PT EXCELCOMINDO PRATAMA

Annual Report 2002

 BRAND
Through targeted marketing and continued expansion of its stable of services, excelcom has been
successful in building a strong brand image with a single brand, “pro-XL”, which covers all prepaid
and postpaid services on offer

DIRECT CUSTOMER CONNECTIONS

With more than 50 XL Shop outlets, 200 XL Ritel outlets, 2,000 XL Kita Outlets, and call centers,
excelcom is committed to get closer to its subscribers. This positions us for growth thru provision
of a customer-centric experience to our esteemed existing and potential customers

CORPORATE GOVERNANCE & OPERATING EFFICIENCY

excelcom has well established business processes and controls and operates on an
integrated ERP platform using industry best practices for business processes. excelcom’s
corporate governance framework provides for appropriate controls / reviews while allowing
for prompt and informed decision making at the same time

QUALITY SERVICE
Operational excellence is the hallmark of our company, and service quality is at its heart. We offer
customers a highly reliable wireless network, fully automated operating systems, and – most of all –
the dedication of more than 1,300 employees for whom customer service is the highest and most
overriding value

WORLD-CLASS NETWORK
excelcom owns an optical fiber backbone running through the length of Java and high capacity
microwave transmission links covering most parts of the country with potential for high cellular usage.
The above infrastructure ensures high quality transmission service and provides required redundancy

NATIONAL MARKET PRESENCE

excelcom’s network covers all the major provincial capitals in the country.
Coverage is extensive in the densely populated islands of Java, Bali &
Sumatra

GROWING MARKET
With a population of approximately 220 million and one of the lowest fixed line and cellular
penetration rates in the region, highly attractive growth opportunities exist for telecommunications
companies in the country. Indonesia has seen rapid cellular growth over the past five years, with
over 60% annual growth in subscribers between 1997 and 2002. excelcom is strongly poised to
take advantage of the growth opportunities
 TABLE OF CONTENTS

MISSION & CORE STRATEGY 4

TO OUR SHAREHOLDERS 5
KEY MILESTONES 6
PRODUCTS & SERVICES 7
ECONOMIC OUTLOOK 9
INDUSTRY OUTLOOK 11
PERFORMANCE HIGHLIGHTS 12
MANAGEMENT DISCUSSIONS AND ANALYSIS OF FINANCIAL 15
CONDITION & RESULTS OF OPERATIONS
STRATEGIC FRAMEWORK AND COMPETITIVE LANDSCAPE 22
CORPORATE GOVERNANCE 23
CORPORATE CITIZENSHIP ROLE 24
HUMAN CAPITAL DEVELOPMENT 25
BOARD OF COMMISSIONERS 27
BOARD OF DIRECTORS 28
INDEPENDENT AUDITORS REPORT
AUDITED FINANCIAL STATEMENT
GLOSSARY
 MISSION & STRATEGY

excelcom mission

To become the premier

Wireless Telephony
service provider

excelcom core business strategies

⌦ Cost effectively provide competitive quality service

⌦ Be customer focused

⌦ Be the preferred employer in the telecoms industry


2002 was a challenging year for excelcom, as we were
not immune to the pressures that impacted the
Indonesian economy and some in our industry. But we
were not nearly as vulnerable, either. While some
companies took radical steps to keep pace –
divestments, consolidation and business reengineering,
excelcom stayed focus on effective use of our
resources and pursuing our fundamental growth
strategies: wireless and data.
The true test of any company’s management expertise,
strategic vision, ability to execute and employee talent
comes when times get tough. We certainly saw our
share of challenges in 2002, and we believe excelcom
continues to make progress towards our ultimate goal of
becoming the premier wireless telephony service
provider in Indonesia.
Having completed the debt restructuring exercise in
2002, we have been able to improve and expand our
network infrastructure to meet the growing demand in
the cellular market. Over US$ 350MM capital
expenditure was made in 2001-2002 to improve service
capability in existing areas and also to extend coverage
to outer islands of Sumatra, Kalimantan, and Sulawesi
where growth prospects are extremely lucrative. The
company intends to be self-sufficient for transmission in
the outer-islands as well by end-2003.
This, in combination with our marketing strategies has
enabled us to grow the total subscriber (including grace)
base from 1.2 million in 2001 to 1.7 million in 2002. Our
ARPUs have remained strong relative to competition,
enabling the revenue to increase from Rp. 2.1 billion in
2001 to Rp. 2.5 billion in 2002. Our EBITDA also
increased from Rp. 1.2 billion in 2001 to Rp. 1.4 billion
in 2002.
Since mid-2002, the Company has been in the process
of implementing a new integrated convergent billing and
CRM system. This system has started functioning in
early 2003 with further enhancements underway. The
billing system will provide the Company with a strong
edge over competition in terms of features and
customer service capability.
The Company has further enhanced its corporate
governance framework, business processes and
increased utilization of the ERP and other company
wide software solutions.
TO OUR SHAREHOLDERS
The Company initiated and liaised with the other
operators and tax authorities to obtain major tax
concessions for corporate tax and abolishment of luxury
sales tax for import of network infrastructure equipment.
These initiatives have further reduced our overall costs
and have improved our cash flows in 2002 and will
continue to have a positive impact in the forthcoming
years.
To ensure successful execution of its strategy,
excelcom’s staffing strategy emphasizes technical
quality and world-class customer care. In terms of
staffing goals, the Company believes that the number of
subscribers per employee should be maintained at a
manageable level to ensure high quality service for
customers. excelcom continues to review its staffing
levels in accordance with the economic and industry
standards. Special focus has been provided for
competency enhancement through continuous training
and learning programs.
With competition increasing, Year 2003-2004 will
remain challenging years for the Company. The
Company intends to achieve a no. 2 status in the
industry (revenues & profitability) and is currently
embarking on an aggressive program to achieve the
same.
The Company’s Management & employees are
confident of achieving the above objective and are fully
committed towards the accomplishment of the same.
5

KEY MILESTONES IN 2002
Restructured the US$ 380 million debt facility,
including US$ 120 million of new financing from the
major vendors at favorable terms.
Network coverage extended to major provincial
capitals of Sumatra, Sulawesi, and Kalimantan.
Competency profiling for various jobs completed for
enhancement of skills through training and learning.
Established an effective defined contribution
pension plan.
Continued improvement in management of capital
expenditures and inventory through more effective
business processes and extensive use of the ERP
and other software solutions.
Obtained abolishment of the regulation on Sales
Tax on Luxury Goods previously imposed on sale
and imports of luxury goods, including
telecommunications components.
KEY MILESTONES
Launched new lines of service, i.e. Leased Line and
ISP
Established an inter-carrier relation / corporate
communication unit to ensure proactive
management of interconnection related issues and
ensured greater focus on external affairs to deal
with regional autonomy / associated issues
Improved channel distribution through a balanced
combination of exclusive dealers, own retail outlets,
XL Kita, and electronic reloads
Entered into an interest rate hedge to safeguard
against long term LIBOR fluctuations
At the end of 2002 obtained significant corporate
tax concessions from the tax office by way of faster
tax depreciation for cellular equipment. This
initiative had major impact on the 2002 cash flow
and will continue to have significant positive impact
in the forthcoming years.
6

PREPAID AND POSTPAID
excelcom currently offers various products and services
to fulfill the communication requirements of the
Indonesian people, as follows:
Prepaid service – provides instant connection to its
high quality GSM network without hassles of
administrative requirements, prompt service
connection, anonymity and ability to monitor costs.
Postpaid service – presents the subscribers with the
ultimate service and customized solutions at
competitive pricing including international roaming
and privileged treatment
to high users.
International roaming
(both ways) – offers
international mobile
services to more than 150
partners operators in
more than 70 countries.
Much of the growth in Indonesia’s cellular market has
been driven by the introduction of prepaid services in
1998, which accounted for more than 90% of new
market subscribers between 1999 and 2002. As a
result, excelcom has focused on attracting only prepaid
customers since early 1999, which currently make up
approximately 98% of its current subscriber base. This
has been achieved largely through the Company’s
“single entry system” policy, whereby new subscribers
(with the exception of corporate subscribers) are
required to join the network on a prepaid package even
if they intend to migrate to a postpaid package
immediately.
The Company believes that a prepaid subscriber base
offers the following significant benefits:
• No bad debt risk or administrative costs in checking
creditworthiness;
PRODUCTS & SERVICES
• Cash received before service is provided;
• No billing costs or requirement to store individual
customer data; and
• Higher airtime rates and greater flexibility on pricing
structures (operators can charge up to 240% of
regulated airtime rates).
These benefits of a prepaid subscriber base have
enabled the Company to maintain a strong degree of
control over its working capital and cash flow.
The Company offers postpaid services principally to
corporate customers and high ARPU users, where
credit risk is generally lower. However, even as
excelcom continues to focus on prepaid services, the
Company intends to increase its postpaid subscriber
base by offering customized packages to attract mid-
high end subscribers from competition.
VALUE ADDED SERVICES
In addition to the basic voice services, excelcom also
offers a variety of Value Added Services (“VAS”) to its
subscribers. These services include voicemail, SMS
messaging, caller line identification, call forwarding, call
waiting and multi-party calling, all of which are charged
on a monthly basis with additional monthly fees.
The Company also offers a range of other Value Added
Services such as mobile banking, location based
services, games and downloads etc. The philosophy
behind offering these services is to offer a
comprehensive range on par with the competition while
minimizing investments in those offerings that are
unlikely to generate a reasonable return on investment.
7
 PRODUCTS & SERVICES

LEASED LINE AND INTERNET ACCESS SERVICE

In addition to its cellular services, excelcom optimizes

its existing network capacity with new integrated
telecommunication services for Corporate customer, to
cater telecommunication requirements for both voice
and data applications.

Leased Line
This service was commercially launched in Q4-
2002, providing high capacity, high reliability
network, wide coverage, offering competitive price
and utilizing state of the art technology.

Broadband Internet Access

Broadband Internet Access service enables our
customer to acquire high speed, unlimited access to
internet connectivity, both for domestic and
international links.

Customized Mobile solution

This service provides a solution concept by utilizing
current features and products, optimizing
excelcom’s infrastructure capabilities, tailored to
customer requirements.

CUSTOMER SERVICE

In order to further serve its customers, excelcom

currently operates 13 Walk in Centers in various cities
throughout the country. In addition, customers can also
access our call centers from anywhere, either using the
toll-free short numbers 818 from their SIM card or
through regular PSTN access number.

8

INDONESIA’S 2002 ECONOMIC PERFORMANCE
Year 2002 continues to show slow economic
development. The impact of the Bali bombing on 12
October, 2002 may be softened by fiscal spending, but
institutional change is the key to sustained economic
growth. The target of 4,0% real GDP growth for the year
2002 was out of reach even before the Bali tragedy. On
the whole, the macro economic performance in 2002
has remained weak despite some improvement
compared with 2001. The condition is evidenced by
GDP growth of 3,2% for 2002 compared with 3,3% in
2001. Various systemic issues like the weak banking
sector, recurring manpower problems, security
concerns, political instability, and social problems
including illegal levies, thievery, etc, have made foreign
investors reluctant to enter Indonesia. The maintenance
of existing foreign investment and encouraging
existing investors to remain is a problem. The small
GDP growth rate means that Indonesia has yet to
disentangling itself from the prolonged economic crisis.
As an engine to reduce unemployment, the growth rate
of less than 5% is still far below what would be required
to resolve Indonesia’s unemployment problem.
Selected Macroeconomic Indicators
Item 2001 2002
GDP % growth 3.3 3.2
SBI (1Month) (%) 17.62 13.0
CPI Inflation (%) 12.55 9.75
Gross Non Performing Loan 12.1 10.2
CAR (Banking Sector) 20.5 22.8
Average Exchange Rate 10,255 9,316
(Rp/USD)
Source: CIC, BI
EXCHANGE RATE AND INFLATION
In 2002 overall, the Rupiah exchange rate showed
considerable strength during the year. The Rupiah
appreciated by a significant 939 points (9.2%) from an
average of Rp. 10,255 to the US dollar in the previous
period to Rp. 9,316. On a point-to-point basis, the
Rupiah posted even sharper gains, increasing 1,450
points (13.9%) from Rp. 10,400 at the end of 2001 to
Rp. 8,950 at the end of 2002.
The strengthening of Rupiah in 2002 was driven by a
number of factors, including market sentiment,
economic fundamentals and measures implemented by
Bank Indonesia to promote currency stability.
ECONOMIC OUTLOOK
Fundamentals boosting the value of the Rupiah
included increased supply of foreign currency on the
domestic market Consistent with the appreciating trend
in the exchange rate, the year 2002 saw relatively
manageable increases in price levels, a development
also supported by lower public expectations of inflation.
The inflation rate eased from 12.55% in 2001 to
10.03%, bringing it close to the 9%-10% target
established by Bank Indonesia.
The lower rate of inflation in 2002 resulted not only from
appreciation in the exchange rate and declining public
expectations of inflation, but also from the reduced
impact of administered prices compared to 2001.
Although increases in administered prices had less
impact than in the previous year, the administered
prices directly and indirectly triggered a broad range of
increases, in fuel, electricity, telephone, transportation,
retail cigarettes, LPG gas, and concomitant increases in
minimum wage levels, The overall impact of
administered prices on CPI-based inflation in 2002
came to about 3,31%, significantly higher than the
assumed 2,57% impact projected at the beginning of
the year.
MONETARY POLICY AND INDICATORS
To maintain price and currency stability, monetary
policy in 2002 was aimed at maintaining control over
base money supply growth by absorbing excess
liquidity in the banking system. The base money supply
expanded within controlled parameters during the year,
remaining within targets with lower growth compared to
the previous year.
Controlled expansion in the base money supply
accompanied by improvement in various macro
indicators provided Bank Indonesia with greater room to
signal further reductions in interest rates and stimulate
the process of economic recovery. Signals of interest
rate reductions were provided by setting lower targets
for auctions of Bank Indonesia Certificates relative to
those reaching maturity, setting a lower number of
winning bids compared to number of bids placed and
reductions in the interest rate for the Bank Indonesia
Deposit Facility.
9
 ECONOMIC OUTLOOK

Despite the limited improvement, banks took advantage
of the positive climate created through interest rate
reductions to proceed with debt restructuring,
strengthen their capital, and increase lending,
particularly in the short-term. Falling deposit rates also
stimulated investor interest in bonds and mutual funds.
In the real sector, stable monetary conditions have
provided the business community with opportunity to
proceed with internal financial restructuring while
helping the public to sustain levels of consumption. The
drop in interest rates has also encouraged reputable
companies to seek alternative sources of financing on
domestic and international financial markets.
BANKING POLICY AND INDICATORS
2003 ECONOMIC OUTLOOK
The world economy of 2003 is projected to register
a faster growth than in 2002. This optimism is
supported by the signs of economic restoration in
the advanced countries like the United States,
European and Asian countries. The improving and
advancing world economy is also certain to make a
positive impact on the Indonesian economy which
can be expected, given a conducive climate in the
country, for better growth in 2003.
Despite the deadly Severe Acute Respiratory
Syndrome (SARS) disease and the Iraqi war, World
Bank projects Indonesian GDP growth rate to be
around 3.3%. A possible negative impact of the
slower growth rate in world trade is likely to be
offset by an increase in oil prices.

The Indonesian Government is expected to achieve

Continuing the policy course charted in previous years,
its deficit target of 1.8% of GDP in 2003. The cut in
Bank Indonesia’s policies for the banking system in
luxury taxes and the costs of reversing the fuel
2002 again focused on the continuation of the twin
subsidy cut are more than offset by additional oil
programs for restructuring of banking institutions and
revenues, and the likely savings in domestic
building resilience into the banking system. Under the
interest payments due to the rapid interest rate
bank restructuring program, Bank Indonesia has
decline. A 1% decline in SBI interest rate reduces
retained the government blanket guarantee scheme
domestic interest payment by Rp. 2 trillion.
although phased reductions will be made in the scope
of the blanket guarantee, while continuing to monitor
Bank Indonesia will maintain a consistent and
progress in the recapitalization of commercial banks
prudent course in the pursuit of its monetary,
and restructuring or bank credit.
banking and payment systems policies.
The various policies adopted in banking, supported by
Government took steps to speed up the economic
improvements in macro indicators such as the Rupiah
recovery by improving the internal security
exchange rate and easing of SBI rates have helped
conditions and enforcement of the rule of law.
bring about improved performance in the banking
Nevertheless with strong commitment actualized
sector. This is demonstrated in growth in mobilized third
through meticulous policy planning, solid condition,
party funds, increased capital and capital adequacy
discipline, patience and diligent implementation of
ratios, improvement in the non-performing loans ratio,
problem-solving measures, the multifold problems
and continued recovery in the bank intermediary
and challenges that lay a head can be overcome.
function as evident from increased new loan
disbursement, rising loan to deposit ratios, increased
Overall, Indonesia’s economy has shown
loan interest income, and change in composition of
remarkable resilience to the Bali bombing in
bank earning assets.
October 02, and the impact of the Iraqi war is likely
to be limited. The increased political stability since
Clearly, the banking sector is still not operating like a
the start of the Megawati Government and the more
normal functioning intermediary despite the fact that the
consistent implementation of reforms under the IMF
key barometers of health – the non-performing loan
supported programs have been beneficial to
(NPL) ratio at 10.2% and capital adequacy ratio at
macroeconomic stability, inflation, and interest
22.8% have improved. Indonesian banks remain
rates, while the Rupiah has kept its strength
reluctant to increase new loan disbursement which
towards the USD. These trends are expected to
hampers the growth in investment activities,
continue in 2003.
employment rate, consumption and economic activity as
a whole.

10

Indonesia, with a population of approximately 220
million by end 2002, is the third most populous country
in the Asia Pacific region behind China and India. The
nominal GDP per capita in 2002 was US$767,
compared with US$488 in India and US$964 in China.
However, with one of the lowest fixed line and cellular
penetration rates in the region, highly attractive growth
opportunities exist for telecommunications companies in
the country.
Cellular Penetration Rate In Major Asian Countries
100.0
80.0
60.0
40.0
20.0
-
Singapore Hong Kong Korea Malaysia
2002
Source: Market Research
Prior to the Asian economic crisis, Indonesia’s
telecommunications market enjoyed growth in line with
a relatively strong overall economic performance.
However, the industry was hit hard by the 1997 Asian
financial crisis; network build-out in the fixed and
cellular sectors slowed and a number of structural
problems arose, including the Government’s policy on
tariffs and problems between the partners of the Kerja
Sama Operasi (“KSOs”)1.
While GDP growth slowed sharply and liquidity
remained tight, private sector consumption remained
buoyant throughout the financial crisis. The cellular
operators launched prepaid services in 1998 which
were widely accepted in the market and also enabled
the operators to overcome the increasing bad debts
resulting from the advent of the monetary and economic
crisis. Since then, the industry has seen exponential
growth and with the worst of the economic crisis now
seemingly passed, the Indonesian telecommunications
sector growth and investment continue to increase and
operators are upgrading networks to satisfy demand
that remains strong due to consumer spending and
gradual recovery of the economy.
The attractive prospects for the industry as well as
confidence in the broader Indonesian story have been
1
A type of build, operate and transfer arrangement with
Telkom
INDUSTRY OUTLOOK
validated by the two recent investments by SingTel in
Telkomsel and ST Telemedia in Indosat. More
importantly, the Government has introduced a range of
policy initiatives aimed at improving both the telecoms
industry structure and regulatory management.
Rapid growth has been recorded in the development of
the telecommunications and communications sector in
2002, marked by the beginning of duopoly by PT.
Telkom and PT. Indosat following the terminations of
PT. Telkom’s monopoly in the operation of local
telecommunications. The duopoly will stimulate
competition between the two state-owned companies in
serving the public. As a compensation for the
termination of PT. Telkom’s monopoly the
government has allowed PT. Telkom to serve the public
through DCS (cellular frequency) 1800 and SLI (direct
International line) accessible through no. 017. With the
termination of PT. Indosat’s monopoly of SLI, the
government has permitted PT. Indosat to serve the
public through DCS 1800, the local telephone network
and the long distance direct telephone network. In the
Thailand Phillippines China Indonesia India first case, PT. Indosat has been given PT. Telkom’s
2005E
operational areas in Jakarta and Surabaya. Two other
areas – Medan and Batam – have technically been ready
to become part of PT. Indosat’s operational areas, but
the permit has not been given as the two areas are
involved in the operational system cooperation (KSO).
Cellular Subscribers end 2002
Other
Satelindo 5%
27%
Telkomsel
53%
Excelcom
15%
The progress of the telecommunication sector in 2002
was also marked by the development of the internet
business, cellular telephone service, the voice over
internet protocol (VoIP) business and an increase in the
telephone tariff.
PT. Telkom has launched the fixed wireless phone with
CDMA technology using 1.9 GHz frequency access in
East Java. Many telephone operators have shifted
their systems from the wire line system to the fixed
wireless CDMA system in building the fixed line
telecommunication access for their customers.
However, the viability of this CDMA system is yet to be
proven elsewhere in the world considering its higher
investment costs, higher handset costs, and its flexibility
compared to the GSM system.
11
 PERFORMANCE HIGHLIGHTS

In IDR Bio. 2000 2001 2002

Balance Sheet
Current Assets 156.7 258.4 401.2
Fixed Assets - Net 2,005.3 3,172.1 4,173.1
Other Assets 470.9 465.1 172.2
Total Assets 2,632.9 3,895.6 4,746.6

Current Liabilities 1,156.2 771.0 888.9

Long-term Liabilities 1,679.1 3,180.0 3,169.8
Stockholders’ Equity (202.4) (55.4) 687.9
Total Liabilities & Stockholders 2,632.9 3,895.6 4,746.6
Equity
Income Statements
Gross Revenues 1,330.5 2,073.0 2,483.8
Net Revenues 1,062.0 1,783.6 2,138.8
Operating Expenses (354.7) (577.7) (695.1)
EBITDA 707.4 1,205.9 1,443.6
EBIT 372.3 691.0 752.7
Net Income (281.4) 147.1 743.3

2000 2001 2002

Selected Ratios
EBITDA Margin 53.2% 58.2% 58.1%
EBIT Margin 28.0% 33.3% 30.3%
Net Income Margin (21.1%) 7.1% 30.0%
Return on Assets1 14.1% 17.7% 15.9%
Current Ratio 13.6% 33.5% 45.1%

1 EBIT / Total Assets

Total Subscribers (including grace) - Num ber of Subscribers -

000 subs 000 subs Pre-Post Com position 2002
2,000 2,000

1,500 1,500 2%

1,000 1,000

500 500

98%
- -
2000 2001 2002 2000 2001 2002

Prepaid Postpaid Prepaid Postpaid Prepaid Postpaid

12
 PERFORMANCE HIGHLIGHTS

Net ARPU - Prepaid Net ARPU - Postpaid

200,000 400,000

175,000 350,000

150,000 300,000

125,000 250,000

100,000 200,000

75,000 150,000

50,000 100,000

25,000 50,000

0 0
2000 2001 2002 2000 2001 2002

Gross Revenue EBITDA

IDR Bio Margin
3,000 1,750 75%

2,500 1,458

2,000 1,167 50%

1,500 875

1,000 583 25%

500 292

0 0 0%
2000 2001 2002 2000 2001 2002

13
 PERFORMANCE HIGHLIGHTS

Net Incom e Shareholders' Equity

IDR Bio Margin IDR Bio
800 50% 800

600 600

400 25% 400

200 200

0 0% 0
2000 2001 2002 2000 2001 2002

(200) (200)

(400) -25% (400)

Total Assets Efficiency Ratio

Subscribers/Em ployee
IDR Bio
5,000 1,500

4,000 1,200

3,000 900

2,000 600

1,000 300

0 0
2000 2001 2002 2000 2001 2002

14
 MANAGEMENT DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULT OF OPERATIONS

The following discussion and analysis of our including the tariff structure, terms of interconnection, and technology
results of operations should be read in and equipment standards and investments. Efficiencies resulting from
conjunction with our audited consolidated better business process management and better management of
financial statements for the year ended 2000, capital projects also play an important role in further supplementing
2001, and 2002. Our audited consolidated the operating performance and excelcom places significant emphasis
financial statements and the financial on these areas.
information discussed below have been
prepared in accordance with Indonesia GAAP,
which differs in certain respects from U.S.
GAAP and/or IAS. For the full year financial
COMPETITION
performance against budget, kindly refer to
the detailed Management Report.
Increased competition from existing operators has resulted in, and is
expected to continue to result in, greater price competition and offering
of innovative products and service packages. Thus, on one hand this
INTRODUCTION would mean increasing pressures on ARPUs while on the other hand
it would allow operators providing better value for money and high
The year 2002 saw further subscriber, quality customer service an edge over the competition. Thus,
revenue and EBITDA growth as the excelcom’s key strategies have been, and will continue to be,
Indonesian cellular market continued to grow maintenance of subscriber loyalty, operating within an effective cost
at a rapid pace. Total subscriber (including structure to be able to price products competitively, continued focus on
grace) base increased from 1.2 million at end- introducing of innovative and unique products and services to
2001 to 1.7 million by end-2002. Prepaid stimulate usage, quality improvement and coverage expansion,
subscribers currently account for almost 97% operational efficiency improvement through maximum utilization of
of the total base with the postpaid subscribers ERP software with reference to industry best practice in formulation of
confined to a very high ARPU subscriber business processes viz. e-TOMTM, proactive response to increasing
segment. Overall EBITDA increased from competition, and last but not least, employee development.
IDR 1,206 billion in 2001 to IDR 1,444 billion
in 2002 (approx. US$ 161 million at an
exchange rate of 1 US$ = Rp 8,940 at year-
end 2002). EBITDA margin was at approx. RESULT OF OPERATIONS
58% and is expected to remain stable in 2003
with the introduction of sophisticated products
and services using new convergent billing (IDR Bio.) 2000 % 2001 % 2002 %
software supported by significant capital
Cellular 1,330.5 100.0% 2,058.4 99.3% 2,448.7 98.6%
expenditure during the last 2 years ensuring
Leased Lines
high quality service provision over the coming and Others 0.0 0.0% 14.6 0.7% 35.1 1.4%
years. This will be further supported by
economies of scale and process Gross Rev. 1,330.5 100.0% 2,073.0 100.0% 2,483.8 100.0%
improvements. COGS 268.5 20.2% 289.4 14.0% 345.0 13.9%
Net Revenue 1,062.0 79.8% 1,783.6 86.0% 2,138.8 86.1%
Op. Expense 354.7 26.7% 577.7 27.9% 695.1 28.0%
FACTORS AFFECTING EXCELCOM’S
EBITDA 707.4 53.2% 1,205.9 58.2% 1,443.6 58.1%
FINANCIAL CONDITION AND RESULT OF
OPERATIONS Depreciation &
Amortization (335.1) (25.2%) (514.9) (24.8%) (690.9) (27.8%)

excelcom’s result of operations, like those of EBIT 372.3 28.0% 691.0 33.3% 752.7 30.3%
other cellular operators, are substantially Int. Exp (Net) (171.8) (12.9%) (249.8) (12.1%) (131.6) (5.3%)
dependent on the number of subscribers, the Other Income
level of subscriber usage, the churn rate of (Losses) (596.6) (44.8%) (219.2) (10.6%) 446.0 18.0%
subscribers, ARPU levels, the amount of
EBT (396.1) (29.8%) 222.1 10.7% 1,067.2 43.0%
capital expenditure, the cost of financing, the
2
level and structure of tariffs, and Taxes 114.7 8.6% (75.0) (3.6%) (323.9) (13.0%)
interconnection arrangements. As excelcom Net Income (281.4) (21.1%) 147.1 7.1% 743.3 30.0%
operates in a competitive and regulated
environment, its operations and financial
performance are also affected by the
Government’s regulation, and policies
regarding the telecommunication industry 2
Includes deferred tax provision
15
 MANAGEMENT DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULT OF OPERATIONS

Gross Revenues

2002 Gross Revenue was IDR 2,484 billion, an increase of

Operating Revenues
19.8% above 2001 gross revenue of Rp. 2,073 billion as - Cellular
2001 % 2002 %
number of subscribers increased by 48.6% from 1,073K at
end-2001 to 1,595K at end-2002 (total subscribers
Prepaid services 1,717.9 83.5% 2,117.4 86.5%
including grace increased by 37.5% from 1,220K at the end
of 2001 to 1,677K at the end of 2002). Revenue growth Postpaid services 189.3 9.2% 207.9 8.5%
was below subscriber growth owing to reduction in ARPUs
especially after the launch of inter-operator SMS in mid- Int’l Roaming 151.1 7.3% 123.4 5.0%
2001. Cellular service remains the main revenue driver
Total 2,058.4 100.0% 2,448.7 100.0%
accounting for 99% of total revenues. Leased lines revenue
showed strong growth in 2002 and increased contribution
to overall revenue from 0.7% in 2001 to 1.4% in 2002. The
leased line business was commercially launched in mid-
2002 after a 9 month pilot project starting in the 3rd quarter Prepaid Service
of 2001.

2002 prepaid revenue was IDR 2,117.4 billion, a 23.3%

increase from 2001 revenue of IDR 1,717.9 billion as
Cellular Business total minutes of use increased from 1,725 million
minutes in 2001 to 1,802 million minutes in 2002
Cellular service revenues consist of: complimented by the growing popularity of SMS. Year
end 2002 prepaid subcribers reached 1,556K, an
Revenues derived from sales of cellular starter packs increase of 50.0% compared to 1,037K in 2001 (Total
for prepaid and activation fees for postpaid prepaid subscribers including grace increased by 38.4%
Revenues from outgoing calls from our customers, from 1,184K in 2001 to 1,639K in 2002) The churn rate
while at home base or while roaming for prepaid subscribers increased marginally from
Revenues from incoming calls to our customer by other 30.6% to 33.0%. The 2002 MOU average was 119,
operators decreasing from 177 in 2001 mainly due to the surge in
SMS usage after inter-operator SMS was launched in
Charges for SMS and other value added services mid-2001. Thus, ARPU (net) declined from IDR 157,000
Monthly service fees from postpaid customers in 2001 to IDR 121,000 in 2002.
Other charges including replacement SIMs and special
numbers Prepaid Revenues
2001 % 2002 %
(IDR Bio.)
Revenues from outgoing calls, incoming calls and SMS
usage of international visitors using excelcom network - Voice 1,573.3 91.6% 1,727.3 81.6%
Revenue composition - SMS 101.0 5.9% 278.1 13.1%

100% - Others 43.7 2.5% 112.0 5.3%

Total 1,717.9 100.0% 2,117.4 100.0%

80%

60%
Voice Revenue for Prepaid increased by 9.8%, from
40% IDR 1,573.3 billion in 2001 to IDR 1,727.3 billion in
2002. Despite this, the voice contribution to the total
20% prepaid revenues decreased from 91.6% in 2001 to
81.6% in 2002 due to increasing SMS usage as
0% explained above. SMS contributed 13.1% of total
2001 2002 prepaid revenues in 2002 compared to 5.9% in 2001.

Prepaid services Postpaid services International Roaming

16
 MANAGEMENT DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULT OF OPERATIONS

Postpaid Service Leased Lines and Other Business

The postpaid revenue increased by 9.8% from IDR 189.3

IDR Bio. 2001 % 2002 %
billion in 2001 to IDR 207.9 billion in 2002 as total minutes
increased from 184 million minutes in 2001 to 190 million
minutes in 2002 and with substantial increase in the usage - Leased Line 1.3 8.9% 9.7 27.6%
of SMS. Postpaid usage remains high mainly due to the
small postpaid base which is comprised of mainly very high - Others 13.4 91.8% 25.4 72.4%
usage subscribers. The total year end 2002 postpaid
subcribers was 39K, an increase of 8.3% compared to 36K Total 14.6 100.0% 35.1 100.0%
in 2001. The churn rate for postpaid subscribers in 2002
improved from 23.7% in 2001 to 18.8% in 2002. SMS
postpaid revenue accounted for 6.7% of the total postpaid Leased line and other revenues increased from IDR
revenue in 2002 compared to 3.3% in 2001. The 2002 14.6 billion in 2001 to IDR 35.1 billion in 2002 mainly
MOU average was 436, slightly below 452 in 2001. because the Company commerically launched the
Despite the decrease in MOU, ARPU (net) increased from leased lines business only in mid-2002. Other revenues
IDR 342,000 in 2001 to IDR 343,000 due to higher SMS within leased line revenue consist of revenues from ISP
usage. business.

Postpaid Revenues Consolidated Operating Expenses

2001 % 2002 %
(IDR Bio.)
Our consolidated operating expenses increased from
- Voice 176.0 92.9% 187.3 90.1% IDR 1,382.0 billion in 2001 to 1,732.4 billion in 2002, an
increase of 25.4%. This was mainly due to increases in
- SMS 6.2 3.3% 13.8 6.7%
depreciation expenses and selling, general and
- Others 7.1 3.7% 6.7 3.2% administrative expenses.

Total 189.3 100.0% 207.9 100.0%

Voice Revenue for Postpaid increased by 6.4% from IDR

176.0 billion in 2001 to IDR 187.3 billion in 2002. Voice
revenue contribution to total postpaid revenues decreased
Operating Expenses Composition 2001
from 92.9% in 2001 to 90.1% in 2002. SMS revenue
increased from 3.3.% of postpaid revenue in 2001 to 6.7%
in 2002. Cellular
Starter
packs and
costs
International roaming 19%
SIM cards
2%

Inroamers Revenue for the year 2002 was IDR 123.4

billion, 18.3% below IDR 151.1 billion in year 2001. This
was mainly due to a stronger Rupiah and fewer travellers
roaming in Indonesia in Q4 2002 owing to the uncertain
security situation which has since then recovered.
Selling,
Salaries & Depr'n
G&A
benefits 37%
33%
9%

17
 MANAGEMENT DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULT OF OPERATIONS

Operating Expenses Composition 2002

Cellular costs increased by 11.1% from IDR 256.2
Starter billion in 2001 to IDR 284.7 billion in 2002 as
Cellular packs and interconnection costs increased following increases in
costs SIM cards gross revenues. % increase in cellular costs was below
16% 4% % increase in gross revenues due to the full impact of
the 2001 retail price increase reflected in the 2002
results and changes in calling pattern.

Cost of starter packs and sim cards sold increased by

81.6 %, from IDR 33.2 billion in 2001 to IDR 60.3 billion
in 2002 due to increases in sim cards sold in 2002 of
around 1 million units compared to around 0.75 million
Selling, Depr'n units in 2001. The new sim card production costs per
G&A Salaries & 40% unit in 2002 was also higher than that of 2001 due to the
32% benefits introduction of new sim card with STK technology with
8% microbrowser for “Life in Hand” program in 2002.

Depreciation increased by 34.9%, from IDR 511.2

The following table summarizes our consolidated operating
expenses for the year ended December 31,
2002 and 2001 and percentage of each expense item to
the total.
billion in 2001 to IDR 689.4 billion in 2002 mainly due to
acquisition of new fixed assets and accelerated
depreciation for certain assets (mainly software)
following more rapid upgrades for MSC / BSS
equipments.

IDR Bio. 2001 % 2002 % 2002 salary & benefits increased by 17.4% from IDR
122.7 billion in 2001 to IDR. 144.1 billion in 2002,
Cellular costs 256.2 18.5% 284.7 16.4% mainly due to increases in headcount from 1,158 at the
end of 2001 to 1,355 at the end of 2002 and annual
Cost of starter packs and salary increase.
SIM cards sold 33.2 2.4% 60.3 3.5%

Depreciation 511.2 37.0% 689.4 39.8% 2002 selling, general and administrative expenses
increased by 20.5% from IDR 458.7 billion in 2001 to
Salaries and benefits 122.7 8.9% 144.1 8.3%
IDR 552.6 billion in 2002, mainly due to increases in
Selling, G&A Expenses 458.7 33.2% 552.6 31.9% advertising & promotion expenses and non-recurring
professional fees mainly relating to the debt
Sales commissions 108.6 7.9% 123.5 7.1% restructuring exercise (approximately IDR 30 billion).
A&P 52.2 3.8% 98.1 5.7% These increases were partly offset by a 53% decline in
general and administration expenses mainly due to
Rental expenses 49.8 3.6% 60.3 3.5% negotiations with the regulator on BTS and microwave
Repair & Maintenance 71.4 5.2% 91.6 5.3%
frequency fees and reversal of IDR38.6 billion of
overaccrued frequency fees from previous years.
Office expenses 21.1 1.5% 31.6 1.8%

Traveling expenses 14.2 1.0% 16.9 1.0% Interest Expense

General & Admin.
expenses 88.4 6.4% 41.6 2.4% Despite the higher amount of outstanding debt, the net
Professional fees 40.9 3.0% 69.7 4.0% interest expenses decreased by 47.3% from IDR 249.8
Bad Debts : write-offs + billion in 2001 to IDR 131.6 billion in 2002 mainly due to
provision 2.9 0.2% 2.0 0.1% the steep decline in US LIBOR. Also, the net interest
Other Opex 9.2 0.7% 17.3 1.0%
expenses in 2001 was higher as it reflected required
one time adjustments to reflect the agreed restructuring
Total Operating Expenditure 1,382.0 100.0% 1,731.1 100.0% terms with the lenders.

18
 MANAGEMENT DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULT OF OPERATIONS

Consolidated Other (Expenses)/ Income

IDR Bio 2000 2001 2002
Full year foreign exchange gain was IDR 483 billion as
opposed to a 2001 forex loss of IDR 219 billion in 2001 due Cash Flows
to appreciation of IDR vs. US$ over the year from IDR Net Cash provided by
10,400/US$ at the end of 2001 to IDR 8,940/US$ at the operating activities 824.7 1,156.3 1,454.5
end of 2002. Cash used in investing
activities 871.4 1,746.8 1,642.0
Other expenses increased from IDR 0.4 billion in 2001 to Net Cash provided by (used
IDR 37.4 billion in 2002 mainly due to amortization of the in) financing activities - 607.2 351.5
option premium for the interest rate hedge which effectively
Cash and Cash equivalents 18.2 35.1 198.6
caps the US$ LIBOR exposure of the Company starting
early 2004.
Capitalization

Consolidated Income/ (Loss) Before Income Tax Expenses Current portion of long term
debt - 31.2 134.1

2002 net income before taxes increased by 380.5% from Long term debt - net of
current portion 1,679.1 3,173.6 3,140.8
IDR 222.1 billion in 2001 to IDR 1,067.2 billion in 2002
mainly due to forex gain as explained above.
Stockholder equity (202.4) (55.4) 687.9

Consolidated Income/ (Loss) After Income Tax Expenses Other Financial Data

2002 net income after tax increased by 405.3% from IDR Total assets 2,632.9 3,895.6 4,746.6
147.1 billion in 2001 to IDR 743.3 billion in 2002 mainly Property, plant and
due to higher forex gain as explained above. In December equipment - net 2,005.3 3,172.1 4,173.1
2002, the Company convinced the tax office to allow faster Total Capex (cash payments
tax depreciation for cellular capital equipment which and vendor financing) 752.2 1,678.0 1,711.7
enabled the Company to significantly reduce its tax liability
for 2002 and will have positive effects on Company cash
flows on a going forward basis. Now that the tax As of December 31, 2002, the consolidated cash and
depreciation is more in line with the accounting cash equivalents amounted IDR 198.6 billion. Principal
depreciation, deferred tax adjustments are expected to source of cash in 2002 was cash flows from operations
decline on a going forward basis. amounting to IDR 1,454.5 billion. These funds were
used principally for capital outlays (purchase of fixed
assets).
LIQUIDITY AND CAPITAL RESOURCES

Cash Flows From Operations

The following table shows our consolidated cash flows,
capitalization and other selected audited financial data as
of and for the years ended December 31 2000, 2001 and
2002:
excelcom has generated strong cash flows from
operating activities since 1998, achieved principally
through tight cost control and a shift towards a prepaid
customer base which has substantially reduced working
capital requirements.

19
 MANAGEMENT DISCUSSION AND ANALYSIS
For the year ended December 31, 2002, net cash flow from
operating activities increased by 25.8% from IDR 1,156.3
billion in 2001 to IDR 1,454.5 billion in 2002 mainly due to
increases in our Income before income tax expense from
IDR 222.1 billion in 2001 to IDR 1,067.2 billion in 2002.
Investing Activities
The majority of excelcom’s capital expenditure is
denominated in US Dollars and has been directed towards
network equipment to build and subsequently maintain
both the cellular network and the Company’s transmission
backbone.
Capex of IDR 1,711.7 billion. in 2002 was principally used
to finance the continued build-out of network coverage and
transmission throughout major islands in Indonesia (Java,
Bali, Lombok, Sumatra, Batam, Kalimantan, Sulawesi).
Majority of the capex was funded by cash from operations
and the balance by way of vendor financing under the
facility provided as part of the debt restructuring
agreement.
Financing Activities
In 2002, there was vendor financing amounting to
approximately US$ 61.1 million as part of the debt
restructuring agreement. This facility was used to purchase
network equipment from major vendor for coverage
expansion and transmission. In 2002, interest and
principal repayment of loan amounted US$ 21.4 million
(equivalent to IDR. 233 billion) and US$ 3.0 million
(equivalent to Rp. 27 billion), respectively.
Fixed Assets & Operating Facilities
Total Net Fixed Assets increased by 31.6% from Rp. 3,172
billion in 2001 to Rp. 4,173 billion in 2002.
Fixed assets consist of:
Network Equipment (Rp. 3,139 billion)
Land rights & Buildings (Rp. 68 billion)
Office Machinery and Equipment (Rp. 50 billion)
Software (Rp 28 billion)
Leasehold Improvements (Rp. 26 billion)
OF FINANCIAL CONDITION AND
RESULT OF OPERATIONS
Furniture, Fixtures and Motor Vehicle (Rp. 21
billion), and
Assets under Construction (Rp. 839 billion).
Assets are predominantly located in Java, and some
locations beyond Java such as Sumatra, Bali, Batam,
Bintan, Lombok, Kalimantan, and Sulawesi.
Risk Management
The Company’s network is comprehensively insured
against a wide range of eventualities, with insurance
coverage for both the repair / replacement of any
damaged physical property and equipment as well as
the gross profit foregone during the period of network
outage as a result of such damaged property /
equipment.
Additionally, excelcom entered into interest rate hedge
to neutralize the impact of the negative movements of
medium and long-term LIBOR rate related to the
Restructured Debt beyond the Company’s capacity limit
while still availing of the low short term interest rates.
The interest rate hedge was done in accordance with
excelcom’s Debt Restructuring documents.
Currently, excelcom is liaising with its insurance broker
to develop the Company’s Business Continuity Plan
(BCP) as an ongoing effort to ensure that any risk
exposure is recognized and handled appropriately.
BCP is also to demonstrate Excelcom's commitment to
sound risk management.
CONCLUSION & 2003 FORECAST
The year 2002 was marked by launches in 3 new areas
i.e. Kalimantan, South Sumatra, and Sulawesi. This
helped in restoring Company’s image and changing the
perception of having a limited coverage.
Since the last two quarters 2002, excelcom has been
exploring the feasibility and possibility to launch MMS-
related (Multi-media services) services in Indonesia
after qualitative consumer research.
20
 MANAGEMENT DISCUSSION AND ANALYSIS
Competition in 2002 was tight,
and is expected to continue in
2003. Following the selective
price decline pioneered by
excelcom in February 2003,
Telkomsel and IM3 followed a
similar path. A price war
between operators could
intensify which will further force
the Company to develop more
creative product offerings.
The implementation of the
convergent billing system will
allow the introduction of
distinctive features which
cannot be easily followed or
imitated by the competitors, i.e.
customized billing, customized
product packages, multiple rate
plans, hybrid postpaid-prepaid account, etc. This would
shift excelcom’s brand from “price quality coverage” to
“customer centric experience”, making it synonymous with
‘value for money’. Hence, this will also enable excelcom to
maintain strong edge over competition in terms of
maintaining high ARPU subscribers.
The Company since February 2003 reduced its
dependence on Main Distributors for starter packs and
vouchers sales, and has relied on its own sales channel of
XL Retail and XL Kita shops, specifically in areas other
than Jabotabek and East Java where sales are still being
handled by Distributors. The goal of this exercise is to
obtain a better picture and first-hand information of the
market conditions and customers, which will enable the
Company to adapt and adjust swiftly to any change in the
market.
In Q2-2003, excelcom will be launching the MMS-related
services and starting Q4-2003, the Company plans to offer
few packet based data applications using 2.5G /GPRS
technology.
OF FINANCIAL CONDITION AND
RESULT OF OPERATIONS
Cautionary Statement Concerning Forward-Looking
Statements
In this Management’s Discussion and Analysis, and
elsewhere in this Annual Report, we have made forward
looking statements. These statements are based on
our estimates and assumptions and are subject to risks
and uncertainties. Forward-looking statements include
the information concerning our possible or assumed
future results of operations. Forward-looking statements
also include those preceded or followed by the words
“anticipates”, “believes”, “estimates”, “hopes”, or similar
expressions.
The following important factors, along with those
discussed elsewhere in this Annual Report could affect
future results and could cause those results to differ
materially from those expressed in the forward-looking
statements:
Materially adverse changes in economic conditions
in the markets served by us or by companies in
which we have substantial investments;
Material changes in available technology
The final outcome of Indonesian Government,
Ministry of Transport, Post and
Telecommunications regulatory initiatives and
proceedings, including arbitration proceedings, and
judicial review of those initiatives and proceedings,
pertaining to, among other matters, the terms of
interconnection, access charges, universal service,
and unbundled network elements, etc.
The extent, timing, success, and overall effects of
competition from others in the GSM markets;
The timing and profitability of our entry into the
regional market
Changes in the accounting regulations by
Indonesian GAAP which could result in an impact
on earnings.
21

EXCELCOM ’S COMPETITIVE POSITION
There are three major cellular operators in the country
accounting for approximately 95% of the total cellular
market:
1. Telkomsel (Telkom Group)
2. Satelindo (Indosat Group)
3. excelcom
Telkomsel (Telkom Group)
Current market leader with over 50% market share.
Started operations in 1995 and was the 2nd operator to
rollout its network after Satelindo.
As a subsidiary of state-owned PT Telkom, it has a
relative edge over the competition in terms of securing
interconnection, sharing sites with the holding
company and availability of PT Telkom’s transmission
capability for carrying traffic.
With the privatization of the telecommunications
industry, the regulatory environment is expected to
establish a level playing field for all operators.
Satelindo (Indosat Group)
The first cellular operator in Indonesia to launch its
service in 1994.
Currently, it is the second largest cellular operator in
Indonesia.
ST Telemedia has recently invested in Indosat and
has retained consultants to assist it in the vertical
merger of Satelindo & IM3. Management attention will
likely be somewhat diverted during the course of the
restructuring exercise.
excelcom
Started operations in late 1996.
It is currently the third largest cellular operator in
Indonesia in terms of subscribers.
However, as a result of having the highest ARPUs in
the industry, the gap in terms of revenue and EBITDA
between excelcom and Satelindo is narrower than the
gap in subscriber numbers.
STRATEGIC FRAMEWORK AND
COMPETITIVE LANDSCAPE
excelcom has a clear strategy to aggressively increase
market share and attain the number two market position
in the near-term especially in terms of revenue and
EBITDA share.
The management believes that it is well positioned to
achieve their objective in account of the following:
Significant network infrastructure spending in 2001-
2002 to improve capacity, quality and coverage:
Well positioned to offer tailored product packages to
target market segments keeping in mind the
regional requirements at all times.
Take advantage of the ongoing consolidation /
restructuring in the cellular industry by maintaining
its strong focus on improving operating
performance.
The privatization of the telecommunications
industry, the regulatory environment is expected to
establish a level playing field for all operators.
EXCELCOM ’S KEY STRATEGIES
Continue to focus on the prepaid market and offer
differentiated products to target market segments
Expand postpaid subscriber base by offering
customized packages to attract mid-high end
subscribers from competition
Shift from “Price Quality Coverage” to “Customer
Centric Experience”, making the excelcom‘s brand
synonymous with ‘value for money’
Increase direct reach to end customers, through
excelcom branded retail outlets
Continue to improve business processes and
leverage information systems to maximize
operating and capex efficiency.
Reduce overall capex cost through introduction of
alternative suppliers for infrastructure equipment
22
 CORPORATE GOVERNANCE

In order to enhance the decision-making process at excelcom, the Company implemented a corporate governance
structure under the umbrella of the Company’s Articles of Association and the Joint Venture Agreement in February 1998
as set out in the diagram below:

Shareholders

Commissioners

Board of Directors

Committees

Marketing Network Corporate Affairs HR/Comp. Finance & Audit

Each Committee is responsible for ensuring that all capital projects have been evaluated (and monitored) in the context of
consistency with the business plan, financial returns and measurable milestones.

The Board of Directors is responsible for the day-to-day operation of the Company’s business and acts as the primary
approval and decision-making body of the business for transactions up to an agreed set limit in US dollar terms.

The Board of Commissioners supervises the management of the Company by the Board of Directors.

The governance process in the Company is evaluated continuously so that the Company can improve its internal process
constantly in the light of the rapid development of the telecommunication industry.

23
 CORPORATE CITIZENSHIP ROLE

excelcom FOR COMMUNITY • excelcom delivered aid to Bali bombing victims and
local government.
Beside its existence as a hi-tech telecommunication A moment of grieve...
service company, excelcom is also playing an important A moment of peace...
role in supporting and catering to public interest, social life A time to embrace the scattered,
and surrounding environment. These efforts will enable A time to rise and get started, poem
excelcom to portray itself as a Good Corporate Citizen. A moment of joy

excelcom’s Good Corporate Citizenship entails support

and care to National Education, Original Arts and This free style poetry is a reflection of our
Surrounding Environment. thoughtfulness and caring related to the bombing
incident in Bali on October 12th, 2002 that shocked
Several activities related to the aforementioned are as the world.
follows: What excelcom gave was not in any way equal to the
pain and wounds experienced by the victims, but
• Assisted United Nation Organization (UNO) in The excelcom believes in a saying “My endowment is
Fourth Preparatory Committee Meeting World Summit worthless, but my sincerity is true”
On Sustainable Development (Prepcom-IV) which was
held in Bali last May 2002. excelcom received a Besides funds donation to the deceased and
Certificate of Appreciation from UNO signed by Nitin wounded victims’ families and local government,
Desai, Secretary General of The World Summit on excelcom employees also supplied food and drink to
Sustainable Development dated July 4, 2002. all volunteers, Sanglah Hospital, Kuta sector Police
Office, and Kuta’s villagers institution (LKMD) directly
• Sponsor to Tim Olimpiade Fisika Indonesia (TOFI) in the location.
(Indonesian Physics Olympiad Team) as one of
Indonesia’s educational treasures specialized in All the activities were then closed with joy by having a
physics for its debut in 33rd International Physics musical concert called "Bali For The World: Voice of
Olympiad (IPhO) 2002 in Bali, Indonesia dated July Stars".
21st to 30th, 2002.
excelcom’s Good Corporate Citizenship will remain one
• excelcom donated 100 Used Personal Computer to PT
of its priorities for participation in the development of The
Kereta Api Indonesia, in addition to that around 100
Republic of Indonesia.
Used PCs were donated to several Educational
Institution.
• excelcom Award, appreciation for Indonesia’s
telecommunication observers. This activity is a print
and cyber media article writing contest for public and
print and cyber media reporters/journalists dated July
1st to October 15th, 2002. excelcom Award is the
umbrella name for all excelcom birthday celebration
activities. This is a regular based activity started on
July 2002 and planned to be conducted every year with
more exploration such as Content Application Contest

24
 HUMAN CAPITAL DEVELOPMENT

excelcom is a lean organization staffed with 1,355

employees (as of December 31, 2002) who represent Employee by age
a young and dynamic workforce. Average age of the
non-managerial staff is 32 years old, while the 41-50 51-60
>60 years
average age of the senior management is 40 years 7.5% 1.8%
0.4%
old.

excelcom’s organization is designed to be customer

focused. The chart below sets out the organization
structure and key functions of the Company’s 31-40
management divisions. 44.6%
<30 years
45.7%

President Director

Sales & Sales & Corporate

Network Marketing, Marketing, Finance Human Capital Logistical
Operations Consumer Business Solution Development Services
Solution

Network Marketing & Sales Financial Human Capital CPU & Contract Corporate
Planning & IT / Product Product Accounting Learning & Management Assurance
Switching Design Management, Marketing & Management Development Logistics & Fleet Corporate
Engineering Voice Development Accounting & Management Communication
Knowledge
Network Marketing & Inter – carrier Corporate Management / E- Real Estate & Corporate
Operation Center Product Relations Finance learning Facility Planning &
(NOC) Management, Treasury Management Process
Non-Voice Corporate
Field Operation Business Revenue
Marketing Solutions Assurance
Software Communication
Applications
Sales Operation
Retail Operation
Contact
Management

25
 The senior management applies an “Open Door” policy
H
to ensureUcontinuous
MAN flows C D
APIofTcommunication
AL EVELand OPideas.
M EN T

Staffing & Hiring Strategy

excelcom’s staffing strategy emphasizes technical quality
and world-class customer care. In terms of staffing goals,
the Company believes that the number of subscribers per
employee should be maintained at a manageable level to
ensure high quality service for customers. excelcom
continues to review its staffing levels in accordance with
the economic condition and industry standards.
To get closer to pools of high quality fresh graduates,
excelcom regularly conducts apprenticeship programs and
direct recruitment from universities.
This open communication policy is further strengthened
through its Corporate Communication group that
actively informs the employees about high-level
strategy, progress on key ongoing projects, operating
performance etc. on a need to know basis.
Such positive culture helps create a healthy working
environment with few labor disputes. Furthermore, the
Company does not need to carry out any retention
program to decrease employee turnover.

Career Rewards
Career Path Planning

excelcom has implemented a competence-based career

advancement project (“CBHRM”). The competencies
required for specific jobs or job families are identified, and Competencies
Performance Recruitment
all staff is required to go through a competency Management
• Competency
Assessment & Selection
assessment process carried out by an independent • Competency
consultant. The gap between the competencies required Profile
for a job and an individual’s competency levels determines
types of training to be conducted and possible job rotation
Succession Training &
or promotion. Planning Development

Learning Program

To ensure the successful execution of its strategy,

excelcom has been investing considerable resources in
extensive world-class training programs for its employees.
Learning program in excelcom is grouped into the following
sections:
Technical learning: for personnel in
telecommunications network and information
technology areas
Sales and Marketing learning: for sales and
marketing personnel and customer service
representatives
Generic learning: trainings in managerial behavior,
culture building, leadership and teamwork,
communication skills, etc.
In addition, staff with responsibilities in certain job
qualification must take regular certified tests. This is to
ensure service quality and conformance to safety
regulations and standards.

Culture

excelcom is an organization with a vibrant culture, which

encourages innovative ideas and full participation of the
employees while promoting a solid teamwork environment.

26
 BOARD OF COMMISSIONERS

The Members of the Board of Commissioners as at 31 December 2002 were as follows:

Peter Sondakh President Commissioner

(Telekomindo representative)

Philip Wang Commissioner

(Telekomindo representative)

Y.W. Junardy Commissioner

(Telekomindo representative)

Sugianto Himawan Commissioner

(Telekomindo representative)

Tan Tjoe Liang Commissioner

(Telekomindo representative)

John Lack Commissioner

(NYNEX Indocel Holding SDN representative)

Stephen Grout Parker Commissioner

(NYNEX Indocel Holding SDN representative)

Lim Lek Suan Commissioner

(AIF representative)

Masami Kobayashi Commissioner

(Mitsui representative)

PAYMENT TO BOARD OF COMMISSIONERS

No salaries / commissioners’ fee was paid to the member of the Board of Commissioners in 2002.

27
 BOARD OF DIRECTORS
.

The Members of the Board of Directors at 31 December 2002 were as follows:

G.F.Rossi President Director

Navin Sonthalia Director - Finance

Rudiantara Director - Strategy & Governance

Kusnadi Sukarja Director - Sales & Marketing

T.I. Surjo Director - HR & Support Service

Note:
*) Voting right of Director of Network Operation in any Company’s formal Board of Directors meeting has been given to Mr.
Mark Denesevich as Foreign Shareholders Representative as stipulated in Deed #100.
*) Werner Noz is appointed as a Network Director as of March 1, 2003.

The credentials of the Company’s key management personnel are set out below:

President Director - G E R A L D F . R O S S I

Mr. Rossi is the President Director of excelcom and has extensive experience in the Indonesian
telecommunications industry. He was transferred to excelcom from an executive director position at PT
Telekomindo Pratama in August 1998.

Mr. Rossi worked for NYNEX Corporation for over 25 years in network and international business
development and most recently as Indonesia’s country manager.

Director of Network - W E R N E R N O Z

Mr. Noz will commence the position of Director of Network by 1 March 2003. He has been with
excelcom since 1996 and held subsequently the position of General Manager Information Technology
and General Manager Corporate Operations, which included the functions of Internal Audit, Business
Transformation, SAP, and Billing.

Before joining excelcom, Mr. Noz held senior positions in a number of large companies, such as Fajar
Surya Wisesa, Raja Garuda Mas, and Saudi Technologists in Dhahran-Al Khobar, Saudi Arabia.

Mr. Noz holds a master degree in Science Electrical Engineering from Delft University.

28
Director of Sales & Marketing - K U S N A D I S U K A R J A

Mr. Sukarja is the Director of Sales & Marketing for excelcom.

Mr. Sukarja has over 20 years of experience in sales and marketing. Prior to joining excelcom, he held
senior positions in a number of hi-tech and IT-related corporations, including IBM, Astra International
and Metrodata Electronics.

Mr. Sukarja graduated from ITB (Bandung Institute of Technology) in 1980, majoring in electronics and
telecommunication engineering.

Director of Corporate Strategy & Governance - R U D I A N T A R A

Mr. Rudiantara has held the position of Director of Corporate Strategy and Governance at excelcom
since July 2000, having previously been the Director of Marketing and Customer Services for four years.
He holds strong relationships with key telecommunications regulators and operators in Indonesia.

Before joining the Company in 1996, Mr. Rudiantara held executive positions at Indosat and its affiliated
company Telkomsel for 11 years. Mr. Rudiantara is also currently the co-chairman of the Indonesia
Cellular Telecommunication Operators Association.

Director of Finance - N A V I N S O N T H A L I A

Mr. Sonthalia has held the position of Director of Finance at excelcom since September 1999, having
joined the Company in 1996 as the head of Management Accounting and Treasury & Financial Control
shortly after the Company commenced operations.

Prior to excelcom, Mr. Sonthalia was the head of Corporate Planning and Management Accounting at
one of Indonesia’s largest clove cigarette manufacturers and manufacturer & distributor of cigarettes in
Indonesia under license from Philip Morris, USA.

Mr. Sonthalia is a qualified Chartered Accountant (ACA), Chartered Management Accountant (ACMA,
England), Certified Accountant (ACCA, England), Corporate Treasurer (ACT, England), Cost & Works
Accountant, Corporate Secretary and Information Systems Graduate.

Director of Human Resources & Support Services - T A R C I S S I U S I N D A R T O S U R J O

Mr. Surjo has held the position of Director of Human Resources and Support Services in excelcom since
October 1997.

Mr. Surjo has over 20 years of working experience and held numerous senior management positions
including senior roles in PT ICI Paints Indonesia and other major Indonesian corporate.

Mr. Surjo obtained his engineering qualifications from Technische Hochschule, Darmstadt and Ruhr
University, Bochum, West Germany.

PAYMENT TO BOARD OF DIRECTORS

The total gross salaries paid to the members of the Board of Directors in 2002 was IDR 13.9 bio., compared to IDR 16.6
bio. in 2001.

29
 APPROVAL TO ANNUAL REPORT

SUBMISSION AND SIGNATURE PAGES FOR DIRECTORS & COMMISSIONERS

(APPROVAL TO THE ANNUAL REPORT OF FINANCIAL YEAR 2002)
With reference to the Article 57 of Law No. 1 / 1995, We, The Board of Directors of PT EXCELCOMINDO PRATAMA,
hereby submits the attached ANNUAL REPORT to be SIGNED by all members of the Board of Directors and
Commissioners:

BOARD OF DIRECTORS

NAME TITLE SIGNATURE DATE

PRESIDENT
GERALD F. ROSSI
DIRECTOR

DIRECTOR OF
NAVIN SONTHALIA
FINANCE

DIRECTOR OF
STRATEGY &
RUDIANTARA
GOVERNANCE

DIRECTOR OF SALES
KUSNADI SUKARJA
& MARKETING

TI SURJO DIRECTOR HR &

SUPPORT SERVICE

30
BOARD OF COMMISSIONERS

(APPROVAL TO THE ANNUAL REPORT OF FINANCIAL YEAR 2002)

NAME TITLE SIGNATURE DATE

PETER SONDAKH PRESIDENT

COMMISSIONER -
PT TELEKOMINDO
PRIMABHAKTI
representative

PHILIP WANG COMMISSIONER -

PT TELEKOMINDO
PRIMABHAKTI
representative

Y.W. JUNARDY COMMISSIONER -

PT TELEKOMINDO
PRIMABHAKTI
representative

SUGIANTO HIMAWAN COMMISSIONER -

PT TELEKOMINDO
PRIMABHAKTI
representative

TAN TJOE LIANG COMMISSIONER -

PT TELEKOMINDO
PRIMABHAKTI
representative

STEPHEN G. PARKER COMMISSIONER -

NYNEX INDOCEL
HOLDING SDN / BELL
ATLANTIC
representative

JOHN LACK COMISSIONER -

NYNEX INDOCEL
HOLDING SDN / BELL
ATLANTIC
representative

31
 LIM LEK SUAN COMMISSIONER -
AIF representative

MASAMI KOBAYASHI COMMISSIONER -

MITSUI AND CO. LTD
representative

32
 GLOSSARY

ARPU Average Revenue Per User

ATM Automated Teller Machine

BHP Fee Biaya Hak Pengelolaan, a concession fee of 1% on net revenue payable to the Government

BSC Base Station Controller, a device that manages radio resources such as the BTS

BTS Base Transceiver Station, an electronic equipment that connects mobile telephone calls to the
GSM system

CAGR Compound Annual Growth Rate

CLI Caller Line Identification

CLIR Caller Line Identification Restriction

DDI Daya Dimensi Indonesia

DLD Domestic Long Distance

E1 Data transfer capacity of 2.048 million bits per second

ERP Enterprise Resource Planning

eTOMTM enhanced Telecom Operations Map TM

excelcom PT Excelcomindo Pratama

GPRS General Packet Radio Services

Government The Government of Indonesia

HLR Home Location Register, a database used in cellular networks to identify / verify a subscriber

IDD International Direct Dialing

Indosat PT Indonesian Satellite Corporation

ISAT PT Indonesian Satellite Corporation

KSO Kerja Sama Operasi, a type of build, operate and transfer arrangement with Telkom

MOC Ministry of Communication

MOU Minutes of Use, the total minutes of use for both outgoing and incoming calls per month per
subscriber

MSC Mobile Switching Center

MTPT Ministry of Transport, Post and Telecommunications. Formerly the ministry charged with regulating
the telecommunications sector, the MTPT has been replaced by the MOC

OFB Optical Fiber Backbone

OTA Over the Air Reload

PBH Pola Bagi Hasil, a type of revenue-sharing arrangement between Telkom and private investors.
PBH is the precursor to KSO

PHS Personal Handyphone System, a Japanese version of a low-powered high frequency alternative to
traditional cellular operating in the 1.9GHz range

33
POC Point Of Charge, the geographical starting point of a call to determine if the call is classified as
local or DLD

Rp or Rupiah or Indonesian Rupiah, the legal currency of the Republic of Indonesia

IDR

SDH Synchronous Digital Hierarchy, a set of international optic fiber transmission standards (for
backbone access)

STK SIM Tool Kit

STM-1 Data transfer capacity of 155.52 million bits per second

SLJJ Sambungan Langsung Jarak Jauh. Domestic long distance voice traffic (same as DLD)

SMS Short Messaging Service

Telkom PT Telekomunikasi Indonesia

TLKM PT Telekomunikasi Indonesia

US$ or US United States Dollar, the legal currency of the United States of America
Dollar

VAS Value Added Services

Verizon Verizon and its predecessor corporate entities, including Bell Atlantic, NYNEX and GTE

VoIP Voice over Internet Protocol

34