PT Indosat Tbk (JSX:ISAT, NYSE:IIT) - Full Year 2005 Results Conference Call - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

OPERATOR: Ladies and gentlemen, welcome to Indosat's full year 2005 results conference call. Thank you for participating in this event. Please be reminded that this conference call will be recorded. Miss [Alziona] [vice president's [inaudible] secretary will be the moderator for today's call. I would now like to pass the call to Miss Alziona.

MISS ALZIONA, MODERATOR, PT INDOSAT TBK: Thank you Andrea. Ladies and gentlemen, good afternoon. On behalf of Indosat pleased to welcome you guests to Indosat's full year 2005 conference call. This conference call is held following our filing of 2005 audited full year financial results to Babepam Jakarta Stock Exchange and Surabaya Stock Exchange on March 23, 2005. The releases and financial report document all can be accessed through our website, www.indosat.com at Investor Relations section.

First I would like to introduce Indosat's Board of Directors who are here with us today. First is Hasnul Suhaimi, Indosat's President Director.

HASNUL SUHAIMI, PRESIDENT DIRECTOR, PT INDOSAT TBK: Good afternoon.

MISS ALZIONA: And our directors, Wong Heang Tuck, Johny Swandi Sjam, Wahyu Wijayadi, Wityasmoro Sih Handayanto, Wimbo Hardjito, Joseph Chan, while we are also waiting for Kaizad Heerjee, our Deputy President Director, to dial in in the call.

For today's conference call, we allocate around one hour presentation and we will be followed by Q&A session. Now I would like to invite Hasnul to deliver a speech.

HASNUL SUHAIMI: Ladies and gentlemen, Indosat's shareholders, investors and analysts, welcome to Indosat's conference call on the full year 2005 results. Thank you for joining and participating in this event.

I am pleased to report on behalf of the Board of Directors that we have submitted the audited consolidated financial statements for the periods ended December 31, 2005, 2004 and 2003 to the stock exchanges and capital market regulators. And in particular I am pleased that we were able to submit our report ahead of the deadline, and we were able to provide the update to you at the earliest.

On this occasion, I would like to inform that Mr. Kaizad B Heerjee has joined our Board of Directors since December last year as Deputy President Director. All of us in the company warmly welcome Kaizad to our team and anticipate excellent contribution from his experience and expertise.

Indosat shareholders, investors and analysts, I will briefly present our operating and financial results for the full year 2005, to be followed by a question and answer session. Allow me to start by highlighting our key achievements during the year.

In the year 2005, we launched a number of initiatives, and as a result we were able to grow our cellular business, and recorded cellular subscribers of around 14.5 million by the year end. On the other hand, cellular revenues increased by around 18% year-on-year. We were also able to grow the revenues from MIDI services by more than 14%, following the increase in demand for IP related and domestic wholesale services. MIDI became the second largest contributor to our operating revenues in the year 2005. Last but not least, despite the intensifying competition in IDD, we were able to grow IDD minutes by around 12%.

The growth in revenues was accompanied with an active cost management program. As a result, our operating income grew by 14% for the year, far higher than the growth in consolidated revenues. Our EBITDA margin was improved to 58%. We [inaudible] from the issuance of $250 million notes, and 1.1 trillion rupees of bonds in June 2005. As a result, we were able to execute our capital expenditure, planned to have 5,700 base stations and finalized the integration of our cellular radio network by year end 2005.

In the following, allow me to elaborate on the results. In the year 2005 we recorded consolidated operating revenues of around 11.6 billion, an increase by 11%, while operating income increased by 14% compared to previous year, and was recorded at around 3.7 trillion. The increase in operating revenues were largely driven by the growing cellular business which reported revenues of around 8.6 trillion, or increased by 18% compared to the prior year.

In 2005, cellular revenues contributed 75% to our operating revenues, while MIDI and fixed telecom contributed to the remaining 25%. We were able to manage our expenses; hence operating expenses in the year 2005 increased by only 10% year-on-year, lower than the growth in our operating revenues.

We will continue our cost management program, and we were able to manage interconnect, marketing and personnel expenses. The trends in other operating expenses were mainly related to our activities to support cellular business growth. Due to the active cost management program, we were able to grow operating income by 14% in the year 2005, higher than the overall growth of our operating revenues.

Earnings before interest, tax depreciation and amortization was recorded around 6.7 trillion, and this represented an EBITDA margin of 58% for the year, an improvement of around 40 basis points compared to the margin in the prior year. Absolute EBITDA increased by around 12% compared to the prior year, and again, this was higher compared to the overall growth of revenues and reflecting the results from our active cost management program.

We recorded a consolidated net income of around 1.6 billion last year, relatively flat compared to the net income in 2004. In analyzing our net income trend, please bear in mind that in the year 2004 we recorded one-off gain of sale of shares in subsidiaries amounting to around 400 billion pre-tax.

Our balance sheet as of December 31, 2005 were in good position. Our net debt to equity was recorded around 54%, and debt to EBITDA was recorded around 2.2 times. We had a cash and cash equivalent balance of around $480 million. This balance in our cash from operation will be used to support our capital expenditure plan in the year 2006.

Our US dollar denominated liabilities were recorded around $371.4 million as of December 31, and we have hedging facilities in the form of cross-currency swap contracts with notional and one-offs, $275 million, at least to provide exposure.

Ladies and gentlemen, consistent with our strategy, and to address the increase in demand from the market, we continue to invest in [network] and facilities. In the year 2005 we [commented] 8.8 trillion of capital expenditure, of which around 7.3 trillion were allocated for cellular business, while the remaining were allocated to fixed telecom, MIDI, backbone and support facilities.

Indosat shareholders, investors and analysts, following the lines of the initiatives, last year we were able to add around 4.7 million cellular subscribers, and recorded a cellular subscriber base of around 14.5 million by year end.

The key marketing and promotion initiatives launched last year were as follows. Mentari Tarif Hebat we call it, which is family and friends package, offering a special voice tariff between three pre-registered numbers including the original party, and until the end of the year it was there, but the program was expanded later to include five registered members with nationwide coverage.

Mentari Parsel, a package with a special tariff during the holiday season in fourth quarter of 2005. A regional tariff for both IM3 and Mentari in the eastern region of Indonesia which is outside of Java. Especially in Kalimantan in the eastern part of Indonesia, a retention program for prepaid by offering sweepstake point each time customer tops up, namely a single point for every 25,000 top up, and IM3 bonus booster, offering a 500 rupee discount for customers who use 2,000 rupees' worth of [minutes] per day. Their program will be expired next month.

We launched I-Ring or personalized ring back tone in areas outside of Java only. We launched Community-Specific Content Value Added SMS, such is …