Reliance Communications Ltd

Forward looking statements

Statements in this Management Discussion and Analysis of Financial Condition andResults of Operations of the Company describing the Company’s objectives,expectations or predictions may be forward looking within the meaning of applicablesecurities laws and regulations. Forward looking statements are based on certainassumptions and expectations of future events.

The Company cannot guarantee that these assumptions and expectations are accurate orwill be realised. The Company assumes no responsibility to publicly amend, modify orrevise forward-looking statements, on the basis of any subsequent developments,information or events. Actual results may differ materially from those expressed in thestatement. Important factors that could influence the Company’s operations includeinterconnect usage charges, determination of tariff and such other charges and levies bythe regulatory authority, changes in government regulations, tax laws, economicdevelopments within the country and such other factors globally.

The financial statements are prepared under historical cost convention, on accrualbasis of accounting, and in accordance with the provisions of the Companies Act, 1956 (theAct) and comply with the Accounting Standards notified under Section 211(3C) of the Actread with the Companies (Accounting Standards) Rules, 2006. The management of RelianceCommunications Limited ("Reliance Communications" or "RCOM" or"the Company") has used estimates and judgments relating to the financialstatements on a prudent and reasonable basis, in order that the financial statementsreflect in a true and fair manner, the state of affairs and profits for the year. Thefollowing discussions on our financial condition and result of operations should be readtogether with our audited consolidated financial statements and the notes to thesestatements included in the Annual Report.

Unless otherwise specified or the context otherwise requires, all references herein to"we", "us", "our", "the Company","Reliance", "RCOM", "RCOM Group" or "RelianceCommunications" are to Reliance Communications Limited and its subsidiaries andassociates.

Macro economics

The Indian economy registered buoyant growth in Financial Year 2009-10 after combatingsevere headwinds caused by the global financial crisis in the previous year. Havingregained some of the growth momentum of the earlier 9 per cent plus era, it is now poisedto cross the ‘double digit growth’ barrier. The challenge is to harness thisquick economic recovery and focus on the development of rural infrastructure. There areseveral factors that underpin the robust performance of the economy in recent times, andaugur well for its long-term health. Apart from the impressive recovery in the industrialsector, there has been a significant revival in investment as well as private consumptiondemand. Favourable capital market conditions, together with improved business sentimentand capital inflows, have also been a cause for optimism. All this has been accompanied bya marked pick-up in corporate earnings and profits.

Given these macro indications, the GDP growth rate may well breach the 10 per cent markin the near future.

Overall review

RCOM is India’s truly integrated and fully converged telecommunications serviceprovider. We operate across the full spectrum of wireless, wireline, voice, data, videoand internet communication services. We also have an extensive international presencethrough the provision of long distance voice, data and internet services and submarinecable network infrastructure globally. With a customer base of over 109 million (includingover 2.5 million overseas retail customers and 2.4 million BigTV DTH customers), RCOM isthe world’s 4th largest operator in terms of number of customers in a single country.Our corporate clientele includes 2,100 Indian and multinational corporations, and over 800global, regional and domestic carriers. Our enterprise customers include 850 of the top1000 enterprises in India. RCOM is India’s first telecom service provider offeringnationwide CDMA and GSM mobile services with digital voice clarity. RelianceCommunications has established a pan-India, next generation, integrated (wireless andwireline), convergent (voice, data and video) digital network that is capable ofsupporting best-of-class services spanning the entire communications value chain, coveringover 24,000 towns and 600,000 villages.

Our mobile portal, R World, offers the widest range of mobile content spanninge-commerce, m-commerce entertainment, music, news, astrology, cricket, bollywood, maps,search, one-click set-up, access to email and social networking. In short, it provides thefull range of communication tools which once fell in the realm of the personal computer,at the price and convenience of a handset.

RCOM owns and operates the world’s largest next generation IP enabled connectivityinfrastructure, comprising over 277,000 route kilometers of fibre optic cable systems inIndia, USA, Europe, Middle East and the Asia Pacific region. In India, we provide longdistance business services including wholesale voice, bandwidth and infrastructureservices. Globally, we provide carrier’s carrier voice, carrier’s carrierbandwidth, enterprise data and consumer voice services.

RCOM offers the most comprehensive portfolio of enterprise voice, data, video, internetand IT infrastructure services catering to large, medium and small enterprises for theircommunications, networking and IT infrastructure needs. Our product portfolio includesnational and international private leased circuits, broadband internet access, audiosolutions including Centrex, toll free services, voice VPN, video conferencing , MPLS-VPN,remote access VPN, Global MPLS VPN managed internet data centre ("IDC") servicesto name a few. RCOM has the biggest Metro Ethernet network which is now available in 144cities with about 35,000 Metro Devices in ring architecture thus enabling more than 1million buildings to provide reliable and scalable bandwidth Metro Ethernet solutions.

RCOM operates nationwide Direct-to-Home satellite TV services under its wholly ownedsubsidiary, Reliance Big TV Limited (Big TV). Big TV uses state-of-the-art MPEG4technology to deliver over 230 channels, including 32 exclusive movie channels, to itssubscribers. We also deliver high definition content and Dolby digital voice quality toour viewers on this platform to create a highly personalised video experience.

RCOM redefines industry benchmarks

Earlier this year, in a game changing move, Reliance broke through the clutter ofmyriad tariffs, with one single rate for all local and STD calls to any mobile or landlinenetwork, anytime, anywhere in India, without any conditions or restrictions. RelianceCommunications has set a new industry standard, offering unbelievable, never-before pricesin a simple and transparent manner.

The ‘Simply Reliance Plan’ offers three variants to meet the needs ofcustomers with different calling patterns, namely, 50 paise per minute, 1 paise per secondand Re.1 per call for duration of 3 minutes across pan India available to all customers,whether existing pre-paid and post-paid or new.

Alliance with Polycom Inc.

RCOM has formed an alliance with Polycom Inc., the global leader in tele-presence,video and voice solutions, to introduce world’s first wireless, high-resolution videoand CD-quality audio, conferencing service along with simple-to-use content sharingcapabilities – at a bandwidth speed of 256 kbps at any place. Using this service,events like live meetings, online education, medical procedures, family events, weddings,parties and ceremonies can be webcasted live by event managers on a pay-per-use basis witha feel real-time, face-to-face visual communication.

Alliance to continue leadership in mobile applications

With the emergence of smart phones and the increased use of mobile internet, the usageis driven by mobile application stores and mobile versions of the popular internetservices. RCOM has strategic tie-ups and alliances with more than 350 technology andcontent partners, various leading M-commerce solutions providers. M-commerce solution, anemerging area in the mobile space, offers a fast, secure, inter-operable and convenientplatform to conclude payment transactions using Reliance Mobile. Reliance subscribers willnow be able to transact in secured and Personal Identification Number (PIN) protectedenvironment for insurance services, DTH recharges, movie tickets, books and periodicals,consumer goods, holiday packages as well as bus and train tickets using their RelianceMobile connection. These services are also available on R World for all GSM customers.

Alliance with Microsoft

RCOM Enterprise Business partnered with Microsoft to combine the power ofvirtualisation technology and cloud computing and launched "Reliance Cloud ComputingServices". This is a hosted infrastructure service for our customers in India toaccess a variety of enterprise scale IT solutions, business applications and services likeserver hosting, data storage and archival, ERP and document management. There is a fullsuite of applications and services based on the cloud computing model. Microsoft’svirtualisation and management technologies has helped us in reducing the input costsinvolved in providing these services, thereby enabling Reliance to pass on the costbenefits to the customers.

Reliance Infratel Limited (RITL) new agreements signed

RITL, during the year under review, signed contracts with all major new and existingoperators for providing passive Infrastructure which has been an effective strategy forour customers for cost savings and improved quality of service. Our customers now includethe top five telecom operators as well as five new entrant operators.

RITL signed a large bulk IRU lease agreement with Aircel for providing ducts on panIndia basis. Additionally, Aircel would take intermediate ‘stations’ fordeployment of their electronics as an add-on co-location service. RITL will also beproviding services for blowing the fiber for Aircel.

Reliance Globalcom new agreements signed

In the Carrier Data segment, we signed contracts of over Rs. 500 crore with ourexisting customer base. We continued to be the preferred service provider to leadingglobal carriers, ISPs and content providers around the world.

In order to sustain our leadership in the global subsea network, we have joined theUS$400 million, 8,300 km, 17 Tbps design capacity Singapore - Hong Kong - Japan (SJC)cable system consortium. The SJC cable system is expected to be completed by Q3 2011 andwill give us the capability and reach to provide voice, internet and data services to ourcustomers in the South East Asian markets of Indonesia, Singapore and the Philippines.Last but not least, our Next Generation cable "Hawk" in the Mediterraneanbetween Middle East and Europe remains on track for completion in 2010-11.

Reliance Globalcom retail expansion

The global calling card market is experiencing hyper-competition. We have been able tomaintain our margins despite the introduction of disruptive tariffs by other Indianoperators both in the US and UK markets. We have focused on delivering more value to ourexisting base of over 2 million Reliance Global Call customers through event-basedcampaigns. We have also expanded our network to Ireland, Spain, Austria, Belgium andNetherlands, taking the total number to 16 countries where Reliance Global Call is nowpresent.

We are now engaging more closely with our customers in US, Canada, UK, Australia, NewZealand, Singapore, Malaysia and promoting our brand across local communities and events.This has been well received and will form the basis for the launch of our new servicesReliance iCall and Reliance Mind Bridge.

Enterprise

In the Enterprise segment, we signed contracts of over Rs. 575 crore and added morethan 80 new logos.

We continue to be preferred by large multinational companies to rollout and managecomplex MPLS VPN networks in stiff competition with the Global top four. We launchedEnterprise Global Ethernet or (EGE) in 36 countries. Only a handful of other telcos canoffer comparable Ethernet reach at one-stop. This product will help us in addressing theEthernet services demand from enterprises outside the United States. We launched a majorbrand building and advertising campaign in US and Europe. This campaign has furtherstrengthened our market position as an agile, reliable and global service provider.

Industry Structure and Regulatory Developments Industry Structure Wireless

The Indian telecom sector continues to demonstrate strong growth in spite ofsluggishness in the global economic environment. The total base of landline and wirelesssubscribers in India has grown to 621.28 million and the tele-density to 52.74 per cent ason 31st March, 2010. The annual growth of 44.58 per cent was primarily driven by ruralexpansion and the proliferation of affordable devices.

Wireless subscribers reached 584.32 million and wireless tele-density stood at 49.60per cent.

The share of private sector in wireless connections touched 87.24 per cent as on 31stMarch 2010.

The year under review witnessed dramatic drop in telecom tariffs. With the launch ofservices by several new operators in the year, the total number of operators in the marketnow stands at 15. The competition caused a further shift with operators focusing onincreased value-added and data services to subscribers in the saturated urban markets.

Internet and Broadband

Internet subscribers in India grew moderately to 20.30 million and broadbandsubscribers to 8.75 million by 31st March, 2010.

Telecom Infrastructure

The demand for telecom infrastructure in India is driven both by the robust growth inthe mobile industry as a whole and by the growth in usage in the new semi-urban and ruralmarkets. The industry landscape has changed with the Government issuing over 120 licensesto new operators and the number of players going up from 5-6 per circle to 9-10 in mostcircles. These new operators have been allotted spectrum in about 18 to 20 circles andsome of them have now got joint venture tie-ups with large global players thereby gettingthe necessary impetus to roll out their services. The roll-out of mobile services by thesenew players further increases the demand for telecom infrastructure. The telecominfrastructure industry will witness a further significant upside from the 3G /BWAauctions and the network rollout plans of the successful bidders. The Industry now hasabout 300,000 towers, with ample opportunities for existing infrastructure providers tooffer tower tenancies to new domestic and multinational operators.

Global

Our global business participates in diverse industry segments, viz., (i) globalsubmarine capacity sales (ii) national long distance for voice and data (iii)international voice transit (iv) international retail voice (v) enterprise connectivityand managed services business. A market leader across different segments, we have thelargest private submarine cable in the world and the largest NLD network in India. We rankamongst the top 25 largest international voice traffic carriers and have established astrong retail brand in the US. Our global business operates a service delivery platformfor internet, data, voice and multimedia communications and is particularly strong in thefast-growing emerging markets of India, China and the Middle East. We have also achievedleadership positions in the developed markets of the US, UK, Western Europe, Australia andSingapore. We are uniquely positioned to provide complete end-to-end solution through ourdiverse best-in-class product range.

1. Sustained High Growth

India will continue to be the fastest growing telecom market in the world in terms ofthe total number of new subscriber additions. This exponential growth phase is expected tolast for a few years before the rate of growth starts leveling off.

2. 3G and WiMax Roll-out

With 3G and WiMax (BWA) spectrum auctions under progress, there is a great potentialfor the take-off of data access and broadband services.

3. Innovations in internet technology

Innovations in internet technology will have a material impact on the mobilecommunications industry.

4. Rural Penetration

Rural coverage will be key to an operator’s growth strategy. Rural tele-density isstill under 25 per cent with significant growth potential, whereas urban tele-density hasalready crossed the 100 per cent mark.

5. Infrastructure sharing

There will be a greater potential for tower sharing / outsourcing model with the entryof new telecom players into India and also due to the advent of 3G and WiMax.

6. Competition

There will be fierce competition among existing and new telecom operators, leading tosubstantial benefits for the subscribers.

1. Dual technology petition quashed by TDSAT

TDSAT, on 31st March, 2009, dismissed the petition filed by the Cellular OperatorsAssociation of India (COAI) challenging the decision of the Government of India to allowdual technology (CDMA and GSM) services to RCOM and other CDMA operators. The tribunal hasalso declared that GSM operators have no vested right to get the radio frequency beyond6.2 MHz. BSNL /MTNL and COAI have challenged the TDSAT order in Supreme Court.

2. Access Deficit Charges

The Telecom Regulatory Authority of India ("TRAI") had abolished AccessDeficit Charges ("ADC"), a levy paid by private telecom operators to BharatSanchar Nigam limited ("BSNL"). Now all domestic and international calls arefree from the incidence of ADC.

BSNL challenged these ADC amendments before the Telecom Disputes Settlement andAppellate Tribunal ("TDSAT"). The TDSAT had dismissed all the appeals. Appealshave been filed by BSNL before Supreme Court against these orders of the TDSAT. Beingstatutory appeals these have been admitted by Supreme Court. However, no stay on TDSATorder has been granted.

3. IUC Regulation of TRAI challenged in TDSAT

TRAI had amended the IUC (Interconnect and Usage Charges) regulation by an amendmentdated 9th March, 2009. The revised IUC rates had become effective from 1st April, 2009.The regulation was challenged by most of the operators. Hearings in the case have beencompleted and TDSAT has reserved its judgment.

4. Launch of Mobile Number Portability (MNP) delayed

On 6th May, 2009, the DoT issued an amendment in the licenses of Unified Access Service(UAS), Cellular Mobile Telephone Service (CMTS), National Long Distance (NLD),International Long Distance (ILD) and basic service to facilitate the timelyimplementation of mobile number portability service in the licensed service area as perthe regulations/directions/orders made/ issued by TRAI. TRAI notified theTelecommunications Mobile Number Portability Regulations (MNP), 2009 (8 of 2009),detailing the procedure for porting, the rights and obligations of various entitiesinvolved and time limits for carrying out Mobile Number Portability. The regulationenvisages a maximum time period of 4 days for the completion of porting process in alllicensed service areas except in the case of Jammu and Kashmir, Assam and North East,where the maximum time allowed is 12 days.

TRAI notified the Telecommunication Mobile Number Portability per Port TransactionCharge and Dipping Charge Regulations, 2009 (9 of 2009) and the Telecommunication Tariff(Forty-Ninth Amendment) Order, 2009, to fix various charges for Mobile Number Portability.The porting charge i.e. the amount to be paid by the subscriber shall not be more than theper port transaction charge i.e. Rs. 19/-. The dipping charge has been left to be settledby mutual negotiation between the telecom service providers and the respective MNP serviceproviders.

DoT has notified new dates for implementation of MNP, which is now expected to beimplemented by 30th September 2010.

5. QoS regulation for wireline and Cellular Mobile Telecom services

TRAI issued revised QoS (Quality of Service) regulation for CMTS and wire line serviceson 20th March, 2009. The existing benchmarks have been tightened and some of theparameters like service access delay have been done away with. Some new parameters like– BTS accumulated downtime, worst affected BTSs due to downtime, worst affected cellshaving more than 3 per cent TCH drop - have been added. The benchmark for Call drop ratiohas been reduced to 2 from 3 per cent earlier. The revised regulation has come into effectfrom 1st July, 2009.

6. Auctioning of 3G and Broadband Wireless Access (BWA) spectrum

In February 2010, DoT floated a NIA (Notice Inviting Application) to invite potentialbidders to apply for 3G and BWA spectrum. The key features of the NIA were as follows: • The willing applicants to apply before 19th March 2010.

• The e-auction of 3G spectrum to start on 9th April 2010; and the BWA auction tostart two days after the completion of the 3G auction.

• The number of slots up for auction to exclude licenses already allotted to BSNLand MTNL.

• Five circles, namely Punjab, West Bengal, Himachal Pradesh, Bihar and Jammu andKashmir to have 4 slots of 5 MHz each for auction while remaining 17 circles to have 3slots of 5MHz each for 3G auction. For BWA auction there is one slot across 22 circles.

• A spectrum base price of Rs. 3,500 crore and Rs. 1,750 crore set for one 3G andone BWA slot respectively.

• Letter of Intent to be issued to the successful 3G bidders but they would beable to roll out services only from September, 2010.

7. Lock-in period of 3 years for promoter’s equity

DoT vide its Circular dated 23rd July, 2009, inter alia provided for a lock-in-periodfor sale of equity of an entity whose share capital is 10 per cent or more in the UASlicensee company on the effective date of UAS licence and whose net-worth has been takeninto consideration for determining the eligibility for grant of UAS license, tillcompletion of three years from the effective date of the UAS licence or till fulfillmentof all the rollout obligations, whichever is earlier.

8. Security clearance for procurement of telecom equipments

DoT issued a directive to all the Unified Access Service as well as NLD, ILD and ISPlicensees on 3rd December 2009. As per the order, prior approval has to be taken from thelicensor before procurement of any telecom equipment/software. DoT issued a format forproviding the details of the equipments, country of origin, port etc on 25th February2010. DoT vide its circular dated 18th March, 2010, exempted from security clearances thepassive equipments and equipments/ software manufactured in India by Indian controlledmanufactures as well as noncore equipments. This created a situation where Licencees havenot been able to import network equipment since 3rd December, 2009. AUSPI and COAI haverequested DoT to reconsider such arbitrary and unreasonable requirements.

9. Review of Spectrum Management and license terms and conditions

DoT has sought TRAI’s recommendations on the report of the DoT’s Committee on"Allocation of Access (GSM/ CDMA) spectrum and pricing" of May 2009. Inaddition, DoT has also sought TRAI’s recommendations on the terms and conditions ofexisting UAS/CMTS licence with respect to the duration of licences, auctioning of allspectrums other than 800, 900 and 1800 MHz bands, capping on the number of licences ineach service area. To formulate its recommendations and initiate consultation withstakeholders, TRAI issued a Consultation Paper on 16th October, 2009, titled "OverallSpectrum Management and review of the license terms and conditions". The consultationpaper covers spectrum and license related issues. The recommendations of TRAI were issuedon 11th May 2010. The key recommendations are as follows:

• Uniform License fee of 6% on all the services including IP1 and ISP license, ina phased manner.

• Removal of Subscriber Linked Criteria for allotment of additional spectrum.

• Roll out criteria for allotment of additional spectrum. The priority forallotment of additional spectrum has also been proposed. As per the recommendation, thosewho have been allotted the initial spectrum and have applied for allotment of additionalspectrum so as to reach contracted spectrum of 6.2 MHz, will be accorded the highestpriority in allocation of spectrum.

• Spectrum limits fixed at 10 MHz for GSM and 6.25 MHz for CDMA in Delhi andMumbai. In rest of India, these limits have been fixed at 8 MHz for GSM and 5 MHz for CDMAtechnology.

• The operators possessing spectrum more than contracted spectrum of 6.2 MHz willhave to pay one time charge based on 3G auction determined price. This charge will belevied for a minimum period of 7 years.

• On merger and acquisition conditions, the merged entity can not have 30% ofsubscriber market share and revenue market share. The merged entity can retain spectrum upto 14.4 MHz.

• Spectrum trading has not been allowed. However spectrum sharing has beenpermitted for those who have been allotted spectrum of 4.4 MHz. TRAI has recommended thatspectrum sharing should be permitted for a maximum period of 5 years.

• Rebate of 0.5% in USO fund to those who complete 4 year roll out obligationssuggested by the TRAI. The USO fund rebate will be 2% for those licensees who cover 100%of the habitations with a population of 500-2000.

• Refarming of 900 MHz band at the time of license renewal. It has been suggestedthat all the licensees will be allotted spectrum in 1800 MHz on the renewal of theirlicenses. 900 MHz band should be used for providing 3G services.

DoT will take a final decision on the above recommendation brought out by TRAI.

10. Re-examination of Merger guidelines by TRAI

DoT issued revised guidelines for intra service area merger on 22nd April, 2008. Theseguidelines have replaced the earlier guidelines issued on 21st February, 2004. Thethreshold level for any merger to take place has been revised to 40 per cent of revenuemarket share and subscriber market share. For considering the number of subscribers,wireline and wireless subscribers will be considered separately. The TRAI is re-examinedthese guidelines and has recommended revising the combine market share limit of themerging entities to 30% of the total market (together for wireline and wireless). The DoThas yet to take final view on TRAI recommendations.

11. Re-verification of Mobile Subscribers

DoT has revised the penalty in case non verification of subscriber. On representation,DoT vide their letter dated 30th September, 2009 has allowed all the operators tore-verify the subscriber from 1st October, 2009 till 31st October, 2010 to avoid penalty.

12. Prepaid services in Jammu and Kashmir (J&K)

DoT had issued a directive in September 2009 for non-continuation of prepaid servicesin J&K. However, it subsequently allowed prepaid services in the state to be resumedin January 2010, subject to re-verification of existing prepaid customers. For newcustomers, the verification guidelines have been strengthened. Prepaid services inJ&K, North East and Assam are renewed on yearly basis. The renewal of the services isto be done in the month of February every year. Prepaid services have been renewed inthese circles till February 2011.

13. TRAI directive on Value Added Services

TRAI had issued a directive on subscription of VAS services on 27th April 2009. As perthe directive, any value added service – for example, a Caller Ring Back Tone couldbe offered to a customer only after receiving a confirmatory SMS from him. However, afterrepresentation from the Industry, TRAI simplified this procedure, and vide its directivedated 4th September 2009, permitted the subscription of VAS by pressing`*’ and`9’ on the handset, thereby making double electronic confirmation.

14. Utilisation of Numbering Resources

The TRAI has initiated discussions to review the current method of allocation andsought suggestions for making more numbers available in the 10 digit format. They are alsoconsidering for the long term the feasibility of using 11 digit numbering format.

15. DTH Regulatory and other issues

a. On 17th March, 2009, TRAI released the Telecommunication (Broadcasting and CableServices) Interconnection (Fifth Amendment) Regulations, 2009, which essentially coverregulatory provisions on non-discriminatory access to content, issues relating tointerconnection for addressable platforms and issues relating to registration ofinterconnection agreement.

b. TDSAT differentiates between whole sale rates of base pack and add-on pack. In itsjudgment TDSAT has accepted ESPN’s contention that 50 per cent discount should begiven only when the channel is being viewed by all or at least a majority of the DTHoperator’s subscriber base.

c. A large number of state governments have started charging or will start chargingentertainment tax (Maharashtra, Karnataka, Rajasthan, Bihar, Goa, Assam, UP, Delhi,Uttaranchal, Punjab, MP, Orissa, and Gujarat). Various DTH operators have filed petitionsagainst Entertainment tax such as the petition filled by Bharti and Tata Sky against thelevy of Entertainment Tax in the Gujarat and Delhi High Courts.

d. Other operators have also filed a Petition in TDSAT for clarification of thedefinition of AGR. The operators have contended that certain items which are not relatedto the provision of DTH service should not be included for the purpose of calculation ofAGR for DTH service.

e. TRAI released consultation papers on Tariff related issues in DTH on 24th December,2009. Individual players have offered their comments on the papers after mutualdiscussions among all members of the DTH association.

RCOM achieves a landmark of 100 million customers

Earlier this year, RCOM crossed the 100-million subscriber mark, making it the 2ndlargest wireless operator in the country to reach the mark. Remarkably, RCOM reached thismilestone within seven years of the launch of its pan-India mobile services, which is thefastest ramp up of mobile customers anywhere in the world. With this landmark achievement,we became the 4th operator in the world to serve over 100 million customers in a singlecountry.

To commemorate the occasion, RCOM launched a 100-day celebration, as part of which aslew of initiatives were announced, including one day of free and unlimited calling on theReliance network across local, STD and roaming.

Churn

Despite stiff and intensifying competition, the churn in our postpaid CDMA and GSMbusinesses during the year was one of the lowest in the industry. In addition, our specialfocus on retaining high value customers yielded significant revenue benefits.

RCOM redefines industry benchmarks: Launches Simply Reliance plans

Reliance pioneered the mobile revolution in 2005 by making the cost of a phone callcheaper than a post card.

The ‘Simply Reliance Plan’ offers one single rate of 50 paise per minuteacross 24,000 towns and 600,000 villages, providing seamless and unconditional benefits toall its existing customers, both prepaid and post-paid, as well as the new ones.Subsequently, we expanded the portfolio by offering subscribers the flexibility of usagedepending on their requirement – of ‘1 paisa per second’ or ‘1 rupeeper call’ tariffs.

RCOM also unveiled two revolutionary tariff plans – 1paisa per SMS or Re.1 forunlimited number of SMSes every day for all mobile customers, regardless of their tariffplans for voice and data services.

GSM – CDMA Integration

As a major step towards business migration of RCOM and RTL for seamless customerservice and improved efficiency at Reliance Touch Points, all Customer Services processesand policies were integrated along with system / front end applications. This was furtherstrengthened with RCOM CDMA integration with GSM.

Reliance Netconnect Broadband Plus

During the year, we rolled out CDMA wireless broadband service,

Reliance Netconnect Broadband Plus, India’s fastest Wireless internet service.Netconnect Broadband Plus has a downlink speed of upto 3.1 Mbps. This makes NetconnectBroadband+ best suited for video streaming, video surveillance, rich media content andsuperior internet browsing.

The initial rollout of the Netconnect Broadband+ service consisted of 38 citiesincluding the metros. This was later expanded to 62 cities towards the end of the fiscalyear. Netconnect Broadband+ will soon be made available in 60 more cities, all withseamless handover to high speed 1x service across 24,000 towns and 600,000 villages aswell as all major road and rail routes, covering over 99 per cent of India’s internetpopulation. The Company retails Netconnect Broadband+ in 12,000 IT retail outlets acrossIndia as well as 2,300 exclusive Reliance Communication retail stores and nearly 240Reliance World outlets.

Netconnect Broadband+ is targeting about 6 million road warriors who need internetaccess on the move with their laptop and about 8 million home PC users who accessentertainment and educational content on a daily basis.

Global Business

Reliance Globalcom spearheads the global telecom operations of Reliance Communications.The global business serves over 2,100 enterprises, 200 carriers and 2.5 million retailcustomers over 160 countries across 5 continents. Reliance Globalcom brings together thesynergies of Reliance Communications Global Business encompassing Enterprise Services,Capacity Sales, Managed Services and a highly successful bouquet of retail products andservices comprising of Global Voice, Internet Solutions and Value Added Services. We ownand operate the world’s largest private undersea cable system spanning 65,000kilometers seamlessly integrated with domestic optic fiber running over 190,000kilometers, providing a robust Global Service Delivery Platform connecting 40 key businessmarkets in India, USA, Europe, the Middle East, and the Asia Pacific region. OurMediterranean cable system, along with our participation in the Singapore Japan cablesystem, will give us the distinction of being the foremost private submarine cable systemsin the world. In the voice segment, we offer International Long Distance carriage andtermination to other carriers as well as, on an inter segment basis, to other businessunits of Reliance Communications.

Carrier services

We offer NLD carriage and termination to other carriers and, on an inter-segment basis,to other business units of Reliance Communications. We are the leading provider ofinternational connectivity and data services to telecom operators, content providers andinternet communities around the globe.

Enterprise services

We are the leading global Managed Network Services provider serving over 60,000 sitesin over 160 countries. We also rank among the top 6 global Ethernet service providers for2009, and among the top 2 connectivity providers to the world’s top exchanges.

Retail services

As part of our retail offering in voice, we offer virtual international callingservices to retail customers for calls to 200 international destinations including Indiaunder the brand Reliance Global Call. Our retail services are available to customers inseveral countries including the United States, Canada, the United Kingdom, Australia, NewZealand, Hong Kong and Malaysia. We have over 2.5 million customers for our RelianceGlobal Call service. The usage of Reliance Global Call accounts for 40 per cent of thetotal retail market calls from the US to India.

In our International Voice business, our focus has been to increase market share andleverage our network capacity. This market is now served by 13 operators, as a result ofwhich margins are under pressure. However, we have been successful in gaining market shareand our total ILD voice traffic has grown more than 30 per cent on a year-on-year basis.We continue to have the largest inbound traffic market share.

Enterprise Broadband

Continuing with our focus on directly connecting buildings in almost 50 cities inIndia, our Broadband network connected over 1 million buildings.

Our robust nationwide network backbone is continuously controlled and monitored at theNational Operating and Control Center (NOCC) located in Mumbai. This NOCC facility isreplicated at Hyderabad to guard against any catastrophe as a redundancy measure. We haveenhanced our capabilities in the Managed Service Operations Centre (MSOC), which isdedicated towards managing the customers’ network. This is poised to help us garnerhigher market share in the fast growing managed services market.

Infrastructure

Reliance Infratel Limited (RITL), our infrastructure subsidiary, signed contractsduring the year with major new and existing operators for providing passive Infrastructurewhich has proved to be an effective strategy for our customers for cost savings andimproved quality of service. Our customers now include the existing top five as well asfive new incumbents out of the total of 15 operators in the market.

• Our total tenancy stands at 1.75 per tower, the highest in the Industry.

• RITL now owns 190,000-Km optical fiber network, providing a more economical andbetter quality link for tenants compared to microwave.

• RCOM’s current utilisation of tower slot assets is 40-50 per cent. Thisgives us significant potential for 3rd party tenants. It also complements our existingpassive infrastructure and provides an integrated solution to tenants.

• As such, we offer our customers an extensive and diverse portfolio ofwell-positioned assets and we believe that our wide and expanding portfolio of tower sitesputs us in a unique position to handle the needs of national, regional, local and emergingwireless service providers in India.

Home / DTH

We launched India’s fully Digital Home Entertainment Service on the world’smost advanced MPEG4 Direct-To-Home (DTH) Platform. Within 90 days of launch, Reliance BigTV Limited (Big TV), the DTH arm of RCOM, acquired 1 million subscribers, the fastest rampup of subscribers ever achieved by any DTH operator in the world. As on 31st March, 2010,Big TV had 2.4 million customers with a National Market share of over 12 per cent. We aretoday present across 6,500 towns with a pan-India service and installation network.

The DTH Industry in India added 8 million subscribers in Financial Year 2009-10. Thereare six players in the industry with an estimated market size of 20 million subscribersand a penetration rate of 20 per cent amongst homes using cable network service.

Reliance Big TV DTH service boasts of over 230 channels, 6 interactive services and arich bouquet of ‘subscription video-on-demand / pay per view’ offerings. Withits state of the art price packaging models, customer friendly entry/ subscription offersand sustained customer management programs, Reliance Big TV commands one of the highestARPUs in the Industry. As we move into our 2nd full year of operations, we have launchedthe dual-capability HD –DVR set top box across top 100 cities – the only DTHoperator in the country to do so. On the cards is a look-and-feel revamp of the platformthrough a contemporary Graphical User Interface along with the added option of Hindilanguage. Reliance Big TV was able to secure

2 Transponders on the existing satellite. We plan to add 60 new channels including arich bouquet of HD channels to the platform. The brand is going for an intensivedistribution drive to tap into 15,000 towns nationally.

3G Launch: The launch of 3G services will add a fresh impetus to telecom growth inthe country. We are proactively getting 3G ready, having committed significant investmentsin wireless infrastructure IP backhaul and VAS.

Both 3G and BWA technologies will be key to serving the pent-up demand in theunderserved broadband market in India. The critical enablers of the migration fromnarrowband voice to the broadband data market are the availability of both adequatespectrum and low-cost devices. We expect the floodgates to open once these enablers arerealised post the spectrum allocation; that is when the process of building India’sdigital economy will begin in right earnest.

Convergence: Our full fledged convergence model is driven both by technology anddemand because, together, they hold the key to the overall success of the value chainsbuilt to provide voice, data and video multi-media networks into a single unified packetbased multi-services platform. With the BWA auctions currently in progress, theconvergence in service through robust Network will drive the Telecom value chains, andlead to a better utilisation of capacity, greater coverage and improved quality. Ourinitiatives for Corporate Convergence will activate consolidations, mergers, acquisitions,or collaborations among the operators.

Rural opportunity: The overall tele-density in India has reached around 52.74 percent. While the urban tele-density has crossed the 100 per cent mark, the ruraltele-density is pegged at 22.17 per cent and steadily growing. Indeed, it is the latterwhich is driving telecom growth in the second phase. Our nationwide network combined withthe national distribution framework gives us a unique advantage in tapping this largeopportunity.

Dual Technology: While offering dual technology services, we also benefit from themassive network build-out for CDMA and GSM, helping us offer highly attractive tariffs andproducts, leverage the available capacity and provide multiple choices to subscribers.

We are also continuously aware of the emerging 3G/WiMAX opportunities and the ensuingpossible options to evolve our current network assets. We possess a wealth of experiencemanaging large-scale networks with extremely high usage volumes at competitive prices.

Passive Infrastructure: The expected technology rollouts this year were driven by2G, 3G and BWA needs of the new and existing mobile operators as well as of the ISPoperators. This translates into the current demand of nearly 500,000 slots – slatedto go up to 700,000 in the next couple of years -

- for passive infrastructure as well as other services. Our next generationinfrastructure is favorably positioned to capture this opportunity.

At RCOM, we approach the market in the telecom infrastructure business with a unifiedand comprehensive approach covering the entire value chain of telecom infrastructureservices, including active and passive infrastructure

Unique Positions in India

• We currently have sites in each of India’s 22 circles – a total of49,300 telecommunication towers as of 31st March, 2010.

• The current average age of our telecommunication towers is 2.8 years.

• All our existing telecommunication towers, unlike some of our competitors, havethe unique capacity to host multiple wireless service providers as tenants Ourmulti-tenancy towers have, on an average, the capacity to host 4 tenants each. As on 31stMarch, 2010, we had a tenancy rate of 1.75, the highest in the industry. We are in aunique position in the industry to offer more capacity/tenancy to 3rd party operators(existing and new) in the B2B space.

• RITL has the largest fiber transmission network in the country with over190,000 kms. of national optic fiber network.

• The duct and fiber pair offerings along with passive infrastructurecompliments our other offerings of transmission connectivity to sites, bulk bandwidth,carriage, NLD / ILD, co-location of customer electronics in our BSC, internet bandwidthand roaming solutions.

• Our customers have typically opted for 3 - 5 B2B services out of the combinedRITL-RCOM portfolio of services.

R World Content: Our Reliance Mobile World (R World) is a virtual one-stop-shop forentertainment, communication, gaming and M-commerce. Thanks to its wide range ofapplications, it has quickly endeared itself to users from all walks of life. RelianceMobile World has hundreds of useful applications and over 200,000 content titles whichinclude Mobile TV, videos, cricket updates, music, ringtones, phonebook transfers, back-upservice, and other M-commerce services such as mobile banking, bill payments, mobilee-mail and instant messenger, city and TV guides, gas cylinder bookings, Speed Posttracking, Airlines and Railway reservations, examination results and much more.

Global

With RCOM’s ownership of Reliance Wimax World (eWave), a pioneer in the globalWimax space, Reliance Globalcom has the capability to launch 4G services in over 50countries. The acquisition of Vanco Group, enables the company to provide managed servicesto over 230 countries and territories across the globe.

RTech: Our Information Technology arm, RTech, has 19,000+ person-years ofexperience across various domains with more than 25 per cent of the team having over 10years of experience. RTech provides application development and maintenance services,Business Consulting, Telecom Network Products and solutions, ERP Implementation andDevelopment services, Geographic Information services, Business Intelligence and DataAnalytics, Knowledge Management, Network and internet Security services, Managed Networkand Infrastructure services, Unified Communication and Messaging services and nationwideIT support services.

Retail

The Company has one of the most extensive distribution and service networks amongst alltelecom players in India, consisting of nearly 2,300 Reliance World and Reliance MobileStores throughout India equipped to sell wireless handsets and service packages, customerservice centers with multilingual capabilities that have over 6,000 agents. In addition,nearly a million retail outlets sell recharges (of which approximately 90 per cent areelectronic recharge enabled). The Company also has alliances with banks for providingelectronic recharge at 14,000 ATMs. Our 24 x 7 customer service is further supported byabout 10,000 employees, multi-lingual contact centre facilities providing full customercare interface and redressal measures.

Entry of many new Operators

The rapid entry of new telecom operators in the market has intensified competitionleading to downward pressure on prices. Our well planned capital investments, backed by aworld class network, puts us in an enviable position in meeting the emerging competitivechallenge in the telecom space.

Entry of Mobile Virtual Network Operator (MVNO)/ Brand franchisees

There is a possibility that the Government may progressively relax MVNO norms. As aresult, more players may be able to access the Indian markets through this route.Consequently, these operators may put pressure on tariffs.

Risks and concerns

1. Some of the operating licences are subject to regulatory compliance under the termsand conditions of licences grant over different part of the world. The rules andregulations, issued by the respective government and regulatory authorities, havingjurisdiction over the Company’s operations and licenses, schedules and obligationsrequire it to meet specified conditions, network build-out requirements and tarifffixation. However, the Company does not perceive any default on this account.

2. Mobile Number Portability (MNP), mandated by DoT, will be implemented on a pan-Indiabasis and could limit the acquisition of new subscribers and the retention of existingones. This move is bound to be beneficial for congestion free new networks as they can useaggressive pricing strategies to lure existing subscribers.

3. Rapid technological changes may increase competition and render the Company’stechnologies, products or services obsolete. Our facilities are tuned to next generationlatest technology and we do not foresee obsolescence at present.

4. The telecommunication services industry is capital intensive. Capital Expenditure(CAPEX) on adaptation to latest technology may put pressures on deliverables. However, theCompany is constantly assessing such technological challenges and taking immediateremedial steps through timely CAPEX plans.

5. The Company faces significant and intense competition in its markets, which couldaggravate with the entry of new licensees that may result in decreases in current andpotential customers, revenues and profitability. But we remain confident that ourcompetitively priced tariff will continue to attract large volumes of traffic, resultingin better utilisation of network, operating efficiencies and cost benefits.

6. We are subject to market risks from changes in interest and foreign currencyexchange rates. In managing exposure to these fluctuations, we may engage in varioushedging transactions that have been authorised according to documented internal policiesand procedures.

Financial Performance - Overview

The company’s financial performance is disclosed in detail under the head‘Financial Performance’ in the Directors’ Report. The consolidatedperformance of the Company is given below:

a. Revenues and operating expenses

On a consolidated basis, the Company earned total revenues of Rs. 22,132.28 crore (US$4903.03 million). The net profit after tax recorded by the Company was Rs. 4,655 crore(US$ 1,031 million). Our total operating expenditure stood at Rs.14,311.80 crore (US$3,170.54 million).

b. Operating profit before finance charges, depreciation and amortisation, exceptionalitems and provision against fixed assets (EBITDA).

The Company earned EBITDA of Rs.7,820.48 crore (US$ 1,732.49 million). The EBITDAmargin for the year was 35.34 per cent.

c. Depreciation and amortisation

The Depreciation and amortisation charges was Rs. 3,746.51 crore (US$ 829.98 million).

d. Profit before tax

The profit before tax was Rs. 5,222.83 crore (US$ 1157.03 million). The provision fortaxes was to the tune of Rs. 445.39 crore (US$ 98.67 million). The net profit after taxwas Rs. 4,655.00 crore (US$ 1,031.24 million).

e. Balance Sheet

As at 31st March, 2010, the Company had total assets of Rs. 92,568.63 crore (US$20,507.01 million). Stakeholders equity was Rs. 43,360.64 crore (US$ 9,605.81 million),while net debt (excluding cash and cash equivalents) was Rs. 24,856.95 crore (US$ 5,506.63million), giving a net debt to equity ratio of 0.57 times.

1. Wireless Segment Customer acquisition

During the year under review the Company added 29.78 million wireless customers (netadditions), an increase of 40.98 per cent over the previous year. As on 31st March, 2010,the Company had 102.45 million wireless customers on its network. During the year, wereached out aggressively to rural areas on the back of a major network expansion thatcontributed substantially to our customer acquisition.

Revenues and profit

The revenues for the financial year ended 31st March, 2010 were Rs. 16,639.61 crore(US$ 3,686.22 million). The EBITDA during the same period was Rs.5,583.12 crore (US$1236.85 million), while the EBIT (Earnings before Interest and Tax) was Rs. 3,754.96 crore(US$ 831.85 million).

2. Global Segment Revenues and profit

The Revenues for the financial year ended 31st March, 2010 in this segment were Rs.8,318.68 crore (US$ 1,842.86 million). While the EBITDA was Rs. 1,662.68 crore (US$ 368.21million), the EBIT stood at was Rs. 554.04 crore (US$ 122.74 million).

3. Enterprise Broadband Segment

We maintained our position as the premium integrated solutions provider for Corporatesin the Broadband segment. Our Enterprise Broadband business maintained its leadership inCentrex, Virtual Private Network and internet Data Centre products and One Office Duo(OOD) voice product. The Company’s Enterprise Broadband segment continued to maintainits growth path and gained significantly during the year even in the midst of aggressivecompetition in data and voice but particularly the internet bandwidth segment. Of ourcurrent portfolio of more than 38 products, our Enterprise Broadband business has not onlypositioned a larger number of products with top corporates but also increased its share ofwallet.

The new products launched during the year included Reverse ITFS, Managed WAN, EWAN, OneOffice Duo, Global MPLS, and Global Ethernet etc.

Our innovative services assurance model of "TechCheck" continued to gainfurther impetus during the year in providing pro-active feedback to subscribers on theservice levels provided by the Company. Customers have rated our Broadband Products andServices at a high customer satisfaction and delight rating. Our CSAT (CustomerSatisfaction) Score increased steadily.

Our Broadband’s Business IT Systems are ISO 27001:2005 Certified (an InformationSecurity Management System Standard).

4. Wireline

Our Optical Fiber Cable backbone network of 190,000+ route-kms supports seamless lastmile Broadband connectivity to over 1 million building across 44 cities. Our BroadbandAccess network is one of the largest in the world, having approx. 38,000+ nodes currently.

Customer Base

Our customer acquisition kept momentum with the increase in network coverage during theyear. Net additions during the year grew by more than 6 per cent. During the year, theCompany acquired close to 85,000 customers, taking the total customer base to 1.47million.

As the Company’s Broadband business is currently serving mainly enterprises, therevenue per line reflects the total portfolio of services and solutions being delivered tocustomers. Our revenue per line has remained well above industry averages, on account ofour mainly enterprise customer base and our successful cross-sell of services to ourcustomers.

Revenues and profit

The revenues for the financial year ended 31st March, 2010 were Rs. 2,838.55 crore (US$628.83 million). The EBITDA was Rs. 1,147.43 crore (US$ 254.19 million), while the EBIT(Earnings before Interest and Tax) was Rs. 681.39 crore (US$ 150.95 million).

Reliance Communications Infrastructure Limited (RCIL)

RCIL provide internet Data Centre (IDC) service facilities to house computer systemsand associated components, such as telecommunications and secured storage systems to theuser companies from our IDCs located in Mumbai, Bangalore, Hyderabad and Chennai. Duringthe year, we commissioned 2 new IDCs at Chennai and Hyderabad respectively. With this, ourIDC capacity has gone up more than 400,000 sq ft, making us the leader in this segmentwith an estimated market share of close to 60 per cent.

Revenues and operating expenses

RCIL earned total revenues of Rs. 4,418.89 crore (US$ 978.93 million) during the yearas compared to Rs. 4,096.03 crore (US$ 807.58 million) for the previous year. RCILincurred total operating expenses of Rs. 4,022.58 crore (US$ 891.13 million) as comparedto Rs. 3,402.73 crore (US$ 670.89 million) in the previous year.

Net Profit

The net profit after tax recorded by RCIL was Rs. 9.49 crore (US$ 2.10 million) ascompared to profit of Rs. 266.18 crore (US$ 52.48 million) in the previous year.

Balance Sheet

As on 31st March, 2010, RCIL had total assets (net) of Rs. 5,165.71 crore (US$ 1144.38million) and shareholders’ fund amounting to Rs. 2,901.71 crore (US$ 642.82 million).

Reliance Telecom Limited (RTL)

RTL, a wholly owned subsidiary of the Company, offers GSM services in Madhya Pradesh,West Bengal, Himachal Pradesh, Orissa, Bihar, Assam, Kolkata and North East service areas.

Operations

During the year, RTL expanded its network, specifically at the areas in the Easternregion.

Revenues and operating expenses

RTL earned total revenues of Rs. 2,279.47 crore (US$ 504.98 million) during the year ascompared to Rs. 2,050.83 crore (US$ 404.34 million) in the previous year. RTL incurredtotal operating expenses of Rs. 1,862.88 crore (US$ 412.69 million) as compared to Rs.1,507.67crore (US$ 297.25 million) in the previous year.

Net Profit

The net profit after tax recorded by RTL was Rs. 33.28 crore (US$ 7.37 million) ascompared to net loss of Rs. 174.29 crore (US$ 34.36 million) in the previous year.

Balance Sheet

As on 31st March, 2010, RTL had total assets (net) of Rs. 6,339.33 crore (US$ 1,404.37million) and shareholders’ fund of Rs. 280.00 crore (US$ 62.03 million).

Reliance Infratel Limited (RITL)

RITL’s business is to build, own and operate telecommunication towers, optic fibercable and other related assets at designated sites and to make available this passiveinfrastructure on a shared basis to wireless and other communications service providersunder long-term contracts. These customers use the space on our telecommunication towersto install their active communication-related equipment to operate their wirelessnetworks. The customers can also use our optic fiber network to connect the sites to theirown core network and to ensure connectivity between circles.

We have used the towers for both our CDMA and GSM technology based services as a partof our strategy to provide dual services on a pan India basis. We have 49,300multi-tenancy towers, with a total capacity of 197,200 slots, the most extensive comparedto any other telecom infrastructure provider. We are capable of adding tenancy capabilityat marginal cost on demand.

Revenues and operating expenses

RITL earned total revenues of Rs. 6,276.74 crore (US$ 1,390.51 million) during the yearas compared to Rs. 4,934.00 crore (US$ 972.79 million) in the previous year. The Companyincurred total operating expenses of Rs. 2,427.54 crore (US$ 537.78 million) as comparedto Rs. 1,553.79 crore (US$ 306.35 million) in the previous year.

Net Profit

The net profit after tax recorded by RITL was Rs. 905.58 crore (US$ 200.62 million) ascompared to Rs. 1,685.72 crore (US$ 332.36 million) in the previous year.

Balance Sheet

As at 31st March, 2010, RITL had total assets (net) of Rs. 16,487.52 crore (US$3,652.53 million). Shareholders’ fund was Rs. 5,164.21 crore (US$ 1,144.05 million).

New Horizons for future Growth

India’s telecom network is the third largest in the world. Telecommunicationactivities saw rapid growth in India and the efforts have been made from both governmentaland non-governmental organisations to further improve the telecommunicationinfrastructure. The eventual goal is to foster the development and widespread use ofmodern telecommunication technologies that will serve all segments of India’sculturally diverse society, and to transform it into a country of technologically awarepeople. The launch of 3G services later this year is likely to reach a size of Rs. 344,921crore (US$ 76.92 billion) by 2012 at a growth rate of over 26 per cent.

Mission 200 million subscribers

We are extremely well placed to capitalise on the growth opportunities in the convergedtelecom market supported by our integrated infrastructure and strong focus on quality ofservices. Our leadership and strength is supported by

• An upgraded and expanded next generation network based onstate-of-the-art technology;

• A strong foray into the rapidly expanding rural market;

• A keen commitment to staying ahead of customer requirements;

• An international presence with owned submarine cable network andgateways;

• Introduction of innovative products and services;

• A sterling track record of growth and execution;

• A focus on optimisation of resources and on building human capital.

Wireless Business 3G Telecom services

The exponential growth of the telecom industry in India has led to the demand forbetter technology and the next level of service delivery. The advent of 3G services laterin the year will add a new dimension to the market, giving us an excellent opportunity tocater our products to the high-value subscribers.

On the downside, the bulk of the subscriber growth in the industry is from low valuecustomers, which is unlikely to translate into major revenue gains for operators. Theentry of new players into an already highly competitive market has brought down thepricing, putting pressure on revenue growth.

The urban market in India is now highly saturated, with over 100 per cent penetration.An increasing part of the new subscriber growth is therefore coming from smallertowns/rural areas, with significantly lower revenue contribution. The dual SIM phenomenonis contributing approximately 30-35 per cent of net additions.

Notwithstanding all this, the Indian telecom industry continues to maintain a highgrowth trajectory. Thanks to the continued outstanding pace of growth, the overallwireless tele-density reached 49.6 per cent as of 31st March, 2010. The subscriber basefor wireless services has increased to 584.32 million as on 31st March, 2010.

Most international developed markets have close to 100 per cent penetration and mostcomparable developing markets currently have penetration levels of 60 per cent – 70per cent.

In other words, despite the recent upswing, the penetration of mobile services in Indiacontinues to be on the lower side, indicating the tremendous future potential for growth.

Value added Services (VAS)

The mobile value added services include, text or SMS, menu based services, downloadingof music or ringtones, mobile TV, videos, streaming, sophisticated m-commerce applicationsetc. With the introduction of 3G technology, and relative inexpensive feature richhandsets, there will be a marked shift in the structure of the VAS market, with non-SMSVAS services becoming a dominant contributor to revenue.

Global Business

We believe that our strategy to leverage our global terabit network together withleadership in Enterprise solutions is delivering a compelling value proposition to ourcustomers. Our customers are endorsing our strategy through repeat and new business wins.Going forward, we expect continued growth in every segment of Reliance Globalcom’sbusiness with the following initiatives:

1. Focus on managed solutions

We continue to enjoy success in retaining our enterprise customers and winning newlogos in competitive bidding. As before, the key differentiators are:

(i) an owned network connectivity to emerging markets;

(ii) proven and trusted rollout expertise;

(iii) own portfolio of products to meet enterprise customer needs; and

(iv) low cost delivery and operations centre.

Going forward, we plan to continue expanding on this model and extend our successes inthe US, Europe, Middle East and Asia.

2. Focus on global Ethernet

There is currently a strong global demand for Ethernet services and it remains a keyarea of focus for us. Our advantage in this segment lies in the fact that many of thefinancial market participants in advanced market of the U.S. are already on our network.We plan to keep our competitive edge by investing in higher-than-industry-standard ServiceLevel Agreements and maintaining capacity with owned metro, backhaul and buildingconnectivity.

3. Ramp up collaboration service

We intend to leverage Reliance Global Call’s adaptable and extendable portal. Thescalability and robustness of the portal makes it easier to manage the expanding customerdatabase. We plan to introduce additional features such as ring back tones, content basedservices to Reliance Global Call customers.

4. Leverage existing global service platform and augment it with focused newbuilds

Our highly scalable global network and delivery platform is a key competitiveadvantage. We intend to leverage this strength to grow our customer base. We plan totarget areas of high growth by expanding and deepening the geographic reach of our networkand platform through focused new builds, at a low marginal cost.

5. Focus on customers in underserved emerging markets

We aim to exploit the growing demand from enterprises located in emerging markets forgreater connectivity to North America and Europe; particularly in light of the offshoringof IT and ITES from the developed economies to low-cost destinations.

Enterprise Broadband and Internet Data Centers (IDC)

We are positive about the revenue opportunities in the current financial year.Corporates have started talking about expansion plans and we are well placed to garner abig share of the new demand. Last year, in order to enhance our share in the market, weadopted a new strategy where we formed separate vertical teams to deliver higher value toour customers. This was very well received by our customers, and our vertical teamregistered some key wins. As a result, we are well poised to get higher revenues from thissector.

Recently, the Small and Medium Business market segment has evolved as a new focus areafor us and we are working on expanding our customer base in this segment. We expect thissegment to emerge as a growth engines for our business in the future. We are also creatingnew offerings specifically for the segment and are realigning our sales channels toincrease our reach in the segment. We have recently launched Cloud Computing Services inIndia on the Microsoft platform. This will offer ‘pay as you go’ enterpriseclass IT infrastructure, and also help in reducing the IT management hassles for SMBs. Wealso plan to expand the portfolio of our IDC-based services and products to be a one-stopshop for enterprise and SMB customers.

Telecom Infrastructure

We are leveraging our extensive capability to offer a wide range of services as anintegrated service provider across the whole infrastructure value chain. Our aim is toprovide a fast track solution to our clients, both for ongoing expansion of our existingtelecom operators and the roll out plans of the new ones. We have achieved unique positionvis--vis other infrastructure providers with better quality tower infrastructure,carriage and transport infrastructure along with the unified approach as an integratedservice provider.

RITL is best positioned to attract tenants for:

• High quality portfolio, capable of housing 4 tenants;

• With marginal Capex, tower tenant capacity of 4 can be enhanced up to 7 tenants.

Home/DTH Business

As Reliance Big TV moves into its 2nd full year of operations, we have launched the HD–DVR set top box across the top 100 Indian cities – the only DTH operator tooffer the dual capability of HD / DVR. We plan to add 60 new channels including a richbouquet of HD channels to the platform.

Reliance Big TV is also seeking to revamp the look and feel of the advanced MPEG4platform through a new Graphical User Interface along with the added option of Hindilanguage.

Adequacy of internal control and Systems

The Company has built adequate systems of internal controls aimed at achievingefficiency in operations, optimum utilisation of resources, effective monitoring andcompliance with all applicable laws.

The internal control mechanism comprises of a well-defined organisational structure,documented policy guidelines, predetermined authority levels and processes commensuratewith the level of responsibility.

The Management Audit Team undertakes extensive checks and reviews through externalfirms of chartered accountants, who provide independent and professional observations. TheAudit Committee of the Board reviews major internal audit reports as well as the adequacyof internal controls.

Risk Management Framework

The Company has instituted a self-governed Risk Management framework based onidentification of potential risk areas, evaluation of risk intensity, and clear-cut riskmitigation policies, plans and procedures both at the enterprise and operating levels.

The framework seeks to facilitate a common organisational understanding of the exposureto various risks and uncertainties at an early stage, followed by timely and effectivemitigation. The Audit Committee of the Board reviews the risk management framework atperiodic intervals.

Human resource and employees relations

An online ‘Speakup’ - Employee engagement survey campaign launched by usreceived overwhelming response from the employee participants, which demonstrated the feelof the employees towards the management’s highly supportive and facilitativeapproach. The survey aims to enable the Company to identify both its strengths as well asthe areas for improvement. During the year, we introduced several other HR-relatedinitiatives aimed at enhancing productivity, morale and motivation among the employees.

We revisited the organisational structure of the businesses to ensure higher standardof customer delivery and lower cost. High-performing employees with proven managementcapabilities were considered for key management positions in the organisation.

The existing HR policies were revised with a view to making them more transparent,employee-friendly and objective in line with best Industry practices. These policies andthe other HR processes have been automated for employee convenience and ease ofadministration.

In order to empower our line managers, HR delegation matrix around recruitment,retention etc., were rolled out for higher accountability as well as speedier resolutionof issues.

E People Solution – an employee portal was launched for redressing employeequeries and grievances in a time bound manner with service level agreements.

During the year Company was successfully able to meet the manpower requirementsemerging from our expanding business. The manpower as on 31st March, 2010 was 30,974across all business.

Information technology

Our IT systems and processes converge across CDMA and GSM technologies providing aseamless customer experience. Every day, we support more than 5 million transactionsthrough 12,000 field and contact center employees. We have built reusable and scalablecomponents that can support over 130 million customers. Our delivery and operationalprocesses are now certified and bench-marked against global standards of CMMI Level 3 andISO 20000, a unique achievement for any telecom operator in terms of in-sourced IToperations.

Our new secure and unified enterprise-wide collaborative platform, MyWorld has won morethan 5 international and local awards for its unique implementation on a Web2.0infrastructure. MyWorld has been a First-time-right product with 98 per cent employeeacceptance. It has enhanced employee productivity by more than 18 per cent within thefirst 3 months of launch. The value of this platform was that without any additionalcapex, and simple reorganisation and representation of data and information from differentapplications and databases, MyWorld completely changed organisation behavior leading toimmediate improvement in productivity across all segments of users. It also created a usergenerated platform that connects on it’s own and makes itself relevant to each userin its own way. RTech, while continuing to service various RCOM business units, alsoprovides application development and maintenance services to Group Companies like RelianceBig Entertainment and Reliance Health. The uniqueness of RTech lies in its projectmanagement capabilities, ability to infuse enormous domain knowledge and operationalexperience with technology and customer focus and operational transparency. Thesecapabilities of RTech have been endorsed by successful external projects in areas ofKnowledge Management, Geographical Information Systems, health care applications,Operational Support Systems (OSS) and IT Infrastructure Management.

RTech’s transformation into a full blown IT company- through innovation, scale,ingenuity, cost sensitivity and efficiency has been recognised by its peers in theInternational and Indian IT industry with a slew of awards and accolades including 2010Gartner Green Data Center Award, SNW Computerworld’s Award for Best Practices inGreen Computing, Energy Efficiency and the Data Center, CIO 100 Award (4th in a row), CIO100 Infrastructure Award, CTO Forum’s CTO of the year, IDC Enterprise InnovationAward, Pioneer CIO Award and many others. RTech is also the sole representative of theIndian telecom industry on the boards of the Tele Management Forum and the MobileMarketing Association.

Awards and Recognitions

During the year under review, we won the prestigious Global World Communication Awards09, held in London. We have won this award in the Best Device Category where weparticipated with a new network device, developed with CISCO. Our competition in thiscategory, at the final stage was with companies like Juniper and Etisalat. RCom was theonly Indian company to win an award at WCA 09. Reliance Communications’ has also wonthe Frost and Sullivan Market Share Leadership award for "Data Center and ManagedServices" category (FY 2009).

We have also won INFOCOMM – CMAI National Telecom Award for the "LargestTelecom Network" category, presented by Secretary, DoT and Chairman, TelecomCommission.

Corporate social responsibility

We continue to strive for sustainability in our operations by promoting the integrationof CSR into our business strategy as well as our everyday functioning. During the yearunder review, we focused on 6 core areas namely environment, community development,education, women’s empowerment, social awareness and health.

CSR Initiatives

Apart from supporting CSR initiatives promoted by Reliance Dhirubhai Ambani Group, ourCSR initiatives include the following:•

• Organised internal campaigns for voluntary blood donations;

• Launched "Little Genius", an effort aimed at more than 200 schools and20 orphanages, with a view to providing under-privileged and served children with anopportunity to explore the digital world in India;

• Provided appropriate solutions and communication services to help people inrural areas access information technology by initiating programs like‘e-Shikshit’. Trained 300 rural youth and women members;

• Provided eye care services to more than 4,000 individuals in the rural terrainin Kerala;•

• Promoted the cause for a healthy fulfilling life after Cancer by co-organising awalkathon in Delhi wherein, more than 3,500 individuals including cancer survivorsparticipated.

• Extended support and services for rendering operative intervention for 100children suffering from Cleft lip and Palate from Uttar Pradesh;

• Encouraged employees to support various social endeavours through voluntarywork; nearly 1800 employees contributed more than 22,000 man hours.

To, The Members of Reliance Communications Limited

We have examined the compliance of conditions of Corporate Governance by RelianceCommunications Limited (‘the Company’) for the financial year ended on 31stMarch, 2010, as stipulated in Clause 49 of the Listing Agreement of the said Company withStock Exchanges in India. The compliance of conditions of Corporate Governance is theresponsibility of the management. Our examination was limited to a review of theprocedures and implementation thereof, adopted by the Company for ensuring compliance ofthe conditions of Corporate Governance. It is neither an audit nor an expression ofopinion on the financial statements of the Company. In our opinion and to the best of ourinformation and according to the explanations given to us, we certify that the Company hascomplied with the conditions of Corporate Governance as stipulated in Clause 49 of theabove mentioned Listing Agreement. We further state that such compliance is neither anassurance as to the future viability of the Company nor the efficiency or effectivenesswith which the management has conducted the affairs of the Company.