1. Company background
TataTeleservices (Maharashtra) Limited (the Company), was
incorporated on March 13, 1995. The Company is licensed to provide
basic and cellular telecommunication services. The Company presently
holds two Unified Access (Basic and Cellular) Service Licenses, one for
Mumbai Service Area and another for Maharashtra and Goa and provides
telecommunication services using Code Division Multiple Access (CDMA)
technology, Global System for Mobile Communications (GSM) technology
under the aforesaid licenses. The Company also holds the National
Internet Service provider - Internet Telephony license. The Company
during the quarter ended June 30, 2010 had succeeded in winning the bid
for 3G spectrum in Maharashtra and Goa circle (excluding Mumbai) (Also
refer Note 22).
The Company is a subsidiary of Tata Sons Limited (the ultimate holding
company).
As at As at
March 31,2011 March 31,2010
Rs.in Crores Rs.in Crores
2. Estimated amount of
contracts remaining to
be executed on capital
account and not provided
for(net of advances) 108.75 186.78
3. a) Bank Guarantees 271.88 249.45
b) Letters of Credit - 22.43
c) Counter guarantees given
by the Company on
behalf of group company 39.00 200.00
d) Guarantees given by a
group company on behalf
of the Company - 80.00
4. Contingent liabilities:
(i) Claims against the company
not acknowledged as debt
Telecom Regulatory Matters*
(Refer notes below) 223.69 273.56
Others 146.50 104.80
* Amounts are net of provision for contingencies made aggregating to
Rs. 185.60 Crores (previous year Nil) (Also refer note 27)
Notes:
Contingent liabilities in respect of Telecom Regulatory Matters
include:
a) Bharat Sanchar Nigam Limited (BSNL) issued demand notices to pay
Access Deficit Charge (ADC) aggregating to Rs.161.27 Crores, including
interest. for the period November 14, 2004 upto February 2%. 2006,
the date after which ADC is payable on Net Adjusted Gross Revenue
Basis. The demands stated that ''fixed wireless'' services provided by
the Company under the brand name WALKY had mobility features and
should be treated as mobile services for the purpose of Interconnect
Usage Charges Regulations and ADC was payable on such calls. The
Company filed an appeal to the Hon''ble Telecom Dispute and Settlement
Appellate Tribunal (TDSAT) in this regard, wherein the TDSAT negated
the Company''s appeal! The Company further filed an appeal before the
Hon''ble Supreme Court (SC) who vide order dated April 30, 2008
confirmed that ADC was payable and since there were claims and
counter-claims between the Company and BSNL, the SC directed that
quantification of amounts payable to each other be made by TDSAT. The
Company had filed a review petition in SC which was rejected.
The Company filed a petition in TDSAT to determine / reconcile amounts
payable to each other and Hon''ble Telecom Dispute and Settlement
Appellate Tribunal (TDSAT) vide its order dated August 12, 2008 held
that BSNL and the Company should exchange relevant information and
reconcile the differences. However, on April 15, 2010, TDSAT confirmed
BSNL demands for period up to August 25, 2005 and has given BSNL
liberty to lodge its claim for a further period up to February 28,2006.
The Company filed an appeal before SC against the aforesaid TDSAT order
dated April 15, 2010. The SC vide its order dated July 23, 2010
admitted the appeal but no stay has been granted. The SC had asked for
details / break up of demands which have been filed. The Company has
also filed stay application in the SC.
Out of the aforesaid Rs.161.27 Crores, the Company. has, in earlier
years, already provided for amounts aggregating to Rs.28.14 Crores
pertaining to ADC for the period from August 26, 2005 upto February 28.
2006. The balance amounts aggregating to Rs. 133.13 Crores have been
disclosed as Contingent Liability under Telecom Regulatory Matters'' as
the Company is of the view that these demands include amounts relating
to ''wireline'' services and ADC for the period before August 26, 2005;
the actual date after which, as per the directions of the Department of
Telecom, services provided under the brand name WALKY are to be
considered as Wireless in Local Loop (Mobile) for the purposes of ADC.
The Company during the earlier year had made on account payment to BSNL
of Rs.75 Crores in relation to the above.
b) The Company had received a demand letter dated March 17, 2008 from
Department of Telecommunications (DoT) for Rs.8.38 Crore, being a
demand for spectrum charges for the period from April 1,2005 to February
29,2008.
This demand was subsequently revised to Rs. 184.69 Crores by DoT, vide
its demand letters dated July 3, 2008, for the period from October
1,1998 to June 3o! 2008 which was further increased to Rs.266.00
Crores vide letter dated February 28, 2009. The amount was again
revised to Rs.259.70 Crores vide letter dated November 25, 2009 for the
extended period till November 30, 2009.The Company had represented to
the Wireless Planning Commission C''WPC), various items of differences
mentioned in the demand orders, vide letter dated September 24, 2008.
Though the Company has now received a revised demand of Rs. 75.47
Crores from DoT on April 26, 2010 the reconciliation process with WPC
is in progress. Hon''ble TDSAT vide its order dated August 25,2010 has
held that the Company should be given credit for all payments made on
producing proof and no penalty should be levied and only simple
interest should be charged. The Company is hopeful of success in the
matter.
c) The definition of Adjusted Gross Revenue (AGR) does not specifically
provide for exemption for proceeds of sale of shares/securities and
deduction on account of bad debts in computation of Licence Fees (LF)
payable to the Government. The Hon''ble Telecom Disputes Settlement and
Appellate Tribunal (TDSAT) had vide its judgment dated August 30, 2007,
held that income from sale of securities is not related to licensed
activity and hence should not attract LF and that bad debts written
off, waivers and discounts are actual monies lost by service providers
and hence should be deducted from AGR. The DoT has filed an appeal in
Supreme Court (SC) against the a fore said TDSAT ruling. Accordingly, the
Company has considered Rs.154.36 Crores, being the LF on profit on sale
of investment and bad debts written off during the current year, as
contingent liability, pending disposal of the aforesaid appeal.
iv) The Company has imported certain capital equipment under Export
Promotion of Capital Goods Scheme of the Central Government at a
concessional rate of Customs Duty. The Company has undertaken export
obligation to the extent of USD 100.8 millions (Rs. 404.41 Crores) to
be fulfilled during a period of 8 years commencing from the January 29,
2003, failing which the Company will be liable to pay the differential
customs duty, together with interest and penalties, if imposed. Up-till
the end of the year, the Company has fulfilled the export obligation to
the extent of Rs.52.79 Crores (previous year Rs.52.79 Crores). The
Company has also requested the authorities for granting extension of
time for fulfilling the obligations in respect of certain licenses for
which the Company expects to receive the same in due course.
v) The Company in 2002 had filed a petition before Hon''ble TDSAT
claiming refund of Rs.50 Crores recovered by Department of
Telecommunications (DoT) in 1999 alleging failure to sign basic
services license agreement for Karnataka circle after accepting Letter
of Intent ( Lol). DoT during the proceedings before TDSAT claimed from
the Company Rs.303 Crores towards loss of (opportunity to earn)
license fee and Rs.351 Crores as interest till October 31, 2002. TDSAT
allowed refund of Rs.50 Crores to the Company with interest of 17% p.a.
and dismissed the counter-claim based on a law point (i.e.TDSAT had no
jurisdiction) and facts. DoT appealed to the Hon''ble Supreme Court
which without commenting on the merits of
the counter-claim confirmed that TDSAT had jurisdiction and remanded
the matter to TDSAT for fresh adjudication. DoT has filed with TDSAT a
counter-claim of Rs.2,015 Crores which includes Rs.303 Crores towards
loss of (opportunity to earn) license fee and interest of Rs.1,712
Crores calculated up to March 31, 2008. The matter has been argued on
merits and TDSAT has reserved its judgment on January 25, 2011. The
Company is hopeful of success in the matter.
Counter guarantees have been given by the Company in the ordinary
course of business and no liability is expected to accrue in this
respect.
As regards disputes and claims referred to above against the Company,
appropriate competent professional advice is available to the Company
based on which, favorable outcomes are anticipated and no liability is
expected to accrue to the Company.
5. In November 1999, the Company established the Employee Stock Option
Plan (ESOP) under which Equity Shares are reserved for issuance to
eligible employees of the Company. In terms of the plan, 1.20 Crores
warrants were issued to Hughes Tele.com (India) Limited Employees Stock
Option Trust, to be held by it on behalf of the Company for awarding
eligible employees as and when advised by the Compensation Committee
constituted for the purpose. Each allotted warrant carries with it a
right to purchase one Equity Share of the Company at a price of
Rs.10/- per share. Other than 2,40,000 fully vested warrants allotted
in an earlier year, all allotted warrants vest at the rate of 25% on
each successive anniversary of the grant date, until fully vested. The
period during which the vested warrants may be exercised expires after
10 years from the date of the vesting.
6. The Company is engaged in providing Telecommunication Services under
Unified Access License. These, in the context of Accounting Standard 17
on Segment reporting, are considered to constitute a single
reportable segment.
The agreements are executed for a period ranging from 6 months to 15
years with a renewable clause and in many cases also provide for
termination at will by either party giving a prior notice period
ranging between 30 to 90 days.
7. No provision for current income tax has been made in the accounts,
since the Company estimates that there will be no taxable profits for
the year. Deferred Tax charges / credits have not been recognized in
view of the tax holiday enjoyed by the Company and on considerations of
prudence as set out in AS 22 on Accounting for Taxes on Income.
8) Related Party disclosures (in terms of Accounting Standard -18)
ii) Details of all Related Parties and their relationships
A Ultimate Holding Company
Tata Sons Ltd.
B Subsidiary Company
21st Century Infra Tele Ltd. (till 20.05.2010)
C List of Fellow Subsidiaries
1 Tata Teleservices Ltd.
2 Tata Internet Services Ltd.
3 Tata Business Support Services Ltd.
4 Tata Consultancy Services Ltd.
5 Tata Housing Development Company Ltd.
6 Tata Realty & Infrastructure Ltd.
7 Tata AIG Life Insurance Company Ltd.
8 Tata AIG General Insurance Company Ltd.
9 Tata Sky Ltd.
10 CMC Ltd.
11 Tata Asset Management Ltd.
12 Tata Securities Ltd.
13 Infiniti Retail Ltd.
14 e-Nxt Financials Ltd.
15 Tata Consulting Engineers Ltd.
16 Tata Petrodyne Ltd.
17 Computational Research Laboratories Ltd.
18 Tcs E-Serve Ltd.
19 TC Travel And Services Ltd.
20 Tata Capital Ltd.
21 Tata Investment Corporation Ltd.
22 Ewart Investments Ltd.
23 Tata Trustee Company Private Ltd.
24 Tata Advanced Systems Ltd.
25 Viom Networks Ltd. (Formerly known as Wireless TT Info Services
Ltd.)
26 Drive India Enterprise Solutions Ltd.
27 21st Century Infra Tele Ltd. (w.e.f. 21.05.2010)
D Key Management Personnel (Managing Director!
1 Dr. Mukund Govind Rajan (till 20.05.2010)
2 Mr. Anil Kumar Sardana (till 31.01.2011)
3 Mr. N. Srinath (w.e.f. 01.02.2011)
Note:
a) 2010-11 figures include Rs.0.56 Crores paid during the year for
2009-10 on account of bonus /performance pay.
b) 2009-10 figures include Rs.0.50 Crores paid during the year for
2008-09 on account of bonus/ performance pay.
c) The above represents the remuneration of erstwhile Managing
Directors.
9. The Company, had identified certain Network Interface Units
(NIU''s), which had been disconnected and were not in use (including not
retrieved) and also had been fully depreciated in the books of account.
The management, having regard to the present condition of the said
NIUs, their future usability and the fact that these NIUs have been fully
depreciated, had decided to write-off the same. Accordingly during the
current year the said NIU''s aggregating Nil (Previous Year Rs.104.54
Crores) were written off and removed from the block of fixed assets.
10. The Company during the quarter ended June 30, 2010, succeeded in
winning the bid for 3G spectrum in Maharashtra circle (including Goa
and excluding Mumbai). The bid price paid towards the related license
fees aggregating to Rs.1,257.82 Crores have been capitalised under
License under Fixed Assets.
In accordance with the accounting policy followed in this regard, the
Company has commenced amortization of the aforesaid license fees, on
commencement of 3G operations and such fees will be amortised over the
remaining life of the license.
The borrowing costs attributable to the aforesaid aggregating Rs. 62.82
Crores (Previous year Rs.18.79 Crores towards GSM operations) have been
capitalized during the year in accordance with AS 16 on ''Borrowing
Costs''.
11. Information regarding the total outstanding dues of Micro
Enterprises and Small Enterprises in Schedule 11 is given to the extent
the same is available with the Company.
12. The Company in the previous year had entered in to a share
purchase agreement with Viom Networks Limited (formerly Wireless-TT
Info Services Limited ) for selling its stake in its wholly owned
subsidiary viz. 21st Century Infra Tele Limited. The Company has,
accordingly, accounted for profit (net of related expenses) on the
aforesaid sale aggregating to Rs.834.93 Crores during the year, on
completion of the necessary formalities.
13. The Central Government, vide notification dated March 31, 2009,
amended AS 11 on ''The Effect of Changes in Foreign Exchange Rates'',
whereby, companies have been given an option to account for exchange
differences arising on reporting of long-term foreign currency monetary
items (assets/liabilities) in so far as they relate to acquisition of a
depreciable capital asset, to be added/deducted from the cost of the
asset and for others to be accumulated in a separate reserve to be
amortized over the balance life of the asset/liability but not beyond
March 31, 2011. The aforesaid option is effective with retrospective
effect in respect of accounting periods commencing on or after December
7, 2006. Accordingly, the Company opted to exercise this option during
the year ending March 31, 2009 and had given the effect of the same in
the accounts of the said year.
During the current year, pursuant to the said option, the Company has
adjusted exchange loss aggregating to Rs. 6.81 Crores (Previous year
Rs.34.65 Crores (exchange gain))agains tthe carrying value of fixed
assets.
The amount (after the aforesaid adjustments) of Plant and Machinery as
at the year-end aggregates to Rs.2.80 Crores (credit) (Previous Year
Rs. 7.54 Crores (credit)) which has been adjusted by way of
depreciation on the grounds of materiality.
14. During the year, the Company re-estimated the balance useful life
of certain items of plant and machinery considering up-gradation of
equipment on account of enhancement of technology and the consequent
enhanced pace of planned replacement. As a result the depreciation
charge for the current year is higher by Rs. 184.81 Crores.
a. Figures pertaining to the previous year have been disclosed in
brackets.
b. Provision for contingencies are primarily towards the outstanding
claims / litigations against the Company relating to Department of
Telecommunication (DoT) and other parties.
15. 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, due to the high
operation costs and on account of the industry being inherently capital
intensive. However, the Company is consistently making operating cash
profits ove rthe past few years.
The subscriber base of the Company has further increased with the
launch of services using the GSM technology during the previous year.
The Company has also received sanctions from banks for additional
long-term funds for future expansion. Further, during the current year
the Company succeeded in winning the bid for 3G spectrum in Maharashtra
circle (including Goa and excluding Mumbai) and has also commenced 3G
services.
Accordingly, based on the aforesaid considerations, the Company is
confident of it''s ability to continue it''s business as a going concern
and the accounts have been prepared on that basis.
16. Figures of the previous year are regrouped and reclassified
wherever necessary to correspond to figures of the current year.
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