PT Telekomunikasi Indonesia Internasional Telin

The following management’s discussion and analysis on the performance of this company is based on Consolidated Financial Statements for the years ended on December 31, 2012, 2013, and 2014 which is also attached in this Annual Report. The presentation of Consolidated Financial Statements complies with FAS applied in Indonesia, which in several terms differ with IFRS. Our principal business is providing local, domestic and international telecommunication service in Indonesia. Through our 65 of ownership in Telkomsel, we become the biggest mobile cellular service provider. Our consolidated revenues increased by 8.1 to Rp89,696 billion. We successfully maintain a high level of profitability with EBITDA margin of 51.1, an increase from the previous year by 50.4. While the net profit margin recorded at 16.3 slightly lower than the previous year by 17.1. As of December 31, 2014 we had 140.6 million cellular phone subscribers through Telkomsel, 9.7 million subscribers on fixed wireline networks, 4.4 million subscribers on fixed wireless networks. Our broadband subscribers consisted of 31.2 million Telkomsel Flash users, 5.8 million Blackberry users and 3.4 million fixed broadband subsribers. We also provide wide range of communication services, including multimedia, data and internet communication-related services, satellite transponder leasing, leased line, interconnection, cable television and VoIP services, as well as multimedia business such as contents and applications. We also operate Multimedia businesses such as content and applications. The growth of Indonesian economy in 2014, measured by Gross Domestic Product GDP at current prices, grew by 5.1, with be supported by strong domestic consumption. The rupiah against the US dollar exchange rate determined based upon by Bank Indonesia exchange rate reached Rp 12,440 or depreciated 2.1 at the close of December 31, 2014, a better from depreciation rate in the previous year at 25.8. Such global economic condition provided less significant impact to our business thus the foreign exchange rate encouraged certain risks on sales, purchase and financing transaction primarily denominated in foreign currencies. Our revenues over 2012 to 2014 period reflected a progressive growth in revenues. The growth was largely driven by increase in revenues from data, internet and information technology service, which increased by 15.7. This growth was primarily driven by increasing of data usage and mobile broadband subscriptions. Moreover, revenues growth was also driven by increasing in cellular voice revenue at 6.7. On the other hand, operating income for 2012 to 2014 period also reflected increase in expenses which was triggered by operating, maintenance and telecommunication service expenses which were primarily as the result of network capacity expansion required to support our services to the customers, especially for data and internet services, as well as in fixed line and cellular subscribers. Continuing a solid performance 100 2014 Annual Report PT Telkom Indonesia Tbk Persero FINANCIAL AND PERF ORMANCE HIGHLIGHT MANA GEMENT REPOR T PREF A GENERAL INF ORMA TION OF TELK OM INDONE SIA MANA GEMENT’S DISCUSSION AND ANAL Y SIS CORPORA TE GO VERNANCE SOCIAL AND ENVIRONMENT AL RE SPONSIBILITY APPENDICE S ECONOMIC AND INDUSTRY OVERVIEW GLOBAL MACRO ECONOMY Overall global economic landscape in 2014 was showing a moderation trend. European economic condition was relatively unstable with Greek and some of other countries’ crises as notable issues. This encouraged Europe Central Bank ECB to apply interest cut and to implement monetary stimulus as an initiative to drive the economics. On the other hand, China as Asian economic booster also indicated an economic growth deceleration despite relatively high growth at 7 level. The decrease in growth rate was due to export weakening as the impact of decreasing global demand, concerning that export has a prominent factor for China’s economic. Thus, the slowdown was still saved by economic growth posted by India and several ASEAN countries that booked positive growth trend. Economic recovery took place in United States over 2014 brought a hope amid decelerating performance of other global economic engines. This economic recovery was a result of series of monetary policies implemented namely stimulus given by Federal Reserve. Economic key indicators have indicated improvement such as through job creation and real sector performance. In 2015, global trading is estimated to grow higher. The growth of global trading volume will be underpinned by economic recovery both in developed and developing countries, including the recovery of United States and most of European countries economics, which were expected to boost export volume to these countries. In ASEAN region, ASEAN Economy Community is expected to encourage inter-state production and trading activities in the region. INDONESIAN MACRO ECONOMY Indonesian economic growth was managed to grow progressively at 5.1 along 2014, underpinned by household consumption and primary commodities export. Prominent household consumption was triggered by increasing number of middle class, supported by Indonesian demography model at productive age as well as increase in income per capita growth. Meanwhile, political activity of General Election Pemilu and Local Election Pemilukada occurred in 2014 also encouraged high domestic consumption. Hence, this economic growth dynamic obligates discipline and consistency in determining policies to maintain stability and sustainability of economic development. Moderate global economic will potentially suppress domestic economic landscape. Non-recovered economy of emerging countries market also has reduced demand on Indonesian export, mainly for primary commodities. The Government and Bank Indonesia has implementing accurate and integrated policies that Indonesian economic was maintained at positive growth level. On November 18, 2014, the Government has decided significantly reduce subsidy post by increasing oil fuel BBM price. The policy is driving the Government to have more stable State Budget with higher allocation for infrastructure development. Having higher capital expenditure allocation for building bigger supporting infrastructure that is expected to provide multiplier effect to our economics. Nearly throughout 2014, BI Rate remained at 7.5 level showing stability of domestic economy. BI Rate booked an increase in November 2014 by 25bps to 7.75 as BI took prudent initiative in responding increasing oil fuel price. Meanwhile, Rupiah against US Dollar exchange rate reached to Rp12,440 or depreciated by 2.1 as closing of December 31, 2014, well beyond depreciation level posted in preceded year at 25.8. The Government is assumed to retain fiscal room flexibility while also increase expenditure allocation for infrastructure sector. Adequate budget spending in infrastructure development will encourage real sector investment which will later expand job opportunity and increasing domestic consumption. Further, various incentives are also needed namely by simplifying licensing process to boost foreign investment inflow to Indonesia to support economic development. The Government is expected to achieve domestic economic growth at approximately 5.4 - 5.8 in 2015. 101 2014 Annual Report PT Telkom Indonesia Tbk Persero