Telkom Indonesia (Persero) Tbk PT (TLK) 2003 Q4 法說會逐字稿

This is Premier Conferencing please stand by. Good day everyone and welcome to the TELKOM's 2002 Order Progress Conference Call. Today's call is being recorded. At this time, for opening remarks I would like to turn the call over to your moderator for today, Mr. Rochiman Soekarno. Please go ahead sir.

Thank you Nora. Good morning ladies and gentlemen. Thank you for joining this conference this -- our conference call this morning. As you may know TELKOM recently filed its amended annual report on Form 20F with the U.S. Securities and Exchange Commission on February 9, 2004. The purpose of this conference call is for management to highlight some of the key aspects of our amended annual report.

We will start this conference call with a speech from President, Director on the 2002 audit results. After the speech, we will continue with the question-and-answer session. The conference is scheduled to end at about 1 hour or more, 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 introduce Mr. Kristiono, TELKOM's President, Director and Chief Executive Officer; Mr. Guntur Siregar, Director of Finance; Mr. Garuda Sugardo, Director of Telecommunication Services Business; Mr. Suryatin Setiawan, Director of Telecommunication Network Business; and last Mr. Agus Utoyo, Director of Human Resources and Support Business.

All the participants before proceeding to the speech I would like to inform you that certain forward-looking statements may be made by or on behalf of TELKOM during this conference call. You are cautioned that these statements involves risks, assumptions, and uncertainties and that such assumptions may not prove to be correct.

Now I would like to direct your attention to our President, Director Mr. Kristiono, who will provide you with much more detail of our amended annual report. Mr. Kristiono, the line is yours.

Thank you Rochiman. Ladies and gentlemen, thank you for attending this conference call. First I'll give a consolidated financial statement for 2002, 2001, and 2000 having completed I would detail [time] out -- unqualified audit opinions. TELKOM's auditor for 2002 was Drs. Hadi Sutanto & Rekan, a member firm of PriceWaterhouseCoopers in Indonesia and for 2001 and 2000 auditor was Hans Tuanakotta Mustafa, a member firm of Deloitte Touche & Tohmatsu in Indonesia. On February 9th, TELKOM filed with the U.S. SEC it's amended annual report on Form 20F, which contained those financial statements. TELKOM also filed its restated financial statement with BAPEPAM on February 9, 2004.

Yesterday, TELKOM received confirmation from the New York Stock Exchange that its name has been removed from the list of late filers for 2002. TELKOM's audited consolidated financial statements contains as an attachment from the consolidated financial statement previously. Under TELKOM's pre-stated financial statement consolidated net income under Indonesian GAAP decreased by 3.7% for 2002 to 8.04t rupiah, 4.3% for 2001 to [4.068t] rupiah and 7.8% for 2000 to [2.75t] rupiah from consolidated net income after tax previously reported and TELKOM's consolidated stockholders' equity under Indonesian GAAP decreased by 8.1% to 14.6t rupiah of Indonesia as of December 31, 2002. 2.6% to 9.081t as of December 31, 2001 and 2.9% to [14.5t] rupiah as of December 31, 2000 from consolidated stockholders liquidity previously reported.

Now to make the assessment of the financial statement in order to bring it into compliance with applicable Indonesia -- Indonesian and United States Accounting Standards. As previously disclosed the principle adjustment relates to provision for Long service at work, housing and transport allowance, provision for post retirement healthcare benefit, [inaudible] and certain of application accounting issues relating among other things to the consolidation of our subsidiary [inaudible]. Throughout these adjustments namely provisions for long service to work and provision for post retirement benefits are likely to have an impact on future financial statements. A detailed description of the [testament] is contained in the amended Form 20F and our consolidated financial statement. While the completion of our audited financial statement and the filing of our amended Form 20F with the U.S. SEC is a very important step in resolving these issues relating to our Form 20F and the Europe the last step it would not be unusual for the U.S. SEC to [comeback] a detailed review of our amended Form 20F and [inaudible] explanation of any disclosure from TELKOM. We are not certain whether the U.S. SEC will choose to review our Form 20F for 2002, 2003 or a later filings revenue any, but we are of course prepared for the possibility of such a review and to respond to any comments the SEC may make.

As I had said previously, TELKOM has threw out [inaudible] and continue to be committed to compliance with all applicable [inaudible] and stock exchange requirements. Over the last several months, TELKOM has regularly updated the market with information on the progress of its 2004 audit and had such regular update calls with a vision on the U.S. SEC, the New York Stock Exchange, and [inaudible].

Going forward, TELKOM intends to [commit the] financial results with improving its funding and financial growth expansion and international growth to ensure that the statements are avoided in the future. In order to ensure that shareholder has an opportunity to approve the outdated consolidated financial statement for 2002, 2001, and 2000 TELKOM intends to hold an extraordinary general meeting on March 10th. Following the appropriate shareholder resolutions TELKOM will replace these old consolidated financial statements of 2002, 2001, and 2000, filed at [Bandung] and the Jakarta Stock Exchange with the newly issued ones and according to the New York Stock Exchange listed rules TELKOM will start [to check] its copies of its amended annual report on Form 20F through its [PDR] disclosures.

I would like to refer you to our press release dated February 9th, our audited consolidated financial statements in our amended annual report on Form 20F for a more detailed explanation of this method. And I think you would like to review our Form 20F from the U.S. SEC website or from www.telkom.co.av. This is will end my remark and let us continue with the question-and-answer session. Thank you.

Thank you Mr. Kristiono. Now we will now continue with our question and answer session. Before asking your question please provide your name as well as the name of your company. The first question please, Ms. Nora.

Thank you Mr. Soekarno. We will be conducting the question and answer session 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 to ask a question. Please state your name and your affiliation before posing your question. Once again press "*" "1" to ask a question. We'll pause for a moment to assemble the queue. Mr. Soekarno, we'll proceed to the first question.

Hi this is Navin Killa from Morgan Stanley. Thank you gentlemen for the conference call, I just wanted to get a sense of the changes that you have made in your employee benefits and what have you -- how does that play out in doing accounts into the future year, what kind of an increase are you looking at in your 2003 employee comp and going forward? The second question I had was on consolidation of [volume building cost], what exactly are the changes you've made. I would imagine you have [inaudible] was consolidated if you could throw light on that, that will be great, thanks

Thank you Navin for that, because your point is not so clear I just might repeat the question. First of all the changes when it came to employee cost going forward and second is for the primary changes what's exactly the number. Okay for the first question may I invite Mr. Agus Utoyo

Okay good morning Mr. Navin Killa. Going forward our changes in the employee cost, I can say that in 2003 there's of course we have to add for the employees 164 that approximately according to the actual calculation that we have to add one other [58.1]b rupiah in 2003 and in 2004 we had 99.1b rupiah. This was [inaudible]. In the -- sorry in the net benefit cost return, benefit cost in 2003, we are the -- we've absorbed [675.0b] rupiah, in 2004 approximately 749.2b rupiah. Thank you, that's all.

Sorry, just to follow up on that does it also impact your numbers from '05 onwards or is it just an adjustment that you have to make in '03 and '04?

Sorry once again. Can you just repeat the question, Mr. Killa?

The question is, will it also impact your numbers from '05 onwards. I know it's difficult to quantify but just -- do you see your number going up, you know, on a...?

For, 2005 and 2006, 2007 for [inaudible] allotted may be a little increase. According to the employee -- number of employee and for net balance sheet it is cost according to the actuary calculation, approximately they will increase exactly -- I don't have any numbers here but our cost will increase some percentages from now.

Okay, second question Guntur will answer.

Good morning Mr. Killa, the impact after strong recommendation from the auditor, we should be consolidated primarily to make it 100% during the -- since the date of acquisition. So, the impact for 2002 after date of closing, additional debt for the balance is round 2.4t rupiah and for the P&L additional for the amortization intangible asset around 56b rupiah and for 2003 it's better around 43b rupiah. Thank you.

Okay Thank you. Bye Guntur. Now we can go to the next question.

Good morning. Hi this is [inaudible] from JP Morgan. Hi, just had two questions. To follow on the question about personnel expenses, were the increase in provisions for post-retirement benefits and the allowances, will there be any cash component or will this for non-cash. In short do you have to sort of fund, [add cash] to the pension and second question is for 2003 do you expect any positive reversals that will fight the offset with these increase? In 2002 we saw some positive reversals, just wondering if you will see that for '03.

Thank you Mr. [inaudible]. As far as the first question about the personnel expense [inaudible] some cash component and the [right conclusion] [inaudible].

Okay. Thank you. Some of the components that's been raised amongst us is discussed on a accrual basis.

So there won't be any need to borrow to put in exciting high amounts of money to the pension to fund it?

Sorry.

There's no need to induce cash -- additional cash into the pension fund?

Yes.

Okay.

Okay, for the next question -- for the next -- second question please can you just repeat it?

Do we expect for 2003 that if there will be any positive reversals similar to 2002 or we saw like trade accounts payable, there was a positive reversal and of course AriaWest was reversed?

Hoping for 2003 we don't have plan for the reverse, because it is already settled in 2002. Thank you.

Thank you.

Thank you, next question please. Nora.

Please go ahead.

From Goldman Sachs, I just had one question and it just pertains to your listing on the New York Stock Exchange. I just wanted to clearly get the understanding from the President; has there been any consideration or has his thoughts changed with regards of the benefits of being listed on the New York Stock Exchange?

Yes, thank you for the question. Yeah, we are committed to maintain our filings at New York Stock Exchange. The benefit is, since we understood that the New York Stock Exchange was tough in some of their regulation and would be also in other side would give the [benefit] of companies to improve the governance of the company.

I think that answers all your questions.

Just a quick follow up, so you are quite happy to pay any penalties that could be levied on the company?

Yeah, I don't know -- we have noticed from the New York Stock Exchange or even the [inaudible] section penalty.

Okay. Thank you very much.

Okay. Thank you.

Ms. Nora next question please.

The next question.

Hi, morning. Freddie [Mulligen] from Merrill Lynch. Can you elaborate on why do you need to adjust the deferred tax fees? Thank you.

Guntur.

In our previous financial report we adjusted the cumulative of difference liabilities income tax that mainly reflects from our ownership in associative company. So, the solution we attributed, they are related adjustment to period 2000, 2001, and 2002. The impact for net income 2000 is around 54b rupiah, 2001 67b rupiah, and 2002 286b rupiah.

Thank you.

And in fact equity, 2000 84b rupiah, 2001 526b rupiah, and 2002 negative [137b] rupiah and -- this the condition is mortaring [ph]. Thank you.

Okay, hello. If I can follow up, what are the associates that impact the deferred tax?

Hi, Freddie, I am pleased to inform you that related to our deferred tax liabilities, mainly in our subsidiaries, also we -- it [defines] that for the subsidiaries more than 25%. This will be no deferred tax liability recognition, so previously we recognized it as one time in 2002, but after the restatement, we have to make retroactive allocation for this year.

Thank you. [inaudible]. I hope you had answer for your question perfectly, next question please.

Mr. Soekarno, there appears to be no more question.

Okay.

I'm sorry sir, one more question just came through and I will open up the line.

My name is [Raymond Gusafi] from CLSA. I have a couple of questions, first on the pension fund that you have allocated, who managed the pension funds and are you intend to outsource this to professionals, that's number one? Number two, have you appointed an auditor for your 2003? And number three -- question number three, can you repeat again to me about the impact on the net periodic retirement cost benefit for 2003 and 2004 earlier that you mentioned in the first questions? And the last one is on the personal expenses, can we'll be able to get how much is the cash component, etcetera? Thank you.

Thank you Raymond. So, for the question about pension funds; it can come from the professionals, obviously they can answer the questions. Agus.

Thank you. Pension funds now means they either [inaudible] that's our organization that sends 94. That is before it's additional pension fund and in 2000 -- and the professional tax now meaning pension fund is coming from TELKOM itself and the auditor for 2003, we want to appoint a auditor that is according to the -- or refer to the auditor that's appointed by TELKOM. And the next question is for the net allocated cost retirement benefit costs that in 2003 that we took 675.0b rupiah and 2004 we plan at 749.2b rupiah and for -- okay and net periodic pension cost itself is for 2003 it's 46.0b rupiah, in 2004 it's 133.2b rupiah.

Can you repeat that again -- the last number?

133.2b cost for 2004 and 46b rupiah for 2003.

Okay.

[inaudible].

Sorry, but that could be the pension fund, so you manage it yourself, you intend to give it to us or talk about please, well I don't know, local fund management?

Yeah, we just [ended the] discussion for this.

Okay, thank you.

The [inaudible] relating to the appointment of the [inaudible] for 2003 [inaudible].

Yeah, then [you regard] that will be there for 2003 back on completion of [inaudible] so we start the collection for auditor of 2003, [inaudible] 2003 auditors. Thank you.

Thank you [Patrick], I think that satisfied the question about segment.

Okay, thank you again.

Nora, please next question.

Next question sir.

It is Navin from Morgan Stanley again.

I am sorry Mr. Navin. We actually cannot hear you sir, can I ask to pickup the handset if you can sir.

Hello.

Hi Mr. Navin.

Is that better.

I'm sorry Mr. Soekarno, are you able to hear Mr. Navin better.

It is very difficult to hear

Yes. So Mr. Navin are you on a handset sir or a speakerphone.

You know, what I already picked up the handset. I'll try to be loud.

You cannot.

Actually I had a follow up question, first is if I look at your fixed lines numbers relative to 2002 it has gone down across the board costing a new set of numbers to your previous set of numbers, I imagine it has do with the deconsolidation of [personal] expense could you please clean that and second for '03 could you provide guidance for your consolidated personal cost in total including one on what you have?

Okay, thank you Mr. Navin Killa. I am sorry the voice was very low so I just want to rephrase the question, for the -- second question about the guidance was 2003 consolidated personal expense, is that right?

Yeah, that's right.

Okay, I think we can start from that question first.

Our consolidated of the personal expense in 2003 I just have a figure for unconsolidated, sorry for unconsolidated figure I'll just tell you that for unconsolidated is 3.00 -- 3.066b rupiah for 2003 unconsolidated personal expense.

Right, so this is only for TELKOM?

Yes, this is only for TELKOM.

And roughly would you be able to give some guidance as to what the number will be?

Yeah, after all this, I think I will give you the number?

And the second question was on fixed line revenues, if I look at the new set of numbers for '02 and compare them with the old set of numbers the fixed line numbers are actually down and I would imagine it has to do with the deconsolidation of one of the [inaudible].

Ms. Nora -- I will just repeat the question.

Okay, Mr. Navin for 2002 before we accrue the consolidation the -- of Pramindo Ikat is by the accounting, [inaudible] 51. It's been deconsolidated for full year and will decreased in the bottom line pre-acquisition loss. But after we discussed with the PWC auditor they recommended us to use the Indonesian Accounting Standard Number 4, the acquisition accrued since the date of the closing of acquisition. So the impact to the profit and loss for the fixed line before we accrue 8.327t rupiah's and after we changed the accounting standard 7.264t rupiah's. So it decreased around [inaudible] 77% at the said month.

We will move to the next question Mr. Sukarno.

Yes.

Hi, hello. It's [Tean Dowe] from Alliance Capital. Just a few questions on the pension fund, again apologies if someone has already asked this, I joined the call a little bit late, so apologies for that. The status of the pension fund now, what is the status or what is the value of your assets versus the, you know, the future value of your liabilities and what assumptions have you used to value that pension fund i.e. what functions have you used for wage growth for return on your investments? The second question is I believe at the moment your pension fund is a defined benefit pension fund. At least Indosat moved to a defined contribution pension fund some years ago, is there any plan to move to a defined contribution plan for your pension fund? And then the third question is just on -- could you give me some idea on the pension fund assets, how that is split between fixed income instruments cash and equity? Thank you.

Okay, thank you [Tean]. First question about the status and evaluation of our pension fund will be answered by Agus and also how is the asset spilt between cash and equity.

Thank you. First of all the assumption of the -- for the pension fund, mainly it's under this complete factor is 13% for the pension fund and for the policy of pension fund it's [inaudible]. Now we follow the defined benefit and for the employee that joined the TELKOM since 1995 we -- now we split the policy not in the defined benefit, but now in the, what we call it defined contribution. I am sorry that's not in 1995, but since July 2002 that's for the new employee that we split the policy not in the defined benefit, but in the contribution scheme here, defined contribution scheme and the splitting for the cash and equity may be Guntur, would you help me to answer.

Hello, Mr. Soekarno, please excuse the interruption.

Just hold the line, please.

Yes sir.

So cash equivalents and bank deposits-- and three are [inaudible] investment here.

I am sorry, what was the proportion, again I got cut off?

The proportion that for the -- this is deposit from our pension fund and for such investments that's not more than 20%.

So not more than 20% in each [of this].

Yes.

Sorry I missed. You referred to a figure of 13% right at the beginning, what does that refer to?

Per sector it is 13%, not 30, but 13%.

Sorry, what does that refer to?

That refers to 13%, 13.

Okay, alright.

Okay, thank you [Tean]. Can we just please go to next question, Ms. Nora.

I am sorry Sir, there seem to be no more questions at the moment.

Okay, so that's the close of questions and answers and of the conference call. So this audit closed [inaudible].

Thank you, Rochiman. One again I would like to again thank you very much for all of your support and taking part in this and we all would like to again strengthen our [inaudible] in order to avoid any statements [inaudible] thank you.

Okay. Thank you. Nora, could you please.

Thank you sir.