.

 

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 May, 2020

 

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 

 

Committed to Sustainable Growth and Better Profitability in Capturing Digital Opportunities

 

At the present, various aspects of the way we live are being continuously transformed towards digitalisation. In line with this transformation, the challenges and risks in this era of digital disruption will increase. This situation places pressure on the telecommunications industry to innovatively adopt information and digital technology. TelkomGroup understands these conditions, but also sees opportunities for digitalisation in the short, medium and long term.

 

Responding to industry dynamics in the digital era, over the last few years, Telkom and its subsidiaries have strategically anticipated these business challenges and risks. TelkomGroup has carried out various initiatives and innovations within its strategic  framework transformation towards becoming a comprehensive digital telecommunications company both in terms of products, services, business processes, business development and human resources. In 2019, all of these efforts produced good results and profitability amidst various business challenges at both national and global level.

 

Entering the coming years, TelkomGroup will continue to realize its commitment to sustainable growth, and achieve good profitability amidst the various challenges and opportunities in digital.

 

DISCLAIMER

 

This Report includes the material data and information for the stakeholders such as investors, costumers and the Government. In general, this Report is based on reliable internal analysis, documents, and resource persons.

 

The “Telkom” term in this Report emphasizes the parent company, while “Telkom and subsidiaries” or “TelkomGroup” is referred to the entire parent company, subsidiaries, and affiliated entities. Nevertheless, the use of the "Telkom" does not eliminate subsidiary and affiliation within the contents and discussion scope of the Report.

 

In addition to publishing this Report, Telkom as a listed company in the New York Stock Exchange (NYSE), is also required to submit SEC Form 20-F as an annual report to the Securities and Exchange Commission (SEC). Therefore, some of the information in this report can also be found in the SEC Form 20-F.  However, the  Annual Report 2019 and the SEC Form 20-F is not the same single report.

 

There be some sections of this Report which include data and information on Telkom’s future view in forward-looking statements, i.e. targets, expectations, estimates, prospects, or projections for Telkom's future operational performance and business condition. Telkom has considered the data and information carefully before published this Report.

 

Telkom understands that risks and uncertainties caused by various factors, such as changes in Indonesia’s economic, social and political situation, that would affect future operational performance and business conditions. Therefore, Telkom reminds the reader that Telkom cannot guarantee the data and information regarding the future view stated in this Report is true, accurate, or could be fully fulfilled.

 

Telkom provides this Report in soft copy, which may be downloaded at http://www.telkom.co.id

 

Telkom stakeholders may submit questions and suggestions regarding this Report to:

 

Investor Relation Unit

Andi Setiawan

PT Telkom Indonesia (Persero) Tbk

The Telkom Hub, Telkom Landmark Tower 39th Floor

Jl. Jend. Gatot Subroto Kav. 52, Jakarta 12710, Indonesia

 

 

TABLE OF CONTENTS

 

TIPS FOR READING THIS REPORT CONTENT

 

Readers looking to gain a general understanding of Telkom are advised this Report from the beginning to the "Report of the Board of Commissioners and Board of Directors". Readers who wish to learn about Telkom in depth are advised to continue reading this Report until the end.

 

 

 

 

 

 

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KALEIDOSCOPE 2019

 

 

 

 

 

PROFILE OF TELKOM AND ITS SUBSIDIARIES

 

PROFILE OF TELKOM

 

 

PROFILE OF SUBSIDIARIES

 

Telkom is the largest telecommunication company in Indonesia with:

 

 

 

INFRASTRUCTURE AND SERVICES

 

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

 

 

 

 

 

PRODUCTS AND CUSTOMERS

 

To create and enhance value for its customers, Telkom organizes its business into Customer Facing Units (CFU) that are based on customers segments. Telkom categorizes its product portfolios under five segments: the mobile, consumer, enterprise, wholesale international business, and "other" segment.

 

Note:

The data presented on this page is current as of December 31, 2019.

 

SOCIAL RESPONSIBILITY

 

Customer Experience

 

Social Contribution

 

Energy and Water Consumption

 

 

FINANCIAL DATA OVERVIEW

 

*As restated, exclude other expenses.

 

 

 

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 30, 2019 for the IDX closed at Rp3,970.  At that price, Telkom's market capitalization reached Rp393.3 trillion or 5.41% 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 2019, which was December 31, 1 Telkom ADS closed at US$28.50. 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 stated period:

 

Effective October 26, 2016, Telkom changed the Depositary Receipt (DR) from 1 Depositary Share (DS) representing 200 shares to 1 DS representing 100 shares.

 

 

CORPORATE ACTION INFORMATION REGARDING STOCKS

 

During the period covered by this report, Telkom did not take any corporate actions, such as stock splits, reverse stock, shares dividend, bonus shares and decrease in nominal value of shares. Therefore, this report does not contain information regarding the dates of corporate actions, stock split ratios, mergers of shares, stock dividends, bonus shares, the number and value of shares before and after corporate actions.

 

 

 

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

 

Dear shareholders and stakeholders,

 

Let us first offer praise and thanks to God Almighty as TelkomGroup successfully recorded fairly good performance throughout 2019 in the midst of a challenging situation.

 

MACRO ECONOMY AND INDUSTRY GENERAL OUTLOOK

 

In 2019, Indonesia recorded fairly good economic growth, amounting to 5.02%. In general, the main macro indicators, in particular the exchange rate of the Rupiah against the USD and interest rates, were relatively stable throughout 2019.

 

The telecommunications industry continued to see dynamic change especially in cellular, in line with shifts in communicating methods. This was marked by the decline of the legacy business, which consists of voice and SMS, to be replaced by digital businesses comprising data and services (digital services), both of which are growing fast. On the other hand, we also see high growth potential in the fixed broadband industry. Demand for this service, together with content, has continued to increase, in accordance with the growing need for high quality connectivity in homes.

 

SUPERVISION AND ASSESSMENT OF THE BOARD OF DIRECTORS’ PERFORMANCE IN 2019

 

Overall, our assessment is that the Board of Directors has performed its duties and roles well throughout 2019. The Board of Directors prepared a work plan and implemented the appropriate strategy to achieve the Company's strategic goals. As a result, Revenue, EBITDA and Net Profit experienced positive growth compared to the previous year.

 

From an operational perspective, the Company also recorded excellent good performance.  Subscribers of IndiHome fixed broadband and cellular service subscribers, in particular mobile broadband customers, continued to increase. This positive operational performance has further strengthened Telkom's position as a market leader in Indonesia’s fixed broadband and cellular industry.

 

The company has also continued to develop its infrastructure capabilities, strengthening its backbone network and optical fiber-based access, as well as its 4G BTS. This excellent operational performance demonstrates the Board of Directors' ability to understand the industry by  creating and implementing the right work programs, which are expected to realize the Company's vision and mission of transforming into a digital telco company that can provide the best digital experience for customers.

 

VIEWS ON BUSINESS PROSPECTS

 

In our view, that the Company's business prospects going forward are quite good. The Company's comprehensive and integrated infrastructure network, from fiber optic cables, data centers and 3G/4G BTS networks to satellites, puts the Company in the lead to capture opportunities for sustainable growth in the future. These opportunities mainly come from fixed broadband services which still has open space for penetration, digital business services for mobile given the high amount of smartphone users, as well as enterprise solutions services which are increasingly needed by corporations and government agencies.

 

The Company’s strategy for the future is also apparent in its main business frameworks of digital connectivity, digital platforms and digital services, each of which is expected to be an engine of growth. Digital connectivity services, such as mobile broadband and fixed broadband, have become core services for the Company. Whereas digital platforms cover a variety of supporting infrastructure (infrastructure as a service) and solutions such as data centers, cloud and cyber security. Meanwhile, digital services have been developed with the aim of facilitating customers’ needs, for example by providing digital services in the fields of fintech, music, video games and so on.

 

In addition to the above, inorganic approaches also present growth opportunities to increase added value, strengthen digital capabilities and create synergies for the Company. In this regard, the Board of Commissioners supports the efforts of the Directors to explore these opportunities.

 

ASSESSMENT OF THE PERFORMANCE OF COMMITTEES UNDER THE BOARD OF COMMISSIONERS

 

The Board of Commissioners of PT Telkom has 3 (three) Committees which assist in carrying out its supervisory duties, namely the Audit Committee, the Nomination and Remuneration Committee (KNR) and the Planning and Risk Evaluation and Monitoring Committee (KEMPR). In our view, the three Committees have carried out their roles well in accordance with expectations. The Committees carry out studies, deliver recommendations to the Board of Commissioners and provide full support so that the oversight mechanism for the Board of Directors can run smoothly.

 

The Audit Committee assists us in supervising and ensuring the effective implementation of internal controls in the preparation of financial statements, conducting reviews of financial information, reviewing Internal Audit Unit investigations and monitoring the audit process for the Partnership and Community Development Program. Next, the Nomination and Remuneration Committee has provided a variety of important recommendations related to policies, criteria and selection of strategic positions within the Company and its subsidiaries, as well as remuneration for the Board of Directors. Whereas the Planning and Risk Evaluation and Monitoring Committee provided recommendations related to the strategic aspects and risk management of the Company and conducted a comprehensive evaluation of the Directors' proposals related to the Company's Budget Activity Plan and monitored their implementation.

 

IMPLEMENTATION OF SUPERIOR CORPORATE GOVERNANCE

 

The Board of Commissioners focuses among others on supervising corporate governance, as we are committed to ensuring that corporate governance in TelkomGroup is implemented to a high standard in accordance with the principles of Good Corporate Governance (GCG). Throughout 2019, the Board of Commissioners actively supervised, and provided advice on, various aspects of the company management, including risk management.

 

One of the governance practices that Telkom has implemented is the Whistleblowing System (WBS). Telkom’s Whistleblowing System mechanism performed well in 2019. With this mechanism, the Company can better identify and minimize the potential for fraud as well as policy irregularities or internal violations.

 

CHANGES TO THE COMPOSITION OF THE BOARD OF COMMISSIONERS

 

The composition of Telkom's Board of Commissioners has changed in accordance with the resolution of the AGM on May 24, 2019. The Annual General Meeting of Shareholders for Fiscal Year 2018 resolved to honorably terminate the term of office of the following Members of the Board of Commissioners:

 

 

The Annual General Meeting of Shareholders for Fiscal Year 2018 also resolved to appoint four new members to the Board of Commissioners, namely Rhenald Kasali, Marsudi Wahyu Kisworo, Ismail, and Marcelino Rumambo Pandin.

 

In addition, 2 (two) commissioners, Edwin Hidayat Abdullah and Isa Rachmatarwata, retired as commissioners as they were appointed by the Shareholders to serve as Directors and Commissioners in other SOEs.

 

Thus, as of December 31, 2019, the composition of the Company's Board of Commissioners became as follows:

 

 

APPRECIATION TO THE STAKEHOLDERS AND CLOSING

 

In closing, on behalf of the Board of Commissioners we would like to thank all of the Directors, the management and employees who have wholeheartedly contributed to managing the business activities of Telkom and its subsidiaries. We also express our appreciation to all shareholders, customers, business partners, and other stakeholders who have supported Telkom to become an outstanding digital telecommunication company both in the present as well as going forward.

 

We confidently believe that, supported by good collaboration, Telkom will be able to continue growing and sustainably improve its profitability in the future

 

Jakarta,  May 27, 2020

 

/s/ Rhenald Kasali

 

Rhenald Kasali

President Commissioner

 

 

 

REPORT OF THE BOARD OF DIRECTORS

 

"Committed to Sustainable Growth and Better Profitability in Capturing Digital Opportunities" 

IndiHome further strengthened its position as a new growth engine during 2019, with profitability approaching global standards. 

 

 

Shareholders, Board of Commissioners, and all respected stakeholders,

 

On behalf of all the Directors and the management of PT Telkom Indonesia (Persero) Tbk ("Telkom" or "Company"), we give thanks and gratitude to God Almighty as the Company was able to do well in 2019.

 

At this occasion, allow us to convey a summary of our efforts and achievements throughout 2019, in particular with regard to Telkom's efforts in realizing its transformation to a global telecommunication company with global standards.

 

ECONOMIC, POLITICAL AND INDUSTRY CONDITIONS

 

Indonesia's Gross Domestic Product (GDP) in 2019 grew quite well, reaching 5.02%. The biggest contribution to economic growth, comprising around 56%, still came from household consumption. This indicates that consumer purchasing power is relatively good, in part due to massive development of infrastructure in recent years. The continuation of the China-United States trade war continued to pose economic challenges throughout 2019, which had an impact on the economic slowdown in several countries including Indonesia, especially in terms of export performance.

 

In terms of key macro indicators, the exchange rate of the Rupiah against the USD in 2019 was relatively stable and even showed a tendency to strengthen, with the Bank Indonesia exchange rate amounting to Rp14,465 per USD on January 2, 2019 and closing at Rp13,901 on December 31, 2019. Likewise, Bank Indonesia's benchmark interest rate (BI 7-day Repo Rate), declined from 6% in January 2019 to the level of 5% in December 2019. This conducive macroeconomic situation naturally had a positive impact on the telecommunications industry, especially with the continued growth in smartphone usage and data consumption.

 

From a political standpoint, the April 2019 elections were successfully held smoothly, safely and peacefully. This strengthened business actors’ confidence in realizing business plans which were previously delayed due to political uncertainty in the previous year.

 

The fixed broadband industry in 2019 grew by around 22%, refering to the two main fixed broadband players who have an estimated market share of 93%. Fixed broadband services still provide high growth opportunities, given that the penetration of this service was still very low at around less than 15% at the end of 2019. Demand for this service has also increased along with the need for high-quality connectivity and increasing demand for content. In addition, while competition in the fixed broadband industry is still relatively relaxed overall, high resource requirements pose a barrier to business actors who wish to expand aggressively.

 

The cellular industry, which benchmarks to the 3 largest cellular operators, grew in the range of 5.1%, more or less in line with GDP growth. The relatively high rate for growth was driven by the digital business from both data services and digital services. The cellular industry continued to be coloured by intense competition in data services,  supported by widespread adoption of smartphones. On the other hand, the use of legacy services, namely voice and SMS, has decreased, as a consequence of customers increasingly switching to using data-based services as a replacement for voice and SMS services.

 

PERFORMANCE OF THE COMPANY IN 2019

 

In 2019, Telkom successfully recorded  total Revenue of IDR 135.6 trillion, growing by 3.7% compared to the previous year. EBITDA was grew 9.5% to Rp64.8 trillion, with EBITDA margin increasing significantly to 47.8% from 45.3% in the previous year. Meanwhile, Net Profit was recorded at Rp18.7 trillion, growing by 3.5% from 2018 Net Profit. Net Cash Flow from Operating Activities reached Rp54.9 trillion, compared to Rp45.7 trillion in 2018. This respectable performance was achieved amidst conditions which were still quite challenging in 2019 given the highly competitive cellular industry, the political agendas of the presidential and vice presidential elections, and the continuing trade war between China and the United States.

 

In the Mobile segment, through its subsidiary Telkomsel, Telkom continued to strengthen its position as the operator with the largest customer base in Indonesia, amounting to 171.1 million subscribers, of which 110.3 million subscribers were mobile data users. Amidst the massive digital lifestyle trend, increased demand for data services drove data traffic growth of 54% to 6,558 petabytes. As a result, Telkomsel's Digital Business Revenues grew significantly by 23% or Rp10.9 trillion to Rp58.2 trillion. In absolute terms, Telkomsel’s Digital Business recorded the highest growth in the industry for 2019 with revenue reaching Rp58.2 trillion, simultaneously acting as a catalyst for the shift from Legacy to Digital Business services. This Digital Business revenue was supported by 22% Data growth and 29% Digital Services growth, in parallel with Telkomsel’s initiatives to develop a variety of Digital Services such as Digital Lifestyle, Digital Advertising, Big Data, Digital Enterprise Solutions and Mobile Payment. In 2019, the contribution from Digital Business increased to become 64% of total revenue, up from 53% in the previous year. On a consolidated basis, including revenue from the Legacy business which decreased by around 22%, Telkomsel recorded Rp87.9 trillion in revenue, 3.0% higher than the previous year, and contributed 65.1% to the consolidated revenue of the Company. Telkomsel was also sucessful in controlling costs, and was able to increase its EBITDA margin to 54.0% from 53.2% previously.

 

In the Consumer segment, IndiHome continued to enjoy positive momentum as a growth driver for the Company. Throughout 2019, IndiHome customers grew by 37.2% or 1.9 million customers to reach 7 million customers. This reflects Indonesian consumers’ high demand for high quality internet services as well ss for a variety interesting content. IndiHome customers consist 48% of triple play customers, which comprise fixed voice, fixed broadband and IP-TV, and 52% of dual play customers. Revenue from the Consumer segment experienced high growth of 27.5% to Rp17.7 trillion, contributing 13.1% to the Company's consolidated income. IndiHome's profitability has also improved with EBITDA reaching 33.9%, approaching global profitability standards.

 

In the Enterprise segment, during 2019 the Company changed its business policies to focus on business lines that have higher profitability and recurring income, especially in enterprise solutions such as enterprise connectivity, data center and cloud services, and selectively reducing or not prioritizing business solutions that have relatively low margin levels and non-recurring income.  Thus, although the Enterprise segment recorded a decline in revenue of 11.2% from the previous year to Rp18.7 trillion in 2019, from a business standpoint its profile improved. The Enterprise segment contributed 13.8% to consolidated revenue.

 

The Wholesale and International Business segment in 2019 achieved decent performance. In this segment, we provide services to telecommunications operators, internet service providers and digital players both domestically and globally. The company recorded revenue of Rp10.6 trillion from the Wholesale and International Business in 2019, growing 5.2% from the previous year. The Wholesale and International Business segment contributed 7.9% to consolidated revenue.

 

Within the various business segments mentioned above, Telkom provides a variety of digital services in the Digital Platforms and Digital Services categories for both B2B and B2C, such as video, games, music, advertising and so on. We continually strive to develop various digital services in accordance with the needs of our customers and to always provide the best experience. Although the contribution of revenue from digital services is currently still relatively small at around 6% of consolidated revenue, it has a high growth rate at nearly 30%, and we believe that this line of business will be a source of future growth for Telkom.

 

In order to maintain its dominance in the telecommunications industry, Telkom continued to strengthen its infrastructure for example in terms of its access and backbone networks, telecommunications towers, and other supporting infrastructure and IT systems. During 2019, the Company built 23 thousand BTS, all of which were 4G, to reach a total of 212,235 BTS of which 161,938 units were 3G and 4G BTS. The Company also built 3,117 km of fiber optic-based backbone network, bringing total backbone length to 164,769 km; built  1.1 million Optical Distribution Points (ODP) and 33 thousand Optical Distribution Cabinet (ODC) units;  and built 15 thousand telecommunications towers as well as various other supporting infrastructure. In order carry out these infrastructure improvements, the Company incurred realized capital expenditure of Rp 36.6 trillion. In addition, the Company also carried out inorganic activities to strengthen its infrastructure by acquiring 95% ownership of PT Persada Sokka Tama, which owns 1,017 telecommunication towers, and by purchasing 2,100 telecommunication towers from PT Indosat Tbk.

 

Commitment to Continue  Growing and to Maintain Healthy Profitability

 

The Company’s good performance as described above is inextricably linked to the effective implementation of its work programs for optimal results in 2019. The three main programs were customer experience, intensifying digital business, and cost effectiveness initiatives. The Company believes that the success of these programs, ran through the entire year, has further strengthened Telkom’s capabilities as a digital telco company, specifically related meeting the needs of all customer segments to ensure the Company can continue to grow and maintain healthy profitability in the future.

 

Building Digital Competence

 

Human resources (HR) is one of the key factors for the Company’s transformation into a excellent and competitive digital telco company at the global level in the future. Telkom consistently develops its HR and simultaneously cultivates a digital culture as important components of the Company's digital transformation.

 

There are four pillars of HR development that the Company carries out. The first is the character development based on The Telkom Way for a digital age, whereby the the philosophical foundation of The Telkom Way continues to be the philosophy to Be the Best, principles of To Be The Star and practices To Be The Winner continue to be.  The second pillar is leadership development with an emphasis digital leader competency. Third is soft skills development for professionals at the manager & middle management leaders level which includes decision making, people development, teamwork, organization awareness, and analytical & conceptual thinking in the digital age. Fourth, Telkom continues to be committed to developing the capabilities and technical expertise of HR based on job families, job functions and job roles that are relevant to digital competence.

 

In practice, digital transformation requires a fundamental change in organizations’ work culture in organizations. All Telkom employees are encouraged to demonstrate high agility in working by involving and forming cross-functional tribes and squads and cross expertise in developing service products. The Company also continues to strengthen the competencies of digital talents who show the outstanding ability to develop innovative digital products.

 

Application of Accounting Standards

 

As a company listed on the New York Stock Exchange (NYSE), Telkom is bound by United States Securities and Exchange Commission (US SEC) regulations to implement IFRS 15 and IFRS 9 starting January 1, 2018 and IFRS 16 starting January 1, 2019. IFRS 15 regulates matters related to the principle of recognition of revenue from contracts with customers, IFRS 9 regulates matters related to financial instruments primarily for allowance for impairment losses of financial assets such as allowance for receivables, and IFRS 16 regulates matters related to lease transactions.

 

Telkom has updated its policies, business processes, data preparation and systems, and ensured the readiness of human resources to carry out these activities,  processes and controls towards ensuring that these IFRS standards are accurately applied in all their complexity.

 

Supported by a variety of processes which have been carried out in an integrated manner, the financial statements both for Telkom and its subsidiaries have been adjusted in accordance IFRS international standards. The consolidated financial statements of TelkomGroup submitted to the US SEC are therefore in accordance with IFRS 9, IFRS 15 and IFRS 16, and can be compared to other companies in the world who have also implemented these three standards.

 

OVERVIEW OF BUSINESS PROSPECTS

 

In parallel with the shift in consumer behavior to adopt a digital lifestyle, there will continue to be a growing need for a variety of digital services to provide various solutions and convenience. To develop such digital services in accordance with consumer needs, digital infrastructure and platform capabilities are needed. To develop digital services and build digital platforms, a foundation for reliable digital connectivity infrastructure is needed. Telkom, with its comprehensive and adequate infrastructure and facilities, is in a leading position to seize future opportunities towards ensure the Company's sustainable growth.

 

As demand for broadband services continues to grow, with shifts in consumer behavior due to the adoption of digital lifestyles by the consumer segment and ICT solutions in the corporate segment, the telecommunication industry is anticipating this and strategically shifting towards the digital world. Telkom observes that these dynamics are apparent in three digital business domains, namely digital connectivity, digital platforms, and digital services. As the dominant provider of broadband services in Indonesia, Telkom continues to strengthen its position as a market leader in the digital connectivity domain by presenting quality services with the widest coverage. Telkom has also accelerated its digital platform domain by developing data center & cloud services in early stages, followed by provision of a smart platform that runs on them as an enabler of various ICT services and solutions. Furthermore, digital service products will be selectively developed, including through acquisitions and partnerships, supported synergistically by the digital platforms and digital connectivity that have been developed so as to give subscribers the best experience.

 

In the Mobile segment, there is potential for future growth in line with the rising level of mobile data users, whereby the current penetration of mobile data users is now at 64% and is expected to keep growing as smartphone usage becomes increasingly widespread. However, the average consumption of mobile data is still relatively low at 5.2 GB per customer per month, compared to other countries such as Thailand and India at, respectively, 13 GB and 11 GB per customer per month. Seeing this, the Company estimates that data traffic will continue to grow significantly over the next few years as digital services such as games, video, advertising and payment, which are still in the initial phase of growth, become more diverse. In addition, the Company has also implemented a strategy to increase the growth potential of High Value Customers and mobile solution services in the Enterprise segment. At present, High Value Customers make a significant contribution to Telkomsel's revenue. We maintain their loyalty by providing a superior experience, among others by utilizing our big data analytics to offer services that are personalized to their needs. We also continue to develop digital solutions for the Enterprise segment including mobile security, NB-IoT and various other solutions. At the same time, the Company is also developing products to meet the needs and demands of the youth segment in accordance with their lifestyle as young people will continue to dominate the demographic structure in Indonesia over the next few years.

 

In the Consumer segment, penetration of fixed broadband services in Indonesia is still very low at less than 15% of the household population, far lower than neighboring countries such as Thailand or Malaysia with around 40% penetration. Supported by increasing numbers of middle class households from year to year, with innovative products offered at attractive prices that target lower middle class households, we believe that demand for IndiHome services will still remain high in the coming years. Through IndiHome, Telkom provides high-quality fixed broadband services to satisfy the need for the internet and simultaneously supports a variety of attractive digital service services. In the long term, IndiHome will be developed to effectively accommodate household activities such as the needs for smart home and edutainment that educates, inspires and entertain.

 

Meanwhile in the Enterprise segment, the Company will focus on providing enterprise solutions, in parallel with Enterprise customers’ need to digitize their business processes to become more competitive. The use of connectivity and digital solutions among MSMEs is also still very low, thus offering considerable growth potential going forward. At the same time, government agencies and local governments are increasingly leveraging digital solutions to improve services to the public through connectivity and smart city platforms, as has already been done in 470 cities all over Indonesia. Simultaneously, in order to increase profitability margins in the Enterprise segment, the Company will continue to focus on business growth by prioritizing recurring solution services with better profit margins.

 

In the Wholesale and International Business segment, the Company focuses on being an enabler as a service provider, telecommunications network,  service providers, data centers, tower infrastructure, infrastructure managed services and power solutions for telecommunications network / service providers and digital ecosystems, both domestic and regional.

 

With the advent of the Indonesian Global Gateway (IGG) cable, which connects the SEA-ME-WE5 submarine cable to the SEA-US submarine cable, the Company has become a Global Digital Hub able to provide direct broadband connectivity between Europe, Asia and America. In its role as an enabler, the Company will become the main gateway for digital connectivity, bringing domestic traffic to the global area and vice versa, as well as handling traffic between countries (hubbing) for both voice and A2P (Application-to-Person) SMS traffic.

 

The Company strengthened its tower business through both organic and inorganic initiatives. In addition, the Company provides power solution services, infra manage services, and maintenance, repair and deployment of submarine cable infrastructure in Indonesian waters as well as of submarine cable infrastructure  owned by regional cable consortiums.

 

The Company's Digital Platform development initiatives include Carrier Neutral Data Centers and the construction of Hyperscale Data Centers, Content Delivery Network (CDN), Cloud servicesand CPaaS (Communication Platform as a Service). Several digital services development initiatives have been carried out in the form of U Points and U Ads services, and more initiatives will continue to be developed to support the Company as a Digital Ecosystem Hub.

 

Programs and Performance Goals for 2020

 

In 2020, the Company will maintain its commitment to continue to grow in a healthy manner with a good level of profitability, in line with its strengthened digital capabilities. In a continuation of the previous year, the Company has launched 3 main programs, namely:

 

Supported by the capabilities we have built over the past few years as well as the strategies and programs that have been systematically prepared and implemented, in 2020 we expect that the Company's performance will continue to improve competitively and achieve good profitability.

 

DEVELOPMENT OF CORPORATE GOVERNANCE IMPLEMENTATION

 

The Company always strives to uphold the implementation of good governance in accordance with the five principles of Good Corporate Governance (GCG), namely transparency, accountability, responsibility, independence and fairness, and with reference to the eight principles of corporate management in accordance with the Implementation of the Corporate Governance Guidelines for Public Companies from the Financial Services Authority (OJK). We are fully aware that good governance, based on best practices, plays an important role in building up the Company's long-term sustainability. Simultaneously, good governance can maintain stakeholder confidence in Telkom.

 

Telkom's efforts to implement good governance have received awards from stakeholders. In 2019, Telkom was awarded as the Best State-Owned Big Cap Enterprise in the 11th IICD CG Conference and Award held by IICD.

 

SOCIAL AND ENVIRONMENTAL RESPONSIBILITIES AND PARTNERSHIP AND COMMUNITY DEVELOPMENT PROGRAM

 

PT Telkom Indonesia (Persero) Tbk realizes the importance of a sustainable society and a  good living environment for the future. Therefore, Telkom is committed to carrying out its social and environmental responsibility through the three pillars of the "Telkom Indonesia for Indonesia"program,  which are the Digital Environment, Digital Society, and Digital Economy pillars. In order to encourage inclusive economic growth, we carry out various programs under the framework of the Digital Economy to support micro, small and medium enterprises, especially the creative industries, in the form of training to "go digital", "go online", and "go global" as well as organizing exhibitions of SME products.

 

Furthermore, as a State-Owned Enterprise (BUMN), we run a Partnership and Community Development Program (PKBL). In 2019, we channeled Rp418.2 billion in PKBL funds to programs that aim to improve community welfare and social life, which was implemented and guided by the Minister of SOE Regulation. Specifically for the Partnership Program, in 2019, Telkom channeled funds amounting to Rp253.4 billion to 5,543 development partners,  who are engaged in the industrial, trade, agriculture, animal husbandry, plantation, fishery, service and other sectors. Whereas realized Community Development funds amounted to Rp.115.3 billion in 2019, which were utilized for 7 sectors, namely Natural Disaster Victim Assistance, Education Assistance, Health Improvement Assistance, Infrastructure Development Support or Public Facilities, Assistance for Worship Facilities, Assistance for Nature Conservation and Community Social Assistance in the context of Poverty Alleviation.

 

CHANGES TO THE COMPOSITION OF THE BOARD OF DIRECTORS IN 2019

 

On May 24, 2019, the Company held an Annual General Meeting of Shareholders (AGMS) and determined changes in the composition of the Company's Directors. The AGMS resolution stipulated the termination of these Telkom Directors’ terms of service:

 

 

The composition of Telkom's Board of Directors as at 31 December 2019 following these changes became:

 

 

We express our deepest appreciation for the roles and contributions of members of the Board of Directors whose terms of service have ended. We hope that the positive values ​​that have been built up thus far can be maintained and developed for the advancement of the Company.

 

CLOSING

 

On behalf of the Board of Directors of PT Telkom Indonesia (Persero) Tbk, I would like to express my gratitude and appreciation to the shareholders, the Board of Commissioners, our loyal customers, business partners, the media, the general public, and other stakeholders for the support given to Telkom throughout 2019. We greatly appreciate the management and employees of Telkom and its subsidiaries for their dedication and hard work throughout 2019, which was a dynamic and challenging year.

 

In closing this report, we ask management and employees to be more productive and continuously innovate in order to seize greater digital opportunities, towards realizing sustainable growth and better profitability in the future.

 

 

Jakarta, May 27, 2020

 

/s/ Ririek Adriansyah

 

Ririek Adriansyah

President Director

 

 

 

 

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

PT TELKOM INDONESIA (PERSERO) TBK 2019 ANNUAL REPORT

 

 

We the undersigned hereby declare that all the information in the PT Telkom Indonesia (Persero) Tbk 2019 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, May 27, 2020

 

 

 

 

 

STATEMENT OF THE BOARD OF DIRECTORS MEMBER REGARDING WITH RESPONSIBILITY FOR

PT TELKOM INDONESIA (PERSERO) TBK 2019 ANNUAL REPORT

 

We the undersigned hereby declare that all the information in the PT Telkom Indonesia (Persero) Tbk 2019 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, May 27, 2020

 

 

 

 

 

 

ABOUT TELKOM

 

 

 

 

 

VISION, MISSION, AND STRATEGY

 

After reviewing process of the company’s existing vision and mission that conducted by Board of Directors and Board of Commissioners, Telkom decided the new purpose, vision, mission, and strategy that is stipulated in the long-term plan and approved by the Directors and Board of Commissioners on December 9, 2019, as follows:

 

Purpose

To build a more prosperous and competitive nation as well as deliver the best value to our stakeholders

 

Vision

To be the most preferred digital telco to empower the society

 

Mission

 

Strategies

Telkom formulates its strategic framework into a portfolio direction strategy that includes the development of 3 business domains, i.e. digital connectivity, digital platforms and digital services. The business domain strategy is supported by the value delivery model strategy that includes portfolio optimization strategy, technology, organization, operational excellence and synergy, talent management and corporate and culture, inorganic initiatives, and corporate governance.

 

In general, Telkom's strategy is contained in the acronym WINDIGITAL, which includes:

 

TRANSFORM AND DIGITIZE

 

In 2019, Telkom had the main programs such as embracing best in class digital experience,  intensifying digital business, and driving smart initiatives on cost effectiveness. The main program is directed for Telkom's transformation into a superior digital telecommunication company. Telkom strengthens products and services for customers, builds broadband and digital business competitiveness, and creates sustainable lean operations based on process digitalization and management. Telkom continues to be the best presenting digital customer experience with the understanding of customer needs as a basis to formulate and deliver experiences beyond expectations. At last, in 2019, Telkom will continue to develop leadership which is oriented to digital culture, work effectiveness, speed, accuracy, and collaboration of the parties.

 

To ensure the implementation of strategic steps for its business transformation, Telkom formed the Group Corporate Transformation (GCT) with its role as a unit that oversees and accelerates transformation, particularly in preparing TelkomGroup to become a digital ready, lean, agile and streamlined company.

 

In its implementation, Telkom not only regulates operating models and structures both for Telkom and in its subsidiaries, but also organizes a more efficient business portfolio and provides maximum value for TelkomGroup, by the Subsidiary Streamlined program and implementing the Shared Service Operation (SSO) in 2020.

 

 

TELKOM MILESTONES

 

After six decades, Telkom has been facing the major challenge in line with the developing Over the Top Application (OTT) or internet-based digital application since the 2000s. To deal with the digital disruption, Telkom should have transformation as a telecommunication company. Telkom then adapted as the innovation and digital technology development, adjusted the product portfolio, built the customer-centric organization, and developed the infrastructure network of digital business.

 

Passing 2019, Telkom succeeded to maintain business growth by reaching and creating new business opportunities. Telkom transformed and expanded the business to handle disruptive competitive growth with the main vision as one of the largest digital telecommunication companies in the Asia Pacific. In line with this transformation, Telkom had satisfying achievements in 2019.  One of them was obtaining international recognition in the Frost & Sullivan Asia Pacific the Best Practices Awards 2019.

 

Telkom's achievement in the digital era is inseparable from the six decades-experience dealing with the business world dynamics. Beginning in 1965, Telkom's history was marked by the separation of postal and telecommunications services by the Government, which divides PN Postel into the State Postal Giro Company (PN Pos Giro) and the State Telecommunications Company (PN Telekomunikasi). Telkom is experiencing various changes and growth, including the company name changes and organizational changes.

 

In 1974, PN Telekomunikasi changed into Perusahaan Umum Telekomunikasi (Perumtel) and separated the PT Industri Telekomunikasi Indonesia (PT INTI) as the independent company which produced telecommunication instrument. Then in 1991, Perumtel changed into a state-owned limited company with the official name of PT Telekomunikasi Indonesia (Persero) or Telkom. Since 1995, Telkom has become a public company listed on the Indonesia Stock Exchange (IDX) and the New York Stock Exchange (NYSE). As of December 31, 2019, Telkom market capitalization value was Rp393.3 trillion in BEI and US$28.23 billion in NYSE.

 

Company Name Changes

1965, Perusahaan Negara Telekomunikasi, is called PN Telekomunikasi

1974, Perusahaan Umum Telekomunikasi, is called Perumtel

1991, PT Telekomunikasi Indonesia (Persero), is called Telkom

 

2019

With Mitratel, Telkom acquired 2,100 towers owned by Indosat Ooredoo and 95% of PT Persada Sokka Tama's shares which have 1,017 towers. In addition, Telkomsel also added 23,162 BTS or grew 12.25% than the previous year. IndiHome subscribers also grew 1.9 million or 37.2% to 7.0 million subscribers. In November 2019, Telkom was awarded “2019 Indonesia IoT Services Provider of the Year” by Frost and Sullivan in Asia Pacific Best Practice Awards. 

 

Telkom decided the new purpose, vision, mission, and strategy that is stipulated in the long-term plan and approved by the Directors and Board of Commissioners on December 9, 2019.

 

2018

Telkom launched Merah Putih Satellite and inaugurated The Telkom Hub as the Center of Excellence and Source of Inspiration to Build Digital Indonesia. Telkom also completed the construction of the Indonesia Global Gateway (IGG) submarine cable, which connects two major submarine cable systems, such as South East Asia-Middle East-Western Europe 5 (SEA-ME-WE 5) and Southeast Asia-United States (SEA-US) Submarine Cable Systems. At the end of this year, IndiHome customers have reached 5.1 million subscribers.

 

2017

Telkom launched Telkom 3S satellite and completed the submarine fiber optic cable of Southeast Asia-United States (SEA-US). Telkom subsidiary, Telkomsel, obtained an additional 30 MHz spectrum at 2.3 GHz frequency.

 

2016

Telkom completed the construction of the submarine cable systems Southeast Asia-Middle East-Western Europe 5 (SEA-ME-WE-5).

 

2011-2015

Telkom completed Telkom Nusantara Super Highway and the True Broadband Access project in 2011 to provide internet access with a capacity of 20 Mbps to 100 Mbps. Telkom became the first operator in Indonesia to commercially launch 4G/LTE services in 2014. A year later, Telkom launched IndiHome packages consisting of broadband internet, fixed wireline phone, and interactive TV services.

 

1999-2010

Telkom launched the Telkom‑1 and Telkom-2 satellite, as well as completed the JaKaLaDeMa submarine fiber optic cable project.

 

1991-1995

Perumtel changed into PT Telekomunikasi Indonesia (Persero) or Telkom under Government Regulation No.25 of 1991 which determined a state-owned enterprise (SOE) became  a limited liability company.  In 1995, Telkom established a subsidiary, Telkomsel, as a cellular operator. In the same year, Telkom made its initial public offering (IPO) at the Jakarta Stock Exchange and the Surabaya Stock Exchange, registered shares on the NYSE and LSE, and publicly offered shares without listing on the Tokyo Stock Exchange.

 

1974

PN Telekomunikasi was turned into Perusahaan Umum Telekomunikasi Indonesia (Perumtel), which provided telecommunications services. PT Industri Telekomunikasi Indonesia, which manufactured telecommunications equipment, changed into an independent company and separated from Perumtel.

 

1965

The Government separated the 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

 

Business activities that operated during the financial year and the types of goods and/or services produced by Telkom refer to the Company's Articles of Association. The last version of the Articles of Association of PT Telkom Indonesia (Persero) Tbk No.32 dated June 21, 2019, 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 and strong competitiveness to gain/pursue profits for increasing value The Company applies the principle of Limited Company.

 

In correlation with the purpose and objective, the business line that including company business activities according to the latest articles of association, could be explained as follows.

 

Main Business Lines

 

Supporting Business Lines

 

Telkom considers the current digital era is affecting the production efficiency and the lower space needs. The more concise equipment and electronic devices resulted in more lenience for Telkom empowering idle or unused assets and space. Therefore, PT Graha Sarana Duta (Telkom Property), a Telkom subsidiary has initiated the leverage asset program since 2018 within two approaches, such as Synergy Group (Internal group customer) and Strategic & Retail Partnership (external group customer). This Synergy Group would enhance cost efficiency while the Strategic & Retail Partnership is to increase revenue from property development, property rental, property facilities, and property management service.

 

PORTFOLIO PRODUCT AND/OR SERVICE

 

In 2019, Telkom business activities have been operated in accordance with the articles of association, which is the provider of telecommunications, informatics and network services. Telkom then developed the business activity into various segments in accordance with the strategy of digital transformation and the development of the telecommunications industry. In every business segment, Telkom has product/service portfolio as follows:

 

 

 

 

AWARDS AND 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: