Idea Cellular Ltd

Dear Shareholders,

Your Directors are pleased to present the 15^th Annual Report, together withthe audited financial statements for the financial year ended March 31, 2010.

Financial Highlights

The financial highlights of the consolidated Statement of Operations of your Companyfor the financial year 2009-10 are summarised below:

Performance Review

During the year under review, your Company’s operations covered all service areasof India. The total revenue for the year ended March 31, 2010 stood at Rs.124,990 mnagainst Rs. 101,544 mn in the previous year, registering a growth of 23%. The Net Profitfor the financial year stood at Rs. 9,539 mn against Rs. 8,816 mn in the previous year.

Review of Consolidated Operations

During the year under review, Spice Communications Limited which had operations in thePunjab and Karnataka service areas, and licenses for National and International LongDistance operations, has been merged with the Company with effect from March 1, 2010,pursuant to a Scheme of Amalgamation. Similarly, the telecom operations of the Biharservice area which were in Aditya Birla Telecom Limited have come into the fold of yourCompany with effect from April 1, 2009, pursuant to a Scheme of Arrangement.

Your Company’s subscriber base increased by 48.4% over the year to reach 63.82 mnas of March 31, 2010. Your Company’s subscriber market share stood at 10.9% as of endMarch, 2010 on a national basis. Further, the Company’s revenue market shareincreased to 12.4% for the year ended March, 2010 from 11.1% for the year ended March,2009. The total Minutes of Usage have increased by more than 40% from 175 bn in 2008-09 to248 bn in 2009-10.

Dividend

As your Company does not have distributable profits as on March 31, 2010, yourDirectors regret their inability to recommend any dividend for the year underconsideration.

Share Capital

During the year under review, the Company issued and allotted 199,153,469 Equity Sharesof Rs. 10/- each, fully paid-up, to the equity shareholders of Spice CommunicationsLimited (Spice), in the ratio of 49 equity shares of the Company for every 100 equityshares held in Spice, as per the approved Scheme of Amalgamation.

Further, the Company issued and allotted 589,114 Equity Shares of Rs. 10/- each to theOption Grantees pursuant to the exercise of stock options under Employee Stock OptionScheme, 2006.

Consequently, the paid-up equity share capital of the Company increased by Rs. 1,997.43mn to Rs. 32,998.38 million.

Credit Ratings

The Company has received P1+ rating for its short term debt program from CRISIL, and anAA rating for its long term debt program from CARE.

Capital Expenditure

During the year, the Company rolled out services in the Orissa, Tamil Nadu, Jammu &Kashmir, Kolkata, West Bengal, Assam and North East service areas, thereby making it anationwide service provider. Moreover, your Company continues to expand network in theincumbent service areas for enhanced coverage and quality. Your Company incurred a capexof Rs. 39,814 mn (including the capex incurred by erstwhile Spice Communications Limited)during the financial year 2009-10.

The Company also made significant progress in rolling out its National Long Distance(NLD) network, and augmenting the International Long Distance (ILD) network. As at endMarch, 2010, it carried about 70% and 62% of its captive NLD and ILD traffic respectively.

Employee Stock Option Scheme

During the year, the ESOS Compensation Committee granted 6,918,750 options as a thirdtranche under the Employee Stock Option Scheme, 2006 (ESOS - 2006) to the eligibleemployees of the Company. Each option is convertible into one Equity Share of the Companyupon vesting. These options will vest in 4 equal annual installments after one year of thegrant and shall be exercisable within a period of 5 years from the date of the vesting.

Further, during the year, the ESOS Compensation Committee had re-priced the Optionsgranted to employees under Tranche I and Tranche II, as these Options had becomeunattractive consequent to a significant drop in share price. This re-pricing was dulyapproved by members at the 14^th Annual General Meeting held on December 21,2009.

Details of the options granted under ESOS–2006 upto March 31, 2010, and otherdisclosures in compliance with Clause 12 of Securities and Exchange Board of India(Employees Stock Option Scheme and Employees Stock Purchase Scheme) Guidelines, 1999, areset out in Annexure ‘B’ to this Report.

Human Resources

Your Company continuously invests in people development, identifying and groomingmanagement talent, and has a culture of harnessing people power to the maximum.

• Merger of Spice Communications Limited with the Company

During the financial year 2009-10, Spice Communications Limited (Spice), havingmobility operations in Punjab and Karnataka service areas including license for Nationaland International Long Distance operations, has been merged with the Company, pursuant tosanction of the Scheme of Amalgamation by the Hon’ble High Court of Gujarat and theHon’ble High Court of Delhi.

The High Court Orders have been filed with the respective Registrar of Companies,pursuant to which the Scheme become effective from March 1, 2010.

• De-merger of Telecom Undertaking (including Unified Access Services Licenseof the Bihar service area from Aditya Birla Telecom Limited (ABTL) to the Company)

Your Directors wish to inform that the telecom operations of the Bihar service area(alongwith certain assets and liabilities) which were hitherto carried out in Aditya BirlaTelecom Limited (a wholly owned subsidiary) have been de-merged into the Company, pursuantto the Scheme of Arrangement approved by the Hon’ble High Court of Gujarat, and theHon’ble High Court of Bombay.

The said Scheme became effective on 1^st March, 2010 with an Appointed Dateof 1^st April, 2009.

• De-merger of Licenses

Your Directors wish to inform that the Scheme of Arrangement filed by the Company withthe Hon’ble High Court of Gujarat for de-merging the UAS Licenses in respect ofPunjab and Karnataka service areas to an eligible entity has been withdrawn. Similarly,the Scheme of Arrangement filed by erstwhile Spice Communications Limited with theHon’ble High Court of Delhi for de-merging UAS Licenses in respect of Delhi, Haryana,Mahrashtra and Andhra Pradesh service areas has also been withdrawn.

• ISP License

In April, 2010, your Company received a License for providing pan India InternetServices (ISP License). This License will enable the Company to offer a gamut of servicesto the enterprise segment on a national basis.

• Auction of 3G Spectrum

The Department of Telecommunications, Ministry of Communications & InformationTechnology had conducted an Auction for 2.1 GHz band (3G Spectrum) in the month of April,2010. After the bidding spanning over 34 days and 183 rounds, your Company emerged winnerin 11 Service Areas viz. Maharashtra, Gujarat, Andhra Pradesh, Kerala, Punjab, Haryana,Uttar Pradesh (E), Uttar Pradesh (W), Madhya Pradesh, Himachal Pradesh and Jammu &Kashmir, at a total cost of Rs. 5,768.59 Crore.

The 3G footprint of the Company in the 11 service areas accounts for as much as 81% ofits national revenue, of these 11, the Company is number 1 in 4 service areas , and number2 in another 3 service areas.

Awards and Recognitions

Some key awards and recognitions received by your Company are:

• Your Company has been ranked 6^th in Investor Relations and ranked 7^thin Corporate Governance amongst Indian Companies by Finance Asia magazine’s annualpoll of investors and analysts.

• Brand !dea has been ranked the 4^th Buzziest Brand byAgencyfaqs.

• Idea won the award for the ‘Best Ad Campaign’ at tele.net TelecomOperator Awards, 2010.

• The campaign "What an Idea Sirjee" continue to win accolades with thecampaign recently winning Silver at EFFIES 2009 for "Democracy" Campaign, whilethe ‘Walk when you Talk’ Campaign was adjudged the 2nd best campaign of the yearby Brand Wagon (FE) and ‘All about Ads’ on NDTV Profit.

New Initiatives and Alliances

During the year under review, your Company made extensive progress on the marketing andcustomer care front by introducing various innovative products and services and alsoentered into various alliances. Some of these are:

• The Company deployed a best-in-class Interactive Voice Response (IVR) system,based on a highly efficient technology architecture deployed by IBM in partnership withCISCO. This IVR is the world’s largest Cisco CVP deployment in telecom, and thelargest deployment in APAC (Asia Pacific American Coalition). The Company currentlymanages close to 5 million customer interactions per day using this IVR.

• The Company conceptualized and launched "Insta Alert", an innovativetool to convey latest offers and service related communication to customers who latch onto the network after a period of inactivity. This application was nominated for the globalGSM Awards at Barcelona.

• Idea launched a standardized self care portal "CARE" which givesinformation to the customer on products / tariffs and information of their account such asbilled amount, last recharge, last calls, unbilled amount, etc.

• Idea was the first operator to launch "Pre Tones". Pre Tones is aninnovative VAS service which allows the user to listen to the caller tones of his / herown choice while making an outgoing call instead of listening to the respondent’scaller tone.

• Idea launched 3G Compatible Net Setter Data Cards to cater to the needs of itsdata -savvy customer segments.

• As one of Idea’s new VAS activities, Idea launched "BuddyRecharge" – a unique peer-to-peer talk time transfer product.

• Idea strengthened its brand through a series of media properties like the IdeaCup, Cricket Series, Talk for India, Bingo Night, etc. Idea associated with IPL teams,Deccan Chargers and Delhi Daredevils as Principal Partners.

• Idea also launched Oongli Cricket during the IPL season, which was wellreceived.

Subsidiaries and Joint Ventures

Your Company has the following subsidiaries and joint ventures:

Subsidiaries

• Aditya Birla Telecom Limited (ABTL), holds 16% shareholding in Indus TowersLimited and 100% shareholding in ICTIL.

• Idea Cellular Services Limited (ICSL), provides manpower services to theCompany.

• Idea Cellular Infrastructure Services Limited (ICISL), is a tower company owningtowers in Bihar and Orissa service areas and provides passive infrastructure services inthese service areas.

• Idea Cellular Towers Infrastructure Limited (ICTIL), holds towers de-merged fromthe Company. ICTIL will subsequently merge into Indus Towers Limited.

• Carlos Towers Limited (Carlos), became subsidiary pursuant to the amalgamationof Spice Communications Limited with the Company and is presently not having anyoperations.

• Swinder Singh Satara and Company Limited (SSS & Co.), is engaged in thebusiness of sale and purchase of Data Cards, mobile hand sets and Fixed Wireless Phones.

As per Section 212(1) of the Companies Act, 1956, the Company is required to attach toits accounts the Director’s Report, Balance Sheet and Profit and Loss Account etc. ofeach of its subsidiaries. As the consolidated accounts present a complete picture of thefinancial results of the Company and its subsidiaries, the Company had applied to theCentral Government seeking exemption from attaching the documents referred to in Section212(1) of the Companies Act, 1956. In terms of the approval granted by the CentralGovernment vide letter No. 47/288/2010-CL-III dated 13.04.2010 under Section 212(8) of theCompanies Act, 1956, a copy of the Balance Sheet, Profit and Loss Account, Reports of theBoard of Directors and Auditors of the aforesaid subsidiaries for year ended March 31,2010 have not been attached with the financial statements of your Company. However, theannual accounts of the subsidiary companies will be made available to any investor of theCompany, who seek such information and are also open for inspection by any investor at theRegistered Office of the Company. The same are also uploaded on the website of theCompany. The statement pursuant to the approval under Section 212(8) of the Companies Act,1956, forms part of the Annual Report.

Joint Ventures

Indus Towers Limited (Indus), in which ABTL holds a 16% stake, is a joint venturebetween the Bharti group, Vodafone Essar group and the Company (through ABTL), andprovides passive infrastructure services in 15 service areas.

Fixed Deposits

Your Company does not accept or hold any deposits and as such, no amount of principalor interest on fixed deposits was outstanding on the date of the Balance Sheet.

Corporate Governance

The Company is committed to maintain the highest standards of Corporate Governance.Your Directors adhere to all the requirements as provided in Clause 49 of the ListingAgreement which relates to Corporate Governance.

The Ministry of Corporate Affairs has issued a set of Voluntary Guidelines on‘Corporate Governance’ and ‘Corporate Social Responsibility’ inDecember, 2009. These guidelines are to serve as a benchmark for the corporate sector, andalso help in achieving the highest standard of Corporate Governance.

Some of the provisions of these guidelines are already in place and are covered in theCorporate Governance Report. The other provisions of these guidelines are being evaluatedand your Company will strive to adopt the same in a phased manner.

A detailed report on the Corporate Governance, together with a certificate from thestatutory auditors confirming compliance with the conditions of Corporate Governance,forms part of this report.

Board of Directors

Consequent upon change in nomination by Axiata Group Berhad, Dr. Shridhir SariputtaHansa Wijayasuriya ceased to be a Director on the Board of your Company with effect fromJanuary 22, 2010 and in his place Mr. Juan Villalonga Navarro has been nominated. Mr.Navarro has been appointed as an Additional Director on the Board of your Company witheffect from January 22, 2010. Further, Dr. Hansa Wijayasuriya has been appointed as anAlternate Director to Mr. Navarro with effect from January 22, 2010.

As per the provisions of Section 260 of the Companies Act, 1956, Mr. Navarro will holdoffice upto the date of the ensuing Annual General Meeting of the Company.

Your Company has received a notice under Section 257 of the Companies Act, 1956together with the requisite deposit from a shareholder, in respect of Mr. Navarro,proposing his appointment as a Director on the Board of the Company. The Resolutionseeking approval of the members for his appointment as Director has been incorporated inthe Notice convening the Annual General Meeting.

In accordance with the provisions of the Companies Act, 1956 and the Articles ofAssociation of the Company, Mrs. Rajashree Birla, Ms. Tarjani Vakil, Mr. Arun Thiagarajanand Mr. Biswajit A. Subramanian retire from office by rotation, and being eligible, offerthemselves for re-appointment at the ensuing Annual General Meeting of the Company.

Brief profiles of the Directors proposed to be appointed / reappointed as requiredunder Clause 49 of the Listing Agreement are annexed to the Notice convening the 15^thAnnual 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 theCompanies Act, 1956, read with the Companies (Disclosures of Particulars in the Report ofBoard of Directors) Rules, 1988, are given to the extent applicable in the Annexure‘A’ forming part of this Report.

Particulars of Employees

In accordance with the provisions of Section 217(2A) of the Companies Act, 1956, readwith the Companies (Particulars of Employees) Rules, 1975, the names and other particularsof employees have been set out in the annexure to this report. However, in terms of theprovisions of Section 219(1)(b)(iv) of the Act, the report and accounts, as therein setout, are being sent to all the members of the Company excluding the aforesaid informationabout employees. Any member, who is interested in obtaining such particulars aboutemployees, 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 forthe Financial Year 2009-10 are in conformity with the requirements of the Companies Act,1956. They believe that the financial statements reflect fairly the form and substance oftransactions carried out during the year and reasonably present the Company’sfinancial 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 havebeen followed other than the accounting treatment for the court approved Scheme(s) ofArrangement which have been explained in the relevant notes to the Accounts;

b) the accounting policies have been applied consistently and judgements and estimatesmade are reasonable and prudent, so as to give a true and fair view of the state ofaffairs of the Company at the end of the financial year and of the profit of the Companyfor that period;

c) proper and sufficient care has been taken to the best of their knowledge and belieffor the maintenance of adequate accounting records in accordance with the provisions ofthe Companies Act, 1956, for safeguarding the assets of the Company and for preventing anddetecting fraud and other irregularities;

d) the annual accounts have been prepared on a going concern basis.

Auditors

Your Company’s Statutory Auditors, M/s. Deloitte Haskins & Sells, CharteredAccountants retire at the conclusion of the ensuing Annual General Meeting. The StatutoryAuditors have confirmed their eligibility and willingness to accept the office onre-appointment. The necessary resolution seeking your approval for re-appointment ofStatutory Auditors has been incorporated in the Notice convening the Annual GeneralMeeting.

Auditors’ Report and Notes to Accounts

The Board has duly reviewed the Statutory Auditors’ Report on the Accounts. Theobservations and comments, appearing in the Auditors’ Report are self-explanatory anddo not call for any further explanation/clarification by the Board of Directors underSection 217(3) of the Companies Act, 1956.

Management Discussion and Analysis

The Management Discussion and Analysis Report for the year under review, as stipulatedunder Clause 49 of the Listing Agreement is presented in a separate section forming partof the Annual Report.

Appreciation

Your Directors wish to express their sincere appreciation to the Department ofTelecommunications, the Central Government, the State Governments, bankers and thebusiness associates for their excellent support and look forward to continued support infuture. Your Directors wish to place on record their appreciation to the employees at alllevels for their hard work, dedication and commitment, which has enabled the Company toprogress.

Annexure ’A’ to the Directors’ Report

Particulars pursuant to the Companies (Disclosure of Particulars in the Report of theBoard of Directors) Rules, 1988 are furnished hereunder:

Annexure ‘B’ to the Directors’ Report

Disclosure pursuant to the provisions of the Securities and Exchange Board of India(Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999