iol netcom ltd Management discussions

Management Discussion and Analysis

(Pursuant to clause 49(IV)(F) of the Listing Agreement)

Management Discussion and Analysis report should include discussion on the following matters within the limits set by the companys competitive position:

1. Industry structure and developments

Despite the overall slowdown and driven by unprecedented demand for mobile phone connections, the Indian telecom industry grew at a rapid pace. The number of telephone subscribers in India increased from 787.28 million in Dec-10 to 846.32 million at the end of Mar-11, registering a sequential growth of 7.50% over the previous quarter as against 8.85% during the QE Dec-10. This reflects year-on-year (Y-O-Y) growth of 36.22% over the same quarter of last year. The overall Teledensity in India has reached 70.89 as on 31st March 2011.

Table 1.1: Subscriber Base & Teledensity - Rural & Urban Quarter ending

	Subscriber Base (million)		Teledensity
	Rural	Urban	Rural	Urban
Mar-10	200.68	420.60	24.27	119.77
Jun-10	219.09	452.59	26.43	128.20
Sep-10	236.21	487.07	28.42	137.25
Dec-10	259.78	527.50	31.18	147.88
Mar-11	282.23	564.08	33.79	157.32

total wireless (GSM + CDMA) subscriber base registered a growth of 7.90% over the previous quarter and increased from 752.19 million at the end of Dec-10 to 811.59 million at the end of Mar-11. The year-on-year (Y-O-Y) growth over the same quarter of last year is 38.89%. Wireless Teledensity increased from 63.22 to 67.98.

Table 1.7: Wireless Subscriber Base & Teledensity - Rural & Urban Quarter ending

	Subscriber Base (million)		Teledensity
	Rural	Urban	Rural	Urban
Mar-10	190.88	393.45	23.08	112.03
Jun-10	209.63	425.87	25.29	120.63
Sep-10	227.08	460.63	27.32	129.80
Dec-10	250.89	501.30	30.11	140.53
Mar-11	273.54	538.05	32.75	150.06

Internet subscribers increased from 18.69 million at the end of Dec-10 to 19.67 million at the end of Mar-11, registering a quarterly growth rate of 5.29%. Top 10 ISPs together hold 94.76% of the total Internet subscriber base. Number of Broadband subscribers increased from 10.99 million at the end of Dec-10 to 11.89 million at the end of Mar-11, registering a quarterly growth of 8.17% and Y-O-Y growth of 35.49%.

Maharashtra is having largest Internet (<256 Kbps) and Broadband (>=256 Kbps) subscriber base in the country. Tamil Nadu is at second place in internet and broadband subscriber base. In all the Top 10 states, the number of broadband subscribers is more than the number of Internet subscribers

The next evolution of broadband services must combine support for advanced applications like voice, video, multimedia, etc, with security to protect both the network and the end user. However, with a converged network infrastructure, service providers can offer voice, video and data - or "Triple Play" - over a single connection to corporate and residential customers. Delivering triple play services over broadband is the next revenue-generating objective for operators and service providers.

Regulatory changes

The Telecom Regulatory Authority had recommended that the unlinking / down linking guidelines should be amended to enable the broadcasters to provide signals to all distributors of TV channels including IPTV service providers. The Authority has held interactive discussions with the broadcasters to obtain a general consensus to adopt non-discriminatory price regime for IPTV and DTH services provide. TRAI has also issued consultation paper on NGN with an objective to develop a suitable regulatory framework for smoother and faster march towards NGN.

2 Opportunities and Threats:

Opportunities:

With the increasing consumer demand for the high quality and content delivery of media services, IPTV has a great potential to tap the market since it not only offers entertainment, but can also provide Internet data services, telephony, e-government and video streaming. The company is enhancing their position to exploit the opportunity. The company is a metro Ethernet fiber network infrastructure company with a fully integrated backbone network, featuring "1-1000 Mbps" access which provides superior network experience over its competitors.

Threats:

The company is facing stiff competition from various similar service providers. Moreover penetration of fast internet, needed for delivering good quality IPTV content is still lacking in pace and quality. The growing number of wireless connections is also hurting the growth of IPTV, which requires a fixed line broadband connection to work effectively. High price of IPTV in comparison to DTH and CAS remains a challenge as consumer remains unsure to invest in a new technology. Intellectual property rights issue regarding converting broadcasts into content for IPTV is still not resolved. Though TRAI is expected to resolve the same in the near future but further delay will hamper the incorporation of contents and features in IPTV services. Lack of Consumer awareness lowering the barriers to change which is traditionally high in Indian consumers.

3 Segment-wise or product-wise performance

The company has operated in one segment and the major revenue of the company comes from lease of optical fiber.

4 Outlook

We believes that IOL Netcom Limited will benefit from the overall economic growth based on:-

• Growth potential and track record of ability to penetrate into the market with cutting edge

• our ability to maximize returns on investment

• Expansion of network and covering the untapped urban/rural areas.

We firmly believe that we will continue to provide unique and innovative products and services to our customers that will help us further consolidate our market leadership

5 Risk and Concern

Our major risk and concern are:

• Change in Rules and Regulation by the Government

• Technical failures and natural disasters

• Change in Technology

6 Internal Control system and their adequacy

The Company believes in formulating adequate and effective internal control systems and implementation of the same results in safeguards of assets and interests of the Company as well as reliability & accuracy of accounting data. Management Information System (MIS) forms an integral part of the Companys control mechanism, where all operating parameters are monitored and controlled.

7 Financial Performance Vs. Operational Performance

The company has achieved net sales of Rs. 114.52 lacs during the year end June 30, 2011 as against sale of Rs. 919.11 lacs during the previous year, a decrease by 87.54%. The net loss for the year ended June 30, 2011 increased to Rs. 912.26 lacs from previous year. On a paid up capital of Rs. 2939.14 lacs the earning per share work out to Rs. (4.58).

8 Development in Human Resources

The focus of Human resource is on building and developing intellectual capital through innovative ideas and by providing the training of the employees is an on going process. The industrial relation climate of the Company continues to remain harmonious with focus on quality and safety.