MIRA INFORM REPORT

Report Date :

25.03.2008

IDENTIFICATION DETAILS

Name :	TATA COMMUNICATIONS LIMITED

Registered Office :	LVSB, Kashinath Dhuru Marg, Prabhadevi, Mumbai – 400028, Maharashtra

Country :	India

Financials (as on) :	31.03.2007

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 :

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 254380000

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 :	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 satish.ranade@vsnl.co.in
Website :	http://www.vsnl.com http://www.internet.vsnl.net.in

Corporate Office 1 :	Videsh Sanchar Bhavan, Mahatma Gandhi Road, Mumbai; 400001, Maharashtra, India
Tel No.:	91-22-2624020
Fax No.:	91-22-2624027
E-Mail :	Satish.ranade@vsnl.co.in

Regional Office :	Mumbai, Maharashtra Chennai, Tamilnadu Kolkata, West Bengal New Delhi

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
Date of Birth/Age :	30.03.1942
Qualification :	B.E. (Mech.)
Date of Appointment :	15.05.2002
Other Directorship Held:	Wartsila India Limited Tata Steel Limited Samtel Colour Limited Rane engine Valves Limited Samcor Glass Limited TRF Limited Carborundam Universal Limited GlaxoSmithKline Consumer Healthcare Limited Batiliboi Limited SRF Limited DCM Engineering Limited Power Finance Corporation Limited

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 :	B.E. (Mech), MBA
Date of Appointment :	13.02.2002 (Appointed as Managing Director on 02.02.2007)
Other Directorship Held:	Tata Teleservices Limited VSNL Global Services Limited

Name :	Mr. Kishor Chaukar
Designation :	Panatone Nominee
Date of Birth/Age :	01.08.1947
Qualification :	B.A. (Eco) – Karnataka University PGDBA (Indian Institute of Management, Ahmedabad) DEA – Rural Economics – University of Dijon, France
Date of Appointment :	01.07.2002
Other Directorship Held:	Tata Industries Limited Tata Advanced Materials Limited Tata Teleservices Limited Tata Autocomp Systems Limited IDFC Private Equity Company Limited Tata Investment Corporation Limited EZE SerWiz Solutions Limited Tata Petrodyne Limited TSR Darashaw Limited

Name :	Mr. Pankaj Agrawal
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. Parmeshwaran
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

Name :	Mr. Vinod Kumar
Designation :	Director
Date of Birth/Age :	14.12.1965
Qualification :	B.E. (Hons), MBA
Date of Appointment :	02.02.2007
Other Directorship Held:	VSNL Global Services Limited

Name :	Mr. S. Ramadorai
Designation :	Director
Date of Birth/Age :	06.10.1944
Qualification :	Bachelor’s degree in Physics from Delhi University Bachelor’s degree in electronics and Telecommunications from IISC Bangalore Master’s degree in Computer Science from University of California, USA
Date of Appointment :	28.06.2007
Other Directorship Held:	Tata Industries Limited Tata Elxsi Limited Tata Technologies Limited WTI Advanced Technology Limited Aviation Software Development Consultancy India Limited CMC Limited Hindustan Unilever Limited Nicholas Piramal India Limited Tata Consultancy Services Limited Tata Teleservices Limited C-Edge Technologies Limited Tata Teleservices (Maharashtra) Limited

KEY EXECUTIVES

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

Name :	Mr. Rajiv Dhar
Designation :	Chief Financial Officer

MAJOR SHAREHOLDERS / SHAREHOLDING PATTERN

(As on 31.03.2007)

Names of Shareholders	No. of Shares	Percentage of Holding
Promoters
Tata Group:
Panatone Finvest Limited	115988857	40.70
Tata Sons Limited	24260497	8.51
The Tata Power Company Limited	2575837	0.90

Central Government	74446885	26.12

Non-Promoters
Indian Public Financial Institutions	31988206	11.22
Indian Nationalized Banks	341893	0.12
Foreign Financial Institutions	8076944	2.83
Foreign Companies (shares held by the Bank of New York as depository for ADRs)	17608384	6.18
Non-resident individuals / Overseas Corporate Bodies	149617	0.05
Other Indian Bodies Corporate	2306837	0.81
Indian Public	7256043	2.56

Total	285000000	100.00

BUSINESS DETAILS

Line of Business :

Providing Telecommunication and Internet Services.

Products :

Product Description:

International Telecommunications Services

GENERAL INFORMATION

No. of Employees :	2926

Bankers :	CITI Bank Inc. Indian Overseas Bank Standard Chartered Bank HDFC Bank Hongkong and Shanghai Banking Corporation State Bank of India ICICI Bank Limited.

Facilities :	Unsecured Loan – As on 31.03.2007 Short Term Loans From Banks - Rs.1976.100 Millions


Banking Relations :	Good

Auditors :
Name :	S.B. Billimoria and Company Chartered Accountants
Other Subsidiary (held indirectly )	VSNL Lanka Limited VSNL Singapore Private 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.10.00 each	Rs.3000.000 Millions

Issued, Subscribed & Paid-up Capital :

No. of Shares	Type	Value	Amount

285000000	Equity shares	Rs.10.00 each	Rs.2850.000 Million

FINANCIAL DATA

[All figures are in Rupees Millions]

ABRIDGED BALANCE SHEET

SOURCES OF FUNDS		31.03.2007	31.03.2006	31.03.2005
SHAREHOLDERS FUNDS
1] Share Capital		2850.000	2850.000	2850.000
2] Share Application Money		0.000	0.000	0.000
3] Reserves & Surplus		60745.000	57761.671	54430.468
4] (Accumulated Losses)		0.000	0.000	0.000
NETWORTH		63595.000	60611.671	57280.468
LOAN FUNDS
1] Secured Loans		0.000	0.000	0.000
2] Unsecured Loans		1976.100	982.501	0.000
TOTAL BORROWING		1976.100	982.501	0.000
DEFERRED TAX LIABILITIES		716.800	750.926	996.796

TOTAL		66287.900	62345.098	58277.264

APPLICATION OF FUNDS

FIXED ASSETS [Net Block]		31541.700	30085.546	23470.282
Capital work-in-progress		3404.400	1478.094	5131.681

INVESTMENT		26735.800	24993.393	12005.839
DEFERREX TAX ASSETS		0.000	0.000	0.000

CURRENT ASSETS, LOANS & ADVANCES
	Inventories	47.200	38.019	19.651
	Sundry Debtors	9551.900	7375.710	6089.452
	Cash & Bank Balances	1043.100	2568.815	14091.243
	Other Current Assets	1047.500	983.025	507.201
	Loans & Advances	11477.500	13063.532	14892.865
Total Current Assets		23167.200	24029.101	35600.412
Less : CURRENT LIABILITIES & PROVISIONS
	Current Liabilities	15856.900	15674.824	15279.229
	Provisions	2704.300	2566.212	2651.721
Total Current Liabilities		18561.200	18241.036	17930.950
Net Current Assets		4606.000	5788.065	17669.462

MISCELLANEOUS EXPENSES		0.000	0.000	0.000

TOTAL		66287.900	62345.098	58277.264

PROFIT & LOSS ACCOUNT

PARTICULARS		31.03.2007	31.03.2006	31.03.2005
Sales Turnover		0.000	0.000	0.000
Other Income		42540.100	40097.273	34104.423
Total Income		42540.100	40097.273	34104.423

Profit/(Loss) Before Tax		7126.300	6867.173	10539.823
Provision for Taxation		2440.700	(2071.753)	2976.149
Profit/(Loss) After Tax		4685.600	4795.420	7563.674

Earnings in Foreign Currency :
	Revenues from telecommunication services	17390.500	16938.734	0.000
	Profit on sale of long-term investments	0.000	0.000	0.000
	Interest Income	90.000	106.157	0.000
	Other	110.700	75.175	0.000
Total Earnings		17591.200	17120.066	0.000

Imports :
	Stores & Spares	63.200	11.490	0.000
	Capital Goods	2340.600	1639.867	0.000
Total Imports		2403.800	1651.357	0.000

Expenditures :
	Salaries, Wages, Bonus, etc.	2436.900	2090.591	1412.808
	Network Costs	22044.700	20958.674	20030.893
	Operating and other Expenses	6630.700	6001.739	3895.660
	Interest	69.100	18.027	0.779
	Depreciation & Amortization	3913.300	3595.572	2441.535
	Other Expenditure	0.000	(110.850)	(1.859)
Total Expenditure		35094.700	32553.753	27779.037

QUARTERLY RESULTS

PARTICULARS	30.06.2007 (1^st Quarter)	30.09.2007 (2^nd Quarter)	31.12.2007 (3^rd Quarter)

Sales Turnover	10081.300	9477.400	10407.400
Other Income	273.200	402.000	727.800
Total Income	10354.500	9879.400	11135.200
Total Expenditure	7754.300	8072.100	9907.800
Operating Profit	2600.200	1807.300	1227.400
Interest	19.400	(87.700)	70.600
Gross Profit	2580.800	1895.000	1156.800
Depreciation	928.900	994.400	1019.400
Tax	556.600	286.400	42.200
Reported PAT	1041.600	614.200	95.200

KEY RATIOS

PARTICULARS		31.03.2007	31.03.2006	31.03.2005
Debt-Equity Ratio		0.02	0.01	0.01
Long Term Debt-Equity Ratio		0.00	0.00	0.00
Current Ratio		1.14	1.52	1.77
TURNOVER RATIOS
Fixed Assets		0.93	1.04	1.19
Inventory		946.56	1118.62	1232.48
Debtors		4.78	6.04	6.88
Interest Cover Ratio		104.13	382.51	7882.63
Operating Profit Margin	(%)	27.48	27.72	26.48
Profit Before Interest And Tax Margin	(%)	17.80	18.21	19.09
Cash Profit Margin	(%)	21.27	22.19	21.09
Adjusted Net Profit Margin	(%)	11.59	12.68	13.70
Return On Capital Employed	(%)	11.32	11.58	11.51
Return On Net Worth	(%)	7.54	8.14	8.31

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 organization and the international maritime satellite organization and holds investments in these organizations.

In India the telephone density is just 1.70% against the global average of 10.00%. Privatization 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 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 Organization (ISRO) 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 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, and 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 recognized 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 Standards `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 Limited (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 and 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 Limited (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) Limited. (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 Satellite 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 Limited (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 specialized 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 utilize 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, and 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 global Internet roaming services.

Power Grid Corporation of India Limited (PGCIL) and Videsh Sanchar Nigam Limited (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 Limited 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 Limited (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 Limited 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 specialized 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 its 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 Limited (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 Bhargava 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 principal’s 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 liberalization 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 the year under review, 2006-07, the Company earned total revenue of Rs.42.54 billion compared to Rs.40.10 billion during the previous year. Profit before tax for the year was Rs.7.13 billion, against Rs.6.87 billion in the previous year. Profit after tax was Rs.4.69 billion compared to Rs.4.80 billion in the previous year.

On a consolidated basis, for 2006-07, the Company's total income was Rs.88.57 billion, with an EBIDTA of Rs.12.99 billion and profit before tax and exceptional items of Rs.3.72 billion.

STRATEGIC OVERVIEW

The past year has been a landmark one in the Company's history. It was the first full year of global operations after the integration of VSNL's major international acquisitions, Tyco Global Network and Teleglobe. The Company strengthened its position in international wholesale voice services, grew its carrier and enterprise data business, launched services through its joint venture in South Africa and announced several new initiatives in global submarine cable systems.

The Company has transformed itself into India's first truly global telecommunications company and today operates in 38 countries across every major geography. VSNL is among the world's top three providers of international wholesale voice services and the number one wholesale Voice over Internet Protocol provider. The Company provides a range of connectivity services across the globe to both carriers and enterprises. It is one of the largest providers of submarine cable capacity in the world, based on its state-of-the-art infrastructure. VSNL is also a global Tier-1 Internet Services Provider (ISP) and one of the major players in the growing global IP Transit market. The Company already offers telecommunication services through its subsidiary in Sri Lanka and a joint venture in Nepal, United Telecom Ltd., while its joint venture in South Africa, Neotel Proprietary Ltd., has also launched its operations.

Meanwhile, in India, the Company continues to be the country's largest player in international telecommunication services for both voice and data. In the voice space, VSNL remains one of the leading players for international voice communications, connecting India to more than 240 countries and territories worldwide. The Company is also a leading player in the Indian data market, offering customers a range of telecommunication solutions, such as private leased circuits, managed data networks, virtual private network services and data centre services. In the retail space, VSNL remains a premier Internet Service Provider, offering connectivity, messaging, Internet telephony and a wide variety of content services. Having pioneered the use of the Internet in India, the Company is now emerging as a key player in India's broadband revolution.

VSNL has transformed itself over the last few years byreworking its strategies and repositioning itself. 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 rapid growth, by expanding into new high-potential areas like enterprise and carrier value added data and broadband services.

* Extend and strengthen its global presence by delivering network and communication solutions globally and by expanding into overseas telecom markets through Greenfield ventures or through mergers and acquisitions.

* Support all its businesses by selective and strategic expansions and modernizations 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 and competitiveness through initiatives such as quality, cost rationalization and profit enhancement; and enhance customer focus and orientation to deliver a customer experience that matches the best in the world.

OPERATIONAL REVIEW:

The Company operates under three main business segments globally - Wholesale Voice, Enterprise and Carrier Data and Other Services.

Wholesale Voice: * International Long Distance (ILD):

ILD voice services were traditionally VSNL's core business. Over the last five years, the international telephony market in India has been under pressure due to increased competition, falling rates and lower margins. With the acquisition of Teleglobe during 2005-06, the Company has transformed itself from a single-country operator to a leading global player, backed by assets that can support its businesses worldwide. VSNL owns and operates one of the largest international networks with coverage to more than 240 countries and territories. The Company also has several hundred direct and bilateral relationships with leading international voice telecommunication providers and carries over 25 billion minutes of international wholesale voice traffic on an annualized basis.

While VSNL retains its position as India's leading ILD services provider, 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.

Therefore, globally the Company's focus continues to remain on increasing volumes and thus revenues, while improving margins by cutting costs. The Company believes that its strategic advantage in this business comes from its volumes, reach, and robust state-of-the-art technology and networks, which are all difficult to replicate.

* National Long Distance (NLD):

The Company has a strong national network infrastructure and interconnects agreements with all basic and cellular mobile service operators in India to carry NLD traffic to and from their networks. However, VSNL is dependent on getting traffic from these access providers, many of who have acquired their own NLD licenses. Meanwhile, direct customer access mechanisms such as the Carrier Access Code (CAC), or Intelligent Network (IN) type services such as calling cards across multiple carrier networks, have not yet been implemented. As a result, VSNL continues to be absent from the retail long distance voice market.

Enterprise and Carrier Data:

VSNL's reach now extends beyond India to enterprises globally, providing connectivity across the world through its own network or with the help of its partners in different geographies. VSNL aims to make inroads into the large and lucrative global markets by developing differentiated services and offering competitive pricing.

As voice, data and video communications converge; the demand for enterprise data services is growing worldwide. 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 customized to meet the varied requirements of the enterprise sector. The Company continues to expand its IP VPN services throughout the main global markets. VSNL has progressed up the value chain to deliver managed solutions to customers. During 2006-07, 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.

To further strengthen its customer value proposition, VSNL partners with Tata Group company TCS and other software and systems integration companies, for integrated joint product and service offerings. The Company also markets its services through indirect channels catering to the small and medium enterprise market in India.

After recent amendments to telecom licences, IP VPN services are to be provided under the ILD and NLD licences. The wireless as well as fibre last-mile network can now be used to provide services under the NLD licence. NLD service providers are also now allowed to make their own arrangements for laying the last mile for providing leased circuits and for connecting Closed User Groups. This amendment removes a major hurdle to VSNL's leased services and the Company is actively expanding its fibre and wireless access network based on the new Wi-max technology to provide its own last mile connectivity to its enterprise customers.

Other Services:

Broadband Business:

Keeping with the pace of growth of 2005-06, the broadband business grew by close to 100% in the year 2006-07. VSNL which was the first broadband service provider in India to offer an integrated voice, video and data service to its customers, has made much more progress in terms of providing Integrated Internet Services to its customers. Customers can now use their high speed internet connection to view movies, buy music, do live Darshan, and buy anti-virus and other software applications, call using net telephony and much more with the state of the art broadband service offered by the company.

VSNL continues to evaluate and test out newer access and application technologies. As part of that VSNL is evaluating and testing WIMAX. Various partnerships with leading industry players in both the software and hardware segments have been announced and VSNL continues to provide thought leadership for various broadband initiatives in India. Dial up Internet Service Continuing from the last year, VSNL continues to lead the dial up market in India in terms of innovations and services for the customer - be it the first of its kind Honours club - named as E3 Honours for high end, long term, and dial up users or alternative mechanisms for payment. To add to all this, VSNL has become the first dial up service operator in the country to offer rich content and interactive services to dial up users using the same user ID and password for multiple services like Internet access, net telephony and value-added email services.

Public Access Business - Wi-Fi and Cybercafes VSNL is now the largest public broadband access provider across the country. Public access is being provided through Wi-Fi hotspots and a chain of Cybercafes. The Wi-Fi hotspots are spread across airports, five star hotels, coffee shops, restaurant chains, hospitals, educational institutes, railway stations, etc across the country with VSNL enjoying good success in terms of major new site acquisitions through the year. Today VSNL provides public internet access at more than 300 hotspot locations, across the country. VSNL was recently invited onto the Board of the Wireless Broadband Alliance (WBA). WBA is the leading global organization representing the largest Wireless Broadband operators like British Telecom, France Telecom, Korea Telecom, StarHub, Swisscom Mobile and T Mobile. VSNL joined WBA in 2006, and is the only representative from India in this world body. This was a fast track path for VSNL into the Board, given the contributions done by VSNL towards pushing aggressive growth for wireless broadband.

To consolidate its position in the Internet space in India, VSNL has over the last two years, acquired two companies:

- Direct Internet Limited and Primus India. In order to streamline the businesses and to provide the necessary managerial focus for unlocking the value of the retail business in the future, the Board decided to hive off the retail business unit into a subsidiary called VSNL Internet Services Limited (VISL). A comprehensive scheme of arrangement and merger of Direct Internet Limited into VISL has been filed with the competent courts. (Please see Management Discussion and Analysis for details).

New Stream Of Business - Outsourcing Services:

To help reduce the total cost of its operations and to take advantage of opportunities in the outsourcing business, VSNL has incorporated a 100% subsidiary VSNL Global Services Limited (VGSL). VGSL will provide outsourcing services, namely, client relationship management services, technical and other support services, transaction processing services, sales administration services, marketing, promotion, maintaining and updating accounting, costing, management records, accounts receivable management, accounts payable management etc. During the year, VGSL has already set up one special economic zone (SEZ) unit and another software technology park (STPI) unit.

Technical Services Agreement with Neotel:

As we have previously reported, the Government of South Africa has selected VSNL as the strategic partner to participate in the second network operator (SNO) process in that country, to provide telecom services in competition with the incumbent carrier. South Africa has issued a licence to this SNO, called Neotel Proprietary Ltd, to provide a broad range of telecommunications services (except mobile services). During the past year, VSNL signed a Technical Services Agreement to provide technical support services to Neotel, to assist it in rolling out its services in South Africa.

Customer Service:

VSNL has made significant progress towards transforming itself into a customer-focused organization. The customer service team's mission is to support the entire customer life cycle from service delivery to service assurance, including retention and growth.

To support its global operations, 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 support its carrier partners. Centralized 24 x 7 call centres in India support VSNL's global wholesale and enterprise businesses. Retail and broadband customers are supported by two other outsourced call centres.

Premature Termination of Monopoly and Compensation: The Company continues to pursue its claim against the Government of India for inadequate compensation given against the premature termination of its ILD monopoly. The Government of India (GoI) had allowed other players into the ILD business from 1 April 2002, terminating VSNL's exclusivity two years ahead of schedule. It gave VSNL a compensation package and had given an assurance prior to disinvestment that it would consider additional compensation if found necessary on a detailed review, when undertaken. However, in February 2002 just before the disinvestment of the Company, the GoI unilaterally granted a further dispensation as full and final settlement of every sort of claim against the proponing of the ILD demonopolisation. VSNL feels that the compensation is inadequate as the losses, as estimated by independent agencies at that time, were quantified at a much higher value. The Company had been pursuing the GoI to consider additional compensation and to ensure that the claim was not barred by limitation, filed a claim in the Mumbai High Court in 2005.

Demerger of Surplus Land: Under the terms of the share purchase and shareholders' agreements signed between the Government of India and the strategic partner (parties) at the time of disinvestment by the government in 2002, it was agreed that certain identified lands would be demerged into a separate company. It was further provided that if for any reason the Company 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 was presented to the VSNL Board in April 2005, and the parties 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

AWARDS AND RECOGNITION:

The Company's transformational initiatives are being recognized in international markets. During the year, the Company earned several prestigious international recognitions for the first time, including:

* Best Pan-Asian Wholesale Provider Award at the Capacity Global Awards 2006.

* Best Wholesale Carrier at the World Communications Awards 2006.

* Voice & Data Top International Long Distance Operator Award for 2001-2006.

* PC Quest Users' Choice for Internet Award for 2002-2005.

VSNL is also the only Indian Telecom company identified by the Boston Consultancy Group as one of the New Global Challengers.

VSNL's CEO Mr. N. Srinath was named the 'Telecom CEO of the Year' by the leading publishing group Telecom Asia in the 2006 edition of their awards. The Institute of Economic Studies (IES), a research oriented organization, also conferred its Excellence Award on VSNL and its Udyog Rattan Award on Mr. N. Srinath in November 2006.

Business Excellence:

The Company has been re-inventing its business model and transforming itself in tandem with market and regulatory changes. To help drive the transformation, VSNL is implementing the Tata Business Excellence Model (TBEM), a framework that lays down best practices in areas like leadership, strategy, customer and market focus, knowledge management, human resources, process management planning, customer service and social responsibility. During the past year, VSNL has made further progress in implementing TBEM, with many continuous improvement projects underway and extensive employee participation.

The Company has initiated an exercise to streamline internal processes across all its entities globally and institutionalize a culture of continuous improvement. The internal audit and revenue assurance teams actively contribute to sustaining process improvement efforts. Senior management regularly tracks implementation of ideas for improvement.

The Company is the world's first telecom service provider to obtain the TL 9000 certification (a set of quality system metrics designed for the telecom industry, encompassing ISO 9001 and other best practices); as well as India's first telecom service provider to obtain the BS7799 certification.

Compliance with section 404 of Sarbanes Oxley Act, 2002:

Pursuant to its listing on the New York Stock Exchange, VSNL must comply with section 404 of the Sarbanes Oxley Act by March 2008. This Act lays down requirements for internal control over financial reporting in the Company.

VSNL is confident of being able to comply with these stringent requirements in time.

Revenue Assurance and Cost Reduction:

VSNL's Revenue Assurance function aims to prevent revenue leakages and ensure robust internal controls and IT processes that keep pace with increasing business complexities, thus moving towards zero tolerance of revenue leakages. A Revenue Assurance charter and manual have been formulated to further structure these activities.

VSNL continues with its ongoing cost reduction exercise and has successfully completed several cost reduction projects as a part of its continuous improvement activities.

Enterprise Risk Management:

VSNL has established an enterprise-wide risk management (ERM) framework to optimally manage risks, as well as to comply with clause 49 of the SEBI Listing Agreement. In line with VSNL's commitment to deliver sustainable value, this framework aims to provide an integrated and organised approach for evaluating and managing risks.

Subsidiaries:

The Statement pursuant to section 212 of the Companies Act, 1956 containing details of the Company's subsidiaries is attached. The consolidated financial statements of the Company and its subsidiaries, prepared in accordance with accounting standard 21 (AS 21) prescribed by The Institute of Chartered Accountants of India, form part of the annual report and accounts. The Company has been granted exemption from attaching the accounts of its subsidiary companies with the balance sheet of the parent company. These documents will be provided on request to any shareholder wishing to have a copy, on receipt of such request by the Deputy Company Secretary at the registered office of the Company. These documents will also be available for inspection by any shareholder at the registered office of the Company.

MANAGEMENT DISCUSSION AND ANALYSIS:

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.1380 billion sector, contributing 5.4% to India's gross domestic product (GDP).

According to the latest figures from the Telecom Regulatory Authority of India (TRAI), during 2006-07 India's mobile subscriber base increased approximately 68%, from 98.78 million to 166.05 million, while the fixed subscriber base declined approximately 1.82% from 41.54 million to 40.78 million. During the year, the broadband subscriber base grew 70%, from 1.35 million to 2.30 million. STD charges fell substantially after the announcement of new Interconnect Usage Charges (IUCs - see below) with effect from 1 March 2006, while international private leased circuit charges dropped by about 10-20% and broadband tariffs fell by 30%. The rapid growth in this market offers a vast potential demand for VSNL’s various services.

Effective 1 April 2007, the TRAI revised the access deficit charge (ADC - a component of the IUC that makes up for below-cost monthly rentals and local call charges for fixed telephones). The ADC was reduced on incoming International Long Distance (ILD) calls from Rs.1.60 per minute to Rs.1.00 per minute and on outgoing ILD calls from Rs.0.80 per minute to nil. The additional revenue share of 1.5% of the adjusted gross revenue (AGR) towards ADC was also reduced to 0.75% for all operators including international long distance operators. Recently, the Department of Telecom (DoT) further relaxed the licence conditions in respect of security related obligations for provision of VPN services for international and national long distance services, and more new entities have been licensed to provide NLD/ILD services.

Regulatory Developments:

Cable Landing Facilities:

Further to the approval of the recommendations made by the TRAI in December 2005, the TRAI after due consultations issued the International Telecommunication Access to Essential Facilities at Cable Landing Stations Regulations, 2007 (5 of 2007) in June 2007.

Even before the recommendations were accepted, VSNL had established uniform practices and procedures for access facilitation to International Telecommunication Entities from India (ITEs) at its various Cable Landing Stations (CLSs), by provisioning Meet-me-Room (MMR) facilities. VSNL has established MMRs at Mumbai, Ernakulam and Chennai, its main cable station locations. Accordingly, eligible ITEs shall be provided with access/interconnection to international capacity on submarine cables landing at a CLS at the relevant MMR. In November 2006, VSNL also published on its website the terms and conditions for access to its CLSs.

Introduction of Resellers:

Further to the approval of the recommendations made by the TRAI in December 2005, the TRAI submitted its recommendations to the DoT in March 2007 regarding terms and conditions to licence resellers in the IPLC segment. To effectively implement these recommendations, the TRAI has also suggested amendments to the ILDO licence to permit the sale of international bandwidth by resellers. The DoT has not yet accepted these recommendations.

AGR in TDSAT:

The Association of Unified Telecom Service Providers of India, Cellular Operators Association of India and some Individual telecom service providers have challenged, before the Hon'ble Telecom Disputes Settlement And Appellate Tribunal (TDSAT), the definition of 'gross revenue' and 'adjusted gross revenue' (AGR) as applied by the DoT for levying licence fees as being unfair and beyond the scope and powers of the DoT. It was represented that the present definition of adjusted gross revenue has a number of anomalies, such as that it encompassed several additional revenue streams that were unrelated to the activities under the licence.

The TDSAT in its order dated 7 July 2006 remitted the matter to the TRAI to make comprehensive recommendations on the individual components of revenue that can be considered part of AGR. The TRAI in September 2006 recommended that certain income should not be included in the AGR viz. (i) income from dividend, (ii) capital gains on account of profit on sale of assets and securities; (iii) gains from foreign exchange fluctuations, (iv) reversal of provisions; (v) income from property rent if not connected to establishing, maintaining and working of telecommunication and (vi) receipts from USO. This matter is being further heard by the TDSAT.

New FDI Guidelines:

The Government of India vide Press Note 3 (2007 Series) dated 19 April 2007 notified the Foreign Direct Investment (FDI) policy, enhancing the FDI limit from 49% to 74% in certain telecom services subject to specified conditions, in super session of its earlier Press Note 5 of 2005. Under the new policy, both direct and indirect foreign investment in the telecom licensee will be counted towards the FDI ceiling. The minimum Indian shareholding prescribed is 26%. FDI up to 49% continues to be permissible on the automatic route and FDI in the Licensee Company / Indian promoters / investment companies including their holding companies requires prior approval from the Foreign Investment Promotion Board if it has a bearing on the overall ceiling of 74%.

Certain security conditions have been imposed on the licensee companies operating telecom services and these shall be applicable to all licensee companies irrespective of their level of FDI. All telecom licensees are required to comply with these terms and conditions within three months and thereafter to file half yearly compliance reports. The DoT is expected to notify the amendments to the licence conditions soon.

Transfer Pricing Mechanism:

Transfer pricing becomes relevant when a business operates in multiple countries. Transactions between associated enterprises located in different jurisdictions are subject to transfer pricing regulations.

Transfer pricing regulations in different countries adopt methodologies that are broadly based on the Organization for Economic Cooperation and Development's (OECD) Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (the 'OECD Guidelines'). An enterprise is expected to choose and adopt the most appropriate among the approved methods that suits its business and economic realities by way of a demonstrated elimination of other approved methods, to determine what independent entities, operating on an arm's length basis, would reasonably expect to earn operating a comparable business as the enterprise. In many countries, these subsidiaries are required to demonstrate to their revenue authorities that the terms of the transfer prices for inter company transactions adhere to the arms length principle.

The Company has expanded its global footprint by acquiring the Tyco Global Network (TGN) in June 2005 and Teleglobe International Holdings Ltd in February 2006. These acquisitions provided VSNL the ability to reach out to a large global customer base and expand and diversify its services. VSNL’s current business model envisages frequent cross usage of networks and other assets apart from cross rendition of various services viz., product development, network management, selling & marketing, billing, service provisioning, customer support, information technology support etc., among the group entities, to render a complete end-to-end service to its customers. The Company has 51 subsidiaries in 24 countries. Each subsidiary discharges its functions, owns its assets, bears its risk and reaps its rewards. Similarly each subsidiary is expected to discharge its statutory obligation including paying taxes on its income. For the VSNL group of Companies, considering the vast network that is owned by the entities, the global reach of the services, the operational interdependence between the group entities, cross continental location of customers, and other value drivers in the business, the Residual Profit Split Method (RPSM) has been chosen and implemented as the global transfer pricing methodology for determining inter company prices for international telecommunication related services. RPSM is one of the acceptable methods prescribed under the Indian tax regulations as well as in many of the other jurisdictions where formal transfer pricing regulations currently exist.

SERVICES:

International Long Distance (ILD):

Globally, VSNL handled 19.7 billion minutes of voice traffic out of which traffic to and from India has grown from about 3.8 billion minutes in 2005-06 to about 5.2 billion in the year under review, with a total revenue of nearly USD 1,170 million. The increased competition in India with the DoT issuing ILD licences to new players, some of who were VSNL's customers earlier, is expected to shrink the Company's addressable market and hence affect this business adversely.

National Long Distance (NLD):

The increased mobile penetration has resulted in significant growth in the NLD traffic within India. The NLD traffic has grown by over 82% from 2.9 billion minutes in 2005-06 to 5.3 billion minutes in 2006-07. The increased competition by issue of new NLD licences along with other regulatory initiatives has reduced the gap between NLD and local tariffs. Continued shrinkage in the Company's addressable market and falling tariffs is expected to affect this business further.

Enterprise Data Services: The Indian corporate segment has also been growing at a very healthy rate, with enterprise data volumes growing almost 100%. In the past financial year, even after adjusting for the 35-40% price drop, the industry growth in revenue terms has been a healthy 20-30%. There are two key drivers for the growth in this business. First, the enhanced capability of the Company to deliver services on a global basis is attracting new customers and opening up new markets. Second, there is significant growth in the existing customers' businesses globally. Banking and financial services (BFSI), information technology (IT), and BPOs / call centres are some examples of high growth sectors.

Internet and Broadband Services:

Broadband in India is a developing story with strong growth expected over the next few years. The growth in broadband subscribers has been slower than that in mobile subscribers. The predominant reasons are the limited access to last mile networks that limits the ability to serve retail customers and the inability to demonstrate an adequate value proposition except to enterprises and a small group of individuals. The Company continues to face the major problem of last mile connectivity to the customer, which it is attempting to overcome by rolling out its own wireless networks based on Wi-Max technologies.

ORGANISATIONAL RESTRUCTURING:

Consolidating Subsidiaries The Company, which currently has over 50 international direct and indirect subsidiaries, has initiated a process to reduce this number to about 30 through appropriate restructuring. The majority of these subsidiaries came into the VSNL fold through the acquisitions of TGN and Teleglobe and was formed to comply with local laws stipulating the creation of country specific subsidiaries to hold the required licenses and assets, and to carry out operations. VSNL aims to have one entity in each country to the extent possible.

Retail Business Hive Off:

During the year under review, VSNL acquired two entities in India, Direct Internet Limited (DIL) and VSNL Internet Services Limited (VISL).

Direct Internet Limited (DIL) provides broadband services, mainly to small and medium enterprises (SMEs). VSNL has acquired the entire shareholding in DIL from Primus Group, USA and consequently, DIL is presently a 100% subsidiary of VSNL.

DIL Internet Limited (DILI), formerly known as Primus Telecommunications India Limited and now as VSNL Internet Services Limited (VISL), is presently a subsidiary of DIL and an indirect subsidiary of VSNL. VISL renders broadband services to the Small and Medium Enterprises (SME) as well as retail customers.

In order to simplify this structure and to enable possible unlocking of value in the retail business in the future, the Board decided to hive off VSNL's retail business unit into VISL. A comprehensive scheme of arrangement for transfer of the retail business undertakings of VSNL to VISL and the amalgamation of Direct Internet Limited with VISL has been filed with the competent High Courts.

Global Structure:

After its acquisitions, VSNL's stated direction is to be structured into global business units and global support functions. Various initiatives are underway to implement this structure, which will best enable VSNL to be a global integrated multi-business telecom player. These initiatives are far reaching in their scope and the impact they will have on the Company's business. They cover projects to improve customer experience, define and create a common company culture, tighten corporate identity and branding, and implement the next generation network (NGN) architecture for converged services among others.

Management of Business Ethics (MBE):

Consistent with the Group's policy, VSNL is systematically implementing the Tata Code of Conduct. VSNL has put in place an organizational structure and a process to implement and improve ethical standards and practices, and began implementing the Tata Code of Conduct in 2003-04. VSNL conducts regular seminars, ethics awareness campaigns and workshops to sustain the momentum and to strengthen ethical values and practices among various stakeholders.

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 service provider 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 annualized 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 characterized 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 capitalizing 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 signaling 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 interconnects 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 (fixed line and cellular) for wholesale long distance traffic. In this regard, the Company's equity investment in Tata Teleservices Limited. (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 travelers 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 annualized 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 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 organization 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 lowed 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 high-speed Internet customers in 43 cities. The Government's 2004 broadband policy estimates that India will have 20 million broadband subscribers by end- 010. 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, and 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 travelers 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 Private. 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 liberalizing 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 Private Limited (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 kilometers (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 Limited. 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 Limited., the investment arm of the Tata Group in South Africa, as the strategic investor in those countries 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 Private. Limited, 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 Limited., 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 organization. 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 organization 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 kilometers 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 centralized 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 utilizing 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 kilometer 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 utilized 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 privatization, 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 demerged 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 Limited. (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 licenses 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.

Contingent Liabilities – As on 31.03.2007

Particulars	Rs. in Millions
Guarantees given on behalf of subsidiaries	21721.800
i. Claims for taxes on income	1984.700
(a) Income tax disputes where the department is in appeal against the Company	65.200
(b) Income tax disputes where the Company has a favourable decision in other than the above	16553.000
ii. Claims for other taxes	61.500
iii. Other Claims	5409.400

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 Limited

VSNL Singapore Private. Limited

VSNL SNOSPV Private Limited

III. Other Subsidiaries (Held indirectly)

VSNL UK Limited

VSNL Netherlands BV

VSNL Bermuda Limited

VSNL Japan K.K

VSNL Telecommunications (Bermuda) Limited

VSNL Hong Kong Limited

ITXC Global Japan YK

ITXC IP Holdings S.a.r.l

Teleglobe America Inc

Teleglobe Asia Data Transport Private. Limited

Teleglobe Asia Private Limited

Teleglobe Bermuda Limited.

Teleglobe Canada ULC

Teleglobe France International S.A.S

Teleglobe International Belgium S.P.R.L

Teleglobe International Hong Kong Limited

Teleglobe International Limited

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. Limited

VSNL International GBRM Limited

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 Limited.

ITXC Global Zagreb d.o.o

Enhanc d Services Inc

ITXC (U) Limited.

ITXC Global Hongkong Limited.

IV. Joint Venture

United Telecom Limited

V. Joint Venture of wholly owned subsidiary

SEPCO Communications Pty. Limited.

SNO Telecommunications (Pty) Limited. (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

VSNL and Ascade Partner to Deliver Quality

CLI Verification Services to Mobile Network Operators

VSNL's VTS Prime and Mobile Direct Customers Benefit from Tier 1 Quality & CLI Delivery to Major Countries Singapore and Stockholm, Sweden--(BUSINESS WIRE)—June 11, 2007—VSNL, a leading communications solutions provider, and Ascade, the global market-leader of Interconnect Solutions, announced today a partnership to provide Calling Line Identification (CLI) delivery assurances to Mobile Network Operators (MNOs) worldwide. By utilizing Ascade’s CLI Verification service, VSNL’s offering branded as Teleglobe VTS Prime Service presently assures Tier 1 quality and CLI delivery to over 135 networks reaching 44 countries around the world. The coverage is persistently growing as Ascade is continuously expanding the span of the service.

Ascade’s CLI Verification service rigorously tests, monitors and gathers reports on the CLI delivery effectiveness of VSNL’s voice traffic and network. VSNL, in turn, uses this information to make real-time changes to correct any degraded CLI delivery performance, providing MNOs with high quality termination with highly effective CLI delivery. VSNL’s CLI assurances help MNOs boost revenues and reduce customer turnover. “CLI delivery assurances are increasingly in demand by MNOs around the world to boost not only their own international call revenues but also the level of customer satisfaction of their international roamers,” said Michel Guyot President, Global Voice Solutions, and VSNL. “Customers utilizing Teleglobe VTS Prime and Mobile Direct services will benefit from this partnership because our enhanced products address the specialized needs of MNOs. Ascade’s CLI verification capabilities complement VSNL’s sophisticated voice network architecture, enabling us to offer our valued customers the best quality service and products in the growing mobile marketplace.”

VSNL holds a market leading position in the voice arena, allowing mobile customers to leverage the scale and breadth of the Company’s global network and extensive relationships to support traffic exchange through multiple protocol networks. As one of the world's largest international wholesale carriers, VSNL has more than 415 combined direct and bilateral relationships with leading international voice telecommunications providers and commercial relationships with over 450 mobile operators worldwide. "Guaranteed quality assurance and reliability are crucial elements in how customers perceive the overall quality of their carrier’s service,” commented Henrik Anderberg, CEO of Ascade. “Ascade is pleased to provide VSNL with this innovative service that will help them assure CLI delivery to mobile networks around the world, leading to increased global mobile call completion.”

Corporate

Teleglobe VTS Prime service ensures reliable, cost effective Tier 1 quality call completion to one of the world’s largest international networks, enabling mobile operators and retail service providers to enhance call quality performance and customer satisfaction. Mobile Direct, VSNL's mobile-to-mobile solution, allows mobile operators to exchange traffic directly on a global basis. It guarantees delivery of key signaling information required for seamless international calling – especially important for roaming traffic. It offers a “one-stop shop” solution for direct transit to any MNO in the world. Further information regarding VSNL’s suite of voice and mobile services can be found at www.vsnlinternational.com.

ABOUT ASCADE AB

Ascade is the global market-leader of Interconnect Solutions for carriers and telecom operators. Our software, Carrier Cockpit™ Suite, enables carriers worldwide to increase profitability and revenue growth. It optimizes and automates all aspects of a carrier’s wholesale and bilateral business including integrated interconnect billing, while providing management with real-time business planning and steering capabilities. Carrier Cockpit™ Suite, developed together with leading international wholesale carriers and incumbents, is the most advanced, mature and widely used Interconnect Solution for managing the wholesale carrier business worldwide. Customers include Reach, Telenor Global Services, SingTel, Telekom Malaysia, Etisalat, Allstream, Elisa, Gateway, TEO, Rosstelecom, PT Telekom, Korea Telecom, Hrvatski Telekom, Telekom Serbia, Lattelecom, Bell Canada, Sunrise, Telekom Austria, MobileOne and more.

Ascade AB is a privately held company owned by founders and leading Nordic investment firms CapMan, listed on the Helsinki Stock Exchange, and SEB Venture Capital, the venture capital division of Nordic financial services group SEB, listed on the Stockholm Stock Exchange. Through its presence in Sweden, US, Dubai, and Singapore, Ascade provides support to its customers worldwide. For more information please visit: www.ascade.com.

About VSNL

Videsh Sanchar Nigam Limited (VSNL), a member of the US$ 27 billion Tata Group, is a leading global communications solutions company offering next-generation voice, data and value-added services to enterprises, carriers and retail consumers. Voted the Best Wholesale Service Provider at the World Communications Awards, 2006, VSNL is one of the world’s largest providers of wholesale international voice services and operates one of the largest global submarine cable networks. VSNL’s customer base includes 1500 Global Carriers, 450 Mobile Operators, 10,000 Enterprises, 500,000 Broadband and Internet subscribers and 300 Wi-Fi public hotspots. Rated amongst the Top 100 Emerging Global Challengers by the Boston Consulting Group, VSNL has offices in over 35 countries including the United States of America, Canada, the United Kingdom, South Africa, Singapore, Hong Kong, Sri Lanka and India. VSNL’s global transmission network of over 200,000 route kilometers and its IP core with 200 points of presence, enable a range of services that include voice, private leased circuits, IP VPN, Internet access, global Ethernet, hosting, mobile signaling and other IP services. Our philosophy of Business Rich drives us to empower our customers to achieve enhanced value in their global businesses. VSNL (www.vsnl.com) is listed on the Bombay Stock Exchange and the National Stock Exchange of India, and its American Depositary Receipts (ADRs) are listed on the New York Stock Exchange.

Corporate

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. These forward looking statements include, among others, statements concerning VSNL’s communications and information services, business, its advantages and VSNL’s strategy for continuing to pursue its business, the anticipated development and launch of new services in its business, the anticipated dates on which VSNL will begin providing certain services or reach specific milestones in the development and implementation of its business strategy, the growth and recovery of the communications and information services, industry, expectations as to its future revenue, margins, expenses and capital requirements and other statements of expectations, beliefs, future plans and strategies, anticipated developments and other matters that are not historical facts. Such statements involve known and unknown risks, uncertainties and other factors, including financial, regulatory and environmental, as well as those relating to industry growth and trend projections, which may cause the 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, failure to increase the volume of traffic on VSNL’s network, failure to develop new products and services that meet customer demands and generate acceptable margins, failure to successfully complete commercial testing of new technology and information systems to support new products and services, including voice transmission services, failure to stabilize or reduce the rate of price compression on certain of VSNL’s communications services, failure to integrate strategic acquisitions such as the Tyco Global Network and Teleglobe International Holdings Limited and changes in government policies or regulations of India and, in particular, changes relating to the administration of VSNL’s industry, and, in general, the 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.

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 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 high technology 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.

Tata Communications Launches Cisco® Certified TelePresence Connection Services Globally

Tata Communications Becomes First Asian Service Provider to Launch this Unique, Life-Like Virtual Meeting Solution

New Delhi, March 19, 2008 - Tata Communications, a leading provider of the new world of communications, announced today the launch of its global Tele Presence network service, which has achieved Cisco Certified Tele Presence Connection status. Cisco Tele Presence is an innovative, realistic virtual meeting solution that creates unique, "in-person" experiences allowing real-time, face-to-face communication over a converged IP network. It delivers life-size images, ultra-high-definition video (1080p), spatial audio and a specially designed environment to create a "room within a room" meeting space.

Cisco Tele Presence is transforming the way organizations conduct business. Companies can utilize the Tele Presence solution to enhance collaboration, make decisions faster, improve cross-cultural communications, and scale scarce resources and move products to market faster. Tata Communications is the first Asian service provider to achieve Cisco Certified Tele Presence Connection status enabling the delivery of the Cisco Tele Presence solution.

The Cisco certification program for Tele Presence services provides businesses with an added level of confidence, which providers such as Tata Communications can deliver the capabilities needed for an optimal Tele Presence experience. The Cisco Tele Presence certification process goes beyond static service measurement of network performance. It adds leading practices based on current industry standards for network architecture, management and performance including measurement, staff, processes and tools. These are audited regularly to help ensure that service providers are committed and able to offer an optimal Tele presence experience providing customers with robust, end-to-end communication solutions that meet their business needs today and into the future.

"With our unparalleled global reach into India, the Americas, Europe and Asia Pacific regions as well as our strength on key international routes, Tata Communications is uniquely poised to serve the needs of customers who wish to use Tele Presence to facilitate richer communications." said Vinod Kumar, President, Global Data and Mobility Solutions.

"We are pleased to have reached this significant milestone in our growing relationship with Tata Communications," said Rajesh Chainani, Vice President – Service Provider, Cisco. "The Cisco Tele presence solution is best delivered over a Cisco Certified Tele Presence Connection taking advantage of Cisco Internet Protocol Next-Generation Network (IP NGN) architecture and innovative technology to deliver a highly scalable and secure solution."

John Landau, Senior Vice President, Global Managed Services, Tata Communications commenting on the company's newest achievement said, "This is a testament to the performance of our global MPLS capability, and is the first step to a rich range of TelePresence Managed Services which Tata Communications will be rolling out in the coming months."

For more information, visit www.tatacommunications.com.

About Tata Communications

Tata Communications Limited along with its global subsidiaries (Tata Communications) is a leading global provider of the new world of communications. The company leverages its Tata Global Network, vertical intelligence and leadership in emerging markets, to deliver value-driven, globally managed solutions to the Fortune 1000 and mid-sized enterprises, service providers and consumers.

The Tata Communications portfolio includes transmission, IP, converged voice, mobility, managed network connectivity, hosted data center, communications solutions and business transformation services to global and Indian enterprises & service providers as well as, broadband and content services to Indian consumers. The Tata Global Network encompasses one of the most advanced and largest submarine cable networks, a Tier-1 IP network, connectivity to more than 200 countries across 300 PoPs and more than one million square feet data center space. Tata Communications serves its customers from its offices in 80 cities in 40 countries worldwide. Tata Communications has a strategic investment in South African operator Neotel, providing the company with a strong anchor to build an African footprint.

The number one global international wholesale voice operator and number one provider of International Long Distance, Enterprise Data and Internet Services in India, the company was named "Best Wholesale Carrier" at the World Communications Awards in 2006 and was named the "Best Pan-Asian Wholesale Provider" at the 2007 Capacity Magazine Global Wholesale Telecommunications Awards for the second consecutive year.

Becoming the leading integrated provider to drive and deliver a new world of communications, Tata Communications became the unified global brand for VSNL, VSNL International, Teleglobe, Tata Indicom Enterprise Business Unit and CIPRIS on February 13, 2008.

Tata Communications Ltd. is a part of the $29 billion Tata Group; it is listed on the Bombay Stock Exchange and the National Stock Exchange of India and its ADRs are listed on the New York Stock Exchange (NYSE: TCL).

www.tatacommunications.com

About Cisco Systems

Cisco (NASDAQ: CSCO) is the worldwide leader in networking that transforms how people connect, communicate and collaborate. Information about Cisco can be found at http://www.cisco.com. For ongoing news, please go to http://newsroom.cisco.com.

Cisco, the Cisco logo, Cisco Systems and the Cisco Systems logo are registered trademarks of Cisco Systems, Inc. in the United States and certain other countries. All other trademarks mentioned in this document are the property of their respective owners. The use of the word partnership does not imply a partnership relationship between Cisco and any other company. This document is Cisco Public Information.

Forward-looking and cautionary statements

Certain words and statements in this release concerning Tata Communications and its prospects, and other statements including those relating to Tata Communications' expected financial position, business strategy, the future development of Tata Communications' operations and the general economy in India, are forward-looking statements. Such statements involve known and unknown risks, uncertainties and other factors, including financial, regulatory and environmental, as well as those relating to industry growth and trend projections, which may cause actual results, performance or achievements of Tata Communications, or industry results, to differ materially from those expressed or implied by such forward-looking statements. The important factors that could cause actual results, performance or achievements to differ materially from such forward-looking statements include, among others, failure to increase the volume of traffic on Tata Communications' network, failure to develop new products and services that meet customer demands and generate acceptable margins, failure to successfully complete commercial testing of new technology and information systems to support new products and services, including voice transmission services, failure to stabilize or reduce the rate of price compression on certain of the company's communications services, failure to integrate strategic acquisitions and changes in government policies or regulations of India and, in particular, changes relating to the administration of Tata Communications' industry, and, in general, the 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 Tata Communications' control, include, but are not limited to, those risk factors discussed in Tata Communications' various filings with the United States Securities and Exchange Commission. These filings are available at www.sec.gov. Tata Communications is under no obligation to, and expressly disclaims any obligation to, update or alter its forward-looking statements.

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.40.34
UK Pound	1	Rs.79.81
Euro	1	Rs.62.01

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

MIRA INFORM REPORT

RATING

47.200

38.019

19.651

9551.900

7375.710

6089.452

1043.100

2568.815

14091.243

1047.500

983.025

507.201

11477.500

13063.532

14892.865

23167.200

24029.101

35600.412

15856.900

15674.824

15279.229

2704.300

2566.212

2651.721

18561.200

18241.036

17930.950

4606.000

5788.065

17669.462

Unit