- 84 - Telkomsel operates its own DBPP for its employees. With this program, employees are entitled to retirement benefits calculated
Infomedia also has its own DBPP for its employees.
b.
Defined Contribution Pension Plan “DCPP” We operate a Defined Contribution Pension Plan for permanent employees who were recruited on or after July 1, 2002. DCPP is
managed by several appointed financial institutions pension fund from which employees can choose. Our contribution to the financial institutions pension fund is determined by the portion taken from participating employee’s basic salary, which totalled
Rp5 billion, Rp5 billion and Rp6 billion, respectively, for the years ended December 31, 2011, 2012 and 2013.
To create a more effective and competitive business environment, we also have an Early Retirement Program “ERP”. The program is run in line with the execution of the 2013-2017 Human Capital Master Plan which is expected to release 1,548
employees. This program is offered to employees who are deemed to have met certain requirements in terms of education, age, position and performance. From 2002 through December 31, 2013, we spent Rp7.3 trillion as compensation for 14,195
employees who participated in the program. In 2013, we did not execute an early retirement program.
Management of Employee Relations with Management
Pursuant to the Presidential Decree No.831998 regarding Ratification of ILO Convention No.871948 regarding Freedom of Association and Protection of the Right Organize, our employees established the Telkom Employees Union “SEKAR”. As of
December 31, 2013, SEKAR represented a total of 16,283 employees or 91.1 of our total workforce. Pursuant to Law No.132003 regarding Manpower and Regulation of the Minister of Manpower and Transmigration No.PER.162011
concerning Procedures Preparation and Ratification of Company Regulations and Preparation and Registration Collective Work Agreement “CWA”, SEKAR is entitled to represent employees in the negotiation of the CWA with management. To renew the
expired CWA IV, negotiations for the CWA V were conducted during 2013. These negotiations have resulted in an agreement that was signed by both parties on August 23, 2013, and has been ratified by the Directorate General of Work Requirement, Welfare and
Discrimination Analysis of the Ministry of Manpower and Transmigration. CWA V is in effect until August 23, 2015.
Telkomsel and Infomedia also have employees’ unions. Telkomsel’s employees’ union, “SEPAKAT”, has 3,972 members or representing 93.1 of Telkomsel’s total employees. Neither we nor our subsidiaries with employees union have experienced material
labor action.
E. SHARE OWNERSHIP
As of February 28, 2014, none of our Directors or senior managers beneficially owned more than 1.0 of our outstanding shares of common stock. In addition, no Commissioners beneficially own our shares of common stock. For information regarding share
ownership of our directors and senior management, see Item 7 “Major Shareholders and Related Party Transactions – Major Shareholders.”
Employee Stock Ownership Program
The Employee Stock Ownership Program “ESOP” is an employee-owner scheme that provides our employee with an ownership interest in our Company. At our initial public offering on November 14, 1995, a total of 116,666,475 shares were issued to 43,218
employees. On June 14, 2013, the Company transferred a portion of the treasury stock to its employees as part of the 2012 annual incentives. The 59,811,400 equal to 299,057,000 shares after stock split treasury stock transferred to 24,993 employees which had a
total fair value of Rp661 billion.
As of February 28, 2014, 228,546,810 of our shares were owned by 23,520 of our employees and our retirees.
Stock Split
At our general shareholders meeting on April 19, 2013, a stock split with a ratio of 1:5 was approved by our shareholders. New Series B common shares were deposited into shareholders accounts on September 2, 2013, as part of the stock split. In connection with our
stock split, effective September 3, 2013, we changed the ratio of our ADSs from one ADS representing 40 Series B common shares, par value Rp250 per share, to one ADS representing 200 Series B common shares, par value Rp50 per share.
- 85 - ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A. MAJOR SHAREHOLDERS
Shareholder Composition
Our authorized capital stock consists of one Series A Dwiwarna share and 399,999,999,999 Series B common stock shares. Our authorized shares, 100,799,996,400 of which are issued and fully paid, consists of one Series A Dwiwarna share and 100,799,996,399
shares of Series B common stock. The Series A Dwiwarna share is owned by the Government and carries special voting rights and the right to nominate, and to veto the appointment and removal of, any director or commissioner, the issue of new shares and amendments
to our Articles of Association including amendments to merge or dissolve us prior to the expiry of its term of existence, to increase or decrease our authorized capital or to reduce our subscribed capital. The material rights and restrictions placed on the common stock
also apply to the Dwiwarna share, except that the Government cannot transfer the Dwiwarna share. The Government’s ownership of the Dwiwarna share gives it effective control over our Company even if it reduces its ownership of our common stock, and its rights
with respect to the Dwiwarna share may only be modified by an amendment of our Articles of Association, which the Government may veto.
Company Shareholders per February 28, 2014
Series A Dwiwarna Share
Series B Shares Common Stock
Percentage of Ownership
Government 1
51,602,353,559 53.14
Public 45,498,500,040
46.86 Capital Subtotal issued and outstanding
1 97,100,853,599
100.00 Treasury Stock
3,699,142,800 -
Total 1
100,799,996,399 100.00
Shareholders Owning More Than 5 of Shares Major Shareholder
Title of Class Person or Group
Number of Shares Percentage of
Ownership
Series A Government
1 -
Series B Government
51,602,353,559 53.14
During the past three years, the percentage of shares held by Government was 52.8, 53.9 and 53.1 as of February 28, 2012, 2013 and 2014, respectively.
Shares Owned by Directors
Directors Number of Shares
Percentage of Ownership
Directors Indra Utoyo
27,540 0.01
Honesti Basyir 540
0.01 Priyantono Rudito
540 0.01
Sukardi Silalahi 540
0.01 Total
29,160 0.01
Shareholders Owning Less Than 5 of Shares
Group Number of Shares
Percentage of Ownership
Foreign Business
37,630,826,424 38.75
Individual 15,345,500
0.01 Local
Business Entities Companies
2,298,992,229 2.37
Mutual Funds 2,441,456,684
2.51 Insurance Companies
1,899,435,600 1.96
- 86 -
Ownership
Pension Funds 613,687,650
0.63 Other Business Entities
59,213,990 0.06
Individuals 539,541,963
0.56 Total
45,498,500,040 46.85
Relationship with the Government and Government Agencies
Our relationship with the Government is multi-faceted. The Government is our majority and controlling shareholder. It is also our regulator as it adopts, administers and enforces relevant laws that regulate telecommunications sector, sets tariffs and issues licenses.
It is also one of our customers and one of our lenders.
As used in this section, the term “Government” includes the Government of Indonesia and its ministries, directly-owned government departments and agencies, but excludes SOEs.
The Government as Shareholder
The Government is our majority and controlling shareholder and owned 53.1 of our common stock as of February 28, 2014. Its ownership of the Series A Dwiwarna share gives it special voting and veto rights. Under relevant laws, the “ownership” of our
common stock and the single outstanding Series A Dwiwarna share is vested in the Ministry of Finance “MoF”. In turn, and under the authority of the MoF, the Minister of State-Owned Enterprise “MSOE” exercises the rights vested in these securities as our
“controlling shareholder”.
As our majority shareholder and controlling shareholder, the Government has an interest in our performance, both in terms of the service we provide to the nation and our ability to operate on a commercial basis. The material rights and restrictions that apply to our
common stock also apply to the Series A Dwiwarna share, except that the Government may not transfer the Series A Dwiwarna share, and has right of veto with regard to: 1 the nomination, appointment and removal of our Directors; 2 the nomination, appointment
and removal of our Commissioners; 3 the issuance of new shares and 4 any amendments to our Articles of Association, including with respect to actions to merge or dissolve our Company, increase or reduce our authorized capital stock, or reduce our subscribed
capital stock.
Accordingly, the Government effectively has control over these matters even if it owns less than a majority share of the outstanding common stock. The Government’s rights with respect to the Series A Dwiwarna share will not expire unless there is a change that
requires the amendment of our Articles of Association, which would require the consent of the Government as the holder of Series A Dwiwarna share.
The Government as Regulator
The Government regulates the telecommunications sector through the MoCI. The MoCI has the authority to issue regulations that implement laws, which are typically broad in scope. Through such decrees the MoCI defines the structure of the industry, determines
tariff formulas, establishes our USO, and otherwise controls many factors that could influence our competitive position, operations and financial position. Through the DGPT, the MoCI regulates the allocation of frequencies and sets numbers for fixed telephone
lines. We are required to obtain a license from the DGPT for each type of service offered, including for the frequencies we use as allocated by the MoCI. We and other operators are required to pay frequency usage fees. Telkomsel also holds licenses issued by the
MoCI some of which were previously issued by the Minister of Communications for the provision of cellular services, and from the Indonesian Investment Coordinating Board in relation to Telkomsel’s investments for the development of cellular phone services with
national coverage, including the expansion of network coverage. The Government, through the MoCI as regulator, has the authority to issue new licenses for the establishment of new joint ventures and other new arrangements, particularly in telecommunications.
Certain licenses require us to pay a concession fee to operate. We pay concession fees for telecommunications services provided and radio frequency usage charges to the MoCI. Concession fees amounted to Rp451 billion in 2012 and Rp442 billion US36 million in
2013. Concession fees as a percentage of total expenses amounted to 0.8 in 2012 and 0.8 in 2013. Radio frequency usage charges amounted to Rp3,002 billion in 2012 and Rp3,098 billion US255 million in 2013. Radio frequency usage charges as a percentage
of total expenses amounted to 5.5 in 2012 and 5.4 in 2013. USO charges to the MoCI amounting to Rp994 billion in 2012 and Rp1,059 billion US87 million in 2013. USO charges as a percentage of our total expenses came to 1.8 in 2012 and 1.8 in 2013.
The Government as Lender
In July 1994, the Government arranged a facility under which certain foreign institutions provided us with a two-step loan for certain expenditures the “sub-loan borrowings”. The sub-loan borrowings were made through the Government and are guaranteed by it. As
of December 31, 2013, we had a total of Rp1,915 billion US157 million in such outstanding two-step loans, including current
- 87 - maturities. We are required to pay the Government interest and repay the principal, which the Government then remits to the
The Government as Customer
Certain Government departments and agencies purchase services from us as direct customers, the terms of which are negotiated on a commercial basis. No services are provided for free or on an in-kind basis. We deal with these departments and agencies as separate
customers. In 2013, the amount of revenues from Government departments and agencies was Rp508 billion, which was approximately 0.61 of our consolidated revenues and did not constitute a material part of our revenues. The Government departments and agencies
are treated for tariff purposes with respect to connection charges and monthly charges as “residential”, which tariffs are lower than the business service rates. This does not apply to the tariffs for local, long distance and IDD calls.
It is our policy not to enter into any transactions with affiliates unless the terms are no less favorable to us than they would be with a third party. The MSOE has advised us that it would not cause us to enter into transactions with other entities under its control unless
the terms were consistent with our policy as referred to above.
Pursuant to OJK regulations, because we are listed on the IDX, any transaction where there is an inherent conflict of interest as defined below with another IDX-listed company must be approved by majority of the holders of our common stock who do not have
a conflict of interest in the proposed transaction, unless such conflict of interest existed before listing and was fully disclosed in the offering documents.
OJK regulations define a conflict of interest as a conflict between our economic interests and the shareholders’ interests on the one hand, and on the other, the personal economic interests of members of the Board of Commissioners, Board of Directors or other
principal shareholders defined as a holder of 20 or more of our common stock or their affiliates, either jointly or individually. A conflict of interest also exists if a member of the Board of Commissioners or Board of Directors or a principal shareholder or their
respective affiliates is involved in a transaction in which its personal interests may be in conflict with ours. OJK has the authority to enforce these rules regarding conflicts of interest and holders of our common stock are also entitled to bring a suit to enforce these.
Under OJK regulations, transactions between us and other State-Owned or controlled enterprises may cause a conflict of interest. In such cases, the approval of the disinterested shareholders must be obtained if a conflict of interest arises. We believe that many
transactions conducted with State-Owned or controlled enterprises are on an arms-length, commercial basis and do not constitute conflict of interest transactions that would require an independent shareholders vote. Such transactions include our sale of telephone
services to State-Owned or controlled enterprises and our purchase of electricity from a State-Owned Enterprise. We expect that from time to time, in connection with the development and growth of our business we would enter into joint ventures, agreements or
transactions with such enterprises. Under such circumstances, we may consult OJK to determine whether a proposed joint venture, agreement or transaction would require a vote of independent shareholders under OJK rules. If OJK is of the view that such
transaction would not require such a vote, we would proceed without seeking the independent shareholders’ approval. Otherwise, we would seek the requisite approval or abandon the proposed action.
Proportion of Common Stock Held in Indonesia and Abroad
As of February 28, 2014, we had 44,518 common stock shareholders, including the Government. This total includes 38,696,301,724 common stock shares owned by 1,821 shareholders outside Indonesia. As of the same date, there were 104 ADS shareholders who
owned 56,880,177 ADS 1 ADS is equivalent to 200 common stock shares.
Change in Control
As of the date of this Annual Report, we are not aware of any plans or developments that could result in a change of control over us, including changes that are still at the planning stage.
B. RELATED PARTY TRANSACTIONS
