RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ET
- 75 - Table of realization of our capital expenditure
Years Ended December 31, 2011
2012 2013
Rp billion Rp billion
Rp billion
Telkomsel 8,472
10,656 15,662
Others 1,929
2,576 3,923
Subtotal for subsidiaries 10,401
13,232 19,585
Total for Telkom Group 14,603
17,272 24,898
Material Commitments for Capital Expenditures
As of December 31, 2013, we had material commitments for capital expenditures under certain contractual arrangements of Rp18,461 billion, principally relating to procurement and installation of the broadband network, transmission equipment and fiber optic
cablesystem.
For a more detailed discussion regarding our material commitments for capital expenditures, see Note 38a to our Consolidated Financial Statements.
Source of Funds We have historically funded our capital expenditures primarily with cash generated from operations and additional fund raised from
external sources as well. In 2014, we expect that our capital expenditure to revenue ratio will be approximately in the range of 25- 30. We expect that of the total increase in amount of capital expenditure in 2014 over 2013, the most significant proportions will be
allocated for mobile and broadband services and with a portion of the increase will be synergistically functionalized to our subsidiaries. We expect to fund the above commitments with our internal and external source of funds.
The realization of the future capital expenditures may differ from the amounts indicated above due to various factors, including but not limited to the Indonesian and global economy environments, the RupiahUS Dollar or other applicable foreign exchange rates, the
availability of supply or vendor or other financing on terms acceptable to us, and also any technical or other problems in the implementation.
Critical Accounting Policies, Estimates and Judgments
For a complete discussion of our critical accounting policies, estimates and judgments, see Note 2ab to our Consolidated Financial Statements.
New Standards and Interpretations
See Note 44 to our Consolidated Financial Statements for a discussion of the new standards, amendments to standards and interpretations not yet effective for the year ended December 31, 2013 and have not been applied in preparing the Consolidated
Financial Statements.
C. RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.
We routinely make investments to improve products and services. Total expenditure reached about Rp13 billion, Rp13 billion and Rp14 billion US1 million, in 2011, 2012 and 2013, respectively. In 2013, we engaged in research and development in the areas of
business, products and services to support of the implementation of mobile broadband, cloud computing, and development of ecosystem-based solutions, such as e-tourism, mobile payment, mobile games, and smart home solutions, that are designed to promote
a digital lifestyle in Indonesia. We also engaged in research and development relating to telecommunication network infrastructure.
We have developed two business incubators located in the cities of Bandung and Yogyakarta called Bandung Digital Valley BDV and Jogja Digital Valley JDV, respectively. Each incubator is intended to help build a national digital creative industry while
strengthening our business portfolio and focuses on innovative ideas which have may or may not been fully market-tested but that we believe have potential.
BDV commenced operations in 2012 and has been involved in the incubation of over a dozen startup companies. We expect JDV to commence incubation activities in 2014.
- 76 - D.
The significant trends, or developments that have had in recent years, and may have in the future, a material impact on our results of operations, financial condition and capital expenditures, include i an increase in cellular telephone revenues with increases in
subscribers, minutes of use, ARPU and regulatory aspects ii an increase in revenues from data, internet and information technology services revenues, and iii a decrease in fixed lines telephone revenues. See “Operating Results”.
We believe favorable external factors, among others, will support our ability to continue to drive revenue growth from data, internet and information technology services as well as from mobile phone services. Indonesias economy recorded a relatively robust growth
in recent years despite a sluggish global economy. With good economic fundamentals, Indonesia’s national economy is expected to continue to grow steadily, with a corresponding increase in consumer purchasing power, which in turn is expected to result in higher
demand for telecommunications services, for both basic telecommunications services as well as the more sophisticated value-added services that are part of the increasingly prevalent digital lifestyle in modern societies.
In the longer term, Indonesia’s economy is also expected to enjoy support from Government initiatives such as the Master Plan for the Acceleration and Expansion of Indonesia’s Economic Development, which was launched in 2011. One of the three pillars of the
master plan is development of national connectivity, including development of the information and communication technology sector. This is in line with our IDN program and our strategic initiative on the development of our Nusantara Superhighway project i.e. the
Palapa ring project known as id-Ring, an optical-based network of six interconnected rings which links Indonesia’s main island groups, namely the Sumatra ring, the Java ring, the Kalimantan ring, the Sulawesi ring, the Bali and Nusa Tenggara ring and the
Maluku and Papua ring. We expect that the development of this extensive telecommunication network connecting all the six major economic corridors will allow us to offer more value-added services, and to reach more customers in a much larger scale, as well as
provide opportunities for our products and services in the IMES areas.
We believe the shift in consumer preferences towards a digital lifestyle will be a key factor that we expect will drive our business in the future. We believe this will lead to continuing increase in broadband demand including mobile broadband, compensating for the
decline of our legacy business both fixed wireline and cellular telephone revenues and SMS revenues. We expect the increase in demand for data communications and corporate internet to continue next year as we increase our capacity to cover more small and
medium enterprises.