.

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 6‑K

 

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13 a‑16 OR 15d‑16

 

UNDER THE SECURITIES EXCHANGE ACT OF 1934

 

For the month of April, 2019

 

Perusahaan Perseroan (Persero)

PT Telekomunikasi Indonesia Tbk

(Exact name of Registrant as specified in its charter)

 

Telecommunications Indonesia

(A state-owned public limited liability Company)

(Translation of registrant’s name into English)

 

Jl. Japati No. 1 Bandung 40133, Indonesia

(Address of principal executive office)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20‑F or Form 40‑F:

Form 20‑F  ☑           Form 40‑F  

 

Indicate by check mark if the registrant is submitting the Form 6‑K in paper as permitted by Regulation S-T Rule 101(b)(1):

 

Yes           No ☑

 

Indicate by check mark if the registrant is submitting the Form 6‑K in paper as permitted by Regulation S-T Rule 101(b)(7):

 

Yes           No ☑

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on behalf by the undersigned, thereunto duly authorized.

 

 

 

 

 

THEME

Stronger, for Your Digital Experience

 

The digital era has given rise to various innovations aimed at producing quality digital solutions, accompanied by best customer experience for customers. The increasing dependence of customers on digital services to support their activities has driven digital adoption across all customer segments to rise as well. As a result of this phenomenon, customers are increasingly abandoning the legacy business, which has traditionally been the main focus for telecommunication operators. Telecommunication operators who still depend on the legacy business are becoming increasingly irrelevant to the activities and businesses of their customers.

 

We realize that the only way to stay strong and still relevant to customers is by delivering quality digital solutions and best customer experience. We are certain that only with strong digital capabilities we can become good partners for our customers in supporting their activities and business operations.

 

To do so, during 2018 we demonstrated our commitment by consistently improving our digital capabilities in terms of services, infrastructure as well as customer experience. We continued to strengthen and develop digital services that deliver increased convenience, and also assisted customers with digitizing their business processes in order to increase the quality and competitiveness of their businesses. This was shown by the significant growth of our digital business, which has successfully compensated the decline of legacy business. We also strengthened our digital backbone network infrastructure, our fiber optic-based access and high speed celuular, and improved our IT capabilities and capacity from front-end to back-end as well as  developing various platforms and applications as enablers. In addition, we have developed digital touch points and leveraged big data analytics and customer insights to ensure that customers are able to enjoy a digital experience.

 

We believe that our actions and achievements throughout 2018, have strengthened our capabilities as a digital telecommunication operator. We dedicate all of this to our customers by delivering high quality services with best customer experience.

DISCLAIMER 

 

While preparing this Report, Telkom selected and presented material information and data for the investors, the goverment and other stakeholders. The materials that are used to prepare this Report are derived from reliable documents and sources. Other than historical information and data, this Report also contains Telkom’s forward-looking statement such as targets, expectations, estimations, prospects  and  projections of Telkom's operating performance and business condition in the future. Even after careful consideration and and a reasonable presentation of the facts in this report, Telkom realizes that there are risks and uncertainties which may be affected by many factors among other things the economic, social, and political situation in.  Therefore, in order to implement good corporate governance, Telkom cannot guarantee that all forward-looking statements made in this Report are entirely correct and accurate and can be fully achieved.

 

This report is available to download at www.telkom.co.id. Furthermore, Telkom invites all readers to submit questions and suggestions regarding to this Report to: http://www.telkom.co.id

 

Investor Relation Unit

Andi Setiawan

PT Telkom Indonesia (Persero) Tbk

Telkom Landmark Tower 39th floor, The Telkom Hub

Jl. Jend. Gatot Subroto Kav. 52 

Jakarta 12710, Indonesia

Phone +62-21-5215 109

Fax. +62-21-5220 500

E-mail investor@telkom.co.id

Facebook TelkomIndonesia

Instagram telkomindonesia

Twitter @telkomindonesia

 

 

 

 

TABLE OF CONTENTS

 

READING THE REPORT CONTENT

 

For the ease of stakeholders, Telkom divided this report into two main parts. The first part, from the front page of the Report to the “Management Report” and “Statement Letter”, is dedicated to readers who want to understand Telkom briefly. Investors and other stakeholders who want to understand more detail about Telkom may continue to read this Report from the first part to second part, namely the “About Telkom” section and so forth until the end of this report.

 

 

 

 

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KALEIDOSCOPE 2018

 

 

 

 

PROFILE OF TELKOM AND ITS SUBSIDIARIES

 

PROFILE OF TELKOM

 

 

Telkom is the largest telecommunications company in Indonesia with

PROFILE OF SUBSIDIARIES

 

 

INFRASTRUCTURE

The mission of the Telkom network infrastructure and development program is to develop and maintain an agile and resilient network and IT infrastructure to support the innovation of its digital services. 

 

 

 

PRODUCTS AND CUSTOMERS

Telkom has four main operating segments that are aligned with its parenting strategy and financial reports which are based on dividing customers into segments.

Note:

The data presented on this page is data up to December 31, 2018.

 

FINANCIAL DATA OVERVIEW

 

 

 

 

 

Remarks: 

 

 

                

 

STOCK INFORMATION

 

TELKOM’S STOCK INFORMATION AT THE IDX

 

The following is the report of the highest, lowest and closing share prices, trading volumes, number of shares outstanding and market capitalization of the stock which were recorded at the Indonesia Stock Exchange (IDX) for the periods indicated:

 

Telkom's stock price on the last trading day which was December 28, 2018 for the IDX closed at Rp3,750. At that price, Telkom's market capitalization reached Rp371.5 trillion or 5.3% of the total capitalization of the Indonesia Stock Exchange (IDX).

 

TELKOM’S AMERICAN DEPOSITORY SHARES (ADS) INFORMATION AT THE NYSE

On the last trading day  of the NYSE for 2018, which was December 31, the closing for 1 Telkom ADS was US$26.21. The following is the report on the highest, lowest, closing and trading volume of Telkom’s ADS which were listed on the New York Stock Exchange (NYSE ) for the period stated:

Effective October 26, 2016, Telkom changed the Depositary Receipt (DR) from 1 Depositary Shares (DS) representing 200 shares to 1 DS represents 100 shares. The presentation on the table above has accommodated the ratio change.

 

CORPORATE ACTION INFORMATION REGARDING STOCKS

 

Based on the resolution of the AGMS dated April 27, 2018, Telkom’s shareholders approved the transfer of the treasury shares totaling 1,737,779,800 shares at a cost of Rp2,541 billion which was provided by reducing the issued and fully paid capital from 100,799,966,400 shares to 99,062,216,600 shares.

 

 

 

BONDS, SUKUK OR CONVERTIBLE BONDS AND MEDIUM TERM NOTES (MTN) INFORMATION

 

 

 

 

 

 

 

 

 

 

 

REPORT OF THE BOARD OF COMMISSIONERS AND DIRECTORS

 

 

 

 

 

 

REPORT OF THE BOARD OF COMMISSIONERS

 

GENERAL OVERVIEW OF THE MACROECONOMY AND INDUSTRY

 

Amidst many challenges in the global economy, stemming from the trade war between the United States and China as well as the economic slowdown in several regions, the Indonesian economy was still able to record fairly good growth of 5.17%, better than 5.07% in the previous year. The government also managed to keep inflation under control at 3.13%, which maintained consumer purchasing power. This relatively good economic growth rate was driven by strong household, corporate and government spending, which was catalyzed among others by massive infrastructure development in various fields. The right balance of fiscal and monetary policies, as well as various economic stimulus packages over the past few years, also supported the achievement of the decent economic growth.

 

The telecommunications industry in Indonesia, in particular cellular, also faced heavy pressure from the continuous decline in the legacy business, namely voice and SMS services, which is happening in all over the world as smartphone adoption continues to change people's communication patterns. In addition, the Government also enacted a prepaid SIM card registration program from October 2017 to April 2018 which had a short term impact on the increasingly fierce industrial competition, though in the long term it will deliver large benefits, not only for operators and the cellular industry, but also for the country and society as a whole.

 

SUPERVISION AND ASSESSMENT OF THE PERFORMANCE OF THE BOARD OF DIRECTORS DURING 2018

 

The Board of Commissioners supervised the performance of the Board of Directors, to ensure that the steps and strategies taken were aligned with the vision, mission, strategic objectives and pre-determined work programs.

 

Overall, we assess that throughout 2018, the Board of Directors discharged its duties, functions and roles well, in the midst of a challenging industry situation, especially with regard to cellular. The Board of Directors demonstrated good ability and capability in establishing and executing strategies with regard to both operational and financial aspects, setting priorities and adjusting strategies in accordance with the characteristics of the very dynamic telecommunications industry.

 

The success of the operational aspect was demonstrated by the excellent results achieved by the prepaid SIM card registration program that our subsidiary, Telkomsel, carried out.  The number of IndiHome fixed broadband subscribers increased by 72.2% to 5.1 million by the end of 2018. In addition, the Company’s network infrastructure was continuously strengthened to provide the best digital experience for customers. During 2018, more than 28,000 new 4G LTE BTS were built, the Indonesia Global Gateway (IGG) submarine cable system was completed, and the Merah Putih Satellite was launched. These achievements were critical, in maintaining the momentum of new growth sources that have great future potential.

 

With regards to the financial aspect, the Board of Directors successfully encouraged our subsidiary, Telkomsel, to execute their strategies well, and so revenue from Telkomsel decreased by only  4.3%, better than the 7.4% decline experienced by the industry as reflected by the revenue of the 3 main cellular operators in Indonesia. On the other hand, the Board of Directors was able to maintain excellent growth performance in the fixed line business, thus ensuring that the Company's consolidated revenue continued to record positive growth amounting to 2%. Although EBITDA and Net Profit, which amounted to Rp59.2 trillion and Rp18.0 trillion respectively, decreased compared to last year's achievement, the Company performed better than other telecommunications operators. This demonstrates that the Board of Directors was able to change its strategy and take the necessary initiatives in response to unfavorable situations.

 

Apart from these operational and financial achievements, the Board of Commissioners assesses that the Board of Directors has systematically carried out various initiatives in order to improve the Company’s digital capabilities, towards achieve the Company's strategic objective to become a digital telco company. These initiatives include strengthening the fiber optic network infrastructure with regard to both backbone and access, strengthening the organization which has transformed into customer based segments Customer Facing Units (CFU) so as to be more agile and responsive in serving customers, as well as fostering a culture of innovation and conducting inorganic activities to further strengthen the Company's digital capabilities.

 

The Board of Commissioners appreciates the strong performance of the Board of Directors throughout 2018. We continuously support efforts to support Telkom’s continued growth in the midst of challenging conditions towards becoming more resilient and providing the best experience for customers.

 

In 2018, the Board of Commissioners established several new policies to strengthen its oversight role in order to ensure that the Company is able to continue expanding, but in a prudent manner based on the principle of prudence to protect and safeguard the interests of Shareholders.

 

OPINION ON BUSINESS PROSPECTS

 

In general, the Board of Commissioners is of the view that the Company still has good business prospects, with many opportunities that will enable the Company to continue to grow in the future. Equipped with the largest fiber optic infrastructure network and a variety of supporting facilities, the Company is in a leading position to provide the data connectivity services and content that have become an essential need in society, for which demand continues to increase. In addition, we are also strongly positioned to service the trend of business processes digitalization among both large and small enterprises as they strive to increase efficiency or grow their businesses.

 

In the Mobile segment, digital business services, including digital service & solutions, will be the main drivers of growth in line with expanding smartphone usage. In addition, we hope that the cellular industry will fare better in 2019, in line with the successful prepaid SIM card registration program which will encourage healthier competition.

 

In the Consumer segment, IndiHome is expected to be the main driver of growth as demand for high-quality fixed broadband services is still very high and growth opportunities are still wide open, given the relatively low penetration of fixed broadband services in Indonesia at around 12%.

 

In the Enterprise segment, there is a rising trend among corporations, government institutions, and Small And Medium Business  (SMB) of adopting integrated ICT solution services in order to increase efficiency, which will provide opportunities for the Company to keep growing this segment.

 

Meanwhile in the Wholesale & International Business segment, the Company's success in completing the Indonesia Global Gateway (IGG) marine cable strategic project that connects the SEA-ME-WE5 submarine cable with the SEA-US submarine cable system, as well as the successful launch of the Merah Putih satellite, will create larger business opportunities for the Company.

 

Besides organic growth, the Board of Commissioners also supported the Board of Directors in actively exploring inorganic initiatives that can deliver added value and create synergies for the Company.

 

ASSESSMENT OF THE PERFORMANCE OF COMMITTEES UNDER THE BOARD OF COMMISSIONERS

 

In carrying out its supervisory function, the Board of Commissioners is assisted by 3 (three) committees, namely the Audit Committee, Nomination and Remuneration Committee (KNR) and the Planning and Risk Evaluation and Monitoring Committee (KEMPR). Throughout 2018, the Board of Commissioners assessed that these three

Committees had worked well in providing recommendations to the Board of Commissioners, so that the supervision mechanisms for the Board of Directors could run well.

 

During 2018, the Nomination and Remuneration Committee (KNR) held 44 meetings and produced various important recommendations regarding changes and remuneration of the Telkom Board of Directors. Meanwhile, the Audit Committee (KA) conducted 26 meetings in 2018, with its main activities consisting among others of supervising Integrated Audits for the 2018 fiscal year, as well as the plans and implementation of the Internal Audit Unit work programs. The Audit Committee also monitored the audit process of the Partnership and Community Development Program (PKBL) carried out by the Community Development Center (CDC) unit for the 2018 fiscal year. In addition, the Audit Committee carried out its responsibilities to review complaints received through the Whistleblowing System (WBS).

 

The Planning and Risk Evaluation and Monitoring Committee (KEMPR) held 10 committee meetings, 15 technical meetings to evaluate the Company's 2018-2022 Long Term Plan (RJPP) and compile the 2019-2023 RJPP as well as evaluate any actions of the Board of Directors that require approval from the Board of Commissioners. In addition, the KEMPR assisted the Board of Commissioners in reviewing the Board of Directors' strategic plans throughout 2018. KEMPR also monitored the Company's Work Plan and Budget (RAKP) and capital expenditure in 2018 and prepared the RAKP for 2019. In terms of risk management, KEMPR has supervised Telkom's risk management activities including the aspects of risk mitigation, risk control effectiveness, and risk management monitoring.

 

We encourage all members of the Committees to continuously improve their abilities and broaden their horizons in the telecommunications industry and finance, so that they can better assist the Board of Commissioners in carrying out its supervisory function of the Board of Directors.

 

APPLICATION OF SUPERIOR CORPORATE GOVERNANCE IN TELKOM

 

We uphold the values of good corporate governance (GCG), and view the implementation of best practices as critical to supporting the achievement of long-term, sustainable performance for the Company. Therefore, this aspect is one of the areas that the Board of Commissioners focuses on supervising.

 

Best practices in risk management are greatly needed in order to be able to identify potential risks that may arise. The Board of Commissioners always plays an active role in monitoring and giving suggestions on the risks faced by the Company. The Board of Commissioners judges that throughout 2018 the Board of Directors has implemented GCG practices effectively and consistently with high standards, by upholding the values of transparency, accountability, responsibility, independence and fairness.

 

It is also our assessment that the implementation and management of Whistleblowing Systems (WBS) in Telkom are running well. The WBS plays a role in helping us supervise potential fraud and policy irregularities as well as violations of internal regulations, including in subsidiaries. The Board of Commissioners actively monitors and makes policy decisions in the cases reported through the WBS.

 

During 2018, we received 24 complaints of which 5 complaints were assessed as being worthy of further investigation.

 

CHANGES IN THE COMPOSITION OF THE BOARD OF COMMISSIONERS

 

In 2018, there was a change in the composition of the Company's Board of Commissioners. The 2017 Annual GMS resolved to honourably discharge Mr. Hadiyanto, and confirmed the dismissal of Mrs. Devi W Suradji who, since December 22, 2017, is no longer serving as a Commissioner of the Company after being appointed to the PT Angkasa Pura 1 Board of Directors. Besides that, Mr. Dolfie Othniel Fredric Palit is no longer serving as a Commissioner after being appointed as a permanent legislative candidate on September 20, 2018.

 

The following is the composition of the Company's Board of Commissioners as of December 31, 2018:

 

 

APPRECIATION TO STAKEHOLDERS AND CLOSING

 

In closing, the Board of Commissioners conveys its highest gratitude and appreciation to the Board of Directors, management and all employees for their support and cooperation during 2018. Hopefully the cooperation and synergy that has been established can be continuously improved so as to achieve better performance in future.

 

We also express the same gratitude and appreciation to all shareholders, customers, business partners, and other stakeholders for the support given to Telkom throughout 2018.

 

We hope that the collaboration and synergy with all stakeholders can be sustained in the future, so that Telkom can continuously improve its performance in the future.

 

Jakarta, April 30, 2019

 

/s/Hendri Saparini

Hendri Saparini

President Commissioner

 

 

 REPORT OF THE BOARD OF DIRECTORS

“Stronger for Your Digital Experience.”

 

The increasingly concrete influence of the digital era has been marked by the emergence of many innovations that are aimed at producing a variety of quality digital solutions for society, accompanied by best customer experience for users. These conditions have driven rising digital adoption across all customer segments when carrying out their activities, resulting in the irrelevance and abandonment of the legacy services that are the main source of income for telecommunication operators. This is a serious threat but at the same time, also poses an opportunity for telecommunication operators to accelerate their transformation into becoming Digital Telecommunication Companies by focusing on providing high-speed connectivity and digital services.

 

In response, Telkom has continued to strengthen its digital capabilities with regard to its services, infrastructure and digital customer experience. In terms of services, Telkom is strengthening and developing digital services in accordance with customer demand, while also increasing business competitiveness. Telkom fully understands that customers, especially in the Mobile and Consumer segments, need a variety of quality digital services so that they can carry out various activities easily, comfortably and pleasantly. As for the Enterprise segment, Telkom provides various services to digitize their business processes so that they can be more efficient, more competitive and create high value. To support these services, Telkom continues to strengthen its digital infrastructure which includes broadband backbone networks, fiberoptic-based access networks, launching the Merah Putih satellite, expanding 4G LTE cellular networks in urban and rural areas, increasing IT capability and capacity from front-end to back-end, and developing various platforms and applications as enablers of digital solutions and services. As for customers’ digital experience, Telkom continues to develop digital touch points, personalize services through the utilization of customer insights and analytical data, and simplify processes to provide the best digital experience for all customers.

 

We believe that our actions and achievements throughout 2018, which we will describe in further detail, have strengthened Telkom's capability as a Digital Telecommunication Company to meet customer demand and provide the best digital experience.

 

COMPANY PERFORMANCE IN 2018

 

In 2018, the Company recorded consolidated revenue for 2018 amounting to Rp130.8 trillion with positive growth of 2.0%, lower than revenue growth in 2017. This was mainly due to a 21.1% decline in the legacy business. However, the Company's digital business revenues, which include broadband connectivity and digital services, grew significantly by 23.1%. With these results, the contribution of digital business in 2018 increased to 63.0% from 52.1% in 2017. This encouraging digital business revenue growth enabled the Company to compensate on a consolidated basis for the decline in legacy business revenue during 2018. These achievements also show that the Company is on the right track to become a Digital Telecommunication Company, one that is strongly committed to continuously strengthening its digital business capabilities to serve customers’ various digital service needs.

 

In 2018, the Company’s Earnings before Interest, Tax, Depreciation and Amortization (EBITDA) decreased by 8.4% to Rp59.2 trillion, which was due among others to a 12.5% increase in operating expenses to Rp71.6 trillion, in line with investment in both mobile and fixed line broadband infrastructure development. Infrastructure development, especially broadband infrastructure, is very important in order for the Company to effectively anticipate the decline of the legacy business while accelerating higher contribution from the digital business and ensuring best digital customer experience.

 

In line with the decline in EBITDA, the Company's Net Profit for 2018 fell by 18.6% to Rp18.0 trillion, or by 13.7% if excluding the positive impact of asset revaluation on Net Profit in 2017.

 

In the Mobile segment, the 3 (three) main operators experienced an increasingly drastic decline in the legacy business of around 21%. On the other hand, mobile data services saw fierce competition which was triggered by intense price wars during the prepaid SIM card registration period. Both these factors caused the total revenue of the 3 (three) major operators to decrease by 7.4%. Telkomsel has taken the initiative to prevent industrial conditions from becoming increasingly unhealthy by encouraging reasonable and affordable pricing of mobile broadband data packages, in order to provide optimal value for both operators and customers. In addition, Telkomsel also made efforts to push back against the decline of the legacy business caused by OTT services, including by offering voice packages and SMS package programs. As a result of these efforts, Telkomsel managed to hold its revenue decline to only 4.3%, better than the 7.4% decline in the total income of the 3 (three) main operators.

 

The prepaid SIM card registration program limits the number of prepaid SIM cards for each customer and so that by the end of 2018, the number of Telkomsel customers had decreased by 17% to 163.0 million customers. In the short term this prepaid SIM card registration program has had a negative impact on the cellular industry, but we believe that in the long term this program will greatly benefit the country, the telecommunications industry and customers. This program will assist the government in supporting national security by providing more complete and better validated citizen identity data. As for the telecommunications industry, in particular cellular, it is hoped that this will encourage healthier and more efficient competition as it focuses on sales of refill packages rather than the sale of starter cards. In addition, by knowing its customer profiles more accurately, operators can more creatively offer the right service packages  in accordance with customer profiles and needs.

 

To improve its digital capabilities, besides developing digital services such as music, games, video and financial technology, Telkomsel also continueds to strengthen its broadband infrastructure by building 28,376 new BTS all of which were based on 4G LTE technology, so that by the end of 2018 4G LTE coveraged reached more than 90% of the population. As a result, data traffic grew sharply by 101.7% to 4.3PetaBytes and Average Revenue Per User (ARPU) for mobile data services increased by 15.9%.

 

The Enterprise segment which includes large corporate customers, Small and Medium Businesses (SMBs) and government institutions, provides end-to-end ICT solutions that include connectivity, IT services, data centers & cloud, business process outsourcing, digital solutions and other support services. In 2018, the Enterprise segment recorded revenue growth of 10.1% to Rp21.1 trillion. The main driver of revenue growth was IT Services, which grew by 48.2%, in line with growing customer demand in the Enterprise segment to digitize their business processes so that corporate customers become more competitive and SMBs can develop furthur, while government institutions at both central and regional can improve their public services.

 

In the Consumer segment, IndiHome, which is an integrated fiber-optic network service package that includes home telephone services, high-speed internet, and interactive television services with IPTV technology, recorded excellent performance. The number of IndiHome customers grew by 72.2% to 5.1 million customers at the end of 2018 from 2.96 million customers at the end of 2017. This achievement further strengthened IndiHome as the market leader in fixed broadband business in Indonesia, with a market share of around 80%. As a result, IndiHome recorded revenue growth of 66.9% and contributed 82.9% to the Consumer segment, up from 62.2% in the previous year, which in turn drove Consumer segment revenue to increase by 25.1% to Rp13.9 trillion.

 

The Wholesale and International Business segment, which includes telecommunications operators, internet service providers and both domestic and global digital players, provides a variety of services consisting of carrier services, telecommunications tower services and managed telecommunications services. This segment recorded revenues of Rp10.1 trillion with a growth of 35.6%, up from Rp7.4 trillion in 2017. The contribution of the digital business tp this segment increased to 57% in 2018 from 53% in 2017.

 

Total capital expenditure in 2018 amounted to Rp 33.6 trillion or 25.7% of revenue. Capital expenditure is mainly used to expand digital capabilities by continuing to build broadband infrastructure including 4G LTE BTS, fiber optic access networks to homes, submarine and terrestrial fiber optic backbone networks, the Merah Putih Satellite and

Data Center & Cloud. At the end of 2018, Telkom had a total of 189,081 BTS units including 138,771 3G and 4G units, and a 161,652 km-long fiber optic backbone network.

 

In 2018, we built fiber optic backbone networks to connect 13 district capitals and capital cities, so that as of the end of 2018, Telkom had successfully connected a  total of 458 district capitals with the fiber optic backbone network, which is expected to increase broadband access and stimulate ICT services in all areas of Indonesia. Meanwhile, with the launch of the Merah Putih Satellite in August 2018, Telkom operates 3 satellites with a total capacity of 133 transponder equivalent (TPE) to meet demand for transmission from various customers in the banking, media electronics, transportation and mining sectors, especially in areas with no fiber optic coverage.  We have carried out this continuous investment in order to strengthen the Company's capability in accelerating the growth of the digital business and providing the best digital experience for customers.

 

STRATEGIC WORK PROGRAM

 

In 2018 the Company established 3 (three) strategic programs, namely: first, Delivering Best Customer Experience; second, Expanding Digital Business; and third, Intensifying Smart Inorganic Initiatives.

 

Delivering Best Customer Experience

 

In the midst of the intense competition in the telecommunications industry, delivering best customer experience is a non-negotiable requirement. The ability to deliver best customer experience, such as understanding customer needs early on and providing services that exceed customer expectations, will enhance customer engagement and open up new business opportunities. To that end, the Company continuously strives to deliver incredible digital experience in every customer journey. The Company provides digital touch points that facilitate interaction, buy products and services, and support various other facilities from submitting complaints and service upgrades to make payments. For each customer journey, the Company measures the customer experience using the Net Promoter Score (NPS) as a global standard. The NPS information is then used to improve customer experience when using services and improve the quality of products and services.

 

Simultaneously, the Company also intensively applies analytical data to develop unique products and services that are aligned with customer needs, and strengthen business processes towards demand fulfillment and resolving customer complaints. We have also developed a new Customer Relationship Management (CRM) application, which we call New Customer Experience (NCX), which enables Telkom to obtain and integrate information such as historical data and customer preferences to deliver best customer experience.

 

On the internal side, Telkom continues to strengthen customer segment based organizations or Customer Facing Units (CFU) as its go-to-market strategy to ensure engagement with customers. Agile organization and work patterns continue to be developed in order to increase work efficiency and effectiveness and accommodate the spirit of innovation and collaboration as part of the digital culture to ensure best digital customer experience as an important focus of the Company.

 

Expanding Digital Business

 

In the midst of the continuously declining legacy business, the Company's strategy is to strengthen and enhance its digital business, including the digital connectivity and services that are increasingly needed by customers. Therefore, the Company continues to expand and accelerate its digital business by strengthening its digital capabilities. Various initiatives have been carried out to accelerate the growth of digital business, in line with the expansion of backbone network infrastructure and broadband network access throughout Indonesia.

 

In the Mobile segment, Telkom has developed digital advertising, mobile banking, internet of things (IoT) and mobile financial services, in addition to digital lifestyle services that focus on providing cellular technology-based

entertainment experiences such as music, video streaming, games, and other value added services (VAS) mobile service platforms. In the Enterprise segment, we provide end to end digital solutions for corporate customers, Small and Medium Business (SMB) and government institutions including connectivity, IT Service, data center & cloud, business process outsourcing, digital solutions and other support services. In the Consumer segment, IndiHome has been further enriched through more high-speed package package choices, more of TV / Video channels, games, a variety of attractive minipack choices, and the monetization of digital inventory for digital advertising. Subsequently in the Wholesale and International Business segment, we provide digital connectivity including data centers for service providers and digital players, both domestically and globally. In addition, we have also developed a variety of other digital services such as e-commerce and digital lifestyle that can be used by all other customer segments.

 

Intensifying Smart Inorganic Initiatives

 

Inorganic activities are an important part of strengthening the Company’s digital capabilities. Inorganic strategies are carried out both through acquisitions and through collaborations or partnership with other parties who have superior digital capabilities. Inorganic initiatives aim to create added value by enhancing digital capabilities, strengthening the digital service ecosystem and other businesses that can deliver value synergies in the group.

 

In January 2018, through its subsidiary PT Metranet, the Company acquired 30.4% of Cellum Global Zrt's shares, in order to improve digital capabilities, especially in the digital payment field. The presence of Cellum Global Zrt is expected to strengthen the back-end of the Company's digital payment platform.

 

In April 2018, through its subsidiary PT Multimedia Nusantara, the Company acquired a 51% stake in PT Swadharma Sarana Informatika, which engages in the business of managed service for ATMs. Subsequently in December 2018, through its subsidiary PT Sigma Cipta Caraka, the Company acquired 70% of the shares of PT Collega Inti Pratama which provides ICT solutions for banks and financial institutions. These two acquisitions are expected to strengthen the Company's digital payment businesses ecosystem and improve its ICT competencies in the banking and insurance financial sector.

 

In September 2018, the Company through its subsidiary PT Metranet collaborated with Oona, a digital company based in Hong Kong, to launch a advertising-based mobile video streaming service which is expected to strengthen the Company’s video service capabilities.

 

BUILDING A DIGITAL CULTURE

 

As part of the company's transformation, the Company has developed its human resources with a digital culture that refers to The Telkom Way as belief system which contains the Philosophy to Be the Best, Principles To Be the Star and Practices To Be The Winner.

 

In order to build a digital culture, Telkom has made fundamental changes regarding its organization and work culture. The functional, hierarchical organization was transformed to become flat and flexible. In this organization, new working models and methods have been implemented that differ from the previous work methods, which resembled a supply chain and was therefore less responsive to rapid change. The new work model and method has been implemented in the form of "tribe" and "squad" organizations, which are cross-functional and cross-expertise teams that work together using agile methods to develop products by involving users in every product development decision. With this new model and way of working, every innovation and change needed to meet users’ needs can be quickly carried out. This startup model and work method is relevant to building digital products, which are highly uncertain. However, this change also requires the Company to provide digital talents with superb abilities in developing digital digital product innovations. 

 

The Company provides the Digital Amoeba Program and the Indigo Program to accommodate digital product innovation activities as well as talent development. Digital Amoeba is an employee innovation program, while the Indigo Program is an innovation development program that involves innovators from outside the company and also

comprises Telkom's contribution to developing Indonesian digital startups and talents. In the Digital Amoeba Program, every employee is encouraged to contribute his or her best ideas for digitalization and digital product development. Every employee whose idea is chosen is given the opportunity to realize it using the best innovation methods, namely design sprint, lean and agile methodology and growth hack cability to accelerate the innovation process. Equipped as such, employees are selected to work collaboratively in squads and tribes. To support the development of digital talent or digital startup outside the Company, Telkom holds Indigo Programs twice a year in order to give opportunities for talent to convey their best digital ideas. The Company provides opportunities to selected talents and startups, and supports them in realizing their ideas. The startups will also be directed to collaborate with the related Digital Amoeba tribes to accelerating innovation.

 

Telkom has implemented a digital culture through the Digital Workstyle and Open Space concepts. Digital Workstyle refers to new working methods that are paperless, wireless, seamless and riskless while Open Spaces stand are associated with unassigned desks, collaborative spaces and warm ambience so as to increase work effectiveness and efficiency while maintaining worklife integration. The digital work environment is also equipped with tools to support more agile work methods, among them Diarium which is a human capital administrative process platform, Esperantum as a work collaboration platform, and Cognitium which supports the employee competency development.

 

ASSET LEVERAGE PROGRAM

 

Telkom’s digital transformation, among others through the modernization of production device technology, has reduced the need for space, and therefore Telkom has implemented the Asset Leverage Program to optimalize the unused space. The Asset Leverage program focuses on increasing cost efficiency and increasing additional contributions to the Company's revenue. These assets were utilized among others for Tier-2 data centers, as office space for subsidiaries that were renting from third parties, and commercial collaborations, whether with subsidiaries or other entities. The increase in efficiency is evident in the utilization from 2016 until the end of 2018 of 113,885m2 in property assets by various TelkomGroup entities which had previously leased from third parties. In 2018, Company succeeded in recording revenues of Rp324 billion from commercial utilization of these assets with other parties.

 

IMPLEMENTATION OF IFRS 9 AND IFRS 15

 

Telkom, as the only company in Indonesia listed on the New York Stock Exchange, has fully applied International Financial Reporting Standards (IFRS) accounting standards since 2011. In line with developments in accounting standards, the Company has fully implemented IFRS 9 and IFRS 15 IFRS to its financial statements for the 2018 Fiscal Year by developing and strengthening its IT Systems and improvingits business processes in accordance with the Sarbane Oxley Act. At present the Company is also preparing for the application of IFRS 16 which goes into effect starting in the 2019 Fiscal Year.

 

SOCIAL AND ENVIRONMENTAL RESPONSIBILITIES AS WELL ASPARTNERSHIP AND COMMUNITY DEVELOPMENT PROGRAMS

 

As an entity that is inseparable from society, we always strive to realize social responsibility towards society and the environment. "Telkom Indonesia for Indonesia" as the theme of implementing social responsibility The Company has 3 (three) pillars covering the Digital Environment, namely the provision of digital facilities to support and connect various community activities, Digital Society to empower communities through education on using digital services to facilitate everyday activities, and the Digital Economy, which offers support for micro, small and medium enterprises. especially in the creative industry, in the form of training to "go digital", " go online", “go global” and organize exhibitions of SME products.

 

As a State-Owned Enterprise (BUMN), the Company also conducts the Partnership and Community Development Program (PKBL) in the form of programs to improve the welfare and social life of the community and is guided by

the Regulation of the Minister of SOEs of the Republic of Indonesia. Since 2018, the Partnership Program has channeled funds amounting to Rp279.98 billion to 7,498 Development Partners in the industrial, trade, agriculture, livestock, plantation, fisheries and services sectors as well as other sector. Meanwhile, the Community Development Program realized IDR 105.88 billion covering 7 fields, namely natural disaster assistance to victims, educational assistance, health improvement assistance, infrastructure development facilities, assistance for religious facilities, assistance for nature conservation, and communitysocial assistance to eradicate poverty.

 

DEVELOPMENT OF CORPORATE GOVERNANCE IMPLEMENTATION

 

The implementation of good corporate governance (GCG) is the foundation for Telkom’s efforts to maintain stakeholder trust and develop its business. Telkom has therefore implemented sustainable risk management by carrying out the five main principles of governanceand the eight principles of corporate management in accordance with Publically Listed Companies Governance Implementation Guidance from the Financial Service Authority (FSA).

 

In 2018, the Indonesian Institute for Corporate Directorship (IICD) assessed 200 issuers with the largest market capitalization on the Indonesia Stock Exchange, using the Corporate Governance Scorecard from the Organization for Economic Co-operation and Development Principle. In this assessment, Telkom successfully won "The Best State Owned Enterprise" in the Big Capitalization category. This shows that Telkom has carried out good corporate governance transparently, with adequate accountability.

.

DESCRIPTION OF BUSINESS PROSPECTS

 

The Company believes that there are still highly promising opportunies for growth in the future. Connectivity and digital services have now become basic needs, both in small towns and rural areas. Whereas for businesses and government institutions, digital services have become an important requirement in maintaining and developing their businesses, as well as improving service to the public. With all its infrastructure and facilities, the Company is in a leading position to realize these opportunities towards ensuring sustainable growth in the future.

 

In the Mobile segment, there are 3 (three) focused areas on business opportunies,they are increasingthe growth potential of High Value Customers, mobile solution services for enterprise, and developing various digital services such as mobile financial services, games and videos. At present, High Value Customers contribute significantly to Telkomsel's revenues. To provide the best experience towards maintaining loyalty and simultaneously increase the number of High Value Customers, we use big data analytics to conduct profiling in order to provide a variety of quality services in line with High Value Customer needs. We also continued to develop services-as-a-solutionfor the Enterprise segment including Mobile Security, NB-IoT and other digital cellular solutions that utilize the Telkomsel myBusiness product portfolio. Meanwhile in terms ofdigitallifestyle services, we are focused on providing lifestyle experiences such as digital music, video, and games. In May 2018, we launched the MAXstream platform and became a one-stop video portal by combining OTT Video apps, linear channels and VOD content. We also offer a complete digital game ecosystem and released our first game, "Shellfire", in October 2018 under the DuniaGames brand.

 

The rising use of smartphones, which at the end of 2018 has reached 66% of Telkomsel customers, will drive data consumption for digital services and solutions. The average data consumption of Telkomsel's customer is around 4 Gigabytes per month, still lower than the data consumption of various operators in other countries such as Malaysia, Thailand and India where data consumption has reached more than 10 Gigabytes per month.

 

In the Enterprise segment, opportunities to increase business growth are still wide open. We believe that the trend of business process digitization will continue to strengthen in the corporate segment, as well for government institutions at both central and regional level. In addition, the penetration of ICT services in Small and Medium Businesses (SMBs) is still relatively low. We believe that as a provider of ICT services, our presence can support business development in the SME segment and simultaneous create market opportunities for us to grow together.

We are also actively exploring opportunities to enhance our digital capabilities through inorganic activities so as to strengthen our integrated digital services.

 

In the Consumer segment, the opportunity to continue to grow is still wide open. At the end of 2018, the penetration of fixed broadband services in Indonesia is still relatively low at around 12%, whereas the number of middle class households is still growing. In addition, the level of competition is also relatively low because fixed broadband service providers require relatively high capital expenditure.

 

In the Wholesale & International Business segment, the Company has successfully completed the construction of the Indonesia Global Gateway (IGG) submarine cable project which stretches for approximately 5,400 km, connecting the South East Asia – United States (SEA-US)submarine cable system and theSouth East Asia – Middle East – Western Europe5(SEA-ME-WE5) submarine cable system, and simultaneously integrating SEA-US and SEA-ME-WE5 with  a fiber optic domestic backbone that covers almost all of the district capitals in Indonesia, thus positioning Telkom as a Global Digital Hub offering alternate direct broadband connectivity between Europe, Asia and the Americas quickly and efficiently.  As a Global Digital Hub, the Company will also develop data centers, cloud, content and platforms that target the Carrier, Internet Service Provider, Digital Players and Enterprise segments in both the domestic and international markets.

 

PERFORMANCE TARGETS IN 2019

 

In 2019, the Company is committed to continue striving to achieve healthy growth and good profitability. Therefore, the Company has formulated 3 main programs in 2019, namely:

With good execution of these programs, we believe that in 2019 the Company will be able to grow above the industry average.

 

CHANGES IN THE BOARD OF DIRECTORS DURING 2018

 

In 2018, the composition of the Board of Directors and Board of Commissioners changed. On April 20, 2018 Mr. Mas'ud Khamid, Director of Consumer Service, was appointed as Director at Pertamina. At the Annual General Meeting of Shareholders (AGMS) for 2017 Financial Year dated April 27, 2018, Ms. Siti Choiriana was appointed as Director of Consumer Service replacing Mr. Mas'ud Khamid.

 

With the abovementioned changes, the composition of the Board of Directors of the Company as of December 31, 2018 is therefore as follows:

 

 

We express our deepest gratitude and highest appreciation to the members of the Board of Directors who have ended their term of service in the Company for all their contributions. May they be able to carry out their best mandates in their new positions. At this opportunity, on behalf of the Board of Directors, we also express our highest gratitude and appreciation to shareholders, the Board of Commissioners, loyal customers, business partners and other stakeholders, for the support provided to the Company throughout 2018.

 

We also express our highest appreciation to the management and all employees for their dedication and hard work in these challenging times. Going forward, we invite all management and employees to work harder and smarter to achieve better performance in the future.

 

Our Company performance and achievements throughout 2018 are comprehensively conveyed in this Annual Report book including the Consolidated Financial Statements and the Financial Statements for the Partnership Program and Community Development Management Center for  2018 Fiscal Year which have been audited by the Public Accounting Firm Purwantono, Sungkoro & Surja (member firm of Ernst & Young Global Limited) with an unqualified opinion for the Consolidated Financial Statements in all material respects.

 

Jakarta, April 30, 2019

 

/s/ Alex Janangkih Sinaga

Alex Janangkih Sinaga

President Director

 

 

 

STATEMENT OF THE MEMBER OF BOARD OF COMMISSIONERS REGARDING WITH RESPONSIBILITY FOR

PT TELKOM INDONESIA (PERSERO) TBK 2018 ANNUAL REPORT

 

We the undersigned hereby declare that all the information in the PT Telkom Indonesia (Persero) Tbk 2018 Annual Report has been presented in its entirety and that we assume full responsibility for the accuracy of the content of the Company’s Annual Report.

This statement is made in all truthfulness.

Jakarta, April 30, 2019

 

 

STATEMENT OF THE MEMBER OF DIRECTORS REGARDING WITH RESPONSIBILITY FOR

PT TELKOM INDONESIA (PERSERO) TBK 2018 ANNUAL REPORT

 

We the undersigned hereby declare that all the information in the PT Telkom Indonesia (Persero) Tbk 2018 Annual Report has been presented in its entirety and that we assume full responsibility for the accuracy of the content of the Company’s Annual Report.

This statement is made in all truthfulness.

Jakarta, April 30, 2019

 

 

 

 

 

ABOUT TELKOM

 

 

 

 

 

 

VISION, MISSION, AND STRATEGY

 

TRANSFORM AND DIGITIZE

 

"Be the King of Digital in the Region" is Telkom's vision with the aim of becoming one of the 10 (ten) Asia Pacific companies with the largest market capitalization in the telecommunications industry in 2020. To realize this vision, there are 3 main programs implemented during 2018, namely Delivering Best Customer Experience, Expanding Digital Business and Intensifying Smart Inorganic. Telkom transformed towards a digital telecommunication company with a paradigm of increasing customer experience, strengthening broadband and digital businesses and implementing lean operations. Increased customer experience is done by formulating experience in each customer journey to understand customer needs earlier and deliver services beyond their expectations. The increase in broadband and digital business is done by presenting reliable and high-quality broadband services, supported by innovative digital services in accordance with lifestyle developments and customer expectations. While lean operations are implemented to streamline digital processes supported by organizations and leadership that have an effective, agile and collaborative digital culture.

 

Telkom's mission is "Lead Indonesian Digital Innovation and Globalization", where Telkom is a pioneer of innovation in Indonesia to become a leading global player. Telkom was active in developing digital ecosystems that encourage various innovations and enhance the competitiveness of the digital industry in Indonesia.

 

In realizing this vision and mission, Telkom carries out a competitive growth strategy through innovation in business models, value chains and digital technology. Telkom is engaged in a TIMES portfolio focusing on the customer value of all customer segments. To realize this strategy, 10 strategic initiatives have been formulated with the acronym "Digital Now".

 

 

 

 

 

 

TELKOM MILESTONE

 

Telkom was established in 1965 when the Government separated postal and telecommunications services by dividing the Postel PN into the State Pos Giro Company (PN Pos & Giro) and the State Telecommunications Company (PN Telekomunikasi). In its journey, the company underwent several changes until in 1995, Telkom became a public company listed on Indonesia Stock Exchange (IDX) and New York Stock Exchange (NYSE).

 

Throughout the 2000s, along with the development of Over the Top Application (OTT) or internet-based digital applications, Telkom started its transformation journey to face digital disruption through various approaches, including changing product portfolios to build customer centric organizations and developing infrastructure networks that support digital businesses.

 

Furthermore, Telkom expanded its business to find new sources of growth. The current transformation and expansion shows Telkom's commitment in facing disruptive competitive growth and becoming one of the largest digital telecommunication companies in the Asia Pacific.

 

2018

 

2017

 

2016

Completed the contruction of the submarine cable systems Southeast Asia-Middle East-Western Europe 5 (SEA-ME-WE-5).

 

2015

Telkom launched IndiHome packages consisting of broadband internet, fixed wireline phone and interactive TV services.

 

2014

Telkom became the first operator in Indonesia to commercially launch 4G/LTE services.

 

2011

The reformation of our telecommunications infrastructure through the completion of the Telkom Nusantara Super Highway project, as well as the True Broadband Access project to provide internet access with a capacity of 20 Mbps to 100 Mbps to customers throughout Indonesia.

 

2010

Telkom completed the JaKaLaDeMa submarine fiber optic cable project.

 

2005

Telkom launched the Telkom‑2 satellite.

 

1999

Telkom launched the Telkom‑1 satellite.

 

1991-1995

Government Regulation No. 25 of 1991 stipulates that as a state-owned enterprise (SOE) became Persero. On May 26, 2018, Telkom build subsidiaries, Telkomsel, as a cellular operator. Telkom made its initial public offering on November 14, 1995, on the Jakarta Stock Exchange and the Surabaya Stock Exchange (which has since become an Indonesia Stock Exchange). Telkom also registered shares on the NYSE and LSE, and openly offered shares without listing on the Tokyo Stock Exchange.

 

1974

PN Telekomunikasi was turned into Perusahaan Umum Telekomunikasi Indonesia (Perumtel), which provided domestic and international telecommunications services, and subsequently spun-off PT Industri Telekomunikasi Indonesia, which manufactured telecommunications equipment, into an independent company.

 

1965

The Government separated postal and telecommunications services by dividing PN Postel into Perusahaan Negara Pos dan Giro and Perusahaan Negara Telekomunikasi (PN Telekomunikasi).

 

 

 

 

 

BUSINESS ACTIVITIES

BUSINESS ACTIVITIES BASED ON TELKOM’S ARTICLES OF ASSOCIATION

The last version of the Articles of Association of PT Telkom Indonesia (Persero) Tbk No.35 dated May 15, 2018, stipulates the purpose and objective of Telkom, which is to conduct business in the telecommunication network and service, informatics and optimization the utilization of Company’s resources to produce high quality goods and/or services with strong competitiveness to gain/pursue profits to increase value The Company applies the principle of Limited Company. In correlation with the purpose and objective, Telkom’s business activities include:

 

Main Businesses

 

Supporting Businesses

 

PORTFOLIO PRODUCT AND/OR SERVICE

 

In general, Telkom's business activities are in line with the articles of association, that is the provision of telecommunications, informatics and network services. Telkom has divided these activities into various business segments in accordance with the strategy of digital transformation and the development of the telecommunications industry. Currently, Telkom has portfolio products as follows:

 

 

Technological developments have caused Telkom's production equipment to no longer require large space. The smaller space of these devices results in idle assets and space that can be utilized to provide maximum benefits for the TelkomGroup. In 2018 Telkom focused and intensively initiated the leverage asset program. Telkom divides leverage asset into two categories based on cooperation partners, namely Synergy Group (Internal group customer) where this utilization is to produce cost efficiency and the Strategic & Retail Partnership (external group customer) aims to obtain revenue from idle assets, Telkom offers services such as property development, property rental, property facilities, and property management managed by a subsidiary, PT Graha Sarana Duta (Telkom Property).

 

 

 

 

AWARDS AND/OR CERTIFICATIONS

 

AWARDS

 

 

CERTIFICATIONS

 

Telkom has various certifications as a form of commitment to provide the best services for customers and implement international standards. Following is the list of Telkom’s certifications and ISO:

Note: