Telkom Indonesia (Persero) Tbk PT (TLK) 2006 Q2 法說會逐字稿

Good day, everyone, and welcome to the P.T. Telkom first half 2006 results conference call. [OPERATOR INSTRUCTIONS]. At this time, for opening remarks, I would like to turn the call over to your moderator for today, Mr. Harsya Denny Suryo, Vice President of Investor Relations and Corporate Secretary. Please go ahead, sir.

Thank you, [inaudible]. Ladies and gentlemen and all participants, welcome to this conference call of P.T. Telkom Indonesia Tbk. Today we will discuss the first half-year results for the year 2006. We would like to mention that the info. memo for the half-year results has been released on August 1, 2006, and it is available on our website www.telkom-indonesia.com. I'll repeat that again – www.telkom-indonesia.com.

I'm delighted to announce to you today that the speaker on the conference call will be the President, Director and CEO of Telkom, Mr. Arwin Rasyid. And, accompanying him, will be the Members of the Board of Directors and most of the senior leaders.

Now ladies and gentlemen, our time for this call is only one hour and this is -- also includes a question and answer session at the end of the presentation. We will have a taped recording of this conference call and it will be available to you one hour from now for the next 24 hours.

Therefore, today I'm delighted to host Mr. Arwin Rasyid, President, Director and Chief Executive Officer, Mr. Garuda Sugardo, as Vice President, Director, Mr. Rinaldi Firmansyah, as Director of Finance, Mr. John Welly as Director of Human Resouces, Mr. Guntur Siregar as Director of Consumer, Mr. Abdul Haris as Director of Network & Solution, Mr. Arief Yahya as Director of Enterprise and Wholesale. And, also, he is not present today, but in line will be Mr. [Yusaf Cuniar as Telkom Sales, President, Director, Finance Director]. And we also have [Mr. Vinta Ramasta] who is also on the call.

Among us we have also our Executive Vice President, which I would like to also announce Mr. David Burke as Executive Vice President for Strategic Investment and Corporate Planning. And we also have [Mr. Pracitio], the EVP for Risk Management and Legal and Compliance, and [Abing Ahmed] as EVP for IT and Supply.

Ladies and gentlemen, I would like to make it clear that some statements made during this conference call may be forward-looking in nature. I am reminded to point out the disclaimer that actual results could differ materially from projection, estimations or expectations voiced during today's call. These may involve risk and uncertainty and may cause actual results and developments to differ substantially from those expressed or implied in these statements. The Company does not guarantee that any action which might have been taken in reliance on those statements will be -– will bring about specific results as expected.

Therefore, it's now my pleasure to turn this call over to Mr. Arwin Rasyid. So Arwin, the time is yours.

Thank you, Denny. Dear analysts, first of all I thank you attending this conference call. I appreciate for giving the time to be here with us today. On behalf of Telkom, allow me on behalf to extend our thanks for the shareholders for the support at our recent Annual General Shareholders Meeting that was held on June 30, 2006. We have announced the results of the meeting in the media, along with a press release [inaudible] which has been posted on our website from July 5, the same year.

Today, we are pleased to announce that the Company has delivered substantial profit for the first half-year results, mainly from tapping into the growth markets. Our first half-year result for 2006 has improved significantly compared to the same period in 2005. Allow me to update you on the progress of our main businesses, as follows.

Telkom Fixed Wireline, as of June 30 2006, the Company recorded growth of 8.7m Fixed Wireline in Services, excluding fixed wireless. This has grown by 0.3% compared to the same period in 2005. In addition, the ARPU for Fixed Wireline remains relatively stable at IDR200,000 per month.

Flexi, or the Fixed Wireless, Flexi [picked up] 3.2m subscribers, or a decrease by 6.5% compared to the same period in 2005. I would like to mention to you that this was mainly due to the results of bonus program that was initiated in April to June of 2005, the last year. However, in 2006, we do not offer such program, thus the results differ from the previous year. Flexi is now available in 235 cities across the country supported by a network of almost 1,500 base stations.

Today, Flexi continues to keep its leading position as the market leader in the fixed wireless market, with 85% market share, or 69% in the limited mobility market. Then the ARPU for Flexi has increased by 23% in the first half of 2006, to be [IDR53,708] as compared to only IDR43,686 a year ago.

In June 2006, we launched a new sales package as a way to bring more excitement to the market by introducing Flexi Sure Price. This promotion package allows subscribers to use local tariffs for Flexi-to-Flexi calls for only IDR49 per minute, and domestic long-distance calls for only IDR900 per minute. In the last few months this promotion has generated significant increases in terms of minute usages.

Let's look at our international line, 007. In the IDD businesses, for the first half-year result, Telkom's 007 has generated net revenues of total amount of IDR362b. This track record growth of 47.5% compared to the same period in 2005. I'd also like to mention to you that Telkom [inaudible] for IDD business has recorded a total of 341.4m minutes for incoming and 71.1m minutes for outgoing international traffic.

Now let's turn to Telkomsel. During the first half of 2006, the competition in the Indonesian mobile services industry has been quite fierce. Nevertheless, Telkomsel has been able to maintain its lead position in the market by picking up the major part of new additions in first half of '06, adding 5m new subscribers, making that a total of 29.3m subscribers as of June 30, 2006, an increase of 36% compared to the previous year.

Telkomsel's [practical] usage recorded a total of 7.9b minutes or a growth of 84% compared to the first half of 2005. As a result, we are pleased to inform you that Telkomsel is by far the market leader of full mobility wireless with more than 50% market share. As of June 30 2006, the total number of base stations grew by 57% to reach 12,156 units as compared to last year.

[While in the] [inaudible] recorded double digit year-on-year, Telkomsel's [inaudible] ARPU decrease year-on-year just by 2%, from IDR87,000 a year ago to IDR85,000 today. While the ARPU of pre-pay subscribers, mainly [a forced impact to us], increased by 4% and 19% respectively.

For our broadband [over] ADSL [inaudible], TelkomSpeedy, we are currently concentrating on aggressively expanding Telkom's Speedy Broadband Services into many cities around the nation by reducing tariffs, repackaging the product and improving customer services. We have also intensified our promotion [inaudible] including co-partnerships with other parties.

As of June 30 2006, TelkomSpeedy has recorded total number of [47,234] subscribers, which are mainly in Jakarta, Surabaya, Bandung, Semarang, Medan and Makasar. In the first half of 2006, Telkom has also launched a campaign for [inaudible] TelkomSpeedy, called Internet 'Go to school'. We also do a joint program with [inaudible] BNI, also [Benmandiri], Microsoft, Intel and Zyrex, a local PC [inaudible] –- sorry for that. Okay, so Zyrex, a local PC manufacturer. This response, during the last [few] days of school was quite positive particularly with the joint effort initiative of Microsoft, Intel and the like.

A month later, on July 7, Telkom has expanded its Speedy Services commercially in 22 cities nationwide, by promoting new tariff packages with cheaper rates compared to previously. And this year we have seen a growth as a result of the above endeavors.

Last but not least, I would like to touch a bit on our dial-up Internet Services, known as TelkomNet Instan. As of June 30 2006, we recorded 645,700 plus fixed-telephone subscribers who have access with TelkomNet Instan, totaling 1.7b minutes of usage. Compared to last year, this traffic has a growth of 26% over the previous year.

Ladies and gentlemen, I would like to move on now to highlight some of the first half-year financial results. I will not attempt to repeat all the numbers you have already read in the earlier [national] info. memo, but I would like to mention that the first half year of 2006 continues to be positive for Telkom Group. The performances were mostly attributable to the following points.

EBITDA consolidated has shown growth in activities at [inaudible] or an increase of 31% compared to the same period last year. The consolidated EBITDA margin improved significantly from only 61% a year ago to be now at 65%. Operating revenues consolidated also grew by 24% to IDR24b, again showing a double-digit growth. Net income per share reached IDR288.7, or grew 53% compared to the same period in 2005. The three biggest revenue contributors of our first half-year results were mainly from Cellular, Data and Internet -– and Interconnection, [or] each has grown by 47%, 34% and 13% respectively.

Meanwhile, in the area of OpEx or operating expense, total consolidated operating expenses have increased by 16.7%, but the main factors were mostly contributing to growth, resulting in a 30.4% increase in depreciation, 20.8% increase in operation maintenance and telecommunication services, and 22.4% in G&A expenses. On the other hand, personnel expenses decreased by 0.7%, mainly due to the fact that an early retirement program was not initiated in the first six months of 2006. Our [inaudible] policy is not to introduce the early retirement program for 2006.

Finally, I'd like to touch on the cash position of the Group. As a result of Group profitability and better collective efforts, the Group's cash and cash equivalent position for the first half of 2006 was maintained IDR9.3 trillion compared to only IDR6 trillion in the same period of last year.

So next, I conclude, the other developments for the first half year [inaudible] to you is showing progress in almost all of our business segments. Moving forward, our intention is to accelerate even more our corporate growth, particularly by ways of synergizing the companies among the Telkom Group, as well as other parties. And with this we will assure ourselves the growth potential is sustainable in the long run.

Well analysts, this concludes my presentation and now we can proceed with Q&A. Thank you very much.

Thank you, Arwin. Now let us open the question and answer session. As we have indicated earlier in the program, before raising your questions, please do mention your name and the company that you represent. Operator, we would like to start with the Q&A. May I have the first question please?

Thank you. [OPERATOR INSTRUCTIONS] We will start with the first question.

Hello, this is [Sundeep Bihani] from Lehman Brothers. Thank you, gentlemen, for the call. I just have three questions, first of all is on your CapEx. Your CapEx for Telkom unconsolidated is only IDR704b compared to your full-year guidance of IDR6.8t. So any sort of color for the second half spending, are you going to ramp up significantly?

Secondly, on Flexi, it looks like Flexi has lost some market share in places like Jakarta and Bandung to competitors, whereas it has been gaining subscribers in outer areas. Do you still maintain your full-year guidance of 6 to 7m subscribers?

The third is on the $1b in cash lying on your balance sheet. What kind of feels are you getting here and any plans how you are going to use it, other than spending it on buybacks?

Also any color on your buybacks would be helpful. Thank you very much.

Okay, thank you very much, Sundeep, from Lehman Brothers. I think I will like to hand over to Rinaldi on the CapEx question, and perhaps maybe on the share buyback before we talk about Flexi. And the [inaudible] cash yes, please.

Yes, Sundeep. I think, okay, on the CapEx program, one is actually we have a few delays on the CapEx spending of this year because of several things. One is we move from a short-term contract to a more to mid to long-term contract. And second, due to the circumstances in Indonesia, most of the procurement is done through the [inaudible] for two purposes. It's for the governance purposes and for the helping efficiency in the CapEx, [with] -– actually we have experienced an efficiency. And the third is particularly also because, by doing that, as I mention, we are -– we have been able to reduce the CapEx cost. So the guidance that we gave, I think up to year end, yes, while we may basically strike most of the little projects in the realms of 75 to 80%, however, the payment terms is around only 45 to 50%. Yes. That is one.

So this is relative to your next question on the [inaudible] in our [hand]. This is basically because of this slow [inaudible] in the CapEx program that we are doing in year 2006. However, as you recall, this August 9, actually tomorrow, the cash will be already reduced by around 4.4t because we are paying the dividend tomorrow. And, basically, we like to maintain our cash position as before because I -- for example, our Telkomsel subsidiary has started also to borrow some money from the bank because of their CapEx spending, etc. and dividend that they have to pay to Telkom.

And secondly, on the shares buyback. On the shares buyback, we did the shares buyback. Up to now it's around 79m shares, or, in rupiah – haven't got it – it's more than IDR500b already.

So that is to answer your first and third questions.

Rinaldi, if I may clarify on the CapEx. So does that mean that the rest of the IDR6t would hit the second half numbers?

Yes, and that's basically in total from 6.8 up to year end, the -- basically completed one is only around 45 to 50%.

Okay thank you.

Okay, I think for the next question I'd like to introduce Guntur Siregar on the Flexi market share.

Thank you. For the Flexi market sales, compared with the other operators of fixed wireline access for the national market shares, Flexi around 74%, and particularly for the Jakarta and Bandung, around 60%. The capacity of Flexi total [inaudible] now is 3.2b and we submit, until the end of this year, around 4.5b. Thank you.

If I may add to what my colleague, Mr. Guntur Siregar, has mentioned to you about Flexi, let me share with you some perspective. Number one is that we are very well aware that the net adds of Flexi for the first half of 2006 is significantly below the first half of 2005 if we compare period to period. However, I did mention in my opening remark just now that the numbers can be misleading if you only look at Jakarta's alone because we did mention to you just now and in the past at previous conference calls, that the high increase in the subscribers of Flexi in 2005 was because of our very aggressive promotion campaign, which, however, led to quite a high [depression] in the first few months of 2006.

But to give you numbers from another angle, I just want to share with you that if you look at the production of minutes. The first half of 2005 the production of voice minutes of Flexi was 1.5b. In the first half of 2006 it reached already 2.2b minutes compared to the same period, period-on-period. That's an increase of 43%.

And if you look at the revenue side -- we don't have it for you in the info. memo -- I just want to show you some numbers. Taking the first half of 2005, the net operating revenue of Flexi was about IDR500b. In the first half of 2006, it has reached already for the [inaudible] around IDR1.1 trillion. This is more than 100% increase.

I just want to caution you not just to look at the number of subscribers but do look at the increase, because there's been an increase in the production of minutes [inaudible] increase in our revenue for Flexi alone.

Now then the other question, what is our expectation towards 2006? We are quire confident that total sales will be over 3m. But then, of course, if you think about the kind of churn, we have a very heavy churn in the first few months of 2006. If you really want to know the net debt, we will definitely revise the expectation, but, before the net debt was anywhere between 5m to 6m. We are looking for 2006 for net debt not to exceed 1m, simply because of the very, very high churn that appeared in the first few months of 2006 as the result of a very aggressive promotion campaign that had been in the first half of 2005.

Is that okay, Sundeep?

Yes indeed, thank you very much [inaudible].

Right thank you. May we have the next question please?

Hello, Karen Ang from Citigroup. I have three questions, first is on your EBITDA margin. I know that if I strip out Telkomsel on the consolidated EBITDA, your margin, sales, something like to 49% in the second quarter from 59% in the first quarter. Is this trend likely to persist through the rest of the year and what do you think is a sustainable EBITDA margin for Telkom ex Telkomsel?

The second question has to do with the cost base Interconnect, which, I guess according to press reports, you have already accepted the RIO being put forward. Can you remind us again what the impact is to Telkom, Telkom's revenues, from an adoption of those RIO's?

And the third question is a follow-up on CapEx. So can you just clarify what the cash CapEx spending for '06 will be for Fixed and for Wireless? And if you can give me a similar number for 2007? Thank you.

Okay thank you. That was Karen Ang from Citigroup. I'll just take your question one and three, simply because it deals with finance, and the second one on costs for Interconnect. The first one I will hand over to Rinaldi.

Hello Karen. I think you pointed correctly that there is a slight decline on the EBITDA margin for the Q2 2006. I think that one should look at the EBITDA margin not on Q1 basis, but -– really like to look at [technical difficulty] -– financial figures --

I think these are the times in which we have enough seasonal and personnel expenses in terms of incentives, bonus, etc. [Technical difficulty] additional [inaudible]. And also I think there are some related costs in the marketing in the subsidiaries with Telkom in the second quarter of 2006. So the biggest factor is seasonal. It's like at the year end we definitely will have also another seasonal expense in terms of the salary, incentives, etc.

So I believe that is so. If you look into the EBITDA margin, I think have a look there at the full-year EBITDA margin and compare it year-on-year.

So what was the sustainable --?

[inaudible]

So what would be a sustainable EBIDTA margin for Telkom ex Telkomsel for the full year then? What would be your guidance?

All of Telkom?

Ex Telkomsel, yes.

Excluding Telkomsel yes. I think for Telkom still our EBITDA margin is about around 28%.

For full-year guidance?

Correct.

Okay.

Yes.

Okay thank you. We'll lead to the next question regarding Interconnect. I'll hand over to Abdul Haris.

Thank you, Karen. Regarding the degree of [inaudible] 2006, the cost base Interconnect [inaudible] will be implemented January 2007, so there is up to 2006. But, for the implementation of 2007 there is an impact, but there is a balancing between local and long distance, so the total slightly, only slightly different. I will submit only [1.20%] for the total [inaudible]. This is the impact for the tariff connection of cost [base in 2007].

Sorry, 1.2% of total revenue? Decline, 1.2% decline.

Yes, that's correct.

Thank you.

Okay? Thank you. May we have the next question please?

Please go ahead.

Hello, good afternoon and thanks for the call. This is [Louis Helado] from JP Morgan. I just have three questions. Just looking at some of the Q-on-Q trends in terms of revenue, and it seems your Data and Internet revenues were down 10% Q-on-Q. I just wanted some color on why that's happened and if we should expect this to recover in the second half?

Same thing with local call revenue, they seem to be down 14% Q-on-Q.

And, lastly, in terms of Interconnect revenue, seems to be flat Q-on-Q. If you could you also give some -– shed some light on what's happening.

Okay Louis Helado from JP Morgan. So I understand two questions, right? Is that correct?

Three. Three revenue components, local revenues, Data Internet and Interconnect.

Okay thank you. We have Rinaldi to answer your question.

Hello Louis. I think let me ask -– answer first on the question on the Data Internet. I think, as you may see, on the Internet there are a few things in the Internet group account of revenues. One is on the FMS, second is the real broadband, and third is the other type of the broadband and Internet services that we are offering.

So, from those five, of Internet and broadband services that we are offering, a few things are occurring and a Q as to compared to Q1. One is, and the biggest part is, due to [happy promotion and gimmick] from our Cellular Telkomsel. Then the FMS revenue of Telkomsel at Q2 is declined of around 10% as compared to the Q1. However, this decline is, on the Telkomsel -- also happened because of the promotion of the FMS, of [inaudible] etc.

So those are the biggest factors of the -– why, on Q-on-Q, Internet is declining. We do expect that by having more subscribers this impact on this decline will be stabilized and we'll start to increase in the third and fourth quarter, especially because now we are launching Speedy, we are launching a few broadband services. That is one.

On local calls, yes. Local calls, I think as you understand our local calls we experience a decline because of the –- one is the production because of less uses of the local calls compared to others, so that means people is shifting a little bit here. This is mostly -– this is on the local calls, yes. Sorry.

[Inaudible].

Interconnection, q-on-q, yes. There is an increase actually on the interconnection.

Is it about 1%?

Yes, interconnection increased by around 1%. That is due to several [inaudible] contributions. One is the [inaudible] grew by around 2% while the international interconnect is down by 5%. So in total interconnection is growing slowly. We are still looking at what would the trend on the interconnect going to be in the next few months. Because as you understand now, you know, operators are directly offering the on-net traffic. So we really are looking of what is going to happen in the next few months. Thanks.

I have one final question on local call revenues and do you think they will recover second half or should we look at decline for the year?

No, local calls, I think, year-on-year, we see the decline, small numbers of decline, yes.

Okay.

Okay, that was Henry Halargo from JP Morgan. May we have the next question please?

Good evening, Suresh Mahadevan, ABN Amro. Thanks a lot for the call. I have three quick questions. One is the Telkomsel. I’m looking the EBITDA line and it’s seems pretty constant for the last three quarters. Is that a function of having a very, very strong fourth quarter or what should we expect going forward? I think that is question number 1.

Question number two is related to Flexi. Just to follow-up I understand you guys are trying to shift the [inaudible] frequency particularly Jakarta, [Bandung, and West Java]. I wanted to just understand from you what the financial impact of that will be in your income statement? That is question number two.

Question number three is for Arwin especially on his mission to triple the market value. I think we’re already at [$17b], so you are well on the way. I just want to hear from him in terms of what are some of the milestones that we should see in coming quarters and what are some of the specific steps you are taking in terms of getting to your goal of tripling the market value? Thanks.

Okay, great, three questions. So we have three questions on EBITDA and Flexi and then on the market cap. Let me see if I can –-

Hello.

Yes, hold on please. Yes please, anyone from Telkomsel.

Yes, [Emil Sucaril] here just trying to answer for the question about the EBITDA comparing Q4 to Q1 2006. It was following this comment about the additional cost increasing for Q1. It start from Q1 you are seeing the [inaudible] are additional. [Inaudible] because they always assimilate in three years. We call it, it is not significant but always debatable on that, so that’s why just following on that way. But that’s why the difference, just because of the accounting system itself. But according to the figures, you see on the figures it’s not so significant about that line. Thank you.

Yes, I just wanted to know what the future trends look like. Because the EBITDA line it’s pretty flat so your revenues are stagnant, no.

I believe we can grow about 24 to 25% for the EBITDA and we’re just to trying maintain it until the [talent] of our businesses is [worked out]. But we believe we can maintain our EBITDA level on 70%.

Okay, thanks.

Okay, so I think we go now to [inaudible].

I think let’s on the Flexi migration, we have disclosed previously in our year end 2005 numbers in which we have excellent depreciation and impaired some assets at a value of IDR850b. And this will be continued in year 2006 and be around, because there are two things. One in the Flexi, second is the migration of the Wireless Local Loop. So the total impact for 2006 is around [IDR550m], additional impact, accelerated depreciation.

Despite IDR50m [inaudible].

Yes.

And what about ’07 is there any [left over] [inaudible] costs?

’07, well it would be less than -– it will be less than IDR300m.

Okay, thanks.

Okay, I think we now move on to question on market cap to Arwin.

Sorry, I didn’t get your name, what’s your name again?

Suresh.

By the way I think you for your billon dollar question. First of all we all understand that the growth in the share price of the Company is not solely determined by the Company’s performance. Also determined by other factors outside the control of the Company. However, let me just share with you briefly what’s happening, or what’s cooking, but of course, allow me not to disclose to you in greater detail, otherwise we are –- it won’t be a surprise for you anymore.

The first thing I want to tell you –- to mention to you – well there are three things. We already embarked on a specific road map study and it just started last month. It will be completed somewhere between October or early November the latest of this year. From that specific road map study we will have a very clear idea how we will go forward to achieve the target level that you just mentioned, you just asked just now. Basically as you can see now it is only in the year 2006 that we have aggressively unbundled our broadband ADSL and the figures only really come into shape somewhere in 007.

At the same time, we would really like beef-up our pay-TV business. You are aware that in Indonesia today there are already more than 28m households that have television. So we think that with our [inaudible] subscribers and with the introduction of the broadband ADSL we should be in the position to be a player in the IPTV within the next two years, which would come out from the result of this study.

Other than that, you know, we all know that a lot of Telecoms is talking about triple play. And looking to the direction, nothing is going to happen in ’06 but it will definitely happen also within the next two, at the most, three years.

So in a nutshell all I’m saying there’s a lot of excitement in the period to come. This year, ’06, is the year of foundation. We’re building a foundation. And we hope as a result of this foundation building will bear fruit in the years 007 and 008.

Well, I hope that answers your question, more or less, thank you.

Thank you Arwin. I think now we can also take another question. Perhaps maybe from participants. Do we have any questions please?

My line is live right now. Colin, here from Credit Suisse. I just have a couple of follow-up questions.

Just on Broadband as Arwin was mentioning and also on tying in with what Rinaldi was saying. Given the CapEx slowing down a bit this year, what would be realistic Broadband targets for in this year and in next year?

And a second question just digging into the cost base interconnect issues slightly deeper. Can you give any indication over what proportions of your Interconnect revenues are coming from long-distance revenue versus local revenues? Thank you.

Sorry, may we have your name again please.

It’s Colin McCallum here, Credit Suisse.

Yes, hi Colin.

Okay, Colin I think both questions will be answered by Guntur Siregar, one on Broadband and also on the Interconnect, perhaps Mr. Haris will also add on.

Okay, thank you. For the Broadband Speedy customer until the end of June some 47,000. And now it’s already 53,000 customers, and we expect at the end of this year around 100,000 customers. And for the next year we have a plan to sell the Broadband Speedy around 200,000 lines. Thank you.

Let me add there actually on the CapEx to the Broadband is already finished that’s why we basically launched promo program in Indonesia on July 7. So while we mentioned that the CapEx slowed down in 2006, but actually on the Broadband it’s finished for 2006.

Thank you Colin. For the Interconnect cost base, actually the Government already makes calculation with consultants in August [inaudible]. And from the consultation there are some resolutions. All the costs already agreed actually among the operators and already stated in the decree of our Minister of Communication and Information. For instance, like [inaudible] interconnection termination fixed to fixed local, the current target 73, but the cost base according to the decree is [IDR157]. It could be anything.

Yes, thanks. I had seen the actual –- the recommended changes. I guess what I was looking for was any ideas on the proportion of your revenue which comes currently -– your interconnect revenues that you disclose as line item, how much of that is from the long distance type of traffic and how much of it is coming from the local side. Just so that we can understand better where the 1.28% conclusion comes from your own calculations.

Actually we want to follow this line, I mean the Government want to decrease cost base of local, our IDR152 per unit. But ultimately the Government cannot follow the reduced of local tariff from cellular to the fixed. As you know we want to recalculate the gains with the Government to make one conclusion, and Telkom is still in negotiation or still in calculation.

Yes, Colin, we do not have ready data for the separation that will be long distance and the domestic calls. I think please later on contact our IR online if you need the real data.

Okay, thank you very much.

Yes, thank you Colin McCallum. May we have the next question?

Please go ahead.

Hello this is [Reno] from IDC.

Can you repeat that again please.

This is Renault from IDC.

Okay, yes.

Okay, I have got several questions. The first one would be related to your international call revenue. I just want to know how much is the share for outgoing calls from your net international call revenue you have reported in the first half report?

And the second question is regarding ADSL, you mentioned also that the revenues also including the share from revenue sharing arranging. What is actually the total share from this revenue sharing arrangement? And would this be also referred to the Telkom link that is provided to ISPs?

And then the third question would be about VoIP. I noticed here that there is slightly decreased in your VoIP revenue from Q1 2006 to Q2 2006. Can you confirm about this. And if it is what would be the major reason for the decrease?

The last question is about your [IPPDN] service, you mentioned also in the report that there are 3,538 subscribers for IPPDN and my question is what is the percentage of revenue of this IPPDN from your data communication revenue?

Okay, thank you very much, Reno from IDC. We have four questions, relating to [inaudible] the Interconnect, ADSL on the revenue sharing agreement and the decline of VoIP. I would like us to have Rinaldi to answer on target questions and perhaps maybe the remaining we will ask Mr. Haris or Guntur to answer the follow-up. Thank you.

I would also like to invite Mr. Yahya to perhaps maybe to comment. We’ve got a whole mix of questions here that involves a number of Directors here. Rinaldi.

Reno, I think on the outgoing call on the international revenue. The international call revenue is around 362. If you –- the market share of this outgoing is currently around 50% compared to the competitors. That is the data that we have and estimated internally of the outgoing international call revenue.

On ADSL I think if you notice on the revenue sharing there are few areas in which initially Telkom is doing it’s piece on the revenue sharing with the vendors, that is in Jakarta and in [Suabuya]. I think what is the percentage of the revenue sharing, we share 40% -- for the revenue sharing it’s still around 40% of the total revenue that we receive from ADSL.

Rinaldi, I think by the question on the rate of VoIP, I’m talking about whether there is really a decrease. Perhaps can you explain to us really from Q1 to Q2 whether there is a decrease [technical difficulty].

The [inaudible] Data Internet from Q1 to Q2 is increased [technical difficulty].

Thank you.

Does that answer pretty much your questions?

I’m sorry but I cannot hear the answer for the VoIP services as it is breaking up.

In quarter two services is IDR147m and in quarter 1 2006 it was IDR78m, so there is increase about 50% more.

Okay.

Okay, Reno. I think overall that explains pretty much on the [inaudible] base side. Thank you for your questions.

May we have the last question please, because we only have small remaining time left? State you question and please state your name and company. Thank you.

Hi, hello this is [Piento from GIC]. I have three questions.

Number one, on your ADR listing, progress on making a decision there?

Number two, the progress of new entrants on the cellular side, are they having any effect yet on your business in terms of pirating your people, making your site acquisitions a bit more difficult, trying to poach some of your distributors?

Third question is just on [KSO7], any truth to the story that will be bought out fairy soon, i.e. in the second half of this year? And what price, what structure, and is it likely to result in any delay of your financial statement at the end of ’06?

Sorry, I have to apologize there’s a number that we didn’t get. First your name and the first two questions, can you repeat and can you speak a little louder please.

Sure, it’s Piento from GIC. The first question is on your ADR listing, have you made any progress on whether to terminate that listing or to carry on.

Second question is just on the progress of new mobile entrants and their affect on Telkomsel? As yet have you seen any effect in terms them in their pre-launch stage trying to pirate your key people or making your site acquisition more difficult or say try to get some of your distributors?

And the third question was just on KSO7 whether that acquisition will happen in the second half this year, what price, what structure and whether that is likely to result in a delay of the review ’06 financial statement?

Okay, thank you for your questions, and I think they were all clear. One is on the ADR listing, the progress of that. And then we understand questions on the new mobile entrants and the third one is on the KSO7 and the progress. This certainly some of the highlights I would like to pass to Arwin, who should be able to tell us on the ADR listing. And perhaps I would like to ask [inaudible] and perhaps me to add on.

Yes as you know this public ADR was actually, in fact, brought forward to us from the [inaudible] actually. They asked us to prepare a study with regards to our dual listing. The study has been completed and we’re already expecting the result within the next week. But what I can share with you at this point is that no decision has yet to taken by the State on Enterprise Ministry. However I can share with you that the result of the study indicates that it is positive for Telkom to remain in a dual listing position.

Your other question with regard to the [KSO] we’re like to inform you that we are very close to reaching agreement. We hope that the deal can be finalized optimistically in the third quarter of this year. And the price, it’s too premature for me to disclose the price, but what we are pleased to share with you is the price that will be achieved in agreement, is a very competitive price, and that has also been validated by independent consultants. That’s about it from my side.

Thank you Arwin. Rinaldi, just a little bit more on mobile.

Well, on the KSO7, I think you will see the same structure as what we did in [inaudible] ‘04. So this is basically a firm payment for every month and we call it early first cash flow. There is no cash outlaid in the beginning, the cash outlay, the cash payment will be coming from the operation of cash ’07. So that is basically what the structure will be. Thanks.

Thank you so much participants for your questions that you have given to us, very interesting. We would like to end but before we end we would like ask the CEO for his closing remarks. Arwin perhaps maybe can you give us your closing remarks.

Yes, well you analysts, this marks the end of our second quarter or first semester conference call. I must say that the first one year during the tenure of the new management of Telkom has been very exciting. We look with much excitement in the quarters to come, the years to come. And we would like to thank you for staying close to us and we hope that when we talk to you again for the third quarter results you will continue to be excited with Telkom. That’s all I want to say for now and thank you to all of you. Have a nice day.

Harsya Denny Suryo. Operator, would you like to conclude the conference call. Thank you.

That concludes today’s conference call. Thank you everyone for your participation.