Telkom Indonesia (Persero) Tbk PT (TLK) 2003 Q3 法說會逐字稿

Welcome to the 2003 Quarter's -- Third Quarter Results Conference Call. Today's call is being recorded. At this time, for opening remarks I would like to turn the conference to your moderator for today, Mr. Sukarno. Mr. Sukarno please go ahead.

Okay. Thank you Ms. Noha. Ladies and gentlemen all the participants of the conference call, good afternoon and thank you for joining the third quarter 2003 conference call. We will start this conference call with a speech from [inaudible] upon the third quarter 2003 financial results. After the speech we will continue with the question-and-answer session. The conference is scheduled to end at 3 p.m. Jakarta time, tape recording of this conference call will be available one 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. Garuda Sugardo, Director of Telecommunication Fixed Services Businesses. Mr. Suryatin Setiawan, Director of Telecommunication Network business; Mr. Agus Utoyo, Director of Human Resources and Support Business; and last Mr. Yusuf Kurnia; Director of Finance from Telkomsel. All the participants before -- before proceeding to the speech I would like to inform you that some statements made during this conference call are related to matters that not historical facts, these are considered as forward-looking statements. These may involve risk and uncertainty and may cause actual results and development to differ materially from those expressed or implied in this statement. The Company does not guarantee that any actions which should have been taken in reliance on the statement will bring specific results as expected. Now I'd like to direct your attention to our President, Director Mr. Kristiono for his speech. Mr. Kristiono the time is yours.

Thank you Rochiman. Ladies and gentlemen thank you for your participation in the conference call. Before we proceed our discussion on TELKOM third quarter 2003 results into detail I would remark the progress of PriceWaterhouseCoopers audit on TELKOM 2002 financial statement as requested by the U.S. SEC. In general, we are delighted to inform you that the [parent audit] progress doesn't indicate any [interest] related to the [completeness] and [inaccuracy] and the revenue recognition as well as any finding with regard to fraud of irregularity as such.

However, you should [subsequent] events that may cause several adjustments to our previous issued 2002 financial statements. The adjustment to the 2002 financial statement will affect previous reported financial information which will [differ] on the both Indonesian and U.S. generally accepted accounting principle. As mentioned in our press release regarding the 2002 audit in progress issued yesterday I would like to say [inaudible] with I expected to affect the [adjustment], namely provision for [inaudible], second provision mostly found in benefit as tax, [plus EBITDA] tax and third [inaudible].

In addition [inaudible] we expect to research the provision that it had -- they recently made in its 2002 financial statement in respect to the AriaWest dispute. Please note that the third quarter 2002 and 2003 financial results presented in this research may also need to be adjusted based on the outcome of the PWC results in the audit. For further details please refer to our press release dated November 6th, 2002. [inaudible] when the audit process is finalized [before TELKOM] and PricewaterhouseCoopers are still in the process of determining the necessary adjustment, while at the same time TELKOM [inaudible] 2001 and 2000 are currently [inaudible].

[In that concern] on to what extend that the matters [inaudible] for 2001 and 2000 financial statements. We sincerely understand that the situation may cause uncertainties for our [operation] and any related parties who are concerned with TELKOM. Therefore we are strongly committed to continue to work with PWC; PWC will enable completion of results at the earliest possible time.

Now I would like to continue our discussion of 2003 third quarter results, for the 9 months ended September 30th, 2003 the consolidation of 10 subsidiary companies and look for additional subsidiaries that we acquire are significantly controlled by TELKOM in the period after September 30th, 2002 and AriaWest in Indonesia and Sumatra, consolidated operating revenue and [continue to show] an increase of 27.9% and 26% respectively.

The growth of operating revenue was mainly reflected by the high increase of revenue from Cellular 38%, Interconnection 43.8%, Network 46.8% and Data and Internet 100.2%. And net income decreased 42.2% compared to previous year due to the fact that TELKOM recognized a gain of 12.72% from TELKOM's share in Telkomsel amounted to 3.196t last year. During the third quarter of 2002, the Company sold a portion of its ownership in Telkomsel. This quarter, TELKOM completed the KSO III [inaudible] through the acquisition of AriaWest. As a result of the consolidation of AriaWest equity, the company recorded accounting loss of 486.75b rupiah due to the fact that AriaWest equity issue and [inaudible] listed as unaudited figures. This item was recorded as a part of other net accounts. We expect that [IDD] will be recorded by the income from operations [inaudible] period.

Now I am going to highlight significant recent developing issues during this quarter. As mentioned before, on July 31, 2003, TELKOM acquired all the share of AriaWest and settled ICC arbitration. Since then, TELKOM fully managed KSO-III, which covers the West Java and Banten regions. The transaction allow TELKOM move forward with rapidly expanding in network infrastructure including fixed wireless network in this area. To realize this commitment in August 2003, TELKOM and PT. INTI signed an agreement for system planning, manufacturing, delivery and construction of 222,300 lines of Base Station of Fixed Wireless Access CDMA 2000-1X system.

The management strongly believes that this transaction will provide real benefit to the customer [alluded] as well as the Company. With regards to Pramindo sales and purchase agreement in September 2003, TELKOM and the shareholder of Pramindo conducted an Interim Closings for the acquisition of an additional 15% of Pramindo shares. TELKOM currently owns 45% of the Pramindo shares. Further, subsequent closings for the remaining 55% of the shares will be conducted on December 15, 2004. Concerning MGTI, TELKOM plans to amend the status of the KSO agreement in order to fully control and operate as well as obtain the right to develop telecommunication infrastructure in KSO IV.

By pursuing the KSO Agreement Amendment instead of continuing with the previous buy-out option, TELKOM will avoid spending an initial payment and utilize the fund for infrastructure development. Despite of our plan to expand the metro capacity in September 2003, TELKOM signed a partnership agreement for Procurement and Installation of the 946 kilometer fiber optic network transmission in Kalimantan and 949 kilometer in Sulawesi with Siemens Consortium. On September 18, 2003, TELKOM launched its prepaid using the brand name Trendy and postpaid card using the brand name KartuHALO as the continuation to its card and non-card prepaid services that is already operated in the quarter.

As of September 30, 2003, the number of subscriber including card sales is 174,541 from a total capacity of 387,570 subscribers. At the end of this year, we are eager to expand the capacity up to 740,000 subscribers, and increase sales volume up to 380,000 subscribers. In addition, in 2004, we planned to add 1m line capacity; however, we remain committed to develop fixed wireline business by using [Goodspan] technology to serve the increasing need of our corporate customers. The company has opened the facility of private participation for contrasting the line infrastructure through a nationwide development of the [DUC] scheme or revenue sharing.

I would like to discuss the company's third quarter 2003 results. The growth of fixed phone revenue was mainly constituted by 8.55% increase of total subscriber including fixed wireless subscriber, the 13.62% pulse production growth in TELKOM division as well as the consolidation of phone revenue of KSO-III, which amounted to 855.85b rupiahs. As of September 30, 2003, the numbers of installed lines were 9m. The 38.1% growth of cellular revenue was primarily due to the 76% increase in total subscriber, which was mainly contributed by 92% growth of prepaid customers. As of September 30, 2003, the total number of subscribers was 8.8 million. The blended [gross] ARPU was 123,000 rupiahs or decreased by 16.9%. On the other hand, the blended SMS ARPU was 23,000 or increased by 27.8%.

We will now proceed our discussion to other major revenue contributors. Interconnection revenue growth was driven by the increase of international callers -- cellular and others, which was 24.9%, 50.2%, and 37% respectively. For international interconnection revenue, the growth was mainly due to the increase of the international traffic/usage. The interconnection revenue growth came from the increase of total cellular subscribers. Meanwhile, the growth of other interconnection revenue derived from interconnection from other fixed line of [leases] and infrastructure leased to the other [inaudible]. Overall, the contribution of the interconnection revenue to total operating revenue increased from 14.2% in third quarter 2002 to 16% in third quarter of 2003. The 100% increase of data and internet revenue is mainly executed from the 132% growth of SMS revenue of Telkomsel, 52% growth TELKOMNet Instant, and 96% of VoIP revenue.

In addition, the contribution of data and internet revenue to total operating revenue increased from 6.9% in the third quarter 2002 to 10.8% in third quarter 2003. The total operating expense increased by 30.8% resulting from the growth of 44.5% personnel, 40.8% operation maintenance of Telecommunication Services, and 44.8% marketing expenses, and at the same time offset by 12.8% decrease of G&A expenses. The increase in personnel expenses was mainly caused by the consolidation of [inaudible] amounted to 184.6b, recognition of liabilities related to the long service awards for our employees amount to 82.9b rupiahs, additional obligations for post-retirement benefit healthcare due to the changes on previous medical cost trend assumption amounted 355.4b rupiahs.

TELKOM has a policy which provides all of the employees [inaudible] working time period and provide housing allowance and transport as they decide. Previously this liability was recognized just on short-term basis and immediately when the payment made, [inaudible] reserves in accordance with accepted accounting standard that company revised accounting treatment to the long-term basis throughout the remaining of employment period.

With regard to post-retirement benefit obligation, the Company is evaluating the key assumption related to the calculations of post-retirement benefit liabilities by considering [inaudible] circumstances. The assumption for medical cost trend projection changed to 13% which was previously 10% average according to inflation rates and cost trends assumptions previously used. In order to maintain cost trend, [we then] raised them to 13% and given that they can policy [inaudible], limitation in the healthcare implementation. Since the calculation of the liabilities related to provision for long service housing and transport allowance as well as post-retirement benefit healthcare is complex, the Company required actuarial expertise to finalize the calculation. The 40.8% increase of the operation and maintenance and telecommunication services expenses were mainly driven by the increase of Telkomsel O&M as a result of the growing numbers of BTS and TRX, the impact of consolidation of AriaWest and the increase of Radio frequency fee, electricity, water, and gas.

Meanwhile general and administration expenses decreased by 12.8% which has mainly resulted from 40.3% increase of research and development and provisional fees, and 37.9% decrease on provision for doubtful accounts and inventory obsolescence. Marketing expense grew by 44.8% which is mainly caused by the increase of advertising and promotion expenses for the new product of TELKOM and Telkomsel. Compared to the previous third quarter results of 2002, income tax expense shows an increase from 20.5% to 34%. The income tax rate in the third quarter 2002 was 20.5% based on the income before tax including extra gain on selling of Telkomsel shares, or 29.1% excluding the extra gain.

In the third quarter 2003 the Company recorded a significant -- Non Tax Deductible Expense originating from employee benefit and other personnel expenses, amortization of intangible asset and impact AriaWest consolidation, it contributed 4.6% to [tax rate comparison] without considering the Non Tax Deductible Expense the tax rate would be 29.4%. This will end my remark; let's now continue with the question-and answer-session. It will be moderated by Rohiman Sukarno. Thank you.

Thank you Mr. Kristiono, we will now continue to the question and answer session. Before raising your questions please provide your name and the name of your company. Ms. Noha (ph.) the first question please.

Thank you Mr. Sukarno. The question-and-answer session will be conducted electronically. To ask a question please press "*" "1" on your telephone keypad at this time, a voice prompt on your phone line will indicate when your line is open, ask the question, please state your name and affiliation before posing your question; once again to press "*" "1" to ask a question. We will pause for a moment to assemble the queue. Mr. Sukarno it seem that we have five questions at this time. I will open the first line sir.

Yes please.

I am Chapman Sailor from Capital International, Kris thank you very much for your initial comments with respect to the audit, I'm sure you are well aware of the negative implications that this process -- successive process for the share price. My question is actually directed to the Director of Finance, however, given that this is your area of responsibility, I wonder if you could help us understand what you were putting in place to make sure that this doesn't happen again, and also if you could help us understand why when you announced results as you initially did last week with a number of items which clearly needed detailed explanations, why you didn't put forth the effort to provide some explanation at that point in time, because clearly this is yet another sign, another event where unnecessary complications arise and clearly the share price is weak as a result.

Mr. Sukarno

Chapman, Mr. Guntur Siregar will answer the -- this question. Mr. Guntur please?

Thank you, Mr. Chapman I think we cannot give all the insight on the detail of information because the audit is in progress now and the successor auditor is still discussing the predecessor auditor. So I think after final discussion the auditor and agree by the management we can issue all the information of the result of the audit. Thank you very much. So after the result of the audit we can continue accrual of the transaction based on the -- our release yesterday. Thank you very much.

Does that answer the question Mr. Chapman. Hello.

Oh sorry sir. I will Mr. Chapman. I'll open up the line for the next question, my apologies. Mr. Chapman can I get you to press "*" "1" now please sir.

Okay, Ms. Noha I think we can go to --.

Go to the next question sir.

Yes.

Thank you. Next question please, your line is open now sir.

Yes, I am Jason Billings from Goldman Sachs in Hong Kong [inaudible]. I actually I had four questions; firstly, [repeat] like Chapman, just trying to get an understanding of the one offset took place in the third quarter, so are you going to tell us for example what the numbers would have been just looking at the recurring costs for the third quarter. Maybe a simpler way to answer it is what do you see the employee cost being in the fourth quarter of this year or for even 2004? My second question is looking at TELKOMFlexi; can you give us an idea of the EBITDA margin of that particular business? Third question is on pulses per line, when I look at your [MDNA] for pulses per line and the changes year-on-year and they are obviously getting impacted by which regions you include. So, I was just trying to get a feel for like-for-like what the pulse per line would have been just for region 2 and 5 just looking at year-on-year. If you can get me that, [going] to seen what decline should I say? Final question is when do you finally expect to start your IDD service? Thank you.

Thank you, Mr. Jason Billings. There are four questions. The first about what is the recurring expense that can be happening next year, especially from the employee, and the second about the Flexi -- it will be answered by Mr. Agus Utoyo. Second about the Flexi EBITDA margin, it will be answered by Mr. Garuda and pass the line as well -- in fact, in which region that [we see]. And lastly when the IDD will be launched, Mr. Suryatin can answer this question. Mr. Agus, please.

Okay, thank you. I'd like to say that for the recurring expense and our third quarter 2003 that recurring expenditure is 2.8t rupiah. And it will happen in [Q format] that first quarter [inaudible] loss and second is for the third [quarter] that's already expressed before and for the 2004, it will continue for the contracting work and for the headcount, and we expect that the outlook of 2003 for the recurring expense approximately at 3.8t and for the non-recurring is 10% of this or approximately 373b rupiah. For the early retirement, we prepared for the [Q] that's already executed and the Q4 is [1,423%] and the budget is approximately -- in Q4 we booked 295b rupiah.

Thank you Mr. Agus. Next question will be answered by Mr. Garuda [inaudible] the question.

Yeah, Jason, Garuda speaking. The question about the EBITDA for Flexi until the end of third quarter this year is 68,948,983,000 rupiah. And then the EBITDA for estimation of this year -- the end of this year is 25,494,373,000. And then about the projection of the EBITDA Flexi for 2004, it will be prediction at 435,795,362,000 rupiah. Is it clear Mr. Jason?

So, 435b rupiah is the EBITDA forecast for 2004?

Yes, 435b in rupiah.

Okay.

And the ARPU, average revenue per subscriber, for Flexi is 171,000 rupiah for postpaid, and a figure of prepaid is still not recorded. For fixed line, the ARPU per line unit is 123,000 -- around 123,000.

It's about IDD. All we can report to you at this point on time is that we are working still very closely with the government. The schedule is something that the government has to decide. We are not aware of what detailed activities they are now carrying out, but we expect that the government will call us for a meeting in November 17 with regards to this issue, and we really do hope that, you know, a progress will be reported out of this November 17 meeting.

Thank you Mr. Suryatin. Ms. Noha our next question please.

[inaudible].

Hello. Good evening it's Henry Cobb from Temzurba Capital. I have got two questions, first on -- again on personnel cost and the other on the audit. On the personnel cost I just wanted to confirm the figure you estimate the recurring cost for the full year 2003 at 3.8t is that correct?

Yes. That's 3.845.

3.845?

Yes.

And we can estimate that it will be a similar amount as a percentage of sales going forward thereafter in 2004?

In 2004 approximately around 4.6 or 4.7.

Okay.

Yes.

And similarly this is affected by the pace of the early retirement program on a forward basis and you say in the release that you've got 1,422 employees in the fourth quarter on the early retirement program. So I am asking does that 3.8t include that cost of those employees to be retrenched in the fourth quarter or what is the estimate for the cost of those employee -- early retirement employees?

Yes that's already including for the early retirement program, the cost of our early retirement program in Q4 is 295b rupiahs.

Okay and my second question is on the audit process. I read the press release yesterday and I just really wanted to -- I was interested that you are obviously going to restate the 2002 results but you are also planning on including Pramindo on a 100% basis, and that's [inaudible] make it quite difficult to account 2004 results, which have been excluding Pramindo. So I am asking whether you'll present the 2002 results one version including Pramindo 100% consolidated and the other one excluding Pramindo; is that something you're planning to do? And also on Pramindo, in the months the 2003 results, does it consolidate 100%?

At the request from the successor auditor now we acquired ownership in Pramindo gradually. The initial closing is 30% equity and in [inaudible] 15% and the last 55% in December 2004. So we approved this under gradually we'll acquire the asset, but the successor auditor recommend to TELKOM should be fully consolidate Pramindo and remaining liabilities related to 70% [inaudible] should be recognized on balance sheet as of December 2002. So the effect of the amount, if 100% consolidated in 2002 on the income statement the impact around 150m rupiahs.

Okay may I -- actually few other questions are just coming up. The other one raised on the proposed [reversal] of the $512b repair provision, whether that will be in the 2002 accounts or the 2003 accounts? And my last question, sorry last three questions -- first is on the CAPEX, are you seeing in the 9 months you've completed a 100% of your CAPEX budget, so I wanted to know what your revised estimate is for CAPEX for TELKOM and for Telkomsel sales for 2003 and 2004 and then lastly I'm interested in why the internet revenues from mobile declined, it's actually quarter-on-quarter [inaudible] decline on quarter-on-quarter.

First question, may I ask to Mr. Suryatin to answer the question about CAPEX for 9 months and also about the internet and revenue as well.

Well the CAPEX for 9 months basically we've completed major [CAPEX] spending in 2003. So, we are confident that the program we plan for 2003 will be finalized in time accordingly. The 2004 picture, the planning session for CAPEX 2004 is now undergoing and we expect probably because in the next year there will be spending in [inaudible] as it was addressed by Kristiono in his speech and at the upcoming satellite plus an additional 1m Flexi. There will be increase of CAPEX for it for -- treatment on infrastructure from the 2003 level.

I see, saving for the full budget as I recall is 10.4t and the [estate] number is 10.2t, so what you are saying is in the fourth quarter, the CAPEX will be approximately --- 200,000m?

Yeah, I think it was not [inaudible].

Sorry.

We were [inaudible].

Right, thank you. Okay, thank you. Noha [may] I [interconnect]?

Rochiman.

[Non English]

Okay. [inaudible] trend.

No, no it's for interconnect, from cellular revenues for mobile quarter-on- quarter, in third quarter your interconnect revenues was I think 2t for the 9 months, [inaudible] 350 for the third quarter alone as opposed to 870 for second quarter, so I really want to know as what's happening to mobile interconnect. What -- why that decreased so dramatically?

[Non English]

Okay, I just -- I am trying to answer that question, first of all on the cellular we are competing [inaudible] within the domestic long distance area, and the other also for the corporate customers market area. For domestic long distance area we have [TELKOM] free roaming, [inaudible] sometime we call it a simply [inaudible]. And because of the competition on the domestic long distance area, so that the impact of TELKOM may be either something close to the -- we don't have any data for that one. That maybe the impact of TELKOM is negatively but I don't believe that the exact figure is really significant for TELKOM because that depend on the traffic pattern development [inaudible] that is depend on the all the cellular operators [strategy] in terms of the pricing and the [second one] also of course it's depend on the [surplus] made by the TELKOM for the cellular industry. SO, then this is just [inaudible] more natural the pattern of traffic. So we need to see more [inaudible] looking forward.

[Thank you]. I am just interested because in the first quarter the trend has been growing and is 8,792t --b rupiah, second quarter 851.5 billion, and third quarter 346, so, I know, either volumes have declined or interconnects tax from cellular operators have declined, because -- I sort of interested what you see is the reason for that sharp drop -- given that this represents 10% of revenues?

I think maybe [Rochiman] will answer directly when [Rochiman] is ready to get the dated detail of the data. So Mr. Henry we will follow-up the questions after the conference call by e-mail.

Okay, I am sorry, my very last question is do you have the volumes for SMS messages sent, did you give out those numbers?

Which number -- could you repeat your question?

The volumes for SMS messages sent in the nine month?

I just remember that for our postpaid customer, you --

Apologies ladies and gentleman, we seem to have lost our host for today, please stand by while they are trying to reconnect.

Hello, Ms. Noha?

Hi, Mr. Sukarno, welcome back. We lost telephone line, sir.

I am sorry.

Can you just, Mr. Henry, can you just [inaudible] answer the question.

Okay.

First of all, the postpaid customers using more SMS would be the subscribers and the prepaid customers [about] the SMS [inaudible], and I don't bring any data for the volume of the SMS, but in term of the revenue, revenue for third quarter has already increased by 130% compared to third quarter last year, and based on the data of ARPU, SMS itself -- promotion of the SMS by the ARPU is about 9%, while though the operating revenues, it is about 18% by the end of third quarter.

Okay. And, sorry, I have still got a few questions. And I just wanted to ask about your dividend policy, what your target pay-out ratio is given all the accounting changes that have been going on, whether that applies to your dividend policy, and what your target for pay-out ratio is either based on earnings or based on free cash flow, and then I think the question that hasn't been answered yet was just on the reversal of the [512b] repaired provision, whether that will be in the 2002 restated numbers or will you actually do that reversal in 2003 -- the provision related to IOS?

Okay the -- now the pay-out ratio [inaudible] is still 40%, and on the -- our free cash flow until the quarter around 1.4t rupiah and end of the year around 500b rupiah.

Okay, thank you Guntur. I think that has answered your questions. Can I go to the next question please, Ms. Noha?

Thank you, sir. Moving on to the next question.

Hi, good afternoon, it's Freddy Mulligen from Merrill Lynch. I have four questions, all related to the post-retirement benefits. Firstly, accumulated post retirement benefit obligation increased by quite significantly, 2.7t end of September, what is causing the increase, it is question number one. Second, will we see another big increase from the 2.7t from here? Third is the obligation for employees' [education] units such as MGTI already included in the 2.7t numbers? And last question is just to clarify the 4.6-4.7t rupiah personnel expense, whether that is total or whether that is just recurring portion and how much of that budgeted for IOS?

[inaudible] for the moment please. [inaudible] discuss through some of the questions.

The 2.7 post retirement benefit does already include for the [inaudible]. And for the next [budget] how we calculate this; it depends on the result of the actuary and [inaudible].

How about the personnel cost budget for the 2004 -- the 4.6-4.7t that you mentioned earlier, is that recurring or is that total including the potential increases in post retirement benefits expense?

Okay for 2004 except recurring and non-recurring, it is in total.

And how much is that budgeted for AriaWest?

For AriaWest in 2004 or 2003?

2004.

2004, I think already including in what I already said before, if we're taking [inaudible] budget.

And do you have the breakdown of Aria -- how much debt is coming from AriaWest?

I think I can say about [inaudible]. Actually the question is -- we don't know --

For this year the consolidated AriaWest budget is 184b for this year.

What is the [inaudible] of this 4.6-4.7t budget [post retirement] cost it will increase in case the post retirement benefit obligation increase further from 2.7t -- have you factored an increase from this 2.7t number into the budget?

The increase for the [total] budget in 2004 -- mainly because [debt] obligation of the healthcare provision and [inaudible] allowance, it is mainly because of [debt].

So, if the 2.5t now increased then the budget will increase further, is it correct?

The 2.5.

The obligation, the total obligations for the post retirement benefit?

Yes.

Thank you very much.

Does that answer your question Mr. Freddie.

Yes, it is. Thank you.

Next question, [inaudible] presentation.

Basically ARPU by --

Hello please say your question; your name and then your question.

Yes. [inaudible].

Mr. Sugardo I might just move on to the next question, if that's okay.

Yes.

Hi, this is Karen Ang from Smith Barney. I have two questions, first is on the consolidated EBITDA, what is your expectation for the fourth quarter and 2004, and the second question relates to KSO III, can you please give us an idea as of 9 months '03, what's the revenue, EBITDA, and operating profit for the KSO operating unit and AriaWest combined? Thank you.

Thank you, [inaudible] will answer the question, please hold on. Thank you Karen, for the [KSO III] the operating revenue until the end of 2003 around 1.44t and the operating expense around 454m, and the operating income around -- expect [996b], and the income before tax around 1.098t, to the EBITDA margin around 61.1%. And for the AriaWest the [estimation] of 2003 a operating revenue around 686b rupiah, after -- since the revenues came from 70% and 30% to 99 -- 90 -- 50%, and 5% for TELKOM. The operating expense, we expect around 223b rupiah, and the operating income around 463b rupiah, and the EBITDA around 383b rupiah.

Yes got it. Thank you.

Thank you [inaudible] I think that concludes the questions. This is the last question please Ms. Noha.

Okay.

Good afternoon this is [inaudible] from J.P. Morgan, thanks for the call. We just had four questions, first of all I was just wondering in terms of the non-deductible expense related to employee benefits in the 9 months, is this related also to the healthcare and liabilities on [long] service obligations or this is a separate item which we have to factor going forward? Second question is on TELKOMFlexi, yesterday Indosat was saying that TELKOMFlexi would be made to increase tariff to somewhere in between mobile tariffs and fixed line tariffs. Is that already finalized or is it still at proposal stage at this point? And in terms of Pramindo could have us a indication of profitability on the KSO?

Can you just read me the last question, please.

In terms of Pramindo and [inaudible] consolidated is the KSO profitable, could you give you us some operational statistics for the KSO?

Okay, thank you. For the first question Mr. Agus Utoyo will answer the question related to healthcare, second Mr. Garuda about [inaudible].

Okay the 9 month, the 9 month personnel expanding quality include for the healthcare and long service [alone], it is already included in there.

Yes, but in terms of the nondeductible expense related to tax is that the cause of this obligation or is it different, is it because of the entire [mix all maybe including]

I think it is confirmed to the tax office that through that deductible [calculates on income tax]

[inaudible].

Okay. Thank you. Garuda

[inaudible] tariff, since October 29, DGPT issued the matter to [inaudible] related to the [draft] preparation of financial decease of [actual excess] tariff and yesterday the 6th of October there was a discussion between TELKOM staff, [Indonusa and also NAPSINDO] with DGPT according to this drop of the [financial] increase. The TELKOM position actually is still based under three positions that before the [fixed wireless asset] tariff it has to be discussed about the [inaudible] tariff for local and long distance, the second about the tariff of interconnection and the third about the tariff of [voice of connection] of cellular [telecommunication].

Now related to the tariff impact to the existing, actually its in the proposal from DGPT to increase the license fee per frequency, and we already talked to them that, actually our argument is that the license fee for the frequencies cannot be equal to the cellular services because the limitation of our bandwidth it is high [megahertz span] compared to the -- around 20 until 50 [megahertz span] of a cellular and also the non [inaudible] spectrum that TELKOM having a more 800 [megahertz span] in the region one, for [inaudible] we have 1900 [megahertz span] individually against 2 and 5. So our proposal is actually the license fee for licensee should be decreased close to the [inaudible] license fee of [20]. And we hope that for a nice discussion, it will be -- there is a draft of the [inaudible] which will be discussed between TELKOM and [inaudible] PT.

Thank you Guntur, Garuda. I'm sorry. For the last question, I am not so clear, can you just repeat once again?

On Pramindo, can you give -- how much you are going to consolidate [inaudible], can you give us some operational statistics with revenue?

Okay, wait a minute please. So, you missed, in the quarter Pramindo [pickup] for the EBITDA around [608b] rupiah and rose around 38% from the third quarter last year and the operating revenue in third quarter this year around 621.6m rupiah, rose 7.9% from the third quarter in last year, thank you.

Thank you, Mr. Guntur. I hope that does answer the questions. Ms. Noha, I think -- we hope that we can all enter the end of question-and-answer session and we come here to the end of the conference call. Before that -- before we --

Thank you sir, we have no more questions at this time.

Yes, before we close the conference call please, Mr. Kristiono wants to [give] the closing remarks.

Yes, thank you for joining the conference today and once again on behalf of the Board, we apologize for not [inaudible] anticipation, but we are in a complete [inaudible] of the shareholders. So, once again I would like to thank you very much and so please move forward on the progress of the [inaudible]. Thank you.