Management Discussion And Analysis Report 

Indian Wireless Sector

The events that have marked the Indian wireless sector during the financial year 2014-15 are indeed the steps in the path towards the vision of "Digital India"; a program to transform India into a digitally empowered society and knowledge economy. Firstly, the Government has clearly identified the 3 key areas -'Digital Infrastructure as a Utility to Every Citizen', 'Governance & Services on Demand' and 'Digital Empowerment of Citizens' which are supported by 9 pillars with the aim of connecting 250,000 Gram Panchayats in phased manner and providing most of the government services via digital platform. Secondly, the DoT has offered additional spectrum under 800 MHz, 1800 MHz and 2100 MHz band which can be used for the advanced technologies like 3G or 4G; along with the added efforts initiated by DoT towards spectrum harmonization. And lastly mobile operators have made large commitments in the spectrum auctions as well as towards rolling out the next generation wireless networks.

The subscriber addition during 2014-15 continued to remain robust in the second largest wireless market globally. On an incremental basis, the subscriber addition of 65.4 Mn during Financial Year 2014-15 was the highest across the globe, surpassing the net subscriber addition in world's largest wireless market of China, for the first time. The reported subscriber base stood at 969.9 Mn as of March 2015, registering a YoY growth of 7.2%. The VLR subscriber addition during the same period stands at 71.8 Mn, taking the VLR subscriber base to 862.6 Mn, a YoY growth of 9.1%.

Subscriber penetration is still at around 68.7% based on VLR subs, against penetration of around 77.3% based on reported subscriber.

A large part of the incremental subscriber addition continues to come from rural India. Out of the total subscriber addition of 65.4 Mn during Financial Year 2014-15, 42.4 Mn subscribers are added from rural areas, constituting 64.9% of subscriber addition. The urban penetration stands at 143.1%, while the rural penetration is still at 47.8%; indicating the growth potential for the industry. 

Incremental subscribers are coming largely from rural areas.

Number of wireless internet subscribers increased to 248.5 Mn as of December, 2014 from 220.4 Mn subscribers as of December, 2013 (TRAI performance indicator report), an addition of 28.1 Mn subscribers. Further, the wireless broadband (>512 kbps) subscriber base has increased to 83.7 Mn as of March 2015, an addition of 37.7 Mn subscribers in one year; reflecting a solid growth of 81.9%. The wireless broadband subscriber penetration (of reported subscribers) improved from 5.1% as of March, 2014 to 8.6% as of March, 2015.

While the voice business continues to grow; the data business acts as a growth driver for the Industry. The strong incumbent operators continued with the expansion of their 2G and 3G network to meet the growing demand of Voice and data. The gross revenue for the sector, during the Financial Year 2014-15, registered 10.8% growth compared to Financial Year 2013-14 of 9.6%. The top three incumbent operators, including Idea, accounted for around 87% of the incremental industry revenue in Financial Year 2014-15.

Spectrum Auction

The Spectrum Auction for 800 MHz band, 900 MHz band, 1800 MHz band and 2100 MHz band commenced on March 4, 2015. The auction was conducted in 20 service areas for 800 MHz band, 17 service areas for 900 MHz band, 15 service areas for 1800 MHz band and 17 service areas for 2100 MHz band. The total spectrum placed for auction, in all four bands, was 470.75 MHz i.e. 108.75 MHz in 800 MHz band, 177.8 MHz in 900 MHz band, 99.2 MHz in 1800 MHz band and 85 MHz in 2100 MHz band.A large chunk of the spectrum offered for auction in 800 MHz band and 1800 MHz band was 'New Spectrum' and the entire spectrum put to auction in 2100 MHz band was 'New Spectrum'. 

However the entire spectrum auctioned under 900 MHz band was 'in-use Spectrum' by existing operators whose licenses were due for extension/renewal in the year 2015/2016. The Spectrum auction concluded on March 25, 2015 after 22 days and 115 rounds.

Out of the total spectrum put to auction ~79% (86.25 MHz) of 800 MHz band, ~94% (168 MHz) of 900 MHz band, ~95% (93.8 MHz) of 1800 MHz band and ~82% (70 MHz) of 2100 MHz band spectrum, the cumulative pay-out amounts of the successful bidders was in excess of Rs. 1.09 lakh crore.        

Discussion on Idea's Operational Performance and Consolidated Financial statements 

Mobile Business

Your company provides GSM-based mobile telecommunications services in all 22 Service Areas of India, and 3G services in 21 Service Areas. Your Company offers 3G services in 12 Service Areas pursuant to spectrum allocated to it and provides 3G services in remaining Service Areas through intra-circle roaming arrangements with other mobile telecommunications service providers.

Out of 22 service areas, your company is among the top three operators in 12 service areas based on revenue market share. In 4 service areas (rebrsenting around 22% of Industry wireless revenue) it holds leadership position and is the 3rd largest operator based on combined revenue of these 15 service areas which rebrsents around 80% of Industry wireless revenue. Your Company continues to expand its brsence in these 15 service areas to consolidate its strong position and improve its profitability.        

 These 15 service areas account for around 94% of company revenue. Idea also has the spectrum to offer 4GLTEservices on 1800 MHz in 7 service areas. 

 Seven operating licenses (rebrsenting around 20% of Industry wireless revenue) of the Company which were cancelled by the Subrme Court in February, 2012, were re-acquired by the company in November, 2012 auction. These 7 service areas, where the commercial operations were started in FY 2009-10, are gestating in terms of profitability. Post reduction in competitive intensity, your Company has started investing in these service areas to improve its coverage. 

These service areas rebrsent 6% of company revenue and Idea has a huge potential to grow. 

 In March, 2015 spectrum auction, the Company won 79.4 MHz spectrum, including 54 MHz spectrum in 900 MHz band for 9 service areas where licenses are due to expire in December, 2015/April, 2016, 5 MHz spectrum of 2100 MHz band (3G) for Kolkata Service Area and additional 20.4 MHz spectrum in 1800 MHz band out of which spectrum can be used for providing LTE or 4G services in the service areas of Tamil Nadu and Odisha. The spectrum won in auction is valid for a period of 20 years from the date of allocation.

On an overall basis your Company has 270.7 MHz of spectrum with highest renewal of 'in use' spectrum among incumbent operators of 16 service areas out of 22 service areas. Out of remaining 6 service areas 4 service areas renewal is due in FY 2022 and 2 service areas in FY 2026. In the last 4 spectrum auctions in the year of 2010, 2012, 2014 and 2015, the Company has committed a sum of Rs. 48,362 crores towards spectrum purchase. DoT has allocated spectrum won in the March, 2015 auction, except for 900 MHz spectrum in 9 service areas, which would be allocated to the company at the time of expiry of licences in December, 2015 for 7 service areas and in April, 2016 for 2 service areas.

Long Distance and Other Services

Your Company holds licenses for NLD, ILD and ISP services. Idea NLD currently carries around 98% of its captive NLD minutes. Idea ILD services now handle around 99% of captive ILD outgoing minutes, besides bringing large volume of incoming minutes from top international carriers across the globe. Idea launched its ISP services in FY 2012 to cater to the captive requirement of its mobile business, which now, also started offering ISP services to external customers like small ISP and enterprise customers for their wholesale Internet backhaul needs. Idea ISP currently handles more than 99% of captive subscriber traffic requirements.

Your Company is making steady investments in its fibre cable transmission network (owned as well as under IRU arrangement with other telecom operators), which is now cumulatively expanded to 93,400 kms, compared to 82,000 kms a year ago, an increase of 11,400 Km in a year. Your Company has also increased the OFC PoPs to over 5,000 PoPs in major cities and linked highways. The fibre network of company allows company to tap the future potential of wireless broadband as well as optimally serve its current NLD/ ILD/ ISP/Wireless Broadband needs.

Network Infrastructure and Coverage

Your Company continues to expand its 2G and 3G network aggressively during the year. It has added 7,589 2G sites on its network, taking the 2G site count to 112,367 as on March 31, 2015. On 3G front company added 8,910 3G cell sites in the 12 service areas where it provides 3G services with its own spectrum, highest ever 3G cell site addition as well as more than 2G site addition for the first time, since launch of 3G services. The company ended the financial year with 30,291 3G sites.

Company has expanded its reach to 364,796 towns and villages as of March, 2015 from 351,502 towns and villages as of March, 2014. The 2G network of your company covers nearly 78% of Indian Population (around 950 Mn).

Tower Portfolio

Company and its subsidiaries own 9,557 towers with a tenancy of over 1.60 as of March 31, 2015. The tenancy ratio for own towers remained in the range of 1.56 to 1.57 during FY 2014  and FY 2013. However, Company remained focused to improve the tenancy on its own towers and during the year tenancy has improved consistently on quarterly basis from 1.57 at the start of the year to 1.60 in Q4FY15.

Besides these towers, your Company through its wholly owned subsidiary Aditya Birla Telecom Ltd. (ABTL), holds 16% equity stake in Indus Towers Limited (Indus). Indus, a joint venture between Bharti Group, Vodafone Group and your Company (thru ABTL), is one of the world's leading tower company with 115,942 towers and tenancy ratio of 2.19 as of March 31, 2015. Providence Equity Partners, through its entity P5 Asia Holding Investments (Mauritius) Limited, beneficially holds 1,925,000 compulsorily convertible brference shares of ABTL, convertible into equity shares rebrsenting 30.3% of the total equity share capital in ABTL post conversion of the said brference shares. The aforesaid holding of Providence Equity Partners' reflects beneficial equity interest in Indus of 4.85% (assuming no other change in the equity share capital of Indus).

3G Services

Your Company, in 2010, won spectrum in 2100 MHz band in 11 service areas to provide 3G services. The 3G spectrum for Punjab service areas, which company won in 2010, was allocated to company during the current financial year and company launched 3G services in Punjab in May, 2014. Additionally, company acquired 5 MHz spectrum in 900 MHz band in Delhi service area in February 2014 Spectrum Auction, and launched 3G services in the month of March, 2015.

The high speed broadband offering of your Company is currently available in 21 service areas (including service areas where these services are provided based on roaming arrangements with other operators). The number of 3G devices on Idea network has increased from 17.2 Mn as of March, 31, 2014 to 36.5 Mn, a growth of 112.2%. The subscribers who are actively using voice and/or data on 3G platform and enjoying wireless broadband services reached to 18.7 Mn as of March, 2015, compared to 10.2 Mn subscribers as of March, 2014, a growth of over 83%.

Revenue Market Share

Revenue Market Share (RMS) is one of the key focus areas for your Company. Your company has improved its Revenue Market Share by around 1.6%, the highest improvement in last one year across all operators, to 18.2% for quarter ended March 31, 2015 from 16.6% in quarter ended March 31, 2014. During the same period (in last 12 months) the incremental revenue market share for your company stands at 33.3%.

Quality Subscriber Base

Your Company is the sixth largest mobile telecommunications company (counted on operations in a single country) in the world based on number of subscribers (GSMA Intelligence, as of March, 2015) currently servicing over 161 Mn active subscribers on VLR as of March 31, 2015. Your Company has always been vigilant in monitoring the quality of its subscriber base. The data released by the TRAI for active subscribers (VLR subscribers) as of March 31, 2015, reaffirms quality of Company's subscriber base as among the best in terms of percentage of active subscribers. As of March 2015, Your Company has 102.3% of reported subscribers as VLR subscribers, which is highest in the industry. The End of Period (EoP) subscriber market share (on VLR) as on March, 2015 stands at 18.7%, as against a reported subscriber markets share of 16.3%. During the Financial Year 2014-15 Your Company has improved its VLR subscriber market share by 1.3%.

On an incremental basis your Company has added 23.5 Mn subscriber against overall industry annual VLR subscriber addition of 71.8 Mn, gaining incremental VLR subscriber market share of 32.8%, which is highest in the industry. Today, nearly 1 out of 3 Indian who buy new connection, brfer to join your company.

Mobile Number Portability

The Mobile Number Portability (MNP) was implemented nationwide on January 20, 2011 and nearly 124 Mn customers have availed the MNP facility offered by Indian Mobile Industry. The trends emerging from MNP are clearly distinguishing the strong operators in terms of customers' brference for better quality of services and brand value. In a see-saw battle over the last 51 months for subrmacy in the MNP space, Idea has maintained leadership position on overall MNP Net Adds. As on  March 31, 2015 Idea has a net MNP gain of 13.4 Mn customers from other existing telecom operators with one out of every four existing mobile customers, who chooses to port out from their existing mobile operator brfer to shift and stay with world class Idea services.

Your Company's success on the MNP front clearly shows the strength of its seamless network coverage, low call drop rate, better voice quality, advanced and brcise billing systems, customer oriented call centers and innovative/competitive product offerings.

Idea Mobile Banking Services

Idea, through its wholly owned subsidiary Idea Mobile Commerce Services Ltd. (IMCSL) is providing mobile banking service to its subscribers in selected service areas. The two ways in which a subscriber can access these services are:

• Bank led Model

a) Business correspondent business with Axis Bank

IMCSL entered into a Business Correspondent relationship with Axis Bank for the purpose of acquiring and servicing customers for savings account of Axis Bank through Idea retailers in August, 2012. The service enables customers who do not have access to banking services to open a bank account and avail basic services like cash deposit, withdrawal, remittances, utility payments etc. through mobile.

b) NEFT and IMPS (Money Transfer Service)

National Electronic Funds Transfer (NEFT) and Immediate Payment Service (IMPS) is a facility through which the customers can transfer funds to any Bank account across India at their own convenience by visiting any of our NEFT/ IMPS retailers and avail the services as Over the Counter (OTC) service. NEFT money transfer over the counter services were launched in November, 2013 and later IMPS services were added in April, 2014. Delhi and Mumbai are the 'originating' and leading circles in the space of 'Money Transfer' business. IMCSL plans to increase the coverage of the service in existing locations and expand to new geographies later.

• Prepaid Payment Instrument (PPI)

PPI is commonly known as semi closed wallet. RBI granted Certificate of Authorisation to IMCSL for PPI in November, 2013. IMCSL commenced PPI services in Mumbai in July 2014 and in select cities of U.P. (East) and Bihar in December, 2014 and July, 2015 respectively. The services offered are both cash and web loading (through net banking) into the wallets. With PPI wallet balance one can recharge mobile of Idea and other operator's brpaid accounts, recharge DTH accounts, pay bills and make mobile digital wallet to digital wallet and wallet to bank account transfers. These wallet accounts can be opened with minimum KYC for balance up to Rs. 10,000/-. IMCSL is expanding coverage of these services to other cities in a phased manner. 

Payments Bank

Your Company has partnered with Aditya Birla Nuvo Limited (ABNL), the promoter and single largest shareholder of the Company, which has made an application to the Reserve Bank of India (RBI) for grant of License for setting-up a "Payments Bank", in accordance with the Guidelines for 'Licensing of Payments Bank' issued by RBI on November 27, 2014. As per the proposed structure, ABNL will hold 51% equity in the Payments Bank, which is proposed to be registered as "Idea Payments Bank Limited" and the balance equity would be held by your Company. The equity participation of the Company in the proposed Payments Bank may be increased up to 60%, subject to regulatory approvals, as applicable.

Non Voice Revenue

The Non-Voice revenue includes Data Revenue and Non Data VAS revenue from SMS and Voice & Text based VAS services and other VAS services.

The wired broadband penetration remains at a nascent stage (1.2%) in India. The wireless network remains brferred choice to access internet for the consumers. Hence, the data along with other Value Added Services (VAS) offers a substantial opportunity for additional growth in the Indian mobile telecommunication industry. The company is expanding its 3G network since launch of 3G services in FY 2010-11 to offer a superior experience to its customer. The expansion of data network coupled with reduction in 3G handset prices and availability of user friendly applications, has resulted in improved share of Data revenue in the total revenue. The data revenue for Financial Year 2014-15 stands at Rs. 45,378 Mn registering a growth of 96.3%, compared to data revenue of Rs. 23,112 Mn for Financial Year 2013-14. The Non-Data VAS revenue also registered a growth of 17.4% on YoY basis.

The contribution of Non voice revenue has improved from 16.5% in Q4FY14 to 24.5% in Q4FY15, an increase of 8% in last 12 months. As the 158 Mn existing subscribers upgrade their telecom usages from Voice to other range of our services, the Company is confident that the 'Non-Voice Revenue' contribution to the service revenue will continue to improve and will increase the Average Revenue Per User (ARPU).

Data revenue growth was driven by improving adoption of the data services by subscribers. The ARPU for the data subscriber increased to Rs. 150 in Q4FY15 compared to Rs. 104 in Q4FY14. The 3G data subscriber base of the company reached to 14.5 Mn as of Mach 2015, more than double compared to 7.2 Mn as of March 2014. Inspite of large subscriber addition on 3G, the ARPU of 3G data subscribers increased by Rs. 45 per user, from Rs. 164 in Q4FY14 to Rs. 209 in Q4FY15. The following table provides the comparison of key data KPI 

Large Scale of Operations

Your company is the 6th largest mobile operator across globe based on number of subscribers (GSMA Intelligence, as of March 2015). Company carried more than 2.06 Bn minutes on a daily basis during Q4FY15. Company carried 683 Bn minutes on its network during FY 2015, compared to 588 Bn minutes in FY 2014, a growth of 16.3%. Further, addition of 95.7 Bn minutes in a year was one of the highest minutes addition by the company in last four years. Your company has carried 172.5 Bn MB of data volume, registering a growth of 117.3% compared to last year.

Power Brand

Brand Idea is a prime example of your Company's contrarian approach to building a successful business in the highly crowded and competitive Indian telecom industry. Idea created clutter breaking communication through thought leadership based on the idea of category building vis-a-vis the beaten path of product and service based advertising. Through futuristic ideas brsented using quirky themes, it showcased the role of voice mobility in offering solutions to challenges faced by Indians -giving people a reason to enter the then small but high potential category of mobile telephony.

This framework has led to the creation of some very noticeable and memorable advertising like the 'Caste War', 'Education for All', 'Use Mobile Save Paper', 'Break the Language Barrier', 'Population' (India busy on Idea 3G), 'Old Idea - New Idea', 'Idea  rings all India - Honey Bunny' and 'Telephone Exchange' which have not only won many awards but also millions of hearts.

With this winning brand strategy, Brand Idea not only created thought leadership for itself in the consumers' minds, but also actively participated in the growing of the category from less than 200 Mn to 900 Mn subscribers today.

Of the 900 Mn telecom subscribers, currently only 200 Mn use mobile data. The brand is today focusing on growing the mobile broadband category in its endeavor to add the next 500 Mn to 700 Mn data users.

Idea started this phase by building relevance for mobile broadband with its 'No Ullu Banaoing' campaign. It was targeted at those segments of people who have access to but did not see any use of mobile internet for themselves. The campaign led to usage trials and also communicated that Idea has a strong internet network across the country.

'No UlluBanaoing' has been followed up with the 'Idea Internet Network - IIN in 2014-15. Education is a great leveler in India and is seen as a key to success. Consumers believe that getting the right education is a step towards achieving their maximum potential. With wide sbrad use of internet, education can now reach a new set of consumers who see this as a great opportunity to learn and improve the quality of their life.

The Idea Internet Network campaign tapped into this insight and chose education as a platform to connect with consumers across the length and breadth of the country. It encouraged consumers to learn anytime, anywhere and to follow their dreams and not let circumstances stop them from achieving their goals.

Brand Idea continues to be a hot favorite at national and international forums. It continues to collect accolades across categories and from panels comprising industry insiders as well as research experts.

STANDALONE FINANCIAL RESULTS

Revenues

Revenue from operations for the financial year ended March 31, 2015 stood at Rs. 312,795 Mn as compared to Rs. 261,795 Mn for financial year ended March 31, 2014, an increase of 19.5%, primarily due to 19.7% increase in service revenues. The growth in minutes of usage by 16.3% along with increase in the realised rate per minute and data revenue led to the increase in service revenues. Revenue Market Share of the Company increased from 16.2% in the brvious year to 17.5% in the current year. Non-voice revenues grew by 60.8% led by a growth of 96.3% in Data revenues from Rs. 23,112 Mn in the brvious year to Rs. 45,378 Mn in the current year and an increase in other non-voice revenues by 17.4% from Rs. 18,901 Mn in brvious year to Rs. 22,181 Mn in the current year. Revenues from International Long Distance services net of inter segment eliminations, increased by 35.3% to Rs.4,371 Mn.

Other Income comprising of Interest Income and Profit on Sale of Current Investments increased by 102.0% from Rs. 2,240 Mn in the brvious year to Rs. 4,523 Mn in the current year. The increase is on account of increase in surplus funds available with the company primarily due to the equity raised during the year and cash profits generated by the company.

Operating Expenses

Total operating expenditure for the financial year ended March 31, 2015 increased by 14.4% to Rs. 216,061 Mn in the current year from Rs. 188,938 Mn incurred in the brvious year, primarily reflecting the volume growth in the company's operations.

Personnel Expenditure: Personnel Expenditure for the financial year ended March 31, 2015 increased by 17.0% to Rs. 13,587 Mn from Rs. 11,610 Mn incurred during the brvious year, primarily as a result of annual increments, an increase in the average number of employees, and post-employment benefits. Our total number of employees increased to 10,875 as of March 31, 2015 from 10,505 as of March 31, 2014.

Network Expense and IT Outsourcing Cost: Network Expense and IT Outsourcing Cost for the financial year ended March 31,2015 increased by 10.9% to Rs. 82,887 Mn from Rs. 74,745 Mn incurred during the brvious year, primarily as a result of the expansion of our network coverage. Our total 2G and 3G cell sites increased to 112,367 and 30,291 cell sites as of March 31, 2015 from 104,778 and 21,381 cell sites as of March 31, 2014, respectively.

Licence Fees and Spectrum Usage Charges: Licence Fees and Spectrum Usage charges increased by 20.9% to Rs. 35,351 Mn for the current year from X 29,238 Mn incurred during the brvious year, corresponding to increase in revenue.

Roaming and Access Charges: Roaming and Access Charges increased by 13.7% to Rs 47,313 Mn for the current year from Rs 41,616 Mn incurred during the brvious year, primarily as a result of an increase in data volume and total minutes of usage.

Subscriber Acquisition and Servicing Expenditure: Subscriber Acquisition and Servicing Expenditure, increased by 19.8% to Rs25,038 Mn for the current year from Rs 20,906 Mn incurred during the brvious year, primarily as a result of increase in gross subscriber additions.

Advertisement and Business Promotion Expenditure:

Advertisement and Business Promotion Expenditure increased by 6.8% to Rs 4,929 Mn for the current year from Rs 4,617 Mn incurred during the brvious year.

Administration and Other Expenses: Administration and Other Expenses increased by 12.1% to Rs 6,955 Mn for the current financial year fromRs6,207 Mn incurred during the brvious year, primarily due to an increase in Directors Commission and Donations.

Profit before Finance charges, Debrciation, Amortisation and Taxes (EBITDA)

The incremental revenue growth has resulted in an EBITDA increase of 34.8% from Rs 75,096 Mn for the brvious year to Rs 101,257 Mn for the current year. EBITDA as a %age of Total Income increased to 31.9% compared to 28.4% for the brvious year.

Debrciation, Amortisation and Interest & Finance Charges

Debrciation and Amortisation expenses increased by 18.6% to Rs 48,550 Mn for the current year as against Rs 40,932 Mn for the brvious year, primarily due to gross block additions and revision in the estimated useful life of certain fixed assets. Interest and Finance Charges for the current year increased from Rs 8,111 Mn to Rs 9,317 Mn, largely due to higher interest cost under the deferred payment obligation towards Spectrum.

Profits and Taxes

For the year ended March 31, 2015, Profit before Tax increased by 66.5% and stood at Rs 43,391 Mn, against Rs 26,053 Mn for the brvious year. Cash Profit increased by 23.5% over brvious year and stood at Rs 77,742 Mn.

The tax charge stood at Rs 15,293 Mn. Net Profit for the current year was higher by 66.3% at Rs 28,098 Mn.

Capital Expenditure

The Company successfully bid for 54 MHz spectrum in the 900 MHz band and 3.2 Mhz spectrum in the 1800 MHz band in the 9 service areas where licenses are due to expire during financial years 2016/ 2017 in the auctions held in March, 2015. Further, the company also won 17.2 MHz of 1800 Mhz spectrum in 4 services areas and 5 MHz of 2100 Mhz spectrum in Kolkata service area in the auction held in March, 2015. The total amount committed by the company for spectrum won in March, 2015 auctions is Rs 301,375 Mn out of which Rs 19,350 Mn has been paid before March 31, 2015 and included in Capital Advances.

Apart from the above, during the year under review, the Company incurred capital expenditure consisting mostly of network equipment (including capital advances) of Rs 41,729 Mn. 

Balance Sheet

During the current financial year, the paid-up equity share capital of the Company increased by Rs 2,782 Mn, pursuant to issue of 275,719,137 equity shares under Qualified Institutional Placement (QIP) and Preferential Allotment of equity shares and issuance of 2,493,529 equity shares to the employees pursuant to exercise of stock options granted under Employee Stock Option Scheme, 2006 and Employee Stock Option Scheme, 2013. The reserves of the Company increased from Rs 122,647 Mn to Rs 182,923 Mn primarily due to current year's profits, brmium on issue of shares under QIP, Preferential allotment, ESOS 2006 & ESOS 2013 which was partially offset by proposed dividend for the current financial year and dividend distribution tax on same. The total shareholders' funds stood at Rs 218,901 Mn as at March 31, 2015.

Total loans outstanding as at March 31, 2015 were Rs 258,754 Mn, an increase of Rs 65,138 Mn, mainly due to the drawdown of Rs 80,500 Mn term loans for possible spectrum auction requirements (95% of this amount forms part of current maturities of Long Term Debt, as the Company has decided to br pay this in May, 2015). Deferred Tax liability as at March 31, 2015 stood at Rs 16,091 Mn. Other Liabilities and Provisions increased from Rs 75,113 Mn to X 83,012 Mn.

The Gross Block and Net Block [including Capital Work in Progress (CWIP)] stood at Rs 609,227 Mn and Rs371,934 Mn respectively as at March 31, 2015. As on March 31, 2015, Investment in subsidiaries stood at Rs 16,466 Mn. Other assets increased from Rs 49,429 Mn to Rs 188,359 Mn majorly due to Investment in Units of Liquid Mutual Funds, Bank Deposits and upfront amount paid towards spectrum.

Cash Flow Statement

During the year under review, the Company generated Rs 94,744 Mn from operating activities, Rs 37,374 Mn from issue of equity share capital and Rs 55,251 Mn net proceeds from borrowings which was primarily used for capital expenditure Rs 57,780 Mn (including payment towards spectrum Rs.19,350 Mn) and payment of interest and finance chargesRs 5,499 Mn. Consequently cash and cash equivalents as on March 31, 2015 increased by Rs 126,133 Mn and stood at Rs127,041 Mn.

CONSOLIDATED FINANCIAL RESULTS

Revenues

Revenue from operations for the financial year ended March 31, 2015 stood at Rs 315,709 Mn as compared to Rs 265,189 Mn for financial year ended March 31, 2014, an increase of 19.1%, primarily due to 19.6% increase in service revenues. The increase in the mobility and ILD service revenue of the company as explained in the standalone results section above along with increase in revenue from Passive Infrastructure services by 5.8% toRs 1,192 Mn. led to the increase in service revenues. Sale of Trading Goods decreased by 23.6% fromRs 2,248 Mn in the brvious year to Rs 1,717 Mn in the current year, primarily due to reduction in number of data cards and handsets sold during the year. 

Other Income comprising of Interest Income and Profit on Sale of Current Investments increased by 107.1% from Rs. 2,268 Mn in the brvious year to Rs 4,697 Mn in the current year. The increase is on account of increase in surplus funds available with the company primarily due to the equity raised during the year and cash profits generated by the company.

Operating Expenses

Total operating expenditure for the financial year ended March 31, 2015 increased by 13.9% to Rs 207,592 Mn in the current year from X 182,269 Mn incurred in the brvious year, primarily as a result of growth in the company's operations. Operational efficiencies have reduced the total operating expenses as a percentage of revenue from 68.1% in the brvious year to 64.8% during the year under review.

Cost of Trading Goods: Cost of Trading Goods decreased by 24.7% to Rs 1,452 Mn in the current year from Rs 1,927 Mn incurred in the brvious year primarily due to reduction in the number of data cards and handsets sold during the year.

Personnel Expenditure: Personnel Expenditure for the financial year ended March 31, 2015 increased by 16.6% to Rs 15,299 Mn from Rs13,121 Mn incurred during the brvious year, primarily as a result of annual increments, an increase in the average number of employees and increase in post-employment benefits. Our total number of employees (excluding employees of Indus Towers Limited) increased to 15,470 as of March 31, 2015 from 14,988 as of March 31, 2014.

Network Expense and IT Outsourcing Cost: Network Expense and IT Outsourcing Cost for the financial year ended March 31,

2015 increased by 10.7% to Rs 71,957 Mn from Rs 64,990 Mn

incurred during the brvious year, primarily as a result of the expansion of our network coverage and expenses incurred by subsidiaries and Joint Venture on additional sites.

Licence Fees and Spectrum Usage Charges & Roaming and Access Charges: The increase in these expenses pertains only to the company covered above under the section on Standalone Financial Results.

Subscriber Acquisition and Servicing Expenditure: Subscriber Acquisition and Servicing Expenditure, increased by 19.9% to Rs 23,752 Mn for the current year from Rs 19,807 Mn incurred during the brvious year, primarily as a result of increase in gross subscriber additions.

Advertisement and Business Promotion Expenditure:

Advertisement and Business Promotion Expenditure increased by 3.4% to Rs 5,031 Mn for the current year from Rs 4,867 Mn incurred during the brvious year.

Administration and Other Expenses: Administration and Other Expenses increased by 11.0% to Rs 7,438 Mn for the current year from Rs 6,703 Mn incurred during the brvious year, primarily due to an increase in Directors Commission and Donations.

Profit before Finance charges, Debrciation, Amortisation and Taxes

The incremental revenue growth has resulted in an EBITDA increase of 32.4% from Rs 85,189 Mn for the brvious year to Rs112,813 Mn for the current year. EBITDA as a percentage of Total Income increased to 35.2% compared to 31.9% for the brvious year.

Debrciation, Amortisation and Finance Charges

Debrciation and Amortisation expenses increased by 17.4% to Rs 53,036 Mn for the current year as against Rs 45,194 Mn for the brvious year, primarily due to gross block additions and revision in the estimated useful life of certain fixed assets. Interest and Finance Charges for the current year increased from Rs 9,552 Mn to Rs 10,452 Mn, largely due to higher interest cost on deferred payment obligation towards Spectrum.

Profits and Taxes

For the year ended March 31, 2015, Profit before Tax increased by 62.0% and stood at Rs 49,325 Mn, against Rs 30,443 Mn for the brvious year. Cash Profit increased by 22.4% over brvious year and stood at Rs 86,161 Mn.

The tax charge for the year stood at Rs 17,396 Mn. Net Profit for the current year was higher by 62.3% at Rs31,929 Mn.

Capital Expenditure

In addition to the spectrum acquired in auctions relating to Idea Cellular Limited as covered above under standalone financial results, during the year under review the capital expenditure (including capital advances) incurred was Rs 45,785 Mn.

Balance Sheet

During the current financial year, the paid-up equity share capital of the Company increased by Rs 2,782 Mn, pursuant to issue of equity shares as mentioned above in the section for standalone financial results. The reserves increased from Rs 132,054 Mn to Rs 194,295 Mn, primarily due to current year's profits and brmium on issue of shares partially offset by proposed dividend  for the current financial year, dividend distribution tax on same and dividend distribution tax paid by Indus. The total shareholders' funds stood at Rs230,273 Mn as at March 31, 2015.

Total loans outstanding as at March 31, 2015 were Rs 268,591 Mn, an increase of Rs 62,242 Mn, mainly due to the drawdown of Rs 80,500 Mn. term loans by the company as mentioned above under the section on standalone financial results. Deferred Tax liability as at March 31, 2015 stood at X 19,015 Mn. Other Liabilities and Provisions increased from Rs 75,823 Mn to Rs 86,770 Mn.

The Gross Block and Net Block [including Capital Work in Progress (CWIP)] stood at Rs 669,612 Mn and Rs 406,741 Mn respectively as at March 31, 2015. Other Assets increased from Rs55,422 Mn to Rs 197,927 Mn. majorly due to Investment in Units of Liquid Mutual Funds, Bank Deposits and upfront amount paid towards spectrum.

Cash Flow Statement

During the year under review, the Group generated Rs 104,179 Mn from operating activities, RsRs 37,374 Mn from issue of equity share capital and Rs 52,355 Mn from net proceeds from borrowings, which was primarily used for capital expenditure Rs 61,628 Mn (including payment towards spectrum RsRs19,350 Mn) and payment of interest and finance charges Rs 6,656 Mn. Consequently cash and cash equivalents as on March 31, 2015 increased by Rs127,202 Mn and stood at Rs 130,745 Mn.

Human Resources

The human resource philosophy and strategy of your Company is to attract and retain the best talent, encourage innovation, create an engaging and motivating workplace environment and be an employer of choice. This was reflected by external recognition through the "HR Excellence Award" given for best practices in Talent Acquisition, brsented at the Economic Times HR Excellence Summit 2014. In the brvious financial year, your Company had also shown an improvement in already high employee engagement scores overall, and significant improvement in areas like training and development and on boarding.

Keeping in view the long term business goals, your company has ensured that the Human Resources strategy is inline and complementary to the business strategy. Your company will focus on succession planning, building capability in digital space and analytics, and ensuring continued high employee engagement along with effective and efficient talent development and deployment. This strategy has strong alignment with your Company's vision to successfully build and sustain your Company's standing as one of India's most admired and valuable corporations despite unrelenting competitive brssures.

Risk Management

The Risk Management framework of your company ensures regular review by management to proactively identify the emerging risks, to do risk evaluation and risk prioritization along with development of risk mitigation plans and action taken to minimize the impact of the risk. The framework requires that the Risk Management Committee be periodically informed about risk minimization procedures adopted by your Company. These processes are also periodically reviewed by management. The various risks, including the risks related to the economy, regulation, competition, technology etc., are documented, monitored and managed efficiently.

Internal Control Systems

Your Company's internal control systems are commensurate with the nature of its business and the size and complexity of its operations. The internal controls cover operations, financial reporting, compliance with applicable laws and regulations, safeguarding assets from unauthorised use and ensure compliance of corporate policies. Internal controls are reviewed periodically by the internal auditors, and are subject to management reviews with significant audit observations and follow up actions reported to the Audit Committee. The Audit Committee actively reviews the adequacy and effectiveness of internal control systems and suggests improvements for strengthening them in accordance with the changes in the business dynamics, if required.

Regulatory

Major regulatory developments for the period are:

1. TRAI Direction for obtaining explicit consent of consumers for provisioning non-subscription based Value Added Service products embedded in SIM Application Tool Kit (STK) of SIM card (November 14, 2014)

The TRAI mandated all telecom service providers to ensure within sixty days (i.e. by January 13, 2015) that the Value Added Services for products embedded in the SIM card be offered to the consumer only after obtaining explicit consent of the consumer.

The Company has already complied with this Directive that has a negative impact on Revenues. However, implementation of this Directive would help in reducing customer issues regarding activation of VAS services without explicit consent.

2. License Amendment regarding Full Mobile Number Portability (November 3, 2014)

The DoT has instructed all Telecom Service Providers to implement the facility of Full Mobile Number Portability in the country. Further, "the Recipient Operator shall forward the porting request for intra as well as inter Licensed Service Area portability to MNP licensee of the zone to which number range holder of the number (subscriber number under porting) belongs. Number range holder of the number means the Access Service provider to whom the numbering range has been allocated by DoT."

The implementation of Full MNP had to be done in 6 months' time from the date of issuance of these instructions i.e. by May 3, 2015. The Company has implemented the same. 

3. Telecommunication Interconnection Usage Charges Regulations, 2015 (February 24 & 25, 2015)

The TRAI recently issued the "Telecommunication Interconnection Usage Charges (Eleventh Amendment) Regulations, 2015 (1 of 2015)" which brscribe revised:

(a) Domestic Termination Charges -Mobile Termination Charges (MTC) and Fixed Termination Charges (FTC)

(b) International Termination Charges

Thus: 

 • MTC for all calls originating from Wireless Network has been reduced from 20 paise per minute to 14 paise per minute (Wireless means Full Mobility, limited mobility and fixed wireless access).

• MTC for all calls originating from Wireline has been set to "Zero".

• FTC for all call originating either from Wireline network or from wireless network has been set to "Zero".

• Termination Charge for International Incoming Calls has been increased to 53 paise per minute from existing 40 paise per minute.

Further, the "Telecommunication Interconnection Usage Charges (Twelfth Amendment) Regulations, 2015 (2 of 2015)" was released on February 25, 2015 as under:

• The said Regulation brscribes a revised ceiling of 35 paise per minute for domestic carriage charge from the earlier ceiling of 65 paise per minute.

• The TRAI proposes to carry out another review after 2 years (during 2017-18).

• The current Regulation has also briefly touched upon the issue of Transit Carriage Charge being levied on TSPs for intra-LSA mobile traffic being handed over at the 

 4. Level-II TAX in the fixed line network of BSNL without brscribing any charges at the brsent moment.

Your Company has accordingly implemented the changes in its billing system.

TRAI amendment to the Quality of Service (QoS) of Broadband Service Regulations - (June 25, 2014)

The TRAI has increased the minimum speed of the internet connection that is able to support interactive services including Internet Access and has the capability of the minimum download speed of 512 kbps to an individual subscriber from the point of brsence (POP) of the service provider intending to provide Broadband Service, will only qualify as "Broadband Connection". The revised definition now overrides the brviously defined minimum download speed of 256 kbps.

5. The TRAI issued the TTO (Sixtieth Amendment) Order, 2015 (April 9, 2015)

• The TRAI has also mandated the TSPs to offer a Special Roaming Tariff Plan to its br-paid and post-paid subscribers in which incoming voice calls while on national roaming shall be free, on payment of fixed charge, if any. 

 • The changes come into effect from May 1, 2015.

Opportunities, Risks, Concerns and Threats

The wireless data subscriber penetration in India is still at around 26%. The wireless broadband services (3G) were commercially launched in India around 4 years back and wireless broadband subscribers penetration is still at 8.6% only. The 'Digital India' drive, data network expansion by strong operators and developments towards 4G LTE technology will certainly change the data growth outlook as envisaged today. Further, less than 50% penetration in rural India indicates the growth opportunity for the voice business going forward. The large wireless operators, including Idea, in last two spectrum auctions of  February, 2014 and March, 2015 have already expanded their data spectrum profile as well as renewed some of their licenses for a period of next 20 years and are getting ready to participate in the Voice and Data growth opportunities offered by the sector.

The auctions have resulted in large spectrum commitments, adversely impacting the financial health of the most operators. However, this also acts as a barrier for entry of any new operator in the sector. Also, high spectrum cost has forced some operators to become selective in renewing their spectrum and the exit from some of the service areas. Some of these operators would also need to take a decision on continuing their current operations, whenever their licenses are coming for renewal in the coming years. This should lead towards consolidation of the Industry. However, competition in the Indian telecommunications industry is still very intense. There may be irrational competition in the sector by new/existing players in future, which may have adverse impact on the Industry health going forward. Further, with the proliferation of number of OTT operators, the risk of voice revenue cannibalization through data remains a large risk for the sector. But, as in past whenever the Industry has witnessed large periods of irrational competition, your Company has emerged competitively stronger. Your company has expanded its spectrum profile covering more than 87% of revenues with either 3G or 4G spectrum as well as planning to launch its own range of 'Digital Services'. Your company is confident of consolidating its position in case the sector again faces hyper-competitive phase.

Your company has successfully renewed spectrum for the nine licenses which are due to expire in December, 2015 /April, 2016, in March, 2015 spectrum auction. Your company now holds liberalized spectrum which is currently used to offer GSM services, in 16 out of 22 service areas, which is highest in the Industry. The remaining six licenses with spectrum in 1800 MHz band are due for extension between FY 2022 to FY 2027. The Company runs a risk of extension at unfavorable terms and higher debt burden.

The regulatory environment continues to remain uncertain and negative for the industry at large. Some of the recent changes in regulations like reduction in IUC charges and reduction in roaming charges cap are adversely impacting the revenue of the sector. Industry, which is more than 2 decades old now, is still awaiting for the road map towards spectrum availability going forward, which is the key component in deciding the strategy for any operator. The Spectrum trading and sharing policy is also being long awaited.

The telecom sector is characterized by technological changes and competition from new technologies is an inherent threat. However, till date, the Indian telecom sector has not faced any disruptive phase arising out of any technological changes. Your Company, with an assortment of spectrum in 900/1800/2100 MHz has an attractive spectrum footprint to adapt to any future technological changes. Your company is closely watching the development on the 4G LTE front and gearing itself to offer 4G services in the near future.

Your Company has several ongoing litigations and any adverse determination of these remains a risk. Your Company believes in sound Corporate Governance Practices and believes that these litigations would be settled in due course in the best interest of all stakeholders. Your Company works with various local, state and central government agencies for specific permissions to operate its mobile licenses and is required to meet various regulatory/policy guidelines of the DoT and may be subjected to penalties/fines or increased cost of compliance. Your Company takes best effort to adhere to all such requirements.

The Company's business is dependent on key Network and IT equipment suppliers for management and continuity of its Network, IT and business processes. Further, these networks may be vulnerable to technical failures or any natural calamity. Your Company is in partnership with global leaders in Network equipment and IT services and enjoys very long standing healthy relations with all its suppliers. The Company has a robust network & IT security processes and disaster recovery plans.

Outlook

In past few years, your Company has consolidated its position from No. 3 operator in India to one among the top 3 operators in India. During the Financial Year 2014-15, your Company has gained more than 33.7% of incremental subscriber market share and close to 29.7% revenue market share. Your company has further improved its data spectrum (3G and 4G) profile with acquisition of 4G spectrum in the service areas of Tamil Nadu and Odisha as well as 3G spectrum in Kolkata service areas. The Broadband spectrum profile (3G or 4G) of your company now covers over 87% of its revenue. The spectrum renewal risk has been taken care by securing 900 MHz spectrum in all 9 service areas which were due to expire in December, 2015/April, 2016.

Your company is brparing itself for the next leg of the growth which appears to be led by data. The company has clearly defined plans to cater the need of data consumers by offering 4G services staring from Calendar year 2016, in a phased manner, in addition to aggressively expansion of own 3G network coverage. Your company is also working to offer its own 'Digital Services' related to information, entertainment, communication, utilities and API. The strong brand pull coupled with the improving cash flows and strong spectrum portfolio provides enough confidence to your company to remain on the path of profitable growth going forward. 

Cautionary Statement

Statements in the Management Discussion and Analysis describing the Company's objectives, projections, estimates, expectations may constitute a "forward-looking statement" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those exbrssed or implied. Important factors that could make a difference to the Company's operations include economic conditions affecting demand/supply and price conditions in the domestic markets in which the Company operates, changes in the Government Regulations, tax laws and other statutes and other incidental factors.