Telkom's profit may drop by 26% this year

Rendi A. Witular, The Jakarta Post, Jakarta

State-owned telecommunications company PT Telekomunikasi Indonesia (Telkom) estimated that net profit for 2003 would decline by 26 percent on the absence of extra income from asset sales as it enjoyed last year.

The company said that net profit is expected to reach around Rp 6.2 trillion (US$733.73 million), down from Rp 8.34 trillion in 2002.

"Unlike the 2002 net profit, this year's profit will only be derived from the company's (core) businesses, which will increase by 20 percent (net profit)," Telkom president Kristiono said in a press briefing on Friday.

The drop was in comparison to last year in which Telkom earned additional income from the sale of a stake worth $429 million in its cellular unit PT Telekomunikasi Seluler Indonesia (Telkomsel) to Singapore's SingTel.

Kristiono added, however, that the proceeds had boosted Telkom's profit to Rp 8.34 trillion in 2002, in which around Rp 5.17 trillion was derived from the company's telecommunications operation, while the remaining Rp 3.17 trillion was from divestment proceeds.

Telkom expects that revenues from its cellular unit Telkomsel will increase this year by 76 percent to Rp 8.79 trillion from Rp 4.99 trillion in 2002, with net profit expected to reach Rp 3.05 trillion, up from Rp 2.03 trillion last year.

The company also said that by the end of this year, subscribers of Telkomsel were projected to reach 9.2 million. In 2004, the company is targeting to net at least 3 million subscribers.

Elsewhere, Kristiono said that the reaudit process of its 2002 financial report would take longer than expected because the company's audit firm PricewaterhouseCoopers (PWC) was still in "negotiation" with Deloitte Touche Tohmatsu, the auditor of the company's 2000 and 2001 financial accounts.

The "negotiation" was conducted between the principal of the two firms in the United States to determine necessary adjustments to Telkom's previously issued financial statements for 2002, he said.

In an earlier press statement, Telkom said that failure to reach agreement with Deloitte would mean that PWC would have to reaudit those accounts, which could delay the revised announcement of the 2002 profit by up to four months.

Kristiono said that Telkom had several times asked PWC to quickly finish the audit because the U.S. Securities and Exchange Commission had threatened to delist Telkom's shares from the New York Stock Exchange (NYSE) if the company failed to immediately finish the reaudit, however to no avail.

Telkom's finance director Guntur Siregar said that the most complicated issues that the two auditors were still debating centered on the need to make adjustments in the calculation of deferred taxes and the consolidation of revenue from Telkom's former joint-venture company PT Pramindo Ikat Nusantara.

He explained that if there was an adjustment in the calculation of deferred taxes, Telkom would have to trim down its 2002 net profit by 11 percent, excluding other adjustments.

The problems with Telkom's 2002 financial report emerged after the SEC rejected an earlier filing because the report was audited by an Indonesian accounting firm which was not properly registered in the U.S.

The SEC had demanded that Telkom, which has shares listed both in Jakarta and New York, resubmit its 2002 accounts as soon as possible.

Telkom then called in PWC in June to reaudit the figures.

Preliminary findings from PWC show that Telkom may have to reduce a previously stated Rp 8.34 trillion net profit for 2002 between 4 percent and 20 percent.