annual report telkom indonesia 2000

2000 Annual Reporton Form 20-F

SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 20-FANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the Ñscal year ended December 31, 2000 Commission Ñle number 1-13330

Perusahaan Perseroan (Persero)P.T. Telekomunikasi Indonesia Tbk.

(Exact name of Registrant as speciÑed in its charter)

Telecommunications Indonesia(a state-owned public limited liability company)

(Translation of Registrant's name into English)

Republic of Indonesia(State or other jurisdiction of incorporation or organization)

Jalan Japati, 1

Bandung 40133

Indonesia

(62) (22) 452-7337*(Address and telephone number of Registrant's principal executive oÇces)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

Title of Name of each exchangeEach class on which registered

American Depositary Shares representing Series B Shares, par Value 500 Rupiahper share ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ New York Stock Exchange

Series B Shares, par value 500 Rupiah per shareÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ New York Stock Exchange**

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 theclose of the period covered by the annual report:

Series A Shares, par value 500 Rupiah per shareÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1

Series B Shares, par value 500 Rupiah per share ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10,079,999,639

Indicate by check mark whether the registrant (1) has Ñled all reports required to be Ñled by Section 13 or15(d) or the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that theRegistrant was required to Ñle such reports), and (2) has been subject to such Ñling requirements for the past90 days.

Yes X No

Indicate by check mark which Ñnancial statement item the Registrant has elected to follow.

Item 17 Item 18 X

* Investor Relations Unit** The Series B Shares were registered in connection with the registration of the American Depositary Shares. The

Series B Shares are not listed for trading on the New York Stock Exchange.

TABLE OF CONTENTS

Page

DEFINITIONS ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1

Introduction ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4

PART I

Item 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS* ÏÏÏÏÏÏÏÏ 5

Item 2. OFFER STATISTICS AND EXPECTED TIMETABLE* ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5

Item 3. KEY INFORMATIONÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5

Item 4. INFORMATION ON THE COMPANY ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9

Item 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 36

Item 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEESÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 45

Item 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS ÏÏÏÏÏÏÏÏÏÏÏÏ 50

Item 8. FINANCIAL INFORMATION ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 51

Item 9. THE OFFER AND LISTINGÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 52

Item 10. ADDITIONAL INFORMATION ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 55

Item 11. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK ÏÏÏÏÏ 64

Item 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES*ÏÏÏÏÏÏÏÏÏÏÏ 70

PART II

Item 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 70

Item 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS

AND USE OF PROCEEDS ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 70

Item 15. RESERVEDÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 70

Item 16. RESERVEDÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 70

PART III

Item 17. FINANCIAL STATEMENTS* ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 70

Item 18. FINANCIAL STATEMENTS ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 70

Item 19. EXHIBITS ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 71

* Omitted because item is not applicable.

i

DEFINITIONS

""AMPS'' (Advanced Mobile Phone System) is a form of analog mobile cellular.

""ASR'' (Answer to Seizure Ratio), see ""Call Completion Rate.''

""ATM'' (Asynchronous Transfer Mode) is a transfer mode in which the information is organized

into cells. It is asynchronous in the sense that the recurrence of cells containing information from an

individual user is not necessarily periodic.

""B2B'' (Business-to Business Electronic Commerce) is a technology-enabled application environ-

ment to facilitate the exchange of business information and automate commercial transaction designed

to automate and optimize interactions between business partners.

""backbone'' means the secondary and tertiary exchanges and the transmission links between and

among them. Transmission media may consist of microwave, submarine cable, satellite, optical Ñbre or

other technologies.

""call completion rate,'' means the percentage of calls that are successfully completed, as measured

by the number of calls successfully answered divided by the number of call attempts that are

recognized by the caller's local exchange, in the case of call completion rates for local calls, and call

attempts that are recognized by the trunk exchange, in the case of call completion rates for long

distance calls. Call completion rate is measured by the answer to seizure ratio (""ASR'').

""capacity utilization'' means the ratio of lines in service to local exchange capacity.

""DCS 1800'' (Digital Communication System) is a mobile cellular system using GSM technology

operating in 1800Mhz frequency.

""distribution point'' means the point of interconnection between the drop wire and the secondary

cable running to a cabinet and/or a local exchange.

""drop wire'' means the wire connecting the subscriber's premises to the distribution point.

""DTR'' (Distributable TELKOM Revenues) is the monthly revenue share payment to be made by

each KSO Unit to TELKOM, being a speciÑed percentage of telephone and other revenues of a KSO

Unit (after deduction of MTR and speciÑed cash expenses) from operating all lines in service in each

KSO Divisions.

""earth station'' means the antenna and associated equipments used to receive or transmit

telecommunication signals via satellite.

""existing installations'' means telecommunications facilities, including telephone lines, network

infrastructures and related assets in existence in each KSO Division as of the beginning of each KSO

Period plus certain facilities and equipments constructed or installed by TELKOM in the KSO Divisions

after such dates which handed over to be managed by KSO Investors.

""Ñxed cellular'' is a form of Ñxed wireless technology, which uses conventional cellular network

conÑgurations to link a subscriber at a Ñxed location to a local exchange.

""Ñxed wire line'' is a Ñxed path (wire or cable) linking a subscriber at a Ñxed location to a local

exchange, usually with an individual phone number.

""Ñxed wireless'' is a wireless, local transmission link using cellular, microwave or radio technology

to link a subscriber at a Ñxed location to a local exchange.

""Government'' means the Government of the Republic of Indonesia.

""GPRS'' (General Packet Radio Service) is a new GSM technology platform, which is also called

the two-and-half Generation (2.5G), that enables mobile-multimedia services over the GSM network.

The services supported by GPRS platform may range from voice services, data transfer (up to

115Kbps), intranet, internet, mobile-commerce, to information services under WAP applications.

1

""GSM'' (Global System for Mobile Telecommunication) is a European standard for digital cellular

telephone.

""HFC'' (High Fibre Coaxial) is a way of delivering video, voice telephony, data, and other

interactive services over coaxial and Ñbre optic cables.

""installed lines'' is lines fully built-out to the distribution point and ready to be connected to

subscribers.

""ISDN'' (Integrated Services Digital Network) is development of system with narrow bandwidth

and digital system from end to end (terminal to terminal) that allows simultaneous transmission of

voice, data and video with high speed, high capacity and high quality.

""KSO'' (Kerjasama Operasi) or Joint Operation Scheme, is a unique type of build, operate, and

transfer arrangement consists of Ñve KSO Divisions known as KSO Unit i.e.: TELKOM's Regional

Divisions I (Sumatera), III (West Java), IV (Central Java), VI (Kalimantan) and VII (Eastern

Indonesia).

""KSO Investor'' means each of the Ñve private joint venture companies, which currently is a party

to a KSO Agreement with TELKOM.

""KSO Period'' means the period commencing as under each KSO Agreement and ending on

December 31, 2010.

""leased line'' means a dedicated telecommunications transmissions line linking one Ñxed point to

another, rented from an operator for exclusive use.

""lines in service'' means revenue-generating lines connected to subscribers, including payphones,

but does not include mobile cellular subscribers or lines used internally by TELKOM.

""local exchange capacity'' means the aggregate number of lines at a local exchange connected and

available for connection to outside plant.

""Mbps'' (megabits per second) is a measurement of speed for digital signal transmission expressed

in millions of bits per second.

""microwave transmission'' means transmission consisting of electromagnetic waves in the radio

frequency spectrum above 890 million cycles per second and below 20 billion cycles per second.

""MTR'' (Minimum TELKOM Revenues) refers to a guaranteed annual minimum amount of

revenue, paid in monthly instalments, by KSO Units to TELKOM.

""NMT-450'' (Nordic Mobile Telephone) is a form of analog mobile cellular service primarily

installed in vehicles.

""Non-KSO Divisions'' means Regional Divisions II (Jakarta) and V (East Java) and the Network

Services and Corporate Head OÇce Divisions of TELKOM.

""non-PBH lines'' means lines not subject to PBH arrangements.

""optical Ñbre cable'' means cables using optical Ñbre and laser technology, whereby modulating

light beams representing data are transmitted through thin Ñlaments of glass.

""outside plant'' is the equipment and facilities used to connect subscriber premises to the local

exchange.

""overlay'' means a separate network, which operates independently of the existing telephone

network, but covers the same geographic region.

""PBH'' (Pola Bagi Hasil) is a type of Build, Operate and Transfer arrangement, refers to a form of

revenue sharing arrangement under which a private investor Ñnances construction of a system,

TELKOM is responsible for operation and maintenance.

2

""PBH lines'' are lines Ñnanced, constructed and operated pursuant to PBH revenue sharing

arrangements.

""PBX'' (Private Branch Exchange) is a small private open architecture telephone network.

""PSDN'' (Packet Switched Data Network) is a network using a switch device and sending packets

of data through the network to some remote locations.

""PSTN'' (Public Switched Telephone Network) is a network operated and maintained by

TELKOM and the KSO Units for and on behalf of TELKOM.

""RIP'' (Rencana Induk Pembangunan) is TELKOM's Ñve-year development plan.

""satellite transponder'' means the radio relay equipment on a satellite, which receives a signal,

ampliÑes it, changes its frequency, and then sends it back to earth.

""switch'' means a mechanical, electrical or electronic device, which opens or closes circuits,

completes or breaks an electrical path, or selects paths or circuits used to route traÇc on the PSTN.

""switching capacity'' means the capacity of all Network exchanges to switch a circuit from one

exchange to another.

""SOPP'' (System On-Line Payment Point) is payment point service, which allows TELKOM

customers to pay their bills electronically through certain on-line and integrated banks or post oÇce.

""trunk exchange'' means a primary, secondary or tertiary exchange.

""USO'' or ""Universal Service Obligation'' is the service obligation imposed by the Government on

all providers of telecommunications services for the purpose of providing public service in Indonesia.

""VoIP'' (Voice over Internet Protocol) also referred to as ""Internet Telephony'' is a two-way

transmission of audio over an IP network, such as the internet.

""VSAT'' (Very Small Aperture Terminal) is a relatively small antenna, typically 1.5 to 3.0 meters

in diameter, used for transmitting and receiving one channel of data communication.

""WAP'' (Wireless Application Protocol) is an open and global standard of technology platform

that enables mobile users to access and interact with mobile information services such as email, Web

sites, Ñnancial info, on line-banking, information and entertainment (infotainment), games, micro

payments, etc.

""WLL'' (wireless local loop) is the use of wireless technology (such as cellular or microwave) as

part of a network's outside plant.

3

Introduction

In this Annual Report certain Rupiah amounts have been translated into Dollars at speciÑed rates.

For 1996 to 1998, Dollar equivalent information for amounts in Rupiah is based on the exchange rates

quoted by Bank Indonesia in its weekly reports. For 1999, TELKOM quotes middle exchange rate from

Dow Jones Telerate, while for 2000, TELKOM quotes exchange rates from the Bridge Telerate, which on

December 31, 2000, was Rp 9,625 • US$1.00. The Federal Reserve Bank of New York does not certify

for customs purposes a noon buying rate for cable transfers in Rupiah. No representation is made that

the Rupiah or Dollar amounts shown herein could have been or could be converted into Dollars or

Rupiah, as the case may be, at any particular rate or at all.

The following table sets forth certain exchange rate information expressed in terms of the

Indonesian Rupiah for Dollars.

At Endof Average

Year Ended December 31, Period High Low Rate

(Rupiah per U.S.$1.00)

1996(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,383 2,383 2,311 2,347





(1) Source: Bank Indonesia.

(2) Source: Dow Jones Telerate

(3) Source: Bridge Telerate

Forward Looking Statement

This document contains certain forward looking statements within the meaning of Section 27A of

the Securities Act of 1933, as amended (the ""Securities Act''), and Section 21E of the Securities

Exchange Act of 1934, as amended (the ""Exchange Act''), with respect to the Ñnancial condition, result

of operations and business of the Company and certain plans and objectives of TELKOM with respect

to these items. In particular among other statements, certain statements in ""Item 5 Operating and

Financial Review and Prospects'' including, without limitation, those concerning the Company's

expectations and plans, strategy, management's objectives, trends in market shares, market standing,

overall market trends, risk management, exchange rates and revenues and general and administration

expenses, and forward looking statements concerning TELKOM's operations, performance and Ñnan-

cial condition. Such statements can be generally identiÑed by the use of terms such as ""believes,''

""expects,'' ""may,'' ""will,'' ""would,'' ""could,'' ""plans,'' or ""anticipates,'' and the negatives of such terms

or comparable terms. By their nature, forward looking statements involve risks and uncertainties

because they are related to events, which depend on circumstances that will occur in the future. There

are a number of factors that could cause actual results and developments to diÅer materially from those

expressed or implied by these forward looking statements. These factors include, but are not limited to,

changes in demand for the Company's products and services, the impact of competitive products and

services and pricing of the Company's products and services, impact of regulation, future exchange and

interest rates, changes in tax rates and future business combinations or dispositions.

4

PART I

Item 1: Identity of Directors, Senior Management and Advisers

Not applicable.

Item 2: OÅer Statistics and Expected Timetable

Not applicable.

Item 3: Key Information

A. Selected Ñnancial data

The following table presents selected Ñnancial information and operating statistics of the Company

for and as of the end of each of the periods indicated. This information should be read in conjunction

with, and is qualiÑed in its entirety by reference to, the Company's Consolidated Financial Statements,

including the notes thereto, and the other information included elsewhere herein. The Company's

Consolidated Financial Statements for the years 1998 and 1999, were audited by Prasetio, Utomo & Co.,

the member Ñrm of Arthur Andersen & Co. SC in Indonesia. The Company's Consolidated Financial

Statements for the year 2000 has been audited by Hans Tuanakotta & Mustofa, a member Ñrm of

Deloitte Touche Tohmatsu in Indonesia as indicated in their report appearing on page F-1 herein. Such

Financial Statements are prepared in accordance with Indonesian GAAP, which diÅers in certain

signiÑcant respects from U.S. GAAP. See ""Quantitative and Qualitative Disclosure About Risk Ì

Summary of Material DiÅerences between Indonesian GAAP and U.S. GAAP'' and Notes 43 and 44 to

the Company's Consolidated Financial Statements, which provide a description of the material

diÅerences between Indonesian GAAP and U.S. GAAP and a reconciliation to the approximate amount

of U.S. GAAP net income and stockholders' equity of the Company for and as of the end of each of the

periods indicated in the Consolidated Financial Statements.

1996 1997 1998 1999 2000Rp Rp Rp Rp Rp

(Rp in billion, except share and ADS data)

Income Statement Data

Indonesian GAAP

Operating revenues

Telephone

Local and domestic long distance usage ÏÏÏÏ 1,953 2,375 2,903 3,571 4,097

Monthly subscription charges ÏÏÏÏÏÏÏÏÏÏÏÏÏ 425 543 683 799 887

Installation charges ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 242 156 106 68 75

OthersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 122 132 113 91 118

Total telephone revenues ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,743 3,206 3,805 4,529 5,178

Revenue Under Joint Operation SchemeÏÏÏÏÏÏ 1,498 1,646 1,592 1,677 2,267

Interconnection ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 310 573 556 892 1,121

Other telecommunication services

Revenue sharingÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 344 272 285 308 308

OthersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 181 212 362 384 502

Total operating revenues ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,076 5,909 6,600 7,790 9,375

5

1996 1997 1998 1999 2000Rp Rp Rp Rp Rp

(Rp in billion, except share and ADS data)

Operating expenses

Personnel ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 787 847 832 1,106 1,439

Depreciation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,402 1,697 2,162 2,364 2,088

Operation, maintenance and

telecommunications services(1) ÏÏÏÏÏÏÏÏÏÏÏÏ 444 412 501 822 1,009

General and administrative ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 267 392 474 508 715

MarketingÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 29 35 31 47 87

Total operating expenses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,927 3,383 4,000 4,847 5,338

Operating incomeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,149 2,526 2,600 2,943 4,037

Other expenses (income)

Interest expense ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 452 523 981 1,487 817

Interest income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (231) (145) (595) (688) (632)

Loss (gain) on foreign exchange Ì netÏÏÏÏÏÏÏ 3 424 966 (280) 1,064

Others Ì net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (146) 102 (177) (538) (670)

Income before provision for income tax ÏÏÏÏÏÏÏÏ 2,071 1,622 1,425 2,962 3,458

Provision for income taxÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 568 470 256 777 906

Minority interest in net income of subsidiary ÏÏÏ Ì Ì Ì 13 13

Net income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,503 1,152 1,169 2,172 2,539

Weighted average shares outstanding (millions) ÏÏ 9,333 9,333 9,333 9,644 10,080

Net income per share ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 161.07 123.44 125.21 225.24 251.89

Net income per ADSÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,221.31 2,468.79 2,504.29 4,504.89 5,037.72

Dividend declared per share ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 24.48 41.25 48.48 50.99 107.76

U.S. GAAP(2)

Net income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,356 811 924 2,385 2,497

Net income per share ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 145.28 86.87 99.01 247.33 247.74

Net income per ADSÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,905.64 1,737.32 1,980.21 4,946.62 4,954.73

As of December 31,

1996 1997 1998 1999 2000

Rp Rp Rp Rp Rp(Rp in billions, U.S.$ in millions)

Balance Sheet DataIndonesian GAAP

Total assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 17,669 19,819 23,693 26,330 28,880Current liabilities(3)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,129 2,370 2,615 3,393 3,390Other liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,249 2,174 2,133 2,142 2,220Long term debt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,424 5,637 8,437 8,541 9,546Total liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,802 10,181 13,185 14,076 15,156Total stockholders' equity ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,867 9,638 10,508 12,224 13,688

U.S. GAAP(3)

Total assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 17,652 19,472 23,069 25,771 28,216Total stockholders' equity ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,496 8,948 9,675 11,605 13,026

(1) Beginning in the third quarter of 1998, management reclassiÑed commissions paid on wartels, and kiosks, as Operation,

Maintenance and Telecommunications Services expenses (rather than marketing expenses).

(2) U.S. GAAP amounts reÖect adjustments resulting from diÅerences in the accounting treatment of pensions, foreign exchange

diÅerential on property under construction, equity in net income (loss) of investees, revaluation of property, plant and

equipment, PBHs and deferred stock issuance cost. See Note 43 to the Company's Consolidated Financial Statements.

(3) Includes current maturities of long-term debt.

6

As of and for the Year Ended December 31,

1996 1997 1998 1999 2000

Operating Statistics (unaudited)Exchange capacity

Non-KSO Divisions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,586,750 4,035,245 4,324,024 4,449,552 4,515,615KSO DivisionsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,756,945 3,356,952 3,827,993 3,909,179 3,946,407

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,343,695 7,392,197 8,152,017 8,358,731 8,462,022Lines in service(1)

Non-KSO Divisions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,302,745 2,746,028 3,014,824 3,256,992 3,610,363KSO DivisionsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,883,285 2,236,438 2,556,820 2,823,201 3,052,242

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,186,030 4,982,466 5,571,644 6,080,193 6,662,605Lines in service per 100 inhabitants

Non-KSO Divisions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3.91 4.58 4.95 5.3 5.7KSO DivisionsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1.35 1.58 1.78 1.9 2.0

Combined ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2.11 2.47 2.73 2.9 3.1Public telephones(2)

Non-KSO Divisions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 74,873 92,192 126,345 155,107 216,288KSO DivisionsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 59,669 74,532 90,306 114,135 129,019

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 134,542 166,724 216,651 269,242 345,307Leased lines in service

Non-KSO Divisions(3) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,401 1,223 1,371 2,446 3,300KSO DivisionsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,032 1,339 1,760 2,143 2,702

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,433 2,562 3,131 4,589 6,002Pulse Subscriber Production(2)(millions)


Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 35,347 42,143 45,905 47,259 52,859Call completion rate (%)

LocalNon-KSO Divisions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 55.9 60.9 68.1 72.0 77.0KSO DivisionsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 58.7 60.2 68.1 70.1 71.4

Combined ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 57.9 60.4 68.1 70.6 73.0Domestic long distance

Non-KSO Divisions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 52.5 56.6 62.1 64.0 69.3KSO DivisionsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 53.6 56.4 62.0 62.4 64.5

Combined ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 53.2 56.5 62.0 63.0 65.8Total Employees


Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 37,644 37,974 38,117 37,983 37,705Lines in service per employee

Non-KSO Divisions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 123 145 157 171 191KSO DivisionsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 99 118 135 149 163

Combined ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 111 131 146 160 177

(1) Includes lines in service operated by TELKOM pursuant to PBHs as of December 31: (1996) 389,972 , (1997) 416,165,

(1998) 406,487, (1999) 405,643 and (2000) 409,818.

(2) Consists of pulses generated from local and domestic long distance calls, excluding calls made from payphones and mobile

cellular phones

(3) Excludes 16,876 leased line and 1,198 leased line operated by Network Division and Multimedia Division, respectively (data

as of December 2000).

7

B. Capitalization and indebtedness

Not applicable.

C. Reason for the oÅer and use of proceeds

Not applicable.

D. Risk Factors

Indonesian Economic, Political and related Considerations

All of the Company's operations are located in Indonesia. The Company and the market price and

liquidity of the ADSs and the shares of Common Stock may be aÅected by changes in Indonesian

governmental policy, taxation and other political, economic, diplomatic or social developments in or

aÅecting Indonesia which are not within the control of the Company.

In the early 1980's, the Government initiated deregulation and economic liberalization policies that

have stimulated economic growth through private enterprise and increased investments. The Company

has beneÑted from the implementation of these policies as they have resulted in signiÑcant increases in,

among other things, business activity and corporate and personal wealth, spurring increased demand

for telecommunications services and increased volume in telephone traÇc.

Although the Government has indicated that it presently intends to continue these policies, and

the Company does not anticipate policy changes, there can be no assurance to that eÅect or that a

change in the Government would not result in changes in policy or the broader economic environment.

Any such change could have a material adverse eÅect upon the Company's business.

Exchange Rate Risk

The holders of ADSs and the Company are subject to currency risk should the value of the rupiah

depreciate against the U.S. dollar and certain currencies. Fluctuations in the exchange rate between the

rupiah and the U.S. dollar may materially aÅect the dollar value of any amounts a holder of ADSs will

receive in respect of dividends, the dollar value of the proceeds a holder would receive upon the sale in

Indonesia of shares of Common Stock and the secondary market price of the ADSs. Furthermore, the

Company receives all of its revenues in rupiah, but must make signiÑcant expenditures in other

currencies, particularly U.S. dollars and Japanese yen, related to the purchase of equipment and the

repayment and servicing of foreign currency denominated indebtedness.

As of December 31, 2000, the Company had a total long-term debt of Rp 10,364.8 billion, which

includes an equivalent of Rp 6,037.1 billion drawn from credit facilities under which it would be subject

to foreign exchange risk.

Currently the Company maintains foreign currency Ì denominated current assets (such as bank

deposits) in suÇcient amounts to meet its anticipated foreign currency Ì denominated current

liabilities when they come due.

Notwithstanding its expectations, there can be no assurance that the Company will be able to

manage its currency exchange rate risk successfully in the future or that the Company will not be

adversely aÅected by its new exposure to currency exchange risk.

Long Term solutions of KSO Agreements

On October 20, 1995, TELKOM entered into long-term agreements with 5 (Ñve) KSO Investors

providing for the transfer of network development and operational responsibility to the KSO Investor

for Regional Divisions I, III, IV, VI, and VII. Due to the depreciation of the rupiah against foreign

currencies, particularly the US Dollar, in 1997 and thereafter, some of the KSO projects have lost their

economic viability.

8

Discussions between TELKOM and KSO Investors have arrived at Ñve alternative solutions:

(i) continue the KSO schemes in accordance with original agreements with certain modiÑcations in

construction provisions, (ii) to form joint venture companies with TELKOM; (iii) to form joint venture

company with Indosat, (iv) separation of assets of the KSO; and (v) termination of the KSO

agreement. The Company believes the KSO scheme is still valid, therefore favors to proceed under the

original agreements with certain modiÑcations. However the Company is still open to discuss any

alternative proposed by the KSO Investors provided a win-win solution is presented.

The alternative solutions being discussed in regard to the KSO problem may result in various

solutions among KSO partners subject to certain conditions. TELKOM's view of the continuation of the

KSO original contract with some amendments is the most suitable to the parties and has the minimum

impact on the Company's Ñnancial position and operations. Meanwhile termination of the KSO is

believed to have the most impact on the Company's Ñnancial position and operations as the Company

would require signiÑcant funding to buy the KSO assets. Given the intensive negotiation being

conducted, the Company cannot determine the solution of its KSO as well as its impact on the

Company's Ñnancial position. In case the Company needs some Ñnancing sources to resolve the KSO

problem, the Company will optimize the use of cash generated internally and may use the other

Ñnancing sources that will result in minimum weighted average cost of capital.

Regulatory Structure

TELKOM and its operations are subject to comprehensive governmental regulation and supervi-

sion. In Indonesia, the Government sets policy for the telecommunications sector pursuant to

applicable laws, which generally establish basic principles and leave considerable discretion to the

Government. The Government is also responsible for implementation and enforcement of applicable

laws and policies. Government policies deÑne, among other things, the terms of TELKOM's exclusivity,

applicable tariÅ policy and structure and Universal Service Obligation (USO). Policies applicable to

the Company and the regulatory environment in which it operates may change and such changes could

have a material adverse eÅect on the Company's operations and Ñnancial prospects.

TariÅ Policy

In Indonesia, any rebalancing of tariÅs to better reÖect the costs of providing such services may

only be implemented through the Government's approval. The Government has stated its intention to

gradually rebalance tariÅs to reÖect costs while, at the same time, retaining aÅordability. No assurance

can be given that reductions in tariÅs for services such as long distance will be oÅset by corresponding

increases in tariÅs for other services.

On October 23, 1995, the Government issued a decree No. KM-79/PR.301/MPPT-95 (""The Price

Cap TariÅ Decree'') which establishes a policy of using a price cap tariÅ formula to aid in determining

future tariÅ adjustments for certain classes of telecommunications services. In relation with the

depreciation of the rupiah, during the year 1998 and 1999, the Government decided to apply a Öat

increase to all tariÅ structure. There is no assurance for a consistent implementation of the Price Cap

Formula.

Item 4: Information on the Company

A. History and development of the company

Perusahaan Perseroan (Persero) P.T. Telekomunikasi Indonesia Tbk. (""TELKOM'' or

the ""Company'') is the principal provider of telecommunications services in Indonesia, providing local

and domestic long distance telephone services through 6.66 million lines in service as of December 31,

2000. TELKOM, either directly or indirectly through its aÇliates, provides a wide range of other

telecommunications services, including mobile and Ñxed cellular, data communications, leased lines

and certain value-added services. TELKOM, a majority state-owned company, is one of the largest

companies in Indonesia with total operating revenues of Rp 9,375.7 billion and Rp 2,539.0 billion of net

9

income in the year 2000. From 1996 to 2000, the Company's operating revenues and net income had

compound annual growth of 16.58% and 14.00%, respectively, while operating income had compound

annual growth of 17.07%.

In 1884, the Dutch colonial government established a private company to provide postal services

and domestic telegraph services and, subsequently, international telegraph services. Telephone services

were Ñrst made available in Indonesia in 1882 and, until 1906, were provided by privately-owned

companies pursuant to a 25-year government license. In 1906, the Dutch colonial government formed a

government agency to assume control of all postal and telecommunications services in Indonesia. In

1961, most of these services were transferred to a newly-established state-owned company to provide

postal and telecommunications services in Indonesia, apart from services in Sumatera, which were

transferred in the 1970's. The Government separated postal and telecommunications services in 1965

into two state-owned companies, PN Pos dan Giro, and PN Telekomunikasi. In 1974,

PN Telekomunikasi was further divided into two state-owned companies, Perusahaan Umum

Telekomunikasi (""Perumtel'') and P.T. Inti, to provide domestic and international telecommunications

services and telecommunications equipment manufacturing, respectively. In 1980, the international

telecommunications business was transferred from Perumtel to Indonesian Satellite Corporation

(""Indosat'').

In 1991, Perumtel was transformed into ""Persero,'' a state-owned limited liability corporation with

commercial purposes, and renamed Perusahaan Perseroan (Persero) P.T. Telekomunikasi Indonesia,

known as TELKOM. Prior to 1995, TELKOM's business was segregated into 12 regional operating units,

known as ""Witels,'' which were centrally controlled by TELKOM's headquarters in Bandung, West

Java. Each Witel had a management structure responsible for all aspects of TELKOM's business in their

respective regions, from the provision of telephone services to property management and security.

During 1995, TELKOM restructured its operations (the ""Restructuring'') by converting all twelve

Witels into seven Regional Divisions (Division I, Sumatera; Division II, Jakarta and the surrounding

areas; Division III, West Java; Division IV, Central Java; Division V, East Java, including Surabaya;

Division VI, Kalimantan; and Division VII, Eastern part of Indonesia) and one Network Division. As

part of the restructuring, the Company's business activities were divided into three main areas, which

were core, related, and supporting business. The Company also entered into KSO Agreements with

Ñve private sector consortia, each of which includes prominent international telecommunication

operator(s), to develop and manage Ñve of TELKOM's seven regional operating divisions with

TELKOM. Furthermore, on November 14, 1995, the Government sold TELKOM shares through a global

initial public oÅering.

In December 1996 and May 1999 the Government sold 388 million and 898 million of its B shares

respectively. Pursuant to Law No. 1 of 1995 on Limited Liability Companies, the minimum issued and

fully paid stock at 25% of the Company's authorized capital stock amounts to Rp 5 trillion. To conform

to the Law, at the Annual General Meeting of the Stockholders in 1999, it was resolved to increase the

issued and fully paid capital stock by capitalizing Additional Paid-in Capital into 746,666,640

Series B shares resulting in a total of 10,079,999,640 outstanding shares.

Capital Expenditures

During 2000, the Company spent Rp 2,103.3 billion on Capital Expenditures. Out of these Capital

Expenditures approximately Rp 1,165.8 billion was spent for infrastructure development,

10

Rp 734.4 billion for PMVIS, and Rp 203.1 billion for support business. The breakdown of 2000 CAPEX is

as follows:

Rp

(billions)

Infrastructures ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,165.83PMVIS:

Phone-Net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 528.03Mobile-Net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ ÌView-NetÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.28Inter-Net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 98.68Service-NetÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 107.38Sub TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 734.37

Support ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 203.11TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,103.31

During 1998, 1999, and 2000 total Capital Expenditures were Rp 4,485.0 billion, Rp 2,713.8 billion,and Rp 2,103.3 billion respectively.

Capital Expenditure Plan 2001

TELKOM's capital expenditure plan for the year 2001 totals approximately Rp 3,625.89 billion,which will be funded by cash generated internally of Rp 3,183.64 billion, and the remaining Rp 442.25billion by committed two step loans. The Company uses an assumed Rupiah/U.S. Dollar exchange rateof Rp 9,100 • US$1.00 for its 2001 capital expenditure plan.

Capex for the year 2001, as mentioned above, is categorized in accordance with TELKOM'sbusiness development plan, to reÖect the Company's present intentions to become a leading companyin information and communication business in the region (See: ""Business Strategy''). The Capex isallocated as follows: (i) development of infrastructure consisting of transmission network, accessnetwork, infrastructure of data backbone, and infrastructure of PSTN backbone in the amount ofRp 1,728.25 billion; (ii) development of phone business in the amount of Rp 144.36 billion; (iii) thedevelopment of mobile business, particularly of the DCS-1800 supported by GPRS and WAP Gatewayin the amount of Rp 594.45 billion; (iv) development of view/cable TV business Rp 2.99 billion;(v) internet development in the amount of Rp 129.64 billion for IP high speed, VoIP, and IP valueadded services; and (vi) Rp 273.87 billion spending in supporting service development consisting of abilling system, network management systems, management information systems, call centers, andenterprise business. The remaining Rp 752.33 billion will be used for supporting capital expenditure,consisting of expenditures such as interest during construction, provision for foreign exchange, projectoperating cost, research & development, contingency, operating capital expenditures for JOS, and otherfacilities. The following table shows the Company's planned capital expenditures for the year 2001:

2001Business Development Rp

(in billions)

Infrastructure ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,728.25Transmission Network ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 430.45Access NetworkÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 973.02Data BackboneÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 152.54PSTN BackboneÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 172.24

Phone ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 144.36Mobile ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 594.45View/cable TVÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2.99Internet ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 129.64Service ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 273.87Supporting ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 752.33

TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,625.89

11

TELKOM's 2001 capital expenditure plan and the implementation of such plan are subject to

change depending on actual facts and circumstances as they may develop from time to time.

Infrastructure Development

The development of infrastructure consists of (i) Rp 430.45 billion for a transmission network

which includes a Ñbre optic transmission network in the city of Jakarta and Surabaya, a backbone/long

haul transmission network, and an additional ground satellite segment, (ii) Rp 973.02 billion for access

network which includes Ñbre access network, copper access network, HFC, wireless access, and High

Speed Multimedia Access using DSL technology (iii) Rp 152.54 billion for data backbone which

includes Router Core and Edge, ATM Network, Frame Relay, and Remote Access Server,

(iv) Rp 172.24 billion for infrastructure of PSTN network which includes upgrading PSTN local switch,

and additional capacity for PSTN trunk. The total budget for infrastructure development is

Rp 1,728.25 billion.

Development of Phone Business

TELKOM plans to invest Rp 144.36 billion in the year 2001 on expanding and improving phonebusiness consisting of: (i) Rp 84.53 billion for additional capacity; (ii) Rp 13.61 billion for additionalISDN capacity and PSTN Value Added Services; and (iii) Rp 46.22 billion for Intelligent Network.

Development of Mobile Business

TELKOM plans to invest Rp 594.45 billion for DCS-1800 infrastructure supported by WAPapplication and GPRS in the year 2001 which includes: (i) Rp 401.71 billion for Mobile SwitchingCenter, Base Station Controller, and Base Transceiver Station; (ii) Rp 85.44 billion for WAP, GPRS, andIN; (iii) Rp 40.36 billion for approach link; and (iv) Rp 66.94 billion for mobile planning tools andsupporting facilities.

Development of View/Cable TV Business

In the year 2001, TELKOM plans to invest Rp 2.99 billion on development of business view/cableTV such as Pay TV, High Speed Internet Access, and Direct to Home (DTH) service. TELKOM isexpected to acquire approximately 10,000 subscribers for Pay TV, approximately 1,800 customers forHigh Speed Internet Access using HFC, and approximately 2,900 customers for DTH service.

Development of Internet/Multimedia Business

TELKOM plans to spend Rp 129.64 billion on internet/multimedia business development which

includes: (i) Rp 22.38 billion on IP high speed; (ii) Rp 49.91 billion on VoIP services and E1 for RAS/

Gateway, (iii) Rp 17.55 billion on Internet Data Center (iv) Rp 20.43 billion for Multimedia VAS, and

(v) Rp 19.38 billion for B2B e-commerce.

Development of Business Service

TELKOM plans to spend Rp 273.87 billion for improvement of TELKOM's service to its business

and other customers by optimizing customer care facilities such as call centers, billing systems for all

services, management information systems and the Total Solution Service/Enterprise business.

Supporting Facilities

The Rp 752.33 billion for supporting capital expenditure consists of Rp 151.04 billion for research &

development, vehicle, oÇce equipment, contingency, and other facilities, and the remaining

12

Rp 601.29 billion is allocated for interest during construction, provision for foreign exchange, project

operating cost, which are related to the above mentioned Development Project, as detailed below:

2001Supporting Rp (billion)

Supporting FacilitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 151.04

Supporting related to development of:

Infrastructure ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 551.44

P-NetÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 28.30

Mobile-NetÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2.99

View-Net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1.02

I-Net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4.17

Service-Net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13.37

Sub Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 601.29

Total SupportingÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 752.33

B. Business Overview

The Company provides a broad range of telecommunications services in Indonesia. The following

table sets forth the contribution of each major service area to TELKOM's operating revenue, for the

periods indicated.

Percentage PercentageYear Ended of Total Year Ended of Total

December 31, Operating December 31, Operating1999 Revenues 2000 Revenues

(Rp in millions) (Rp in millions)

Operating revenues

Telephone services

Local and domestic long distance

Usage(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,570,891 45.8 4,097,093 43.7

Installation charges(2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 68,277 0.9 75,382 0.8

Monthly subscription chargesÏÏÏÏÏÏÏÏÏÏÏ 799,074 10.3 887,355 9.4

Phone cards ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ -8,645 -0.1 34,426 0.4

Others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 99,305 1,3 83,608 0.9

Total telephone revenuesÏÏÏÏÏÏÏÏÏÏÏ 4,528,902 58.2 5,177,864 55.2

Revenue Under Joint Operation

Scheme (JOS)

Minimum TELKOM Revenues (MTR) ÏÏÏÏÏ 1,452,912 18.6 1,556,699 16.6

Distributable TELKOM Revenues (DTR)ÏÏÏ 208,956 2.7 695,106 7.4

Amortization of unearned initial investor

payment under JOS ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 15,349 0.2 15,349 0.2

Total Revenue Under JOS ÏÏÏÏÏÏÏÏÏÏ 1,677,217 21.5 2,267,154 24.2

13

Percentage PercentageYear Ended of Total Year Ended of Total

December 31, Operating December 31, Operating1999 Revenues 2000 Revenues

(Rp in millions) (Rp in millions)

Interconnection revenueÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 892,050 11.4 1,121,482 12.0

Other telecommunications services

Revenue under revenue sharing

Arrangement(3)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 308,147 4.0 308,365 3.3

Leased lines ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 100,475 1.3 193,869 2.1

Satellite transponderÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 215,790 2.8 183,255 1.9

Telex and telegram ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13,078 0.2 7,498 0.1

Multimedia ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 35,407 0.4 65,164 0.7

Others(4) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 19,143 0.2 51,055 0.5

Total other telecommunications services

RevenuesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 692,040 8.9 809,206 8.6

Total operating revenueÏÏÏÏÏÏÏÏÏÏÏÏ 7,790,209 100.0 9,375,706 100.0

(1) Local and domestic long distance usage including revenues from 405,463 and 409,818 PBH lines in service as of December 31,

1999 and 2000, respectively, which are reÖected under Revenue Sharing Arrangement (Ñxed wire line).

(2) Excludes installation charges for Ñxed wire lines placed in service subject to PBHs.

(3) Includes TELKOM's revenue sharing from PBH cellular operators.

(4) Includes revenues from ISDN, IN, VSAT, telefax and value added services.

Telephone Services

As of December 31, 2000, the number of lines in service was 6.66 million lines, consisting of

6.32 million subscribers' lines and 345,307 public phones including kiosk phones. The subscribers are

segmented by business, residential (including Government agencies), and social subscribers (mainly

non-proÑt organization). TELKOM's subscribers pay one time installation charges, on going monthly

subscription charges, and pay usage charges for local and domestic long distance services which are

generally uniform nationwide and are based on call distance, call duration and the time the call is

made.

The Company's development in installed lines, lines in service, and traÇc volume and certain of

their respective annual growth rates during the period of 1996 Ì 2000 (including KSO Division) can be

seen in the following table:

As of December 31,

1996 1997 1998 1999 2000

Installed lines ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,808,849 6,523,724 7,197,099 7,429,262 7,668,077

Growth (%)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 30.0 12.3 10.3 3.2 3.2

Lines in serviceÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,186,030 4,982,466 5,571,644 6,080,193 6,662,605

Growth (%)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 27.2 19.0 11.8 9.1 9.6

Year Ended December 31,

1996 1997(2) 1998 1999 2000

TraÇc volume(1)

(millions of Pulses) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 35,347 42,144 45,905 47,259 52,859

Growth (%) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 25.1 19.2 8.9 2.95 11.85

(1) Figures indicated exclude public phone.

(2) As a result of decreases of pulse duration in 1997, volume measured in pulses is not directly comparable.

14

Meanwhile, the TELKOM lines among Regional Divisions as of December 31, 2000, are illustrated

in the following table:

Division I Division II Division III Division IV Division V Division VI Division VII Total

(Sumatera) (Jakarta) (West (Central (East (Kalimantan) (EastJava) Java) Java) Indonesia)

Local Exchange

CapacityÏÏÏÏ 1,128,400 3,123,519 878,860 754,534 1,392,096 381,871 802,742 8,462,022

Installed Lines 1,027,706 2,777,394 714,583 721,164 1,308,904 361,481 756,845 7,668,077

Lines in

Service ÏÏÏÏÏ 897,323 2,412,221 639,913 579,647 1,198,142 302,948 632,411 6,662,605

Utilization Rate

(LIS/IL)ÏÏÏÏ 87.31 86.85 89.55 80.38 91.54 83.81 83.56 86.89

Employees(1) ÏÏ 5,880 9,238 2,922 3,307 4,526 1,574 5,105 32,552

Population

(millions)(2) 45.4 24.5 25.4 39.2 38.3 12.4 31.5 216.8

Line

Penetration(%) 2.0 9.8 2.5 1.5 3.1 2.5 2.0 3.1

Population

Density (per

km)(2) ÏÏÏÏÏÏ 97 1,809 792 891 605 21 40 108

(1) Total TELKOM employees as of December 31, 2000 were 37,705 including 4,661 employees in the Supporting Division and

Corporate OÇce.

(2) Source: Indonesian Central Bureau of Statistics (Projected Ñgures only).

In 2000, telephone services contributed Rp 5,177.86 billion or 55.23% of TELKOM's total operating

revenues. No single customer accounted for more than 1% of TELKOM's total telephone revenues, and

TELKOM estimates that its top 100 customers (other than interconnection customers) together

accounted for less than 5% of TELKOM's total telephone revenues in 2000.

Joint Operation Scheme Services (KSO)

As of December 31, 2000, of the total number of 6.66 million lines in service, 3.05 million lines were

in the KSO regions, which consists of 2.92 million subscriber lines and 0.13 million public phones

including kiosk phones. Revenue from all KSO Regions amounted to Rp 2,267.15 billion or 24.2% of the

Total Operating Revenue. The revenue consisted of Rp 1,556.7 billion as MTR payments, Rp 695.1

billion as DTR payments and Rp 15.3 billion as amortization of initial investor's payments.

Each KSO Revenue performances for the last three years (1998 Ì 2000) are indicated in the

following table:

1998 1999 2000

KSO-Division MTR DTR MTR DTR MTR DTR

(Rp billion) (Rp billion) (Rp billion)

Division I (Sumatra) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 464.6 40.1 471.6 64.2 488.2 206.5

Division III (West Java)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 307.5 29.1 312.1 34.1 344.0 79.9

Division IV (Central Java) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 316.2 19.4 321,0 31.6 355.8 107.9

Division VI (Kalimantan) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 135.0 20.1 135,0 31.4 137.0 101.9

Division VII (Eastern Indonesia)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 210.1 34.0 213.2 47.6 231.7 198.9

TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,433.4 142.7 1,452.9 208.9 1,556.7 695.1

Interconnection Services

TELKOM and the KSO Units receive interconnection revenues from operators of other telecommu-

nications services, such as mobile cellular, Ñxed cellular, Ñxed wire line, and international long distance,

that interconnects with the PSTN. Under the current interconnection regime, mobile cellular networks

are not required to interconnect with the PSTN.

15

Interconnection traÇc volumes are indicated in the following table:

Year Ended December 31,

1996 1997(1) 1998(1) 1999(1) 2000(1)

(millions of minutes)

Mobile Cellular

GSM

Incoming paid minutes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 261.1 1,492.6 920.8 1,396.8 1,988.6

Outgoing paid minutes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 114.9 350.7 604.8 873.2 1,687.1

AMPS/NMT-450

Incoming paid minutes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 161.3 255.1 119.7 62.9 71.8

Outgoing paid minutes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5.0 56.1 62.0 24.7 34.0

Subtotal ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 542.4 2,154.4 1,707.4 2,357.7 3,781.5

Fixed Cellular



Subtotal ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 35.7 35.2 63.6 75.0 111.8

Total cellular paid minutes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 578.1 2,189.6 1,771.0 2,432.7 3,893.3

Fixed Wire line Interconnection(2)

Incoming paid minutes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì 7.4 26.1 30.1

Outgoing paid minutes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì 0.4 2.9 3.3

Total paid minutes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì 7.8 29.0 33.4

International Interconnection



Total paid minutes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 607.0 697.5 717.9 654.3 596.3

(1) International paid minutes includes data from Indosat 001 and Satelindo 008, which does not include minutes from mobile

cellular and Ñxed wireless operators that are interconnected directly with international gateways.

(2) For 1998, four months ended December 31,1998.

During 2000, TELKOM received Rp 1,121.5 billion from interconnection services or 12% of

TELKOM's total operating revenue.

Other Telecommunication Services

The Company provides a variety of other services such as leased lines, satellite transponders, telex

and telegram. Among those services, the revenue under PBH and the satellite transponder contributed

a signiÑcant amount to TELKOM's other telecommunication services revenue. During the year 2000,

other telecommunication revenues booked Rp 809.2 billion.

Network Infrastructure

General

The Network comprises a hierarchy of exchanges ranging from the local exchange through trunk

exchanges: the primary, secondary and tertiary exchanges. Each local exchange is connected to the

subscriber's premises by equipment and facilities called outside plant. Outside plant includes wire line

and wireless local transmission links and the distribution facilities joining them.

During 2000, TELKOM achieved a local call completion rate of 72.97%, an improvement of 3.31%

compared to the previous year, and a domestic long distance call completion rate of 65.82%, an

improvement of 4.51% on the previous year's rate. The penetration rate was 3.07 lines in services per

100 inhabitants, among the lowest in the world.

16

Outside Plant and Switching Facilities

As of December 31, 2000, TELKOM's 8.5 million lines exchange capacity were connected to

4.5 million and 4.0 million local exchanges in the Non-KSO and KSO Divisions, respectively. TELKOM

and the KSO Partners have already used copper wire, optical Ñbre, radio access, and hybrid Ñbre

coaxial as medium of access network.

The Company believes that digitalization substantially increases network eÇciency, performance,

and call routing Öexibility. As of December 31, 2000, digitalization of TELKOM's switching facilities was

100% at trunk exchanges. By the end of 2000, the capacity utilization rate for both Non KSO Divisions

and KSO Divisions was 78.74%.

Transmission Facilities

Transmission facilities refer to all kinds of transmission media that link exchanges together. As of

December 31, 2000, TELKOM utilizes 3,431 kilometres of optical Ñbre to link high volume routes such

as Jakarta-Surabaya, and 2,875 kilometres of submarine cable to link Sumatera-Java-Kalimantan and

Sulawesi.

TELKOM currently operates TELKOM-1, Palapa B-4 satellites, and 179 earth stations including 1

satellite control system. TELKOM-1 has 36 transponders including 12 extended C-band transponders

replacing the Palapa B2R, which reached the end of operational life in November 1999. The Palapa B-4,

which has 24 transponders is due to reach the end of its normal operational life in May, 2001. In

addition to its own purpose, the Company leases satellite transponder capacity and provide earth

station satellite up linking and down linking services to domestic and international users. TELKOM

uses its satellites for (i) providing network backbone transmission; (ii) providing rural telecommunica-

tion service; (iii) providing back-up for the national telecommunication network; (iv) oÅering satellite

up-linking and down-linking, VSAT, and multimedia services.

The following table illustrates the transmission capacity of the Company's backbone transmission

facilities as of December 31, 2000.

Capacity in Percentagenumber of of total

Transmission medium circuits capacity

Optical Ñbre cable ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 174,300 54,44

MicrowaveÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 101,970 31,85

Submarine cableÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 33,480 10,46

Satellite ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10,426 3,26

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 320,176 100.00

17

Network Development

The number of installed lines during the period of 1996 Ì 2000, including KSO, and the

approximate numbers of lines to be added in Division II and Division V during 2001, are shown in the

following table:

TelkomHistorical Projection

1996 1997 1998 1999 2000 2001

Division II (Jakarta)Non-PBH linesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 554,475 222,996 158,685 126 48,547 120,624PBH lines ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì Ì Ì Ì

SubtotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 554,475 222,996 158,685 126 48,547 120,624Division V (East Java)

Non-PBH linesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 255,761 194,140 86,511 50,653 79,936 125,837PBH lines ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì Ì Ì Ì

SubtotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 255,761 194,140 86,511 50,653 79,936 125,837KSO Divisions

TELKOM linesNon-PBH linesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 416,957 50,256 Ì Ì Ì Ì

PBH lines ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì Ì Ì Ì

SubtotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 416,957 50,256 Ì Ì Ì Ì

KSO InvestorLines ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 114,365 247,483 428,479 181,384 110,332 Ì

Total New LinesInstalledÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,341,558 714,875 673,675 232,163 238,815 Ì

Partnership Arrangements and Joint Ventures

To Ñnance investment opportunities, TELKOM has three types of partnership with private

investors. These partnerships are in the form of revenue Sharing Scheme (PBH), Joint Operation

Scheme (KSO), and Joint Ventures Company (JVC). Each cooperation with a private entity has a

diÅerent contribution toward TELKOM's proÑt and loss statement. In addition to partnership arrange-

ment, TELKOM also entered into a joint cooperation with several business partners.

PBH

Currently, TELKOM has several PBHs for Ñxed wire line and mobile cellular services. In 2000,

TELKOM revenues from PBH were Rp 308.4 billion or 3.3% of TELKOM's Total operating revenue and

this contributes to other telecommunication services revenues.

Historically, TELKOM provided analog cellular services through PBH arrangement with several

private investors. By the year 2000, all but one of the analog cellular PBH schemes were transformed to

joint venture arrangements, with TELKOM as a minority shareholder in each.

The only analog cellular service subject to PBH arrangement is PT Telesera, using AMPS cellular

networks operating in Bali, Kalimantan and Southern Sumatera with a total of 7,556 subscribers as of

December 31, 2000. The PBH scheme sets the revenue share at 30% Ì 70% between TELKOM and

Telesera, respectively. The PBH will expire on June 2001, where all assets will be transferred to

TELKOM.

KSO

In June 1995, following an international tender, TELKOM and the Minister of Tourism Post and

Telecommunications (MTPT) announced the names of the successful bidders for KSO in respect of the

development and operation of TELKOM's basic Ñxed telecommunications facilities and services in Ñve

18

of TELKOM's seven Regional Divisions. In the fourth quarter of 1995 each of the KSO Agreements,

including their related construction contracts and certain related agreements, were signed by the

respective parties.

The Joint Operating Scheme or KSO Agreement is a form of contractual joint operation scheme

under which each KSO Investor, through the KSO Unit, is responsible for the operation of the local

network in the respective KSO Region for a period of 15 years, ending December 31, 2010. Each KSO

Region is operated by a diÅerent KSO Unit, involving separate international telecommunications

operator.

The main terms of each KSO Agreement are substantially similar, except for the Ñnancial terms

described below. Each KSO Unit is treated as a division of TELKOM, managed and operated by the

KSO Investor in the name of TELKOM for and on behalf of TELKOM and the KSO Investor. Four of the

Ñve KSO Units began to manage, operate, repair and maintain their respective KSO Division's assets

for a 15-year period commencing January 1, 1996. The Ñfth KSO Investor, Cable & Wireless Mitratel,

commenced management and operation of Division VI on April 1, 1996. All KSOs expire on the same

date, December 31, 2010. The KSO Investors are to undertake the planning, designing, engineering,

Ñnancing and constructing a minimum of two million installed lines in the aggregate.

Due to the economic crisis, the KSO investors had diÇculties carrying out their obligations

according to the KSO Agreement. In order to assist the KSO Investors to continue their obligations and

maintain the continuity of the agreement, TELKOM has provided them short-term relief by signing a

Memorandum of Understanding (MOU) on June 5, 1998.

TELKOM receives three principal types of payments from each KSO Unit or KSO Investor during

the term of the KSO i.e.: (i) a one-time Initial Investor Payment, (ii) Minimum TELKOM Revenues

(MTR) and (iii) Distributable TELKOM Revenues (DTR). At the end of the KSO period, all of the lines

constructed by the KSO Investors are to be transferred to TELKOM for a nominal payment.

The following table sets forth certain information concerning the KSOs. Such information has been

derived from the KSO Agreements, the June 5, 1998 Memorandum of Understanding and other related

sources.

Division I Division III Division IV Division VI Division VII Total

KSO Investor ÏÏÏÏÏÏÏÏÏÏÏÏÏ Pramindo Aria West Mitra Global Daya Mitra Bukaka SingTel Ì

Ikat International Telekomunikasi Telekomunikasi

Indonesia

Participants in the KSO

Investor

Foreign

Telecommunications

Operator ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ France US West Telstra Global Cable & Singapore Ì

Cables et International Ltd. (20%) Wireless Telecommunication

Radio SA BV (35%) Nippon (Singapore) International

(35%) Telegraph and Pte, Ltd. Pte. Ltd. (40%)

Telephone (25%)

Corporation

(15%)

Indonesian and Other

Participant ÏÏÏÏÏÏÏÏÏÏÏÏÏ P.T. Astratel P.T. Artimas Indosat (30%) P.T. Intidaya P.T. Bukaka Ì

Nusantara Kencana P.T. Widya Sistelindomitra Telekomindo

(40%) (52.5%) Duta Kharisma Tbk. International

Indosat Asian Informindo (38.71%) (60%)

(13%) Infrastructure (15%) P.T. Mitracipta

Marubeni Fund (12.5%) P.T. Krida Sarananusa

Corporation Salindo Sentosa (26.61%)

(8%) (10%) TM

Others (4%) Others (10%) Communications

(H.K.) Ltd.

(9.68%)

19

Division I Division III Division IV Division VI Division VII Total

Minimum new line

Installation(1) ÏÏÏÏÏÏÏÏÏÏÏ 290,000 290,000 350,000 115,000 223,000 1,268,000

Initial investor payment to

TELKOM (US$ millions) $35 $30 $10 $20 $10 $105

Minimum TELKOM

Revenue (2000)

(Rp Millions)(2)ÏÏÏÏÏÏÏÏÏ Rp 488,156 Rp 343,969 Rp 355,800 Rp 137,052 Rp 231,722 Rp 1,556,699

TELKOM's Revenue

Sharing (2000)(3)ÏÏÏÏÏÏÏÏ 30% 30% 30% 30% 35% Ì

Distributable TELKOM

Revenue (2000)

(Rp Million) ÏÏÏÏÏÏÏÏÏÏÏ Rp 206,497 Rp 79,911 Rp 107,962 Rp 101,861 Rp 198,875 Rp 695,106

(1) Minimum new line installation by the KSO Investors during the Construction Period, which ends March 31, 1999, as

required by the KSO Agreements Amendment.

(2) The 2000 MTR amounts shown are the amounts provided for by the KSO Agreements.

(3) The 2000 TELKOM Revenue Sharing percentages shown are the percentages provided for by the KSO Agreements.

KSO's Principal Financial Terms

Overview. Each KSO Unit is (i) operated as a separate entity for accounting purposes,

(ii) responsible for certain payments to TELKOM, (iii) entitled to revenues generated from all lines in

service within the geographical KSO Division on a sender-keep-all basis, and (iv) responsible for all

costs associated with operation of the KSO Unit.

TELKOM is entitled to receive with respect to each KSO Division (i) a one-time Initial Investor

Payment, (ii) Minimum TELKOM Revenues (MTR) and (iii) Distributable TELKOM Revenues

(DTR).

Initial Investor Payment. Within 1 (one) month after the KSO Agreements were signed, each KSO

Investor made an agreed one-time payment to TELKOM (""Initial Investor Payment''), totalling

US$105 million. The Initial Investor Payment is amortized over the KSO Period.

MTR and DTR. The amount of the MTR payments in each KSO Division is subject to adjustments

in certain circumstances in connection with the construction of new installations by the KSO investors,

completion of TELKOM's existing projects, and certain force majeure events. Apart from force-majeure

events, over which the Company has no control, TELKOM does not expect the amount of the

adjustments to be material individually or in the aggregate in any given month or over time.

The KSO Unit is required to pay to TELKOM on a monthly basis, DTR payments, which comprise

a revenue share of 30% (except for KSO Unit VII, in the eastern part of Indonesia: 35%) of the

diÅerence of Total KSO revenues for the month less the MTR payment less the KSO operating

expenses (as deÑned below) for the month (such diÅerence is referred to as the ""Distributable KSO

revenues''). Total KSO revenues are essentially based on a sender-keep-all structure where the KSO

Unit is entitled to collect revenues from the operation of the KSO Unit and all interest earned thereon,

including installation charges, monthly subscription charges, pulse charges, and charges for other

telecommunications services oÅered to subscribers, TELKOM's interconnection revenue for interna-

tional calls originating from or terminating in the KSO Division, all revenues derived from PBH basic

(telephone) telecommunications services and operations in the KSO Division, an agreed portion of

interconnection payments from third party telecommunications service providers such as interconnect-

ing wireless telecommunications operators, and payments from public telecommunications kiosks and

payphone operators in the KSO Division. The KSO Unit is also responsible for all expenses directly

incurred by the KSO Unit in their respective region, except depreciation, amortization, interest or

Ñnancing charges in respect of either New Installations or Existing Installations.

20

Structure, Operation and Ownership

KSO Investors are licensed by the MOC (formerly, the MTPT) to operate Ñxed line and Ñxed

wireless services in the KSO Divisions under the terms of exclusivity granted to TELKOM in the name

of TELKOM and for and on behalf of TELKOM and the KSO Investor. The KSO Investors are

accountable for the achievement of speciÑc operational performance targets during the KSO Period

relating to the expansion and quality of telecommunications services. The operational targets for each

KSO Unit are set forth in the KSO Agreement for each Division.

Employees and Management of the KSO

Each KSO Unit is staÅed by existing TELKOM employees in each KSO Division, supplemented by

additional management staÅ hired by the KSO Investor. Such additional employees remain the

employees of the KSO Investor. All employees are paid by the KSO Unit. Compensation and other

beneÑts payable to TELKOM KSO employees are determined by the KSO Unit's management. The

KSO Division, to the extent reasonably possible, is required to make maximum use in its operations of

available Indonesian human and material resources, goods and services, including resources and

services provided by business support services of TELKOM.

Early Termination

A KSO Agreement may be terminated by either party upon the material breach of the other party's

obligations under the KSO Agreement or the related Construction Agreement. In addition, TELKOM

may terminate a KSO Agreement in certain speciÑc circumstances, including a KSO Investor's failure to

(i) meet the agreed construction timetable for two consecutive quarters or (ii) complete construction

and successfully pass an interconnection test prior to the end of the Construction Period.

Asset Disposition at End of KSO Period

The ownership of the new installations is to be automatically transferred to TELKOM for nominal

consideration of Rp 100 at the end of the KSO period and TELKOM is to take over the operations of the

KSO Units at that time. TELKOM is also to reimburse each KSO Investor for additional new

installations which are not fully paid for out of KSO Unit revenues by the end of the KSO Period in an

amount equal to the net present value of the KSO Investor's projected share of Distributable KSO

Revenues attributable to any additional new installation over the balance of the applicable Payback

Period, plus an amount to be agreed by TELKOM and such KSO Investor as fair compensation in

respect of any uncompleted and untested Additional New Installations.

Additional Installations

The KSO Investors have the exclusive right during the Construction Period to construct public

switched telephone facilities (subject to Existing Installations) in the KSO Divisions. Thereafter, for the

remainder of the KSO Period, the KSO Investors have a Ñrst right of negotiation to construct Additional

New Installations in their KSO Divisions. The payback period of such Additional Installation is to be

agreed by TELKOM and the KSO Investors and approved by the Minister of the MOC (formerly the

MTPT) (the ""Payback Period'').

Other

TELKOM has agreed to indemnify the KSO Investors for certain losses, which may be incurred by

the KSO Investors as a result of speciÑc actions of TELKOM that are inconsistent with the KSO

Agreements.

21

Developments Relating to the KSO

Due to the economic crisis, the KSO investors had diÇculties carrying out their obligations

according to the KSO Agreement. In order to assist the KSO Investors to continue their obligations and

maintain the continuity of the agreement, TELKOM has provided them short-term relief by signing a

Memorandum of Understanding (MoU) on June 5, 1998.

With regard to the expiration of the MoU during the month of November and December 1999,

TELKOM and the KSO investors had conducted meetings concerning the KSO operational and

Ñnancial performances as well as the organizational eÅectiveness of the scheme. In essence, the parties

have agreed to return to the most of the terms of the original KSO Agreement beginning January 1,

2000.

However, as a result of the rapid Rupiah depreciation and insuÇcient or no tariÅ increase in 1999

and 2000, respectively, the KSO partners refused to develop more lines, due to the loss of the economic

viability of the business. The KSO partners assert an increase in tariÅ, but TELKOM considered that the

assertion has to be plead to the Government which, as regulator, has the authority in the telecommuni-

cations sector. The long-term KSO solution is closely connected with the restructuring of the

Indonesian telecommunications industry commenced by the Government and is strongly inÖuenced by

the Indonesian investment climate. The matter was stipulated on one article of the LoI with IMF.

The Government, acting as the mediator of negotiations between TELKOM and KSO Investors,

expected that the negotiations would solve the problem and bring mutual advantages to both parties

and could ensure: (i) the continuing long term development of telecommunications facilities,

(ii) developing a conducive investment climate, and (iii) inventing a healthy telecommunications

industry structure in Indonesia.

The Company believes that whatever solution is taken for the KSO problem, it should take into

account several considerations i.e. company value, investment in telecommunications infrastructures,

shareholder approval, customer service, and employees response. The Company shall optimize the use

of cash generated internally by adjusting the terms of payment of the transactions.

KSO I

TELKOM had conducted preliminary meetings with PT Pramindo Ikat Nusantara (KSO Partner in

Region I Sumatera) concerning the possible ""sell back'' of KSO I Assets to TELKOM, however, both

parties have not determined the amount and terms of payment. The Company indicates that if the

transaction occurs, payments shall be done during 2002.

KSO III

On September 11, 2000, TELKOM and PT Aria West International (Ariawest currently operates

KSO-Region III of West Java) have signed a Good Faith Interim Solution Agreement as a supplement

to the KSO Agreement. The agreement contains several items including performance bond, operating

capital expenditures including Y2K, Multimedia Feasibility Study, and the appointment of General

Manager and Deputy General Manager of the KSO Unit Regional Division III.

Ariawest International has oÅered TELKOM to buy the KSO Asset's in KSO III. In response to the

oÅer, TELKOM has invited Ariawest for discussions.

KSO IV

On February 2001, TELKOM and Indosat signed a Memorandum of Understanding for the transfer

of the Company's rights and obligations as a party to the KSO Agreement between the Company and

PT Mitra Global Telekomunikasi Indonesia (KSO partner in Region IV Central Jawa & DIY) and

transfer of the Company's asset under the KSO Agreement to PT Indosat for U.S.$375 million as part of

a series of transactions that would eliminate the cross-shareholdings of Telkom and Indosat and

22

alternative source of internal funding. The transaction is subject to certain conditions, including

regulatory and corporate approvals. It is currently anticipated that both Telkom and Indosat will seek

shareholder approval by the end of April. If approved, Indosat will own the KSO IV assets in Central

Java and DI Yogyakarta (See ""Material Contracts''). As of December 31, 2000, Indosat holds a 30.6%

stake in MGTI, Telkom's partner in the KSO IV joint operating scheme, which will remain in eÅect

through December 31, 2010. MGTI's other shareholders include NTT (15.3%) and Telstra (20.4%).

KSO VI

On March 14, 2001, TELKOM and PT Daya Mitra Telekomunikasi (DMT' KSO Partner in

Region VI Kalimantan) have signed a Memorandum of Understanding for the acquisition of 90.32%

interest in DMT for U.S.$121.93 million. DMT, has existing debt obligations of approximately U.S.$88.5

million. In connection with the transaction, TELKOM expects to assume responsibility for a portion of

the debt. TELKOM shall make an initial payment of U.S.$18.29 million upon completion of the

transaction and will pay the remaining amount in equal quarterly installments within 2®two© years.

The transaction is still subject to certain conditions and the parties obtaining necessary corporate

approval.

KSO VII

TELKOM and PT Bukaka Singtel (the KSO Partner in Region VII Eastern Indonesia) intend to

continue the KSO schemes in accordance with original agreements and certain modiÑcations, which

beneÑts both parties. The Company has also reached an agreement with the KSO Partner to construct

lines in the city of Manado referred to as ""Manado Millennium'' which shall be followed by other such

projects.

Joint Ventures

Currently, TELKOM has several joint venture companies for mobile cellular services and other

telecommunication related businesses. TELKOM revenues from joint ventures are derived from usage

of TELKOM's infrastructure (including interconnection) and dividends. (See Item 9. The OÅer and

Listing Ì Subsidiary Information).

Partnership

In order to implement the PMVIS strategy (See ""Business Strategy'') in a faster and more eÅective

way, TELKOM is determined to carry out the business through several partnership arrangements.

TELKOM has selected several experienced companies having various competencies, planning and

sales; good business track records; and ready to commit to provide Ñnancing and other resources. The

partnerships objective are to strengthen horizontal linkage, by establishing business partners in terms

of combining resources, sharing risks and beneÑts, speeding up implementation, and leveraging

business value, rather than just mere technology vendors. However, the term partnership shall not be

referred to as a form of company in relation to corporate law. In no event shall parties involved be

deemed as a partner in this sense.

23

On October 12, 2000, TELKOM has signed memorandums of understanding for the formation of9 (nine) business partnerships, which has to be followed by joint planning sessions before the signingof each contract, namely:

No. Partners Business Area

1. PT Alcatel Indonesia Cable TV2. PT Lucent Technologies N.S.I. Multimedia Access

PT Internusa Distribusi Netindo3. PT Alcatel Indonesia Multimedia Access

PT ABC TelekomunikasiPT Adhiloka Sejahtera

4. PT Ericsson Indonesia Multimedia AccessPT Pyramid Indo Usaha

5. Gilat Satellite Networks Ltd. Internet Protocol High SpeedPT Citra Sari Makmur

6. PT NEC Nusantara Comm. Voice Over Internet ProtocolSumitomo CorporationPT Stimec Alita NasioPT Datacraft Indonesia

7. PT Lucent Technologies Network Systems Intelligent NetworkIndonusa

8. PT Swara Tatanan Parama Guna Personal Handy-Phone SystemPT Industri Telekomunikasi IndonesiaPT Nasio Karya PratamaPT Laras SarkomindoPT AmaÑndo PersadaJapan Radio Co.

9. PT Trans Komunikasi Data Telkom Memo Desa Maju

Business Strategy

The Indonesian telecommunications industry is evolving from the traditional telecommunicationsbusiness into the era of convergence of telecommunications, computer, and internet businesses. As thebusiness environment changes, TELKOM as an incumbent operator, thoroughly recognizes that manyaspects have to be anticipated, such as: customer demand, technological growth and regulation.

In anticipation of business environment changes, TELKOM has set up a new approach. TheCompany's vision has been renewed: ""to become a leading InfoCom company in the region''.TELKOM's aims to become a solution provider in the InfoCom industry by providing ""one stopservice'', whilst ensuring the best quality of service and competitive pricing through utilization of ""stateof the art'' technology and ""partnerships''.

To implement its vision and mission, TELKOM has set 6 (six) strategic policies as follow:(i) Business Area, TELKOM's core business covers Plain Ordinary Telephone Service abbreviated asPOTS (PhoneNet), Mobile Service (MobileNet), Cable TV and Interactive Service (ViewNet),Multimedia/Internet (InterNet), and ServiceNet; (ii) Human Resource, management is based on corecompetencies of Customer Orientation, Information Technology, Telecommunications Knowledge,

Achievement Orientation, Communication, Innovation and Process Improvement, Teamwork, Adapta-bility and Diversity Management, and Self Development; (iii) Service Excellence, policy is implementedto acquire, grow, serve and retain the customers; (iv) Capital Expenditures, investment policy is

intended to support recovery of cancelled investment and to develop new businesses; (v) GoodCorporate Governance, includes business process accountability, conformity, and transparency;(vi) Good Corporate Citizenship, is intended to implement TELKOM's concern for its surroundingcommunity.

24

The success of these business strategies strongly relies on good customer service, therefore

TELKOM plans to implement a new excellence in customer service policy through the optimalization of

end user life cycles which cover acquisition, growth, service and retention actions as integrated cycles.

These policies are aimed to retain, acquire and give value added to the customer for the coming

competitive era and implementation of the customer protection laws. In addition, it shall also be

supported by customer care programs, customer acquisition, new product development based on

customer need, and customer retention programs by delivering a service level guarantee or other

incentives in order to form loyalty based customer.

Product Development

TELKOM has been intensively assessing new technologies and services, as well as identifying

business opportunities to enhance the Company value. TELKOM refocuses its core business areas in

Ñve streams as the Company's product development, referred to as PMVIS which includes: Plain

Ordinary Telephone Services/Phone (P); Mobile (M); View (V); Internet (I); and Service (S), so that

it will secure the right strategy for TELKOM's competitive edge. With regard to the global business

phenomenon, TELKOM should pay more attention to mobile and internet/multimedia business as

well. As part of the policy, TELKOM is still continuing to replace copper wire with Ñbre optic to digitise

the network and to enhance broadband capacity for selected high volume business and residential

customers.

To adopt to the new business-opportunities, TELKOM has established 7 (seven) business projects

to cover the 5 (Ñve) core business areas which are: B2B, VoIP, Mobile, Intelligent Network, Calling

Card and Pay-Phone, Cable TV, and Business Enterprise Project.

B2B. The B2B Commerce project shall provide business integration, commerce application, and

security infrastructure, which shall enable TELKOM to become a complete B2B Commerce enabler

company. TELKOM uses a unique strategy and smart business initiative to win the market by targeting

small medium enterprise, government, state own companies, and Ñnancial market. During the year

2000, TELKOM has signed memorandum of understandings with some partners in infrastructure

developments in such areas as: CertiÑcation Authority, on-line banking, Pharmacy On line, e-

government, state-owned enterprise online, on-line supply chain, small medium enterprise online,

electronic settlement, e-procurement, and National Chambers of Commerce (KADIN).

VoIP. TELKOM is currently preparing Voice over Internet Protocol (VoIP) service to strengthen

its core businesses. In December 2000, through a partnership program, TELKOM and PT Vasindo

launched a new high-speed-internet protocol-backbone branded as Domestic Clearing House (DCH),

which enable it to provide settlement and wholesale services for VoIP providers in Indonesia. DCH

supports calling card, premium call, and VSAT services. In 2001, TELKOM plans to launch new-

internet protocol-based-services using a brand name ""Teleponi Hemat'' or ""TELKOM Save''.

Mobile. TELKOM will operate mobile phone services based on DCS-1800 system with 15 Mhz

frequency bandwidth featured with General Packet Radio Services (GPRS), Intelligent Network (IN),

and Wireless Application Protocol (WAP) platforms. This system, which is categorized as two-and-half

Generation (2.5G) mobile cellular, will enable voice and high speed data services (up to 115 Kbps)

such as basic voice, WAP, information services, mobile commerce, telemetry, mobile intranet and

mobile internet. For the above purpose, TELKOM has set up a business project called TELKOMobile to

implement such system. PT Siemens Indonesia and TELKOM have signed a contract to install the DCS-

1800 systems (2.5G) with 200,000 subscribers. The contract amount is EUR 62,744,829 and IDR

24,809,615,817. The system shall be ready for service by the end of August 2001. Commercial launching

is projected to commence on the fourth quarter of 2001 covering Jakarta, Bandung, and Lampung areas

with some possible coverage expansions to Surabaya, Denpasar, and Batam areas with a total target

customer of approximately 360,000 by the end of 2002.

Intelligent Network. In order to accommodate the growth of multimedia and internet/data

services, in September 2000, TELKOM launched a high-speed internet and multimedia content

25

distribution services via satellite under a brand name TELKOMNet Turbo. This service would comprise:

(i) high-speed internet access; (ii) multicasting (web casting and video casting); (iii) Ñle distribution;

and (iv) access to TV digital.

Calling Card. In 2001, TELKOM Calling card business project will expand into card phone

management system (CMS) which can be utilized as a credit card or debit card and to implement

calling card based on IN and VoIP.

Business Enterprise Project. On November 2, 2000, TELKOM signed an Agreement withC2C Pte. Ltd., a company in which Singtel holds majority shares, to be a landing party for a newsubmarine cable system plan, built, operate and maintain by C2C over the Southeast Asia and Trans-PaciÑc region. The C2C cable network system has a competitive value compared to the existing systemdue to the high capacity Ñber optic communications network. TELKOM utilizes this technology toprepare its international business infrastructure for broadband communication as part of TELKOM'sfuture technology. TELKOM and C2C will implement joint marketing.

Regulations

The overall program of telecommunications sector deregulation is closely linked to the nationaleconomic recovery program supported by the International Monetary Fund (""IMF''). The national planis documented in the Memorandum of Economic and Financial Policies. (""MEFP''), as further clariÑedin the Letters of Intent (""LoI'') to the IMF in January and May 2000. The main focus of MEFP is tostabilize the economy and regain trust through a comprehensive plan based on: (i) deregulation;(ii) pro-competition; (iii) liberalization; (iv) restructuring; (v) market access; and (vi) market orientedregulations.

The LoI stipulated among other things the requirement of TELKOM and INDOSAT to resolve their

cross-ownership in several aÇliates including Telkomsel, Satelindo, Lintasarta, Patrakom, Menara

Jakarta, and Bangtelindo. In addressing such LoI, TELKOM and INDOSAT have signed an MOU

relating to a series of transactions that would eÅectively resolve the joint ownership arrangement

between TELKOM and INDOSAT (See: ""Material Contracts: Solution to the Cross Shareholdings with

INDOSAT).

In addition to the resolution of cross-ownership problem, the LoI also requires TELKOM andINDOSAT to divest its ownership in non-strategic aÇliates by the end of 2001. TELKOM is conductingthe study on aÇliates to restructure its business portfolio regarding aÇliates. The compliance to thisrequirement may cause the Company to divest its investment in some aÇliates or may add itsinvestment in some aÇliates, as the Company believes their strategic position.

The Government's telecommunication reform policy as formulated in its ""Blueprint of theIndonesian Government's Policy on telecommunications'' dated July 20, 1999 (""Blueprint'') is to:(i) increase the sector's performance in the era of globalization; (ii) liberalize the sector with acompetitive structure by removing monopolistic controls; (iii) increase transparency and predictabilityof the regulatory framework; (iv) create opportunities for national telecommunications operators toform strategic alliances with foreign partners; and (v) create business opportunities for small andmedium enterprises and to facilitate new job opportunities.

The regulatory reforms of the Indonesian telecommunications sector in 1999 have their foundation

in Law No. 36/1999 (the ""New Telecom Law''), which replaced the old telecommunication law

No. 3/1989 (the ""Old Telecom Law'').

The law is followed by the Ministry of Communication release regarding principal license to enter

international telecommunication services business to TELKOM in 2003 and domestic long distance

telecommunication services business to INDOSAT in 2003 and local service to INDOSAT in 2002.

These licenses are aimed to establish full service providers companies. Although the Company does not

expect direct competition in its core business in 2001, in the long run the Company may have direct

competition from INDOSAT. The Company cannot predict the extent of such competition may aÅect

the Company Ñnancial performance in the long run.

26

Administration of the Telecommunication Industry

The legal framework for the telecommunications industry is based on speciÑc laws, government

regulations and ministerial decrees enacted and issued from time to time. MOC is responsible for the

overall supervision and regulation of the industry. Within the Ministry various directorates and bureaus

carry out speciÑc regulatory duties. The Directorate General of Post and Telecommunications (DGPT),

which is headed by a Director General, regulates the telecommunications industry in Indonesia,

including granting licences, frequency management, standardization, and tariÅ setting. Major policy

and management decisions by the Company that aÅect national telecommunications development may

require consultation with, or the approval of the MOC.

Telecommunications Law

On September 8, 1999, the Government enacted a New Telecom Law No. 36/1999, which became

eÅective September 8, 2000, to replace the Old Telecom Law No. 3/1989. The new Telecom law

provides key guidelines for industry reforms, including industry liberalization, provision of new

entrants and an increase in the industry's competitive structure. It eliminates the concept of organizing

entities, thus ending TELKOM's status as organizing entities for the industry. However, based on prior

decrees creating certain exclusivity entitlements, TELKOM will retain its status as telecommunications

operators subject to fulÑlment of any licensing requirement under the law.

Pursuant to the new Telecom law, telecommunications operations are classiÑed into three service

categories: (i) telecommunication network operations, (ii) telecommunications services operations,

and (iii) Special Telecommunications Operations. Under these categories, telecommunications network

operation and/or provision of telecommunications services may be carried out by legal entity

established for the purpose on the basis of applicable regulation. These legal entities include State-

Owned Enterprise (BUMN), Regional State-Owned Enterprise (BUMD), Private Owned Companies,

and Cooperatives.

In implementing its business, a telecommunication network provider may conduct telecommunica-

tions services, while a telecommunication service provider in operating its telecommunication services

can use its own network or rent a telecommunications network owned by other telecommunication

network provider. On the other hand, individuals, government institutions, special agencies, and legal

entities may conduct special telecommunications operations. License for special telecommunication

operations is given only for the purpose of self-interest, national defence and security interest, and

broadcasting. Under the New Telecom Law, new players may enter the telecommunication business

without the cooperation of an organizing body, after obtaining a license from the Minister of

Communication (MOC).

TariÅ for usage of the telecommunications network and/or telecommunications services are

determined by the providers based on the tariÅ category, structure and formula set by the government.

The formula is determined based on the provider cost component.

Every telecommunications network operator, by request, is obligated/entitled to interconnect its

network with another network operator. The implementation of this obligation shall be guided by the

following principles: (i) EÇcient Source Usage, (ii) Telecommunication System and Equipment

Compatibility, (iii) Quality Service Improvement, and (iv) Fair Competition. This means that

operators that interconnect with TELKOM's network are required to enter into an agreement with

TELKOM establishing settlement procedures for the interconnection payments.

Under the new law, each licensed provider is obliged to pay license right to Government as a

percentage of revenue.

The new telecommunications law Number 36 of 1999 does not terminate the existing exclusive

rights of TELKOM. However the new telecommunications law allows early termination of the rights

subject to compensation agreement between TELKOM, and the government.

27

On August 1st, 2000, the Government, through the Director General of Post and Telecommunica-

tions (DGPT), announced Release Number o5/HMS/JP/VIII/2000, dated August 1st, 2000 and the

correction thereto No. 1718/UM/VII/2000 dated August 2nd, 2000, which contains early termination of

TELKOM exclusive rights for local in August 2002 and domestic long-distance telecommunication

services in August 2003. This Decree marks the end of the monopoly era. Therefore, the Company no

longer remains the sole domestic telecommunications services provider in Indonesia.

The following table sets forth comparative matrix of the previous and new telecommunications

law:

Description Law 3/1989 Law 36/1999

Operator The Government through Regional-owned Enterprises, state-

Organizing Body owned companies, private and

cooperatives

Service Category Basic and Non-Basic Services, and Telecommunication Network,

Special Telecommunications Telecommunication Services, and

Special Telecommunication

Cooperation JVC, KSO, and Management Pure Business Decision

Framework Contract

Business Mode Through Cooperation with Based on Business Viability

Organizing Body

Exclusivity Monopoly and Duopoly Exclusivity Exclusivity is maintained as

scheduled, Acceleration is possible

by application of compensation

TariÅ Determined by the Government Determined by the Operators based

on formula determined by the

Government

Regulator Government Government assisted by an

Independent Body (to be

established)

Currently, TELKOM, is not required to hold a license in order to provide telecommunications

services, other than licenses allocating frequency bands. Joint Operating Schemes also do not require

licenses for providing telecommunications services as TELKOM is deemed to remain the operator of

such businesses. Joint venture companies, however, do require licenses.

The new telecom law only outlined substantial and principal topics. Its implementation will be

conducted through several Government Decree promulgated there under.

On September 8, 2000, two implementing regulations of the New Telecom Law were issued,

named Government Regulation No. 52 on Operation of Telecommunications and Government Regula-

tion No. 53 on Utilization of Radio Frequency Spectrum and Satellite Orbit. The MoC and DGPT are

still in the process of Ñnalizing various other ministerial decrees, which are intended to implement

other aspects of the new telecom law.

On January 16, 2001, Government issued a new rule of National Fundamental Technical Plan

(National FTP) through Ministerial Decree No. 4/2001. The National FTP set numerous technical plans

that regulate technical aspect for both telecommunication network and service providers. It consists of

(i) numbering plan, (ii) interconnection plan, (iii) charging plan, (iv) routing plan, (v) transmission

plan, (vi) signalling plan, (vii) switching plan, (viii) synchronization plan, (ix) subscriber access plan,

(x) network management plan, (xi) technical availability plan, and (xii) service operation plan.

Government Policy

The Government's development policies used to be set forth in consecutive Ñve-year development

plans known as ""Repelitas.'' Each Repelita assesses the current level of economic progress, establishes

28

priorities for the next Ñve-year plan and realigns those previously made for future Repelitas. The

Company takes into account the Government's targets when setting its own development plans,

although it is not formally obligated to meet such targets.

In 1995, the Government set the long-term targets for local exchange capacity, local exchange

capacity per 100 inhabitants and call completion rates for Repelitas VI through Repelita X, as stated in

the following table:

Repelita (Year Ended March 31)

Development Targets VI VII VIII IX X

(1999) (2004) (2009) (2014) (2019)

Local exchange capacity (millions of lines) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10.5 19.0 29.0 42.0 60.7

Local exchange capacity per 100 inhabitants(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5.1 8.7 12.4 17.1 23.6

Call completion rate(2)

Local(%) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 65 70 75 80 90

Domestic long distance(%) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 45 50 55 60 80

(1) Referred to in the Repelita as line penetration.

(2) Repelitas use the terminology ""successful call ratio,'' TELKOM has interpreted this to mean ASR and, with the MTPT's

consent, has reported only ASR data to the MTPT since 1991.

In view of the Indonesian economic turmoil, the Government did not announce detailed plans for

Repelita VII, which may result in amendments to the long-term plan shown above. Since there are no

detail plans from the Government, TELKOM arranges its own long-term plans, internally known as

Corporate Strategic Scenario (CSS).

The following table gives certain basic measures of the development of the Indonesian domestic

telecommunications network.

CompoundAnnualGrowth

Year Ended December 31, Rate(%)1996 1997 1998 1999 2000 1996-2000

Lines in serviceÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,186,030 4,982,466 5,571,644 6,080,193 6,662,605 12.3

Population (millions)(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 198.3 201.4 204.4 207.4 216.8 2.3

Lines in service per 100

InhabitantsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2.11 2.47 2.73 2.93 3.07 9.8

Call completion rate(%)(2)

Local ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 57.90 60.43 68.07 70.63 72.97 6.0

Domestic long distanceÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 53.21 56.46 62.04 62.98 65.82 5.5

Fault rate(3) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1.55 1.14 1.10 0.62 1.33 3.8

Digitalization(%)(4)

Switching

Local exchanges ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 96 99 99 100 100 1.0

Trunk exchanges ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 100 100 100 100 100 0.0

TransmissionÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 85.0 92 93.8 95.6 96.6 3.2

Number of public telephones ÏÏÏÏÏÏÏÏÏÏÏÏÏ 134,542 166,724 216,651 269,242 345,307 26.6

Domestic call volume (billions of pulses) ÏÏ 35.3 42.1 45.9 47.3 52.9 10.6

Number of mobile cellular subscribers ÏÏÏÏÏ 562,517 916,173 1,065,820 2,220,969 3,669,327 59.8

Mobile cellular subscribers per 1000

InhabitantsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2.84 4.55 5.21 10.71 16.92 56.3

(1) Source: Indonesian Central Bureau of Statistics.

(2) As measured by ASR.

(3) Faults per 100 lines in service per month.

(4) Expressed as a percentage of switching or transmission capacity, as applicable.

29

As of December 31, 2000, the line penetration rate was 5.7% and 2.0% for Non-KSO Division and

KSO Division, respectively, and 3.1% nationally. The following table presents the penetration rate for

each regional division:

Division I Division II Division III Division IV Division V Division VI Division VII Total

LISÏÏÏÏÏÏÏÏÏ 897,323 2,412,221 639,913 579,647 1,198,142 302,948 632,411 6,662,605

PopulationÏÏ 45,436,572 24,523,000 25,442,000 39,178,407 38,336,320 12,378,174 31,520,936 216,815,409

DensityÏÏÏÏÏ 1.97 9.84 2.52 1.48 3.13 2.45 2.01 3.07

As of December 31, 2000, approximately 49.23% of total lines in service were in the major

metropolitan areas of Jakarta, Surabaya, Semarang, Bandung, Medan, and Denpasar. The following

table presents the number of line in service among the 6 major metropolitan areas:

Jakarta Surabaya Semarang Bandung Medan Denpasar Total

LISÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,672,351 668,220 182,073 371,653 213,135 172,445 3,279,877

Population ÏÏÏÏÏÏÏÏÏÏÏ 8,384,853 2,558,816 1,345,065 2,141,837 1,899,327 522,785 16,852,683

DensityÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 19.9 26.1 13.5 17.4 11.2 33.0 19.5

Competition

In previous years, consistent with its emphasis on national economic development, the Govern-

ment, through the Ministry of Tourism Post and Telecommunication (MTPT), has articulated the

policy of gradually liberalizing the telecommunication industry. In keeping with this policy, the

Government has fostered the development of a limited competitive environment in certain of the

Company's business, including mobile and Ñxed cellular telecommunications and non-basic services.

This liberalization has taken the form of requiring TELKOM, as the domestic sector's organizing body,

to cooperate with investors in the provision of basic telecommunications services.

With eÅect from January 1, 1996, the MTPT granted TELKOM (i) the exclusive right to provide

local Ñxed wire line and Ñxed wireless telecommunication services nationwide, including services

provided for and on behalf of TELKOM pursuant to joint operating schemes, for a minimum of 15 years

and (ii) the exclusive right to provide domestic long distance telecommunications services nationwide

for a minimum of ten years. However as a result of certain changes to the interconnection regime and

the tariÅ structure initially introduced in November 1996, the Company expects to face competition,

which may include price competition, from cellular operators for the provision of long distance

services. Under the current interconnection regime, long distance calls originating or terminating on

mobile cellular networks are no longer required to interconnect with the PSTN, and TELKOM and the

KSO Units do not receive interconnection charges for long distance calls, which do not interconnect

with the PSTN. In addition, in 1997 the MTPT announced that the tariÅs set by the MTPT are

maximum tariÅs, thus permitting all service providers (including TELKOM and the cellular operators)

to discount tariÅs for local, long distance calls, installation and monthly charges. As a result, the

Company may face price competition from cellular operators for the provision of long distance services.

Currently, seven companies hold licenses for the provision of PCN/DCS 1800 services in various

region throughout Indonesia, and all the three existing nationwide GSM 900 MHz had received a

license to extend their operating frequency to 1800 Mhz. The company does anticipate that the

introduction of further cellular operators may signiÑcantly increase competition among cellular

operators generally and, to some extent, increase competition to the Ñxed line services. Such

competition could have a negative material impact on the Company's growth potential and Ñnancial

performance.

TELKOM's exclusivity does not include telecommunication services provided through private

networks. Certain large corporations and Ñnancial institutions have had specialized service require-

ments and pricing benchmarks which TELKOM historically was not able to satisfy. These entities have

therefore constructed private networks in order to service their own business needs. Government

regulations provide that, subject to limited exceptions, the use of private networks is restricted to

internal use by a closed user group and cannot be connected to the PSTN. The Company believes that

30

extension of such closed user group to others or expansion of private networks will be limited as a

result of: (i) the high expense of maintaining a private network, (ii) Governmental enforcement of

restrictions on the number of users in a closed-user group and on the ability of private networks to

interconnect with the PSTN, and (iii) eÅorts by the Company to increase the quality and reliability of

the PSTN and to provide the types of services necessary to address the needs of the business sector in

Indonesia.

The New Telecom Law allows for the early termination of the existing rights of TELKOM, subject

to its compensation agreement between the Government and TELKOM.

On August 1st, 2000, the Government, through the Director General of Post and Telecommunica-

tions (DGPT), announced Release Number o5/HMS/JP/VIII/2000, dated August 1st, 2000, and the

correction thereto No. 1718/UM/VII/2000 dated August 2nd, 2000, which contains early termination of

TELKOM exclusive rights for local and domestic long-distance telecommunication services. This Decree

marks the end of the monopoly era. Therefore, the Company no longer remains the sole domestic

telecommunications services provider in Indonesia.

In line with the Government's policy to rescind TELKOM's exclusivity right and establish

competitive industry, the Government shall give TELKOM permanent license for international direct

dialling in August 2003. While INDOSAT shall be given permanent license for local services in

August 2002 and domestic long-distance services in August 2003.

As consequence of the organizing entity concept under the Old Telecom Law, TELKOM and

Indosat have joint-ownership in most telecommunications companies in Indonesia. The Blueprint calls

for further progressive elimination of these complex shareholdings to promote competition and avoid

any actual or potential conÖicts of interest in a more competitive telecommunication environment.

TariÅ Regime

The new Telecom law No. 36/1999 stated that tariÅ structure for the operation of telecommunica-

tions network and/or telecommunications services are regulated through government regulations. In

addition it also delivers the decision of the tariÅ amount for the operation of telecommunications

network and/or telecommunications services to the operator based on a formula regulated by the

government.

Under the Government Regulation No. 52/2000, tariÅ category is classiÑed into tariÅ for telecom-

munication network provider, covering tariÅ for leased network and interconnection, and tariÅ for

telecommunication service provider, which also includes retail tariÅ for Ñxed line and mobile services.

TariÅ structure for telecommunication network provider consists of access charge, usage charge and

charge related to the universal service obligation, whereas tariÅ structure for retail Ñxed line services

consists of installation charge, monthly charge, usage charge and charges related to additional facilities

delivered. TariÅ structure for retail mobile services consists of airtime tariÅ, roaming tariÅ and tariÅ for

multimedia services.

The Government is currently in the process of formulating a new Ministerial Decree in the

implementation of the new tariÅ policy. During this transition period, telecommunication operators use

the current tariÅ regime based on Ministerial Decree issued prior to New Telecom Law No. 36/1999.

TariÅ for Providing Telecommunication Service

Fixed Line Domestic Telephone TariÅs.

On October 23, 1995, the Government issued a Price Cap TariÅ Decree based on a formula set forth

in general terms and calculated by reference to the Indonesian Consumer Price Index (CPI) for the

preceding year, as published by the Indonesian Central Bureau of Statistics. The price cap applies to

monthly subscription and local and domestic long distance usage charges. In calculating the adjustment

to these prices, each Service is weighted in proportion to the contribution it made to operating revenues

31

from all Services. The weighted average increase in prices charged for the Services for any year must be

equal to or less than a speciÑed percentage, which is equal to the CPI minus an eÇciency factor (the

""X-factor''). In determining the X-factor, the Government is to take consideration improvements in the

cost eÇciency of the Services resulting from technological improvements, the interests of the aÅected

telecommunications operators and the purchasing power of the Subscribers to the Services.

The following table set forth the tariÅs for Domestic Fixed Telephone Services, for the years 1999

and 2000. There were no tariÅ changes within the year 2000.

Access charges(1) Business Residential Social

(in Rupiah) (in Rupiah) (in Rupiah)

Installation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 175,000 Ì 450,000 75,000 Ì 295,000 50,000 Ì 205,000

Monthly Subscription ÏÏÏÏ 26,100 Ì 39,100 14,500 Ì 22,900 10,600 Ì 15,700 (maximum tariÅ)

BeginningMarch 1, 1999

Price PulseUsage charges(2) Per Minute(3) Duration

(in Rupiah)(Ñxed tariÅ)

Local(4)

up to 20 km ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 56 3 min

20-30 kmÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 84 2 min

Over 30 km ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,002 10 sec

Domestic long Distance

0-20 kmÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 56 3 min

20-30 kmÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 84 2 min

30-100 kmÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,150 7 sec

100-200 kmÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,150 7 sec



500-1000 kmÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,010 4 sec

Over 1000 km ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,010 4 sec

(1) The range in prices is a function of diÅerentiated prices for certain geographic categories, which have diÅerent tariÅ levels

based on certain network and social-economic factors.

(2) Usage tariÅs are diÅerentiated by time of day, Sundays and public holidays, varying between 100-125% (for local) and 25%-

125% (for domestic long distance) of the stated ""base'' rate; tariÅs illustrated above reÖect per minute charges at 100%.

(3) Price per minute calculated by TELKOM based on pulse duration and price per pulse. The minimum peak hour duration for

peak hour local calls is 1.5 minutes.

(4) Only for Regional Division II (Jakarta) and Bandung area (area code 022), the pulse duration for usage charge for local call

H 30 km at 100% tariÅ is 2 min (or price per minute • 84).

On November 10, 2000, DGPT issued a guidance letter No. 2775/Dittel/XI/2000, setting a plan to

increase retail Ñxed line domestic tariÅ with total increase of 45.49% in 3 years, comprising a gradual

increase of 21.67% in 2001, 15.60% in 2002, and 8.22% in 2003. Implementation of this tariÅ adjustment is

subject to Parliament discussion and MoC decree.

Mobile Cellular TariÅ

Structure of Mobile Cellular TariÅ consists of activation, monthly subscription and usage charges.

The Government stipulates the Mobile Cellular TariÅ as maximum tariÅ. Monthly subscription charge

includes also the fee related to the frequency usage of the outstation, while the usage charge consists of

Air Time charge and a charge related to the type of conversation, for example local or DLD. The

following table set forth the tariÅs for Mobile Cellular TariÅ, beginning February 25, 1998.

32

MOBILE CELLULAR TARIFF (MAXIMUM TARIFF)

Activation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Rp 200,000.00

Monthly Charge (including frequency charge) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Rp 65,000.00/month

Usage Charge:

Air Time ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Rp 325.00/minute

Roaming ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Rp 1,000.00/call

Other Services TariÅ

Currently, the Government sets tariÅs for other services, such as telex, telegram, value added

services, and multimedia services. Under the New Telecom Law, tariÅ amount for the operation of

other services shall be determined by the operators, based on a formula regulated by the Government.

TariÅ for Providing Telecommunication Network

Interconnection Arrangement

The Fundamental Technical Plan (FTP) sets forth the technical requirements and routing plan for

interconnection of the networks of various telecommunications operators among themselves and with

the Public Switched Telephone Network (PSTN). Under the FTP, mobile and Ñxed cellular operators

are permitted to interconnect with the PSTN for access to the PSTN and other networks, such as

international gateways and the network of other cellular operators. In addition, cellular operators may

interconnect directly with such other networks without traversing the PSTN. For each interconnection

with the PSTN, TELKOM or the relevant KSO Unit receives the applicable interconnection charge set

forth in the Interconnection TariÅ Decree.

Cellular and Fixed Line Interconnection.

For local calls from a mobile cellular network to the PSTN, the cellular operator is required to pay

TELKOM 50% of the prevailing tariÅ for local pulse per minute. For local calls from the PSTN to a

cellular network, TELKOM collects a per minute charge of 50% of the prevailing applicable local call

tariÅ plus an airtime charge of Rp 325.00 per minute. The airtime charge must be remitted by TELKOM

to the cellular operator. The Interconnection Decree, eÅective April 1, 1998, indicates that it is possible

for long distance calls to be carried by more than one cellular network. Pursuant to the Decree, for DLD

calls which originate on the PSTN, TELKOM is entitled to retain a portion of the prevailing DLD tariÅ,

which ranges from 40% of the tariÅ, in cases where the entire DLD portion is carried by one cellular

operator and delivered to another, up to 85% of the tariÅ, in cases where the entire DLD portion is

carried by the PSTN. For domestic long distance calls which originate from a cellular operator,

TELKOM is entitled to retain a portion of the prevailing DLD tariÅ, which ranges from 25% where the

entire DLD portion is carried by a cellular operator and the call is delivered to a cellular subscriber, up

to 85%, in cases where the entire DLD portion is carried by the PSTN and the call is delivered to a

PSTN subscriber.

Fixed cellular networks may interconnect with the PSTN at the local exchange and the DLD

Network levels, and may interconnect directly with the international gateways.

Currently, Ratelindo is the only Ñxed cellular service provider in Indonesia, apart from TELKOM

and the KSO Unit. Local calls between PSTN and Ratelindo's network are operated on a ""sender keep

all'' basis. For DLD calls that originate on Ratelindo's network and transit the PSTN, TELKOM is to

receive 35% of Ratelindo's revenues from such calls. For DLD calls that originate on the PSTN,

TELKOM is to retain 65% of its revenue from such calls.

Fixed Wireline Interconnection.

Since September 1, 1998, TELKOM has been receiving a share of Batam Bintan Telekomunikasi

(BBT)'s revenue for each successful call that interconnects with the PSTN. Under the interconnection

33

agreement, TELKOM is to receive 75% of BBT's revenues from domestic long distance calls that

originate and terminate at the PSTN. For local calls between the PSTN and BBT, revenues are shared

on a sender keep all basis. For calls originating from BBT and terminating at a mobile cellular network

which transits the PSTN, TELKOM is to receive 50% of 50% of the prevailing local call tariÅs for local

calls and 60% of BBT's revenue from DLD calls. For DLD calls, which originate from BBT terminating at

a Ñxed cellular network and transiting the PSTN, TELKOM is to receive 50% of BBT's revenue. In case

of international calls, BBT is to receive 50% of TELKOM's interconnection revenue (access and usage),

for all incoming and outgoing international calls from and to BBT, which transit through TELKOM.

International Interconnection.

Interconnection for international calls consists of access charge, usage charge and a charge for

Universal Service Obligation (USO).

The following table sets forth the international interconnection tariÅ, eÅective as of December 1,

1998:

Description New TariÅ

Access Charge ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Rp 850/call

Usage ChargeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Rp 550/paid minutes

USO ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Rp 750/call

Leased line tariÅ

Currently, government determines tariÅs for leased line. Of this tariÅ, the most signiÑcant to

TELKOM is the tariÅ for low and high-speed leased lines, which varies according to the type of

subscriber, speed and type of the line, and distance covered by the line. EÅective January 1, 1997, the

Government decreased the tariÅ for leased line by an average of 52%. Leased line tariÅs for other

telecommunications operators and Government bodies were further reduced by up to 30%, starting

from January 1, 1998.

Under the new law, the operators shall determine tariÅ amount for the operation of leased line

services, based on a formula regulated by the Government.

Universal Service Obligation

Under the New Telecom Law, all telecommunications network operators and service providers are

bound by a universal service obligation (""USO''), which requires provision of telecommunications

facilities and infrastructure or other compensation to all operators. The local network provider will be

responsible for network installation in the USO areas. Thereafter, cost arising from providing networks

in the USO areas will be passed onto other network and service providers that send traÇc to the

recipient network providers, in the form of USO fees. A speciÑc regulation is expected to be issued in

order to implement this USO.

Relationship with the Government

State of the Republic of Indonesia as Shareholder

The State of the Republic of Indonesia currently holds 66.19% of TELKOM's Common Stock and

the Series A share (the ""Dwiwarna Share''), which has special voting rights. The Government's rights

with respect to the Dwiwarna Share will not terminate unless the Articles of Association of the

Company are amended, which would require the consent of the Government as holder of such a Share.

It is the policy of the Company not to enter into transactions with aÇliates unless the terms thereof

are no less favorable to the Company than those, which could be obtained by the Company on an

arm's-length basis from an unaÇliated third party. The Government has advised the Company that the

34

MOF, in its capacity as controlling shareholder of the Company, will not cause the Company to enter

into transactions with other entities under its control unless the terms thereof are consistent with the

Company's policy set forth in the preceding sentence.

Under regulations of Badan Pengawas Pasar Modal (""BAPEPAM''), Indonesia's capital markets

supervisory agency, because the Company is listed on Indonesian stock exchanges, any transaction in

which there is a conÖict of interest (as deÑned below) must be approved by a majority of the holders of

shares of common stock who do not have a conÖict of interest in the proposed transaction, unless the

conÖict existed before the Company was listed and was fully disclosed in the oÅering documents. A

conÖict of interest is deÑned in BAPEPAM regulations as the diÅerence between the common interests

of the Company and its shareholders, and the personal economic interests of the members of the board

of commissioners, board of directors or principal shareholders (a holder of 20% or more of the issued

shares), jointly or separately. A conÖict of interest also exists when members of the board of

commissioners, board of directors or a principal shareholder of the Company is involved in a

transaction in which their personal interests may be in conÖict with the interest of the Company.

BAPEPAM has power to enforce this rule; shareholders of the Company may also be entitled to seek

enforcement or bring enforcement action based on this rule.

Government as Regulator

The Government regulates the telecommunications sector through the MOC. In particular, the

Ministry has authority to issue decrees implementing laws, which are typically broad in scope, thereby

giving the Ministry considerable latitude. Pursuant to such decrees, the Ministry deÑnes the scope of

TELKOM's exclusivity, formulates and approves TELKOM's tariÅs, determines TELKOM's USO and

otherwise controls many factors aÅecting TELKOM's competitive position, operations and Ñnancial

condition. Through the DGPT, the Government regulates the frequency bandwidth allocation, and

TELKOM must obtain a license from the Directorate for each of its services utilizing frequency

bandwidths. The Company and other operators are also required to pay radio frequency usage. The

Government also requires all operators, including TELKOM, to pay a concession fee of 1% of its

collected operating revenues. The concession fee is payable by all telecommunications operators in

Indonesia, whether private or Government-owned. The Company also is required to pay to the

Government radio frequency usage charges in connection with radio transmission used in providing

telecommunications services. The fee is applicable to all users of radio frequency in Indonesia and is

calculated based on the location and number of channels, base stations and repeater towers. The MOC

as regulator has the authority to grant new licenses for the establishment of new joint ventures and

other arrangements, particularly in telecommunications sector.

Government as Lender

As of December 31, 2000, the Government has sub-loaned borrowings from foreign lenders in the

total amount of Rp 10,364.8 billion. The Government will receive from TELKOM interest and principal

repayment, the amount of which will be transferred to the respective lenders. At the end of

December 2000, of the total loan outstanding 56.1% was in foreign currencies and the remaining 43.9%

was rupiah denominated. Interest payment will be paid in Öoating rate between 8.45% and 14.53%, and

in Ñxed rate between 3.10% and 13.25%.

Government as Customer

The Government purchases services from the Company on a commercial basis. Government

entities, in the aggregate, constitute the largest user of the Company's services. The Company,

however, deals with the various departments and agencies of the Government as separate customers,

and the provision of services to any department or agency does not constitute a material part of

TELKOM's revenues.

35

C. Organizational structure

President Director

Director of Finance

DevelopmentDivision

Research onInformationTechnologyDivision

NetworkDivision

MultimediaDivision

AtelierDivision

PropertyDivision

SubsidiariesFoundations

Director of Operation and

Marketing

Director ofPlanning andTechnology

Director ofHuman Resources

Development

CorporateSecretary

InternalAuditor

InformationSystemDivision

TrainingDivision

RegionalDivisions

BusinessDevelopment

Group

D. Property, plant and equipment

TELKOM currently possesses over 3,000 properties. Titles to such properties range from 20 to

30 years extensions, up to an unlimited time for certain land use titles where use is restricted to the

operation of telecommunications. In addition, the Company leases additional properties, most of which

are from state-owned companies under the purview of the Ministry of Forestry. Most of the Company's

sites are related directly to its telecommunications operations and are used for network equipment of

various types, such as exchanges, transmission stations and microwave radio equipment. The Company

holds registered titles for the majority of its properties and has submitted or is in the process of

submitting applications for the remainder. None of the Company's properties is mortgaged or

otherwise encumbered.

At December 31, 2000, all property, plant and equipment, except land, were insured against Ñre,

theft, and other possible risks for Rp 16,137,128 million and an additional coverage for Palapa B4 and

Telkom I Satellite for U.S.$83,870.

Item 5: Operating and Financial Review and Prospects

The following discussion is based on the Consolidated Financial Statements included elsewhere in

this Annual Report. Such Consolidated Financial Statements are prepared in accordance with Indone-

sian GAAP, which diÅers in certain respects from U.S. GAAP. See ""Notes 43 and 44 of the Company's

Consolidated Financial Statements''.

36

A. Operating Result

Year ended December 31

1998 1999 2000

Rp (billion) Rp (billion) Rp (billion)

Income and Expense Items

Operating revenues ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,600.0 7,790.2 9,375.7

Operating expense ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,000.3 4,846.7 5,338.4

Operating incomeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,599.7 2,943.5 4,037.3

Other income (expense)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1,175.3) 19.3 (578.9)

Tax expenseÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 255.8 777.0 906.2

Minority interestÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0 13.3 13.2

Net income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,168.7 2,172.3 2,539.0

Operating marginÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 39.4 37.8 43.1

Year Ended December 31, 2000 compared to Year Ended December 31, 1999.

General

For the year 2000, TELKOM recorded net income of Rp 2,539.0 billion or an increase of 16.88%

compared to the previous year of Rp 2,172.3 billion. The increase was attributed to the higher growth of

operating revenues compared to the growth of operating expenses, and the decrease in interest

expense. This resulted in earning per share (EPS) of Rp 251.89 in 2000 compared to Rp 225.24 in 1999.

For the year 2000, TELKOM reported operating income of Rp 4,037.3 billion, an increase of 37.16%

compared to Rp 2,943.5 billion in 1999. While other income (expense), tax expense and minority

interest and net income of subsidiary in 2000 were Rp 578.9 billion, Rp 906.2 billion and Rp 13.2 billion

respectively. These resulted in net income of Rp 2,539.0 billion in 2000, or an increase of 16.9% from

Rp 2,172.3 billion in 1999.

Operating Revenues

Compared to the previous year, total operating revenues increased by 20.4% from

Rp 7,790.2 billion in 1999 to Rp 9,375.7 billion. The main contributor to total operating revenues were

telephone revenues (55.23%), followed by revenues under Joint Operation Scheme (24.18%), intercon-

nection revenues (11.96%), and revenues from other telecommunications services (8.63%).

Telephone Revenues

Telephone revenues consists of revenues from local and domestic long distance usage, monthly

subscription charges, installation charges, pay phone, and other telephone services. For the year ended

December 31, 2000, total telephone revenues grew by 14.33% from Rp 4,528.9 billion in 1999 to

Rp 5,177.9 billion in 2000. The increase in telephone revenues resulted from: (i) the growth of 14.74% in

local and domestic long distance, from Rp 3,570.9 billion in 1999 to Rp 4,097.1 billion in 2000,

(ii) monthly subscription charges of 11.05% from Rp 799.1 billion in 1999 to Rp 887.4 billion in 2000,

and (iii) installation charges of 10.40% from Rp 68.3 billion in 1999 to Rp 75.4 billion in 2000.

In the year ended December 31, 2000, an additional 506,347 subscribers connected to the

Company's network, an increase of 11% over the net growth of 455,958 subscribers achieved in the

previous year. Net subscribers growth is the amount of gross additional subscribers minus the number

of disconnected subscribers.

During the Ñscal year ended December 31, 2000, the Company recorded an increase of 5.3% in

telephone revenues per average subscribers (excluding revenue under Joint Operating Scheme) from

Rp 1.51 million in 1999 to Rp 1.59 million in 2000.

Phone card as part of telephone revenues recorded a proÑt of Rp 34.4 billion in 2000 compared to a

loss of Rp 8.6 billion in 1999.

37

Revenues under Joint Operation Scheme

The revenues under Joint Operation Scheme in 2000 increased by 35.18% from Rp 1,677.2 billion in

1999 to Rp 2,267.2 billion in 2000. This growth was mainly due to the 7.1% increase in MTR from

Rp 1,452.9 billion in 1999 to Rp 1,556.7 billion in 2000, and the 232.6% increase in Distributable

TELKOM Revenue (DTR) from Rp 209.0 billion in 1999 to Rp 695.1 billion in 2000. Amortized revenues

representing the amortization of the initial investor payments remained unchanged at Rp 15.3 billion.

The DTR increase was primarily a result of the change in DTR sharing percentage from 90% (KSO

Investor) : 10% (TELKOM) to 70% (KSO Investor) : 30% (TELKOM) since January 2000.

Interconnection Revenues

Interconnection revenues increased by 25.7% from Rp 892.1 billion in 1999 to Rp 1,121.5 billion in

2000. Contributing to the interconnection revenues were Rp 782.6 billion from mobile cellular, Rp 40.9

billion from Ñxed wireless, Rp 14.9 billion from Ñxed wire line interconnection, and Rp 283.1 billion

from international service interconnection. The Company recorded a growth in cellular traÇc, which

interconnects with TELKOM's network from 2,432.7 million paid minutes in 1999 to 3,893.3 million paid

minutes in 2000.

Revenues from international interconnection payments decreased by 8.9% from Rp 311.7 billion in

1999 to Rp 284.0 billion in 2000, and revenues from cellular interconnection payments increased by

8.5% from Rp 545.1 billion in 1999 to Rp 591.2 billion in 2000.

Revenues from Other Telecommunications Services

Revenues from other telecommunications services increased by 16.9% from Rp 692.0 billion in 1999

to Rp 809.2 billion in 2000. This increase resulted primarily from an 84.2% increase in multimedia

services from Rp 35.4 billion in 1999 to Rp 65.2 billion in 2000 and from a 92.9% increase in leased

channel from Rp 100.5 billion in 1999 to Rp 193.9 billion in 2000.

Operating Expenses

Operating expenses increased by 10.1% from Rp 4,846.7 billion in 1999 to Rp 5,338.4 billion in 2000.

The operating expenses consist of depreciation, personnel, operations, maintenance and telecommuni-

cations services, general and administrative, and marketing expenses.

Depreciation

Depreciation expenses decreased by 11.7% from Rp 2,363.6 billion in 1999 to Rp 2,087.8 billion in

2000. The decrease in depreciation expense was attributed to fully depreciated assets in 2000. In

addition, in 1999, the company recorded accelerated depreciation of the cable networks.

Personnel

In August 2000, the Company increased the employee basic salary by 50%. This policy impacted

the personnel expenses which increased by 30.2% from Rp 1,105.7 billion in 1999 to Rp 1,439.5 billion in

2000 and directly aÅected the income tax expense of employees paid by the Company which increased

by 57.3% from Rp 109.9 billion in 1999 to Rp 172.9 billion in 2000.

Operations, Maintenance and Telecommunications Services

Operations, maintenance and telecommunications service expenses increased by 22.8% from

Rp 822.0 billion in 1999 to Rp 1,009.5 billion in 2000. The increase was mainly due to the 53.3% increase

in kiosk phone commissions from Rp 242.9 billion in 1999 to Rp 372.3 billion in 2000, and the 35.8%

increase in electricity expense from Rp 75.8 billion in 1999 to Rp 102.9 billion in 2000.

38

The increase in kiosk commissions resulted from the growth of 53.74% in kiosk phones from

148,863 lines in 1999 to 228,862 lines in 2000, while the increase in electricity expense was due to the

increase in electricity tariÅs.

General and Administrative

General and administrative expenses increased by 40.6% from Rp 508.4 billion in 1999 to

Rp 715.0 billion in 2000. The major contributors to this increase were the 72.2% increase in provision for

doubtful accounts receivable and inventory from Rp 162.0 billion in 1999 to Rp 279.0 billion in 2000 due

to provisions for the account receivable of Komselindo, Mobisel, Metrosel, and MTR of KSO Regional

Division III. In addition, this increase was also caused by a 180.3% increase in research, development

and professional fees from Rp 22.8 billion in 1999 to Rp 63.9 billion in 2000 due to the Company's

financial advisory and legal consultant since September 2000.

Marketing

Marketing expenses increased by 84.3% from Rp 47.0 billion in 1999 to Rp 86.6 billion in 2000,

primarily due to the marketing promotion via TV broadcast programmes in 2000. Advertising and

promotion expense increased by 68.9% from Rp 44.1 billion in 1999 to Rp 74.5 billion in 2000.

Other Income (Expense)

During 2000, the Company recorded other expenses (net) of Rp 578.9 billion compared to other

income (net) of Rp 19.3 billion in 1999. This was largely due to the loss of foreign exchange

(net) resulting from the depreciation of the Rupiah in 2000, from a net gain of Rp 280.2 billion in 1999

to a net loss of Rp 1,064.2 billion in 2000. As of December 31, 2000 the exchange rate was

US$1 • Rp 9,625 compare to exchange rate as of December 31, 1999 US$1 • Rp 7,110.

Provision For Income Taxes

The provision for income taxes increased by Rp 129.2 billion or 16.6% from Rp 777.0 billion in 1999

to Rp 906.2 billion in 2000. The increase was largely attributed to the increase of the Company's taxable

income. See Note 26 to the Company's Consolidated Financial Statements.

Year Ended December 31, 1999 compared to Year Ended December 31, 1998

General

During 1999, TELKOM reported operating income of Rp 2,943.5 billion or an increase of 13.2%

compared to Rp 2,599.7 billion in 1998. While other income-net and provision for income tax in 1999

were Rp 19.3 billion and Rp 777.0 billion respectively. This resulted in net income of Rp 2,172.3 billion

in 1999, or an increase of 85.9% from Rp 1,168.7 billion in 1998.

Operating Revenues

During 1999, total operating revenues increased by 18.0% to Rp 7,790.2 billion from

Rp 6,600.0 billion in 1998. Total operating revenue comprises telephone revenue, revenue under Joint

Operation Scheme, interconnection revenues, and revenues from other telecommunications services.

Telephone

Telephone revenues increased 19.0% from Rp 3,805.2 billion in 1998 to Rp 4,528.9 billion in 1999.

Telephone revenue comprises revenues from usage charges for local and domestic long distance

telephone calls, installation charges, monthly subscription charges, and phone card revenues.

Local and Domestic Long Distance Usage. Revenues from local and domestic long distance calls

increased by 23.0% from Rp 2,902.6 billion in 1998 to Rp 3,570.9 billion in 1999. This revenue

39

contributed 45.8% of total operating revenue in 1999 compared to 44.0% in 1998. The increase in

revenue from local and domestic long distance was attributed to the growth of 8.0% in lines in service

during 1999, pulses production of 2.8%, and tariÅ increases of 15%. In addition, the Company believes

the growth was also attributed to the improvement of network quality as measured by successful call

ratios from 68.1% in 1998 to 72.0% in 1999 for local calls and 62.1% in 1998 to 64.0% in 1999 for domestic

long distance calls.

Local and domestic long distance usage as measured by pulses per average subscriber, excluding

public phones, decreased by 7.6% from 9,056 pulses per subscriber in 1998 to 8,372 in 1999. The

decrease was primarily a result of the larger proportion of lines in service in 1999 that were connected

to residential subscribers. The company believes that the local and domestic long distance usage may

increase if the lines in service and the usage of telecommunications services increase in line with the

improvement of economic and social conditions in Indonesia.

Monthly Subscription Charges. Revenues from monthly subscription charges increased by 16.9%

from Rp 683.3 billion in 1998 to Rp 799.1 billion in 1999, primarily as a result of the increase of 1.5%,

8.9%, and 7.4% for business, residential, and social subscribers lines respectively, compared to those in

1998.

Installation charges. Revenues from installation charges declined by 35.5% from Rp 105.9 billion in

1998 to Rp 68.3 billion in 1999. The primary factor causing this decrease was the reduced number of

additional lines in service in 1999 compared to 1998, and discounting of installation fees during 1999.

Phone cards. During 1999, TELKOM recorded a loss of Rp 8.6 billion from phone cards. This loss

was 309.5% larger compared to Rp 2.1 billion loss reported in 1998. This loss was mainly associated

with the transfer of the magnetic and chip phone card business back to the Company.

Revenues under Joint Operation Scheme

The revenue under Joint Operation Scheme in 1999 increased by 5.4% from Rp 1,591.5 billion in

1998 to Rp 1,677.2 billion in 1999. This growth was mainly due to the 1.4% increase in MTR from

Rp 1,433.4 billion in 1998 to Rp 1,452.9 billion in 1999 and the 46.4% increase in DTR from Rp 142.8

billion in 1998 to Rp 209.0 billion in 1999. Amortized revenue representing the amortization of the

initial investor payments remained unchanged at Rp 15.3 billion.

Interconnection

Interconnection revenues increased by 60.6% from Rp 555.5 billion in 1998 to Rp 892.1 billion in

1999. The increase principally resulted from the growth in cellular traÇc, which interconnects with the

PSTN, and 67% increase in international interconnection tariÅs, which was eÅective December 1, 1998.

Revenues from international interconnection payments increased by 54.7% from Rp 201.5 billion in

1998 to Rp 311.7 billion in 1999, and revenues from cellular interconnection payments increased by

60.5% from Rp 339.7 billion in 1998 to Rp 545.1 billion in 1999.

Other Telecommunications Services

Revenues from other telecommunications services increased by 6.8% from Rp 647.7 billion in 1998

to Rp 692.0 billion in 1999. This increase was largely attributed to the increase in revenues from satellite

transponder, revenues from revenue sharing, and multimedia revenues. Revenues from telex and

telegram services continued to decrease.

Satellite transponder. Revenues from satellite transponder leasing services increased by 3.6% from

Rp 208.3 billion in 1998 to Rp 215.8 billion in 1999. The increase was attributed to the increase in leasing

transponders, despite the decrease in number of customers from 28 customers as of December 31, 1998

to 18 customers as of December 31, 1999.

40

Revenue Sharing. Revenues from revenue sharing increased by 8.0% from Rp 285.2 billion in 1998

to Rp 308.1 billion in 1999. Revenue sharing includes the Company's share of revenues earned under

Ñxed line and mobile cellular PBHs as Well as the amortization of unearned income related to these

PBH arrangements. See Note 34 to the Company's Consolidated Financial Statements.

Leased lines. Revenue from leased line services decreased by 3.9% from Rp 104.6 billion in 1998 to

Rp 100.5 billion in 1999. The Company believes that the number of leased lines in service has growth

potential due to the needs of mobile cellular networks and other telecommunications providers with

respect to expanding their transmission infrastructure.

Multimedia. Revenue from multimedia increased by 43.9% from Rp 24.6 billion in 1998 to

Rp 35.4 billion in 1999.

Telex and Telegram revenues decreased by 22.5% from Rp 16.9 billion in 1998 to Rp 13.1 billion in

1999, in line with a continuing long-term trend of substitution by other services, such as facsimile and

multimedia.

Other. Revenues from other services increased by 132.9% from Rp 8.2 billion in 1998 to

Rp 19.1 billion in 1999. This increase was attributed to the growth in revenue from value added services

particularly from ISDN services.

Operating Expenses

Operating expenses increased by 21.2% from Rp 4,000.3 billion in 1998 to Rp 4,846.7 billion in 1999.

The operating expenses consist of depreciation, personnel, operations, maintenance and telecommuni-

cations services, general and administrative, and marketing expenses.

Depreciation

Depreciation expenses increased by 9.3% from Rp 2,162.0 billion in 1998 to Rp 2,363.6 billion in

1999. The increase in depreciation expense was largely due to the increase in new property, plant and

equipment being placed in service by TELKOM and accelerated depreciation of the cable networks. The

categories of property, plant and equipment with the most signiÑcant additions were the Company's

satellite and, earth station equipment (Rp 1,258.0 billion or 69.8% increase), cable network

(Rp 914.2 billion or 12.2% increase), and its transmission installation and equipment (Rp 649.4 billion

or 19.4% increase).

Personnel

Personnel expenses increased by 32.9% from Rp 831.8 billion in 1998 to Rp 1,105.7 billion in 1999.

The growth in personnel expenses in 1999 was primarily due to a 44.5% increase in employee salary

and allowance from Rp 359.4 billion in 1998 to Rp 519.4 billion in 1999, which resulted in the increase of

employee income tax amounting Rp 42.5 billion or 63.1% from Rp 67.4 billion to Rp 109.9 billion in

1999. In addition, net periodic pension cost increased by Rp 30.3 billion or 98.4% from Rp 30.8 billion in

1998 to Rp 61.1 billion in 1999.

Consistent with the practice of most state-owned companies, TELKOM pays the income tax

expense on behalf of its employees.

Operations, Maintenance and Telecommunications Services

Operations, maintenance and telecommunications service expenses increased by 63.9% from

Rp 501.4 billion in 1998 to Rp 822.0 billion in 1999. The increase was mainly due to the Rp 133.2 billion

or 1,402.1% increase in Y2K expenses from Rp 9.5 billion in 1998 to Rp 142.7 billion in 1999, the Rp 135.5

billion or 126.2% increase in kiosk commissions from Rp 107.4 billion in 1998 to Rp 242.9 billion in 1999,

and the Rp 35.1 billion or 18.3% increase in operation and maintenance expenses of telecommunications

equipment from Rp 192.3 billion in 1998 to Rp 227.4 billion in 1999.

41

General and Administrative

General and administrative expenses increased by 7.4% from Rp 473.5 billion in 1998 to Rp 508.4

billion in 1999. The major contributors to this increase were a Rp 64.8 billion or 67% increase in

provision for bad debts and inventory obsolescence from Rp 97.2 billion in 1998 to Rp 162.0 billion in

1999, a Rp 9.1 billion or 30.7% increase in travelling expenses from Rp 29.6 billion to Rp 38.7 billion, and

a Rp 7.2 billion or 47.7% increase in security and screening expenses from Rp 15.1 billion to Rp 22.3

billion.

These increases were partly oÅset by a reduction of professional fees from Rp 28.1 billion to

Rp 10.2 billion, and education, training and recruitment from Rp 131.0 billion in 1998 to Rp 98.2 billion

in 1999.

Marketing

Marketing expenses increased by 48.7% from Rp 31.6 billion in 1998 to Rp 47.0 billion in 1999,

primarily due to Rp 9.0 billion or a 37.5% increase in marketing advertising promotion expenses from

Rp 24.0 billion to Rp 33.0 billion, and Rp 6.5 billion or 85.5% increase in other marketing expenses from

Rp 7.6 billion in 1998 to Rp 14.1 billion in 1999.

Other Expenses (Income)

During 1999, the Company recorded other income (net) of Rp 19.3 billion compared to other

expenses of Rp 1,175.3 billion in 1998. This fundamental change was largely due to the Company

booking gains on foreign exchange of Rp 280.2 billion in 1999 compared to a loss of Rp 965.5 billion

1998, the increase in equity in net income of investees amounting to Rp 417.7 billion from Rp 7.1 billion

in 1998 to Rp 424.8 billion in 1999, Rp 2.9 billion or a 15.6% increase in interest income from Rp 595.2

billion in 1998 to Rp 688.1 billion in 1999. The increase in other income was partly oÅset by Rp 506.7

billion or a 51.7% increase in interest expense from Rp 980.7 billion to Rp 1,487.4 billion.

For consolidating purposes due to the increase in investment in PT. Infomedia Nusantara the

Company recorded net revenue amounting to Rp 31.7 billion in 1999 in other income.

Provision For Income Taxes

The provision for income taxes increased by Rp 521.2 billion or 203.8% from Rp 255.8 billion in

1998 to Rp 777.0 billion in 1999. The increase was largely attributed to the increase in the Company's

taxable income. See Note 26 to the Company's Consolidated Financial Statements.

Net Income

Net income increased by 85.9% from Rp 1,168.7 billion in 1998 to Rp 2,172.3 billion in 1999, for the

reasons discussed above.

B. Liquidity and Capital Resources

The major sources of Company's liquidity over the three years ended December 31, 2000, have

been cash generated from operations, cash received from the proceeds of time deposit maturities, and

proceeds from sale of property, plant, and equipment.

Cash generated from operating activities was Rp 3,589.5 billion in 1998, Rp 4,249.9 billion in 1999,

and Rp 4,957.1 billion in 2000. The increase from 1999 to 2000 was mainly due to the increase in

operating proÑt, favorable working capital movements, and the continuing impact of the consolidation

of Infomedia Nusantara, a subsidiary that TELKOM acquired in 1999 and owns a majority interest. The

increase from 1998 to 1999 was primarily due to an increase in operating proÑt, partly oÅset by

movements in working capital.

42

Net cash Öow from operating activities was used mainly to Ñnance capital expenditures, to repay

long-term debt, to Ñnance cash dividend payments, to purchase marketable securities and to placed in

time deposits.

The repayments of long-term debts were Rp 284.1 billion in 1998, Rp 610.0 billion in 1999, and

Rp 682.1 billion in 2000. The payments of dividends were Rp 448.6 billion in 1998, Rp 475.6 billion in

1999, and Rp 1,103.4 billion in 2000.

In 1998 the Company drew Rp 2,722.7 billion of committed loans from foreign lenders for investing

activities. The amount of Rp 972.5 billion in 1999 and Rp 580.6 billion in 2000, were used for the same

purpose. As a result the ratio of long-term debt to total long-term debt and equity was 44.6% in 1998,

41.1% in 1999, and 41.1% in 2000.

The following table set forth TELKOM's outstanding long-term debt as of December 31, 2000.

Currency Amount in Original Currency Rupiah Equivalent

U.S. DollarÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 432.86 million 4.187.91 billion

Yen ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 17.83 billion 1,502.80 billion

French Franc ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 192.28 million 264.23 billion

Netherlands Guilder ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 19.82 million 81.11 billion

Swedish Krone ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 866 thousand 883 million

Deutsche Mark ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 40 thousand 184 million

Total (Rupiah Equivalent)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 6,037.12 billion

Rupiah ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 4,327.66 billion

Total (Rupiah Equivalent)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 10,364.78 billion

The implementation of prudent policies in cash management and loans from foreign lenders have

contributed to the increase of cash and cash equivalents and availability funds from foreign lenders at

the end of the years over the period of 1998-2000. As of December 31, 1998 cash and cash equivalents

was Rp 2,536.3 billion, while at the end of 1999 and 2000 cash and cash equivalents were Rp 3,597.5

billion and Rp 3,542.2 billion, respectively. The Company believes that it will able to fulÑl cash

requirements in its operation.

The following table set forth TELKOM's outstanding committed loans from foreign lenders as of

December 31, 2000.

UndisbursedCurrency Committed Amount Amount Drawn Amount

U.S. DollarÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 294.86 million 196.10 million 98.76 million

Yen ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 29.30 billion 23.37 billion 5.93 billion

French Franc ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 127.80 million 125.47 million 1.61 million

In addition, TELKOM has historically met its working capital and capital expenditure requirements

principally with cash Öows generated from operations and funds from multilateral and bilateral

international Ñnancial institutions (which TELKOM receives from the Government through an on-

going lending program). With these Ñnancing methods the Company has been able to fulÑl its required

funds, although since the IPO the Company has been relying only on undisbursed committed loans.

Assuming that the Company requires larger funds compared to the funds available from these sources,

the Company may seek funds from alternative sources, such as sales of common stock or issuance of

bonds. No assurance can be given that such alternative sources of funding will be available when

required.

InÖation

InÖation in Indonesia as measured by a consumer price index (CPI) which was 77.6%, 2.01%, and

9.35% in 1998, 1999, and 2000 respectively, according to the Indonesian Central Bureau of Statistics.

43

While the price cap tariÅ formula (CPI-X°Z) applicable to TELKOM's business is calculated by

reference to Indonesia's CPI, TELKOM is unable to determine whether and to what extent any increase

in Rupiah-denominated costs as a result of inÖation will be oÅset by any future tariÅ increase.

Accordingly, the Company's results of operations and Ñnancial condition could be signiÑcantly and

adversely aÅected by future inÖation.

C. Research and Development, Patents and Licenses, etc

TELKOM invests in improvements and additions to its facilities and in new services and

businesses, all of which it classiÑes as research and development. TELKOM expended approximately

Rp 12.3 billion, Rp 12.6 billion, and Rp 33.1 billion in 1998, 1999, and 2000 respectively, for research and

development. During 2000, the Company's Research on Information Technology Division (RisTI)

works in conjunction with the marketing department to develop projects having potential commercial

applications based on anticipated market demand and technological and economic feasibility.

With regard to the Company's new vision, RisTI implemented several projects which fall into three

general categories: (i) development of telecommunication technology, which consists of: Multimedia

City Plan Development (Jakarta and Surabaya), National Backbone Data Network, VoIP Technology

Assessment and Network Planning Project, WAP Program, Detail Design Tools Software Development

(for cable network planning), Virtual Phone, Virtual Internet, etc; (ii) telecommunication technology

analysis, such as: Network Analyzer for Telecommunication Fraud, Cable Implementation Quality

System (CIQD), and other new telephone design with a variety of features; and (iii) development of a

management system, which is aimed to develop new projects i.e.: web based customer care system

(using the brand name RisTIshop), new product developments which are integrated based on web

(on-line), e-government solutions, Telkom Information Center, BaliMoon Island Project, E-Service,

Knowledge Management, Royalty Development, and others.

D. Trend Information

Since 1997, Indonesia has been experiencing economic diÇculties due to unusually high exchange

rates, slowing down of economics activities, high unemployment, and lack of customer aÅordability.

High exchange rates have increased the Company's cost of funds, as well as the amount of debt to be

served, while the slowing down of economic activities has aÅected the growth of the Company's

subscribers and revenues.

In response to these economic events, the Government, through Minister of Communications, has

proposed to the Parliament (DPR) on increase of telephone tariÅs by 45% to be implemented within

three years beginning 2000. The implementation of the increase in tariÅs for the year 2000 was not

approved by the Parliament due to low customer aÅordability.

Resolution of the KSO is dependent on the negotiations between TELKOM and KSO partners

which is coordinated and will be decided by the Government, and other factors which are beyond the

Company's control, such as tariÅ increases, compensation on termination of the exclusivity rights, and

others.

Resolution of cross ownership issues in aÇliates companies between TELKOM and INDOSAT will

depend on the negotiation process and the restructuring scheme of Indonesia's telecommunication

systems, that will be taken by the Government.

The future potential growth of telecommunication market demand in Indonesia based on a

research study by Boston Consulting Group in 1999 may indicate compound annual growth rate

(CAGR) of local business by 15%, domestic long distance by 17%, international direct dial by 12%,

mobile business by 41%, and internet business by 64%. These businesses would contribute to the total

market growth from local business by 15%, domestic long distance by 22%, international direct dial by

7%, mobile business by 51%, and internet businesses by 5%. It concluded that mobile and internet

businesses are the yardstick of future business in telecommunication. TELKOM will consider this

44

phenomenon in its selected investment activities carefully in order to anticipate diminishing return on

Ñxed telephone revenue. TELKOM will continue to adopt economic measures and other measures to

address the economic diÇculties by initiating cost cutting and eÇciency programs.

It is not possible to determine the future aÅect the continuation of the slow down of economic

activities, which may have impacts on the Company's liquidity and earnings, including the aÅect

Öowing through to the Company's customers.

Item 6: Directors, Senior Management and Employees

A. Directors and Senior Management

In accordance with Indonesian law, the Company has a Board of Commissioners and a Board of

Directors. The two Boards are separate and no individual may be a member of both Boards.

Board of Commissioners

The Board of Commissioners consists of Ñve members, one of whom is the President Commis-

sioner. The members of the Board of Commissioners are elected and dismissed by shareholders'

resolutions at a general meeting of shareholders, which meeting must be attended by the holder of the

Dwiwarna Share and which resolution must be approved by the holder of the Dwiwarna Share.

The current members of the Board of Commissioners of the Company are as follows:

Current Position(s) with TELKOM;Name Age Other Positions with Institutions; Education

Bacelius Ruru ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 52 Chairman of Commissioner of TELKOM since April 2000.

Chairman of the Jakarta Initiative Taskforce since

April 2000. Deputy Minister of Investment and State-

Owned Enterprises in charge of Supervising and Control

of the Ministry and formerly as Deputy for Mining and

Agro-Industry Business in the same Ministry (1998-2000).

Director General of the State-Owned Enterprise in

Ministry of Finance (1995-1998). Chairman of Capital

Market Supervisory Agency in Ministry of Finance (1993-

1995). Head of Legal Bureau and Public Relations of

Ministry of Finance (1987-1993). 1975-1993 in charge of

director/head of some Directorates/

institutions in Ministry of Finance. Graduate from Faculty

of Law, University of Indonesia (1975). Harvard Law

School (1981).

Rahardjo Tjakraningrat ÏÏÏÏÏÏÏÏÏÏ 57 Commissioner of TELKOM since April 2000.

Commissioner of PT. Multi Eka Karma since 2000.

President Director of PT. Multi Eka Karma (1996 to 2000).

President Director of PT Telesarana Adi Prima (1995 to

1997). Director of Finance of PT.BELTDC (1992 to 1995).

Director of Commercial of PT. Rajasa Hasanah

Perkasa/Era Mobitel (1986 to 1991). Graduate from

Faculty of Law, University of Indonesia (1966).

45


Purnomo Sidhi ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 55 Commissioner of TELKOM since April 2000. Senior

Executive Advisor to the Minister of Communication

(since 1997). Indonesian Air Force Operation

Commander II (1996 to 1997). Vice Commander I of

Indonesian Air Force Operation (1994 to 1996). Senior

Executive Advisor to the Chief of Indonesian Air Force

(1992 to 1993). Graduate from Indonesian Air Force

Academy (1968). Air-Flight Instructor School (1977).

School of StaÅ and Commander of Indonesian Air Force

(1985). S.I.D.M.C., USA (1995).

Noor Fuad ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 53 Commissioner of TELKOM since April 2000. Secretary

General, Ministry of Finance (2000 to date). Commissioner

of PT Inhutani III, Ministry of Forest (1987-1994).

Commissioner of PT Pelabuhan Indonesia I Medan (1995-

1998). Senior Executive Advisor of Human Resources to

the President Director of PT Rajawali Nusindo (1997 to

date). Commissioner of PT Pelabuhan Indonesia III

Surabaya (1998 to date). Commissioner of PT Perkebunan

Nasional VIII Jawa Barat (1999 to date). Commissioner of

PT BRI Sanwa Ì Finance (1999 to date). Graduate from

Faculty of Economy, Gajah Mada University, Yogyakarta

(1972). M.Sc. in Policy Economics, University of Illinois

(1986).

Andi Siswaka FaisalÏÏÏÏÏÏÏÏÏÏÏÏÏ 46 Commissioner of PT TELKOM since April 2000. Director of

Planning and Technology of PT TELKOM (1996-2000),

Vice President of Corporate and Technological Planning of

PT TELKOM (1995-1996), General Manager of Corporate

Planning of PT TELKOM (1993-1995). Head of the North

Jakarta Regional Telecommunication OÇce (1991-1993).

Head of the Kebayoran Baru Service OÇce (1990-1991).

Graduate in Electrical Engineering, Trisakti University,

Jakarta, 1983. Master of Science, American World

University (1998).

The term of each of the Commissioners concludes at the close of the third annual general meeting

of shareholders after the date of his appointment. The Commissioners' business address is Jalan Japati,

1, Bandung 40133, Indonesia.

Board of Directors

The Board of Directors consists of one President Director and four Directors. Directors are electedand dismissed by shareholders' resolutions at a general meeting of shareholders, which meeting mustbe attended by the holder of the Dwiwarna Share and which resolution must be approved by theholder of the Dwiwarna Share.

46

The current members of the Board of Directors are as follows:


Muhammad Nazif ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 56 President Director of TELKOM since April 2000. VicePresident University of Indonesia 1994-2000. Head ofDepartment, Faculty of Economics, University ofIndonesia, 1992-1994. Member of Deregulation Team,Ministry of Finance, 1990-1993. Head of the Secretary forthe Junior Minister of Finance, 1989-1993. Member ofEÇciency Improvement Team of State-Owned Enterprises,Ministry of Finance, 1989-1991. Executive Director ofIslamic Development Bank, 1990-1991. President Directorof Bank Umum Koperasi Indonesia, 1985-1989. ExecutiveDirector of Bank Duta Ekonomi, 1972-1979. First NationalBank (Citibank), 1968. MBA, Katholieke University,Leuven, Belgium, 1981. Graduate of Economic Faculty,University of Indonesia, 1973.

Mursyid AmalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 53 Director of Finance since April 2000. Chairman of LogisticAssistant Group, TELKOM Corporate OÇce, 1997-2000.Logistic General Manager TELKOM, 1995-1997. LogisticGeneral Manager TELKOM of Jakarta Regional Division,1992-1995. Magister Management (MM), Bandung Schoolof Management, 1997. Graduate of Economic Faculty, theIslamic University of Nusantara, 1986.

Komarudin SastrakoesoemahÏÏÏÏÏ 50 Director of Operations and Marketing since April 2000.Head of TELKOM's Development Division, 1997-2000.Member of Blue Print Development Team, DirectorateGeneral of Post and Telecommunication, 1999. Member ofKSO Development Team, 1994-1995. Chief of RegionalDivision IX Kalimantan, 1992-1993. Graduate of ElectricalEngineering Bandung Institute of Technology, 1976.

TauÑk Akbar ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 50 Director of Human Resources Development, since April2000. President Director of PT Aplikanusa Lintasarta, 1994-2000. Executive General Manager of Palapa SatellitesOperation of TELKOM, 1992-1993. General ManagerTelecommunication Planning of TELKOM, 1990-1992.Manager Satellite Transmission Planning of TELKOM,1983-1989. Astronout Training for Indonesia Candidate(Payload Specialist) NASA, Houston, Texas, 1986.Telecommunication Management Course, Vancouver,Canada, 1991. Graduate of Electrical Engineering BandungInstitute of Technology, 1975.

KristionoÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 47 Director of Planning and Technology since April 2000.Head of TELKOM's Regional Division V, East Java, 1995-2000. Head of TELKOM IV Project, 1992-1995. GeneralManager TELKOM's Logistic Department, 1990-1992.Deputy of Chief Regional Division VII Denpasar, 1989-1990. Technical Manager, 1978-1989. Graduate of ElectricalEngineering, Surabaya Institute of Technology, 1978.

47

None of the Directors has a service contract with the Company nor are any such contracts

proposed. The Directors' terms of appointment end on the close of the Ñfth annual general meeting

after the date of appointment. There is no family relationship among any of the Commissioners and

Directors listed above. The Directors' business address is Jalan Japati, 1, Bandung 40133, Indonesia.

B. Compensation

Each Commissioner is granted a monthly honorarium and certain other allowances and is paid an

annual bonus if TELKOM surpasses certain Ñnancial operating targets, the amounts of which are

determined by the shareholders at the general meeting of shareholders. Each Commissioner also

receives a lump-sum bonus paid at the end of the Commissioner's term pursuant to an MOF letter that

applies to all state-owned companies. Each Director is granted a monthly salary and certain other

allowances (including a pension if such Director is otherwise eligible). Each Director also receives an

annual bonus and other incentives if TELKOM surpasses certain Ñnancial and operating targets, the

amounts of which are determined by the shareholders at the general meeting of the shareholders.

Bonuses and incentives are budgeted annually and are based on the recommendation of the Board of

Directors which recommendation must be approved by the Board of Commissioners before submission

to the shareholders. No fees are paid to the Commissioners or Directors for their attendance at their

respective board meetings. In addition, Directors receive certain other in-kind beneÑts, such as housing

and car and driver. For the year ended December 31, 2000, the aggregate compensation paid by the

Company to all Commissioners and Directors as a group was Rp 9.6 billion.

C. Board practices

The principal functions of the Board of Commissioners are to supervise the Board of Directors,

review the Company's development plan, and monitor the performance of its work plan and budget,

and the implementation of its Articles of Association and resolutions of the shareholders' general

meeting. In carrying out supervisory activities, the Board of Commissioners represents the interests of

the shareholders and is accountable to the shareholders in general meeting.

Individual Directors are charged with speciÑc responsibilities. In the event that a vacancy occurs in

the Board of Directors, so long as the position remains vacant, one of the other directors will be

nominated by the Board of Commissioners to perform the work of the absentee director. If, for any

reason, the Company ceases to have any Directors, the Board of Commissioners is to assume the

ongoing obligations of the Board of Directors and must convene a general meeting of shareholders to

elect a new Board of Directors within at least 60 days.

The Board of Directors is generally responsible for managing the business of the Company in

accordance with all applicable laws, the Articles of Association of the Company and the policies and

directives of the general meeting of shareholders and the Board of Commissioners. The Board of

Directors is required to obtain the written approval of the Board of Commissioners for the following

actions: buying or selling the shares of listed companies in excess of the amount stipulated by the Board

of Commissioners; participating in or disposing of other capital investments; establishing subsidiaries;

entering into licensing agreements, management contracts or similar agreements with other entities for

a period of more than one year; selling or otherwise disposing of Ñxed assets; ceasing to collect or

writing oÅ bad debts from the Company's books or inventory in excess of the amount stipulated by the

Board of Commissioners; binding the Company as surety in excess of the amount stipulated by the

Board of Commissioners; and assuming or granting intermediate or long-term loans and assuming

short-term loans not in the ordinary course of business in excess of the amount stipulated in the

Company's work plan and budget, as approved by the Board of Commissioners. In addition, any of the

above transactions which involves 5% or more of the Company's revenues or 10% or more of

stockholders' equity or such other amount as speciÑed in Indonesian capital market regulations must be

authorized by the shareholders at the general meeting of shareholders. In the performance of its duties,

the Board of Directors must act in the interests of the Company.

48

D. Employees

As of December 31, 2000, the Company had 37,705 employees, of which 18,917 and 18,788

personnel are in TELKOM Regions and KSO Regions respectively. TELKOM's eÇciency, as measured

by lines per employee, has improved from 160.1 lines per employee as of December 31, 1999 to 176.7

lines per employee as of December 31, 2000 in all Divisions, including the KSO Divisions, as of

December 31, 2000. This increase is due to the construction of new lines, outsourcing certain business

support activities, and selective employee hiring.

TELKOM KSO Employees remain employees of TELKOM and are subject to all employment rules

and policies of TELKOM in force at that time, except to the extent that rules and policies are

supplemented, in favor of the employee, by the rules and policies of the KSO Unit. Additional KSO

Employees are the employees of the KSO Investor, and TELKOM has no obligation to continue their

employment at the end of the KSO Period.

In general, TELKOM employees receive a base salary and salary-related allowances, a bonus and

various beneÑts, including a pension plan, medical beneÑts for themselves and certain members of their

immediate family, housing allowance, other allowances and certain other beneÑts, including those

related to performance of the employee's working unit.

Bonuses are budgeted in advance by the Board of Directors and the Board of Commissioners and

are paid out in the year following the year in which they are earned. Over the past Ñve years, the size of

the annual bonus pool has ranged from Rp 135 billion to Rp 197 billion. Bonuses paid by TELKOM are

allocated only to Non-KSO Division employees. After the size of the bonus pool is determined,

management allocates the pool among the Divisions depending upon their respective performances,

and uniform bonuses for employees at each staÅ level for each Division are then determined.

Pursuant to the Initial Public OÅering in 1995, 116,667,000 shares of Common Stock were reserved

for mandatory sale to employees of the Company. The Company paid for such shares (which were

sold at the same per share price as the public oÅering price of shares of Common Stock sold in

Indonesia pursuant to the Initial Public OÅering (i.e., Rp 2,050 per share)) on behalf of its employees

as follows: 90% of the purchase price was deducted from employee cash bonuses that had been

previously allocated but not paid; the Company paid the balance of the purchase price plus taxes

payable by its employees on the purchase of such shares (amounting to approximately 15% of the

purchase price) and reported those payments as additional vacation pay, employee incentives and

other allowances.

TELKOM's mandatory retirement age for all employees (other than directors) is 56. Upon reaching

56, employees and their dependents are entitled to a pension under a deÑned beneÑt plan depending

on their length of service to the Company. The amount of the pension entitlement is based on the

employee's years of service and salary level upon retirement and is transferable to dependents upon

the employee's death. Certain changes to the form of beneÑts are required under Pension Law

No. 11/1992. See Note 29 to the TELKOM's Consolidated Financial Statements, for the funded status of

the pension plan. TELKOM also provides post-retirement health care beneÑts to retired employees

hired before November 1, 1995 who have 20 years of service and certain members of their immediate

family, the amount of which is accounted for over the working lives of the employees based on

actuarial assumptions pursuant to U.S. GAAP requirements. See Note 30 to the Company's Consoli-

dated Financial Statements, for the funded status of pension plan. In addition, the Company oÅers job

retraining programs to its retirees and has established a Health Foundation to provide services to its

employees and retirees.

The employment is not subject to a collective bargaining agreement. On March 1st, 2000, TELKOM

employees formed a union named ""Serikat Karyawan TELKOM'' or SEKAR''. The nature of SEKAR in

some extent diÅer with union in general, however, the formation of SEKAR is in line with the

Presidential Decree No.83 of 1998 regarding RatiÑcation of ILO Convention No. 87 of 1948 concerning

the Freedom to form a union and the protection of the right to form an organization. Basically, the

49

formation of SEKAR based on the sense of belonging and to take the right position the implementation

of the Company's policy. Presently, more than 50% of TELKOM employees belong to SEKAR, which

membership is not compulsory. TELKOM has never experienced a strike, except several clariÑcation of

the Company's policy. The Company believes its relations with its employees are good.

In line with the changes in business environment, TELKOM sets its new policy on human

resources called Human Resource Excellence Program to prepare more professional and competent

people to operate and run InfoCom business. The program encompasses Competency Based Human

Resources Management (CBHRM), Retention Plan, Outsourcing, and Early Retirement. As conse-

quence of the implementation of CBHRM, outsourcing program is prepared to assess competencies for

non-core business area that may not necessarily been retained due to easily obtained through

outsourcing.

E. Share ownership

At December 31, 2000, to the Company's knowledge, apart from the Government, there were no

shareholders beneÑcially owning more than 10% of the Company's outstanding Common Stock.

The following table sets forth certain information as of December 31, 2000 with respect to

(1) persons known to the Company to be the owner of more than 10% of the Company's Common

Stock (whether directly or beneÑcially through ADSs); and (2) the total amount of any class of the

Company's Common Stock owned by the Commissioners and Directors of the Company as a group.

Title of Class Identity of Person or Group Amount Owned Percent of Class

Series A Government 1 100.00%

Series B Government 6,672,235,355 66.19%

Series B Commissioners and Directors 57,204 *

* Less than 1%.

Item 7: Major Shareholders and Related Party Transactions

A. Major shareholders

The Government holds a majority of the outstanding common stock of the Company and so

retains control of the Company and has the power to elect all of its Board of Commissioners and all of

its Board of Directors and to determine the outcome of substantially all actions requiring the approval

of the shareholders. In addition, the Company's Common Stock is also owned by Pension Funds,

Insurance Funds and other Institutions, owned or controlled, directly or indirectly, by the Government.

The Government is also the holder of the Dwiwarna Share, which has special voting rights. The

material rights and restrictions which are applicable to the common stock are also applicable to the

Dwiwarna Share, except that the Government may not transfer the Dwiwarna Share and it has a veto

with respect to (i) election and removal of Directors; (ii) election and removal of Commissioners; and

(iii) amendments to the Articles of Association, including amendments to merge or dissolve the

Company prior to the expiration of its term of existence, increase or decrease its authorized capital, and

reduce its subscribed capital. Accordingly, the Government will have eÅective control of these matters

even if it were to beneÑcially own less than a majority of the outstanding shares of common stock.

In December 1996 and May 1999 the Government sold 388 million and 898 million of its B shares

respectively. Pursuant to the Law No. 1 of 1995 on Limited Liability Companies, the minimum issued

and fully paid stock at 25% of the Company's authorized capital stock amounts to Rp 5 trillion. To

conform with the law, at the Annual General Meeting of the Stockholders in 1999, it was resolved to

increase the issued and fully paid capital stock by capitalizing additional paid-in capital into

746,666,640 B shares resulting in a total of 10,079,999,640 outstanding shares.

50

B. Related party transaction

TELKOM is a party to certain agreements and engages in transactions with a number of entities

that are related to the Company, such as joint venture companies, cooperatives and foundations, as

well as the Government and entities that are related to or owned or controlled by the Government,

such as state-owned entities. See Note 31 to the Company's Consolidated Financial Statements. The

most signiÑcant of these transactions include interconnection agreements with Indosat and all of

TELKOM's associated mobile cellular joint venture companies relating to the provision of PSTN

interconnection services, customer billing and other services by the Company. The Company is a party

to various on-lending agreements with the Government. The Company also pays concession fees and

radio frequency usage charges to the MOC with respect to the Company's operations. In addition, the

Company is a party to various agreements with other state-owned entities such as insurance

companies, banks and certain suppliers.

C. Interest of experts and counsel

Not applicable.

Item 8: Financial Information

A. Consolidated Ñnancial statement and other Ñnancial information

Refer to page 5

B. Legal Proceedings

AriaWest, an investor in a Joint Operation Scheme, has recently raised against the Company, in

correspondence between AriaWest and the Company, several claims under Indonesian law. These

putative claims assert (i) AriaWest's entitlements, pursuant to the Good Faith Interim Solution

Agreement; (ii) AriaWest's entitlements, pursuant to the KSO Agreement, to set-oÅs against MTR due

to the Company under the KSO Agreement; and (iii) breach of the KSO Agreement by the Company.

AriaWest has indicated to the Company that it is withholding from the Company certain payments due

to the Company under the KSO Agreement as set-oÅs against its putative claims. However, AriaWest

has not asserted these claims in any legal proceeding; but has asserted them only through written

correspondence addressed to the Company and the Government of Indonesia, as well as verbally

during the course of discussions between the parties. In its correspondence, AriaWest expressly has

purported to reserve its rights to alter or modify at any time its allegations or putative claims against the

Company.

Given the preliminary nature of AriaWest's putative claims, the Company cannot predict whether

any legal proceedings or dispute resolution proceedings under the KSO Agreement will ensure as a

result of such claims. Should any such proceedings be commercial, the Company anticipates that it

would vigorously contest any claims by AriaWest under the KSO Agreement and any right to set-oÅ of

MTR due to the Company asserted by AriaWest.

TELKOM is not currently a party to and, in recent years, has not been a party to, any material legal

or arbitration proceedings or disputes pending or threatened against the Company or with respect to its

properties which are material, or which have had or which may have, a signiÑcant eÅect on the

Company's Ñnancial position.

51

Item 9: The OÅer and Listing

A. OÅer and listing details

The table below sets forth, for the periods indicated, the reported high and low quoted prices for

the currently outstanding Common Stock on the JSX.

SHARE PRICE INFORMATION

Price per Share

Calendar Year High Low

(in Rupiah)

1998First Quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,000 2,225Second QuarterÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,275 2,825Third Quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,625 1,525Fourth Quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,150 1,3001999First Quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,825 2,575Second QuarterÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,125 2,750Third Quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,650 2,450Fourth Quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,800 2,9002000First Quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,350 3,325Second QuarterÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,775 2,675Third Quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,325 2,600Fourth Quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,890 2,025

On December 29, 2000, the closing price for a share of Common Stock was Rp 2,050.

The table below sets forth, for the periods indicated, the reported high and low quoted prices of the

ADSs on the NYSE and LSE.

AMERICAN DEPOSITARY SHARE PRICE INFORMATION

Price per Share


(in U.S.$)

1998

First Quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ NYSE 109/16 511/16

LSE 10.55 5.75

Second Quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ NYSE 9∑ 5

LSE 9.75 5.06

Third Quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ NYSE 7 2∑

LSE 7.09 2.8

Fourth Quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ NYSE 81/16 211/16

LSE 8.32 2.58

1999

First Quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ NYSE 8.99 5.69

LSE 8.92 5.80

Second Quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ NYSE 13.08 6.43

LSE 13.01 6.43

Third Quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ NYSE 13.63 6.19

LSE 13.18 6.17

Fourth Quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ NYSE 11 7.19

LSE 11.2 7.22

52

Price per Share


(in U.S.$)

2000

First Quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ NYSE 12 91/16

LSE 12.15 9.1875

Second Quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ NYSE 911/16 67/16

LSE 9.625 6.45

Third Quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ NYSE 8 5∑

LSE 7.875 6.10

Fourth Quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ NYSE 65/16 4±

LSE 6.425 4.275

On December 29, 2000, the closing price for an ADS was U.S.$4± on the NYSE and U.S.$4.275 on

the LSE.

B. Plan of Distribution

Not applicable.

C. Markets

TELKOM's Common Stock is listed on the Jakarta Stock Exchange (""JSX'') and the Surabaya Stock

Exchange (""SSX''). The JSX is the principal non-U.S. trading market for the Company's Common

Stock. In addition, American Depositary Shares (""ADSs''), each representing twenty shares of

Common Stock, are listed on the New York Stock Exchange (""NYSE'') and the London Stock

Exchange (""LSE'').

The Indonesian Securities Market

Currently there are two stock exchanges in Indonesia. The primary market is the JSX and the other

is the SSX located in Surabaya, East Java. The JSX is the larger and more prominent of the two

exchanges, with an aggregate equity market capitalization of Rp 259.6 trillion at year end 2000 as

compared to Rp 227.9 million for the SSX. Total trading value on the JSX during 2000 was Rp 9.4

trillion, compared with Rp 9.3 million on the SSX.

Overview of the JSX

There are currently two daily trading sessions from Monday to Thursday, 9:30 a.m. to 12:00 noon,

and 1:30 p.m. to 4:00 p.m. There are two trading sessions on Friday, from 9:30 a.m. to 11:30 a.m. and

from 2:00 p.m. to 4:00 p.m.

Following the Decree issued by the Director of the Jakarta Sock Exchange (JSX) No. Kep-331/

BEJ/102000, the price movements for TELKOM shares in the JSX shall be in multiples of Rp 25 and each

price movement should be no more than Rp 25.

Trading is divided into three market segments: regular market, negotiation market, and cash

market. The regular market is the mechanism for trading stock in standard lots on a continuous auction

market during exchange hours. With respect to the trading of stock, the round lots consist of 500 shares

for non-banking and of 5000 shares for banking sectors. Auctioning takes place according to price

priority and time priority. Price priority gives priority to buying orders at a lower price or selling orders

at a higher price. If buying or selling orders are placed at the same price, priority is given to the buying

or selling order placed Ñrst (time priority).

The negotiation market trading consists of (i) block trading, i.e. lots of 200,000 shares or more;

(ii) odd lot trading with round lots of less than 500 shares or less than 5000 shares for banking

companies; (iii) crossing by an exchange member receiving buying and selling orders for the same

53

number of shares at the same price; and (iv) foreign board trading in stocks where foreign ownership

has reached 49% of listed shares. Odd lots may not be traded more than 5% above or below the latest

price on the regular market. Odd lot dealers may set prices within a range of not more than 7% above or

below the regular market price, and must buy or sell stock directly to and from customers in crossing

without charging commission. In the case of newly listed or newly traded shares which have yet to

establish a market price, the price referred to is the initial public oÅering price.

Transactions on the JSX regular market and negotiation market are required to be settled no later

than the fourth trading day after the transactions. In case of a default by an exchange member on

settlement upon the due date, the Indonesian Clearing and Guarantee Corporation, P.T. Kliring

Penjaminan Efek Indonesia (""KPEI'') may perform the obligations or rights of such a defaulting

exchange member, by, for example, buying and/or selling shares in the cash market in order to settle

the defaulted transaction. Any such action by KPEI does not eliminate the liabilities of the defaulting

party, which eÅected the transaction. All cash market transactions must be reported to the JSX. An

exchange member defaulting in settlement is liable to a Ñne of 0.25% for the Ñrst day and thereafter a

Ñne of 0.5% of the transaction value payable to his counterpart in the transaction, and shall also be

issued with a warning. Delay in payment of the Ñne is also liable to a penalty equal to 1% of the Ñne for

each calendar day of delay.

The JSX board of directors may cancel a transaction if proof exists of fraud, manipulation or the use

of insider information. The JSX board of directors may also suspend trading if there are indications of

bogus transactions or jacking up of share prices, misleading information, use of insider information,

counterfeit securities or securities blocked from trading, upon the occurrence of other important events

that may aÅect investment decisions.

Exchange members may charge a fee for their services based on an agreement with the clients up

to a maximum of 1% of the transaction value. When conducting stock transactions on the JSX, exchange

members are required to pay a transaction fee equal to the cumulative transaction value for each month

based on 0.04% (subject to a minimum fee of Rp 250,000) of transaction for stocks and other registered

securities.

Shareholders or their appointees may request the issuer or a Securities Administration Bureau

appointed by the issuer at any time during working hours to register their shares in the issuer's Registry

of Shareholders.

Trading on the NYSE and LSE

The Bank of New York serves as depositary (the ""Depositary'') with respect to the ADSs traded on

the NYSE and the LSE. Each ADS represents twenty shares of Common Stock. As of December 31,

2000 44,960,509 ADSs were outstanding in the United States and there were 218 registered voters of

ADSs.

D. Selling Shareholders

Not applicable.

E. Dilution

Not applicable.

F. Expenses of the issue

Not applicable.

54

Item 10: Additional Information

A. Share capital

Not applicable.

B. Memorandum and Articles of Association

The Company's articles of association registered with the Ministry of Justice in accordance with the

Limited Liability Company Law No. 1 Year 1995 and announced by Ministerial Decree number C2-

7468.HT.01.04.TH.97 year 1997.

The articles of association among others stated that any transaction involved conÖict of interest

between the Company and directors, commissioners and shareholders should be approved by

shareholders meeting, in which the approval given by majority of independent shareholders. There is

no provision in the article of association that stated determination of compensation of directors and

commissioners and their power to vote in determination of that compensation. According to TELKOM's

article of association, there is no requirement for directors and commissioners to own certain number of

shares to be qualiÑed as director or commissioner of the Company. Directors and commissioners have

no certain right to share in the company proÑts, however, board of directors have responsibility to

make a plan in using the company proÑt. The articles of association stated no limitation of right to own

common shares with voting right. The Company's plan to carry out merger, acquisition and corporate

restructuring should be approved by shareholders meeting in which the holder of Dwiwarna share

attend and give its approval.

C. Material contracts

Solution to the Cross Shareholdings with Indosat

On February 15, 2001, TELKOM and Indosat signed an MOU relating to a series of transactions,

amounting to U.S.$1.5 billion that would eÅectively resolve the joint ownership arrangement between

TELKOM and Indosat.

The MOU calls for the following transactions to occur between TELKOM and Indosat: TELKOM

would acquire Indosat's 35% interest in Telkomsel for U.S.$945 million, while Indosat would acquire

from TELKOM: (i) TELKOM's 22.5% interest in Satelindo for U.S.$186 million, (ii) TELKOM's 37.66%

interest in Lintasarta for U.S.$38 million, and (iii) the KSO IV Assets for U.S.$375 million. Upon the

completion of these transaction TELKOM will pay Indosat an amount of U.S.$346 million.

The transaction is subject to certain conditions, including regulatory and corporate approvals. It is

currently anticipated that both TELKOM and Indosat will seek shareholder approval in May 2001.

D. Exchange controls

Foreign Equity Ownership Restrictions

Prior to September 1997, foreign investors were only permitted to purchase up to 49% of shares

oÅered in a public oÅer and up to 49% of the publicly listed shares of all Indonesian listed companies,

regardless of the nature of their activities. On September 4, 1997, such restrictions were removed for

most Indonesian companies, including TELKOM.

Foreign Exchange

Foreign exchange controls were abolished in 1971 and Indonesia now maintains a liberal foreign

exchange system that permits the free Öow of foreign exchange. Capital transactions, including

remittances of capital, proÑts, dividends and interest, are free of exchange controls. A number of

regulations, however, have an impact on the exchange system. Only banks authorized to deal in

foreign exchange, for example, can execute exchange transactions related to the import and export of

55

goods. Prior approval by the Government is also required for foreign loans with maturities of one year

or longer made to any public enterprise or public entity.

Bank Indonesia holds the authority to issue Rupiah currency and has responsibility for maintain-

ing the stability of the Rupiah. Prior to August 14, 1997, Bank Indonesia maintained stability of the

Rupiah through a trading band policy, pursuant to which Bank Indonesia would enter the foreign

currency market and buy or sell Rupiah, as required, when trading in the Rupiah exceeded bid and

oÅer prices announced by Bank Indonesia on a daily basis. On August 14, 1997 Bank Indonesia

terminated the trading band policy, eÅectively free Öoating the Rupiah against other currencies. Since

that date, the Rupiah has depreciated signiÑcantly against world currencies.

During the past 20 years, the value of the Rupiah has been devalued three times against the

U.S. Dollar. These downward adjustments occurred in November 1978, when the exchange rate was

realigned from 415 to 623 Rupiah to the Dollar; in March 1983, when the rate went from 703 to

970 Rupiah to the Dollar; and in September 1986, when the rate fell from 1,134 to 1,644 Rupiah to the

Dollar. Between the time of the 1986 devaluation and August 14, 1997 the value of the Rupiah has

gradually adjusted downward in value against the Dollar by about 4% annually. Since the free Öoating

regime was implemented in August 1997, the Rupiah Öuctuation has been signiÑcant. During 2000, the

average rate of Rupiah to the Dollar was 8,403 with the highest and lowest rates being 9,675 and 7,035

respectively.

E. Taxation

The following summary of Indonesian, and United States federal income tax matters contains a

description of the principal Indonesian and U.S. federal tax consequences of the purchase, ownership

and disposition 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 PURCHASE, 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''). As used in the preceding sentence, a ""non-

resident individual'' is a foreign national individual who is not physically present in Indonesia for

183 days or more during any twelve month period or present for any period with the intent to reside in

Indonesia, 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 Ñxed 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-Indonesian 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 the Company out of retained earnings and distributed to a Non-Indonesian

Holder in respect of Common Stock or ADSs are subject to Indonesian withholding tax, currently 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 the beneÑcial owner of the dividend and has provided to

the Company (with a copy to the Indonesian OÇce of Tax Services where the Company is registered)

a certiÑcate of tax domicile issued by the competent authority, or its designee, of the jurisdiction where

56

the Non-Indonesian Holder is domiciled. Indonesia has concluded double taxation treaties with a

number of countries, including Australia, Belgium, Canada, France, Germany, Japan, Malaysia,

Mauritius, The Netherlands, Singapore, Sweden, Switzerland, the United Kingdom and the United

States of America. Under the U.S.-Indonesia double taxation treaty, the withholding tax on dividends is

generally, in the absence of a 25% voting interest, reduced to 15%.

Capital Gains

The sale or transfer of Common Stock listed on an Indonesian stock exchange is subject to

withholding tax at the rate of 0.1% of the value of the transaction. The broker executing the transaction

is obligated to withhold such tax. The holding, sale or transfer of founder shares listed on an

Indonesian stock exchange may, under current Indonesian tax regulations, be subject to additional 0.5%

Ñnal income tax.

Subject to the promulgation of implementing regulations (which have not yet been issued to

date), the estimated net income received or accrued from the sale of movable assets in Indonesia,

which may include Common Stock not listed on an Indonesian stock exchange 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%. However,

this provision in the income tax law is not currently applied in practice. It is expected that, if and when

implementing regulations are issued with respect to this provision in the income tax law, in practice

this withholding tax will (i) only be applied if Common Stock not listed on an Indonesian stock

exchange is purchased and paid for by an Indonesian resident subject to tax or by a permanent

establishment in Indonesia of a non-resident entity or individual and (ii) not aÅect the net proceeds

from any sale or transfer of ADSs through a regular trade on the NYSE by a Non-Indonesian Holder.

In cases where a purchaser or Indonesian broker will be required under Indonesian tax laws to

withhold tax on payment of the purchase price for Common Stock or ADSs, that payment may be

exempt from Indonesian withholding or other Indonesian income tax under applicable double taxation

treaties to which Indonesia is a party (including the U.S.-Indonesia double taxation treaty). However,

current Indonesian tax regulations do not provide speciÑc procedures for removing the purchaser's or

Indonesian broker's obligation to withhold tax from the proceeds of such sale. To take advantage of the

double taxation treaty relief, Non-Indonesian Holders may have to seek a refund from the Indonesian

Tax OÇce by making a speciÑc application accompanied by a CertiÑcate of Domicile issued by the

competent tax authority, or its designee; of the jurisdiction in which the Non-Indonesian Holder is

domiciled.

Stamp Duty

Transactions in common stock in Indonesia are subject to stamp duty payable at the rate of

Rp 6,000 on transactions with a value of more than Rp 1,000,000 and Rp 3,000 on transactions with a

value of between Rp 250,000 and Rp 1,000,000. Transactions having a value less than Rp 250,000 are not

subject to stamp duty.

United States Federal Income Taxation

The following is a general description of the principal United States federal income tax conse-

quences of the purchase, ownership and disposition of the ADSs or shares of Common Stock. This

description is for general information purposes only and is based on the United States Internal Revenue

Code of 1986, as amended (the ""Code''), Treasury regulations promulgated there under, and judicial

and administrative interpretations thereof, all as in eÅect on the date hereof and all of which are subject

to change, possibly retroactively. The tax treatment of a holder of ADSs or shares of Common Stock

may vary depending upon his particular situation. Certain holders (including, but not limited to,

insurance companies, tax-exempt organizations, Ñnancial institutions, persons subject to the alternative

minimum tax, broker-dealers, persons that have a ""functional currency'' other than the U.S. Dollar and

57

persons owning, directly or indirectly, 10% or more of the voting shares of the Company) may be

subject to special rules not discussed below. Except as indicated, the following summary is limited to

United States persons who will hold the ADSs or shares of Common Stock as ""capital assets'' within

the meaning of Section 1221 of the Code. The discussion below does not address the eÅect of any state

or local tax law on a holder of the ADSs or shares of Common Stock.

As used herein, the term ""United States Person'' means (i) a citizen or resident of the United

States for United States federal income tax purposes, (ii) a corporation, a partnership or other entity

created or organized under the laws of the United States or any State thereof (unless, in the case of a

partnership. Treasury Regulations otherwise provide), (iii) an estate the income of which is subject to

United States federal income tax without regard to its source or (iv) a trust if a court within the United

States is able to exercise primary supervision over the administration of the trust and one or more

United States persons have the authority to control all substantial decisions of the trust.

Holders of ADRs evidencing Common Stock will be treated as the owners of the Common Stock

represented by those ADSs. Accordingly, no gain or loss will be recognized upon the exchange of ADSs

for the holder's proportionate interest in the shares of Common Stock, a holder's tax basis in the

withdrawn shares of Common Stock will be the same as his tax basis in the ADSs surrendered

therefore, and the holding period in the withdrawn shares of Common Stock will include the period

during which the holder held the surrendered ADSs.

Taxation of Dividends

The gross amount of a distribution with respect to ADSs or shares of Common Stock, without

reduction for Indonesian taxes withheld, will be treated as a dividend taxable as ordinary income on the

date of receipt by the Depositary or the holder of such shares, respectively, to the extent of the

Company's current and accumulated earnings and proÑts as determined for U.S. federal income tax

purposes. Distributions, if any, in excess of such current and accumulated earnings and proÑts will

constitute a non-taxable return of capital and will be applied against and reduce such holder's tax basis

in such ADSs or shares of Common Stock. To the extent that such distributions are in excess of such

basis, the distributions will constitute capital gain as discussed below. U.S. corporate holders will

generally not be allowed a deduction for dividends received in respect of distributions on ADSs or

shares of Common Stock.

A pro rata stock dividend by the Company will not be considered a taxable dividend.

If a dividend distribution is paid with respect to ADSs or shares of Common Stock in Rupiah, the

amount included in income will be the U.S. Dollar value, on the date of receipt by the Depositary or the

holder of such shares of Common Stock, respectively, of the amount distributed. Any subsequent gain

or loss in respect of such Rupiah arising from exchange rate Öuctuations will be ordinary income or

loss. If the Depositary converts the Rupiah to U.S. Dollars on the date it receives such Rupiah, United

States persons will not recognize any such gain or loss.

Subject to the limitations and conditions set forth in the Code, United States persons may elect to

claim a credit against their United States federal income tax liability for Indonesian tax withheld from

dividends received in respect of the ADSs or shares of Common Stock. Dividends will generally

constitute non-U.S. source ""passive income'' or ""Ñnancial services income.'' The rules relating to the

determination of the foreign tax credit are complex and prospective purchasers should consult their

personal tax advisors to determine whether and to what extent they would be entitled to such credit.

United States persons that do not elect to claim foreign tax credits may instead claim a deduction for

Indonesian tax withheld.

A holder of ADSs or shares of Common Stock that is, with respect to the United States, a foreign

corporation or a non-resident alien individual (a ""non-U.S. holder'') will generally not be subject to

U.S. federal income tax on dividends received on Common Stock or ADSs, unless (i) such gain is

eÅectively connected with the conduct by the non-U.S. holder of a U.S. trade or business or (ii) the

58

non-U.S. holder is an individual who is present in the U.S. for at least 183 days during the taxable year

of the disposition and certain other conditions are met, or (iii) the non-U.S. holder is an individual and

there is a present or former connection between such non-U.S. holder and the United States, including,

without limitation, such non-U.S. holder's status as a former citizen thereof or a former resident

thereof.

Taxation of Capital Gains

The sale or other disposition of ADSs or shares of Common Stock (or pre-emptive rights with

respect to such ADSs or shares) by a United States person will generally result in the recognition of

U.S. source gain or loss in an amount equal to the diÅerence between the amount realized on the sale

or other disposition and the holder's adjusted basis in such ADSs or shares. This will result in a long-

term or short-term capital gain or loss, depending on whether the ADSs or shares of Common Stock

have been held for more than one year. Long-term capital gain of a non-corporate holder is currently

subject to a maximum rate of 20% in respect of property with a holding period of more than one year.

Any gain will be U.S. source for foreign tax credit purposes. Any loss will generally be allocated against

U.S. source income.

A non-U.S. holder of ADSs or shares of Common Stock will not be subject to U.S. federal income

tax on gain from the sale or other disposition of such ADSs or shares unless (i) such gain is eÅectively

connected with the conduct by the non-U.S. holder of a U.S. trade or business or (ii) the non-U.S.

holder is an individual who is present in the U.S. for at least 183 days during the taxable year of the

disposition and certain other conditions are met, or (iii) the non-U.S. holder is an individual and there

is a present or former connection between such non-U.S. holder and the United States, including,

without limitation, such non-U.S. holder's status as a former citizen thereof or a former resident

thereof.

Passive Foreign Investment Company Status

Special adverse United States federal income tax rules apply to holders of equity interests in a

corporation classiÑed as a passive foreign investment company (""PFIC'') under the Code. A foreign

corporation will constitute a PFIC for United States federal income tax purposes if 75% or more of its

gross income for a taxable year consists of passive income (generally, interest, dividends, rents,

royalties and net gain from the disposition of assets that give rise to such income) or 50% or more of its

average assets held during a taxable year consists of passive assets. Passive assets are deÑned as assets

that give rise, or that reasonably could give rise during the reasonably foreseeable future, to passive

income.

Based on the Company's existing and anticipated future operations, the Company believes that it

is not, intends and anticipates that it will not become in the foreseeable future, a PFIC. If the Company

is not operated in the manner currently anticipated, however, the Company may be considered a PFIC

for the current or for a subsequent year depending upon the composition of the Company's income or

assets.

If the Company is or becomes a PFIC, any ""excess distribution'' realized by a U.S. Holder with

respect to its ADSs or shares of Common Stock would be allocated over the entire period during which

the U.S. Holder held such ADSs or shares of Common Stock and would be subject to a ""deferred tax

amount'' to the extent not allocated to the current year. Any ""excess distribution'' allocated to the

current year would be treated as ordinary income. The ""deferred tax amount'' consists of a tax imposed

at the highest rate applicable to the year or years to which an ""excess distribution'' is allocated plus

interest on such tax computed from the due date of the U.S. Holder's tax return for the year or years to

which such ""excess distribution'' is allocated.

In general, an ""excess distribution'' is any distribution with respect to the Company's ADSs or

shares of Common Stock to the extent it exceeds 125% of the average distributions with respect to such

ADSs or shares of Common Stock received by the U.S. Holder over the prior three years. An ""excess

59

distribution'' also includes any gain recognized by the U.S. Holder with respect to its ADSs or shares of

Common Stock.

If the Company is classiÑed as a PFIC, it should be possible to avoid the adverse tax consequences

associated therewith but only if (i) the U.S. Holder elects to annually mark-to-market the ADSs or

shares of Common Stock and recognize ordinary gain or loss therefrom or (ii) assuming certain

conditions are met (which is not likely to be the case with respect to the Company), the U.S. Holder

elects to include in income annually its share of the ordinary earnings and capital gain of the Company.

Should the Company ever be classiÑed as a PFIC, U.S. Holders are advised to consult their tax advisors

concerning the United States federal income tax consequences of holding ADSs or shares of Common

Stock and of making the mark-to-market election. A U.S. Holder who owns ADSs or shares of

Common Stock during any year that the Company is a PFIC must Ñle with the IRS Form 8621.

United States Backup Withholding and Information Reporting

Payments made by a United States paying agent or other United States intermediary in respect of

the ADSs or shares of Common Stock may be subject to information reporting to the IRS and a 31%

backup withholding tax. Backup withholding will not apply, however, (i) to a holder who furnishes a

correct taxpayer identiÑcation number and makes any other required certiÑcation, or (ii) to a holder

who is otherwise exempt from backup withholding. Generally, a U.S. Holder will provide such

certiÑcation on Form W-9 (Request for Taxpayer IdentiÑcation Number and CertiÑcation) and a non-

U.S. Holder will provide such certiÑcation on Form W-8 (CertiÑcate of Foreign Status).

Any amounts withheld under the backup withholding rules from a payment to a holder will be

allowed as a refund or a credit against such holder's United States federal income tax, provided that the

holder has complied with applicable reporting obligations.

F. Dividends and paying agents

Not applicable.

G. Statement by experts

Not applicable.

H. Documents on display

Not applicable.

I. Subsidiary information

As of December 31, 2000, TELKOM had stakes in 19 companies operating in telecommunications

related businesses. All the subsidiaries (except for Infomedia Nusantara which starting 1999 was

consolidated and holds 18.50% Medianusa Pte. Ltd, a sales agent domiciled in Singapore, in search of

advertisers for telephone directories) contributed Rp 342.9 billion to Other Income. The following table

sets forth TELKOM's Joint venture companies and TELKOM's percentage ownership in each of them.

TelkomNo. Company Ownership Business Operations

(%)

1. Telkomsel 42.72% GSM Cellular (national coverage)

2. Satelindo 22.50% GSM Cellular (national coverage),

international direct dialling (IDD),

Satellite for domestic & international

60

TelkomNo. Company Ownership Business Operations

(%)

3. Telekomindo Primabhakti 9.00% Holding company: GSM Cellular GSM

(national coverage), Revenue Sharing

Arrangement on TELKOM's Ñxed lines,

Ñnance, and hotel

4. Komselindo 35.00% AMPS Cellular (regional coverage)

5. Mobisel 25.00% NMT-450 Cellular (regional coverage)

6. Metrosel 20.17% AMPS Cellular (regional coverage)

7. Ratelindo 12.86% Fixed Wireless (regional coverage)

8. Aplikanusa Lintasarta 37.66% VSAT, Internet, Digital Data Network,

and Electronic Banking System

9. PasiÑk Satelit Nusantara 22.57% Satellite transponder and communication

10. Infomedia Nusantara 51.00% Information on telecommunication

subscribers (Yellow Pages)

11. Multimedia Nusantara 31.00% Multimedia services

12. Indonusa Telemedia 35.00% Multimedia services

13. Patra Telekomunikasi Indonesia 30.00% VSAT for oil companies

14. Citra Sari Makmur 25.00% VSAT and telecommunication

technology consulting

15. Batam Bintan Telekomunikasi 5.00% Fixed line in Batam and Bintan Islands

16. Bangtelindo 3.18% Construction and Consulting

17. Menara Jakarta 20.00% Infrastructure for multimedia services in

Jakarta

18. Tangara Mitrakom 25.00% VSAT

19. Napsindo Primatel Internasional 32.00% Network Access point

Telkomsel

PT Telekomunikasi Selular (""Telkomsel'') was established in 1995 as a joint venture company

between TELKOM and Indosat to operate a nation-wide GSM mobile cellular network. TELKOM's

initial capital contribution to Telkomsel was its existing GSM network facilities in Riau and North

Sumatera, which were valued for such purposes at Rp 66.6 billion. During 1996, following an

international competitive bidding process, PTT Telecom B.V. (""PTTTBV'') of the Netherlands,

P.T. Setdco Megasel Asia (""Setdco''), a private Indonesian company, and TELKOM subscribed to new

shares in Telkomsel for an aggregate consideration of approximately U.S.$550 million, including

approximately U.S.$502 million in cash. As a result of the foregoing investments, ownership interests in

Telkomsel became: TELKOM (42.72%); Indosat (35.0%); KPN Telecom BV(17.28%); and PT Setdco

Megacell Asia (5.0%). As of December 31, 2000, Telkomsel had approximately 1,687,339 subscribers in

the major population centers in all of Indonesia's provinces.

Satelindo

PT Satelit Palapa Indonesia (""Satelindo'') is a joint venture company established in January 1993

and is owned by TELKOM (22.5%), Indosat (7.5%), P.T. Bimagraha Telekomindo (45%), and

DeTeAsia Holding GmbH, Germany (25%), a subsidiary of Deutsche Telekom. Pursuant to separate

Ministerial decrees, Satelindo has been granted a license to operate international telecommunications,

satellite services, and to provide nation-wide GSM mobile cellular services. Under its license, Satelindo

is prohibited from linking its satellites to the PSTN. Satelindo has been granted 10 MHz of the available

GSM frequency bandwidth and, as of December 31, 2000, had approximately 1,055,306 mobile cellular

subscribers in the major population centers in all provinces.

61

Telekomindo Primabhakti

PT Telekomindo Primabhakti (""Telekomindo'') is a joint venture company in which TELKOM has

a 9% interest, P.T. Rajawali Wira Bhakti Utama has an 84.2% interest and other parties collectively hold

a 6.8% interest. Telekomindo, as a holding company, among others provides GSM mobile cellular

services nation-wide through Excelcomindo, a joint venture subsidiary with NYNEX. Telekomindo is

an investor in four Ñxed wire line PBHs with TELKOM: (i) two in Jakarta comprised of 150,000 lines;

(ii) one in Surabaya comprised of 50,000 lines; and (iii) one in Bandung comprised of 15,000 lines.

Such PBHs are due to expire in 2002 and 2005. Telekomindo also participates in a PBH with TELKOM

for the operation of a group of three AMPS mobile cellular networks. This PBH will expire in June 2001

and in accordance with the PBH agreement TELKOM will own the PBH assets.

Komselindo

PT Komunikasi Selular Indonesia (""Komselindo'') is a joint venture company established in

January 1995 between TELKOM (35%) and P.T. Elektrindo Nusantara (""Elektrindo'') (65%) to operate

an AMPS mobile cellular network, which was previously operated as a PBH between TELKOM and

Elektrindo. TELKOM transferred the switching operations of this PBH to Komselindo in May 1995 as

payment for the purchase price of its interest in the company. As of December 31, 2000, Komselindo

had a total of approximately 74,858 subscribers in Jakarta, Bandung, Medan, Manado and Ujung

Pandang.

Mobisel

PT Mobile Selular Indonesia (""Mobisel'') is a joint venture company established in January 1996

between TELKOM (25%), TELKOM's Pension Fund (5%) and P.T. Rajasa Hazanah Perkasa (""Rajasa'')

(70%). Mobisel provides the NMT-450 services formerly provided by TELKOM and Rajasa pursuant to

a PBH in Jakarta Central Java, East Java, West Java, Bali and Lampung. As at December 31, 2000,

Mobisel had approximately 14,037 subscribers. Following a continuous evaluation and restructuring

policy of its subsidiary, TELKOM has decide to divest its ownership in this Company and has set its

intention of selling its ownership in this company.

Metrosel

PT Metro Selular Indonesia (""Metrosel'') is a joint venture company owned by TELKOM

(20.17%), P.T. Centralindo Panca Sakti (""CPS'') (51.23%), Asia Link (20%), TELKOM's Pension Fund

(3.83%) and others. Metrosel provides the AMPS services previously provided by TELKOM and CPS

pursuant to a PBH in Central and East Java. TELKOM transferred the switching operations of this PBH

to Metrosel in 1996 as payment for the purchase price of its equity interest in the company. As at

December 31, 2000, Metrosel had a total of approximately 62,981 subscribers.

Ratelindo

PT Radio Telepon Indonesia (""Ratelindo'') is a joint venture company established in 1993 by

TELKOM and P.T. Bakrie Electronics Company, a private company in which PTT Netherlands is a

shareholder. Ratelindo began oÅering Ñxed cellular services in Jakarta in August 1995 and, as at

December 31, 2000, had approximately 119,495 subscribers. Besides TELKOM, Ratelindo is the only

other provider of Ñxed wireless technology in Indonesia. TELKOM has a 12.86% ownership interest in

Ratelindo.

Lintasarta

PT Aplikanusa Lintasarta (""Lintasarta'') is a joint venture company, owned by TELKOM

(37.66%), Indosat (32.64%), the pension funds of various banks (26.02%), and others (3.68%).

Lintasarta provides PSDN services in cooperation with TELKOM and participates with Indosat and

TELKOM in another joint venture company to provide VSAT services, e-mail services, and credit card

62

payphones. Lintasarta also transmits data over ordinary telephone lines and provides network

application facilities for Indonesia's oÇcial electronic bank reporting system as well as other services to

the banking industry. Lintasarta is subject to the Government policy to eliminate such cross-ownership

with INDOSAT. TELKOM and INDOSAT signed an MOU relating to a series of transactions that

would eÅectively resolve the joint ownership arrangement between TELKOM and INDOSAT. IN-

DOSAT will acquire TELKOM's 37.66% interest in Lintasarta for U.S.$38 million. This transaction is

subject to certain conditions, including regulatory and corporate approvals. It is currently anticipated

that both TELKOM and INDOSAT will seek shareholder's approval by the end of April 2001

(See:""Material Contracts: Solution to the Cross Shareholdings with INDOSAT'').

PasiÑk Satelit Nusantara

PT PasiÑk Satelit Nusantara (""PSN'') is a private Indonesian satellite company, which conducted

an initial public oÅering of its common stock on NASDAQ in June 1996. The shareholders of PSN

include TELKOM (22.57%), Elektrindo (22.9%), Hughes Communications (8.5%), Telesat Canada

(8.5%), and others (37.53%), including holders of ADSs (14.67%). PSN provides satellite transponder

leasing and satellite-based communication services to nations in the Asia PaciÑc region.

Infomedia Nusantara

TELKOM's stake in P.T. Infomedia Nusantara (""Infomedia'') (previously known as ""Elnusa

Yellow Pages'') was made initially in September 1995 by applying the royalties earned by the

Company from Infomedia to the subscription price of the shares. The Company earns a royalty under a

cooperation agreement with Infomedia on publishing telephone directories. Infomedia is engaged in

providing telecommunications information and other information services in the form of printed and

electronic media. As of October 7, 1999, the Company's equity interest in Infomedia is 51%.

Multimedia Nusantara

PT Multimedia Nusantara (""Multimedia'') is a joint venture company owned by TELKOM (31%),

Indosat Megamedia (15%), TVRI Foundation (5%), and Indocitra Grahabawana (49%). Multimedia

provides pay television and multimedia telecommunications services.

Indonusa Telemedia

In October 2000, TELKOM increased its ownership in PT Indonusa Telemedia (""INT'') by adding

equity call of Rp 14 billion. The Company currently holds 35% ownership interest and is expected to

hold 57.5% ownership interest in INT when the legal requirements pertaining to the transaction

completed. INT engages in interactive multimedia services including TV Cable and internet.

Patra Telekomunikasi Indonesia

Since September 1995, TELKOM had a 30% equity interest in PT Patra Telekomunikasi Indonesia

(""Patrakomindo''). Patrakomindo is a joint venture company whose other shareholders are Indosat

(10%), Elnusa (40%), and Tanjung Mustika (20%). Patrakomindo provides satellite communication

and related services and facilities to the petroleum industry. Following a continuous evaluation and

restructuring of its aÇliates s well as the government policy to eliminate cross-ownership between

TELKOM, TELKOM has decide to divest its ownership in this company and has express Patrakomindo

is subject cross-ownership with INDOSAT, with regard to the government policy to eliminate such

cross-ownership either TELKOM or INDOSAT or both parties should divest its ownership in

Patrakomindo. See ""Regulation''. Currently TELKOM and INDOSAT are engaging negotiation on this

matter.

63

Citra Sari Makmur

TELKOM converted its ownership in PT Citra Sari Makmur (""CSM'') from PBH to JVC in

November 1996. The shareholders of CSM are TELKOM (25%), Subagio W. (38.29%), and Bell Atlantic

Indonesia Inc. (36.71%). CSM provides consultancy services relating to applications of VSAT and other

telecommunications technology and related facilities.

Batam Bintan Telekomunikasi

PT Batam Bintan Telekomunikasi (""BBT'') provides Ñxed line telecommunications services at

Batamindo Industrial Park at Muka Kuning, Batam Island and at Bintan Beach International Resort and

Bintan Industrial Estate in Bintan Island, which are special economic and tourist development zones on

those islands. The shareholders of BBT are Batamindo (95%) and TELKOM (5%).

Bangtelindo

PT Bangtelindo was established in 1994. The shareholders of Bangtelindo are TELKOM (3.18%),

TELKOM's Pension Fund (82%), and others (14.82%). Bangtelindo's primary business is providing

consultancy services on the installation and maintenance of telecommunications facilities. Bangtelindo

is subject to cross-ownership with INDOSAT and TELKOM may decide to maintain its ownership in

this company.

Menara Jakarta

As of 1997, the Company has held a 20.00% equity interest in PT Menara Jakarta (""MJ''). MJ plans

to construct and operate building towers and related telecommunications facilities. Pending improve-

ment in the economic and social situation in Indonesia, this company is not actively pursuing its

development plans. MJ is subject to cross-ownership with INDOSAT, with regard to the government

policy to eliminate such cross ownership either TELKOM or INDOSAT or both parties should divest its

ownership in MJ. See ""Regulation'' TELKOM has express its intention of selling its ownership in this

company.

Tangara Mitrakom

TELKOM holds a 25% equity interest in Tangara Mitrakom (Tangara). Tangara's main business is

the provision of micro earth station communication services. Tangara's other shareholders are PT

Prima Tangara Citra (65%) and Koperasi Pegawai BNI-46 Swadharma (10%). Following a continuous

evaluation and restructuring of its aÇliates, TELKOM has decided to divest its ownership in this

company and has express its intention of selling its ownership in this company.

Napsindo Primatel Internasional

PT Napsindo Primatel Internasional (Napsindo) was established on December 30, 1998 and its

shareholders are TELKOM (32%) and PT Infoasia Sukses Mandiri (68%). Napsindo's primary business

includes providing Network Access Point (NAP) for Internet TraÇc Consolidation in Indonesia and

Voice Over Data Services.

Item 11: Quantitative and Qualitative Disclosure About Market Risk

Disclosure About Market Risk

The Company is exposed to market risks primarily from changes in foreign currency exchange

rates, changes in interest rates and equity price risk on the value of its long-term investments. The

Company does not generally hedge its monetary assets and liabilities against its foreign currency

liabilities, which have a maturity of between 15 to 20 years, as it believes that the expenses associated

with fully hedging such liabilities is not justiÑed. Instead the company hedged its obligations for the

related year. As of December 31, 2000, approximately 7.13% of TELKOM's foreign currency denomi-

64

nated obligations was hedged using foreign currency time deposits (given the general unavailability of

forward contracts to hedge foreign currency obligations in Indonesia). The Company has hedged

foreign currency denominated obligation for the year 2000, in the amount of 52.03%. The Company's

exposure to interest rate risk is managed through maintaining a mix of Ñxed and variable rate liabilities

and assets, including short term Ñxed rate assets, rates for which are reset periodically. The Company's

exposure to such market risks Öuctuated signiÑcantly during 1998, 1999, and 2000 as the Indonesian

economy has been aÅected by a signiÑcant Öuctuation of the Rupiah and interest rates. The Company

is not able to predict whether such conditions will continue during the remainder of 2002 or thereafter.

Interest Rate Sensitivity

The Company's exposure to interest rate Öuctuations results primarily from Öoating rate long-term

debt pursuant to loans under the Government on-lending program which have been used to Ñnance

the Company's capital expenditures and which bears interest at rates based on the average three month

term Bank Indonesia CertiÑcate during the last six-month before the six-month period within which the

installment falls due, plus a Ñxed percentage of margin. See Note 15 to the Company's Consolidated

Financial Statements. To the extent interest rates in Indonesia Öuctuate signiÑcantly, as they did from

11.25% in early 2000 to approximately 13.53% in early 2001, the Company's interest obligations under

its long term debt would increase.

The table below provides information about the Company's material Ñnancial instruments that are

sensitive to changes in interest rates. For debt obligations and time deposits, the table presents principal

cash Öows and related weighted average interest rates by expected maturity dates. The information is

presented in Rupiah equivalents, which is the Company's reporting currency. The instrument's actual

cash Öows are denominated in Rupiah, U.S. Dollars, Netherlands Guilders, French Francs, Deutsche

Marks, and Japanese Yen, as appropriate and as indicated in the table. The information presented in the

table has been determined based on the following assumptions: (i) Ñxed interest rates on Rupiah time

deposits are based on interest rates oÅered in eÅect as of February 14, 2001, by the banks where such

deposits were located; (ii) variable interest rates on Rupiah denominated long-term liabilities are

calculated as of February 14, 2001 and are based on contractual terms setting interest rates based on the

average three month term Bank Indonesia CertiÑcate during the last six-month period within which the

instalment falls due, plus a Ñxed percentage of margin; (iii) variable interest rates on U.S. Dollars and

French Francs are based on interest rates oÅered by the various lending institutions to the Republic of

Indonesia as of February 14, 2001; and (iv) the value of marketable securities is based on the value of

such securities at February 14, 2001. However, no assurance can be given that such assumptions will be

correct for future periods. Such assumptions and the information described in the table may be

inÖuenced by a number of factors, including changes in interest rates in Indonesia and other monetary

and macro economic factors aÅecting Indonesia. Such assumptions are diÅerent from the rates used in

65

the Company's Consolidated Financial Statements, and accordingly amounts shown in the table may

vary from amounts shown in the Company's Consolidated Financial Statements.

Outstanding Balance as atDecember 31, 2000

Expected Maturity DateForeign RpCurrency Equivalent Rate 2001 2002 2003 2004 2005 2006-2025

(in thousands) (Rp in millions) (%) (Rp in millions)

ASSETS

Fixed Rate

Cash and cash

equivalents

Deposit on call and

Time deposit

Rupiah

PrincipalÏÏÏÏÏÏÏ 2,316,785

Interest ÏÏÏÏÏÏÏÏ 12.52

U.S. Dollar

PrincipalÏÏÏÏÏÏÏ 44,869 429,643


Short-term

Investments

Time deposits

Rupiah

PrincipalÏÏÏÏÏÏÏ 3,866,274


U.S. DollarÏÏÏÏÏÏÏ 300 2,879

Marketable Securities

Rupiah ÏÏÏÏÏÏÏÏÏÏ 1,837

LIABILITIES

Long-term debt Ì

Related party

Variable Rate

Rupiah

PrincipalÏÏÏÏÏÏÏÏÏ 2,809,298 12.5 (256,949) (245,681) (242,039) (237,684) (234,864) (1,592,081)

Interest ÏÏÏÏÏÏÏÏÏÏ (416,383) (327,475) (294,340) (262,615) (230,532) (1,192,200)

French Franc

PrincipalÏÏÏÏÏÏÏÏÏ 42,037 57,767 8.5 (7,702) (7,702) (7,702) (7,702) (7,702) (19,256)

Interest ÏÏÏÏÏÏÏÏÏÏ (4,701) (4,052) (3,404) (2,763) (2,108) (2,435)

U.S. Dollars

PrincipalÏÏÏÏÏÏÏÏÏ 212,418 2,055,145 8.7 (171,430) (196,161) (199,940) (199,940) (199,940) (1,087,734)


Fixed Rate

Rupiah

PrincipalÏÏÏÏÏÏÏÏÏ 1,436,554 13.2 (186,513) (153,244) (147,326) (124,483) (94,867) (730,121)


French Franc



U.S. Dollars

PrincipalÏÏÏÏÏÏÏÏÏ 180,788 1,749,125 5.8 (133,983) (133,983) (133,983) (143,639) (155,394) (1,048,143)


Japanese Yen

PrincipalÏÏÏÏÏÏÏÏÏ 15,858,742 1,336,993 3.1 (31,318) (31,318) (31,318) (31,318) (58,199) (1,153,522)


Netherlands Guilder



Exchange Rate Sensitivity

The Company's exposure to exchange rate Öuctuations results primarily from long term debt

obligations and accounts receivable and payable, which are primarily paid for through draw downs

66

under the Government on-lending program and are expressed in U.S. Dollars, Yen, French Francs,

Deutsche Marks and Netherlands Guilders. For a description of the Company's foreign currency assets

and liabilities, see Note 38 to the Company's Consolidated Financial Statements. Part of these

obligations might be oÅset by increases in the value of foreign currency time deposits and by increases

in the value of foreign currency accounts receivable, assuming that the counter-parties are able to meet

their foreign currency obligations to TELKOM at market rates.

The table below provides information about the Company's Ñnancial instruments by functional

currency and presents such information in Rupiah equivalents, which is the Company's reporting

currency. The information on instruments and transactions that are sensitive to foreign exchange rates,

including U.S. Dollar, Netherlands Guilder, French Franc, Deutsche Mark, Yen, Swedish Krona, and

Australian Dollar debt obligations and term deposits and the Company's accounts payable and

receivable. The table presents principal cash Öows by expected maturity dates. The information

presented in the table has been determined based on the assumptions the exchange rate for U.S.

Dollars is based on the rates quoted by Bridge Telerate on February 28, 2001 for buying and selling rates

for U.S. Dollars of Rp 9,833, as well as the exchange rates for other currencies. However, no assurance

can be given that such assumptions will be correct for future periods. Such assumptions and the

information described in the table may be inÖuenced by a number of factors, including a Öuctuation

and/or depreciation of the Rupiah in future periods.

Outstanding Balanceas at

December 31, 2000Expected Maturity DateForeign Rp

Currency Equivalent 2001 2002 2003 2004 2005 2000-2005

(in (Rp in (Rp in millions)thousands) millions)

ASSETS

Fixed Rate

Cash and cash equivalents

Current Account

U.S. Dollars ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,213 11,614

Japanese YenÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 172 14

French Francs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,631 6,298

Swedish Krona ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 285 291

Deutsche Mark ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.47 2

Great Britain

Pound Sterling ÏÏÏÏÏÏÏÏÏÏÏÏ 3 40

Deposits on call and time

deposits

U.S. Dollars ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 44,871 429,643

Temporary investments

U.S. Dollar ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 300 2,879

Accounts Receivable

U.S. Dollars ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 14,966 143,299

Advances and others

U.S. Dollars ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

French Francs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

Japanese YenÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

Australian Dollars ÏÏÏÏÏÏÏÏÏÏÏÏÏ

67

Outstanding Balanceas at

December 31, 2000Expected Maturity DateForeign Rp

Currency Equivalent 2001 2002 2003 2004 2005 2000-2005

(in (Rp in (Rp in millions)thousands) millions)

LIABILITIES

Accounts payable

U.S. Dollars ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 702 6,790

FRF ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 18,971 26,070

Singapore DollarÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1 6

Malaysian RinggitÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2 5

Japanese YenÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,264,150 106,576

Deutsche Mark ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 230 1,058

Accrued expenses

U.S. Dollars ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 11,854 114,683

Japanese YenÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 82,389 6,946

French Francs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,307 8,667

Netherland Guilder ÏÏÏÏÏÏÏÏÏÏÏÏ 507 2,075

Advances from customers and

suppliers

U.S. Dollar ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 938 4,076

Current maturities of long-term

debt-related party

U.S. Dollar ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 31,567 305,412

French Francs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 18,824 25,868

Long-term debt

Related Party

U.S. Dollar ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 361,639 3,498,858 (370,471) (392,600) (404,356) (425,768) (435,424) (1,775,652)

Japanese YenÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 15,487,259 1,305,675 (32,741) (32,741) (32,741) (64,027) (95,313) (1,079,430)

French Francs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 128,967 177,225 (25,868) (25,868) (25,868) (25,868) (25,868) (73,753)

Netherland Guilder ÏÏÏÏÏÏÏÏÏÏ 16,743 68,505 (15,523) (15,523) (15,523) (15,523) (15,523) (3,343)

Third Parties

U.S. Dollars ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 39,652 383,638 365,112

Japanese YenÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,967,149 165,809 115,099

French Francs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 44,492 61,141

Netherland Guilder ÏÏÏÏÏÏÏÏÏÏ 36 149

Deutsche marks ÏÏÏÏÏÏÏÏÏÏÏÏÏ 40 184

Australian dollars ÏÏÏÏÏÏÏÏÏÏÏÏ

Swedish Krona ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

(1) Liabilities in 2001 include Rp 173,396, U.S.$37.7 million and Í1,839.7 million which are draw downs pursuant to the on-

lending program with the Government, which, prior to authorizations being issued by the Government, are classiÑed as

non-interest bearing long-term debt to third parties, net of advances. See Note 15 of the Company's Consolidated Financial

Statements.

Equity Price Risk

The Company's long term investments consist primarily of minority investments in the equity of

private Indonesian companies. With respect to the Indonesian companies in which the Company has

investments, the Ñnancial performance of such companies may be aÅected by the Öuctuation of macro

economic and social conditions such as the level of economic activity, Rupiah exchange rates against

other currencies, inÖation, and interest rates.

Summary of SigniÑcant DiÅerences Between Indonesian GAAP and U.S. GAAP

The Company's consolidated Ñnancial statements have been prepared in accordance with Indone-

sian GAAP, which diÅers in certain respects from U.S. GAAP. The signiÑcant diÅerences are described

in the approximations in Notes 43 and 44 to the Company's Consolidated Financial Statements.

68

The signiÑcant diÅerences between Indonesian and U.S. GAAP as applied to the Company's

income statements are in the treatment of capitalization of foreign exchange losses, equity in net

income (loss) of investees, pensions, revaluation of property, plant and equipment, revenue sharing

arrangements and stock issuance costs. The causes of the diÅerences are as discussed below:

Foreign Exchange DiÅerential on Construction in Progress

Under Indonesian GAAP, commencing in 1997 foreign exchange diÅerential resulting from loans

used to Ñnance assets under construction is required to be capitalized. Capitalization of foreign

exchange diÅerential ceases when construction is substantially complete and the asset is ready for its

intended use. Under U.S. GAAP, foreign exchange diÅerential is required to be charged to current

operations. Consequently, on a U.S. GAAP basis, the Company's net income would have been Rp 109.9

billion higher in 1999, and Rp 133.7 billion lower in 2000.

Equity in Net Income of Investees

The amount of the net income of investees recognized by the Company under Indonesian GAAP

diÅered from the amount that would be recognized under U.S. GAAP, primarily as a result of

depreciation of foreign exchange losses capitalized to assets acquired in foreign currencies by the

investees in previous years. As a result, on a U.S. GAAP basis, the Company's net income would have

been Rp 74.7 billion higher in 1999 and Rp 2.4 billion higher in 2000.

Pensions

Under Indonesian GAAP, prior service cost related to the increase in pension beneÑts for

pensioners is required to be charged directly to expense when incurred. In 1994 and 1999, the Company

increased pension beneÑts. For U.S. GAAP purposes, under the provisions of SFAS 87, however, such

prior service cost should be deferred and amortized systematically over future periods. The amount of

the diÅerence was Rp 70.5 billion higher in 1999 and Rp 94.6 billion higher in 2000 under U.S. GAAP

reporting.

Revaluation of Property, Plant and Equipment

While Indonesian GAAP does not generally allow companies to recognize increases in the value of

property, plant and equipment that occur subsequent to acquisition, an exception is provided for

revaluations made in accordance with government regulations. The Company revalued its property,

plant and equipment that were used in operation on January 1, 1979 and January 1, 1987. Under U.S.

GAAP, property, plant and equipment may not be stated at more than their historical acquisition cost.

Consequently, on a U.S. GAAP basis, the Company's net income would have been Rp 4.1 billion,

higher for 1998, 1999, and 2000, respectively.

Revenue Sharing Arrangements

Under Indonesian GAAP, property, plant and equipment built by an investor pursuant to a PBH

arrangement are recognized as property, plant and equipment in the books of the party to whom

ownership in such properties shall be transferred at the end of the revenue sharing period, with a

corresponding initial credit to unearned income. The property, plant and equipment are depreciated

over their useful lives while unearned income is amortized over the revenue sharing period. The

Company records its share of the revenues earned from these revenue sharing arrangements on a net

basis.

Under U.S. GAAP, the accounting treatment for revenue sharing arrangements depends on the

substance of the arrangement. When there is no guaranteed investment return to the investors, the

accounting treatment is similar to that under Indonesian GAAP. When there is a speciÑc guaranteed

investment return to the investors assets under revenue-sharing arrangements are recorded, and,

69

correspondingly, a liability representing the obligation under revenue sharing arrangements is re-

corded. A portion of the investor's share of revenue is recorded as interest expense based on such

speciÑed rate of return and the balance as a deduction of the obligation. Revenues earned are recorded

on a gross basis.

In connection with the diÅerent treatment of revenue sharing arrangements under U.S. GAAP and

Indonesian GAAP, the Company's income before tax on a U.S. GAAP basis would have been Rp 9.1

billion higher for 1998, Rp 11.9 billion higher in 1999, and Rp 23.3 billion lower in 2000.

Stock Issuance Costs

Under Indonesian GAAP, stock issuance costs are deferred and amortized over a period of time.

For U.S. GAAP purposes, the stock issuance costs are oÅset against the proceeds from the stock

issuance. As a result of this diÅerence, the Company's income before tax would be Rp 26.9 billion

higher for each of 1998 and 1999, and Rp 22.4 billion higher in 2000 under U.S. GAAP reporting.

The Company's net income calculated in accordance with U.S. GAAP was Rp 924 billion,

Rp 2,385.3 billion and Rp 2,497.2 billion, or 20.9% lower, 9.8% higher, and 1.6% lower than net income

calculated in accordance with Indonesian GAAP for 1998, 1999 and 2000, respectively. Stockholders'

equity calculated in accordance with U.S. GAAP for 1999 and 2000 was Rp 11,604.8 billion, and

Rp 13,026.3 billion or 5.1% lower, and 4.8% lower than stockholders' equity calculated in accordance

with Indonesian GAAP, respectively.

Item 12: Description of Securities Other than Equity Securities

Not applicable.

PART II

Item 13: Defaults, Dividend Arrearages and Delinquencies

The Company paid dividend to its shareholders yearly since 1996.

Item 14: Material ModiÑcations to the Rights of Security Holders and Use of Proceeds

Not applicable.

Item 15: Reserved

Item 16: Reserved

PART III

Item 17: Financial Statements

Not applicable. See Item 18.

Item 18: Financial Statements

The following Ñnancial statements, together with the report of ®TELKOM Auditors© thereon are

Ñled as part of this annual report.

70

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA

INDEX TO FINANCIAL STATEMENTS

Page

Independent Auditors' Report ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ F-1

Consolidated Balance Sheets as of December 31, 1999 and 2000 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ F-4

Consolidated Statements of Income for the Years Ended December 31, 1998, 1999 and 2000ÏÏÏ F-6

Consolidated Statements of Changes in Equity for the Years Ended December 31, 1998, 1999

and 2000 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ F-7

Consolidated Statements of Cash Flows for the Years Ended December 31, 1998, 1999 and

2000 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ F-9

Notes to Consolidated Financial StatementsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ F-11

Item 19: Exhibits

Not available

71

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA

INDEX TO FINANCIAL STATEMENTS

Page

Independent Auditors' Report ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ F-1

Consolidated Balance Sheets as of December 31, 1999 and 2000 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ F-4

Consolidated Statements of Income for the Years Ended December 31, 1998, 1999 and 2000ÏÏÏ F-6

Consolidated Statements of Changes in Equity for the Years Ended December 31, 1998, 1999

and 2000 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ F-7

Consolidated Statements of Cash Flows for the Years Ended December 31, 1998, 1999 and

2000 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ F-9

Notes to Consolidated Financial StatementsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ F-11

F-1

Independent Auditors' Report

No. 280201 TI LSW SA

The Stockholders, Board of Commissioners and Directors

Perusahaan Perseroan (Persero) P.T. Telekomunikasi Indonesia Tbk

We have audited the accompanying consolidated balance sheet of Perusahaan Perseroan (Persero)

P.T. Telekomunikasi Indonesia Tbk and its subsidiary as of December 31, 2000 and the related

consolidated statements of income, changes in equity, and cash Öows for the year then ended, all

expressed in Rupiah. These Ñnancial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on these Ñnancial statements based on our audit. We did not

audit the Ñnancial statements of PT Telekomunikasi Selular (Telkomsel), the Company's investment in

which is accounted for by use of the equity method. The Company's equity of Rp 1,491,071 million in

Telkomsel's net assets at December 31, 2000 and of Rp 574,920 million in that company's net income for

the year then ended are included in the accompanying consolidated Ñnancial statements. The Ñnancial

statements of Telkomsel were audited by other auditors whose report, which expressed an unqualiÑed

opinion with explanatory paragraph concerning the eÅect of the economic conditions in Indonesia, has

been furnished to us, and our opinion insofar as it relates to the amounts included for Telkomsel, is

based solely on the report of such other auditors. The consolidated Ñnancial statements of the

Company and its subsidiary as of and for each of the two years in the period ended December 31, 1999

were audited by other auditors whose report, dated February 3, 2000, expressed an unqualiÑed opinion

on those statements, and included an explanatory paragraph concerning the eÅects of the economic

conditions in Indonesia on the Company and its subsidiary.

We conducted our audit in accordance with auditing standards established by the Indonesian

Institute of Accountants and generally accepted auditing standards in the United States of America.

Those standards require that we plan and perform the audit to obtain reasonable assurance about

whether the Ñnancial statements are free of material misstatement. An audit includes examining, on a

test basis, evidence supporting the amounts and disclosures in the Ñnancial statements. An audit also

includes assessing the accounting principles used and signiÑcant estimates made by management, as

well as evaluating the overall Ñnancial statement presentation. We believe that our audit and the report

of the other auditors provide a reasonable basis for our opinion.

In our opinion, based on our audit and the report of the other auditors, the 2000 consolidated

Ñnancial statements present fairly, in all material respects, the Ñnancial position of Perusahaan

Perseroan (Persero) P.T. Telekomunikasi Indonesia Tbk and its subsidiary as of December 31, 2000,

and the results of their operations, changes in their equity, and their cash Öows for the year then ended

in conformity with generally accepted accounting principles in Indonesia.

As described in Note 37a to the consolidated Ñnancial statements, an investor in a Joint Operation

Scheme has recently asserted several claims against the Company. The investor has not asserted these

claims in any legal proceeding; instead it has asserted them only through correspondence and verbal

discussions.

Note 39 to the consolidated Ñnancial statements includes a summary of the eÅects the economic

conditions in Indonesia have had on the Company and its subsidiary, as well as measures the

Company and its subsidiary have implemented or plan to implement in response to the economic

conditions. The accompanying Ñnancial statements include the eÅects of the economic conditions to

the extent they can be determined and estimated.

Generally accepted accounting principles in Indonesia vary in certain respects with those in the

United States of America. A description of the signiÑcant diÅerences between those two generally

accepted accounting principles and approximate eÅects of those diÅerences on the income for the year

ended December 31, 2000 and equity as of December 31, 2000 are set forth in Notes 43 and 44,

respectively, to the consolidated Ñnancial statements.

F-2

Our audit also comprehended the translation of Rupiah amounts into United States Dollar and, in

our opinion, such translation has been made in conformity with the basis stated in Note 3 to the

consolidated Ñnancial statements. Such U.S. Dollar amounts are presented solely for the convenience of

the readers.

HANS TUANAKOTTA & MUSTOFA

Ludovicus Sensi W, SE, MM, BAP

License No. 99.1.0705

February 28, 2001

F-3

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk

AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 1999 AND 2000

(Figures in tables are presented in millions of Rupiah and thousands of U.S. Dollar)

ASSETS

Notes 1999 2000

Rp Rp U.S.$ (Note 3)

CURRENT ASSETSCash and cash equivalents ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2d,4,31 3,597,537 3,542,174 360,233

Temporary investmentsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2e,5,31 1,319,535 3,870,990 393,673

Trade accounts receivable ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2f,6,7,31

Related parties Ì net of allowance for doubtfulaccounts of Rp 30,459 million in 1999 andRp 167,669 million in 2000 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 484,461 685,856 69,751

Third parties Ì net of allowance for doubtfulaccounts of Rp 203,819 million in 1999 andRp 186,602 million in 2000 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 616,397 661,639 67,288

Other accounts receivable Ì net of allowance fordoubtful accounts of Rp 868 million in 1999 andRp 2,683 million in 2000 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2f,31 56,268 115,098 11,705

Inventories Ì net of allowance for obsolescence ofRp 51,929 million in 1999 and Rp 23,319 million in2000 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2g,8 411,956 108,568 11,041

Prepaid expenses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2h,31 125,984 124,641 12,676

Total Current AssetsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,612,138 9,108,966 926,367

NONCURRENT ASSETSLong-term investments Ì net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2e,9 1,483,933 1,768,206 179,823

Property, plant and equipment Ì net of accumulateddepreciation of Rp 10,899,090 million in 1999 andRp 12,127,818 million in 2000ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2i,10 17,198,001 16,953,486 1,724,142

Property, plant and equipment under revenue-sharing arrangements Ì net of accumulateddepreciation of Rp 666,384 million in 1999 and Rp763,765 million in 2000 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2j,11,34 630,890 533,509 54,257

Advances and others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2l,31 374,147 494,582 50,298

Advance payment for investment inshares of stockÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9 Ì 14,000 1,424

Property not used in operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,143 7,472 760Deferred stock issuance costs Ì net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2m 22,402 Ì Ì

Total Noncurrent Assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 19,717,516 19,771,255 2,010,704

TOTAL ASSETS ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 26,329,654 28,880,221 2,937,071

See accompanying notes to consolidated Ñnancial statements which are an integral part of the

consolidated Ñnancial statements.

F-4


AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 1999 AND 2000


LIABILITIES AND EQUITY

Notes 1999 2000

Rp Rp U.S.$ (Note 3)

CURRENT LIABILITIESTrade accounts payable ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 12,31

Related parties ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 392,190 375,475 38,185Third parties ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 466,134 827,543 84,160

Other accounts payable ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 31 20,263 26,357 2,680Taxes payable ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2q,13 626,941 338,956 34,471Dividends payable ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,258 1,492 152Accrued expensesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 14,31 1,079,533 836,030 85,023Unearned incomeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 43,070 46,041 4,682Advances from customers and suppliersÏÏÏÏÏÏÏÏÏÏÏÏÏ 31 86,034 119,218 12,124Current maturities of long-term debt Ì related party 15,31 674,679 818,516 83,242

Total Current Liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,393,102 3,389,628 344,719

NONCURRENT LIABILITIESDeferred tax liabilities Ì net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2q,26 1,535,237 1,767,215 179,723Unearned income on revenue-sharing

arrangementsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2j,11,34 437,641 299,409 30,449Unearned initial investor payments under joint

operation schemeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2k,19,33 168,842 153,493 15,610Long-term debtÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 15,31

Two-step loans Ì related party, net of currentmaturitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,644,008 8,852,652 900,300

Project cost payableÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 896,507 693,607 70,539

Total noncurrent liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10,682,235 11,766,376 1,196,621

MINORITY INTEREST IN NET ASSETS OFSUBSIDIARYÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2b 30,008 36,574 3,720

EQUITYCapital stock Ì Rp 500 par value per Series A

Dwiwarna share and Series B ShareAuthorized Ì 1 Series A Dwiwarna share and

39,999,999,999 Series B sharesIssued and fully paid Ì 1 Series A Dwiwarna share

and 10,079,999,639 Series B shares ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 16 5,040,000 5,040,000 512,560Additional paid-in capitalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 17 1,073,333 1,073,333 109,156DiÅerence due to change of equity in associated

companies ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2e,9 430,722 426,397 43,364Unrealized loss on decline in value of securitiesÏÏÏÏÏÏ 2e,5 (159) (165) (17)Translation adjustment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2c,9 162,299 177,114 18,012Retained earnings

AppropriatedÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 28 171,719 193,442 19,673Unappropriated ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,346,395 6,777,522 689,263

Total equityÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 12,224,309 13,687,643 1,392,011

TOTAL LIABILITIES AND EQUITY ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 26,329,654 28,880,221 2,937,071



F-5


AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000

(Figures in tables are presented in millions of Rupiah and thousands of U.S. Dollar, except

share and ADS data)

Notes 1998 1999 2000

Rp Rp Rp U.S.$ (Note 3)

OPERATING REVENUES

TelephoneÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2n,18 3,805,207 4,528,902 5,177,864 526,580

Revenue under Joint Operation

Scheme ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2k,2n,19,33 1,591,537 1,677,217 2,267,154 230,566

Interconnection revenues ÏÏÏÏÏÏÏÏ 2n,31 555,511 892,050 1,121,482 114,053

Other telecommunications services 2n,20 647,745 692,040 809,206 82,295

Total Operating RevenuesÏÏ 6,600,000 7,790,209 9,375,706 953,494

OPERATING EXPENSES

DepreciationÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2i,2j,10,11 2,162,015 2,363,579 2,087,824 212,328

Personnel ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2n,21 831,754 1,105,702 1,439,456 146,390


telecommunications servicesÏÏÏÏ 2n,22 501,392 822,033 1,009,472 102,662

General and administrativeÏÏÏÏÏÏÏ 2n,23 473,547 508,388 715,045 72,719

Marketing ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2n 31,570 47,044 86,586 8,806

Total Operating Expenses ÏÏ 4,000,278 4,846,746 5,338,383 542,905

OPERATING INCOMEÏÏÏÏÏÏÏÏÏÏÏÏ 2,599,722 2,943,463 4,037,323 410,589

OTHER INCOME (CHARGES)

Interest income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2d,2e,31 595,168 688,077 631,650 64,238

Equity in net income of associated

companiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2e,9,31 7,124 424,794 342,876 34,870

Gain (loss) on foreign

exchange Ì net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2c,38 (965,491) 280,176 (1,064,184) (108,226)

Interest expenseÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 24,31 (980,714) (1,487,430) (816,749) (83,062)

Others Ì net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 25 168,643 113,633 327,460 33,302

Other income (charges) Ì netÏÏÏÏ (1,175,270) 19,250 (578,947) (58,878)

INCOME BEFORE TAXÏÏÏÏÏÏÏÏÏÏÏÏ 1,424,452 2,962,713 3,458,376 351,711

TAX EXPENSE ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2q,26 (255,782) (777,047) (906,204) (92,159)

INCOME BEFORE MINORITY

INTEREST IN NET INCOME OF

SUBSIDIARY ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,168,670 2,185,666 2,552,172 259,552

MINORITY INTEREST IN NET

INCOME OF SUBSIDIARY ÏÏÏÏÏÏ 2b Ì (13,345) (13,161) (1,339)

NET INCOMEÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,168,670 2,172,321 2,539,011 258,213

BASIC EARNINGS PER SHAREÏÏÏÏ 2r,27

Net income per shareÏÏÏÏÏÏÏÏÏÏÏÏ 125.21 225.24 251.89 0.03

Net income per ADS

(20 series B shares per ADS)ÏÏÏÏÏ 2,504.29 4,504.89 5,037.72 0.51



F-6

F-7

PER

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HA

AN

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(Fig

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Unre

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Rp

Rp

Rp

Rp

Rp

Rp

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ÏÏÏÏÏ

4,6

66,6

67

1,4

46,6

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419,6

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on A

pril 17, 1998:

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ÏÏÏ

28

ÌÌ

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(452,4

45)

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rveÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

28

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66,6

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1,4

46,6

66

419,6

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159,8

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ÏÏÏÏÏ

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net of defe

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Rp 4

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pril 16, 1999:

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28

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(475,8

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28

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F-8

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28

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(165)

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ments

.


AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS



1998 1999 2000


Cash Flows from Operating Activities

Cash receipts from operating revenues

Telephone ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,562,632 4,312,222 4,883,551 496,649

Minimum Telkom Revenues ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,471,769 1,452,912 1,327,386 134,993

Interconnection Ì net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 767,197 983,911 1,252,742 127,402

Other telecommunications servicesÏÏÏÏÏÏÏÏÏÏ 483,553 600,130 771,480 78,458

Distributable KSO revenues ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 193,677 176,966 623,307 63,389

Total cash receipts from operating

revenues ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,478,828 7,526,141 8,858,466 900,891

Cash payments for operating expenses

Personnel ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (735,328) (1,014,324) (1,281,503) (130,327)


telecommunications services ÏÏÏÏÏÏÏÏÏÏÏÏÏ (658,711) (840,192) (774,021) (78,717)

General and administrative ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (319,157) (275,974) (387,349) (39,393)

MarketingÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (26,642) (37,821) (76,172) (7,746)

Total cash payments for operating

expenses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1,739,838) (2,168,311) (2,519,045) (256,183)

Interest income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 578,503 696,625 665,686 67,699

Income tax ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (236,531) (227,578) (1,252,669) (127,394)

Interest expense ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (736,970) (1,419,297) (856,961) (87,152)

Other Ì net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (754,472) (157,666) 61,620 6,267

Net Cash Provided by Operating Activities ÏÏÏÏÏÏ 3,589,520 4,249,914 4,957,097 504,128

Cash Flows from Investing Activities

Proceeds from sale of marketable securities and

maturity of time deposits ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 390,472 1,160,690 5,118,034 520,496

Decrease (increase) in advances and others ÏÏÏ 111,744 (161,770) 139,761 14,214

Proceeds from sale of property, plant and

equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,411 5,338 5,950 605

Purchases of marketable securities and

placements in time depositsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (92,000) (2,437,268) (7,682,827) (781,331)

Acquisitions of property, plant and equipment (1,493,717) (656,014) (793,918) (80,740)

Advance payment for investment in shares of

stock ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì (14,000) (1,424)

Increase in long-term investments ÏÏÏÏÏÏÏÏÏÏÏÏ (1,279) (14,077) Ì Ì

Net Cash Used in Investing Activities ÏÏÏÏÏÏÏÏÏÏÏ (1,079,369) (2,103,101) (3,227,000) (328,180)

Cash Flows from Financing Activities

Cash dividend paid ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (448,623) (475,559) (1,103,389) (112,213)

Repayment of long-term debt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (284,120) (610,037) (682,071) (69,365)

Net Cash Used in Financing Activities ÏÏÏÏÏÏÏÏÏÏ (732,743) (1,085,596) (1,785,460) (181,578)

F-9


AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS Ì (Continued)



1998 1999 2000


Net Increase (Decrease) in Cash and Cash

Equivalents ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,777,408 1,061,217 (55,363) (5,630)

Cash and Cash Equivalents at Beginning of Year 758,912 2,536,320 3,597,537 365,863

Cash and Cash Equivalents at End of Year ÏÏÏÏÏÏ 2,536,320 3,597,537 3,542,174 360,233

SUPPLEMENTAL CASH FLOW

INFORMATION

Transactions not aÅecting cash Öows:

Increase in property under construction through

the incurrence of long-term debt ÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,722,705 972,548 580,584 59,044

Capitalization of borrowing costs during

construction

Foreign exchange diÅerential ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 236,358 (33,960) 175,489 17,847

Interest ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 40,465 6,493 62,534 6,360

Changes from equity transactions of associated

companies aÅecting the following accounts:

Investment in shares of stock ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 218,708 28,896 14,986 1,524

Translation adjustment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 153,096 9,203 14,815 1,507

Deferred tax liability ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 65,613 8,668 4,496 457

DiÅerence due to change of equity in

associated companiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 11,023 (4,325) (440)

Increase (decrease) in property, plant and

equipment and unearned income under

revenue-sharing arrangement ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 55,627 (7,442) Ì Ì

Adjustment of long-term receivable and the

related unearned incomeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 25,809 Ì Ì Ì

Transfer of advance payment to property, plant

and equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,774 Ì Ì Ì



F-10

PERUSAHAAN PERSEROAN (PERSERO)

P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD

ENDED DECEMBER 31, 2000

(Figures in tables are presented in millions of Rupiah)

1. GENERAL

a. Establishment and General Information

Perusahaan Perseroan (Persero) P.T. Telekomunikasi Indonesia Tbk (""the Company'') was

originally a part of ""Post en Telegraafdienst'', which was established in 1884 under the framework of

Decree No. 7 dated March 27, 1884 of the Governor General of the Dutch Indies and published in the

State Gazette No. 52 dated April 3, 1884.

In 1991, based on Government Regulation No. 25 year 1991, the status of the Company was

changed into a state-owned limited liability corporation (""Persero''). The Company was established

based on notarial deed No. 128 dated September 24, 1991 of Imas Fatimah, S.H.. The Company's

articles of association have been amended several times, most recently by notarial deed No. 58 dated

April 23, 1997 of A. Partomuan Pohan, S.H., LL.M., to conform with Law No. 1 year 1995 on Limited

Liability Companies and Law No. 8 year 1995 on Capital Markets. The latest amendments were

approved by the Minister of Justice of the Republic of Indonesia in his decision letter No. C2-

7468.HT.01.04.Th.97 dated July 31, 1997.

The Company's principal business is the provision of domestic telecommunications services,

including telephone, telex, telegram, satellite, leased lines, electronic mail, mobile communication and

cellular services. In order to accelerate the construction of telecommunications facilities, to make the

Company a world-class operator, and to increase the technology as well as the knowledge and skills of

its employees, the Company has entered into agreements with investors to develop, manage and

operate telecommunications facilities under Joint Operation Scheme ®known as ""Kerja Sama Operasi''

or ""KSO'' (Note 33)©.

Under Law No. 3 year 1989 on Telecommunications which took eÅect on April 1, 1989, Indonesian

legal entities are allowed to provide basic telecommunications services in cooperation with the

Company as the domestic telecommunications organizing body (or ""badan penyelenggara''). Other

Indonesian legal entities are also allowed to individually provide non-basic telecommunications

services. In providing telecommunications services, these entities are required to obtain licenses from

the Minister of Communications of the Republic of Indonesia (the Ministry of Communications

assumed responsibility for the telecommunications sector from the now defunct Ministry of Tourism,

Post and Telecommunications in March 1998). Government Regulation No. 8 year 1993 concerning the

provision of telecommunications services, further regulates that cooperation which provides basic

telecommunications services can be in the form of joint venture, joint operation or contract manage-

ment and that the entities cooperating with the domestic telecommunications organizing body must

use the organizing body's telecommunications networks. If the telecommunications networks are not

available, the Government Regulation requires that the cooperation be in the form of a joint venture

that is capable of constructing the necessary networks.

The Minister of Tourism, Post and Telecommunications of the Republic of Indonesia, through his

two decision letters both dated August 14, 1995, reaÇrmed the status of the Company as the organizing

body for the provision of domestic telecommunications services. Further, eÅective from January 1, 1996,

the Company was granted the exclusive right to provide local wireline and Ñxed wireless services for a

minimum period of 15 years and the exclusive right to provide domestic long-distance telecommunica-

tions services for a minimum period of 10 years. The exclusive rights also apply to telecommunications

services provided for and on behalf of the Company through a Joint Operation Scheme (KSO). This

F-11



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)




grant of rights does not aÅect the Company's right to provide other domestic telecommunications

services.

Based on press release No. o5/HMS/JP/VIII/2000 dated August 1, 2000 from the Director General

of Post and Telecommunications and the correction thereto No. 1718/UM/VII/2000 dated August 2,

2000, the period of exclusive rights granted to the Company to provide local wireline and Ñxed wireless

services is shortened to August 2002 and to August 2003 for domestic long-distance telecommunica-

tions services. In return, new operators are required to pay compensation to the Company, the amount

of which is to be estimated by an independent appraiser. The Company is further granted the permit to

provide international telecommunications services eÅective August 2003.

On September 8, 1999, the Government issued Law No. 36 year 1999 on Telecommunications to

replace Law No. 3 year 1989. Under the new Law, which took eÅect from September 2000, telecommu-

nications activities cover:

‚ Telecommunications networks

‚ Telecommunications services

‚ Special telecommunications

National state-owned companies, regional state-owned companies, privately-owned companies

and cooperatives are allowed to provide telecommunications networks and services. Special telecom-

munications can be provided by individuals, government agencies and legal entities other than

telecommunications networks and service providers.

Under Law No. 36, activities which result in monopolistic practices and unhealthy competition are

prohibited. In relation with this law, Government Regulation No. 52 year 2000 was issued, which

provides that interconnection fee shall be charged to originating telecommunications network operator

where telecommunications service is provided by two or more telecommunications network operators.

The Company's head oÇce is located in Jalan Japati No. 1, Bandung, West Java. In 1996, Ñve of the

Company's seven regional divisions started to operate as separate units (known as ""KSO Units'')

under Joint Operation Scheme (Note 33).

According to Article 3 of the Company's articles of association:

1. The Company's objective, in its broadest sense, is the development, operation and

improvement of the quality of telecommunications services and improvement of the utilization of

the Company's resources.

2. To achieve the above objective, the Company will be involved in the following activities:

a. Planning, building, providing, owning, developing, operating and maintaining tele-

communications facilities to support the provision of telecommunications services.

b. Increasing the capability of telecommunications facilities in order to improve telecom-

munications services to the public.

c. Performing activities and other eÅorts in connection with the utilization and develop-

ment of the Company's resources, in its broadest sense, and optimizing the utilization of the

F-12







Company's property, plant and equipment, information system, education and training, and

repairs and maintenance facilities.

The Company had 37,705 employees as of December 31, 2000, including those in the KSO Units.

Based on the resolution of the Stockholders' Extraordinary Meeting, the minutes of which have

been notarized by deed No. 7 dated April 7, 2000 of A. Partomuan Pohan, S.H., LL.M., the composition

of the Company's board of commissioners from 2000 to 2001 is as follows:

President Commissioner : Bacelius Ruru

Commissioners : Noor Fuad

Purnomo Sidhi

Andi Siswaka Faisal

Rahardjo Tjakraningrat

Based on the resolution of the Stockholders' General Meeting, the minutes of which have been

notarized by deed No. 6 dated April 7, 2000 of the same notary, the composition of the board of

directors from 2000 to 2005 is as follows:

President Director : Muhammad Nazif

Directors : Mursyid Amal

TauÑk Akbar

Komaruddin Sastrakoesoemah

Kristiono

b. Consolidated Subsidiary

The Company has a 51% ownership interest in PT Infomedia Nusantara (""Infomedia''), a

company domiciled in Jakarta. Infomedia started commercial operations in 1995 and is engaged in

providing telecommunications information service and other information services in the form of

printed and electronic media. As of December 31, 2000, total assets of Infomedia amounted to

Rp 186,548 million.

The Company's equity interest in Infomedia has increased to 51% in September, 1999. Accordingly,

the accounts of Infomedia were consolidated with those of the Company starting in 1999.

c. Public OÅering of Shares of the Company

The Company's total number of shares immediately prior to its initial public oÅering was

8,400,000,000 which was made up of 8,399,999,999 series B shares and 1 series A Dwiwarna share, all of

which were owned by the State of the Republic of Indonesia. On November 14, 1995, the Government

sold the Company's shares through an initial public oÅering in Jakarta Stock Exchange and Surabaya

Stock Exchange. The shares oÅered consisted of 933,333,000 new series B shares and 233,334,000

series B shares owned by the State of the Republic of Indonesia. The share oÅering was also conducted

on the New York Stock Exchange and London Stock Exchange for 700 million series B shares owned by

the State of the Republic of Indonesia, which were converted to 35 million American Depositary Shares

(ADS). Each ADS represents 20 series B shares.

F-13







In December 1996, the Government of the Republic of Indonesia made a block-sale of 388 million

series B shares, and later in 1997, the Government distributed 2,670,300 series B shares as an incentive

for the stockholders not to sell their shares within one year from the date of the initial public oÅering.

In May 1999, the Government made a further block-sale of 898 million series B shares.

Under Law No.1 year 1995 on Limited Liability Companies, the minimum total par value of the

Company's issued shares of capital stock has to be 25% of the total par value of the Company's

authorized capital stock, or in the Company's case, Rp 5 trillion. To comply with the Law, it was

resolved at the Annual General Meeting of Stockholders on April 16, 1999 to increase the issued shares

of capital stock. The bonus shares were distributed to existing shareholders in August 1999.

As of December 31, 2000, all of the Company's series B shares have been listed on the Jakarta Stock

Exchange and Surabaya Stock Exchange and 44,960,509 ADS on the New York Stock Exchange and

London Stock Exchange.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Consolidated Financial Statement Presentation

The consolidated Ñnancial statements have been prepared in accordance with generally accepted

accounting principles in Indonesia (""Indonesian GAAP''), which diÅer in certain respects with

generally accepted accounting principles in the United States of America (""U.S. GAAP''). A description

of signiÑcant diÅerences and their approximate eÅects on net income and equity are set forth in

Notes 43 and 44, respectively. The consolidated Ñnancial statements also include certain additional

disclosures in order to conform more closely to the form and content of Ñnancial statements required by

the Securities and Exchange Commission of the United States of America (the ""U.S. SEC'') (Note 45).

The consolidated Ñnancial statements, except for the statements of cash Öows, are prepared under

the accrual basis of accounting. The reporting currency used in the preparation of the consolidated

Ñnancial statements is the Indonesian Rupiah, while the measurement basis used is the historical cost,

except for certain accounts which are measured on the bases described in the related accounting

policies.

The consolidated statements of cash Öows are prepared using the direct method with classiÑcations

of cash Öows into operating, investing and Ñnancing activities.

b. Principles of Consolidation

The consolidated Ñnancial statements include the Ñnancial statements of the Company and

Infomedia, a 51%-owned subsidiary. Intercompany balances and transactions including unrealized

gains or losses on intercompany transactions are eliminated to reÖect the Ñnancial position and the

results of operations of the Company and its subsidiary as one business entity.

c. Foreign Currency Transactions and Translation

The books of accounts of the Company and its subsidiary are maintained in Indonesian Rupiah.

Transactions during the year involving foreign currencies are recorded at the rates of exchange

prevailing at the time the transactions are made. At balance sheet date, monetary assets and liabilities

denominated in foreign currencies are adjusted to reÖect the rates of exchange prevailing at that date.

F-14







The resulting gains or losses are credited or charged to current operations, except for foreign exchange

diÅerentials that can be attributed to qualifying assets which are capitalized.

The exchange rates used for translation of monetary assets and liabilities denominated in foreign

currencies are the buying and selling rates published by Dow Jones Telerate in 1999 and the Bridge

Telerate in 2000. The Dow Jones Telerate buying and selling rates, applied respectively to monetary

assets and liabilities, were Rp 7,070 and Rp 7,150 to U.S.$1 as of December 31, 1999, while the Bridge

Telerate buying and selling rate applied respectively to monetary assets and liabilities were Rp 9,575

and Rp 9,675 to U.S.$1 as of December 31, 2000. The Company does not guarantee that assets and

liabilities denominated in foreign currencies can be translated to Indonesian Rupiah at the rates of

exchange as of December 31, 2000.

The books of accounts of PT PasiÑk Satelit Nusantara and PT Citra Sari Makmur, associated

companies, are maintained in U.S. Dollar. For the purpose of reporting these investments using the

equity method, the assets and liabilities of these companies as of balance sheet date are translated into

Rupiah using the rates of exchange prevailing at that date, while revenues and expenses are translated

at the average rates of exchange for the year. The resulting translation adjustments are shown as part of

equity as ""Translation Adjustment''.

d. Cash and Cash Equivalents

Cash and cash equivalents consist of cash on hand and in banks and all unrestricted investments

with maturities of three months or less from the date of placement.

CertiÑcates of the Bank Indonesia are stated at face value less unamortized discount.

e. Investments

Time deposits

Time deposits with maturities of more than three months are presented as temporary investments

and are stated at nominal values.

Investments in available for sale securities

Investments in available for sale securities are stated at fair value. Unrealized gains or losses from

the increase or decrease in fair value are recorded as part of equity and recognized as income or

expenses of the period when realized.

Investments in associated companies

Investments in shares of stock with ownership interest of 20% to 50%, directly or indirectly owned,

are accounted for using the equity method whereby the Company's proportionate share in the income

or loss of the associated company after the date of acquisition is added to or deducted from, and the

dividends received are deducted from, the acquisition cost of the investments. Equity in net income or

losses is adjusted for the straight-line amortization, over Ñve years, of goodwill. The carrying amount of

the investments is written down to recognize any permanent declines in the value of individual

investments. Any such write downs are charged directly to current operations.

F-15







Other investments

Investments in shares of stock with ownership interest of less than 20% that do not have readily

determinable fair values and are intended for long-term investments are stated at cost. The carrying

amount of the investments is written down to recognize a permanent decline in the value of the

individual investments. Any such write downs are charged directly to current operations.

Change of equity in associated companies

Changes in the value of investments due to changes in the equity of associated companies arising

from capital transactions of such associated companies with other parties are recognized in equity as

""DiÅerence Due to Change of Equity in Associated Companies'', and recognized as income or expenses

in the period the investments are disposed of.

f. Allowance for Doubtful Accounts

Allowance for doubtful accounts is provided based on a review of the status of the individual

receivable accounts at the end of the year.

g. Inventories

Inventories are stated at cost or net realizable value, whichever is lower. Cost is determined using

the weighted average method.

h. Prepaid Expenses

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

i. Property, Plant and Equipment

Property, plant and equipment are stated at cost, except for certain revalued assets, less accumu-

lated depreciation.

Most of the Company's property, plant and equipment acquired up to January 1, 1979 and

January 1, 1987 have been revalued in accordance with Decree No. 109/KMK.04/1979 dated March 27,

1979 of the Minister of Finance of the Republic of Indonesia and Government Regulation No. 45 of

1986, respectively. The revaluation increments of Rp 86,787 million resulting from the 1979 revaluation

and Rp 381,908 million resulting from the 1987 revaluation were capitalized to capital stock in 1984 and

1988, respectively. Acquisitions after January 1, 1987 are stated at cost.

F-16







Depreciation is computed using the straight-line method based on the estimated useful lives of the

assets as follows:

Years

Buildings ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 20

Switching equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5-15

Telegraph, telex and data communication equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5-15

Transmission installation and equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5-20

Satellite, earth station and equipmentÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5-15

Cable network ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5-15

Power supply ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5-10

Data processing equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5-10

Other telecommunications peripherals ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5

OÇce equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5

Vehicles ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5

Other equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5

Land is stated at cost and is not depreciated. Unused property, plant and equipment are stated at

the lower of carrying value or net realizable value.

When the carrying amount of an asset exceeds its estimated recoverable amount, the asset is

written down to its estimated recoverable amount, which is determined as the higher of net selling

price or value in use.

The cost of maintenance and repairs is charged to operations as incurred; expenditures which

extend the useful life of the asset or result in increased future economic beneÑts such as increase in

capacity and improvement in the quality of output or standard of performance are capitalized. When

assets are retired or otherwise disposed of, their carrying values and the related accumulated

depreciation are removed from the accounts and any resulting gain or loss is reÖected in the current

operations.

Computer software used for data processing is added to the value of the computer hardware to

which it is attributed.

Property under construction is stated at cost which includes all borrowing costs during construc-

tion on debts incurred to Ñnance the construction. Gain on foreign exchange that can be attributed to

the property under construction is adjusted to the foreign exchange diÅerential and capitalized as a

borrowing cost. Property under construction is transferred to the respective property, plant and

equipment account when completed and ready for use.

j. Revenue-Sharing Arrangements

Under Indonesian Statement of Financial Accounting Standards (""PSAK'') No. 35, ""Accounting

for Income from Telecommunications Services'', assets under revenue-sharing arrangements are to be

capitalized by the party (the organizing body) to whom ownership of such assets shall be transferred

at the end of the revenue-sharing period, if the following criteria are met:

‚ There is a certainty that the organizing body will acquire the assets, the ownership of which

will be transferred at the end of the revenue-sharing period.

F-17







‚ The organizing body will be free from any claims from third parties with respect to the

acquisition of such assets.

‚ The agreement covering the revenue-sharing arrangements is irrevocable.

The Company records such assets as ""Property, Plant and Equipment under Revenue-Sharing

Arrangements'' (with a corresponding initial credit to ""Unearned Income under Revenue-Sharing

Arrangements'' presented under Liabilities) based on the costs incurred by the investors as agreed

upon in the contracts entered into by the Company and the investors (Notes 11 and 34). The property,

plant and equipment are depreciated over their estimated useful lives using the straight-line method.

Property, plant and equipment and unearned income are recorded at the beginning of the revenue-

sharing period. The unearned income related to the acquisition of the property, plant and equipment

under revenue-sharing arrangements is amortized over the revenue-sharing period using the straight-

line method.

At the end of the revenue-sharing period, the respective property, plant and equipment under

revenue-sharing arrangements are reclassiÑed to the ""Property, Plant and Equipment'' account. When

property, plant and equipment under revenue-sharing arrangements are acquired by the Company

before the end of the revenue-sharing period, the net book value of the assets is reclassiÑed to the

""Property, Plant and Equipment'' account, and the balance of the related unearned income is reÖected

as gain or loss in the current operations.

Revenue earned under revenue-sharing arrangements is recognized on the basis of the Company's

share as provided in the agreement.

k. Joint Operation Schemes

For the operations of telecommunications facilities and the provisions of telecommunications

services which have been transferred by the Company to the Ñve KSO Investors (Note 33), the

Company recognizes the following income in lieu of the traditional revenue and expense accounts:

amortization of unearned initial investor's payments, Minimum Telkom Revenues (MTR) and the

Company's share of distributable KSO revenue.

The unearned initial investor payments received as compensation from the KSO Investors are

presented net of all direct costs incurred in connection with the preparation of the KSO and are

amortized over the KSO period using the straight-line method for 15 years starting January 1, 1996.

MTR are recognized on a monthly basis based on the calculation of the contracted MTR amount

for the current year, in accordance with the KSO agreement.

The Company's share of distributable KSO revenues is recognized on the basis of the agreed

Company's percentage share of the KSO revenues, net of MTR and operational expenses of the KSO

Units, as provided in the KSO agreements.

Under PSAK No. 39, ""Accounting for Joint Operation Scheme'', which supersedes paragraph 14 of

PSAK No. 35, the assets built by the KSO Investors under the Joint Operation Scheme should be

recorded in the books of the KSO Investors which operate the assets and shall be transferred to the

Company at the end of the KSO period.

F-18







l. Deferred Charges for Landrights

Expenses related to the legal processing of landrights are deferred and amortized using the

straight-line method over the legal term of the landright which is shorter than its economic life.

m. Deferred Stock Issuance Costs

Stock issuance costs were deferred and amortized over Ñve years using the straight-line method.

n. Revenue and Expense Recognition

Revenue from installations is recognized at the time the installations are placed in service. Revenue

from usage charges is recognized as the charges are incurred by customers.

Revenues from network interconnection with other domestic and international telecommunica-

tions carriers are recognized as incurred and are presented on a net basis.

Revenues under Joint Operation Scheme are recognized as discussed in Note 2k.

Revenues under Revenue-Sharing Arrangements are recognized as discussed in Note 2j.

Expenses are recognized when incurred.

o. Pension Plan

The Company established a deÑned beneÑt pension plan covering all its permanent employees.

Current service cost is charged to operations in the current period. Past service cost, actuarial

adjustments and the eÅect of changes in assumptions for active participants are amortized using the

straight-line method over the estimated average residual employment period that has been determined

by the actuary.

The method used by the actuary for actuarial calculation is the Projected-Unit Credit method.

p. Postretirement Health Care Plan

The Company recognizes the cost of providing postretirement health care plan beneÑts over the

working lives of its employees based on actuarial computations. This practice is similar to that provided

by Statement of Financial Accounting Standards No. 106, ""Employers' Accounting for Postemployment

BeneÑts Other than Pensions'' (""SFAS 106''), of U.S. GAAP.

q. Income Tax

Current tax expense is determined based on the taxable income for the year computed using

prevailing tax rates.

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to

diÅerences between the Ñnancial statement carrying amounts of existing assets and liabilities and their

respective tax bases. Deferred tax liabilities are recognized for all taxable temporary diÅerences and

deferred tax assets are recognized for deductible temporary diÅerences to the extent that it is probable

that taxable income will be available in future periods against which the deductible temporary

diÅerences can be utilized.

F-19







Deferred tax is calculated at the tax rates that have been enacted or substantively enacted by the

balance sheet date. Deferred tax is charged or credited in the statement of income, except when it

relates to items charged or credited directly to equity, in which case the deferred tax is also charged or

credited directly to equity.

Deferred tax assets and liabilities are oÅset in the balance sheet, except if these are for diÅerentlegal entities, in the same manner the current tax assets and liabilities are presented.

r. Earnings per Share and Earnings per American Depositary Share (""ADS'')

Basic earnings per share is computed by dividing net income by the weighted average number ofshares outstanding during the year. Net income per ADS is computed by multiplying basic earnings pershare by 20, the number of shares represented by each ADS.

s. Segment information

Segment information is prepared in conformity with the accounting policies adopted for preparing

and presenting the consolidated Ñnancial statements.

3. TRANSLATION OF RUPIAH INTO UNITED STATES DOLLARS

The Ñnancial statements are stated in Rupiah. The translations of Rupiah amounts into UnitedStates Dollar are included solely for the convenience of the readers and have been made using theaverage of the market buying and selling rates of Rp 9,833 to U.S.$1 published by Bridge Telerate onFebruary 28, 2001. The convenience translations should not be construed as representations that theRupiah amounts have been, could have been, or could in the future be, converted into United StatesDollar at this or any other rate of exchange.

4. CASH AND CASH EQUIVALENTS

1999 2000

Rp Rp

Cash on hand ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,717 2,787Cash in banks

Related partiesRupiah

Bank Mandiri ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 17,641 93,893Bank Negara IndonesiaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 16,701 59,674Bank Rakyat Indonesia ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,288 20,618Bank Pos Nusantara ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,251 1,938

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 42,881 176,123

Foreign currenciesBank Mandiri ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 937 17,621Bank Negara IndonesiaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 708 328Bank Rakyat Indonesia ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9 8


Total Ì related parties ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 44,535 194,080

F-20







1999 2000

Rp Rp

Third partiesRupiah

Bank Bukopin ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 28 434Bank Niaga ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 14 306Bank Central Asia ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 29 287Bank Internasional IndonesiaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7 77Standard Chartered Bank ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 42Bank Dai-Ichi Kangyo IndonesiaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10 11Bank Duta ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 36 10Citibank ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 24 6American Express BankÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 6Bank Universal ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8 Ì

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 156 1,179

Foreign currenciesCitibank ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9 105American Express BankÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 105Bank Dai-Ichi Kangyo IndonesiaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8 66Bank Niaga ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6 48Bank Universal ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9 Ì

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 32 324

Total Ì third parties ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 188 1,503

Total cash in banks ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 44,723 195,583

CertiÑcates of Bank IndonesiaFace value ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 600,000Unamortized discount ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì (2,624)

Net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 597,376

Time depositsRelated parties

RupiahBank Mandiri ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,168,512 1,071,732Bank Negara IndonesiaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 786,515 446,810Bank Rakyat Indonesia ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 50,000 404,558Bank Tabungan Negara ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 150,690 204,950

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,155,717 2,128,050

Foreign currenciesBank Mandiri ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 336,816 200,023Bank Negara IndonesiaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 179,531Bank Rakyat Indonesia ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 34,949


Total Ì related parties ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,492,533 2,542,553

F-21







1999 2000

Rp Rp

Third partiesRupiah

Bank Danamon Indonesia ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 57,510Bank Niaga ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 14,450 44,700Bank Panin ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 32,000Bank Universal ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13,500 20,000Bank Bukopin ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9,425 16,950Bank MegaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 13,400Bank Internasional IndonesiaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,354 2,650Standard Chartered Bank ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 1,525Bank Duta ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,000 ÌBank Central Asia ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,000 ÌCitibank ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 250 Ì


Foreign currenciesBank Internasional IndonesiaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,130 11,973Bank Niaga ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 745 2,687Bank Dai-Ichi Kangyo IndonesiaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 480Bank Universal ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 710 Ì


Total Ì third parties ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 55,564 203,875

Total time depositsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,548,097 2,746,428

Total Cash and Cash EquivalentsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,597,537 3,542,174

1999 2000

Interest rates per annum

CertiÑcates of Bank Indonesia ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 14.125%-14.625%

Time deposits

Rupiah ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7%-42% 12.52%-14.33%

Foreign currencies ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.13%-13% 5%-6.84%

F-22







5. TEMPORARY INVESTMENTS

1999 2000

Rp Rp

Time deposits

Related parties Ì Rupiah

Bank Mandiri ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,149,988 1,828,017

Bank Tabungan Negara ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 1,023,268

Bank Negara IndonesiaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 166,590 1,010,989

Total Ì related parties ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,316,578 3,862,274

Third parties

Rupiah

Bank Bukopin ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,114 3,000

Bank Yudha Bhakti ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 1,000

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,114 4,000

United States Dollar

Bank Dai-Ichi Kangyo Indonesia ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 2,879

Total Ì third parties ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,114 6,879

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,317,692 3,869,153

Available for sale securities

Investments in mutual fund (Reksa Dana Seruni)

At cost ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,002 2,002

Unrealized loss on decline in valueÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (159) (165)

Net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,843 1,837

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,319,535 3,870,990

Interest rates per annum on time deposits

Rupiah ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13%-35% 11.14%-14.33%

United States Dollar ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 5.125%

Time deposits have terms of more than three months to two years

The time deposit of subsidiary in Bank Dai-Ichi Kangyo Indonesia amounting U.S.$300,000 is used

as a guarantee for the Letter of Credit facility granted by the bank for the payment of subsidiary's

foreign suppliers.

The subsidiary has time deposits amounting to Rp 6,714 million in Bank Bukopin which is used as

a guarantee for the capital credit facility extended by the bank to Koperasi Infomedia Nusantara

(KOPIN). The KOPIN credit facility is used among others to Ñnance loans to subsidiary's employees.

The credit facility has a maximum amount of Rp 7.5 billion and a three-year term, due in 2003. As of

December 31, 2000 the time deposit is recorded as other assets.

Investments in mutual fund represent mutual fund certiÑcates-Seruni issued by PT (Persero)

Danareksa which earn dividends on a monthly basis. The carrying value of these investments as of

December 31, 1999 and 2000 represents the net assets value as of these dates.

F-23







Investments placed with related parties have similar interest rates, terms and conditions as those

placed with third parties.

6. TRADE ACCOUNTS RECEIVABLE Ì RELATED PARTIES

a. By Debtor

1999 2000

Rp Rp

KSO Units ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 278,458 503,187

Government agencies ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 116,459 119,304

PT Komunikasi Selular IndonesiaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 55,593 90,681

PT Citra Sari MakmurÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 42,070

PT Napsindo Primatel Internasional ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 31,956

PT Mobile Selular Indonesia ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 15,000 27,298

PT Metro Selular Nusantara ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 18,165 21,419

PT Aplikanusa Lintasarta ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 17,257 6,345

PT Radio Telepon Indonesia ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,832 4,868

PT Patra Telekomunikasi IndonesiaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 4,152

PT Gratika ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 248 228

OthersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 11,908 2,017

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 514,920 853,525

Allowance for doubtful accounts ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (30,459) (167,669)

Net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 484,461 685,856

Trade accounts receivable from certain related parties are presented net of the Company's

liabilities to such parties.

b. By Age Category

1999 2000

Rp Rp

0 to 6 months ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 476,096 680,631

7 to 12 months ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,036 121,972

13 to 24 months ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13,868 20,668

More than 24 months ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 17,920 30,254

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 514,920 853,525

Allowance for doubtful accounts ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (30,459) (167,669)

Net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 484,461 685,856

F-24







c. By Currency

1999 2000

Rp Rp

Rupiah ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 495,451 753,620

United States Dollar ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 19,469 99,905

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 514,920 853,525

Allowance for doubtful accounts ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (30,459) (167,669)

Net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 484,461 685,856

Changes in the allowance for doubtful accounts

1999 2000

Rp Rp

Beginning balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 48,437 30,459

Additions (deductions)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (17,978) 137,210

Ending balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 30,459 167,669

An allowance for doubtful accounts is provided at a certain percentage of the accounts that have

been overdue, and full provision on those related parties receivables with signiÑcant capital deÑcien-

cies. Management believes that the allowance for doubtful receivables from related parties is adequate

to cover possible losses on uncollectible accounts.

Management also believes that there are no signiÑcant concentrations of credit risk on these

receivables.

7. TRADE ACCOUNTS RECEIVABLE Ì THIRD PARTIES

a. By Debtor

1999 2000

Rp Rp

Residential and business customers ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 818,545 806,477

PT Saranaprima Raya Telemindo ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,432 9,106

OthersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 239 32,658




F-25







b. By Age Category

1999 2000

Rp Rp

0 to 3 months ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 614,033 656,472

More than 3 months ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 206,183 191,769




c. By Currency

1999 2000

Rp Rp

Rupiah ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 799,801 819,055

United States Dollar ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 20,415 29,175

Singapore DollarÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 6

Malaysian Ringgit ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 5




Changes in the allowance for doubtful accounts

1999 2000

Rp Rp


Additions (deductions)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 60,671 (17,217)


Management believes that the allowance for doubtful receivables from third parties is adequate to

cover possible losses on uncollectible accounts.

Management also believes that there are no signiÑcant concentrations of credit risk in third party

receivables.

F-26







8. INVENTORIES

1999 2000

Rp Rp

Components:

Cables and transmission installation spare partsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 38,194 34,660

Telephone terminals, cards and spare parts ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13,069 11,156

Other spare parts ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 11,226 22,805


Allowance for obsolescence ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (10,225) (13,573)

Net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 52,264 55,048

Modules:

Cables and transmission installation spare partsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 384,362 42,438

Telephone terminals, cards and spare parts ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 16,882 20,641

Other spare parts ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 152 187


Allowance for obsolescence ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (41,704) (9,746)

Net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 359,692 53,520


Changes in the allowance for obsolescence of inventories are as follows:

1999 2000

Rp Rp

Beginning balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13,351 51,929

Additions (deductions)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 38,578 (28,610)

Ending balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 51,929 23,319

Management believes that the established allowance is suÇcient to cover possible losses from the

decline in inventory value due to obsolescence.

The Company did not insure its inventories at December 31, 1999 and 2000.

F-27







9. LONG-TERM INVESTMENTS Ì NET

1999 2000

Percentage of Carrying Percentage of CarryingDomicile Ownership Amount Ownership Amount

Rp Rp

Equity method:

PT Telekomunikasi Selular ÏÏÏÏÏÏÏÏÏ Jakarta 42.72 965,908 42.72 1,491,071

PT Aplikanusa Lintasarta ÏÏÏÏÏÏÏÏÏÏÏ Jakarta 37.66 84,162 37.66 102,817

PT PasiÑk Satelit Nusantara ÏÏÏÏÏÏÏÏ Bekasi 22.57 133,273 22.57 77,625

PT Citra Sari MakmurÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Jakarta 25.00 47,740 25.00 66,386

PT Metro Selular Nusantara ÏÏÏÏÏÏÏÏ Surabaya 20.17 29,162 20.17 9,777

PT Patra Telekomunikasi IndonesiaÏÏ Jakarta 30.00 6,674 30.00 6,976

PT Indonusa Telemedia ÏÏÏÏÏÏÏÏÏÏÏÏ Jakarta 35.00 3,474 35.00 3,412

PT Multimedia Nusantara ÏÏÏÏÏÏÏÏÏÏ Jakarta 31.00 4,715 31.00 2,575

PT Napsindo Primatel Internasional Jakarta 32.00 480 32.00 2,390

PT Tangara MitrakomÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Jakarta 25.00 282 25.00 232

PT Satelit Palapa IndonesiaÏÏÏÏÏÏÏÏÏ Jakarta 22.50 184,370 22.50 Ì

PT Menara Jakarta ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Jakarta 20.00 7,161 20.00 Ì

PT Mobile Selular Indonesia ÏÏÏÏÏÏÏÏ Jakarta 25.00 Ì 25.00 Ì

PT Komunikasi Selular IndonesiaÏÏÏÏ Jakarta 35.00 Ì 35.00 Ì

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,467,401 1,763,261

Cost method:

PT Telekomindo Primabhakti ÏÏÏÏÏÏÏ Jakarta 9.00 90,000 9.00 90,000

PT Radio Telepon Indonesia ÏÏÏÏÏÏÏÏ Jakarta 12.86 11,695 12.86 11,695

PT Batam Bintan TelekomunikasiÏÏÏÏ Batam 5.00 587 5.00 587

PT BangtelindoÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Bandung 3.18 199 3.18 199

Medianusa Pte. Ltd.ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Singapore Ì Ì 18.50 108

Investment in convertible bonds Ì

PT Aplikanusa Lintasarta ÏÏÏÏÏÏÏÏÏÏÏ Jakarta Ì 4,051 Ì 4,051

Decline in value of investments ÏÏÏÏÏÏÏ (90,000) (101,695)

Net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 16,532 4,945

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,483,933 1,768,206

PT Telekomunikasi Selular (""Telkomsel'')

Telkomsel is engaged in providing telecommunications facilities and GSM mobile cellular services

with national coverage.

Telkomsel received noncash capital contributions from its stockholders in 1999 and 2000, and also

allocated a certain percentage of the 1999 net income as a bonus distribution to its employees in 2000.

The carrying amount of the Company's investment in Telkomsel was adjusted to reÖect the eÅect

of the change in Telkomsel's equity resulting from such transactions.

F-28







1999 2000

Rp Rp

Beginning balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 686,501 965,908

Equity in net income of associated company ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 287,677 574,920

Dividends received ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (8,629) (42,795)

DiÅerence due to change of equity in associated company ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 359 (6,962)

Ending balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 965,908 1,491,071

PT Aplikanusa Lintasarta (""Lintasarta'')

Lintasarta is a data communication operator and network application services company.

Lintasarta provides Packet Switched Data Network (""PSDN''), Very Small Aperture Terminal

(""VSAT'') data, Electronic Mail (""E-Mail''), and Digital Data Networks (""DDNs'') services. Lintasarta

also supplies Data Over Voice (""DOV'') digital equipment and network application facilities for

Indonesia's oÇcial electronic bank reporting system, shared Automated Teller Machine (""ATM'')

system, a money market information system, and a regional processor for the Society for Worldwide

Interbank Financial Telecommunications (""SWIFT'') system in Indonesia.

In April 1996, the Company purchased from Lintasarta 3,000 convertible bonds with a nominal

value of Rp 1 million per unit. The bonds will mature in 2001 and earn interest at the average annual

rate for three-month period of time deposits from the largest state-owned banks and three privately-

owned banks, plus 1%. The bonds are convertible upon maturity into Lintasarta's shares of stock at

their par value.

In June 1997, the Company increased its ownership in Lintasarta to 27.46% by acquiring 1,210

shares representing a 2.46% equity ownership and 295 convertible bonds which were previously owned

by PT Telekomindo Primabhakti (one of the stockholders of Lintasarta).

In November 1997, Lintasarta issued 7,344 new shares with a par value of Rp 1 million per share.

The issuance of the new shares decreased the ownership of the Company to 24.43%, since the

Company did not acquire its portion of the new shares.

In October 1998, the Company increased its ownership in Lintasarta to 32.53% by acquiring 13,945

shares with a par value of Rp 1 million per share.

In May 1999, the Company increased its ownership in Lintasarta to 33.43% by acquiring 836 shares

owned by ""Dana Pensiun Bapindo'' at Rp 2.5 million per share. At the same time, the Company also

purchased 104 convertible bonds at Rp 1 million each.

In August 1999, the Company increased its ownership in Lintasarta to 36.54% by acquiring 1,009

shares owned by ""Dana Pensiun Bank Bumi Daya'' and 1,881 shares owned by ""Dana Pensiun Bank

Dagang Negara'' at Rp 2.5 million per share. At the same time, the Company also purchased 223 and

211 convertible bonds from ""Dana Pensiun Bank Bumi Daya'' and ""Dana Pensiun Bank Dagang

Negara'', respectively, at Rp 1 million each.

In September 1999, the Company further increased its ownership in Lintasarta to 37.66% by

acquiring 1,040 shares owned by ""Dana Pensiun Bank Ekspor-Impor'' at Rp 2.5 million per share. At

the same time, the Company also purchased 218 convertible bonds at Rp 1 million each.

F-29







1999 2000

Rp Rp


Acquisition of 4,766 shares from other investorsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 11,619 Ì

Equity in net income of associated companyÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 16,447 30,646

Dividends receivedÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (7,720) (11,991)


PT PasiÑk Satelit Nusantara (""PSN'')

PSN is engaged in providing satellite transponder leasing and satellite-based communication

services in the Asia-PaciÑc Region.

1999 2000

Rp Rp


Equity in net loss of associated company ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (52,443) (60,328)

Translation adjustment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 18,797 3,896

DiÅerence due to change of equity in associated company ÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 784


PT Citra Sari Makmur (""CSM'')

CSM is engaged in providing VSAT, net application services, consulting services on telecommuni-

cations technology and related facilities.

1999 2000

Rp Rp

Beginning balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 50,098 47,740

Equity in net income of associated companyÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,291 1,378

Translation adjustment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (5,649) 17,268

Ending balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 47,740 66,386

PT Metro Selular Nusantara (""Metrosel'')

Metrosel is engaged in providing national mobile cellular services and related facilities in Central

Java, Yogyakarta, East Java, Maluku and Irian Jaya. These services were previously provided by the

Company under the revenue-sharing arrangements with PT Centralindo Panca Sakti Cellular (a

company which has taken over the rights and obligations of PT Centralindo Panca Sakti or ""CPS'').

The Company's initial capital contribution of Rp 10,087 million represents a 20.17% ownership interest

and was made in the form of property, plant and equipment under the revenue-sharing arrangement

between the Company and CPS, over which the Company has the right of ownership upon

termination of such revenue-sharing arrangement.

In February 1997, Metrosel issued 1,250,000 new shares with a par value of Rp 10,000 per share to

Asia Link B.V. for U.S.$84,375 thousand. The issuance of the new shares has no impact on the

Company's ownership interest since the Company was granted 251,940 shares by the Company's

F-30







Pension Fund (formerly Yayasan Dana Pensiun Pegawai PT Telekomunikasi Indonesia/""YDPP

Telkom''), a stockholder of Metrosel.

1999 2000

Rp Rp


Equity in net loss of associated company ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (2,951) (19,385)


PT Patra Telekomunikasi Indonesia (""Patrakomindo'')

Patrakomindo is engaged in providing satellite communication system services and related

facilities to the petroleum industry.

1999 2000

Rp Rp

Beginning balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 6,674

Equity in net income of associated companyÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,674 351

Dividend received ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì (49)

Ending balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,674 6,976

PT Indonusa Telemedia (""Indonusa'')

Indonusa is engaged in providing multimedia telecommunications services.

In 2000, the Company acquired an additional 2,800,000 shares amounting to Rp 28,000 million, of

which Rp 14,000 million was paid in September 2000 and the remaining Rp 14,000 million was paid on

January 10, 2001. The Company recognized the payment made in 2000 as ""Advance Payment for

Investment in Shares of Stock'' which will be reclassiÑed to investment once the legal requirements for

the increase in Indonusa's issued capital are completed.

1999 2000

Rp Rp

Beginning balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,286 3,474

Equity in net loss of associated company ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (812) (62)

Ending balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,474 3,412

PT Multimedia Nusantara (""Multimedia'')

Multimedia is engaged in providing pay-television and multimedia telecommunications services.

1999 2000

Rp Rp

Beginning balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,397 4,715

Equity in net loss of associated company ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1,682) (2,140)

Ending balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,715 2,575

F-31







PT Napsindo Primatel Internasional (""Napsindo'')

Napsindo is engaged in providing ""Network Access Point'' (NAP), ""Voice Over Data''

(VOD) and other related business.

The Company's investment of Rp 1,036 million in Napsindo representing 32% equity ownership,

had been fully paid by PT Infoasia Sukses Mandiri (ISM) based on a grant agreement between ISM

and the Company.

1999 2000

Rp Rp

Beginning balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 480

Capital contributionÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,036 Ì

Equity in net income (loss) of associated companyÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (556) 1,910

Ending balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 480 2,390

Based on the Deed of Napsindo's Resolution No. 104 dated October 31, 2000 which was notarized

by Ellize Asmawel, S.H., in relation with the increase in Napsindo's paid-in capital, the Company has

increased its investment in Napsindo to Rp 14,876 million in order to maintain its 32% ownership

interest. The increase in investment was eÅected through compensation of Napsindo's debt to the

Company.

As of December 31, 2000, the Company has not recorded the increase in investment as the legal

requirements for the increase in Napsindo's authorized and issued capital have not been fully

completed.

PT Tangara Mitrakom (""Tangarakom'')

Tangarakom is engaged in providing VSAT.

Based on a grant agreement dated December 26, 1997 between the Company and PT Prima

Tangara Citra (PTC), it was agreed that the Company's investment in Tangarakom amounting to

Rp 250 million, representing a 25% ownership interest, would be paid by PTC and Koperasi

Swadharma as donation to the Company. In 1999, PTC and Koperasi Swadharma made the payment in

the amount of Rp 217 million and Rp 33 million, respectively.

1999 2000

Rp Rp

Beginning balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 282

Capital contribution ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 250 Ì

Equity in net income (loss) of associated company ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 32 (44)

Dividend received ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì (6)

Ending balanceÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 282 232

Based on the Deed of Tangarakom's Resolution No. 122 dated November 29, 2000 which was

notarized by Agus Madjid, S.H., Tangarakom issued 1,500 new shares with par value of Rp 1 million

per share. The issuance of the new shares decreased the ownership of the Company to 10% since the

Company did not acquire its portion of the new shares.

F-32







As of December 31, 2000, the investment in Tangarakom was still accounted for using the equity

method as the legal requirements for the increase in Tangarakom's issued capital have not been fully

completed.

PT Satelit Palapa Indonesia (""Satelindo'')

Satelindo is engaged in providing GSM mobile cellular services, international telecommunications

services and satellite transponder leasing.

In 1999, the Company's investment in Satelindo was adjusted to reÖect the increase in additional

paid-in capital of Satelindo which resulted from grant contributions from DeTeMobil Deutsche

Telekom MobilNet Gmbh, one of its stockholders. The increase, net of deferred tax eÅect, is reÖected as

""DiÅerence Due to Change of Equity in Associated Company'' in the consolidated balance sheets.

1999 2000

Rp Rp

Beginning balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 184,370

Equity in net income (loss) of associated companyÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 168,982 (184,370)

DiÅerence due to change in equity in associated company ÏÏÏÏÏÏÏÏÏÏÏÏ 15,388 Ì

Ending balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 184,370 Ì

PT Menara Jakarta (""MJ'')

MJ intended to construct and operate building tower and related facilities. The economic diÇcul-

ties faced by Indonesia (Note 39) have resulted to the termination of MJ's construction projects at the

end of 1997.

1999 2000

Rp Rp

Beginning balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,026 7,161

Equity in net income of associated companyÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 135 Ì

Decline in value of investment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì (7,161)

Ending balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,161 Ì

PT Mobile Selular Indonesia (""Mobisel'')

Mobisel is engaged in providing mobile cellular services and related facilities. These services were

previously provided by the Company under the revenue-sharing arrangements with PT Rajasa

Hazanah Perkasa (""RHP''). The capital contribution of the Company amounting to Rp 10,398 million,

which represents a 25% equity ownership, was made in the form of property, plant and equipment

under the revenue-sharing arrangements between the Company and RHP, over which the Company

has the right of ownership at the termination of the revenue-sharing arrangements.

At December 31, 1999 and 2000, the carrying amount of the Company's investment in Mobisel is

nil.

F-33







PT Komunikasi Selular Indonesia (""Komselindo'')

Komselindo is a joint-venture between the Company and PT Elektrindo Nusantara (""Elektrindo''),

and is engaged in providing analog mobile cellular services. These services were previously provided

by the Company under the revenue-sharing arrangements with Elektrindo.

Elektrindo transferred its property, plant and equipment acquired under the revenue-sharing

arrangements to Komselindo for Rp 188,195 million based on the appraised value and the agreement

among the Company, Elektrindo and Komselindo. This transaction is considered as a transaction

between entities under common control since Elektrindo owns 65% of Komselindo. The Company

recognized its equity in the loss from the diÅerence between the transfer price and the net book value,

to the extent of the amount of its investment in Komselindo.

As of December 31, 1999 and 2000, the carrying value of the investment in Komselindo is nil.

Based on the Deed of Komselindo's Resolution No. 110 dated October 10, 2000 which was

notarized by Ny. R. Arie Soetardjo, S.H., the Company agreed to the conversion of Rp 92,750 million of

receivable from Komselindo to equity in order to maintain a 35% ownership interest.

As of December 31, 2000, the Company has not recorded the conversion.

PT Telekomindo Primabhakti (""Telekomindo'')

Telekomindo is engaged in the construction and development of building and telecommunications

facilities.

1999 2000

Rp Rp

CostÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 90,000 90,000

Decline in value of investment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (90,000) (90,000)

Net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì

PT Radio Telepon Indonesia (""Ratelindo'')

Ratelindo is engaged in providing facilities and telecommunications services using domestic Ñxed

wireless network.

The Company has recognized a loss due to decline in value of its investment as Ratelindo had a

capital deÑciency.

1999 2000

Rp Rp

CostÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 11,695 11,695

Decline in value of investment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì (11,695)

Net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 11,695 Ì

F-34







PT Batam Bintan Telekomunikasi (""BBT'')

BBT is engaged in providing Ñxed line telecommunications services at Batamindo Industrial Park in

Muka Kuning, Batam Island and at Bintan Beach International Resort and Bintan Industrial Estate in

Bintan Island.

In June 1996, based on a cooperation agreement between the Company and PT Batamindo

Investment Corporation (""BIC''), the Company's investment in BBT was fully paid by BIC as BIC's

donation to the Company.

PT Bangtelindo

PT Bangtelindo is primarily engaged in providing consultancy services on the installation and

maintenance of telecommunications facilities.

Medianusa Pte. Ltd.

Medianusa Pte. Ltd. is an associated company of Infomedia, a subsidiary. Medianusa is engaged as

a sales agent, in search of advertisers for telephone directories.

The Company plans to restructure its investments in associated companies by selling its shares in

Tangarakom, MJ, Patrakomindo and Mobisel, based on the letters No. 115-118/KU830/ KUG-00/2000/

RHS, all dated November 28, 2000 which were addressed to the president directors of the respective

associated companies.

10. PROPERTY, PLANT AND EQUIPMENT

January 1, December 31,1999 Additions(1&2) Deductions 1999

At cost or revalued amounts:

Land ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 279,887 16,121 180,762 115,246

Buildings ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,391,434 28,842 42,906 1,377,370

Switching equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,640,033 97,595 232,150 6,505,478

Telegraph, telex and data communication

equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 221,587 Ì 261 221,326

Transmission installation and equipmentÏÏÏÏÏÏ 3,351,302 686,485 37,124 4,000,663

Satellite, earth station and equipmentÏÏÏÏÏÏÏÏÏ 1,802,450 1,304,011 46,001 3,060,460

Cable network ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,519,968 949,925 35,704 8,434,189

Power supply ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 730,133 14,383 15,100 729,416

Data processing equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 680,541 48,101 24,835 703,807

Other telecommunications peripherals ÏÏÏÏÏÏÏÏ 937,060 19,856 495,818 461,098

OÇce equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 330,755 24,276 2,940 352,091

Vehicles ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 148,788 3,943 1,970 150,761

Other equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 47,376 4,321 Ì 51,697

F-35







January 1, December 31,1999 Additions(1&2) Deductions 1999

Property under construction:

Buildings ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 84,714 14,858 25,693 73,879

Switching equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 275,880 321,100 149,625 447,355

Transmission installation and equipmentÏÏÏÏ 1,358,505 152,537 1,061,010 450,032

Satellite, earth station and equipmentÏÏÏÏÏÏÏ 963,518 418,981 1,281,657 100,842

Cable network ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 746,106 747,327 714,707 778,726

Power supply ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 32,990 9,317 12,124 30,183

Data processing equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 48,119 17,356 19,031 46,444

Other telecommunications peripherals ÏÏÏÏÏÏ 4,923 13,210 12,105 6,028

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 27,596,069 4,892,545 4,391,523 28,097,091

Accumulated depreciation:

Land ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 43,197 16,015 59,212 Ì

Buildings ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 451,318 75,051 25,630 500,739

Switching equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,436,340 449,912 232,150 2,654,102

Telegraph, telex and data communication

equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 172,089 16,928 18 188,999

Transmission installation and equipmentÏÏÏÏÏÏ 1,288,414 152,052 37,124 1,403,342

Satellite, earth station and equipmentÏÏÏÏÏÏÏÏÏ 1,241,758 403,918 46,001 1,599,675

Cable network ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,198,933 884,742 35,704 3,047,971

Power supply ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 441,768 74,649 15,099 501,318

Data processing equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 172,498 67,403 24,835 215,066

Other telecommunications peripherals ÏÏÏÏÏÏÏÏ 761,163 109,080 495,817 374,426

OÇce equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 228,953 48,572 2,940 274,585

Vehicles ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 96,985 19,427 1,938 114,474

Other equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13,305 11,088 Ì 24,393

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9,546,721 2,328,837 976,468 10,899,090

Net Book Value ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 18,049,348 17,198,001

(1) including reclassiÑcation from ""Property, Plant and Equipment under Revenue-Sharing Arrangements'' and reclassiÑcation

of computer software.

(2) including prior-period correction charged/credited to Other Expenses/Income

F-36







January 1, December 31,2000 Additions Deductions ReclassiÑcations 2000

At cost or revalued amounts:Land ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 115,246 3,465 Ì 22 118,733BuildingsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,377,370 3,731 Ì 91,323 1,472,424Switching equipmentÏÏÏÏÏÏÏÏÏÏÏÏ 6,505,478 15,555 Ì 538,665 7,059,698Telegraph, telex and data

communication equipment ÏÏÏÏÏ 221,326 200 Ì (14,934) 206,592Transmission installation and

equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,000,663 6,823 2,384 227,133 4,232,235Satellite, earth station and

equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,060,460 5,964 276,942 (285,118) 2,504,364Cable networkÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,434,189 43,910 8,752 1,151,931 9,621,278Power supply ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 729,416 6,826 2,337 77,607 811,512Data processing equipment ÏÏÏÏÏÏ 703,807 155,459 Ì (9,874) 849,392Other telecommunications

peripherals ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 461,098 27,451 146 8,534 496,937OÇce equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 352,091 45,266 689 10,347 407,015Vehicles ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 150,761 11,405 1,606 (2,585) 157,975Other equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 51,697 7,077 Ì 2,748 61,522Property under construction:

BuildingsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 73,879 118,370 Ì (135,453) 56,796Switching equipmentÏÏÏÏÏÏÏÏÏÏ 447,355 417,599 Ì (555,846) 309,108Transmission installation and

equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 450,032 31,794 Ì (237,675) 244,151Satellite, earth station and

equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 100,842 41,790 Ì (132,310) 10,322Cable networkÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 778,726 747,974 Ì (1,183,878) 342,822Power supply ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 30,183 23,309 Ì (42,352) 11,140Data processing equipment ÏÏÏÏ 46,444 65,542 Ì (10,181) 101,805Other telecommunications

peripherals ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,028 11,923 Ì (12,468) 5,483

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 28,097,091 1,791,433 292,856 (514,364) 29,081,304

Accumulated depreciation:BuildingsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 500,739 66,052 Ì (921) 565,870Switching equipmentÏÏÏÏÏÏÏÏÏÏÏÏ 2,654,102 467,647 Ì (12,153) 3,109,596Telegraph, telex and data

communication equipment ÏÏÏÏÏ 188,999 9,521 Ì (2,675) 195,845Transmission installation and

equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,403,342 299,135 2,384 (3,470) 1,696,623Satellite, earth station and

equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,599,675 146,773 232,685 (420,009) 1,093,754Cable networkÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,047,971 722,905 8,752 (33,516) 3,728,608Power supply ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 501,318 70,086 2,337 (2,165) 566,902Data processing equipment ÏÏÏÏÏÏ 215,066 97,932 Ì (16,066) 296,932

F-37








Other telecommunicationsperipherals ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 374,426 45,998 146 (21,909) 398,369

OÇce equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 274,585 36,619 689 1,326 311,841Vehicles ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 114,474 17,033 1,555 (2,218) 127,734Other equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 24,393 10,742 Ì 609 35,744

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10,899,090 1,990,443 248,548 (513,167) 12,127,818

Net Book ValueÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 17,198,001 16,953,486

Depreciation charged to operations amounted to Rp 2,026,601 million, Rp 2,259,419 million and

Rp 1,990,443 million in 1998, 1999 and 2000, respectively.

Interest capitalized to property under construction amounted to Rp 116,766 million,

Rp 133,300 million and Rp 62,534 million in 1998, 1999 and 2000, respectively. Capitalization rates are

the borrowing rates on debts incurred related to property under construction.

Foreign exchange diÅerential capitalized as part of property under construction amounted to

Rp 336,777 million, (Rp 72,677) million and Rp 175,489 million in 1998, 1999 and 2000, respectively.

Management believes that no impairment in assets value contemplated in PSAK No. 48 concerning

""Impairment of Assets'' has occurred. For property, plant and equipment which are no longer used due

to technological change, obsolescence, or malfunction, an accelerated depreciation is employed and

such property, plant and equipment are then reclassiÑed to property not used in operation.

The Company and its subsidiary own several pieces of land located throughout Indonesia with

Building Use Right (Hak Guna Bangunan or HGB) for a period of 20 Ó 30 years which will expire

between 2001 Ó 2029. Management believes that there will be no diÇculty in the extension of the

landrights since all the parcels of land were acquired legally and supported by suÇcient evidence of

ownership.

Some of the Company's land measuring 1,401,181 m2 are still under the name of other parties

including, among others, the now defunct Ministry of Tourism, Post and Telecommunications and the

Ministry of Communication of the Republic of Indonesia. As of February 28, 2001, the transfer of the

legal title of ownership on those parcels of land to the Company is still in progress.

At December 31, 1999 and 2000, all property, plant and equipment, except land, were insured with

PT Asuransi Jasa Indonesia against Ñre, theft and other possible risks for Rp 14,089,462 million and

Rp 16,137,128 million, respectively, and an additional coverage for Palapa B4 and Telkom 1 Satellite for

U.S.$12,980 thousand at December 31, 1999 and U.S.$83,870 thousand at December 31, 2000. Manage-

ment believes that the insurance coverage is adequate to cover possible losses on the assets insured.

F-38







11. PROPERTY, PLANT AND EQUIPMENT UNDER REVENUE-SHARING ARRANGEMENTS

January 1, December 31,1999 Additions(*) Deductions 1999

At cost:

LandÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,160 Ì Ì 3,160

Buildings ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13,782 10,170 Ì 23,952

Switching equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 640,862 78,602 Ì 719,464

Transmission installation and equipment 169,624 Ì Ì 169,624

Cable network ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 326,511 13,618 Ì 340,129

Other telecommunication peripheralsÏÏÏ 135,893 Ì 94,948 40,945

TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,289,832 102,390 94,948 1,297,274


LandÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 672 158 Ì 830

Buildings ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,384 3,749 Ì 7,133

Switching equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 206,119 92,025 Ì 298,144

Transmission installation and equipment 151,732 5,954 Ì 157,686

Cable network ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 150,899 14,109 Ì 165,008

Other telecommunication peripheralsÏÏÏ 114,212 16,854 93,483 37,583

TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 627,018 132,849 93,483 666,384

Net Book Value ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 662,814 630,890

(*) including prior period adjustments which were charged/credited to Other Expense/Income


At cost:

LandÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,160 Ì Ì Ì 3,160

Buildings ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 23,952 Ì Ì Ì 23,952

Switching equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏ 719,464 Ì Ì (92,948) 626,516

Transmission installation and

equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 169,624 Ì Ì (62,066) 107,558

Cable network ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 340,129 Ì Ì (5,337) 334,792

Other telecommunications

peripherals ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 40,945 Ì Ì 160,351 201,296

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,297,274 Ì Ì Ì 1,297,274

F-39









LandÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 830 158 Ì Ì 988

Buildings ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,133 1,198 Ì (133) 8,198

Switching equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏ 298,144 44,000 Ì (57,659) 284,485

Transmission installation and

equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 157,686 11,559 Ì (92,858) 76,387

Cable network ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 165,008 26,830 Ì 643 192,481

Other telecommunication

peripherals ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 37,583 13,636 Ì 150,007 201,226

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 666,384 97,381 Ì Ì 763,765

Net Book Value ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 630,890 533,509

Depreciation charged to operations amounted to Rp 135,414 million, Rp 104,160 million and

Rp 97,381 million in 1998, 1999 and 2000, respectively.

Rights to the property, plant and equipment under revenue-sharing arrangements are legally

retained by the investors until the end of the revenue-sharing period (Note 34).

The details of unearned income under revenue-sharing arrangements are as follows:

1999 2000

Rp Rp

Gross amount ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,297,274 1,297,274

Accumulated amortization ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (859,322) (997,865)

Cumulative eÅect of contract amendment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (311) Ì

Net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 437,641 299,409

12. TRADE ACCOUNTS PAYABLE

1999 2000

Rp Rp

Related parties

Payable to other telecommunications carriersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 258,472 192,735

Purchases of equipment, materials and servicesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 49,896 130,795

Concession fees ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 26,690 33,913

Others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 57,132 18,032

TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 392,190 375,475

Third parties

Purchases of equipment, materials and servicesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 335,541 682,908

Payable related to revenue-sharing arrangements ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 103,506 118,899

Others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 27,087 25,736

TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 466,134 827,543

TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 858,324 1,203,018

F-40







Trade accounts payable by currency are as follows:

1999 2000

Rp Rp

RupiahÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 847,360 1,062,524

Japanese Yen ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 106,576

French FrancÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,350 26,070

United States Dollar ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,614 6,790

Deutsche MarkÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 1,058

TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 858,324 1,203,018

13. TAXES PAYABLE

1999 2000

Rp Rp

Corporate income tax (Note 26)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 503,980 118,009

Income taxes

Article 21 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 19,865 40,539



Article 26 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,166 849

Property taxÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 193

Value Added Tax ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 87,157 123,450


The amount of Output VAT which has not been remitted to the State Treasury is reported in the

taxes payable account. Based on a circular letter No. SE-48/PJ.3/1988 dated December 31, 1988 of the

Director General of Taxation, the Company is not allowed to credit the Input VAT against the Output

VAT.

However, based on the letter from Director General of Taxation No. S-2023/PJ.53/2000 dated

October 24, 2000, the Company will be able to credit the Input VAT up to the balance which has not

been expensed starting from January 1, 2001.

VAT is applied on the provision of interconnection services between telecommunications compa-

nies starting from January 1, 2000 in accordance with the circular letter of the Director General of

Taxation No. SE-01/PJ.54/2000 dated January 19, 2000.

F-41







14. ACCRUED EXPENSES

1999 2000

Rp Rp

Postretirement beneÑt cost ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 272,650 371,603

Interest and bank charges ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 385,479 269,933

Salaries and employees bonuses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 103,551 72,652

General, administrative and marketingÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 93,427 64,024

Operation, maintenance and telecommunications servicesÏÏÏÏÏÏÏÏÏÏÏÏÏ 61,196 45,045

Others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 163,230 12,773

TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,079,533 836,030

15. LONG-TERM DEBT

Two-Step Loan Ì related party

The recognition of two-step loans (loans which were obtained by the Government of the Republic

of Indonesia from overseas banks and a consortium of contractors which are then on-loaned to the

Company) is based on Withdrawal Authorization (""WA'') or other similar documents issued by the

lenders. The loans entered into up to July 1994 were recorded and are payable in Rupiah based on the

exchange rate at the date of withdrawal. Loans entered into after July 1994 are payable in their original

currencies and any resulting foreign exchange gain or loss is borne by the Company.

The details of the two-step loans are as follows:

Interest RateCreditors (%) 1999 2000

RP Rp

Overseas banks ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3.10-13.91 7,875,346 9,239,333

Consortium of contractorsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3.20-14.53 443,341 431,835

TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,318,687 9,671,168

Current maturitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (674,679) (818,516)

Long-term portionÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,644,008 8,852,652

The loans originating from overseas banks are payable in various currencies except for

Rp 4,431,233 million in 1999 and Rp 4,048,905 million in 2000 which are payable in Rupiah. The loans

acquired are intended for and are attributable to the construction of certain property, plant and

equipment. The loans are payable in semi-annual installments and are due on various dates until 2025.

The loans originating from the consortium of contractors are payable in Japanese Yen except for

Rp 223,737 million in 1999 and Rp 196,947 million in 2000 which are payable in Rupiah. The loans

acquired are used to Ñnance the Company's second digital telephone exchange project. The loans are

payable in semi-annual installments and are due on various dates until 2015.

F-42







Each of the loans bears one of the following interest rates:

Ì Fixed rate.

Ì Average interest rate on 3-month term Bank Indonesia CertiÑcate during the last six-month

before the six-month period within which the installment falls due, plus 1%, the interest rate of

which is established by the Ministry of Finance through its periodic notice to the Company.

Ì Interest rate oÅered by lenders, plus 0.5%.

The annual interest rates charged on loans repayable in Rupiah range from 12.25% to 46.67% in

1999 and from 12.25% to 14.53% in 2000, on those repayable in U.S. Dollar range from 4% to 8.72% in

1999 and from 4% to 9.26% in 2000, and on those repayable in Japanese Yen range from 3.10% to 3.20%

in 1999 and 2000.

The unused portions of the credit facilities as of December 31, 2000 in U.S. Dollar, French Franc

and Japanese Yen amounted to U.S.$98,419 thousand, FRF 1,616 thousand and Í 5,931 million,

respectively.

The schedule of the required principal payments on the Company's long-term debt as of

December 31, 2000 is as follows:

Year 2000

Rp

2001ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 818,516





2006 Ó 2025ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,706,760

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9,671,168

Project Cost Payable

This account represents the Company's liabilities to a number of contractors, denominated in

various currencies, except for Rp 109,719 million in 1999 and Rp 81,803 million in 2000 which are

denominated in Rupiah. These liabilities arise from contractor billings which have not been paid for by

the lender through the ""two-step loans'' discussed above.

At December 31, 2000, project cost payable to related parties amounted to Rp 12,606 million.

F-43







16. CAPITAL STOCK

1999 and 2000

Percentage of TotalName of Stockholder Number of Shares Ownership (%) Paid-up Capital

Rp

Series A Dwiwarna share

State of the Republic of IndonesiaÏÏÏÏÏÏÏ 1 Ì Ì

Series B shares

State of the Republic of IndonesiaÏÏÏÏÏÏÏ 6,672,235,355 66.19 3,336,118

Public (below 5% each)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,407,764,284 33.81 1,703,882

TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10,079,999,640 100.00 5,040,000

At December 31, 2000, the Company's commissioners, directors, and employees owned a total of

24,210,919 Company's shares.

17. ADDITIONAL PAID-IN CAPITAL

1998 1999 2000

Rp Rp Rp

Proceeds from sale of 933,333,000 shares with par value of

Rp 2,050 per share through initial public oÅering in

1995ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,446,666 1,446,666 1,446,666

Capitalization into 746,666,640 series B shares in 1999 ÏÏÏÏ Ì (373,333) (373,333)

Balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,446,666 1,073,333 1,073,333

18. OPERATING REVENUES Ì TELEPHONE

1998 1999 2000

Rp Rp Rp

Local and domestic long-distance usage ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,902,565 3,570,891 4,097,093

Monthly subscription charges ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 683,273 799,074 887,355

Installation charges ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 105,854 68,277 75,382

Phone cardsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (2,065) (8,645) 34,426

OthersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 115,580 99,305 83,608

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,805,207 4,528,902 5,177,864

19. OPERATING REVENUES Ì REVENUE UNDER JOINT OPERATION SCHEME

1998 1999 2000

Rp Rp Rp

Minimum Telkom Revenues ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,433,436 1,452,912 1,556,699

Share in distributable KSO revenues ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 142,752 208,956 695,106

Amortization of unearned initial investor payments under

Joint Operation Scheme ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 15,349 15,349 15,349

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,591,537 1,677,217 2,267,154

F-44







Distributable KSO revenues represent the entire KSO revenues, net of MTR and operational

expenses of the KSO Units. These revenues are shared between the Company and the KSO Investors

based upon agreed percentages. Agreed percentages for revenue distribution between the Company

and KSO Investors for 1998 Ó 1999 and 2000 were 10%:90% and 30%:70%, respectively.

20. OPERATING REVENUES Ì OTHER TELECOMMUNICATIONS SERVICES

1998 1999 2000

Rp Rp Rp

Revenues under Revenue-Sharing Arrangements:

Net share in revenues earned under Revenue-Sharing

ArrangementsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 126,932 151,973 170,133

Amortization of unearned income under Revenue-Sharing

ArrangementsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 158,233 156,174 138,232

Leased lines ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 104,596 100,475 193,869

Satellite transponder leaseÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 208,270 215,790 183,255

Multimedia ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 24,596 35,407 65,164

Telex and telegram ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 16,899 13,078 7,498

Others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,219 19,143 51,055

TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 647,745 692,040 809,206

21. OPERATING EXPENSES Ì PERSONNEL

1998 1999 2000

Rp Rp Rp

Salaries and related allowances ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 359,376 519,444 635,015

Vacation pay, incentives and other allowances ÏÏÏÏÏÏÏÏÏÏÏÏ 137,980 159,208 236,594

Employee income tax ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 67,434 109,885 172,943

Net periodic postretirement beneÑt costÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 107,997 121,541 165,103

Net periodic pension cost ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 30,754 61,069 72,643

HousingÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 44,212 43,067 65,401

Medical ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 31,403 38,332 52,941

Others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 52,598 53,156 38,816

TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 831,754 1,105,702 1,439,456

F-45







22. OPERATING EXPENSES Ì OPERATION, MAINTENANCE AND

TELECOMMUNICATIONS SERVICES

1998 1999 2000

Rp Rp Rp

Distributors' and telephone kiosks' commissions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 107,396 242,909 372,258

Operation and maintenanceÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 192,334 227,413 309,596

Electricity, gas and water ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 76,998 75,821 102,935

Insurance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 29,301 40,783 92,280

Concession fees ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 42,971 52,028 50,467

Travel ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,754 7,346 11,029

Radio frequency usage charges ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,257 7,006 9,445

Franchise fee ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 12,146 6,695 6,255

Cost of phone cardsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,163 292 2,195

Year 2000 remediation cost ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9,534 142,702 1,228

OthersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 12,538 19,038 51,784

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 501,392 822,033 1,009,472

23. OPERATING EXPENSES Ì GENERAL AND ADMINISTRATIVE

1998 1999 2000

Rp Rp Rp

Provision for doubtful accounts and inventory obsolescence ÏÏÏÏÏÏÏÏÏÏÏ 97,223 161,973 278,960

Training, education and recruitment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 131,045 98,155 101,490

Collection expensesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 61,211 67,998 100,970

TravelÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 29,623 38,742 49,217

Security and screening ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 15,123 22,294 34,707

Research and development ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 12,347 12,598 33,110

Professional fees ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 28,054 10,177 30,748

Printing and stationery ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 25,167 24,963 26,700

Amortization of deferred stock issuance costsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 26,883 26,883 22,402

Meetings ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10,339 14,094 16,326

Others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 36,532 30,511 20,415

TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 473,547 508,388 715,045

24. INTEREST EXPENSE

1998 1999 2000

Rp Rp Rp

Interest expenseÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,097,480 1,620,730 879,283

Interest capitalized to property under construction ÏÏÏÏÏÏÏÏÏ (116,766) (133,300) (62,534)

Charged to current operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 980,714 1,487,430 816,749

F-46







25. OTHER INCOME (CHARGES) Ì OTHERS Ì NET

1998 1999 2000

Rp Rp Rp

Income from Ñnes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 69,606 69,966 95,650

RentalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 24,427 29,582 59,190

TrainingÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 11,801 14,600 36,088

RepairsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 20,992 24,455 28,003

Supporting facilities replacementÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9,699 18,739 22,259

Collection service revenueÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9,669 14,512 12,433

Others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 22,449 (58,221) 73,837


26. INCOME TAX

Tax expense of the Company and its subsidiary consists of the following:

1998 1999 2000Rp Rp Rp

Current tax ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 159,153 613,897 677,250

Deferred tax ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 96,629 163,150 228,954


Current Tax

A reconciliation between income before tax per consolidated statements of income and taxable

income is as follows:

1998 1999 2000

Rp Rp Rp

Income before tax per consolidated statements of income 1,424,452 2,962,713 3,458,376

Minority interest in subsidiary's income before tax ÏÏÏÏÏÏÏ Ì (18,680) (21,087)

Income before taxÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,424,452 2,944,033 3,437,289

Temporary diÅerences:

Provision for doubtful accounts ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 99,244 114,721 217,294

Provision for inventory obsolescenceÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (2,021) 47,252 61,666

Provision for decline in value of securitiesÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 90,000 18,856

Timing diÅerence of KSO Units ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,935 3,677 14,605

Amortization of deferred stock issuance costs ÏÏÏÏÏÏÏÏÏÏ 12,706 16,250 14,428

Equity in income of associated companies ÏÏÏÏÏÏÏÏÏÏÏÏÏ (7,124) (437,817) (356,575)

Depreciation of property, plant and equipment ÏÏÏÏÏÏÏÏ (330,233) (68,485) (349,114)

Gain on sale of property, plant and equipment ÏÏÏÏÏÏÏÏ (2,960) (78,322) (218,708)

Net periodic pension costs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (14,307) 45,062 (155,839)

Inventory written oÅ ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (11,473) (8,673) (3,992)

Amortization of landrights ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì (2,885) (894)

F-47







1998 1999 2000

Rp Rp Rp

Accounts receivable written oÅÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (47,289) (116,168) Ì

OthersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (23,575) Ì Ì

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (322,097) (395,388) (758,273)

Nondeductible expenses (nontaxable income):

Net periodic postretirement beneÑt cost ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 121,541 165,103

Depreciation of property, plant and equipment under

Revenue-Sharing Arrangements ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 135,414 104,161 97,381

Employees' beneÑts ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 25,203 26,166 32,048

Repairs and maintenance on leased land/buildings ÏÏÏÏÏ 7,569 14,297 28,462

Non-deductible expenses of KSO Units ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (5,300) 6,157 17,256

Tax penalty ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 52,150 16,703

Interest income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (595,952) (687,757) (631,646)

Amortization of unearned income on Revenue-Sharing

Arrangements ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (158,233) (156,174) (138,232)

Income from land/building rental ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (15,465) (29,412) (58,211)

OthersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 34,950 26,864 28,139


Taxable incomeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 530,541 2,026,638 2,236,019

The details of current tax expense and payable of the Company are as follows:

1998 1999 2000

Rp Rp Rp

Current tax expense ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 159,153 607,983 670,796

Less prepaid taxes

Income tax

Article 22 1,449 132 25

Article 23 8,798 14,006 14,283

Article 25 127,892 89,865 541,074


Current tax payable of the Company ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 21,014 503,980 115,414

Subsidary ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì 2,595


The taxable income and current tax payable of the Company and its subsidiary for 1999 are in

accordance with the corporate tax returns Ñled with the Tax Service OÇce.

In 2000, the Company received Tax Assessment Letters (SKP) from the Tax Service OÇce for its

corporate income tax for the years 1997 to 1999. The additional tax due was settled in December 2000

and the diÅerence between the recorded amount of tax liabilities/prepayments and the amount

assessed by the Tax Service OÇce was charged to current operations.

F-48







Deferred Tax

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

January 1, Movements December 31, Movements December 31,1999 for the Year 1999 for the Year 2000

Rp Rp Rp Rp Rp

Deferred tax assets:Allowance for doubtful

accountsÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 62,578 35,465 98,043 69,496 167,539Allowance for inventory

obsolescence ÏÏÏÏÏÏÏÏÏÏ 4,101 11,630 15,731 17,442 33,173Allowance for decline in

value of securities ÏÏÏÏÏ Ì 27,000 27,000 5,657 32,657Deferred stock issuance

costs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 2,848 2,848 4,328 7,176Accrued postretirement

beneÑt cost ÏÏÏÏÏÏÏÏÏÏÏ 80,143 (80,143) Ì Ì ÌOthers ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 208 (208) Ì Ì Ì

Total deferred tax assetsÏÏÏÏ 147,030 (3,408) 143,622 96,923 240,545

Deferred tax liabilities:Depreciation of property,

plant and equipment ÏÏ (1,347,784) (44,043) (1,391,827) (170,346) (1,562,173)Investment in shares of

stockÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (162,721) (140,014) (302,735) (111,469) (414,204)Net periodic pension

costs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,664 13,904 16,568 (46,818) (30,250)LandrightsÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì (865) (865) (268) (1,133)Deferred stock issuance

costs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (2,027) 2,027 Ì Ì Ì

Total deferred tax liabilities (1,509,868) (168,991) (1,678,859) (328,901) (2,007,760)

Net deferred tax liabilities ÏÏ (1,362,838) (172,399) (1,535,237) (231,978) (1,767,215)

A reconciliation between the total tax expense and the amounts computed by applying the

eÅective tax rates to income before tax is as follows:

1998 1999 2000

Rp Rp Rp

Income before tax per consolidated statements of income 1,424,452 2,962,713 3,458,376

Minority interest in subsidiary's income before tax ÏÏÏÏÏÏ Ì (18,680) (21,087)

Income before taxÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,424,452 2,944,033 3,437,289

F-49







1998 1999 2000

Rp Rp Rp

Tax expense at eÅective tax rates:

10% x Rp 25 millionÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (2) (2) (2)

15% x Rp 25 millionÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (4) (4) (4)

30% x Rp 1,424,402 million in 1998 Rp 2,943,983 million

in 1999 and Rp 3,437,239 million in 2000 ÏÏÏÏÏÏÏÏÏÏÏ (427,321) (883,195) (1,031,172)

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (427,327) (883,201) (1,031,178)

Tax eÅect of nontaxable income (nondeductible

expenses)

Interest income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 178,786 206,327 189,494

Amortization of unearned income under Revenue-

Sharing ArrangementsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 47,470 46,852 41,470

Income from land/building rental ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,640 8,824 17,463

Postretirement beneÑt costÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì (36,462) (49,531)

Depreciation of property, plant and equipment under

Revenue-Sharing Arrangements ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (40,624) (31,248) (29,215)

Employee beneÑts ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (7,561) (7,850) (9,615)

Repairs and maintenance on leased land/buildings ÏÏÏÏ (2,271) (4,289) (8,538)

Nondeductible expenses of KSO Units ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,590 (1,847) (5,177)

Tax penalty ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì (15,645) (5,011)

OthersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (10,485) (53,174) (8,441)

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 171,545 111,488 132,899

Tax expense of the Company ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (255,782) (771,713) (898,279)

Tax expense of the SubsidiaryÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì (5,334) (7,925)

Total Tax Expense ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (255,782) (777,047) (906,204)

27. BASIC EARNINGS PER SHARE

Net income per share is computed by dividing net income with the average number of shares

outstanding during the year, totaling 9,333,333,000, 9,644,472,563 and 10,079,999,640 shares in 1998,

1999 and 2000, respectively.

The Company does not have dilutive potential ordinary shares.

28. CASH DIVIDENDS AND GENERAL RESERVE

‚ Based on the Annual General Meeting of Stockholders as stated in notarial deed No. 25 dated

April 17, 1998 of Notary A. Partomuan Pohan, S.H., LL.M., the stockholders approved to

distribute cash dividends for 1997 amounting to Rp 452,445 million or Rp 48.48 per share, and

appropriate Rp 11,311 million for general reserve.



distribute cash dividends for 1998 amounting to Rp 475,863 million or Rp 50.99 per share, and

appropriate Rp 11,897 million for general reserve.

F-50









distribute cash dividends for 1999 amounting to Rp 1,086,161 million or Rp 107.76 per share,

and appropriate Rp 21,723 million for general reserve.

29. PENSION PLAN

The Company provides a deÑned beneÑt pension plan to its employees under which pension

beneÑts to be paid are based on the employee's latest basic salary and number of years of service. The

plan is managed by Dana Pensiun Telkom, which deed of establishment was approved by the Minister

of Finance of the Republic of Indonesia in his decision letter No. S.199/MK.11/1984 dated April 23,

1984.

The Pension Fund's main sources of funds are the contributions from the employees and the

Company. The employees' contribution is 8.4% of basic salary. Any remaining amount required to fund

the plan is contributed by the Company.

To increase the pension beneÑts, the Company has increased the basic salaries of active employees

by 50%, starting from August 1, 2000.

EÅective January 1, 1999, the Company increased the pension beneÑts of pensioners by 15%, and

the basic salary of active employees which is the basis for the computation of pension beneÑts, in

accordance with the resolutions at the Annual General Meeting of Stockholders and at the Board of

Commissioners' Meeting held in 1999.

The Company's contributions to the pension fund amounted to Rp 44,709 million,

Rp 16,007 million and Rp 228,482 million for the years ended December 31, 1998, 1999 and 2000,

respectively.

The composition of the net periodic pension cost charged to income for the Company's plan

(excluding those of KSO Units) is as follows:

1998 1999 2000

Rp Rp Rp

Return on plan assetsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (141,206) (223,671) (279,302)

Interest cost ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 144,821 181,504 216,869

Amortization and deferral ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 11,287 76,427 90,068

Increase in amortization of prior service cost ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,630 10,802 23,806

Service cost (beneÑts earned during the year)ÏÏÏÏÏÏÏÏÏÏÏÏÏ 12,222 16,007 21,202

Net periodic pension cost ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 30,754 61,069 72,643

The pension cost attributable to the KSO Units amounted to Rp 12,291 million, Rp 15,786 million

and Rp 18,241 million in 1998, 1999 and 2000, respectively.

F-51







The funded status of the plan as of December 31, 1998, 1999 and 2000 is as follows:

1998 1999 2000

Rp Rp Rp

Vested beneÑts ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,057,611 1,252,802 1,594,178

Accumulated beneÑt obligationÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,188,450 1,386,172 1,790,885

Projected beneÑt obligation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1,452,888) (1,634,356) (2,209,592)

Plan assets at fair value ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,518,948 1,819,798 2,091,721

Projected beneÑt obligation (in excess of ) less than

plan assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 66,060 185,442 (117,871)

Unamortized net amount resulting from changes in

plan experience and actuarial assumptionsÏÏÏÏÏÏÏÏÏÏ (572,130) (733,110) (363,314)

Unamortized prior service cost ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 141,677 166,847 284,838

Unrecognized net obligation at the date of initial

application of PSAK No. 24ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 292,061 263,427 234,792

Prepaid (accrued) pension cost ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (72,332) (117,394) 38,445

Plan assets consist mainly of Rupiah time deposits.

The unrecognized net obligation at the date of initial application of PSAK No. 24 is amortized over

the remaining average future working lives of active employees, i.e., 17.2 years, starting from January 1,

1992.

The actuarial valuations for the pension plan as of December 31, 1998, 1999 and 2000 were

prepared by PT Watson Wyatt Purbajaga, an independent actuary in association with Watson Wyatt

Worldwide, using the ""projected-unit-credit'' method with the following assumptions:

1998 1999 2000

% % %

Discount rate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 12.5 13 13

Expected long-term rate of return on Pension Fund assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13 15 13

Salary growth rate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6 6 6

DeÑned beneÑts growth rate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 15 Ì

30. POSTRETIREMENT BENEFITS

The Company provides a postretirement health care plan for all of its pensioners who have

worked for over 20 years and to their eligible dependents. The requirement of working for over 20 years

does not apply to the employees who retired prior to June 3, 1995. However, the employees hired by

the Company starting from November 1, 1995 will no longer be entitled to this plan. The plan is

managed by Yayasan Kesehatan Pegawai Telkom (""YKPT'').

The Company accounts for the cost of the beneÑts over the working lives of its employees based

on actuarial computations similar to those provided by Statement of Financial Accounting Standards

No. 106, ""Employers' Accounting for Postretirement BeneÑts Other than Pensions'' (""SFAS 106''), of

U.S. GAAP. The transition obligation at the date of initial application of SFAS 106 is Rp 524,250 million

and is being amortized over 20 years starting January 1, 1995.

F-52







The Company's contributions to YKPT amounted to Rp 111,498 million, Rp 150,216 million and


The composition of the net periodic postretirement beneÑt cost (excluding those of KSO Units) is

as follows:

1998 1999 2000

Rp Rp Rp

Return on plan assetsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì (15,481) (39,773)

Service costÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,452 11,519 16,082

Interest cost ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 78,254 104,212 149,765

Amortization of unrecognized transition obligationÏÏÏÏÏÏÏÏÏÏÏÏ 26,213 26,213 26,213

Amortization of prior service cost ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (4,922) (4,922) 12,816

Net periodic postretirement beneÑt costÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 107,997 121,541 165,103

Cost of postretirement beneÑts attributable to the KSO Units amounted to Rp 9,055 million,

Rp 12,126 million and Rp 16,704 million in 1998, 1999 and 2000, respectively.

The actuarial valuations for the postretirement beneÑt plan as of December 31, 1998, 1999 and 2000

were prepared by PT Watson Wyatt Purbajaga, an independent actuary in association with Watson

Wyatt Worldwide, using the ""projected-unit-credit'' method with the following assumptions:

1998 1999 2000

% % %

Discount rate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 12.5 12.5 13

Expected long-term rate of return of YKPT assetsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 12.5 13

Cost trend rateÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10-15 10-15 10

The funded status of the plan as of December 31, 1998, 1999 and 2000 is as follows:

1998 1999 2000

Rp Rp Rp

Accumulated postretirement beneÑt obligation

Retirees ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 458,130 628,294 713,646

Other fully eligible plan participants ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 39,884 73,466 116,807

Other active plan participants ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 348,532 510,441 551,411

TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 846,546 1,212,201 1,381,864

Plan assets at fair value ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (126,189) (257,761) (317,694)

Unfunded postretirement beneÑt obligation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 720,357 954,440 1,064,170

Unrecognized prior service cost ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 58,025 53,103 48,180

Unrecognized transition obligation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (419,398) (393,185) (366,972)

Unrecognized net loss ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (68,603) (341,708) (373,775)

Accrued postretirement beneÑt cost ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 290,381 272,650 371,603

F-53







A 1% increase in the cost trend rate would increase service cost and interest cost, and accumulated

postretirement beneÑt obligation as of December 31, 1998, 1999 and 2000 as follows:

1998 1999 2000

Rp Rp Rp

Service cost and interest costÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 116,811 155,685 222,659

Accumulated postretirement beneÑt obligation ÏÏÏÏÏÏÏÏÏÏÏ 1,011,494 1,453,738 1,619,262

31. TRANSACTIONS WITH RELATED PARTIES

In the normal course of business, the Company entered into transactions with related parties. The

following transactions with related parties have been conducted under terms and conditions which are

the same if these were conducted with third parties:

a. Government of the Republic of Indonesia

‚ The Company obtained ""two-step loans'' from the Government of the Republic of Indonesia,

the Company's majority shareholder (Note 15).

‚ The Company pays concession fees for telecommunications services provided and radio

frequency usage charges to the Ministry of Communications (formerly, Ministry of Tourism,

Post and Telecommunications) of the Republic of Indonesia. Concession fees amounted to

Rp 42,971 million, Rp 52,028 million and Rp 50,467 million in 1998, 1999 and 2000, respectively,

while radio frequency usage charges amounted to Rp 7,257 million, Rp 7,006 million and


b. Indonesian Satellite Corporation Tbk (""Indosat'')

The Company has an agreement with Indosat, a majority state-owned international telecommuni-

cations services company, for the provision of international telecommunications services to the public.

The principal matters covered by the agreement are as follows:

‚ The Company provides local network for the customers to make or receive international calls.

Indosat provides the international network for the customers, except for certain border towns,

as determined by the Director General of Post and Telecommunications of the Republic of

Indonesia. The international telecommunications services include telephone, telex, telegram,

packet switched data network, television, teleprinter, Alternate Voice/Data Telecommunica-

tions (AVD), hotline and teleconferencing.

‚ The Company and Indosat are responsible for their respective telecommunications facilities.

‚ Customer billing and collection, except for leased lines and public phones located at the

international gateways, are handled by the Company.

‚ The Company receives compensation for the services provided in the Ñrst item above, based on

the interconnection tariÅ determined by the Minister of Tourism, Post and Telecommunications

of the Republic of Indonesia (Note 35).

The Company's compensation relating to leased lines/channel services, such as IBS, AVD and

printer is calculated at 15% of Indosat's revenues from such services.

F-54







Indosat also leases circuits from the Company to link Jakarta and Medan.

The Company has been handling customer billing and collection for Indosat. Indosat is gradually

taking over the activities and performing its own direct billing and collection. The Company receives

compensation from Indosat computed at 1% of the collections made by the Company starting

January 1, 1995, plus the billing process expenses which are Ñxed at a certain amount per record.

Interconnection revenues earned from Indosat were Rp 169,262 million, Rp 259,136 million and


c. Satelindo

The Company has an agreement with Satelindo, an associated company (Note 9), whereby both

parties agreed, among other matters, on the following:

‚ Interconnection of the Company's PSTN with Satelindo's international gateway exchange,

enabling the Company's customers to make outgoing or receive incoming international calls

through Satelindo's international gateway exchange.

‚ Billings for the international telecommunications services used by domestic customers through

Satelindo's international gateway exchange will be handled by the Company.

The Company also has an agreement with Satelindo for the interconnection of Satelindo's GSM

mobile cellular telecommunications network with the Company's PSTN, enabling the Company's

customers to make outgoing calls to or receive incoming calls from Satelindo's customers.

Interconnection revenues earned from Satelindo were Rp 114,644 million, Rp 213,803 million, and


The Company leases international circuits from Satelindo. Payment made in relation to the lease

expense amounted to Rp 19,611 million in 2000.

Based on an agreement entered into among the Company, PT Bimagraha Telekomindo and

Indosat in 1993, at the time of Satelindo's establishment, the Company agreed to transfer to Satelindo,

its so-called B2P, B2R and B4 Palapa satellites and other assets relating to the Company's satellite

control station located in Jakarta. These transfers are to be covered in a separate agreement between

Satelindo and the Company. The separate agreement regarding the transfers of these satellites and

other assets has not been made. In November 2000, the Company entered into an agreement with a

third party, in which the Company agreed to sell the B2R Satellite, or to lease the said satellite to such

third party if the sale is not consummated. In the Extraordinary Meeting of Satelindo's Stockholders on

November 29, 2000, a representative was appointed by Satelindo's Stockholders to discuss the satellite

issue with the Company.

In 1994, the Company transferred to Satelindo the right to use a parcel of Company-owned land

located in Jakarta which had been previously leased to Telekomindo, an associated company (Note 9).

Based on the transfer agreement, Satelindo is given the right to use the land for 30 years and can apply

for the right to build properties thereon. The ownership of the land is retained by the Company.

Satelindo agreed to pay Rp 43,023 million to the Company for the thirty-year right. Satelindo paid

Rp 17,214 million in 1995 and the remaining Rp 25,809 million has not been paid since then, as the

Utilization Right (""Hak Pengelolaan Lahan'') on the land could not be delivered as provided in the

F-55







transfer agreement. In 2000, the Company and Satelindo agreed on an alternative solution which will

beneÑt both parties, by accounting the above payment as lease consideration.

d. The Company provides telecommunication services to Government agencies.

e. The Company has entered into agreements with Government agencies and associated companies

(Note 9) Ì Lintasarta, CSM and Patrakomindo for utilization of the Company's Palapa B4 and

Telkom 1 satellite transponders or frequency channels. Revenues earned from these transactions

amounted to Rp 86,305 million in 2000.

f. The Company provides leased lines to associated companies (Note 9) Ì Telkomsel, CSM,

Lintasarta, Satelindo, Komselindo, Excelcomindo Pratama, Mobisel, Metrosel and PSN which can

be used by the associated companies permanently or temporarily for telephone, telegraph, data,

telex, facsimile or other telecommunications services. Revenue earned from these transactions

amounted to Rp 81,983 million in 2000.

g. The Company provides a data communication network system for Lintasarta, and operates

telemetry tracking and command station for PSN, both of which are associated companies

(Note 9). Revenues earned by the Company from these transactions amounted to

Rp 5,699 million, Rp 11,978 million and Rp 16,384 million in 1998, 1999 and 2000, respectively.

h. The Company purchases property and equipment including construction and installation services

from a number of related parties. These related parties include PT Industri Telekomunikasi

Indonesia, Lembaga Elektronika Nasional, PT Adhi Karya, PT Pembangunan Perumahan, PT

Nindya Karya, PT Boma Bisma Indra, PT Wijaya Karya, PT Waskita Karya which all are state-

owned companies, PT Gratika which is an associated company of Dana Pensiun Telkom,

Telekomindo and PT Bangtelindo which are associated companies (Note 9), and Koperasi

Pegawai Telekomunikasi, a related party cooperative. Purchases made from these related parties

amounted to Rp 213,892 million, Rp 84,320 million and Rp 104,669 million in 1998, 1999 and 2000,

respectively.

i. The Company carries insurance (on its property, plant and equipment against property losses and

on employees' social security) obtained from PT Asuransi Jasa Indonesia, PT Asuransi Tenaga

Kerja and PT Persero Asuransi Jiwasraya, which are state-owned insurance companies. Insurance

premiums amounted to approximately Rp 41,227 million, Rp 44,448 million and Rp 100,716 million

in 1998, 1999 and 2000, respectively.

j. The Company maintains current accounts and time deposits (Notes 4 and 5) in several state-

owned banks. In addition, some of those banks are appointed as collecting agents for the

Company. The Company also has an investment in mutual funds managed by Danareksa, a state-

owned company (Note 5).

k. The Company has revenue-sharing arrangements with Telekomindo, an associated company

(Note 9). Revenues earned under these arrangements amounted to Rp 36,428 million,

Rp 29,096 million and Rp 93,348 million in 1998, 1999 and 2000, respectively.

l. The Company leases buildings, purchases materials and construction services, and utilizes

maintenance and cleaning services from Dana Pensiun Telkom and PT Sandhy Putra Makmur, a

subsidiary of Yayasan Sandikara Putra Telkom Ì a foundation managed by Dharma Wanita

F-56







Telkom. Total charges from these transactions amounted to Rp 2,755 million, Rp 12,780 million

and Rp 35,103 million in 1998, 1999 and 2000, respectively.

m. The Company purchased encoded phone cards from Perusahaan Umum Percetakan Uang

Republik Indonesia, a state-owned company. Expenses arising from this transaction amounted to

Rp 634 million, Rp 292 million, and Rp 2,195 million in 1998, 1999 and 2000, respectively.

n. In 1991, the Company granted loans to Koperasi Telekomunikasi (""Koptel'') amounting to

Rp 1,000 million, repayable by 2001, to support Koptel's activities in providing housing loans to

the Company's employees. The balance of the loans amounted to Rp 300 million as of

December 31, 1998, 1999 and 2000.

o. The Company earned interconnection revenues from Telkomsel, Komselindo, Excelcomindo

Pratama, Metrosel, Mobisel, Ratelindo, BBT and Patrakomindo, which are associated companies

(Note 9) , totaling Rp 265,906 million, Rp 407,133 million and Rp 630,730 million in 1998, 1999 and

2000, respectively.

p. In addition to revenues earned under the KSO Agreement (Notes 19 and 33), the Company also

earned income from buildings rental, repairs and maintenance services and training services,

provided to the KSO Units, amounting to Rp 96,393 million, Rp 28,114 million and Rp 95,227

million in 1998, 1999 and 2000, respectively.

q. The Company provides a deÑned beneÑt pension plan and a postretirement health care plan for

its pensioners through Dana Pensiun Telkom and YKPT, respectively (Notes 29 and 30).

The Company has also seconded a number of its employees to related parties to assist them in

operating their business. In addition, the Company provided certain of its related parties with the right

to use its buildings free of charge.

Presented below are balances of accounts with related parties:

a. Cash and cash equivalents (Note 4)

b. Temporary investments (Note 5)

c. Trade accounts receivable (Note 6)

1999 2000

Rp Rp

d. Other accounts receivable

Government agenciesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 31,251

State-owned banks (interest)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 16,394 28,591

KSO Units ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,048 5,822

Employees ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 635 517

Others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 34,662 1,851

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 53,739 68,032

F-57







1999 2000

Rp Rp

e. Advances and others

PT Industri Telekomunikasi IndonesiaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 127

Others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 328 Ì

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 328 127

f. Trade accounts payable

PT Satelit Palapa Indonesia ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 45,770 77,987

PT Industri Telekomunikasi IndonesiaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9,933 46,092

PT Indonesian Satellite CorporationÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 45,667 41,235

PT Excelcomindo Pratama ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 34,663 38,849

Government agenciesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 27,968 33,913

KSO Units ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 148,069 21,578

PT Waskita Karya ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 267 18,238

PT Telekomindo Primabhakti ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,652 18,113

PT Telekomunikasi Selular ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 10,358

Koperasi Pegawai TelkomÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9,961 4,390

Lembaga Elektronika Nasional ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 523 486

PT Boma Bisma Indra ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,842 354

PT Bangtelindo ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 886 63

PT Sandhy Putra Makmur ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 593 51



g. Other accounts payable (to employees) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 19,039 12,678

h. Accrued expense

Yayasan Kesehatan Pegawai Telkom ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 272,650 371,603

Government agenciesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 421,499 269,933

Employees ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 103,551 72,652

PT Asuransi Jasa Indonesia ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,636 5,442

Dana Pensiun Telkom ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 110,961 Ì



i. Advances from customers and Government agenciesÏÏÏÏÏÏÏÏ 7,455 33,305

j. Long-term debt (Note 15).

32. SEGMENT INFORMATION

The Company and its subsidiary are presently engaged in providing local and domestic long-

distance telephone services and other services (including among others mobile cellular telecommunica-

F-58







tions, leased lines, telex, transponder, satellite, and Very Small Aperture Terminal Ì VSAT) as well as

providing ancillary services.

Telephone services and other telecommunications services are provided by the regional divisions

and the network division which operate all over Indonesia.

Management presents segment information based on geographical location of the customers.

a. Revenues

1999 2000

% Rp % Rp

Telecommunications services

KSO I Chairman's OÇce (Sumatera) ÏÏÏÏÏÏÏÏÏÏÏÏ 6.91 538,270 7.44 697,313

Regional Division II (Jakarta) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 49.09 3,824,338 45.62 4,277,403

KSO III Chairman's OÇce (West Java) ÏÏÏÏÏÏÏÏÏÏ 4.51 351,309 4.56 427,228

KSO IV Chairman's OÇce (Central Java) ÏÏÏÏÏÏÏÏ 4.56 355,032 4.95 464,200

Regional Division V (East Java) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 20.75 1,616,502 20.28 1,901,384

KSO VI Chairman's OÇce (Kalimantan) ÏÏÏÏÏÏÏÏÏ 2.16 168,550 2.57 240,819

KSO VII Chairman's OÇce (East Indonesia)ÏÏÏÏÏÏ 3.39 263,762 4.63 433,839

OthersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8.48 660,537 9.05 848,763

Ancillary services(*) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.15 11,909 0.90 84,757

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 100.00 7,790,209 100.00 9,375,706

(*) Including those of Head OÇce which has signiÑcant cash and cash equivalents, and short-term as well as long-term

investments which are not allocated to each segment.

b. Segment Result

1999 2000

% Rp % Rp


KSO I Chairman's OÇce (Sumatera) ÏÏÏÏÏÏÏÏÏÏ 12.11 356,567 13.00 524,916

Regional Division II (Jakarta) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 74.34 2,187,984 60.04 2,424,154

KSO III Chairman's OÇce (West Java) ÏÏÏÏÏÏÏÏ 7.91 232,920 7.50 302,896

KSO IV Chairman's OÇce (Central Java) ÏÏÏÏÏÏ 8.86 260,766 9.61 388,072

Regional Division V (East Java) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 27.17 799,707 22.73 917,744

KSO VI Chairman's OÇce (Kalimantan) ÏÏÏÏÏÏÏ 3.57 105,124 4.49 181,207

KSO VII Chairman's OÇce (East Indonesia)ÏÏÏÏ 4.16 122,457 7.40 298,801

OthersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1.31) (38,557) 6.04 243,646

Ancillary services(*) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (36.81) (1,083,505) (30.81) (1,244,113)

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 100.00 2,943,463 100.00 4,037,323

Other income (charges) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 32,698 (565,248)

Total before eliminations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,976,161 3,472,075

EliminationsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (13,448) (13,699)

Income Before Tax ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,962,713 3,458,376

F-59







c. Total Assets

1999 2000

% Rp % Rp


KSO I Chairman's OÇce (Sumatera) ÏÏÏÏÏÏÏÏÏÏ 4.74 1,250,094 3.96 1,146,500

Regional Division II (Jakarta) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 24.31 6,408,478 21.34 6,169,731

KSO III Chairman's OÇce (West Java) ÏÏÏÏÏÏÏÏ 2.39 631,162 2.56 739,283

KSO IV Chairman's OÇce (Central Java) ÏÏÏÏÏÏ 1.83 482,322 1.53 443,852

Regional Division V (East Java) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 11.71 3,085,385 11.19 3,237,095

KSO VI Chairman's OÇce (Kalimantan) ÏÏÏÏÏÏÏ 1.60 422,358 1.34 386,826

KSO VII Chairman's OÇce (East Indonesia)ÏÏÏÏ 3.44 905,590 2.82 815,219

OthersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8.50 2,241,348 12.13 3,506,693

Ancillary services(*) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 41.48 10,934,150 43.13 12,473,089

Total before elimination ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 100.00 26,360,887 100.00 28,918,288

Elimination ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (31,233) (38,067)

Total after eliminationÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 26,329,654 28,880,221

(*) Including those of Head OÇce which has signiÑcant cash and cash equivalents, and short-term as well as long-term

investments which are not allocated to each segment.

33. JOINT OPERATION SCHEME (""KSO'')

In 1995, the Company and Ñve investors (PT Pramindo Ikat Nusantara, PT AriaWest International,

PT Mitra Global Telekomunikasi Indonesia, PT Dayamitra Telekomunikasi, and PT Bukaka Singtel

International) entered into agreements on Joint Operation Scheme (""KSO'') and KSO construction

agreements for the provision of telecommunications facilities and services for the Sixth Five-Year

Development Plan (""Repelita VI'') of the Republic of Indonesia. The Ñve investors have conducted the

development and have taken over the operation of the basic Ñxed telecommunications facilities and

services in Ñve of the Company's seven regional divisions.

The agreements contain, among others, the following provisions:

‚ The Company's existing assets in the Ñve regional divisions, together with the assets to be built

under the KSO construction agreements, will be managed, operated and maintained by each

KSO Unit, in the name of the Company and for and on behalf of the Company and the KSO

Investors, commencing from January 1, 1996 to December 31, 2010 (""KSO period'').

‚ In the aggregate, a minimum of two million lines are to be planned, designed, engineered,

Ñnanced and constructed by the KSO Investors during a 3-year period beginning from

January 1, 1996, except for Regional Division VI Ì Kalimantan which started on April 1, 1996.

‚ The Company will receive two principal types of payments from each KSO Unit during the

term of the KSO, namely Minimum Telkom Revenues (""MTR'') and share in distributable KSO

revenues, and a one-time initial investor payment from each of the KSO Investors.

F-60







The initial investor payments totaling U.S.$105 million or equivalent to Rp 230,239 million were

made by the KSO Investors to the Company as compensation for their rights to participate in

developing and operating telecommunications facilities in the KSO regional divisions.

MTR represents an annual amount guaranteed by the KSO Investors and is required to be

supported by bank guarantees. The MTR is payable on a monthly basis in Ñxed amounts which may

increase every year during the KSO period. A further monthly adjustment for the MTR is possible

depending upon KSO Investor's performance under its commitment to install additional lines.

Distributable KSO revenues are the entire KSO revenues, net of MTR and operational expenses of

the KSO Units, as provided in the KSO agreements. These revenues are shared between the Company

and the KSO Investors based on percentages agreed upon. The Company receives 35% of the

distributable KSO revenues from Regional Division VII, and 30% from the other KSO Regional

Divisions.

At the end of the KSO period, all rights, title and interests of the KSO Investor in existing

installations and all work in progress, inventories, equipment, materials, plans and data relating to any

approved additional new installation projects then uncompleted or in respect of which Interconnection

Tests have not then been successfully completed, shall be sold and transferred to the Company without

requiring any further action by any party, upon payment by the Company to the KSO Investor of one

hundred Rupiah, plus:

a. the net present value, if any, of the KSO Investor's projected share in distributable KSO

revenues, from the additional new installations forming part of the KSO system on the termination

date, over the balance of the applicable payback periods.

b. an amount to be agreed upon between the Company and the KSO Investor as fair

compensation in respect of any uncompleted or untested additional new installations transferred

as referred to above.

The depreciation of the Rupiah against the U.S. Dollar (Note 39), which started in the second

semester of 1997, has impacted the Ñnancial condition of the KSO Investors. In response to the

economic condition, the KSO Investors and the Company have signed a Memorandum of Understand-

ing (MOU) to amend certain provisions of the KSO agreements (Note 36c). For the years 1998 and

1999, the Company had adopted the provisions of the MOU. Starting November 1999, the Company

and the KSO Investors have begun to renegotiate the terms of the KSO agreements in conjunction with

the changing environment and the expiration of certain terms in the MOU. Among others, it was

agreed to return to most of the provisions of the original KSO agreements starting January 1, 2000.

Discussions between the Company and the KSO Investors concerning the KSO problems have

arrived at various alternatives. The Company views that the continuation of the original KSO

agreements, with some amendments, is the most suitable to the Company and has the minimum

impact on the Company's Ñnancial position and result of operations. Termination of the KSO

agreements could have signiÑcant impact as the Company would require signiÑcant funding to buy the

KSO assets. Pending completion of the negotiations, the long-term solution of the KSO problems and

its eÅect on the Company's Ñnancial condition and operational activities cannot be determined.

F-61







34. REVENUE-SHARING AGREEMENTS WITH SEVERAL INVESTORS

The Company has entered into separate agreements with several investors under Revenue-Sharing

Arrangements (""RSA'') to develop Ñxed lines, analog mobile cellular lines, public card-phone booths

(including their maintenance), and related supporting facilities.

Under the RSA, the investors Ñnance the costs incurred in developing telecommunications

facilities. Upon completion of the construction, the Company manages and operates the facilities. The

investors legally retain the rights to the property, plant and equipment constructed by them during the

revenue-sharing periods. At the end of each revenue-sharing period, the investors transfer the

ownership of the facilities to the Company.

The Company bears the cost of repairs and maintenance of the facilities during the revenue-

sharing period. The revenue-sharing period is determined on the basis of the internal rates of return

agreed by both parties. The internal rates of return range from 24% to 30%, and the revenue-sharing

periods vary from one year and seven months to Ñfteen years from the start of commercial operations.

The revenue-sharing period can be either Ñxed regardless of full investment returns to the investors, or

extended to ensure full investment returns to the investors. The revenue-sharing periods end on

various dates until 2009.

The revenues earned from the customers in the form of line installation charges are fully for the

account of the investors. The revenues from outgoing telephone pulse and monthly subscription

charges are shared between the investors and the Company at the proportion of 60:40 or 70:30 (in favor

of the investors) depending on the agreements. Certain additional arrangements are made for revenues

earned from analog mobile cellular, whereby revenues from international outgoing pulses are fully

owned by the Company. Revenues earned from pay phone cards during the revenue-sharing period

are shared at the proportion of 60:40 (in favor of the investors) based on the recorded usage of pulses.

The investors' share of revenues amounted to Rp 527,504 million, Rp 527,708 million and


The Company has no plans to enter into any additional revenue-sharing arrangements for Ñxed

line telephone services.

35. INTERCONNECTION TARIFFS AND TARIFF ARRANGEMENTS

TariÅs for telecommunications services are based on decrees issued by the Ministry of Communi-

cations, formerly, Ministry of Tourism, Post and Telecommunications (""MTPT'').

Fixed Line Subscribers' TariÅs

TariÅs for Ñxed line subscribers are imposed for network access and usage. Access charges consist

of a one-time installation charge and a monthly subscription charge. Usage charges are measured in

pulses and classiÑed as either local or domestic long-distance. The tariÅs depend on call distance, call

duration, the time of day, the day of the week and holidays.

The telephone tariÅs are regulated under decree No. KM.9/1999 dated January 29, 1999 and letter

No. 47/SM/III/Phb-99 dated March 1, 1999 of the Ministry of Communications, which came into eÅect

on February 1, 1999.

F-62







Interconnection TariÅs

Interconnection tariÅs regulate the sharing of long-distance interconnection calls between the

Company and other cellular operators.

The current interconnection tariÅ is governed under MTPT Decree No. KM.46/PR.301/MPPT-98

(""Decree No. 46'') dated February 27, 1998 which came into eÅect on April 1, 1998.

This decree has superseded decree No. KM.108/PR.301/MPPT-94 and the amendment thereto,

No. KM.5/PR.301/MPPT-97, which had been in operation since December 28, 1994 and January 1,

1997, respectively.

Interconnection tariÅs based on Decree No. 46 are as follows:

a. International interconnection with Public Switched Telephone Network (""PSTN'')

The international interconnection tariÅ is calculated by applying the following charges to

successful incoming and outgoing calls to the Company's network:

TariÅ

Access charge ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Rp 500 per call

Usage chargeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Rp 330 per paid minutes

Universal Service Obligation (USO)ÏÏÏÏÏÏÏÏÏÏ Rp 750 per call

On June 11, 1999, based on Decree No. KM.37/1999 of the Ministry of Communications, eÅective

December 1, 1998 the above international interconnection tariÅs were revised as follows:

TariÅ

Access charge ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Rp 850 per call

Usage chargeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Rp 550 per paid minutes

Universal Service Obligation (USO)ÏÏÏÏÏÏÏÏÏÏ Rp 750 per call

Indosat is exempted from paying the USO until December 31, 2004, while the USO

charges payable by Satelindo are paid directly to the MTPT/Ministry of Communications.

b. Mobile cellular interconnection with the PSTN

1. Local Calls

For local calls from a mobile cellular network to PSTN, the cellular operator pays the

Company 50% of the prevailing tariÅ for local calls. For local calls from PSTN to a cellular

network, the Company charges its subscribers the applicable local call tariÅ plus an air

time charge, and pays the cellular operator the air time charge.

2. Domestic Long-distance Calls

Decree No. 46 provides tariÅs which vary among long-distance carriers, and indicates

that it is possible for long-distance calls to be carried by more than one long-distance

network. Pursuant to this decree, for long-distance calls which originate from the PSTN,

the Company is entitled to retain a portion of the prevailing long-distance tariÅ, which

portion ranges from 40% of the tariÅ, in cases where the entire long-distance portion is

carried by one cellular operator and delivered to another, and up to 85%, in cases where

the entire long-distance portion is carried by the PSTN.

F-63







For long-distance calls which originate from a cellular operator, the Company is

entitled to retain a portion of the prevailing long-distance tariÅ, which portion ranges

from 25% of the tariÅ, in cases where the entire long-distance portion is carried by a

cellular operator and the call is delivered to a cellular subscriber, and up to 85%, in cases

where the entire long-distance portion is carried by the PSTN and the call is delivered to

a PSTN subscriber.

Interconnection tariÅs with mobile cellular networks, including USO, are determined based on the

duration of the call. Access and usage charges for international telecommunications traÇc interconnec-

tion with telecommunications networks of more than one domestic carrier are to be shared proportion-

ately with each carrier involved, which proportion is determined by the MTPT.

Interconnection tariÅs between a Ñxed cellular network and the PSTN is regulated under MTPT

letter No. KU.506/1/1/MPPT-97 dated January 2, 1997 and letter No. KU.506/4/6/MPPT-97 dated

July 21, 1997. Currently, Ratelindo and the Company are the only operators of Ñxed cellular networks.

For Ñxed cellular interconnection with the PSTN, the ""sender-keeps-all'' basis for local calls is applied

and for domestic long-distance calls which originate from Ratelindo's network and transit to PSTN, the

Company receives 35% of Ratelindo's revenue for such calls. For domestic long-distance calls that

originate from PSTN, the Company retains 65% as its revenue for such calls.

The Directorate General of Post and Telecommunications is currently preparing new interconnec-

tion tariÅs in connection with the issuance of Law No. 36 year 1999 and Government Regula-

tion No. 52 year 2000.

36. COMMITMENTS

a. Letters of Comfort

The Company issued support in the form of letters of comfort to certain lenders of Komselindo

with respect to a U.S.$100 million loan in 1997 and to lenders of Mobisel, with respect to a

U.S.$60 million loan in 1996, which are due in 2002 and 2001, respectively. Komselindo and Mobisel are

both associated companies. The letters of comfort provide that the Company agrees to use its best

eÅorts to cause these associated companies to perform all their obligations under the loan agreements.

b. Capital Expenditures

As of December 31, 2000, the amounts of capital expenditures committed under contractual

arrangements, principally relating to procurement and installation of switching equipment, transmis-

sion equipment and cable network, are as follows:

Amounts inForeign Currencies Equivalent

Currencies (in thousands) in Rupiah

RupiahÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 684,416

United States Dollar ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 50,822 491,701

Japanese Yen ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,094,530 92,276

French FrancÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,140 7,064

Swedish KronaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 431 439

TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,275,896

F-64







c. Memorandum of Understanding

On June 5, 1998, the Company and all of the KSO Investors entered into a Memorandum of

Understanding (""MOU'') agreeing to amend certain provisions of the KSO agreements, including

among others:

‚ The percentage of sharing of the distributable KSO revenues for 1998 and 1999 shall become

10% and 90% for the Company and the KSO Investors, respectively.

‚ The minimum number of access line units to be installed by the KSO Investors up to March 31,

1999 shall be 1,268,000 lines.

‚ The incremental rate of the MTR will not exceed 1% in 1998 and 1.5% in 1999 for the KSO

agreements with the Investors that have MTR incremental factors.

‚ ""Operating Capital Expenditures'' in each of the KSO Units will be shared between the

Company and the respective KSO Investors in proportion to the previous year's share in the

annual net income of the respective KSO Units, starting from 1999.

‚ The cancellation of the requirement to maintain a bank guarantee in respect of MTR.

In 1998 and 1999, the Company adopted the above provisions of the MOU. Starting Novem-

ber 1999, the Company and the KSO Investors have begun to renegotiate the terms of the KSO

agreements in conjunction with the changing environment and the expiration of certain terms in the

MOU. Commencing January 1, 2000, the Company has recorded the MTR and distributable KSO

Revenues based on the terms originally agreed under the KSO agreements.

d. Agreement with PT AriaWest International (""AriaWest'')

In 1997, the Company appointed AriaWest (investor of KSO III) to conduct a feasibility study on

the business of providing multimedia services for a cost of Rp 14,000 million. If the business were

determined to be feasible, the Company and AriaWest agreed to establish a joint venture in conducting

the business and such payment would be considered as the Company's capital contribution in the joint

venture. However, due to the deteriorating economic conditions which began since the middle of 1997,

the joint venture company was not feasible to be established. The Company has recognized the

Rp 14,000 million as an expense in 1998. The amount was fully settled in 2000.

37. CONTINGENCIES

a. Claims from AriaWest

AriaWest, an investor in a Joint Operation Scheme, has recently asserted against the Company

several claims under Indonesian law. These putative claims assert (i) AriaWest's entitlements, pursuant

to the Good Faith Interim Solutions Agreement dated September 12, 2000, to withhold certain

Minimum Telkom Revenue (""MTR'') due to the Company under the KSO Agreement; (ii) AriaWest

entitlements, pursuant to the KSO Agreement, to set-oÅs against MTR due to the Company under the

KSO Agreement; and (iii) breach of the KSO Agreement by the Company. AriaWest has not asserted

these claims in any legal proceeding; instead, it has asserted them only through written correspondence

addressed to the Company and the Government of Indonesia, as well as verbally during the course of

F-65







discussions between the parties. In its correspondence, AriaWest expressly has purported to reserve its

rights to alter or modify at any time its allegations or putative claims against the Company.

Given the preliminary nature of AriaWest's putative claims, it is impossible to predict at this time

whether any legal proceeding will ensue as a result of such claims.

b. Litigation

Except for claims from AriaWest, the Company is not currently a party to and, in recent years, has

not been a party to, any material legal or arbitration proceedings or disputes pending or threatened

against the Company or with respect to its properties which are material, or which have had or which

may have, a signiÑcant eÅect on the Company's Ñnancial position.

38. ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

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

1999 2000

Foreign ForeignCurrencies Equivalent Currencies Equivalent

(in thousands) in Rupiah (in thousands) in Rupiah

Assets

Cash and cash equivalents

Related parties

United States DollarÏÏÏÏÏÏÏÏÏÏÏÏ 47,843 338,251 44,470 425,815

French Franc ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2 2 4,631 6,298

Swedish Krona ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì 289 291

Great Britain Pound sterlingÏÏÏÏÏ 6 74 3 40

Japanese Yen ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 11 1 172 14

Deutsche Mark ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì 0.47 2

Singapore Dollar ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 33 142 Ì Ì

Third parties

United States DollarÏÏÏÏÏÏÏÏÏÏÏÏ 512 3,617 1,614 15,464

Temporary investments

Third parties

United States DollarÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì 300 2,879

Trade accounts receivable

Related parties


Third parties


Singapore Dollar ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì 1 6

Malaysian Ringgit ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì 2 5

Other accounts receivable

Related parties

United States DollarÏÏÏÏÏÏÏÏÏÏÏÏ 728 5,150 1,481 14,181

Third parties

United States DollarÏÏÏÏÏÏÏÏÏÏÏÏ 236 1,666 4 38

F-66







1999 2000



Advances and others

United States DollarÏÏÏÏÏÏÏÏÏÏÏÏ 7,079 31,037 Ì Ì

French Franc ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9,578 5,641 Ì Ì

Japanese Yen ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 210,627 4,875 Ì Ì

Australian DollarÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 510 1,004 Ì Ì

Total Assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 431,344 594,113

Liabilities

Trade accounts payable

Third parties

United States DollarÏÏÏÏÏÏÏÏÏÏÏÏ 925 6,614 702 6,790

French Franc ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,964 4,350 18,971 26,070

Japanese Yen ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì 1,264,150 106,576

Deutsche Mark ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì 230 1,058

Accrued expenses



Swedish Krona ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì 21 22

Great Britain Pound sterlingÏÏÏÏÏ Ì Ì 61 881

Japanese Yen ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 38,462 2,685 82,389 6,946

Deutsche Mark ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì 2 7

Singapore Dollar ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì 118 658

Australian DollarÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì 29 155

Netherlands GuilderÏÏÏÏÏÏÏÏÏÏÏÏ 955 3,119 507 2,075

Advances from customers and

suppliers Ì third parties

United States DollarÏÏÏÏÏÏÏÏÏÏÏÏ 1,555 11,116 938 9,076

Current maturities of long-term

debt Ì related party

United States DollarÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì 31,567 305,412

French Franc ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì 18,824 25,868

Japanese Yen ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì 371,483 31,318

Netherlands GuilderÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì 3,044 12,455

Long-term debt

Related parties

United States DollarÏÏÏÏÏÏÏÏÏÏÏÏ 375,715 2,686,365 361,639 3,498,858


Japanese Yen ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 12,912,553 901,521 15,487,259 1,305,675

Netherlands GuilderÏÏÏÏÏÏÏÏÏÏÏÏ 22,831 74,601 16,743 68,505

F-67







1999 2000



Third parties



Swedish Krona ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 297 250 866 883

Japanese Yen ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,736,463 121,235 1,967,149 165,809

Deutsche Mark ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,879 6,915 40 184

Australian DollarÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,881 13,450 Ì Ì

Netherlands GuilderÏÏÏÏÏÏÏÏÏÏÏÏ 972 3,176 36 149

Total Liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,663,154 6,320,784

Net Liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (4,231,810) (5,726,671)

The conversion rates used by the Company on December 31, 1999 and 2000 and the prevailing

rates on February 28, 2001 are as follows (in full Rupiah amount):

December 31,

1999 2000 February 28, 2001

Foreign Currency Buying Selling Buying Selling Buying Selling

United States Dollar ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,070.0 7,150.0 9,575.0 9,675.0 9,825.0 9,840.0

French Franc ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,085.0 1,097.4 1,359.8 1,374.2 1,378.4 1,380.7

Great Britain Pound sterling ÏÏÏÏÏÏÏÏÏÏÏ 11,425.1 11,558.0 14,303.1 14,462.2 14,185.3 14,216.8

Japanese YenÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 69.0 69.8 83.4 84.3 84.3 84.5

Deutsche Mark ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,638.7 3,680.8 4,560.4 4,609.1 4,622.7 4,630.8

Singapore DollarÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,242.4 4,293.0 5,521.9 5,532.8 5,640.1 5,650.3

Australian Dollar ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,609.6 4,669.0 5,306.5 5,371.6 5,166.0 5,183.7

Netherlands Guilder ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,229.5 3,267.5 4,047.6 4,091.6 4,102.8 4,110.8

Swedish Krona ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 830.4 840.8 1,007.0 1,018.6 997.6 999.2

Malaysian Ringgit ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,860.4 1,881.7 2,519.7 2,546.1 2,585.5 2,589.5

On the basis of the rates on February 28, 2001, the Company's foreign exchange loss on foreign

currency liabilities, net of foreign currency assets as of December 31, 2000 is increased by

Rp 63,910 million.

39. ECONOMIC CONDITION

Since the middle of 1997, many Asia PaciÑc countries including Indonesia have been experiencing

adverse economic condition mainly resulting from currency depreciation in the region, the principal

consequences of which have been an extreme lack of liquidity and high interest and foreign exchange

rates. The crisis has also involved declining prices in shares of stock, tightening of available credit, and

stoppage or postponement of certain construction projects. Foreign exchange rates and prices of shares

of stock are still highly volatile. However, interest rates and inÖation have declined since 1999.

High exchange and interest rates have increased the cost of funds, as well as the amount of debt to

be serviced by the Company, the subsidiary, and the associated companies. The depreciation of the

F-68







Rupiah has also impacted the Ñnancial condition of the KSO Investors. The slowing down of economic

activities has aÅected the growth of the Company's subscribers.

In response to these economic events, the management has adopted more stringent criteria in the

evaluation of investment activities. The management will continue to adopt this measure and will

initiate a cost-cutting program as well as pursuing project developments using the ""turnkey'' system,

hence not all risks incurred are borne by the Company.

Management has also taken proactive measures in resolving the KSO issues and in managing

investments in associated companies eÅectively and selectively by utilizing the services of international

legal and Ñnancial consultants.

Recovery of the economy to a sound and stable condition is dependent on the Ñscal, monetary and

other measures being taken by the Government, actions which are beyond the Company and its

subsidiary's control, to achieve economic recovery. It is not possible to determine the future eÅect the

economic condition may have on the Company and its subsidiary's liquidity and earnings, including

the eÅect Öowing through from their investors, customers and suppliers.

40. RECLASSIFICATION OF ACCOUNTS

To conform with the 2000 consolidated Ñnancial statement presentation, certain accounts in the

1999 consolidated Ñnancial statement are reclassiÑed.

Following is a summary of signiÑcant accounts in the 1999 consolidated Ñnancial statements before

and after the reclassiÑcations:

1999

As PreviouslyAs Restated Reported

Rp Rp

Additional paid-in capital ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,073,333 1,504,055

DiÅerence due to change of equity in associated companiesÏÏÏÏÏÏ 430,722 162,299

Translation adjustment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 162,299 Ì

41. OTHER INFORMATION

On June 20, 2000, the Minister of Manpower of the Republic of Indonesia issued Decree No.

Kep-150/Men/2000 on the Settlement of Work Dismissal and Determination of Separation, Gratuity

and Compensation Payments by Companies. This decree requires companies to pay their employees

termination, gratuity and compensation beneÑts in case of employment separation.

As provided in Note 29, the Company has a deÑned beneÑt pension plan to its employees. To date,

the Company does not have any plan for mass employment terminations in the foreseeable future,

which will signiÑcantly aÅect its Ñnancial position and operational activities.

In relation with this decree, the Company has accrued the estimated cost of annual voluntary

resignation of its employees which was recorded as part of personnel-related expense.

F-69







42. SUBSEQUENT EVENTS

a. From January 1 to February 28, 2001, the Company made an installment payment

amounting to Rp 192,496 million, U.S.$9,127 thousand, FRF 4,618 thousand, and NLG 2,273

thousand on the two-step loans from related party (Note 15).

b. On February 15, 2001, the Company and Indosat signed a Memorandum of Understanding

(""MOU'') relating to a series of transactions concerning their ownership interest in Telkomsel,

Satelindo and Lintasarta. In addition, the Company agreed to sell to Indosat all the Company's

assets used under the KSO Agreement (Regional Division IV) with PT Mitra Global

Telekomunikasi Indonesia (""MGTI'') and will assign such KSO Agreement with MGTI to Indosat

(altogether referred to as ""KSO IV Assets'').

Under the MOU, the following transactions are to occur between the Company and Indosat:

1. The Company will acquire Indosat's 35% interest in Telkomsel for U.S.$945 million.

2. Indosat will acquire the following from the Company:

‚ The Company's 22.5% interest in Satelindo for U.S.$186 million

‚ The Company's 37.66% interest in Lintasarta for U.S.$38 million

‚ The KSO IV Assets for U.S.$375 million

These transactions are subject to certain conditions, including regulatory and corporate approvals.

It is anticipated that both the Company and Indosat will seek shareholder approval by the end of

April 2001.

43. SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES

FOLLOWED BY THE COMPANY AND ITS SUBSIDIARY AND U.S. GENERALLY

ACCEPTED ACCOUNTING PRINCIPLES

The consolidated Ñnancial statements have been prepared in accordance with Indonesian GAAP

which diÅer in certain respects from U.S. GAAP.

The signiÑcant diÅerences are reÖected in the approximations provided in Note 44 and arise due to

the items discussed in the following paragraphs:

a. Pension

The Company, for purposes of Indonesian GAAP, uses a method of accounting for pensions that is

substantially consistent with the requirements of U.S. GAAP.

As stated in its pension plan regulations, the Company does not provide regular pension increases.

However, in 1994 and 1998 (eÅective January 1, 1999), the Company made increases in pension

beneÑts for pensioners, which were considered as prior service costs. Based on PSAK No. 24, the prior

service costs attributable to the increases in pension beneÑts for pensioners in 1994 and 1999, were

directly charged to expense in those years. Under SFAS 87, such prior service costs should be deferred

and amortized systematically over the estimated average future working periods of active employees

(14.4 years in 1999 and 15.9 years in 1994).

F-70







b. Revaluation of Property, Plant and Equipment

While Indonesian GAAP do not generally allow companies to recognize increases in the value of

property, plant and equipment that occur subsequent to acquisition, an exception is provided for

revaluation made in accordance with Government regulation. The Company revalued its property,

plant and equipment that were used in operations as of January 1, 1979 and January 1, 1987. Under U.S.

GAAP, property, plant and equipment may not be stated at more than their historical acquisition cost.

c. Stock Issuance Costs

Under Indonesian GAAP, stock issuance costs are deferred and amortized over a certain period of

time. Under U.S. GAAP, the stock issuance costs are oÅset against the proceeds from the stock

issuance.

EÅective 2000, the Capital Market Supervisory Agency (Bapepam) requires that stock issuance

costs be recorded as part of additional paid-in capital.

d. Revenue-Sharing Arrangements

Under Indonesian GAAP, property, plant and equipment built by an investor under revenue-

sharing arrangements are recognized as property, plant and equipment under revenue-sharing arrange-

ments in the books of the party to whom ownership in such properties shall be transferred at the end of

the revenue-sharing period, with a corresponding initial credit to unearned income. The property, plant

and equipment are depreciated over their useful lives, while the unearned income is amortized over the

revenue-sharing period. The Company records its share of the revenues earned on a net basis.

Under U.S. GAAP, the accounting for revenue-sharing arrangements depends on the substance of

the arrangements. When there is no guaranteed investment return to the investors, the accounting

treatment is similar to that under Indonesian GAAP. When there is a guaranteed investment return to

the investors based on a certain rate of return, the assets under revenue-sharing arrangements are

recorded and, an obligation under revenue-sharing arrangements is correspondingly recognized. A

portion of the investor's share in revenue is recorded as interest expense based on such rate of return

and the remaining portion is treated as a reduction of the obligation. Revenues earned are recorded on

a gross basis. This accounting treatment also applies to changes during the revenue-sharing period that

aÅect the characteristics of the commitment.

e. Foreign Exchange DiÅerential on Property under Construction

Under Indonesian GAAP, starting 1997, foreign exchange diÅerential resulting from loans used to

Ñnance property under construction should be capitalized. Capitalization of foreign exchange diÅeren-

tial ceases when the construction is substantially completed and the constructed property is ready for

its intended use. Under U.S. GAAP, foreign exchange diÅerential should be charged to current

operations.

F-71







44. RECONCILIATION OF NET INCOME AND EQUITY DETERMINED UNDER

INDONESIAN AND U.S. GAAP

The following is a summary of the signiÑcant adjustments to net income for the years ended

December 31, 1998, 1999 and 2000 and to equity as of December 31, 1998, 1999 and 2000 which would

be required if U.S. GAAP had been applied, instead of Indonesian GAAP, in the consolidated Ñnancial

statements:

1998 1999 2000

Rp Rp Rp

Net income according to the consolidated statements of

income prepared under Indonesian GAAPÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,168,670 2,172,321 2,539,011

U.S. GAAP adjustments Ì increase (decrease) due to:

Capitalization of foreign exchange diÅerential Ì net of

related depreciation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (319,697) 109,869 (133,666)

Equity in net gain (loss) of associated companies ÏÏÏÏÏÏ (71,748) 74,705 2,389

PensionsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (5,323) 70,531 94,636

Amortization of deferred stock issuance costs ÏÏÏÏÏÏÏÏÏÏ 26,883 26,883 22,402

Revenue-sharing arrangements ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9,132 11,909 (23,347)

Revaluation of property, plant and equipment ÏÏÏÏÏÏÏÏÏ 4,095 4,095 4,095

Income tax eÅect on U.S. GAAP adjustments ÏÏÏÏÏÏÏÏÏÏ 112,085 (84,986) (8,336)

Net adjustments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (244,573) 213,006 (41,827)

Approximate net income in accordance with U.S. GAAP ÏÏ 924,097 2,385,327 2,497,184

Net income per share Ì in full Rupiah amount ÏÏÏÏÏÏÏÏÏÏ 99.01 247.33 247.74

Net income per ADS (20 B shares per ADS) Ì in full

Rupiah amountÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,980.21 4,946.62 4,954.73

1999 2000

Rp Rp

Equity according to the consolidated balance sheets prepared under

Indonesian GAAP ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 12,224,309 13,687,643

U.S. GAAP adjustments Ì increase (decrease) due to:

PensionsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 44,537 139,173

Revaluation of property, plant and equipment:

IncrementÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (664,974) (664,974)

Accumulated depreciation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 652,855 656,950

Capitalization of foreign exchange diÅerential Ì net of related

depreciationÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (507,999) (641,665)

Revenue-sharing arrangements ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (361,325) (384,672)

Deferred stock issuance costsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (22,402) Ì

Equity in net income of associated companiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (16,503) (14,114)

Deferred tax liabilities on U.S. GAAP adjustmentsÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 256,288 247,952

Net adjustments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (619,523) (661,350)

Approximate stockholders' equity in accordance with U.S. GAAP ÏÏ 11,604,786 13,026,293

F-72







With regard to the consolidated balance sheets and consolidated statements of income, the

following signiÑcant captions determined under U.S. GAAP would have been:

1999 2000

Rp Rp

Consolidated balance sheetsCurrent assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,612,138 9,108,966Total assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 25,770,630 28,216,417Current liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,348,566 3,250,456Total liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 14,165,844 15,190,124

Consolidated statements of incomeOperating incomeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,276,137 4,353,373

45. ADDITIONAL FINANCIAL STATEMENT DISCLOSURES REQUIRED BY U.S. GAAP

AND THE U.S. SEC

The following information is presented on the basis of U.S. GAAP:

a. Income Tax

The reconciliation between the expected income tax provision in accordance with U.S. GAAP andthe actual provision for income tax recorded in accordance with U.S. GAAP is as follows:

1998 1999 2000

Rp Rp Rp

Approximate income before tax in accordance with U.S.GAAP ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,067,794 3,260,705 3,424,885

Deduct minority interest in Subsidiary's income before tax Ì (18,680) (21,087)

Income before provision for tax after minority interest ÏÏÏÏ 1,067,794 3,242,025 3,403,798

Expected income tax in accordance with U.S. GAAP atstatutory tax ratesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 320,329 972,599 1,021,131

EÅect of permanent diÅerences at the enacted maximumtax rate (30%):Net periodic postretirement beneÑt cost ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 116,605 49,531Employee beneÑts ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,561 7,850 9,615Permanent diÅerences of the KSO Units ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1,589) 1,848 5,177Interest income which was already subjected to Ñnal tax (178,639) (206,327) (189,494)Revenue-sharing arrangements ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (2,640) (10,723) (10,330)Deferred stock issuance costs(*)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (8,065) (8,065) (6,721)Revaluation of property, plant and equipment(*) ÏÏÏÏÏÏ (1,229) (1,229) (1,229)OtherÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,969 (15,859) 28,935


Subsidiary's provision for income tax ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 5,334 7,925

Provision for income tax in accordance with U.S. GAAP ÏÏ 143,697 862,033 914,540

(*) The tax eÅects of the stock issuance costs and revaluation of property, plant and equipment are oÅset against stockholders'

equity for U.S. GAAP purposes.

F-73







BeneÑts enjoyed by pensioners fall under the category of beneÑts in kind which are non-

deductible expenses under Indonesian tax laws.

b. Fair Value of Financial Instruments

The following methods and assumptions are used to estimate the fair value of each class of

Ñnancial instruments:

Cash and cash equivalents and temporary investments

The carrying amount approximates fair value because of the short-term nature of the instruments.

Long-term debt Ì related party Ì less current maturities

The fair value of these Ñnancial instruments are estimated on the basis of the discounted value of

future cash Öows expected to be paid, considering rates of interest at which the Company could borrow

as of the respective balance sheet dates.

For purposes of estimating the fair value of the long-term debt, the Company has used the Rupiah

borrowing rates of 26.36% and 14.09%, the average U.S. Dollar borrowing rate of 6.8% and 7.32% and

the respective average borrowing rates for the debt in other currencies, which represent the average

rates for 1999 and 2000, respectively, prior to the onset of the economic diÇculties (Note 39). Under

the current environment, an estimate of the interest rates as of a point in time, given the signiÑcance of

the Company's debt and the general unavailability of funds, is not possible. For one percentage point

increase in the aboveÓmentioned borrowing rates, the fair value of the Company's long-term debt at

December 31, 2000 would decrease by Rp 425,803 million.

The estimated fair values of the Company and its subsidiary's Ñnancial instruments are as follows:

Carrying Amount Fair Value

Rp Rp

1999:

Cash and cash equivalents ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,597,537 3,597,537

Temporary investments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,319,535 1,319,535

Long-term debt Ì related party Ì net of current maturities ÏÏÏÏ 7,644,008 5,853,430

2000:

Cash and cash equivalents ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,542,174 3,542,174

Temporary investments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,870,990 3,870,990

Long-term debt Ì related party Ì net of current maturities ÏÏÏÏ 8,852,652 7,458,658

The methods and assumptions followed to disclose the fair value are inherently judgmental and

involve various limitations, including the following:

‚ Fair values presented do not take into consideration the eÅect of future currency Öuctuations.

‚ Estimated fair values are not necessarily indicative of the amounts that the Company and its

subsidiary would record upon disposal/termination of the Ñnancial instruments.

F-74







c. Research and Development

Research and development expenditures, as determined under U.S. GAAP, amounted to approxi-

mately Rp 12,347 million, Rp 12,598 million and Rp 33,110 million in 1998, 1999 and 2000, respectively.

d. Valuation and Qualifying Accounts

The following summarizes the activities in the valuation and qualifying accounts:

AdditionsBalance atBeginning (Charged to Cost Unrealized Balance at

of Year and Expenses) Loss Deductions End of Year

Rp Rp Rp Rp Rp

1999:

Unrealized loss on decline in market

value of marketable securitiesÏÏÏÏÏÏ 707 Ì 159 707 159

Allowance for doubtful accounts


Related parties ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 48,437 6,371 Ì 24,349 30,459

Third partiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 143,148 125,557 Ì 64,886 203,819

Allowance for inventory obsolescence 13,351 47,252 Ì 8,674 51,929

2000:

Unrealized loss on decline in market

value of marketable securitiesÏÏÏÏÏÏ 159 Ì 6 Ì 165

Allowance for doubtful accounts


Related parties ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 30,459 137,210 Ì 167,669

Third partiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 203,819 76,243 Ì 93,460 186,602

Allowance for inventory obsolescence 51,929 Ì Ì 28,610 23,319

e. Risks and Uncertainties

The preparation of Ñnancial statements in conformity with generally accepted accounting princi-

ples requires management to make estimates and assumptions that aÅect the reported amounts of

assets and liabilities at the date of the Ñnancial statements and the reported amounts of revenues and

expenses during the reporting period. Actual results could be diÅerent from these estimates.

f. Derivative Financial Transactions

There are no derivative contracts outstanding as of December 31, 2000.

Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instru-

ments and Hedging Activities, is eÅective for all Ñscal years beginning after June 15, 2000. SFAS 133, as

amended, establishes accounting and reporting standards for derivative instruments, including certain

derivative instruments embedded in other contracts and for hedging activities. Under SFAS 133, certain

contracts that were not formerly considered derivatives may now meet the deÑnition of a derivative.

The Company will adopt SFAS 133 eÅective January 1, 2001. Management does not expect the

F-75







adoption of SFAS 133 to have a signiÑcant impact on the Ñnancial position, results of operations, or

cash Öows of the Company.

g. Comprehensive Income

Comprehensive income Ì net of tax, as determined under U.S. GAAP in 1998, 1999 and 2000

amounted to Rp 1,077,193 million, Rp 2,405,394 million and Rp 2,507,668 million, respectively.

Adjustments to 1999 and 2000 net income to arrive at comprehensive income represent the increase

in investment as a result of foreign currency translation of associated companies, changes of equity in

associated companies and unrealized loss on decline in value of securities.

In 1998, the adjustment represented the increase in investment as a result of the change in

reporting currency to U.S. Dollar of two associated companies.

h. General Price Level Financial Information

Indonesia has experienced a cumulative inÖation rate of approximately 98% for the three years

ended December 31, 2000. As a result, the currency in which the Company and its subsidiary report, the

Indonesian Rupiah, is considered a currency in a hyperinÖationary economy in accordance with U.S.

GAAP.

The Company and its subsidiary's consolidated Ñnancial statements, prepared in accordance with

Indonesian GAAP, do not include any adjustments to consider the eÅects of changing prices.

In accordance with regulations of the United States Securities and Exchange Commission, the

following supplemental Ñnancial information is provided to approximate the eÅects of changing prices

upon the Company and its subsidiary's Ñnancial position and results of operations. In presenting the

following information, the Company and its subsidiary's are utilizing the historical cost/constant

currency methodology and are applying it to the consolidated Ñnancial statements prepared in

accordance with Indonesian GAAP, eliminating the eÅects of the revaluation of property, plant and

equipment in 1979 and 1987. In presenting comparative amounts for 1999, the restated Ñnancial

information has been adjusted to present such information in terms of the measuring unit at

December 31, 2000.

1999 2000

Rp Rp

Current monetary assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,644,488 8,873,920

Inventories and other current assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 591,761 245,221

Total current assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,236,249 9,119,141

Property, plant and equipment and other assetsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 42,257,563 39,824,424

Total Assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 49,493,812 48,943,565

F-76







1999 2000

Rp Rp

Current monetary liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,564,526 3,224,463

Other current liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 147,205 172,640

Total current liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,711,731 3,397,103

Long-term debt and other noncurrent liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 14,163,703 14,231,118

Minority interest in net assets of subsidiaryÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 33,140 39,999

Equity ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 31,585,238 31,275,345

Total Liabilities and Equity ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 49,493,812 48,943,565

Operating revenues ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,871,776 10,023,827

Operating expenses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (2,817,976) (3,460,729)

Depreciation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (4,206,718) (4,490,988)

Other income (expense)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (310,387) (715,255)

Tax expenseÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (858,156) (946,677)

Gain on net monetary liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 132,176 437,442

Minority interest in net income of subsidiary ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (14,738) (13,749)

Net Income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 795,977 833,871

F-77

SIGNATURES

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, as amended, the

Registrant hereby certiÑes that it meets all of the requirements for Ñling on Form 20-F and that it has

duly caused this annual report to be signed on its behalf by the undersigned, there unto duly

authorized, in Jakarta, on the 19th day of March, 2001.

PERUSAHAAN PERSEROAN (PERSERO) P.T.

TELEKOMUNIKASI INDONESIA Tbk.

By:

MUHAMMAD NAZIF

President Director

MESSAGE FROM THE CHAIRMAN OF THE BOARD

Indonesia's telecommunications industry has been undergoing a signiÑcant transformation since

the promulgation of Telecommunication Law No. 36/1999 in September 1999 which comes into eÅect

on September 8, 2000. The law has marked the end of telecommunications monopoly in Indonesia, and

has exposed TELKOM full competition in its business engagement. This may constitute pressures as

well as challenges to the Company in grasping opportunities to improve its performance in all aspects. I

believe, however, that as incumbent operator with long standing stature, TELKOM has been well

prepared for the new circumstances and is poised to take advantages of the new competitive

environment.

Amidst the changing telecommunication business environment and the impact of monetary crisis

engulÑng Indonesia since mid 1997, TELKOM recorded a successful performance in the year 2000. The

performance, which is presented in detail in this report, reÖects a positive continuous growth during

the last Ñve years with a compound annual growth rate in operating revenues and operating income of

16,6 per cent and 17.1 per cent respectively.

However, in the year 2000, TELKOM has been facing a number of problems to be resolved such as

KSO (joint operation scheme) commitment, cross shareholding and joint shareholdings in several

associated companies. Nevertheless, being a company with convincing fundamental infrastructure,

competent employees, and long standing experiences, TELKOM will be capable to compete and

become the winner through proper setting of its business strategy, including allocation and utilization

of its resources.

As TELKOM faces full competitive environment in all business lines and in order to cope with

increasing pressures and totally diÅerent nature of competition from the past, the Company has to

improve its competence to fulÑll market requirements, by implementing competence-based human

resources management, as well as creating new business opportunities.

The new vision provides the Company with crystal clear direction for improvement through the

establishment of strategic platforms and strategic policies, which eventually lead to increasing company

value in all aspects.

After all, I would like to express my gratitude for the support extended by the shareholders, the

management team, employees, customers, partners and others, who have unceasingly encouraged

TELKOM to achieve its performance targets in 2000. We are conÑdent that with God's blessing we will

be able to achieve more in the future.

Bandung, 19 March 2001

BACELIUS RURU

Chairman of the Board

MESSAGE FROM THE PRESIDENT DIRECTOR TO SHAREHOLDERS

Dear Shareholders,

The year 2000 was Öourished by the change in regulatory aspect suggesting that the industry will

see dynamic changes where only the most competitive, Öexible and eÇcient company can adapt and

survive. TELKOM is fortunate to have experiences of operating in the demanding and burgeoning

telecommunications services and network providers. This will stand us in good stead as we prepare for

even more intense market competition in Indonesia.

Although Ñxed-line and related plain ordinary telephone services currently remain the core of

TELKOM's business, yet we are aware, that transformation of telecommunication industry will enter

into the convergent process of the formerly separated information service and communication service.

TELKOM is currently entering into InfoCom business.

In terms of internal initiatives, the year 2000 has been noticed as a year of consolidated eÅort in

preparing the business foundations for pre-empting the competition and grasping opportunities ahead,

by redeÑning strategies related to business areas, human resource management, business excellence,

capital expenditures, good corporate governance, and good corporate citizenship.

Although the domestic macro-economic condition was still similar to the previous year as the

continuing impact of the monetary crisis, TELKOM has successfully passed the year 2000 with a good

Ñnancial outcome as reÖected in the balance sheets and statement of income of the year 2000. This

achievement was the result of serious eÅorts and committed attitude to sustain the Company's growth

combined with potential support from the customers.

TELKOM's net income for the year 2000 was Rp 2,539.0 billion, up by 16.9 per cent, and earning

before interest, tax, depreciation and amortization (EBITDA) was Rp 6,125.1 billion or an increase by

15.4 per cent compared to the previous year.

Operating revenues increased by 20.4 per cent to Rp 9,375.7 billion, reÖecting a continuing demand

for TELKOM's services and improved levels of customer service, despite increasing foreign exchange

pressures on our margins. In addition the growth of operating expenses could be reduced below the

growth of operating revenues. However, the depreciation of Rupiah as well as the increase in interest

expense has negatively signiÑcantly impacted the Company net income.

It is noticed that the increase in revenue was achieved in an environment of unresolved KSO's

resolution, business restructuring, and the issue of earlier termination of exclusivity right.

We also report that the Company could maintain its position as one of the major contributors to

the Government with total contribution of Rp 1,454 million, which includes dividend for Ñscal year

1999, taxes and liabilities.

On the other hand, during 2000 TELKOM shares price at the stock exchange both domestic and

overseas suÅered a gradual decline along with the decline of the Jakarta Composite Index. As a matter

of fact, major investors considered the country risk has been mounting as riots and unrests are recurring

in the country, resulting in the security, socio-economic and political instability, which by all means

posed a signiÑcant eÅect to the investment decision during the year 2000.

Our response to the challenges was reÖected in the setting of strategic policies through the

establishment of seven business projects in 2000 covering Enterprise Business, Mobile Communica-

tions, Cable TV, Calling Card and Pay-phone, Intelligent Network, Voice over Internet Protocol, and

Business to Business.

We believe our strategic platforms will match the dynamics of a more competitive market. As the

Company simultaneously continues with the transformation of corporate culture, we wish to become a

highly competitive and leading company applying state-of-the-art technology as well as user friendly,

which is always adaptive to customer and community needs as a part of the overall eÅorts to

consistently build up the Company value.

Bandung, 19 March 2001

MUHAMMAD NAZIF

President Director and CEO


PT TELEKOMUNIKASI INDONESIA Tbk.

(""PT TELKOM'')

NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS 2001

NOTICE IS HEREBY GIVEN that the Extraordinary General Meeting of Shareholders (""EGMS'') and Annual

General Meeting of Shareholders (""AGMS'') 2001 of Perusahaan Perseroan (Persero) PT Telekomunikasi

Indonesia Tbk (""PT TELKOM'' or the ""Company'') will be held on May 10th, 2001 at 09:00 a.m. Jakarta Time, at

Aula Pangeran Kuningan Room, Gedung Grha Citra Caraka, 1st Floor, Jl. Jend. Gatot Subroto No. 52,

Jakarta 12710 Ì Indonesia, to consider if thought Ñt, to pass the following resolutions of the Company:

EXTRAORDINARY GENERAL MEETING OF SHAREHOLDERS

1. Approval relating to the transactions with Perusahaan Perseroan (Persero) PT Indonesian Satellite Corporation

Tbk. (""Indosat''), involving a material transaction and conÖict of interests:

a. Acquisition by TELKOM of 35.0% of the issued and fully paid shares of PT Telekomunikasi Selular by owned

by Indosat;

b. Sale by TELKOM of 22.5% of the issued and fully paid shares of PT Satelit Palapa Indonesia to Indosat;

c. Sale by TELKOM of 37,66% of the issued and fully paid shares of PT Aplikanusa Lintasarta, and all

outstanding convertible bonds (or shares issued upon from the conversion hereof) of PT Aplikanusa

Lintasarta held by TELKOM at their principal amount plus unpaid accrued interest, to Indosat; and

d. Acquisition by Indosat of all of TELKOM's rights, and transfer or novation of all of TELKOM's obligations,

under a joint operating agreement with PT Mitra Global Telekomunikasi Indonesia, together with all of

TELKOM's assets which TELKOM is required to make available for use by the joint operating scheme created

by the joint operating agreement;

2. Approval relating to the acquisition by TELKOM of 90.32% of the issued and fully paid shares of PT Daya Mitra

Telekomunikasi owned by PT Intidaya Sistelindomitra, Cable & Wireless plc and PT Mitracipta Sarananusa,

and the guarantee of certain debt obligations of PT Daya Mitra Telekomunikasi owed to Cable & Wireless plc,

by TELKOM, involving a material transaction.

ANNUAL GENERAL MEETING OF SHAREHOLDERS

1. Approval of the Company's Annual Report for the Ñnancial year 2000.

2. RatiÑcation of the Company audited consolidated Ñnancial statements for the Ñnancial year 2000 and acquittal

and discharge to the Board of Directors and Board of Commissioners.

3. Determination of the Ñnancial year 2000's proÑt utilization including distribution of dividend.

4. Appointment of Public Accountant to audit the Company records for 2001 Ñnancial year.

5. Approval of the change of the Company's Articles of Association with regard to (i) scope of Business in line

with the InfoCom Business; (ii) value of Material Transactions; (iii) adjustment of the duty and authority of the

Company's Board of Directors and Commissioners; and (iv) include terms regarding Independent

Commissioner.

6. Appointment of the Board of Commissioners for 2001 Ó 2004 along with the delegation of duty and authority.

7. Approval relating to the company's reorganization and business reconstruction principal.

8. Determination of the compensation for the Board of Directors and the Board of Commissioners in 2001 Ñnancial

year.

Those eligible to attend the EGMS and AGMS shall be shareholders of the Company whose names are

registered at the Company's ADS at 16:00 p.m. New York time on April 13th, 2001.

By Order of the Board of Directors

MUHAMMAD NAZIF

President Director

April, 2000

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