Telkom Indonesia (Persero) Tbk PT (TLK) 2003 Q2 法說會逐字稿

Good day everyone and welcome to the P.T. Telekomunikasi 2003 Half Year Results Conference Call. Today's call is being recorded. At this time, I would like to turn the conference over to your host, Mr. Rochiman Sukarno. Please go ahead.

Okay, thank you Greg (ph.). Good afternoon and thank you for joining the first half of the 2003 conference call. Ladies and gentlemen, all the participants of the conference call, this conference call will start with a speech by the President and Director upon the first half of 2003 financial and operational results. After the speech, the conference will continue with the question-and-answer session and will end at 5 p.m. Jakarta Time. The recording of the conference call will be available 1 hour from now and will last 24 hours thereafter. I am delighted to host Mr. Kristiono, TELKOM's President, Director, and Chief Executive Officer; Mr. Guntur Siregar, Director of Finance; Mr. Suryatin Setiawan, Director of Telecommunications Network Business; Mr. Agus Utoyo, Director of Human Resources and Support Business and Mr. Balu Nargito (ph.) President and Director of TELKOM Tel (ph.). All the participants before proceeding to the speech, I would like to inform you that some statements made during this conference call are related to matters that are of historical facts. These are considered as forward-looking statements. These may involve risks and uncertainties and may cause actual results and developments to differ materially from those expressed or implied in these statements. The company does not guarantee that any action, which should have been taken in reliance to the statements, will bring specific results as expected. Now, please direct our attention to Mr. Kristionio's speech. Mr. Kristionio, the time is yours.

Thank you Rochiman. Ladies and gentlemen, thank you for your participation in this conference call. Before we proceed to the discussion of the company's first half of 2003 results, the management would like to express our sincere apology and confirm our continuing commitment to bring the company's annual report on Form 20-F into full compliance with the U.S. SEC requirements. Regarding the preparation of the conference, the annual report for the SEC [inaudible]. As we [inaudible] disclosed, we are engaged, SEC qualified our results KAP Drs. Hadi Sutanto & Rekan, PriceWaterhouseCoopers PwC. It's currently performing their audit work. PwC's audit is proceeding well and on track. While is it difficult to predict the time period required for the audit, TELKOM continues to expect the audit to be completed in 2-3 month period refer to in our June press release. We would expect to file an SEC [complaint] as soon after the completion of the PwC audit. TELKOM believes it's important for the investor and the public that any misunderstanding regarding TELKOM progress with the SEC issues are avoided. Accordingly, TELKOM has instituted a policy of not responding or relate to questions on this matter. However, TELKOM understands the strong interest of the media and investors regarding our 20-F. Accordingly, TELKOM will continue to provide regular updates on its progress and development through recent press release.

Ladies and gentlemen, I am delighted to announce that the company's business growth is very fundamentally strong. This is reflected by the 32% growth in revenue, almost 30% growth in EBITDA, eventually [12.65%] growth in net income. In addition, during the first half of 2003, the overall revenue engine generator, that is fixed phone, cellular interconnection, data and internet and network revenues constantly show significant growth to the operating revenue. All the participants of the conference call, now I would like to highlight some recent development issues during the second quarter 2003.

The Indonesian telecommunication industry just has entered into a new development phase when the Minister of Communication established the Indonesian Telecommunication Regulatory Body last month. Its membership consists of the Directorate General Post and Telecommunication and the Telecommunication Regulatory Committee. This new regulatory body was set up to provide [inaudible] government, in order to guarantee transparency, independency, and fair principles in telecommunication network and service provider operation in term of regulatory and supervising aspects. As part of the company's strong commitment to develop the national telecommunication industry, on July 31, 2003, TELKOM closed acquisition of AriaWest and settled the ICC arbitration. TELKOM now wholly operates, controls, and manages KSO III and for the [inaudible] expanding its network infrastructure including fixed wireless network in this region. Prior to the closing date on December 31, 2005, the revenue share between AriaWest and TELKOM shall be 95% and 5% respectively and 70% and 30% thereafter.

With regards to the progress of the MGTI acquisition, TELKOM and shareholder of MGTI are currently still undergoing negotiation process [inaudible] need time to conclude the process. In response to the recent news [because] in several mass media regarding the negotiation with [inaudible], we hereby say that thus far TELKOM didn’t receive any formal notice from the shareholders of MGTI. As of May, 2003, the TELKOM increased its ownership in PT Multimedia Nusantara from 31% to 100% through the purchase of all 69% share in the company while TELKOM sold its entire 21.34% share in PT Menara Jakarta. The transaction combined with an establishment of Pro Infokom Indonesia are part of the subsidiaries structuring plan in order to strengthen our Multimedia business.

With regard IDD business, TELKOM is still expecting the license from the government. The product has been tested and is ready to be launched as soon as the license has been issued by the government. The new service called TELKOMFlexi that's thus been launched has been showing a good progress across Indonesia, it currently has been in operation in 9 cities. As of the end of June, 2003, the total number of the subscriber was more than 40,000. With regard to the target lines deployment for 2003, the [inaudible] deployment to increase at a [inaudible], we have [assessed] the target deployment of fixed wireless from 740,000 to a figure of 510,000 lines.

TELKOM has received an AAA corporate rating IDR 1 trillion bonds/2002 from PEFINDO, Indonesian Credit Rating Company. In addition, the rating is valid for period June 30, 2003 to June 1, 2004.

Ladies and gentleman, all the participants of the conference call, now I would like to discuss in brief on the first half of 2003 results. There were several significant events influenced the first half of 2003 results, include consolidation of 1. The sale of 12.7% share of Telkomsel, early resignmentreassignment program and bond insurance.

TELKOM's consolidated operating revenue grew by 32%, attributable from the 19% increase in fixed telephone revenue, 35% increase in cellular revenue, and 111% increase in the Interconnection revenue and 103% growth in Data and Internet revenue, 27% in Network revenue and [211%] increase in Other Telecommunications services revenue. The figure shows that all of TELKOM revenue stream except for joint operating scheme and revenue sharing arrangement have declined 30% and 8% respectively. They are [4-5] significant contribution from the company's operating revenues. The fixed phone revenue growth is mainly contributed by 7.6% increase of total line in service, the consolidation of phone revenue of KSO is amounted to Rp. 873 billion. In addition, the ARPU increased by 3% to become Rp. 179,073. The high increase of cellular revenue was primarily due to [inaudible] 84% increase in total subscriber. The blended [wise] ARPU decreased by 70%, on the other hand blended SMS ARPU increased by 35%.

Ladies and gentlemen, we shall now proceed to [our net] cash and to our other secure revenue contributors. Interconnection revenue growth was driven by the increase of international calls. Cellulars and others were 51%, 113%, and 190% respectively. The increase of international calls due to the growth of international offset [driven] by [52%], as we said by 87% for cellular interconnection, the growth on the increase of the total cellular subscriber. The increase of data and internal revenue is mainly attributed from the strong growth of SMS inline with the [inaudible] cellular subscribers. The IT revenue and telecom net instant revenue. [inaudible] of the conference call, the total operating expense increased by 36% contributed by the growth of provisional expenses, operation maintenance, and telecommunication servers expenses and other [main] expenses. An increase of personnel expenses were mainly caused by the consolidation of KSO 1, Pramindo, Napsindo, Pro Infokom Indonesia and Multimedia Nusantara amounted to Rp. 291b. Net effect of the payment for the benefit allowance and 2002 earlier retirement program amounted Rp. 98b, and approve of early retirement program expenses of KSO 1 and 6 in 2003 amounted Rp. [93b]. In wire the [inaudible] 39% increase of the operation and maintenance and telecommunication server expenses were mainly driven by the consolidation of Pramindo, KSO 1, Napsindo, Profitability Infokom Indonesia and Metra operation and maintenance expenses amounted to Rp. 64b. The increase of the operation and maintenance expenses of Telekomsel, inline with the addition of the new Base Transciever station as well as the new Transmitting and Receiving Exchange. Farther expenses were increased with due to increase Moragio Frequency (ph.) changing Of Rp. 84b attributed was the [inaudible] an amount of Rp. 48b and [inaudible] in the amount of 24b and [inaudible] of Rp. 36b. The 11.5% increase of general and administration expenses were mainly due to no addition or provision for [inaudible] for KSO III recognized in 2003 and deduction of [inaudible] fee expenses. Marketing expenses grew by 44% which was mainly due to the increase of new [syllabus] promotion expenses in TELKOM has amounted to 37.6b and Rp. 13.3b for the [concepts].

Ladies and gentlemen this will end my remarks and [ask to] continue with the question-and-answer session. It will be moderated by Gardener (ph.).

The question-and-answer portion will be conducted electronically. Any one wishing to queue for a question may signal now by pressing "*" "1"on your telephone. You will hear a double chime indicating that you are in the queue. And when you are selected to ask a question you will hear a voice prompt stating that your line has been un-muted. At that point, please state your name and company name before posing your question; again to queue for a question please press "*" "1". You may proceed with your first question.

Thank you. This is Sergi Basarti (ph.) from CLSA. I have couple of questions -- first is on the TELKOMFlexi; is it possible -- can you let us know what would be the ARPU for month, and also the total revenue year-to-date from this flexi and totally on the [inaudible] about the [marketed] CAPEX that you are going to spend on this network? And second question is on the personnel expenses -- first half of the year probably 1.7t personnel expenses; what would be the targeted first half -- I mean, full year personnel expenses and how much is attributed for the early retirement cost? That's all from me. Thank you.

Okay. Thank you, [inaudible]. For the first question regarding the TELKOM [sell] -- for the TELKOMFlexi, I mean, the ARPU and targeted [complex], both Flexi -- [inaudible] to answer and for the [inaudible] and for a [provisional] expenses, their will be [inaudible].

Okay, thank you Arryman. First of all the personnel expense -- for full year we have been completed approximately -- sorry consolidated Rp. 2380b or consolidated -- [Rp. 3.822] and for early retirement program for year 2003, we are growing bit half year -- per half year 75b and for the max [65b] max. So, total [193] for year 2003.

The personnel expenses of 3.8% includes the entire [operating] cash of the [consolidation] because I understand that the [cash would] be -- has a quarterly substantial personnel expenses and also a professional fees?

Well, I never included for the KSO III.

So we will be looking at the -- well I [inaudible] feeling for the yearend including the cash flow [fees then].

Yeah, [inaudible] Rp. 250b estimated for KSO III.

Okay. Thank you.

We will go to our next question.

Yes, hold down for a minute please and let's answer the [inaudible].

Thank you Arryman, Garga (ph.) speaking. As you had mentioned that you have to be [inaudible], the number of subscriber until the end of June, it's more than 40,000 plus KSO for the [inaudible] Indonesia. The -- few of Flexi in Jakarta is close to Rp. 140,000 but in [Indonesia] now it is around Rp. 85,000 per month. So, the revenue of Flexi is unconsolidated; it is Rp. 7.8b and consolidated is Rp. 11.6b.

And the CAPEX [full year]?

CAPEX, we have been seeing the targeted CAPEX as we mentioned in the last call, which is [1.4t].

For all of this Flexi alone [inaudible]?

Obviously, yeah, for the Flexi only.

And, sorry, earlier during the conference call, you mentioned that you are going to cut down your target to 510,000, can you -- why you cut down debt, you said because of delay in the deployment or is a -- I don't know, it's an expensive [enterprises] or just blank spots, etcetera?

Actually there has been some delay as you might be aware that, you know, deployment in Jakarta has been little bit delayed because of some technical difficulties that we found but actually it has been recovered. That's one element of it. The other thing is that we've changed a little bit the approach in deploying the fixed wireless CDMA, not only about the number of cities that we are going to cover, but it is for focusing on the coverage -- on the coverage within cities. So, this basically will change a little bit the deployment flat. But at the moment, we will maintain still the targeted CAPEX as planned originally.

Fair. Thank you.

Okay, thank you [inaudible]. Craig, next question please.

Hi, this is [Navin] [inaudible] from [Navin] [inaudible]. Thanks a lot for the conference call. I have about four questions; one is directly related to [IOS], we have heard that [IOS] had some unfulfilled fixed line built out commitments; can you provide some more details of that? Second, could you clarify that the company around 1t of carry forward tax losses and about what timeframe would you be able to utilize that? The third question I have is total amount intangible assets that will be created as a result of the [IOS] transaction, if you could [throw] any guidance of that and fourthly, to look at your release, which came out last week. We are talking about a reduction in the total cost of the transaction by around $25m, could you please explain this number?

Okay, Thank you Mr. [Navin] [inaudible]. We have four questions from you. The first is about the unfulfilled line built out. That comes about [$1.7t] [inaudible] tax loss carry forward and the third is about intangible assets and how is the calculation of reduction of U.S. $25m? I think the questions will be answered of on top of [inaudible].

About nothing to the cost carry forward of 1.5 [inaudible]. You can use up to the [inaudible] -- and up to the [IOS] of [inaudible] appropriate, and we do hope after we change our share between cash flow with the [IOS] from 70 to 70 and 30 through 95% and 5%. We do hope the next year [IOS] can use the tax loss carry forward. And, the second about and the third question is about the intangible assets for [IOS] -- around 1.3t rupiahs and reduction about U.S. $20m -- U.S. $25m. It means calculation accrue interest from March 2001 until August 2002 the --

That's the end of it.

-- principle and just in principle and the accrue interest around [U.S. $26m.]

Thank you.

So, as you know that the -- due to problem of the infrastructure in [IOS] for different case [history] and [inaudible] as soon as the closing of the [Toyota] [inaudible]. So, actually what we think for the procedure that we do and throughout to the deployment of the infrastructure as soon as how we can [start] to the -- but anyhow we are waiting [inaudible] still there and we hope that by the acceleration of the deployment of Flexi being [inaudible] the deployment of infrastructure in [IOS] will be soon fulfilled.

And the unfulfilled built out is actually is about [210] kilo?

Okay [inaudible] I think another question.

Next question, please.

Go to the next questioner.

Hi, good afternoon. I am Freddy (ph.) [inaudible] from Merrill Lynch. I have three questions. First is to -- on the early retirement, more on that, looking on 2004, can you provide an update as to how many employees are expected to take on the early retirement and how much of probation is to be expected for ‘O4. Second question on [IOS] if you can provide the basic financial, even the un-audited numbers for ’02, and of course, revenue, EBITDA, profit after-tax, and [inaudible] and certainly on the compensation for the long distance [inaudible]. Should we expect financial compensation for Indostat for [inaudible] on a net basis as [inaudible] then decided? Thanks.

Okay. Thank you for [inaudible]. The first question is about the employee retirement [inaudible] the probation of fund may be as deployed for [inaudible]. And you just repeat the second question probably?

On [IOS] if you can provide the updated financials even if it’s an un-audited numbers for 2002, give us revenue, EBIDTA, and so on?

Okay the second question will be answered by [inaudible] and the first compensation of long distance will be [inaudible].

Okay thank you [inaudible], early retirement program [inaudible] program of 2002 in Q4 of 2003 we plan 1,100 people that approximately budgeted Rp. [284m] per people, and we plan for 2004 -- [if the rest] is [1255] people and budget approximately to Rp. [284m]. That’s all.

Okay. Thank you [inaudible].

[inaudible]. The first half of the KSO III must [inaudible] audit again. The operating revenue around [622b] rupiah and the first and the [cash] around [214b] rupiah. Operating income 408b rupiah, other [inaudible] billion rupiahs, EBITDA around 481t rupiahs, and the margin is [5.6%]. Thank you.

Thank you. [inaudible]. Next question will be answered by [inaudible].

First compensation we are not aware of any figure -- [inaudible] compensation, the only thing that we can suspect is [inaudible] would be probably -- most probably in the form some licenses including the [inaudible] 1800 licenses as we have been given. And with respect, you know, some portion of cash will be part of compensation but as I stated before, we are unaware any figures and we even don’t know as how and when the government would like to announce the compensation package.

Thank you [inaudible]

Thank you. Just follow up on the [IOS], the operating revenue figure of [622b], is that revenue at the operating unit level or is that at the [ISO] levels?

This operating [unit].

Operating [unit]. Okay, thank you.

Thank you for that. And Craig, next question please.

Hi, this is [inaudible] from Citigroup Asset Management. Just two questions, firstly on the regulatory side on the fixed wireless regulation, can you give us an update in what’s happening and whether do you think there mobility is likely to be limited to one [base station]? secondly, there was earlier some talk of the change in the mobile to fixed termination rate, is there any update on that and the third question is could you tell us what the contribution DLD business group EBIDTA was in the first half? And, also how you plan to afford -- to defend your market share once monopoly goes away on the DLD side? Thank you. [inaudible]

Sorry, I therefore, placed on [inaudible] first about the regulatory side (ph.) of the fixed wireless and the second is what are the [inaudible]. Can you just repeat it once more?

The second question was -- there was some discussion earlier on the change in mobile-to-fix termination rate. So I want to know whether it is still on.

Okay, is it about the EBIDTA?

Yes.

Ya, the EBITDA and the market share of [inaudible] the price?

Not the market share. Once -- how do you plan to defend your market share in the segment where you are dominant now once the monopoly has been taken away? Do you see Indosat coming into this market segment in a big way?

Okay, thank you. The third question will be answered by [inaudible].

Yes. I think about the regulation of the [inaudible] access, it is still under discussion by the government, but until now, TELKOM still implements the one [inaudible] for one local [inaudible] fixed phone ordinary and the discussion is still being done between [Digicell], TELKOM, and also the consultant of [Digicell].

Do you have some sense for timeframe over which you expect a decision?

Yes. Actually TELKOM still proposes to make the new regulation static in Flexi-phone (ph.). We need first is rebalancing tariff for our local and long distance. The second is the interconnection, one tariff interconnection, and the third about the cellular tariff that are being now implemented under [inaudible] tariff also. So, before these three items, we still want to implement and propose the existing tariff, but I think it will be finalized during three months from now.

Okay,

[inaudible] Fixed mobile termination rate is part of the interconnection regime and until now the government has not issued any new regulation. We have -- government has been collecting all operators and discuss this matter, but until now there no formal decree issued by the military on the new interconnection [inaudible]. We are expecting that this will happen soon, but we are not aware of what is the game (ph.) plan of the government. The TIB market share, if the [inaudible] service provider, the first scrap is basically from the BBOYT (ph.), but in terms of the revenue that [inaudible] provider can get out of our total [inaudible] revenues is particularly very small. As the competition is increasing and we know Indosat will be part of the player. One of the thing that we push -- that we propose to the government so that in the in the [inaudible] package that the government also is releasing the tariff rebalancing scheme that we have been proposing since last January since the tariff hike which has been postponed was including the tariff rebalancing so that we can reduce basically or eliminate the proxy [inaudible] long distance part to local part. So, this comes in package, we believe --.

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Sorry for the interruption. So the push -- we proposed to government that one package of [inaudible] as well as the tariff rebalancing. If this doesn’t happen quickly, then the [inaudible] process of planning by investigation to further rout, which probably we can offer at cheaper price, meaning giving more discounts to the users, but this will happen in a very selected manner.

Okay, if you could --

Net EBITDA, you know, the revenue configuration to the EBITDA is basically 25%, final [inaudible].

Should 25% of group EBITDA comes from [DLE]? Is that what you are saying?

unconsolidated. It is probably TELKOM.

Yeah, on a consolidated basis?

It's around 21%.

Okay and there is one quick follow-up question on fixed wireless. You have scaled this year's target down from 740 to 510? What about FY '04, have you scaled down that target as well?

There is no plan of EBITDA -- if you think the cellular subscriber base net-net target.

No, not cellular subscribers, on fixed wireless, you just said that you will reduce this year's target from 740,000 to 510,000 [inaudible]. What is the target for FY '04? For next year?

1m.

1m.

It is the capacity that we plan to [inaudible].

1m in addition to this year's 500,000?

Yes.

Okay, thank you.

Thank you [inaudible]. Now, we move to the next question please.

Good after, this is [inaudible]. I have got few questions, first is whether your business revisions were correct following revision of [inaudible], the second is the [inaudible] is repaidyed [inaudible] done by the previous shareholders is [inaudible] and so, the [inaudible] by the launch [inaudible]?

[inaudible].

[inaudible].

[inaudible] involving [inaudible] government and I think [inaudible] and things may require a little bit more time to organize [inaudible] compensation together with [inaudible] OIBD license.

So, then you will launch probably until next year?

We would expect that this will happen this year.

Okay.

About the CAPEX for the [inaudible] we have been targeting for the construction of around 47,600 line units and [inaudible] 60,000 fixed wireless CVND (ph.) units with a total effect of approximately 252.8 [inaudible] units.

Okay, is that -- what would be your accrued number for the whole year?

For whole year?

Yes, for full year including [case history]?

[inaudible].

For the TELKOM including the [case history]?

[inaudible] a second from you. Is there any another question from you?

Just when in the acquisition when you [inaudible] [case history] it was the $58m cash $100m [inaudible], you have seen the [$196,000m] of cash and then you also mentioned that $99m of debt was repaid and I just want to know whether it was you that repaid that debt or there was the previous shareholder?

Okay, hold on.

Total CAPEX TELKOM with the case is 3 -- 4.3 trillion Rupiah.

Okay. And for next year?

For next year the CAPEX around 4 trillion Rupiah.

Okay. Thank you very much on the [inaudible] question.

The outstanding principle around [$73.9b] and the accrued interest from the debt principle for August 2002, around [$12.6m] and the accrued interest post August, 2003 around [$12.47m]. And the total is [$99.07b].

So, that was repaid by the TELKOM?

Yes.

Okay, we should include that in the acquisition price. Okay and could you also just give some guidance on the -- you mentioned the tariff increases that are being discussed, could you give some guidance as to what your targets and fixed -- CDMA online growth is without tariff rise and what the target will be if there was a tariff increase? And what would besides the tariff increase might be?

I better ask [inaudible].

For the tariff increase -- and till now TELKOM still don’t have any idea because it is still totally decided by the government and still under discussion looking through the any aspect of the balancing itself and then cellular and also [inaudible] discussion of its tariff. And also the implementation of the -- actual implementation of the independent regulatory body itself, now being done as temporary action, but anyhow we feel optimistic that this tariff will be setup in this year.

But, presumably the government -- the tariff decision will be -- they'll expect all the incremental tariff rise is used for increased line development? Is that correct? I mean, incremental tariff, any incremental revenues from the tariff will have to play towards the [inaudible] [CAPEX] effectively?

[inaudible].

Yeah, actually in first year of -- in this early first year, we estimated that if the tariff increases at a time that [telephone] net allowance goes through the 1b Rupiah increasing of the revenue, and I think so if tariff and the tariff adjustment, of course, we will -- we should do some additional developing online.

Okay. So could you give us, I am assuming that there is no tariff increase, could you just give some guidance as to what your target fixed-line growth and what your targets of wireless line growth is for this year and next year?

While we are waiting for this decision from the government, we are still optimizing the existing CAPEX to develop the target, but anyhow with the deployment of Flexi as [partially] has been mentioned before, we are still optimistic that the deployment will [inaudible] the demand on the markets close to 40 [decrease] during this year. By TELKOM guys [inaudible] and also by [inaudible] appropriate transfer [DOC].

Roughly, are you assuming that for your line growth if there is not tariff increase and that 60% of your line growth is going to be wireless local loop?

Yes. The assumption that we have made for next year is adding another 1m fixed-wireless CDMA [solution] and another 200-300,000, you know, wire lines. That's plan has been made with the assumption that there is no tariff hike at all.

Okay and then -- and for estimate we should assume that if there was a tariff hike, the majority of the additional revenues would be deployed for fixed-line growth?

The approach that has been generally taken is for penetration and you know customer base expansion. We will rely, you know, mostly on fixed-wireless CDMA solution. So, if you have other additional CAPEX because of this additional revenue, then for customer base expansion and penetration we will be spending more on fixed-wireless CDMA.

Okay. And is there, kind of, I think you gave previously, you know, five-year target of what the original target was of adding, I think, was it 2.8m lines as the next five years from 2001? And -- which you've then revised up to [1.6m] lines in [excess] of tariff increase, but -- which we use this targets or there are still likely [inaudible] in place?

Yes, because until the tariff hike is really implemented and we will be reviewing, otherwise, we will maintain the original platform.

Okay.

Okay, Thank you.

Thank you, thank you very much.

[That may conclude].

Karen Ang from Smith Barney in Singapore. I have two questions. First question is when the [DOD] market is open for competition in August 2003, will there be equal access [immediately] i.e., will your subscribed -- fixed-line subscribers be able to access Indosat [DOD] service? The second question has to do with our [IOS] increase. Can you please repeat what is the operating and net income for [IOS] and consolidated for the first half of the year? Thank you.

Okay, thank you. For the first question, for the end market, it will answered Suryatin and [inaudible]

Yeah, thank you. For the [inaudible], it is open [to all] competitions by Indosat. The government will implement an equal access as you mentioned. We are not discussing as what access code being used for each operator, we strongly recommend the government and request to the government that the 036 as access code [inaudible] DLD services maintained and another code will be awarded for Indosat.

So let's say on 1 August, TELKOM subscriber can dial Indosat access code and access the Indosat DLD service. Is that correct?

The TELKOM subscribers, if they want -- if they dial "0" that means they go for our DLD service. If they dial another code that we will be assigning for Indosat, then they will go for Indosat DLD service and vice versa.

So, that will be available by 1st August?

No, the 1st August has been over and there is no announcement from the government. So, now we are waiting until the government is really announcing. We are still very hopeful that this will be announced till year, we don't know really when it will happen.

Profit and loss for the KSO III unit, we repeat, the operating revenue Rp. 622b, operating expense Rp 214b, operating income Rp. [408b], other Rp. 73b, profit before tax Rp. 451b and the EBITDA margin around 65%. Thank you.

Thank you.

Thank you. Next question please.

Yes good afternoon, it's Jason Gillings (ph.) from Goldman Sachs. I had four questions; my first question is, can we have a rough idea in terms of what is the EBITDA margin for TELKOMFlexi please? Second question is what needs to be done for you to actually receive your fixed line tariff increase? Third question is, can we have the churn rates for Telkomsel please? And my final question is also in back on TELKOMFlexi, in that how are you ensuring that your subscriber growth on TELKOMFlexi is not hurting Telkomsel's subscriber growth? Thank you.

Thank you, Mr. [Jason Gillings] The first one is about the EBITDA margin of TELKOMFlexi, [inaudible] okay and then second question about the fixed line requirement of tariff hike, [inaudible] and for the third question about Telkomsel's [inaudible] and the last one, I hope [inaudible]

What needs to be done for the tariff increase to happen, we don't see anything that we can do at the moment. All we need to do here, we have done it and I think they are full control is now in the hands of the ministry and I think as I said, we are very hopeful that the ministry will finally endorse this tariff hike and our latest proposal and recommendation to the government is to launch tariff hike in conjunction with the termination of monopoly, leading to the stopping of monopoly by working this globally or stopping globally, licensing us international and endorsing the tariff increase and support and [process] end user.

Second --?

Suggestion about the controversy between Flexi and Telkomsel, I think it is already happening now in the market that Telkomsel's still growth more than before since that our [inaudible] of synergy marketing that's going on between Telkomsel and TELKOMFlexi, it's not really gets the market that awareness of TELKOM group products still keeps Telkomsel still growing and TELKOMFlexi also gets certain segment markets for it and the only things that its influenced about the dealership, but it is not really tougher by the synergy program between TELKOM and Telkomsel.

About the any other market for TELKOMFlexi, I am sorry, we cannot give you the exact figure for the margin because we don’t have reference to see last year. But we can give you the data since TELKOMFlexi operated 6 months ago with 33,000 connected subscriber, we have revenue around Rp. 11b. Thank you.

Does that answer your question?

My other question, what churn rate at Telkomsel? Do you have that please?

Yah, churn rate, every one for post-paid, is 2.4% and prepaid is 2.8% per month. But we are increasing the six months from January to June, it's almost 30% [including the] customer base.

That’s great, thank you very much.

Thank you.

Great. If there is any questions, this is the final one.

Okay, one moment that I direct to your last question.

And hi, his is [Nick Life] from CSFB in Hong Kong. A couple of questions on the IDD please. Can you talk about, how you intend on addressing that market in terms of your billing? Whether that would be just out of your fixed line bill? How you would distribute the service, whether you can sell the service using your bill [inaudible] advertising medium, your access c to customers [inaudible] code access and finally, if you can talk about your market share ambitions and the timeframe for achieving those market share ambitions on IDD? Thank you.

Thank you, [Nick Life]. I think that it can be accessed by [inaudible]. About the IDD [inaudible] and integration after market share advance [inaudible]

The equal access, I think we have addressed before that it will be an equal access but we have different codes than [Indosat]. So, our new codes expected to be probably 007. The billing will be included in our fixed line billing and it is the case now for also Indosat and in the fixed line field there will be another field, which is TELKOM IDD 007. Yes, of course, we will use also the different ways at promoting this including the bill print that we will use also to some more [inaudible] With regard to market share, this year we aimed to have 10% of market share, and assuming that we will have this on August1, but it's already a little bit delayed. So, we will maintain still on 10% revenue share --market share and it is very initial state of cost [inaudible]. So the total revenue that we will get assuming that IDD will be launched by the month of August, we will eventually be balanced with the discount that we will be providing for the first two months of this IDD launching.

Given the competitive advantages that you appear to have with this billing and access to customers, your 10% seems very conservative, what kind of market shares you would be targeting for '04? Can we assume a [50%] market share?

For next year it will be 25%. This is as of the planning process is [inaudible] money. The 25% is something that we have put as our planning features but the --

Would you describe that as conservative or aggressive because it seems that you have a [inaudible] advantage?

Many will see this a little bit of conservative, but we don’t want to be very aggressive. We don’t know what competitive sales costs the government of Indonesia will play for this [inaudible] we are not aware of what will be the team to -- at this particular stage, we would rather plan it for 25% and still get the other markets, -- markets where you know are very familiar to us like Japan or Singapore or you don't know everywhere else -- 25% in the second year, it is something which is already very aggressive.

Okay. So that's no other competitor has had that kind of [inaudible] advantages going into the market.

[Inaudible].

On domestic long distance, would you expensing or would you be enforced to bill for Indosat when they break into your market?

We don’t know of course what is being prepared by Indosat but knowing that they let us to fuel their, you know [IVP surplus] we will assume that they will let us also to do the billing for DLDs.

I mean is your IT [inaudible].com in place to do on their behalf.

Sorry.

[inaudible] capable of billing the DLDs for Indosat today? Yes as of three days ago August 1 actually.

Yes.

Okay.

We have the capacity; Steve, we have the capability to do it.

Okay but you don’t know whether you would be willing to do that yet or if you would like to do that yet?

No we don't know yet.

Hi sorry, just a follow-up question; this is Jeff Tan from CSFB here; on the 1m additional capacity that you mentioned of FLEXI, could you actually [inaudible], how much of that is going to be in Jakarta, and secondly the second question is about TELKOM sales they seems to be growing much quickly than anticipated, can you give us sort of guidance on '04 has that been [inaudible], thank you?

Yes thank you Jeff. The program of Flexi is, you know, it is actually net intensity of the corporate, that's [inaudible] has been mentioned, and also then to increase the capacity and capability of the network itself. So, deployment run will be an additional in the next year; it will be 40% -- more than 40% it would be in Jakarta and the second hint is Surabaya, there is going to be Smithen (ph.), Batam and then the others. And of course by this experience of this year's deployment we are going to catch the 1m deployment of [inaudible]. [inaudible] also deploy to [inaudible] together with the [inaudible] to the many island if Indonesia. It's the answer for your question.

Hello.

Yes, do you want to take another question?

Okay this is the final one and [inaudible].

We come up to the final question and answer and we have to end this [inaudible]. Before we close, let me trace through any closing remarks. It will be my pleasure.

Right, [inaudible] of the conference, I would like to again [inaudible] thank you very much for your participation today. We do look forward to your continuous support and [inaudible] with your problems, you can communicate with Lao Deat (ph.) the Manager [inaudible] TELKOM and [inaudible] the future under dynamic environment. Thank you very much.

Thank you every one for your participation in today’s conference. You may know disconnect.