MIRA INFORM REPORT

Report Date :

13.04.2007

IDENTIFICATION DETAILS

Name :	VIDESH SANCHAR NIGAM LIMITED
Registered Office :	Videsh Sanchar Bhavan, Mahatma Gandhi Road, Mumbai; 400001, Maharashtra
Country :	India
Financials (as on) :	31.03.2006
Date of Incorporation :	19.03.1986
Com. Reg. No.:	039266
CIN No.: [Company Identification No.]	L64200MH1986PLC039266
TAN No.: [Tax Deduction & Collection Account No.]	MUMV03188D
Legal Form :	Public limited liability company The shares of the company are listed on the Stock Exchanges.
Line of Business :	Providing Telecommunication and Internet Services.

RATING & COMMENTS

MIRA’s Rating :

A

RATING		STATUS	PROPOSED CREDIT LINE
56-70	A	Financial & operational base are regarded healthy. General unfavourable factors will not cause fatal effect. Satisfactory capability for payment of interest and principal sums	Fairly Large

Maximum Credit Limit :	USD 200000000
Status :	Good
Payment Behaviour :	Regular
Litigation :	Clear
Comments :	Recently, Government of India has divested 25% stake in favour of Tata, who won against Reliance Group. Tata is country’s premier industrial house having fine track of performance. Group chairman is Mr. Ratan Tata. Industry circle of the company has welcomed the new management. Subject is now under the control and management of Tata, highly respectable industrial house of the country. Available information indicates high financial responsibility of the company. Financial position is good. Payments are always correct and as per commitments The company can be considered for normal business dealing at usual trade terms and conditions.

LOCATIONS

Registered Office :	Videsh Sanchar Bhavan, Mahatma Gandhi Road, Mumbai; 400001, Maharashtra
E-Mail :	Satish.ranade@vsnl.co.in
Regional Office :	Mumbai, Maharashtra Chennai, Tamilnadu Kolkata, West Bengal New Delhi
Corporate Office :	Lokmanya Videsh Sanchar Bhawan Kashinath Dhuru Marg, Prabhadevi, Mumbai - 400 028, Maharashtra
Tel. No.:	91-22-24312700 / 56578765
DID No. :	91-22-24310510
Fax No.:	91-22-24322678 / 56395162
Info Fax :	91-22-24320220
Tele Gram :	VIDESHSANCHAR
E-Mail :	help@vsnl.com
Website :	http://www.vsnl.com http://www.internet.vsnl.net.in
Branches :	Located at :- Ambattur, Arvi, Bangalore, Bhubaneshwar, Chandigarh, Coimbatore, Dehradun, Ernakulam, Gandhinagar, Goa, Guwahati, Hyderabad, Indore, Jaipur, Jalandhar, Kanpur, Patna, Pondicherry, Pune and Thiruvananthapuram

DIRECTORS

Name :	Mr. Subodh Bhargava
Designation :	Chairman
Name :	Mr. Ishaat Hussain
Designation :	Director
Date of Birth/Age :	02.09.1947
Qualification :	Graduated in Economics from St. Stephens College, Delhi, Fellow of the Institute of Chartered Accountants in England and Wales, attended Advanced Management Program at Harvard Business School
Date of Appointment :	01.07.2002
Name :	Mr. N. Srinath
Designation :	Executive Director
Date of Birth/Age :	08.07.1962
Qualification :	Graduated as a Mechanical Engineer from III (Madras), Post Graduate Diploma in Management from MM (Calcutta), Tata Administrative Services Officer
Date of Appointment :	13.02.2002
Name :	Mr. Kishor Chaukar
Designation :	Panatone Nominee
Name :	Mr. Pankaj Agrawala
Designation :	Government Nominee
Name :	Dr. Mukund Rajan
Designation :	Panatone Nominee
Date of Birth/Age :	05.04.1968
Qualification :	Bachelor of Technology from IIT Delhi, Masters and Doctorate in International Relations from Oxford University, Tata Administrative Service Officer
Date of Appointment :	06.05.2005
Name :	Mr. N. Parameswaran
Designation :	Government Nominee
Name :	Mr. P. V. Kalyanasundaram
Designation :	Independent
Date of Birth/Age :	25.02.1958
Qualification :	Bachelor of Arts degree in history, from the New College, Chennai, Bachelor of Law degree from Madras Law College.
Date of Appointment :	09.09.2005
Name :	Dr. V.R.S. Sampath
Designation :	Independent
Date of Birth/Age :	12.08.1956
Qualification :	Bachelor of Arts degree in History from the Presidency College, Bachelor of Law degree from Madras Law College, Master of Law degree and a PHD from the University of Madras. Master of Arts degree in History from the Madurai Kamaraj University
Date of Appointment :	09.09.2005
Name :	Mr. Amal Ganguli
Designation :	Independent
Date of Birth/Age :	17.10.1939
Qualification :	Fellow of the Institute of Chartered Accountants in England and Wales, Fellow of Institute of Chartered Accountants of India, Fellow of British Institute of Management, member of New Delhi Chapter of Institute of Internal Auditors, Florida, USA, Alumnus of IMI, Geneva
Date of Appointment :	17.07.2006

KEY EXECUTIVES

Name :	Mr. Satish Ranade
Designation :	Company Secretary & Chief Legal Officer

MAJOR SHAREHOLDERS / SHAREHOLDING PATTERN

Names of Shareholders	No. of Shares
Promoters
Tata Group
- Panatone finest Limited	115738857
-Tata Sons Limited	10360497
- The Tata Power Company Limited	2575837
- The Tata Iron and Steel Company	0
- Tata Industries Limited	0
Central Government	74446885
Non Promoters
Indian Public Financial Institutions	2668678
Indian nationalized banks	248448
Foreign Financial Institutions	27528395
Foreign companies (share held by the bank of New York as depository for ADRs)	17081284
Non-residnt individuals/ Overseas Corporate Bodies	144635
Other Indian Bodies Corporate	2494521
Indian Public	7691428
In Transit demat shares	2235
Total:	285000000

BUSINESS DETAILS

Line of Business :	Providing Telecommunication and Internet Services.
Products :	Product Description: International Telecommunications Services

GENERAL INFORMATION

No. of Employees :	Total:2926
Bankers :	Citibank Inc. Indian Overseas Bank Standard Chartered Bank HDFC Bank Hongkong & Shanghai Banking Corporation State Bank of India ICICI Bank Ltd.
Facilities :	Unsecured Loan Short Term Foreign Currency Loans From Banks - Rs.982.501 Millions

Banking Relations :	Good
Auditors :
Name :	Messrs S.B. Billimoria & Co., Chartered Accountants
Other Subsidiary (held indirectly )	VSNL Lanka Limited VSNL Singapore Pte Limited VSNL America Inc VSNL UK Limited VSNL France SAS VSNL Portugal Unipessoal Limitada Vdesh Sanchar Nigam Spain, SRL VSNL Japan K. K. VSNL Hong Kong Limited
Associates/Subsidiaries :	Associates: Tata Managerial Personnel Subsidiaries: VSNL Telecomnication (US) Inc. VSNL Netherland B. V. VSNL UK Limited
Joint Venture :	United Telecom Limited

CAPITAL STRUCTURE

Authorised Capital :

No. of Shares	Type	Value	Amount
300000000	Equity Shares	Rs.10 each	Rs.3000.000 Millions

Issued, Subscribed & Paid-up Capital :

No. of Shares	Type	Value	Amount
285000000	Equity shares	Rs.10/- each	Rs.2850.000 Million

FINANCIAL DATA

[all figures are in Rupees Millions]

ABRIDGED BALANCE SHEET

SOURCES OF FUNDS		31.03.2006	31.03.2005	31.03.2004
SHAREHOLDERS FUNDS
1] Share Capital		2850.000	2850.000	2850.000
2] Share Application Money		0.000	0.000	0.000
3] Reserves & Surplus		57761.671	54430.468	48821.767
4] (Accumulated Losses)		0.000	0.000	0.000
NETWORTH		60611.671	57280.468	51671.767
LOAN FUNDS
1] Secured Loans		0.000	0.000	0.000
2] Unsecured Loans		982.501	0.000	630.000
TOTAL BORROWING		982.501	0.000	630.000
DEFERRED TAX LIABILITIES		750.926	996.796	71.166
TOTAL		62345.098	58277.264	52372.933
APPLICATION OF FUNDS
FIXED ASSETS [Net Block]		30085.546	23470.282	19743.640
Capital work-in-progress		1478.094	5131.681	--
INVESTMENT		24993.393	12005.839	20891.446
DEFERREX TAX ASSETS		0.000	0.000	0.000
CURRENT ASSETS, LOANS & ADVANCES
	Inventories	38.019	19.651	24.091
	Sundry Debtors	7375.710	6089.452	4401.957
	Cash & Bank Balances	2568.815	14091.243	10467.110
	Other Current Assets	983.025	507.201	857.687
	Loans & Advances	13063.532	14892.865	11245.959
Total Current Assets		24029.101	35600.412	26996.804
Less : CURRENT LIABILITIES & PROVISIONS
	Current Liabilities	15674.824	15279.229	13341.390
	Provisions	2566.212	2651.721	1917.567
Total Current Liabilities		18241.036	17930.950	15258.957
Net Current Assets		5788.065	17669.462	11737.847
MISCELLANEOUS EXPENSES		0.000	0.000	0.000
TOTAL		62345.098	58277.264	52372.933

PROFIT & LOSS ACCOUNT

PARTICULARS		31.03.2006	31.03.2005	31.03.2004
Sales Turnover		0.000	0.000	0.000
Other Income		40097.273	34104.423	33710.686
Total Income		40097.273	34104.423	33710.686
Profit/(Loss) Before Tax		6867.173	10539.823	5432.618
Provision for Taxation		(2071.753)	2976.149	1656.058
Profit/(Loss) After Tax		4795.420	7563.674	3776.560
Earnings in Foreign Currency :
	Revenues from telecommunication services	16938.734	0.000	0.000
	Profit on sale of long-term investments	0.000	0.000	0.000
	Interest Income	106.157	0.000	0.000
	Other	75.175	0.000	13835.697
Total Earnings		17120.066	0.000	13835.697
Imports :
	Stores & Spares	11.490	0.000	0.000
	Capital Goods	1639.867	0.000	0.000
Total Imports		1651.357	0.000	0.000
Expenditures :
	Salaries, Wages, Bonus, etc.	2090.591	1412.808	0.000
	Network Costs	20958.674	20030.893	0.000
	Operating and other Expenses	6001.739	3895.660	0.000
	Interest	18.027	0.779	0.000
	Depreciation & Amortization	3595.572	2441.535	0.000
	Other Expenditure	(110.850)	(1.859)	28048.596
Total Expenditure		32553.753	27779.037	28048.596

QUARTERLY / SUMMARISED RESULTS

PARTICULARS	30.06.2006	30.09.2006	31.12.2006
Type	1st Qtr	2nd Qtr	3rd Qtr
Sales Turnover	9240.000	9660.000	1,0660.000
Other Income	270.000	530.000	730.000
Total Income	9510.000	1,0190.000	1,1390.000
Total Expenditure	7140.000	7680.000	8320.000
Operating Profit	2370.000	2510.000	3070.000
Interest	10.000	10.000	20.000
Gross Profit	2360.000	2500.000	3050.000
Depreciation	1050.000	900.000	920.000
Tax	510.000	480.000	710.000
Reported PAT	880.000	1070.000	1420.000

200606 Expenditure Includes Network Cost Rs 5360.00 million Operating & Other expenses Rs 1160.00 million Salaries & Related Costs Rs 590.00 million Tax Includes Provision for Current Tax Rs 500.00 million Deferred Tax Rs (80.00)million Fringe Benefit Tax Rs 10.00 million EPS is Basic & Diluted Status of Investor Complaints for the quarter ended June 30, 2006 Complaints Pending at the beginning of the quarter Nil Complaints Received during the quarter 01 Complaints disposed off during the quarter 01 Complaints unresolved at the end of the quarter Nil 1. The above results were taken on record by the Board of Directors of the Company at their meeting held on July 29, 2006. 2. Consequent to the revised Accounting Standard 15- Employee Benefits issued by the Institute of Chartered Accountants of India, becoming effective from April 1, 2006 a charge of Rs 18.70 million has been recorded in the current period on an estimated basis. The adjustment to opening reserves required under the transitional provisions of the standard will be made during the current financial year. 3. Figures for the previous period have been regrouped where necessary.

200609 EPS is Basic & Diluted Status of Investor Complaints for the quarter ended September 30, 2006 Complaints Pending at the beginning of the quarter Nil Complaints Received during the quarter 02 Complaints disposed off during the quarter 02 Complaints unresolved at the end of the quarter Nil 1. The above results for the quarter and half year ended September 30, 2006 have been subjected to a limited review by the statutory auditors, recommended by the audit committee and were taken on record by the Board of Directors of the Company at their meeting held on October 31, 2006. 2. Consequent to the revised Accounting Standard 15 -Employee Benefits issued by the Institute of Chartered Accountants of India, becoming effective from April 1, 2006, a charge of Rs 37.40 million has been recorded in the current period on an estimated basis. The adjustment to opening reserves required under the transitional provisions of the standard will be made during the current financial year. 3. The previous period's figures have been regrouped and reclassified wherever necessary to make them comparable with the current period's figures.

KEY RATIOS

PARTICULARS	31.03.2006	31.03.2005	31.03.2004
Debt-Equity Ratio	0.01	0.01	0.04
Long Term Debt-Equity Ratio	0.00	0.00	0.03
Current Ratio	1.52	1.77	2.15
TURNOVER RATIOS
Fixed Assets	1.04	1.19	1.12
Inventory	1118.62	1232.48	2041.42
Debtors	6.04	6.88	5.13
Interest Cover Ratio	382.51	7882.63	1235.68
Operating Profit Margin(%)	27.72	26.48	22.63
Profit Before Interest And Tax Margin(%)	18.21	19.09	17.18
Cash Profit Margin(%)	22.19	21.09	17.39
Adjusted Net Profit Margin(%)	12.68	13.70	11.94
Return On Capital Employed(%)	11.58	11.51	9.77
Return On Net Worth(%)	8.14	8.31	7.05

STOCK PRICES

Face Value	Rs.10.00
High	Rs.422.50
Low	Rs.415.50

LOCAL AGENCY FURTHER INFORMATION

History

Subject was incorporated on 19^th March, 1986 at Mumbai in Maharashtra having Company Registration Number 39266.

Subject was incorporated to provide international telecommunications services to and from India which were handled by the Overseas Communication Services (OCS). The company was incorporated to take over the activities of the erstwhile OCS w.e.f. 1^st April 1986. The company is licensed by the government to operate on a monopoly basis till 31^st March 2004. The company represents India as its signatory to the international telecommunication satellite organisation and the international maritime satellite organisation and holds investments in these organisations.

In India the telephone density is just 1.70% against the global average of 10.00%. Privatisation of domestic services was initiated in mid 1994, but political hurdles during the tendering delayed the process. The telecom sector in India over the last one year has seen a lot of activity. An infrastructure sector status has now been awarded with tax holidays. To achieve this the government has allowed for breaking the monopolies to allow competition.

The company was incorporated in 1986 as a Government of India as company, with a view to provide international Telecommunication Services such maritime mobile communications, e-mail, electronic data exchanges, leased lines, etc. The company completed its maiden GDR issue to the extent of USD 527 million.

Government of India was holding 52.97% stake in company of which it has divested 25% stake to the Tata Group as a strategic partner along with the right to manage the company. Panatone Finvest Limited a company which is owned by various Tata Group companies has picked the stake at a price of Rs. 202 per share. Consequent to this divestment Government of India’s stake in company has come down to 26.12%. Subsequent to all above issues, the company now became a Tata Group company.

In May 2002, the company signed a memorandum of understanding (MoU) with Antrix, the commercial arm of the Indian Space Research Organisation (ISRO) for acquisition of satellite capacity in the Indian Ocean region. In August 2000 the company made an history by becoming the first indian public sector unit to list on any stock exchange in the US by trading in American depository receipts on the New York Stock Exchange (NYSE). Further in October 2000 it announced a bonus issue in the ratio of two shares for every share held.

Since the company has no direct access to provide voice services to its end customers it has decided to invest in Tata Teleservices Limited, a company already holds basic licenses for Andhra Pradesh, Tamilnadu, Karnataka, etc. This strategic decision has been taken by the company’s board and has decided to invest up to Rs. 8.5 billion in TTSL’s equity over a seven year period. Subsequently, for the year 2002-2003 the company has invested over Rs. 2.800 billion and picked up 19.9% of TTSL’s equity.

United Telecom Limited, a company promoted by VSNL, MTNL and TCIL along with Nepal Ventures Private Limited is providing CDMA based basic service in Nepal. The company explored into Srilankan market by floating a company, VSNL Lanka Limited and later it became a wholly owned subsidiary of VSNL Lanka Limited.

Has External Gateway Operator Licence.

1986

Company was Incorporated on 19th March with the object of assuming responsibilities for providing international telecommunication services, which were being provided by the erstwhile OCS, Department of Telecommunications, Ministry of Communications.

The main business of the Company is to provide basic international switched telecommunication services - comprising telephone, telex and telegraph services.

Company is now concentrating on two telecom - related services. One is a vital service for aeronautical, maritime, and onshore and offshore mobile communications in the Indian ocean, the other is the growing software export business.

The Company provides telex services to 237 territories worldwide and handles on an average more than 15,000 international telex calls each day. The Company handles on an average approximately 600 telegrams daily.

1992

The Company offers Intelsat Business Service - a dedicated satellite-based service that provides high speed, high quality data circuits on a point-to-point basis through earth stations strategically located near the customer's premises.

The Company has entered the era of mobile communications by commissioning its own Land Earth Station (LES) at Arvi near Pune.

The Company won the prestigious IMM Award (Institute of Marketing and management) for the best marketing Company of the year 1992 amongst both public and Private Sectors.

1993

The Company introduced Inmarsat-C service, which permits transmission of messages via small portable terminals.

The Company introduced a video conferencing service (both domestic and international) through studios located at the Company's international gateways at Mumbai, New Delhi, Calcutta and Chennai. The Company also provides international relay of television programs and news services via satellite on a contractual basis.

The company has been recognised as one of the best run companies in the country, rated `EXCELLENT' for the sixth successive year 1998-99, among Memorandum of understanding [MoU] signing PSEs.

1994

The Company launched the Concert Packet Service (CPS) for Indian customers on 7 June, in co-operation with British Telecom, UK.

1995

In November, the Company introduced Inmarsat-B services for voice and data transmissions and Inmarsat-M services for voice transmissions, both in digital format.

The Company commenced providing Internet access services in August, and is the largest commercial provider of access to the Internet in Mumbai, Chennai, New Delhi, Kolkata, Bangalore and Pune and also a dominant commercial provider of access to the Internet in India, with DoT providing access where the Company is unable to do so.

The Company is one of the founding investors in ICO Global Communications (Holdings) Limited which was formed by a consortium of international telecommunications companies, governments and satellite and telephone equipment manufacturers to establish and operate a satellite-based mobile telecommunication system.

Internet Access Services were introduced by the Company in India on 15th August.

The Company is setting up two Standard `A' Intelsat earth stations, one at Halisahar (Calcutta) and second at Korattur (Chennai).

The Company has introduced two innovative Incentive Schemes for increased usage of Hindi with cash incentives to staff at all levels viz. incentive scheme for passing different Hind examinations and incentive scheme for doing original work in Hindi.

1996

The company has accorded approval to set up a subsidiary company to provide value added services in India, with a share capital of upto Rs 800.000 millions.

The Company is the exclusive provider of public international telecommunication services in India, linking the domestic Indian telecommunications network to 236 territories worldwide.

The Company has entered into a Construction and Maintenance Agreement with other international telecommunication carriers for the construction of SEA-ME-WE-3, a high capacity undersea optical fibre cable extending from Germany to Japan and Australia that will land in a total of 33 countries.

The Company has recently announced the introduction of `Universal Connect' services jointly with TMI (Tele Media International) a wholly-owned subsidiary of Telecommunications Italia.

The Company has signed a Construction and Maintenance Agreement for the Fibre Optic Link Around the Globe (FLAG).

1997

The Company introduced managed data network services in January and now offers such services through the global alliance networks of six global partners-BT, Cable & Wireless, EQUANT, Global One, IBM Global Services and Tele Media International.

In February, the Company and DoT agreed to the current revenue sharing arrangement, which took effect on 1st April, and will remain effective until 31st March 2002.

The Company has made an offering of 30000000 Global Depository Receipts (GDRs) representing 15000000 No. of Equity Shares at an offer price of US $13.93 per GDR in March/April.

Company, the country's only Internet service provider, has suspended new dial-up connections.

Subhash Chandra promoted Afro-Asian Satellite Communications (ASC) and Videsh Sanchar Nigam Ltd (VSNL) will be jointly setting up a dedicated primary gateway in Mumbai following the implementation of the former's $900 million Agrani project.

Company will also set up its own facilities for a Direct-to-Home (DTH) television service platform for Indian satellite television channels.

The company has also entered into a construction and maintenance agreement with other international telecom carriers for the construction of SEA-ME-WE-3, a high capacity undersea optical fibre cable extending from Germany to Japan and Australia that will land in a total of 33 countries.

Company also gearing up to introduce Globally Managed Data Services in technical cooperation with telecom major Cable & Wireless of the UK.

Company (VSNL) launched the Inmarsat-Phone services, also called the Mini-M service, in Chennai.

Company will be setting up international gateways in Ernakulam, Jalandhar and Ahmedabad by the year-end, and two more next year, in Hyderabad and Kanpur.

Company is inviting fresh proposals from AT&T Unisource, BT-MCI and Sprint International for its proposed joint venture for setting up a regional hub in the country.

A memorandum of understanding was signed here recently between Electronic Corporation of Goa (ECG) and Videsh Sanchar Nigam Ltd (VSNL) for setting up an earth station at the Verna software Technology Park, South Goa, besides providing allied services in satellite communication.

Company has emerged as the second largest investor in ICO Global Communications (ICOGC).

Company has joined several other Asian telecom companies in legally challenging the right of US telecom regulator, the Federal Communications Commission (FCC), to unilaterally determine the rates for telecom access to the United States.

Globalstar India Satellite Service (P) Ltd. (GISS) and Videsh Sanchar Nigam Limited (VSNL) had signed a memorandum of understanding for putting up three gateways for GISS in India.

The company and ICO Global Communications signed a final agreement for establishing an ICO Satellite Access Node (SAN) at Chattarpur, New Delhi.

The company, India's international telecom carrier) has obtained a AAA rating from Credit Rating & Information Services of India (Crisil) for a Rs.1000.000 millions bond issue. This is the first time the VSNL has gone in for a credit rating.

1998

The company is set to join World source Services, which provides latest telecommunication facilities and get membership of World Partners Association.

Company, the country's international telecom monopoly, has decided to amend its memorandum of association to include domestic long distance telephony as part of its service offerings.

Company has qualified for being rated "Excellent" amongst MOU-signing Public Sector Undertakings with GoI for the year based on achievements against targets set out in the MoU for that year.

In September, the Company signed an MOU for participation in the South Africa and Far-East (SAFE) undersea optical fibre system.

Company has signed a Memorandum of Understanding (MOU) with Madhya Pradesh State Electronics Development Corporation Limited (Optel) on 24th April, at Bhopal to set up a Statelite Earth Station at Indore.

The company and Microsoft have together set up a Microsoft download server in India (http://www.vsnl.net.in/msdownload). The server, the first of such mirror sites in India, mirrors Microsoft's software download site.

The telecom major Videsh Sanchar Nigam Limited (VSNL) and IBM Global Services India have expanded the network services portfolio in India by introducing `IBM managed data network services (MDNS)' for remote access (IP dial) on IBM global network infrastructure.

Company, the country's international telecom carrier, is set to sign a memorandum of understanding (MoU) for a $15 billion (Rs.630,000.000 millions) submarine optical fibre telecom cable project.

Company on 16.07.98 launched sim cards for Inmarsat mini-M global mobile phone users.

Company is set to tie up with home grown television channels like Sun TV, Enadu TV, Asianet, New Delhi Television TVI and Udaya for providing satellite uplinking.

The telecom commission is considering a plan to merge Videsh Sanchar Nigam Ltd (VSNL India International telecom carrier) into India Telecom, the proposed corporatised version of the department of telecom (DoT).

Public sector Videsh Sanchar Nigam Limited (VSNL) has launched India's most advanced earth station at, International Technology Park (ITPL), Bangalore to serve software companies operating from there.

Company has awarded a contract to Siemens Public Communication Networks Limited for setting up a nationwide state-of-the-art data network, using digital cross-connect.

Company introduced a new Internet dial-up service through high speed ISDN (integrated services digital network) lines in Bangalore.

Company has introduced a flexihour accounts scheme for Internet users, allowing its customers to upgrade form one slab to another.

1999

The Videsh Sanchar Nigam (VSNL) has conducted a "Vision 2004" study.

The Company provides Home Country Direct services, which permit a caller to speak to an operator in his home country directly and place a collect or charge call.

The Company provides an international E-mail service - GEMS 400, which permits subscribers to send E-mail both to other subscribers within India and to 242 public E-mail systems in 75 countries.

As on 31st March, the Company had switching capacity of 34200 international telephone, 2386 telex and 128 telegraph terminations.

The capacity of International Voice Circuits has increased from 966 to 17922 as on 31st March.

The Company has introduced several international specialised and value added services in recent years and seeks to increase the portion of its revenues derived from such value-added services.

The Company seeks to enter into joint ventures with foreign companies to develop telecommunication projects to permit the Company to utilise its existing expertise and gain additional experience with potential strategic partners.

The Company and DoT entered into a licence agreement on 25th January, under which the Company was granted a licence to provide Internet access service in six cities on a non-exclusive basis.

International telecommunications provider Videsh Sanchar Nigam Limited (VSNL) will enter the national long distance telephony segment when it is opened up for competition in 2000.

The company, which is the second largest shareholder in ICO Global, a consortium of telecom operators, entered into a pre-launch agreement with ICO Global on Monday to pave the way for the setting up of a joint venture company.

The company and ICO Global Communications, the global mobile satellite communications company, signed the pre-launch agreement.

The company has launched an Internet Central Control Facility (ICCF) and a new Web Site.

Company has emerged as the top exporter for the year 1997-98, while Indian Oil Corporation, occupies the second spot, according to the annual Global magazine's survey of top exporters.

Company, India's international telecommunications provider, has launched a number of Internet services, including a global Internet roaming services.

PowerGrid Corporation of India Ltd (PGCIL) and Videsh Sanchar Nigam Ltd (VSNL) signed a memorandum of understanding on future cooperation in the area of telecommunications.

Company has tied up with Indian Overseas Bank (IOB) to extend Internet connections to subscribers over the counters of IOB in Mumbai.

Company has set up an internal committee to look into its proposed entry into domestic long-distance telephony (DLT).

The company has tied up with ICICI Bank to provide the latter's Net-banking clients on-line registration and payment facility for taking Net connections.

Company and Hughes Escorts Communication Ltd signed an agreement that would enable Hughes Escorts Communications to use the VSNL's Internet infrastructure.

2000

The company has also launched an e-mail service exclusively for the media called mediapoint.enmail.com., this is to bring media professionals on one virtual platform, to hear their views and help the common man to give single point access to the media.

The Company is planning to set up an Internet consultancy division, which will offer technical consultancy to start-up Internet Service Providers (ISPs).

The company (VSNL) and Haryana Electronics Development Corporation Ltd (HARTRON) signed a memorandum of understanding (MoU) to set up a high speed data communication facility with associated marketing services for data links, internet access and other value added services of VSNL.

The proposed VSNL-HARTRON project, is setting up a high speed data communications facility to provide optical fibre and micro-wave connectivity between the electronics city and VSNL's international gateway based in Delhi.

The company has tied up with a Silicon Valley-based software company for the technology to manufacture Internet appliances including colour televisions (CTVs).

In March, the Company plans to install electronic data interchange facilities at Chennai, New Delhi and Calcutta and to upgrade and augment its existing electronic data interchange facilities at Mumbai.

The Company, State-owned international telecom carrier, is planning to use foreign satellites to provide band-width to private internet service providers. It has doubled its bandwidth capacity to 300 Mbps.

A MoU for the year 2000-20001 has been signed between the Department of Telecom Services and the Videsh Sanchar Nigam Limited.

The Company is setting up a Standard-B earth station facility at Hyderabad, to enable the region to have better international telecommunications facilities.

The Company has signed an MoU with ISRO's commercial arm, Antrix Corporation, for acquisition of satellite capacity in the region.

The Company will convert its global depositary receipts into American Depositary Receipts in a one-for-one ratio.

The Company commissioned its roof-top Earth Station at P S G College of Technology in Coimbatore.

The Company will acquire an additional internet bandwidth in the current fiscal, bringing its total to 750 megabites from the present 315 megabites.

The Department of Telecommunications has asked Videsh Sanchar Nigam Ltd to set up an exclusive website showing requirement and status of applications from private players for bandwidth.

The company’s `monsoon package' introduced from June, for a period of two months has resulted in a spurt in internet connections in Kolkata.

The Company has signed a memorandum of understanding with Yahoo! India to host the latter's servers at its facilities in Mumbai.

The Company has recommended a 1:1 bonus to its shareholders and proposed increasing the authorised share capital to Rs 2500 millions from the existing Rs 1000.000 millions.

The Company has become the first Indian Public Sector undertaking to list on the New York Stock Exchange as it began trading its American depository receipts under the ticker symbol VSL.

The Company revised the ratio of bonus shares to 2:1 -- two new shares for each existing share from the earlier recommended ratio of 1:1.

The company and HDFC have jointly launched online renewal facility for Internet subscription in Mumbai, New Delhi, Kolkata, Chennai, Pune and Bangalore.

The company has launched a 65-day Festive Fiesta for its Internet customers in the six cities of Delhi, Mumbai, Chennai, Kolkata, Bangalore and Pune.

The company is set to enter the cellular service sector.

The Company will raise its bandwidth capacity to nearly one giga byte, to improve Internet infrastructure in the country.

Crisil has removed from rating watch, the FA rating assigned to the fixed deposit programme of SREI International Finance.

The Company has commissioned a new and improved stream of 155 mb international Internet bandwidth at its New Delhi gateway.

The company has launched high speed Internet access through Integrated Services Digital Network at its customer awareness centre in Videsh Sanchar Bhawan, Jalandhar.

The Company launched its first IT-node in Coimbatore after the grant of all-India licence which permits VSNL to expand beyond the six cities licensed earlier.

The company offers both basic and specialised value-added telecommunication services such as maritime mobile communications, e-mail, electronic data exchanges, leased lines, bureau fax tele-conferencing, radio photos, etc. It is an international company both in terms of the services it provides and its ownership. It has been constantly upgrading its infrastructure investing in switching and transmission facilities, new earth stations and gateways and mobile satellite communication networks. The company is also participating in ventures that provide quality services for multimedia applications to customers with the help of emerging Global Multimedia Satellite Systems.

2001

The Company has commissioned Cisco's high-end gigabit switch routers to serve as important internet exchange points in the country.

The Company has issued Bonus Shares at the rate of 2:1.

The race for the 25 per cent stake in company is hotting up with telecom majors France Telecom, Essar and Singapore Telecom joining the likely-bidders list along with Reliance and Concert - joint venture between AT&T and British Telecom.

The Company is all set to launch direct to home service throughout the country by the end of this year.

The Company has marked out a capital expenditure of Rs. 20,000 millions for 2001-02 which will be broadly allocated among it's direct-to-home and domestic long distance projects as well as acquisition of extra bandwidth among other areas.

The Company has entered into an agreement with Teleglobe, a subsidiary of the Canadian Telecom major BCE, for assured revenues in a bid to corner some of the global traffic between Teleglobe and other carriers in the Asia-Pacific region.

Mr. S. K. Gupta, chairman and managing director of Videsh Sanchar Nigam Ltd (VSNL), has been elected as one of the directors on the board of Intelsat.

The company wants to reward its existing shareholders by declaring a 1,000 per cent dividend.

2002

The company has informed that Shri Subodh Bharagava an independent part-time-non-official Director has resigned from the post of Directorship from the Board of VSNL and ceases to be Director with effect from January 17, 2002.

Company has informed BSE that Shri Ashok Wadhwa an independent (part-time non-official) Director has resigned from the post of directorship from the Board of VSNL and ceases to be Director with effect from January 23, 2002.

Company has informed that Shri Rakesh Kumar, Sr. Dy Director General (ML), DoT has been appointed as Government Director on the Board of VSNL.

GOI signs share purchase agreement for divestment of stake in VSNL with Panatone Finvest Limited.

The Board of Directors of company was reconstituted as below:

Shri Ratan Tata Chairman Shri S K Gupta Managing Director Shri N Srinath Director (Operations) Smt Sadhana Dikshit Director Shri Rakesh Kumar Director Padmashri N R Narayana Murthy Director.

The company has informed that Smt Sadhana Dikshit has resigned from the post of Director of the Company and ceases to be Director.

In Feb. 2002 the company has informed that, the Tata Group has been declared the successful bidder in the disinvestment process initiated by the Government of India (GOI). Accordingly GOI has entered into share purchase agreement with Panatone Finvest, as investing vehicle for the four Tata Group Companies as its principals viz. Tata Sons, Tata Power, Tata Iron & Steel Company and Tata Industries for transfer of 25% stake in VSNL at Rs. 202 per share.

Mr. Y. Ss Bhave & Mr. Subodh Bhargava appointed on the Board of the company.

Company has appointed Mr Suresh Krishna on the Board with effect from May 24, 2002 as part-time Independent Director.

The Tata group has appointed two of its group executives -- Ishaat Hussain, director (finance), Tata Sons, and Kishore A Chaukar, managing director, Tata Industries -- as additional directors on the board of company.

At the Board Meeting the Board also appointed Mr Vivek Singhal and Professor Ashok Jhunjhunwala as Additional Directors (Independent Directors) on the Board of VSNL w e f from the conclusion of 16th AGM held on August 20, 2002.

Company has informed BSE that the Chairman Mr R N Tata informed that Mr S K Gupta the present Managing Director of the Company on his superannuation on September 30, 2002 from VSNL will be appointed by Tatas as their senior executive for a period of five years and will be deputed to VSNL for a period of upto two years as its Managing Director.

2003

Mumbai: Company (VSNL), signed an interconnect agreement with Bharat Sanchar Nigam (BSNL) and Mahanagar Telephone Nigam (MTNL) on May 28. When contacted, BSNL chairman Prithipal Singh confirmed that the agreement had been signed, but said he did not have any details. With the telecom regulator, TRAI, deciding on the quantum of the interconnect charges, the discussions were more or less limited to the amount of discounts that could be offered.

Facilities

The company has nine gateways at Kolkata, Chennai, Delhi, Mumbai, Ernakulam, Gandhinagar, Hyderabad, Kanpur and Jalandhar. It has four exchanges located at Mumbai, Delhi, Kolkata and Chennai. The company has seven earth stations located at Delhi, Dehradun, Pune, Kolkata, Korattur and Bangalore. The company operates four submarine cables. These facilities are used by the company to uplink and offer the gateway facilities.

The company is the exclusive provider of international telecommunication services to and from India. The company had a monopoly status as the international telecommunications provider until 2004.

In September, 2000 the Government of India announced its intention to allow private players to provide international telephone services from April 2002, thus terminating company’s monopoly two years ahead of schedule. However government plans to compensate company for this termination and the same has been approved by the company.

The company has the largest dedicated Internet Network in India. To maintain and increase the leadership, company will continue to invest in infrastructure to support both basic telephony and value added service. The company completed its maiden US$ 527 millions GDR issue in March 1997.

In May 2000, the company signed a memorandum of understanding with Abtrix, the commercial arm of the Indian Space Research Organization for acquisition of satellite capacity in the Indian Ocean Region.

In August 2000, the company made a history by becoming the first Indian Public Sector Unit to list on any stock exchange in the USA by trading its American Depository Receipts on the New York Stock Exchange. Further in October, 2000 it announced a bonus issue in the ratio of two shares for every share held.

Moreover the Government of India in crucial development had decided to disinvest 25 % stake from its present 52.97 % stake in company’s equity to a strategic partner along with right to management. Also as a part of continuing liberalisation and deregulation of the telecommunication market, the Indian government recently announced guidelines and eligibility criteria for entry into Domestic Long Distance and Direct-to-Home business. The same is being considered by the company.

The company is also examining opportunities in basic and cellular telephony abroad. To this end the company Mahanagar Telephone Nigam (MTNL) and Telecommunication Consultants India (TCIL) had signed a joint venture agreement with Nepal Ventures Private Limited. (NVPL) and formed new company named United Telecom to offer wireless-in-local-loop (WLL) based basic services in Nepal.

In February, 2002 the company informed that, the Tata Group has been declared the successful bidder in the disinvestment process initiated by the Government of India (GOI). Accordingly Government of India has entered into share purchase agreement with Panatone Finvest, as investing vehicle for the four Tata Group Companies as its principals viz. Tata Sons, Tata Power, Tata Iron & Steel Company and Tata Industries for transfer of 25 % stake in company at Rs. 202/- per share

Financial Performance:

During financial year 2005-06, the Company succeeded in growing each one of its business segments. A total of

3.8 billion voice minutes were carried by the India business which translates into a volume increase of 36% over the previous year.The revenue in the Wholesale Voice segment grew by 15.25%, from Rs.18.77 billion to Rs.21.63 billion. The pressure on margins continued during this year as well. The Enterprise and Carrier Data segment reported revenue of Rs.12.62 billion, a growth of 12.95% over the previous year.The revenues in the 'Other Services' segment, which includes TV uplinking, transponder leasing services, retail internet, etc., reported a growth of 15.24% over the previous year. Consequent to substantial increases in the complexities of the Company's businesses, and its focus on growth and globalisation, total expenditure at Rs.32.66 billion in FY 05-06 was higher by 17.57% (Rs.27.78 billion in FY 04-05). VSNL's profit before tax and exceptional items increased from Rs.6.33 billion in FY 04-05 to Rs.7.54 billionin FY 05-06. In the previous year, the Company had substantial

exceptional earnings from the disposal of its investments made in earlier years in international satellite companies.

CONSOLIDATED FINANCIAL PERFORMANCE

For the first time, the Company is reporting the consolidated financial results. The results of the key acquisitions made during the year - Tyco Global Network, Teleglobe, and VSNL Broadband Limited - are included in the Company's consolidated results from their respective acquisition dates. For 2005-06, the Company's total income on a consolidated basis was Rs.47.97 billion, EBIDTA Rs.6.23 billion and profit before tax and exceptional items Rs.3.45 billion.

STRATEGIC OVERVIEW

The Company is evolving into India's first truly global telecommunications company. Today, VSNL is among the

world's top three providers of international wholesale voice services, and the number one wholesale Voice over Internet Protocol provider (according to independent published reports). The Company provides seamless connectivity across the globe to both carriers and enterprises, supported by a state-of-the-art network infrastructure. VSNL's submarine cable network of over 2,00,000 route kilometers is one of the world's largest. The Company already offers telecommunication services in Sri Lanka and Nepal, and has received the licence to be a strategic partner and investor in South Africa's Second National Operator (SNO). As of June 30, 2006, VSNL had 52 subsidiaries in 21 countries and about 25% of its employees are located outside Indian.

Meanwhile, in India, the Company continues to be the country's largest player in international telecommunication

services and has a strong pan-India domestic backbone. The Company is also a leading player in the Indian

enterprise data market, offering customers a range of telecommunication solutions, such as Private Leased

Circuits, Managed Data Networks and Virtual Private Network services. In the retail space, VSNL remains a

premier Internet Service Provider, offering a variety of services including connectivity, messaging and Internet

telephony. Having pioneered the use of the Internet in India, the Company is now a key player in India's emerging broadband revolution. VSNL has transformed itself over the last few years by reworking its strategies and repositioning itself. During the year, the Company completed the acquisition of the Tyco Global Network which is a robust network of international submarine cable systems and Teleglobe which was one of

the leading global long distance voice and wholesale data players. Domestically, the Company acquired Tata Power Broadband, now known as VSNL Broadband Limited, having about 1000 kilometres of optical fibre infrastructure in Mumbai and Pune; acquired the assets of 7 Star.com Pvt. Limited, a suburban cable operator in Mumbai offering broadband services and acquired Direct Internet Limited which provides internet and related services predominantly to small and medium sector enterprise customers. The Company's overall strategy remains to:

• Maintain its leadership in wholesale services with a global footprint, new products and enhanced service

levels.

• Diversify and de-risk its business model and ensure high growth, by expanding into high-potential newer

businesses like enterprise and carrier value added data and broadband services.

• Extend and strengthen its global presence in different ways, such as by delivering network and communication solutions globally, and by expanding into overseas telecom markets through Greenfield ventures or through acquisitions.

• Support all its businesses by selective and strategic expansion and modernisation of its state-of-the-art

infrastructure network.

• Fully leverage synergies with other Tata Group companies in the telecom and software sectors, to

give customers a range of end-to-end solutions.

• Continuously improve efficiency, competitiveness and customer satisfaction through initiatives such as

quality, cost rationalisation and profit enhancement.

OPERATIONAL REVIEW

The Company operates under three business segments inIndia - Wholesale Voice, Enterprise and Carrier Data and Other Services. VSNL's investments internationally are through its wholly owned subsidiary headquartered in

Singapore. The Company now has major operations spread across Singapore, Canada, the United States of America, the United Kingdom, France and other key commercial and strategically important locations across the globe.

WHOLESALE VOICE

The Company's largest revenue segment in India is the traditional wholesale voice business consisting of

International Long Distance (ILD) and National Long Distance (NLD) voice services.

International Long Distance (ILD) Voice

ILD voice services have been traditionally the core business of the Company. Over the last four years, the international telephony market in India has been pressured by increased competition, falling rates and lower margins. During 2005-06, VSNL acquired international wholesale voice serviceprovider Teleglobe International Holdings for an enterprise value of US$239 million. The Company has transformed itself from a single-country operator to a globally competitive, large-scale player, backed by assets that can support its businesses across the globe. VSNL is now among the top three wholesale voice providers in the world, and owns and operates world's one of the largest international networks with coverage to more than 240 countries and territories. The Company also has over 415 direct and bilateral relationships with leading international voice telecommunication providers and carries over 20 billion minutes of international wholesale voice traffic on annualised basis.

VSNL retains its position as India's top ILD services provider, offering telephone services to more than 200 international destinations. During 2005-06, international settlement rates (determining ILD services payments between telecom providers of different countries) remained more or less stable. However, both tariffs and interconnect rates (determining VSNL's revenues for international calls passed to or from other domestic telecom networks) declined, sustaining the pressure on margins.

During 2005-06, the Telecom Regulatory Authority of India (TRAI) reduced the Access Deficit Charge (ADC) on

incoming ILD calls from Rs.3.25 per minute to Rs.1.60 per minute and on outgoing ILD calls from Rs.2.50 per minute to Rs.0.80 per minute. However, from March 1, 2006 onwards, telecom operators must also pay a revenue share of 1.5% of the Adjusted Gross Revenue (AGR) towards ADC. Meanwhile, the Department of Telecommunications (DoT) relaxed the licence conditions for international and national long distance services, and reduced the entry fee for these businesses from Rs. 250 million and Rs. 1 billion respectively to Rs.25 million each, effective January 1,2006. The licence fee payable by all long distance service providers to the DoT has also been reduced to a uniform 6% of the AGR, effective January 1, 2006. These changes may serve to raise traffic volumes, although they also raise competitive pressures.

From February 13, 2004, VSNL ceased to be the preferred carrier for outbound traffic from the public sector access providers Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL). Despite this, during 2005-06, outgoing traffic volumes stayed at more or less the same level as in the previous year, while incoming traffic volumes increased by 67%.

This business is now characterised by increased competition and falling rates and margins, both in India

and internationally. Therefore, the Company's focus is on increasing volumes and thus revenues, while improving margins by cutting costs. VSNL is capitalising on its longstanding relationships with international carriers, offering them flexible solutions. The Company has signed interconnect agreements/arrangements with all domestic cellular service providers and private basic operators for direct termination and pick up of ILD traffic. Simultaneously, VSNL is restructuring its costs through negotiations with suppliers and carriers, better efficiencies, and reengineering of its networks. The Company is also in the process of offering higher margin and higher value services to improve profits in this segment. For example, VSNL is now a major player in the mobile signalling business globally, supplying wholesale services to mobile operators for their international roaming and messaging needs.

The Company believes that its strategic advantage in this business comes from its volumes, reach, and robust

networks, which are all difficult to replicate. A key concern in the ILD voice business is the illegal market

(please see Management Discussion and Analysis for a discussion of regulatory issues). In the past, VSNL had

undertaken major initiatives to combat grey traffic, supporting the enforcement authorities who have been

tracking and shutting down illegal operators.These efforts,if consistently enforced, will help to curb the grey market.

National Long Distance (NLD) Voice

In September 2002, the Company entered the NLD services market to offer national long distance services to

its customers, as a logical extension of its international telephony expertise. NLD services now account for a

significant component of VSNL's voice services, and volumes in this segment increased from 1.4 billion minutes

in 2004-05 to 2.9 billion minutes in 2005-06. From March 1, 2006, TRAI abolished the per-minute ADC of a uniform 30 paise per minute on all NLD calls; however, it introduced a revenue share-based ADC of 1.5% of the AGR. VSNL welcomes the reduction in ADC, which has contributed to a substantial increase in call volumes and benefits the end customer with lower tariffs.

The Company has a robust national network infrastructure and interconnect agreements with all basic and cellular mobile service operators in the country to carry NLD traffic to their networks. The delay in implementing Direct Customer Access mechanisms such as Carrier Access Code (CAC) or Carrier Pre-Selection (CPS) have resulted in VSNL continuing to be absent from the retail voice market. The Company is dependent on its relationships with access providers (fixedline and cellular) for wholesale long distance traffic. In this regard, the Company's equity investment in Tata Teleservices Ltd. (TTSL) has enabled VSNL to offer ILD and

NLD services to all subscribers of TTSL. This attempts to fill an important gap in VSNL's access to end customers.(Please see Management Discussion and Analysis for details.)

Calling Cards

The Company launched Tata Indicom calling cards in 2004. While the 'Global' calling card was targeted at Indian

outbound travellers and overseas residents, 'Hello Duniya' was aimed at Indian customers for cheaper and convenient NLD/ILD calling. VSNL stopped the 'Hello Duniya'outbound calling service in March 2005, as directed by TRAI on the grounds that only access providers (basic service license or unified access service license holders) can provide such services. In May 2006, the Telecom Dispute Settlement and Appellate Tribunal (TDSAT) rejected the Company's petition maintaining that VSNL cannot access subscribers directly and provide outbound calling cards under its NLD/ ILD license. The Company believes that calling cards are a

globally recognized mechanism for operators to offer retail long distance services, and in the absence of CAC / CPS, the only mechanism available to provide customers with choice in India. The Company is examining its option to appeal against this TDSAT ruling in the Supreme Court.

ENTERPRISE AND CARRIER DATA

The Indian enterprise data market continues to grow at an annualised rate of 60-70% each year. VSNL's Enterprise Business Unit serves large, mid-sized and small businesses, and its industry-specific solutions encompass banking and financial services, information technology/IT enabled services, industrial and distribution, pharma, petroleum, media and entertainment, travel, and Government verticals. With voice, data and video communications converging, the demand for enterprise data services is growing. In addition to international and national private leased circuits (IPLCs and NPLCs), the Company offers a wide

range of Internet Protocol (IP) services encompassing internet telephony, MPLS VPNs (Virtual Private Networks),

internet access, managed hosting and other data centre services, internet leased lines, mail and messaging services, video conferencing, website hosting services with security back-up and database management services and network management.

VSNL's telecom service offerings can be seamlessly integrated across products and geographies, and

customised to meet the varied requirements of the enterprise sector. The Company continues to extend its

reach in the main global markets to provide IP-VPN services. VSNL has progressed up the value chain to deliver

consulting and managed solutions to customers. During 2005-06, the Company significantly expanded its VPN and data centre offerings, establishing state-of-the-art Asynchronous Transfer Mode (ATM) and Multi Protocol

Label Switching (MPLS) networks.

VSNL also launched several new offerings. In November 2005, it introduced the Tata Indicom Web Conferencing

Service powered by the Microsoft Office Live Meeting Platform. Microsoft and VSNL also announced an alliance

to create rich solutions and services targeted at the enterprise, small and medium business and consumer

segments.

In July 2005, VSNL announced its intention to partner with Thomson, the leading technology and service provider in the media and entertainment space. The two companies will offer high quality services and new technologies to the Indian media and entertainment market and also explore opportunities in managing and delivering content for third parties, and developing end-to-end solutions for network operators as well as content management and distribution solutions.

To further strengthen its customer value proposition, VSNL partners with TCS and CMC, the software companies of the Tata Group, for integrated joint product and service offerings. VSNL also partners with TCS in the international market to leverage TCS's existing relationships with numerous Fortune 500 companies globally. The Company also markets its services through indirect channels catering to the small and medium enterprise market.

VSNL is extending its services beyond India to enterprises globally, through its subsidiaries in different geographies.The aim is to make inroads into the large and lucrative global market by developing differentiated services and offering competitive pricing. This is made possible by VSNL's low-cost global infrastructure, and by capitalizing upon its existing international organisation and employees for sales and marketing initiatives.

OTHER SERVICES

VSNL was the first company to introduce retail internet services in India in 1995. Since then, VSNL has been a

premier Internet Service Provider, offering a variety of services including connectivity, messaging and internet

telephony. VSNL is now a significant broadband player and is currently extending its broadband services infrastructure, including last mile connectivity and a content and services portal, across all major Indian cities.

Dial Up Internet Service

VSNL continues to lead the dial up market in India in terms of innovations and services for the customer, and offers services in 300 towns and cities. However, this business is undergoing fundamental changes, as higher-end users migrate to similarly-priced broadband services, while lowend users are being targeted by basic telephony operators who have direct access to customers and offer post-paid or pay-as-you-use services. VSNL's strategy in this segment is to retain customers with excellent service and value addition, while also capturing those that wish to convert to broadband.

Broadband Business

VSNL began offering broadband services in April 2004 soon after it acquired the narrowband and broadband business of Dishnet, and now serves 125,000 broadband and highspeed Internet customers in 43 cities. The Government's 2004 broadband policy estimates that India will have 20 million broadband subscribers by end-2010. During 2005-06, VSNL's broadband business grew by well over 100%, keeping pace with the industry's high growth. VSNL aims to be the forerunner in this service which offers great growth potential.

VSNL has licensed content and services from some of the best content owners in India and abroad, providing access to videos, live news, radio channels, feeds from religious institutions, over 4,200 education modules, more than 300,000 music downloads, online tests, games, e-books, mobile ring-tones and a host of other services. Additionally, for business users, VSNL offers services like domain registration, website hosting, Web2SMS, Mail SMS alerts and Bulk Web2SMS.

Last-mile access to the customer is a crucial factor in the success of a broadband business. Therefore, VSNL is

building a Metropolitan Area Network (MAN) in key cities and continues to evaluate and test newer access and

application technologies.

Wi-Fi and Cybercafes

VSNL is now one-of India's largest public broadband access providers, using Wi-Fi hotspots and a chain of cybercafes. (Wireless Fidelity or Wi-Fi enables computers, PDAs and other computing devices to use high speed Internet without any wires or cables, at places which are Wi-Fi enabled, called hotspots.) Today VSNL provides access at more than 100 hot spot locations across the country, including railway stations, airports, five star hotels, coffee shops and restaurant chains. VSNL is also tying up domestic and international roaming agreements, through which VSNL will provide public access to travellers into India and offer access to VSNL customers at around 50,000 hotspots internationally.

Internet Telephony

Effective April 2002, the Government of India permitted Internet Service Providers to offer voice telephony over

the Internet using the Voice over Internet Protocol (VoIP). VSNL has deployed its unique, fully owned internet

telephony infrastructure.This self-managed network allows VSNL to offer enhanced features, flexibility in billing and plans and superior voice quality. VSNL offers both corporate and retail net telephony services, complementing its voice business. Low tariffs in Internet telephony could encourage

usage and increase international call volumes.

INTERNATIONAL INITIATIVES

VSNL's international operations (VSNL International) are headquartered out of Singapore, through its wholly owned subsidiary, VSNL Singapore Pte. Limited (VSPL). As on 30 June 2006, the Company has 52 subsidiaries in 21 countries and has a direct operating presence with over 1000 employees in several countries in North America,

Europe and Asia, offering services to both wholesale and enterprise customers.VSNL International is rapidly growing its global footprint, with offices currently in Virginia, New Jersey, London, Paris, Madrid, Amsterdam, Frankfurt, Singapore and Tokyo. In a parallel international initiative, the Company also aims to leverage its expertise to operate telecom services in countries that are liberalising and opening up their telecom

markets. VSNL already participates in a Joint Venture that provides telecom services in Nepal and has a subsidiary which holds an External Gateway Operators licence in Sri Lanka. VSNL, as reported last year, will soon offer telecom services in South Africa through its participation in the Second National Operator (SNO) process.

VSNL Singapore Pte. Ltd. (VSPL)

The Company set up VSPL in January 2004 as a wholly owned subsidiary. VSPL manages and maintains the

Singapore landing for the Tata Indicom Cable (TIC). The company also acquires and sells other cable capacity

throughout the Asia Pacific region. VSPL has obtained the required FBO license from the Singapore authorities to

own and operate facilities used in the provision of telecom services. VSPL is also the holding company for all of VSNL's international operations, including TGN and Teleglobe.

Acquisition of Tyco Global Network

In July 2005, the Company completed the acquisition of TGN, a state-of-the-art undersea cable network that spans 60,000 kilometres (37,280 miles) and the continents of North America, Europe and Asia. With the acquisition of TGN for US$130 million, VSNL is now one of the world's largest submarine cable system owners, providing submarine cable bandwidth to its customers in multiple continents.

Acquisition of Teleglobe International Holdings Limited

In February 2006, the Company completed its acquisition of Bermuda-based Teleglobe International Holdings Ltd. VSNL will leverage Teleglobe's network and capabilities as part of its strategy to deliver key mobile, data and voice offerings to global enterprise customers. Teleglobe serves as the product brand for the voice, mobile and IP transit wholesale services. VSNL International is the product brand for the Company's wholesale IPL and ethernet offerings, as well as the full enterprise portfolio.

South Africa -Second National Operator (SNO)

In February 2005, the South African government selected a consortium of VSNL and Tata Africa Holdings Ltd., the investment arm of the Tata Group in South Africa, as the strategic investor in that country's proposed SNO structure. The equity partners in the SNO are Eskom, Transnet and Nexus and a holding company with 51% stake. VSNL will hold its stake in this holding company with two other private consortia. This new venture is allowed to provide domestic and international voice and data services, except mobile services. The SNO received its license in December 2005 and expects to make a business launch during the later part of 2006. The South African market is a large and exciting opportunity in its own right, and also provides a future gateway to the rest of Africa. VSNL SNOSPV Pte. Ltd., a wholly-owned subsidiary of VSNL incorporated in

Singapore, is the investment vehicle for all investments made by VSNL in the SNO venture.

VSNL Lanka Limited (VLL)

In June 2003, VSNL Lanka Ltd., a wholly owned subsidiary set up by VSNL in Sri Lanka, received an External Gateway Operator (EGO) licence.The EGO licence allows VLL to offer ILD voice and data services, which it began providing in February 2004. The Sri Lankan market, growing at an estimated 20%-25% every year, allows VSNL to increase its sub-continental presence and extend offerings in the region to international carriers. VLL has witnessed substantial growth in its very short existence. It was able to earn cash profits within the first six months of its operations and recorded net profits in the first year of its operations.

CUSTOMER SERVICE

VSNL has transformed itself into a customer-focused organisation. The charter of the Customer Service

Organization is to support the entire customer life cycle from service delivery to service assurance, including

retention and growth. To support VSNL's international presence, the Company is defining and implementing stringent service delivery standards that adhere to global best practices. In addition, VSNL has created a dedicated team to bring focus to its relationship with other carrier partners. In order to support the enterprise and international business functions, VSNL has established a centralized 24x7 call centre. Retail and broadband customers are supported by two other outsourced call centres. The organisation is also providing its expertise in setting up the entire customer service function including customer impacting processes and systems, to support the SNO initiative in South Africa.

INFRASTRUCTURE

One of the biggest strengths of the Company is its global, robust, scalable network, with the unique advantage of

diversity and multiple connectivity options internationally. The Company operates a total of 26 switches: 5

international gateway switches and 21 NLD switches. VSNL has over 50 earth stations, ownership in over 100 sub-sea and terrestrial cable systems with 200,000 kilometres of fibre and cable, 275 points of presence in 25 countries and access to five geo-stationary satellites. The Company also has seven data centres globally.

Tata Indicom Cable (TIC)

In March 2005, VSNL operationalised its own Tata Indicom Cable (TIC). The state-of-the-art 3,100 km submarine cable system between Chennai and Singapore is VSNL's first fully owned undersea cable with an initial capacity of 320 gigabits per second that can be ultimately scaled up to 5.12 terabits pet second. With an estimated life of 25 years,the new cable enhances significantly India's connectivity into the Asia-Pacific region and the U.S, via the Pacific.

SEA-ME-WE4

VSNL is one of the founding members of SEA-ME-WE4, a consortium of 16 parties that has set up a cable system between France and Singapore with Mumbai as one of the landing points.The cable has a design system capability of 1.28 terabits per second with initial capacity of 160 gigabits per second. This system has an estimated life of 25 years. This new cable enhances significantly India's connectivity into the Asia-Pacific region, Middle East, Europe and the U.S, both via the Atlantic and the Pacific Ocean. VSNL has been assigned the crucial responsibility of network administration and the operation of the centralised network operating centre located at Mumbai to manage the entire system, thereby giving credibility to the Company's skills and technical expertise. The system was inaugurated for service in November 2005.

VSNL is already utilising SEA-ME-WE2, SEA-ME-WE3, SAFE, FLAG and TIC submarine cable systems as part of its international network out of India.

VSNL's submarine cable landing stations in India are integrated with its domestic NLD network and provide customers with a choice of bandwidth options. VSNL offers redundancy on the intra Asia, Trans Pacific, Trans Atlantic, continental Europe and U.S long distance routes. VSNL also benefits from mutual restoration agreements between cable systems in which it participates.These arrangements help reduce or eliminate the cost of restoration, driving down the cost to customers and increasing reliability and customer service. A cable restoration agreement for VSNL's TIC cable with i2i, a parallel Chennai-Singapore cable, came into force in June 2005.

NLD Backbone

VSNL's domestic long distance network infrastructure includes a 37,000 kilometre fibre optic network and a new

MPLS based IP VPN backbone linking over 120 points of presence, which is integrated with the Company's

international MPLS network thereby enabling multinational companies to seamlessly connect deep into India. The Company has rolled out its metro ethernet services in eight major cities.

Last Mile

In view of the fact that the last mile was not readily available, in order to be able to provide IP VPN services to

corporate clients as a part of its ISP offering the Company has invested substantially in Wireless last mile on

Multipoint Microwave Distribution System(MMDS) technology and fiber as well as through arrangements with

cable operators to provide broadband services. In view of the recent amendments in the telecom licenses, the IP VPN services have now become a part of the NLD license and the MMDS as well as the other last mile network can now be utilised for providing services under the NLD license.

Another significant change brought about by the amendment is that the NLD service provider is permitted

to make its own arrangements for laying the last mile to serve its customers directly for provision of leased circuits

and CUG's, which was hitherto not permitted. This amendment removes a major hurdle in terms of availability

of the last mile to VSNL

INDUSTRY ANALYSIS

The Indian telecom industry has changed significantly over the last decade with all its segments opening to

competition. This market is now highly competitive, complex and evolving rapidly, with numerous service

offerings of different kinds, including fixed-line, mobile, internet, long distance and various data services. India's

telecom market is growing rapidly and by 2010, telecom is expected to be a Rs. 1,380 billion sector, contributing

5.4% to India's GDP.

According to the latest figures from TRAI, during 2005-06, the mobile subscriber base increased approximately 73%, from 52 million to over 90 million, while the fixed subscriber base increased approximately 8% from 46

million to 50 million. During the year, the subscriber base for internet services grew 25%, from 5.5 million to 6.94

million. Broadband subscribers exceeded 1.3 million as on March 31, 2006. STD charges fell substantially after

announcement of new Interconnect Usage Charge (lUCs) with effect from March 1,2006, international private leased circuit charges dropped by between 35-70%, and broadband tariffs fell by 40-50%. The rapid growth in this

market, combined with falling tariffs, offers great potential demand for various services of VSNL.

DEMERGER OF SURPLUS LAND

Under the terms of the share purchase and shareholders' agreements signed between the parties at the time of

privatisation, it was agreed that certain identified lands would be demerged into a separate company. It was

further agreed that if for any reason the Company cannot hive off or demerge the land into a separate entity, alternative courses as stipulated in the share purchase and shareholders' agreement would be explored. A draft scheme of demerger has been presented to the VSNL Board, and the parties to the shareholders' agreement are currently examining the legality and feasibility of implementing the scheme. The land identified for demerger at different locations measures 773.13 acres, and carries a book value (as indicated in the accounts) of Rs.1.64 million.

IMPORTANT HISTORICAL EVENTS AT VSNL

Disinvestment

VSNL ceased to be a Public Sector Undertaking (PSU) on February 13, 2002 when the Government of India, which owned 52.97% of VSNL's equity, divested 25% stake to the Tata Group as a strategic partner along with the right to manage the Company. Following its subsequent open offer for a further 20% of VSNL's equity, the Tata Group is the Company's biggest shareholder with a holding of over 45% as of June 30, 2006, while Gol is VSNL's second-largest shareholder with a 26.12% stake.

Investment in TTSL

In 2002, VSNL was entirely dependent on the public sector incumbent access providers and other cellular and basic service providers to route their traffic through VSNL. It became imperative for VSNL to acquire an end-customer base of its own. The VSNL Board had accordingly decided to invest in Tata Teleservices Ltd. (TTSL). At the time the investment was approved, TTSL was present in crucial telecom circles across India that yielded over 65% of the country's telecom revenues. TTSL has subsequently taken additional licences that will give it nation-wide coverage. VSNL's investment in TTSL now gives the Company substantial access to end customers across the entire country. VSNL's total investment in TTSL's equity as on March 31, 2006 stood at Rs.10.11 billion (16.14%). VSNL's effective holding in TTSL stands at 14.14% as of March 31, 2006.

Fixed Assets:

Land

Buildings

Plant and Machinery

Furniture and Fixture

Office Equipments

Motor Vehicles

Good will

Related Party Disclosures

(a) List of related parties and relationship:

I. Investing party

Panatone Finvest Limited

II. Subsidiaries (Held directly)

VSNL Broadband Limited

VSNL America Inc.

VSNL Lanka Ltd

VSNL Singapore Pte. Ltd.

VSNL SNOSPV Pte. Ltd

III. Other Subsidiaries (Held indirectly)

VSNL UK Ltd

VSNL Netherlands BV

VSNL Bermuda Ltd

VSNL Japan K.K

VSNL Telecommunications (Bermuda) Ltd.

VSNL Hong Kong Ltd

ITXC Global Japan YK

ITXC IP Holdings S.a.r.l

Teleglobe America Inc

Teleglobe Asia Data Transport Pte. Ltd

Teleglobe Asia Pte. Ltd

Teleglobe Bermuda Ltd.

Teleglobe Canada ULC

Teleglobe France International S.A.S

Teleglobe International Belgium S.P.R.L

Teleglobe International Hong Kong Ltd

Teleglobe International Ltd

Teleglobe International Luxembourg S.a.r.l

Teleglobe Italy S.r.l

Teleglobe Netherlands B.V

Teleglob Spain Communications S.L

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.)

TLGB International Germany GmbH

TLGB Luxembourg Holdings S.a.r.l

TLGB Netherlands Holdings B.V

VSNL (Portugal) Unipessoal Limitada

VSNL Belgium BVBA

VSNL France SAS

VSNL International (Nordics) AS

VSNL International (Global) Corp.

VSNL International (Guam) Lie

VSNL International (Portugal) Instalacao e Manutencao de Redes LDA

VSNL International (US) Inc

VSNL International Australia Pty. Ltd

VSNL International GBRM Ltd

VSNL International IPCO LLC

VSNL International Puerto Rico Inc

VSNL International (ITXC) Corp.

VSNL International(Poland) Sp. Zo.o

VSNL Spain Sri

VSNL Telecommunications(UK) Inc

VSNL(Germany) GMBH

ITXC Global UK Ltd.

ITXC Global Zagreb d.o.o

Enhanc d Services Inc

ITXC (U)Ltd.

ITXC Global HongKong Ltd.

IV. Joint Venture

United Telecom Limited

V. Joint Venture of wholly owned subsidiary

SEPCO Communications Pty. Ltd.

SNO Telecommunications (Pty) Ltd. (Subsidiary of SEPCO)

VI. Key Managerial Personnel

N.Srinath - Executive Director

The company is in collaboration with :-

Cable and Wireless

IBM Global Services

Tele Media International Limited

Global One

British Telecom

AS PER WEBSITE

Press Releases

Connect to the world …as Sachin connects a six

Now Tata Indicom Wi-Fi Service in Chinnaswamy stadium at speeds that fast bowlers round the world envy Bangalore, November 16, 2005: As India takes on South Africa at Chinnaswamy Stadium, watch the pace heating up. And it’s not just the cricket they are talking about. KSCA is getting all wired up or should they say Unwired – with blazing Internet speeds using wireless aka Wi-Fi technology.

All across the world, people now want to be connected anytime, anywhere to the Internet – be it while waiting to catch a flight at the airport or the airport lounge, while having a cup of coffee and refreshments at a coffee shop, anywhere in a hotel or while enjoying the sea breeze on the promenade.

VSNL, the company that pioneered Internet in India, alongwith Karnataka State Cricket Association, are now taking this to an even higher keel by offering Wi-Fi Service at the Chinnaswamy Cricket stadium in Bangalore.

As per the agreement between the two sides, VSNL will offer Tata Indicom Wi-Fi Service for five years at the stadium. The service will be launched on Nov 19, 2005 during the 2nd ODI between India and South Africa and shall be available at the club house, guest rooms and conference halls and also at the corporate boxes and press enclosure at the stadium.

“VSNL has always believed in continuous innovation to serve the customer. Staying “always connected” is one of the imperatives of the globalized world and what better place than Bangalore, the city that is spearheading India’s IT revolution to espouse that.

KSCA also has been a pioneer in offering state of the art facilities and comforts to patrons, journalists, the various corporate boxes and special events that are organized around international cricket. During such events, the journalists and corporate community now have the additional advantage of always being connected. They are

extremely happy to associate with KSCA in offering this service,” Shashi Kalathil – COO, Retail & Broadband Business, VSNL said. KSCA’s Hon.Secretary, Brijesh Patel said, “They are always looking at ways to offer the

best and latest to our patrons & they are very excited to be the first stadium in India to offer wireless Internet on a permanent basis. It is a delight to associate with VSNL and the Tata Group in offering this service.”

VSNL & Microsoft launch Web Conferencing Service

Mumbai, November 22 2005 – Making a foray into the Web Conferencing market, Videsh Sanchar Nigam Ltd (VSNL) today unveiled the Tata Indicom Web Conferencing Service based on the Microsoft Office Live Meeting Platform. Addressing media at a press conference held in the city today, Mr. Kishor Chaukar, Managing Director, Tata Industries & Director, VSNL and Ms. Neelam Dhawan, Managing Director Microsoft Corporation India Pvt. Ltd. also announced a strategic alliance to address the emerging communication needs of the enterprise, SMB and consumer segments. Under the alliance, VSNL will combine its vast communications network with Microsoft software to create rich solutions and services targeted at these segments. VSNL and Microsoft will also undertake joint Go to Market initiatives to evangelize and market these offerings in the target segments. VSNL Director, Mr. Kishor A Chaukar said “Armed with the combined strength of VSNL & Microsoft Office Live Meeting, their endeavour will be to deliver the next generation of real time communication to enterprises in India. Their latest offering will enable their customers to meet the twin objectives of enhancing team communication and reducing travel time. This alliance is in keeping with their objective of offering end-to-end managed services to their customers.”

Commenting on the partnership, Ms. Neelam Dhawan, Managing Director, Microsoft India said, “Delivering software as a service is key to improving access to IT, and ensuring that Indian enterprises and consumers can realize the benefits of technology. A few years ago, it would have been impossible to think of deriving synergies

between the telecom and IT industries. The rapid growth of telecom networks, and adoption of IT – is fostering a marketplace that is ready for converged solutions.” “VSNL is one of India’s leading telecom service providers with a strong foothold in the enterprise segment. The launch of the Tata Indicom Web Conferencing Service, powered

by Microsoft Office Live Meeting is an example of the powerful converged solutions that such a partnership can provide.”

A cost-saving alternative to business travel, Tata Indicom Web Conferencing will make it easy for information workers in the SMB and enterprise, to conduct real-time, highly interactive and visually rich online meetings. It is a hosted software solution that minimizes infrastructure and setup requirements and lets people collaborate and share information regardless of location. To use this service, all that is required is a PC and an

intern et connection, and users will easily be able to exchange data such as presentations and documents etc. and conduct virtual meetings from anywhere in the world.

The service is based on the Microsoft Office Live Meeting - a global web conferencing service that is being used by business across the world to communicate efficiently, and reduce costs. In fiscal year 2004, Microsoft used Live Meeting to replace one in five business trips and saved over 40 million dollars worldwide. In fiscal year 2005, Microsoft Corporation expects to save US$ 75 million by using Live Meeting.

VSNL’s Executive Director N Srinath named

Telecom Asia’s CEO of the Year

Mumbai, April 24, 2006: In a significant honour, VSNL’s Executive Director, Mr. N Srinath has been named the ‘Telecom CEO of the Year’ by the leading publishing group, Telecom Asia in the 2006 edition of their awards.

Mr. Srinath received the special trophy at a glittering ceremony in Phuket, Thailand today.

The 2006 Telecom Asia award has been given in recognition of Mr. Srinath’s role in transforming VSNL from a domestic monopoly to a major global telco in just four years. This makeover was achieved at a time when the Indian telecommunications market was becoming de-regulated and fiercely competitive.

In February 2002 when the Tata Group became the Strategic Partner in VSNL through the Indian Government’s disinvestment programme, the company had a monopoly in the International Long Distance (ILD) market. This monopoly was terminated two years ahead of schedule in April 1, 2002, which led to VSNL reinventing its business model and entering several new businesses, both in India and overseas.

“It is an honor to receive this award which is a recognition of the great strides that VSNL has made in the last few years in re-inventing itself to compete in a global marketplace. I am pleased to accept this on behalf of all the people who have helped make this happen,” Mr. N Srinath said while accepting the award.

Robert Clark, chairman of the judging panel and Telecom Asia Editor-at-Large, said: "In the last four years, VSNL has made the transition from monopoly carrier in a developing market into one of the world’s foremost global bandwidth providers and wholesale carriers. This award recognizes Mr Srinath's leading role in driving that change."

The Telecom Asia Awards across various categories for both individuals and companies are the most prestigious honors program in Asian telecommunications and have been presented annually since 1998. The award winners were chosen on their combined financial, market and technology strengths based on the financial analysis and

assessments of a 19-member judging panel.

The financial analysis of the carriers was conducted by a research team at IDC, a leading provider of global ICT research and advice, drawing on its extensive communications research expertise across Asia-Pacific.

Mr Srinath, 43, is a mechanical engineer from the Indian Institute of Technology (IIT), Chennai and an MBA from the Indian Institute of Management, Kolkata. Mr. Srinath joined the Tata Administrative Services in 1986 and has held positions in the project management, sales and marketing, and corporate functions in different Tata companies over the last 20 years. He has been responsible for setting up new projects in hightechnology

areas like process automation and control, computers and telecommunications.

After his probation, he was a project executive in Tata Honeywell from 1987 to 1988, working on getting various approvals and the necessary project funding. He then moved to Tata Industries as Executive Assistant to the Chairman, an assignment he handled till mid-1992. He was part of the team that set up Tata Information Systems (later Tata IBM). In June 1992 he moved into that company full-time for the next six years, during

which period he handled a number of assignments in sales and marketing. In March 1998, he returned to Tata Industries as General Manager (Projects) and worked with Tata Teleservices in this capacity for a year. In April 1999, he moved to Hyderabad as Chief Operating Officer responsible for the operations of the Tata Teleservices. In late 2000 he took over as chief executive officer of Tata Internet Services, a position he held

till February 2002, when he moved to VSNL as Director (Operations) and subsequently became Executive Director.

About Telecom Asia

Telecom Asia is Asia's largest regional telecom publishing group. It publishes the magazines Telecom Asia, Wireless Asia and Telecom China and www.telecomasia.net, aimed at telecommunications professionals around the region. Combined, these titles serve 108,000 subscribers.

About VSNL

Videsh Sanchar Nigam Limited (VSNL), a part of the Tata Group, is a leading international telecommunications company. VSNL has, with the acquisition of Teleglobe, become one of the world’s largest carriers of international voice complementing its emergence as the largest provider of submarine cable bandwidth. VSNL has a global

presence including operations in USA, Canada, UK, South Africa, Singapore, Sri Lanka and India making it the first Indian truly global telecommunications company. Its range of service offerings include wholesale voice, private leased circuits, IP MPLS VPN, Internet access, hosting, mobile signaling and several other IP services. The company is now poised to offer managed data services and deliver end-to-end telecommunications

solutions to carriers and enterprises globally. VSNL, a pioneer in offering Internet services to individual customers now offers a full slew of retail products in India like highspeed broadband, dial-up Internet, Wi-FI, net telephony and calling cards under the Tata Indicom brand name, and continues to be one of the leading retail Internet players in India.

VSNL is listed on the major stock exchanges in India and also has its ADRs listed on the New York Stock Exchange. (www.vsnl.in)

Forward-looking and cautionary statements

Certain words and statements in this release concerning VSNL and its prospects, and other statements relating to VSNL’s expected financial position, business strategy, the future development of VSNL’s operations and the general economy in India, are forward-looking statements. Such statements involve known and unknown risks, uncertainties and other factors, which may cause actual results, performance or achievements of VSNL, or industry results, to differ materially from those expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions

regarding VSNL’s present and future business strategies and the environment in which VSNL will operate in the future. The important factors that could cause actual results, performance or achievements to differ materially from such forward-looking statements include, among others, changes in government policies or regulations of India and, in particular, changes relating to the administration of VSNL’s industry, and changes in general economic, business and credit conditions in India. Additional factors that could cause actual results, performance or achievements to differ materially from such forward-looking statements, many of which are not in VSNL’s control, include, but are not limited to, those risk factors discussed in VSNL’s various filings with the United States Securities and Exchange Commission. These filings are available at www.sec.gov.

Videsh Sanchar Nigam Ltd (VSNL) has announced that the Company & GFA India (which owns the brand Pizza Corner and Coffee World) have entered into a tie up to provide Tata Indicom Wi-Fi Service in all 500 outlets that GFA India plans to roll-out across the country over the next five years.

Customers can now walk into any Pizza Corner or Coffee World outlet & experience the internet on their laptop or Wi-Fi enabled PDAs at blazing speeds. They can download mails in a matter of seconds, upload heavy presentations in the blink of an eye. And not only that, users can download music, watch movies and the latest videos, play games, share ideas and much more. And all of this is made possible by Tata Indicom Wi-Fi Service.

"They recognize the growing need of their consumers to be connected — anytime and anywhere. At VSNL, they are constantly trying to meet evolving consumer needs by providing connectivity and new experiences for their customers. Tata Indicom Wi-Fi Service ensures that people can spend their time more productively and do their work more efficiently, wherever they may be. And with GFA’s commitment to providing more than just a dining experience to their customers, this fits in perfectly", said Shashi Kalathil, President, Broadband and Retail Business Unit of the Company.

They are very excited to be providing Tata Indicom Wi-Fi Service to their customers. As they expand their footprint across the country, they endeavour to provide enhanced customer experience through value added services.

They are sure that this tie up will delight their customers over a great cup of coffee or a slice of pizza,” said Mr. Anoop Sequeira, CEO, GFA India Pvt Ltd.

About Wi-Fi: Wireless Fidelity (Wi-Fi) enables computers, PDAs and other computing devices to use high speed internet without the need for any wires or cables. This service can be availed at places which are Wi-Fi enabled and in common parlance, called “hotspots”.

About VSNL Videsh Sanchar Nigam Limited (VSNL) is a leading provider of International Telecommunications Services. VSNL is India's largest player in International Long Distance services and has a strong pan-India domestic Long Distance presence. VSNL is also a leading player in the Corporate Data Market in India today with a strong service offering covering IPLCs, ILLs, Frame relay, ATM and MPLS based IP-VPN services. VSNL has a strong infrastructure base that covers multiple submarine cable systems, switching gateways, IP PoPs and earth stations.

With its recent acquisition of Tyco's global submarine network, VSNL provides seamless connectivity across the globe to carriers and enterprises. VSNL has 30 Points of Presence in 12 countries in North America, Europe and Asia. VSNL also has business operations in Sri Lanka and Nepal and is soon entering South Africa.

In India, VSNL is rapidly growing its retail presence under the Tata Indicom brand through its products like high-speed broadband, dial-up Internet, wi-fi, net telephony and calling cards. VSNL is consolidating its presence in the Internet space with an increased focus on the Retail Broadband business. VSNL is listed on the major stock exchanges in India and also has its ADRs listed on the New York Stock Exchange.

Forward-looking and cautionary statements Certain words and statements in this release concerning VSNL and its prospects, and other statements relating to VSNL’s expected financial position, business strategy, the future development of VSNL’s operations and the general economy in India, are forwardlooking statements. Such statements involve known and unknown risks, uncertainties and other factors, which may cause actual results, performance or achievements of VSNL, or industry results, to differ materially from those expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding VSNL’s present and future business strategies and the environment in which VSNL will operate in the future. The important factors that could cause actual results, performance or achievements to differ materially from such forward-looking statements include, among others,

CMT REPORT (Corruption, Money Laundering & Terrorism]

The Public Notice information has been collected from various sources including but not limited to: The Courts, India Prisons Service, Interpol, etc.

1] INFORMATION ON DESIGNATED PARTY

No records exist designating subject or any of its beneficial owners, controlling shareholders or senior officers as terrorist or terrorist organization or whom notice had been received that all financial transactions involving their assets have been blocked or convicted, found guilty or against whom a judgement or order had been entered in a proceedings for violating money-laundering, anti-corruption or bribery or international economic or anti-terrorism sanction laws or whose assets were seized, blocked, frozen or ordered forfeited for violation of money laundering or international anti-terrorism laws.

2] Court Declaration :

No records exist to suggest that subject is or was the subject of any formal or informal allegations, prosecutions or other official proceeding for making any prohibited payments or other improper payments to government officials for engaging in prohibited transactions or with designated parties.

3] Asset Declaration :

No records exist to suggest that the property or assets of the subject are derived from criminal conduct or a prohibited transaction.

4] Record on Financial Crime :

Charges or conviction registered against subject: None

5] Records on Violation of Anti-Corruption Laws :

Charges or investigation registered against subject: None

6] Records on Int’l Anti-Money Laundering Laws/Standards :

Charges or investigation registered against subject: None

7] Criminal Records

No available information exist that suggest that subject or any of its principals have been formally charged or convicted by a competent governmental authority for any financial crime or under any formal investigation by a competent government authority for any violation of anti-corruption laws or international anti-money laundering laws or standard.

8] Affiliation with Government :

No record exists to suggest that any director or indirect owners, controlling shareholders, director, officer or employee of the company is a government official or a family member or close business associate of a Government official.

9] Compensation Package :

Our market survey revealed that the amount of compensation sought by the subject is fair and reasonable and comparable to compensation paid to others for similar services.

10] Press Report :

No press reports / filings exists on the subject.

CORPORATE GOVERNANCE

MIRA INFORM as part of its Due Diligence do provide comments on Corporate Governance to identify management and governance. These factors often have been predictive and in some cases have created vulnerabilities to credit deterioration.

Our Governance Assessment focuses principally on the interactions between a company’s management, its Board of Directors, Shareholders and other financial stakeholders.

CONTRAVENTION

Subject is not known to have contravened any existing local laws, regulations or policies that prohibit, restrict or otherwise affect the terms and conditions that could be included in the agreement with the subject.

FOREIGN EXCHANGE RATES

Currency	Unit	Indian Rupees
US Dollar	1	Rs.41.99
UK Pound	1	Rs.84.22
Euro	1	Rs.57.22

SCORE & RATING EXPLANATIONS

SCORE FACTORS	RANGE	POINTS
HISTORY	1~10	9
PAID-UP CAPITAL	1~10	8
OPERATING SCALE	1~10	7
FINANCIAL CONDITION
--BUSINESS SCALE	1~10	6
--PROFITABILIRY	1~10	5
--LIQUIDITY	1~10	7
--LEVERAGE	1~10	7
--RESERVES	1~10	9
--CREDIT LINES	1~10	8
--MARGINS	-5~5	--
DEMERIT POINTS
--BANK CHARGES	YES/NO	YES
--LITIGATION	YES/NO	NO
--OTHER ADVERSE INFORMATION	YES/NO	NO
MERIT POINTS
--SOLE DISTRIBUTORSHIP	YES/NO	NO
--EXPORT ACTIVITIES	YES/NO	NO
--AFFILIATION	YES/NO	YES
--LISTED	YES/NO	YES
--OTHER MERIT FACTORS	YES/NO	YES
TOTAL		66

This score serves as a reference to assess SC’s credit risk and to set the amount of credit to be extended. It is calculated from a composite of weighted scores obtained from each of the major sections of this report. The assessed factors and their relative weights (as indicated through %) are as follows:

Financial condition (40%) Ownership background (20%) Payment record (10%)

Credit history (10%) Market trend (10%) Operational size (10%)

RATING EXPLANATIONS

RATING		STATUS	PROPOSED CREDIT LINE
>86	Aaa	Possesses an extremely sound financial base with the strongest capability for timely payment of interest and principal sums	Unlimited
71-85	Aa	Possesses adequate working capital. No caution needed for credit transaction. It has above average (strong) capability for payment of interest and principal sums	Large
56-70	A	Financial & operational base are regarded healthy. General unfavourable factors will not cause fatal effect. Satisfactory capability for payment of interest and principal sums	Fairly Large
41-55	Ba	Overall operation is considered normal. Capable to meet normal commitments.	Satisfactory
26-40	B	Unfavourable & favourable factors carry similar weight in credit consideration. Capability to overcome financial difficulties seems comparatively below average/normal.	Small
11-25	Ca	Adverse factors are apparent. Repayment of interest and principal sums in default or expected to be in default upon maturity	Limited with full security
<10	C	Absolute credit risk exists. Caution needed to be exercised	Credit not recommended
NR		In view of the lack of information, we have no basis upon which to recommend credit dealings	No Rating

PRIVATE & CONFIDENTIAL : This information is provided to you at your request, you having employed MIPL for such purpose. You will use the information as aid only in determining the propriety of giving credit and generally as an aid to your business and for no other purpose. You will hold the information in strict confidence, and shall not reveal it or make it known to the subject persons, firms or corporations or to any other. MIPL does not warrant the correctness of the information as you hold it free of any liability whatsoever. You will be liable to and indemnify MIPL for any loss, damage or expense, occasioned by your breach or non observance of any one, or more of these conditions