MANAGEMENT DISCUSSION AND ANALYSIS REPORT

OVERVIEW OF INDIA'S ECONOMY

According to the new data, rebased to 2011-12, released by the Central Statistics Office ("CSO"), India - the seventh-largest economy in the world by nominal GDP and the third-largest by purchasing power parity, is projected to have grown at the rate of the 7.3% in 2014-15 as compared to 6.9% in the brvious year. While there was minimal growth in agriculture, industry and services sector grew faster than the brvious year. Domestic consumption continued to major component of the GDP followed by capital formation.

India is being considered as macro-economic stable again by rating agencies, which can be credited to both external factors such as favorable crude prices, currency under control as well as internal ones with the most significant being reduced inflation and improvement in "twin deficits":

nCurrent Account Deficit (“CAD”) narrowed sharply to 0.2% of GDP, in the fourth quarter of 2014-15 mainly on account of a lower trade gap. For the full fiscal year the current account deficit shrank to 1.3% of GDP, from 1.7% of GDP, a year ago; and

nFiscal deficit at 4% of GDP, as per the latest estimates, overcoming a shortfall in tax collections. This is marginally better than the ambitious target of 4.1% of GDP.

According to the Reserve Bank of India's (“RBI”) Monetary Policy Report (April 2015), the broad-based decline in retail inflation since September 2014, plans announced in the Union Budget to step up infrastructure investment, debrssed commodity prices and upbeat financial market conditions have improved the prospects for growth in 2015-16. RBI's Consumer Confidence Survey (“CCS”) points to growing consumer optimism since June 2014, reflecting purchasing power gains arising from lower inflation as well as improved perception of income, spending and employment growth. As per median estimates, based on the Survey of Professional Forecasters conducted by RBI, the Indian economy is expected to grow by 7.9% in 2015-16 as compared to 7.3% in2014-15 (based on 2011-12 data series), while The International Monetary Fund ("IMF") in its World Economic Outlook projects the growth of GDP for Indian economy at 7.5%.

TELECOM INDUSTRY DEVELOPMENTS

Global Telecom Industry

The mobile industry continues to scale rapidly, with a total of 7.3 Billion connections at the end of 2014 while the unique subscribers were about 3.6 Billion. Roughly half of the world's population now has a mobile subscription, up from just one in five about 10 years ago and by 2020, this is expected to scale up to three-fifths of the global population, with close to one Billion new subscribers added over the period. The global mobile connections increased by about 5% in the year 2014. Developed markets are growing more slowly as penetration rates approach levels close to saturation. For example, in Europe the connections growth was just above 1% in 2014. At the other end of the spectrum, Africa was still the world's most under-penetrated region with connections growth at nearly 11%.

IndianTelecom Industry

With 960 Million connections and 833 Million Visitor Location Register ("VLR") subscribers, India continues to be the world's second largest telecommunications' market, next only to China. In 2014, VLR subscribers in India grew by 9.3% which was little below Africa at 10.9% and significantly above the global growth of 5.6%.

What is also noteworthy is India's growth of internet subscribers at 23% during 2014, higher than Africa. Indian telecom market continued to evolve dramatically over the past two decades starting from voice calling to the advent of SMS and mobile messaging, to the most recent emergence of smartphone and the mobile application ecosystem. These innovative third-party applications, more commonly referred to as 'Apps', have pushed the boundaries of digital communications and shown us what users now expect from modern mobile communications services.

Telecommunication service providers in the Country today seem to be divided in their opinion about whether these services are a threat to their operations or an opportunity. However, it is undeniable that these have in fact brought a new wave of growth into the industry which was going through fears of getting stagnated. While the operators are still refining their position in the value chain in many of these emerging market opportunities, the tangible benefits in terms of both data usage and revenue growth have already started accruing for all operators including the Company.

The Indian mobile broadband landscape is still evolving. Smartphone adoption is on the rise across all sections of the society. As per industry estimates, around one in three people in urban India today use smartphones and around three in five are using mobile broadband. With the cost of owning a smartphone decreasing sharply, these figures are expected to continue rising. Rural India, although currently trailing, iscatching up fast and the overall smarthphones in the country are expected to go up by about 5 times by 2019.

Consumers today are using their mobile phones for a whole bunch of services, which include social networking and instant messaging. According to a research by GSMA intelligence smartphone users across the eight major markets surveyed spend roughly twice as much time using social networking (an average of 13 hours a week) than making voice calls rendering social networks the dominant communications medium. Driven primarily by smartphone adoption, the transformative shift in consumer behaviour towards social networking is universal, with consumers in Brazil and South Africa spending up to 15 hours a week on social networking and those in the US spending more than 12 hours a week on the same activity. Consumers in India currently spend about 10 hours or about 26% of their time on social networks. It is likely that the Indian consumer will also gradually shift more towards social network and internet from voice calling in the years to come.

With a diverse consumer base adopting mobile broadband, increasing smartphone adoption and using a wide variety of services, the mobile data traffic is increasing. Data traffic per month in 2014 was about 87.9 Petabytes, which is 1.7 times the brvious year traffic and was 244 times the traffic five years earlier (in 2009). To put things in perspective, this was the equivalent of 22 million DVDs each month or 242 million text messages each second. That is the scale of growth data traffic is witnessing in India and as per the latest industry estimates the trend is expected to continue leading to data traffic in 2019 becoming 3163 times the traffic in 2009. This amounts to about 1.1 Exabytes per month in 2019 (the equivalent of 285 million DVDs each month), up from 87.9 Petabytes per month in 2014.

This is an unbrcedented quantum of traffic on the telecommunications network. While this promises to be an exciting phase of growth for the Company, it also implies an ongoing challenge to maintain network experience and meet customer demands for the entire industry.

The Company is also evaluating the need to be ready with the network as well as operational strategy to be able to satisfy the needs of the evolved new age customers. Simplicity is the key, as consumers need for easy-to-understand data plans.

KEY REGULATORY DEVELOPMENTS / LITIGATIONS

DualTechnology

¦ The challenge by Cellular Operators Association of India to the Government of India's Dual Technology Policy is pending before the Subrme Court ("SC"). The matter will be listed in due course.

3G Intra Circle Roaming ("ICR")

¦ Telecom Disputes Settlement and Appellate Tribunal ("TDSAT") judgment pronounced on April 29, 2014 held that intra-circle 3G roaming arrangements do not violate any licence provisions.

¦ DoT has filed an appeal before SC and also an application seeking stay on the judgment passed by TDSAT. DoT's appeal was admitted and no interim relief was granted by the SC. The main appeal filed by DoT is pending for hearing.

Adjusted Gross Revenue ("AGR") Definition

¦ TDSAT has pronounced its judgment in April 2015, wherein the impugned demands have been set aside by the Tribunal and it has directed the DoT to rework the licence fee payable for the duration which was challenged. The highlights of the judgment are as follows:

o Under licence agreement, revenue is no different from the way it is defined in AS 9 i.e., gross inflow of cash, receivables, or other consideration arising in the course of the ordinary activities of an enterprise from the sale of goods, from the rendering of services and from the use by others of enterprise resources yielding interest, royalties and dividends.

o By virtue of SC order in Association of Unified Telecom Service Providers of India ("AUSPI") case, for computation of licence fee of an enterprise, gross revenue would also include inflow from all its business activities whether under the licence or beyond the licence.

o Gross revenue will also include all the items exbrssly specified in Clause 19.1 of the licence agreement whether or not in accounting system any of those items are viewed as revenue.

o Deductions are only those permissible which are exbrssly specified in Clause 19.2 of the licence agreement.

SpectrumTrading and Spectrum Sharing

¦ TRAI has submitted its recommendation on spectrum trading and sharing to the DoT. The Telecom Commission has referred back to TRAI seeking clarifications on some of the recommendations on both spectrum trading and sharing.

3G Rollout Obligation

¦ DoT has issued revised Test Schedule Test Procedure ("TSTP") on February 5, 2015 addressing the concerns of the industry. Major highlights of TSTP are as follows:

o RSCP level of >-99dB as against initially of >-93dBm. This will save a large number of 3G Sites required to meet the test criteria.

o 50m x 50m grid has been removed and revised grid size for metro/big DHQ/big town will be 4Km x 4Km and for other DHQ/towns the grid size will be 2Km x 2Km.

o 50% loading of Cell Site has been removed. This was critical, if implemented; more sites would have been required.

¦ As the testing procedure has been issued only in February 2015, the industry is seeking extension of date of rollout.

Certain Amendments Issued byTRAI

¦ Reduction in Interconnect Usage Charge ("IUC")

o TRAI vide its regulation dated February 23, 2015 has revised the IUC which is effective from March 1, 2015.

o Local and National Long Distance ("NLD") calls (Wireless to wireless: means full mobility, limitedmobility & fixed wireless access services) reduced from 20 paisa/min. to 14 paisa/min.

o Carriage charges reduced from 65 paisa/min. to 35 paisa/min.

o International Long Distance ("ILD") calls (incoming calls to wireless & wireline) have been increased from 40 paisa/min. to 53 paisa/min.

o No termination charges will be applicable from wireless to wireline, wireline to wireline & from wireline to wireless.

¦ Reduction in National RoamingTariffs

o Outgoing local voice call: Reduced from Rs. 1/min. to Rs. 0.8/min.; Outgoing long distance (inter-circle) voice call reduced from Rs. 1.5/min. to Rs. 1.15/min.;

o Incoming voice call reduced from Rs. 0.75/min. to Rs. 0.45/min.;

o Outgoing local SMS reduced from Rs. 1/SMS to Rs. 0.25/SMS and Outgoing long distance SMS reduced from Rs. 1.5/SMS to Rs. 0.38/SMS.

¦ Net Neutrality

o TRAI has issued Consultation Paper in March 2015. o Key issues discussed at the Consultation Paper:

¦ Current policy dispensation for Over the top ("OTT") players vis-a-vis Telecommunication service providers;

¦ Issues arising because of net neutrality.

¦ Full Mobile Number Portability ("MNP")

o TRAI has issued amendment to the Telecommunication MNP Regulation 2009, which will facilitate full MNP (Pan India portability) in the country w.e.f. May 3, 2015. The industry had exbrssed its inability to implement full MNP by DoT deadline. Government has extended this date by two months.

RISKS AND CONCERNS

This section discusses the various aspects of enterprise-wide risks management. It might be noted that the risk related information outlined here is not exhaustive and is for information purpose only.

The Company is exposed to a number of risks such as regulatory risks, technology risks, financing risks and competition risks.

The Company has a well defined risk management framework and Governance process including a risk management calendar which enables proactive identification, recording, tracking of risks and monitoring of mitigation plans to respond to changes in business and regulatory environment. The risk management process is embedded in all facets of Company's work systems, thereby reassuring all stakeholders, customers, investors, employees and partners of the Company's business sustainability.

This objective of the Company's risk management policy is to ensure that an effective Enterprise Risk Management ("ERM") program is established and implemented within the Company which will provide regular reports on:

1. The performance of the ERM program, including any exceptions, to key stakeholders.

2. The movement of identified risk, to give an overview of the Risk Profile of the Company as on a date.

The ERM framework aims to realize the following benefits for the organization:

1. Enhance risk management;

2. Facilitate risk based decision making;

3. Improve governance and accountability;

4. Enhance credibility with key stakeholders such as investors, employees, government, regulators, society etc.;

5. Protect and enrich stakeholder value. The key risks facing the Company include:

1. Regulatory Risks

Telecom Policies in areas of dual technology licence, allocation of spectrum, EMF radiation, green technology issues, security guidelines and the decision to charge One

Time Spectrum Charge ("OTSC") within contracted quantum of spectrum etc. have led to litigation and these issues are now pending before various courts.

The Company's licences and spectrum allocations are for fixed periods and are renewable for additional terms subject to approvals and successful bidding in future auctions.

2. Technological Risks

The technological landscape within the telecom industry continues to change rapidly. New services offerings such as 4G are being launched by competition and these products would compete with the existing voice and data offerings of the Company and could impact its current market share and pricing. The Company's CDMA technology has witnessed a similar phenomenon wherein the ecosystem has continued to witness a gradual decline globally due to limited availability of handsets and limited scope for international roaming.

Such changes in technology may require the Company to invest in newer technologies which would demand significant capital investments. The Company's purchase of spectrum in 800 MHz band in the recently concluded auction was one such investment. The Company may need to deploy additional resources on a continuous basis to ensure that it is able to offer state of the art technology to meet the evolving customer's expectations.

3. Financing Risks

The Company continues to invest in expanding its telecom infrastructure. Further, the Company has successfully bid and won additional spectrum during the year and may require additional capital to enable its growth plans.

The Company may not be able to raise adequate capital to meet its capital expenditure requirements or the terms of raising fresh capital may not be in line with past terms and conditions and/or may be subject to such covenants which may be challenging for the Company to adhere to thereby impacting the costs of not only incremental capital but also existing debt adversely.

The Company has experienced difficulties in its borrowing programs in the past when the telecom sector was faced with uncertainties and continued uncertainty around various business and regulatory parameters may continue to affect the ability of the Company to raise additional funds from Banks and Financial Institutions.

4. Competition Risks

The Indian telecommunication industry continues to witness intense competition. Over the past year, the focus of the telecom companies has shifted from voice to the high growth domain of data services. Efforts by operators (existing and new) to penetrate 3G services further and 4G services offerings could further intensify competition in data services. Competition also creates need for continued significant expenditure on marketing and advertising to ensure sustainability and growth of the Company's revenues. While the Company will ensure all efforts to sustain and grow its revenues, due to factors beyond the control of the Company, the Company may not be successful or fall short of its targets.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

An Audit Committee of the Board of Directors has been constituted as per the provisions of Section 177 of the Companies Act, 2013 ("Act").

The internal audit for various functions/aspects is conducted by the independent firms, which conduct reviews and evaluation and brsent their reports to the Audit Committee and the management at regular intervals.

The Internal Auditors' Reports dealing with internal control systems are reviewed by the Audit Committee and appropriate actions are taken, wherever necessary.

OPPORTUNITIES AND THREATS

Opportunities

The evolving Indian telecom market continues to provide operators with new growth opportunities. During the last couple of years, the industry has seen some moderation in the competitive landscape resulting in some positive signs in tariffs and profitability.

¦ In the spectrum auctions concluded in March 2015, the industry players have spent Rs. 109,875 Crore to acquire spectrum in the 800 MHz, 900 MHz, 1800 MHz and 2100 MHz bands. Such large investments made by telecom operators to acquire spectrum could possibly lead to tariff increases during the next year.

¦ The Indian wireless data market is in its nascent stage. The projected increase in smartphones' penetration levels (4 to 5 times between 2014 to 2019) will lead to faster growth of the data services in coming years and provide the operators with an opportunity to focus on servicing data needs of the consumer and acquire a share in this segment. Your Company enjoys leadership position in the data segment and has consistently been a pioneer in launching successful data products including Tata DOCOMO Photon portfolio.

¦ New business services such as Wi-Fi etc. provide potential for the operators to expand the breadth of their services and remain competitive in the market. The Company is well positioned to serve the customer in these areas after having launched innovative products and services in the past year.

Thus increase in data volumes, increase in tariffs and increased penetration in rural areas are expected to be the key growth enablers in near future.

Threats

The last few years have witnessed uncertainty on the regulatory front and slowdown on the economic front. A stable regulatory and economic environment is critical for realizing the telecom sector's growth potential.

Further, the competitive intensity in the telecommunications sector is expected to remain a challenge for all service providers due to launches by new operators, introduction of new technologies, aggressive pricing and marketing practices and fierce competition in bidding for spectrum.

HUMAN RESOURCES ("HR")

With the changing workforce dynamics and business requirements, it is important to streamline the Company's HR practices to cater to organizational needs more effectively. The Company continued to focus on capability building and talent development during the year, with the ultimate objective of increased higher productivity of employees.

The Company developed its new learning and development model which emphasizes on functional needs of the employees and is an evolution over its brvious editions. This has been developed in line with the global trends and the need for employees to keep pace with rapid changes in their respective fields.

The Company also continued the automation and centralization of its processes with the goal of improving efficiency of the employees and the organization.

The Company had a total of 1,178 employees on its rolls as on March 31, 2015.

QUALITY AND PROCESSES

The Company has undertaken TL 9000 (R 5.0) certification to demonstrate its capability to consistently provide services that enhance customer satisfaction through effective deployment of a quality management system. The Company received this brstigious certification for the first time in December 2009 for Data Products (Multiprotocol Label Switching, Internet Leases Line, Domestic Leased Circuit and National Private Leased Circuit). The Surveillance Audit was successfully completed in October 2014.

The Company was awarded with ISO 27001:2005, ISMS (Information Security Management Systems) Certification in May 2011. The Recertification Audit was successfully completed in April 2014 and an upgrade Audit to ISO 27001:2013 in April 2015.

The Company was awarded with BS 25999-2:2007, BCMS (Business Continuity Management Systems) certification in June 2012. The upgrade to ISO 22301:2012 and Surveillance Audit was successfully completed in May 2014 while the company is undergoing an Integrated Management System Recertification audit for ISO 27001:2013 and ISO 22301:2012 in May 2015.

The Company deploys the newly established "FITT" (Framework for Improvement in Tata Teleservices) framework, which is an integrated bouquet of methodologies (including Lean/Six Sigma/Gemba-Kaizen etc.) to drive Quality and process improvement projects across functions. Benchmarking and adoption of best practices, both within and outside the industry, has been institutionalized as part of this framework. 'QUICK' certification continues to enhance competency of Junior Management and builds the culture of small improvements at workplace. Introduced in 2013, QUICK has ensured that over 93% of employees on the ground are certified after attending a training program and completing a project to apply the learning and practice the tools. "QUICK PLUS" certifications were introduced this year as a competency enhancement tool to enable the middle managers to focus on improving productivity and efficiency.

There were other process improvement initiatives this year around enhancing customer experience and profitability, in line with overall organizational strategy. Customer service operations and delivery process cycle (particularly customer acquisition, payment collection, customer complaint and query handling) have been re-engineered under "MAGIC -Make A Great Imbrssion on every Customer" umbrella of projects to administer an improved experience at key customer interfaces. MAGIC is a key initiative undertaken by the Company which embarks on the journey of Customer Experience transformation.

Large-scale pan-India initiatives (aka 'Transformation projects') also lead to identification of key process gaps / improvement opportunities which are then looped back within the FITT framework to simplify and optimize using appropriate methodology.

The Company promotes a culture of innovation and has provided various forums (platforms) for employees to post innovative ideas and suggestions against business challenges and to showcase their innovations. "TTL Innovation Awards" is now an established practice in order to recognize and celebrate the spirit of innovation, and promote a culture that strives to 'open up and do the new'. This contest aims to identify and recognize the best innovations within the organization, awarding individuals and teams in areas of customer service, marketing, products and processes among others.

KEY FINANCIAL INFORMATION & OPERATIONAL PERFORMANCE

Revenue from Telecommunications service

As on March 31, 2015, the Company had a total wireless subscriber base of 10.3 Million as compared to brvious year level of 9.8 Million. There was a reduction in subscriber base of CDMA technology by about 8% while the subscriber base for GSM grew by about 14%.

CDMA technology is a part of a globally diminishing ecosystem, and has seen a gradual decline in customer base as well as revenue over the last few years. GSM technology although new for the Company is a part of a growing ecosystem and has so far the growth in GSM has compensated for the decline in CDMA.

The Company's service revenue for the year ended March 31, 2015 increased to Rs. 2,837 Crore as against Rs. 2,649 Crore in the brvious year.

Similar to the growth in subscribers, operating revenue growth was about 7% during the year. Revenue growth from GSM and wireline operations were better at about 13% and 11% respectively while the CDMA operations witnessed a decline in revenue by about 5%.

Other Income

Other income during the year stood at Rs. 102 Crore (Previous year Rs. 169 Crore) which included income from rendering of services to the tune of Rs. 56 Crore (Previous year Rs. 82 Crore).

Operating expenses

Operating expenses including provision for contingencies for the year were recorded at Rs. 2,293 Crore as against Rs. 2,205 Crore in the brvious year. The major components of the total operating expenses are as follows -

Network operations costs were reported about 8% higher at Rs. 764 Crore as compared to Rs. 708 Crore in the brvious year. This was due to a combination of expansion of network by the Company as well as annual increase in costs. The employee cost reduced by about 8% during the year at Rs. 159 Crore against Rs. 173 Crore in the brvious year.

Earnings Before Interest, Tax, Debrciation and Amortization ("EBITDA")

The focus during the last couple of years for the Company has been on optimizing its operations and increasing the asset utilizations. Due to these efforts, the Company continues to witness an improvement in the EBITDA.

Net loss

The Company's loss before taxes increased to Rs. 615 Crore as compared to last year level of Rs. 560 Crore. Although the operating profit was higher for the Company, the net loss increased with a substantial increase in finance cost.

Balance Sheet

The Shareholders' Funds was Rs. 2,968 Crore (Negative) as at March 31, 2015 against Rs. 2,353 Crore (Negative) as at March 31, 2014.

Total borrowing for the Company (including long term borrowing, short term borrowing and current maturities of long term borrowing, acceptance and payables under usance of credit) was Rs. 7,579 Crore as compared to Rs. 6,672 Crore in the brvious year.

The Net Block (including tangible as well as intangible assets) as at March 31, 2015, reduced to Rs. 4,188 Crore as compared to Rs. 4,518 Crore in the brvious year. The tight control by the Company on investments has resulted in fixed assets not going up.

The long term loans and advances for the Company have increased sharply to Rs. 1,327 Crore against Rs. 632 Crore in the brvious year. This is primarily on account of Rs. 600 Crore capital advance paid for the spectrum acquired by the Company in Spectrum Auctions conducted by the DoT in March 2015.

OUTLOOK

The outlook for the Company continues to be positive with the telecom sector continuing to offer opportunities, both in voice and data, to quality operators in the long run. The Company has set ambitious targets for the future.

Albeit a late entrant, the Company's GSM business has witnessed healthy growth driven by a focus on the growing subscriber base, process improvement across business lines and brand strength. The growth in the GSM business shall continue to be better than the decline in the CDMA business, which is stemming from shrinking CDMA ecosystem globally. The Company continues to focus on profitable revenue growth, with specific focus on data, tapping the growing data market.

The broad strategy of the Company would revolve around:

1) Acquiring better customers

The Company is striving to shift a larger part of its customer base from 'voice only' customers to 'voice + data' customers as well as focus on driving higher penetration of smartphones among its customers. These initiatives will enable the Company, to effectively sustain the substantial growth in data revenue witnessed in the last two years. The Company has invested substantially in the spectrum auctions thereby gearing up to launch new generation technologies in the near future.

2) Providing superior customer experience

The Company is plowing a two pronged approach. On one end it is improving the customer's experience with everyday services such as billing, collections, call centers as well as improving the overall experience at all critical touch points with the customer. On the other end, the Company is also concentrating on providing differentiated services to its best customers which will include exclusive retention tools and schemes, special help desks at retail stores and empowered employees for faster resolution of any concerns.

3) Building a stronger organization

The Company plans to continue investing in its strongest assets which are the employees. There is a framework laid out to ensure that the Company engages in quality hiring and reduced attrition, building its leadership capability and maintaining a strong emotional connect with its employees.

Also, to tap the emerging opportunities in new-generation services, the Company has a dedicated team to focus on non-voice services, which will be the driver of revenues and margins in the future. Several services have been launched already such as home surveillance, smart tracking solutions, m-commerce and other machine-to-machine solutions. The changing needs of customers will necessitate that the Company continue to evolve with the market if they are to truly provide value and remain competitive on a sustained basis.