AR TELKOMSEL.indd

Maintaining Leadership through Continuous Growth
Telkomsel, as the leader in Indonesia’s cellular industry, has
been able to maintain its position as the market leader amid tight
competition.
Innovative products, comprehensive network coverage and
continuous development of customer services have been the
winning approaches of Telkomsel.
The cover of this report explains how Telkomsel continuously maintains
its leadership in terms of network coverage for whole Indonesia, as it
now provides coverage in all main cities in all counties in Indonesia.
Thus, our choice of the theme for the 2004 Annual Report “Maintaining
Leadership Through Continuous Growth”, best describes the Company
in its current condition.
The year 2004 highlighted continuous growth for Telkomsel with 16.3
million customers, from 9.6 million in 2003, as its market share soared
to 54%.
| 2004 Annual Report | 1
Financial Highlights
(IN BILLION RUPIAH)
2004
2003
2002
2001
2000
14,765
11,146
7,573
4,918
2,801
6,744
4,800
3,444
1,932
1,165
INCOME STATEMENTS
Operating Revenues
Operating Expenses
(incl. Depreciation)
10,672
8,026
5,110
3,499
1,967
EBIT
8,021
6,346
4,129
2,986
1,636
Net Income
5,473
4,237
2,787
2,044
1,345
4,099
2,676
1,856
1,995
1,287
EBITDA
BALANCE SHEET
Current Assets
14,967
12,695
9,034
5,321
3,066
Other Assets
483
39
49
143
351
Total Assets
19,549
15,410
10,939
7,459
4,704
Current Liabilities
3,306
2,790
2,152
2,212
1,194
Other/Long-term Liabilities
2,365
2,309
1,598
27
20
Stockholders’ Equity
13,878
10,311
7,189
5,220
3,490
Total Liabilities &
Stockholders’ Equity
19,549
15,410
10,939
7,459
4,704
Property, Plan and Equipment - Net
CASH FLOWS
8,913
6,610
4,517
2,756
1,867
Cash Flow From Investing Activities
(5,470)
(5,310)
(4,531)
(2,626)
(1,523)
Cash Flow From Financing Activities
(341)
475
671
763
(210)
Dividends (net of Tax)
(1,840)
(1,057)
(818)
(544)
(115)
Net Cash In/Out Flows
1,262
718
(161)
349
19
EBITDA Margin - net 1)
72.3%
72.0%
67.5%
71.1%
70.2%
EBITDA Margin - gross 2)
57.9%
58.4%
54.3%
57.2%
54.8%
Net Income Margin
Cash Flow From Operations
FINANCIAL RATIOS
37.1%
38.0%
36.8%
41.6%
48.0%
Return on Assets 4)
31.3%
32.2%
30.3%
33.6%
33.9%
Return on Equity
45.3%
48.4%
44.9%
46.9%
46.8%
5)
3)
1) EBITDA : Net Operating Revenues (interconnect outpayment & dealer discounts were deducted from revenues)
2) EBITDA : Gross Operating Revenues (interconnect outpayment & dealer discounts were added back to revenues)
3) Net Income : Operating Revenues
4) Net Income : Average Total Assets
5) Net Income : Average Equity
2 | 2004 Annual Report |
| Operating Revenue (IN BILLION RUPIAH)
| EBITDA (IN BILLION RUPIAH)
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| Net Income (IN BILLION RUPIAH)
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| Return on Equity (IN PERCENTAGE)
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| Return on Assets (IN PERCENTAGE)
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| Free Cash Flow * (IN BILLION RUPIAH)
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* CASH FLOW FROM OPERATIONS MINUS
CASH FLOW FOR INVESTMENTS
| Dividends (IN BILLION RUPIAH)
| Net Investment* (IN BILLION RUPIAH)
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* INVESTMENTS (ADDITION TO FIXED ASSETS) LESS
DEPRECIATION
| 2004 Annual Report | 3
Operational
Highlights
2004
2003
2002
2001
2000
Net Additions
Postpaid kartuHALO
Prepaid simPATI
Prepaid Kartu As
Total
321
2,976
3,405
6,702
84
3,494
3,578
58
2,701
2,759
208
1,357
1,565
220
442
662
Customer Base
Postpaid kartuHALO
Prepaid simPATI
Prepaid Kartu As
Total
1,328
11,558
3,405
16,291
1,007
8,582
9,589
923
5,088
6,011
865
2,387
3,252
657
1,030
1,687
Total ARPU 1)
Postpaid kartuHALO
Prepaid simPATI
Prepaid Kartu As
Blended
304
84
48
102
314
95
123
298
103
145
287
111
170
281
103
179
Non-voice ARPU
Postpaid kartuHALO
Prepaid simPATI
Prepaid Kartu As
Blended
41
23
17
24
30
23
24
21
18
19
12
10
11
-
AERPU 2) - in thousand rupiah
95
119
136
166
172
113
69
-
-
-
-
4,820
10.8
3,483
7.0
1,995
3.3
1,411
1.7
95.19%
99.26%
94.62%
99.19%
91.17%
98.75%
88.72%
97.55%
88.22%
97.28%
3,331
4,891
2,869
3,342
2,536
2,370
2,319
1,402
1,758
960
CUSTOMER BASE - IN THOUSAND
ARPU - IN THOUSAND RUPIAH
SMS
Number of message/sub/month - kartuHALO
130
Number of message/sub/month - simPATI
68
Number of message/sub/month - Kartu As
35
NETWORK DATA
BTS/Capacity
Base Station
6,205
Overall Network Capacity (in million subscribers) 17.9
Quality of Service
Call success rate
Call completion rate
EMPLOYEE DATA
Total Employees
Efficiency Ratio (subscribers / employee)
1) ARPU refers to average monthly ARPU (average revenue per user) of the year which is calculated by taking the sum of the ARPU for each
month of the year and dividing by 12. ARPU is computed by dividing total cellular revenues for either postpaid or prepaid subscribers
(excluding connection fees, interconnection revenues, international roaming revenues from visitors, dealer discounts and tax) for each
month by the respective average number of postpaid or prepaid subscriber for that month.
2) AERPU (average effective revenue per user) is calculated from booked net operating revenues divided by the average number of subscribers (number of subscribers at the beginning of the year added with number of subscribers at the end of the year divided by 2) and
then divided by 12.
4 | 2004 Annual Report |
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| Market Share (IN PERCENTAGE)
| Customer Base (IN THOUSAND)
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| 2004 Annual Report | 5
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Telkomsel
grows its
market share
to 54%
Mochammad Hasjim Thojib | President Commissioner
6 | 2004 Annual Report |
Message from the
President Commissioner
Over the last few years, the role of developing Asia on the world stage has been
growing and this is generally expected to be a continuing trend. Indonesia, as
one of the largest developing countries in Asia, will certainly benefit from this
advancement and will find its place to contribute to it as well.
After successfully concluding three rounds of elections
We are more than pleased to see Telkomsel’s 2004
in 2004, it appears that Indonesia is well positioned to
performance in Indonesia’s cellular market. Despite more
participate in the Asian growth. Foreign investors’ interest
intense competition, Telkomsel has managed to outpace
in Indonesian business is clearly on the rise as is evident
market growth and expand its market share from 51%
from the record levels at the Jakarta Stock Exchange
to 54%. Going forward, we intend to continue to take
(JSX) and overseas investors have actively participated
at least half of the new subscribers that will be added
in the divestments, privatizations and merger as well as
to the market.
acquisition activities of government owned business.
Margins and returns in 2004 were impressive as well.
The cellular market clearly benefits from this development.
Where we expected pressure on margins resulting from
The number of subscribers has grown from 19 million
increased competition, Telkomsel has managed to
in 2003 to around 30 million in 2004, bringing cellular
maintain EBITDA and net income margins at 72% and
penetration to about 14%. With an addressable market
37% respectively.
that we expect to grow to 80 million by 2009, it is certain
that growth prospects remain very significant.
With a return on equity of 45%, while more than doubling
the free cash flow, Telkomsel has created an excellent
The competitive landscape in the market has further
value for Telkom and SingTel, reflected as well in a 71%
intensified in 2004. Price competition has so far, however,
increase of dividend payments made in 2004.
has resulted mainly in price cuts on starter packs and
lower voucher denominations, rather than cheaper minute
Telkomsel, with its extensive world class network and
pricing. Competitors, as expected have significantly
innovative services, is well placed to meet the challenges
increased spending on network deployment to improve
ahead and to translate market potential into further
network coverage and quality. Other providers, with their
growth and value creation for the shareholders.
new shareholders, now have stronger backing and are also
expected to increase efforts to improve network performance
On behalf of the Board of Commissioners, I hereby
and start taking part in the growing market.
extend my appreciation to the Management and
employees who have, with their dedication, contributed
We welcome this level of more-balanced competition
to the results achieved.
as it is likely to further stimulate market growth and
penetration.
Mochammad Hasjim Thojib | President Commissioner
| 2004 Annual Report | 7
To accommodate the
growth in subscribers
and traffic, and further
improve our network
quality and coverage,
we have successfully
completed provision of
coverage to all main cities
in all counties in 2004
Bajoe Narbito | President Director
8 | 2004 Annual Report |
Message from the
President Director
The theme of our 2003 Annual Report was “Growing Momentum”. We have witnessed
this momentum materializing in 2004. The Indonesian mobile communication
market has grown around 60% to more than 30 million subscribers, the highest
absolute annual growth ever recorded for the market.
Telkomsel has captured its share of this growth by adding
both top line and bottom line. Declining ARPU’s, as a
6.7 million subscribers in 2004, a year-on-year growth of
result of penetrating the lower market segments, have
70%. More importantly, however, is that we have been
not translated in margin and return erosion through
able to capture the majority of all net adds available in
effective operational cost controls that are firmly in
the market and increase our market share to 54%, despite
place. We completed a network procurement tender in
much stronger competition compared to previous years.
2004 to ensure cost efficiency in network expansion and
We have demonstrated that we remain to be the preferred
management in the future.
operator for the majority of the mobile communication
subscribers in Indonesia.
For Indonesia, the year 2004 ended with the disastrous
consequences of the tsunami in Aceh and North
To accommodate the growth in subscribers and traffic,
Sumatera. However, we are extremely grateful that all of
and further improve our network quality and coverage,
our employees in North Sumatera, particularly in Aceh,
we again successfully completed a significant investment
have survived this disaster. Although our network in Aceh
program in 2004, adding 1,385 base stations to our already
was affected, we have been able to restore services to a
extensive network. By the end of 2004, Telkomsel completed
large extent within only two weeks.
a program to provide coverage in all ‘Ibu Kota Kabupaten’
(capital/main cities in all counties) in Indonesia.
Going forward, we continue to have a positive outlook
on the market potential and we believe that we are
Innovation has been one of the drivers for the results
looking forward to having more than 40 million mobile
achieved in 2004, in particular the launching of our
communication subscribers in the market by the end of
second pre-paid product line (Kartu As), the introduction
2005. At the end of 2004, we already had the first phase
of over the air reload (M-KIOS) and the launching of our
of our 2005 expansion programs up and running.
ring back tone feature.
Finally, we firmly believe that Telkomsel will maintain its
Our main focus remains on maximizing value creation
growth and profitability profile in 2005, and for that we
for our shareholders. We have done so throughout 2004
would like to thank our loyal customers, our motivated
by growing our revenues to Rp 14.8 trillion and net
employees and our committed shareholders.
income to Rp 5.5 trillion, a growth of around 30% for
Bajoe Narbito | President Director
| 2004 Annual Report | 9
Key Milestones in
2004
Telkomsel further moved forward
Telkomsel launched HALObebas,
on its path to third generation
a service package option plan
mobile services by the introduction
for Telkomsel’s postpaid service
of EDGE technology to Indonesia.
kartuHALO. With this new program,
Telkomsel received the ISO 9001
Through EDGE, the customers
customers can choose among three
version 2000 for its Call Centre or
will be able to enjoy mobile data
different subscription packages: free
Customer Service On-line in Jakarta
transmission services at faster
domestic roaming, free monthly fee,
and Surabaya.
speed than ever before.
or free monthly 150 SMS.
February
January
July
Septem
August
Telkomsel introduced a service for
Telkomsel launched a new product
simPATI card users to do pulse reload
called Kartu As Always On, making it
by using kartuHALO. The service allows
the first pre-paid card in Indonesia
kartuHALO subscribers to furnish pulse
without expiration date. This is a
reload to selected simPATI users.
breakthrough in Indonesia’s cellular
industry where usually a pre-paid card
validity period is based on recharge.
Telkomsel signed an agreement with
Sony Music Indonesia and Consortium
The launching of simPATI HOKI 25.
SK Telecom to offer a service called
The simPATI HOKI 25 is an economical
“Nada Sambung Pribadi Telkomsel”
pre-paid card starter package that
(Ring Back Tone). Instead of the
only costs Rp 25,000, which includes
Telkomsel and PT Bank Central Asia
regular connecting tone, the service
Rp 15,000 worth of pulse. Again,
joined forces to introduce the m-
offers music as connecting tone,
this is one of Telkomsel’s ways to
BCA Telkomsel service that enables
such as pop, dangdut, traditional,
offer the public the opportunity to
BCA customers to enjoy banking
religious, jazz and rock.
enjoy quality cellular communication
services at an affordable price. The
transactions through cell phones
using kartuHALO.
simPATI users can enjoy a new
simPATI HOKI 25 also includes the
service from Telkomsel called Free
free roaming feature.
Domestic Roaming (free receiving
calls from anywhere and any operator
in Indonesia).
10 | 2004 Annual Report |
To anticipate the rapidly increasing
need for prepaid recharge credit
Telkomsel introduced a new prepaid
Telkomsel signed an interconnect
product called Kartu As with several
agreement with Excelcom and
advantages, among others lower
Indosat on MMS services so that
start-up price (Rp 25,000 starter-pack
customers can send and receive MMS
with Rp 25,000 pulse credit), flat
(Multimedia Messaging Services)
(no peak/off-peak) tariffs, cheaper
between operators. MMS is the next
tariff for intra Kartu As calls, and free
generation of messaging services.
roaming from all operators.
April
ber
a s w e l l a s s ma l l e r re c h a rge
denominations, Telkomsel launched
its prepaid recharge innovation
M-KIOS, which allows dealers
to sell reload credit from their
mobile phone directly to the
customer’s mobile phone.
May
June
November
December
Telkomsel and VISA International
Telkomsel lowered simPATI rate up to
Telkomsel introduced its latest
together introduced simPATI Autorefill
80% for calls between the hours of
innovation of Mobile Message Board
via VISA card. Telkomsel launched an
23:00 - 06:59 local time, effective
(MMB), allowing all Telkomsel
innovative service called simPATI
November 1, 2004 until December
customers to create facilities like
Autorefill via VISA card that enables
31, 2004. During that period, new
a quiz organizer, polling or other
VISA card customers to do pulse
simPATI customers will also receive
activities related to promotion and
reload on any mobile phone that uses
10% bonus of the pulse value when
distribution of information through
a simPATI pre-paid card.
reloading for the first time.
pre-assigned short numbers.
Telkomsel with six other Asia Pacific
operators (Bharti, Globe, Maxis,
Optus, Singtel, and TCC) signed
a joint venture agreement called
Bridge Mobile Pte Ltd. (BMPL), a
company incorporated in Singapore.
BMPL is a strategic vehicle of Bridge
Mobile Alliance (BMA) to broaden
regional mobile alliance and to foster
partnership among mobile operators
in Asia Pacific.
| 2004 Annual Report | 11
Product Lines
and Services
Innovation as a Key Component of Telkomsel’s Market Leadership
Pushing Indonesia’s cellular market forward through innovation
As part of its commitment to the market and the industry, Telkomsel, as the undisputed cellular market leader in
Indonesia, is pushing forward development by always being at the forefront of change and innovation. Telkomsel is
clearly leading the market and always setting new trends. These are some examples of Telkomsel’s “firsts” in the
market to date:
1995
First in Indonesia to make SMS a basic service
1996
First to cover all provinces of Indonesia
1997
2004
First to launch EDGE technology in Indonesia
First in Indonesia to launch special post-paid price plan
options (HALObebas)
First to launch rechargable GSM prepaid in Asia
(simPATI)
First in Indonesia to launch special product for low-end
market (Kartu As)
2000
First in Indonesia to disconnect card validity period from
pulse credit recharge (Kartu As)
First to launch Mobile Banking in
Indonesia
2001
First in Indonesia to commercially launch Ring Back
Tone service with original song content from all major
record labels
2003
First to launch Mobile Message Board allowing customers
to create their own SMS content pages
First in Indonesia to launch Family
package (HALOkeluarga)
First in Indonesia to launch Prepaid International
Roaming
First to launch automated long-term special service option
for prepaid users (simPATIzone)
First in Indonesia to launch GPRS Roaming
Product Portfolio
2004 saw the birth of Telkomsel’s third main product:
Kartu As. This product is a prepaid solution specifically
created to be more affordable for the Indonesian market.
It completes Telkomsel’s product portfolio, which now
consists of three main products:
• kartuHALO, Indonesia’s most popular postpaid service
(>70% market share).
• simPATI, Indonesia’s most popular and complete
prepaid service.
• Kartu As, a new and no frills prepaid product to
specifically accommodate people that require basic
and cost-efficient prepaid cellular services.
First to achieve coverage in all counties in
Indonesia
First to launch M-KIOS offering electronic
phone-to-phone prepaid top-up
By launching this new product, Telkomsel opened up a whole
new segment of potential customers in the market, which
was previously untapped. The threshold for consumers to
use cellular service has effectively been lowered by this
product, therefore making it more affordable for a much
larger market. This marketing innovation by Telkomsel has
subsequently been followed by other players in the market.
However, none has achieved the same success. Kartu As
managed to sign up more than 3 million customers within
six months of its launch.
Another very successful innovation launched by Telkomsel
this year was HALObebas, a service package option plan
for Telkomsel’s postpaid service kartuHALO. With this new
program, customers can choose among three different
12 | 2004 Annual Report |
| Brand Equity Indices and Top-of
Mind Brand Awareness
SOURCE: AC NIELSEN’S WINNING BRAND SURVEY
subscription packages:
• HALObebas Roaming Nasional, offering free domestic
roaming service (no charge for any incoming calls
throughout Indonesia).
• HALObebas 150 SMS, which offers 150 free SMS
messages each month as well as a monthly fee
discount of Rp. 20,000.
• HALObebas Abonemen which offers postpaid services
without any monthly subscription fees (though
messaging tariffs are slightly higher and a minimum
usage amount of Rp. 25,000 per month applies).
This was the first ever postpaid service option plan launched
in Indonesia and was an instant success, immediately
increasing kartuHALO sales dramatically, resulting in a
net additions figure of over 300,000 for this product. This
innovation was subsequently followed by competition.
For the simPATI product, a new starter pack branding
concept was launched under the brand name simPATI HOKI.
Under this successful and popular brand name, two new
starter pack offers were launched in the market, accounting
for a substantial increase in simPATI’s customer base.
More Innovations
In early 2004, Telkomsel further moved forward on its path
to third generation mobile services by its introduction of
EDGE technology in Indonesia.
In the third quarter of the year, Telkomsel was the first
operator in Indonesia to commercially launch Ring Back
Tone services using original songs by original artists through
cooperation with all major international and domestic record
labels. The service was launched under the brand name Nada
Sambung Pribadi Telkomsel and covered the whole of Java
island by year end, with more than 200,000 active users
and a selection of more than 2,000 songs.
December saw another industry first launched by Telkomsel
with the introduction of the Mobile Message Board service.
This in-house development offers Telkomsel customers to
create their own SMS content and share it with others. The
service uses dedicated short code numbers and can be accessed
both through SMS and web. It can be used for community
communication and has shown a promising start.
| 2004 Annual Report | 13
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Electronic Reload M-KIOS
In order to anticipate the rapidly increasing need for
prepaid recharge credit as well as smaller recharge
denominations, Telkomsel also launched its prepaid
recharge innovation M-KIOS, which allows dealers to sell
recharge credit from their mobile phone directly to the
customer’s mobile phone. By the end of 2004, already more
than 20,000 M-KIOS dealers were operating throughout
Indonesia. This service was an important strategic move
for Telkomsel in:
• Increasing cost efficiency by reducing the need for
printing and distributing physical recharge scratch
vouchers.
• Rapidly expanding the distribution channel and further
penetrating remote areas.
• Allowing the introduction of lower-denomination
recharge credits.
• Providing more convenience to our subscribers.
SMS and Mobile Data Services
Telkomsel customers now send around 34 million SMS
messages each day. Mobile Data Service has also shown
a significant increase this year. SMS and mobile data
services (non-voice) contributed around 25% to total
revenues in 2004.
Indonesia’s best and most extensive mobile
telecommunications network
Telkomsel became the first and only cellular operator in
Indonesia to provide coverage in all of Indonesia’s over
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16.3
Market Share of
54%
widest range of
products
650 cities in all counties in Indonesia, using more than
6,000 BTS. GPRS was also rolled out nationwide. This
enormous network now covers more than 90% of the total
Indonesian population. Both Telkomsel’s postpaid and
prepaid customers can now enjoy their mobile services
worldwide on each of Telkomsel’s 356 international
roaming partner networks.
Continuous Development of Customer Services
Besides more than 60 grhaPARI service centers fully owned
and operated by Telkomsel, there are almost 100 GeraiHALO
million subscibers
franchised service centers to serve Telkomsel customers
nationwide. Telkomsel’s four ISO-certified call centers
provide a 24-hour a day professional customer service.
Telkomsel also implemented Segmented Service within
the Call Center, which consist of HALO Corporate, HALO
Regular, SimPATIZone, simPATI Regular and Kartu As. The
service is aimed at high-value customers. The Successful
Call Ratio (SCR) for high-value customers has been
improving since September 2004 due to the Segmented
Service implementation.
A W A R D S
Telkomsel’s performance was again noticed and rewarded in 2004 by being awarded three
Indonesian Customer Satisfaction Awards (ICSA) for kartuHALO and simPATI as well as the Golden
ICSA Award for five consecutive wins and consistent performance improvement, two Indonesian
Best Brand Awards (also for kartuHALO and simPATI) and Superbrand Status from the International
Superbrand organization. The organization ruled that the Telkomsel Corporate Brand, kartuHALO
and simPATI, both fulfilled their stringent selection criteria to be called “Superbrands.” In
addition, the brand simPATI HOKI has been so successful that it was awarded “Best Product of
the Year” by Selular Magazine.
According to independent research studies by companies like AC Nielsen, Synovate, Frontier
and MARS; simPATI and kartuHALO are both market leaders in the Indonesian market in their
respective product categories. The products are leading the market in terms of total numbers
of active customers, brand awareness and preference, as well as customer satisfaction. Even
with its recent launch in May 2004, Kartu As already gained
popularity with very high awareness levels nationwide,
| Overall Satisfaction Score
overtaking several products that have been around in the
market much longer.
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SOURCE : SYNOVATE RESEARCH
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A survey by Synovate among more than 5,000 cellular
customers across 16 cities in Indonesia reveals that Telkomsel leads in customer
satisfaction. Telkomsel generally performs better than other GSM operators as well as
CDMA operators. Analysts indicate that customer satisfaction is primarily driven by
brand image, perceived quality, perceived value and perceived price. Telkomsel is rated
favorably in terms of perceived value due to higher quality perception. Furthermore,
Telkomsel has a much better image than other operators.
An independent Overall Brand & Advertising Awareness Tracking Study by AC Nielsen
among over 2,000 respondents across nine cities in Indonesia reveals that simPATI
and kartuHALO continue to be cited as major players in their respective pre- and post
paid card segments, in terms of awareness and usage.
14 | 2004 Annual Report | Telkomsel
Product Features and Tariffs
(As of December 31, 2004)
No. Product Features
kartuHALO
simPATI
Kartu As
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
N/A
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
N/A
Y
Y
Y
Y
Y
Y
Y
N/A
Y
Y
Y
N/A
Y
Y
Y
Y
N/A
Y
Y
Y
Y
N/A
Y
Y
Y
N/A
N/A
Y
N/A
Y
N/A
Y
N/A
Y
Y
Y
N/A
N/A
N/A
N/A
N/A
Y
Y
Y
Y
N/A
Y
N/A
Y
Y
N/A
Y
kartuHALO
simPATI
Kartu As
650 - 813
650 - 813
775 - 938
300 - 1500
300 - 1500
1300 - 1600
1000
1200
1500
1100 - 2628
1100 - 2628
1100 - 2628
300 - 4000
300 - 4000
3500 - 4000
1000
1200
3850
1220 - 3083
1220 - 3083
1220 - 3083
300 - 4500
300 - 4500
4000 - 4500
1000
1200
3850
450 - 531
650 - 1696
785 - 2221
895 - 2676
400 - 950
1200 - 2300
1200 - 3720
1200 - 4150
700
2000
3200
3200
Same POC_MOBILE
Different POC_MOBILE (Long Distance -1)
Different POC_MOBILE (Long Distance -2)
Free
460 - 1815*)
570 - 2270*)
Free
Free
Free
Free
Free
Free
SMS
MMS
GPRS
250-350
1000-1250
25/kB-30/kB
350
1250
30/kB
100-300
1250
30/kB
30
30
30
30
30
30
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
Call Hold
Call Waiting
Voice Mail
Call Forwarding
SMS
Mobile Fax & Data
CLI/CLIP
International Roaming
Domestic Roaming
Info On Demand
WAP
Multi Party Calling
Pulse Checking / Voucher Inquiry
CLIR
Internet Message Service
SMS to Email
M-Banking Plain SMS
M-Banking STK
Premium Call Access
GPRS
MMS
EDGE
CSD Data
Video Streaming
WiFi
VOIP
MMS Inter Operator
Pulse Transfer
Ring Back Tone
TELKOMSEL’s Tariff
LOCAL (POC-MOBILE)
KH to KH, or SP to SP, or KA to KA
KH or SP or KA to other Telkomsel
KH or SP or KA to other Operators
LONG DISTANCE -1
KH to KH, or SP to SP, or KA to KA
KH or SP or KA to other Telkomsel
KH or SP or KA to other Operators
LONG DISTANCE -2
KH to KH, or SP to SP, or KA to KA
KH or SP or KA to other Telkomsel
KH or SP or KA to other Operators
PSTN (fixed phone)
Telkomsel to Local POC_PSTN (=< 30KM)
Telkomsel to PSTN Zone-1: >30 km - < 200 KM
Telkomsel to PSTN Zone-2: 200 KM - 500 KM
Telkomsel to PSTN Zone-3: > 500 KM
DOMESTIC ROAMING (Incoming)
TIME UNIT (in second)
Local
20
LONG DISTANCE -1
15
LONG DISTANCE -2
15
Notes:
- Tariff excluding 10% tax for postpaid; including tax for prepaid
- simPATI off-peak promotional tariff valid only from November 1 until December 31, 2004
- KH = kartuHALO (postpaid)
- SP = simPATI (prepaid)
- KA = Kartu As (prepaid)
* Free for customers who choose free roaming monthly plan
Telkomsel | 2004 Annual Report | 15
Telkomsel provides GSM cellular services
in Indonesia through its own network and
internationally through 356 International
Roaming Partner networks in 145
countries at the end of 2004
16 || 2004
2004 Annual
Annual Report
Report ||
Network and Information
Technology
Comprehensive network coverage, innovative products, and continuous development
of customer services have been the winning approaches of Telkomsel management.
Facilitating network capacity growth and providing world-class quality is crucial
in acquiring higher market share and maintaining market leadership in a rapidly
growing cellular telecommunications market in Indonesia.
As the leading cellular service provider in the country,
Telkomsel has the largest cellular network capacity of
approximately 17.9 million in the country with 6,205
BTS, which cover more than 90% of population and more
than 650 cities. Telkomsel also has the most extensive
international roaming coverage with 356 network
operators from 145 countries.
Program Accomplishment
In 2004 we completed our Intelligent Network (IN)
Cluster implementation, which replaced the previous IN
Classic. The new platform is capable of providing twice as
much subscriber handling capacity and it also allows for
Convergent Online Charging (COC). Currently, there are 16
IN Clusters in Java, Sumatra and Kalimantan.
World Class Performance
2004 saw a major network and infrastructure rollout
program, which was more than adequate to support the
additional customers. Throughout the year, Telkomsel
provided world-class performance in terms of Successful
Call Rate (SCR) of 95.19% and Call Completion Rate (CCR)
of 99.26%.
We completed a network equipment and services
procurement tender in 2004. Terms and conditions ensure
cost efficiency in network roll-out and network management
in the future. The completion of the tender has already
translated in significant reduction in capital expenditure
(capex) and operational expenditure (opex) in 2004.
Network Development
In 2004, Telkomsel focused both on capacity expansion to
accommodate increased traffic from additional customers,
as well as to continue the network-coverage expansion
and quality improvement. A major accomplishment was to
provide coverage to all regional city capitals or IKK (Ibu
Kota Kabupaten) by the end of 2004. Furthermore, we have
also further strengthened our indoor signal quality in major
buildings and expanded our indoor coverage as well.
Network development in 2004 included the introduction
of EDGE (Enhanced Data rate for GSM Evolution) service.
Through EDGE, we are able to provide data transmission
services at faster speed than GPRS (General Packet Radio
Service) as well as that of the CDMA 2000-1 X system.
Meanwhile, the roll-out of GPRS gathered pace in 2004,
with the system already in full use in more than 95% of
the areas that we covered by the end 2004.
To ensure and further improve network quality, we have
conducted radio equipment optimalization in Jabotabek,
West Java and Kalimantan.
| 2004 Annual Report | 17
Information Technology
Information Technology (IT) plays an important role to
maintain competitiveness of the company. IT has three
main focus points, which are to support on internal
users to run the business effectively through integrated
support systems; to support the implementation of value
added services (VAS); and to develop strategic IT plans
for the Company.
In 2004, Telkomsel finished phase one of the three phases
of the Convergent Online Charging (COC) Project. To
support various product schemes, there are enhancements
in the existing billing system to enable the release of the
new suites of packages of kartuHALO named HALObebas,
as well as the start of multiple billling cycle.
Telkomsel also built a carrier-grade Data Center for IT
equipment in its own building on TB Simatupang, Jakarta.
Furthermore, the implementation of IT Security system is
now in place. Besides securing the IT unit, the system also
secures all IT related systems within Telkomsel, especially
the critical ones, both physically and logically.
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18 | 2004 Annual Report |
Human Resources
Development
Managerial Assessment
Improvement of leadership quality has been one of the
Company’s key objectives this year. In 2004, a managerial
assessment was carried out on Vice Presidents, General
Managers and Managers, by a qualified independent
assessor. Some of the competencies assessed were
leadership, strategic vision and functional capability in each
field and occupation. A feedback program was conducted
following the assessment project through a structured
training program. The assessment is being followed up by
placement, training and recruitment actions.
with the latest technology, as well as other market
changes, force Telkomsel to continuously adapt.
Rebalancing Compensation
As the market leader, Telkomsel wants the remuneration
of human resources to be competitive in the market.
Telkomsel conducted salary rebalancing by optimizing the
fixed/variable ratio of remuneration packages.
Employee Ratio
The Efficiency ratio between customer base and employees
by the end of 2004 increased from 3,342 to 4,891
customers per employee in 2004, an increase of 46%.
The improvement reflects an increase in human resource
efficiency, which places Telkomsel in the top league
worldwide in terms of efficiency. By the end of 2004,
Telkomsel employed 3,331 personnel, an increase of
16% compared to last year with 2,869 people. Of 3,331
Telkomsel’s employess, 40% worked in Head Office and 60%
worked in the regional offices all over Indonesia.
Reorganization
The increase in cellular customer demand for various
services, such as personalized services and new features
| 2004 Annual Report | 19
Changes in the organization throughout 2004 included
among others, the development of certain functions
within the Head Office, and delegating more authority
to the regions to make decisions. This resulted in the
formation of four Regional Offices, and creation of a
formal coordination mechanisms between Head Office and
regions. With this reorganization, Telkomsel has become
more flexible and effective.
Good Corporate
Governance
Board of Commissioners
Board of Directors
Telkomsel’s Articles of Association (the “Articles”)
The principal functions of the Board of Directors are to
provide that the Board of Commissioners, shall consist
lead and manage Telkomsel as well as control and manage
of six members, including the President Commissioner.
Telkomsel’s assets. In accordance with the Shareholders’
The Shareholders’ Agreement further provides that
Agreement and the Articles, the Board of Directors
the President Commissioner shall be appointed by the
shall consist of five Directors, one of whom shall be the
shareholder holding the greater number of shares.
President Director.
The Articles provide that the principal functions of the
The Shareholders’ Agreement states that the shareholders
Board of Commissioners are to supervise the management
shall be entitled to nominate more than one candidate as
of Telkomsel by the Board of Directors, and the
a Director (and recommend the removal of such Director) in
implementation of Telkomsel’s business plan. The Board
proportion to their respective shareholdings. In accordance
of Commissioners is accountable to the General Meeting
with the Shareholders’ Agreement, Telkom is currently
of Shareholders. Members of the Board of Commissioners
entitled to nominate three Directors and SingTel Mobile is
are elected by the shareholders of Telkomsel. Pursuant to
entitled to nominate two Directors. The President Director
the Shareholders’ Agreement, the shareholders are entitled
and Director of Finance shall be Telkom’s representatives.
to nominate a number of candidates as Commissioners
(and recommend the removal of such Commissioners) in
The Articles also provided that meetings of the Board of
proportion to the size of their respective ownership. Telkom
Directors must be held at least once every two months and
is currently entitled to nominate four Commissioners, and
at any other time upon the request of any of the Director.
SingTel Mobile is entitled to nominate two Commissioners.
The Articles further state that the quorum for all Directors’
However, Telkom only assigns three representatives on
meetings is four members of the Board of Directors present
the Board of Commissioners. One position on the Board
or represented in such meeting, one of whom must be a
of Commissioners is currently vacant.
Director nominated by SingTel Mobile.
Meetings of the Board of Commissioners must be held at
Resolutions of meetings of the Board of Directors shall
least once every three months and at any other time upon
be adopted by the affirmative vote of a majority of the
request of any member of the Board of Commissioners. The
members of the Board of Directors. In the event of a tie,
quorum for all Board of Commissioners meetings is four
the matter shall be referred to a meeting of the Board of
members of the Commissioners, one of whom must be a
Commissioners.
Commissioner nominated by SingTel Mobile.
Compensation
Results of meetings of the Board of Commissioners shall
The Commissioners and Directors receive compensation
be by affirmative vote of a majority of the members of the
determined at the General Meeting of Shareholders of
Board of Commissioners. In the event of a tie, the matter
Telkomsel. No fees are paid to the Commissioners or Directors
shall be referred to a General Meeting of the Shareholders
for their attendance at their respective board meetings.
for resolution.
For the year ended 31 December 2004 the aggregate
compensation paid by Telkomsel to all Commissioners and
Directors as a group was approximately Rp 14 billion.
20 | 2004 Annual Report |
Conflict of Interest
or Commissioners has any substantial interest, directly
The Articles stipulate that members of the Board of
or indirectly, in any company with a similar business as
Directors are prohibited from assuming other positions
Telkomsel.
outside Telkomsel which may directly or indirectly raise
conflicts of interest with Telkomsel and/or which violate
Family Relationships
the provision of applicable laws and regulations. The
None of the Directors or Commissioners is related to one
Articles further state that any non-conflicting concurrent
another.
position assumed by the Board of Directors would require
the permission of the Board of Commissioners and shall
Committees
be reported to the General Meeting of Shareholders. The
Based upon the Shareholders’ Agreement, each Board
concurrent assumption of any non-conflicting position
may from time to time form or authorize the formation of
assumed by the President Director requires permission from
committees of its members to deal with matters pertinent
the General Meeting of Shareholders. The Articles also state
to or assist with the discharge of the relevant Board’s
that members of the Board of Commissioners shall not
responsibilities and obligations. The members of any
assume any position outside Telkomsel that may directly
committee shall include at least one person nominated
or indirectly raise conflicts of interest unless determined
by SingTel Mobile. Currently, Telkomsel has the following
otherwise by the General Meeting of Shareholders.
committees:
•
An Audit Committee of the Board of Commissioners,
In addition, the Articles prohibit a Director with conflicting
that has the responsibility to review the audited
interests to represent Telkomsel in any issues which cause
financial statements of the company and to discuss
such conflict of interest.
these with the external auditors. The Audit Committee
consists of: Triwahyusari (Head of Committee), Lim
Given that each Director and Commissioner of Telkomsel
Chuan Poh and Iwan Setiawan (Committee Members),
is a nominee of either Telkom or SingTel Mobile, which are
and is regulated by an Audit Committee Charter. The
both telecommunications operators, none of the Directors
Audit Committee also regularly interacts with the head
| 2004 Annual Report | 21
•
of Internal Audit to discuss internal control issues.
controls that does not expose the Company to unnecessary
A Remuneration Committee of the Board of
foreign exchange risks. The policies include:
Commissioners having responsibility to determine
the remuneration of the Board of Directors, subject
•
Progressive accumulation of USD and EUR funds
to unanimous Board of Commissioners approval. The
using excess cashflows to continually cover foreign
Remuneration Committee consists of: Woeryanto
exchange exposures, based on the Company’s cashflow
Soeradji (Head of Committee) and Hui Weng Cheong
projections.
(Committee Member).
•
An Investment Committee of the Board of Commissioners
•
Hedging foreign exchange exposures with derivative
having responsibility for reviewing the investment
financial instruments such as forward foreign exchange
plans and management of the implementation
contracts.
of those plans by the company. The Investment
Committee consists of: Hui Weng Cheong (Head of
The revenues from international roaming services also
Committee), Mochammad Hasjim Thojib and Willem
provide a natural hedge for transactional foreign exchange
Lucas Timmermans (Committee Members).
exposure. The amount of this revenue in 2004 was USD
47.8 million.
Business Planning and Budget Preparation
The Board of Directors and no more than two representatives
The balances of significant monetary assets and liabilities
of each Shareholder shall meet prior to 30 September in
in foreign currencies as of December 31, 2004 are as
each year to prepare a new Budget for the following financial
follows:
year and to refine and update the Business Plan.
If the Budget and/or the Business Plan is unanimously
agreed by the Business Plan Team, it shall present the
Assets
Liabilities
USD
EUR
JPY
SGD
AUD
67,397,163
85,523,947
-
-
-
164,149,038
77,887,266
17,264,495
401,091
70,000
proposed Budget and Business Plan to the Board of
Commissioners for their review, consideration and approval
As of 31 December 2004, Telkomsel had covered the
prior to 30 November each year.
12-months forex cash requirements in USD and EUR to a
level of approximately 46% and 37%, respectively, with
Risk and Foreign Exchange Rate Management
cash deposits, derivatives and expected foreign currency
The Company’s foreign exchange risk exposure mainly
cash inflows.
arises from its capital expenditure and to a lesser extent
its operational expenditure are denominated in USD
Transparency and Disclosure
and EUR, whilst its revenues are mainly denominated in
Telkomsel reports its operational and financial performance
Rupiah. Financing facilities for the expenditures have
to the Board of Commissioners and its shareholders on a
been in USD and EUR.
monthly basis.
The objectives of the Company’s foreign exchange policies
On a quarterly basis, Telkomsel reports its operational and
are to allow the Company to effectively manage exposures
financial performance by issuing the quarterly ‘Highlights’.
that arise from business operations within a framework of
These highlights are available on Telkomsel’s website
22 | 2004 Annual Report |
(www.telkomsel.com) and are mailed to anyone who has
At an entity level, the Internal Audit Charter has been
signed up for our mailing service. Telkomsel’s database
updated to increase Internal Audit independence in line
for this mailing service contains major investment houses
with international standards. An Audit Committee Charter
and fund managers, financial institutions, analysts and
compliant with best practice and reflecting Sarbanes Oxley
private persons.
requirements has also been approved.
Each year, an annual report is produced, primarily to fulfill
Measures
the reporting requirement to the shareholders, and to
Measuring tools have been implemented including
provide a growing group of investors, analysts and others,
a balanced score card to assist with Sarbanes Oxley
with an overview of the previous year performance.
compliance allowing for regular monitoring of compliance
rates across the organization.
Although Telkomsel is a private, non-public company,
we do have an investor relations team. The task of the
An audit Recommendations Database has been established,
investor relations team is to define, prepare and provide
and will provide regular updates on recommendations
information that the company is willing to share and
outstanding and implementation rates, to determine
disclose to interested third parties.
effectiveness of Internal Audit recommendations.
Internal Control
A Sarbanes Oxley software application has been developed
The company has made substantial progress in improving
to track compliance and assist reporting of key indicators
its internal audit function. An ex professional audit
to management and the Audit Committee.
services partner has been retained as the Vice President
Internal Audit, and a General Management position has
A performance review system in line with International
been filled with an experienced telecommunications
best practice has been established to monitor individual
internal audit executive.
auditor performance, identify areas for improvement,
training needs and determine how to improve the Internal
A key 2005 objective is to increase company wide internal
Audit division effectiveness. A quality survey has been
control awareness to a satisfactory level, prior to the first
developed to ensure feedback is collected and monitored
external audit on the Sarbanes Oxley internal controls
identifying internal perception and satisfaction with
compliance. To this end, a number of workshops have been
Internal Audit quality.
presented to divisions and managers by Internal Audit
on the topic of Internal Control and Sarbanes Oxley Act
Finally, the Audit Committee has been benchmarked
requirements, and this process will continue in 2005.
against international best practice and a programme of
internal and external training and coaching is underway
In parallel, a Controls Self Assessment (CSA) project is being
to meet the required standards.
implemented and will be in place during 2005. Expected
benefits from the CSA implementation are increased awareness
Sarbanes Oxley Development
and ownership of internal controls by employees and
Sarbanes Oxley developments have gone through two
management; and a monitoring tool to assess improvements
phase so far, project managed and rolled out by Internal
in Internal Control awareness during the year.
Audit, Finance and Accounting, with support from Ernst
| 2004 Annual Report | 23
Telkomsel’s Participation in Tsunami Relief Efforts
The disastrous tsunami in Aceh
and North Sumatera affected
our network. However, we
have been able to restore
services to a large extent
within only two weeks. We are
extremely grateful that all of
our employees, particularly in
Aceh, survived this disaster.
Telkomsel’s relief efforts for
Aceh and North Sumatera
include cash, donation of
125 handsets with simPATI
cards for rescue teams, mobile
grapari that provided free calls
and also functioned as call
center and information center.
We also created sms facilities
for customers to donate for the
tsunami victims.
Clockwise from top left : Aerial view of tsunami-stricken region of Meulaboh,
Network and equipment repair activities began soon after the disaster.
and Young. In the initial phase starting October 2003,
community. To cultivate good corporate citizenship,
entity level assessments have been completed, resulting in
we have actively participated in the development of
recommendations on entity level controls to be improved.
our environment by initiating a number of community
In addition, documenting and flowcharting of key processes
development programs in education and other areas.
related to the Act, section 404, as well as quality assurance
This includes social activities such as providing relief
of this process, were completed under this Phase.
aid to victims of natural disasters all over Indonesia,
mass circumcision or mass marriages in less developed
Validation audits have being undertaken since June 2004,
villages, school endowments and scholarship programs,
as part of phase II. These confirm actual compliance of
rehabilitation programs in correctional facilities, arts and
business units with documented control systems. It is
sports sponsorship and other charities.
anticipated that around 70% of areas will be tested for
validation by March 2005, after which a second follow
In addition to financial support to people in Aceh and
up validation process will take place, which will include
North Sumatera affected by the tsunami and earthquake
testing of S 302 disclosure controls and procedures, as
disasters that hit these areas by the end of this year,
well as follow up on recommendations and areas tested
other Telkomsel’s participation included donation of 125
under the first validation exercise.
handsets with simPATI simcards to the rescue teams,
providing mobile grapari where people could make a
Good Corporate Citizenship
free call, utilizing Telkomsel’s call centers as information
As the leading company in the cellular telecommunications
centers where people could communicate their condition
sector in Indonesia and also part of the society, Telkomsel’s
or locate their family, and creating sms facility for
prosperity is inseparable from the well being of the
customers who wanted to make donation (Rp 2,000 per
sms) to the tsunami victims.
24 | 2004 Annual Report |
Bridge Mobile
Alliance
Bridge Mobile Pte Ltd. (BMPL) was established on
benefits to its shareholders and non-shareholder BMA
November 3rd, 2004, consisting of seven Asia Pacific
members.
operators (Bharti, Globe, Maxis, Optus, Singtel, TCC and
Telkomsel) who joined to establish a regional joint venture
The agreement between BMPL and members is divided
to look at providing commercial benefits and delivering
into three parts;
regional services to their combined 56 million subscribers.
1. A Joint Venture Agreement, which has been signed on
Telkomsel’s investment in BMPL will be up to USD 4 million.
November 2004, governing the contractual framework
So far we have paid in the initial equity participation of
and relationships between the shareholders.
USD 1 million. The ownership of BMPL is divided equally
among its members (at present, 14.2857%).
2. A Master Service Contract (MSC), which is still in
progress. It will set the parameters of rights and
obligations between BMPL and services it provides.
BMPL has three objectives, which are creating clear
3. A Business Contract, when products are launched.
competitive advantages in key areas for the Bridge Mobile
Alliance (BMA) members; providing an inter-working model
BMPL has two mainstreams of services, unanimous and
based on commercial principles with equitable benefits;
voluntary. The unanimous services will be provided by all
and to be financially viable and provide commercial
members while voluntary services will be provided by each
members’ decision.
| 2004 Annual Report | 25