Bharti Airtel Financial Report 2008-2009

8/8/2019 Bharti Airtel Financial Report 2008-2009

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BHARTI AIRTEL LIMITED

ANNUAL REPORT 2008-2009

DIRECTOR'S REPORT

ToThe Members

Dear Shareholders,

Your directors have pleasure in presenting the fourteenth annual report onthe business and operations of the Company together with audited financial

statements and accounts for the year ended March 31, 2009.

Overview:

Bharti Airtel is one of Asia's leading providers of telecommunicationservices with presence in all the 22 licensed jurisdictions (also known as

Telecom Circles) in India, and in Sri Lanka. The Company served anaggregate of 96.6 mn customers as of March 31, 2009; of whom 93.9 mnsubscribe to GSM services and 2.7 mn use Telemedia Services either for

voice and/or broadband access delivered through DSL. The Company alsooffers an integrated suite of telecom solutions to enterprise customers, inaddition to providing long distance connectivity both nationally andinternationally. The Company also deploys, owns and manages passiveinfrastructure pertaining to telecom operations under its subsidiary BhartiInfratel Limited. Bharti Infratel owns 42% of Indus Towers Limited. BhartiInfratel and Indus Towers are the two top providers of passiveinfrastructure services in India.

During the financial year 2008-09, the Company achieved various

accomplishments and became the largest integrated telecom company in Indiabased on total telecom subscribers.

Some of the key highlights include the following:

* First operator in India to cross the total customer base of 96 mn.

* Highest net addition of 31.93 mn of total customers in a year.

* Full year consolidated gross revenue of Rs 374 bn and consolidated EBITDAof Rs 153 bn.

* Full year consolidated net profit of Rs 79 bn.

* Year on Year (Y-o-Y) growth of total customer base by 50% resulted in 38%increase in revenues and 23% increase in net profit.

* Mobile Network is present in 5060 census towns and 414,906 non-censustowns and villages in India, thus covering approximately 81% of thecountry's population.

* Focus on rural penetration and customer affordability has led to mobiletariffs of 1.2 cents/minute, one of the lowest in the world.

* Expanded its international footprint by launching mobile operations in

Sri Lanka on a state-of-the-art 3.5G network

* Made its television debut by launching Airtel Digital TV, its Direct-to-


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Home (DTH) satellite TV service.

* Debuted Triple Play service with Airtel digital TV interactive - itsInternet Protocol Television Service in NCR under a unified brand 'Airtel'.

FINANCIAL RESULTS AND RESULTS OF OPERATIONS:

Financial highlights of Consolidated Statement of Operations of theCompany:

(Amount in Rs. mn, except percentages)

Particulars Year ended Y-o-Y

31-Mar-09 31-Mar-08 Growth

Gross revenue 373,521 270,122 38%

EBITDA 152,858 114,018 34%

Cash profit from 135,769 111,535 22%operations

Earnings before 85,910 73,115 17%taxation

Net profit/(loss) 78,590 63,954 23%

Financial highlights of Standalone Statement of Operations of the Company(legal entity):

(Amount in Rs. mn, except percentages)

Particulars Year ended Y-o-Y

31-Mar-09 31-Mar-08 Growth

Gross revenue 340,143 257,035 32%

EBITDA 131,918 106,848 23%

Cash profit from 115,686 104,369 11%operations

Earnings before 81,615 69,725 17%

taxation

Net profit/(loss) 77,438 62,442 24%

LIQUIDITY:

The Company meets its working capital requirement by having suitablecommercial arrangement with its creditors and sufficient stand by creditlines with banks and financial institutions and operates a robust cashmanagement system to ensure timely availability of funds and itsdeployment. The Company has been able to optimize finance cost and generatefunds for expansion by minimizing the amount of funds tied up in current

assets.

As on March 31, 2009, the Company has cash and bank balance of Rs. 27,660


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mn and marketable securities of Rs. 23,422 mn. The Company actively managesits short-term liquidity to generate optimum returns via investments madein Debt and Money Market instruments including Bank Fixed Deposits &Certificates of Deposits, Liquid and Income Debt Fund schemes, FixedMaturity Plans and other similar instruments.

TRANSFER TO RESERVE:

Out of total profit of Rs. 77,438 mn for the financial year 2008-2009, anamount of Rs. 6,000 mn is proposed to be transferred to the GeneralReserve.

DIVIDEND:

Your Board of directors in its board meeting dated 29th April, 2009, hasrecommended a final dividend of Rs. 2 per equity share of Rs. 10 each (20%of face value) for the financial year 2008-09. The total dividend payoutwill amount to Rs. 4,442 mn, including Rs. 645 mn as tax on dividend. Thepayment of dividend is subject to the approval of the shareholders in the

ensuing Annual General Meeting of the Company.

SUBSIDIARY COMPANIES:

Your Company has the following fourteen subsidiary companies (i) BhartiHexacom Limited (ii) Bharti Airtel Services Limited (iii) Bharti TelemediaLimited (iv) Bharti Infratel Limited (v) Bharti Infratel Ventures Limited(vi) Bharti Airtel (UK) Limited (vii) Bharti Airtel (USA) Limited (viii)Bharti Airtel (Canada) Limited (ix) Bharti Airtel (Hongkong) Limited (x)Bharti Airtel (Singapore) Private Limited (xi) Bharti Airtel Lanka(Private) Limited (xii) Bharti Airtel Holdings (Singapore) Pte. Limited(xiii) Network i2i Limited (xiv) Bharti Infratel Lanka (Private) Limited.

As per Section 212(1) of the Companies Act, 1956, the Company is requiredto attach to its accounts the Directors' Report, Balance Sheet and Profitand Loss Account etc. of each of its subsidiaries. As the consolidatedaccounts present a complete picture of the financial results of the Companyand its subsidiaries, the Company had applied to the Central Governmentseeking exemption from attaching the documents referred to in Section212(1). In terms of approval granted by the Central Government under

Section 212(8) of the Companies Act, 1956 vide letter No. 47/212/2009-CL-III dated 30-03-2009, a copy of the Balance Sheet, Profit and Loss Account,Reports of the Board of directors and Auditors of the subsistingsubsidiaries for the year ended March 31, 2009 have not been attached withthe Balance Sheet of the Company. The Annual Accounts of these subsidiarycompanies, along with the related information, is available for inspection

at the Company's registered office and copies will be made available toBharti Airtel's investors and subsidiary companies investors upon request.The statement pursuant to the approval under Section 212(8) of the

Companies Act, 1956, is annexed as parts of the Notes to ConsolidatedAccounts of the Company on page no. 191.

QUALITY:

Quality is at the core of everything we do at Airtel. It supports allinternal functions in delivering to customer requirements through customercentric processes and products. Continuous improvement and innovation isembraced throughout the Airtel ecosystem, fostered by a philosophy of

getting it right the first time by driving issues to root cause andeliminating repeat problems. We firmly believe quality begins with ouremployees and continuously invest in their training and development. A few


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initiatives which are ingrained in the DNA of Airtel are lean six sigma,process standardization and variation reduction, six sigma plus andknowledge management.

We have a proven track record of pursuing quality management systems. Our

processes have been benchmarked with global best practices and standards,

with rigorous assessments regularly conducted on them by reputed externalassessors. Our ISO27001 implementation is amongst the largest globally, andour ongoing BS25999-compliant BCP implementation is amongst the largest inAsia. Airtel is TL9000 and PCI DSS compliant, and its IT infrastructure andprocesses are compliant with COBIT and ITIL best practices. We are alsoimplementing SAS 70 across the BPO partners.

BRANDING:

Brand Airtel moved closer to its vision to be the most admired brand by2010. Airtel sustained its momentum in the telecom space by getting closerto the 100 mn subscriber milestone and extended the brand to TV screens bylaunching DTH TV services and IPTV.

For the mobility vertical, the over-arching brand philosophy focused onstrengthening the brand's perception as a trustworthy service leader. A

segmented approach stretched the brand's relevance across socioeconomicsegments of over 300 mn mobile users in the country.

The business's rural thrust was supported by network and handset bundlecampaigns to drive acquisition amongst non-users. The rural networkcampaign positioned the role of the ubiquitous Airtel network as that of aradar that allowed the rural youth to discover their aspirations thatstretched beyond their villages, while simultaneously being in touch withtheir near ones back home.

Low cost handset bundles (Airtel connection with entry-level handsets) werepromoted through a national campaign supported by on-ground roll-out ofdemonstration vans in the rural hinterland. The on-air campaign focused onthe need for owning a handset bundle and the on-ground vans focused ondriving activation through live demos and activation offers in villagehaats and melas. For the urban centers, the brand's belief in a barrierfree world was extended to an on-ground manifestation through the ownership

of the Airtel Delhi Half Marathon. This brand asset strengthened thebrand's iconic leadership stature.

Airtel's mCommerce solution which won an award for simplicity of use andinbuilt security features at the GSM World Mobile Congress, was launchedusing impactful communication that clearly focused on how this new service

makes life simple. The service which transforms your mobile phone into apayment device is now being adopted by consumers at an accelerated pace.

Communication for value added services like Voice Search for Hello Tunesand Voice SMS drove brand affinity amongst the youth segment.

Operations in Sri Lanka were launched with a high-voltage launch campaign'Hello Sri Lanka' featuring Airtel's brand ambassador Shahrukh Khan. Thisled to an unprecedented demand for application forms before launch. Themega launch was followed by a series of tariff campaigns which changed thegame in this market. Using the platform of simplification', Airtel managedto reposition competition as complex and unfriendly towards the user. An

unprecedented demand for Airtel connections was witnessed post thesecampaigns. The subscriber base is currently accelerating towards the1million mark in record time.


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Airtel's foray in the DTH segment comes with the strategic view ofexpanding our portfolio of services beyond the telecom business and is theculmination of our 'three screens' strategy, which is to be present acrossmobile phones, computers and TV screens. Airtel marked an entry into the

nascent but fast-growing DTH category with a differentiated and relevant

customer proposition. Given the rather noisy advertising environment andstrongly entrenched competition, a disruptive yet strong message wasdeveloped for building relevance and driving acquisition. The brand'sunique proposition was based on dramatizing the TV viewing experience - anddefined as magical entertainment'. The marketing mix of digital TV',product design and experience were carefully evolved to bring the magic'alive, be it the stylish and premium look of the set-top box, the easy to

navigate multi-lingual electronic program guide, the unique anddifferentiated features like Universal Remote, Widgets, Radio-on-TV, etc. -all of which were firsts in India. Special care was taken to ensure thatcustomer touch points like the Customer Care Services, dress and servicecodes for installation engineers, etc. were all detailed to enrich thecustomer experience at every interaction. The 360 degree launch was with

creative manifestation - 'Come Home to the Magic' and was ranked No.3amongst Best Advertisements in NDTV's. All about Ads 2008 ranking.

By the end of the year, the brand health scores reached an all-time high.The year was dotted with multiple industry accolades including four ABBYAwards, two EFFIES Awards, WOW Award for the Airtel Delhi Half Marathon andthe Singapore Outdoor Award for Airtel-Rajdhani Express.

The Economic Times (Brand Equity) featured Airtel as the best advertiserfor the year 2008 and agency faqs elected Airtel as the 'Buzziest Brand2008' and the 'Brand with the Longest Buzz (three consecutive years)'. Thelaunch in Sri Lanka got extensive coverage and accolades from the country's

print and digital media and in India within four months of launch, Airtel

had become an established player in the DTH category.

HIGHLIGHTS OF THE YEAR:

Major agreements and alliances:

During the year, the Company signed the following major agreements relating

to operations, customer service, innovation and technology:

* With IBM, to handle Bharti's IT requirements in Sri Lanka. IBM willprovide IT support for Bharti's operations in Sri Lanka, which is anextension of the software major's contract in India.

* With IBM Daksh, to enhance its customer service experience for its top-end Platinum customers through process and technology innovation. Under thesix-year contract, IBM's managed business services unit IBM Daksh will

provide voice and back-office services including customer service,collections, and customer retention from its centers. IBM Daksh expects tohave over 700 employees in the first year focused on providing services inover 11 languages to elite Airtel customers across the country.

* With Alcatel-Lucent, a venture to manage Bharti Airtel's pan-Indiabroadband and telephone services and help Airtel's transition to NextGeneration Networks to offer advanced services like high-speed internet,Triple Play, media-rich VAS (Value Added Services), MPLS (Multi Protocol

Label Switching), VPN (Virtual Private Network) for both retail andbusiness customers. Under the Joint Venture, Alcatel-Lucent will design,plan, deploy, optimize and manage Bharti Airtel's broadband and telephone


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network across India. A new legal entity is being formed which will bemanaged and controlled by Alcatel-Lucent. This is the first ManagedServices partnership for broadband and telephone services in India.

* With Infosys Technologies Limited (Infosys) to deliver superior customer

experience to the customers of Airtel digital TV, it's Direct-To-Home (DTH)

TV service. As part of its Digital Convergence Platform, Infosys willprovide a suite of products including devices, application servers andinteractive applications that will focus on providing an enhanced digitallifestyle to Airtel digital TV customers.

* With HP, to promote the penetration of broadband and personal computers.Under the scope of the partnership, Airtel will offer consumers a broadband

connection at discounted entry cost with every HP and Compaq notebook anddesktop.

* With Apple Inc. to bring the iPhone to India. iPhone 3G combines all therevolutionary features of iPhone with 3G networking that is twice as fastas the first generation iPhone.

* Bharti Airtel and RIM introduced the Blackberry Bold for its customers inIndia. The Blackberry Bold smartphone is the first Blackberry smartphone to

support tri-band HSDPA high speed networks around the world providingsuperior functionality and performance for business professionals and powerusers

* With Cisco(R) to launch Managed MPLS (Multi Protocol Layer Switching)Service. The launch includes a Tier 1 MSCP (Managed Services ChannelProgram) certification from Cisco for their network and servicecapabilities, to provide Managed MPLS VPN(Virtual Private Network)services. With this Airtel has become the first service provider in APAC

(Asia Pacific American Coalition) to achieve Cisco Powered Managed Multi-

Protocol Layer Switching Provider status under CISCO MSCP Program. Thecertification places it in a league of select global operators that areendorsed for carrier class MPLS networks and enterprise class MPLS servicecapabilities. Airtel has also obtained a certification from Cisco for theirTelepresence Connection capabilities, which recognizes Airtel MPLS networkfor running Hi-Definition video conferencing services, which give usersreal life-like experience.

* With Virtela signed a strategic agreement to significantly enhance itsinternational managed MPLS connectivity outside of India to more than 5000PoPs (Points of Presence) across 190 countries. Under the agreement, BhartiAirtel and Virtela have integrated their networks through connection pointsin South East Asia and Europe in order to expand Bharti's MPLS based IP-VPN

capabilities around the world. Bharti Airtel will now be able to offer itsEnterprise customers seamless managed MPLS connectivity and advanced

managed network solutions to key business customers on a truly globalbasis.

* With Pacnet (region's largest independent telecommunications serviceprovider) for a Network to Network Interface (NNI) agreement tointerconnect their respective networks, expanding connections to and fromIndia. Under the agreement, the two companies will directly interconnecttheir network infrastructure to expand their respective MPLS based IP VPNcapabilities and to provide advanced IP (Internet Protocol) solutions to

key business customers in the region. The agreement will enable bothcompanies to deliver greater coverage, seamless user experience andreliable technology to their customers. Airtel and Pacnet have also


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announced a special 'Gateway to India' offering for high capacityInternational Private Line circuits between the United States and India.

* With IFFCO to herald the second Green Revolution to benefit millions ofrural consumers with a Joint venture company, IFFCO Kisan Sanchar Ltd

(IKSL) that will harness the power of telecom to add value to the farm

sector and empower the rural farmer by giving him access to vitalinformation, which will enhance his livelihood and quality of life. IKSLwill offer products and services, specifically designed for farmers,through IFFCO societies in villages across the country. On offer areaffordable mobile handsets bundled with Airtel mobile connection andcustomized value added services.

* With 15 global telecom majors to build Europe India Gateway (EIG), acable system from India to United Kingdom. Airtel is the only Indianservice provider to be a part of this consortium, and will be operating thecable landing station in Mumbai. The other members of the EIG cableconsortium include AT&T, BT, C&W, Djibouti Telecom, Du, Gibtelecom, IAM,Libyan Telecom, MTN Group Ltd., Omantel, PT Comunicacoes-S.A, Saudi Telecom

Company, Telecom Egypt, Telkom SA Ltd, and Verizon Business.

* With the country's flagship oil company - Indian Oil Corporation (IOC) -

that will enable Airtel to access 18,000 retail outlets and 5,500 Indanecooking gas distributors of the oil giant to take the mobile opportunityhome to more customers. This is an exclusive alliance between Airtel andIOC.

* With FirstSource Solutions (a leading global BPO services provider), athree-year outsourcing agreement to provide a suite of BPO servicescovering both voice and back office in areas such as customer accounting,VAS (Value Added Services) provisioning, fraud & credit monitoring,

customer service, collections, customer retention to Airtel.

* With Australia Japan Cable (AJC) to interconnect their current and futurenetworks in Guam. This landmark agreement will allow both parties to offerservices from a number of locations including Singapore and the USA WestCoast to Australia. The innovative agreement will utilize the underseacable assets of Bharti Airtel and AJC. The joint network is expected tocarry commercial traffic by end of Q1 FY 09-10.

* With asklaila, India's first local information service, enabling Airtelcustomers to get up-to-date information about their city, free of cost,through asklaila's extensive city information database. The asklaila-powered Airtel city search' is accessible across six cities, includingDelhi, Mumbai, Chennai, Hyderabad, Kolkata and Bangalore.

New products/initiatives:

During the year, the Company launched various new and innovative productsand services in the market. This enabled the company to strengthen itsleadership position despite intense competition. The following are keylaunches and initiatives for the year:

* The Company made its foray into media and television by redefining homeentertainment with Airtel digital TV. The service is available to customersthrough 31,000 retail points including Airtel Relationship Centres acrossthe country.

* Launched its virtual calling card service Airtel Call Home' in UK,Singapore and Canada. The service is targeted at the huge Indian Diaspora,


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Non-Resident Indians (NRIs) and Indian students in these markets.

* Launched its mobile services in Sri Lanka under the Airtel brand. TheCompany has launched a suite of innovative services and redefinedaffordability on a state-of-the-art 3.5G network. Bharti Airtel plans to

invest around USD 200 million in its Sri Lanka operations.

* Expanded the footprint by launching its Mobile Services in Lakshadweep.Bharti Airtel is the first private mobile service provider in the islands.

* Launched Triple Play with Airtel digital TV interactive - Telephone,Broadband and TV on a single line. The Triple Play Service is initiallyavailable to customers in Delhi, Gurgaon and Noida. Airtel's state-of-

theart IPTV Head-end, with best-in-class MPEG4-10 compression technology,will allow it to offer more content and better quality images as well asservices like live broadcast television, network based time-shifted TV,real video-on-demand and a host of other interactive services.

* Pioneered 16 Mbps broadband thereby offering the fastest wireline

broadband on DSL in the country. This service is powered by the CarrierEthernet network and will be initially available in the cities of DelhiNCR, Chennai and Bangalore with phased roll-out to additional cities of

Hyderabad, Pune, Mumbai and Kolkata

* Announced the launch of the world's first Windows based Online Desktop-powered by Microsoft and Nivio, giving access to a personal virtual desktopfrom any computer connected to the internet for Airtel broadband customers.This initiative will pave the way for easy and affordable access tocomputing and broadband in India. This service will be available to allAirtel broadband customers across 95 cities in the country.

* Launched Overseas Recharge Service, yet another first' in the Indian

telecom market. Airtel has partnered with ezetop International to makeprepaid recharge available in over 150 money exchanges in the UAE andonline at www.ezetop.com

* Introduced calling rate of 1 cent per minute on its online calling cardservice www.airtelcallhome.com. This will enable the Indian diaspora in USto call friends and family back in India at the most competitive rates in

the market.

* Launched VeriSign(R) Identity Protection (VIP) Services for itsEnterprise customers in India in partnership with VeriSign. VIP Services isa comprehensive suite of authentication and fraud detection solutions thatenables organizations to strengthen and protect their customers' online

identities.

* Spelled 'End of Distance' in India with unprecedented tariff reductions

on STD and Roaming services for its customers. While STD rates came down toRs. 1.50/- minute from the earlier Rs. 2.65/- minute, the reductionsenabled Airtel customers to receive a call while roaming at Rs. 1/- minute,as compared to the earlier Rs. 1.75/- minute. Further, while roaming,Airtel customers can make an outgoing local call at Rs. 1/- minute and anSTD call at Rs. 1.50/minute

* With mChek to offer the toll tag recharge through Airtel mobile for theDelhi Gurgaon Expressway.

* Expanded its Premium International Toll Free services from 80 countriesfor its Enterprise customers in India. These services enable enterprises to


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offer a convenient and cost effective way to their overseas customers,business partners and employees travelling abroad, to communicate withthem, through an international toll free number.

Other company developments:

* Bharti Airtel launched Airtel Innovation Fund' aimed at promotinginnovation and entrepreneurship in the field of telecommunications. This isthe first ever innovation fund in India specifically for the telecomsector. The objective of the Fund is to provide opportunities toentrepreneurs with a vision to build businesses based on innovative ideas.The Fund will have an initial corpus of Rs. 200 crores and will be led andadministered by Bharti Airtel.

* Airtel is now a fully ISO 27001:2005 Certified Organization. The ISO27001:2005 certification (from BSI: British Standards Institute) ensures ahigh quality information security environment within Airtel. It helps buildtrust and confidence amongst customers and further enhances the confidenceof employees in operational processes. With a total of 29 certificates

awarded under the ISO 27001:2005 Certification Program, Airtel has theunique distinction of being awarded the largest number of certificates toany single company in India across sectors and one of the largest in the

world.

* Bharti Airtel Limited announced key apex level organizational changesaimed at laying the foundation for the Company's next phase of growth.Manoj Kohli, CEO & Joint Managing Director, Bharti Airtel will increasinglyfocus on strategy development, governance and organization development.Sanjay Kapoor has been elevated from President - Mobile Services to a newlycreated position of Deputy CEO. In his new role, Sanjay will lead theMobile, Telemedia and DTH businesses. Sanjay will report to Manoj Kohli.

Having led the transformation at the Telemedia business, Atul Bindal will

take over as President - Mobile Services. K Srinivas who was ExecutiveDirector (East) - Mobile Services and in-charge of Sri Lanka operationswill take over as Joint President - Telemedia Services. Atul and K Srinivaswill report to Sanjay Kapoor. David Nishball will continue as President -Enterprise Services and will report to Manoj Kohli.

REGULATORY AND KEY INDUSTRY DEVELOPMENTS:

Update on regulatory and key industry development forms part of theManagement Discussion and Analysis report.

CAPITAL MARKET RATINGS:

Bharti Airtel Limited has outstanding ratings with four institutions,CRISIL & ICRA (national) and Fitch Ratings and S&P (international).

* CRISIL & ICRA have rated Airtel at the top end of their rating scales,both for short term (P1+ / A1+) as well as long term (AAA/LAAA)

* International rating agencies, both Fitch Ratings and S&P have ratedAirtel at the level of the sovereign rating of India (BBB-)

While India's country rating has been put on a negative outlook by S&P, ona recent review of Airtel by S&P, they have retained stable outlook' forAirtel backed by the superior financial strength and positive business and

growth outlook.

SHARE CAPITAL:


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During the year, the Company issued 238,942 equity shares on exercise ofstock options under ESOP Scheme 2005 of the Company.

The Company also allotted 93,408 equity shares upon conversion of Foreign

Currency Convertible Bonds (FCCBs). Due to these corporate actions, the

issued, subscribed and paid-up equity share capital increased from1,897,907,446 (March 31, 2008) to 1,898,239,796 equity shares as of March31, 2009.

In the Board meeting held on April 2009, subject to the approval of itsshareholders, the Board of directors has approved sub-division (sharesplit) of existing equity shares of Rs. 10/- (Ten) each into 2 (Two) equity

shares of Rs. 5 (Five) each. The Company is in the process of completingall the procedural formalities to give effect to the sub-division ofshares.

CORPORATE GOVERNANCE:

The Company is committed to maintain the highest standards of corporategovernance. The Directors adhere to the requirements set out by theSecurities and Exchange Board of India's Corporate Governance Practices and

have implemented all the stipulations prescribed.

A detailed report on Corporate Governance pursuant to the requirements ofClause 49 of the Listing Agreement forms part of the Annual Report. Acertificate from the Auditors of the company, S.R. Batliboi & Associates,Chartered Accountants, Gurgaon confirming compliance of conditions ofCorporate Governance as stipulated under the previously mentioned Clause 49is annexed to the Report as Annexure A.

SECRETARIAL AUDIT REPORT:

In keeping with the high standards of corporate governance adopted by theCompany and also to ensure proper compliance with the provisions of variouscorporate laws, the regulations and guidelines issued by the Securities andExchange Board of India and the listing agreement, the Company hasvoluntarily started the practice of a Secretarial Audit from a practicingcompany secretary.

The Company has appointed Mr. T.V. Narayanswamy, Practicing CompanySecretary, to conduct the Secretarial Audit of the Company for thefinancial year ended March 31, 2009. He has submitted his report confirmingthe compliance with all the applicable provisions of various corporatelaws. The Secretarial Audit Report is provided separately in the Annual

Report.

CORPORATE SOCIAL RESPONSIBILITY:

At Bharti Airtel, Corporate Social Responsibility (CSR) encompasses muchmore than social outreach programs and is an integral part of the way theCompany conducts its business. Detailed information on the initiatives ofthe Company towards CSR activities is provided in the Corporate SocialResponsibility section of the Annual Report.

DIRECTORS:

Since the last Directors' Report, Akhil Gupta relinquished the position ofJoint Managing Director of the Company and continues to be a non-executivedirector on the Board. Francis Heng and Kurt Hellstrom have resigned from


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the Board due to personal reasons. During the year, Manoj Kohli wasappointed as Joint Managing Director of the Company. Quah Kung Yang, NikeshArora and Craig Ehrlich were appointed as additional directors. The Boardplaces on record its sincere appreciation for the services rendered byFrancis Heng and Kurt Hellstrom during their tenure on the Board.

Ajay Lal, Akhil Gupta, Arun Bharat Ram and N. Kumar, retire by rotation atthe forthcoming Annual General Meeting and, being eligible, offerthemselves for reappointment.

The Company has received notice from a member under section 257 of theCompanies Act, 1956 proposing the appointment of Quah Kung Yang, NikeshArora and Craig Ehrlich as non-executive directors of the Company.

A brief resume, nature of expertise, details of directorships held in othercompanies and shareholding in the Company of the directors proposingappointment/re-appointment as stipulated under Clause 49 of the ListingAgreement with the Stock Exchanges is appended as an annexure to the noticeof ensuing annual general meeting.

FIXED DEPOSITS:

We have not accepted any fixed deposits and, as such, no amount ofprincipal or interest was outstanding as of the balance sheet date.

AUDITORS:

The Statutory Auditors of the Company, M/s. S. R. Batliboi & Associates,Chartered Accountants, Gurgaon, retire at the conclusion of the ensuingannual general meeting of the Company and have confirmed their willingnessand eligibility for re-appointment and have also confirmed that their re-

appointment, if made, will be within the limits under Section 224(1B) of

the Companies Act, 1956.

AUDITORS' REPORT:

The Board has duly examined the statutory auditors' report to accounts andclarifications wherever necessary, have been included in the Notes toAccounts section of the Annual Report.

As regards comments under para ix(a) of Annexure to the Auditors' Reportregarding slight delay in a few cases in deposition of statutory dues, theCompany is further strengthening its process to ensure that even such minordelays do not occur in future. As regards the comment under para xxi ofAnnexure to the Auditors' Report, to address the issues of fraud by

employees and external parties, the Company has taken appropriate stepsincluding issuance of warning letters, termination of service of the errantemployees, termination of the contract/agreements with the external

parties, legal action against the external parties involved etc. TheCompany is further strengthening its internal control systems to reduce theprobability of occurrence of such events in future.

ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGEEARNINGSAND OUTGO:

For the Company, being a service provider organization, most of the

information as required under Section 217(1)(e) of the Companies Act, 1956,read with the Companies (Disclosure of particulars in the report of theBoard of Directors) Rules, 1988, as amended is not applicable. However, the


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information as applicable has been given in Annexure B to this report.

EMPLOYEES STOCK OPTION PLAN:

The Company values its human resource and is committed to adopt the best HR

practices. The employees of the Company are presently benefited from two

ESOP Schemes under 2001 and 2005, Employee Stock Option Policy. The policyalso helps in retention of well-performing employees, who are contributingto the growth of the Company.

Disclosure in compliance with Clause 12 of the Securities and ExchangeBoard of India (Employee Stock Option Scheme and Employee Stock PurchaseScheme) Guidelines, 1999, as amended, are provided in Annexure C to this

Report.

A certificate from M/s S.R. Batliboi & Associates, Chartered Accountants,Statutory Auditors, with respect to the implementation of the CompanyEmployee's Stock Option schemes, would be placed before the shareholders atthe ensuing Annual General Meeting, and a copy of the same shall be

available for inspection at the registered office of the Company.

PARTICULARS OF EMPLOYEES:

Information as per the provisions of Section 217(2A) of the Companies Act,1956 read with the Companies (Particulars of Employees) Rules, 1975.

DIRECTORS' RESPONSIBILITY STATEMENT:

Pursuant to Section 217(2AA) of the Companies Act, 1956, the directors tothe best of their knowledge and belief confirm that:

(i) in the preparation of the annual accounts for the year ended 31st March

2009, the applicable accounting standards have been followed along withproper explanation relating to material departures;

(ii) they have selected and applied consistently and made judgments andestimates that are reasonable and prudent to give a true and fair view ofthe state of affairs of the Company as at the end of the financial year andof the profit of the Company for the year;

(iii) they have taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of theCompanies Act, 1956 and for safeguarding the assets of the Company and forpreventing and detecting fraud and other irregularities;

(iv) they have prepared the annual accounts on a going concern basis.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT:

In accordance with the Listing Agreement requirements, the ManagementDiscussion and Analysis report is presented in a separate section forming apart of the Annual Report.

ACKNOWLEDGEMENTS:

Your directors wish to place on record their appreciation to the Departmentof Telecommunications (DOT), the Central Government, the State Governments

and Company's Bankers, the business associates, for the assistance, co-operation and encouragement they extended to the Company and to theemployees for their continuing support and unstinting efforts in ensuring


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an excellent all round operational performance. Last but not the least thedirectors would like to thank various partners viz. Bharti Telecom,Singapore Telecommunications Ltd., and other valuable shareholders fortheir support and contribution. We look forward to their continued supportin the future.

Annexure B:

INFORMATION RELATING TO CONSERVATION OF ENERGY, TECHNOLOGYABSORPTION,RESEARCH AND DEVELOPMENT AND FOREIGN EXCHANGE EARNING AND OUTGOFORMINGPART OF DIRECTORS' REPORT IN TERMS OF SECTION 217(1)(e) OF THE COMPANIES

ACT, 1956 READ WITH THE COMPANIES (DISCLOSURE OF PARTICULARS IN THEREPORTOF THE BOARD OF DIRECTORS) RULES 1988.

CONSERVATION OF ENERGY & TECHNOLOGY ABSORPTION:

Bharti Airtel Limited, being a telecommunications service provider, theinformation in Part A and B pertaining to conservation of energy andtechnology absorption are not applicable to the Company. However, the

Company requires energy for its operations and every endeavor has been madeto ensure the optimal use of energy, avoid wastage and conserve energy asfar as possible.

From time to time, the Company evaluates global innovation and technologyas a benchmark and wherever required, enters into arrangements to avail ofthe latest technology trends and practices.

FOREIGN EXCHANGE EARNING AND OUTGO:

Activities relating to exports initiatives taken to increase exports;development of new export markets for products and services; and exportplans;

International Long Distance Business:

We have seen significant growth in our long distance business. With India's

increasing integration into the global macro economy, we anticipatesignificant further growth in this domain. We have strong relationships forunder-sea networks and we will continue to invest in major cable systems toincrease our presence and share of the global traffic.

International Calling Card Services:

Airtel CallHome, our international calling service through wholly ownedsubsidiary companies, connects the widespread NRI population in USA to

their families and friends in India at a cost effective and reliablemanner. The service was launched in December 2006. The launch markedBharti Airtel's foray into the US market. The Company further launched itsservices in UK, Canada and Singapore in 2008-09. The Company also plans toextend its services through its wholly owned subsidiary companies, acrossthe globe to address the needs of the Indian diaspora through our globalnetwork in near future.

Telecom Services in other countries:

The Company continuously explores and evaluates various opportunities forgrowth and expansion inside and outside the country organically and through


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alliances, mergers/ acquisitions in identified markets, subject toavailability of licenses, growth potential and cost as well as otherrelevant factors. In its efforts, the Company achieved its first successupon receipt of letter of offer in January 2007 after a competitive biddingprocess, from the Telecom Regulatory Commission of Sri Lanka to offer 2G

and 3G services in Sri Lanka. Bharti Airtel started providing these

services from January 2009, through its wholly owned subsidiary companyBharti Airtel Lanka (Private) Limited, Sri Lanka. In addition, BhartiInfratel Lanka (Private) Limited, a wholly-owned subsidiary of BhartiAirtel Lanka (Private) Limited, has also been incorporated with anobjective to provide passive infrastructure services on a non-discriminatory basis to all telecom operators in Sri Lanka.

Total foreign exchange used and earned for the year:

(a) Total Foreign Exchange Earning Rs. 18,093 mn(b) Total Foreign Exchange Outgo Rs. 53,663 mn

Annexure C:

INFORMATION REGARDING THE EMPLOYEES STOCK OPTION SCHEME:(as on March 31, 2009)

Particulars ESOP Scheme 2005 ESOP Scheme 2001

1) Number of Stock 87,23,966 *1,94,53,868Options granted

2) Pricing Formula The Exercise Price 1,45,07,843 @ 22.5per options shallnot be less than 8,80,000 @ 0.91

the par value of the

Equity Share of the 21,90,000 @ 70Company and shallnot be more than the 71,265 @ Nilprice prescribedunder Chapter XIII 20,000 @ 120of the SEBI(Disclosure and

Investor 12,500 @ 221Protection)Guidelines 2000 asamended. Relevant 17,72,260 @ 10Date being theGrant Date.

3) Option Vested 22,03,175 1,78,08,375

4) Number of Options 6,59,392** 13,749,755exercised

5) Number of shares 6,53,317 Nilarising as a resultof exercise of option

6) Number of option 21,74,100 41,86,341lapsed

7) Variation of terms NA NAof option


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share (EPS) pursuant toissue of shares onexercise of optionscalculated in accordancewith Accounting Standard

(AS) 20 Earning Per

Share'

12) In case, the NA 36,81,825employees compensation (0.0019)cost is calculated onthe basis of intrinsicvalue of Stock Option,

difference between theemployees compensationof the Stock Optioncost based on intrinsicvalue of the Stock andthe employees

compensation of theStock Option cost basedfair value for the year

ended March 31, 2009and the impact of thisdifference on profitsand on EPS of theCompany.

13) For Options whose a) Rs. 22.5; Rs 70;exercise price either Rs. Nil; Rs 120;equals or exceeds or Rs. 10; Rs 221

is less than the

market price of thestock the followingare disclosedseparately:-

a) Weighted average Rs. 541.53exercise price

b) Weighted average Rs. 267.95 b) NA; NA;fair price Rs. 139.40;Rs. 168.87;Rs. 427.79;Rs. 542.96

14) A description of the method and : Fair value Method :significant assumptions used during Black Scholes/Lattice Valuation

the year to estimate the fair values Modelof options, including the followingweighted average information.

(i) risk free interest rate : i) 4.45% P.A to 9.70% P.A.(The Government Securities curveyields are considered as onvaluation date)

(ii) expected life : ii) 48 to 60 months

(iii) expected volatility : iii) 36.23% to 41.39% (assuming


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250 trading days to annualize)

(iv) expected dividends : iv) Nil

(v) the price of the underlying : v) Rs. 616.80 to Rs. 832.55 per

share in market at the time equity share

of option grant

* Grants of 4,066,025 number of shares were made out of the options lapsedover a period of time.

** This includes 6,075 number of options under Scheme 2005, which ispending allotment and against which money has been realised.

*** This include Rs. 1,540 thousand on account of money received against6,075 options pending allotment.

Corporate Social Responsibility:

In today's competitive environment, businesses continue to be underpressure to focus their energies on achieving their business goals andobjectives. But an equally powerful imperative to reach beyond business

processes and goals has also gained ground. At Bharti Airtel, we havealways believed that business success cannot be an end in itself rather itis a means to a set of higher socio-economic goals. Over the years we havemade a conscious effort to reach out to society at large, as much as wehave striven to promote the interests of the stakeholders in our business.

In 2008-09, we undertook many initiatives in the social welfare space. Wefirmly believe that our efforts are creating a long lasting impact on ourstakeholders, both internal (employees) and external (customers, suppliers

and the community). Internally, we have been able to make transformational

changes in the workplace to build on employee trust. Similarly the trust ofour external stakeholders has further strengthened through our involvementin various life spaces - education and training, health, environment.

Educate and Inspire:

India's most conspicuous advantage lies in its demographic situation - its

youthful population. When more than 54% of its population belong to thebelow-25 age bracket, the challenge for the country obviously lies inpreparing this large segment for gainful employment - to make it a powerfulproductive force. Education, of course, plays a critical role in makingthis possible and we have taken a conscious decision to focus a substantialpart of our philanthropic activities on the promotion of education,

particularly in the far flung villages, which continue to struggle withpoor infrastructure.

Most of our welfare activities are routed through Bharti Foundation, thephilanthropic arm of the Bharti Group. Set up in 2000, the Foundation hasbeen working towards improving access to quality education in rural India.Here are some of the programs and projects that Bharti Foundation is

undertaking to impact the quality of education in the country:

At the grassroot:

Satya Bharti School Program (SBS):

'Create temples of learning radiating knowledge and excellence for


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underprivileged children'

The Satya Bharti School Program is the flagship program of BhartiFoundation. Launched in 2006, it aims to make available high qualityeducation to poor and under-privileged children - especially the girl

child. Within just a few years of its existence, it has indeed become

recognized as one of the most powerful programs in the arena of primaryeducation. The Foundation is responsible for end-to-end management of theschools, right from construction to imparting of education.

The Program operates with a two pronged approach. On the one hand, theFoundation builds new primary schools from scratch and operates them on itsown with active support from local communities. On the other hand, it also

partners the State Governments to adopt already existing government primaryschools with the aim to improve their overall performance and functioning,following the same curriculum philosophy and quality standards as their ownprimary schools.

The schools, constructed by Bharti Foundation are designed to be cost

effective, child and environment friendly. The curriculum for these schoolshas been creatively designed to empower children to look at education notas a task but as an experience that contributes towards the development of

important life skills and values in addition to linguistics andmathematical skills.

Community participation plays a big role in the running of these schools.The Foundation has quite successfully enlisted the support of the villagepanchayats and local bodies in running these schools. Communityparticipation is ensured through various modes like contribution of land,sponsoring of mid-day meals and its utensils, sponsoring of materials usedin school construction, sponsoring of stationery for use in schools and

also to monitor school activities.

The Satya Bharti School Program has made significant progress since itsinception in 2006. In just two years, 158 primary schools have becomeoperational. Over 17,000 underprivileged children have been enrolled, ofwhich 48 per cent are girls.

By the completion of Phase one, the Foundation aims to operationalize 236

primary schools reaching out to approximately 50,000 children acrossPunjab, Haryana, Rajasthan, Uttar Pradesh and Tamil Nadu.

Satya Bharti Senior Secondary School Program:

To ensure continuous access to quality education for children of its

primary schools, Bharti Foundation plans to set up one Satya Bharti SeniorSecondary School, in public-private partnership mode, over a cluster of 8-10 Satya Bharti Primary Schools. In addition to regular academics, these

schools will provide vocational training opportunities to children to helpthem gain employment within their own village upon completing theirschooling. Establishment of senior secondary and vocational trainingschools is in process; they will become operational shortly.

Other educational programs:

Support Talent to Bloom - Scholarships and Mentorship:

Bharti Scholarship and Mentorship Program aims to help academically brightstudents with limited financial means to pursue higher education inmanagement, engineering (electronics, telecom and software) and


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agriculture. Ever since its inception the program has expanded its scopeand coverage to include students from more regions and disciplines. Todaythe program supports 224 scholars in 38 premier institutions of highereducation across 26 states.

The Foundation also supports 40 underprivileged girls through the

Scholarship Program under the Bharti Udayan Shalini Fellowship Program.This scholarship extends support to only girl students from underprivilegedbackground to pursue higher education and vocational training courses.Periodic workshops on topics like career counseling and personalitydevelopment, peer handholding (by senior fellows of previous years) andmentoring by interested individuals from civil society form a strongcomponent of the program.

Bharti Foundation has also made a substantial contribution to the Dr.Manmohan Singh Undergraduate Scholarship Program at the University ofCambridge, as one of its promoters. The Program provides full funding,covering fees and means - tested maintenance for undergraduate study in anysubject at any of the colleges that are part of the University of

Cambridge.

Building Centres of Excellence:

Bharti Foundation has joined hands with premier institutes in the countryto further the cause of higher education and training in the area oftechnology and management.

Bharti School of Telecommunication Technology and Management, IIT, Delhi,operational since 2006 provides education and training opportunities toacademically bright young people to develop future leaders andentrepreneurs. Every year, the school impacts 200 students directly or

indirectly. The School extends access to its state-of-theart facilities not

only to its own scholars but also scholars pursuing other courses.

Bharti Centre for Communication in IIT, Mumbai, launched during the yearstrives for excellence in research in communication theory and systems andfosters technical collaboration between research and user groups.

Bharti Institute of Public Policy will be established at the Indian School

of Business (ISB) campus in Mohali, Punjab to promote research andexcellence in Public Policy.

Other initiatives:

Bharti Foundation has also supported and facilitated several initiatives in

the field of primary education over the last few years.

26 Bharti Computer Centres and 104 Bharti Library and Activity Centres were

set up by the Foundation in partnership with other NGOs like Pratham,Infotech, Kalakar Trust and Adarshila. Presently being run as independentunits, these centres aim to make books and technology accessible tochildren in the rural pockets of the country.

The Foundation has also supported the Mid-Day Meal Program, in partnershipwith Akshaya Patra.

Over the years, Bharti Foundation has successfully extended the ambit of

its programs to new areas. Its programs have directly and indirectlyimpacted more than 150,000 children and youth so far. The Foundationexpects to reach out to more than 200,000 children through its Satya Bharti


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School Program in the future.

Besides initiatives in the focus area of education, we undertook severalother measures in the areas of health, environment, and disaster managementsupport. The involvement of large numbers of employees across businesses

was particularly heartening.

Public Health:

We firmly believe that mobile telephony empowers users to connect with eachother in unheard of ways to overcome difficult situations. We havediscovered a novel way of extending our spirit of innovation in the area ofblood donation by finding a mode to connect the blood banks with donors and

users. Mobility Tamil Nadu extended its association with Jeevan Blood Bankin Chennai under its Airtel Cares for Everyone' (ACE) project. This firstof its kind initiative enables people to get information on availability ofblood within minutes and access the real time stock of tested bloodcomponents from Jeevan Blood Bank 24 hours a day. Airtel already has apartnership with Jeevan, in which a few numbers have been provided free of

cost for Jeevan to stay in touch with people wanting to donate blood andpatients in need of blood. Mobility Karnataka too launched a virtual bloodbank to bridge the gap between donor and recipients.

Like in previous years, circle organizations regularly organized blooddonation camps in association with Rotary blood bank, Lions blood bank andInternational Red Cross to encourage employees to donate blood.

We also worked towards creating awareness about different diseases andtheir preventive measures among employees.

Rural Empowerment:

Our rapid rural penetration enables us to impact lives in India's far flungvillages. Our connections have turned out to be key catalysts in the ruralareas both in terms of economic productivity and governance.

The E-Gram project initiated last year has already made a hugetransformational impact in rural Gujarat, as citizens no longer have totravel long distances to get routine official work done. The initiative has

truly carried the government to the villager's doorstep. We are determinedto help initiate many such e-governance initiatives in the future as well.

Impact of our business on the rural economy has been quite profound. Wehave successfully connected the rural farmers, the artisans and the smallentrepreneurs to their markets, raising their incomes substantially. During

the year we launched a path-breaking project in the shape of our jointventure with IFFCO - IFFCO Kisan Sanchar Limited (IKSL). IKSL is making adiscernible impact on agricultural productivity through its timely

information offerings in the area of weather forecast, commodity rates andfarming techniques. To ensure rapid dissemination of the services we arealso providing affordable handsets to the farmers.

Support and inspire the young and vulnerable:

Employees across businesses and circle organizations have always been keento extend a helping hand to children from the poor and deprived sections ofthe society. Through the year, several initiatives were undertaken by

employees, a handful of which are presented here:

On Children's Day they visited nearby schools with goodies and gifts for


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the students and shared some warm moments with them. They engaged thechildren with unfilled games, singing and painting competition. At the TNGHead Office, the employees conducted a charity auction of children'spaintings. All collections from this were donated to the SOS Children'sVillage.

Employees in Mobility Karnataka and Mobility Assam undertook severalinitiatives to bring smiles to people living in orphanages and old agehomes. Airtel Team in Mangalore (Karnataka) celebrated Diwali with childrenat Prashanth Nilaya', an orphanage for girls. Employees of Mobility NESAtoo visited an orphanage and an old age home to celebrate Bihu there.

Like last year Mobility Tamil Nadu joined hands with a local voluntary

organization on World Disability Day to organize a funfair to cheer theexemplary spirit of individuals who have risen above their disabilities tomake a difference to their own lives and to the society. 'Gift A Smile' wasone more initiative for visually challenged children by CSR volunteers ofBharti Airtel - Transport National Group. The volunteers visited NationalAssociation for the Blind (NAB), a school for taking care and grooming the

visually impaired children to understand their disability and inspire themto look at life more positively. Various fun-filled activities like Dancing& Painting Competition, Poetry Recitation and Storytelling were organized

followed by a Prize Distribution ceremony.

Telemedia North hub has adopted Prayas, a national level voluntaryorganization (NGO) functioning in collaboration with the Delhi Police,Delhi School of Social Work (University of Delhi), and variousgovernmental, bilateral and non-governmental organizations. Theorganization is deeply committed to the cause of neglected, disadvantagedand deprived children, youth and women from underprivileged communities inslums / rural areas of Delhi and in the states of Gujarat, Bihar, Assam,

Arunachal Pradesh and Haryana. Every month Telemedia North donates proceeds

from its scrap sale to Shruti, an NGO focused on education for education ofthe vision impaired.

Think Green:

Bharti Airtel believes in the philosophy of 4Rs - refuse, reduce, reuse andrecycle. The philosophy extends to all our acts in our offices and on our

sites. We have stepped up our efforts towards energy conservation bysharing infrastructure, using technology aids like video conferencing toreduced travel and deploying green shelters. At our offices, we havedeployed waste water recycling, energy efficient lighting, the concept ofthe energy wheel, air curtains on major office exits and disposalmechanisms for discarded oil. We have also teamed up with global majors to

form teams focusing on energy optimization by way of introducing energy-efficient equipment and exploring alternate energy sources like solar,wind, bio-fuel / hydrogen etc. to reduce the environmental impact.

Green Shelters at cell sites has reduced operational costs by as much as40% as compared to conventional shelters. Airtel has saved over 75mn litersof diesel and over 400mn KWH of energy on an annualized basis, translatinginto approx. US$ 100mn in energy savings alone. Carbon emission has reducedby over 500,000 mt annually by deploying green shelters at all our sitesacross India.

As an environment conscious organization, Bharti Airtel constantly explores

all possibilities to control energy consumption and reduce green housegases on priority basis. We have set up dedicated teams to deal with energyefficiency and renewable energy. The teams are led by top management, which


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shows the commitment to the cause. There is a constant endeavor to installthe latest energy efficient equipment and control systems in all facilitiessuch as BTSes, data centers and MSCs. Applications of renewable andalternate energy are being taken up to install solar hybrid towers forBTSes, use of alternate fuels to operate DG sets, obtaining wind energy for

the bulk consuming loads.

Bharti Airtel is the first company to apply for carbon credits byimplementing energy efficiency power interface units and back-up coolingsystems in BTS. Energy councils were set up across the businesses toimplement energy efficient initiatives.

The World Environment Day was celebrated with much enthusiasm across circle

organizations. Each one Plant one', a campaign launched by Mobility TamilNadu symbolized employee commitment to the cause. In Mobility Gujaratemployees celebrated by wearing green, and adopted car pooling to minimizepollution.

We have automated many of our HR processes through an innovative technology

program called e-tize. Airtel employees conduct their day-to-day workthrough this comprehensive automation journey, touching all core domains;Learning and development, Leave management, Compensation management,

expense management and travel management. All this have reduced employeeinterface processes to the click of a button, significantly improvingemployee motivation and comfort.

Alongside a dramatic transformation in work processes, e-tize deliversequally powerful dividends in terms of environment friendliness. Employeetouch point automation initiatives manage to save approx 600,000 sheets ofpaper every year.

Disaster Relief:

During the year states like Bihar, Bengal, Orissa and Assam faced severalnatural calamities in the shape of floods. As a responsible corporateBharti Airtel and its employees rose to the occasion to support the floodvictims both in terms of financial contributions and donation of reliefmaterials. Employees in circle organizations and business units went on acollection drive to raise substantial amounts of relief materials for the

flood victims. Bharti Foundation made a contribution of Rs. 30mn to thePrime Minister's Relief Fund for supporting the government's relief work inthe flood affected areas.

Natural disasters are always better handled with an early warning system inplace. With this in mind Bharti Airtel has joined hands with Massachusetts

Institute of Technology (MIT) to develop an early warning system to predictfloods at least 15 days in advance. Under the agreement, we will providedata about the water-levels of various rivers at different points and the

status of embankments to the institute, while MIT will analyze this data bysuper computers vis-a-vis other references drawn in from satellites. Thisnovel approach follows encouraging results from a pilot project weundertook in four districts of Bihar - Muzaffarpur, Vaishali, Samastipurand Darbhanga in July 2008. We strongly believe the success of this earlywarning system will open the door for many such initiatives across thecountry, which has a topographical diversity that exposes it to a varietyof natural disasters.

Innovation and Entrepreneurship-Rekindle the spirit:

Innovation and entrepreneurship have been at the core of Bharti Airtel's


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phenomenal market penetration and growth. It has always been our desire tospread this spirit to the wider society. The Company therefore launched theAirtel Innovation Fund' aimed at promoting innovation and entrepreneurshipin the field of telecommunications. The objective of the first such Fundsin telecom is to provide opportunities to entrepreneurs with a vision to

build businesses based on innovative ideas. The Fund has an initial corpus

of Rs. 2bn and will be led and administered by Bharti Airtel.

Sporty ways - Ensuring a healthy future:

Promoting a sporting culture and developing a keen awareness about healthyliving is a priority for us. Through the year, it has been our consistentendeavor to promote such a culture both within the organization and

outside.

Airtel Delhi Half Marathon was our biggest initiative on this front. Themega event enabled Delhi's young and old to rub shoulders with professionalmarathoners on Delhi roads to rediscover the joys of running. The event wasa rousing success, in which more than 30,000 participated. We are certainly

going to continue our association with this premier event in future.

To enhance employee involvement in sports, Airtel Centre and circle

organizations continued organizing internal sports events through the year.Like last year, the Airtel 20:20 Cricket Cup was a grand success, in whichall the circle organizations and the businesses participated with muchenthusiasm.

Cultural Connect - Be one with India's diversity:

Over the years Bharti Airtel has carved out an enduring relationship withIndia's hugely diversified culture. We have built this relationship by

diligently investing in popular cultural events in different regions of the

country. These relationships continued through the year, be it the famousDahi handi festival in Maharashtra or for that matter the very popular boatraces in the Kerala backwaters.

Circle organizations have been actively promoting local music and dancefestivals. Mobility Orissa continued its association with the state'spremier annual cultural show, the Konark Dance & Music Festival. The

festival helps connect the wider public to the rich cultural tradition ofthe state. Mobility NESA supported the annual Kameswari Dance Festival,where noted classical dancers and singers from across the countryparticipated.

Another association that we are extremely proud of is our support for

Habba, Bengalooru's biggest cultural festival celebrating the spirit of thecity. The annual festival showcases every conceivable element of theregion's culture so successfully starting from music, dance, fashion to

craftsmanship.

Bharti Airtel's continuous support to these events have kept the country'srich cultural roots fresh in the public mind. Many struggling art formshave received a new lease of life because of our associations with them.

ACT - A Caring Touch:

ACT is an employee philanthropy programme that encourages all Bharti Group

employees to contribute time, skills, knowledge, materials and money toeither Bharti Foundation or any other charitable organization of theirchoice empanelled in ACT. Employees across our businesses and circle


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organizations have regularly donated stationery and teaching materials tothe students of nearby Satya Bharti Schools. To facilitate employeevolunteering on a larger scale, Bharti Airtel continues its policy ofoffering one day's paid leave to all employees.

Mobility Karnataka's institutional team decided to welcome 2009 with a

message of 'WE CARE'. Under the Program all the team members will bedonating a recurring amount (ranging from Rs. 50 to Rs. 250) over the next12 months for various Bharti ACT initiatives through the ACT portal. TheCompany will be making a matching contribution to support the cause.

Employees in the circle also joined hands with Pragati EducationalFoundation to sponsor the education and its related expenses for 18 girl

students with excellent past educational track records. Other employeesfrom Bangalore are acting as mentors to these children and assisting themin their academics.

Bharti Airtel's success as a business entity only inspires us to be moreambitious in the social arena. Even as we try to align our business

priorities to make an incremental impact on the quality of life around us,we remain equally determined to transcend our business arena to trigger bigtransformational changes in the socio-economic landscape through our CSR

initiatives. While Bharti Foundation will continue to be the principalchannel for our CSR initiatives, we will always be keen to align ourbusiness processes and goals to make a more deep rooted impact on thesociety directly.

Management Discussion & Analysis:

Industry Structure and Developments:

Indian telecom industry:

The Indian telecom sector has seen a phenomenal growth and currently hasclose to 430 mn telecom customers. The market surpassed the USA to becomethe second largest market in the world after China. Notwithstanding this,the telecom penetration is only 37% with a wireless penetration of 33.7%and broadband penetration of 0.54%, thereby offering a good growthpotential.

The target of the Government is to reach 500 mn telecom customers of which20 mn broadband customers by 2010. India presents robust growthopportunities driven by economic growth, increasing urbanization, risingincome levels and a large youth population. The majority of new customerswill be from the hinterland and remote areas with inadequate basic

infrastructure and no previous connectivity, demanding low tariffs forvoice calls and value added services like information about market andcommodity prices, weather update, health update etc. The urban consumer

demands high speed internet connectivity and audio-video streaming,navigation and location maps, music downloads, gaming, m-commerce, IPTV andmobile TV. Tariffs for local and long distance calls are at the lowestlevels in the world and still falling.

Innovations like shared infrastructure, new low cost technology and energysaving devices are critical to rural connectivity. On the other hand,competition will intensify with entry of new players and interest fromglobal telecom operators, many of whom wish to re-enter India after an

earlier departure and participate in the success of Indian telecom.

Bharti Airtel, with over 96 mn customers as on March 31, 2009, is the


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* Interconnection Usage Charge (IUC) regime:

On March 9, 2009, TRAI issued a revised IUC regime wherein (i) TerminationCharge (TC) has been reduced from Re.0.30/- min. to Re.0.20/- min. (ii) TC

on incoming international calls has been increased from Re.0.30/- min. to

Re.0.40/- min.(iii) Transit Charge has been reduced from Rs.0.20/- min. toRs.0.15/- min.

* Roll out obligations:

On February 10, 2009, Department of Telecommunications (DoT) modified theroll-out obligations of Access Service Providers.

The service providers now need to fulfill their 1st and 3rd phase of rollout obligations within the 1st and 3rd year respectively from the date ofallocation of startup spectrum, as against from the effective date of thelicence agreement.

As per DoT, while computing the period of one year, the average delay inSACFA clearance shall be excluded. Moreover, in-building coverage will notbe considered for roll out obligations for imposition of liquidated

damages.

* Internet Protocol Television (IPTV) Services:

On September 8, 2008, the Ministry of Information & Broadcasting modifiedthe guidelines for downlinking of television channels to enablebroadcasters to provide their content to IPTV service providers. Earlier,IPTV service providers were not allowed to take content from broadcasters.

* Resale of International Private Leased Circuit (IPLC):

On September 24, 2008, DoT introduced a new license regime for IPLC whereinresale of IPLC has been permitted to provide end-to-end IPLC between Indiaand the country of destination for any capacity denomination. Afterobtaining the IPLC from ILDOs, the licensee can sell the bandwidth onretail basis with or without value addition to end customers and in thisregard can have agreement for leased line with Access Providers, NLDOs and

ILDOs. The licensee has also been allowed to provide billing services toits customers either directly or through an Access Provider.

Regulatory work-in-progress:

* Universal Service Obligation (USO) and Rural telephony:

On March 19, 2009, TRAI recommended separation of USO fund from the purviewof DoT so as to ensure efficient utilization of the funds collected to

enhance rural connectivity. According to TRAI, the USO fund administratorshould be effectively empowered with administrative and financialauthority. TRAI has further stated that the USO fund Act should be amendedso that the money accruing to the fund is directly managed by theorganization and is not routed through the budgetary process of the UnionGovernment.

TRAI also made other significant recommendations to enhance rural telephonysuch as (i) reduction in 2% USO levy after covering 75% of the development

blocks including villages (ii) subsidy scheme for optical fibre from USOFsubsidized towers to the near block headquarters etc. The aboverecommendation is yet to be endorsed by the DoT.


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* Lock-in-period for Promoter's equity:

On March 12, 2009, TRAI recommended a lock-in period of 3 years of theequity share capital of promoter(s), whose net-worth has been taken into

consideration for determining the eligibility for grant of a Unified Access

Service License.

As per TRAI, after fulfillment of roll out obligations and DoT's priorapproval, such promoters may be allowed to sell their equity within thelock-in period as well. However, on such transactions, 50% of the profitwill have to be retained in the business as a special reserve and utilizedfor telecom network expansion only and balance to be transferred to the

DoT.

The above recommendation is yet to be endorsed by the DoT.

* Value Added Services (VAS):

On February 13, 2009, TRAI released its recommendations related to VAS.TRAI did not recommend any separate category of license or registration forVAS.

As per TRAI, mutual commercial agreements between telecom access serviceproviders and content providers/content aggregators for revenue share inthe provisioning of VAS services will remain the model.

* Spectrum Charges:

On December 10, 2008, TRAI gave its concurrence on DoT's various proposalsrelated to spectrum charging.

Segregation of 2G & 3G revenue : TRAI endorsed the proposal of DoT to ruleout the proposal of segregation of 2G & 3G revenue after taking intoaccount the huge difficulties in verification and audit to preventaccounting and arbitrage and other practical difficulties.

Annual Spectrum Charges: TRAI also endorsed DoT's proposal to increase theannual spectrum charges for differential levels of spectrum i.e.

Spectrum in MHz in 2G Proposed Annual SpectrumCharges as % of AGR

Upto 4.4MHz (GSM) / 2.5MHz (CDMA) 3Upto 6.2MHz (GSM) / 5MHz (CDMA) 4

Upto 8MHz 5Upto 10MHz 6Upto 12.5MHz 7

Upto 15MHz 8

These charges applicable to an operator with 2G spectrum should beapplicable to the 2G+3G spectrum holder on their total AGR.

Spectrum Charges for stand-alone 3G operator : The annual spectrum chargeswill be 3% with moratorium of 1 year from assignment of spectrum.

Apart from the above, TRAI also recommended an annual administrative charge

of 2% of the highest bid amount during the validity of 3G spectrum. Thischarge would be over and above the annual spectrum charges. This proposalis yet to be endorsed by DoT.


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* Mobile Virtual Network Operator (MVNO):

On August 6, 2008 and by means of its subsequent amendment dated March 12,2009, TRAI recommended the entry of MVNOs in India.

The definition of MVNO as suggested is: 'MVNO in a service area is anentity that does not have spectrum of its own for access services but islicensed to provide access services to its customers through an agreementwith any licensed access provider. The MVNO should not possess spectrum foraccess services in any manner including licensing of spectrum'.

As per TRAI, MVNO should be free to choose its business model (Full or

Intermediate or Thin). Typically, a Thin MVNO would offer services in itsown brand without any infrastructure and a full MVNO could set up its ownHLR, VLR, IN switches, MSC etc. but not the Radio Access Network (RAN).

TRAI has also recommended that at present, one MVNO may be restricted toget parented to one telecom operator only in any service area.

This is yet to be endorsed by the DoT.

* Carrier Selection and NLD Calling Cards:

On August 20, 2008 TRAI issued the direction that in today's contextCarrier Selection is not justifiable on need & cost benefit basis'.

As an alternative to Carrier Selection, TRAI recommended that NLDOs andILDOs should be allowed to introduce their own calling cards. As per TRAI,on such long distance calling cards, local calls and other intelligentnetwork based and value added services like tele-voting, toll free numbers,

SMS/MMS and content services should not be allowed.


* Internet Telephony:

On August 18, 2008 and by means of its subsequent clarification datedFebruary 3, 2009 TRAI recommended to allow ISPs to offer full fledged

unrestricted internet telephony (i.e. calling from internet to PSTN/PLMNnumbers and vice versa within India).

In this regard, allocation of E.164 number resources may be permitted toISPs for providing Internet Telephony.

In order to facilitate termination of Internet Telephony calls on PSTN/PLMNand vice versa including among ISPs both within telecom circle as well asacross the telecom circles, ISPs and NLDOs have been permitted to connect

with each other through public internet (the internet cloud) only.

As per TRAI, ISPs should not be subject to any QoS norms and also may not

be mandated to provide emergency number dialing at present.


* 3G and BWA Auction:

During the year, DoT initiated the process of auction of 3G and BWAspectrum but the auction date was deferred with no definitive announcement


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on dates. It is expected that it will take place after the formation of thenew central government. Meanwhile, a Group of Ministers has beenconstituted to decide on the issue of pricing of 3G spectrum and BWAlicenses.

OPPORTUNITIES AND THREATS:

Opportunities:

The rural landscape:

The Indian telecommunication industry is now the 2nd largest wirelessmarket in the world after China and is poised to deliver solid growth

forward. The focus on rural penetration and customer affordability will beinstrumental in driving the next phase of growth in India. The majority ofthe wireless net additions have started to come from the rural segment.

The telecom industry plays a pivotal role in transforming the lives of therural households which account for 70% of India's population. An increasing

number of rural customers is contributing to the growth in telecom sector.The rural segment is witnessing a growth of 8-10% every month - giving asubstantial boost to the telecom sector.

With rural teledensity still below 15%, the opportunities are immense andAirtel is leveraging its fast mover advantage to reach the hinterlands.Currently, more than 60% of our new customers come from rural India.

New technologies and paradigms:

As growth in data traffic accelerates with the proliferation and adoptionof web services the telecom operators will evolve their infrastructure

through upgrading their access transmission infrastructure from the base

stations to the core switching network. With increasing bandwidth and datademands, advanced technologies like HSPA, WiMAX and WiFi will be deployed.3G and BWA auctions will be held in the 2nd half of the year. Convergencewill be a vital phenomenon to support all network and IT services, using IPas the strategic technology.

Infrastructure sharing may extend to active infrastructure, resulting in

opportunity to reduce the costs to deploy mobile network infrastructure.The Enterprise Segment will see increased emphasis on managed services andMPLS technology which provides differentiated and assured Quality ofService (QoS).

Triple Play services (Voice, Data and Video) will gather momentum with

telecom operators getting into media space through DTH and IPTV platforms.The DTH market will evolve further as the low levels of reach, quality andservice standards of existing cable operators, coupled with growing demand

for digital content and introduction of CAS (conditional access system) bythe Government of India will all work together give a boost to thissegment. Airtel will strengthen its position as an integrated playerthrough offering services across all technologies.

Bharti Airtel will participate in the discussions on the feasibility andthe model for adopting 3G and other NGN (Next Generation Networks) relatedtechnologies in the Indian context.

Our entry into the Sri Lankan market for telecom services in January 2009is very encouraging. Our experience in the Indian Market and unique valuebased low cost business model is suitable for the Sri Lankan customer and


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integrated portfolio of product and service offerings will emerge strongerand retain its leadership.

SEGMENT WISE PERFORMANCE:

Bharti Airtel has had an overall robust performance in all segments in

which it operates. In all, the Company added 31,938,527 mobile customers inFY 2008-09, representing a customer addition of 51.52% over the previousyear. As on March 31, 2009 the Company had an aggregate of 96,649,487customers, consisting of 93,923,248 mobile and 2,726,239 Telemediacustomers. Our total customer base increased by 50.38% compared to thecustomer base on March 31, 2008.

Mobile Services:

The Company offers mobile services using GSM technology on 900MHz and1800MHz bands, and is the largest wireless service provider in the country,based on the number of customers. This segment constitutes the largestportion of the Company's business, both in terms of total revenues and

total customers. The company's 93,923,248 mobile customers accounted for acustomer market share of 24% of the wireless market, as on March 31, 2009.

The Company offers post-paid, pre-paid, roaming and value added servicesthrough its extensive sales and distribution channel, covering 1,191,323outlets.

During the financial year, the Company expanded its operations to 5,060census towns and 414,906 non-census towns and villages in India, thuscovering approximately 81% of the country's population. Post the Company'slaunch on January 12, 2009, our services are now operational in Sri Lanka.These services have been launched on a state-of-the-art 3.5G network.

The Company's strong performance has helped to consolidate its leadershipin the market and has given it the opportunity to take full advantage ofthe rapidly growing telecom market.

The revenues from the mobile services for the financial year wereRs.304,188 mn, a growth of 39% over the revenues in the previous financialyear. The mobile services business contributed 81% to the consolidated

revenues. The growth in revenues happened despite reductions in tariffs andintense competition. With mobile tariffs in India being among the lowest inthe world, the Company's prime focus is on ensuring customer satisfactionthrough network quality, superior customer service and continuousinnovation in value added services that would help expand its mobilesubscriber base and drive up volumes. The key financial results of the

mobile segment for the year ended March 31, 2009 are presented below:

Particulars FY 2007-08 FY 2008-09 Y-o-Y

Growth

Customers 61,984,721 93,923,248 52%Gross Revenue Rs. 218,697 mn Rs. 304,188 mn 39%EBIT Rs. 59,269 mn Rs. 68,746 mn 16%

Telemedia Services:

The Company provides broadband (DSL) and telephone services (fixed line) in

15 circles spanning over 95 cities with growing focus on new media andentertainment solutions such as DTH and IPTV. As on March 31, 2009, theCompany had 2,726,239 customers (a growth of 19.3%), of which 39.3% (~10,


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71,412) were subscribing to broadband / internet services.

The product offering in this segment includes supply and installation offixed-line telephones providing local, national and international longdistance voice connectivity and broadband Internet access through DSL.

We also remain strongly committed to our focus on Small and Medium BusinessEnterprises. We provide a range of customized Telecom / IT solutions andaim to achieve revenue leadership in this rapidly growing segment of ICTmarket.

The strategy of our Telemedia business is to focus on cities with highrevenue potential, except for DTH which is an all India offering. Airtel

digital TV is available to customers through 31,000 retail points in over4,000 cities and towns across the country.

The revenues from the Telemedia services were Rs. 33,426 mn, a growth of17% over the revenues in the previous financial year. The key financialresults of Telemedia Services for the year ended March 31, 2009 are

presented below.

Particulars FY 2007-08 FY 2008-09 Y-o-Y

Growth

Customers 2,283,328 2,726,239 19%Gross Revenue Rs.28,615 mn Rs.33,426 mn 17%EBIT Rs.6,109 mn Rs.8,188 mn 34%

Enterprise Services:

Enterprise Services provides a broad portfolio of services to large

Enterprise and Carrier customers. Enterprise Services is regarded as the

trusted communications partner to India's leading organizations, helpingthem to meet the challenges of growth.

The Enterprise Services group has two sub-groups, viz. Carriers andCorporate business units.

Carriers - the Carrier business unit provides long distance wholesale voice

and data services to carrier customers as well as to other business unitsof Airtel. It also offers virtual calling card services in the overseasmarkets. The business unit owns a state of the art national andinternational long distance network infrastructure enabling it to provideconnectivity services both within India and connecting India to the world.

The national long distance infrastructure comprises of 101,337 routekilometers of optical fibre, over 1,500 MPLS and SDH POPs and over 1,491POIs with the local exchanges, providing a pan-India reach.

The international infrastructure includes ownership of the i2i submarinecable system connecting Chennai to Singapore, consortium ownership of theSMW4 submarine cable system and investment in capacities across a number ofdiverse submarine cable systems across transatlantic and transpacificroutes. In the recent past we have announced investments in new cablesystems such as Asia America Gateway (AAG), India Middle East and WesternEurope (IMEWE), Unity North, EIG (Europe India Gateway) and Eastern AfricaSubmarine Cable System (EASSy).

The key financial results of the Carriers division for the year ended March31, 2009 are presented below:


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Particulars FY 2007-08 FY 2008-09 Y-o-YGrowth

Gross Revenue Rs.43,798 mn Rs.68,235 mn 56%

EBIT Rs.11,289 mn Rs.25,709 mn 128%

Corporates - This business unit delivers end-to-end telecom solutions toIndia's large corporates. It serves as the single point of contact for alltelecommunication needs for corporate customers in India by providing afull suite of communication services across data, voice and managedservices.

It specializes in providing customized solutions to address uniquerequirements of different industry verticals; BFSI, IT, ITeS, manufacturingand distribution, media, education, telecom, Government and PSUs and retailamong others.

Backed by the alliances with leading technology companies worldwide and

state of the art infrastructure, it offers a complete range of telecomsolutions. These solutions enable corporates to network their officeswithin India and across the globe, provide them infrastructure to run

business critical applications and provide them means to connect with theircustomers, vendors and employees.

These services include; Internet, MPLS -VPN, domestic and internationalprivate leased circuits, Satellite services (VSAT), Audio and Videoconferencing, Data Centre services, Managed network services, corporateValue Added Services, EPBX, Centrex, Contact

Documents

Bharti Airtel Financial Report 2008-2009