Interconnection AR TELKOM 2014 ENG

PROPERTY, PLANT EQUIPMENT Our property and equipment is used for telecommunication operations, which mainly consist of transmission installation and equipment, cable network and switching equipment. A description of these is contained elsewhere in Note 11 to our Consolidated Financial Statements. Except for ownership rights granted to individuals in Indonesia, reversionary rights to land rests with the Republic of Indonesia, pursuant to Agrarian Law No.51960. Land title is designated through land rights, including Right to Build Hak Guna Bangunan or HGB and Right of Use Hak Guna Usaha or HGU. Land title holders enjoy full use of the land for a specified period, subject to renewal and extensions. In most instances, land rights are freely tradable and may be pledged as security under loan agreements. We own several pieces of land located throughout Indonesia with the right to build and use for a period of 10 to 45 years, which will expire between 2015 and 2053. We believe that there will be no difficulty in obtaining the extension of the land rights when they expire. We hold registered rights to build and use for most of our properties. Pursuant to Government Regulation No.401996, the maximum initial period for the right to build is 30 years and is renewable for an additional 20 years. We are not aware of any environmental issues that could affect the utilization of our property and equipment. All assets owned by the Company have been pledged as collateral for bonds Notes 20a. Certain property and equipment of the Company’s subsidiaries have been pledged as collateral under lending agreements Notes 17 and 21. As of December 31, 2014 the cost of fully depreciated property and equipment of Company that are still used in operations amounted to Rp47,910 billion. We are currently performing modernization of network assets to replace the fully depreciated property and equipment. INSURANCE As of December 31, 2014, our property and equipment except land rights, with net carrying amount of Rp85,352 billion were insured against fire, theft, earthquake and other specified risks, with a maximum loss claim of Rp15,244 billion, US119 million, EURO133 thousand, SGD29 million and HKD19 million. Management believes that the insurance coverage is adequate to cover potential losses from the insured risks. OPERATIONAL OVERVIEW NETWORK INFRASTRUCTURE DEVELOPMENT Our network infrastructure can be categorized into national and international network infrastructure. National network infrastructure was held to realize one of our major programs, namely Indonesia Digital Network IDN. International Networks We operate international gateways in Batam, Jakarta, and Surabaya to route outgoing and incoming calls on our IDD service “007”. After the Batam Singapore Cable System BSCS, Asia America Gateway AAG, and Singapore Japan Cable System SJC on March 7, 2014, our subsidiary TII or Telin, in cooperation with other 17 global telecommunication providers signed MoU of submarine cable development project, South East Asia – Middle East -Western Europe 5 SEA-ME-WE 5 in Kuala Lumpur, Malaysia. SEA-ME- WE5 is a submarine cable system with a length of approximatelly 20.000 km stretching from Dumai, Indonesia to several countries in Southeast Asia, France and Italy with direct connection from Indonesia to Europe, SEA-ME-WE 5. Development of submarine cable system infrastructure was also carried out by signing MoU of Southeast Asia – United States SEA – USA Cable System, where Telin is also joined as member on a consortium with other 6 global telecommunication companies. SEA – US connects Manado Indonesia, Davao Philippines, Piti Guam, Oahu Hawaii, United States, and Los Angeles California, United States. In line with SEA-ME-WE5, the submarine cable system has a capacity to accommodate data and internet requirement from Indonesia directly to the owner of the majority of the world internet content, silicon valley. To support the international services both voice and data, Telin operates 16 points of presence “POP” in various parts of the world, including in Asia Dubai, Singapore, Hong Kong, Malaysia and Tokyo, Europe London , Frankfurt and Amsterdam and the USA Ashburn, New York, Los Angeles, San Jose and Palo Alto. National Network In the master plan and IDN infrastructure, our target was 150 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 to modernize legacy network into a network that used a broadband access infrastructure. We have 13.3 million homepass of broadband access while Telkomsel digital network was strengthened by 85,420 base stations. We continue to pursue development of our network infrastructure to offer a more efficient and cost-competitive service as part of the Government’s Master Plan for the Acceleration and Expansion of Indonesias Economic Development “MP3EI” in line with our transformation into a TIMES provider under our Indonesia Digital Network IDN program. In the framework of developing high-quality, efficient and competitive infrastructure in terms of the costs in delivery services, we continue to pursue the development and improvement of the network infrastructure, known as Telkom One Network, which was built and operated by Telkom Group. Our IDN program involves the following three program developments: 1. id-Convergence “id-Con”: convergence of the node service network infrastructure into a multi-service and multi-screen integrated NGN. 2. id-Ring: development of our transport network infrastructure into an IP-based and optical backbone network. 3. id-Access: development of our customer access network infrastructure into a high speed broadband access through fiber optic and Wi-Fi networks. Fixed Wireline Network As of December 31, 2014, we managed 9.7 million fixed wireline connections. In the master plan and IDN infrastructure, our target was to modernize legacy network into a network that used a broadband access infrastructure. Operating Statistics As and for the year ended December 31, 2014 2013 2012 2011 2010 Exchange capacity 13,946,801 13,918,369 13,908,003 12,180,214 11,237,229 Installed lines 10,341,807 10,650,652 11,109,156 11,005,208 10,510,048 Lines in service 9,698,255 9,350,806 9,034,010 8,688,526 8,302,818 Lines in service are subscriber lines and public telephone lines, including the lines in service that we operate under revenue-sharing arrangements. Fixed Wireless Network Our fixed wireless infrastructure consists primarily of mobile switching centers “MSC” and base station sub systems “BSS”, which consists of a base station controller “BSC” and a base transceiver station “BTS”. According to the Decree of the Minister of Communication and Information of the Republic of Indonesia No. 934, dated September 26, 2014, approval has been given for the allocation of radio frequency 8 MHz in the range of 880-887.5 MHz paired with 925-932.5 MHz from our Company to Telkomsel. On June 27, 2014, we entered into a Conditional Business Transfer Agreement with Telkomsel to transfer parts of our fixed wireless business and migrated subscribers to Telkomsel. However, we plan to continue to operate the Flexi service till the end of 2015 or until our remaining Flexi customers have migrated to Telkomsel, if earlier. Cellular Network Our cellular services, which are operated by our subsidiary, Telkomsel, have the most extensive network coverage of any cellular operators in Indonesia. Telkomsel currently operates on the GSMDCS, GPRS, EDGE,3.5G and 4G networks. The GSMDCS network consists of 7.5 MHz of bandwidth on the 900 MHz frequency and 22.5 MHz of bandwidth on the 1.8 GHz frequency. Telkomsel’s 3G network uses 15 MHz of bandwidth on the 2.1 GHz frequency. The range of cellular services on the GSM network provided by Telkomsel extends to all cities and districts in Indonesia. In 2014, Telkomsel has added 15,556 unit of BTS. As of December 31, 2014, Telkomsel’s digital network was supported by 85,420 BTS. 151 2014 Annual Report PT Telkom Indonesia Tbk Persero