Tata Teleservices (Maharashtra)

1.  Company background
 
 Tata Teleservices (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.The Company has also been granted approval by Department of
 Telecommunications (DoT) for providing telecommunication services using
 Global System for Mobile Communications (GSM) technology under the
 aforesaid licenses. The Company has already been allotted trial
 Spectrum by DoT for Mumbai, Maharashtra and Goa Service Area. The
 Company also holds the National Internet Service provider - Internet
 Telephony license.
 
 The Company is a subsidiary of Tata Sons Limited (the ultimate holding
 company)
 
                                           As at             As at
                                    March 31,2009       March 31,2008
                                      Rs.lnCrores         Rs.lnCrores
 
 2. Estimated amount of contracts 
 remaining to be executed on capital
 account and not provided for 
 (net of advances)                       476.03              180.74
 
 3. Counter guarantees given by 
 the Company                             760.00              720.00
 
 4.  Contingent liabilities:
 
 (i) Claims against the company not acknowledged as debt
    Telecom Regulatory Matters           405.76              142.44
    (Refer notes below)
    Others                                97.50               83.33
 
 Notes:
 
 Contingent liabilities in respect of Telecom Regulatory Matters
 include:
 
 a) The Company had received an Order from the Hon. Supreme Court
 dismissing the Companys petition regarding Access Deficit Charge (ADC)
 demanded by Bharat Sanchar Nigam Limited (BSNL) in respect of fixed
 wireless services provided under the brand name WALKY. Demand
 notices have been received from BSNL, to pay ADC aggregating to Rs.
 108.49 Crores for the period 14th November 2004 upto 28th February,
 2006; the date after which ADC is payable on Net Adjusted Gross Revenue
 Basis.
 
 Out of the above, 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. 80.35 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 26th August, 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 has filed a
 review petition in this regard and on the said basis, 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.  The Company is awaiting the
 relevant information from BSNL.The Company is hopeful of success in the
 matter.
 
 The Company during the year has made on account payment to BSNL of
 Rs.50 Crores in relation to the above, which is in addition to Rs. 25
 Crores paid in earlier years.
 
 b) The Company had received a demand letter dated March 17, 2008 from
 DoT for Rs.8.38 Crore, being a demand for spectrum charges for the
 period from April 1,2005 to February 29,2008, which was disclosed as
 contingent liability as at March 31,2008.
 
 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 30,2008 which was further increased to Rs. 266.00 Crores
 vide letter dated February 28, 2009. The Company has represented to the
 Wireless Planning Commission (WPC) various items of differences
 mentioned in the demand orders, vide letter dated September 24,2008.
 Reconciliation of the differences is in progress with the WPC.The
 Company is expecting a revised order after the completion of the
 reconciliation and is hopeful of success in the matter.
 
 ii) Disputed Tax demands in Appeals before relevant authorities:
 
 Income Tax 0.08 0.08
 
 iii) 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) [net
 of USD 65.5 millions (Rs. 262.24 Crores) for which the company has
 applied for exemption] to be fulfilled during a period of 8 years
 commencing from the 29th January 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.  35.53 Crores
 (previous year Rs. 21.22 Crores)
 
 iv) The Company in 2002 had filed a petition before 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 Honble 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 upto March 31,2008. The TDSAT vide its order
 dated September 18,2008 held that since the counter claim filed by DoT
 is in the nature of a recovery suit appropriate court fee needs to be
 affixed. The matter has been adjourned for hearing on August
 12,2009.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 other disputes and claims 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.  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.
 
 6. 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.
 
 7.  The Company commenced provision of mobile services using CDMA
 technology in the year 2003. Currently, the Company provides fixed
 wireless telephony services using the erstwhile Time Division Multiple
 Access (TDMA) technology to certain selected Village Public Telephone
 (VPT) customers only. Since the erstwhile TDMA technology has become
 obsolete, the Company has during the previous year decided to dispose
 off the fixed assets pertaining to TDMA technology except for those
 being utilized to service the aforesaid VPT Customers, aggregating
 Rs.610.75 Crores (Net block Rs.4.64 Crores) {including those lying in
 capital inventory aggregated to Rs. 13.81 Crores (Net Block Nil)}.
 Accordingly the said assetswere retired from active use and
 transferred to Assets awaiting disposal, at an estimated realisable
 value of Rs. 2.30 Crores in the previous year, of which during the
 current year the Company has written off assets aggregating Rs.1.20
 Crores being not realizable.
 
 8.  The Company, during the year, has identified certain Network
 Interface Units (NIUs), which have been disconnected and are not in
 use (including not retrieved) and also have 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 N Ills have been fully depreciated, have decided to write-off the
 same. Accordingly the said NIUs aggregating Rs.368.58 C rores (cost)
 have been written off during year and removed from the block of fixed
 assets.
 
 9.  The Company during the previous year, has been granted approval by
 DoT for providing telecommunication services using GSM technology
 underthe terms of the existing Unified Access Services Licenses.The
 amounts paid towards the related license fees aggregating Rs.392.66
 Crores have been capitalised as intangible assets. The Company has
 already been allotted trial Spectrum by DpT for Mumbai Service Area,
 Maharashtra and Goa Service Area.
 
 In accordance with its accounting policy, the Company will commence
 amortization of the license fees paid, on commencement of GSM
 operations and will amortise such fees over the remaining life of the
 respective license.
 
 The borrowing costs attributable to the GSM operations aggregating
 Rs.45.63 Crores (Previous Year Rs.8.63 Crores) have been capitalized
 during the year in accordance with AS 16 on Borrowing Costs and
 included under Capital Work in Progress.
 
 10.  As per information available with the Company, none of the
 creditors has confirmed that they are registered under the Micro, Small
 and Medium enterprises Development Act, 2006.The disclosure regarding
 dues to such creditors is given accordingly in Schedule 11.
 
 11.  During the year, the Company has acquired a wholly owned
 subsidiary viz. 21st Century Infra Tele Limited (21st Century).
 
 Consequent to the Shareholders approval on transfer of Passive Tower
 Infrastructure Business (PI Business), the Company has entered into
 a Business Transfer Agreement (BTA) on September 30, 2008 to transfer
 the same on a going concern basis to 21st Century. The transfer
 includes transfer of assets (fixed and current), liabilities (specific)
 
 12.  With effect from April 1,2008, the Company has decided to
 recognise the upfront (Universal Service Obligation) USO subsidy
 granted by Department of Telecommunication over the remaining validity
 period of the scheme/agreement as against the method of recognizing the
 said revenue over a period of 5 years from the date of receipt from
 DoT.  Accordingly, Other Income for the year is higher by Rs.17.95
 Crores, and Loss after tax is lower by the like amount.
 
 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, 2007. The Company has exercised this option and has given the
 following effect in the accounts for the aforesaid:
 
 a) Exchange gain (net of depreciation) relating to year ended March
 31,2008 adjusted in debit balance of Profit and Loss account and Plant
 and Machinery aggregating to Rs. 18.76 Crores.
 
 b) Exchange loss relating to year ended March 31,2009 adjusted against
 carrying value of fixed assets aggregating to Rs. 49.45 Crores.
 
 Due to the aforesaid option exercised by the Company, the depreciation
 for the year is higher by Rs. 0.88 Crores and the loss for the year is
 lower by Rs. 48.57 Crores and the amount (after the aforesaid
 adjustments) of Plant and Machinery remaining to be amortised as at
 March 31,2009 aggregates to Rs. 29.81 Crores.
 
 14.  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 is in advanced stages
 of financial closure for proposed GSM and other Network Roll out and
 would be able to meet its further funding requirements. The Company in
 the previous year had also paid Rs.392.66 Crores as license fees for
 providing services using GSM technology under the existing licenses and
 expects to roll-out the related services during the next financial
 year. Based on the foregoing considerations, the Company is confident
 of its ability to continue in business as a going concern and the
 accounts have accordingly been prepared on this basis.
 
 15.  Figures of the year are regrouped and reclassified wherever
 necessary to correspond to figures of the current year.