indosatar09 english completed

8/21/2019 INDOSATAR09 English Completed

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MAKINGCHANGES

2009ANNUAL REPORT


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DYNAMICALLY MAKING CHANGESTO POSITION OUR BUSINESS FORLONG TERM RESULTS

TABLE OF CONTENTS

Vision and Mission 3

Our Values and Progress 4

Key Initiatives in 2009 6

Financial Highlights 8

Operational Highlights 10

Stock & Bond Highlights 12Outstanding Awards in 2009 16

2009 Event Highlights 18

Organizational Structure 20

Our Story 22

Our Products and Brands 24

Message from the Board of Commissioners 28

The Board of Directors Report 37

Information on the Company 43

Corporate Governance Report 79

Making a Difference 102

Risk Factor 105

Management Discussion and Analysis 121

Responsibility for the 2009 Consolidated 150

Financial Statement 151

Reconciliation of Indonesian GAAP to IFRS 257

Responsibility for the 2009 Annual Report 263

Annual Report on Form 20-F 265

International Financial Reporting Standard (IFRS) 394

Shareholders Information A-1

DISCLAIMER

This is the Annual Report for the year ended December 31, 2009 and prepared in accordance with Bapepam-LK Rule X.K.6 and X.K.7. Section 20-F in this

Annual Report is adopted from the Annual Report on Form 20-F which we have filed to the US-SEC.

In this Annual Report, references to Indosat, Company, we, us, and our are to PT Indosat Tbk and its consolidated subsidiaries. All references

to Indonesia are references to the Republic of Indonesia. All references to the Government herein are references to the Government of Indonesia.

References to United States or U.S. are to the United States of America. References to Indonesian Rupiah or Rp are to the lawful currency of

Indonesia and references to U.S. dollars or US$ are to the lawful currency of the United States. Certain figures (including percentages) have been

rounded for convenience, and therefore indicated and actual sums, quotients, percentages and ratios may differ. Unless otherwise indicated, all financial

information with respect to us has been presented in Indonesian Rupiah in accordance with Indonesian GAAP.

This Annual Report contains certain financial information and results of operations, and may a lso contain certain projections, plans, strategies, and objectives

of Indosat, that are not statements of historical fact which would be treated as forward looking statements within the meaning of a pplicable law. Forward

looking statements are subject to risks and uncertainties that may cause actual events and the Company,s future results to be materially different than

expected or indicated by such statements. No assurance can be given that the results anticipated by Indosat, or indicated by any such forward looking

statements, will be achieved.

No information herein should be reproduced without the express written permission of the Company. For updated information, please contact the

Investor Relations Group at Jl. Medan Merdeka Barat No.21, Jakarta 10110, Indonesia. Tel. (62-21) 3000 3001, 3869 615, Fax. (62-21) 3000 3757 or

E-mail:[email protected]

We are committed to c ommunicating openly with each of our stakeholders. All stakeholders can visit our website at www.indosat.com for more information

about Indosat. An online version of this document is also available at www.indosat.com.

OUR VALUES

AND STRATEGY

THE HIGHLIGHTS

THE COMPANY

THE REPORT


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I N D O S A T 2 0 0 9 A N N U A L R E P O R T 1

OUR VALUESAND STRATEGY

Our strategy in 2009 brought us closer to realizingour Vision and Mission

Leveraging its existing strengths and with thesupport of our new major shareholder, QatarTelecom (Qtel), Indosat initiated a sweepingstrategy shift in 2009 towards realizing our

Vision and Mission. While subtle, changeswe have made marked a significant internaltransformation in Indosats approach to thebusiness. We anticipate that the full impact ofthis shift will continue to be felt far into thefuture as Indosat renews itself towards realizingour Vision and Mission.

I N D O S A T 2 0 0 9 A N N U A L R E P O R T


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2 M A K I N G C H A N G E S



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VISION &MISSION

Our VisionTo be the provider of choice for communication and information

solutions in Indonesia by:

Offering a full range of communication and information

products, services and solutions.

Being customers rst choice for the provision of information

and communication products, services and solutions.

Providing products and services which contribute to a better

quality of life for the communities in which we operate.

Our Mission

To provide and develop

innovative and high quality

products, services and solutions

which offer the best value to

our customers.

To continuously enhance

shareholders value.

To provide a better quality of

life for our stakeholders.


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OUR VALUES

ANDPROGRESS

We offer the most complete range of services by any

one telecommunications provider in Indonesia.

Sheer size: Indosat has 33.1 million cellular subscribers

and 16,353 BTS.

Strong brand equity and a reputation for excellence.

Building on our values, Insan Gemilang, Indosathas become the second largest cellular operatorin Indonesia, in terms of cellular subscriber

numbers and a leading provider of internationallong distance services in Indonesia.


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Our corporate culture, as embodied in the following Values of InsanGemilang, serves to guide our conduct:

To work

together as

one, utilizing

the skills and

experiences of

our colleagues

and partners in

an environment

that nurtures

trust.

To focus on

exceeding our

customers

expectations in

everything that

we do.

To be committed

to becoming a

solid partner and

to work to create

collaborative,

productive

and mutually

beneficial

relationships with

these partners.

To uphold the

highest ethical

standards in all

aspects of our

work, based on

the principles

of loyalty,

responsibility

and dedication

to the Company.

INTEGRITY

To strive to

produce the

best results in

everything that

we do and to

create results

that exceed

expectations.

TEAMWORK EXCELLENCE PARTNERSHIP CUSTOMER FOCUS


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KEY INITIATIVESIN 2009


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Implemented in the first half of the year, by the second halfof the year these initiatives had generated tangible results,generating improvements quarter-by-quarter and beyond.

A Three Pillar Value Strategy was created to effect this change, as follows:

In order to differentiate ourselves in the

market and retain our strong competitive

position, Indosat made the following

changes in 2009. Our goal was to transform

into a customer-focused organization, in

the process enhancing our value.

realized throughVALUE STRATEGY of:

CUSTOMER FOCUSEDTRANSFORMATION

PILLAR 1:Marketing and

Product Innovation

PILLAR 2:Strong

Distribution Channel

PILLAR 3:High Level of

Network Quality

Supported by creation of focused Strategic Business Units (SBU) by Consumer type :Consumer Wireless, Consumer Broadband, Corporate Solutions, Wholesale & Infrastructure

Strengthening sbscribers

perception with effective

marketing campaign Providing competitive

programs Lanching innovative

products Creating programs to increase

cstomers loyalty and to

retain valued customers

Improving distribtion

capability by optimizing

distribution channel Implementing competitive

dealer incentive system Redcing channel

concentration by creatingalternative channels

Additional capacity and

coverage and improving

network and IT quality On time & an efcient

network and supportinginfrastructure roll-out


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THE HIGHLIGHTS

(in Billion Rupiah) 2009 2008 2007 2006 2005

STATEMENT OF INCOME

Operating Revenues 18,393.0 18,659.1 16,488.5 12,239.4 11,589.8

Operating Expenses 15,180.0 13,925.9 11,968.9 8,840.7 7,937.9

Operating Income 3,213.0 4,733.3 4,519.6 3,398.7 3,651.9

Other Income (Expenses) - Net (981.0) (2,408.2) (1,590.0) (1,375.8) (1,299.2)

Equity in Net Income (Loss) of Associated Companies 0.0 0.0 0.0 (0.2) 0.1

Income Before Income Tax 2,232.0 2,325.1 2,929.6 2,022.7 2,352.8

Income Tax Expenses - Net (677.3) (419.8) (859.5) (576.1) (697.9)

Income Before Minority Interest in Net Income of Subsidiaries 1,554.7 1,905.3 2,070.1 1,446.6 1,654.9

Minority Interest in Net Income of Subsidiaries (56.5) (26.8) (28.1) (36.5) (31.4)

Net Income 1,498.2 1,878.5 2,042.0 1,410.1 1,623.5

Shares Outstanding(in millions of shares) 5,433.9 5,433.9 5,433.9 5,433.9 5,356.2

Basic Earnings per Share (In Rp full amount) 275.7 345.7 375.8 260.9 309.0

EBITDA 8,774.4 9,289.2 8,682.8 7,051.9 6,732.1

BALANCE SHEETTotal Assets 55,041.5 51,693.3 45,305.1 34,228.7 32,787.1

Property and Equipment - Net 44,428.8 38,394.1 30,572.8 24,918.6 21,564.8

Working Capital (5,928.5) (983.5) (832.5) (1,137.8) 2,095.6

Total Liabilities 36,753.2 33,994.8 28,463.0 18,826.3 18,296.1

Minority Interest 330.6 288.9 297.4 200.6 175.7

Total Stockholders,Equity 17,957.7 17,409.6 16,544.7 15,201.8 14,315.3

OPERATING RATIOS (%)

Operating Income to Operating Revenues 17.47 25.37 27.41 27.77 31.51

Operating Income to Stockholders,Equity 17.89 27.19 27.32 22.36 25.51

Operating Income to Total Assets 5.84 9.16 9.98 9.93 11.14

EBITDA Margin 47.71 49.78 52.66 57.62 58.09Net Profit Margin 8.15 10.07 12.38 11.52 14.01

Return on Equity 8.34 10.79 12.34 9.28 11.34

Return on Assets 2.72 3.63 4.51 4.12 4.95

FINANCIAL RATIOS (%)

Current Ratio 54.63 90.79 92.86 83.28 138.58

Debt to Equity Ratio 141.14 124.69 99.84 75.13 87.34

Total Liabilities to Total Assets 66.77 65.76 62.83 55.00 55.80

DIVIDEND PER SHARE (RP)

Final 172.85 187.90 129.75 149.32 154.23

Payment Date 22/7/2009 15/7/2008 13/7/2007 8/8/2006 15/7/2005

FINANCIALHIGHLIGHTS


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THE HIGHLIGHTS

INCOME BEFOREINCOME TAX(In Billion Rupiah)

BASIC EARNINGSPER SHARES(In Rp full amount)

OPERATINGREVENUES(In Billion Rupiah)

OPERATINGEXPENSES(In Billion Rupiah)

OPERATINGINCOME(In Billion Rupiah)

NET INCOME(In Billion Rupiah)

18,393.0

09

08

07

06

05

18,659.1

16,488.5

12,239.4

11,589.8

15,180.0

09

08

07

06

05

13,925.9

11,968.9

8,840.7

7,937.9

09

08

07

06

05

4,733.3

4,519.6

3,398.73,651.9

3,213.0

09

08

07

06

05

1,878.52,042.0

1,410.11,623.5

1,498.2

09

08

07

06

05

2,325.1

2,929.6

2,022.72,352.8

2,232.0

09

08

07

06

05

345.7375.8

260.9309.0

275,7


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THE HIGHLIGHTS

OPERATIONALHIGHLIGHTS Unit 2009 2008 % Change

CELLULAR

Prepaid Subscribers subscriber 31,333,173 35,591,033 -12.0

Postpaid Subscribers subscriber 1,803,342 919,213 96.2

Total Subscribers subscriber 33,136,515 36,510,246 -9.2

ARPU Prepaid Rp 33,138 34,610 -4.3

ARPU Postpaid Rp 175,327 189,710 -7.6ARPU Blended Rp 37,330 38,639 -3.4

FIXED WIRELESS

Prepaid Subscribers subscriber 525,391 681,362 -22.9

Postpaid Subscribers subscriber 68,742 80,227 -14.3

Total Subscribers subscriber 594,133 761,589 -22.0

ARPU Prepaid Rp 23,207 17,955 29.3

ARPU Postpaid Rp 69,160 94,555 -26.9

ARPU Blended Rp 28,402 22,858 24.3

IDD

Outgoing Traffic minute 502,032,713 473,991,957 5.9Incoming Traffic minute 1,486,213,187 1,484,450,321 0.1

Total Traffic minute 1,988,244,900 1,958,442,278 1.5

Incoming/Outgoing Ratio - 3.0 -3.1 -196.8

MIDI

Wholesale

International High Speed Leased Line cct/64kbps 80,048 45,594 75.6

Domestic High Speed Leased Circuit cct/64kbps 170,844 129,315 32.1

Frame Relay port 356 494 -27.9

IPVPN cct/64kbps 16,476 18,114 -9.0

Lintasarta

High Speed Leased Line SDL link 752 906 -17.0

Frame Relay access 4,046 4,431 -8.7

VSAT terminal 3,075 2,564 19.9

IPVPN link 7,308 6,182 18.2

IM2

Internet Dial Up user 9,291 13,142 -29.3

Internet Dedicated link 884 1665 -46.9

IPVPN link 447 562 -20.5

Employees (permanent and non-permanent incl. subsidiaries employees)

person 7,126 7,700 -7.5

Galeri Indosat Service centre 171 162 43.2

Griya Indosat Service centre 61 163 -62.6


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THE HIGHLIGHTS

CELLULARSUBSCRIBERCOMPOSITION(Million)

FIXEDWIRELESSSUBSCRIBERCOMPOSITION

IDD TRAFFIC(Million Minutes)

BLENDED ARPU*-CELLULAR(Thousand Rupiah)*Blended ARPU:Average Revenueper User

BLENDEDARPU*-FIXEDWIRELESS(thousand Rupiah)*Blended ARPU:Average Revenueper User

TOTALCELLULARSUBSCRIBERS(Million)

TOTAL FIXEDWIRELESSSUBSCRIBERS

INCOMING/OUTGOINGRATIO

09

08

07

06

05

36.5

24.5

16.7

14.5

33.1

09

08

31.3

36.5

0.9

1.8

35.6

33.1

09

08

33.1

38.6

189.7

175.3

37.3

09

08

07

06

05

761,589

627,934

378,727

271,158

594,133

09

08

3.1 3.0

34.6

Prepaid

Total

Postpaid

09

08

525,391

761,589

80,227

68,742

681,362

594,133

09

08

1.5

2.0

0.5

0.5

1.5

2.0

09

08

23,2

22,9

94,5

69,2

28,4

17,9


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THE HIGHLIGHTS

STOCK HIGHLIGHTS

Quarterly Stock Price on the NYSE (US$/ADR)

2009 2008 Volume 2009 (ADS)

Period Highest Lowest Highest Lowest Highest Lowest

First Quarter 26.25 16.74 47.01 32.72 228,721 2,374

Second Quarter 26.65 20.99 38.91 29.20 121,100 5,300

Third Quarter 28.35 24.29 37.45 29.86 292,254 500

Fourth Quarter 30.37 24.28 31.80 16.00 252,192 935

Stock Performance

New York Stock Exchange (US$/ADR) Indonesia Stock Exchange (Rp/Share)

2009 2008 2009 2008

Highest 30.37 47.01 5,950 8,750

Lowest 16.74 16.00 4,200 3,950

Year End 25.11 25.85 4,725 5,750

Basic Earnings per ADR/Share 1.47 1.58 275.72 345.7Dividend per Share/ADR - 0.92 - 172.85

Dividend Payout Ratio (%) - 50.00 - 50.00

(%) Dividend Yield

Dividend per ADR/Share

Year-End ADR/Share Price - 3.56 - 3.01

P/E Ratio

Year-End per ADR/Share Price

Earnings per ADR/Share 17.08x 16.36x 17.13x 16.63x

Quarterly Stock Price on the IDX (Rp)

2009 2008 Volume 2009 (LOT)

Period Highest Lowest Highest Lowest Highest Lowest

First Quarter 5,900 4,200 8,750 5,850 88,855 1,015

Second Quarter 5,950 4,850 7,000 5,300 78,074 1,845

Third Quarter 5,700 5,050 6,750 5,800 58,314 1,740

Fourth Quarter 5,700 4,600 5,750 3,950 25,283 633

STOCK AND BONDHIGHLIGHTS

Date Information Stock Exchange AuthorizedCapital

Number ofShares Issued

Nominal Valueper Share

18 October1994

Initial PublicOffering

New York Stock Exchange in theform of American DepositoryShares (ADS)

1 Series A*) share3,999,999,999 seriesB shares

1 Series A*) share1,035,499,999 Series B shares(including 25,012,300 ADS)

1 ADS equivalent to10 series B shares

19 October1994

Jakarta Stock Exchange &Surabaya Stock Exchange

Rp 500 per share

March 2004 Nominal ValueStock Split

Jakarta Stock Exchange, SurabayaStock Exchange and New YorkStock Exchange

1 Series A*) share,19,999,999,999 seriesB shares


Rp 100 per share

1 ADS equivalent to50 Series B shares

1 August 2004-1 August 2005

Execution ofESOP I

Jakarta Stock Exchange &Surabaya Stock Exchange

178,674,500 Series B shares Rp 100 per share

31 December2005

Amount ofShares afterESOP I closed

Jakarta Stock Exchange, SurabayaStock Exchange and New YorkStock Exchange



Rp 100 per share


1 August 2004-1 August 2006

Execution ofESOP II

Jakarta Stock Exchange andSurabaya Stock Exchange

77,759,000 Series B shares Rp 100 per share

31 December

2006

Number of

shares afterclosing ofESOP II

Jakarta Stock Exchange, Surabaya

Stock Exchange and New YorkStock Exchange

1 Series A*) share,

19,999,999,999 seriesB shares

1 Series A*) share

5,433,933,499 Series B shares(including 6,288,502 ADS)

Rp 100 per share


31 December2009

Indonesia Stock Exchange andNew York Stock Exchange



Rp 100 per share


*) Series A share is owned by the Government of Republic Indonesia

Stock Listing Chronology


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THE HIGHLIGHTS

0

5,000

10,000

15,000

20,000

25,000

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

Jan Feb Mar Apr May Jun Jull Ags Sep Oct Nov Dec

VolumePrice

200

INDONESIA STOCK EXCHANGE (ISAT)Period: January 1 - December 31, 2009

VolumePrice

0

50,000

100,000

150,000

0.00

10.00

20.00

Jan Feb Mar Apr May Jun Jul Ags Sep Oct Nov Dec

NEW YORK STOCK EXCHANGE (IIT)Period: January 1 - December 31, 2009 VolumePrice

VolumePrice

STOCK PERFORMANCE

PUBLIC

REPUBLIC OF INDONESIA

QATAR TELECOM (QTEL ASIA) PTE. LTD.

INDOSATSHAREHOLDERS

65.00%

20.71%

14.29%SHAREHOLDERS COMPOSITIONAs of December 31, 2009


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THE HIGHLIGHTS

BOND HIGHLIGHTS

Bond Ratings as of December 31, 2009

Bond Rating Released Date ofRating Report

Rating Agency

1. Second Indosat Bonds series B in Year2002 with Fixed Rate

idAA+

(Negative Outlook)November 2009 PT Pemeringkat Efek Indonesia (Pefindo).

2. Third Indosat Bonds in Year 2003 withFixed Rates

idAA+


3. Guaranteed Notes Due 2010 BB(Stable Outlook)

December 2009 Standard & Poors (S&P)

Ba1(Stable Outlook)

September 2009 Moodys Investors Service

4. Fourth Indosat Bonds in Year 2005with Fixed Rate

idAA+


5. Indosat Syariah Ijarah Bonds in Year2005

idAA

(sy)+

(Negative Oulook)November 2009 PT Pemeringkat Efek Indonesia (Pefindo).

6. Guaranteed Notes Due 2012 BB(Stable Outlook)

December 2009 Standard & Poors (S&P)

Ba1(Stable Outlook)

September 2009 Moodys Investors Service

7. Fifth Indosat Bonds in Year 2007 withFixed Rates

idAA+


8. Indosat Sukuk Ijarah II in Year 2007idAA

(sy)+


9. Sixth Indosat Bonds in Year 2008 withFixed Rates

idAA+


10. Indosat Sukuk Ijarah III in Year 2008idAA

(sy)+


11. Seventh Indosat Bonds in Year 2009with Fixed Rates

idAA+


12. Indosat Sukuk Ijarah IV in Year 2009idAA

(sy)+


Bond Listing Chronology

Description Release Date StockExchange

Total Interest Rate Maturity

Second Indosat Bonds November 6, 2002 Surabaya Stock Exchange* Series B : Rp200.0 b illion 16.0% per annum November 6 , 2032

Third Indosat Bonds October 22, 2003 Surabaya Stock Exchange* Series B : Rp640.0 billion 12.875% per annum October 22, 2010

Fourth Indosat Bonds June 21, 2005 Surabaya Stock Exchange* Rp815.0 billion 12% per annum June 21, 2011

Fifth Indosat Bonds May 29, 2007 Surabaya Stock Exchange* Series A : Rp1.230 billion 10.20% per annum May 29, 2014

Series B : Rp1.370 billion 10.65% per annum May 29, 2017

Sixth Indosat Bonds April 9, 2008 Indonesia Stock Exchange Series A : Rp760.0 billion 10.25% per annum April 9, 2013

Series B : Rp320.0 billion 10.80% per annum April 9, 2015

Seventh Indosat Bonds December 8, 2009 Indonesia Stock Exchange Series A : Rp700.0 billion 11.25% per annum December 8, 2014

Series B : Rp600.0 billion 11.75% per annum December 8, 2016

IndosatSyariah Ijarah Bonds

June 21, 2005 Surabaya Stock Exchange* Rp285.0 billion Rp34.2 billion per annum June 21, 2011

IndosatSukuk Ijarah II

May 29, 2007 Surabaya Stock Exchange* Rp400 billion Rp40.8 billion per annum May 29, 2014

IndosatSukuk Ijarah III

April 9, 2008 Indonesia Stock Exchange Rp570 billion Rp58.43 billion per annum April 9, 2013

IndosatSukuk Ijarah IV

December 8, 2009 Indonesia Stock Exchange Series A : Rp28.0 bil lion Ijarah Return Rp3.150billion per annum

December 8, 2014

Series B : Rp172.0 billion Ijarah Return Rp20.210billion per annum

December 8, 2016

Guaranteed Notes

due 2010

November 5, 2003 Luxembourg Stock

Exchange and SingaporeExchange SecuritiesTrading Limited

US$234.7 million 7.75% per annum November 5, 2010

Guaranteed Notesdue 2012

June 22, 2005 Singapore ExchangeSecurities Trading Limited

US$109.4 million 7.125% per annum June 22, 2012

*on November 30, 2007, the Surabaya Stock Exchange and the Jakarta Stock Exchange merged to become Indonesia Stock Exchange


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THE HIGHLIGHTS

PT APLIKANUSA LINTASARTA (LINTASARTA)

Indosat holds of 72.36% the shares in Lintasarta, which provides

high-speed communication and corporate network services.

Address:

Gedung Menara Thamrin Fl.12

Jl. M.H. Thamrin Kav.3Jakarta 10250

Phone : (62-21) 230 2345

Fax. : (62-21) 230 3883

Website: http://www.lintasarta.net

Contact person: Lista Dewi Soegiharto,

General Manager Corporate Secretary

Phone : (62-21) 230 2345

Email : [email protected]

PT INDOSAT MEGA MEDIA (IMM)

Indosat hold 99.85% of its shares in IMM, which provides multimedia

and internet services which include IP-based multimedia, Internet,

and IP-based LAN & WAN network communications services.

Address:

Jl. Kebagusan Raya No. 36Pasar Minggu, Jakarta 12550

Contact person: Andri Aslan,

Head of Corporate Secretary

Phone : (62) 855 1082101, (62-21) 7854 6969, ext. 103.


INDOSAT FINANCE COMPANY B. V. (IFB)

IFB was established in Amsterdam, the Netherlands, in October 2003

and operates as a nancing company. Indosat holds 100% of the

shares in this company.In 2003, IFB issued guaranteed notes which

are due in 2010.

Address:

Netherlands Prins Bernhardplein 200

1097 JB Amsterdam, The Netherlands

Phone : (31-20) 521 4777

Fax. : (31-20) 521 4888

post address P.O. Box 990

1000 AZ Amsterdam, The Netherlands

Contact person: Gert Jan van Nieuwpoort,

Financial Account Manager

Phone : (31-20) 521 4830

Fax. : (31-20) 521 4825


INDOSAT INTERNATIONAL FINANCE COMPANY B. V. (IIFB)

IIFB was incorporated in Amsterdam, the Netherlands, in April 2005

and operates as a nancing company. Indosat holds 100% of the

shares in this company. In 2005, IIFB issued guaranteed notes which

are due in 2012.

Address :Netherlands Prins Bernhardplein 200

1097 JB Amsterdam, The Netherlands

Phone : (31-20) 521 4777

Fax. : (31-20) 521 4888

P.O. Box 990, 1000 AZ Amsterdam, The Netherlands

Contact person: Gert Jan van Nieuwpoort,

Financial Account Manager

Phone : (31-20) 521 4830

Fax. : (31-20) 521 4825


INDOSAT SINGAPORE PTE. LTD (ISP)

ISP was established in Singapore on 21 December 2005. ISP is wholly-

owned by Indosat. This company provides telecommunications services.

Indosat holds 100% of the shares in this company.Address:

8 Temasek Boulevard, Suntec City Tower 3, #15-05

Singapore 038988

Phone : (65) 62355155

Fax. : (65) 63374838

Contact person: Asrul Ardianto


PT STAR ONE MITRA TELEKOMUNIKASI (SMT)

SMT was established on 15 June 2006 to support the construction and

operation of xed wireless access network sing Code Division Mltiple

Access (CDMA) 2000-1x technology in Central Java and its srronding

area. Indosat holds 72.54% of the shares in this company.

Address:

Gd Grinatha Fl. 1

Jl. Pemuda No. 142

Semarang 50132

Phone : (62-21) 62355155

Fax. : (62-24) 3560806

Contact person: M.Farid Baay


SUBSIDIARY COMPANIESAs of December 31, 2009


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THE HIGHLIGHTS

OUTSTANDINGAWARDS IN 2009OUTSTANDINGAWARDS IN 2009

I n 2 0 0 9 , I n d o s a twon a tota l of 22awards including thefollowing outstandingawards for excellencein various categories,most notably for:

PRODUCTEXCELLENCE

INDONESIA CELLULAR AWARD

Best Operator GSM, VAS, Best

BlackBerry Services

TOP BRAND AWARD

for Mentari, IM3, & Matrix brands

by Frontier Consulting Group and

Marketing Magazine

INDONESIA TELECOM AWARD

Mobile Data Service Provider of

the Year by Frost & Sullivan

CORPORATEPERFORMANCE/GCG

TOP 10 INDONESIAS

MOST ADMIRED COMPANIES

by Wall Street Journal Asia

Singapore (Innovation, Corporate

Reputation).

ANNUAL REPORT AWARD

3rdplace Private Non Finance Listed

Category from Annual Report Award

INDONESIAS MOST

TRUSTED COMPANIESbased on Investors & Analysts

Assessment Survey by SWA Sembada

Magazine

ISLAMIC FINANCE AWARD & CUP

(IFAC)

Biggest Sukuk Issuer by Karim

Business Consulting

PR PEOPLE OF THE YEAR

Journalist Choice from Marketing

MIX Magazine


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THE HIGHLIGHTS

CORPORATE SOCIALRESPONSIBILITY

INDONESIA CELLULAR AWARD

Best CSR program

METRO TV MDGs AWARD 2009for Reducing Child Mortality in Indonesia

PR PROGRAM OF THE YEAR

Si lver category (CSR IWIC activity) by

Marketing MIX Magazine

5THINDONESIA SUSTAINABILITY

REPORT AWARD

Best Runner Up 2, and Best Runner Up 1 on

Website by National Center for Sustainability

Reporting

HUMAN RESOURCESDEVELOPMENT

HR EXCELLENCE AWARD 2009

Ranked 4th for Overal l Talent

Management from University of

Indonesia and SWA Magazine

CUSTOMER SERVICE

BEST CONTACT CENTER

INDONESIA 2009

from Indonesia Contact Center

Association (ICCA)

CALL CENTER AWARD 2009/

SERVICE QUALITY AWARD 2009

from Carre-CCSL and Marketing

Magazine


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THE HIGHLIGHTS

2009 EVENTHIGHLIGHTS

16 JANUARYLaunch of MENTARI Gratis Ribuan Kali Nelpon Seharian

(MENTARI Thousands of Calls Free Daily) program including a

new Starter Pack and a re-designed Mentari logo.

>9 MARCH

Our Indonesia Sehat (Healthy Indonesia) and

Indonesia Belajar (Indonesia Learns) CSR

programs launched in Papua.

21 JULYIndosat was the first operator in Indonesia to provide in- ight

calls and SMS services, through our AeroMobile services.


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THE HIGHLIGHTS

>>6 OCTOBER

Indosat donated over Rp2 Billion worth of assistance through the

West Sumatera Red Cross and the West Sumatera Disaster Relief

Teams to the victims of the Padang, West Sumatera earthquake.

31 AUGUSTSuccessful launched of Indosats PALAPA-D Satellite in Xichang, China. The PALAPA-D Satellite

will strengthen Indosats backbone and support other Indosat services such as cellular service,

fixed telephone and fixed data.

8 SEPTEMBERIndosat was granted additional 3G frequency by Ministerial Decree of Communication andInformation Technology Number 268/KEP/M.KOMINFO/9/2009, obtaining an additional

allocation of 2.1 GHz radio frequency bands, which will enable Indosat to increase capacity,

quality, and coverage.

19 SEPTEMBERMoody raised the Indosats rating of senior unsecured foreign currency bonds to Ba1 and Ba2,

and confirmed a stable outlook for Indosats local currency corporate family rating.

3 NOVEMBERThe 21 finalists of the Indosat Wireless Innovation

Contest (IWIC) 2009, a wireless technology

competition held by Indosat, were selected fromalmost 300 applications.


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THE COMPANY

ORGANIZATIONALSTRUCTURE

PRESIDENT DIRECTOR and

CHIEF EXECUTIVE

OFFICER

HARRY SASONGKOTIRTOTJONDRO

CHIEF SALES

OFFICER

GROUP HEADS

CHIEF

INFORMATION

OFFICER

GROUP HEADS

DIRECTOR and CHIEF

COMMERCIAL OFFICER

LASZLO IMRE BARTA*

CHIEF MARKETING

OFFICER

GROUP HEADS GROUP HEADS GROUP HEADS GROUP HEADS

DIRECTOR and CHIEF

WHOLESALE &

INFRASTRUCTURE

OFFICER

FADZRI SENTOSA

CHIEF CORPORATE

SOLUTION OFFICER

*Replacing Kaizad B. Heerjee effective May 1, 2010.


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THE COMPANY

GROUP HEADSGROUP HEAD

SOX

GROUP HEADS

GROUP HEAD

INTERNAL

AUDIT

GROUP HEADS

GROUP HEAD

CORPORATE

SECRETARY

DIRECTOR and CHIEF

TECHNOLOGY OFFICER

STEPHEN EDWARDHOBBS

GROUP HEADS

CHIEF STRATEGY and

PLANNING OFFICER

CHIEF HUMAN

RESOURCES

OFFICER

GROUP HEADS

DIRECTOR and CHIEF

FINANCIAL OFFICER

PETER WLADYSLAWKUNCEWICZ

CHIEF LEGAL and

COMPLIANCE

OFFICER

GROUP HEAD

ENTERPRISE RISK

MANAGEMENT

GROUP HEADS

As part of our transformation towardsvalue in 2009, the number of directorswas reduced from 9 to 5


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THE COMPANY

The Company wasf i r s t f o u n d e d in1967 as a ForeignCapital Company inIndonesia.

1967 It became the f irsti n t e r n a t i o n a ltelecommunicationscompany to be ownedby the Government inIndonesia.

1980

The Government of Indonesia sold41.9% of its shares to SingaporeTechnologies Telemedia Pte. Ltd (STT).In the same year Indosat introduced

Shariah Bonds, pioneering shariahfinancing in Indonesia.

2002

Went public, listing on the IndonesiaStock Exchange and the New YorkStock Exchange.

1994

E s t a b l i s h e dP T I n d o s a t

M u l t i M e d iaMobile (IM3), apioneer of GPRSand multimedias e r v i c e s i nIndonesia.

2001

OURSTORY


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THE COMPANY

M e r g e d w i t h i t s t h r e es u b s i d i a r y c o m p a n i e s ,Satelindo, IM3 and Bimagraha,becoming a major cellularoperator in Indonesia.

2003

Acquired a 3G licenseand introduced 3.5Gservices in Jakarta andSurabaya.

2006

2008Indosat shares were indirectly ownedby Qtel Q.S.C. (Qtel) through IndonesiaCommunications Limited (ICLM) andIndonesia Communications Pte. Ltd

(ICLS) in the amount of 40.81%.The Government of Indonesia andthe public respectively owned theremaining 14.29% and 44.90%.

Qtel acquired 24.19% series B

shares from the public, becoming

the majority shareholder of

Indosat at 65%. Therefore,

Indosat was owned by Qatar

Telecom Q.S.C. (Qtel) through

Qtel Asia, the Government of

Indonesia and the public.

Indosat was granted an additional

3G frequency by the Ministry of

Communication and Information

Technology, and its subsidiary, IM2,

also won the government WiMAXlicense tender.

2009

Throughout our long history, PT Indosat Tbk

became known as a pioneering and enterprisingcompany that constantly evolved to adjust to thecompetitive marketplace


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THE COMPANY

OUR PRODUCTSANDBRANDS

Staying on Cutting Edge

Indosat is known for its innovative andpioneering approach. Drawing on ourcomprehensive range of capabilities, weare able to create exciting new packages

and services for our customers.

Cellular and 3.5G Broadband

Products & Brands Description Cstomer Benet

Affordable mobile prepaid

communication services targeted at the

youth segment

Ability to talk longer

and send more text messages

Mobile prepaid communication services

for general usersSimple and economical at rates

Premium GSM mobile postpaidcommunication services

High mobility and quality,

widest international coverage,

premium services

CREATING VALUE - DELIVERING THE RIGHT PRODUCTFOR EVERY CUSTOMER.


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THE COMPANY

A variant of the Matrix product which

offers exible post-paid cellular service

with additional prepaid reload capability

Provides exibility in controlling costs.

Combines the benefits of postpaid and

prepaid cellular services

Fixed Wireless Acess (FWA) with limited

mobility within city/area code

Affordable daily usage communication

services for voice and SMS and also

cheap Internet access.

Global push mail service and postpaid/

prepaid cellular service

Attractive bundling package

for mobile email messaging and

telephone services

Mobile wireless internet/data service on

a 3.5G Broadband technology (GPRS/

EDGE/UMTS/HSDPA/HSPA+)

High speed connection up to 21 Mbps

Value Added Services for cellular users Choice of features, content and gamesfor entertainment


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THE COMPANY

Fixed Telecommnication


Domestic and international

Voice Over Internet Protocol (VOIP)

service

Affordable at international tariff, VoIP

calling cards to facilitate long distance

calls, control over cost of callsGLOBAL SAVE *

International Direct DialingClear quality IDD calls, budget IDD,

worldwide calling coverage

MIDI Services(Multimedia Data and Internet)


IPLC

(INTERNATIONAL

PRIVATE

LEASED CIRCUIT)

Data Communication Services:

The products and services that we offer

in this business segment include high-

speed point-to-point international and

domestic digital leased line broadband

and narrowband services, a high-

performance packet-switching service

and satellite transponder leasing and

broadcasting services.

Point-to-point private

circuit connections

DPLC

(DOMESTIC PRIVATE

LEASED CIRCUIT)

FRAME RELAY &

ASYNCHRONOUS

TRANSFER MODE (ATM)

Flexibility for variable traffic

INTERNET NETWORK

PROVIDER (INP)Access to global Internet

INDOSAT DEDICATED

INTERNET ACCESS (IDIA)

Ability to create private network through

data packageINDOSAT NATIONAL

INTERNET EXCHANGE

(INIX)

MULTI-PROTOCOL LABEL

SWITCHING (MPLS)-BASED

SERVICES Solutions for national and international

broadcast services

SATELLITE SERVICES

DISASTER RECOVERY

CENTER (DRC)Secure data service

* TERMINATED IN MARCH 2010


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M A K I N G C H A N G E S28

THE REPORT -MESSAGE FROM THE BOARDOF COMMISSIONERS

MESSAGE FROMTHE BOARD OFCOMMISSIONERS

We have committed to the path ofchange, re-invigorating our strategy

and refining our model, in pursuit oflong-term shareholder value.

CHANGING WITH PURPOSE.TRANSFORMING FOR VALUE.It gives me great pleasure to open this review of Indosats

2009 performance. To me, this is a particularly important

review, charting the many advances we have made

together in our first full year as part of one family the

Qtel Family. Even against the harshest of economic

backdrops, I am proud that our commitment to sharing

knowledge, expertise and resources across our company

has enabled Indosat to make significant strategic progress

this year.

This progress owes much to change. We have chosen the

path of change not because events have forced us to do

so, but because we see real and significant value from

re-invigorating our strategy and refining our model.

The changes we have initiated this year within Indosat

go right to the heart of our operations, our vision and

our own leadership team to ensure that our attention is

trained squarely on one central aim: the transformation

of our strong operational position into long-term,

shareholder value.

Value is the future for Indosat and there is much value

to pursue. As an organization we are today united in our

belief that long-term success in the Indonesian market

can only be achieved through focusing on the value

subscribers generate by using our services. But the

Indonesian consumer is demanding, constantly expecting

ever more innovative services from us as the pace of

economic and technological change both at home and

abroad provides new technologies and opportunities to

communicate. Indosat has long understood this dynamic

consumer. Our mission is to continue to offer value to


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THE REPORT -MESSAGE FROM THE BOARD

OF COMMISSIONERS

Sheikh Abdulla Mohammed S.A Al Thani

President Commissioner


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these consumers whilst at the same time ensuring that

we secure value for our shareholders. I am pleased to

report that we are making solid progress on both these

value fronts.

BOLD STEPS. DELIVERING RESULTS.The steps we have taken to reposition towards a value-

based strategy have been bold and, in many areas,

significant. It has taken time and energy to take these

steps. It will take further time and further energy to

see them through to completion. Nevertheless, the first

results emerging from these changes indicate that we

were right to be bold.

Look first at our performance in Q3 and Q4 the first

six months in which our revised strategy had been fully

implemented and it is easy to see our volume-to-

value shift starting to take hold. During this period

we achieved a 12 percent quarter on quarter increase

in cellular revenue and a 16 percent quarter on quarter

increase in data revenue. We have also added back 4.4

million subscribers to the subscriber base in this period.

This not only reverses the downward trend seen in the

first six months of 2009 when we first took steps to revisit

and realign our subscriber base, but also adds back new

higher-value subscribers who are buying-in to our re-

energized proposition and increasing our cellular ARPU

by 24 percent. These are two significant signs of how the

right change, implemented in the right way, can deliver

the right results.

We can only push for value if we understand properly

where that value can come from within our business. Toachieve this, we have organized our operations into four

distinct areas of operation Consumer Wireless, Consumer

Broadband, Corporate and Wholesale & Infrastructure.

This means that we are now fully focused on our many

different customers and their many different needs. We

have teams who understand how to meet those needs,

and of course, when we deliver to our customers, our

shareholders will ultimately benefit as well.

This will take time to translate in to improvements in

profitability. But we believe those improvements will

come. Certainly, on a year-on-year basis, EBITDA has been

impacted this year by our restructuring focus slightly

lower than last year at Rp8.77 billion. Nevertheless, we

have worked hard to reduce the impact of our changes

on EBITDA margin. We firmly believe we have a very

solid base from which to pursue our profitable growth

ambitions in the year ahead.

Finally, we have renewed the strength and depth of our

senior leadership team, ensuring that new skills have

been brought in from outside, and that the right skills

are deployed internally in the areas where they are

needed the most. I look forward to continuing to work

with Harry and his team in the year ahead as we push

ahead with our value vision.

PLAYING OUR PART.Whilst we have committed ourselves this year to change,

there is one element of Indosats business model that

we refuse to change: our commitment to strive for the

highest standards of corporate social responsibility.

During the year we looked closely at our long-standing

Corporate Governance Framework and took steps to

further enhance its aims and effectiveness. Wherever

possible, we seek not only to meet the requirements

of our various Exchanges and Regulators, but also to

exceed those requirements and set new standards for

other Indonesian companies to follow. It also means

a commitment to investing in the communities that

contribute to our success. Indosat has long spearheadedprojects to improve standards of health, education and

social well-being in Indonesia and this year has been

no exception.

This year, however, Indonesia faced one of the largest

natural challenges it has ever faced. In October a powerful

earthquake brought devastation to western Indonesia

triggering landslides, trapping thousands of people


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OF COMMISSIONERS

Sheikh Abdulla Mohammed S.A Al ThaniPresident Commissioner

under fallen buildings and cutting-off large swathes of the

community from the outside world. Just as the concept of

family is important to our organization, it is also one of

the core values of the Qatari nation which was proud to

assist Indonesia in this time of need. A 20-strong team

of Qatari Special Forces was deployed to the devastated

area along with significant quantities of aid, working with

Indonesian counterparts to ensure this aid reached areas

of greatest need in the quickest possible time. Just as the

Qtel Group stands committed to nurturing growth across

its family of companies, the state of Qatar will always

extend a helping hand across the family of nations when

it is needed the most. The people of Indonesia can always

be sure of Qatars support.

VALUING YOUR SUPPORT.To speak of change is easy. To deliver real and valuable

change, however, relies heavily on the support, endeavors

and commitment of many people in many areas. On behalf

of my colleagues on both the Board of Commissioners and

Board of Directors, I would like to extend sincere thanks

to you, Indosats shareholders, for the steadfast support

you have given to our transformation agenda over the

course of the past year. This support has bolstered our

efforts and enhanced the pace of change we have been

able to achieve.

My deep appreciation also goes out to all Indosat

employees, each of whom embraced our vision for the

future this year with enthusiasm and purpose. My

colleagues and I are also grateful to the many partners,

stakeholders and organizations that have worked closely

with us throughout 2009 to support and roll-out the

change program we have put in place.

MOVING FORWARD.My Board colleagues and I are extremely proud of this

organization and its potential. Indosat remains a highly

profitable organization, with a strong market position,

focused on real and tangible growth opportunities.

Furthermore, it retains all of the advantages of being

a full service provider: extremely important in an age

where consumer and business demands are becoming

increasingly complex. All of this supports my continuing

belief that with the support of my fellow Commissioners,

Directors, colleagues and you, our shareholders Indosat

remains extremely well positioned to outpace any growth

that the wider industry here in Indonesia can achieve,

over the long term.


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RICHARD FARNSWORTH SENEYCommissioner

RACHMAT GOBELCommissioner

SHEIKH ABDULLA MOHAMMEDS.A AL THANIPresident Commissioner

DR. NASSER MOHAMMED MARAFIHCommissioner


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OF COMMISSIONERS

JARMANCommissioner

SOEPRAPTO S.I.PIndependent Commissioner

GEORGE THIA PENG HEOKIndependent Commissioner

CHRIS KANTER*Independent Commissioner

ALEXANDER RUSLI*Independent Commissioner

RIONALD SILABANCommissioner

* Chris Kanter and Alexander Rusli were appointed as Independent Commissioners at the Extraordinary GeneralShareholders Meeting dated January 28, 2010, effective immediately. They replace Michael F. Latimer andSetyanto Prawira Santosa, who were honorably discharged on that same day.


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BOARD OF COMMISSIONERSPROFILESSheikh Abdulla Mohammed S.A Al Thani has been the President Commissioner since August 2008. Sheikh Abdulla is currently

the Chairman of the Board of Directors of Qtel. In his capacity as Chairman, he has helped enhance Qtels corporate governance

system to ensure Qtel is directed and controlled in line with international practices. Sheikh Abdulla has also overseen the

restructuring and regional expansion of Qtel. After Qtels acquisition of Kuwait-based Wataniya, which was considered at

that time to be the largest telecommunications deal in the Arab world, Sheikh Abdulla was appointed Chairman of Wataniya.

Sheikh Abdulla is also a member of the Qatari Planning Council and was the Chief of the Royal Court (Amiri Diwan) from 2000

to 2005. Sheikh Abdulla has an extensive background in both the military and aviation fields and is a certified pilot (instructor)

by the British Royal Air Force.

Rachmat Gobel has been a Commissioner since August 2008. He currently is the Chairman of the Gobel Group of companies

which has operations in manufacturing, trading, services, integrated logistics management as well as food and hospitality,

including industrial catering. Gobel Group is the Indonesian joint venture partner of Matsushita Electric Industrial Co., Ltd., a

global leader in electronics and electrical goods marketed under the brand name of Panasonic. He also serves as Vice Presidentof the Indonesian Chamber of Commerce and Industry (KADIN). Mr. Gobel graduated with a Bachelor of Science degree in

International Trade from Chuo University, Tokyo in 1987 and was awarded an Honorary Doctorate Degree from Takushoku

University, Tokyo, Japan in 2002. In 2009, he received the prestigious Distinguished Engineering Award in Manufacturing

Technology from the Agency for the Assessment and Application of Technology (BPPT). Mr. Gobel is also actively involved in

numerous social activities, including the Indonesian Olympic Committee and the Indonesian Red Cross.

Rionald Silaban, has been a Commissioner since June 2008 and was appointed as a member of the Risk Management

Committee in the same year. He currently serves as a Director of the Center for Policy Analysis and Harmonization of the

Ministry of Finance in Indonesia. In the past he held several positions including as the Director of Fiscal Risk Management

of the Ministry of Finance from 2006 to 2008, Senior Advisor at the World Bank in Washington D.C., U.S. from 2004 to 2006,

Division Head in Secretariat General of the Ministry of Finance from 2002 to 2004, Head of the Assets Monitoring Division of

the Indonesian Banking Restructuring Agency from 2000 to 2002, Division Head for Financial Service of the Legal Bureau ofthe Ministry of Finance from 1998 to 2000, Deputy Director for Privatization of Directorate General State-Owned Enterprise

of the Ministry of Finance from 1997 to 1998, Head of Section of the Legal Bureau of the Ministry of Finance from 1994 to

1997 and Head of Secretariat for Privatization Committee of Ministry of Finance from 1994 to 1997. Mr. Silaban received

a law degree from the University of Indonesia in 1989 and a LL.M. degree from the Georgetown University Law Center,

Washington D.C. in the United States, in 1993.

Dr. Nasser Mohammed Marafih has been a Commissioner since August 2008 and is also the Chairman of our Remuneration

and Budget Committee. Dr. Marafih began his career at Qtel in 1992 as an expert advisor from the University of Qatar and

was subsequently appointed as the Director of Strategic Planning and Development in 1994 and the Chief Executive Officer

in 2002. He helped guide Qtel through its transformation program and the restructuring of its business units and corporate

centers. He played a key role in Qtels acquisition of the Kuwait-based Wataniya in 2007, a strategic deal with AT&T to gain

an equity stake in NavLink. Dr. Marafih holds a Bachelor of Science degree in Electrical Engineering, a Master of Science and a

Ph.D. in Communication Engineering, all from George Washington University in the United States. Dr. Marafih has participated

in a number of high level government committees in Qatar and is a member of the Board of Directors of a number of Qtel

subsidiaries. Dr. Marafih also served as a lecturer and assistant professor in the Electrical Engineering Department of the

University of Qatar. He has been a member of the Institute of Electrical and Electronics Engineers Inc. for over ten years.

Richard Farnsworth Seney has been a Commissioner since June 2009. Mr. Seney has been Chief Operating Officer of Qtel

International (QI) since 2007 to the present, President and Chief Executive Officer of MCT Corp. (including predecessors)

from 1992 to 2007, Executive Vice President and General Manager of MCT Investors, L.P. from 1987 to 2002, and Executive

Vice President and Chief Financial Officer of Charisma Communications Corporation from 1985 to 1992. Mr. Seney received a

Bachelor degree in Commerce from the University of Virginia McIntire School of Commerce.

Sheikh Abdulla Mohammed S.A Al Thani

Rachmat Gobel

Rionald Silaban

Dr. Nasser Mohammed Marafih

Richard Farnsworth Seney


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OF COMMISSIONERS

Soeprapto S.IP has been an Independent Commissioner and a member of our Audit Committee since June 2005. In the past,

Mr. Soeprapto has held several positions, including as Assistant Personnel to the Army Chief of Staff of the Republic of Indonesia

from 2000 to 2001, and Commissioner of PT Nusariau Kencana Coal from 2001 to 2003. In addition, Mr. Soeprapto has served

as a Commissioner of PT Mentari Abdi Pertiwi since 2004. Mr. Soeprapto earned a degree in Political Science from the Open

University, Jakarta and attended training at the Indonesian National Defense Institute.

Soeprapto S.I.P

George Thia Peng Heok has been an Independent Commissioner since June 2008 and was appointed as Chairman of our Audit

Committee in the same year. He became a member of our Risk Management Committee in August 2008. Mr. Thia currently serves

as Director/Consultant in Asiainc Private Limited. In the past he has held several positions including as Consultant to the SingaporeExchange from 2005 to 2008, Consultant/Director, Strategic Advisory Private Limited from 2003 to 2006, Executive Chairman,

MediaStream Limited from 1999 to 2003, Director/Consultant, Phoenix Capital Private Limited from 1995 to 1998, Executive

Chairman, Asia Matrix Limited from 1993 to 1995, Managing Director, Lum Chang Securities Private Limited from 1991 to 1993,

Managing Director, Sun Hung Kai Securities Private Limited from 1989 to 1991, Managing Director, Merrill Lynch International

Bank Limited from 1987 to 1989, Executive Director/Partner, Kay Hian Private Limited from 1985 to 1987 and Managing Director,

Morgan Grenfell (Asia) Limited from 1975 to 1985. Mr. Thia is a Certified Public Accountant and a Fellow Member of both the

Chartered Association of Certified Accountants (United Kingdom) and the Singapore Institute of Directors.

Alexander Rusli has been an Independent Commissioner since January 2010 and currently serves as member of our Remuneration

Committee. Mr. Rusli currently is a commissioner of PT Krakatau Steel (Persero), the 100% state-owned company that produces

carbon-steel products. He was formerly Expert Advisor to the Minister for State-Owned Enterprises, with oversight of 140

State-owned enterprises and more than 500 subsidiaries. Prior to such time, he was an Expert Advisor to the Minister of

Communications and Information Technology, where he was involved in the formulation of policy and regulation and inoverseeing the national state ICT infrastructure projects, a position he held under two cabinet ministers. Mr. Rusli has also acted

as a Principal Consultant for Pricewaterhouse Coopers. He holds a Doctor of Philosophy, Information Systems, Curtin University

of Technology, Australia.

Chris Kanter has been an Independent Commissioner since January 2010. Mr. Kanter currently serves as Chairman and

Founder of Sigma Sembada Group, a major turnkey contractor with transportation and logistics arms. He had been Vice

President for Investment, Telecommunication, Information-Technology, Transportation and Tourism of the Indonesian

Chamber of Commerce and Industry (KADIN Indonesia) since 1994. He has recently been reappointed for a further five yearterm to 2013 in charge of Investment and Transportation. He has also held the position of Chairman of the Executive Board

of KADIN, Indonesias Special Committee on Investment and International Trade Development, and Chairman of the Board

of Founders of the Swiss German University. Mr. Kanter has also held a number of roles in the Indonesian Government and

has been closely involved with The Policy Package for Improving Investment Climate in Indonesia and also served as member

of the Consultative Congress (MPR) of the Republic of Indonesia from 1998 to 2002. Mr. Kanter is a graduate of the Faculty

of Engineering, Trisakti University, Indonesia.

Jarman has been a Commissioner since June 2008. He currently serves as Assistant to the Deputy Minister of State-Owned

Enterprises in Energy Industry but has previously held various positions, including President Commissioner of PT Tambang

Batubara Bukit Asam (Persero) from March 2004 to May 2008, Commissioner of PT Tambang Batubara Bukit Asam (Persero)

from April 2003 to March 2004, Assistant to the Deputy Minister of State-Owned Enterprises in Strategic Industry and

Telecommunications from January 2002 to February 2006 and Commissioner of PT Industri Sandang Nusantara (Persero) from

December 2002 to now. Mr. Jarman received a Bachelor degree in Electrical Engineering from the University of Indonesia in

1981 and a Master of Science from Rensselaer Polytechnic Institute in the United States, in 1991.

George Thia Peng Heok

Alexander Rusli

Chris Kanter

Jarman


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THE REPORT -THE BOARD OF DIRECTORS REPORT

Harry Sasongko TirtotjondroPresident Director andChief Executive Officer


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THE BOARDOF DIRECTORS

REPORT

transform Indosats business focus from an emphasis

on volume to a customer-focused value-based strategy.

Such repositioning was essential if we were to break

away from the current market dynamics of rising price

competition and declining profitability, and grow our

bottom line.

Under our new customer focus, we moved to create

value as defined in terms of customer mapping. We

reorganised the company according to consumer type

profit centres, creating four Strategic Business Units

(SBUs) each concentrated on maximising profits in one

of the profit centre areas: Consumer Wireless, Consumer

Broadband, Corporate, and Infrastructure & Wholesale.

Such segmentation has enabled our teams to focus,

deliver better solutions to customers various needs, and

enhance the value that Indosat represents to customers.In addition, this structure delivered the agility and focus

of a smaller organization combined with the advantages

and resources of Indosats overall organisation.

ACTING BOLDLY TO ENHANCE VALUEThroughout Indosats forty-two years of history,

change has been a constant theme for Indosat with the

Company responding quickly and dynamically to market

transformations and evolving consumer needs. Facing

the pressures of a competitive landscape industry and

the global economic volatility, the year 2009 was no

exception. While the Indonesian telecommunications

industry managed to grow as a whole, albeit at a slower

rate than in 2008, telecommunications providers across

the board experienced at or decreased profitability amid

pricing pressures and a fierce fight for consumer loyalty.

Against this backdrop, Indosat made bold changes in

order to defend and grow our value to consumers and

ultimately, our shareholders.

With the support of our new major shareholderQtel, and drawing on Qtels broad global experience

and deep resources, we committed early in 2009 to

2009 marked a transformation inIndosats business strategy andexecution aimed to enhance thevalue of our products and servicesto consumers. As demonstrated by

improving results, we are confidentthat we are on the right track towardsincreasing shareholder value.


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Supporting the efforts of these SBUs, a company-wide

three-pronged Value Strategy was devised and put into

place at the start of 2009. Specifically, the three pillars

of our Value Strategy were: 1) innovative marketing and

products, 2) a strong distribution network, and 3) a high

quality network.

The first pillar, bringing innovative marketing and

products to the table, leveraged Indosats existing

strengths and pioneering image. We upgraded our

loyalty programs aimed at retaining our most valuable

customers, rolled out competitive product packages,

cutting edge products, and communicated marketing

messages to build up consumer awareness. In particular

we concentrated on upgrading our Data capabilities, a

sector in which we anticipate high future growth and in

which we already have a substantial lead.

The second pillar of strengthening our distribution

network involved improving our internal sales force as

well as our dealer selection process, creating alternative

product distribution channels, and optimising our existingchannels. In parallel, we pushed to improve sales through

channel management strategies such as targeted sales

programs working together with banks and other sales

partners, and strategic bundling programs.

The third pillar of our strategy, upgrading our network for

high quality, is an ongoing process as we added capacity,

expanded coverage and we strove to improve our

network quality, particularly in the areas that generate

the majority of our revenue but while also maintaining

our network quality in other areas. Important events in

improving our network quality and coverage included

the efficient and timely roll out of more BTS, bringing

the total number to 16,353; the launch of our Palapa-D

Satellite; and building out our JAKABARE Ocean Cable

Communication System, a 1,300 km fibre optic cable that

will link Java, Kalimantan, Batam, and Singapore.

As with any far-reaching transformation, the changes we

made required an adjustment period and our full year

performance metrics for 2009 consequently fell short

of those in 2008 as it took time to put our volume-to-

value strategy in place. By the second half of the year

however, the impact of strategy shift began to be felt as

indicators ticked up in 3Q and went on to show strong

growth in 4Q. We therefore feel confident that we are

on the right path and that shareholders and customers

alike will continue to reap the benefits of this shift down

the road.

RESULTS AND PERFORMANCEFor the twelve months ended 31 December 2009,

the Company recorded a slight decline of 1.4% in

consolidated operating revenue to Rp18.39 trillion,

with an EBITDA margin of 48%. Indosats cellular, fixed

data (MIDI) and fixed voice businesses contributed 76%,

15% and 9% respectively to the Companys consolidated

operating revenue.

On a year-on-year basis, cellular revenues decreased

by 1.8% to Rp13.93 trillion as a result of a clean-up of

the pre-paid subscriber records in the first half of 2009.

Fixed data revenue decreased by 0.5% while fixed voice

revenue decreased by 0.1%. Meanwhile, operating

expenses increased by 9.0% for the 12 months ended 31

December 2009 as a result of higher depreciation and

amortization charges, government levies and site and

rental costs.

Performance suffered in first half of the year as we

implemented our value-based strategy outlined above,

due to our shifting strategy focus and the shedding

of less valuable subscribers. Our efforts paid off in the

second half of the year and we ended the year on a

high note, with cellular revenues showing 5.6% positive

growth in 3Q and accelerating to 12.2% growth in 4Q,

while fixed data revenues in 4Q demonstrated evenhigher growth at 16.2%.

The increase in cellular revenues in the second half of 2009

was due to an increase in the number and profitability

of subscribers, while the increases in fixed data (MIDI)

revenues was driven largely by increased demand for

corporate data communication (Multi Protocol Label

Switching/MPLS), application services, internet services,

satellite leases and digital data network services from our

corporate customers, for which we project rising future

demand. Fixed voice revenues were essentially at, in

part due to the appreciation of the Rupiah against the

US Dollar as some revenue from incoming calls originates


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in US Dollars; we continued to expand our fixed wireless

service, reaching 82 cities as of year-end, to position this

segment for improved revenue growth in 2010.

Operationally, we were able to meet our targets in 2009

in nearly all areas, as measured by the quantitative and

qualitative Key Performance Indicators assigned to each

sector including each of the new SBUs. Our network

quality as measured by indicators such as Call Success

Rates, Attached Success Rate and SMS Delivery Rates also

showed measurable improvement. Notable achievements

included successfully obtaining a second 3G carrier, in line

with our strategy to solidify our leading market position

in wireless broadband.

Crucial to attracting new customers and retaining

existing subscribers, Indosat launched various pioneering

and innovative products in 2009 including the Indonesias

first 21 Mbps wireless data service, the first-in-the-world

launch of BlackBerry Enterprise Service On Demand,

and our AeroMobile service, which provides cellular

and SMS service on selected airlines while in the air.These initiatives were supported by customised loyalty

programs and attractively bundled packages.

To responsibly finance these initiatives while maintaining

liquidity, we took on more 17.1% debt, reaching a total

of Rp25,474.4 billion in debt. Two bond issues were held

to raise cash: the Indosat VII issue valued at Rp1.3 trillion

and the Indosat sukuk ijarah (shariah bond) IV, valued

Rp200 billion. Indicative of our strong financial position

and overall operational strength, our bond ratings

received high idAA+ and idAA(sy) rankings by ratings

agency Pefindo, and Moody further raised the rating of

our senior unsecured foreign currency bonds.

Our achievements in 2009 were recognised by 22 major

awards in 2009. Among others, Indosat was named the

Best GSM Operator in 2009 by Indonesia Cellular Awards

(ICA) 2009, Best Mobile Data Service Provider by Frost

and Sullivan, and our Matrix, Mentari and IM3 brands

won the Top Brand awards. We were named one of

the Indonesias Top 10 Most Admired Companies in the

Innovation and Corporate Reputation categories by the

Wall Street Journal Asia 200 survey. We also won awards

for our bond issues, awards for our 2008 annual report and

2008 sustainability report, awards for our HR programs,

our PR programs and personnel, our Call Centers, and

for various products and services. These awards are an

external confirmation that we are on the right track to

strengthening our organisation and delivering enhanced

value to customers.

CREATING SUSTAINABLE VALUE BY DOINGGOODIn 2009, we refined and strengthened our Good

Corporate Governance (GCG) practices as detailed later

in this report. We also complied with various domestic

and international regulatory reporting requirements,

such as Bapepam-LK (the Indonesian Capital Market

Supervisory Agency) requirements and section 404 of the

U.S. Sarbanes-Oxley Act as a dual-listed public company

on both the Indonesian Stock Exchange and the New

York Stock Exchange. In recognition of the quality of our

reporting, our 2008 Annual Report took third place in

the Bapepams annual reporting contest, in the Private

Non-Financial Listed category.

On a similar note, we refined and expanded our long

standing corporate social responsibility (CSR) programs.

These encompass a variety of programs include important

health and education programs. In 2009 we allocated

Rp13.4 billion towards activities that support our

community and our environment. I am proud to note that

Indosat won the Best CSR/Corporate Social Responsibility

award at the Indonesia Cellular Awards (ICA) 2009 and

other events for our whole hearted efforts.

FUTURE OUTLOOKThis year has been one of transformation and change

for Indosat. As we review our performance it is clear that

the company has been emboldened and re-energised

by the marked shift in strategy, organizational change

and focus.

Looking forward, we expect that macro-economic growth

will improve in 2010, giving the telecommunications

industry some breathing room, but that pricing pressures

will also intensify. Our strategy is to ride that out and

at the same time position ourselves for future long term

profit growth through innovative and improved solutions

and products for our customers.


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We continue to forecast major growth opportunities

ahead for the telecommunications industry in Indonesia,

given its growing population and rising disposable

income combined with a mobile penetration that is still

below most ASEAN regional users. Moreover, the data

segment of our business has huge untapped prospects

driven by Indonesians enthusiasm for online social

networking among other factors, not least of which

are the relatively stable current economic and political

conditions. In short, we view the telecommunications

industry in Indonesia as a long term growth industry

and Indosat intends to participate fully in that market by

creating new products, improving our service capabilities,

expanding our cellular business and fixed wireless, and

growing our wireless broadband data services across

Indonesia. As a fully integrated telecommunications

operator, we firmly believe in the strengths of our

business, our people and our ability to out-pace industry

growth, leveraging our scale and breadth of services

as the industry and consumers demand increasingly

advanced and complex solutions.

In closing, I am confident that we will be able to

successfully execute this shift, resulting in a stronger,

more driven company that is better able to compete

and deliver profit, a credit to our shareholders and to

the global visions of our Qtel parent company. Drawing

on our strengths and product leadership, we intend to

uniquely position Indosat as a company built not only to

last, but to lead.

A WORD OF THANKSWe would like to extend our thanks to all our shareholders

for their encouragement throughout 2009. It is our hope

that our relationship will continue to develop in the

years ahead as the company grows. Your insights and

support are greatly appreciated as always in helping us

evolve and facing the challenges ahead, as we strive to

realize our vision of becoming the provider of choice for

communication and information solutions in Indonesia.

We also wish to extend a heartfelt thank you to all our

employees for their contributions for the company.

On behalf of the Board of Directors, I would like to

express our sincere appreciation to our shareholders for

their continued support. In particular, we welcome Qtels

vote of confidence as expressed by its decision to become

our new majority shareholder.

We further recognize that our collective success would not

be possible without the contributions of our colleagues

and staff members, the support of our strategic partners,

and our customers trust. I would like to extend our

appreciation to all our stakeholders.

Thank you for your trust and commitment in us. We

appreciate the responsibility and trust that has been

given to us. With the Almightys blessing, we hope

to forge ahead in the coming year to reap rewards

for us all.

Harry Sasongko TirtotjondroPresident Director andChief Exective Ofcer


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LASZLO IMRE BARTA*Director and Chief Commercial Officer

HARRY SASONGKO TIRTOTJONDROPresident Directorand Chief Executive Officer

PETER WLADYSLAW KUNCEWICZDirector and Chief Financial Officer

STEPHEN EDWARD HOBBSDirector and Chief Technology Officer

* Laszlo Imre Barta was appointed as a member of the Board of Directors at the Extraordinary General ShareholdersMeeting dated January 28, 2010, effective as of May 1, 2010. He replaced Kaizad Bomi Heerjee, who was honorablydischarged effective April 30, 2010.

FADZRI SENTOSADirector and Chief Wholesale andInfrastructure Officer


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Peter Wladyslaw Kuncewicz has been a Director and our Chief Financial Officer since September 2009. Mr. Kuncewicz has 30years experience in finance across multiple international markets, 10 of them in the telecommunications sector. From 2006 to2009, Mr. Kuncewicz was the Chief Financial Officer of Telenor Pakistan, the No. 2 player in an active market of five players inPakistan. From 1998 to 2006, he was the Chief Financial Officer of Star Foods SA, an FMCG Company, and from 1996 to 1997,he was the Finance Director at United Biscuits Poland. He also worked in finance procurement and IT roles at Batelco, Bahrainfrom 1996 to 1998. He received a Bachelor degree in Biology from the University of Sussex, England, and a Master of Sciencedegree in Business Planning and Finance from University of Salford, England. He is also a member of the Chartered Institute ofManagement Accountants of the United Kingdom.

Peter Wladyslaw Kuncewicz

BOARD OF DIRECTORSPROFILES

Stephen Edward Hobbs has been a Director and Chief Technology Officer since June 2009. Mr. Hobbs has assumed the roleof CTO for Asiacell in Iraq for the first nine months of its operation, following its CPA license award between 2003 and 2004.Mr. Hobbs has been previously engaged in independent consulting practice, supporting key clients such as Virgin Management,United Kingdom , C&W, United Kingdom, Wataniya Telecom (Kuwait) and Sapient (United Kingdom/United States), supportingthe areas of technology, development and strategy. Mr. Hobbs has experience as Chief Engineer of C&W Mobile, CTO Asia,CTO Global Mobile, Vice President Mobile and ASP services (C&W Global) until 2001, as a pioneer in small antenna satellitesystems and an expert in security programs in wireless environments. He has over three decades of international managementexperience in the telecommunications and technology industries across Europe and Asia. Mr. Hobbs was a Petty Officer Radio

Electrician (Royal Navy) at Cable & Wireless Telecommunication.

Stephen Edward Hobbs

Laszlo Imre Barta has been a Director and Chief Commercial Officer since May 1, 2010. He was formerly the Deputy ChiefMarketing Officer of Grameenphone in Bangladesh. He spent more than four years at Grameenphone in Bangladesh, duringwhich time he developed and led the rollout of the business market strategy, established and led the SME department, andserved as Sales Director. Prior to being seconded to Grameenphone by the Telenor Group, Mr. Barta was at Pannon GSM inHungary, where he headed the Corporate Clients department. Before Pannon, Mr. Barta was with Ericsson Hungary wherehe led the sale of handsets and accessories to local Hungarian mobile operators. He joined Ericsson from Philip Morris,where he started his career in Sales. Mr. Barta has degrees in Accounting and Landscape Architecture & Engineering fromHungarian universities.

Laszlo Imre Barta

Fadzri Sentosa has been a Director since June 2007 and a Director and chief wholesale and infrstructure officer since June 2009.Currently, Mr. Sentosa is a member of the Board of Commissioners of PT Aplikanusa Lintasarta. Mr. Sentosa has previouslyheld various positions with us, including as member of the Board of Commissioners of PT Indosat Mega Media from 2005to 2009, Group Head of National Card and Channel Management from 2006 to 2007, Senior Vice President of Commerce,Jabotabek Region from 2005 to 2006 and Senior Vice President of Cellular Sales from 2003 to 2004, member of the Board ofDirectors of Satelindo in 2003 and a member of the Board of Director of IM3 from 2002 to 2003. Mr. Sentosa received a Masterdegree in International Business Management from the University of Technology, Sydney in 2001 and a Bachelor degree inTelecommunications Engineering from the Bandung Institute of Technology in 1986.

Fadzri Sentosa

Harry Sasongko Tirtotjondro has been the President Director and Chief Executive Officer since August 2009. Mr. Sasongko haspreviously held the positions of President Director and Chief Executive Officer of GE Consumer Finance from 2005 to 2009,where he was recognized as one of Indonesias top 10 best CEOs in 2008 by the SWA Magazine & Synovate awards. From 1998to 2005, he was a member of the Lippo Group, where he served as Managing Director of the Matahari Retail & Lippo Bank. Hewas formerly the Managing Director of the Consumer Banking of PT Bank Tiara Asia from 1995 to 1998, and was Director of PTCiticorp Finance and Citibank, N.A. in 1998. Mr. Sasongko earned a Bachelor in Civil Engineering degree from Bandung Instituteof Technology Indonesia, a Master of Science degree from the Ohio State University in the United States, and is a Chartered

Financial Consultant (ChFC), obtained from the Singapore College of Insurance / American College in the United States.

Harry Sasongko Tirtotjondro


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THE REPORT -INFORMATION ON THE COMPANY

INFORMATION

ON THE COMPANYThe Information contained in this section is extracted from theCompanys 2009 Annual Report on Form 20-F.


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HISTORY AND DEVELOPMENT OF THECOMPANY

PT Indosat Tbk was established by the Government on

November 10, 1967 as a foreign investment company

to provide international telecommunications services

in Indonesia and began commercial operations in

September 1969 to build, transfer and operate an

International Telecommunications Satellite Organization

(Intelsat) earth station in Indonesia to access IntelsatsIndian Ocean Region satellites for a period of 20 years. In

2001, as part of the Governments initiative to restructure

the telecommunications industry, we entered into an

agreement with Telkom to eliminate our respective

cross-shareholdings in several operating subsidiaries,

including:

our acquisition of Telkoms 22.5% ownership interest

in Satelindo (at the time the second largest cellular

operator in Indonesia);

Telkoms acquisition of our 35.0% ownership interest

in Telkomsel; and

our acquisition of Telkoms 37.2% ownership interest in

Lintasarta and the purchase of Lintasartas convertible

bonds held by Telkom.

Subsequent to the agreement with Telkom, we completed

the acquisition of the remaining minority interests in

Satelindo in June 2002. Since entering the Indonesian

cellular market through our acquisition of Satelindo and

establishment of IM3 and the subsequent integration of

such companies in 2003, cellular services have become

the largest contributor to our operating revenues.

In August 2002, we entered the domestic fixed line

telecommunications sector by obtaining a license to

provide local fixed network services in the Jakarta and

Surabaya areas.

In 2002, the Government divested 517.5 million shares,

representing approximately 50.0% of our outstanding

Series B shares at the time, in two stages. In May 2002,

the Government sold 8.1% of our outstanding shares

through an accelerated global tender. In December 2002,the Government divested 41.9% of our outstanding Series

B shares to a former subsidiary of STT Communications

Ltd. (STT).

In June 2008, Qtel acquired STTs interest in us, triggering

a mandatory tender offer by Qtel to acquire up to

1,314,466,775 Series B Shares, representing approximately

24.19% of our total issued and outstanding Series B

Shares, at a purchase price of the U.S. Dollar equivalent of

Rp369,400 per ADS and Rp7,388 per Series B Share. Qtel

is a publicly held corporation which is majority-owned

by the State of Qatar and its affiliated entities. Qtel is

organized under the laws of the State of Qatar with

shares listed on the Doha Securities Market, as well as

the Abu Dhabi Securities Market, and Global Depository

Receipts traded on the London Stock Exchange. Qtel is

Qatars exclusive telecommunications provider and one

of the largest public companies in that country and

provides a wide range of telecommunications products,

including, among others, national and international GSM

mobile services, Internet and cable television services.

As of December 31, 2009, the Government owned

14.29% of our outstanding shares, including 1 Series

A share, and Qtel Asia owned approximately 65.0% of

our outstanding Series B shares. Qtel Asia is owned by

Qtel. The remaining 20.71% of our outstanding Series B

shares is owned by public shareholders as of December

31, 2009.

For a description of our principal capital expenditures

since January 1, 2007 and principal capital expenditures

currently in progress, including the amount invested

and method of financing, see Chapter Management

Discussion and Analysis.

Our registered office is located at Indosat Building, JalanMedan Merdeka Barat, No. 21, Jakarta 10110, Republic

of Indonesia, and our telephone number is +62 21 -

3869615. Our corporate website may be accessed through

the URL http://www.indosat.com. The information found

on our corporate website does not, however, form

part of this annual report and is not incorporated by

reference herein. Our agent for service of process in the

United States with respect to our ADSs is Bank of New

York Mellon, Depository Receipt Division, 101 Barclay

Street, New York, New York 10286, U.S.A.


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BUSINESS OVERVIEW

We are a fully integrated Indonesian telecommunications

network and service provider and we offer a

full complement of national and international

telecommunications services in Indonesia. We are

the second-largest cellular operator, as measured by

number of cellular subscribers, and a leading provider

of international long-distance services in Indonesia. We

also provide MIDI services to Indonesian and regionalcorporate and retail customers. We also provide MIDI

services to Indonesian and regional corporate and

indosatar09 english completed

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