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Year on Year Performance (Rs. in Crores)

Particulars 2010-11 2009-10 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 2001-02 2000-01 1999-00 1998-99

Income from 2,248.74 2,069.10 1,941.68 1,707.19 1,406.98 1,095.13 807.47 597.50 359.59 252.50 139.23 63.81 3.22

Earnings Before Interest, 1,146.77* 540.51 593.18 485.55 302.60 124.71 (66.12) 50.74 52.85 7.60 (46.42) (119.57) (28.19) Depreciation, Tax and Amortisation

Profit / (Loss) before 49.91 (298.00) (158.39) (124.81) (315.39) (492.96) (527.86) (269.68) (205.00) (148.49) (208.91) (270.14) (62.38) Extraordinary Item and tax

Extraordinary Item - - - - (5.48) 47.25 ------

Profit / (Loss) after tax 49.90 (298.01) (159.60) (125.74) (310.61) (541.06) (527.86) (269.68) (205.00) (148.49) (208.91) (270.14) (62.38)

End of Period Subscribers 16,852 13,000 7,495 5,079 3,074 1,840 1,006 488 232 165 75 22 12 (Nos. in Thousands)

* Including Rs.834.93 Crores towards profit on sale of wholly owned tower subsidiary. 1

BOARD OF DIRECTORS CONTENTS

Mr. Kishor A. Chaukar (Chairman) Notice 2 Mr. Amal Ganguli Mr. Nadir Godrej Prof. Ashok Jhunjhunwala Directors' Report 5 Mr. D. T. Joseph Mr. N. S. Ramachandran Mr. S. Ramadorai Corporate Governance Report 10 Mr. Koichi Takahara Mr. Narasimhan Srinath (Managing Director w.e.f. February 1, 2011) Management Discussion and Analysis of 16 Financial Condition and Results of COMPLIANCE OFFICER Operations

Mr. Madhav Joshi Chief Legal Officer & Company Secretary Auditors' Report 22

INVESTOR SERVICES Balance Sheet 24 Mr. Hiten Koradia Manager - Investor Relations Tel: 91 22 6661 5445 Profit & Loss Account 25 E-mail: [email protected]

STATUTORY AUDITORS Schedules forming part of the Balance 26 Sheet and Profit & Loss Account M/s. Deloitte Haskins & Sells Chartered Accountants 12, Dr. Annie Besant Road, Cash Flow Statement 44 Opp. Shiv Sagar Estate, Worli, - 400 018. Consolidated Financial Statements REGISTRARS & SHARE TRANSFER AGENTS

TSR Darashaw Limited Auditors' Report 45 6-10, Haji Moosa Patrawala Industrial Estate, 20, Dr. E. Moses Road, Near Famous Studio, Mahalaxmi, Consolidated Balance Sheet 46 Mumbai - 400 011. Tel: 91 22 6656 8484 Fax: 91 22 6656 8494 / 6656 8496 47 Email: [email protected] Consolidated Profit & Loss Account Website: www.tsrdarashaw.com

48 REGISTERED OFFICE Schedules forming part of the Consolidated Balance Sheet and Profit & Loss Account Premises, T. B. Kadam Marg, Chinchpokli, Mumbai - 400 033. Consolidated Cash Flow Statement 67 Tel: 91 22 6661 5445 Fax: 91 22 6660 5516 / 5517 e-mail: [email protected] Balance Sheet Abstract and General 68 Website: www.tatateleservices.com Business Profile

Sixteenth Annual General Meeting of () Limited will be held on Tuesday, August 16, 2011 at 1500 hours at Kamalnarayan Bajaj Hall & Art Gallery, Bajaj Bhavan, Jamnalal Bajaj Marg, 226, Nariman Point, Mumbai 400 021 The Annual Report can be accessed at www.tatateleservices.com 2 16th Annual Report 2010-2011

NOTICE Notice is hereby given that the Sixteenth Annual General the Act, be and is hereby appointed a Director of the Meeting of Tata Teleservices (Maharashtra) Limited will be held Company, liable to retire by rotation.” on Tuesday, August 16, 2011 at 1500 hours at Kamalnarayan 7. To consider and if thought fit, to pass with or without Bajaj Hall & Art Gallery, Bajaj Bhavan, Jamnalal Bajaj Marg, modifications, if any, the following resolution as an 226, Nariman Point, Mumbai 400 021- to transact the following Ordinary Resolution: business: “RESOLVED THAT consent of the Company be and is ORDINARY BUSINESS hereby accorded pursuant to the provisions of Sections 1. To consider and, if thought fit, to pass, with or without 269 and 316 and other applicable provisions, if any, of the modifications, if any, the following as an Ordinary Companies Act, 1956 (“Act”) read with Schedule XIII to the Resolution: Act, and any other applicable laws and regulations, to the “RESOLVED that the Company's audited Balance Sheet appointment of Mr. Narasimhan Srinath (“the Appointee”), as at March 31, 2011, the audited Profit and Loss Account who is also Managing Director of Tata Teleservices and the audited Cash Flow Statement for the financial year Limited, as Managing Director of the Company for a period ended on that date together with Directors' and Auditors' of 3 years w.e.f. February 1, 2011. Report thereon be and are hereby approved and adopted.” RESOLVED FURTHER THAT subject to superinten- 2. To consider and, if thought fit, to pass, with or without dence, control and direction of the Board, the Appointee modifications, if any, the following as an Ordinary shall perform such duties and functions as may be Resolution: commensurate with his position as Managing Director of the Company, and as may be delegated by the Board from “RESOLVED THAT M/s Deloitte Haskins & Sells, time to time. Chartered Accountants, having Registration No. 117366W, retiring auditors of the Company, be and are RESOLVED FURTHER THAT the Board be and is hereby hereby re-appointed as the Auditors of the Company to authorized to take all such steps as may be necessary, hold office from the conclusion of this meeting until the proper and expedient to give effect to this resolution.” conclusion of the next Annual General Meeting of the Registered Office By order of the Board Company on remuneration to be decided by the Board of Voltas Premises, For Tata Teleservices Directors.” T. B. Kadam Marg, (Maharashtra) Limited 3. To consider and, if thought fit, to pass, with or without Chinchpokli, modifications, if any, the following as an Ordinary Mumbai - 400 033. Resolution: “RESOLVED THAT Mr. Amal Ganguli, who retires from the Mumbai Madhav Joshi office of Director by rotation in this Annual General Meeting July 4, 2011 Chief Legal Officer & Company Secretary and being eligible offers himself for re-election, be and is hereby re-elected a Director of the Company, whose office Notes: shall be liable to retirement by rotation.” 1. A MEMBER ENTITLED TO ATTEND AND VOTE IS 4. To consider and, if thought fit, to pass, with or without ENTITLED TO APPOINT A PROXY TO ATTEND AND modifications, if any, the following as an Ordinary VOTE AT THE MEETING INSTEAD OF HIMSELF AND A Resolution: PROXY NEED NOT BE A MEMBER. A proxy, in order to “RESOLVED THAT Mr. D. T. Joseph, who retires from the be effective, should be deposited at the Registered Office office of Director by rotation in this Annual General Meeting of the Company not less than 48 hours before the and being eligible offers himself for re-election, be and is commencement of the meeting. hereby re-elected a Director of the Company, whose office 2. The Explanatory Statement pursuant to section 173(2) of shall be liable to retirement by rotation.” the Companies Act, 1956 in respect of the business under 5. To consider and, if thought fit, to pass, with or without Item Nos. 6 and 7 above are annexed hereto and forms modifications, if any, the following as an Ordinary part of this Notice. The relevant details as required by Resolution: Clause 49 of the Listing Agreements entered into with the Stock Exchanges, of persons seeking appointment/re- “RESOLVED THAT Prof. Ashok Jhunjhunwala, who retires appointment as Directors are also annexed. from the office of Director by rotation in this Annual General Meeting and being eligible offers himself for re-election, be 3. The Register of Directors' Shareholding, Register of and is hereby re-elected a Director of the Company, whose Proxies and Statutory Auditors' would be available for office shall be liable to retirement by rotation.” inspection by the Members, at the Meeting. All documents referred to in the accompanying Notice and Explanatory SPECIAL BUSINESS Statement are also open for inspection by the Members at 6. To consider and if thought fit, to pass with or without the Registered Office of the Company on any day between modifications, if any, the following resolution as an 10.00 a.m. to 12.00 p.m. except Saturday, Sunday and Ordinary Resolution: Public Holiday up to the date of Annual General Meeting. “RESOLVED THAT Mr. Narasimhan Srinath, who was 4. The Register of Members and Share Transfer Books of the appointed as an Additional Director of the Company and Company will remain closed from Friday, August 5, 2011 who holds office upto the date of this Annual General to Tuesday, August 16, 2011 (both days inclusive). Meeting of the Company in terms of Section 260 of the 5. Members/proxies should bring duly filled Attendance Slips Companies Act, 1956 (“Act”) and in respect of whom the to attend the Meeting. Company has received a notice pursuant to Section 257 of 3

6. Members whose shareholding is in electronic mode are may be terminated by either party by giving to the other party six requested to direct change of address notifications to their months' notice. respective Depository Participants. Upon the termination of the appointment, for any reason, whatsoever: EXPLANATORY STATEMENT PURSUANT TO SECTION 173 (2) OF THE COMPANIES ACT, 1956 (i) the Appointee shall immediately tender his resignation from offices held by him in any subsidiaries and associated Item No. 6 and 7 - Appointment of Mr. N. Srinath as Director companies (excluding TTSL which would have a separate and Managing Director agreement with Mr. Srinath) without claim for The Board of Directors (“Board”) has appointed Mr. Narasimhan compensation for loss of office; and Srinath (“the Appointee” or “Mr. Srinath”) as Additional Director (ii) the Appointee shall not without the consent of the of the Company w.e.f. February 1, 2011 and Managing Director Company at any time thereafter represent himself as of the Company for a period of 3 years w.e.f. February 1, 2011. connected with the Company or any of the subsidiaries and Mr. Srinath is also Managing Director of Tata Teleservices associated companies (excluding TTSL which would have Limited (“TTSL”) and hence the appointment was made in a separate agreement with Mr. Srinath). compliance with the provisions of Section 316 of the Companies The draft of the Agreement proposed to be signed between the Act, 1956 (“Act”). Mr. Srinath would not draw any remuneration Company and Mr. Srinath is available for inspection at the from the Company as Managing Director. Registered Office of the Company between 10.00 a.m. to 12.00 The Company and TTSL (which holds 37.65% of the total equity p.m. on any day except Saturday, Sunday and Public Holiday. share capital of the Company) are working towards better Mr. Srinath is a member of the Finance Committee, Executive operational and functional integration so as to take full Committee, Investors' Grievance Committee and Securities advantage of operational synergies and to present a unified Committee of the Company. He does not hold any equity shares pan- entity especially in reference to the common brands or any other securities in the Company as of date. being used by each of these two entities. Similarly, the discerning enterprise customers across India must see the The Board considers that the Company would be benefited services as seamless without any issue with regard to the immensely from Mr. Srinath's appointment and therefore entities being legally distinct. The synergy in operations of the recommends the passing of these resolutions. Company and TTSL could be achieved more efficaciously now None of the Directors of the Company except Mr. Srinath is in that both the Companies have a common Managing Director. any way concerned or interested in these resolutions. Mr. Srinath aged 49 years, is Mechanical Engineer from IIT Resolution No.7 read with this explanatory statement should be (Chennai) and has a Management Degree from IIM (), treated as an abstract of the terms of the appointment of Mr. specialising in Marketing and Systems. Since joining the Tata Srinath as Managing Director as required under Section 302 of Administrative Services in 1986, Mr. Srinath has held positions the Act. in Project Management, Sales & Marketing, and Management The Board recommends the passing of these Resolutions in the in different Tata companies over the last 24 years. interests of the Company. Before joining the Company as Managing Director, Mr. Srinath was Managing Director of Limited. Registered Office By order of the Board Voltas Premises, For Tata Teleservices The appointment of Mr. Srinath is by virtue of his employment in T. B. Kadam Marg, (Maharashtra) Limited the Company and his appointment is subject to the provisions of Chinchpokli, Section 283(1) (l) of the Act. The terms and conditions of the Mumbai - 400 033. appointment of Mr. Srinath also include provisions pertaining to adherence with the Tata Code of Conduct, intellectual property, Mumbai Madhav Joshi non-competition, avoidance of conflict of interest with the July 4, 2011 Chief Legal Officer & Company Secretary Company and maintaining confidentiality. The appointment

Important Communication to Members The Ministry of Corporate Affairs has taken a “Green Initiative” by allowing service of notice/ documents including Annual Report by e-mail to members. To support this green initiative of the Government in full measure, members who have not registered their e-mail addresses, so far, are requested to register their e-mail addresses, in respect of electronic holdings with the Depository through their concerned Depository Participants or alternatively send an email to the Company at [email protected] or the Registrars and Share Transfer Agent at [email protected] 4 16th Annual Report 2010-2011

Details of Directors Seeking Re-appointment at the Annual General Meeting (“AGM”)

Particulars Mr. Amal Ganguli Mr. Mr. D. T. Joseph Prof. Ashok Jhunjhunwala Mr. N. Srinath

Date of Birth October 17, 1939 December 21, 1945 June 22, 1953 July 8, 1962

Date of March 24, 2009 May 8, 2009 (Appointed by April 12, 2007 (last February 1, 2011 Appointment (Appointed by shareholders shareholders at the AGM (re-appointment by at the AGM held on August held on August 13, 2009) shareholders at the AGM 13, 2009) held on August 13, 2009)

Chartered Accountant, Masters degrees in English B. Tech from IIT, Kanpur & Mechanical Engineering Qualifications Member of the Institute of Literature and Economics MS and Ph. D degrees from from IIT (Chennai) and a Chartered Accountants in from the University of the University of Maine Management Degree from England & Wales and the Madras and University of IIM (Kolkata) ICAI Manchester, respectively

Expertise in specific Rich experience in Finance Rich experience in Rich experience in Telecom Rich experience in Telecom functional area Administration

Number of shares Nil Nil 4,700 Nil held in the Company (Including held by dependents)

Directorships held Ÿ Maruti Suzuki India Ltd. Ÿ Shreyas Shipping & Ÿ Polaris Software Lab Ltd. Ÿ Tata Communications Ltd. in other Public Ÿ Tata Communications Ltd. Logistics Ltd. Ÿ Tejas Networks Ltd. Ÿ Tata Teleservices Ltd. Companies# Ÿ Century Textile & Ÿ Mundra Port & Special Ÿ Sasken Communications Ÿ Tata Business Support Industries Ltd. Economic Zone Ltd. Technologies Ltd. Services Ltd. Ÿ ICRA Ltd. Ÿ Ocean Sparkle Ltd. Ÿ 3i Infotech Ltd. Ÿ Viom Networks Ltd. Ÿ HCL Technologies Ltd. Ÿ West Asia Maritime Ltd. Ÿ Tata Communications Ltd. Ÿ Viom Infra Networks Ÿ New Television Ltd. Ÿ Shreyas Relay Systems Ÿ Exicom Tele-Systems Ltd. (Maharastra) Ltd. Ÿ Triveni Turbines Ltd. Ltd. Ÿ AVTEC Ltd. Ÿ Dedicated Freight Ÿ Hughes Communications Corridor Corporation of India Ltd. India Ltd. Ÿ Aricent Technologies (Holdings) Ltd.

Memberships / Audit Committee Audit Committee Audit Committee Audit Committee Chairmanships of Ÿ Maruti Suzuki India Ltd.** Ÿ Shreyas Shipping & Ÿ Polaris Software Lab Ltd. Ÿ Tata Business Support Committees* of Ÿ Tata Communications Logistics Ltd. Ÿ Tejas Networks Ltd. Services Ltd. other Public Ltd.** Ÿ Mundra Port & Special Ÿ Sasken Communications Companies# Ÿ Century Textile & Economic Zone Ltd. Technologies Ltd. Industries Ltd. Ÿ West Asia Maritime Ltd. Ÿ ICRA Ltd. Ÿ Shreyas Relay Systems Investors Grievance Ÿ HCL Technologies Ltd. Ltd.** Committee Ÿ New Delhi Television Ÿ Dedicated Freight Ÿ Polaris Software Lab Ltd. Ltd.** Corridor Corporation of Ÿ Triveni Turbines Ltd. India Ltd. Ÿ Hughes Communications India Ltd.** Investors Grievance Ÿ Aricent Technologies Committee (Holdings) Ltd.** Ÿ Mundra Port & Special Economic Zone Ltd.

* Includes only Audit Committee and Shareholders / Investors Grievance Committee # Public Companies excluding Foreign Companies and Section 25 Companies ** Chairmanship of the Committee 5

DIRECTORS' REPORT Dear Members, The Company launched many services over the years involving significant investments and the new services like GSM and The Directors have pleasure in presenting the 16th Annual are in the initial phase of gestation period. It is not uncommon for Report together with the audited financial statements of the telecommunication service providers, due to high operation Company for the year ended March 31, 2011 and other costs and inherently capital intensive industry, to have longer accompanying reports, notes and certificates. gestation period. The accumulated losses of the Company at Financial Results the close of the year have exceeded its paid up capital and reserves, however, the Company is consistently making The financial results of the Company's operations during the operating cash profits over the past few years. year are given below: The Company had availed of short term loans for payment of 3G (Rs. in Crores) licence fee and roll out of 3G network. The Company has got its Particulars 2010 - 11 2009 - 10 Business Plan appraised by IDBI Bank Limited and is in the process of replacing the short term loans with the new long term Telecom Revenue 2,248.74 2,069.10 loans. In May’2011, the Company has tied up for long term Other Income 67.20 208.71 External Commercial Borrowings of USD 350 Million for refinancing of short term loans availed for 3G spectrum fees and Profit on Sale of Long Term Investment 834.93 - for capex. Total Income 3,150.87 2,277.81 Products and Services Operation and Other Expenses 1,818.50 1,737.30 The Company holds two Unified Access (basic + cellular) Service Licences (“UASL”), one for Mumbai Metro and the other Provision for Contingencies 185.60 - for Maharashtra circle i.e. Rest of Maharashtra and . The Earnings Before Interest, Depreciation, 1,146.77 540.51 current subscriber base of 16.85 million consists of CDMA Tax and Amortisation (“EBIDTA”) subscribers, GSM wireless subscribers and wireline Finance & Treasury Charges (Net) 346.16 317.62 subscribers. Depreciation / Amortisation 750.70 520.89 During the year, the Company focused on increasing its retail presence to achieve a better market penetration for its various Profit / (Loss) before tax 49.91 (298.00) products and services. The highly successful launch of GSM services under Tata DOCOMO brand has given a significant Wealth tax 0.01 0.01 boost to subscriber additions. The Company's total subscriber Profit / (Loss) after tax 49.90 (298.01) base as on March 31, 2011 stood at 16.85 million, an increase of 30% over the previous year. The Company's wireless The total income for the year was Rs.3,150.87 Crores which subscriber base in Rest of Maharashtra circle crossed 10 rd included the profit on sale of the wholly owned subsidiary of million, and the Company now has the 3 largest subscriber Rs.834.93 Crores and telecom revenue of Rs.2,248.74 Crores, base in this geography. The Company's wireless subscriber which was higher by 8%. Other income for the year was lower at base in Mumbai circle crossed 5.9 million subscribers and the nd Rs. 67.20 Crores as the scheme of subsidy from Department of Company now has the 2 largest subscriber base in this (“DoT”) under the Universal Service geography. During the year, the Company registered highest Obligations scheme ended on March 31, 2010. Operating incremental wireless subscriber additions of 14.3% and end of expenses increased by 5%, mainly due to costs associated with period market share of 16.7%. the expanded rollout of GSM service besides operations of 3G CDMA & Wireline Services services. The increase in expenses would have been higher but for the reduced handset subsidy and tighter control on The Company offers High Speed Internet Access (“HSIA”) expenses. The Company made a provision for Contingencies of service under the Tata Photon Plus brand across Mumbai and Rs.185.60 Crores towards the outstanding claims/litigation. The major towns in Maharashtra and Goa. During the year, the Company reported EBIDTA of Rs.1,146.77 Crores (including Company increased its focus on CDMA's inherent data profit on sale of subsidiary Rs.834.93 Crores), as compared to capabilities. Five additional Towns in Rest of Maharashtra the previous year's EBIDTA of Rs.540.51 Crores. The circle, now have Photon plus wireless broadband services, depreciation was higher as it included an amount of Rs.184.81 offering speeds upto 3.1 Mbps. Value Added Services (“VAS”) Crores towards additional depreciation after re-estimation of the of Photon TV and the new Photon Music that ride on photon balance useful lives of certain items of plant and machinery. access, are innovative services for customers. After taking into effect of the above, the Company made a profit The Company continued to focus on value added service after tax for the year of Rs.49.90 Crores. offerings. Data and VAS revenues have now grown to account India has the second largest telecom network in the world after for 27% of the wireless revenues. The Company introduced China. As of April'2011, there were 861 million telephone several attractive product and service propositions such as connections in the country of which 827 million were wireless Mobile TV, Music downloads and Personalised Caller tunes. connections. Approximately 15-20 million mobile connections The Company was the first to launch a Wi-fi Router Hub on are being added every month. The national mobile tele-density Photon plus and also on a dual hub supporting Photon plus and is around 72 per hundred. The revenue growth however, is not 3G. in proportion to the subscriber growth, as many subscribers are Tata Photon plus, HSIA has been awarded the coveted “Product having multiple SIMs from different operators which is facilitated of the year 2011” for best innovation under the category by easy availability of the handsets supporting multiple SIMs. Wireless Mobile Broadband Category. Earlier NDTV had rated 6 16th Annual Report 2010-2011

Tata Photon as the Gadget of the year 2010. It also received in speed mobile broadband, Multimedia & Video calling facility and June’2011, six outdoor advertising awards. other video based services like mobile TV, video on demand

etc. As you know, the Company obtained 3G spectrum in Rest of Maharashtra circle, where it was the first and fastest operator to Network Rollout launch 3G services in record time with a range of new services During the year, the Company successfully expanded GSM like Video Calling, Mobile TVand App Stores. The Company did wireless services under 'Tata DOCOMO' brand to reach 898 not pursue its bid for 3G spectrum in Mumbai due to what it towns in Maharashtra and Goa. The Company has also entered considers to be unreasonably high bids. The Company would into international bi-lateral agreement with more than 140 however continue to address the market requirements through operators across different countries to offer seamless Tata Photon plus which is strongly established as a leader in International roaming facility to Tata DOCOMO subscribers. high speed data access. HSIA has also been made available on a growing range of mobile handsets. The Company is also The 3G rollout by the Company is one of the fastest by any exploring the options for 3G roaming with other operators. standards with integration of complex network elements. The Company has laid over 2,175 kms. of buried fibre across The Company has also now spread CDMA voice and Photon Mumbai and already connects over 20,000 buildings with Whiz services in 1,184 towns and provides HSIA service in broadband services. To expand the network further at optimal Maharashtra and Goa. cost, the Company has entered into co-build agreement with other operators. The Company would continue to make During the year, the Company has focused on operational investments to strengthen its Digital Mumbai offerings and efficiency and quality control measures with a constant would increase voice and data penetration in already wired endeavor to further improve its network quality. The Company buildings. has also successfully unlocked the bandwidth potential in its existing transmission network and offered transmission The Company is a Category A (National) ISP Licensee and bandwidth to the new operators. offers a broad range of Internet-related services including Digital Subscriber Lines (“DSL”), leased lines and dial-up Quality and Processes internet access. The Company, along with Tata Teleservices The Company has undertaken ISO 9001:2008 certification to Limited (“TTSL”), has a national footprint for its Tata Indicom demonstrate its capability to consistently provide services that conference call service, with 15 Points of Presence across the enhance customer satisfaction through effective deployment of country for providing local access to conference bridges. a quality management system. The Company was the first basic The Company has also made significant investments in the telecommunication provider to get the coveted ISO 9001:2000 Enterprise and Small and Medium Enterprise (“SME”) business certification in August 2002. In the recent Surveillance audit for segment. It has further expanded its wireline presence in ISO 9001:2008 Certification conducted by TUV India in October Mumbai, Maharashtra & Goa and added a range of Enterprise 2010, the Company was awarded a Certificate of Continuation products and services to become a complete provider of all for ISO 9001:2008 with 'Nil' Non-Conformance. enterprise needs. The Company continues to have significant The Company along with Tata Teleservices Limited has also presence in the wireline segment. recently been awarded the ISO 27001:2005 Certification, for Network quality and Customer service Information Security Management System. As per the Indian Telecom Services Performance Indicators The Company is also taking active part in the Tata Business reports by TRAI, the Company's network is congestion free for Excellence Model (“TBEM”) process, with knowledge sharing last nine consecutive quarters. and appropriate support being extended by Tata Quality Management Services (“TQMS”), a division of The Company continues to improve on the quality of its Limited. customer services. Brand Tata DOCOMO offers easy and simple tariff plans, and easy to navigate customer care IVR and The model enables the leadership to set direction of the direct access to the customer care executives. The Company organization based on its Vision, Mission and Values and to also scored a unique first, with the introduction of a Performance strategize its business priorities based on a variety of Guarantee for CDMA, for high concern areas of call drops, bill environmental factors like competition, industry, technology complaint resolution and wait time at the call center. and regulatory changes as well as internal capabilities. GSM Services Human Resources Tata DOCOMO introduced many innovative Value Added The Company assigns the highest degree of importance to its Services to customers, across Voice, Text & Data verticals. “My human resources which are very critical for a service song” (Reverse Caller tune) was a first and a unique proposition organization like ours. The Human Resources (“HR”) function of in telecom space from Tata DOCOMO, which allows users to the Company constantly strives to achieve the mission of the listen to their favourite songs when they call others. Keeping the Company by creating a favorable work environment and by consumers in mind Tata DOCOMO also introduced Jobs & institutionalizing a performance oriented work culture. Matrimony search on mobile which allows users to search the The Company has laid out strong processes to ensure it attracts perfect Job and the right match for themselves. The Pay for and retains the right talent. what you use concept was extended to GPRS services i.e. pay per site plans. Innovative packaging of Talktime and Data was A rewards & recognition scheme for various awards is in place also done. to encourage employees perform better. During the year, Tata DOCOMO was the first to launch 3G The Company promotes a culture of innovation and has services. We now offer 3G services in 19 towns in Rest of provided various forums (portals) for employees to post Maharashtra circle. In 3G Services, Tata DOCOMO offers high innovative ideas and suggestions. The Company recently won 7

the best innovative idea award under the Tata Innovista 2011 by Cost Audit Branch of Ministry of Corporate Affairs read program. with Section 233B of the Companies Act, 1956 (“Act”) and subject to the approval of the Central Government, the Board of The Company strongly believes that coaching employees Directors of your Company has appointed M/s. Sanjay Gupta & removes barriers and boundaries and this culture emphasizes Associates, Cost Accountants, as Cost Auditor of the Company individual and team achievement towards the common for the accounting year 2011-12. organizational goal. Internal Auditors Regulatory Developments and Important Litigation The Board has empanelled select firms for handling various There have been many regulatory changes, prominent amongst internal audits based on their experience effective April 1, 2011. which are implementation of Mobile Number Portability across India on January 20, 2011, auction of 3G spectrum, initiation of Statutory Auditors process to formulate a comprehensive National Telecom Policy M/s. Deloitte Haskins & Sells (“DHS”), Chartered Accountants, (“NTP”) 2011 and National Frequency Allocation Plan 2011. the present statutory auditors retire at this meeting and are Detailed information on the regulatory developments and eligible for re-appointment. The Audit Committee and the Board important litigation has been provided in the report on recommend their re-appointment. Management Discussion & Analysis of Financial Condition and Results of Operations which forms part of this Annual Report. Statutory Disclosures Directors Directors' Responsibility Statement Effective May 20, 2010, Dr. Mukund Rajan resigned from the Pursuant to the provisions of Section 217(2AA) of the Act, the position of Director and Managing Director of the Company to Directors, based on the representations received from the take up responsibility in another Tata company. Mr. Anil Kumar operating management, confirm that: Sardana was appointed as Managing Director of the Company 1. In the preparation of the annual accounts, the applicable with effect from May 20, 2010. Mr. Anil Kumar Sardana resigned accounting standards have been followed and there are no from the position of Managing Director of the Company to take material departures; up responsibility in another Tata company with effect from close of business hours of January 31, 2011. Mr. Anil Kumar Sardana 2. They have, in the selection of the accounting policies, continued as a Non-Executive director of the Company till May consulted the Statutory Auditors, and have applied them 19, 2011. The Board and the Company record its sincere consistently and made judgments and estimates that are appreciation of the valuable services rendered and contribution reasonable and prudent so as to give a true and fair view of by Dr. Mukund Rajan and Mr. Anil Kumar Sardana especially for the state of affairs of the Company at the end of the bringing in considerable operational efficiency and advantages financial year and of the loss of the Company for the period; arising out of association with and working in tandem with TTSL, 3. They have taken proper and sufficient care, to the best of this has resulted in improving cost effectiveness by way of their knowledge and ability, for the maintenance of combined purchase negotiations, marketing campaigns and adequate accounting records in accordance with the brand building, regulatory affairs. The Board appointed Mr. N. provisions of the Act, for safeguarding the assets of the Srinath as the Additional Director and Managing Director of the Company and for preventing and detecting fraud and other Company w.e.f. February 1, 2011. The resolutions for irregularities; appointment of Mr. N. Srinath as Director and Managing Director of the Company are included in the Notice convening They have prepared the annual accounts on a going concern Annual General Meeting of the Company. The Board basis. recommends these resolutions for your approval. Fixed Deposits

In accordance with the provisions of Article 71 and 72 of the The Company has not accepted any deposits within the Articles of Association of the Company, Mr. Amal Ganguli, Mr. meaning of Section 58A of the Act, and the rules made D. T. Joseph and Prof. Ashok Jhunjhunwala retire by rotation at thereunder. the ensuing Annual General Meeting of the Company and, being eligible, offer themselves for re-election. The Board of Balance Sheet Abstract and General Business Profile Directors recommends their re-election. Information pursuant to Department of Company Affairs' Subsidiary notification dated May 15, 1995, relating to the Balance Sheet Abstract and General Business Profile of the Company is given The Company had a Wholly Owned Subsidiary i.e. 21st Century in the Annual Report for information of the shareholders. Infra Tele Limited (“CITL”) which was sold to Wireless - TT Info Services Limited (now Viom Networks Limited), the passive Conservation of Energy, Technology Absorption and infrastructure subsidiary of TTSL, for net consideration of Foreign Exchange Earnings and Outgo approximately Rs.956 Crores in May'2010. The disclosures as required under the Companies (Disclosure Dividend & Appropriations of Particulars in the Report of the Board of Directors) Rules, 1988 are given below: In view of the accumulated losses, the Directors regret their inability to recommend any dividend for the year under (i) Energy Conservation: consideration. No appropriations are proposed to be made for a. Electricity is used for the working of the Company's the year under consideration. telephone exchanges and other network Cost Audit infrastructure equipment. The Company regularly reviews power consumption patterns across its Pursuant to the Order No. F. NO. 52/26/CAB-2010 dated May 2, network and implements requisite improvements/ 8 16th Annual Report 2010-2011

changes in the network or processes in order to In keeping with the Tata Climate Change policy, the Company optimize power consumption and thereby achieve seeks to continuously find ways to reduce carbon footprint and cost savings. leverage telecommunications reach for initiatives aimed at the benefit of society and the environment including sharing of b. Reduction of Diesel Generator (“DG”) running during tower infrastructure resulting in substantial reductions in energy power cuts through DG on delay Management consumption, encouraging use of audio and video conference system. instead of travel for reduction of carbon dioxide emissions, c. Periodic energy audit and implementation of audit mountain greening, introduction of highly efficient power recommendations. sources and air-conditioning equipment at its network centers, encouraging customers to switch to an e-bill instead of receiving (ii) Technology Absorption: The Company has not imported printed bills, statements and receipts, encouraging employees any technology. The Company has not yet established to re-use stationery, introduction of print manager to discourage separate Research & Development facilities. wasteful paper usage. (iii) Foreign Exchange Earnings and Outgo: The Company generates awareness about various NGOs and (Rs. in Crores) their area of work. The Company inserts ad campaigns of the NGO in the monthly bills sent out to its customers. The initiative Particulars 2010-11 2009-10 was launched to encourage people from different walks of life to Earnings NIL NIL engage in acts of giving be it in cash, time, skills or simple acts of kindness. Prior to the general elections, the Company launched Outgo 11.27 17.61 a campaign urging voters to cast their votes after making an Capital Goods 193.42 577.51 informed choice. The Company uses its wide subscriber network to create awareness through alerts say hightide timings Particulars of Employees during the monsoon via SMS alerts, and public services issues like Swine Flu prevention. The particulars of employees as required under Section 217(2A) of the Act, read with the Companies (Particulars of Unemployed youth from under-privileged families in rural areas, Employees) Rules, 1975 forms part of this report. However, in across various districts of Maharashtra, are chosen to undergo pursuance of Section 219(1)(b)(iv) of the Act, this report is training to become electrical and telecom wiremen in a training being sent to the shareholders of the Company excluding the program designed and supported by the Company. The aforesaid information. Any Member interested in obtaining a telecom wiremen's training was conducted by the Company's copy of such information may write to the Company Secretary at engineers and managers. All the trainees were thereafter the registered office of the Company. referred to franchisees/contractors in Company's areas of operations, and the Company also helped them get suitable Corporate Governance jobs in their respective talukas. A report on Corporate Governance appears after this report. A The Company has in place a Safety Policy. The Safety Policy certificate from M/s. Deloitte Haskins & Sells, Chartered aims at ensuring zero harm to employees and material within Accountants with regard to compliance with the corporate and outside the office premises. The initiatives taken by the governance code by the Company is annexed hereto as Company included: Annexure I and forms part of this report.  Safety sessions for all employees; The Company has fully complied with all mandatory requirements prescribed under Clause 49 of the listing  Fire Mock drill once in every 6 month; agreements with the Bombay Stock Exchange Limited (“BSE”)  Percolation of Safety Guidelines and Knowledge and the National Stock Exchange of India Limited (“NSE”). The Management on health and safety through mailers (Do's & Company has also implemented some of the non-mandatory Don'ts during emergency, Ergonomic, Road Safety, provisions. articles related to Health, Safety during Fire, Flood and Corporate Sustainability Earthquake etc.). The contribution of the towards nation building has Acknowledgements been far-reaching. As is the ethos of large Tata conglomerate, The Directors wish to place on record their sincere appreciation the Company too, has made small but significant contributions of the assistance and support extended by the employees, to this holistic canopy of corporate sustainability. customers, financial institutions, banks, vendors, Government The Company has always promoted the highest standards of and others associated with the activities of the Company. corporate ethics and compliance in dealing and conduct of its For and on behalf of the Board of Directors operations. The Company is committed to pursuing initiatives relating to environmental preservation, management of natural Mumbai, Kishor A. Chaukar resources, community health, education and empowerment of June 28, 2011 Chairman children. 9

Annexure I AUDITORS' CERTIFICATE

To the members of Tata Teleservices (Maharashtra) Limited We have examined the compliance of conditions of Corporate Governance by Tata Teleservices (Maharashtra) Limited for the year ended on March 31, 2011, as stipulated in Clause 49 of the Listing Agreement of the said Company with the stock exchanges. The Compliance of conditions of Corporate Governance is the responsibility of the Management. Our examination was limited to procedures and implementation thereof, adopted by the Company for ensuring compliance of the conditions of Corporate Governance. It is neither an audit nor an expression of opinion on the financial statements of the Company. In our opinion and to the best of our information and according to the explanations given to us, we certify that the Company has complied in all material aspects with the conditions of Corporate Governance as stipulated in the above-mentioned Listing Agreement.

We state that no investor grievance is pending for a period exceeding one month against the Company, based on the records maintained by the Investors Services Department and as certified by the Compliance Officer of the Company. We further state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency or effectiveness with which the Management has conducted the affairs of the Company. For Deloitte Haskins & Sells Chartered Accountants (Registration No. 117366W)

A. B. Jani Partner Mumbai, Dated: April 26, 2011 Membership No: 46488

DECLARATION REGARDING COMPLIANCE BY BOARD MEMBERS AND SENIOR MANAGEMENT PERSONNEL WITH THE COMPANY'S CODE OF CONDUCT

This is to confirm that the Company has adopted a Code of Conduct for its employees including the Managing Director. In addition, the Company has adopted a Code of Conduct for its Non-Executive Directors. Both these codes are available on the Company's website. I confirm that the Company has in respect of the financial year ended March 31, 2011, received from the Senior management Team of the Company and the Members of the Board a declaration of compliance with the Code of Conduct as applicable to them. For the purpose of this declaration, Senior Management Team means the Chief Financial Officer, employees in the General Manager cadre and above and the Company Secretary as on March 31, 2011.

Mumbai Mr. N. Srinath April 26, 2011 Managing Director 10 16th Annual Report 2010-2011

CORPORATE GOVERNANCE REPORT FOR THE YEAR 2010-11 STATEMENT OF COMPANY'S PHILOSOPHY ON quarter, half-year or financial year, as the case may be. As CORPORATE GOVERNANCE regards declaration of interim dividend and other matters referred to in (c) to (g) above, Managing Director/Chief The Company believes in the highest standards of good and Executive Officer is required, well before initiation of such ethical corporate governance practices. The Company's Board activity/project, to form a core team of Designated Employees of Directors (“the Board”) has adopted the Tata Code of and/or Designated Group Persons who would work on such Conduct for its employees including its senior management and assignment. Managing Director/Chief Executive Officer is also Managing Director. The Company has also adopted a Code of required to designate a senior employee who would be in- Conduct for its Non-Executive Directors. Both these Codes are charge of the project. Such team members are required to available on the website of the Company i.e. execute an undertaking not to deal in the securities of the www.tatateleservices.com. The Company's corporate Company till the Price Sensitive Information regarding the governance philosophy has been further strengthened through activity/project is made public or the activity/project is the Tata Code of Conduct for Prevention of Insider Trading and abandoned and the Trading Window would be regarded as Code of Corporate Disclosure Practices. closed for them. The Trading Window is opened 24 (twenty- TATA CODE OF CONDUCT four) hours after the information referred to above is made public. The Tata Code of Conduct governs: WHISTLE BLOWER POLICY (a) Conduct of business in consonance with national interest; The Company has adopted a Whistle Blower Policy, which (b) Fair and accurate presentation of financial statements; affords protection and confidentiality to whistle blowers. The Audit Committee Chairman is authorized to receive from whistle (c) Being an Equal Opportunities employer; blowers Protected Disclosures under this policy. The Audit (d) Prohibition of taking gifts and donations, which can be Committee is also authorized to supervise the conduct of perceived to be intended to obtain business or investigations of any disclosures made by whistle blowers in uncompetitive favours; accordance with the policy. (e) Practicing political non-alignment; No class of personnel has been denied access to the Audit Committee. (f) Maintaining quality of products and services; Code of Conduct (g) Being a good Corporate Citizen; All Directors and senior management personnel have affirmed (h) Ethical conduct; and compliance with the respective Codes for the financial year (i) Commitment to enhancement of shareholder value. ended March 31, 2011. The declaration by Managing Director in this respect appears elsewhere in this Annual Report. CODE OF CONDUCT FOR PREVENTION OF INSIDER TRADING BOARD OF DIRECTORS

In compliance with the Securities & Exchange Board of India Composition (Prevention of Insider Trading) Regulations, 1992 As on March 31, 2011, the Company had 10 Directors with a (“Regulations”), the Company had framed a Code of Conduct Non-Executive Chairman. 9 (90%) Directors were Non- for Prevention of Insider Trading and Code of Corporate Executive, and 5 (50%) of them were Independent Directors. Disclosure Practices (“Code”) for prevention of insider trading The Company is managed by Managing Director under the and ensuring timely disclosures of all material price sensitive supervision and control of the Board. Managing Director is information in a transparent manner. In terms of the Code, assisted by a team of highly qualified and experienced specified persons (Directors/Officers/ Designated Employees) professionals. of the Company are prohibited from dealing in the securities of the Company during the period when the Trading Window is The Board has agreed that Non-Executive Directors are not and closed. The Trading Window for dealing in securities of the shall not be responsible for the day-to-day affairs of the Company is closed for the following purposes, namely (a) Company. declaration of financial results (quarterly, half-yearly and annual), (b) declaration of dividends (interim and final), (c) issue None of the Directors is a member in more than 10 mandatory of securities by way of public/rights/bonus issue etc., (d) any committees nor acts as a Chairman in more than 5 mandatory major expansion plans or execution of new projects, (e) committees across all public companies in which he is a amalgamation, mergers, takeovers and buy-back, (f) disposal Director. of whole or substantially whole of the undertaking, and (g) any The Board composition and the number of Chairmanships/ significant changes in policies, plans or operations of the Directorships of the Board and Chairmanships/Memberships of Company. In respect of declaration of financial results, the the Committees of the Board held by each of the Directors as on Trading Window remains closed from the end of the respective March 31, 2011 is given below. 11

Name of the Director Category Number of Relationship No. of Directorships No. of Committee Shares held in the with other in all Public Positions held in all Company including Directors Companies * Public Companies** shares held by dependents Chairman Member Chairman Member Mr. Kishor A. Chaukar Non-Executive - None 4 9 1 4 (Chairman) Mr. Amal Ganguli Independent - None - 11 5 5 Non-Executive Mr. Nadir Godrej Independent - None 3 10 1 2 Non-Executive Prof. Ashok Independent 4,700 None - 8 1 5 Jhunjhunwala Non-Executive Mr. D. T. Joseph Independent - None - 7 1 5 Non-Executive Mr. N. S. Independent - None - 2 1 2 Ramachandran Non-Executive Mr. S. Ramadorai Non-Executive - None 6 7 4 5 Mr. Anil Sardana Non-Executive - None 1 7 - - Mr. Kochi Takahara Non-Executive - None - 1 - - Mr. N. Srinath Executive - None - 6 - 2 (Managing Director) * Excludes alternate directorships and directorships in private, foreign and Section 25 companies. ** Represents Chairmanships / Memberships of only Audit Committee and Shareholders / Investors' Grievance Committees across all public limited companies (listed as well as unlisted) including those of the Company. Board Meetings and General Meeting All information required to be placed before the Board of The Board met at least once in each quarter and the maximum Directors under Clause 49 of the listing agreements, has been time gap between two Board meetings did not exceed the limit duly placed. Dates of the Board/Committee Meetings in the prescribed in Clause 49 of the listing agreement. Eight meetings ensuing year are decided before the start of the financial year of the Board were held during the financial year ended on March and are communicated to all the Directors. Additional meetings 31, 2011. The meetings of the Board were held on April 30, of the Board are held when deemed necessary by the Board. 2010, May 20, 2010, July 29, 2010, August 9, 2010, October 25, The Agenda along with the explanatory notes is sent in advance 2010, January 13, 2011, January 27, 2011 and March 4, 2011. to the Directors. The details of participation of the Directors of the Company Directors' Remuneration during the financial year ended March 31, 2011 in Board None of the Non-Executive Directors have any material Meetings and Annual General Meeting (“AGM”) of the Company pecuniary relationship or transaction with the Company. is as under: Name of the Director No. of Board Whether Independent Directors: Sitting fees of Rs.15,000/- per head per Meetings during attended meeting was paid to the Independent Directors for physically 2010-11 AGM held on attending meetings of the Board, Audit and Remuneration Committees and Rs.5,000/- per head per meeting for other Held Attended August 9, 2010 Committee meetings. Mr. Kishor A. Chaukar 8 8 Yes @ Non-Executive Non-Independent Directors: No sitting fees is Mr. Amal Ganguli 8 3 No @ paid to Non-Executive Non-Independent Directors. Mr. Nadir Godrej 8 6 Yes The Company also reimburses out-of-pocket expenses Prof. Ashok Jhunjhunwala 8 7 Yes incurred by the Directors for attending Meetings and for Mr. D. T. Joseph 8 6 Yes business of the Company. % Dr. Mukund Rajan 2 1 Not Applicable The Company has paid remuneration by way of salary, Mr. N. S. Ramachandran 8 7 Yes allowances, retiral benefits, perquisites, and performance pay Mr. S. Ramadorai 8 5 Yes to its Managing Director. Increments are decided by the Remuneration Committee within the salary scale approved by Mr. Anil Kumar Sardana 8 6 Yes the Members and the limits approved by the Central Mr. Kochi Takahara 8 7 Yes Government. The contract with Managing Director may be Mr. N. Srinath* 1 1 Not Applicable terminated by either party by giving six months notice or the Company paying six months salary in lieu thereof. There is no % Ceased to be a Director w.e.f. May 20, 2010. separate provision for payment of severance fees. Mr. N @ In addition also participated in one meeting over Srinath, who has been appointed Managing Director of the teleconference. Company effective February 1, 2011 will not draw any * Appointed as Additional Director and Managing Director remuneration from the Company. w.e.f. February 1, 2011, details provided from the date of appointment. 12 16th Annual Report 2010-2011

None of the Directors has been issued any stock options by the The Audit Committee met at least once in each quarter and the Company during the year or anytime in the past. maximum time gap between two Audit Committee meetings did The details of remuneration paid by the Company to its not exceed the limit prescribed in Clause 49 of the listing Directors during the financial year 2010-11 are as follows: agreement. Four Audit Committee meetings were held during the financial year ended on March 31, 2011. The meetings were A) Non-Executive Directors held on April 29, 2010, July 29, 2010, October 25, 2010 and Name of the Director Sitting Fees (Rs.) January 27, 2011. Mr. Kishor A. Chaukar - Terms of Reference Mr. Amal Ganguli 60,000 The terms of reference for the Audit Committee are broadly as Mr. Nadir Godrej 90,000 under: Prof. Ashok Jhunjhunwala 1,65,000 a) Overseeing the Company's financial reporting process and Mr. D. T. Joseph 90,000 the disclosure of its financial information to ensure that the Mr. N. S. Ramachandran 1,85,000 financial statements are correct, sufficient and credible. Mr. S. Ramadorai - b) Recommending the appointment and removal of external Mr. Koichi Takahara - auditor, fixation of audit fee and also approval of payment for any other services. B) Managing Director (in Rupees) c) Reviewing the quarterly, half yearly and annual financial Name of Salary Allowances Retirals & Performance Total statements before submission to the Board, focusing primarily on any related party transactions as per the Director Perquisites Pay* Accounting Standard 18. Dr. Mukund 3,45,484 1,72,742 10,79,507 56,40,000 72,37,733 @ d) Reviewing with the management, external and internal Rajan auditors, the adequacy of internal control systems and Mr. Anil 5,03,342 43,29,456 - - 48,32,798 ensuring compliance therewith. Kumar # e) Reviewing the adequacy of the internal audit function, Sardana including the structure of the internal audit department, * Performance Pay for FY 2009-10 was paid in 2010-11. staffing and seniority of the official heading the department, @ Remuneration paid for the period April 1, 2010 to May 20, reporting structure, and coverage and frequency of internal 2010. audit. # Remuneration paid for the period May 20, 2010 to January f) Discussing with internal auditors any significant findings 31, 2011. and follow up thereon. g) Reviewing the findings of any internal investigations by the AUDIT COMMITTEE internal auditors into matters where there is suspected Composition fraud or irregularity or a failure of internal control systems of The Audit Committee of the Board of the Company has been a material nature and reporting these matters to the Board. constituted in compliance with the provisions of Clause 49 of the h) Discussing with external auditors before the listing agreement read with Section 292A of the Companies Act, commencement of the audit about the nature and scope of 1956 (“Act”) and comprises 4 members. All of them are Non- audit as well as having post-audit discussions to ascertain Executive Directors and 3 of them are Independent Directors. any areas of concern. The Committee functions under the Chairmanship of Prof. i) Reviewing the Company's financial and risk management Ashok Jhunjhunwala. The Audit Committee meetings are also policies. attended by Managing Director, Chief Financial Officer, j) Looking into reasons for any substantial defaults in Statutory Auditors and Internal Auditors. The functional heads payment to depositors, debenture holders, shareholders are also invited as and when required. The Company Secretary (in case of non payment of declared dividends) and acts as the Secretary to the Committee. The composition of the creditors. Committee is as follows: k) Reviewing the functioning of the Whistle Blower Policy adopted by the Company. Name of Member Category No. of Meetings l) Reviewing the report on Management Discussion & during 2010-11 Analysis of Financial Condition and Results of Operations, Held Attended to be included in the Company's Annual Report to its shareholders. Prof. Ashok Independent, 4 4 Jhunjhunwala, Non-Executive Management Discussion & Analysis of Financial Condition and (Chairman) Results of Operations, statements of related party transactions, Mr. N. S. Independent, 4 4 internal audit reports, fraud-related reports, quarterly results, Ramachandran Non-Executive management letters from auditors, proposals and terms of appointment of internal auditors have been regularly placed Mr. S. Ramadorai Non-Executive 4 2 before the Audit Committee for review during the financial year Director 2010-11. Mr. Amal Ganguli* Independent, 2 1** INVESTORS' GRIEVANCE COMMITTEE Non-Executive Composition & Terms of Reference * Appointed a member of the Audit Committee on August 9, 2010. The Investors' Grievance Committee of the Board looks into ** In addition, participated in one meeting over redressal of the shareholders' complaints in respect of any teleconference. matter including transfer of shares, non-receipt of annual report, 13

dematerialization of shares, issue of duplicates and renewed Board and take steps to refresh the composition of the Board share certificates, etc. During the financial year 2010-11, the from time to time, and Executive Committee to review business Committee met once on March 4, 2011. The Committee is and strategy. authorized to delegate its powers to officers and employees of RISK MANAGEMENT the Company and/or of the Company's Registrar and Share Transfer Agent. The delegates regularly attend to share transfer The Company has devised a formal Risk Management formalities at least once every 15 days. The Composition of the Framework for risk assessment and minimisation. Further, the Committee is as follows: Company assesses the risk management framework periodically. The scope of the Audit Committee includes review Name of Member Category No. of Meetings of the Company's financial and risk management policies. during 2010-11 GENERAL BODY MEETINGS Held Attended The Company's first statutory meeting was held on April 24, 1 1 Mr. N. S. Independent, 1995. Till date, the Company has held 15 AGMs and 13 Extra Ramachandran Non-Executive Ordinary General Meetings of the shareholders. The details of (Chairman) Director the last 3 AGMs are as under: 1 1 Mr. N. Srinath Executive Particulars Date Venue Director 13th AGM August 12, 2008 Mumbai th Mr. Madhav Joshi, Chief Legal Officer & Company Secretary, is 14 AGM August 13, 2009 Mumbai the Compliance Officer of the Company. 15th AGM August 9, 2010 Mumbai

The details of complaints received and redressed during the Details of special resolutions passed in the above referred year is as follows: meetings are as under: Opening Received Resolved Closing Particulars Section under Purpose Balance during the during Balance of the AGM which resolution year the year was passed

0 155 154 1* th 15 AGM Section 198, 269, Appointment of Mr. Anil * since resolved. held on 309 and 316 of the Kumar Sardana as August 9, Companies Act, Managing Director and The status of complaints is reported to the Board on a quarterly 2010 1956 remuneration for a basis. period of 3 years. REMUNERATION COMMITTEE Common Seal and Amendment of Article The Company has constituted a Remuneration Committee for Execution of 91 to simplify provisions the purpose of approving from time to time, the remuneration Documents for affixation of the payable to Managing Director and Executive Director/s and to common seal. discharge any other duties and functions as may be specified under the law, or to perform such task/s as may be entrusted by POSTAL BALLOT the Board from time to time. During the financial year 2010-11, the Committee met once on June 10, 2010. The Company's No postal ballot was conducted during the financial year ended Remuneration Committee comprises 3 Directors, all of whom on March 31, 2011. are Non-Executive Directors and two are Independent RELATED PARTY TRANSACTIONS Directors. The Committee's composition is as under: There were no materially significant related party transactions Name of Member Category No. of Meetings during the year, which in the opinion of the Board may have during 2010-11 potential conflicts with the larger interests of the Company. Apart from paying sitting fees, there was no pecuniary Held Attended transaction undertaken by the Company with the independent/ Mr. N. S. Independent, 1 1 non-executive directors during the year ended March 31, 2011. Ramachandran, Non-Executive Transactions with related parties are disclosed in Note No. 15 of (Chairman) Director Schedule 17 to the Accounts in the Annual Report. Prof. Ashok Independent, 1 -* COMPLIANCE WITH CAPITAL MARKET LAWS Jhunjhunwala Non-Executive Director There has neither been any non-compliance on the part of the Company on any matter related to capital markets during the 1 1 Mr. Kishor A. Non-Executive last three years, nor have any penalties or strictures been Chaukar Director imposed on the Company in this respect. * Prof. Ashok Jhunjhunwala participated over As required under Clause 49 of the listing agreement, for the teleconference. financial year 2010-11, the Company has submitted to the The Board has also constituted other Committees i.e. Ethics Bombay Stock Exchange Limited and the National Stock and Compliance Committee to consider matters relating to Exchange of India Limited, quarterly compliance reports signed Insider Trading Code, Nominations Committee to make by the Compliance Officer of the Company, confirming recommendations regarding the composition of the Board and compliance with the mandatory requirements of the said identification of Independent Directors to be inducted on the Clause. 14 16th Annual Report 2010-2011

MEANS OF COMMUNICATION exchanges within the stipulated time. The quarterly, half yearly and annual results are published in Market Price Data Marathi and English Newspapers. The financial results, The High & Low on closing price of the Company's shares shareholding patterns, press releases, and presentations made during each month in the last financial year, were as follows: to institutional investors and analysts are also available on the website of the Company i.e. www.tatateleservices.com. (Amount in Rupees) CERTIFICATION WITH RESPECT TO FINANCIAL BSE NSE Month STATEMENTS High Low High Low The certificate as required under Clause 49 of the listing April 2010 24.80 23.00 24.85 23.00 agreement is furnished by Managing Director and the Chief May 2010 22.95 19.10 23.05 19.05 Financial Officer of the Company to the Board of Directors of the Company with respect to accuracy of financial statements and June 2010 22.80 19.30 22.85 19.30 adequacy of internal controls. July 2010 22.85 21.35 22.85 21.35 IMPLEMENTATION OF NON-MANDATORY CORPORATE August 2010 24.80 22.45 24.90 22.40 GOVERNANCE REQUIREMENTS September 2010 23.65 22.05 23.65 22.10 The Company has implemented the nonmandatory corporate October 2010 24.85 22.50 24.90 22.50 governance requirements prescribed under Clause 49 of the November 2010 23.40 18.80 23.40 18.75 listing agreement with the stock exchanges with respect to Remuneration Committee and Whistle Blower Policy. December 2010 19.95 18.35 20.00 18.35 MANAGEMENT DISCUSSION & ANALYSIS January 2011 20.15 17.20 20.10 17.20 The Management Discussion and Analysis is attached and February 2011 16.95 14.40 17.00 14.40 forms part of this Annual Report. March 2011 17.10 14.79 17.10 14.75 GENERAL SHAREHOLDER INFORMATION Performance of the Company's Share Price in comparison Annual General Meeting to BSE and NSE indices The ensuing Sixteenth Annual General Meeting is scheduled to The performance of TTML's Share Price vis-à-vis the broad be held on Tuesday, August 16, 2011 at 1500 hours at based BSE and NSE indices during the financial year 2010-11 is Kamalnarayan Bajaj Hall & Art Gallery, Bajaj Bhavan, Jamnalal as under: Bajaj Marg, 226, Nariman Point, Mumbai 400 021. Particulars TTML Share TTML Share Financial Year Price v/s BSE Price v/s NSE The Company follows the April - March, financial year. The TTML BSE TTML NIFTY financial results for first, second (half yearly) and third quarters Share Sensex Share are generally published in July, October and January Price (Rs.) Price (Rs.) respectively. Annual audited financial results are generally As on April 1, 23.80 17,692.62 23.90 5,290.50 published in April/May/June. The financial results are uploaded 2010 on the Company's website. As on 17.10 19,445.22 17.10 5,833.75 The same are also uploaded on the website of the Corporate March 31, 2011 Filing and Dissemination System viz. www.corpfiling.co.in and are available for public viewing effective from April 1, 2010 as Change (%) (28.15) 9.91 (28.45) 10.27 Securities and Exchange Board of India (“SEBI”) has discontinued Electronic Data Information Filing and Retrieval Registrar and Share Transfer Agents System (“EDIFAR”) site w.e.f. April 1, 2010. The Company has appointed TSR Darashaw Limited (formerly Date of Book Closure Tata Share Registry Limited) as its Registrar & Share Transfer Agents. Shareholders are advised to approach TSR Darashaw The share transfer books & the Members' register will be closed Limited (“TSR”) on the following address for any shares & demat between Friday, August 5, 2011 to Tuesday, August 16, 2011 related queries and problems: (both days inclusive) for the purposes of the Sixteenth Annual General Meeting. TSR Darashaw Limited Listing on the Stock Exchanges and Stock Code 6-10, Haji Moosa Patrawala Industrial Estate, 20, Dr. E. Moses Road, Near Famous Studio, The Company's equity shares are listed on the following Mahalaxmi, Mumbai 400 011. exchanges: Tel.: 91 22 6656 8484 Bombay Stock Exchange The National Stock Exchange Fax: 91 22 6656 8496 Limited (“BSE”) of India Limited (“NSE”) E-mail: [email protected] P. J. Towers Exchange Plaza, 5th floor, Website: www.tsrdarashaw.com Dalal Street Plot No. C/1, 'G' Block, Share Transfer System Mumbai - 400 023. Bandra-Kurla Complex, Bandra (E), Mumbai - 400 051. All physical share transfers are handled by TSR. The transferee is required to furnish the transfer deed duly completed in all Stock Code : 532371 Stock Symbol : TTML respects together with the share certificates to TSR at the above said address in order to enable TSR to process the transfer. As The Company has paid annual listing fees to both the stock regards transfers of dematerialized shares, the same can be 15

effected through the demat accounts of the transferor/s and The Company had a total of 5,12,872 shareholders as on March transferee/s maintained with recognized Depository 31, 2011. Participants. The quarterly shareholding patterns filed with the stock Distribution of Shareholding exchanges are also uploaded on the website of the Company and the same are also uploaded on the website of the Corporate The broad shareholding distribution of the Company as on Filing and Dissemination System viz. www.corpfiling.co.in and March 31, 2011 with respect to categories of investors was as are available for public viewing effective from April 1, 2010 as follows: SEBI has discontinued EDIFAR site w.e.f. April 1, 2010. Category of Investors Percentage of Shareholding Dematerialization of Shares & Liquidity As on As on As of March 31, 2011, 99.83% of the total equity shares issued March 31, March 31, by the Company have been dematerialised. The equity shares 2011 2010 of the Company are under compulsory dematerialized form. The equity shares of the Company are available for Promoters & Promoter Indian 65.60* 65.60 dematerialisation with both the depositories in India i.e. National Group Companies Foreign 12.12 12.12 Securities Depository Limited (“NSDL”) and Central Depository International Investors 1.73 1.49 Services (India) Limited (“CDSL”). (FIIs / NRIs / OCBs / Foreign Outstanding Employee Stock Options, GDRs, ADRs, etc. Banks / Foreign Corporate Bodies) The Company has not issued any GDRs/ADRs/Warrants. 0.42 0.76 Indian Financial Institutions / There are no outstanding Foreign Currency Convertible Bonds Banks / Mutual Funds (“FCCBs”) and Employee Stock Options. Private Bodies Corporate 2.24 2.60 Where we offer service Individuals 17.89 17.43 The Company now offers GSM service in 898 Towns and TOTAL 100.00 100.00 CDMA services in 1,184 towns in the States of Maharashtra and Goa through its telephone exchanges located at Turbhe (Navi * As on March 31, 2011, Tata Teleservices Limited Mumbai), Nariman Point (Mumbai), Marol (Mumbai), Andheri (Promoter) has pledged their shareholding equivalent to (Mumbai), , Nasik, Panjim, Nagpur, and Kolhapur. 26% (Shares pledged by Promoters of the Company as on March 31, 2010 was 49.7%) of the Company's total paid-up Address for correspondence capital to secure the term loans/facilities availed by the Shareholders holding shares in physical mode are requested to Company. direct all equity share related correspondence /queries to TSR The broad shareholding distribution of the Company as on and only the non-share related correspondence and complaints March 31, 2011 with respect to size of holdings was as follows: regarding TSR should be addressed to the Compliance Officer at the registered office of the Company. Shareholders holding Range % of Paid-up % of Total No. of shares in electronic mode (dematerialized) should address all (No. of Shares) Capital Shareholders shares-related correspondence to their respective Depository 1 to 500 4.20 75.03 Participants only. 501 to 1000 3.15 13.66 Auditors' Certificate 1001 to 2000 2.64 6.24 The certificate dated April 26, 2011 issued by M/s. Deloitte 2001 to 3000 1.38 1.95 Haskins & Sells, Statutory Auditors on compliance with the 3001 to 4000 0.81 0.82 Corporate Governance requirements by the Company is 4001 to 5000 0.92 0.71 annexed to the Directors' Report. 5001 to 10000 1.94 0.96 10001 and above 84.96 0.63 Total 100.00 100.00 16 16th Annual Report 2010-2011

MANAGEMENT DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Industry Structure and Developments  Audit by The Comptroller and Auditor General The Indian telecom services sector has witnessed tremendous (“CAG”): The Association of Unified Telecom Service subscriber growth, primarily driven by intense competition, Providers of India (“AUSPI”) alongwith with its members entry of new operators and falling tariffs. Today, India has the has filed a Petition before TDSAT challenging the letters second largest telecom network in the world after China. As of dated March 16, 2010 whereby DoT sought information April'2011, there were more than 861 million telephone from the Telecom Service Providers for audit by CAG. The connections in the country of which 827 million were wireless Petition challenges the powers of CAG to audit the connections. Approximately 15-20 million mobile (SIM) accounts of private companies and Rules 5(b) of the TRAI connections are being added every month. The national mobile Service Providers (Maintenance of Books of Accounts and tele-density is around 72 per hundred. Mobile Number other Documents) Rules 2002. The TDSAT has struck Portability (“MNP”) was launched across the country on January down the said appointment. A Petition challenging the 20, 2011. aforesaid Rules is pending before the Delhi High Court. Urban Teledensity is around 160% with presence of multiple  Public Interest Litigation (“PIL”) in Supreme Court: Mr. SIMs while the rural teledensity is around 35%.This highlights Prashant Bhushan, Advocate has filed a PIL before the major growth potential in rural areas. Indian telecom companies Supreme Court of India challenging the Policy of 'First Cum have been expanding their networks and are significantly First Service' based upon the press release dated January increasing their geographical coverage in rural India. 10, 2008 and all actions taken pursuant thereto including In India, there are various kinds of telecom service licences, cancellation of licences and allocation of spectrum as a including access licences, i.e. basic/fixed service, cellular, result thereof. TRAI had recommended cancellation of Unified Access (basic + cellular) service; carrier licences, i.e. some licences as the licensees failed to meet in time the national long distance and international long distance; licences roll-out obligations embodied in the UAS licenses. Similar for internet services; VSAT licences; and IP-1 registration for Petition has been filed by Dr. Subramanium Swami as well. passive infrastructure (towers, ducts, fibre). Unified Access In both the PILs the arguments had been concluded and Service Licence (“UASL”) operators like the Company can judgement is reserved by the Supreme Court. provide, besides fixed & mobile services, internet, internet  Dual technology: DoT had issued on October 19, 2007, a telephony and broadband services under their UASL licence. press release permitting the use of alternate wireless Unrestricted competition is allowed in all the categories. technologies by UAS Licensees. UAS Licensees who were REGULATORY DEVELOPMENTS using CDMA technology for wireless access are now Details of major developments on the regulatory front are as permitted to use GSM technology and vice-versa. In under: August 2008, the Hon'ble Delhi High Court upheld the  National Telecom Policy 2011: The Department of Government's decision. On March 31, 2009, TDSAT Telecommunications (“DoT”) has initiated the process to dismissed a petition filed by the Cellular Operators formulate a comprehensive National Telecom Policy Association of India (“COAI”) and other GSM operators (“NTP”) 2011. This will take into account the changes that against the Government's decision to allow dual have taken place in the industry since NTP 1999. A technology. TDSAT also directed DoT to immediately Committee has been constituted with Additional Secretary review the subscriber base of BSNL and Mahanagar (T) and Advisor (T) as the co-chairman and DDGs as Telephone Nigam Limited (“MTNL”) in all the circles and Members. Two rounds of the meetings have already taken withdraw the spectrum allocated beyond the criteria laid place since then and eight sub-groups have been down by DoT. The Hon'ble Supreme Court on appeals by constituted to work on specific areas. Hon'ble Minister of BSNL and MTNL has for the time being, stayed such Communications Mr. Kapil Sibal has held round table requirement to surrender the spectrum. COAI has also conferences with stake-holders on broadband, Unified filed appeal before the Supreme Court against the order of licence. TDSAT.  National Frequency Allocation Plan 2011: The current  Telecommunication Interconnection Usage Charges policy document on spectrum viz. the National Frequency R e g u l a t i o n , 2 0 0 3 : T h e T R A I a m e n d e d Allocation Plan- 2008 (“NFAP-2008”) was made effective Telecommunication Interconnection Usage Charges from April 1, 2009. The fast emergence of new wireless R e g u l a t i o n , 2 0 0 3 v i d e T e l e c o m m u n i c a t i o n technologies and applications necessitated the review of Interconnection Usage Charges (Tenth Amendment) NFAP-2008. Accordingly, the review/ revision of NFAP has Regulations, 2009 which became effective from April 1, been undertaken by DoT and draft NFAP 2011 has been 2009 reduced termination charges for all types of domestic published. calls viz. fixed to fixed, fixed to mobile, mobile to fixed and  Access Deficit Charges a levy paid by private telecom mobile to mobile to 20 paise per minute from 30 paise per operators to Bharat Sanchar Nigam Limited (“BSNL”) for minute, and increased termination charges for incoming meeting the cost of unprofitable operations in rural areas, international calls to 40 paise per minute from 30 paise per was abolished by The Telecom Regulatory Authority of minute. This change has been challenged by incumbent India (“TRAI”) w.e.f. April 1, 2008. Telecom Disputes operators before the TDSAT. The Company, Tata Settlement Appellate Tribunal (“TDSAT”) on petition by Teleservices Limited (“TTSL”) and AUSPI have filed an BSNL upheld TRAI action. Appeals have been filed by appeal demanding a 'Bill & Keep' arrangement. Arguments BSNL before Supreme Court against these orders of the in all these appeals have been concluded in March'2010. TDSAT. Being statutory appeals these have been The TDSAT vide its judgment dated September 29, 2010 admitted by Supreme Court. However, no stay of TDSAT had remanded the matter for fresh consideration by TRAI order has been granted. in a time bound manner after holding consultation with all 17

the stakeholders. TRAI has filed statutory appeal against over the next four years and has made the said judgement of TDSAT in Supreme Court, inter alia recommendations for facilitating Mergers & challenging the powers TDSAT to interfere with the Acquisitions. DoT is yet to take decision on these regulations framed by TRAI. The appeal has been recommendations. admitted and would come up for hearing in due course,  Security Clearance Before Purchase of Equipment: however there is no stay in the interim. DoT vide letter dated December 3, 2009 has amended the  Telecom Commercial Communications Customer UASL agreement asking all the service providers to take Preference Regulations, 2010: TRAI has announced a security clearance from DoT before placing purchase new Unsolicited Commercial Communications (“UCC”) orders. Almost after a year, some relaxations were Regulation in December, 2010. It has been amended 5 announced and the operators are permitted to import times and the final date of implementation is still awaited equipment when they submit legal undertakings. Fresh from TRAI. guidelines have been announced by DoT on May 31, 2011  Spectrum which include some relaxations. (a) Allocation of 3G Spectrum  Re-verification of Mobile Subscribers: DoT vide their letter dated September 30, 2009, has allowed all the The Company has succeeded in winning the bid for operators to re-verify the subscribers from October 1, 2009 3G spectrum in Maharashtra circle (excluding till October 31, 2010 to avoid penalty. The date was further Mumbai but including Goa) with a bid value of extended first till December 31, 2010 and then on Rs.1,257.82 Crores. The Company received 3G representation by Apex Committee on Telecom (“ACT”), Spectrum in September'2010 and was able to launch finally till March 31, 2011. 3G services in November'2010, the first private operator to launch the same.  Quality of Service (QoS):  DoT asked all 3G operators to withdraw certain 3G For customer complaints, service requests, Value services for security reasons and subsequently Added Services (VAS) deactivation and service allowed them on January 14, 2011 with some termination, toll free number 198 has been activated. requirements to be completed before end of This will be a common number for all service providers June'2011. for all products.  (b) Guidelines for allocation of additional Spectrum Performance parameters of Network, Billing and Customer Care are required to be published on the Based on TRAI recommendations (which website each quarter. An online Telecom Consumers discriminate between GSM and CDMA operators by Grievance Monitoring System is likely to be allotting spectrum in a 2:1 ratio based on the introduced. unsubstantiated presumption that CDMA technology is significantly more spectrum efficient), DoT issued  Efficient Utilisation of Numbering Resources: The fresh spectrum allocation guidelines in January'2008, availability of new numbers is under severe pressure in increasing substantially the subscriber number view of the rapid growth of mobile connections. The TRAI thresholds, making it more difficult for established has initiated discussions to review the current method of service providers to acquire more spectrum and allocation and sought suggestions for making more improve their quality of service to subscribers. DoT numbers available in the 10 digit format. They are also had set up a committee on June 16, 2008 to review the considering for the long term the feasibility of using 11 digit spectrum allocation criteria. TDSAT, in a recent format. The possibility of re-allocation of levels now allotted judgment, has held that the TRAI recommendations for fixed line numbers to mobile is high. DoT vide their letter were made in a non-transparent manner and has dated February 7, 2011 has changed the criterion for advised DoT to issue fresh guidelines after getting the allocation of new numbering levels which is discriminatory Second Spectrum Committee report. Second towards new entrants like the Company in GSM field. Committee submitted its report on May 13, 2009 Representations have been made by associations. recommending auction of 2G spectrum beyond initial Opportunities and Threats allotment of spectrum of 4.4 MHz. Report had been The Company offers CDMA and GSM telecom services in referred by DoT to TRAI. TRAI has submitted its Mumbai and Maharashtra (comprising Maharashtra and Goa recommendation on Spectrum Management and states) telecom circles. The Company successfully launched Licencing Framework on May 11, 2010. GSM services in August'2009, as a result of which it today has In its recommendation of May 11, 2010, TRAI has one of the most complete portfolios of telecom services in the capped the spectrum allotment to GSM and CDMA. It country including landline, wireless (CDMA & GSM), voice, data has recommended that committed spectrum is 6.2 and broadband services. MHz for GSM and 5 MHz in respect of CDMA. The Company won 3G Spectrum in Rest of Maharashtra 'Prescribed limit' of spectrum i.e. the amount of (including Goa) Circle during the 3G Spectrum auctions held in spectrum that can be assigned by the Government April-May'2010. The Company believes that this region of over would be 8 MHz/5 MHz (GSM/CDMA) in the whole of 100 million people comprising of rapidly growing cities such as the country except in the metro service areas of Delhi Pune, Nasik, Aurangabad, Vasai and Nagpur has high growth and Mumbai, where it would be 10 MHz/6.25 MHz. potential and would help Company in further strengthening its However, spectrum assigned beyond committed market positioning. amount of 6.2/5 MHz (GSM/CDMA) will be paid for at In Mumbai, which in comparison has a significantly smaller the 'Current Price'. TRAI has submitted on February population of around 20 million people, the Company already 8, 2011, supplementary recommendations on Current has multiple telecommunication assets including its EDGE Price for 1,800 MHz spectrum. TRAI has also enabled GSM platform, a substantial wireline broadband recommended licence fees to be brought down to 6% 18 16th Annual Report 2010-2011

access infrastructure and extremely successful wireless in the Hon'ble Supreme Court challenging the whole order, broadband services offered on the CDMA platform through the while the Company and TTSL have filed an appeal seeking Photon+ offerings, all of which the Company will continue to implementation of the order from the first demand for the leverage effectively. It is also exploring possibility of roaming year 1999-00, raised by DoT in May'2003. The appeals are arrangements with other operators for GSM 3G services. expected to be listed for hearing shortly. The year witnessed the launch of new Value Added Services  Fulfillment of Roll-out Obligations: As a UAS Licensee, (“VAS”), which are expected to bolster the Company's revenues the Company was required to complete certain rollout significantly in the coming years. obligations within 1st and 3rd years from the effective date of Information on important litigations concerning the its license(s). The coverage had to be certified by the Company is as under: Telecommunication Engineering Center (“TEC”). Due to reasons not in the control of any of the UASL operators, the  Spectrum: Tata Teleservices Limited (TTSL) and the first year norms could not be met by any of them. Company filed in December'2007, a petition before TDSAT: Despite various representations from the industry and the - challenging allocation of spectrum beyond the Company, DoT on June 4, 2007, issued show cause contracted amount to GSM operators; notices to the Company and other operators alleging non- - querying the pricing of spectrum beyond the fulfillment of the stipulated rollout obligations at the end of contracted amount and recommending, if necessary, the first year. The notices required the Company to explain withdrawal of excess spectrum allocated to GSM to DoT, why liquidated damages of Rs.14 Crores (i.e. Rs.7 operators; Crores each for Mumbai and Maharashtra circle) should - seeking release of the 3rd and 4th CDMA carriers not be recovered from the Company for the alleged failure. (within the contracted amount of 5+5 MHz) against its The Company has replied to the notices. The Company pending applications; has received legal opinion that the demands are invalid - seeking upfront allotment of the contracted 5+5 MHz under law. spectrum to CDMA operators, as was done in the  Special Audit by DoT: DoT appointed a firm of chartered case of GSM operators; and accountants as special auditor to conduct audit of licence - demanding technology neutrality. fee payments during the FY 2006-07 and 2007-08. The DoT assured TDSAT that spectrum would be allocated report of the special auditor has been submitted to DoT in against the pending applications. However, without last week of May'2010. allocating spectrum against pending applications, DoT  Spectrum usage charges: TTSL/TTML filed an Petition enhanced substantially the subscriber number before TDSAT challenging the order dated February 25, requirement for spectrum allocation eligibility in 2010 issued by DoT increasing the spectrum usage January'2008. The TDSAT was waiting the charges from 2% of AGR to 3%. Similar Petitions have recommendation of TRAI on the report of the Expert been filed by other operators also. The Company's petition committee. TRAI has made its recommendations on May was dismissed by TDSAT vide judgement dated 11, 2010. These recommendations however do not deal September 1, 2010. Appeal has been filed before Supreme with this issue. The Company's petition has been Court. The appeal has been admitted on February 14, dismissed and the company has been advised to take up 2011. the matter of equal allocation of spectrum with DoT. An  Letter of Intent of 1997: The erstwhile appeal has been filed before the Supreme Court against promoters of the Company in 1997 had applied in the name the order of TDSAT. of the Company for basic services licence in Karnataka  WLL (M) Walky: The Supreme Court on May 30, 2008, circle. A letter of Intent (“LoI”) was issued by DoT to the had held that ADC is payable on services provided under Company. However, DoT did not take a decision till Walky phones for the period November 14, 2004 to August March'1999 on certain pending issues/requests by the 26, 2005. The matter of quantification of these claims were Company and the LoI lapsed. DoT recovered in 1999 from left to be done by TDSAT. Subsequently facing threat of Maharashtra licence payments a sum of Rs.50 Crores disconnection and unreasonable demands of BSNL, alleging failure on the part of the Company to sign licence TTSL/TTML filed petition before TDSAT. In the said for Karnataka. During the hearing, DoT lodged a counter- Petition, TTSL/TTML inter alia sought information from claim for loss of licence fee and claimed interest on it. BSNL regarding its 26 lakhs WLL(M) phones and sharing TDSAT ordered refund of Rs.50 Crores and dismissed the of relevant data in order to raise counter claim. TDSAT vide counter-claim on the ground that TDSAT had no its order dated April 15, 2010 erroneously held that jurisdiction. On appeal by DoT, Supreme Court held that Supreme Court has finally decided the claims of BSNL. TDSAT had jurisdiction and remanded the case for re- Consequently appeal has been filed before the Supreme hearing to TDSAT. Currently, judgment of TDSAT has Court against the said order of TDSAT. been reserved after the matter was re-heard.  Computation of Licence Fee: TDSAT in its judgement of Segment-wise or product-wise performance July'2006, had laid down the principle that revenues The Company is in the business of providing a wide range of accruing from non-licensed activities should not attract telephony products in Mumbai Service Area and Maharashtra licence fee and directed TRAI to prepare a list of items to be (including Goa) Service Area. Details of various products and included and excluded from Adjusted Gross Revenue services are provided in the Directors' Report. (“AGR”) which attracts licence fee. Outlook The matter was decided in 2007 by TDSAT, which based The outlook for the Company appears bright on a long-term on TRAI recommendations identified various items to be basis. It successfully launched GSM services under Tata excluded from AGR. The order would be effective from the DOCOMO brand in Mumbai and Maharashtra circles in date of filing of petitions in TDSAT. DoT has filed an appeal August'2009. It has been successful in winning 3G spectrum for 19

Maharashtra circle (which includes Goa). The Company has The Company may be required to obtain additional 2G been making cash profits in last 21 quarters. spectrum in the future on payment basis which may impose The Company successfully launched 3G wireless service under additional financial burden on the Company. 'Tata DOCOMO' brand in 16 Towns in Rest of Maharashtra Delay in receipt of contracted spectrum of 6.2 MHz may create Circle. The rollout by the Company is one of the fastest by any quality of service issues and may result in customer dis- standards. satisfaction. To address this, the Company may be required to The Company will also benefit from its association with TTSL, rollout more cellsites, thereby substantially increasing the which has licences to provide telecom services in 20 circles operating expenditure. across India. TTSL has also been permitted by DoT to use GSM Technological Risks Technology in 17 Circles and has been allocated GSM Changes in technology may render the Company's current spectrum in 16 circles. It has also won 3G spectrum in 8 circles, technologies obsolete or require it to make substantial capital primarily in the western belt of the country. investments for upgradation. The telecommunication industry The national teledensity is around 72% mark, but accounting for has seen rapid changes in technology. Although the Company the considerable multi-Simming phenomenon in the industry, strives to keep its technology up to date in accordance with the the 'actual' tele-density is much lesser. Considering the latest international technological standards, the technology teledensity of other comparable regions and countries in Asia, currently employed by it may become obsolete or subject to there is a significant market in India still waiting to be tapped and competition from new technologies in the future. the Company will take all the necessary initiatives to become a Financing Risks major player in its chosen areas of operation. The Company is a telecommunication service provider and The Company expanded its network throughout the States of requires significant funding on an ongoing basis for expanding Maharashtra and Goa and the Company now offers GSM telecom infrastructure including services to be offered using services in 898 Towns and CDMA services in 1,184 towns by GSM technology. Approximately half of the project cost is the end of the financial year 2010-11. funded by way of debt that is subject to a number of terms and The Company has been late entrant in CDMA and GSM 2G conditions including periodic review of the business plan. services, but it now has an opportunity to be on par with other Besides, the Company has also borrowed additional funds for operators as for providing 3G services. The Company's Photon+ making 3G spectrum payment of Rs.1,257.58 Crores. high speed internet services along with some other strategies Interconnection Risks will enable it to compete in Mumbai, where it did not pursue No operator has been able to win pan-india 3G spectrum and bidding for 3G spectrum due to exorbitantly high bid price. hence roaming arrangements will assume great importance. Risks and Concerns The Company and TTSL will also require roaming As is the case with any infrastructure project, the Company is arrangements in 13 circles where they have not been able to win exposed to a number of risks. The Company assesses the risks 3G spectrum. Augmentation of capacities or creation of every year and presents them to the Audit Committee in line with separate interconnection facilities for GSM services are some of Clause 49 of the Listing Agreement with stock exchanges. The the business requirements which are dependent on co- key risks include: operation of other operators. Regulatory Risks Competition Risks The Indian telecommunications industry is subject to extensive The Indian telecommunication industry has recently witnessed Government regulation, especially as regards allocation of intense competition with the entry of 4-5 new operators leading spectrum and introduction of new services. However, the to further fall in tariffs. The tariffs are the lowest in the world. industry is being liberalised and the Company would continue its Competition also creates need for higher expenditure on endeavor to take advantage of the new opportunities offered by marketing and advertising. regulatory changes. These include use of alternate technology, Dependency on the Promoters new platforms and the proposed introduction of 3G services, The Company has closely aligned and integrated its business which could allow the Company to provide all types of high operations and strategies with those of TTSL and also shares speed communication and convergence services. certain infrastructure (e.g. billing platform, intelligent network The Company's telecommunications licenses, provide broad platform etc.) and activities (e.g. procurement) with TTSL. The discretion to the Government to influence the conduct of the Company benefits from the goodwill associated with the Tata Company's businesses by giving it the right to modify, at any Indicom brand that Tata Sons Limited has permitted the time, the terms and conditions of the licenses and take over the Company to use for marketing its CDMA products and services entire services, equipment and networks or terminate or and Tata DOCOMO brand that Tata Sons Limited and NTT suspend the licenses, if necessary or expedient, in the public Docomo Inc. has permitted the Company to use for marketing interest or in the interest of national security or in the event of a its GSM products and services. The Company's central services national emergency, war or similar situation. sharing arrangements with TTSL allow it to jointly negotiate with The Company's licenses are for fixed periods (i.e. upto equipment suppliers and service providers and benefit from September'2017) and are renewable for additional terms at the economies of scale. In addition, the Company offers roaming discretion of the Government. There can be no assurance that services to its CDMA/GSM mobile subscribers, who can roam in any of the Company's licenses will be renewed at all or renewed the service areas where TTSL network is operational and vice- on the same or better terms. versa. Although all the above positively impact the Company's The recent amendment to licenses requiring prior approval of performance, if the Company is viewed as a stand alone Licensor before placing purchase orders for imported 'active' enterprise, this inter-dependency may be perceived to be an equipment and software and current embargo on Chinese area of concern. vendors may adversely affect the Company in short term and Internal Control Systems and their adequacy may impose additional costs. An Audit Committee of the Board of Directors has been 20 16th Annual Report 2010-2011

constituted as per the provisions of Section 292A of the charges. The tariffs of prepaid, postpaid and fixed line segments Companies Act, 1956 (“Act”) and Corporate Governance have been reduced to match reductions undertaken by requirements specified by the stock exchanges. competitors. The internal audit for various functions/aspects is conducted by Revenue (Rs. in Crores) independent firms/internal audit team, which conducts reviews 2,500.00 2,248.74 and evaluation and present their reports to the Audit Committee 2,069.10 and the management at regular intervals. 1,941.68 2,000.00 The Internal Auditors' Reports dealing with internal control 1,707.19 systems are considered by the Audit Committee and 1,406.98 1,500.00 appropriate actions are taken, wherever necessary. Analysis of Financial Condition and Results of Operations 1,000.00 The financial statements have been prepared in accordance with the requirements of the Act, the Indian Generally Accepted Accounting Principles (Indian GAAP) and the Accounting 500.00 Standards as prescribed by the Institute of Chartered Accountants of India. - 2006-07 2007-08 2008-09 2009-10 2010-11 The Board of Directors believes that it has been objective and prudent in making estimates and judgements relating to the financial statements and confirms that these financial Other Income statements are a true and fair presentation of the Company's Other income decreased to Rs.67.20 Crores (previous year operations and profits for the year. Rs.208.71 Crores), which includes subsidies received from the Developments on Human Resources Front Universal Service Obligation Fund towards provision of Rural Household Direct Exchange Lines (“RDELs”) in specified Short The entry of new service providers has substantially increased Distance Charging Areas (“SDCAs”) amounting to Rs.6.87 competition in the market. Increase in choices means more Crores (previous year Rs. 141.29 Crores). As RDELs scheme effort and higher decibel volumes in acquiring and retaining has come to an end, there is no likelihood of the Company subscribers which in turn makes it imperative to retain valuable benefitting from such subsidies any further. and skilled intellectual capital. The offer of higher monetary compensation by other operators and other service sectors like Earnings Before Interest, Depreciation, Taxation and retail and media have also increased the challenges of Amortisation ( “EBIDTA”) retention. The initiatives undertaken by the Company have During the year, EBIDTA increased by 112% from Rs.540.51 been described in the Directors' Report. Crores to Rs.1,146.77 Crores primarily due to profit on sale of The Company and TTSL are working towards better operational long term investment of Rs.834.93 Crores and reduction on and functional integration so as to take full advantage of operating expenses offset partially by an increase in costs operational synergies and to present a unified pan-India entity associated with expanded network rollout including launch of especially in reference to the common brands being used by 3G services, provision for contingencies and reduction in USO each of these two entities. Some senior employees of the Subsidy. Company have been deputed to TTSL to take up national EBITDA (Rs. in Crores) responsibility (TTSL and the Company), as such only a portion 1,200.00 1,146.77 of cost of such employees is charged to the Company. The Company had 1,725 employees on its rolls as on March 31, 2011. 900.00 Key Financial Information & Operational Performance Revenues from Telecommunication Services 593.18 600.00 540.51 During the year, revenues from telecommunication services 485.55 increased to Rs.2,248.74 Crores (previous year Rs.2,069.10). 302.60 This revenue growth was largely driven by the 30% increase in 300.00 the number of subscribers to 168 lakhs at the end of March’ 2011 (compared to 130 lakhs subscriber as at the end of March' 2010). The revenue growth is based on the growth in subscriber - base, amidst falling tariffs including the drop in termination 2006-07 2007-08 2008-09 2009-10 2010-11 21

Cash Profit sale of investment in the tower subsidiary. The Company's During the year, Cash Profits increased from Rs.229.89 Crores Business Plan has been appraised by IDBI Bank Limited and to Rs.800.61 Crores primarily due to profit on sale of long term the Company has entered into a Common Terms Agreement investments offset partially by costs associated with the with the lenders for long term loans for nine years aggregating expansion of network for GSM services, costs of launch of 3G Rs.3,427 Crores. services including interest costs. Net Profit The Company reported net profit of Rs.49.90 Crores for the year Cash Profit (Rs. in Crores) (previous year net loss of Rs.298.01 Crores). The Company divested its entire stake in the tower subsidiary during the year 1,000.00 800.61 (profit on sale Rs.834.93 Crores) and have made provision for contingencies towards various telecom disputes for Rs.185.60 800.00 Crores and for accelerated depreciation based on re-estimation 600.00 of useful lives of certain equipment for Rs.184.81 Crores. The Company launched its full mobility services using CDMA 400.00 314.54 288.40 222.89 technology in the second half of 2003-04 and launched GSM 200.00 130.84 services only in August'2009 and it is not uncommon for large green-field infrastructure telecom projects to incur losses during - the initial few years of project implementation. The Company 2006-07 2007-08 2008-09 2009-10 2010-11 has also commenced 3G Services during the current year in Rest of Maharashtra Circle. Expenses Fixed Assets The major expenses as a percentage of total cost are as follows: The Company continues to grow its network in Mumbai and other cities in Maharashtra and Goa. The year-end Gross Block Expenses increased by Rs.2,047.02 Crores (Net of deletions of Rs.10.55 Crores) to Rs.7,621.16 Crores (previous year Rs.5,574.14 Crores). The major increase in the Gross Block was on account Depreciation 24% Network Cost 20% of launch of 3G Services, building of GSM network and Provision for Contingencies expansion of the CDMA network by installation of switches, cell 6% Interconnect Cost 15% sites and backbone amounting to Rs.799.75 Crores. The Gross Interest 11% Block also includes the cost of 3G license fee Rs.1,257.82 Marketing 10% Crores.

Employee Cost 5% The year-end Net Block has increased from Rs.3,503.82 Crores Administrative Cost to Rs.4,802.83 Crores after considering accelerated 8% depreciation based on re-estimation of useful lives of certain Network Operations Cost Employee Costs Interest Cost Depreciation equipment for Rs.184.81 Crores. The year-end Capital Work-in- Interconnect and other Administrative and Marketing and Provision for access costs Other Overheads Business Promotion Contingencies Progress is at Rs.153.05 Crores (previous year Rs.196.91 Crores). Total depreciation for FY11 was Rs.750.70 Crores (including Net Current Liabilities additional depreciation of Rs.184.81 Crores as a result of re- The Current Liabilities increased from Rs.878 Crores to Rs.920 estimatation of the balance useful life of certain items of plant Crores primarily due to increase in Capex Creditors from Rs.541 and machinery considering up-gradation of equipment on Crores to Rs.698 Crores offset by higher bank balances. account of enhancement of technology and the consequent Loan Funds enhanced pace of planned replacement. Total depreciation net of additional depreciation for FY11 was Rs.565.89 Crores as The total loan funds increased from Rs.3,609 Crores to compared to Rs.520.89 Crores in FY10. Rs.4,653 Crores primarily on account of Rs.1,258 Crores 3G license fee payment financed through short term borrowings. Finance Charges During the year, the Company has tied up long term funding for The Finance Charges increased from Rs.317.62 Crores to Wireline, CDMA & GSM services. In May’ 2011, the Company Rs.346.16 Crores. This is primarily on account of interest has tied up for long term External Commercial Borrowings of charge on 3G license fees in Q4 subsequent to launch of 3G USD 350 Million for refinancing of short terms loans availed for services in Rest of Maharashtra. The higher interest rates and 3G spectrum fees and for capex. additional borrowings were offset by the cash inflow from the 22 16th Annual Report 2010-2011

AUDITORS’ REPORT TO THE MEMBERS OF (c) the Balance Sheet, the Profit and Loss Account and TATA TELESERVICES (MAHARASHTRA) LIMITED the Cash Flow Statement dealt with by this report are in agreement with the books of account; 1. We have audited the attached Balance Sheet of TATA (d) in our opinion, the Balance Sheet, the Profit and Loss TELESERVICES (MAHARASHTRA) LIMITED (“the Account and the Cash Flow Statement dealt with by Company”) as at March 31, 2011, the Profit and Loss this report are in compliance with the Accounting Account and the Cash Flow Statement of the Company for Standards referred to in Section 211(3C) of the the year ended on that date, both annexed thereto. These Companies Act, 1956; financial statements are the responsibility of the Company's Management. Our responsibility is to express (e) in our opinion and to the best of our information and an opinion on these financial statements based on our according to the explanations given to us, the said audit. accounts give the information required by the Companies Act, 1956 in the manner so required and 2. We conducted our audit in accordance with the auditing give a true and fair view in conformity with the standards generally accepted in India. Those Standards accounting principles generally accepted in India: require that we plan and perform the audit to obtain reasonable assurance about whether the financial (i) in the case of the Balance Sheet, of the state of statements are free of material misstatements. An audit affairs of the Company as at March 31, 2011; includes examining, on a test basis, evidence supporting (ii) in the case of the Profit and Loss Account, of the the amounts and the disclosures in the financial profit of the Company for the year ended on that statements. An audit also includes assessing the date and accounting principles used and the significant estimates (iii) in the case of the Cash Flow Statement, of the made by the Management, as well as evaluating the overall cash flows of the Company for the year ended on financial statement presentation. We believe that our audit that date. provides a reasonable basis for our opinion. 5. On the basis of the written representations received from 3. As required by the Companies (Auditor's Report) Order, the Directors as on March 31, 2011 taken on record by the 2003 (CARO) issued by the Central Government in terms Board of Directors, none of the Directors is disqualified as of Section 227(4A) of the Companies Act, 1956, we on March 31, 2011 from being appointed as a director in enclose in the Annexure a statement on the matters terms of Section 274(1)(g) of the Companies Act, 1956. specified in paragraphs 4 and 5 of the said Order. 4. Further to our comments in the Annexure referred to in For Deloitte Haskins & Sells paragraph 3 above, we report as follows: Chartered Accountants (a) we have obtained all the information and explanations (Registration No. 117366W) which to the best of our knowledge and belief were necessary for the purposes of our audit; A B Jani (b) in our opinion, proper books of account as required by law have been kept by the Company so far as it Partner appears from our examination of those books; Mumbai, dated: April 26, 2011 Membership No. 46488 ANNEXURE TO THE AUDITORS’ REPORT Re: Tata Teleservices (Maharashtra) Limited physically verified during the year by the Management at reasonable intervals. (Referred to in Paragraph 3 of our report of even date) (b) In our opinion and according to the information and (i) Having regard to the nature of the Company's activities, explanation given to us, the procedures of physical clauses (xiii) and (xiv) of CARO are not applicable. verification of stocks followed by the Management (ii) In respect of its fixed assets: were reasonable and adequate in relation to the size of the Company and the nature of its business. (a) The Company has maintained proper records (c) In our opinion and according to the information and showing full particulars, including quantitative details explanations given to us, the Company has and situation of the fixed assets. maintained proper records of its inventories and no (b) All fixed assets have not been physically verified by material discrepancies were noticed on physical the management during the year but there is a regular verification. program of verification which, in our opinion, is reasonable having regard to the size of the Company (iv) The Company has neither granted nor taken any loans, and the nature of its assets. No material secured or unsecured, from companies, firms or other discrepancies were noticed on such verification. parties listed in the Register maintained under Section (c) The fixed assets disposed off during the year, in our 301 of the Companies Act, 1956. opinion, do not constitute a substantial part of the (v) In our opinion and according to the information and fixed assets of the Company and such disposal has, in explanations given to us, there is an adequate internal our opinion, not affected the going concern status of control system commensurate with the size of the the Company. Company and the nature of its business with regard to (iii) In respect of its inventory: purchases of inventory and fixed assets and the sale of (a) As explained to us, the stocks of trading goods were goods and services. During the course of our audit, we 23

have not observed any major weakness in such internal by the Central Government for the maintenance of cost control system. records under Section 209(1) (d) of the Companies Act, (vi) In respect of contracts or arrangements entered in the 1956 in respect of telecommunication activities and are of Register maintained in pursuance of Section 301 of the the opinion that prima facie the prescribed accounts and Companies Act, 1956, to the best of our knowledge and records have been made and maintained. We have, belief and according to the information and explanations however, not made a detailed examination of the records given to us: with a view to determining whether they are accurate or complete. To the best of our knowledge and according to (a) The particulars of contracts or arrangements referred the information and explanations given to us, the Central to Section 301 that needed to be entered in the Government has not prescribed the maintenance of cost Register maintained under the said Section have records for any other product of the Company. been so entered. (x) According to the information and explanations given to us (b) Where each of such transaction is in excess of Rs.5 in respect of statutory dues: lakhs in respect of any party, the transactions have been made at prices which are prima facie reasonable (a) The Company has generally been regular in having regard to the prevailing market prices at the depositing undisputed dues, including Provident relevant time except in respect of certain purchases Fund, Investor Education and Protection Fund, for which comparable quotations are not available and Employees' State Insurance, Income-tax, Sales Tax, in respect of which we are unable to comment. Wealth Tax, Service Tax, Custom Duty, Excise Duty, Cess and other material statutory dues applicable to it (vii) According to the information and explanations given to us, with the appropriate authorities. the Company has not accepted any deposit from the public during the year. (b) There were no undisputed amounts payable in respect of Income-tax, Wealth Tax, Custom Duty, (viii) In our opinion, the internal audit functions carried out Excise Duty, Cess and other material statutory dues in during the year by firm of Chartered Accountants arrears as at March 31, 2011 for a period of more than appointed by the Management have been commensurate six months from the date they became payable. with the size of the Company and the nature of its business. (c) Details of dues of Income-tax, Sales Tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty and Cess (ix) We have broadly reviewed the books of account which have not been deposited as on March 31, 2011 maintained by the Company pursuant to the rules made on account of disputes are given below: Name of statute Nature of Forum where dispute Period to which Amount involved the dues is pending the amount relates (Rs. in Crores) The Income-tax Act, 1961 Income tax demand Income Tax Apellate Tribunal A.Y. 1998-99 0.08 Service tax Act Service tax demand Commisioner of Service Tax Nov. 2004 to April 2008 60.40 Service tax Act Service tax demand Additional Commisioner April 2005 to March 2010 0.20 Service tax Act Service tax demand CESTAT April 2004 to March 2010 6.36 Sales tax Act Sales tax demand Joint Commisioner (Appeal) II April 2001 to March 2004 0.21

(xi) The accumulated losses of the Company at the end of the the Balance Sheet, we report that funds raised on short- financial year are more than fifty percent of its net worth term basis have been used during the year for long-term and the Company has not incurred cash losses in the investment to the extent of Rs 2,548.03 Crores. financial year and in the immediately preceding financial (xvii) According to the information and explanations given to us, year. the Company has not made preferential allotment of (xii) In our opinion and according to the information and shares to parties and companies covered in the Register explanations given to us, the Company has not defaulted maintained under Section 301 of the Companies Act, in the repayment of dues to banks and financial 1956 at a price which is prima facie not prejudicial to the institutions. interests of the Company. (xiii) In our opinion and according to the information and (xviii) The Company has not issued any debentures during the explanations given to us, the Company has not granted year. any loans and advances on the basis of security by way of (xix) The Company has not raised any money by way of public pledge of shares, debentures and other securities. issues during the year. (xiv) In our opinion and according to the information and (xx) To the best of our knowledge and according to the explanations given to us, the terms and conditions of the information and explanations given to us, no fraud by the guarantees given by the Company for loans taken by Company and no fraud on the Company has been noticed others from banks and financial institutions are not prima or reported during the year. facie prejudicial to the interests of the Company. (xv) In our opinion and according to the information and For Deloitte Haskins & Sells explanations given to us, the term loans have been Chartered Accountants applied for the purposes for which they were obtained, (Registration No. 117366W) other than temporary deployment pending application. A B Jani (xvi) In our opinion and according to the information and Partner explanations given to us and on an overall examination of Mumbai, dated: April 26, 2011 Membership No. 46488 24 16th Annual Report 2010-2011

BALANCE SHEET AS AT MARCH 31, 2011 As at As at Schedule March 31, 2011 March 31, 2010 Rs. in Crores Rs. in Crores SOURCES OF FUNDS

Shareholders' Funds Share Capital 1 1,897.20 1,897.20 Reserves and Surplus 2 583.16 583.16 2,480.36 2,480.36 Loan Funds Secured Loans 3 2,669.78 2,300.43 Unsecured Loans 4 1,982.82 1,309.00 4,652.60 3,609.43 Total 7,132.96 6,089.79

APPLICATION OF FUNDS Fixed Assets 5 Gross Block (at cost) 7,621.16 5,574.14 Less : Accumulated Depreciation / Amortisation 2,818.33 2,070.32 Net Block 4,802.83 3,503.82 Capital Work - In - Progress 153.05 196.91 4,955.88 3,700.73 Investments 6 - 120.00 Current Assets, Loans and Advances Cash and Bank Balances 7 74.68 22.98 Sundry Debtors 8 294.98 264.12 Inventories 9 3.78 6.40 Loans and Advances 10 517.46 301.05 890.90 594.55 Less : Current Liabilities and Provisions Current Liabilities 11 1,619.05 1,466.05 Provisions 12 191.56 6.13 1,810.61 1,472.18 Net Current Liabilities (919.71) (877.63) Profit and Loss Account 3,096.79 3,146.69 Total 7,132.96 6,089.79

Significant Accounting Policies and Notes to Financial Statements 17

In terms of our report attached For Deloitte Haskins & Sells For and on behalf of the Board Chartered Accountants Kishor A. Chaukar N. Srinath (Chairman) (Managing Director) A.B.Jani Prof. Ashok Jhunjhunwala D. T. Joseph Koichi Takahara Partner (Director) (Director) (Director) S. Ramadorai Anil Kumar Sardana N. S. Ramachandran (Director) (Director) (Director) S. Venkatesan Madhav J. Joshi (Chief Financial Officer) (Chief Legal Officer and Company Secretary) Place: Mumbai Place: Mumbai Date : April 26, 2011 Date : April 26, 2011 25

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2011 Schedule 2010-11 2009-10 Rs. in Crores Rs. in Crores Income

Telecommunication Services 13 2,248.74 2,069.10 Other Income 14 67.20 208.71 Profit on Sale of Long Term Investment (Refer Note 24 of Schedule 17) 834.93 - Total 3,150.87 2,277.81

Expenditure

Operation and Other Expenses 15 1,818.50 1,737.30 Provision for contingencies (Refer Note 27 of Schedule 17) 185.60 - Profit before Finance and Treasury charges, 1,146.77 540.51 Depreciation and Tax

Finance and Treasury Charges (Net) 16 346.16 317.62

Depreciation /Amortisation (Refer Note a of Schedule 5 and Note No 26 of Schedule 17) 750.70 520.89 Profit / (Loss) before tax 49.91 (298.00) Provision for Tax - Wealth Tax 0.01 0.01 Profit / (Loss) after tax 49.90 (298.01)

Balance brought forward (3,146.69) (2,848.68)

Balance carried to Balance Sheet (3,096.79) (3,146.69)

Earnings Per Share - Basic and Diluted (Rs.) 0.26 (1.57) (Refer Note 17 of Schedule 17)

Par Value (Rs.) 10.00 10.00

Significant Accounting Policies and Notes to Financial Statements 17

In terms of our report attached For Deloitte Haskins & Sells For and on behalf of the Board Chartered Accountants Kishor A. Chaukar N. Srinath (Chairman) (Managing Director) A.B.Jani Prof. Ashok Jhunjhunwala D. T. Joseph Koichi Takahara Partner (Director) (Director) (Director) S. Ramadorai Anil Kumar Sardana N. S. Ramachandran (Director) (Director) (Director) S. Venkatesan Madhav J. Joshi (Chief Financial Officer) (Chief Legal Officer and Company Secretary) Place: Mumbai Place: Mumbai Date : April 26, 2011 Date : April 26, 2011 26 16th Annual Report 2010-2011

SCHEDULES FORMING PART OF THE BALANCE SHEET AS AT MARCH 31, 2011 As at As at March 31, 2011 March 31, 2010 Rs. in Crores Rs. in Crores SCHEDULE - 1

SHARE CAPITAL Authorised: 2,500,000,000 Equity Shares of Rs.10/- each 2,500.00 2,500.00 2,500.00 2,500.00 Issued and Subscribed 1,897,196,854 (Previous year 1,897,196,854) Equity Shares of Rs.10/- each fully paid-up 1,897.20 1,897.20 1,897.20 1,897.20 Note: Of the above 1,107,401,219 Equity Shares are held by Tata Sons Limited (the ultimate Holding Company) and its Subsidiaries.

SCHEDULE - 2

RESERVES AND SURPLUS Securities Premium Account: Balance as per last Balance Sheet 583.16 583.16 583.16 583.16

SCHEDULE - 3

SECURED LOANS From Banks (Refer note below) Term Loans 2,066.58 1,556.64 Cash Credit Accounts 12.85 165.38 Acceptances 590.35 578.41 2,669.78 2,300.43

Note : Stipulated securities for the loans are either one or more of the following as per terms of the arrangements with respective banks:

- by first pari pasu charge on the assets of the Company, - by pledge of shares held by Tata Teleservices Limited in the Company, - by assignment of the proceeds on sale of network in the event of cancellation of the telecom license, - by assignment of telecom license, - by assignment of insurance policies, - by sponsor support undertaking of Tata Sons Limited (the Ultimate Holding Company).

SCHEDULE - 4

UNSECURED LOANS From Banks - Short Term Loans 1,982.82 1,289.00 Inter-corporate deposits - 20.00 1,982.82 1,309.00 SCHEDULES FORMING PART OF THE BALANCE SHEET AS AT MARCH, 31 2011 SCHEDULE - 5 FIXED ASSETS Rs. in Crores

PARTICULARS GROSS BLOCK DEPRECIATION / AMORTISATION NET BLOCK Notes As at Additions Deletions As at Upto For the Deletions Upto As at As at April 1, March 31, March 31, year March 31, March 31, March 31, 2010 2011 2010 2011 2011 2010 Tangible Assets Leasehold assets : Land 7.11 - - 7 .11 1 .25 0 .07 - 1 .32 5 .79 5.86 Office premises 6.86 - - 6 .86 1 .60 0 .08 - 1 .68 5 .18 5.26 Buildings 15.01 1.42 - 1 6.43 0 .97 0 .30 - 1 .27 1 5.16 14.04 Plant and Machinery 4,397.66 748.07 9.87 5 ,135.86 1 ,576.85 6 34.32 2.07 2 ,209.10 2 ,926.76 2,820.81 Furniture, Fixtures and 105.75 5.23 0.02 1 10.96 7 8.25 1 4.81 0.02 9 3.04 1 7.92 27.50 Office Equipment Vehicles 1.71 - 0.66 1 .05 0 .98 0 .24 0.60 0 .62 0 .43 0.73 Intangible Assets License (Refer note 22 of ( d ) 925.21 1,257.82 - 2 ,183.03 3 64.95 9 0.25 - 4 55.20 1 ,727.83 560.26 Schedule 17) Indefeasible Rights of Use 83.24 36.56 - 1 19.80 2 2.29 6 .42 - 2 8.71 9 1.09 60.95 ('IRU') Computer Software 31.59 8.47 - 4 0.06 2 3.18 4 .21 - 2 7.39 1 2.67 8.41 5,574.14 2,057.57 10.55 7 ,621.16 2 ,070.32 7 50.70 2.69 2 ,818.33 4 ,802.83 3,503.82 Previous year 4,552.63 1,131.77 110.26 5 ,574.14 1 ,653.55 5 23.25 106.48 2 ,070.32 Capital Work-In-Progress: Capital advances 2 4.82 24.28 Capital Inventory [net of provision for obsolescence of Rs. 15.75 Crores (previous year Rs. 15.75 Crores)] 1 08.85 136.98 Assets under construction 1 9.38 35.65 153.05 196.91 TOTAL 4 ,955.88 3,700.73

Notes: (a) Depreciation in the Profit and Loss Account is net of amounts aggregating to Nil (previous year Rs. 2.36 Crores) on account of write back of provision for obsolescence on capital inventory put to use. (b) Deletion includes Plant and Machinery aggregating to Nil [Previous Year Rs. 104.54 Crores (Gross Block )] which are fully depreciated and are written off during the year. (Refer note 21 of Schedule 17) (c) Refer Note 25 of Schedule 17 regarding adjustment of foreign exchange differences on account of notification issued by Central Government. (d) Refer Note 26 of Schedule 17 regarding re-estimation of balance useful life of certain items of Plant and Machinery. (e) Remaining amortisation period for License fees is -

- for providing services using CDMA and GSM technology - 6.5 years (Previous Year 7.5 years ) - for providing services using 3G technology - 19.25 years. (f) The legal formalities in respect of one of the buildings are in the process of being completed. 27

28 16th Annual Report 2010-2011

SCHEDULES FORMING PART OF THE BALANCE SHEET AS AT MARCH 31, 2011 As at As at March 31, 2011 March 31, 2010 Rs. in Crores Rs. in Crores SCHEDULE - 6

INVESTMENT (Non-Trade) (Unquoted) (Refer Note 19 of Schedule 17)

Long- term Investment (at cost) In Subsidiary Company: Nil (Previous Year 120,000,000 ) Equity Shares of 21st Century Infra - 120.00 Tele Limited of Rs 10/- each fully paid-up.

- 120.00

SCHEDULE - 7

CASH AND BANK BALANCES

Cash on hand - 0.03

Balance with Scheduled Banks in - Current Accounts 24.28 22.85 - Cash Credit Accounts (Refer Note below Schedule 3) 0.10 0.10 - Term Deposit Accounts (including interest accrued Rs. 0.30 Crores 50.30 - (previous year Nil)) 74.68 22.98

SCHEDULE - 8

SUNDRY DEBTORS (Unsecured )

Outstanding for a period exceeding six months 88.79 305.96 Others 276.43 239.77 365.22 545.73 Less: Provision 70.24 281.61 294.98 264.12 Note: Considered good 294.98 264.12 Considered Doubtful 70.24 281.61 365.22 545.73

SCHEDULE - 9

INVENTORY

Traded Goods Starter Kits 3.78 6.40 3.78 6.40 29

SCHEDULES FORMING PART OF THE BALANCE SHEET AS AT MARCH 31, 2011 As at As at March 31, 2011 March 31, 2010 Rs. in Crores Rs. in Crores SCHEDULE - 10

LOANS AND ADVANCES (Unsecured)

Advances recoverable in cash or in kind or for value to be received 442.96 238.26 [Includes Rs.0.18 Crores (Previous year Rs.0.18 Crores) due from an officer of the Company. Maximum amount outstanding at any time during the year is Rs.0.18 Crores (Previous year Rs.0.18 Crores )]

Premises and other deposits 60.76 54.72 Advance Tax paid (Tax Deducted at Source) 16.36 10.69 520.08 303.67 Less : Provision 2.62 2.62 517.46 301.05 Notes : Considered good 517.46 301.05 Considered doubtful 2.62 2.62 520.08 303.67

SCHEDULE - 11

Current Liabilities

Sundry Creditors (Refer Note 23 of Schedule 17) Total Outstanding dues of Micro Enterprises and Small Enterprises 0.35 - Total Outstanding dues of Creditors other than Micro Enterprises and Small Enterprises: - Under Usance Letter of Credit 571.67 526.26 - Others 877.59 810.41 1,449.61 1,336.67 Deposits from Customers and others 66.30 72.17 Interest accrued but not due on loans 2.68 15.13 Other liabilities 100.46 42.08 1,619.05 1,466.05

Note: Other Liabilites include temporary overdrawn bank balances as per books aggregating to Rs. 37.35 Crores (Previous year Rs. 0.93 Crores)

SCHEDULE - 12

Provisions

For Contingencies (Refer Note 27 of Schedule 17) 185.60 - For Asset retirement obligation (site restoration cost) 0.49 0.49 For Retirement benefits 5.46 5.63 For Wealth Tax 0.01 0.01 191.56 6.13 30 16th Annual Report 2010-2011

SCHEDULES FORMING PART OF PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2011 2010-11 2009-10 Rs. in Crores Rs. in Crores SCHEDULE - 13

TELECOMMUNICATION SERVICES

Telephony 1,890.05 1,788.14 Internet Services 94.71 72.64 Interconnection Usage Charges [including in respect of earlier years Nil 229.67 174.36 (Previous year Rs. 0.62 Crores)] Sale of Traded Goods 34.31 33.96 2,248.74 2,069.10

SCHEDULE - 14

OTHER INCOME

Subsidies from Department of Telecommunications (DoT) 6.87 141.29 Excess provision / Sundry credit balances in respect of earlier years written back 18.19 25.16 Infrastructure Sharing 7.11 0.49 Profit on Fixed assets sold (Net) 29.24 35.45 Sale of Refurbished Network Interface Units 1.15 2.66 Miscellaneous Receipts 4.64 3.66 67.20 208.71

SCHEDULE - 15

OPERATION AND OTHER EXPENSES

Network Operation costs Revenue Share to DoT 197.94 193.97 Repairs and Maintenance - Plant and Machinery [including capital inventory consumed Rs 2.14 Crores (Previous year Rs. 8.63 Crores)] 37.88 60.46 Power 150.19 107.96 Rent 55.18 35.43 Rates and taxes 1.71 7.91 Insurance 1.32 1.77 Infrastructure Sharing Cost [including in respect of earlier years Rs.1.21 Crores 167.06 112.74 (Previous year Nil)] Miscellaneous 23.70 15.58 634.98 535.82 Interconnection and Other access costs [including in respect of earlier years Nil 456.97 440.91 (Previous year Rs.0.22 Crores)] (net of excess provision in respect of earlier years written back Rs.3.07 Crores (previous year Nil))

Payments to and Provisions for Employees Salaries and Bonus 147.52 127.02 Contribution to Provident and other Funds 7.26 7.50 Staff Welfare 10.87 11.74 165.65 146.26 31

SCHEDULES FORMING PART OF PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2011 2010-11 2009-10 Rs. in Crores Rs. in Crores Administrative and Other expenses Rent (net of recoveries Rs.0.41 Crores (previous year Nil)) 19.07 19.42 Rates and taxes 7.94 5.88 Repairs and Maintenance -others 9.98 5.56 Travel and conveyance expenses 11.42 19.10 Collection / Credit verification charges 10.02 11.10 Customer service and call centre cost 108.94 110.83 Assets awaiting disposal written off - 0.56 Bad Debts writen off 237.94 - Provision for Doubtful Debts written back (237.94) - Provision for Doubtful Debts and Advances (Net of insurance received amounting 26.57 20.35 to Rs. Nil (previous year Rs. 0.42 Crores)) Insurance Expenses 0.02 0.03 Miscellaneous expenses 46.40 49.30 Contractual and other claims and liabilities (Net) (1.44) 0.28 238.92 242.41 Marketing and business promotion expenses Advertisement and business promotion expenses 152.76 133.09 Hand set Subsidy (Net of Rs. 6.60 Crores (Previous year Rs. 3.57 Crores) incentive received) 7.63 80.67 Sales Commission and Expenses 139.39 135.16 Traded Goods - Starter Kits Opening Stock 6.40 2.01 Add: Purchases 19.58 27.37 Less: Closing stock 3.78 6.40 22.20 22.98 321.98 371.90 1,818.50 1,737.30

SCHEDULE - 16 FINANCE AND TREASURY CHARGES (NET) Interest On Fixed Term Loans 346.05 295.21 On Inter-corporate deposits 0.57 1.08 On Others 29.90 13.93 Expenses for loan arrangement, bill discounting and bank charges 21.21 21.77 Foreign exchange fluctuations (Net) (Refer Note 16(ii) of Schedule 17) 18.89 4.48 416.62 336.47 Less: Interest Capitalized (Refer Note 22 of schedule17) 62.82 18.79 353.80 317.68 Less: Interest Income On Term Deposits with Banks (Tax deducted at source Rs. 0.07 Crores 1.12 - (Previous year Nil)) On Others 0.11 - 352.57 317.68 Less: Profit on sale / redemption of units (Current Investment) 6.41 0.06 346.16 317.62 32 16th Annual Report 2010-2011

SCHEDULES FORMING PART OF THE BALANCE SHEET AND PROFIT AND LOSS ACCOUNT SCHEDULE 17

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO under Capital Work-In-Progress till such time as they FINANCIAL STATEMENTS are issued for new installation or replacement. 1. Company background The Company capitalises software and related implementation costs as intangible assets, where it is Tata Teleservices (Maharashtra) Limited (“the Company”), reasonably estimated that the software has an was incorporated on March 13, 1995. The Company is enduring useful life. licensed to provide basic and cellular telecommunication services. The Company presently holds two Unified License fees paid by the Company for acquiring Access (Basic and Cellular) Service Licenses, one for licenses to operate telecommunication / internet Mumbai Service Area and another for Maharashtra and telephony services are capitalised as intangible Goa and provides telecommunication services using Code assets. Division Multiple Access (CDMA) technology, Global Indefeasible Rights to Use ('IRU') bandwidth System for Mobile Communications (GSM) technology capacities by the Company are capitalised as under the aforesaid licenses. The Company also holds the intangible assets. National Internet Service provider - Internet Telephony license. The Company during the quarter ended June 30, Assets acquired pursuant to an agreement for 2010 had succeeded in winning the bid for 3G spectrum in exchange of similar assets are recorded at the net Maharashtra and Goa circle (excluding Mumbai) (Also book value of the assets given up, with an adjustment refer Note 22). for any balancing receipt or payment of cash or any other form of consideration. The Company is a subsidiary of Tata Sons Limited (the ultimate holding company). d) Depreciation 2. Significant Accounting Policies i) Fixed assets are depreciated on a straight line basis, based on the following estimates of their useful (a) Basis of preparation of financial statements economic lives : The accounts have been prepared to comply in all material aspects with applicable accounting Useful Life principles in India, the Accounting Standards (AS) (In years) notified in the Companies (Accounting Standards) Buildings 60 Rules 2006 and relevant provisions of the Companies Plant and Machinery (Also refer Note 26 below) Act, 1956 (the Act). - Network Equipment 12 (b) Use of estimates - Outside Plant 18 - Network Interface Units (Refer note 21) 5 The preparation of financial statements in conformity with generally accepted accounting principles - Air- Conditioning Equipment 6 requires estimates and assumptions to be made that - Generators 6 affect the reported amounts of assets and liabilities - Electrical Equipments 6 and disclosure of contingent liabilities on the date of - Computers 3 the financial statements and the reported amounts of - Office Equipments 3 revenues and expenses during the reporting year. - Computer Software 3 Differences between actual results and estimates are Furniture and Fittings 3 recognised in the periods in which the results are Vehicles 5 known / materialise. Depreciation rates derived from the above are not (c) Fixed Assets less than the rates prescribed in Schedule XIV to the Fixed assets are stated at their historical cost of Companies Act, 1956. acquisition or construction, less accumulated ii) Leasehold land and premises are amortised uniformly depreciation/amortization and impairment loss. Cost over the period of lease. includes all costs incurred to bring the assets to their working condition and location (Also refer note 25) iii) License fees is amortized uniformly over the original and Site Restoration cost obligations where outflow of license period of 20 years / extended period as resources is considered probable. permitted by DoT, as applicable, from the date of commencement of operations. Since the Company Assets retired from active use and held for disposal has intention of being in business for a period well are stated at lower of net book value or net realisable beyond 10 years and the telecommunication value. business cannot be carried on without the Telecom Expenditure related to and incurred during the license, the useful life of the asset will exceed the construction period of switches and cell sites are rebuttable presumption of 10 years under AS 26 on capitalised as part of the construction cost and “Intangible Assets” (Refer note 22). allocated to the relevant fixed assets. iv) Indefeasible Right to Use ('IRU') bandwidth capacities Capital inventory comprises of switching equipment, by the Company are amortised over a period of fifteen field unit cards, and capital stores that are carried years based on management estimate of useful life of 33

the assets or period of the agreement whichever is where all other services and products are paid for lower. separately, are recognised as and when such features are v) Depreciation on additions and deletions to assets activated. during the year is charged to revenue pro rata to the Revenue is recognised when it is earned and no significant period of their use. uncertainty exists as to its ultimate realisation or collection. vi) The Company provides for obsolescence of its slow h) Government Grants moving capital inventory by way of depreciation, at the Subsidies granted by Government for providing telecom rate of 33.33% p.a. of cost. services in rural areas are recognized as income in e) Foreign Currency transactions accordance with the relevant terms and conditions of the i. Transactions in foreign currency are recorded at the scheme / agreement with DoT. original rates of exchange in force at the time i) Borrowing costs transactions are effected. Borrowing costs attributable to the acquisition of a ii. Foreign currency denominated assets and liabilities qualifying asset, as defined in AS 16 on “Borrowing Costs”, are reported as follows: are capitalised as part of the cost of acquisition. Other a) Monetary items are translated into rupees at the borrowing costs are expensed as incurred. exchange rates prevailing at the balance sheet j) Earnings per share date. Non-Monetary items such as fixed assets The Company reports basic and diluted earnings per share are carried at their historical rupee values. in accordance with AS 20 on “Earnings Per Share”. Basic b) Gains/losses arising on settlement of foreign earning per share is computed by dividing the net profit or currency transactions or restatement of foreign loss for the year by the weighted average number of Equity currency denominated assets and liabilities shares outstanding during the year. Diluted earnings per (monetary items) are recognised in the profit and share is computed by dividing the net profit or loss for the loss account, except for long term assets/ year by the weighted average number of Equity shares liabilities which pertain to acquisition of fixed outstanding during the year as adjusted for the effects of all assets which are adjusted in the cost of fixed dilutive potential equity shares, except where the results assets (Refer note 25). are anti-dilutive. iii. In case of forward exchange covers, the premium or k) Operating Leases discount arising at the inception of the contract is Assets taken on lease under which all significant risks and amortised as expense or income over the life of the rewards of ownership are effectively retained by the lessor contract. are classified as operating leases. Lease payments under iv. Pursuant to the announcement on accounting for operating leases are recognized as expenses as incurred derivatives issued by the Institute of Chartered in accordance with the respective lease agreements. Accountants of India (ICAI), the Company in l) Cash Flow Statement accordance with the principle of prudence as enunciated in Accounting Standard 1 on 'Disclosure The Cash Flow statement is prepared by the indirect of Accounting Policies' provides for losses in respect method set out in AS 3 on “Cash Flow Statements” and of all outstanding derivative contracts at the Balance presents Cash flows by operating, investing and financing Sheet date by marking them to market. Any gains activities of the Company. arising on such mark to market are not recognized as m) Finance and Treasury charges income (Refer note 16 (ii)). Net finance and treasury charges are disclosed in the f) Employee benefits financial statements. Interest and other income earned Retirement benefit costs are expensed to revenue as from treasury operations are reduced from the costs of incurred. treasury operations. Contributions to the Provident and Superannuation Funds n) Inventories are made in accordance with the rules of the Funds. Inventories are valued at lower of cost and net realizable The Company participates in a group gratuity cum life value. Cost of Inventories comprises of all cost of assurance scheme administered by the Life Insurance purchases and other costs incurred in bringing the Corporation (LIC). Provision for the year in respect of inventories to their present location and condition. Cost of gratuity is made on the basis of actuarial valuation as at the traded goods is determined on weighted average basis. end of the year. o) Fringe Benefits Tax Leave encashment is provided for on the basis of actuarial Fringe Benefits Tax (FBT) is recognized as per the valuation as at the end of the year. provisions of the Income-tax Act, 1961 and the Guidance g) Revenue recognition Note on Accounting for Fringe Benefits Tax issued by the Revenue from telecommunication services is recognised ICAI. as the service is performed on the basis of actual usage of p) Impairment of assets the Company's network in accordance with contractual An asset is considered as impaired in accordance with AS obligations and is recorded net of service tax. The amount 28 on “Impairment of Assets” when at the balance sheet charged to subscribers for specialised features which date there are indications of impairment and the carrying entitle them to access the network of the Company and amount of the asset, or where applicable the cash 34 16th Annual Report 2010-2011

generating unit to which the asset belongs, exceeds its and ADC was payable on such calls. The Company recoverable amount (i.e. the higher of the asset's net filed an appeal to the Hon'ble Telecom Dispute and selling price and value in use). In assessing the value in Settlement Appellate Tribunal (TDSAT) in this regard, use, the estimated future cash flows expected from the wherein the TDSAT negated the Company's appeal. continuing use of the asset and from its ultimate disposal The Company further filed an appeal before the are discounted to their present values using a pre- Hon'ble Supreme Court (SC) who vide order dated determined discount rate. The carrying amount is reduced April 30, 2008 confirmed that ADC was payable and to the recoverable amount and the reduction is recognized since there were claims and counter-claims between as an impairment loss in the profit and loss account. the Company and BSNL, the SC directed that q) Investments quantification of amounts payable to each other be made by TDSAT. The Company had filed a review Current investments are carried at lower of cost and fair petition in SC which was rejected. value. Long term investments are carried at cost. Provision The Company filed a petition in TDSAT to determine / is made to recognise a decline other than temporary in the reconcile amounts payable to each other and Hon'ble carrying amount of long term investments. Telecom Dispute and Settlement Appellate Tribunal r) Contingent Liabilities (TDSAT) vide its order dated August 12, 2008 held Contingent Liabilities as defined in AS 29 on “Provision, that BSNL and the Company should exchange Contingent Liabilities and Contingent Assets” are relevant information and reconcile the differences. disclosed by way of notes to accounts. Provision is made if However, on April 15, 2010, TDSAT confirmed BSNL it becomes probable that an outflow of future economic demands for period up to August 25, 2005 and has benefits will be required for an item previously dealt with as given BSNL liberty to lodge its claim for a further a contingent liability. period up to February 28, 2006. The Company filed an As at As at appeal before SC against the aforesaid TDSAT order March 31,2011 March 31, 2010 dated April 15, 2010. The SC vide its order dated July Rs. in Crores Rs. in Crores 23, 2010 admitted the appeal but no stay has been 3. Estimated amount of contracts granted. The SC had asked for details / break up of remaining to be executed on demands which have been filed. The Company has capital account and not provided also filed stay application in the SC. for (net of advances) 108.75 186.78 Out of the aforesaid Rs.161.27 Crores, the Company, has, in earlier years, already provided for amounts 4. a) Bank Guarantees 271.88 249.45 aggregating to Rs.28.14 Crores pertaining to ADC for b) Letters of Credit - 22.43 the period from August 26, 2005 upto February 28, 2006. The balance amounts aggregating to c) Counter guarantees Rs.133.13 Crores have been disclosed as Contingent given by the Company on Liability under 'Telecom Regulatory Matters' as the behalf of group company 39.00 200.00 Company is of the view that these demands include amounts relating to 'wireline' services and ADC for the d) Guarantees given by a period before August 26, 2005; the actual date after group company on behalf which, as per the directions of the Department of of the Company - 80.00 Telecom, services provided under the brand name 5. Contingent liabilities : "WALKY" are to be considered as Wireless in Local Loop (Mobile) for the purposes of ADC. (i) Claims against the company not acknowledged as debt The Company during the earlier year had made on account payment to BSNL of Rs.75 Crores in relation Telecom Regulatory Matters * to the above. (Refer notes below) 223.69 273.56 b) The Company had received a demand letter dated Others 146.50 104.80 M a r c h 1 7 , 2 0 0 8 f r o m D e p a r t m e n t o f * Amounts are net of provision for contingencies made Telecommunications (DoT) for Rs.8.38 Crore, being a aggregating to Rs. 185.60 Crores (previous year Nil) demand for spectrum charges for the period from April (Also refer note 27) 1, 2005 to February 29, 2008. Notes: This demand was subsequently revised to Rs.184.69 Crores by DoT, vide its demand letters dated July 3, Contingent liabilities in respect of Telecom Regulatory 2008, for the period from October 1, 1998 to June 30, Matters include: 2008 which was further increased to Rs.266.00 a) Bharat Sanchar Nigam Limited (BSNL) issued Crores vide letter dated February 28, 2009. The demand notices to pay Access Deficit Charge (ADC) amount was again revised to Rs.259.70 Crores vide aggregating to Rs.161.27 Crores, including interest, letter dated November 25, 2009 for the extended for the period November 14, 2004 upto February 28, period till November 30, 2009.The Company had 2006, the date after which ADC is payable on Net represented to the Wireless Planning Commission Adjusted Gross Revenue Basis. The demands stated (“WPC”), various items of differences mentioned in that 'fixed wireless' services provided by the Company the demand orders, vide letter dated September 24, under the brand name "WALKY" had mobility features 2008. Though the Company has now received a and should be treated as mobile services for the revised demand of Rs. 75.47 Crores from DoT on purpose of Interconnect Usage Charges Regulations April 26, 2010 the reconciliation process with WPC is 35

in progress. Hon'ble TDSAT vide its order dated the counter-claim confirmed that TDSAT had jurisdiction August 25, 2010 has held that the Company should be and remanded the matter to TDSAT for fresh adjudication. given credit for all payments made on producing proof DoT has filed with TDSAT a counter-claim of Rs.2,015 and no penalty should be levied and only simple Crores which includes Rs.303 Crores towards loss of interest should be charged. The Company is hopeful (opportunity to earn) license fee and interest of Rs.1,712 of success in the matter. Crores calculated up to March 31, 2008. The matter has c) The definition of Adjusted Gross Revenue (AGR) been argued on merits and TDSAT has reserved its does not specifically provide for exemption for judgment on January 25, 2011. The Company is hopeful of proceeds of sale of shares/securities and deduction success in the matter. on account of bad debts in computation of Licence Counter guarantees have been given by the Company in Fees (LF) payable to the Government. The Hon'ble the ordinary course of business and no liability is expected Telecom Disputes Settlement and Appellate Tribunal to accrue in this respect. (TDSAT) had vide its judgment dated August 30, As regards disputes and claims referred to above against 2007, held that income from sale of securities is not the Company, appropriate competent professional advice related to licensed activity and hence should not is available to the Company based on which, favorable attract LF and that bad debts written off, waivers and outcomes are anticipated and no liability is expected to discounts are actual monies lost by service providers accrue to the Company. and hence should be deducted from AGR. The DoT has filed an appeal in Supreme Court (SC) against the 6. Payments to Auditors (excluding service tax) : aforesaid TDSAT ruling. Accordingly, the Company 2010-11 2009-10 has considered Rs.154.36 Crores, being the LF on Rs. in Crores Rs. in Crores profit on sale of investment and bad debts written off i) Audit fees 0.21 0.20 during the current year, as contingent liability, pending ii) Tax Audit fees 0.05 0.05 disposal of the aforesaid appeal. As at As at iii) Other matters March 31, 2011 March 31, 2010 (For Quarterly Audits, Rs. in Crores Rs. in Crores certification work etc.) 0.31 0.31 i) Disputed Income Tax vi) Out of pocket expenses demands in Appeals [Current year Rs. 74,905/- before relevant authorities 0.08 0.08 (Previous year Rs. 38,423/-)] 7. In November 1999, the Company established the ii) Show cause /demand notices Employee Stock Option Plan (ESOP) under which Equity received from Service Tax 66.96 66.68 Shares are reserved for issuance to eligible employees of Authorities the Company. In terms of the plan, 1.20 Crores warrants iii) Sales Tax 0.21 0.21 were issued to Hughes Tele.com (India) Limited Employees Stock Option Trust, to be held by it on behalf of iv) The Company has imported certain capital equipment the Company for awarding eligible employees as and under “Export Promotion of Capital Goods Scheme” of the when advised by the Compensation Committee Central Government at a concessional rate of Customs constituted for the purpose. Each allotted warrant carries Duty. The Company has undertaken export obligation to with it a right to purchase one Equity Share of the Company the extent of USD 100.8 millions (Rs. 404.41 Crores) to be at a price of Rs.10/- per share. Other than 2,40,000 fully fulfilled during a period of 8 years commencing from the vested warrants allotted in an earlier year, all allotted January 29, 2003, failing which the Company will be liable warrants vest at the rate of 25% on each successive to pay the differential customs duty, together with interest anniversary of the grant date, until fully vested. The period and penalties, if imposed. Up-till the end of the year, the during which the vested warrants may be exercised Company has fulfilled the export obligation to the extent of expires after 10 years from the date of the vesting. Rs.52.79 Crores (previous year Rs.52.79 Crores). The Company has also requested the authorities for granting The position of the allotted warrants is as follows: extension of time for fulfilling the obligations in respect of As at As at certain licenses for which the Company expects to receive March 31, 2011 March 31, 2010 the same in due course. (Nos.) (Nos.) v) The Company in 2002 had filed a petition before Hon'ble Opening Balance - 7,950 TDSAT claiming refund of Rs.50 Crores recovered by Exercised - 6,350 Department of Telecommunications (DoT) in 1999 alleging Lapsed - 1,600 failure to sign basic services license agreement for Closing Balance - - Karnataka circle after accepting Letter of Intent ( LoI). DoT during the proceedings before TDSAT claimed from the Since the market value of the Company's shares on the Company Rs.303 Crores towards loss of (opportunity to grant dates did not exceed the exercise price of Rs.10/-, no earn ) license fee and Rs.351 Crores as interest till October compensation expense has been recorded. 31, 2002. TDSAT allowed refund of Rs.50 Crores to the 8. The Company is engaged in providing Telecommunication Company with interest of 17% p.a. and dismissed the Services under Unified Access License. These, in the counter-claim based on a law point (i.e.TDSAT had no context of Accounting Standard 17 on "Segment jurisdiction) and facts. DoT appealed to the Hon'ble reporting", are considered to constitute a single reportable Supreme Court which without commenting on the merits of segment. 36 16th Annual Report 2010-2011

9. (a) Operating lease rent expenses for the year in Actuarial Assumptions respect of lease agreements entered from April 1, Particulars As at As at 2001. March 31, 2011 March 31, 2010 2010-11 2009-10 Rs. in Crores Rs. in Crores Rs. in Crores Rs. in Crores Discount rate 8.25% 8.00% Residential Flats for accommodation of Rate of increase in 6.50% 6.50% employee 0.06 0.95 compensation levels of covered employees Cell Sites and others 241.25 166.64 Rate of Return on Plan 8.00% 8.00% Assets (b) Future Minimum Lease Payments under Non-Cancellable Operating Lease : Category of Assets As at As at As at As at March 31, 2011 March 31, 2010 March 31, 2011 March 31, 2010 Rs. in Crores Rs. in Crores Insurer Managed Funds 5.27 3.73 Due not later than one year 143.10 130.42 Total 5.27 3.73

Due later than one year and Experience Adjustment April-Mar’11 April-Mar’10 not later than five years 453.70 454.48 Rs. in Crores Rs. in Crores

Due later than five years 804.79 781.42 On Plan Liability Loss 0.21 0.08 On Plan Asset Gain/(Loss) 0.48 (0.31) The agreements are executed for a period ranging from 6 months to 15 years with a renewable clause and in many 11. No provision for current income tax has been made in the cases also provide for termination at will by either party accounts, since the Company estimates that there will be giving a prior notice period ranging between 30 to 90 days. no taxable profits for the year. Deferred Tax charges / credits have not been recognized in view of the tax holiday 10. The disclosure as required under AS 15 regarding the enjoyed by the Company and on considerations of Company's gratuity plan is as follows: prudence as set out in AS 22 on “Accounting for Taxes on Income”. Particulars As at As at March 31, 2011 March 31, 2010 12. Value of imports on CIF basis in respect of : Rs. in Crores Rs. in Crores 2010-11 2009-10 Projected benefit obligation, 5.35 3.99 Rs. in Crores Rs. in Crores beginning of the year Service cost 1.56 1.21 Capital Goods 193.42 577.51 Interest cost 0.43 0.40 Actuarial Gain on obligation (0.04) (0.12) 13. Expenditure in Foreign Currency (Payment basis) on account of : Benefits paid (0.46) (0.13) 2010-11 2009-10 Projected benefit obligation, 6.84 5.35 Rs. in Crores Rs. in Crores end of the year Interest 9.23 14.42 Projected benefit obligation, 6.84 5.35 end of the year Other 2.84 3.19 Fair value of plan assets at 5.27 3.73 the end of the year 11.27 17.61 Net liability recognized in 1.57 1.62 the Balance Sheet 14. Value of Capital Inventory consumed during the year : Fair Value of Plan Assets at 3.73 2.77 2010-11 2009-10 the beginning of the year Rs. in Crores % Rs. in Crores % Expected Return on Plan 0.29 0.31 Assets Indigenous 2.14 100 8.63 100 Contributions 1.23 1.08 Benefit Paid (0.46) (0.13) Imported - - - - Actuarial Gain / (Loss) on 0.48 (0.30) 2.14 100 8.63 100 Plan Assets Fair Value of Plan Assets at 5.27 3.73 the end of the year Total Actuarial Gain / (Loss) 0.52 (0.18) Recognized 15) Related Party disclosures (in terms of Accounting Standard - 18) i) Details of transactions with Related Parties (Rs. in Crores)

Ultimate Subsidiary Holding Company For the year ended March 31, 2011 Company (Upto to Fellow Subsidiaries May 20, 2010)

Tata 21st 21st Tata Viom Drive India Tata Tata Tata Tata Tata Realty Tata AIG Tata AIG Tata CMC Sons Century Century Teleservices Networks Enterprise Internet Business Consultancy Housing & Life General Sky Ltd. Ltd. Infra Tele Infra Tele Ltd. Ltd. Solutions Services Support Services Development Infrastructure Insurance Insurance Ltd. Ltd. Ltd. (Formely Ltd. Ltd. Services Ltd. Company Ltd. Company Company known as Ltd. Ltd. Ltd. Ltd. Wireless TT Info Services Ltd. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 1) Expenses : - Salary - - - 11.51 ------Customer Service and Call Centre Cost - - - 0.03 - - - 4.03 66.66 ------Advertisement and Business promotion expenses - - - 5 7 . 1 5 - 1 1.07 ------0 . 0 1 - - Network operation cost - 9 . 1 2 8 0 . 1 4 1 5 . 5 9 0.1 0 ------Administrative and Other Expenses 0.09 - - 5.68 - 6.48 - - 0.77 ------Rent - - - - - 1.63 1 .55 - - 0 . 0 6 ------Interconnection and Other access costs - - - 1 1 6 . 2 9 ------Infrastructure Sharing Cost - 1 2 . 0 5 7 0 . 8 8 0 . 0 3 ------Interest ------

2) Income : - Towards Recharge Coupon Vouchers ------Rent - - - 2 . 2 9 ------Rendering Telecom Services 0.47 - - 12.78 0.07 0.04 - 0.43 11.89 0.32 0.34 1.34 0.41 0.74 0.72 - Sale of Network Interface Units - - - - - 2.45 ------

3) Reimbursement of Expenses - 0.22 0.94 5.92 ------4) Purchase of Fixed Asset - - - 4 6 . 4 0 - 0.68 - - 0 . 9 8 ------5) Security Deposits Repaid - 1 0 . 0 0 ------6) Security Deposits Given - 2 4 . 0 0 ------7) Repayment of inter corporate deposit ------8) Sale of Subsidiary Company - - - - 956.3 3 ------9) Outstanding as at March 31, 2011 : Sundry Debtors 0.03 - - 2.73 0.01 0.01 - 0.09 1.81 0.05 0.05 0.26 0.06 0.07 0.10

Sundry Creditors - - 1.30 22.49 0.09 - - - 0.60 ------Loans and Advances - - - - - 2.44 ------0.01 - - Security Deposits Taken - - - 1 . 7 3 ------Security Deposits Given - - 1 4 . 0 0 ------0 .0 1 - - - - -

Since the figures are less than the denominations disclosed, the figures do not appear Figures above are inclusive of Service Tax where ever applicable Others Include Ewart Investments Ltd. Tata Trustee Company Ltd. Ltd. 37 15) Related Party disclosures (in terms of Accounting Standard - 18) 38 i) Details of transactions with Related Parties Rs. in Crores 16 th

Key Annual Report2010-201 Manage- For the year ended March 31, 2011 Fellow Subsidiaries ment Personnel

Infiniti e-Nxt Tata Tata Computational Tata Asset TCS TC Travel Tata Tata Tata Others Managing Total Retail Financials Consulting Petrodyne Research Management E-Serve And Capital Securities Investment Director Ltd. Ltd. Engineers Ltd. Laboratories Ltd. Ltd. Services Ltd. Ltd. Corporation Ltd. Ltd. Ltd. Ltd. 1 16 17 18 19 20 21 22 23 24 25 26 27 28 1) Expenses : - Salary ------1.21 12.71 - Customer Service and Call Centre Cost ------70.73 - Advertisement and Business

promotion expenses ------68.22

- Network operation cost ------104.95 - Administrative and Other Expenses 0.32 ------0.38 - - - - - 13.72 - Rent ------3 . 2 4 - Interconnection and Other access costs ------1 1 6 . 2 9 - Infrastructure Sharing Cost ------8 2 . 9 6 - Interest ------0.56 - - - - 0 . 5 6

2) Income :

- Towards Recharge Coupon Vouchers 0.01 ------0.01 - Rent ------2 . 2 9 - Rendering Telecom Services 0.35 1.34 0.17 0.07 0.07 0.54 0.04 - 0.47 0.05 0.02 - 0.01 32.68 - Sale of Network Interface Units ------2.45

3) Reimbursement of Expenses ------7 . 0 8 4) Purchase of Fixed Asset ------4 8 . 0 7 5) Security Deposits Repaid ------1 0 . 0 0 6) Security Deposits Given ------24.00 7) Repayment of inter corporate deposit ------20.00 - - - - 20.00 8) Sale of Subsidiary Company ------9 5 6 . 3 3 9) Outstanding as at March 31, 2011 : Sundry Debtors 0 . 0 3 0.3 0 0.03 - 0.01 0 . 03 0 .0 2 - 0.15 0. 02 - - - 5 . 8 6 Sundry Creditors 0 . 0 1 ------0.04 - - - - 2 4 . 5 3 Loans and Advances ------2 . 4 5 Security Deposits Taken ------1 . 7 3 Security Deposits Given ------14.01

Since the figures are less than the denominations disclosed, the figures do not appear Figures above are inclusive of Service Tax where ever applicable Others Include Ewart Investments Ltd. Tata Trustee Company Ltd. Tata Advanced Systems Ltd. 15) Related Party disclosures (in terms of Accounting Standard - 18) i) Details of transactions with Related Parties (Rs. in Crores)

Ultimate Subsidiary For year ended March 31, 2010 Holding Fellow Subsidiaries Company Company Tata 21st Tata Tata Tata Tata Tata Tata Realty Tata AIG Tata AIG CMC Tata Asset Sons Century Teleservices Internet Business Consultancy Housing & Life General Ltd. Ltd. Management Ltd. Infra Tele Ltd. Services Support Services Development Infrastructure Insurance Insurance Ltd. Ltd. Ltd. Services Ltd. Company Ltd. Company Company Ltd. Ltd. Ltd. Ltd.

1 2 3 4 5 6 7 8 9 10 11 12 13 1) Expenses : - Salary - - 3.30 ------Customer Service and Call Cen t r e C o s t - - 0 .15 - 3 . 6 0 5 4 . 5 9 ------Advertisement and Business - - 21.65 ------

promotion expenses

- Network operation cost - 75.42 9.73 ------Administrative and Other Expenses 0.03 - 3.33 ------Rent - - 0 .01 1 . 5 7 - - 0 . 0 1 ------Interconnection and Other acce s s c o s ts - - 5 7 .55 ------Infrastructure Sharing Cost - 8 2 . 8 0 0.57 ------Interest ------2) Income : - Towards Recharge Coupon Vou c h e r s ------Rent - - 2.29 ------Rendering Telecom Services 0 . 5 0 - 4 .93 0 . 0 3 0 . 6 6 1 6 . 3 8 0 . 1 2 0. 3 3 3.3 0 0 .96 1 .15 0 .6 8 0.55 - Sale of Refurbished Network Int e r f a c e Unit s - - 0 .71 ------3) Reimbursement of Expenses - 2.62 5.09 ------

4) Investment in Subsidiary - 45.00 ------5) Sale of Fixed Asset - 3 . 0 6 3 6 .37 ------6) Purchase of Fixed Asset - - 4 7 .02 - - 3 . 5 1 ------7) Inter-corporate deposits tak e n ------8) Repayment of inter corpora t e d e p osit ------9) Outstanding as at March 31 , 2 0 1 0 : Sundry Debtors 0 . 0 6 - 0 .93 0 . 0 2 0 . 1 0 1 . 6 7 0 . 0 3 0. 0 1 0.4 4 0 .56 0 .14 0 .0 6 0.02 Sundry Creditors - - 6 .30 - - 0 . 0 3 0 . 0 1 ------Loans and Advances - 14.75 - - - - - 0.01 - 0.01 - - - Security Deposits Taken - - 1 .73 ------Security Deposits Given ------0 . 0 1 ------Inter-corporate Deposits ------10) Investment in Subsidiary as at - 120.00 ------March 31, 2010

Since the figures are less tha n t h e d eno min a t io n s disclosed , t h e f i g u r es d o n o t a p pea r Figures above are inclusive of Service Tax where ever applicable Others Include Ewart Investments Ltd. Tata Trustee Company Ltd. (formerly Tata Trustee Company Private Ltd.) Tata Advanced Systems Ltd.

Wireless - TT Info Services Ltd. 39 15) Related Party disclosures (in terms of Accounting Standard - 18) 40 i) Details of transactions with Related Parties

(Rs. in Crores) 16

Key th

For year ended March 31, 2010 Fellow Subsidiaries Management Annual Report2010-201 Personnel Tata Infiniti e-Nxt Tata Consulting Tata Tata Computational TCS TC Travel Tata Others Managing Total Securities Retail Financials Engineers Investment Petrodyne Research E-Serve And Capital Director Ltd. Ltd. Ltd. Ltd. Corporation Ltd. Laboratories Ltd. Services Ltd. (formerly TCE Ltd. Ltd. Ltd. Consulting Engineers 14 15 16 17 18 19 20 21 22 23 24 25 1) Expenses : - Salary ------1.63 4.93 - Customer Service and Call Centre Cost ------58.34 1

- Advertisement and Business - 0.26 ------21.91 promotion expenses - Network operation cost ------8 5 . 1 5 - Administrative and Other Expenses ------0.49 - - - 3.85 - Rent ------1 . 5 9 - Interconnection and Other ac c e s s c o s t s ------5 7 . 5 5 - Infrastructure Sharing Cost ------8 3 . 3 7 - Interest ------1 . 0 8 - - 1 . 0 8 2) Income : - Towards Recharge Coupon Vouchers - 0.06 ------0.06

- Rent ------2.29 - Rendering Telecom Services 0.24 0.65 1.34 0.39 0.01 0.06 0.03 0.12 - 0.94 0.01 0.02 33.40 - Sale of Refurbished Network I n t e r f a c e U n its ------0 . 7 1 3) Reimbursement of Expen s e s ------7 . 7 1 4) Investment in Subsidiary ------4 5 . 0 0 5) Sale of Fixed Asset ------3 9 . 4 3 6) Purchase of Fixed Asset ------5 0 . 5 3 7) Inter-corporate deposits tak e n ------40 . 0 0 - - 4 0 . 0 0 8) Repayment of inter corpora t e d e p o s i t ------20 . 0 0 - - 2 0 . 0 0 9) Outstanding as at March 31 , 2 0 1 0 : Sundry Debtors 0.05 0.06 0.31 0.03 - 0.01 - 0.03 - 0.11 - - 4.64

Sundry Creditors - - - 0.01 - - - - - 0.03 - - 6.38

Loans and Advances - 0.15 ------14.92 Security Deposits Taken ------1.73 Security Deposits Given ------0 . 0 1 Inter-corporate Deposits ------20 . 0 0 - - 2 0 . 0 0 10) Investment in Subsidiar y a s a t ------1 2 0 . 0 0 March 31, 2010

Since the figures are less t h a n t h e d e n o m i n a t io n s d is c l o s e d , t h e f i g u r e s d o n o t a ppea r Figures above are inclusive of Service Tax where ever applicable Others Include Ewart Investments Ltd. Tata Trustee Company Ltd. (formerly Tata Trustee Company Private Ltd.) Tata Advanced Systems Ltd. Wireless - TT Info Services Ltd. 41

15) Related Party disclosures (in terms of Accounting Standard - 18) ii) Details of all Related Parties and their relationships

A Ultimate Holding Company 14 e-Nxt Financials Ltd. Tata Sons Ltd. 15 Tata Consulting Engineers Ltd. 16 Tata Petrodyne Ltd. B Subsidiary Company 17 Computational Research Laboratories Ltd. 21st Century Infra Tele Ltd. (till 20.05.2010) 18 Tcs E-Serve Ltd. 19 TC Travel And Services Ltd. C List of Fellow Subsidiaries 20 Ltd. 1 Tata Teleservices Ltd. 21 Tata Investment Corporation Ltd. 2 Tata Internet Services Ltd. 22 Ewart Investments Ltd. 3 Tata Business Support Services Ltd. 23 Tata Trustee Company Private Ltd. 4 Tata Consultancy Services Ltd. 24 Tata Advanced Systems Ltd. 5 Tata Housing Development Company Ltd. 25 Viom Networks Ltd. (Formerly known as 6 Tata Realty & Infrastructure Ltd. Wireless TT Info Services Ltd.) 7 Tata AIG Life Insurance Company Ltd. 26 Drive India Enterprise Solutions Ltd. 8 Tata AIG General Insurance Company Ltd. 27 21st Century Infra Tele Ltd. (w.e.f. 21.05.2010) 9 Tata Sky Ltd. 10 CMC Ltd. D Key Management Personnel (Managing Director) 11 Tata Asset Management Ltd. 1 Dr. Mukund Govind Rajan (till 20.05.2010) 12 Tata Securities Ltd. 2 Mr. Anil Kumar Sardana (till 31.01.2011) 13 Infiniti Retail Ltd. 3 Mr. N. Srinath (w.e.f. 01.02.2011)

16. Derivatives As at As at March 31, 2011 March 31,2010 i) Outstanding derivatives : 17. Earnings Per Share Data As at Mar 31, 2011 As at Mar 31, 2010 USD in Rs. in USD in Rs. in i) Profit / (Loss) after Tax Millions Crores Millions Crores (Rs. in Crores) 49.90 (298.01) ii) Weighted average a) Forward number of shares Contract 65.35 291.43 86.03 386.25 outstanding. 1,897,196,854 1,897,196,089 b) Currency options iii) Nominal Value of Equity for hedging of Shares (Rs) 10 10 foreign currency exposure 70.00 313.79 58.00 261.61 iv) Basic and Diluted Earnings per Share (Rs.) 0.26 (1.57) Total 135.35 605.22 144.03 647.86 18. Quantitative details of principal items of goods traded c) Interest Rate (Starter Kits): Swaps 0.99 4.41 66.83 300.06 Quantity Value (Nos) Rs. in Crores ii) The mark to market loss of outstanding interest rate swaps a) Opening Stock 2843689 6.40 as at the year-end aggregate to Rs. 1.92 Crores (Previous (674148) (2.01) year Rs. 8.27 Crores). b) Purchases 9461883 19.58 iii) The foreign currency exposure that are not hedged by (13459703) (27.37) derivative instruments: As at Mar 31, 2011 As at Mar 31, 2010 c) Sales 10144708 34.31 USD in Rs. in USD in Rs. in (11290162) (33.96) Millions Crores Millions Crores D) Closing Stock 2160864 3.78 Vendor payables 107.91 481.22 41.08 184.45 (2843689) (6.40)

107.91 481.22 41.08 184.45 Note: Figures in ( ) pertain to those of the previous year. 42 16th Annual Report 2010-2011

19. Following units have been purchased and redeemed by the SBI- Premier Liquid Fund - Company during the year ended March 31, 2011: Super Inst. Growth 5,875,555.73 10 9.00

Particulars No. of Face Cost Reliance Liquid Fund Units Value (Rs. in Cash Plan - Growth 46,813,336.84 10 73.36 Crores) ICICI Prudential Ultra IDBI Liquid Fund - Growth 23,860.13 1,000 2.50 Short Term Plan Super Premium Growth 244,491,263.27 10 254.53 UTI Money Market Mutual Fund - Institutional ICICI Prudential Growth Plan 110,055.58 1,000 12.00 Flexible Income Plan Premium - Growth 20,819,938.33 100 360.59 20. Managerial Remuneration :

ICICI Prudential Liquid i) Managing Director Plan Super Institutional 2010-11 2009-10 Growth 170,859,735.29 100 2,348.88 Rs. in Crores Rs. in Crores Salaries 1.10 0.91 ICICI Floating Rate Plan D 3,582,389.03 100 50.02 Contribution to Provident and other Fund 0.01 0.07 HDFC Liquid Fund - Premium Plus Plan - Monetary value of perquisites 0.10 0.65 Growth 217,856,941.41 10 407.20 Total 1.21 1.63 HDFC Liquid Fund - Premium Plan - Growth 71,758,371.48 10 135.00 Note:

HDFC Cash Mgt Fund- a) 2010-11 figures include Rs.0.56 Crores paid during the Treasury Advantage Plan- year for 2009-10 on account of bonus / performance pay. Wholesale Growth 80,281,967.48 10 164.07 b) 2009-10 figures include Rs.0.50 Crores paid during the BSL Saving Fund year for 2008-09 on account of bonus / performance pay. Institutional Growth 76,451,955.02 10 135.80 c) The above represents the remuneration of erstwhile BSL Cash Plus Institutional Managing Directors. Premium Growth 263,379,714.03 10 396.60 ii) Non-executive Directors BSL Ultra Short Term 2010-11 2009-10 Fund Institutional Growth 76,819,492.27 10 85.00 Rs. in Crores Rs. in Crores

BSL Cash Manager - Directors’ Sitting Fees 0.06 0.07 Institutional Plan Growth 32,992,597.06 10 52.07 21. The Company, had identified certain Network Interface Tata Floater Fund 41,590,186.91 10 58.53 Units (NIU's), which had been disconnected and were not in use (including not retrieved) and also had been fully Tata Liquid Super High depreciated in the books of account. The management, Inv. Fund - Appreciation 1,741,042.38 1,000 305.20 having regard to the present condition of the said NIUs, their future usability and the fact that these NIUs have been JPMorgan India Liquid fully depreciated, had decided to write-off the same. Fund - Super Institutional Accordingly during the current year the said NIU's Growth 80,066,871.88 10 98.75 aggregating Nil (Previous Year Rs.104.54 Crores) were written off and removed from the block of fixed assets. LICMF Liquid Fund - Growth Plan 29,307,418.23 10 50.76 22. The Company during the quarter ended June 30, 2010, succeeded in winning the bid for 3G spectrum in JM High Liquidity Fund - Maharashtra circle (including Goa and excluding Mumbai). Super Inst Plan - Growth 28,512,232.13 10 42.25 The bid price paid towards the related license fees aggregating to Rs.1,257.82 Crores have been capitalised DSP Black Rock Liquidity under License under Fixed Assets. Fund - Institutional Plan - In accordance with the accounting policy followed in this Growth 843,226.58 1,000 116.30 regard, the Company has commenced amortization of the aforesaid license fees, on commencement of 3G SBI- Magnum Insta Cash operations and such fees will be amortised over the Fund - Cash Option 11,675,150.61 10 25.00 remaining life of the license. 43

The borrowing costs attributable to the aforesaid considering up-gradation of equipment on account of aggregating Rs. 62.82 Crores (Previous year Rs.18.79 enhancement of technology and the consequent Crores towards GSM operations) have been capitalized enhanced pace of planned replacement. As a result the during the year in accordance with AS 16 on 'Borrowing depreciation charge for the current year is higher by Rs. Costs'. 184.81 Crores. 23. Information regarding the total outstanding dues of Micro 27. The following table sets forth the movement in the Enterprises and Small Enterprises in Schedule 11 is given provision for contingencies: to the extent the same is available with the Company. Rs. in Crores

24. The Company in the previous year had entered in to a Sr. Description As at Additions Amount As at share purchase agreement with Viom Networks Limited No. April 1, during the used / March 31, (formerly Wireless-TT Info Services Limited ) for selling its 2010 period / reversed 2011 stake in its wholly owned subsidiary viz. 21st Century Infra year Tele Limited. The Company has, accordingly, accounted 1 Provision for - 185.60 - 185.60 for profit (net of related expenses) on the aforesaid sale Contingencies (16.74) - (16.74) - aggregating to Rs.834.93 Crores during the year, on completion of the necessary formalities. a. Figures pertaining to the previous year have been disclosed in brackets. 25. The Central Government, vide notification dated March 31, 2009, amended AS 11 on ´The Effect of Changes in b. Provision for contingencies are primarily towards the Foreign Exchange Rates', whereby, companies have been outstanding claims / litigations against the Company given an option to account for exchange differences arising relating to Department of Telecommunication (DoT) and on reporting of long-term foreign currency monetary items other parties. (assets/liabilities) in so far as they relate to acquisition of a 28. The accumulated losses of the Company at the close of the depreciable capital asset, to be added/deducted from the year have exceeded its paid-up capital and reserves. This, cost of the asset and for others to be accumulated in a however, is not uncommon for telecommunication service separate reserve to be amortized over the balance life of providers, due to the high operation costs and on account the asset/liability but not beyond March 31, 2011. The of the industry being inherently capital intensive. However, aforesaid option is effective with retrospective effect in the Company is consistently making operating cash profits respect of accounting periods commencing on or after over the past few years. December 7, 2006. Accordingly, the Company opted to The subscriber base of the Company has further increased exercise this option during the year ending March 31, 2009 with the launch of services using the GSM technology and had given the effect of the same in the accounts of the during the previous year. The Company has also received said year. sanctions from banks for additional long-term funds for During the current year, pursuant to the said option, the future expansion. Further, during the current year the Company has adjusted exchange loss aggregating to Rs. Company succeeded in winning the bid for 3G spectrum in 6.81 Crores (Previous year Rs.34.65 Crores (exchange Maharashtra circle (including Goa and excluding Mumbai) gain)) against the carrying value of fixed assets. and has also commenced 3G services. The amount (after the aforesaid adjustments) of Plant and Accordingly, based on the aforesaid considerations, the Machinery as at the year-end aggregates to Rs.2.80 Company is confident of it's ability to continue it's business Crores (credit) (Previous Year Rs. 7.54 Crores (credit)) as a going concern and the accounts have been prepared which has been adjusted by way of depreciation on the on that basis. grounds of materiality. 29. Figures of the previous year are regrouped and reclassified 26. During the year, the Company re-estimated the balance wherever necessary to correspond to figures of the current useful life of certain items of plant and machinery year.

Signatures to Schedules ‘1’ to ‘17’ In terms of our report attached For Deloitte Haskins & Sells For and on behalf of the Board Chartered Accountants Kishor A. Chaukar N. Srinath (Chairman) (Managing Director) A.B.Jani Prof. Ashok Jhunjhunwala D. T. Joseph Koichi Takahara Partner (Director) (Director) (Director) S. Ramadorai Anil Kumar Sardana N. S. Ramachandran (Director) (Director) (Director) S. Venkatesan Madhav J. Joshi (Chief Financial Officer) (Chief Legal Officer and Company Secretary) Place: Mumbai Place: Mumbai Date : April 26, 2011 Date : April 26, 2011 44 16th Annual Report 2010-2011

CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2011 2010-11 2009-10 Rs. in Crores Rs. in Crores A Cash flows from operating activities Net Profit / (Loss) before tax 49.91 (298.00) Adjustments for : Depreciation/Amortisation (Refer Note 26 of Schedule 17) 750.70 520.89 Profit on Fixed assets sold (Net) (29.24) (35.45) Profit on redemption of units (Current Investment) (6.41) (0.06) Interest Income (1.23) - Profit on Sale of Long term investment (Refer note 24 of Schedule 17) (834.93) - Provision for contingencies (Refer note 27 of Schedule 17) 185.60 - Asset awaiting disposal written off - 0.56 Finance and Treasury charges 353.80 317.68 418.29 803.62 Operating profit before working capital changes 468.20 505.62 (Increase) in Sundry Debtors (30.86) (23.39) (Increase) in Loans and Advances (216.41) (1.70) Decrease / (Increase) in Inventory 2.62 (4.39) Increase in Current liabilities and Provisions 8.26 74.39 Cash Generated from operations 231.81 550.53 Taxes paid (0.01) (0.01) Net Cash generated from operating activities 231.80 550.52

B Cash flow from investing activities Purchase of Fixed Assets (1858.09) (728.80) Proceeds from sale of Fixed Assets 37.10 39.23 Purchase of Current Investments (5,183.41) (74.85) Sale of Current Investments 5,189.82 74.91 Proceeds from sale of long term Investment (Refer Note 24 of Schedule 17) 956.33 - Investment in Subsidiary - (45.00) Net Cash used for investing activities (858.25) (734.51)

C Cash flow from financing activities Proceeds from Issue of Shares - 0.01 Proceeds from Long term borrowings 679.25 1,186.00 Repayment of Long term borrowings (170.27) (1,336.23) Proceeds from Short term borrowings 3,314.78 1,833.00 Repayment of Short term borrowings (2,640.00) (1,316.95) (Repayment) / Proceeds of Acceptances and Cash Credit Accounts (Net) (140.59) 131.34 Finance and Treasury charges paid (366.25) (317.68) Interest received 1.23 - Net cash generated from financing activities 678.15 179.49 Net increase / (decrease) in cash or cash equivalents 51.70 (4.50) Cash and cash equivalents at beginning of the year 22.98 27.48 Cash and cash equivalents at end of the year 74.68 22.98 51.70 (4.50) Notes to Cash Flow Statement 1. Components of Cash and Cash Equivalents include Cash and Bank balances in Current Accounts (Refer Schedule 7 to the Balance Sheet). 2. Purchase of Fixed Assets are inclusive of movements in Capital Work-in-Progress between the commencement and end of the year.

In terms of our report attached For Deloitte Haskins & Sells For and on behalf of the Board Chartered Accountants Kishor A. Chaukar N. Srinath (Chairman) (Managing Director) A.B.Jani Prof. Ashok Jhunjhunwala D. T. Joseph Koichi Takahara Partner (Director) (Director) (Director) S. Ramadorai Anil Kumar Sardana N. S. Ramachandran (Director) (Director) (Director) S. Venkatesan Madhav J. Joshi (Chief Financial Officer) (Chief Legal Officer and Company Secretary) Place: Mumbai Place: Mumbai Date : April 26, 2011 Date : April 26, 2011 45

AUDITORS' REPORT TO THE BOARD OF DIRECTORS OF opinion in so far as it relates to the amounts included in TATA TELESERVICES (MAHARASHTRA) LIMITED respect of this subsidiary is based solely on the reports of the other auditors. 1. We have audited the attached Consolidated Balance 4. We report that the Consolidated Financial Statements Sheet of TATA TELESERVICES (MAHARASHTRA) have been prepared by the Company in accordance with LIMITED (“the Company”) and its subsidiary (the the requirements of Accounting Standard 21 Company and its subsidiary constitute “the Group”) as at (Consolidated Financial Statements) as notified under the March 31, 2011, the Consolidated Profit and Loss Account Companies (Accounting Standards) Rules, 2006. and the Consolidated Cash Flow Statement of the Group for the year ended on that date, both annexed thereto. 5. Based on our audit and on consideration of the separate These financial statements are the responsibility of the audit reports on the individual financial statements of the Company's Management and have been prepared on the Company, and the aforesaid subsidiary, and to the best of basis of the separate financial statements and other our information and according to the explanations given to information regarding components. Our responsibility is to us, in our opinion, the Consolidated Financial Statements express an opinion on these Consolidated Financial give a true and fair view in conformity with the accounting Statements based on our audit. principles generally accepted in India: 2. We conducted our audit in accordance with the auditing (i) in the case of the Consolidated Balance Sheet, of the standards generally accepted in India. Those Standards state of affairs of the Group as at March 31, 2011; require that we plan and perform the audit to obtain reasonable assurance about whether the financial (ii) in the case of the Consolidated Profit and Loss statements are free of material misstatements. An audit Account, of the profit of the Group for the year ended includes examining, on a test basis, evidence supporting on that date and the amounts and the disclosures in the financial (iii) in the case of the Consolidated Cash Flow Statement, statements. An audit also includes assessing the of the cash flows of the Group for the year ended on accounting principles used and the significant estimates that date. made by the Management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. For DELOITTE HASKINS & SELLS 3. We did not audit the financial statements of the subsidiary, Chartered Accountants whose financial statements reflect total revenues of (Registration No. 117366W) Rs.9.74 Crores and net cash inflows amounting to Rs.0.03 Crores for the year ended on March 31, 2011 as considered in the Consolidated Financial Statements. A B Jani These financial statements have been audited by other Partner auditors whose reports have been furnished to us and our Mumbai, dated: April 26, 2011 Membership No. 46488 46 16th Annual Report 2010-2011

CONSOLIDATED BALANCE SHEET AS AT MARCH 31, 2011 Schedule As at As at March 31, 2011 March 31, 2010 Rs. in Crores Rs. in Crores SOURCES OF FUNDS

Shareholders' Funds Share Capital 1 1,897.20 1,897.20 Reserves and Surplus 2 583.16 583.16 2,480.36 2,480.36 Loan Funds Secured Loans 3 2,669.78 2,630.96 Unsecured Loans 4 1,982.82 1,309.00 4,652.60 3,939.96 Total 7,132.96 6,420.32

APPLICATION OF FUNDS

Fixed Assets 5 Gross Block (at cost) 7,621.16 6,163.58 Less : Accumulated Depreciation / Amortisation 2,818.33 2,212.38 Net Block 4,802.83 3,951.20 Capital Work - In - Progress 153.05 204.71 4,955.88 4,155.91

Current Assets, Loans and Advances Cash and Bank Balances 6 74.68 23.01 Sundry Debtors 7 294.98 292.43 Inventories 8 3.78 6.40 Loans and Advances 9 517.46 331.14 890.90 652.98 Less : Current Liabilities and Provisions Current Liabilities 10 1,619.05 1,552.94 Provisions 11 191.56 12.65 1,810.61 1,565.59 Net Current Liabilities (919.71) (912.61) Profit and Loss Account 3,096.79 3,177.02 Total 7,132.96 6,420.32

Significant Accounting Policies and Notes to Financial Statements 16

In terms of our report attached For Deloitte Haskins & Sells For and on behalf of the Board Chartered Accountants Kishor A. Chaukar N. Srinath (Chairman) (Managing Director) A.B.Jani Prof. Ashok Jhunjhunwala D. T. Joseph Koichi Takahara Partner (Director) (Director) (Director) S. Ramadorai Anil Kumar Sardana N. S. Ramachandran (Director) (Director) (Director) S. Venkatesan Madhav J. Joshi (Chief Financial Officer) (Chief Legal Officer and Company Secretary) Place: Mumbai Place: Mumbai Date : April 26, 2011 Date : April 26, 2011 47

CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2011 Schedule 2010-11 2009-10 Rs. in Crores Rs. in Crores INCOME

Telecommunication Services 12 2,248.74 2,069.10 Infrastructure Sharing Revenue 16.85 29.17 Other Income 13 60.09 211.18 Profit on Sale of Subsidiary (Refer Note 24 of Schedule 16) 865.38 - Total 3,191.06 2,309.45

EXPENDITURE

Operation and Other Expenses 14 1,815.87 1,712.95 Provision for contingencies (Refer Note 27 of Schedule 16) 185.60 - Profit before Finance and Treasury charges, 1,189.59 596.50 Depreciation and Tax Finance and Treasury Charges (Net) 15 351.71 350.51 Depreciation /Amortisation. (Refer Note a of Schedule 5 and Note 26 of Schedule 16) 757.64 563.98 Profit / (Loss) before tax 80.24 (317.99) Provision for Tax - Wealth Tax 0.01 0.01 Profit / (Loss) after tax 80.23 (318.00)

Balance brought forward (3,177.02) (2,859.02) Balance carried to Balance Sheet (3,096.79) (3,177.02)

Earnings Per Share - Basic and Diluted (Rs.) 0.42 (1.68) (Refer Note 17 of Schedule 16) Par Value (Rs.) 10.00 10.00

Significant Accounting Policies and Notes to Financial Statements 16

In terms of our report attached For Deloitte Haskins & Sells For and on behalf of the Board Chartered Accountants Kishor A. Chaukar N. Srinath (Chairman) (Managing Director) A.B.Jani Prof. Ashok Jhunjhunwala D. T. Joseph Koichi Takahara Partner (Director) (Director) (Director) S. Ramadorai Anil Kumar Sardana N. S. Ramachandran (Director) (Director) (Director) S. Venkatesan Madhav J. Joshi (Chief Financial Officer) (Chief Legal Officer and Company Secretary) Place: Mumbai Place: Mumbai Date : April 26, 2011 Date : April 26, 2011 48 16th Annual Report 2010-2011

SCHEDULES FORMING PART OF THE CONSOLIDATED BALANCE SHEET AS AT MARCH 31, 2011 As at As at March 31, 2011 March 31, 2010 Rs. in Crores Rs. in Crores SCHEDULE - 1

SHARE CAPITAL

Authorised 2,500,000,000 Equity Shares of Rs.10/- each 2,500.00 2,500.00 2,500.00 2,500.00 Issued and Subscribed 1,897,196,854 (Previous year 1,897,196,854) Equity Shares of Rs.10/- each fully paid-up 1,897.20 1,897.20 1,897.20 1,897.20 Notes: Of the above 1,107,401,219 Equity Shares are held by Tata Sons Limited (the ultimate Holding Company) and its Subsidiaries.

SCHEDULE - 2

RESERVES AND SURPLUS

Securities Premium Account: Balance As per last Balance Sheet 583.16 583.16 583.16 583.16

SCHEDULE - 3

SECURED LOANS

From Banks (Refer note below) Term Loans 2,066.58 1,883.64 Cash Credit Accounts 12.85 168.91 Acceptances 590.35 578.41 2,669.78 2,630.96 Note : Stipulated securities for the loans are either one or more of the following as per terms of the arrangements with respective banks : - by first pari pasu charge on the assets of the Company, - by pledge of shares held by Tata Teleservices Limited in the Company, - by assignment of the proceeds on sale of network in the event of cancellation of the telecom license, - by assignment of telecom license and - by assignment of insurance policies, - by sponsor support undertaking of Tata Sons Limited (the Ultimate Holding Company).

SCHEDULE - 4

UNSECURED LOANS

From Banks - Short Term Loans 1,982.82 1,289.00 Inter-corporate deposits - 20.00 1,982.82 1,309.00 49

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( 50 16th Annual Report 2010-2011

SCHEDULES FORMING PART OF THE CONSOLIDATED BALANCE SHEET AS AT MARCH 31, 2011 As at As at March 31, 2011 March 31, 2010 Rs. in Crores Rs. in Crores SCHEDULE - 6

CASH AND BANK BALANCES

Cash on hand - 0.03 Balance with Scheduled Banks in - Current Accounts 24.28 22.88 - Cash Credit Accounts (Refer Note below Schedule 3) 0.10 0.10 - Term Deposit Accounts (including interest accrued Rs.0.30 Crores (previous year Nil)) 50.30 - 74.68 23.01

SCHEDULE - 7

SUNDRY DEBTORS (Unsecured )

Outstanding for a period exceeding six months 88.79 306.50 Others 276.43 267.73 365.22 574.23 Less: Provision 70.24 281.80 294.98 292.43 Note: Considered good 294.98 292.43 Considered Doubtful 70.24 281.80 365.22 574.23

SCHEDULE - 8

INVENTORY

Traded Goods Starter Kits 3.78 6.40 3.78 6.40

SCHEDULE - 9

LOANS AND ADVANCES (Unsecured )

Advances recoverable in cash or in kind or for value to be received 442.96 274.56 [Includes Rs.0.18 Crores due from an officer of the Company. Maximum amount outstanding at any time during the year is Rs.0.18 Crores (Previous year Rs.0.18 Crores)] Premises and other deposits 60.76 48.51 Advance Tax paid (Tax Deducted at Source) 16.36 10.69 520.08 333.76 Less : Provision 2.62 2.62 517.46 331.14 Note : Considered good 517.46 331.14 Considered doubtful 2.62 2.62 520.08 333.76 51

SCHEDULES FORMING PART OF THE CONSOLIDATED BALANCE SHEET AS AT MARCH 31, 2011 As at As at March 31, 2011 March 31, 2010 Rs. in Crores Rs. in Crores SCHEDULE - 10

Current Liabilities

Sundry Creditors (Refer Note 23 of Schedule 16)

Total Outstanding dues of Micro Enterprises and Small Enterprises 0.35 -

Total Outstanding dues of Creditors other than Micro Enterprises and Small Enterprises:

- Under Usance Letter of Credit 571.67 526.26 - Others 877.59 890.04 1,449.61 1,416.30

Deposits from Customers and others 66.30 78.06 Interest accrued but not due on loans 2.68 15.13 Other liabilities 100.46 43.45 1,619.05 1,552.94

Note: Other Liabilites include temporary overdrawn bank balances aggregating to Rs.37.35 Crores (Previous year Rs.0.93 Crores)

SCHEDULE - 11

Provisions For Contingencies 185.60 - For Asset retirement obligation (site restoration cost) 0.49 6.93 For Retirement benefits 5.46 5.71 For Wealth Tax 0.01 0.01 191.56 12.65 52 16th Annual Report 2010-2011

SCHEDULES FORMING PART OF CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED AS AT MARCH 31, 2011 2010-11 2009-10 Rs. in Crores Rs. in Crores

SCHEDULE - 12

TELECOMMUNICATION SERVICES

Telephony 1,890.05 1,788.14 Internet Services 94.71 72.64 Interconnection Usage Charges [including in respect of earlier years 229.67 174.36 Rs. Nil Crores(Previous year Rs. 0.62 Crores)] Sale of Traded Goods 34.31 33.96 2,248.74 2,069.10

SCHEDULE - 13

OTHER INCOME

Subsidies from Department of Telecommunications (DoT) 6.87 141.29 Excess provision / Sundry credit balances in respect of earlier years written back 18.19 28.16 Profit on Fixed assets sold (Net) 29.24 35.41 Sale of Refurbished Network Interface Units 1.15 2.66 Miscellaneous Receipts 4.64 3.66 60.09 211.18

SCHEDULE - 14 OPERATION AND OTHER EXPENSES Network Operation costs Revenue Share to DoT 197.94 193.97 Repairs and Maintenance - Plant and Machinery [including capital inventory 39.34 68.47 consumed Rs.2.14 Crores (Previous year Rs.8.63 Crores)] Power 150.19 107.96 Rent 57.70 49.20 Rates and taxes 2.69 9.41 Insurance 1.38 2.02 Infrastructure Sharing Cost 156.47 51.84 Others 25.47 23.64 631.18 506.51 Interconnection and Other access costs 456.97 440.91 [including in respect of earlier years Nil (Previous year Rs. 0.22 Crores)] (net of excess provision in respect of earlier years written back Rs. 3.07 crores (previous year Nil))

Payments to and Provisions for Employees Salaries and Bonus 147.67 129.27 Contribution to Provident and other Funds 7.27 7.59 Staff Welfare 10.89 11.91 165.83 148.77 53

SCHEDULES FORMING PART OF CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED AS AT MARCH 31, 2011 2010-11 2009-10 Rs. in Crores Rs. in Crores Administrative and Other expenses Rent (net of recoveries Rs.0.41 Crores (previous year Nil)) 19.07 19.87 Rates and taxes 7.94 5.88 Repairs and Maintenance -others 9.99 5.71 Travel and conveyance expenses 11.44 19.26 Collection / Credit verification charges 10.02 11.10 Customer service and call centre cost 108.94 110.83 Assets awaiting disposal written off - 0.56 Bad Debts writen off 237.94 - Provision for Doubtful Debts written back (237.94) - Provision for Bad/Doubtful debts and advances 27.32 20.54 (Net of insurance received amounting to Rs. Nil (previous year Rs.0.42 Crores)) Insurance Expenses 0.02 0.03 Miscellaneous expenses 46.61 50.79 Contractual and other claims and liabilities (Net) (1.44) 0.29 239.91 244.86 Marketing and business promotion expenses Advertisement and business promotion expenses 152.76 133.09 Hand set Subsidy (Net of Rs.6.60 Crores (Previous year Rs.3.57 Crores) 7.63 80.67 incentive received) Sales Commission and Expenses 139.39 135.16 Traded Goods - Starter Kits Opening Stock 6.40 2.01 Purchases 19.58 27.37 Less: Closing stock 3.78 6.40 22.20 22.98 321.98 371.90 1,815.87 1,712.95

SCHEDULE - 15

FINANCE AND TREASURY CHARGES (NET)

Interest On Fixed Term Loans 351.23 325.45 On Inter-corporate deposits 0.57 1.08 On Others 30.22 15.56 Expenses for loan arrangement, bill discounting and bank charges 21.26 22.80 Foreign exchange fluctuations (Net) (Refer Note 16(ii) of Schedule 16) 18.89 4.48 422.17 369.37 Less: Interest Capitalized (Refer Note 22 of schedule16) 62.82 18.79 359.35 350.58 Less: Interest Income On Term Deposits with Banks (Tax deducted at source Rs.0.07 Crores 1.12 - (Previous year Nil)) On Others 0.11 - 358.12 350.58 Less: Profit on sale / redemption of units (Current Investment) 6.41 0.07 351.71 350.51 54 16th Annual Report 2010-2011

SCHEDULES FORMING PART OF THE CONSOLIDATED estimates and assumptions to be made that affect the BALANCE SHEET AND PROFIT AND LOSS ACCOUNT reported amounts of assets and liabilities and disclosure of SCHEDULE 16 contingent liabilities on the date of the financial statements and the reported amounts of revenues and expenses SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO during the reporting year. Differences between actual FINANCIAL STATEMENTS results and estimates are recognised in the periods in 1. Company background which the results are known / materialise. Tata Teleservices (Maharashtra) Limited (“TTML”/“Parent (d) Fixed Assets Company”), is licensed to provide basic and cellular Fixed assets are stated at their historical cost of acquisition telecommunication services. TTML presently holds two or construction, less accumulated depreciation/ Unified Access (Basic and Cellular) Service Licenses, one amortisation. Cost includes all costs incurred to bring the for Mumbai Service Area and another for Maharashtra and assets to their working condition and location (Also refer Goa and provides telecommunication services using Code note 25) and Site Restoration cost obligations where Division Multiple Access (CDMA) technology. The Parent outflow of resources is considered probable. Company has also commenced telecommunication Assets retired from active use and held for disposal are services using Global System for Mobile Communications stated at lower of net book value or net realisable value. (GSM) technology under the aforesaid licenses. TTML also holds the National Internet Service provider - Internet Expenditure related to and incurred during the construction Telephony license. period of switches and cell sites are capitalised as part of the construction cost and allocated to the relevant fixed TTML is a subsidiary of Tata Sons Limited. (the ultimate assets. holding Company). Capital inventory comprises switching equipment, field unit 21st Century Infra Tele Limited (“CITL”/“subsidiary”) cards, tower equipment, capital stores and other became a wholly owned subsidiary of TTML w.e.f July 1, accessories that are carried under Capital Work-In- 2008. CITL provides passive infrastructure support to Progress till such time as they are issued for new telecommunication service providers. The Department of installation or replacement. Telecommunications, Ministry of Communication and IT, Government of India has registered CITL as a The Group capitalises software and related Infrastructure Provider Category I (IP-I) with effect from implementation costs as intangible assets, where it is 30th September, 2008. CITL had entered into a Business reasonably estimated that the software has an enduring Transfer Agreement with TTML on September 30, 2008 for useful life. purchase of “Passive Tower Infrastructure Business” ('PI License fees paid by the Parent Company for acquiring Business') from TTML on a going concern basis for a lump licenses to operate telecommunication / internet telephony sum consideration. During the year the Subsidiary services are capitalised as intangible assets. company has been sold by the Parent Company (Also refer Indefeasible Rights to Use ('IRU') bandwidth capacities by note 24 below). the Parent Company are capitalised as intangible assets. 2. Significant Accounting Policies Assets acquired pursuant to an agreement for exchange of (a) Basis of preparation of financial statements similar assets are recorded at the net book value of the The accompanying Consolidated Financial Statements of assets given up, with an adjustment for any balancing the Parent Company and its subsidiary as aforesaid receipt or payment of cash or any other form of (hereinafter together referred as “the group”), have been consideration. prepared to comply in all material aspects with applicable (e) Depreciation accounting principles in India, the Accounting Standards i) Fixed assets are depreciated on a straight line basis, (AS) notified in the Companies (Accounting Standards) based on the following estimates of their useful Rules 2006. The financial statements of the subsidiaries economic lives: used in the consolidation are drawn up to the date of sale of Subsidiary Company. Useful Life (b) Principles of Consolidation (In years) Buildings 60 The financial statements of the Parent Company and its Plant and Machinery (Also refer Note 26 below) subsidiary have been consolidated on a line by line basis - Network Equipment 12 by adding together the book value of like items of assets, - Outside Plant 18 liabilities, income, expenses, after eliminating intra-group - Network Interface Units (Refer note 21 ) 5 transactions and any unrealized gain or losses on the - Air- Conditioning Equipment 6 balances remaining within the group in accordance with - Generators 6 the Accounting Standard 21 on “Consolidated Financial - Electrical Equipments 6 Statements” (AS-21). - Computers 3 The financial statements of the Parent Company and its - Office Equipments 3 subsidiary have been consolidated using uniform - Computer Software 3 accounting policies for like transaction and other events in Furniture and Fittings 3 similar circumstances. Vehicles 5 (c) Use of estimates Depreciation rates derived from the above are not The preparation of financial statements in conformity with less than the rates prescribed in Schedule XIV to the generally accepted accounting principles requires Companies Act, 1956. 55

ii) Leasehold land and premises are amortised uniformly life assurance scheme administered by the Life Insurance over the period of lease. Corporation (LIC). Provision for the year in respect of iii) License fees is amortized uniformly over the original gratuity is made on the basis of actuarial valuation as at the license period of 20 years / extended period as end of the year. permitted by DoT, as applicable, from the date of Leave encashment and gratuity are provided for on the commencement of operations. Since the Company basis of actuarial valuation as at the end of the year. has intention of being in business for a period well (h) Revenue recognition beyond 10 years and the telecommunication Revenue from telecommunication services is recognised business cannot be carried on without the Telecom as the service is performed on the basis of actual usage of license, the useful life of the asset will exceed the the Parent Company's network in accordance with rebuttable presumption of 10 years under AS 26 on contractual obligations and is recorded net of service tax. “Intangible Assets” (Refer note 22). The amount charged to subscribers for specialised iv) Indefeasible Right to Use ('IRU') bandwidth capacities features which entitle them to access the network of the taken by the Parent Company are amortised over a Parent Company and where all other services and period of fifteen years based on a management products are paid for separately, are recognised as and estimate of useful life of the assets or period of the when such features are activated. agreement whichever is lower. Revenue is recognised when it is earned and no significant v) Depreciation on additions and deletions to assets uncertainty exists as to its ultimate realisation or collection. during the year is charged to revenue pro rata to the (i) Government Grants period of their use. Subsidies granted by Government for providing telecom vi) The Group provides for obsolescence of its slow services in rural areas are recognized as income in moving capital inventory by way of depreciation, at the accordance with the relevant terms and conditions of the rate of 33.33% p.a. of cost. scheme / agreement with DoT. (f) Foreign Currency transactions (j) Borrowing costs i) Transactions in foreign currency are recorded at the Borrowing costs attributable to the acquisition of a original rates of exchange in force at the time qualifying asset, as defined in AS 16 on “Borrowing Costs”, transactions are effected. are capitalised as part of the cost of acquisition. Other ii) Foreign currency denominated assets and liabilities borrowing costs are expensed as incurred. are reported as follows: (k) Earnings per share a) Monetary items are translated into rupees at the The Group reports basic and diluted earnings per share in exchange rates prevailing at the balance sheet accordance with AS 20 on “Earnings Per Share”. Basic date. Non-Monetary items such as fixed assets earning per share is computed by dividing the net profit or are carried at their historical rupee values. loss for the year by the weighted average number of Equity b) Gains/losses arising on settlement of foreign shares outstanding during the year. Diluted earnings per currency transactions or restatement of foreign share is computed by dividing the net profit or loss for the currency denominated assets and liabilities year by the weighted average number of Equity shares (monetary items) are recognised in the profit and outstanding during the year as adjusted for the effects of all loss account, except for long term dilutive potential equity shares, except where the results assets/liabilities which pertain to acquisition of are anti-dilutive. fixed assets which are adjusted in the cost of (l) Operating Leases fixed assets (Refer note 25). Assets taken on lease under which all significant risks and iii) In case of forward exchange covers entered into by rewards of ownership are effectively retained by the lessor the Parent Company, the premium or discount arising are classified as operating leases. Lease payments under at the inception of the contract is amortised as operating leases are recognized as expenses as incurred expense or income over the life of the contract. in accordance with the respective lease agreements. iv) Pursuant to the announcement on accounting for (m) Cash Flow Statement derivatives issued by the Institute of Chartered The Cash Flow statement is prepared by the indirect Accountants of India (ICAI), the Parent Company in method set out in AS 3 on “Cash Flow Statements” and accordance with the principle of prudence as presents Cash flows by operating, investing and financing enunciated in Accounting Standard 1 on 'Disclosure activities of the group. of Accounting Policies' provides for losses in respect n) Finance and Treasury charges of all outstanding derivative contracts at the Balance Sheet date by marking them to market. Any gains Net finance and treasury charges are disclosed in the arising on such mark to market are not recognized as financial statements. Interest and other income earned income (Refer note 16 (ii)). from treasury operations are reduced from the costs of treasury operations. (g) Employee benefits (o) Inventories Retirement benefit costs are expensed to revenue as incurred. Inventories are valued at lower of cost and net realizable value. Cost of Inventories comprises all cost of purchases Contributions to the Provident and Superannuation Funds and other costs incurred in bringing the inventories to their are made in accordance with the rules of the Funds. present location and condition. Cost of traded goods is The Parent Company participates in a group gratuity cum determined on weighted average basis. 56 16th Annual Report 2010-2011

(p) Fringe Benefits Tax Matters include:

Fringe Benefits Tax (FBT) is recognized as per the a) Bharat Sanchar Nigam Limited (BSNL) issued provisions of the Income-tax Act, 1961 and the Guidance demand notices to pay Access Deficit Charge (ADC) Note on Accounting for Fringe Benefits Tax issued by the aggregating to Rs.161.27 Crores, including interest, ICAI. for the period November 14, 2004 upto February 28, (q) Impairment of assets 2006, the date after which ADC is payable on Net Adjusted Gross Revenue Basis. The demands stated An asset is considered as impaired in accordance with AS that 'fixed wireless' services provided by the Parent 28 on “Impairment of Assets” when at the balance sheet Company under the brand name “WALKY” had date there are indications of impairment and the carrying mobility features and should be treated as mobile amount of the asset, or where applicable the cash services for the purpose of Interconnect Usage generating unit to which the asset belongs, exceeds its Charges Regulations and ADC was payable on such recoverable amount (i.e. the higher of the asset's net calls. The Parent Company filed an appeal to the selling price and value in use). In assessing the value in Hon'ble Telecom Dispute and Settlement Appellate use, the estimated future cash flows expected from the Tribunal (TDSAT) in this regard, wherein the TDSAT continuing use of the asset and from its ultimate disposal negated the Parent Company's appeal. The Parent are discounted to their present values using a pre- Company further filed an appeal before the Hon'ble determined discount rate. The carrying amount is reduced Supreme Court (SC) who vide order dated April 30, to the recoverable amount and the reduction is recognized 2008 confirmed that ADC was payable and since as an impairment loss in the profit and loss account. there were claims and counter-claims between the (r) Investments Parent Company and BSNL, the SC directed that Current investments are carried at lower of cost and fair quantification of amounts payable to each other be value. Long term investments are carried at cost. Provision made by TDSAT. The Parent Company had filed a is made to recognise a decline other than temporary in the review petition in SC which was rejected. carrying amount of long term investments. The Parent Company filed a petition in TDSAT to (s) Contingent Liabilities determine / reconcile amounts payable to each other and Hon'ble Telecom Dispute and Settlement Contingent Liabilities as defined in AS 29 on “Provision, Appellate Tribunal (TDSAT) vide its order dated Contingent Liabilities and Contingent Assets” are August 12, 2008 held that BSNL and the Parent disclosed by way of notes to accounts. Provision is made if Company should exchange relevant information and it becomes probable that an outflow of future economic reconcile the differences. However, on April 15, 2010, benefits will be required for an item previously dealt with as TDSAT confirmed BSNL demands for period up to a contingent liability. August 25, 2005 and has given BSNL liberty to lodge As at As at its claim for a further period up to February 28, 2006. March 31,2011 March 31, 2010 The Parent Company filed an appeal before SC Rs. in Crores Rs. in Crores against the aforesaid TDSAT order dated April 15, 2010. The SC vide its order dated July 23, 2010 3. Estimated amount of contracts admitted the appeal but no stay has been granted. remaining to be executed on The SC had asked for details / break up of demands capital account and not provided which have been filed. The Parent Company has also for (net of advances) 108.75 203.11 filed stay application in the SC. 4. a) Bank Guarantees 271.88 249.45 Out of the aforesaid Rs.161.27 Crores, the Parent b) Letters of Credit - 22.43 Company, has, in earlier years, already provided for amounts aggregating to Rs.28.14 Crores pertaining c) Counter guarantees to ADC for the period from August 26, 2005 upto given by the Company on February 28, 2006. The balance amounts behalf of Group Company 39.00 200.00 aggregating to Rs.133.13 Crores have been disclosed as Contingent Liability under 'Telecom d) Guarantees given by a Regulatory Matters' as the Company is of the view group company on behalf that these demands include amounts relating to of the Parent Company - 80.00 'wireline' services and ADC for the period before 5. Contingent liabilities : August 26, 2005; the actual date after which, as per the directions of the Department of Telecom, services (i) Claims against the Parent Company provided under the brand name “WALKY” are to be not acknowledged as debt considered as Wireless in Local Loop (Mobile) for the Telecom Regulatory Matters * purposes of ADC.

(Refer notes below) 223.69 273.56 The Parent Company during the earlier year had

Others 146.50 106.19 made on account payment to BSNL of Rs.75 Crores in relation to the above. * Amounts are net of provision for contingencies made aggregating to Rs. 185.60 Crores (previous year Nil) b) The Parent Company had received a demand letter (Also refer note 27) dated March 17, 2008 from Department of Telecommunications (DoT) for Rs.8.38 Crore, being a Notes: demand for spectrum charges for the period from April Contingent liabilities in respect of Telecom Regulatory 1, 2005 to February 29, 2008. 57

This demand was subsequently revised to Rs.184.69 extension of time for fulfilling the obligations in respect of Crores by DoT, vide its demand letters dated July 3, certain licenses for which the Company expects to receive 2008, for the period from October 1, 1998 to June 30, the same in due course. 2008 which was further increased to Rs. 266.00 v) The Parent Company in 2002 had filed a petition before Crores vide letter dated February 28, 2009. The Hon'ble TDSAT claiming refund of Rs.50 Crores recovered amount was again revised to Rs.259.70 Crores vide by Department of Telecommunications (DoT) in 1999 letter dated November 25, 2009 for the extended alleging failure to sign basic services license agreement for period till November 30, 2009.The Parent Company Karnataka circle after accepting Letter of Intent ( LoI). DoT had represented to the Wireless Planning during the proceedings before TDSAT claimed from the Commission (WPC), various items of differences Parent Company Rs.303 Crores towards loss of mentioned in the demand orders, vide letter dated (opportunity to earn ) license fee and Rs.351 Crores as September 24, 2008. Though the Parent Company interest till October 31, 2002. TDSAT allowed refund of has now received a revised demand of Rs. 75.47 Rs.50 Crores to the Parent Company with interest of 17% Crores from DoT on April 26, 2010 the reconciliation p.a. and dismissed the counter-claim based on a law point process with WPC is in progress. Hon'ble TDSAT vide (i.e.TDSAT had no jurisdiction) and facts. DoT appealed to its order dated August 25, 2010 has held that the the Hon'ble Supreme Court which without commenting on Parent Company should be given credit for all the merits of the counter-claim confirmed that TDSAT had payments made on producing proof and no penalty jurisdiction and remanded the matter to TDSAT for fresh should be levied and only simple interest should be adjudication. DoT has filed with TDSAT a counter-claim of charged. The Parent Company is hopeful of success Rs.2,015 Crores which includes Rs.303 Crores towards in the matter. loss of (opportunity to earn) license fee and interest of c) The definition of Adjusted Gross Revenue (AGR) Rs.1,712 Crores calculated up to March 31, 2008. The does not specifically provide for exemption for matter has been argued on merits and TDSAT has proceeds of sale of shares/securities and deduction reserved its judgment on January 25, 2011. The Parent on account of bad debts in computation of Licence Company is hopeful of success in the matter. Fees (LF) payable to the Government. The Hon'ble Counter guarantees have been given by the Parent Telecom Disputes Settlement and Appellate Tribunal Company in the ordinary course of business and no liability (TDSAT) had vide its judgment dated August 30, is expected to accrue in this respect. 2007, held that income from sale of securities is not related to licensed activity and hence should not As regards disputes and claims referred to above against attract LF and that bad debts written off, waivers and the Parent Company, appropriate competent professional discounts are actual monies lost by service providers advice is available to the Parent Company based on which, and hence should be deducted from AGR. The DoT favorable outcomes are anticipated and no liability is has filed an appeal in Supreme Court (SC) against the expected to accrue to the Parent Company. aforesaid TDSAT ruling. Accordingly, the Parent 6. Payments to Auditors (excluding service tax): Company has considered Rs.154.36 Crores, being the LF on profit on sale of investment and bad debts 2010-11 2009-10 written off during the current period, as contingent Rs. in Crores Rs. in Crores liability, pending disposal of the aforesaid appeal. i) Audit fees 0.22 0.26 As at As at ii) Tax Audit fees 0.05 0.06 March 31, 2011 March 31, 2010 Rs. in Crores Rs. in Crores iii) Other matters i) Disputed Income Tax (For Quarterly Audits, demands in Appeals certification work etc.) 0.31 0.31 before relevant authorities 0.08 0.08 iv) Out of pocket expenses [Current year Rs. 74,905/- ii) Show cause /demand notices (Previous year Rs. 63,276/-)] received from Service Tax 66.96 66.68 Authorities 7. In November 1999, the Parent Company established the Employee Stock Option Plan (ESOP) under which Equity iii) Sales Tax 0.21 0.21 Shares are reserved for issuance to eligible employees of iv) The Parent Company has imported certain capital the Parent Company. In terms of the plan, 1.20 Crores equipment under “Export Promotion of Capital Goods warrants were issued to Hughes Tele.com (India) Limited Scheme” of the Central Government at a concessional rate Employees Stock Option Trust, to be held by it on behalf of of Customs Duty. The Parent Company has undertaken the Parent Company for awarding eligible employees as export obligation to the extent of USD 100.8 millions (Rs. and when advised by the Compensation Committee 404.41 Crores) to be fulfilled during a period of 8 years constituted for the purpose. Each allotted warrant carries commencing from the January 29, 2003, failing which the with it a right to purchase one Equity Share of the Parent Parent Company will be liable to pay the differential Company at a price of Rs.10/- per share. Other than customs duty, together with interest and penalties, if 2,40,000 fully vested warrants allotted in an earlier year, all imposed. Up-till the end of the year, the Parent Company allotted warrants vest at the rate of 25% on each has fulfilled the export obligation to the extent of Rs.52.79 successive anniversary of the grant date, until fully vested. Crores (previous year Rs.52.79 Crores). The Parent The period during which the vested warrants may be Company has also requested the authorities for granting exercised expires after 10 years from the date of the vesting. 58 16th Annual Report 2010-2011

The position of the allotted warrants is as follows: Services and providing Passive Infrastructure Support As at As at Services to Telecommunication Service Provider. March 31, 2011 March 31, 2010 Accordingly, in accordance with Accounting Standard 17 (Nos.) (Nos.) on “Segment reporting”, the primary reporting segments of Opening Balance - 7,950 the Group, therefore, are the business segment, viz. Exercised - 6,350 i) Telecommunication Services Lapsed - 1,600 ii) Passive Infrastructure Services Closing Balance - - b) Secondary Segment : Since the market value of the Company's shares on the grant dates did not exceed the exercise price of Rs.10/-, no The group operated only in the Indian market representing compensation expense has been recorded. a singular economic environment with similar risks and rewards and hence there are no reportable geographical 8. Segment Reporting segments. a) Primary Segments : The group is engaged in providing Telecommunication Primary Business Information (Business Segments) for period ended March 31, 2011 Particulars Business Segments Elimination Total Telecommunication Passive Infra- Services structure Services Revenue External Revenue * 3,181.32 9.74 - 3,191.06 Inter-segment Revenue - 10.92 10.92 - Total Revenue 3,181.32 20.66 10.92 3,191.06 Segment Result 403.89 5.43 - 409.32 Unallocable Income - - - 22.63 Interest & Financing Charges (Net) - - - 351.71 Loss before Tax - - - 80.24 Provision for Tax (Net) - - - 0.01 Loss after Tax - - - 80.23 Other Information Segment Assets 5,830.42 - - 5,830.42 Unallocated Corporate Assets - - - 16.36 Total Assets 5,830.42 - - 5,846.78 Segment Liabilities 1,810.61 - - 1,810.61 Unallocated Corporate Liabilities - - - 4,652.60 Total Liabilities 1,810.61 - - 6,463.21 Capital Expenditure 1,858.09 50.41 0.33 1,908.17 Depreciation and Amortisation 750.70 6.94 - 757.64

* also includes other operating income Primary Business Information (Business Segments) for period ended March 31, 2010 Particulars Business Segments Elimination Total Telecommunication Passive Infra- Services structure Services Revenue External Revenue * 2,249.10 28.68 - 2,277.78 Inter-segment Revenue - 70.64 70.64 - Total Revenue 2,249.10 99.32 70.64 2,277.78 Segment Result (9.05) 9.90 - 0.85 Unallocable Income - - - 31.67 Interest & Financing Charges (Net) - - - 350.51 Loss before Tax - - - (317.99) Provision for Tax (Net) - - - 0.01 Loss after Tax - - - (318.00) Other Information Segment Assets 4,404.59 538.17 144.56 4,798.20 Unallocated Corporate Assets - - - 10.69 Total Assets 4,404.59 538.17 144.56 4,808.89 Segment Liabilities 1,472.18 108.16 14.75 1,565.59 Unallocated Corporate Liabilities - - - 3,939.96 Total Liabilities 1,472.18 108.16 14.75 5,505.55 Capital Expenditure 728.80 170.52 9.74 889.58 Depreciation and Amortisation 520.89 43.09 - 563.98 * also includes other operating income 59

9. (a) Operating lease rent expenses for the year in Actuarial Assumptions: respect of lease agreements entered from April 1, Particulars As at As at 2001. March 31, 2011 March 31, 2010 2010-11 2009-10 Rs. in Crores Rs. in Crores Rs. in Crores Rs. in Crores Residential Flats for Discount rate 8.25% 8.00% accommodation of Rate of increase in 6.50% 6.50% employee 0.06 0.95 compensation levels of covered employees Cell Sites (Infrastructure Rate of Return on Plan 8.00% 8.00% Sharing) and others 233.18 119.97 Assets

(b) Future Minimum Lease Payments Category of Assets As at As at under Non-Cancellable Operating Lease : March 31, 2011 March 31, 2010 As at As at Rs. in Crores Rs. in Crores Mar 31, 2011 Mar 31, 2010 Insurer Managed Funds 5.27 3.73 Rs. in Crores Rs. in Crores Total 5.27 3.73 Due not later than one year 143.10 130.42 Experience Adjustment April-Mar’11 April-Mar’10 Due later than one year and Rs. in Crores Rs. in Crores Not later than five years 453.70 454.48 On Plan Liability Loss 0.21 0.08 Due later than five years 804.79 781.42 On Plan Asset Gain/(Loss) 0.48 (0.31)

The agreements are executed for a period ranging from 6 11. No provision for current income tax has been made in the months to 15 years with a renewable clause and in many accounts, since the Group estimates that there will be no cases also provide for termination at will by either party taxable profits for the period. Deferred Tax charges / giving a prior notice period ranging between 30 to 90 days. credits have not been recognized in view of the tax holiday enjoyed by the Parent Company and on considerations of 10. The disclosure as required under AS 15 regarding the prudence as set out in AS 22 on “Accounting for Taxes on Company's gratuity plan is as follows: Income”. Particulars As at As at 12. Value of imports on CIF basis in respect of : March 31, 2011 March 31, 2010 Rs. in Crores Rs. in Crores 2010-11 2009-10 Projected benefit obligation, 5.37 3.99 Rs. in Crores Rs. in Crores beginning of the year Capital Goods 193.42 577.51 Service cost 1.56 1.22 Interest cost 0.43 0.40 13. Expenditure in Foreign Currency (Payment basis) on Actuarial Gain on obligation (0.04) (0.11) account of : Benefits paid (0.48) (0.13) 2010-11 2009-10 Rs. in Crores Rs. in Crores Projected benefit obligation, 6.84 5.37 end of the year Interest 9.23 14.42 Projected benefit obligation, 6.84 5.37 end of the year Other 2.84 3.19 Fair value of plan assets at 5.27 3.73 the end of the year 11.27 17.61 Net liability recognized in 1.57 1.64 14. Value of Capital Inventory consumed during the year : the Balance Sheet 2010-11 2009-10 Fair Value of Plan Assets at 3.73 2.77 the beginning of the year Rs. in Crores % Rs. in Crores % Expected Return on Plan 0.29 0.31 Indigenous 2.14 100 8.63 100 Assets Contributions 1.23 1.08 Imported - - - - Benefit Paid (0.46) (0.13) 2.14 100 8.63 100 Actuarial Gain/(Loss) on 0.48 (0.30) Plan Assets Fair Value of Plan Assets at 5.27 3.73 the end of the year Total Actuarial Gain / (Loss) 0.52 (0.19) Recognized 60 16th Annual Report 2010-2011

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i) Details of transactions with Related Parties (Rs. in Crores) 16 Ultimate th

For year ended March 31, 2010 Holding Fellow Subsidiaries Annual Report2010-201 Company Tata Sons Tata Tata Internet Tata Tata Tata Housing Tata Realty & Tata Tata AIG Tata Sky CMC Tata Asset Ltd. Teleservices Services Business Consultancy Development Infrastructure AIG Life General Ltd. Ltd. Management Ltd. Ltd. Support Services Company Ltd. Insurance Insurance Ltd. Services Ltd. Ltd. Company Company Ltd. Ltd. Ltd. 1 2 3 4 5 6 7 8 9 10 11 12 1) Expenses : - Salary - 3.30 ------Customer Service and Call Centre Cost - 0.15 - 3.60 54.59 ------

1 - Advertisement and Business - 21.65 ------

promotion expenses - Network operation cost - 9.73 ------

- Administrative and Other Expenses 0.03 3.33 ------

- Rent - 0.01 1.57 - - 0.12 ------

- Interconnection and Other access costs - 57.55 ------

- Infrastructure Sharing Cost - 0.57 ------

- Interest ------

2) Income : - Towards Recharge Coupon Vouchers ------

- Rent - 2.29 ------

- Rendering Telecom Services 0.50 4.93 0.03 0.66 16.38 0.12 0.33 3.30 0.96 1.15 0.68 0.55

- Infrastructure Sharing Revenue ------

- Sale of Refurbished Network Interface Units - 0.71 ------

3) Reimbursement of Expenses - 5.09 ------

4) Sale of Fixed Asset - 36.37 ------

5) Purchase of Fixed Asset - 47.02 - - 3.51 ------6) Inter-corporate deposits taken ------7) Security Deposits taken ------8) Repayment of inter corporate deposit ------9) Outstanding as at March 31, 2010 : Sundry Debtors 0.06 0.93 0.02 0.10 1.67 0.03 0.01 0.44 0.56 0.14 0.06 0.02 Sundry Creditors - 6 . 3 0 - - 0.03 0. 0 1 ------Loans and Advances ------0.0 1 - 0.0 1 - - - Security Deposits Taken - 1 . 7 3 ------Security Deposits Given - - - - - 0.01 ------Inter-corporate Deposits ------

Since the figures are less than the denominations disclosed, the figures do not appear Figures above are inclusive of Service Tax where ever applicable Others Include Ewart Investments Ltd. Tata Trustee Company Ltd. (formerly Tata Trustee Company Private Ltd.) Tata Advanced Systems Ltd. 63 ) s 3 3 5 0 7 8 6 9 9 1 0 1 8 7 3 1 4 1 5 0 7 3 0 0 5 0 e r 9 7 8 7 5 0 0 2 7 7 3 3 3 1 7 0 3 9 5 4 3 5 0 0 7 0

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1 64 16th Annual Report 2010-2011

15) Related Party disclosures (in terms of Accounting Standard - 18) ii) Details of all Related Parties and their relationships

A Holding Company 16 Tata Petrodyne Ltd. Tata Sons Ltd. 17 Computational Research Laboratories Ltd. 18 Tcs E-Serve Ltd. B List of Fellow Subsidiaries 19 TC Travel And Services Ltd. 1 Tata Teleservices Ltd. 20 Tata Capital Ltd. 2 Tata Internet Services Ltd. 21 Tata Investment Corporation Ltd. 3 Tata Business Support Services Ltd. 22 Ewart Investments Ltd. 4 Tata Consultancy Services Ltd. 23 Tata Trustee Company Private Ltd. 5 Tata Housing Development Company Ltd. 24 Tata Advanced Systems Ltd. 6 Tata Realty & Infrastructure Ltd. 25 Viom Networks Limited (Formerly known as 7 Tata AIG Life Insurance Company Ltd. Wireless TT Info Services Ltd.) 8 Tata AIG General Insurance Company Ltd. 26 Drive India Enterprise Solutions Ltd. 9 Tata Sky Ltd. 27 21st Century Infra Tele Ltd. (w.e.f. 21.05.2010) 10 CMC Ltd. 11 Tata Asset Management Ltd. C Key Management Personnel (Managing Director) 12 Tata Securities Ltd. 1 Dr. Mukund Govind Rajan (till 20.05.2010) 13 Infiniti Retail Ltd. 2 Mr. Anil Kumar Sardana (till 31.01.2011) 14 e-Nxt Financials Ltd. 3 Mr. N. Srinath (w.e.f. 01.02.2011) 15 Tata Consulting Engineers Ltd.

16. Derivatives As at As at March 31, 2011 March 31,2010 i) Outstanding derivatives : 17. Earnings Per Share Data As at Mar 31, 2011 As at Mar 31, 2010 USD in Rs. in USD in Rs. in i) Profit / (Loss) after Tax Millions Crores Millions Crores (Rs. in Crores) 80.23 (318.00) a) Forward ii) Weighted average Contract 65.35 291.43 86.03 386.25 number of shares outstanding. 1,897,196,854 1,897,196,089 b) Currency options for hedging of iii) Nominal Value of Equity foreign currency Shares (Rs) 10 10 exposure 70.00 313.79 58.00 261.61 iv) Basic and Diluted Total 135.35 605.22 144.03 647.86 Earnings per Share (Rs.) 0.42 (1.68) c) Interest Rate 18. Quantitative details of principal items of goods traded Swaps 0.99 4.41 66.83 300.06 (Starter Kits): Quantity Value ii) The mark to market loss of outstanding currency options (Nos) Rs. in Crores and interest rate swaps as at the year-end aggregate to Rs. a) Opening Stock 2843689 6.40 1.92 crores (Previous year Rs. 8.27 Crores). (674148) (2.01) iii) The foreign currency exposure that are not hedged by b) Purchases 9461883 19.58 derivative instruments: (13459703) (27.37)

As at Mar 31, 2011 As at Mar 31, 2010 c) Sales 10144708 34.31 USD in Rs. in USD in Rs. in (11290162) (33.96) Millions Crores Millions Crores d) Closing Stock 2160864 3.78 Vendor payables 107.91 481.22 41.08 184.45 (2843689) (6.40)

107.91 481.22 41.08 184.45 Note: Figures in ( ) pertain to those of the previous year. 65

19. Following units have been purchased and redeemed by the SBI- Premier Liquid Fund - Parent Company during the year ended March 31, 2011: Super Inst. Growth 5,875,555.73 10 9.00

Particulars No. of Face Cost Reliance Liquid Fund Units Value (Rs. in Cash Plan - Growth 46,813,336.84 10 73.36 Crores) ICICI Prudential Ultra IDBI Liquid Fund - Growth 23,860.13 1,000 2.50 Short Term Plan Super Premium Growth 244,491,263.27 10 254.53 UTI Money Market Mutual Fund - Institutional ICICI Prudential Growth Plan 110,055.58 1,000 12.00 Flexible Income Plan 20. Managerial Remuneration : Premium - Growth 20,819,938.33 100 360.59 i) Managing Director ICICI Prudential Liquid 2010-11 2009-10 Plan Super Institutional Rs. in Crores Rs. in Crores Growth 170,859,735.29 100 2,348.88 Salaries 1.10 0.91

ICICI Floating Rate Contribution to Provident Plan D 3,582,389.03 100 50.02 and other Fund 0.01 0.07 Monetary value of perquisites 0.10 0.65 HDFC Liquid Fund - Premium Plus Plan - Total 1.21 1.63 Growth 217,856,941.41 10 407.20 Note: HDFC Liquid Fund - a) 2010-11 figures include Rs.0.56 Crores paid during the Premium Plan - Growth 71,758,371.48 10 135.00 year for 2009-10 on account of bonus / performance pay. HDFC Cash Mgt Fund- b) 2009-10 figures include Rs.0.50 Crores paid during the Treasury Advantage Plan- year for 2008-09 on account of bonus / performance pay. Wholesale Growth 80,281,967.48 10 164.07 c) The above represents the remuneration of erstwhile Managing Directors. BSL Saving Fund Manager in Subsidiary Company Institutional Growth 76,451,955.02 10 135.80 2010-11 2009-10 Rs. in Crores Rs. in Crores BSL Cash Plus Institutional Premium Growth 263,379,714.03 10 396.60 Salaries 0.04 0.39

BSL Ultra Short Term Contribution to Provident Fund Institutional Growth 76,819,492.27 10 85.00 and other Fund 0.00 0.02

BSL Cash Manager - Total 0.04 0.41 Institutional Plan Growth 32,992,597.06 10 52.07 ii) Non-executive Directors Tata Floater Fund 41,590,186.91 10 58.53 2010-11 2009-10 Rs. in Crores Rs. in Crores Tata Liquid Super High Inv. Fund - Appreciation 1,741,042.38 1,000 305.20 Directors’ Sitting Fees 0.06 0.08 21. The Parent Company, had identified certain Network JP Morgan India Liquid Interface Units (NIU's), which had been disconnected and Fund - Super Institutional were not in use (including not retrieved) and also had been Growth 80,066,871.88 10 98.75 fully depreciated in the books of account. The management, having regard to the present condition of the LICMF Liquid Fund - said NIUs, their future usability and the fact that these NIUs Growth Plan 29,307,418.23 10 50.76 have been fully depreciated, had decided to write-off the same. Accordingly during the current year the said NIU's JM High Liquidity Fund - aggregating Nil (cost) (Previous year Rs.104.54 Crores) Super Inst Plan - Growth 28,512,232.13 10 42.25 were written off and removed from the block of fixed assets. DSP Black Rock Liquidity Fund - Institutional Plan - 22. The Parent Company during the quarter ended June 30, Growth 843,226.58 1,000 116.30 2010, succeeded in winning the bid for 3G spectrum in Maharashtra circle (including Goa and excluding Mumbai). SBI- Magnum Insta Cash The bid price paid towards the related license fees Fund - Cash Option 11,675,150.61 10 25.00 aggregating to Rs.1,257.82 Crores have been capitalized under License under Fixed Assets. 66 16th Annual Report 2010-2011

In accordance with the accounting policy followed in this 26. During the year, the Company re-estimated the balance regard, the Company has commenced amortization of the useful life of certain items of plant and machinery aforesaid license fees, on commencement of 3G considering up-gradation of equipment on account of operations and such fees will be amortised over the enhancement of technology and the consequent remaining life of the license. enhanced pace of planned replacement. As a result the The borrowing costs attributable to the aforesaid depreciation charge for the current year is higher by Rs. aggregating Rs. 62.82 Crores (Previous year Rs.18.79 184.81 Crores. Crores towards GSM operations) have been capitalized 27. The following table sets forth the movement in the during the year in accordance with AS 16 on 'Borrowing provision for contingencies: Costs'. (Rs. in Crores)

23. Information regarding the total outstanding dues of Micro Sr. Description As at Additions Amount As at Enterprises and Small Enterprises in Schedule 10 is given No. April 1, during the used / March 31, to the extent the same is available with the Company. 2010 period / reversed 2011 year 24. The Parent Company in the previous year had entered in to 1 Provision for - 185.60 - 185.60 a share purchase agreement with Viom Networks Limited Contingencies (formerly Wireless-TT Info Services Limited ) for selling its (16.74) - (16.74) - stake in its wholly owned subsidiary viz. 21st Century Infra a. Figures pertaining to the previous year have been Tele Limited. The Company has, accordingly, accounted disclosed in brackets. for profit (net of related expenses) on the aforesaid sale aggregating to Rs.865.38 Crores during the year, on b. Provision for contingencies are primarily towards the completion of the necessary formalities. outstanding claims / litigations against the Parent C o m p a n y r e l a t i n g t o D e p a r t m e n t o f 25. The Central Government, vide notification dated March 31, Telecommunication (DoT) and other parties. 2009, amended AS 11 on ´The Effect of Changes in Foreign Exchange Rates', whereby, companies have been 28. The accumulated losses of the Parent Company at the given an option to account for exchange differences arising close of the year have exceeded its paid-up capital and on reporting of long-term foreign currency monetary items reserves. This, however, is not uncommon for (assets/liabilities) in so far as they relate to acquisition of a telecommunication service providers, due to the high depreciable capital asset, to be added/deducted from the operation costs and on account of the industry being cost of the asset and for others to be accumulated in a inherently capital intensive. However, the Company is separate reserve to be amortized over the balance life of consistently making operating cash profits over the past the asset/liability but not beyond March 31, 2011. The few years. aforesaid option is effective with retrospective effect in The subscriber base of the Parent Company has further respect of accounting periods commencing on or after increased with the launch of services using the GSM December 7, 2006. Accordingly, the Company opted to technology during the previous year. The Parent Company exercise this option during the year ending March 31, 2009 has also received sanctions from banks for additional long- and had given the effect of the same in the accounts of the term funds for future expansion. Further, during the current said year. year the Parent Company succeeded in winning the bid for During the current year, pursuant to the said option, the 3G spectrum in Maharashtra circle (including Goa and Parent Company has adjusted exchange loss aggregating excluding Mumbai) and has also commenced 3G services. to Rs.6.81 Crores (Previous year Rs.34.65 Crores Accordingly, based on the aforesaid considerations, the (exchange gain)) against the carrying value of fixed assets. Parent Company is confident of it's ability to continue it's The amount (after the aforesaid adjustments) of Plant and business as a going concern and the accounts have been Machinery as at the year-end aggregates to Rs.2.80 prepared on that basis. Crores (credit) (Previous Year Rs.7.54 Crores (credit)) 29. Figures of the previous year are regrouped and reclassified which has been adjusted by way of depreciation on the wherever necessary to correspond to figures of the current grounds of materiality. year.

Signatures to Schedules ‘1’ to ‘16’ In terms of our report attached For Deloitte Haskins & Sells For and on behalf of the Board Chartered Accountants Kishor A. Chaukar N. Srinath (Chairman) (Managing Director) A.B.Jani Prof. Ashok Jhunjhunwala D. T. Joseph Koichi Takahara Partner (Director) (Director) (Director) S. Ramadorai Anil Kumar Sardana N. S. Ramachandran (Director) (Director) (Director) S. Venkatesan Madhav J. Joshi (Chief Financial Officer) (Chief Legal Officer and Company Secretary) Place: Mumbai Place: Mumbai Date : April 26, 2011 Date : April 26, 2011 67

CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2011 2010-11 2009-10 Rs. in Crores Rs. in Crores A Cash flows from operating activities Net Profit / (Loss) before tax 80.24 (317.99) Adjustments for : Depreciation/Amortisation 757.64 563.98 Profit on Fixed assets sold (Net) (29.24) (35.41) Profit on redemption of units (Current Investment) (6.41) (0.06) Interest Income (1.23) - Profit on Sale of Subsidiary (Refer note 24 of Schedule 16) (865.38) - Provision for contingencies (Refer note 27 of Schedule 16) 185.60 - Asset awaiting disposal written off - 0.56 Finance and Treasury charges (Net) 359.35 350.58 400.33 879.65 Operating profit before working capital changes 480.57 561.66 Increase in Sundry Debtors (2.55) (39.77) Increase in Loans and Advances (186.32) (22.96) Decrease / (Increase) in Inventory 2.62 (4.39) Decrease / (Increase) in Current liabilities and Provisions (48.51) 95.60 Cash Generated from operations 245.81 590.14 Taxes paid (0.01) (0.01) Net Cash generated from operating activities 245.80 590.13

B Cash flow from investing activities Purchase of Fixed Assets (1908.17) (889.58) Proceeds from sale of Fixed Assets 498.78 39.78 Purchase of Current Investments (5,183.41) (77.10) Sale of Current Investments 5,189.82 87.17 Proceeds from sale of Long term investment 866.78 - Net Cash used for investing activities (536.20) (839.73)

C Cash flow from financing activities Proceeds from Issue of Shares - 0.01 Proceeds from Long term borrowings 702.91 1,386.53 Repayment of Long term borrowings (524.46) (1,336.23) Proceeds from Short term borrowings 3,314.78 1,833.00 Repayment of Short term borrowings (2,640.00) (1,418.95) (Repayment) / Proceeds of Acceptances and Cash Credit ( Net) (140.59) 131.34 Finance and Treasury charges paid (371.80) (350.58) Interest received 1.23 - Net cash generated from financing activities 342.07 245.12 Net decrease in cash or cash equivalents 51.67 (4.48) Cash and cash equivalents at beginning of the year 23.01 27.49 Cash and cash equivalents at end of the year 74.68 23.01 51.67 (4.48)

Notes to Cash Flow Statement 1. Components of Cash and Cash Equivalents includes Cash and Bank balances in Current Accounts (Refer Schedule 6 to the Balance Sheet). 2. Purchase of Fixed Assets are inclusive of movements in Capital Work in Progress between the commencement and end of the year.

In terms of our report attached For Deloitte Haskins & Sells For and on behalf of the Board Chartered Accountants Kishor A. Chaukar N. Srinath (Chairman) (Managing Director) A.B.Jani Prof. Ashok Jhunjhunwala D. T. Joseph Koichi Takahara Partner (Director) (Director) (Director) S. Ramadorai Anil Kumar Sardana N. S. Ramachandran (Director) (Director) (Director) S. Venkatesan Madhav J. Joshi (Chief Financial Officer) (Chief Legal Officer and Company Secretary) Place: Mumbai Place: Mumbai Date : April 26, 2011 Date : April 26, 2011 68 16th Annual Report 2010-2011

BALANCE SHEET ABSTRACT AND GENERAL BUSINESS PROFILE

I Registration Details Registration No. 11-86354 State Code 11 Balance Sheet Date March 31, 2011

II Capital raised during the year (Rs. in Crores) (Equity Share Capital & Security Premium Account) Public Issue - Rights Issue - Bonus Issue - Private Placement -

III Position of Mobilisation and Deployment of Funds (Rs. in Crores) Total Liabilities 7,132.96 Total Assets 7,132.96 Sources of Funds Paid-up Capital 1,897.20 Reserves & Surplus 583.16 Secured Loans 2,669.78 Unsecured Loans 1,982.82 Application of Funds Investments - Net Fixed Assets (including Capital Work-in-Progress) 4,955.88 Net Current Assets (919.71) Accumulated Losses 3,096.79

IV Performance of the Company (Rs. in Crores) Turnover (including other income) 3,150.87 Expenditure 1,818.50 Loss Before Tax 49.91 Loss After Tax 49.90 Earning Per Share (Rs.) 0.26 Dividend Rate -

V Generic Names of three Principal Products/Services of the Company Item Code No. (ITC Code) Not Applicable Product Description Telecommunication Services

For and on behalf of the Board

Kishor A. Chaukar N. Srinath (Chairman) (Managing Director) Prof. Ashok Jhunjhunwala D. T. Joseph Koichi Takahara (Director) (Director) (Director) S. Ramadorai Anil Kumar Sardana N. S. Ramachandran (Director) (Director) (Director) S. Venkatesan Madhav J. Joshi (Chief Financial Officer) (Chief Legal Officer and Company Secretary) Place: Mumbai Date : April 26, 2011 Registered Office: Voltas Premises, T. B. Kadam Marg, Chinchpokli, Mumbai 400 033.

ATTENDANCE SLIP Sixteenth Annual General Meeting on Tuesday, August 16, 2011

Reg. Folio No………………………………… DP ID*…………………………….. Client ID*…………………...………………… Name …………………………………………………………………….……………………………………………………………… Address ……………………………………………………………………….………………………………………………………… ……………………………………………………………………………………….…………………………………………………… ………………………………………………………………………………………….………………………………………………… I certify that I am a registered shareholder / proxy for the registered shareholder of the Company. I hereby record my presence at the SIXTEENTH ANNUAL GENERAL MEETING of the Company at Kamalnarayan Bajaj Hall & Art Galary Bajaj, Bhavan, Jamnalal Bajaj Marg, 226, Nariman Point, Mumbai - 400 021 at 1500 hours on Tuesday, August 16, 2011.

Member/Proxy name in Block Letters ………………………………………………..………………………………………………

Member/Proxy's Signature ……………………….....…...……………………………………………………………………………

Note: Please fill in this slip and hand over at the ENTRANCE TO THE AUDITORIUM.

* Applicable for shareholder(s) holding shares in electronic (dematerialized) form.

Registered Office: Voltas Premises, T. B. Kadam Marg, Chinchpokli, Mumbai 400 033.

PROXY FORM

Reg. Folio No………………………………… DP ID*…………………………….. Client ID*…………………...………………… I/We ...... of ...... in the district of ...... being a member/members of the above named Company hereby appoint ...... of ...... in the district of ...... or failing him ...... of ...... in the district of ...... as my/our proxy to vote for me/us on my/our behalf at the SIXTEENTH ANNUAL GENERAL MEETING of the Company to be held on Tuesday, August 16, 2011 and at any adjournment thereof. Affix a Signature ...... 15 ps. Revenue Signed this ...... day of ...... 2011. Stamp

Note: This form in order to be effective should be duly stamped, completed and signed and must be deposited at the Registered Office of the Company, not less than 48 hours before the meeting.

* Applicable for investors holding shares in electronic (dematerialised) form.