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2014 Annual Report SUSTAINABLE COMPETITIVE GROWTH Through Digital Business SUSTAINABLE COMPETITIVE GROWTH THROUGH DIGITAL BUSINESS Investing in the digital business is a necessity for us to improve our competitiveness while maintaining sustainable growth in the future. In 2014, one of our main programs was to continue developing infrastructure to support growth of the digital business. We have continued to develop our optical fiber-based access network, which at the end of 2014 had 13.2 million homes passed. Subsequently, weplan to deploy optical fiber connections to homes and buildings to revive ourfixed line business. In the cellular business unit, during 2014 we have built 15,556 new BTS, 75% of which are 3G/4G BTS. At the end of 2014, we had 85,420 BTSs, of which 45% were 3G/4GBTSs. Our BTS infrastructure demonstrates our superiority in terms of coverage and capacity and also reflects our commitment to provide the best digital experience. Telkomsel is the first commercial operator in Indonesia to provide 4G services to further enhance the digital experience of our customers. In addition, we have also installed 170,000 Wi-Fi access points to help off-load our mobile customer data traffic. Our fixed line broadband services and Telkomsel's cellular services are supported by a superior backbone network. At the end of 2014, we have built 76,700 kilometers of fiber-optic backbone network. We are continuing to build our backbone network so as to eventually reach all parts of the archipelago. We have also built a 54,800 m2 data center to support cloud computing services (cloud services). We seek to provide a comprehensive range of services to meet customer needs by developing digital services, through various content and applications that can support their digital lifestyle. These are important parts of our efforts to generate demand for increasingly more data traffic, accompanied by various programs to accelerate the use of smart devices. Our efforts in building broadband infrastructure, coupled with various supporting strategies, have shown positive results of high growth in revenue from the digital business, with its contribution to total revenue also increasing significantly. Digital business will be the Company’s driver of future growth. We are on the right track towards becoming a digital company and simultaneously helping to realize the digital society. ANNUAL REPORT THEME CONTINUITY We are consistently on our strategic measure to build a sustainable competitive growth. This is reflected on our Annual Reports theme continuity: PT TELEKOMUNIKASI INDONESIA, Tbk. PT TELEKOMUNIKASI 2012 Annual Report PT Telekomunikasi Indonesia, Tbk PT TELEKOMUNIKASI INDONESIA, Tbk. Annual Report 2010 Moving Forward Beyond Telecommunications Bringing Indonesia to the Digital Society Your Future Starts Today Starts Future Your Annual Report 2010 PT TELEKOMUNIKASI INDONESIA, Tbk. Investor Relations Grha Citra Caraka 5th Floor Jl. Jend. Gatot Subroto Kav. 52 Jakarta 12710 Tel. : (62-21) 521 5109 Annual Report Annual Report Your Future Fax. : (62-21) 522 0500 e-mail : [email protected] Starts Today IDX : TLKM NYSE : TLK LSE : TKIA 2010 2011 Annual Report PT TELEKOMUNIKASI INDONESIA, Tbk. www.telkom.co.id Melangkah Melampaui Batas Telekomunikasi 2010: 2011 2012 Your Future Starts Today Moving Forward Beyond Bringing Indonesia to the Telecommunications Digital Society With focus on TIME (telecommunication, The advances in broadband technology- We pioneered the digital society in information, media & edutainment) based further narrow the distance Indonesia with a focus on service services, we are committed to ensuring between users. We take this opportunity implementation of Telecommunications, that every customer can enjoy the lifestyle to strengthen the infrastructure of Information, Media, Edutainment and of the future, starting today. broadband-based to support innovation Services ("TIMES"), including the of services and products leading to development of Indonesia Digital Information, Media, and Edutainment Network. (“IME"). 2014 Annual Report PT Telekomunikasi Indonesia, Tbk Indonesia, Telekomunikasi PT Annual Report 2013 2013 Annual Report 2013 Annual Report PT Telekomunikasi Indonesia, Tbk PT Telekomunikasi Indonesia, Tbk • Telkom’s Solid Increasing in Net Rp 14.2 trillion Profitability Income Creating Global Talents and Opportunities Global Talents Creating 10.5% • Increasing Increasing number of 131.5 million number of cellular subscribers customers above Industry 5.1% Increasing number of 27.8 million broadband subscribers 45.4% Increasing number of 9.3 million Fixedline subscribers 4.5% PT Telekomunikasi Indonesia, Tbk. Investor Relations • Network Number of BTS 75,579 BTS Grha Merah Putih 5th floor Strengthening Jl. Jend. Gatot Subroto Kav. 52 Jakarta 12710, Indonesia Creating Global Talents T +62 21 521 5109 F +62 21 522 0500 and Opportunities 25.9% email : [email protected] IDX : TLKM SUSTAINABLE COMPETITIVE GROWTH NYSE : TLK LSE : TKID Through Digital Business www.telkom.co.id 2013 2014 Creating Global Talents Sustainable and Opportunities Competitive Growth Through Digital International expansion has become a Business necessity for us to be able to maintain a high and sustainable growth rate. This strategic initiative has led us achieve We are responding to global double-digit growth and solidify us as market challenges by dominant TIMES service provider transforming ourselves into a Company in Indonesia and taken into account in the regional area. digital business so that we remain able to grow competitively and sustainably. Toward "The King of Digital" TELKOM'S MAIN PROGRAMS 3Dealing with the dynamic and fast-changing challenges of the telecommunication, information technology and media industries, we are focusing our business strategy on 3 main programs that we call Telkom’s Masterpieces in 2014. 1. Telkomsel Double Digit Revenue Growth With our leading-edge infrastructure, both in coverage and capacity, as well as analytical capabilities, we can position ourselves as the cellular operator with a double-digit revenue growth. To ensure the achievement of double-digit revenue growth, we are currently prioritizing the deployment of our fiber network over Telkomsel's BTS in order to consistently improve our data service quality. 2. Indonesia Digital Network (IDN) 2015 IDN 2015 is our vision of a true end-to-end broadband infrastructure development from the end user terminal, access network, transport network to the services. IDN 2015 was developed to enable equal access, and to improve the quality, and increase the capacity, of broadband infrastructure in all parts of Indonesia. 3. International Expansion International expansion is one of the steps to realize our objective "To Become a leading TIMES player in the region". We are developing and expanding our business outside of Indonesia to broaden and diversify our market. By expanding internationally, we are also preparing our human resources to be ready in facing the ASEAN Economic Community which will begin by the end of 2015. 2014 Annual Report PT Telkom Indonesia Tbk (Persero) 1 preface HIGHLIGHT FINANCIAL AND PERFORMANCE AND PERFORMANCE FINANCIAL MANAGEMENT REPORT MANAGEMENT 2 2014 2014 Annual Report Annual Report Double Digit TELKOM INDONESIA TELKOM Telkomsel Telkomsel GENERAL INFORMATION OF OF INFORMATION GENERAL Revenue Revenue PT Telkom Indonesia Tbk(Persero) PT Telkom Growth AND ANALYSIS AND ANALYSIS MANAGEMENT’S DISCUSSION MANAGEMENT’S CORPORATE GOVERNANCE CORPORATE ENVIRONMENTAL ENVIRONMENTAL AND RESPONSIBILITY SOCIAL SOCIAL ppendices A 2014 Annual Report PT Telkom Indonesia Tbk (Persero) Telkomsel is the main backbone to our revenue, contributing up to 60% of our consolidated revenues. To maintain its position as the main contributor, Telkomsel is committed to continuing developing its infrastructure, particularly broadband infrastructure, with the aim of improving its service quality and coverage. Telkomsel is also adopting state-of-the-art technology to improve customers’ experience. We have therefore supported Telkomsel in developing its business by allocating the largest portion of our capital expenditure to strengthen its business to maintainan above industry average growth. Triple double-digit growth - 10.4% in Revenues - 10.0% in EBITDA - 11.9% in Net Income The first mobile operator to commercially market the 4G LTE in Indonesia 15,500 new BTS (75% 3G BTS) Total BTS reached 85,420 units 2014 Annual Report PT Telkom Indonesia Tbk (Persero) 3 preface HIGHLIGHT FINANCIAL AND PERFORMANCE AND PERFORMANCE FINANCIAL 2020 Telkom Master Plan to Realize IDN Indonesia Digital Network Broadband Network Digital Ecosystem MANAGEMENT REPORT MANAGEMENT Build Smart City (county town) Ecosystem Accelerating digital creative community TELKOM INDONESIA TELKOM Nationwide ecosystem-based apps (e-health, e-tourism, etc) GENERAL INFORMATION OF OF INFORMATION GENERAL Service 100% broadband in sub-district Mobile signal 100% in village AND ANALYSIS AND ANALYSIS Deploy 100.000km Fiber Optic MANAGEMENT’S DISCUSSION MANAGEMENT’S Infrastructure Backbone 30 million household fixed broadband 200 mobile broadband cities CORPORATE GOVERNANCE CORPORATE Access ENVIRONMENTAL ENVIRONMENTAL AND RESPONSIBILITY SOCIAL SOCIAL ppendices A 4 2014 Annual Report PT Telkom Indonesia Tbk (Persero) The Indonesia Digital Network program consists of access network infrastructures (Id-Access), a network backbone (Id-Ring), and an integrated NGN for multi- service and multi-screen (Id-Convergence) as