Annual Report Telkom Indonesia 2000

2000 Annual Report on Form 20-F

SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549

FORM 20-F ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Ñscal year ended December 31, 2000

Commission Ñle number 1-13330

Perusahaan Perseroan (Persero) P.T. Telekomunikasi Indonesia Tbk. (Exact name of Registrant as speciÑed in its charter)

Telecommunications Indonesia (a state-owned public limited liability company) (Translation of Registrant's name into English)

Republic of Indonesia (State or other jurisdiction of incorporation or organization)

Jalan Japati, 1 Bandung 40133 Indonesia (62) (22) 452-7337* (Address and telephone number of Registrant's principal executive oÇces)

Securities registered or to be registered pursuant to Section 12(b) of the Act. Title of Each class

Name of each exchange on which registered

American Depositary Shares representing Series B Shares, par Value 500 Rupiah per share ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Series B Shares, par value 500 Rupiah per shareÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

New York Stock Exchange New York Stock Exchange**

Securities registered or to be registered pursuant to Section 12(g) of the Act. None Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act. None Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report: Series A Shares, par value 500 Rupiah per share ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Series B Shares, par value 500 Rupiah per share ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

1 10,079,999,639

Indicate by check mark whether the registrant (1) has Ñled all reports required to be Ñled by Section 13 or 15(d) or the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to Ñle such reports), and (2) has been subject to such Ñling requirements for the past 90 days. Yes X No Indicate by check mark which Ñnancial statement item the Registrant has elected to follow. Item 17

Item 18 X

* Investor Relations Unit ** The Series B Shares were registered in connection with the registration of the American Depositary Shares. The Series B Shares are not listed for trading on the New York Stock Exchange.

TABLE OF CONTENTS Page

DEFINITIONS ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

1

Introduction ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

4

PART I Item

1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS* ÏÏÏÏÏÏÏÏ

5

Item

2. OFFER STATISTICS AND EXPECTED TIMETABLE* ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

5

Item

3. KEY INFORMATIONÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

5

Item

4. INFORMATION ON THE COMPANY ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

9

Item

5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

36

Item

6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEESÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

45

Item

7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS ÏÏÏÏÏÏÏÏÏÏÏÏ

50

Item

8. FINANCIAL INFORMATION ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

51

Item

9. THE OFFER AND LISTINGÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

52

Item 10.

ADDITIONAL INFORMATION ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

55

Item 11.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK ÏÏÏÏÏ

64

Item 12.

DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES*ÏÏÏÏÏÏÏÏÏÏÏ

70

PART II Item 13.

DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

70

Item 14.

MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

70

Item 15.

RESERVEDÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

70

Item 16.

RESERVEDÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

70

PART III Item 17.

FINANCIAL STATEMENTS* ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

70

Item 18.

FINANCIAL STATEMENTS ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

70

Item 19.

EXHIBITS ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

71

* Omitted because item is not applicable.

i

DEFINITIONS ""AMPS'' (Advanced Mobile Phone System) is a form of analog mobile cellular. ""ASR'' (Answer to Seizure Ratio), see ""Call Completion Rate.'' ""ATM'' (Asynchronous Transfer Mode) is a transfer mode in which the information is organized into cells. It is asynchronous in the sense that the recurrence of cells containing information from an individual user is not necessarily periodic. ""B2B'' (Business-to Business Electronic Commerce) is a technology-enabled application environment to facilitate the exchange of business information and automate commercial transaction designed to automate and optimize interactions between business partners. ""backbone'' means the secondary and tertiary exchanges and the transmission links between and among them. Transmission media may consist of microwave, submarine cable, satellite, optical Ñbre or other technologies. ""call completion rate,'' means the percentage of calls that are successfully completed, as measured by the number of calls successfully answered divided by the number of call attempts that are recognized by the caller's local exchange, in the case of call completion rates for local calls, and call attempts that are recognized by the trunk exchange, in the case of call completion rates for long distance calls. Call completion rate is measured by the answer to seizure ratio (""ASR''). ""capacity utilization'' means the ratio of lines in service to local exchange capacity. ""DCS 1800'' (Digital Communication System) is a mobile cellular system using GSM technology operating in 1800Mhz frequency. ""distribution point'' means the point of interconnection between the drop wire and the secondary cable running to a cabinet and/or a local exchange. ""drop wire'' means the wire connecting the subscriber's premises to the distribution point. ""DTR'' (Distributable TELKOM Revenues) is the monthly revenue share payment to be made by each KSO Unit to TELKOM, being a speciÑed percentage of telephone and other revenues of a KSO Unit (after deduction of MTR and speciÑed cash expenses) from operating all lines in service in each KSO Divisions. ""earth station'' means the antenna and associated equipments used to receive or transmit telecommunication signals via satellite. ""existing installations'' means telecommunications facilities, including telephone lines, network infrastructures and related assets in existence in each KSO Division as of the beginning of each KSO Period plus certain facilities and equipments constructed or installed by TELKOM in the KSO Divisions after such dates which handed over to be managed by KSO Investors. ""Ñxed cellular'' is a form of Ñxed wireless technology, which uses conventional cellular network conÑgurations to link a subscriber at a Ñxed location to a local exchange. ""Ñxed wire line'' is a Ñxed path (wire or cable) linking a subscriber at a Ñxed location to a local exchange, usually with an individual phone number. ""Ñxed wireless'' is a wireless, local transmission link using cellular, microwave or radio technology to link a subscriber at a Ñxed location to a local exchange. ""Government'' means the Government of the Republic of Indonesia. ""GPRS'' (General Packet Radio Service) is a new GSM technology platform, which is also called the two-and-half Generation (2.5G), that enables mobile-multimedia services over the GSM network. The services supported by GPRS platform may range from voice services, data transfer (up to 115Kbps), intranet, internet, mobile-commerce, to information services under WAP applications. 1

""GSM'' (Global System for Mobile Telecommunication) is a European standard for digital cellular telephone. ""HFC'' (High Fibre Coaxial) is a way of delivering video, voice telephony, data, and other interactive services over coaxial and Ñbre optic cables. ""installed lines'' is lines fully built-out to the distribution point and ready to be connected to subscribers. ""ISDN'' (Integrated Services Digital Network) is development of system with narrow bandwidth and digital system from end to end (terminal to terminal) that allows simultaneous transmission of voice, data and video with high speed, high capacity and high quality. ""KSO'' (Kerjasama Operasi) or Joint Operation Scheme, is a unique type of build, operate, and transfer arrangement consists of Ñve KSO Divisions known as KSO Unit i.e.: TELKOM's Regional Divisions I (Sumatera), III (West Java), IV (Central Java), VI (Kalimantan) and VII (Eastern Indonesia). ""KSO Investor'' means each of the Ñve private joint venture companies, which currently is a party to a KSO Agreement with TELKOM. ""KSO Period'' means the period commencing as under each KSO Agreement and ending on December 31, 2010. ""leased line'' means a dedicated telecommunications transmissions line linking one Ñxed point to another, rented from an operator for exclusive use. ""lines in service'' means revenue-generating lines connected to subscribers, including payphones, but does not include mobile cellular subscribers or lines used internally by TELKOM. ""local exchange capacity'' means the aggregate number of lines at a local exchange connected and available for connection to outside plant. ""Mbps'' (megabits per second) is a measurement of speed for digital signal transmission expressed in millions of bits per second. ""microwave transmission'' means transmission consisting of electromagnetic waves in the radio frequency spectrum above 890 million cycles per second and below 20 billion cycles per second. ""MTR'' (Minimum TELKOM Revenues) refers to a guaranteed annual minimum amount of revenue, paid in monthly instalments, by KSO Units to TELKOM. ""NMT-450'' (Nordic Mobile Telephone) is a form of analog mobile cellular service primarily installed in vehicles. ""Non-KSO Divisions'' means Regional Divisions II (Jakarta) and V (East Java) and the Network Services and Corporate Head OÇce Divisions of TELKOM. ""non-PBH lines'' means lines not subject to PBH arrangements. ""optical Ñbre cable'' means cables using optical Ñbre and laser technology, whereby modulating light beams representing data are transmitted through thin Ñlaments of glass. ""outside plant'' is the equipment and facilities used to connect subscriber premises to the local exchange. ""overlay'' means a separate network, which operates independently of the existing telephone network, but covers the same geographic region. ""PBH'' (Pola Bagi Hasil) is a type of Build, Operate and Transfer arrangement, refers to a form of revenue sharing arrangement under which a private investor Ñnances construction of a system, TELKOM is responsible for operation and maintenance. 2

""PBH lines'' are lines Ñnanced, constructed and operated pursuant to PBH revenue sharing arrangements. ""PBX'' (Private Branch Exchange) is a small private open architecture telephone network. ""PSDN'' (Packet Switched Data Network) is a network using a switch device and sending packets of data through the network to some remote locations. ""PSTN'' (Public Switched Telephone Network) is a network operated and maintained by TELKOM and the KSO Units for and on behalf of TELKOM. ""RIP'' (Rencana Induk Pembangunan) is TELKOM's Ñve-year development plan. ""satellite transponder'' means the radio relay equipment on a satellite, which receives a signal, ampliÑes it, changes its frequency, and then sends it back to earth. ""switch'' means a mechanical, electrical or electronic device, which opens or closes circuits, completes or breaks an electrical path, or selects paths or circuits used to route traÇc on the PSTN. ""switching capacity'' means the capacity of all Network exchanges to switch a circuit from one exchange to another. ""SOPP'' (System On-Line Payment Point) is payment point service, which allows TELKOM customers to pay their bills electronically through certain on-line and integrated banks or post oÇce. ""trunk exchange'' means a primary, secondary or tertiary exchange. ""USO'' or ""Universal Service Obligation'' is the service obligation imposed by the Government on all providers of telecommunications services for the purpose of providing public service in Indonesia. ""VoIP'' (Voice over Internet Protocol) also referred to as ""Internet Telephony'' is a two-way transmission of audio over an IP network, such as the internet. ""VSAT'' (Very Small Aperture Terminal) is a relatively small antenna, typically 1.5 to 3.0 meters in diameter, used for transmitting and receiving one channel of data communication. ""WAP'' (Wireless Application Protocol) is an open and global standard of technology platform that enables mobile users to access and interact with mobile information services such as email, Web sites, Ñnancial info, on line-banking, information and entertainment (infotainment), games, micro payments, etc. ""WLL'' (wireless local loop) is the use of wireless technology (such as cellular or microwave) as part of a network's outside plant.

3

Introduction In this Annual Report certain Rupiah amounts have been translated into Dollars at speciÑed rates. For 1996 to 1998, Dollar equivalent information for amounts in Rupiah is based on the exchange rates quoted by Bank Indonesia in its weekly reports. For 1999, TELKOM quotes middle exchange rate from Dow Jones Telerate, while for 2000, TELKOM quotes exchange rates from the Bridge Telerate, which on December 31, 2000, was Rp 9,625 • US$1.00. The Federal Reserve Bank of New York does not certify for customs purposes a noon buying rate for cable transfers in Rupiah. No representation is made that the Rupiah or Dollar amounts shown herein could have been or could be converted into Dollars or Rupiah, as the case may be, at any particular rate or at all. The following table sets forth certain exchange rate information expressed in terms of the Indonesian Rupiah for Dollars. Year Ended December 31,

At End of Average Period High Low Rate (Rupiah per U.S.$1.00)

1996(1) 1997(1) 1998(1) 1999(2) 2000(3)

2,383 4,650 8,025 7,110 9,625

ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

2,383 4,650 14,900 9,600 9,675

2,311 2,396 7,300 6,575 7,035

2,347 2,952 9,875 8,522 8,403

(1) Source: Bank Indonesia. (2) Source: Dow Jones Telerate (3) Source: Bridge Telerate

Forward Looking Statement This document contains certain forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the ""Securities Act''), and Section 21E of the Securities Exchange Act of 1934, as amended (the ""Exchange Act''), with respect to the Ñnancial condition, result of operations and business of the Company and certain plans and objectives of TELKOM with respect to these items. In particular among other statements, certain statements in ""Item 5 Operating and Financial Review and Prospects'' including, without limitation, those concerning the Company's expectations and plans, strategy, management's objectives, trends in market shares, market standing, overall market trends, risk management, exchange rates and revenues and general and administration expenses, and forward looking statements concerning TELKOM's operations, performance and Ñnancial condition. Such statements can be generally identiÑed by the use of terms such as ""believes,'' ""expects,'' ""may,'' ""will,'' ""would,'' ""could,'' ""plans,'' or ""anticipates,'' and the negatives of such terms or comparable terms. By their nature, forward looking statements involve risks and uncertainties because they are related to events, which depend on circumstances that will occur in the future. There are a number of factors that could cause actual results and developments to diÅer materially from those expressed or implied by these forward looking statements. These factors include, but are not limited to, changes in demand for the Company's products and services, the impact of competitive products and services and pricing of the Company's products and services, impact of regulation, future exchange and interest rates, changes in tax rates and future business combinations or dispositions.

4

PART I Item 1:

Identity of Directors, Senior Management and Advisers

Not applicable. Item 2:

OÅer Statistics and Expected Timetable

Not applicable. Item 3: A.

Key Information

Selected Ñnancial data

The following table presents selected Ñnancial information and operating statistics of the Company for and as of the end of each of the periods indicated. This information should be read in conjunction with, and is qualiÑed in its entirety by reference to, the Company's Consolidated Financial Statements, including the notes thereto, and the other information included elsewhere herein. The Company's Consolidated Financial Statements for the years 1998 and 1999, were audited by Prasetio, Utomo & Co., the member Ñrm of Arthur Andersen & Co. SC in Indonesia. The Company's Consolidated Financial Statements for the year 2000 has been audited by Hans Tuanakotta & Mustofa, a member Ñrm of Deloitte Touche Tohmatsu in Indonesia as indicated in their report appearing on page F-1 herein. Such Financial Statements are prepared in accordance with Indonesian GAAP, which diÅers in certain signiÑcant respects from U.S. GAAP. See ""Quantitative and Qualitative Disclosure About Risk Ì Summary of Material DiÅerences between Indonesian GAAP and U.S. GAAP'' and Notes 43 and 44 to the Company's Consolidated Financial Statements, which provide a description of the material diÅerences between Indonesian GAAP and U.S. GAAP and a reconciliation to the approximate amount of U.S. GAAP net income and stockholders' equity of the Company for and as of the end of each of the periods indicated in the Consolidated Financial Statements. 1996 1997 1998 1999 2000 Rp Rp Rp Rp Rp (Rp in billion, except share and ADS data)

Income Statement Data Indonesian GAAP Operating revenues Telephone Local and domestic long distance usage ÏÏÏÏ Monthly subscription charges ÏÏÏÏÏÏÏÏÏÏÏÏÏ Installation charges ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ OthersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total telephone revenues ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Revenue Under Joint Operation SchemeÏÏÏÏÏÏ Interconnection ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Other telecommunication services Revenue sharing ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ OthersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total operating revenues ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

5

1,953 425 242 122 2,743 1,498 310

2,375 543 156 132 3,206 1,646 573

2,903 683 106 113 3,805 1,592 556

3,571 799 68 91 4,529 1,677 892

4,097 887 75 118 5,178 2,267 1,121

344 181

272 212

285 362

308 384

308 502

5,076

5,909

6,600

7,790

9,375

1996 1997 1998 1999 2000 Rp Rp Rp Rp Rp (Rp in billion, except share and ADS data)

Operating expenses Personnel ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Depreciation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Operation, maintenance and telecommunications services(1) ÏÏÏÏÏÏÏÏÏÏÏÏ General and administrative ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ MarketingÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total operating expenses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Operating incomeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Other expenses (income) Interest expense ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Interest income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Loss (gain) on foreign exchange Ì netÏÏÏÏÏÏÏ Others Ì net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Income before provision for income tax ÏÏÏÏÏÏÏÏ Provision for income taxÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Minority interest in net income of subsidiary ÏÏÏ Net income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Weighted average shares outstanding (millions) ÏÏ Net income per share ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Net income per ADS ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Dividend declared per share ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ U.S. GAAP(2) Net income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Net income per share ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Net income per ADS ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

787 1,402

847 1,697

832 2,162

1,106 2,364

1,439 2,088

444 267 29 2,927 2,149

412 392 35 3,383 2,526

501 474 31 4,000 2,600

822 508 47 4,847 2,943

1,009 715 87 5,338 4,037

452 523 981 1,487 817 (231) (145) (595) (688) (632) 3 424 966 (280) 1,064 (146) 102 (177) (538) (670) 2,071 1,622 1,425 2,962 3,458 568 470 256 777 906 Ì Ì Ì 13 13 1,503 1,152 1,169 2,172 2,539 9,333 9,333 9,333 9,644 10,080 161.07 123.44 125.21 225.24 251.89 3,221.31 2,468.79 2,504.29 4,504.89 5,037.72 24.48 41.25 48.48 50.99 107.76 1,356 145.28 2,905.64

811 86.87 1,737.32

1996 Rp

Balance Sheet Data Indonesian GAAP Total assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Current liabilities(3) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Other liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Long term debt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total stockholders' equity ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ U.S. GAAP(3) Total assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total stockholders' equity ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

924 99.01 1,980.21

2,385 247.33 4,946.62

2,497 247.74 4,954.73

As of December 31, 1997 1998 1999 2000 Rp Rp Rp Rp (Rp in billions, U.S.$ in millions)

17,669 2,129 2,249 4,424 8,802 8,867

19,819 23,693 26,330 28,880 2,370 2,615 3,393 3,390 2,174 2,133 2,142 2,220 5,637 8,437 8,541 9,546 10,181 13,185 14,076 15,156 9,638 10,508 12,224 13,688

17,652 8,496

19,472 8,948

23,069 9,675

25,771 11,605

28,216 13,026

(1) Beginning in the third quarter of 1998, management reclassiÑed commissions paid on wartels, and kiosks, as Operation, Maintenance and Telecommunications Services expenses (rather than marketing expenses). (2) U.S. GAAP amounts reÖect adjustments resulting from diÅerences in the accounting treatment of pensions, foreign exchange diÅerential on property under construction, equity in net income (loss) of investees, revaluation of property, plant and equipment, PBHs and deferred stock issuance cost. See Note 43 to the Company's Consolidated Financial Statements. (3) Includes current maturities of long-term debt.

6

1996

Operating Statistics (unaudited) Exchange capacity Non-KSO Divisions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ KSO DivisionsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Lines in service(1) Non-KSO Divisions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ KSO DivisionsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Lines in service per 100 inhabitants Non-KSO Divisions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ KSO DivisionsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Combined ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Public telephones(2) Non-KSO Divisions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ KSO DivisionsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Leased lines in service Non-KSO Divisions(3) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ KSO DivisionsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Pulse Subscriber Production(2)(millions) Non-KSO Divisions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ KSO DivisionsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Call completion rate (%) Local Non-KSO Divisions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ KSO DivisionsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Combined ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Domestic long distance Non-KSO Divisions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ KSO DivisionsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Combined ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total Employees Non-KSO Divisions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ KSO DivisionsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Lines in service per employee Non-KSO Divisions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ KSO DivisionsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Combined ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

As of and for the Year Ended December 31, 1997 1998 1999

2000

3,586,750 4,035,245 4,324,024 4,449,552 4,515,615 2,756,945 3,356,952 3,827,993 3,909,179 3,946,407 6,343,695 7,392,197 8,152,017 8,358,731 8,462,022 2,302,745 2,746,028 3,014,824 3,256,992 3,610,363 1,883,285 2,236,438 2,556,820 2,823,201 3,052,242 4,186,030 4,982,466 5,571,644 6,080,193 6,662,605 3.91 1.35 2.11

4.58 1.58 2.47

4.95 1.78 2.73

5.3 1.9 2.9

5.7 2.0 3.1

74,873 59,669 134,542

92,192 74,532 166,724

126,345 90,306 216,651

155,107 114,135 269,242

216,288 129,019 345,307

1,401 1,032 2,433

1,223 1,339 2,562

1,371 1,760 3,131

2,446 2,143 4,589

3,300 2,702 6,002

19,602 15,745 35,347

23,772 18,371 42,143

25,095 20,810 45,905

25,077 22,182 47,259

28,231 24,628 52,859

55.9 58.7 57.9

60.9 60.2 60.4

68.1 68.1 68.1

72.0 70.1 70.6

77.0 71.4 73.0

52.5 53.6 53.2

56.6 56.4 56.5

62.1 62.0 62.0

64.0 62.4 63.0

69.3 64.5 65.8

18,671 18,973 37,644

18,990 18,984 37,974

19,210 18,907 38,117

19,079 18,904 37,983

18,917 18,788 37,705

123 99 111

145 118 131

157 135 146

171 149 160

191 163 177

(1) Includes lines in service operated by TELKOM pursuant to PBHs as of December 31: (1996) 389,972 , (1997) 416,165, (1998) 406,487, (1999) 405,643 and (2000) 409,818. (2) Consists of pulses generated from local and domestic long distance calls, excluding calls made from payphones and mobile cellular phones (3) Excludes 16,876 leased line and 1,198 leased line operated by Network Division and Multimedia Division, respectively (data as of December 2000).

7

B.

Capitalization and indebtedness Not applicable.

C.

Reason for the oÅer and use of proceeds Not applicable.

D.

Risk Factors

Indonesian Economic, Political and related Considerations All of the Company's operations are located in Indonesia. The Company and the market price and liquidity of the ADSs and the shares of Common Stock may be aÅected by changes in Indonesian governmental policy, taxation and other political, economic, diplomatic or social developments in or aÅecting Indonesia which are not within the control of the Company. In the early 1980's, the Government initiated deregulation and economic liberalization policies that have stimulated economic growth through private enterprise and increased investments. The Company has beneÑted from the implementation of these policies as they have resulted in signiÑcant increases in, among other things, business activity and corporate and personal wealth, spurring increased demand for telecommunications services and increased volume in telephone traÇc. Although the Government has indicated that it presently intends to continue these policies, and the Company does not anticipate policy changes, there can be no assurance to that eÅect or that a change in the Government would not result in changes in policy or the broader economic environment. Any such change could have a material adverse eÅect upon the Company's business. Exchange Rate Risk The holders of ADSs and the Company are subject to currency risk should the value of the rupiah depreciate against the U.S. dollar and certain currencies. Fluctuations in the exchange rate between the rupiah and the U.S. dollar may materially aÅect the dollar value of any amounts a holder of ADSs will receive in respect of dividends, the dollar value of the proceeds a holder would receive upon the sale in Indonesia of shares of Common Stock and the secondary market price of the ADSs. Furthermore, the Company receives all of its revenues in rupiah, but must make signiÑcant expenditures in other currencies, particularly U.S. dollars and Japanese yen, related to the purchase of equipment and the repayment and servicing of foreign currency denominated indebtedness. As of December 31, 2000, the Company had a total long-term debt of Rp 10,364.8 billion, which includes an equivalent of Rp 6,037.1 billion drawn from credit facilities under which it would be subject to foreign exchange risk. Currently the Company maintains foreign currency Ì denominated current assets (such as bank deposits) in suÇcient amounts to meet its anticipated foreign currency Ì denominated current liabilities when they come due. Notwithstanding its expectations, there can be no assurance that the Company will be able to manage its currency exchange rate risk successfully in the future or that the Company will not be adversely aÅected by its new exposure to currency exchange risk. Long Term solutions of KSO Agreements On October 20, 1995, TELKOM entered into long-term agreements with 5 (Ñve) KSO Investors providing for the transfer of network development and operational responsibility to the KSO Investor for Regional Divisions I, III, IV, VI, and VII. Due to the depreciation of the rupiah against foreign currencies, particularly the US Dollar, in 1997 and thereafter, some of the KSO projects have lost their economic viability. 8

Discussions between TELKOM and KSO Investors have arrived at Ñve alternative solutions: (i) continue the KSO schemes in accordance with original agreements with certain modiÑcations in construction provisions, (ii) to form joint venture companies with TELKOM; (iii) to form joint venture company with Indosat, (iv) separation of assets of the KSO; and (v) termination of the KSO agreement. The Company believes the KSO scheme is still valid, therefore favors to proceed under the original agreements with certain modiÑcations. However the Company is still open to discuss any alternative proposed by the KSO Investors provided a win-win solution is presented. The alternative solutions being discussed in regard to the KSO problem may result in various solutions among KSO partners subject to certain conditions. TELKOM's view of the continuation of the KSO original contract with some amendments is the most suitable to the parties and has the minimum impact on the Company's Ñnancial position and operations. Meanwhile termination of the KSO is believed to have the most impact on the Company's Ñnancial position and operations as the Company would require signiÑcant funding to buy the KSO assets. Given the intensive negotiation being conducted, the Company cannot determine the solution of its KSO as well as its impact on the Company's Ñnancial position. In case the Company needs some Ñnancing sources to resolve the KSO problem, the Company will optimize the use of cash generated internally and may use the other Ñnancing sources that will result in minimum weighted average cost of capital. Regulatory Structure TELKOM and its operations are subject to comprehensive governmental regulation and supervision. In Indonesia, the Government sets policy for the telecommunications sector pursuant to applicable laws, which generally establish basic principles and leave considerable discretion to the Government. The Government is also responsible for implementation and enforcement of applicable laws and policies. Government policies deÑne, among other things, the terms of TELKOM's exclusivity, applicable tariÅ policy and structure and Universal Service Obligation (USO). Policies applicable to the Company and the regulatory environment in which it operates may change and such changes could have a material adverse eÅect on the Company's operations and Ñnancial prospects. TariÅ Policy In Indonesia, any rebalancing of tariÅs to better reÖect the costs of providing such services may only be implemented through the Government's approval. The Government has stated its intention to gradually rebalance tariÅs to reÖect costs while, at the same time, retaining aÅordability. No assurance can be given that reductions in tariÅs for services such as long distance will be oÅset by corresponding increases in tariÅs for other services. On October 23, 1995, the Government issued a decree No. KM-79/PR.301/MPPT-95 (""The Price Cap TariÅ Decree'') which establishes a policy of using a price cap tariÅ formula to aid in determining future tariÅ adjustments for certain classes of telecommunications services. In relation with the depreciation of the rupiah, during the year 1998 and 1999, the Government decided to apply a Öat increase to all tariÅ structure. There is no assurance for a consistent implementation of the Price Cap Formula. Item 4: A.

Information on the Company

History and development of the company

Perusahaan Perseroan (Persero) P.T. Telekomunikasi Indonesia Tbk. (""TELKOM'' or the ""Company'') is the principal provider of telecommunications services in Indonesia, providing local and domestic long distance telephone services through 6.66 million lines in service as of December 31, 2000. TELKOM, either directly or indirectly through its aÇliates, provides a wide range of other telecommunications services, including mobile and Ñxed cellular, data communications, leased lines and certain value-added services. TELKOM, a majority state-owned company, is one of the largest companies in Indonesia with total operating revenues of Rp 9,375.7 billion and Rp 2,539.0 billion of net 9

income in the year 2000. From 1996 to 2000, the Company's operating revenues and net income had compound annual growth of 16.58% and 14.00%, respectively, while operating income had compound annual growth of 17.07%. In 1884, the Dutch colonial government established a private company to provide postal services and domestic telegraph services and, subsequently, international telegraph services. Telephone services were Ñrst made available in Indonesia in 1882 and, until 1906, were provided by privately-owned companies pursuant to a 25-year government license. In 1906, the Dutch colonial government formed a government agency to assume control of all postal and telecommunications services in Indonesia. In 1961, most of these services were transferred to a newly-established state-owned company to provide postal and telecommunications services in Indonesia, apart from services in Sumatera, which were transferred in the 1970's. The Government separated postal and telecommunications services in 1965 into two state-owned companies, PN Pos dan Giro, and PN Telekomunikasi. In 1974, PN Telekomunikasi was further divided into two state-owned companies, Perusahaan Umum Telekomunikasi (""Perumtel'') and P.T. Inti, to provide domestic and international telecommunications services and telecommunications equipment manufacturing, respectively. In 1980, the international telecommunications business was transferred from Perumtel to Indonesian Satellite Corporation (""Indosat''). In 1991, Perumtel was transformed into ""Persero,'' a state-owned limited liability corporation with commercial purposes, and renamed Perusahaan Perseroan (Persero) P.T. Telekomunikasi Indonesia, known as TELKOM. Prior to 1995, TELKOM's business was segregated into 12 regional operating units, known as ""Witels,'' which were centrally controlled by TELKOM's headquarters in Bandung, West Java. Each Witel had a management structure responsible for all aspects of TELKOM's business in their respective regions, from the provision of telephone services to property management and security. During 1995, TELKOM restructured its operations (the ""Restructuring'') by converting all twelve Witels into seven Regional Divisions (Division I, Sumatera; Division II, Jakarta and the surrounding areas; Division III, West Java; Division IV, Central Java; Division V, East Java, including Surabaya; Division VI, Kalimantan; and Division VII, Eastern part of Indonesia) and one Network Division. As part of the restructuring, the Company's business activities were divided into three main areas, which were core, related, and supporting business. The Company also entered into KSO Agreements with Ñve private sector consortia, each of which includes prominent international telecommunication operator(s), to develop and manage Ñve of TELKOM's seven regional operating divisions with TELKOM. Furthermore, on November 14, 1995, the Government sold TELKOM shares through a global initial public oÅering. In December 1996 and May 1999 the Government sold 388 million and 898 million of its B shares respectively. Pursuant to Law No. 1 of 1995 on Limited Liability Companies, the minimum issued and fully paid stock at 25% of the Company's authorized capital stock amounts to Rp 5 trillion. To conform to the Law, at the Annual General Meeting of the Stockholders in 1999, it was resolved to increase the issued and fully paid capital stock by capitalizing Additional Paid-in Capital into 746,666,640 Series B shares resulting in a total of 10,079,999,640 outstanding shares. Capital Expenditures During 2000, the Company spent Rp 2,103.3 billion on Capital Expenditures. Out of these Capital Expenditures approximately Rp 1,165.8 billion was spent for infrastructure development,

10

Rp 734.4 billion for PMVIS, and Rp 203.1 billion for support business. The breakdown of 2000 CAPEX is as follows: Rp (billions)

Infrastructures ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PMVIS: Phone-Net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Mobile-Net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ View-NetÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Inter-Net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Service-Net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Sub TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Support ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

1,165.83 528.03 Ì 0.28 98.68 107.38 734.37 203.11 2,103.31

During 1998, 1999, and 2000 total Capital Expenditures were Rp 4,485.0 billion, Rp 2,713.8 billion, and Rp 2,103.3 billion respectively. Capital Expenditure Plan 2001 TELKOM's capital expenditure plan for the year 2001 totals approximately Rp 3,625.89 billion, which will be funded by cash generated internally of Rp 3,183.64 billion, and the remaining Rp 442.25 billion by committed two step loans. The Company uses an assumed Rupiah/U.S. Dollar exchange rate of Rp 9,100 • US$1.00 for its 2001 capital expenditure plan. Capex for the year 2001, as mentioned above, is categorized in accordance with TELKOM's business development plan, to reÖect the Company's present intentions to become a leading company in information and communication business in the region (See: ""Business Strategy''). The Capex is allocated as follows: (i) development of infrastructure consisting of transmission network, access network, infrastructure of data backbone, and infrastructure of PSTN backbone in the amount of Rp 1,728.25 billion; (ii) development of phone business in the amount of Rp 144.36 billion; (iii) the development of mobile business, particularly of the DCS-1800 supported by GPRS and WAP Gateway in the amount of Rp 594.45 billion; (iv) development of view/cable TV business Rp 2.99 billion; (v) internet development in the amount of Rp 129.64 billion for IP high speed, VoIP, and IP value added services; and (vi) Rp 273.87 billion spending in supporting service development consisting of a billing system, network management systems, management information systems, call centers, and enterprise business. The remaining Rp 752.33 billion will be used for supporting capital expenditure, consisting of expenditures such as interest during construction, provision for foreign exchange, project operating cost, research & development, contingency, operating capital expenditures for JOS, and other facilities. The following table shows the Company's planned capital expenditures for the year 2001: 2001 Rp (in billions)

Business Development

Infrastructure ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Transmission Network ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Access Network ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Data Backbone ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PSTN BackboneÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Phone ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Mobile ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ View/cable TV ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Internet ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Service ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Supporting ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 11

1,728.25 430.45 973.02 152.54 172.24 144.36 594.45 2.99 129.64 273.87 752.33 3,625.89

TELKOM's 2001 capital expenditure plan and the implementation of such plan are subject to change depending on actual facts and circumstances as they may develop from time to time. Infrastructure Development The development of infrastructure consists of (i) Rp 430.45 billion for a transmission network which includes a Ñbre optic transmission network in the city of Jakarta and Surabaya, a backbone/long haul transmission network, and an additional ground satellite segment, (ii) Rp 973.02 billion for access network which includes Ñbre access network, copper access network, HFC, wireless access, and High Speed Multimedia Access using DSL technology (iii) Rp 152.54 billion for data backbone which includes Router Core and Edge, ATM Network, Frame Relay, and Remote Access Server, (iv) Rp 172.24 billion for infrastructure of PSTN network which includes upgrading PSTN local switch, and additional capacity for PSTN trunk. The total budget for infrastructure development is Rp 1,728.25 billion. Development of Phone Business TELKOM plans to invest Rp 144.36 billion in the year 2001 on expanding and improving phone business consisting of: (i) Rp 84.53 billion for additional capacity; (ii) Rp 13.61 billion for additional ISDN capacity and PSTN Value Added Services; and (iii) Rp 46.22 billion for Intelligent Network. Development of Mobile Business TELKOM plans to invest Rp 594.45 billion for DCS-1800 infrastructure supported by WAP application and GPRS in the year 2001 which includes: (i) Rp 401.71 billion for Mobile Switching Center, Base Station Controller, and Base Transceiver Station; (ii) Rp 85.44 billion for WAP, GPRS, and IN; (iii) Rp 40.36 billion for approach link; and (iv) Rp 66.94 billion for mobile planning tools and supporting facilities. Development of View/Cable TV Business In the year 2001, TELKOM plans to invest Rp 2.99 billion on development of business view/cable TV such as Pay TV, High Speed Internet Access, and Direct to Home (DTH) service. TELKOM is expected to acquire approximately 10,000 subscribers for Pay TV, approximately 1,800 customers for High Speed Internet Access using HFC, and approximately 2,900 customers for DTH service. Development of Internet/Multimedia Business TELKOM plans to spend Rp 129.64 billion on internet/multimedia business development which includes: (i) Rp 22.38 billion on IP high speed; (ii) Rp 49.91 billion on VoIP services and E1 for RAS/ Gateway, (iii) Rp 17.55 billion on Internet Data Center (iv) Rp 20.43 billion for Multimedia VAS, and (v) Rp 19.38 billion for B2B e-commerce. Development of Business Service TELKOM plans to spend Rp 273.87 billion for improvement of TELKOM's service to its business and other customers by optimizing customer care facilities such as call centers, billing systems for all services, management information systems and the Total Solution Service/Enterprise business. Supporting Facilities The Rp 752.33 billion for supporting capital expenditure consists of Rp 151.04 billion for research & development, vehicle, oÇce equipment, contingency, and other facilities, and the remaining 12

Rp 601.29 billion is allocated for interest during construction, provision for foreign exchange, project operating cost, which are related to the above mentioned Development Project, as detailed below: 2001 Rp (billion)

Supporting

Supporting FacilitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Supporting related to development of: Infrastructure ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ P-NetÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Mobile-NetÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ View-Net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ I-Net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Service-Net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Sub Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total SupportingÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ B.

151.04 551.44 28.30 2.99 1.02 4.17 13.37 601.29 752.33

Business Overview

The Company provides a broad range of telecommunications services in Indonesia. The following table sets forth the contribution of each major service area to TELKOM's operating revenue, for the periods indicated. Year Ended December 31, 1999 (Rp in millions)

Operating revenues Telephone services Local and domestic long distance Usage(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Installation charges(2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Monthly subscription charges ÏÏÏÏÏÏÏÏÏÏÏ Phone cards ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total telephone revenuesÏÏÏÏÏÏÏÏÏÏÏ Revenue Under Joint Operation Scheme (JOS) Minimum TELKOM Revenues (MTR) ÏÏÏÏÏ Distributable TELKOM Revenues (DTR)ÏÏÏ Amortization of unearned initial investor payment under JOS ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total Revenue Under JOS ÏÏÏÏÏÏÏÏÏÏ

Percentage of Total Operating Revenues

Year Ended December 31, 2000 (Rp in millions)

Percentage of Total Operating Revenues

3,570,891 68,277 799,074 -8,645 99,305 4,528,902

45.8 0.9 10.3 -0.1 1,3 58.2

4,097,093 75,382 887,355 34,426 83,608 5,177,864

43.7 0.8 9.4 0.4 0.9 55.2

1,452,912 208,956

18.6 2.7

1,556,699 695,106

16.6 7.4

15,349 1,677,217

0.2 21.5

15,349 2,267,154

0.2 24.2

13

Year Ended December 31, 1999 (Rp in millions)

Interconnection revenueÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Other telecommunications services Revenue under revenue sharing Arrangement(3) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Leased lines ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Satellite transponder ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Telex and telegram ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Multimedia ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Others(4) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total other telecommunications services Revenues ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total operating revenue ÏÏÏÏÏÏÏÏÏÏÏÏ

Percentage of Total Operating Revenues

Year Ended December 31, 2000 (Rp in millions)

Percentage of Total Operating Revenues

892,050

11.4

1,121,482

12.0

308,147 100,475 215,790 13,078 35,407 19,143

4.0 1.3 2.8 0.2 0.4 0.2

308,365 193,869 183,255 7,498 65,164 51,055

3.3 2.1 1.9 0.1 0.7 0.5

692,040 7,790,209

8.9 100.0

809,206 9,375,706

8.6 100.0

(1) Local and domestic long distance usage including revenues from 405,463 and 409,818 PBH lines in service as of December 31, 1999 and 2000, respectively, which are reÖected under Revenue Sharing Arrangement (Ñxed wire line). (2) Excludes installation charges for Ñxed wire lines placed in service subject to PBHs. (3) Includes TELKOM's revenue sharing from PBH cellular operators. (4) Includes revenues from ISDN, IN, VSAT, telefax and value added services.

Telephone Services As of December 31, 2000, the number of lines in service was 6.66 million lines, consisting of 6.32 million subscribers' lines and 345,307 public phones including kiosk phones. The subscribers are segmented by business, residential (including Government agencies), and social subscribers (mainly non-proÑt organization). TELKOM's subscribers pay one time installation charges, on going monthly subscription charges, and pay usage charges for local and domestic long distance services which are generally uniform nationwide and are based on call distance, call duration and the time the call is made. The Company's development in installed lines, lines in service, and traÇc volume and certain of their respective annual growth rates during the period of 1996 Ì 2000 (including KSO Division) can be seen in the following table:

Installed lines ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Growth (%)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Lines in service ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Growth (%)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

As of December 31, 1998 1999

1996

1997

5,808,849 30.0 4,186,030 27.2

6,523,724 12.3 4,982,466 19.0 1996

7,197,099 10.3 5,571,644 11.8

7,429,262 3.2 6,080,193 9.1

2000

7,668,077 3.2 6,662,605 9.6

Year Ended December 31, 1997(2) 1998 1999

2000

(1)

TraÇc volume (millions of Pulses) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Growth (%) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

35,347 25.1

42,144 19.2

45,905 8.9

47,259 2.95

(1) Figures indicated exclude public phone. (2) As a result of decreases of pulse duration in 1997, volume measured in pulses is not directly comparable.

14

52,859 11.85

Meanwhile, the TELKOM lines among Regional Divisions as of December 31, 2000, are illustrated in the following table: Division I Division II (Sumatera) (Jakarta) Local Exchange Capacity ÏÏÏÏ 1,128,400 Installed Lines 1,027,706 Lines in Service ÏÏÏÏÏ 897,323 Utilization Rate (LIS/IL) ÏÏÏÏ 87.31 Employees(1) ÏÏ 5,880 Population (millions)(2) 45.4 Line Penetration(%) 2.0 Population Density (per km)(2) ÏÏÏÏÏÏ 97

Division III (West Java)

Division IV (Central Java)

Division V Division VI Division VII (East (Kalimantan) (East Java) Indonesia)

Total

3,123,519 2,777,394

878,860 714,583

754,534 721,164

1,392,096 1,308,904

381,871 361,481

802,742 756,845

8,462,022 7,668,077

2,412,221

639,913

579,647

1,198,142

302,948

632,411

6,662,605

86.85 9,238

89.55 2,922

80.38 3,307

91.54 4,526

83.81 1,574

83.56 5,105

86.89 32,552

24.5

25.4

39.2

38.3

12.4

31.5

216.8

9.8

2.5

1.5

3.1

2.5

2.0

3.1

1,809

792

891

605

21

40

108

(1) Total TELKOM employees as of December 31, 2000 were 37,705 including 4,661 employees in the Supporting Division and Corporate OÇce. (2) Source: Indonesian Central Bureau of Statistics (Projected Ñgures only).

In 2000, telephone services contributed Rp 5,177.86 billion or 55.23% of TELKOM's total operating revenues. No single customer accounted for more than 1% of TELKOM's total telephone revenues, and TELKOM estimates that its top 100 customers (other than interconnection customers) together accounted for less than 5% of TELKOM's total telephone revenues in 2000. Joint Operation Scheme Services (KSO) As of December 31, 2000, of the total number of 6.66 million lines in service, 3.05 million lines were in the KSO regions, which consists of 2.92 million subscriber lines and 0.13 million public phones including kiosk phones. Revenue from all KSO Regions amounted to Rp 2,267.15 billion or 24.2% of the Total Operating Revenue. The revenue consisted of Rp 1,556.7 billion as MTR payments, Rp 695.1 billion as DTR payments and Rp 15.3 billion as amortization of initial investor's payments. Each KSO Revenue performances for the last three years (1998 Ì 2000) are indicated in the following table: 1998 MTR DTR (Rp billion)

KSO-Division

Division Division Division Division Division

I (Sumatra) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ III (West Java)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ IV (Central Java) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ VI (Kalimantan) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ VII (Eastern Indonesia)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

1999 MTR DTR (Rp billion)

464.6 40.1 471.6 307.5 29.1 312.1 316.2 19.4 321,0 135.0 20.1 135,0 210.1 34.0 213.2 1,433.4 142.7 1,452.9

64.2 34.1 31.6 31.4 47.6 208.9

2000 MTR DTR (Rp billion)

488.2 344.0 355.8 137.0 231.7 1,556.7

206.5 79.9 107.9 101.9 198.9 695.1

Interconnection Services TELKOM and the KSO Units receive interconnection revenues from operators of other telecommunications services, such as mobile cellular, Ñxed cellular, Ñxed wire line, and international long distance, that interconnects with the PSTN. Under the current interconnection regime, mobile cellular networks are not required to interconnect with the PSTN. 15

Interconnection traÇc volumes are indicated in the following table: 1996

Mobile Cellular GSM Incoming paid minutes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Outgoing paid minutes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ AMPS/NMT-450 Incoming paid minutes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Outgoing paid minutes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Subtotal ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Fixed Cellular Incoming paid minutes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Outgoing paid minutes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Subtotal ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total cellular paid minutes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Fixed Wire line Interconnection(2) Incoming paid minutes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Outgoing paid minutes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total paid minutes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ International Interconnection Incoming paid minutes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Outgoing paid minutes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total paid minutes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

261.1 114.9

Year Ended December 31, 1997(1) 1998(1) 1999(1) (millions of minutes)

2000(1)

1,492.6 350.7

920.8 604.8

1,396.8 1,988.6 873.2 1,687.1

161.3 255.1 5.0 56.1 542.4 2,154.4

119.7 62.0 1,707.4

62.9 24.7 2,357.7

71.8 34.0 3,781.5

32.2 31.6 34.2 3.5 3.6 29.5 35.7 35.2 63.6 578.1 2,189.6 1,771.0

41.9 33.1 75.0 2,432.7

72.5 39.3 111.8 3,893.3

Ì Ì Ì

Ì Ì Ì

7.4 0.4 7.8

26.1 2.9 29.0

30.1 3.3 33.4

345.0 262.0 607.0

407.7 289.8 697.5

408.2 309.7 717.9

403.2 251.1 654.3

345.8 250.6 596.3

(1) International paid minutes includes data from Indosat 001 and Satelindo 008, which does not include minutes from mobile cellular and Ñxed wireless operators that are interconnected directly with international gateways. (2) For 1998, four months ended December 31,1998.

During 2000, TELKOM received Rp 1,121.5 billion from interconnection services or 12% of TELKOM's total operating revenue. Other Telecommunication Services The Company provides a variety of other services such as leased lines, satellite transponders, telex and telegram. Among those services, the revenue under PBH and the satellite transponder contributed a signiÑcant amount to TELKOM's other telecommunication services revenue. During the year 2000, other telecommunication revenues booked Rp 809.2 billion. Network Infrastructure General The Network comprises a hierarchy of exchanges ranging from the local exchange through trunk exchanges: the primary, secondary and tertiary exchanges. Each local exchange is connected to the subscriber's premises by equipment and facilities called outside plant. Outside plant includes wire line and wireless local transmission links and the distribution facilities joining them. During 2000, TELKOM achieved a local call completion rate of 72.97%, an improvement of 3.31% compared to the previous year, and a domestic long distance call completion rate of 65.82%, an improvement of 4.51% on the previous year's rate. The penetration rate was 3.07 lines in services per 100 inhabitants, among the lowest in the world. 16

Outside Plant and Switching Facilities As of December 31, 2000, TELKOM's 8.5 million lines exchange capacity were connected to 4.5 million and 4.0 million local exchanges in the Non-KSO and KSO Divisions, respectively. TELKOM and the KSO Partners have already used copper wire, optical Ñbre, radio access, and hybrid Ñbre coaxial as medium of access network. The Company believes that digitalization substantially increases network eÇciency, performance, and call routing Öexibility. As of December 31, 2000, digitalization of TELKOM's switching facilities was 100% at trunk exchanges. By the end of 2000, the capacity utilization rate for both Non KSO Divisions and KSO Divisions was 78.74%. Transmission Facilities Transmission facilities refer to all kinds of transmission media that link exchanges together. As of December 31, 2000, TELKOM utilizes 3,431 kilometres of optical Ñbre to link high volume routes such as Jakarta-Surabaya, and 2,875 kilometres of submarine cable to link Sumatera-Java-Kalimantan and Sulawesi. TELKOM currently operates TELKOM-1, Palapa B-4 satellites, and 179 earth stations including 1 satellite control system. TELKOM-1 has 36 transponders including 12 extended C-band transponders replacing the Palapa B2R, which reached the end of operational life in November 1999. The Palapa B-4, which has 24 transponders is due to reach the end of its normal operational life in May, 2001. In addition to its own purpose, the Company leases satellite transponder capacity and provide earth station satellite up linking and down linking services to domestic and international users. TELKOM uses its satellites for (i) providing network backbone transmission; (ii) providing rural telecommunication service; (iii) providing back-up for the national telecommunication network; (iv) oÅering satellite up-linking and down-linking, VSAT, and multimedia services. The following table illustrates the transmission capacity of the Company's backbone transmission facilities as of December 31, 2000. Transmission medium

Optical Ñbre cable ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ MicrowaveÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Submarine cableÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Satellite ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

17

Capacity in number of circuits

Percentage of total capacity

174,300 101,970 33,480 10,426 320,176

54,44 31,85 10,46 3,26 100.00

Network Development The number of installed lines during the period of 1996 Ì 2000, including KSO, and the approximate numbers of lines to be added in Division II and Division V during 2001, are shown in the following table:

1996

Division II (Jakarta) Non-PBH linesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PBH lines ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Subtotal ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Division V (East Java) Non-PBH linesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PBH lines ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Subtotal ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ KSO Divisions TELKOM lines Non-PBH linesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PBH lines ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Subtotal ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ KSO Investor Lines ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total New Lines InstalledÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

Historical 1997 1998

1999

2000

Telkom Projection 2001

554,475 Ì 554,475

222,996 Ì 222,996

158,685 Ì 158,685

126 Ì 126

48,547 Ì 48,547

120,624 Ì 120,624

255,761 Ì 255,761

194,140 Ì 194,140

86,511 Ì 86,511

50,653 Ì 50,653

79,936 Ì 79,936

125,837 Ì 125,837

416,957 Ì 416,957

50,256 Ì 50,256

Ì Ì Ì

Ì Ì Ì

Ì Ì Ì

Ì Ì Ì

114,365

247,483

428,479

181,384

110,332

Ì

1,341,558

714,875

673,675

232,163

238,815

Ì

Partnership Arrangements and Joint Ventures To Ñnance investment opportunities, TELKOM has three types of partnership with private investors. These partnerships are in the form of revenue Sharing Scheme (PBH), Joint Operation Scheme (KSO), and Joint Ventures Company (JVC). Each cooperation with a private entity has a diÅerent contribution toward TELKOM's proÑt and loss statement. In addition to partnership arrangement, TELKOM also entered into a joint cooperation with several business partners. PBH Currently, TELKOM has several PBHs for Ñxed wire line and mobile cellular services. In 2000, TELKOM revenues from PBH were Rp 308.4 billion or 3.3% of TELKOM's Total operating revenue and this contributes to other telecommunication services revenues. Historically, TELKOM provided analog cellular services through PBH arrangement with several private investors. By the year 2000, all but one of the analog cellular PBH schemes were transformed to joint venture arrangements, with TELKOM as a minority shareholder in each. The only analog cellular service subject to PBH arrangement is PT Telesera, using AMPS cellular networks operating in Bali, Kalimantan and Southern Sumatera with a total of 7,556 subscribers as of December 31, 2000. The PBH scheme sets the revenue share at 30% Ì 70% between TELKOM and Telesera, respectively. The PBH will expire on June 2001, where all assets will be transferred to TELKOM. KSO In June 1995, following an international tender, TELKOM and the Minister of Tourism Post and Telecommunications (MTPT) announced the names of the successful bidders for KSO in respect of the development and operation of TELKOM's basic Ñxed telecommunications facilities and services in Ñve 18

of TELKOM's seven Regional Divisions. In the fourth quarter of 1995 each of the KSO Agreements, including their related construction contracts and certain related agreements, were signed by the respective parties. The Joint Operating Scheme or KSO Agreement is a form of contractual joint operation scheme under which each KSO Investor, through the KSO Unit, is responsible for the operation of the local network in the respective KSO Region for a period of 15 years, ending December 31, 2010. Each KSO Region is operated by a diÅerent KSO Unit, involving separate international telecommunications operator. The main terms of each KSO Agreement are substantially similar, except for the Ñnancial terms described below. Each KSO Unit is treated as a division of TELKOM, managed and operated by the KSO Investor in the name of TELKOM for and on behalf of TELKOM and the KSO Investor. Four of the Ñve KSO Units began to manage, operate, repair and maintain their respective KSO Division's assets for a 15-year period commencing January 1, 1996. The Ñfth KSO Investor, Cable & Wireless Mitratel, commenced management and operation of Division VI on April 1, 1996. All KSOs expire on the same date, December 31, 2010. The KSO Investors are to undertake the planning, designing, engineering, Ñnancing and constructing a minimum of two million installed lines in the aggregate. Due to the economic crisis, the KSO investors had diÇculties carrying out their obligations according to the KSO Agreement. In order to assist the KSO Investors to continue their obligations and maintain the continuity of the agreement, TELKOM has provided them short-term relief by signing a Memorandum of Understanding (MOU) on June 5, 1998. TELKOM receives three principal types of payments from each KSO Unit or KSO Investor during the term of the KSO i.e.: (i) a one-time Initial Investor Payment, (ii) Minimum TELKOM Revenues (MTR) and (iii) Distributable TELKOM Revenues (DTR). At the end of the KSO period, all of the lines constructed by the KSO Investors are to be transferred to TELKOM for a nominal payment. The following table sets forth certain information concerning the KSOs. Such information has been derived from the KSO Agreements, the June 5, 1998 Memorandum of Understanding and other related sources. KSO Investor ÏÏÏÏÏÏÏÏÏÏÏÏÏ

Participants in the KSO Investor Foreign Telecommunications Operator ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

Indonesian and Other Participant ÏÏÏÏÏÏÏÏÏÏÏÏÏ

Division I

Division III

Division IV

Division VI

Division VII

Total

Pramindo Ikat

Aria West International

Mitra Global Telekomunikasi Indonesia

Daya Mitra Telekomunikasi

Bukaka SingTel

Ì

France Cables et Radio SA (35%)

US West International BV (35%)

Telstra Global Ltd. (20%) Nippon Telegraph and Telephone Corporation (15%)

Cable & Wireless (Singapore) Pte, Ltd. (25%)

Singapore Telecommunication International Pte. Ltd. (40%)

Ì

P.T. Astratel Nusantara (40%) Indosat (13%) Marubeni Corporation (8%) Others (4%)

P.T. Artimas Kencana (52.5%) Asian Infrastructure Fund (12.5%)

Indosat (30%) P.T. Widya Duta Informindo (15%) P.T. Krida Salindo Sentosa (10%) Others (10%)

P.T. Bukaka Telekomindo International (60%)

Ì

19

P.T. Intidaya Sistelindomitra Kharisma Tbk. (38.71%) P.T. Mitracipta Sarananusa (26.61%) TM Communications (H.K.) Ltd. (9.68%)

Minimum new line Installation(1) ÏÏÏÏÏÏÏÏÏÏÏ Initial investor payment to TELKOM (US$ millions) Minimum TELKOM Revenue (2000) (Rp Millions)(2) ÏÏÏÏÏÏÏÏÏ TELKOM's Revenue Sharing (2000)(3) ÏÏÏÏÏÏÏÏ Distributable TELKOM Revenue (2000) (Rp Million) ÏÏÏÏÏÏÏÏÏÏÏ

Division I

Division III

Division IV

Division VI

Division VII

Total

290,000

290,000

350,000

115,000

223,000

1,268,000

$35

$30

$10

$20

$10

$105

Rp 488,156

Rp 343,969

Rp 355,800

Rp 137,052

Rp 231,722

Rp 1,556,699

30%

30%

30%

30%

35%

Ì

Rp 206,497

Rp 79,911

Rp 107,962

Rp 101,861

Rp 198,875

Rp 695,106

(1) Minimum new line installation by the KSO Investors during the Construction Period, which ends March 31, 1999, as required by the KSO Agreements Amendment. (2) The 2000 MTR amounts shown are the amounts provided for by the KSO Agreements. (3) The 2000 TELKOM Revenue Sharing percentages shown are the percentages provided for by the KSO Agreements.

KSO's Principal Financial Terms Overview. Each KSO Unit is (i) operated as a separate entity for accounting purposes, (ii) responsible for certain payments to TELKOM, (iii) entitled to revenues generated from all lines in service within the geographical KSO Division on a sender-keep-all basis, and (iv) responsible for all costs associated with operation of the KSO Unit. TELKOM is entitled to receive with respect to each KSO Division (i) a one-time Initial Investor Payment, (ii) Minimum TELKOM Revenues (MTR) and (iii) Distributable TELKOM Revenues (DTR). Initial Investor Payment. Within 1 (one) month after the KSO Agreements were signed, each KSO Investor made an agreed one-time payment to TELKOM (""Initial Investor Payment''), totalling US$105 million. The Initial Investor Payment is amortized over the KSO Period. MTR and DTR. The amount of the MTR payments in each KSO Division is subject to adjustments in certain circumstances in connection with the construction of new installations by the KSO investors, completion of TELKOM's existing projects, and certain force majeure events. Apart from force-majeure events, over which the Company has no control, TELKOM does not expect the amount of the adjustments to be material individually or in the aggregate in any given month or over time. The KSO Unit is required to pay to TELKOM on a monthly basis, DTR payments, which comprise a revenue share of 30% (except for KSO Unit VII, in the eastern part of Indonesia: 35%) of the diÅerence of Total KSO revenues for the month less the MTR payment less the KSO operating expenses (as deÑned below) for the month (such diÅerence is referred to as the ""Distributable KSO revenues''). Total KSO revenues are essentially based on a sender-keep-all structure where the KSO Unit is entitled to collect revenues from the operation of the KSO Unit and all interest earned thereon, including installation charges, monthly subscription charges, pulse charges, and charges for other telecommunications services oÅered to subscribers, TELKOM's interconnection revenue for international calls originating from or terminating in the KSO Division, all revenues derived from PBH basic (telephone) telecommunications services and operations in the KSO Division, an agreed portion of interconnection payments from third party telecommunications service providers such as interconnecting wireless telecommunications operators, and payments from public telecommunications kiosks and payphone operators in the KSO Division. The KSO Unit is also responsible for all expenses directly incurred by the KSO Unit in their respective region, except depreciation, amortization, interest or Ñnancing charges in respect of either New Installations or Existing Installations. 20

Structure, Operation and Ownership KSO Investors are licensed by the MOC (formerly, the MTPT) to operate Ñxed line and Ñxed wireless services in the KSO Divisions under the terms of exclusivity granted to TELKOM in the name of TELKOM and for and on behalf of TELKOM and the KSO Investor. The KSO Investors are accountable for the achievement of speciÑc operational performance targets during the KSO Period relating to the expansion and quality of telecommunications services. The operational targets for each KSO Unit are set forth in the KSO Agreement for each Division. Employees and Management of the KSO Each KSO Unit is staÅed by existing TELKOM employees in each KSO Division, supplemented by additional management staÅ hired by the KSO Investor. Such additional employees remain the employees of the KSO Investor. All employees are paid by the KSO Unit. Compensation and other beneÑts payable to TELKOM KSO employees are determined by the KSO Unit's management. The KSO Division, to the extent reasonably possible, is required to make maximum use in its operations of available Indonesian human and material resources, goods and services, including resources and services provided by business support services of TELKOM. Early Termination A KSO Agreement may be terminated by either party upon the material breach of the other party's obligations under the KSO Agreement or the related Construction Agreement. In addition, TELKOM may terminate a KSO Agreement in certain speciÑc circumstances, including a KSO Investor's failure to (i) meet the agreed construction timetable for two consecutive quarters or (ii) complete construction and successfully pass an interconnection test prior to the end of the Construction Period. Asset Disposition at End of KSO Period The ownership of the new installations is to be automatically transferred to TELKOM for nominal consideration of Rp 100 at the end of the KSO period and TELKOM is to take over the operations of the KSO Units at that time. TELKOM is also to reimburse each KSO Investor for additional new installations which are not fully paid for out of KSO Unit revenues by the end of the KSO Period in an amount equal to the net present value of the KSO Investor's projected share of Distributable KSO Revenues attributable to any additional new installation over the balance of the applicable Payback Period, plus an amount to be agreed by TELKOM and such KSO Investor as fair compensation in respect of any uncompleted and untested Additional New Installations. Additional Installations The KSO Investors have the exclusive right during the Construction Period to construct public switched telephone facilities (subject to Existing Installations) in the KSO Divisions. Thereafter, for the remainder of the KSO Period, the KSO Investors have a Ñrst right of negotiation to construct Additional New Installations in their KSO Divisions. The payback period of such Additional Installation is to be agreed by TELKOM and the KSO Investors and approved by the Minister of the MOC (formerly the MTPT) (the ""Payback Period''). Other TELKOM has agreed to indemnify the KSO Investors for certain losses, which may be incurred by the KSO Investors as a result of speciÑc actions of TELKOM that are inconsistent with the KSO Agreements. 21

Developments Relating to the KSO Due to the economic crisis, the KSO investors had diÇculties carrying out their obligations according to the KSO Agreement. In order to assist the KSO Investors to continue their obligations and maintain the continuity of the agreement, TELKOM has provided them short-term relief by signing a Memorandum of Understanding (MoU) on June 5, 1998. With regard to the expiration of the MoU during the month of November and December 1999, TELKOM and the KSO investors had conducted meetings concerning the KSO operational and Ñnancial performances as well as the organizational eÅectiveness of the scheme. In essence, the parties have agreed to return to the most of the terms of the original KSO Agreement beginning January 1, 2000. However, as a result of the rapid Rupiah depreciation and insuÇcient or no tariÅ increase in 1999 and 2000, respectively, the KSO partners refused to develop more lines, due to the loss of the economic viability of the business. The KSO partners assert an increase in tariÅ, but TELKOM considered that the assertion has to be plead to the Government which, as regulator, has the authority in the telecommunications sector. The long-term KSO solution is closely connected with the restructuring of the Indonesian telecommunications industry commenced by the Government and is strongly inÖuenced by the Indonesian investment climate. The matter was stipulated on one article of the LoI with IMF. The Government, acting as the mediator of negotiations between TELKOM and KSO Investors, expected that the negotiations would solve the problem and bring mutual advantages to both parties and could ensure: (i) the continuing long term development of telecommunications facilities, (ii) developing a conducive investment climate, and (iii) inventing a healthy telecommunications industry structure in Indonesia. The Company believes that whatever solution is taken for the KSO problem, it should take into account several considerations i.e. company value, investment in telecommunications infrastructures, shareholder approval, customer service, and employees response. The Company shall optimize the use of cash generated internally by adjusting the terms of payment of the transactions. KSO I TELKOM had conducted preliminary meetings with PT Pramindo Ikat Nusantara (KSO Partner in Region I Sumatera) concerning the possible ""sell back'' of KSO I Assets to TELKOM, however, both parties have not determined the amount and terms of payment. The Company indicates that if the transaction occurs, payments shall be done during 2002. KSO III On September 11, 2000, TELKOM and PT Aria West International (Ariawest currently operates KSO-Region III of West Java) have signed a Good Faith Interim Solution Agreement as a supplement to the KSO Agreement. The agreement contains several items including performance bond, operating capital expenditures including Y2K, Multimedia Feasibility Study, and the appointment of General Manager and Deputy General Manager of the KSO Unit Regional Division III. Ariawest International has oÅered TELKOM to buy the KSO Asset's in KSO III. In response to the oÅer, TELKOM has invited Ariawest for discussions. KSO IV On February 2001, TELKOM and Indosat signed a Memorandum of Understanding for the transfer of the Company's rights and obligations as a party to the KSO Agreement between the Company and PT Mitra Global Telekomunikasi Indonesia (KSO partner in Region IV Central Jawa & DIY) and transfer of the Company's asset under the KSO Agreement to PT Indosat for U.S.$375 million as part of a series of transactions that would eliminate the cross-shareholdings of Telkom and Indosat and 22

alternative source of internal funding. The transaction is subject to certain conditions, including regulatory and corporate approvals. It is currently anticipated that both Telkom and Indosat will seek shareholder approval by the end of April. If approved, Indosat will own the KSO IV assets in Central Java and DI Yogyakarta (See ""Material Contracts''). As of December 31, 2000, Indosat holds a 30.6% stake in MGTI, Telkom's partner in the KSO IV joint operating scheme, which will remain in eÅect through December 31, 2010. MGTI's other shareholders include NTT (15.3%) and Telstra (20.4%). KSO VI On March 14, 2001, TELKOM and PT Daya Mitra Telekomunikasi (DMT' KSO Partner in Region VI Kalimantan) have signed a Memorandum of Understanding for the acquisition of 90.32% interest in DMT for U.S.$121.93 million. DMT, has existing debt obligations of approximately U.S.$88.5 million. In connection with the transaction, TELKOM expects to assume responsibility for a portion of the debt. TELKOM shall make an initial payment of U.S.$18.29 million upon completion of the transaction and will pay the remaining amount in equal quarterly installments within 2®two© years. The transaction is still subject to certain conditions and the parties obtaining necessary corporate approval. KSO VII TELKOM and PT Bukaka Singtel (the KSO Partner in Region VII Eastern Indonesia) intend to continue the KSO schemes in accordance with original agreements and certain modiÑcations, which beneÑts both parties. The Company has also reached an agreement with the KSO Partner to construct lines in the city of Manado referred to as ""Manado Millennium'' which shall be followed by other such projects. Joint Ventures Currently, TELKOM has several joint venture companies for mobile cellular services and other telecommunication related businesses. TELKOM revenues from joint ventures are derived from usage of TELKOM's infrastructure (including interconnection) and dividends. (See Item 9. The OÅer and Listing Ì Subsidiary Information). Partnership In order to implement the PMVIS strategy (See ""Business Strategy'') in a faster and more eÅective way, TELKOM is determined to carry out the business through several partnership arrangements. TELKOM has selected several experienced companies having various competencies, planning and sales; good business track records; and ready to commit to provide Ñnancing and other resources. The partnerships objective are to strengthen horizontal linkage, by establishing business partners in terms of combining resources, sharing risks and beneÑts, speeding up implementation, and leveraging business value, rather than just mere technology vendors. However, the term partnership shall not be referred to as a form of company in relation to corporate law. In no event shall parties involved be deemed as a partner in this sense.

23

On October 12, 2000, TELKOM has signed memorandums of understanding for the formation of 9 (nine) business partnerships, which has to be followed by joint planning sessions before the signing of each contract, namely: No.

1. 2. 3.

4. 5. 6.

7. 8.

9.

Partners

Business Area

PT Alcatel Indonesia PT Lucent Technologies N.S.I. PT Internusa Distribusi Netindo PT Alcatel Indonesia PT ABC Telekomunikasi PT Adhiloka Sejahtera PT Ericsson Indonesia PT Pyramid Indo Usaha Gilat Satellite Networks Ltd. PT Citra Sari Makmur PT NEC Nusantara Comm. Sumitomo Corporation PT Stimec Alita Nasio PT Datacraft Indonesia PT Lucent Technologies Network Systems Indonusa PT Swara Tatanan Parama Guna PT Industri Telekomunikasi Indonesia PT Nasio Karya Pratama PT Laras Sarkomindo PT AmaÑndo Persada Japan Radio Co. PT Trans Komunikasi Data

Cable TV Multimedia Access Multimedia Access

Multimedia Access Internet Protocol High Speed Voice Over Internet Protocol

Intelligent Network Personal Handy-Phone System

Telkom Memo Desa Maju

Business Strategy The Indonesian telecommunications industry is evolving from the traditional telecommunications business into the era of convergence of telecommunications, computer, and internet businesses. As the business environment changes, TELKOM as an incumbent operator, thoroughly recognizes that many aspects have to be anticipated, such as: customer demand, technological growth and regulation. In anticipation of business environment changes, TELKOM has set up a new approach. The Company's vision has been renewed: ""to become a leading InfoCom company in the region''. TELKOM's aims to become a solution provider in the InfoCom industry by providing ""one stop service'', whilst ensuring the best quality of service and competitive pricing through utilization of ""state of the art'' technology and ""partnerships''. To implement its vision and mission, TELKOM has set 6 (six) strategic policies as follow: (i) Business Area, TELKOM's core business covers Plain Ordinary Telephone Service abbreviated as POTS (PhoneNet), Mobile Service (MobileNet), Cable TV and Interactive Service (ViewNet), Multimedia/Internet (InterNet), and ServiceNet; (ii) Human Resource, management is based on core competencies of Customer Orientation, Information Technology, Telecommunications Knowledge, Achievement Orientation, Communication, Innovation and Process Improvement, Teamwork, Adaptability and Diversity Management, and Self Development; (iii) Service Excellence, policy is implemented to acquire, grow, serve and retain the customers; (iv) Capital Expenditures, investment policy is intended to support recovery of cancelled investment and to develop new businesses; (v) Good Corporate Governance, includes business process accountability, conformity, and transparency; (vi) Good Corporate Citizenship, is intended to implement TELKOM's concern for its surrounding community. 24

The success of these business strategies strongly relies on good customer service, therefore TELKOM plans to implement a new excellence in customer service policy through the optimalization of end user life cycles which cover acquisition, growth, service and retention actions as integrated cycles. These policies are aimed to retain, acquire and give value added to the customer for the coming competitive era and implementation of the customer protection laws. In addition, it shall also be supported by customer care programs, customer acquisition, new product development based on customer need, and customer retention programs by delivering a service level guarantee or other incentives in order to form loyalty based customer. Product Development TELKOM has been intensively assessing new technologies and services, as well as identifying business opportunities to enhance the Company value. TELKOM refocuses its core business areas in Ñve streams as the Company's product development, referred to as PMVIS which includes: Plain Ordinary Telephone Services/Phone (P); Mobile (M); View (V); Internet (I); and Service (S), so that it will secure the right strategy for TELKOM's competitive edge. With regard to the global business phenomenon, TELKOM should pay more attention to mobile and internet/multimedia business as well. As part of the policy, TELKOM is still continuing to replace copper wire with Ñbre optic to digitise the network and to enhance broadband capacity for selected high volume business and residential customers. To adopt to the new business-opportunities, TELKOM has established 7 (seven) business projects to cover the 5 (Ñve) core business areas which are: B2B, VoIP, Mobile, Intelligent Network, Calling Card and Pay-Phone, Cable TV, and Business Enterprise Project. B2B. The B2B Commerce project shall provide business integration, commerce application, and security infrastructure, which shall enable TELKOM to become a complete B2B Commerce enabler company. TELKOM uses a unique strategy and smart business initiative to win the market by targeting small medium enterprise, government, state own companies, and Ñnancial market. During the year 2000, TELKOM has signed memorandum of understandings with some partners in infrastructure developments in such areas as: CertiÑcation Authority, on-line banking, Pharmacy On line, egovernment, state-owned enterprise online, on-line supply chain, small medium enterprise online, electronic settlement, e-procurement, and National Chambers of Commerce (KADIN). VoIP. TELKOM is currently preparing Voice over Internet Protocol (VoIP) service to strengthen its core businesses. In December 2000, through a partnership program, TELKOM and PT Vasindo launched a new high-speed-internet protocol-backbone branded as Domestic Clearing House (DCH), which enable it to provide settlement and wholesale services for VoIP providers in Indonesia. DCH supports calling card, premium call, and VSAT services. In 2001, TELKOM plans to launch newinternet protocol-based-services using a brand name ""Teleponi Hemat'' or ""TELKOM Save''. Mobile. TELKOM will operate mobile phone services based on DCS-1800 system with 15 Mhz frequency bandwidth featured with General Packet Radio Services (GPRS), Intelligent Network (IN), and Wireless Application Protocol (WAP) platforms. This system, which is categorized as two-and-half Generation (2.5G) mobile cellular, will enable voice and high speed data services (up to 115 Kbps) such as basic voice, WAP, information services, mobile commerce, telemetry, mobile intranet and mobile internet. For the above purpose, TELKOM has set up a business project called TELKOMobile to implement such system. PT Siemens Indonesia and TELKOM have signed a contract to install the DCS1800 systems (2.5G) with 200,000 subscribers. The contract amount is EUR 62,744,829 and IDR 24,809,615,817. The system shall be ready for service by the end of August 2001. Commercial launching is projected to commence on the fourth quarter of 2001 covering Jakarta, Bandung, and Lampung areas with some possible coverage expansions to Surabaya, Denpasar, and Batam areas with a total target customer of approximately 360,000 by the end of 2002. Intelligent Network. In order to accommodate the growth of multimedia and internet/data services, in September 2000, TELKOM launched a high-speed internet and multimedia content 25

distribution services via satellite under a brand name TELKOMNet Turbo. This service would comprise: (i) high-speed internet access; (ii) multicasting (web casting and video casting); (iii) Ñle distribution; and (iv) access to TV digital. Calling Card. In 2001, TELKOM Calling card business project will expand into card phone management system (CMS) which can be utilized as a credit card or debit card and to implement calling card based on IN and VoIP. Business Enterprise Project. On November 2, 2000, TELKOM signed an Agreement with C2C Pte. Ltd., a company in which Singtel holds majority shares, to be a landing party for a new submarine cable system plan, built, operate and maintain by C2C over the Southeast Asia and TransPaciÑc region. The C2C cable network system has a competitive value compared to the existing system due to the high capacity Ñber optic communications network. TELKOM utilizes this technology to prepare its international business infrastructure for broadband communication as part of TELKOM's future technology. TELKOM and C2C will implement joint marketing. Regulations The overall program of telecommunications sector deregulation is closely linked to the national economic recovery program supported by the International Monetary Fund (""IMF''). The national plan is documented in the Memorandum of Economic and Financial Policies. (""MEFP''), as further clariÑed in the Letters of Intent (""LoI'') to the IMF in January and May 2000. The main focus of MEFP is to stabilize the economy and regain trust through a comprehensive plan based on: (i) deregulation; (ii) pro-competition; (iii) liberalization; (iv) restructuring; (v) market access; and (vi) market oriented regulations. The LoI stipulated among other things the requirement of TELKOM and INDOSAT to resolve their cross-ownership in several aÇliates including Telkomsel, Satelindo, Lintasarta, Patrakom, Menara Jakarta, and Bangtelindo. In addressing such LoI, TELKOM and INDOSAT have signed an MOU relating to a series of transactions that would eÅectively resolve the joint ownership arrangement between TELKOM and INDOSAT (See: ""Material Contracts: Solution to the Cross Shareholdings with INDOSAT). In addition to the resolution of cross-ownership problem, the LoI also requires TELKOM and INDOSAT to divest its ownership in non-strategic aÇliates by the end of 2001. TELKOM is conducting the study on aÇliates to restructure its business portfolio regarding aÇliates. The compliance to this requirement may cause the Company to divest its investment in some aÇliates or may add its investment in some aÇliates, as the Company believes their strategic position. The Government's telecommunication reform policy as formulated in its ""Blueprint of the Indonesian Government's Policy on telecommunications'' dated July 20, 1999 (""Blueprint'') is to: (i) increase the sector's performance in the era of globalization; (ii) liberalize the sector with a competitive structure by removing monopolistic controls; (iii) increase transparency and predictability of the regulatory framework; (iv) create opportunities for national telecommunications operators to form strategic alliances with foreign partners; and (v) create business opportunities for small and medium enterprises and to facilitate new job opportunities. The regulatory reforms of the Indonesian telecommunications sector in 1999 have their foundation in Law No. 36/1999 (the ""New Telecom Law''), which replaced the old telecommunication law No. 3/1989 (the ""Old Telecom Law''). The law is followed by the Ministry of Communication release regarding principal license to enter international telecommunication services business to TELKOM in 2003 and domestic long distance telecommunication services business to INDOSAT in 2003 and local service to INDOSAT in 2002. These licenses are aimed to establish full service providers companies. Although the Company does not expect direct competition in its core business in 2001, in the long run the Company may have direct competition from INDOSAT. The Company cannot predict the extent of such competition may aÅect the Company Ñnancial performance in the long run. 26

Administration of the Telecommunication Industry The legal framework for the telecommunications industry is based on speciÑc laws, government regulations and ministerial decrees enacted and issued from time to time. MOC is responsible for the overall supervision and regulation of the industry. Within the Ministry various directorates and bureaus carry out speciÑc regulatory duties. The Directorate General of Post and Telecommunications (DGPT), which is headed by a Director General, regulates the telecommunications industry in Indonesia, including granting licences, frequency management, standardization, and tariÅ setting. Major policy and management decisions by the Company that aÅect national telecommunications development may require consultation with, or the approval of the MOC. Telecommunications Law On September 8, 1999, the Government enacted a New Telecom Law No. 36/1999, which became eÅective September 8, 2000, to replace the Old Telecom Law No. 3/1989. The new Telecom law provides key guidelines for industry reforms, including industry liberalization, provision of new entrants and an increase in the industry's competitive structure. It eliminates the concept of organizing entities, thus ending TELKOM's status as organizing entities for the industry. However, based on prior decrees creating certain exclusivity entitlements, TELKOM will retain its status as telecommunications operators subject to fulÑlment of any licensing requirement under the law. Pursuant to the new Telecom law, telecommunications operations are classiÑed into three service categories: (i) telecommunication network operations, (ii) telecommunications services operations, and (iii) Special Telecommunications Operations. Under these categories, telecommunications network operation and/or provision of telecommunications services may be carried out by legal entity established for the purpose on the basis of applicable regulation. These legal entities include StateOwned Enterprise (BUMN), Regional State-Owned Enterprise (BUMD), Private Owned Companies, and Cooperatives. In implementing its business, a telecommunication network provider may conduct telecommunications services, while a telecommunication service provider in operating its telecommunication services can use its own network or rent a telecommunications network owned by other telecommunication network provider. On the other hand, individuals, government institutions, special agencies, and legal entities may conduct special telecommunications operations. License for special telecommunication operations is given only for the purpose of self-interest, national defence and security interest, and broadcasting. Under the New Telecom Law, new players may enter the telecommunication business without the cooperation of an organizing body, after obtaining a license from the Minister of Communication (MOC). TariÅ for usage of the telecommunications network and/or telecommunications services are determined by the providers based on the tariÅ category, structure and formula set by the government. The formula is determined based on the provider cost component. Every telecommunications network operator, by request, is obligated/entitled to interconnect its network with another network operator. The implementation of this obligation shall be guided by the following principles: (i) EÇcient Source Usage, (ii) Telecommunication System and Equipment Compatibility, (iii) Quality Service Improvement, and (iv) Fair Competition. This means that operators that interconnect with TELKOM's network are required to enter into an agreement with TELKOM establishing settlement procedures for the interconnection payments. Under the new law, each licensed provider is obliged to pay license right to Government as a percentage of revenue. The new telecommunications law Number 36 of 1999 does not terminate the existing exclusive rights of TELKOM. However the new telecommunications law allows early termination of the rights subject to compensation agreement between TELKOM, and the government. 27

On August 1st, 2000, the Government, through the Director General of Post and Telecommunications (DGPT), announced Release Number o5/HMS/JP/VIII/2000, dated August 1st, 2000 and the correction thereto No. 1718/UM/VII/2000 dated August 2nd, 2000, which contains early termination of TELKOM exclusive rights for local in August 2002 and domestic long-distance telecommunication services in August 2003. This Decree marks the end of the monopoly era. Therefore, the Company no longer remains the sole domestic telecommunications services provider in Indonesia. The following table sets forth comparative matrix of the previous and new telecommunications law: Description

Law 3/1989

Law 36/1999

Operator

The Government through Organizing Body

Service Category

Basic and Non-Basic Services, and Special Telecommunications

Cooperation Framework Business Mode Exclusivity

JVC, KSO, and Management Contract Through Cooperation with Organizing Body Monopoly and Duopoly Exclusivity

TariÅ

Determined by the Government

Regulator

Government

Regional-owned Enterprises, stateowned companies, private and cooperatives Telecommunication Network, Telecommunication Services, and Special Telecommunication Pure Business Decision Based on Business Viability Exclusivity is maintained as scheduled, Acceleration is possible by application of compensation Determined by the Operators based on formula determined by the Government Government assisted by an Independent Body (to be established)

Currently, TELKOM, is not required to hold a license in order to provide telecommunications services, other than licenses allocating frequency bands. Joint Operating Schemes also do not require licenses for providing telecommunications services as TELKOM is deemed to remain the operator of such businesses. Joint venture companies, however, do require licenses. The new telecom law only outlined substantial and principal topics. Its implementation will be conducted through several Government Decree promulgated there under. On September 8, 2000, two implementing regulations of the New Telecom Law were issued, named Government Regulation No. 52 on Operation of Telecommunications and Government Regulation No. 53 on Utilization of Radio Frequency Spectrum and Satellite Orbit. The MoC and DGPT are still in the process of Ñnalizing various other ministerial decrees, which are intended to implement other aspects of the new telecom law. On January 16, 2001, Government issued a new rule of National Fundamental Technical Plan (National FTP) through Ministerial Decree No. 4/2001. The National FTP set numerous technical plans that regulate technical aspect for both telecommunication network and service providers. It consists of (i) numbering plan, (ii) interconnection plan, (iii) charging plan, (iv) routing plan, (v) transmission plan, (vi) signalling plan, (vii) switching plan, (viii) synchronization plan, (ix) subscriber access plan, (x) network management plan, (xi) technical availability plan, and (xii) service operation plan. Government Policy The Government's development policies used to be set forth in consecutive Ñve-year development plans known as ""Repelitas.'' Each Repelita assesses the current level of economic progress, establishes 28

priorities for the next Ñve-year plan and realigns those previously made for future Repelitas. The Company takes into account the Government's targets when setting its own development plans, although it is not formally obligated to meet such targets. In 1995, the Government set the long-term targets for local exchange capacity, local exchange capacity per 100 inhabitants and call completion rates for Repelitas VI through Repelita X, as stated in the following table: Repelita (Year Ended March 31) VI VII VIII IX X (1999) (2004) (2009) (2014) (2019)

Development Targets

Local exchange capacity (millions of lines) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Local exchange capacity per 100 inhabitants(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Call completion rate(2) Local(%) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Domestic long distance(%) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

10.5 5.1

19.0 8.7

29.0 12.4

42.0 17.1

60.7 23.6

65 45

70 50

75 55

80 60

90 80

(1) Referred to in the Repelita as line penetration. (2) Repelitas use the terminology ""successful call ratio,'' TELKOM has interpreted this to mean ASR and, with the MTPT's consent, has reported only ASR data to the MTPT since 1991.

In view of the Indonesian economic turmoil, the Government did not announce detailed plans for Repelita VII, which may result in amendments to the long-term plan shown above. Since there are no detail plans from the Government, TELKOM arranges its own long-term plans, internally known as Corporate Strategic Scenario (CSS). The following table gives certain basic measures of the development of the Indonesian domestic telecommunications network.

Year Ended December 31, 1997 1998 1999

1996

Lines in serviceÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Population (millions)(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Lines in service per 100 InhabitantsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Call completion rate(%)(2) Local ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Domestic long distance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Fault rate(3) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Digitalization(%)(4) Switching Local exchanges ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Trunk exchanges ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Transmission ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Number of public telephones ÏÏÏÏÏÏÏÏÏÏÏÏÏ Domestic call volume (billions of pulses) ÏÏ Number of mobile cellular subscribers ÏÏÏÏÏ Mobile cellular subscribers per 1000 InhabitantsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1) (2) (3) (4)

2000

4,186,030 4,982,466 5,571,644 6,080,193 6,662,605 198.3 201.4 204.4 207.4 216.8

Compound Annual Growth Rate(%) 1996-2000

12.3 2.3

2.11

2.47

2.73

2.93

3.07

9.8

57.90 53.21 1.55

60.43 56.46 1.14

68.07 62.04 1.10

70.63 62.98 0.62

72.97 65.82 1.33

6.0 5.5 3.8

99 99 100 100 100 100 100 100 92 93.8 95.6 96.6 166,724 216,651 269,242 345,307 42.1 45.9 47.3 52.9 916,173 1,065,820 2,220,969 3,669,327

1.0 0.0 3.2 26.6 10.6 59.8

96 100 85.0 134,542 35.3 562,517 2.84

4.55

Source: Indonesian Central Bureau of Statistics. As measured by ASR. Faults per 100 lines in service per month. Expressed as a percentage of switching or transmission capacity, as applicable.

29

5.21

10.71

16.92

56.3

As of December 31, 2000, the line penetration rate was 5.7% and 2.0% for Non-KSO Division and KSO Division, respectively, and 3.1% nationally. The following table presents the penetration rate for each regional division: LISÏÏÏÏÏÏÏÏÏ Population ÏÏ DensityÏÏÏÏÏ

Division I

Division II

Division III

Division IV

Division V

Division VI

Division VII

Total

897,323 45,436,572 1.97

2,412,221 24,523,000 9.84

639,913 25,442,000 2.52

579,647 39,178,407 1.48

1,198,142 38,336,320 3.13

302,948 12,378,174 2.45

632,411 31,520,936 2.01

6,662,605 216,815,409 3.07

As of December 31, 2000, approximately 49.23% of total lines in service were in the major metropolitan areas of Jakarta, Surabaya, Semarang, Bandung, Medan, and Denpasar. The following table presents the number of line in service among the 6 major metropolitan areas: LISÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Population ÏÏÏÏÏÏÏÏÏÏÏ Density ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

Jakarta

Surabaya

Semarang

Bandung

Medan

Denpasar

Total

1,672,351 8,384,853 19.9

668,220 2,558,816 26.1

182,073 1,345,065 13.5

371,653 2,141,837 17.4

213,135 1,899,327 11.2

172,445 522,785 33.0

3,279,877 16,852,683 19.5

Competition In previous years, consistent with its emphasis on national economic development, the Government, through the Ministry of Tourism Post and Telecommunication (MTPT), has articulated the policy of gradually liberalizing the telecommunication industry. In keeping with this policy, the Government has fostered the development of a limited competitive environment in certain of the Company's business, including mobile and Ñxed cellular telecommunications and non-basic services. This liberalization has taken the form of requiring TELKOM, as the domestic sector's organizing body, to cooperate with investors in the provision of basic telecommunications services. With eÅect from January 1, 1996, the MTPT granted TELKOM (i) the exclusive right to provide local Ñxed wire line and Ñxed wireless telecommunication services nationwide, including services provided for and on behalf of TELKOM pursuant to joint operating schemes, for a minimum of 15 years and (ii) the exclusive right to provide domestic long distance telecommunications services nationwide for a minimum of ten years. However as a result of certain changes to the interconnection regime and the tariÅ structure initially introduced in November 1996, the Company expects to face competition, which may include price competition, from cellular operators for the provision of long distance services. Under the current interconnection regime, long distance calls originating or terminating on mobile cellular networks are no longer required to interconnect with the PSTN, and TELKOM and the KSO Units do not receive interconnection charges for long distance calls, which do not interconnect with the PSTN. In addition, in 1997 the MTPT announced that the tariÅs set by the MTPT are maximum tariÅs, thus permitting all service providers (including TELKOM and the cellular operators) to discount tariÅs for local, long distance calls, installation and monthly charges. As a result, the Company may face price competition from cellular operators for the provision of long distance services. Currently, seven companies hold licenses for the provision of PCN/DCS 1800 services in various region throughout Indonesia, and all the three existing nationwide GSM 900 MHz had received a license to extend their operating frequency to 1800 Mhz. The company does anticipate that the introduction of further cellular operators may signiÑcantly increase competition among cellular operators generally and, to some extent, increase competition to the Ñxed line services. Such competition could have a negative material impact on the Company's growth potential and Ñnancial performance. TELKOM's exclusivity does not include telecommunication services provided through private networks. Certain large corporations and Ñnancial institutions have had specialized service requirements and pricing benchmarks which TELKOM historically was not able to satisfy. These entities have therefore constructed private networks in order to service their own business needs. Government regulations provide that, subject to limited exceptions, the use of private networks is restricted to internal use by a closed user group and cannot be connected to the PSTN. The Company believes that 30

extension of such closed user group to others or expansion of private networks will be limited as a result of: (i) the high expense of maintaining a private network, (ii) Governmental enforcement of restrictions on the number of users in a closed-user group and on the ability of private networks to interconnect with the PSTN, and (iii) eÅorts by the Company to increase the quality and reliability of the PSTN and to provide the types of services necessary to address the needs of the business sector in Indonesia. The New Telecom Law allows for the early termination of the existing rights of TELKOM, subject to its compensation agreement between the Government and TELKOM. On August 1st, 2000, the Government, through the Director General of Post and Telecommunications (DGPT), announced Release Number o5/HMS/JP/VIII/2000, dated August 1st, 2000, and the correction thereto No. 1718/UM/VII/2000 dated August 2nd, 2000, which contains early termination of TELKOM exclusive rights for local and domestic long-distance telecommunication services. This Decree marks the end of the monopoly era. Therefore, the Company no longer remains the sole domestic telecommunications services provider in Indonesia. In line with the Government's policy to rescind TELKOM's exclusivity right and establish competitive industry, the Government shall give TELKOM permanent license for international direct dialling in August 2003. While INDOSAT shall be given permanent license for local services in August 2002 and domestic long-distance services in August 2003. As consequence of the organizing entity concept under the Old Telecom Law, TELKOM and Indosat have joint-ownership in most telecommunications companies in Indonesia. The Blueprint calls for further progressive elimination of these complex shareholdings to promote competition and avoid any actual or potential conÖicts of interest in a more competitive telecommunication environment. TariÅ Regime The new Telecom law No. 36/1999 stated that tariÅ structure for the operation of telecommunications network and/or telecommunications services are regulated through government regulations. In addition it also delivers the decision of the tariÅ amount for the operation of telecommunications network and/or telecommunications services to the operator based on a formula regulated by the government. Under the Government Regulation No. 52/2000, tariÅ category is classiÑed into tariÅ for telecommunication network provider, covering tariÅ for leased network and interconnection, and tariÅ for telecommunication service provider, which also includes retail tariÅ for Ñxed line and mobile services. TariÅ structure for telecommunication network provider consists of access charge, usage charge and charge related to the universal service obligation, whereas tariÅ structure for retail Ñxed line services consists of installation charge, monthly charge, usage charge and charges related to additional facilities delivered. TariÅ structure for retail mobile services consists of airtime tariÅ, roaming tariÅ and tariÅ for multimedia services. The Government is currently in the process of formulating a new Ministerial Decree in the implementation of the new tariÅ policy. During this transition period, telecommunication operators use the current tariÅ regime based on Ministerial Decree issued prior to New Telecom Law No. 36/1999. TariÅ for Providing Telecommunication Service Fixed Line Domestic Telephone TariÅs. On October 23, 1995, the Government issued a Price Cap TariÅ Decree based on a formula set forth in general terms and calculated by reference to the Indonesian Consumer Price Index (CPI) for the preceding year, as published by the Indonesian Central Bureau of Statistics. The price cap applies to monthly subscription and local and domestic long distance usage charges. In calculating the adjustment to these prices, each Service is weighted in proportion to the contribution it made to operating revenues 31

from all Services. The weighted average increase in prices charged for the Services for any year must be equal to or less than a speciÑed percentage, which is equal to the CPI minus an eÇciency factor (the ""X-factor''). In determining the X-factor, the Government is to take consideration improvements in the cost eÇciency of the Services resulting from technological improvements, the interests of the aÅected telecommunications operators and the purchasing power of the Subscribers to the Services. The following table set forth the tariÅs for Domestic Fixed Telephone Services, for the years 1999 and 2000. There were no tariÅ changes within the year 2000. Access charges(1)

Business (in Rupiah)

Residential (in Rupiah)

Social (in Rupiah)

Installation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 175,000 Ì 450,000 75,000 Ì 295,000 50,000 Ì 205,000 Monthly Subscription ÏÏÏÏ 26,100 Ì 39,100 14,500 Ì 22,900 10,600 Ì 15,700 (maximum tariÅ) Beginning March 1, 1999 Price Pulse Per Minute(3) Duration (in Rupiah) (Ñxed tariÅ)

Usage charges(2)

Local(4) up to 20 km ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 20-30 km ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Over 30 km ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Domestic long Distance 0-20 km ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 20-30 km ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 30-100 km ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 100-200 km ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 200-300 km ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 300-500 km ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 500-1000 km ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Over 1000 km ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

56 84 1,002

3 min 2 min 10 sec

56 84 1,150 1,150 1,610 1,610 2,010 2,010

3 min 2 min 7 sec 7 sec 5 sec 5 sec 4 sec 4 sec

(1) The range in prices is a function of diÅerentiated prices for certain geographic categories, which have diÅerent tariÅ levels based on certain network and social-economic factors. (2) Usage tariÅs are diÅerentiated by time of day, Sundays and public holidays, varying between 100-125% (for local) and 25%125% (for domestic long distance) of the stated ""base'' rate; tariÅs illustrated above reÖect per minute charges at 100%. (3) Price per minute calculated by TELKOM based on pulse duration and price per pulse. The minimum peak hour duration for peak hour local calls is 1.5 minutes. (4) Only for Regional Division II (Jakarta) and Bandung area (area code 022), the pulse duration for usage charge for local call H 30 km at 100% tariÅ is 2 min (or price per minute • 84).

On November 10, 2000, DGPT issued a guidance letter No. 2775/Dittel/XI/2000, setting a plan to increase retail Ñxed line domestic tariÅ with total increase of 45.49% in 3 years, comprising a gradual increase of 21.67% in 2001, 15.60% in 2002, and 8.22% in 2003. Implementation of this tariÅ adjustment is subject to Parliament discussion and MoC decree. Mobile Cellular TariÅ Structure of Mobile Cellular TariÅ consists of activation, monthly subscription and usage charges. The Government stipulates the Mobile Cellular TariÅ as maximum tariÅ. Monthly subscription charge includes also the fee related to the frequency usage of the outstation, while the usage charge consists of Air Time charge and a charge related to the type of conversation, for example local or DLD. The following table set forth the tariÅs for Mobile Cellular TariÅ, beginning February 25, 1998. 32

MOBILE CELLULAR TARIFF (MAXIMUM TARIFF) Activation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Monthly Charge (including frequency charge) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Usage Charge: Air Time ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Roaming ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

Rp 200,000.00 Rp 65,000.00/month Rp 325.00/minute Rp 1,000.00/call

Other Services TariÅ Currently, the Government sets tariÅs for other services, such as telex, telegram, value added services, and multimedia services. Under the New Telecom Law, tariÅ amount for the operation of other services shall be determined by the operators, based on a formula regulated by the Government. TariÅ for Providing Telecommunication Network Interconnection Arrangement The Fundamental Technical Plan (FTP) sets forth the technical requirements and routing plan for interconnection of the networks of various telecommunications operators among themselves and with the Public Switched Telephone Network (PSTN). Under the FTP, mobile and Ñxed cellular operators are permitted to interconnect with the PSTN for access to the PSTN and other networks, such as international gateways and the network of other cellular operators. In addition, cellular operators may interconnect directly with such other networks without traversing the PSTN. For each interconnection with the PSTN, TELKOM or the relevant KSO Unit receives the applicable interconnection charge set forth in the Interconnection TariÅ Decree. Cellular and Fixed Line Interconnection. For local calls from a mobile cellular network to the PSTN, the cellular operator is required to pay TELKOM 50% of the prevailing tariÅ for local pulse per minute. For local calls from the PSTN to a cellular network, TELKOM collects a per minute charge of 50% of the prevailing applicable local call tariÅ plus an airtime charge of Rp 325.00 per minute. The airtime charge must be remitted by TELKOM to the cellular operator. The Interconnection Decree, eÅective April 1, 1998, indicates that it is possible for long distance calls to be carried by more than one cellular network. Pursuant to the Decree, for DLD calls which originate on the PSTN, TELKOM is entitled to retain a portion of the prevailing DLD tariÅ, which ranges from 40% of the tariÅ, in cases where the entire DLD portion is carried by one cellular operator and delivered to another, up to 85% of the tariÅ, in cases where the entire DLD portion is carried by the PSTN. For domestic long distance calls which originate from a cellular operator, TELKOM is entitled to retain a portion of the prevailing DLD tariÅ, which ranges from 25% where the entire DLD portion is carried by a cellular operator and the call is delivered to a cellular subscriber, up to 85%, in cases where the entire DLD portion is carried by the PSTN and the call is delivered to a PSTN subscriber. Fixed cellular networks may interconnect with the PSTN at the local exchange and the DLD Network levels, and may interconnect directly with the international gateways. Currently, Ratelindo is the only Ñxed cellular service provider in Indonesia, apart from TELKOM and the KSO Unit. Local calls between PSTN and Ratelindo's network are operated on a ""sender keep all'' basis. For DLD calls that originate on Ratelindo's network and transit the PSTN, TELKOM is to receive 35% of Ratelindo's revenues from such calls. For DLD calls that originate on the PSTN, TELKOM is to retain 65% of its revenue from such calls. Fixed Wireline Interconnection. Since September 1, 1998, TELKOM has been receiving a share of Batam Bintan Telekomunikasi (BBT)'s revenue for each successful call that interconnects with the PSTN. Under the interconnection 33

agreement, TELKOM is to receive 75% of BBT's revenues from domestic long distance calls that originate and terminate at the PSTN. For local calls between the PSTN and BBT, revenues are shared on a sender keep all basis. For calls originating from BBT and terminating at a mobile cellular network which transits the PSTN, TELKOM is to receive 50% of 50% of the prevailing local call tariÅs for local calls and 60% of BBT's revenue from DLD calls. For DLD calls, which originate from BBT terminating at a Ñxed cellular network and transiting the PSTN, TELKOM is to receive 50% of BBT's revenue. In case of international calls, BBT is to receive 50% of TELKOM's interconnection revenue (access and usage), for all incoming and outgoing international calls from and to BBT, which transit through TELKOM. International Interconnection. Interconnection for international calls consists of access charge, usage charge and a charge for Universal Service Obligation (USO). The following table sets forth the international interconnection tariÅ, eÅective as of December 1, 1998: Description

New TariÅ

Access Charge ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Usage Charge ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ USO ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

Rp 850/call Rp 550/paid minutes Rp 750/call

Leased line tariÅ Currently, government determines tariÅs for leased line. Of this tariÅ, the most signiÑcant to TELKOM is the tariÅ for low and high-speed leased lines, which varies according to the type of subscriber, speed and type of the line, and distance covered by the line. EÅective January 1, 1997, the Government decreased the tariÅ for leased line by an average of 52%. Leased line tariÅs for other telecommunications operators and Government bodies were further reduced by up to 30%, starting from January 1, 1998. Under the new law, the operators shall determine tariÅ amount for the operation of leased line services, based on a formula regulated by the Government. Universal Service Obligation Under the New Telecom Law, all telecommunications network operators and service providers are bound by a universal service obligation (""USO''), which requires provision of telecommunications facilities and infrastructure or other compensation to all operators. The local network provider will be responsible for network installation in the USO areas. Thereafter, cost arising from providing networks in the USO areas will be passed onto other network and service providers that send traÇc to the recipient network providers, in the form of USO fees. A speciÑc regulation is expected to be issued in order to implement this USO. Relationship with the Government State of the Republic of Indonesia as Shareholder The State of the Republic of Indonesia currently holds 66.19% of TELKOM's Common Stock and the Series A share (the ""Dwiwarna Share''), which has special voting rights. The Government's rights with respect to the Dwiwarna Share will not terminate unless the Articles of Association of the Company are amended, which would require the consent of the Government as holder of such a Share. It is the policy of the Company not to enter into transactions with aÇliates unless the terms thereof are no less favorable to the Company than those, which could be obtained by the Company on an arm's-length basis from an unaÇliated third party. The Government has advised the Company that the 34

MOF, in its capacity as controlling shareholder of the Company, will not cause the Company to enter into transactions with other entities under its control unless the terms thereof are consistent with the Company's policy set forth in the preceding sentence. Under regulations of Badan Pengawas Pasar Modal (""BAPEPAM''), Indonesia's capital markets supervisory agency, because the Company is listed on Indonesian stock exchanges, any transaction in which there is a conÖict of interest (as deÑned below) must be approved by a majority of the holders of shares of common stock who do not have a conÖict of interest in the proposed transaction, unless the conÖict existed before the Company was listed and was fully disclosed in the oÅering documents. A conÖict of interest is deÑned in BAPEPAM regulations as the diÅerence between the common interests of the Company and its shareholders, and the personal economic interests of the members of the board of commissioners, board of directors or principal shareholders (a holder of 20% or more of the issued shares), jointly or separately. A conÖict of interest also exists when members of the board of commissioners, board of directors or a principal shareholder of the Company is involved in a transaction in which their personal interests may be in conÖict with the interest of the Company. BAPEPAM has power to enforce this rule; shareholders of the Company may also be entitled to seek enforcement or bring enforcement action based on this rule. Government as Regulator The Government regulates the telecommunications sector through the MOC. In particular, the Ministry has authority to issue decrees implementing laws, which are typically broad in scope, thereby giving the Ministry considerable latitude. Pursuant to such decrees, the Ministry deÑnes the scope of TELKOM's exclusivity, formulates and approves TELKOM's tariÅs, determines TELKOM's USO and otherwise controls many factors aÅecting TELKOM's competitive position, operations and Ñnancial condition. Through the DGPT, the Government regulates the frequency bandwidth allocation, and TELKOM must obtain a license from the Directorate for each of its services utilizing frequency bandwidths. The Company and other operators are also required to pay radio frequency usage. The Government also requires all operators, including TELKOM, to pay a concession fee of 1% of its collected operating revenues. The concession fee is payable by all telecommunications operators in Indonesia, whether private or Government-owned. The Company also is required to pay to the Government radio frequency usage charges in connection with radio transmission used in providing telecommunications services. The fee is applicable to all users of radio frequency in Indonesia and is calculated based on the location and number of channels, base stations and repeater towers. The MOC as regulator has the authority to grant new licenses for the establishment of new joint ventures and other arrangements, particularly in telecommunications sector. Government as Lender As of December 31, 2000, the Government has sub-loaned borrowings from foreign lenders in the total amount of Rp 10,364.8 billion. The Government will receive from TELKOM interest and principal repayment, the amount of which will be transferred to the respective lenders. At the end of December 2000, of the total loan outstanding 56.1% was in foreign currencies and the remaining 43.9% was rupiah denominated. Interest payment will be paid in Öoating rate between 8.45% and 14.53%, and in Ñxed rate between 3.10% and 13.25%. Government as Customer The Government purchases services from the Company on a commercial basis. Government entities, in the aggregate, constitute the largest user of the Company's services. The Company, however, deals with the various departments and agencies of the Government as separate customers, and the provision of services to any department or agency does not constitute a material part of TELKOM's revenues. 35

C.

Organizational structure

President Director

Director of Planning and Technology

Director of Finance

Director of Operation and Marketing

Director of Human Resources Development Corporate Secretary

Business Development Group

Development Division

Research on Information Technology Division

Internal Auditor

Regional Divisions

Network Division

Multimedia Division

Atelier Division

Foundations

D.

Training Division

Property Division

Information System Division

Subsidiaries

Property, plant and equipment

TELKOM currently possesses over 3,000 properties. Titles to such properties range from 20 to 30 years extensions, up to an unlimited time for certain land use titles where use is restricted to the operation of telecommunications. In addition, the Company leases additional properties, most of which are from state-owned companies under the purview of the Ministry of Forestry. Most of the Company's sites are related directly to its telecommunications operations and are used for network equipment of various types, such as exchanges, transmission stations and microwave radio equipment. The Company holds registered titles for the majority of its properties and has submitted or is in the process of submitting applications for the remainder. None of the Company's properties is mortgaged or otherwise encumbered. At December 31, 2000, all property, plant and equipment, except land, were insured against Ñre, theft, and other possible risks for Rp 16,137,128 million and an additional coverage for Palapa B4 and Telkom I Satellite for U.S.$83,870. Item 5:

Operating and Financial Review and Prospects

The following discussion is based on the Consolidated Financial Statements included elsewhere in this Annual Report. Such Consolidated Financial Statements are prepared in accordance with Indonesian GAAP, which diÅers in certain respects from U.S. GAAP. See ""Notes 43 and 44 of the Company's Consolidated Financial Statements''.

36

A.

Operating Result Year ended December 31 1998 1999 2000 Rp (billion) Rp (billion) Rp (billion)

Income and Expense Items Operating revenues ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Operating expense ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Operating incomeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Other income (expense)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Tax expenseÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Minority interestÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Net income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Operating margin ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

6,600.0 4,000.3 2,599.7 (1,175.3) 255.8 0 1,168.7 39.4

7,790.2 4,846.7 2,943.5 19.3 777.0 13.3 2,172.3 37.8

9,375.7 5,338.4 4,037.3 (578.9) 906.2 13.2 2,539.0 43.1

Year Ended December 31, 2000 compared to Year Ended December 31, 1999. General For the year 2000, TELKOM recorded net income of Rp 2,539.0 billion or an increase of 16.88% compared to the previous year of Rp 2,172.3 billion. The increase was attributed to the higher growth of operating revenues compared to the growth of operating expenses, and the decrease in interest expense. This resulted in earning per share (EPS) of Rp 251.89 in 2000 compared to Rp 225.24 in 1999. For the year 2000, TELKOM reported operating income of Rp 4,037.3 billion, an increase of 37.16% compared to Rp 2,943.5 billion in 1999. While other income (expense), tax expense and minority interest and net income of subsidiary in 2000 were Rp 578.9 billion, Rp 906.2 billion and Rp 13.2 billion respectively. These resulted in net income of Rp 2,539.0 billion in 2000, or an increase of 16.9% from Rp 2,172.3 billion in 1999. Operating Revenues Compared to the previous year, total operating revenues increased by 20.4% from Rp 7,790.2 billion in 1999 to Rp 9,375.7 billion. The main contributor to total operating revenues were telephone revenues (55.23%), followed by revenues under Joint Operation Scheme (24.18%), interconnection revenues (11.96%), and revenues from other telecommunications services (8.63%). Telephone Revenues Telephone revenues consists of revenues from local and domestic long distance usage, monthly subscription charges, installation charges, pay phone, and other telephone services. For the year ended December 31, 2000, total telephone revenues grew by 14.33% from Rp 4,528.9 billion in 1999 to Rp 5,177.9 billion in 2000. The increase in telephone revenues resulted from: (i) the growth of 14.74% in local and domestic long distance, from Rp 3,570.9 billion in 1999 to Rp 4,097.1 billion in 2000, (ii) monthly subscription charges of 11.05% from Rp 799.1 billion in 1999 to Rp 887.4 billion in 2000, and (iii) installation charges of 10.40% from Rp 68.3 billion in 1999 to Rp 75.4 billion in 2000. In the year ended December 31, 2000, an additional 506,347 subscribers connected to the Company's network, an increase of 11% over the net growth of 455,958 subscribers achieved in the previous year. Net subscribers growth is the amount of gross additional subscribers minus the number of disconnected subscribers. During the Ñscal year ended December 31, 2000, the Company recorded an increase of 5.3% in telephone revenues per average subscribers (excluding revenue under Joint Operating Scheme) from Rp 1.51 million in 1999 to Rp 1.59 million in 2000. Phone card as part of telephone revenues recorded a proÑt of Rp 34.4 billion in 2000 compared to a loss of Rp 8.6 billion in 1999. 37

Revenues under Joint Operation Scheme The revenues under Joint Operation Scheme in 2000 increased by 35.18% from Rp 1,677.2 billion in 1999 to Rp 2,267.2 billion in 2000. This growth was mainly due to the 7.1% increase in MTR from Rp 1,452.9 billion in 1999 to Rp 1,556.7 billion in 2000, and the 232.6% increase in Distributable TELKOM Revenue (DTR) from Rp 209.0 billion in 1999 to Rp 695.1 billion in 2000. Amortized revenues representing the amortization of the initial investor payments remained unchanged at Rp 15.3 billion. The DTR increase was primarily a result of the change in DTR sharing percentage from 90% (KSO Investor) : 10% (TELKOM) to 70% (KSO Investor) : 30% (TELKOM) since January 2000. Interconnection Revenues Interconnection revenues increased by 25.7% from Rp 892.1 billion in 1999 to Rp 1,121.5 billion in 2000. Contributing to the interconnection revenues were Rp 782.6 billion from mobile cellular, Rp 40.9 billion from Ñxed wireless, Rp 14.9 billion from Ñxed wire line interconnection, and Rp 283.1 billion from international service interconnection. The Company recorded a growth in cellular traÇc, which interconnects with TELKOM's network from 2,432.7 million paid minutes in 1999 to 3,893.3 million paid minutes in 2000. Revenues from international interconnection payments decreased by 8.9% from Rp 311.7 billion in 1999 to Rp 284.0 billion in 2000, and revenues from cellular interconnection payments increased by 8.5% from Rp 545.1 billion in 1999 to Rp 591.2 billion in 2000. Revenues from Other Telecommunications Services Revenues from other telecommunications services increased by 16.9% from Rp 692.0 billion in 1999 to Rp 809.2 billion in 2000. This increase resulted primarily from an 84.2% increase in multimedia services from Rp 35.4 billion in 1999 to Rp 65.2 billion in 2000 and from a 92.9% increase in leased channel from Rp 100.5 billion in 1999 to Rp 193.9 billion in 2000. Operating Expenses Operating expenses increased by 10.1% from Rp 4,846.7 billion in 1999 to Rp 5,338.4 billion in 2000. The operating expenses consist of depreciation, personnel, operations, maintenance and telecommunications services, general and administrative, and marketing expenses. Depreciation Depreciation expenses decreased by 11.7% from Rp 2,363.6 billion in 1999 to Rp 2,087.8 billion in 2000. The decrease in depreciation expense was attributed to fully depreciated assets in 2000. In addition, in 1999, the company recorded accelerated depreciation of the cable networks. Personnel In August 2000, the Company increased the employee basic salary by 50%. This policy impacted the personnel expenses which increased by 30.2% from Rp 1,105.7 billion in 1999 to Rp 1,439.5 billion in 2000 and directly aÅected the income tax expense of employees paid by the Company which increased by 57.3% from Rp 109.9 billion in 1999 to Rp 172.9 billion in 2000. Operations, Maintenance and Telecommunications Services Operations, maintenance and telecommunications service expenses increased by 22.8% from Rp 822.0 billion in 1999 to Rp 1,009.5 billion in 2000. The increase was mainly due to the 53.3% increase in kiosk phone commissions from Rp 242.9 billion in 1999 to Rp 372.3 billion in 2000, and the 35.8% increase in electricity expense from Rp 75.8 billion in 1999 to Rp 102.9 billion in 2000. 38

The increase in kiosk commissions resulted from the growth of 53.74% in kiosk phones from 148,863 lines in 1999 to 228,862 lines in 2000, while the increase in electricity expense was due to the increase in electricity tariÅs. General and Administrative General and administrative expenses increased by 40.6% from Rp 508.4 billion in 1999 to Rp 715.0 billion in 2000. The major contributors to this increase were the 72.2% increase in provision for doubtful accounts receivable and inventory from Rp 162.0 billion in 1999 to Rp 279.0 billion in 2000 due to provisions for the account receivable of Komselindo, Mobisel, Metrosel, and MTR of KSO Regional Division III. In addition, this increase was also caused by a 180.3% increase in research, development and professional fees from Rp 22.8 billion in 1999 to Rp 63.9 billion in 2000 due to the Company's financial advisory and legal consultant since September 2000. Marketing Marketing expenses increased by 84.3% from Rp 47.0 billion in 1999 to Rp 86.6 billion in 2000, primarily due to the marketing promotion via TV broadcast programmes in 2000. Advertising and promotion expense increased by 68.9% from Rp 44.1 billion in 1999 to Rp 74.5 billion in 2000. Other Income (Expense) During 2000, the Company recorded other expenses (net) of Rp 578.9 billion compared to other income (net) of Rp 19.3 billion in 1999. This was largely due to the loss of foreign exchange (net) resulting from the depreciation of the Rupiah in 2000, from a net gain of Rp 280.2 billion in 1999 to a net loss of Rp 1,064.2 billion in 2000. As of December 31, 2000 the exchange rate was US$1 • Rp 9,625 compare to exchange rate as of December 31, 1999 US$1 • Rp 7,110. Provision For Income Taxes The provision for income taxes increased by Rp 129.2 billion or 16.6% from Rp 777.0 billion in 1999 to Rp 906.2 billion in 2000. The increase was largely attributed to the increase of the Company's taxable income. See Note 26 to the Company's Consolidated Financial Statements. Year Ended December 31, 1999 compared to Year Ended December 31, 1998 General During 1999, TELKOM reported operating income of Rp 2,943.5 billion or an increase of 13.2% compared to Rp 2,599.7 billion in 1998. While other income-net and provision for income tax in 1999 were Rp 19.3 billion and Rp 777.0 billion respectively. This resulted in net income of Rp 2,172.3 billion in 1999, or an increase of 85.9% from Rp 1,168.7 billion in 1998. Operating Revenues During 1999, total operating revenues increased by 18.0% to Rp 7,790.2 billion from Rp 6,600.0 billion in 1998. Total operating revenue comprises telephone revenue, revenue under Joint Operation Scheme, interconnection revenues, and revenues from other telecommunications services. Telephone Telephone revenues increased 19.0% from Rp 3,805.2 billion in 1998 to Rp 4,528.9 billion in 1999. Telephone revenue comprises revenues from usage charges for local and domestic long distance telephone calls, installation charges, monthly subscription charges, and phone card revenues. Local and Domestic Long Distance Usage. Revenues from local and domestic long distance calls increased by 23.0% from Rp 2,902.6 billion in 1998 to Rp 3,570.9 billion in 1999. This revenue 39

contributed 45.8% of total operating revenue in 1999 compared to 44.0% in 1998. The increase in revenue from local and domestic long distance was attributed to the growth of 8.0% in lines in service during 1999, pulses production of 2.8%, and tariÅ increases of 15%. In addition, the Company believes the growth was also attributed to the improvement of network quality as measured by successful call ratios from 68.1% in 1998 to 72.0% in 1999 for local calls and 62.1% in 1998 to 64.0% in 1999 for domestic long distance calls. Local and domestic long distance usage as measured by pulses per average subscriber, excluding public phones, decreased by 7.6% from 9,056 pulses per subscriber in 1998 to 8,372 in 1999. The decrease was primarily a result of the larger proportion of lines in service in 1999 that were connected to residential subscribers. The company believes that the local and domestic long distance usage may increase if the lines in service and the usage of telecommunications services increase in line with the improvement of economic and social conditions in Indonesia. Monthly Subscription Charges. Revenues from monthly subscription charges increased by 16.9% from Rp 683.3 billion in 1998 to Rp 799.1 billion in 1999, primarily as a result of the increase of 1.5%, 8.9%, and 7.4% for business, residential, and social subscribers lines respectively, compared to those in 1998. Installation charges. Revenues from installation charges declined by 35.5% from Rp 105.9 billion in 1998 to Rp 68.3 billion in 1999. The primary factor causing this decrease was the reduced number of additional lines in service in 1999 compared to 1998, and discounting of installation fees during 1999. Phone cards. During 1999, TELKOM recorded a loss of Rp 8.6 billion from phone cards. This loss was 309.5% larger compared to Rp 2.1 billion loss reported in 1998. This loss was mainly associated with the transfer of the magnetic and chip phone card business back to the Company. Revenues under Joint Operation Scheme The revenue under Joint Operation Scheme in 1999 increased by 5.4% from Rp 1,591.5 billion in 1998 to Rp 1,677.2 billion in 1999. This growth was mainly due to the 1.4% increase in MTR from Rp 1,433.4 billion in 1998 to Rp 1,452.9 billion in 1999 and the 46.4% increase in DTR from Rp 142.8 billion in 1998 to Rp 209.0 billion in 1999. Amortized revenue representing the amortization of the initial investor payments remained unchanged at Rp 15.3 billion. Interconnection Interconnection revenues increased by 60.6% from Rp 555.5 billion in 1998 to Rp 892.1 billion in 1999. The increase principally resulted from the growth in cellular traÇc, which interconnects with the PSTN, and 67% increase in international interconnection tariÅs, which was eÅective December 1, 1998. Revenues from international interconnection payments increased by 54.7% from Rp 201.5 billion in 1998 to Rp 311.7 billion in 1999, and revenues from cellular interconnection payments increased by 60.5% from Rp 339.7 billion in 1998 to Rp 545.1 billion in 1999. Other Telecommunications Services Revenues from other telecommunications services increased by 6.8% from Rp 647.7 billion in 1998 to Rp 692.0 billion in 1999. This increase was largely attributed to the increase in revenues from satellite transponder, revenues from revenue sharing, and multimedia revenues. Revenues from telex and telegram services continued to decrease. Satellite transponder. Revenues from satellite transponder leasing services increased by 3.6% from Rp 208.3 billion in 1998 to Rp 215.8 billion in 1999. The increase was attributed to the increase in leasing transponders, despite the decrease in number of customers from 28 customers as of December 31, 1998 to 18 customers as of December 31, 1999. 40

Revenue Sharing. Revenues from revenue sharing increased by 8.0% from Rp 285.2 billion in 1998 to Rp 308.1 billion in 1999. Revenue sharing includes the Company's share of revenues earned under Ñxed line and mobile cellular PBHs as Well as the amortization of unearned income related to these PBH arrangements. See Note 34 to the Company's Consolidated Financial Statements. Leased lines. Revenue from leased line services decreased by 3.9% from Rp 104.6 billion in 1998 to Rp 100.5 billion in 1999. The Company believes that the number of leased lines in service has growth potential due to the needs of mobile cellular networks and other telecommunications providers with respect to expanding their transmission infrastructure. Multimedia. Revenue from multimedia increased by 43.9% from Rp 24.6 billion in 1998 to Rp 35.4 billion in 1999. Telex and Telegram revenues decreased by 22.5% from Rp 16.9 billion in 1998 to Rp 13.1 billion in 1999, in line with a continuing long-term trend of substitution by other services, such as facsimile and multimedia. Other. Revenues from other services increased by 132.9% from Rp 8.2 billion in 1998 to Rp 19.1 billion in 1999. This increase was attributed to the growth in revenue from value added services particularly from ISDN services. Operating Expenses Operating expenses increased by 21.2% from Rp 4,000.3 billion in 1998 to Rp 4,846.7 billion in 1999. The operating expenses consist of depreciation, personnel, operations, maintenance and telecommunications services, general and administrative, and marketing expenses. Depreciation Depreciation expenses increased by 9.3% from Rp 2,162.0 billion in 1998 to Rp 2,363.6 billion in 1999. The increase in depreciation expense was largely due to the increase in new property, plant and equipment being placed in service by TELKOM and accelerated depreciation of the cable networks. The categories of property, plant and equipment with the most signiÑcant additions were the Company's satellite and, earth station equipment (Rp 1,258.0 billion or 69.8% increase), cable network (Rp 914.2 billion or 12.2% increase), and its transmission installation and equipment (Rp 649.4 billion or 19.4% increase). Personnel Personnel expenses increased by 32.9% from Rp 831.8 billion in 1998 to Rp 1,105.7 billion in 1999. The growth in personnel expenses in 1999 was primarily due to a 44.5% increase in employee salary and allowance from Rp 359.4 billion in 1998 to Rp 519.4 billion in 1999, which resulted in the increase of employee income tax amounting Rp 42.5 billion or 63.1% from Rp 67.4 billion to Rp 109.9 billion in 1999. In addition, net periodic pension cost increased by Rp 30.3 billion or 98.4% from Rp 30.8 billion in 1998 to Rp 61.1 billion in 1999. Consistent with the practice of most state-owned companies, TELKOM pays the income tax expense on behalf of its employees. Operations, Maintenance and Telecommunications Services Operations, maintenance and telecommunications service expenses increased by 63.9% from Rp 501.4 billion in 1998 to Rp 822.0 billion in 1999. The increase was mainly due to the Rp 133.2 billion or 1,402.1% increase in Y2K expenses from Rp 9.5 billion in 1998 to Rp 142.7 billion in 1999, the Rp 135.5 billion or 126.2% increase in kiosk commissions from Rp 107.4 billion in 1998 to Rp 242.9 billion in 1999, and the Rp 35.1 billion or 18.3% increase in operation and maintenance expenses of telecommunications equipment from Rp 192.3 billion in 1998 to Rp 227.4 billion in 1999. 41

General and Administrative General and administrative expenses increased by 7.4% from Rp 473.5 billion in 1998 to Rp 508.4 billion in 1999. The major contributors to this increase were a Rp 64.8 billion or 67% increase in provision for bad debts and inventory obsolescence from Rp 97.2 billion in 1998 to Rp 162.0 billion in 1999, a Rp 9.1 billion or 30.7% increase in travelling expenses from Rp 29.6 billion to Rp 38.7 billion, and a Rp 7.2 billion or 47.7% increase in security and screening expenses from Rp 15.1 billion to Rp 22.3 billion. These increases were partly oÅset by a reduction of professional fees from Rp 28.1 billion to Rp 10.2 billion, and education, training and recruitment from Rp 131.0 billion in 1998 to Rp 98.2 billion in 1999. Marketing Marketing expenses increased by 48.7% from Rp 31.6 billion in 1998 to Rp 47.0 billion in 1999, primarily due to Rp 9.0 billion or a 37.5% increase in marketing advertising promotion expenses from Rp 24.0 billion to Rp 33.0 billion, and Rp 6.5 billion or 85.5% increase in other marketing expenses from Rp 7.6 billion in 1998 to Rp 14.1 billion in 1999. Other Expenses (Income) During 1999, the Company recorded other income (net) of Rp 19.3 billion compared to other expenses of Rp 1,175.3 billion in 1998. This fundamental change was largely due to the Company booking gains on foreign exchange of Rp 280.2 billion in 1999 compared to a loss of Rp 965.5 billion 1998, the increase in equity in net income of investees amounting to Rp 417.7 billion from Rp 7.1 billion in 1998 to Rp 424.8 billion in 1999, Rp 2.9 billion or a 15.6% increase in interest income from Rp 595.2 billion in 1998 to Rp 688.1 billion in 1999. The increase in other income was partly oÅset by Rp 506.7 billion or a 51.7% increase in interest expense from Rp 980.7 billion to Rp 1,487.4 billion. For consolidating purposes due to the increase in investment in PT. Infomedia Nusantara the Company recorded net revenue amounting to Rp 31.7 billion in 1999 in other income. Provision For Income Taxes The provision for income taxes increased by Rp 521.2 billion or 203.8% from Rp 255.8 billion in 1998 to Rp 777.0 billion in 1999. The increase was largely attributed to the increase in the Company's taxable income. See Note 26 to the Company's Consolidated Financial Statements. Net Income Net income increased by 85.9% from Rp 1,168.7 billion in 1998 to Rp 2,172.3 billion in 1999, for the reasons discussed above. B.

Liquidity and Capital Resources

The major sources of Company's liquidity over the three years ended December 31, 2000, have been cash generated from operations, cash received from the proceeds of time deposit maturities, and proceeds from sale of property, plant, and equipment. Cash generated from operating activities was Rp 3,589.5 billion in 1998, Rp 4,249.9 billion in 1999, and Rp 4,957.1 billion in 2000. The increase from 1999 to 2000 was mainly due to the increase in operating proÑt, favorable working capital movements, and the continuing impact of the consolidation of Infomedia Nusantara, a subsidiary that TELKOM acquired in 1999 and owns a majority interest. The increase from 1998 to 1999 was primarily due to an increase in operating proÑt, partly oÅset by movements in working capital. 42

Net cash Öow from operating activities was used mainly to Ñnance capital expenditures, to repay long-term debt, to Ñnance cash dividend payments, to purchase marketable securities and to placed in time deposits. The repayments of long-term debts were Rp 284.1 billion in 1998, Rp 610.0 billion in 1999, and Rp 682.1 billion in 2000. The payments of dividends were Rp 448.6 billion in 1998, Rp 475.6 billion in 1999, and Rp 1,103.4 billion in 2000. In 1998 the Company drew Rp 2,722.7 billion of committed loans from foreign lenders for investing activities. The amount of Rp 972.5 billion in 1999 and Rp 580.6 billion in 2000, were used for the same purpose. As a result the ratio of long-term debt to total long-term debt and equity was 44.6% in 1998, 41.1% in 1999, and 41.1% in 2000. The following table set forth TELKOM's outstanding long-term debt as of December 31, 2000. Currency

U.S. DollarÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Yen ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ French Franc ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Netherlands Guilder ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Swedish Krone ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Deutsche Mark ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total (Rupiah Equivalent) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Rupiah ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total (Rupiah Equivalent) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

Amount in Original Currency

Rupiah Equivalent

432.86 million 17.83 billion 192.28 million 19.82 million 866 thousand 40 thousand Ì Ì Ì

4.187.91 billion 1,502.80 billion 264.23 billion 81.11 billion 883 million 184 million 6,037.12 billion 4,327.66 billion 10,364.78 billion

The implementation of prudent policies in cash management and loans from foreign lenders have contributed to the increase of cash and cash equivalents and availability funds from foreign lenders at the end of the years over the period of 1998-2000. As of December 31, 1998 cash and cash equivalents was Rp 2,536.3 billion, while at the end of 1999 and 2000 cash and cash equivalents were Rp 3,597.5 billion and Rp 3,542.2 billion, respectively. The Company believes that it will able to fulÑl cash requirements in its operation. The following table set forth TELKOM's outstanding committed loans from foreign lenders as of December 31, 2000. Currency

U.S. DollarÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Yen ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ French Franc ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

Committed Amount

Amount Drawn

Undisbursed Amount

294.86 million 29.30 billion 127.80 million

196.10 million 23.37 billion 125.47 million

98.76 million 5.93 billion 1.61 million

In addition, TELKOM has historically met its working capital and capital expenditure requirements principally with cash Öows generated from operations and funds from multilateral and bilateral international Ñnancial institutions (which TELKOM receives from the Government through an ongoing lending program). With these Ñnancing methods the Company has been able to fulÑl its required funds, although since the IPO the Company has been relying only on undisbursed committed loans. Assuming that the Company requires larger funds compared to the funds available from these sources, the Company may seek funds from alternative sources, such as sales of common stock or issuance of bonds. No assurance can be given that such alternative sources of funding will be available when required. InÖation InÖation in Indonesia as measured by a consumer price index (CPI) which was 77.6%, 2.01%, and 9.35% in 1998, 1999, and 2000 respectively, according to the Indonesian Central Bureau of Statistics. 43

While the price cap tariÅ formula (CPI-X°Z) applicable to TELKOM's business is calculated by reference to Indonesia's CPI, TELKOM is unable to determine whether and to what extent any increase in Rupiah-denominated costs as a result of inÖation will be oÅset by any future tariÅ increase. Accordingly, the Company's results of operations and Ñnancial condition could be signiÑcantly and adversely aÅected by future inÖation. C.

Research and Development, Patents and Licenses, etc

TELKOM invests in improvements and additions to its facilities and in new services and businesses, all of which it classiÑes as research and development. TELKOM expended approximately Rp 12.3 billion, Rp 12.6 billion, and Rp 33.1 billion in 1998, 1999, and 2000 respectively, for research and development. During 2000, the Company's Research on Information Technology Division (RisTI) works in conjunction with the marketing department to develop projects having potential commercial applications based on anticipated market demand and technological and economic feasibility. With regard to the Company's new vision, RisTI implemented several projects which fall into three general categories: (i) development of telecommunication technology, which consists of: Multimedia City Plan Development (Jakarta and Surabaya), National Backbone Data Network, VoIP Technology Assessment and Network Planning Project, WAP Program, Detail Design Tools Software Development (for cable network planning), Virtual Phone, Virtual Internet, etc; (ii) telecommunication technology analysis, such as: Network Analyzer for Telecommunication Fraud, Cable Implementation Quality System (CIQD), and other new telephone design with a variety of features; and (iii) development of a management system, which is aimed to develop new projects i.e.: web based customer care system (using the brand name RisTIshop), new product developments which are integrated based on web (on-line), e-government solutions, Telkom Information Center, BaliMoon Island Project, E-Service, Knowledge Management, Royalty Development, and others. D.

Trend Information

Since 1997, Indonesia has been experiencing economic diÇculties due to unusually high exchange rates, slowing down of economics activities, high unemployment, and lack of customer aÅordability. High exchange rates have increased the Company's cost of funds, as well as the amount of debt to be served, while the slowing down of economic activities has aÅected the growth of the Company's subscribers and revenues. In response to these economic events, the Government, through Minister of Communications, has proposed to the Parliament (DPR) on increase of telephone tariÅs by 45% to be implemented within three years beginning 2000. The implementation of the increase in tariÅs for the year 2000 was not approved by the Parliament due to low customer aÅordability. Resolution of the KSO is dependent on the negotiations between TELKOM and KSO partners which is coordinated and will be decided by the Government, and other factors which are beyond the Company's control, such as tariÅ increases, compensation on termination of the exclusivity rights, and others. Resolution of cross ownership issues in aÇliates companies between TELKOM and INDOSAT will depend on the negotiation process and the restructuring scheme of Indonesia's telecommunication systems, that will be taken by the Government. The future potential growth of telecommunication market demand in Indonesia based on a research study by Boston Consulting Group in 1999 may indicate compound annual growth rate (CAGR) of local business by 15%, domestic long distance by 17%, international direct dial by 12%, mobile business by 41%, and internet business by 64%. These businesses would contribute to the total market growth from local business by 15%, domestic long distance by 22%, international direct dial by 7%, mobile business by 51%, and internet businesses by 5%. It concluded that mobile and internet businesses are the yardstick of future business in telecommunication. TELKOM will consider this 44

phenomenon in its selected investment activities carefully in order to anticipate diminishing return on Ñxed telephone revenue. TELKOM will continue to adopt economic measures and other measures to address the economic diÇculties by initiating cost cutting and eÇciency programs. It is not possible to determine the future aÅect the continuation of the slow down of economic activities, which may have impacts on the Company's liquidity and earnings, including the aÅect Öowing through to the Company's customers. Item 6: A.

Directors, Senior Management and Employees

Directors and Senior Management

In accordance with Indonesian law, the Company has a Board of Commissioners and a Board of Directors. The two Boards are separate and no individual may be a member of both Boards. Board of Commissioners The Board of Commissioners consists of Ñve members, one of whom is the President Commissioner. The members of the Board of Commissioners are elected and dismissed by shareholders' resolutions at a general meeting of shareholders, which meeting must be attended by the holder of the Dwiwarna Share and which resolution must be approved by the holder of the Dwiwarna Share. The current members of the Board of Commissioners of the Company are as follows: Name

Age

Bacelius Ruru ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

52

Rahardjo Tjakraningrat ÏÏÏÏÏÏÏÏÏÏ

57

Current Position(s) with TELKOM; Other Positions with Institutions; Education

Chairman of Commissioner of TELKOM since April 2000. Chairman of the Jakarta Initiative Taskforce since April 2000. Deputy Minister of Investment and StateOwned Enterprises in charge of Supervising and Control of the Ministry and formerly as Deputy for Mining and Agro-Industry Business in the same Ministry (1998-2000). Director General of the State-Owned Enterprise in Ministry of Finance (1995-1998). Chairman of Capital Market Supervisory Agency in Ministry of Finance (19931995). Head of Legal Bureau and Public Relations of Ministry of Finance (1987-1993). 1975-1993 in charge of director/head of some Directorates/ institutions in Ministry of Finance. Graduate from Faculty of Law, University of Indonesia (1975). Harvard Law School (1981). Commissioner of TELKOM since April 2000. Commissioner of PT. Multi Eka Karma since 2000. President Director of PT. Multi Eka Karma (1996 to 2000). President Director of PT Telesarana Adi Prima (1995 to 1997). Director of Finance of PT.BELTDC (1992 to 1995). Director of Commercial of PT. Rajasa Hasanah Perkasa/Era Mobitel (1986 to 1991). Graduate from Faculty of Law, University of Indonesia (1966).

45

Name

Age

Purnomo Sidhi ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

55

Noor Fuad ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

53

Andi Siswaka FaisalÏÏÏÏÏÏÏÏÏÏÏÏÏ

46

Current Position(s) with TELKOM; Other Positions with Institutions; Education

Commissioner of TELKOM since April 2000. Senior Executive Advisor to the Minister of Communication (since 1997). Indonesian Air Force Operation Commander II (1996 to 1997). Vice Commander I of Indonesian Air Force Operation (1994 to 1996). Senior Executive Advisor to the Chief of Indonesian Air Force (1992 to 1993). Graduate from Indonesian Air Force Academy (1968). Air-Flight Instructor School (1977). School of StaÅ and Commander of Indonesian Air Force (1985). S.I.D.M.C., USA (1995). Commissioner of TELKOM since April 2000. Secretary General, Ministry of Finance (2000 to date). Commissioner of PT Inhutani III, Ministry of Forest (1987-1994). Commissioner of PT Pelabuhan Indonesia I Medan (19951998). Senior Executive Advisor of Human Resources to the President Director of PT Rajawali Nusindo (1997 to date). Commissioner of PT Pelabuhan Indonesia III Surabaya (1998 to date). Commissioner of PT Perkebunan Nasional VIII Jawa Barat (1999 to date). Commissioner of PT BRI Sanwa Ì Finance (1999 to date). Graduate from Faculty of Economy, Gajah Mada University, Yogyakarta (1972). M.Sc. in Policy Economics, University of Illinois (1986). Commissioner of PT TELKOM since April 2000. Director of Planning and Technology of PT TELKOM (1996-2000), Vice President of Corporate and Technological Planning of PT TELKOM (1995-1996), General Manager of Corporate Planning of PT TELKOM (1993-1995). Head of the North Jakarta Regional Telecommunication OÇce (1991-1993). Head of the Kebayoran Baru Service OÇce (1990-1991). Graduate in Electrical Engineering, Trisakti University, Jakarta, 1983. Master of Science, American World University (1998).

The term of each of the Commissioners concludes at the close of the third annual general meeting of shareholders after the date of his appointment. The Commissioners' business address is Jalan Japati, 1, Bandung 40133, Indonesia. Board of Directors The Board of Directors consists of one President Director and four Directors. Directors are elected and dismissed by shareholders' resolutions at a general meeting of shareholders, which meeting must be attended by the holder of the Dwiwarna Share and which resolution must be approved by the holder of the Dwiwarna Share.

46

The current members of the Board of Directors are as follows: Current Position(s) with TELKOM; Other Positions with Institutions; Education

Name

Age

Muhammad Nazif ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

56

President Director of TELKOM since April 2000. Vice President University of Indonesia 1994-2000. Head of Department, Faculty of Economics, University of Indonesia, 1992-1994. Member of Deregulation Team, Ministry of Finance, 1990-1993. Head of the Secretary for the Junior Minister of Finance, 1989-1993. Member of EÇciency Improvement Team of State-Owned Enterprises, Ministry of Finance, 1989-1991. Executive Director of Islamic Development Bank, 1990-1991. President Director of Bank Umum Koperasi Indonesia, 1985-1989. Executive Director of Bank Duta Ekonomi, 1972-1979. First National Bank (Citibank), 1968. MBA, Katholieke University, Leuven, Belgium, 1981. Graduate of Economic Faculty, University of Indonesia, 1973.

Mursyid Amal ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

53

Director of Finance since April 2000. Chairman of Logistic Assistant Group, TELKOM Corporate OÇce, 1997-2000. Logistic General Manager TELKOM, 1995-1997. Logistic General Manager TELKOM of Jakarta Regional Division, 1992-1995. Magister Management (MM), Bandung School of Management, 1997. Graduate of Economic Faculty, the Islamic University of Nusantara, 1986.

Komarudin SastrakoesoemahÏÏÏÏÏ

50

Director of Operations and Marketing since April 2000. Head of TELKOM's Development Division, 1997-2000. Member of Blue Print Development Team, Directorate General of Post and Telecommunication, 1999. Member of KSO Development Team, 1994-1995. Chief of Regional Division IX Kalimantan, 1992-1993. Graduate of Electrical Engineering Bandung Institute of Technology, 1976.

TauÑk Akbar ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

50

Director of Human Resources Development, since April 2000. President Director of PT Aplikanusa Lintasarta, 19942000. Executive General Manager of Palapa Satellites Operation of TELKOM, 1992-1993. General Manager Telecommunication Planning of TELKOM, 1990-1992. Manager Satellite Transmission Planning of TELKOM, 1983-1989. Astronout Training for Indonesia Candidate (Payload Specialist) NASA, Houston, Texas, 1986. Telecommunication Management Course, Vancouver, Canada, 1991. Graduate of Electrical Engineering Bandung Institute of Technology, 1975.

KristionoÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

47

Director of Planning and Technology since April 2000. Head of TELKOM's Regional Division V, East Java, 19952000. Head of TELKOM IV Project, 1992-1995. General Manager TELKOM's Logistic Department, 1990-1992. Deputy of Chief Regional Division VII Denpasar, 19891990. Technical Manager, 1978-1989. Graduate of Electrical Engineering, Surabaya Institute of Technology, 1978.

47

None of the Directors has a service contract with the Company nor are any such contracts proposed. The Directors' terms of appointment end on the close of the Ñfth annual general meeting after the date of appointment. There is no family relationship among any of the Commissioners and Directors listed above. The Directors' business address is Jalan Japati, 1, Bandung 40133, Indonesia. B.

Compensation

Each Commissioner is granted a monthly honorarium and certain other allowances and is paid an annual bonus if TELKOM surpasses certain Ñnancial operating targets, the amounts of which are determined by the shareholders at the general meeting of shareholders. Each Commissioner also receives a lump-sum bonus paid at the end of the Commissioner's term pursuant to an MOF letter that applies to all state-owned companies. Each Director is granted a monthly salary and certain other allowances (including a pension if such Director is otherwise eligible). Each Director also receives an annual bonus and other incentives if TELKOM surpasses certain Ñnancial and operating targets, the amounts of which are determined by the shareholders at the general meeting of the shareholders. Bonuses and incentives are budgeted annually and are based on the recommendation of the Board of Directors which recommendation must be approved by the Board of Commissioners before submission to the shareholders. No fees are paid to the Commissioners or Directors for their attendance at their respective board meetings. In addition, Directors receive certain other in-kind beneÑts, such as housing and car and driver. For the year ended December 31, 2000, the aggregate compensation paid by the Company to all Commissioners and Directors as a group was Rp 9.6 billion. C.

Board practices

The principal functions of the Board of Commissioners are to supervise the Board of Directors, review the Company's development plan, and monitor the performance of its work plan and budget, and the implementation of its Articles of Association and resolutions of the shareholders' general meeting. In carrying out supervisory activities, the Board of Commissioners represents the interests of the shareholders and is accountable to the shareholders in general meeting. Individual Directors are charged with speciÑc responsibilities. In the event that a vacancy occurs in the Board of Directors, so long as the position remains vacant, one of the other directors will be nominated by the Board of Commissioners to perform the work of the absentee director. If, for any reason, the Company ceases to have any Directors, the Board of Commissioners is to assume the ongoing obligations of the Board of Directors and must convene a general meeting of shareholders to elect a new Board of Directors within at least 60 days. The Board of Directors is generally responsible for managing the business of the Company in accordance with all applicable laws, the Articles of Association of the Company and the policies and directives of the general meeting of shareholders and the Board of Commissioners. The Board of Directors is required to obtain the written approval of the Board of Commissioners for the following actions: buying or selling the shares of listed companies in excess of the amount stipulated by the Board of Commissioners; participating in or disposing of other capital investments; establishing subsidiaries; entering into licensing agreements, management contracts or similar agreements with other entities for a period of more than one year; selling or otherwise disposing of Ñxed assets; ceasing to collect or writing oÅ bad debts from the Company's books or inventory in excess of the amount stipulated by the Board of Commissioners; binding the Company as surety in excess of the amount stipulated by the Board of Commissioners; and assuming or granting intermediate or long-term loans and assuming short-term loans not in the ordinary course of business in excess of the amount stipulated in the Company's work plan and budget, as approved by the Board of Commissioners. In addition, any of the above transactions which involves 5% or more of the Company's revenues or 10% or more of stockholders' equity or such other amount as speciÑed in Indonesian capital market regulations must be authorized by the shareholders at the general meeting of shareholders. In the performance of its duties, the Board of Directors must act in the interests of the Company. 48

D.

Employees

As of December 31, 2000, the Company had 37,705 employees, of which 18,917 and 18,788 personnel are in TELKOM Regions and KSO Regions respectively. TELKOM's eÇciency, as measured by lines per employee, has improved from 160.1 lines per employee as of December 31, 1999 to 176.7 lines per employee as of December 31, 2000 in all Divisions, including the KSO Divisions, as of December 31, 2000. This increase is due to the construction of new lines, outsourcing certain business support activities, and selective employee hiring. TELKOM KSO Employees remain employees of TELKOM and are subject to all employment rules and policies of TELKOM in force at that time, except to the extent that rules and policies are supplemented, in favor of the employee, by the rules and policies of the KSO Unit. Additional KSO Employees are the employees of the KSO Investor, and TELKOM has no obligation to continue their employment at the end of the KSO Period. In general, TELKOM employees receive a base salary and salary-related allowances, a bonus and various beneÑts, including a pension plan, medical beneÑts for themselves and certain members of their immediate family, housing allowance, other allowances and certain other beneÑts, including those related to performance of the employee's working unit. Bonuses are budgeted in advance by the Board of Directors and the Board of Commissioners and are paid out in the year following the year in which they are earned. Over the past Ñve years, the size of the annual bonus pool has ranged from Rp 135 billion to Rp 197 billion. Bonuses paid by TELKOM are allocated only to Non-KSO Division employees. After the size of the bonus pool is determined, management allocates the pool among the Divisions depending upon their respective performances, and uniform bonuses for employees at each staÅ level for each Division are then determined. Pursuant to the Initial Public OÅering in 1995, 116,667,000 shares of Common Stock were reserved for mandatory sale to employees of the Company. The Company paid for such shares (which were sold at the same per share price as the public oÅering price of shares of Common Stock sold in Indonesia pursuant to the Initial Public OÅering (i.e., Rp 2,050 per share)) on behalf of its employees as follows: 90% of the purchase price was deducted from employee cash bonuses that had been previously allocated but not paid; the Company paid the balance of the purchase price plus taxes payable by its employees on the purchase of such shares (amounting to approximately 15% of the purchase price) and reported those payments as additional vacation pay, employee incentives and other allowances. TELKOM's mandatory retirement age for all employees (other than directors) is 56. Upon reaching 56, employees and their dependents are entitled to a pension under a deÑned beneÑt plan depending on their length of service to the Company. The amount of the pension entitlement is based on the employee's years of service and salary level upon retirement and is transferable to dependents upon the employee's death. Certain changes to the form of beneÑts are required under Pension Law No. 11/1992. See Note 29 to the TELKOM's Consolidated Financial Statements, for the funded status of the pension plan. TELKOM also provides post-retirement health care beneÑts to retired employees hired before November 1, 1995 who have 20 years of service and certain members of their immediate family, the amount of which is accounted for over the working lives of the employees based on actuarial assumptions pursuant to U.S. GAAP requirements. See Note 30 to the Company's Consolidated Financial Statements, for the funded status of pension plan. In addition, the Company oÅers job retraining programs to its retirees and has established a Health Foundation to provide services to its employees and retirees. The employment is not subject to a collective bargaining agreement. On March 1st, 2000, TELKOM employees formed a union named ""Serikat Karyawan TELKOM'' or SEKAR''. The nature of SEKAR in some extent diÅer with union in general, however, the formation of SEKAR is in line with the Presidential Decree No.83 of 1998 regarding RatiÑcation of ILO Convention No. 87 of 1948 concerning the Freedom to form a union and the protection of the right to form an organization. Basically, the 49

formation of SEKAR based on the sense of belonging and to take the right position the implementation of the Company's policy. Presently, more than 50% of TELKOM employees belong to SEKAR, which membership is not compulsory. TELKOM has never experienced a strike, except several clariÑcation of the Company's policy. The Company believes its relations with its employees are good. In line with the changes in business environment, TELKOM sets its new policy on human resources called Human Resource Excellence Program to prepare more professional and competent people to operate and run InfoCom business. The program encompasses Competency Based Human Resources Management (CBHRM), Retention Plan, Outsourcing, and Early Retirement. As consequence of the implementation of CBHRM, outsourcing program is prepared to assess competencies for non-core business area that may not necessarily been retained due to easily obtained through outsourcing. E.

Share ownership

At December 31, 2000, to the Company's knowledge, apart from the Government, there were no shareholders beneÑcially owning more than 10% of the Company's outstanding Common Stock. The following table sets forth certain information as of December 31, 2000 with respect to (1) persons known to the Company to be the owner of more than 10% of the Company's Common Stock (whether directly or beneÑcially through ADSs); and (2) the total amount of any class of the Company's Common Stock owned by the Commissioners and Directors of the Company as a group. Title of Class

Series A Series B Series B

Identity of Person or Group

Government Government Commissioners and Directors

Amount Owned

1 6,672,235,355 57,204

Percent of Class

100.00% 66.19% *

* Less than 1%.

Item 7: A.

Major Shareholders and Related Party Transactions

Major shareholders

The Government holds a majority of the outstanding common stock of the Company and so retains control of the Company and has the power to elect all of its Board of Commissioners and all of its Board of Directors and to determine the outcome of substantially all actions requiring the approval of the shareholders. In addition, the Company's Common Stock is also owned by Pension Funds, Insurance Funds and other Institutions, owned or controlled, directly or indirectly, by the Government. The Government is also the holder of the Dwiwarna Share, which has special voting rights. The material rights and restrictions which are applicable to the common stock are also applicable to the Dwiwarna Share, except that the Government may not transfer the Dwiwarna Share and it has a veto with respect to (i) election and removal of Directors; (ii) election and removal of Commissioners; and (iii) amendments to the Articles of Association, including amendments to merge or dissolve the Company prior to the expiration of its term of existence, increase or decrease its authorized capital, and reduce its subscribed capital. Accordingly, the Government will have eÅective control of these matters even if it were to beneÑcially own less than a majority of the outstanding shares of common stock. In December 1996 and May 1999 the Government sold 388 million and 898 million of its B shares respectively. Pursuant to the Law No. 1 of 1995 on Limited Liability Companies, the minimum issued and fully paid stock at 25% of the Company's authorized capital stock amounts to Rp 5 trillion. To conform with the law, at the Annual General Meeting of the Stockholders in 1999, it was resolved to increase the issued and fully paid capital stock by capitalizing additional paid-in capital into 746,666,640 B shares resulting in a total of 10,079,999,640 outstanding shares. 50

B.

Related party transaction

TELKOM is a party to certain agreements and engages in transactions with a number of entities that are related to the Company, such as joint venture companies, cooperatives and foundations, as well as the Government and entities that are related to or owned or controlled by the Government, such as state-owned entities. See Note 31 to the Company's Consolidated Financial Statements. The most signiÑcant of these transactions include interconnection agreements with Indosat and all of TELKOM's associated mobile cellular joint venture companies relating to the provision of PSTN interconnection services, customer billing and other services by the Company. The Company is a party to various on-lending agreements with the Government. The Company also pays concession fees and radio frequency usage charges to the MOC with respect to the Company's operations. In addition, the Company is a party to various agreements with other state-owned entities such as insurance companies, banks and certain suppliers. C.

Interest of experts and counsel Not applicable.

Item 8: A.

Financial Information

Consolidated Ñnancial statement and other Ñnancial information Refer to page 5

B.

Legal Proceedings

AriaWest, an investor in a Joint Operation Scheme, has recently raised against the Company, in correspondence between AriaWest and the Company, several claims under Indonesian law. These putative claims assert (i) AriaWest's entitlements, pursuant to the Good Faith Interim Solution Agreement; (ii) AriaWest's entitlements, pursuant to the KSO Agreement, to set-oÅs against MTR due to the Company under the KSO Agreement; and (iii) breach of the KSO Agreement by the Company. AriaWest has indicated to the Company that it is withholding from the Company certain payments due to the Company under the KSO Agreement as set-oÅs against its putative claims. However, AriaWest has not asserted these claims in any legal proceeding; but has asserted them only through written correspondence addressed to the Company and the Government of Indonesia, as well as verbally during the course of discussions between the parties. In its correspondence, AriaWest expressly has purported to reserve its rights to alter or modify at any time its allegations or putative claims against the Company. Given the preliminary nature of AriaWest's putative claims, the Company cannot predict whether any legal proceedings or dispute resolution proceedings under the KSO Agreement will ensure as a result of such claims. Should any such proceedings be commercial, the Company anticipates that it would vigorously contest any claims by AriaWest under the KSO Agreement and any right to set-oÅ of MTR due to the Company asserted by AriaWest. TELKOM is not currently a party to and, in recent years, has not been a party to, any material legal or arbitration proceedings or disputes pending or threatened against the Company or with respect to its properties which are material, or which have had or which may have, a signiÑcant eÅect on the Company's Ñnancial position.

51

Item 9: A.

The OÅer and Listing

OÅer and listing details

The table below sets forth, for the periods indicated, the reported high and low quoted prices for the currently outstanding Common Stock on the JSX. SHARE PRICE INFORMATION Price per Share High Low (in Rupiah)

Calendar Year

1998 First Quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Second Quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Third Quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Fourth Quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1999 First Quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Second Quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Third Quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Fourth Quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2000 First Quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Second Quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Third Quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Fourth Quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

5,000 4,275 4,625 3,150

2,225 2,825 1,525 1,300

3,825 5,125 4,650 4,800

2,575 2,750 2,450 2,900

4,350 3,775 3,325 2,890

3,325 2,675 2,600 2,025

On December 29, 2000, the closing price for a share of Common Stock was Rp 2,050. The table below sets forth, for the periods indicated, the reported high and low quoted prices of the ADSs on the NYSE and LSE. AMERICAN DEPOSITARY SHARE PRICE INFORMATION Price per Share High Low (in U.S.$)

Calendar Year

1998 First Quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

NYSE 109/16 LSE 10.55 Second Quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ NYSE 9∑ LSE 9.75 Third Quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ NYSE 7 LSE 7.09 Fourth Quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ NYSE 81/16 LSE 8.32 1999 First Quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ NYSE 8.99 LSE 8.92 Second Quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ NYSE 13.08 LSE 13.01 Third Quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ NYSE 13.63 LSE 13.18 Fourth Quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ NYSE 11 LSE 11.2 52

511/16 5.75 5 5.06 2∑ 2.8 211/16 2.58 5.69 5.80 6.43 6.43 6.19 6.17 7.19 7.22

Price per Share High Low (in U.S.$)

Calendar Year

2000 First Quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

NYSE LSE Second Quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ NYSE LSE Third Quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ NYSE LSE Fourth Quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ NYSE LSE

12 91/16 12.15 9.1875 911/16 67/16 9.625 6.45 8 5∑ 7.875 6.10 65/16 4± 6.425 4.275

On December 29, 2000, the closing price for an ADS was U.S.$4± on the NYSE and U.S.$4.275 on the LSE. B.

Plan of Distribution Not applicable.

C.

Markets

TELKOM's Common Stock is listed on the Jakarta Stock Exchange (""JSX'') and the Surabaya Stock Exchange (""SSX''). The JSX is the principal non-U.S. trading market for the Company's Common Stock. In addition, American Depositary Shares (""ADSs''), each representing twenty shares of Common Stock, are listed on the New York Stock Exchange (""NYSE'') and the London Stock Exchange (""LSE''). The Indonesian Securities Market Currently there are two stock exchanges in Indonesia. The primary market is the JSX and the other is the SSX located in Surabaya, East Java. The JSX is the larger and more prominent of the two exchanges, with an aggregate equity market capitalization of Rp 259.6 trillion at year end 2000 as compared to Rp 227.9 million for the SSX. Total trading value on the JSX during 2000 was Rp 9.4 trillion, compared with Rp 9.3 million on the SSX. Overview of the JSX There are currently two daily trading sessions from Monday to Thursday, 9:30 a.m. to 12:00 noon, and 1:30 p.m. to 4:00 p.m. There are two trading sessions on Friday, from 9:30 a.m. to 11:30 a.m. and from 2:00 p.m. to 4:00 p.m. Following the Decree issued by the Director of the Jakarta Sock Exchange (JSX) No. Kep-331/ BEJ/102000, the price movements for TELKOM shares in the JSX shall be in multiples of Rp 25 and each price movement should be no more than Rp 25. Trading is divided into three market segments: regular market, negotiation market, and cash market. The regular market is the mechanism for trading stock in standard lots on a continuous auction market during exchange hours. With respect to the trading of stock, the round lots consist of 500 shares for non-banking and of 5000 shares for banking sectors. Auctioning takes place according to price priority and time priority. Price priority gives priority to buying orders at a lower price or selling orders at a higher price. If buying or selling orders are placed at the same price, priority is given to the buying or selling order placed Ñrst (time priority). The negotiation market trading consists of (i) block trading, i.e. lots of 200,000 shares or more; (ii) odd lot trading with round lots of less than 500 shares or less than 5000 shares for banking companies; (iii) crossing by an exchange member receiving buying and selling orders for the same 53

number of shares at the same price; and (iv) foreign board trading in stocks where foreign ownership has reached 49% of listed shares. Odd lots may not be traded more than 5% above or below the latest price on the regular market. Odd lot dealers may set prices within a range of not more than 7% above or below the regular market price, and must buy or sell stock directly to and from customers in crossing without charging commission. In the case of newly listed or newly traded shares which have yet to establish a market price, the price referred to is the initial public oÅering price. Transactions on the JSX regular market and negotiation market are required to be settled no later than the fourth trading day after the transactions. In case of a default by an exchange member on settlement upon the due date, the Indonesian Clearing and Guarantee Corporation, P.T. Kliring Penjaminan Efek Indonesia (""KPEI'') may perform the obligations or rights of such a defaulting exchange member, by, for example, buying and/or selling shares in the cash market in order to settle the defaulted transaction. Any such action by KPEI does not eliminate the liabilities of the defaulting party, which eÅected the transaction. All cash market transactions must be reported to the JSX. An exchange member defaulting in settlement is liable to a Ñne of 0.25% for the Ñrst day and thereafter a Ñne of 0.5% of the transaction value payable to his counterpart in the transaction, and shall also be issued with a warning. Delay in payment of the Ñne is also liable to a penalty equal to 1% of the Ñne for each calendar day of delay. The JSX board of directors may cancel a transaction if proof exists of fraud, manipulation or the use of insider information. The JSX board of directors may also suspend trading if there are indications of bogus transactions or jacking up of share prices, misleading information, use of insider information, counterfeit securities or securities blocked from trading, upon the occurrence of other important events that may aÅect investment decisions. Exchange members may charge a fee for their services based on an agreement with the clients up to a maximum of 1% of the transaction value. When conducting stock transactions on the JSX, exchange members are required to pay a transaction fee equal to the cumulative transaction value for each month based on 0.04% (subject to a minimum fee of Rp 250,000) of transaction for stocks and other registered securities. Shareholders or their appointees may request the issuer or a Securities Administration Bureau appointed by the issuer at any time during working hours to register their shares in the issuer's Registry of Shareholders. Trading on the NYSE and LSE The Bank of New York serves as depositary (the ""Depositary'') with respect to the ADSs traded on the NYSE and the LSE. Each ADS represents twenty shares of Common Stock. As of December 31, 2000 44,960,509 ADSs were outstanding in the United States and there were 218 registered voters of ADSs. D.

Selling Shareholders Not applicable.

E.

Dilution Not applicable.

F.

Expenses of the issue Not applicable. 54

Item 10: A.

Additional Information

Share capital Not applicable.

B.

Memorandum and Articles of Association

The Company's articles of association registered with the Ministry of Justice in accordance with the Limited Liability Company Law No. 1 Year 1995 and announced by Ministerial Decree number C27468.HT.01.04.TH.97 year 1997. The articles of association among others stated that any transaction involved conÖict of interest between the Company and directors, commissioners and shareholders should be approved by shareholders meeting, in which the approval given by majority of independent shareholders. There is no provision in the article of association that stated determination of compensation of directors and commissioners and their power to vote in determination of that compensation. According to TELKOM's article of association, there is no requirement for directors and commissioners to own certain number of shares to be qualiÑed as director or commissioner of the Company. Directors and commissioners have no certain right to share in the company proÑts, however, board of directors have responsibility to make a plan in using the company proÑt. The articles of association stated no limitation of right to own common shares with voting right. The Company's plan to carry out merger, acquisition and corporate restructuring should be approved by shareholders meeting in which the holder of Dwiwarna share attend and give its approval. C.

Material contracts

Solution to the Cross Shareholdings with Indosat On February 15, 2001, TELKOM and Indosat signed an MOU relating to a series of transactions, amounting to U.S.$1.5 billion that would eÅectively resolve the joint ownership arrangement between TELKOM and Indosat. The MOU calls for the following transactions to occur between TELKOM and Indosat: TELKOM would acquire Indosat's 35% interest in Telkomsel for U.S.$945 million, while Indosat would acquire from TELKOM: (i) TELKOM's 22.5% interest in Satelindo for U.S.$186 million, (ii) TELKOM's 37.66% interest in Lintasarta for U.S.$38 million, and (iii) the KSO IV Assets for U.S.$375 million. Upon the completion of these transaction TELKOM will pay Indosat an amount of U.S.$346 million. The transaction is subject to certain conditions, including regulatory and corporate approvals. It is currently anticipated that both TELKOM and Indosat will seek shareholder approval in May 2001. D.

Exchange controls

Foreign Equity Ownership Restrictions Prior to September 1997, foreign investors were only permitted to purchase up to 49% of shares oÅered in a public oÅer and up to 49% of the publicly listed shares of all Indonesian listed companies, regardless of the nature of their activities. On September 4, 1997, such restrictions were removed for most Indonesian companies, including TELKOM. Foreign Exchange Foreign exchange controls were abolished in 1971 and Indonesia now maintains a liberal foreign exchange system that permits the free Öow of foreign exchange. Capital transactions, including remittances of capital, proÑts, dividends and interest, are free of exchange controls. A number of regulations, however, have an impact on the exchange system. Only banks authorized to deal in foreign exchange, for example, can execute exchange transactions related to the import and export of 55

goods. Prior approval by the Government is also required for foreign loans with maturities of one year or longer made to any public enterprise or public entity. Bank Indonesia holds the authority to issue Rupiah currency and has responsibility for maintaining the stability of the Rupiah. Prior to August 14, 1997, Bank Indonesia maintained stability of the Rupiah through a trading band policy, pursuant to which Bank Indonesia would enter the foreign currency market and buy or sell Rupiah, as required, when trading in the Rupiah exceeded bid and oÅer prices announced by Bank Indonesia on a daily basis. On August 14, 1997 Bank Indonesia terminated the trading band policy, eÅectively free Öoating the Rupiah against other currencies. Since that date, the Rupiah has depreciated signiÑcantly against world currencies. During the past 20 years, the value of the Rupiah has been devalued three times against the U.S. Dollar. These downward adjustments occurred in November 1978, when the exchange rate was realigned from 415 to 623 Rupiah to the Dollar; in March 1983, when the rate went from 703 to 970 Rupiah to the Dollar; and in September 1986, when the rate fell from 1,134 to 1,644 Rupiah to the Dollar. Between the time of the 1986 devaluation and August 14, 1997 the value of the Rupiah has gradually adjusted downward in value against the Dollar by about 4% annually. Since the free Öoating regime was implemented in August 1997, the Rupiah Öuctuation has been signiÑcant. During 2000, the average rate of Rupiah to the Dollar was 8,403 with the highest and lowest rates being 9,675 and 7,035 respectively. E.

Taxation

The following summary of Indonesian, and United States federal income tax matters contains a description of the principal Indonesian and U.S. federal tax consequences of the purchase, ownership and disposition of ADSs or shares of Common Stock. INVESTORS SHOULD CONSULT THEIR TAX ADVISORS ABOUT THE INDONESIAN AND UNITED STATES FEDERAL, STATE AND LOCAL TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF ADSs OR SHARES OF COMMON STOCK. Indonesian Taxation The following is a summary of the principal Indonesian tax consequences of the ownership and disposition of Common Stock or ADSs to a non-resident individual or non-resident entity that holds Common Stock or ADSs (a ""Non-Indonesian Holder''). As used in the preceding sentence, a ""nonresident individual'' is a foreign national individual who is not physically present in Indonesia for 183 days or more during any twelve month period or present for any period with the intent to reside in Indonesia, during which period such non-resident individual receives income in respect of the ownership or disposition of Common Stock or ADSs, and a ""non-resident entity'' is a corporation or a non-corporate body that is established, domiciled or organized under the laws of a jurisdiction other than Indonesia and does not have a Ñxed place of business or otherwise conducts business or carries out activities through a permanent establishment in Indonesia during an Indonesian tax year in which such non-Indonesian entity receives income in respect of the ownership or disposition of Common Stock or ADSs. In determining the residency of an individual or entity, consideration will be given to the provisions of any applicable double taxation treaty to which Indonesia is a party. Dividends Dividends declared by the Company out of retained earnings and distributed to a Non-Indonesian Holder in respect of Common Stock or ADSs are subject to Indonesian withholding tax, currently at the rate of 20%, on the amount of the distribution (in the case of cash dividends) or on the shareholders' proportional share of the value of the distribution. A lower rate provided under double taxation treaties may be applicable provided the recipient is the beneÑcial owner of the dividend and has provided to the Company (with a copy to the Indonesian OÇce of Tax Services where the Company is registered) a certiÑcate of tax domicile issued by the competent authority, or its designee, of the jurisdiction where 56

the Non-Indonesian Holder is domiciled. Indonesia has concluded double taxation treaties with a number of countries, including Australia, Belgium, Canada, France, Germany, Japan, Malaysia, Mauritius, The Netherlands, Singapore, Sweden, Switzerland, the United Kingdom and the United States of America. Under the U.S.-Indonesia double taxation treaty, the withholding tax on dividends is generally, in the absence of a 25% voting interest, reduced to 15%. Capital Gains The sale or transfer of Common Stock listed on an Indonesian stock exchange is subject to withholding tax at the rate of 0.1% of the value of the transaction. The broker executing the transaction is obligated to withhold such tax. The holding, sale or transfer of founder shares listed on an Indonesian stock exchange may, under current Indonesian tax regulations, be subject to additional 0.5% Ñnal income tax. Subject to the promulgation of implementing regulations (which have not yet been issued to date), the estimated net income received or accrued from the sale of movable assets in Indonesia, which may include Common Stock not listed on an Indonesian stock exchange or ADSs, by a NonIndonesian holder (with the exception of the sale of assets under Article 4 paragraph (2) of the Indonesian income tax law) may be subject to Indonesian withholding tax at the rate of 20%. However, this provision in the income tax law is not currently applied in practice. It is expected that, if and when implementing regulations are issued with respect to this provision in the income tax law, in practice this withholding tax will (i) only be applied if Common Stock not listed on an Indonesian stock exchange is purchased and paid for by an Indonesian resident subject to tax or by a permanent establishment in Indonesia of a non-resident entity or individual and (ii) not aÅect the net proceeds from any sale or transfer of ADSs through a regular trade on the NYSE by a Non-Indonesian Holder. In cases where a purchaser or Indonesian broker will be required under Indonesian tax laws to withhold tax on payment of the purchase price for Common Stock or ADSs, that payment may be exempt from Indonesian withholding or other Indonesian income tax under applicable double taxation treaties to which Indonesia is a party (including the U.S.-Indonesia double taxation treaty). However, current Indonesian tax regulations do not provide speciÑc procedures for removing the purchaser's or Indonesian broker's obligation to withhold tax from the proceeds of such sale. To take advantage of the double taxation treaty relief, Non-Indonesian Holders may have to seek a refund from the Indonesian Tax OÇce by making a speciÑc application accompanied by a CertiÑcate of Domicile issued by the competent tax authority, or its designee; of the jurisdiction in which the Non-Indonesian Holder is domiciled. Stamp Duty Transactions in common stock in Indonesia are subject to stamp duty payable at the rate of Rp 6,000 on transactions with a value of more than Rp 1,000,000 and Rp 3,000 on transactions with a value of between Rp 250,000 and Rp 1,000,000. Transactions having a value less than Rp 250,000 are not subject to stamp duty. United States Federal Income Taxation The following is a general description of the principal United States federal income tax consequences of the purchase, ownership and disposition of the ADSs or shares of Common Stock. This description is for general information purposes only and is based on the United States Internal Revenue Code of 1986, as amended (the ""Code''), Treasury regulations promulgated there under, and judicial and administrative interpretations thereof, all as in eÅect on the date hereof and all of which are subject to change, possibly retroactively. The tax treatment of a holder of ADSs or shares of Common Stock may vary depending upon his particular situation. Certain holders (including, but not limited to, insurance companies, tax-exempt organizations, Ñnancial institutions, persons subject to the alternative minimum tax, broker-dealers, persons that have a ""functional currency'' other than the U.S. Dollar and 57

persons owning, directly or indirectly, 10% or more of the voting shares of the Company) may be subject to special rules not discussed below. Except as indicated, the following summary is limited to United States persons who will hold the ADSs or shares of Common Stock as ""capital assets'' within the meaning of Section 1221 of the Code. The discussion below does not address the eÅect of any state or local tax law on a holder of the ADSs or shares of Common Stock. As used herein, the term ""United States Person'' means (i) a citizen or resident of the United States for United States federal income tax purposes, (ii) a corporation, a partnership or other entity created or organized under the laws of the United States or any State thereof (unless, in the case of a partnership. Treasury Regulations otherwise provide), (iii) an estate the income of which is subject to United States federal income tax without regard to its source or (iv) a trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust. Holders of ADRs evidencing Common Stock will be treated as the owners of the Common Stock represented by those ADSs. Accordingly, no gain or loss will be recognized upon the exchange of ADSs for the holder's proportionate interest in the shares of Common Stock, a holder's tax basis in the withdrawn shares of Common Stock will be the same as his tax basis in the ADSs surrendered therefore, and the holding period in the withdrawn shares of Common Stock will include the period during which the holder held the surrendered ADSs. Taxation of Dividends The gross amount of a distribution with respect to ADSs or shares of Common Stock, without reduction for Indonesian taxes withheld, will be treated as a dividend taxable as ordinary income on the date of receipt by the Depositary or the holder of such shares, respectively, to the extent of the Company's current and accumulated earnings and proÑts as determined for U.S. federal income tax purposes. Distributions, if any, in excess of such current and accumulated earnings and proÑts will constitute a non-taxable return of capital and will be applied against and reduce such holder's tax basis in such ADSs or shares of Common Stock. To the extent that such distributions are in excess of such basis, the distributions will constitute capital gain as discussed below. U.S. corporate holders will generally not be allowed a deduction for dividends received in respect of distributions on ADSs or shares of Common Stock. A pro rata stock dividend by the Company will not be considered a taxable dividend. If a dividend distribution is paid with respect to ADSs or shares of Common Stock in Rupiah, the amount included in income will be the U.S. Dollar value, on the date of receipt by the Depositary or the holder of such shares of Common Stock, respectively, of the amount distributed. Any subsequent gain or loss in respect of such Rupiah arising from exchange rate Öuctuations will be ordinary income or loss. If the Depositary converts the Rupiah to U.S. Dollars on the date it receives such Rupiah, United States persons will not recognize any such gain or loss. Subject to the limitations and conditions set forth in the Code, United States persons may elect to claim a credit against their United States federal income tax liability for Indonesian tax withheld from dividends received in respect of the ADSs or shares of Common Stock. Dividends will generally constitute non-U.S. source ""passive income'' or ""Ñnancial services income.'' The rules relating to the determination of the foreign tax credit are complex and prospective purchasers should consult their personal tax advisors to determine whether and to what extent they would be entitled to such credit. United States persons that do not elect to claim foreign tax credits may instead claim a deduction for Indonesian tax withheld. A holder of ADSs or shares of Common Stock that is, with respect to the United States, a foreign corporation or a non-resident alien individual (a ""non-U.S. holder'') will generally not be subject to U.S. federal income tax on dividends received on Common Stock or ADSs, unless (i) such gain is eÅectively connected with the conduct by the non-U.S. holder of a U.S. trade or business or (ii) the 58

non-U.S. holder is an individual who is present in the U.S. for at least 183 days during the taxable year of the disposition and certain other conditions are met, or (iii) the non-U.S. holder is an individual and there is a present or former connection between such non-U.S. holder and the United States, including, without limitation, such non-U.S. holder's status as a former citizen thereof or a former resident thereof. Taxation of Capital Gains The sale or other disposition of ADSs or shares of Common Stock (or pre-emptive rights with respect to such ADSs or shares) by a United States person will generally result in the recognition of U.S. source gain or loss in an amount equal to the diÅerence between the amount realized on the sale or other disposition and the holder's adjusted basis in such ADSs or shares. This will result in a longterm or short-term capital gain or loss, depending on whether the ADSs or shares of Common Stock have been held for more than one year. Long-term capital gain of a non-corporate holder is currently subject to a maximum rate of 20% in respect of property with a holding period of more than one year. Any gain will be U.S. source for foreign tax credit purposes. Any loss will generally be allocated against U.S. source income. A non-U.S. holder of ADSs or shares of Common Stock will not be subject to U.S. federal income tax on gain from the sale or other disposition of such ADSs or shares unless (i) such gain is eÅectively connected with the conduct by the non-U.S. holder of a U.S. trade or business or (ii) the non-U.S. holder is an individual who is present in the U.S. for at least 183 days during the taxable year of the disposition and certain other conditions are met, or (iii) the non-U.S. holder is an individual and there is a present or former connection between such non-U.S. holder and the United States, including, without limitation, such non-U.S. holder's status as a former citizen thereof or a former resident thereof. Passive Foreign Investment Company Status Special adverse United States federal income tax rules apply to holders of equity interests in a corporation classiÑed as a passive foreign investment company (""PFIC'') under the Code. A foreign corporation will constitute a PFIC for United States federal income tax purposes if 75% or more of its gross income for a taxable year consists of passive income (generally, interest, dividends, rents, royalties and net gain from the disposition of assets that give rise to such income) or 50% or more of its average assets held during a taxable year consists of passive assets. Passive assets are deÑned as assets that give rise, or that reasonably could give rise during the reasonably foreseeable future, to passive income. Based on the Company's existing and anticipated future operations, the Company believes that it is not, intends and anticipates that it will not become in the foreseeable future, a PFIC. If the Company is not operated in the manner currently anticipated, however, the Company may be considered a PFIC for the current or for a subsequent year depending upon the composition of the Company's income or assets. If the Company is or becomes a PFIC, any ""excess distribution'' realized by a U.S. Holder with respect to its ADSs or shares of Common Stock would be allocated over the entire period during which the U.S. Holder held such ADSs or shares of Common Stock and would be subject to a ""deferred tax amount'' to the extent not allocated to the current year. Any ""excess distribution'' allocated to the current year would be treated as ordinary income. The ""deferred tax amount'' consists of a tax imposed at the highest rate applicable to the year or years to which an ""excess distribution'' is allocated plus interest on such tax computed from the due date of the U.S. Holder's tax return for the year or years to which such ""excess distribution'' is allocated. In general, an ""excess distribution'' is any distribution with respect to the Company's ADSs or shares of Common Stock to the extent it exceeds 125% of the average distributions with respect to such ADSs or shares of Common Stock received by the U.S. Holder over the prior three years. An ""excess 59

distribution'' also includes any gain recognized by the U.S. Holder with respect to its ADSs or shares of Common Stock. If the Company is classiÑed as a PFIC, it should be possible to avoid the adverse tax consequences associated therewith but only if (i) the U.S. Holder elects to annually mark-to-market the ADSs or shares of Common Stock and recognize ordinary gain or loss therefrom or (ii) assuming certain conditions are met (which is not likely to be the case with respect to the Company), the U.S. Holder elects to include in income annually its share of the ordinary earnings and capital gain of the Company. Should the Company ever be classiÑed as a PFIC, U.S. Holders are advised to consult their tax advisors concerning the United States federal income tax consequences of holding ADSs or shares of Common Stock and of making the mark-to-market election. A U.S. Holder who owns ADSs or shares of Common Stock during any year that the Company is a PFIC must Ñle with the IRS Form 8621. United States Backup Withholding and Information Reporting Payments made by a United States paying agent or other United States intermediary in respect of the ADSs or shares of Common Stock may be subject to information reporting to the IRS and a 31% backup withholding tax. Backup withholding will not apply, however, (i) to a holder who furnishes a correct taxpayer identiÑcation number and makes any other required certiÑcation, or (ii) to a holder who is otherwise exempt from backup withholding. Generally, a U.S. Holder will provide such certiÑcation on Form W-9 (Request for Taxpayer IdentiÑcation Number and CertiÑcation) and a nonU.S. Holder will provide such certiÑcation on Form W-8 (CertiÑcate of Foreign Status). Any amounts withheld under the backup withholding rules from a payment to a holder will be allowed as a refund or a credit against such holder's United States federal income tax, provided that the holder has complied with applicable reporting obligations. F.

Dividends and paying agents Not applicable.

G.

Statement by experts Not applicable.

H.

Documents on display Not applicable.

I.

Subsidiary information

As of December 31, 2000, TELKOM had stakes in 19 companies operating in telecommunications related businesses. All the subsidiaries (except for Infomedia Nusantara which starting 1999 was consolidated and holds 18.50% Medianusa Pte. Ltd, a sales agent domiciled in Singapore, in search of advertisers for telephone directories) contributed Rp 342.9 billion to Other Income. The following table sets forth TELKOM's Joint venture companies and TELKOM's percentage ownership in each of them. No.

1. 2.

Company

Telkomsel Satelindo

Telkom Ownership (%)

42.72% 22.50%

60

Business Operations

GSM Cellular (national coverage) GSM Cellular (national coverage), international direct dialling (IDD), Satellite for domestic & international

No.

Company

Telkom Ownership (%)

3.

Telekomindo Primabhakti

9.00%

4. 5. 6. 7. 8.

Komselindo Mobisel Metrosel Ratelindo Aplikanusa Lintasarta

35.00% 25.00% 20.17% 12.86% 37.66%

9. 10.

PasiÑk Satelit Nusantara Infomedia Nusantara

22.57% 51.00%

11. 12. 13. 14.

Multimedia Nusantara Indonusa Telemedia Patra Telekomunikasi Indonesia Citra Sari Makmur

31.00% 35.00% 30.00% 25.00%

15. 16. 17.

Batam Bintan Telekomunikasi Bangtelindo Menara Jakarta

5.00% 3.18% 20.00%

18. 19.

Tangara Mitrakom Napsindo Primatel Internasional

25.00% 32.00%

Business Operations

Holding company: GSM Cellular GSM (national coverage), Revenue Sharing Arrangement on TELKOM's Ñxed lines, Ñnance, and hotel AMPS Cellular (regional coverage) NMT-450 Cellular (regional coverage) AMPS Cellular (regional coverage) Fixed Wireless (regional coverage) VSAT, Internet, Digital Data Network, and Electronic Banking System Satellite transponder and communication Information on telecommunication subscribers (Yellow Pages) Multimedia services Multimedia services VSAT for oil companies VSAT and telecommunication technology consulting Fixed line in Batam and Bintan Islands Construction and Consulting Infrastructure for multimedia services in Jakarta VSAT Network Access point

Telkomsel PT Telekomunikasi Selular (""Telkomsel'') was established in 1995 as a joint venture company between TELKOM and Indosat to operate a nation-wide GSM mobile cellular network. TELKOM's initial capital contribution to Telkomsel was its existing GSM network facilities in Riau and North Sumatera, which were valued for such purposes at Rp 66.6 billion. During 1996, following an international competitive bidding process, PTT Telecom B.V. (""PTTTBV'') of the Netherlands, P.T. Setdco Megasel Asia (""Setdco''), a private Indonesian company, and TELKOM subscribed to new shares in Telkomsel for an aggregate consideration of approximately U.S.$550 million, including approximately U.S.$502 million in cash. As a result of the foregoing investments, ownership interests in Telkomsel became: TELKOM (42.72%); Indosat (35.0%); KPN Telecom BV(17.28%); and PT Setdco Megacell Asia (5.0%). As of December 31, 2000, Telkomsel had approximately 1,687,339 subscribers in the major population centers in all of Indonesia's provinces. Satelindo PT Satelit Palapa Indonesia (""Satelindo'') is a joint venture company established in January 1993 and is owned by TELKOM (22.5%), Indosat (7.5%), P.T. Bimagraha Telekomindo (45%), and DeTeAsia Holding GmbH, Germany (25%), a subsidiary of Deutsche Telekom. Pursuant to separate Ministerial decrees, Satelindo has been granted a license to operate international telecommunications, satellite services, and to provide nation-wide GSM mobile cellular services. Under its license, Satelindo is prohibited from linking its satellites to the PSTN. Satelindo has been granted 10 MHz of the available GSM frequency bandwidth and, as of December 31, 2000, had approximately 1,055,306 mobile cellular subscribers in the major population centers in all provinces.

61

Telekomindo Primabhakti PT Telekomindo Primabhakti (""Telekomindo'') is a joint venture company in which TELKOM has a 9% interest, P.T. Rajawali Wira Bhakti Utama has an 84.2% interest and other parties collectively hold a 6.8% interest. Telekomindo, as a holding company, among others provides GSM mobile cellular services nation-wide through Excelcomindo, a joint venture subsidiary with NYNEX. Telekomindo is an investor in four Ñxed wire line PBHs with TELKOM: (i) two in Jakarta comprised of 150,000 lines; (ii) one in Surabaya comprised of 50,000 lines; and (iii) one in Bandung comprised of 15,000 lines. Such PBHs are due to expire in 2002 and 2005. Telekomindo also participates in a PBH with TELKOM for the operation of a group of three AMPS mobile cellular networks. This PBH will expire in June 2001 and in accordance with the PBH agreement TELKOM will own the PBH assets. Komselindo PT Komunikasi Selular Indonesia (""Komselindo'') is a joint venture company established in January 1995 between TELKOM (35%) and P.T. Elektrindo Nusantara (""Elektrindo'') (65%) to operate an AMPS mobile cellular network, which was previously operated as a PBH between TELKOM and Elektrindo. TELKOM transferred the switching operations of this PBH to Komselindo in May 1995 as payment for the purchase price of its interest in the company. As of December 31, 2000, Komselindo had a total of approximately 74,858 subscribers in Jakarta, Bandung, Medan, Manado and Ujung Pandang. Mobisel PT Mobile Selular Indonesia (""Mobisel'') is a joint venture company established in January 1996 between TELKOM (25%), TELKOM's Pension Fund (5%) and P.T. Rajasa Hazanah Perkasa (""Rajasa'') (70%). Mobisel provides the NMT-450 services formerly provided by TELKOM and Rajasa pursuant to a PBH in Jakarta Central Java, East Java, West Java, Bali and Lampung. As at December 31, 2000, Mobisel had approximately 14,037 subscribers. Following a continuous evaluation and restructuring policy of its subsidiary, TELKOM has decide to divest its ownership in this Company and has set its intention of selling its ownership in this company. Metrosel PT Metro Selular Indonesia (""Metrosel'') is a joint venture company owned by TELKOM (20.17%), P.T. Centralindo Panca Sakti (""CPS'') (51.23%), Asia Link (20%), TELKOM's Pension Fund (3.83%) and others. Metrosel provides the AMPS services previously provided by TELKOM and CPS pursuant to a PBH in Central and East Java. TELKOM transferred the switching operations of this PBH to Metrosel in 1996 as payment for the purchase price of its equity interest in the company. As at December 31, 2000, Metrosel had a total of approximately 62,981 subscribers. Ratelindo PT Radio Telepon Indonesia (""Ratelindo'') is a joint venture company established in 1993 by TELKOM and P.T. Bakrie Electronics Company, a private company in which PTT Netherlands is a shareholder. Ratelindo began oÅering Ñxed cellular services in Jakarta in August 1995 and, as at December 31, 2000, had approximately 119,495 subscribers. Besides TELKOM, Ratelindo is the only other provider of Ñxed wireless technology in Indonesia. TELKOM has a 12.86% ownership interest in Ratelindo. Lintasarta PT Aplikanusa Lintasarta (""Lintasarta'') is a joint venture company, owned by TELKOM (37.66%), Indosat (32.64%), the pension funds of various banks (26.02%), and others (3.68%). Lintasarta provides PSDN services in cooperation with TELKOM and participates with Indosat and TELKOM in another joint venture company to provide VSAT services, e-mail services, and credit card 62

payphones. Lintasarta also transmits data over ordinary telephone lines and provides network application facilities for Indonesia's oÇcial electronic bank reporting system as well as other services to the banking industry. Lintasarta is subject to the Government policy to eliminate such cross-ownership with INDOSAT. TELKOM and INDOSAT signed an MOU relating to a series of transactions that would eÅectively resolve the joint ownership arrangement between TELKOM and INDOSAT. INDOSAT will acquire TELKOM's 37.66% interest in Lintasarta for U.S.$38 million. This transaction is subject to certain conditions, including regulatory and corporate approvals. It is currently anticipated that both TELKOM and INDOSAT will seek shareholder's approval by the end of April 2001 (See:""Material Contracts: Solution to the Cross Shareholdings with INDOSAT''). PasiÑk Satelit Nusantara PT PasiÑk Satelit Nusantara (""PSN'') is a private Indonesian satellite company, which conducted an initial public oÅering of its common stock on NASDAQ in June 1996. The shareholders of PSN include TELKOM (22.57%), Elektrindo (22.9%), Hughes Communications (8.5%), Telesat Canada (8.5%), and others (37.53%), including holders of ADSs (14.67%). PSN provides satellite transponder leasing and satellite-based communication services to nations in the Asia PaciÑc region. Infomedia Nusantara TELKOM's stake in P.T. Infomedia Nusantara (""Infomedia'') (previously known as ""Elnusa Yellow Pages'') was made initially in September 1995 by applying the royalties earned by the Company from Infomedia to the subscription price of the shares. The Company earns a royalty under a cooperation agreement with Infomedia on publishing telephone directories. Infomedia is engaged in providing telecommunications information and other information services in the form of printed and electronic media. As of October 7, 1999, the Company's equity interest in Infomedia is 51%. Multimedia Nusantara PT Multimedia Nusantara (""Multimedia'') is a joint venture company owned by TELKOM (31%), Indosat Megamedia (15%), TVRI Foundation (5%), and Indocitra Grahabawana (49%). Multimedia provides pay television and multimedia telecommunications services. Indonusa Telemedia In October 2000, TELKOM increased its ownership in PT Indonusa Telemedia (""INT'') by adding equity call of Rp 14 billion. The Company currently holds 35% ownership interest and is expected to hold 57.5% ownership interest in INT when the legal requirements pertaining to the transaction completed. INT engages in interactive multimedia services including TV Cable and internet. Patra Telekomunikasi Indonesia Since September 1995, TELKOM had a 30% equity interest in PT Patra Telekomunikasi Indonesia (""Patrakomindo''). Patrakomindo is a joint venture company whose other shareholders are Indosat (10%), Elnusa (40%), and Tanjung Mustika (20%). Patrakomindo provides satellite communication and related services and facilities to the petroleum industry. Following a continuous evaluation and restructuring of its aÇliates s well as the government policy to eliminate cross-ownership between TELKOM, TELKOM has decide to divest its ownership in this company and has express Patrakomindo is subject cross-ownership with INDOSAT, with regard to the government policy to eliminate such cross-ownership either TELKOM or INDOSAT or both parties should divest its ownership in Patrakomindo. See ""Regulation''. Currently TELKOM and INDOSAT are engaging negotiation on this matter. 63

Citra Sari Makmur TELKOM converted its ownership in PT Citra Sari Makmur (""CSM'') from PBH to JVC in November 1996. The shareholders of CSM are TELKOM (25%), Subagio W. (38.29%), and Bell Atlantic Indonesia Inc. (36.71%). CSM provides consultancy services relating to applications of VSAT and other telecommunications technology and related facilities. Batam Bintan Telekomunikasi PT Batam Bintan Telekomunikasi (""BBT'') provides Ñxed line telecommunications services at Batamindo Industrial Park at Muka Kuning, Batam Island and at Bintan Beach International Resort and Bintan Industrial Estate in Bintan Island, which are special economic and tourist development zones on those islands. The shareholders of BBT are Batamindo (95%) and TELKOM (5%). Bangtelindo PT Bangtelindo was established in 1994. The shareholders of Bangtelindo are TELKOM (3.18%), TELKOM's Pension Fund (82%), and others (14.82%). Bangtelindo's primary business is providing consultancy services on the installation and maintenance of telecommunications facilities. Bangtelindo is subject to cross-ownership with INDOSAT and TELKOM may decide to maintain its ownership in this company. Menara Jakarta As of 1997, the Company has held a 20.00% equity interest in PT Menara Jakarta (""MJ''). MJ plans to construct and operate building towers and related telecommunications facilities. Pending improvement in the economic and social situation in Indonesia, this company is not actively pursuing its development plans. MJ is subject to cross-ownership with INDOSAT, with regard to the government policy to eliminate such cross ownership either TELKOM or INDOSAT or both parties should divest its ownership in MJ. See ""Regulation'' TELKOM has express its intention of selling its ownership in this company. Tangara Mitrakom TELKOM holds a 25% equity interest in Tangara Mitrakom (Tangara). Tangara's main business is the provision of micro earth station communication services. Tangara's other shareholders are PT Prima Tangara Citra (65%) and Koperasi Pegawai BNI-46 Swadharma (10%). Following a continuous evaluation and restructuring of its aÇliates, TELKOM has decided to divest its ownership in this company and has express its intention of selling its ownership in this company. Napsindo Primatel Internasional PT Napsindo Primatel Internasional (Napsindo) was established on December 30, 1998 and its shareholders are TELKOM (32%) and PT Infoasia Sukses Mandiri (68%). Napsindo's primary business includes providing Network Access Point (NAP) for Internet TraÇc Consolidation in Indonesia and Voice Over Data Services. Item 11:

Quantitative and Qualitative Disclosure About Market Risk

Disclosure About Market Risk The Company is exposed to market risks primarily from changes in foreign currency exchange rates, changes in interest rates and equity price risk on the value of its long-term investments. The Company does not generally hedge its monetary assets and liabilities against its foreign currency liabilities, which have a maturity of between 15 to 20 years, as it believes that the expenses associated with fully hedging such liabilities is not justiÑed. Instead the company hedged its obligations for the related year. As of December 31, 2000, approximately 7.13% of TELKOM's foreign currency denomi64

nated obligations was hedged using foreign currency time deposits (given the general unavailability of forward contracts to hedge foreign currency obligations in Indonesia). The Company has hedged foreign currency denominated obligation for the year 2000, in the amount of 52.03%. The Company's exposure to interest rate risk is managed through maintaining a mix of Ñxed and variable rate liabilities and assets, including short term Ñxed rate assets, rates for which are reset periodically. The Company's exposure to such market risks Öuctuated signiÑcantly during 1998, 1999, and 2000 as the Indonesian economy has been aÅected by a signiÑcant Öuctuation of the Rupiah and interest rates. The Company is not able to predict whether such conditions will continue during the remainder of 2002 or thereafter. Interest Rate Sensitivity The Company's exposure to interest rate Öuctuations results primarily from Öoating rate long-term debt pursuant to loans under the Government on-lending program which have been used to Ñnance the Company's capital expenditures and which bears interest at rates based on the average three month term Bank Indonesia CertiÑcate during the last six-month before the six-month period within which the installment falls due, plus a Ñxed percentage of margin. See Note 15 to the Company's Consolidated Financial Statements. To the extent interest rates in Indonesia Öuctuate signiÑcantly, as they did from 11.25% in early 2000 to approximately 13.53% in early 2001, the Company's interest obligations under its long term debt would increase. The table below provides information about the Company's material Ñnancial instruments that are sensitive to changes in interest rates. For debt obligations and time deposits, the table presents principal cash Öows and related weighted average interest rates by expected maturity dates. The information is presented in Rupiah equivalents, which is the Company's reporting currency. The instrument's actual cash Öows are denominated in Rupiah, U.S. Dollars, Netherlands Guilders, French Francs, Deutsche Marks, and Japanese Yen, as appropriate and as indicated in the table. The information presented in the table has been determined based on the following assumptions: (i) Ñxed interest rates on Rupiah time deposits are based on interest rates oÅered in eÅect as of February 14, 2001, by the banks where such deposits were located; (ii) variable interest rates on Rupiah denominated long-term liabilities are calculated as of February 14, 2001 and are based on contractual terms setting interest rates based on the average three month term Bank Indonesia CertiÑcate during the last six-month period within which the instalment falls due, plus a Ñxed percentage of margin; (iii) variable interest rates on U.S. Dollars and French Francs are based on interest rates oÅered by the various lending institutions to the Republic of Indonesia as of February 14, 2001; and (iv) the value of marketable securities is based on the value of such securities at February 14, 2001. However, no assurance can be given that such assumptions will be correct for future periods. Such assumptions and the information described in the table may be inÖuenced by a number of factors, including changes in interest rates in Indonesia and other monetary and macro economic factors aÅecting Indonesia. Such assumptions are diÅerent from the rates used in

65

the Company's Consolidated Financial Statements, and accordingly amounts shown in the table may vary from amounts shown in the Company's Consolidated Financial Statements. Outstanding Balance as at December 31, 2000 Foreign Rp Currency Equivalent (in thousands) (Rp in millions) ASSETS Fixed Rate Cash and cash equivalents Deposit on call and Time deposit Rupiah PrincipalÏÏÏÏÏÏÏ Interest ÏÏÏÏÏÏÏÏ U.S. Dollar PrincipalÏÏÏÏÏÏÏ Interest ÏÏÏÏÏÏÏÏ Short-term Investments Time deposits Rupiah PrincipalÏÏÏÏÏÏÏ Interest ÏÏÏÏÏÏÏÏ U.S. DollarÏÏÏÏÏÏÏ Marketable Securities Rupiah ÏÏÏÏÏÏÏÏÏÏ LIABILITIES Long-term debt Ì Related party Variable Rate Rupiah PrincipalÏÏÏÏÏÏÏÏÏ Interest ÏÏÏÏÏÏÏÏÏÏ French Franc PrincipalÏÏÏÏÏÏÏÏÏ Interest ÏÏÏÏÏÏÏÏÏÏ U.S. Dollars PrincipalÏÏÏÏÏÏÏÏÏ Interest ÏÏÏÏÏÏÏÏÏÏ Fixed Rate Rupiah PrincipalÏÏÏÏÏÏÏÏÏ Interest ÏÏÏÏÏÏÏÏÏÏ French Franc PrincipalÏÏÏÏÏÏÏÏÏ Interest ÏÏÏÏÏÏÏÏÏÏ U.S. Dollars PrincipalÏÏÏÏÏÏÏÏÏ Interest ÏÏÏÏÏÏÏÏÏÏ Japanese Yen PrincipalÏÏÏÏÏÏÏÏÏ Interest ÏÏÏÏÏÏÏÏÏÏ Netherlands Guilder PrincipalÏÏÏÏÏÏÏÏÏ Interest ÏÏÏÏÏÏÏÏÏÏ

Rate (%)

2001

2002

Expected Maturity Date 2003 2004 2005 (Rp in millions)

2006-2025

2,316,785 12.52 44,869

429,643 6.35

3,866,274 13.2 300

2,879 1,837

2,809,298

12.5

(256,949) (245,681) (242,039) (237,684) (234,864) (1,592,081) (416,383) (327,475) (294,340) (262,615) (230,532) (1,192,200)

42,037

57,767

8.5

212,418

2,055,145

8.7

1,436,554

13.2

105,754

145,326

7.3

180,788

1,749,125

5.8

(133,983) (133,983) (133,983) (143,639) (155,394) (1,048,143) (101,379) (95,452) (84,903) (73,870) (61,637) (261,953)

15,858,742

1,336,993

3.1

(31,318) (31,318) (31,318) (31,318) (58,199) (1,153,522) (43,054) (44,081) (43,082) (42,200) (39,697) (345,846)

19,787

80,960

7.7

(12,455) (6,586)

(7,702) (4,701)

(7,702) (4,052)

(7,702) (3,404)

(7,702) (2,763)

(7,702) (2,108)

(19,256) (2,435)

(171,430) (196,161) (199,940) (199,940) (199,940) (1,087,734) (189,745) (209,572) (191,357) (171,444) (150,566) (693,391)

(186,513) (153,244) (147,326) (124,483) (94,867) (188,749) (156,959) (131,447) (113,683) (98,727) (18,166) (10,463)

(18,166) (9,141)

(12,455) (6,110)

(18,166) (7,819)

(12,455) (4,946)

(18,166) (6,514)

(12,455) (3,793)

(18,166) (5,174)

(12,455) (2,617)

(730,121) (553,225) (54,497) (7,148)

(18,685) (1,742)

Exchange Rate Sensitivity The Company's exposure to exchange rate Öuctuations results primarily from long term debt obligations and accounts receivable and payable, which are primarily paid for through draw downs 66

under the Government on-lending program and are expressed in U.S. Dollars, Yen, French Francs, Deutsche Marks and Netherlands Guilders. For a description of the Company's foreign currency assets and liabilities, see Note 38 to the Company's Consolidated Financial Statements. Part of these obligations might be oÅset by increases in the value of foreign currency time deposits and by increases in the value of foreign currency accounts receivable, assuming that the counter-parties are able to meet their foreign currency obligations to TELKOM at market rates. The table below provides information about the Company's Ñnancial instruments by functional currency and presents such information in Rupiah equivalents, which is the Company's reporting currency. The information on instruments and transactions that are sensitive to foreign exchange rates, including U.S. Dollar, Netherlands Guilder, French Franc, Deutsche Mark, Yen, Swedish Krona, and Australian Dollar debt obligations and term deposits and the Company's accounts payable and receivable. The table presents principal cash Öows by expected maturity dates. The information presented in the table has been determined based on the assumptions the exchange rate for U.S. Dollars is based on the rates quoted by Bridge Telerate on February 28, 2001 for buying and selling rates for U.S. Dollars of Rp 9,833, as well as the exchange rates for other currencies. However, no assurance can be given that such assumptions will be correct for future periods. Such assumptions and the information described in the table may be inÖuenced by a number of factors, including a Öuctuation and/or depreciation of the Rupiah in future periods. Outstanding Balance as at December 31, 2000 Foreign Rp Currency Equivalent (in (Rp in thousands) millions) ASSETS Fixed Rate Cash and cash equivalents Current Account U.S. Dollars ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Japanese Yen ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ French Francs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Swedish Krona ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Deutsche Mark ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Great Britain Pound Sterling ÏÏÏÏÏÏÏÏÏÏÏÏ Deposits on call and time deposits U.S. Dollars ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Temporary investments U.S. Dollar ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Accounts Receivable U.S. Dollars ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Advances and others U.S. Dollars ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ French Francs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Japanese Yen ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Australian Dollars ÏÏÏÏÏÏÏÏÏÏÏÏÏ

1,213 172 4,631 285 0.47

11,614 14 6,298 291 2

3

40

44,871

429,643

300

2,879

14,966

143,299

2001

67

2002

Expected Maturity Date 2003 2004 2005 (Rp in millions)

2000-2005

Outstanding Balance as at December 31, 2000 Foreign Rp Currency Equivalent (in (Rp in thousands) millions) LIABILITIES Accounts payable U.S. Dollars ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ FRF ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Singapore DollarÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Malaysian RinggitÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Japanese Yen ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Deutsche Mark ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Accrued expenses U.S. Dollars ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Japanese Yen ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ French Francs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Netherland Guilder ÏÏÏÏÏÏÏÏÏÏÏÏ Advances from customers and suppliers U.S. Dollar ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Current maturities of long-term debt-related party U.S. Dollar ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ French Francs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Long-term debt Related Party U.S. Dollar ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Japanese Yen ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ French Francs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Netherland Guilder ÏÏÏÏÏÏÏÏÏÏ Third Parties U.S. Dollars ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Japanese Yen ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ French Francs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Netherland Guilder ÏÏÏÏÏÏÏÏÏÏ Deutsche marks ÏÏÏÏÏÏÏÏÏÏÏÏÏ Australian dollars ÏÏÏÏÏÏÏÏÏÏÏÏ Swedish Krona ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

702 18,971 1 2 1,264,150 230

6,790 26,070 6 5 106,576 1,058

11,854 82,389 6,307 507

114,683 6,946 8,667 2,075

938

4,076

31,567 18,824

305,412 25,868

361,639 15,487,259 128,967 16,743

3,498,858 1,305,675 177,225 68,505

39,652 1,967,149 44,492 36 40

383,638 165,809 61,141 149 184

2001

2002

Expected Maturity Date 2003 2004 2005 (Rp in millions)

2000-2005

(370,471) (392,600) (404,356) (425,768) (435,424) (1,775,652) (32,741) (32,741) (32,741) (64,027) (95,313) (1,079,430) (25,868) (25,868) (25,868) (25,868) (25,868) (73,753) (15,523) (15,523) (15,523) (15,523) (15,523) (3,343) 365,112 115,099

(1) Liabilities in 2001 include Rp 173,396, U.S.$37.7 million and Í1,839.7 million which are draw downs pursuant to the onlending program with the Government, which, prior to authorizations being issued by the Government, are classiÑed as non-interest bearing long-term debt to third parties, net of advances. See Note 15 of the Company's Consolidated Financial Statements.

Equity Price Risk The Company's long term investments consist primarily of minority investments in the equity of private Indonesian companies. With respect to the Indonesian companies in which the Company has investments, the Ñnancial performance of such companies may be aÅected by the Öuctuation of macro economic and social conditions such as the level of economic activity, Rupiah exchange rates against other currencies, inÖation, and interest rates. Summary of SigniÑcant DiÅerences Between Indonesian GAAP and U.S. GAAP The Company's consolidated Ñnancial statements have been prepared in accordance with Indonesian GAAP, which diÅers in certain respects from U.S. GAAP. The signiÑcant diÅerences are described in the approximations in Notes 43 and 44 to the Company's Consolidated Financial Statements. 68

The signiÑcant diÅerences between Indonesian and U.S. GAAP as applied to the Company's income statements are in the treatment of capitalization of foreign exchange losses, equity in net income (loss) of investees, pensions, revaluation of property, plant and equipment, revenue sharing arrangements and stock issuance costs. The causes of the diÅerences are as discussed below: Foreign Exchange DiÅerential on Construction in Progress Under Indonesian GAAP, commencing in 1997 foreign exchange diÅerential resulting from loans used to Ñnance assets under construction is required to be capitalized. Capitalization of foreign exchange diÅerential ceases when construction is substantially complete and the asset is ready for its intended use. Under U.S. GAAP, foreign exchange diÅerential is required to be charged to current operations. Consequently, on a U.S. GAAP basis, the Company's net income would have been Rp 109.9 billion higher in 1999, and Rp 133.7 billion lower in 2000. Equity in Net Income of Investees The amount of the net income of investees recognized by the Company under Indonesian GAAP diÅered from the amount that would be recognized under U.S. GAAP, primarily as a result of depreciation of foreign exchange losses capitalized to assets acquired in foreign currencies by the investees in previous years. As a result, on a U.S. GAAP basis, the Company's net income would have been Rp 74.7 billion higher in 1999 and Rp 2.4 billion higher in 2000. Pensions Under Indonesian GAAP, prior service cost related to the increase in pension beneÑts for pensioners is required to be charged directly to expense when incurred. In 1994 and 1999, the Company increased pension beneÑts. For U.S. GAAP purposes, under the provisions of SFAS 87, however, such prior service cost should be deferred and amortized systematically over future periods. The amount of the diÅerence was Rp 70.5 billion higher in 1999 and Rp 94.6 billion higher in 2000 under U.S. GAAP reporting. Revaluation of Property, Plant and Equipment While Indonesian GAAP does not generally allow companies to recognize increases in the value of property, plant and equipment that occur subsequent to acquisition, an exception is provided for revaluations made in accordance with government regulations. The Company revalued its property, plant and equipment that were used in operation on January 1, 1979 and January 1, 1987. Under U.S. GAAP, property, plant and equipment may not be stated at more than their historical acquisition cost. Consequently, on a U.S. GAAP basis, the Company's net income would have been Rp 4.1 billion, higher for 1998, 1999, and 2000, respectively. Revenue Sharing Arrangements Under Indonesian GAAP, property, plant and equipment built by an investor pursuant to a PBH arrangement are recognized as property, plant and equipment in the books of the party to whom ownership in such properties shall be transferred at the end of the revenue sharing period, with a corresponding initial credit to unearned income. The property, plant and equipment are depreciated over their useful lives while unearned income is amortized over the revenue sharing period. The Company records its share of the revenues earned from these revenue sharing arrangements on a net basis. Under U.S. GAAP, the accounting treatment for revenue sharing arrangements depends on the substance of the arrangement. When there is no guaranteed investment return to the investors, the accounting treatment is similar to that under Indonesian GAAP. When there is a speciÑc guaranteed investment return to the investors assets under revenue-sharing arrangements are recorded, and, 69

correspondingly, a liability representing the obligation under revenue sharing arrangements is recorded. A portion of the investor's share of revenue is recorded as interest expense based on such speciÑed rate of return and the balance as a deduction of the obligation. Revenues earned are recorded on a gross basis. In connection with the diÅerent treatment of revenue sharing arrangements under U.S. GAAP and Indonesian GAAP, the Company's income before tax on a U.S. GAAP basis would have been Rp 9.1 billion higher for 1998, Rp 11.9 billion higher in 1999, and Rp 23.3 billion lower in 2000. Stock Issuance Costs Under Indonesian GAAP, stock issuance costs are deferred and amortized over a period of time. For U.S. GAAP purposes, the stock issuance costs are oÅset against the proceeds from the stock issuance. As a result of this diÅerence, the Company's income before tax would be Rp 26.9 billion higher for each of 1998 and 1999, and Rp 22.4 billion higher in 2000 under U.S. GAAP reporting. The Company's net income calculated in accordance with U.S. GAAP was Rp 924 billion, Rp 2,385.3 billion and Rp 2,497.2 billion, or 20.9% lower, 9.8% higher, and 1.6% lower than net income calculated in accordance with Indonesian GAAP for 1998, 1999 and 2000, respectively. Stockholders' equity calculated in accordance with U.S. GAAP for 1999 and 2000 was Rp 11,604.8 billion, and Rp 13,026.3 billion or 5.1% lower, and 4.8% lower than stockholders' equity calculated in accordance with Indonesian GAAP, respectively. Item 12:

Description of Securities Other than Equity Securities

Not applicable. PART II Item 13:

Defaults, Dividend Arrearages and Delinquencies

The Company paid dividend to its shareholders yearly since 1996. Item 14:

Material ModiÑcations to the Rights of Security Holders and Use of Proceeds

Not applicable. Item 15:

Reserved

Item 16:

Reserved PART III

Item 17:

Financial Statements

Not applicable. See Item 18. Item 18:

Financial Statements

The following Ñnancial statements, together with the report of ®TELKOM Auditors© thereon are Ñled as part of this annual report. 70

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA INDEX TO FINANCIAL STATEMENTS Page

Independent Auditors' Report ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Consolidated Balance Sheets as of December 31, 1999 and 2000 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Consolidated Statements of Income for the Years Ended December 31, 1998, 1999 and 2000 ÏÏÏ Consolidated Statements of Changes in Equity for the Years Ended December 31, 1998, 1999 and 2000 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Consolidated Statements of Cash Flows for the Years Ended December 31, 1998, 1999 and 2000 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Notes to Consolidated Financial StatementsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Item 19:

Exhibits

Not available

71

F-1 F-4 F-6 F-7 F-9 F-11

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA INDEX TO FINANCIAL STATEMENTS Page

Independent Auditors' Report ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Consolidated Balance Sheets as of December 31, 1999 and 2000 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Consolidated Statements of Income for the Years Ended December 31, 1998, 1999 and 2000 ÏÏÏ Consolidated Statements of Changes in Equity for the Years Ended December 31, 1998, 1999 and 2000 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Consolidated Statements of Cash Flows for the Years Ended December 31, 1998, 1999 and 2000 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Notes to Consolidated Financial StatementsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

F-1

F-1 F-4 F-6 F-7 F-9 F-11

Independent Auditors' Report No. 280201 TI LSW SA The Stockholders, Board of Commissioners and Directors Perusahaan Perseroan (Persero) P.T. Telekomunikasi Indonesia Tbk We have audited the accompanying consolidated balance sheet of Perusahaan Perseroan (Persero) P.T. Telekomunikasi Indonesia Tbk and its subsidiary as of December 31, 2000 and the related consolidated statements of income, changes in equity, and cash Öows for the year then ended, all expressed in Rupiah. These Ñnancial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these Ñnancial statements based on our audit. We did not audit the Ñnancial statements of PT Telekomunikasi Selular (Telkomsel), the Company's investment in which is accounted for by use of the equity method. The Company's equity of Rp 1,491,071 million in Telkomsel's net assets at December 31, 2000 and of Rp 574,920 million in that company's net income for the year then ended are included in the accompanying consolidated Ñnancial statements. The Ñnancial statements of Telkomsel were audited by other auditors whose report, which expressed an unqualiÑed opinion with explanatory paragraph concerning the eÅect of the economic conditions in Indonesia, has been furnished to us, and our opinion insofar as it relates to the amounts included for Telkomsel, is based solely on the report of such other auditors. The consolidated Ñnancial statements of the Company and its subsidiary as of and for each of the two years in the period ended December 31, 1999 were audited by other auditors whose report, dated February 3, 2000, expressed an unqualiÑed opinion on those statements, and included an explanatory paragraph concerning the eÅects of the economic conditions in Indonesia on the Company and its subsidiary. We conducted our audit in accordance with auditing standards established by the Indonesian Institute of Accountants and generally accepted auditing standards in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Ñnancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the Ñnancial statements. An audit also includes assessing the accounting principles used and signiÑcant estimates made by management, as well as evaluating the overall Ñnancial statement presentation. We believe that our audit and the report of the other auditors provide a reasonable basis for our opinion. In our opinion, based on our audit and the report of the other auditors, the 2000 consolidated Ñnancial statements present fairly, in all material respects, the Ñnancial position of Perusahaan Perseroan (Persero) P.T. Telekomunikasi Indonesia Tbk and its subsidiary as of December 31, 2000, and the results of their operations, changes in their equity, and their cash Öows for the year then ended in conformity with generally accepted accounting principles in Indonesia. As described in Note 37a to the consolidated Ñnancial statements, an investor in a Joint Operation Scheme has recently asserted several claims against the Company. The investor has not asserted these claims in any legal proceeding; instead it has asserted them only through correspondence and verbal discussions. Note 39 to the consolidated Ñnancial statements includes a summary of the eÅects the economic conditions in Indonesia have had on the Company and its subsidiary, as well as measures the Company and its subsidiary have implemented or plan to implement in response to the economic conditions. The accompanying Ñnancial statements include the eÅects of the economic conditions to the extent they can be determined and estimated. Generally accepted accounting principles in Indonesia vary in certain respects with those in the United States of America. A description of the signiÑcant diÅerences between those two generally accepted accounting principles and approximate eÅects of those diÅerences on the income for the year ended December 31, 2000 and equity as of December 31, 2000 are set forth in Notes 43 and 44, respectively, to the consolidated Ñnancial statements. F-2

Our audit also comprehended the translation of Rupiah amounts into United States Dollar and, in our opinion, such translation has been made in conformity with the basis stated in Note 3 to the consolidated Ñnancial statements. Such U.S. Dollar amounts are presented solely for the convenience of the readers.

HANS TUANAKOTTA & MUSTOFA

Ludovicus Sensi W, SE, MM, BAP License No. 99.1.0705 February 28, 2001

F-3

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1999 AND 2000 (Figures in tables are presented in millions of Rupiah and thousands of U.S. Dollar) ASSETS Notes

1999 Rp

Rp

2000 U.S.$ (Note 3)

CURRENT ASSETS Cash and cash equivalents ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

2d,4,31

3,597,537

3,542,174

360,233

Temporary investments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

2e,5,31

1,319,535

3,870,990

393,673

484,461

685,856

69,751

616,397

661,639

67,288

2f,31

56,268

115,098

11,705

2g,8 2h,31

411,956 125,984 6,612,138

108,568 124,641 9,108,966

11,041 12,676 926,367

NONCURRENT ASSETS Long-term investments Ì net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

2e,9

1,483,933

1,768,206

179,823

Property, plant and equipment Ì net of accumulated depreciation of Rp 10,899,090 million in 1999 and Rp 12,127,818 million in 2000ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

2i,10

17,198,001 16,953,486

1,724,142

Property, plant and equipment under revenuesharing arrangements Ì net of accumulated depreciation of Rp 666,384 million in 1999 and Rp 763,765 million in 2000 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

2j,11,34

630,890

533,509

54,257

Advances and others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

2l,31

374,147

494,582

50,298

Advance payment for investment in shares of stockÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

9

Ì

14,000

1,424

8,143 7,472 22,402 Ì 19,717,516 19,771,255 26,329,654 28,880,221

760 Ì 2,010,704 2,937,071

Trade accounts receivable ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2f,6,7,31 Related parties Ì net of allowance for doubtful accounts of Rp 30,459 million in 1999 and Rp 167,669 million in 2000 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Third parties Ì net of allowance for doubtful accounts of Rp 203,819 million in 1999 and Rp 186,602 million in 2000 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Other accounts receivable Ì net of allowance for doubtful accounts of Rp 868 million in 1999 and Rp 2,683 million in 2000 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Inventories Ì net of allowance for obsolescence of Rp 51,929 million in 1999 and Rp 23,319 million in 2000 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Prepaid expenses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total Current AssetsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

Property not used in operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Deferred stock issuance costs Ì net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total Noncurrent Assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ TOTAL ASSETS ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

2m

See accompanying notes to consolidated Ñnancial statements which are an integral part of the consolidated Ñnancial statements. F-4

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1999 AND 2000 (Figures in tables are presented in millions of Rupiah and thousands of U.S. Dollar) LIABILITIES AND EQUITY Notes

1999 Rp

Rp

2000 U.S.$ (Note 3)

CURRENT LIABILITIES Trade accounts payable ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 12,31 Related parties ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 392,190 375,475 Third parties ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 466,134 827,543 Other accounts payable ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 31 20,263 26,357 Taxes payable ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2q,13 626,941 338,956 Dividends payable ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,258 1,492 Accrued expensesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 14,31 1,079,533 836,030 Unearned incomeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 43,070 46,041 Advances from customers and suppliersÏÏÏÏÏÏÏÏÏÏÏÏÏ 31 86,034 119,218 Current maturities of long-term debt Ì related party 15,31 674,679 818,516 Total Current Liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,393,102 3,389,628 NONCURRENT LIABILITIES Deferred tax liabilities Ì net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2q,26 1,535,237 1,767,215 Unearned income on revenue-sharing arrangementsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2j,11,34 437,641 299,409 Unearned initial investor payments under joint operation scheme ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2k,19,33 168,842 153,493 Long-term debtÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 15,31 Two-step loans Ì related party, net of current maturities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,644,008 8,852,652 Project cost payableÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 896,507 693,607 Total noncurrent liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10,682,235 11,766,376 MINORITY INTEREST IN NET ASSETS OF SUBSIDIARYÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2b 30,008 36,574 EQUITY Capital stock Ì Rp 500 par value per Series A Dwiwarna share and Series B Share Authorized Ì 1 Series A Dwiwarna share and 39,999,999,999 Series B shares Issued and fully paid Ì 1 Series A Dwiwarna share and 10,079,999,639 Series B shares ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 16 5,040,000 5,040,000 Additional paid-in capitalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 17 1,073,333 1,073,333 DiÅerence due to change of equity in associated companies ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2e,9 430,722 426,397 Unrealized loss on decline in value of securitiesÏÏÏÏÏÏ 2e,5 (159) (165) Translation adjustment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2c,9 162,299 177,114 Retained earnings AppropriatedÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 28 171,719 193,442 Unappropriated ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,346,395 6,777,522 Total equity ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 12,224,309 13,687,643

19,673 689,263 1,392,011

TOTAL LIABILITIES AND EQUITY ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

2,937,071

26,329,654 28,880,221

38,185 84,160 2,680 34,471 152 85,023 4,682 12,124 83,242 344,719 179,723 30,449 15,610 900,300 70,539 1,196,621 3,720

512,560 109,156 43,364 (17) 18,012

See accompanying notes to consolidated Ñnancial statements which are an integral part of the consolidated Ñnancial statements. F-5

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000 (Figures in tables are presented in millions of Rupiah and thousands of U.S. Dollar, except share and ADS data) Notes

OPERATING REVENUES TelephoneÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Revenue under Joint Operation Scheme ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Interconnection revenues ÏÏÏÏÏÏÏÏ Other telecommunications services Total Operating RevenuesÏÏ OPERATING EXPENSES DepreciationÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Personnel ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Operation, maintenance and telecommunications servicesÏÏÏÏ General and administrativeÏÏÏÏÏÏÏ Marketing ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total Operating Expenses ÏÏ OPERATING INCOME ÏÏÏÏÏÏÏÏÏÏÏÏ OTHER INCOME (CHARGES) Interest income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Equity in net income of associated companiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Gain (loss) on foreign exchange Ì net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Interest expenseÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Others Ì net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Other income (charges) Ì netÏÏÏÏ INCOME BEFORE TAXÏÏÏÏÏÏÏÏÏÏÏÏ TAX EXPENSE ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ INCOME BEFORE MINORITY INTEREST IN NET INCOME OF SUBSIDIARY ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ MINORITY INTEREST IN NET INCOME OF SUBSIDIARY ÏÏÏÏÏÏ NET INCOME ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ BASIC EARNINGS PER SHAREÏÏÏÏ Net income per shareÏÏÏÏÏÏÏÏÏÏÏÏ

1998 Rp

1999 Rp

Rp

2000 U.S.$ (Note 3)

2n,18

3,805,207

4,528,902

5,177,864

526,580

2k,2n,19,33 2n,31 2n,20

1,591,537 555,511 647,745 6,600,000

1,677,217 892,050 692,040 7,790,209

2,267,154 1,121,482 809,206 9,375,706

230,566 114,053 82,295 953,494

2i,2j,10,11 2n,21

2,162,015 831,754

2,363,579 1,105,702

2,087,824 1,439,456

212,328 146,390

2n,22 2n,23 2n

501,392 473,547 31,570 4,000,278 2,599,722

822,033 508,388 47,044 4,846,746 2,943,463

1,009,472 715,045 86,586 5,338,383 4,037,323

102,662 72,719 8,806 542,905 410,589

2d,2e,31

595,168

688,077

631,650

64,238

2e,9,31

7,124

424,794

342,876

34,870

2c,38 24,31 25

(965,491) 280,176 (1,064,184) (980,714) (1,487,430) (816,749) 168,643 113,633 327,460 (1,175,270) 19,250 (578,947)

2q,26

2b

(108,226) (83,062) 33,302 (58,878)

1,424,452 (255,782)

2,962,713 (777,047)

3,458,376 (906,204)

351,711 (92,159)

1,168,670

2,185,666

2,552,172

259,552

Ì 1,168,670

(13,345) 2,172,321

(13,161) 2,539,011

(1,339) 258,213

2r,27

Net income per ADS (20 series B shares per ADS) ÏÏÏÏÏ

125.21

225.24

251.89

0.03

2,504.29

4,504.89

5,037.72

0.51

See accompanying notes to consolidated Ñnancial statements which are an integral part of the consolidated Ñnancial statements. F-6

F-7

Balance as of December 31, 1999 ÏÏ

Ì

Ì

2c,9

28

5,040,000

Ì 373,333 Ì

Ì

2e,5

28 1c,17

Ì

2e,9

4,666,667

Ì Ì

28

Balance as of January 1, 1999 ÏÏÏÏÏ DiÅerence due to change of equity in Telkomsel and Satelindo Ì net of deferred tax eÅect of Rp 4,724 millionÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Unrealized loss on decline in value of securitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Foreign currency translation of PSN and CSM Ì net of deferred tax eÅect of Rp 3,944 million ÏÏÏ Resolved during the Annual General Meeting of the Stockholders on April 16, 1999: Declaration of cash dividend ÏÏÏ Appropriation for general reserve ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Bonus shares ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Net income for the yearÏÏÏÏÏÏÏÏÏÏ

Ì

28

4,666,667

Ì

4,666,667

2c,9

Notes

Balance as of December 31, 1998 ÏÏ

Balance as of January 1, 1998 ÏÏÏÏÏ Foreign currency translation of PSN and CSM Ì net of deferred tax eÅect of Rp 65,613 million ÏÏ Resolved during the Annual General Meeting of the Stockholders on April 17, 1998: Declaration of cash dividend ÏÏÏ Appropriation for general reserve ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Net income for the yearÏÏÏÏÏÏÏÏÏÏ

Description

Capital Stock Rp

1,073,333

Ì (373,333) Ì

Ì

Ì

Ì

Ì

1,446,666

1,446,666

Ì Ì

Ì

Ì

1,446,666

430,722

Ì Ì Ì

Ì

Ì

Ì

11,023

419,699

419,699

Ì Ì

Ì

Ì

419,699

DiÅerence due to Change of Equity Additional in Associated Paid-in Capital Companies Rp Rp

(159)

Ì Ì Ì

Ì

Ì

(159)

Ì

Ì

Ì

Ì Ì

Ì

Ì

Ì

Unrealized Loss on Decline in Value of Securities Rp

162,299

Ì Ì Ì

Ì

9,203

Ì

Ì

153,096

153,096

Ì Ì

Ì

153,096

Ì

171,719

11,897 Ì Ì

Ì

Ì

Ì

Ì

159,822

159,822

11,311 Ì

Ì

Ì

148,511

5,346,395

(11,897) Ì 2,172,321

(475,863)

Ì

Ì

Ì

3,661,834

3,661,834

(11,311) 1,168,670

(452,445)

Ì

2,956,920

Retained earnings Translation Adjustment Appropriated Unappropriated Rp Rp Rp

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000 (Figures in tables are presented in millions of Rupiah)

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY

12,224,309

Ì Ì 2,172,321

(475,863)

9,203

(159)

11,023

10,507,784

10,507,784

Ì 1,168,670

(452,445)

153,096

9,638,463

Total Equity Rp

F-8

Ì

Ì

Ì Ì Ì

2e,5

2c,9

28 28 5,040,000

Ì

5,040,000

2e,9

Notes

1,073,333

Ì Ì

Ì

Ì

Ì

Ì

1,073,333

426,397

Ì Ì

Ì

Ì

Ì

(4,325)

430,722

(165)

Ì Ì

Ì

Ì

(6)

Ì

(159)

Unrealized Loss on Decline in Value of Securities Rp

177,114

Ì Ì

Ì

14,815

Ì

Ì

162,299

193,442

21,723 Ì

Ì

Ì

Ì

Ì

171,719

6,777,522

(21,723) 2,539,011

(1,086,161)

Ì

Ì

Ì

5,346,395

Retained earnings Translation Adjustment Appropriated Unappropriated Rp Rp Rp

13,687,643

Ì 2,539,011

(1,086,161)

14,815

(6)

(4,325)

12,224,309

Total Equity Rp

See accompanying notes to consolidated Ñnancial statements which are an integral part of the consolidated Ñnancial statements.

Balance as of December 31, 2000 ÏÏ

Balance as of January 1, 2000 ÏÏÏÏÏ DiÅerence due to change of equity in Telkomsel and PSN Ì net of deferred tax eÅect of Rp 1,853 million ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Unrealized loss on decline in value of securitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Foreign currency translation of PSN and CSM Ì net of deferred tax eÅect of Rp 6,349 million ÏÏÏ Resolved during the Annual General Meeting of the Stockholders on April 7, 2000: Declaration of cash dividend ÏÏÏ Appropriation for general reserve ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Net income for the yearÏÏÏÏÏÏÏÏÏÏ

Description

Capital Stock Rp

DiÅerence due to Change of Equity Additional in Associated Paid-in Capital Companies Rp Rp

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY Ì (Continued) FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000 (Figures in tables are presented in millions of Rupiah)

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000 (Figures in tables are presented in millions of Rupiah and thousands of U.S. Dollar) 1998 Rp

Cash Flows from Operating Activities Cash receipts from operating revenues Telephone ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Minimum Telkom Revenues ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Interconnection Ì net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Other telecommunications servicesÏÏÏÏÏÏÏÏÏÏ Distributable KSO revenues ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total cash receipts from operating revenues ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Cash payments for operating expenses Personnel ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Operation, maintenance and telecommunications services ÏÏÏÏÏÏÏÏÏÏÏÏÏ General and administrative ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ MarketingÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total cash payments for operating expenses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Interest income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Income tax ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Interest expense ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Other Ì net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Net Cash Provided by Operating Activities ÏÏÏÏÏÏ Cash Flows from Investing Activities Proceeds from sale of marketable securities and maturity of time deposits ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Decrease (increase) in advances and others ÏÏÏ Proceeds from sale of property, plant and equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Purchases of marketable securities and placements in time deposits ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Acquisitions of property, plant and equipment Advance payment for investment in shares of stock ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Increase in long-term investments ÏÏÏÏÏÏÏÏÏÏÏÏ Net Cash Used in Investing Activities ÏÏÏÏÏÏÏÏÏÏÏ Cash Flows from Financing Activities Cash dividend paid ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Repayment of long-term debt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Net Cash Used in Financing Activities ÏÏÏÏÏÏÏÏÏÏ

F-9

1999 Rp

Rp

2000 U.S.$ (Note 3)

3,562,632 1,471,769 767,197 483,553 193,677

4,312,222 1,452,912 983,911 600,130 176,966

4,883,551 1,327,386 1,252,742 771,480 623,307

496,649 134,993 127,402 78,458 63,389

6,478,828

7,526,141

8,858,466

900,891

(735,328) (1,014,324) (1,281,503) (658,711) (319,157) (26,642)

(774,021) (387,349) (76,172)

(78,717) (39,393) (7,746)

(1,739,838) (2,168,311) (2,519,045) 578,503 696,625 665,686 (236,531) (227,578) (1,252,669) (736,970) (1,419,297) (856,961) (754,472) (157,666) 61,620

(256,183) 67,699 (127,394) (87,152) 6,267

3,589,520

390,472 111,744 5,411

(840,192) (275,974) (37,821)

(130,327)

4,249,914

4,957,097

504,128

1,160,690 (161,770)

5,118,034 139,761

520,496 14,214

5,950

605

5,338

(92,000) (2,437,268) (7,682,827) (1,493,717) (656,014) (793,918)

(781,331) (80,740)

Ì Ì (14,000) (1,279) (14,077) Ì (1,079,369) (2,103,101) (3,227,000)

(1,424) Ì (328,180)

(448,623) (475,559) (1,103,389) (284,120) (610,037) (682,071) (732,743) (1,085,596) (1,785,460)

(112,213) (69,365) (181,578)

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS Ì (Continued) FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000 (Figures in tables are presented in millions of Rupiah and thousands of U.S. Dollar) 1998 Rp

Net Increase (Decrease) in Cash and Cash Equivalents ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Cash and Cash Equivalents at Beginning of Year Cash and Cash Equivalents at End of Year ÏÏÏÏÏÏ SUPPLEMENTAL CASH FLOW INFORMATION Transactions not aÅecting cash Öows: Increase in property under construction through the incurrence of long-term debt ÏÏÏÏÏÏÏÏÏÏÏÏÏ Capitalization of borrowing costs during construction Foreign exchange diÅerential ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Interest ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Changes from equity transactions of associated companies aÅecting the following accounts: Investment in shares of stock ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Translation adjustment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Deferred tax liability ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ DiÅerence due to change of equity in associated companiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Increase (decrease) in property, plant and equipment and unearned income under revenue-sharing arrangement ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Adjustment of long-term receivable and the related unearned incomeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Transfer of advance payment to property, plant and equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

1999 Rp

2000 U.S.$ (Note 3)

Rp

1,777,408 758,912 2,536,320

1,061,217 2,536,320 3,597,537

(55,363) 3,597,537 3,542,174

(5,630) 365,863 360,233

2,722,705

972,548

580,584

59,044

236,358 40,465

(33,960) 6,493

175,489 62,534

17,847 6,360

218,708 153,096 65,613

28,896 9,203 8,668

14,986 14,815 4,496

1,524 1,507 457

Ì

11,023

(4,325)

(440)

55,627

(7,442)

Ì

Ì

25,809

Ì

Ì

Ì

2,774

Ì

Ì

Ì

See accompanying notes to consolidated Ñnancial statements which are an integral part of the consolidated Ñnancial statements.

F-10

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) 1. GENERAL a. Establishment and General Information Perusahaan Perseroan (Persero) P.T. Telekomunikasi Indonesia Tbk (""the Company'') was originally a part of ""Post en Telegraafdienst'', which was established in 1884 under the framework of Decree No. 7 dated March 27, 1884 of the Governor General of the Dutch Indies and published in the State Gazette No. 52 dated April 3, 1884. In 1991, based on Government Regulation No. 25 year 1991, the status of the Company was changed into a state-owned limited liability corporation (""Persero''). The Company was established based on notarial deed No. 128 dated September 24, 1991 of Imas Fatimah, S.H.. The Company's articles of association have been amended several times, most recently by notarial deed No. 58 dated April 23, 1997 of A. Partomuan Pohan, S.H., LL.M., to conform with Law No. 1 year 1995 on Limited Liability Companies and Law No. 8 year 1995 on Capital Markets. The latest amendments were approved by the Minister of Justice of the Republic of Indonesia in his decision letter No. C27468.HT.01.04.Th.97 dated July 31, 1997. The Company's principal business is the provision of domestic telecommunications services, including telephone, telex, telegram, satellite, leased lines, electronic mail, mobile communication and cellular services. In order to accelerate the construction of telecommunications facilities, to make the Company a world-class operator, and to increase the technology as well as the knowledge and skills of its employees, the Company has entered into agreements with investors to develop, manage and operate telecommunications facilities under Joint Operation Scheme ®known as ""Kerja Sama Operasi'' or ""KSO'' (Note 33)©. Under Law No. 3 year 1989 on Telecommunications which took eÅect on April 1, 1989, Indonesian legal entities are allowed to provide basic telecommunications services in cooperation with the Company as the domestic telecommunications organizing body (or ""badan penyelenggara''). Other Indonesian legal entities are also allowed to individually provide non-basic telecommunications services. In providing telecommunications services, these entities are required to obtain licenses from the Minister of Communications of the Republic of Indonesia (the Ministry of Communications assumed responsibility for the telecommunications sector from the now defunct Ministry of Tourism, Post and Telecommunications in March 1998). Government Regulation No. 8 year 1993 concerning the provision of telecommunications services, further regulates that cooperation which provides basic telecommunications services can be in the form of joint venture, joint operation or contract management and that the entities cooperating with the domestic telecommunications organizing body must use the organizing body's telecommunications networks. If the telecommunications networks are not available, the Government Regulation requires that the cooperation be in the form of a joint venture that is capable of constructing the necessary networks. The Minister of Tourism, Post and Telecommunications of the Republic of Indonesia, through his two decision letters both dated August 14, 1995, reaÇrmed the status of the Company as the organizing body for the provision of domestic telecommunications services. Further, eÅective from January 1, 1996, the Company was granted the exclusive right to provide local wireline and Ñxed wireless services for a minimum period of 15 years and the exclusive right to provide domestic long-distance telecommunications services for a minimum period of 10 years. The exclusive rights also apply to telecommunications services provided for and on behalf of the Company through a Joint Operation Scheme (KSO). This F-11

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) grant of rights does not aÅect the Company's right to provide other domestic telecommunications services. Based on press release No. o5/HMS/JP/VIII/2000 dated August 1, 2000 from the Director General of Post and Telecommunications and the correction thereto No. 1718/UM/VII/2000 dated August 2, 2000, the period of exclusive rights granted to the Company to provide local wireline and Ñxed wireless services is shortened to August 2002 and to August 2003 for domestic long-distance telecommunications services. In return, new operators are required to pay compensation to the Company, the amount of which is to be estimated by an independent appraiser. The Company is further granted the permit to provide international telecommunications services eÅective August 2003. On September 8, 1999, the Government issued Law No. 36 year 1999 on Telecommunications to replace Law No. 3 year 1989. Under the new Law, which took eÅect from September 2000, telecommunications activities cover: ‚

Telecommunications networks

‚

Telecommunications services

‚

Special telecommunications

National state-owned companies, regional state-owned companies, privately-owned companies and cooperatives are allowed to provide telecommunications networks and services. Special telecommunications can be provided by individuals, government agencies and legal entities other than telecommunications networks and service providers. Under Law No. 36, activities which result in monopolistic practices and unhealthy competition are prohibited. In relation with this law, Government Regulation No. 52 year 2000 was issued, which provides that interconnection fee shall be charged to originating telecommunications network operator where telecommunications service is provided by two or more telecommunications network operators. The Company's head oÇce is located in Jalan Japati No. 1, Bandung, West Java. In 1996, Ñve of the Company's seven regional divisions started to operate as separate units (known as ""KSO Units'') under Joint Operation Scheme (Note 33). According to Article 3 of the Company's articles of association: 1. The Company's objective, in its broadest sense, is the development, operation and improvement of the quality of telecommunications services and improvement of the utilization of the Company's resources. 2. To achieve the above objective, the Company will be involved in the following activities: a. Planning, building, providing, owning, developing, operating and maintaining telecommunications facilities to support the provision of telecommunications services. b. Increasing the capability of telecommunications facilities in order to improve telecommunications services to the public. c. Performing activities and other eÅorts in connection with the utilization and development of the Company's resources, in its broadest sense, and optimizing the utilization of the F-12

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) Company's property, plant and equipment, information system, education and training, and repairs and maintenance facilities. The Company had 37,705 employees as of December 31, 2000, including those in the KSO Units. Based on the resolution of the Stockholders' Extraordinary Meeting, the minutes of which have been notarized by deed No. 7 dated April 7, 2000 of A. Partomuan Pohan, S.H., LL.M., the composition of the Company's board of commissioners from 2000 to 2001 is as follows: President Commissioner Commissioners

: :

Bacelius Ruru Noor Fuad Purnomo Sidhi Andi Siswaka Faisal Rahardjo Tjakraningrat

Based on the resolution of the Stockholders' General Meeting, the minutes of which have been notarized by deed No. 6 dated April 7, 2000 of the same notary, the composition of the board of directors from 2000 to 2005 is as follows: President Director Directors

: :

Muhammad Nazif Mursyid Amal TauÑk Akbar Komaruddin Sastrakoesoemah Kristiono

b. Consolidated Subsidiary The Company has a 51% ownership interest in PT Infomedia Nusantara (""Infomedia''), a company domiciled in Jakarta. Infomedia started commercial operations in 1995 and is engaged in providing telecommunications information service and other information services in the form of printed and electronic media. As of December 31, 2000, total assets of Infomedia amounted to Rp 186,548 million. The Company's equity interest in Infomedia has increased to 51% in September, 1999. Accordingly, the accounts of Infomedia were consolidated with those of the Company starting in 1999. c. Public OÅering of Shares of the Company The Company's total number of shares immediately prior to its initial public oÅering was 8,400,000,000 which was made up of 8,399,999,999 series B shares and 1 series A Dwiwarna share, all of which were owned by the State of the Republic of Indonesia. On November 14, 1995, the Government sold the Company's shares through an initial public oÅering in Jakarta Stock Exchange and Surabaya Stock Exchange. The shares oÅered consisted of 933,333,000 new series B shares and 233,334,000 series B shares owned by the State of the Republic of Indonesia. The share oÅering was also conducted on the New York Stock Exchange and London Stock Exchange for 700 million series B shares owned by the State of the Republic of Indonesia, which were converted to 35 million American Depositary Shares (ADS). Each ADS represents 20 series B shares. F-13

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) In December 1996, the Government of the Republic of Indonesia made a block-sale of 388 million series B shares, and later in 1997, the Government distributed 2,670,300 series B shares as an incentive for the stockholders not to sell their shares within one year from the date of the initial public oÅering. In May 1999, the Government made a further block-sale of 898 million series B shares. Under Law No.1 year 1995 on Limited Liability Companies, the minimum total par value of the Company's issued shares of capital stock has to be 25% of the total par value of the Company's authorized capital stock, or in the Company's case, Rp 5 trillion. To comply with the Law, it was resolved at the Annual General Meeting of Stockholders on April 16, 1999 to increase the issued shares of capital stock. The bonus shares were distributed to existing shareholders in August 1999. As of December 31, 2000, all of the Company's series B shares have been listed on the Jakarta Stock Exchange and Surabaya Stock Exchange and 44,960,509 ADS on the New York Stock Exchange and London Stock Exchange. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a. Consolidated Financial Statement Presentation The consolidated Ñnancial statements have been prepared in accordance with generally accepted accounting principles in Indonesia (""Indonesian GAAP''), which diÅer in certain respects with generally accepted accounting principles in the United States of America (""U.S. GAAP''). A description of signiÑcant diÅerences and their approximate eÅects on net income and equity are set forth in Notes 43 and 44, respectively. The consolidated Ñnancial statements also include certain additional disclosures in order to conform more closely to the form and content of Ñnancial statements required by the Securities and Exchange Commission of the United States of America (the ""U.S. SEC'') (Note 45). The consolidated Ñnancial statements, except for the statements of cash Öows, are prepared under the accrual basis of accounting. The reporting currency used in the preparation of the consolidated Ñnancial statements is the Indonesian Rupiah, while the measurement basis used is the historical cost, except for certain accounts which are measured on the bases described in the related accounting policies. The consolidated statements of cash Öows are prepared using the direct method with classiÑcations of cash Öows into operating, investing and Ñnancing activities. b. Principles of Consolidation The consolidated Ñnancial statements include the Ñnancial statements of the Company and Infomedia, a 51%-owned subsidiary. Intercompany balances and transactions including unrealized gains or losses on intercompany transactions are eliminated to reÖect the Ñnancial position and the results of operations of the Company and its subsidiary as one business entity. c. Foreign Currency Transactions and Translation The books of accounts of the Company and its subsidiary are maintained in Indonesian Rupiah. Transactions during the year involving foreign currencies are recorded at the rates of exchange prevailing at the time the transactions are made. At balance sheet date, monetary assets and liabilities denominated in foreign currencies are adjusted to reÖect the rates of exchange prevailing at that date. F-14

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) The resulting gains or losses are credited or charged to current operations, except for foreign exchange diÅerentials that can be attributed to qualifying assets which are capitalized. The exchange rates used for translation of monetary assets and liabilities denominated in foreign currencies are the buying and selling rates published by Dow Jones Telerate in 1999 and the Bridge Telerate in 2000. The Dow Jones Telerate buying and selling rates, applied respectively to monetary assets and liabilities, were Rp 7,070 and Rp 7,150 to U.S.$1 as of December 31, 1999, while the Bridge Telerate buying and selling rate applied respectively to monetary assets and liabilities were Rp 9,575 and Rp 9,675 to U.S.$1 as of December 31, 2000. The Company does not guarantee that assets and liabilities denominated in foreign currencies can be translated to Indonesian Rupiah at the rates of exchange as of December 31, 2000. The books of accounts of PT PasiÑk Satelit Nusantara and PT Citra Sari Makmur, associated companies, are maintained in U.S. Dollar. For the purpose of reporting these investments using the equity method, the assets and liabilities of these companies as of balance sheet date are translated into Rupiah using the rates of exchange prevailing at that date, while revenues and expenses are translated at the average rates of exchange for the year. The resulting translation adjustments are shown as part of equity as ""Translation Adjustment''. d. Cash and Cash Equivalents Cash and cash equivalents consist of cash on hand and in banks and all unrestricted investments with maturities of three months or less from the date of placement. CertiÑcates of the Bank Indonesia are stated at face value less unamortized discount. e. Investments Time deposits Time deposits with maturities of more than three months are presented as temporary investments and are stated at nominal values. Investments in available for sale securities Investments in available for sale securities are stated at fair value. Unrealized gains or losses from the increase or decrease in fair value are recorded as part of equity and recognized as income or expenses of the period when realized. Investments in associated companies Investments in shares of stock with ownership interest of 20% to 50%, directly or indirectly owned, are accounted for using the equity method whereby the Company's proportionate share in the income or loss of the associated company after the date of acquisition is added to or deducted from, and the dividends received are deducted from, the acquisition cost of the investments. Equity in net income or losses is adjusted for the straight-line amortization, over Ñve years, of goodwill. The carrying amount of the investments is written down to recognize any permanent declines in the value of individual investments. Any such write downs are charged directly to current operations. F-15

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) Other investments Investments in shares of stock with ownership interest of less than 20% that do not have readily determinable fair values and are intended for long-term investments are stated at cost. The carrying amount of the investments is written down to recognize a permanent decline in the value of the individual investments. Any such write downs are charged directly to current operations. Change of equity in associated companies Changes in the value of investments due to changes in the equity of associated companies arising from capital transactions of such associated companies with other parties are recognized in equity as ""DiÅerence Due to Change of Equity in Associated Companies'', and recognized as income or expenses in the period the investments are disposed of. f. Allowance for Doubtful Accounts Allowance for doubtful accounts is provided based on a review of the status of the individual receivable accounts at the end of the year. g. Inventories Inventories are stated at cost or net realizable value, whichever is lower. Cost is determined using the weighted average method. h. Prepaid Expenses Prepaid expenses are amortized over their beneÑcial periods using the straight-line method. i. Property, Plant and Equipment Property, plant and equipment are stated at cost, except for certain revalued assets, less accumulated depreciation. Most of the Company's property, plant and equipment acquired up to January 1, 1979 and January 1, 1987 have been revalued in accordance with Decree No. 109/KMK.04/1979 dated March 27, 1979 of the Minister of Finance of the Republic of Indonesia and Government Regulation No. 45 of 1986, respectively. The revaluation increments of Rp 86,787 million resulting from the 1979 revaluation and Rp 381,908 million resulting from the 1987 revaluation were capitalized to capital stock in 1984 and 1988, respectively. Acquisitions after January 1, 1987 are stated at cost.

F-16

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) Depreciation is computed using the straight-line method based on the estimated useful lives of the assets as follows: Years

Buildings ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Switching equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Telegraph, telex and data communication equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Transmission installation and equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Satellite, earth station and equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Cable network ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Power supply ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Data processing equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Other telecommunications peripherals ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ OÇce equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Vehicles ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Other equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

20 5-15 5-15 5-20 5-15 5-15 5-10 5-10 5 5 5 5

Land is stated at cost and is not depreciated. Unused property, plant and equipment are stated at the lower of carrying value or net realizable value. When the carrying amount of an asset exceeds its estimated recoverable amount, the asset is written down to its estimated recoverable amount, which is determined as the higher of net selling price or value in use. The cost of maintenance and repairs is charged to operations as incurred; expenditures which extend the useful life of the asset or result in increased future economic beneÑts such as increase in capacity and improvement in the quality of output or standard of performance are capitalized. When assets are retired or otherwise disposed of, their carrying values and the related accumulated depreciation are removed from the accounts and any resulting gain or loss is reÖected in the current operations. Computer software used for data processing is added to the value of the computer hardware to which it is attributed. Property under construction is stated at cost which includes all borrowing costs during construction on debts incurred to Ñnance the construction. Gain on foreign exchange that can be attributed to the property under construction is adjusted to the foreign exchange diÅerential and capitalized as a borrowing cost. Property under construction is transferred to the respective property, plant and equipment account when completed and ready for use. j. Revenue-Sharing Arrangements Under Indonesian Statement of Financial Accounting Standards (""PSAK'') No. 35, ""Accounting for Income from Telecommunications Services'', assets under revenue-sharing arrangements are to be capitalized by the party (the organizing body) to whom ownership of such assets shall be transferred at the end of the revenue-sharing period, if the following criteria are met: ‚

There is a certainty that the organizing body will acquire the assets, the ownership of which will be transferred at the end of the revenue-sharing period. F-17

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) ‚

The organizing body will be free from any claims from third parties with respect to the acquisition of such assets.

‚

The agreement covering the revenue-sharing arrangements is irrevocable.

The Company records such assets as ""Property, Plant and Equipment under Revenue-Sharing Arrangements'' (with a corresponding initial credit to ""Unearned Income under Revenue-Sharing Arrangements'' presented under Liabilities) based on the costs incurred by the investors as agreed upon in the contracts entered into by the Company and the investors (Notes 11 and 34). The property, plant and equipment are depreciated over their estimated useful lives using the straight-line method. Property, plant and equipment and unearned income are recorded at the beginning of the revenuesharing period. The unearned income related to the acquisition of the property, plant and equipment under revenue-sharing arrangements is amortized over the revenue-sharing period using the straightline method. At the end of the revenue-sharing period, the respective property, plant and equipment under revenue-sharing arrangements are reclassiÑed to the ""Property, Plant and Equipment'' account. When property, plant and equipment under revenue-sharing arrangements are acquired by the Company before the end of the revenue-sharing period, the net book value of the assets is reclassiÑed to the ""Property, Plant and Equipment'' account, and the balance of the related unearned income is reÖected as gain or loss in the current operations. Revenue earned under revenue-sharing arrangements is recognized on the basis of the Company's share as provided in the agreement. k. Joint Operation Schemes For the operations of telecommunications facilities and the provisions of telecommunications services which have been transferred by the Company to the Ñve KSO Investors (Note 33), the Company recognizes the following income in lieu of the traditional revenue and expense accounts: amortization of unearned initial investor's payments, Minimum Telkom Revenues (MTR) and the Company's share of distributable KSO revenue. The unearned initial investor payments received as compensation from the KSO Investors are presented net of all direct costs incurred in connection with the preparation of the KSO and are amortized over the KSO period using the straight-line method for 15 years starting January 1, 1996. MTR are recognized on a monthly basis based on the calculation of the contracted MTR amount for the current year, in accordance with the KSO agreement. The Company's share of distributable KSO revenues is recognized on the basis of the agreed Company's percentage share of the KSO revenues, net of MTR and operational expenses of the KSO Units, as provided in the KSO agreements. Under PSAK No. 39, ""Accounting for Joint Operation Scheme'', which supersedes paragraph 14 of PSAK No. 35, the assets built by the KSO Investors under the Joint Operation Scheme should be recorded in the books of the KSO Investors which operate the assets and shall be transferred to the Company at the end of the KSO period. F-18

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) l. Deferred Charges for Landrights Expenses related to the legal processing of landrights are deferred and amortized using the straight-line method over the legal term of the landright which is shorter than its economic life. m. Deferred Stock Issuance Costs Stock issuance costs were deferred and amortized over Ñve years using the straight-line method. n. Revenue and Expense Recognition Revenue from installations is recognized at the time the installations are placed in service. Revenue from usage charges is recognized as the charges are incurred by customers. Revenues from network interconnection with other domestic and international telecommunications carriers are recognized as incurred and are presented on a net basis. Revenues under Joint Operation Scheme are recognized as discussed in Note 2k. Revenues under Revenue-Sharing Arrangements are recognized as discussed in Note 2j. Expenses are recognized when incurred. o. Pension Plan The Company established a deÑned beneÑt pension plan covering all its permanent employees. Current service cost is charged to operations in the current period. Past service cost, actuarial adjustments and the eÅect of changes in assumptions for active participants are amortized using the straight-line method over the estimated average residual employment period that has been determined by the actuary. The method used by the actuary for actuarial calculation is the Projected-Unit Credit method. p. Postretirement Health Care Plan The Company recognizes the cost of providing postretirement health care plan beneÑts over the working lives of its employees based on actuarial computations. This practice is similar to that provided by Statement of Financial Accounting Standards No. 106, ""Employers' Accounting for Postemployment BeneÑts Other than Pensions'' (""SFAS 106''), of U.S. GAAP. q. Income Tax Current tax expense is determined based on the taxable income for the year computed using prevailing tax rates. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to diÅerences between the Ñnancial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax liabilities are recognized for all taxable temporary diÅerences and deferred tax assets are recognized for deductible temporary diÅerences to the extent that it is probable that taxable income will be available in future periods against which the deductible temporary diÅerences can be utilized. F-19

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) Deferred tax is calculated at the tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax is charged or credited in the statement of income, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also charged or credited directly to equity. Deferred tax assets and liabilities are oÅset in the balance sheet, except if these are for diÅerent legal entities, in the same manner the current tax assets and liabilities are presented. r. Earnings per Share and Earnings per American Depositary Share (""ADS'') Basic earnings per share is computed by dividing net income by the weighted average number of shares outstanding during the year. Net income per ADS is computed by multiplying basic earnings per share by 20, the number of shares represented by each ADS. s. Segment information Segment information is prepared in conformity with the accounting policies adopted for preparing and presenting the consolidated Ñnancial statements. 3. TRANSLATION OF RUPIAH INTO UNITED STATES DOLLARS The Ñnancial statements are stated in Rupiah. The translations of Rupiah amounts into United States Dollar are included solely for the convenience of the readers and have been made using the average of the market buying and selling rates of Rp 9,833 to U.S.$1 published by Bridge Telerate on February 28, 2001. The convenience translations should not be construed as representations that the Rupiah amounts have been, could have been, or could in the future be, converted into United States Dollar at this or any other rate of exchange. 4. CASH AND CASH EQUIVALENTS 1999 Rp

Cash on hand ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Cash in banks Related parties Rupiah Bank Mandiri ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Bank Negara Indonesia ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Bank Rakyat Indonesia ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Bank Pos Nusantara ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Foreign currencies Bank Mandiri ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Bank Negara Indonesia ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Bank Rakyat Indonesia ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total Ì related parties ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ F-20

2000 Rp

4,717

2,787

17,641 16,701 6,288 2,251 42,881

93,893 59,674 20,618 1,938 176,123

937 708 9 1,654 44,535

17,621 328 8 17,957 194,080

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) 1999 Rp

Third parties Rupiah Bank Bukopin ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Bank Niaga ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Bank Central Asia ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Bank Internasional IndonesiaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Standard Chartered Bank ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Bank Dai-Ichi Kangyo IndonesiaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Bank Duta ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Citibank ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ American Express BankÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Bank Universal ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Foreign currencies Citibank ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ American Express BankÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Bank Dai-Ichi Kangyo IndonesiaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Bank Niaga ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Bank Universal ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total Ì third parties ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total cash in banks ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ CertiÑcates of Bank Indonesia Face value ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Unamortized discount ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Time deposits Related parties Rupiah Bank Mandiri ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Bank Negara Indonesia ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Bank Rakyat Indonesia ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Bank Tabungan Negara ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Foreign currencies Bank Mandiri ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Bank Negara Indonesia ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Bank Rakyat Indonesia ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total Ì related parties ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

F-21

2000 Rp

28 14 29 7 Ì 10 36 24 Ì 8 156

434 306 287 77 42 11 10 6 6 Ì 1,179

9 Ì 8 6 9 32 188 44,723

105 105 66 48 Ì 324 1,503 195,583

Ì Ì Ì

600,000 (2,624) 597,376

2,168,512 786,515 50,000 150,690 3,155,717

1,071,732 446,810 404,558 204,950 2,128,050

336,816 Ì Ì 336,816 3,492,533

200,023 179,531 34,949 414,503 2,542,553

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) 1999 Rp

Third parties Rupiah Bank Danamon Indonesia ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Bank Niaga ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Bank Panin ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Bank Universal ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Bank Bukopin ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Bank MegaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Bank Internasional IndonesiaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Standard Chartered Bank ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Bank Duta ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Bank Central Asia ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Citibank ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Foreign currencies Bank Internasional IndonesiaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Bank Niaga ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Bank Dai-Ichi Kangyo IndonesiaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Bank Universal ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total Ì third parties ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total time depositsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total Cash and Cash EquivalentsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

Ì 14,450 Ì 13,500 9,425 Ì 5,354 Ì 5,000 4,000 250 51,979

57,510 44,700 32,000 20,000 16,950 13,400 2,650 1,525 Ì Ì Ì 188,735

2,130 745 Ì 710 3,585 55,564 3,548,097 3,597,537

11,973 2,687 480 Ì 15,140 203,875 2,746,428 3,542,174

1999

Interest rates per annum CertiÑcates of Bank Indonesia ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Time deposits Rupiah ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Foreign currencies ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

F-22

2000 Rp

2000

Ì 7%-42% 0.13%-13%

14.125%-14.625% 12.52%-14.33% 5%-6.84%

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) 5. TEMPORARY INVESTMENTS 1999 Rp

Time deposits Related parties Ì Rupiah Bank Mandiri ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Bank Tabungan Negara ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Bank Negara IndonesiaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total Ì related parties ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Third parties Rupiah Bank Bukopin ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Bank Yudha Bhakti ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ United States Dollar Bank Dai-Ichi Kangyo Indonesia ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total Ì third parties ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Available for sale securities Investments in mutual fund (Reksa Dana Seruni) At cost ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Unrealized loss on decline in value ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Interest rates per annum on time deposits Rupiah ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ United States Dollar ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

2000 Rp

1,149,988 Ì 166,590 1,316,578

1,828,017 1,023,268 1,010,989 3,862,274

1,114 Ì 1,114

3,000 1,000 4,000

Ì 1,114 1,317,692

2,879 6,879 3,869,153

2,002 (159) 1,843 1,319,535

2,002 (165) 1,837 3,870,990

13%-35% Ì

11.14%-14.33% 5.125%

Time deposits have terms of more than three months to two years The time deposit of subsidiary in Bank Dai-Ichi Kangyo Indonesia amounting U.S.$300,000 is used as a guarantee for the Letter of Credit facility granted by the bank for the payment of subsidiary's foreign suppliers. The subsidiary has time deposits amounting to Rp 6,714 million in Bank Bukopin which is used as a guarantee for the capital credit facility extended by the bank to Koperasi Infomedia Nusantara (KOPIN). The KOPIN credit facility is used among others to Ñnance loans to subsidiary's employees. The credit facility has a maximum amount of Rp 7.5 billion and a three-year term, due in 2003. As of December 31, 2000 the time deposit is recorded as other assets. Investments in mutual fund represent mutual fund certiÑcates-Seruni issued by PT (Persero) Danareksa which earn dividends on a monthly basis. The carrying value of these investments as of December 31, 1999 and 2000 represents the net assets value as of these dates. F-23

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) Investments placed with related parties have similar interest rates, terms and conditions as those placed with third parties. 6. TRADE ACCOUNTS RECEIVABLE Ì RELATED PARTIES a. By Debtor 1999 Rp

KSO Units ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Government agencies ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PT Komunikasi Selular IndonesiaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PT Citra Sari MakmurÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PT Napsindo Primatel Internasional ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PT Mobile Selular Indonesia ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PT Metro Selular Nusantara ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PT Aplikanusa Lintasarta ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PT Radio Telepon Indonesia ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PT Patra Telekomunikasi IndonesiaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PT Gratika ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ OthersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Allowance for doubtful accounts ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

2000 Rp

278,458 503,187 116,459 119,304 55,593 90,681 Ì 42,070 Ì 31,956 15,000 27,298 18,165 21,419 17,257 6,345 1,832 4,868 Ì 4,152 248 228 11,908 2,017 514,920 853,525 (30,459) (167,669) 484,461 685,856

Trade accounts receivable from certain related parties are presented net of the Company's liabilities to such parties. b. By Age Category 1999 Rp

0 to 6 months ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7 to 12 months ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13 to 24 months ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ More than 24 months ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Allowance for doubtful accounts ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

F-24

2000 Rp

476,096 680,631 7,036 121,972 13,868 20,668 17,920 30,254 514,920 853,525 (30,459) (167,669) 484,461 685,856

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) c. By Currency 1999 Rp

Rupiah ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ United States Dollar ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Allowance for doubtful accounts ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

2000 Rp

495,451 753,620 19,469 99,905 514,920 853,525 (30,459) (167,669) 484,461 685,856

Changes in the allowance for doubtful accounts 1999 Rp

Beginning balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Additions (deductions)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ending balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

2000 Rp

48,437 30,459 (17,978) 137,210 30,459 167,669

An allowance for doubtful accounts is provided at a certain percentage of the accounts that have been overdue, and full provision on those related parties receivables with signiÑcant capital deÑciencies. Management believes that the allowance for doubtful receivables from related parties is adequate to cover possible losses on uncollectible accounts. Management also believes that there are no signiÑcant concentrations of credit risk on these receivables. 7. TRADE ACCOUNTS RECEIVABLE Ì THIRD PARTIES a. By Debtor 1999 Rp

Residential and business customers ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PT Saranaprima Raya Telemindo ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ OthersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Allowance for doubtful accounts ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

F-25

2000 Rp

818,545 806,477 1,432 9,106 239 32,658 820,216 848,241 (203,819) (186,602) 616,397 661,639

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) b. By Age Category 1999 Rp

0 to 3 months ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ More than 3 months ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Allowance for doubtful accounts ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

2000 Rp

614,033 656,472 206,183 191,769 820,216 848,241 (203,819) (186,602) 616,397 661,639

c. By Currency 1999 Rp

Rupiah ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ United States Dollar ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Singapore DollarÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Malaysian Ringgit ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Allowance for doubtful accounts ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

2000 Rp

799,801 819,055 20,415 29,175 Ì 6 Ì 5 820,216 848,241 (203,819) (186,602) 616,397 661,639

Changes in the allowance for doubtful accounts 1999 Rp

Beginning balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Additions (deductions)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ending balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

2000 Rp

143,148 203,819 60,671 (17,217) 203,819 186,602

Management believes that the allowance for doubtful receivables from third parties is adequate to cover possible losses on uncollectible accounts. Management also believes that there are no signiÑcant concentrations of credit risk in third party receivables.

F-26

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) 8. INVENTORIES 1999 Rp

Components: Cables and transmission installation spare partsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Telephone terminals, cards and spare parts ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Other spare parts ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Allowance for obsolescence ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Modules: Cables and transmission installation spare partsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Telephone terminals, cards and spare parts ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Other spare parts ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Allowance for obsolescence ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

38,194 13,069 11,226 62,489 (10,225) 52,264

2000 Rp

34,660 11,156 22,805 68,621 (13,573) 55,048

384,362 42,438 16,882 20,641 152 187 401,396 63,266 (41,704) (9,746) 359,692 53,520 411,956 108,568

Changes in the allowance for obsolescence of inventories are as follows: 1999 Rp

Beginning balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Additions (deductions)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ending balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

13,351 38,578 51,929

2000 Rp

51,929 (28,610) 23,319

Management believes that the established allowance is suÇcient to cover possible losses from the decline in inventory value due to obsolescence. The Company did not insure its inventories at December 31, 1999 and 2000.

F-27

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) 9. LONG-TERM INVESTMENTS Ì NET Domicile

Equity method: PT Telekomunikasi Selular ÏÏÏÏÏÏÏÏÏ PT Aplikanusa Lintasarta ÏÏÏÏÏÏÏÏÏÏÏ PT PasiÑk Satelit Nusantara ÏÏÏÏÏÏÏÏ PT Citra Sari MakmurÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PT Metro Selular Nusantara ÏÏÏÏÏÏÏÏ PT Patra Telekomunikasi IndonesiaÏÏ PT Indonusa Telemedia ÏÏÏÏÏÏÏÏÏÏÏÏ PT Multimedia Nusantara ÏÏÏÏÏÏÏÏÏÏ PT Napsindo Primatel Internasional PT Tangara Mitrakom ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PT Satelit Palapa Indonesia ÏÏÏÏÏÏÏÏÏ PT Menara Jakarta ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PT Mobile Selular Indonesia ÏÏÏÏÏÏÏÏ PT Komunikasi Selular IndonesiaÏÏÏÏ Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Cost method: PT Telekomindo Primabhakti ÏÏÏÏÏÏÏ PT Radio Telepon Indonesia ÏÏÏÏÏÏÏÏ PT Batam Bintan TelekomunikasiÏÏÏÏ PT Bangtelindo ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Medianusa Pte. Ltd.ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Investment in convertible bonds Ì PT Aplikanusa Lintasarta ÏÏÏÏÏÏÏÏÏÏÏ Decline in value of investments ÏÏÏÏÏÏÏ Net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

1999 Percentage of Carrying Ownership Amount Rp

2000 Percentage of Carrying Ownership Amount Rp

Jakarta Jakarta Bekasi Jakarta Surabaya Jakarta Jakarta Jakarta Jakarta Jakarta Jakarta Jakarta Jakarta Jakarta

42.72 37.66 22.57 25.00 20.17 30.00 35.00 31.00 32.00 25.00 22.50 20.00 25.00 35.00

965,908 84,162 133,273 47,740 29,162 6,674 3,474 4,715 480 282 184,370 7,161 Ì Ì 1,467,401

42.72 37.66 22.57 25.00 20.17 30.00 35.00 31.00 32.00 25.00 22.50 20.00 25.00 35.00

1,491,071 102,817 77,625 66,386 9,777 6,976 3,412 2,575 2,390 232 Ì Ì Ì Ì 1,763,261

Jakarta Jakarta Batam Bandung Singapore

9.00 12.86 5.00 3.18 Ì

90,000 11,695 587 199 Ì

9.00 12.86 5.00 3.18 18.50

90,000 11,695 587 199 108

Jakarta

Ì

4,051 (90,000) 16,532 1,483,933

Ì

4,051 (101,695) 4,945 1,768,206

PT Telekomunikasi Selular (""Telkomsel'') Telkomsel is engaged in providing telecommunications facilities and GSM mobile cellular services with national coverage. Telkomsel received noncash capital contributions from its stockholders in 1999 and 2000, and also allocated a certain percentage of the 1999 net income as a bonus distribution to its employees in 2000. The carrying amount of the Company's investment in Telkomsel was adjusted to reÖect the eÅect of the change in Telkomsel's equity resulting from such transactions.

F-28

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) 1999 Rp

Beginning balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Equity in net income of associated company ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Dividends received ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ DiÅerence due to change of equity in associated company ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ending balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

2000 Rp

686,501 965,908 287,677 574,920 (8,629) (42,795) 359 (6,962) 965,908 1,491,071

PT Aplikanusa Lintasarta (""Lintasarta'') Lintasarta is a data communication operator and network application services company. Lintasarta provides Packet Switched Data Network (""PSDN''), Very Small Aperture Terminal (""VSAT'') data, Electronic Mail (""E-Mail''), and Digital Data Networks (""DDNs'') services. Lintasarta also supplies Data Over Voice (""DOV'') digital equipment and network application facilities for Indonesia's oÇcial electronic bank reporting system, shared Automated Teller Machine (""ATM'') system, a money market information system, and a regional processor for the Society for Worldwide Interbank Financial Telecommunications (""SWIFT'') system in Indonesia. In April 1996, the Company purchased from Lintasarta 3,000 convertible bonds with a nominal value of Rp 1 million per unit. The bonds will mature in 2001 and earn interest at the average annual rate for three-month period of time deposits from the largest state-owned banks and three privatelyowned banks, plus 1%. The bonds are convertible upon maturity into Lintasarta's shares of stock at their par value. In June 1997, the Company increased its ownership in Lintasarta to 27.46% by acquiring 1,210 shares representing a 2.46% equity ownership and 295 convertible bonds which were previously owned by PT Telekomindo Primabhakti (one of the stockholders of Lintasarta). In November 1997, Lintasarta issued 7,344 new shares with a par value of Rp 1 million per share. The issuance of the new shares decreased the ownership of the Company to 24.43%, since the Company did not acquire its portion of the new shares. In October 1998, the Company increased its ownership in Lintasarta to 32.53% by acquiring 13,945 shares with a par value of Rp 1 million per share. In May 1999, the Company increased its ownership in Lintasarta to 33.43% by acquiring 836 shares owned by ""Dana Pensiun Bapindo'' at Rp 2.5 million per share. At the same time, the Company also purchased 104 convertible bonds at Rp 1 million each. In August 1999, the Company increased its ownership in Lintasarta to 36.54% by acquiring 1,009 shares owned by ""Dana Pensiun Bank Bumi Daya'' and 1,881 shares owned by ""Dana Pensiun Bank Dagang Negara'' at Rp 2.5 million per share. At the same time, the Company also purchased 223 and 211 convertible bonds from ""Dana Pensiun Bank Bumi Daya'' and ""Dana Pensiun Bank Dagang Negara'', respectively, at Rp 1 million each. In September 1999, the Company further increased its ownership in Lintasarta to 37.66% by acquiring 1,040 shares owned by ""Dana Pensiun Bank Ekspor-Impor'' at Rp 2.5 million per share. At the same time, the Company also purchased 218 convertible bonds at Rp 1 million each. F-29

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) 1999 Rp

Beginning balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Acquisition of 4,766 shares from other investorsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Equity in net income of associated company ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Dividends receivedÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ending balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

2000 Rp

63,816 84,162 11,619 Ì 16,447 30,646 (7,720) (11,991) 84,162 102,817

PT PasiÑk Satelit Nusantara (""PSN'') PSN is engaged in providing satellite transponder leasing and satellite-based communication services in the Asia-PaciÑc Region. 1999 Rp

Beginning balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Equity in net loss of associated company ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Translation adjustment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ DiÅerence due to change of equity in associated company ÏÏÏÏÏÏÏÏÏÏÏÏÏ Ending balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

2000 Rp

166,919 133,273 (52,443) (60,328) 18,797 3,896 Ì 784 133,273 77,625

PT Citra Sari Makmur (""CSM'') CSM is engaged in providing VSAT, net application services, consulting services on telecommunications technology and related facilities. 1999 Rp

Beginning balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Equity in net income of associated company ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Translation adjustment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ending balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

50,098 3,291 (5,649) 47,740

2000 Rp

47,740 1,378 17,268 66,386

PT Metro Selular Nusantara (""Metrosel'') Metrosel is engaged in providing national mobile cellular services and related facilities in Central Java, Yogyakarta, East Java, Maluku and Irian Jaya. These services were previously provided by the Company under the revenue-sharing arrangements with PT Centralindo Panca Sakti Cellular (a company which has taken over the rights and obligations of PT Centralindo Panca Sakti or ""CPS''). The Company's initial capital contribution of Rp 10,087 million represents a 20.17% ownership interest and was made in the form of property, plant and equipment under the revenue-sharing arrangement between the Company and CPS, over which the Company has the right of ownership upon termination of such revenue-sharing arrangement. In February 1997, Metrosel issued 1,250,000 new shares with a par value of Rp 10,000 per share to Asia Link B.V. for U.S.$84,375 thousand. The issuance of the new shares has no impact on the Company's ownership interest since the Company was granted 251,940 shares by the Company's F-30

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) Pension Fund (formerly Yayasan Dana Pensiun Pegawai PT Telekomunikasi Indonesia/""YDPP Telkom''), a stockholder of Metrosel. 1999 Rp

Beginning balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Equity in net loss of associated company ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ending balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

2000 Rp

32,113 29,162 (2,951) (19,385) 29,162 9,777

PT Patra Telekomunikasi Indonesia (""Patrakomindo'') Patrakomindo is engaged in providing satellite communication system services and related facilities to the petroleum industry. 1999 Rp

Beginning balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Equity in net income of associated company ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Dividend received ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ending balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

2000 Rp

Ì 6,674 6,674 351 Ì (49) 6,674 6,976

PT Indonusa Telemedia (""Indonusa'') Indonusa is engaged in providing multimedia telecommunications services. In 2000, the Company acquired an additional 2,800,000 shares amounting to Rp 28,000 million, of which Rp 14,000 million was paid in September 2000 and the remaining Rp 14,000 million was paid on January 10, 2001. The Company recognized the payment made in 2000 as ""Advance Payment for Investment in Shares of Stock'' which will be reclassiÑed to investment once the legal requirements for the increase in Indonusa's issued capital are completed. 1999 Rp

Beginning balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Equity in net loss of associated company ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ending balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

2000 Rp

4,286 3,474 (812) (62) 3,474 3,412

PT Multimedia Nusantara (""Multimedia'') Multimedia is engaged in providing pay-television and multimedia telecommunications services. 1999 Rp

Beginning balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Equity in net loss of associated company ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ending balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ F-31

2000 Rp

6,397 4,715 (1,682) (2,140) 4,715 2,575

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) PT Napsindo Primatel Internasional (""Napsindo'') Napsindo is engaged in providing ""Network Access Point'' (NAP), ""Voice Over Data'' (VOD) and other related business. The Company's investment of Rp 1,036 million in Napsindo representing 32% equity ownership, had been fully paid by PT Infoasia Sukses Mandiri (ISM) based on a grant agreement between ISM and the Company. 1999 Rp

Beginning balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Capital contribution ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Equity in net income (loss) of associated company ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ending balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

2000 Rp

Ì 480 1,036 Ì (556) 1,910 480 2,390

Based on the Deed of Napsindo's Resolution No. 104 dated October 31, 2000 which was notarized by Ellize Asmawel, S.H., in relation with the increase in Napsindo's paid-in capital, the Company has increased its investment in Napsindo to Rp 14,876 million in order to maintain its 32% ownership interest. The increase in investment was eÅected through compensation of Napsindo's debt to the Company. As of December 31, 2000, the Company has not recorded the increase in investment as the legal requirements for the increase in Napsindo's authorized and issued capital have not been fully completed. PT Tangara Mitrakom (""Tangarakom'') Tangarakom is engaged in providing VSAT. Based on a grant agreement dated December 26, 1997 between the Company and PT Prima Tangara Citra (PTC), it was agreed that the Company's investment in Tangarakom amounting to Rp 250 million, representing a 25% ownership interest, would be paid by PTC and Koperasi Swadharma as donation to the Company. In 1999, PTC and Koperasi Swadharma made the payment in the amount of Rp 217 million and Rp 33 million, respectively.

Beginning balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Capital contribution ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Equity in net income (loss) of associated company ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Dividend received ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ending balanceÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

1999 Rp

2000 Rp

Ì 250 32 Ì 282

282 Ì (44) (6) 232

Based on the Deed of Tangarakom's Resolution No. 122 dated November 29, 2000 which was notarized by Agus Madjid, S.H., Tangarakom issued 1,500 new shares with par value of Rp 1 million per share. The issuance of the new shares decreased the ownership of the Company to 10% since the Company did not acquire its portion of the new shares. F-32

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) As of December 31, 2000, the investment in Tangarakom was still accounted for using the equity method as the legal requirements for the increase in Tangarakom's issued capital have not been fully completed. PT Satelit Palapa Indonesia (""Satelindo'') Satelindo is engaged in providing GSM mobile cellular services, international telecommunications services and satellite transponder leasing. In 1999, the Company's investment in Satelindo was adjusted to reÖect the increase in additional paid-in capital of Satelindo which resulted from grant contributions from DeTeMobil Deutsche Telekom MobilNet Gmbh, one of its stockholders. The increase, net of deferred tax eÅect, is reÖected as ""DiÅerence Due to Change of Equity in Associated Company'' in the consolidated balance sheets. 1999 Rp

Beginning balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Equity in net income (loss) of associated company ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ DiÅerence due to change in equity in associated company ÏÏÏÏÏÏÏÏÏÏÏÏ Ending balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

2000 Rp

Ì 184,370 168,982 (184,370) 15,388 Ì 184,370 Ì

PT Menara Jakarta (""MJ'') MJ intended to construct and operate building tower and related facilities. The economic diÇculties faced by Indonesia (Note 39) have resulted to the termination of MJ's construction projects at the end of 1997. 1999 Rp

Beginning balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Equity in net income of associated company ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Decline in value of investment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ending balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

2000 Rp

7,026 7,161 135 Ì Ì (7,161) 7,161 Ì

PT Mobile Selular Indonesia (""Mobisel'') Mobisel is engaged in providing mobile cellular services and related facilities. These services were previously provided by the Company under the revenue-sharing arrangements with PT Rajasa Hazanah Perkasa (""RHP''). The capital contribution of the Company amounting to Rp 10,398 million, which represents a 25% equity ownership, was made in the form of property, plant and equipment under the revenue-sharing arrangements between the Company and RHP, over which the Company has the right of ownership at the termination of the revenue-sharing arrangements. At December 31, 1999 and 2000, the carrying amount of the Company's investment in Mobisel is nil. F-33

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) PT Komunikasi Selular Indonesia (""Komselindo'') Komselindo is a joint-venture between the Company and PT Elektrindo Nusantara (""Elektrindo''), and is engaged in providing analog mobile cellular services. These services were previously provided by the Company under the revenue-sharing arrangements with Elektrindo. Elektrindo transferred its property, plant and equipment acquired under the revenue-sharing arrangements to Komselindo for Rp 188,195 million based on the appraised value and the agreement among the Company, Elektrindo and Komselindo. This transaction is considered as a transaction between entities under common control since Elektrindo owns 65% of Komselindo. The Company recognized its equity in the loss from the diÅerence between the transfer price and the net book value, to the extent of the amount of its investment in Komselindo. As of December 31, 1999 and 2000, the carrying value of the investment in Komselindo is nil. Based on the Deed of Komselindo's Resolution No. 110 dated October 10, 2000 which was notarized by Ny. R. Arie Soetardjo, S.H., the Company agreed to the conversion of Rp 92,750 million of receivable from Komselindo to equity in order to maintain a 35% ownership interest. As of December 31, 2000, the Company has not recorded the conversion. PT Telekomindo Primabhakti (""Telekomindo'') Telekomindo is engaged in the construction and development of building and telecommunications facilities. 1999 Rp

CostÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Decline in value of investment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

2000 Rp

90,000 90,000 (90,000) (90,000) Ì Ì

PT Radio Telepon Indonesia (""Ratelindo'') Ratelindo is engaged in providing facilities and telecommunications services using domestic Ñxed wireless network. The Company has recognized a loss due to decline in value of its investment as Ratelindo had a capital deÑciency. 1999 Rp

CostÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Decline in value of investment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ F-34

2000 Rp

11,695 11,695 Ì (11,695) 11,695 Ì

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) PT Batam Bintan Telekomunikasi (""BBT'') BBT is engaged in providing Ñxed line telecommunications services at Batamindo Industrial Park in Muka Kuning, Batam Island and at Bintan Beach International Resort and Bintan Industrial Estate in Bintan Island. In June 1996, based on a cooperation agreement between the Company and PT Batamindo Investment Corporation (""BIC''), the Company's investment in BBT was fully paid by BIC as BIC's donation to the Company. PT Bangtelindo PT Bangtelindo is primarily engaged in providing consultancy services on the installation and maintenance of telecommunications facilities. Medianusa Pte. Ltd. Medianusa Pte. Ltd. is an associated company of Infomedia, a subsidiary. Medianusa is engaged as a sales agent, in search of advertisers for telephone directories. The Company plans to restructure its investments in associated companies by selling its shares in Tangarakom, MJ, Patrakomindo and Mobisel, based on the letters No. 115-118/KU830/ KUG-00/2000/ RHS, all dated November 28, 2000 which were addressed to the president directors of the respective associated companies. 10. PROPERTY, PLANT AND EQUIPMENT January 1, 1999

At cost or revalued amounts: Land ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Buildings ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Switching equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Telegraph, telex and data communication equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Transmission installation and equipment ÏÏÏÏÏÏ Satellite, earth station and equipmentÏÏÏÏÏÏÏÏÏ Cable network ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Power supply ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Data processing equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Other telecommunications peripherals ÏÏÏÏÏÏÏÏ OÇce equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Vehicles ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Other equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

F-35

Additions(1&2)

Deductions

December 31, 1999

279,887 1,391,434 6,640,033

16,121 28,842 97,595

180,762 42,906 232,150

115,246 1,377,370 6,505,478

221,587 3,351,302 1,802,450 7,519,968 730,133 680,541 937,060 330,755 148,788 47,376

Ì 686,485 1,304,011 949,925 14,383 48,101 19,856 24,276 3,943 4,321

261 37,124 46,001 35,704 15,100 24,835 495,818 2,940 1,970 Ì

221,326 4,000,663 3,060,460 8,434,189 729,416 703,807 461,098 352,091 150,761 51,697

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah)

Property under construction: Buildings ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Switching equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Transmission installation and equipment ÏÏÏÏ Satellite, earth station and equipmentÏÏÏÏÏÏÏ Cable network ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Power supply ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Data processing equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Other telecommunications peripherals ÏÏÏÏÏÏ Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

January 1, 1999

Additions(1&2)

Deductions

December 31, 1999

84,714 275,880 1,358,505 963,518 746,106 32,990 48,119 4,923 27,596,069

14,858 321,100 152,537 418,981 747,327 9,317 17,356 13,210 4,892,545

25,693 149,625 1,061,010 1,281,657 714,707 12,124 19,031 12,105 4,391,523

73,879 447,355 450,032 100,842 778,726 30,183 46,444 6,028 28,097,091

Accumulated depreciation: Land ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Buildings ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Switching equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Telegraph, telex and data communication equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Transmission installation and equipment ÏÏÏÏÏÏ Satellite, earth station and equipmentÏÏÏÏÏÏÏÏÏ Cable network ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Power supply ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Data processing equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Other telecommunications peripherals ÏÏÏÏÏÏÏÏ OÇce equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Vehicles ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Other equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

43,197 451,318 2,436,340

16,015 75,051 449,912

59,212 25,630 232,150

Ì 500,739 2,654,102

172,089 1,288,414 1,241,758 2,198,933 441,768 172,498 761,163 228,953 96,985 13,305 9,546,721

16,928 152,052 403,918 884,742 74,649 67,403 109,080 48,572 19,427 11,088 2,328,837

18 37,124 46,001 35,704 15,099 24,835 495,817 2,940 1,938 Ì 976,468

188,999 1,403,342 1,599,675 3,047,971 501,318 215,066 374,426 274,585 114,474 24,393 10,899,090

Net Book Value ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

18,049,348

17,198,001

(1) including reclassiÑcation from ""Property, Plant and Equipment under Revenue-Sharing Arrangements'' and reclassiÑcation of computer software. (2) including prior-period correction charged/credited to Other Expenses/Income

F-36

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) January 1, 2000

At cost or revalued amounts: Land ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ BuildingsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Switching equipment ÏÏÏÏÏÏÏÏÏÏÏÏ Telegraph, telex and data communication equipment ÏÏÏÏÏ Transmission installation and equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Satellite, earth station and equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Cable networkÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Power supply ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Data processing equipment ÏÏÏÏÏÏ Other telecommunications peripherals ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ OÇce equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Vehicles ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Other equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Property under construction: BuildingsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Switching equipment ÏÏÏÏÏÏÏÏÏÏ Transmission installation and equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Satellite, earth station and equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Cable networkÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Power supply ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Data processing equipment ÏÏÏÏ Other telecommunications peripherals ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Accumulated depreciation: BuildingsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Switching equipment ÏÏÏÏÏÏÏÏÏÏÏÏ Telegraph, telex and data communication equipment ÏÏÏÏÏ Transmission installation and equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Satellite, earth station and equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Cable networkÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Power supply ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Data processing equipment ÏÏÏÏÏÏ

Additions

Deductions

ReclassiÑcations

115,246 1,377,370 6,505,478

3,465 3,731 15,555

Ì Ì Ì

22 91,323 538,665

221,326

200

Ì

(14,934)

4,000,663

6,823

2,384

3,060,460 8,434,189 729,416 703,807

5,964 43,910 6,826 155,459

461,098 352,091 150,761 51,697

December 31, 2000

118,733 1,472,424 7,059,698 206,592

227,133

4,232,235

276,942 8,752 2,337 Ì

(285,118) 1,151,931 77,607 (9,874)

2,504,364 9,621,278 811,512 849,392

27,451 45,266 11,405 7,077

146 689 1,606 Ì

8,534 10,347 (2,585) 2,748

496,937 407,015 157,975 61,522

73,879 447,355

118,370 417,599

Ì Ì

(135,453) (555,846)

56,796 309,108

450,032

31,794

Ì

(237,675)

244,151

100,842 778,726 30,183 46,444

41,790 747,974 23,309 65,542

Ì Ì Ì Ì

(132,310) (1,183,878) (42,352) (10,181)

10,322 342,822 11,140 101,805

6,028 28,097,091

11,923 1,791,433

Ì 292,856

(12,468) (514,364)

5,483 29,081,304

500,739 2,654,102

66,052 467,647

Ì Ì

(921) (12,153)

565,870 3,109,596

188,999

9,521

Ì

(2,675)

195,845

1,403,342

299,135

2,384

(3,470)

1,696,623

1,599,675 3,047,971 501,318 215,066

146,773 722,905 70,086 97,932

232,685 8,752 2,337 Ì

(420,009) (33,516) (2,165) (16,066)

1,093,754 3,728,608 566,902 296,932

F-37

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) January 1, 2000

Additions

Deductions

Other telecommunications peripherals ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ OÇce equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Vehicles ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Other equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

374,426 274,585 114,474 24,393 10,899,090

45,998 36,619 17,033 10,742 1,990,443

146 689 1,555 Ì 248,548

Net Book ValueÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

17,198,001

ReclassiÑcations

(21,909) 1,326 (2,218) 609 (513,167)

December 31, 2000

398,369 311,841 127,734 35,744 12,127,818 16,953,486

Depreciation charged to operations amounted to Rp 2,026,601 million, Rp 2,259,419 million and Rp 1,990,443 million in 1998, 1999 and 2000, respectively. Interest capitalized to property under construction amounted to Rp 116,766 million, Rp 133,300 million and Rp 62,534 million in 1998, 1999 and 2000, respectively. Capitalization rates are the borrowing rates on debts incurred related to property under construction. Foreign exchange diÅerential capitalized as part of property under construction amounted to Rp 336,777 million, (Rp 72,677) million and Rp 175,489 million in 1998, 1999 and 2000, respectively. Management believes that no impairment in assets value contemplated in PSAK No. 48 concerning ""Impairment of Assets'' has occurred. For property, plant and equipment which are no longer used due to technological change, obsolescence, or malfunction, an accelerated depreciation is employed and such property, plant and equipment are then reclassiÑed to property not used in operation. The Company and its subsidiary own several pieces of land located throughout Indonesia with Building Use Right (Hak Guna Bangunan or HGB) for a period of 20 Ó 30 years which will expire between 2001 Ó 2029. Management believes that there will be no diÇculty in the extension of the landrights since all the parcels of land were acquired legally and supported by suÇcient evidence of ownership. Some of the Company's land measuring 1,401,181 m2 are still under the name of other parties including, among others, the now defunct Ministry of Tourism, Post and Telecommunications and the Ministry of Communication of the Republic of Indonesia. As of February 28, 2001, the transfer of the legal title of ownership on those parcels of land to the Company is still in progress. At December 31, 1999 and 2000, all property, plant and equipment, except land, were insured with PT Asuransi Jasa Indonesia against Ñre, theft and other possible risks for Rp 14,089,462 million and Rp 16,137,128 million, respectively, and an additional coverage for Palapa B4 and Telkom 1 Satellite for U.S.$12,980 thousand at December 31, 1999 and U.S.$83,870 thousand at December 31, 2000. Management believes that the insurance coverage is adequate to cover possible losses on the assets insured.

F-38

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) 11. PROPERTY, PLANT AND EQUIPMENT UNDER REVENUE-SHARING ARRANGEMENTS January 1, 1999

Additions(*)

Deductions

December 31, 1999

At cost: LandÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Buildings ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Switching equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Transmission installation and equipment Cable network ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Other telecommunication peripherals ÏÏÏ TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

3,160 13,782 640,862 169,624 326,511 135,893 1,289,832

Ì 10,170 78,602 Ì 13,618 Ì 102,390

Ì Ì Ì Ì Ì 94,948 94,948

3,160 23,952 719,464 169,624 340,129 40,945 1,297,274

Accumulated depreciation: LandÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Buildings ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Switching equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Transmission installation and equipment Cable network ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Other telecommunication peripherals ÏÏÏ TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

672 3,384 206,119 151,732 150,899 114,212 627,018

158 3,749 92,025 5,954 14,109 16,854 132,849

Ì Ì Ì Ì Ì 93,483 93,483

830 7,133 298,144 157,686 165,008 37,583 666,384

Net Book Value ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

662,814

630,890

(*) including prior period adjustments which were charged/credited to Other Expense/Income January 1, 2000

At cost: Land ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Buildings ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Switching equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏ Transmission installation and equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Cable network ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Other telecommunications peripherals ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

Additions

Deductions

ReclassiÑcations

December 31, 2000

3,160 23,952 719,464

Ì Ì Ì

Ì Ì Ì

Ì Ì (92,948)

3,160 23,952 626,516

169,624 340,129

Ì Ì

Ì Ì

(62,066) (5,337)

107,558 334,792

40,945 1,297,274

Ì Ì

Ì Ì

160,351 Ì

F-39

201,296 1,297,274

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) January 1, 2000

Accumulated depreciation: Land ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Buildings ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Switching equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏ Transmission installation and equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Cable network ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Other telecommunication peripherals ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Net Book Value ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

December 31, 2000

Additions

Deductions

ReclassiÑcations

830 7,133 298,144

158 1,198 44,000

Ì Ì Ì

Ì (133) (57,659)

988 8,198 284,485

157,686 165,008

11,559 26,830

Ì Ì

(92,858) 643

76,387 192,481

37,583 666,384

13,636 97,381

Ì Ì

150,007 Ì

201,226 763,765

630,890

533,509

Depreciation charged to operations amounted to Rp 135,414 million, Rp 104,160 million and Rp 97,381 million in 1998, 1999 and 2000, respectively. Rights to the property, plant and equipment under revenue-sharing arrangements are legally retained by the investors until the end of the revenue-sharing period (Note 34). The details of unearned income under revenue-sharing arrangements are as follows: 1999 Rp

Gross amount ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Accumulated amortization ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Cumulative eÅect of contract amendment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

2000 Rp

1,297,274 1,297,274 (859,322) (997,865) (311) Ì 437,641 299,409

12. TRADE ACCOUNTS PAYABLE 1999 Rp

Related parties Payable to other telecommunications carriers ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Purchases of equipment, materials and servicesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Concession fees ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Third parties Purchases of equipment, materials and servicesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Payable related to revenue-sharing arrangements ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ F-40

2000 Rp

258,472 49,896 26,690 57,132 392,190

192,735 130,795 33,913 18,032 375,475

335,541 103,506 27,087 466,134 858,324

682,908 118,899 25,736 827,543 1,203,018

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) Trade accounts payable by currency are as follows:

Rupiah ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Japanese Yen ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ French FrancÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ United States Dollar ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Deutsche MarkÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

1999 Rp

2000 Rp

847,360 Ì 4,350 6,614 Ì 858,324

1,062,524 106,576 26,070 6,790 1,058 1,203,018

13. TAXES PAYABLE

Corporate income tax (Note 26)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Income taxes Article 21 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Article 23 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Article 25 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Article 26 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Property taxÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Value Added Tax ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

1999 Rp

2000 Rp

503,980

118,009

19,865 1,052 7,721 7,166 Ì 87,157 626,941

40,539 3,080 52,836 849 193 123,450 338,956

The amount of Output VAT which has not been remitted to the State Treasury is reported in the taxes payable account. Based on a circular letter No. SE-48/PJ.3/1988 dated December 31, 1988 of the Director General of Taxation, the Company is not allowed to credit the Input VAT against the Output VAT. However, based on the letter from Director General of Taxation No. S-2023/PJ.53/2000 dated October 24, 2000, the Company will be able to credit the Input VAT up to the balance which has not been expensed starting from January 1, 2001. VAT is applied on the provision of interconnection services between telecommunications companies starting from January 1, 2000 in accordance with the circular letter of the Director General of Taxation No. SE-01/PJ.54/2000 dated January 19, 2000.

F-41

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) 14. ACCRUED EXPENSES

Postretirement beneÑt cost ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Interest and bank charges ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Salaries and employees bonuses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ General, administrative and marketingÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Operation, maintenance and telecommunications servicesÏÏÏÏÏÏÏÏÏÏÏÏÏ Others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

1999 Rp

2000 Rp

272,650 385,479 103,551 93,427 61,196 163,230 1,079,533

371,603 269,933 72,652 64,024 45,045 12,773 836,030

15. LONG-TERM DEBT Two-Step Loan Ì related party The recognition of two-step loans (loans which were obtained by the Government of the Republic of Indonesia from overseas banks and a consortium of contractors which are then on-loaned to the Company) is based on Withdrawal Authorization (""WA'') or other similar documents issued by the lenders. The loans entered into up to July 1994 were recorded and are payable in Rupiah based on the exchange rate at the date of withdrawal. Loans entered into after July 1994 are payable in their original currencies and any resulting foreign exchange gain or loss is borne by the Company. The details of the two-step loans are as follows: Interest Rate (%)

Creditors

Overseas banks ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Consortium of contractorsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Current maturitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Long-term portionÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

3.10-13.91 3.20-14.53

1999 RP

7,875,346 443,341 8,318,687 (674,679) 7,644,008

2000 Rp

9,239,333 431,835 9,671,168 (818,516) 8,852,652

The loans originating from overseas banks are payable in various currencies except for Rp 4,431,233 million in 1999 and Rp 4,048,905 million in 2000 which are payable in Rupiah. The loans acquired are intended for and are attributable to the construction of certain property, plant and equipment. The loans are payable in semi-annual installments and are due on various dates until 2025. The loans originating from the consortium of contractors are payable in Japanese Yen except for Rp 223,737 million in 1999 and Rp 196,947 million in 2000 which are payable in Rupiah. The loans acquired are used to Ñnance the Company's second digital telephone exchange project. The loans are payable in semi-annual installments and are due on various dates until 2015.

F-42

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) Each of the loans bears one of the following interest rates: Ì Fixed rate. Ì Average interest rate on 3-month term Bank Indonesia CertiÑcate during the last six-month before the six-month period within which the installment falls due, plus 1%, the interest rate of which is established by the Ministry of Finance through its periodic notice to the Company. Ì Interest rate oÅered by lenders, plus 0.5%. The annual interest rates charged on loans repayable in Rupiah range from 12.25% to 46.67% in 1999 and from 12.25% to 14.53% in 2000, on those repayable in U.S. Dollar range from 4% to 8.72% in 1999 and from 4% to 9.26% in 2000, and on those repayable in Japanese Yen range from 3.10% to 3.20% in 1999 and 2000. The unused portions of the credit facilities as of December 31, 2000 in U.S. Dollar, French Franc and Japanese Yen amounted to U.S.$98,419 thousand, FRF 1,616 thousand and Í 5,931 million, respectively. The schedule of the required principal payments on the Company's long-term debt as of December 31, 2000 is as follows: Year

2000 Rp

2001 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2002 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2003 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2004 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2005 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2006 Ó 2025 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

818,516 797,499 791,718 774,177 782,498 5,706,760 9,671,168

Project Cost Payable This account represents the Company's liabilities to a number of contractors, denominated in various currencies, except for Rp 109,719 million in 1999 and Rp 81,803 million in 2000 which are denominated in Rupiah. These liabilities arise from contractor billings which have not been paid for by the lender through the ""two-step loans'' discussed above. At December 31, 2000, project cost payable to related parties amounted to Rp 12,606 million.

F-43

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) 16. CAPITAL STOCK

Name of Stockholder

Number of Shares

Series A Dwiwarna share State of the Republic of IndonesiaÏÏÏÏÏÏÏ Series B shares State of the Republic of IndonesiaÏÏÏÏÏÏÏ Public (below 5% each)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

1999 and 2000 Percentage of Ownership (%)

Total Paid-up Capital Rp

1

Ì

Ì

6,672,235,355 3,407,764,284 10,079,999,640

66.19 33.81 100.00

3,336,118 1,703,882 5,040,000

At December 31, 2000, the Company's commissioners, directors, and employees owned a total of 24,210,919 Company's shares. 17. ADDITIONAL PAID-IN CAPITAL 1998 Rp

Proceeds from sale of 933,333,000 shares with par value of Rp 2,050 per share through initial public oÅering in 1995 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Capitalization into 746,666,640 series B shares in 1999 ÏÏÏÏ Balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

1,446,666 Ì 1,446,666

1999 Rp

2000 Rp

1,446,666 1,446,666 (373,333) (373,333) 1,073,333 1,073,333

18. OPERATING REVENUES Ì TELEPHONE 1998 Rp

Local and domestic long-distance usage ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Monthly subscription charges ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Installation charges ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Phone cardsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ OthersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

1999 Rp

2000 Rp

2,902,565 3,570,891 4,097,093 683,273 799,074 887,355 105,854 68,277 75,382 (2,065) (8,645) 34,426 115,580 99,305 83,608 3,805,207 4,528,902 5,177,864

19. OPERATING REVENUES Ì REVENUE UNDER JOINT OPERATION SCHEME

Minimum Telkom Revenues ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Share in distributable KSO revenues ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Amortization of unearned initial investor payments under Joint Operation Scheme ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ F-44

1998 Rp

1999 Rp

2000 Rp

1,433,436 142,752

1,452,912 208,956

1,556,699 695,106

15,349 1,591,537

15,349 1,677,217

15,349 2,267,154

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) Distributable KSO revenues represent the entire KSO revenues, net of MTR and operational expenses of the KSO Units. These revenues are shared between the Company and the KSO Investors based upon agreed percentages. Agreed percentages for revenue distribution between the Company and KSO Investors for 1998 Ó 1999 and 2000 were 10%:90% and 30%:70%, respectively. 20. OPERATING REVENUES Ì OTHER TELECOMMUNICATIONS SERVICES

Revenues under Revenue-Sharing Arrangements: Net share in revenues earned under Revenue-Sharing ArrangementsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Amortization of unearned income under Revenue-Sharing ArrangementsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Leased lines ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Satellite transponder leaseÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Multimedia ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Telex and telegram ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

1998 Rp

1999 Rp

2000 Rp

126,932

151,973

170,133

158,233 104,596 208,270 24,596 16,899 8,219 647,745

156,174 100,475 215,790 35,407 13,078 19,143 692,040

138,232 193,869 183,255 65,164 7,498 51,055 809,206

21. OPERATING EXPENSES Ì PERSONNEL 1998 Rp

Salaries and related allowances ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 359,376 Vacation pay, incentives and other allowances ÏÏÏÏÏÏÏÏÏÏÏÏ 137,980 Employee income tax ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 67,434 Net periodic postretirement beneÑt costÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 107,997 Net periodic pension cost ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 30,754 HousingÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 44,212 Medical ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 31,403 Others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 52,598 TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 831,754

F-45

1999 Rp

2000 Rp

519,444 159,208 109,885 121,541 61,069 43,067 38,332 53,156 1,105,702

635,015 236,594 172,943 165,103 72,643 65,401 52,941 38,816 1,439,456

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) 22. OPERATING EXPENSES Ì OPERATION, MAINTENANCE AND TELECOMMUNICATIONS SERVICES

Distributors' and telephone kiosks' commissions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Operation and maintenanceÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Electricity, gas and water ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Insurance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Concession fees ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Travel ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Radio frequency usage charges ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Franchise fee ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Cost of phone cardsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Year 2000 remediation cost ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ OthersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

1998 Rp

1999 Rp

2000 Rp

107,396 192,334 76,998 29,301 42,971 5,754 7,257 12,146 5,163 9,534 12,538 501,392

242,909 227,413 75,821 40,783 52,028 7,346 7,006 6,695 292 142,702 19,038 822,033

372,258 309,596 102,935 92,280 50,467 11,029 9,445 6,255 2,195 1,228 51,784 1,009,472

1998 Rp

1999 Rp

23. OPERATING EXPENSES Ì GENERAL AND ADMINISTRATIVE

Provision for doubtful accounts and inventory obsolescence ÏÏÏÏÏÏÏÏÏÏÏ Training, education and recruitment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Collection expensesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ TravelÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Security and screening ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Research and development ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Professional fees ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Printing and stationery ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Amortization of deferred stock issuance costsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Meetings ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

2000 Rp

97,223 161,973 278,960 131,045 98,155 101,490 61,211 67,998 100,970 29,623 38,742 49,217 15,123 22,294 34,707 12,347 12,598 33,110 28,054 10,177 30,748 25,167 24,963 26,700 26,883 26,883 22,402 10,339 14,094 16,326 36,532 30,511 20,415 473,547 508,388 715,045

24. INTEREST EXPENSE 1998 Rp

Interest expense ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Interest capitalized to property under construction ÏÏÏÏÏÏÏÏÏ Charged to current operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

F-46

1999 Rp

2000 Rp

1,097,480 1,620,730 879,283 (116,766) (133,300) (62,534) 980,714 1,487,430 816,749

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) 25. OTHER INCOME (CHARGES) Ì OTHERS Ì NET 1998 Rp

Income from Ñnes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ RentalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ TrainingÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ RepairsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Supporting facilities replacement ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Collection service revenueÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

1999 Rp

69,606 24,427 11,801 20,992 9,699 9,669 22,449 168,643

2000 Rp

69,966 95,650 29,582 59,190 14,600 36,088 24,455 28,003 18,739 22,259 14,512 12,433 (58,221) 73,837 113,633 327,460

26. INCOME TAX Tax expense of the Company and its subsidiary consists of the following:

Current tax ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Deferred tax ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

1998 Rp

1999 Rp

2000 Rp

159,153 96,629 255,782

613,897 163,150 777,047

677,250 228,954 906,204

Current Tax A reconciliation between income before tax per consolidated statements of income and taxable income is as follows: 1998 Rp

Income before tax per consolidated statements of income Minority interest in subsidiary's income before tax ÏÏÏÏÏÏÏ Income before taxÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Temporary diÅerences: Provision for doubtful accounts ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Provision for inventory obsolescenceÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Provision for decline in value of securities ÏÏÏÏÏÏÏÏÏÏÏÏÏ Timing diÅerence of KSO Units ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Amortization of deferred stock issuance costs ÏÏÏÏÏÏÏÏÏÏ Equity in income of associated companies ÏÏÏÏÏÏÏÏÏÏÏÏÏ Depreciation of property, plant and equipment ÏÏÏÏÏÏÏÏ Gain on sale of property, plant and equipment ÏÏÏÏÏÏÏÏ Net periodic pension costs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Inventory written oÅ ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Amortization of landrights ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ F-47

1,424,452 Ì 1,424,452

1999 Rp

2000 Rp

2,962,713 3,458,376 (18,680) (21,087) 2,944,033 3,437,289

99,244 114,721 217,294 (2,021) 47,252 61,666 Ì 90,000 18,856 4,935 3,677 14,605 12,706 16,250 14,428 (7,124) (437,817) (356,575) (330,233) (68,485) (349,114) (2,960) (78,322) (218,708) (14,307) 45,062 (155,839) (11,473) (8,673) (3,992) Ì (2,885) (894)

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) 1998 Rp

Accounts receivable written oÅ ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ OthersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Nondeductible expenses (nontaxable income): Net periodic postretirement beneÑt cost ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Depreciation of property, plant and equipment under Revenue-Sharing Arrangements ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Employees' beneÑts ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Repairs and maintenance on leased land/buildings ÏÏÏÏÏ Non-deductible expenses of KSO Units ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Tax penalty ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Interest income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Amortization of unearned income on Revenue-Sharing Arrangements ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Income from land/building rental ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ OthersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Taxable incomeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

1999 Rp

2000 Rp

(47,289) (116,168) Ì (23,575) Ì Ì (322,097) (395,388) (758,273) Ì

121,541

165,103

135,414 104,161 97,381 25,203 26,166 32,048 7,569 14,297 28,462 (5,300) 6,157 17,256 Ì 52,150 16,703 (595,952) (687,757) (631,646) (158,233) (156,174) (138,232) (15,465) (29,412) (58,211) 34,950 26,864 28,139 (571,814) (522,007) (442,997) 530,541 2,026,638 2,236,019

The details of current tax expense and payable of the Company are as follows: 1998 Rp

Current tax expense ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 159,153 Less prepaid taxes Income tax Article 22 1,449 Article 23 8,798 Article 25 127,892 TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 138,139 Current tax payable of the Company ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 21,014 Subsidary ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 21,014

1999 Rp

2000 Rp

607,983

670,796

132 25 14,006 14,283 89,865 541,074 104,003 555,382 503,980 115,414 Ì 2,595 503,980 118,009

The taxable income and current tax payable of the Company and its subsidiary for 1999 are in accordance with the corporate tax returns Ñled with the Tax Service OÇce. In 2000, the Company received Tax Assessment Letters (SKP) from the Tax Service OÇce for its corporate income tax for the years 1997 to 1999. The additional tax due was settled in December 2000 and the diÅerence between the recorded amount of tax liabilities/prepayments and the amount assessed by the Tax Service OÇce was charged to current operations. F-48

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) Deferred Tax The details of the Company's deferred tax assets and liabilities are as follows: January 1, 1999 Rp

Movements for the Year Rp

Deferred tax assets: Allowance for doubtful accountsÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 62,578 35,465 Allowance for inventory obsolescence ÏÏÏÏÏÏÏÏÏÏ 4,101 11,630 Allowance for decline in value of securities ÏÏÏÏÏ Ì 27,000 Deferred stock issuance costs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 2,848 Accrued postretirement beneÑt cost ÏÏÏÏÏÏÏÏÏÏÏ 80,143 (80,143) Others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 208 (208) Total deferred tax assetsÏÏÏÏ 147,030 (3,408) Deferred tax liabilities: Depreciation of property, plant and equipment ÏÏ (1,347,784) (44,043) Investment in shares of stock ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (162,721) (140,014) Net periodic pension costs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,664 13,904 Landrights ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì (865) Deferred stock issuance costs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (2,027) 2,027 Total deferred tax liabilities (1,509,868) (168,991) Net deferred tax liabilities ÏÏ (1,362,838) (172,399)

December 31, 1999 Rp

Movements for the Year Rp

December 31, 2000 Rp

98,043

69,496

167,539

15,731

17,442

33,173

27,000

5,657

32,657

2,848

4,328

7,176

Ì Ì 143,622

Ì Ì 96,923

Ì Ì 240,545

(1,391,827)

(170,346)

(1,562,173)

(302,735)

(111,469)

(414,204)

16,568 (865)

(46,818) (268)

(30,250) (1,133)

Ì (1,678,859) (1,535,237)

Ì (328,901) (231,978)

Ì (2,007,760) (1,767,215)

A reconciliation between the total tax expense and the amounts computed by applying the eÅective tax rates to income before tax is as follows: 1998 Rp

Income before tax per consolidated statements of income Minority interest in subsidiary's income before tax ÏÏÏÏÏÏ Income before taxÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

F-49

1,424,452 Ì 1,424,452

1999 Rp

2,962,713 (18,680) 2,944,033

2000 Rp

3,458,376 (21,087) 3,437,289

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) 1998 Rp

Tax expense at eÅective tax rates: 10% x Rp 25 millionÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 15% x Rp 25 millionÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 30% x Rp 1,424,402 million in 1998 Rp 2,943,983 million in 1999 and Rp 3,437,239 million in 2000 ÏÏÏÏÏÏÏÏÏÏÏ Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Tax eÅect of nontaxable income (nondeductible expenses) Interest income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Amortization of unearned income under RevenueSharing ArrangementsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Income from land/building rental ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Postretirement beneÑt cost ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Depreciation of property, plant and equipment under Revenue-Sharing Arrangements ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Employee beneÑts ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Repairs and maintenance on leased land/buildings ÏÏÏÏ Nondeductible expenses of KSO Units ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Tax penalty ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ OthersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Tax expense of the Company ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Tax expense of the SubsidiaryÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total Tax Expense ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

1999 Rp

(2) (4)

2000 Rp

(2) (4)

(2) (4)

(427,321) (883,195) (1,031,172) (427,327) (883,201) (1,031,178)

178,786

206,327

189,494

47,470 4,640 Ì

46,852 8,824 (36,462)

41,470 17,463 (49,531)

(40,624) (31,248) (7,561) (7,850) (2,271) (4,289) 1,590 (1,847) Ì (15,645) (10,485) (53,174) 171,545 111,488 (255,782) (771,713) Ì (5,334) (255,782) (777,047)

(29,215) (9,615) (8,538) (5,177) (5,011) (8,441) 132,899 (898,279) (7,925) (906,204)

27. BASIC EARNINGS PER SHARE Net income per share is computed by dividing net income with the average number of shares outstanding during the year, totaling 9,333,333,000, 9,644,472,563 and 10,079,999,640 shares in 1998, 1999 and 2000, respectively. The Company does not have dilutive potential ordinary shares. 28. CASH DIVIDENDS AND GENERAL RESERVE ‚

Based on the Annual General Meeting of Stockholders as stated in notarial deed No. 25 dated April 17, 1998 of Notary A. Partomuan Pohan, S.H., LL.M., the stockholders approved to distribute cash dividends for 1997 amounting to Rp 452,445 million or Rp 48.48 per share, and appropriate Rp 11,311 million for general reserve.

‚

Based on the Annual General Meeting of Stockholders as stated in notarial deed No. 16 dated April 16, 1999 of Notary A. Partomuan Pohan, S.H., LL.M., the stockholders approved to distribute cash dividends for 1998 amounting to Rp 475,863 million or Rp 50.99 per share, and appropriate Rp 11,897 million for general reserve. F-50

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) ‚

Based on the Annual General Meeting of Stockholders as stated in notarial deed No. 6 dated April 7, 2000 of Notary A. Partomuan Pohan, S.H., LL.M., the stockholders approved to distribute cash dividends for 1999 amounting to Rp 1,086,161 million or Rp 107.76 per share, and appropriate Rp 21,723 million for general reserve.

29. PENSION PLAN The Company provides a deÑned beneÑt pension plan to its employees under which pension beneÑts to be paid are based on the employee's latest basic salary and number of years of service. The plan is managed by Dana Pensiun Telkom, which deed of establishment was approved by the Minister of Finance of the Republic of Indonesia in his decision letter No. S.199/MK.11/1984 dated April 23, 1984. The Pension Fund's main sources of funds are the contributions from the employees and the Company. The employees' contribution is 8.4% of basic salary. Any remaining amount required to fund the plan is contributed by the Company. To increase the pension beneÑts, the Company has increased the basic salaries of active employees by 50%, starting from August 1, 2000. EÅective January 1, 1999, the Company increased the pension beneÑts of pensioners by 15%, and the basic salary of active employees which is the basis for the computation of pension beneÑts, in accordance with the resolutions at the Annual General Meeting of Stockholders and at the Board of Commissioners' Meeting held in 1999. The Company's contributions to the pension fund amounted to Rp 44,709 million, Rp 16,007 million and Rp 228,482 million for the years ended December 31, 1998, 1999 and 2000, respectively. The composition of the net periodic pension cost charged to income for the Company's plan (excluding those of KSO Units) is as follows: 1998 Rp

Return on plan assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Interest cost ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Amortization and deferral ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Increase in amortization of prior service cost ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Service cost (beneÑts earned during the year)ÏÏÏÏÏÏÏÏÏÏÏÏÏ Net periodic pension cost ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

1999 Rp

2000 Rp

(141,206) (223,671) (279,302) 144,821 181,504 216,869 11,287 76,427 90,068 3,630 10,802 23,806 12,222 16,007 21,202 30,754 61,069 72,643

The pension cost attributable to the KSO Units amounted to Rp 12,291 million, Rp 15,786 million and Rp 18,241 million in 1998, 1999 and 2000, respectively.

F-51

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) The funded status of the plan as of December 31, 1998, 1999 and 2000 is as follows: 1998 Rp

1999 Rp

2000 Rp

Vested beneÑts ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

1,057,611

1,252,802

1,594,178

Accumulated beneÑt obligationÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

1,188,450

1,386,172

1,790,885

Projected beneÑt obligation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Plan assets at fair value ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Projected beneÑt obligation (in excess of ) less than plan assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Unamortized net amount resulting from changes in plan experience and actuarial assumptionsÏÏÏÏÏÏÏÏÏÏ Unamortized prior service cost ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Unrecognized net obligation at the date of initial application of PSAK No. 24 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Prepaid (accrued) pension cost ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

(1,452,888) (1,634,356) (2,209,592) 1,518,948 1,819,798 2,091,721 66,060

185,442

(117,871)

(572,130) 141,677

(733,110) 166,847

(363,314) 284,838

292,061 (72,332)

263,427 (117,394)

234,792 38,445

Plan assets consist mainly of Rupiah time deposits. The unrecognized net obligation at the date of initial application of PSAK No. 24 is amortized over the remaining average future working lives of active employees, i.e., 17.2 years, starting from January 1, 1992. The actuarial valuations for the pension plan as of December 31, 1998, 1999 and 2000 were prepared by PT Watson Wyatt Purbajaga, an independent actuary in association with Watson Wyatt Worldwide, using the ""projected-unit-credit'' method with the following assumptions:

Discount rate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Expected long-term rate of return on Pension Fund assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Salary growth rate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ DeÑned beneÑts growth rate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

1998 %

1999 %

2000 %

12.5 13 6 Ì

13 15 6 15

13 13 6 Ì

30. POSTRETIREMENT BENEFITS The Company provides a postretirement health care plan for all of its pensioners who have worked for over 20 years and to their eligible dependents. The requirement of working for over 20 years does not apply to the employees who retired prior to June 3, 1995. However, the employees hired by the Company starting from November 1, 1995 will no longer be entitled to this plan. The plan is managed by Yayasan Kesehatan Pegawai Telkom (""YKPT''). The Company accounts for the cost of the beneÑts over the working lives of its employees based on actuarial computations similar to those provided by Statement of Financial Accounting Standards No. 106, ""Employers' Accounting for Postretirement BeneÑts Other than Pensions'' (""SFAS 106''), of U.S. GAAP. The transition obligation at the date of initial application of SFAS 106 is Rp 524,250 million and is being amortized over 20 years starting January 1, 1995. F-52

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) The Company's contributions to YKPT amounted to Rp 111,498 million, Rp 150,216 million and Rp 82,853 million in 1998, 1999 and 2000, respectively. The composition of the net periodic postretirement beneÑt cost (excluding those of KSO Units) is as follows: 1998 Rp

1999 Rp

2000 Rp

Return on plan assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì (15,481) (39,773) Service costÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,452 11,519 16,082 Interest cost ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 78,254 104,212 149,765 Amortization of unrecognized transition obligationÏÏÏÏÏÏÏÏÏÏÏÏ 26,213 26,213 26,213 Amortization of prior service cost ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (4,922) (4,922) 12,816 Net periodic postretirement beneÑt costÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 107,997 121,541 165,103 Cost of postretirement beneÑts attributable to the KSO Units amounted to Rp 9,055 million, Rp 12,126 million and Rp 16,704 million in 1998, 1999 and 2000, respectively. The actuarial valuations for the postretirement beneÑt plan as of December 31, 1998, 1999 and 2000 were prepared by PT Watson Wyatt Purbajaga, an independent actuary in association with Watson Wyatt Worldwide, using the ""projected-unit-credit'' method with the following assumptions:

Discount rate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Expected long-term rate of return of YKPT assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Cost trend rateÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

1998 %

1999 %

2000 %

12.5 Ì 10-15

12.5 12.5 10-15

13 13 10

The funded status of the plan as of December 31, 1998, 1999 and 2000 is as follows: 1998 Rp

Accumulated postretirement beneÑt obligation Retirees ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Other fully eligible plan participants ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Other active plan participants ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Plan assets at fair value ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Unfunded postretirement beneÑt obligation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Unrecognized prior service cost ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Unrecognized transition obligation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Unrecognized net loss ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Accrued postretirement beneÑt cost ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

F-53

458,130 39,884 348,532 846,546 (126,189) 720,357 58,025 (419,398) (68,603) 290,381

1999 Rp

628,294 73,466 510,441 1,212,201 (257,761) 954,440 53,103 (393,185) (341,708) 272,650

2000 Rp

713,646 116,807 551,411 1,381,864 (317,694) 1,064,170 48,180 (366,972) (373,775) 371,603

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) A 1% increase in the cost trend rate would increase service cost and interest cost, and accumulated postretirement beneÑt obligation as of December 31, 1998, 1999 and 2000 as follows:

Service cost and interest costÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Accumulated postretirement beneÑt obligation ÏÏÏÏÏÏÏÏÏÏÏ

1998 Rp

1999 Rp

2000 Rp

116,811 1,011,494

155,685 1,453,738

222,659 1,619,262

31. TRANSACTIONS WITH RELATED PARTIES In the normal course of business, the Company entered into transactions with related parties. The following transactions with related parties have been conducted under terms and conditions which are the same if these were conducted with third parties: a. Government of the Republic of Indonesia ‚

The Company obtained ""two-step loans'' from the Government of the Republic of Indonesia, the Company's majority shareholder (Note 15).

‚

The Company pays concession fees for telecommunications services provided and radio frequency usage charges to the Ministry of Communications (formerly, Ministry of Tourism, Post and Telecommunications) of the Republic of Indonesia. Concession fees amounted to Rp 42,971 million, Rp 52,028 million and Rp 50,467 million in 1998, 1999 and 2000, respectively, while radio frequency usage charges amounted to Rp 7,257 million, Rp 7,006 million and Rp 9,445 million in 1998, 1999 and 2000, respectively.

b. Indonesian Satellite Corporation Tbk (""Indosat'') The Company has an agreement with Indosat, a majority state-owned international telecommunications services company, for the provision of international telecommunications services to the public. The principal matters covered by the agreement are as follows: ‚

The Company provides local network for the customers to make or receive international calls. Indosat provides the international network for the customers, except for certain border towns, as determined by the Director General of Post and Telecommunications of the Republic of Indonesia. The international telecommunications services include telephone, telex, telegram, packet switched data network, television, teleprinter, Alternate Voice/Data Telecommunications (AVD), hotline and teleconferencing.

‚

The Company and Indosat are responsible for their respective telecommunications facilities.

‚

Customer billing and collection, except for leased lines and public phones located at the international gateways, are handled by the Company.

‚

The Company receives compensation for the services provided in the Ñrst item above, based on the interconnection tariÅ determined by the Minister of Tourism, Post and Telecommunications of the Republic of Indonesia (Note 35).

The Company's compensation relating to leased lines/channel services, such as IBS, AVD and printer is calculated at 15% of Indosat's revenues from such services. F-54

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) Indosat also leases circuits from the Company to link Jakarta and Medan. The Company has been handling customer billing and collection for Indosat. Indosat is gradually taking over the activities and performing its own direct billing and collection. The Company receives compensation from Indosat computed at 1% of the collections made by the Company starting January 1, 1995, plus the billing process expenses which are Ñxed at a certain amount per record. Interconnection revenues earned from Indosat were Rp 169,262 million, Rp 259,136 million and Rp 248,996 million in 1998, 1999 and 2000, respectively. c. Satelindo The Company has an agreement with Satelindo, an associated company (Note 9), whereby both parties agreed, among other matters, on the following: ‚

Interconnection of the Company's PSTN with Satelindo's international gateway exchange, enabling the Company's customers to make outgoing or receive incoming international calls through Satelindo's international gateway exchange.

‚

Billings for the international telecommunications services used by domestic customers through Satelindo's international gateway exchange will be handled by the Company.

The Company also has an agreement with Satelindo for the interconnection of Satelindo's GSM mobile cellular telecommunications network with the Company's PSTN, enabling the Company's customers to make outgoing calls to or receive incoming calls from Satelindo's customers. Interconnection revenues earned from Satelindo were Rp 114,644 million, Rp 213,803 million, and Rp 225,372 million in 1998, 1999 and 2000, respectively. The Company leases international circuits from Satelindo. Payment made in relation to the lease expense amounted to Rp 19,611 million in 2000. Based on an agreement entered into among the Company, PT Bimagraha Telekomindo and Indosat in 1993, at the time of Satelindo's establishment, the Company agreed to transfer to Satelindo, its so-called B2P, B2R and B4 Palapa satellites and other assets relating to the Company's satellite control station located in Jakarta. These transfers are to be covered in a separate agreement between Satelindo and the Company. The separate agreement regarding the transfers of these satellites and other assets has not been made. In November 2000, the Company entered into an agreement with a third party, in which the Company agreed to sell the B2R Satellite, or to lease the said satellite to such third party if the sale is not consummated. In the Extraordinary Meeting of Satelindo's Stockholders on November 29, 2000, a representative was appointed by Satelindo's Stockholders to discuss the satellite issue with the Company. In 1994, the Company transferred to Satelindo the right to use a parcel of Company-owned land located in Jakarta which had been previously leased to Telekomindo, an associated company (Note 9). Based on the transfer agreement, Satelindo is given the right to use the land for 30 years and can apply for the right to build properties thereon. The ownership of the land is retained by the Company. Satelindo agreed to pay Rp 43,023 million to the Company for the thirty-year right. Satelindo paid Rp 17,214 million in 1995 and the remaining Rp 25,809 million has not been paid since then, as the Utilization Right (""Hak Pengelolaan Lahan'') on the land could not be delivered as provided in the F-55

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) transfer agreement. In 2000, the Company and Satelindo agreed on an alternative solution which will beneÑt both parties, by accounting the above payment as lease consideration. d. The Company provides telecommunication services to Government agencies. e. The Company has entered into agreements with Government agencies and associated companies (Note 9) Ì Lintasarta, CSM and Patrakomindo for utilization of the Company's Palapa B4 and Telkom 1 satellite transponders or frequency channels. Revenues earned from these transactions amounted to Rp 86,305 million in 2000. f. The Company provides leased lines to associated companies (Note 9) Ì Telkomsel, CSM, Lintasarta, Satelindo, Komselindo, Excelcomindo Pratama, Mobisel, Metrosel and PSN which can be used by the associated companies permanently or temporarily for telephone, telegraph, data, telex, facsimile or other telecommunications services. Revenue earned from these transactions amounted to Rp 81,983 million in 2000. g. The Company provides a data communication network system for Lintasarta, and operates telemetry tracking and command station for PSN, both of which are associated companies (Note 9). Revenues earned by the Company from these transactions amounted to Rp 5,699 million, Rp 11,978 million and Rp 16,384 million in 1998, 1999 and 2000, respectively. h. The Company purchases property and equipment including construction and installation services from a number of related parties. These related parties include PT Industri Telekomunikasi Indonesia, Lembaga Elektronika Nasional, PT Adhi Karya, PT Pembangunan Perumahan, PT Nindya Karya, PT Boma Bisma Indra, PT Wijaya Karya, PT Waskita Karya which all are stateowned companies, PT Gratika which is an associated company of Dana Pensiun Telkom, Telekomindo and PT Bangtelindo which are associated companies (Note 9), and Koperasi Pegawai Telekomunikasi, a related party cooperative. Purchases made from these related parties amounted to Rp 213,892 million, Rp 84,320 million and Rp 104,669 million in 1998, 1999 and 2000, respectively. i. The Company carries insurance (on its property, plant and equipment against property losses and on employees' social security) obtained from PT Asuransi Jasa Indonesia, PT Asuransi Tenaga Kerja and PT Persero Asuransi Jiwasraya, which are state-owned insurance companies. Insurance premiums amounted to approximately Rp 41,227 million, Rp 44,448 million and Rp 100,716 million in 1998, 1999 and 2000, respectively. j. The Company maintains current accounts and time deposits (Notes 4 and 5) in several stateowned banks. In addition, some of those banks are appointed as collecting agents for the Company. The Company also has an investment in mutual funds managed by Danareksa, a stateowned company (Note 5). k. The Company has revenue-sharing arrangements with Telekomindo, an associated company (Note 9). Revenues earned under these arrangements amounted to Rp 36,428 million, Rp 29,096 million and Rp 93,348 million in 1998, 1999 and 2000, respectively. l. The Company leases buildings, purchases materials and construction services, and utilizes maintenance and cleaning services from Dana Pensiun Telkom and PT Sandhy Putra Makmur, a subsidiary of Yayasan Sandikara Putra Telkom Ì a foundation managed by Dharma Wanita F-56

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) Telkom. Total charges from these transactions amounted to Rp 2,755 million, Rp 12,780 million and Rp 35,103 million in 1998, 1999 and 2000, respectively. m. The Company purchased encoded phone cards from Perusahaan Umum Percetakan Uang Republik Indonesia, a state-owned company. Expenses arising from this transaction amounted to Rp 634 million, Rp 292 million, and Rp 2,195 million in 1998, 1999 and 2000, respectively. n. In 1991, the Company granted loans to Koperasi Telekomunikasi (""Koptel'') amounting to Rp 1,000 million, repayable by 2001, to support Koptel's activities in providing housing loans to the Company's employees. The balance of the loans amounted to Rp 300 million as of December 31, 1998, 1999 and 2000. o. The Company earned interconnection revenues from Telkomsel, Komselindo, Excelcomindo Pratama, Metrosel, Mobisel, Ratelindo, BBT and Patrakomindo, which are associated companies (Note 9) , totaling Rp 265,906 million, Rp 407,133 million and Rp 630,730 million in 1998, 1999 and 2000, respectively. p. In addition to revenues earned under the KSO Agreement (Notes 19 and 33), the Company also earned income from buildings rental, repairs and maintenance services and training services, provided to the KSO Units, amounting to Rp 96,393 million, Rp 28,114 million and Rp 95,227 million in 1998, 1999 and 2000, respectively. q. The Company provides a deÑned beneÑt pension plan and a postretirement health care plan for its pensioners through Dana Pensiun Telkom and YKPT, respectively (Notes 29 and 30). The Company has also seconded a number of its employees to related parties to assist them in operating their business. In addition, the Company provided certain of its related parties with the right to use its buildings free of charge. Presented below are balances of accounts with related parties: a. Cash and cash equivalents (Note 4) b. Temporary investments (Note 5) c. Trade accounts receivable (Note 6) 1999 Rp

d. Other accounts receivable Government agenciesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ State-owned banks (interest)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ KSO Units ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Employees ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ F-57

Ì 16,394 2,048 635 34,662 53,739

2000 Rp

31,251 28,591 5,822 517 1,851 68,032

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) 1999 Rp

2000 Rp

e. Advances and others PT Industri Telekomunikasi IndonesiaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

Ì 328 328

127 Ì 127

f. Trade accounts payable PT Satelit Palapa Indonesia ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PT Industri Telekomunikasi IndonesiaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PT Indonesian Satellite CorporationÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PT Excelcomindo Pratama ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Government agenciesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ KSO Units ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PT Waskita Karya ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PT Telekomindo Primabhakti ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PT Telekomunikasi Selular ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Koperasi Pegawai TelkomÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Lembaga Elektronika Nasional ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PT Boma Bisma Indra ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PT Bangtelindo ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PT Sandhy Putra Makmur ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

45,770 9,933 45,667 34,663 27,968 148,069 267 7,652 Ì 9,961 523 1,842 886 593 58,396 392,190

77,987 46,092 41,235 38,849 33,913 21,578 18,238 18,113 10,358 4,390 486 354 63 51 63,768 375,475

g. Other accounts payable (to employees) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

19,039

12,678

h. Accrued expense Yayasan Kesehatan Pegawai Telkom ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Government agenciesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Employees ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PT Asuransi Jasa Indonesia ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Dana Pensiun Telkom ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

272,650 421,499 103,551 4,636 110,961 1,454 914,751

371,603 269,933 72,652 5,442 Ì 1,611 721,241

i. Advances from customers and Government agenciesÏÏÏÏÏÏÏÏ

7,455

33,305

j. Long-term debt (Note 15). 32. SEGMENT INFORMATION The Company and its subsidiary are presently engaged in providing local and domestic longdistance telephone services and other services (including among others mobile cellular telecommunicaF-58

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) tions, leased lines, telex, transponder, satellite, and Very Small Aperture Terminal Ì VSAT) as well as providing ancillary services. Telephone services and other telecommunications services are provided by the regional divisions and the network division which operate all over Indonesia. Management presents segment information based on geographical location of the customers. a. Revenues 1999 %

Telecommunications services KSO I Chairman's OÇce (Sumatera) ÏÏÏÏÏÏÏÏÏÏÏÏ Regional Division II (Jakarta) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ KSO III Chairman's OÇce (West Java) ÏÏÏÏÏÏÏÏÏÏ KSO IV Chairman's OÇce (Central Java) ÏÏÏÏÏÏÏÏ Regional Division V (East Java) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ KSO VI Chairman's OÇce (Kalimantan) ÏÏÏÏÏÏÏÏÏ KSO VII Chairman's OÇce (East Indonesia)ÏÏÏÏÏÏ OthersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ancillary services(*) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

2000 Rp

6.91 538,270 49.09 3,824,338 4.51 351,309 4.56 355,032 20.75 1,616,502 2.16 168,550 3.39 263,762 8.48 660,537 0.15 11,909 100.00 7,790,209

%

Rp

7.44 697,313 45.62 4,277,403 4.56 427,228 4.95 464,200 20.28 1,901,384 2.57 240,819 4.63 433,839 9.05 848,763 0.90 84,757 100.00 9,375,706

(*) Including those of Head OÇce which has signiÑcant cash and cash equivalents, and short-term as well as long-term investments which are not allocated to each segment.

b. Segment Result 1999 %

Telecommunications services KSO I Chairman's OÇce (Sumatera) ÏÏÏÏÏÏÏÏÏÏ Regional Division II (Jakarta) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ KSO III Chairman's OÇce (West Java) ÏÏÏÏÏÏÏÏ KSO IV Chairman's OÇce (Central Java) ÏÏÏÏÏÏ Regional Division V (East Java) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ KSO VI Chairman's OÇce (Kalimantan) ÏÏÏÏÏÏÏ KSO VII Chairman's OÇce (East Indonesia)ÏÏÏÏ OthersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ancillary services(*) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Other income (charges) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total before eliminations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ EliminationsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Income Before Tax ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ F-59

2000 Rp

%

Rp

12.11 356,567 13.00 524,916 74.34 2,187,984 60.04 2,424,154 7.91 232,920 7.50 302,896 8.86 260,766 9.61 388,072 27.17 799,707 22.73 917,744 3.57 105,124 4.49 181,207 4.16 122,457 7.40 298,801 (1.31) (38,557) 6.04 243,646 (36.81) (1,083,505) (30.81) (1,244,113) 100.00 2,943,463 100.00 4,037,323 32,698 2,976,161 (13,448) 2,962,713

(565,248) 3,472,075 (13,699) 3,458,376

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) c. Total Assets 1999

Telecommunications services KSO I Chairman's OÇce (Sumatera) ÏÏÏÏÏÏÏÏÏÏ Regional Division II (Jakarta) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ KSO III Chairman's OÇce (West Java) ÏÏÏÏÏÏÏÏ KSO IV Chairman's OÇce (Central Java) ÏÏÏÏÏÏ Regional Division V (East Java) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ KSO VI Chairman's OÇce (Kalimantan) ÏÏÏÏÏÏÏ KSO VII Chairman's OÇce (East Indonesia)ÏÏÏÏ OthersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ancillary services(*) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total before elimination ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Elimination ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total after eliminationÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

2000

%

Rp

%

Rp

4.74 24.31 2.39 1.83 11.71 1.60 3.44 8.50 41.48 100.00

1,250,094 6,408,478 631,162 482,322 3,085,385 422,358 905,590 2,241,348 10,934,150 26,360,887

3.96 21.34 2.56 1.53 11.19 1.34 2.82 12.13 43.13 100.00

1,146,500 6,169,731 739,283 443,852 3,237,095 386,826 815,219 3,506,693 12,473,089 28,918,288

(31,233) 26,329,654

(38,067) 28,880,221

(*) Including those of Head OÇce which has signiÑcant cash and cash equivalents, and short-term as well as long-term investments which are not allocated to each segment.

33. JOINT OPERATION SCHEME (""KSO'') In 1995, the Company and Ñve investors (PT Pramindo Ikat Nusantara, PT AriaWest International, PT Mitra Global Telekomunikasi Indonesia, PT Dayamitra Telekomunikasi, and PT Bukaka Singtel International) entered into agreements on Joint Operation Scheme (""KSO'') and KSO construction agreements for the provision of telecommunications facilities and services for the Sixth Five-Year Development Plan (""Repelita VI'') of the Republic of Indonesia. The Ñve investors have conducted the development and have taken over the operation of the basic Ñxed telecommunications facilities and services in Ñve of the Company's seven regional divisions. The agreements contain, among others, the following provisions: ‚

The Company's existing assets in the Ñve regional divisions, together with the assets to be built under the KSO construction agreements, will be managed, operated and maintained by each KSO Unit, in the name of the Company and for and on behalf of the Company and the KSO Investors, commencing from January 1, 1996 to December 31, 2010 (""KSO period'').

‚

In the aggregate, a minimum of two million lines are to be planned, designed, engineered, Ñnanced and constructed by the KSO Investors during a 3-year period beginning from January 1, 1996, except for Regional Division VI Ì Kalimantan which started on April 1, 1996.

‚

The Company will receive two principal types of payments from each KSO Unit during the term of the KSO, namely Minimum Telkom Revenues (""MTR'') and share in distributable KSO revenues, and a one-time initial investor payment from each of the KSO Investors. F-60

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) The initial investor payments totaling U.S.$105 million or equivalent to Rp 230,239 million were made by the KSO Investors to the Company as compensation for their rights to participate in developing and operating telecommunications facilities in the KSO regional divisions. MTR represents an annual amount guaranteed by the KSO Investors and is required to be supported by bank guarantees. The MTR is payable on a monthly basis in Ñxed amounts which may increase every year during the KSO period. A further monthly adjustment for the MTR is possible depending upon KSO Investor's performance under its commitment to install additional lines. Distributable KSO revenues are the entire KSO revenues, net of MTR and operational expenses of the KSO Units, as provided in the KSO agreements. These revenues are shared between the Company and the KSO Investors based on percentages agreed upon. The Company receives 35% of the distributable KSO revenues from Regional Division VII, and 30% from the other KSO Regional Divisions. At the end of the KSO period, all rights, title and interests of the KSO Investor in existing installations and all work in progress, inventories, equipment, materials, plans and data relating to any approved additional new installation projects then uncompleted or in respect of which Interconnection Tests have not then been successfully completed, shall be sold and transferred to the Company without requiring any further action by any party, upon payment by the Company to the KSO Investor of one hundred Rupiah, plus: a. the net present value, if any, of the KSO Investor's projected share in distributable KSO revenues, from the additional new installations forming part of the KSO system on the termination date, over the balance of the applicable payback periods. b. an amount to be agreed upon between the Company and the KSO Investor as fair compensation in respect of any uncompleted or untested additional new installations transferred as referred to above. The depreciation of the Rupiah against the U.S. Dollar (Note 39), which started in the second semester of 1997, has impacted the Ñnancial condition of the KSO Investors. In response to the economic condition, the KSO Investors and the Company have signed a Memorandum of Understanding (MOU) to amend certain provisions of the KSO agreements (Note 36c). For the years 1998 and 1999, the Company had adopted the provisions of the MOU. Starting November 1999, the Company and the KSO Investors have begun to renegotiate the terms of the KSO agreements in conjunction with the changing environment and the expiration of certain terms in the MOU. Among others, it was agreed to return to most of the provisions of the original KSO agreements starting January 1, 2000. Discussions between the Company and the KSO Investors concerning the KSO problems have arrived at various alternatives. The Company views that the continuation of the original KSO agreements, with some amendments, is the most suitable to the Company and has the minimum impact on the Company's Ñnancial position and result of operations. Termination of the KSO agreements could have signiÑcant impact as the Company would require signiÑcant funding to buy the KSO assets. Pending completion of the negotiations, the long-term solution of the KSO problems and its eÅect on the Company's Ñnancial condition and operational activities cannot be determined. F-61

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) 34. REVENUE-SHARING AGREEMENTS WITH SEVERAL INVESTORS The Company has entered into separate agreements with several investors under Revenue-Sharing Arrangements (""RSA'') to develop Ñxed lines, analog mobile cellular lines, public card-phone booths (including their maintenance), and related supporting facilities. Under the RSA, the investors Ñnance the costs incurred in developing telecommunications facilities. Upon completion of the construction, the Company manages and operates the facilities. The investors legally retain the rights to the property, plant and equipment constructed by them during the revenue-sharing periods. At the end of each revenue-sharing period, the investors transfer the ownership of the facilities to the Company. The Company bears the cost of repairs and maintenance of the facilities during the revenuesharing period. The revenue-sharing period is determined on the basis of the internal rates of return agreed by both parties. The internal rates of return range from 24% to 30%, and the revenue-sharing periods vary from one year and seven months to Ñfteen years from the start of commercial operations. The revenue-sharing period can be either Ñxed regardless of full investment returns to the investors, or extended to ensure full investment returns to the investors. The revenue-sharing periods end on various dates until 2009. The revenues earned from the customers in the form of line installation charges are fully for the account of the investors. The revenues from outgoing telephone pulse and monthly subscription charges are shared between the investors and the Company at the proportion of 60:40 or 70:30 (in favor of the investors) depending on the agreements. Certain additional arrangements are made for revenues earned from analog mobile cellular, whereby revenues from international outgoing pulses are fully owned by the Company. Revenues earned from pay phone cards during the revenue-sharing period are shared at the proportion of 60:40 (in favor of the investors) based on the recorded usage of pulses. The investors' share of revenues amounted to Rp 527,504 million, Rp 527,708 million and Rp 508,355 million in 1998, 1999 and 2000, respectively. The Company has no plans to enter into any additional revenue-sharing arrangements for Ñxed line telephone services. 35. INTERCONNECTION TARIFFS AND TARIFF ARRANGEMENTS TariÅs for telecommunications services are based on decrees issued by the Ministry of Communications, formerly, Ministry of Tourism, Post and Telecommunications (""MTPT''). Fixed Line Subscribers' TariÅs TariÅs for Ñxed line subscribers are imposed for network access and usage. Access charges consist of a one-time installation charge and a monthly subscription charge. Usage charges are measured in pulses and classiÑed as either local or domestic long-distance. The tariÅs depend on call distance, call duration, the time of day, the day of the week and holidays. The telephone tariÅs are regulated under decree No. KM.9/1999 dated January 29, 1999 and letter No. 47/SM/III/Phb-99 dated March 1, 1999 of the Ministry of Communications, which came into eÅect on February 1, 1999. F-62

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) Interconnection TariÅs Interconnection tariÅs regulate the sharing of long-distance interconnection calls between the Company and other cellular operators. The current interconnection tariÅ is governed under MTPT Decree No. KM.46/PR.301/MPPT-98 (""Decree No. 46'') dated February 27, 1998 which came into eÅect on April 1, 1998. This decree has superseded decree No. KM.108/PR.301/MPPT-94 and the amendment thereto, No. KM.5/PR.301/MPPT-97, which had been in operation since December 28, 1994 and January 1, 1997, respectively. Interconnection tariÅs based on Decree No. 46 are as follows: a. International interconnection with Public Switched Telephone Network (""PSTN'') The international interconnection tariÅ is calculated by applying the following charges to successful incoming and outgoing calls to the Company's network: TariÅ

Access charge ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Usage chargeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Universal Service Obligation (USO) ÏÏÏÏÏÏÏÏÏÏ

Rp 500 per call Rp 330 per paid minutes Rp 750 per call

On June 11, 1999, based on Decree No. KM.37/1999 of the Ministry of Communications, eÅective December 1, 1998 the above international interconnection tariÅs were revised as follows: TariÅ

Access charge ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Usage chargeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Universal Service Obligation (USO) ÏÏÏÏÏÏÏÏÏÏ

Rp 850 per call Rp 550 per paid minutes Rp 750 per call

Indosat is exempted from paying the USO until December 31, 2004, while the USO charges payable by Satelindo are paid directly to the MTPT/Ministry of Communications. b. Mobile cellular interconnection with the PSTN 1. Local Calls For local calls from a mobile cellular network to PSTN, the cellular operator pays the Company 50% of the prevailing tariÅ for local calls. For local calls from PSTN to a cellular network, the Company charges its subscribers the applicable local call tariÅ plus an air time charge, and pays the cellular operator the air time charge. 2. Domestic Long-distance Calls Decree No. 46 provides tariÅs which vary among long-distance carriers, and indicates that it is possible for long-distance calls to be carried by more than one long-distance network. Pursuant to this decree, for long-distance calls which originate from the PSTN, the Company is entitled to retain a portion of the prevailing long-distance tariÅ, which portion ranges from 40% of the tariÅ, in cases where the entire long-distance portion is carried by one cellular operator and delivered to another, and up to 85%, in cases where the entire long-distance portion is carried by the PSTN. F-63

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) For long-distance calls which originate from a cellular operator, the Company is entitled to retain a portion of the prevailing long-distance tariÅ, which portion ranges from 25% of the tariÅ, in cases where the entire long-distance portion is carried by a cellular operator and the call is delivered to a cellular subscriber, and up to 85%, in cases where the entire long-distance portion is carried by the PSTN and the call is delivered to a PSTN subscriber. Interconnection tariÅs with mobile cellular networks, including USO, are determined based on the duration of the call. Access and usage charges for international telecommunications traÇc interconnection with telecommunications networks of more than one domestic carrier are to be shared proportionately with each carrier involved, which proportion is determined by the MTPT. Interconnection tariÅs between a Ñxed cellular network and the PSTN is regulated under MTPT letter No. KU.506/1/1/MPPT-97 dated January 2, 1997 and letter No. KU.506/4/6/MPPT-97 dated July 21, 1997. Currently, Ratelindo and the Company are the only operators of Ñxed cellular networks. For Ñxed cellular interconnection with the PSTN, the ""sender-keeps-all'' basis for local calls is applied and for domestic long-distance calls which originate from Ratelindo's network and transit to PSTN, the Company receives 35% of Ratelindo's revenue for such calls. For domestic long-distance calls that originate from PSTN, the Company retains 65% as its revenue for such calls. The Directorate General of Post and Telecommunications is currently preparing new interconnection tariÅs in connection with the issuance of Law No. 36 year 1999 and Government Regulation No. 52 year 2000. 36. COMMITMENTS a. Letters of Comfort The Company issued support in the form of letters of comfort to certain lenders of Komselindo with respect to a U.S.$100 million loan in 1997 and to lenders of Mobisel, with respect to a U.S.$60 million loan in 1996, which are due in 2002 and 2001, respectively. Komselindo and Mobisel are both associated companies. The letters of comfort provide that the Company agrees to use its best eÅorts to cause these associated companies to perform all their obligations under the loan agreements. b. Capital Expenditures As of December 31, 2000, the amounts of capital expenditures committed under contractual arrangements, principally relating to procurement and installation of switching equipment, transmission equipment and cable network, are as follows: Amounts in Foreign Currencies (in thousands)

Currencies

Rupiah ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ United States Dollar ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Japanese Yen ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ French FrancÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Swedish KronaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ F-64

Ì 50,822 1,094,530 5,140 431

Equivalent in Rupiah

684,416 491,701 92,276 7,064 439 1,275,896

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) c. Memorandum of Understanding On June 5, 1998, the Company and all of the KSO Investors entered into a Memorandum of Understanding (""MOU'') agreeing to amend certain provisions of the KSO agreements, including among others: ‚

The percentage of sharing of the distributable KSO revenues for 1998 and 1999 shall become 10% and 90% for the Company and the KSO Investors, respectively.

‚

The minimum number of access line units to be installed by the KSO Investors up to March 31, 1999 shall be 1,268,000 lines.

‚

The incremental rate of the MTR will not exceed 1% in 1998 and 1.5% in 1999 for the KSO agreements with the Investors that have MTR incremental factors.

‚

""Operating Capital Expenditures'' in each of the KSO Units will be shared between the Company and the respective KSO Investors in proportion to the previous year's share in the annual net income of the respective KSO Units, starting from 1999.

‚

The cancellation of the requirement to maintain a bank guarantee in respect of MTR.

In 1998 and 1999, the Company adopted the above provisions of the MOU. Starting November 1999, the Company and the KSO Investors have begun to renegotiate the terms of the KSO agreements in conjunction with the changing environment and the expiration of certain terms in the MOU. Commencing January 1, 2000, the Company has recorded the MTR and distributable KSO Revenues based on the terms originally agreed under the KSO agreements. d. Agreement with PT AriaWest International (""AriaWest'') In 1997, the Company appointed AriaWest (investor of KSO III) to conduct a feasibility study on the business of providing multimedia services for a cost of Rp 14,000 million. If the business were determined to be feasible, the Company and AriaWest agreed to establish a joint venture in conducting the business and such payment would be considered as the Company's capital contribution in the joint venture. However, due to the deteriorating economic conditions which began since the middle of 1997, the joint venture company was not feasible to be established. The Company has recognized the Rp 14,000 million as an expense in 1998. The amount was fully settled in 2000. 37. CONTINGENCIES a. Claims from AriaWest AriaWest, an investor in a Joint Operation Scheme, has recently asserted against the Company several claims under Indonesian law. These putative claims assert (i) AriaWest's entitlements, pursuant to the Good Faith Interim Solutions Agreement dated September 12, 2000, to withhold certain Minimum Telkom Revenue (""MTR'') due to the Company under the KSO Agreement; (ii) AriaWest entitlements, pursuant to the KSO Agreement, to set-oÅs against MTR due to the Company under the KSO Agreement; and (iii) breach of the KSO Agreement by the Company. AriaWest has not asserted these claims in any legal proceeding; instead, it has asserted them only through written correspondence addressed to the Company and the Government of Indonesia, as well as verbally during the course of F-65

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) discussions between the parties. In its correspondence, AriaWest expressly has purported to reserve its rights to alter or modify at any time its allegations or putative claims against the Company. Given the preliminary nature of AriaWest's putative claims, it is impossible to predict at this time whether any legal proceeding will ensue as a result of such claims. b. Litigation Except for claims from AriaWest, the Company is not currently a party to and, in recent years, has not been a party to, any material legal or arbitration proceedings or disputes pending or threatened against the Company or with respect to its properties which are material, or which have had or which may have, a signiÑcant eÅect on the Company's Ñnancial position. 38. ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES The balances of monetary assets and liabilities denominated in foreign currencies are as follows: 1999 Foreign Currencies Equivalent (in thousands) in Rupiah

Assets Cash and cash equivalents Related parties United States Dollar ÏÏÏÏÏÏÏÏÏÏÏÏ French Franc ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Swedish Krona ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Great Britain Pound sterlingÏÏÏÏÏ Japanese Yen ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Deutsche Mark ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Singapore Dollar ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Third parties United States Dollar ÏÏÏÏÏÏÏÏÏÏÏÏ Temporary investments Third parties United States Dollar ÏÏÏÏÏÏÏÏÏÏÏÏ Trade accounts receivable Related parties United States Dollar ÏÏÏÏÏÏÏÏÏÏÏÏ Third parties United States Dollar ÏÏÏÏÏÏÏÏÏÏÏÏ Singapore Dollar ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Malaysian Ringgit ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Other accounts receivable Related parties United States Dollar ÏÏÏÏÏÏÏÏÏÏÏÏ Third parties United States Dollar ÏÏÏÏÏÏÏÏÏÏÏÏ

2000 Foreign Currencies Equivalent (in thousands) in Rupiah

47,843 2 Ì 6 11 Ì 33

338,251 2 Ì 74 1 Ì 142

44,470 4,631 289 3 172 0.47 Ì

425,815 6,298 291 40 14 2 Ì

512

3,617

1,614

15,464

Ì

Ì

300

2,879

2,754

19,469

10,434

99,905

2,888 Ì Ì

20,415 Ì Ì

3,047 1 2

29,175 6 5

728

5,150

1,481

14,181

236

1,666

4

38

F-66

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) 1999 Foreign Currencies Equivalent (in thousands) in Rupiah

Advances and others United States Dollar ÏÏÏÏÏÏÏÏÏÏÏÏ French Franc ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Japanese Yen ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Australian DollarÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total Assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Liabilities Trade accounts payable Third parties United States Dollar ÏÏÏÏÏÏÏÏÏÏÏÏ French Franc ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Japanese Yen ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Deutsche Mark ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Accrued expenses United States Dollar ÏÏÏÏÏÏÏÏÏÏÏÏ French Franc ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Swedish Krona ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Great Britain Pound sterlingÏÏÏÏÏ Japanese Yen ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Deutsche Mark ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Singapore Dollar ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Australian DollarÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Netherlands GuilderÏÏÏÏÏÏÏÏÏÏÏÏ Advances from customers and suppliers Ì third parties United States Dollar ÏÏÏÏÏÏÏÏÏÏÏÏ Current maturities of long-term debt Ì related party United States Dollar ÏÏÏÏÏÏÏÏÏÏÏÏ French Franc ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Japanese Yen ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Netherlands GuilderÏÏÏÏÏÏÏÏÏÏÏÏ Long-term debt Related parties United States Dollar ÏÏÏÏÏÏÏÏÏÏÏÏ French Franc ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Japanese Yen ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Netherlands GuilderÏÏÏÏÏÏÏÏÏÏÏÏ

2000 Foreign Currencies Equivalent (in thousands) in Rupiah

7,079 9,578 210,627 510

31,037 5,641 4,875 1,004 431,344

Ì Ì Ì Ì

Ì Ì Ì Ì 594,113

925 3,964 Ì Ì

6,614 4,350 Ì Ì

702 18,971 1,264,150 230

6,790 26,070 106,576 1,058

8,670 1,687 Ì Ì 38,462 Ì Ì Ì 955

61,989 1,852 Ì Ì 2,685 Ì Ì Ì 3,119

11,854 6,307 21 61 82,389 2 118 29 507

114,683 8,667 22 881 6,946 7 658 155 2,075

1,555

11,116

938

9,076

Ì Ì Ì Ì

Ì Ì Ì Ì

31,567 18,824 371,483 3,044

305,412 25,868 31,318 12,455

375,715 111,275 12,912,553 22,831

2,686,365 122,155 901,521 74,601

361,639 128,967 15,487,259 16,743

3,498,858 177,225 1,305,675 68,505

F-67

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) 1999 Foreign Currencies Equivalent (in thousands) in Rupiah

Third parties United States Dollar ÏÏÏÏÏÏÏÏÏÏÏÏ French Franc ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Swedish Krona ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Japanese Yen ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Deutsche Mark ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Australian DollarÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Netherlands GuilderÏÏÏÏÏÏÏÏÏÏÏÏ Total Liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Net Liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

74,579 98,887 297 1,736,463 1,879 2,881 972

2000 Foreign Currencies Equivalent (in thousands) in Rupiah

533,241 108,520 250 121,235 6,915 13,450 3,176 4,663,154 (4,231,810)

39,652 44,492 866 1,967,149 40 Ì 36

383,638 61,141 883 165,809 184 Ì 149 6,320,784 (5,726,671)

The conversion rates used by the Company on December 31, 1999 and 2000 and the prevailing rates on February 28, 2001 are as follows (in full Rupiah amount): December 31, 1999 Foreign Currency

United States Dollar ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ French Franc ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Great Britain Pound sterling ÏÏÏÏÏÏÏÏÏÏÏ Japanese Yen ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Deutsche Mark ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Singapore DollarÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Australian Dollar ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Netherlands Guilder ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Swedish Krona ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Malaysian Ringgit ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

2000

Buying

Selling

Buying

Selling

7,070.0 1,085.0 11,425.1 69.0 3,638.7 4,242.4 4,609.6 3,229.5 830.4 1,860.4

7,150.0 1,097.4 11,558.0 69.8 3,680.8 4,293.0 4,669.0 3,267.5 840.8 1,881.7

9,575.0 1,359.8 14,303.1 83.4 4,560.4 5,521.9 5,306.5 4,047.6 1,007.0 2,519.7

9,675.0 1,374.2 14,462.2 84.3 4,609.1 5,532.8 5,371.6 4,091.6 1,018.6 2,546.1

February 28, 2001 Buying Selling

9,825.0 1,378.4 14,185.3 84.3 4,622.7 5,640.1 5,166.0 4,102.8 997.6 2,585.5

9,840.0 1,380.7 14,216.8 84.5 4,630.8 5,650.3 5,183.7 4,110.8 999.2 2,589.5

On the basis of the rates on February 28, 2001, the Company's foreign exchange loss on foreign currency liabilities, net of foreign currency assets as of December 31, 2000 is increased by Rp 63,910 million. 39. ECONOMIC CONDITION Since the middle of 1997, many Asia PaciÑc countries including Indonesia have been experiencing adverse economic condition mainly resulting from currency depreciation in the region, the principal consequences of which have been an extreme lack of liquidity and high interest and foreign exchange rates. The crisis has also involved declining prices in shares of stock, tightening of available credit, and stoppage or postponement of certain construction projects. Foreign exchange rates and prices of shares of stock are still highly volatile. However, interest rates and inÖation have declined since 1999. High exchange and interest rates have increased the cost of funds, as well as the amount of debt to be serviced by the Company, the subsidiary, and the associated companies. The depreciation of the F-68

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) Rupiah has also impacted the Ñnancial condition of the KSO Investors. The slowing down of economic activities has aÅected the growth of the Company's subscribers. In response to these economic events, the management has adopted more stringent criteria in the evaluation of investment activities. The management will continue to adopt this measure and will initiate a cost-cutting program as well as pursuing project developments using the ""turnkey'' system, hence not all risks incurred are borne by the Company. Management has also taken proactive measures in resolving the KSO issues and in managing investments in associated companies eÅectively and selectively by utilizing the services of international legal and Ñnancial consultants. Recovery of the economy to a sound and stable condition is dependent on the Ñscal, monetary and other measures being taken by the Government, actions which are beyond the Company and its subsidiary's control, to achieve economic recovery. It is not possible to determine the future eÅect the economic condition may have on the Company and its subsidiary's liquidity and earnings, including the eÅect Öowing through from their investors, customers and suppliers. 40. RECLASSIFICATION OF ACCOUNTS To conform with the 2000 consolidated Ñnancial statement presentation, certain accounts in the 1999 consolidated Ñnancial statement are reclassiÑed. Following is a summary of signiÑcant accounts in the 1999 consolidated Ñnancial statements before and after the reclassiÑcations: 1999 As Previously As Restated Reported Rp Rp

Additional paid-in capital ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ DiÅerence due to change of equity in associated companiesÏÏÏÏÏÏ Translation adjustment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

1,073,333 430,722 162,299

1,504,055 162,299 Ì

41. OTHER INFORMATION On June 20, 2000, the Minister of Manpower of the Republic of Indonesia issued Decree No. Kep-150/Men/2000 on the Settlement of Work Dismissal and Determination of Separation, Gratuity and Compensation Payments by Companies. This decree requires companies to pay their employees termination, gratuity and compensation beneÑts in case of employment separation. As provided in Note 29, the Company has a deÑned beneÑt pension plan to its employees. To date, the Company does not have any plan for mass employment terminations in the foreseeable future, which will signiÑcantly aÅect its Ñnancial position and operational activities. In relation with this decree, the Company has accrued the estimated cost of annual voluntary resignation of its employees which was recorded as part of personnel-related expense. F-69

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) 42. SUBSEQUENT EVENTS a. From January 1 to February 28, 2001, the Company made an installment payment amounting to Rp 192,496 million, U.S.$9,127 thousand, FRF 4,618 thousand, and NLG 2,273 thousand on the two-step loans from related party (Note 15). b. On February 15, 2001, the Company and Indosat signed a Memorandum of Understanding (""MOU'') relating to a series of transactions concerning their ownership interest in Telkomsel, Satelindo and Lintasarta. In addition, the Company agreed to sell to Indosat all the Company's assets used under the KSO Agreement (Regional Division IV) with PT Mitra Global Telekomunikasi Indonesia (""MGTI'') and will assign such KSO Agreement with MGTI to Indosat (altogether referred to as ""KSO IV Assets''). Under the MOU, the following transactions are to occur between the Company and Indosat: 1. The Company will acquire Indosat's 35% interest in Telkomsel for U.S.$945 million. 2. Indosat will acquire the following from the Company: ‚

The Company's 22.5% interest in Satelindo for U.S.$186 million

‚

The Company's 37.66% interest in Lintasarta for U.S.$38 million

‚

The KSO IV Assets for U.S.$375 million

These transactions are subject to certain conditions, including regulatory and corporate approvals. It is anticipated that both the Company and Indosat will seek shareholder approval by the end of April 2001. 43. SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES FOLLOWED BY THE COMPANY AND ITS SUBSIDIARY AND U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES The consolidated Ñnancial statements have been prepared in accordance with Indonesian GAAP which diÅer in certain respects from U.S. GAAP. The signiÑcant diÅerences are reÖected in the approximations provided in Note 44 and arise due to the items discussed in the following paragraphs: a. Pension The Company, for purposes of Indonesian GAAP, uses a method of accounting for pensions that is substantially consistent with the requirements of U.S. GAAP. As stated in its pension plan regulations, the Company does not provide regular pension increases. However, in 1994 and 1998 (eÅective January 1, 1999), the Company made increases in pension beneÑts for pensioners, which were considered as prior service costs. Based on PSAK No. 24, the prior service costs attributable to the increases in pension beneÑts for pensioners in 1994 and 1999, were directly charged to expense in those years. Under SFAS 87, such prior service costs should be deferred and amortized systematically over the estimated average future working periods of active employees (14.4 years in 1999 and 15.9 years in 1994). F-70

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) b. Revaluation of Property, Plant and Equipment While Indonesian GAAP do not generally allow companies to recognize increases in the value of property, plant and equipment that occur subsequent to acquisition, an exception is provided for revaluation made in accordance with Government regulation. The Company revalued its property, plant and equipment that were used in operations as of January 1, 1979 and January 1, 1987. Under U.S. GAAP, property, plant and equipment may not be stated at more than their historical acquisition cost. c. Stock Issuance Costs Under Indonesian GAAP, stock issuance costs are deferred and amortized over a certain period of time. Under U.S. GAAP, the stock issuance costs are oÅset against the proceeds from the stock issuance. EÅective 2000, the Capital Market Supervisory Agency (Bapepam) requires that stock issuance costs be recorded as part of additional paid-in capital. d. Revenue-Sharing Arrangements Under Indonesian GAAP, property, plant and equipment built by an investor under revenuesharing arrangements are recognized as property, plant and equipment under revenue-sharing arrangements in the books of the party to whom ownership in such properties shall be transferred at the end of the revenue-sharing period, with a corresponding initial credit to unearned income. The property, plant and equipment are depreciated over their useful lives, while the unearned income is amortized over the revenue-sharing period. The Company records its share of the revenues earned on a net basis. Under U.S. GAAP, the accounting for revenue-sharing arrangements depends on the substance of the arrangements. When there is no guaranteed investment return to the investors, the accounting treatment is similar to that under Indonesian GAAP. When there is a guaranteed investment return to the investors based on a certain rate of return, the assets under revenue-sharing arrangements are recorded and, an obligation under revenue-sharing arrangements is correspondingly recognized. A portion of the investor's share in revenue is recorded as interest expense based on such rate of return and the remaining portion is treated as a reduction of the obligation. Revenues earned are recorded on a gross basis. This accounting treatment also applies to changes during the revenue-sharing period that aÅect the characteristics of the commitment. e. Foreign Exchange DiÅerential on Property under Construction Under Indonesian GAAP, starting 1997, foreign exchange diÅerential resulting from loans used to Ñnance property under construction should be capitalized. Capitalization of foreign exchange diÅerential ceases when the construction is substantially completed and the constructed property is ready for its intended use. Under U.S. GAAP, foreign exchange diÅerential should be charged to current operations.

F-71

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) 44. RECONCILIATION OF NET INCOME AND EQUITY DETERMINED UNDER INDONESIAN AND U.S. GAAP The following is a summary of the signiÑcant adjustments to net income for the years ended December 31, 1998, 1999 and 2000 and to equity as of December 31, 1998, 1999 and 2000 which would be required if U.S. GAAP had been applied, instead of Indonesian GAAP, in the consolidated Ñnancial statements:

Net income according to the consolidated statements of income prepared under Indonesian GAAPÏÏÏÏÏÏÏÏÏÏÏÏÏ U.S. GAAP adjustments Ì increase (decrease) due to: Capitalization of foreign exchange diÅerential Ì net of related depreciation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Equity in net gain (loss) of associated companies ÏÏÏÏÏÏ Pensions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Amortization of deferred stock issuance costs ÏÏÏÏÏÏÏÏÏÏ Revenue-sharing arrangements ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Revaluation of property, plant and equipment ÏÏÏÏÏÏÏÏÏ Income tax eÅect on U.S. GAAP adjustments ÏÏÏÏÏÏÏÏÏÏ Net adjustments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Approximate net income in accordance with U.S. GAAP ÏÏ Net income per share Ì in full Rupiah amount ÏÏÏÏÏÏÏÏÏÏ Net income per ADS (20 B shares per ADS) Ì in full Rupiah amount ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

1998 Rp

1999 Rp

2000 Rp

1,168,670

2,172,321

2,539,011

(319,697) 109,869 (133,666) (71,748) 74,705 2,389 (5,323) 70,531 94,636 26,883 26,883 22,402 9,132 11,909 (23,347) 4,095 4,095 4,095 112,085 (84,986) (8,336) (244,573) 213,006 (41,827) 924,097 2,385,327 2,497,184 99.01

247.33

247.74

1,980.21

4,946.62

4,954.73

Equity according to the consolidated balance sheets prepared under Indonesian GAAP ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ U.S. GAAP adjustments Ì increase (decrease) due to: Pensions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Revaluation of property, plant and equipment: Increment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Accumulated depreciation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Capitalization of foreign exchange diÅerential Ì net of related depreciation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Revenue-sharing arrangements ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Deferred stock issuance costsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Equity in net income of associated companiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Deferred tax liabilities on U.S. GAAP adjustmentsÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Net adjustments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Approximate stockholders' equity in accordance with U.S. GAAP ÏÏ F-72

1999 Rp

2000 Rp

12,224,309

13,687,643

44,537

139,173

(664,974) 652,855

(664,974) 656,950

(507,999) (641,665) (361,325) (384,672) (22,402) Ì (16,503) (14,114) 256,288 247,952 (619,523) (661,350) 11,604,786 13,026,293

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) With regard to the consolidated balance sheets and consolidated statements of income, the following signiÑcant captions determined under U.S. GAAP would have been:

Consolidated balance sheets Current assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Current liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Consolidated statements of income Operating incomeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

1999 Rp

2000 Rp

6,612,138 25,770,630 3,348,566 14,165,844

9,108,966 28,216,417 3,250,456 15,190,124

3,276,137

4,353,373

45. ADDITIONAL FINANCIAL STATEMENT DISCLOSURES REQUIRED BY U.S. GAAP AND THE U.S. SEC The following information is presented on the basis of U.S. GAAP: a. Income Tax The reconciliation between the expected income tax provision in accordance with U.S. GAAP and the actual provision for income tax recorded in accordance with U.S. GAAP is as follows: 1998 Rp

Approximate income before tax in accordance with U.S. GAAP ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Deduct minority interest in Subsidiary's income before tax Income before provision for tax after minority interest ÏÏÏÏ Expected income tax in accordance with U.S. GAAP at statutory tax ratesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ EÅect of permanent diÅerences at the enacted maximum tax rate (30%): Net periodic postretirement beneÑt cost ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Employee beneÑts ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Permanent diÅerences of the KSO Units ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Interest income which was already subjected to Ñnal tax Revenue-sharing arrangements ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Deferred stock issuance costs(*)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Revaluation of property, plant and equipment(*) ÏÏÏÏÏÏ OtherÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Subsidiary's provision for income tax ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Provision for income tax in accordance with U.S. GAAP ÏÏ

1,067,794 Ì 1,067,794 320,329

1999 Rp

2000 Rp

3,260,705 3,424,885 (18,680) (21,087) 3,242,025 3,403,798 972,599

1,021,131

Ì 116,605 49,531 7,561 7,850 9,615 (1,589) 1,848 5,177 (178,639) (206,327) (189,494) (2,640) (10,723) (10,330) (8,065) (8,065) (6,721) (1,229) (1,229) (1,229) 7,969 (15,859) 28,935 (176,632) (115,900) (114,516) Ì 5,334 7,925 143,697 862,033 914,540

(*) The tax eÅects of the stock issuance costs and revaluation of property, plant and equipment are oÅset against stockholders' equity for U.S. GAAP purposes.

F-73

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) BeneÑts enjoyed by pensioners fall under the category of beneÑts in kind which are nondeductible expenses under Indonesian tax laws. b. Fair Value of Financial Instruments The following methods and assumptions are used to estimate the fair value of each class of Ñnancial instruments: Cash and cash equivalents and temporary investments The carrying amount approximates fair value because of the short-term nature of the instruments. Long-term debt Ì related party Ì less current maturities The fair value of these Ñnancial instruments are estimated on the basis of the discounted value of future cash Öows expected to be paid, considering rates of interest at which the Company could borrow as of the respective balance sheet dates. For purposes of estimating the fair value of the long-term debt, the Company has used the Rupiah borrowing rates of 26.36% and 14.09%, the average U.S. Dollar borrowing rate of 6.8% and 7.32% and the respective average borrowing rates for the debt in other currencies, which represent the average rates for 1999 and 2000, respectively, prior to the onset of the economic diÇculties (Note 39). Under the current environment, an estimate of the interest rates as of a point in time, given the signiÑcance of the Company's debt and the general unavailability of funds, is not possible. For one percentage point increase in the aboveÓmentioned borrowing rates, the fair value of the Company's long-term debt at December 31, 2000 would decrease by Rp 425,803 million. The estimated fair values of the Company and its subsidiary's Ñnancial instruments are as follows: Carrying Amount Rp

Fair Value Rp

1999: Cash and cash equivalents ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Temporary investments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Long-term debt Ì related party Ì net of current maturities ÏÏÏÏ

3,597,537 1,319,535 7,644,008

3,597,537 1,319,535 5,853,430

2000: Cash and cash equivalents ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Temporary investments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Long-term debt Ì related party Ì net of current maturities ÏÏÏÏ

3,542,174 3,870,990 8,852,652

3,542,174 3,870,990 7,458,658

The methods and assumptions followed to disclose the fair value are inherently judgmental and involve various limitations, including the following: ‚

Fair values presented do not take into consideration the eÅect of future currency Öuctuations.

‚

Estimated fair values are not necessarily indicative of the amounts that the Company and its subsidiary would record upon disposal/termination of the Ñnancial instruments. F-74

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) c. Research and Development Research and development expenditures, as determined under U.S. GAAP, amounted to approximately Rp 12,347 million, Rp 12,598 million and Rp 33,110 million in 1998, 1999 and 2000, respectively. d. Valuation and Qualifying Accounts The following summarizes the activities in the valuation and qualifying accounts: Balance at Beginning of Year Rp

1999: Unrealized loss on decline in market value of marketable securitiesÏÏÏÏÏÏ Allowance for doubtful accounts Trade accounts receivable Related parties ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Third parties ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Allowance for inventory obsolescence 2000: Unrealized loss on decline in market value of marketable securitiesÏÏÏÏÏÏ Allowance for doubtful accounts Trade accounts receivable Related parties ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Third parties ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Allowance for inventory obsolescence

Additions (Charged to Cost Unrealized and Expenses) Loss Rp Rp

Deductions Rp

Balance at End of Year Rp

707

Ì

159

707

159

48,437 143,148 13,351

6,371 125,557 47,252

Ì Ì Ì

24,349 64,886 8,674

30,459 203,819 51,929

159

Ì

6

Ì

165

30,459 203,819 51,929

137,210 76,243 Ì

Ì Ì Ì

93,460 28,610

167,669 186,602 23,319

e. Risks and Uncertainties The preparation of Ñnancial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that aÅect the reported amounts of assets and liabilities at the date of the Ñnancial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could be diÅerent from these estimates. f. Derivative Financial Transactions There are no derivative contracts outstanding as of December 31, 2000. Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities, is eÅective for all Ñscal years beginning after June 15, 2000. SFAS 133, as amended, establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities. Under SFAS 133, certain contracts that were not formerly considered derivatives may now meet the deÑnition of a derivative. The Company will adopt SFAS 133 eÅective January 1, 2001. Management does not expect the F-75

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) adoption of SFAS 133 to have a signiÑcant impact on the Ñnancial position, results of operations, or cash Öows of the Company. g. Comprehensive Income Comprehensive income Ì net of tax, as determined under U.S. GAAP in 1998, 1999 and 2000 amounted to Rp 1,077,193 million, Rp 2,405,394 million and Rp 2,507,668 million, respectively. Adjustments to 1999 and 2000 net income to arrive at comprehensive income represent the increase in investment as a result of foreign currency translation of associated companies, changes of equity in associated companies and unrealized loss on decline in value of securities. In 1998, the adjustment represented the increase in investment as a result of the change in reporting currency to U.S. Dollar of two associated companies. h. General Price Level Financial Information Indonesia has experienced a cumulative inÖation rate of approximately 98% for the three years ended December 31, 2000. As a result, the currency in which the Company and its subsidiary report, the Indonesian Rupiah, is considered a currency in a hyperinÖationary economy in accordance with U.S. GAAP. The Company and its subsidiary's consolidated Ñnancial statements, prepared in accordance with Indonesian GAAP, do not include any adjustments to consider the eÅects of changing prices. In accordance with regulations of the United States Securities and Exchange Commission, the following supplemental Ñnancial information is provided to approximate the eÅects of changing prices upon the Company and its subsidiary's Ñnancial position and results of operations. In presenting the following information, the Company and its subsidiary's are utilizing the historical cost/constant currency methodology and are applying it to the consolidated Ñnancial statements prepared in accordance with Indonesian GAAP, eliminating the eÅects of the revaluation of property, plant and equipment in 1979 and 1987. In presenting comparative amounts for 1999, the restated Ñnancial information has been adjusted to present such information in terms of the measuring unit at December 31, 2000.

Current monetary assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Inventories and other current assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total current assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Property, plant and equipment and other assetsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total Assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

F-76

1999 Rp

2000 Rp

6,644,488 591,761 7,236,249 42,257,563 49,493,812

8,873,920 245,221 9,119,141 39,824,424 48,943,565

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) DECEMBER 31, 1999 AND 2000, AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (Figures in tables are presented in millions of Rupiah) 1999 Rp

2000 Rp

Current monetary liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Other current liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total current liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Long-term debt and other noncurrent liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Minority interest in net assets of subsidiaryÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Equity ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total Liabilities and Equity ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

3,564,526 147,205 3,711,731 14,163,703 33,140 31,585,238 49,493,812

3,224,463 172,640 3,397,103 14,231,118 39,999 31,275,345 48,943,565

Operating revenues ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Operating expenses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Depreciation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Other income (expense)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Tax expenseÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Gain on net monetary liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Minority interest in net income of subsidiary ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Net Income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

8,871,776 10,023,827 (2,817,976) (3,460,729) (4,206,718) (4,490,988) (310,387) (715,255) (858,156) (946,677) 132,176 437,442 (14,738) (13,749) 795,977 833,871

F-77

SIGNATURES Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, as amended, the Registrant hereby certiÑes that it meets all of the requirements for Ñling on Form 20-F and that it has duly caused this annual report to be signed on its behalf by the undersigned, there unto duly authorized, in Jakarta, on the 19th day of March, 2001.

PERUSAHAAN PERSEROAN (PERSERO) P.T. TELEKOMUNIKASI INDONESIA Tbk. By:

MUHAMMAD NAZIF President Director

MESSAGE FROM THE CHAIRMAN OF THE BOARD Indonesia's telecommunications industry has been undergoing a signiÑcant transformation since the promulgation of Telecommunication Law No. 36/1999 in September 1999 which comes into eÅect on September 8, 2000. The law has marked the end of telecommunications monopoly in Indonesia, and has exposed TELKOM full competition in its business engagement. This may constitute pressures as well as challenges to the Company in grasping opportunities to improve its performance in all aspects. I believe, however, that as incumbent operator with long standing stature, TELKOM has been well prepared for the new circumstances and is poised to take advantages of the new competitive environment. Amidst the changing telecommunication business environment and the impact of monetary crisis engulÑng Indonesia since mid 1997, TELKOM recorded a successful performance in the year 2000. The performance, which is presented in detail in this report, reÖects a positive continuous growth during the last Ñve years with a compound annual growth rate in operating revenues and operating income of 16,6 per cent and 17.1 per cent respectively. However, in the year 2000, TELKOM has been facing a number of problems to be resolved such as KSO (joint operation scheme) commitment, cross shareholding and joint shareholdings in several associated companies. Nevertheless, being a company with convincing fundamental infrastructure, competent employees, and long standing experiences, TELKOM will be capable to compete and become the winner through proper setting of its business strategy, including allocation and utilization of its resources. As TELKOM faces full competitive environment in all business lines and in order to cope with increasing pressures and totally diÅerent nature of competition from the past, the Company has to improve its competence to fulÑll market requirements, by implementing competence-based human resources management, as well as creating new business opportunities. The new vision provides the Company with crystal clear direction for improvement through the establishment of strategic platforms and strategic policies, which eventually lead to increasing company value in all aspects. After all, I would like to express my gratitude for the support extended by the shareholders, the management team, employees, customers, partners and others, who have unceasingly encouraged TELKOM to achieve its performance targets in 2000. We are conÑdent that with God's blessing we will be able to achieve more in the future.

Bandung, 19 March 2001

BACELIUS RURU Chairman of the Board

MESSAGE FROM THE PRESIDENT DIRECTOR TO SHAREHOLDERS Dear Shareholders, The year 2000 was Öourished by the change in regulatory aspect suggesting that the industry will see dynamic changes where only the most competitive, Öexible and eÇcient company can adapt and survive. TELKOM is fortunate to have experiences of operating in the demanding and burgeoning telecommunications services and network providers. This will stand us in good stead as we prepare for even more intense market competition in Indonesia. Although Ñxed-line and related plain ordinary telephone services currently remain the core of TELKOM's business, yet we are aware, that transformation of telecommunication industry will enter into the convergent process of the formerly separated information service and communication service. TELKOM is currently entering into InfoCom business. In terms of internal initiatives, the year 2000 has been noticed as a year of consolidated eÅort in preparing the business foundations for pre-empting the competition and grasping opportunities ahead, by redeÑning strategies related to business areas, human resource management, business excellence, capital expenditures, good corporate governance, and good corporate citizenship. Although the domestic macro-economic condition was still similar to the previous year as the continuing impact of the monetary crisis, TELKOM has successfully passed the year 2000 with a good Ñnancial outcome as reÖected in the balance sheets and statement of income of the year 2000. This achievement was the result of serious eÅorts and committed attitude to sustain the Company's growth combined with potential support from the customers. TELKOM's net income for the year 2000 was Rp 2,539.0 billion, up by 16.9 per cent, and earning before interest, tax, depreciation and amortization (EBITDA) was Rp 6,125.1 billion or an increase by 15.4 per cent compared to the previous year. Operating revenues increased by 20.4 per cent to Rp 9,375.7 billion, reÖecting a continuing demand for TELKOM's services and improved levels of customer service, despite increasing foreign exchange pressures on our margins. In addition the growth of operating expenses could be reduced below the growth of operating revenues. However, the depreciation of Rupiah as well as the increase in interest expense has negatively signiÑcantly impacted the Company net income. It is noticed that the increase in revenue was achieved in an environment of unresolved KSO's resolution, business restructuring, and the issue of earlier termination of exclusivity right. We also report that the Company could maintain its position as one of the major contributors to the Government with total contribution of Rp 1,454 million, which includes dividend for Ñscal year 1999, taxes and liabilities. On the other hand, during 2000 TELKOM shares price at the stock exchange both domestic and overseas suÅered a gradual decline along with the decline of the Jakarta Composite Index. As a matter of fact, major investors considered the country risk has been mounting as riots and unrests are recurring in the country, resulting in the security, socio-economic and political instability, which by all means posed a signiÑcant eÅect to the investment decision during the year 2000. Our response to the challenges was reÖected in the setting of strategic policies through the establishment of seven business projects in 2000 covering Enterprise Business, Mobile Communications, Cable TV, Calling Card and Pay-phone, Intelligent Network, Voice over Internet Protocol, and Business to Business.

We believe our strategic platforms will match the dynamics of a more competitive market. As the Company simultaneously continues with the transformation of corporate culture, we wish to become a highly competitive and leading company applying state-of-the-art technology as well as user friendly, which is always adaptive to customer and community needs as a part of the overall eÅorts to consistently build up the Company value. Bandung, 19 March 2001

MUHAMMAD NAZIF President Director and CEO

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PERUSAHAAN PERSEROAN (PERSERO) PT TELEKOMUNIKASI INDONESIA Tbk. (""PT TELKOM'') NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS 2001 NOTICE IS HEREBY GIVEN that the Extraordinary General Meeting of Shareholders (""EGMS'') and Annual General Meeting of Shareholders (""AGMS'') 2001 of Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk (""PT TELKOM'' or the ""Company'') will be held on May 10th, 2001 at 09:00 a.m. Jakarta Time, at Aula Pangeran Kuningan Room, Gedung Grha Citra Caraka, 1st Floor, Jl. Jend. Gatot Subroto No. 52, Jakarta 12710 Ì Indonesia, to consider if thought Ñt, to pass the following resolutions of the Company:

EXTRAORDINARY GENERAL MEETING OF SHAREHOLDERS 1. Approval relating to the transactions with Perusahaan Perseroan (Persero) PT Indonesian Satellite Corporation Tbk. (""Indosat''), involving a material transaction and conÖict of interests: a. Acquisition by TELKOM of 35.0% of the issued and fully paid shares of PT Telekomunikasi Selular by owned by Indosat; b. Sale by TELKOM of 22.5% of the issued and fully paid shares of PT Satelit Palapa Indonesia to Indosat; c. Sale by TELKOM of 37,66% of the issued and fully paid shares of PT Aplikanusa Lintasarta, and all outstanding convertible bonds (or shares issued upon from the conversion hereof) of PT Aplikanusa Lintasarta held by TELKOM at their principal amount plus unpaid accrued interest, to Indosat; and d. Acquisition by Indosat of all of TELKOM's rights, and transfer or novation of all of TELKOM's obligations, under a joint operating agreement with PT Mitra Global Telekomunikasi Indonesia, together with all of TELKOM's assets which TELKOM is required to make available for use by the joint operating scheme created by the joint operating agreement; 2. Approval relating to the acquisition by TELKOM of 90.32% of the issued and fully paid shares of PT Daya Mitra Telekomunikasi owned by PT Intidaya Sistelindomitra, Cable & Wireless plc and PT Mitracipta Sarananusa, and the guarantee of certain debt obligations of PT Daya Mitra Telekomunikasi owed to Cable & Wireless plc, by TELKOM, involving a material transaction.

ANNUAL GENERAL MEETING OF SHAREHOLDERS 1. Approval of the Company's Annual Report for the Ñnancial year 2000. 2. RatiÑcation of the Company audited consolidated Ñnancial statements for the Ñnancial year 2000 and acquittal and discharge to the Board of Directors and Board of Commissioners. 3. Determination of the Ñnancial year 2000's proÑt utilization including distribution of dividend. 4. Appointment of Public Accountant to audit the Company records for 2001 Ñnancial year. 5. Approval of the change of the Company's Articles of Association with regard to (i) scope of Business in line with the InfoCom Business; (ii) value of Material Transactions; (iii) adjustment of the duty and authority of the Company's Board of Directors and Commissioners; and (iv) include terms regarding Independent Commissioner. 6. Appointment of the Board of Commissioners for 2001 Ó 2004 along with the delegation of duty and authority. 7. Approval relating to the company's reorganization and business reconstruction principal. 8. Determination of the compensation for the Board of Directors and the Board of Commissioners in 2001 Ñnancial year.

Those eligible to attend the EGMS and AGMS shall be shareholders of the Company whose names are registered at the Company's ADS at 16:00 p.m. New York time on April 13th, 2001. By Order of the Board of Directors

MUHAMMAD NAZIF President Director

April, 2000

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