Your Directors are pleased to present the seventeenth Annual Report, together with the audited financial statements of the Company for the financial year ended March 31, 2012.
Your Company continues its enviable four year track record of being the fastest growing major Indian mobile operator in terms of revenue growth. The Company's revenue market share increased from 13.3% at the beginning of the calendar year 2011 to 14.4% at the end of the calendar year 2011.
Your Company's total subscriber base as on March 31, 2012 stood at 112.7 Mn, an increase of 25.9% over the previous year. On a national basis, your Company's subscriber market share stood at 12.3% as of end March, 2012. The subscriber base of your Company is among the best in terms of percentage of active subscribers to total subscribers. As on March 31, 2012, your Company had around 93.4% of total subscribers as active subscribers, which is highest in the Industry.
Your Company's 3G investment plans are on track with high speed broad band services now available in more than 3,000 towns and 10,000 villages in 20 service areas (including those with roaming arrangements), with around 2.6 Mn subscribers actively using the Company's 3G platform and enjoying services whose time has come.
Your Company's total minutes of usage on the network for the financial year 2011-12 crossed 453 billion minutes, strengthening the Company's position among the top 10 Telecom Operators in the world.
During the financial year 2011-12, on a standalone basis, the total revenues of the Company were Rs. 193,223 Mn, representing a growth of 25.6% over the Previous year, primarily driven by 25% growth in total Minutes of Usage. The EBITDA also increased to Rs. 43,128 Mn, a growth of 37.9% compared to the previous year.
The Profit after Tax was lower at Rs. 5,765 Mn, a decrease of 31.7% as compared to the previous year, primarily on account of higher depreciation & amortisation and interest charges due to 3G investments. As of March 31, 2012, your Company has accumulated Profits of Rs. 10,248 Mn.
On a consolidated basis, the total revenues were Rs. 195,412 Mn, representing a growth of 26% over the previous year. The EBITDA also increased to Rs. 50,923 Mn, a growth of 34.3% as compared to previous year. The consolidated Profit after Tax stood at Rs. 7,230 Mn, a decrease of 19.6% compared to the previous year.
The Company is in the telecommunication sector which continues to see tremendous growth and significant new investments. Keeping in view the future requirement of funds and emerging regulatory challenges, your Directors have decided not to recommend any Dividend for the financial year ended on March 31, 2012.
During the year under review, your Company issued and allotted 5,573,605 Equity Shares of Rs. 10/- each, fully paid-up, to the option grantees pursuant to the exercise of stock options by eligible employees under the Employee Stock Option Scheme, 2006 (ESOS-2006).
Consequently, the issued, subscribed and paid-up equity share capital of your Company as on March 31, 2012 stood at Rs. 33,088,451,100/-, comprising of 3,308,845,110 Equity Shares of Rs. 10/- each.
Your Company continues to enjoy credit rating of CARE A1+ and CRISIL A1+ for its short term debt program and CARE AA rating for its long term debt program.
Your Company continues to expand its reach to tap the uncovered population and enhance the quality of its network, including investments towards roll out of 3G services. During the year your Company added 9,522 2G cell sites and expanded its 3G network to 12,825 3G cell sites. On consolidated level, the capital expenditure (including capital advances) stands at Rs. 45,447 Mn during the financial year 2011-12.
Your Company also made significant progress in rolling out its Long Distance network. As at end March, 2012, it carried over 93% of its captive NLD and ILD outgoing traffic.
Employee Stock Option Scheme
Your Company values its employees and is committed to adopt the best HR practices for rewarding them suitably. In this direction your Company had implemented the Employee Stock Option Scheme, 2006 (ESOS-2006) and made grants to eligible employees under the said Scheme from time to time.
The relevant disclosure in compliance with clause 12 of Securities and Exchange Board of India (Employees Stock Option Scheme and Employees Stock Purchase Scheme) Guidelines, 1999, as amended, is set out in Annexure 'A' to this Report.
A certificate from M/s. Deloitte Haskins & Sells, Statutory Auditors, with respect to the implementation of the Company's Employees Stock Option Scheme, would be placed before the shareholders at the ensuing Annual General Meeting and a copy of the same will also be available for inspection at the registered office of the Company.
The human resource philosophy and strategy of your Company is structured to attract and retain the best talent that encourages innovation and creates engaging and motivating workplace environment. This strategy has, through strong alignment with your Company's vision, successfully built and sustained your Company's standing as one of India's most admired and valuable corporations despite unrelenting competitive pressures.
• Supreme Court Judgment on quashing of licenses granted in January, 2008
The Hon'ble Supreme Court, on petitions filed by the Centre for Public Interest Litigation and others, has quashed all the telecom licenses granted by the DoT, to various Telecom Operators in January, 2008 pursuant to two Press Releases dated January 10, 2008, issued by the DoT. These licenses included seven operating licenses held by the Company in respect of the Tamilnadu (including Chennai), Kolkata, West Bengal, Orissa, Assam, North East and Jammu & Kashmir service areas and two non-operating licenses in respect of Punjab and Karnataka service areas. Besides, the Company was also holding non-operative telecom licenses for four service areas granted by the DoT in January, 2008 to erstwhile Spice Communications Limited (Spice), which has since been merged with the Company. These four licenses pertained to Andhra Pradesh, Maharashtra, Delhi and Haryana service areas. The judgment has also cancelled the allocation of startup spectrum which was earmarked pursuant to grant of these licenses. Through the said judgment, as modified by a further order dated April 24, 2012, the TRAI has been directed to make fresh recommendations for grant of licenses and allocation of spectrum in 2G band by auction, as was done for allocation of spectrum in 3G band and the DoT has been directed to complete the auction by August 31, 2012.
The shareholders may note that your Company is committed to take all necessary steps to safeguard its interest in the matter. As the impact, if any, on the operations in the said seven service areas and on the carrying values of these licenses as on March 31, 2012 amounting to Rs.2,777.8 Mn is dependent upon the steps that the DoT may take and on the outcome of the auction to be conducted as per directive of the Hon'ble Supreme Court, operations in these seven service areas currently continue as usual and accordingly the financial statements include the operational results of these service areas on a going concern basis.
• 3G Services
Your Company during the period March, 11 to October, 11, launched 3G services in 10 out of the 11 service areas (except Punjab) where it had won 3G spectrum. The DoT has not allowed commercial usage of the earmarked 3G spectrum for Punjab service area to the Company. The Company has also entered into bilateral roaming arrangements with other leading operators in 10 other service areas except Orissa.
The DoT had, vide its order dated December 23, 2011, ordered Telecom Operators to stop provision of services under 3G Intra Circle Roaming Agreements in service areas where it has not won 3G Spectrum. The Company alongwith other Telecom Operators has challenged the said order and Hon'ble Telecom Dispute Settlement Appellate Tribunal (TDSAT) has passed a "no coercive action" order till the time the dispute is decided. The final hearing in the matter has concluded and judgement is reserved.
• Merger of Spice Communications Limited
The Hon'ble High Court of Delhi vide its order dated July 04, 2011, pursuant to an application filed by the DoT, while re-affirmed the amalgamation of erstwhile Spice Communications Limited (Spice) with the Company, has transferred unto DoT, inter alia, the operating licenses held by erstwhile Spice in respect of Punjab and Karnataka service areas. Your Company has challenged the said order before appellate bench of the Hon'ble Delhi High Court, which through interim orders has directed DoT to continue to accept the payment of the License Fee from your Company as was being done before the said order dated July 04, 2011 and has directed DoT not to enforce any demand in respect of non-operative licenses. Meanwhile the hearing in the said matter is complete and judgment reserved.
• Notices from DoT for alleged violation of terms and conditions of License Agreement
Due to the DoT's alleged contention that the acquisition of erstwhile Spice Communications Limited and its subsequent amalgamation violates certain license conditions/guidelines, the Company had received various Show Cause/Demand Notices from the DoT in respect of the operational and non-operational licenses and also on certain other alleged violations of license agreement. Your Company is contesting the same before the Hon'ble TDSAT.
• 3G Spectrum for Punjab Service Area
The DoT, though, has earmarked the 3G spectrum in respect of Punjab service area, which was won by the Company in the 3G spectrum auction conducted by DoT in May, 2010, has not yet allowed commercial use of the same to your Company, due to, inter alia, alleged violation of certain license conditions.
The Company had approached the Hon'ble TDSAT and filed a Petition for necessary direction to the DoT to allow the commercial usage of allocated 3G Spectrum for Punjab service area. The TDSAT has dismissed the said petition in view of order passed by Delhi High Court in July, 2011 concerning amalgamation of erstwhile Spice Communications Limited with the Company, which was holding the operative 2G license in respect of Punjab service area. The Company has since filed an appeal against the order of TDSAT in the Supreme Court, where the matter remains sub judice.
Awards and Recognitions
Your Company's brand initiatives have been recognized and appreciated across forums, and we have won many awards, both nationally and internationally.
• Idea won prestigious Gold EFFIE for 'no idea-get Idea' (number portability) campaign and Silver EFFIE for 'Break the Language Barrier' campaign.
• 'No Idea-Get Idea' and 'Break the Language Barrier' campaigns transcended national boundaries to be ranked globally as the Best Brand Campaign, 2011 by World Communication Awards, London.
• The "Most Trusted Brands Survey" by Brand Equity ranked Idea as 28th amongst all Products and Services Brands climbing 117 ranks over last year. The same survey ranked Idea 4th amongst all Service Brands.
• In radio, Idea won 6 awards at the Golden Mikes Awards 2011 and was adjudged the 'Advertiser of the Year'.
• Idea won a number of awards for interesting and innovative work on the Digital medium:
- A Gold at The Yahoo Big Chair.
- At the WAT Awards: Silver for Social Media Campaign of the Year and Digital Media Campaign of the Year.
- At exchange 4media Indian Digital Media Awards (IDMA): A Silver for the Best Video Creative made for Internet/Mobile Media
During the year under review, your Company made extensive progress on the marketing and customer care front by entering into various alliances, introducing various innovative products and services. Some of these are -
• The Company launched some interesting enterprise solutions for large scale businesses. One such significantly big solution is the first of its kind IVR based LPG gas booking for IOCL & HPCL across 15 circles which is touching lives of about 30 million IOCL/HPCL consumers and generates about 20 million gas refills every month. The product has enabled customers to book their gas cylinder by dialing an IVR number on a 24x7 basis and to receive SMS confirmations for the booking and the dispatch.
• The Company's large array of Value Added Services has added many more innovative and customer friendly services. One such significant one is Text Subscription services in 9 vernacular/local languages which has significant relevance for the non-metro and rural customers.
• The Company also introduced the 'Complaint Availability Status' on web for its prepaid and postpaid customers, wherein customers can avail the status of their complaint, by simply logging on to the Idea web portal.
• The Company launched a unique first of its kind loyalty program that rewards customers with free instant talk time.
• To facilitate higher adoption of 3G services by customers and to provide better face-to-face interaction, 3G Experience Zones have been established at the Service Centers across various cities. The 3G Experience Zones are managed by trained Data Specialists equipped with TV's, Netbook's, 3G compatible handset's, NetSetter's and device simulators for demonstration and query handling.
• Idea's continued focus on communicating 3G through its blockbuster media campaigns have resulted in Idea having the strongest brand association with '3G'
• Idea strengthened its brand through number of high impact media properties like Kaun Banega Crorepati, Idea Filmfare Awards, Citizen Journalist Awards, in addition to several regional media properties. The brand continues its association with the Delhi Daredevils team in IPL 5.
Subsidiaries and Joint Ventures
Your Company has the following subsidiaries and joint ventures:
• Aditya Birla Telecom Limited, holds 16% shareholding in Indus Towers Limited and 100% shareholding in Idea Cellular Towers Infrastructure Limited and is engaged in the trading of communication devices.
• Idea Cellular Services Limited, provides manpower services to the Company.
• Idea Cellular Infrastructure Services Limited, is a tower company owning towers in Bihar and Orissa service areas and provides passive infrastructure services in these service areas.
• Idea Cellular Towers Infrastructure Limited (ICTIL), holds towers de-merged from the Company. ICTIL has filed a scheme of arrangement in the Hon'ble High Court of Delhi which provides for its merger into Indus Towers Limited.
• Idea Mobile Commerce Services Limited, is engaged in the business of Mobile Banking.
• Idea Telesystems Limited (formerly Swinder Singh Satara and Company Limited), is engaged in the trading of communication devices.
In terms of general exemption granted by the Ministry of Corporate Affairs, Government of India, vide its Circular No. 2/2011 dated February 8, 2011, and in compliance with the conditions enlisted therein, the reports and annual accounts of the subsidiary companies for the financial year ended March 31, 2012 have not been attached to the Company's Accounts.
The annual accounts and other related information of the Subsidiary Companies shall be available for inspection during business hours by the members at the Registered Office of the Company. The copies of these documents will also be made available to the members upon request.
Indus Towers Limited, in which Aditya Birla Telecom Limited (ABTL) holds a 16% stake, is a joint venture with the Bharti Infratel and Vodafone Essar and provides passive infrastructure services in 15 service areas.
Your Company does not accept or hold any deposits and as such, no amount of principal or interest on fixed deposits was outstanding on the date of the Balance Sheet.
The Company is committed to maintain the highest standards of Corporate Governance. Company continues to be compliant with the requirements enshrined in clause 49 of the Listing Agreement which relates to Corporate Governance.
A Report on Corporate Governance as stipulated under clause 49 of the Listing Agreement forms part of the Annual Report. A certificate from the Statutory Auditors of the Company, confirming compliance with the conditions of Corporate Governance, as stipulated under clause 49 forms part of this Report.
Management Discussion and Analysis
The Management Discussion and Analysis Report for the year under review, as stipulated under clause 49 of the Listing Agreement is presented in a separate section forming part of the Annual Report.
During the year under review, Ms. Madhabi Puri Buch was appointed as an Additional Independent Director on the Board of your Company with effect from December 22, 2011. As per the provisions of Section 260 of the Companies Act, 1956, she holds office upto the date of the ensuing Annual General Meeting of the Company.
Your Company has received a notice under Section 257 of the Act 1956, together with the requisite deposit, from a member proposing the appointment of Ms. Buch as a Director on the Board of the Company. Resolution seeking approval of the Members for the appointment of Ms. Buch as a Director of the Company has been incorporated in the Notice of the ensuing Annual General Meeting together with a brief resume.
In accordance with the provisions of the Companies Act, 1956 and the Articles of Association of the Company, Mr. Mohan Gyani, Mr. Arun Thiagarajan, Mr. R.C. Bhargava and Mr. P. Murari retire from office by rotation, and being eligible, offer themselves for re-appointment at the ensuing Annual General Meeting of the Company.
Brief profile of the Directors proposed to be appointed/re-appointed as required under clause 49 of the Listing Agreement are annexed to the Notice convening the 17th Annual General Meeting forming part of this Annual Report.
Conservation of Energy, Technology Absorption, Foreign Exchange Earnings & Outgo
The particulars as required to be disclosed pursuant to Section 217(1)(e) of the Companies Act, 1956, read with the Companies (Disclosures of Particulars in the Report of Board of Directors) Rules, 1988, are given to the extent applicable in the Annexure 'B' forming part of this Report.
Particulars of Employees
In accordance with the provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, the names and other particulars of employees have been set out in the annexure to this report. However, in terms of the provisions of Section 219(1)(b)(iv) of the Companies Act, 1956, the report and accounts, as therein set out, are being sent to all the members of the Company excluding the aforesaid information about employees. Any member, who is interested in obtaining such particulars about employees, may write to the Company Secretary at the Registered Office of the Company.
Directors' Responsibility Statement
Your Directors affirm that the audited accounts containing the financial statements for the financial year 2011-12 are in conformity with the requirements of the Companies Act, 1956. They believe that the financial statements reflect fairly the form and substance of transactions carried out during the year and reasonably present the Company's financial condition and results of operations.
Pursuant to Section 217(2AA) of the Companies Act, 1956, the Directors confirm that:
a) in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;
b) the accounting policies have been applied consistently and judgments and estimates made are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company as at the end of the financial year and of the profit of the Company for that period;
c) proper and sufficient care has been taken to the best of their knowledge and belief for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
d) the annual accounts have been prepared on a going concern basis.
The Statutory Auditors of the Company, M/s. Deloitte Haskins & Sells, Chartered Accountants, Mumbai, retire at the conclusion of the ensuing Annual General Meeting. The Statutory Auditors have confirmed their eligibility and willingness to accept the office on re-appointment. The Board recommends their re-appointment for the next term.
Auditors' Report and Notes to Accounts
The Board has duly reviewed the Statutory Auditors' Report on the Accounts. The observations appearing in the Auditors' Report, including the sub-judice matter are self-explanatory and do not call for any further explanation/clarification by the Board of Directors under Section 217(3) of the Companies Act, 1956.
During the year under review, the Ministry of Corporate Affairs (MCA) has issued Telecom Industry specific Cost Audit Order dated May 2, 2011, making appointment of Cost Auditor mandatory, inter-alia, for the Companies to whom the Cost Accounting Records (Telecommunications) Rules, 2002 apply.
Accordingly, in terms of the above order and pursuant to the provisions of Section 233B of the Act, your Directors have appointed M/s. Sanjay Gupta & Associates, Cost Accountants, as the Cost Auditors of the Company to audit the cost records/ accounts maintained as per the Cost Accounting Records (Telecommunications) Rules, 2002 for the financial year ending March 31, 2012. The Cost Audit Report for the financial year 2011-12 is yet to be placed before the Board.
Your Directors wish to express their sincere appreciation to the Department of Telecommunications, the Central Government, the State Governments, bankers and all the business associates for their support and look forward to continued support in future. Your Directors also wish to place on record their appreciation to the employees for their commitment in the progress of the Company.
For and on behalf of the Board
Kumar Mangalam Birla
Date: April 26, 2012