Risks Related to Development of New Businesses

- 24 - While operator consolidation may lead to improved conditions in the cellular telecommunication industry, it also present challenges for Telkomsel in maintaining its market position.

7. Risks Related to Development of New Businesses

We believe that efforts to develop new businesses other than our telecommunication business as well as international expansion are necessary to ensure continuing business growth. We plan to undertake these activities through our subsidiaries, Metra and TII. Risks related to new business development include competition from established players, suitability of business model, the need to acquire new expertise in the new areas of operation, and risks related to online media such as risks relating to intellectual property, consumer protection and confidentiality of customer data. Focusing on international expansion is one of our strategic business intiatives. In particular, we have already started expansion into seven countries, namely Hong Kong-Macau, Timor Leste, Australia, Myanmar, Malaysia, Taiwan, and United States of America through our subsidiary, TII. Expanding our operations internationally exposes us to a number of risks associated with operating in new jurisdictions for example, our international operations could be adversely affected by political, or social instability and unrest, by regulatory changes, such as an increase in taxes applicable to our operations, macroeconomic instability, limitations on or controls on the foreign exchange trade, competition from local operators, difference in consumer preferences and a lack of expertise in the local markets in which we will be operation. Any of these factors could cause our expected returns from our expansion to be limited and could have a material and adverse effect on our business, results of operations and financial condition. ITEM 4. INFORMATION ON THE COMPANY A. HISTORY AND DEVELOPMENT OF THE COMPANY We are a limited liability company incorporated under the laws of Indonesia and domiciled in Bandung. We trade under the legal name “Perusahaan Perseroan Persero PT Telekomunikasi Indonesia Tbk” and with the commercial name “Telkom”. We were converted from a state agency to a State-Owned Enterprise on September 24, 1991 and obtained status as a legal entity on November 19, 1991 for an indefinite period of time. Our registered office is located at Jl. Japati No.1, Bandung 40133, Indonesia, and our telephone number is +62 21 521 5109. Our agent for service of process in the United States with respect to our ADSs is Puglisi Associate at 850 Library Avenue, Suite 204, Newark, DE, 19711. Our corporate website may be accessed at www.telkom.co.id. The information found on our corporate website does not form part of this Form 20-F and is not incorporated by reference herein. Information about the legislation under which we operate is provided elsewhere in this Form 20-F. A description, including the amount invested, of our principal capital expenditures and divestitures including interests in other companies, since the beginning of our last three financial years and information concerning our principal capital expenditures is contained elsewhere in this Form 20-F. A description of our principal capital expenditures and divestitures, since the beginning of the last three financial years to the date of this Annual Report is set forth in Item 5 “Operating and Financial Review and Prospects – Liquidity – Capital Expenditures”. Information concerning our principal capital expenditures and divestitures currently in progress is also described in Item 5 “Operating and Financial Review and Prospects – Liquidity – Capital Expenditures”. We are a State-Owned Enterprise that operates in the telecommunications and network services sector in Indonesia. Our history and certain information required by Item 4 of Form 20-F is as follows: History of Telkom 1856-1882 On October 23, 1856, the Dutch colonial government deployed the first electromagnetic telegraph in Indonesia, connecting Batavia Jakarta with Buitenzorg Bogor. 1906-1965 The Dutch colonial government established a government agency to operate post and telecommunications services in Indonesia. In 1965, the post and telecommunications services were separated and brought under the control of two state companies, PN Pos and Giro and PN Telekomunikasi. 1974 PN Telekomunikasi was split into two divisions, PT Industri Telekomunikasi Indonesia “PT INTI”, which manufactured telecommunications equipment, and Perusahaan Umum Telekomunikasi “Perumtel”, which supplied domestic and international telecommunication services. - 25 - The international telecommunication business was taken over by Indosat. 1991 Perumtel became PT Telekomunikasi Indonesia or Telkom, and operations were organized into twelve regional units “Witel”. These were later reorganized into seven regional divisions: Division I Sumatra, Division II Jakarta and Surrounding Area, Division III West Java, Division IV Central Java and DI Yogyakarta, Division V East Java, Division VI Kalimantan and Division VII Eastern Indonesia. 1995 We held our Initial Public Offering on November 14, 1995 on the Jakarta Stock Exchange and the Surabaya Stock Exchange. On May 26, 1995, we established Telkomsel, our cellular business subsidiary. 1999 The Telecommunications Law Law No. 361999, which went into effect in September 2000, facilitated the entry of new players, intensifying the competition in the telecommunications industry . 2001 We acquired Indosat’s 35 shareholdings in Telkomsel, making us the majority shareholder with a stake of 77.7. Indosat then took over our 22.5 shareholding in Satelindo and 37.7 share in PT Aplikanusa Lintasarta. At the same time, we lost our exclusive right to be the sole fixed line telephone operator in Indonesia. 2002 We divested 12.7 of our shares in Telkomsel to Singapore Telecom Mobile Pte Ltd. “SingTel Mobile”. 2004 We launched our international direct dial fixed line service. 2005 The Telkom-2 Satellite was launched to replace all satellite transmission services previously provided by the Palapa B-4 satellite. This brought our total number of satellites launched to eight, including the Palapa A-1 satellite. 2009 We underwent a transformation from an infocom to a TIME company. The new Telkom was introduced to the public with the new corporate logo and tagline, “the world in your hand”. 2010 The JaKaLaDeMa submarine and fiber optic cable project linking Java, Kalimantan, Sulawesi, Denpasar and Mataram was successfully completed in April 2010. 2011 We commenced the reform of our telecommunications infrastructure through the Telkom Nusantara Super Highway project, which unites the Indonesian archipelago from Sumatra to Papua, and the True Broadband Access project, which will enable customers all over Indonesia to have broadband access to the internet. 2012 We sought to achieve widespread broadband penetration throughout Indonesia through the implementation of the Indonesia Wi-Fi program towards the development of Indonesia Digital Network. We sought to improve business value creation by reconfiguring our business portfolios from TIME to TIMES Telecommunications, Information, Media, Edutainment Services. Establishment of Telkom Corporate University to develop a globally competitive human capital “from competence to commerce”. 2013 We commenced operations in seven countries, namely Hong Kong-Macau, Timor Leste, Australia, Myanmar, Malaysia, Taiwan and United States of America. - 26 - BUSINESS OVERVIEW Business Portfolio We are a State-Owned Enterprise and currently the largest telecommunication service and network provider in Indonesia. We serve millions of customers throughout Indonesia with a complete range of telecommunications services that include fixed wireline and fixed wireless telephone connections, cellular services, network and interconnection services, as well as internet and data communication services. We also provide services in information, media and edutainment, including cloud-based and server-based managed services, e-Payment and IT enabler services, Pay TV, as well as e-Commerce and other portal services. We posted revenues of Rp77,127 billion and Rp82,967 billion, respectively, for the years ended December 31, 2012 and 2013. Fixed line telephone services include local, direct long-distance “DLD”, and international call services, as well as other telecommunications and supporting services. Fixed wireless services include local and direct long-distance CDMA-based telephone connections, and other telecommunication services. Cellular services comprise cellulars telecommunication service. Our telecommunications-related business may experience certain seasonal effects. Cellular tend to increase around the Ramadhan lunar month and the culmination of the Eid festivity, as well as during the December holiday season, while fixed line communications from homes and offices and fixed wireless communications may decrease when there are fewer working days in the period or a greater number of subscribers are on vacation. In 2013, except for OLOs who use our interconnection services and Telkomsel’s employee cooperative “Kisel”, none of our customers accounted for more than 1 of our total revenues. A substantial majority of our revenue has and continues to come from telecommunications-related services, including data and internet services. As a company that provides TIMES, we continue to encourage innovations in sectors other than telecommunications, and capture synergies among all of our products, services and solutions ranging from our legacy business to the new economy business “NEB”. Our business portfolio is grouped into the following lines of business:

A. Telecommunications Business