TLK Perusahaan Perseroan Persero PT Telekomunikasi Indonesia

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MATERIAL TOPICS [102-47]

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TelkomGroup follows global trends, including issues related to ESG and sustainability. In this report, we present material topics that we consider influential according to stakeholders’ needs; ensuring the right strategic direction and comprehensive assessment towards the Company’s most significant sustainability issues. This awareness is critical to identifying, managing our sustainability risks and opportunities, and to creating long-term value.

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MATERIAL TOPICS BOUNDARIES AND IMPACTS [103-1; 102-46]

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Customer data protection and privacy is a material topics managed by TelkomGroup as it relates to customer trust towards our products and services. On the other hand, protection and privacy are part of human rights and have a part in affecting customer satisfaction and the Company's reputation. Stakeholders affected by this topic include:

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The quality of products and services is a material topic for TelkomGroup as it is closely related to the management of systemic risk and technological disruption. In addition, Telkom as a technology service provider must manage the risk of technological disruption considering its effect on the technological network and customer services quality. Stakeholders affected by this topic include:

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Innovation and digitization is a material topics because they are related to TelkomGroup's commitment to digital transformation. The Company continues to encourage innovation to support product and service quality, as well as technology development and digitalization that can support the efficiency and sustainability of the TelkomGroup. Stakeholders affected by this topic include:

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Performance growth is a material topic. Telkom has a large economic contribution through operational costs, taxation, dividends, and community empowerment that is beneficial for the state and the general public. The achievement of economic performance will impact on all Telkom stakeholders.

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Occupational health and safety (HSE) is a material topic because Telkom has a fairly high job risk in certain areas (e.g. high altitudes or high-voltage electricity areas). This topic is important because the workplace risk involves workers’ safety that must be properly guaranteed. The stakeholders affected by this topic are all employees in the TelkomGroup.

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Anti-corruption is a material topic because Telkom is committed to implementing sustainable ethical behavior and business ethics. Stakeholders affected by this topic are all top management and Telkom personnel who are required to comply with anti-corruption policies. In addition, vendors and/or other stakeholders who work together are also expected to support anti-corruption practices at Telkom.

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Supply-chain management is a material topic because Telkom has a goal of implementing fair and transparent procurement management practices to support the Company's operations. Each work partner/supplier/supplier will be asked to sign an integrity pact containing a statement not to engage in corrupt practices, price collusion, and conflicts of interest in every procurement process carried out. Stakeholders affected by this topic are all suppliers who cooperate with TelkomGroup.

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SUSTAINABILITY PERFORMANCE

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ETHICS: RESPONSIBLE GOVERNANCE AND BUSINESS

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GOVERNANCE GUIDELINES AND POLICIES

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The implementation of sustainability governance at TelkomGroup is part of good corporate governance. We believe that good governance is fundamental in realizing the company's vision, mission, and values in all of our business activities, as well as being an important key to improving performance and sustainable competitive advantage. Telkom and its Subsidiaries have various guidelines that form the basis for implementing good governance, including Good Corporate Governance Guidelines; Board Manual of the Board of Directors and the Board of Commissioners; Charter Committee; and Code of Conduct.

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In addition, in carrying out its business, Telkom always upholds the business ethics as stated in Resolution of the Board of Directors No. PD.201.01/r.00/PS150/COP-B04000000/2014 regarding Business Ethics within the TelkomGroup. The main aspects that are regulated in the implementation of Telkom's business ethics consist of:

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GOVERNANCE STRUCTURE [102-18]

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Telkom has a governance structure consisting of General Meeting of Shareholders (GMS), Board of Commissioners, and Board of Directors. Each has an important role in implementing governance in accordance with its functions, duties and responsibilities. Telkom has an ad hoc unit involved in implementing sustainability initiatives and practices. Several units are closely related to the implementation of sustainability initiatives, namely Corporate Secretary, Corporate Strategic Planning, Community Development Center, Risk Management, Service Operation Division, Consumer, Enterprise, Human Capital Management, and Digital Business. In addition, Telkomsel and PT Graha Sarana Duta (Telkom Property) as Subsidiaries, also play a major role in the sustainability of TelkomGroup. Supervision of the effectiveness of sustainability initiatives implementation is carried out by Directorate of Human Capital Management, which has been assisting the Board of Directors to collect and report sustainability initiatives achievements.

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Based on OJK Circular Letter No. 16/SEOJK.04/2021 regarding Form and Content of the Annual Report of Issuers or Public Companies, companies are directed to establish a sustainability committee under the Board of Directors and led by Director of Operations. Following up on this directive, Community Development Center unit is currently preparing Telkom CSR Committee.

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APPROACH IN PREVENTION PRINCIPLE [102-11]

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Good corporate governance practices include risk management as a form of implementing the precautionary principle. Regarding governance challenges, Ministry of SOEs has issued Regulation of Minister of SOE No. PER.08/MBU/2020 regarding Strategic Plan of Ministry of SOEs for 2020-2024 which contains initiatives to strengthen risk management function and implementation of SOE governance. The implementation of risk management in SOE is very important in making corporate decisions so that potential losses can be reduced.

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In 2021, risk management at Telkom refers to ISO 31000:2018 Risk Management - Principles and Guidelines, which consists of 3 main components:

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The change of risk management standardization at Telkom to ISO 31000:2018 was carried out for the following reasons:

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A more detailed explanation regarding governance, the Board of Directors and the Board of Commissioners, risk management as the implementation of the precautionary approach, and internal control, can be read in 2021 Annual Report Chapter of Corporate Governance.

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Regarding the implementation of sustainability practices, Telkom has applied the precautionary principle not only to business risks but also to social and environmental risks. Telkom and its Subsidiaries have implemented an Environmental Management System based on ISO 14001 in operating areas where environmental issues are relevant and significant. In addition, Telkom also increases attention and management of social aspects such as labor practices, human rights practices, consumer issues, fair operating practices, and Community Involvement Development (CID).

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COMMITMENT TO ANTI-CORRUPTION, ANTI-BRIBERY, AND ANTI-FRAUD [103-1; 103-2; 103-3; 205-1; 205-2]

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Telkom's commitment to implement anti-corruption, anti-bribery and anti-fraud practices is carried out by establishing an organization, formal procedures & systems, and internal and external audits based on ISO 37001:2016 Anti-Bribery Management System (ABMS) for the recruitment, procurement, and Gratification Control Unit at Telkom and the service process at 7 Witel Class A as representatives of each Telkom Regional. This effort has shown results through the ISO 37001:2016 Surveillance and Expansion Certification from Sucofindo on September 24, 2021, and successfully achieved a score of 100 (Maximum) in monitoring and evaluation in the third quarter of 2021 by the Corruption Eradication Commission (KPK). To strengthen ABMS implementation, Telkom plans to strengthen infrastructure & resources while also expanding ABMS implementation to all Witel Class A and Subsidiaries per 2022.

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Anti-Corruption Socialization [205-2]

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On the commemoration of World Anti-Corruption Day in 2021, Telkom requires all employees to access the Gratification Prevention e-learning module and was given socialization to expand knowledge and awareness about gratifications and gratification reporting procedures. In addition, direct sources from the KPK team held an Executive Briefing – Awareness of Corruption Prevention and Encounter in SOE for all levels of the Board of Directors.

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Whistleblowing System

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Since 2006, Telkom has had a Whistleblowing System (WBS) policy in which implementations follows regulatory dynamics from the capital market listing, the Ministry of SOEs, and also the best practices of corporate governance.

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To maintain the independence and improve the effectiveness of the WBS, on January 31, 2022, a new phase of Telkom's WBS has been launched called the Telkom Integrity Line, which is a new face for the previous WBS in providing formal channels for employees within the Telkom Group and other third parties to submit complaints or complaints, with several improvements including:

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Some of the conditions that need to be fulfilled by the whistleblower include:

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Through Telkom Integrity Line, it is hoped that the WBS reporters will not hesitate to submit the report because the confidentiality of the reporter's identity will be maintained and there is certainty that the report will be followed up and reported to the reporter. We will explain the results of the Telkom Integrity Line implementation in the SR for the 2022 fiscal year.

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With the Telkom Integrity Line, it is hoped that the reporter will not hesitate to submit the report because the confidentiality of the reporter's identity will be maintained and there is certainty that the report will be followed up and reported to the reporter. We will explain the results of the implementation of the Telkom Integrity Line in the SR for the 2022 fiscal year.

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Throughout 2021, Telkom has received 1,200 complaints through the WBS mechanism of the old reporting system. Of this number, there are no complaints that get to be followed up under the WBS criteria and procedures, while 36 complaints are related to services. Complaints related to services have been forwarded to management through the IA unit to be informed and followed up with the relevant work units. The table below presents information on complaints received by Telkom over the last 3 years and the follow-up process carried out:

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A more detailed explanation of the WBS reporting mechanism for 2021 can be accessed in the 2021 Annual Report Chapter of the Whistleblowing System.

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FAIR BUSINESS PRACTICES [206-1]

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In 2021, competition in the telecommunications and digital businesses became more competitive, especially driven by people's behaviour changes due to the impact of the COVID-19 pandemic. Telecommunications providers compete fiercely on price, network quality and coverage, service coverage, features offered, and customer service. As the largest telecommunications company in Indonesia, Telkom applies precautionary principle in business policy and product development so as does not violate regulations related to business competition in Indonesia.

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One of the toughest competitions with competitors is in terms of offering telecommunication products and services such as unlimited data packages, along with the increasing number of smartphone users. The use of smartphones has supported people to communicate more efficiently by mobile, so that telecommunications providers also need to compete in terms of data network coverage. This competitive situation can have an impact on decreasing profit margins, which are influenced by product pricing.

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Number of Fines and Sanctions Related to Monopolistic and Unfair Business Competition Practices [206-1][TC-TL-520a.1]

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Telkom and its Subsidiaries carry out fair operations and avoid monopolies and unfair competitive practices. Compliance with this practice refers to Law no. 5 of 1999 concerning the Prohibition of Monopolistic Practices and Unfair Business Competition ("Business Competition Law") which prohibits agreements and activities in which unfair business competition and abuse of market position are dominant.

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In the last three years, there have been no fines or sanctions imposed on Telkom related to violations of competition provisions.

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In addition, during the reporting period, Telkom is still following up on calls from the KPPU regarding the alleged violation of business competition in restricting Netflix access to the IndiHome service and there has been a decision stating that Telkom is not proven to have committed a violation.

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CUSTOMER DATA PRIVACY PROTECTION [103-1; 103-2; 103-3]

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The increasing attention of the public, especially customers, to the security of data privacy has prompted us to place the protection of customer data privacy as a material topic in this report. The development and use of technology include cybercrime, specifically personal data theft and misuse. Telkom as a digital telco company is committed to protecting customer data privacy. We run our business in line with the Minister of Communication and Information Regulations No. 20 of 2016 concerning the Protection of Personal Data in Electronic Systems. The regulation requires us to manage the acquisition, collection, processing, analysis, storage, use, dissemination, and destruction of personal data and or customer transaction data.

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Policies and Practices regarding Privacy and Data Security [TC-TL-220a.1][TC-TL-230a.2]

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We have established an internal organization for Telkom Data Protection Governance, chaired by the Director of NITS. The purpose of this data governance is to maintain the confidentiality, integrity, authenticity, access, availability, and use of information. Data security protection is carried out throughout the information lifecycle, namely: personnel, processes, applications and services, database systems, operating systems, networks, and hardware.

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Telkom as an information system provider company has established several internal regulations related to the protection of personal data security, namely:

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The determination of policies related to the protection of privacy and security of customer data is also implemented by Telkomsel with the following policies:

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Telkomsel customers can access the retail customer data privacy policy through the website https://www.telkomsel.com/privacy-policy or can contact customer service via e-mail cs@telkomsel.co.id or telephone number 188. As for IndiHome customer data can be accessed through the website https://indihome.co.id/syarat-ketentuan#, or customers can contact customercare@telkom.co.id or call phone number 147.

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Customer Data for Secondary Purposes [TC-TL-220a.2][TC-TL-220a.4]

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In practice, personal data can be used or displayed to third parties for other purposes, which is called data use for Secondary Purposes. In managing personal data, customers are given the option by the electronic system operator to give consent whether or not personal data can be used and/or displayed to third parties.

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Based on Law No. 11 of 2016 concerning Information and Electronic Transactions (ITE), law enforcement officers have the right to requests for the use of customer data for Secondary Purposes to Telkom regarding the settlement of cases, especially fraud cases. Telkom assists in providing the data to help to resolve cases. Practices regarding the provision and use of customer data refer to the Compliance & Risk Management Director Regulation No. 603.01/r.00/HK000/COP-D0020000/2011 dated 6 July 2011 regarding the Implementation Guidelines for Providing Records and Data on the Use of Telecommunication Facilities to Law Enforcement Officials.

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Throughout 2021, law enforcement officers submitted 33 requests related to tracking the use of IP addresses, call data records, and customer data. Almost all of these requests were fulfilled by Telkom.

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Complaints and Legal Cases related to Data Privacy [418-1][TC-TL-220a.3]

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In 2021, Telkom received a request from the Government to update the Terms and Conditions in the PeduliLindungi application corresponding data privacy complaints. The government complaint was immediately followed up by Telkom, demonstrating responsiveness to complaints regarding the implementation of personal data protection and compliance.

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Throughout 2021, we reported no cases related to data being sold and/or misused and ensured there was no data leakage to irresponsible parties. Telkom is committed to taking firm action if there are employees who trade data, as well as steal and/or misuse customer data.

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Regarding the legal issue of consumer data breaches faced by Telkom in 2021, Telkom reports no legal problems, sanctions, or monetary losses due to the case. During the reporting period, Telkom also did not receive any warnings or complaints regarding non-compliance with data privacy regulations.

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On the other hand, in 2021, Telkomsel as a Telkom Subsidiary is only involved in the settlement procedure of criminal cases related to illegal access and personal data transfer that occurred in 2020. The report on this criminal case shows that Telkomsel is firmly against acts of violating data privacy, especially those involving system violations or violations of applicable standard operating procedures.

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SUPPLY CHAIN [102-9; 103-1; 103-2; 103-3]

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Telkom demonstrates support towards the Government's policy to purchase products and use domestic services by prioritizing local supply for the company’s goods and services procurement. Local partners/suppliers domiciled in Indonesia can support TelkomGroup's operations in various regions of the archipelago and demonstrates lesser carbon footprint when compared to suppliers from abroad. In addition, by prioritizing local partners/suppliers, Telkom can contribute to the National Economic Recovery (PEN).

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TelkomGroup Supply Chain Chart

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We implement fair and transparent procurement management practices to support the Company's operations through a signed integrity pact with partners to not engage in corrupt practices, price collusion, and conflicts of interest in every procurement process. In addition, Telkom seeks to reduce physical contact with partners during the procurement process or build partnerships by maximizing the use of video conference and e-auction. This is in line with the Decree of the Director of Finance Number PR 301.08/r.03/HK240/COP-A00110000/2021 dated 24 May 2021 concerning Procurement Implementation Guidelines.

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In the procurement process, there are three main stages that prospective partners/vendors need to go through, namely:

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Telkom carries out a due diligence process from the beginning of registration until the evaluation stage by assessing the partnership’s mandatory and optional aspects. Assessment of related suppliers is carried out periodically as an effort to mitigate existing risks to ensure a fraud-free ecosystem in the supply chain. The results of the assessment will determine the partner's risk level. If the risk is high, monitoring and re-evaluation will be carried out on the partner.

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Periodically, Telkom evaluates the performance of suppliers to ensure that there is a good, sustainable cooperation relationship, and of course provides optimal benefits for both parties. In accordance with Company Regulation No.PR.301.03/r.00/HK.240/COP-D005000/2012 dated June 29, 2012, regarding Supplier Management, supplier evaluation includes aspects of Quality, Cost, Delivery and Service (QCDS). In 2021, there was no blacklist action against suppliers/partners who have poor performance based on the evaluation results, meaning there are no suppliers who have been terminated because they are considered unable to do the work.

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Local Party Involvement [102-7; 102-9; 204-1]

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During 2021, Telkom has 95.2% or 884 local partners (Indonesia) out of 929 total partners, while 4.8% are foreign partners. The involvement of local parties in 2021 has increased compared to the previous year, where in 2020, Telkom has 852 local (Indonesian) partners out of 861 total partners.

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Supports Increasing the Domestic Component Level (TKDN)

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As a SOE, Telkom adheres to the goods and/or services policy of procurement to prioritize the use of Domestic Products in accordance with the provisions for the utilization of domestic production. However, it is necessary to adjust internal policies to respond to changes while still considering the implementation of cost leadership and efficiency. One of the internal policy adjustments is to apply category management-based procurement and a center-led procurement model within Telkom. On May 24, 2021, Regulation of the Director of Finance of the Company (Persero) PT Telekomunikasi Indonesia Tbk No.PR.301.08/r.04/HK240/COP-A00110000/2021 was issued regarding Procurement Implementation Guidelines. Through this internal policy adjustment, the use of domestic products in every procurement process carried out by TelkomGroup still considers the quality and economic aspects of the goods and/or services provided.

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As of the end of 2021, TelkomGroup's TKDN achievement amounted to around 37.6% of CAPEX spending and 74.9% of OPEX spending. Telkom's CAPEX spending is dominated by using fiber optic materials and installation services, for retail, business, and wholesale customers. Fiber optic technology is indeed the main infrastructure used to provide IndiHome services, as Telkom's FTTH broadband service. In the future, Telkom will encourage the transfer of active customer termination device (NTE) technology from technology owners to be carried out by local industries so that it is expected to have an impact on decreasing imported goods, strengthening the structure of the national manufacturing industry, and absorption of local workers.

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Inclusive telecommunication is also pursued through Telkom's support for the Telecommunication and Information Accessibility Agency (BAKTI) program initiated by the Ministry of Communication and Information. It is hoped that the implementation of BAKTI will ensure an even distribution of communication access in Indonesia through satellite-based internet. We, at TelkomGroup, have already built communication access throughout Indonesia. We have built optical fiber both on land and at sea that connects almost all districts, also in very remote areas with the support of mobile broadband and satellite. In addition, we also play an important role in digitizing Indonesia through the Indonesia Digital Network (IDN) which focuses on true-broadband connectivity and ICT services evenly with points of presence (PoP) spread throughout Indonesia. In addition to connectivity, TelkomGroup is also developing an international-scale hyperscale data center in Cikarang and a regional data center (NeucentrIX) spread across several regions as the foundation for digital use cases such as cloud computing, block chain & big data/AI, as well as technology enablers to support the realization of the vision. "Advanced Indonesia". This activity is in line with the seven RPJMN Development Agenda 2020-2024, especially to strengthen infrastructure development in ICT and Digital Transformation.

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Systemic Risk Management from Network Disruption [201-2][TC-TL-550a.1][TC-TL-550a.2]

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TelkomGroup considers the existence of systemic risks caused by natural disasters or the impact of climate change, which will affect business sustainability. Telkom also considers the potential of technological disruptions that could affect our telecommunications infrastructure due to the impact of natural disasters such as floods, landslides, storms, and forest fires. However, at this time we have not conducted any research on climate risk, nor have we measured the financial implications of the risks and opportunities of climate change.

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Disturbances to infrastructure due to the impact of natural conditions most often occur on submarine cables, mainly caused by volcanic eruptions and earthquakes in the sea. In addition, disturbances in the submarine cable system were also found due to the impact of shipping activities. In the fiber optic backbone system, disturbances are generally caused by third parties such as road excavation works and vandalism, such as copper cable theft, ODC, BTS, and others. In addition to natural factors and third parties, disturbances can also be caused by the process of migrating new infrastructure/systems and the integration process between different systems not going well, as well as ineffective asset protection system management.

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TelkomGroup runs a replacement system when a service interruption occurs. This effort was made because we understand that the risk of disruption to the IT network/infrastructure will still exist even though prevention has been taken. Some of the mitigation efforts that we take if there is a disruption that has an impact on service interruptions, namely:

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INFORMATION TECHNOLOGY AND CYBER SECURITY [TC-TL-230a.2]

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Since 2014, Telkom has had Cyber ​​Security Operation Center capabilities in order to prevent cyber threats. The Cyber ​​Security Operation Center has a function as a center for monitoring, detecting, and implementing responses to information security incidents at Telkom, with the main activities conducting security monitoring, incident response management, vulnerability assessment, penetration testing, log management and analysis, and security awareness. The existence of Cyber ​​Security Operation which operates 24x7 helps Telkom to anticipate and respond to security threats more quickly and can share information related to information security more effectively.

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So far, the management of cyber threats/attacks on networks, applications, and data has been running well, so it does not have a significant negative impact. However, technology will continue to develop along with the growing variety of cyber threats. So we need to be vigilant as part of preventive measures, by identifying several causes that can give rise to information security risks, including:

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Furthermore, we carry out controls to mitigate cyberthreats, by:

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TelkomGroup recognizes the importance of handling cybersecurity threats properly and maintaining adequate protection to minimize the possibility of a successful attack. Employees at all levels will undergo cybersecurity training for at least 1 training in a year to learn how to detect and report malware, ransomware and other malicious software or attempts at intrusion into company information technology systems. The training provided is also useful so that employees can increase awareness and procedures for maintaining data privacy. A total of 9,313 employees received training related to cybersecurity through the Digilearn app in 2021. Telkom also conducts socialization related to cyber security through Diarium, a social media application for Telkom Group employees, as well as roadshows to various regions to increase awareness of cyber security threats and strengthen end-user culture towards cyber security.

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Personnel Certification and Information Security System Certification

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The implementation of the data security management system at TelkomGroup has been certified according to SNI ISO/IEC 27001:2013 Information Security Management System. The implementation of this certification is one of the efforts to strengthen the security of IT infrastructure from the risk of cyber attacks. To support the implementation of the cyber security system, we also improve the ability of human resources to handle cyber attacks. Some of the certifications held by TelkomGroup personnel, which increase their knowledge to deal with and manage the risk of cyberattacks, are:

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In 2021, as many as 376 employees have obtained at least one type of certification related to information security systems.

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Information Security Breach [TC-TL-230a.1]

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Throughout 2021, Telkom detected 53.9 million cyber threats against our servers. Most threats are non-intrusive, but only 14 threats need to be watched out for and need to be handled specifically.

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QUALITY OF PRODUCT AND SERVICE [103-1; 103-2; 103-3]

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All Telkom products have been through a safety evaluation process for users and the wider community. TelkomGroup also ensures that the electronic devices that accompany its products and services are in accordance with the requirements in Indonesia and have a proper level of security for customers. We have provided accurate information on each of our products contained in mobile starter packs. Product information can also be found on the website, through our promotional activities and marketing communications. To date, there have been no product recalls for reasons of safety risks that could harm consumers. Responsibility for products and services implemented by the TelkomGroup is also carried out through the application of product and service guarantees to consumers. We provide after-sales warranty and implement a customer service policy that focuses on service delivery, service assurance, and measuring service quality.

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TelkomGroup is committed to maintaining the quality of products and services with full responsibility to provide the best customer experience. The need for communication and connection during the pandemic is mainly used for education and work which certainly makes customers not tolerate the slightest disturbance. For this reason, Telkom always strives to improve the system and look for innovative ways of working to increase the effectiveness and efficiency of the improvement process which will ultimately increase customer satisfaction. This increase in customer satisfaction will indirectly invite the entry of new customers to become TelkomGroup customers and ensure the continuity of the Company's business.

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