Idea Cellular

1.  Equity Share Capital
 
 a) Increase in Authorised Share Capital: At the Annual General Meeting
 held on December 12, 2007, members of the company passed a resolution
 to increase Authorised Equity Share Capital from Rs. 37,750.00 million
 to Rs. 42,750.00 million and Authorised Redeemable Cumulative Non
 Convertible Preference Share capital from Rs. 5,000.00 million to Rs.
 15,000.00 million
 
 b) Issue of shares under Green Shoe Option (GSO)
 
 On April 5, 2007, the Company issued 42,500,000 Equity Shares of Rs. 10
 each amounting to Rs. 3,187.50 million under Green Shoe Option. Share
 Premium account stands increased by Rs. 2,762.51 million on issue of
 the above shares.
 
 2.  Investments in new subsidiary companies
 
 During the year ended March 31, 2008 three new 100% subsidiary
 companies, Idea Cellular Services Limited (ICSL), Idea Cellular
 Infrastructure Services Limited (ICISL) and Idea Cellular Tower
 Infrastructure Limited (ICTIL), a subsidiary of ICISL, have been formed
 with a paid–up capital of Rs. 0.50 million each.
 
 ICSL provides manpower services in the areas of subscriber acquisition
 and servicing required by the mobility circles of the Company. ICISL
 and ICTIL are formed to roll–out and provide Passive Infrastructure
 services in specified licence areas of the Company.
 
 3.  Joint Venture agreement with Indus Towers Limited (Indus):
 
 A joint venture agreement consisting of the Company and its 100%
 subsidiary ICISL along with Bharti Airtel Limited and Vodafone Essar
 Limited and their subsidiaries has been entered into effective December
 8, 2007. The 16% equity shareholding in Indus Tower Limited is held by
 ICISL. Indus Towers Limited is a company formed to develop and provide
 passive infrastructure services.
 
 4.  New Licences
 
 On January 10, 2008, the Company deposited Rs. 6845.90 million
 following receipt of Letter of Intent (LoI) for the telecom service
 areas of Assam, Jammu & Kashmir, Karnataka, Kolkatta, North East,
 Orissa, Punjab, Tamil Nadu and West Bengal (including Chennai service
 area) for which the Company had applied for Licences.  On February 28,
 2008 DoT granted the UASL licences making the Company a pan India
 Licence holder.
 
 5.  The Company was allotted 4.4 Mhz spectrum in the Mumbai and Tamil
 Nadu (including Chennai) telecom service areas on January 11, 2008 and
 April 22, 2008 respectively.
 
 6.  Term Loans
 
 a) Foreign Currency and Rupee Loans
 
 Foreign Currency Loans amounting to Rs. 5,658.20 million (Previous year
 Rs. Nil) and Rupee Loans amounting to Rs.  48,579.90 million (Previous
 year Rs. 35,200.00 million) are secured by way of first
 charge/assignment ranking pari- passu interse the lenders, as under:
 
 i. First charge by mortgage on all the movable and immovable properties
 of the Company,
 
 ii. A first priority charge over all intangible assets of the Company,
 
 iii. Assignment of the rights, titles and interest, on deposits,
 investments, bank accounts, book debts, insurance covers, other general
 assets, letters of credit and guarantee or performance bond, provided
 in favour of the Company.
 
 b) Vehicle Loan
 
 Vehicle Loan amounting to Rs. 306.23 million (Previous year Rs. 197.19
 million) is secured by hypothecation of Vehicles against which the
 loans have been taken.
 
 7.  Interest from Department of Telecommunications
 
 The Company had recognised an income of Rs. 802.27 million during the
 year ended March 31, 2003 being refund of excess interest charged by
 DoT on the licence fee payable by the Company pursuant to the judgement
 dated April 9, 2002 of Telecom Disputes Settlement and Appellate
 Tribunal (TDSAT). During the previous years, DoT arbitrarily
 acknowledged an amount of Rs. 758.76 million against Company’s claim of
 Rs. 802.27 million The Company has represented this matter with DoT.
 The Company has not provided for the difference of Rs. 43.51 million,
 as in the opinion of the management, the amount is recoverable from
 DoT.
 
 The Company is also entitled to interest on the amount of the refund so
 accrued in terms of the Supreme Court Judgement; the recognition of
 revenue on account of the same has been postponed pending acceptance in
 this respect by DoT. As of March 31, 2008, this case is pending before
 the Hon’ble Supreme Court.
 
 8.  Contingent Liabilities
 
 a) On March 2, 2006, the Honourable Supreme Court passed an order
 adjudicating that providing of telecommunication services cannot be
 termed as ‘Goods’ under the Sale of Goods Act. In view of the above
 judgment, demands raised for Sales Tax on Activation of new
 connections, Rentals and Airtime by Sales Tax Authorities stand
 extinguished. As of March 31, 2008, Sales Tax demands of Rs. 60.22
 million (Previous year Rs.931.40 million) are required to be yet
 formally vacated by the authorities.
 
 b) Export obligation under EPCG (Export Promotion Credit Gurantee)
 Scheme is Rs. 301.06 million (Previous year Rs. 301.06 million).
 Failure to meet this export obligation within the stipulated time frame
 as per Foreign Trade Policy 2004-2009 would result in the payment of
 the aggregated differential duty saved amounting Rs. 37.72 million
 (Previous year Rs. 37.72 million) along with interest thereon. The
 Company is confident of meeting the obligations based on its current
 international in-roaming revenue trends.
 
 c) During the fnancial year 2006-07, the WPC Wing of the DoT had raised
 demands towards monthly compounded interest on WPC charges for the
 period upto the fnancial year 2002-03 in respect of the telecom service
 areas of the erstwhile IMCL and BTA Cellcom Ltd.
 
 Telecom operators had paid WPC Royalty and licence fees towards GSM
 frequency, access and back-bone frequency charges on circle area basis
 as provided in the licence terms from inception till fnancial year
 2002-03 while the DoT demands were on city basis. The above matter was
 disputed by the operators and contested in TDSAT. DoT proposed a change
 in the basis of levy of spectrum charges based on revenue share vide
 their letter dated April 18, 2002 on the condition of its acceptance in
 entirety and withdrawal of all legal proceedings by the operators. Vide
 their letter dated March 26, 2002, DoT had also given time to the
 operators to deposit the earlier principal demands by April 15, 2002.
 The operators accepted the offer of change to revenue share basis on
 August 23, 2002. The interest demand now raised by WPC wing of DoT for
 the period before April 15, 2002 is contrary to the DoT proposal in
 2002.
 
 The Company is therefore in the process of taking suitable remedial
 action on these demands including a notice to the erstwhile promoter of
 Idea Mobile Communication Limited for Rs. 348.79 million (refer Note 11
 below).
 
 d) Other Matters not provided for
 
 
                                                  (Rupees in Million)
 
 Particulars                                 As on       As on 
                                          March 31,     March 31, 
                                              2008        2007 
 
 Income Tax Matters not                      18.75       98.38
 acknowledged as debts
 
 Sales Tax & Service
 Tax Matters not                          1,254.06      313.83
 acknowledged as debts
 
 Other claims not
                                          1,117.18      505.36
 acknowledged as debts
 
 e) Estimated amount of contracts (net of advance) remaining to be
 executed on capital account and not provided for.
 
                                          (Rupees in Million)
 
 Particulars                            As on             As on
                                       March 31,       March 31,
                                         2008             2007
 
 Estimated amount of
 
                                       17,555.13        10,177.57
 contracts (net of advance)
 
 11.  In accordance with an assignment agreement entered between the
 original promoters of the amalgamated subsidiary Idea Mobile
 Communications Limited (IMCL) i.e. Escorts Ltd. and First Pacific
 Company Ltd., IMCL had issued interest free unsecured Bond of Rs.
 1,757.36 million to Escorts Limited vide a Loan agreement dated January
 15, 2004. This bond was in lieu of the loans from the original
 promoters and included accrued interest of Rs. 857.36 million on June
 10, 2004. This Bond is repayable on January 15, 2014 and carries a put
 option for Escorts Limited for a period of thirty days commencing on
 January 15, 2010 to redeem the entire amount or part thereof at a price
 which would have been payable by the Company had the Company opted for
 an early redemption in accordance with the terms of the said agreement.
 The Company is entitled to pre payment and set off against certain
 contingent liabilities that may crystallise after June 10, 2004.
 
 On the request of Escorts Ltd, the Company on July 21, 2006 has
 consented to release the redemption proceeds of the above loan to UTI
 Bank on the same terms and conditions, as mentioned in the above Loan
 agreement.
 
 9.  Transfer of Licences
 
 The Company’s application to Department of Telecommunication (DOT) for
 transfer of telecom licenses held in the name of the erstwhile
 subsidiaries (which stands merged with the Company) i.e. Idea Mobile
 Communications Limited, Idea Telecommunications Limited and BTA Cellcom
 Limited in the name of the Company is pending. The Company meets the
 licencing condition laid down for transfer of licenses in case of
 amalgamation and expects to receive this procedural approval in the
 ensuing period.
 
 10. During the year the Company has entered in to a composite IT
 outsourcing agreement wherein fixed assets and services related to IT
 has been supplied by the vendor. Such fixed assets received have been
 accounted for as a finance lease. Correspondingly, such assets and
 liabilities are recorded at the fair value of the lease assets at the
 time of receipt and depreciated on the stated useful life applicable to
 similar assets of the Company.
 
 As at March 31, 2008 the amounts towards the supply of fixed assets
 during the year stands fully paid and there are no minimum lease
 payments outstanding as at the year end.