PT Indosat Tbk (IIT)

OPERATING REVENUES

         2o,2w,19,25,

30,31,32

Cellular

10,367,914

10,055,756

1,038,711

Multimedia, Data

Communication,

Internet (“MIDI”)

1,979,378

2,009,059

207,526

Fixed telecommunication

1,301,529

1,344,711

138,902

OPERATING REVENUES

2o,19,25,

30,31,32

Cellular

6,694,016

6,604,711

645,938

Multimedia, Data

Communication,

Internet (“MIDI”)

1,286,913

1,396,462

136,573

Fixed telecommunication

853,155

918,501

89,829

I. Operating revenues

Operating revenues was Rp4,497.4 billion in Q1-09, an increase of Rp228.2 billion [Q1-08 Rp4,269.2 billion] or 5.3% on a year on year basis. This was comprised from a contribution of cellular, fixed data and fixed voice businesses of 74%, 16% and 10% respectively.

Cellular revenues increased 2.6% to Rp3,337.1 billion [Q108:Rp3,251.3 billion] driven by an increase of 25.8% in the subscriber base despite a decline in Average Revenue Per User (ARPU). As at 31 March 2009, our cellular subscriber base totaled 33.3 million subscribers or net additional subscribers of 6.8 million subscribers. While ARPU for cellular customers was Rp30,625, a decline of 28.4% year on year due to  intensified price competition in the market which began in early 2008 together with the impact of lower interconnection charges in April 2008. In terms of traffic, the Average Minute of Usage (MOU) was 94.1 minutes, a growth of 21.0 % on Q1-08, driven mainly by an increase in outgoing traffic from low tariff subscribers.

Features revenue increased 22.5% as a result of an increase in the number of SMS delivered by 40% despite a reduction in SMS tariffs.

Following a substantial increase in the net addition of subscribers since early 2008, we identified the development of high levels of calling card behavior from customers who took advantage of competitively priced plans only to then become inactive. Given this market dynamic, we took the decision at the end of Q4 of last year to refocus the strategy of our cellular business on value of market share as opposed to volume. As a result of which, our customer reward system is now based on length of relationship. We have increased the price of our Starter Pack and have reduced free minutes. This strategy has seen us remove 3 million inactive users from our customer base, whilst increasing our active subscriber numbers, stabilizing MOU, and improving the quality of service offered to our customers.

Fixed Data (MIDI) revenues grew 16.1% from Rp612.3 billion in Q1-08 to Rp711.0 billion in Q1-09.  This increase is due primarily to increased demand on internet, IPVPN, leased line services, application service and digital data network from corporate customers.

Fixed Voice (Fixed Telecommunication) revenues increased from Rp405.6 billion in Q108 to Rp449.3 billion in Q109.  This growth of 10.8% on a year-on-year basis is due to an increase in international call (IDD) revenue as a result of the continued depreciation of the Rupiah against the US Dollar, in particular revenue from incoming calls originated in US Dollars. We have also witnessed a slight growth in revenue from fixed wireless services. As at 31 March 2009, our fixed wireless subscribers were nearly 700,000 a decrease of 2.4% on year on year basis.

Operating Revenues

Total operating revenues increased from Rp12,239.4 billion in 2006 to Rp16,488.5 billion in 2007, or 34.7%, primarily as a result of growth in operating revenues from cellular services. During 2007, operating revenues from cellular services increased by Rp3,525.0 billion, or 38.2%, from Rp9,227.5 billion in 2006 to Rp12,752.5 billion in 2007. Operating revenues from MIDI services increased by Rp266.0 billion, or 14.0%. Operating revenues from fixed telecommunications services increased by Rp458.1 billion, or 41.3%, in each case compared to 2006.

Using the net based method for recording interconnection revenues and expenses, 2007 operating revenue would have increased by Rp2,867.7 billion, or 23.4%, from Rp12,239.4 billion in 2006 to Rp15,107.1 billion in 2007, and revenue from cellular services would have increased by Rp2,517.3 billion, or 27.3%, from Rp9,227.5 billion in 2006 to Rp11,744.9 billion in 2007. Operating revenue from fixed telecommunication would have increased by Rp84.4 billion, or 7.6%, from Rp1,109.3 billion in 2006 to Rp1,193.7 billion in 2007.

Cellular Services. In 2007, we recorded cellular services operating revenues of Rp12,752.5 billion, an increase of 38.2% from Rp9,227.5 billion in 2006. As a result, operating revenues from cellular services represented 77.3% of our total operating revenues for 2007, compared to 75.4% for 2006. Such growth was lower than our 46.9% increase in cellular subscribers from 2006 to 2007 primarily due to a combination of increased penetration to lower-income subscribers, a decrease in our effective revenue per minute due to discounts and bonuses such as tariff packages we offered and extended local zones. Other factors have contributed to this trend, including increased usage of SMS, rather than voice services. Many new cellular subscribers are younger retail subscribers who typically use SMS heavily, but generate less cellular voice traffic than our existing cellular subscribers.

Usage charges increased by Rp1,225.1 billion, or 23.0%, from 2006, and represented 51.3% of our total cellular services operating revenues. This increase in usage was primarily due to expansion of our cellular subscriber base and aggressive marketing efforts to attract new subscribers.

In 2007, cellular services operating revenues generated by value-added features increased by Rp1,162.6 billion, or 38.5%, compared to 2006 primarily due to increased usage of SMS and value-added services. The contribution of value-added features to cellular services operating revenues remained stable at around 32.8% in 2006 and 2007.

MIDI Services. In 2007, operating revenues from MIDI services increased by 14.0% from Rp1,902.6 billion in 2006 to Rp2,168.6 billion in 2007 primarily due to increased Internet, IP VPN and leased lines, resulting from increased domestic demand for such services. Internet operating revenues represented the largest component of MIDI services operating revenue, which increased by Rp148.0 billion. Growth in Internet services was driven by increasing ISP and Internet protocol-based services. Operating revenues from IP VPN increased by Rp152.3 billion primarily due to higher capacity and more dedicated circuits being leased by wholesale customers.

Fixed Telecommunications Services. Fixed telecommunications services operating revenues increased by 41.3% to Rp1,567.4 billion in 2007 from Rp1,109.3 billion in 2006. Operating revenues from international calls

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and fixed wireless access services represented 78.5% and 14.0%, respectively, of fixed telecommunications services operating revenues. The remaining 7.5% of fixed telecommunications services operating revenues in 2007 was generated by fixed line and other services. Revenues from international calls increased from Rp857.7 billion in 2006 to Rp1,230.2 billion in 2007 due to increases in incoming call revenue, although our outgoing call revenue decreased due to competition with other operators such as Telkom. However, the total volume of international calls from our “001” and “008” gateways increased by 35.2% from 1,134.3 million minutes in 2006 to 1,533.5 million minutes in 2007. Total incoming traffic increased by 26.1% from 980.5 million minutes in 2006 to 1,236.6 million minutes in 2007, primarily due to pricing and volume commitments with several foreign telecommunications operators. Outgoing traffic increased by 93.0% from 153.8 million minutes in 2006 to 296.9 million minutes in 2007 primarily due to increased user traffic from “Flatcall 01016.” Outgoing traffic from non-Indosat access decreased due to competition from other domestic telecommunications operators as well as from VoIP providers.

While our operating revenues from “Flatcall 01016,” which charges a lower tariff per minute, have been increasing, such increases have been unable to compensate for lower operating revenues generated by international long-distance services. Operating revenues from fixed wireless access services increased from Rp149.9 billion in 2006 to Rp218.7 billion in 2007 primarily due to an increase in our fixed wireless access subscriber base.

OPERATING REVENUES

2n,19,25,

30,31,32

Cellular

9,146,449

10,226,044

1,084,416

Multimedia, Data

Communication,

Internet (“MIDI”)

1,568,223

2,121,248

224,947

Fixed telecommunication

1,165,308

1,301,529

138,020

Operating revenues

Operating revenues

Operating revenues

Operating Revenues

Total operating revenues increased from Rp11,589.8 billion in 2005 to Rp12,239.4 billion in 2006, or 5.6%, primarily as a result of growth in operating revenues from cellular services. During 2006, operating revenues from cellular services increased 6.7% from Rp8,645.0 billion in 2005 to Rp9,227.5 billion in 2006. In 2006, operating revenues from MIDI services increased by Rp208.6 billion, or 12.3%, while operating revenues from fixed telecommunications services decreased by Rp141.5 billion, or 11.3%, in each case compared to 2005. As a result, operating revenues from cellular services represented 75.4% of our total operating revenues for 2006, compared to 74.6% for 2005.

Cellular Services. In 2006, we recorded cellular services operating revenues of Rp9,227.5 billion, an increase of 6.7% from Rp8,645.0 billion in 2005. Such growth was lower than our 15.1% increase in cellular subscribers from 2005 to 2006 primarily due to increased penetration in the lower-income cellular subscriber market through discount offers and simplified zones, each of which decreased our effective revenue per minute. Some of our cellular subscribers experienced inconsistent cellular service quality as a result of our network integration in 2005 and our network optimization in the first quarter of 2006. As a result, our customers experienced periodic difficulties completing cellular voice calls, thereby limiting the growth of our cellular services operating revenues.

Usage charges increased by Rp523.8 billion, or 10.9%, from 2005, and represented 57.6% of our total cellular services operating revenues. This increase in usage was primarily due to the expansion of our cellular subscriber base and aggressive marketing efforts to add new subscribers.

In 2006, cellular services operating revenues generated by value-added features increased by Rp207.5 billion, or 7.4%, compared to 2005 primarily due to increased usage of SMS and VAS services. The contribution of value-added features to cellular services operating revenues remained stable from 32.6% in 2005 to 32.8% in 2006.

MIDI Services. In 2006, operating revenues from MIDI services increased by 12.3% from Rp1,694.0 billion in 2005 to Rp1,902.6 billion in 2006 primarily due to increased IP VPN, Internet and leased lines operating revenues resulting from increased domestic demand for such services. IP VPN operating revenues represented the largest component of MIDI services operating revenues. Growth in Internet services was driven by increasing ISP and Internet protocol-based services, such as IP VPN. In 2006, MIDI services operating revenues from IP VPN increased by Rp198.7 billion primarily due to higher capacity and more dedicated circuits being leased by wholesale customers.

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Fixed Telecommunications Services. Fixed telecommunications services operating revenues decreased by 11.3% to Rp1,109.3 billion in 2006 from Rp1,250.8 billion in 2005. Operating revenues from international calls and fixed wireless services represented 77.3% and 13.5%, respectively, of fixed telecommunications services operating revenues. The remaining 9.2% of fixed telecommunications services operating revenues in 2006 was generated by fixed line and other services. Revenues from international calls decreased from Rp1,085.1 billion in 2005 to Rp857.7 billion in 2006 due to competition with other operators such as Telkom. However, the total volume of international calls from our “001” and “008” gateways increased by 17.6% from 964.7 million minutes in 2005 to 1,134.3 million minutes in 2006. Total incoming traffic increased by 21.3% from 808.0 million minutes in 2005 to 980.5 million minutes in 2006, primarily due to pricing and volume commitments with several foreign telecommunications operators. Outgoing traffic decreased by 1.8% from 156.6 million minutes in 2005 to 153.8 million minutes in 2006 primarily due to increased competition from other domestic telecommunications operators as well as competition from VoIP providers.

While our operating revenues from “Flatcall 01016,” which charges a lower tariff per minute, have been increasing, such increases have been unable to compensate for lower operating revenues generated by international long-distance services. Operating revenues from fixed wireless services increased from Rp86.2 billion in 2005 to Rp149.9 billion in 2006 primarily due to an increase in our fixed wireless subscriber base.

Operating revenues

OPERATING REVENUES

2n,20,26,

31,32,33

Cellular

8,644,951

9,227,537

12,752,496

1,357,660

Multimedia, Data

Communication,

Internet (“MIDI”)

1,694,033

1,902,589

2,168,584

230,872

Fixed telecommunication

1,250,807

1,109,281

1,567,415

166,870

Operating revenues

Cellular services. In the Nine Months Year 2007, Indosat recorded cellular operating revenues of Rp.9,146.5 billion, an increase of 37.7% from Rp.6,641.4 billion in the Nine Months Year 2006 due to increase in subscriber base. Using the net reporting format, our cellular operating revenues would be Rp.8,428.1 billion, an increase of 26.9% from the same period of last year. As of 30 September 2007 Indosat reached 22.0 million subscribers or a total net add of 5.3 million subscribers from end of 2006.

Fixed Data (MIDI) services. Operating revenues from fixed data services grew 11.0%, from Rp1,413.4 billion in 9M-2006 to Rp.1,568.2 billion in 9M-2007. The increase in fixed data revenues was primarily due to increase revenues in Internet, leased lines and IP VPN.

Fixed Voice services. Operating revenues from Fixed Voice services increased from Rp.817.2 billion to Rp.1,165.3 billion or grew by 42.6% on a year-on-year basis mainly due to change of reporting format, increase of international call (IDD) revenue and increase of fixed wireless services revenue. The increase in IDD revenue was driven by increase in IDD traffic mainly in incoming traffic. On a net basis, the growth of fixed voice revenues would be 8.6% from Rp817.2 billion in the Nine Months 2006 to Rp887.5 billion in the Nine Months 2007.

OPERATING REVENUES

        2n,30

Cellular

21,35,36,37

6,641,420

9,146,449

1,001,034

Multimedia, Data Communication,

Internet (‘‘MIDI’’)

22

1,413,351

1,568,223

171,635

Fixed Telecommunication

23,35,36

817,173

1,165,308

127,537

Operating revenues

Cellular services. In the First Half Year 2007, Indosat recorded cellular operating revenues of Rp.5,897.1 billion, an increase of 37.4% from Rp.4,290.8 billion in the First Half Year 2006 due to increase in subscriber base. Using the net reporting format, our cellular operating revenues would be Rp.5,455.8 billion, an increase of 27.1% from the same period of last year. As of 30 June 2007 Indosat reached 20 million subscribers or a total net add of 3.3 million subscribers from end of 2006.

Fixed Data (MIDI) services. Operating revenues from fixed data services grew 9.9%, from Rp927.3 billion in 1H-2006 to Rp.1,018.7 billion in 1H-2007. The increase in fixed data revenues was primarily due to increase revenues in Internet, leased lines and IP VPN.

Fixed Voice services. Operating revenues from Fixed Voice services increased from Rp.548.9 billion to Rp.774.4 billion or grew by 41.1% on a year-on-year basis due to increase in international call (IDD) revenue and fixed wireless services revenue. The increase in IDD revenue was driven by increase in IDD traffic mainly in incoming traffic. On a net basis, the growth of fixed voice revenues would be 8.0% from Rp548.9 billion in the first half 2006 to Rp592.7 billion in the first half 2007.

OPERATING REVENUES

        2o,30

Cellular

21,35,36,37

4,290,844

5,897,104

651,326

Multimedia, Data Communication,

Internet (‘‘MIDI’’)

22

927,331

1,018,678

112,511

Fixed Telecommunication

23,35,36

548,936

774,447

85,537

Operating revenues

Cellular services revenues. In the First Quarter 2007, Indosat recorded cellular operating revenues of Rp2,899 billion, an increase of 33.5% from Rp2,172 billion in the First Quarter 2006. As at 31 March 2007 there were 18.0 million subscribers or a total net add of 1.3 million subscribers from end of 2006. Indosat’s customer base consisted of 95% prepaid and 5% postpaid subscribers. This subscriber growth was attributed to our various innovative marketing programs and improved distributionship as well as the network quality starting from mid 2006.

Fixed Data (MIDI) services. Operating revenues from fixed data services grew 8.3%, from Rp456 billion in First Quarter 2006 to Rp494 billion in First Quarter 2007. The increase in fixed data revenues was primarily contributed by the growth in leased line & IPVPN due to increased demand from corporate and wholesale customers.

Fixed Voice services. Operating revenues from Fixed Voice services increased from Rp272 billion to Rp 382 billion or grew by 40.5% on a year-on-year basis due to the new reporting format for interconnection and revenue increase in international call (IDD) and revenue increase in fixed wireless services.

OPERATING REVENUES

        2o,30

Cellular

21,34,35,36

2,171,917

2,898,980

317,940

Multimedia, Data Communication,

Internet (‘’MIDI’’)

22

455,672

493,523

54,126

Fixed Telecommunication

23,34,35

272,005

382,260

41,924

Operating Revenues

Total operating revenues increased from Rp10,430.1 billion in 2004 to Rp11,589.8 billion in 2005, or 11.1%, primarily as a result of growth in operating revenues from cellular services. During 2005, operating revenues from cellular services increased 17.7% from Rp7,342.1 billion in 2004 to Rp8,645.0 billion in 2005. In 2005, operating revenues from MIDI services increased by Rp210.1 billion, or 14.2%, while operating revenues from fixed telecommunications services decreased by Rp293.9 billion, or 19.0%, in each case compared to 2004. As a result, operating revenues from cellular services represented 74.6% of our total operating revenues for 2005, compared to 70.4% for 2004.

Cellular Services.    In 2005, we recorded cellular services operating revenues of Rp8,645.0 billion, an increase of 17.7% from Rp7,342.1 billion in 2004. Such growth was less than the 48.8% increase in cellular subscribers from 2004 to 2005 primarily due to lower usage levels by new cellular subscribers as compared to existing cellular subscribers and decreased usage in late-2005 by certain existing cellular subscribers.

Usage charges increased by Rp575.3 billion, or 13.6% from 2004, and represented 55.5% of our total cellular services operating revenues. This increase was primarily due to increases in usage resulting from our expanding cellular subscriber base, but was offset by decreased usage on a per subscriber basis. Our usage charges were also impacted by marketing efforts designed to attract new subscribers, including package promotions that offered free domestic roaming and discounted voice tariffs and SMS charges during 2005.

In 2005, cellular services operating revenues generated by value-added features increased by Rp684.2 billion, or 32.1%, compared to 2004. The increase in value-added features resulted primarily from increased SMS and VAS services. As a result, contribution of value-added features to cellular services operating revenues increased from 29.0% in 2004 to 32.6% in 2005. We expect that value-added features charges will continue to increase as a proportion of cellular services operating revenues, as we expand our value-added features offerings.

MIDI Services.    In 2005, operating revenues from MIDI services increased by Rp210.1 billion or 14.2% from Rp1,483.9 billion in 2004 to Rp1,694.0 billion in 2005 primarily due to increased IP VPN, Internet and leased lines operating revenues resulting from increased domestic demand for such services. Frame relay services operating revenues are generated by Lintasarta and us and represented the largest component of MIDI services operating revenues. Growth in frame relay services was driven by the wholesale market, including international and domestic high-speed leased lines, and Internet protocol-based services, such as IP VPN. In 2005, MIDI services operating revenues from Internet services increased by Rp101.1 billion due to higher capacity and more dedicated circuits being leased by wholesale customers.

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Fixed Telecommunications Services.    Fixed telecommunications services operating revenues decreased by 19.0% to Rp1,250.8 billion in 2005 from Rp1,544.7 billion in 2004. Operating revenues from international long-distance services represented 86.8% of fixed telecommunications services operating revenues in 2005 with the balance generated from our fixed-line and wireless services. Fixed-line and wireless services operating revenues increased by 93.4% from Rp83.1 billion in 2004 to Rp160.6 billion in 2005 primarily due to the increase of our fixed wireless and fixed lines subscriber base.

Total call volume from our “001” and “008” international gateways increased by 12.2% from 859.5 million minutes in 2004 to 964.7 million minutes in 2005. Total incoming traffic increased by 20.5% from 670.8 million minutes in 2004 to 808.0 million minutes in 2005, primarily due to the implementation of pricing and volume commitments with several foreign telecommunications operators. Outgoing traffic decreased by 17.0% from 188.7 million minutes in 2004 to 156.6 million minutes in 2005, due primarily to increased competition from other domestic telecommunications operators and competition from VoIP providers. The decrease in operating revenues from fixed telecommunications services, notwithstanding the increase in total international long-distance call volume, was due to the declining volume of outgoing calls relative to incoming call volume and the continuing decrease in net settlements with foreign telecommunications operators for incoming calls.

OPERATING REVENUES

2o,30

Cellular

21,35,36,37

7,342,061

8,644,951

9,227,537

1,023,009

Multimedia, Data

Communication,

Internet (“MIDI”)

22

1,483,941

1,694,033

1,902,589

210,930

Fixed telecommunication

23,35,36

1,544,684

1,250,807

1,109,281

122,980

Other services

59,420

-

-

-

Total Operating Revenues

10,430,106

11,589,791

12,239,407

1,356,919

Operating revenues

Cellular services revenues. In the full year 2006, Indosat recorded cellular operating revenues of Rp9,228 billion, or an increase of 6.7% from Rp8,645 billion in the full year 2005. As of end 31 December 2006 there were 16,704,639 subscribers or a total net add of 2,192,186 subscribers during the year. Indosat customer base consisted of 95% prepaid and 5% postpaid subscribers. This healthy subscriber growth can be attributed to the various innovative marketing programs and the network quality that was fixed in Q1 of 2006.

Fixed Data (MIDI) services.    Operating revenues from fixed data services grew 12.3%, from Rp1,694 billion in full year 2005 to Rp1,903 billion in full year 2006. The increase in fixed data revenues is primarily contributed by the growth in Leased line, IPVPN  and Internet access services due to demand from corporate customers.

Fixed Voice services.    Operating revenues from fixed voice services decreased 11.3%, from Rp1,251 billion in full year 2005 to Rp1,109 billion in full year 2006. Due to competition, international calls revenues were stable even though international traffic showed an increasing trend, especially for incoming traffic.

Operating revenues

Cellular services revenues. In the nine months 2006, we recorded cellular operating revenues of Rp6,641.4 billion, or increase 1.4% from Rp6,549.1 billion in the nine months 2005. As of end September 2006 we had 14,233,362 subscribers consisted of 94% prepaid and 6% postpaid subscribers. Following the new marketing initiatives between April and September, we recorded net add subscribers during third quarter of 373,448 even though we deleted 1.3 million subscribers due to the prepaid registration. Other operational figures such as Minutes of Usage and number of SMS have also shown positive and consistent month over month growth. This marketing effort also boosted usage revenues by 10.2% and features revenue by 5.2% in the third quarter compared to the second quarter 2006. Total cellular revenue increased by 10.9% from Rp.2,118.9 in second quarter to Rp.2,350.6 in third quarter 2006.

*includes interconnection income, monthly subscription fee, connection fees, and others

MIDI services.    Operating revenues from MIDI services grew 14.0%, from Rp1,240.0 billion in nine months 2005 to Rp1,413.4 billion in nine months 2006, despite the increased competition from domestic and international providers. The increase in MIDI revenues is contributed by growth both IP based services such as Frame relay, IPVPN, Internet access and Non IP based services as well.

Fixed Telecommunication services.    Operating revenues from fixed telecommunication services decreased 14.6%, from Rp956.9 billion in nine months 2005 to Rp817.2 billion in nine months 2006 despite the increase in international incoming call (IDD) traffic. The appreciation of Rupiah against US Dollar in 2006 compare to 2005 as well as the continued accounting rate reduction have impacted to our decreased in incoming revenues.

Operating revenues

Cellular services revenues. In the first half 2006, we recorded cellular operating revenues of Rp4,290.8 billion, or decrease 0.5% from Rp4,312.4 billion in the first half 2005. As of end June 2006 we had 13,859,914 subscribers consisted of 95% prepaid and 5% postpaid subscribers. Following the new marketing initiatives in April and June, our subscribers increased by 903,734 subscribers and usage revenues increased by 9.4% in the second quarter compared to the first quarter 2006.   

*includes interconnection income, monthly subscription fee, connection fees, and others

MIDI services.    Operating revenues from MIDI services grew 13.1%, from Rp820.1 billion in first half 2005 to Rp927.3 billion in first half 2006, despite the increased competition from domestic and international providers. The increase in MIDI revenues is contributed by growth of IP based services (IP VPN) such as Frame relay, IPVPN and Internet access as well of wholesale services.

Fixed Telecommunication services.    Operating revenues from fixed telecommunication services decreased 15.3%, from Rp648.3 billion in first half 2005 to Rp548.9 billion in first half 2006. Our international call (IDD) traffic grew especially the incoming traffic, and this made an increase of IDD revenues in the second quarter 2006.

OPERATING REVENUES

2o,30

Cellular

21,35,36,37

4,312,363

4,290,844

461,381

Multimedia, Data Communication,

Internet (“MIDI”)       

22

820,065

927,331

99,713

Fixed Telecommunications

23,35,36,37

648,258

548,936

59,025

Operating Revenues

Total operating revenues increased from Rp8,229.6 billion in 2003 to Rp10,430.1 billion in 2004, or 26.7%, primarily as a result of growth in operating revenues from cellular services. During 2004, operating revenues from cellular cervices increased 43.6% from Rp5,111.9 billion in 2003 to Rp7,342.1 billion in 2004. Operating revenues from MIDI services increased by Rp238.2 billion, or 19.1%, while operating revenues from fixed telecommunications services decreased by Rp263.0 billion, or 14.5%, in each case compared to 2003. As a result, cellular services operating revenues represented 70.4% of our total operating revenues for 2004, compared to 62.1% for 2003.

Cellular Services.    For the year ended December 31, 2004, we recorded cellular services operating revenues totaling Rp7,342.1 billion, or an increase of Rp2,230.2 billion from Rp5,111.9 billion in 2003. Usage charges increased by Rp948.1 billion, or 29.0%, compared to 2003 and represented 57.5% of total cellular services revenues, compared to 64.0% in 2003. Although usage charges increased significantly in 2004 compared to 2003, they did not increase at the same rate as the rate of new cellular subscribers as, consistent with industry trends, many of the new subscribers we added were from the retail and middle-income market and had lower monthly usage and higher price sensitivity than cellular subscribers during the early development of the Indonesian market. In addition, our usage charges were affected by our marketing strategy to attract new customers, including package promotions, offering free domestic roaming and discounted voice tariffs and SMS charges during 2004.

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Value-added features charges increased by Rp973.6 billion, or 84.1%, compared to 2003 and represented 29.0% of total cellular revenues, compared to 22.6% in 2003. A substantial portion of value-added features are SMS-related, and we expect that value-added features charges will continue to increase as a proportion of cellular revenues, as we expand the number of value-added features.

Interconnection revenues increased by Rp225.3 billion, or 46.7%, primarily as a result of the increase in calls to new cellular subscribers. Connection fees increased by Rp54.2 billion, or 109.7%, principally as a result of the substantial increase in cellular subscribers during the period, together with the impact of reduced discounting of connection fees during 2004.

As of December 31, 2004, we reported cellular subscriber growth totaling approximately 63.6% compared to December 31, 2003. As of December 31, 2004, we had 9,754,607 subscribers, a net addition of approximately 3,792,163 subscribers during 2004. The increase in the number of subscribers was attributable to our aggressive promotional efforts, expansion and enhancement of our network and coverage, as well as the introduction of various new cellular features and products.

MIDI Services.    Operating revenues from MIDI services increased by Rp238.1 billion, or 19.1%, from Rp1,245.8 billion in 2003 to Rp1,483.9 billion in 2004 due to increased consumer and corporate demand. In particular, growth in frame relay services was driven by the wholesale market, including international and domestic high-speed leased lines, and Internet protocol-based services, such as IPVPN, which are recorded as Internet revenues. Frame relay services operating revenues are generated by Lintasarta and us and are the largest component of MIDI services operating revenues. In 2004, frame relay services contributed Rp373.9 billion, an increase of Rp69.6 billion from 2003. Internet revenues totaled Rp193.7 billion and Rp289.1 billion in 2003 and 2004, respectively. Satellite lease revenues increased slightly, from Rp145.7 billion in 2003 to Rp152.9 billion in 2004.

Fixed Telecommunications Services.    Operating revenues from fixed telecommunications services decreased by Rp263.0 billion, or 14.5%, from Rp1,807.7 billion in 2003 to Rp1,544.7 billion in 2004. Operating revenues from international long-distance services represented 94.2% of fixed telecommunications services operating revenues in 2004 with the balance generated from our fixed wireless services introduced in May 2004.

Total call volume from our “001” and “008” international gateways increased by 0.5% from 855.6 million minutes in 2003 to 859.5 million minutes in 2004. Total incoming traffic increased by 7.8% from 622.4 million minutes in 2003 to 670.8 million minutes in 2004 due in part to our strategy of implementing a market termination rate-based pricing system with several foreign telecommunications operators during 2004, which had the effect of reducing charges for incoming calls as well as generating higher volume commitments from certain foreign telecommunications operators. Outgoing traffic decreased by 19.1% from 233.2 million minutes in 2003 to 188.7 million minutes in 2004, due primarily to increased competition from VoIP service providers and also from competition from Telkom, which began providing IDD services in 2004.

The decrease in operating revenues from fixed telecommunications services, notwithstanding the increase in total international long-distance call volume, was due to declining volume of outgoing calls relative to incoming call volume and the continuing decrease in net settlements with foreign telecommunications operators for incoming calls.

Operating revenues

Operating revenues increased by 11.1% from Rp10,430.1 billion in  2004 to Rp11,589.8 billion in  2005 primarily as a result of growth in operating revenues from cellular services. Year-on-year, operating revenues from cellular and MIDI services increased by 17.7% and 14.2% respectively while operating revenues from fixed telecommunications services decreased by 19.0%. As a result, cellular services revenues represented 74.6% of our total operating revenues in  2005 or increased its contribution from  70.4% in  2004.

Cellular services.  In  2005, we recorded cellular services operating revenues amounting to Rp8,645.0 billion, or an increase of 17.7% from Rp7,342.1 billion in  2004. The increase in revenues of 17.7% in 2005 which is lower than the increase in subscribers of 48.8% was due, among others, to the declining Blended ARPU from Rp 89,489 in 2004 to Rp 67,113 or declined 25% in 2005.

Cellular revenues arising from airtime and roaming calls are recognized based on the duration of successful calls made through the Company’s cellular network.  For post-paid subscribers, monthly service fees are recognized as the service is provided. For prepaid customers, the activation component of starter package sales is recognized upon delivery to dealers or direct sale to end-customers. Sales of initial/reload vouchers are recorded as unearned revenue and recognized as revenue upon usage of the airtime or upon expiration of the airtime.

Revenues from interconnection fees with operators (usage revenues) are recognized monthly on the basis of the actual recorded traffic for the month. Cellular revenues are presented on a net basis, after interconnection expenses, and revenues sharing with the content providers.

Our cellular revenues were derived mainly from the following items :

·

Usage charges increased by Rp575.3 billion in 2005, or increased by 13.6% compared to the prior year and represented 54.5% of our cellular services operating revenues. In 2004, usage charges contributed 57.5% to the cellular services operating revenues. This increase was due to the increase in usage of cellular service as a result from the growing subscriber base.

·

Value-added features increased by Rp684.2 billion, or 32.1%, in  2005 compared to 2004. The increase in value added features is mainly due to the increase in usage of short message and VAS services. As a result, contribution of value-added features to cellular services operating revenues increased from 29.0% in  2004 to 32.6% in  2005.