This duty prohibits self-dealing by a director and mandates that the best interest of the corporation and its shareholders take precedence over any interest possessed by a director, officer or controlling shareholder and not shared by the shareholders generally. | Under the Indonesian Company Law, the board of directors is responsible for the management of the company and must act in good faith. The board of directors must act in the best interest of the company and in accordance with the company's purposes and objectives. |
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Delaware Law | Indonesian Law |
|---|---|
In general, actions of a director are presumed to have been made on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the corporation. However, this presumption may be rebutted by evidence of a breach of one of the fiduciary duties. Should such evidence be presented concerning a transaction by a director, a director must prove the procedural fairness of the transaction, and that the transaction was of fair value to the corporation. |
Delaware Law | Indonesian Law |
|---|---|
Shareholder action by written consent | |
A Delaware corporation may, in its certificate of incorporation, eliminate the right of shareholders to act by written consent. | Shareholders of an Indonesian limited liability company may only exercise their voting rights in a general meeting of shareholders and may not act by written consent. Alternatively, voting rights may also be exercised by way of a written resolution provided that such resolution is signed by all of the shareholders of the company. |
Shareholder proposals | |
A shareholder of a Delaware corporation has the right to put any proposal before the annual meeting of shareholders, provided it complies with the notice provisions in the governing documents. A special meeting may be called by the board of directors or any other person authorized to do so in the governing documents, but shareholders may be precluded from calling special meetings. | Under the Indonesian Company Law, one or more shareholders holding at least 10% of the total number of issued voting shares, unless the company's articles of association call for a smaller number of voting shares, are entitled to request that a general meeting of shareholders be convened by the board of directors. If the board of directors fails to convene the general meeting of shareholders, shareholders are entitled to request the board of commissioners to convene a general meeting of shareholders. If the board of directors or the board of commissioners (as the case may be) fails to convene a general meeting of shareholders as explained above, the shareholders may file an application with the district court having jurisdiction over the domicile of the company to allow them to call and convene a general meeting of shareholders. |
Cumulative voting | |
Under the Delaware General Corporation Law, cumulative voting for elections of directors is not permitted unless the corporation's certificate of incorporation provides for it. | Under the Indonesian Company Law, cumulative voting is not permitted for the election of directors. |
Removal of directors |
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Delaware Law | Indonesian Law |
|---|---|
A Delaware corporation with a classified board may be removed only for cause with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. | Under the Indonesian Company Law, any dismissal (with or without cause) of a member of the board of directors must be approved by a general meeting of shareholders. Such a general meeting of shareholders must be attended by the holders of more than one-half of the total number of the company's issued voting shares, and the decision must be approved by the holders of more than one-half of the total votes validly cast at the meeting. |
Delaware Law | Indonesian Law |
|---|---|
Transactions with interested shareholders | |
The Delaware General Corporation Law generally prohibits a Delaware corporation from engaging in certain business combinations with an "interested shareholder" for three years following the date that such person becomes an interested shareholder. An interested shareholder generally is a person or group who or which owns or owned 15.0% or more of the corporation's outstanding voting stock within the past three years. | For Indonesian public companies, affiliated party transaction and conflict of interest transaction rules may apply to transactions between public companies and any of their principal shareholders (where a "principal shareholder" is defined as the owner, directly or indirectly, of at least 20% of the outstanding shares in a public company) or "controlling persons" (pengendali) (defined as persons who (i) own more than 50% of the issued and paid-up shares in a company or (ii) have the ability to determine, directly or indirectly, in whatsoever manner, the management and/or policies of a company). Affiliated Party Transaction An affiliated party transaction is defined as any activity or transaction conducted by a public company or a controlled company: (i) with an affiliate (a category defined under Indonesian capital market rules which includes principal shareholders) of the public company or an affiliate of a member of the board of directors, the board of commissioners, a principal shareholder or a controlling person (pengendali) of such public company, or (ii) in the interest of an affiliate of a member of the board of directors, the board of commissioners, a principal shareholder or a controlling person (pengendali) of such public company. Affiliated party transactions must be, among other things, in compliance with the public company's internal policy governing related party transactions, disclosed to the public, reported to the relevant authority, and supported by a fairness opinion issued by a registered independent appraiser, unless it is an exempt transaction. Conflict of Interest Transaction A conflict of interest is defined as the difference between the economic interests of a public company and the |
160
Delaware Law | Indonesian Law |
|---|---|
personal economic interests of its directors, commissioners, principal shareholders or controlling persons (pengendali), which may cause losses to such company. In practice, fairness opinions by a registered independent appraiser are used to assess whether a transaction may be affected by a conflict of interest. By law, OJK has discretion to determine if certain affiliated party transactions involve any conflict of interest, and would therefore require the approval of independent shareholders and disclosed the related information to the public, unless exempted. If the transaction between the public company and a principal shareholder is deemed a conflict-of-interest transaction, the public company needs to, among other things, obtain the approval of its independent shareholders in a general meeting of shareholders, unless exempted. Independent shareholders are defined as shareholders having no conflict of interest in respect of the transaction, and the independent shareholders must make a declaration to that effect and is not a member of the board of directors, a member of the board of commissioners, a principal shareholder or a controlling person (pengendali) (or an affiliate of the foregoing persons or entities) of such public company. | |
Dissolution; Winding up | |
Unless the board of directors of a Delaware corporation approves the proposal to dissolve, dissolution must be approved by shareholders holding 100.0% of the total voting power of the corporation. Only if the dissolution is initiated by the board of directors may it be approved by a simple majority of the corporation's outstanding shares. Delaware law allows a Delaware corporation to include in its certificate of incorporation a supermajority voting requirement in connection with dissolutions initiated by the board. | Dissolution of a company must be approved by a general meeting of shareholders; such meeting has to be attended by shareholders holding at least three-quarters of the total number of outstanding shares in the company carrying valid voting rights. The approval must be obtained by a majority of at least three-quarters of the total votes validly cast at the meeting. For SOEs, dissolution of a company must be effected by way of a Government regulation promulgated by the MSOE. |
Variation of rights of shares | |
A Delaware corporation may vary the rights of a class of shares with the approval of a majority of the outstanding shares of such class, unless the certificate of incorporation provides otherwise. | The Indonesian Company Law allows companies to issue different classes of shares. Varying rights of existing shares or issuing new classes of shares with different rights requires amending the company's articles of association. Such amendment must be approved by a general meeting of shareholders. With regards to public companies, and under OJK Regulation No. 22/POJK.04/2021 on the Use of Share Classifications with Multiple Voting Rights by Issuers with High Innovation and Growth to Undertake Equity-based Public Offerings in the form of Shares, public companies with certain strict requirements (such as |
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Delaware Law | Indonesian Law |
|---|---|
utilizing technologies to create innovative products that increase productivity and economic growth as well as having substantial social benefit) may adopt a different class of shares with more than one type of voting right – also known as dual-class shares with multiple voting rights. Such adoption must also be included in the company's articles of association and approved by a general meeting of shareholders. | |
Amendment of governing documents | |
A Delaware corporation's governing documents may be amended with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. | To amend the articles of association of an Indonesian limited liability company, a general meeting of shareholders is required. Unless the existing articles of association stipulate a higher quorum, a general meeting of shareholders can be held if attended by shareholders representing at least two-thirds of the total issued voting shares. The general meeting of shareholders may adopt valid resolutions with affirmative votes of at least two-thirds of the total votes validly cast at the meeting. For public companies, affirmative votes representing more than two-thirds of the total votes validly cast in the meeting are required. |
Inspection of books and records | |
Shareholders of a Delaware corporation, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose and to obtain copies of list(s) of shareholders and other books and records of the corporation and its subsidiaries, if any, to the extent the books and records of such subsidiaries are available to the corporation. | Examination of documents and information pertaining to the company may be requested for the purpose of obtaining data or information if a director's or a commissioner's unlawful act is suspected to have caused losses to the company, its shareholders or third parties. An application must be made to the district court having jurisdiction over the domicile of the company. The application requesting the right to examine the company must be made in good faith and based on fair reasoning. Such application can be made by: |
● one or more shareholders holding at least 10% of the total number of issued voting shares; ● any other party that, pursuant to prevailing regulations, the company's articles of association or an agreement with the company, is granted such authority to submit the request for examination; or ● the State Attorney, for public order purposes. | |
Payment of dividends | |
The board of directors may approve a dividend without shareholder approval. Subject to any restrictions contained in its certificate of incorporation, the board | Indonesian Company Law provides that dividends can be paid to shareholders from the company's cumulative net profits (after deductions for allocation to the reserve fund). If a loss is booked by the company in a preceding fiscal year and cannot be covered by the reserve fund, such loss |
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may declare and pay dividends upon the shares of its capital stock either: ● out of its surplus; or ● in case there is no such surplus, out of its net profits for the fiscal year in which the dividend is declared or the preceding fiscal year. Shareholder approval is required to authorize capital stock in excess of that provided in the charter. Directors may issue authorized shares without shareholder approval. | should be carried forward and in the current fiscal year, the company will still be deemed to be making a loss if this carried over loss cannot be covered by the current fiscal year's profit. Under such circumstances, the company is not be able to distribute dividends from profits it earned in the current fiscal year. Before the company pays dividends, the company must reserve its profits until it reaches an amount equal to at least 20% of the company's subscribed and paid-up capital. This means that if the company already has a compulsory reserve, the rest of the accumulated net profit can be distributed as dividends. Interim dividends may also be distributed, provided that: ● the company's articles of association allow it; ● the amount of the company's net profit exceeds the amount of the issued and paid-up capital plus the reserve fund; and ● the distribution of the interim dividends will neither cause the company to be unable to pay its obligations to its creditors, nor disrupt the company's operations. |
Creation and issuance of new shares | |
All creation of shares requires the board of directors to adopt a resolution or resolutions, pursuant to authority expressly vested in the board of directors by the provisions of the company's certificate of incorporation. | Issuance of new shares must be approved by a general meeting of shareholders (with different quorum and voting requirements applicable depending on whether the company seeks to increase its authorized capital or not). ● Issuance of new shares in an amount that is still within the company's authorized capital must be approved by a general meeting of shareholders attended by shareholders representing more than one-half of the total number of issued voting shares in the company, and the decision must be approved by shareholders representing more than one-half of the total votes validly cast at the meeting. ● Issuance of new shares in an amount that exceeds the company's authorized capital must be approved by a general meeting of shareholders attended by shareholders representing at least two-thirds of the total number of issued voting shares. The general meeting of shareholders may adopt valid resolutions with affirmative votes representing at least two-thirds of the total votes validly cast at the meeting (or more than two-thirds for public companies). |
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● In general, the issuance of new shares must also be accompanied by the issuance of pre-emptive rights to existing shareholders. However, for public companies, under OJK Regulation No. 32/POJK.04/2015 on Capital Increases of Public Companies with the Issuance of Pre-emptive Rights, as amended by OJK Regulation No. 14/POJK.04/2019, and under certain conditions, the issuance of shares can be carried out without issuing pre-emptive rights, provided that the issuance of shares must not be in excess of 10% of the issued and paid-up capital of the company, among other things. In addition, unless certain exemptions apply, prior approval by the independent shareholders is generally required for the issuance of new shares without pre-emptive rights. |
C. MATERIAL CONTRACTS
In 2023, in line with our FMC initiative, we entered into the following contracts with Telkomsel to combine our fixed broadband and mobile broadband services into a single business entity, by transferring a portion of our assets and liabilities allocated to the IndiHome business segment to Telkomsel:
| ● | Wholesale Agreement between Telkom and Telkomsel dated April 6, 2023 (the "Wholesale Agreement"). |
| ● | Fixed Broadband Core Transition Services Agreement between Telkom and Telkomsel dated April 6, 2023 (the "Fixed Broadband Core TSA"); |
| ● | IT System Transition Services Agreement between Telkom and Telkomsel dated April 6, 2023 (the "IT System TSA"); and |
| ● | Deed of Spin-off of IndiHome Business Segment by Telkom into Telkomsel dated June 27, 2023 (the "Deed of Transfer"); |
The Wholesale Agreement sets forth the terms and conditions of Telkom's provision of infrastructure, devices, professional services, and network capacity to Telkomsel for an initial period of five years commencing on the Effective Date (as defined therein) of the Wholesale Agreement, in respect of Telkomsel's indiHome customers. Such services shall include connectivity and transport to deliver fixed broadband and IPTV, voice service, and service level agreement, as described in Article 3 of this Agreement.
The IT System TSA sets forth the terms and conditions of Telkom's provision of transitional IT system services to Telkomsel for its IndiHome service (fixed broadband, IPTV, and voice) for an initial period of two years commencing on the Effective Date (as defined therein) of the IT System TSA. Such services shall include the IT service (provision of service and platform maintenance, technical operations, support and management, application enhancement/expansion, audit and compliance, system and data migration, and coordination and reporting) and billing and collecting system operation (billing and collection operation support, revenue assurance, and fraud management), as described in Article 3 of this Agreement.
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The Fixed Broadband Core TSA sets forth the terms and conditions of Telkom's provision of transitional fixed broadband core services to Telkomsel for its indiHome service (fixed broadband, IPTV, and voice) for an initial period of two years commencing on the Effective Date (as defined therein) of the Fixed Broadband Core TSA. Such services shall include the provision of operational equipment and services & deliverables (technical support, supporting tools, and reporting and performance evaluation), as described in Article 3 of this Agreement.
The Deed of Transfer sets forth the terms and conditions of the transfer of the IndiHome business segment from Telkom to Telkomsel, which involved the transfer of assets and liabilities associated with IndiHome from Telkom to Telkomsel, against which Telkomsel will issue new shares to Telkom. Telkom has disclosed the IndiHome Integration to the public, its employees, and creditors, in line with applicable laws, regulations, and the articles of association of the respective parties involved.
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D. EXCHANGE CONTROLS
Currently, Indonesia has limited foreign exchange controls. The Indonesian Rupiah has been, and in general is, freely convertible. However, in order to maintain the stability of the Indonesian Rupiah and prevent utilization of the Indonesian Rupiah for speculative purposes by non-residents, BI has introduced regulations to restrict the movement of Indonesian Rupiah from (i) banks within Indonesia to offshore banks or to an offshore branch or office of an Indonesian bank, and (ii) investments denominated in Indonesian Rupiah with foreign parties and/or Indonesian parties domiciled or permanently residing outside Indonesia (without underlying trade or investment reasons), both of which thereby limit offshore trading to existing sources or liquidity. Furthermore, under BI Regulation No. 21/15/PBI/2019 on the Supervision of Foreign Exchange Activities Between Banks and Customers, ("PBI 21/15/PBI/2019"), any outgoing transfer from Indonesia to offshore in foreign currency (non-Rupiah) exceeding US$100,000 or its equivalent by any party through an Indonesian bank (save for transfers of a party's own bank deposit to its own offshore bank account) must be supported by valid underlying and supporting documentation as prescribed in PBI 21/15/PBI/2019. Such documentation includes copies of import duty (pemberitahuan pabean impor), letters of credit and invoices. The maximum amount of outgoing transfer must not exceed the amount stated in the supporting documentation plus 2.5%. In addition, BI has the authority to request information and data concerning foreign currency activities of all people and legal entities that are either domiciled in Indonesia or who plan to reside in Indonesia for at least one year.
BI Regulation No. 21/2/PBI/2019 on Reporting of Foreign Exchange Activities enacted on January 9, 2019, requires bank institutions, non-bank financial institutions, non-financial institutions, state/regional-owned companies, private companies, business entities and individuals to submit a report to BI on their foreign exchange activities. The report must include, among other things, information relating to (i) trade activities in goods, services and other transactions between Indonesian residents and non-residents of Indonesia, (ii) details of any offshore loans and/or risk participation transactions entered into and the supporting documents of the offshore loans such as loan agreements, (iii) details of plans in relation to the withdrawal and/or repayment of offshore loans and/or risk participation transactions, (iv) details of realization in relation to the withdrawal and/or repayment of offshore loans and/or risk participation transactions, (v) the entity’s position with respect to, or changes in, its offshore financial assets, offshore financial liabilities and/or risk participation transactions, and (vi) plans in relation to the incurrence of new offshore loans and/or amendments to existing offshore loans and/or risk-participating transactions.
The foreign exchange traffic report must be submitted to BI no later than the fifteenth day of the subsequent month. In the event that a correction must be made, the correction must be submitted no later than the twentieth day of the reporting month. Failure to submit the foreign exchange report is punishable in the form of a written warning to the borrower. BI may also issue a notice to the authorities, offshore lenders and/or the parent company of the borrower with respect to non-compliance.
Pursuant to Presidential Decree No. 59 of 1972 on the Acceptance of Foreign Credit, as partially revoked by Presidential Regulation No. 86 of 2006 on Granting of Government Guarantees for the Acceleration of the Development
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of Coal-Powered Power Plants, we are required to obtain approval from the MoF prior to entering into foreign commercial loans. We are also required to submit periodic reports to the MoF during the term of such foreign commercial loans. Following the disbanding of the PKLN Team in 2020 and pending the issuance of the relevant implementing regulations, there is uncertainty as to the MoF's approval process and how periodic reports on foreign commercial loans will be handled.
E. TAXATION
The following summary contains a description of the principal Indonesian and United States federal income tax consequences of the purchase, ownership, and disposition of ADSs or shares of common stock. This summary does not purport to be a complete description of all of the tax considerations that may be relevant to a decision to acquire, own or dispose of ADSs or shares of common stock.
Investors should consult their tax advisors about the Indonesian and United States federal, state, and local tax consequences to them of the acquisition, ownership, and disposition of ADSs or shares of common stock.
Indonesian Taxation
The following is a summary of the principal Indonesian tax consequences of the ownership and disposition of common stock or ADSs to a non-resident individual or non-resident entity that holds common stock or ADSs (a "Non-Indonesian Holder"). A "non-resident individual" is a foreign national individual who does not reside in Indonesia and is not physically present in Indonesia for more than 183 days within a 12-month period, or an Indonesian citizen who is residing outside of Indonesia for more than 183 days within a 12-month period and fulfills certain requirements on her or his place of residency, main activities, habitual abode, tax status and/or other requirements, during which period such non-resident individual receives income in respect of the ownership or disposition of common stock or ADSs and a "non-resident entity" is a corporation or a non-corporate body that is established, domiciled or organized under the laws of a jurisdiction other than Indonesia and does not have a fixed place of business or otherwise conducts business or carries out activities through a permanent establishment in Indonesia during an Indonesian tax year in which such non-resident entity receives income in respect of the ownership or disposition of common stock or ADSs. In determining the residency of an individual or entity, consideration will be given to the provisions of any applicable double taxation treaty to which Indonesia is a party.
Dividends
Dividends declared by us out of retained earnings and distributed to a Non-Indonesian Holder in respect of common stock or ADSs are subject to Indonesian withholding tax, which, as of the date of this annual report on Form 20-F, is at the rate of 20%, on the amount of the distribution (in the case of cash dividends) or on the shareholders proportional share of the value of the distribution. A lower rate provided under double taxation treaties may be applicable, provided the recipient is able to comply with the following strict requirements:
1. | If the provisions under the tax treaty is different from those under Indonesian Income Tax Law. | |||
2. | The income recipient is not an Indonesian tax resident. | |||
3. | The non-resident income recipient is an individual or an entity who is a tax resident of the country under the concerned tax treaty partner. | |||
4. | The non-resident income recipient submits a certificate of domicile that meets with the following administrative requirements and certain other requirements: | |||
a. | The administrative requirements to be fulfilled by the non-resident income recipient in order to apply the tax treaty are as follows: | |||
1. | Uses Form DGT (Indonesian Directorate General of Taxes Form); | |||
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2. | the form must be filled in correctly, completely, and clearly by the non-resident income recipient; | |||
3. | the form must be signed by the non-resident income recipient or equivalent mark/stamp as normally used in its country; | |||
4. | the form must be signed by the authorized official of the treaty country where the non-resident income recipient resides or equivalent mark/stamp as normally used; | |||
5. | there is a statement made by the non-resident income recipient stating that there is no tax treaty abuse; | |||
6. | there is a statement that the non-resident income recipient is the Beneficial Owner in case it is required by the tax treaty; | |||
7. | the form must be used for the period stated in Form DGT; and | |||
8. | the signing and marking by the competent tax authority officer must be done in Part II of Form DGT. | |||
b. | Certain other requirements are that the certificate of domicile must explain the following information: | |||
1. | There are relevant economic motives in relation to the establishment of the entity; | |||
2. | the entity has its own management to conduct business and the management has independent discretion; | |||
3. | the entity has sufficient assets to conduct business other than the assets generating income from Indonesia; | |||
4. | the entity has sufficient and qualified personnel to conduct business; and | |||
5. | the entity has business activities other than receiving dividends, interests, and/or royalties from Indonesia. | |||
5. | There is no tax treaty abuse. To meet this condition, the non-resident income recipient shall comply with the requirements below: | |||
a. | If the non-resident income recipient is an individual, he or she does not act as an agent or nominee; or | |||
b. | If the non-resident income recipient is an entity, it is required to: | |||
1. | have economic substance in the establishment of the entity or the implementation of the transaction; | |||
2. | have a legal form that reflects the economic substance in the establishment of the entity or the implementation of the transaction; | |||
3. | have business activities which are managed by its own management and the management has sufficient authority to carry out the transactions (i.e., has independent discretion); | |||
4. | have fixed assets and non-fixed assets (other than the assets generating income from Indonesia), which are adequate and sufficient to conduct business activities in that treaty partner country; | |||
5. | have sufficient employees with the expertise and certain skills in accordance with its line of business; and | |||
6. | have activities or an active business other than only receiving income in the form of dividends, interests, or royalties from Indonesia. | |||
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7. | there is no arrangement of transactions either directly or indirectly with the objective to obtain benefits from implementation of a tax treaty, such as: - reduction of tax burden; and/or - double non-taxation in any country or jurisdiction; which contradicts the purpose and objectives of the double tax avoidance agreement. | |||
6. | The non-resident income recipient is the beneficial owner of the income as required by the concerned tax treaty. The requirements for a beneficial owner are as follows: | |||
a. | If the non-resident income recipient is an individual, he or she does not act as an agent or nominee; or | |||
b. | If the non-resident income recipient is an entity, it should comply with the following requirements: | |||
1. | It does not act as an agent, nominee, or conduit; | |||
2. | It must have control in using or enjoying funds, assets, or rights that can generate income from Indonesia; | |||
3. | No more than 50% of the total non-consolidated income is used to fulfill obligations to other parties; | |||
4. | It bears the risks of assets, capital, and/or liabilities; and | |||
5. | It does not have written or unwritten obligation to provide part or all of the income derived from Indonesia to another party. | |||
Capital Gains
The sale or transfer of common stock through the IDX is subject to a final withholding tax at the rate of 0.1% of the gross value of the transaction. The broker executing the transaction is obligated to withhold such tax. The sale or transfer of founder shares through the IDX under current Indonesian tax regulations, be subject to additional income tax if the 0.5% final income tax has not been settled after the initial public offering.
Subject to the promulgation of implementing regulations, the estimated net income received or accrued from the sale of movable assets in Indonesia, which may include common stock not listed on the IDX or ADSs, by a Non-Indonesian Holder (with the exception of the sale of assets under Article 4 paragraph (2) of the Indonesian Income Tax Law) may be subject to Indonesian withholding tax at the rate of 20%.
There is no specific tax regulation on the sale of listed shares outside the IDX. If the transfer of listed shares outside the IDX by a non-resident taxpayer is considered as the transfer of unlisted shares by a non-resident taxpayer, then general tax regulation will be applied, which is, withholding tax of 5% of the sales price (or may be subject to the double taxation treaty) will be applicable.
Under Indonesian Tax Laws, a purchaser or Indonesian broker is required to withhold tax on payment of the purchase price for common stock or ADSs through the IDX. Theoretically, that payment may be exempt from Indonesian withholding or other Indonesian income tax under applicable double taxation treaty to which Indonesia as a party (including the United States-Indonesia double taxation treaty). However, except for the sale or transfer of shares in a non-public company, the current Indonesian tax regulations do not provide specific procedures for the application of the tax treaty from the proceeds of such sale. To take advantage of the double taxation treaty relief, Non-Indonesian Holders may need to fulfill certain requirements including making a specific application accompanied by a specific form which is set by the Indonesian Tax Office as a Certificate of Residency and filled in by the recipient of the income and validated by the competent authority of the country where the recipients are resident. The original Certificate of Residency that has been validated by the competent authority must be provided to the custodian that will forward it to the withholding tax agent.
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Stamp Duty
Since January 1, 2021, pursuant to Law No. 10 of 2020 on Stamp Duty ("Law No. 10/2020"), the nominal amount of the Indonesian stamp duty is Rp10,000 for documents concerning civil matters and documents presented as evidence before a court of law. Law No. 10/2020 stipulates the triggering event for each type of document (e.g., for agreements, the stamp duty becomes due and payable upon signing, and for documents relating to securities transactions effected through the stock exchange, the stamp duty becomes due and payable when the documents evidencing the transfer (e.g., the trade confirmation for trading of stocks listed on the IDX) are made (e.g., issued by the broker)). Such stamp duty is payable by the relevant party as set out in the law. For documents relating to listed stock transactions (i.e., trade confirmations), the stamp duty is payable by the recipient of the document (i.e., the purchaser of the securities). For other types of commercial papers (e.g., collective share certificates evidencing ownership of non-listed securities), the stamp duty is payable by the issuer of such commercial paper when the document evidencing ownership of the commercial papers are made by the issuer of the securities.
Certain Considerations Regarding U.S. Federal Income Tax
The following is a summary of certain material U.S. federal income tax considerations to U.S. Holders, as defined below, of ADSs or common stock that are held as "capital assets" (generally, property held for investment) under section 1221 of the U.S. Internal Revenue Code of 1986, as amended, (the "Code"). This summary is based upon the Code, its legislative history, final, temporary and proposed U.S. Treasury regulations promulgated thereunder, published rulings and court decisions, as well as the Convention between the Government of the United States and the Government of the Republic of Indonesia for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income (the "Treaty"), each as in effect on the date hereof, all of which are subject to change, or changes in interpretation, possibly with retroactive effect. In addition, this discussion is based in part upon representations of the depositary and the assumption that each obligation in the Deposit Agreement and any related agreements will be performed according to its terms.
This summary does not discuss all aspects of U.S. federal income taxation which may be relevant to particular investors in light of their individual investment circumstances, including investors subject to special tax rules (including, but not limited to, a person who directly, indirectly or constructively owns 10% or more of the stock of the Company, a person who acquires ADSs or common stock pursuant to the exercise of any employee share option or otherwise as compensation, banks and other financial institutions, insurance companies, broker or dealers in securities, a trader in securities who elects to use a mark-to-market method of accounting for its securities holdings, a person that may have been liable for alternative minimum tax, regulated investment companies, real estate investment trusts, partnerships and their partners, individual retirement and other tax-deferred accounts, certain former U.S. citizens or long-term residents, and tax-exempt organizations (including private foundations)), holders who are not U.S. Holders, investors that will hold ADSs or common stock as part of a straddle, hedge, conversion, constructive sale, or other integrated transaction for U.S. federal income tax purposes, investors subject to special tax accounting rules as a result of any item of gross income with respect to the ADSs or common stock being taken into account in an applicable financial statement, or investors that have a functional currency other than the U.S. Dollar, all of whom may be subject to tax rules that differ significantly from those summarized below. In addition, this summary does not address U.S. federal estate and gift taxes, the U.S. federal Medicare tax on net investment income, or state, local, or non-U.S. tax considerations. Each U.S. Holder is urged to consult such holder's tax advisor regarding the U.S. federal, state, local and non-U.S. income, and other tax considerations of their investment in the ADSs or common stock.
For purposes of this summary, a "U.S. Holder" is a beneficial owner of ADSs or common stock that is, for U.S. federal income tax purposes:
(i) | an individual who is a citizen or resident of the United States; |
(ii) | a corporation, created in, or organized under the laws of, the United States or any state thereof or the District of Columbia; |
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(iii) | an estate the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source; or |
(iv) | a trust (A) the administration of which is subject to the primary supervision of a U.S. court and which has one or more U.S. persons who have the authority to control all substantial decisions of the trust or (B) that has made a valid election to be treated as a U.S. person under the Code. |
If a partnership (or other entity or arrangement that is treated as a partnership for U.S. tax purposes) is the beneficial owner of ADSs or common stock, the tax treatment of a partner in the partnership (or interest holder in the "tax transparent" entity) will generally depend on the status of the partner (or interest holder) and the activities of the partnership (or "tax transparent" entity). In general, for U.S. federal income tax purposes, U.S. Holders of ADSs will be treated as the beneficial owners of the underlying common stock represented by the ADSs.
As described in more detail below, based on our Consolidated Financial Statements and relevant market data, we believe that we did not meet the definition of a passive foreign investment company (a “PFIC”) for U.S. federal income tax purposes with respect to our 2023 taxable year. In addition, based on our Consolidated Financial Statements and our current expectations regarding the value and nature of our assets, the sources and nature of our income, and relevant market data, we do not anticipate we will be a PFIC for any future taxable year. However, our status for the 2023 taxable year and future taxable years will depend on our income and assets (which for this purpose depends in part on the market value of the ADSs or common shares) in those years. See the discussion below under "Passive Foreign Investment Company."
Prospective purchasers should consult their own tax advisors concerning the U.S. federal, state, local, foreign and other tax consequences of acquiring, owning and disposing of ADSs or common stock, in light of their particular circumstances.
Distributions on the Common Stock or ADSs
Subject to the discussion below under "Passive Foreign Investment Company," the gross U.S. Dollar amount of any distribution of cash or property (without deduction for any tax withheld), other than certain pro rata distributions of common stock, we make on the common stock or ADSs out of our current or accumulated earnings and profits (as determined for U.S. federal income tax purposes) will generally be includible in a U.S. Holder's gross income as ordinary dividend income when the distribution is actually or constructively received by such U.S. Holder, or by the depositary in the case of ADSs. Distributions that exceed our current and accumulated earnings and profits will be treated as a non-taxable return of capital to the extent of the U.S Holder’s basis in the common stock or ADSs and thereafter as capital gain. However, we do not calculate earnings and profits in accordance with U.S. tax principles. Accordingly, all distributions by us to U.S. Holders will generally be treated as ordinary dividend income. Any dividend will not be eligible for the dividends-received deduction generally granted to U.S. corporations in respect of dividends received from U.S. corporations. The amount of any distribution of property other than cash will be the fair market value of such property on the date of such distribution.
The U.S. Dollar amount of dividends received by certain non-corporate U.S. Holders will generally be taxable at favorable rates as opposed to being taxable at ordinary income rates if the dividends are "qualified dividends." Dividends paid on ADSs or common stocks will be treated as qualified dividends if (i) certain holding period requirements are met, (ii) either the Treaty is a qualified treaty for purposes of the "qualified dividend" rules, or the dividends are with respect to ADSs readily tradable on a U.S. securities market, and (iii) we were not, in the taxable year prior to the year in which the dividend was paid, and are not, in the year in which the dividend is paid, a "passive foreign investment company," or PFIC. The Treaty has been approved for purposes of the qualified dividend rules, and we expect to qualify for benefits under the Treaty so long as there is substantial and regular trading in our common stock on the IDX. We are considered a qualified foreign corporation with respect to the ADSs because our ADSs are listed on the NYSE.
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Based on our Consolidated Financial Statements and relevant market data, we believe that we did not meet the definition of a PFIC for U.S. federal income tax purposes with respect to our 2022 taxable year. In addition, based on our Consolidated Financial Statements and our current expectations regarding the value and nature of our assets, the sources and nature of our income, and relevant market data, we do not anticipate we will be a PFIC for any future taxable year. However, our status for the 2022 taxable year and future taxable years will depend on our income and assets (which for this purpose depends in part on the market value of the ADSs or common shares) in those years. See the discussion below under "Passive Foreign Investment Company."
U.S. Holders of ADSs or common stock should consult their own tax advisors regarding the availability of the reduced dividend tax rate in light of their own particular circumstances.
The amount of the dividend distribution paid in any foreign currency that a U.S. Holder must include in its income will be the U.S. Dollar value of the foreign currency payments made, determined at the spot rate on the date the dividend distribution is actually or constructively received, regardless of whether the payment is in fact converted into U.S. Dollars. Generally, any gain or loss resulting from currency exchange fluctuations during the period from the date the U.S. Holder includes the dividend payment in income to the date it converts the payment into U.S. Dollars will be treated as ordinary income or loss from U.S. sources.
Dividends paid by us generally will constitute income from sources outside the United States for U.S. foreign tax credit limitation purposes and will be categorized as "passive category income" or, in the case of certain U.S. Holders, as "general category income" for U.S. foreign tax credit purposes. Subject to certain complex limitations, it is possible that any Indonesian tax withheld from distributions to a U.S. Holder in accordance with the Treaty generally may be deductible or creditable, at such U.S. Holder's option, in computing such U.S. Holder's federal income tax liability. However, U.S. Treasury regulations released in January 2022 tightened the standards for determining whether a foreign tax is creditable, and we have not determined whether this Indonesian withholding tax would be creditable under these regulations. Accordingly, U.S. Holders should consult their tax advisors regarding the creditability of this Indonesian tax. If a U.S. Holder elects to claim a deduction, rather than a foreign tax credit, for a particular taxable year, such election will apply to all foreign taxes paid or accrued by or on behalf of the U.S. Holder in the particular year.
A U.S. Holder may not be able to claim a foreign tax credit (and instead may claim a deduction) for non-U.S. taxes imposed on dividends paid on the ADSs or common stock if such U.S. Holder (i) held the ADSs or common shares for less than a specified minimum period during which such U.S. Holder was not protected from risk of loss with respect to such shares, or (ii) is obligated to make payments related to the dividends (for example, pursuant to a short sale). The rules relating to the U.S. foreign tax credits are complex and U.S. Holders may be subject to various limitations on the amount of foreign tax credits that are available. U.S. Holders should consult their own tax advisors regarding the effect of these rules in their particular circumstances.
In the event we are required to withhold Indonesian income tax on dividends paid to U.S. Holders on the ADSs or common stock (see discussion under "Indonesian Taxation"), a U.S. Holder may be able to claim a reduced rate of Indonesian withholding tax if such U.S. Holder is eligible for benefits under the Treaty. Any amount of tax withheld that could have been reduced under the Treaty will not be eligible for credit against the U.S. Holder’s U.S. federal income tax liability, even if the tax would otherwise be creditable. U.S. Holders should consult their own tax advisors about the eligibility for reduction of Indonesian withholding tax.
Sale or Other Disposition of ADSs or Common Stock
Subject to the discussion below under "Passive Foreign Investment Company," upon a sale, exchange or other disposition of the ADSs or common stock, a U.S. Holder will generally recognize capital gain or loss for U.S. federal income tax purposes in an amount equal to the difference between the U.S. Dollar value of the amount realized and the U.S. Holder's adjusted tax basis, determined in U.S. Dollars, in such ADSs or common stock. Gain or loss recognized upon the sale or other disposition of ADSs or common stock will generally be long-term capital gain or loss if the U.S. Holder's holding period for such ADSs or common stock exceeds one year. The deductibility of capital losses is subject to limitations.
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A U.S. Holder that receives foreign currency from a sale or disposition of ADSs or common stock generally will realize an amount equal to the U.S. Dollar value of the foreign currency determined on (i) the date of receipt of payment in the case of a cash-basis U.S. Holder, and (ii) the date of disposition in the case of an accrual-basis U.S. Holder. If our ADSs or common stock are treated as traded on an "established securities market," a cash-basis taxpayer or, if it so elects, an accrual-basis taxpayer, will determine the U.S. Dollar value of the amount realized by translating the amount received at the spot rate of exchange on the settlement date of the sale. A U.S. Holder will have a tax basis in the foreign currency received equal to the U.S. Dollar amount realized. Any currency exchange gain or loss realized on a subsequent conversion of the foreign currency into U.S. Dollars for a different amount generally will be treated as ordinary income or loss from sources within the United States. However, if such foreign currency is converted into U.S. Dollars on the date received by the U.S. Holder, a cash-basis or electing accrual-basis U.S. Holder should not recognize any gain or loss on such conversion.
The creditability of any Indonesian taxes imposed on a disposition is subject to the same uncertainty described above in connection with the Indonesian withholding tax on dividends (see discussion under “Distributions on the Common Stock or ADSs”). Moreover, any gain or loss will generally be U.S. source gain or loss for foreign tax credit limitation purposes and as a result of the U.S. foreign tax credit limitation, foreign taxes, if any, imposed upon a disposition of the ADSs or common stock may not be creditable. U.S. Holders should consult their own tax advisors regarding the tax consequences if a foreign tax is imposed on a disposition of ADSs or common stock, including the creditability of such tax, and the availability of a foreign tax credit or deduction in respect of such tax.
Passive Foreign Investment Company
The Code provides special, generally adverse, rules regarding certain distributions received by U.S. persons with respect to, and sales, exchanges, and other dispositions, including pledges, of shares of stock of, a PFIC. In general, a foreign corporation is a PFIC for any taxable year in which, after applying relevant look-through rules with respect to the income and assets of subsidiaries:
•75% or more of its gross income for such year consists of passive income, such as dividends, interest, rents, royalties, and gains from the sale of assets that give rise to passive income; or
•50% or more of the average quarterly value of its gross assets during such year consists of assets that produce, or are held for the production of, passive income.
"Passive income" for this purpose includes, for example, dividends, interest, royalties, rents and gains from commodities and securities transactions and the excess of gains over losses from the disposition of assets which produce passive income. Passive income does not include rents and royalties derived from the active conduct of a trade or business. If the stock of a non-U.S. corporation is publicly traded for the taxable year, the asset test is applied using the fair market value of the assets for purposes of measuring such corporation's assets. If we own, directly or indirectly, at least 25% (by value) of the stock of another corporation, we will be treated, for purposes of the PFIC tests, as owning our proportionate share of the other corporation's assets and receiving our proportionate share of the other corporation's income for purposes of the PFIC income and asset tests.
We do not believe we were a PFIC for prior taxable years. Based on the current and anticipated composition of our assets and income and the current expectations regarding the price of the ADSs and common stock, we do not believe that we are a PFIC for our 2022 taxable year, and we do not expect to become a PFIC for future taxable years. This is a factual determination, however, that must be made annually at the end of the taxable year. Therefore, it may be possible that we are classified as a PFIC for our 2022 taxable year or for another future taxable year. Changes in the nature of our income or assets or a decrease in the trading price of the ADSs or common stock may cause us to be considered a PFIC in the current or any subsequent year.
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If we were a PFIC in any taxable year that a U.S. Holder held the ADSs or common stock, and any entity in which we own or are treated as owning equity interests is also a PFIC (any such entity, a "Lower-tier PFIC"), the U.S. Holder will be deemed to own the U.S. Holder’s proportionate share of the Lower-tier PFIC and will be subject to U.S. federal income tax according to the rules described in the following paragraph on (i) certain distributions by the Lower-tier PFIC, and (ii) a disposition of equity interests of the Lower-tier PFIC, in each case as if the U.S. Holder owned its proportionate share of the Lower-tier PFIC directly, even though the U.S. Holder will not receive the proceeds of those distributions or dispositions.
Generally, if we are a PFIC for any taxable year during which a U.S. Holder owns ADSs or common stock, gain recognized by a U.S. Holder upon a sale or other disposition (including, under certain circumstances, a pledge) of the ADSs or common stock will be allocated ratably over the U.S Holder’s holding period for such ADSs or common stock. The amounts allocated to the taxable year of the sale or other disposition and to the years before we became a PFIC will be taxed as ordinary income. The amount allocated to each other taxable year will be subject to tax at the highest rate in effect for that taxable year for individuals or corporations, as applicable, and an interest charge will be imposed on the resulting tax liability for each relevant taxable year. Further, such U.S. Holder generally would be subject to special rules with respect to "excess distributions" made by us on the ADSs or common stock and with respect to gain from a U.S. Holder's disposition of the ADSs or common stock. An "excess distribution" generally is defined as the excess of the distributions a U.S. Holder receives with respect to the ADSs or common stock in any taxable year, over 125% of the average annual distributions that such U.S. Holder has received from us during the shorter of the three preceding years, or such U.S. Holder’s holding period for the ADSs or common stock. Generally, a U.S. Holder would be required to allocate any excess distribution or gain from the disposition of the ADSs or common stock ratably over such U.S. Holder’s holding period for the ADSs or common stock. The portion of the excess distribution or gain allocated to a prior taxable year, other than a year prior to the first year in which we became a PFIC, would be taxed at the highest U.S. federal income tax rate on ordinary income in effect for such taxable year, and a U.S. Holder would be subject to an interest charge (at the rate generally applicable to an underpayment of tax) on the resulting tax liability, determined as if the tax liability had been due with respect to such particular taxable year. The portion of the excess distribution or gain that is not allocated to prior taxable years, together with the portion allocated to the years prior to the first year in which we became a PFIC, would be included in a U.S. Holder’s gross income for the taxable years of the excess distribution or disposition and taxed as ordinary income.
If we were a PFIC in any year during a U.S. Holder's holding period, we would generally continue to be treated as a PFIC with respect to such U.S. Holder's investment unless the U.S. Holder has made certain elections under the PFIC rules, such as a mark-to-market election or a "qualified electing fund" ("QEF") election. U.S. Holders should consult their tax advisors regarding the availability and advisability of making a mark-to-market election in their particular circumstances. There is no law, regulation or administrative guidance that provides for a right to make mark-to-market election for equity interests in any Lower-tier PFIC the shares of which are not regularly traded on a qualified exchange. As a result, even if a U.S. Holder makes a mark-to-market election with respect to such U.S. Holder’s ADSs or common stock, such U.S. Holder could nevertheless be subject to the PFIC rules described in the preceding paragraph with respect to such U.S Holder’s indirect interest in any Lower-tier PFIC.
If we are a PFIC (or treated as a PFIC with respect to a U.S. Holder) for a taxable year in which we pay a dividend or for the prior taxable year, the favorable tax rate described above with respect to dividends paid to certain non-corporate U.S. Holders will not apply.
Prospective investors should assume, however, that a QEF election will not be available because we do not expect to provide U.S. Holders with the information needed to make such an election. U.S. Holders should consult with their own tax advisors concerning the consequences to them if we are or become a PFIC, including but not limited to any reporting requirements and the availability and applicability of any election that may be available to mitigate adverse consequences, in light of such U.S. Holders' particular circumstances.
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If we were regarded as a PFIC, a U.S. Holder of ADSs or common stock generally would be required to file an information return on Internal Revenue Service ("IRS") Form 8621 for any year in which the U.S. Holder received a direct or indirect distribution with respect to the ADSs or common stock, recognized gain on a direct or indirect disposition of the ADSs or common stock, or made an election with respect to the ADSs or common stock, reporting distributions received and gains realized with respect to the ADSs or common stock. In addition, if we were regarded as a PFIC, a U.S. Holder would be required to file an annual information return (also on IRS Form 8621) relating to the U.S. Holder's ownership of the ADSs or common stock. This requirement would be in addition to other reporting requirements applicable to ownership in a PFIC.
The rules applicable to owning stock of a PFIC are complex. We encourage U.S. Holders to consult their own tax advisors concerning the U.S. federal income tax consequences of holding the ADSs or common stock that would arise if we were considered a PFIC.
Backup Withholding Tax and Information Reporting Requirements
U.S. backup withholding tax and information reporting requirements generally apply to certain payments made to certain non-corporate holders of stock. Information reporting generally will apply to payments of dividends on and to proceeds from the sale or redemption of ADSs or common stock made within the United States or by a U.S. payor or U.S. middleman to a holder of ADSs or common stock (other than an "exempt recipient," including a corporation, a payee that is not a U.S. person that provides an appropriate certification, and certain other persons).
A payor will be required to withhold backup withholding tax from any payments of dividends on, or the proceeds from the sale or redemption of, ADSs or common stock within the United States or by a U.S. payor or U.S. middleman to a U.S. Holder, other than an exempt recipient, if such U.S. Holder fails to furnish its correct taxpayer identification number or otherwise fails to comply with, or establish an exemption from, such backup withholding tax requirements. The backup withholding tax is not an additional tax and may be credited against a U.S. Holder's regular U.S. federal income tax liability or, if in excess of such liability, refunded by the IRS if a timely refund claim is filed with the IRS.
Information With Respect To Foreign Financial Assets
Certain U.S. Holders may be required to report information with respect to such holder's interest in "specified foreign financial assets" (as defined in Section 6038D of the Code), including stock of a non-U.S. corporation that is not held in an account maintained by certain financial institutions, if the aggregate value of all such assets exceeds certain dollar thresholds. Persons who are required to report specified foreign financial assets and fail to do so may be subject to substantial penalties. U.S. Holders are urged to consult their own tax advisors regarding the foreign financial asset reporting obligations and their possible application to the holding of the ADSs or common stock.
The discussion above is a general summary only. It is not intended to constitute a complete analysis of all tax considerations applicable to an investment in ADSs or common stock. Each prospective U.S. Holder should consult with such U.S. Holder’s own tax advisor concerning the tax consequences to such U.S. Holder of an investment in ADSs or common stock, in light of such U.S. Holder’s particular circumstances.
F. DIVIDENDS AND PAYING AGENTS
Not applicable.
G. STATEMENT BY EXPERTS
Not applicable.
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H. DOCUMENTS ON DISPLAY
Any material which is filed as an exhibit to this annual report on Form 20-F with the U.S. Securities and Exchange Commission is available for inspection at our offices. See "Item 4. Information on the Company — History and Development of the Company — Profile of Telkom Indonesia."
| I. | SUBSIDIARY INFORMATION |
Not applicable.
J. | ANNUAL REPORT TO SECURITY HOLDERS |
If we are required to provide an annual report to security holders in response to the requirements of Form 6-K, we will submit the annual report to security holders in electronic format in accordance with the EDGAR Filer Manual.
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
We are exposed to market risks that arise from changes in foreign exchange rates and interest rates risk, each of which will have an impact on us. Generally, we do not hedge our long-term liabilities in foreign currencies but hedge our obligation for the current year. As of December 31, 2023, assets in foreign currencies represented 337.8% of our liabilities denominated in foreign currencies. Our exposure to interest rate risk is managed through a mix of fixed and variable rate liabilities and assets, including short-term fixed-rate assets. Our exposure to such market risks fluctuated during 2021, 2022 and 2023 as the Indonesian economy was affected by changes in the U.S. Dollar to Indonesian Rupiah exchange rate and interest rates themselves. We are not able to predict whether such conditions will continue during 2024 or thereafter.
Foreign Exchange Rate Risk
We are exposed to foreign exchange risk on sales, purchases and borrowings that are denominated in foreign currencies, primarily in U.S. Dollars. Our exposures to other foreign exchange rates are not material. The foreign currency exchange rate risks on our obligations are expected to be partly offset by time deposits and receivables denominated in foreign currencies, which are generally equal to at least 25% of our current foreign currency liabilities.
For the sensitivity analysis of the risk of foreign exchange rate exposure, we take into consideration the assets and liabilities with exposure to the fluctuation of exchange rates recorded in our consolidated balance sheet. This analysis considers only financial assets and financial liabilities registered in U.S. Dollars, since our exposure to exchange variations against other foreign currencies is not material.
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Information on such sensitivity analysis showing the impact on our equity and profit/(loss) of hypothetical variations of the U.S. Dollar and the Japanese Yen against the Rupiah as of December 31, 2023 can be found in Note 34b of our Consolidated Financial Statements. As of December 31, 2023, we estimate that 1% appreciation of the U.S. Dollars against the Rupiah and 5% appreciation of the Japanese Yen against the Rupiah would cause Rp91 billion profit (compared to Rp92 billion profit as of December 31, 2022) and Rp4 billion loss (compared to Rp9 billion loss as of December 31, 2022), respectively. Further, as of December 31, 2023, we estimate that 1% depreciation of the U.S. Dollar against the Rupiah and 5% depreciation of the Japanese Yen against the Rupiah would cause Rp91 billion loss and Rp4 billion profit, respectively. The analysis assumes that all other variables, in particular foreign currency rates, remain constant.
The below table shows a break down by main categories of financial assets and financial liabilities of our exposure to foreign currency risk as of December 31, 2023:
Foreign Exchange Risk | Outstanding Balance | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
as of December 31, 2023 | Expected Maturity Date | |||||||||||||||||
Foreign | Rp | Fair | ||||||||||||||||
| Currency |
| Equivalent |
| 2024 |
| 2025 |
| 2026 |
| 2027 |
| 2028 |
| Thereafter |
| Value | |
(million) | (Rp billion) | (Rp billion) | ||||||||||||||||
ASSETS |
|
|
|
|
|
|
|
|
| |||||||||
Cash and Cash Equivalents |
|
|
|
|
|
|
|
|
| |||||||||
U.S. Dollar |
| 263 |
| 4,055 |
| 4,055 |
| — |
| — |
| — |
| — |
| — |
| 4,055 |
Japanese Yen |
| 6 |
| 1 |
| 1 |
| — |
| — |
| — |
| — |
| — |
| 1 |
Others(1) |
| 16 |
| 215 |
| 215 |
| — |
| — |
| — |
| — |
| — |
| 215 |
Other Current Financial Assets | ||||||||||||||||||
U.S. Dollar |
| 27 |
| 419 |
| 419 |
| — |
| — |
| — |
| — |
| — |
| 419 |
Others(1) |
| 0 |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
Trade Receivables | ||||||||||||||||||
Related Parties | ||||||||||||||||||
U.S. Dollar |
| 0 |
| 2 |
| 2 |
| — |
| — |
| — |
| — |
| — |
| 2 |
Others(1) |
| 0 |
| 0 |
| 0 |
| — |
| — |
| — |
| — |
| — |
| 0 |
Third Parties | ||||||||||||||||||
U.S. Dollar | 153 |
| 2,356 |
| 2,356 | — | — | — | — | — | 2,356 | |||||||
Others(1) | 12 |
| 169 |
| 169 | — | — | — | — | — | 169 | |||||||
Contract Assets | ||||||||||||||||||
U.S. Dollar | 7 |
| 107 |
| 107 | — | — | — | — | — | 107 | |||||||
Others(1) | — | — | — | — | — | — | — | — | — | |||||||||
Other Receivables | ||||||||||||||||||
U.S. Dollar | 1 |
| 8 |
| 8 | — | — | — | — | — | 8 | |||||||
Others(1) | 1 |
| 17 |
| 17 | — | — | — | — | — | 17 | |||||||
Other Current Assets | ||||||||||||||||||
U.S. Dollar | 1 |
| 22 |
| 22 | — | — | — | — | — | 22 | |||||||
Others(1) | 3 |
| 12 |
| 12 | — | — | — | — | — | 12 | |||||||
Long-term Investment in Financial Instruments | ||||||||||||||||||
U.S. Dollar | 377 |
| 5,802 |
| 5,802 | — | — | — | — | — | 5,802 | |||||||
Japanese Yen | — | — | — | — | — | — | — | — | — | |||||||||
Others(1) | 6 |
| 100 |
| 100 | — | — | — | — | — | 100 | |||||||
Other Non-current Assets | ||||||||||||||||||
U.S. Dollar | 0 |
| 5 |
| 5 | — | — | — | — | — | 5 | |||||||
Others(1) | 0 |
| 9 |
| 9 | — | — | — | — | — | 9 | |||||||
LIABILITIES | ||||||||||||||||||
Trade Payables | ||||||||||||||||||
Related Parties | ||||||||||||||||||
U.S. Dollar | 0 |
| 2 |
| 2 | — | — | — | — | — | 2 | |||||||
Others(1) | — | — | — | — | — | — | — | — | — | |||||||||
Third Parties | ||||||||||||||||||
U.S. Dollar | 164 |
| 2,532 |
| 2,532 | — | — | — | — | — | 2,532 | |||||||
Japanese Yen | 27 |
| 3 |
| 3 | — | — | — | — | — | 3 | |||||||
Others(1) | 10 |
| 142 |
| 142 | — | — | — | — | — | 142 | |||||||
Other Payables | ||||||||||||||||||
U.S. Dollar | 2 |
| 36 |
| 36 | — | — | — | — | — | 36 | |||||||
Others(1) | 8 |
| 19 |
| 19 | — | — | — | — | — | 19 | |||||||
Accrued Expenses | ||||||||||||||||||
U.S. Dollar | 32 |
| 497 |
| 497 | — | — | — | — | — | 497 | |||||||
Japanese Yen | 3 |
| 0 |
| 0 | — | — | — | — | — | 0 | |||||||
Others(1) | 5 |
| 52 |
| 52 | — | — | — | — | — | 52 | |||||||
Advances from Customers | ||||||||||||||||||
U.S. Dollar | 3 |
| 45 |
| 45 | — | — | — | — | — | 45 | |||||||
Others(1) | 0 |
| 2 |
| 2 | — | — | — | — | — | 2 | |||||||
Short-term Bank Loans | ||||||||||||||||||
U.S. Dollar | — | — | — | — | — | — | — | — | — | |||||||||
Current Maturities of Long-term Liabilities | ||||||||||||||||||
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Foreign Exchange Risk | Outstanding Balance | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
as of December 31, 2023 | Expected Maturity Date | |||||||||||||||||
Foreign | Rp | Fair | ||||||||||||||||
| Currency |
| Equivalent |
| 2024 |
| 2025 |
| 2026 |
| 2027 |
| 2028 |
| Thereafter |
| Value | |
(million) | (Rp billion) | (Rp billion) | ||||||||||||||||
U.S. Dollar | 11 |
| 174 |
| 174 | — | — | — | — | — | 174 | |||||||
Japanese Yen | 768 |
| 84 |
| 84 | — | — | — | — | — | 84 | |||||||
Others(1) | 0 |
| 5 |
| 5 | — | — | — | — | — | 5 | |||||||
Other Liabilities | ||||||||||||||||||
U.S. Dollar | 0 |
| 1 |
| 1 | — | — | — | — | — | 1 | |||||||
Others(1) | — | — | — | — | — | — | — | — | — | |||||||||
Long-term Liabilities(2) | ||||||||||||||||||
U.S. Dollar | 32 |
| 491 |
| — | 52 |
| 109 | 183 |
| 147 | — | 491 | |||||
Japanese Yen | — | — | — | — | — | — | — | — | — | |||||||||
Others(1) | 2 |
| 25 |
| — | — | — | — | — | — | 25 | |||||||
Notes:
| (1) | Assets and liabilities denominated in other foreign currencies are presented as U.S. Dollar equivalents using the Reuters bid and offer rates prevailing at the end of the reporting period. |
| (2) | Long-term liabilities for the purpose of this table consist of loans denominated in foreign currencies from long-term bank loans. |
Interest Rate Risk
Our exposure to interest rate fluctuations results primarily from changes to the floating rate applied for long-term debt. Borrowings at variable interest rates expose our Company and our subsidiaries to interest rate risk. In order to reduce our exposure to interest rate fluctuations, we aim to balance the share of our fixed-rate loans and floating-rate loans in our bank borrowings. We try to achieve this where there are opportunities to increase the share of fixed-rate loans in our overall loan portfolio in light of prevailing interest rates available in the market at any given time and based on market and our expectations as to future floating and fixed interest rates. As of December 31, 2023, approximately 43.7% (based on the aggregate then outstanding principal) of our total bank borrowings were floating-rate loans. To measure market risk fluctuations in interest rates, our Company and our subsidiaries primarily use the interest margin and maturity profile of the financial assets and liabilities based on the changing schedule of the interest rate.
In this Form 20-F, we chose to provide investors with the results of a sensitivity analysis related to our interest rate risk sensitive instruments as opposed to the tabular presentation of information related to interest rate risk sensitive instruments, we disclosed in previous annual reports on Form 20-F. We believe such presentation, together with comparable information for the fiscal year ended December 31, 2023, makes it easier to understand the impact of variations in interest rates on our Company's financial performance and financial position as we use selected hypothetical changes in interest rates to illustrate such impact. We also believe this type of sensitivity analysis provides useful information and is widely used by investors for measuring the impact of such variations on interest rate risk sensitive instruments held by issuers.
As of December 31, 2023, we estimate that a decrease by 25 basis points in the interest rates of our variable rate borrowings would have increased our equity and profit or loss by Rp74 billion (compared with a Rp88.2 billion increase as of December 31, 2022); a similar increase by 25 basis points in the interest rates of our variable rate borrowings would have decreased our equity and profit or loss by Rp74billion (compared with a Rp88.2 billion decrease as of December 31, 2022). The analysis assumes that all other variables, in particular foreign currency rates, remain constant.
Credit Risk
Credit risk is the potential financial loss resulting from the failure of a customer or counterparty to settle its financial obligations to us in accordance with the terms and conditions of the contract as and when they fall due. Credit risk arises mainly from trade receivables from the sales of products and services. Our management has a credit policy in place to monitor credit risk on an ongoing basis. As of December 31, 2023, there were no significant concentrations of credit risk. Since early 2020, due to the COVID-19 pandemic, some of our certain customers particularly in the Enterprise segment have been facing business and financial difficulties. We have increased the monitoring of our customers' accounts and the balance of our receivables. We have agreements in place to postpone payments of fees due by certain of our enterprise customers in consideration of our pre-existing business relationship with them and in light of current circumstances and hardship. In an effort to attenuate such counterparty risk, since early 2020 we have asked our individual customers to make a one-month deposit based on their standard subscription fee that can be used to offset any fee amount
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accrued and unpaid. As of December 31, 2023, customers’ default on fee payments had not significantly increased compared to the preceding financial year. For additional information on the maximum exposure to credit risk of our financial assets as of December 31, 2023, please refer to Note 34b.iv to our Consolidated Financial Statements.
Financial Risk
We classify our financial assets as at amortized cost, at Fair Value through Profit or Loss ("FVTPL") and Fair Value through Other Comprehensive Income ("FVTOCI"). We are exposed to changes in debt and equity market prices related to financial assets measured at FVTPL carried at fair value. Gains arising from changes in the fair value of financial assets measured at FVTPL are recognized in our consolidated statements of profit or loss and other comprehensive income. We periodically monitor the performance of our financial assets measured at FVTPL, and we regularly assess their relevance to our long-term strategic plans.
As of December 31, 2023, our management considered the price risk for our financial assets measured at FVTPL to be immaterial in terms of the possible impact on profit or loss and total equity from a reasonably possible change in fair value.
Liquidity Risk
Liquidity risk arises in situations where we experience difficulties in fulfilling our financial obligations when they become due. Prudent liquidity risk management implies maintaining sufficient cash in order to meet our financial obligations. We regularly monitor our financial position ratios, such as liquidity ratios and debt-to-equity ratios, and our ability to comply with applicable covenant in our financial agreements. For additional information on our exposure to liquidity risk, please refer to Note 34b.v to our Consolidated Financial Statements.
(1) |
|
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
A. DEBT SECURITIES
Not applicable.
B. WARRANTS AND RIGHTS
Not applicable.
C. OTHER SECURITIES
Not applicable.
D. AMERICAN DEPOSITARY SHARES
Bank of New York Mellon Corporation (previously "The Bank of New York") serves as the "Depositary" for our ADSs, which are traded on the NYSE. See Exhibit 2.1 to this Form 20-F for a description of our ADSs.
Investors pay a depositary fee directly, or through a broker acting on their behalf, for the delivery or surrender of ADSs for the purpose of withdrawal. The Depositary also collects fees for making distributions to investors by deducting the fee from the amount distributed or by selling a portion of the distributable property to pay the fee. The Depositary may collect its annual fee for depositary services by making a deduction from the cash distributions or by directly billing investors or charging the book-entry system accounts of the parties acting on their behalf. The Depositary may refuse to provide fee-generating services until its bills for such services are paid.
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Deposit, Withdrawal and Cancellation
Shares or evidence of the right to receive shares may be deposited by delivery to the custodian, accompanied by the required documentation and certification and, if the Depositary requires, together with a written order directing the Depositary to execute and deliver to, or upon the written order of, the person or persons stated in such order, an ADR or ADRs for the number of ADS representing such deposit. The deposited securities, which shall consist of the deposited shares and any and all other securities, property and cash deposited with the Depositary, or the custodian (the "Deposited Securities") shall be held by the Depositary or by a custodian for the account and to the order of the Depositary or at such other place or places as the Depositary shall determine.
Upon receipt by the custodian of any deposit, together with the other documents required, the custodian shall notify the Depositary and the person or persons to whom or upon whose written order an ADR or ADRs are deliverable. Upon receiving such notice from the custodian, or upon the receipt of shares by the Depositary, and upon the receipt of the payment of applicable fees, taxes and charges, the Depositary will execute and deliver to or upon the order of the person or persons entitled to the ADRs the appropriate number of ADRs registered in the name or names and evidencing any authorized number of ADS requested by such person.
Holders of ADRs may surrender their ADRs at the Depositary's corporate trust office. Upon such surrender and the payment of applicable fees, taxes and charges, the Depositary shall deliver to such holders or upon their order the amount of Deposited Securities at the time represented by the ADS evidenced by the ADR. Delivery of such Deposited Securities may be made by the delivery of (a) certificates in the name of such person in whose name an ADR is registered (an "ADR Holder") or as ordered by him or certificates properly endorsed or accompanied by proper instruments of transfer to such owner or as ordered by him and (b) any other securities, property, and cash to which such owner is then entitled in respect of such ADRs. The Deposited Securities are to be delivered at the corporate trust office of the Depositary, if feasible.
Rights of the ADR Holders to Inspect the Books of the Depositary and the List of ADR Holders
The Depositary will make available for inspection by ADR Holders the books for the registration and transfers of ADRs at its corporate trust office, provided that such inspection shall not be for the purpose of communicating with the ADR Holders in the interest of a business or object other than our business or a matter related to the Deposit Agreement or the ADRs.
Voting Rights
Upon receipt of notice of any meeting of shareholders or other Deposited Securities, the Depositary shall provide ADR Holders with a notice of such meeting. Such notice shall contain the same information as is contained in such notice of meeting and a statement that the ADR Holders as of the close of business on a specified record date will be entitled to instruct the Depositary as to the exercise of the voting rights, if any, pertaining to the amount of shares represented by their respective ADSs and a statement as to the manner in which such instructions may be given. Upon the ADR Holder's request on such record date, received on or before the date specified by the Depositary, the Depositary shall endeavor, in so far as practicable, to vote or cause to be voted the amount of shares or other Deposited Securities represented by the ADS evidenced by such ADR in accordance with the ADR Holder's instructions.
If no such instructions are received by the Depositary on or before the date specified by the Depositary, the Depositary shall deem that such holder of ADRs has instructed the Depositary to give a discretionary proxy to a person designated by us with respect to such Deposited Securities and, if and to the extent permitted under Indonesian laws and our Articles of Association, the Depositary shall give a direction proxy to a person designated by us to vote such Deposited Securities, except where we have informed the Depositary that we do not wish such proxy to be given or that such matter materially and adversely affects the rights of the holders of the shares.
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Dividends and Other Distributions
An ADR Holder generally has the right to receive the distributions we make on the Deposited Securities. Such ADR Holder's receipt of these distributions may be limited, however, by practical considerations and legal limitations. ADR Holders will receive such distributions under the terms of the Deposit Agreement in proportion to the number of ADSs held as of a specified record date, after deduction the applicable fees, taxes, and expenses.
Cash Distributions
Whenever the Depositary receives any cash dividend or other cash distribution on any Deposited Securities, the Depositary shall convert such dividend or distribution into U.S. Dollars and distribute the amount so receive to the entitled ADR Holders in proportion to the number of ADS representing such Deposited Securities held by them. Where we are or the Depositary is required to withhold from such cash dividend or such other cash distribution an amount on account of taxes or other governmental charges, and such amount is so withheld, the amount distributed to the relevant ADR Holders shall be reduced accordingly.
Distributions of Shares
When a distribution upon any Deposited Securities consists of a dividend in, or free distribution of, shares, the Depositary may distribute to the entitled ADR Holders, in proportion to the number of ADS representing such Deposited Securities held by them respectively, additional ADRs evidencing an aggregate number of ADS representing the amount of shares received as dividend or free distribution, subject to the terms and conditions of the Deposit Agreement and the withholding or any tax or other governmental charge. If we have not provided satisfactory assurances that such distribution would not require registration under the Securities Act or is exempt from registration under the Securities Act, the Depositary may withhold the distribution of ADRs.
In lieu of delivering receipts for fractional ADS, the Depositary shall sell the amount of share represented by the aggregate of such fractions and distribute the net proceeds as in the case of a cash distribution.
Distributions of Rights
In the event that we offer or cause to be offered to the holders of any Deposited Securities, any rights to subscribe for additional shares or any rights of any other nature, the Depositary, after having consulted with us, shall have discretion as to the procedure to be followed in making such rights available to any ADR Holders or in disposing of such rights on behalf of any ADR Holders. If, by the terms of such rights offering or for any other reason, the Depositary may not either make such rights available to any ADR Holders or dispose of such rights and make the net proceeds available to such ADR Holders in U.S. Dollars, the Depositary shall allow the rights to lapse.
If at the time of the offering of any rights the Depositary determines in its discretion that it is lawful and feasible to make such rights available to all or certain ADR Holders but not to other ADR Holders, the Depositary may, after consultation with us, distribute to any ADR Holder to whom it determines the distribution to be lawful and feasible, in proportion to the number of ADS held by such ADR Holder, warrants or other instruments in such form as it deems appropriate.
In circumstances in which rights would otherwise not be distributed, if an ADR Holder requests the distribution of warrants or other instruments in order to exercise the rights allocable to the ADS of such ADR Holder, the Depositary will make such rights available to such ADR Holder upon written notice from us to the Depositary. ADRs so distributed shall be legend in accordance with applicable U.S. laws and all be subject to the appropriate restrictions on sale, deposit, cancellation, and transfer under such laws.
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If the Depositary has distributed warrants or other instruments for rights to all or certain ADR Holders, upon instruction from such ADR Holder pursuant to such warrants or other instruments to the Depositary to exercise such rights, upon payment by such ADR Holder to the Depositary for the account of such ADR Holder of an amount equal to the purchase price of the shares to be received upon the exercise of the rights, and upon payment of the fees of the Depositary and any other applicable charges, the Depositary shall, on behalf of such ADR Holder, exercise such rights and purchase the shares. The shares will then be deposited, and the Depositary shall execute and deliver the ADRs to the ADR Holder.
If the Depositary determines that it is not lawful and feasible to make such right available to all or certain ADR Holders, it may sell the rights, warrants or other instruments in proportion to the number of ADS held by the ADR Holders to whom it has determined may not lawfully or feasibly make such rights available, and allocate the net proceeds of such sales (net of the fees of the Depositary and all taxes and governmental charges), upon averaged or other practical basis without regard to any distinctions among such ADR Holders because of exchange restrictions or the date of deliver of any ADR or otherwise and distribute the net proceeds to the extent possible as in the case of a cash distribution.
The Depositary will not offer rights to ADR Holders having an address in the United States unless both the rights and the securities to which such rights relate are either exempt from registration under the Securities Act with respect to a distribution to all ADR Holders or are registered under the Securities Act.
Distributions Other than Cash, Shares or Rights
When the Depositary receives distributions other than cash, shares or rights, the Depositary shall cause the securities or property received by it to be distributed to the ADR Holders entitled thereto, after reduction or upon payment of any applicable fees, expense, taxes or other charges, in proportion to the number of ADS representing such Deposited Securities held by them respectively; provided, however, that if in the opinion of the Depositary such distribution cannot be made proportionately among the entitled ADR Holders, or if for any other reason, the Depositary deems such distribution not to be feasible, the Depositary may adopt such method as it may deem equitable and practicable for the purpose of effecting such distribution, including, but not limited to the public or private sale of the securities or property thus received, or any part thereof, and the net proceeds of such sales (net of the fees) shall be distributed by the Depositary to the entitled ADR Holders as in the case of a cash distribution.
Procedures for Transmitting Notices, Reports and Proxy Soliciting Material
We shall provide to the Depositary and the custodian, on or before the first date on which we give notice of any meeting of shareholders or other Deposited Securities, or of any adjourned meeting of such holders, or of the taking of any action in respect of any cash of other distributions or the offering of any rights, a copy of such notice and a translation of such notice and any other reports and communications which are generally made available by us to the holders of our shares. The Depositary will arrange for the mailing of copies of such notices, reports and communications to all ADR Holders at our request.
Reclassification, Recapitalization and Mergers
In circumstances not considered to be distribution of shares, upon any change in nominal value, change in par value, split-up, consolidation, or any other reclassification of the Deposited Securities, or upon any recapitalization, reorganization, merger or consolidation, or sale of assets affecting us or to which we are a party, any securities which shall be received by the Depositary or a custodian in exchange for or in conversion of or in respect of the Deposited Securities shall be treated as new Deposited Securities under the Deposit Agreement, and the ADS shall represent, in addition to the existing Deposited Securities, the right to receive the new Deposited Securities received in exchange for conversion. The Depositary may also or, if requested by us, shall execute and deliver additional receipts as in the case of a dividend in shares, or call for the surrender of outstanding ADRs to be exchanged for new ADRs specifically describing such new Deposited Securities.
If the Depositary determines that any such adjustment, delivery or exchange is not lawful or practicable, the Depositary may sell such securities or property at a public or private sale and distribute the net proceeds to the entitled ADR Holders as in the case of a cash distribution.
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Depositary Payments
In addition to the Deposit Agreement we entered into with the Depositary on November 21, 1995, we entered into a new agreement with the Depositary in 2016, as amended on November 25, 2022, pursuant to which the Depositary agreed to reimburse us up to US$1.0 million in 2016 and up to US$850,000 in each of the subsequent six years for certain expenses we incur in relation to the administration and maintenance of the ADS facility, including, but not limited to, investor relations expenses, legal fees and disbursements and other ADS program-related expenses. The reimbursement will be adjusted if the Depositary's collection of dividend fees and the number of ADSs outstanding falls below a stipulated minimum.
The Depositary did not waive, or pay directly to third parties on our behalf, any expenses relating to the year ended December 31, 2023.
Payment of Taxes
ADR Holders are responsible for any taxes or other governmental charges payable on their ADSs or on the deposited securities represented by any of their ADSs. The Depositary may refuse to register any transfer of the ADR Holders' ADRs or allow such ADR Holders to withdraw the Deposited Securities represented by their respective ADRs until such taxes or other charges are paid and may withhold any dividends or other distributions. It may apply payments owed to the ADR Holders or sell Deposited Securities represented by such ADR Holders' ADRs to pay any taxes owed and such ADR Holders will remain liable for any deficiency.
Costs Related to ADS Issue and Handling
Shareholders depositing or withdrawing ordinary shares or ADS must pay: | For: | |
|---|---|---|
US$5 (or less) per 100 ADS (or part of 100 ADS). | Issuance of ADSs, including issuance resulting from a distribution of shares or rights or other property. Cancellation of ADSs for the purpose of withdrawal, including in case of termination of the Deposit Agreement. | |
US$0.02 (or less) per ADS. | Any cash payment to registered ADS shareholders. | |
Up to US$0.05 per ADS. | Receiving or distributing dividends. | |
A fee equivalent to the fee payable if the securities distributed to shareholders had been shares and those shares had been deposited for the issuance of ADS. | Delivery of securities by the Depositary to registered ADS shareholders. | |
US$0.02 (or less) per ADS per calendar year. | Depositary services. | |
Registration or transfer fees. | Transfer or registration of shares on the share register to or from the name of the Depositary or its agent when shareholders deposit or withdraw ordinary shares. | |
Depositary fees. | Telegram, telex and fax transmissions (if provided for in the Deposit Agreement). Converting foreign currency to U.S. Dollars. | |
Taxes and other duties levied by the Government, the Depositary or the custodian upon payment of the ADSs or other shares underlying the ADSs, such as share transfer tax, stamp duty or income tax. | As necessary. | |
Any costs incurred by the Depositary or its agent for servicing the securities deposited. | As necessary. |
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Amendment
We may agree with the Depositary to amend the Deposit Agreement and the ADRs without the consent of ADR Holders. Any amendment which shall add or increase fees or charges (except for taxes and other governmental charges or registration fees, cable, telex or facsimile transmission costs, delivery charges or similar items), or which shall prejudice a substantial existing right of ADR Holders, shall, however, not become effective as to outstanding ADRs until thirty (30) days after the Depositary notifies ADR Holders of such amendment. Every ADR Holder at the time any amendment so becomes effective shall be deemed, by continuing to hold such ADRs, to consent and agree to such amendment and to be bound by the ADRs and the Deposit Agreement as amended thereby.
Restrictions on the Right to Transfer or Withdraw the Underlying Securities/Limitations on Execution and Delivery, Transfer and Surrender of ADRs
As a condition precedent to any execution and delivery, registration of transfer, split-up, combination or surrender of any ADR or withdrawal of any Deposited Securities, the Depositary, custodian, registrar or we may require payment by the presenter of the ADRs of a sum sufficient to reimburse any of them for any applicable taxes or governmental charges, fees and expenses and the production of proof satisfactory to it as to the identity and genuineness of any signature and may also require compliance with such regulations, if any, as we or the Depositary may establish consistent with the provisions of the Deposit Agreement.
During the period when the transfer books of the Depositary are closed or when we or the Depositary deem necessary and advisable or to comply with a requirement of law or any government or governmental body or commission, or for any other reason, the delivery of ADRs may be suspended, the transfer of ADRs in certain instance may be refused, or the registration of transfer of outstanding ADRs generally may be suspended, subject to certain exceptions.
Without limitation of the foregoing, the Depositary will not knowingly accept for deposit under the Deposit Agreement any shares required to be registered under the provisions of the Securities Act, unless a registration statement is in effect as to such shares.
Prior to delivery, transfer or surrender of ADRs or withdrawal of shares or other Deposited Securities, an indemnity bond may be required if the Depositary deems that fees, taxes or other charges will be payable following such transactions.
Limitations on Obligations and Liability
The Deposit Agreement expressly limits our obligations and liability and the obligations and liability of the Depositary. We and the Depositary are only obligated to take the actions in good faith and without being negligent as specifically set forth in the Deposit Agreement.
Neither we nor the Depositary have any obligation to become involved in a lawsuit or other proceeding related to the ADRs or the Deposit Agreement on behalf of ADR Holders or on behalf of any other person unless we or the Depositary, as applicable, have been provided with satisfactory indemnity against all expense and liabilities.
Neither we nor the Depositary shall be liable for any of our or the Depositary's action or non-action in reliance on the advice or information from legal counsel, accountants, any person presenting shares for deposit, any ADR Holder, or any other person we or the Depositary believed in good faith to be competent to give such advice or information.
PART II
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
There are no defaults, dividend arrearages or delinquencies to which this Item applies.
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ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
Not applicable.
ITEM 15. CONTROLS AND PROCEDURES
A. DISCLOSURE CONTROLS AND PROCEDURES
Our management, with the participation of our chief executive officer and chief financial officer, has performed an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act) as of December 31, 2023, as required by Rule 13a-15(b) under the Exchange Act.
Our management has concluded that, as of December 31, 2023, our disclosure controls and procedures were effective. Controls and procedures conducted by management include controls and procedures that are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure. It should be noted that a control system, no matter how well conceived or operated, can only provide reasonable, not absolute, assurance of achieving the desired objectives of the control system.
B. MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). The internal control over financial reporting is a process designed by, or under the supervision of, the CEO and CFO, and executed by the Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with IFRS as issued by the IASB, and includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of our Company, (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with IFRS as issued by the IASB, and that receipts and expenditures of our Company are being made only in accordance with authorizations of our management and Board of Directors, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our Company's assets that could have a material effect on the Consolidated Financial Statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements. Furthermore, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2023. In making this assessment, management used the criteria set forth in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") (2013 framework). Based on this assessment, management concluded that as of December 31, 2023, our internal control over financial reporting was effective.
C. ATTESTATION REPORT OF THE REGISTERED PUBLIC ACCOUNTING FIRM
The effectiveness of our internal control over financial reporting as of December 31, 2023, has been audited by KAP Purwantono, Sungkoro & Surja, an independent registered public accounting firm, as stated in their report which is included in the Consolidated Financial Statements.
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D. CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There have been no significant changes in our internal control over financial reporting during the most recently completed fiscal year that would materially affect or are reasonably likely to materially affect, our internal control over financial reporting.
We are committed to continual improvements in internal control processes and will continue to review and monitor the control over financial reporting and its procedures in order to ensure compliance with the requirements of the Sarbanes-Oxley Act of 2002 and related regulations as stipulated by COSO. We will also continue to assign significant company resources from time to time to improve our internal control over financial reporting.
ITEM 16. [RESERVED]
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
As of December 31, 2023, the Board of Commissioners determined that Mr. Emmanuel Bambang Suyitno and Mr. Edy Sihotang, members of the Audit Committee, each qualify as an Audit Committee Financial Expert in accordance with the requirements of Item 16A of Form 20-F and as an "independent" member in accordance with the provisions of Rule 10A-3 under the Exchange Act.
Mr. Suyitno has been a member of our Audit Committee since September 1, 2020. Previously Mr. Suyitno served as a member of the Corporate Secretary Division of PT PP Presisi Tbk (2017-2020), Senior Vice President – Head of Investor Relations, Corporate Finance, MIS & Audit of Lucky Group of Indonesia (2016-2017), and as Audit Committee Member of PT Danareksa (Persero) (2014-2016). Mr. Suyitno is a Chartered Accountant and Indonesia Registered Accountant by the Ministry of Finance of the Republic of Indonesia. He also holds a Certification in Audit Committee Practices (CACP).
Mr. Sihotang has been a member of our Audit Committee since August 2, 2021. Previously Mr. Sihotang served as a VP Investigation & WBS of PT Pertamina (State-Owned Enterprise) (2019-2020), and also various positions in PT Pertamina and its subsidiaries (2009-2012), Head of Internal Audit of Rehabilitation and Reconstruction Agency (BRR) NAD-Nias (2006-2009), Public Accountant of Hadori, Soejatna & Partner Accounting Firm (1997-1998), Government auditor of BPKP (Financial and Development Audit Agency) (1985-1997). Mr. Sihotang is a Chartered Accountant and Indonesia Registered Accountant by the Ministry of Finance of the Republic of Indonesia. He also holds a Certification in Audit Committee Practices (CACP), and he is a Certified Internal Auditor (CIA), Certified Forensic Auditor (CFrA), Certified Fraud Examiner (CFE), Certified Risk Management Assurance (CRMA), and Certified Control Self-Assessment (CCSA).
ITEM 16B. CODE OF ETHICS
In compliance with Section 406 of the Sarbanes-Oxley Act of 2002, our code of ethics applies equally to our Commissioners, our President Director, and our Director of Finance (positions equivalent to Chief Executive Officer and Chief Financial Officer, respectively), Directors and other key officers as well as all of our employees. You may view our code of ethics on our website at www.telkom.co.id/sites/about-telkom/en_US/page/code-of-ethics-and-corporate-culture-80. Amendments to or waivers from the code of ethics will be posted on our website as well. Information contained on that website is not a part of this annual report on Form 20-F. Copies of our code of ethics may also be obtained at no charge by writing to our Investor Relations Unit at Telkom Landmark Tower, 39th Floor, Jl. Gatot Subroto No. 52, Jakarta 12710, Indonesia.
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
In line with existing procedures and taking into consideration the independence and qualifications of independent auditors, at our AGMS on May 30, 2023, we appointed KAP Purwantono, Sungkoro & Surja, a registered KAP with the
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OJK, to perform the audit on our Consolidated Financial Statements for the year ended December 31, 2023, and on the effectiveness of internal control over financial reporting as of December 31, 2023. The fee for the audit and other service, for the fiscal year ended December 31, 2023 was agreed at Rp72.9 billion.
KAP Purwantono, Sungkoro & Surja has been our public accountant since 2012.
KAP Purwantono, Sungkoro & Surja is also assigned to perform an audit of funds utilization of the Partnership and Community Development Program ("PKBL") for the fiscal year ended December 31, 2023.
Fees and Services of the External Auditor
The following table summarizes the fees for audit and other services in 2021, 2022 and 2023:
For Years Ended on December 31, | ||||||
| 2021 |
| 2022 |
| 2023 | |
(Rp million) | (Rp million) | (Rp million) | ||||
Audit Fee |
| 59,050 |
| 59,700 |
| 68,969 |
All Other Fees |
| 11,540 |
| 5,440 |
| 3,964 |
Audit Committee Pre-Approval Policies and Procedures
We have adopted pre-approval policies and procedures under which all non-audit services provided by our independent registered public accounting firm must be pre-approved by our Audit Committee, as set forth in the Audit Committee Charter. Pursuant to the charter, permissible non-audit services may be performed by our independent registered public accounting firm provided that: (i) our Board of Directors must deliver to the Audit Committee (through the Board of Commissioners) a detailed description of the non-audit service that is to be performed by the independent public accounting firm, and (ii) the Audit Committee will determine whether the proposed non-audit service will affect the independence of our independent public accounting firm or would give rise to any conflict of interest.
Pursuant to Section 10(i)(1)(B) of the Exchange Act and paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X issued there under, our Audit Committee Charter waives the pre-approval requirement for permissible non-audit services where: (i) the aggregate amount of the fees for such non-audit services constitutes no more than 5% of the total amount of fees paid by us to our independent registered public accounting firm during the year in which the services are provided; or (ii) the proposed services are not regarded as non-audit services at the time the contract to perform the engagement is signed. In addition to these two requirements, the performance of non-audit services must be approved prior to the completion of the audit by a member of the Audit Committee who has been delegated pre-approval authority by the full Audit Committee, or by the full Audit Committee itself.
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
The NYSE listing standards require that a United States listed company must have an audit committee, a nominating/corporate governance committee and a compensation committee. Each of these committees must consist solely of independent directors and must have a written charter that addresses certain matters specified in the listing standards.
The Indonesian Company Law does not require Indonesian public companies to form any of the committees described in the NYSE listing standards. However, the OJK Audit Committee Regulation requires the board of commissioners of a public company to establish an audit committee which is chaired by an independent commissioner. In addition, the OJK Audit Committee Regulation requires each member of such audit committee to be either an independent commissioner or external independent member, with the audit committee comprised of at least three members with at least one independent commissioner and one external independent member and at least one member of the audit committee having expertise in accounting or finance.
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The NYSE listing standards, as required by Rule 10A-3(c)(3) of the Exchange Act require foreign private issuers whose shares are listed on the NYSE to have an audit committee comprised of independent directors. However, such foreign private issuers may be exempted from the independence requirement if: (i) the home country government or stock exchange requires the Company to have an audit committee, (ii) the audit committee is separate from the board of directors and includes non-board members as in our case, members from the Board of Commissioners, (iii) the audit committee members are not selected by management and no executive officer of the Company is a member of the audit committee, (iv) the home country government or stock exchange requires the audit committee to be independent of the Company's management, and (v) the audit committee is responsible for the appointment, retention and oversight of the work of external auditors. We avail ourselves of this exemption and document this on our Section 303A Annual Written Affirmations submitted to the NYSE. However, unlike the NYSE listing standards requirements, according to the current regulations relating to audit committees in Indonesia, our Audit Committee does not have direct responsibility for the appointment, compensation, and retention of an external auditor. Our Audit Committee may only recommend the appointment of an external auditor to the Board of Commissioners and the Board of Commissioner's decision must have the approval of the shareholders.
Our Audit Committee has five members: three Independent Commissioners and two external independent members who are not affiliated with our Company.
All members of our Audit Committee are independent directors as required by Rule 10A-3 of the Exchange Act. We rely on the general exemption under Rule 10A-3(c)(3) regarding the composition of our Audit Committee. We believe that our reliance on this exemption does not materially and adversely affect the ability of our Audit Committee to act independently.
Further, we believe that the intent of the provision which requires each member of an audit committee to be an independent director is to ensure that the audit committee is independent from influence by management and provides a forum separate from management in which auditors and other interested parties can candidly discuss concerns. The OJK Audit Committee Regulation requires each member of an audit committee to be either an independent commissioner or external independent member. Such external independent members are, by principle, independent not only of management but also of the Board of Commissioners, the Board of Directors and our Company as a whole. We therefore believe that the standard established by the OJK Audit Committee Regulation is equally effective in ensuring the ability of an audit committee to act independently.
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
Not applicable.
ITEM 16F. CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT
Not applicable.
ITEM 16G. CORPORATE GOVERNANCE
The following is a summary of significant differences between the corporate governance practices followed by Indonesian companies and those required by NYSE listing standards for domestic United States issuers.
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A. OVERVIEW OF INDONESIAN LAW
Indonesian public companies are required to observe and comply with certain good corporate governance practices. The requirements and the standards for good corporate governance practices for public companies are embodied in the following regulations: the Indonesian Company Law; the Indonesian Capital Market Law (as amended by Law No. 4 of 2023 on Development and Strengthening of the Financial Sector); the Indonesian Law on SOEs; MSOE Regulation No. PER-02/MBU/03/2023 on Corporate Governance Guidelines and Significant Corporate Activities of State-Owned Enterprises; OJK regulations; and IDX rules. In addition to the above, the articles of association of public companies incorporate provisions directing the implementation of good corporate governance practices.
Similar to the laws of the United States, Indonesian laws require public companies to observe and comply with corporate governance standards that are more stringent than those applied to privately-owned companies. In Indonesia, the term "public company" does not necessarily refer to a company whose shares are listed on a securities exchange. Under the Indonesian Capital Markets Law, a non-listed company may be deemed a public company and subjected to the laws and regulations governing public companies, if such company meets or exceeds the capital and number of shareholder requirements applicable to a public company.
On November 30, 2004, the National Committee on Governance Policy (Komite Nasional Kebijakan Governansi or "KNKG") was established pursuant to the Decree of the Coordinating Minister of Economic Affairs No. KEP.49/M.EKONOM/1/2004 ("KEP No. 49"), which was formed to revitalize the former National Committee on Good Corporate Governance established in 1999. The KNKG aims to enhance the comprehension and implementation of good governance policies in Indonesia and advises the Government on governance issues, both in public and corporate sectors. KEP No. 49 was last amended and revoked by the Decree of the Coordinating Minister for Economic Affairs No. 117 of 2016. Pursuant to Decree No. 44 of 2021 of the KNKG, the KNKG will have, among other things, a new organizational structure, and new duties (such as monitoring and evaluating the implementation of good governance policies relating to the new licensing policy introduced by the Job Creation Law 2023).
The KNKG formulated the General Code for Indonesian Corporate Governance 2019 (the Pedoman Umum Governansi Korporat Indonesia or "PUGKI") which recommended setting more stringent corporate governance standards for Indonesian companies, such as the appointment of independent commissioners and nomination and remuneration committees by the board of commissioners, as well as increasing the scope of disclosure obligations for Indonesian companies. Although the KNKG recommended that the GCG Code be adopted by the Government as a basis for legal reform, as of the date of this annual report on Form 20-F, the Government has not enacted regulations that fully implement the provisions of the GCG Code.
B. COMPOSITION OF INDEPENDENT BOARD OF DIRECTORS AND BOARD OF COMMISSIONERS
The NYSE listing standards provide that the board of directors of a United States listed company must consist of a majority of independent directors and that certain committees must consist solely of independent directors. A director qualifies as independent only if the board affirmatively determines that the director has no material relationship with the company, either directly or indirectly.
Unlike companies incorporated in the United States, the management of an Indonesian company consists of two organs of equal stature, the board of directors and the board of commissioners. Generally, the board of directors is responsible for the day-to-day business activities of the company and is authorized to act for and on behalf of the company, while the board of commissioners has the authority and responsibility to supervise the board of directors and is statutorily mandated to provide advice to the board of directors by the Indonesian Company Law.
The Indonesian Company Law requires the board of commissioners of a public company to have at least two members. Although the Indonesian Company Law is silent as to the composition of the board of commissioners, OJK Rule No. 33/2014 states that at least 30% of the members of the board of commissioners of a public company (such as our Company) must be independent.
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The Indonesian Company Law provides that the board of directors of a publicly listed company has the authority to manage the daily operations of the company and must have at least two members, each of whom must meet the minimum qualification requirements set forth in the Indonesian Company Law and the capital market laws.
Given the difference between the role of the members of the board of directors in an Indonesian company and that of their counterparts in a United States company, Indonesian law does not require that certain members of the board of directors must be independent and neither does it require the creation of certain committees composed entirely of independent directors.
C. COMMITTEES
See "Item 16D. Exemptions from the Listing Standards for Audit Committees."
D. DISCLOSURE REGARDING CORPORATE GOVERNANCE
The NYSE listing standards require United States companies to adopt, and post on their websites, a set of corporate governance guidelines. The guidelines must address, among other things: director qualification standards, director responsibilities, director access to management and independent advisors, director compensation, director orientation and continuing education, management succession, and an annual performance evaluation itself. In addition, the CEO of a United States company must certify to the NYSE annually that he or she is not aware of any violations by the company of the NYSE's corporate governance listing standards. The certification must be disclosed in our annual report to shareholders. Indonesian law does not have disclosure requirements similar to NYSE listing standards. However, the Indonesian Capital Markets Law generally requires Indonesian public companies to disclose certain types of information to shareholders, and to the OJK and the IDX, e.g., information relating to changes in the public company's shareholdings and material information or facts that may affect the decision of shareholders to maintain their share ownership in the public company or investment decision of potential third-party investors.
E. CODE OF BUSINESS CONDUCT AND ETHICS
The NYSE listing standards require each United States listed company to adopt, and post on its website, a code of business conduct and ethics for its directors, officers, and employees. There is no similar requirement under Indonesian law. However, companies that are required to file or furnish reports to the SEC must disclose in their annual reports whether they have adopted a code of ethics for their senior financial officers. Although the requirements as to the contents of the code of ethics under SEC rules are not identical to those set forth in the NYSE listing standards, there are significant similarities in which under SEC rules, the code of ethics must be designed to promote: (a) honest and ethical conduct, including the handling of conflicts of interest between personal and professional relationships, (b) full, fair, accurate and timely disclosure in reports and documents filed with or submitted to the SEC, (c) compliance with applicable laws and regulations, (d) prompt internal reporting of violations of the code, and (e) accountability for adherence to the code. Furthermore, shareholders must be given access to physical or electronic copies of the code.
ITEM 16H. MINE SAFETY DISCLOSURE
Not applicable.
ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
ITEM 16J. INSIDER TRADING
Pursuant to applicable SEC transition guidance, the disclosure required by Item 16J will be applicable to the Company from the fiscal year ending December 31, 2024.
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ITEM 16K. CYBERSECURITY
We endeavour to create a cybersecurity framework through continuous monitoring, regular assessments, a skilled workforce, and a dedicated governance structure for data protection and cybersecurity operations.
Regular Monitoring and Audits
Our Cybersecurity Operation Center operates 24/7 to address cybersecurity threats and protect sensitive data. It is responsible for monitoring security threats and incidents, detecting, analyzing and responding to security incident threats, conducting further investigations and forensics on security threats, carrying out security testing and vulnerability management, and managing security threat intelligence. Our Cybersecurity Operation Center is overseen by our Operational Vice President (“OVP”) of Cybersecurity, who reports directly to our Director of Network & IT Solutions.
Our OVP of Cybersecurity is responsible for managing the end-to-end cyber security management function of our Group, including the development and implementation of cybersecurity strategies, operations, and partnerships, and improving cybersecurity engineering and/or development capabilities. Our OVP of Cybersecurity reports to and interacts with various departments such as Corporate Strategic Planning, Security team subsidiaries, Indonesia Security Incident Response Team, Governance & Risk Management, Internal Audit, and other units under the Directorate of Network & IT Solutions.
As part of our IT risk management practices, our Telkom Integrated Management Representative Task Force, together with the management of each unit throughout our Group, ensures that risk assessment is carried out, establishes and executes our Risk Treatment Plan, implements controls, monitors and reviews the effectiveness of our information security system operations, and documents the results. We conduct risk assessments at least once a year, according to rules set out in our Risk Assessment Policy Standards. We also conduct internal and external audits periodically or at least once a year. Discrepancies between implementation and policy identified in the operational process and audit results are followed up with evaluations and necessary corrective steps, which are fully documented.
At the Board of Directors level, the responsibility for cybersecurity falls to the Director of Network and IT Solutions. For oversight purposes, our risk management team provides a quarterly report on our risk profile to the Planning and Risk Evaluation and Monitoring Committee, which is part of our Board of Commissioners.
Incident Management
We have established a Computer Security Incident Response Team ("CSIRT") to manage and respond to cybersecurity incidents.
| · | Composition: The CSIRT consists of designated personnel with specific roles and responsibilities related to cybersecurity incident management, such as the Coordinator and the Secretary, and multiple specific fields within it, such as Legal, Communications & Public Relations, IT & Infrastructure, among others. These designees each have designated tasks such as coordinating incident response activities, monitoring cybersecurity incident activities, supporting data management and reporting, undergoing post-incident evaluations, and ensuring all actions adhere to specific procedural and security response guidelines; |
| · | Procedure and coordination: The CSIRT coordinates with various departments and stakeholders within our Group to ensure a comprehensive and timely response to cybersecurity incidents, such as by allowing coordinators and other key personnel to appoint appropriate deputies for daily operations or during incident handling. This enables inter-unit and even inter-subsidiary coordination for rapid incident response; and |
| · | Reporting: The CSIRT is responsible for reporting cybersecurity incidents to the relevant authorities, our management, and affected parties, as per our incident response plan, to ensure compliance with applicable regulatory requirements. |
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Policies and Procedures
We implement several policies and procedures designed to protect confidential information and personal data, as part of a comprehensive approach to maintaining confidentiality and preventing unauthorized access or disclosure. These policies and procedures include:
| · | Encryption technology: Such policies specify the design and implementation of adequate encryption technology to secure the transmission of information according to our needs, thus ensuring that sensitive data remains confidential during communication processes. With respect to encryption, we have implemented policies regarding the management of cryptography and security of physical environments that span both digital and physical domains of information security. |
| · | Access control management: We have established Access Control Management standards governing physical access management, remote access management, user access management, and controls over system and application access. These standards include obligations not to share user access information (including passwords) with others and to report unauthorized use of access credentials. We adopt a structured approach to restrict and monitor who has access to specific pieces of information, thereby limiting the risk of unauthorized disclosure. Furthermore, we conduct regular review and revision of our Access Control Management standards. These reviews ensure that our access control mechanisms remain effective and in line with evolving security landscapes. |
| · | Confidentiality agreements: Generally, we require written permission from the relevant business unit before copying or distributing sensitive data. Additionally, our confidentiality measures extend to controlling how information is shared, both internally and externally, and ensuring that sensitive data is only used for legitimate business purposes. |
| · | Monitoring and reporting: Our information security policies include provisions for regular reviews of information security incidents and the effectiveness of information transmission security measures. We also require immediate reporting in cases where sensitive data is damaged, lost, or stolen, so that we can quickly identify and mitigate any breaches in confidentiality. |
| · | Segregation of duties: Our emphasis on ensuring segregation of duties to prevent misuse of information is also a critical measure for safeguarding the confidentiality and integrity of sensitive data. By requiring multiple checks or approvals for critical actions, we aim to reduce the risk of unauthorized disclosures or breaches. |
Furthermore, we implement and regularly update our cybersecurity policies and regulations to align with evolving needs and industry standards. These updates incorporate changes and improvements in information security management to ensure that our practices remain effective and relevant. In order to keep our information security standards current and effective, we endeavour to adhere to international standards such as ISO/IEC 27001:2013 and ISO/IEC 27002:2013, which are globally recognized frameworks for information security. We attained these certifications on April 12, 2022. In developing and updating our policies and regulations, we also consider the European Commission Information System Security Policy C (2006) 3602, Standard on Access Control and Authentication, which provides guidance on maintaining a framework for information access and identity management, both of which are critical components of effective information security management systems. In addition, with respect to coding, we consider the OWASP Secure Coding Practices Checklist, which provides guidance on best practices in coding to enhance software security. This checklist specifically helps developers avoid common coding pitfalls that could lead to security vulnerabilities.
Overall, our policies and procedures collectively form a framework aimed at preserving the confidentiality of sensitive information and preventing unauthorized disclosure through technical, administrative, and procedural safeguards.
Employee and Third Parties
We endeavor to establish clear guidelines for employee behavior and raise cybersecurity awareness among our workforce in the following ways. In addition to our own employees, we also extend our information security regulations to external parties and work partner employees. This means that individuals or organizations who collaborate with or provide services to us are required to adhere to our information security policies and standards.
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To effectively address potential cybersecurity threats stemming from our engagement with third-party service providers, we carefully identify and assess cybersecurity risks inherent to such engagement on a case-by-case basis. Following such identification of risks and assessment , we may include specific agreements, covenants and representations in our contracts with such third-party service providers to require compliance with cybersecurity standards we deem appropriate. For third-party service providers who assist with the making of applications or software we use or make available to our customers, we also conduct vulnerability and penetration tests to ensure compliance wih our cybersecurity standards.
Employee Behavioral Guidelines
We have established clear and detailed guidelines designed to safeguard confidential information and minimize the risk of information leakage or misuse by our employees. These guidelines encompass various aspects of data handling, confidentiality, and the acceptable use of company resources. Specifically, our guidelines cover the following:
| · | Employee obligations and prohibitions: Employees are required to know, understand, and comply with our information security policies, sign an Integrity Pact annually, and responsibly manage and protect information from misuse by unauthorized parties. Our guidelines explicitly prohibit several actions to protect confidential information, including sharing passwords, accessing information unlawfully, misusing company information, storing important company documents without proper security measures, and leaving devices unsecured. Our employees are also responsible for ensuring their actions align with applicable standards. |
| · | Social media and external communication: Our guidelines prescribe restrictions on posting or forwarding information classified as Highly Confidential or Confidential on social media, except for specific company programs. Our guidelines also prohibit the posting or forwarding of hoax news, provocative materials, or content related to sensitive social issues, and the unauthorized sharing of company information with unauthorized parties. |
| · | Use of cloud storage and external software: Storing classified information in cloud storage or websites not managed by us is forbidden, as is the installation of software on information technology work equipment outside of established procedures or that infringes on intellectual property laws. |
| · | Handling and transmission of sensitive data: Our guidelines mandate that transactions of data and information classified as Confidential or Highly Confidential must be conducted through systems managed by us to prevent unauthorized access and ensure data integrity. |
These guidelines aim to ensure that our employees act responsibly with regard to the handling and distribution of confidential and sensitive information. The measures are designed to cultivate a security-conscious environment, thereby reducing the likelihood of inadvertent leaks or malicious misuse of company data and resources.
Increasing Cybersecurity Awareness
We conduct programs aimed at improving the cybersecurity awareness of our employees. This includes continuous socialization of our Information Security Governance policies and competency enhancement related to cybersecurity awareness. We also test the level of cybersecurity awareness of our employees periodically or as needed.
We also have a procedure in place for enforcing discipline regarding any violations of our information security regulations, which includes coordination among relevant units, such as the Human Capital Management Unit and Cyber Security Management Unit.
As of the date hereof, we have 28 employees with various globally recognized information security certifications, such as the following:
192
| ● | IT Infrastructure Library ("ITIL"): ITIL is a set of detailed practices for IT service management that focuses on aligning IT services with the needs of business. It provides a practical framework for identifying, planning, delivering, and supporting IT services to the business; |
| ● | Certified Information Security Manager ("CISM"): Offered by the Information Systems Audit and Control Association ("ISACA"), CISM provides executives with the knowledge to manage and oversee an enterprise’s information security program; |
| ● | Certified Information Systems Auditor ("CISA"): Another certification from ISACA, CISA validates an IT security professional's auditing, control, and assurance of information systems; |
| ● | Control Objectives for Information and Related Technologies 2019 ("COBIT"): COBIT is a comprehensive framework that helps organizations achieve their goals for the governance and management of enterprise IT. It helps firms create optimal value from IT by maintaining a balance between realizing benefits and optimizing risk levels and resource use; |
| ● | Certified Information Systems Security Professional ("CISSP"): Offered by the International Information System Security Certification Consortium, CISSP validates an IT security professional's technical skills and experience in designing, engineering, and managing the overall security posture of an organization; |
| ● | Certified Ethical Hacker ("CEH"): Provided by EC-Council, CEH certifies individuals in the specific network security discipline of Ethical Hacking from a vendor-neutral perspective; |
| ● | CompTIA Cybersecurity Analyst (CySA+): This certification from CompTIA allows IT security analysts to apply behavioral analytics to networks and devices to prevent, detect, and combat cybersecurity threats through continuous security monitoring; |
| ● | Cisco Certified Network Associate ("CCNA"): Cisco's CCNA certification is an associate-level certification that covers a broad range of fundamentals for IT careers, based on the latest networking technologies, software development skills, and job roles. It is designed for network administrators and engineers; and |
| ● | Offensive Security Certified Professional ("OSCP"): OSCP is a technical certification focused on practical penetration testing skills and methodologies. Provided by Offensive Security, it prepares professionals to conduct ethical hacking in a variety of scenarios and environments. |
Our cybersecurity training programs aim to achieve the following:
| · | Raising awareness: The trainings inform employees about potential cyber threats, suspicious activities (such as phishing attempts via suspicious links), and risky behaviors (such as sharing passwords). This heightened awareness helps employees identify and avoid actions that could lead to cyber-attacks; |
| · | Developing skills: The certification opportunities included in the trainings equip the workforce with the necessary technical skills to effectively respond to and manage cybersecurity incidents when they occur; |
| · | Strengthening the human firewall: Employees are often the first line of defense against cyber intrusions. By training our employees in cybersecurity best practices, we strengthen our overall security posture and reduces the likelihood of successful attacks resulting from human error or lack of awareness; and |
| · | Enabling proactive risk management: We hope that the training will enable our employees to proactively identify potential vulnerabilities and threats, allowing us to address risks before they lead to full-blown security incidents. Essentially, the trainings help shift from reactive incident response to proactive risk management. |
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Overall, we take a comprehensive approach to cybersecurity, implementing various measures, policies, and regulations to protect sensitive information and maintain the integrity of our systems and data.
As at the date hereof, no risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, have materially affected us, including our business strategy, results of operations, or financial condition. However, we believe that we, as with other telecommunications companies worldwide, face increasing cybersecurity threats that may, if such risks materialize, materially affect our business strategy, results of operations, or financial condition. For a description of such threats, please see "Item 3D—Risk Factors—Risks Related to Our Business—Our networks and equipment face potential physical and cybersecurity threats such as theft, vandalism and acts intended to disrupt our operations, which could materially and adversely affect our operating results"
PART III
ITEM 17. FINANCIAL STATEMENTS
We have responded to Item 18 in lieu of this Item.
ITEM 18. FINANCIAL STATEMENTS
See pages F-1 through F-119.
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ITEM 19. EXHIBITS
The following exhibits are filed as part of this Form 20-F:
1.1 | ||
2.1 | ||
4.1* | Deed of Spin-off of IndiHome Business Segment by Telkom into Telkomsel dated February 9, 2023. | |
4.2* | Fixed Broadband Core Transition Services Agreement between Telkom and Telkomsel dated April 6, 2023. | |
4.3* | IT System Transition Services Agreement between Telkom and Telkomsel dated April 6, 2023. | |
4.4* | Wholesale Agreement between Telkom and Telkomsel dated April 6, 2023. | |
12.1 |
| |
12.2 | ||
13.1 | ||
13.2 | ||
97.1 | Guidelines for the deferred bonus mechanism of Telkom dated June 22, 2022. | |
101.INS | XBRL Instance Document | |
101.SCH | XBRL Taxonomy Extension Schema Document | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | XBRL Taxonomy Extension Presentation Label Linkbase Document | |
* Certain portions of this exhibit have been redacted pursuant to Instruction 4(a) of the Instructions as to Exhibits of Form 20-F. | ||
195
SIGNATURES
Pursuant to the requirement of Section 12 of the Securities Exchange Act of 1934, as amended, the Registrant hereby certifies that it meets all the requirements for filing its annual report on Form 20-F and that is has duly caused and authorized the undersigned to sign this annual report on Form 20-F on its behalf.
PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA TBK
Jakarta, April 1 , 2024
By: | /s/ Ririek Adriansyah | |
Ririek Adriansyah | ||
President Director / Chief Executive Officer |
196
Perusahaan Perseroan (Persero)
PT Telekomunikasi Indonesia Tbk.
and its subsidiaries
Consolidated financial statements
as of December 31, 2022 and 2023
and for each of the three years in the period ended December 31, 2023
with reports of independent registered public accounting firm
Statement of the Board of Directors
regarding the Board of Director’s Responsibility for
Consolidated Financial Statements as of December 31, 2023
Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk and its Subsidiaries
On behalf of the Board of Directors, we the undersigned:
1. | Name | : | Ririek Adriansyah |
Business Address | : | Jl. Japati No.1 Bandung 40133 | |
Address | : | Jl. Karang Tengah Raya Pertanian I/99 RT 05 RW 04 | |
Kelurahan Lebak Bulus, Kecamatan Cilandak, Jakarta Selatan | |||
Phone | : | (022) 452 7101 | |
Position | : | President Director | |
2. | Name | : | Heri Supriadi |
Business Address | : | Jl. Japati No.1 Bandung 40133 | |
Address | : | Jl. Rancamayar No. 18 RT 001 RW 008 Kelurahan Gumuruh Kecamatan Batununggal, Bandung | |
Phone | : | (022) 452 7201/ 021 520 9824 | |
Position | : | Director of Finance and Risk Management |
We hereby state as follows:
1. | We are responsible for the preparation and presentation of the consolidated financial statement of Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk (the "Company") and its subsidiaries as of December 31, 2023 and for the year ended; |
2. | The Company and its subsidiaries' consolidated financial statement as of December 31, 2023 and for the year ended have been prepared and presented in accordance with International Financial Reporting Standards; |
3. | All information has been fully and correctly disclosed in the Company and its subsidiaries' consolidated financial statement; |
4. | 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; |
5. | We are responsible for the Company and its subsidiaries’ internal control system. |
This statement is considered to be true and correct.
Jakarta, April 1, 2024
for and behalf of
PT Telkom Indonesia (Persero) Tbk
/s/ Ririek Adriansyah | /s/ Heri Supriadi |
Ririek Adriansyah | Heri Supriadi |
President Director | Director of Finance and Risk Management |
Report of Independent Registered Public Accounting Firm
Report No. 00004/2.1032/NS.0/06/0687-2/1/IV/2024
To the Shareholders and the Boards of Commissioners and Directors of
Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk.
Opinion on the Financial Statements
We have audited the accompanying consolidated statements of financial position of Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk. (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of profit or loss and other comprehensive income, changes in equity, and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated April 1, 2024 expressed an unqualified opinion thereon..
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
Report of Independent Registered Public Accounting Firm (continued)
Report No. 00004/2.1032/NS.0/06/0687-2/1/IV/2024 (continued)
Basis for Opinion (continued)
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements, and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates..
Evaluation of property and equipment estimated useful lives | |
Description of the matter | As of December 31, 2023, the balance of consolidated telecommunication infrastructures amounted to Rp158,516 billion which represents 55% of total consolidated assets. As discussed in Notes 2x and 12 to the accompanying consolidated financial statements, the Company reviews the estimated useful lives of its property and equipment, including telecommunication infrastructures, at least annually and such estimates are updated if expectations differ from previous estimates due to changes in expectation of physical wear and tear, technical or commercial obsolescence, and legal or other limitations on the continuing use of the property and equipment. Auditing the Company's estimated useful lives of telecommunication infrastructures is complex and requires significant judgment because the determination of the estimated useful lives considers a number of factors, including strategic business plans, expected future technological developments, and market behavior. |
Report of Independent Registered Public Accounting Firm (continued)
Report No. 00004/2.1032/NS.0/06/0687-2/1/IV/2024 (continued)
Evaluation of property and equipment estimated useful lives (continued) | |
How we addressed the matter in our audit | We obtained an understanding, and evaluated the design and tested the operating effectiveness, of internal controls over the Company’s process of estimating the useful lives of its telecommunication infrastructures. This included, among others, testing of management’s review control on checking the completeness and accuracy of the assets classification data and assessing the appropriateness of the judgments regarding the most relevant data to be considered in determining its useful lives. We also tested management’s control on benchmarking analysis, including the selection criteria, on the estimated useful lives of telecommunication infrastructures. To test whether the estimated useful lives of telecommunication infrastructures used by management was reasonable, our audit procedures included, among others, obtaining an understanding of management’s strategy related to assets replacements and assessed the reasonableness of such assumptions by considering external sources, such as telecommunication technology growth, changes in market demand, and current economic and regulatory trends. We assessed whether the benchmarking analysis on the estimated useful lives of telecommunication infrastructures used by management was complete and consistent with the selection criteria through comparison with a sample portfolio of public companies within the telecommunication industry. |
/s/ Purwantono, Sungkoro & Surja
We have served as the Company’s independent auditor since 2012
Jakarta, Indonesia
April 1, 2024
Report of Independent Registered Public Accounting Firm
Report No. 00005/2.1032/NS.0/06/0687-2/1/IV/2024
To the Shareholders and the Boards of Commissioners and Directors of
Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk.
Opinion on Internal Control over Financial Reporting
We have audited Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk. (the “Company”) internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the “COSO criteria”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated statements of financial position of the Company as of December 31, 2023 and 2022, the related consolidated statements of profit or loss and other comprehensive income, changes in equity, and cash flows for each of the three years in the period ended December 31, 2023, and the related notes, and our report dated April 1, 2024 expressed an unqualified opinion thereon..
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the United States federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion..
Report of Independent Registered Public Accounting Firm (continued)
Report No. 00005/2.1032/NS.0/06/0687-1/1/IV/2024
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Purwantono, Sungkoro & Surja
Jakarta, Indonesia
April 1, 2024
PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2022 AND 2023
AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2023
WITH REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Table of Contents
| Page | |
Statement of the Board of Directors |
| |
Reports of Independent Registered Public Accounting Firm (PCAOB ID: 1381) |
| |
F-1 | ||
Consolidated Statements of Profit or Loss and Other Comprehensive Income | F-2 | |
F-3 – F-5 | ||
F-6 | ||
F-7 – F-110 |
PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
As of December 31, 2022 and 2023
(Amounts in the tables are expressed in billions of Rupiah and millions of US Dollar, unless otherwise stated)
2022 | 2023 | |||||||
| Notes |
| Rp |
| Rp |
| US$ (Note 3) | |
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash and cash equivalents |
| 4,31,34 |
| |
| | | |
Other current financial assets |
| 5,31,34 |
| |
| | | |
Trade and other receivables |
| 6,31,34 |
| |
| | | |
Contract assets |
| 7,31 |
| |
| | | |
Inventories |
| 8 |
| |
| | | |
Prepaid income taxes |
| 28a |
| |
| | | |
Prepaid other taxes |
| 28b |
| |
| | | |
Contract costs | 10 | | | | ||||
Other current assets |
| 9,31 |
| |
| | | |
Total Current Assets |
| |
| | | |||
NON-CURRENT ASSETS | ||||||||
Contract assets |
| 7,31 |
| |
| | | |
Long-term investments | 11 | | | | ||||
Contract costs | 10 | | | | ||||
Property and equipment |
| 12,31,33 |
| |
| | | |
Right-of-use assets | 13a | | | | ||||
Intangible assets |
| 15 |
| |
| | | |
Deferred tax assets |
| 28h |
| |
| | | |
Other non-current assets | 14,28,31 | | | | ||||
Total Non-current Assets |
| |
| | | |||
TOTAL ASSETS |
| |
| | | |||
LIABILITIES AND EQUITY | ||||||||
CURRENT LIABILITIES | ||||||||
Trade and other payables |
| 16,31,34 |
| |
| | | |
Contract liabilities | 18a,31 | | | | ||||
Current income tax liabilities |
| 28c |
| |
| | | |
Other tax liabilities |
| 28d |
| |
| | | |
Accrued expenses |
| 17,31,34 |
| |
| | | |
Customer deposits |
| 31 |
| |
| | | |
Short-term bank loans and current maturities of long-term loans and other borrowings |
| 19,31,34 |
| |
| | | |
Current maturities of lease liabilities | 13a,34 | | | | ||||
Total Current Liabilities |
| |
| | | |||
NON-CURRENT LIABILITIES | ||||||||
Deferred tax liabilities |
| 28h |
| |
| |
| |
Contract liabilities |
| 18b,31 |
| |
| | | |
Long service award provisions |
| 30 |
| |
| | | |
Pension benefits and other post-employment benefits obligations |
| 29 |
| |
| | | |
Long-term loans and other borrowings |
| 20,31,34 |
| |
| | | |
Lease liabilities | 13a,34 | | | | ||||
Other liabilities |
| |
| | | |||
Total Non-current Liabilities |
| |
| |
| | ||
TOTAL LIABILITIES |
| |
| |
| | ||
EQUITY | ||||||||
Capital stock |
| 22 |
| |
| | | |
Additional paid-in capital |
|
| |
| | | ||
Retained earnings |
| |
| | | |||
Other reserves |
|
| |
| | | ||
Net equity attributable to owners of the parent company |
| |
| |
| | ||
Non-controlling interests |
| 21 |
| |
| |
| |
TOTAL EQUITY |
| |
| |
| | ||
TOTAL LIABILITIES AND EQUITY |
| |
| |
| | ||
The accompanying notes form an integral part of these consolidated financial statements.
F-1
PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
For each of the Three Years in the Period Ended December 31, 2023
(Amounts in the tables are expressed in billions of Rupiah and millions of US Dollar, unless otherwise stated)
2021 | 2022 | 2023 | ||||||||
| Notes |
| Rp |
| Rp |
| Rp |
| US$ (Note 3) | |
REVENUES |
| 24,31 |
| |
| |
| | | |
COST AND EXPENSES | ||||||||||
Operation, maintenance, and telecommunication service expenses |
| 26,31 |
| ( |
| ( |
| ( | ( | |
Depreciation and amortization expenses |
| 12,13,15 |
| ( |
| ( |
| ( | ( | |
Personnel expenses |
| 25, 31 |
| ( |
| ( |
| ( | ( | |
Interconnection expenses |
| 31 |
| ( |
| ( |
| ( | ( | |
General and administrative expenses |
| 27,31 |
| ( |
| ( |
| ( | ( | |
Marketing expenses | ( | ( | ( | ( | ||||||
Unrealized gain (loss) on changes in fair value of investments |
| 11 |
| |
| ( |
| ( | ( | |
Gain (loss) on foreign exchange - net |
|
| |
| |
| ( | ( | ||
Other income - net |
|
| |
| |
| | | ||
OPERATING PROFIT |
| |
| |
| |
| | ||
Finance income |
| 31 |
| |
| |
| | | |
Finance cost |
| 31 |
| ( |
| ( |
| ( | ( | |
Share of profit (loss) of long-term investment in associates |
| 11 |
| ( |
| ( |
| | | |
PROFIT BEFORE INCOME TAX |
| |
| |
| |
| | ||
INCOME TAX (EXPENSE) BENEFIT |
| 28e | ||||||||
Current |
| ( |
| ( |
| ( | ( | |||
Deferred |
| ( |
| |
| | | |||
| ( |
| ( |
| ( |
| ( | |||
PROFIT FOR THE YEAR |
| |
| |
| |
| | ||
OTHER COMPREHENSIVE INCOME (LOSS) | ||||||||||
Other comprehensive income (loss) to be reclassified to profit or loss in subsequent periods: | ||||||||||
Foreign currency translation |
|
| |
| |
| ( | ( | ||
Changes in fair value of investments |
| 11 |
| ( |
| |
| | | |
Share of other comprehensive income of long-term investment in associates |
| 11 |
| ( |
| |
| ( | | |
Other comprehensive income (loss) not to be reclassified to profit or loss in subsequent periods: | ||||||||||
Defined benefit actuarial gain (loss) - net |
| 29 |
| |
| |
| ( |
| ( |
Other comprehensive income (loss) - net |
| |
| |
| ( |
| ( | ||
TOTAL COMPREHENSIVE INCOME FOR THE YEAR |
| |
| |
| |
| | ||
Profit for the year attributable to: | ||||||||||
Owners of the parent company |
| 23 |
| |
| |
| | | |
Non-controlling interests |
| 21 |
| |
| |
| | | |
| |
| |
| |
| | |||
Total comprehensive income for the year attributable to: | ||||||||||
Owners of the parent company |
|
| |
| |
| | | ||
Non-controlling interests |
|
| |
| |
| | | ||
| |
| |
| |
| | |||
BASIC EARNINGS PER SHARE (in full amount) |
| 23 | ||||||||
Profit per share |
| |
| |
| | | |||
Profit per ADS ( |
| |
| |
| | | |||
The accompanying notes form an integral part of these consolidated financial statements.
F-2
PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For Each of the Three Years in the Period Ended December 31, 2023
(Amounts in the tables are expressed in billions of Rupiah, unless otherwise stated)
Attributable to owners of the parent company | ||||||||||||||||
Capital | Additional | Retained | Other | Non-controlling | Total | |||||||||||
Description |
| Notes |
| stock |
| paid-in capital |
| earnings |
| reserves |
| Net |
| interests |
| equity |
Balance, December 31, 2020 |
| |
| |
| |
| |
| |
| |
| | ||
Net comprehensive income for the year |
| |||||||||||||||
Profit for the year | 21,23 |
| — |
| — |
| |
| — |
| |
| | | ||
Other comprehensive income (loss) |
|
| — |
| — |
| |
| | |
| ( | | |||
Net comprehensive income for the year |
| — |
| — |
| |
| |
| |
| |
| | ||
Transaction with owners recorded directly in equity | ||||||||||||||||
Cash dividend |
| 22 |
| — |
| — |
| ( |
| — |
| ( |
| ( |
| ( |
Changes in non-controlling interests | — | — | ( | — | ( | | | |||||||||
Changes in non-controlling interests from initial public offering of subsidiary | — | — | | — | | | | |||||||||
Net transactions with owners |
| — |
| — |
| ( |
| — |
| ( |
| ( |
| ( | ||
Balance, December 31, 2021 |
| |
| |
| |
| |
| |
| |
| | ||
The accompanying notes form an integral part of these consolidated financial statements.
F-3
PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (continued)
For Each of the Three Years in the Period Ended December 31, 2023
(Amounts in the tables are expressed in billions of Rupiah, unless otherwise stated)
Attributable to owners of the parent company | ||||||||||||||||
|
| Capital |
| Additional |
| Retained |
| Other |
|
| Non-controlling |
| Total | |||
Description | Notes | stock | paid-in capital | earnings | reserves | Net | interests | equity | ||||||||
Balance, December 31, 2021 |
| |
| |
| |
| |
| |
| |
| | ||
Net comprehensive income for the year |
| |||||||||||||||
Profit for the year | 21,23 |
| — |
| — |
| | — | | | | |||||
Other comprehensive income |
|
| — |
| — |
| | | | | | |||||
Net comprehensive income for the year |
| — |
| — |
| |
| |
| |
| |
| | ||
Transaction with owners recorded directly in equity | ||||||||||||||||
Cash dividend |
| 22 |
| — |
| — |
| ( | — | ( | ( |
| ( | |||
Repurchase of non-controlling interest shares | — | — | — | — | — | ( | ( | |||||||||
Changes in non-controlling interests | — | — | — | — | — | | | |||||||||
Investment from non-controlling interests for newly established indirect subsidiary | — | — | — | — | — | | | |||||||||
Net transactions with owners |
| — |
| — |
| ( |
| — |
| ( |
| ( |
| ( | ||
Balance, December 31, 2022 |
| |
| |
| |
| |
| |
| |
| | ||
The accompanying notes form an integral part of these consolidated financial statements.
F-4
PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (continued)
For Each of the Three Years in the Period Ended December 31, 2023
(Amounts in the tables are expressed in billions of Rupiah, unless otherwise stated)
Attributable to owners of the parent company | ||||||||||||||||
|
| Capital |
| Additional |
| Retained |
| Other |
|
| Non-controlling |
| Total | |||
Description | Notes | stock | paid-in capital | earnings | reserves | Net | interests | equity | ||||||||
Balance, December 31, 2022 |
| |
| |
| |
| |
| |
| |
| | ||
Net comprehensive income for the year |
| |||||||||||||||
Profit for the year | 21,23 |
| — |
| — |
| | — | | | | |||||
Other comprehensive income (loss) |
|
| — |
| — |
| ( | ( | ( | | ( | |||||
Net comprehensive income (loss) for the year |
| — |
| — |
| |
| ( |
| |
| |
| | ||
Transaction with owners recorded directly in equity | ||||||||||||||||
Differences in non-controlling interest ownership acquisition transactions of subsidiary | — | — | | — | | — | | |||||||||
Cash dividend |
| 22 |
| — |
| — |
| ( | — | ( | ( | ( | ||||
Repurchase of non-controlling interest shares |
|
| — |
| — |
| — |
| — |
| — |
| ( |
| ( | |
Changes in non-controlling interests | — | — | — | — | — | | | |||||||||
Additional capital contributions from non-controlling interests of subsidiaries | 1e,21 | — | — | — | — | — | | | ||||||||
Net transactions with owners |
| — |
| — |
| ( |
| — |
| ( |
| ( |
| ( | ||
Balance, December 31, 2023 |
| |
| |
| |
| |
| |
| |
| | ||
The accompanying notes form an integral part of these consolidated financial statements.
F-5
PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For Each of the Three Years in the Period Ended December 31, 2023
(Amounts in the tables are expressed in billions of Rupiah and millions of US Dollar,
unless otherwise stated)
Notes | 2021 | 2022 | 2023 | |||||||
|
| Rp |
| Rp |
| Rp |
| US$ (Note 3) | ||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||
Cash receipts from customers and other operators |
| |
| |
| | | |||
Cash receipts from interests |
| |
| |
| | | |||
Cash receipts from tax refund | | | | | ||||||
Cash payments for expenses |
| ( |
| ( |
| ( | ( | |||
Cash payments to employees |
| ( |
| ( |
| ( | ( | |||
Cash payments for corporate and final income taxes |
| ( |
| ( |
| ( | ( | |||
Cash payments for finance costs |
| ( |
| ( |
| ( | ( | |||
Cash payments for short-term and low-value lease assets | 13a | ( | ( | ( | ( | |||||
Cash payments for value added taxes - net |
| ( |
| ( |
| ( | ( | |||
Cash receipts from (payments for) others - net |
| ( |
| |
| | | |||
Net cash provided by operating activities |
| |
| |
| |
| | ||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||||
Proceeds from insurance claims | 12 |
| |
| |
| |
| | |
Proceeds from sale of property and equipment |
| 12 |
| |
| |
| | | |
Dividend received from associated company |
| — |
| |
| | | |||
Purchase of property and equipment |
| 12,36 |
| ( |
| ( |
| ( | ( | |
Purchase of intangible assets | 15,36 | ( | ( | ( | ( | |||||
Addition of long-term investment in financial instrument | ( | ( | ( | ( | ||||||
Proceeds from (placement in) other current financial assets - net |
| |
| ( |
| ( | ( | |||
(Increase) decrease of other assets |
|
| ( |
| |
| ( |
| ( | |
Net cash used in investing activities |
| ( |
| ( |
| ( |
| ( | ||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||
Proceeds from loans and other borrowings |
| 19,20 |
| |
| |
| | | |
Proceeds from initial public offering of subsidiary | | — | — | — | ||||||
Proceeds from issuance of new shares of subsidiaries | — | | | | ||||||
Repayments of loans and other borrowings | 19,20 | ( | ( | ( | ( | |||||
Cash dividend paid to the Company's stockholders | 22 |
| ( |
| ( |
| ( | ( | ||
Cash dividend paid to non-controlling interests of subsidiaries |
|
| ( |
| ( |
| ( | ( | ||
Repayments of principal portion of lease liabilities | 36 |
| ( |
| ( |
| ( | ( | ||
Placement in shares buyback of subsidiary |
| 1e |
| — |
| ( |
| ( | ( | |
Net cash used in financing activities |
| ( |
| ( |
| ( |
| ( | ||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
| |
| ( |
| ( |
| ( | ||
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS |
| |
| |
| ( |
| ( | ||
ALLOWANCE FOR EXPECTED CREDIT LOSSES | ( | ( | ( | ( | ||||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR |
| 4 |
| |
| |
| |
| |
CASH AND CASH EQUIVALENTS AT END OF THE YEAR |
| 4 |
| |
| |
| |
| |
The accompanying notes form an integral part of these consolidated financial statements.
F-6
PERUSAHAAN PERSEROAN (PERSERO)
PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2022 and 2023
For Each of the Three Years in Period Ended December 31, 2023
(Amounts in the tables are expressed in billions of Rupiah, unless otherwise stated)
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 which 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”).
The Company was established based on Notarial Deed No. 128 dated September 24, 1991 of Imas Fatimah, S.H. The deed of establishment was approved by the 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 Company's Articles of Association had been amended several times, with the latest amendments made is in relation with adjustments of the Company’s business activities in the Articles of Association with the Standard Classification of Indonesian Business Fields in 2020.
Amendments to the Company’s Articles of Association as stated in the Notary Deed of Ashoya Ratam, S.H., M.Kn. No. 37 dated June 22, 2022 has been received and approved by the Minister of Law and Human Rights of the Republic of Indonesia (“MoLHR”) based on letter No. AHU-0044650.AH.01.02. Year of 2022 dated June 29, 2022 concerning the Acceptance of Notification Approval of Amendment to the Articles of Association of the Limited Liability Company (Persero) PT Telekomunikasi Indonesia Tbk.
In accordance with Article 3 of the Company’s Articles of Association, the scope of the Company’s activities is to provide telecommunication network and telecommunication and information services, and to optimize the Company’s resources to provide high quality and competitive goods and/or services to gain/pursue profit in order to increase the value of the Company by applying the Limited Liability Company principle. To achieve these objectives, the Company is involved in the following activities:
i. Main business:
(a) Planning, building, providing, developing, operating, marketing or selling or leasing, and maintaining telecommunications and information networks in a broad sense in accordance with the prevailing laws and regulations.
(b) Planning, developing, providing, marketing or selling, and improving telecommunications and information services in a broad sense in accordance with the prevailing laws and regulations.
(c) Investing, including in the form of equity contribution in other companies, in line with and to achieve the purposes and objectives of the Company.
F-7
ii. Supporting business:
| (a) | Providing payment transactions and money transfer services through telecommunications and information networks. |
| (b) | Performing other activities and undertakings in connection with the optimization of the Company’s resources, which includes the utilization of the Company’s property and equipment and movable assets, information systems, education and training, and repair and maintenance facilities. |
| (c) | Collaborating with other parties in order to optimize the information and communication or technology resources owned by other service provider in information, communication and technology industry to achieve the purposes and objectives of the Company. |
The Company is domiciled and headquartered in Bandung, West Java, located at Jalan Japati No.1, Bandung.
The Company was granted several networks and/or services provision licenses by the Government which are valid for an unlimited period of time, given that the Company complies with the prevailing laws and regulations and fulfills the obligation stated in those licenses. For every license issued by the Ministry of Communication and Information (“MoCI”), an evaluation is performed annually and an overall evaluation is performed every
The reports comprise of several informations, such as network development progress, service quality standard achievement, number of customers, license payment, and universal service contribution. Meanwhile, for internet telephone services for public purpose, internet interconnection service, and internet access service, additional information is required, such as operational performance, customer segmentation, traffic, and gross revenue.
Details of these licenses are as follows:
License |
| License No. |
| Type of service |
| Grant date/latest |
License to operate internet telephone services for public purpose | 127/KEP/DJPPI/ KOMINFO/3/2016 | Internet telephone services for public purpose | March 30, 2016 | |||
License to operate internet service provider | 2176/KEP/M.KOMINFO/ 12/2016 | Internet service provider | December 30, 2016 | |||
License to operate content service provider | 1040/KEP/M.KOMINFO/ 16/2017 | Content service provider | May 16, 2017 | |||
License for the implementation of internet interconnection services | 1004/KEP/M.KOMINFO/ 2018 | Internet interconnection services | December 26, 2018 | |||
License to operate data communication system services | 046/KEP/M.KOMINFO/ 02/2020 | Data communication system services | August 3, 2020 | |||
License of IPTV service provider | 022/KEP/M.KOMINFO/02/2021 | Multimedia IPTV service provider | February 25, 2021 | |||
License of electronic money issuer and money transfer | Bank Indonesia License 23/587/DKSP/Srt/B | Electronic money and money transfer service | July 1, 2021 | |||
License to operate fixed network long distance direct line | 073/KEP/M.KOMINFO/02/2021 | Fixed network long distance direct line | August 23, 2021 | |||
License to operate fixed international network | 082/KEP/M.KOMINFO/ 02/2021 | Fixed international network | October 8, 2021 | |||
License to operate fixed closed network | 094/KEP/M.KOMINFO/ 02/2021 | Fixed closed network | December 9, 2021 | |||
License to operate circuit switched-based local fixed line network | 095/KEP/M.KOMINFO/ 02/2021 | Circuit switched-based and packet switched-based local fixed line network | December 9, 2021 |
b. The company’s Board of Commissioners, Board of Directors, Audit Committee, Corporate Secretary, and Internal Audit
i. Boards of Commissioners and Directors
F-8
Based on the resolutions made at Annual General Meeting (“AGM“) of Stockholders of the Company as covered by Notarial Deed of Ashoya Ratam, S.H., M.Kn., No. 35 dated June 23, 2023 and No. 34, dated June 18, 2021, the composition of the Company’s Boards of Commissioners and Directors as of December 31, 2022 and 2023, respectively, were as follows:
| 2022 |
| 2023 | |
President Commissioner/ | Bambang Permadi | Bambang Permadi | ||
Independent Commissioner | Wawan Iriawan | Wawan Iriawan | ||
Independent Commissioner | Bono Daru Adji | Bono Daru Adji | ||
Independent Commissioner | Abdi Negara Nurdin | Abdi Negara Nurdin* | ||
Commissioner | Arya Mahendra Sinulingga | Arya Mahendra Sinulingga | ||
Commissioner | Marcelino Rumambo Pandin | Marcelino Rumambo Pandin | ||
Commissioner | Ismail | Ismail | ||
Commissioner | Rizal Mallarangeng | Rizal Mallarangeng | ||
Commissioner | Isa Rachmatarwata | Isa Rachmatarwata | ||
Commissioner | - | Silmy Karim | ||
President Director | Ririek Adriansyah | Ririek Adriansyah | ||
Director of Enterprise & Business Service | F.M. Venusiana R. | F.M. Venusiana R. | ||
Director of Digital Business | Muhamad Fajrin Rasyid | Muhamad Fajrin Rasyid | ||
Director of Human Capital Management | Afriwandi | Afriwandi | ||
Director of Finance & Risk Management | Heri Supriadi | Heri Supriadi | ||
Director of Network & IT Solution | Herlan Wijanarko | Herlan Wijanarko | ||
Director of Strategic Portfolio | Budi Setyawan Wijaya | Budi Setyawan Wijaya | ||
Director of Wholesale & International Services | Bogi Witjaksono | Bogi Witjaksono | ||
Director of Group Business Development | - | Honesti Basyir | ||
Director of Consumer Service | F.M. Venusiana R. | - |
* | Based on Notification Letter of VP Investor Relations No. Tel.03/LP 000/DCI-M0200000/2024 addressed to Indonesian Financial Services Authority regarding the Resignation of the Company’s Independent Commissioners, starting from January 19, 2024, Mr. Abdi Negara Nurdin no longer serve as the Company's Independent Commissioner. |
F-9
ii. Audit Committee, Corporate Secretary, and Internal Audit
The composition of the Company’s Audit Committee, Corporate Secretary, and Internal Audit as of December 31, 2022 and 2023, respectively, were as follows:
| 2022 |
| 2023 | |
Chairman | Bono Daru Adji | Bono Daru Adji | ||
Member | Bambang Permadi | Bambang Permadi | ||
Member | Wawan Iriawan | Wawan Iriawan | ||
Member | Abdi Negara Nurdin | Abdi Negara Nurdin* | ||
Member | Emmanuel Bambang Suyitno | Emmanuel Bambang Suyitno | ||
Member | Edy Sihotang | Edy Sihotang | ||
Corporate Secretary | R. Achmad Faisal | Anetta Hasan** | ||
Internal Audit | Daru Mulyawan | Daru Mulyawan |
* | Based on the Company’s Board of Commissioner's Letter No. 04/KEP/DK/2024 dated February 6, 2024 regarding the Composition of the Company's Audit Committee Members, Mr. Abdi Negara Nurdin no longer serve as member of the Company's Audit Committee. |
** | Based on Notification Letter of VP Investor Relations No. Tel.11/LP 000/DCI-M0000000/2024 addressed to Indonesian Financial Services Authority about Information regarding The Appointment of the Company’s Corporate Secretary, starting from March 18, 2024, Ms. Anetta Hasan no longer serve as the Company’s Corporate Secretary and Mr.R. Achmad Faisal was appointed as Interim Corporate Secretary. |
c. Public offering of securities of the Company
The Company's shares are listed and traded on the Indonesia Stock Exchange (“IDX”) and the New York Stock Exchange (“NYSE”) since November 14, 1995.
On June 16, 2015, the Company issued Continuous Bonds I Telkom Phase I 2015 with nominal of Rp
F-10
d. Subsidiaries
As of December 31, 2022 and 2023, the Company has consolidated the following directly and indirectly owned subsidiaries (Notes 2b and 2d):
i. Direct subsidiaries:
Start year of | ||||||||||||
operation | Percentage of ownership* | Total assets before elimination | ||||||||||
Subsidiary |
| Nature of business |
| commencement |
| 2022 |
| 2023 |
| 2022 |
| 2023 |
PT Telekomunikasi Selular (“Telkomsel”)** | Mobile telecommunication, fixed broadband, network service, and IPTV |
| 1995 |
| |
| |
| |
| | |
PT Dayamitra Telekomunikasi Tbk. ("Mitratel") | Leasing of towers and digital support services for mobile infrastructure |
| 1995 |
| |
| |
| |
| | |
PT Multimedia Nusantara ("Metra") | Network telecommunication services and multimedia |
| 1998 |
| |
| |
| |
| | |
PT Telekomunikasi Indonesia International (“Telin”) | International telecommunication and information services |
| 1995 |
| |
| |
| |
| | |
PT Telkom Satelit Indonesia (“Telkomsat”) | Telecommunication - provides satellite communication system and its related services |
| 1996 |
| |
| |
| |
| | |
PT Sigma Cipta Caraka (“Sigma”) | Hardware and software computer consultation service |
| 1988 |
| |
| |
| |
| | |
PT Graha Sarana Duta ("GSD") | Developer, trade, service and transportation | 1982 | | | | | ||||||
PT Telkom Akses ("Telkom Akses") | Construction, service and trade in the field of telecommunication |
| 2013 |
| |
| |
| |
| | |
PT Telkom Data Ekosistem ("TDE") | Data center | 1996 | | | | | ||||||
PT Metra-Net (“Metra-Net”) | Multimedia portal service |
| 2009 |
| |
| |
| |
| | |
PT Infrastruktur Telekomunikasi Indonesia (“Telkom Infra”) | Developer service and trading in the field of telecommunication |
| 2014 |
| |
| |
| |
| | |
PT PINS Indonesia (“PINS”) | Trade in telecommunication devices |
| 1995 |
| |
| |
| |
| | |
PT Napsindo Primatel Internasional (“Napsindo”) | Telecommunication - provides Network Access Point (“NAP”), Voice Over Data (“VOD”) and other related services |
| 1999; ceased operations on January 13, 2006 |
| |
| |
| |
| | |
PT Telkom Infrastruktur Indonesia (“Infraco”) | Network telecommunication and information services |
| not yet operating*** |
| — |
| |
| — |
| | |
* Percentage of ownership amounting to 99.99% is presented with rounding of 100%.
** Refer to Note 1e for details of the Company’s ownership changes in Telkomsel.
***Commencement of commercial operation starts in 2024.
All direct subsidiaries are domiciled in Indonesia.
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ii. Indirect subsidiaries:
Start year of | ||||||||||||
operation | Percentage of ownership* | Total assets before elimination | ||||||||||
Subsidiary |
| Nature of business |
| commencement |
| 2022 |
| 2023 |
| 2022 |
| 2023 |
PT Metra Digital Investama (“MDI”) | Trading, information and multimedia technology, entertainment and investment services |
| 2013 |
| |
| |
| |
| | |
Telekomunikasi Indonesia International Ltd. ("Telin Hong Kong"), domiciled in Hong Kong | Investment holding and telecommunication services |
| 2010 |
| |
| |
| |
| | |
Telekomunikasi Indonesia International Pte. Ltd. ("Telin Singapore"), domiciled in Singapore | Telecommunication and related services | 2008 | | | | | ||||||
PT Infomedia Nusantara (“Infomedia”) | Information provider services, contact center and content directory |
| 1984 |
| |
| |
| |
| | |
PT Telkom Landmark Tower (“TLT”) | Property development and management services | 2012 | | | | | ||||||
PT Finnet Indonesia (“Finnet”) | Information technology services | 2006 | | | | | ||||||
PT Persada Sokka Tama ("PST") | Leasing of towers and other telecommunication services | 2008 | | | | | ||||||
PT Nuon Digital Indonesia (“Nuon”) | Digital content exchange hub services |
| 2010 | | | | | |||||
Telekomunikasi Indonesia International (TL) S.A. ("Telkomcel"), domiciled in Timor Leste | Telecommunication networks, mobile, internet, and data services |
| 2012 |
| |
| |
| |
| | |
PT Telkomsel Mitra Inovasi ("TMI") | Business management consulting and investment services |
| 2019 |
| |
| |
| |
| | |
PT Metra Digital Media (“MD Media”) | Telecommunication information and other Information services |
| 2013 |
| |
| |
| |
| | |
PT Telkomsel Ekosistem Digital ("TED") | Business management consulting services and investment and/or investment in other companies | 2021 | | | | | ||||||
PT Administrasi Medika (“Admedika”) | Health insurance administration services |
| 2003 |
| |
| |
| |
| | |
PT Teknologi Data Infrastruktur (“TDI”) | Telecommunication service and data center | 2013 | | | | | ||||||
TS Global Network Sdn. Bhd. ("TSGN"), domiciled in Malaysia | Satellite services |
| 1996 |
| |
| |
| |
| | |
PT Swadharma Sarana Informatika ("SSI") | Cash replenishment services and ATM maintenance |
| 2001 |
| |
| |
| |
| | |
PT Digital Aplikasi Solusi (“Digiserve”) | Communication system services | 2014 | | | | | ||||||
PT Graha Telkomsigma ("GTS") | Management and consultation services | 1999 | | | | | ||||||
PT Graha Yasa Selaras (“GYS”) | Tourism and hospitality services |
| 2012 |
| |
| |
| |
| | |
PT Nusantara Sukses Investasi ("NSI") | Service and trading |
| 2014 |
| |
| |
| |
| | |
PT Nutech Integrasi ("Nutech") | System integrator service |
| 2001 |
| |
| |
| |
| | |
Telekomunikasi Indonesia International (USA) Inc. (“Telin USA”), domiciled in USA | Telecommunication and information services | 2014 | | | | | ||||||
PT Collega Inti Pratama ("CIP") | Trading and services | 2001 | | | | | ||||||
PT Media Nusantara Data Global ("MNDG") | Consultation services of hardware, software, data center, and internet exchange |
| 2012 |
| |
| |
| |
| | |
Telekomunikasi Indonesia International (Malaysia) Sdn. Bhd. (”Telin Malaysia”), domiciled in Malaysia | Telecommunication and information services |
| 2013 |
| |
| |
| |
| | |
Telekomunikasi Indonesia International (Australia) Pty. Ltd. (“Telin Australia”), domiciled in Australia | Telecommunication and information services |
| 2013 |
| |
| |
| | | ||
PT Metra TV (“Metra TV”) | Subscription broadcasting services | 2013 | | | | | ||||||
PT Pojok Celebes Mandiri ("PCM") | Travel agent services | 2008 | | | | | ||||||
PT Bosnet Distribution Indonesia (“BDI”) | Trade and consultation services | 2012 | | | | | ||||||
PT Metraplasa (“Metraplasa”) | Network and e-commerce services | 2014; ceased operations on October, 2020 | | | | | ||||||
NeutraDC Singapore Pte.Ltd (“NeutraDC Singapore”) domiciled in Singapore | Data center |
| not yet operating*** |
| — |
| |
| — |
| — | |
* Percentage of ownership amounting to 99.99% is presented into rounding of 100%.
*** Commencement of commercial operation starts in 2024.
Other than those specifically stated, indirect subsidiaries are domiciled in Indonesia.
F-12
e. Other important informations
i. Telkomsel
On June 27, 2023, the Company signed the Spin-off Decree of IndiHome Business to Telkomsel No. 140 that has been approved by AGM of Stockholders based on Notarial Deed of Ashoya Ratam, S.H., M.Kn., No. 35 dated June 23, 2023. The value of IndiHome business segment transferred is Rp
ii. Mitratel
Share buyback
On June 2, 2022, Mitratel announced to buyback its shares with a maximum amount of Rp
Towers acquisition
| (a) | On March 1, 2023, Mitratel and PT Indosat Tbk. (“Indosat”) signed a Seller Closing Certificate for the acquisition of |
| (b) | On November 24, 2023, Mitratel acquired |
iii. Sigma
Based on Notarial Deed No.120 dated April 19, 2022 of Jimmy Tanal, S.H., M.Kn., the Company acquired Sigma’s shares from Metra, resulted in
iv. TDI
Based on Notarial Deed of Jimmy Tanal, SH., MKn No. 201 dated October 25, 2023, the shareholders approved the issuance of
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v. NeutraDC Singapore
Based on Accounting and Corporate Regulatory Authority Singapore (“ACRA”) documents, TDE established NeutraDC Singapore which is domiciled in Singapore on December 7, 2023 by the issuance of
vi. Infraco
Based on Notarial Deed No. 26 dated December 8, 2023 of Aulia Taufani, S.H., the Company and Metra established Infraco by the issuance of
f. Completion and authorization for the issuance of the consolidated financial statements
The Company’s management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, which have been completed and authorized for issuance by the Board of Directors of the Company on April 1, 2024.
2. SUMMARY OF MATERIAL ACCOUNTING POLICIES INFORMATION
The consolidated financial statements of the Company and its subsidiaries (collectively referred to as “the Group”) have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).
a. Basis of preparation of the consolidated 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.
The reporting currency in the consolidated financial statements is the Indonesian Rupiah (“Rp”) which is also the functional currency of the Group, except for subsidiaries whose functional currency is the US Dollar, Australian Dollar, and Malaysian Ringgit.
Figures in the consolidated financial statements containing values under Rp1 billion and US$1 million are presented with zero.
The consolidated financial statements provide comparative information in respect of the previous period.
The following amendments, which are effective for annual periods beginning on or after January 1, 2023 are applicable and does not have any material impact to the consolidated financial statements of the Group, unless otherwise stated.
i. | Amendments to IAS 1: Disclosure of Accounting Policies |
The amendments provide guidance and examples to help entities apply materiality judgements to accounting policy disclosures.
ii. | Amendments to IAS 8: Definition of Accounting Estimates |
The amendments introduce a definition of ‘accounting estimates’ and clarify the distinction between changes in accounting estimates and changes in accounting policies and the correction
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of errors. It clarifies how entities use measurement techniques and inputs to develop accounting estimates.
iii. | Amendments to IAS 12: Deferred Tax related to Assets and Liabilities arising from a Single Transaction |
This amendment regulates initial recognition exemption criteria for deferred tax assets or liabilities arising from a single transaction. It proposes that entities recognize deferred tax assets and liabilities at the time of initial recognition.
iv. | Amendment to IAS 12: International Tax Reform - Pillar Two Model Rules |
The amendments to PSAK 46 have been introduced in response to the Pillar Two Rules, issued by Organization for Economic Co-operation and Development (OECD), and include:
(a) | An exception to the recognition and disclosure of deferred taxes related to the Pillar Two income taxes; and |
(b) | Disclosure requirements for affected entities to help users of the financial statements better understand an entity’s exposure to Pillar Two income taxes arising from that legislation, particularly before its effective date. |
The mandatory temporary exception - the use of which is required to be disclosed-applies immediately.
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 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.
Generally, there is a presumption that a majority of voting rights results in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:
i. | The contractual arrangement with the other vote holders of the investee, |
ii. | Rights arising from other contractual arrangements, and |
iii. | The Group's voting rights and potential voting rights. |
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 profit or loss and other comprehensive income from the date the Group gains financial 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.
All intra-Group assets and liabilities, equity, revenue and expenses, and cash flow relating to transactions within Group are fully eliminated on consolidation.
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In case of loss of control over a subsidiary, the Group:
| i. | derecognizes the assets (including goodwill) and liabilities of the subsidiary at the carrying amounts on the date when it loses control; |
| ii. | derecognizes the carrying amounts of any non-controlling interests of its former subsidiary on the date when it loses control; |
| iii. | recognizes the fair value of the consideration received (if any) from the transaction, events, or condition that caused the loss of control; |
| iv. | recognizes the fair value of any investment retained in the subsidiary at fair value on the date of loss of control; and |
| v. | recognizes any surplus or deficit in profit or loss that is attributable to the Group. |
c. Transactions with related parties
The Group has transactions with related parties. The definition of related parties used is in accordance with International Accounting Standards (“IAS”) 24, Related Party Disclosures. The party which is considered a related party is a person or entity that is related to the entity that is preparing its financial statements.
Key management personnel are identified as the persons having authority and responsibility for planning, directing, and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of the 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 and goodwill
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 the net assets acquired is in excess of the aggregate consideration transferred, the Group re-assesses 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 or loss.
Any contingent consideration to be transferred by the acquirer is recognized at fair value at the acquisition date. Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. Contingent consideration classified as an asset or liability that is a financial instrument and within the scope of IFRS 9 Financial Instruments is measured at fair value with the changes in fair value recognized in the statement of profit or loss in accordance with IFRS 9. Other contingent consideration that is not within the scope of IFRS 9 is measured at fair value at each reporting date with changes in fair value recognized in profit or loss.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group shall report in its consolidated financial statements provisional amounts for the items for which the accounting is incomplete. During the measurement period, the
F-16
Group shall retrospectively adjust the provisional amounts recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition date and, if known, would have affected the measurement of the amounts recognized as of that date. The measurement period ends immediately after the Company receives the information about the facts and circumstances that existed at the acquisition date or learns that additional information cannot be obtained. However, the measurement period must not exceed one year from the date of acquisition.
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.
Business combination between businesses or 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. The excess of consideration paid or received over the carrying value of interest acquired or sold, net of income tax, is directly recognized to retained earnings.
e. Cash and cash equivalents
Cash and cash equivalents in the consolidated statement of financial position comprise cash in banks and on hand and short-term highly liquid deposits with a maturity of three months or less, that are readily convertible to a known amount of cash and subject to an insignificant risk of changes in value.
For the purpose of the consolidated statement of cash flows, cash and cash equivalents consist of cash and short-term deposits, as defined above, net of outstanding bank overdrafts as they are considered an integral part of the Group’s cash management.
Time deposits with maturities of more than three months but not more than one year are presented as part of “Other current financial assets” in the consolidated statements of financial position.
f. Inventories
Inventories consist of components, which represent telephone terminals, cables, and other spare parts. Inventories also include Subscriber Identification Module (“SIM”) cards, handsets, wireless broadband modems, and prepaid vouchers which are expensed upon sale.
Inventories are valued at the lower of cost and net realizable value. Net realizable value is determined by either estimating the selling price in the ordinary course of business, less estimated cost to sell or determining the prevailing replacement costs.
The costs of inventories consist of the purchase price, import duties, other taxes, transport, handling, and other costs directly attributable to their acquisition.
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 an expense in the period in which the write-down or loss occurs. The amount of any reversal of any write-down of inventories, arising from an increase in net realizable value, 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 inventory items.
F-17
g. Prepaid expenses
Prepaid expenses are amortized over their future beneficial periods using the straight-line method. Prepaid expenses are presented in the consolidated statement of financial position as part of other current assets and other non-current assets.
h. Intangible assets
Intangible assets are recognized if it is highly 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 losses (if any). Intangible assets are amortized over their estimated useful lives. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least at the end of the reporting period. The Group estimates the recoverable value of its intangible assets. When the carrying amount of an intangible asset exceeds its estimated recoverable amount, the asset is written down to its estimated recoverable amount.
Intangible assets except goodwill, are amortized using the straight-line method, based on the estimated useful lives of the intangible assets as follows:
| Years | |
Software |
| |
License |
| |
Other intangible assets |
|
Intangible assets are derecognized on disposal, or 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 statements of profit or loss and other comprehensive income.
i. Property and equipment
Property and equipment are stated at cost less accumulated depreciation, and impairment losses (if any).
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.
F-18
Property and equipment are depreciated or amortized using the straight-line method based on the estimated useful lives of the assets as follows:
| Years | |
Buildings |
| |
Leasehold improvements |
| |
Switching equipment |
| |
Telegraph, telex, and data communication equipment |
| |
Transmission installation and equipment |
| |
Satellite, earth station, and equipment |
| |
Cable network |
| |
Power supply |
| |
Data processing equipment |
| |
Vehicles |
| |
Other telecommunication peripherals |
| |
Office equipment |
| |
Other equipment |
|
Significant expenditures related to leasehold improvements are capitalized and depreciated over the lease term.
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 estimated amount that the 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 measured reliably.
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 statements of financial position and the resulting gains or losses on the disposal or sale of the property and equipment are recognized in the consolidated statements of profit or loss and other comprehensive income.
Certain computer hardware cannot 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 are charged to the consolidated statements of profit or loss and other comprehensive income as incurred. Significant renewals and betterments are capitalized to related property and equipment account.
Property under construction is stated at cost less impairment (if any), until the 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.
F-19
Capitalization of borrowing cost ceases when the construction is completed, and the asset is ready for its intended use or sale.
j. Leases
The Group assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The lease term corresponds to the non-cancellable period of each contract, except in cases where the Group is reasonably certain of exercising renewal options contractually foreseen.
The Group has made use of the package of practical expedients available within IFRS 16, which among other things:
| ● | the use of a single discount rate to a portfolio of leases with reasonably similar characteristics; |
| ● | the accounting for operating leases with a remaining lease term of less than 12 months as short-term leases; |
| ● | the exclusion of initial direct costs for the measurement of the right-of-use asset (“ROU”) as short-term leases; |
| ● | the use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease; |
| ● | not to separate non-lease components from lease components, and instead, account for both as a single lease component; and |
| ● | not to recognize a lease liability and a ROU asset for leases where the underlying assets are low-value assets (i.e. underlying assets with a maximum value of US$ |
The Group applies the definition of a lease and related guidance set out in IFRS 16 to all lease contracts.
i. | The Group as lessee |
The Group applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Group recognizes lease liabilities to make lease payments and ROU assets representing the right to use the underlying assets.
The Group recognizes ROU assets at the commencement date of the lease. ROU assets are measured at cost, less any accumulated amortization and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of ROU assets includes the amount of lease liabilities recognized, initial direct costs incurred, restoration costs and lease payments made at or before the commencement date less any lease incentives received.
ROU assets are amortized on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets, as follows:
| Years | |
Land rights |
| |
Buildings |
| |
Transmission installation and equipment |
| |
Vehicles |
| |
Others |
|
If ownership of the ROU asset transfers to the Group at the end of the lease term or the cost reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset. The ROU assets are subject to impairment in accordance with IAS 36: Impairment of Assets.
F-20
Lease liabilities
At the commencement date of the lease, the Group recognizes lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating the lease, if the lease term reflects the Group exercising the option to terminate. Variable lease payments that do not depend on an index or a rate are recognized as expenses in the period in which the event or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments, or a change in the assessment of an option to purchase the underlying asset.
Short-term leases with a duration of less than 12 months and low-value assets leases, as well as those lease elements, partially or totally not complying with the principles of recognition defined by IFRS 16 will be treated similarly to operating leases. The Group will recognize those lease payments on a straight-line basis over the lease term in the consolidated statements of profit or loss and other comprehensive income.
ii. | The Group as lessor |
Under IFRS 16, a lessor continues to classify leases as either finance leases or operating leases and account for those two types of leases differently. Leases in which the Group transfers substantially all the risks and rewards incidental to ownership of an asset are classified as finance leases, otherwise it will be classified as operating leases. Lease classification is made at the inception date and is reassessed only if there is a lease modification.
At the commencement date, the Group recognizes assets held under a finance lease at an amount equal to the net investment in the lease and present it as finance lease receivable. The net investment in the lease includes fixed payments (including in substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and residual value guarantees provided to the lessor by the lessee. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the lessee and payments of penalties for terminating the lease, if the lease term reflects the Group exercising the option to terminate.
As required by IFRS 9, an allowance for expected credit loss has been recognized on the finance lease receivables and presented under "Other receivables".
Rental income arising from operating leases is accounted for on a straight-line basis over the lease terms and is included in revenue in the consolidated statement of profit or loss and other comprehensive income due to its operating nature. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the underlying asset and recognized over the lease term on the same basis as rental income. Contingent rents are recognized as revenue in the period in which they are earned.
F-21
If an arrangement contains lease and non-lease components, the Group applies IFRS 15 Revenue from Contracts with Customers to allocate the consideration in the contract. Revenue arising from operating lease is recorded as revenue from lessor transactions (Note 2m).
k. 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 statements 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 drawn 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 prepayment for liquidity services and amortized over the period of the facilities to which it relates.
l. Foreign currency translations
Transactions in foreign currencies are translated into Indonesian Rupiah at the Reuters’ mid rates of exchange prevailing at transaction date. At the consolidated statements of financial position dates, 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 statements of financial position dates, as follows (in full amount):
2022 | 2023 | |||||||
| Buy |
| Sell |
| Buy |
| Sell | |
United States Dollar (“US$”) 1 |
| | |
| | | ||
Australian Dollar (“AU$”) 1 |
| | |
| | | ||
Singapore Dollar (“SGD”) 1 | | | | | ||||
New Taiwan Dollar (“TWD”) 1 | | | | | ||||
Euro ("EUR") 1 |
| | |
| | | ||
Japanese Yen ("JPY") 1 |
| | |
| | | ||
Malaysian Ringgit ("MYR") 1 | | |
| | | |||
Hong Kong Dollar (“HKD”) 1 | | |
| | | |||
Myanmar Kyat (“MMK”) 1 | | |
| | | |||
China Yuan ("CNY") 1 | ||||||||
The result of foreign exchange gains or losses, realized and unrealized, are credited or charged to the consolidated statements 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 2i).
m. Revenue and expense recognition
Revenue from contract with customers
IFRS 15 establishes a comprehensive framework to determine how, when, and how much revenue is to be recognized. The standard provides a single principles-based five-step model for the determination and recognition of revenue to be applied to all contracts with customers. The standard also provides specific guidance requiring certain types of costs to obtain and/or fulfil a contract to be capitalized and amortized on a systematic basis that is consistent with the transfer to the customer of the goods or services to which the capitalized cost relates.
F-22
Below is the summary of the Group’s revenue recognition accounting policy for each revenue stream:
i. Mobile
Revenue from mobile primarily comprises of revenue from cellular service which among others: telephone service, interconnection service, internet and data service and Short Messaging Services (“SMS”) service. Those services are offered on postpaid or prepaid basis.
For prepaid services, initial package sales (also known as SIM cards and initial charging vouchers) and top-up vouchers are initially recognized as contract liabilities. The Group recognizes contract assets for the services from postpaid customers that have not been billed.
All mobile services revenues are recognized based on output method, either per actual usage or allowance unit used (if services sold in plan basis), because the customer simultaneously receives and consumes the benefits provided by the Group.
For services sold in bundled plan, total consideration is allocated to performance obligations based on stand-alone selling price for each of product and/or service. The Group estimates the stand-alone selling price using the price enacted if the services are sold on a stand-alone basis. Most bundled plans sold by the Group only include services which are generally satisfied over the same period of time. Therefore, the revenue recognition pattern is generally not impacted by the allocation.
The consideration that is received is allocated between the telecommunication services sold and the points issued, with the consideration allocated to points that are equal to its fair value. The fair value of the points that are issued is deferred and recognized as revenue when the points are redeemed, expired, or when the program is terminated.
ii. Consumer
Revenue from consumer primarily comprises of revenue from fixed telephone and IndiHome services. Revenues from fixed telephone service are derived from customer who subscribes to fixed telephone service only, while revenues from IndiHome service are derived from customer who subscribes to internet services or to bundled package with combination of consumer service (i.e. telephone, internet and data, and paid TV). Those services are offered on a postpaid basis and billed in the following month. The Group applies terms and conditions that requires the customer to pay substantive early termination penalty if the customer’s contract is ended at the customer’s request and/or fault within the first 12 months after the service is activated. After the initial 12-month period, the customer can decide to stop subscribing in accordance with the applicable terms and conditions without incurring any penalties. In accordance with IFRS 15, the contract period is 12 months, which is then followed by a monthly contract.
All consumer services are recognized using the output method based on the customer's actual usage or time elapsed basis as the customer simultaneously receives and consumes the benefits provided by the Group.
Customers required to pay an upfront fee at the commencement of the contract. The upfront fee is considered to be a material right because the customer is not required to pay an upfront fee when the customer renews the service beyond the original contract period. The Group values the renewal option in the amount of the consideration received from the upfront fee for the installation service. The Group defers the amount of renewal option as contract liabilities and recognizes it as revenue on a straight-line basis over the expected customer life. The Group estimates the expected customer life based on the historical information and customer trends and updates the evaluation on an annual basis.
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iii. Enterprise
Revenue from enterprise customers primarily comprises of revenue from providing telephone service, internet and data, information technologies, and other services (e.g. manage service, call center service, e-health, e-payment, and others). Some of the contracts with enterprise customers are bespoke in nature.
Revenues from enterprise customers are recognized overtime using output method based on actual usage or time elapsed if the provision of service does not depend on usage (i.e. minute of voice, kilobyte of data, etc.), except for sales of goods which are recognized at a point in time, because the customer simultaneously receives and consumes the benefits provided by the Group. Revenues for performance obligations that are satisfied at a point in time is recognized when control of goods is transferred to the customer, typically when the customer has physical possession of the goods.
Some of the arrangements in enterprise customers are offered as bundled arrangements. For bundled arrangements, the product and/or service in the contract is accounted for as a single performance obligation when it is separately identifiable from other promises in the contract and the customer can benefit from the product/service on its own. The total consideration is allocated to each distinct performance obligation that has been included in the contract, based on its stand-alone selling price. The stand-alone selling price is determined according to the observable prices at which individual product and/or service are sold separately, adjusted for market conditions and normal discounts as appropriate. Alternatively, when the observable prices are not available, the expected cost-plus margin approach is used to determine the stand-alone selling prices.
Certain contracts with enterprise customers may give rise to variable consideration as the contract price depends on a future event (e.g. usage based contract or revenue-share based contract). In estimating the variable consideration, the Group is required to use either the expected value method or the most likely amount method based on the method that better predicts the amount of consideration to which it will be entitled. The Group determines that the most expected value method is the appropriate method to use in estimating the variable consideration for a single contract with a large number of possible outcomes.
Before including any amount of variable consideration in the transaction price, the Group considers whether the amount of variable consideration is constrained. The Group determines that the estimates of variable consideration are not constrained based on its historical experience, business forecast, and the current economic conditions and only includes variable consideration to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.
When another party is involved in providing products and/or services to a customer, the Group is the principal if it controls the specified products and/or services before those products and/or services are transferred to the customer. Revenues are recorded on the net amount that has been retained (the amount paid by the customer less the amount paid to the suppliers), when, in substance, the Group has acted as agent and earned commission from the suppliers of the products and/or services sold.
iv. Wholesale and International Business (“WIB”)
Revenue from WIB is mainly comprises of interconnections service for interconnection of other telecommunications carriers’ subscriber calls to the Group’s subscribers (incoming call) and calls between other telecommunications carriers subscribers through the Group’s network (transit) and network service with other telecommunications carriers. All of these services are recognized based on the output method using the basis of the actual recorded traffic for the month.
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Contract assets
A contract asset is initially recognized for revenue earned from delivery of goods or services because the receipt of consideration is conditional on certain milestones or upon completion of the project. Upon completion of the milestones or the project, the amount recognized as contract assets is reclassified to trade receivables.
Contract assets are subject to impairment assessment.
Contract liabilities
A contract liability is recognized if a payment is received or a payment is due (whichever is earlier) from a customer before the Group transfers the related goods or services. Contract liabilities are recognized as revenue when the Group performs under the contract (i.e., transfers control of the related goods or services to the customer).
Incremental cost of obtaining and cost of fulfilling contract
The incremental costs of obtaining/fulfilling contracts with customers, which principally are comprised of sales commissions and contract fulfilment costs, are initially recognized on the consolidated statements of financial position as contract costs. These costs are subsequently amortized on a systematic basis that is consistent with the period and pattern of transfer to the customer of the related products or services. Costs that do not qualify as costs of obtaining/fulfilling contract with customers are expensed as incurred or in accordance with other relevant standards.
At the end of each reporting year, the Group evaluates whether there is an indication that capitalized contract costs may be impaired. An impairment exists when the carrying amount of the contract costs exceeds the amount expected to be received in exchange for goods and services. When impairment exists, an impairment loss is recognized in consolidated statements of profit or loss and other comprehensive income.
Revenue from lessor transactions
Revenue from lessor transactions comprises of revenue from telecommunication tower operating leases and other rental. Rental income is recognized on a straight-line basis over the lease term and is included in revenue in the statement of profit or loss due to its operating nature.
Expenses
Expenses are recognized as they are incurred.
n. 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.
ii. 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.
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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.
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 owned by defined benefit pension plan and post-retirement health care benefits plan as well as qualifying insurance policy. The assets are measured at fair value as of reporting dates. The fair value of qualifying insurance policy is deemed to be the present value of the related obligations (subject to any reduction required if the amounts receivable under the insurance policies are not recoverable in full).
Remeasurement, comprising of actuarial gains and losses, the effect of the asset ceiling (excluding amounts included in net interest on the net defined benefit liability (asset)) and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability (asset)) 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 reclassified to profit or loss in subsequent periods.
Past service costs are recognized immediately in profit or loss on the earlier of:
(a) | the date of plan amendment or curtailment; and |
(b) | the date that the Group recognized restructuring-related costs. |
Net interest is calculated by applying the discount rate to the net defined benefit liabilities or assets.
Gains or losses on curtailment are recognized when there is a commitment to make a material reduction in the number of employees covered by a plan or when there is an amendment of defined benefit plan terms such as that a material element of future services to be provided by current employees will no longer qualify for benefits, or will qualify only for reduced benefits.
Gains or losses on settlement are recognized when there is a transaction that eliminates all further legal or constructive obligation for part or all of the benefits provided under a defined benefit plan (other than the payment of benefit in accordance with the program and included in the actuarial assumptions).
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.
In 2021, the IFRS Interpretations Committee (Committee) finalized an agenda decision regarding attribution of benefits to periods of service in accordance with IAS 19 Employee Benefits. The Group has adopted an agenda decision and accordingly changed its accounting policy regarding attribution of benefits to periods of service previously applied.
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In prior years, the Group attributed benefits under the defined benefit plan’s benefit formula to periods of service from the date when employees provide their services until their retirement age. The Group changed the policy for attributing benefits under the plan to the date when employee service first leads to benefits under the plan until the date when further employee service will lead to no material amount of further benefits under the plan.
o. Taxes
Income tax
Current and deferred income taxes are recognized as income or expense and included in the consolidated statements of profit or loss and other comprehensive income, except to the extent that the income tax arises from a transaction or event which is recognized directly in equity, in which case, the income tax is recognized directly in equity.
Current income tax assets and liabilities are measured at the amounts expected to be recovered or paid by using the tax rates and tax laws that have been enacted or substantively enacted at each reporting date. Management periodically evaluates positions taken in Annual Tax Returns ("Surat Pemberitahuan Tahunan"/"SPT Tahunan") 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.
Tax assessments
Amendment to taxation obligation is recorded when an assessment letter ("Surat Ketetapan Pajak" or "SKP") is received or, if appealed against, when the results of the appeal have been determined. The additional taxes and penalty imposed through SKP are recognized as revenue or expense in the current year profit or loss, unless objection/appeal is taken. The additional taxes and penalty imposed through SKP are deferred as long as they meet the asset recognition criteria.
Deferred tax
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 assets is reviewed at each reporting date and reduced if it is no longer probable that sufficient taxable profit will be available to compensate part or all of the benefits of deferred tax assets. Unrecognized deferred tax assets are re-assessed at each reporting date and recognized if it is probable that future taxable profits will be available for recovery. Tax deductions arising from the reversal of deferred tax assets are excluded from estimates of future taxable income.
Deferred tax transactions which are recognized outside profit or loss. Therefore, deferred taxes on these transactions are recognized either in other comprehensive income or recognized directly in equity.
Deferred tax assets and liabilities are offset in the consolidated statements of financial position, if and only if it has a legally enforceable right to set off current tax assets and liabilities and the deferred tax assets and liabilities relate to income taxes levied by the same Tax Authority on either the same taxable entity or different taxable entities which intend either to settle current tax liabilities and assets on a net
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basis, or to realize the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled.
Value added tax ("VAT")
Revenues, expenses and assets are recognized net of the VAT amount except:
i. | VAT arising from the purchase of assets or services that cannot be credited by the Tax Office, which VAT is recognized as part of the acquisition cost of the asset or as part of the applied expenses; and |
ii. | Receivables and payables are presented including the amount of VAT. |
Uncertainty over income tax treatments
IFRIC 23: Uncertainty Over Income Tax Treatments stated that the recognition and measurement of tax assets and liabilities that contain uncertainty over income tax are determined by considering whether to be treated separately or together, the assumptions used in the examination of tax treatments by the Tax Authorities, consideration the probability that the Tax Authorities will accept uncertain tax treatment and re-consideration or estimation if there is a change in facts and circumstances.
If the acceptance of the tax treatment by the Tax Authorities is probable, the measurement is in line with income tax fillings. If the acceptance of the tax treatment by the Tax Authorities is not probable, the Group measures its tax balances using the method that provides the better prediction of resolution (i.e. most likely amount or expected value).
Final tax
Indonesian tax regulations impose final tax on several types of transactions based on the gross value of the transaction. Therefore, final tax which is charged based on such transaction remains subject to tax even though the taxpayer incurred a loss on the transaction.
Final tax on construction services and leases are presented as part of “other income-net”.
p. Financial instruments
The Group classifies financial instruments into financial assets and financial liabilities. A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
i. Financial assets
Initial recognition and measurement
Financial assets are classified, at initial recognition, and subsequently measured at amortized cost, fair value through OCI (“FVTOCI”), and fair value through profit or loss (“FVTPL”).
The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow characteristics and the Group’s business model for managing them. With the exception of trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient, the Group initially measures a financial asset at its fair value plus, in the case of a financial asset not at FVTPL, transaction costs. Trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient are measured at the transaction price determined under IFRS 9 and IFRS 15.
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In order for a financial asset to be classified and measured at amortized cost or FVTOCI, it needs to give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding. This assessment is referred to as the solely payments of principal and interest test and is performed at an instrument level.
The Group’s business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both.
Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the marketplace (regular way trades) are recognized on the trade date, i.e., the date that the Group commits to sell the asset.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in four categories:
(a) | Financial assets at amortized cost (debt instruments) |
The Group measures financial assets at amortized cost if both of the following conditions are met:
| ● | The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows; and |
| ● | The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. |
Financial assets at amortized cost are subsequently measured using the effective interest rate (“EIR”) method and are subject to impairment. Gains and losses are recognized in profit or loss when the asset is derecognized, modified or impaired. The Group’s financial assets at amortized cost consist of cash and cash equivalents, trade and other receivables, other current financial assets, and other non-current assets.
(b) | Financial assets at FVTOCI with recycling of cumulative gains and losses (debt instruments) |
The Group measures debt instruments at FVTOCI if both of the following conditions are met:
| ● | The financial asset is held within a business model with the objective of both holding to collect contractual cash flows and selling; and |
| ● | The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. |
For debt instruments at FVTOCI, interest income, foreign exchange revaluation, and impairment losses or reversals are recognized in the statement of profit or loss and computed in the same manner as for financial assets measured at amortized cost. The remaining fair value changes are recognized in OCI. Upon derecognition, the cumulative fair value change recognized in OCI is recycled to profit or loss.
The Group has no debt instruments classified at FVTOCI with recycling of cumulative gains and losses as of December 31, 2022 and 2023.
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(c) | Financial assets designated at FVTOCI with no recycling of cumulative gains and losses upon derecognition (equity instruments) |
Upon initial recognition, the Group can elect to classify irrevocably its equity investments as equity instruments designated at FVTOCI when they meet the definition of equity under IAS 32, Financial Instruments: Presentation and are not held for trading. The classification is determined on an instrument-by-instrument basis. Gains and losses on these financial assets are never recycled to consolidated statement of profit or loss and other comprehensive income. Dividends are recognized as other income in the statement of profit or loss when the right of payment has been established, except when the Group benefits from such proceeds as a recovery of part of the cost of the financial asset, in which case, such gains are recorded in OCI. Equity instruments designated at FVTOCI are not subject to impairment assessment. The Group’s financial assets at this category consists of long-term investments in financial instruments.
(d) | Financial assets at FVTPL |
Financial assets at FVTPL include financial assets held for trading, financial assets designated upon initial recognition at FVTPL, or financial assets mandatorily required to be measured at fair value. Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. Derivatives, including separated embedded derivatives, are also classified as held for trading unless they are designated as effective hedging instruments. Financial assets with cash flows that are not solely payments of principal and interest are classified and measured at FVTPL, irrespective of the business model. Notwithstanding the criteria for debt instruments to be classified at amortized cost or at FVTOCI, as described above, debt instruments may be designated at FVTPL on initial recognition if doing so eliminates, or significantly reduces, an accounting mismatch.
Financial assets at FVTPL are carried in the consolidated statement of financial position at fair value with net changes in fair value recognized in the consolidated statement of profit or loss and other comprehensive income. The Group’s financial assets at FVTPL consists of other long-term investments in financial instruments and other current financial assets.
Expected credit losses (“ECL”)
The Group recognizes an allowance for ECL for all debt instruments not held at FVTPL. ECL are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.
ECL are recognized in
For trade receivables and contract assets, the Group applies a simplified approach in calculating ECL. Therefore, the Group does not track changes in credit risk, but instead recognizes a loss allowance based on lifetime ECL at each reporting date. The Group has established an allowance for expected credit loss methodology that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment.
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The Group considers a financial asset in default when contractual payments are
ii. Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables or as derivatives designated as hedging instruments in an effective hedge, as appropriate.
All financial liabilities are recognized initially at fair value and, in the case of loan and borrowings and payables, net of directly attributable transaction costs.
The Group classifies its financial liabilities as: (i) financial liabilities at FVTPL or (ii) financial liabilities measured at amortized costs.
The Group’s financial liabilities include trade and other payables, accrued expenses, customer deposits, Interest-bearing loans, and lease liabilities. Interest-bearing loans consist of short-term bank loans, two-step loans, bonds and medium-term notes, long-term bank loans, and other borrowings.
Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
(a) | Financial liabilities at FVTPL |
Financial liabilities at FVTPL include financial liabilities held for trading and financial liabilities designated upon initial recognition as at FVTPL. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the Group that are not designated as hedging instruments in hedge relationships as defined by IFRS 9. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Gains or losses on liabilities held for trading are recognized in the statement of profit or loss.
Financial liabilities designated upon initial recognition at FVTPL are designated at the initial date of recognition, and only if the criteria in IFRS 9 are satisfied. The Group has not designated any financial liability as at FVTPL.
(b) | Financial liabilities measured at amortized cost |
This is the category most relevant to the Group. After initial recognition, interest-bearing loans and other borrowings are subsequently measured at amortized cost using the EIR method. Gains and losses are recognized in profit or loss when the liabilities are derecognized as well as through the EIR amortization process. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included as finance costs in the statement of profit or loss. This
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category generally applies to interest-bearing loans and other borrowings. For more information, refer to Note 20.
iii. Offsetting financial instruments
Financial assets and liabilities are offset and the net amount is reported in the consolidated statements of financial position when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle them on a net basis, or realize the assets and settle the liabilities simultaneously. The right of offset 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. |
iv. Derecognition of financial instruments
The Group derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire, or when the Group transfers substantially all the risks and rewards of ownership of the financial asset.
The Group derecognizes a financial liability when the obligation specified in the contract is discharged or cancelled or has expired.
q. Treasury stock
Reacquired Company’s shares of stock are accounted for at their reacquisition cost and classified as “Treasury Stock” and presented as a deduction in equity. The cost of treasury stock sold/transferred is accounted for using the weighted average method. The portion of treasury stock transferred for employee stock ownership program is accounted for at its fair value at grant date. Any difference between the carrying amount and consideration from future re-sale of treasury stocks, is recognized as part of additional paid-in-capital in the equity.
r. 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 is recognized as a liability based on the Board of Directors’ decision supported by the approval from the Board of Commissioners.
s. 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 the basic earnings per share by
The Company does not have potentially dilutive financial instruments.
t. Segment information
The Group’s segment information is presented based upon identified operating segments. An operating segment is a component of an entity:
i. | 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); |
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ii. | whose operating results are regularly reviewed by the Group’s Chief Operating Decision Maker ("CODM") i.e., the Directors, to make decisions about resources to be allocated to the segment and assess its performance; and |
iii. | for which discrete financial information is available. |
u. Provisions
Provisions are recognized when the Group has present obligations (legal or constructive) arising from past events and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligations and the amount can be measured reliably.
Provisions for onerous contracts are recognized when the contract becomes onerous for the lower of the cost of fulfilling the contract and any compensation or penalties arising from failure to fulfill the contract.
v. Impairment of non-financial assets
At the end of each reporting period, the Group assesses whether there is an indication that an non-financial assets may be impaired. These assets include property and equipment, current assets, and other non-current assets, including intangible assets. 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 (“VIU”). 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.
In determining fair value less costs to sell, recent market transaction prices 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 multiple valuations or other available fair value indicators.
Impairment losses of continuing operations are recognized in the consolidated statements of profit or loss and other comprehensive income.
At the end of each reporting period, the Group assesses 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 consolidated statement of profit or loss and other comprehensive income.
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
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less than its carrying amount, an impairment loss is recognized. Impairment loss relating to goodwill cannot be reversed in future periods.
w. Current and non-current classifications
The Group presents assets and liabilities in the statement of financial position based on current/non- current classification. An asset is presented as current when it is:
i. | expected to be realized or intended to be sold or consumed in the normal operating cycle; |
ii. | held primarily for the purpose of trading; |
iii. | expected to be realized within twelve months after the reporting period; or |
iv. | cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period. |
Asset which do not meet above criteria are classified as non-current assets.
A liability is presented as current when:
i. it is expected to be settled in the normal operating cycle;
ii. it is held primarily for the purpose of trading;
iii. it is due to be settled within twelve months after reporting period;
iv. there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
The terms of liability that could, at the option of counterparty, result in its settlement by the issue of equity instruments do not affect its classification.
Liabilities which do not meet above criteria are classified as long-term liabilities.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
x. Significant accounting judgements, estimates and assumptions
The preparation of the Group's consolidated financial statements requires management to make judgements, estimates and assumptions that affect the reporting amounts of revenue, expenses, assets and liabilities, and the accompanying disclosures, and disclosures of contingent liabilities, at the end of the reporting period.
Uncertainty about these assumptions and estimates can produce results that require a material adjustment to the carrying amounts of assets and liabilities affected in the coming periods.
i. Judgements
The following judgements were made by management in applying the Group's accounting policies that have the most significant influence on the amounts recognized in the consolidated financial statements:
Income taxes
Uncertainties exist with respect to the interpretation of complex tax regulations, changes in tax laws, and the amount and timing of future taxable income could necessitate future adjustments to tax income and expense already recorded.
Judgement is also involved in determining the provision for corporate income tax. There are certain transactions and computation for which the ultimate tax determination is uncertain during the ordinary course of business.
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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.
ii. Estimates and assumptions
Estimates and assumption 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 makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions at the reporting date 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.
(a) 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 and return on investment (“ROI”). Any changes in these assumptions will impact the carrying amount of the 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 Government bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating the terms of the related retirement benefit obligations.
If there is an improvement in the ratings of such Government bonds or a decrease in interest rates as a result of improving economic conditions, there could be a material impact on the discount rate used in determining the post-employment benefit obligations.
Other key assumptions for retirement benefit obligations are based in part on current market conditions. Additional information is disclosed in Notes 29 and 30.
(b) Useful lives of property and equipment
The Group estimates the useful lives of its 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 reviews its estimates of useful lives at least each financial year-end and such estimates are updated if expectations differ from previous estimates due to changes in expectation of physical wear and tear, technical or commercial obsolescence, and legal or other limitations on the continuing 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.
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In 2021, the Company accelerated the useful lives of Multi-Service Access Node (“MSAN”) assets until 2022. In 2022, the Group changed its estimated useful lives of towers as disclosed in Note 12. In 2023, there is no change of estimated useful lives.
(c) Determining the lease term of contracts with renewal and termination options - Group as lessee
The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised.
The Group has several lease contracts that include extension and termination options. The Group applies judgement in evaluating whether it is reasonably certain whether or not to exercise the option to renew or terminate the lease. That is, it considers all relevant factors that create an economic incentive for it to exercise either the renewal or termination. After the commencement date, the Group reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise or not to exercise the option to renew or to terminate.
(d) Allowance for expected credit losses for financial assets
For trade receivables and contract assets, the Group applies a simplified approach in calculating ECLs. Therefore, the Group does not track changes in credit risk, but instead recognizes a loss allowance based on lifetime ECLs at each reporting date. The Group has established an allowance for expected credit losses methodology that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors, and the economic environment.
For term deposits and debt instruments at FVTOCI, the Group applies the low credit risk simplification. At every reporting date, the Group evaluates whether the deposits or debt instrument are considered to have low credit risk using all reasonable and supportable information that is available without undue cost or effort. In making that evaluation, the Group reassesses the internal credit rating of the debt instrument. In addition, the Group considers that there has been a significant increase in credit risk when contractual payments are more than
The Group assesses whether there is objective evidence that other receivables or other financial assets have been impaired at the end of each reporting period. Allowance for expected credit losses of receivables is calculated based on a review of the current status of existing receivables, historical collection experience and adjusted forward-looking information. Such allowances are adjusted periodically to reflect the actual and anticipated experience.
The Group has reassessed the model used to calculate ECLs based on the latest reasonable and supportable data to better reflect the current change in circumstances. Methods and approaches will continue to be monitored and updated if additional reasonable and supportable data and information are available, including forward-looking information and other input in the future.
(e) Revenue
| (i) | Critical judgements in determining the performance obligation, timing of revenue recognition and revenue classification |
The Group provides information technology services that are bespoke in nature. Bespoke products consist of various goods and/or services bundled together in order to provide integrated solution services to customers. In addition to the bespoke service, the Group
F-36
also provides multiple standard products as bundling product in contract with customer. Significant judgement is required in determining the number and nature of performance obligations promised to customers in those contracts. The number and nature of performance obligations will determine the timing of revenue recognition for such contract.
The Group reviews the determination of performance obligations on a contract-by-contract basis. When a contract consisting of several goods and/or service is assessed to have one performance obligation, the Group applies a single method of measuring progress for the performance obligation based on the measurement method that best depicts the economics of the contract, which in most cases is over time.
The Group also presents the revenue classification using consistent approach. When a contract consisting of several goods and/or service is assessed to have one performance obligation, the Group presents that performance obligations in one financial statement line items which best represent the main service of the Group, which in most cases is the internet, data communication and information technology services.
(ii) | Critical judgements in determining the stand-alone selling price |
The Group provides wide array of products related to telecommunication and technology. To determine the stand-alone selling price for goods and/or services that do not have any readily available observable price, the Group uses the expected cost-plus margin approach. The Group determines the appropriate margin based on historical achievement.
(f) Test for impairment of non-current assets and goodwill
The application of the acquisition method in a business combination requires the use of accounting estimates in allocating the purchase price to the fair market value of the assets and liabilities acquired, including intangible assets. Certain business acquisitions by the Group resulted goodwill, which is not amortized but is tested for impairment annually and every indication of impairment exists.
The calculation of future cash flows in determining the fair value of property and equipment and other non-current assets of the acquired entity at the acquisition date involves significant estimation. Although management believes that the assumptions used are appropriate, significant changes to those assumptions can materially affect the evaluation of recoverable amounts and may result in impairment according to IAS 36: Impairment of Assets.
(g) Fair value measurement of financial instruments
When the fair values of financial assets and financial liabilities recorded in the statement of financial position cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the discounted cash flow (“DCF”) model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. Judgements include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions relating to these factors could affect the reported fair value of financial instruments.
(h) Acquisition
The Group evaluates each acquisition transaction to determine whether it will be treated as an asset acquisition or business combination. For transactions that are treated as an asset acquisition, the purchase price is allocated to the assets obtained, without the recognition of goodwill. For acquisitions that meet the business combination definition, the Group applies the accounting for business acquisition method for assets acquired and liabilities assumed which
F-37
are recorded at fair value at the acquisition date, and the results of operations are included with the Group's results from the date of each acquisition.
Any excess from the purchase price paid for the amount recognized for assets acquired and liabilities incurred is recorded as goodwill. The Group continues to evaluate acquisitions that are counted as a business combination for a period not exceeding one year after the applicable acquisition date of each transaction to determine whether additional adjustments are needed to allocate the purchase price paid for the assets acquired and liabilities assumed. The fair value of assets acquired and liabilities incurred are usually determined using either an estimated replacement cost or a discounted cash flow valuation method. When determining the fair value of tangible assets acquired, the Group estimates the cost of replacing assets with new assets by considering factors such as the age, condition, and economic useful lives of the assets. When determining the fair value of the intangible assets obtained, the Group estimates the applicable discount rate and the time and amount of future cash flows, including the rates and terms for the extension and reduction.
3. TRANSLATION OF INDONESIAN RUPIAH INTO UNITED STATES DOLLAR
The consolidated financial statements are stated in Indonesian Rupiah. The translation of the Indonesian Rupiah amounts into U.S. Dollar amounts are included solely for the convenience of the readers and has been made using the average of the market buy and sell rates of Rp
F-38
4. CASH AND CASH EQUIVALENTS
The breakdown of cash and cash equivalents is as follows:
| 2022 |
| 2023 | |||||||
Balance | Balance | |||||||||
Currency | Rupiah | Currency | Rupiah | |||||||
| Currency |
| (in million) |
| equivalent |
| (in million) |
| equivalent | |
Cash on hand |
| Rp |
| — |
| |
| — |
| |
Cash in bank |
|
|
|
|
|
|
|
|
|
|
Related parties |
|
|
|
|
|
|
|
| ||
PT Bank Mandiri (Persero) Tbk (“Bank Mandiri”) |
| Rp |
| — | |
| — | | ||
| US$ |
| | |
| | | |||
| EUR |
| | |
| | | |||
| JPY |
| | |
| | | |||
| HKD |
| | |
| | | |||
| AU$ |
| | |
| | | |||
PT Bank Negara Indonesia (Persero) Tbk (“BNI”) | Rp | — | | — | | |||||
US$ | | | | | ||||||
SGD | | | | | ||||||
EUR | | | | | ||||||
PT Bank Tabungan Negara (Persero) Tbk ("BTN") | Rp | — | | — | | |||||
PT Bank Rakyat Indonesia (Persero) Tbk ("BRI") |
| Rp | — | | — | | ||||
| US$ | | | | | |||||
TWD | — | — | | | ||||||
Bank Pembangunan Daerah ("BPD") | Rp | — | | — | | |||||
Others (each below Rp100 billion) |
| Rp |
| — | |
| — | | ||
US$ | 0 | 0 | 0 | 0 | ||||||
Sub-total |
|
|
| |
|
|
| | ||
Third parties |
|
|
|
|
|
|
|
|
|
|
The Hongkong and Shanghai Banking Corporation Ltd. ("HSBC Hongkong") | US$ | | | | | |||||
| HKD |
| |
| |
| |
| | |
Standard Chartered Bank (“SCB”) |
| US$ |
| |
| |
| |
| |
| SGD |
| |
| |
| |
| | |
PT Bank CIMB Niaga Tbk (”Bank CIMB Niaga”) | Rp | — | | — | | |||||
US$ | | | | | ||||||
PT Bank Central Asia Tbk (“BCA”) | Rp | — | | — | | |||||
US$ | | | | | ||||||
DBS Bank (Hong Kong) Ltd. ("DBS Hong Kong") | US$ | | | | | |||||
HKD | | | | | ||||||
Citibank, N.A. (“Citibank”) | Rp | — | | — | | |||||
US$ | | | | | ||||||
EUR | — | — | | | ||||||
Others (each below Rp100 billion) | Rp | — | | — | | |||||
US$ | | | | | ||||||
| TWD |
| | |
| | | |||
MYR | | | | | ||||||
| AU$ |
| | |
| | | |||
| MMK |
| | |
| | | |||
SGD | | | | | ||||||
| EUR | 0 | 0 | — | — | |||||
Sub-total |
| | | |||||||
Total of cash in bank |
|
| |
| | |||||
|
| |||||||||
Time deposit |
|
|
| |||||||
Related parties | ||||||||||
BRI | Rp | — | | — | | |||||
US$ | | | | | ||||||
BNI | Rp | — | | — | | |||||
US$ | | | | | ||||||
BPD | Rp | — | | — | | |||||
PT Bank Pembangunan Daerah Jawa Barat dan Banten Tbk | Rp |
| — | | — | | ||||
PT Bank Syariah Indonesia Tbk. (“BSI”) | Rp |
| — | | — | | ||||
BTN | Rp | — | | — | | |||||
Mandiri |
| Rp |
| — | | — | | |||
US$ | | | | | ||||||
Sub-total |
|
| |
| | |||||
|
|
| ||||||||
Time deposits (continued) | ||||||||||
Third parties |
|
|
| |||||||
PT Bank Mega Tbk (“Bank Mega”) |
| Rp |
| — |
| |
| — |
| |
| US$ |
| |
| |
| |
| | |
PT Bank Tabungan Pensiunan Nasional Syariah Tbk ("BTPN Syariah") | Rp | — | — | — | | |||||
Bank CIMB Niaga | Rp | — | | — | | |||||
US$ | | | | | ||||||
PT Bank Maybank Indonesia Tbk (“Maybank”) |
| Rp |
| — |
| |
| — |
| |
US$ | | | | | ||||||
MYR | | | — | — | ||||||
PT Bank Danamon Indonesia Tbk (“Bank Danamon”) | Rp | — | | — | | |||||
US$ | | | | | ||||||
Others (each below Rp100 billion) |
| Rp | — | | — | | ||||
US$ | — | — | | | ||||||
MYR | — | — | | | ||||||
Sub-total |
| | | |||||||
Total of time deposits |
| | | |||||||
Allowance for expected credit losses | ( | ( | ||||||||
Total |
| | | |||||||
F-39
Interest rates per annum on time deposits are as follows:
| 2022 |
| 2023 | |
Rupiah |
| |||
Foreign currencies |
|
The Group placed the majority of its cash and cash equivalents in state-owned banks (related party) because they have the most extensive branch networks in Indonesia and are considered to be financially sound banks.
5. OTHER CURRENT FINANCIAL ASSETS
The breakdown of other current financial assets is as follows:
2022 | 2023 | |||||||||
Balance | Balance | |||||||||
Foreign currency | Foreign currency | |||||||||
| Currency |
| (in millions) |
| Rupiah equivalent |
| (in millions) |
| Rupiah equivalent | |
Time deposits | ||||||||||
Related parties | ||||||||||
BRI | Rp | — | | — | | |||||
BNI | Rp | — | | — | | |||||
Bank Mandiri | Rp | — | | — | | |||||
US$ | | | | | ||||||
BSI | Rp | — | | — | | |||||
Others (each below Rp100 billion) | Rp | — | — | — | | |||||
Third parties United Overseas Bank Limited Singapore (“UOB Singapore”) | US$ | | | | | |||||
Standard Chartered Bank (Singapore) Limited (“SCB Singapore”) | US$ | | | | | |||||
Others (each below Rp100 billion) | Rp | — | | — | | |||||
US$ | | | | | ||||||
Total time deposits | | | ||||||||
Escrow accounts | Rp | — | | — | | |||||
US$ | | | | | ||||||
Total escrow accounts | | | ||||||||
Mutual funds | ||||||||||
Related parties | ||||||||||
Others (each below Rp100 billion) | Rp | — | | — | | |||||
Third parties | ||||||||||
PT Henan Putihrai Asset Management ("HPAM") | Rp | — | | — | | |||||
Total mutual funds | | | ||||||||
Others (each below Rp100 billion) | Rp | — | | — | | |||||
US$ | | | — | — | ||||||
MYR | | | | | ||||||
Total others | | | ||||||||
Allowance for expected credit losses | ( | ( | ||||||||
Total | | | ||||||||
F-40
The time deposits have maturities of more than three months but not more than one year, with interest rates as follows:
| 2022 |
| 2023 | |
Rupiah |
|
| ||
Foreign currencies |
|
6. TRADE AND OTHER RECEIVABLES
The breakdown of trade and other receivables is as follows:
| 2022 |
| 2023 | |
Trade receivables |
| |
| |
Allowance for expected credit losses |
| ( |
| ( |
Net |
| |
| |
Other receivables |
| |
| |
Allowance for expected credit losses |
| ( |
| ( |
Net |
| |
| |
Total trade and other receivables |
| |
| |
Trade receivables arise from services provided to both retail and non-retail customers, with details as follows:
a. By debtor
(i) Related parties
| 2022 |
| 2023 | |
State-owned enterprises |
| |
| |
Government agencies |
| |
| |
PT Indonusa Telemedia ("Indonusa") |
| |
| |
Indosat |
| |
| |
Others (each below Rp100 billion) |
| |
| |
Total |
| |
| |
Allowance for expected credit losses |
| ( |
| ( |
Net |
| |
| |
(ii) Third parties
| 2022 |
| 2023 | |
Individual and business subscribers |
| |
| |
Overseas international carriers |
| |
| |
Total |
| |
| |
Allowance for expected credit losses |
| ( |
| ( |
Net |
| |
| |
F-41
b. By age
2022 | 2023 | ||||||||||||
|
| Allowance for |
| Expected |
|
| Allowance for |
| Expected | ||||
expected credit | credit | expected credit | credit | ||||||||||
Gross | losses | loss rate | Gross | losses | loss rate | ||||||||
Not past due |
| | | | % | | | | % | ||||
Past due up to 3 months |
| | | | % | | | | % | ||||
Past due more than 3 to 6 months |
| | | | % | | | | % | ||||
Past due more than 6 months |
| | | | % | | | | % | ||||
Total |
| |
| |
| |
| |
| ||||
The Group has made allowance for expected credit losses based on the collective assessment of historical impairment rates and individual assessment of its customers’ credit history, adjusted for forward-looking factors specific from the customers and the economic environment. The Group does not apply a distinction between related party and third party receivables in assessing amounts past due. As of December 31, 2022 and 2023, the carrying amounts of trade receivables of the Group considered past due but not impaired amounted to Rp
c. By currency
| 2022 |
| 2023 | |
Rupiah |
| |
| |
U.S. Dollar |
| |
| |
Singapore Dollar | | | ||
Others (each below Rp100 billion) |
| |
| |
Total |
| |
| |
Allowance for expected credit losses |
| ( |
| ( |
Net |
| |
| |
d. Movements in the allowance for expected credit losses
| 2022 |
| 2023 | |
Beginning balance |
| |
| |
Allowance for expected credit losses |
| |
| |
Receivables written-off |
| ( |
| ( |
Ending balance |
| |
| |
The receivables written-off relate to both related parties and third parties trade receivables.
Management believes that the allowance for expected credit losses of trade receivables is adequate to cover losses on uncollectible trade receivables.
As of December 31, 2022 and 2023, certain trade receivables of the subsidiaries amounting to Rp
F-42
7. CONTRACT ASSETS
The breakdown of contract assets is as follows:
| 2022 |
| 2023 | |
Contract assets |
| |
| |
Allowance for expected credit losses |
| ( |
| ( |
Net |
| |
| |
Current portion |
| ( |
| ( |
Non-current portion |
| |
| |
Management believes that the allowance for expected credit losses is adequate to cover losses on uncollectible contract assets.
Refer to Note 31 for details of related party transactions.
8. INVENTORIES
Inventories, all recognized at net realizable value, consist of:
| 2022 |
| 2023 | |
SIM cards and prepaid vouchers | |
| | |
Components | |
| | |
Others (each below Rp100 billion) | |
| | |
Total | |
| | |
Provision for obsolescence | ( | ( | ||
Net | |
| |
Management believes the provision is adequate to cover losses from the decline in inventory value due to obsolescence.
The inventories recognized as expenses included in operations, maintenance, and telecommunication service expenses in 2021, 2022 and 2023 amounted to Rp
There were
As of December 31, 2022 and 2023, modules (part of property and equipment) and components held by the Group with book value amounting to Rp
Management believes the insurance coverage is adequate to cover potential losses of inventories arising from the insured risks.
F-43
9. OTHER CURRENT ASSETS
The breakdown of other current assets is as follows:
| 2022 |
| 2023 | |
Prepaid frequency license fees - current portion (Note 33c.i) |
| |
| |
Advances |
| |
| |
Prepaid salaries |
| |
| |
Prepaid rental |
| |
| |
Others (each below Rp100 billion) |
| |
| |
Total |
| |
| |
10. CONTRACT COSTS
Movements of contract costs for the years ended December 31, 2022 and 2023 are as follows:
2022 | ||||||
| Cost to obtain |
| Cost to fulfill |
| Total | |
At January 1, 2022 |
| |
| |
| |
Addition current year |
| |
| |
| |
Amortization during the year |
| ( |
| — |
| ( |
Expense during the year | — | ( | ( | |||
At December 31, 2022 |
| |
| |
| |
Current |
| ( |
| ( |
| ( |
Non-current |
| |
| |
| |
2023 | ||||||
| Cost to obtain |
| Cost to fulfill |
| Total | |
At January 1, 2023 |
| |
| |
| |
Addition current year |
| |
| |
| |
Amortization during the year |
| ( |
| — |
| ( |
Expense during the year | — | ( | ( | |||
Impairment | — | ( | ( | |||
At December 31, 2023 |
| |
| |
| |
Current |
| ( |
| ( |
| ( |
Non-current |
| |
| |
| |
F-44
11. LONG-TERM INVESTMENTS
The breakdown of long-term investments are as follows:
| 2022 |
| 2023 | |
Financial instruments | ||||
At fair value through profit or loss: |
|
| ||
Equity |
| |
| |
Convertible bonds |
| |
| |
At fair value through other comprehensive income: | ||||
Equity | | | ||
| | |||
Associates | ||||
PT Jalin Pembayaran Nusantara ("Jalin") | | | ||
Others (each below Rp100 billion) | | | ||
| | |||
Total long-term investments |
| |
| |
Investments in equity at fair value through profit or loss are long-term investments in the form of shares in various start-up companies engaged in information and technology. The Group does not have significant influence in these start-up companies.
Investments in equity at fair value through profit or loss include:
(i) | Telkomsel's investment in PT GoTo Gojek Tokopedia Tbk. (“GOTO”). As of December 31, 2023, Telkomsel assessed the fair value of the investment in GOTO was Rp |
(ii) | Investments by MDI in several start-up entities engaged in the information and technology sector. The additional investments during the period by MDI amounted to Rp |
Investments in convertible bonds at fair value through profit or loss represent long-term investments owned by Telkomsel and MDI in the form of convertible bonds in various start-up companies engaged in information and technology, which will be immediately converted into shares when they mature.
The unrecognized share in losses in other investment cumulatively as of December 31, 2021, 2022 and 2023 was amounting to Rp
F-45
12. PROPERTY AND EQUIPMENT
The details of property and equipment are as follows:
December 31, | Reclassifications/ | December 31, | ||||||||
| 2021 |
| Additions |
| Deductions |
| Translations |
| 2022 | |
At cost: | ||||||||||
Directly acquired assets | ||||||||||
Buildings | | | ( | | | |||||
Leasehold improvements | | | ( | | | |||||
Switching equipment | | | ( | | | |||||
Telegraph, telex, and data communication | ||||||||||
equipment | | — | — | — | | |||||
Transmission installation and equipment | | | ( | | | |||||
Satellite, earth station, and equipment | | | ( | | | |||||
Cable network | | | ( | ( | | |||||
Power supply | | | ( | | | |||||
Data processing equipment | | | ( | | | |||||
Other telecommunication peripherals | | | — | | | |||||
Office equipment | | | ( | | | |||||
Vehicles | | | ( | | | |||||
Other equipment | | | ( | | | |||||
Property under construction | | | — | ( | | |||||
Total | |
| |
| ( |
| ( |
| | |
Accumulated depreciation: | ||||||||||
Directly acquired assets | ||||||||||
Buildings |
| | | ( | | | ||||
Leasehold improvements |
| | | ( | — | | ||||
Switching equipment |
| | | ( | | | ||||
Telegraph, telex, and data communication |
| |||||||||
equipment |
| | — | — | — | | ||||
Transmission installation and equipment |
| | | ( | | | ||||
Satellite, earth station, and equipment |
| | | ( | | | ||||
Cable network |
| | | ( | ( | | ||||
Power supply |
| | | ( | | | ||||
Data processing equipment |
| | | ( | ( | | ||||
Other telecommunication peripherals |
| | | — | | | ||||
Office equipment |
| | | ( | | | ||||
Vehicles |
| | | ( | | | ||||
Other equipment |
| | | ( | | | ||||
Total |
| | | ( |
| ( |
| | ||
Net book value |
| | |
F-46
| December 31, |
|
|
| Reclassifications/ |
| December 31, | |||
2022 | Additions | Deductions | Translations | 2023 | ||||||
At cost: | ||||||||||
Directly acquired assets | ||||||||||
Buildings |
| | | ( | | | ||||
Leasehold improvements |
| | | ( | | | ||||
Switching equipment |
| | | ( | ( | | ||||
Telegraph, telex, and data communication equipment |
| | — | — | — | | ||||
Transmission installation and equipment |
| | | ( | | | ||||
Satellite, earth station, and equipment |
| | | — | — | | ||||
Cable network |
| | | ( | ( | | ||||
Power supply |
| | | ( | | | ||||
Data processing equipment |
| | | ( | | | ||||
Other telecommunication peripherals |
| | | — | | | ||||
Office equipment |
| | | ( | ( | | ||||
Vehicles |
| | | ( | ( | | ||||
Other equipment |
| | | — | | | ||||
Property under construction |
| | | — | ( | | ||||
Total |
| |
| |
| ( |
| ( |
| |
Accumulated depreciation: | ||||||||||
Directly acquired assets | ||||||||||
Buildings |
| | | ( | ( | | ||||
Leasehold improvements |
| | | ( | ( | | ||||
Switching equipment |
| | | ( | ( | | ||||
Telegraph, telex, and data communication equipment |
| | — | — | — | | ||||
Transmission installation and equipment |
| | | ( | ( | | ||||
Satellite, earth station, and equipment |
| | | — | ( | | ||||
Cable network |
| | | ( | ( | | ||||
Power supply |
| | | ( | ( | | ||||
Data processing equipment |
| | | ( | ( | | ||||
Other telecommunication peripherals |
| | | — | ( | | ||||
Office equipment |
| | | ( | ( | | ||||
Vehicles |
| | | ( | ( | | ||||
Other equipment |
| | | — | — | | ||||
Total |
| | | ( |
| ( |
| | ||
Net book value |
| | |
The property and equipment group consists of (1) switching equipment; (2) telegraph, telex, and data communication equipment; (3) transmission installation and equipment; (4) satellite, earth station, and equipment; (5) cable network; (6) power supply; (7) data processing equipment; and (8) other telecommunication peripherals are the main telecommunication infrastructure of the Group.
a. Gain on sale of property and equipment
| 2021 |
| 2022 |
| 2023 | |
Proceeds from sale of property and equipment |
| |
| |
| |
Net book value |
| ( |
| ( |
| ( |
Gain on sale of property and equipment |
| |
| |
| |
F-47
b. Others
| (i) | During 2022 and 2023, the CGUs that independently generate cash inflows are fixed wireline, cellular, and others. Management believes that there is |
| (ii) | Interest capitalized to property under construction amounted to Rp |
| (iii) |
| (iv) | In 2021, 2022, and 2023, the Group obtained proceeds from the insurance claim on lost and damaged property and equipment, with a total value of Rp |
| (v) | In 2022, the estimated useful lives of towers owned by the Group were changed from |
| (vi) | In 2022, the equipment units of Telkomsel with the net carrying amount of Rp |
| (vii) | In 2021, the Company decided to discontinue the use of MSAN assets and accelerate the depreciation of the MSAN assets, which were fully depreciated in 2022. The impact of accelerated depreciation of MSAN assets for the year ended December 31, 2022 amounted to Rp |
| (viii) | As of December 31, 2022 and 2023, the Group’s property and equipment with a net carrying amount of Rp |
| (ix) | As of December 31, 2022 and 2023, the percentage of completion of property under construction was approximately |
| (x) | As of December 31, 2022 and 2023, all assets owned by the Company have been pledged as collateral for bonds (Note 20b) while certain property and equipment of the Company’s |
F-48
| subsidiaries with gross carrying value amounting to Rp |
| (xi) | As of December 31, 2022 and 2023, the cost of fully depreciated property and equipment of the Group that are still used in operations amounted to Rp |
| (xii) | In 2022 and 2023, the total fair values of land rights and buildings of the Group amounted to Rp |
13. LEASES
a. | The Group as a lessee |
The Group leases several assets including land rights, building, transmission installation and equipment, vehicles, and others which used in operations, which generally have lease term between
The carrying amounts of right-of-use assets recognized and the movement during the year are as follows:
|
|
| Transmission |
|
|
| ||||||
installation and | ||||||||||||
Land rights | Buildings | equipment | Vehicles | Others | Total | |||||||
As at January 1, 2022 | | | | | | | ||||||
Additions | | | | | | | ||||||
Deductions and reclassifications | ( | ( | ( | ( | | ( | ||||||
Depreciation expense | ( | ( | ( | ( | ( | ( | ||||||
As at December 31, 2022 | | | | | | | ||||||
Additions | | | | | | | ||||||
Deductions and reclassifications | ( | ( | ( | | | ( | ||||||
Depreciation expense | ( | ( | ( | ( | ( | ( | ||||||
As at December 31, 2023 | | | | | | |
The carrying amounts of the lease liabilities and the movements during the year are as follows:
| 2022 |
| 2023 | |
As at January 1 |
| |
| |
Accretion of interest |
| |
| |
Additions (Note 36a) |
| |
| |
Deductions |
| ( |
| ( |
As at December 31 |
| |
| |
Current |
| ( |
| ( |
Non-current |
| |
| |
F-49
The maturity analysis of lease payments are as follows:
| 2022 |
| 2023 | |
No later than a year |
| |
| |
Later than 1 year and no later than 5 years |
| |
| |
Later than 5 years |
| |
| |
Total lease payments | | | ||
Interest | ( | ( | ||
Net present value of lease payments | | | ||
Current |
| ( |
| ( |
Non-current |
| |
| |
The Group also has certain leases with lease terms of twelve months or less and low-value leases. The Group applies the ‘short-term lease’ and ‘lease of low-value assets’ recognition exemptions for these leases. There are
The following are the amounts recognized in profit or loss:
| 2022 |
| 2023 | |
Depreciation expense of right-of-use assets |
| |
| |
Expense relating to short-term leases |
| |
| |
Interest expense on lease liabilities |
| |
| |
Expense relating to leases of low-value assets |
| |
| |
b. | The Group as a lessor |
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
The minimum amount of future lease payments and receipts for operating lease agreements are as follows:
| 2022 |
| 2023 | |
Less than 1 year |
| |
| |
1-5 years |
| |
| |
More than 5 years |
| |
| |
Total |
| |
| |
14. OTHER NON-CURRENT ASSETS
The breakdown of other non-current assets is as follows:
| 2022 |
| 2023 | |
Prepaid frequency license fees - net of current portion (Note 33c.i) |
| |
| |
Prepaid expenses |
| |
| |
Prepaid taxes - net of current portion (Note 28a) |
| |
| |
Claims for tax refund - net of current portion (Note 28b) | | | ||
Advances |
| |
| |
Security deposits | | | ||
Others (each below Rp100 billion) |
| |
| |
Total |
| |
| |
F-50
15. INTANGIBLE ASSETS
The details of intangible assets are as follows:
|
|
|
| Other intangible |
| |||||
Goodwill | Software | License | assets | Total | ||||||
Gross carrying amount: | ||||||||||
Balance, December 31, 2021 |
| |
| |
| |
| |
| |
Additions |
| — | | | | | ||||
Deductions |
| — | ( | — | ( | ( | ||||
Reclassifications/translations |
| — | ( | | — | ( | ||||
Balance, December 31, 2022 |
| |
| |
| |
| |
| |
Accumulated amortization: | ||||||||||
Balance, December 31, 2021 |
| ( | ( | ( | ( | ( | ||||
Amortization |
| — | ( | ( | ( | ( | ||||
Deductions |
| — | | — | | | ||||
Reclassifications/translations |
| — | ( | ( | — | ( | ||||
Balance, December 31, 2022 |
| ( |
| ( |
| ( |
| ( |
| ( |
Net book value |
| |
| |
| |
| |
| |
|
|
|
| Other intangible |
| |||||
Goodwill | Software | License | assets | Total | ||||||
Gross carrying amount: | ||||||||||
Balance, December 31, 2022 |
| |
| |
| |
| |
| |
Additions |
| — | | | | | ||||
Deductions |
| — | ( | ( | — | ( | ||||
Reclassifications/translations |
| — | ( | ( | ( | ( | ||||
Balance, December 31, 2023 |
| |
| |
| |
| |
| |
Accumulated amortization and impairment losses: | ||||||||||
Balance, December 31, 2022 |
| ( | ( | ( | ( | ( | ||||
Amortization |
| — | ( | ( | ( | ( | ||||
Impairment | ( | — | — | — | ( | |||||
Deductions |
| — | | | — | | ||||
Reclassifications/translations |
| — | | | | | ||||
Balance, December 31, 2023 |
| ( |
| ( |
| ( |
| ( |
| ( |
Net book value |
| |
| |
| |
| |
| |
| (i) | Goodwill resulted from the acquisition by Mitratel, Metranet, Metra, Sigma, TDE, and Telkomsat amounted to Rp |
| (ii) | The remaining amortization periods of software for the year ended December 2021, 2022, and 2023 are from |
| (iii) | As of December 31, 2022 and 2023, the cost of fully amortized intangible assets that are still utilized in operations amounted to Rp |
F-51
16. TRADE AND OTHER PAYABLES
This account consists of the following:
| 2022 |
| 2023 | |
Trade payables |
| |
| |
Other payables |
| |
| |
Total trade and other payables |
| |
| |
The breakdown of trade payables is as follows:
| 2022 |
| 2023 | |
Related parties | ||||
Radio frequency usage charges, concession fees, and Universal Service Obligation (“USO”) charges |
| |
| |
Purchases of equipments, materials, and services |
| |
| |
Payables to other telecommunication providers |
| |
| |
Sub-total |
| |
| |
Third parties | ||||
Purchases of equipments, materials, and services |
| |
| |
Payables to other telecommunication providers |
| |
| |
Sub-total |
| |
| |
Total |
| |
| |
Trade payables by currency are as follows:
| 2022 |
| 2023 | |
Rupiah |
| |
| |
US Dollar |
| |
| |
Others |
| |
| |
Total |
| |
| |
Terms and conditions of the trade and other payables:
a. | The Group's trade payables and other payables are non-interest bearing and normally settled within 1 year term. |
b. | Refer to Note 31c for details on related party transactions. |
c. | Refer to Note 34b.v for the Group's liquidity risk management. |
17. ACCRUED EXPENSES
The breakdown of accrued expenses is as follows:
| 2022 |
| 2023 | |
Operation, maintenance, and telecommunication service |
| |
| |
Salaries and benefits |
| |
| |
General, administrative, and marketing expenses |
| |
| |
Interest and bank charges |
| |
| |
Total |
| |
| |
Refer to Note 31 for details of related party transactions.
F-52
18. CONTRACT LIABILITIES
The breakdown of contract liabilities is as follows:
| a. | Current |
| 2022 |
| 2023 | |
Advances from customers for Mobile | | | ||
Advances from customers for Enterprise | | | ||
Advances from customers for WIB | | | ||
Advances from customers for Consumer | | | ||
Advances from customers for others |
| |
| |
Total |
| |
| |
b. | Non-Current |
| 2022 |
| 2023 | |
Advances from customers for WIB | | | ||
Advances from customers for Consumer | | | ||
Advances from customers for Enterprise | | | ||
Advances from customers for others | — | | ||
Total |
| |
| |
Contract liabilities at the beginning period which were recognized as revenue in 2022 and 2023 amounted to Rp
Refer to Note 31 for details of related party transactions.
19. SHORT-TERM BANK LOANS AND CURRENT MATURITIES OF LONG-TERM LOANS AND OTHER BORROWINGS
This account consists of the following:
| 2022 |
| 2023 | |
Short-term bank loans |
| |
| |
Current maturities of long-term borrowings |
| |
| |
Total |
| |
| |
F-53
a. | Short-term bank loans |
Outstanding | ||||
Lenders | 2022 | 2023 | ||
Related parties |
|
| ||
Bank Mandiri |
| |
| |
BNI |
| |
| |
Sub-total |
| |
| |
Third parties |
|
| ||
PT Bank HSBC Indonesia ("HSBC") | | | ||
MUFG Bank ("MUFG") |
| | | |
UOB Indonesia | — | | ||
PT Bank DBS Indonesia ("DBS") | |
| | |
Others (each below Rp100 billion) |
| |
| |
Sub-total |
| |
| |
Total |
| |
| |
Other significant information relating to short-term bank loans as of December 31, 2023 is as follows:
|
|
| Total |
|
|
|
| |||||||
facility | ||||||||||||||
(in | Interest rate per | |||||||||||||
Borrower | Currency | billions)* | Maturity date | Interest rate | annum | Security** | ||||||||
Mandiri | ||||||||||||||
2020 | Finnet | Rp | | October 31, 2024 | Monthly | 1 month JIBOR + | None | |||||||
2021 - 2022 |
| Nutech, Mitratel |
| Rp |
| | July 26, 2024 - September 27, 2024 | Monthly |
|
| Trade receivables and property and equipment | |||
BNI |
|
|
|
|
|
|
|
|
|
|
|
| ||
2014 - 2017 |
| GSD, Sigma |
| Rp |
| | January 9, 2024 - | Monthly |
|
| Trade receivables and property and equipment | |||
2017 - 2021 |
| Metranet, Telkom Infra, Infomedia |
| Rp |
| | February 18, 2024 - | Monthly |
| 1 month JIBOR + | Trade receivables | |||
HSBC |
|
|
|
| ||||||||||
2014 |
| Sigmaa |
| Rp |
| | November 6, 2024 | Monthly |
| Under BLR |
| Trade receivables | ||
2018 - 2023 |
| Sigma, Metra, PINS, Metranet,Telkomsat, GSD, TDE |
| Rp |
| | June 4, 2024 - | Monthly, Quarterly |
| 1 month |
| None | ||
MUFG Bank |
|
|
|
| ||||||||||
2018 - 2019 |
| Infomedia, Metra, GSD, Telkom Infra, Telkomsat |
| Rp |
| | October 31, 2024 | Monthly, Quarterly |
| 1 month | None | |||
UOB Indonesia |
|
|
|
|
| |||||||||
2016 |
| Finnet |
| Rp |
| | October 31, 2024 | Monthly |
| 1 month |
| None | ||
DBS |
|
|
|
| ||||||||||
2018 |
| Telkom Infra, Infomedia |
| Rp |
| | July 31, 2024 | Monthly |
| 1 month JIBOR + | None |
* In original currency
** Refer to Note 6 and Note 12 for details of trade receivables and property and equipment pledged as collateral.
a Unsettled loan will be automatically extended.
As stated in the agreements, the Group is required to comply with all covenants or restrictions such as limitation that the Company must have a majority shareholding of at least 51% of the subsidiaries and must maintain certain level of financial ratios. On December 11, 2023, December 18, 2023, and December 22, 2023, the Group obtained waiver from BNI, Bank DBS, and HSBC, respectively, related to the non-fulfillment financial ratios in Sigma. As of December 31, 2023, the Group has complied with all covenants regarding these financial ratios.
The credit facilities were obtained by the Group for working capital purposes.
F-54
b. | Current maturities of long-term loans and other borrowings |
| Notes |
| 2022 |
| 2023 | |
Two-step loans |
| 20a |
| |
| |
Bonds and medium-term notes ("MTN") |
| 20b |
| — |
| |
Bank loans |
| 20c |
| |
| |
Other borrowings |
| 20d |
| |
| |
Total |
|
|
| |
| |
20. LONG-TERM LOANS AND OTHER BORROWINGS
Long-term loans and other borrowings consist of the following:
| Notes |
| 2022 |
| 2023 | |
Two-step loans |
| 20a |
| |
| — |
Bonds and MTN |
| 20b |
| |
| |
Bank loans |
| 20c |
| |
| |
Other borrowings |
| 20d |
| |
| — |
Total |
|
|
| |
| |
Scheduled principal payments as of December 31, 2023 are as follows:
Year | ||||||||||||||
| Notes |
| Total |
| 2025 |
| 2026 |
| 2027 |
| 2028 |
| Thereafter | |
Bonds and MTN |
| 20b |
| |
| | — | — | — |
| | |||
Bank loans |
| 20c |
| |
| | | | | | ||||
Total |
|
|
| |
| |
| |
| |
| |
| |
a. Two-step loans
Two-step loans are unsecured loans obtained by the Government from overseas banks which are then re-loaned to the Company. Loans obtained after July 1994 are payable in their original currencies and any resulting foreign exchange gain or loss is borne by the Company.
2022 | 2023 | |||||||||
Outstanding | Outstanding | |||||||||
|
| Foreign currency |
| Rupiah |
| Foreign currency |
| Rupiah | ||
Lenders | Currency | (in millions) | equivalent | (in millions) | equivalent | |||||
Overseas banks |
| Yen |
| |
| |
| |
| |
| Rp |
| — |
| |
|
| — | ||
Total |
|
|
|
|
| |
|
|
| |
Current maturities (Note 19b) |
|
|
|
|
| ( |
|
|
| ( |
Long-term portion |
|
|
|
|
| |
|
|
| — |
Principal payment | Interest payment | Interest rate per | |||||||
Lenders |
| Currency |
| schedule |
| period |
| annum | |
Overseas banks | Yen | Semi-annually | Semi-annually | | % | ||||
| Rp |
| Semi-annually |
| Semi-annually |
| | % |
The loans were intended for the development of telecommunications infrastructure and supporting telecommunications equipment. The loans will be settled semi-annually and due on various dates through 2024.
F-55
The Company had used all facilities under the two-step loans program since 2008 and the withdrawal period for the two-step loans has ended.
Under the loan covenants, the Company is required to maintain financial ratios as follows:
| i. | Projected net revenue to projected debt service ratio should exceed |
| ii. | Internal financing (earnings before depreciation and finance costs) should exceed |
As of December 31, 2023, the Company has complied with the above-mentioned ratios.
b. Bonds and MTN
Outstanding | ||||
Bonds and MTN | 2022 | 2023 | ||
Bonds |
|
| ||
2015 |
|
| ||
Series B |
| |
| |
Series C |
| |
| |
Series D |
| |
| |
MTN |
|
| ||
MTN Mitratel 2023 |
| — |
| |
Total |
| |
| |
Unamortized debt issuance cost |
| ( |
| ( |
Long-term portion |
| |
| |
Current maturities (Note 19b) |
| — |
| ( |
Long-term portion |
| |
| |
| i. | Bonds |
2015
Interest payment | Interest rate | ||||||||||||||
Bonds |
| Principal |
| Issuer |
| Listed on |
| Issuance date |
| Maturity date |
| period |
| per annum |
|
Series A | | The Company | IDX | June 23, 2015 | June 23, 2022 | Quarterly | | % | |||||||
Series B | | The Company | IDX | June 23, 2015 | June 23, 2025 | Quarterly | | % | |||||||
Series C |
| |
| The Company |
| IDX | June 23, 2015 | June 23, 2030 |
| Quarterly |
| | % | ||
Series D |
| |
| The Company |
| IDX | June 23, 2015 | June 23, 2045 |
| Quarterly |
| | % | ||
Total |
| |
|
|
|
|
|
|
|
|
|
|
The bonds are not secured by specific security but by all of the Company’s assets, movable or non-movable, either existing or in the future (Note 12b.x). The underwriters of the bonds are PT Bahana, TCW Management Investment (“Bahana TCW”), PT BRI Danareksa Sekuritas, PT Mandiri Sekuritas, and PT Trimegah Sekuritas Indonesia Tbk. and the trustee is Bank Permata. 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 and support, and acquisition of some domestic and international entities.
As of December 31, 2023, the rating of the bonds issued by Pefindo is idAAA (Triple A).
F-56
Based on the Indenture Trusts Agreement, the Company is required to comply with all covenants or restrictions, including maintaining financial ratios as follows:
(a) Debt to equity ratio should not exceed
(b) EBITDA to interest ratio should not be less than
(c) Debt service coverage is at least
As of December 31, 2023, the Company has complied with the above-mentioned ratio.
ii. | MTN |
On September 26, 2023, Mitratel issued MTN amounting to Rp
MTN Mitratel 2023 with annual interest rate
Bank Mandiri was appointed as trustee for the issuance of MTN Mitratel 2023. The rating of the MTN issued by Pefindo is idAAA (Triple A).
F-57
c. Bank loans
2022 | 2023 | |||||||||
Outstanding | Outstanding | |||||||||
Foreign | Foreign | |||||||||
|
| currency |
| Rupiah |
| currency |
| Rupiah | ||
Lenders | Currency | (in millions) | equivalent | (in millions) | equivalent | |||||
Related parties |
|
|
|
|
| |||||
BNI |
| Rp |
| — | |
| — | | ||
Bank Mandiri |
| Rp |
| — | |
| — | | ||
BRI |
| Rp |
| — | |
| — | | ||
BSI | Rp | — | | — | | |||||
Sub-total |
|
|
|
|
| |
|
|
| |
Third parties |
|
|
|
|
|
|
|
|
|
|
BCA | Rp | — | | — | | |||||
Syndication of banks | Rp | — | | — | | |||||
USD | | | | | ||||||
Bank CIMB Niaga |
| Rp |
| — | | — | | |||
USD | | | | | ||||||
DBS | Rp | — | | — | | |||||
Bank Permata |
| Rp |
| — | | — | | |||
Bank of China | Rp | — | | — | | |||||
HSBC | Rp | — | | — | | |||||
BJB | Rp | — | — | — | | |||||
MUFG Bank | Rp | — | | — | | |||||
Bank Danamon |
| Rp |
| — | | — | | |||
PT Bank ANZ Indonesia ("Bank ANZ") |
| Rp |
| — | | — | | |||
UOB Singapore |
| USD |
| | | — | — | |||
Others (each below Rp100 billion) |
| Rp |
| — | | — | | |||
| MYR |
| |
| | |
| | ||
Sub-total |
|
|
|
| |
|
| | ||
Total |
|
|
|
| |
| | |||
Unamortized debt issuance cost |
|
|
|
|
| ( |
|
| ( | |
|
|
|
|
| |
|
| | ||
Current maturities (Note 19b) |
| ( | ( | |||||||
Long-term portion |
| | | |||||||
F-58
Other significant information relating to bank loans as of December 31, 2023 is as follows:
|
|
|
| Current |
|
|
|
| ||||||||
Total | period | Principal | Interest | |||||||||||||
facility | payment | payment | payment | Interest rate | ||||||||||||
Borrower | Currency | (in billions)* | (in billions)* | schedule | period | per annum | Security** | |||||||||
BNI |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
2013 - 2022 | The | Rp | | | 2018 - 2033 | Monthly, Quarterly | 1 month JIBOR + | Trade receivables and property and equipment | ||||||||
2018 | GSD | Rp | | | 2021 - 2024 | Quarterly | Trade receivables | |||||||||
Bank Mandiri | ||||||||||||||||
2017 - 2023 | The Company, | Rp | | | 2019 - 2029 | Quarterly | 3 months JIBOR + | None | ||||||||
BRI | ||||||||||||||||
2017 - 2019 |
| The Company |
| Rp |
| |
| |
| 2019 - 2026 |
| Quarterly |
| 3 months JIBOR + |
| None |
BSI | ||||||||||||||||
2018 - 2021 | SSI, | Rp | | | 2019 - 2025 | Monthly | None | |||||||||
BCA | ||||||||||||||||
2020 - 2023 |
| The Company, |
| Rp |
| |
| — |
| 2024 - 2030 |
| Quarterly |
|
| None | |
2020 - 2023 | The | Rp | | | 2020 - 2031 | Quarterly | 3 months JIBOR + | None | ||||||||
Syndication of banks |
|
|
|
| ||||||||||||
2018 | Telin | USD | | | 2020 - 2025 | Semi-annually | 6 months SOFR + | None | ||||||||
2022 | Mitratel | Rp | | | 2024 - 2030 | Quarterly | None | |||||||||
Bank CIMB Niaga | ||||||||||||||||
2019 - 2022 | PINS, Mitratel | Rp | | | 2021 - 2029 | Quarterly | 3 months JIBOR + | None | ||||||||
2021 - 2022 | Telin | USD | | — | 2024 - 2030 | Semi-annually | 6 months SOFR + | None | ||||||||
DBS | ||||||||||||||||
2021 | Mitratel | Rp | | — | 2023 - 2028 | Quarterly | 3 months JIBOR + | None | ||||||||
Bank Permata | ||||||||||||||||
2020 - 2022 |
| Mitratel |
| Rp |
| |
| |
| 2021 - 2029 |
| Quarterly |
| 3 months JIBOR + |
| None |
Bank of China |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019 |
| Telkomsel |
| Rp |
| |
| |
| 2021 - 2025 |
| Monthly |
|
| None | |
HSBC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021 |
| Mitratel |
| Rp |
| |
| |
| 2023 - 2028 |
| Quarterly |
| 3 months |
| None |
BJB | ||||||||||||||||
2023 | Telkomsel | Rp | | | 2023 - 2025 | Monthly | None | |||||||||
MUFG Bank |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021 |
| Mitratel |
| Rp |
| |
| — |
| 2022 - 2028 |
| Quarterly |
| 3 months |
| None |
Bank Danamon |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2022 |
| Mitratel |
| Rp |
| |
| |
| 2022 - 2025 |
| Quarterly |
| 3 months |
| None |
ANZ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015 |
| GSD, PINS |
| Rp |
| |
| |
| 2020 - 2025 |
| Quarterly |
| 3 months JIBOR + |
| None |
*In original currency
** | Refer to Notes 6 and Notes 12 for details of trade receivables and property and equipment pledged as collaterals. |
As stated in the agreements, the Group is required to comply with all covenants or restrictions such as dividend distribution, obtaining new loans, and maintaining financial ratios. On December 11, 2023, December 13, 2023, and December 22, 2023, the Group obtained waiver from BNI, Bank Mandiri, and BCA, respectively, related to the non-fulfillment financial ratios in Sigma and GSD. As of December 31, 2023, the Group has complied with all covenants regarding these financial ratios.
The credit facilities were obtained by the Group for working capital purposes and investment purposes.
F-59
As of December 31, 2023, the Group had Rp
d. Other borrowings
Outstanding | ||||
Lenders |
| 2022 |
| 2023 |
PT Sarana Multi Infrastruktur (Persero) |
| |
| |
("Sarana Multi Infrastruktur") |
| ( |
| |
Total |
| |
| |
Current maturities (Note 19b) |
| ( |
| ( |
Long-term portion |
| |
| — |
Other significant information relating to other borrowings as of December 31, 2023 is as follows:
Total facility | Current period | Principal payment | Interest rate | |||||||||||
| Borrower |
| Currency |
| (in billions) |
| payment (in billions) |
| schedule |
| per annum |
| Security | |
Sarana Multi | ||||||||||||||
Infrastruktur | ||||||||||||||
March 29, 2019* | The Company | Rp | | | Semi-annually | 3 months | None | |||||||
March 29, 2019* |
| Telkomsat |
| Rp |
| |
| |
| Semi-annually |
| 3 months |
| None |
* | Based on the latest amendment on June 15, 2020 |
Under the agreement, the Company and Telkomsat are required to comply with all covenants or restrictions, including maintaining financial ratios as follows:
(a)Debt to equity ratio should not exceed
(b)Net debt EBITDA to interest ratio should not be less than
(c)Debt service coverage is at least
As of December 31, 2023, the Company and Telkomsat has complied with the above-mentioned ratios.
21. NON-CONTROLLING INTERESTS
The details of non-controlling interests are as follows:
| 2022 |
| 2023 | |
Non-controlling interests in net assets of subsidiaries: |
|
|
|
|
Telkomsel |
| |
| |
Mitratel |
| |
| |
Others |
| |
| |
Total |
| |
| |
| 2021 |
| 2022 |
| 2023 | |
Non-controlling interests in profit (loss) of subsidiaries: |
|
|
|
|
|
|
Telkomsel |
| |
| |
| |
Mitratel | | | | |||
Others |
| ( |
| |
| ( |
Total |
| |
| |
| |
F-60
Material partly-owned subsidiaries
The non-controlling interest which are considered material to the Company are the non-controlling interest in Telkomsel and Mitratel.
On December 31, 2022 and 2023, non-controlling interest ownership in Telkomsel is
On December 31, 2022 and 2023, non-controlling interest ownership in Mitratel is
The summarized financial informations of Telkomsel and Mitratel are provided below. These informations are based on amounts before intercompany eliminations and adjustments.
Summarized statements of financial position:
Telkomsel | Mitratel | |||||||
| 2022 |
| 2023 |
| 2022 |
| 2023 | |
Current assets |
| |
| | | | ||
Non-current assets |
| |
| | | | ||
Current liabilities |
| ( |
| ( | ( | ( | ||
Non-current liabilities |
| ( |
| ( | ( | ( | ||
Total equity |
| |
| | | | ||
Attributable to: |
|
|
|
| ||||
Owners of the parent company |
| |
| | | | ||
Non-controlling interests |
| |
| | | | ||
Summarized statements of profit or loss and other comprehensive income:
Telkomsel | Mitratel | |||||||||||
| 2021 |
| 2022 |
| 2023 |
| 2021 |
| 2022 |
| 2023 | |
Revenues |
| |
| |
| | | | | |||
Operation expenses |
| ( |
| ( |
| ( | ( | ( | ( | |||
Other expenses – net |
| ( |
| ( |
| ( | ( | ( | ( | |||
Profit before income tax |
| |
| |
| | | | | |||
Income tax expense – net |
| ( |
| ( |
| ( | ( | ( | ( | |||
Profit for the year |
| |
| |
| | | | | |||
Other comprehensive income (loss) – net |
| ( |
| |
| | | ( | | |||
Total comprehensive income for the year |
| |
| |
| | | | | |||
Attributable to non-controlling interests |
| |
| |
| | | | | |||
Dividends paid to non-controlling interests |
| |
| |
| | — | | | |||
F-61
Summarized statements of cash flows:
Telkomsel | Mitratel | |||||||||||
| 2021 |
| 2022 |
| 2023 |
| 2021 |
| 2022 |
| 2023 | |
Operating |
| |
| |
| | | | | |||
Investing |
| ( |
| ( |
| ( | ( | ( | ( | |||
Financing |
| ( |
| ( |
| ( | | ( | ( | |||
Net increase (decrease) in cash and cash equivalents |
| ( |
| |
| ( | | ( | ( | |||
22. CAPITAL STOCK
The details of capital stock are as follows:
2022 | ||||||
Percentage of | Total paid-in | |||||
Description |
| Number of shares |
| ownership |
| capital |
Series A Dwiwarna share | ||||||
Government |
| | | | ||
Series B shares | ||||||
Government |
| | | | ||
The Bank of New York Mellon Corporation* |
| | | | ||
Directors (Note 1b): |
| |||||
Ririek Adriansyah |
| | | | ||
Budi Setyawan Wijaya | | | | |||
Afriwandi | | | | |||
Herlan Wijanarko | | | | |||
Heri Supriadi | | | | |||
Commisioner (Note 1b): | ||||||
Arya Mahendra Sinulingga | | | | |||
Public (individually less than 5%) |
| | | | ||
Total |
| |
| |
| |
F-62
2023 | ||||||
Percentage of | Total paid-in | |||||
Description |
| Number of shares |
| ownership |
| capital |
Series A Dwiwarna share | ||||||
Government |
| | | | ||
Series B shares | ||||||
Government |
| | | | ||
The Bank of New York Mellon Corporation* |
| | | | ||
Directors (Note 1b): |
| |||||
Ririek Adriansyah |
| | | | ||
Bogi Witjaksono | | | | |||
Afriwandi | | | | |||
Heri Supriadi | | | | |||
F.M. Venusiana R. | | | | |||
Herlan Wijanarko | | | | |||
Muhamad Fajrin Rasyid | | | | |||
Budi Setyawan Wijaya | | | | |||
Honesti Basyir | | | | |||
Commissioners (Note 1b): | ||||||
Isa Rachmatarwata | | | | |||
Marcelino Rumambo Pandin | | | | |||
Ismail | | | | |||
Arya Mahendra Sinulingga | | | | |||
Rizal Mallarangeng | | | | |||
Public (individually less than 5%) |
| | | | ||
Total |
| |
| |
| |
* The Bank of New York Mellon Corporation serves as the Depositary of the registered ADS holders for the Company’s ADSs. 1 ADS represents
The Company issued only 1 Series A Dwiwarna share which is held by the Government of the Republic of Indonesia and cannot be transferred to any party, and has a veto right in the General Meeting of Stockholders of the Company with respect to the election and removal of the Boards of Commissioners and Directors, issuance of new shares, and amendments of the Company’s Articles of Association.
The Company's authorized capital stock consists of
Pursuant to the AGM of Stockholders of the Company stated in Notarial Deed No. 37 dated May 28, 2021 of Utiek R. Abdurachman, S.H., M.Li., M.Kn., the Company’s stockholders approved the distribution of cash dividend and special cash dividend for 2020 amounting to Rp
Pursuant to the AGM of Stockholders of the Company stated in Notarial Deed No. 29 dated May 27, 2022 of Ashoya Ratam, S.H., M.Kn., the Company’s stockholders approved the distribution of cash dividend for 2021 amounting to Rp
Pursuant to the AGM of Stockholders of the Company as stated in Notarial Deed No. 73 dated May 30, 2023 of Ashoya Ratam, S.H., M.Kn., the Company’s stockholders approved the distribution of cash
F-63
dividend for 2022 amounting to Rp
As of December 31, 2023, all of the Company's Series B shares have been listed on the IDX and
23. BASIC 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
Basic earnings per share amounted to Rp
24. REVENUES
The Group derives revenues in the following major product lines:
Consolidated | ||||||||||||
2021 | Mobile | Consumer | Enterprise | WIB | Others | revenue | ||||||
Telephone revenues | ||||||||||||
Cellular | | — | — | | — | | ||||||
Fixed lines | — | | | | — | | ||||||
Total telephone revenues | | | | | — | | ||||||
Interconnection revenues |
| | — |
| — |
| |
| — |
| | |
Data, internet, and information technology service revenues |
|
|
|
|
|
|
|
|
|
| ||
Cellular data and internet |
| | — |
| — |
| — |
| — |
| | |
Internet, data communication, and information technology services |
| — | |
| |
| |
| — |
| | |
SMS |
| | — |
| |
| — |
| — |
| | |
Others |
| — | — |
| |
| |
| |
| | |
Total data, internet, and information technology service revenues |
| | |
| |
| |
| |
| | |
Network revenues |
| | — |
| |
| |
| — |
| | |
IndiHome revenues | — | | | — | — | | ||||||
Other services |
|
|
|
|
|
|
|
| ||||
Call center service |
| — | — |
| |
| |
| — |
| | |
Manage service and terminal |
| — | — |
| |
| |
| — |
| | |
E-health |
| — | — |
| |
| — |
| — |
| | |
E-payment |
| | — |
| |
| — |
| |
| | |
Others |
| — | |
| |
| |
| |
| | |
Total other services | | |
| |
| |
| |
| | ||
Total revenues from contract with customer |
| | |
| |
| |
| |
| | |
Revenues from lessor transactions |
| — | — |
| — |
| |
| — |
| | |
Total revenues | | | | | | | ||||||
Adjustments and eliminations | — | | | | ( | |||||||
Total external revenues as reported in note operating segment |
| |
| |
| |
| |
| |
|
F-64
|
|
|
|
|
|
|
|
|
|
| Consolidated | |
2022 | Mobile | Consumer | Enterprise | WIB | Others | revenue | ||||||
Telephone revenues | ||||||||||||
Cellular | | — | — | | — | | ||||||
Fixed lines | — | | | | — | | ||||||
Total telephone revenues | | | | | — | | ||||||
Interconnection revenues |
| | — |
| — |
| |
| — |
| | |
Data, internet, and information technology service revenues |
|
|
|
|
|
|
|
|
|
| ||
Cellular data and internet |
| | — |
| — |
| — |
| — |
| | |
Internet, data communication, and information technology services |
| — | |
| |
| |
| — |
| | |
SMS |
| | — |
| |
| — |
| — |
| | |
Others |
| | — |
| |
| |
| |
| | |
Total data, internet, and information technology service revenues |
| | |
| |
| |
| |
| | |
Network revenues |
| | — |
| |
| |
| — |
| | |
IndiHome revenues | — | | | — | — | | ||||||
Other services |
|
|
|
|
|
|
|
| ||||
Call center service |
| — | — |
| |
| |
| — |
| | |
Manage service and terminal |
| — | — |
| |
| |
| — |
| | |
E-health |
| — | — |
| |
| — |
| — |
| | |
E-payment |
| | — |
| |
| — |
| — |
| | |
Others |
| | |
| |
| |
| |
| | |
Total other services |
| | |
| |
| |
| |
| | |
Total revenues from contract with customer | | |
| |
| |
| |
| | ||
Revenues from lessor transactions | — | — |
| — |
| |
| — |
| | ||
Total revenues |
| | | | | | | |||||
Adjustments and eliminations | — | | | ( | ( | |||||||
Total external revenues as reported in note operating segment | |
| |
| |
| |
| |
|
|
|
|
|
|
|
|
|
|
|
| Consolidated | |
2023 | Mobile | Consumer | Enterprise | WIB | Others | revenue | ||||||
Telephone revenues | ||||||||||||
Cellular | | — | — | | — | | ||||||
Fixed lines | — | | | | — | | ||||||
Total telephone revenues | | | | | — | | ||||||
Interconnection revenues |
| | — |
| — |
| |
| — |
| | |
Data, internet, and information technology service revenues |
|
|
|
|
|
|
|
|
|
| ||
Cellular data and internet |
| | — |
| — |
| — |
| — |
| | |
Internet, data communication, and information technology services |
| | |
| |
| |
| — |
| | |
SMS |
| | — |
| |
| — |
| — |
| | |
Others |
| | — |
| |
| |
| |
| | |
Total data, internet, and information technology service revenues |
| | |
| |
| |
| |
| | |
Network revenues |
| | — |
| |
| |
| — |
| | |
IndiHome revenues | — | | | — | — | | ||||||
Other services |
|
|
|
|
|
|
|
| ||||
Call center service |
| — | — |
| |
| — |
| — |
| | |
Manage service and terminal |
| — | — |
| |
| |
| — |
| | |
E-health |
| — | — |
| |
| — |
| — |
| | |
E-payment |
| — | — |
| |
| — |
| — |
| | |
Others |
| | |
| |
| |
| |
| | |
Total other services |
| | |
| |
| |
| |
| | |
Total revenues from contract with customer |
| | |
| |
| |
| |
| | |
Revenues from lessor transactions |
| — | — |
| — |
| |
| — |
| | |
Total revenues | | | | | | | ||||||
Adjustments and eliminations | — | | | | ( | |||||||
Total external revenues as reported in note operating segment |
| |
| |
| |
| |
| |
|
F-65
Management expects that most of the transaction price allocated to the unsatisfied contracts as of December 31, 2023 will be recognized as revenue during the next reporting periods. Unsatisfied performance obligations as of December 31, 2023, which management expects to be realised within one year is Rp
The Group entered into non-cancellable lease agreements with both third and related parties. The lease agreements cover leased lines, telecommunication equipment, and land and building with terms ranging from
Refer to Note 31 for details of related party transactions.
25. PERSONNEL EXPENSES
The breakdown of personnel expenses is as follows:
| 2021 |
| 2022 |
| 2023 | |
Salaries and related benefits |
| |
| |
| |
Vacation pay, incentives, and other benefits |
| |
| |
| |
Pension and other post-employment benefits (Note 29) |
| |
| |
| |
LSA expense (Note 30) | |
| |
| | |
Others |
| |
| |
| |
Total |
| |
| |
| |
Refer to Note 31 for details of related parties transactions.
26. OPERATION, MAINTENANCE, AND TELECOMMUNICATION SERVICE EXPENSES
The breakdown of operation, maintenance, and telecommunication service expenses is as follows:
| 2021 |
| 2022 |
| 2023 | |
Operation and maintenance |
| |
| |
| |
Radio frequency usage charges (Note 33c.i) |
| |
| |
| |
Leased lines and Customer Premises Equipment("CPE") |
| |
| |
| |
Concession fees and USO charges (Note 16) |
| |
| |
| |
Electricity, gas, and water |
| |
| |
| |
Cost of SIM cards, vouchers, and sales of peripherals (Note 8) |
| |
| |
| |
Project management |
| | | | ||
Vehicles rental and supporting facilities |
| |
| |
| |
Insurance |
| |
| |
| |
Others (each below Rp100 billion) |
| |
| |
| |
Total |
| |
| |
| |
Refer to Note 31 for details of related parties transactions.
F-66
27. GENERAL AND ADMINISTRATIVE EXPENSES
The breakdown of general and administrative expenses is as follows:
| 2021 |
| 2022 |
| 2023 | |
General expenses |
| |
| |
| |
Professional fees |
| |
| |
| |
Allowance for expected credit losses trade receivables (Note 6) |
| |
| |
| |
Training, education, and recruitment |
| |
| |
| |
Traveling |
| |
| |
| |
Meeting |
| |
| |
| |
Social contribution |
| |
| |
| |
Collection expenses |
| |
| |
| |
Others (each below Rp100 billion) |
| |
| |
| |
Total |
| |
| |
| |
Refer to Note 31 for details of related parties transactions.
28. TAXATION
a. Prepaid income taxes
| 2022 |
| 2023 | |
The Company - Corporate income tax |
| |
| |
Subsidiaries - Corporate income tax |
| |
| |
Total |
| |
| |
Current portion |
| ( | ( | |
Non-current portion (Note 14) |
| |
| |
b. Prepaid other taxes
The breakdown of prepaid other taxes is as follows:
| 2022 |
| 2023 | |
The Company: |
|
|
|
|
VAT |
| |
| |
Article 21 - Individual income tax |
| |
| |
Article 22 - Withholding tax on goods delivery and imports |
| |
| |
Article 23 - Withholding tax on service delivery |
| |
| |
Subsidiaries: |
|
| ||
VAT |
| |
| |
Article 4(2) - Final tax | | | ||
Article 23 - Withholding tax on service delivery |
| |
| |
Total |
| |
| |
Current portion |
| ( |
| ( |
Non-current portion (Note 14) |
| |
| |
F-67
c. Current income tax liabilities
The breakdown of current income tax liabilities is as follows:
| 2022 |
| 2023 | |
The Company: |
|
|
|
|
Article 25 - Installment of corporate income tax |
| |
| |
Article 29 - Corporate income tax | | — | ||
Subsidiaries: |
|
| ||
Article 25 - Installment of corporate income tax |
| |
| |
Article 29 - Corporate income tax |
| |
| |
Total |
| |
| |
d. Other tax liabilities
The breakdown of other tax liabilities is as follows:
| 2022 |
| 2023 | |
The Company: | ||||
Income taxes | ||||
Article 4(2) - Final tax |
| |
| |
Article 21 - Individual income tax |
| |
| |
Article 22 - Withholding tax on goods delivery and imports |
| |
| |
Article 23 - Withholding tax on services |
| |
| |
Article 26 - Withholding tax on non-resident income |
| |
| |
VAT | | | ||
VAT - Tax collector |
| |
| |
Sub-total |
| |
| |
Subsidiaries: |
|
|
|
|
Income taxes | ||||
Article 4(2) - Final tax |
| |
| |
Article 21 - Individual income tax |
| |
| |
Article 22 - Withholding tax on goods delivery and imports |
| |
| |
Article 23 - Withholding tax on services |
| |
| |
Article 26 - Withholding tax on non-resident income |
| |
| |
VAT |
| |
| |
VAT - Tax collector | | | ||
Sub-total |
| |
| |
Total |
| |
| |
F-68
e. The components of consolidated income tax expense (benefit) are as follows:
| 2021 |
| 2022 |
| 2023 | |
Current |
|
|
|
|
|
|
The Company |
| |
| |
| |
Subsidiaries |
| |
| |
| |
Sub-total |
| |
| |
| |
Deferred |
|
|
|
|
|
|
The Company |
| ( |
| ( |
| |
Subsidiaries |
| |
| ( |
| ( |
Sub-total |
| |
| ( |
| ( |
Net income tax expense |
| |
| |
| |
F-69
f. Reconciliation of income tax expense
The details of the net income tax expense for the years ended December 31, 2021, 2022 and 2023 are as follows:
| 2021 |
| 2022 |
| 2023 | |
Estimated taxable income of the Company | | | | |||
Corporate Income Tax: |
|
|
| |||
Current corporate income tax expense: | ||||||
The Company | | | | |||
Subsidiaries | | | | |||
Current income tax expense of previous year: | ||||||
Final tax expense | ||||||
The Company | | | | |||
Subsidiaries | | — | | |||
Total income tax expense - current | | | | |||
Income tax expense (benefit) - deferred effect of temporary differences at enacted maximum tax rates |
|
| ||||
The Company |
|
| ||||
Net periodic pension and other post-employment benefits costs | ( |
| |
| | |
Contract Cost | ( |
| ( |
| ( | |
Leases | ( |
| ( |
| | |
Realization of accrual of expenses and inventory write-off (provision for inventory obsolescence) | — |
| ( |
| ( | |
Amortization of (addition to) deferred installation fee | ( |
| ( |
| ( | |
Allowance for expected credit losses | ( | | | |||
Provision for employee benefits | ( | | ( | |||
Amortization of intangible assets, land rights and others | |
| ( |
| ( | |
Depreciation and gain on disposal or sale of property and equipment | ( |
| ( |
| | |
Net | ( |
| ( |
| | |
Telkomsel |
|
|
|
|
| |
Fair value measurement of other financial instruments | | ( | ( | |||
Leases | ( |
| |
| | |
Allowance for expected credit losses | | | ( | |||
Amortization of license | |
| ( |
| | |
Provision for employee benefits | ( |
| ( |
| ( | |
Contract liabilities | ( | — | ( | |||
Contract cost | | — | ( | |||
Other financial instruments | | | ( | |||
Depreciation and gain on disposal or sale of property and equipment | |
| ( |
| ( | |
Net | |
| ( |
| ( | |
Subsidiaries - other - net | |
| ( |
| ( | |
Net income tax benefit - deferred | |
| ( |
| ( | |
Income tax expense - net | |
| |
| |
F-70
The reconciliation between the income tax expense calculated by applying the applicable tax rate of
| 2021 |
| 2022 |
| 2023 | |
Profit before income tax consolidation |
| |
| |
| |
Less consolidated income subject to final tax - net |
| ( |
| ( |
| ( |
| |
| |
| | |
Income tax expense calculated at the Company’s applicable statutory tax rate |
| |
| |
| |
Difference in applicable statutory tax rate for subsidiaries |
| |
| |
| |
Non-deductible expenses |
| ( |
| |
| |
Final income tax expense |
| |
| |
| |
Deferred tax adjustment |
| ( |
| ( |
| ( |
Unrecognized deferred tax | | ( | | |||
Others |
| |
| |
| |
Net income tax expense |
| |
| |
| |
In Law No. 7 of 1983 concerning Income Tax as amended several times, most recently by Law No. 6 of 2023 concerning Stipulation of Government Regulations in Lieu of Law no. 2 of 2022 concerning Job Creation becomes Law, Article 17 paragraph (1) letter b which stipulates that the tax rate applied to Taxable Income for domestic corporate taxpayers and permanent establishments is
The Company applied the tax rate of
The Company has submitted its Annual Corporate Income Tax Return for the 2022 fiscal year on April 28, 2023, to the Tax Authority in accordance with the applicable tax regulations.
g. Tax assessments
(i) The Company
Income tax fiscal year 2015
On April 25, 2017, the Tax Authorities issued Tax Overpayment Assessment Letter (“SKPLB”) for corporate income tax amounting to Rp
On July 18, 2018, the Tax Authorities issued Decision Letter on Company’s objections for SKPLB of corporate income tax, wherein the Tax Authorities has granted the several Company’s objection and additional amount of overpayment which should be received amounting to Rp
F-71
On July 8, 2020, the Company received appeal decision from the Tax Court regarding corporate income tax dispute for fiscal year 2015. The Tax Court partially approved the appeal filed by the Company. On September 9, 2020, the Company received tax refund of additional overpayment of corporate income tax amounting to Rp
On October 26, 2020, the Company received notification letter from Tax Court that Tax Authorities filed a judicial review of corporate income tax dispute for fiscal year 2015. On December 2, 2020, the Company filed a contra memorandum for judicial review as the response of Tax Authorities judicial review.
The entire file of the Judicial Review Memorandum submitted by the Judicial Review Applicant (DGT) and the Judicial Review Counter Memorandum file sent by the Respondent (Telkom) have been forwarded by the Secretariat of the Tax Court to the Supreme Court on December 13, 2022, with a letter of introduction number PKMA-1594/XII/ PAN.Wk/2022.
On May 25, 2023, the Supreme Court issued Decision number 1365/B/PK/Pjk/2023 which rejected the DGT's request for review. Thus, all tax obligations for 2015 have permanent legal force through the Issuance of the Supreme Court Decision and have passed the tax determination expiration period as stipulated in the tax law.
Income Tax and VAT fiscal year 2019
On May 12, 2022, the Company received a notice of field audit for overpayment of domestic VAT for period January to December 2019. On November 30, 2022, the Company received VAT Collector ("WAPU") Underpayment Assessment Letter ("SKPKB") and Tax Collection Letter ("STP") for the period January to December 2019 amounting to Rp
On April 12, 2023, the Company received a Field Audit Notification Letter to test compliance with tax obligations on Corporate Income Tax and Income Tax Withholding/Collection for the 2019 Fiscal Year. As of the issuance date of these financial statements, the tax audit process is still ongoing.
Income Tax and VAT fiscal year 2020
On September 1, 2022, the Company received a notice of field audit for overpayment of domestic VAT for period May 2020. On March 10, 2023, the Company received SKPKB and STP VAT for May 2020 WAPU in the amount of Rp
On March 13, 2023, the Company received a Field Audit Notification Letter for Overpayment of VAT Tax Return for January to April, July, September and November to December 2020. On April 6, 2023, the Company received a Field Audit Notification Letter regarding the overpayment of VAT Tax Return for June, August and October 2020. On June 20, 2023, the Company received Audit Notification Letter to test compliance with tax obligations regarding Corporate Income Tax, VAT and Income Tax Withholding/Collection for the 2020 Fiscal Year.
F-72
As of the issuance date of these financial statements, the Company has received Tax Assessment Letters and STP for the period of January, February, April and July 2020, consisting of Domestic VAT SKPLB amounting to Rp
Income tax and VAT fiscal year 2021
On June 20, 2023, the Company received a Tax Audit Notification Letter for Corporate Income Tax, VAT and Withholding Income Tax for the 2021 Fiscal Year. As of the issuance date of these financial statements, the audit process for all types of taxes is still ongoing.
(ii) Telkomsel
Income tax and VAT fiscal year 2014
In May 2019, Telkomsel received tax underpayment assessment letters for the 2014 CIT, VAT and WHT in total amount of Rp
In July 2020, Telkomsel received an objection decision letter which accepted Telkomsel’s objection of Rp
In September 2020, Telkomsel filed an appeal to the Tax Court for the 2014 CIT, WHT and VAT assessments amounting to Rp
In April 2022, Telkomsel received the Tax Court’s Verdict for the 2014 underpayment of WHT and VAT, which partially accepted Telkomsel’s appeal amounting to Rp
In August 2022, Telkomsel received notifications that the Tax Authorities had filed a judicial review to the Supreme Court (“SC”) for the 2014 VAT amounting to Rp
In February and March 2023, the SC fully rejected the judicial review claimed by the Tax Authorities on tax periods of 2014 VAT amounting to Rp
As at the authorization date of these consolidated financial statements, the result of appeal for CIT have not yet been received.
Income tax and VAT fiscal year 2015
In August 2019, Telkomsel received the tax underpayment assessment letters for the 2015 CIT, VAT and WHT in total amount of Rp
F-73
In July 2020, Telkomsel received an objection decision letter from Tax Authorities that rejected all Telkomsel's objection.
In September 2020, Telkomsel filed an appeal to the Tax Court for the 2015 CIT, WHT and VAT assessments amounting to Rp
In April and May 2022, Telkomsel received the Tax Court’s Verdict for the 2015 underpayment of WHT and VAT which partially accepted the Telkomsel’s appeal amounting to Rp
In August 2022, Telkomsel received notifications that the Tax Authorities had filed a judicial review to the SC for the 2015 VAT amounting to Rp
During February to May 2023, Telkomsel received decision letters from SC, which fully rejected the Judicial Review claimed by the Tax Authorities for the tax periods of 2015 fiscal year VAT amounting to Rp
As at the authorization date of these consolidated financial statements, the results of appeal for CIT have not yet been received.
Income tax and VAT fiscal year 2018
In September 2022, Telkomsel received tax underpayment assessment letters for the 2018 CIT, VAT and WHT amounting to Rp
On October 14, 2022, Telkomsel paid and accepted a portion of the CIT tax assessment of Rp
On December 13, 2022, Telkomsel filed an objection to the Tax Authorities amounting to Rp
In October 2023, Telkomsel received objection decision letters from Tax Authorities, which partially accepted Telkomsel’s objection for WHT and VAT as well as rejected the entire Telkomsel’s objection for CIT.
Telkomsel has fully received tax refunds amounting to Rp
F-74
h. Deferred tax assets and liabilities
The details of the Group's deferred tax assets and liabilities are as follows:
Deferred tax asset and liabilities | (Charged) credited to | |||||||
in financial position | profit or loss | |||||||
| 2022 |
| 2023 |
| 2022 |
| 2023 | |
The Company |
|
|
|
|
|
| ||
Allowance for expected credit losses |
| |
| | ( |
| ( | |
Net periodic pension and other |
|
|
| |||||
post-employment benefit costs |
| |
| | ( |
| ( | |
Difference between accounting and tax bases of property and equipment | | | | ( | ||||
Provision for employee benefits |
| |
| | ( |
| | |
Deferred installation fee |
| |
| | |
| | |
Land rights, intangible assets and others |
| |
| | |
| | |
Accrued expenses and provision for inventory obsolescence |
| |
| | |
| | |
Leases |
| ( |
| — | |
| | |
Capitalization of contract cost | ( | | | | ||||
Total deferred tax assets | | | | ( | ||||
Telkomsel |
|
|
|
|
| |||
Provision for employee benefits |
| |
| | |
| | |
Allowance for expected credit losses | | | ( | | ||||
Contract liabilities | — | | — | | ||||
Fair value measurement of financial instruments | ( | — | | | ||||
Difference between accounting and tax bases of property and equipment | ( | | | | ||||
Leases |
| ( |
| ( | ( |
| ( | |
License amortization |
| ( |
| ( | |
| ( | |
Contract cost | — | ( | — | | ||||
Other financial instruments | | | ( | | ||||
Deferred tax assets of Telkomsel - net | | | | | ||||
Deferred tax assets of the other subsidiaries - net | | | | ( | ||||
Deferred tax liabilities of the other subsidiaries - net | ( | ( | ( | | ||||
Deferred tax expense |
|
| |
| | |||
Total deferred tax assets - net | | | ||||||
Total deferred tax liabilities - net |
| ( |
| ( | ||||
As of December 31, 2021, 2022 and 2023, the aggregate amounts of temporary differences associated with investments in subsidiaries and associated companies, for which deferred tax liabilities are not recognized were Rp
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 can be reduced if actual future taxable income is lower than estimates.
i. Administration
In October 2021, the Government also issued Law No.7/2021 on the Harmonization of Tax Regulations, which, among other things, regulates the rates of income tax and VAT. Starting January 1, 2022, the Group applies the income tax rate on employee taxable income in accordance with paragraph (1) letter a of Article 17 Chapter III, and starting April 1, 2022 the VAT rate changes to
In February 2022, the Government issued Government Regulation No. 9/2022 concerning the Second Amendment to Government Regulation No. 51/2008 concerning Income Tax on Income from Construction Services Business. The Company ensures administrative and legal aspects of transactions and builds solid coordination between related units to prepare for the application of the
F-75
income tax rate rule for construction service businesses as stipulated in article 3 paragraph (1) of the regulation.
In June 2023, the Government issued Minister of Finance Regulation No. 66/PMK.03/2023 concerning Income Tax Treatment of Reimbursement or Compensation in Relation to Work or Services Received or Obtained in Kind and/or Enjoyment. The Company ensures administrative and legal aspects of transactions, and builds intensive coordination between related units to implement these rules.
In December 2023, the Government issued Government Regulation No. 58 of 2023 concerning Income Tax Withholding Rates Article 21 on Income in Connection with Work, Services or Activities of Individual Taxpayers as well as Regulation of the Minister of Finance No. 168 of 2023 concerning Guidelines for Implementing Tax Deductions on Income in Connection with Work, Services or Individual Activities which will come into effect from January 1, 2024. With this provision, there is a change in the mechanism for calculating Income Tax Article 21 for Employees which previously used progressive rates in accordance with Article 17 of the Law -The Income Tax Law uses the average effective rate (TER) for Article 21 Income Tax deductions as regulated in the government regulation. The Company ensures that there is intensive coordination between related units to implement these regulations.
29. PENSION AND OTHER POST-EMPLOYMENT BENEFITS
The details of pension and other post-employment benefit liabilities are as follows:
| Notes |
| 2022 |
| 2023 | |
Pension benefit and other post-employment benefit obligations |
|
|
|
|
| |
Pension benefit |
|
|
|
|
| |
The Company - funded | 29a.i.a |
|
| |||
Defined pension benefit obligation | 29a.i.a.i |
| |
| | |
Additional pension benefit obligation | 29a.i.a.ii |
| |
| | |
The Company - unfunded | 29a.i.b |
| |
| | |
Telkomsel | 29a.ii |
| |
| | |
Projected pension benefit obligations |
|
| |
| | |
Net periodic post-employment health care benefit | 29b |
| — |
| | |
Other post-employment benefit | 29c |
| |
| | |
Long service employee benefit | 29d | | | |||
Obligation under the Labor Law | 29e |
| |
| | |
Total |
|
| |
| |
F-76
The details of net pension benefit expense recognized in the consolidated statements of profit or loss and other comprehensive income is as follows:
| Notes |
| 2021 |
| 2022 |
| 2023 | |
Pension benefit cost |
|
|
|
|
|
|
|
|
The Company - funded |
| 29a.i.a |
|
|
| |||
Defined pension benefit obligation |
| 29a.i.a.i |
| |
| |
| |
Additional pension benefit obligation |
| 29a.i.a.ii |
| — |
| |
| |
The Company - unfunded |
| 29a.i.b |
| |
| |
| |
Telkomsel | 29a.ii |
| |
| |
| | |
Total periodic pension benefit cost |
| |
| |
| | ||
Net periodic post-employment health care benefit cost | 25,29b |
| |
| |
| | |
Other post-employment benefit cost |
| 25,29c |
| |
| |
| |
Long service employee benefit cost | 25,29d | | | | ||||
Obligation under the Labor Law |
| 25,29e |
| |
| |
| |
Total |
|
|
| |
| |
| |
The amounts recognized in OCI are as follows:
| Notes |
| 2021 |
| 2022 |
| 2023 | |
Defined benefit plan actuarial gain (loss) | ||||||||
The Company - funded |
| 29a.i.a |
|
|
| |||
Defined pension benefit obligation |
| 29a.i.a.i |
| |
| |
| ( |
Additional pension benefit obligation |
| 29a.i.a.ii |
| |
| ( |
| |
The Company - unfunded |
| 29a.i.b |
| |
| |
| |
Telkomsel |
| 29a.ii |
| ( |
| |
| |
Others | ( | | | |||||
Post-employment health care benefit cost |
| 29b |
| |
| |
| ( |
Other post-employment benefit |
| 29c |
| |
| |
| ( |
Obligation under the Labor Law |
| 29e |
| |
| |
| |
Sub-total |
|
|
| |
| |
| ( |
Deferred tax effect at the applicable tax rates |
| 28h |
| ( |
| ( |
| |
Defined benefit plan acturial gain (loss) - net of tax |
|
|
| |
| |
| ( |
F-77
The following table presents the changes in projected pension benefit obligation and post-employment health care benefit obligations, changes in pension benefit and post-employment health care benefit plan assets, funded status of the pension plan and post-employment health care benefit plan, and net amount recognized in the consolidated statements of financial position as of December 31, 2022 and 2023, under the defined benefit pension plan:
Funded | Post-employment | |||||||||||||
Defined pension benefit obligation | health care benefit | |||||||||||||
The Company | Telkomsel | The Company | ||||||||||||
Projected | ||||||||||||||
Projected | Projected | post-employment | Post-employment | |||||||||||
pension | Pension | pension | Pension | health care | health care | |||||||||
benefit | benefit | benefit | benefit | benefit | benefit | |||||||||
| obligations |
| plan assets |
| obligations |
| plan assets |
| obligation |
| plan assets |
| Total | |
Balance, January 1, 2022 |
| |
| ( |
| |
| ( |
| |
| ( |
| |
Service costs |
| |
| — |
| |
| — |
| — |
| — |
| |
Interest costs (income) |
| |
| ( |
| |
| ( |
| |
| ( |
| |
Plan administration cost |
| — |
| |
| — |
| — |
| — |
| |
| |
Additional welfare benefits |
| |
| — |
| — |
| — |
| — |
| — |
| |
Cost recognized in the consolidated statement of profit or loss |
| |
| ( |
| |
| ( |
| |
| ( |
| |
Actuarial (gain) loss on: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Experience adjustments |
| ( |
| — |
| ( |
| — |
| ( |
| — |
| ( |
Changes in demographic assumptions |
| — |
| — |
| ( |
| — |
| — |
| — |
| ( |
Changes in financial assumptions |
| ( |
| — |
| ( |
| — |
| ( |
| — |
| ( |
Return on plan assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(excluding amount included in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
net interest expense) |
| — |
| |
| ( |
| |
| — |
| ( |
| |
Changes in asset ceiling | — |
| — |
| — |
| — |
| — |
| |
| | |
Cost recognized in OCI |
| ( |
| |
| ( |
| |
| ( |
| |
| ( |
Employer’s contributions |
| — |
| ( |
| — |
| — |
| — |
| — |
| ( |
Pension plan participants’ contributions |
| |
| ( |
| — |
| — |
| — |
| — |
| — |
Benefits paid from plan assets |
| ( |
| |
| ( |
| — |
| — |
| — |
| ( |
Benefits paid by employer |
| ( |
| — |
| — |
| — |
| ( |
| |
| ( |
Balance, December 31, 2022 |
| |
| ( |
| |
| ( |
| |
| ( |
| |
Projected pension benefit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
obligation at end of year |
| |
|
| |
|
| — |
|
|
| | ||
| Funded |
| Post-employment |
|
| |||||||||
Defined pension benefit obligation | health care benefit | |||||||||||||
The Company | Telkomsel | The Company | ||||||||||||
Projected | ||||||||||||||
Projected | Projected | post-employment | Post-employment | |||||||||||
pension | Pension | pension | Pension | health care | health care | |||||||||
benefit | benefit | benefit | benefit | benefit | benefit | |||||||||
| obligations |
| plan assets |
| obligations |
| plan assets |
| obligation |
| plan assets |
| Total | |
Balance, January 1, 2023 |
| |
| ( |
| |
| ( |
| |
| ( |
| |
Service costs |
| |
| — |
| |
| — |
| — |
| — |
| |
Settlement costs | ( | | — | — | — | — | — | |||||||
Interest costs (income) |
| |
| ( |
| |
| ( |
| |
| ( |
| |
Plan administration cost |
| ( |
| |
| — |
| |
| — |
| |
| |
Interest expense on effect of asset ceiling | — | — | — | — | — | | | |||||||
Additional welfare benefits |
| |
| — |
| — |
| — |
| — |
| — |
| |
Cost recognized in the consolidated statement of profit or loss |
| |
| ( |
| |
| ( |
| |
| ( |
| |
Actuarial (gain) loss on: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Experience adjustments |
| |
| — |
| ( |
| — |
| ( |
| — |
| ( |
Changes in demographic assumptions |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
Changes in financial assumptions |
| |
| — |
| ( |
| — |
| |
| — |
| |
Return on plan assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(excluding amount included in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
net interest expense) |
| — |
| ( |
| — |
| |
| — |
| ( |
| ( |
Changes in asset ceiling |
| — |
| — |
| — |
| — |
| — |
| ( |
| ( |
Cost recognized in OCI |
| |
| ( |
| ( |
| |
| |
| ( |
| |
Employer’s contributions |
| — |
| ( |
| — |
| ( |
| — |
| — |
| ( |
Pension plan participants’ contributions |
| |
| ( |
| — |
| — |
| — |
| — |
| — |
Benefits paid from plan assets |
| ( |
| |
| ( |
| — |
| ( |
| |
| ( |
Benefits paid by employer | ( | — | — | — | — | — | ( | |||||||
Benefit obligation from transferred employees | — | — | | ( | — | — | | |||||||
Effect on transfer of IndiHome business to Telkomsel |
| ( |
| |
| — |
| — |
| ( |
| |
| ( |
Balance, December 31, 2023 |
| |
| ( |
| |
| ( |
| |
| ( |
| |
Projected pension benefit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
obligation at end of year |
| |
|
| |
|
| |
|
|
| | ||
The following table presents the changes in unfunded projected pension benefit obligations, additional pension benefit obligations, other post-employment benefit obligations and obligations under the Labor
F-78
Law, changes in additional pension benefit plan assets, and net amount recognized in the consolidated statements of financial position as of December 31, 2022 and 2023, under the defined benefit pension plan:
The Company | ||||||||||||
The Company | and its subsidiaries | |||||||||||
Other |
| |||||||||||
Additional | post-employment | Long service | Obligations |
| ||||||||
pension benefit | benefit | employee | under |
| ||||||||
| Unfunded |
| obligations |
| obligations |
| benefit |
| the Labor Law |
| Total | |
Balance, January 1, 2022 | | — | | | | | ||||||
Service costs |
| |
| |
| |
| |
| |
| |
Interest costs |
| |
| — |
| |
| — |
| — |
| |
Cost recognized in the consolidated statement of profit or loss |
| |
| |
| |
| |
| |
| |
Actuarial gain recognized in OCI |
| ( |
| |
| ( |
| — |
| ( |
| ( |
Benefits paid by employer |
| ( |
| — |
| ( |
| ( |
| ( |
| ( |
Balance, December 31, 2022 |
| |
| |
| |
| |
| |
| |
|
|
|
|
|
|
|
| The Company | ||||
The Company | and its subsidiaries | |||||||||||
Other | ||||||||||||
Additional | post-employment | Long service | Obligations | |||||||||
pension benefit | benefit | employee | under | |||||||||
| Unfunded |
| obligations |
| obligations |
| benefit |
| the Labor Law |
| Total | |
Balance, January 1, 2023 | | | | | | | ||||||
Service costs |
| |
| — |
| |
| |
| |
| |
Interest costs |
| |
| |
| |
| — |
| |
| |
Cost recognized in the consolidated statement of profit or loss |
| |
| |
| |
| |
| |
| |
Actuarial (gain) loss recognized in OCI |
| ( |
| ( |
| |
| — |
| ( |
| ( |
Benefits paid by employer | ( | ( | ( | ( | ( | ( | ||||||
Effect on transfer of IndiHome business to Telkomsel |
| ( |
| |
| ( |
| — |
| |
| ( |
Balance, December 31, 2023 |
| |
| |
| |
| |
| |
| |
a. Pension benefit cost
i. The Company
(a) Funded pension plan
(i) Defined pension benefit obligation
The Company sponsors a defined benefit pension plan for employees with permanent status prior to July 1, 2002. The plan is governed by the pension laws in Indonesia and managed by Telkom Pension Fund (“Dana Pensiun Telkom” or “Dapen”). Pension Fund Management in accordance with the Pension Fund and Investment Directives Regulations determined by the Founder is carried out by the Board of Management. The Board of
F-79
Management is monitored by the Oversight Board consisting of representatives of the Company and participants.
The pension benefits are paid based on the participating employees’ latest basic salary at retirement and the number of years of their service. The participating employees contribute
Risks exposed to defined benefit programs are risks such as asset volatility and changes in bond yields. The project liabilities are calculated using a discount rate that refers to the level of government bond yields, if the return on program assets is lower, it will result in a program deficit. A decrease in the yield of government bonds will increase the program liabilities, although this will be offset in part by an increase in the value of the program bonds held. The Company ensures that the investment position is set within the framework of asset-liability matching ("ALM") that has been formed to achieve long-term results that are in line with the liabilities in the defined benefit pension plan. Within the ALM framework, the Company's objective is to adjust its pension assets and liabilities by investing in a well diversified portfolio to produce an optimal rate of return, taking into account the level of risk. Investment in the program has been well diversified, so that one investment's poor performance will not have a material impact on all asset groups.
As of December 31, 2022 and 2023, plan assets consist of:
2022 | 2023 | |||||||
| Quoted in |
|
| Quoted in |
| |||
active market | Unquoted | active market | Unquoted | |||||
Cash and cash equivalents |
| |
| — |
| |
| — |
Equity instruments: |
|
|
|
|
|
|
|
|
Financials |
| |
| — |
| |
| — |
Consumer non-cyclicals |
| |
| — |
| |
| — |
Basic material |
| |
| — |
| |
| — |
Infrastructures | | — | | — | ||||
Energy |
| |
| — |
| |
| — |
Technology |
| |
| — |
| |
| — |
Industrials |
| |
| — |
| |
| — |
Consumer Cyclicals |
| |
| — |
| |
| — |
Properties and real estate |
| |
| — |
| |
| — |
Healthcare | | — | | — | ||||
Transportation and logistic | | — | | — | ||||
Equity-based mutual fund |
| |
| — |
| |
| — |
Fixed income instruments: |
|
|
|
|
|
|
|
|
Corporate bonds |
| — |
| |
| — |
| |
Government bonds |
| |
| — |
| |
| — |
Fixed income mutual funds ("RDPT") |
| — |
| |
| — |
| |
Midterm notes ("MTN") | — | | — | | ||||
Asset-backed securities ("EBA") | — | | — | | ||||
Sukuk | — | | — | | ||||
Non-public equity: |
|
|
|
|
|
| ||
Direct placement |
| — |
| |
| — |
| |
Property |
| — |
| |
| — |
| |
Others |
| — |
| |
| — |
| |
Total |
| |
| |
| |
| |
F-80
Pension plan assets include Series B shares issued by the Company with fair values totalling Rp
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
Based on the Company regulations issued on September 30, 2022, regarding the Pension Fund Regulations from the Telkom Pension Fund, the Company stipulates that retirees who quit other than because of Disciplinary Punishment, Early Retirement, and at their own request and receive Pension Benefits of less than Rp
The actuarial valuation for the defined benefit pension plan was performed based on the measurement date as of December 31, 2021, with reports dated March 24, 2022 by KKA Santhi Devi and Ardianto Handoyo and, an independent actuary in association with Willis Towers Watson (“WTW”) and as of December 31, 2022 and 2023 with report dated March 18, 2023 and March 1, 2024, respectively, by KKA I Gde Eka Sarmaja, FSAI and Partner. The principal actuarial assumptions used by the independent actuary as of December 31, 2021, 2022 and 2023 are as follows:
| 2021 |
| 2022 |
| 2023 |
| |
Discount rate |
| | % | | % | | % |
Rate of compensation increases |
| | % | | % | | % |
Indonesian mortality table |
| 2019 |
| 2019 |
| 2019 |
(ii) Additional pension benefit obligation
Based on the Company Regulations issued on September 30, 2022, regarding the Regulations on Pension Funds from Telkom Pension Funds, the Company organizes a Defined Contribution Other Benefit Program (“PMLIP”) in the form of Additional Benefits. PMLIP participants are entitled to receive Periodic Pension Benefits every month in accordance with the provisions in the Pension Fund Regulations. Additional Benefit Funds are sourced from Employer Additional Benefit contributions and provision for investment development proceeds if the FSR is achieved above
The actuarial valuation for additional pension benefit was performed based on the measurement date as of December 31, 2021, with reports dated March 24, 2022 by KKA Santhi Devi and Ardianto Handoyo and, an independent actuary in association with WTW and as of December 31, 2022 and 2023 with report dated March 18, 2023 and March 1,
F-81
2024, respectively, by KKA I Gde Eka Sarmaja, FSAI and Partner. The principal actuarial assumptions used by the independent actuary as of December 31, 2021, 2022 and 2023 are as follows:
| 2021 |
| 2022 |
| 2023 |
| |
Discount rate |
| | % | | % | | % |
Indonesian mortality table |
| 2019 |
| 2019 |
| 2019 |
Additional pension benefit obligation has been set aside since 2018 according to the approval by the Oversight Board. As of December 31, 2023, there are no additional obligations set aside because the requirements for recognizing additional benefits as mentioned above have not been fulfilled.
(b) Unfunded pension plan
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 with permanent status hired on or after July 1, 2002. The plan is managed by Financial Institutions Pension Fund (Dana Pensiun Lembaga Keuangan or “DPLK”). The Company’s contribution to DPLK is determined based on a certain percentage of the participants’ salaries and amounted to Rp
Since 2007, the Company has provided pension benefit based on uniformization for both participants prior to and from April 20, 1992 effective for employees retiring beginning February 1, 2009. In 2010, the Company replaced the uniformization 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 Company also provides benefits to employees during a pre-retirement period in which they are inactive for
The actuarial valuation for the defined benefit pension plan was performed based on the measurement date as of December 31, 2021, with reports dated March 24, 2022 by KKA Santhi Devi and Ardianto Handoyo and, an independent actuary in association with WTW and as of December 31, 2022 and 2023 with report dated March 8, 2023 and March 1, 2024, respectively, by KKA I Gde Eka Sarmaja, FSAI and Partner. The principal actuarial assumptions used by the independent actuary as of December 31, 2021, 2022 and 2023 are as follows:
| 2021 |
| 2022 |
| 2023 | ||
Discount rate |
| ||||||
Rate of compensation increases |
| ||||||
Indonesian mortality table |
| 2019 |
| 2019 |
| 2019 |
ii. Telkomsel
Telkomsel provides a defined benefit pension plan to its employees. Under this plan, employees are entitled to pension benefits determined based on their latest basic salary or take-home pay (exclusive of functional allowances) and number of service years. The plan is managed by PT
F-82
Asuransi Jiwasraya (Persero) (“Jiwasraya”), a state-owned life insurance company, through an annuity insurance contract. Until 2004, employees contributed
On April 23, 2021, Telkomsel and Jiwasraya agreed to terminate the insurance program contract (as mentioned above) and entered into restructuring agreement. The agreement replaced the benefit plan from annuities to lumpsum benefit. Based on this agreement, both parties agreed to determine the Cash Value ("CV”) at the termination date which divided into CV for active participant and passive participant amounting to Rp
On June 27, 2023, the Company and Telkomsel signed an agreement regarding Dapen to appoint Telkomsel as a Partner of the Company as the sole Founder, which resulted in rights and obligations to Telkomsel as governed in the Pension Fund Agreement effective from the business transfer of IndiHome consumer business segment to Telkomsel.
Effective from the business transfer of IndiHome consumer business segment to Telkomsel, Telkomsel sponsors a defined benefit pension plan for transferring employees hired prior to July 1, 2002. The plan is governed by the pension laws in Indonesia and managed by Dapen. Dapen is managed in accordance with the Pension Fund and Investment Directives Regulations, which is determined by the Company as the Founder and is carried out by the Board of Management. The Board of Management is monitored by the Oversight Board, appointed by the Founder.
The pension benefits are paid based on the participating employee’s latest basic salary at retirement and the number of years of their service. The participating employees contribute
The actuarial valuation for the defined benefit pension plan was performed based on the measurement date as of December 31, 2021 with reports dated March 24, 2022 by KKA Santhi Devi and Ardianto Handoyo, an independent actuary in association with WTW, and as of December 31, 2022 and 2023 with report dated February 28, 2023 and March 5, 2024, respectively, by KKA Halim and Partner, an independent actuary in association with Milliman. The principal actuarial assumptions used by the independent actuary as of December 31, 2021, 2022 and 2023, are as follows:
| 2021 |
| 2022 |
| 2023 |
| |
Discount rate |
| 6.75% - 7.25% | |||||
Rate of compensation increases |
| 6.10% - 8.00% | 7.50% - 8.00% | ||||
Indonesian mortality table |
| 2019 |
| 2019 |
| 2019 |
b. Post-employment health care benefit cost
The Company provides post-employment health care benefits to all its employees hired before November 1, 1995 who have worked for the Company for
F-83
are no longer entitled to this plan. The plan is managed by Yayasan Kesehatan Telkom (“Yakes Telkom”).
The defined contribution post-employment health care benefit plan is provided to employees with permanent status hired on or after November 1, 1995 or employees with terms of service less than
2022 | 2023 | |||||||
Quoted in | Quoted in | |||||||
| active market |
| Unquoted |
| active market |
| Unquoted | |
Cash and cash equivalents |
| |
| — |
| |
| — |
Equity instruments: |
|
|
|
|
|
|
|
|
Financials |
| |
| — |
| |
| — |
Consumer Non-Cyclicals |
| |
| — |
| |
| — |
Basic material |
| |
| — |
| |
| — |
Infrastructures | | — | | — | ||||
Energy |
| |
| — |
| |
| — |
Technology |
| |
| — |
| |
| — |
Industrials |
| |
| — |
| |
| — |
Consumer Cyclicals |
| |
| — |
| |
| — |
Properties and real estate |
| |
| — |
| |
| — |
Healthcare | | — | | — | ||||
Transportation and logistic |
| |
| — |
| |
| — |
Equity-based mutual funds |
| |
| — |
| |
| — |
Fixed income instruments: |
|
|
|
|
|
| ||
Government obligations | | — | | — | ||||
Corporate obligations | — | — | | — | ||||
Fixed income mutual funds |
| |
| — |
| |
| — |
Unlisted shares: |
|
|
|
| ||||
Private placement |
| — |
| |
| — |
| |
Total |
| |
| |
| |
| |
Yakes Telkom plan assets also include Series B shares issued by the Company with fair value totaling Rp
The actuarial valuation for post-employment health care benefit was performed based on the measurement date as of December 31, 2021, with reports dated March 24, 2022 by KKA Santhi Devi and Ardianto Handoyo and, an independent actuary in association with WTW and as of December 31, 2022 and 2023 with report dated March 8, 2023 and March 1, 2024, respectively, by
F-84
KKA I Gde Eka Sarmaja, FSAI and Partner. The principal actuarial assumptions used by the independent actuary as of December 31, 2021, 2022 and 2023 are as follows:
| 2021 |
| 2022 |
| 2023 |
| |
Discount rate |
| | % | | % | | % |
Health care costs trend rate assumed for next year |
| | % | | % | | % |
Ultimate health care costs trend rate |
| | % | | % | | % |
Year that the rate reaches the ultimate trend rate |
| 2021 |
| 2022 | 2023 | ||
Indonesian mortality table |
| 2019 |
| 2019 | 2019 |
c. Other post-employment benefits cost
The Company provides other post-employment 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") and death allowance (Meninggal Dunia or "MD" allowance) is given to employees who have passed away with an amount of 12 times from the last salary.
The actuarial valuation for other post-employment benefit was performed based on the measurement date as of December 31, 2021, with reports dated March 24, 2022 by KKA Santhi Devi and Ardianto Handoyo and, an independent actuary in association with WTW and as of December 31, 2022 and 2023 with report dated March 8, 2023 and March 1, 2024, respectively, by KKA I Gde Eka Sarmaja, FSAI and Partner. The principal actuarial assumptions used by the independent actuary as of December 31, 2021, 2022 and 2023 are as follows:
| 2021 |
| 2022 |
| 2023 |
| |
Discount rate |
| | % | | % | | % |
Indonesian mortality table |
| 2019 |
| 2019 |
| 2019 |
d. Long service employee benefit
The Company provides long service employee benefit to employee hired before July 1, 2002 and have a service period of more than
e. Obligation under the Labor Law
Under Law No. 11 Year 2020, the Group is required to provide minimum pension benefits, if not covered yet by the sponsored pension plans, to its employees upon retirement. Total obligation recognized as of December 31, 2022 and 2023 amounted to Rp
F-85
f. Maturity Profile of Defined Benefit Obligation (“DBO”)
The timing of benefits payments and weighted average duration of DBO for 2022 and 2023 are as follows:
Expected Benefits Payment | ||||||||||||||
| The Company |
|
|
| ||||||||||
Funded |
|
| Post-employment |
| Other post- | Post-employment | ||||||||
Defined pension | Additional pension | health care | employment | benefits | ||||||||||
Time Period |
| benefit obligation |
| benefit obligation |
| Unfunded |
| Telkomsel |
| benefits |
| benefits |
| UUCK (Telkom) |
2022 | ||||||||||||||
Within next 10 years |
| |
| |
| |
| |
| |
| | | |
Within 10-20 years |
| |
| |
| |
| |
| |
| | | |
Within 20-30 years |
| |
| |
| |
| |
| |
| | | |
Within 30-40 years |
| |
| |
| |
| |
| |
| | | |
Within 40-50 years |
| |
| |
| — |
| — |
| |
| — | — | |
Within 50-60 years |
| |
| — |
| — |
| — |
| |
| — | — | |
Within 60-70 years |
| |
| — |
| — |
| — |
| |
| — | — | |
Within 70-80 years |
| — |
| — |
| — |
| — |
| |
| — | — | |
Weighted average duration of DBO |
|
|
|
|
|
| ||||||||
2023 | ||||||||||||||
Within next 10 years |
| | | | | | | | ||||||
Within 10-20 years |
| | | | | | | | ||||||
Within 20-30 years |
| | | | | | | | ||||||
Within 30-40 years |
| | | | | | | | ||||||
Within 40-50 years |
| | | — | — | | — | — | ||||||
Within 50-60 years |
| | — | — | — | | — | — | ||||||
Within 60-70 years |
| | — | — | — | | — | — | ||||||
Within 70-80 years |
| — | — | — | — | | — | — | ||||||
Weighted average duration of DBO |
| |||||||||||||
g. Sensitivity Analysis
As of December 31, 2022, and 2023,
Discount Rate | Rate of Compensation | |||||||
| ||||||||
| Increase (decrease) in amounts |
| Increase (decrease) in amounts | |||||
Sensitivity | ||||||||
2022 | ||||||||
Funded: |
| |||||||
Defined pension benefit obligation |
| ( |
| |
| |
| ( |
Unfunded |
| ( |
| |
| |
| ( |
Telkomsel |
| ( |
| |
| |
| ( |
Post-employment health care benefits |
| ( |
| |
| |
| ( |
Other post-employment benefits |
| ( | | — | — | |||
Post-employment benefits UUCK (Telkom) | ( | | | ( | ||||
2023 |
| |||||||
Funded: |
| |||||||
Defined pension benefit obligation |
| ( |
| |
| |
| ( |
Unfunded |
| ( | | | ( | |||
Telkomsel |
| ( | | | ( | |||
Post-employment health care benefits |
| ( | | | ( | |||
Other post-employment benefits |
| ( | | | ( | |||
Post-employment benefits UUCK (Telkom) | ( | | | ( | ||||
F-86
The sensitivity analysis was 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 DBO at the end of the year. 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 analysis from the previous period.
30. LONG SERVICE AWARDS ("LSA") PROVISIONS
Telkomsel and Telkomsat provide certain cash awards or certain number of days leave benefits to their employees based on the employees’ length of service requirements, including LSA and Long Service Leaves ("LSL"). LSA are either paid at the time the employees reach certain years of 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 meet the requisite number of years of service and reach a certain minimum age.
The obligation with respect to these awards which was determined based on an actuarial valuation using the Projected Unit Credit method amounted to Rp
31. RELATED PARTY 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 |
| Nature of accounts/ transactions |
|---|---|---|---|---|
The Government Ministry of Finance | Majority stockholder | Internet and data service revenues, other telecommunication service revenues, finance income, finance costs, and investment in financial instruments | ||
Government agencies | Entities under common control | Network service revenues, internet and data service revenues, other telecommunication revenues, life insurance expenses, press release expenses, customer education expenses, office building lease expenses, consultant expenses, training expenses, finance income, and purchase of property and equipments | ||
MoCI | Entity under common control | Concession fees, radio frequency usage charges, USO charges, telecommunication service revenues, and license expenses | ||
State-owned enterprises | ||||
Indosat | Entity under common control | Interconnection revenues, leased lines revenues, satellite transponder usage revenues, interconnection expenses, telecommunication facilities usage expenses, operating and maintenance expenses, and usage of data communication network system expenses | ||
PT Pertamina (Persero) (“Pertamina”) | Entity under common control | Internet and data service revenues and other telecommunication service revenues | ||
State-owned banks | Entities under common control | Finance income and finance costs | ||
Bank Mandiri | Entity under common control | Internet and data service revenues, other telecommunication service revenues, finance income, finance costs, cash in bank, time deposits, loan, and consultant expenses | ||
BNI | Entity under common control | Internet and data service revenues, other telecommunication service revenues, finance income, finance costs, cash in bank, time deposits, loan, consultant expenses, and financing | ||
BRI | Entity under common control | Internet and data service revenues, other telecommunication service revenues, finance income, finance costs, cash in bank, time deposits, and loan | ||
PT Taspen (Persero) (“Taspen”) | Entity under common control | Internet and data service revenues and other telecommunication service revenues | ||
PT Perusahaan Listrik Negara (“PLN”) | Entity under common control | Internet and data service revenues, other telecommunication service revenues, and electrical utility expenses |
F-87
Related parties |
| Nature of relationships |
| Nature of accounts/ transactions |
|---|---|---|---|---|
PT Asuransi Jasa Indonesia (“Jasindo”) | Entity under common control | Property and equipment insurance expenses and personal insurance expenses | ||
PT BNI Life Insurance (“BNI Life Insurance”) | Entity under common control | Medical expenses | ||
Bahana TCW | Entity under common control | Mutual funds | ||
Sarana Multi Infrastruktur | Entity under common control | Other borrowings and finance costs | ||
BTN | Entity under common control | Cash in bank and time deposits | ||
BSI | Entity under common control | Cash in bank, time deposits, and loan | ||
PT Omni Inovasi Indonesia Tbk. (“Omni Inovasi Indonesia”) | Associated company | Distribution of SIM cards and pulse reload voucher | ||
PT Fintek Karya Nusantara (“Finarya”) | Associated company | Marketing expenses and distribution of SIM cards and pulse reload voucher | ||
Indonusa | Associated company | Internet and data service revenues and other telecommunication service revenues | ||
PT Kereta Cepat Indonesia China (“KCIC”) | Other related entity | Other telecommunication service revenues | ||
Padi UMKM | Other related entity | Operational and maintenance expenses, collection fees, training expenses, internal security expenses, research and development expenses, printing expenses, meeting expenses, general and other administrative expenses, promotion expenses, advertising expenses, sales fees, customer education expenses, and marketing expenses | ||
Directors | Key management personnel | Honorarium and facilities | ||
Commissioners | Supervisory personnel | Honorarium and facilities |
The outstanding balances of trade receivables and payables as of December 31, 2022 and 2023 are unsecured and interest-free and the settlement is expected to occur in cash. There have been
b.Significant transactions with related parties
The following are significant transactions with related parties:
2021 | 2022 | 2023 | ||||||||||
|
| % of total |
|
| % of total |
|
| % of total | ||||
Amount | revenues | Amount | revenues | Amount | revenues | |||||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
Majority stockholder |
|
|
|
|
|
|
|
|
|
|
|
|
Ministry of Finance |
| |
| |
| |
| |
| |
| |
Entities under common control |
|
|
|
|
|
|
|
|
| |||
Government agencies |
| |
| |
| |
| |
| |
| |
Indosat |
| |
| |
| |
| |
| |
| |
Pertamina | | | | | | |||||||
MoCI | | | | | | | ||||||
BNI |
| |
| |
| |
| |
| |
| |
BRI | | | | | | | ||||||
Bank Mandiri | | | | | | | ||||||
Taspen | | | | | | | ||||||
Others (each below Rp100 billion) |
| |
| |
| |
| |
| |
| |
Sub-total |
| |
| |
| |
| |
| |
| |
Associated companies |
| |
| |
| |
| |
| |
| |
Other related entities | | | | | | | ||||||
Total |
| |
| |
| |
| |
| |
| |
F-88
2021 | 2022 | 2023 | ||||||||||
|
| % of total |
|
| % of total |
|
| % of total | ||||
Amount | expenses | Amount | expenses | Amount | expenses | |||||||
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Entities under common control | ||||||||||||
MoCI |
| |
| |
| |
| |
| | | |
PLN |
| |
| |
| |
| |
| | | |
Indosat |
| |
| |
| |
| |
| | | |
Jasindo |
| |
| |
| |
| |
| | | |
Government agencies |
| |
| |
| |
| |
| | | |
BNI Life Insurance | — | — | — | — | | | ||||||
Bank Mandiri | | | — | — | | | ||||||
Others (each below Rp100 billion) |
| |
| |
| |
| |
| | | |
Sub-total |
| |
| |
| |
| |
| |
| |
Associated companies |
|
|
|
|
|
|
|
|
|
|
|
|
Finarya |
| |
| | | | | | ||||
Others (each below Rp100 billion) |
| |
| |
| |
| |
| |
| |
Sub-total |
| |
| |
| |
| |
| |
| |
Other related entities |
|
|
|
|
|
|
|
|
|
|
|
|
Padi UMKM |
| |
| |
| |
| |
| |
| |
Others (each below Rp100 billion) |
| |
| |
| |
| |
| |
| |
Sub-total |
| |
| |
| |
| |
| |
| |
Total |
| |
| |
| |
| |
| |
| |
2021 | 2022 | 2023 | ||||||||||
|
| % of total |
|
| % of total |
|
| % of total | ||||
Amount | finance income | Amount | finance income | Amount | finance income | |||||||
Finance income |
|
|
|
|
|
|
|
|
|
|
|
|
Entities under common control |
|
|
|
|
|
|
|
|
|
|
|
|
State-owned banks |
| |
| |
| |
| |
| |
| |
Government agencies | | | | | | | ||||||
Total |
| |
| |
| |
| |
| |
| |
2021 | 2022 | 2023 | ||||||||||
|
| % of total |
|
| % of total |
|
| % of total | ||||
Amount | finance cost | Amount | finance cost | Amount | finance cost | |||||||
Finance cost |
|
|
|
|
|
|
|
|
|
|
|
|
Majority stockholder |
|
|
|
|
|
|
|
|
|
|
|
|
Ministry of Finance |
| |
| |
| |
| |
| |
| |
Entities under common control |
|
|
|
|
|
| ||||||
State-owned banks |
| |
| |
| |
| |
| |
| |
Sarana Multi Infrastruktur |
| |
| |
| |
| |
| |
| |
Sub-total | | | | | | | ||||||
Total |
| |
| |
| |
| |
| |
| |
F-89
2021 | 2022 | 2023 | ||||||||||
|
| % of total |
|
| % of total |
|
| % of total | ||||
Amount | revenues | Amount | revenues | Amount | revenue | |||||||
Distribution of SIM card and voucher |
|
|
|
|
|
|
|
|
|
|
|
|
Associated companies |
|
|
|
|
|
| ||||||
Omni Inovasi Indonesia | | | | | | | ||||||
Finarya |
| — |
| — |
| |
| |
| |
| |
Total |
| |
| |
| |
| |
| |
| |
| 2022 | 2023 | ||||||
|
| % of total |
|
| % of total | |||
Amount | property and | Amount | property and | |||||
Purchase of property and equipment |
|
|
|
|
|
|
|
|
Entities under common control |
| |
| |
| |
| |
Total |
| |
| |
| |
| |
c. Balance of accounts with related parties
2022 | 2023 | |||||||
|
| % of total |
|
| % of total | |||
Amount | assets | Amount | assets | |||||
Cash and cash equivalents (Note 4) |
| |
| |
| |
| |
Other current financial assets (Note 5) |
| |
| |
| |
| |
Trade receivables (Note 6) |
| |
| |
| |
| |
Contract assets | ||||||||
Majority stockholder | ||||||||
Ministry of Finance | | | | | ||||
Entities under common control | ||||||||
Government agencies | | | | | ||||
Others (each below Rp100 billion) | | | | | ||||
Sub-total | | | | | ||||
Associated companies | | | | | ||||
Other related entities | | | | | ||||
Total | | | | | ||||
Other current assets |
|
|
|
|
|
|
|
|
Entities under common control |
|
|
|
|
|
|
|
|
MoCI |
| |
| |
| |
| |
Others |
| |
| |
| |
| |
Sub-total |
| |
| |
| |
| |
Associated companies | | | | | ||||
Other related entities |
| — |
| — |
| |
| |
Total |
| |
| |
| |
| |
Other non-current assets |
|
|
|
|
|
|
|
|
Entities under common control |
|
|
|
|
|
|
|
|
MoCI |
| |
| |
| |
| |
Others |
| |
| |
| |
| |
Total |
| |
| |
| |
| |
F-90
2022 | 2023 | |||||||
|
| % of total |
|
| % of total | |||
Amount | liabilities | Amount | liabilities | |||||
Trade payables (Note 16) |
|
|
|
|
|
|
|
|
Majority stockholder |
|
|
|
|
|
|
|
|
Ministry of Finance |
| |
| |
| |
| |
Entities under common control |
|
|
|
|
|
|
|
|
MoCI |
| |
| |
| |
| |
Indosat |
| |
| |
| |
| |
BNI | | | | | ||||
Bank Mandiri | | | | | ||||
Others (each below Rp100 billion) |
| |
| |
| |
| |
Sub-total |
| |
| |
| |
| |
Associated companies |
| |
| |
| |
| |
Other related entities | | | | | ||||
Total |
| |
| |
| |
| |
Accrued expenses |
|
|
|
|
|
|
|
|
Majority stockholder |
|
|
|
|
|
|
|
|
Ministry of Finance |
| |
| |
| |
| |
Entities under common control |
|
|
|
|
|
|
| |
PLN |
| |
| |
| |
| |
Others |
| |
| |
| |
| |
Sub-total |
| |
| |
| |
| |
Total |
| |
| |
| |
| |
2022 | 2023 | |||||||
|
| % of total |
|
| % of total | |||
Amount | liabilities | Amount | liabilities | |||||
Contract liabilities | ||||||||
Majority stockholder | ||||||||
Ministry of Finance | | | | | ||||
Entities under common control | ||||||||
Government agencies | | | | | ||||
MoCI | | | | | ||||
Others (each below Rp100 billion) | | | | | ||||
Sub-total | | | | | ||||
Associated companies | | | | | ||||
Other related entities | ||||||||
KCIC | — | — | | | ||||
Others | | | | | ||||
Sub-total | | | | | ||||
Total | | | | | ||||
Short-term bank loans (Note 19a) |
| |
| |
| | | |
Two-step loans (Note 20a) |
| |
| |
| | | |
Long-term bank loans (Note 20c) |
| |
| |
| | | |
Other borrowings (Note 20d) |
| |
| |
| | | |
d. Significant agreements with related parties
i. The Government
The Company obtained two-step loans from the Government (Note 20a).
F-91
ii. Indosat
The Company has an agreement with Indosat to provide international telecommunication 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 Global System for Mobile ("GSM”) cellular telecommunication 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 telecommunication 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 enabling Indosat’s mobile customers to access the Company’s International Direct Dialing (“IDD”) service by dialing “007”.
The Company has been handling customer billings and collections for Indosat. Indosat is gradually taking over the activities and performing its own direct billing and collection. The Company has received compensation from Indosat computed at
On December 18, 2017, the Company and Indosat signed amendments to the interconnection agreements for the fixed line networks (local, Sambungan Langsung Jarak Jauh (“SLJJ”), and international) and mobile network for the implementation of cost-based tariff obligations under MoCI Regulation No. 8/Year 2006. These amendments took effect starting from January 1, 2018.
Telkomsel also entered into an agreement with Indosat for the provision of international telecommunication services to its GSM mobile cellular customers.
The Company also provides leased lines to Indosat and its subsidiaries, namely PT Aplikanusa Lintasarta ("Lintasarta"). The leased lines can be used by these companies for telephone, telegraph, data, telex, facsimile, or other telecommunication services.
iii. Others
The Company entered into an agreement with Lintasarta for the use of satellite transponders or the Company's subscribed circuit telecommunication satellite frequency channels.
e. Remuneration of key management and supervisory personnel
Key management personnel consists of the Directors of the Company and supervisory personnel consists of the Board of Commissioners.
F-92
The Company provides remuneration in the form of salaries/honorarium and facilities to support the governance and oversight duties of the Board of Commissioners along with the leadership and management duties of the Directors. Total of such remuneration is as follows:
2021 | 2022 | 2023 |
| ||||||||||
|
| % of total |
|
| % of total |
|
| % of total |
| ||||
Amount | expenses | Amount | expenses | Amount | expenses |
| |||||||
Board of Directors |
| |
| | |
| | |
| | |||
Board of Commissioners |
| |
| | |
| | |
| | |||
The amounts disclosed in the table are amounts recognized as general and administration expense during the reporting periods.
32. OPERATING SEGMENTS
The Group has
Management monitors the operating results of the business units separately for the purpose of decision-making about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss and is measured on the basis of Indonesian Financial Accounting Standards which differs from IFRS primarily in the accounting for land rights. However, the financing activities and income taxes are managed on group basis and are not separately monitored and allocated to operating segments.
Segment revenues and expenses include inter-segment transactions and are accounted at prices that management believes represent market prices.
2021 | ||||||||||||||||
|
|
|
|
| Total |
| Adjustment and |
| Total | |||||||
| Mobile | Consumer | Enterprise | WIB | Others | segment | elimination | consolidated | ||||||||
Segment results |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External revenues |
| |
| |
| |
| |
| |
| |
| |
| |
Inter-segment revenues |
| |
| |
| |
| |
| |
| |
| ( |
| — |
Total segment revenues |
| |
| |
| |
| |
| |
| | ( | | ||
Segment results |
| |
| |
| ( |
| |
| |
| | ( | | ||
Other information |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Capital expenditures |
| ( |
| ( |
| ( |
| ( |
| ( |
| ( |
| ( |
| ( |
Depreciation and amortization |
| ( |
| ( |
| ( |
| ( |
| ( |
| ( |
| |
| ( |
Provision recognized in current year |
| ( |
| ( |
| ( |
| |
| ( |
| ( |
| ( |
| ( |
F-93
2022 | ||||||||||||||||
|
|
|
|
| Total |
| Adjustment and |
| Total | |||||||
| Mobile | Consumer | Enterprise | WIB | Others | segment | elimination | consolidated | ||||||||
Segment results |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External revenues |
| |
| |
| |
| |
| |
| |
| |
| |
Inter-segment revenues |
| |
| |
| |
| |
| |
| |
| ( |
| — |
Total segment revenues |
| |
| |
| |
| |
| |
| | ( | | ||
Segment results |
| |
| |
| |
| |
| ( |
| | ( | | ||
Other information |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Capital expenditures |
| ( |
| ( |
| ( |
| ( |
| ( |
| ( |
| ( |
| ( |
Depreciation and amortization |
| ( |
| ( |
| ( |
| ( |
| ( |
| ( |
| |
| ( |
Provision recognized in current year |
| ( |
| ( |
| ( |
| |
| ( |
| ( |
| |
| ( |
2023 | ||||||||||||||||
|
|
|
|
|
| Total |
| Adjustment and |
| Total | ||||||
Mobile | Consumer | Enterprise | WIB | Others | segment | elimination | consolidated | |||||||||
Segment results |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
External revenues |
| |
| | | | |
| |
| |
| | |||
Inter-segment revenues |
| | ( | | | |
| |
| ( |
| — | ||||
Total segment revenues |
| | | | | |
| | ( | | ||||||
Segment results |
| | | | | ( |
| | ( | | ||||||
Other information |
|
|
|
|
|
|
| |||||||||
Capital expenditures |
| ( | ( | ( | ( | ( |
| ( |
| ( |
| ( | ||||
Depreciation and amortization |
| ( | ( | ( | ( | ( |
| ( |
| |
| ( | ||||
Provision recognized in current year |
| ( | ( | | ( | ( |
| ( |
| |
| ( | ||||
Adjustments and eliminations:
| a. | Revenue reconciliation |
| 2021 |
| 2022 |
| 2023 | |
Total segment revenues |
| |
| |
| |
Revenue from other non-operating segments |
| |
| |
| |
Adjustment and inter-segment elimination |
| ( |
| ( |
| ( |
Consolidated revenues |
| |
| |
| |
F-94
| b. | Segment results reconciliation |
| 2021 |
| 2022 |
| 2023 | |
Total segment results |
| |
| |
| |
Loss from other non-operating segments |
| ( |
| ( |
| ( |
Adjustment and inter-segment elimination |
| ( |
| ( |
| |
Finance income |
| |
| |
| |
Finance cost |
| ( |
| ( |
| ( |
Share of profit (loss) of long-term investment in associates |
| ( |
| ( |
| |
IFRS reconciliation |
| |
| |
| |
Consolidated profit before income tax |
| |
| |
| |
| c. | Capital expenditure reconciliation |
| 2021 |
| 2022 |
| 2023 | |
Total segment capital expenditure |
| ( |
| ( |
| ( |
Capital expenditure from other non-operating segments |
| ( |
| ( |
| ( |
IFRS reconciliation |
| |
| |
| |
Consolidated capital expenditure |
| ( |
| ( |
| ( |
| d. | Depreciation and amortization reconciliation |
| 2021 |
| 2022 |
| 2023 | |
Total segment depreciation and amortization |
| ( |
| ( |
| ( |
Depreciation and amortization from other non-operating segments |
| ( |
| ( |
| ( |
Adjustment and inter-segment elimination |
| |
| |
| |
IFRS reconciliation |
| |
| |
| |
Consolidated depreciation and amortization |
| ( |
| ( |
| ( |
| e. | Provision recognized in current year reconciliation |
| 2021 |
| 2022 |
| 2023 | |
Total segment provision |
| ( |
| ( |
| ( |
Provision recognized from other non-operating segments |
| ( |
| ( |
| ( |
Adjustment and inter-segment elimination |
| ( |
| |
| |
Consolidated provision recognized in current year |
| ( |
| ( |
| ( |
Geographic information:
2021 | 2022 | 2023 | ||||
External revenues | ||||||
Indonesia | | | | |||
Abroad | | | | |||
Total | | | |
The revenue information above is based on the location of the customers.
F-95
There are no revenue from major customer which exceeds 10% of total revenues for the year ended December 31, 2021, 2022, and 2023.
| 2022 |
| 2023 | |
Non-current operating assets |
|
|
|
|
Indonesia |
| |
| |
Abroad |
| |
| |
Total |
| |
| |
Non-current operating assets for segment reporting purpose consist of property and equipment and intangible assets.
33. SIGNIFICANT COMMITMENTS AND AGREEMENTS
a. Capital expenditures
As of December 31, 2023, capital expenditures committed under the contractual arrangements are Rp
The above balance includes the following significant agreements:
Contracting parties |
| Date of agreement |
| Significant part of the agreement |
Telkomsel and PT Phincon | September 12, 2019 - September 12, 2024 | Development and Rollout Agreement ("DRA") and Technical Support Agreement ("TSA") Customer Relationship Management ("CRM") Solution System Integrator | ||
Telkomsel, PT Ericsson Indonesia, PT Huawei Tech Investment, and PT ZTE Indonesia | February 1, 2021 - | Procurement Agreement for Radio Ultimate Solution ("ROA") and TSA | ||
Telkomsel, PT Sempurna Global Pratama, PT Lintas Teknologi Indonesia, and PT Ericsson Indonesia | September 1, 2021 - September 1, 2024 | Procurement Agreement of Next Generation of Gateway GPRS Support Node ("GGSN") (Virtualized EPC) | ||
Telkomsel, Amdocs Software Solutions Limited Liability Company, and PT Application Solutions | October 8, 2021 – October 8, 2024 | Agreement Online Charging System (“OCS”) and Service Control Points (“SCP”) System Solution Development | ||
Telkomsel and PT Application Solutions | October 8, 2021 - October 8, 2024 | TSA for OCS and SCP | ||
Telkomsat and Thales Alenia Space France ("TAS") | October 28, 2021 - October 27, 2037 | Procurement and Installation Agreement of HTS 113BT Satellite System | ||
Telkomsel and PT Ericsson Indonesia | February 13, 2022 - February 12, 2025 | Procurement Agreement for CS Core Solution ROA and TSA | ||
Telkomsel and PT Lintas Teknologi Indonesia | February 13, 2022 - February 12, 2025 | Procurement Agreement for CS Core Solution ROA and TSA | ||
Telkomsel and PT Huawei Tech Investment | March 24, 2022 - March 24, 2025 | Procurement Agreement for GGSN | ||
Telkomsat and Space Exploration Technologies Corporation ("SpaceX") | April 19, 2022 - June 30, 2025 | Procurement Agreement for Launch Service of HTS 113BT Satellite |
b. Borrowings and other credit facilities
(i) As of December 31, 2023, the Company has bank guarantee facilities for tender bonds, performance bonds, maintenance bonds, deposit guarantee, and advance payment bonds for various projects of the Company, as follows:
Lenders |
| Total facility |
| Maturity |
| Currency |
| Facility utilized |
BRI |
| |
| March 14, 2024 |
| Rp |
| |
BNI |
| |
| March 31, 2024 |
| Rp |
| |
Bank Mandiri |
| |
| June 21, 2025 |
| Rp |
| |
Total |
| |
|
|
|
|
| |
F-96
The Company has sufficient bank facilities to meet their current obligations (Note 34b.v).
(ii) As of December 31, 2023, Telkomsel has bank guarantee facilities for various projects, as follows:
Lenders |
| Total facility |
| Maturity |
| Currency | Facility utilized | |
BRI |
| |
| September 25, 2028 | Rp |
| | |
BNI |
| |
| December 11, 2024 |
| Rp |
| |
Total |
| |
|
|
|
|
| |
Bank guarantee facility with BRI and BNI are mainly for performance bond and surety bond of radio frequency (Note 33c.i)
(iii) Telin has a bank guarantee facilities from Bank Mandiri with a maximum credit limit of US$
c. Others
(i) | Radio frequency usage |
With reference to Law No. 36 of 1999, the use of radio frequency spectrum and the cost of using radio frequency are determined by the government. With reference to the Decision Letter No. 025/TEL.01.02/2022 Year 2022 dated January 28, 2022 of the MoCI, the MoCI granted Telkomsel the rights to provide mobile telecommunication services with radio frequency bandwidth in the 800 MHz, 900 MHz, 1,800 MHz, 2.1 GHz and 2.3 GHz; and basic telecommunication services.
With reference to Decision Letters No. 509 Year 2016, No. 1896 year 2017, No. 806 Year 2019, No.620 Year 2020, No. 178 Year 2021, No. 479 Year 2022, No. 90 Year 2023, and No. 188 Year 2023 of the MoCI, Telkomsel is required, among other things, to:
1. | Issue a surety bond each year amounting Rp |
2. | Issue a surety bond each year amounting Rp |
3. | Issue a surety bond amounting Rp |
4. | Pay an annual right of usage (“BHP”) as set forth in the decision letters. The BHP is payable upon receipt of Surat Pemberitahuan Pembayaran (notification letter) from the DGPI. The BHP fee is payable annually up to the expiry period of the license. |
The following are radio frequency band licenses owned by Telkomsel along with the BHP fees paid during current year:
1. | Radio frequency for band 800 MHz, 900 MHz, and 1,800 MHz |
Based on Decree No. 620 Year 2020 of the MoCI, concerning the extension of the determination of radio frequency bands 800 MHz, 900 MHz and 1,800 MHz, Telkomsel should pay annual frequency usage fees from 2020 to 2030.
F-97
2. | Radio frequency for band up to 2.1 GHz |
License No. |
|
| Description |
Decree No. 90 Year 2023 of the MoCI amd. Decree No. 76 Year 2023 of the MoCI | On February 27, 2023, Telkomsel was granted to utilize the annual radio frequency license for band 1,975 – 1,980 MHz paired with 2,165 – 2,170 MHz until March 18, 2033. | ||
Decree No. 509 Year 2016 of the MoCI amd. Decree No. 76 Year 2023 of the MoCI | MoCI granted the extension of the radio frequency license for band 1,970 – 1,975 MHz paired with 2,160 – 2,165 MHz until March 28, 2026. | ||
Decree No. 806 Year 2019 of the MoCI amd. Decree No. 76 Year 2023 of the MoCI | MoCI granted the extension of the radio frequency license for band 1,965 – 1,970 MHz paired with 2,155 – 2,160 MHz until September 30, 2029. | ||
Decree No. 479 Year 2022 of the MoCI amd. Decree No. 76 Year 2023 of the MoCI | Telkomsel as the winner of auction and was granted to utilize the radio frequency license for band 1,960-1,965 MHz paired with 2,150-2,155 MHz effective from January 11, 2023. |
3. | Radio frequency for band up to 2.3 GHz |
License No. |
|
| Description |
Decree No. 1896 Year 2017 of the MoCI | Telkomsel was appointed to use the radio frequency license for band 2,300 – 2,330 Mhz until 2026. | ||
Decree No. 178 Year 2021 of the MoCI | Telkomsel as the winner to utilize the radio frequency license for band 2,330 – 2,340 MHz paired with 2,340 – 2,350 MHz for Block A and Block C, respectively until 2030. | ||
Decree No. 487 Year 2022 of the MoCI amd. Decree No. 92 Year 2023 of the MoCI | On November 18, 2022, Telkomsel received a right to use reallocated radio frequency license for band 2,340 – 2,355 MHz paired with 2,330 – 2,360 MHz. | ||
Decree No. 188 Year 2023 of the MoCI | On April, 2023, Telkomsel was granted an approval to allocate part of the rights-of-use of 2.3 GHz radio frequency spectrum to PT Smart Telecom. |
(ii) | Radio frequency spectrum cooperation agreement |
The MoCI has given approval to Telkomsel for a cooperation on the use of radio frequency spectrum with KCIC through a letter No. B-171/M.KOMINFO/SP.01.01/03/2023 dated March 17, 2023, regarding the Cooperation Agreement on the Use of Radio Frequency Spectrum in the range of 891 – 895 MHz paired with 936 – 940 MHz, with a period up to December 14, 2030.
As result from this agreement, KCIC shall pay to the Company several compensations, which are annual utilization fees totaling Rp
(iii) | Supplier of Google product cooperation agreement |
On November 10, 2022, Sigma and PT Google Cloud Indonesia (“Google”) signed a cooperation agreement authorizing Sigma as a supplier of Google products. This Agreement requires Sigma to meet the minimum commitment to purchase Google products and is obligated to pay the difference between the realized value of the purchase of Google products and the minimum commitment. The minimum commitment values from November 2023 up to November 2024 and November 2024 up to November 2025 are US$
F-98
(iv) | USO |
On December 27, 2011, Telkomsel (on behalf of Konsorsium Telkomsel, a consortium which was established with Mitratel on December 9, 2011) was selected by Balai Penyedia dan Pengelola Pembiayaan Telekomunikasi dan Informatika (“BPPPTI”), now has been renamed as Badan Aksesibilitas Telekomunikasi dan Informasi (“BAKTI”) as a provider of the USO Program in the border areas with a total price of Rp
In 2015, the Program was ceased. In January 2016, Telkomsel filed an arbitration claim to BANI for the settlement of the outstanding receivables of USO Programs.
On June 22, 2017, Telkomsel received a decision letter from BANI No. 792/1/ARB-BANI/2016 requesting BAKTI to pay compensation to Telkomsel amounting to Rp
The MoCI issued Regulation No. 5 Year 2021 dated March 31, 2021 which replaced previous regulations regarding policies underlying the USO program. The regulation requires telecommunications operators in Indonesia to contribute
Based on Decree No. 827/KOMINFO/BAKTI.31/KS.1/10/2021 dated October 4, 2021 of BAKTI granted Telkomsel as operating cooperation partners (“KSO”) for eight packages KSO, which cover Nusa Tenggara, Kalimantan, Sulawesi, Maluku, West Papua, West Central Papua, North Central Papua and South East Papua for period from 2021 until 2031.
34. FINANCIAL INSTRUMENTS
a. Financial assets and financial liabilities
i. Classification
(a) Financial assets
| 2022 |
| 2023 | |
Amortized cost | ||||
Cash and cash equivalents | | | ||
Other current financial assets | | | ||
Trade and other receivables | | | ||
Other non-current assets | | | ||
FVTPL | ||||
Long-term investment in financial instruments | | | ||
Other current financial assets | | | ||
FVTOCI | ||||
Long-term investment in financial instruments | | | ||
Total financial assets |
| |
| |
F-99
(b) Financial liabilities
| 2022 |
| 2023 | |
Financial liabilities measured at amortized cost |
|
|
|
|
Trade and other payables |
| |
| |
Accrued expenses |
| |
| |
Customers deposits |
| |
| |
Short-term bank loans |
| |
| |
Two-step loans |
| |
| |
Bonds and MTN |
| |
| |
Long-term bank loans |
| |
| |
Other borrowings | | | ||
Lease liabilities |
| |
| |
Other liabilities |
| |
| |
Total financial liabilities |
| |
| |
ii. Fair values
The following table presents comparison of the carrying amounts and fair values of the Company's financial instruments, other than those the fair values are considered to approximate their carrying amounts as the impact of discounting is not significant:
Fair value measurement at reporting date using | ||||||||||
|
|
| Quoted prices in |
|
| |||||
active markets for | Significant | |||||||||
identical assets or | Significant other | unobservable | ||||||||
liabilities | observable inputs | inputs | ||||||||
2022 | Carrying value | Fair value | (level 1) | (level 2) | (level 3) | |||||
FVTPL |
|
|
|
|
|
|
|
|
|
|
Other current financial assets |
| |
| |
| |
| — |
| — |
Long-term investment in financial instruments | | | | — | | |||||
FVTOCI | ||||||||||
Long-term investment in financial instruments | | | — | — | | |||||
Financial liabilities at amortized cost |
|
|
|
|
|
|
|
|
| |
Interest-bearing loans and other borrowings: |
|
|
|
|
|
|
|
|
|
|
Two-step loans |
| |
| |
| — |
| — |
| |
Bonds and MTN |
| |
| |
| |
| — |
| — |
Long-term bank loans |
| |
| |
| — |
| — |
| |
Other borrowings |
| |
| |
| — |
| — |
| |
Lease liabilities |
| |
| |
| — |
| — |
| |
Other liabilities | | | — | — | | |||||
Total |
| |
| |
| |
| — |
| |
F-100
Fair value measurement at reporting date using | ||||||||||
|
|
| Quoted prices in |
|
| |||||
active markets for | Significant | |||||||||
identical assets or | Significant other | unobservable | ||||||||
liabilities | observable inputs | inputs | ||||||||
2023 | Carrying value | Fair value | (level 1) | (level 2) | (level 3) | |||||
FVTPL |
|
|
|
|
|
|
|
|
|
|
Other current financial assets |
| | | | — | — | ||||
Long-term investment in financial instruments | | | | — | | |||||
FVTOCI | ||||||||||
Long-term investment in financial instruments | | | — | — | | |||||
Financial liabilities at amortized cost |
| |||||||||
Interest-bearing loans and other borrowings: |
| |||||||||
Two-step loans |
| | | — | — | | ||||
Bonds and MTN |
| | | | — | | ||||
Long-term bank loans |
| | | — | — | | ||||
Other borrowings |
| | | — | — | | ||||
Lease liabilities |
| | | — | — | | ||||
Other liabilities | | | — | — | | |||||
Total |
| |
| |
| |
| — |
| |
As of December 31, 2022, there was a transfer of the fair value hierarchy of financial assets from level 2 and level 3 to level 1 with the consideration that there was a quoted price in an active market condition for identical assets that could be accessed on the measurement date. Therefore, these financial assets can be categorized as level 1. These financial assets are long-term investments in shares in GOTO of Rp
Loss on fair value recognized in consolidated statements of profit or loss for 2023 amounting to Rp
Reconciliations of the beginning and ending balances for items measured at fair value using significant unobservable inputs (level 3) as of December 31, 2022 and 2023 are as follows:
| 2022 |
| 2023 | |
Beginning balance |
| |
| |
Gain (loss) recognized in consolidated statement of: |
|
| ||
Profit or loss |
| |
| ( |
Other comprehensive income |
| ( |
| ( |
Purchase/addition |
| |
| |
Settlement/deduction |
| ( |
| ( |
Ending balance |
| |
| |
F-101
Sensitivity Analysis
The following table summarizes the quantitative information about the significant unobservable inputs used in level 3 fair value measurements:
|
|
| Significant |
| Range |
| Sensitivity | |
Valuation | unobservable | (weighted | of the input of | |||||
Industry | technique | input | average) | fair value | ||||
Investment in equity | ||||||||
Non-listed equity investment - technology | OPM Backsolve method | Volatility | ||||||
Exit timing | Increase (decrease) in | |||||||
Probability of IPO | ||||||||
CoCos Equity | Volatility | |||||||
Exit timing | Increase (decrease) in | |||||||
Probability-weighted Method | Volatility | |||||||
Exit timing | Increase (decrease) in | |||||||
Recent Transaction | Volatility | |||||||
Exit timing | Increase (decrease) in | |||||||
Market movement | Volatility | |||||||
Time to liquidity | Increase (decrease) in | |||||||
Non-listed equity investment - credit rating agency | Discounted cash flow | Weighted Average Cost of Capital ("WACC") | ||||||
Terminal growth rate | ||||||||
Non-listed equity investment - telecommunication | Discounted cash flow | WACC | ||||||
Terminal growth rate | ||||||||
Convertible bonds |
|
|
|
| ||||
Non-listed equity investment - technology | OPM Backsolve method | Volatility | ||||||
| Exit timing |
| Increase (decrease) in | |||||
Market movement | Volatility | |||||||
Time to liquidity | Increase (decrease) in | |||||||
| Conversion discount | Probability of qualified financing |
iii. Fair value measurement
Fair value is the amount for which an asset could be exchanged, or a liability settled, between parties in an arm's length transaction.
F-102
The fair values of short-term financial assets and financial liabilities with maturities of one year or less (cash and cash equivalents, trade and other receivables, other current financial assets, trade and other payables, accrued expenses, and short-term bank loans) and other non-current assets are considered to approximate their carrying amounts as the impact of discounting is not significant.
The fair values of long-term financial assets (other non-current assets (long-term trade receivables and restricted cash)) approximate their carrying amounts as the impact of discounting is not significant.
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:
(a) | Fair value through profit or loss, primarily consists of stocks, mutual funds, corporate and government bonds, and convertible bonds. Stocks 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. The fair value of convertible bonds and subsidiaries investments (non-listed equity investments) are determined using valuation technique. Corporate and government bonds are stated at fair value by reference to prices of similar securities at the reporting date. |
(b) | The fair values of long-term financial liabilities are estimated by discounting the future contractual cash flows of each liability at rates offered to the Group for similar liabilities of comparable maturities by the bankers of the Group, except for bonds which are based on market price. |
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. Financial risk management objectives and policies
The Group’s activities expose it to a variety of financial risks such as market risks (including foreign exchange risk, market price 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 on foreign currency risk management mainly on time deposit placements and hedging to cover foreign currency risk exposures for periods ranging from
Financial risk management is carried out by the Corporate Finance unit under policies approved by the Board of Directors. The Corporate Finance unit identifies, evaluates, and hedges financial risks.
i. 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. Dollar and Japanese Yen. The Group’s exposures to other foreign exchange rates are not material.
Increasing risks of foreign currency exchange rates on the obligations of the Group are expected to be partly offset by the effects of the exchange rates on time deposits and receivables in foreign currencies that are equal to at least
F-103
The following table present the Group's financial assets and financial liabilities exposure to foreign currency risk:
2022 | 2023 | |||||||
| US Dollar |
| Japanese Yen |
| US Dollar |
| Japanese Yen | |
(in billions) | (in billions) | (in billions) | (in billions) | |||||
Financial assets |
| |
| |
| |
| |
Financial liabilities |
| ( |
| ( |
| ( |
| ( |
Net exposure |
| |
| ( |
| |
| ( |
Sensitivity analysis
A strengthening of the U.S. Dollar and Japanese Yen, as indicated below, against the Rupiah at December 31, 2023 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/profit (loss) | |
December 31, 2023 |
|
|
U.S. Dollar ( |
| |
Japanese Yen ( | ( |
A weakening of the U.S. Dollar and Japanese Yen against the Rupiah at December 31, 2023 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.
ii. Market price risk
The Group is exposed to changes in debt and equity market prices related to financial assets measured at FVTPL carried at fair value. Gains arising from changes in the fair value of financial assets measured at FVTPL are recognized in the consolidated statements of profit or loss and other comprehensive income.
The performance of the Group’s financial assets measured at FVTPL is monitored periodically, together with a regular assessment of their relevance to the Group’s long-term strategic plans.
As of December 31, 2023, management considered the price risk for the Group’s financial assets measured at FVTPL to be immaterial in terms of the possible impact on profit or loss and total equity from a reasonably possible change in fair value.
iii. Interest rate risk
Interest rate fluctuation is monitored to minimize any negative impact to financial performance. Borrowings at variable interest rates expose the Group to interest rate risk (Notes 19 and 20). To measure market risk pertaining to fluctuations in interest rates, the Group primarily uses interest margin and maturity profile of the financial assets and liabilities based on changing schedule of the interest rate.
F-104
At reporting date, the interest rate profile of the Group’s interest-bearing borrowings was as follows:
| 2022 |
| 2023 | |
Fixed rate borrowings |
| |
| |
Variable rate borrowings |
| |
| |
Sensitivity analysis for variable rate borrowings
As of December 31, 2023, a decrease (increase) by
iv. Credit risk
The following table presents the maximum exposure to credit risk of the Group’s financial assets:
| 2022 |
| 2023 | |
Cash and cash equivalents |
| |
| |
Other current financial assets |
| |
| |
Trade and other receivable, net | | | ||
Other non-current assets |
| |
| |
Total |
| |
| |
The Group is exposed to credit risk primarily from cash and cash equivalents and trade and other receivables. The credit risk is controlled by continuous monitoring of outstanding balance and collection. Credit risk from balances with banks and financial institutions is managed by the Group's Corporate Finance Unit in accordance with the Group's written policy.
The Group placed the majority of its cash and cash equivalents in state-owned 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. Therefore, it is intended to minimize financial loss through banks and financial institutions’ potential failure to make payments.
The customer credit risk is managed by continuous monitoring of outstanding balances and collection. Trade and other receivables do not have any major concentration of risk whereas no customer receivable balance exceeds
Management is confident in its ability to continue to control and sustain minimal exposure to the customer credit risk given that the Group has recognized sufficient provision for impairment of receivables to cover incurred loss arising from uncollectible receivables based on existing historical data on credit losses.
v. Liquidity risk
Liquidity risk arises in situations where the Group has difficulties in fulfilling financial liabilities when they become due.
Prudent liquidity risk management implies maintaining sufficient cash in order to meet the Group’s financial obligations. The Group continuously performs an analysis to monitor financial position ratios, such as liquidity ratios and debt-to-equity ratios, against debt covenant requirements. The Group has a net current liabilities position as of December 31, 2023, and is expected to meet its current obligations by having access to sufficient undrawn bank facilities amounted to Rp
F-105
The following is the maturity profile of the Group’s financial liabilities based on contractual undiscounted payments:
| Carrying |
| Contractual |
|
|
|
|
| 2027 and | |||||
amount | cash flows | 2023 | 2024 | 2025 | 2026 | thereafter | ||||||||
2022 | ||||||||||||||
Trade and other payables | | ( |
| ( |
| — |
| — |
| — |
| — | ||
Accrued expenses | | ( |
| ( |
| — |
| — |
| — |
| — | ||
Customer deposits | | ( | ( | — | — | — | — | |||||||
Short-term bank loans | | ( | ( | — | — | — | — | |||||||
Interest bearing loans: |
|
|
|
|
| |||||||||
Two-step loans | | ( |
| ( |
| ( |
| — |
| — |
| — | ||
Bonds and MTN | | ( |
| ( |
| ( |
| ( |
| ( |
| ( | ||
Long-term bank loans | | ( |
| ( |
| ( |
| ( |
| ( |
| ( | ||
Other borrowings | | ( |
| ( |
| ( |
| — |
| — |
| — | ||
Lease liabilities | | ( |
| ( |
| ( |
| ( |
| ( |
| ( | ||
Other liabilities | | ( | ( | ( | ( | ( | ( | |||||||
Total | | ( |
| ( |
| ( |
| ( |
| ( |
| ( |
| Carrying |
| Contractual |
|
|
|
|
| 2028 and | |||||
amount | cash flows | 2024 | 2025 | 2026 | 2027 | thereafter | ||||||||
2023 | ||||||||||||||
Trade and other payables | | ( |
| ( |
| — |
| — |
| — |
| — | ||
Accrued expenses | | ( |
| ( |
| — |
| — |
| — |
| — | ||
Customer deposits | | ( | ( | — | — | — | — | |||||||
Short-term bank loans | | ( | ( | — | — | — | — | |||||||
Interest bearing loans: |
|
|
|
|
| |||||||||
Two-step loans | | ( |
| ( |
| — |
| — |
| — |
| — | ||
Bonds and MTN | | ( |
| ( |
| ( |
| ( | ( | ( | ||||
Long-term bank loans | | ( |
| ( |
| ( |
| ( | ( | ( | ||||
Other borrowings | | ( |
| ( |
| — |
| — | — | — | ||||
Lease liabilities | | ( |
| ( |
| ( |
| ( | ( | ( | ||||
Other liabilities | | ( | ( | ( | ( | ( | ( | |||||||
Total | | ( |
| ( |
| ( |
| ( |
| ( |
| ( |
The difference between the carrying amount and the contractual cash flows is interest value. The interest values of variable-rate borrowings are determined based on the effective interest rates as of reporting dates.
35. CAPITAL MANAGEMENT
The capital structure of the Group is as follows:
2022 | 2023 |
| |||||||
| Amount |
| Portion |
| Amount |
| Portion |
| |
Short-term debts |
| |
| | % | |
| | % |
Long-term debts |
| |
| | % | |
| | % |
Total debts |
| |
| | % | |
| | % |
Equity attributable to owners of the parent company |
| |
| | % | |
| | % |
Total |
| |
| | % | |
| | % |
The Group’s objectives when managing capital are to safeguard the Group’s 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.
F-106
Periodically, the Group conducts debt valuation to assess possibilities of refinancing existing debts with new ones with 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’s 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 arrangements 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 December 31, 2022 and 2023 is as follows:
| 2022 |
| 2023 |
| |
Total interest-bearing debts |
| |
| | |
Less: cash and cash equivalents |
| ( |
| ( | |
Net debts |
| |
| | |
Total equity attributable to owners of the parent company |
| |
| | |
Net debt-to-equity ratio |
| % | % |
As stated in Note 20, the Group is required to maintain a certain debt-to-equity ratio and debt service coverage ratio by the lenders. For the years ended December 31, 2022 and 2023, the Group has complied with the externally imposed capital requirements.
36. SUPPLEMENTAL CASH FLOW INFORMATION
a. The non-cash investing activities for the years ended December 31, 2021, 2022 and 2023 are as follows:
| 2021 |
| 2022 |
| 2023 | |
Acquisition of property and equipment: |
|
|
|
|
|
|
Credited to trade payables |
| |
| |
| |
Borrowing cost capitalization |
| |
| |
| |
Addition of right-of-uses assets: | ||||||
Credited to leases liabilities (Note 13) |
| | | | ||
Acquisition of intangible assets: | ||||||
Credited to trade payables |
| |
| |
| |
F-107
b. | The changes in liabilities arising from financing activities is as follows: |
Non-cash changes | ||||||||||||
Foreign | ||||||||||||
January 1, | exchange | Other | December 31, | |||||||||
| 2022 |
| Cash flows |
| movement |
| New leases |
| Changes |
| 2022 | |
Short-term bank loans |
| |
| |
| ( |
| — |
| — |
| |
Two step loans |
| |
| ( |
| ( |
| — | — |
| | |
Bonds and notes payable |
| |
| ( |
| — |
| — | — |
| | |
Long-term bank loans |
| |
| ( |
| |
| — | ( |
| | |
Other borrowings |
| |
| ( |
| — |
| — | |
| | |
Lease liabilities |
| |
| ( |
| |
| | ( |
| | |
Total liabilities from financing activities |
| |
| ( |
| |
| | ( |
| | |
Non-cash changes | ||||||||||||
|
|
| Foreign |
|
|
| ||||||
January 1, | exchange | Other | December 31, | |||||||||
2023 | Cash flows | movement | New leases | Changes | 2023 | |||||||
Short-term bank loans | |
| |
| — |
| — |
| — |
| | |
Two step loans |
| |
| ( |
| |
| — | — |
| | |
Bonds |
| |
| |
| — |
| — | — |
| | |
Long-term bank loans |
| |
| |
| ( |
| — | |
| | |
Other borrowings |
| |
| ( |
| — |
| — | |
| | |
Lease liabilities |
| |
| ( |
| ( |
| | ( |
| | |
Total liabilities from financing activities |
| |
| ( |
| ( |
| | ( |
| | |
37. SUBSEQUENT EVENTS
| a. | In January 2024, Telkomsel has paid the entire outstanding loans to BSI, Bank of China, and BJB amounting to Rp |
| b. | On March 27, 2024, the Company entered into credit agreement with Bank DBS amounting to Rp |
38. NEW ACCOUNTING STANDARDS AND INTERPRETATIONS NOT YET ADOPTED
Effective for annual periods beginning on or after January 1, 2024
| ● | Amendments to IAS 1, Classification of Liabilities as Current or Non-current and Non-Current Liabilities with Covenants |
The amendments clarify the criteria for determining whether to classify a liability as current or non-current. Entity shall classify a liability as current when:
- | it expects to settle the liability in its normal operating cycle; |
- | it holds the liability primarily for the purpose of trading; |
- | the liability is due to be settled within twelve months after the reporting period; or |
- | it does not have the right at the end of the reporting period to defer settlement of the liability for at least twelve months after the reporting period. |
An entity’s right to defer settlement of a liability arising from a loan arrangement for at least twelve months after the reporting period may be subject to the entity complying with conditions specified in that loan arrangement (‘covenants’). If an entity is required to comply with the covenant on or before the end of the reporting period. Such a covenant:
| a. | affects whether the right exists at the end of the reporting period if an entity is required to comply with the covenant on or before the end of the reporting period. Such a covenant affects whether the right exists at the end of the reporting period even if compliance with the covenant is assessed only after the reporting period. |
| b. | do not affect whether that right exists at the end of the reporting period if an entity is required to comply with the covenant only after the reporting period. |
F-108
Classification of a liability is unaffected by the likelihood that the entity will exercise its right to defer settlement of the liability for at least twelve months after the reporting period. An entity has to disclose information in the notes that enables users of financial statements to understand the risk that non-current liabilities with covenants could become repayable within twelve months.
These amendments are not expected to have an impact to the Group’s consolidated financial position or performance. The Group intends to adopt these amendments in future periods when they become effective.
| ● | Amendments to IFRS 16, Lease liability in a sale and leaseback |
The amendment requires a seller-lessee to subsequently measure lease liabilities arising in a sale and leaseback transaction, to ensure the seller- lessee does not recognize any amount of the gain or loss that relates to the right-of-use it retains.
These amendments are not expected to have an impact to the Group’s consolidated financial position or performance. The Group intends to adopt these amendments in future periods when they become effective.
| ● | Amendments to IAS 7 and IFRS 7, Disclosures: Supplier Finance Arrangements |
The amendments clarify the characteristics of supplier finance arrangements. Supplier finance arrangements are characterised by one or more finance providers offering to pay amounts an entity owes its suppliers and the entity agreeing to pay according to the terms and conditions of the arrangements at the same date as, or a date later than, suppliers are paid.
The amendments require an entity to disclose information about its supplier finance arrangements that enables users of financial statements to assess the effects of those arrangements on the entity’s liabilities and cash flows and on the entity’s exposure to liquidity risk.
An entity shall disclose in aggregate for its supplier finance arrangements including terms and conditions of the arrangements. However, an entity shall disclose separately the terms and conditions of arrangements that have dissimilar terms and conditions. An entity also disclose quantitative information on liabilities related to those arrangements as at the beginning and end of the reporting period and the type and effect of non-cash changes in the carrying amounts of those arrangements. In the context of quantitative liquidity risk disclosures required by IFRS 7, supplier finance arrangements are included as an example of other factors that might be relevant to disclose.
These amendments are not expected to have an impact to the Group’s consolidated financial position or performance. The Group intends to adopt these amendments in future periods when they become effective.
F-109
Effective for annual periods beginning on or after January 1, 2025
| ● | Amendments to IAS 21, Lack of exchangeability |
The amendment to IAS 21 specifies how an entity should assess whether a currency is exchangeable and how it should determine a spot exchange rate when exchangeability is lacking.
A currency is exchangeable into another currency when an entity is able to obtain the other currency within a time frame that allows for a normal administrative delay and through a market or exchange mechanism in which an exchange transaction would create enforceable rights and obligations.
An entity shall estimate the spot exchange rate at a measurement date when a currency is not exchangeable into another currency at that date. An entity’s objective in estimating the spot exchange rate is to reflect the rate at which an orderly exchange transaction would take place at the measurement date between market participants under prevailing economic conditions. When an entity estimates a spot exchange rate because a currency is not exchangeable into another currency, the entity shall disclose information that enables users of its financial statements to understand how the currency not being exchangeable into the other currency affects, or is expected to affect, the entity’s financial performance, financial position and cash flows.
These amendments are not expected to have an impact to the Group’s consolidated financial position or performance. The Group intends to adopt these amendments in future periods when they become effective.
F-110