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Tata Communications Directors Report, Tata Comm Reports by Directors

Tata Communications

BSE: 500483  |  NSE: TATACOMM  |  ISIN: INE151A01013  |  Telecommunications - Service

Explore Tata Comm connections « Mar 07
Directors Report Year End : Mar '08
The directors are pleased to present the 22nd annual report and audited
 accounts of Tata Communications Limited for the financial year ended 31
 March 2008.
 
 FINANCIAL PERFORMANCE
 
 During the year under review, 2007-08, your Company earned a total
 revenue of Rs. 34.65 billion compared to Rs.  39.58 billion during the
 previous year. Profit before tax for the year was Rs. 4.49 billion,
 against Rs. 7.12 billion in the previous year. Profit after tax was Rs.
 3.04 billion compared to Rs. 4.68 billion in the previous year.
 
 On a consolidated basis, for 2007-08, the Company’s total income was
 Rs. 85.37 billion, with an EBIDTA of Rs. 8.45 billion and profit before
 tax and exceptional items of Rs.  1.60 billlion.
 
 The audited annual accounts for the year 2007-08 have been drawn up
 taking into account the court order approving the hive off of the
 retail business unit with effect from 1 March 2007.
 
 Dividend
 
 The directors are pleased to recommend a dividend of Rs.4.50 per share
 (Rs.4.50 per share for the previous year) for the financial year ended
 31 March 2008. The amount available for appropriation is Rs. 20.76
 billion, out of which the Company proposes to transfer Rs. 332.72
 million to general reserves, leaving Rs. 18.92 billion to the balance
 sheet.
 
 TATA COMMUNICATIONS
 
 During the year 2007-08, the Company changed its name to Tata
 Communications Limited. The Company also signed the Brand Equity and
 Business Promotion Agreement (BEBP Agreement) with Tata Sons Limited,
 the owners of intellectual property rights for the brand name /
 corporate name Tata.
 
 During the year 2007-08, the Company completed the integration of its
 major international acquisitions, TGN and Teleglobe, giving the Company
 expanded global reach and ability to deliver IP-leveraged
 communications solutions to businesses and consumers worldwide. On 13
 February 2008, the Company launched its new identity and the brand
 “Tata Communications” integrating the former VSNL, VSNL International,
 Teleglobe and CIPRIS brands worldwide.
 
 OVERVIEW
 
 Over the last few years, your Company, steadfastly pursuing its
 strategy, has successfully completed large international acquisitions
 and invested heavily in communications networks in India and outside.
 As a result, your Company has emerged as one of the top players
 worldwide in its major business segments, with operations in 38
 countries.
 
 Internationally, your Company remains one of the top three providers of
 international wholesale voice services and wholesale Voice over
 Internet Protocol (VoIP) services. It is one of the largest providers
 of submarine cable capacity in the world, is a global Tier-1 Internet
 Services Provider (ISP) and is a major player in the growing global IP
 Transit market. Your Company also offers telecommunication services
 through a subsidiary in Sri Lanka and joint ventures in Nepal and South
 Africa. Tata Communications is the only Indian telecom company
 identified by the Boston Consulting Group as one of the new global
 challengers.
 
 During the year under review, your Company strengthened its position in
 international wholesale voice services and grew its carrier and
 enterprise data businesses. The global demand for bandwidth has surged,
 given increasing broadband penetration, the popularity of rich media
 digital content and expansion into emerging markets. Tata
 Communications aims to leverage its TGN network, which is one of the
 most recent and advanced submarine cable and Internet Protocol (IP)
 networks, to meet the demand for converged IP solutions. Your Company
 is actively involved in the creation of additional submarine cable
 systems connecting emerging markets in Asia, the Middle East and Africa
 to Europe, to meet the demands of consumer broadband and enterprise
 customers over the next five to eight years.
 
 OPERATIONAL REVIEW
 
 Your Company operates under three main business segments globally -
 Wholesale Voice, Enterprise and Carrier Data and Other Services.
 
 Wholesale Voice
 
 - International Long Distance (ILD)
 
 ILD voice services were traditionally your Company’s core business.
 Tata Communications remains one of India’s leading providers of
 international voice communication services. Your Company also has
 several hundred direct and bilateral relationships with leading
 international voice telecommunication providers and carries over 23
 billion minutes of international wholesale voice traffic on an
 annualised basis.  Over the last five years, the international
 telephony market in India has been under pressure due to increasing
 competition, falling rates and lower margins. During the year under
 review there was further reduction in tariffs and interconnect rates,
 increasing the downward pressure on revenues.  Therefore, globally your
 Company continues to focus on increasing volumes and thus revenues,
 while cutting costs to improve margins. Your Company believes that its
 strategic advantage in this business comes from its carrier
 relationships supported by the volumes, reach, and robust
 state-of-the-art technology and networks, which are difficult to
 replicate.
 
 - National Long Distance (NLD)
 
 Your Company has a strong national network infrastructure and
 interconnect agreements with all basic and cellular mobile service
 operators in India to carry NLD traffic to and from their networks.
 However, Tata Communications is dependent on getting traffic from these
 access providers, many of whom have acquired their own NLD licenses.
 Meanwhile, direct customer access mechanisms such as the Carrier Access
 Code (CAC), have not yet been implemented.  The telecom regulator has
 recently initiated a consultation process for the implementation of
 CAC.  Any such implementation will enable Tata Communications to enter
 the retail long distance market.
 
 Enterprise and Carrier Data
 
 - Carrier Data
 
 Tata Communications is one of the world’s leading wholesale providers
 of data, IP and mobile signalling services. Your Company leverages its
 TGN submarine cable network to provide high-speed bandwidth
 connectivity to other telecom carriers and ISPs worldwide. The TGN
 network extends across the Atlantic and Pacific Oceans and also
 connects locations within Europe and India to Singapore. Your Company
 is now supplementing this network with two new cables. TGN-Intra Asia
 will connect Singapore to Hong Kong and Japan, via the Philippines and
 Vietnam. TGN-Eurasia will connect Mumbai to Western Europe via Egypt.
 In addition, your Company is playing an important role in the creation
 of other cable systems that connect India to the Middle East, Africa
 and Europe.
 
 Tata Communications also operates one of the world’s leading IP
 networks and provides wholesale IP transit services to tier-2 ISPs and
 regional carriers. Your Company is one of the few ISPs that has a
 strong position in all the major regions, including North America,
 Europe, Asia and Africa. The Company is also introducing other
 value-added services, like Content Delivery Networks (CDN) to leverage
 its existing position with the ISP market segment.
 
 Tata Communications is a leading provider of mobile signalling services
 to mobile operators worldwide. Its offerings include signal conversion
 and managed roaming services. In addition, the Company is introducing
 new, innovative services such as mobile messaging and M-commerce
 (cross-border transfer of money) in partnership with mobile operators
 and banks.
 
 - Enterprise Data
 
 In addition to being a leading player in the Indian data market, your
 Company also serves enterprises globally, providing worldwide
 connectivity through its own network, or assisted by partners in
 different geographies. As voice, data and video communications
 converge; the demand for enterprise data services is growing worldwide.
 By developing differentiated services and offering competitive pricing,
 your Company is tapping these large and lucrative global markets.
 
 Tata Communications offers a very wide range of telecommunication
 solutions that can be seamlessly integrated across products and
 geographies and extensively customised. In addition to international
 and national private leased circuits (IPLCs and NPLCs), your Company
 offers a wide range of Ethernet Services, Internet Protocol (IP) and
 managed services encompassing Internet telephony, Multi Protocol Label
 Switching based Virtual Private Networks (MPLS VPNs), Internet access,
 managed hosting, messaging and other collaboration and conferencing
 services, managed security services and other professional services.
 
 The Company continues to expand its MPLS VPN and Ethernet services
 throughout the main global markets.  The expansion is being carried out
 through direct entry into new markets as well as through partnerships
 with regional / local operators. To further strengthen its customer
 value proposition, Tata Communications partners with Tata Group company
 Tata Consultancy Services Limited (TCS) and other software and systems
 integration companies, for integrated joint product and service
 offerings. Your Company also markets its services through indirect
 channels catering to the small and medium enterprise market in India.
 
 After recent amendments to telecom licences, IP VPN services are to be
 provided under the ILD and NLD licences. The wireless as well as fibre
 last-mile network can now be used to provide services under the NLD
 licence. NLD service providers are also now allowed to make their own
 arrangements for laying the last mile for providing leased circuits and
 for connecting Closed User Groups. This amendment removes a major
 hurdle to Tata Communications’ leased services and the Company is
 actively expanding its fibre and wireless access network based on the
 new Wi-Max technology, to provide its own last mile connectivity to its
 enterprise customers.
 
 Other Services
 
 In the retail space, Tata Communications remains a premier Internet
 Service Provider, offering connectivity, messaging, Internet telephony
 and a wide variety of content services.  Your Company is also a key
 player in India’s rapidly growing and high potential broadband sector.
 
 - Broadband
 
 As reported last year, your Board had decided to hive off the retail
 business unit into its wholly owned subsidiary VSNL Internet Services
 Ltd. (VISL), to simplify the structure and to enable possible future
 value unlocking in the retail business. A comprehensive scheme of
 arrangement was filed last year for transferring the retail business
 undertakings of Tata Communications Ltd. to VISL and amalgamating
 Direct Internet Limited with VISL. The Hon’ble High Courts at Mumbai
 and Delhi have now approved this scheme.  Accordingly, the retail
 business unit stands hived off with effect from 1 March 2007. The name
 of VISL has subsequently changed to Tata Communications Internet
 Services Ltd.
 
 Broadband penetration in India is expected to grow rapidly over the
 next few years. The Department of Telecommunications (DoT) had
 announced 2007 as the ‘Year of Broadband’. However, the
 non-availability of good quality last mile networks continues to impede
 broadband growth. To overcome the last mile connectivity problem, your
 Company is rolling out wireless networks based on Wi-Max technology.
 Your Company has already commercially launched wireless broadband
 services in Bangalore in December 2007 with encouraging customer
 feedback. With an ambitious rollout plan, your Company shall soon
 extend these services to other select cities as well.
 
 For the wireline broadband service, the focus was on acquiring
 customers on high revenue generating plans. Therefore, Tata
 Communications continues to be one of the highest ARPU (average revenue
 per user) per month broadband service providers.
 
 Wireless Fidelity or Wi-Fi enables computers, PDAs and other computing
 devices to use high speed Internet without any wires or cables, at
 places that are Wi-Fi enabled, called hotspots. Your Company provides
 broadband public access through Wi-Fi hotspots. With close to 500
 hotspots, Tata Communications is India’s leading Wi-Fi hotspot provider
 spread across segments such as airports, hotels, coffee shops,
 restaurant chains, hospitals, educational institutes, railway stations,
 even stores. Tata Communications clocked a growth of over 200% in the
 hotspot space and has been successful in major new site acquisitions.
 
 Tata Communications is actively engaged in Wi-Max industry initiatives
 and has been an active member of the Wi-Max Forum, where it has been
 recently upgraded to a principal member status. It has also been very
 actively involved with industry and professional bodies in devising
 product specifications and requirements for the Indian markets.
 
 Tata Communications is also the only Indian ISP to be a member of the
 Wireless Broadband Alliance (WBA).  In less than two years, your
 Company has achieved the distinction of chairing this prestigious
 international association, which has an impressive member list
 including industry leaders like British Telecom, France Telecom, Korea
 Telecom, StarHub, Swisscom Mobile and T-Mobile. It was a fast-track
 path for Tata Communications into this international forum,
 
 given your Companys contributions towards pushing aggressive growth for
 wireless broadband.
 
 - Innovation
 
 Your Company has been a leader in offering integrated and innovative
 Internet services. It continued its progress during the year by adding
 a slew of access products, applications and content services across its
 access products namely, broadband, dialup and Wi-Fi. Some of the
 innovative services launched during the year include international
 Wi-Fi roaming, web conferencing, photos printing, latest movie
 catalogues.
 
 New Stream Of Business - Outsourcing Services
 
 To help reduce the total cost of operations and to take advantage of
 opportunities in the outsourcing business, Tata Communications
 incorporated a 100% subsidiary, Tata Communications Transformation
 Services Ltd (TCTS). TCTS will provide outsourcing services to other
 communication service providers, namely, client relationship management
 services, services engineering and design services, procurement network
 management, etc. TCTS has set up one unit in a special economic zone
 (SEZ) and another one within a software technology park (STPI).
 
 As the global telecom business becomes more competitive and margins
 come under pressure, several carriers are seeking to create more
 efficient back-end operations, supported by scalable, low cost delivery
 models. Your Company is leveraging its experience and global scale to
 offer a variety of high-end operations outsourcing services out of its
 delivery centres in India. Over a period of time, this business
 promises to be a major avenue of growth for your Company.
 
 Technical Services Agreement with Neotel
 
 As reported earlier, the Government of South Africa had selected Tata
 Communications as the strategic partner to participate as the second
 network operator (SNO) in that country, to provide telecom services in
 competition with the incumbent carrier. South Africa has issued a
 licence to this SNO, called Neotel Proprietary Ltd, to provide a broad
 range of telecommunications services (except mobile services). Neotel
 has launched its voice and enterprise services in that country. During
 the past year, Tata Communications signed a technical services
 agreement to provide technical support services to Neotel, to assist it
 in rolling out its services in South Africa.
 
 Joint Venture with CEC
 
 Your Company has entered into a joint venture agreement with the
 shareholders of China Enterprise Communications Limited (CEC),
 according to which the Company will be acquiring a 50% equity interest
 in CEC subject to the approvals of the requisite governmental and
 regulatory bodies in China.
 
 CEC is a value-added telecommunications services and integrated IT
 solutions provider headquartered in Beijing, China. CEC was recently
 awarded a nationwide IP VPN service license by China’s Ministry of
 Information Industry (MII), the first telecom valued-added service
 license granted to a non-facilities based service provider. CEC has
 network reach throughout China, with no regional restrictions on its
 service capabilities. CEC provides VPN connectivity services to 347
 cities in China.
 
 CECs reach in China complements the Company’s VPN presence in 120
 Indian cities and 19 other major business capitals in North America,
 Europe and Asia.
 
 This joint venture is the first of its kind in the Chinese telecom
 sector, after China’s entry into the WTO. It will leverage key
 synergies between the Company’s high performance global IP network with
 CEC’s extensive IP VPN coverage in Greater China, providing seamless
 connectivity to the world’s most dynamically growing economic regions.
 
 Customer Service
 
 Tata Communications has made significant progress towards transforming
 itself into a customer-focused organisation. The customer service
 team’s mission is to support the entire customer life cycle from
 service delivery to service assurance, including retention and growth.
 
 To support its global operations, the Company is defining and
 implementing stringent service delivery standards that adhere to global
 best practices. In addition, Tata Communications has created a
 dedicated team to support its carrier partners. Centralised 24 x 7 call
 centres in India support Tata Communications’ global wholesale and
 enterprise businesses. Two other outsourced call centres support retail
 and broadband customers.
 
 During the year, your Company has progressed towards creating a global
 Customer Service and Operations organisation, establishing standardized
 processes and establishing strict internal and external service level
 targets.
 
 Premature Termination of Monopoly and Compensation
 
 The Company continues to pursue its claim for compensation consequent
 to premature termination of its ILD monopoly. The Government of India
 (GoI) had allowed other players into the ILD business from 1 April
 2002, terminating Tata Communications’s exclusivity two years ahead of
 schedule. It gave Tata Communications a compensation package and had
 given an assurance prior to disinvestment that it would consider
 additional compensation if found necessary on a detailed review, when
 undertaken. However, in February 2002, just before the disinvestment of
 the Company, the GoI unilaterally granted a further dispensation as
 full and final settlement of every sort of claim against the preponing
 of the ILD demonopolisation.
 
 Tata Communications feels that the compensation is inadequate as the
 losses, as estimated by independent agencies at that time, were
 quantified at a much higher value. The Company had been pursuing the
 GoI to consider additional compensation and to ensure that the claim
 was not barred by limitation, filed a claim in the Mumbai High Court in
 2005.
 
 Flag Arbitration Matter
 
 FLAG commenced an ICC arbitration against the Company in December 2004
 based on a dispute arising out of the Construction and Maintenance
 Agreement (C&MA) governing the FLAG Europe-Asia (FEA) cable system. By
 a 2:1 majority, the ICC Arbitration Tribunal gave a First Partial Award
 in May 2006 granting FLAG access and allowing upgradation. The Company
 has complied fully with this Award.
 
 In February 2007, FLAG filed a damages claim with the same Tribunal
 based on its finding in the First Partial Award.  Your Company
 submitted a detailed defence rejecting any liability for damages. The
 Tribunal has not yet come out with a verdict.
 
 Following receipt of the First Partial Award, in September 2006, the
 Company filed proceedings in the Netherlands Court seeking to set aside
 the First Partial Award on several grounds. The Netherlands Court
 issued its judgment on 19 March 2008 rejecting the Company’s
 application. The judgment of the Netherlands Court is potentially
 subject to two levels of appeal. Based on legal advice, the appeal is
 arguable and the Company has filed an appeal in the higher court in the
 Netherlands.
 
 Surplus Land
 
 Under the terms of the share purchase and shareholders’ agreements
 signed between the Government of India and the strategic partner
 (parties) at the time of disinvestment by the Government in 2002, it
 was agreed that certain identified lands would be demerged into a
 separate company. It was further provided that if for any reason the
 Company cannot hive off or demerge the land into a separate entity,
 alternative courses as stipulated in the share purchase and
 shareholders’ agreement would be explored. A draft scheme of demerger
 was presented to the Board in April 2005, and the parties are examining
 the legality and feasibility of implementing the scheme. The land
 identified for demerger at different locations measures 773.13 acres,
 and carries a book value (as indicated in the accounts) of Rs.1.64
 million.
 
 Land to Employees Co-operative Housing Society
 
 VSNL Employees Co-operative Housing Society, Chennai had moved the
 Hon’ble Delhi High Court seeking directions to the Company, Government
 of India (GoI) and the strategic partner in respect of their long
 pending issue of transfer of 32.5 acres of land situated at
 Padianallur, Chennai to the Society. The said piece of 32.5 acres of
 land forms a part of the surplus land and, therefore, the Company
 submitted before the Hon’ble High Court, its custodial position by
 virtue of the SHA in respect of the surplus land.  The Hon’ble High
 Court after hearing the matter decided in favour of the Society. The
 matter was appealed by the Government of India for review of the
 decision which was finally dismissed by the division bench of Hon’ble
 High Court. Thereafter, with the due approval of the Board, in order to
 comply with the orders of the Hon’ble Delhi High Court, the Company has
 proceeded to transfer the said land to the Society as per the orders of
 the Hon’ble Delhi High Court.
 
 HUMAN RESOURCES
 
 Human Resources continues to be a prime focus area within Tata
 Communications. The Company constantly reviews its HR practices and
 policies in order to keep pace with market changes and has embarked on
 a range of initiatives to create a positive work environment, ample
 opportunities for career growth and development and to support managers
 in enhancing motivation and engagement levels within their teams.
 
 Tata Communications Group had 5,147 employees on 31 March 2008, against
 4,401 on 31 March 2007. Of these, 1,008 (1,200 last year) were located
 outside India.
 
 The Company has a structured process for recruiting and orienting new
 recruits and training its workforce in both technical and non-technical
 areas. The compensation and employee benefit practices of Tata
 Communications aim to be market driven, attractive and innovative,
 adapted to suit geographic requirements. The Company continued to
 maintain harmonious relationships with employees across the globe.
 
 The Company conducts annual employee satisfaction surveys and based on
 the findings, takes up various steps to enhance employee engagement and
 satisfaction.
 
 Tata Communications has adopted the Code for Affirmative Action and is
 working with reputed national level bodies and non-governmental
 agencies to provide support in the areas of education, employability
 and entrepreneurship development specifically focused on the socially
 and economically disadvantaged sections in the country at large and
 specifically the SC & ST communities. Tata Communications continued its
 partnership with Dr Reddy’s Foundation (DRF) through the Telecom
 Training Academy that has been set up to provide internship
 opportunities in different vocational skills required for the telecom
 industry. The Academy focuses on development of students from
 economically weaker sections of society, especially candidates who are
 completing their Diploma / ITI courses from rural and smaller towns.
 The Academy has about 160 interns at various stages of the internship
 programme.
 
 AWARDS AND RECOGNITION
 
 The Companys transformational initiatives are being recognised in
 international markets. During the year, the Company earned several
 prestigious international recognitions for the first time, including:
 
 - Atlantic ACM Excellence in Wholesale 2008.
 
 - Frost & Sullivan #1 Enterprise Data Services Provider in India 2007.
 
 - Best Wholesale Carrier at the Telecom World Middle East 2007.
 
 - Best Pan-Asian Wholesale Provider at the Capacity Global Awards 2007.
 
 - Telecom magazine Tele.net’s award for Best Long Distance Operator.
 
 - Tele.nets award for the Best Internet and Broadband Operator.
 
 Tata Communicationss CEO Mr. N Srinath was named the Telecom CEO of the
 Year by the leading publishing group Telecom Asia in the 2006 edition
 of their awards. The Institute of Economic Studies (IES), a research
 oriented organisation, also conferred its Excellence Award on Tata
 Communications and its Udyog Rattan Award on Mr N.  Srinath in November
 2006.
 
 INTERNAL INITIATIVES
 
 Your Company continues with various internal initiatives such as
 organisation restructuring, profit enhancement, cost optimisation,
 quality programmes, customer care and information technology to compete
 effectively, improve organisational flexibility and respond quickly to
 customers.  Some important initiatives are:
 
 - Business Excellence
 
 Your Company has been re-inventing its business model and transforming
 itself in tandem with market and regulatory changes. To help drive the
 transformation, Tata Communications is implementing the Tata Business
 Excellence Model (TBEM), a framework that lays down best practices in
 areas like leadership, strategy, customer and market focus, knowledge
 management, human resources, process management planning, customer
 service and social responsibility.
 
 Your Company has increased the number of employees engaging themselves
 in these activities and has created a strong, quality/TBEM literate
 workforce. Among the important achievements are: the Company is the
 first telecom service provider in the world to obtain the TL 9000
 certification; the first telecom company in India to obtain the ISO
 14001 certification for environment management; and the first telecom
 service provider in India and the world to obtain the BS 7799 and the
 ISO 27001 certifications respectively for information security.
 
 Your Company has initiated an exercise to streamline internal processes
 across all its entities globally and institutionalise a culture of
 continuous improvement.
 
 The internal audit and revenue assurance teams actively contribute to
 sustaining process improvement efforts. Senior management regularly
 tracks implementation of ideas for improvement.
 
 - Compliance with section 404 of Sarbanes Oxley Act, 2002
 
 Pursuant to it’s listing on the New York Stock Exchange, Tata
 Communications was required to comply with section 404 of the Sarbanes
 Oxley Act by March 2008. This Act lays down requirements for internal
 control over financial reporting. For the current fiscal, in addition
 to management’s own assessment of the effectiveness of such internal
 control, the Company’s external auditors are also required to issue an
 opinion on whether effective internal control over financial reporting
 was maintained in all material respects by management.  Tata
 Communications is confident of being able to get the certification of
 being compliant with these stringent requirements.
 
 - Revenue Assurance and Cost Reduction
 
 Tata Communications’ Revenue Assurance function aims to prevent revenue
 leakages and ensure robust internal controls and IT processes that keep
 pace with increasing business complexities, thus moving towards zero
 tolerance of revenue leakages. A Revenue Assurance charter and manual
 have been formulated to further structure these activities.
 
 Tata Communications continues with its ongoing cost reduction exercise
 and has successfully completed several cost reduction projects as a
 part of its continuous improvement activities.
 
 - Enterprise Risk Management
 
 Tata Communications has established an enterprise- wide risk management
 (ERM) framework to optimally identify and manage risks, as well as to
 comply with clause 49 of the SEBI Listing Agreement. In line with your
 Companys commitment to deliver sustainable value, this framework aims
 to provide an integrated and organised approach for evaluating and
 managing risks. The output of this ERM exercise also forms the basis of
 Companys annual internal audit programme.
 
 - Risk-based Internal Audit
 
 Your Companys internal audit team has adopted the risk-based audit
 approach. The risk assessments performed under the ERM exercise and for
 compliance with section 404 of the Sarbanes Oxley Act (SoX), form key
 inputs for the annual audit plans for each business and functional
 unit. This approach also ensures optimal synergy between internal audit
 and the SoX compliance process.
 
 Fixed Deposits
 
 Tata Communications has not accepted nor does it hold any public
 deposits.
 
 STATUTORY INFORMATION AND DISCLOSURES
 
 Particulars of Employees
 
 The provisions of Section 217(2A) of the Companies Act, 1956, read with
 the Companies (Particulars of Employees) Rules, 1975, require the
 Company to provide certain details about the employees who were in
 receipt of remuneration of not less than Rs.24,00,000 during the year
 ended 31 March 2008 or not less than Rs.2,00,000 per month during any
 part of the said year. The Company had 144 such employees employed
 during the year ended 31 March 2008. However, as per the provisions of
 section 219(1)(b)(iv) of the Companies Act, 1956, the Directors’ Report
 being sent to the shareholders does not include this annexure.  Any
 shareholder interested in obtaining a copy of the annexure may write to
 the deputy company secretary at the Companys registered office.
 
 R & D, Technology Absorption and Foreign Exchange Earnings
 
 There are no particulars to be disclosed pertaining to the year under
 review, in respect of Research & Development (R&D) and technology
 absorption as required under Companies (Disclosure of Particulars in
 the Report of the Board of Directors) Rules, 1988. For the purpose of
 Form ‘C’ under the said rules, foreign exchange earnings were
 equivalent to Rs.10.35 billion and foreign exchange outgo was
 equivalent to Rs.7.83 billion.
 
 Auditors Report
 
 There are no qualifications in the report of the statutory auditors for
 the year 2007-08.
 
 Subsidiaries
 
 The statement pursuant to section 212 of the Companies Act, 1956
 containing details of the Company’s subsidiaries, is attached. The
 consolidated financial statements of the Company and its subsidiaries,
 prepared in accordance with accounting standard 21 (AS 21) prescribed
 by the Institute of Chartered Accountants of India, form part of the
 annual report and accounts.
 
 These documents will be provided on request to any shareholder wishing
 to have a copy, on receipt of such request by the deputy company
 secretary at the Company’s registered office. These documents will also
 be available for inspection by any shareholder at the Company’s
 registered office.
 
 The Board of Directors
 
 The Tata Communications Board presently consists of eleven Directors.
 Mr. S. Ramadorai joined the Board on 28 June 2007. Mr. Ishaat Hussain
 resigned from the Board on 26 June 2007. Mr. A.K. Srivastava, DDG (AS),
 Dot, was appointed as permanent (non-retiring) government nominee
 director on the Board with effect from 31 July 2007 in casual vacancy
 caused due to the resignation of Mr. N. Parameswaran, government
 nominee director.  Mr. Arun Gandhi joined the Board on 10 September
 2007.  Mr. H.P. Mishra, DDG (WPF), DoT, was appointed as permanent
 (non-retiring) government nominee director on the Board with effect
 from 22 October 2007 in casual vacancy caused due to the resignation of
 Mr. Pankaj Agarwala, government nominee director. Dr.  Mukund Rajan,
 Director, resigned from the Board with effect from 24 June 2008.
 
 In accordance with the provisions of the Companies Act, 1956 and the
 Companies Articles of Association, Mr. PV Kalyanasundaram, Dr. V.R.S
 Sampath and Mr. Amal Ganguli retire by rotation at the ensuing annual
 general meeting and being eligible, offer themselves for reappointment.
 
 In accordance with the provisions of the Companies Act, 1956 and the
 Companies Articles of Association, Mr. Arun Gandhi holds office only up
 to this annual general meeting; notices under the provisions of section
 257 of the Companies Act, 1956 have been received by the Company from a
 member signifying his intention to propose Mr. Arun Gandhi as a
 candidate for the office of Director.
 
 For details about the Directors, please refer to Point 2 of the Report
 on Corporate Governance.
 
 None of the Company’s Directors are disqualified from being appointed
 as a Director as specified in Section 274 of the Companies Act, 1956 as
 amended by the Companies (Amendment) Act, 2000.
 
 Corporate Governance
 
 Pursuant to Clause 49 of the listing agreements with the stock
 exchanges, a Management Discussion and Analysis, Corporate Governance
 Report and Auditors’ Certificate regarding compliance with conditions
 of corporate governance form a part of the directors’ report.
 
 Corporate Sustainability Initiatives
 
 As a member of the Tata Group, Tata Communications is committed to the
 Group’s philosophy of improving the quality of life in the communities
 we serve. Tata Communications has a Corporate Social Responsibility
 (CSR) Policy and is a member of the Tata Council for Community
 Initiatives (TCCI). The Company fosters an internal culture of
 volunteerism and contributes to the socio-economic development of the
 communities it operates in, through financial and other assistance to
 various causes and organisations.
 
 Tata Communications is sensitive towards environmental, ecological and
 biodiversity concerns arising out of its operations. Towards that end,
 Tata Communications has also become the first telecom service provider
 in India to obtain ISO 14001 Certification.
 
 Management of Business Ethics (MBE)
 
 Consistent with the Group’s policy, Tata Communications is
 systematically implementing the Tata Code of Conduct.  Tata
 Communications has put in place an organisational structure and a
 process to implement and improve ethical standards and practices, and
 began implementing the Tata Code of Conduct in 2003-04. Tata
 Communications conducts regular seminars, ethics awareness campaigns
 and workshops to sustain the momentum and to strengthen ethical values
 and practices among various stakeholders.
 
 DIRECTORS RESPONSIBILITY STATEMENT
 
 Pursuant to Section 217(2AA) of the Companies Act, 1956, the Directors,
 based on the representations received from the operating management,
 confirm that:
 
 - In the preparation of the annual accounts, the applicable accounting
 standards have been followed and there are no material departures;
 
 - They have consulted the Statutory Auditors in the selection of the
 accounting policies and have applied them consistently and made
 judgements and estimates that are reasonable and prudent so as to give
 a true and fair view of the state of affairs of the Company at the end
 of the financial year and of the profit of the Company for that period;
 
 - They have taken proper and sufficient care, to the best of their
 knowledge and ability, for the maintenance of adequate accounting
 records in accordance with the provisions of the Companies Act, 1956,
 for safeguarding the assets of the Company and for preventing and
 detecting fraud and other irregularities;
 
 - They have prepared the annual accounts on a going concern basis.
 
 ACKNOWLEDGMENTS
 
 The Directors would like to express their thanks for the hard work and
 dedication of every employee. The Directors appreciate the support of
 various Ministries and departments of the Government of India, the
 Department of Telecommunications and I&B Ministry. The Directors are
 also grateful to the Company’s stakeholders and partners including its
 customers, shareholders, bankers, solicitors, suppliers and foreign
 telecom administrations for their support.
 
                                  On behalf of the Board of Directors
 
                                             Subodh Bhargava
 Dated: 26 June 2008                             Chairman
 
 Registered Office :
 VSB, M.G. Road, Fort,
 Mumbai - 400 001.
Source : Religare Technova

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