Indosat AR10 ENG

2010 Annual Report

dIsclaIMer This is the Annual Report for the year ended December 31, 2010 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 also 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 applicable 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: investor@indosat. com. We are committed to communicating 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.

Introduction

Business & Services Review

Operational Review

Corporate Governance

Risk Factors

Management Discussion & Analysis

Financial Report

Corporate Data

Indosats transformation continued in 2010 as we laid the foundation groundwork that will enable us to unleash our full potential. As we focused on CUSTOMERS, moved into new GROWTH MARKET segments, instilled a sense of new direction and purpose in OUR PEOPLE, improved returns from OUR ASSETS, and kept pace with the latest TECHNOLOGY, Indosat has became a much stronger secondposition player in the cellular market in Indonesia, and well along the first steps in its journey to always outperform in our endeavors.

INDOSAT 2010 Annual Report

1

CONTENTS

INTRODUCTION

16 17 18 20 22 24 26 28 30 34 38

Indosat in Brief Vision, Mission, and Values Financial Highlights Operational Highlights Stock and Bond Highlights Awards and Achievements 2010 Event Highlights 2010 Our Products and Brands Report from the Board of Commissioners Board of Commissioners Profile Report from the Board of Directors Board of Directors Profile

01BUSINESS & SERVICES REVIEW

42

46 50 54

Cellular Services Multimedia, Data Communication & Internet (MIDI) Services Fixed Telecommunication Services

4458 Human Resources Network and Information Technology

OPERATIONAL REVIEW

62

56CORPORATE GOVERNANCE68 Corporate Governance 89 Audit Committee Report 91 Budget Committee Report 92 Risk Management Committee Report

662INDOSAT 2010 Annual Report

93 Remuneration Committee Report

Introduction


Operational Review


Risk Factors


Financial Report

Corporate Data

RISK FACTORS

96

Risks Relating to Indonesia

101 Risks Relating to Our Business 106 Risks Relating to Cellular Services Business 109 Risks Relating to Fixed Data (MIDI) Services Business 110 Risks Relating to Fixed Telecommunications Services Business

94MANAGEMENT DISCUSSION & ANALYSIS114 Management Discussion & Analysis

112FINANCIAL REPORTS151 Financial Statement 281 Annual Report on Form 20-F 419 International Financial Reporting Standard (IFRS)

149CORPORATE DATAIn 2010 Indosat introduced customer loyalty program for cellular subscribers which known as Senyum Setia Indosat program.

545Bapepam-LK Regulation No.X.K.6 Cross Reference

546 548 550 551

Shareholders Information Organizational Structure Member of Audit Committee Profile Subsidiary Companies

552INDOSAT 2010 Annual Report

3

FOCUSING ON OUR CUSTOMERSFocus on customers is key to Indosats long-term sustainable growth strategy. In the transformation into a customer-centric organization, Indosat in 2010 has completed the final stages of a new business model with four Strategic Business Unit (SBU), each concentrating on meeting the needs of a different market segment.

Consumer Wireless SBUServing the needs of the retail market segment for cellular services in both prepaid and postpaid service plans.

Consumer Broadband SBUServing the needs of the retail market segment for leading edge mobile broadband services.

Corporate Solutions SBUServing the needs of corporate customers for integrated solutions in information and communications services such as high-speed international leased circuits, high-speed domestic leased circuits, IP-VPN, Frame Relay and Internet services.

Wholesale & Infrastructure SBUServing the needs of wholesale customers for International Direct Dialing (IDD) services, roaming, hubbing, satellite transponder lease, tower lease, and submarine cable capacity lease.

4


Introduction


Operational Review


Risk Factors


Financial Report

Corporate Data

+6.1+172.5%Growth of International High Speed Leased Circuit

%

Growth of Total IDD Traffic

Growth of Satelite Transponder Lease Service

+20.3

%

+34.3

%

Growth of Cellular Subscribers Base


5

IDENTIFYING OPPORTUNITIES IN NEW GROWTH MARKETSOur adoption of a balanced-value strategy and our focus on customers through innovative services have enabled us to maintain our market share for cellular services and improve our consolidated revenue stream. We continue to gain insights into customers needs and to identify market segments with high-growth potential, where we can create solutions in communications and information to meet current or anticipated demands.Consumer Wireless InnovationThefirstcellularproviderinIndonesiathatoffersAndroid-basedservicesincooperation with several distributors of leading Android handsets in the country ExpandBlackBerryservices-increaselinkcapacitytoResearchinMotionserversto100 Mbps dual-link, the largest in Indonesia to date Providingi-klanasintegratedSelfServiceMobileAdvertisingPortalforthebenefitof advertising agencies, advertisers and subscribers. IndosatestablishedtheIndosatInnovationLabattheIndosatBuildinginJakarta, intended to facilitate local application developers, especially the young innovators, to develop applications for existing cellular systems in the market, with possible commercial use by Indosat.

Consumer Broadband InnovationBroadband-on-RequestforpostpaidMatrixsubscribersprovidingoptionsofdaily,weekly andmonthlyquotapackagesaswellasunlimitedpackages.

Corporate Solutions InnovationDataCenter/DisasterRecoveryCenterandmanagedservicessolutions. BlackBerryEnterpriseSolution(BES)OnDemandHostedthatcanbeaccesseddirectlyby SMSfromtheusersMatrix,Mentari,IM3orStarOnecardswithoutrequiringexpensive servers or software

6


Introduction


Operational Review


Risk Factors


Financial Report

Corporate Data

+12.1

+5.2

%

%

Consolidated Total Revenue

Revenue Cellular

+2.0

%

EBITDA Margin


7

BRINGING OUT THE BEST IN OUR PEOPLEThepeopleofIndosataretransformingintohighquality professionals with integrity that are capable of managing change to achieve success in business. Our people now have a new sense of purpose and direction as defined in our new vision statement. They know where we are going and how to get there, together.

Indosat Transformation Awareness

An internal programs designed to reinforce employee motivation and readiness in dealing with the various aspects of our ongoing corporate transformation, including a series of IndosatChangeLeaderworkshopstoprovideseniormanagementandmanageriallevel staffwiththenecessaryleadershipqualitiestoleadthedrivefortransformationattheir respective units.

Operational Excellence

A Program Management Office (PMO) was set up to prepare the foundation and drive continuous operational excellence initiatives that will eventually lead to a cost conscious and high performance culture within the organization. An Operational Excellence Award competition was held in 2010 to invite ideas from employees for improvements in our operational processes and procedures.

Indosat Financial Awareness

The aim of Indosat Financial Awarness (IFA) program is to help develop a performance based culture within the organization, whereby all employees will have a deeper understanding of the Companys financial performance and a sense of direct relation between their daily duties and the Companys overall performance.

Employee Productivity

Indosat Transformation Program has already shown concrete results, including a marked increase in employee productivity level in 2010 compared to the previous year, as measured by dividing total revenues with number of employees.

Code of Ethics

A formal document of Company Code of Ethics Guidelines was issued, and each individual employee, including the Board of Directors, has signed his or her own personal copy as a pledge to abide by the Code of Ethics.8INDOSAT 2010 Annual Report

Introduction


Operational Review


Risk Factors


Financial Report

Corporate Data

Growth of EBITDA supported by Operational Excellence

+9.7

+11.96

%

%

Increase of Employee Productivity

Indosat Financial Awareness Training for All Employees

1 Day


9

OPTIMIZING RETURNS FROM OUR DIVERSE ASSETSAs a fully integrated telecommunications network and service provider in Indonesia, Indosat possesses considerable resources in the form of its telecommunications tower and fiber optics backbone networks as well as satellite system assets. Optimizing returns on these assets is a sound strategy to improve profitability.

Revenue from Shared Towers Rp 252 billionIndosat has set up a dedicated unit in 2010 to run its tower business, which as at year-end 2010 has booked a number of tower sharing contracts to third-party operators as well as our subsidiaries, involving 3,019 towers and generated revenues of Rp 252 billion. The initiative was taken in compliance with recent regulations by the Government in regards telecommunications tower sharing by telecommunication service providers. Indosat is currently formulating company policies in regards tower network expansion.

10


Introduction

Business & Report Services Review

Operational Review


Risk Factors


Financial Report

Corporate Data

Rp 252Billions Tower Sharing Revenue

3,019Total Tower Shared


11

PIONEERING THE USE OF LEADING-EDGE TECHNOLOGYSince back in the mid-1970s, when Indosat operated the countrys first international communications satellite system, technology has been part of the existence of Indosat. In keeping pace with the rapid advances in technology, Indosat intends to secure an edge over the competition into the future.

42 Mbps Downlink 5.8 Mbps UplinkIn 2010, Indosat become the first operator in Asia, and the second in the world, to launch a commercial mobile broadband access service using Dual-Carrier High Speed Packet Access (HSPA)+ technology.

Zinc-Air BatteryIndosat has completed the final preparations for the deployment of high-capacity, rechargeable air-breathing zinc batteries in some of its Base Transceiver Station (BTS), with the advantages of being more energy-efficient and environmentally friendly compared with conventional lead-acid batteries.

Network ModernizationIndosat is gradually phasing-out its legacy base station network with the latest in Software DefinedRadio(SDR)/SingleRAN(radioaccessnetwork)productthatofferssavingsin power consumption, transmission expense, footprint and maintenance costs when compared with conventional BTS solutions.

Indosat Innovation LabIndosatInnovationLabwascreatedtopromotecreativityandinnovationsinwireless technology among the nations young application developers. As a place for experiments and discussions in developing practical applications for a variety of wireless operating platformscurrentlyinthemarket,theIndosatInnovationLabislocatedatIndosatBuilding inJakarta,withplanstoestablishsimilarfacitiesinBandungandYogyakarta.

12


Introduction


Operational Review


Risk Factors


Financial Report

Corporate Data

42 MbpsDC HSPA+

Network Modernization in Jabodetabek, Sumatera and Kalimantan

Launching of Indosat Innovation Lab

Pioneers In Deploying Zinc Air Battery


13

CORPORATE SOCIAL RESPONSIBILITY

Realizing Our CommitmentIndosat takes seriously its commitments as a sustainable responsible business. We are committed to uphold the highest standards in corporate governance practices. We are committed to abide by the 10 Principles of the UN Global Compact. And we are committed to contribute positively to communities and the environment.

Indosat continues to actively contribute to the betterment of communities and the environment in Indonesia. Under the umbrella program of Satukan Cinta Negeri, Indosat engaged in a variety of initiatives that focus on areas of education, healthcare, environment preservation, and philanthropy. Ongoing initiatives such as Mobile Clinic, Indosat Wireless Innovation Contest (IWIC) or the Bio-Fuel BTS project are integrated within our business

14


Introduction


Operational Review


Risk Factors


Financial Report

Corporate Data

and operational activities and designed to bring tangible benefits and long-term value creation in their respective area of interest. In 2010, Indosat spent a total of Rp 13 billion on these and other programs. Community involvement and environment programs, however, are only part of Indosats corporate social responsibility (CSR) approach to sustainability. In line with its CSR goals of to grow

in compliance with laws and regulations and to care for the community, Indosat intends to ensure responsible company activities that encourage positive impact on all its stakeholders, including shareholders, customers, employees, business partners, communities and the environment. Our comprehensive activities in this regards is presented separately in our 2010 Sustainability Report, Realizing Our Commitment.


15

INDOSAT IN BRIEFIndosat was founded as a Foreign Capital Company in Indonesia, the first to provide international telecommunications services via international satellite. Indosat has grown and became the first international telecommunications company tobeacquiredandwholyownedbythe Government of Indonesia. Became a public company with share listing on the Indonesia Stock Exchange and the NewYorkStockExchange.TheGovernment of Indonesia and public have 65% and 35% shareownership, respectively. AcquiredmajorityshareholdinginSatelindo, a cellular and IDD operator in Indonesia. Established PT Indosat MultiMedia Mobile (IM3), a pioneer of GPRS and multimedia services in Indonesia. The Government of Indonesia sold a portion ofitsshareholdingequatingto8.10%oftotal shares in Indosat to the public and 41.94% of total shares to Singapore Technologies TelemediaPte.Ltd(STT).TheGovernmentof Indonesia has 15.00% shares, STT 41.94% and the remaining 43.06% held by the public. Merged with its three subsidiary companies, Satelindo, IM3 and Bimagraha, becoming a major cellular operator in Indonesia. Acquireda3Glicenseandintroduced3.5G servicesinJakartaandSurabaya. Indosat shares were indirectly owned by Qatar Telecom (Qtel) Q.S.C. (Qtel) through IndonesiaCommunicationsLimited(ICLM)and IndonesiaCommunicationsPte.Ltd(ICLS)in theamountof40.81%.TheGovernmentof Indonesia and the public respectively owned the remaining 14.29% and 44.90%. Qtelacquired24.19%seriesBsharesfrom the public, becoming the majority shareholder of Indosat with 65%.Therefore, Indosat was owned by Qatar Telecom (Qtel) Q.S.C. (Qtel) throughQatarTelecom(QtelAsia)Pte.Ltd (65%), the Government of Indonesia (14.29%) and the public (20.71%). Indosat was granted a second license for 3G frequencybytheMinistryofCommunication and Information Technology, and its subsidiary, IM2, also won the government WiMAX license tender.

1967 1980 1994 2001 2002 2003 2006 2008

2010In 2010, Indosat completed the groundworks for a fundamental transformation into a customer-centric, highperformance organization, which included an organization restructuring, cellular network modernization and expansion, and initiatives in operational excellence.

2009

16


Introduction


Operational Review


Risk Factors


Financial Report

Corporate Data

VISION, MISSION, AND VALUES

VisionTo be the customers preferred choice for all information and communication needs

Mission Toprovideanddevelopinnovativeandhighqualityproducts,servicesand solutions which offer the best value to our customers. Tocontinuouslyenhanceshareholdersvalue. Toprovideabetterqualityoflifeforourstakeholders.

ValuesINTEGRITY TEAMWORK EXCELLENCE PARTNERSHIP CUSTOMERFOCUS


17

FINANCIAL HIGHLIGHTS

(in billion Rupiah) 2010INCOME STATEMENT Operating Revenues Operating Expenses Operating Income Other Income (Expenses) Net EquityinNetIncome(Loss)ofAssociatedCompanies Income before Income Tax Income Tax Expenses Net Income before Minority Interest in Net Income of Subsidiaries Minority Interest in Net Income of Subsidiaries Net Income Shares Outstanding (in million of shares) Basic Earnings per Share (in Rp full amount) EBITDA BALANCE SHEET Total Assets PropertyandEquipmentNet Working Capital TotalLiabilities Minority Interest TotalStockholdersEquity OPERATING RATIOS (%) Operating Income to Operating Revenues OperatingIncometoStockholdersEquity Operating Income to Total Assets EBITDA Margin Net Profit Margin ReturnonEquity Return on Assets FINANCIAL RATIOS (%) Current Ratio DebttoEquityRatio TotalLiabilitiestoTotalAssets DIVIDEND PER SHARE (Rp) Final Payment Date 137.86 02/08/2010 172.85 22/7/2009 187.90 15/7/2008 129.75 13/7/2007 149.32 8/8/2006 51.55 133.79 65.47 54.62 141.14 66.77 90.79 124.69 65.76 92.86 99.84 62.83 83.28 74.74 55.00 17.55 19.46 6.58 48.62 3.27 3.63 1.23 17.07 17.89 5.84 46.61 7.96 8.34 2.72 24.64 27.19 9.16 48.35 9.78 10.79 3.63 26.78 27.32 9.98 51.46 12.10 12.34 4.51 27.20 22.36 9.93 56.43 11.28 9.28 4.12 52,818.2 43,571.0 (5,788.0) 34,581.7 385.8 17,850.7 55,041.5 44,428.8 (5,931.6) 36,753.2 330.6 17,957.7 51,693.3 38,394.1 (983.5) 33,994.8 288.9 17,409.6 45,305.1 30,572.8 (832.5) 28,463.0 297.4 16,544.7 34,228.7 24,918.6 (1,137.8) 18,826.3 200.6 15,201.8 19,796.5 16,322.6 3,473.9 (2,392.1) 0.0 1,081.8 (357.8) 724.0 (76.8) 647.2 5,433.9 119.1 9,625.9 18,824.2 15,611.2 3,213.0 (981.0) 0.0 2,232.0 (677.3) 1,554.7 (56.5) 1,498.2 5,433.9 275.7 8,774.4 19,211.5 14,478.2 4,733.3 (2,408.2) 0.0 2,325.1 (419.8) 1,905.3 (26.8) 1,878.5 5,433.9 345.7 9,289.2 16,873.8 12,354.2 4,519.6 (1,590.0) 0.0 2,929.6 (859.5) 2,070.1 (28.1) 2,042.0 5,433.9 375.8 8,682.8 12,496.3 9,097.6 3,398.7 (1,375.8) (0.2) 2,022.7 (576.1) 1,446.6 (36.5) 1,410.1 5,404.7 260.9 7,027.2

2009

2008

2007

2006

18


Introduction


Operational Review


Risk Factors


Financial Report

Corporate Data

Operating Revenue (Rp billion)19,211.5 16,873.8 18,824.2

Operating Expenses19,796.5

(Rp billion)16,322.615,611.2 14,478.2 12,354.2

12,496.3 9,097.6

06 Operating Income (Rp billion)

07

08

09

10

06

07

08

09

10

Income before Income Tax (Rp billion)4,733.3 4,519.6 2,929.6

3,473.93,398.7 3,213.0 2,022.7

2,325.1 2,232.0

1,081.8

06

07

08

09

10 06 07

08

09

10

Net Income (Rp billion)

Basic Earnings per Shares (Rp full amount)375.8 345.7 2,042.0 1,878.5 275.7 1,498.2 1,410.1 260.9

647.2

119.1

06

07

08

09

10 06 07 08

09

10


19

OPERATIONAL HIGHLIGHTS

UnitCELLULAR Prepaid Subscribers Postpaid Subscribers Total Subscribers ARPU Prepaid ARPU Postpaid ARPU Blended FIXED WIRELESS Prepaid Subscribers Postpaid Subscribers Total Subscribers ARPU Prepaid ARPU Postpaid ARPU Blended IDD Outgoing Traffic Incoming Traffic Total Traffic Incoming/OutgoingRatio MIDI Wholesale InternationalHighSpeedLeasedCircuit DomesticHighSpeedLeasedCircuit Transponder Frame Relay Internet IPVPN Lintasarta HighSpeedLeasedLineSDL Frame Relay VSAT IPVPN IM2 Internet Dial Up Internet Dedicated IPVPN Employees (permanent and non-permanent incl. subsidiaries employees) Galeri Indosat Griya Indosat KiosLayanan&PenjualanIndosat(KILAT) e-Galeri user link link person service centre service centre service centre service centre 64Kbps 64Kbps 64Kbps 64Kbps Mbps Mbps Mhz Mbps Mbps Mbps minutes minutes minutes subscriber subscriber subscriber Rp Rp Rp subscriber subscriber subscriber Rp Rp Rp

201043,170,139 1,102,178 44,272,317 31,493 234,037 34,712

200931,163,859 1,803,342 32,967,201 33,448 175,327 37,664

% Change38.5% -38.9% 34.3% -5.8% 33.5% -7.8%

489,007 61,123 550,130 14,719 45,613 17,730

525,391 68,742 594,133 23,207 69,160 28,402

-6.9% -11.1% -7.4% -36.6% -34.0% -37.6%

463,037,201 1,723,855,406 2,186,892,608 3.7

502,031,713 1,558,463,354 2,060,495,067 3.0

-7.8% 10.6% 6.1% 24.1%

13,614 15,678 707 10 3,383 1,396 60,517 18,012 15,634 47,523 8,068 758 396 6,694 169 60 13 3

5,054 11,712 738 22 5,754 1,030 64,087 25,173 6,602 31,558 9,291 884 447 7,126 171 61 -

169.4% 33.9% -4.2% -54.5% -41.2% 35.5% -5.6% -28.4% 136.8% 50.6% -13.2% -14.3% -11.4% -6.1% -1.2% -1.6% N/A N/A

20


Introduction


Operational Review


Risk Factors


Financial Report

Corporate Data

Total Cellular Subscribers (million)44.3

Cellular Subscribers Composition (million)44.343.2

Blended ARPU Cellular (Rp thousand)234.0 Prepaid Postpaid

36.5 33.0 31.2 24.5

33.0

175.3

Total

16.7

1.8

1.1

33.4

37.7 31.5

34.7

06

07

08

09

102009

2010 2009

2010

Total Fixed Wireless Subscribers761,589

Fixed Wireless Subscribers Composition594,133525,391 489,007

Blended ARPU Fixed Wireless (Rp thousand)Prepaid Postpaid Total 45.6

550,130

69.2

627,934

594,133

550,130

378,727 23.2

28.4 17.714.7 61,123 68,742

06

07

08

09

102009

2010

2009

2010

Incoming/Outgoing Ratio (million)3.7

IDD Traffic (million Minutes)2,186.9 2,060.5

3.0

1,723.9 1,558.5

502

463.0 Incoming Traffic Outgoing Traffic Total Traffic

09

10

2009

2010


21

STOCK AND BOND HIGHLIGHTSSTOCK HIGHLIGHTSStock Performance New York Stock Exchange (US$/ADR) 2010 Highest Lowest YearEnd BasicEarningsperADR/Share DividendperShare/ADR Dividend Payout Ratio (%) (%)DividendYield DividendperADR/Share Year-EndADR/SharePrice P/ERatio Year-EndperADR/SharePrice EarningsperADR/Share Quarterly Stock Price on the NYSE (US$/ADR) Period First Quarter Second Quarter Third Quarter Fourth Quarter Quarterly Stock Price on the IDX (Rp/ADR) Period First Quarter Second Quarter Third Quarter Fourth Quarter Bond Highlights DescriptionSecond Indosat Bonds Third Indosat Bonds Fourth Indosat Bonds Fifth Indosat Bonds Sixth Indosat Bonds Seventh Indosat Bonds Indosat Syariah Ijarah Bonds Indosat Sukuk Ijarah II Indosat Sukuk Ijarah III Indosat Sukuk Ijarah IV Guaranteed Notes due 2010

Indonesia Stock Exchange (Rp/Share) 2010 6,300 4,400 5,400 119.10 2009 5,950 4,200 4,725 275.72 137.86 50

2009 30.37 16.74 25.11 1.47 0.73 50

35.58 24.22 29.12 0.66

2.91

2.91

44.12x

17.08x

45.34x

17.13x

2010 Highest 33.96 34.19 30.46 35.58 Lowest 25.38 25.97 24.22 28.01 Highest 26.25 26.65 28.35 30.37

2009 Lowest 16.74 20.99 24.29 24.28

Volume 2010 (ADS) Highest 95,984 117,276 214,629 80,143 Lowest 1,200 400 400 407

2010 Highest 6,200 6,150 5,500 6,300 Lowest 4,700 4,775 4,400 5,100 Highest 5,900 5,950 5,700 5,700

2009 Lowest 4,200 4,850 5,050 4,600

Volume 2010 (LOT) Highest 52,529 13,851 44,367 19,341 Lowest 283 598 643 886

Release Date06-Nov-02 22-Oct-03 21-Jun-05 29-May-07 09-Apr-08 08-Dec-09 21-Jun-05 29-May-07 09-Apr-08 08-Dec-09 05-Nov-03

Stock ExchangeSurabaya Stock Exchange* Surabaya Stock Exchange* Surabaya Stock Exchange* Surabaya Stock Exchange*

Total

Interest Rate

Maturity06-Nov-32 Fully Repaid 22-Oct-10 21-Jun-11 29-May-14 29-May-17 09-Apr-13 09-Apr-15 08-Dec-14 08-Dec-16 21-Jun-11 29-May-14 09-Apr-13 08-Dec-14 08-Dec-16 Fully Repaid 10-Aug-10

Guaranteed Notes due 2012 Guaranteed Notes due 2020

22-Jun-05 29-Jul-10

Series B : Rp200.0 billion 16.00% per annum Series B : Rp640.0 billion 12.88%perannum Rp815.0billion 12.00% per annum Series A : Rp1,230.0 billion 10.20% per annum Series B : Rp1,370.0 billion 10.65% per annum Indonesia Stock Echange Series A : Rp760.0 billion 10.25% per annum Series B : Rp320.0 billion 10.80%perannum Indonesia Stock Echange Series A : Rp700.0 billion 11.25% per annum Series B : Rp600.0 billion 11.75% per annum Surabaya Stock Exchange* Rp285.0billion Rp34.2 billion per annum Surabaya Stock Exchange* Rp400.0 billion Rp40.8billionperannum Indonesia Stock Echange Rp570.0 billion Rp58.4billionperannum Indonesia Stock Echange SeriesA:Rp28.0billion Ijarah Return Rp3.2 billion per annum Series B : Rp172.0 billion Ijarah Return Rp20.2 billion per annum LuxembourgStockExchangeand US$234.7 million 7.75% per annum Singapore Exchange Securities TradingLimited Singapore Exchange Securities US$109.4 million 7.13% per annum TradingLimited Singapore Exchange Securities US$650.0 million 7.38%perannum TradingLimited

Fully Repaid 2-Sep-10 29-Jul-20

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

22


Introduction


Operational Review


Risk Factors


Financial Report

Corporate Data

STOCK PERFORMANCEIndonesia Stock Exchange (ISAT) Period:1January31December201010,000 20,000

8,000

15,000

6,000Volume Price

10,000 4,000 5,000

2,000

0

January

February

March

April

Mei

June

July

August

September

October

November

December

0

New York Stock Exchange (IIT) Period:1January31December201035.00 30.00 25.00 20.00Price

35,000 30,000 25,000 20,000 15,000 10,000 5,000 0Volume

15.00 10.00 5.00 0

January

February

March

April

Mei

June

July

August

September

October

November

December

Shareholders Composition (as of 31 December 2010)QATAR TELECOM (QTEL ASIA) PTE. LTD.

65.00%

REPUBLIC OF INDONESIA

14.29%

PUBLIC/FREE FLOAT

15.60%

SKAGEN AS 5.11%


23

AWARDS AND ACHIEVEMENTS 2010

The many accolades that we received serve as a testimony ofourstrongshowingin2010inregardsthequalityofour services, our organization and our business practices. CUSTOMER SERVICECall Center Award for Service Excellence for Telecommunication Industry Excellence The Best Contact Center Indonesia 2010 ExcellenceAchievement TheBestTeamWorkContactCenter TheBestHRRetentionAbove100Seat TheBestVideoContactCenter TheBestTechnologyInnovation TheBestBusinessContribution TheBestBackOfficeOperation TheBestAgentInbound TheBestSupervisorAbove100seat TheBestAgentOutbound TheBestAgentQualityAssurance TheBestTeamLeader TheBestBackOfficeSupport

HUMAN RESOURCES DEVELOPMENTIndonesian Marketing Dream Team Champion RecognitionofChampionshipin Marketing Strategy for IM3 Marketing Team Indonesia Most Recommended Consumer Community 2010 i-Cyclist(IndosatCyclist)

Indosat Wireless Innovation Contest Best CSR Program Operator ofTheYear:IWIC

ICCA The Best Team Work Contact Center

24


Introduction


Operational Review


Risk Factors


Financial Report

Corporate Data

PRODUCT EXCELLENCE CORPORATE PERFORMANCEThe Asias 200 Most Admired Companies IndonesiasTop10MostAdmired Companies Pefindo Award SilverAwardBestBondTypeIssuer Syariah Bonds IICD GCG Award 2009 BestNon-FinancialPublicly-Listed Company Finance Asia Award BestHighYieldBond2010Award TOP Brand Award 2010 SimCardGSMPostpaid(Matrix) SimCardGSMPrepaid(IM3) InternetServiceProvider(mobile) The Net Promoter Customer Loyalty Award 2010 TheNetPromoterLeader2010inGSM for IM3 2nd Indonesia Word of Mouth Marketing Award 2010 TheMostRecommendedBlackBerry Internet Service Digital Marketing Awards TheBestDigitalProductcategory Simcard (IM3) TheBestWebsitecategory telecommunication Indonesia Most Popular Brand in Social Media 2010 SimcardGSM:IM3 Indonesia Cellular Award 2010 BestBundlingPhonewithSonyXPeriaX10

CORPORATESOCIAL RESPONSIBILITYIndonesia Cellular Award 2010 CorporateSocialResponsibilities(CSR) MetroTV MDGs Award 2010 Goal5:ImprovingMaternalHealth

Cellular Award 2010 Best Customer Care Indosat

Indonesia Cellular Award 2010 The Best Bundling Phone

Metro TV MDGs Award 2010


25

EVENT HIGHLIGHTS 2010

January

February

March

April

Meraih Mimpi Bersama IM3Jakarta,January18,2010Entering the new year with a new spirit for innovations, Indosat launched Meraih Mimpi Bersama IM3 (Get YourDreamwithIM3)marketing campaign that provides IM3 and also Mentari subscribers with fast broadband access at only Rp0.3 per kilobyte. The service enables existing IM3 and Mentari SIM card users to enjoy high speed data access of up to 2 Mbps from their handsets at a very affordable rates without having to change to a new SIM card. New subscribers to this service meanwhile can also enjoy a bonus of 100 free SMS daily to all operators, subject to certain conditions.

Indosat Presents BlackBerry StarOneJakarta,February20,2010 Indosat introduced Indosat StarOne BlackBerry services, allowing StarOne subscribers to enjoy a variety of convenient and attractive BlackBerry service features.

Mentari Makes Closer Ties With Family MembersJakarta,March11,2010Indosat launched the Mentari 50 package, offering special benefits for all family members of Mentari subscribers throughout Indonesia.

Indosat Launched BlackBerry On Demand (Enterprise) HostedJakarta,April1,2010Indosat presented another innovation with the launch of BlackBerry On Demand (Enterprise) Hosted services, that enable corporate users to activate and access Indosats hosted BlackBerry Enterprise Services directly through SMS.

Indosat Launched The First Android-Based Service in IndonesiaJakarta,February22,2010-In collaboration with 6 leading Android handset distributors, Indosat launched the first Android-based services in Indonesia, including a variety of Android-based applications that can be purchased through the Android Application Store.

Indosat Launched Mentari TaiwanJakarta,March22,2010Indosat launched the Mentari Taiwan prepaid SIM card in collaboration with Taiwan-based Far EasTone Telecommunications (FET).

Kartu Indosat, One Card for Many Benefits IndosatlaunchedKartuIndosat(IndosatCard), with a tagline of Semuanya Bisa Semaunya, is the first such product in Indonesia providing the utmost convenience for subscribers to choose the desired call number and service package with the purchase of a single SIM card starter pack.

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Indosat Innovation Lab, in Appreciation of 43 Years of Indosat TheIndosatInnovationLabis a facility where young application developers and innovators can experiment and get together for creative discussions on the development of practical applicationsforhand-heldsystemsandequipment inthemarket.ThefirstIndosatInnovationLabwas establishedatIndosatsHeadQuarterinJakarta,and two more such facilities are planned to be established inBandungandYogyakarta.

May

July

October

November

Indosat Introduced e-GaleriJakarta,May5,2010Indosat launched the e-Galeri, self-service vending machines located in strategic public places. This innovative service enable customers to purchase topup vouchers or starter packs, pay their post-paid bills, obtain info on the latest promo programs as well as locations of the nearest Indosat Galeri or Indosat Griya outlets, without having to call our Contact Center or visit our outlets.

i-klan Store, the Worlds First SelfService Mobile Advertising PortalJakarta,July14,2010Indosat collaborated with its subsidiary, IM2, to launch the i-klan Store, the worlds first mobile advertising portal that enables commercial advertisers as well as Indosat subscribers to conduct on-line advertising transactions by accessing www.indosat.com/i-klanorwww. iklanstore.net via their cellular handsets.

Indosats Aid for Merapi VictimsYogyakarta,October28,2010 Through the Indosat Peduli program, Indosat helped victims of Merapi eruptions by the provision of medical services through its Mobile Clinic units, donations of essential items, and free telecommunication services for disaster victims and also for various volunteer groups involved in victim evacuation process.

Indosat Support Telecommunication Facilities During State Visit of President Barrack ObamaJakarta,November11,2010 The successful state visit of US President Barrack Obama to Indonesia in 9-10 November 2010 also marked the success of Indosat that has been entrusted by the US Embassy in Indonesia to provide all telecommunications support facilities and services during the highly publicized visit.

Grand Final of 5th IWIC, in INDOSAT AWARDS, an Appreciation for Music Industry in Indonesia Indosat inaugurated the INDOSAT AWARDS, an annual event organized to appreciate and promote Indonesias musical artists and talents, and to support the domestic music industry to become an asset of the nation. Appreciation of 43 Years of Indosat Indosat held the grand final of the 5th Indosat Wireless Innovation Contest (IWIC), an annual competition for creative ideas and innovations in wireless technology.


27

OUR PRODUCTS AND BRANDSCELLULAR SERVICESDescriptionAffordable mobile prepaid communication services targeted at the youth segment.

Customer Benefit

Ability to talk longer and send more text messages.

Mobile prepaid communication services for general users.

Simple and economical flat rates.

Premium GSM mobile postpaid communication services.

Highmobilityandquality,widest international coverage, premium services.

A variant of the Matrix product which offers flexible post-paid cellular service with additional prepaid reload capability.

Provides flexibility in controlling costs. Combines the benefits of postpaid and prepaid cellular services.

Globalpushmailserviceandpostpaid/ prepaid cellular service.

Attractive bundling package for mobile email messaging and telephone services.

Mobilewirelessinternet/dataservice on a 3.5G Broadband technology (GPRS/EDGE/UMTS/HSDPA/HSPA+).

High speed connection up to 42 Mbps.

Value Added Services for cellular users.

Choice of features, content and games for entertainment.

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FIXED TELECOMMUNICATION SERVICESDescriptionDomestic and international Voice Over Internet Protocol (VoIP) service.

Customer BenefitAffordable flat international tariff, VoIP calling cards to facilitate long distance calls, control over cost of calls.

International Direct Dialing.

ClearqualityIDDcalls,budgetIDD, worldwide calling coverage.

Fixed Wireless Acess (FWA) with limited mobilitywithincity/areacode.

Affordable daily usage communication services for voice and SMS and also cheap Internet access.

MIDI SERVICES (MULTIMEDIA, DATA COMMUNICATION AND INTERNET)DescriptionIPLC (InternationalPrivateLeasedCircuit) DPLC (DomesticPrivateLeasedCircuit)

Customer BenefitPoint-to-point private circuit connections.

Frame Relay & ATM (Asynchronous Transfer Mode)

Flexibility for variable traffic. Data Communication Services:

INP (Internet Network Provider)

IDIA (Indosat Dedicated Internet Access) INIX (Indosat National Internet Exchange) MPLS (Multi-ProtocolLabelSwitching) Satellite Services

The products and services that we offer in this business segment include highspeed point-to-point international and domestic digital leased line broadband and narrowband services, a highperformance packet-switching service and satellite transponder leasing and broadcasting services.

Access to global Internet.

Ability to create private network through data package.

Solutions for national and international broadcast services.

DRC (Disaster Recovery Center)

Secure data service.


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REPORT FROM THE BOARD OF COMMISSIONERS

Our focus on a balanced value strategy with a customer centric approach that focuses on technological innovation and product offering will enable to us to become the full service provider of choice in Indonesia in the long term.

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Growth, Innovation and ResilienceIt gives me great pleasure to open this review of Indosats 2010 performance. Throughout 2010, the Company has continued to demonstrate the enormous potential that a combined strategy of focussing on customer value and technological innovation can achieve. We embarked upon a program in 2009 to transform the Company and to focus on value. We have made clear and confident progress towards successfully implementing this strategy. Our cellular market share has grown significantly and we have laid the technological foundations in order to develop and build on this progress in the years to come. This has been achieved against a backdrop of slower overall growth in the market and heightened competition for revenue market share and we are justifiably proud of the progress we have achieved. In 2010, the active removal of lower value, calling card style customers from our network and our concentration onexpandingthecustomerexperienceandquality towards higher value subscribers has seen four consecutive quartersofcellularmarketsharegrowth.Thisisparticularly impressive given the increased competitive price dynamics towards the latter end of the year.

This turnaround was not just apparent in the evolution and growth of our customer base. Through sharing knowledge, expertise and resources across the Qtel Group we have also focussed heavily on expanding customer choice through the development of our product range. These have focussed on the development of enterprise led solutions across the Android, Blackberry and Apple product lines, some of which were global firsts in technological innovation and further demonstrating our products and services leadership role in Indonesia. Inordertosupporttherequirementsofhighervalue customers and to ensure that they and our future customers are offered the optimum service possible, we havealsocontinuedtoprioritiseournetworkquality.The network is now DC HSPA+ ready and capable of offering speeds of up to 42Mbps, this is a key differentiator in the market and we are proud to be the first network to offer these speeds in Asia.

Translating Value into PerformanceOur value approach to developing market share and customer experience has translated strongly in terms of financial results and despite a program of continued capital investment in the business; we have recorded strong


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REPORT FROM THE BOARD OF COMMISSIONERS

EBITDA growth of 9.7% to Rp9,625.9 billion in 2010. This growth has not been at the expense of EBITDA margin whichwehavesuccessfullyincreasedto48.62%,thishas been underpinned by various cost efficiency programs which are in line with the ongoing strategic realignment of the business. Company revenues have also substantially increased with growth of 5.2% to Rp19,796.5 billion in 2010. This is principally as a result of the rate of growth in our cellular businesses and our balanced value strategy which saw cellular revenue grow by 12.1% to Rp16,027.1 billion.

Lastyear,weannouncedthestrategicrealignmentofthe business into four distinct business units. I am pleased to announce that the implementation of this has entered its final phase. This will streamline management focus and ensure the optimisation of our output across the business. This is underpinned by our initiatives to help develop and motivate our people. We strongly recognise the integral value our employees represent and have put in place a series of programs to ensure that they have the skills, empowerment and prospects to move the business forward.

Committed to our responsibilitiesThe turnaround of our business was validated by the internationalcapitalmarketsinJuly2010,wherewe successfully raised US$ 650 million at 7.375%. This enabled us to refinance a number of existing facilities and reduce the Companys overall debt position by 5.5% by the end of the year; we will look to continue to minimalise our financing costs throughout 2011. Our financial performance is a tribute to the strength and depth of our senior leadership team who have in a short period of time, implemented a strategy that will maximise the potential to obtain a market leadership position whilst continuing to deliver value to our shareholders. The team have demonstrated their ability to instil a revised focus and purpose to the Companys activities and we have every confidence in the roadmap they have devised for the next five years to further transform the business. We are also continually aware of the role that Indosat plays in the community. The Indonesian people have been affected by a number of natural disasters in 2010 and have been cut off from vital services and supplies. Indosat has worked hard to support those affected through disaster aid programs during the Mount Merapi eruptions and our ongoing Mobile Health Clinic program. In 2011 we will In 2010, we have continued to further develop the implementation of Corporate Governance practices across the organisation. We issued a formal Company Code of Ethics Guidelines that applies to all employees and we have a new labour agreement between the Indosat employee union and management. Alongside our commitment to our staff is our steadfast, continued focus on corporate social responsibility an intrinsic part of our strategic goal of sustainability.

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further develop programs that underpin our commitment to improving standards of health, education and social wellbeing in Indonesia.

strategy. My colleagues and I are also grateful to the many partners, stakeholders and organisations that have worked closely with us throughout 2010 to support and roll-out the change programme we have put in place.

Ongoing support is key to our successOn 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, whose enthusiasm, dedication and ability have been essential in helping us deliver on our turnaround

Moving forwardMy Board colleagues and I are extremely proud of the genuine progress our organization has made over the course of the last year. Indosat remains a Company with outstanding potential for development in a market which is growing rapidly, both in terms of population but also sophistication. Our focus on a balanced value strategy with a customer centric approach that focuses on technological innovation and product offering will, I am confident, with your continued support enable to us to become the full service provider of choice in Indonesia in the long term.

Sheikh Abdulla Mohammed S.A Al Thani President Commissioner


33

BOARD OF COMMISSIONERS PROFILE

1.

Sheikh Abdulla Mohammed S.A. Al Thanihas been the President Commissioner since August 2008.SheikhAbdullaiscurrentlytheChairmanof the Board of Directors for 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, thereby reinforcing both corporate accountability and the sustained creation of shareholder wealth. Sheikh Abdulla has also overseen the restructuring and regionalexpansionofQtel.AfterQtelsacquisitionof Kuwait-basedWataniya,inwhatwasconsideredat

that time to be the largest telecommunications deal in the Arab World, Sheikh Abdulla was appointed Chairman of Wataniya. Sheikh Abdulla previously held several high profile positions in Qatar including Chief of the Royal Court (Amiri Diwan) from 2000 to 2005. He also served as a Member of the Qatari Planning Council from 2001 to 2004. A certified pilot instructor by way of the British Royal Air Force, Sheikh Abdulla has an extensive background in both the military and in aviation, he completed his studies at the Senior Army War College, Carlisle Barracks in the United States of America.

1

2

33. Alexander RusliIndependent Commissioner

45. Soeprapto S.I.P

5

1. Sheikh Abdulla Mohammed S.A Al ThaniPresident Commissioner

Independent Commissioner

4. Parikesit SupraptoCommissioner

2. George Thia Peng HeokIndependent Commissioner

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2.

George Thia Peng Heokhas been an Independent Commissioner and ChairmanoftheAuditCommitteesinceJune2008. Mr.ThiacurrentlyservesasDirector/Consultantin AsiaincPrivateLimited.Inthepasthehasheldseveral positionsincludingasConsultant/Director,Strategic AdvisoryPrivateLimitedfrom2003to2006,Executive Chairman,MediaStreamLimitedfrom1999to2003, Director/Consultant,PhoenixCapitalPrivateLimited from1995to1998,ExecutiveChairman,AsiaMatrix Limitedfrom1993to1995,ManagingDirector,Lum

ChangSecuritiesPrivateLimitedfrom1991to1993, ManagingDirector,SunHungKaiSecuritiesPrivate Limitedfrom1989to1991,ManagingDirector,Merrill LynchInternationalBankLimitedfrom1987to1989, ExecutiveDirector/Partner,KayHianPrivateLimited from1985-1987andManagingDirector,Morgan Grenfell(Asia)Limitedfrom1975to1985.Mr.Thiais a Certified Public Accountant and a Fellow Member of both the Chartered Association of Certified Accountants(U.K.)andtheSingaporeInstituteof Directors

66. Chris KanterIndependent Commissioner

7

88. Rachmat GobelCommissioner

9

1010. Richard Farnsworth SeneyCommissioner

7. Rionald SilabanCommissioner

9. Dr. Nasser Mohammed MarafihCommissioner


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BOARDOFCOMMISSIONERSPROFILE

3.

Alexander Ruslihas been an Independent Commissioner since January2010andcurrentlyservesasmemberof our Remuneration Committee. Mr. Rusli currently is acommissionerofPTKrakatauSteel(Persero),the 100% state-owned company that produces carbonsteel 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 in overseeing 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.

5.

Soeprapto S.I.Phas been an Independent Commissioner and a memberoftheAuditCommitteesinceJune2005. 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 currently serves as Commissioner of PT Sawit KaltimLestarifrom2010tonow.Heearnedadegree in Political Science from the Terbuka University, JakartaandParticipantRegulerCourse(KRA29)in 1996 at the Indonesian National Resiliance Institute (Lemhanas).

6.

Chris KanterhasbeenIndependentCommissionersinceJanuary 2010.Mr.KantercurrentlyservesasChairmanand Founder of Sigma Sembada Group, a major turn key contractor with transportation and logistics arms. He had been Vice President for Investment, Telecommunication, Information-Technology, Transportation and Tourism of the Indonesian ChamberofCommerceandIndustry(KADIN Indonesia) since 1994 until 2010. He has recently been reappointed for a further five year term to 2015 as Vice Chairman Board of Advisor. He is also recently appointed as Vice Chairman of APINDO (Indonesia Employer Association). He also Chairman of Board of Founders of the Swiss German University. Mr.Kanterhasalsoheldanumberofrolesinthe 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 Indonesiafrom1998to2002andrecentlyappointed by the President as member of National Economic Council(KEN)reportingdirectlytothePresident Indonesia.

4.

Parikesit Supraptohas been a Commissioner since February 2011. He currently serves as Deputy Minister of State-Owned Enterprises for Services but has previously held various positions, Deputy Minister of State-Owned Enterprises forBankingandFinancialIndustryfrom2008to2010, Expert Advisor on Small Enterprises for the Minister forState-OwnedEnterprisesforfrom2006to2008, Assistant to the Deputy Minister of State Owned Enterprises in Restructuring & Privatization of Financial and Construction Industry from 2002 to 2005 and Director of the Restructuring and Privatization of the Directorate General State-Owned Enterprise of the Ministry of Finance from 2001 to 2002. Mr. Suprapto received a Bachelor degree in Corporate Economy fromSekolahTinggiManajemenIndustri,Jakartain 1980,aMasterDegreeinEconomicDevelopment from Indiana University in the United States, in 1990 and a Doctoral Degree in Economic Development from the University of Notre Dame in the United States, in 1995.

7.

Rionald SilabanhasbeenaCommissionersinceJune2008andwas appointed as a member of the Risk Management Committee in the same year. He currently serves as Director of Center for Policy Analysis and Harmonization of the Ministry of Finance in Indonesia. In the past he held several positions including Director of Fiscal Risk Management of the Ministry of Finance

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from2006to2008,SeniorAdvisorattheWorldBank 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 Assets Monitoring Division of the Indonesian Banking Restructuring Agency from 2000 to 2002, Division Head for FinancialServiceoftheLegalBureauoftheMinistry ofFinancefrom1998to2000,DeputyDirectorfor Privatization of Directorate General State-Owned Enterprise of the Ministry of Finance from 1997 to 1998,HeadofSectionoftheLegalBureauofthe Ministry of Finance from 1994 to 1997 and Head of Secretariat for Privatization Committee of Ministry of Financefrom1994to1997.Mr.SilabanearnedaLaw DegreefromtheUniversityofIndonesiain1989and aLL.M.degreefromtheGeorgetownUniversityLaw Center, Washington D.C., U.S. in 1993.

9.

Dr. Nasser Mohammed Marafihhas been a Commissioner at Indosat since August 2008andistheChairmanoftheRemuneration and Budget Committee. He began his career at Qatar Telecom (Qtel) in 1992 as an expert advisor fromtheUniversityofQatarandwassubsequently appointed in 1994 to Director of Strategic Planning and Development and finally to his current role of Chief Executive Officer in 2002. In this capacity Dr. Marafih has participated in a number of highlevel government committees and is a member of the Board of Directors of a number of Qtel subsidiaries. He also sits on the Board of Directors of the GSM Association. Dr. Marafih helped guide Qtel through its transformation into a global company and he played akeyroleinQtelsmajoracquisitions.Previously, Dr Marafih served as a lecturer and assistant professor in the Electrical Engineering Department of the University of Qatar. Dr. Marafih holds a Bachelor of Science in Electrical Engineering, a Master of Science and a Ph.D. in Communication Engineering, all from George Washington University in the United States.

8.

Rachmat GobelhasbeenaCommissionersinceAugust2008.He currently is the Chairman of the Gobel Group of companies that has operations in manufacturing, trading, services, integrated logistics management, and food and hospitality including industrial catering. Mr. Gobel is the Indonesian joint venture partner of MatsushitaElectricIndustrialCo.,Ltd.,aworldglobal leader in electronics and electrical goods under the brand name of Panasonic. He also serves as the Vice Chairman of the Board of Advisors in the Indonesian ChamberofCommerceandIndustry(KADIN),the Vice Chairman of the Employers Association of Indonesia (APINDO), the Chairman of the Federation ofElectronic&TelematicsAssociations(F.GABEL) and was appointed as a member of the National Innovation Committee by President Indonesia. Mr. Gobel graduated with a Bachelor of Science degree in International Trade from Chuo University, Tokyoin1987andwasawardedanHonorary Doctorate Degree from Takushoku University, Tokyo, Japanin2002.In2009,hereceivedtheprestigious 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.

10. Richard Farnsworth Seney hasbeenaCommissionersinceJune2009.Mr.Seney has served as Chief Operating Officer of Qtel International (QI) from 2007 to the present, President and Chief Executive Officer of MCT Corp. (including predecessors) from 1992 to 2007, Executive Vice PresidentandGeneralManagerofMCTInvestors,L.P. from1987to2002,andExecutiveVicePresidentand Chief Financial Officer of Charisma Communications Corporationfrom1985to1987.Mr.Seneyreceiveda bachelors degree in Commerce from the University of Virginia McIntire School of Commerce.


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THE BOARD OF DIRECTORS REPORTThe year 2010 was a turnaround year for Indosat as we gained new momentum to expand revenue market share in our cellular business, modernized our telecommunications networks, and completed the basic framework for the continuing transformation in our business, organization and people.Strengthening Our PositionIndonesias telecommunications market and operating landscape entering 2010 were little different than the previous years, with slower overall growth in the industry accompanied by heightened competition especially among the major industry players to retain and expand revenue market share including through aggressive pricing strategies. Within the market and operating environment as described above, we believe that Indosat has succeeded in strengthening its second-place position in the cellular market, which represented our primary businesslinecontributingsome81%ofourtotalrevenues in 2010. While we continue to pursue a balanced-value strategy, we focused more on resources allocation to target high-potential segments or services, and succeeded in considerably expanding our cellular subscriber base. As at December 31, 2010, we have 44.3 million cellular subscribers, a 34.3% increase y-o-y. We believe that these subscribers have chosen us for our product innovation and quality,networkreliability,andexcellentservice.

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Our market leadership in products and services was in full evidence in 2010. In March 2010, Indosat became the first cellular provider in Indonesia that offers Android-based services in cooperation with several distributors of leading Android handsets in the country, along with the i-Store, a virtual Android Apps Store and the Indosat Wiigo, the first Android-on-demand solution in Indonesia. Next, in April 2010, Indosat became the first telco operator in Asia and the second in the world to launch a commercial service of broadband Internet access with Dual Carrier (DC) HSPA+ technology giving downlink speeds up to 42 Mbps and uplinkspeedsofupto5.8Mbps,takingadvantageofthe second carrier license recently issued to Indosat in 2009. As of year-end 2010, the high-speed DC HSPA+ service has beenavailableinJakarta,SurabayaandMedan. Another pioneering service was the i-klan Store, the worlds first self-service, mobile Internet advertising portal. LaunchedinJuly2010,thei-klanStoreadvertisersto conduct highly segmented advertising campaign direct to a subscribers handset. Indosat has also strengthened its position in BlackBerrys services through the launch of StarOne BlackBerry on the CDMA 2000-1x platform, as well as innovations such as BlackBerry On Demand (Enterprise) Hosted that enable businesses to access the full suite of BlackBerry enterprise solutions, including Mobile Data Services, from their Matrix, Mentari, IM3 and StarOne SIM cards without the need of specialized servers or software. We also spent considerable resources in cellular network expansion and modernization throughout 2010. We began implementing single RAN SDR (Software Define Radio) technology in our Base Transceiver Station (BTS) network, while preparing to migrate into an all-IP network. These are investments that will enable us to capture more market revenue share, while also resulting in more cost-efficient network operating costs in the short and medium term going forward.

increased pressures from our competitors especially during thefourthquarteroftheyear. Our EBITDA grew by a healthy 9.7% to Rp9,626 billion in 2010, while EBITDA margin was improved by 2 percentage pointsoverthelevelin2009to48.6%.Theincreasein EBITDA margin demonstrates the progress we continue to make with our cost efficiency programs, which in 2010 include a realignment of the commission structure to wholesalers and retailers towards more efficient marketing and selling costs. During the year, we introduced a new vendor management strategy that will eventually lead to better prices on equipmentpurchases.Wehavealsoimplementedamore stringentapproachtoCAPEXinvestments,requiringthat individual CAPEX investment proposal be assessed in terms of expected commercial returns. Without compromising onournetworkqualityandexpansionprograms,wehave managed therefore to considerably reduce the ratio of CAPEX-to-sales, with cash-out CAPEX of Rp6,535 billion in 2010 compared to Rp10,670 billion in 2009. While the greater bulk of savings from these initiatives will only be realized in 2011 and later years, Indosat in 2010 has already moved into a positive operating cash flows position, reversing the trend in the previous couple of years. IndosatconcludedasuccessfulrefinancingexerciseinJuly 2010, raising US$ 650 million at 7.375% over 10 years in the international bond market. We used the proceeds to repay our USD bonds due in 2010, early repaid our USD Bonds due in 2012 and early repaid four of our IDR loans due in 2012, 2013 and 2014. With total debt successfully reduced by 5.5% at year-end 2010, we can expect a reduction in our financing costs in 2011, to the benefit of our bottom line. We were greatly encouraged that we have been able to achieve these results alongside ongoing initiatives in the broader transformation of our business towards becoming a customer centric organization.

2010 Results and PerformanceIndosat recorded Rp19,796 billion in consolidated operating revenues for the full year of 2010, a turn-around growth of 5.2% over revenues in 2009. While revenues from our noncellular business were below target, this was more than compensated for by the robust performance of our cellular business, which posted a 12.1% revenue growth over last years level to Rp16,027 billion in 2010, despite greatly

Transforming to Unleash Our PotentialIndosat continued to transform towards its vision to be the customers preferred provider for all communications and information needs. We established the Indosat Transformation Roadmap 2010-2015 that will take us over the next five years into a position to out-perform the


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REPORT FROM THE BOARD OF DIRECTORS

competition. We aim to get there by focusing more on our customer, expanding into new high-growth markets, improving the competencies of our people, delivering the highest returns on our assets, and securing a technological leadership to give us an edge over the competition. All of these will be delivered with emphasis on Excellence in Execution based on cost efficiency and effectiveness while striving for speed and accuracy in execution. By the end of 2010, our organization restructuring, which forms an important element in our business transformation, was nearly completed with all the major building blocks already in place. The implementation of our new business model with the creation of four Strategic Business Unit (SBUs) each concentrating on a different market segment had entered its final phase. We have also transformed the organization of a number of support functions to be centralized at the Head Office instead of operating from our Regional Offices as previously. We embarked on a program called Operational Excellence Award, in which we encourage employees to submit ideas for improvements in our operational process and procedures. We rolled-out the Indosat Financial Awareness (IFA) program, an initiative designed to provide an adequateleveloffinancialskillandawarenessappropriate for employees at different levels and competencies in the organization. A similar undertaking was the Indosat Transformation Awareness (ITA) program intended to reinforce employee motivation and readiness in dealing with the various aspects of our ongoing corporate transformation. Indosat also held a number of Indosat ChangeLeaderworkshopsforseniormanagement and staff at the managerial level, providing them with thenecessaryleadershipqualitiestoleadthedrivefor transformation at their respective units.

executive committees to strengthen our overall governance framework, amended our Articles of Association to comply with prevailing laws and regulations as well as to accommodate recent changes in our organization structure, and issued a guide to the implementation of Companys Code of Ethics that applies to all employees including theBoardofDirectors.WehaveanewCollectiveLabor Agreement(CLA)documentsignedbytheManagement and the Indosat employee union in December 31, 2010, andwecontinuetoimprovethequalityofourcustomer service, including in complaint handling. Meanwhile, the highlights of our Corporate Social Responsibility (CSR) activities throughout 2010 in areas of community involvement and environment include among others our Mobile Health Clinic program, disaster aid programs during the Mount Merapi eruptions, the fifth annual Indosat Wireless Innovation Contest (IWIC) to promote innovations and creativity in wireless technology among the general public, and efforts to reduce the carbon footprint in our Base Transceiver Station (BTS) operations. These and many other activities as well, are described in more detail in a separate Indosat Sustainability Report 2010, which is the third such document the we have published in line with global best practice.

Recognition for ExcellenceOur striving for Excellence in Execution has not gone unnoticed and we received many accolades recognizing a variety of achievements and accomplishments. The qualityofourcallcenterandcustomerservicewasnotably recognized by the Call Center Award for Service Excellence 2010 from Carre-Center for Customer Satisfaction & Loyalty(Carre-CCSL)andMarketingmagazine,anaward in Best Contact Center Indonesia 2010 from Indonesia Contact Center Association (ICCA), and the accolade as Best Customer Care Operator in the Selular Award 2010 by Selular magazine. Indosat was also recognized in the sixth position as Most Admired Companies in Indonesia 2010inthepollingbyAsiaWallStreetJournal.Inaddition, wereceivedmanyawardsrecognizingthequalityand innovativeness of our products and services. Without detracting from such recognitions, we also admit that there are still lots of room for improvement in many aspects of our business and operations. Ever mindful that we are now playing not only against competitors in the telecommunications industry but also in a league of major national and multi-national companies, we have striven

A Responsible Corporate CitizenIndosat continues to honor the commitment to serve the communities and to responsibly implement our goals of sustainability. We have defined five areas in which we aim to differentiate ourselves as a responsible corporate citizen, namely in organizational governance, labor practices, consumer issues, environment, and community involvement. The year 2010 saw major progress in regards the implementation of Good Corporate Governance (GCG) practices in our organization. We established a number of

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to instill a mindset of continuous improvement within our entire organization. This, we believe, is a crucial aspect that will enable us to secure and maintain a leading position as a full-service and fully integrated telecommunications operator and responsible corporate citizen unlike any other in Indonesia.

additional network transmission capacity, and continuing with our network modernization program as well as our plan for the launch of Palapa-E satellite. Meanwhile, Indosat will also continue with key initiatives to improve work effectiveness and achieve operational excellence within the overall framework of our sustainable transformation program of our organization and people. These initiatives, along with our business strategies, will solidify not only our market position, but also enhance the value we provide to customers and stakeholders alike as a full-service and fully integrated telecommunications operator unlike any other in Indonesia.

Changes to the Board of DirectorsPursuant to the resolutions of the Extraordinary General MeetingofShareholdersonFebruary8,2011,HansC. Moritz has taken over the position of Stephen Edward Hobbs in the Board of Directors, effective as of May 1, 2011.

Business Prospects and Strategy 2011For Indosat, the year 2011 will be a year of hope and challenges. While we recognize that many challenges still lie ahead, we can expect to begin to see some concrete results out of the various initiatives that we have taken in 2010 in building a solid foundation for our ongoing transformation. On that note, we have established our work programs and priorities for 2011. Our main priority is in maintaining and further strengthening our position as regards revenue market share. We aim to achieve this by, among other things, strengthening our position in broadband and BlackBerry services including in the corporate and SME market segments, developing our mobile-commerce services as well as tower business, and implementing a networkcluster strategy in potential areas. Indosat will also focus on buildingandimprovingservicecapacityandqualitythrough the development of HSPA+ services, cost-efficient BTS,

AcknowledgmentsIt has indeed been a challenging journey for Indosat in the last couple of years, as we completed the first steps in our transformational growth path to unleash our potential and ultimately to outperform in what we do. On behalf of the Board of Directors, I would like to extend the highest of appreciation to the entire management and staff of Indosat for their dedicated efforts that have made for a satisfying 2010. Our thanks also go to the shareholders for their guidanceandcontinuingvoteofconfidenceinus.Equally important for our many successes in 2010 is of course the contributions of our strategic partners and especially of our loyal customers, for which we are sincerely grateful. We look forward to the continuing support from all our stakeholders. Encouraged by the positive results and progress that we have made in 2010, we are excited about our potential to achieve even greater successes in 2011 and beyond.

Harry Sasongko Tirtotjondro President Director and Chief Executive Officer


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BOARD OF DIRECTORS PROFILE

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1. Harry Sasongko TirtotjondroPresident Director & Chief Executive Officer

2. Hans Christiaan Moritz*Director & Chief Technology Officer

3. Fadzri SentosaDirector & Chief Wholesale and Infrastructure Officer

*Stephen Edward HobbsPursuant to the Extraordinary General Meeting of shareholders convened onFebruary8,2011theshareholders have honorably discharged Stephen Edward Hobbs as member of the Board of Directors from April 30, 2011 and appoint Hans Christiaan Moritz as his replacement for the period commencing from May 1, 2011.

4. Laszlo Imre BartaDirector & Chief Commercial Officer

5. Peter Wladyslaw KuncewiczDirector & Chief Financial Officer

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Risk Factors


Financial Report

Corporate Data

1.

Harry Sasongko Tirtotjondrohas been the President Director and Chief Executive Officer since August 2009. Mr. Sasongko has previously held the positions of President Director and Chief Executive Officer of GE Consumer Finance from 2005 to 2009, where he was recognized as one ofIndonesiastop10bestCEOsin2008bytheSWA Magazine&Synovateawards.From1998to2005,he wasamemberoftheLippoGroup,whereheserved asManagingDirectoroftheMatahariRetail&Lippo Bank. He was formerly the Managing Director of the Consumer Banking of PT Bank Tiara Asia from 1995 to1998,andwasDirectorofPTCiticorpFinance andCitibank,N.A.in1998.Mr.Sasongkoearneda Bachelor in Civil Engineering degree from Bandung Institute of Technology Indonesia, a Master of Science degree from the Ohio State University in the United States, and is a Chartered Financial Consultant (ChFC), obtainedfromtheSingaporeCollegeofInsurance/ American College in the United States.

Sales from 2003 to 2004, member of the Board of Directors of Satelindo in 2003 and a member of the Board of Director of IM3 from 2002 to 2003. Mr. Sentosa received a Master degree in International Business Management from the University of Technology, Sydney in 2001 and a Bachelor degree in Telecommunications Engineering from the Bandung InstituteofTechnologyin1986.

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Laszlo Imre Bartahas been a Director and Chief Commercial Officer since May 1, 2010. He was formerly the Deputy Chief Marketing Officer of Grameenphone in Bangladesh. He spent more than four years at Grameenphone in Bangladesh, during which time he developed and led the rollout of the business market strategy, established and led the SME department, and served as Sales Director. Prior to being seconded to Grameenphone by the Telenor Group, Mr. Barta was at Pannon GSM in Hungary, where he headed the Corporate Clients department. Before Pannon, Mr. Barta was with Ericsson Hungary where he 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 AccountingandLandscapeArchitecture&Engineering from Hungarian universities.

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Hans Christiaan Moritzwas appointed as Director and Chief Technology Officer in February 2011 and assume his duties as of May 1, 2011. Mr. Moritz has 22 years experience in the mobile telecom industry and has previously held various positions, including Head Corporate Project Officer at Vodafone India from 2009 to 2011, Group OperationsDirectorAfrica/ChiefTechnologyOfficer at Zain from 2006 to 2009, Chief Technology Officer at Zain Uganda from 2004 to 2006, Chief Operating OfficeratKPNInternet,from2003to2004,General Manager of the Business Unit Broadband Network atKPNTelecomfrom2001to2003,ChiefOperating OfficeratBASEandfrom1998to2000,Operations DirectorAsia(basedinIndonesia)atKPNAsiafrom 1994 to 1997. Mr. Moritz received a Master degree in Mathematicsin1986andvariousBachelordegrees, i.eElectronicsin1978,FeedbackandControlSystems in1984andWaterManagementin1984.

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Peter Wladyslaw Kuncewiczhas been a Director and Chief Financial Officer sinceSeptember2009.Mr.Kuncewiczhas30years experience in finance across multiple international markets, 10 of them in the telecommunications sector. From2006to2009,Mr.KuncewiczwastheChief Financial Officer of Telenor Pakistan, the No. 2 player in an active market of five players in Pakistan. From 1998to2006,hewastheChiefFinancialOfficerof 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 andITrolesatBatelco,Bahrainfrom1996to1998. He received a Bachelor degree in Biology from the University of Sussex, England, and a Master of Science degree in Business Planning and Finance from University of Salford, England. He is also a member of the Chartered Institute of Management Accountants oftheUnitedKingdom.

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Fadzri SentosahasbeenaDirectorsinceJune2007andaDirector and Chief Wholesale and Infrastructure Officer since June2009.Currently,Mr.Sentosaisamember of the Board of Commissioners of PT Aplikanusa Lintasarta.Mr.Sentosahaspreviouslyheldvarious positions with us, including as member of the Board of Commissioners of PT Indosat Mega Media from 2005 to 2009, Group Head of National Card and Channel Management from 2006 to 2007, Senior VicePresidentofCommerce,JabotabekRegionfrom 2005 to 2006 and Senior Vice President of Cellular


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Operational Review


Risk Factors


Financial Report

Corporate Data

BUSINESS & SERVICES REVIEW


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CELLULAR SERVICES

The Mentari and IM3 brands won the Top Brand Award for three consecutive years in 2008, 2009 and 2010, while the Matrix brand won the Top Brand Award for 2010.

Cellular ServicesThe market for cellular telecommunications services in Indonesia has seen significant growth in the past decade. While growth rate has tended to decline slightly in the last couple of years as the market become more saturated, it is still a prospective market nevertheless. Growth potential exists as the domestic cellular penetration rate is still relatively low compared to peer countries in the region, and also as Indonesia continues to modernize and its economy to grow. In this market, Indosat has cemented its position as the second largest cellular telecommunications provider as measured by the number of cellular subscribers, with 44.3 million subscribers (including wireless broadband subscribers) as of December 31, 2010. Revenues from cellular services accounted for 81.0% of our total consolidated operating revenues in 2010.

offering competitively-priced voice services, while the IM3 brand is promoted more to cater to the needs of the younger generation for attractively-packaged voice, SMS and data services. The Matrix brand meanwhile is directed more for users in corporate environment as well as retail premium subscribers. Our cellular products offers subscribers a variety of valueadded services and features, such as SMS, MMS and Voice, GPRS capability for mobile Internet, data transfer and push e-mail (BlackBerry services), as well as free of charge standard functions such as caller identification, call holding, call waiting and call forwarding. Our cellular subscribers can also make and receive calls, send and receive SMS text massages, and use data connection (GPRS/3G) services while travelling overseas. As of December 31, 2010, our postpaid cellular subscribers could roam internationally on 468 networks, owned by 336 operators in 153 countries, and our prepaid cellular subscribers could roam internationally on 21 networks, owned by 21 operators in 17 countries. In recent years, SMS usage fees has represented a substantial portion of our operating revenues from valueadded cellular services and features. In December 2010,

ServicesIndosat offers a comprehensive product suite in mobile voice and data services, including wireless broadband services. These services are delivered through Indosats cellular product brands comprising prepaid Mentari and IM3 as well as post-paid Matrix plans, all of whom enjoy a high degree of brand recognition within their respective, highly differentiated consumer segments. Our Mentari brand is mainly marketed towards the more mature market,

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Operational Review


Risk Factors


Financial Report

Corporate Data

for instance, we recorded a daily average of approximately 516.0 million text messages (excluding value-added service SMS, such as SMS related to promotions by content providers and advertisers).

TariffThe Ministry of Communication and Information Technology (MOCIT) establishes a tariff formula that determines the amounts that operators may charge for prepaid and postpaid cellular services, although allows cellular service providers to offer promotional programs that offer lower prices than the ceiling tariffs. We currently price our prepaid cellular services under a variety of ongoing promotional programs pursuant to which we offer a variety of incentives to attract new subscribers, stimulate demand and improve our competitive position.

Leading the MarketOur market leadership in products and services was in full evidence in 2010. In March 2010, Indosat became the first

cellular provider in Indonesia that offers Android-based services in cooperation with several distributors of leading Android handsets in the country, along with the i-Store, a virtual Android Apps Store and the Indosat Wiigo, the first Android-on-demand solution in Indonesia. Indosat also launched the Mentari Taiwan, an innovative co-brand prepaid product with the Taiwan-based telco operator Far EasTone Telecommunication, offering lower international direct dial rates for users in Taiwan, which include substantial numbers of Indonesian migrant workers, in making calls to Indosat Mentari, IM3, Matrix and StarOne numbers in Indonesia. Another pioneering service was the i-klan Store, the worlds first self-service, mobile Internet advertising portal. Launched in July 2010, the i-klan Store allows advertisers to conduct highly segmented advertising campaign direct to a subscribers handset. Service features available in the i-klan Store portal include a wide choice of advertising delivery channels, market segment targetting, and payment facility using credit card, PayPal, account debit, or Indosats own iPay and Dompetku services.

MU24H itu IM3, a promotion program with many benefits for IM3 customers. INDOSAT 2010 Annual Report

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CELLULAR SERVICE

With more than 500,000 subscribers as at year-end 2010, Indosat has carved up a strong position in the market for BlackBerry services in Indonesia, which is recognized as the second largest market in the world for BlackBerry services. Back in 2004, Indosat was the first operator to offer BlackBerry Enterprise Solutions (BES) in Indonesia, initially for its post-paid Matrix subscribers, and also the first to offer such service for pre-paid Mentari and IM3 subscribers as well in 2009. In a bid to strengthen its market position for BlackBerry services, Indosat has arranged in October 2010 to increase its link capacity to Research in Motion servers to 100 Mbps dual-link, the largest in Indonesia to date. The increased capacity allows for faster speed to the benefit of our BlackBerry service subscribers. In 2010, Indosat launched the BES on Demand (Enterprise) Hosted, the first of its kind in Indonesia. Whereas the previous BES On Demand services require the use of specific servers and software on the part of corporate subscribers, services in the BES On Demand (Enterprise) Hosted is specifically developed for the Small and Medium-scale Enterprise (SME) segment, and can be accessed directly by SMS from the users Matrix, Mentari, and IM3. With the potential that resides in the SME subscriber market segment, the BES on Demand Hosted is expected to contribute significantly in further strengthening Indosats leading position for BlackBerry services in Indonesia.

Marketing ActivitiesIndosat markets its cellular products and services through integrated sales and customer service walk-in centers called Indosat Gallery, which is owned by Indosat, and Indosat Griya, which is owned by exclusive distributors. As at year-end 2010, there were 169 Indosat Gallery as well as 60 Indosat Griya. These walk-in centers are available for subscribers in most of Indonesias cities in all provinces from North Sumatera to Papua. In addition, customers also have access to Indosats cellular products and services through KILAT (Indosat Sales & Service Kiosk) outlets owned and managed by individual partners of Indosat, with 13 outlets total in 2010. Also in 2010, Indosat introduced the e-Galeri, self-service vending machine and billing payment terminals located in public places where customers can top up their prepaid cards, purchase starter packs, pay their post-paid bills, and obtain the latest information about Indosats products and promotional offers. The first of its kind in Indonesia, the e-Galeri provides increased convenience for customers in avoiding the need to locate an Indosat Gallery or Indosat Griya as well as long queue at the walk-in centers. While our direct marketing channels are instrumental in maintaining our visibility in the market, the bulk of our sales revenues from cellular services is contributed by our independent dealers. Indosat maintains a network of some 52 independent dealers, which operates their own regional and multi-regional distribution networks throughout Indonesia providing sales, customer service, billing payment and information services to individual users of Indosats products and services. In 2010, Indosat improved its dealership management strategy through a realignment of the commission structure. In the new system, payment percentage for wholesalers and retailers is set on a scale determined by how long the new subscriber actually remains with the network as well as the usage volume. The new commission system has already proved its worth in encouraging more quality sales as well as in optimizing marketing and selling cost. As at year-end 2010, Indosats cellular subscriber base numbered some 44.3 million subscribers (including wireless broadband subscribers), up from some 33.0 million a year earlier. While we had been successful in eliminating most

Wireless BroadbandWireless broadband services have become increasingly popular in Indonesia. Indosat offers wireless broadband services for handheld devices that can be accessed through Matrix, Mentari and IM3 cards. A Broadband-on-Request program for Mentari and IM3 subscribers was launched in 2009, and became available in 2010 for postpaid Matrix subscribers as well providing options of daily, weekly and monthly quota packages as well as unlimited packages. Next, in April 2010, Indosat became the first telco operator in Asia and the second in the world to launch a commercial service of broadband Internet access with Dual Carrier (DC) HSPA+ technology giving downlink speeds up to 42 Mbps and uplink spee

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