Mahanagar Telephone Nigam

The Directors have pleasure in presenting the 22nd Annual Report of
 your Company together with the Statement of Accounts and Auditors
 Report as well as comments of Comptroller and Auditor General on the
 Accounts for the financial year ended on March 31, 2008.
 
 HIGHLIGHTS
 
 India has set on to join a handful elite of nations offering
 third-generation (3G) mobile telephony services as the Govt, announced
 the auction of slices of spectrum to offer the high-value services
 which give the Telecom Industry a chance to earn higher revenue per
 user and your company is ready to launch the 3G services soon.
 
 The company is well equipped to keep pace with the competition in the
 growing economy of the country.  During the year there is a tremendous
 increase in the cellular subscriber base. The company has continued to
 provide a sustained push to mobile services through an expanding
 network and a large range of services.  The Company strives for
 enhancement of the shareholders value.
 
 We strengthened our leadership in GSM mobile services by improving on
 market shares in both the metros. The net profit during this year has
 gone down by Rs 948.45. million as compared to previous year which is
 mainly due to revision of tariff.
 
 The reduction in tariff is costing your company dearly. But inspite of
 all the facts, due to the hard work of our officials, we have almost
 maintained our profit in the last three years at the similar level.
 
 There is a decline in income from services as compared to previous
 year. This is partly attributed to the decline in tariffs due to heavy
 competition. The downward trend of the Fixed line subscribers is still
 an area of concern for the company.
 
 FINANCIAL RESULTS
 
 Sources and application of funds for the year under review are given
 below:-
 
                                                       (Rs. in Million)
                                                    2007-08   2006-07
 
 Income from Services                              47225.17  49093.18
 
 Expenditure (excluding-                           46955.02  47881.54
 
 Interest & prior period Adjustments)
 Operating Profit                                    270.15   1211.64
 
 Other Income                                       6074.16   6735.30
 
 Interest                                             27.82     20.11
 
 Profit before tax                                  6316.49   7926.83
 
 Tax provision for the year                         2248.31   3266.50
 
 Prior Period Adjustments                          (1800.73) (2157.03)
 
 Net Profit for the year                            5868.91   6817.36
 
 Profit available for                               5868.91   6817.36 
 
 Appropriation
 Interim/Proposed final dividend                    2520.00   2520.00
 
 Dividend Tax                                        428.27    372.14
 
 Transfer to:
 
 a) Contingency Reserve
 
 b) Reserve for R&D
 
 c) General Reserve                                 2920.64   3925.22
 
 SOURCES AND USES OF FUNDS
 
 Authorised Capital                                 8000.00   8000.00
 
 Issued, Subscribed & paid-up Capital               6300.00   6300.00
 
 Reserves & Surpl                                 112913.58 109992.96 
 Secured and unsecured loan
 
 Deferred Tax Liability (Net)                       4865.16   6204.79
 
 REPRESENTED BY
 
 Fixed Assets* (Net Block)                         63197.96  64036.68
 
 Investment                                         5573.92   4414.03
 
 Net Current Assets                                44065.31  44186.71
 
 Deferred Revenue Expenditure                       1591.70   2216.51
 
 Capital Work-in-Progress                           9649.85   7643.82
 
 Note : Previous years figures have been re-grouped/re-cast wherever
 considered necessary.
 
 DIVIDEND
 
 The Company has paid an interim dividend @ 30 % for the year 2007-08
 and the Board is pleased to recommend payment of final dividend @ 10%
 i.e. total 40% on the paid up equity capital of Rs. 6300 million. The
 dividend will absorb a sum of Rs. 2520 million excluding dividend tax.
 
 SUBSIDIARY COMPANIES
 
 Your Company has two subsidiaries viz. Millennium Telecom Ltd. (MTL) at
 Mumbai and Mahanagar Telephone Mauritius Ltd. (MTML) at Mauritius.The
 reports and accounts of subsidiary companies pursuant to section 212 of
 the Companies Act, 1956 are annexed.
 
 (i) Millennium Telecom Ltd. (MTL)
 
 MTL is handling the project for laying submarine cable from India to
 south East Asia and Middle East with ultimate intent to extend
 eventually to the USA and Europe. By investing in this project, MTNL &
 BSNL (would be joint venture partner with 50% equity participation in
 capital of MTL) can get International Bandwidth to support its own
 network demand as well as to lease it to others at very competitive
 rates.  Thus, MTNL & BSNL would not be dependent on other operators for
 international bandwidth.
 
 (ii) Mahanagar Telephone Mauritius Ltd. (MTML)
 
 The company was incorporated as private domestic company at Mauritius
 on 14.11.2003 with an authorized capital of MUR 600M and the paid up
 capital as on 31.3.2008 stands as MUR 436.5 Million. The company is
 having License from the telecom regulatory ICTA for Fixed Telephone
 Services, Mobile Services, International Long Distance Services and
 Internet Services.
 
 It has.lnstalled 100K state of art technology CDMA IX & IX EVDO switch
 with a radio network of 51 Base stations. The system is equipped to
 provide value added services viz., SMS, DATA, Multi-media service
 
 The following Telecom Services are being provided by MTML as of today:
 
 Fixed Wireless Telephone
 
 Mobile
 
 International Long Distance Calls.
 
 Internet through Fixed Wireless Phones and Data cards
 
 The Company is second operator in Fixed Line and third operator in
 Mobile and one among the seven ILD operators.The company is equipped
 with call centre (10 positions) and 11 Customer Care centres all over
 the island and started its operations in the year 2005-2006 partially.
 The full operations of the company started from March 2007.
 
 * The company is having the following customer base as of 31.3.2008.
 
 Fixed Wireless Phones                                        26,710
 
 Mobile                                                        8,901
 
 International Long Distance (through CAC)                     5,708
 
 Internet Customers                                            2,993
 
 REVENUE
 
 * The company earned a gross revenue of MUR 188.8M from services during
 the year 2007-08 and just broke even during the year 2007-08.
 
 The Fixed assets of the company as of 31.3.2008 MUR 445.27 M.
 
 JOINT VENTURES
 
 Your company has two joint ventures viz. UNITED TELECOMMUNICATIONS LTD.
 (UTL) & MTNLSTPI IT SERVICES Ltd.
 
 (i) UNITED TELECOMMUNICATIONS LTD.  (UTL)
 
 UTL is a Public Limited Company registered in Nepal and has been
 promoted by three telecom majors viz. MTNL, TCIL & VSNL (TATA) and
 Vishal Group of Nepal. Initially, UTL deployed state of art 3G CDMA
 2000 1 xWLL equipments for providing Basic Telephone Service based on
 WLL technology in Kathmandu valley consisting of five municipalities
 namely Kathmandu city, Lalitpur, Bkaktapur, Thimi and Kitipur.  For
 serving customers in the valley, UTL has established a modern customer
 service centre called Wave Gallery in Pitlisadak for providing
 registration and other commercial services to its customers.
 Subsequently five more Customer Service Centres in Hattisar, Chhabhil,
 Balaju, Patan, Ghatagharand Kakhtapurwere established in valley.
 
 UTL has set up first call centre for telecom in Nepal with IVRS system
 for customers support services like FRS (Fault Repair Service), DQ
 (Directory Enquiry), PRS (Payment Reminder System) etc. UTL installed
 international Gateway Switch from M/s. Alcatel (France/India) and
 Satellite Earth Station from M/s. GSI (USA) for provision of
 international customers through its own international gateway
 (consisting of satellite earth station and international gateway
 switch) in April 2004. As on date, UTL has expanded its services in
 Hetuda, Birganj, Butwal, Bhairawah, Pokhara, Banepa,
 Bharatpur/Narayanagarh, Birat Nagarm Itahari and Dharan. In another
 couple of months, UTL services will be available in Simra and Damak.
 
 UTL was adjudged as one of the highest payer of taxes towards Customs
 Duty, VAT, TSC, TDS etc and UTL by this way has remitted more than NRs
 20 crore to the Government treasury. As on date, Customer base is about
 115,000. The number of PCOs are about 1200.
 
 UTL is planning to deploy Value Added Services (VAS) viz PDSN(high
 speed internet of 144 KBPS), SMS, etc and also the expansion,
 upgradation of existing network including IN platform. Also provision
 of pre- paid services is on anvil. The network covers adjourning
 villages to the cities wherever its services are in operation, 283
 villages have been covered having customer base of 16,559.
 
 (ii) MTNLSTPI IT SERVICES Ltd.
 
 MTNL has joined hands with Software Technology Parks of India (STPI), a
 society under the Ministry of Information Technology as 50:50 partners.
 The main objective of the company is to undertake all such activities
 that are required to make domain India.in popular. The joint venture
 was incorporated on 31 - 03-2006 under the Companies Act 1956, with
 authorized capital of Rs. 50 Crores and at present the paid up capital
 is Rs. 5 Lacs.
 
 The project under this joint venture is under way. MTNL-STPI JV project
 of data centre at Chennai will provide services like messaging,
 web-hosting, application hosting, Web-farming application etc. The
 company is in the process of recruiting its own staff and will be
 recruiting the best professionals from software industry.
 
 The Company has obtained Certificate of Commencement of Business from
 ROC on 14-12-2007.
 
 SYSTEM STATUS OF MTNL AS ON 31st MARCH 2008.
 
 S.
 NO. PARTICULARS                            DELHI     MUMBAI        TOTAL
 
 1 Number of Exchanges                        342        210         552
 
 2 Equipped Capacity*                     5135129    4734081     9869210
 
 Digital Lines                            5135129    4734081     9869210
 
 DLC Capacity                              160152     117734      277886
 
 Digitalization % lines                       100%       100%       100%
 
 3 DELs (Including WLL Fixed and GSM)     3181463    4028385    7209848
 
 4 DELs
 
 a) Wired Lines.                          1574417    2101452    3675869
 
 b) WLL-Fixed                               27640     103572     131212
 
 c) Garuda (FWT)
 
 d) WLL-Mobile                             100966      59950     160916
 
 e) Cellular Mobile (GSM)                 1478440    1763411    3241851
 
 5 DLC (Nos)                                  425        509        934
 
 6 Leased Circuits                          15273      35900      51173
 
 7 PCOs
   Local                                    57340     134794     192134
   STD                                      25352      21849      47201
   Total                                    82692     156643     239335
 
 8 Tax capacity                            150000     155200     305200
 
 9 Tandem                                  370500     386060     756560
 
 10 ISDN                                     8945      16748      25693
 
 11 Internet connection
 
 a) Pre paid                                19892       7407      27299
 
 b) Post paid                              593825     735182    1329007
 
 c) Broadband (including ADSL)             232169     338422     570591
 
 12 Waiting List                              Nil        Nil        Nil
 
 13 OFC (in Route Kms)                   7172.383   5866.132  13038.515
 
 14 OFC (in Fibre Kms)                 201349.534 138992.902 340342.436
 
 15 IPTV                                     3481       3499       6980
 
 16 VOIP                                     1523       1302       2825
 (including WLL fixed ,WLL mobile & GSM)
 
 CUSTOMER CARE AND AFTER SALE SERVICES
 
 MTNL pays utmost attention to customer care and after sales services.
 The customer care help lines for all its services have been
 strengthened and more trained staff has been posted on these help lines
 as well as in Sanchar Haats to provide on the spot solutions to all the
 requirements of the customers. With a view to provide world class
 customer care services, the company has recently increased the seats in
 all its call centers by deploying qualified professionals.
 
 HUMAN RESOURCE DEVELOPMENT
 
 The Telecom industry in India is undergoing through a volatile phase
 and fate of the organizations is being written and re-written everyday.
 In the recent past, we have identified Human Resources as one of the
 strategic partners for rapid business strides leading to success in all
 strata of our operations. During last fiscal also we continued our
 endeavors towards world standards HR policies.
 
 We have always considered our Manpower as one of our greatest assets
 and this is what differentiates MTNL from its competitors. We have a
 strong manpower base of 47422 Nos. with wide array of Technical and
 Managerial aptitudes and also talented supporting staff having exposure
 to state of the art technologies prevailing in Telecom Industry in the
 world. As a step towards restructuring of our manpower we have adopted
 dual pronged strategy, viz., at one end we have recruited young and
 talented professionals in areas like Telecom, Finance, HR, Marketing,
 Law and on the other hand we have taken steps towards rightsizing of
 the organization by offering VRS.
 
 Thus fine-tuning our existing manpower mix in terms of age,
 qualification, and aptitude to meet the demands posed by the changing
 Business Environment and to take advantage of the opportunities
 presented to serve ever-increasing customer base.
 
 TRAINING PERFORMANCE
 
 Our Company has been conducting various Training & Development
 activities, which apart from minimizing the skill gap and technical
 obsolescence, are also focusing towards attaining the bigger
 organizational purpose of building a competent workforce to take the
 challenge in the currently existing
 
 Telecom sector.
 
 CENTRE FOR EXCELLENCE IN TELECOM TECHNOLOGY AND MANAGEMENT (CETTM)
 
 Our dream for having a world-class in house Training Centre furthered
 one step when CETTM (Centre for Excellence in Telecom Training &
 Management) was awarded ISO 9001:2000 certification. CETTM is slowly
 taking the lead role and becoming the nodal center for HRD. Induction
 Training programme for newly recruited executive Trainees in the field
 of Telecom, Finance, Marketing, HR, Legal have been conducted at CETTM.
 
 CETTM has started generating revenues by leasing out infrastructure and
 providing training to other organizations of repute.
 
 INDUSTRIAL RELATIONS
 
 Industrial peace and Industrial harmony based on healthy Employee
 Relations, like the previous year prevailed throughout the year. The
 Grievances/Issues raised by the employees/Union/Associations was given
 due attention and regard. The cases/issues brought up by them were
 settled through regular meetings ad interactions between Management and
 Unions/Associations and action as mutually agreed was taken to settle
 them.
 
 A further step towards Workers Participation in critical issues
 concerning business endeavors, a special Joint Negotiation Committee
 meeting was convened to share the views of recognized Unions on the
 various aspects of our business endeavors and to obtain opinion from
 them in further improving the same.
 
 EMPLOYEES WELFARE
 
 Employees Welfare Schemes like subsidized Canteen, Creches, Housing,
 Medical facilities, Scholarships for the wards of employees, Group
 Insurance, dormitories for females working in night shift etc.
 continued and maintained by the Company for its employees. Sports and
 Cultural activities were also given priority during the year.
 
 IMPLEMENTATION OF OFFICIAL LANGUAGE POLICY
 
 The company continued its efforts to comply with statutory requirements
 in promoting the use of Hindi and has been able to achieve most of the
 annual targets set by the Government for implementation and promotion
 of Hindi as Official Language in the Company.
 
 IMPLEMENTATION OF RESERVATION POLICY FOR SC/ST/OBC AND PH COMMUNITY
 
 Your Company has endeavored to fulfill all the statutory requirements
 with regard to implementation of reservation policy for candidates
 belonging to SC/ST/OBC communities and as well as Physically Challenged
 candidates.
 
 WORKING CONDITIONS OF WOMAN EMPLOYEES
 
 We are continuously striving towards gender sensitization amongst our
 employees. Special care has been taken in case of woman employees
 working in night shifts. Also to redress the issues of Sexual
 Harassment at workplace Special Cells have been constituted.
 
 The Parliamentary Committee on empowerment of Women had studied the
 working conditions of women in MTNL during the year. Special grants
 have been sanctioned to Women Welfare Committee at Delhi/ Mumbai.
 
 CORPORATE SOCIAL RESPONSIBILITY
 
 Fulfilling the Social Responsibility was always high on our agenda and
 in last fiscal year also your company supported a lot of Organizations
 fighting for the bigger social cause. In many instances we also took
 the same responsibility on our shoulders.
 
 MANPOWER STATUS
 
 As on 31 st March 2008 your Company had a strength of employees as per
 details given below:-
 
 MTNL Employees working strength as on 31.3.2008
 
 Group                       Working    SC    ST
 
 A                              1257   230    57
 
 B                              5342   807   115 
 
 C                             28214  4892   533
 
 D                             12538  2912   922
 
 Total                         47351  8841  1627
 
 DRMs                             71     0     1
 
 Grand Total                   47422  8841  1628
 
 VIGILANCE
 
 Vigilance cell in MTNL is headed by Sh. Kabal Singh, IRSSE who has
 joined as CVO in corporate office on 24.3.2005. CVO is responsible for
 complete vigilance administration of MTNL. In 2007-08, emphasis has
 been laid on incorporating practices to increase transparency and
 making systemic improvements to prevent the possibility of
 manipulation. Under the guidance and instructions of Central Vigilance
 commission steps has been initiated for ensuring efficient vigilance
 administration by leveraging of technology and through increasing
 transparency by way of making effective use of information technology
 in the functioning of company. In its commitment to ensure total
 transparency MTNL achieved a milestone by way of signing a MOU with
 Transparency International - India (Til) for implementation of
 Integrity Pact in all its major procurements. Integrity Pact is a tool
 developed by a NGO named Transparency International, which ensures that
 all activities and transactions between a Company or Government
 Departments and their Suppliers are handled in a Fair, Transparent and
 Corruption Free manner.
 
 Training programmes, seminars and workshops had been conducted from
 time to time to enhance the knowledge and skills of executives and
 staff so as to improve their efficacy and strengthen their role in
 overall development of the organization. The Vigilance Awareness Week
 was celebrated from 12.11.2007 to 17.11.2007 and various activities
 were observed during this week. Customers feedback and suggestion via
 a questioner was collected through various Sanchar Haats/CSCs for
 improvement in the services and complaint handling policy of MTNL was
 released. The telecom frauds and system failures causing revenue
 leakage were detected with the help of Fraud Management and Control
 Centre (FMCC). FMCC is proving a vital instrument in timely detection
 of various revenue realization related issues such as delay in
 disconnection of service due to non-payment bills or non-issue of bills
 etc. The cases of high calling customers and bulk users were regularly
 monitored and checked so as to prevent any potential financial loss to
 company.
 
 Monthly Vigilance meetings were regularly conducted to monitor the
 progress of pending vigilance complaints and disciplinary cases. In
 these meetings, remedial measures and actions were suggested and
 initiated to redress the problems and remove the hurdles in timely
 settlement of such cases. Vigilance branch received 321 complaints
 during the year. These complaints were expeditiously examined and
 necessary actions were taken! Total 107 disciplinary cases were
 finalized during the year. Regular inspections were also carried out by
 vigilance officials at sensitive areas and corrective action were
 initiated and suggested wherever required. Major/minor penalty,
 disciplinary proceedings have been initiated against 105 employees of
 the company for the irregularities and misconducts detected during
 vigilance investigations.
 
 CONSERVATION OF ENERGY AND TECHNOLOGY ABSORPTION
 
 Being a service providing organization, the relevant rules in this
 regard are not applicable to your Company.
 
 FOREIGN EXCHANGE EARNINGS
 
 a) Activities relating to Export and total Foreign Exchange earned and
 used:-
 
 Earned: Rs. (Million) 66.70
 
 Expenditure in Foreign Currency Rs. (Million) 34.09
 
 CORPORATE GOVERNANCE
 
 Your company follows the principles of effective corporate governance
 practices. The Company has taken steps to comply with the requirements
 of revised Clause 49 of the Listing Agreement with the Stock Exchanges.
 A Report on Corporate Governance has been appended under separate
 section titled Corporate Governance Report and forms a part of the
 Annual Report.
 
 COMPLIANCE CERTIFICATE
 
 A certificate from the Practicing Company Secretary regarding
 compliance of conditions of Corporate Governance is stipulated under
 revised Clause 49 of the Listing Agreement is attached to this report.
 
 DIRECTORS RESPONSIBILITY STATEMENT
 
 Pursuant to the provisions of Sec 217(2AA) of the Companies Act, 1956,
 the Directors to the best of their knowledge and belief confirm that:
 
 (i) in the preparation of the annual accounts, the applicable
 accounting standards have been followed along with proper explanation
 relating to material departures;
 
 (ii) they have selected such accounting policies and applied them
 consistently and made judgments and estimates that are reasonable and
 prudent so as to give a true and fair view of the state of affairs of
 the company as at the end of the financial year and of the profit or
 loss of the company for that period;
 
 (iii) they have taken proper and sufficient care for the maintenance of
 adequate accounting records in accordance with the provisions of the
 Companies Act 1956 and for safeguarding the assets of the company and
 for preventing and detecting fraud and other irregularities;
 
 (iv) they have prepared the annual accounts on a going concern basis.
 
 PARTICULARS OF EMPLOYEES
 
 During the year under report, there was no employee who was in receipt
 of remuneration in excess of limits prescribed under the provisions of
 Section 217(2A) of the Companies Act, 1956 read with the Companies
 (Particulars of Employees), Rules, 1975.
 
 COMMENTS OF C & AG ON THE ACCOUNTS
 
 Comments of C&AG and management replies thereto are given as an
 Annexure to the Directors Report.
 
 DIRECTORS
 
 During the year under report, the Board of Directors of your Company
 met frequently. At these meetings, the Board held intensive discussions
 on the budget, important financial transactions and various steps to
 face the impending competition from private operators both in Basic
 Telephone Service and Cellular Mobile Telephony and other value added
 services.
 
 Sh.R.S.P.Sinha continued to be the Chairman and Managing Director of
 your company and Sh. Kuldip Singh, and Smt. Anita Soni continued to be
 the Director(Technical) and Director(Finance) respectively of your
 Company.
 
 During the period under report, the following changes took place in
 the Directorship of the Company:-
 
 1 . Sh. Satya Prakash Pachauri was appointed as Director (HR) w.e.f.
 06.12.2007 in place of Sh. V.  Shivakumar who had retired from the
 services of the company after completion of his tenure on 03.04.07.
 
 2.  Sh. J. S. Deepak Joint Secretary (T), Department of
 Telecommunication was appointed as director in place of Sh. M.  Sahu
 w.e.f. 30.04.2008
 
 3.  Smt. Usha Sahajpal was appointed as non-official Part-Time Director
 (Independent Director) w.e.f.  30.04.2008.
 
 4.  Smt. Anuradha Joshi Durgapal, DDG (FEB.), DOT was appointed as
 Govt, director w.e.f 31.7.2008 in place of Sh. A.S. Bhola.
 
 The Board places on record its deep appreciation for the excellent
 services rendered by Sh M. Sahu and Sh. A.S. Bhola during their tenure
 as Directors on the Board of MTNL.
 
 AUDITORS
 
 M/s. Bansal Sinha & Co. Chartered Accountants, were appointed as
 Statutory Auditors of your Company by the Comptroller and Auditor
 General of India. In addition, M/s. Gandhi Minocha & Co. and M/s C.V.K.
 & Associates, Chartered Accountants were appointed as Branch Auditors
 for Delhi and Mumbai units respectively for the year 2008-09.
 
 ACKNOWLEDGEMENT
 
 Your Directors take this opportunity to gratefully acknowledge the
 help, guidance and support received from Deptt. of Telecom (DOT) and
 various Ministries of the Government of India. Your Directors are
 especially grateful to its Bankers, all stakeholders and investors
 including ADR holders, for their continued patronage and confidence
 reposed in the company.
 
 The Directors would like to express their thanks for the sincere hard
 work and dedication of every employee , leading to impressive results
 of your company. The Board is confident that with the employees
 continued enthusiasm, initiative and dedicated efforts, your company
 could face the new challenges and opportunities arising out of the
 resultant competition from private operators in the Cellular Mobile,
 Basic Telephone, Internet services and other Value Added services.
 
                       For and on behalf of the Board of Directors
 
                                    (R.S.P. SINHA)
                           CHAIRMAN AND MANAGING DIRECTOR
 
 PLACE: NEW DELHI
 DATE : 29th August 2008