Form 20-F

20-F 1 d240919d20f.htm FORM 20-F Form 20-F

As filed with the Securities and Exchange Commission on October 14, 2011

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

(Mark One)

¨	Registration statement pursuant to section 12(b) or (g) of the Securities Exchange Act of 1934

x	Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended March 31, 2011

¨	Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Transition period from to

¨	Shell Company Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number 001-15118

TATA COMMUNICATIONS LIMITED

(FORMERLY KNOWN AS VIDESH SANCHAR NIGAM LIMITED)

(Exact name of Registrant as specified in its charter)

Not Applicable

(Translation of Registrant’s name into English)

The Republic of India

(Jurisdiction of incorporation or organization)

Sanjay Baweja

Tel No: +91-22-6657 8765

Facsimile: +91-22-6725 9029

Address: 6th floor, B Tower, Plots C21& C36, ‘G’ Block,

Bandra Kurla Complex, Mumbai-400 098, INDIA

(Name, telephone, facsimile number and address of company contact person)

VSB, Mahatma Gandhi Road, Fort, Mumbai—400001, INDIA

(Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act:


Title of Each Class		Name of Each Exchange on Which Registered
American Depositary Shares*		New York Stock Exchange
Equity Shares, par value 10 per share**

Securities registered pursuant to Section 12(g) of the Act:

None

(Title of class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

(Title of class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the Annual Report: 285,000,000 Equity Shares

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ¨ No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ¨ Accelerated filer x Non-accelerated filer ¨

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing

US GAAP x

International Financial Reporting Standards as issued

by the International Accounting Standards Board ¨

Other ¨

Indicate by check mark which financial statement item the registrant has elected to follow. Item 17 ¨ Item 18 x

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

*	American Depositary Shares evidenced by American Depositary Receipts. Each American Depositary Share represents two Shares.

**	Not for trading, but only in connection with the listing of American Depositary Shares pursuant to the requirements of the New York Stock Exchange.

TABLE OF CONTENTS


		Page
CURRENCY OF PRESENTATION AND CERTAIN DEFINED TERMS			1
EXCHANGE RATES			1
FORWARD-LOOKING STATEMENTS			1
PART I
ITEM 1.	IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS		2
ITEM 2.	OFFER STATISTICS AND EXPECTED TIMETABLE		2
ITEM 3.	KEY INFORMATION		2
ITEM 3	RISK FACTORS		5
ITEM 4.	INFORMATION ON THE COMPANY		16
ITEM 4A.	UNRESOLVED STAFF COMMENTS		33
ITEM 5.	OPERATING AND FINANCIAL REVIEW AND PROSPECTS		33
ITEM 6.	DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES		61
ITEM 7.	MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS		73
ITEM 8.	FINANCIAL INFORMATION		74
ITEM 9.	THE OFFER AND LISTING		79
ITEM 10.	ADDITIONAL INFORMATION		80
ITEM 11.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		100
ITEM 12.	DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES		101
PART II
ITEM 13.	DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES		102
ITEM 14.	MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS		102
ITEM 15.	CONTROLS AND PROCEDURES		102
ITEM 16A.	AUDIT COMMITTEE FINANCIAL EXPERT		103
ITEM 16B.	CODE OF ETHICS		103
ITEM 16C.	PRINCIPAL ACCOUNTANT FEES AND SERVICES		104
ITEM 16D.	EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES		105
ITEM 16E.	PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS		105
ITEM 16F.	CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT		105
ITEM 16G.	CORPORATE GOVERNANCE		105
PART III
ITEM 17.	FINANCIAL STATEMENTS		108
ITEM 18.	FINANCIAL STATEMENTS		108
ITEM 19.	EXHIBITS		109
SIGNATURES			109
GLOSSARY			110

CURRENCY OF PRESENTATION AND CERTAIN DEFINED TERMS

In this Form 20-F, references to “U.S.” or the “United States” are to the United States of America, its territories and its possessions. References to “India” are to the Republic of India. References to “$” or “Dollars” or “US Dollars” are to the legal currency of the United States and references to “ LOGO ” or “Rupees” or “Indian Rupees” are to the legal currency of India.

Our financial statements are presented in Indian Rupees and are prepared in accordance with United States generally accepted accounting principles or US GAAP. In this Form 20-F, any discrepancies in any table between totals and the sums of the amounts listed are due to rounding. For the convenience of the reader, this Form 20-F contains translations of certain Indian Rupee amounts into US Dollars, which should not be construed as a representation that such Indian Rupee or US Dollar amounts referred to herein could have been, or could be, converted to US Dollars or Indian Rupees, as the case may be, at any particular rate, the rates stated, or at all. References to “Indian GAAP” are to Indian generally accepted accounting principles. References to a particular “fiscal” year are to the Company’s fiscal year ended March 31 of such year. References to years not specified as being fiscal years are to calendar years.

Unless the context otherwise requires, references herein to “we,” “us,” “our,” “the Company”, “our Company” and “Tata Communications” are to Tata Communications Limited and its subsidiaries, unless it is clear from the context or expressly stated that these references are only to Tata Communications Limited.

Teleglobe and the Teleglobe logos are registered trademarks of Tata Communications (Bermuda) Limited in the United States and/or other countries. All rights are reserved. Tata and Tata Communications are registered trademarks of Tata Sons Limited used under license by Tata Communications Limited and its subsidiaries worldwide. This Form 20-F refers to trade names and trademarks of other companies. The mention of these trade names and trademarks in this Form 20-F is made with due recognition of the rights of these companies and without any intent to misappropriate those names or marks. All other trade names and trademarks appearing in this Form 20-F are the property of their respective owners.

EXCHANGE RATES

All conversion from Indian rupees to US Dollars are based on the noon buying rate in New York City for cable transfers in foreign currencies as certified by the Federal Reserve Bank of New York for custom purposes which was LOGO 44.54 per $1.00 on March 31, 2011. Unless otherwise specified herein, financial information has been converted into US Dollars at this rate. For more information regarding rates of exchange between Indian Rupees and US Dollars, see “Item 3. Key Information—Exchange Rates.”

FORWARD-LOOKING STATEMENTS

(CAUTIONARY STATEMENTS UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995)

This Form 20-F contains “forward-looking statements” (as the phrase is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended) and information that is based on our management’s current expectations, assumptions, estimates and projections about our Company and our industry and information currently available to us. These forward-looking statements are identified by their use of terms and phrases such as “anticipate”, “believe”, “could”, “estimate”, “expect”, “intend”, “may”, “plan”, “objectives”, “outlook”, “probably”, “project”, “will”, “seek”, “target” and similar terms and phrases and reflect our current views with respect to future events and are subject to certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, our actual results may vary materially from those described in this document.

These forward-looking statements include, among others, statements concerning:

•

our communications and information services business, its advantages and our strategy for continuing to pursue our business;

•

anticipated development and the launch of new services in our business;

•

anticipated dates on which we will begin providing certain services or reach specific milestones in the development and implementation of our business strategy;

•

growth and recovery of the communications and information services industry;

•

expectations as to our future revenue, margins, expenses and capital requirements; and

•

other statements of expectations, beliefs, future plans and strategies, anticipated developments and other matters that are not historical facts.

These forward-looking statements are subject to risks and uncertainties, including financial, regulatory, environmental, industry growth and trend projections, that could cause actual events or results to differ materially from those expressed or implied by the statements. The most important factors that could prevent us from achieving our stated goals include, but are not limited to, our failure to:

•

increase the volume of traffic on our network;

•

develop new products and services that meet customer demands and generate acceptable margins;

•

successfully complete commercial testing of new technology and information systems to support new products and services, including voice and data transmission services;

•

stabilize or reduce the rate of price compression on certain of our communications services;

•

integrate strategic acquisitions;

•

attract and retain qualified management and other personnel; and

•

meet all of the terms and conditions of our debt obligations and other contractual obligations.

We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. Further disclosures that we make on related subjects in our additional filings with the Securities and Exchange Commission (“SEC”) should be considered. For further information regarding the risks and uncertainties that may affect our future results, please review the information set forth below under “Item 3. Key Information—Risk Factors.”

Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s perception and analysis only as of the date of this Form 20-F. In addition, readers should carefully review the other information in this Form 20-F and in the Company’s periodic reports and other documents filed with the SEC from time to time.

PART I

ITEM 1.

IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2.

OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3.

KEY INFORMATION

Selected Financial Data

The following table sets forth our selected consolidated financial data. The consolidated financial data has been derived from, and should be read in conjunction with, our consolidated financial statements prepared in accordance with US GAAP, along with the notes thereto. Our selected income statement data for the fiscal years ended March 31, 2009, 2010 and 2011 and the selected balance sheet data as of March 31, 2010 and 2011 are derived from financial statements audited by Deloitte Haskins & Sells, an independent registered public accounting firm included in this Form 20-F.

Our selected income statement data for the fiscal years ended March 31, 2007 and 2008 and our selected balance sheet data as of March 31, 2007, 2008 and 2009 are derived from our audited financial statements not included in this annual report. Our selected financial data and our financial statements are presented in Indian rupees. Financial data as of and for the fiscal year ended March 31, 2011 has been translated into US Dollars for your convenience.

Fiscal Year ended March 31,


	2007			2008			2009			2010			2011			2011
Income Statement Data	(Millions of ) (1)															(Millions of US $)
Operating revenue
Revenues from telecommunication services		85,977			82,331			97,295			106,080			113,840			2,556
Cost of revenues:
Network and transmission costs		51,445			46,717			51,201			61,452			67,213			1,509
License fees		1,087			848			863			794			664			15

Total cost of revenues		52,532			47,565			52,064			62,246			67,877			1,524
Other operating costs:
Depreciation and amortization		6,966			7,358			10,180			14,074			13,980			314
Other operating costs		23,037			27,200			30,394			31,323			32,347			726

Operating income/(loss)		3,442			208			4,657			(1,563	)		(364	)		(8	)
Non-operating income/(expense), net:
Gain on sale of investments		17			145			4,289			347			138			3
Interest income from income tax refunds		63			167			—			2,183			40			1
Interest income from banks and others		63			100			491			673			762			17
Interest expense		(1,380	)		(1,469	)		(2,732	)		(4,188	)		(4,088	)		(92	)
Other non-operating income, net		2,317			1,767			971			1,165			1,831			41

Total non-operating income/(expense), net		1,080			710			3,019			180			(1,317	)		(30	)

Income / (loss) before income tax		4,522			918			7,676			(1,383	)		(1,681	)		(38	)
Income tax (expense) / benefit		(2,807	)		(1,280	)		(2,430	)		969			(765	)		(17	)
Dividend tax		(180	)		(218	)		(218	)		(218	)		—			—
Equity in net loss of equity method investees		(96	)		(393	)		(1,120	)		(3,192	)		(5,636	)		(127	)

Net Income/(loss)		1,439			(973	)		3,908			(3,824	)		(8,082	)		(182	)
Net income attributable to non-controlling interest		—			(1	)		(22	)		(12	)		(13	)		—

Net income / (loss) attributable to Tata Communications Limited		1,439			(974	)		3,886			(3,836	)		(8,095	)		(182	)
Basic earnings/(loss) per equity share		5.05			(3.42	)		13.64			(13.46	)		(28.40	)	US$	(0.64	)
Weighted average number of shares outstanding(2)		285			285			285			285			285			285
Basic earnings/(loss) per ADS (where each ADS represents two shares)		10.10			(6.84	)		27.28			(26.92	)		(56.80	)	US$	(1.28	)
Dividends per share		4.50			4.50			4.50			4.50			—			—
Other financial data
Net cash provided by operating activities		6,192			10,401			14,724			14,413			11,678			262
Net cash used in investing activities		(12,074	)		(16,674	)		(35,116	)		(21,604	)		(15,024	)		(337	)
Dividends		(1,283	)		(1,283	)		(1,283	)		(1,283	)		—			—
Net cash (used in)/provided by financing activities		3,806			6,738			22,548			4,186			7,847			176

(1)	Except per share data.

(2)	In millions.

As at March 31,


Balance Sheet Data	2007		2008		2009		2010		2011		2011
Balance Sheet Data	(Millions of )										(Millions of US $)
Total assets		119,522		136,323		192,333		186,758		183,743		4,126
Total debt		24,082		30,420		60,229		61,596		68,827		1,545
Accounts payable		18,152		22,245		34,063		30,123		24,758		556
Accrued expenses and other liabilities		24,980		32,841		45,524		47,720		50,979		1,145
Total liabilities		67,214		85,506		139,816		139,439		144,564		3,246
Total shareholders’ equity of the Company		52,308		50,785		52,467		47,261		39,111		878
Total liabilities and shareholders’ equity		119,522		136,323		192,333		186,758		183,743		4,126

Exchange Rates

Fluctuations in the exchange rate between the Indian Rupee and the US Dollar will affect the US Dollar equivalent of the Indian Rupee price of the Company’s equity shares (“Shares”) on the Indian stock exchanges and, as a result, will likely affect the market price of the Company’s American Depositary Shares (“ADS”) that are listed on the New York Stock Exchange, and vice versa. Such fluctuations will also affect the US Dollar conversion by the Depository of any cash dividends paid in Indian Rupees on the Shares represented by the ADS.

The following table sets forth, for the fiscal years indicated, information concerning the number of Indian Rupees for which one US Dollar could be exchanged based on the foreign exchange rates certified by the Federal Reserve Bank of New York for customs purposes. The column titled “Average” in the table below is the average of the certified foreign exchange rates on the last business day of each month during the year.


Fiscal Year Ended March 31,	Period
Fiscal Year Ended March 31,	End		Average		High		Low
	( )
2011		44.54		45.46		47.49		43.90
2010		44.95		47.18		50.48		44.94
2009		50.87		46.32		51.96		39.73
2008		40.02		40.00		43.05		38.48
2007		43.10		45.06		46.83		42.78

The following table sets forth the high and low exchange rates for the previous six months and is based on the foreign exchange rates certified by Federal Reserve Bank of New York on each business day during the period:


Month	High		Low
	( )
April 2011		44.51		44.00
May 2011		45.33		44.27
June 2011		45.00		44.59
July 2011		44.62		44.03
August 2011		46.15		44.06
September 2011		49.47		45.66

Capitalization and Indebtedness

Not applicable.

Reasons for the Offer and Use of Proceeds

Not applicable.

RISK FACTORS

In addition to the other information set forth in this document, including the matters contained under the caption “Forward-Looking Statements” you should carefully read the matters set forth below. The Company believes that each of these matters could materially affect our business. We recognize that most of these factors are beyond our ability to control, and therefore, also to predict an outcome.

You should carefully consider the following risk factors as well as the other information contained in this report in evaluating us and our business.

Reductions in prices for communications services in India and worldwide have had and are expected to continue to have an adverse effect on our results of operations and financial condition.

Telecommunications tariffs in India have declined significantly in recent years as a result of increased competition. Average international call tariffs have declined from approximately LOGO 48 (US$1.08) per minute in 2002 to approximately LOGO 5 (US$0.11) per minute in 2010. The pricing war among service providers in India was carried over to the international calling market with carriers dropping call prices to international markets to as low as LOGO 1 (US$0.02) per minute in 2011. Market pricing for international long distance telecommunications services continues to see annual declines between 5% and 10%. We expect that the prices for our communications services in India and worldwide will continue to decrease:

•

as we and our competitors increase transmission capacity on existing and new networks;

•

as our traffic volumes increase because many of our customer agreements provide for volume-based pricing or contain other provisions for decreases in prices;

•

as a result of technological advances; and

•

as a result of synergies realized through strategic acquisitions by us and our competitors.

Even though the decline in tariffs has resulted in traffic volume growth, they have, and are expected to continue to, materially and adversely affect our revenues. Revenues from our international long distance business and related products (which constituted 53.83% and 53.86% of our total revenue in fiscal 2011 and fiscal 2010, respectively) increased to LOGO 61,282 million (US$1,376 million) in fiscal 2011 from LOGO 57,131 million in fiscal 2010.

Intensifying competition in the Indian telecommunications sector may continue to adversely affect our business.

We have faced a number of new competitors to our international long distance (“ILD”) business, particularly since the Government of India (“GoI”) relaxed the licensing conditions and reduced the entry fees for ILD and national long distance (“NLD”) services in January 2006 (from LOGO 250 million and LOGO 1 billion, respectively, to LOGO 25 million and LOGO 25 million, respectively).

There are also an increasing number of players offering various forms of data products, a business in which we have historically been a market leader.

As a result of a recall of the Carrier Access Code(CAC) and Carrier Pre-selection(CPS) implementation in India by the Telecom Regulatory Authority of India (TRAI), many of our end customers do not have the right to choose to use our services, even if we offer the most competitive rates and best quality.

Until 2002, we had a monopoly on the provision of ILD services, and, until 2004, we were the exclusive provider of ILD services for Bharat Sanchar Nigam Limited (“BSNL”) and Mahanagar Telephone Nigam Limited (“MTNL”), but since then we have had to compete for business from the access providers in the open market. Currently, access providers (including competitors such as BSNL, MTNL, Bharti, Vodafone and Reliance), which own or control the access telephone networks in India (through which all international calls that we carry that either originate or terminate in India must pass) may choose not to use our ILD or NLD services.

A customer choice regime that was expected to be completed by December 2003 was not implemented due to technical and other reasons. In an order in 2009, the TRAI recalled the directive requiring all service providers to implement CAC/CPS; instead the TRAI recommended the use of calling cards as the customer choice mechanism, which the DoT has accepted. Now long distance operators can sell directly to end-customers calling cards for domestic and ILD services. However, there is still uncertainty around the interconnection terms and conditions. In February 2011, TRAI said that it would come out with new interconnection usage charges payable by one operator to another.

We must continue to increase the volume of voice, internet, data and video transmissions on our network both in India and worldwide in order to realize the anticipated cash flow, operating efficiencies and cost benefits of our network, particularly since certain elements of our costs (such as repair and maintenance costs) are fixed.

Illegal international telephony operators have adversely affected our call volumes.

Illegal operators in India offer cheaper services since they do not pay license fees, taxes or Interconnection Usage Charges (“IUC”) or any other regulatory fees. These illegal operators have captured a part of the incoming ILD traffic into India.

Telecommunications carriers that we do business with could suffer from decreasing margins and financial distress, which may negatively impact our business.

Several telecommunications carriers that we do business with, have in the recent past, suffered from reduced profit margins and other significant financial pressures. Some of these companies have been acquired and are undergoing restructurings of their businesses. There is no assurance that we will continue to derive business from these carriers. Further, if any of the major carriers that we do business with encounters financial difficulties or files for bankruptcy, we may be unable to recover amounts owed to us.

Our mobile global roaming business may be adversely affected by changing technologies.

Our wireless mobile global roaming business provides roaming services for Global Systems for Mobile (“GSM”), Integrated Dispatch Enhanced Network (“iDEN”), Universal Mobile Telecommunications System (“UMTS”, “3G”) and Enhanced Specialized Mobile Radio (“ESMR”) networks around the world. With increasing pressure on roaming margins, regulatory caps on inter-operator tariffs (IOTs) in some geographies and increased competition, we expect strong price pressure in our international signaling transport and conversion businesses. Though this price erosion will be partially offset by the continued volume growth in emerging markets, a shift towards more sophisticated signaling and roaming outsourcing solutions targeted at Tier-1 mobile operators and groups will be an imperative to sustain revenues and margins. We are also engaging new segments like hub providers and Application-to-Person (A2P) service providers as both customers and channel partners to drive additional revenue growth.

The advent of next generation Long Term Evolution (LTE) standards also presents new opportunities for signaling and roaming connectivity and interoperability. We have already embarked on network modernization to collaborate with early-adopters on LTE/DIAMETER signaling interconnectivity and service enablement.

Our international operations and investments expose us to risks that could materially and adversely affect our business.

We have operations and investments outside of India and the United States, as well as rights to undersea cable capacity extending to other countries that expose us to risks inherent in international operations. These include:

•

general economic, social and political conditions;

•

difficulty in enforcing agreements and collecting receivables through certain foreign legal systems;

•

tax rates in some foreign countries exceeding those in India and the U.S.;

•

fluctuations in foreign currency exchange rates;

•

withholding requirements or the imposition of tariffs, exchange controls or other restrictions on foreign earnings;

•

difficulties and costs of compliance with foreign laws and regulations that impose restrictions on our investments and operations, and penalties for noncompliance, including loss of licenses and monetary fines;

•

difficulties in obtaining licenses or interconnection arrangements on acceptable terms, if at all; and

•

changes in Indian and U.S. laws and regulations relating to foreign trade and investment.

Failure to complete development, testing and the introduction of new services, including managed services, could affect our ability to compete in the industry.

We continuously develop, test and introduce new communications services so that we can compete for new customers and in new segments of the communications business. Sometimes the introduction of new services requires the successful upgrade or development of new technology, which may be dependent on the conclusion of contract negotiations with vendors and vendors meeting their obligations in a timely manner. In addition, our new service offerings may not be widely accepted by our customers. If we are not able to successfully complete the development and introduction of new services, including new managed services, in a timely manner, our business could be materially and adversely affected.

Our technical infrastructure is vulnerable to damage, interruptions or failures which may result in reduced traffic, reduced revenues and harm to our reputation.

Our technical infrastructure is vulnerable to damage or interruptions caused by earthquakes, floods, storms, fires, power outages, war, riots, intentional misdeeds and other similar events. In particular, a major part of our international traffic is routed through undersea cable systems as well as through cable systems between different countries. These cables are prone to damage, including cable cuts. Any serious damage to major cables or simultaneous multiple cable failures could seriously disrupt traffic, which might lead to losses in revenue and adversely affect our reputation.

In addition, natural information technology system failures (hardware or software), human error or computer viruses may affect the quality of our services and cause temporary service interruptions. More rarely, software problems are hidden in vendors equipment, undetectable through regular commissioning testing, but appear when specific traffic loading conditions are reached on the network which can severely impact several pieces of equipment simultaneously. These types of events could result in customer dissatisfaction and reduced traffic and revenues.

Our growth may depend upon our successful integration of acquired businesses.

We have made significant acquisitions in recent years and will continue to explore the possibility of future acquisitions as our business needs require. The integration of acquired businesses involves a number of risks, including:

•

demands on management related to the significant increase in size after the acquisition;

•

the diversion of management’s attention from the management of daily operations to the integration of operations;

•

higher integration costs than anticipated;

•

failure to achieve expected synergies and costs savings;

•

regulatory restrictions imposing a constraint on optimal designs for integration of Operations Support Systems—Business Support Systems (“OSS-BSS Systems”);

•

difficulties in the assimilation of different cultures and practices, as well as in the assimilation and retention of broad and geographically dispersed personnel and operations; and

•

difficulties in the integration of departments, systems (including accounting systems) technologies, books and records and procedures, as well as in maintaining uniform standards, controls (including internal control over financial reporting), procedures and policies.

Our profitability may be adversely affected if we become the victim of fraud or theft of services.

The industry in which we operate has incurred losses in the last several years due to fraud. Although we have implemented various measures in order to control losses relating to fraudulent practices, we may not succeed in effectively controlling fraud when operating in the international or domestic Indian telecommunications markets.

Our business may be adversely affected if we cannot fulfill our commitments under significant contracts.

We have entered into a number of significant contracts with certain of our Global Voice Solutions and Global Data and Management Services customers. Failure to meet our commitments under these contracts could result in financial losses and damage our reputation. Our five largest customers collectively accounted for 18% of our revenues in fiscal 2011 and if, due to any reason, we lose any of our major customers or they terminate the agreement entered into with our Company, it could negatively impact our revenues as well as our profitability and cash generation ability.

Our profitability may be adversely affected if certain revenue share disputes are decided against our Company.

We are required to pay a certain percentage of our adjusted gross revenue (“AGR”) to the telecom licensor in India under the terms of our license. We are involved with the licensor in a dispute resolution process under Indian telecom regulations about the definition of AGR. If the matters in dispute are decided against us, we will be required to pay a substantially higher amount that we presently do under the license. See “Item 4-License Fees and Tariffs”.

If certain tax claims made by the Indian tax authorities against us are upheld, our financial condition would be adversely impacted.

Over past fiscal years, the Company has made certain tax holiday and expense claims based on our understanding of the tax laws as reinforced by legal precedent and legal advice received from external tax counsel. The Indian Tax Authority has not accepted our claims and in a few instances has levied penalties against the Company. We have challenged the position taken by the Indian Tax Authority, which are at various stages of adjudication. If all of these disputes are decided against us, it could have an adverse financial implication of LOGO 27,083 million. For significant disputes see “Item 8-Legal Proceedings”.

We may not receive additional compensation from the GoI for the early termination of our monopoly on international telephony services.

On April 1, 2002, the GoI allowed private operators to start offering ILD services, thereby terminating our monopoly on offering such services two years ahead of schedule. The GoI compensated us with a package of benefits. The GoI had given an assurance prior to the termination of our monopoly that it would consider additional compensation if it found this necessary following a detailed review. However, prior to the termination of our monopoly, the GoI announced that it viewed the package of benefits that it gave to us as the full and final settlement of all claims arising out of the early termination of our ILD monopoly. We have been pursuing the GoI to consider providing us with additional compensation and in 2005 the Company filed a suit for additional compensation in the Hon’ble Bombay High Court. On July 7, 2010, the Hon’ble Bombay High Court ruled that it did not have jurisdiction to entertain this suit in view of the provisions of the Telecom Regulatory Authority of India Act, 1997. The Company filed an appeal in the Hon’ble Bombay High Court in October 2010. There can be no assurance that our claim will be successful or that we will receive any additional compensation from the GoI, or if we do receive compensation, as to the amount, nature or timing of such compensation.

We are subject to extensive regulation and supervision by the GoI, which could adversely affect the operation of our business and prevent us from entering into transactions that are in the best interests of our shareholders.

We must obtain telecommunications licenses from the Department of Telecommunications (“DoT”) to provide some of our services. The DoT retains the right to modify the terms and conditions of our licenses at any time if in its opinion it is necessary or expedient to do so in the interest of the general public or for the proper operation of the telecommunication sector. A change in certain significant terms of any of the licenses, such as their duration, the range of services permitted or the scope of exclusivity, if any, could have a material adverse effect on our business and prospects. The DoT is empowered to revoke a license granted by it for any breach of the license conditions.

In May 2011, the DoT notified the Company that it amended one of the conditions to the Company’s license to make it the responsibility of the Company to maintain security of networks and equipment. If the Company breached this newly amended condition, it could be liable for a maximum penalty of LOGO 500 million, and could be subject to criminal charges. Preparing for compliance with this amended condition could result in delays in creating capacity in our networks and in providing of services to customers, which could adversely affect the revenues and profitability of the Company.

We must also annually obtain various radio spectrum operating licenses from the Wireless Planning and Co-ordination Wing of the Ministry of Communications (“WPC”). The non-renewal or modification of these licenses, or punitive action by the GoI for continuing these services without renewal of the licenses, could adversely affect us.

In addition, approval of the TRAI is required for all our new pricing initiatives and product launches.

Any disputes between us and the GoI regarding the terms of our telecommunications licenses, as well as any dispute between us and the other service providers in India, is required to be adjudicated by the Telecom Disputes Settlement Appellate Tribunal (“TDSAT”). Failure to follow TDSAT orders may lead to the imposition of fines and other punitive actions.

Regulatory decisions and changes in the regulatory environment in the jurisdictions in which we do business could adversely affect us.

We have interests in a large number of geographic areas throughout the world and must comply with an extensive range of requirements that are meant to regulate and supervise the licensing, construction and operation of telecommunications networks and services. These requirements are likely to increase with our overseas expansion. In particular, there are agencies which regulate and supervise the allocation of frequency spectrum and which monitor and enforce regulation and competition laws that apply to the telecommunications industry. We cannot provide any assurances that governments in the countries in which we intend to operate will issue or renew licenses we need on acceptable terms or at all.

Furthermore, some of the jurisdictions where we provide services have little, if any, written regulations governing our operations. The written regulations and guidelines that do exist in a jurisdiction may not specifically address our operations. It is possible that one or more governmental agencies will disagree with our interpretation of existing laws or regulations and assert that our operations are not in compliance with those laws or regulations. In that event, it is possible that the governmental agency might initiate an enforcement action or impose restrictions on our operations which could have a material adverse effect on our operations.

We have incurred debt, which to a certain extent could restrict our growth, place us at a competitive disadvantage and adversely affect our cash flow and financial condition.

We incurred additional debt in fiscal 2011 primarily to finance our capital expenditures and investments. As of March 31, 2011, the outstanding principal amount of our indebtedness was LOGO 68,827 million (US$1,545 million) as opposed to LOGO 61,596 million as on March 31, 2010. We may also obtain additional long-term debt and working capital lines of credit to meet future financing needs.

The consequences on our financial condition and results of operations that could result from our debt include:

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a limitation on our ability to obtain additional substantial debt financing;

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accelerated maturity of some or all of our outstanding indebtedness in the event we are unable to meet the financial covenants contained in our debt agreements;

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the allocation of a portion of our cash flow from operations to service our debt, thus reducing the amount of our cash flow available for other purposes, such as capital expenditures, investments or dividends;

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limitations on our ability to exploit lucrative large opportunities that arise in the market and are important for our growth and;

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competitive disadvantage if our competitors do not have as much debt as us.

A termination of relationships with key suppliers could cause delays and costs.

We are dependent on key third-party suppliers for fiber, computers, software, optronics, transmission electronics and related components of our network. We are also dependent on key suppliers to repair and maintain our extensive undersea and other cable assets. If any of these relationships is terminated or a key supplier fails to provide reliable services or equipment, we might be unable to obtain suitable alternative arrangements quickly and consequently could experience significant delays and additional costs.

Similarly, vendors bringing equipment to end-of-life status and cutting support on such equipment without proper notification can cause risks to our network. Changes in a large network can take more time than the notification time given. The same can be caused by vendors going out of business or being bought with the new owner not supporting all types of equipment from the acquired company.

If our vendors fail to obtain the approval of the Telecom Engineering Center (“TEC”) for the switching equipment that they provide to us, the growth of our interconnection capacities with domestic voice carriers may be limited.

In India, we are required to install “TEC” type approved switching equipment in the network for interconnection with domestic voice operators. Vendors are required to obtain approval from the TEC of the switching equipment and then regularly renew. Failure to renew the approval by a vendor in a timely manner could restrict us from further augmenting the interconnection capacities with domestic voice carriers. This could lead to reduced service quality to our customers, customer dissatisfaction and hence reduced traffic and revenues.

Our dependence on third party Passive Infrastructure Providers for the collocation of wireless equipment might impact service levels and cause additional costs.

We are dependent on third party passive infrastructure providers for collocating our wireless equipment. Any inability of the passive infrastructure providers to comply with service level agreements (SLAs) that provide for site access and uptime might adversely affect our service levels to our customers. We might be unable to obtain suitable alternative arrangements quickly and consequently could experience significant delays and additional costs.

We have made, and in the future might make, substantial capital investments in new telecommunications projects which may expose us to liquidity and execution risks.

We have made substantial additional investments in new telecommunications projects, including in connection with technology upgrades and our continuing geographic expansion. We spent approximately LOGO 15,366 million (US$ 345 million) on capital expenditures in fiscal 2011 and we expect our capital expenditures in fiscal 2012 to be approximately LOGO 25,611 million (US$ 575 million). Our capital expenditures may increase in the future because of cost overruns or delays in our projects or as we strive to offer new services, improve our capabilities and remain competitive. Uncertainty in the international financial markets, may adversely affect our ability to obtain capital when needed or on terms that are attractive. Though there is less uncertainty in the international financial markets, market sentiments have not reverted to pre-crisis levels. Even if we are able to make all of our planned capital expenditures, telecommunications technology evolves rapidly so there can be no assurance that any of our investments in new technology will have a positive impact on our financial results.

The absence of a robust business continuity plan could affect our business adversely.

Our operations are dependent on various information technology systems and applications which may not be adequately supported by a robust business continuity plan, which could seriously impact our business in the event of a disaster of any nature.

It is increasingly costly for us to comply with new and changing corporate governance and public disclosure requirements.

Changing laws, regulations and standards relating to accounting, corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002, new SEC regulations, NYSE rules, Securities and Exchange Board of India (“SEBI”) rules and regulations and Indian stock exchange listing regulations are creating uncertainty for companies like ours because they sometimes lack specificity and may be subject to varying interpretations. Their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs of compliance as a result of ongoing revisions to such governance standards.

Our efforts to comply with evolving corporate governance and public disclosure laws, regulations and standards have resulted in, and are likely to continue to result in, increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. In addition, the new laws, regulations and standards regarding corporate governance may make it more difficult for us to obtain director and officer liability insurance. Further, our board members, chief executive officer and chief financial officer could face an increased risk of personal liability in connection with the performance of their duties.

Our business may be adversely affected by any slowdown in economic growth in India, the United States or other countries where we conduct business or by a slowdown in the growth of the IT sector.

The growth of telecommunications traffic is related to general economic growth and slowdowns in the economy could result in slower growth rates in telecommunications traffic. Economic slowdowns in India and the U.S. pose the greatest risk for us because approximately 27.07% and 15.72% of our operating revenues were from India and the United States, respectively, during fiscal 2011. Commencing in 2007 and continuing into 2011, the U.S. securities markets have experienced significant deterioration and volatility and the liquidity of U.S. credit markets have substantially tightened, which has had negative repercussions on the global economy. These developments could continue to present risks for an extended period of time for us, including a potential slowdown in our sales to customers in the financial sector. Slowdowns in the IT sector might adversely affect our revenues as well, because the IT sector is a major contributor to our telephony and leased channel revenues.

A substantial portion of our assets are located in India and our equity is listed on the Indian stock exchanges. Accordingly, our performance and the market price and liquidity of our equity may be affected by changes in exchange rates and controls, interest rates, government policy, taxation and other political, economic or social developments in or affecting India.

Since 1991, successive governments in India have pursued policies of economic liberalization, including significantly relaxing restrictions on the private sector. Nevertheless, the role of the GoI and state governments in the Indian economy as producers, consumers and regulators remains significant in ways that affect all Indian companies, including us.

Political instability could result in changes in policy, delay reforms of the Indian economy and could have a material adverse effect on the market for securities of Indian companies, including the Shares, and consequently the ADSs.

Terrorist attacks and other acts of violence or war involving India, the United States and other countries could adversely affect the financial markets and our business.

Terrorist attacks and other acts of violence or war may negatively affect the Indian markets where the Shares trade and adversely affect the worldwide financial markets. These acts may also result in a loss of business confidence and make travel more difficult.

Also, as a result of such events, India, the United States or certain other countries where our Company has or may have major business interests may enter into armed conflict with other countries. The consequences of any potential armed conflicts are unpredictable. In addition, India has from time to time experienced unrest relating to religious and political differences within India’s population, as well as with its neighboring country Pakistan.

Any increase in regional or international hostilities, terrorist attacks or other acts of violence or war could have a significant adverse impact on international and Indian financial markets or economic conditions or on the GoI’s policy, thereby disrupting communications. Such political tensions could create a greater perception that investment in Indian companies involves a higher degree of risk and could have an adverse impact on our business, or the market price of the Shares and ADSs.

Conditions in the Indian securities markets may affect the price or liquidity of the Shares and ADSs.

The Indian securities markets are smaller in terms of trading volume and more volatile than the securities markets in the United States and certain European and other countries. The Indian stock exchanges have in the past experienced substantial fluctuations in the prices of listed securities. It is generally perceived that there is a lower level of regulation and monitoring of the Indian securities markets and the activities of investors, brokers and other market participants than in securities markets in the United States and certain European and other countries.

The Indian stock exchanges have experienced trading interruptions in the past because of regulatory interventions and operational issues. If these interruptions were to recur, it could affect the market price and liquidity of the securities of Indian companies, including the Shares and ADSs. In addition, the governing bodies of the Indian stock exchanges have from time to time imposed restrictions on trading in certain securities, limitations on price movements and margin requirements. Similar problems could occur in the future and, if they do, it could affect the market price and liquidity of the Shares and ADSs.

We and you may be subject to potential losses arising out of risks associated with the conversion rates between the functional currency of the Company and other foreign currencies.

Fluctuations in the exchange rate between the Indian rupee and the U.S. dollar will affect the U.S. dollar equivalent of the Indian rupee price of equity shares on the Indian stock exchanges and, as a result, the price of our ADSs in the United States, as well as the U.S. dollar value of the proceeds a holder would receive upon the sale in India of any equity shares withdrawn from the Depository under the Depository Agreement will be impacted. Such fluctuations will also affect the Dollar equivalent of any cash dividends in Rupees received on the Shares represented by the ADSs and the Dollar equivalent of the proceeds in Rupees of a sale of the Shares in India.

Fluctuations in the exchange rates affect the respective functional currency amount of foreign currency settlements received by the Company from and paid by the Company to foreign telecommunication administrations, other service providers, and payments to vendors for imported equipment and technology and on account of foreign currency borrowings.

You may not be able to enforce a judgment of a foreign court against us.

We are organized under the laws of India. All of the Company’s directors and many of its officers are Indian nationals and all or a significant portion of the assets of all of the directors and officers and a substantial portion of our assets are located in India. As a result, it may be difficult for investors to effect service of process on us or such directors or officers outside India or to enforce judgments against them obtained from courts outside India, including judgments predicated on the civil liability provisions of the United States federal securities laws.

Dealings with telecommunication service providers in countries designated by the U.S. Department of State as state sponsors of terrorism may lead some potential customers and investors in the U.S. and other countries to avoid doing business with us.

The United States, and from time to time other countries have laws that may prohibit or restrict their citizens from engaging in certain business activities in certain countries, or that otherwise impose economic sanctions on such countries. International bodies such as the United Nations may also impose sanctions on certain countries from time to time. The United States currently has laws that prohibit or restrict its citizens from doing business in North Korea, Cuba, Iran, the Sudan and Syria.

As a major provider of international telecommunications services to customers in India, the Company enters into interconnection agreements with communications providers around the world including agreements with providers located in certain of such countries to facilitate the carrying of telecommunications traffic to and from such countries, and we may do so in the future.

We are substantially owned by some of the Tata group companies and the GoI who have significant rights in relation to the election of our board of directors and may have interests which conflict with those of our other shareholders, including holders of the ADSs.

As of March 31, 2011, 50.03% of our outstanding equity was held by Panatone Finvest Limited and other Tata group companies, and 26.12% was held by the GoI. Panatone Finvest Limited, certain other Tata group companies and the GoI are parties to a Shareholders’ Agreement (the “SHA”) pursuant to which they have agreed on certain matters with respect to our governance and operation, including the composition and election of our board of directors. As a result of their equity holdings and the SHA, Panatone Finvest Limited and the GoI together control all matters submitted to shareholders, including the election of directors. They also have significant control over the matters that come up for consideration at the meetings of our board of directors. There can be no assurance that the interests of Panatone Finvest Limited and the GoI will not differ from the interests of our other shareholders, including the holders of ADSs.

Future sales by the GoI of our shares may adversely affect our share price.

As of March 31, 2011, the GoI’s stake in our Company was 26.12%. If or when the GoI decides to reduce its stake in our Company, the manner in which the GoI decides to reduce its stake and the selection of the buyer of such stake, may have an adverse impact on the price of the Shares.

We may face potential conflicts of interest relating to our principal shareholder.

Our principal shareholder is part of the Tata group of companies which has diverse business activities and interests. The Tata group or their affiliates could engage in activities, or seek opportunities, that are or could be in competition with our activities or interests. In particular, the Tata group has interests in other companies in the telecommunications sector, such as Tata Teleservices Limited.

Disagreements between the Tata group of companies and the GoI concerning our activities could result in a deadlock, which could adversely affect our business.

Panatone Finvest Limited, certain other Tata group companies and the GoI have agreed in the SHA that we shall not undertake certain corporate actions unless at least one director nominated by each of them (in the case of a board meeting) or at least one authorized representative nominated by each of them (in the case of a shareholder meeting) consents to such action. Panatone Finvest Limited, the other Tata group companies and the GoI have also agreed not to transfer their shares in our Company without giving the other certain rights of first refusal and tag-along rights. In the event that Panatone Finvest Limited, the other Tata group companies and the GoI fail to agree on any such matter, their disagreement could result in us not taking advantage of a potential opportunity. Further, any disagreement in relation to raising funds through non-debt sources could result in an inability to implement our capital expenditure plans efficiently.

The demerger of surplus land held by us may not be completed on satisfactory terms.

Under the terms of the SHA, Panatone Finvest Limited agreed to cause us to demerge certain land that we own but were not actively using into a separate company. No time period was specified in the agreement for such demerger. We, Panatone Finvest Limited and the GoI are currently discussing various options in connection with the demerger. Until such time as the demerger takes place, the lands are under our possession and upkeep. We cannot predict if the demerger will take place or the extent to which expenditure that we might have to incur for the security, upkeep and maintenance of the surplus land will continue. Further, we may have to bear significant costs, including taxes and duties, relating to the demerger, and we cannot predict what effect, if any, the demerger and the legal and valuation process relating to the demerger will have on our financial condition.

Holders of ADSs have no voting rights.

Investors in ADSs have no voting rights, unlike holders of Shares. It is contemplated that the Bank of New York Mellon, as depository for the ADSs (the “Depository”) will exercise its right to vote the Shares represented by ADSs as directed by our board of directors. Investors may withdraw the Shares underlying the ADSs and seek to vote the Shares obtained from the withdrawal. However, for foreign investors, this withdrawal process may be subject to delays.

There is a limited market for the ADSs.

Even though the ADSs are listed on the New York Stock Exchange, there is no assurance that any trading market for the ADSs will be sustained. Subsequent to the open/tender offer by Panatone Finvest Limited, the number of shares represented by ADSs declined from approximately 60 million (representing 21% of the issued and outstanding Shares) as of March 31, 2002 to approximately 19.94 million (representing 7.00% of the issued and outstanding Shares) as of March 31, 2011. This may affect the liquidity of the market for the ADSs and the price at which they trade.

Indian law imposes foreign investment restrictions that limit a holder’s ability to convert equity shares into ADSs, which may cause the Shares to trade at a discount or premium relative to the market price of the ADSs.

Although the GoI permits two-way fungibility of ADSs, this is still subject to sectoral caps under regulations governing foreign direct investment (“FDI”) in India, compliance with the provisions of the Issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme 1993, periodic guidelines issued by the GoI and registration requirements in the United States. Such restrictions on foreign ownership of the underlying equity shares may cause the Shares to trade at a discount or premium to the ADSs.

An investor in the ADSs may not be able to exercise preemptive rights for additional Shares and may thereby suffer dilution of his or her equity interest in us.

A company incorporated in India must offer its holders of equity shares preemptive rights to subscribe and pay for a proportionate number of shares to maintain their existing ownership percentage prior to the issuance of any new equity shares, unless such preemptive rights have been waived by three-fourths of the shares voting on the resolution. Holders of ADSs may be unable to exercise preemptive rights for equity shares underlying ADSs unless a registration statement under the Securities Act is effective with respect to such rights or an exemption from the registration requirements of the Securities Act is available. We are not obliged to prepare and file such a registration statement and our decision on whether to do so will depend on the costs and potential benefits of enabling the holders of ADSs to exercise their preemptive rights, and any other factors we consider appropriate at the time. No assurance can be given that we would file a registration statement under these circumstances. If we issue any such securities in the future, such securities may be issued to the Depository, which may sell such securities for the benefit of the holders of the ADSs. There can be no assurance as to the value, if any, that the Depository would receive upon the sale of such securities. To the extent that holders of ADSs are unable to exercise preemptive rights granted in respect of the shares represented by their ADSs, their proportional interests in us would be reduced.

Intellectual property and proprietary rights of others could prevent us from using necessary technology to provide our services.

If technology that is necessary for us to provide our services is held under patent by another person, we would have to negotiate a license for the use of that technology. We may not be able to negotiate such a license at a price that is acceptable. The existence of such patents, or our inability to negotiate a license for any such technology on acceptable terms, could force us to cease using the technology and offering products and services incorporating the technology.

To the extent that we are subject to litigation regarding the ownership of our intellectual property, this litigation could:

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be time-consuming and expensive;

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divert attention and resources away from our daily business;

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impede or prevent delivery of our products and services; and

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require us to pay significant royalties, licensing fees and damages.

Parties making claims of infringement may be able to obtain injunctive or other equitable relief that could effectively block our ability to provide our services and could cause us to pay substantial damages. In the event of a successful claim of infringement, we may need to obtain one or more licenses from third parties, which may not be available at a reasonable cost, if at all. The defense of any lawsuit could result in time-consuming and expensive litigation, regardless of the merits of such claims, and could also result in damages, license fees, royalty payments and restrictions on our ability to provide our services, any of which could harm our business.

Impairment of our intellectual property rights could harm our business.

Our efforts to protect our intellectual property rights through patent, copyright, trademark and trade secret laws in various jurisdictions worldwide may not prevent misappropriation, and our failure to protect our proprietary rights could materially adversely affect our business, financial condition and operating results.

A third party could, without authorization, copy or otherwise appropriate our proprietary network information. Our agreements with employees and others who participate in development activities could be breached, we may not have adequate remedies for any breach, and our trade secrets may otherwise become known or independently developed by competitors.

We may be unable to hire and retain sufficient qualified personnel; the loss of any of our key executive officers could adversely affect our business.

We believe that our success in the future will depend to a large extent on our ability to attract and retain highly skilled, knowledgeable, sophisticated and qualified managerial, professional and technical personnel. We expect to experience significant competition in attracting and retaining personnel who possess the skills that we are seeking. Our business is managed by a team of key executive officers and their immediate teams. Loss of any of these key executives could have a material adverse effect on our business.

Our operations and profitability may be adversely affected if the funding required for the plans is delayed.

The Company is dependent on its promoter shareholders i.e. the Panatone Finvest Limited and the Government of India, agreeing to the proposals for raising non-debt funds such as subscription to the new shares or monetization of certain assets. This dependency arises in view of the provisions of the Share Purchase Agreement (“SPA”) among Panatone Finvest Limited, the Government of India and the Company and the provisions of the Articles of Association of the Company. If the promoter shareholders do not agree to such proposals for any reason, the Company may not be able to implement its capital expenditure plans efficiently and, as a result, its operations and profitability may be adversely affected.

Currency and exchange rate fluctuations could adversely affect our results of operations.

The functional currency of Tata Communications Limited and its Indian subsidiaries is the Indian Rupee, whereas the functional currency of TCIPL and its subsidiaries and VSNL SNOSPV Pte Ltd. is the United States Dollar and that of all other subsidiaries is the currency in the country of incorporation. We incur network and other expenses and sell our products/services in various countries outside India. Moreover, we have outstanding foreign currency denominated debt and credit facilities in a few jurisdictions. Hence, we are sensitive to fluctuations in foreign currency exchange rates. Adverse changes in exchange rates may have a material adverse effect on our revenues, other income and cost of services sold, gross margin and net income, and hence may have an impact on our business, operating results and financial condition.

Also we expect that a majority of our transactions, both revenue and a significant portion of our expenses, including personnel costs, as well as capital and operating expenditures, will continue to be in foreign currencies, including the U.S. dollar, the British Pound, the Euro and the Canadian dollar, for the foreseeable future. Therefore, we expect to continue to experience foreign exchange losses and gains on transactions denominated in foreign currencies in respect of our foreign currency assets and liabilities due to currency fluctuations in the future as well.

We use derivative financial instruments such as foreign exchange forward and option contracts to mitigate the risk of changes in foreign exchange rates on accounts receivable and payables and loans to Subsidiaries/Equity Method Investees denominated in foreign currencies. These derivative financial instruments may not be able to offset in full the foreign exchange losses, if any.

Additionally, our hedging activities may also result in losses due to volatility in foreign currency markets and the timing of hedging activity. These fluctuations may have an impact on our business, operating results and financial condition.

The uncertainty in the global financial markets primarily caused by fears of a debt crisis in Europe and the volatility of the U.S markets continue to have negative repercussions on the global economy and, as a result, could present new challenges for our business.

Commencing in 2007 and trickling into 2011, certain adverse financial developments have impacted the European, U.S. and global financial markets. These developments include a general slowing of economic growth both in the U.S. and globally, substantial volatility in equity securities markets; volatility and tightening of liquidity in credit markets and the fear of debt defaults led by Greece. While it is difficult to predict how long these conditions will exist and which markets and businesses of our company may be affected, these developments could continue to present risks for an extended period of time for our company, including a potential slowdown in our sales to customers in the financial sector. Moreover, the potential debt crisis in Europe could adversely impact our business in the region.

The attempts of the global economy to come out of a slump may slow down further due to the factors mentioned above and as a result our profitability may be adversely impacted by an increase in bad debts.

The Company sells to a large number of customers, across many countries, ranging from government backed agencies and large wholesalers to enterprises. An economic slowdown may impact the ability of some of these customers to continue to trade, which in turn may result in losses from writing these debts off. Although risk management processes are in place to manage this risk, and provisions are established for debts that may not be recoverable we cannot be certain that there will not be further losses above those already provided for.

Our operations and profitability may be adversely affected by decisions taken by revenue authorities in various jurisdictions in which we operate which are beyond our control.

The integrated nature of our worldwide operations can produce conflicting claims from revenue authorities as to the profits to be taxed in individual territories. The resolution of these disputes can result in a reallocation of profits between jurisdictions and an increase or decrease in related tax costs, and has the potential to affect our cash flows and earnings per share. Claims, regardless of their merits or their outcome, are costly, divert management attention, and may adversely affect our reputation.

The majority of the jurisdictions in which we operate have double tax treaties with other foreign jurisdictions, which enable us to ensure that our revenues and capital gains do not incur a double tax charge. If any of these double tax treaties should be withdrawn or amended, especially in a territory where a member of the Company is involved in a taxation dispute with a tax authority in relation to cross-border transactions, such withdrawal or amendment could have a materially adverse effect on our financial condition and results of operations, as could a negative outcome of a tax dispute or failure of tax authorities to agree through competent authority proceedings.

Emerging markets are an important part of our business plans. As we continue to develop our business in emerging markets, we may face challenges unique to emerging markets that could adversely impact our operations and / or profitability.

The development of our business in emerging markets may be a critical factor in determining our future ability to sustain or increase the level of our global revenues. Challenges that arise in relation to the development of the business in emerging markets include, but are not limited to, more volatile economic conditions, competition from companies that are already present in the market, the need to identify correctly and leverage appropriate opportunities for sales and marketing, poor protection of intellectual property, inadequate protection against crime (including counterfeiting, corruption and fraud), inadvertent breaches of local law/regulation and not being able to recruit sufficient personnel with appropriate skills and experience. The failure to exploit potential opportunities appropriately in emerging markets may have a materially adverse effect on our financial condition and results of operations.

Acquisitions and strategic alliances formed as part of our externalization strategy may be unsuccessful.

We seek acquisitions of complementary businesses, technology licensing arrangements, strategic alliances and collaborations to expand our product portfolio and geographical presence as part of our business strategy. Examples of such recent strategic acquisitions, arrangements, collaborations and alliances include:

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launch of a Virtual Proxy (vProxy) managed security service in partnership with Zscaler

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strategic sourcing agreement with Videotron to route 100% of Videotron’s international voice traffic through the Tata Communications network

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acquisition of British Telecom’s Mosaic business to accelerate our Media and Entertainment capability

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collaboration with BIX, Etisalat, Mobily, Nawras and Qtel to construct, operate and maintain the TGN-Gulf undersea cable system which will connect Mumbai with Bahrain, Oman, Qatar, Saudi Arabia and United Arab Emirates;

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collaboration with Mobily to construct, operate and maintain a branch on the TGN-Eurasia undersea cable system to connect Saudi Arabia with Mumbai and Marseille, France;

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Telepresence inter-connection agreements with British Telecom and Telefonica to enable inter-carrier Telepresence sessions between each company’s respective customers; launch of first public Telepresence suite in East Africa with Safaricom. Collaboration with Starwood Hotels, American Express Travel, Carlson Wagonlit Travel and Sabre to offer public Telepresence room services to corporate customers: and

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acquisition of BitGravity Inc. with respect to development of CDN technology.

We may not complete these types of transactions or collaborative projects in a timely manner, on a cost-effective basis, or at all, and may not realize the expected benefits of any acquisition, licensing arrangement or strategic alliance. Other companies may also compete with us for these opportunities. The success of such current and future arrangements is largely dependent on the technology and other intellectual property we acquire and the resources, efforts and skills of our partners. Disputes and difficulties in such relationships may arise, often due to conflicting priorities or conflicts of interest which may erode or eliminate the benefits of these alliances if, for example, the agreements are terminated; sufficient financial or other resources are not made available to the alliances; intellectual property is negatively impacted; obligations are not performed as expected; controls and commercial limitations are imposed on the marketing and promotion of products to be co-developed; or challenges in achieving the commercial success of the product are encountered during the development process. Also, under many of our strategic alliances, we make milestone payments well in advance of commissioning a cable system, with no assurance that we will ever recoup those payments. If these types of transactions are unsuccessful, this may have an adverse effect on our financial condition and results of operations.

In addition, integration of an acquired business could involve incurring significant debt and unknown or contingent liabilities, as well as have a negative effect on our reported results of operations from acquisition-related charges, amortization of expenses related to intangibles and charges for impairment of long-term assets. These effects, individually or in combination, could cause a deterioration of our credit rating, increased borrowing costs and interest expense.

Our increasing reliance on outsourced personnel to develop and maintain our internal IT infrastructure could, if not properly managed, result in a disruption of critical internal services and, as a result, adversely affect our operations

We are dependent on effective information technology (IT) systems. These systems support key business functions such as our R&D and billing capabilities, and are an important means of internal communication and communication with customers and suppliers. Any significant disruption of these IT systems or the failure of new IT systems to integrate with existing IT systems could materially and adversely affect our operations. We also have a number of outsourcing arrangements in respect of critical processes, services and the support of our IT infrastructure and our increasing dependency on these outsource providers could impact our ability to deliver on business targets and to maintain our compliance status and reputation. Risk associated with outsource providers is mitigated by our contracting approach which enables us to monitor closely any degradation in services and enact staged remedies.

The Company is engaged in continuous productivity initiatives aimed at making the Company more profitable and its operations more efficient. Failure of one or all of these initiatives or mismanagement of the same may have a material adverse effect on our operations and/or profitability.

We are implementing various productivity initiatives and restructuring programs, with the aim of enhancing the long-term efficiency of the business. However, the anticipated cost savings and other benefits are based on preliminary estimates and the actual savings may vary significantly. In particular, these cost reduction measures are based on current conditions and do not take into account any future changes to the communications industry or our operations, including new business developments, wage and price increases and other factors. If inappropriately managed the expected value of the initiative could be lost through low employee morale and hence productivity, increased absence levels and industrial action. Our failure to implement successfully these planned cost reduction measures, either through the successful conclusion of employee relations processes (including consultation and engagement, talent management and recruitment and retention), or the possibility that these efforts do not generate the level of cost savings we anticipate, could have a materially adverse effect on our financial condition, results of operations and reputation.

Our operations and/or profitability could be adversely affected by the increase in environmental legislation worldwide which may result in an increase in our cost of compliance.

We integrate core values of environmental protection into our business strategy to add value to the business, manage risk and enhance our reputation. We are subject to laws and regulations concerning the environment, safety matters and regulation of product safety in the countries where we sell our products and/or services or otherwise operate our business. These requirements include regulation of the handling, transportation, use and disposal of materials used in our business, including the discharge of pollutants into the environment. In the normal course of our business, we are exposed to risks relating to (i) possible releases of hazardous substances (such as fuel from our storage tanks or acid from battery accumulators) into the environment which could cause environmental or property damage or personal injuries, and which could require remediation of contaminated soil and groundwater and (ii) possible damage due to the removal of certain decommissioned submarine fiber optic cables which could require remediation and/or rectification. Under certain laws, we may be required to remediate contamination at third party sites, or at certain of our properties regardless of whether the contamination was caused by us, or by previous occupants of the property.

An increasing amount of intangible assets, goodwill and other long lived assets on our books may lead to significant impairment charges in the future.

The amount of goodwill, IRU and other intangible assets on our consolidated balance sheet amounts to approximately 12% of the Company’s total assets. Although no significant impairments are currently anticipated, any future diminution in the enterprise value of the reporting business unit may lead to material impairment charges. We regularly review our long-lived intangible and tangible assets, including identifiable intangible assets, investments in associated companies and goodwill, for impairment. Goodwill is subject to impairment review at least annually. Other long-lived assets are reviewed for impairment at least annually or when there is an indication that impairment may have occurred. Any significant impairment charges could have a material adverse effect on our results of operations. For a detailed discussion of how we determine whether an impairment has occurred, what factors could result in an impairment and the increasing impact of impairment charges on our results of operations, see “Item 5 Operating and Financial Review and Prospects—Critical Accounting Policies —Impairment of Long-Lived Assets and Valuation of Goodwill” and “Item 18 Financial Statements”

ITEM 4.

INFORMATION ON THE COMPANY

Tata Communications Limited, formerly known as Videsh Sanchar Nigam Limited (VSNL), is a leading global provider of a new world of communications. With a leadership position in emerging markets, Tata Communications leverages its advanced solutions capabilities and domain expertise across its global and pan-India network to deliver managed solutions to multi-national enterprises, service providers and Indian consumers.

The Tata Global Network includes one of the most advanced and largest submarine cable networks, a Tier-1 IP network, with connectivity to more than 200 countries across 400 points of presence (“PoPs”), and nearly 1 million square feet of data center and collocation space worldwide. Incorporated in 1986, the Company has quickly become a significant global player in the highly competitive telecommunications industry. Over the past several years, the Company has restructured itself from a pure long distance service provider in India to one of the leading integrated communications solutions providers globally. The Company has transformed itself into a global player through a series of organic as well as inorganic growth strategies, while maintaining its focus on ILD voice services.

Today, the Company is one of the world’s largest providers of ILD voice services and operates one of the largest global submarine cable networks in the world. The Company’s customer base includes approximately 1,600 global carriers and service providers, 785 mobile operators, over 50,000 business customer relationships (enterprises and SMEs), 190,000 broadband and internet subscribers and 500 Wi-Fi public hotspots. The Company’s global transmission network of over 210,000 route kilometers and its IP core with over 400 points of presence, enable a range of services that include traditional TDM voice, VoIP, private leased circuits, IP VPN, Internet access, global Ethernet, data centers, co-location, managed network, managed services, managed hosting, managed storage, mobile signaling and other IP-related services. Tata Communications’ depth and breadth of reach in emerging markets includes leadership in Indian enterprise data services, leadership in global international voice, and strategic investments in operators in South Africa (Neotel), Sri Lanka (Tata Communications Lanka Limited) and Nepal (United Telecom Limited).

The Company’s Internet website address is http://www.tatacommunications.com. Information on the Company’s website is not incorporated into and should not be considered a part of this document. The Company’s registered office is at VSB, Mahatma Gandhi Road, Fort, Mumbai 400 001, India (and its telephone number is +91-22-6657 8765). The process agent for the Company’s ADR facility is State Bank of India, New York office, 460 Park Avenue, New York, 10022.

History and Development of the Company

The Company was incorporated on March 19, 1986 as a limited liability company under the Indian Companies Act, 1956. On April 1, 1986, the Company assumed control and management of all of the assets, employees and operations of the Overseas Communications Service, a department of the Ministry of Communications of the Government of India. The Company was wholly owned by the Government of India until 1992 at which time the Government of India sold 12 million shares it owned in the Company to various financial institutions in India. During 1997 and 1999, the Government also sold some of its equity holdings in the Company through the issuance of global depositary receipts (“GDRs”).These GDRs were converted into ADRs (also referred to herein as American Depository Shares or ADS) upon the Company’s listing on the New York Stock Exchange on August 15, 2000.

In February 2002, through a competitive bidding process, the Government of India selected Panatone Finvest Ltd., a Tata group company, as the Strategic Partner for the sale and purchase of 25% of the then outstanding voting capital of the Company from the Government of India. By virtue of this transaction, the Government of India’s holdings in the Company were reduced to 27.97% and the Company ceased to be a Government of India enterprise. Other Tata companies have since made open market purchases of the Company’s equity shares, and the consolidated shareholding of the Tata companies in the Company as of March 31, 2011 was 50.03% and that of the Government of India was 26.12%.

On March 31, 2002, the Company’s monopoly in International Long Distance (“ILD”) in India terminated pursuant to a notice of early termination issued by the Government of India. With effect from April 2002, the Government of India began to license new operators to provide international telephone services, who now compete with the Company in India.

In recent years, the Company has made a number of acquisitions. They include:

•

In February 2005, the South African government selected the Company as a strategic investor in the country’s proposed second national telecommunications operator (Neotel). The Company through a wholly owned subsidiary, VSNL SNOSPV Pte Ltd, incorporated in Singapore acquired 43.16% of SEPCO Communications Pty. Ltd (SEPCO), a company incorporated in South Africa which in turn owns 51% in Neotel. Neotel launched services on August 31, 2006. In January 2009, the Company through the same wholly owned subsidiary in Singapore acquired an additional 27% stake directly in Neotel. The Company increased its effective holding in Neotel from 49% to 61.5% with effect from May 2011 through the same wholly owned subsidiary. Consequently, Neotel has become a subsidiary of the Company.

•

In May 2008, the Company, through one of its subsidiaries, Tata Communications (Netherlands) BV (“TCNLD”) entered into a CDN strategic alliance with BitGravity Inc. to establish a revenue share arrangement with BitGravity. BitGravity has built a next generation CDN technology for the broadcasting industry and large file download applications, which is optimized to deliver HD-quality video on demand, live broadcasts, gaming downloads and applications for the Internet. The Company has installed a CDN platform in Europe, Asia, India and North America (a total of 17 CDN nodes) which are owned and operated by the Company but equipped with BitGravity CDN technology. In August 2008, TCNLD invested $11.5 million in convertible debt issued by BitGravity Inc. On December 14, 2009, TCNLD acquired equity shares in BitGravity Inc. representing an equity interest of 22.86% for consideration of approximately $1.4 million. On September 19, 2010, TCNLD acquired another 22.86% of the outstanding equity shares of BitGravity Inc. for approximately $1.4 million. In February 2011, TCNLD bought out substantially all other shareholders in BitGravity for $5.82 million such that TCNLD now holds an equity interest of 99.999% in BitGravity and full management control.

•

On January 16, 2010, the Company through its United Kingdom (UK) subsidiary, Tata Communications (UK) Ltd., completed its purchase of the business and assets of the Cosmos business of British Telecommunications PLC (“BT Mosaic”) for cash consideration of $3.2 million. BT Mosaic offers an on-demand digital media management platform that manages content and workflow from production to distribution across collaborative market ecosystems, and provides equipment and professional services exclusively relating to these services.

During fiscal 2008, the Company changed its name from VSNL to Tata Communications Limited. In fiscal 2008, the Company also signed a Brand Equity and Business Promotion Agreement (the “BEBP Agreement”) with Tata Sons Limited, the owners of the intellectual property rights for the brand and corporate name “Tata”. On February 13, 2008, the Company launched its new identity and brand name worldwide, integrating the former VSNL, VSNL International, Teleglobe and CIPRIS brands. In February 2010, 33 subsidiaries of Tata Communications Limited entered into the BEBP Agreement with Tata Sons Limited. The Company and its various wholly-owned subsidiaries worldwide operate under the single unified brand name of “Tata Communications”.

Business Strategy

The Company’s vision is to deliver a new world of communications to advance the reach and leadership of its customers. Its strategy is to build leading-edge IP-leveraged solutions advanced by its unmatched global infrastructure and leadership position in India and other markets where it competes. To this end, the Company provides a differentiated choice to service provider, enterprise and SME customers. That differentiated choice offers a growing range of services utilizing Internet protocol and other leading edge technologies and world class managed service offerings in established, emerging and underserved markets.

Adapting Business Model to a Changing Environment

The ILD voice industry is in a major transition as voice traffic is shifting from traditional carriers (fixed-line operators) to emerging mobile, web telephony and ISP/broadband operators. The shift in ownership of end-user subscribers is coincident with a technology shift from a minutes-based unit model to a multi-media session. As the industry continues to consolidate, ILD voice traffic is expected to grow with a renewed focus on customer support and quality of service. The Company is therefore focused on developing solutions and technology to cater to new age communication requirements with continued automation of much of its transactional systems and processes to better support the wholesale business, and restructuring the organization to better penetrate those segments expected to experience the highest growth rate in the coming years (mobile, web telephony, ISP/broadband operators).

In June 2009, the Company through its wholly-owned indirect subsidiary, Tata Communications (UK) Ltd., entered into a major global voice strategic agreement with British Telecom Plc (BT). The five-year agreement allows Tata Communications and BT to mutually benefit from shared resources as part of a global supply arrangement. In fiscal 2011, the Company signed a number of other strategic sourcing agreements with various operators such as Videotron, a cable operator and broadband service provider in Canada. Under this agreement, Videotron will route 100% of its international voice traffic through the Company’s network and Videotron will continue to be one of the Company’s key suppliers of telecommunication services in Canada.

Continuing Leadership in India

Currently, the Company has leading market shares in voice and data transmission in India. In ILD voice, the Company commands a 26% market share in the ILD Inbound business. In enterprise data services, the Company is a market leader with over 19% of the market and has won the Enterprise Data Service Provider of the Year award from a leading telecom and technology research firm.

The Company is now specifically addressing the needs of small and medium enterprises segment in India with solutions that give access agnostic internet services along with a variety of internet enabled content applications and managed services

Differentiated Enterprise Offerings

The Company intends to strengthen its position in network services and continuously develops and introduces new products and services catering to the needs of corporate customers, such as corporate Internet telephony, bandwidth-on-demand and hosted contact centers. Additionally, the Company offers new services such as Telepresence virtual meeting room, content delivery networks, cloud computing or Infrastructure as a Service (IaaS), managed hosting and storage, managed messaging, managed security and other managed products and services.

Growth in Managed Services

The Company has introduced a number of managed services as part of its offerings to enterprise customers on a global basis. Revenue from managed services has grown 32% in fiscal 2011 as against fiscal 2010. These services include:

•

IT Infrastructure Services

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Colocation Services

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Managed Hosting Services

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Managed Storage Services

•

Infrastructure as a Service

•

Security Services

•

CPE-Based Services

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Cloud-Based Services

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Professional Services

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Application Services

•

Collaboration Services

•

Conferencing and Messaging Services

•

Telepresence

•

Hosted Contact Center Services

The Company is one of the largest players in the data center business in India, with facilities in many of the major commercial centers. In September 2010 it announced the opening of its state-of-the-art Tata Communications Exchange (TCX) data center in Singapore, built to meet the growing IT outsourcing needs of enterprises in Asia Pacific. It will have a total potential of 66,000 sq. ft. of data center space and will provide increased capacity for both domestic and international firms, bringing cost and resource efficiencies as well as greater IT service availability and performance.

In October 2010, the Company announced the launch of InstaCompute^TMand InstaOffice^TM in India to further its promise of bringing productivity enhancing services to its Enterprise customers. The launch marks the Company’s expansion in the cloud space to deliver self-service, pay-as-you-use IT application and data center infrastructure services, accessed through the Internet. In March 2011, InstaCompute^TM was launched in Singapore, covering neighboring countries: Malaysia, Hong Kong, Thailand, Indonesia, Vietnam and the Philippines. It brings the scalable infrastructure on demand services to the region’s large and medium enterprises, the gaming industry, as well as global businesses with an Asia Pacific customer base.

Strategic overseas expansion, greenfield ventures and acquisitions

The Company believes that its leading Indian market position, growing service offerings and deployment of leading-edge technologies together give it competitive advantages in emerging and underserved markets. With our global legacy-free infrastructure and on-the-ground presence in key markets, the Company aims to leverage its advanced solutions capabilities and domain expertise across its global and pan-India network to deliver managed solutions to multi-national enterprises, service providers and small and medium enterprises.

The following is a breakdown of the Company’s revenues by geography:


	March 31,
For the fiscal years ended:	2009		2010		2011
	(In millions)
India		31,984		28,847		30,813	US$	692
United States of America		16,683		19,159		17,893		402
United Kingdom		6,791		11,637		13,167		296
Canada		3,976		4,274		5,849		131
Rest of the world		37,861		42,163		46,118		1,035

Total		97,295		106,080		113,840	US$	2,556

Africa

In 2008, the Company entered the South African market as a strategic partner to Neotel. The Company also holds IRU capacity on the privately owned SEACOM cable system, which will have landing sites in South Africa, Mozambique, Tanzania and Kenya in Africa, in Mumbai, India, and in Marseille, France. The Company, through its 100% owned subsidiary Tata Communications Transformation Services Limited, a leading provider of business transformation, telecom BPO and consultancy services, also manages the network administration, operations and maintenance functions of this SEACOM cable system. The Company is also actively pursuing partnerships in key African countries. In September 2009, the Company announced a partnership with AccessKenya to launch a Tier 1 Internet Point of Presence in Kenya and in May 2010 announced a partnership with Infinity Africa to expand the reach of its IP network further into East Africa and thus reinforce its commitment to emerging markets. In January 2011, the Company in partnership with Safaricom, a leading provider of converged communications solutions, launched East Africa’s first public Telepresence suite at the Serena Hotels in Kenya and Uganda. Connectivity and management of the Telepresence rooms will be led by Tata Communications, linking Kenya and Uganda to public and private rooms throughout Tata Communications’ network and partner networks. The network spans 32 locations across five continents.

Asia

On August 18, 2009, the Company announced the completed installation, testing and commissioning of the TGN-Intra Asia (TGN-IA) Cable System, a 6700 km Undersea Cable System connecting Singapore, Hong Kong, Tokyo, Vietnam and the Philippines. The Company also has network and commercial network partnerships in Thailand, Nepal, Philippines, South Korea, Vietnam, Singapore, Indonesia and Malaysia. In September 2010, the Company opened a 66,000 sq. ft data center in Singapore to provide increased capacity for both domestic and international firms. In March 2011, the Company launched its Infrastructure as a Service (IaaS) offering—InstaCompute^TM in Singapore, covering neighboring countries: Malaysia, Hong Kong, Thailand, Indonesia, Vietnam and the Philippines. InstaCompute^TM will bring scalable cloud computing services to the region’s large and medium enterprises, the gaming industry, as well as global businesses with an Asia Pacific customer base. Singapore’s Economic Development Board granted official International Headquarter Status to the Company in Singapore. The Company plans to increase its local Singapore workforce by 60% over the next four years and invest SGD $110 million per year over the next four years to focus on innovation and support its customers and the Singapore market. In April 2011, the Company inaugurated its second international gateway in Sri Lanka. Strengthening its seven year presence in the country, the new facility will further strengthen the reliability and stability of the Company’s services to operators and enterprise customers.

Middle East and North Africa

In the Middle East, the Company is a major investor in the SMW3 and SMW4 cable systems that serve the region and the landing partner for those systems in India. The Company is actively pursuing investment opportunities to expand the reach of its sub-sea cable infrastructure into the region. As part of its expansion in the Middle East, the Company, through a wholly owned subsidiary, is constructing a new TGN-Gulf cable system in partnership with several major telecommunications operators in the Middle East. Work began on the TGN Gulf cable during October 2009 and it is expected to be completed in the second half of 2011. The TGN Gulf cable system will act as a gateway to the TGN network connecting the region with reliable high speed bandwidth to all the key cities of the world. Furthermore, the Company has expanded its reach into the Middle East and North African enterprise market with strategic partnerships for network and managed services.

On March 2, 2009, the Company announced that it will begin offering enterprise network services in the United Arab Emirates (UAE) through a partnership agreement with Etisalat to extend its reach by offering Layer-2 Global Ethernet services into and out of the UAE. Furthermore, on June 8, 2009, the Company announced a strategic alliance with Qtel that will strengthen both companies’ network reach in the region and internationally. The Company also has other commercial network partnerships in Bahrain, Kuwait, Oman, Saudi Arabia, Egypt, Morocco and Turkey for the provision of telecommunication services. In March 2011, the Company introduced the True MidEast plan for its trueroots® customers across the US, UK and Canada. With the True MidEast plan, customers can now call Saudi Arabia, UAE, Kuwait, Bahrain, Qatar, and Oman at competitive rates, using local access numbers.

Achieving synergies with other Tata companies

Achieving synergies with other Tata companies would enable the Company to access the former’s existing customer bases and have the opportunity to share infrastructure costs. Accordingly, the Company has and continues to identify synergies and potential opportunities with other Tata companies. In particular, the Company has partnered with Tata Consultancy Services (“TCS”), a leading IT services company, on several occasions to jointly provide TCS’ customers a broad range of end-to-end IT and telecom solutions.

Implementation of the “Enterprise-wide Risk Management (ERM)” Framework

The Company has established an ERM framework to optimally identify and manage risks, as well as to comply with Clause 49 of the Securities and Exchange Board of India Listing Agreement. 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 synergies between our internal audit and the SOX compliance processes.

Discussion on Climate Change

It is now generally accepted that the use of fossil energy sources and the related greenhouse gas (GHG) emissions lead to an increase of carbon dioxide (CO₂) in the atmosphere and related adverse effects on the global climate. Tata Communications’ commitment to environmental sustainability draws from the rich heritage of the Tata group and its involvement and concern for the environment and society, which is embodied in the Tata Code of Conduct. Tata Communications’ environmental impacts result from our business operations globally and the products and solutions that we provide to our customers. To that end, Tata Communications has initiatives and programs that reduce the energy waste in our data centers and facilities through operational practices, use of energy efficient systems and use of renewable /alternative energy such as wind power to reduce the carbon footprint from use of energy in our facilities. Tata Communications offers products like Telepresence that reduce business travel and therefore help our customers to improve their environmental performance towards their sustainability objectives.

We have also established a Health, Safety and Environment (HSE) Council to review the health, safety and environmental issues in the workplace. HSE performance data will be collected, validated and consolidated using a uniform tool. HSE auditing is an integral part of the corporate control process, assuring the Company of adequate systems to ensure legal compliance, consistent HSE standards, and suitable and effective measures for maintaining a high level of health, safety and environmental protection.

The HSE Council is an independent group which reports to the Global Management Committee (GMC), and exercises governance on behalf of the GMC. It will coordinate all HSE activities, propose Company-wide HSE policies and practices, and define valid procedures for use across business units. The HSE Council has two committees - the Corporate HSE Steering Committee and the Corporate HSE Coordination Committee. The former is responsible for corporate HSE policy, strategy, guidelines and the HSE audit program while the latter fulfills advisory/coordination functions, such as defining and revising corporate HSE guidelines and coordinating and facilitating training, as well as discussing new legislative trends and exchanging knowledge.

Principal Activities

The Company is a leading global communications company offering a broad range of integrated communications services in the following three segments: Global Voice Solutions (“GVS”) Global Data and Managed Services (“GDMS”) and Others.

Set out below is a break-down of the Company’s revenues by segment:


	For the fiscal years ended March 31,
	2009		2010		2011		2011
	(In millions)
Global Voice Solutions (GVS)		56,245		61,436		65,516	US$	1,471
Global Data and Managed Services (GDMS)		38,919		42,413		46,604	US$	1,046
Others		2,131		2,231		1,720	US$	39

Total		97,295		106,080		113,840	US$	2,556

Global Voice Solution (GVS)

The Company derives a substantial portion of its revenue from Global Voice Solutions which it provides primarily to telecommunications carriers for the delivery of international calls to over 200 countries and territories (greater than 1,000 destinations).

The Company is the leading global voice solutions provider in the world, with an estimated 16.2 % market share of ILD voice traffic. The Company fully owns and operates one of the largest international voice networks with coverage in more than 200 countries and territories. It maintains over 480 direct and bilateral relationships with leading international voice telecommunication providers. Transporting more than 40 billion minutes annually of ILD and more than 10 billion minutes of NLD, the Company has a wide range of customers that can be divided into 3 main categories: Mobile, Broadband and Carriers. In addition, the Company is the worldwide leader in international access voice services (toll-free, home country direct (“HCD”) and local number services) as well as being a leading provider for other value-added services worldwide, such as ISDN, audiotext, operator, managed calling cards solutions, voice peering and the Voice over IPX services.

The Company’s portfolio of global voice solutions is comprised of the following:

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Voice Termination Services (ILD, VTS, VTS Economy, VTS Prime). Through its global NGN network, the Company carries international long distance traffic to 240 countries and territories around the world. VTS Prime, VTS and VTS Economy are solutions designed to meet each customer’s specific needs in terms of voice quality and price. VTS Prime is ideal for the Mobile, Retail and Broadband services where being the highest ratio of voice quality and additional features is required.

•

ILD Inbound Services or “Access Services” (Toll-Free, Local Number Services, HCD). The Company’s access services are fully automated, caller-dialed service options, which allow users to receive toll-free calls from various countries around the world. ITFS offers coverage from over 100 countries, UIFN from 45 countries, Local Number Services from 40 countries and HCD from over 110 countries.

•

UIFN (Universal International Free Phone Service). Sometimes referred to as a “Universal 800” or “Global 800” number. This service is available in over 45 participating countries.

•

Managed Calling Cards Solution. Enables carriers to have a private-label prepaid calling service with products and rate plans customized to their markets.

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Audiotext. Provides transport traffic to destination numbers promoted by content providers in various countries for voice, data and/or online information services which may be accessed via the international public telephone network.

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ISDN. Provides a high-quality, high-speed, clear channel data solution that delivers data connectivity to over 120 countries and is ideal for video conferencing applications.

•

Operator. Services allow end-users to originate operator-assisted calls (collect and sent paid) to and from Canada.

•

National Long Distance (“NLD”)in India

The Company has a national network of about 41,000 route kilometers for national long distance services in India.

Global Data and Managed Services (GDMS)

The Company is one of the world’s largest providers of data services, primarily focusing on International and National Private Leased Circuit (IPLC and NPLC) services and IP transit services. The Company supplies some of the world’s largest international telecom companies with transmission backbone services across the Atlantic, the Pacific, and into and out of India. As a Tier 1 ISP, the Company operates one of the largest IP networks in the world with points of presence around the globe. The Company offers a full range of customized managed and connectivity solutions to cater to the business needs of the top global multinational corporations across the world. In addition to international and national private leased circuits, the Company offers Virtual Private Networks and associated Managed Services, Ethernet Services, Internet Access, Managed Hosting, Cloud-based Services and Internet Telephony. The Company also provides other value—added offerings such as Collaboration and Conferencing services, Managed Security services, and other Professional services.

Enterprise Data Business

The Company offers customized, end-to-end voice and data solutions as well as managed services to enterprise customers worldwide, including:

•

International Private Leased Circuits (“IPLCs”). The Company provides international dedicated connectivity for customers who need reliable, 24-hour communications from a fixed point in one country to a fixed point in another. These services are provided using the Company’s international gateways, earth stations and cable stations.

•

National Private Leased Circuits (“NPLCs”). The Company provides dedicated point-to-point domestic leased lines for customers who need reliable, secure and dedicated connectivity between their offices across a particular country, such as India. The Company has set up a countrywide optical fiber cable backbone, which connects national long distance points of presence on a high capacity network.

•

Internet Leased Line Circuits. The Company provides Internet leased lines, which are a high speed, flexible bandwidth solution that provide constant internet access.

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Dedicated Internet Access Services. The Company provides Internet access service with a dedicated Internet connection. The service provides a flexible bandwidth solution with constant internet access speed.

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Frame Relay Services. The Company provides frame relay services, which are a data transmission technique used to send digital information, such as voice, data, local area network, and wide area network traffic quickly and cost-efficiently to many destinations from one port.

•

ATM Services (Asynchronous Transfer Mode). The Company provides ATM services, which are used to send digital information, such as voice, video and data traffic quickly and cost-efficiently to many destinations from one port.

•

Data Center Infrastructure and Application Services. The Company provides customers the option of outsourcing their mission-critical systems operation through system collocation, server hosting, storage, and application hosting in the Company’s data centers across India and the world whilst connecting to the Company’s global network backbone. The Company operates more than one million sq. ft. of space in data centers and collocation facilities across three continents. The Company has also introduced its Infrastructure as a Service (IaaS) offering which provides secure and elastic, on-demand computing and storage resources to businesses over the network as and when they need them. InstaCompute^TM allows organizations to manage their business in line with growing and fluctuating market demands and rapidly evolving technology.

•

Global VPN (Virtual Private Network) Services. The Company offers VPN services based on MPLS technology. Both layer 2 and layer 3 services are supported. The Company operates 118 points of presence in fiscal 2011 to deliver the service across various locations within India. The Company also offers international VPN services across 70 countries and through VNO extended coverage to over 205 countries.

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Global and Pan-India Ethernet Service. The Company offers metro, national and global Ethernet services on essentially the same footprint as its Global VPN Services. The MEF certified Ethernet services are offered on both a SDH/SONET and MPLS platform.

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Television Uplinking. The Company provides television uplinking facilities on a 24 x 7 basis to various broadcasters. The Company also provides international and domestic relay of television programs and news services via satellite and fiber on a contractual basis as well as on an on-demand basis to various media customers. The Company also uses digital satellite news gathering terminals for “on-site” live video uplinking.

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Transponder Lease Services. The Company provides transponder capacity to media broadcasters and government institutions in India.

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Hosted Contacted Center Services. The Company provides a range of contact center services hosted in the global network and based on world leading solutions from Cosmocom.

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IPLC Service. This service is an uncompressed TDM voice solution for customers making bulk inbound / outbound calls between India and foreign destinations primarily suited for large customers such as call centers.

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MVoIP and IPVoice Connect. To meet the growing international long distance calling requirements of Enterprise Customers, the Company offers VoIP solutions over its Internet and global VPN networks.

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Business Messaging and Collaboration. The Company provides hosted Microsoft Exchange messaging with security, archiving/storage, and associated collaboration applications. The service is offered as both “Ready Access Business Messaging” as an off-the-shelf software-as-a-service and as “Adaptive Business Messaging” as bespoke customer-dedicated implementations. The Company in partnership with Google also launched its InstaApps^TM offering which brings global internet-based collaboration and office tools to companies. This offering includes email and calendar, instant messaging, voice and video chat, as well as office document applications which are accessible to businesses when and where they need them.

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Business Audio and Web Conferencing. The Company provides global audio and web conferencing services to facilitate communications amongst globally dispersed teams and audiences.

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Managed Security Services. Listed in the Gartner Magic Quadrant for MSSPs, the Company is a Tier 1 provider of managed security services that enable the customer to achieve information security compliance and business continuity in the face of continuously evolving security threats. In addition to being SAS-70 Type I&II and ISO-27001 certified, the Company has achieved worldwide Cisco^® Managed Services Channel Partner (MSCP) status and Cisco^® Powered designations for its managed Firewall, Managed IDS/IPS, Managed Internet and Managed MPLS VPN Services.

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Telepresence Virtual Meeting Room Services. The Company is a leading global provider of worldwide virtual meeting room services offering managed Telepresence services for an enterprise’s private Telepresence networks and also has a complementary global network of Telepresence public rooms with 33 currently active public rooms across the world. The Company’s Telepresence exchange service is the first in the world enabling business-to-business Telepresence collaboration to businesses globally, enabling a broader ecosystem of connected rooms for enterprises and their partners.

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Media Management Platform. The Company unveiled Mosaic, its media management platform in 2010. With its cloud-based media management, Mosaic helps media customers improve cross enterprise collaboration for content creation management and multi-format delivery. It helps enterprises to deliver innovative services that meet rapidly changing consumer demands and maintain and expand audience numbers and provides the flexibility of an open operating environment and lower production costs. In 2011 this offering helped optimize the commercial delivery chain between advertiser and broadcaster, enabling faster production and preparation of content for transmission and multi-platform delivery for customers.

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Global Video Network – Video Connect. The Company launched the world’s leading dedicated global video network called Video Connect, designed to help broadcasters, studios and production houses deliver video content flexibly and cost effectively to media hotspots worldwide. It also enables permanent availability of bandwidth and seamless transmission of video at constant bit rates ensuring round the clock system availability along with analytics to provide reports on video quality.

Carrier Data Business

The Company’s portfolio of carrier data services is comprised of the following main product lines:

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Global Transmission Services. The Company’s Global Transmission Services, including IPLC and NPLC services, provide customers with dedicated high-speed connections between the Company’s network of global points of presence over which they can transport voice, data, facsimile, messaging and video conferencing. Within India, the Company operates a countrywide optical fiber cable backbone, which connects national points of presence on a high-capacity network. These services are sold as leases or as standard 15-year IRUs (Indefeasible Rights of Use). The Company’s global IP network called the Tata Global Network (TGN) is comprised of one of the most advanced and largest submarine cable networks, which connects over 240 countries with more than 210,000 km of terrestrial and submarine optic fibers. The Company builds and operates its own global ring of cable systems and is also a part of 80 other consortiums and private cables.

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IP Transit Service. The Company is a Tier 1 ISP and has a global IP backbone with communication nodes located throughout the world. The Company connects customers in more than 132 countries to the Internet.

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Local and International Internet Access Service. This service provides connectivity to customers from virtually any country to one of our Internet nodes on the Company’s global Internet backbone.

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Managed Node Service. The IP transit service option is designed to enable customers to physically locate nodes in the Company’s facilities while still being an integral part of such customer’s network.

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White Label Enterprise Service. The Company sells managed network services, such as global VPN, as well as global managed services, such as Telepresence and managed security services.

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Content Delivery Network Service. A content delivery network or content distribution network (CDN) is a system of computers networked together across the Internet that cooperates transparently moving content behind the scenes to optimize the delivery process to deliver content (especially large media content) to end-users. BitGravity’s Video Delivery solution leverages efficient network architecture to deliver superior end-user experiences easily and affordably. Videos are pre-warmed and stored in nodes across 25 locations around the world. This ensures an extremely fast time to first byte and high throughput resulting in a smooth video playback. BitGravity’s Live solution helps customers broadcast live on their site and within web-based applications with easy to implement, scalable and cost-effective live streaming.

Mobility Services

The Company’s mobility services are tailored to the specific needs of the mobile network operators, providing them with the ability to seamlessly interconnect to other mobile networks as well as to leverage the Company’s suite of innovative roaming and messaging offerings in application service provider mode. The Company’s mobility services include:

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Wireless Global Roaming. The Company offers a Wireless Global Roaming Service (“WGR”) to mobile network operators. It allows for the interconnection of signaling between different operating standards, such as the American National Standards Institute (“ANSI”) and International Telecommunications Union-Technical (“ITU-T”). It is predominantly used for international roaming of subscribers between networks using either GSM or iDEN™ technologies.

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SCCP Service. SCCP is an inter-carrier signaling transport service, which relies on global titles of layer 3 of the SS7 protocol layer to route SS7 traffic. Our SCCP service is designed for GSM and ESMR/iDEN™ mobile operators who wish to use our signaling network to interconnect to other mobile networks to allow roaming and SMS delivery. The Company also offers cross-standard SMS termination which provides, among other services, ITU-T based mobile operators with the necessary translation of GSM SMS messages and its delivery to most North American Code Division Multiple Access, or CDMA, operators.

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Managed Roaming Service (Steering of Roaming). The Managed Roaming service enables Operators to steer their outbound roaming subscribers to preferred networks.

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Intelligent CAMEL eXchange (ICX). ICX provides a single point of connectivity for an extensive CAMEL footprint, while allowing Mobile Network Operators (“MNO”) to maintain bilateral roaming agreements. Offered as a managed service, ICX is an end-to-end service, whose scope covers normalization, testing and monitoring of the MNO’s SS7 connections to their CAMEL roaming partners.

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SMS Hub Enablement. The SHE service offers a unique method of intelligent SMS routing, allowing greater flexibility and control over co-existing bilateral and hub-based SMS-terminated traffic.

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Signaling Monitoring, Alarming and Reporting Tool. This service, referred to as SS7 SMART, allows mobile operators to monitor the signaling traffic they exchange with carriers worldwide in order to monitor and block potential fraud and unsolicited use of their network. SS7 SMART embedded reporting tools also allow operators to generate traffic reports for the purposes of billing and reconciliation of their SMS interconnection agreements.

Others

In addition to the Global Voice Solutions and Global Data and Managed Services described above, the Company offers a number of other services.

Small and Medium Enterprise Segment Services

A brief description of some of the larger Small and Medium Business services provided by the Company is set forth below:

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Gateway Internet Access Services. The Company offers an enhanced integrated dial up Internet service combining multiple services like Internet access, net telephony and value-added services, to customers who are typically households and small businesses.

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Broadband Through Metro Ethernet. The Company provides broadband services using metro Ethernet technology, which enables data transfers at high speeds.

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Broadband Through DSL. The Company provides Internet access using digital subscriber line technology, which provides bandwidth of up to 11 Mbps.

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Broadband Through WIMAX. The Company currently provides Internet access using Fixed Wimax (802.16d) technology.

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Internet Leased Line Circuits. The Company provides Internet leased lines, which are a high speed, flexible bandwidth solutions that provide constant internet access.

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Net Access using Wi-Fi. The Company provides Wi-Fi, or Wireless Fidelity, with approximately 500 sites across India presently connected.

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Internet Telephony. The Company offers voice telephony over the Internet using Voice over Internet Protocol (“VoIP”), including enhanced features like flexibility in billing and plans and superior voice quality.

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Content Services. For its customers, the Company provides a range of content services, which include applications, audio and video services.

Along with the specific SME products, the entire portfolio of Enterprise products is also available for the SME segment with suitable adaptations done for the SME segment

Payments to and from Foreign Administrations or Carriers

The Company has entered into telecommunication agreements with more than 480 foreign telecommunications administrations or carriers that govern the rates of payment by the Company to the foreign administrations or carriers for use of their facilities in connecting international calls, and by the foreign administrations or carriers to the Company for the use of its facilities (and the domestic Indian networks) in connecting international calls billed abroad.

The practice among carriers for settlement of traffic is based on commercial agreements reached between the carriers exchanging traffic. Based on the agreed upon rate negotiated with each foreign telecommunications administration or carrier, the Company makes payments to the administration or carrier for outgoing traffic and receives payments from such administration or carrier for incoming traffic. Settlements between the Company and the major carriers are generally made monthly, although settlements for long-term reciprocal traffic exchange relationships (otherwise referred to as bi-laterals) can be made quarterly or annually. Settlements are made on a net basis at the applicable settlement rate. Exchange of network capacity for the transport of voice traffic with other telecommunications service providers are recorded as non-monetary transactions and measured at the carrying value of the capacities exchanged by the Company.

Revenue Sharing Arrangements in India

Although the Company provides international gateway access out of and into India, as per Indian regulation, an International Long Distance Operator (ILDO) is not allowed to access an ‘end user’ directly. Hence all calls that either originate or terminate in India must pass through the domestic networks of access providers i.e. mobile and / or landline network operators. The Company has entered into interconnect agreements with BSNL, MTNL, and other fixed-line and cellular operators in India.

The commercial terms of the Company’s agreements are based on the IUC announced by the TRAI from time to time. The Company is required to pay termination charges of LOGO 0.40 per minute for international incoming traffic to India. The rates for outgoing international traffic are not regulated and are determined between the parties.

License Fees and Tariffs

ILD and NLD Licenses

Under the Company’s ILD and NLD licenses, a license fee is payable annually in an amount equal to 6% of the adjusted gross revenues from the Company’s ILD and NLD services, respectively.

In fiscal 2005, the Company filed a dispute with the Department of Telecommunications in India (“DoT”) because the DoT was including certain income (e.g., investment and interest income, income from the sale of property, plant equipment, foreign exchange gains and other non-operating income) and excluding certain deductible expenses (e.g., bandwidth and other network related costs) while calculating adjusted gross revenues for purposes of the license fees. The DoT refused to consider the Company’s arguments.

In fiscal 2005, the Company also filed a petition with the Telecom Disputes Settlement and Appellate Tribunal (“TDSAT”) to obtain TDSAT’s clarification on whether or not the basis of DoT’s determination of license fees payable by the Company was appropriate. In August 2007, the TDSAT concluded that license fees were not payable on certain income, such as income from investments, sales of immovable property, plant and equipment, foreign exchange gains and other non-operating income. Additionally, the TDSAT concluded that bandwidth and other similar network costs incurred should not be deducted from revenues in computing license fees.

The Company challenged the TDSAT conclusion in the Supreme Court of India, the outcome of which is currently pending. The Company, on the basis of an external legal opinion, expects the Supreme Court of India to overturn the TDSAT conclusion and permit deduction of bandwidth and other similar network costs from revenues retrospectively from fiscal 2003 in order to compute license fees.

In January 2008, DoT issued an additional license fee demand for fiscals 2003, 2004 and 2005 of LOGO 2,950 million for (a) additional payment of license fees (computed on the basis of the TDSAT conclusion) of LOGO 829 million, (b) compounded interest of LOGO 912 million on unpaid license fees, (c) a penalty of LOGO 772 million and interest on the penalty of LOGO 386 million (together referred to as “penalty”) totaling LOGO 1,158 million, (all of (a)-(c) aggregating LOGO 2,899 million), and (d) an excess claim of LOGO 51 million by DoT which has since been adjusted against the demands in subsequent years.

In January 2008, the Company made payment of LOGO 2,950 million, which the Company recorded as license fees paid under protest. The additional license fees and interest totaling LOGO 1,741 million demanded by the DoT have been accrued as liabilities by recognizing an expense. The accrued liability of LOGO 1,741 million has not been offset against the payment of LOGO 2,950 million pending outcome of the Company’s challenge against the TDSAT conclusion in the Supreme Court of India, as the Company believes that its challenge is more likely to be successful in the Supreme Court of India and deduction of bandwidth and other network-related costs will be permitted for the purpose of computing license fees.

The Company had also challenged the legality of penalty provisions in the license agreement in TDSAT. TDSAT accepted the Company’s position and ruled in favour of the Company. Striking the penalty provisions in the license agreement. Consequently, LOGO 1,158 million became refundable by DoT. The Company filed a petition in TDSAT seeking it to direct DoT to refund the penalty amounting to LOGO 1,158 million, along with interest thereon amounting to LOGO 940 million. The TDSAT accepted the Company’s contention and accordingly, on July 13, 2011, ordered DoT to refund the penalty of LOGO 1,158 million along with interest thereon of LOGO 940 million. However, DoT has disputed the order of TDSAT and has filed an appeal against TDSAT’s order in the Supreme Court.

The Company has not recorded an expense and liability in respect of the DoT’s claim for a penalty and interest on the penalty totaling LOGO 1,158 million as the Company believes that the DoT’s claim will not be sustained. In accordance with the license agreement, a penalty and any interest on a penalty is payable to the DoT only if the shortfall in license fees paid in any fiscal year is more than 10% of the license fees payable. The DoT terminated the Company’s exclusive right to provide international long distance service in fiscal 2002 and granted a compensation of LOGO 793 million (as certified by the Government of India’s auditors) to the Company (the compensation was paid by the DoT in April 2008). In accordance with the license agreement, the compensation receivable from the DoT should have been offset against the license fees, as the agreement permits the deduction of any amounts due to the Company from the DoT from any amounts payable by the Company to the DoT. The penalty was computed by the DoT without offsetting the compensation of LOGO 793 million (US$ 18 million). Had the DoT offset the compensation due to the Company against the additional license fees claimed from the Company, consequent to the TDSAT conclusion, the license fees paid would have been short by lower than 10% of the license fees payable in respect of those fiscal years.

In fiscal 2010, DoT completed its assessment for fiscal 2006 and raised a demand of LOGO 1,046 million. The Company challenged DoT’s order in the TDSAT and TDSAT, in its order dated August 19, 2010, held: a) a license fee is not applicable on non-telecom income and other miscellaneous income; b) penalty and interest thereon is not applicable on a shortfall of a license fee; c) a deduction in AGR for cost items is not allowed; d) a suo-moto inter-license adjustment by the licensee is not permitted. Hence, the Company’s liability was reduced to LOGO 41 million including interest up to September 2011.

The DoT has filed an appeal in the Supreme Court against the above mentioned judgment of TDSAT dated August 19, 2010 and the same has been tagged with other similar appeals pending for the previous years.

License fees under the ISP with Internet Telephony (Restricted) License

The Company pays an annual license fee to the DoT under its ISP with Internet Telephony (restricted) license in an amount of 6% of AGR. AGR has been defined as gross revenue including certain revenues and excluding certain charges. The Company paid license fees of approximately LOGO 56 million for fiscals 2009, 2010 and 2011, representing 6% of AGR excluding income from non-licensed and financial activities, consistent with the Company’s position that it should be permitted to exclude non-ISP related revenue. The Company, however, has made a provision of approximately LOGO 45 million in the event the DoT and TDSAT decide against the Company’s position.

Tariffs for IPLC (Half Circuits)

In 2006, the TRAI fixed ceilings on tariffs in respect of E-1 (2MBPS line), DS-3 (45 MBPS) and STM-1 (155 MBPS) capacities at LOGO 1.3 million, LOGO 10.4 million and LOGO 29.9 million per annum, respectively. Subsequently, the DoT permitted the resale of IPLC services, although it is not clear if any resellers have begun operations. Further, in June 2007, the TRAI directed owners of cable landing stations to allow eligible Indian international telecommunication entities to access international submarine cable capacity on any submarine cable system. This resulted in full capacity landing by eligible Indian international telecommunication entities, which may also result in a reduction in prices of IPLC services.

Domestic Leased Circuit Tariffs

In 2005, the TRAI fixed ceilings on tariffs in respect of E-1 (2MBPS line), DS-3 (45 MBPS) and STM-1 (155 MBPS) capacities at LOGO 0.85 million, LOGO 6.16 million an LOGO 16.5 million per annum, respectively.

Sales and Marketing

Global Voice Solutions

The Company’s Global Voice Solutions business unit is focused on international and India long distance voice solutions, which are provided to mobile operators, broadband operators, web portals and carrier customers. The Global Voice Solutions (“GVS”) sales team is the primary interface with telecommunication operator customers throughout the world. The team is responsible for building relationships with local/regional service provider customers in order for them to sell voice solutions to their end users. The GVS sales team is also responsible for securing supply capacity in support of voice termination services around the world. The team is comprised of a global organization, maintaining a local presence in key markets around the globe. The Global Voice product marketing team is engaged in new product development as well as managing existing product operations to meet customer and market requirements.

Global Data and Managed Services

Enterprise Data

The Company’s Enterprise Data business unit provides a suite of managed network and connectivity solutions, managed services (including managed infrastructure) and applications services to enterprises worldwide to meet their business needs and growth requirements with a focus on specializing in emerging markets. The business needs of enterprises are taken into consideration as our global product management organization develops launches and broadens enterprise services in all markets. Each region has a direct and an indirect (Channel Partner) strategy, and through well-defined strategies, the Company provides customized solutions that meet the needs of enterprise customers on a regional as well as global basis.

In India, the Enterprise Business Unit is structured to service differentiated segments via different pan-India sales groups. Large corporate and government customers are addressed by a direct sales team, whereas enterprise services to medium enterprises are led through an indirect or channel partner model. A specialized channel sales and enablement team manages approximately 150 channel partners to provide network services and managed services to the target segment.

Internationally, the Enterprise Business Unit is managed in each region through the Tata Communications’ direct and indirect teams located in the Americas, Europe and Africa, the Middle East and North Africa (MENA), and Asia. These teams are focused on providing network services and managed services to cater to the business needs of the top 2,000 global multinational corporations as well as the fast growing emerging enterprises in those regions. In addition, the Company’s presence in these geographies is being expanded by leveraging the regional and global partners (system integrators and IT partners) to serve some of the large corporations as well as mid-tier enterprises in these markets.

Carrier Data

For carrier connectivity services, the Company operates a focused sales force predominantly targeting its largest global and India-based carrier customers. For key global customers, the teams are organized under a single global account manager who is based near the customer’s headquarters, and who in turn supports account managers based in regions where the customer also does business. There is a dedicated team in India that supports India-based carriers as well as all global carrier requirements in this particular market.

Others

The Small and Medium Enterprise Unit primarily caters to small and medium enterprise business customers in India which primarily consist of small/home offices and small and medium sized enterprises. The large range of the products of this unit includes connectivity and collaboration solutions aimed at improving the productivity of small and medium businesses. The connectivity solutions include internet leased line, broadband and wi-fi solutions while the collaboration solutions include VoIP, hosted contact center, cloud based business application services and infrastructure as service offerings. The products of this unit are standardized for mass usage as well as customized in the case of the medium enterprise customers.

The products are sold through a mix of direct sales channel. Alternate channels like direct selling associates, channel partners and online selling are also available. The unit places specific emphasis on creating awareness and educating prospective customers about the Company’s products

Further growth in this business was linked to the Company being able to successfully acquire spectrum for creating access networks. Unfortunately, the Company was not able to acquire spectrum in any of the circles in the last auction for Broadband Wireless Access. The auction closed at prices that were seen to be in excess of what the current Broadband business cases would be able to support and seemed to reflect the effects of a perceived scarcity of spectrum combined with the limited number of slots being auctioned. In the immediate term, the Company will step-up its focus on Small and Medium Enterprises (SMEs) and will approach the market led by a portfolio of business applications.

The small business segment in India has been growing at a frantic pace and the Internet is proving to be a decisive edge for small businesses to overcome the various other infrastructural challenges in the country. The Company has been pursuing a focused strategy for small businesses with a specific range of highly customized Internet Leased line services along with VoIP and Value Added Services like Security and Web hosting. These existing capabilities that our Company has developed, its existing customer base of SMEs, its business applications portfolio and current network are particularly suited to growing our SME business. Also, the Company has started offering cloud based services like Insta Compute^TM and InstaOffice^TM to the SME customers.

Government Regulations

The business of the Company and its subsidiaries is subject to comprehensive regulation by various governmental bodies around the world, including in India, the U.S. and Europe.

India

The Ministry of Communications of the Government of India, through the Telecom Commission and the DoT, is responsible for telecom policy and licensing in India. The TRAI is responsible for ensuring that the interests of consumers are protected and nurturing conditions for the growth of telecommunications, broadcasting and cable services in a manner and at a pace that will enable India to play a leading role in the emerging global information society. The Company has ILD, NLD, Internet Telephony Service Provider (ITSP), TV uplinking and unified messaging service licenses in India.

United States

In the U.S., the Federal Communications Commission (“FCC”) exercises jurisdiction over the facilities and services that the Company uses to provide interstate and international telecommunications services. The FCC may promulgate new rules, revise old rules, or otherwise change regulatory requirements that affect the Company and/or its services and facilities from time to time; if challenged, such changes may be subject to judicial review. The Company is unable to predict future FCC rulings and the results of any subsequent judicial review or how these might affect our operations. State regulatory commissions generally have jurisdiction over intrastate telecommunications services and related facilities, but the Company does not currently provide intrastate services.

International Regulation. The Company has obtained the necessary FCC authority under Section 214 of the Communications Act of 1934, to use on a facilities and resale basis, various transmission media to provide domestic and international switched and private line services on a non-dominant carrier basis, except that the Company is regulated as a dominant carrier on the U.S.—India route. The Company also holds multiple FCC licenses granted under the Cable Landing License Act and FCC rules to own and operate undersea cables that land on U.S. shores. In addition to maintaining the FCC licenses, the Company is subject to various requirements regarding common carrier operations, network security obligations, approvals for certain corporate transactions, and certain reports and fees.

Canada

The Canadian Radio-television and Telecommunications Commission (“CRTC”) is the regulatory authority in Canada that is charged with regulating companies that provide telecommunications services in Canada. Industry Canada is the federal ministry that regulates the use of wireless spectrum in Canada. The Company holds a Basic International Telecommunications Service (“BITS”) license issued by the CRTC, which authorizes the Company to operate telecommunications facilities and services used in transporting basic telecommunications service traffic between Canada and other countries. The Company also holds a number of International Submarine Cable licenses, also issued by the CRTC. The Company holds a number of earth station licenses issued by Industry Canada for its earth stations that provide telecommunications services by means of satellites.

European Union

The Company provides international telecommunications services in several of the member states of the European Union (“EU”). In the EU, the regulation of the telecommunications industry is governed at a supranational level by the European Parliament, Council and Commission. Implementation of EU directives has not been uniform across the Member States. Even with harmonization, the national regulatory agencies continue to be responsible for issuing general authorizations and specific licenses. The Company is required to obtain and maintain a variety of telecommunications authorizations in the countries in which it operates. The Company

must also comply with a variety of regulatory obligations, including obtaining permits to land its cables in the territories to which they are connected and payment of regulatory fees.

Asia-Pacific Region

The Company holds all necessary telecommunications and other licenses that permit it to own and operate assets in key countries and regions, including Taiwan, Japan, Hong Kong and Singapore.

Other Markets

The Company is also subject to regulation in several other countries throughout the world in connection with its subsea cable, carrier services and other telecommunications service activities. In these jurisdictions, the Company’s local operating entities hold non-exclusive licenses or operate pursuant to general authorization.

Organizational Structure

The Company is partially owned by some of the Tata companies. The Tata companies are comprised of over 90 operating companies in seven business sectors: information systems and communications; engineering; materials; services; energy; consumer products; and chemicals. The Tata companies are one of India’s largest and most respected business conglomerates, with estimated revenues of approximately US$ 85 billion in fiscal 2011. The Tata companies collectively employ around 395,000 people. The Tata companies have operations in more than 80 countries and export products and services to 85 countries.

As of March 31, 2011, Panatone Finvest Limited, in conjunction with certain other Tata companies, held 50.03% of the outstanding equity of the Company, and the Government of India held 26.12%. See “Item 4-History and Development of the Company”.

As of September 30, 2011, the Company and its subsidiaries (including its joint ventures/Equity Method Investees but excluding stock held for investment purposes only) included the following legal entities:

LOGO

Tata Communications Internet Services Limited (“TCISL”) filed a scheme of merger with the Honorable High Court of Bombay on May 4, 2011 for the merger of TCISL with the Company. On August 20, 2011, the Honorable High Court of Bombay sanctioned the merger of TCISL with the Company. The merger was effective from April 1, 2010.

Tata Communications (America) Inc.

In order to simplify and streamline our operations in the United States, during fiscal 2011, Tata Communications (US) Inc., Tata Communications Services (America) Inc. and VSNL International (IPCO), LLC were merged into Tata Communications (America) Inc., with the latter being the surviving entity. Also, VSNL International (Global) Corp. was merged into VSNL International (ITXC) Corp. with the latter being the surviving entity.

Significant Subsidiaries

Tata Communications International Pte Limited

Tata Communications International Pte Limited (“TCIPL”) (formerly known as VSNL International Pte Limited) incorporated in Singapore, is a wholly owned direct subsidiary of the Company that serves as the Company’s international holding company for the Company’s operations outside of India, with the exception of the Company’s activities in South Africa and Sri Lanka, which are undertaken by different entities. TCIPL also serves as an operating company with significant operations in Singapore, providing customers communications services into and out of Singapore.

Neotel (Pty) Limited (Equity method investee)

The Company through a wholly owned subsidiary incorporated in Singapore acquired 43.16% of SEPCO Communications Pty. Ltd (SEPCO), a company incorporated in South Africa, which in turn owns 51% in Neotel, also a company incorporated in South Africa.

In January 2009, the Company through the same wholly owned subsidiary in Singapore acquired an additional 27% stake directly in Neotel. The Company, which had an effective holding of 49% in Neotel, increased its effective holding in Neotel to 61.5% effective from May 2011 through its wholly owned subsidiary VSNL SNOSPV Pte. Ltd. Consequently, Neotel has become a subsidiary of the Company. Neotel offers telecommunication services to the wholesale, enterprises and consumer segments. Neotel runs the first Next Generation Network and the first CDMA network of South Africa (SA).

Property, Plants and Equipment

The Company’s operations are conducted from owned and leased properties in the various locations in which the Company and its subsidiaries conduct business. The Company’s property, plant and equipment which has a carrying amount of LOGO 16,864 million (US$ 379 million) are provided as security against the Company’s non-convertible debentures to the extent of LOGO 12,500 million (US$ 281 million).

The major services provided by the Company are based on its bandwidth capacity in various undersea cable and land cable systems and satellites. These assets are briefly described below.

Undersea Cables

The Company has ownership interests and access to capacity in various undersea cables interconnecting the South Asia region, as well as linking that region with Europe, Africa, North America and Asia-Pacific.

The Company owns and operates six specific fiber-optic cable systems: TGN-Pacific, an eight-fiber pair ring cable system between Japan and the West Coast of the U.S and a four-fiber pair linear submarine cable system from Japan to Guam that is the largest cable system across the Pacific in terms of activated and future capacity design; TGN-Atlantic, which is a four-fiber pair ring cable system between the East Coast of the U.S. and the UK; TGN-WER, which is a four-fiber pair ring cable system between Portugal, Spain and the UK; TGN-Northern Europe, which is a four-fiber pair linear system from the UK to the Netherlands; Tata Indicom Cable (TIC), which is a 3,100 km eight fiber pair submarine cable system between Chennai, India and Singapore and TGN-Intra Asia, a wholly-owned four fiber pair linear submarine cable system connecting Singapore, Hong Kong, and Tokyo. The TGN-Intra Asia also directly connects to partners in Vietnam and in the Philippines through branching units. The TGN-Intra Asia System has added over 1,100GBit/s lit capacity, which represents just 10% of the potential system capacity.

In order to meet fast growing bandwidth and diversity requirements in India, the Company has taken the initiative to invest in two new submarine cable systems between India and Europe linking Mumbai, India to Marseille, France. The first is a private system and will be known as TGN-Eurasia. TGN-Eurasia will have a minimum capacity of 1.28 Tbps and is expected to be in service in the second half of 2011. The second is a shared system based upon the traditional consortium model and is known as IMEWE (India-Middle East-Western Europe) having a minimum design capacity of 3.84 Tbps and landing in 8 countries. This cable went into service in December 2010.

The Company has also secured IRU capacity in the SEA (South & East Africa) cable system (SEACOM). This system was built under a third party initiative and the main segment between South Africa and Mumbai, India was put into service in August 2009. As of August 2009, the SEACOM system provides direct connectivity from South Africa and Eastern Africa to India, and will provide direct connectivity to Europe before the end of 2011.

The Company also has ownership in the South East Asia-Middle East-Western Europe 3 (SEA-ME-WE 3) consortium cable, a medium capacity undersea optical fiber cable extending from Germany to Japan and Australia that lands in a total of 33 countries and which carries the Company’s voice, data and Internet traffic between those countries.

The Company also has ownership in South East Asia-Middle East-Western Europe 4 (SEA-ME-WE4), a high capacity undersea cable system between France and Singapore which lands in 14 countries in Southeast Asia, the Middle East and Europe. Since going into service in 2005, this system has been upgraded twice and is currently undergoing a third upgrade which is projected to be completed towards the end of 2011.

The Company has ownership in the Asia Pacific Cable Network 2 (APCN2) consortium cable, a large capacity undersea optical fiber cable ring extending from Singapore to Japan via Hong Kong, the Philippines, South Korea, Taiwan and China which carries some of the Company’s voice, data and Internet traffic between those countries.

The Company has also invested in the South African Telephony-3 /South Asia Far East (SAT-3 /SAFE) undersea cable linking India and Malaysia in the East to Portugal in the West via South Africa. The total length of this link is 28,800 km with a design life of 25 years. The Company operates voice, data and Internet circuits on this undersea cable.

As part of its expansion in the Middle East, the Company, through a wholly owned subsidiary, is constructing a new TGN-Gulf cable system in partnership with several major telecommunications operators in the Middle East. Work began on the TGN-Gulf cable during October 2009 and is expected to be completed in the second half of 2011. TGN-Gulf cable will act as a gateway to the Tata Global Network connecting the region with reliable high speed bandwidth to many key global cities.

In order to further meet fast growing bandwidth and diversity requirements from Africa to Europe and the U.S, the Company has taken the initiative to invest in a new submarine cable system between South Africa and Europe, linking Cape Town, South Africa to London, U.K. along with 12 intermediate landings on the west coast of Africa and Europe. The system will be known as WACS (West Africa Cable System), and is expected to be completed in the first half of 2012. The Company has secured IRU capacity in the PPC-1 (Pipe Pacific Cable 1) cable system that was completed and came in to service in late October 2009. The PPC-1 system provides direct connectivity from the Company’s cable station facility in Guam to Sydney, Australia, and will address the growing needs of Australia for bandwidth and diversity.

The Company also has lesser ownership interests in various undersea consortium cables- the Trans Atlantic-14 cable (connecting the UK, France, Germany and the U.S.), the FLAG Europe-Asia Cable (connecting Europe and Asia), the Japan-US Cable (connecting the U.S. and Japan), the Americas-2 Cable (connecting Caribbean and Latin American countries), the Columbus-3 cable system (connecting Portugal and the U.S.) and a new Unity Cable between Japan and the U.S.

Points of Presence

The Company has equipped nodes in the Americas, Europe, the Middle East, Africa and Asia Pacific to provide and support the Company’s suite of products and services globally. Our coverage on VPN extends to 70 countries with 177 Government VPN (“GVPN”) PoPs and Network to Network Interface (“NNIs”) and, through our VNO, the Company extends service to over 205 countries. The Company also has over 226 IP Transit pops strategically located in 29 countries and 2250 G of IP backbone capacity that is spread over 5 continents. The Company is one of the top 10 Global Tier 1 Providers and has one of the the top 10 Best Connected Networks with 1700 Petabits of Internet traffic carried every month.

Property and Plants

In addition to the cables and points of presence described above, the Company’s infrastructure includes owned and leased property made up of cable station, collocation, rack and cabinet space in collocation centers in 20 countries with those material properties detailed below (Note : IDCs, administrative offices, Telepresence rooms and Partnerships sites are excluded)


Region			Square feet
North America			741,116
Europe			205,006
Asia-Pacific			81,107

The Company also has three large earth station teleports in Canada to operate in the Atlantic and Pacific Ocean regions and one small leased teleport in Denmark to operate in the Indian Ocean region. From these sites, it currently accesses more than 15 different satellites and can use approximately 50 satellite earth station antennas.

Voice Switches

For NLD traffic in India, the Company operates nine TDM switches and an NGN Voice network. For the Company’s ILD traffic, the Company operates 16 NGN Voice international switching facilities of which four are located in India, three in the U.S., two in each of Canada and South Africa( Johannesburg and Cape Town) and one in each of Madrid (Spain), London (U.K.), Frankfurt (Germany), Singapore and Sydney (Australia). All gateways route international traffic (including transit traffic) to and from the domestic telecommunications network using a combination of terrestrial fiber optic facilities, undersea cable links and satellite transmission facilities.

NGN

The Company has deployed and commissioned an NGN Voice network to cater to its NLD voice business. The infrastructure consists of soft-switches in Mumbai, Delhi and Chennai, India. The network was commissioned in July 2007 and its usage has now been extended to include international traffic.

Similarly, for its ILD traffic, the Company has deployed NGN Voice soft-switch components for international requirements in twelve locations (Los Angeles, Newark, New York, Montreal, Toronto, London, Madrid, Frankfurt, Sydney, Singapore, Johannesburg and Cape Town).

India Domestic Bandwidth Media, Access Network & Data Centers

Since 2002, the Company has deployed NLD connectivity with 196 points of presence on 44,924 segment wise STM-1 equivalent bandwidth. NLD augmentations have been implemented to meet the forecasted growth.

WiMax

The Company has deployed a wireless access network across India to address the last-mile access requirements of large enterprise and SME businesses. The Company’s wireless access network is based on the state of the art WiMax technology in the 3.3 -3.4 GHz band. The Company’s deployment covers 201 cities with 1,446 base stations. With this deployment, the Company now has an extensive wireless coverage providing tremendous reach to its customers in these markets. The Company is expanding the WiMax network further to cover 223 cities by the end of 2011.

Data Centers

Tata Communications is one of the largest players in the data center business in India, with facilities in many of the major commercial centers. It recently opened its largest center in Pune with nearly 55,000 square feet of rack space. During fiscal 2011, the Company launched the TCX data center in Singapore which will have a total potential of 66,000 gross square feet of data center capacity built to meet the growing IT outsourcing needs of enterprises in Asia Pacific. The Company also added 13,500 square feet of data center space in the cities of Mumbai, Chennai, and Delhi, India.

In addition to increasing data center capacity during fiscal 2011, the Company launched an Infrastructure as a Service (IaaS) offering branded InstaCompute^TM in the India and Singapore markets. The Company made enhancements to its existing hosting and storage services including managed Database Administration, network ports, and new releases of the services portfolio focused on usage based services. In October 2010, the Company expanded in the cloud space to deliver self-service, pay-as-you use IT application and data center infrastructure services, accessed through the internet by launching the InstaCompute^TM and InstaOffice^TM offering. Launched in India, followed by Singapore, these services will help businesses harness the power of IT infrastructure and applications without investing capital, manpower and management resources.

Non-India Domestic Bandwidth Media Carrying Voice, Data and IP Circuits

As of March 31, 2011, the Company operated a total of 1,104,644 international circuits supporting the Company’s voice and data services and products. Of the 1,104,644 international circuits, 993,279 circuits were used to support voice services and products. The remaining 111,365 circuits are a combination of backbone circuits connecting the Company’s extensive global data networks to provide data and enterprise voice services.

Satellites

In India, the Company has six satellite earth stations in operation. The Company operates a total of 1343 Switched TDM voice circuits using one of these earth stations in India, resulting in a total of 296 equivalent 64 Kbps satellite channels. The Company also operates data circuits on these satellites for a total of 8 equivalent 64 Kbps satellite channels.

The Company also has three large earth station teleports in Canada and one small leased teleport in Europe. From these sites, it accesses more than 8 different satellites but also has extra antennas that can operate on different satellites if required.

Other Facilities

The Company’s infrastructure includes various facilities used primarily for its various specialized and value-added Enterprise and Internet services. As of March 31, 2011, the Company owned a high capacity underground fiber optic cable across the country, approximately six earth stations, terrestrial communication links connecting the Company’s National Domestic Switches (nine TDM Switches, nine NGN Media Gateways and three softswitches) and the Company’s international switches (four TDM Switches, nine NGN Media Gateways, three softswitches and one IN Switch) at four of its locations with its earth stations and cable stations and a variety of hardware used in more than 160 cities in India for the Company’s 124 Internet access nodes in India. As of March 31, 2011, the Company has a high capacity underground fiber optic cable national network of about 41,000 route kilometers.

Demerger of Surplus Land

Under the terms of the SHA signed between the GoI and the Strategic Partner (the parties) at the time of a disinvestment of erstwhile VSNL, 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 could not hive off or demerge the land into a separate entity, alternative courses as stipulated in the SHA would be explored. A draft scheme of demerger was presented to the board of the Company in April 2005, and the parties continue to examine the legality and feasibility of implementing the scheme. The land identified for demerger at different locations measured 773.13 acres.

The VSNL Employees Cooperative Housing Society, Chennai (Society) petitioned the Hon’ble Delhi High Court for a transfer of 32.5 acres of land situated at Padianallur, Chennai, which was part of the identified surplus land. According to the order of the Honorable High Court and the advice from the GoI, the process of transferring the said land to the Society was completed in July 2009. As a result, the surviving land now measures 740.63 acres having a book value of LOGO 1.63 million.

ITEM 4 A.

UNRESOLVED STAFF COMMENTS

None.

ITEM 5.

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following discussion of the results of operations for the fiscal years ended 2009, 2010 and 2011 and the financial condition of the Company as at March 31, 2010 and 2011 should be read in conjunction with the audited consolidated financial statements of the Company and the notes thereto included in this Annual Report prepared in accordance with US GAAP. The Company’s fiscal year ends on March 31 of each year, and therefore all references to a particular fiscal year are to the twelve months ended March 31 of such year.

Introduction

The Company is a facilities-based service provider of a broad range of integrated communications services. The Company generates revenue from three business segments: Global Voice Solutions, Global Data and Managed Services, and Others.

Global Voice Solutions

The Company is one of the world’s largest ILD voice players with approximately 16.2% market share. The Company owns and operates international networks with coverage in more than 200 countries and territories and maintains over 1,600 direct and bilateral relationships with leading international voice telecommunication providers. Traffic into and out of India continues to represent a significant portion of the Company’s ILD Voice segment and the Company is a market leader in terms of the volume of inbound termination of calls to India. In fiscal 2011, the Company carried more than 40 billion minutes of ILD voice traffic and more than 10 billion minutes of NLD voice traffic.

Over the past several years, the global voice market has experienced an increase in traffic volumes as a result of significant growth in telephone density in developing countries and high growth rates in the number of cellular subscribers worldwide.

In India, where the Company is a significant player in ILD voice services, the telecom market is growing rapidly and is expected to be worth US$ 66 billion by 2015 compared with US$ 37 billion in 2010. According to the latest figures from the Telecom Regulatory Authority of India (TRAI), as of March 31, 2011, India’s mobile subscriber base stood at 811.59 million having increased by 39% from 584 million, while the fixed-line subscriber base declined by 6% from 37 million to 34.73 million, and the broadband subscriber base reached 11.87 million. The fiscal year 2011 witnessed significant regulatory developments including the implementation of Mobile Number Portability (MNP), which was launched in January 2011 and the issuance of 3G licenses. In summary, the telecom landscape continues to evolve and operators such as our Company will have to constantly transform themselves to remain competitive to address new market segments. The international and national long distance voice market continues to be a business of scale, with constant pressures on prices and margins. The economic downturn has further increased the pressure on prices for international voice calls. Alternate services, such as portal-based offerings on the Web, are growing in popularity and usage has also added to this pressure. The share of mobile communications continues to grow in relation to fixed voice and there is an increasing use of Voice over Internet Protocol (VoIP) in providing services.

The need for profitability in a largely commoditized market is making operators seek both scale and efficiency in their operations. Apart from driving consolidation, this could also create new business models based on greater collaboration between operators, which we believe the Company is well positioned to benefit from.

Global Data and Managed Services

The Indian GDMS segment has been growing at a very healthy rate. This growth is driven by two factors. Firstly, Indian businesses are increasingly adopting IT and networking technology to improve productivity and create competitive advantage. Secondly, since Indian business is growing globally and international companies are increasing their Indian presence, there is an associated need for greater connectivity to and within India. Banking and financial services, information technology and business process outsourcing/call centers are some examples of high growth sectors in the country.

Internationally, increasing costs of capital have resulted in the delay and cancellation of private data center facilities, driving more purchases of data center collocation and hosted computing services from external service providers. The Company is one of the largest players in the data center business in India. In September 2010, the Company announced the opening of its state-of-the-art Tata Communications Exchange (TCX) data center in Singapore, built to meet the growing IT outsourcing needs of enterprises in Asia Pacific. It will have a total potential of 66,000 sq ft of data center space and will provide increased capacity for both domestic and international firms, bringing them cost and resource efficiencies as well as greater IT service availability and performance. The Company’s global and India managed hosting services are aggressively supporting this direction. Along with managed hosting there is an increasing trend on global as well as Indian enterprises to outsource telecom services on a “Managed” basis. The Company has over the years developed other Managed services like Managed Security services, Telepresence and Infrastructure as a Service which enables the Company to capitalize on these emerging trends in the enterprise space. These managed services also enable enterprises to reduce costs of In-house Telecom teams and at the same time enable the Company to capture a higher portion of the overall telecom spend of enterprises.

Tata Communications’ endeavor is to continuously develop new products and services to enhance value for customers. With this in mind the Company has made certain investments in the cloud computing, media and entertainment space in the past year. In the media and entertainment space, in 2008, the Company had entered into a strategic alliance with an award-winning content delivery network (CDN) company, BitGravity. In February 2011, the Company completed its acquisition of a majority interest in BitGravity. This acquisition complements the Company’s global media and enterprise strategy and will add enhanced CDN and streaming capabilities to the growing line-up of value-added hosting, storage, and security services, all of which leverage the Company’s global IP network. The addition of BitGravity’s product portfolio and its employee skill set will further accelerate the delivery of new features and services to Tata Communications’ customers. The Company has also made investments in the cloud computing space to deliver self-service, pay-as-you-use IT application and data center infrastructure services, accessed through the Internet with the launch of its cloud offerings—InstaCompute^TM in India and Singapore in the past year. InstaCompute^TM is an Infrastructure as a Service (IaaS) offering that is secure, elastic and on-demand. Computing and storage resources are delivered to businesses over the Company’s IP backbone and MPLS networks, as and when they need them. The Company plans to extend these offerings to Europe, the US and South Africa. The Company has also combined its next generation managed security solutions with superior Internet leased line products, and launched its Internet Clean Pipe Solution for small and medium business segments. As part of the Global Media and Entertainment Services (GMES) portfolio, Tata Communications unveiled Video Connect and Mosaic. Video Connect is the world’s leading dedicated global video network designed to help broadcasters, studios and production houses deliver video content flexibly and cost effectively to media hotspots worldwide. Mosaic is Tata Communications’ media management platform with which its cloud based media management capability helps media customers improve cross enterprise collaboration for content creation management and multi-format delivery.

The global data market is undergoing rapid changes. With the growing need for bandwidth around the world, there continues to be growth in the demand for submarine cable capacity. Several new cable systems have been announced or are being constructed in different markets, such as across the Pacific, within Asia, connecting Europe and Asia and on both the east and west coasts of Africa. Availability of large capacity in line with market growth and diversity to provide continuity of services in the event of cable cuts due to acts of man or nature continues to be important drivers of this growth. The addition of these new cables presents both investment opportunities as well as downward price challenges.

The global enterprise market has seen growing demand for network services, data center services, and value-added services. While the global recession has caused delays in decision-making and deferred procurement by some customer segments, information and communications technology investments by enterprises broadly continues to grow. This is motivated by the need for better engagement and service levels with their own customers, the need for higher velocity and flexibility in business, and the growth of global supply chains and markets. Industry leaders are more sharply focused on increasing the ratio of IT budgets that are applied to competitive advantage and innovation versus basic services and compliance. Though the global enterprise market has slowly and steadily emerged from the economic recession the focus of most CIOs still remains on cost saving IT and telecom solutions.

Also over the past three years the Company has focused on creating its competitive differentiator in emerging markets. Leveraging its strong base in one of the fastest growing emerging markets of India, the Company has further expanded its presence in other emerging markets like the Middle East, South Africa and parts of Asia. The increasing commerce between the developed countries and emerging markets in the post slow down era has resulted in increased need for telecom connectivity to and from emerging markets. The Company is thus in a competitive position to serve the needs of enterprises to and from emerging markets and going ahead the Company expects to continue investing in emerging markets to further strengthen its position.

Others

In the Small and Medium Enterprise Unit business space, the Company offers connectivity, managed services, cloud services, messaging, internet telephony and a wide variety of content services as a premier Internet Service Provider (ISP). The Company has stepped up its focus on the rapidly growing Small and Medium Enterprise (SME’s) segment and is approaching the market led by a portfolio of business applications which include highly customized Internet Leased Line services along with VoIP and Value Added Services like Security and Web hosting, Hosted Contact Center, Business Application solutions and Infrastructure as a Service offerings.

New Growth Opportunities

TCTSL

With the increasing need for reducing costs, several carriers around the world are looking to rationalize costs and relocate some of their business processes. They are also looking to improve operating efficiencies and network/infrastructure productivity. Leveraging its operating expertise across a wide variety of technology platforms as well as global experience in different developed and emerging markets around the world, and its relationships with these carriers, the Company is seeking to cater to this need. This initiative is being implemented through Tata Communications Transformation Services Limited (“TCTSL”), a wholly-owned subsidiary in India. Through its world-class delivery centers in Pune and in Chennai, TCTSL provides business transformation, telecom BPO and consultancy services to telecommunications carriers around the world. TCTSL delivers solutions for all stages of the carrier processes and operations, such as network engineering, design, implementation and operations. TCTSL operations are totally independent, ensuring full confidentiality in managing the business processes of its customers. TCTSL employs approximately 1,053 people.

TCBIL

In order to capture emerging opportunities in the banking and financial services sectors, the Company formed Tata Communications Banking InfraSolutions Limited (“TCBIL”) in February 2008, as its wholly-owned subsidiary. With a highly experienced team of professionals from the banking and financial services industry, TCBIL commenced commercial operations in April 2009. TCBIL provides infrastructure solutions to the banking industry, including services relating to establishing and operating Automated Teller Machines (ATMs), Electronic Transaction Processing Solutions (ETPS), Check Truncation Services (CTS), and Core Banking Solutions (CBS).

Other Joint Ventures and Acquisitions

BitGravity

In fiscal 2011, the Company completed its acquisition of a majority interest in BitGravity, an award-winning content delivery network (CDN) company. BitGravity will integrate as a Tata Communications operating business subsidiary. The acquisition, initially announced on January 11, 2011, complements Tata Communications’ global media and enterprise strategy. It will add enhanced CDN and streaming capabilities to the Company’s growing line-up of value-added hosting, storage, and security services, and will also leverage the Company’s global IP network. The addition of BitGravity’s product portfolio and its employee skill set will further accelerate the delivery of new features and services to Tata Communications’ customers.

Cable Depot Joint Venture at Cochin

The South East Asia and Indian Ocean Cable Maintenance Authority (SEAIOCMA) consortium, which maintains undersea cables in the Asia-Pacific region, has engaged and stationed a repair ship owned by Indian Ocean Cableship Pte Ltd. Singapore (IOCPL) at Cochin port, in order to enable SEAIOCMA to repair damaged cables in the Indian Ocean region efficiently in minimum time. To support the ship in securing ready spares required for the repair of cables, the Company entered into a 40/60 joint venture with IOCPL (the Company is the 40% partner) to establish a cable depot at Cochin to house submarine cable spares. During fiscal 2010, the Company purchased 40,000 shares in Cochin Submarine Cable Depot (India) Pvt. Ltd. (CSCDIPL)(face value LOGO 10 each) for an aggregate purchase price of LOGO 0.4 million. Keeping in mind the land and customs duty issues at Cochin port and non-availability of any suitable location elsewhere in India, the Board of CSCDIPL approved the winding up of CSCDIPL. The JV Company thereafter went ahead with filing for name strike off under Sec 560 of the Indian Companies Act, 1956. It was under three months notice period from March 24, 2011 i.e. the date of the Notice for name strike off. The period of three months expired on June 22, 2011 and further Company has not received any notice or show cause notice to the contrary during this period. However, as per the procedure of the Ministry of Corporate Affairs, the name of the company has been sent to official gazette for publication. The Registrar of Companies will issue a further notice under Section 560 (5) of the Indian Companies Act, 1956 intimating that the company is struck off. The notice from the Registrar of Companies under Section 560 (5) is yet to be received.

Acquisitions

As discussed above and elsewhere in this Form 20-F, the Company has completed several acquisitions. See History and Development of the Company in Item 4. The Company sees a growing proportion of its revenues from its international operations and these acquisitions can and will have a significant impact on this trend.

Operating Results

Fiscal Year 2011 Compared to Fiscal Year 2010

The following table sets forth information regarding the Company’s net income for the fiscal years ended March 31, 2010 and 2011:


	2010					2011								Increase / (Decrease)			Increase / (Decrease)
	(in millions)			% of revenues		(in millions)			US $ (in millions)			% of revenues		(in millions)			%
Operating Revenues		106,080			100.00		113,840			2,556			100.00		7,760			7.32
Cost of Revenues and Other Operating costs		(107,643	)		101.47		(114,204	)		(2,564	)		100.32		6,561			6.10
Non-operating income/(expense), net		180			0.17		(1,317	)		(30	)		1.16		1,497			831.67
Income tax (expense) / benefit		969			0.91		(765	)		(17	)		0.67		1,734			178.95
Dividend tax		(218	)		0.21		—			—			—		(218	)		(100.00	)
Share in net loss of equity method investees		(3,192	)		3.01		(5,636	)		(127	)		4.95		2,444			76.57
Net income attributable to noncontrolling interest		(12	)		0.01		(13	)		(—	)		0.01		1			8.33
Net income (loss)		(3,836	)		3.62		(8,095	)		(182	)		7.11		4,259			111.03

Revenues

The following table sets forth information regarding the Company’s revenues for the fiscal years ended March 31, 2010 and 2011:


	2010		2011				Increase / (Decrease)			Increase / (Decrease)
	(in millions)		(in millions)		US $ (in millions)		(in millions)			%
Telephone:
International long distance (“ILD”) and related products		57,131		61,282		1,376		4,151			7.27
National long distance (“NLD”)		4,305		4,234		95		(71	)		(1.65	)
Corporate data transmission:
Leased circuits and IRUs		13,064		11,034		248		(2,030	)		(15.54	)
Frame relay and MDNS services		348		379		9		31			8.91
Internet leased lines		4,448		5,694		128		1,246			28.01
Internet (including Corporate IP Transit)		9,452		8,242		185		(1,210	)		(12.80	)
Other		17,332		22,975		515		5,643			32.56
Total		106,080		113,840		2,556		7,760			7.32

Telephone

ILD Revenue

ILD with related products constitutes the single largest revenue stream of the Company—53.83% and 53.86% of revenues in fiscal years 2011 and 2010, respectively. Globally, during fiscal 2011, there were further reductions in tariff and interconnect rates, increasing the downward pressure on margins and revenues. However, this downward pressure was counterbalanced by traffic volumes continuing to increase. Globally, the Company continues to focus on increasing volumes and thus revenues, while cutting costs to improve margins. During fiscal 2011, globally, Tata Communications carried over 40 billion minutes of international voice traffic, a growth of about 26% over the previous fiscal year. Traffic to and from India has grown from about 9.76 billion minutes in fiscal 2010 to about 13 billion minutes in fiscal 2011. Increasing competition is expected to shrink the Company’s addressable market and hence affect this business adversely. Management believes that the Company’s scale, global reach, innovative solutions, expertise and strong business relationships give it the capability to compete successfully in this space. In fiscal 2010, the Company through its wholly-owned indirect subsidiary, Tata Communications (UK) Ltd., has fully deployed the solution for a major global voice strategic agreement with British Telecom Plc (BT). The 5-year agreement allows Tata Communications and BT to mutually benefit from shared resources as part of a global supply arrangement. The Company has leveraged this deal to sign more strategic sourcing agreements such as a full route outsource agreement with Videotron, one of the largest Canadian cable operator. Under this agreement, Videotron will route 100% of its international voice traffic through the Company’s network and Videotron will continue to be one of the Company’s key suppliers of telecommunication services in Canada. Through it, the Company will become Videotron’s sole provider of international voice termination. By tapping into the Company’s extensive and robust voice infrastructure, Videotron will be able to offer its customers higher quality international calls at competitive rates. The Company’s advanced voice traffic management tools will also allow Videotron to effectively manage operational costs and increase focus on its core businesses and key growth areas.

The Company’s strategic voice traffic outsourcing enables providers to leverage the Company’s scale and routing expertise while reducing their exposure in the low-margin, high-risk international voice termination business.

NLD Revenue

NLD is a revenue stream that is generated by the Company’s India operations. NLD volumes have increased by 9% in fiscal 2011 over fiscal 2010. However, revenues decreased by 1.65% in fiscal 2011 due to a decrease in net revenue per minute. New telecom licensees rolled out their services in fiscal 2011. These operators did not have their own widespread network, resulting in an increase in NLD traffic. Gross revenues per minute decreased to LOGO 0.41 (US$0.009) in fiscal 2011 as compared to LOGO 0.45 in fiscal 2010 due to price erosion across the telecom industry.

The Company’s NLD traffic grew by over 9% from 9.51 billion minutes in fiscal 2010 to 10.4 billion minutes in fiscal 2011. Increased competition through the issue of new NLD licenses, along with other regulatory initiatives, has reduced the gap between NLD and local tariffs. Despite continued shrinkage in the Company’s addressable market and falling tariffs, the Company has increased its market share. The Company has a strong 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. While increased competition in the long distance space affects our business, it also opens up opportunities to share the Company’s network infrastructure with new licensees. The DoT has permitted sharing of active infrastructure. The DoT has yet to accept the TRAI’s recommendation to introduce unrestricted Internet Telephony, particularly PSTN interconnection in India. This may provide new avenues for the Company in the NLD business area, although margins may remain low.

Corporate Data Transmission

Leased Circuits and IRUs Revenue

Revenue from leased circuits (international and national) and IRUs, which form a substantial part of the revenue generated by our GDMS segment, decreased by 15.54% during fiscal 2011 The decrease was predominantly on account of price reductions. These services contributed approximately 9.69% and 12.32% in fiscals 2011 and 2010, respectively, of the Company’s total revenues.

Frame Relay and MDNS Services Revenue

Revenue from frame relay and MDNS services were LOGO 348 million and LOGO 379 million (US$ 9 million) for fiscal 2010 and 2011, respectively. For fiscal 2011, we have seen a slight increase in revenues to the extent of LOGO 31 million (8.91%) over fiscal 2010 revenues due to higher revenues from existing customers

Internet Leased Lines Revenue

Revenues from internet leased lines increased by approximately 28% in fiscal 2011 as compared to fiscal 2010. The increase was predominantly on account of growth in revenues from enterprise customers and the addition of new circuits.

Internet Revenue

Internet revenues decreased by 12.80% in fiscal 2011 as compared to fiscal 2010. Internet revenues include revenues from retail dial-up and broadband services offered by the Company in India, services offered by TCISL and corporate IP transit services offered by the Company across the globe. Corporate IP transit services revenues decreased to approximately LOGO 5,273 million (US$ 118 million) in fiscal 2011 from LOGO 6,201 million in fiscal 2010 due to higher price reductions for major customers.

Broadband revenues have decreased to LOGO 1,602 million (US$ 36 million) in fiscal 2011 from LOGO 2,158 million in fiscal 2010 as there was more churn of broadband customers due to a focus on broadband services to small and medium businesses across India. The Company continues to focus on broadband services to small and medium businesses across India and plans to strengthen its product, delivery and customer service in this domain. The tariffs in the broadband business will continue to be under pressure due to increased competition in this space.

Other Revenue

Other revenue increased by 32.56% in fiscal 2011 over fiscal 2010 mainly due to an increase in revenues of VPN, data center services, Global roaming, ethernet, hosting and O&M services. VPN revenues have grown to LOGO 3,502 million (US$ 79 million) in fiscal 2011 from LOGO 2,008 million in fiscal 2010. IDC revenues have grown to LOGO 3,143 million (US$ 71 million) in fiscal 2011 from LOGO 2,389 million in fiscal 2010. Global roaming services contributed LOGO 3,686 million (US$ 83 million) in fiscal 2011 as against LOGO 3,184 million in fiscal 2010. Hosting, Ethernet, TV uplinking and O&M revenue contributed LOGO 5,437 million (US$ 122 million) in fiscal 2011 as against LOGO 4,479 million in fiscal 2010. Revenue from these services accounted for 20.18% of the Company’s total revenue in fiscal 2011 as compared to 16.34% in fiscal 2010.

Operating Costs

The following table sets forth information regarding the Company’s operating costs for the fiscal years ended March 31, 2010 and 2011.


	2010		2011				Increase / (Decrease)			Increase / (Decrease)
	(in millions)		(in millions)		US $ (in millions)		(in millions)			%
Network and transmission costs
Interconnect charges		59,006		64,981		1,459		5,975			10.13
Rent of landlines		208		185		4		(23	)		(11.06	)
Space segment utilization charges		256		205		5		(51	)		(19.92	)
Other transmission costs		1,982		1,842		41		(140	)		(7.06	)
Total		61,452		67,213		1,509		5,761			9.37
License fees		794		664		15		(130	)		(16.37	)
Other operating costs including depreciation and amortization		45,397		46,327		1,040		930			2.05
Total operating costs		107,643		114,204		2,564		6,561			6.10

Network and Transmission Costs

Network and transmission cost increased by 9.37% in fiscal 2011 over fiscal 2010. As a percentage of revenue, network and transmission costs increased to 59.04% in fiscal 2011 from 57.93% in fiscal 2010. The increase in fiscal 2011 was primarily because of increased ILD traffic and the addition of new services.

Interconnect charges increased by 10.13% in fiscal 2011 as against an increase of 20.68% in fiscal 2010. As a percentage of revenue, interconnect charges increased from approximately 55.62% in fiscal 2010 to 57.08% in fiscal 2011. The increase in fiscal 2011 was mainly due to the growth in ILD traffic. The Company now operates in global markets where the pricing of its products and services is extremely competitive, impacting the cost to revenue ratio.

In fiscal 2011, rent of landlines decreased by 11.06% as against a decrease of 26.76% in fiscal 2010. There has been an increase in off-net charges because of an increase in E1s (2MBPS circuits) leased by the Company (22,636 E1s in fiscal 2011 as against 19,799 E1s in fiscal 2010). As a percentage of revenue, rent of landlines decreased from 0.20% in fiscal 2010 to 0.16% in fiscal 2011. The decrease in the rent of landlines inspite of an increase in the number of E1’s was on account of a reduction in the price per E1.

The Company continues to rationalize its space segment utilization charges by surrendering surplus capacity and utilizing its fiber optic cable infrastructure for carrying voice and data traffic. The space segment utilization charges have decreased by 19.92% in fiscal 2011 as against a decrease of 19.50% in fiscal 2010. As a percentage of revenue, space segment utilization charges decreased from 0.24% in fiscal 2010 to 0.18% in fiscal 2011 due to such cost rationalization.

License Fees

The license fee payable by the Company to the DoT is 6% of adjusted gross revenues (“AGR”). The Government of India defines AGR as gross call revenues less access charges actually paid to other carriers for carrying calls less service and sales taxes paid to the Government of India. As explained under Item 4 above, we have certain disputes with the Government of India over the calculation of AGR and therefore of license fees. The total amounts provided towards ILD, NLD and ISP licenses for fiscals 2011 and 2010 were LOGO 684 million (US$ 15 million) and LOGO 785 million, respectively.

As part of the compensation to the Company for the early termination of its exclusivity in providing ILD services, the Government of India provided that the Company would be refunded 10% of the license fees it paid towards NLD services for first five years i.e. from fiscal 2002 to fiscal 2006. Accordingly, the Company has taken a net charge of 5% of the revenues from NLD services in its financial statements and recorded a receivable from the Government of 10% of the license fees for that period. Out of the total claim of LOGO 802.80 million, LOGO 793.10 million was reimbursed by the DoT. The balance of the claim of LOGO 9.70 million is pending with the DoT. The Company has requested that the DoT refund the balance of the claim.

Other Operating Costs

Other operating costs increased by 2.05% in fiscal 2011 over fiscal 2010. The increase in other operating cost in fiscal 2011 was primarily due to our infrastructure roll-out and organizational growth. As a percentage of revenue, total other operating costs marginally decreased from 42.80% in fiscal 2010 to 40.69% in fiscal 2011. Details of some of the components of other operating costs were as follows:

•

Depreciation and amortization charges decreased from LOGO 14,074 million in fiscal 2010 to LOGO 13,980 (US$ 314 million) in fiscal 2011 primarily due to some of the assets reaching the end of their economic useful lives during the year. Net additions in PP&E and Intangible Assets decreased from LOGO 21,175 million during fiscal 2010 to LOGO 10,624 million (US$ 239 million) during fiscal 2011. The effective rate of depreciation on PP&E was 9.72% and 9.01% in fiscal 2010 and fiscal 2011, respectively. Because of investments in undersea cable assets, cloud computing assets, rollout of NLD and MAN networks and other PP&E, the Company expects its depreciation charge to increase in the foreseeable future.

Manpower costs constituted about 32.55% and 28.29% of other operating costs in fiscal 2011 and fiscal 2010, respectively. These costs increased by 17.40% in fiscal 2011 as against an increase of 13.90% in fiscal 2010. The increase in fiscal 2011 was primarily due to an increase in manpower and normal increments. During 2011, the Company incurred severance costs of LOGO 269 million (US$ 6 million). As of March 31, 2011, the Company had a total of 6,539 employees, of which 5,250 employees (80%) were based in India. Outsourced manpower costs decreased by 31.44% from LOGO 2,070 million in fiscal 2010 to LOGO 1,419 million (US$ 32 million) in fiscal 2011. Outsourced manpower costs constituted about 3.06% and 4.56% of other operating costs in fiscal 2011 and fiscal 2010.

•

Repairs and maintenance costs constituted about 10.50% and 10.10% of other operating costs in fiscal 2011 and fiscal 2010, respectively. These costs increased by 6.09% in fiscal 2011 as against a decrease by 11.70% in fiscal 2010 mainly due to an increase in repairs and maintenance charges on plants and machinery, primarily cables, in the current year.

•

Legal and professional fees constituted 1.27% and 2.04% of other operating costs in fiscal 2011 and fiscal 2010, respectively. These costs decreased by 36.34% in fiscal 2011 as against increase by 4.83% in fiscal 2010. In fiscal 2010 the amount was higher as the Company increased its operations outside India and incurred charges for advisory services related to the Company’s compliance with the covenants in its debt agreements.

Non-Operating Income /Expense

The following table sets forth information regarding the Company’s non-operating income for the fiscal years ended March 31, 2010 and 2011:


	2010			2011						Increase / (Decrease)			Increase / (Decrease)
	(in millions)			(in millions)			US$ (in millions)			(in millions)			%
Gain on sale of investments (net)		347			138			3			(209	)		(60.23	)
Interest income / (expense) net		(1,332	)		(3,286	)		(74	)		1,954			146.70
Dividend income		2			3			—			1			50.00
Foreign exchange gains / (loss) (net)		43			339			8			296			688.37
Liabilities not required to be settled written back		304			625			14			321			105.59
Other income		816			864			19			48			5.88
Total		180			(1,317	)		(30	)		(1,497	)		(831.67	)

Gain on Sale of Investments

The gain on sale of investments was LOGO 138 million (US$ 3 million) and LOGO 347 million in fiscal 2011 and 2010, respectively. In fiscal 2011, the gain on sale of investments included a gain on the sale of mutual fund investments and a sale of Art Technology Group Inc. (ATG) shares. In fiscal 2010, the gain on sale of investments was primarily from the sale of mutual fund investments. Profit from the sale of mutual funds reduced from LOGO 343.60 million during fiscal 2010 to LOGO 46.23 million (US$ 1.04 million) during fiscal 2011. The reduction was due to a substantially lower level of investments in mutual funds in fiscal 2011 as compared to fiscal 2010. During fiscal 2011, there was also a gain of LOGO 91.73 million (US$ 2.06 million) on the sale of the Company’s investments in ATG shares.

Interest Income/Expense (Net)

Net interest represents the net interest accrued by the Company on its bank and other deposits and borrowings under its overdraft facilities. Interest income from banks and others increased to LOGO 762 million (US$ 17 million) in fiscal 2011 from LOGO 673 million in fiscal 2010 on account of loans made to SEPCO/Neotel. During fiscal 2011, the Company had interest expense of LOGO 4,088 million on short-term and long-term debt as against LOGO 4,188 million in fiscal 2010. The decrease is primarily on account of higher capitalization of interest in fiscal 2011 compared to fiscal 2010. In fiscal 2011 and 2010, the Company had interest income on income tax refunds of LOGO 40 million and LOGO 2,183 million related to its India operations, respectively.

Dividend Income

Investments in mutual funds were in debt funds whose return was linked to interest rate movements. In fiscal 2011, a majority of the Company’s investments in mutual funds were sold. As these investments were in growth schemes instead of dividend schemes, the impact of a dividend is realized at the time of the sale of the investment. Dividends from mutual funds increased from LOGO 2 million in fiscal 2010 to LOGO 3 million in fiscal 2011 because of an increase in investible surplus in Tata Communications Transformation Services Limited.

Liabilities not required to be settled written back

During fiscal 2011, the Company wrote back liabilities of LOGO 625 million (US$ 14 million) as against LOGO 304 million in fiscal 2010. The reason for liabilities written back is on account of the expiration of the statute of limitations period during which the liabilities were not claimed by the creditors.

Other Income

Other income of LOGO 864 million (US$ 19 million) in fiscal 2011 primarily included rental and space sharing income of LOGO 232 million (US$5 million), the recovery of bad debts, interest income from customers and scrap sales income of LOGO 183 million (US$4 million), a gain on the re-measurement of previously held interests in BitGravity on the acquisition date of LOGO 128 million (US$ 3 million) and termination fee from China Enterprise Communication Limited (“CEC”) for terminating the joint venture agreement amounting to LOGO 90 million (US$ 2 million). In fiscals 2011 and 2010, other income included rental and space sharing income of LOGO 232 million (US$ 5 million) and LOGO 246 million, respectively.

Income Tax Expense

The statutory income tax rates in India were 33.22% for fiscal 2011 and 33.99% for fiscal 2010. For fiscal 2011, income tax expense was LOGO 765 million (US$ 17 million) as against an income of LOGO 969 million for fiscal 2010. The Company incurred tax expense of LOGO 765 million (US$ 17 million) since the Company’s operations outside India incurred losses which could not be set-off against the profits earned by the Company’s operations within India.

Fiscal 2010’s income tax benefit of LOGO 969 million was comprised of LOGO 1,831 million relating to tax expense and LOGO 2,800 million relating to excess tax provisions written back by the Company. The Company incurred tax expense of LOGO 1,831 million since the Company’s operations outside of India incurred losses which could not be set-off against the profits earned by the Company’s operations within India. The excess income tax provisions written back amounting to LOGO 2,800 million were attributable to the receipt of a favorable order by the Company from the Income Tax Appellate Tribunal (ITAT) pertaining to the reimbursement of the DOT levy for fiscal 1994. After reviewing the records produced, the ITAT held that the relevant provisions of the law for reopening of the assessment were not followed by the Income Tax Department (ITD) and therefore quashed the reassessment order summarily. The ITD has appealed to the High Court against the ITAT’s decision, but High Court has dismissed the appeal. The time limit allowing the ITD to appeal against the aforesaid Order of the High Court before the next higher judiciary i.e. Supreme Court, has not yet expired

In fiscal 2007, the Company commenced its analysis under Section 382 of the US Internal Revenue Code to ascertain the amount of operating loss in respect of a subsidiary of Teleglobe International Holdings Ltd (TIHL) that will be available for future utilization consequent to the acquisition of TIHL by the Company in fiscal 2006. In fiscal 2008, deferred tax assets and corresponding valuation allowances of LOGO 2,605 million were written-off as the Company concluded that these deferred tax assets were not available for future utilization. The above write-off did not have an impact on the income statement as there was an equal but opposite movement in valuation allowance.

An unfavorable outcome in the future on the tax disputes in respect of its tax holiday claim under Section 80-IA, claim for capital loss on sale of ICO Global, reimbursement of the DoT levy by the Government of India and penalties would negatively affect the Company’s results of operations by LOGO 6,275 million, LOGO 1,077 million, LOGO 5,530 million and LOGO 8,185 million, respectively.

Taxes and interest relating to these tax disputes (other than penalties) have been paid in full and classified as advance income taxes on the balance sheet. Penalties of LOGO 4,952 million (out of a total LOGO 8,185 million of penalties imposed by the tax authorities) have also been paid and classified as advance income taxes on the balance sheet, which may result in an additional future penalty payment of up to LOGO 3,233 million if the Company is unsuccessful in all of its significant tax disputes.

The Company continues to be subject to other significant claims by the revenue authorities in respect of income tax matters. These are described under “Item 8—Legal Proceedings.”

Share in Net Loss of Equity Method Investees

During fiscal 2010 and fiscal 2011, Tata Communications’ equity ownership interest in United Telecom Limited (“UTL”) was 26.66%, in SEPCO Communications Pty. Ltd (“SEPCO”) was 43.16% and in Neotel Pty Ltd. (Neotel) was 27%. SEPCO is an investment company which owns 51% of the equity of Neotel. Therefore, the effective interest of the Company in Neotel was 49.01% in fiscal 2010 and 2011 for purposes of determining the Company’s share in net loss of equity method investees.

The Company’s share in the net loss of equity method investees in fiscal 2011 was LOGO 5,636 million (US$ 127 million) as compared to LOGO 3,192 million in fiscal 2010 because the Company’s share in the net losses from Neotel and SEPCO has increased from LOGO 3197 million in fiscal 2010 to LOGO 5,534 million (US$ 124 million) in fiscal 2011. Neotel is currently in its network and customer reach expansion phase which has resulted in the losses. As the business scale of Neotel increases, the Company expects the losses from Neotel to reduce.

Fiscal Year 2010 Compared to Fiscal Year 2009

The following table sets forth information regarding the Company’s net income for the fiscal years ended March 31, 2009 and 2010:


	2009					2010								Increase / (Decrease)			Increase / (Decrease)
	(in millions)			% of revenues		(in millions)			US $ (in millions)			% of revenues		(in millions)			%
Revenues		97,295			100.00		106,080			2,360			100		8,785			9.03
Operating costs		(92,638	)		95.22		(107,643	)		(2,395	)		101.47		15,005			16.20
Non-operating income, net		3,019			3.10		180			4			0.17		(2,839	)		(94.04	)
Income tax (expense)/benefit		(2,430	)		2.50		969			22			0.91		(3,399	)		(139.88	)
Dividend tax		(218	)		0.22		(218	)		(5	)		0.21		—			—
Share in net loss of equity method investees		(1,120	)		1.15		(3,192	)		(71	)		3.01		2,072			185.00
Net income attributable to noncontrolling interest		(22	)		0.02		(12	)		—			0.01		(10	)		(45.45	)

Net income		3,886			4.00		(3,836	)		(85	)		3.62		(7,722	)		(198.71	)

Revenues

The following table sets forth information regarding the Company’s revenues for the fiscal years ended March 31, 2009 and 2010:


	2009		2010				Increase / (Decrease)			Increase / (Decrease)
	(in millions)		(in millions)		US $ (in millions)		(in millions)			%
Telephone:
International long distance (“ILD”) and related products		50,587		57,131		1,271		6,544			12.94
National long distance (“NLD”)		5,658		4,305		96		(1,353	)		(23.91	)
Corporate data transmission:
Leased circuits and IRUs		12,326		13,064		291		738			5.99
Frame relay and MDNS services		814		348		8		(466	)		(57.25	)
Internet leased lines		5,549		4,448		99		(1,101	)		(19.84	)
Internet (including Corporate IP Transit)		9,040		9,452		210		412			4.56
Other		13,321		17,332		385		4,011			30.11

Total		97,295		106,080		2,360		8,785			9.03

Telephone

ILD Revenue

ILD with related products is the single largest revenue stream of the Company—53.86% and 51.99% of revenues in fiscal years 2010 and 2009, respectively. Globally, during fiscal 2010, there were further reductions in tariff and interconnect rates, increasing the downward pressure on margins and revenues. However, this downward pressure was counterbalanced by traffic volumes continuing to increase. Globally, the Company continues to focus on increasing volumes and thus revenues, while cutting costs to improve margins. During fiscal 2010, globally, Tata Communications carried 32.6 billion minutes of international voice traffic, a growth of about 30% over the previous fiscal year. Traffic to and from India has grown from about 8.37 billion minutes in fiscal 2009 to about 9.76 billion minutes in fiscal 2010. Increasing competition is expected to shrink the Company’s addressable market and hence affect this business adversely. Management believes that the Company’s scale, global reach, innovative solutions, expertise and strong business relationships give it the capability to compete successfully in this space. In June 2009, the Company through its wholly-owned indirect subsidiary, Tata Communications (UK) Ltd., entered into a major global voice outsourcing strategic agreement with BT. The 5-year agreement allows Tata Communications and BT to mutually benefit from shared resources as part of a global supply arrangement. This agreement represented approximately 6 billion minutes per year that the Company will manage on behalf of BT, representing approximately a 20% increase of the Company’s voice traffic volumes in fiscal 2009.

NLD Revenue

NLD is a revenue stream that is generated by the Company’s India operations. NLD volumes decreased by 5% in fiscal 2010 over fiscal 2009. Revenues decreased by approximately 24% in fiscal 2010 over fiscal 2009 due to a decrease in volumes. Major telecom operators in India have been rolling out their own networks across India. As these operators start carrying more traffic on their own networks, the Company’s addressable market continues to shrink. Gross revenues per minute have decreased to LOGO 0.45 in fiscal 2010 as compared to LOGO 0.51 in fiscal 2009.

The Company’s NLD traffic fell by over 5% from 10.04 billion minutes in fiscal 2009 to 9.51 billion minutes in fiscal 2010. Increased competition through the issue of new NLD licenses, along with other regulatory initiatives, has reduced the gap between NLD and local tariffs. Continued shrinkage in the Company’s addressable market and falling tariffs is expected to affect this business. The Company has a strong 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 CAC, have not yet been implemented. During the year, the DoT reviewed the long pending consultation process for the implementation of CAC and eventually recalled the CAC directive and recommended calling cards operated by NLD/ILD operators as an alternative to the CAC. These recommendations have been accepted by the DoT which will enable the Company to enter the retail long distance calling card market. While increased competition in the long distance space affects our business, it also opens up opportunities to share the Company’s network infrastructure with new licensees. The DoT has permitted sharing of active infrastructure. The DoT is yet to accept TRAI’s recommendation to introduce unrestricted Internet Telephony, particularly PSTN interconnection in India. This may provide new avenues for the Company in the NLD business area, although margins maybe low.

Corporate Data Transmission

Leased Circuits and IRUs Revenue

Revenue from leased circuits (international and national) and IRUs, which form a substantial part of the revenue generated by our GDMS segment, increased by 5.99% during fiscal 2010 over fiscal 2009. The increase was predominantly on account of growth in revenues from other service providers and the addition of new circuits. These services contributed approximately 12.32% and 12.67% in fiscals 2010 and 2009, respectively, of the Company’s total revenues.

Frame Relay and MDNS Services Revenue

Revenue from frame relay and MDNS services were LOGO 814 million and LOGO 348 million for fiscal 2009 and 2010, respectively. For fiscal 2010, we have seen a decline in revenues to the extent of LOGO 466 million (57.25%) over fiscal 2009 revenues because of customers moving to other products and services which are technologically and commercially more efficient. We therefore expect revenues from these services to decline going forward.

Internet Leased Lines Revenue

Revenues from internet leased lines decreased by approximately 19.84% in fiscal 2010 as compared to fiscal 2009 due to low demand for high-speed dedicated internet access by enterprise customers and steep pricing reductions.

Internet Revenue

Internet revenues increased by 4.56% in fiscal 2010 over fiscal 2009. Internet revenues include revenues from retail dial-up and broadband services offered by the Company in India, services offered by TCISL and corporate IP transit services offered by the Company across the globe. Corporate IP transit services revenues increased to approximately LOGO 6,201 million in fiscal 2010 from LOGO 5,615 million in fiscal 2009 due to an increase in revenues from other service providers.

Broadband revenues increased to LOGO 2,158 million in fiscal 2010 from LOGO 2,032 million in fiscal 2009 due to our focus on customers from whom the Company generates higher revenues. The Company continues to focus on broadband services to small and medium businesses across India and plans to strengthen its product, delivery and customer service in this domain. The tariffs in the broadband business will continue to be under pressure due to increased competition in this space.

Other Revenue

Other revenue increased by 30.11% in fiscal 2010 over fiscal 2009 due to an increase in revenues of VPN, data center services, Global roaming, ethernet, hosting and O&M services. VPN revenues grew to LOGO 2,008 million in fiscal 2010 from LOGO 1,634 million in fiscal 2009. IDC revenues grew to LOGO 2, 389 million in fiscal 2010 from LOGO 1,954 million in fiscal 2009. Global roaming services contributed LOGO 3,184 million in fiscal 2010 as against LOGO 2,716 million in fiscal 2009. Hosting, Ethernet, TV uplinking and O&M revenue contributed LOGO 4,479 million in fiscal 2010 as against LOGO 2,571 million in fiscal 2009. Revenue from these services accounted for 16.34% of the Company’s total revenue in fiscal 2010 as compared to 13.69% in fiscal 2009.

Operating Costs

The following table sets forth information regarding the Company’s operating costs for the fiscal years ended March 31, 2009 and 2010.


	2009		2010				Increase / (Decrease)			Increase / (Decrease)
	(in millions)		(in millions)		US $ (in millions)		(in millions)			%
Network and transmission costs
Interconnect charges		48,893		59,006		1,312		10,113			20.68
Rent of landlines		284		208		5		(76	)		(26.76	)
Space segment utilization charges		318		256		6		(62	)		(19.50	)
Other transmission costs		1,706		1,982		44		276			16.18
Total		51,201		61,452		1,367		10,251			20.02
License fees		863		794		18		(69	)		(8.00	)
Other operating costs including depreciation and amortization		40,574		45,397		1,010		4,823			11.89

Total operating costs		92,638		107,643		2,395		15,005			16.20

Network and Transmission Costs

Network and transmission costs increased by 20.02% in fiscal 2010 over fiscal 2009. As a percentage of revenue, network and transmission costs increased to 57.93% in fiscal 2010 from 52.62% in fiscal 2009. The increase in fiscal 2010 was primarily because of increased ILD traffic and the addition of new services.

Interconnect charges increased by 20.68% in fiscal 2010 as against an increase of 10.91% in fiscal 2009. As a percentage of revenue, interconnect charges increased from approximately 50.25% in fiscal 2009 to 55.62% in fiscal 2010. The increase in fiscal 2010 was mainly due to the growth in ILD traffic. The Company now operates in global markets where the pricing of its products and services is extremely competitive, impacting the cost to revenue ratio.

In fiscal 2010, rent of landlines decreased significantly as against fiscal 2009 because of a decrease in off-net charges consequent to a decrease in E1s (2MBPS circuits) leased by the Company (19,799 E1s in fiscal 2010 as against 23,244 E1s in fiscal 2009). As a percentage of revenue, rent of landlines decreased from 0.29% in fiscal 2009 to 0.20% in fiscal 2010.

The Company continues to rationalize its space segment utilization charges by surrendering surplus capacity and utilizing its fiber optic cable infrastructure for carrying voice and data traffic. The space segment utilization charges have decreased by 19.50% in fiscal 2010 as against an increase of 7.07% in fiscal 2009. As a percentage of revenue, space segment utilization charges decreased from 0.33% in fiscal 2009 to 0.24% in fiscal 2010 due to such cost rationalization.

License Fees

The license fee payable by the Company to the DoT is 6% of adjusted gross revenues (“AGR”). The Government of India defines AGR as gross call revenues less access charges actually paid to other carriers for carrying calls less service and sales taxes paid to the Government of India. As explained under Item 4 above, we have certain disputes with the Government of India over the calculation of AGR and therefore of license fees. The total amounts provided towards ILD, NLD and ISP licenses for fiscals 2010 and 2009 were LOGO 785 million and LOGO 824 million, respectively.

Other Operating Costs

Other operating costs increased by 11.89% in fiscal 2010 over fiscal 2009. As a percentage of revenue, total other operating costs marginally increased from 41.70% in fiscal 2009 to 42.80% in fiscal 2010. The increase in fiscal 2010 is primarily due to our infrastructure roll-out and organizational growth. Increases in some of the components of other operating costs were as follows:

•

Depreciation and amortization charges increased from LOGO 10,180 million in fiscal 2009 to LOGO 14,074 million in fiscal 2010. Due to an increase in the Company’s gross block of PP&E from LOGO 112,993 million in fiscal 2009 to LOGO 133,765 million in fiscal 2010, there was a corresponding increase in depreciation. The effective rate of depreciation on PP&E was 8.29% and 9.72% in fiscal 2009 and fiscal 2010, respectively. Because of investments in undersea cable assets, data centers, rollout of NLD and MAN networks and other PP&E, the Company expects its depreciation charge to continue to increase in the foreseeable future.

•

Manpower costs constituted about 28.29% and 27.79% of other operating costs in fiscal 2010 and fiscal 2009, respectively. These costs increased by 13.90% in fiscal 2010 as against an increase of 28.26% in fiscal 2009. The increase in fiscal 2010 was primarily due to an increase in manpower and normal increments. As of March 31, 2010, the Company had a total of 6,457 employees, of which 5,275 employees (82%) were based in India. Outsourced manpower costs decreased by 12.37% from LOGO 2,362 million in fiscal 2009 to LOGO 2, 070 million in fiscal 2010. Outsourced manpower costs constituted about 4.56% and 5.82% of other operating costs in fiscal 2010 and fiscal 2009.

•

Repairs and maintenance costs constituted about 10.10% and 12.80% of other operating costs in fiscal 2010 and fiscal 2009, respectively. These costs decreased by 11.70% in fiscal 2010 and increased by 17.54% in fiscal 2009 due to a decrease in repairs and maintenance charges on plants and machinery in the current year.

•

Legal and professional fees constituted 2.04% and 2.18% of other operating costs in fiscal 2010 and fiscal 2009, respectively. These costs increased by 4.83% in fiscal 2010 and decreased by 81.83% in fiscal 2009. In fiscal 2010 the amount was higher due to the Company’s increased operations outside India.

Non-Operating Income

The following table sets forth information regarding the Company’s non-operating income for the fiscal years ended March 31, 2009 and 2010:


	2009			2010						Increase / (Decrease)			Increase / (Decrease)
	(in millions)			(in millions)			US$ (in millions)			(in millions)			%
Gain on sale of investments (net)		4,289			347			8			(3,942	)		(91.91	)
Interest income / (expense) net		(2,241	)		(1,332	)		(29	)		(909	)		(40.56	)
Dividend income		225			2			—			(223	)		(99.11	)
Foreign exchange gains (loss) (net)		(76	)		43			1			(119	)		(156.58	)
Liabilities not required to be settled written back		228			304			6			76			33.33
Other income		594			816			18			222			37.37

Total		3,019			180			4			(2,839	)		(94.04	)

Gain on Sale of Investments

The gain on sale of investments was LOGO 347 million and LOGO 4,289 million in fiscal 2010 and 2009, respectively. In fiscal 2009, the gain on sale of investments included a gain on the sale of our partial investment in shares of Tata Teleservices Limited amounting to LOGO 3,904 million. In fiscal 2010, the gain on sale of investments was primarily from the sale of mutual fund investments.

Interest Income/Expense (Net)

Net interest represents the net interest accrued by the Company on its bank and other deposits and borrowings under its overdraft facilities. Interest income from banks and others increased to LOGO 673 million in fiscal 2010 from LOGO 491 million in fiscal 2009 on account of loans given to SEPCO/Neotel. During fiscal 2010, the Company had interest expense of LOGO 4,188 million on short-term and long- term debt as against LOGO 2,732 million in fiscal 2009. The increase was mostly because of an increase in the margin on our dollar borrowings and an increase in our rupee debt. In fiscals 2010 and 2009, the Company had interest income on income tax refunds of LOGO 2,183 million and LOGO Nil related to its India operations, respectively.

Dividend Income

Investments in mutual funds were in debt funds whose return was linked to interest rate movements. In fiscal 2010, the investments were made in growth schemes, instead of dividend schemes. The impact of a dividend is realized at the time of the sale of the investment. Hence, the dividend income earned on investments in mutual funds decreased.

Other Income

Other income of LOGO 816 million in fiscal 2010 included rental and space sharing income of LOGO 246 million, interest income from customers and scrap sales income of LOGO 98 million. In fiscals 2010 and 2009, other income included rental and space sharing income of LOGO 246 million and LOGO 249 million, respectively.

Income Tax Expense

The Company’s effective tax rate on a consolidated basis was (70.06%) in fiscal 2010 as against 31.66% in fiscal 2009. The statutory income tax rates in India were 33.99% for fiscal 2010 and 33.99% for fiscal 2009. Fiscal 2010’s income tax benefit of LOGO 969 million was comprised of LOGO 1,831 million relating to tax expense and LOGO 2,800 million relating to excess tax provisions written back by the Company. The Company incurred tax expense of LOGO 1,831 million since the Company’s operations outside of India incurred losses which could not be set-off against the profits earned by the Company’s operations within India. The excess income tax provisions written back amounting to LOGO 2,800 million were attributable to the receipt of a favorable order by the Company from the Income Tax Appellate Tribunal (‘ITAT’) pertaining to the reimbursement of the DOT levy for fiscal 1994. After reviewing the records produced, the ITAT held that the relevant provisions of the law for reopening of the assessment were not followed by the Income Tax Department (‘ITD’) and therefore quashed the reassessment order summarily. Against the ITAT order, the ITD filed an appeal before the High Court which was dismissed by the High Court. Based on such judicial analysis and the favorable opinions of the legal counsel, the Company believes that no provision is required to be retained in the books for covering the aforesaid liability and consequently, the Company has wrote back the corresponding excess tax provision of LOGO 2,800 million.

The Company’s effective tax rate in fiscal 2010 was (70.06%) as against (33.99%) due to excess tax provisions written back on account of a favorable order by the Company from ITAT pertaining to fiscal 1994.

In fiscal 2007, the Company commenced its analysis under Section 382 of the US Internal Revenue Code to ascertain the amount of operating loss in respect of a subsidiary of Teleglobe International Holdings Ltd (TIHL) that will be available for future utilization because of the acquisition of TIHL by the Company in fiscal 2006. In fiscal 2008, deferred tax assets and corresponding valuation allowances of LOGO 2,605 million were written-off as the Company concluded that these deferred tax assets were not available for future utilization. The above write-off did not have an impact on the income statement as there was an equal but opposite movement in valuation allowance.

An unfavorable outcome in the future on the tax disputes in respect of its tax holiday claim under Section 80-IA, claim for capital loss on sale of ICO Global, reimbursement of the DoT levy by Government of India and penalties would negatively affect the Company’s results of operations by LOGO 6,275 million, LOGO 1,077 million, LOGO 5,530 million and LOGO 6,871 million, respectively.

Taxes and interest relating to these tax disputes (other than penalties), have been paid in full and classified as advance income taxes on the balance sheet. Penalties of LOGO 6,861 million (out of a total LOGO 6,871 million of penalties imposed by the tax authorities) have also been paid, which may result in an additional future penalty payment of up to LOGO 10 million if the Company is unsuccessful in all of its significant tax disputes.

The Company continues to be subject to other significant claims by the revenue authorities in respect of income tax matters. These are described under “Item 8—Legal Proceedings.”

Share in Net Loss of Equity Method Investees

During fiscal 2009 and fiscal 2010, Tata Communications’ equity ownership interest in United Telecom Limited (UTL) was 26.66% and in SEPCO Communications Pty. Ltd (SEPCO) was 43.16%. SEPCO is an investment company which owns 51% of the equity of Neotel (Pty) Ltd (Neotel), a company which provides basic telecommunication services in South Africa.

On January 19, 2009, the Company directly acquired an additional 27% equity ownership interest in Neotel.

The Company’s share in the net loss of equity method investees in fiscal 2010 was LOGO 3,192 million as compared to LOGO 1,120 million in fiscal 2009 because the Company’s share in the net losses from Neotel and SEPCO increased from LOGO 890 million in fiscal 2009 to LOGO 3,197 million in fiscal 2010. Neotel is currently in its network and customer reach expansion phase which resulted in the losses. As the business scale of Neotel increases, the Company expects the losses from Neotel to reduce.

Critical Accounting Policies

US GAAP

The Company prepares its statutory financial statements in accordance with Indian GAAP. US GAAP differs in certain material respects from Indian GAAP. Principal differences insofar as they relate to the Company include differences in the measurement basis for acquisitions accounted for using the purchase method, valuation of investments, measurement and accounting for impairment loss of long–lived assets, accounting for deferred income taxes, accounting for retirement benefits, compensated absences, financial instruments, proposed dividends and taxes thereon and the presentation and format of the financial statements and related notes.

The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses for the years presented. Management bases its estimates and judgments on historical experience and other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. The Company believes the following critical accounting policies apply to and affect significant judgments and estimates used in the preparation of its consolidated financial statements.

Useful lives of Property, Plant and Equipment (“PP&E”) and Other Intangibles

We estimate the useful lives of property, plant and equipment and intangible assets in order to determine the amount of depreciation and amortization expense to be recorded during any reporting period. Such estimated life is based on historical experience with similar assets or the fair valuation done at the time of acquisition, as well as taking into account anticipated technological or other changes. If technological changes were to occur more rapidly than anticipated or in a different form than anticipated, the useful lives assigned to these assets may need to be shortened, resulting in the recognition of increased depreciation and amortization expense in future periods. The Company’s intangible assets include customer relationships, computer software and license costs. Customer relationships, computer software, license and spectrum are amortized using the straight-line method, over the estimated useful lives. The purchase of capacity on specified cables for a stated period of time which is substantially lower than the economic lives of the cables are classified as an operating lease, and recognized as expense on a straight-line basis over the contracted period. Capacity purchase contracts which do not transfer the right to use any specific cable and do not identify capacity in a specific cable, and under which the service provider can meet its obligation by routing the Company’s traffic utilizing capacity in any of its cables depending on availability are accounted for as service contracts. Capacity expense under service contracts are recognized on a straight-line basis over the contract period.

Impairment of Long-Lived Assets

The Company evaluates the carrying amount of its long-lived assets for impairment whenever events or circumstances indicate the carrying amount of such assets may not be recoverable. The Company subjects such assets to a test of recoverability based on the undiscounted cash flows from the use or disposition of such assets. If the carrying amount of the asset exceeds the undiscounted cash flows, the Company recognizes an impairment loss measured as the amount by which the carrying amount of the long-lived asset exceeds the fair value. Assets to be disposed off are reported at the lower of the carrying value or the fair value less the cost to sell. The undiscounted cash flows calculation uses various assumptions and estimates regarding future revenue, expenses and cash flows projections over the estimated remaining useful life of the asset or asset group. These forecasts are subject to changes in external factors, including adverse regulatory and legal rulings. If the asset is impaired, we recognize an impairment loss, as the difference between the carrying amount and the fair value of the asset. The adjusted carrying amount is the new cost basis.

Valuation of Goodwill

Goodwill is tested for potential impairment on an annual basis, which for the Company is performed on March 31 or in interim periods if events and circumstances indicate a potential impairment. As reporting units are determined after an acquisition or evolve with changes in business strategy, goodwill is assigned and it may no longer retain its association with a particular transaction. All revenue streams and related activities of a reporting unit, whether acquired or organic, are available to support the carrying amount of goodwill. The reporting units for impairment assessments are generally one level below the operating segment and have been identified as international voice (included under the GVS operating segment), broadband internet through optical fiber, broadband and dial-up internet and Content Delivery Network (all included under the GDMS operating segment).

Under the applicable accounting standard, goodwill impairment analysis is a two-step test. The first step of the goodwill impairment test compares the fair value of the reporting unit with its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired; however, if the carrying amount of the reporting unit exceeds its fair value, the second step is performed. The second step involves calculating an implied fair value of goodwill for each reporting unit for which the first step indicated possible impairment. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination, which is the excess of the fair value of the reporting unit, as determined in the first step, over the aggregate fair values of the individual assets, liabilities and identifiable intangibles as if the reporting unit was being acquired in a business combination. The adjustments to measure the assets, liabilities and intangibles at fair value are only for the purpose of measuring the implied fair value of goodwill and these adjustments are not reflected in the consolidated balance sheet. If the implied fair value of goodwill exceeds the goodwill assigned to the reporting unit, there is no impairment. If the goodwill assigned to a reporting unit exceeds the implied fair value of the goodwill, an impairment charge is recorded for the excess. An impairment loss recognized cannot exceed the amount of goodwill assigned to a reporting unit, and the loss establishes a new basis in the goodwill. Subsequent reversal of goodwill impairment losses is not permitted.

Estimating the fair value of reporting units is a subjective process that requires significant estimates and assumptions, particularly related to cash flows and the appropriate discount rates. The fair values of the reporting units were determined using a valuation technique consistent with the income approach. For the purpose of the income approach, internal forecasts were used to estimate the future cash flows (including a terminal value approach to estimate cash flows beyond the final year of the forecast) after considering current economic conditions and trends, estimated future operating results and growth rates, anticipated future economic and regulatory conditions and the availability of necessary technology and network infrastructure. Due to the inherent uncertainty involved in making those estimates, actual results could differ from the estimates. The Company evaluates the merits of each significant assumption, both individually and in the aggregate, used to determine the fair values of the reporting units, as well as the fair values of the corresponding assets and liabilities within the reporting units, for reasonableness.

Cash flows were discounted based on equity return rates. The Company believes that the discount rates used adequately reflect the inherent risk in the businesses of the reporting units, uncertainty in the economic environment and the risks associated with the internally developed forecasts. Expected rates of equity returns were estimated based on historical market returns for similar industries of the reporting units.

Legal claims against the Company

There are a number of legal proceedings covering a wide range of matters pending or threatened against us. We have accrued for loss contingencies that are probable and where the loss amount can be reasonably estimated. The judgments we make with regard to whether to establish an accrual are based on an evaluation of all relevant factors by internal and external legal counsel, as well as subject matter experts and are based upon an analysis of potential results, assuming a combination of litigation and settlement strategies. Claims are continually monitored and revalued as new information is obtained. We may not establish our liability for a particular matter until long after the litigation is filed, once a liability becomes probable and estimable. In respect of loss contingencies where the reliable estimate of loss is a range, the amount accrued is the better estimate of the loss within the range and when no amount within the range is a better estimate than any other amount, the minimum amount in the range in accrued.

The actual settlement of such matters could differ from the judgments made in determining how much, if any, to accrue. We do not believe these proceedings will have a material adverse effect on our consolidated financial results. While we believe that our accruals for these matters are adequate, if the actual loss from a loss contingency is significantly different than the estimated loss, our results of operations may be over or understated.

Income Taxes

Assessment of the appropriate amount and classification of income taxes is dependent on several factors, including estimates of the timing and probability of realization of deferred income taxes and the timing of income tax payments. Deferred income taxes are provided for the effect of temporary differences between the amounts of assets and liabilities recognized for financial reporting purposes and the amounts recognized for income tax purposes. The Company measures deferred tax assets and liabilities using enacted tax rates that, if changed, would result in either an increase or decrease in the provision for income taxes in the period of change. A valuation allowance is recorded when it is more-likely than not that a deferred tax asset will not be realized. In assessing the likelihood of realization, management considers estimates of future taxable income, the character of income needed to realize future tax benefits, and all available evidence. Income tax benefits from tax positions have been recognized only when it was more likely than not that the Company would be entitled to the economic benefits of the tax positions. The more-likely-than-not threshold has been determined based on the technical merits that the position will sustain upon examination. If a tax position is not considered more-likely-than-not to be sustained based solely on its technical merits, no benefits of the tax position are recognized. Actual income taxes could vary from estimated amounts due to the future impacts of various items, including changes in income tax laws, our financial condition and results of operations in future periods, as well as final review of our tax returns by taxing authorities, which, as a matter of course, are regularly audited by the Indian and foreign tax authorities. Upon adoption of ASC 740-10-25 (formerly FIN 48), the variation on account of review could be minimized but may not be altogether eliminated.

Accounting policy on uncertain tax positions

Uncertain tax positions are recognized using the more-likely-than-not threshold determined solely based on the technical merits that the tax positions sustain upon examination. Tax positions that met the recognition threshold are measured as the largest amount of tax benefit that is greater than 50 percent likely of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. Interest and penalties relating to uncertain tax positions are classified as income tax expense in the statement of operations and reduced from advance income taxes which are presented in the balance sheet under non-current assets.

Asset retirement obligations

The Company’s asset retirement obligations relate to the costs associated with the removal of long-lived assets when they will be retired. The Company records a liability at the estimated current fair value of the costs associated with the removal obligations. The fair value of a liability for an asset retirement obligation is recognized if a reasonable estimate of the fair value can be made. The liability for an asset retirement cost is capitalized by increasing the carrying amount of the related long-lived asset and is depreciated over its useful life. The estimated removal liabilities are based on historical cost information, industry factors and engineering estimates. The Company measures changes in a liability for an asset retirement obligation due to the passage of time by applying an interest method of allocation to the amount of the liability at the beginning of the period. The interest rate used to measure that change is the credit-adjusted risk-free rate that existed when the liability was initially measured. That accretion is recognized as an increase in the carrying amount of the liability and as an expense classified as interest expense in the statement of operations.

Segment Analysis

The Board of Directors and the Managing Director of the Company together as a group constitute the “Chief Operating Decision Makers” (CODM) and allocate resources to and assess the performance of the segments of the Company.

Prior to fiscal 2010, the Company recognised the following operating segments based on its then organizational structure:

•

Wholesale Voice: comprised of International Long Distance voice services

•

Enterprise and Carrier Data: comprised of Corporate Data Transmission services

•

Others: Comprised of national voice services, retail Internet, data centers, signaling and roaming services and television

Effective April 1, 2010, the Company changed its business segments to reflect a change in the Company’s operational and organization structure. Accordingly, the Company has identified the following operating segments:


Global Voice Solutions (GVS)	:	International and National Long Distance Voice Services

Global Data and Managed Services (GDMS)	:	Corporate Data transmission services, Internet Data Centre, Virtual Private Network, Mobile Signaling, Global Roaming, TV up linking and other Network and Managed Services

Others	:	Retail Internet Business

Revenues from the GVS and GDMS segments exceed 75% of the Company’s total consolidated revenues. The Chief Operating Decision Makers (“CODM”), comprised of the board of directors and managing director of the Company, determine the Company’s reportable segments, and allocate resources and costs to, and assess the performance of, each of the Company’s segments.

Fiscal Year 2011 Compared to Fiscal Year 2010

The following is a summary of segment information for the fiscal years ended March 31, 2010 and March 31, 2011:


Segment	2010				2011								Increase / (Decrease)						Increase / (Decrease)
	Revenues		Results		Revenues				Results				Revenues			Results			Revenues			Results
	(millions)		(millions)		(millions)		US $ (millions)		(millions)		US $ (millions)		(millions)			(millions)			%			%
Global Voice Solutions		61,436		11,014		65,516		1,471		10,015		225		4,080			(999	)		6.64			(9.07	)
Global Data and Managed Services		42,413		30,600		46,604		1,046		34,282		770		4,191			3,682			9.88			12.03
Others		2,231		2,220		1,720		39		1,666		37		(511	)		(554	)		(22.90	)		(24.95	)
Total		106,080		43,834		113,840		2,556		45,963		1,032		7,760			2,129			7.32			4.86

Global Voice Solutions

Revenues from our GVS segment increased by 6.64% in fiscal 2011, from LOGO 61,436 million in fiscal 2010 to LOGO 65,516 million (US$ 1,471 million) in fiscal 2011. In fiscal 2011 and 2010, the Company carried more than 40 billion minutes and 32.6 billion minutes, respectively, of international voice traffic. The Indian business of the Company carried international traffic of approximately 13 billion minutes in fiscal 2011 and 9.76 billion minutes in fiscal 2010. Similarly, volumes in national long distance services have increased by approximately 9% to 10.39 billion minutes in fiscal 2011 from 9.51 billion minutes in fiscal 2010 and gross revenue per minute for this business decreased significantly from LOGO 0.45 in fiscal 2010 to LOGO 0.41 (US$ 0.009) in fiscal 2011. The segment results of GVS decreased from LOGO 11,014 million in fiscal 2010 to LOGO 10,015 million in fiscal 2011, a decrease of 9.07% due to a decrease in margins. However there was continuous focus on increasing volumes as a result of which segment revenues increased

Segment results of GVS were approximately 15.29% and 17.93% of total GVS revenues for fiscal 2011 and fiscal 2010, respectively.

The retentions per minute are in line with the pricing prevailing in the highly competitive global voice markets in which the Company operates. Though on a blended basis the Company has been able to maintain its retentions, these are expected to decrease in the foreseeable future.

Global Data and Managed Services

Revenues from our GDMS segment increased by 9.88% in fiscal 2011, from LOGO 42,413 million in fiscal 2010 to LOGO 46,604 million (US$ 1,046 million) in fiscal 2011. Though the Company witnessed volume growth, tariff drops were significant and the Company expects tariffs to continue to be under pressure. Also, other value-added services including mobile roaming and signaling, global roaming, data centers, TV uplinking, VPN and O&M, have all contributed to significant growth in segment revenues

The segment result of GDMS increased from LOGO 30,600 million in fiscal 2010 to LOGO 34,282 million (US$ 770 million) in fiscal 2011, an increase of 12.03%. The GDMS segment results were 72.15% and 73.56% of GDMS segment revenue for fiscal 2010 and fiscal 2011, respectively. However, these segment results are not indicative of the true margins of this segment as substantial costs of the Company cannot be allocated among segments, as discussed below and in the consolidated financial statements of the Company.

Others

Revenues from the Others segment decreased from LOGO 2,231 million in fiscal 2010 to LOGO 1,720 million (US$ 39 million) in fiscal 2011, a decrease of 22.90%. The segment results decreased from LOGO 2,220 million in fiscal 2010 to LOGO 1,666 million (US$ 37 million) in fiscal 2011.

Fiscal Year 2010 Compared to Fiscal Year 2009

The following is a summary of segment information for the fiscal years ended March 31, 2009 and March 31, 2010:


Segment	2009				2010								Increase / (Decrease)					Increase / (Decrease)
	Revenues		Results		Revenues				Results				Revenues		Results			Revenues		Results
	(millions)		(millions)		(millions)		US $ (millions)		(millions)		US $ (millions)		(millions)		(millions)			%
Global Voice Solutions		56,245		14,042		61,436		1,367		11,014		245		5,191		(3,028	)		9.23		(21.56	)
Global Data and Managed Services		38,919		29,182		42,413		944		30,600		681		3,494		1,418			8.98		4.86
Others		2,131		2,007		2,231		50		2,220		49		100		213			4.69		10.61
Total		97,295		45,231		106,080		2,361		43,834		975		8,785		(1,397	)		9.03		(3.09	)

Global Voice Solutions

Revenues from our GVS segment have increased by 9.23% in fiscal 2010, from LOGO 56,245 million in fiscal 2009 to LOGO 61,436 million in fiscal 2010. In fiscal 2010 and 2009, the Company carried approximately 32.6 billion minutes and 25 billion minutes, respectively, of international voice traffic. The Indian business of the Company carried international traffic of approximately 9.76 billion minutes in fiscal 2010 and 8.37 billion minutes in fiscal 2009. Volumes in national long distance services have decreased by approximately 5% to 9.51 billion minutes in fiscal 2010 from 10.04 billion minutes in fiscal 2009 and gross revenue per minute for this business also decreased from LOGO 0.51 in fiscal 2009 to LOGO 0.45 in fiscal 2010. The segment results of GVS decreased from LOGO 14,042 million in fiscal 2009 to LOGO 11,014 million in fiscal 2010, a decrease of 21.56% due to a decrease in margins. However there was a continuous focus on increasing volumes as result of which segment revenues increased

Segment results of GVS were approximately 17.93% and 24.96% of total GVS revenues for fiscal 2010 and fiscal 2009, respectively.

The retentions per minute were in line with the pricing prevailing in the highly competitive global voice markets in which the Company operates. Though on a blended basis the Company was able to maintain its retentions, these were expected to decrease in the foreseeable future.

Global Data and Managed Services

Revenues from our GDMS segment have increased by 8.98% in fiscal 2010, from LOGO 38,919 million in fiscal 2009 to LOGO 42,413 million in fiscal 2010. Though the Company has witnessed volume growth, tariff drops were significant and the Company expected tariffs to continue to be under pressure. Other value-added services including mobile roaming and signaling, data centers, TV uplinking, VPN and O&M, have all contributed to significant growth in segment revenues

The segment result of GDMS increased from LOGO 29,182 million in fiscal 2009 to LOGO 30,600 million in fiscal 2010, an increase of 4.86%. The GDMS segment results were 74.98% and 72.15% of GDMS segment revenue for fiscal 2009 and fiscal 2010, respectively. However, these segment results were not indicative of the true margins of this segment as substantial costs of the Company could not be allocated among segments, as discussed below and in the consolidated financial statements of the Company.

Others

Revenues from the Others segment increased from LOGO 2,131 million in fiscal 2009 to LOGO 2,231 million in fiscal 2010, an increase of 4.69%. The segment results increased from LOGO 2,007 million in fiscal 2009 to LOGO 2,220 million in fiscal 2010.

Allocation of Costs Among Segments

Revenues and interconnect charges are directly attributable to each segment. Space segment utilization charges, rent of landlines and other network and transmission costs are allocated based on the utilization of satellite and landlines by the businesses included in each segment. License fees for international voice and corporate data transmission services are allocated based on net revenues generated from these services. Depreciation and amortization, impairment loss on intangible assets and all other operating costs are unallocable.

Telecommunication services are provided utilizing the Company’s property plant and equipment which do not generally make a distinction between the types of service. As a result, assets and expenses relating to those assets are not allocated to segments.

Liquidity and Capital Resources


	2009			2010			2011
	( millions)			( millions)			( millions)			(US $ millions)
Cash flows provided by operating activities		14,724			14,413			11,678			262
Cash flows used in investing activities		(35,116	)		(21,604	)		(15,024	)		(337	)
Cash flows provided by/(used in) financing activities		22,548			4,186			7,847			176
Effect of foreign exchange on cash flows		445			344			(59	)		(2	)
Cash and cash equivalents, beginning of year		2, 449			5,050			2,389			54

Cash and cash equivalents, end of year		5,050			2,389			6,831			153

Cash Flows Provided by Operating Activities

The Company generated LOGO 14,724 million, LOGO 14,413 million and LOGO 11,678 million (US$ 262 million) as cash from operating activities for fiscal 2009, fiscal 2010 and fiscal 2011, respectively. During fiscal 2011, a decrease in net operating profit contributed to decrease in cash flows from operations.

During fiscal 2011, the net impact of working capital and other non-current assets and liabilities changes was an outflow of LOGO 228 million (US$ 5 million) as against an outflow of LOGO 397 million in fiscal 2010 and an inflow of LOGO 1,474 million in fiscal 2009. The outflow of net working capital and other non-current assets and liabilities changes decreased due to a combination of a net change in accounts receivable, advance income taxes (net), prepaid expenses and other current assets, other non-current assets, accounts payable, accrued expenses and other current and non-current liabilities in fiscal 2011 over fiscal 2010. The changes in working capital and other non-current assets and liabilities arise primarily from the timing of receipts and payments related to our accounts receivable, other current and non-current assets, accounts payable and other current and non-current liabilities.

Cash Flows Used in Investing Activities

The Company used cash amounting to LOGO 35,116 million, LOGO 21,604 million and LOGO 15,024 million (US$ 337 million) towards investing activities during fiscal 2009, fiscal 2010 and fiscal 2011, respectively. The Company’s purchase of tangible and intangible assets net of sale proceeds were lower by LOGO 9,594 million in fiscal 2011 as against fiscal 2010. In fiscal 2010, the Company used net cash of LOGO 2,826 million during the year from sale of available for sale investments, net of purchases which in 2011 was LOGO 3,815 million (US$ 86 million). The Company, during fiscal 2011, also made additional investments and provided loans to the extent of LOGO 4,028 million (US$ 90 million) to support its long-term venture in South Africa which in fiscal 2010 was LOGO 2,092 million. The Company made additional investments in BitGravity of LOGO 308 million (US$ 7 million). During fiscal 2011, the Company also received a refund which amounted to LOGO 748 million (US$ 17 million) from China Enterprise Communications Limited arising from dissolution of a joint venture. The restricted interest bearing deposit of LOGO 2,550 million was placed with a bank in India in fiscal 2009 as margin money for a short period (40 days) for issuing a bank guarantee until the bank sets up credit limit for the Company. This restricted interest bearing deposit matured during the fiscal 2010 and had a value of LOGO 2,662 million at maturity. Further in fiscal 2010, a sum of LOGO 9.26 million was placed as interest bearing restricted deposits with banks due to statutory / legal requirements which matured in fiscal 2011 and had a value of LOGO 13 million (US$ 0.29 million). As on March 31, 2011, the Company had LOGO 76.25 million of interest bearing restricted deposits with banks due to statutory / legal requirements.

Cash Flows Provided by (Used in) Financing Activities

The Company generated capital resources from its financing activities to the extent of LOGO 22,548 million in fiscal 2009, LOGO 4,186 million in fiscal 2010 and LOGO 7,847 million (US$ 175 million) in fiscal 2011. During fiscal 2010, the Company’s proceeds from long-term borrowings net of repayment were LOGO 9,389 million, which the Company used for various capital expenditures and to augment growth plans. During fiscal 2011, the Company had availed long term borrowings net of repayments amounting to LOGO 59 million. The Company availed debt in an aggregate amount of LOGO 7,821 million (US$ 176 million) (net of repayments) in fiscal 2011 ranging from overnight overdrafts to short-term loans for a period up to one year. The Company as on March 31, 2011 had total long-term debt of LOGO 55,164 million (US$ 1,239 million) and cash and cash equivalents of LOGO 6,831 million (US$ 153 million) as against long-term debt of LOGO 55,509 million and cash and cash equivalents of LOGO 2,389 million as of March 31, 2010.

Other than the normal business capital expenditures related to its existing businesses and related working capital requirements, the known and likely commitments of the Company for new and existing ventures and debt repayments are discussed below. The Company will have to explore options to raise financial resources either in the domestic or global markets or both to meet its likely commitments. The extent to which financing is required in fiscal 2012 is discussed below. The terms and conditions under which financing will be available cannot be determined and are subject to fluctuations and uncertainties. Any problems in obtaining favorable credit ratings and access to the financial markets could be detrimental to the Company’s liquidity position and could cause delays and cost escalations in the Company’s business plans. Management expects to honor all its likely commitments through existing surplus cash and liquid investments and any balance through financing.

The following factors are expected to impact the Company’s liquidity and capital resources:

Board of Directors’ Approval for Investments in South Africa

The Company owns 43.16% in SEPCO Telecommunication Pty. Ltd. (SEPCO). SEPCO in turn owns 51% in Neotel, the second national telecommunications operator in South Africa. In addition to the above, the Company directly owns 27% in Neotel. The Board has approved an investment limit of up to US$ 395 million in Neotel.

Planned Capital Expenditures and Cash Requirements

The Company has forecasted total capital expenditures of approximately LOGO 25,611 million (US$ 575 million) in its annual operating plan for fiscal 2012 for upgrading facilities and setting up new networks and facilities. This is over and above the investment commitment in Neotel.

The capital expenditures include a planned investment in ongoing cable systems for approximately LOGO 8,819 million (US$ 198 million) which includes some of the ongoing projects like Eurasia, the West Africa Cable system and TGN Gulf cable.

Fall in Revenues due to Tariff Drops both in Voice and Data

The Company has gradually over the past years witnessed pricing pressures on its products and services, both in the Global Voice Solutions and Other segments. Further, the entry into the India enterprise business of major international carriers who have capacities on international cables may cause prices of many of our enterprise products and services to decline. These factors could cause revenues and profits to decline in fiscal 2012 and future periods, which would affect the working capital of the Company.

Unfavorable Resolution of Tax Disputes

An unfavorable outcome in the future in the tax disputes in respect of its tax holiday claim under Section 80-IA, claim for capital loss on sale of ICO Global, reimbursement of the DoT levy by Government of India and penalties would negatively affect the Company’s results of operations by LOGO 6,275 million, LOGO 1,077 million, LOGO 5,530 million and LOGO 8,185 million, respectively.

Taxes and interest relating to these tax disputes (other than penalties) have been paid in full and classified as advance income taxes on the balance sheet. Penalties of LOGO 4,952 million (out of total of LOGO 8,185 million of penalties imposed by tax authorities) have also been paid and classified as advance income taxes on the balance sheet, which may result in an additional future penalty payment of up to LOGO 3,233 million if the Company is unsuccessful in all of its significant tax disputes.

Details of Loan Facilities and Financing Requirements

In fiscal 2011 and fiscal 2010, the Company’s outstanding loan balance increased by approximately LOGO 7,231 million and LOGO 1,367 million, respectively, consisting of an increase in short-term borrowings of LOGO 4,682 million and LOGO 6,417 million in fiscal 2011 and 2010 respectively, an increase in long-term borrowings of LOGO 2,549 million and a decrease in long-term borrowings of LOGO 5,050 million in fiscal 2011 and fiscal 2010, respectively. The additional short-term borrowings were incurred to finance the Company’s working capital requirements. The unsecured short-term borrowings carried a weighted average interest rate of approximately 2.95% per annum and 7.38% per annum in fiscal 2011 and fiscal 2010, respectively. The long-term borrowings consist of secured and unsecured term and foreign currency loans (mainly denominated in US Dollar and Rupee) with a fixed interest rate of 4% and variable interest rates ranging from Libor plus 135 basis points to 470 basis points per annum for US dollar denominated loans and 5.95% to 11.70% per annum on secured and unsecured Indian Rupee loans. The maturity dates of these loans range from April 2011 to March 2020. Please refer note 17 in the Company’s consolidated financial statements for additional information. As of March 31, 2011, the Company’s total interest bearing debt was 176% of total shareholders’ equity as compared to 130% on March 31, 2010.

The Company has unutilized lines of short-term credit facilities of LOGO 3,272 (US$ 73 million) million and LOGO 9,559 million as of March 31, 2011 and March 31, 2010, respectively and LOGO 484.40 million (US$ 10.88 million) and LOGO Nil of long-term credit facilities as of March 31, 2011 and March 31, 2010, respectively.

In fiscal 2012, the Company may require additional financing of approximately LOGO 10,244 million (US$ 230 million) to meet its likely commitments which are primarily capital expenditures. Further, the Company intends to refinance/repay LOGO 13,663 million (US$ 307 million) of short-term loans and LOGO 9,064 million (US$ 204 million) of long-term loans maturing in fiscal 2012. The additional financing may be obtained by way of loans from Indian and overseas banks / financial institutions. These loans will be denominated mainly in Indian Rupee, US Dollar and South African Rand.

The Company may also obtain financing through one or more equity offerings which would be subject to shareholders’ approvals (including the Government of India).

Details of Loan covenant restrictions:

For fiscal 2011 and fiscal 2010, the financial loans covenants are applicable to long-term dollar denominated loans. It was also applicable to long-term ZAR denominated loans for fiscal 2010, which were prepaid in fiscal 2011. The financial covenants are based on the annual consolidated financial statements of the Company prepared in accordance with Indian Accounting Standards (referred to as “Indian GAAP”). In accordance with the loan agreements, the annual consolidated financial statements to compute the covenants exclude the financial statements of VSNL SNOSPV Pte. Ltd, a subsidiary, SEPCO, and UTL, joint ventures and Neotel a subsidiary of SEPCO (referred to as “Relevant Group”)

A breach of any financial covenant will result in an event of default under the applicable loan agreement and will give the lenders the right to demand immediate loan repayments. The financial covenants that are applicable for fiscal 2010 and fiscal 2011 are set out below in table. The terms defined in the loan agreements that are used in the financial covenants are detailed after the table.

No.

Loan balance as of
March 31, 2010 to which
Financial Covenant is
applicable

Loan balance as of
March 31, 2011 to
which Financial
Covenant is
applicable

Financial Covenant

Threshold level

pertaining to the

financial covenant

Actual level
pertaining to
financial
covenant for
the fiscal 2010

Actual level
pertaining to
financial
covenant for
the fiscal
2011

33,438 million

33,109 million (US$ 743 million)

Tangible Net Worth of the Relevant Group

Levels are different for LOGO 23,415 million (US$ 525 million) loan availed in fiscal 2011 and different for remaining loans amounting to LOGO 9,694 million (US$ 218 million)

Levels for LOGO 9,694 million (US$ 218 million) loans

As of March 31, 2010, 2011 and 2012 must exceed LOGO 25 billion

As of March 31, 2013 must exceed LOGO 35 billion.

As of March 31, 2014 and annual periods ending beyond March 31, 2014 must exceed LOGO 42 billion.

Levels for LOGO 23,415 million (US$ 526 million) loan

As of March 31, 2011, 2012 and 2013 must exceed LOGO 40 billion.

As of March 31, 2014 and annual periods ending beyond March 31, 2014 must exceed LOGO 45 billion.

Tangible net worth was LOGO

51.07 billion

Tangible net worth was LOGO

46.82 billion (US$ 1.05 billion)

33,438 million

33,109 million (US$ 743 million)

Ratio of Total Net Fixed Assets of the Relevant Group to Net Debt

Levels for LOGO 9,694 million (US$ 218 million) loans

Should exceed 1.6 times

Levels for LOGO 23,415 million (US$ 526 million) loan

Should exceed 1.75 times

The ratio of Total Net Fixed Assets to Net Debt was 3.18 times.

The ratio of Total Net Fixed Assets to Net Debt was

For LOGO 9,694 million (US$ 218 million) loans - 2.84 times.

For LOGO 23,415 million (US$ 526 million) loans - 2.62 times.

33,438 million

33,109 million (US$ 743 million)

Ratio of Net Debt to EBITDA and limit on Net Debt

Levels for LOGO 9,694 million (US$ 218 million) loans

For any relevant fiscal year in which the ratio of Net Debt to EBITDA is greater than 3.25:1, Net Debt should not exceed US$ 2.3 billion

Levels for LOGO 23,415 million (US$ 526 million) loan

For fiscal 2011 if the ratio of Net Debt to EBITDA is greater than 3.00:1, Net Debt should not exceed US$ 2.3 billion

For fiscal 2012 if the ratio of Net Debt to EBITDA is greater than 3.00:1, Net Debt should not exceed US$ 2.5 billion

Net Debt to EBITDA ratio was 3.63 times and the Net Debt was US$ 1,194.75 million.

Net Debt to EBITDA ratio was 3.72 times and the Net Debt was US$ 1,324.36 million.

33,438 million

33,109 million (US$ 743 million)

The ratio of EBITDA to Net Interest Expense

Levels for LOGO 9,694 million (US$ 218 million) loans

EBITDA in fiscals 2010 to 2014 should exceed Net Interest Expense as follows:

2010 and 2011 - 2.25 times

2012 - 2.75 times

2013 - 3.10 times

2014 and beyond - 3.25 times

Levels for LOGO 23,415 million (US$ 526 million) loan

EBITDA in fiscals 2011 to 2014 should exceed Net Interest Expense as follows:

2011 - 2.25 times

2012 - 2.75 times

2013 - 3.75 times

2014 and beyond – 4.00 times

The ratio of EBITDA to Net Interest Expense was 3.72 times.

The ratio of EBITDA to Net Interest Expense was 3.76 times.

33,438 million

33,109 million (US$ 743 million)

Ratio of Net Debt to EBITDA.

Levels for LOGO 9,694 million (US$ 218 million) loans

In fiscal 2013 and beyond, Net Debt should not exceed 3.25 times EBITDA.

Levels for LOGO 23,415 million (US$ 526 million) loan

In fiscals 2013 and beyond, Net Debt should not exceed 3.00 times EBITDA.

This covenant is applicable from fiscal 2013 onwards and hence not relevant for fiscal 2010.

This covenant is applicable from fiscal 2013 onwards and hence not relevant for fiscal 2011.

Definitions:

“Tangible Net Worth” means, as at any particular time, shareholders’ funds less (but without double counting) any amount included in shareholders’ funds which is attributable to:

goodwill;

amounts set aside for tax;

minority interests;

the amount by which the net book value of any asset has been written up after 31 March 2006 (or, in the case of a person becoming a member of the Relevant Group after that date, the date on which that person became or becomes a member of the Relevant Group) by way of revaluation or on its transfer from one member of the Relevant Group to another; and

any dividend or other distribution declared, recommended or made by any member of the Group,

but ignoring any variation in the credit or debit balance on the Relevant Group consolidated profit and loss account since the date of the then latest audited consolidated balance sheet of the Relevant Group except to the extent reflected in any later Relevant Group consolidated profit and loss statement.

For the avoidance of doubt the Wimax license fee will not be deducted when calculating Tangible Net Worth and any depreciation or amortization of the Wimax license fee included in the calculation of Tangible Net Worth shall be cumulatively added back.

“Total Net Fixed Assets” means at any time but without double counting:

the aggregate book value of all fixed assets less depreciation;

the aggregate book value of all capital work in progress;

investments (but excluding the book value of the Tata Teleservices Limited (TTSL) Investment); and

the last traded value of the TTSL Investment,

in each case, of each member of the Relevant Group as determined from the financial statements of the Relevant Group.

It may be noted that in case of LOGO 9,694 million (US$ 218 million) loans last traded value of TTSL is taken at 100% and in case of LOGO 23,415 million (US$ 525 million) loan last traded value of TTSL is taken at 75%.

“Net Debt” means at any time, without double counting, the aggregate net amount of all borrowings of the Relevant Group:

excluding any working capital or similar facilities (the proceeds of which are applied solely towards working capital purposes) which are (i) not made available in cash by way of short term or long term loans; and (ii) not exceeding an aggregate amount of US$75,000,000 (or its equivalent in any other currency or currencies); and

reducing by any cash and/or cash equivalents and investments made in mutual funds, bank deposits and any other available means for surplus funds investment by the Relevant Group.

“EBITDA” means, in relation to any relevant fiscal year, the total consolidated profit of the Relevant Group for that relevant fiscal year:

before taking into account:

Interest Expense;

ii.

tax;

iii.

any share of the profit of any associated company or undertaking, except for dividends received in cash by any member of the Relevant Group; and

iv.

extraordinary and exceptional items (excluding tax, license fee refunds and any interest on such refunds); and

after adding back all amounts provided for depreciation and amortisation for that Relevant Period, as determined from the financial statements of the Relevant Group.

“Net Interest Expense” means Interest Expense less all income received by the Relevant Group in the relevant fiscal year in respect of any cash and/or cash equivalents and investments made in mutual funds, bank deposits and any other available means of surplus funds investment of the Relevant Group.

“Interest Expense” means, in relation to any Relevant Period, the aggregate amount of interest and any other finance charges (whether or not paid, payable or capitalised) accrued by the Relevant Group in the relevant fiscal year in respect of borrowings including:

a.	the interest element of leasing and hire purchase payments;

b.	commitment fees, commissions, arrangement fees and guarantee fees; and

amounts in the nature of interest payable in respect of any shares other than equity share capital, adjusted (but without double counting) by adding back the net amount payable (or deducting the net amount receivable) by members of the Relevant Group in respect of that Relevant Period under any interest or (so far as they relate to interest) currency hedging arrangements and all as determined from the financial statements.

Based on the covenants levels as on March 31, 2011, the Company could have raised additional debt of LOGO 29,372 million without breaching any of its debt covenants as on March 31, 2011. Accordingly, considering the Company’s current financial position, and taking into account management’s assessment of its business potential, the Company anticipates that it will continue to comply with the covenants described above.

Other material limitations—Debt and non-debt financing :

Panatone Finvest Limited and the Government of India agreed in the Shareholders’ Agreement that the Company would not undertake certain corporate actions unless at least one director nominated by each of them (in the case of a Board meeting) or at least one authorized representative nominated by each of them (in the case of a shareholder meeting) consents to such action. These actions include, among other things, the granting of any security or incurring of indebtedness in excess of the net worth of the Company per se. In the event that Panatone Finvest Limited and the Government of India fail to agree on such matter, their disagreement could result in the Company’s inability to borrow funds for future expansion.

However the Board of Directors of the Company including the nominee directors of the Government of India and Panatone Finvest Limited agreed to allow the Company to raise debt and provide guarantees which may in the aggregate exceed the net worth of the Company per se by up to LOGO 41,990 million, subject to the Company obtaining shareholders’ approval in the event the borrowings of the Company on a unconsolidated basis exceed the unconsolidated net worth of the Company as per Indian GAAP. The unconsolidated net worth of the Company as per Indian GAAP as on March 31, 2011 stood at LOGO 70,075 million and unconsolidated borrowings of the Company as on March 31, 2011 stood at LOGO 22,150 million. In view of the above approval and the fact that the unconsolidated borrowings are well within the unconsolidated net worth of the Company, management believes that the Company has no material restrictions to raise additional debt necessary to fund its expansion plans.

The authorized share capital of the Company is LOGO 3,000 million of which the issued share capital is LOGO 2,850 million at a par value of LOGO 10 per share. The Company postponed seeking shareholders’ approval for an increase of the current level of authorized capital as required Government approvals were not received at the time of the Annual General Body Meeting held on August 7, 2009. The Company shall approach the shareholders as soon as it receives Government approval for increasing its authorized capital which is under consideration by the Government.

Disclosure on Short Term Borrowings:

The Company’s short term borrowings were in the nature of Buyer’s credit, Post shipment Credit and Others (Unsecured Non Convertible Debentures, Overdrafts and Bilateral Bank Loans)

Buyers Credit and Post shipment credit:

Buyer’s credit funds were borrowed for financing trade imports as and when required. Buyers credit are offered by banks for funding capital goods imports with an option to roll over the facility for a maximum period of three years which results in cash liquidity for a longer period at short term-rates. Post shipment credits were borrowed for financing trade exports as the same are available from banks at highly competitive rates. Post shipment credits are offered by banks for funding exports with option for the borrower to repay upon receipt of funds from the customer which results in cash liquidity before actual customer receipts.

The lenders for these transactions are banks and hence there is minimal credit risk.

Both Buyer’s credit and Post shipment credit were borrowed as and when there were capital imports and exports which resulted in peak borrowing and also explains the difference between average borrowings for the fiscal year and borrowings outstanding as at fiscal year end appearing in Table 1 below

Other Short Term Borrowings:

Short term borrowings and overdrafts were availed for meeting working capital shortfalls. The lenders for these transactions are banks and mutual funds and hence there is minimal credit risk.

The above short-term borrowings were requirement-based resulting in peak borrowing as appearing in table below. Part of these were repaid during the year and part were availed mid-year which explains the difference between average borrowings for fiscal year and borrowings outstanding as at fiscal yearend detailed in table below. The total weighted average interest rate on short term borrowings as on March 31, 2011 was 2.95%.


CATEGORY	Currency	Amount outstanding as at Mar 31, 2011		Average amount outstanding during fiscal 2011		Maximum Amt outstanding during fiscal 2011		Weighted Average Interest rate for fiscal 2011
		Millions		Millions		Millions		Millions
India
Buyers credit	USD		28.30		21.82		28.30		2.15	%
Short term unsecured debentures	INR		NIL		391.67		1,850.00		6.86	%
Mibor linked borrowings	INR		NIL		75.00		500.00		4.87	%
Overdrafts	INR		434.98		314.97		872.79		9.35	%

International
Overdrafts	USD		14.30		6.95		16.28		3.25	%
Short term borrowings	USD		230.00		118.67		230.00		2.48	%

SNOSPV
Short term borrowings	USD		25.00		8.33		25.00		2.96	%

TCTSL
Post Shipment Loans	GBP		0.97		0.79		1.67		3.05	%

Off-Balance Sheet Arrangements

The Company provided a guarantee for LOGO 5,485 million to the buying stake holder of our investment in TTSL shares in fiscal 2009 in respect of certain representation and warranties mainly relating to the validity of the selling shareholders’ title to and sale of TTSL shares and the validity of TTSL’s telecommunication license.

Table of Aggregate Contractual Obligations

The Company had the following contractual and commercial commitments related to normal business activities as of March 31, 2011:


	Payments Due by Period ( millions)
	Total		Less Than 1 Year		1-3 Years		3-5 Years		More than 5 years
Long Term Debt		55,164		9,064		19,876		23,104		3,120
Purchase Obligations		11,550		10,644		870		36		—
Other Long Term Contractual Commitments (1)		3,446		2,042		132		1,272		—
Operating Lease Obligations		18,030		2,653		4,567		4,056		6,754

(1)	The other long term contractual commitments consist primarily of bank guarantees amounting to 1,411 million and standby letters of credit amounting to 2,035 million.

(2)	In accordance with the agreement dated September 29, 2011 between the shareholders and lenders of SEPCO Group, the Company has committed to provide additional funding of 3,393 million (US$ 76 million)

The Company is not involved in any trading activities.

Capital Expenditures

The Company has forecast total capital expenditures of approximately LOGO 25,611 million (US$ 575 million) in its annual operating plan for fiscal 2012 for upgrading facilities and setting up new networks and facilities. The bulk of the capital expenditures will be made to enhance the transmission capacities and last-mile connectivity of the Company, both inland and offshore, the primary benefit of which will be an expansion in our capacity, but the enhancements will also improve network resilience, expand network reach, optimize our network and enable us to offer newer services and solutions. The data and internet product businesses of the GDMS segment of the Company will derive the most benefits from these advancements. In addition, the Company expects to make capital expenditures to grow its ILD Voice business, including expenditures to develop and acquire information technology assets, sustenance capital expenditures and expenditures to enhance infrastructure. The Company also expects to make capital expenditures to develop infrastructure that will be able to be used in all the segments of the Company.

Research and Development, Patents and Licenses

The Company conducts its own internal research and development in order to achieve its strategic goals and to remain a leader in current technological advancements. The main focus of the Company’s internal research and development activity is the exploration of suitable technologies that will enable the Company to best serve its customers, gain a competitive advantage in the telecommunications market and reduce its cost of operations. The research and development that the Company has focused on in recent years has been on access technologies, content delivery systems, tools for network optimization, graphic user interface applications for network inventory systems and internet applications.

In accordance with the Company’s accounting policy on research and development, all costs incurred in connection with research and development by the Company are charged to the income statement under the relevant line items.

Financial and Management Accounting and Reporting Systems

The Company was subject to various laws and Government policies in respect of public sector enterprises and followed procedures appropriate for a public sector entity until its privatization in fiscal 2002. Consequently, the Company did not have the financial and management accounting and reporting systems that are typical of private comparable companies outside India. Although the Company initiated various steps to improve its processes and systems, the Company has to continue to invest in improving its processes and systems further in light of the dynamic conditions and changes within the industry in which it operates. In addition, the Company has grown quickly as a result of significant acquisitions in fiscal 2006. In fiscal 2009, the Company has introduced new processes and has also upgraded the ERP system for its international operations due to which the accounting and reporting systems have significantly stabilized.

In June 2011, the Company upgraded the ERP system for Indian operations to the latest and improved version. The Company is in the process of migrating most of the entities of the group to a common ERP system and also implementing a specialized tool for planning and consolidation which are expected to be completed during fiscal 2012.

The Company has made and will continue to make significant efforts to further develop and maintain effective accounting and reporting systems.

ITEM 6.

DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

Directors and Principal Officers

The Company is managed by its board of directors (the “Board”). The Indian Companies Act, 1956 (the “Act”) and the Company’s Articles of Association (the “Articles”) provide for a board of directors of not less than three and not more than twelve directors.

Under the Articles and in accordance with the SHA and SPA, the composition of the Board is determined as follows:

The Board is to be comprised of 12 directors. At least three-fourths of the total number of directors must, at all times, be Indian nationals.

So long as the GoI holds at least 10% of the voting equity share capital of the Company, the composition of the Board must be as follows:

•

Four out of 12 directors must be permanent or non-retiring directors, of which the GoI and Panatone Finvest Limited are entitled to appoint two directors each.

•

The remaining eight directors retire by rotation. Of the retiring directors, four directors must be independent directors. Panatone Finvest Limited and the GoI are entitled to recommend two independent directors each.

•

The composition of the remaining four directors, i.e. the retiring non-independent directors, must be determined as follows:

•

So long as Panatone Finvest Limited, together with its affiliates, holds 25% of the voting equity shares of the Company, the GoI and Panatone Finvest Limited nominate two such directors each.

•

As soon as Panatone Finvest Limited acquires and holds more than 25% but less than 30% of the voting equity shares of the Company, Panatone Finvest Limited will have the right to appoint three such directors and the GoI will have the right to appoint one such director.

•

As soon as Panatone Finvest Limited acquires and holds more than 30% of the voting equity shares of the Company, Panatone Finvest Limited will have the right to appoint all four such directors.

Notwithstanding anything to the contrary above:

•

The GoI has the right to appoint two non-retiring directors so long as the GoI holds at least 10% of the voting equity shares of the Company.

•

The GoI is entitled to appoint one non-retiring director so long as the GoI is a shareholder of the Company.

•

If a person who is not a party to the SHA acquires Shares or the right to appoint directors from the GoI, Panatone Finvest Limited or another party to the SHA and requests the right to nominate one or more directors, such person will be entitled to nominate one or more directors depending on the percentage of equity shares of the Company held by such person.

•

The proportion of representation of the GoI and Pantone Finvest Limited on any committees or sub-committees of the Board must be the same as that of such party on the Board.

•

In the event the Board constitutes a share transfer committee for the purpose of effecting the transfer of the Shares, such share transfer committee must include one nominee each of Panatone Finvest Limited and the GoI.

•

As long as Panatone Finvest Limited holds 25% of the voting equity shares of the Company, one of the directors nominated by Panatone Finvest Limited must be the Managing Director of the Company.

As of September 30, 2011, the Board had eleven directors—three independent directors, two directors nominated by the GoI and six directors nominated by Panatone Finvest Limited.

Mr. Vinod Kumar, who was a non-executive director on the board, was appointed as the Managing Director and Group CEO with effect from February 1, 2011 subject to approval of shareholders and the Central Government as may be necessary. He replaced Mr. N. Srinath and Mr. Srinath continues to be a Director on the Board of Tata Communications Ltd and some of its subsidiary/associate companies. Mr. H.P. Mishra, who was nominated by the Government of India as a permanent (non-retiring) director, has ceased to be a director on the board of Tata Communications Limited with effect from with effect from April 1, 2010. Mr. Manish Sinha, Deputy. Director General (LF), Department of Telecommunications, was appointed in place of Mr. H.P. Mishra on the board of the Company. Mr. Manish Sinha ceased to be a director on the board of Tata Communications Limited with effect from September 15, 2010; effective the same date, Mr. Shabhaz Ali, Deputy Director General (TRF & Accounts), Department of Telecommunications, was appointed as government nominee director on the board of the Company. Mr. PV Kalyanasundaram and Dr. V.R.S Sampath, both independent directors ceased to be directors with effect from May 20, 2011 and June 2, 2011, respectively. Mr. AK Srivastava, then Deputy Director General (AS) and Mr. Shahbaz Ali ceased to be directors with effect from August 9, 2011.

On the recommendation of the government, the board has appointed Mr. Uday B. Desai as an additional director (independent) with effect from 6 June 2011. Mr. AK Mittal, Senior Deputy Director General (AS), DoT and Mr. Saurabh Tiwari, Deputy Director General (LF.II), DoT, nominated by the Government of India were appointed as additional directors with effect from August 9, 2011.

The business address of each of the directors is the registered office of the Company. As of September 30, 2011, the directors, their positions and terms were as follows:


Name	Age	Position	Term	Director Since
Subodh Bhargava	69	Independent Director and Chairman	Liable to retire by rotation	May 2002
Vinod Kumar	46	Managing Director and Group Chief Executive Officer	Non-retiring Director	February 2007
Srinath Narasimhan	49	Director	Non-retiring Director	February 2002
Kishor A. Chaukar	64	Director	Liable to retire by rotation	July 2002
Amal Ganguli	72	Independent Director	Liable to retire by rotation	July 2006
S. Ramadorai	67	Director	Liable to retire by rotation	June 2007
A.R.Gandhi	68	Director	Liable to retire by rotation	September 2007
Dr. Ashok Jhunjhunwala	58	Director	Liable to retire by rotation	October 2008
Mr. Uday B Desai	60	Independent Director	Liable to retire by rotation	June 2011
Ajay Kumar Mittal ⁽¹⁾	56	Director (GoI Nominee)	Liable to retire by rotation	August 2011
Saurabh Tiwari ⁽¹⁾	44	Director (GoI Nominee)	Liable to retire by rotation	August 2011

⁽¹⁾	Typically, nominee directors continue on the Board for so long as the nomination is not changed by the GoI.

There are no exclusive directors’ service contracts providing for benefits upon termination of employment with the Company or any of its subsidiaries except those normal retirement benefits applicable to the employees of the Company. However, as per the agreement between the Company and Mr. Vinod Kumar, his employment can be terminated by either party by giving six months notice or by the Company on paying six months’ basic salary in lieu thereof.

Set forth below is selected biographical information for the Company’s directors:

MR. SUBODH BHARGAVA

CHAIRMAN

Mr. Subodh Bhargava, born in 1942, holds a Degree in Mechanical Engineering from the University of Roorkee. He started his career with Balmer Lawrie & Co., Kolkata before joining the Eicher group of companies in Delhi in 1975. On March 31, 2000, he retired as the Group Chairman and Chief Executive and is now the Chairman Emeritus, Eicher group. He is the past President of CII and the Association of Indian Automobile Manufacturers; and the Vice President of the Tractor Manufacturers Association. Over several years, he has been a key spokesperson for Indian industry, contributing to and influencing government policy while simultaneously working with industry to evolve new responses to the changing environment. He was a member of the Insurance Tariff Advisory Committee, the Economic Development Board of the government of Rajasthan. He was also the chairman of the National Accreditation Board for Certifying Bodies (NABCB) under the aegis of the Quality Council of India (QCI). Mr. Bhargava has been closely associated with technical and management education in India. He was the Chairman of the Board of Apprenticeship Training and a Member of the Board of Governors of the University of Roorkee; The Indian Institute of Foreign Trade, New Delhi; the Indian Institute of Management, Indore; and the Entrepreneurship Development Institute of India, Ahmedabad. He is currently on the Board of Governors of IIM (Lucknow), other institutions for engineering and business management education and the Centre for Policy Research. He is a Member of the Technology Development Board, Ministry of Science & Technology, Govt. of India. He was conferred with the first IIT Roorkee Distinguished Alumnus Award in 2005 by Indian Institute of Technology, Roorkee. Mr Bhargava is the Chairman of Tata Communications Limited and also Wartsila India Limited and a Director on the boards of several Indian corporates such as Tata Steel Limited, Tata Motors Limited and Larsen & Toubro Ltd.

MR. VINOD KUMAR

MANAGING DIRECTOR & GROUP CEO

Vinod Kumar is Managing Director of Tata Communications Limited and CEO of the Tata Communications Limited group. Mr. Kumar joined Tata Communications in April 2004, just when the Company was starting to grow internationally. He was closely associated with the acquisitions of TGN and Teleglobe and assumed responsibility as Managing Director of the Company’s international operations. Subsequently, he was promoted to Chief Operating Officer, whilst managing the Global Data Business Unit as well as the Engineering and Operations functions. Mr Kumar was also appointed as a non-executive director on the Board of Tata Communications Limited in February 2007. In February 2011, Mr. Kumar was appointed as the Managing Director of Tata Communications Limited and as Tata Communications Limited Group CEO. Mr. Kumar has been at the forefront of Tata Communications’ shift away from traditional network services towards managed services and, recently, cloud computing. With over 20 years of experience in the global telecom industry, Mr. Kumar has an impressive track record in developing business strategies and creating fast growth organizations across the world. Prior to Tata Communications, he was Senior Vice President of Asia Netcom, responsible for generating top-line growth including strategy formulation, product marketing and sales. He was actively involved in the financial restructuring and eventual asset sale of Asia Global Crossing to China Netcom, resulting in the formation of Asia Netcom. In 1999, Mr. Kumar joined WorldCom Japan as Chief Executive Officer. Prior to this, he held various senior positions in Global One in the United States and Asia where he has had major responsibilities in market management, sales, marketing, product management, multinational account management and operations. Mr. Kumar is a Member on the Board of Economic Development Board (EDB), the lead government agency responsible for planning and executing strategies to enhance Singapore’s position as a global business centre and grow the Singapore economy. Mr. Kumar is also a Member on the Governing Council of Human Capital Leadership Institute (HCLI) in Singapore, a premier institution for raising human capital management capabilities in Asia. Mr. Kumar was born in 1965 and graduated with honours in Electrical and Electronic Engineering from the Birla Institute of Technology and Science in India.

MR. SRINATH NARASIMHAN

DIRECTOR

Mr. N. Srinath, born in 1962, has a degree in Mechanical Engineering from IIT (Chennai) and a Management Degree from IIM (Kolkata), specialising in Marketing and Systems. Since joining Tata Administrative Services in 1986, Mr. Srinath has held positions in Project Management, Sales & Marketing, and Management in different Tata companies in the ICT sector. On completing his probation with the TAS in 1987, Mr. Srinath joined Tata Honeywell, a start-up in the business of process control systems, as Project Executive working until late 1988 on securing various statutory approvals and funding necessary for the project. He then moved to Tata Industries as Executive Assistant to the Chairman, an assignment he handled until March 1992. In that period, he was also part of the team that set up Tata Information Systems (later Tata IBM). From June 1992 to February 1998 he handled a number of assignments in Tata Information Systems Limited in Sales & Marketing to enterprise customers in the banking, retail, petroleum and process manufacturing sectors. In March 1998, Mr. Srinath returned to Tata Industries as General Manager (Projects) responsible for overseeing the project implementation of Tata Teleservices fixed line telecom service in the state of Andhra Pradesh. In April 1999, he took over as the Chief Operating Officer of Tata Teleservices responsible for Sales, Customer Service, Networks and Information Technology. From late 2000 until February 2002, he was the Chief Executive Officer of Tata Internet Services, a start-up Internet services business serving retail and enterprise customers. Mr. Srinath joined Tata Communications (then known as VSNL) in 2002 as Director (Operations) when the Tata Group was selected as the strategic partner for the Company. Since February 2007 Mr. Srinath has been the Managing Director of Tata Communications Limited & CEO of the Tata Communications global group of companies. Under his leadership, Tata Communications has transformed from a monopoly, public sector undertaking into a global communications services provider offering advanced network, managed and cloud services to customers worldwide. Mr. Srinath has received several recognitions in the telecom industry. He was named the ‘Telecom CEO of the Year’ in Asia by the leading publishing Group Telecom Asia in the 2006 edition of their awards. The Institute of Economic Studies (IES), a research oriented organisation, conferred its Udyog Rattan Award on Mr. Srinath in November 2006. In 2008 and 2009, Mr. Srinath was named as the world’s eighth most influential telecom personality by the Global Telecoms Business magazine as well as the ‘Telecom Person of the Year’ by the India-based Voice and Data magazine in 2008. Since February 1, 2011, he has been appointed as the Managing Director of Tata Teleservices Limited one of India’s leading mobile service providers.

MR. KISHOR A. CHAUKAR

DIRECTOR

Mr. Kishor A. Chaukar, born in 1947, currently the Managing Director of Tata Industries Limited (TIL), is a post-graduate in management from the Indian Institute of Management at Ahmedabad. TIL is the smaller of the two principal holding companies of the Tata Group, India’s largest and best-known conglomerate. TIL acts as the new projects promotion arm of the Group, and spearheads the entry of the Group in the emerging, high-tech and sunrise sectors of the economy. In his capacity as Managing Director of TIL, Mr. Chaukar is responsible for enhancing the value and interest of TIL in TIL divisions and in companies where TIL has made investments. Mr. Chaukar is a member of the Group Corporate Centre, which is engaged in strategy formulation at the House of Tata. He also chairs the Tata Council for Community Initiatives (TCCI), the nodal forum of the Group, on matters related to corporate sustainability. Mr. Chaukar is a member of the Board and Advisory Board of several national and international organizations in the Corporate Sustainability and Human Rights space, Global Reporting Initiative – Amsterdam Shell Foundation Breathing Space India Advisory Board – New Delhi, and the Tata Memorial Centre – Mumbai. Mr. Chaukar was previously the managing director of ICICI Securities & Finance Company Ltd. (July 1993 to October 1998), and was a member of the Board of Directors of ICICI Ltd. from February 9, 1995 to October 15, 1998 and Bhartiya Agro Industries Foundation, an NGO engaged in rural development and Godrej Soaps Ltd.

MR. AMAL GANGULI

DIRECTOR

Mr. Amal Ganguli, born in 1939, is a fellow member of the Institute of Chartered Accountants of India and the Institute of Chartered Accountants of England and Wales and a member of the New Delhi Chapter of The Institute of Internal Auditors, Florida, USA. He was the Chairman and Senior Partner of Pricewaterhouse Coopers (PWC), India until his retirement on 31 March 2003. Besides his qualifications in the area of accounting and auditing, Mr. Ganguli is an alumnus of IMI, Geneva. Mr. Ganguli trained in the UK to become a Chartered Accountant. He was seconded as a Partner to PWC, UK/USA for a year in 1972-73. During his career, which is spanned over 40 years, Mr. Ganguli’s range of work included International Tax advice and planning, cross border investments, corporate mergers and re-organizations, financial evaluation of projects, management, operational and statutory audit and consulting projects funded by international funding agencies. In the course of his professional career, he has dealt with a variety of clients, including US AID, the World Bank, ADB, NTPC, Alcatel, GE, Hindustan Lever, STC, Hewlett Packard and IBM. Mr. Ganguli is a member of the Board of Directors of number of companies, such as Hughes Communications India Limited, HCL Technologies Limited, New Delhi Television Limited, Century Textiles and Industries Limited, Aricent Technologies (Holdings) Ltd, AVTEC Ltd, ICRA Ltd and Maruti Suzuki India Ltd. Mr. Ganguli is a member of the Audit Committees of HCL Technologies Limited, Century Textiles and Industries Limited, and ICRA Ltd. He is the chairman of the Audit Committee of Aricent Technologies (Holdings) Ltd, New Delhi Television Ltd, Tata Communications Limited and Maruti Suzuki Ltd.

MR. S. RAMADORAI

DIRECTOR

In February 2011, S. Ramadorai first entered public service when the Indian Government appointed him as the Advisor to the Prime Minister in the National Skill Development Council, in the rank of Cabinet Minister. The Council, which is headed by the Prime Minister, seeks to develop a strategy for Skill Development at the national level with a view to addressing skill deficits. Mr. S. Ramadorai, born in 1944, Vice-Chairman of Tata Consultancy Services Limited (TCS), has been associated with TCS for the past 39 years. He took over as CEO of TCS in 1996 when TCS’s revenues were at $160 million and has since led the Company through some of its most dynamic phases, including its going public in 2004. In October 2009, he stepped down as CEO, leaving a $6 billion global IT services company to his successor and is now the Vice Chairman of the Company. Today, the Company’s revenues stand at USD 8 billion for the fiscal year ended 31 March 2011, with an employee base of over 198,500 of the world’s best trained IT consultants in 42 countries. Mr. Ramadorai is the Chairman of other Tata companies - Tata Elxsi Ltd, Tata Technologies Ltd, CMC Ltd and CRL Limited. He is also on the boards of a number of companies and educational institutions – Tata Industries, Hindustan Unilever Limited, the Bombay Stock Exchange and the MIT Sloan School of Management (EMSAB). In recognition of Mr. Ramadorai’s commitment and dedication to the IT industry he was awarded the Padma Bhushan (India’s third highest civilian honour) in January 2006. In April 2009, he was awarded the CBE (Commander of the Order of the British Empire) by her Majesty Queen Elizabeth II for his contribution to Indo-British economic relations. His academic credentials include a Bachelors degree in Physics from Delhi University (India), a Bachelor of Engineering degree in Electronics and Telecommunications from the Indian Institute of Science, Bangalore (India) and a Masters degree in Computer Science from the University of California - UCLA, USA. In 1993, Mr. Ramadorai attended the Sloan School of Management’s highly acclaimed Senior Executive Development Program.

MR. A.R. GANDHI

DIRECTOR

Mr. Arunkumar Ramanlal Gandhi, born in 1943, is a director on the Board of Directors of Tata Sons Ltd and is a member of the Group Corporate Centre of the Tata Companies. He is a fellow member of the Institute of Chartered Accountants in England and Wales and the Institute of Chartered Accountants of India. He is an associate member of the Chartered Institute of Taxation, London. Prior to joining Tata Sons, he was with M/s N. M. Raiji & Co., Chartered Accountants. He joined the firm as a partner in July 1969 and in 1993 became a senior partner. The firm has more than 60 years of professional standing. He joined Tata Sons Limited as an Executive Director on 18th August 2003 and continued in that position until 17th August 2008. Mr. Gandhi has been assisting the Tata Group in acquiring diverse assets and companies across the globe. This has enabled the Tata Group to acquire critical assets, resources and access to world class R&D facilities. In the course of his professional career, Mr. Gandhi has worked on numerous mergers and acquisitions, both crossborder and domestic transactions. Mr. Gandhi has been a member of various committees constituted by industry forums and regulatory bodies, such as SEBI’s Takeover Panel Exemption Committee and the Institute of Chartered Accountants of India’s Accounting Standards Board.

DR. ASHOK JHUNJHUNWALA

DIRECTOR

Dr. Ashok Jhunjhunwala, born in 1953, received his B.Tech degree from IIT, Kanpur, and his MS and Ph.D degrees from the University of Maine. From 1978 to 1981, he was with Washington State University as Assistant Professor. Since 1981, he has been teaching at IIT, Madras, where he leads the Telecommunications and Computer Networks group (TeNeT). This group works with industry in the development of technologies relevant in India. It has incubated several technology companies which work in partnership with TeNeT group to develop Telecom and Banking products for Indian Urban and Rural Markets. He chairs the Rural Technology Business Incubator (RTBI) at IIT Madras and the Mobile Payment Forum of India (MPFI). Dr. Ashok Jhunjhunwala was awarded the Padma Shri in the year 2002. He was awarded Shanti Swarup Bhatnagar Award in 1998, Dr. Vikram Sarabhai Research Award for the year 1997, Millennium Medal in Indian Science Congress for the year 2000, H.K. Firodia for “Excellence in Science and Technology” for the year 2002, Shri Om Prakash Bhasin Foundation Award for Science & Technology for the year 2004, Jawaharlal Nehru Birth Centenary Lecture Award by INSA for the year 2006, IBM Innovation and Leadership Forum Award by IBM for the year 2006 and an Honorary Doctorate by the institute of Blekinge Institute of Technology Sweden and Excellence in Science and Technology Award. He is a Fellow of World Wireless Research Forum, IEEE and Indian academies, including INAE, IAS, INSA and NAS. Dr. Jhunjhunwala is a Director on the Board of many other companies, such as TTML, Polaris, 3i Infotech, Sasken, Tejas and Exicom. He is a member of the Prime Minister’s Scientific Advisory Committee.

DR. UDAY B. DESAI

DIRECTOR

Mr. Uday B. Desai received a B. Tech. degree from Indian Institute of Technology, Kanpur, India, in 1974, a M.S. degree from the State University of New York, Buffalo, in 1976, and a Ph.D. degree from Johns Hopkins University, Baltimore, U.S.A., in 1979, all in Electrical Engineering. Since June 2009, he has been Director of IIT Hyderabad. From 1979 to 1984, he was an Assistant Professor in the School of Electrical Engineering and Computer Science Department at Washington State University, Pullman, WA, U.S.A., and was Associate Professor at the same place from 1984 to 1987. From 1987 to May 2009 he was a Professor in the Electrical Engineering Department at the Indian Institute of Technology - Bombay. He was Dean of Students at IIT-Bombay from Aug 2000 to July 2002. He has held a Visiting Associate Professor’s position at Arizona State University, Purdue University, and Stanford University. He was a visiting Professor at EPFL, Lausanne during the summer of 2002. From July 2002 to June 2004 he was the Director of HP-IITM R and D Lab. at IITMadras. His research interest is in wireless communication, Cognitive Radio, Cyber Physical Systems, wireless sensor networks and statistical signal processing. He is also interested in multimedia, image and video processing. He is the Editor of the book “Modeling and Applications of Stochastic Processes” (Kluwer Academic Press, Boston, U.S.A. 1986) and co-editor of Second Asian Applied Computing Conference, Springer Verlag (2004). He is also a co-author of four books “A Bayesian Approach to Image Interpretation”, “Multifractal based Network Modeling”, Multihop Mobile Wireless Networks, and “Capacity Enhancement and Interference Mitigation in Multiuser UWB: Capacity Enhancement and Interference Mitigation in Multiuser Ultra Wideband (UWB) Systems”. Dr. Desai is a senior member of IEEE, a Fellow of INSA (Indian National Science Academy), Fellow of Indian National Academy of Engineering (INAE), and a Fellow of The Institution of Electronic & Telecommunication Engineers (IETE). He is the recipient of the J C Bose Fellowship. He is also the recipient of the Excellence in Teaching Award from IIT-Bombay for 2007. He was an associate editor of IEEE Transactions on Image Processing from Jan 1999 to Dec. 2001. He is on the Technology Advisory Board of Microsoft Research Lab. India. He was one of the founding members of COMSNETS and the Society for Cancer Research and Communication. He was the Chair for IEEE Bombay Section from 2006-2008. He was also on the Visitation Panel for the University of Ghana.

MR. AJAY KUMAR MITTAL

DIRECTOR

Mr. A.K. Mittal graduated in Engineering, Electronics and Communications in 1976 from the University of Roorkee (now one of the Indian Institutes of Technology). He also holds a Diploma in Management. After working in the R&D wing of Indian Telephone Industries Ltd. for about two and a half years, he joined Indian Telecom Service in the erstwhile Posts & Telegraphs Department (now Department of Telecommunications) in February, 1979 and was posted as Assistant Divisional Engineer Telecom. In 1981, he was given charge of setting up the ground segment of the New Delhi Satellite Earth Station located at Sikandarabad (U.P.) for the INSAT-1, series of satellites where he commissioned and then operated SCPC, FDM-FDMA Systems for voice communication as well as TV uplinking, Radio uplinking, meteorological data uplinking and reception systems. He also set up the Network Operations Control Centre NOCC) for INSAT. Later he was involved in setting up Earth Stations in remote and hilly areas of some states. As Assistant Director General (Satellite Planning) in the Department of Telecommunications Headquarter, in 1987, he was involved in planning of satellite communications systems. Thereafter, as Director Telecommunications, he was responsible for operations and maintenance of a large Optical Fibre, Microwave, Coaxial and Satellite Communication Network in the State of U.P. In 1991, as Director in the Headquarters of the Department of Telecom, he handled regulation and tariffing of telecommunications services. He was responsible for activities relating to opening up of the telecom sector for competition from 1991 onwards. This included invitation of bids for basic services, mobile services and radio paging services. He remained in this position for over 6 years. Subsequently, from 1998 onwards, as General Manager in U.P. (West) Circle of Department of Telecommunications, he headed the Operations and Maintenance Wing, responsible for making policies in respect of operations of all types of services and ensuring that services are maintained as per desired Quality of Service. He was deputed to the Headquarters of BSNL, a public sector unit under the Ministry of Communications, as Deputy Director General (Network Management) in the year 2000 where for a period of about 7 years he was in-charge of management of BSNL’s international and national long distance switching and transmission network. During this period, he set up Network Management Systems, an overlay managed signaling network, a KU Band VSAT Network and a country-wide Managed Leased Line Network. He was also a member of the core team responsible for planning and implementation of the Indo-Srilanka Submarine Cable System. Later, for a period of over two years, while on deputation to BSNL, he worked as General Manager (Mobile Network Planning and Operations) in J&K State. Currently he is working as Senior Deputy Director General in DoT headquarters responsible for policy on licensing of Access Services and related matter as well as implementation of telecom security related policies.

MR. SAURABH KUMAR TIWARI

DIRECTOR

Mr. Saurabh K Tiwari, born in 1967, holds a Masters degree in Political Science with a Certificate of Merit from the University of Allahabad. He completed his MBA with specialisation in Finance from the National Institute of Financial Management, an autonomous body under the Ministry of Finance, Govt. of India. He has recently completed LLB from Delhi University. Besides being a Fellow of the University Grants Commission, he has taught Political Philosophy in the Post Graduate Classes of the University of Allahabad for two years. After passing the Civil Services Examination in 1993, he joined the Indian P&T Accounts and Finance Service. He has wide ranging work experience in the Government of India and PSUs. He has handled the Central Area of MTNL, Delhi which provides service to the elite of India, including the President, Prime Minister, Union Council of Ministers, Embassies, High Commissions and the Central Business District. He has also served as the Financial Advisor to various units of the Indian Air Force, including the Central Air Command, Bamrauli. He was instrumental in designing and implementing the software for the revision of pension of more than two million Defence Pensioners, spread throughout the country, as per the recommendations of the Sixth Pay Commission. His current assignment as Deputy Director General (Licensing Finance), Department of Telecom, Government of India involves assessment of revenue in an amount of LOGO 165 thousand crores annually resulting in collection of LOGO 10,000 crores (approximately) in the form of license fee – the single largest contributor to the non-tax revenue of India. He has attended various trainings and seminars in India and abroad. Besides, he has been a regular faculty in various training institutes. Mr. Tiwari has exemplary leadership qualities. He has been the General Secretary of the Indian P&T Accounts and Finance Service Officers’ Association for almost a decade now. An avid sportsperson, he has won various awards in games like Volley ball, Football, Badminton, Cricket and Tennis.

Principal Officers

The names and designations of our other principal officers are listed in the table below.


Name	Age	Position	Date of Joining
Satish Ranade	58	Company Secretary and Chief Legal Officer	May 1987
Madhusudhan MR	48	Chief Officer—Customer Services and Operations	June 2004
Sanjay Baweja	51	Chief Financial Officer	January 2009
Srinivasa Addepalli	36	Senior Vice President—Corporate Strategy and Marketing	October 2006
John Hayduk	42	Senior Vice President and Chief Technology Officer—Network and Services Engineering	September 2005
Michel Guyot	53	President—Global Voice Business	February 2006
John Freeman	41	General Counsel	June 2004
Aadesh Goyal	48	Global Head HR	Feb 2010
Laurie Bowen	50	President Sales & Strategy, Global Data & Mobility Services	April 2010

Set forth below is selected biographical information for the Company’s principal officers:

Mr. Satish G. Ranade, Company Secretary & Chief Legal Officer, joined the Company in 1987 and has been closely associated with the organic and inorganic expansion of the Company. Prior to joining the Company, Mr. Ranade was Deputy Secretary of Maharashtra Elektrosmelt Limited, Mumbai. He is a law graduate and a Fellow Member of the Institute of Company Secretaries of India.

Mr. MR Madhusudhan, Chief Officer, Customer Service and Operations has been with the Company since June 2004. Prior to that, he worked with various companies, including NDDB, BPL Mobile AT&T and Lucent Technologies.

Mr. Sanjay Baweja, Chief Financial Officer, is a Chartered Accountant and a Cost & Works Accountant and has been with the Company since January 2009. Prior to joining the Company, he was with Emaar MGF Land Limited as Executive President—Corporate Affairs and Chief Risk Officer. He has also worked in several roles across Bharti Airtel, Xerox Modicorp, Digital Equipment and Ballarpur Industries.

Mr. Srinivasa Addepalli, Senior Vice President—Corporate Strategy and Marketing, transferred to the Company from Tata Industries in October 2006, where he was in the group Chairman’s Office and responsible for coordinating the various telecom activities within the group. Prior to that, he was with the Tata Strategic Management Group, where he was closely involved with the formulation of the Tata companies’ telecom strategy and business plans, including the acquisition of Tata Communications Limited and the expansion of Tata Teleservices.

Mr. John Hayduk, President, Product Management and Service Development was previously Senior Vice President and Chief Technology Officer—Network and Services Engineering. He has over 15 years of telecommunications experience. Prior to joining the Company in September 2005, he ran Telcordia’s IMS/Network business unit.

Mr. Michel Guyot, President—Global Voice Business, has over 30 years of international telecommunications experience. He joined the Company in March 1977, and his previous position was Vice President—International Markets (Europe, Middle East, Africa, Asia-Pacific) for Teleglobe and its predecessor Teleglobe Inc. Mr. Guyot is also the Chairman of the Board of Directors for the Telecommunications Executive Management Institute of Canada.

Mr. John R. Freeman, General Counsel has over 15 years of international, cross border telecommunications experience representing large multinational companies in legal and compliance matters. Prior to joining Tata Communications in April 2004, Mr. Freeman served as General Counsel and Assistant General Counsel to several multinational telecommunications / managed services companies headquartered in Asia, the US and Europe.

Mr. Aadesh Goyal, Global Head HR, received his Masters in Management Studies from BITS-Pilani. Mr. Goyal joined the Company in 2010 as Global Head of Human Resources. He comes to us from PeopleStrong HR Services where he was the Chairman and CEO. Earlier, he worked with Aricent/Hughes Software Systems for 16 years where he had joined as part of the start-up team and was also a Director on the Board. He played several roles including Global Head of HR, CEO of its BPO Business, and Head of the Gurgaon Center. He started his career with C-DoT in Project Management and HR & Technology promotion.

Ms. Laurie Bowen, President, Sales & Strategy—Global Data & Mobility, has over 27 years experience in telecommunications working for both BT and IBM prior to joining Tata Communications in 2010. She holds two BSC degrees in Computer Science and Electrical Engineering.

No director or officer of the Company has any family relationship with any other officer or director of the Company. Other than as described above, there are no arrangements or understandings among any directors or any officers and any other persons regarding their elections to their posts with the Company.

Compensation of Directors and Officers

Non-Executive Directors

Remuneration up to a sum not exceeding 1% per annum of the net profits of the Company (calculated in accordance with the provisions of Sections 198, 349 and 350 of the Indian Companies Act) is distributed amongst the directors of the Company as may be decided by the Board. Our shareholders’ approval of this remuneration plan expired on April 1, 2010. For fiscal 2011, the remuneration plan will be put before the shareholders for their approval for the next five years.

During fiscal 2011, the directors, other than the executive directors, received a sitting fee not exceeding LOGO 20,000 (US$449) for attending each Board and audit committee meeting and LOGO 10,000 (US$225) per meeting for attending the meetings of the committees of the Board other than the audit committee. During fiscal 2011, a total amount of LOGO 1,960,000 (US$44,005) was paid towards sitting fees.

All directors are also reimbursed for travel and out-of-pocket expenses in connection with their attendance at Board and committee meetings.

The details of the commissions provided and sitting fees paid to our non-executive directors for fiscal 2011 are as follows:


	(Amount in Million)
Name of the Director	Commission		Sitting Fees
Mr. Subodh Bhargava [Chairman]		0.64		0.41
Mr. Vinod Kumar (Refer Note 1)		—		—
Mr. N Srinath (Refer Note 2)		—		—
Mr. Kishor A. Chaukar		0.28		0.31
Mr. P.V. Kalyanasundaram (Refer Note 3)		0.25		0.28
Dr. V.R.S. Sampath (Refer Note 4)		0.24		0.27
Mr. Amal Ganguli		0.44		0.33
Mr. S. Ramadorai		0.09		0.12
Mr. A.K. Srivastava (Refer Note 5 and 10)		—		—
Mr. Arun Gandhi		0.09		0.08
Dr. Ashok Jhunjhunwala		0.14		0.16
Mr. Manish Sinha (Refer Note 6 and 10)		—		—
Mr. Shahbaz Ali (Refer Note 7 and 10)		—		—
Mr. Uday B Desai (Refer Note 8)		—		—
Mr. Ajay Kumar Mittal (Refer Note 9 and 10)		—		—
Mr. Saurabh Tiwari (Refer Note 9 and 10)		—		—
Total		2.17		1.96

Notes:

1.	Non-executive Director until January 31, 2011. Appointed as MD & group CEO with effect from February 1, 2011

2.	Non-executive Director with effect from February 1, 2011

3.	Resigned with effect from May 20, 2011

4.	Resigned with effect from June 2, 2011

5.	Resigned with effect from August 9, 2011

6.	Joined with effect from April 1, 2010 and resigned with effect from September 15, 2010

7.	Joined with effect from September 15, 2010 and resigned with effect from August 9, 2011

8.	Joined with effect from June 6, 2011

9.	Joined with effect from August 9, 2011

10.	The Government Directors have informed the Company that they shall not accept any sitting fees or commission as their Directorships are considered to be part of their official duty.

Executive Directors and Principal Officers

During fiscal 2011, the aggregate amount of compensation paid to all directors and principal officers of the Company was approximately LOGO 305.98 million (US$ 6.87 million) and individual compensation of executive directors and principal officers located in India was as follows:


	Gross Remuneration
	( )		(US$)
Name	(in Millions)
Mr. Vinod Kumar [Executive Director with effect from February 1, 2011]		29.85		0.67
N. Srinath		18.09		0.41
Satish Ranade		9.35		0.21
Madhusudhan MR		15.58		0.35
Sanjay Baweja		15.13		0.34
Srinivasa Addepalli		10.49		0.24
Aadesh Goyal		10.62		0.24

For fiscal 2011, the aggregate amount set aside or accrued by the Company to provide pension, retirement or similar benefits for directors and principal officers was approximately LOGO 8.54 million (US$ 0.19 million). A performance pay scheme is in place that is applicable to all employees, including heads of the various business units and support functions in the Company. This performance pay is based on three main components – company achievement during the fiscal year under consideration, functional imperatives achievement and individual’s achievement. The weight assigned to these three components is based on the grade of the employee. The higher the grade level of the employee, the higher is the weight on the company and functional component. Key imperatives are predefined for the company and each Function/Business unit. The extent to which the bonus will be paid is based on actual achievement against these imperatives. The individual’s performance is assessed by his superior and is reviewed by the next level manager, after which the assessed ratings are normalized on a company-wide scale, as appropriate. An individual performance driven bonus is paid based on the final rating classification of the employee which is determined based on the Performance Management Process guidelines of the Company.

The performance evaluation process for employees of subsidiaries is the same as that for the Company’s employees. Once the final normalized ratings are determined for the employees of subsidiaries, these are communicated to their respective parent companies, which are responsible for making the payment.

Share Ownership

As of September 30, 2011, none of the members of the Board held any Shares or options for Shares in the Company. The executive officers of the Company, either individually or as a group, did not beneficially own more than one percent of the Company’s issued and outstanding Shares.

Global Management Committee

The Company established a committee to make strategic decisions—the Global Management Committee. The Global Management Committee is tasked with formulating strategies and endeavoring to build consensus and increase transparency. It is also authorized to address issues relating to networks, expansion, entry into newer geographies and human resources.

Audit Committee

The audit committee consists of the following members:

(i) Mr. Amal Ganguli (Chairman)

(ii) Mr. Subodh Bhargava

(iii) Mr. Uday B Desai (with effect from June 6, 2011)

(iv) Mr. Saurabh Tiwari (with effect from August 9, 2011)

(v) Mr. P.V. Kalyanasundaram (until 20 May 2011)

(vi) Mr. Manish Sinha (with effect from April 1, 2010 until September 15, 2010)

(vii) Mr. Shahbaz Ali (with effect from September 15, 2010 until August 9, 2011)

Mr. Satish Ranade, Company Secretary and Chief Legal Officer of the Company, is the audit committee’s Secretary.

The Audit Committee met 8 times during fiscal 2011.

Our audit committee’s powers and terms of reference were created in light of the requirements of the Companies Act, 1956, Clause 49 of the Company’s listing agreement with the Indian stock exchange, and US laws. The powers, terms of reference and scope of the authority of the audit committee include:

Powers of the Audit Committee:

(1)	To investigate any activity within its terms of reference.

(2)	To seek information from any employee.

(3)	To obtain external legal or other professional advice.

(4)	To secure the attendance of outsiders with relevant expertise, if it considers it necessary.

Terms of Reference of the Audit Committee:

(1)	Oversight of the Company’s financial process and disclosure of its financial information to ensure that the financial statements are correct, sufficient and credible;

(2)	Recommending to the Board the appointment, re-appointment and, if required, replacement or removal of the statutory auditor and the fixing of audit fees;

(3)	Approving payment to statutory auditors for any other services rendered by the statutory auditors;

(4)	Reviewing with management the annual and quarterly financial statements before submission to the Board for approval;

(5)	Reviewing with management the performance of statutory and internal auditors and the adequacy of internal control systems;

(6)	Reviewing the adequacy of the internal audit function, if any, including the structure of the internal audit department, staffing and seniority of the official heading the department, reporting structure coverage and frequency of internal audits;

(7)	Discussing with internal auditors any significant findings;

(8)	Reviewing the findings of any internal investigations by the internal auditors into matters where there is suspected fraud or irregularity or a failure of internal control systems of a material nature and reporting the matter to the Board;

(9)	Discussing with statutory auditors the nature and scope of the audit before the audit commences as well as any areas of concern post-audit;

(10)	Looking into the reasons for substantial defaults in the payment to the depositors, debenture holders, shareholders (in case of non-payment of declared dividends) and creditors; and

(11)	Reviewing the whistleblower mechanism.

Scope of the Audit Committee’s Authority Regarding Whistle blowing:

(1)	To establish procedures for the receipt, retention, and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters.

(2)	To take due actions as required under the Company’s Whistleblower Policy from time to time.

Review of Information by the Audit Committee:

The audit committee must review the following:

(1)	Management discussion and analysis of financial condition and results of operations;

(2)	Statement of significant related party transactions submitted by management;

(3)	Management letters / letters of internal control weaknesses issued by the statutory auditors;

(4)	Internal audit reports relating to internal control weaknesses; and

(5)	The appointment, removal and terms of remuneration of the chief internal auditor.

Remuneration Committee

Our remuneration committee consists of the following members:

(1)	Mr. Kishor Chaukar

(2)	Mr. Subodh Bhargava

(3)	Mr. A.K. Mittal (with effect from August 9, 2011)

(4)	Mr. A.K. Srivastava (Until August 9, 2011)

Mr. Satish Ranade, Company Secretary and Chief Legal Officer, is our remuneration committee’s convener.