Bharti Airtel - Annual Report - 2008-2009

BHARTI AIRTEL LIMITED

ANNUAL REPORT 2008-2009

DIRECTOR'S REPORT

To
The Members

Dear Shareholders,

Your directors have pleasure in presenting the fourteenth annual report on
the business and operations of the Company together with audited financial
statements and accounts for the year ended March 31, 2009.

Overview:

Bharti Airtel is one of Asia's leading providers of telecommunication
services with presence in all the 22 licensed jurisdictions (also known as
Telecom Circles) in India, and in Sri Lanka. The Company served an
aggregate of 96.6 mn customers as of March 31, 2009; of whom 93.9 mn
subscribe to GSM services and 2.7 mn use Telemedia Services either for
voice and/or broadband access delivered through DSL. The Company also
offers an integrated suite of telecom solutions to enterprise customers, in
addition to providing long distance connectivity both nationally and
internationally. The Company also deploys, owns and manages passive
infrastructure pertaining to telecom operations under its subsidiary Bharti
Infratel Limited. Bharti Infratel owns 42% of Indus Towers Limited. Bharti
Infratel and Indus Towers are the two top providers of passive
infrastructure services in India.

During the financial year 2008-09, the Company achieved various
accomplishments and became the largest integrated telecom company in India
based on total telecom subscribers.

Some of the key highlights include the following:

* First operator in India to cross the total customer base of 96 mn.

* Highest net addition of 31.93 mn of total customers in a year.

* Full year consolidated gross revenue of Rs 374 bn and consolidated EBITDA
of Rs 153 bn.

* Full year consolidated net profit of Rs 79 bn.

* Year on Year (Y-o-Y) growth of total customer base by 50% resulted in 38%
increase in revenues and 23% increase in net profit.

* Mobile Network is present in 5060 census towns and 414,906 non-census
towns and villages in India, thus covering approximately 81% of the
country's population.

* Focus on rural penetration and customer affordability has led to mobile
tariffs of 1.2 cents/minute, one of the lowest in the world.

* Expanded its international footprint by launching mobile operations in
Sri Lanka on a state-of-the-art 3.5G network

* Made its television debut by launching Airtel Digital TV, its Direct-to-
Home (DTH) satellite TV service.

* Debuted Triple Play service with Airtel digital TV interactive - its
Internet Protocol Television Service in NCR under a unified brand 'Airtel'.

FINANCIAL RESULTS AND RESULTS OF OPERATIONS:

Financial highlights of Consolidated Statement of Operations of the
Company:

(Amount in Rs. mn, except percentages)

Particulars Year ended Y-o-Y

31-Mar-09 31-Mar-08 Growth

Gross revenue 373,521 270,122 38%

EBITDA 152,858 114,018 34%

Cash profit from 135,769 111,535 22%
operations

Earnings before 85,910 73,115 17%
taxation

Net profit/(loss) 78,590 63,954 23%

Financial highlights of Standalone Statement of Operations of the Company
(legal entity):

(Amount in Rs. mn, except percentages)

Particulars Year ended Y-o-Y

31-Mar-09 31-Mar-08 Growth

Gross revenue 340,143 257,035 32%

EBITDA 131,918 106,848 23%

Cash profit from 115,686 104,369 11%
operations

Earnings before 81,615 69,725 17%
taxation

Net profit/(loss) 77,438 62,442 24%

LIQUIDITY:

The Company meets its working capital requirement by having suitable
commercial arrangement with its creditors and sufficient stand by credit
lines with banks and financial institutions and operates a robust cash
management system to ensure timely availability of funds and its
deployment. The Company has been able to optimize finance cost and generate
funds for expansion by minimizing the amount of funds tied up in current
assets.

As on March 31, 2009, the Company has cash and bank balance of Rs. 27,660
mn and marketable securities of Rs. 23,422 mn. The Company actively manages
its short-term liquidity to generate optimum returns via investments made
in Debt and Money Market instruments including Bank Fixed Deposits &
Certificates of Deposits, Liquid and Income Debt Fund schemes, Fixed
Maturity Plans and other similar instruments.

TRANSFER TO RESERVE:

Out of total profit of Rs. 77,438 mn for the financial year 2008-2009, an
amount of Rs. 6,000 mn is proposed to be transferred to the General
Reserve.

DIVIDEND:

Your Board of directors in its board meeting dated 29th April, 2009, has
recommended a final dividend of Rs. 2 per equity share of Rs. 10 each (20%
of face value) for the financial year 2008-09. The total dividend payout
will amount to Rs. 4,442 mn, including Rs. 645 mn as tax on dividend. The
payment of dividend is subject to the approval of the shareholders in the
ensuing Annual General Meeting of the Company.

SUBSIDIARY COMPANIES:

Your Company has the following fourteen subsidiary companies (i) Bharti
Hexacom Limited (ii) Bharti Airtel Services Limited (iii) Bharti Telemedia
Limited (iv) Bharti Infratel Limited (v) Bharti Infratel Ventures Limited
(vi) Bharti Airtel (UK) Limited (vii) Bharti Airtel (USA) Limited (viii)
Bharti Airtel (Canada) Limited (ix) Bharti Airtel (Hongkong) Limited (x)
Bharti Airtel (Singapore) Private Limited (xi) Bharti Airtel Lanka
(Private) Limited (xii) Bharti Airtel Holdings (Singapore) Pte. Limited
(xiii) Network i2i Limited (xiv) Bharti Infratel Lanka (Private) Limited.

As per Section 212(1) of the Companies Act, 1956, the Company is required
to attach to its accounts the Directors' Report, Balance Sheet and Profit
and Loss Account etc. of each of its subsidiaries. As the consolidated
accounts present a complete picture of the financial results of the Company
and its subsidiaries, the Company had applied to the Central Government
seeking exemption from attaching the documents referred to in Section
212(1). In terms of approval granted by the Central Government under
Section 212(8) of the Companies Act, 1956 vide letter No. 47/212/2009-CL-
III dated 30-03-2009, a copy of the Balance Sheet, Profit and Loss Account,
Reports of the Board of directors and Auditors of the subsisting
subsidiaries for the year ended March 31, 2009 have not been attached with
the Balance Sheet of the Company. The Annual Accounts of these subsidiary
companies, along with the related information, is available for inspection
at the Company's registered office and copies will be made available to
Bharti Airtel's investors and subsidiary companies investors upon request.
The statement pursuant to the approval under Section 212(8) of the
Companies Act, 1956, is annexed as parts of the Notes to Consolidated
Accounts of the Company on page no. 191.

QUALITY:

Quality is at the core of everything we do at Airtel. It supports all
internal functions in delivering to customer requirements through customer
centric processes and products. Continuous improvement and innovation is
embraced throughout the Airtel ecosystem, fostered by a philosophy of
getting it right the first time by driving issues to root cause and
eliminating repeat problems. We firmly believe quality begins with our
employees and continuously invest in their training and development. A few
initiatives which are ingrained in the DNA of Airtel are lean six sigma,
process standardization and variation reduction, six sigma plus and
knowledge management.

We have a proven track record of pursuing quality management systems. Our
processes have been benchmarked with global best practices and standards,
with rigorous assessments regularly conducted on them by reputed external
assessors. Our ISO27001 implementation is amongst the largest globally, and
our ongoing BS25999-compliant BCP implementation is amongst the largest in
Asia. Airtel is TL9000 and PCI DSS compliant, and its IT infrastructure and
processes are compliant with COBIT and ITIL best practices. We are also
implementing SAS 70 across the BPO partners.

BRANDING:

Brand Airtel moved closer to its vision to be the most admired brand by
2010. Airtel sustained its momentum in the telecom space by getting closer
to the 100 mn subscriber milestone and extended the brand to TV screens by
launching DTH TV services and IPTV.

For the mobility vertical, the over-arching brand philosophy focused on
strengthening the brand's perception as a trustworthy service leader. A
segmented approach stretched the brand's relevance across socioeconomic
segments of over 300 mn mobile users in the country.

The business's rural thrust was supported by network and handset bundle
campaigns to drive acquisition amongst non-users. The rural network
campaign positioned the role of the ubiquitous Airtel network as that of a
radar that allowed the rural youth to discover their aspirations that
stretched beyond their villages, while simultaneously being in touch with
their near ones back home.

Low cost handset bundles (Airtel connection with entry-level handsets) were
promoted through a national campaign supported by on-ground roll-out of
demonstration vans in the rural hinterland. The on-air campaign focused on
the need for owning a handset bundle and the on-ground vans focused on
driving activation through live demos and activation offers in village
haats and melas. For the urban centers, the brand's belief in a barrier
free world was extended to an on-ground manifestation through the ownership
of the Airtel Delhi Half Marathon. This brand asset strengthened the
brand's iconic leadership stature.

Airtel's mCommerce solution which won an award for simplicity of use and
inbuilt security features at the GSM World Mobile Congress, was launched
using impactful communication that clearly focused on how this new service
makes life simple. The service which transforms your mobile phone into a
payment device is now being adopted by consumers at an accelerated pace.

Communication for value added services like Voice Search for Hello Tunes
and Voice SMS drove brand affinity amongst the youth segment.

Operations in Sri Lanka were launched with a high-voltage launch campaign
'Hello Sri Lanka' featuring Airtel's brand ambassador Shahrukh Khan. This
led to an unprecedented demand for application forms before launch. The
mega launch was followed by a series of tariff campaigns which changed the
game in this market. Using the platform of simplification', Airtel managed
to reposition competition as complex and unfriendly towards the user. An
unprecedented demand for Airtel connections was witnessed post these
campaigns. The subscriber base is currently accelerating towards the
1million mark in record time.

Airtel's foray in the DTH segment comes with the strategic view of
expanding our portfolio of services beyond the telecom business and is the
culmination of our 'three screens' strategy, which is to be present across
mobile phones, computers and TV screens. Airtel marked an entry into the
nascent but fast-growing DTH category with a differentiated and relevant
customer proposition. Given the rather noisy advertising environment and
strongly entrenched competition, a disruptive yet strong message was
developed for building relevance and driving acquisition. The brand's
unique proposition was based on dramatizing the TV viewing experience - and
defined as magical entertainment'. The marketing mix of digital TV',
product design and experience were carefully evolved to bring the magic'
alive, be it the stylish and premium look of the set-top box, the easy to
navigate multi-lingual electronic program guide, the unique and
differentiated features like Universal Remote, Widgets, Radio-on-TV, etc. -
all of which were firsts in India. Special care was taken to ensure that
customer touch points like the Customer Care Services, dress and service
codes for installation engineers, etc. were all detailed to enrich the
customer experience at every interaction. The 360 degree launch was with
creative manifestation - 'Come Home to the Magic' and was ranked No.3
amongst Best Advertisements in NDTV's. All about Ads 2008 ranking.

By the end of the year, the brand health scores reached an all-time high.
The year was dotted with multiple industry accolades including four ABBY
Awards, two EFFIES Awards, WOW Award for the Airtel Delhi Half Marathon and
the Singapore Outdoor Award for Airtel-Rajdhani Express.

The Economic Times (Brand Equity) featured Airtel as the best advertiser
for the year 2008 and agency faqs elected Airtel as the 'Buzziest Brand
2008' and the 'Brand with the Longest Buzz (three consecutive years)'. The
launch in Sri Lanka got extensive coverage and accolades from the country's
print and digital media and in India within four months of launch, Airtel
had become an established player in the DTH category.

HIGHLIGHTS OF THE YEAR:

Major agreements and alliances:

During the year, the Company signed the following major agreements relating
to operations, customer service, innovation and technology:

* With IBM, to handle Bharti's IT requirements in Sri Lanka. IBM will
provide IT support for Bharti's operations in Sri Lanka, which is an
extension of the software major's contract in India.

* With IBM Daksh, to enhance its customer service experience for its top-
end Platinum customers through process and technology innovation. Under the
six-year contract, IBM's managed business services unit IBM Daksh will
provide voice and back-office services including customer service,
collections, and customer retention from its centers. IBM Daksh expects to
have over 700 employees in the first year focused on providing services in
over 11 languages to elite Airtel customers across the country.

* With Alcatel-Lucent, a venture to manage Bharti Airtel's pan-India
broadband and telephone services and help Airtel's transition to Next
Generation Networks to offer advanced services like high-speed internet,
Triple Play, media-rich VAS (Value Added Services), MPLS (Multi Protocol
Label Switching), VPN (Virtual Private Network) for both retail and
business customers. Under the Joint Venture, Alcatel-Lucent will design,
plan, deploy, optimize and manage Bharti Airtel's broadband and telephone
network across India. A new legal entity is being formed which will be
managed and controlled by Alcatel-Lucent. This is the first Managed
Services partnership for broadband and telephone services in India.

* With Infosys Technologies Limited (Infosys) to deliver superior customer
experience to the customers of Airtel digital TV, it's Direct-To-Home (DTH)
TV service. As part of its Digital Convergence Platform, Infosys will
provide a suite of products including devices, application servers and
interactive applications that will focus on providing an enhanced digital
lifestyle to Airtel digital TV customers.

* With HP, to promote the penetration of broadband and personal computers.
Under the scope of the partnership, Airtel will offer consumers a broadband
connection at discounted entry cost with every HP and Compaq notebook and
desktop.

* With Apple Inc. to bring the iPhone to India. iPhone 3G combines all the
revolutionary features of iPhone with 3G networking that is twice as fast
as the first generation iPhone.

* Bharti Airtel and RIM introduced the Blackberry Bold for its customers in
India. The Blackberry Bold smartphone is the first Blackberry smartphone to
support tri-band HSDPA high speed networks around the world providing
superior functionality and performance for business professionals and power
users

* With Cisco(R) to launch Managed MPLS (Multi Protocol Layer Switching)
Service. The launch includes a Tier 1 MSCP (Managed Services Channel
Program) certification from Cisco for their network and service
capabilities, to provide Managed MPLS VPN(Virtual Private Network)
services. With this Airtel has become the first service provider in APAC
(Asia Pacific American Coalition) to achieve Cisco Powered Managed Multi-
Protocol Layer Switching Provider status under CISCO MSCP Program. The
certification places it in a league of select global operators that are
endorsed for carrier class MPLS networks and enterprise class MPLS service
capabilities. Airtel has also obtained a certification from Cisco for their
Telepresence Connection capabilities, which recognizes Airtel MPLS network
for running Hi-Definition video conferencing services, which give users
real life-like experience.

* With Virtela signed a strategic agreement to significantly enhance its
international managed MPLS connectivity outside of India to more than 5000
PoPs (Points of Presence) across 190 countries. Under the agreement, Bharti
Airtel and Virtela have integrated their networks through connection points
in South East Asia and Europe in order to expand Bharti's MPLS based IP-VPN
capabilities around the world. Bharti Airtel will now be able to offer its
Enterprise customers seamless managed MPLS connectivity and advanced

managed network solutions to key business customers on a truly global
basis.

* With Pacnet (region's largest independent telecommunications service
provider) for a Network to Network Interface (NNI) agreement to
interconnect their respective networks, expanding connections to and from
India. Under the agreement, the two companies will directly interconnect
their network infrastructure to expand their respective MPLS based IP VPN
capabilities and to provide advanced IP (Internet Protocol) solutions to
key business customers in the region. The agreement will enable both
companies to deliver greater coverage, seamless user experience and
reliable technology to their customers. Airtel and Pacnet have also
announced a special 'Gateway to India' offering for high capacity
International Private Line circuits between the United States and India.

* With IFFCO to herald the second Green Revolution to benefit millions of
rural consumers with a Joint venture company, IFFCO Kisan Sanchar Ltd
(IKSL) that will harness the power of telecom to add value to the farm
sector and empower the rural farmer by giving him access to vital
information, which will enhance his livelihood and quality of life. IKSL
will offer products and services, specifically designed for farmers,
through IFFCO societies in villages across the country. On offer are
affordable mobile handsets bundled with Airtel mobile connection and
customized value added services.

* With 15 global telecom majors to build Europe India Gateway (EIG), a
cable system from India to United Kingdom. Airtel is the only Indian
service provider to be a part of this consortium, and will be operating the
cable landing station in Mumbai. The other members of the EIG cable
consortium include AT&T, BT, C&W, Djibouti Telecom, Du, Gibtelecom, IAM,
Libyan Telecom, MTN Group Ltd., Omantel, PT Comunicacoes-S.A, Saudi Telecom
Company, Telecom Egypt, Telkom SA Ltd, and Verizon Business.

* With the country's flagship oil company - Indian Oil Corporation (IOC) -
that will enable Airtel to access 18,000 retail outlets and 5,500 Indane
cooking gas distributors of the oil giant to take the mobile opportunity
home to more customers. This is an exclusive alliance between Airtel and
IOC.

* With FirstSource Solutions (a leading global BPO services provider), a
three-year outsourcing agreement to provide a suite of BPO services
covering both voice and back office in areas such as customer accounting,
VAS (Value Added Services) provisioning, fraud & credit monitoring,
customer service, collections, customer retention to Airtel.

* With Australia Japan Cable (AJC) to interconnect their current and future
networks in Guam. This landmark agreement will allow both parties to offer
services from a number of locations including Singapore and the USA West
Coast to Australia. The innovative agreement will utilize the undersea
cable assets of Bharti Airtel and AJC. The joint network is expected to
carry commercial traffic by end of Q1 FY 09-10.

* With asklaila, India's first local information service, enabling Airtel
customers to get up-to-date information about their city, free of cost,
through asklaila's extensive city information database. The asklaila-
powered Airtel city search' is accessible across six cities, including
Delhi, Mumbai, Chennai, Hyderabad, Kolkata and Bangalore.

New products/initiatives:

During the year, the Company launched various new and innovative products
and services in the market. This enabled the company to strengthen its
leadership position despite intense competition. The following are key
launches and initiatives for the year:

* The Company made its foray into media and television by redefining home
entertainment with Airtel digital TV. The service is available to customers
through 31,000 retail points including Airtel Relationship Centres across
the country.

* Launched its virtual calling card service Airtel Call Home' in UK,
Singapore and Canada. The service is targeted at the huge Indian Diaspora,
Non-Resident Indians (NRIs) and Indian students in these markets.

* Launched its mobile services in Sri Lanka under the Airtel brand. The
Company has launched a suite of innovative services and redefined
affordability on a state-of-the-art 3.5G network. Bharti Airtel plans to
invest around USD 200 million in its Sri Lanka operations.

* Expanded the footprint by launching its Mobile Services in Lakshadweep.
Bharti Airtel is the first private mobile service provider in the islands.

* Launched Triple Play with Airtel digital TV interactive - Telephone,
Broadband and TV on a single line. The Triple Play Service is initially
available to customers in Delhi, Gurgaon and Noida. Airtel's state-of-
theart IPTV Head-end, with best-in-class MPEG4-10 compression technology,
will allow it to offer more content and better quality images as well as
services like live broadcast television, network based time-shifted TV,
real video-on-demand and a host of other interactive services.

* Pioneered 16 Mbps broadband thereby offering the fastest wireline
broadband on DSL in the country. This service is powered by the Carrier
Ethernet network and will be initially available in the cities of Delhi
NCR, Chennai and Bangalore with phased roll-out to additional cities of
Hyderabad, Pune, Mumbai and Kolkata

* Announced the launch of the world's first Windows based Online Desktop-
powered by Microsoft and Nivio, giving access to a personal virtual desktop
from any computer connected to the internet for Airtel broadband customers.
This initiative will pave the way for easy and affordable access to
computing and broadband in India. This service will be available to all
Airtel broadband customers across 95 cities in the country.

* Launched Overseas Recharge Service, yet another first' in the Indian
telecom market. Airtel has partnered with ezetop International to make
prepaid recharge available in over 150 money exchanges in the UAE and
online at www.ezetop.com

* Introduced calling rate of 1 cent per minute on its online calling card
service www.airtelcallhome.com. This will enable the Indian diaspora in US
to call friends and family back in India at the most competitive rates in
the market.

* Launched VeriSign(R) Identity Protection (VIP) Services for its
Enterprise customers in India in partnership with VeriSign. VIP Services is
a comprehensive suite of authentication and fraud detection solutions that
enables organizations to strengthen and protect their customers' online
identities.

* Spelled 'End of Distance' in India with unprecedented tariff reductions
on STD and Roaming services for its customers. While STD rates came down to
Rs. 1.50/- minute from the earlier Rs. 2.65/- minute, the reductions
enabled Airtel customers to receive a call while roaming at Rs. 1/- minute,
as compared to the earlier Rs. 1.75/- minute. Further, while roaming,
Airtel customers can make an outgoing local call at Rs. 1/- minute and an
STD call at Rs. 1.50/minute

* With mChek to offer the toll tag recharge through Airtel mobile for the
Delhi Gurgaon Expressway.

* Expanded its Premium International Toll Free services from 80 countries
for its Enterprise customers in India. These services enable enterprises to
offer a convenient and cost effective way to their overseas customers,
business partners and employees travelling abroad, to communicate with
them, through an international toll free number.

Other company developments:

* Bharti Airtel launched Airtel Innovation Fund' aimed at promoting
innovation and entrepreneurship in the field of telecommunications. This is
the first ever innovation fund in India specifically for the telecom
sector. The objective of the Fund is to provide opportunities to
entrepreneurs with a vision to build businesses based on innovative ideas.
The Fund will have an initial corpus of Rs. 200 crores and will be led and
administered by Bharti Airtel.

* Airtel is now a fully ISO 27001:2005 Certified Organization. The ISO
27001:2005 certification (from BSI: British Standards Institute) ensures a
high quality information security environment within Airtel. It helps build
trust and confidence amongst customers and further enhances the confidence
of employees in operational processes. With a total of 29 certificates
awarded under the ISO 27001:2005 Certification Program, Airtel has the
unique distinction of being awarded the largest number of certificates to
any single company in India across sectors and one of the largest in the
world.

* Bharti Airtel Limited announced key apex level organizational changes
aimed at laying the foundation for the Company's next phase of growth.
Manoj Kohli, CEO & Joint Managing Director, Bharti Airtel will increasingly
focus on strategy development, governance and organization development.
Sanjay Kapoor has been elevated from President - Mobile Services to a newly
created position of Deputy CEO. In his new role, Sanjay will lead the
Mobile, Telemedia and DTH businesses. Sanjay will report to Manoj Kohli.
Having led the transformation at the Telemedia business, Atul Bindal will
take over as President - Mobile Services. K Srinivas who was Executive
Director (East) - Mobile Services and in-charge of Sri Lanka operations
will take over as Joint President - Telemedia Services. Atul and K Srinivas
will report to Sanjay Kapoor. David Nishball will continue as President -
Enterprise Services and will report to Manoj Kohli.

REGULATORY AND KEY INDUSTRY DEVELOPMENTS:

Update on regulatory and key industry development forms part of the
Management Discussion and Analysis report.

CAPITAL MARKET RATINGS:

Bharti Airtel Limited has outstanding ratings with four institutions,
CRISIL & ICRA (national) and Fitch Ratings and S&P (international).

* CRISIL & ICRA have rated Airtel at the top end of their rating scales,
both for short term (P1+ / A1+) as well as long term (AAA/LAAA)

* International rating agencies, both Fitch Ratings and S&P have rated
Airtel at the level of the sovereign rating of India (BBB-)

While India's country rating has been put on a negative outlook by S&P, on
a recent review of Airtel by S&P, they have retained stable outlook' for
Airtel backed by the superior financial strength and positive business and
growth outlook.

SHARE CAPITAL:

During the year, the Company issued 238,942 equity shares on exercise of
stock options under ESOP Scheme 2005 of the Company.

The Company also allotted 93,408 equity shares upon conversion of Foreign
Currency Convertible Bonds (FCCBs). Due to these corporate actions, the
issued, subscribed and paid-up equity share capital increased from
1,897,907,446 (March 31, 2008) to 1,898,239,796 equity shares as of March
31, 2009.

In the Board meeting held on April 2009, subject to the approval of its
shareholders, the Board of directors has approved sub-division (share
split) of existing equity shares of Rs. 10/- (Ten) each into 2 (Two) equity
shares of Rs. 5 (Five) each. The Company is in the process of completing
all the procedural formalities to give effect to the sub-division of
shares.

CORPORATE GOVERNANCE:

The Company is committed to maintain the highest standards of corporate
governance. The Directors adhere to the requirements set out by the
Securities and Exchange Board of India's Corporate Governance Practices and
have implemented all the stipulations prescribed.

A detailed report on Corporate Governance pursuant to the requirements of
Clause 49 of the Listing Agreement forms part of the Annual Report. A
certificate from the Auditors of the company, S.R. Batliboi & Associates,
Chartered Accountants, Gurgaon confirming compliance of conditions of
Corporate Governance as stipulated under the previously mentioned Clause 49
is annexed to the Report as Annexure A.

SECRETARIAL AUDIT REPORT:

In keeping with the high standards of corporate governance adopted by the
Company and also to ensure proper compliance with the provisions of various
corporate laws, the regulations and guidelines issued by the Securities and
Exchange Board of India and the listing agreement, the Company has
voluntarily started the practice of a Secretarial Audit from a practicing
company secretary.

The Company has appointed Mr. T.V. Narayanswamy, Practicing Company
Secretary, to conduct the Secretarial Audit of the Company for the
financial year ended March 31, 2009. He has submitted his report confirming
the compliance with all the applicable provisions of various corporate
laws. The Secretarial Audit Report is provided separately in the Annual
Report.

CORPORATE SOCIAL RESPONSIBILITY:

At Bharti Airtel, Corporate Social Responsibility (CSR) encompasses much
more than social outreach programs and is an integral part of the way the
Company conducts its business. Detailed information on the initiatives of
the Company towards CSR activities is provided in the Corporate Social
Responsibility section of the Annual Report.

DIRECTORS:

Since the last Directors' Report, Akhil Gupta relinquished the position of
Joint Managing Director of the Company and continues to be a non-executive
director on the Board. Francis Heng and Kurt Hellstrom have resigned from
the Board due to personal reasons. During the year, Manoj Kohli was
appointed as Joint Managing Director of the Company. Quah Kung Yang, Nikesh
Arora and Craig Ehrlich were appointed as additional directors. The Board
places on record its sincere appreciation for the services rendered by
Francis Heng and Kurt Hellstrom during their tenure on the Board.

Ajay Lal, Akhil Gupta, Arun Bharat Ram and N. Kumar, retire by rotation at
the forthcoming Annual General Meeting and, being eligible, offer
themselves for reappointment.

The Company has received notice from a member under section 257 of the
Companies Act, 1956 proposing the appointment of Quah Kung Yang, Nikesh
Arora and Craig Ehrlich as non-executive directors of the Company.

A brief resume, nature of expertise, details of directorships held in other
companies and shareholding in the Company of the directors proposing
appointment/re-appointment as stipulated under Clause 49 of the Listing
Agreement with the Stock Exchanges is appended as an annexure to the notice
of ensuing annual general meeting.

FIXED DEPOSITS:

We have not accepted any fixed deposits and, as such, no amount of
principal or interest was outstanding as of the balance sheet date.

AUDITORS:

The Statutory Auditors of the Company, M/s. S. R. Batliboi & Associates,
Chartered Accountants, Gurgaon, retire at the conclusion of the ensuing
annual general meeting of the Company and have confirmed their willingness
and eligibility for re-appointment and have also confirmed that their re-
appointment, if made, will be within the limits under Section 224(1B) of
the Companies Act, 1956.

AUDITORS' REPORT:

The Board has duly examined the statutory auditors' report to accounts and
clarifications wherever necessary, have been included in the Notes to
Accounts section of the Annual Report.

As regards comments under para ix(a) of Annexure to the Auditors' Report
regarding slight delay in a few cases in deposition of statutory dues, the
Company is further strengthening its process to ensure that even such minor
delays do not occur in future. As regards the comment under para xxi of
Annexure to the Auditors' Report, to address the issues of fraud by
employees and external parties, the Company has taken appropriate steps
including issuance of warning letters, termination of service of the errant
employees, termination of the contract/agreements with the external
parties, legal action against the external parties involved etc. The
Company is further strengthening its internal control systems to reduce the
probability of occurrence of such events in future.

ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS
AND OUTGO:

For the Company, being a service provider organization, most of the
information as required under Section 217(1)(e) of the Companies Act, 1956,
read with the Companies (Disclosure of particulars in the report of the
Board of Directors) Rules, 1988, as amended is not applicable. However, the
information as applicable has been given in Annexure B to this report.

EMPLOYEES STOCK OPTION PLAN:

The Company values its human resource and is committed to adopt the best HR
practices. The employees of the Company are presently benefited from two
ESOP Schemes under 2001 and 2005, Employee Stock Option Policy. The policy
also helps in retention of well-performing employees, who are contributing
to the growth of the Company.

Disclosure in compliance with Clause 12 of the Securities and Exchange
Board of India (Employee Stock Option Scheme and Employee Stock Purchase
Scheme) Guidelines, 1999, as amended, are provided in Annexure C to this
Report.

A certificate from M/s S.R. Batliboi & Associates, Chartered Accountants,
Statutory Auditors, with respect to the implementation of the Company
Employee's Stock Option schemes, would be placed before the shareholders at
the ensuing Annual General Meeting, and a copy of the same shall be
available for inspection at the registered office of the Company.

PARTICULARS OF EMPLOYEES:

Information as per the provisions of Section 217(2A) of the Companies Act,
1956 read with the Companies (Particulars of Employees) Rules, 1975.

DIRECTORS' RESPONSIBILITY STATEMENT:

Pursuant to Section 217(2AA) of the Companies Act, 1956, the directors to
the best of their knowledge and belief confirm that:

(i) in the preparation of the annual accounts for the year ended 31st March
2009, the applicable accounting standards have been followed along with
proper explanation relating to material departures;

(ii) they have selected and applied consistently and made judgments and
estimates that are reasonable and prudent to give a true and fair view of
the state of affairs of the Company as at the end of the financial year and
of the profit of the Company for the year;

(iii) they have taken proper and sufficient care for the maintenance of
adequate accounting records in accordance with the provisions of the
Companies Act, 1956 and for safeguarding the assets of the Company and for
preventing and detecting fraud and other irregularities;

(iv) they have prepared the annual accounts on a going concern basis.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT:

In accordance with the Listing Agreement requirements, the Management
Discussion and Analysis report is presented in a separate section forming a
part of the Annual Report.

ACKNOWLEDGEMENTS:

Your directors wish to place on record their appreciation to the Department
of Telecommunications (DOT), the Central Government, the State Governments
and Company's Bankers, the business associates, for the assistance, co-
operation and encouragement they extended to the Company and to the
employees for their continuing support and unstinting efforts in ensuring
an excellent all round operational performance. Last but not the least the
directors would like to thank various partners viz. Bharti Telecom,
Singapore Telecommunications Ltd., and other valuable shareholders for
their support and contribution. We look forward to their continued support
in the future.

Annexure B:

INFORMATION RELATING TO CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION,
RESEARCH AND DEVELOPMENT AND FOREIGN EXCHANGE EARNING AND OUTGO FORMING
PART OF DIRECTORS' REPORT IN TERMS OF SECTION 217(1)(e) OF THE COMPANIES
ACT, 1956 READ WITH THE COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT
OF THE BOARD OF DIRECTORS) RULES 1988.

CONSERVATION OF ENERGY & TECHNOLOGY ABSORPTION:

Bharti Airtel Limited, being a telecommunications service provider, the
information in Part A and B pertaining to conservation of energy and
technology absorption are not applicable to the Company. However, the
Company requires energy for its operations and every endeavor has been made
to ensure the optimal use of energy, avoid wastage and conserve energy as
far as possible.

From time to time, the Company evaluates global innovation and technology
as a benchmark and wherever required, enters into arrangements to avail of
the latest technology trends and practices.

FOREIGN EXCHANGE EARNING AND OUTGO:

Activities relating to exports initiatives taken to increase exports;
development of new export markets for products and services; and export
plans;

International Long Distance Business:

We have seen significant growth in our long distance business. With India's
increasing integration into the global macro economy, we anticipate
significant further growth in this domain. We have strong relationships for
under-sea networks and we will continue to invest in major cable systems to
increase our presence and share of the global traffic.

International Calling Card Services:

Airtel CallHome, our international calling service through wholly owned
subsidiary companies, connects the widespread NRI population in USA to
their families and friends in India at a cost effective and reliable
manner. The service was launched in December 2006. The launch marked
Bharti Airtel's foray into the US market. The Company further launched its
services in UK, Canada and Singapore in 2008-09. The Company also plans to
extend its services through its wholly owned subsidiary companies, across
the globe to address the needs of the Indian diaspora through our global
network in near future.

Telecom Services in other countries:

The Company continuously explores and evaluates various opportunities for
growth and expansion inside and outside the country organically and through
alliances, mergers/ acquisitions in identified markets, subject to
availability of licenses, growth potential and cost as well as other
relevant factors. In its efforts, the Company achieved its first success
upon receipt of letter of offer in January 2007 after a competitive bidding
process, from the Telecom Regulatory Commission of Sri Lanka to offer 2G
and 3G services in Sri Lanka. Bharti Airtel started providing these
services from January 2009, through its wholly owned subsidiary company
Bharti Airtel Lanka (Private) Limited, Sri Lanka. In addition, Bharti
Infratel Lanka (Private) Limited, a wholly-owned subsidiary of Bharti
Airtel Lanka (Private) Limited, has also been incorporated with an
objective to provide passive infrastructure services on a non-
discriminatory basis to all telecom operators in Sri Lanka.

Total foreign exchange used and earned for the year:

(a) Total Foreign Exchange Earning Rs. 18,093 mn
(b) Total Foreign Exchange Outgo Rs. 53,663 mn

Annexure C:

INFORMATION REGARDING THE EMPLOYEES STOCK OPTION SCHEME:
(as on March 31, 2009)

Particulars ESOP Scheme 2005 ESOP Scheme 2001

1) Number of Stock 87,23,966 *1,94,53,868
Options granted

2) Pricing Formula The Exercise Price 1,45,07,843 @ 22.5
per options shall
not be less than 8,80,000 @ 0.91
the par value of the
Equity Share of the 21,90,000 @ 70
Company and shall
not be more than the 71,265 @ Nil
price prescribed
under Chapter XIII 20,000 @ 120
of the SEBI
(Disclosure and
Investor 12,500 @ 221
Protection)
Guidelines 2000 as
amended. Relevant 17,72,260 @ 10
Date being the
Grant Date.

3) Option Vested 22,03,175 1,78,08,375

4) Number of Options 6,59,392** 13,749,755
exercised

5) Number of shares 6,53,317 Nil
arising as a result
of exercise of option

6) Number of option 21,74,100 41,86,341
lapsed

7) Variation of terms NA NA
of option

8) Money realized by
exercise of options 16,70,45,342*** 35,69,99,122

9) Total number of 58,90,474 15,17,772
options in force

10) i) Senior Managerial
personnel:

1. Mr. Manoj Kohli 4500 Nil

2. Mr. Sarvjit Singh 3000 Nil
Dhillon

3. Mr. S. Asokan 4500 Nil

4. Mr. Inder Walia 7500 Nil

5. Ms. Vijaya Sampath 3000 Nil

6. Mr. David Nishball 4500 Nil

7. Mr. Jai Menon 7500 10000

8. Mr. Sanjay Kapoor 4500 Nil

9. Mr. K Shankar 4500 Nil

10. Mr. Narender Gupta 3000 Nil

11. Mr. Shaun Parmar Nil 10000

12. Ms. Jyoti Pawar Nil 5000

13. Mr. Srikanth Nil 12500
Balachander

14. Mr. Shireesh M Joshi Nil 15000

15. Ms. Ranjana Smetacek Nil 5000

ii) Any other employee Nil Nil
who receives a grant in
any one year of option
amounting to 5% or more
of option granted during
that year

iii) Identified employees Nil Nil
who were granted option,
during any one year,
equal to or exceeding 1%
of the issued capital
(excluding outstanding
warrants and conversions)
of the company at the
time of grant

11) Diluted earning per 0.0026 NA
share (EPS) pursuant to
issue of shares on
exercise of options
calculated in accordance
with Accounting Standard
(AS) 20 Earning Per
Share'

12) In case, the NA 36,81,825
employees compensation (0.0019)
cost is calculated on
the basis of intrinsic
value of Stock Option,
difference between the
employees compensation
of the Stock Option
cost based on intrinsic
value of the Stock and
the employees
compensation of the
Stock Option cost based
fair value for the year
ended March 31, 2009
and the impact of this
difference on profits
and on EPS of the
Company.

13) For Options whose a) Rs. 22.5; Rs 70;
exercise price either Rs. Nil; Rs 120;
equals or exceeds or Rs. 10; Rs 221
is less than the
market price of the
stock the following
are disclosed
separately:-

a) Weighted average Rs. 541.53
exercise price

b) Weighted average Rs. 267.95 b) NA; NA;
fair price Rs. 139.40;
Rs. 168.87;
Rs. 427.79;
Rs. 542.96

14) A description of the method and : Fair value Method :
significant assumptions used during Black Scholes/Lattice Valuation
the year to estimate the fair values Model
of options, including the following
weighted average information.

(i) risk free interest rate : i) 4.45% P.A to 9.70% P.A.
(The Government Securities curve
yields are considered as on
valuation date)

(ii) expected life : ii) 48 to 60 months

(iii) expected volatility : iii) 36.23% to 41.39% (assuming
250 trading days to annualize)

(iv) expected dividends : iv) Nil

(v) the price of the underlying : v) Rs. 616.80 to Rs. 832.55 per
share in market at the time equity share
of option grant

* Grants of 4,066,025 number of shares were made out of the options lapsed
over a period of time.

** This includes 6,075 number of options under Scheme 2005, which is
pending allotment and against which money has been realised.

*** This include Rs. 1,540 thousand on account of money received against
6,075 options pending allotment.

Corporate Social Responsibility:

In today's competitive environment, businesses continue to be under
pressure to focus their energies on achieving their business goals and
objectives. But an equally powerful imperative to reach beyond business
processes and goals has also gained ground. At Bharti Airtel, we have
always believed that business success cannot be an end in itself rather it
is a means to a set of higher socio-economic goals. Over the years we have
made a conscious effort to reach out to society at large, as much as we
have striven to promote the interests of the stakeholders in our business.

In 2008-09, we undertook many initiatives in the social welfare space. We
firmly believe that our efforts are creating a long lasting impact on our
stakeholders, both internal (employees) and external (customers, suppliers
and the community). Internally, we have been able to make transformational
changes in the workplace to build on employee trust. Similarly the trust of
our external stakeholders has further strengthened through our involvement
in various life spaces - education and training, health, environment.

Educate and Inspire:

India's most conspicuous advantage lies in its demographic situation - its
youthful population. When more than 54% of its population belong to the
below-25 age bracket, the challenge for the country obviously lies in
preparing this large segment for gainful employment - to make it a powerful
productive force. Education, of course, plays a critical role in making
this possible and we have taken a conscious decision to focus a substantial
part of our philanthropic activities on the promotion of education,
particularly in the far flung villages, which continue to struggle with
poor infrastructure.

Most of our welfare activities are routed through Bharti Foundation, the
philanthropic arm of the Bharti Group. Set up in 2000, the Foundation has
been working towards improving access to quality education in rural India.
Here are some of the programs and projects that Bharti Foundation is

undertaking to impact the quality of education in the country:

At the grassroot:

Satya Bharti School Program (SBS):

'Create temples of learning radiating knowledge and excellence for
underprivileged children'

The Satya Bharti School Program is the flagship program of Bharti
Foundation. Launched in 2006, it aims to make available high quality
education to poor and under-privileged children - especially the girl
child. Within just a few years of its existence, it has indeed become
recognized as one of the most powerful programs in the arena of primary
education. The Foundation is responsible for end-to-end management of the
schools, right from construction to imparting of education.

The Program operates with a two pronged approach. On the one hand, the
Foundation builds new primary schools from scratch and operates them on its
own with active support from local communities. On the other hand, it also
partners the State Governments to adopt already existing government primary
schools with the aim to improve their overall performance and functioning,
following the same curriculum philosophy and quality standards as their own
primary schools.

The schools, constructed by Bharti Foundation are designed to be cost
effective, child and environment friendly. The curriculum for these schools
has been creatively designed to empower children to look at education not
as a task but as an experience that contributes towards the development of
important life skills and values in addition to linguistics and
mathematical skills.

Community participation plays a big role in the running of these schools.
The Foundation has quite successfully enlisted the support of the village
panchayats and local bodies in running these schools. Community
participation is ensured through various modes like contribution of land,
sponsoring of mid-day meals and its utensils, sponsoring of materials used
in school construction, sponsoring of stationery for use in schools and
also to monitor school activities.

The Satya Bharti School Program has made significant progress since its
inception in 2006. In just two years, 158 primary schools have become
operational. Over 17,000 underprivileged children have been enrolled, of
which 48 per cent are girls.

By the completion of Phase one, the Foundation aims to operationalize 236
primary schools reaching out to approximately 50,000 children across
Punjab, Haryana, Rajasthan, Uttar Pradesh and Tamil Nadu.

Satya Bharti Senior Secondary School Program:

To ensure continuous access to quality education for children of its
primary schools, Bharti Foundation plans to set up one Satya Bharti Senior
Secondary School, in public-private partnership mode, over a cluster of 8-
10 Satya Bharti Primary Schools. In addition to regular academics, these
schools will provide vocational training opportunities to children to help
them gain employment within their own village upon completing their
schooling. Establishment of senior secondary and vocational training
schools is in process; they will become operational shortly.

Other educational programs:

Support Talent to Bloom - Scholarships and Mentorship:

Bharti Scholarship and Mentorship Program aims to help academically bright
students with limited financial means to pursue higher education in
management, engineering (electronics, telecom and software) and
agriculture. Ever since its inception the program has expanded its scope
and coverage to include students from more regions and disciplines. Today
the program supports 224 scholars in 38 premier institutions of higher
education across 26 states.

The Foundation also supports 40 underprivileged girls through the
Scholarship Program under the Bharti Udayan Shalini Fellowship Program.
This scholarship extends support to only girl students from underprivileged
background to pursue higher education and vocational training courses.
Periodic workshops on topics like career counseling and personality
development, peer handholding (by senior fellows of previous years) and
mentoring by interested individuals from civil society form a strong
component of the program.

Bharti Foundation has also made a substantial contribution to the Dr.
Manmohan Singh Undergraduate Scholarship Program at the University of
Cambridge, as one of its promoters. The Program provides full funding,
covering fees and means - tested maintenance for undergraduate study in any
subject at any of the colleges that are part of the University of
Cambridge.

Building Centres of Excellence:

Bharti Foundation has joined hands with premier institutes in the country
to further the cause of higher education and training in the area of
technology and management.

Bharti School of Telecommunication Technology and Management, IIT, Delhi,
operational since 2006 provides education and training opportunities to
academically bright young people to develop future leaders and
entrepreneurs. Every year, the school impacts 200 students directly or
indirectly. The School extends access to its state-of-theart facilities not
only to its own scholars but also scholars pursuing other courses.

Bharti Centre for Communication in IIT, Mumbai, launched during the year
strives for excellence in research in communication theory and systems and
fosters technical collaboration between research and user groups.

Bharti Institute of Public Policy will be established at the Indian School
of Business (ISB) campus in Mohali, Punjab to promote research and
excellence in Public Policy.

Other initiatives:

Bharti Foundation has also supported and facilitated several initiatives in
the field of primary education over the last few years.

26 Bharti Computer Centres and 104 Bharti Library and Activity Centres were
set up by the Foundation in partnership with other NGOs like Pratham,
Infotech, Kalakar Trust and Adarshila. Presently being run as independent
units, these centres aim to make books and technology accessible to
children in the rural pockets of the country.

The Foundation has also supported the Mid-Day Meal Program, in partnership
with Akshaya Patra.

Over the years, Bharti Foundation has successfully extended the ambit of
its programs to new areas. Its programs have directly and indirectly
impacted more than 150,000 children and youth so far. The Foundation
expects to reach out to more than 200,000 children through its Satya Bharti
School Program in the future.

Besides initiatives in the focus area of education, we undertook several
other measures in the areas of health, environment, and disaster management
support. The involvement of large numbers of employees across businesses
was particularly heartening.

Public Health:

We firmly believe that mobile telephony empowers users to connect with each
other in unheard of ways to overcome difficult situations. We have
discovered a novel way of extending our spirit of innovation in the area of
blood donation by finding a mode to connect the blood banks with donors and
users. Mobility Tamil Nadu extended its association with Jeevan Blood Bank
in Chennai under its Airtel Cares for Everyone' (ACE) project. This first
of its kind initiative enables people to get information on availability of
blood within minutes and access the real time stock of tested blood
components from Jeevan Blood Bank 24 hours a day. Airtel already has a
partnership with Jeevan, in which a few numbers have been provided free of
cost for Jeevan to stay in touch with people wanting to donate blood and
patients in need of blood. Mobility Karnataka too launched a virtual blood
bank to bridge the gap between donor and recipients.

Like in previous years, circle organizations regularly organized blood
donation camps in association with Rotary blood bank, Lions blood bank and
International Red Cross to encourage employees to donate blood.

We also worked towards creating awareness about different diseases and
their preventive measures among employees.

Rural Empowerment:

Our rapid rural penetration enables us to impact lives in India's far flung
villages. Our connections have turned out to be key catalysts in the rural
areas both in terms of economic productivity and governance.

The E-Gram project initiated last year has already made a huge
transformational impact in rural Gujarat, as citizens no longer have to
travel long distances to get routine official work done. The initiative has
truly carried the government to the villager's doorstep. We are determined
to help initiate many such e-governance initiatives in the future as well.

Impact of our business on the rural economy has been quite profound. We
have successfully connected the rural farmers, the artisans and the small
entrepreneurs to their markets, raising their incomes substantially. During
the year we launched a path-breaking project in the shape of our joint
venture with IFFCO - IFFCO Kisan Sanchar Limited (IKSL). IKSL is making a
discernible impact on agricultural productivity through its timely
information offerings in the area of weather forecast, commodity rates and
farming techniques. To ensure rapid dissemination of the services we are
also providing affordable handsets to the farmers.

Support and inspire the young and vulnerable:

Employees across businesses and circle organizations have always been keen
to extend a helping hand to children from the poor and deprived sections of
the society. Through the year, several initiatives were undertaken by
employees, a handful of which are presented here:

On Children's Day they visited nearby schools with goodies and gifts for
the students and shared some warm moments with them. They engaged the
children with unfilled games, singing and painting competition. At the TNG
Head Office, the employees conducted a charity auction of children's
paintings. All collections from this were donated to the SOS Children's
Village.

Employees in Mobility Karnataka and Mobility Assam undertook several
initiatives to bring smiles to people living in orphanages and old age
homes. Airtel Team in Mangalore (Karnataka) celebrated Diwali with children
at Prashanth Nilaya', an orphanage for girls. Employees of Mobility NESA
too visited an orphanage and an old age home to celebrate Bihu there.

Like last year Mobility Tamil Nadu joined hands with a local voluntary
organization on World Disability Day to organize a funfair to cheer the
exemplary spirit of individuals who have risen above their disabilities to
make a difference to their own lives and to the society. 'Gift A Smile' was
one more initiative for visually challenged children by CSR volunteers of
Bharti Airtel - Transport National Group. The volunteers visited National
Association for the Blind (NAB), a school for taking care and grooming the
visually impaired children to understand their disability and inspire them
to look at life more positively. Various fun-filled activities like Dancing
& Painting Competition, Poetry Recitation and Storytelling were organized
followed by a Prize Distribution ceremony.

Telemedia North hub has adopted Prayas, a national level voluntary
organization (NGO) functioning in collaboration with the Delhi Police,
Delhi School of Social Work (University of Delhi), and various
governmental, bilateral and non-governmental organizations. The
organization is deeply committed to the cause of neglected, disadvantaged
and deprived children, youth and women from underprivileged communities in
slums / rural areas of Delhi and in the states of Gujarat, Bihar, Assam,
Arunachal Pradesh and Haryana. Every month Telemedia North donates proceeds
from its scrap sale to Shruti, an NGO focused on education for education of
the vision impaired.

Think Green:

Bharti Airtel believes in the philosophy of 4Rs - refuse, reduce, reuse and
recycle. The philosophy extends to all our acts in our offices and on our
sites. We have stepped up our efforts towards energy conservation by
sharing infrastructure, using technology aids like video conferencing to
reduced travel and deploying green shelters. At our offices, we have
deployed waste water recycling, energy efficient lighting, the concept of
the energy wheel, air curtains on major office exits and disposal
mechanisms for discarded oil. We have also teamed up with global majors to
form teams focusing on energy optimization by way of introducing energy-
efficient equipment and exploring alternate energy sources like solar,
wind, bio-fuel / hydrogen etc. to reduce the environmental impact.

Green Shelters at cell sites has reduced operational costs by as much as
40% as compared to conventional shelters. Airtel has saved over 75mn liters
of diesel and over 400mn KWH of energy on an annualized basis, translating
into approx. US$ 100mn in energy savings alone. Carbon emission has reduced
by over 500,000 mt annually by deploying green shelters at all our sites
across India.

As an environment conscious organization, Bharti Airtel constantly explores
all possibilities to control energy consumption and reduce green house
gases on priority basis. We have set up dedicated teams to deal with energy
efficiency and renewable energy. The teams are led by top management, which
shows the commitment to the cause. There is a constant endeavor to install
the latest energy efficient equipment and control systems in all facilities
such as BTSes, data centers and MSCs. Applications of renewable and
alternate energy are being taken up to install solar hybrid towers for
BTSes, use of alternate fuels to operate DG sets, obtaining wind energy for
the bulk consuming loads.

Bharti Airtel is the first company to apply for carbon credits by
implementing energy efficiency power interface units and back-up cooling
systems in BTS. Energy councils were set up across the businesses to
implement energy efficient initiatives.

The World Environment Day was celebrated with much enthusiasm across circle
organizations. Each one Plant one', a campaign launched by Mobility Tamil
Nadu symbolized employee commitment to the cause. In Mobility Gujarat
employees celebrated by wearing green, and adopted car pooling to minimize
pollution.

We have automated many of our HR processes through an innovative technology
program called e-tize. Airtel employees conduct their day-to-day work
through this comprehensive automation journey, touching all core domains;
Learning and development, Leave management, Compensation management,
expense management and travel management. All this have reduced employee
interface processes to the click of a button, significantly improving
employee motivation and comfort.

Alongside a dramatic transformation in work processes, e-tize delivers
equally powerful dividends in terms of environment friendliness. Employee
touch point automation initiatives manage to save approx 600,000 sheets of
paper every year.

Disaster Relief:

During the year states like Bihar, Bengal, Orissa and Assam faced several
natural calamities in the shape of floods. As a responsible corporate
Bharti Airtel and its employees rose to the occasion to support the flood
victims both in terms of financial contributions and donation of relief
materials. Employees in circle organizations and business units went on a
collection drive to raise substantial amounts of relief materials for the
flood victims. Bharti Foundation made a contribution of Rs. 30mn to the
Prime Minister's Relief Fund for supporting the government's relief work in
the flood affected areas.

Natural disasters are always better handled with an early warning system in
place. With this in mind Bharti Airtel has joined hands with Massachusetts
Institute of Technology (MIT) to develop an early warning system to predict
floods at least 15 days in advance. Under the agreement, we will provide
data about the water-levels of various rivers at different points and the
status of embankments to the institute, while MIT will analyze this data by
super computers vis-a-vis other references drawn in from satellites. This
novel approach follows encouraging results from a pilot project we
undertook in four districts of Bihar - Muzaffarpur, Vaishali, Samastipur
and Darbhanga in July 2008. We strongly believe the success of this early
warning system will open the door for many such initiatives across the
country, which has a topographical diversity that exposes it to a variety
of natural disasters.

Innovation and Entrepreneurship-Rekindle the spirit:

Innovation and entrepreneurship have been at the core of Bharti Airtel's
phenomenal market penetration and growth. It has always been our desire to
spread this spirit to the wider society. The Company therefore launched the
Airtel Innovation Fund' aimed at promoting innovation and entrepreneurship
in the field of telecommunications. The objective of the first such Funds
in telecom is to provide opportunities to entrepreneurs with a vision to
build businesses based on innovative ideas. The Fund has an initial corpus
of Rs. 2bn and will be led and administered by Bharti Airtel.

Sporty ways - Ensuring a healthy future:

Promoting a sporting culture and developing a keen awareness about healthy
living is a priority for us. Through the year, it has been our consistent
endeavor to promote such a culture both within the organization and
outside.

Airtel Delhi Half Marathon was our biggest initiative on this front. The
mega event enabled Delhi's young and old to rub shoulders with professional
marathoners on Delhi roads to rediscover the joys of running. The event was
a rousing success, in which more than 30,000 participated. We are certainly
going to continue our association with this premier event in future.

To enhance employee involvement in sports, Airtel Centre and circle
organizations continued organizing internal sports events through the year.
Like last year, the Airtel 20:20 Cricket Cup was a grand success, in which
all the circle organizations and the businesses participated with much
enthusiasm.

Cultural Connect - Be one with India's diversity:

Over the years Bharti Airtel has carved out an enduring relationship with
India's hugely diversified culture. We have built this relationship by
diligently investing in popular cultural events in different regions of the
country. These relationships continued through the year, be it the famous
Dahi handi festival in Maharashtra or for that matter the very popular boat
races in the Kerala backwaters.

Circle organizations have been actively promoting local music and dance
festivals. Mobility Orissa continued its association with the state's
premier annual cultural show, the Konark Dance & Music Festival. The
festival helps connect the wider public to the rich cultural tradition of
the state. Mobility NESA supported the annual Kameswari Dance Festival,
where noted classical dancers and singers from across the country
participated.

Another association that we are extremely proud of is our support for
Habba, Bengalooru's biggest cultural festival celebrating the spirit of the
city. The annual festival showcases every conceivable element of the
region's culture so successfully starting from music, dance, fashion to
craftsmanship.

Bharti Airtel's continuous support to these events have kept the country's
rich cultural roots fresh in the public mind. Many struggling art forms
have received a new lease of life because of our associations with them.

ACT - A Caring Touch:

ACT is an employee philanthropy programme that encourages all Bharti Group
employees to contribute time, skills, knowledge, materials and money to
either Bharti Foundation or any other charitable organization of their
choice empanelled in ACT. Employees across our businesses and circle
organizations have regularly donated stationery and teaching materials to
the students of nearby Satya Bharti Schools. To facilitate employee
volunteering on a larger scale, Bharti Airtel continues its policy of
offering one day's paid leave to all employees.

Mobility Karnataka's institutional team decided to welcome 2009 with a
message of 'WE CARE'. Under the Program all the team members will be
donating a recurring amount (ranging from Rs. 50 to Rs. 250) over the next
12 months for various Bharti ACT initiatives through the ACT portal. The
Company will be making a matching contribution to support the cause.

Employees in the circle also joined hands with Pragati Educational
Foundation to sponsor the education and its related expenses for 18 girl
students with excellent past educational track records. Other employees
from Bangalore are acting as mentors to these children and assisting them
in their academics.

Bharti Airtel's success as a business entity only inspires us to be more
ambitious in the social arena. Even as we try to align our business
priorities to make an incremental impact on the quality of life around us,
we remain equally determined to transcend our business arena to trigger big
transformational changes in the socio-economic landscape through our CSR
initiatives. While Bharti Foundation will continue to be the principal
channel for our CSR initiatives, we will always be keen to align our
business processes and goals to make a more deep rooted impact on the
society directly.

Management Discussion & Analysis:

Industry Structure and Developments:

Indian telecom industry:

The Indian telecom sector has seen a phenomenal growth and currently has
close to 430 mn telecom customers. The market surpassed the USA to become
the second largest market in the world after China. Notwithstanding this,
the telecom penetration is only 37% with a wireless penetration of 33.7%
and broadband penetration of 0.54%, thereby offering a good growth
potential.

The target of the Government is to reach 500 mn telecom customers of which
20 mn broadband customers by 2010. India presents robust growth
opportunities driven by economic growth, increasing urbanization, rising
income levels and a large youth population. The majority of new customers
will be from the hinterland and remote areas with inadequate basic
infrastructure and no previous connectivity, demanding low tariffs for
voice calls and value added services like information about market and
commodity prices, weather update, health update etc. The urban consumer
demands high speed internet connectivity and audio-video streaming,
navigation and location maps, music downloads, gaming, m-commerce, IPTV and
mobile TV. Tariffs for local and long distance calls are at the lowest
levels in the world and still falling.

Innovations like shared infrastructure, new low cost technology and energy
saving devices are critical to rural connectivity. On the other hand,
competition will intensify with entry of new players and interest from
global telecom operators, many of whom wish to re-enter India after an
earlier departure and participate in the success of Indian telecom.

Bharti Airtel, with over 96 mn customers as on March 31, 2009, is the
largest integrated telecom operator in India with investments of Rs. 23,489
mn, revenues of Rs. 373,521 mn and Rs. 78,590 mn in net profits. It is
among the top five companies in terms of market capitalization in India.

Recent developments in regulation:

Whilst much of the success is attributable to the entrepreneurial spirit of
the telecom companies, various pro-active and positive policy measures
taken by the regulatory authorities have also provided an impetus for
growth. The relative importance of the regulatory changes should be viewed
in light of big challenges and opportunities that the industry is facing
today (as detailed in later sections of this report). Overall, the
direction and pace of regulatory changes is positive for the industry and
augurs well for the Company. The following list captures the key regulatory
changes that were implemented by the Department of Telecommunication (DoT)
and Telecom Regulatory Authority of India (TRAI) in the year 2008-09.

Regulatory changes:

* Regulation on Quality of Service (QoS) for the telecom sector:

On March 20, 2009, Telecom Regulatory Authority of India (TRAI) released
its regulations on QoS standards for both wireline and wireless services.
For wireline services, TRAI has specified that billing complaints should be
resolved within a maximum of 4 weeks. A parameter, Answer to Seizure Ratio,
has been prescribed as an alternative to the Call Completion Rate (CCR)
wherever the CCR cannot be measured and reported.

For cellular services, the benchmark for call drop rates has been revised
from the existing less than 3% to less than or equal to 2%. The condition
on accumulated downtime for community isolation has been replaced with a
new parameter on network availability, wherein network availability will be
assessed through two separate parameters - Base Transceiver Stations'
(BTSs) accumulated downtime and worst-affected BTSs due to downtime.

* Interconnection Regulation for Broadcasting Sector:

On March 19, 2009, TRAI released the new interconnection regulation for the
broadcasting sector wherein TRAI has not prescribed any limit / regulation
on carriage / placement fee, which distributors of channels charge from
broadcasters to carry their channels on its platform.

Moreover, for the DTH sector, a distinction / definition has been
prescribed for commercial and ordinary customers to enable DTH operators to
provide their services to commercial customers as well.

* QoS Regulations for DTH operators:

On March 16, 2009, TRAI released its QoS standards for DTH operators. As
per this regulation, DTH operators have been barred from amending the
composition of their subscription package during the first 6 months, if
such channels continue to be available on their platform. In case of
withdrawal of any channel within the first 6 months, the DTH operator has
to proportionately reduce the subscription charges and / or will have to
offer any other channel of the same genre and language.

Apart from the above, the operator will not be allowed to charge any fee
towards visiting or repair and maintenance charges of DTH Consumer Premises
Equipment (CPE) during the period of warranty for such DTH CPE acquired on
outright purchase basis.

* Interconnection Usage Charge (IUC) regime:

On March 9, 2009, TRAI issued a revised IUC regime wherein (i) Termination
Charge (TC) has been reduced from Re.0.30/- min. to Re.0.20/- min. (ii) TC
on incoming international calls has been increased from Re.0.30/- min. to
Re.0.40/- min.(iii) Transit Charge has been reduced from Rs.0.20/- min. to
Rs.0.15/- min.

* Roll out obligations:

On February 10, 2009, Department of Telecommunications (DoT) modified the
roll-out obligations of Access Service Providers.

The service providers now need to fulfill their 1st and 3rd phase of roll
out obligations within the 1st and 3rd year respectively from the date of
allocation of startup spectrum, as against from the effective date of the
licence agreement.

As per DoT, while computing the period of one year, the average delay in
SACFA clearance shall be excluded. Moreover, in-building coverage will not
be considered for roll out obligations for imposition of liquidated
damages.

* Internet Protocol Television (IPTV) Services:

On September 8, 2008, the Ministry of Information & Broadcasting modified
the guidelines for downlinking of television channels to enable
broadcasters to provide their content to IPTV service providers. Earlier,
IPTV service providers were not allowed to take content from broadcasters.

* Resale of International Private Leased Circuit (IPLC):

On September 24, 2008, DoT introduced a new license regime for IPLC wherein
resale of IPLC has been permitted to provide end-to-end IPLC between India
and the country of destination for any capacity denomination. After
obtaining the IPLC from ILDOs, the licensee can sell the bandwidth on
retail basis with or without value addition to end customers and in this
regard can have agreement for leased line with Access Providers, NLDOs and
ILDOs. The licensee has also been allowed to provide billing services to
its customers either directly or through an Access Provider.

Regulatory work-in-progress:

* Universal Service Obligation (USO) and Rural telephony:

On March 19, 2009, TRAI recommended separation of USO fund from the purview
of DoT so as to ensure efficient utilization of the funds collected to
enhance rural connectivity. According to TRAI, the USO fund administrator
should be effectively empowered with administrative and financial
authority. TRAI has further stated that the USO fund Act should be amended
so that the money accruing to the fund is directly managed by the
organization and is not routed through the budgetary process of the Union
Government.

TRAI also made other significant recommendations to enhance rural telephony
such as (i) reduction in 2% USO levy after covering 75% of the development
blocks including villages (ii) subsidy scheme for optical fibre from USOF
subsidized towers to the near block headquarters etc. The above
recommendation is yet to be endorsed by the DoT.

* Lock-in-period for Promoter's equity:

On March 12, 2009, TRAI recommended a lock-in period of 3 years of the
equity share capital of promoter(s), whose net-worth has been taken into
consideration for determining the eligibility for grant of a Unified Access
Service License.

As per TRAI, after fulfillment of roll out obligations and DoT's prior
approval, such promoters may be allowed to sell their equity within the
lock-in period as well. However, on such transactions, 50% of the profit
will have to be retained in the business as a special reserve and utilized
for telecom network expansion only and balance to be transferred to the
DoT.

The above recommendation is yet to be endorsed by the DoT.

* Value Added Services (VAS):

On February 13, 2009, TRAI released its recommendations related to VAS.
TRAI did not recommend any separate category of license or registration for
VAS.

As per TRAI, mutual commercial agreements between telecom access service
providers and content providers/content aggregators for revenue share in
the provisioning of VAS services will remain the model.

* Spectrum Charges:

On December 10, 2008, TRAI gave its concurrence on DoT's various proposals
related to spectrum charging.

Segregation of 2G & 3G revenue : TRAI endorsed the proposal of DoT to rule
out the proposal of segregation of 2G & 3G revenue after taking into
account the huge difficulties in verification and audit to prevent
accounting and arbitrage and other practical difficulties.

Annual Spectrum Charges: TRAI also endorsed DoT's proposal to increase the
annual spectrum charges for differential levels of spectrum i.e.

Spectrum in MHz in 2G Proposed Annual Spectrum
Charges as % of AGR

Upto 4.4MHz (GSM) / 2.5MHz (CDMA) 3
Upto 6.2MHz (GSM) / 5MHz (CDMA) 4
Upto 8MHz 5
Upto 10MHz 6
Upto 12.5MHz 7
Upto 15MHz 8

These charges applicable to an operator with 2G spectrum should be
applicable to the 2G+3G spectrum holder on their total AGR.

Spectrum Charges for stand-alone 3G operator : The annual spectrum charges
will be 3% with moratorium of 1 year from assignment of spectrum.

Apart from the above, TRAI also recommended an annual administrative charge
of 2% of the highest bid amount during the validity of 3G spectrum. This
charge would be over and above the annual spectrum charges. This proposal
is yet to be endorsed by DoT.

* Mobile Virtual Network Operator (MVNO):

On August 6, 2008 and by means of its subsequent amendment dated March 12,
2009, TRAI recommended the entry of MVNOs in India.

The definition of MVNO as suggested is: 'MVNO in a service area is an
entity that does not have spectrum of its own for access services but is
licensed to provide access services to its customers through an agreement
with any licensed access provider. The MVNO should not possess spectrum for
access services in any manner including licensing of spectrum'.

As per TRAI, MVNO should be free to choose its business model (Full or
Intermediate or Thin). Typically, a Thin MVNO would offer services in its
own brand without any infrastructure and a full MVNO could set up its own
HLR, VLR, IN switches, MSC etc. but not the Radio Access Network (RAN).

TRAI has also recommended that at present, one MVNO may be restricted to
get parented to one telecom operator only in any service area.

This is yet to be endorsed by the DoT.

* Carrier Selection and NLD Calling Cards:

On August 20, 2008 TRAI issued the direction that in today's context
Carrier Selection is not justifiable on need & cost benefit basis'.

As an alternative to Carrier Selection, TRAI recommended that NLDOs and
ILDOs should be allowed to introduce their own calling cards. As per TRAI,
on such long distance calling cards, local calls and other intelligent
network based and value added services like tele-voting, toll free numbers,
SMS/MMS and content services should not be allowed.

This is yet to be endorsed by the DoT.

* Internet Telephony:

On August 18, 2008 and by means of its subsequent clarification dated
February 3, 2009 TRAI recommended to allow ISPs to offer full fledged
unrestricted internet telephony (i.e. calling from internet to PSTN/PLMN
numbers and vice versa within India).

In this regard, allocation of E.164 number resources may be permitted to
ISPs for providing Internet Telephony.

In order to facilitate termination of Internet Telephony calls on PSTN/PLMN
and vice versa including among ISPs both within telecom circle as well as
across the telecom circles, ISPs and NLDOs have been permitted to connect
with each other through public internet (the internet cloud) only.

As per TRAI, ISPs should not be subject to any QoS norms and also may not

be mandated to provide emergency number dialing at present.

This is yet to be endorsed by the DoT.

* 3G and BWA Auction:

During the year, DoT initiated the process of auction of 3G and BWA
spectrum but the auction date was deferred with no definitive announcement
on dates. It is expected that it will take place after the formation of the
new central government. Meanwhile, a Group of Ministers has been
constituted to decide on the issue of pricing of 3G spectrum and BWA
licenses.

OPPORTUNITIES AND THREATS:

Opportunities:

The rural landscape:

The Indian telecommunication industry is now the 2nd largest wireless
market in the world after China and is poised to deliver solid growth
forward. The focus on rural penetration and customer affordability will be
instrumental in driving the next phase of growth in India. The majority of
the wireless net additions have started to come from the rural segment.

The telecom industry plays a pivotal role in transforming the lives of the
rural households which account for 70% of India's population. An increasing
number of rural customers is contributing to the growth in telecom sector.
The rural segment is witnessing a growth of 8-10% every month - giving a
substantial boost to the telecom sector.

With rural teledensity still below 15%, the opportunities are immense and
Airtel is leveraging its fast mover advantage to reach the hinterlands.
Currently, more than 60% of our new customers come from rural India.

New technologies and paradigms:

As growth in data traffic accelerates with the proliferation and adoption
of web services the telecom operators will evolve their infrastructure
through upgrading their access transmission infrastructure from the base
stations to the core switching network. With increasing bandwidth and data
demands, advanced technologies like HSPA, WiMAX and WiFi will be deployed.
3G and BWA auctions will be held in the 2nd half of the year. Convergence
will be a vital phenomenon to support all network and IT services, using IP
as the strategic technology.

Infrastructure sharing may extend to active infrastructure, resulting in
opportunity to reduce the costs to deploy mobile network infrastructure.
The Enterprise Segment will see increased emphasis on managed services and
MPLS technology which provides differentiated and assured Quality of
Service (QoS).

Triple Play services (Voice, Data and Video) will gather momentum with
telecom operators getting into media space through DTH and IPTV platforms.
The DTH market will evolve further as the low levels of reach, quality and
service standards of existing cable operators, coupled with growing demand
for digital content and introduction of CAS (conditional access system) by
the Government of India will all work together give a boost to this
segment. Airtel will strengthen its position as an integrated player
through offering services across all technologies.

Bharti Airtel will participate in the discussions on the feasibility and
the model for adopting 3G and other NGN (Next Generation Networks) related
technologies in the Indian context.

Our entry into the Sri Lankan market for telecom services in January 2009
is very encouraging. Our experience in the Indian Market and unique value
based low cost business model is suitable for the Sri Lankan customer and
we hope and expect to establish a strong presence in Sri Lanka, and create
value for the Sri Lankan customers.

Strong strategic partnerships:

We have a strategic alliance with SingTel, which has enabled us to further
enhance and expand our telecommunications network in India to provide
quality service to our customers. The investment made by SingTel in Bharti
is one of their largest investments made in the world outside Singapore.

We have also established strong alliances with equipment and technology
partners who share our drive for development of innovative solutions.
Ericsson, Nokia Siemens and Huawei are equipment partners supporting our
aggressive expansion plans by deploying state of the art technology across
our networks. IBM has been working closely with us to transform our IT
systems, key business processes and establishing an enterprise integration
platform. Telephone services and long distance networks equipment partners
include Siemens, CISCO, WIPRO and Tellabs among others. Nortel, IBM Daksh,
Mphasis, Firstsource, Teleperformance, Aegis and HTMT are associated with
us for providing excellent customer experience through dedicated call
center operations. We have a strategic partnership with Infosys to provide
a suite of products, including devices, application servers and interactive
applications to enhance digital lifestyle for our customers. We work with
globally renowned organizations such as On Mobile, Comviva, Yahoo, Google
and Cellbrum among others to provide each of our customers with a unique
experience in the areas of CRBT(caller ring back tone), Music on Demand,
Email services and other Airtel Live applications.

We are considering a joint venture with Alcatel Lucent for managed services
for our broadband and fixed line/telephone services. This is the first
Managed Services partnership for Broadband and Telephone Services in India.
The joint venture when executed will provide services for Airtel's
migration to Next Generation Networks (NGN) to offer advanced services like
highspeed internet, Triple Play, media-rich VAS, MPLS, VPN for both retail
and business customers.

Threats:

Economic Meltdown:

There is a global economic slowdown that has severely impacted the largest
economies and the effect is cascading down to the smaller and emerging
economies. Governments across the globe are offering bailout packages to
stimulate growth, infuse consumer confidence and provide employment
opportunities. Large multinational corporations are struggling to grow
their top-lines. As a result, the Enterprise business may be affected by
this but we expect revival of this segment in the second half of this
fiscal year. However, the India growth story continues, backed by a strong
rural economy.

Increased competition may reduce market share and/or revenue:

The wireless market in the year 2008-09 saw the entry of many existing
players into newer circles along with operators migrating to GSM from CDMA
technology. The coming year will see competition intensify as the market
will grow to 550 mn customers.

The market also saw the entry of many international and national long
distance operators. This may lead to some tariff erosion and pressure on
marketing expenditure in the coming year. Bharti Airtel, with its
integrated portfolio of product and service offerings will emerge stronger
and retain its leadership.

SEGMENT WISE PERFORMANCE:

Bharti Airtel has had an overall robust performance in all segments in
which it operates. In all, the Company added 31,938,527 mobile customers in
FY 2008-09, representing a customer addition of 51.52% over the previous
year. As on March 31, 2009 the Company had an aggregate of 96,649,487
customers, consisting of 93,923,248 mobile and 2,726,239 Telemedia
customers. Our total customer base increased by 50.38% compared to the
customer base on March 31, 2008.

Mobile Services:

The Company offers mobile services using GSM technology on 900MHz and
1800MHz bands, and is the largest wireless service provider in the country,
based on the number of customers. This segment constitutes the largest
portion of the Company's business, both in terms of total revenues and
total customers. The company's 93,923,248 mobile customers accounted for a
customer market share of 24% of the wireless market, as on March 31, 2009.

The Company offers post-paid, pre-paid, roaming and value added services
through its extensive sales and distribution channel, covering 1,191,323
outlets.

During the financial year, the Company expanded its operations to 5,060
census towns and 414,906 non-census towns and villages in India, thus
covering approximately 81% of the country's population. Post the Company's
launch on January 12, 2009, our services are now operational in Sri Lanka.
These services have been launched on a state-of-the-art 3.5G network.

The Company's strong performance has helped to consolidate its leadership
in the market and has given it the opportunity to take full advantage of
the rapidly growing telecom market.

The revenues from the mobile services for the financial year were
Rs.304,188 mn, a growth of 39% over the revenues in the previous financial
year. The mobile services business contributed 81% to the consolidated
revenues. The growth in revenues happened despite reductions in tariffs and
intense competition. With mobile tariffs in India being among the lowest in
the world, the Company's prime focus is on ensuring customer satisfaction
through network quality, superior customer service and continuous
innovation in value added services that would help expand its mobile
subscriber base and drive up volumes. The key financial results of the
mobile segment for the year ended March 31, 2009 are presented below:

Particulars FY 2007-08 FY 2008-09 Y-o-Y
Growth

Customers 61,984,721 93,923,248 52%
Gross Revenue Rs. 218,697 mn Rs. 304,188 mn 39%
EBIT Rs. 59,269 mn Rs. 68,746 mn 16%

Telemedia Services:

The Company provides broadband (DSL) and telephone services (fixed line) in
15 circles spanning over 95 cities with growing focus on new media and
entertainment solutions such as DTH and IPTV. As on March 31, 2009, the
Company had 2,726,239 customers (a growth of 19.3%), of which 39.3% (~10,
71,412) were subscribing to broadband / internet services.

The product offering in this segment includes supply and installation of
fixed-line telephones providing local, national and international long
distance voice connectivity and broadband Internet access through DSL.

We also remain strongly committed to our focus on Small and Medium Business
Enterprises. We provide a range of customized Telecom / IT solutions and
aim to achieve revenue leadership in this rapidly growing segment of ICT
market.

The strategy of our Telemedia business is to focus on cities with high
revenue potential, except for DTH which is an all India offering. Airtel
digital TV is available to customers through 31,000 retail points in over
4,000 cities and towns across the country.

The revenues from the Telemedia services were Rs. 33,426 mn, a growth of
17% over the revenues in the previous financial year. The key financial
results of Telemedia Services for the year ended March 31, 2009 are
presented below.

Particulars FY 2007-08 FY 2008-09 Y-o-Y
Growth

Customers 2,283,328 2,726,239 19%
Gross Revenue Rs.28,615 mn Rs.33,426 mn 17%
EBIT Rs.6,109 mn Rs.8,188 mn 34%

Enterprise Services:

Enterprise Services provides a broad portfolio of services to large
Enterprise and Carrier customers. Enterprise Services is regarded as the
trusted communications partner to India's leading organizations, helping
them to meet the challenges of growth.

The Enterprise Services group has two sub-groups, viz. Carriers and
Corporate business units.

Carriers - the Carrier business unit provides long distance wholesale voice
and data services to carrier customers as well as to other business units
of Airtel. It also offers virtual calling card services in the overseas
markets. The business unit owns a state of the art national and
international long distance network infrastructure enabling it to provide
connectivity services both within India and connecting India to the world.

The national long distance infrastructure comprises of 101,337 route
kilometers of optical fibre, over 1,500 MPLS and SDH POPs and over 1,491
POIs with the local exchanges, providing a pan-India reach.

The international infrastructure includes ownership of the i2i submarine
cable system connecting Chennai to Singapore, consortium ownership of the
SMW4 submarine cable system and investment in capacities across a number of
diverse submarine cable systems across transatlantic and transpacific
routes. In the recent past we have announced investments in new cable
systems such as Asia America Gateway (AAG), India Middle East and Western
Europe (IMEWE), Unity North, EIG (Europe India Gateway) and Eastern Africa
Submarine Cable System (EASSy).

The key financial results of the Carriers division for the year ended March
31, 2009 are presented below:

Particulars FY 2007-08 FY 2008-09 Y-o-Y
Growth

Gross Revenue Rs.43,798 mn Rs.68,235 mn 56%
EBIT Rs.11,289 mn Rs.25,709 mn 128%

Corporates - This business unit delivers end-to-end telecom solutions to
India's large corporates. It serves as the single point of contact for all
telecommunication needs for corporate customers in India by providing a
full suite of communication services across data, voice and managed
services.

It specializes in providing customized solutions to address unique
requirements of different industry verticals; BFSI, IT, ITeS, manufacturing
and distribution, media, education, telecom, Government and PSUs and retail
among others.

Backed by the alliances with leading technology companies worldwide and
state of the art infrastructure, it offers a complete range of telecom
solutions. These solutions enable corporates to network their offices
within India and across the globe, provide them infrastructure to run
business critical applications and provide them means to connect with their
customers, vendors and employees.

These services include; Internet, MPLS -VPN, domestic and international
private leased circuits, Satellite services (VSAT), Audio and Video
conferencing, Data Centre services, Managed network services, corporate
Value Added Services, EPBX, Centrex, Contact centre solutions, Toll free
services, Mobile Enterprise Enablement solutions.

The key financial results of the Enterprise Services - Corporates division
for the year ended March 31, 2009 are presented below:

Particulars FY 2007-08 FY 2008-09 Y-o-Y
Growth

Gross Revenue Rs.13,885 mn Rs.16,434 mn 18%
EBIT Rs.5,245 mn Rs.5,928 mn 13%

Passive Infrastructure Services:

Bharti Infratel provides passive infrastructure services on a non-
discriminatory basis to all telecom operators in India. Bharti Infratel
deploys, owns and manages passive infrastructure in 11 circles of India.
Infratel also holds 42% share in Indus Towers (a Joint Venture between
Bharti Infratel, Vodafone and Idea Cellular). Indus operates in 16 circles
(4 circles common with Infratel, 12 circles on exclusive basis).

Bharti Infratel has 27,548 towers in 11 circles, excluding the 35,066
towers in 12 circles for which the right of use has been assigned to Indus
with effect from 1st January 2009.

Indus Towers has built 14,484 towers during the financial year ended March
09 and has a portfolio of 95,154 towers including the towers under right of
use.

The key financial results of the Passive Infrastructure Services division
for the year ended March 31, 2009 are:

Particulars FY 2007-08 FY 2008-09 Y-o-Y
Growth

Gross Revenue Rs.6,023 mn Rs.50,913 mn 745%
EBIT Rs.1,243 mn Rs.3,204 mn 158%

OUTLOOK:

The India growth story continues and we expect revival of the economy in
the second half of this fiscal year. We have no doubts that the telecom
sector will lead the economic revival and Bharti Airtel will be at the
forefront. We are the first private mobile GSM operator to have an all
India footprint and operations in Sri Lanka. We believe that we are in a
strong position to enhance our leadership, based on:

* our rich human resource talent pool.

* our focus on building a strong brand, and enhancing customer experience.

* our ability to maximize returns on investment; strong financial health

and positive free cash flow.

* our focus on new services and businesses (managed services, m-commerce,
m-entertainment, media).

* the expansion of our networks to rural markets.

* the ability to leverage on the strengths of our business partners and our
integrated player status.

We are an innovative company and our products and services are based on
deep customer understanding. We believe that customer value management,
market planning and our strong partner ecosystem will be the key drivers
for success.

RISKS AND CONCERNS:

Our business is subject to extensive regulation by the Government, which
could have an adverse effect on our business.

The telecom business is subject to extensive regulation. We, however, do
not perceive adverse changes in the regulatory environment. We are
confident that the government will continue to ensure a level playing field
for all operators, keeping the customers' best interest in mind.

Technical failures and natural disasters could damage our telecommunication
networks:

We maintain insurance for our assets, equal to the replacement value of our
existing telecommunications network, which provides cover for damage caused
by fire, special perils, and terrorist attacks. Technical failures and
natural disasters even when covered by insurance, may cause disruption,
however temporary, in our operations.

We have been investing significantly in business continuity plans and

disaster recovery, initiatives, which will enable us to continue with
normal operations under most circumstances.

Changes in available technology could increase competition and our capital
costs:

In order to remain competitive, we consistently introduce sophisticated new
technologies. If the new technologies we have adopted, or on which we
intend to adopt, fail to be cost-effective and accepted by customers, our
ability to remain competitive could be affected.

We have prudently deployed new technologies after assessing the experience
our international partners have had in the deployment processes before
choosing to do so ourselves.

Skilled Manpower and Talent:

The growth of the Indian economy has led to an increased requirement for
talented managerial personnel. We believe that talented manpower is a key
strength. Given the track record and success of our employees, other
companies often look to Bharti Airtel Ltd as a hunting ground for talent.

As a retention strategy, the company has issued many schemes including
ESOPs. Further, in order to mitigate the risk we place considerable
emphasis on development of leadership skills and on building employee
motivation.

INTERNAL CONTROL SYSTEMS:

The Company deploys a robust system of internal controls to allow optimal
use and protection of assets, facilitate accurate and timely compilation of
financial statements and management reports and ensure compliance with
statutory laws, regulations and company policies. The Company has also put
in place an extensive monitoring and review mechanism, whereby the
Management regularly reviews actual performance with reference to business
plans; both financial and operational.

The Corporate Assurance Group is responsible for performing regular
Internal Assurance reviews to ensure adequacy of the internal control
systems and adherence to management policies and statutory requirements.

The Corporate Assurance Group deploys an Annual Internal Assurance plan
based on assessment of major risks in each of the businesses. Risk
Assessment helps in identifying and focusing on all high-risk areas. The
internal assurance review covers all the business-critical processes, such
as Sales and Marketing, Revenue Assurance, Billing & Collection, Technology
Services, Network Operations, Procurement and Financial Accounting.

The Corporate Assurance Group reports directly to the Audit Committee of
the Board and to the Chairman and Managing Director of the Company and
administratively to the CEO & Joint Managing Director. The Board Audit
Committee approves the annual audit plan, reviews observations of both
internal and external audits, risk assessment and adequacy of internal
controls.

DISCUSSION ON FINANCIAL PERFORMANCE:

Particulars FY 2007-08 FY 2008-09 Commentary

Customers 64,268,049 96,649,487 Growth of
50% Y-o-Y

Gross Revenue Rs 270,122 mn Rs 373,521 mn Growth of
38% Y-o-Y

EBITDA Rs 114,018 mn Rs 152,858 mn Growth of
34% Y-o-Y

PAT Rs 63,954 mn Rs 78,590 mn Growth of
23% Y-o-Y

Gross Assets Rs 423,224 mn Rs 586,616 mn Increase by
Rs 163,392 mn

Capital Rs 218,043 mn Rs 166,945 mn Decline of
Expenditure 25% Y-o-Y

Capital 63.82% 63.67%
Productivity

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES:

The year 2008-09 witnessed unprecedented changes in the global business
environment. However, the India telecom sector in India continued to grow
rapidly, adding new customers and directly contributing to the country's
economic growth.

Despite increased competition and tough economic conditions, it has been a
year of expanding market leadership for Airtel. While our three businesses
continue to grow from strength to strength, the launch of mobile services
in Sri Lanka operations, DTH and IPTV services has now made Airtel a
complete integrated player with a presence across the three screens -
mobile phones, computer and TV screens and with geographical presence
beyond India.

Our performance in 2008-09 has demonstrated that our strategies of customer
and employee centricity, higher investments for building infrastructure and
leaner business model have helped us not only to weather the storm but also
to emerge stronger in the market place.

With the 2010 vision of being the most admired brand in India targeted by
top talent' as a constant theme, Airtel has a long-term human resources
strategy in place to attract, retain and get the best talent; to build the
right capabilities in current and new businesses and strengthen its
competitive advantage. We have focused on intensive training and
development for employees at all levels aimed at grooming our people to
take larger responsibilities and newer challenges. Career progression and
succession planning has been the key to build a robust leadership pipeline.
While a large number of key leadership positions were filled in from our
large internal leadership pipeline, we have also focused on acquiring new
competencies required for new business opportunities. Airtel also brought
in high quality people from the best companies across the globe.

Airtel has constantly re-invented its business model and organization
design to create challenging jobs and offer an enriched experience for our
people. The company has also encouraged employees to participate in our CSR
initiative of educating under-privileged children in rural areas. It is
heartening to note that the various HR initiatives have helped in reducing
the attrition to 18% from the earlier 28%. Airtel is also the proud
recipient of the prestigious Gallup Great Place to Work' award second time
in row.

At the end of March 31, 2009, Bharti Airtel had a total of 24,538
employees; 10,357 were on the rolls of Bharti Airtel Limited, 14,181 were
on the rolls of Bharti Airtel Services Limited.

COMPETITION:

Competition is not new to the Indian telecom industry and the Industry has
witnessed the launch of new circles by existing players and migration to
GSM technology by CDMA players. Many mobile players are also entering the
Enterprise business by launching their NLD/ILD operations.

Bharti Airtel has consistently strengthened its leadership position among
the private operators, backed by its strong execution capabilities,
customer centric products and services and a strong management team. We
will continue the focus on our customers with Value Added Services and
invest in further enhancing our brand strengths. We are confident that with
the solid foundations built over the past 14 years, we are well placed to
take full advantage of the market opportunities that this buoyant market
presents and continue to hold our leadership position.

KEY STRATEGIES:

In the year gone by, Bharti Airtel has focused on making telecom services
affordable through a dedicated effort of rationalizing and simplifying
tariffs. The Company will continue to pursue this strategy of
affordability, availability and simplicity. The customer has been at the
centre of our strategy and going forward our full focus will be, and remain
on customer service. The Company believes that infrastructure sharing will
provide a boost to managing efficient operations, resulting in significant
cost savings. We will explore the extent of active infrastructure sharing
based on guidelines issued by TRAI. We recognize the potential offered by
the rural Indian market. Significant expansion, both of network and
distribution, is being planned. In the coming year, the Company expects
more than half of its new business to come from rural customers.

In addition to rural expansion, Bharti Airtel has also expanded abroad
through the launch of its operations in Sri Lanka where it has successfully
replicated its unique business model.

The coming year will see a stronger emphasis on non-mobile business with
Direct -to- home (DTH) services and IPTV services. The Company will
increase investments in the area of broadband to enhance penetration and
usage of broadband services. The Company will focus on non-voice business
by developing customized solutions in the B2B space.

Our focus is to achieve higher cost efficiency by delivering on economies
of scale and by making appropriate changes in our business model. We
envisage that this will result in productivity gains and ongoing strong
financial health.