Threshold Passive Foreign Investment Company “PFIC” Classification Matters

Decree No.KM.352004” provides that only local fixed network operators holding licenses issued by the MoC may offer limited mobility wireless or fixed wireless access services. In addition, MoC Decree No.352004 states that each limited mobility wireless access operator must provide basic telephone services. Under an automated migration feature, customers are able to make and receive calls on their fixed limited mobility wireless access phones using a different number with a different area code.

8. Cellular

Cellular telephone service is provided in Indonesia on the radio frequency spectrum of 1.8 GHz DCS technology, 2.1 GHz UMTS technology and 900 MHz GSM and UMTS technology. The MoCI regulates the use and allocation of the radio frequency spectrum for mobile cellular networks. Telkomsel has obtained frequency allocation for cellular services on the 900 MHz, 1.8 GHz and 2.1 GHz frequency bands. For the allocation of radio frequency spectrum 2.1 GHz, in 2006 the government allocates a tender process for the allocation of 5 MHz, whereas for the allocation of additional radio spectrum allocated through an evaluation mechanism in 2009 and selection in 2013 where each is the addition of 5 MHz. The allocation of bandwidth in the 2.1 GHz frequency spectrum is regulated by: MoCI Decree No.19KEPM.KOMINFO22006 dated February 14, 2006 regarding the Determination of Winner of IMT-2000 Mobile Cellular Operator Selection at 2.1 GHz Radio Frequency Band. MoCI Decree No.268KEPM.KOMINFO92009 regarding the Determination of Additional Allocation of Radio Frequency Bandwidth Blocks, Tariffs, and Payment Scheme Radio Frequency Spectrum Right of Usage Fees for IMT-2000 Moble Cellular Operators at 2.1 GHz Radio Frequency Band. MoCI Decree No.191 Year 2013 regarding the Determination of PT Telekomunikasi Selular as Winner in the Selection of Users of Additional Frequency Bandwidth at 2.1 GHz Radio Frequency Band for IMT-2000 Moble Cellular Operators.

9. Interconnection

The Telecommunications Law expressly prohibits monopolistic and unfair business practices and requires network providers to allow users to access other users or obtain services from other networks by paying interconnection fees agreed upon by each network operator. Government Regulation No.522000 dated July 11, 2000 regarding Telecommunications Operations provides that interconnection charges between two or more network operators must be transparent, mutually agreed upon and fair. On February 8, 2006, the MoCI issued Regulation No.8 PERM.KOMINFO022006 on Interconnection “MoCI Regulation No.82006”, mandated a cost-based interconnection tariff scheme for all network and services operators replacing the previous revenue-sharing scheme. Under the new scheme, interconnection charges are determined by the network operator on which a call terminates based on a long-run incremental cost formula. MoCI Regulation No.82006 requires operators to submit to the ITRA annual RIO proposals containing proposed interconnection tariffs for the coming year. Operators are required to use the cost-based methodology in preparing RIO proposals, and the ITRA and MoCI are required to use the same methodology in evaluating the RIO proposals and approving interconnection tariffs. Pursuant to MoCI Regulation No.82006 and ITRA Letter No.246BRTIVIII2007 dated August 6, 2007, we submitted a RIO proposal to the ITRA in October 2007, which covered adjustments for operational, configuration, technical and service offerings. In December 2007, we and all other network operators signed new interconnection agreements that superseded previous interconnection agreements between us and other network operators which also amended all interconnection agreements signed in December 2006. On February 5, 2008, the ITRA required that we and other operators begin implementing the cost-based interconnection tariff regime. On April 11, 2008, pursuant to Directorate General of Post and Telecommunication “DGPT” Decree No.2052008, the ITRA and the MoCI approved RIO proposals from all operators to replace previous interconnection agreements. The RIO approved in 2008 was effective until July 29, 2011 when new interconnection charges were implemented as stipulated in ITRA Letter No.227BRTIXII2010 dated December 31, 2010 regarding the Implementation of Interconnection Charges in 2011. This is the result of interconnection charges recalculation conducted in 2010 by MoCI that was agreed on by all operators and outlined in a Memorandum of Understanding. The results of this interconnection charges reform caused a slight decrease in interconnection costs. On December 12, 2011, the ITRA changed the SMS interconnection fee basis from a “Sender Keep All” basis to a cost basis interconnection fee calculation which 146 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