Tata Teleservices (Maharashtra)

The Directors have pleasure in presenting the 13th Annual Report
 together with the audited financial statements of the Company for the
 year ended March 31,2008 and other accompanying reports, notes and
 certificates.
 
 Financiai Results
 
 The financial results of the Companys operations during the year are
 given below:
 
                                                     (Rs. Crores)
 
 Particulars                               2007-08            2006-07
 
 Telecom Revenue                          1,707.19           1,406.98
 
 Ottitif Income                              82.41              17.44
 
 Total income                             1,789.60           1,424.42
 
 Expenditure                              1,304.05           1,12.382
 
 Earnings Before Interest, Depreciation, 
 Tax and Amortisation                       485.55             302.60
 
 (EBIDTA)
 
 Finances Treasury Charges (Net)            171.01             171.76
 
 Depreciation                               439.35             446.23
 
 Loss before Extraordinary item and tax     124.81             315.39
 
 Extraordinary item                            -                (5.48)
 
 Loss before tax                            124.81             309.91
 
 Fringe Benefit tax                           0.93               0.70
 
 Loss after tax                             125.74             310.61
 
 The total revenue grew by 26% to Rs. 1,790 crores. The subscriber base
 grew by 65% to cross 50 lakhs, mainly through the increased additions
 to the Prepaid Mobile subscriber base. Other income includes the
 subsidy received from the Universal Services Obligation (USO) Fund for
 providing telephony service in rural areas (to compensate the lower
 revenues compared to the costs incurred for operations at these
 locations). The increased mix of prepaid subscribers resulted in lower
 Average Revenue per User (ARPU) apart from reduced tariffs due to
 competitive market moves. Cost optimization efforts, however, ensured a
 lower rate of increase of 16% in operating expenses, compared with 26%
 increase in revenues. The Company reported a positive EBIDTA of Rs.
 485.55 crores, representing a significant improvement over the previous
 years EBIDTA of Rs. 302.60 crores.
 
 Indian Telecom - Phenomena! growth continues
 
 Liberalization of the Indian Telecom Sector began in the year 1991.
 India today has the second largest telecom network in the world after
 China. As of March 31, 2008, there were more than 300 million telephone
 connections in the country of which 261 million were mobile
 connections. Approximately 8 million mobile connections are being added
 every month.  The tele-density which was less than 1 per hundred in
 1984 is today over 26 per hundred. Telephone connections are to be
 expected to touch the 500 million mark by the year 2010.
 
 This growth, however, has been concentrated mainly in urban areas,
 while rural teledensity remains low at less than 7%.  Despite a steady
 fall in the ARPU with ever declining tariffs (Indian telecommunication
 tariffs are the lowest in the world), Indian telecom companies have
 been expanding their network and increasing their coverage of areas in
 rural India. The Government of India, through the Department of
 Telecommunications (DoT), has also sought to assist the process of
 enhancement of rural penetration by extending upto March 2009 its
 scheme of giving subsidies on rural lines, and by allocating funds from
 the USO Fund for construction of shared passive infrastructure in rural
 areas.
 
 36 new companies have applied for licenses in various circles
 (aggregating to 482 applications for various circles) and DoT has
 accepted the recommendation of the Telecom Regulatory Authority of
 India (TRAI) that there should be no cap on the number of telecom
 operators per circle (notwithstanding the fact that this would cause
 scarcity of spectrum for the existing operators). DoT has already
 issued 7-8 new mobile licences, and the licensees are awaiting spectrum
 allocation to start operations. There could thus be 10-12 operators
 fighting for market share in any circle.
 
 Consequent to policy clarifications by DoT, the Company has been
 permitted by DoT to apply for spectrum which can be used to deploy GSM
 technology. The Company paid Rs. 393 crores for such permission for its
 two telecom circles of Mumbai and Rest of Maharashtra (including Goa).
 The GSM option will help the Company to address the challenges posed by
 increased competition in an environment where spectrum availability is
 constrained. Cost efficiencies will be achieved in the GSM roll-out by
 re-use of much of the network infrastructure created for the CDMA
 deployment.
 
 The UASL License of the Company has also been amended. The Company
 expects to roll-out GSM services after it is allotted spectrum by DoT.
 
 The Companys Performance
 
 The Company holds two Unified Access (basic + cellular) Service
 Licences (UASL), one for Mumbai Metro and the other for the Rest of
 Maharashtra and Goa.
 
 During the year, the Company consolidated its position in the market by
 increasing its share of new additions in the wireless market (i.e.
 fixed wireless and mobile). Its incremental market share placed it at
 the 4th position in its areas of operation.  The Company also launched,
 towards the end of the year, the Virgin Mobile brand, targeted at the
 youth segment.
 
 Products and Services
 
 During the year, the Company focused on increasing its retail presence
 to penetrate the market better with its various products and services.
 The Company increased its subscriber base in the mobile and fixed
 wireless categories, as also in the wireline space, apart from
 enhancing its offerings of value added services.
 
 The wireless/mobile subscriber base almost doubled from 27.70 lakhs to
 46.80 lakhs. This growth was fueled by the increase in network
 coverage, accompanied by the introduction of new handsets at attractive
 prices, and the introduction of creative tariffs.
 
 The Company has reciprocal roaming arrangements with Tata Teleservices
 Limited (TTSL), which offers services in 18 other telecom circles, and
 thus the Companys subscribers enjoy pan-India mobility. TTSL has also
 signed Unified Access Service licence agreements with DoT for the last
 remaining circles of Jammu and Kashmir, North East and Assam and would
 roll out services in these circles in the next few months. The Company
 has also entered into arrangements with overseas telecom operators to
 provide international roaming facilities to its subscribers.
 
 Following is a comparative summary of subscriber numbers achieved by
 the Company as at the end of the year under review vis-a-vis the
 previous year:
 
                                                   (Figures in Lakhs)
 
 Particulars                 As on March 31,2007  As on March 3 7,2008 
 
 Wireless/Mobile Subscribers          27.70              46.80
 
 Wireline Subscribers                  3.00               4.00
 
 Total                                30.70              50.80
 
 The Company, using the franchisee model, has opened a large number of
 True Value Shops to display its range of products and services and
 increase accessibility for its customers.
 
 The Company continued to focus on value added service offerings.
 Welcome Tunes (Caller Ringback Tunes), video streaming and other data
 and content services brought in improved revenues.
 
 The Company is a Category A (National) ISP Licensee and offers a broad
 range of Internet-related product offerings including DSL, leased lines
 and dial-up internet access.
 
 The Company, along with TTSL, has a national footprint for its popular
 Tata Indicom conference call service, with 15 Points of Presence across
 the country for providing local access to conference bridges.
 
 The Company also offers its products and services through a web-based
 online retail store called i-Choose whereby anybody can buy a handset
 along with the tariff p\an chosen by him/her simply by making an
 on-line payment. The device ordered is delivered at the customers
 home.
 
 New Customer Offerings
 
 During the year, the Company introduced several attractive product and
 service propositions that addressed specific customer needs:
 
 The launch of the USB Plug-to-surf Modems has provided instant wireless
 internet access to thousands of lap-lop and desktop owners. The product
 has also been launched in the prepaid segment for consumers who have
 budget constraints, such as students.
 
 The launch of the Go One Starter kit which enables a consumer to have
 life time connectivity at a very affordable tariff of Rs. 1.00 per
 minute across all local network calls has helped to break barriers and
 made mobile connectivity more affordable.
 
 Electronic recharge was introduced which helped the Company to reduce
 costs on printing, octroi, and logistics. The current penetration of
 E-recharge is 70% of total recharges.
 
 The launch of Special Tariff Vouchers (STVs) for different segments of
 consumers with feature specific needs such as STD or night time calling
 helped consumers to get better tariff benefits.
 
 The launch of copy a ring tone (popular name * 2 copy) helped to
 improve the penetration of Caller Ring back Tunes.  Network
 Infrastructure
 
 During the year, the Company rolled out CDMA wireless services in 208
 new towns in Maharashtra and Goa. It now offers services in 565 towns
 and also along the major national highways linking various towns in
 Maharashtra and Goa. The Companys subscribers are therefore able to
 enjoy uninterrupted services while traveling by road and rail along
 major travel routes in Maharashtra and Goa.
 
 The Company had participated in 2004 in an open bidding process for
 providing fixed phones in rural areas with support from the USO Fund.
 It won bids in 43 Short Distance Charging Areas (SDCAs), and started
 providing services in many rural villages in the interiors of
 Maharashtra. The scheme has been extended by DoTto March 31, 2009, and
 the Company has already installed over 3.48 lakh rural lines, for which
 it is eligible to get subsidies towards meeting part of the capital
 expenditure and operating costs incurred for every line installed and
 operational at these locations.
 
 The Company implemented cost efficiency measures by optimizing its
 infrastructure, increasing the utilization factor, and through the use
 of power saving equipment. The Company, in co-operation with other
 private operators, focused on increasing the sharing of passive
 infrastructure like towers, duct space and site equipment amongst the
 operators, with a view to optimizing network costs and operating
 expenses. On similar lines, expansion of the fiber back bone has been
 carried out in several areas through cost effective sharing
 arrangement, with other service providers
 
 Passive Tower Infrastructure Transfer
 
 To capitalize on the opportunity created by the increased industry
 focus on infrastructure sharing, the Company like other leading telecom
 operators, proposes to concentrate on its core business activity i.e.
 providing telecommunication services, and transfer its Passive Tower
 Infrastructure to a Wholly Owned Subsidiary (WoS) which would be formed
 for this purpose.
 
 The Company may subsequently divest some or all of the equity and/or
 preference shares that would be held by the Company in the WoS in
 favour of investor/s or infrastructure providers including Wireless
 Tata Tele Info Limited (WTTIL), a tower subsidiary of TTSL, and/or
 merge it with any other entity including WTTIL. No decision has been
 made in this regard but the Board will adopt structures as may be
 advised to optimize value. Appropriate approvals, as may be required in
 law, will be sought at the appropriate time. Approval of the Members to
 go through this process has already been obtained through Postal
 Ballot, the results of which were announced on May 28, 2008.
 
 The above arrangement would be in line with the global trend of
 segregating the telecommunication service and telecommunication
 infrastructure business, with a view to adopt best management
 practices, establish highest operation standards, provide best in class
 value proposition to all stakeholders and also to identify separately
 the actual economic value addition arising out of passive
 infrastructure business and telecommunication service business.
 
 Quality and Processes
 
 The Company has undertaken ISO 9001:2000 certification to demonstrate
 its capability to consistently provide services that enhance customer
 satisfaction through effective deployment of a quality management
 system. The Company became the first basic telecommunication provider
 to get the coveted ISO 9001: 2000 certification in August 2002. In the
 recent ISO Surveillance Audit conducted by Intertek Quality Registrar
 in December 2007, the Company was awarded a Certificate of Continuation
 for ISO 9001:2000 with Zero Non-Conformance.
 
 The Company undertook training and certification programs across all
 customer-facing units to ensure a consistent and superior customer
 experience. Internal quality audit is used as a management tool for
 independent assessment of the effectiveness of the quality management
 system, and to keep processes current with business needs and
 directions. The Companys Quality Assurance Team conducted internal
 quality audits, the findings of which were discussed in Management
 review meetings. Conformance levels of the Companys processes were
 continuously evaluated and corrective action taken towards improving
 products and services thereby ensuring improved customer satisfaction.
 
 The Company is also taking active part in the Tata Business Excellence
 Model (TBEM) process, with knowledge sharing and appropriate support
 being extended by Tata Quality Management Services (TQMS), a division
 of Tata Sons Ltd.
 
 Regulatory Developments and Important Litigation
 
 a) There have been many regulatory changes which were announced during
 the year, prominent amongst these being termination of the Access
 Deficit Charge (ADC), the DoTs decision to introduce in phases the
 mobile number portability, the DoTs decision to allow use of alternate
 technologies by UASL licensees (CDMA operators, on payment of specified
 fees, can use GSM technology and vice versa), the TRAI regulations in
 respect of unsolicited calls and the DoTs enhancement of the
 subscriber base criterion for allocation of additional spectrum.
 
 b) The Company has also been a party to some important litigation like
 Fixed Wireless ADC demands of BSNL of 2004-05, the DoTs attempt to
 lodge a counter-claim on the Company for not signing in 1997 the
 licence agreement for basic services in the Karnataka circle, the
 penalty imposed by the DOT for the launch of innovative Push to Talk
 services, and industry litigation on exclusion of revenues unrelated to
 licensed activities for determining licence fee liability.
 
 Information on these regulatory developments and important litigation
 have been provided in the report on Managements Discussion & Analysis
 of Financial Condition and Results of Operations which forms part of
 this Annual Report.
 
 Dividend
 
 In view of losses, the Directors regret their inability to recommend
 any dividend for the year under consideration.
 
 Appropriations
 
 No appropriations are proposed to be made for the year under
 consideration.
 
 Share Capital
 
 During the year, the Company issued an aggregate of 18,050 equity
 shares of Rs.10/- each at par, pursuant to the Companys Employee Stock
 Option Plan (the Company stopped granting fresh options under this
 scheme after April 2001). An aggregate of 8,40,48,942 equity shares of
 Rs. 10/-each, were issued at a premium of Rs. 14.49 per share, pursuant
 to the conversion of Foreign Currency Convertible Bonds (FCCBs).
 
 Due to the above, the paid-up share capital of the Company now stands
 increased from Rs. 1,809.50 crores to Rs. 1,893.56 crores.
 
 Directors
 
 Effective February 29, 2008, Mr. Charles Antony who was the Managing
 Director of the Company, resigned from the Board of Directors. The
 Board records its sincere appreciation of the valuable services
 rendered by Mr. Charles Antony.
 
 During the year, Dr. Mukund Rajan was appointed as an Additional
 Director with effect from January 23, 2008. The Board appointed Dr.
 Mukund Rajan as the Managing Director of the Company for a period of 5
 years with effect from February 28, 2008. Approval of Members has been
 obtained through Postal Ballot, the results of which were announced on
 May 28, 2008.
 
 Mr. Nadir Godrej and Mr. Anil Sardana were appointed as Additional
 Directors with effect from March 12, 2008. Mr. Nadir Godrej is an
 Independent Director. As per the provisions of the Section 260 of the
 Companies Act, 1956 (Act), these Directors hold office only upto the
 date of the forthcoming Annual General Meeting of the Company. The
 Company has received a notice under Section 257 of the Act along with
 requisite deposit, in respect of the above persons, proposing their
 appointment as Directors of the Company. Accordingly, resolutions
 seeking the approval of the Members for the appointment of Dr.  Mukund
 Rajan, Mr. Nadir Godrej and Mr. Anil Sardana as Directors of the
 Company have been incorporated in the Notice of the forthcoming Annual
 General Meeting along with brief details about them. The Board
 recommends these appointments in the interests of the Company.
 
 Mr. A. R. Gandhi and Mr. S Ramadorai retire by rotation and offer
 themselves for re-election, which the Directors consider to be in the
 best interests of the Company and therefore recommend for the approval
 of the shareholders.
 
 Human Resources
 
 With the entry of new service providers, competition in the market is
 substantially increasing. The increased choice available to customers
 leads to additional time and effort on the part of service providers to
 acquire and retain the customers, thereby creating increasing pressures
 on the service providers to retain valuable, trained human resources;
 the offer of higher monetary compensation by other operators and other
 service sectors like retail and media have also increased the challenge
 of retaining the employees. In this environment, the Company has been
 working towards institutionalizing a performance oriented culture. The
 HR systems e.g. recruitment, performance management system, and rewards
 and recognition, have been aligned with the business objectives of the
 Company. The Company attaches considerable importance to training and
 employee development with a focus on customer sensitivity, processes
 and ISO training. A regular comnunication, channel is maintained with
 the employees through Town halls, Departmental meets and other such
 fora.
 
 The Board of Directors sincerely thanks all the employees who have put
 in hard work and helped the Company to increase substantially its
 subscriber base during the year and to improve its financial
 performance.
 
 Social Responsibility
 
 Social responsibility is a way of life in every Tata Group Company. A
 number of community initiatives were undertaken by the Company during
 the year.
 
 Rural youth empowerment: Providing training and helping rural
 unemployed youth to get employment:
 
 The Company selected 27 unemployed youth from rural areas (3 open
 category candidates and 24 candidates in SO ST/OBC category) across
 various districts of Maharashtra and supported their training on the
 twin program of Electrical Wiremen (Maharashtra Government syllabus)
 and Telecom Wiremen training designed by the Company. The Electrical
 Wiremen training was imparted by the Ramakrishna Mission at Sakwara
 (Vasai Taluka, Thane District), while the Telecom Wiremen training was
 conducted by the Companys Engineers and Managers. The training,
 lodging and boarding expenses for the 6 month courses were borne by the
 Company. All the trainees were thereafter referred to franchisees.
 contractors in the R-DEL roll out areas of the Company, and the Company
 helped them in getting suitable jobs in then respective Talukas.
 
 Collection and distribution of clothes to needy people in rural areas:
 
 Old clothes were collected from the employees and distributed to the
 needy and poor in rural areas especially in Mokhada Taluka. The
 distribution of the clothes was carried out through the Ramakrishna
 Mission, Rural Health and Welfare Unit.
 
 Auditors
 
 Internal Auditors
 
 The Board has re-appointed M/s. Axis Risk Consulting Services Private
 Limited as the Internal Auditors, effective Apr 1,2008.
 
 Statutory Auditors
 
 M/s Deloitte Haskins & Sells, Chartered Accountants, the present
 statutory auditors retire at this meeting and are eligible for
 re-appointment. The Audit Committee and the Board recommend their
 re-appointment.
 
 Statutory Disclosures
 
 Directors Responsibility Statement
 
 Pursuant to the provisions of Section 217 (2AA) of the Companies Act,
 1956, the Directors, based on the representations received from the
 operating management, confirm that:
 
 1.  In the preparation of the annual accounts, the applicable
 accounting standards have been followed and there are no material
 departures;
 
 2.  They have, in the selection of the accounting policies, consulted
 the Statutory Auditors, 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 loss of the Company for the period;
 
 3.  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;
 
 4.  They have prepared the annual accounts on a going concern basis.
 Auditors Observations (pi. refer paragraph xi in the Annexure to the
 Auditors Report)
 
 In our opinion, and according to the information and explanations given
 to us, the accumulated losses of the Company, at the end of the
 financial year are more than fifty percent of its net worth. The
 Company has not incurred cash losses during the financial year under
 audit and in the immediately preceding financial year.
 
 Management Response:
 
 Attention is invited to the following note (No. 28 in Schedule 16
 forming part of the Balance Sheet and Profit ana Loss Account), which
 is self-explanatory: 28. The accumulated losses of the Company at the
 close of the year have exceeded its paid up capital and reserves.
 This, however, is not uncommon for telecommunication service providers
 in their initial years of commercial operations, due to high operation
 costs of heavy infrastructure and high capital requirement for building
 the network.  The Company is consistently making cash profits, and has
 been able to grow its subscriber base and network. The Company would be
 able to meet its funding requirements with the various funding options
 including debt. The Company, during the year, also paid Rs. 392.66
 crores as license fees for providing GSM services under the existing
 licenses and expects to roll-out the related services in due course
 after being allotted the required spectrum from DoT. The Company
 expects to take advantage of providing diversified products/services to
 its customers before the number portability regime is introduced apart
 from getting economies of operation by optimally using its
 infrastructure. The Company is therefore viewed as a going concern
 and the accounts nave accordingly been prepared under the going concern
 assumption.
 
 Fixed Deposits
 
 The Company has not accepted any deposits within the meaning of Section
 58A of the Companies Act, 1956 and the rules made thereunder.
 
 Balance Sheet Abstract and Companys General Business Profile
 
 Information pursuant to Department of Company Affairs notification
 dated May 15, 1995, relating to the Balance Sheet Abstract and
 Companys General Business Profile is given in the Annual Report for
 information of the shareholders.
 
 Conservation of Energy, Technology Absorption and Foreign Exchange
 Earnings and Outgo
 
 The disclosures as required under the Companies (Disclosure of
 Particulars in the Report of the Board of Directors) Rules, 1988 are
 given below:
 
 (i) Energy Conservation: Electricity is used for the working of the
 Companys telephone exchanges and other network infrastructure
 equipment. The Company regularly reviews power consumption patterns
 across its networks and implements requisite improvements/changes in
 the network or processes in order to optimize power consumption and
 thereby achieve cost savings.
 
 (ii) Technology Absorption: The Company has not imported any
 technology. The Company has not yet established separate R&D
 facilities.
 
 (iii) Foreign Exchange Earnings and Outgo:
  
                                                     (Rs. Gores)
 
 Particulars                          Current Year     Previous Year
 
 Earnings                                   Nil            NIL
 
 Outgo                                    43.89          28.57
 
 Capital Goods                           197.88         467.48
 
 Particulars of Employees and Stock Options
 
 The Company had issued stock options during the period 1999-2001. The
 information as required by the provisions of Section 217(2A) of the
 Companies Act, 1956, read with the Companies (Particulars of Employees)
 Rules, 1975 is annexed hereto as Annexure I and forms part of this
 report.
 
 Further, the information as required to be disclosed in the Annual
 Report pursuant to the Securities & Exchange Board of India (Employees
 Stock Option Schemes and Employees Stock Purchase Scheme) Guidelines,
 1999 is also annexed to this Directors Report as Annexure II and forms
 part of this report.
 
 A certificate from M/s Deloitte Haskins & Sells, Chartered Accountants,
 Statutory Auditors, with regard to the implementation of the Companys
 Employees Stock Option Plan, would be open for inspection in the
 ensuing Annual General Meeting.
 
 Corporate Governance
 
 A report on Corporate Governance appears after this report. A
 certificate from M/s. Deloitte Haskins & Sells DHS), Chartered
 Accountants, Statutory Auditors, with regard to compliance with the
 corporate governance code by the Company is annexed hereto as Annexure
 III and forms part of this report.
 
 The Company has fully complied with all mandatory requirements
 prescribed under Clause 49 of listing agreements with the Bombay Stock
 Exchange Limited (BSE) and the National Stock Exchange of India Limited
 (NSE). The Company has also implemented some of the non-mandatory
 provisions.
 
 Acknowledgements
 
 The Directors wish to place on record their sincere appreciation of the
 assistance and support extended by the employees, customers, financial
 institutions, banks, vendors, Government and others associated with the
 activities of the Company.
 
 
                           For and on behalf of the Board of Directors
 
 Mumbai,                                                  Ratan K.Tata
 
 Date: June 11, 2008                                          Chairman