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2010 Annual Report

PT Ind

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TIAL

2010 Annual Report

PT Indosat Tbk.Jl. Medan Merdeka Barat No. 21Jakarta 10110, IndonesiaTel: 62 21 3000 3001Fax: 62 21 3812 617

www.indosat.comemail: [email protected]

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 indicat-

ed 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 Rela-

tions 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.

Indosat’s 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 second-

position player in the cellular market in Indonesia, and well along the first

steps in its journey to always outperform in our endeavors.

2 INDOSAT • 2010 Annual Report

CONTENTS

16 Indosat in Brief

17 Vision, Mission, and Values

18 Financial Highlights

20 Operational Highlights

22 Stock and Bond Highlights

24 Awards and Achievements 2010

26 Event Highlights 2010

28 Our Products and Brands

30 Report from the Board of Commissioners

34 Board of Commissioners Profile

38 Report from the Board of Directors

42 Board of Directors Profile

INTRODUCTION

01

CORPORATE GOVERNANCE

68 Corporate Governance

89 Audit Committee Report

91 Budget Committee Report

92 Risk Management Committee Report

93 Remuneration Committee Report

66

44

BUSINESS & SERVICES REVIEW

46 Cellular Services

50 Multimedia, Data Communication& Internet (MIDI) Services

54 Fixed Telecommunication Services

56

OPERATIONAL REVIEW

58 Human Resources

62 Network and Information Technology

Introduction Operational Review

Corporate Governance

Management Discussion &

Analysis

Financial Report

Risk Factors

Corporate Data

3INDOSAT • 2010 Annual Report

Business & Services

Review

94

RISK FACTORS

96 Risks Relating to Indonesia

101 Risks Relating to Our Business

106 Risks Relating to the Cellular Services Business

109 Risks Relating to the Fixed Data (“MIDI”) Services Business

110 Risks Relating to the Fixed Telecommunications Services Business

112

MANAGEMENT DISCUSSION & ANALYSIS

114 Management Discussion & Analysis

552

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

149

FINANCIAL REPORTS

151 Financial Statement

281 Annual Report on Form 20-F

419 International Financial Reporting Standard (IFRS)

545

CORPORATE DATA

546 Shareholder’s Information

548 Organizational Structure

550 Members of Audit Committee Profile

551 Subsidiary CompaniesIn 2010 Indosat introduced a customer loyalty program for cellular subscribers known as

“Senyum Setia Indosat” program.


Focus on customers is key to Indosat’s long-term sustainable

growth strategy. In the transformation into a customer-centric

organization, Indosat in 2010 completed the final stages of a

new business model with four Strategic Business Units (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 SBU Serving the needs of wholesale customers for International Direct Dialing (IDD) services, roaming, hubbing, satellite transponder lease, tower lease, and submarine cable capacity lease.

FOCUSING ON OUR CUSTOMERS




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+34.3%Growth of Cellular Subscribers Base

Growth of International High

Speed Leased Circuit

+172.5%

Growth of Total IDD Traffic

+6.1%Growth of Satelite Transponder Lease

Service

+20.3%


Our 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 Innovation•ThefirstcellularproviderinIndonesiathatoffersAndroid-basedservicesincooperation

with several distributors of leading Android handsets in the country•ExpandedBlackBerryservices-increaselinkcapacitytoResearchinMotionserversto

100 Mbps dual-link, the largest in Indonesia to date•Providingi-klanasintegratedSelfServiceMobileAdvertisingPortalforthebenefitof

advertising agencies, advertisers and subscribers •IndosatestablishedtheIndosatInnovationLabattheIndosatBuildinginJakarta,

intended to facilitate local application developers, especially young innovators, to develop applications for existing cellular systems in the market, with possible commercial use by Indosat.

Consumer Broadband Innovation•Broadband-on-RequestforpostpaidMatrixsubscribersprovidingoptionsofdaily,weekly

andmonthlyquotapackagesaswellasunlimitedpackages.

Corporate Solutions Innovation•DataCenter/DisasterRecoveryCenterandmanagedservicessolutions•BlackBerryEnterpriseSolution(BES)OnDemandHostedthatcanbeaccesseddirectlyby

SMSfromtheuser’sMatrix,Mentari,IM3orStarOnecardswithoutrequiringexpensiveservers or software

IDENTIFYING OPPORTUNITIES IN NEWGROWTH MARKETS




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+12.1%Cellular Revenue

+5.2%Consolidated Total Revenue

+2.0%EBITDA Margin


ThepeopleofIndosataretransformingintohighquality

professionals with integrity, 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 program reinforces employee motivation and readiness in dealing with various aspects of our ongoing corporate transformation, including a series of Indosat Change Leaderworkshopstoprovideseniormanagementandmanageriallevelstaffwiththenecessaryleadershipqualitiestoleadthedrivefortransformationattheirrespectiveunits.

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 AwarenessThe aim of the 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 Company’s financial performance and a sense of direct relation between their daily duties and the Company’s overall performance.

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

Code of EthicsA 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.

BRINGING OUT THE BEST IN OUR PEOPLE




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+9.7%Growth of EBITDA

supported by Operational Excellence

+11.96%Increase of Employee

Productivity 1 DayIndosat Financial

Awareness Training for All Employees


As 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 TowersRp 252 billion

Indosat set up a dedicated unit in 2010 to run its tower business, which as at year-end 2010 booked a number of tower sharing contracts with third-party operators as well as our subsidiaries, involving 3,019 towers and generating revenues of Rp252 billion.

The initiative was taken in compliance with recent regulations by the Government in regards to telecommunications tower sharing by telecommunication service providers. Indosat is currently formulating Company policies in regards to tower network expansion.

OPTIMIZING RETURNS FROM OUR DIVERSE ASSETS




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3,019Total

Towers Shared

Tower Sharing Revenue

Rp 252Billion


Since back in the mid-1970s, when Indosat operated the country’s

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 Downlink5.8 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),whichofferssavingsinpowerconsumption, transmission expense, footprint and maintenance costs when compared with conventional BTS solutions.

Indosat Innovation LabIndosatInnovationLabwascreatedtopromotecreativityandinnovationsinwirelesstechnology among the nations’ young application developers. As a place for experiments and discussions in developing practical applications for a variety of wireless operating platformscurrentlyinthemarket,theIndosatInnovationLabislocatedattheIndosatBuildinginJakarta,withplanstoestablishsimilarfacitiesinBandungandYogyakarta.

PIONEERING THE USE OF LEADING-EDGE TECHNOLOGY




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Pioneers In Deploying Zinc Air

Battery

Network Modernization in Jabodetabek, Sumatera and Kalimantan

Launching of Indosat

Innovation Lab

42 MbpsDC HSPA+


CORPORATE SOCIAL RESPONSIBILITY

Realizing Our Commitment Indosat 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 the Mobile Clinic,

Indosat Wireless Innovation Contest (IWIC) and the Bio-

Fuel BTS project are integrated within our business and




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operational activities and are designed to bring tangible

benefits and long-term value creation in their respective

areas of interest. In 2010, Indosat spent a total of Rp13

billion on these and other programs.

Community involvement and environment programs,

however, are only part of Indosat’s 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 impacts for all its stakeholders, including

shareholders, customers, employees, business partners,

communities and the environment. Our comprehensive

activities in this regard is presented separately in our 2010

Sustainability Report, ‘Realizing Our Commitment’.


INDOSAT IN BRIEF

1967Indosat was founded as a Foreign Capital Company in Indonesia, the first to provide international telecommunications services via international satellite.

1980Indosat has grown and become the first international telecommunications company tobeacquiredandwholyownedbytheGovernment of Indonesia.

1994Became a public company with share listing on the Indonesia Stock Exchange and the NewYorkStockExchange.TheGovernmentof Indonesia and public with 65% and 35% shareownership, respectively.

2001AcquiredmajorityshareholdinginSatelindo,a cellular and IDD operator in Indonesia. Established PT Indosat MultiMedia Mobile (IM3), a pioneer of GPRS and multimedia services in Indonesia.

2002

The Government of Indonesia sold a portion ofitsshareholdingequatingto8.10%oftotalshares in Indosat to the public and 41.94% of total shares to Singapore Technologies TelemediaPte.Ltd(STT).TheGovernmentofIndonesia with 15.00% shares, STT 41.94% and the remaining 43.06% held by the public.

2003Merged with its three subsidiary companies, Satelindo, IM3 and Bimagraha, becoming a major cellular operator in Indonesia.

2006 Acquireda3Glicenseandintroduced3.5GservicesinJakartaandSurabaya.

2008

Indosat shares were indirectly ownedby Qatar Telecom (Qtel) Q.S.C. (Qtel) through IndonesiaCommunicationsLimited(ICLM)andIndonesiaCommunicationsPte.Ltd(ICLS)intheamountof40.81%.TheGovernmentofIndonesia and the public respectively owned the remaining 14.29% and 44.90%.

2009

Qtelacquired24.19%seriesBsharesfromthe 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 forthe3GfrequencybytheMinistryofCommunication and Information Technology, and its subsidiary, IM2, also won the government WiMAX license tender.

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




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VisionTo be the customer’s preferred choice for all information and

communication needs

Mission• Toprovideanddevelopinnovativeandhighqualityproducts,

services and solutions which offer the best value to our customers.

• Tocontinuouslyenhanceshareholdersvalue.

• Toprovideabetterqualityoflifeforourstakeholders.

Values

•INTEGRITY

•TEAMWORK

•EXCELLENCE

•PARTNERSHIP

•CUSTOMERFOCUS


FINANCIAL HIGHLIGHTS

(in billion Rupiah)

2010 2009 2008 2007 2006

INCOME STATEMENT

Operating Revenues 19,796.5 18,824.2 19,211.5 16,873.8 12,496.3

Operating Expenses 16,322.6 15,611.2 14,478.2 12,354.2 9,097.6

Operating Income 3,473.9 3,213.0 4,733.3 4,519.6 3,398.7

Other Income (Expenses) – Net (2,392.1) (981.0) (2,408.2) (1,590.0) (1,375.8)

EquityinNetIncome(Loss)ofAssociatedCompanies 0.0 0.0 0.0 0.0 (0.2)

Income before Income Tax 1,081.8 2,232.0 2,325.1 2,929.6 2,022.7

Income Tax Expenses – Net (357.8) (677.3) (419.8) (859.5) (576.1)

Income before Minority Interest in Net Income of

Subsidiaries724.0 1,554.7 1,905.3 2,070.1 1,446.6

Minority Interest in Net Income of Subsidiaries (76.8) (56.5) (26.8) (28.1) (36.5)

Net Income 647.2 1,498.2 1,878.5 2,042.0 1,410.1

Shares Outstanding (in millions of shares) 5,433.9 5,433.9 5,433.9 5,433.9 5,404.7

Basic Earnings per Share (in Rp full amount) 119.1 275.7 345.7 375.8 260.9

EBITDA 9,625.9 8,774.4 9,289.2 8,682.8 7,027.2

BALANCE SHEET

Total Assets 52,818.2 55,041.5 51,693.3 45,305.1 34,228.7

PropertyandEquipment–Net 43,571.0 44,428.8 38,394.1 30,572.8 24,918.6

Working Capital (5,788.0) (5,931.6) (983.5) (832.5) (1,137.8)

TotalLiabilities 34,581.7 36,753.2 33,994.8 28,463.0 18,826.3

Minority Interest 385.8 330.6 288.9 297.4 200.6

TotalStockholders’Equity 17,850.7 17,957.7 17,409.6 16,544.7 15,201.8

OPERATING RATIOS (%)

Operating Income to Operating Revenues 17.55 17.07 24.64 26.78 27.20

OperatingIncometoStockholders’Equity 19.46 17.89 27.19 27.32 22.36

Operating Income to Total Assets 6.58 5.84 9.16 9.98 9.93

EBITDA Margin 48.62 46.61 48.35 51.46 56.43

Net Profit Margin 3.27 7.96 9.78 12.10 11.28

ReturnonEquity 3.63 8.34 10.79 12.34 9.28

Return on Assets 1.23 2.72 3.63 4.51 4.12

FINANCIAL RATIOS (%)

Current Ratio 51.55 54.62 90.79 92.86 83.28

DebttoEquityRatio 133.79 141.14 124.69 99.84 74.74

TotalLiabilitiestoTotalAssets 65.47 66.77 65.76 62.83 55.00

DIVIDEND PER SHARE (Rp)

Final 137.86 172.85 187.90 129.75 149.32

Payment Date 02/08/2010 22/7/2009 15/7/2008 13/7/2007 8/8/2006




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Operating Revenue

(Rp billion)

Operating Income

(Rp billion)

Net Income

(Rp billion)

Operating Expenses

(Rp billion)

Income before Income Tax

(Rp billion)

Basic Earnings per Shares

(Rp full amount)

06

06

06

06

06

06

07

07

07

07

07

07

08

08

08

08

08

08

09

09

09

09

09

09

15,611.2

2,232.0

275.7

18,824.2

3,213.0

1,498.2

14,478.2

2,325.1

345.7

19,211.5

4,733.3

1,878.5

12,354.2

2,929.6

375.8

16,873.8

4,519.6

2,042.0

9,097.6

2,022.7

260.9

12,496.3

3,398.7

1,410.1

10

10

10

10

10

10

16,322.6

1,081.8

119.1

19,796.5

3,473.9

647.2


OPERATIONAL HIGHLIGHTS

Unit 2010 2009 % Change

CELLULAR

Prepaid Subscribers subscribers 43,170,139 31,163,859 38.5%

Postpaid Subscribers subscribers 1,102,178 1,803,342 -38.9%

Total Subscribers subscribers 44,272,317 32,967,201 34.3%

ARPU Prepaid Rp 31,493 33,448 -5.8%

ARPU Postpaid Rp 234,037 175,327 33.5%

ARPU Blended Rp 34,712 37,664 -7.8%

FIXED WIRELESS

Prepaid Subscribers subscribers 489,007 525,391 -6.9%

Postpaid Subscribers subscribers 61,123 68,742 -11.1%

Total Subscribers subscribers 550,130 594,133 -7.4%

ARPU Prepaid Rp 14,719 23,207 -36.6%

ARPU Postpaid Rp 45,613 69,160 -34.0%

ARPU Blended Rp 17,730 28,402 -37.6%

IDD

Outgoing Traffic minutes 463,037,201 502,031,713 -7.8%

Incoming Traffic minutes 1,723,855,406 1,558,463,354 10.6%

Total Traffic minutes 2,186,892,608 2,060,495,067 6.1%

Incoming/OutgoingRatio – 3.7 3.0 24.1%

MIDI

Wholesale

InternationalHighSpeedLeasedCircuit Mbps 13,614 5,054 169.4%

DomesticHighSpeedLeasedCircuit Mbps 15,678 11,712 33.9%

Transponder Mhz 707 738 -4.2%

Frame Relay Mbps 10 22 -54.5%

Internet Mbps 3,383 5,754 -41.2%

IPVPN Mbps 1,396 1,030 35.5%

Lintasarta

HighSpeedLeasedLineSDL 64Kbps 60,517 64,087 -5.6%

Frame Relay 64Kbps 18,012 25,173 -28.4%

VSAT 64Kbps 15,634 6,602 136.8%

IPVPN 64Kbps 47,523 31,558 50.6%

IM2

Internet Dial Up users 8,068 9,291 -13.2%

Internet Dedicated links 758 884 -14.3%

IPVPN links 396 447 -11.4%

Employees (permanent and non-permanent incl.

subsidiaries’ employees)persons 6,694 7,126 -6.1%

Galeri Indosat service centres 169 171 -1.2%

Griya Indosat service centres 60 61 -1.6%

KiosLayanan&PenjualanIndosat(KILAT) service centres 13 - N/A

e-Galeri service centres 3 - N/A

Total Cellular Subscribers

(million)

Incoming/Outgoing Ratio

(million)

Total Fixed Wireless Subscribers

Cellular Subscriber Composition

(million)

IDD Traffic

(million minutes)

Fixed Wireless Subscriber Composition

Blended ARPU Cellular

(Rp thousand)

Blended ARPU Fixed Wireless

(Rp thousand)

2009

2009

2009

2009

09

33.0

594,133

1.8

68,742

502

175.3

69.2

36.5

3.0

761,589

44.3

550,130

2,186.9

34.7

17.7

24.5

627,934

1.1

61,123

463.0

234.0

45.6

16.7

378,727

43.2

489,007

1,723.9

31.5

14.7

31.2

525,391

1,558.5

33.4

23.2

Prepaid

Postpaid

Total

Prepaid

Postpaid

Total

Incoming Traffic

Outgoing Traffic

Total Traffic

10

2010

2010

2010

2010

44.3

3.7

550,130

33.0

594,133

2,060.5

37.7

28.4

20092010

06

06

07

07

08

08

09

09

10

10




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Unit 2010 2009 % Change

CELLULAR

Prepaid Subscribers subscribers 43,170,139 31,163,859 38.5%

Postpaid Subscribers subscribers 1,102,178 1,803,342 -38.9%

Total Subscribers subscribers 44,272,317 32,967,201 34.3%

ARPU Prepaid Rp 31,493 33,448 -5.8%

ARPU Postpaid Rp 234,037 175,327 33.5%

ARPU Blended Rp 34,712 37,664 -7.8%

FIXED WIRELESS

Prepaid Subscribers subscribers 489,007 525,391 -6.9%

Postpaid Subscribers subscribers 61,123 68,742 -11.1%

Total Subscribers subscribers 550,130 594,133 -7.4%

ARPU Prepaid Rp 14,719 23,207 -36.6%

ARPU Postpaid Rp 45,613 69,160 -34.0%

ARPU Blended Rp 17,730 28,402 -37.6%

IDD

Outgoing Traffic minutes 463,037,201 502,031,713 -7.8%

Incoming Traffic minutes 1,723,855,406 1,558,463,354 10.6%

Total Traffic minutes 2,186,892,608 2,060,495,067 6.1%

Incoming/OutgoingRatio – 3.7 3.0 24.1%

MIDI

Wholesale

InternationalHighSpeedLeasedCircuit Mbps 13,614 5,054 169.4%

DomesticHighSpeedLeasedCircuit Mbps 15,678 11,712 33.9%

Transponder Mhz 707 738 -4.2%

Frame Relay Mbps 10 22 -54.5%

Internet Mbps 3,383 5,754 -41.2%

IPVPN Mbps 1,396 1,030 35.5%

Lintasarta

HighSpeedLeasedLineSDL 64Kbps 60,517 64,087 -5.6%

Frame Relay 64Kbps 18,012 25,173 -28.4%

VSAT 64Kbps 15,634 6,602 136.8%

IPVPN 64Kbps 47,523 31,558 50.6%

IM2

Internet Dial Up users 8,068 9,291 -13.2%

Internet Dedicated links 758 884 -14.3%

IPVPN links 396 447 -11.4%

Employees (permanent and non-permanent incl.

subsidiaries’ employees)persons 6,694 7,126 -6.1%

Galeri Indosat service centres 169 171 -1.2%

Griya Indosat service centres 60 61 -1.6%

KiosLayanan&PenjualanIndosat(KILAT) service centres 13 - N/A

e-Galeri service centres 3 - N/A

Total Cellular Subscribers

(million)

Incoming/Outgoing Ratio

(million)

Total Fixed Wireless Subscribers

Cellular Subscriber Composition

(million)

IDD Traffic

(million minutes)

Fixed Wireless Subscriber Composition

Blended ARPU Cellular

(Rp thousand)

Blended ARPU Fixed Wireless

(Rp thousand)

2009

2009

2009

2009

09

33.0

594,133

1.8

68,742

502

175.3

69.2

36.5

3.0

761,589

44.3

550,130

2,186.9

34.7

17.7

24.5

627,934

1.1

61,123

463.0

234.0

45.6

16.7

378,727

43.2

489,007

1,723.9

31.5

14.7

31.2

525,391

1,558.5

33.4

23.2

Prepaid

Postpaid

Total

Prepaid

Postpaid

Total

Incoming Traffic

Outgoing Traffic

Total Traffic

10

2010

2010

2010

2010

44.3

3.7

550,130

33.0

594,133

2,060.5

37.7

28.4

20092010

06

06

07

07

08

08

09

09

10

10


STOCK AND BOND HIGHLIGHTS

Stock Performance

New York Stock Exchange

(US$/ADR)

Indonesia Stock Exchange

(Rp/Share)

2010 2009 2010 2009

Highest 35.58 30.37 6,300 5,950

Lowest 24.22 16.74 4,400 4,200

YearEnd 29.12 25.11 5,400 4,725

BasicEarningsperADR/Share 0.66 1.47 119.10 275.72

DividendperShare/ADR – 0.73 – 137.86

Dividend Payout Ratio (%) – 50 – 50

(%)DividendYield

DividendperADR/Share

Year-EndADR/SharePrice – 2.91 – 2.91

P/ERatio

Year-EndperADR/SharePrice

EarningsperADR/Share 44.12x 17.08x 45.34x 17.13x

Indonesia Stock Exchange (ISAT)

Period:1January–31December2010

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

Period2010 2009 Volume 2010 (ADS)

Highest Lowest Highest Lowest Highest Lowest

First Quarter 33.96 25.38 26.25 16.74 95,984 1,200

Second Quarter 34.19 25.97 26.65 20.99 117,276 400

Third Quarter 30.46 24.22 28.35 24.29 214,629 400

Fourth Quarter 35.58 28.01 30.37 24.28 80,143 407

Quarterly Stock Price on the IDX (Rp/ADR)

Period2010 2009 Volume 2010 (LOT)


First Quarter 6,200 4,700 5,900 4,200 52,529 283

Second Quarter 6,150 4,775 5,950 4,850 13,851 598

Third Quarter 5,500 4,400 5,700 5,050 44,367 643

Fourth Quarter 6,300 5,100 5,700 4,600 19,341 886

Bond Highlights

Description Release Date Stock Exchange Total Interest Rate Maturity

Second Indosat Bonds 06-Nov-02 Surabaya Stock Exchange* Series B : Rp200.0 billion 16.00% per annum 06-Nov-32

Third Indosat Bonds 22-Oct-03 Surabaya Stock Exchange* Series B : Rp640.0 billion 12.88% per annum Fully Repaid 22-Oct-10

Fourth Indosat Bonds 21-Jun-05 Surabaya Stock Exchange* Rp815.0 billion 12.00% per annum 21-Jun-11

Fifth Indosat Bonds 29-May-07 Surabaya Stock Exchange* Series A : Rp1,230.0 billion

10.20% per annum 29-May-14

Series B : Rp1,370.0 billion


Sixth Indosat Bonds 09-Apr-08 Indonesia Stock Echange Series A : Rp760.0 billion 10.25% per annum 09-Apr-13

Series B : Rp320.0 billion 10.80% per annum 09-Apr-15

Seventh Indosat Bonds 08-Dec-09 Indonesia Stock Echange Series A : Rp700.0 billion 11.25% per annum 08-Dec-14

Series B : Rp600.0 billion 11.75% per annum 08-Dec-16

Indosat Syari’ah Ijarah Bonds

21-Jun-05 Surabaya Stock Exchange* Rp285.0 billion Rp34.2 billion per annum 21-Jun-11

Indosat Sukuk Ijarah II 29-May-07 Surabaya Stock Exchange* Rp400.0 billion Rp40.8 billion per annum 29-May-14

Indosat Sukuk Ijarah III 09-Apr-08 Indonesia Stock Echange Rp570.0 billion Rp58.4 billion per annum 09-Apr-13

Indosat Sukuk Ijarah IV 08-Dec-09 Indonesia Stock Echange Series A : Rp28.0 billion Ijarah Return Rp3.2 billion per annum 08-Dec-14

Series B : Rp172.0 billion Ijarah Return Rp20.2 billion per annum 08-Dec-16

Guaranteed Notes due 2010

05-Nov-03 Luxembourg Stock Exchange and Singapore Exchange Securities Trading Limited

US$234.7 million 7.75% per annum Fully Repaid 10-Aug-10


22-Jun-05 Singapore Exchange Securities Trading Limited

US$109.4 million 7.13% per annum Fully Repaid 2-Sep-10


29-Jul-10 Singapore Exchange Securities Trading Limited

US$650.0 million 7.38% per annum 29-Jul-20

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

STOCK PERFORMANCESTOCK HIGHLIGHTS

8,000

6,000

4,000

2,000

0

15,000

10,000

5,000

0January February March April Mei June

Pric

e (R

p) Volume

July August September October November December

New York Stock Exchange (IIT)


35.00

30.00

25.00

20.00

15.00

10.00

5.00

0

35,000

30,000

25,000

20,000

15,000

10,000

5,000


Pric

e (U

S$) Volum

e


Shareholders Composition

(as of 31 December 2010)

QATAR TELECOM (QTEL ASIA) PTE. LTD.65.00% REPUBLIC OF INDONESIA

14.29%

PUBLIC/FREE FLOAT15.60%

SKAGEN AS5.11%




Analysis

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Business & Services

Review

Stock Performance

New York Stock Exchange

(US$/ADR)

Indonesia Stock Exchange

(Rp/Share)

2010 2009 2010 2009

Highest 35.58 30.37 6,300 5,950

Lowest 24.22 16.74 4,400 4,200

YearEnd 29.12 25.11 5,400 4,725

BasicEarningsperADR/Share 0.66 1.47 119.10 275.72

DividendperShare/ADR – 0.73 – 137.86

Dividend Payout Ratio (%) – 50 – 50

(%)DividendYield

DividendperADR/Share

Year-EndADR/SharePrice – 2.91 – 2.91

P/ERatio

Year-EndperADR/SharePrice

EarningsperADR/Share 44.12x 17.08x 45.34x 17.13x

Indonesia Stock Exchange (ISAT)


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

Period2010 2009 Volume 2010 (ADS)


First Quarter 33.96 25.38 26.25 16.74 95,984 1,200

Second Quarter 34.19 25.97 26.65 20.99 117,276 400

Third Quarter 30.46 24.22 28.35 24.29 214,629 400

Fourth Quarter 35.58 28.01 30.37 24.28 80,143 407

Quarterly Stock Price on the IDX (Rp/ADR)

Period2010 2009 Volume 2010 (LOT)


First Quarter 6,200 4,700 5,900 4,200 52,529 283

Second Quarter 6,150 4,775 5,950 4,850 13,851 598

Third Quarter 5,500 4,400 5,700 5,050 44,367 643

Fourth Quarter 6,300 5,100 5,700 4,600 19,341 886

Bond Highlights

Description Release Date Stock Exchange Total Interest Rate Maturity

Second Indosat Bonds 06-Nov-02 Surabaya Stock Exchange* Series B : Rp200.0 billion 16.00% per annum 06-Nov-32

Third Indosat Bonds 22-Oct-03 Surabaya Stock Exchange* Series B : Rp640.0 billion 12.88% per annum Fully Repaid 22-Oct-10

Fourth Indosat Bonds 21-Jun-05 Surabaya Stock Exchange* Rp815.0 billion 12.00% per annum 21-Jun-11

Fifth Indosat Bonds 29-May-07 Surabaya Stock Exchange* Series A : Rp1,230.0 billion


Series B : Rp1,370.0 billion


Sixth Indosat Bonds 09-Apr-08 Indonesia Stock Echange Series A : Rp760.0 billion 10.25% per annum 09-Apr-13

Series B : Rp320.0 billion 10.80% per annum 09-Apr-15

Seventh Indosat Bonds 08-Dec-09 Indonesia Stock Echange Series A : Rp700.0 billion 11.25% per annum 08-Dec-14

Series B : Rp600.0 billion 11.75% per annum 08-Dec-16

Indosat Syari’ah Ijarah Bonds

21-Jun-05 Surabaya Stock Exchange* Rp285.0 billion Rp34.2 billion per annum 21-Jun-11

Indosat Sukuk Ijarah II 29-May-07 Surabaya Stock Exchange* Rp400.0 billion Rp40.8 billion per annum 29-May-14

Indosat Sukuk Ijarah III 09-Apr-08 Indonesia Stock Echange Rp570.0 billion Rp58.4 billion per annum 09-Apr-13

Indosat Sukuk Ijarah IV 08-Dec-09 Indonesia Stock Echange Series A : Rp28.0 billion Ijarah Return Rp3.2 billion per annum 08-Dec-14

Series B : Rp172.0 billion Ijarah Return Rp20.2 billion per annum 08-Dec-16


05-Nov-03 Luxembourg Stock Exchange and Singapore Exchange Securities Trading Limited

US$234.7 million 7.75% per annum Fully Repaid 10-Aug-10


22-Jun-05 Singapore Exchange Securities Trading Limited

US$109.4 million 7.13% per annum Fully Repaid 2-Sep-10


29-Jul-10 Singapore Exchange Securities Trading Limited

US$650.0 million 7.38% per annum 29-Jul-20

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

STOCK PERFORMANCESTOCK HIGHLIGHTS

8,000

6,000

4,000

2,000

0

15,000

10,000

5,000


Pric

e (R

p) Volume


New York Stock Exchange (IIT)


35.00

30.00

25.00

20.00

15.00

10.00

5.00

0

35,000

30,000

25,000

20,000

15,000

10,000

5,000


Pric

e (U

S$) Volum

e


Shareholders Composition

(as of 31 December 2010)

QATAR TELECOM (QTEL ASIA) PTE. LTD.65.00% REPUBLIC OF INDONESIA

14.29%

PUBLIC/FREE FLOAT15.60%

SKAGEN AS5.11%


AWARDS AND ACHIEVEMENTS 2010

The many accolades that we received serve as a testimony

ofourstrongshowingin2010asregardsthequalityofour

services, our organization and our business practices.

HUMAN RESOURCES DEVELOPMENT

CUSTOMERSERVICE

Indonesian Marketing Dream Team Champion•RecognitionofChampionshipin

Marketing Strategy for IM3 Marketing Team

Indonesia Most Recommended Consumer Community 2010•i-Cyclist(IndosatCyclist)

Call 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

Indosat Wireless Innovation Contest

Best CSR Program Operator ofTheYear:IWIC

ICCAThe Best Team Work

Contact Center




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CORPORATESOCIALRESPONSIBILITY

CORPORATEPERFORMANCE

PRODUCTEXCELLENCE

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

•TheBestDigitalProduct–category

Simcard (IM3)

•TheBestWebsite–category

Telecommunication

Indonesia Most Popular Brand in Social

Media 2010

•SimcardGSM:IM3

Indonesia Cellular Award 2010

•BestBundlingPhonewithSonyXPeriaX10


•CorporateSocialResponsibilities(CSR)

MetroTV MDGs Award 2010

•Goal5:ImprovingMaternalHealth

The Asia’s 200 Most Admired Companies•Indonesia’sTop10MostAdmired

Companies

Pefindo Award•SilverAward–BestBondTypeIssuer–

Syariah Bonds

IICD GCG Award 2009•BestNon-FinancialPublicly-Listed

Company

Finance Asia Award •BestHighYieldBond2010Award


The Best Bundling Phone

Metro TV MDGs Award 2010

Cellular Award 2010Best Customer Care

Indosat


EVENT HIGHLIGHTS 2010

“Kartu Indosat”, One Card for Many Benefits –

Indosat launched “Kartu Indosat” (Indosat Card),

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.

January February March April

”Meraih Mimpi Bersama IM3”

Jakarta, January 18, 2010 –

Entering the new year with a new

spirit for innovations, Indosat

launched “Meraih Mimpi Bersama

IM3” (Get Your Dream with

IM3) 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 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 StarOne

Jakarta, February 20, 2010 –

Indosat introduced Indosat

StarOne BlackBerry services,

allowing StarOne subscribers to

enjoy a variety of convenient

and attractive BlackBerry service

features.

Indosat Launched The First Android-Based Service in Indonesia

Jakarta, February 22, 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.

Mentari Makes Closer Ties With Family Members

Jakarta, March 11, 2010 – Indosat

launched the Mentari 50 package,

offering special benefits for

all family members of Mentari

subscribers throughout Indonesia.

Indosat Launched Mentari – Taiwan

Jakarta, March 22, 2010 – Indosat

launched the Mentari – Taiwan

prepaid SIM card in collaboration

with Taiwan-based Far EasTone

Telecommunications (FET).

Indosat Launched BlackBerry On Demand (Enterprise) Hosted

Jakarta, April 1, 2010 – Indosat

presented another innovation

with the launch of BlackBerry

On Demand (Enterprise) Hosted

services, that enable corporate

users to activate and access

Indosat’s hosted BlackBerry

Enterprise Services directly

through SMS.




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Indosat Innovation Lab, in Appreciation of 43 Years of Indosat –TheIndosatInnovationLabisa facility where young application developers and innovators can experiment and get together for creative discussions on the development of practical applicationsforhand-heldsystemsandequipmentinthemarket.ThefirstIndosatInnovationLabwasestablishedatIndosat’sHeadQuarterinJakarta,andtwo more such facilities are planned to be established inBandungandYogyakarta.

INDOSAT AWARDS, an Appreciation

for Music Industry in Indonesia –

Indosat inaugurated the INDOSAT

AWARDS, an annual event organized

to appreciate and promote

Indonesia’s musical artists and

talents, and to support the domestic

music industry to become an asset of

the nation.

Grand Final of 5th IWIC,

in 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.

May July October November

Indosat Introduced e-Galeri

Jakarta, May 5, 2010 – Indosat

launched the e-Galeri, self-

service vending machines

located in strategic public places.

This innovative service enable

customers to purchase top-up

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 World’s First Self-Service Mobile Advertising Portal

Jakarta, July 14, 2010 – Indosat

collaborated with its subsidiary,

IM2, to launch the i-klan

Store, the world’s 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-klan

or www.iklanstore.net via their

cellular handsets.

Indosat’s Aid for Merapi Victims

Yogyakarta, October 28, 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 Obama

Jakarta, November 11, 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.


OUR PRODUCTS AND BRANDS

CELLULAR SERVICES

Affordable mobile prepaid communication services targeted at the youth segment.

Ability to talk longer and send more text messages.

Description Customer Benefit

Mobile prepaid communication services for general users.

Simple and economical flat rates.

Premium GSM mobile postpaid communication services.

Highmobilityandquality,widestinternational 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/dataserviceon 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 SERVICES

Domestic and international Voice Over Internet Protocol (VoIP) service.

International Direct Dialing.

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

ClearqualityIDDcalls,budgetIDD,worldwide calling coverage.

Description Customer Benefit

MIDI SERVICES (MULTIMEDIA, DATA COMMUNICATION AND INTERNET)

Point-to-point private circuit connections.

IPLC(InternationalPrivateLeasedCircuit)

DPLC(DomesticPrivateLeasedCircuit)

Access to global Internet.INP (Internet Network Provider)

Solutions for national and international broadcast services.

MPLS (Multi-ProtocolLabelSwitching)

Satellite Services

Flexibility for variable traffic.Frame Relay & ATM(Asynchronous Transfer Mode)

Ability to create private network through data package.

IDIA (Indosat Dedicated Internet Access)

INIX(Indosat National Internet Exchange)

Secure data service.DRC (Disaster Recovery Center)

Customer BenefitDescription

Data Communication 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.

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

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


REPORT FROMTHE 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.




Analysis

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Growth, Innovation and Resilience It gives me great pleasure to open this review of Indosat’s

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, 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 Performance Our 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


EBITDA growth of 9.7% to Rp9,625.9 billion in 2010. This

growth has not been at the expense of the EBITDA margin

whichwehavesuccessfullyincreasedto48.62%,andhas

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.

The 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 Company’s overall debt position by 5.5% by the end

of the year; we will look to continue minimalising 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 Company’s activities and we have every

confidence in the roadmap they have devised for the next

five years to further transform the business.

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 responsibilitiesAlongside our commitment to our staff is our steadfast,

continued focus on corporate social responsibility an

intrinsic part of our strategic goal of sustainability.

In 2010, we continued to further develop the

implementation of Corporate Governance practices across

the organisation. We issued a formal Company Code of

Ethics that applies to all employees and we have a new

labour agreement between the Indosat employee union

and management.

We are also continually aware of the role that Indosat plays

in the community. The Indonesian people were affected

by a number of natural disasters in 2010 and were cut

off from vital services and supplies. Indosat 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 further

REPORT FROMTHE BOARD OF COMMISSIONERS




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develop programs that underpin our commitment to

improving standards of health, education and social well-

being in Indonesia.

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, Indosat’s 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

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.

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 ThaniPresident Commissioner


1. Sheikh Abdulla Mohammed S.A. Al Thani has been the President Commissioner since August

2008.SheikhAbdullaiscurrentlytheChairmanofthe Board of Directors for Qtel. In his capacity as Chairman, he has helped enhance Qtel’s 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.AfterQtel’sacquisitionofKuwait-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. Sheikh Abdulla Mohammed S.A. Al Thani President Commissioner

2. George Thia Peng Heok Independent Commissioner

1 2 3 4 5

3. Alexander Rusli Independent Commissioner

4. Parikesit Suprapto Commissioner

5. Soeprapto S.I.P Independent Commissioner

BOARD OF COMMISSIONERS PROFILE




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2. George Thia Peng Heok has been an Independent Commissioner and

ChairmanoftheAuditCommitteesinceJune2008.Mr.ThiacurrentlyservesasDirector/ConsultantinAsiaincPrivateLimited.InthepasthehasheldseveralpositionsincludingasConsultant/Director,StrategicAdvisoryPrivateLimitedfrom2003to2006,ExecutiveChairman,MediaStreamLimitedfrom1999to2003,Director/Consultant,PhoenixCapitalPrivateLimitedfrom1995to1998,ExecutiveChairman,AsiaMatrixLimitedfrom1993to1995,ManagingDirector,Lum

ChangSecuritiesPrivateLimitedfrom1991to1993,ManagingDirector,SunHungKaiSecuritiesPrivateLimitedfrom1989to1991,ManagingDirector,MerrillLynchInternationalBankLimitedfrom1987to1989,ExecutiveDirector/Partner,KayHianPrivateLimitedfrom1985-1987andManagingDirector,MorganGrenfell(Asia)Limitedfrom1975to1985.Mr.Thiaisa Certified Public Accountant and a Fellow Member of both the Chartered Association of Certified Accountants(U.K.)andtheSingaporeInstituteofDirectors

6 7 8 9 10

6. Chris Kanter Independent Commissioner

7. Rionald Silaban Commissioner

8. Rachmat Gobel Commissioner

9. Dr. Nasser Mohammed Marafih Commissioner

10. Richard Farnsworth Seney Commissioner


3. Alexander Rusli has been an Independent Commissioner since

January2010andcurrentlyservesasmemberofour Remuneration Committee. Mr. Rusli currently is acommissionerofPTKrakatauSteel(Persero),the100% 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 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.

4. Parikesit Suprapto has 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,Jakartain1980,aMasterDegreeinEconomicDevelopmentfrom 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.

5. Soeprapto S.I.P has 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.Heearnedadegreein Political Science from the Terbuka University, JakartaandParticipantRegulerCourse(KRA29)in1996 at the Indonesian National Resiliance Institute (Lemhanas).

6. Chris Kanter hasbeenIndependentCommissionersinceJanuary

2010.Mr.KantercurrentlyservesasChairmanandFounder 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(KADINIndonesia) 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.KanterhasalsoheldanumberofrolesintheIndonesian 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 Indonesiafrom1998to2002andrecentlyappointedby the President as member of National Economic Council(KEN)reportingdirectlytothePresidentIndonesia.

7. Rionald Silaban hasbeenaCommissionersinceJune2008andwas

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,SeniorAdvisorattheWorldBankin 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 FinancialServiceoftheLegalBureauoftheMinistryofFinancefrom1998to2000,DeputyDirectorforPrivatization of Directorate General State-Owned Enterprise of the Ministry of Finance from 1997 to 1998,HeadofSectionoftheLegalBureauoftheMinistry of Finance from 1994 to 1997 and Head of Secretariat for Privatization Committee of Ministry of Financefrom1994to1997.Mr.SilabanearnedaLawDegreefromtheUniversityofIndonesiain1989andaLL.M.degreefromtheGeorgetownUniversityLawCenter, Washington D.C., U.S. in 1993.

8. Rachmat Gobel hasbeenaCommissionersinceAugust2008.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.,aworldgloballeader 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),theVice 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, Tokyoin1987andwasawardedanHonoraryDoctorate 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.

9. Dr. Nasser Mohammed Marafih has been a Commissioner at Indosat since August

2008andistheChairmanoftheRemunerationand Budget Committee. He began his career at Qatar Telecom (Qtel) in 1992 as an expert advisor fromtheUniversityofQatarandwassubsequentlyappointed 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 high-level 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 akeyroleinQtel’smajoracquisitions.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.

10. Richard Farnsworth Seney hasbeenaCommissionersinceJune2009.Mr.Seney

has served as Chief Operating Officer of Qtel International (QI) from 2007 until his retirement in March 2011, President and Chief Executive Officer of MCT Corp. (including predecessors) from 1992 to 2007, Executive Vice President and General Manager ofMCTInvestors,L.P.from1987to2002,andExecutive Vice President and Chief Financial Officer of CharismaCommunicationsCorporationfrom1985to1987.Mr.Seneyreceivedabachelor’sdegreeinCommerce from the University of Virginia McIntire School of Commerce.

THE BOARD OF DIRECTORS’ REPORT

Strengthening Our Position Indonesia’s telecommunications market and operating landscape entering 2010 were little different than 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%ofourtotalrevenuesin 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.

The 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.




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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,takingadvantageofthesecond 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 world’s first self-service, mobile Internet advertising portal. LaunchedinJuly2010,thei-klanStoreadvertiserstoconduct highly segmented advertising campaign direct to a subscriber’s handset. Indosat has also strengthened its position in BlackBerry 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 Defined 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.

2010 Results and Performance Indosat 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 non-cellular 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 year’s level to Rp16,027 billion in 2010, despite greatly

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%.TheincreaseinEBITDA 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.WehavealsoimplementedamorestringentapproachtoCAPEXinvestments,requiringthatindividual CAPEX investment proposal be assessed in terms of expected commercial returns. Without compromising onournetworkqualityandexpansionprograms,wehavemanaged 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.

IndosatconcludedasuccessfulrefinancingexerciseinJuly2010, 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.

Transforming to Unleash Our Potential Indosat 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


competition. We aim to get there by focusing more on our customers, 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 Units (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 adequateleveloffinancialskillandawarenessappropriatefor 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 ChangeLeaderworkshopsforseniormanagementand staff at the managerial level, providing them with thenecessaryleadershipqualitiestoleadthedrivefortransformation at their respective units. A Responsible Corporate Citizen Indosat 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 to the implementation of Good Corporate Governance (GCG) practices in our organization. We established a number of

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 Company’s Code of Ethics that applies to all employees including theBoardofDirectors.WehaveanewCollectiveLaborAgreement(CLA)signedbytheManagementandtheIndosat employee union in December 31, 2010, and we continuetoimprovethequalityofourcustomerservice,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 Excellence Our striving for Excellence in Execution has not gone unnoticed and we received many accolades recognizing a variety of achievements and accomplishments. The qualityofourcallcenterandcustomerservicewasnotablyrecognized by the Call Center Award for Service Excellence 2010 from Carre-Center for Customer Satisfaction & Loyalty(Carre-CCSL)andMarketingmagazine,anawardin 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 2010’inthepollingbyAsiaWallStreetJournal.Inaddition,wereceivedmanyawardsrecognizingthequalityandinnovativeness of our products and services.

Without detracting from such recognitions, we also admit that there is 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

REPORT FROMTHE BOARD OF DIRECTORS




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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.

Changes to the Board of Directors Pursuant 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 network-cluster strategy in potential areas. Indosat will also focus on buildingandimprovingservicecapacityandqualitythroughthe development of HSPA+ services, cost-efficient BTS,

additional network transmission capacity, and continuing with our network modernization program as well as our plan for the launch of the 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.

Acknowledgments It 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.Equallyimportant for our many successes in 2010 are 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 TirtotjondroPresident Director and Chief Executive Officer


BOARD OF DIRECTORS PROFILE

1. Harry Sasongko Tirtotjondro President Director & Chief Executive Officer

2. Hans Christiaan Moritz* Director & Chief Technology Officer

3. Fadzri Sentosa Director & Chief Wholesale and Infrastructure Officer

4. Laszlo Imre Barta Director & Chief Commercial Officer

5. Peter Wladyslaw Kuncewicz Director & Chief Financial Officer

*Stephen Edward HobbsPursuant to the Extraordinary General Meeting of shareholders convened onFebruary8,2011theshareholdershave 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.

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1. Harry Sasongko Tirtotjondro has 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 ofIndonesia’stop10bestCEOsin2008bytheSWAMagazine&Synovateawards.From1998to2005,hewasamemberoftheLippoGroup,whereheservedasManagingDirectoroftheMatahariRetail&LippoBank. He was formerly the Managing Director of the Consumer Banking of PT Bank Tiara Asia from 1995 to1998,andwasDirectorofPTCiticorpFinanceandCitibank,N.A.in1998.Mr.SasongkoearnedaBachelor 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.

2. Hans Christiaan Moritz was 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 Voda

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