TWENTIETH ANNUAL REPORT 2005-06

CONTENTS

Corporate Details .............................................................................................................. 2

Notice .................................................................................................................................... 5
Directors’ Report ................................................................................................................ 10
Report on Corporate Governance .............................................................................. 21
Declaration by CEO regarding Company’s Code of Conduct and
CEO/CFO Certification ..................................................................................................... 36
Auditors’ Certificate on Corporate Governance ..................................................... 37
Financial Ratios .................................................................................................................. 38
Auditors’ Report ................................................................................................................. 39
Balance Sheet ..................................................................................................................... 42
Profit & Loss Account ....................................................................................................... 43
Cash Flow Statement ....................................................................................................... 44
Schedules ............................................................................................................................. 45
Notes to the Accounts ..................................................................................................... 55
Section 212 of the Companies Act, 1956, related to Subsidiary Companies 73
Consolidated Accounts
Auditors’ Report on Consolidated Financial Statements .................................... 77
Consolidated Balance Sheet .......................................................................................... 78
Consolidated Profit & Loss Account ........................................................................... 79
Consolidated Cash Flow Statement ........................................................................... 80
Consolidated Schedules ................................................................................................. 81
Consolidated Notes to the Accounts ......................................................................... 88
Board of Directors ............................................................................................................. 107

Annual General Meeting on Wednesday, September 13, 2006, at MC Ghia Hall, Kalaghoda Mumbai at 11.00 a.m.
As a measure of economy, copies of the Annual Report will not be distributed at the Annual General Meeting.
Shareholders are requested to kindly bring their copies to the meeting.

1
VIDESH SANCHAR NIGAM LIMITED
Twentieth Annual Report 2005-2006

CORPORATE DETAILS

BOARD OF DIRECTORS
(As on 1st August 2006)

Mr. Subodh Bhargava (Chairman) (Independent)

Mr. N. Srinath (Executive Director)

Mr. Ishaat Hussain (Panatone Nominee)

Mr. Kishor Chaukar (Panatone Nominee)

Mr. Pankaj Agrawala (Government Nominee)

Dr. Mukund Rajan (Panatone Nominee)

Mr. N. Parameswaran (Government Nominee)

Mr. P. V. Kalyanasundaram (Independent)

Dr. V.R.S. Sampath (Independent)

Mr. Amal Ganguli (Independent)

Mr. Satish Ranade Company Secretary & Chief Legal Officer

REGISTERED OFFICE Videsh Sanchar Bhavan, Mahatma Gandhi Road,
Mumbai – 400 001.
CORPORATE OFFICE Lokmanya Videsh Sanchar Bhawan
Kashinath Dhuru Marg, Prabhadevi, Mumbai – 400 028.

BANKERS Citibank Inc.

Indian Overseas Bank
Standard Chartered Bank
HDFC Bank
Hongkong & Shanghai Banking Corporation
State Bank of India
ICICI Bank Ltd.
LEGAL ADVISORS Messrs ANS Law Associates
Messrs Mulla & Mulla and Craigie Blunt & Caroe
STATUTORY AUDITORS Messrs S.B. Billimoria & Co., Chartered Accountants
REGISTRARS & Messrs Sharepro Services (India) Pvt. Ltd.
TRANSFER AGENTS Satam Estate, 3rd Floor,
Above Bank of Baroda, Chakala
Andheri (East), Mumbai - 400 099.

2
 REVENUE EARNED 2005-06

Interest 2%

Other Income 3%

Other Traffic
Revenue 9%

Enterprise &
Carrier Data 31%

Wholesale Voice 55%

DISTRIBUTION OF REVENUE 2005-06

Staff Cost 5%

Reserve 8%

Dividend 4%

Taxes 5%

Depreciation 9%

Operating &
Other Expenses 15%

Network Cost 54%

3
VIDESH SANCHAR NIGAM LIMITED
Twentieth Annual Report 2005-2006

AVG. CAPITAL EMPLOYED AND ROCE

70000 40
60000 35
30
Rs. in Millions

50000
41948 40938
38342 25
40000
20
30000 19.73 15
20000 10
11.91
10000 9.00 5
0 0
2003-04 2004-05 2005-06

Average Capital Employed ROCE

EBIDTA
10000 8759
9000 7691
8000
Rs. in Millions

7000
6000 5154
5000
4000
3000
2000
1000
0
2003-04 2004-05 2005-06

WHOLESALE VOLUME
7000 6746

6000
Minutes in Millions

5000 4282
4000
2967
3000
2000
1000
0
2003-04 2004-05 2005-06

4
 NOTICE
NOTICE is hereby given that the Twentieth Annual General Meeting of Videsh Sanchar Nigam Limited will be held at 1100
hours on Wednesday, 13 September 2006, at MC Ghia Hall, Bhogilal Hargovindas Building, Second Floor, 18/20 Kaikhushru
Dubash Marg, Kalaghoda, Mumbai – 400 023 to transact the following business:
1. To receive, consider and adopt the Balance Sheet of the Company as on 31 March 2006, the audited Profit and Loss
Account for the year ended on that date, the Auditors’ Report thereon and the Report of the Board of Directors.
2. To declare a dividend for the financial year 2005-2006.
3. To appoint a Director in place of Mr. N. Srinath who retires at this Annual General Meeting and being eligible offers
himself for reappointment.
4. To appoint a Director in place of Mr. Ishaat Hussain who retires at this Annual General Meeting and being eligible
offers himself for reappointment.
Special Business
5. To appoint a Director liable to retire by rotation in place of Dr. Mukund Rajan who holds office only up to this Annual
General Meeting and in respect of whom a notice under the provisions of Section 257 of the Companies Act, 1956
has been received by the Company from a member signifying his intention to propose Dr. Mukund Rajan as a
candidate for the office of director.
6. To appoint a Director liable to retire by rotation in place of Mr. P.V. Kalyanasundaram who holds office only up to this
Annual General Meeting and in respect of whom a notice under the provisions of Section 257 of the Companies Act,
1956 has been received by the Company from a member signifying his intention to propose Mr. P.V. Kalyanasundaram
as a candidate for the office of director.
7. To appoint a Director liable to retire by rotation in place of Dr. V.R.S. Sampath who holds office only up to this Annual
General Meeting and in respect of whom a notice under the provisions of Section 257 of the Companies Act, 1956
has been received by the Company from a member signifying his intention to propose Dr. V.R.S. Sampath as a
candidate for the office of director.
8. To appoint a Director liable to retire by rotation in place of Mr. Amal Ganguli who holds office only up to the date of
this Annual General Meeting and in respect of whom a notice under the provisions of Section 257 of the Companies
Act, 1956 has been received by the Company from a member signifying his intention to propose Mr. Amal Ganguli as
a candidate for the office of director.
9. To consider and, if thought fit, to pass with or without modification the following Resolution as a Special Resolution:
“RESOLVED THAT pursuant to Section 224 A and other applicable provisions, if any, of the Companies Act, 1956, M/s S.B.
Billimoria & Co., Chartered Accountants be and are hereby appointed Statutory Auditors of the Company to hold office
from the conclusion of this Annual General Meeting until the conclusion of the next Annual General Meeting and to
examine and audit the accounts of the Company for the financial year 2006-2007 on such remuneration as may be
mutually agreed upon between the Board of Directors and the Auditors, plus reimbursement of service tax, traveling and
out of pocket expenses.”
“RESOLVED FURTHER THAT the Auditors of the Company be and are hereby authorized to carry out (either themselves or
through qualified associates) the audit of the Company’s accounts maintained at all its branches and establishments
(whether now existing or acquired during the financial year ending 31 March 2007) wherever in India or abroad.”
10. To consider and, if thought fit, to pass with or without modification the following Resolution as a Special Resolution:
“RESOLVED THAT pursuant to Section 309 and other applicable provisions, if any, of the Companies Act, 1956 (the Act) and
pursuant to the provisions of Clause 49 I (B) of the Listing Agreement, a sum not exceeding one percent per annum of the
net profits of the Company calculated in accordance with the provisions of Sections 198, 249 and 350 of the Act, be paid to
and distributed amongst the Directors of the Company or some or any of them (other than the Whole-time Directors), in
such amounts or proportions and in such manner and in all respects as may be directed by the Board of Directors or any
Committee formed by the Board of Directors and entrusted with such responsibilities, and such payments shall be made in
respect of the profits of the Company for each year of the period of five years commencing 1 April 2005.”
By Order of the Board of Directors
Satish Ranade
Dated : 11 August 2006 Company Secretary
Registered Office : & Chief Legal Officer
Videsh Sanchar Bhavan
M.G. Road, Mumbai - 400 001.

5
VIDESH SANCHAR NIGAM LIMITED
Twentieth Annual Report 2005-2006

NOTES :
1. A MEMBER ENTITLED TO ATTEND AND VOTE IS ENTITLED TO APPOINT A PROXY TO ATTEND AND VOTE INSTEAD OF
HIMSELF AND THE PROXY NEED NOT BE A MEMBER. THE INSTRUMENT APPOINTING A PROXY SHOULD, HOWEVER, BE
DEPOSITED AT THE REGISTERED OFFICE OF THE COMPANY NOT LESS THAN 48 HOURS BEFORE THE COMMENCEMENT
OF THE MEETING.
2. Members who hold shares in dematerialized form are requested to bring their DP ID and Client ID numbers for easy
identification of attendance at the meeting.
3. The statement of material facts pursuant to Section 173 (2) of the Companies Act, 1956, setting out the material facts
in respect of the business under all items except item Nos.1 to 4 is annexed hereto.
4. The details regarding the persons proposed to be appointed as Directors have been given in the Annexure attached
to the Notice and their brief resume is published elsewhere in the Annual Report.
5. This may be taken as notice of declaration of dividend for 2005-2006 in accordance with Article 93 of Articles of
Association of the Company in respect of dividend for that year when declared.
6. Register of members and transfer books of the Company shall remain closed from 16 August 2006 to 22 August
2006 (both days inclusive) for the purpose of ascertaining eligibility to dividend.
7. The dividend as recommended by the Board of Directors, if declared at this Annual General Meeting, shall be paid on
or after Wednesday the 20 September 2006.
(i) to those shareholders whose names appear on the Company’s Register of Members after giving effect to all
valid share transfers in physical form lodged with the Registrar & Transfer Agents (R&T Agents) of the Company
on or before Monday, 14 August 2006.
(ii) in respect of shares held in electronic form, to those “deemed members” whose names appear in the statements
of beneficial ownership furnished by National Securities Depository Limited (NSDL) and Central Depository
Services (India) Limited (CDSL) as at the end of business on Monday, 14 August 2006. In respect of shares held in
demat mode, the dividend will be paid on the basis of beneficial ownership as per details to be furnished by
NSDL and CDSL for this purpose.
8. Pursuant to the provisions of Section 205A(5) of the Companies Act, 1956, dividends for the financial year ended 31
March 1995 and thereafter, which remain unclaimed in the unpaid dividend account for a period of seven years from
the date of transfer of the same, will be transferred to the Investor Education and Protection Fund established by the
Central Government. The Members and Shareholders who have not encashed their dividend warrant(s) so far for the
financial year ended 31 March 1999 or any subsequent financial years are requested to make their claim to the R&T
Agents of the Company. According to the provisions of the Act, no claims shall lie against the said Fund or the
Company for the amounts of dividend so transferred nor shall any payment be made in respect of such claims. The
summary of the unpaid dividend for the past years and the date on which the outstanding amount shall be transferred
to Investor Education and Protection Fund on the dates as given in the table below:
Date of Balance as on Dividend for Transfer to Investor
AGM/Board 30 June 2006 the year Remarks Education &
Protection Fund
30 Sept 1999 40,478.50 1998-99 Final Dividend 11 Nov 2006
10 March 2000 543,486.00 1999-00 Interim Dividend 21 April 2007
26 Sept 2000 339,134.00 1999-00 Final Dividend 7 Nov 2007
27 Sept 2001 2,770,900.00 2000-01 Final Dividend 27 Oct 2008
14 Dec 2001 3,054,084.00 2001-02 Interim Dividend 13 Jan 2009
20 Aug 2002 2,388,446.00 2001-02 Final Dividend 19 Sept 2009
2 Sept 2003 1,422,666.00 2002-03 Final Dividend 2 Oct 2010
2 Sept 2004 854,676.00 2003-04 Final Dividend 2Oct 2011
14 Sept 2005 1,007,380.00 2004-05 Final Dividend 14 Oct 2012
Total 12,421,250.50
9. Consequent upon the introduction of Section 109A of the Companies Act, 1956, shareholders are entitled to make
nomination in respect of shares held by them in physical form. Shareholders desirous of making nominations are
requested to send their requests in Form No. 2B in duplicate (which will be made available on request) to the R&T
Agents of the Company.
10. Members are requested to notify any change in their addresses immediately, in any event not later than Monday, 14
August 2006, so as to enable us to despatch the dividend warrants at the correct addresses:
a) In case of physical shares to the R&T Agents, M/s Sharepro Services India Private Limited, Satam Estate, 3rd Floor,
Above Bank of Baroda, Chakala, Andheri East, Mumbai-400 099.
b) In case of shares held in demat form to their depositary participants (DPs).

6
Annexure to the Notice dated 11 August 2006
The Statement of Material Facts pursuant to Section 173 (2) of the Companies Act, 1956.
In respect of Item No. 5
Dr. Mukund Rajan was appointed on 6 May 2005 in casual vacancy of Mr. Ratan Tata who was appointed in the 17th AGM
held on 2 September 2003. Mr. Ratan Tata being a director liable to retire by rotation would have retired in the ensuing
AGM. Under Section 262 of the Companies Act, 1956 and under Article 66C, Dr. Mukund Rajan holds office up to the
date till when Mr. Tata would have held the office i.e. till the date of the forthcoming Annual General Meeting. Dr. Mukund
Rajan is eligible for appointment as a Director of the Company and the Company has, pursuant to Section 257 of the
Companies Act, 1956, received a notice in writing proposing his candidature for appointment. If appointed, Dr. Mukund
Rajan will act as a non-executive Director liable to retire by rotation.
None of the Directors other than Dr. Mukund Rajan is concerned or interested in the above Resolution.
In respect of Item No. 6
Mr. P.V. Kalyanasundaram was appointed as an Additional Director on the Board with effect from 14 September 2005
under Article 66B of the Articles of Association of the Company. Under Section 260 of the Companies Act, 1956 and under
the said Article, Mr. P.V. Kalyanasundaram holds office only up to the date of the forthcoming Annual General Meeting. Mr.
P.V. Kalyanasundaram is eligible for appointment as a Director of the Company and the Company has, pursuant to Section
257 of the Companies Act, 1956, received a notice in writing proposing his candidature for appointment. If appointed, Mr.
P.V. Kalyanasundaram will act as a non-executive Director liable to retire by rotation. For the purposes of Clause 49 of the
Listing Agreement with Indian Stock Exchanges, Mr. Kalyanasundaram would be an Independent Director.
None of the Directors other than Mr. P.V. Kalyanasundaram is concerned or interested in the above Resolution.
In respect of Item No. 7
Dr. V.R.S. Sampath was appointed as an Additional Director on the Board with effect from 14 September 2005 under
Article 66B of the Articles of Association of the Company. Under Section 260 of the Companies Act, 1956 and under the
said Article, Dr. V.R.S. Sampath holds office up to the date of the forthcoming Annual General Meeting. Dr. V.R.S. Sampath
is eligible for appointment as a Director of the Company and the Company has, pursuant to Section 257 of the Companies
Act, 1956, received a notice in writing proposing his candidature for appointment. If appointed, Dr. V.R.S. Sampath will act
as a non-executive Director liable to retire by rotation. For the purposes of Clause 49 of the Listing Agreement with
Indian Stock Exchanges, Dr. V.R.S. Sampath would be an Independent Director.
None of the Directors other than Dr. V.R.S. Sampath is concerned or interested in the above Resolution.
In respect of Item No. 8
Mr. Amal Ganguli was appointed as an Additional Director on the Board with effect from 17 July 2006 under Article 66B
of the Articles of Association of the Company. Under Section 260 of the Companies Act, 1956 and under the said Article,
Mr. Ganguli holds office only up to the date of the forthcoming Annual General Meeting. Mr. Ganguli is eligible for
appointment as a Director of the Company and the Company has, pursuant to Section 257 of the Companies Act, 1956,
received a notice in writing proposing his candidature for appointment. If appointed, Mr. Ganguli will act as a non-
executive Director liable to retire by rotation. For the purposes of Clause 49 of the Listing Agreement with Indian Stock
Exchanges, Mr. Ganguli would be an Independent Director.
None of the Directors other than Mr. Ganguli is concerned or interested in the above Resolution.
In respect of Item No. 9
Section 224A of the Companies Act, 1956 provides that the appointment or reappointment of an Auditor or Auditors of the
Company at each Annual General Meeting shall be by way of a special resolution if the company is one in which not less
than 25% of the subscribed share capital is held singly or in combination thereof by the Central Government, public
financial institutions, etc.
The Central Government holds about 26.12% of the subscribed and paid-up capital of the Company; and hence, reappoinment
of M/s. S. B. Billimoria & Co., Chartered Accountants, the Statutory auditors, is required to be made by way of a Special
Resolution. As required under Section 224 of the Act, necessary certificates have been received from them to the effect that
their appointment, if made, will be in accordance with the limits specified in Section 224 (1B) of the Act.
The Board commends the resolution for acceptance by the members.
None of the Directors is interested in this resolution.

7
VIDESH SANCHAR NIGAM LIMITED
Twentieth Annual Report 2005-2006

In respect of Item No. 10

Taking in to account the responsibilities of Directors, it is proposed that in terms of Section 309(4) of the Companies Act,
1956, the directors (apart from the the Whole-time Directors) be paid, for each of the financial years of the Company
commencing from 1 April 2005, remuneration not exceeding one percent per annum of the net profits of the Company
computed in accordance with the provisions of the Companies Act, 1956. Such remuneration can be paid by way of
commission with the prior approval of shareholders whereas the same would require prior approval of government if it is
paid by way of monthly or periodical payments. The remuneration will be distributed amongst all or some of the
Directors in accordance with the directions given by the Board or any sub-committee of the Board formed for the
purpose.
Under the provisions of Clause 49 I (B) of the Listing Agreement, all fees / compensation (except sitting fees), if any, paid
to the non-executive directors including independent directors shall be fixed by the board of directors and shall require
previous approval of shareholders in general meeting. The consent of the members and shareholders of the Company is
therefore being sought pursuant to the said provisions of the Listing Agreement and the Act.
All the Directors of the Company, except the Whole-time Directors, are concerned or interested to the extent of the
remuneration that may be received by them.
By Order of the Board of Directors
Satish Ranade
Dated : 11 August 2006 Company Secretary
Registered Office : & Chief Legal Officer
Videsh Sanchar Bhavan
M.G. Road, Mumbai - 400 001.

8
 Brief resume of Directors Seeking Appointment/Re-Appointment at the
20th Annual General Meeting
Particulars Mr. N. Srinath Mr. Ishaat Dr. Mukund Mr. P.V. Dr. V.R.S. Mr. Amal Ganguli
Hussain Rajan Kalyanasundaram Sampath

Date of Birth 8 July 1962 2 September 5 April 1968 25 February 12 August 1956 17 October 1939
1947 1958

Date of Appointment 13 February 1 July 2002 6 May 2005 9 September 9 September 17 July 2006
2002 2005 2005

Qualifications Graduated as a Graduated in Bachelor of Bachelor of Arts Bachelor of Arts Fellow of the Institute of
Mechanical Economics Technology degree in degree in Chartered Accountants in
Engineer from from St. from IIT Delhi, history, from History from England and Wales, Fellow
IIT (Madras), Stephens Masters and the New the Presidency of Institute of Chartered
Post Graduate College, Delhi, Doctorate in College, College, Accountants of India,
Diploma in Fellow of the International Chennai, Bachelor of Law Fellow of British Institute
Management Institute of Relations from Bachelor of Law degree from of Management, member
from IIM Chartered Oxford degree from Madras Law of New Delhi Chapter of
(Calcutta), Tata Accountants in University, Tata Madras Law College, Master Institute of Internal
Administrative England and Administrative College. of Law degree Auditors, Florida, USA,
Services Officer Wales, attended Service Officer and a PHD from Alumnus of IMI, Geneva
Advanced the University
Management of Madras.
Program at Master of Arts
Harvard degree in
Business School History from
the Madurai
Kamaraj
University

Expertise in Specific Functional General Financial General Eminent Eminent Accounting and
Area Management Management Management Lawyer Lawyer Audit

Directorships held in other Tata Tata Sons Tata Arni Vegetable Hughes Communications
Public Companies (excluding Teleservices Limited,Tata Teleservices Oil Ltd India Ltd., Flextronics
foreign and private companies) Limited, VSNL Steel Ltd., Titan Limited, Software Systems Ltd.,
Broadband Industries Ltd. , Piem Hotels Tube Investments of India
Limited Voltas Ltd, Tata Limited Ltd., HCL Technologies
Teleservices Ltd., Samtel Colour Ltd.,
Ltd.,Tata New Delhi Television Ltd.,
Industries Ltd., Century Textiles and
Tata AIG Industries Ltd., Avtec Ltd.,
General ICRA Ltd., Maruti Udyog
Insurance Co. Ltd.
Ltd., Tata AIG
Life Insurance
Co. Ltd., CMC
Limited, Tata
Sky Ltd,Tata
Refractories
Limited

Memberships/Chairmanships of Audit Tata Audit Committee

Committees in other Public Committee Teleservices Felxtronics Software
Companies Tata Steel Ltd., Limited – Share Systems Ltd., HCL
Titan Industries Transfer Technologies Ltd., Samtel
Ltd. , Tata Committee Colour Ltd., New Delhi
Industries Television Ltd., Century
Limited, Tata Textiles and Industries
Trustee Ltd., Maruti Udyog Ltd.
Company
Ltd.,Tata AIG
General
Insurance Co.
Ltd., Tata
Teleservices
Limited Tata
AIG Life
Insurance Co.
Ltd.

Shareholding In VSNL NIL NIL 15 NIL NIL NIL

9
VIDESH SANCHAR NIGAM LIMITED
Twentieth Annual Report 2005-2006

DIRECTORS’ REPORT
Dear Shareholders,
The directors are pleased to present the annual report and Dividend
audited accounts for the financial year ended March 31, The directors are pleased to recommend a dividend of
2006. Rs.4.50 per share for the financial year ended March 31,
FINANCIAL PERFORMANCE 2006. The directors propose that profits be appropriated
During financial year 2005-06, your Company succeeded in the following manner:
in growing each one of its business segments. A total of TABLE 2
3.8 billion voice minutes were carried by the India business
(Rs. in Million)
which translates into a volume increase of 36% over the
previous year. The revenue in the Wholesale Voice segment DESCRIPTION Amount
grew by 15.25%, from Rs.18.77 billion to Rs.21.63 billion.
The pressure on margins continued during this year as Amount available for appropriation
well. The Enterprise and Carrier Data segment reported - balance carried forward 11,859.08
revenue of Rs.12.62 billion, a growth of 12.95% over the - Profit for the year 4,795.42 16,654.50
previous year. The revenues in the ‘Other Services’ segment,
which includes TV uplinking, transponder leasing services, Less:
retail internet, etc., reported a growth of 15.24% over the - Dividend @45% on the
previous year. Consequent to substantial increases in the paid-up capital of Rs.2,850 million 1,282.50
complexities of the Company’s businesses, and its focus
- Tax on total dividend 179.87
on growth and globalisation, total expenditure at Rs.32.66
billion in FY 05-06 was higher by 17.57% (Rs.27.78 billion - Transfer to general reserve 479.54
in FY 04-05). VSNL’s profit before tax and exceptional items Surplus carried to balance sheet 14,712.59
increased from Rs.6.33 billion in FY 04-05 to Rs.7.54 billion
in FY 05-06. CONSOLIDATED FINANCIAL PERFORMANCE
In the previous year, your Company had substantial For the first time, your Company is reporting the
exceptional earnings from the disposal of its investments consolidated financial results. The results of the key
made in earlier years in international satellite acquisitions made during the year - Tyco Global Network,
companies. Teleglobe, and VSNL Broadband Limited - are included in
A summary of VSNL’s financial performance for the year is the Company’s consolidated results from their respective
as follows: acquisition dates.
TABLE 1
For 2005-06, the Company’s total income on a consolidated
Audited financial results for the year 2005-2006 (Rs. in Million)
basis was Rs.47.97 billion, EBIDTA Rs.6.23 billion and profit
Description 2005-06 2004-05 % Change before tax and exceptional items Rs.3.45 billion.
Income from operations
STRATEGIC OVERVIEW
- Wholesale Voice 21,626 18,765 15.25
- Enterprise & Carrier Data 12,618 11,170 12.95 Your Company is evolving into India’s first truly global
- Other services 3,565 3,095 15.24 telecommunications company. Today, VSNL is among the
Other income 2,288 1,075 113.04
world’s top three providers of international wholesale voice
services, and the number one wholesale Voice over Internet
Total Revenue 40,097 34,105 17.57
Protocol provider (according to independent published
EBITDA margins before
exceptional items (%) 23.16 23.28 (0.52) reports). Your Company provides seamless connectivity
Depreciation 3,594 2,440 47.30 across the globe to both carriers and enterprises, supported
Prior years adjustment – by a state-of-the-art network infrastructure. VSNL’s
net expense/(income) (109) - - submarine cable network of over 2,00,000 route kilometres
Exceptional items – is one of the world’s largest. Your Company already offers
expense/(income) 676 (4,214) (116.04) telecommunication services in Sri Lanka and Nepal, and
Profit before tax 6,867 10,540 (34.85) has received the licence to be a strategic partner and
Tax 2,072 2,976 (30.38) investor in South Africa’s Second National Operator (SNO).
Profit after tax 4,795 7,564 (36.61) As of June 30, 2006, VSNL had 52 subsidiaries in 21
Earnings per share (Rs.) 16.83 26.54 (36.59) countries and about 25% of its employees are located
Net worth outside India.
(Excluding Capital Reserve) 58,554 55,220 6.04 Meanwhile, in India, your Company continues to be the
Normal dividend per share (Rs.) 4.50 4.50 - country’s largest player in international telecommunication
Special dividend per share (Rs.) - 1.50 - services and has a strong pan-India domestic backbone.
Previous year’s figures have been regrouped wherever necessary. Your Company is also a leading player in the Indian

10
enterprise data market, offering customers a range of
telecommunication solutions, such as Private Leased
Circuits, Managed Data Networks and Virtual Private
Network services. In the retail space, VSNL remains a
premier Internet Service Provider, offering a variety of
services including connectivity, messaging and Internet
telephony. Having pioneered the use of the Internet in
India, your Company is now a key player in India’s emerging
broadband revolution.
VSNL has transformed itself over the last few years by
reworking its strategies and repositioning itself. During the
year, your Company completed the acquisition of the Tyco
Global Network which is a robust network of international
submarine cable systems and Teleglobe which was one of
the leading global long distance voice and wholesale data
players. Domestically, your Company acquired Tata Power
Broadband, now known as VSNL Broadband Limited, having
about 1000 kilometres of optical fibre infrastructure in
Mumbai and Pune; acquired the assets of 7 Star.com Pvt.
Limited, a suburban cable operator in Mumbai offering
broadband services and acquired Direct Internet Limited
which provides internet and related services
predominantly to small and medium sector enterprise
customers. Your Company’s overall strategy remains to:
• Maintain its leadership in wholesale services with a
global footprint, new products and enhanced service
levels.
• Diversify and de-risk its business model and ensure
high growth, by expanding into high-potential newer
businesses like enterprise and carrier value added data
and broadband services.
• Extend and strengthen its global presence in different
ways, such as by delivering network and
communication solutions globally, and by expanding
into overseas telecom markets through greenfield
ventures or through acquisitions.
• Support all its businesses by selective and strategic
expansion and modernisation of its state-of-the-art
infrastructure network.
• Fully leverage synergies with other Tata Group
companies in the telecom and software sectors, to
give customers a range of end-to-end solutions.
• Continuously improve efficiency, competitiveness and
customer satisfaction through initiatives such as
quality, cost rationalisation and profit enhancement.
OPERATIONAL REVIEW
Your Company operates under three business segments in
India – Wholesale Voice, Enterprise and Carrier Data and
Other Services. VSNL’s investments internationally are
through its wholly owned subsidiary headquartered in
Singapore. Your Company now has major operations spread
across Singapore, Canada, the United States of America, the
United Kingdom, France and other key commercial and
strategically important locations across the globe.
WHOLESALE VOICE
Your Company’s largest revenue segment in India is the
traditional wholesale voice business consisting of
International Long Distance (ILD) and National Long
Distance (NLD) voice services.
International Long Distance (ILD) Voice
ILD voice services have been traditionally the core business
of your Company. Over the last four years, the international
telephony market in India has been pressured by increased
competition, falling rates and lower margins. During 2005-
06, VSNL acquired international wholesale voice service
provider Teleglobe International Holdings for an enterprise
value of US$239 million. Your Company has transformed
itself from a single-country operator to a globally
competitive, large-scale player, backed by assets that can
support its businesses across the globe. VSNL is now
among the top three wholesale voice providers in the
world, and owns and operates world’s one of the largest
international networks with coverage to more than 240
countries and territories. Your Company also has over 415
direct and bilateral relationships with leading international
voice telecommunication providers and carries over 20
billion minutes of international wholesale voice traffic on
annualised basis.
VSNL retains its position as India’s top ILD services provider,
offering telephone services to more than 200 international
destinations. During 2005-06, international settlement rates
(determining ILD services payments between telecom
providers of different countries) remained more or less
stable. However, both tariffs and interconnect rates
(determining VSNL’s revenues for international calls passed
to or from other domestic telecom networks) declined,
sustaining the pressure on margins.
During 2005-06, the Telecom Regulatory Authority of India
( TRAI) reduced the Access Deficit Charge (ADC) on
incoming ILD calls from Rs.3.25 per minute to Rs.1.60 per
minute and on outgoing ILD calls from Rs.2.50 per minute
to Rs.0.80 per minute. However, from March 1, 2006
onwards, telecom operators must also pay a revenue share
of 1.5% of the Adjusted Gross Revenue (AGR) towards ADC.
Meanwhile, the Department of Telecommunications (DoT)
relaxed the licence conditions for international and
national long distance services, and reduced the entry fee
for these businesses from Rs. 250 million and Rs. 1 billion
respectively to Rs.25 million each, effective January 1, 2006.
The licence fee payable by all long distance service
providers to the DoT has also been reduced to a uniform
6% of the AGR, effective January 1, 2006. These changes
may serve to raise traffic volumes, although they also raise
competitive pressures.
From February 13, 2004, VSNL ceased to be the preferred
carrier for outbound traffic from the public sector access
providers Bharat Sanchar Nigam Limited (BSNL) and
Mahanagar Telephone Nigam Limited (MTNL). Despite this,
during 2005-06, outgoing traffic volumes stayed at more
or less the same level as in the previous year, while
incoming traffic volumes increased by 67%.
11
VIDESH SANCHAR NIGAM LIMITED
Twentieth Annual Report 2005-2006
This business is now characterised by increased
competition and falling rates and margins, both in India
and internationally. Therefore, your Company’s focus is on
increasing volumes and thus revenues, while improving
margins by cutting costs. VSNL is capitalising on its long-
standing relationships with international carriers, offering
them flexible solutions. Your Company has signed
interconnect agreements/arrangements with all domestic
cellular service providers and private basic operators for
direct termination and pick up of ILD traffic. Simultaneously,
VSNL is restructuring its costs through negotiations with
suppliers and carriers, better efficiencies, and re-
engineering of its networks. Your Company is also in the
process of offering higher margin and higher value services
to improve profits in this segment. For example, VSNL is
now a major player in the mobile signalling business
globally, supplying wholesale services to mobile operators
for their international roaming and messaging needs.
Your Company believes that its strategic advantage in this
business comes from its volumes, reach, and robust
networks, which are all difficult to replicate.
A key concern in the ILD voice business is the illegal market
(please see Management Discussion and Analysis for a
discussion of regulatory issues). In the past, VSNL had
undertaken major initiatives to combat grey traffic,
supporting the enforcement authorities who have been
tracking and shutting down illegal operators. These efforts,
if consistently enforced, will help to curb the grey market.
National Long Distance (NLD) Voice
In September 2002, your Company entered the NLD
services market to offer national long distance services to
its customers, as a logical extension of its international
telephony expertise. NLD services now account for a
significant component of VSNL’s voice services, and
volumes in this segment increased from 1.4 billion minutes
in 2004-05 to 2.9 billion minutes in 2005-06. From March
1, 2006, TRAI abolished the per-minute ADC of a uniform
30 paise per minute on all NLD calls; however, it introduced
a revenue share-based ADC of 1.5% of the AGR. VSNL
welcomes the reduction in ADC, which has contributed to
a substantial increase in call volumes and benefits the end
customer with lower tariffs.
Your Company has a robust national network infrastructure
and interconnect agreements with all basic and cellular
mobile service operators in the country to carry NLD traffic
to their networks.
The delay in implementing Direct Customer Access
mechanisms such as Carrier Access Code (CAC) or Carrier
Pre-Selection (CPS) have resulted in VSNL continuing to
be absent from the retail voice market. Your Company is
dependent on its relationships with access providers (fixed
line and cellular) for wholesale long distance traffic. In this
regard, your Company’s equity investment in Tata
Teleservices Ltd. (TTSL) has enabled VSNL to offer ILD and
12
NLD services to all subscribers of TTSL. This attempts to fill
an important gap in VSNL’s access to end customers.
(Please see Management Discussion and Analysis for
details.)
Calling Cards
Your Company launched Tata Indicom calling cards in 2004.
While the ‘Global’ calling card was targeted at Indian
outbound travellers and overseas residents, ‘Hello Duniya’
was aimed at Indian customers for cheaper and convenient
NLD/ILD calling. VSNL stopped the ‘Hello Duniya’ outbound
calling service in March 2005, as directed by TRAI on the
grounds that only access providers (basic service license
or unified access service license holders) can provide such
services. In May 2006, the Telecom Dispute Settlement and
Appellate Tribunal ( TDSAT ) rejected your Company’s
petition maintaining that VSNL cannot access subscribers
directly and provide outbound calling cards under its NLD/
ILD license. Your Company believes that calling cards are a
globally recognized mechanism for operators to offer retail
long distance services, and in the absence of CAC / CPS,
the only mechanism available to provide customers with
choice in India. Your Company is examining its option to
appeal against this TDSAT ruling in the Supreme Court.
ENTERPRISE AND CARRIER DATA
The Indian enterprise data market continues to grow at
an annualised rate of 60-70% each year. VSNL’s Enterprise
Business Unit serves large, mid-sized and small businesses,
and its industry-specific solutions encompass banking and
financial services, information technology/IT enabled
services, industrial and distribution, pharma, petroleum,
media and entertainment, travel, and Government verticals.
With voice, data and video communications converging,
the demand for enterprise data services is growing. In
addition to international and national private leased
circuits (IPLCs and NPLCs), your Company offers a wide
range of Internet Protocol (IP) services encompassing
internet telephony, MPLS VPNs (Virtual Private Networks),
internet access, managed hosting and other data centre
services, internet leased lines, mail and messaging services,
video conferencing, website hosting services with security
back-up and database management services and network
management.
VSNL’s telecom service offerings can be seamlessly
integrated across products and geographies, and
customised to meet the varied requirements of the
enterprise sector. The Company continues to extend its
reach in the main global markets to provide IP-VPN
services.
VSNL has progressed up the value chain to deliver
consulting and managed solutions to customers. During
2005-06, the Company significantly expanded its VPN and
data centre offerings, establishing state-of-the-art
Asynchronous Transfer Mode (ATM) and Multi Protocol
Label Switching (MPLS) networks.

VSNL also launched several new offerings. In November
2005, it introduced the Tata Indicom Web Conferencing
Service powered by the Microsoft Office Live Meeting
Platform. Microsoft and VSNL also announced an alliance
to create rich solutions and services targeted at the
enterprise, small and medium business and consumer
segments.
In July 2005, VSNL announced its intention to partner with
Thomson, the leading technology and service provider in
the media and entertainment space. The two companies
will offer high quality services and new technologies to
the Indian media and entertainment market and also
explore opportunities in managing and delivering content
for third parties, and developing end-to-end solutions for
network operators as well as content management and
distribution solutions.
To further strengthen its customer value proposition, VSNL
partners with TCS and CMC, the software companies of
the Tata Group, for integrated joint product and service
offerings. VSNL also partners with TCS in the international
market to leverage TCS’s existing relationships with
numerous Fortune 500 companies globally. Your Company
also markets its services through indirect channels catering
to the small and medium enterprise market.
VSNL is extending its services beyond India to enterprises
globally, through its subsidiaries in different geographies.
The aim is to make inroads into the large and lucrative
global market by developing differentiated services and
offering competitive pricing. This is made possible by
VSNL’s low-cost global infrastructure, and by capitalising
upon its existing international organisation and employees
for sales and marketing initiatives.
OTHER SERVICES
VSNL was the first company to introduce retail internet
services in India in 1995. Since then, VSNL has been a
premier Internet Service Provider, offering a variety of
services including connectivity, messaging and internet
telephony. VSNL is now a significant broadband player and
is currently extending its broadband services infrastructure,
including last mile connectivity and a content and services
portal, across all major Indian cities.
Dial Up Internet Service
VSNL continues to lead the dial up market in India in terms
of innovations and services for the customer, and offers
services in 300 towns and cities. However, this business is
undergoing fundamental changes, as higher-end users
migrate to similarly-priced broadband services, while low-
end users are being targeted by basic telephony operators
who have direct access to customers and offer post-paid
or pay-as-you-use services. VSNL’s strategy in this segment
is to retain customers with excellent service and value
addition, while also capturing those that wish to convert
to broadband.
Broadband Business
VSNL began offering broadband services in April 2004 soon
after it acquired the narrowband and broadband business
of Dishnet, and now serves 125,000 broadband and high-
speed Internet customers in 43 cities. The Government’s
2004 broadband policy estimates that India will have 20
million broadband subscribers by end-2010. During 2005-
06, VSNL’s broadband business grew by well over 100%,
keeping pace with the industry’s high growth. VSNL aims
to be the forerunner in this service which offers great
growth potential.
VSNL has licensed content and services from some of the
best content owners in India and abroad, providing access
to videos, live news, radio channels, feeds from religious
institutions, over 4,200 education modules, more than
300,000 music downloads, online tests, games, e-books,
mobile ring-tones and a host of other services. Additionally,
for business users, VSNL offers services like domain
registration, website hosting, Web2SMS, Mail SMS alerts
and Bulk Web2SMS.
Last-mile access to the customer is a crucial factor in the
success of a broadband business. Therefore, VSNL is
building a Metropolitan Area Network (MAN) in key cities
and continues to evaluate and test newer access and
application technologies.
Wi-Fi and Cybercafes
VSNL is now one of India’s largest public broadband access
providers, using Wi-Fi hotspots and a chain of cybercafés.
(Wireless Fidelity or Wi-Fi enables computers, PDAs and
other computing devices to use high speed Internet
without any wires or cables, at places which are Wi-Fi
enabled, called hotspots.) Today VSNL provides access at
more than 100 hot spot locations across the country,
including railway stations, airports, five star hotels, coffee
shops and restaurant chains. VSNL is also tying up domestic
and international roaming agreements, through which
VSNL will provide public access to travellers into India and
offer access to VSNL customers at around 50,000 hotspots
internationally.
Internet Telephony
Effective April 2002, the Government of India permitted
Internet Service Providers to offer voice telephony over
the Internet using the Voice over Internet Protocol (VoIP).
VSNL has deployed its unique, fully owned internet
telephony infrastructure. This self-managed network allows
VSNL to offer enhanced features, flexibility in billing and
plans and superior voice quality. VSNL offers both corporate
and retail net telephony services, complementing its voice
business. Low tariffs in Internet telephony could encourage
usage and increase international call volumes.
INTERNATIONAL INITIATIVES
VSNL’s international operations (VSNL International) are
headquartered out of Singapore, through its wholly owned
subsidiary, VSNL Singapore Pte. Limited (VSPL). As on 30
June 2006, your Company has 52 subsidiaries in 21
countries and has a direct operating presence with over
1000 employees in several countries in North America,
13
VIDESH SANCHAR NIGAM LIMITED
Twentieth Annual Report 2005-2006
Europe and Asia, offering services to both wholesale and
enterprise customers. VSNL International is rapidly growing
its global footprint, with offices currently in Virginia, New
Jersey, London, Paris, Madrid, Amsterdam, Frankfurt,
Singapore and Tokyo.
In a parallel international initiative, your Company also aims
to leverage its expertise to operate telecom services in
countries that are liberalising and opening up their telecom
markets. VSNL already participates in a Joint Venture that
provides telecom services in Nepal and has a subsidiary
which holds an External Gateway Operators licence in Sri
Lanka. VSNL, as reported last year, will soon offer telecom
services in South Africa through its participation in the
Second National Operator (SNO) process.
VSNL Singapore Pte. Ltd. (VSPL)
Your Company set up VSPL in January 2004 as a wholly
owned subsidiary. VSPL manages and maintains the
Singapore landing for the Tata Indicom Cable (TIC). The
company also acquires and sells other cable capacity
throughout the Asia Pacific region. VSPL has obtained the
required FBO license from the Singapore authorities to
own and operate facilities used in the provision of telecom
services. VSPL is also the holding company for all of VSNL’s
international operations, including TGN and Teleglobe.
Acquisition of Tyco Global Network
In July 2005, your Company completed the acquisition of
TGN, a state-of-the-art undersea cable network that spans
60,000 kilometres (37,280 miles) and the continents of
North America, Europe and Asia. With the acquisition of
TGN for US$130 million, VSNL is now one of the world’s
largest submarine cable system owners, providing
submarine cable bandwidth to its customers in multiple
continents.
Acquisition of Teleglobe International Holdings Limited
In February 2006, your Company completed its acquisition
of Bermuda-based Teleglobe International Holdings Ltd.
VSNL will leverage Teleglobe’s network and capabilities as
part of its strategy to deliver key mobile, data and voice
offerings to global enterprise customers. Teleglobe serves
as the product brand for the voice, mobile and IP transit
wholesale services. VSNL International is the product brand
for the Company’s wholesale IPL and ethernet offerings,
as well as the full enterprise portfolio.
South Africa -Second National Operator (SNO)
In February 2005, the South African government selected
a consortium of VSNL and Tata Africa Holdings Ltd., the
investment arm of the Tata Group in South Africa, as the
strategic investor in that country’s proposed SNO structure.
The equity partners in the SNO are Eskom, Transnet and
Nexus and a holding company with 51% stake. VSNL will
hold its stake in this holding company with two other
private consortia. This new venture is allowed to provide
domestic and international voice and data services, except
mobile services. The SNO received its license in December
2005 and expects to make a business launch during the
14
later part of 2006. The South African market is a large and
exciting opportunity in its own right, and also provides a
future gateway to the rest of Africa. VSNL SNOSPV Pte.
Ltd., a wholly-owned subsidiary of VSNL incorporated in
Singapore, is the investment vehicle for all investments
made by VSNL in the SNO venture.
VSNL Lanka Limited (VLL)
In June 2003, VSNL Lanka Ltd., a wholly owned subsidiary
set up by VSNL in Sri Lanka, received an External Gateway
Operator (EGO) licence. The EGO licence allows VLL to offer
ILD voice and data services, which it began providing in
February 2004. The Sri Lankan market, growing at an
estimated 20%-25% every year, allows VSNL to increase its
sub-continental presence and extend offerings in the
region to international carriers. VLL has witnessed
substantial growth in its very short existence. It was able
to earn cash profits within the first six months of its
operations and recorded net profits in the first year of its
operations.
CUSTOMER SERVICE
VSNL has transformed itself into a customer-focused
organisation. The charter of the Customer Service
Organization is to support the entire customer life cycle
from service delivery to service assurance, including
retention and growth.
To support VSNL’s international presence, the Company is
defining and implementing stringent service delivery
standards that adhere to global best practices. In addition,
VSNL has created a dedicated team to bring focus to its
relationship with other carrier partners.
In order to support the enterprise and international
business functions, VSNL has established a centralized 24x7
call centre. Retail and broadband customers are supported
by two other outsourced call centres. The organisation is
also providing its expertise in setting up the entire
customer service function including customer impacting
processes and systems, to support the SNO initiative in
South Africa.
HUMAN RESOURCES
VSNL has been constantly reviewing its HR policies in order
to keep pace with the market changes and has embarked
on a range of initiatives focusing on creating a positive
work environment that provides employees with ample
opportunities for growth and development as well as
ensuring high levels of motivation and engagement.
Manpower Planning
The manpower requirements are assessed on a regular
basis keeping in view the competitive nature of our
industry and talent induction has been done in areas like
Customer Service, Sales, Networks, Finance, etc. Also efforts
have been put in to ensure creation of an internal talent
pool by recruiting and training Graduate Engineer Trainees
and Management Trainees.
VSNL employed 2,926 employees on March 31, 2006,
against 2,479 on March 31, 2005. Of these, 2,258 are
executives and 668 are non-executives.
Training and Leadership Development
The changing business scenario necessitates continuous
development of employees in terms of skills and
competencies in line with the Company’s requirements.
In-house training programs as well as programs with the
help of external faculty were conducted covering
functional, behavioural and management areas. The
Company has implemented a systematic process for
orientation and training of new recruits.
Compensation and benefit practices
Compensation and benefit practices which the Company
had evolved during the period under review aim to be
competitive, attractive and innovative and is either global
or local in orientation depending on what best drives
business performance and rewards individual contribution.
Performance based pay and performance linked incentive
are some of the initiatives that have contributed to attract
and retain key talent, foster a superior performance culture
and accomplishment of targets. The benefit packages and
personnel policies are continuously being reviewed to give
our employees comparable industry and market practices.
Employee Relations
During the year, harmonious relationships were maintained
with the employee representative bodies. A significant
milestone was the introduction of a Performance
Management System for non-executives, as a consequence
of a three-year accord reached on productivity-linked
incentive and performance linked pay.
The Company conducted its second employee satisfaction
survey in January 2006. Based on the findings, VSNL has
taken up various enterprise and team level issues to
enhance satisfaction.
INFRASTRUCTURE
One of the biggest strengths of your Company is its global,
robust, scalable network, with the unique advantage of
diversity and multiple connectivity options internationally.
Your Company operates a total of 26 switches: 5
international gateway switches and 21 NLD switches. VSNL
has over 50 earth stations, ownership in over 100 sub-sea
and terrestrial cable systems with 200,000 kilometres of
fibre and cable, 275 points of presence in 25 countries and
access to five geo-stationary satellites. Your Company also
has seven data centres globally.
Tata Indicom Cable (TIC)
In March 2005, VSNL operationalised its own Tata Indicom
Cable (TIC). The state-of-the-art 3,100 km submarine cable
system between Chennai and Singapore is VSNL’s first fully
owned undersea cable with an initial capacity of 320
gigabits per second that can be ultimately scaled up to
5.12 terabits per second. With an estimated life of 25 years,
the new cable enhances significantly India’s connectivity
into the Asia-Pacific region and the U.S, via the Pacific.
SEA-ME-WE4
VSNL is one of the founding members of SEA-ME-WE4, a
consortium of 16 parties that has set up a cable system
between France and Singapore with Mumbai as one of
the landing points. The cable has a design system capability
of 1.28 terabits per second with initial capacity of 160
gigabits per second. This system has an estimated life of
25 years. This new cable enhances significantly India’s
connectivity into the Asia-Pacific region, Middle East,
Europe and the U.S, both via the Atlantic and the Pacific
Ocean. VSNL has been assigned the crucial responsibility
of network administration and the operation of the
centralised network operating centre located at Mumbai
to manage the entire system, thereby giving credibility to
your Company’s skills and technical expertise. The system
was inaugurated for service in November 2005.
VSNL is already utilising SEA-ME-WE2, SEA-ME-WE3, SAFE,
FLAG and TIC submarine cable systems as part of its
international network out of India.
VSNL’s submarine cable landing stations in India are
integrated with its domestic NLD network and provide
customers with a choice of bandwidth options. VSNL offers
redundancy on the intra Asia, Trans Pacific, Trans Atlantic,
continental Europe and U.S long distance routes. VSNL also
benefits from mutual restoration agreements between
cable systems in which it participates. These arrangements
help reduce or eliminate the cost of restoration, driving
down the cost to customers and increasing reliability and
customer service. A cable restoration agreement for VSNL’s
TIC cable with i2i, a parallel Chennai-Singapore cable, came
into force in June 2005.
NLD Backbone
VSNL’s domestic long distance network infrastructure
includes a 37,000 kilometre fibre optic network and a new
MPLS based IP-VPN backbone linking over 120 points of
presence, which is integrated with the Company’s
international MPLS network thereby enabling multinational
companies to seamlessly connect deep into India. Your
Company has rolled out its metro ethernet services in eight
major cities.
Last Mile
In view of the fact that the last mile was not readily
available, in order to be able to provide IP VPN services to
corporate clients as a part of its ISP offering your Company
has invested substantially in Wireless last mile on
Multipoint Microwave Distribution System(MMDS)
technology and fiber as well as through arrangements with
cable operators to provide broadband services. In view of
the recent amendments in the telecom licenses, the IP VPN
services have now become a part of the NLD license and
the MMDS as well as the other last mile network can now
be utilised for providing services under the NLD license.
15
VIDESH SANCHAR NIGAM LIMITED
Twentieth Annual Report 2005-2006
Another significant change brought about by the
amendment is that the NLD service provider is permitted
to make its own arrangements for laying the last mile to
serve its customers directly for provision of leased circuits
and CUG’s, which was hitherto not permitted. This
amendment removes a major hurdle in terms of availability
of the last mile to VSNL.
INTERNAL INITIATIVES
Your Company continues with various internal initiatives
such as organisation restructuring, profit enhancement,
cost optimisation, quality, customer care and information
technology to compete effectively, improve organisational
flexibility and respond quickly to customers. Some
important initiatives are:
Business Excellence
Your Company has been re-inventing its business model
and transforming itself in tandem with business and
regulatory changes. To help drive the transformation, VSNL
is implementing the Tata Business Excellence Model
(TBEM), a framework that lays down best practices in areas
like leadership, strategy, customer and market focus,
knowledge management, human resources, process
management planning, customer service and social
responsibility. During the past year, VSNL has made further
progress in implementing TBEM, with many continuous
improvement projects underway and extensive employee
participation.
Amongst the many initiatives undertaken, your Company
became the world’s first telecom service provider to obtain
the TL 9000 certification (a set of quality system metrics
designed for the telecom industry, encompassing ISO 9001
and other best practices). Your Company is also the first
telecom service provider in India to obtain the BS7799
certification.
In line with a Tata Group priority, your Company has been
actively promoting innovations. In the first year of the
initiative, VSNL has registered six copyrights for innovation
done by its employees. VSNL is also a member of the Tata
Knowledge Centre, a key initiative started by Tata Quality
Management Services (TQMS) this year.
Your Company is successfully running the Six Sigma Green
Belt and Black Belt programmes, and has completed more
than 100 projects over the last year, with many more in
the pipeline.
Compliance with section 404 of Sarbanes Oxley Act,
2002
Pursuant to its listing on the New York Stock Exchange,
VSNL must comply with section 404 of the Sarbanes Oxley
Act by March 2007, which lays down requirements for
internal control over financial reporting in the Company.
VSNL continues to make rapid progress towards
compliance with these stringent requirements.
Revenue Assurance and Cost Reduction
VSNL continues with its ongoing cost reduction exercise
that began in September 2002, and has successfully
completed several cost reduction projects as a part of its
continuous improvement activities.
16
VSNL’s Revenue Assurance function aims to proactively
prevent revenue leakages and ensure robust internal
controls and processes that keep pace with increasing
business complexities, thus moving towards zero tolerance
of revenue leakages. A Revenue Assurance charter and
manual have been formulated to further structure these
activities.
Business Process Improvement
In its constant endeavour for excellence, your Company
has initiated an exercise to streamline internal processes
and institutionalise a culture of continuous improvement.
The internal audit and revenue assurance teams actively
contribute to sustaining process improvement efforts.
Senior management regularly tracks implementation of
improvement ideas.
Enterprise Risk Management
VSNL is establishing an enterprise-wide risk management
(ERM) framework to take advantage of opportunities and
optimally manage risks, as well as to duly comply with
clause 49 of the Listing Agreement. In line with VSNL’s
commitment to delivering sustainable value, this
framework aims to provide an integrated and organised
approach for evaluating and managing risks.
FIXED DEPOSITS
VSNL has not accepted nor does it hold any public
deposits.
STATUTORY INFORMATION AND DISCLOSURES
Information in accordance with the provisions of Section
217 (2A) of the Companies Act, 1956, read with the
Companies (Particulars of Employees) Rules, 1975, as
amended, regarding employees is given in Annexure ‘II’ to
the Directors’ Report. There are no particulars to be
disclosed pertaining to the year under review, in respect
of R&D and technology absorption as required under
Companies (Disclosure of Particulars in the Report of the
Board of Directors) Rules, 1988. For the purpose of Form ‘C’
under the said rules, foreign exchange earnings were
equivalent to Rs.17,120 million and foreign exchange
outgo was equivalent to Rs. 7,958 million. There are no
qualifications contained in the report of the statutory
auditors for the year 2005-06.
SUBSIDIARIES
The Statement pursuant to section 212 of the Companies
Act, 1956 containing details of the Company’s subsidiaries
is attached. The consolidated financial statements of the
Company and its subsidiaries, prepared in accordance with
accounting standard 21 (AS 21) prescribed by The Institute
of Chartered Accountants of India, form part of the annual
report and accounts. The Company has been granted
exemption from attaching the accounts etc., of its
subsidiary companies with the balance sheet of the parent
company. These documents will be provided on request
to any shareholder wishing to have a copy, on receipt of
such request by the deputy company secretary at the
registered office of the Company. These documents will
also be available for inspection by any shareholder at the
registered office of the Company.
THE BOARD OF DIRECTORS
The VSNL Board presently consists of ten Directors.
Mr. Subodh Bhargava took over as Chairman of VSNL with
effect from April 11, 2005. Dr. Mukund Rajan joined the
Board on May 6, 2005. Mr. N. Parameswaran, Government
Nominee Director, joined the Board with effect from August
30, 2005 and on September 14, 2005, Mr. P.V.
Kalyanasundaram and Dr. V.R.S. Sampath, Independent
Directors, joined the Board. On 17 July 2006, Mr. Amal
Ganguli, Independent Director, joined the Board of VSNL.
On April 11, 2005, Mr. Ratan Tata resigned as a Director of
VSNL; on August 10, 2005, Mr. Rakesh Kumar, government
nominee Director, resigned as Director of VSNL; on
September 9, 2005, Mr. Vivek Singhal and Dr. Ashok
Jhunjhunwala, Independent Directors, resigned as Directors
of VSNL; on November 25, 2005, Mr. F.A. Vandrevala, Director,
resigned as Director of VSNL and on March 21, 2006, Mr.
Suresh Krishna, Independent Director, resigned and they
accordingly ceased to be Directors on the Board of VSNL
from the respective dates. For details about the Directors,
please refer to Point 2 of the Report on Corporate
Governance below. The Board places on record its
appreciation for the services rendered by the outgoing
Directors.
In accordance with the provisions of the Companies Act,
1956 and the Company’s Articles of Association, Mr. N.
Srinath and Mr. Ishaat Hussain retire by rotation at the
ensuing annual general meeting and being eligible, offer
themselves for reappointment.
In accordance with the provisions of the Companies Act,
1956 and the Company’s Articles of Association, Dr.
Mukund Rajan, Mr. P.V. Kalyanasundaram, Dr. V.R.S. Sampath
and Mr. Amal Ganguli hold office only up to this Annual
General Meeting; notices under the provisions of section
257 of the Companies Act, 1956 have been received by
the Company from members signifying their intention to
propose them as a candidate for the office of Director.
None of the Company’s directors are disqualified from
being appointed as Directors as specified in Section 274
of the Companies Act, 1956 as amended by the Companies
(Amendment) Act, 2000.
CORPORATE GOVERNANCE
Pursuant to Clause 49 of the listing agreements with the
stock exchanges, a Management Discussion and Analysis,
Corporate Governance Report and Auditors’ Certificate
regarding compliance of conditions of Corporate
Governance are made a part of the annual report.
CORPORATE SUSTAINABILITY INITIATIVES
As a member of the Tata family, VSNL is committed to the
Group’s philosophy of improving the quality of life in the
communities we serve. VSNL has a Corporate Social
Responsibility (CSR) Policy and is a member of the Tata
Council for Community Initiatives (TCCI). The Company
fosters an internal culture of volunteerism and contributes
to the socio-economic development of the communities
it operates in, through financial and other assistance to
various causes and organisations.
VSNL is sensitive towards environmental, ecological and
biodiversity concerns arising out of its operations. Towards
that end, VSNL has also become the first telecom service
provider in India to obtain ISO 14001 Certification.
MANAGEMENT OF BUSINESS ETHICS (MBE)
Consistent with the Group’s policy, VSNL is systematically
implementing the Tata Code of Conduct. VSNL has put in
place an organisational structure and a process to
implement and improve ethical standards and practices,
and began implementing the Tata Code of Conduct in
2003-04. VSNL conducts regular seminars, quiz
competitions, ethics awareness campaigns and workshops
to sustain the momentum and to strengthen ethical values
and practices among various stakeholders.
DIRECTORS’ RESPONSIBILITY STATEMENT
Pursuant to Section 217(2AA) of the Companies Act, 1956,
the Directors, based on the representations received from
the operating management, confirm that-
• In the preparation of the annual accounts, the
applicable accounting standards have been followed
and there are no material departures;
• They have, in the selection of the accounting policies,
consulted the statutory auditors and have applied
them consistently and made judgements and
estimates that are reasonable and prudent so as to
give a true and fair view of the state of affairs of the
Company at the end of the financial year and of the
profit of the Company for that period;
• They have taken proper and sufficient care, to the
best of their knowledge and ability, for the
maintenance of adequate accounting records in
accordance with the provisions of the Companies Act,
1956, for safeguarding the assets of the Company and
for preventing and detecting fraud and other
irregularities;
• They have prepared the annual accounts on a going
concern basis.
ACKNOWLEDGMENTS
The Directors would like to express their thanks for the
hard work and dedication of every employee. The Directors
appreciate the support of various Ministries and
departments of the Government of India and the DoT. The
Directors are also grateful to the Company’s stakeholders
and partners including its customers, shareholders, bankers,
solicitors, suppliers and foreign telecom administrations
for their support.
On behalf of the Board of Directors
Subodh Bhargava
Dated: 11 August 2006 Chairman
Registered Office :
Videsh Sanchar Bhavan
M. G. Road,
Mumbai - 400 001.
17
VIDESH SANCHAR NIGAM LIMITED
Twentieth Annual Report 2005-2006
ANNEXURE 1: MANAGEMENT DISCUSSION AND ANALYSIS
INDUSTRY ANALYSIS
The Indian telecom industry has changed significantly over
the last decade with all its segments opening to
competition. This market is now highly competitive,
complex and evolving rapidly, with numerous service
offerings of different kinds, including fixed-line, mobile,
internet, long distance and various data services. India’s
telecom market is growing rapidly and by 2010, telecom
is expected to be a Rs.1,380 billion sector, contributing
5.4% to India’s GDP.
According to the latest figures from TRAI, during 2005-06,
the mobile subscriber base increased approximately 73%,
from 52 million to over 90 million, while the fixed
subscriber base increased approximately 8% from 46
million to 50 million. During the year, the subscriber base
for internet services grew 25%, from 5.5 million to 6.94
million. Broadband subscribers exceeded 1.3 million as on
March 31, 2006. STD charges fell substantially after
announcement of new Interconnect Usage Charge (IUCs)
with effect from March 1, 2006, international private leased
circuit charges dropped by between 35-70%, and
broadband tariffs fell by 40-50%. The rapid growth in this
market, combined with falling tariffs, offers great potential
demand for various services of VSNL.
International Long Distance Voice (ILD)
The combined ILD traffic to and from India has grown from
about seven billion minutes in 2004-05 to about 10 billion
minutes in 2005-06, an increase of approximately 50%, with
a total revenue of nearly Rs.20 billion. The increase in
outgoing traffic is an effect of the dramatic increase in
mobile subscribers coupled with the decrease in ILD calling
rates. At the same time, the increased global expansion of
Indian corporates and emergence of India as a global
services center has led to an increase in incoming ILD
traffic.
National Long Distance Voice (NLD)
The increased mobile penetration has also resulted in
significant growth in the NLD traffic. The NLD traffic has
grown by over 70% from 30 billion minutes in 2004-05 to
48 billion minutes in 2005-06. The increased competition
along with regulatory initiatives has reduced the gap
between NLD and local tariffs. Further reduction in coming
years is expected to drive growth further, with NLD traffic
expected to almost double to 80 billion minutes (TRAI
forecasts) over the next year.
Enterprise Data Services
Meanwhile, the Indian corporate segment has also been
growing at a very healthy rate, with enterprise data
volumes growing almost 100%. Even coupled with the 35-
40% price drop, the industry growth in revenue terms has
been a healthy 20-30% in the past financial year. There are
two key drivers for this growth. First, the enhanced
18
capability of Indian corporates to deliver goods and
services on a global basis is opening up new customers
and geographies for this business. Second, there is
significant growth in the existing customers’ end
businesses. Banking and financial services (BFSI),
information technology (IT), and BPOs/ Call Centres are
some examples of high growth sectors.
A combination of these two factors has created a platform
for VSNL’s Enterprise Business Unit to expand the existing
business and create a new portfolio of services.
Internet and Broadband Services
Broadband in India is a developing story with strong
growth expected over the next few years. Broadband
services to residential homes emerged in early 2005.
Although the growth in broadband subscribers has been
slow in comparison to mobile, predominantly due to the
inability to demonstrate a unique value proposition to the
market other than to enterprises and a small group of
users. However, due to the recent focus of broadband
players on bundled services like the introduction of IPTV,
the market may achieve higher growth rates within a
couple of years. By the end of March 2006, the pace of
broadband deployments had already quickened and the
total number of broadband subscribers in the country
crossed the one million mark for the first quarter of 2006.
India’s entertainment industry is large, with cable revenues
alone estimated at Rs.157 billion in 2005. The right mix of
content and information could help to proliferate
broadband usage among Indian consumers in the future.
PREMATURE TERMINATION OF MONOPOLY AND
COMPENSATION
The Government of India (GoI) allowed private players into
the ILD business from April 1, 2002, terminating VSNL’s
exclusivity two years ahead of schedule, and compensated
VSNL with a package of benefits. GoI had given assurance
prior to disinvestment that GoI would consider additional
compensation if found necessary on a detailed review,
when undertaken. However, prior to the disinvestment of
VSNL in February 2002, GoI granted a dispensation as full
and final settlement of every sort of claim against
preponing of ILD de-monopolisation of VSNL by two years.
VSNL had been pursuing GoI for considering additional
compensation. Since legalities warranted the filing of a
plaint with the High Court within the stipulated time to
ensure that the claim is not barred by limitation, VSNL has
filed a claim in the Mumbai High Court.
DEMERGER OF SURPLUS LAND
Under the terms of the share purchase and shareholders’
agreements signed between the parties at the time of
privatisation, it was agreed that certain identified lands
would be demerged into a separate company. It was
further agreed that if for any reason the Company cannot
hive off or demerge the land into a separate entity,
alternative courses as stipulated in the share purchase and
shareholders’ agreement would be explored. A draft
scheme of demerger has been presented to the VSNL
Board, and the parties to the shareholders’ agreement are
currently examining the legality and feasibility of
implementing the scheme. The land identified for
demerger at different locations measures 773.13 acres, and
carries a book value (as indicated in the accounts) of Rs.1.64
million.
IMPORTANT HISTORICAL EVENTS AT VSNL
Disinvestment
VSNL ceased to be a Public Sector Undertaking (PSU) on
February 13, 2002 when the Government of India, which
owned 52.97% of VSNL’s equity, divested 25% stake to the
Tata Group as a strategic partner along with the right to
manage the Company. Following its subsequent open offer
for a further 20% of VSNL’s equity, the Tata Group is the
Company’s biggest shareholder with a holding of over 45%
as of June 30, 2006, while GoI is VSNL’s second-largest
shareholder with a 26.12% stake.
Investment in TTSL
In 2002, VSNL was entirely dependent on the public sector
incumbent access providers and other cellular and basic
service providers to route their traffic through VSNL. It
became imperative for VSNL to acquire an end-customer
base of its own. The VSNL Board had accordingly decided
to invest in Tata Teleservices Ltd. (TTSL). At the time the
investment was approved, TTSL was present in crucial
telecom circles across India that yielded over 65% of the
country’s telecom revenues. TTSL has subsequently taken
additional licences that will give it nation-wide coverage.
VSNL’s investment in TTSL now gives the Company
substantial access to end customers across the entire
country. VSNL’s total investment in TTSL’s equity as on
March 31, 2006 stood at Rs.10.11 billion (16.14%). VSNL’s
effective holding in TTSL stands at 14.14% as of March 31,
2006.
RISKS AND CONCERNS
Like all companies, VSNL is exposed to certain risks and
concerns in the course of its business:
End Customer Ownership
An important concern for the Company on its voice
business continues to be VSNL’s lack of direct access to
end customers. VSNL is dependent on cellular and basic
telecommunication service providers to route the national
long distance and international calls of their customers
through VSNL. Some of these operators are also
competitors of VSNL in the long distance and other
markets. It would be a serious disadvantage to VSNL not
to have access to a large base of customers in order to
compete for its business. VSNL has also been pursuing
implementation of Direct Customer Access either through
the long awaited Carrier Access Code (CAC, which allows
subscribers to choose their long distance provider) regime
or through services like calling cards.
Delay in Implementation of CAC Regime
The Carrier Access Code (CAC) regime was to have been
implemented in phases for different segments of the long
distance sector, with the final implementation of Carrier
Pre Selection (CPS) to be completed by December 2003.
Carrier selection gives subscribers the option to either pre-
select a long distance carrier for all ILD calls, or choose a
provider for each call by dialling a carrier access code
before making a call. Customers can then freely choose
their long distance carrier based on competitiveness and
quality, rather than the choice being made by access
operators, as is the case at present.
However, implementation of the CAC regime has been
delayed due to technical and other reasons. In view of the
intense competition and the fact that other players are
integrated service providers, early implementation of the
CAC regime is important to allow a stand-alone long
distance operator such as VSNL to develop its own
customer base. The delay in implementation of the CAC
regime is a cause of concern for VSNL. The Company hopes
that this regime, which is essential to the survival of stand-
alone ILD and NLD operators and is a fair entitlement of
subscribers seeking competitive service options, will be
implemented at the earliest.
Regulatory Environment and Tariffs
Most of VSNL’s services including ILD, NLD and internet
services are operated under licences from the DoT, and
the Company is subject to the terms and conditions
included therein. As India continues to liberalise its telecom
sector and the regulatory regime keeps pace with the
changing telecom scenario, it is possible that there may
be interpretational differences on the guidelines, licence
conditions etc. leading to the need for VSNL to defend its
position in case of any notice etc. from the regulator or
licensor.
TRAI has recommended norms for a Unified Licensing
Regime (ULR), which the DoT is considering. If
implemented, these norms may increase competitive
pressures.
The telecom environment in the country has been further
liberalized with significant changes in the NLD and ILD
Licenses. Pursuant to the Press Note No. 5 dated November
3, 2005 issued by the Department of Industrial Policy and
Promotion, Ministry of Commerce and Industry,
Government of India, the DoT vide its directives dated
December 14, 2005 conveyed certain amendments to the
ILD and NLD licenses. The foreign Direct Investment ceiling
has been enhanced from 49% to 74 % with some stringent
guidelines regarding remote access and the same has been
made applicable to all telecom service providers
irrespective of the level of foreign direct investment. This
will affect the efficient monitoring and maintenance of
international networks. The entry barriers for the telecom
licenses have also been substantially reduced by
prescribing an entry fee of Rs. 2.5 crores each for ILD and
19
VIDESH SANCHAR NIGAM LIMITED
Twentieth Annual Report 2005-2006
NLD licenses which is expected to lead to a number of
players entering the field leading to adverse effect on
Company’s margins.
The tariffs charged by telecommunication service providers
in India including VSNL are subject to TRAI regulations.
VSNL periodically renegotiates interconnect agreements
with various domestic mobile service operators and basic
telecom service providers; and settlement rates with
international carriers. The consequent revisions could have
a material effect on VSNL’s operations and financial
condition.
The grey market and the IUC regime
On January 24, 2003, the Telecom Regulatory Authority of
India (TRAI) decided to introduce the interconnection
usage charge (IUC) regime to govern inter-operator
settlements for calls passed between different networks
and implemented the system from May 1, 2003. The IUC
includes the cost of the origination/termination of a call
and an inbuilt Access Deficit Charge (ADC), which makes
up for below-cost monthly rentals and local call charges
for fixed telephone connections in rural areas.
High ADCs had encouraged grey market ILD services,
especially in the larger cities. Illegal international route
operators offer cheaper services since they do not pay ADC.
According to various market estimates these operators take
a share of as much as 30%-40% of the incoming
international long distance traffic into India. These
illegitimate operators take away the business of licensed
providers and deprive the Government of income since
licence fees are revenue based; they also pose a threat to
the security of the country since such grey calls cannot be
monitored.
During 2005-06, TRAI reduced the ADCs on incoming ILD
calls from Rs. 3.25 to Rs. 1.60 per minute and from Rs.2.50
to Rs.0.80 per minute on outgoing ILD calls, and abolished
the per minute based ADC on NLD calls of Rs.0.30 per
minute, effective March 1, 2006. However, a revenue share
based ADC of 1.5% of the AGR has been introduced
effective from March 1, 2006. The reductions may have an
impact on curbing illegal operations and increasing
volumes of legitimate carriers like VSNL.
Increased Competition
The de-regulation of the Indian telecom market exposes
the Company to increased competition:
• The Internet Service Provider (ISP) business is intensely
competitive and has a large number of players.
• ISPs are allowed to provide Internet telephony calls
overseas. Though, the quality of such service may not
be comparable to traditional ILD calls, it may be
affecting VSNL’s ILD business as also the Company’s
own Internet telephony services.
• VSNL has entered new businesses such as the national
long distance and broadband businesses, where there
are several potential and existing competitors.
Relaxation of licensing conditions for National and
***
20
International Long distance services by the
Department of Telecommunications effective January
1, 2006 is likely to intensify competition in these
sectors.
Integration of International Acquisitions
VSNL has embarked on an aggressive growth strategy in
which acquisitions play an important role. Further, a large
part of VSNL’s operations are now in international markets.
Integrating the acquisitions and managing operations in
diverse international locations would be critical to the
success of VSNL’s plans.
Economic Conditions
Downturns in the Indian, regional and global economies
could have a material adverse effect on the Company’s
short-term business and prospects. VSNL’s operations could
be affected by adverse developments in the operations of
some of its key overseas business associates.
Exchange Rate Parity
A significant portion of Company’s revenues is received in
foreign exchange. Similarly, a large portion of its costs is
incurred in foreign exchange. Hence, the parity of the rupee
to the US dollar and the SDR to the US dollar can have
significant impact on the Company’s revenues. Therefore,
the Company partially hedges its foreign exchange risk.
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
VSNL has a well-developed internal control system and
has also implemented the SAP system for accounting.
Internal control systems for the newly acquired businesses
are being reviewed and will be streamlined. The financial
powers of various executives are clearly defined in the
delegation of powers. Technical and financial operations
are controlled by state-of-the-art technology and systems.
The accounts of the Company are subjected to statutory
audit.
CAUTIONARY STATEMENT
Statements in the directors’ report and management
discussion and analysis describing the Company’s
objectives, projections, estimates and expectations may be
‘forward-looking statements’ within the meaning of
applicable securities laws and regulations. Actual results
could differ substantially or materially from those
expressed or implied. Important factors that could make a
difference to the Company’s operations include economic
conditions affecting demand/supply and price conditions
in the domestic and overseas markets in which the
Company operates, changes in government regulations,
policies, tax laws and other incidental factors. Further, the
Company retains the flexibility to respond to fast-changing
market conditions and business imperatives. Therefore, the
Company may need to change any of the plans and
projections that have been outlined in this report,
depending on market conditions.
 REPORT ON CORPORATE GOVERNANCE FOR THE YEAR 2005-06
(In accordance with clause 49 of the listing agreement with Indian stock exchanges)
Corporate governance is the system by which business
corporations are directed and controlled. The corporate
governance structure specifies the distribution of rights
and responsibilities among different participants in the
corporation, such as the board, managers, shareholders and
other stakeholders, and spells out the rules and procedures
for making decisions on corporate affairs. By doing this, it
also provides the structure through which the company
objectives are set, and the means of attaining those
objectives and monitoring performance.
1. CORPORATE GOVERNANCE PHILOSOPHY AND
PRACTICE
VSNL has evolved from a monopoly ILD player to a multi-
national corporation having its presence felt across the
globe. Its businesses are no longer confined within the
boundaries of India but are now spread across the globe
offering a wide spectrum of basic and value added services.
The challenge for VSNL for governance lies in designing a
model addressing the specific and unique needs of
geographies and yet strengthening and aligning the overall
business objectives and goals.
The Company believes that total business risk elimination
is never possible but can be minimized by consistently
developing and following the best practices of Corporate
Governance. To this end, the Company focuses on
developing and implementing higher standards of
accountability to enable optimum returns to all
stakeholders. The company is installing new state-of-the
art systems including integrated financial accounting and
budgeting systems and through a systematic process of
training and development has increased the quality of its
personnel.
Fairness in words, actions and deeds with all stakeholders
are the pillars of corporate governance philosophy of the
Company. Corporate Governance in substance rather than
form is what the Company believes in and actively
Board Meetings
Name of Director Category during the tenure
Held Attended
Directors in Office
Mr. Subodh Bhargava Independent
[Chairman : w.e.f. Non Executive 11 11
11.04.05]
Mr. N. Srinath Not Independent
Executive 11 11
Mr. Ishaat Hussain Not Independent
Non Executive 11 10
Mr. Kishore A. Chaukar Not Independent
Non Executive 11 10
implements. To ensure this, a high level Corporate
Governance Council has been formed to ensure that the
best practices of Corporate Governance are adopted.
VSNL’s operations and accounts are audited at three levels:
an internal audit; a statutory audit by an Indian accounting
firm under Indian accounting requirements and their
restatement by an internationally recognised accounting
firm according to US GAAP. The Company communicates
regularly with its shareholders through bulletins,
presentations and meetings with analysts and investors.
2. BOARD OF DIRECTORS
The Company is managed exclusively by and under the
directions of the Board. The composition of the Board is
governed by the applicable laws and regulations as well
as the Articles of Association of the Company. The powers
delegated by the Board to the Managing Director and by
the Managing Director to the sub-ordinate officers are
documented in the Delegation of Powers (DoP). The DoP
is revised periodically.
Nine out of ten directors are non-executive directors,
forming more than half of the total number of directors.
VSNL has four independent directors and one executive
director.
None of the directors hold directorships in more than the
permissible number of companies under the applicable
provisions. Similarly, none of the directors on the board’s
sub-committees hold membership of more than ten
committees of boards, nor is any director a chairman of
more than five committees of boards.
The names and categories of the directors on the board,
their attendance at board meetings during the year and
at the last annual general meeting, and the number of
directorships and committee memberships held by them
in other companies as of 31 March 2006 (with Directorships
updated as of 30 July 2006) are given below:
Attendance No. of Directorships No. of Committee Positions
at the last AGM in Public Companies held in Public Companies
(14.09.2005) Including VSNL Including VSNL
Chairman Member Chairman Member
Yes 2 10 3 5
Yes NIL 3 NIL NIL
Yes 1 11 3 6
Yes NIL 12 4 3
21
VIDESH SANCHAR NIGAM LIMITED
Twentieth Annual Report 2005-2006

Attendance No. of Directorships No. of Committee Positions

Board Meetings at the last AGM in Public Companies held in Public Companies
Name of Director Category during the tenure (14.09.2005) Including VSNL Including VSNL

Held Attended Chairman Member Chairman Member

Directors in Office
Mr. Pankaj Agrawala1 Not Independent
Non Executive 11 8 No NIL 2 NIL 3
Dr. Mukund Rajan Not Independent
[w.e.f. 06.05.05]. Non Executive 10 9 Yes NIL 3 NIL NIL

Mr. N. Parameswaran1 Not Independent

[w.e.f. 30.08.05] Non Executive 8 7 Yes NIL 2 NIL NIL

Mr. P.V. Kalyanasundaram Independent

[w.e.f. 14.09.05] Non Executive 7 6 N/A NIL NIL NIL 1
Dr. V.R.S. Sampath Independent
[w.e.f. 14.09.05] Non Executive 7 6 N/A NIL 2 NIL 1

Mr. Amal Ganguli Independent

[w.e.f. 17.07.06] Non Executive N/A N/A N/A NIL 11 3 4
Directors served during the year
Mr. R.N. Tata Not Independent
[Until 11.04.05] Non Executive 1 1 N/A 12 2 NIL 8

Mr. Rakesh Kumar1 Not Independent

[Until 10.08.05] Non Executive 3 3 N/A NIL NIL NIL NIL

Mr. Suresh Krishna Independent

[Until 21.03.06] Non Executive 10 3 No 6 3 2 3

Mr. Vivek Singhal Independent

[Until 09.09.05] Non Executive 4 1 N/A NIL 6 1 1

Dr. Ashok Jhunjhunwala Independent

[Until 09.09.05] Non Executive 4 4 N/A NIL 8 NIL 8

Mr. F.A. Vandrevala Not Independent

[Until 25.11.05] Non Executive 5 5 Yes 2 13 NIL 2

1
Nominee director of the Government of India.

Notes :
(a) None of the directors is related to any other director.
(b) None of the directors has any business relationship with the company.
(c) None of the directors received any loans and advances from the company during the year.
(d) The information as required under Annexure IA to Clause 49 is being made available to the board.
(e) The company did not have any pecuniary relationship or transactions with non-executive directors during 2005-06.
(f ) The detailed resume of each director and the details of the directors proposed to be appointed/reappointed at the
20th Annual General Meeting are published elsewhere in the Annual Report.
(g) The gap between two board meetings did not exceed four months. The dates on which the 11 board meetings were
held are as follows:
11 April 2005 9 June 2005 28 July 2005 30 August 2005
14 September 2005 7 October 2005 25 October 2005 7 December 2005
31 January 2006 1 March 2006 31 March 2006

22
3. AUDIT COMMITTEE
The audit committee consists of four members. The
Chairman of the committee is Mr. Subodh Bhargava, an
independent director, who earlier served as the Chairman
and Managing Director of Eicher Motors and has necessary
and sufficient financial and accounting background.
The other members of the committee are Mr. Pankaj
Agrawala, Government Nominee Director, Mr. P.V.
Kalyanasundaram, Independent Director and Mr. Amal
Ganguli, Independent Director. Mr. Satish Ranade, Company
Secretary and Chief Legal Officer is the audit committee’s
Secretary. Mr. Ishaat Hussain, Director (Finance), Tata Sons
Limited, who was a member of the Audit Committee till
24 October 2005, is a special invitee for Audit Committee
meetings.
The audit committee has adequate powers and detailed
terms of reference to play an effective role as required
under the provisions of the Companies Act, 1956 and
clause 49 of VSNL’s listing agreement with the stock
exchanges.
Attendance at the Audit Committee Meetings
Name of Member Audit Committee
Meetings during the tenure
Held Attended
Mr. Subodh Bhargava 6 6
3 June 2005 8 June 2005 28 July 2005
(Informal meeting)
24 October 2005 31 January 2006 1 February 2006
4. REMUNERATION COMMITTEE
a) Constitution and Terms of Reference
The Remuneration Committee consists of two members.
The Chairman of the Committee is Mr. Kishor Chaukar,
Mr. Subodh Bharagava is the other member on the
Committee. Mr. Satish Ranade, Company Secretary and
Chief Legal Officer is the Remuneration Committee’s
Convener. In January 2006, the Remuneration Committee
through a circular resolution had recommended certain
changes in the terms of appointment of the executive
director. One meeting of the Remuneration Committee
was held on 26 June 2006.
The broad terms of reference of the Remuneration
Committee are to review the performance of the Whole-
time Directors, after considering the Company’s
performance and recommend to the Board
remuneration including salary, perquisites and
commission to be paid to the Company’s Whole-time
Directors within the overall ceilings approved by the
shareholders.

Mr. Pankaj Agrawala 6 5 b) Remuneration Policy

Mr. P.V. Kalyanasundaram The non-executive Directors were not paid any
[W.e.f. 24.10.05] 3 2 remuneration till 2004-05 except payment by way of
sitting fees. For the financial year 2005-06, subject to
Mr. Amal Ganguli
[W.e.f. 17.07.06] N/A N/A approval of shareholders at the 20th Annual General
Meeting, the Company proposes to pay remuneration
Mr. Ishaat Hussain (Special
to the non-executive directors (NEDs) by way of
Invitee) [Member till
24.10.05] 3 1 commission at a rate not exceeding 1% per annum of
the profits of the Company (computed in accordance
Mr. Vivek Singhal with Section 309(5) of the Companies Act, 1956). The
[Until 09.09.05] 3 2 distribution of commission amongst the NEDs is placed
Dr. Ashok Jhunjhunwala before the Board. The commission to NEDs is proposed
[Until 09.09.05] 3 2 to be distributed broadly on the basis of their attendance
and contribution at the Board and certain Committee
At the Annual General Meeting held on September 14,
meetings as well as the time spent on operational
2005, the Chairman of the Audit Committee, Mr. Subodh
matters other than at the meetings.
Bhargava was present. During the last financial year, the
Audit Committee held five formal meetings and one The Company pays sitting fees of Rs.10,000/- (Rs.5000/-
informal meeting and not more than four months had till 1 March 2006) per meeting to the non-executive
elapsed between any two meetings. The dates of meetings directors for attending the meetings of the Board and
of the Audit Committee are as follows: Committee meetings.

23
VIDESH SANCHAR NIGAM LIMITED
Twentieth Annual Report 2005-2006

The Company pays remuneration by way of salary, d) The details of remuneration to the whole-time director
perquisites and allowances (fixed component) and during the year 2005-06 are as follows:
commission (variable component) to the whole time (Amount in Rs.)
director. Salary is paid within the range approved by the
Name Salary Perquisites & Commission*
shareholders. Annual increments, recommended by the Allowances
Remuneration Committee are approved by the Board.
Mr. N. Srinath 44,85,035 375042 25,00,000
Within the prescribed ceiling, the perquisites package is
approved by the Remuneration Committee. Commission Total 44,85,035 375042 25,00,000
is calculated with reference to net profits of the Company * Commission payable will be paid only after the date of
in a particular financial year and is determined by the the Annual General Meeting.
Board of Directors at the end of the financial year based 5. INVESTOR GRIEVANCE COMMITTEE
on the recommendations of the remuneration
committee, subject to overall ceilings stipulated in The committee consists of three members. The Chairman
Sections 198 and 309 of the Companies Act, 1956. of the Committee is Mr. Kishor A. Chaukar who is the
Specific amount payable to the whole-time director is Managing Director of Tata Industries Limited. The other
based on the performance criteria laid down by the members are Mr. Pankaj Agrawala, nominee Director of
Board which broadly takes in to account the profits the Government and Dr. V.R.S. Sampath, Independent
earned by the Company for the year. Director. Mr. Satish Ranade, Company Secretary and Chief
c) The details of commission proposed to be paid to the Legal Officer is the Investor Grievance Committee’s
non-executive directors for the year 2005-06, subject to secretary. During the last financial year, the Committee held
approval of the shareholders at the Annual General three meetings.
Meeting are as follows:
(Amount in Rs.) The details of grievances received from the shareholders
during the year and their status on 31 March 2006 is given
Name of the Director Commission Sitting Fees
below:
Mr. Subodh Bhargava
(Chairman Board/Audit) 8,23,500 1,15,000 Sr. Nature of Complaints No. of Complaints
Mr. Ishaat Hussain 2,37,900 70,000 No. Received Pending
Mr. Kishor Chaukar 3,01,950 95,000
1. SEBI/Stock Exchange
Mr. Pankaj Agrawala 2,65,350 NIL
Complaint 2 NIL
Dr. Mukund Rajan 1,64,700 50,000
Mr. N. Parameswaran 1,28,100 NIL 2. Direct/Miscellaneous/
Other Complaint 17 NIL
Mr. P.V. Kalyanasundaram 1,46,400 45,000
Dr. V.R..S. Sampath 1,37,250 55,000 TOTAL 19 NIL
Mr. R.N. Tata
This committee has been delegated the powers to approve
(Chairman Board)
the issue of Duplicate Share Certificates and approve
[Till 11 April 2005] 45,750 5,000
transfer/transmission of shares exceeding 500 shares per
Mr. Rakesh Kumar folio. The Registrar and Transfer Agents have been
[Till 10 August 2005] 54,900 NIL authorised to issue Duplicate Share Certificates and
Mr. Suresh Krishna approve transfer/transmission up to a maximum of 500
[Till 21 March 2006] 54,900 20,000 shares per folio, limited only to routine day-to-day work.
Mr. Vivek Singhal As the shares of the company are under compulsory
[Till 9 September 2005] 54,900 15,000 dematerialized trading for all investors, this delegation is
considered adequate. All the shares received for transfer
Dr. Ashok Jhunjhunwala till March 31, 2006 have been duly processed.
[Till 9 September 2005] 2,10,450 70,000
Mr. F.A. Vandrevala 6. ETHICS AND COMPLIANCE COMMITTEE
[Till 25 November 2005] 1,46,400 40,000
In accordance with the Securities and Exchange Board of
Total 27,72,450 5,80,000 India (Prohibition of Insider Trading) Regulations, 1992, as

24
amended, the Board of Directors of the Company adopted
the “VSNL Code Of Conduct For Prevention of Insider
Trading and Code of Corporate Disclosure Practices” to be
followed by “Directors”, “Designated Employees”,
“Designated Persons” and “Insiders”. The code is based on
the principle that Directors, Designated Employees,
Designated Persons and Insiders should not have undue
advantage over other shareholders, in their personal
security transactions, due to their possible advance
knowledge of Price Sensitive Information. The code,
therefore, seeks to ensure timely and adequate disclosure
of Price Sensitive Information to the investor community
by the Company to enable them to take informed
investment decisions with regard to the Company’s
securities.
In terms of the said code, an Ethics and Compliance
Committee was constituted in 2003. The present
committee consists of three members. The Chairman of
the committee is Mr. Kishor A. Chaukar, who is the
Managing Director of Tata Industries Limited, Mr. Pankaj
Agrawala, government nominee director and Dr. V.R.S.
Sampath, Independent Director are the members. Mr. Satish
Ranade, Company Secretary and Chief Legal Officer is the
convener of the Committee.
Three meetings of the committee were held during the
year 2005-06.

7. GENERAL BODY MEETINGS

The location and time of the last three general body meetings are as follows:
Meeting Date Location, Description and Type of Resolutions Voting
1 March 2006 An Extraordinary General Meeting was Both the resolutions were put to vote
held at 1500 hours at Birla Matushri Sabhagar, by show of hands and were carried
New Marine Lines, Mumbai - 400020. unanimously.
There were two resolutions, both of which were Special.

14 September 2005 The 19th Annual General Meeting was held at 1100 hours All the resolutions were put to
at Birla Matushri Sabhagar, New Marine Lines, vote by show of hands and were
Mumbai – 400020. carried unanimously.
There were Six resolutions (1 special and 5 ordinary).

2 September 2004 The 18th Annual General Meeting was held at 1100 hours All the resolutions were put to
at Birla Matushri Sabhagar, New Marine Lines, vote by show of hands and were
Mumbai - 400020. carried unanimously.
There were Six resolutions (1 special and 5 ordinary).

2 April 2004 An Extraordinary General Meeting was held at 1500 hours Both the resolutions were put
at Birla Matushri Sabhagar, New Marine Lines, to vote by show of hands and were
Mumbai - 400020. carried unanimously.
There were two resolutions, both of which were Special.

2 September 2003 The 17th Annual General Meeting was held at 1100 hours All the resolutions were put to vote
at Birla Matushri Sabhagar, New Marine Lines, by show of hands and were carried
Mumbai - 400020. unanimously.
There were ten resolutions (2 special and 8 ordinary).

8. DISCLOSURES
i) There were no significant related-party transactions
of the company with its promoters, directors or
management, their subsidiaries or relatives that may
have potential conflict with the interest of the
company at large. Note number B.20 of the Notes on
Accounts may also be referred to in this respect. No
non-compliance notice has been issued and no
penalties or strictures have been imposed on the
company by SEBI, any stock exchange or any statutory
authority on any matter related to capital markets
during the last three years.
ii) The Company has adopted a Whistle Blower Policy
and has established necessary mechanisms for

25
VIDESH SANCHAR NIGAM LIMITED
Twentieth Annual Report 2005-2006

employees to report concerns about unethical a. The Company has setup a Remuneration
behaviour. No person has been denied access to the Committee. Please see the paragraph on
Audit Committee. Remuneration Committee.
iii) SECRETARIAL AUDIT b. REGULATORY AUDIT
A qualified practicing Company Secretary carried out
Though not required under any statutory
quarterly secretarial audit to reconcile the total
obligations but in the interest of better Corporate
admitted capital with National Securities Depository
Governance and benchmarking, VSNL is
Limited (NSDL) and Central Depository Services (India)
undergoing a voluntary Regulatory Audit. The
Limited (CDSL) and the total issued and listed capital.
Audit is being carried out by M/s. Ernst and Young
The audits confirm that the total issued/paid-up
Pvt. Ltd., an external agency.
capital is in agreement with the total number of shares
in physical form and the total number of c. The Auditor’s Report on the financial statements
dematerialized shares held with NSDL and CDSL. of the Company is unqualified.
iv) The Company fulfilled the following non-mandatory
requirements:

9. DISCLOSURE REQUIRED BY CLAUSE 32 OF THE LISTING AGREEMENT

Amount of loans and advances in the nature of loans outstanding from subsidiaries during the year ended 31 March
2006
Name of the Company Outstanding Maximum Investment in Investment
as at amount shares of the in shares of
31 March, 2006 outstanding Company subsidiaries of
during the year the Company
Rupees ‘000 Rupees ‘000 No of shares No of Shares

a) Subsidiaries

(i) VSNL Broadband Ltd. - - - -

(ii) VSNL America Inc. 233,226 233,226 - *

(iii) VSNL Lanka Ltd - - - -

(iv) VSNL Singapore Pte Ltd. 2,519,256 6,479,889 - **

(v) VSNL SNOSPV Pte. Ltd - - - -

Name of the Subsidiary No of Shares

* VSNL UK Ltd 1

** VSNL Netherlands BV 16,718,000

** VSNL Bermuda Ltd 1,200,000

** VSNL Japan K.K 300

** VSNL Telecommunications (Bermuda) Ltd. 1,200,000

** VSNL HongKong Ltd 1

26
Name of the Subsidiary No of Shares
Subsidiaries of VSNL Netherlands B.V

VSNL International (US) Inc 3,000

VSNL Telecommunications(UK) Inc 6,500,002

VSNL France SAS 1,847,000

VSNL Spain Srl 2,053,006

VSNL (Portugal) Unipessoal Limitada 1,055,000

VSNL Belgium BVBA 186

VSNL(Germany) GMBH 1

VSNL International (Portugal) Instalacao e

Manutencao de Redes LDA 12,447,000

Subsidiaries of VSNL Telecommunications (Bermuda)Ltd

Teleglobe Bermuda Ltd. 1,200,000

TLGB Luxembourg Holdings S.ar.l 500

Subsidiary of VSNL Telecommunications(US) Inc.

VSNL International (Guam) Llc NA

Subsidiaries of TLGB Luxembourg Holdings S. ar.l

TLGB Netherlands Holdings B.V 18,000

Subsidiaries of Teleglobe Bermuda Ltd

VSNL International(Poland) Sp. Zo.o 1

ITXC IP Holdings S.a.r.l 500

Teleglobe International Ltd 8,416,801

Teleglobe International HongKong Ltd 10,000

VSNL International Australia Pty. Ltd 555,001

VSNL International GBRM Ltd 1,200,000

VSNL International Puerto Rico Inc 1,000

Teleglobe Asia Pte. Ltd 100,000

Teleglobe Asia Data Transport Pte. Ltd 100,000

ITXC Global Japan YK 120

Teleglobe International Luxembourg S.a.r.l 500

27
VIDESH SANCHAR NIGAM LIMITED
Twentieth Annual Report 2005-2006

Name of the Subsidiary No of Shares

ITXC Global UK Ltd. (Under liquidation) 100

ITXC (UK)Ltd. (Under liquidation) 100

ITXC Global HongKong Ltd. (Under liquidation) 1,180,000

Subsidiary of TLGB Netherlands Holdings B.V

VSNL International(ITXC) Corp. 1,000

Subsidiaries of Telelobe International Luxembourg S.a.r.l

Teleglobe International Belgium S.P.R.L 1

Teleglobe Italy S.r.l 500

Teleglobe Netherlands B.V 22,000

Subsidiaries of Teleglobe Netherlands B.V

Teleglobe Italy S.r.l 9,500

Teleglobe France International S.A.S 37,000

TLGB International Germany GmbH 1

Teleglobe Spain Communications S.L 278,939

Teleglobe International Belgium S.P.R.L 99

Teleglobe Canada ULC 402

VSNL International(Poland) Sp. Zo.o 999

VSNL International ( Nordics) AS 1,000

Subsidiary of VSNL Portugal Unipessol Limitada

VSNL International (Portugal) Instalacao e Manutencao de Redes LDA 12,447,000

Subsidiaries of VSNL International (ITXC) Corp.

Teleglobe America Inc 100

VSNL International (Global) Corp. 100

Enhanced Services Inc (Under liquidation) NA

Subsidiaries of VSNL International (Global) Corp.

ITXC Global Zagreb d.o.o (Under liquidation) 20,000

Subsidiaries of Teleglobe America Inc

VSNL International IPCO LLC NA

28
10. MEANS OF COMMUNICATION
VSNL’s quarterly results are published in the Indian Express
and Loksatta among others, and are also hosted on VSNL’s
website: www.vsnl.in. The company’s press releases, details
of significant developments and investor updates are also
made available on the website. The company generally
holds a press conference/investors’ meet after the
half-yearly results are taken on record by the board relating
to the period ending September 30th and March
31st every year.
The management discussion and analysis forms part of
the directors’ report and is included in the annual report
for the year 2005-06. Segmental information may be
referred to in Note number B.19 of the Notes on Accounts.
11. SHAREHOLDER INFORMATION
DATE AND VENUE OF THE AGM
The twentieth annual general meeting of Videsh Sanchar
Nigam Limited will be held at 1100 hours on Wednesday,
13 September 2006, at MC Ghia Hall, Bhogilal Hargovindas
Building, Second Floor, 18/20 Kaikhushru Dubash Road
Marg, Kalghoda, Mumbai - 400023.
FINANCIAL CALENDAR
Fiscal year ending : March 31, 2006
Annual General Meeting : September 13, 2006
KEY FINANCIAL REPORTING DATES FOR THE FINANCIAL
YEAR 2006-07
First quarter ending June 30, 2006 : July 29, 2006
Second quarter ending Sept 30, 2006: On or before
October 31, 2006
Third quarter ending Dec 31, 2006 : On or before
January 31, 2007
Fourth quarter ending : On or before April
March 31, 2007 30, 2007 or if
audited, on or
before
June 30, 2007.
BOOK CLOSURE DATES FOR THE PURPOSE OF DIVIDEND
VSNL’s register of members and share transfer books will
remain closed from 16 August 2006 to 22 August 2006
(both days inclusive), to determine the entitlement of
shareholders to receive the final dividend as may be
declared for the year ended March 31, 2006.
DIVIDEND PAYMENT
The dividend as recommended by the Board of Directors,
if declared at this Annual General Meeting, shall be paid
on or after Wednesday the 20 September 2006:
(i) to those shareholders whose names appear on the
Company’s Register of Members after giving effect to
all valid share transfers in physical form lodged with
the Registrar & Transfer Agents (R&T Agents) of the
Company on or before Monday, 14 August 2006.
(ii) in respect of shares held in electronic form, to those
“deemed members” whose names appear in the
statements of beneficial ownership furnished by
National Securities Depository Limited (NSDL) and
Central Depository Services (India) Limited (CDSL) as
at the end of business on Monday, 14 August 2006. In
respect of shares held in demat mode, the dividend
will be paid on the basis of beneficial ownership as
per details to be furnished by NSDL and CDSL for this
purpose.
BANK DETAILS
In order to provide protection against fraudulent
encashment of dividend warrants, members are requested
to provide, if they have not already provided, their bank
account numbers, bank account type and names and
addresses of bank branches, quoting folio numbers, to the
R&T agents (in case of physical shareholding) to enable
them to incorporate the same on the dividend warrants.
In case of dematerialised holding the bank account details
should be intimated and updated with the shareholder’s
Depository Participant.
LISTING ON STOCK EXCHANGES IN INDIA AND LISTING
FEES
The company’s shares are listed on the stock exchanges at
Mumbai (BSE) and National Stock Exchange (NSE) in India.
Annual listing fees as due to each of the above stock
exchanges for 2006-2007 have been paid.
LISTING ON STOCK EXCHANGE OUTSIDE INDIA
The Company’s ADRs are listed on the New York Stock
Exchange (NYSE) and have been traded on the NYSE since
August 15, 2000. The annual listing fee payable to the NYSE
is being paid regularly.
DEPOSITORY BANK FOR ADR HOLDERS
The Bank of New York, 101, Barclays Street, 22nd Floor West,
New York, NY 10286, Telephone: +1 (212) 815 8365,
Facsimile: +1 (212) 571 3050
Local Address : The Bank of New York, Express Towers,
12th Floor, Nariman Point, Mumbai 400 021, Telephone:
(022) 2204 4941/43, Facsimile: (022) 2204 4942.
29
VIDESH SANCHAR NIGAM LIMITED
Twentieth Annual Report 2005-2006

CUSTODIAN FOR THE DEPOSITORY IN INDIA New York Stock Exchange : VSL
ISIN No. for equity shares : INE151A01013
ICICI Bank Limited, Securities Markets Services, 1st Floor, ISIN No. for ADRs : US92659G6008
Empire Complex, 414 Senapati Bapat Marg, Lower Parel, CUSIP No. for ADRs : 92659G600
Mumbai – 400013. Telephone: 91-22-5667 2026, 5667 2030
Facsimile: 91-22-5667 2779/2740. Reuters Codes

STOCK CODE VSNL.BO (BSE)

VSNL.NS (NSE)
Bombay Stock Exchange : 500483 VSNLq.L (LSE).
National Stock Exchange : VSNL

STOCK MARKET DATA RELATING TO SHARES LISTED IN INDIA

Monthly high and low quotations and volume of shares/ADRs traded at BSE, NSE & NYSE for 2005-2006 are:

BSE Share Price NSE Share Price NYSE ADR Price in USD
Month
High Low Volume High Low Volume High Low Volume

Apr-05 218.00 180.00 1891929 208.60 194.80 5837756 10.04 7.83 1702200

May-05 215.00 196.00 1070946 209.15 206.65 3440165 9.61 8.30 820700

Jun-05 251.90 206.50 4107489 246.65 207.10 10368247 9.85 9.20 2959000

Jul-05 444.00 243.00 41461082 417.50 250.90 107345506 11.35 9.45 5012000

Aug-05 444.70 347.15 44967171 433.05 357.70 111947988 19.70 11.33 4234400

Sep-05 408.70 328.00 15851379 404.30 345.30 46120535 19.94 16.29 2223500

Oct-05 372.40 270.10 15636391 369.75 272.90 44314645 18.23 15.30 2531200

Nov-05 379.90 287.00 20765253 377.05 291.90 59428570 17.15 12.15 2649600

Dec-05 430.55 355.50 35435974 424.50 367.30 95856103 16.35 12.95 1808500

Jan-06 406.20 351.00 14028299 398.50 358.20 39864907 18.95 16.15 1963800

Feb-06 402.45 362.50 9176451 392.90 364.95 29363269 18.19 16.01 1200600

Mar-06 493.45 362.00 30940616 470.75 366.20 57258468 18.25 16.16 2672600

Total 235332980 611146159 29778100

30
 Closing Share Price Closing Share Price at BSE

0
50
100
150
200
250
300
350
400
450
500
0
50
100
150
200
250
300
350
400
450
500
1-Apr-05 1-Apr-05

13-May-05 02-May-05

10-Jun-05 08-Jun-05

08-Jul-05 07-Jul-05

05-Aug-05 08-Aug-05

Close (Rs.)
02-Sep-05 08-Sep-05

14-Oct-05 07-Oct-05

NSE Closing Share Price

11-Nov-05 10-Nov-05

09-Dec-05 09-Dec-05

06-Jan-06 09-Jan-06

Nifty Close
03-Feb-06 Close (Rs.) Sensex Close

VSNL Closing Share Price at NSE V/S Nifty Close

10-Feb-06
VSNL Closing Share Price at BSE V/S Sensex Close

03-Mar-06 02-Mar-06

31-Mar-06 31-Mar-06

0
0

500
1000
1500
2000
2500
3000
3500
4000
2000
4000
6000
8000
10000
12000

Nifty Close Sensex Closing

31
VIDESH SANCHAR NIGAM LIMITED
Twentieth Annual Report 2005-2006

VSNL Closing ADR Price at NYSE V/S NYSE Composite Index

25
8500
VSNL Closing Price at NYSE (USD)

20
8000

NYSE Composite Index

15
7500

10
7000

5
6500

0
6000
1-Nov-05
1-Sep-05

31-Mar-06
1-Feb-06
1-Aug-05

3-Oct-05

1-Mar-06
2-May-05

3-Jan-06
1-Jul-05

1-Dec-05
1-Apr-05

1-Jun-05

VSNL ADR Closing Price NYSE Composite Index

SHARE TRANSFER SYSTEM

Share transfers in physical form can be lodged with the R&T agents of VSNL. The transfers are normally processed within
15 days from the date of receipt if the documents are complete in all respects. The Investor Grievances Committee is
empowered to approve the share transfers. However, in the interests of shareholder friendliness, the R&T Agents have
been empowered to approve the share transfers up to 500 shares per folio per transfer.
DISTRIBUTION OF SHAREHOLDING

Number of Shareholders
Number of ordinary shares held
31.03.2006 31.03.2005

1 to 500 51536 59450

501 to 1000 1295 1751

1001 to 10000 1624 2154

Over 10000 183 115

Total 54638 63470

Dematerialisation of Shares and Liquidity

Approx 99.9% of the company’s share capital available in the market is dematerialised as on March 31, 2006. The company’s
shares are regularly traded on the Bombay Stock Exchange Limited and the National Stock Exchange, as is evident from
the table containing stock market data.

32
CATEGORIES OF SHAREHOLDERS AS OF 31 MARCH

Category Number of Voting Strength Number of Shares Held

Shareholders (Percentage)

2006 2005 2006 2005 2006 2005

PROMOTERS

Tata Group

- Panatone Finvest Limited 2 2 40.61 45.00 115738857 128250000

- Tata Sons Limited 2 2 3.64 1.58 10360497 4494497

- The Tata Power Company Limited 1 0 0.90 0 2575837 0

- The Tata Iron & Steel Company

Limited 0 0 0.00 0 0 0

- Tata Industries Limited 0 0 0.00 0 0 0

Central Government 1 1 26.12 26.12 74446885 74446885

NON-PROMOTERS

Indian Public Financial Institutions 43 47 9.36 9.13 26686978 26010736

Indian nationalised banks 12 9 0.09 0.16 248448 466485

Foreign Financial Institutions 88 34 9.66 2.35 27528395 6696329

Foreign companies (shares held

by The Bank of New York as
depository for ADRs) 2 2 5.99 11.25 17081284 32071857

Non-resident individuals /
Overseas Corporate Bodies 446 393 0.05 0.06 144635 178508

Other Indian Bodies Corporate 1730 1420 0.88 0.74 2494521 2101892

Indian Public 52310 61559 2.70 3.61 7691428 10280576

In transit demat shares 1 1 0.00 0.00 2235 2235

Total 54638 63470 100 100 285000000 285000000

33
VIDESH SANCHAR NIGAM LIMITED
Twentieth Annual Report 2005-2006

Outstanding ADRs
8540642 ADRs (each representing two ordinary share of the company) are outstanding as of March 31, 2006. In respect of
these ADRs, the option to convert into shares is alive.
SHARE CAPITAL HISTORY
Details of share capital history since incorporation is as follows:

Dates Particulars of Issue Number of Total Number Nominal Value

Shares of Shares of Shares (Rs.)
19.3.86 Allotted as Purchase consideration for assets &
liabilities of OCS 126 126 126,000

1.4.86 Allotted as Purchase consideration for assets &

liabilities of OC +599,874 600,000 600,000,000
March’91 Shares of Rs.1000/- each subdivided into
shares of Rs.10/- each NIL 60,000,000 600,000,000

06.02.92 Bonus of 1:3 issued to Government of India. +20,000,000 80,000,000 800,000,000

Jan-Feb 92 12 million shares disinvested in favour of Indian

Financial Institutions by GOI @ Rs.123/- per share NIL 80,000,000 800,000,000

1994-95 2,382,529 Shares transferred to disinvested parties

as bonus shares NIL 80,000,000 800,000,000

27.03.97 VSNL raised its share capital by way of GDR Issue,

and also GOI Divested 39 lakh shares in GDR
markets @ US$13.93 per GDR equivalent to
Rs.1000 per share. +12,165,000 92,165,000 921,650,000

04.04.97 VSNL raised its capital by way of GDR Issue Green

Shoe option @ US$13.93 per GDR equivalent
Rs.1000 per share. +2,835,000 95,000,000 950,000,000

Feb. 1999 10million shares divested by GOI in GDR markets

@ US$9.25 per GDR equivalent to Rs.786.25
per share. NIL 95,000,000 950,000,000

May 1999 396,991 shares Divested by GOI by way of offer of

shares to employees of VSNL @ Rs.294 per share
locked in for a period of 3 years. NIL 95,000,000 950,000,000

Sept’99 10 lakh shares Divested by GOI in domestic

markets @ Rs.750 per share. NIL 95,000,000 950,000,000

15 August Listing of ADRs on New York Stock Exchange NIL 95,000,000 950,000,000
2000
24.11.2000 Bonus shares in the ratio of 2:1. +190,000,000 285,000,000 2,850,000,000
27.9.2001 VSNL declares dividend @ 500% i.e. Rs.50/-
per share at 15 AGM. NIL 285,000,000 2,850,000,000
January VSNL pays special interim Dividend of 750%
2002 i.e. Rs.75/- per share NIL 285,000,000 2,850,000,000

34
 Dates Particulars of Issue Number of Total Number Nominal Value
Shares of Shares of Shares (Rs.)
13.02.2002 25% of VSNL Stake transferred to Tata Group’s
investment vehicle Panatone Finvest Ltd. Govt
holdings reduced to 27.97% from 52.97%. VSNL
ceases to be a Government of India Enterprise NIL 285,000,000 2,850,000,000

21.02.2002 5264555 shares Divested by GOI by way of offer

of shares to employees of VSNL @ Rs.47.85 per
share locked in for a period of 1 year. NIL 285,000,000 2,850,000,000
10.04.02 Open Offer by Panatone Finvest Limited in
accordance with SEBI guidelines to acquire upto
57 million shares @ Rs.202/- per share NIL 285,000,000 2,850,000,000
08.06.02 Open offer complete with Panatone holding
total of 128249910 shares including 57 million
shares as above. NIL 285,000,000 2,850,000,000

Locations of Other Offices

Regional Offices : Mumbai, Chennai, Kolkata and New Delhi.
Branches : Ambattur, Arvi, Bangalore, Bhubaneswar, Chandigarh, Coimbatore, Dehradun, Ernakulam, Gandhinagar, Goa,
Guwahati, Hyderabad, Indore, Jaipur, Jalandhar, Kanpur, Patna, Pondicherry, Pune, Thiruvananthapuram.
Address for Correspondence
Registered Office Corporate Office
Videsh Sanchar Bhavan (VSB) Lokmanya Videsh Sanchar Bhavan (LVSB)
Mahatma Gandhi Road, Kashinath Dhuru Marg
Mumbai - 400 001. Prabhadevi Mumbai – 400 028.
Tel : +91 (22) 6657 8765 Tel : +91 (22) 6657 8765
Fax : +91 (22) 6639 5162 Fax : +91 (22) 6639 5162
Email : help@vsnl.com Email : help@vsnl.com
Website : www.vsnl.in Website : www.vsnl.in
Compliance Officer
Mr. Satish Ranade
Company Secretary & Chief Legal Officer Any shareholder complaints/queries may be addressed
Lokmanya Videsh Sanchar Bhavan to:
Kashinath Dhuru Marg, Prabhadevi, Registrar and Transfer Agents
Mumbai - 400 028. M/s. Sharepro Services (India) Pvt. Ltd.
Tel : +91 (22) 6657 8765 Unit : Videsh Sanchar Nigam Limited
Fax : +91 (22) 6659 1962 Satam Estate, 3rd Floor,
Email : satish.ranade@vsnl.co.in Above Bank of Baroda,
Chakala, Andheri (East),
Any queries relating to financial statements of the
Mumbai - 400 099.
Company may be addressed to:
Tel : +91 (22) 2821 5168
Investor Relations Cell
Fax : +91 (22) 2837 5646
Videsh Sanchar Nigam Limited
E-mail : sharepro@vsnl.com
Lokmanya Videsh Sanchar Bhavan
Kashinath Dhuru Marg, Opposite Kirti College,
Prabhadevi, Mumbai - 400 028.
Tel : +91 (22) 66578765
Fax: +91 (22) 66395162
Email: investor.relations@vsnl.co.in

35
VIDESH SANCHAR NIGAM LIMITED
Twentieth Annual Report 2005-2006

DECLARATION REGARDING COMPLIANCE BY BOARD MEMBERS

AND SENIOR MANAGEMENT PERSONNEL WITH THE
COMPANY’S CODE OF CONDUCT

This is to confirm that the Company has adopted a Code of Conduct for its Board Members and senior management of the
Company.

I confirm that the Company has in respect of the financial year ended March 31, 2006, received from the senior management
team of the Company and the Members of the Board a declaration of compliance with the Code of Conduct as applicable to
them.

Place: Mumbai N. Srinath

Date: 27 July 2006 Executive Director

CHIEF EXECUTIVE OFFICER (CEO) AND CHIEF FINANCIAL OFFICER (CFO) CERTIFICATION

17 July 2006

As required under Clause 49(V) of the Listing Agreement with Indian Stock Exchanges, the under signed hereby confirm the
following:

a) We have reviewed financial statements and the cash flow statement for the year and that to the best of our knowledge
and belief :

i) these statements do not contain any materially untrue statement or omit any material fact or contain statements
that might be misleading;
ii) these statements together present a true and fair view of the company’s affairs and are in compliance with existing
accounting standards, applicable laws and regulations.

b) There are, to the best of our knowledge and belief, no transactions entered into by the company during the year which
are fraudulent, illegal or violative of the company’s code of conduct.

c) We accept responsibility for establishing and maintaining internal controls for financial reporting and that we have
evaluated the effectiveness of internal control systems of the company pertaining to financial reporting and have
disclosed to the auditors and the Audit Committee, deficiencies in the design or operation of such internal controls, if
any, of which we are aware and the steps we have taken or propose to take to rectify these deficiencies.

d) We have indicated to the auditors and the Audit committee the following:

i) significant changes in internal control over financial reporting during the year, if any;
ii) significant changes in accounting policies during the year and that the same have been disclosed in the notes to
the financial statements, if any; and
iii) There have been no instances of significant fraud of which we have become aware.

Rajiv Dhar N. Srinath

(Chief Financial Officer) (Executive Director)

36
 AUDITORS’ CERTIFICATE ON COMPLIANCE WITH THE CONDITIONS OF
CORPORATE GOVERNANCE UNDER CLAUSE 49 OF THE LISTING AGREEMENTS
To the Members of
VIDESH SANCHAR NIGAM LIMITED
We have examined the compliance of conditions of corporate governance by VIDESH SANCHAR NIGAM LIMITED (“the
Company”), for the year ended on 31 March, 2006, as stipulated in Clause 49 of the Listing Agreement of the said
Company with stock exchanges.
The compliance of conditions of Corporate Governance is the responsibility of the management. Our examination was
been limited to a review of the procedures and implementation thereof, adopted by the Company for ensuring compli-
ance with the conditions of corporate governance. It is neither an audit nor an expression of opinion on the financial
statements of the Company.
In our opinion and to the best of our information and according to the explanations given to us and the representations
made by the Directors and the Management, we certify that the Company has complied with the conditions of corporate
governance as stipulated in the above mentioned Listing Agreement.
We further state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency
or effectiveness with which the management has conducted the affairs of the Company.
For S. B. BILLIMORIA & CO.
Chartered Accountants
N VENKATRAM
Partner
Membership No: 71387
Mumbai: 11 August, 2006

37
VIDESH SANCHAR NIGAM LIMITED
Twentieth Annual Report 2005-2006

FINANCIAL RATIOS
2001-2002 2002-2003 2003-2004 2004-2005 2005-2006

Profitability ratios
EBIDTA Margin 22.85 25.13 16.29 23.28 23.16

Cash Profit Margin 21.62 19.26 16.30 29.33 20.92

Net Profit Margin 19.79 16.21 11.20 22.18 11.96

Return on Average Capital Employed 25.15 15.29 9.00 19.73 11.71

Return on Net Worth 24.20 14.73 7.05 13.88 8.14

Total Expenditure/Total Income 70.83 73.93 83.62 81.45 81.19
Figures are in %
BUSINESS CHARCTERISTICS
Debt to Equity Ratio 0.11 0.06 0.01 - 0.02

Tax rate (%) 32.14 37.81 30.48 28.24 30.17

Revenue to Capital Ratio 1.21 0.77 0.64 0.59 0.64
Income/Debtors Ratio 4.78 5.76 7.19 5.42 5.13

Income/Avg Assets Ratio 2.59 1.56 1.12 1.19 1.04

Net Working Capital as part of TCE % 66.00 61.00 37.00 39.00 15.81
Current Ratio 2.90 3.37 1.77 1.99 1.32

Quick Ratio 2.90 3.37 1.77 1.99 1.32

Cash and Equivalents/Total Assets Ratio 42.96 37.89 19.99 24.18 4.12

Depreciation/Gross Block % 4.60 4.46 7.31 7.67 8.77

GROWTH(% OVER PRECEDING YEARS)

Growth in Turnover (10.72) (32.33) (29.95) 1.17 17.57

Growth in FE Earnings (14.16) (31.79) (51.45) 41.06 (11.08)

Growth in PBIDT (excl other income) (15.25) (29.81) (54.81) 49.22 13.88
Growth in PAT (20.88) (44.57) (51.59) 100.28 (36.60)
Growth in Cash Profit (19.07) (39.74) (40.72) 82.09 (16.14)

PER SHARE DATA

Earnings (Rs.) 49.38 27.37 13.25 26.54 16.83

Dividend % 875.00 85.00 45.00 60.00 45.00

Book Value (Rs.) 176.98 194.75 181.30 200.98 212.67

P/E (as of Year End) 3.79 2.67 15.46 7.05 27.38

38
 AUDITORS’ REPORT
TO THE MEMBERS OF VIDESH SANCHAR NIGAM LIMITED
1. We have audited the attached balance sheet of
VIDESH SANCHAR NIGAM LIMITED as at 31 March,
2006, and also the profit and loss account and the
cash flow statement for the year ended on that date
both annexed thereto. These financial statements are
the responsibility of the Company’s Management. Our
responsibility is to express an opinion on these
financial statements based on our audit.
2. We conducted our audit in accordance with auditing
standards generally accepted in India. Those standards
require that we plan and perform the audit to obtain
reasonable assurance about whether the financial
statements are free of material misstatement. An audit
includes examining, on a test basis, evidence
supporting the amounts and disclosures in the
financial statements. An audit also includes assessing
the accounting principles used and significant
estimates made by the management, as well as
evaluating the overall financial statement
presentation. We believe that our audit provides a
reasonable basis for our opinion.
3. As required by the Companies (Auditor’s Report)
Order, 2003 issued by the Central Government of India
in terms of sub-section (4A) of Section 227 of the
Companies Act, 1956, we enclose in the Annexure a
statement on the matters specified in paragraphs 4
and 5 of the said Order to the extent applicable.
4. Further to our comments in the Annexure referred to
in paragraph 3 above, we report that:
(i) we have obtained all the information and
explanations, which to the best of our knowledge
and belief were necessary for the purpose of our
audit;
(ii) in our opinion, proper books of account as
required by law have been kept by the Company
so far as appears from our examination of those
books;
(iii) the balance sheet, profit and loss account and
cash flow statement dealt with by this report are
in agreement with the books of account;
(iv) in our opinion, the balance sheet, profit and loss
account and cash flow statement dealt with by
this report comply with the accounting standards
referred to in sub-section (3C) of Section 211 of
the Companies Act, 1956;
(v) on the basis of written representations received
from the directors, as on 31 March, 2006, and
taken on record by the Board of Directors, we
report that none of the directors is disqualified
as on 31 March, 2006 from being appointed as
a director in terms of clause (g) of sub-section
(1) of Section 274 of the Companies Act, 1956;
and
(vi) in our opinion and to the best of our information
and according to the explanations given to us,
the said accounts give the information required
by the Companies Act, 1956, in the manner so
required and give a true and fair view in
conformity with the accounting principles
generally accepted in India:
(a) in the case of the balance sheet, of the state
of affairs of the Company as at 31 March,
2006;
(b) in the case of the profit and loss account, of
the profit for the year ended on that date;
and
(c) in the case of the cash flow statement, of
the cash flows for the year ended on that
date.
For S. B. BILLIMORIA & Co.
Chartered Accountants
N VENKATRAM
Partner
Membership No: 71387
Mumbai, 26 June, 2006
39
VIDESH SANCHAR NIGAM LIMITED
Twentieth Annual Report 2005-2006
ANNEXURE TO THE AUDITORS’ REPORT
(Referred to in paragraph 3 of our report of even date)
(i) (a) The Company has maintained proper records
showing full particulars including quantitative
details and situation of fixed assets.
(b) As explained to us, physical verification of a
major portion of fixed assets as at 31 March,
2006 was conducted by the Management
during the year. In our opinion, the frequency
of physical verification is reasonable. Having
regard to the size of the operations of the
Company and on the basis of explanations
received, in our opinion, the net differences
found on physical verification were not
significant.
(ii) (a) As explained to us, the stocks of stores and
spares have been verified during the year. In
our opinion, the frequency of verification is
reasonable.
(b) In our opinion and according to the information
and explanations given to us, the procedures
of physical verification of stocks followed by the
Management are reasonable and adequate in
relation to the size of the Company and the
nature of its business.
(c) In our opinion and according to the information
and explanations given to us, the Company is
maintaining proper records of inventory. The
discrepancies noticed on verification between
the physical stocks and the book records were
not material having regard to the size of the
operations of the Company.
(iii) The Company has not taken or granted any loans
during the year to parties covered in the register
maintained under Section 301 of the Companies Act,
1956.
(iv) In our opinion and according to the information
and explanations given to us, there is adequate
internal control system commensurate with the
size of the Company and the nature of its business
for the purchase of inventory and fixed assets and
for rendering of services. During the course of our
audit, we have not observed any major weakness
in the internal controls in relation to purchase of
inventor y, fixed assets and for rendering of
services.
40
(v) (a) To the best of our knowledge and belief and
according to the information and explanations
given to us, we are of the opinion that the
transactions that need to be entered into the
register maintained under Section 301 of the
Companies Act, 1956 have been so entered.
(b) In our opinion and having regard to our
comments in paragraph (iv) above, and
according to the information and explanations
given to us, transactions made in pursuance of
contracts or arrangements entered in the
register maintained under Section 301 of the
Companies Act, 1956 and exceeding the value
of Rupees five lakhs in respect of any party
during the year have been made at prices which
are reasonable having regard to prevailing
market prices at the relevant time, where such
market prices are available.
(vi) In our opinion and according to the information and
explanations given to us, the Company has not
accepted deposits from the public to which the
provisions of Section 58A, 58AA or any other relevant
provisions of the Companies Act, 1956 are applicable
during the period covered by our audit report.
(vii) In our opinion, the Company has an internal audit
system commensurate with the size and nature of
its business.
(viii) We have broadly reviewed the books of account and
records maintained by the Company relating to
telecommunication activities pursuant to the Rules
made by the Central Government for the
maintenance of cost records under Section 209 (1)
(d) of the Companies Act, 1956 and, are of the
opinion that prima facie, the prescribed accounts and
records have been made and maintained. We have
not, however, made a detailed examination of the
records with a view to determining whether they
are accurate or complete.
(ix) (a) According to the information and explanations
given to us, the Company is generally regular
in depositing with appropriate authorities
undisputed statutory dues including provident
fund, investor education and protection fund,
income tax, sales tax, wealth tax, service tax,
customs duty, excise duty, cess and other
 material statutory dues applicable to it. The
Company has received exemption from the
operation of Employees’ State Insurance Act,
1948.
(b) According to the information and explanations
given to us, no undisputed amounts payable in
respect of income tax, wealth tax, sales tax,
service tax, customs duty, excise duty and cess
were in arrears, as at 31 March, 2006 for a period
of more than six months from the date they
became payable.
(c) According to the information and explanations
given to us, details of dues of sales tax, income
tax, excise duty and service tax which have not
been deposited on account of any dispute are
given below:
Particulars Period to which Forum where
the amount relates the dispute is
pending
Sales Tax 1989-90, 1996-97, Tribunal
1997-98, 1998-99,
1999-00, 2000-01,
2001-02, 2003-04
Sales Tax 2001-02, 2002-03 Asst. Commissioner
Sales Tax 2001-02, 2002-03, High Court
2003-04, 2004-05
TDS 2002-03, 2003-04 Commissioner
Entry Tax 2002-03, 2004-05 High Court
(x) The Company does not have accumulated losses.
The Company has not incurred cash losses during
the financial year covered by our audit and the
immediately preceding financial year.
(xi) In our opinion and according to the information and
explanations given to us, the Company has not
defaulted in repayment of dues to a financial
institution, bank or debenture holder.
(xii) The Company has not granted any loans and
advances on the basis of security by way of pledge
of shares, debentures and other securities during
the year. Accordingly, the provisions of clause 4 (xii)
of the Companies (Auditor’s Report) Order, 2003 are
not applicable to the Company.
(xiii) In our opinion, the Company is not a chit fund or a
nidhi/mutual benefit fund/society. Accordingly, the
provisions of clause 4 (xiii) of the Companies
(Auditor’s Report) Order, 2003 are not applicable to
the Company.
(xiv) In our opinion and according to the information and
explanations given to us, the Company is not dealing
in or trading in shares, securities, debentures and
other investments. Accordingly, the provisions of
clause 4 (xiv) of the Companies (Auditor’s Report)
Order, 2003 are not applicable to the Company.
(xv) In our opinion and according to the information and
explanations given to us, the terms and conditions
on which the Company has given guarantee for
loans taken by others from banks or financial
institutions are not prejudicial to the interest of the
Company.
(xvi) In our opinion and according to the information
and explanations given to us, no term loans have
been raised during the financial year covered by
our audit.
(xvii) In our opinion and according to the information and
explanations given to us, and on an overall
Amount examination of the balance sheet of the Company,
in Rs. ‘000
we report that no funds raised on short-term basis
100,385 have been used for long-term investment.
(xviii) According to the information and explanations given
to us, the Company has not made any preferential
10,705 allotment of shares to parties and companies
14,689 covered in the register maintained under Section
301 of the Companies Act, 1956.
1,038
(xix) In our opinion and according to the information
59,392 and explanations given to us, the Company has
not issued any secured debentures during the
period covered by our report. Accordingly, the
provisions of clause 4 (xix) of the Companies
(Auditor’s Report) Order, 2003 are not applicable
to the Company.
(xx) During the period covered by our audit report, the
Company has not raised any money by public issues.
(xxi) To the best of our knowledge and belief and
according to the information and explanations
given to us, no fraud on or by the Company has
been noticed or reported during the course of our
audit.
For S. B. BILLIMORIA & Co.
Chartered Accountants
N VENKATRAM
Partner
Membership No: 71387
Mumbai, 26 June, 2006
41
VIDESH SANCHAR NIGAM LIMITED
Twentieth Annual Report 2005-2006

BALANCE SHEET AS AT 31 MARCH, 2006

As at
Schedule 31 March, 2005
Rupees’000 Rupees’000
FUNDS EMPLOYED:
1 SHARE CAPITAL 1 2,850,000 2,850,000
2 RESERVES AND SURPLUS 2 57,761,671 54,430,468
3 TOTAL SHAREHOLDERS’ FUNDS 60,611,671 57,280,468
4 UNSECURED LOANS 3 982,501 —
5 DEFERRED TAX LIABILITY (NET) 750,926 996,796
(Refer Note B15, Schedule 20)
62,345,098 58,277,264
APPLICATION OF FUNDS:
6 FIXED ASSETS 4
(a) Gross Block 40,996,363 31,826,824
(b) Less: Accumulated Depreciation/Amortisation 10,910,817 8,356,542
(c) Net Block 30,085,546 23,470,282
(d) Capital work-in-progress 1,478,094 5,131,681
31,563,640 28,601,963
7 INVESTMENTS 5 24,993,393 12,005,839
8 A. CURRENT ASSETS
(a) Inventories 6 38,019 19,651
(b) Sundry Debtors 7 7,375,710 5,140,573
(c) Cash and Bank Balances 8 2,568,815 14,091,243
(d) Other Current Assets 9 983,025 752,809
10,965,569 20,004,276
B. LOANS AND ADVANCES 10 13,063,532 14,892,865
24,029,101 34,897,141
9 Less: CURRENT LIABILITIES AND
PROVISIONS
(A) Current Liabilities 11 15,674,824 14,535,221
(B) Provisions 12 2,566,212 2,692,458
18,241,036 17,227,679
10 NET CURRENT ASSETS [(8) less (9)] 5,788,065 17,669,462
11 TOTAL ASSETS (NET) 62,345,098 58,277,264
SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS 20
As per our report attached For and on behalf of the Board
For S.B. BILLIMORIA & CO.
Chartered Accountants

N. VENKATRAM SUBODH BHARGAVA N. SRINATH

Partner Chairman Executive Director

RAJIV DHAR SATISH RANADE

Chief Financial Officer Company Secretary & Chief Legal Officer
MUMBAI MUMBAI
DATED: 26 June, 2006 DATED: 26 June, 2006

42
 PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 MARCH, 2006
Schedule Year ended
31 March, 2005
Rupees’000 Rupees’000
INCOME:
1 REVENUES FROM TELECOMMUNICATION SERVICES 13 37,809,525 33,030,391
2 OTHER INCOME 14 1,334,228 519,873
3 INTEREST INCOME 15 389,302 554,938
4 INTEREST ON INCOME TAX REFUNDS 564,218 —
5 TOTAL INCOME 40,097,273 34,105,202
EXPENDITURE:
6 SALARIES AND RELATED COSTS 16 2,090,591 1,412,808
7 NETWORK COSTS 17 20,958,674 20,030,893
8 OPERATING AND OTHER EXPENSES 18 6,001,739 3,895,660
9 INTEREST EXPENSE 18,027 779
10 DEPRECIATION AND AMORTISATION 4 3,595,572 2,441,535
Less: TRANSFER FROM CAPITAL RESERVE (1,846) (1,859)
11 PRIOR PERIOD ADJUSTMENTS (NET) 19 (109,004) —
12 TOTAL EXPENDITURE 32,553,753 27,779,816
PROFIT BEFORE TAXES AND EXCEPTIONAL ITEMS 7,543,520 6,325,386
13 EXCEPTIONAL ITEMS:
(a) Profit from sale of long term investment, net of licence fee — 4,687,303
(b) Provision for recoverable pension obligation
(Refer Note B6, Schedule 20) (64,220) (472,866)
(c) Fixed Assets written off
(Refer Note B8, Schedule 20) (612,127) —
PROFIT BEFORE TAXES 6,867,173 10,539,823
14 TAXES
(a) CURRENT TAX (2,275,260) (2,050,519)
(b) DEFERRED TAX 245,870 (925,630)
(c) FRINGE BENEFIT TAX (42,363) —
PROFIT AFTER TAXES 4,795,420 7,563,674
15 BALANCE BROUGHT FORWARD FROM PREVIOUS YEAR 11,859,083 7,004,890
AMOUNT AVAILABLE FOR APPROPRIATIONS 16,654,503 14,568,564
16 APPROPRIATIONS :
(a) PROPOSED DIVIDEND (Refer Note B3, Schedule 20) 1,282,500 1,710,000
(b) TAX ON DIVIDEND 179,871 243,114
(c) GENERAL RESERVE 479,542 756,367
BALANCE CARRIED TO BALANCE SHEET 14,712,590 11,859,083
EARNINGS PER SHARE (EPS)
17 Basic/Diluted earnings per share, before exceptional items (Rs.) 18.40 14.34
(Refer Note B18, Schedule 20)
18 Basic/Diluted earnings per share, including exceptional items (Rs.) 16.83 26.54
(Refer Note B18, Schedule 20)
SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS 20
As per our report attached For and on behalf of the Board
For S.B. BILLIMORIA & CO.
Chartered Accountants

N. VENKATRAM SUBODH BHARGAVA N. SRINATH

Partner Chairman Executive Director

RAJIV DHAR SATISH RANADE

Chief Financial Officer Company Secretary & Chief Legal Officer
MUMBAI MUMBAI
DATED: 26 June, 2006 DATED: 26 June, 2006

43
VIDESH SANCHAR NIGAM LIMITED
Twentieth Annual Report 2005-2006

CASH FLOW STATEMENT FOR THE YEAR ENDED 31 MARCH, 2006

Year ended
31 March, 2005
(Rupees in ‘000) (Rupees in ‘000)
1 CASH FLOWS FROM OPERATING ACTIVITIES
PROFIT BEFORE TAX AND EXCEPTIONAL ITEMS 7,543,520 6,325,386
Adjustments for:
Depreciation 3,595,572 2,441,535
Transfer from capital reserve (1,846) (1,859)
Loss/(Profit) on sale of fixed assets 21,131 (11,111)
Interest income (389,302) (554,938)
Interest expense 18,027 366
Fixed assets written down - 32,547
Interest on income tax refunds (564,218) -
Dividend income/profit on sale of current investments (483,069) (287,445)
Exchange difference on cash and cash equivalents 886 (4,673)
Valuation loss on current investments - 149
Dividend income from long-term investments - (6,331)
OPERATING PROFIT BEFORE WORKING CAPITAL CHANGES 9,740,701 7,933,626
Inventories (18,368) 4,440
Sundry debtors (2,231,725) (1,634,425)
Other current assets (360,068) 121,419
Loans and advances (113,156) (25,059)
Current liabilities and provisions 2,290,637 589,198
Cash generated from operations before tax 9,308,021 6,989,199
Income taxes refunds / (paid ) 265,563 (3,756,751)
Interest on income tax refunds 564,218 -
NET CASH FROM OPERATING ACTIVITIES 10,137,802 3,232,448
2 CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (7,969,579) (10,605,756)
Purchase of long-term investments (1,755,180) (2,354,000)
Investments in preference share capital of subsidiaries (1,083,052) -
Investments in equity share capital of subsidiaries (2,037,776) (202,880)
(Purchase)/Sale of current investments (net of mutual funds dividend re-invested) (net) (6,142,630) 8,570,632
Payment made for acquisition of Seven Star Dot Com business (Refer note 3, Schedule 11) (30,483)
Proceeds from sale of fixed assets 7,023 733,930
Proceeds from sale of long-term investment ( net of licence fee ) - 7,789,383
Proceeds from liquidation of subsidiaries - 221
Sale of investments in subsidiary 525 -
Advances paid for equity investments in subsidiaries - (226,237)
Loans to subsidiaries (net) (2,175,146) (1,881,735)
Dividend income on long term investments - 6,331
Dividend income on current investments 44,264 56,850
Fixed deposits (net) 11,750,682 (1,702,391)
Interest received 449,417 580,089
NET CASH FROM / (USED IN) INVESTING ACTIVITIES (8,941,935) 764,437
3 CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from unsecured loan (net) 982,501 -
Repayment of unsecured loans (net) - (630,000)
Dividends paid including dividend tax (1,949,693) (1,450,549)
Interest paid (5,072) (366)
CASH FLOW FROM / (USED IN) FINANCING ACTIVITIES (972,264) (2,080,915)
NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS 223,603 1,915,970
CASH AND CASH EQUIVALENTS AS AT 1 APRIL, 2005 2,222,581 301,938
(Refer note B14, Schedule 20)
Exchange difference on cash and cash equivalents (886) 4,673
CASH AND CASH EQUIVALENTS AS AT 31 MARCH, 2006 2,445,298 2,222,581
(Refer note B14, Schedule 20)
Notes :
1. Figures in brackets represent outflows.
2. Advances paid for equity investments in VSNL Singapore Pte.Ltd. and VSNL Lanka Ltd. of Rs.226,237 thousands have been converted into equity
during the year ended 31 March,2006.
3. Loans to Subsidiaries of Rs.1,304,400 thousands have been converted into equity during the year ended 31 March,2006.
As per our report attached For and on behalf of the Board
For S.B. BILLIMORIA & CO.
Chartered Accountants

N. VENKATRAM SUBODH BHARGAVA N. SRINATH

Partner Chairman Executive Director

RAJIV DHAR SATISH RANADE

Chief Financial Officer Company Secretary & Chief Legal Officer
MUMBAI MUMBAI
DATED: 26 June, 2006 DATED: 26 June, 2006

44
 SCHEDULES FORMING PART OF THE BALANCE SHEET
SCHEDULE - 1 As at As at
31 March, 2006 31 March, 2005
SHARE CAPITAL Rupees ‘000 Rupees ‘000
AUTHORISED
300,000,000 (2005:300,000,000) Equity Shares of Rs.10 each 3,000,000 3,000,000

ISSUED, SUBSCRIBED AND PAID UP

285,000,000 (2005: 285,000,000) Equity Shares of Rs.10 each, fully paid-up 2,850,000 2,850,000

Notes:
1) 60,000,000 (2005: 60,000,000) shares have been allotted as fully
paid up, pursuant to the contract without payment being received
in cash
2) 210,000,000 (2005: 210,000,000) shares have been allotted as fully paid
bonus shares by capitalisation of General Reserve
3) 15,000,000 (2005:15,000,000) shares are allotted as fully paid up by
way of Euro issue represented by 30,000,000 American Depository
Receipts (ADRs)

SCHEDULE - 2
RESERVES AND SURPLUS
(a) CAPITAL RESERVE (Refer Note B2, Schedule 20)
Balance at the beginning of the year 2,059,898 2,061,757
Less : Transferred to profit and loss account (1,846) (1,859)
2,058,052 2,059,898
(b) Securities Premium Account
Balance at the beginning of the year 8,348,834 8,348,834
8,348,834 8,348,834
(c) General Reserve
Balance at the beginning of the year 32,162,653 31,406,286
Add: Transferred from profit and loss account 479,542 756,367
32,642,195 32,162,653
(d) PROFIT AND LOSS ACCOUNT
Balance carried forward 14,712,590 11,859,083
57,761,671 54,430,468

SCHEDULE - 3
UNSECURED LOANS
Short Term Foreign Currency Loans From Banks 982,501 —
982,501 —

45
 SCHEDULES FORMING PART OF THE BALANCE SHEET

46
SCHEDULE - 4 FIXED ASSETS (Rupees ‘000)
SL. FIXED ASSETS GROSS BLOCK ACCUMULATED DEPRECIATION/AMORTISATION NET BLOCK
NO. 1 April, Additions Deductions/ 31 March, 1 April, Depreciation/ Deductions/ 31 March, 31 March, 31 March,
2005 Adjustments 2006 2005 Amortisation Adjustments 2006 2006 2005
Expense
(a) LAND 782,327 - - 782,327 36,309 8,286 - 44,595 737,732 746,018
782,327 - - 782,327 28,023 8,286 - 36,309 746,018 754,304

(b) BUILDINGS 2,576,599 18,035 (268) 2,594,366 330,405 41,154 (12) 371,547 2,222,819 2,246,194
2,576,781 4,059 (4,241) 2,576,599 290,371 40,871 (837) 330,405 2,246,194 2,286,410

(c) PLANT AND MACHINERY 25,150,378 10,136,711 (1,637,683) 33,649,406 6,745,138 2,991,996 (1,008,357) 8,728,777 24,920,629 18,405,240
17,076,708 8,799,631 (725,961) 25,150,378 4,890,151 1,857,104 (2,117) 6,745,138 18,405,240 12,186,557

(d) FURNITURE AND FIXTURES 432,298 47,541 (1,163) 478,676 122,920 52,072 (761) 174,231 304,445 309,378
325,564 114,950 (8,216) 432,298 100,161 28,065 (5,306) 122,920 309,378 225,403

(e) OFFICE EQUIPMENTS 364,807 28,370 (5,230) 387,947 106,439 18,706 (1,584) 123,561 264,386 258,368
307,994 58,930 (2,117) 364,807 90,307 17,059 (927) 106,439 258,368 217,687
VIDESH SANCHAR NIGAM LIMITED

(f ) COMPUTERS 1,534,327 452,526 (32,507) 1,954,346 787,116 287,374 (29,988) 1,044,502 909,844 747,211
1,406,186 146,411 (18,270) 1,534,327 509,516 287,794 (10,194) 787,116 747,211 896,670

(g) MOTOR VEHICLES 16,574 2,254 (935) 17,893 10,320 1,383 (595) 11,108 6,785 6,254
Twentieth Annual Report 2005-2006

16,974 - (400) 16,574 9,178 1,453 (311) 10,320 6,254 7,796

(h) GOODWILL 969,514 161,888 - 1,131,402 217,895 194,601 - 412,496 718,906 751,619
1,019,514 - (50,000) 969,514 16,992 200,903 - 217,895 751,619 1,002,522

TOTAL 31,826,824 10,847,325 (1,677,786) 40,996,363 8,356,542 3,595,572 (1,041,297) 10,910,817 30,085,546 23,470,282
23,512,048 9,123,981 (809,205) 31,826,824 5,934,699 2,441,535 (19,692) 8,356,542 23,470,282 17,577,349
(i) CAPITAL WORK-IN- 1,478,094
PROGRESS 5,131,681
(including advances
for capital
expenditure Rs. 37,821
thousands 2005:Rs. 30,874
thousands)

GRAND TOTAL 31,563,640

28,601,963

NOTES: 3 Additions to Plant and Machinery/ Capital Work in Progress are net of
Rs. 934 thousands (2005: Rs. 11,283 thousands) on account of increase in
1 Land includes Rs. 638,340 thousands under lease. This includes: liabilities consequent to fluctuations in foreign exchange rates.
(i) Rs. 2,558 thousands in respect of which conveyance is not done. 4 Plant and machinery includes the net block of Indefeasible Rights of Use
(IRUs) for domestic and international telecommunication circuits
(ii) Leasehold Land in Srinagar in respect of which lease deed is not available. Rs. 2,056,664 thousands (2005: Rs. 2,638,393 thousands).
(iii) Rs. 12,079 thousands in respect of which lease agreement has not been executed/ 5 Deduction/adjustments for the year ended 31 March 2004, included
registered. reduction in cost of gross block and corresponding reduction in
accumulated depreciation aggregating Rs. 15,577,519 thousands and Rs.
(iv) Rs. 1,640 thousands identified as Surplus Land. 6,013,426 thousands respectively. The net reduction in carrying cost
2 Gross block of buildings include: aggregating Rs. 9,564,093 thousands was debited to Securities Premium
Account in accordance with the terms of the approval of the shareholders
(i) Rs. 77,888 thousands for leasehold office space, of which Rs. 18,414 thousands and the High Court of Judicature at Bombay.
(2005: Rs. 8,384 thousands) pertains to assets acquired on or after 31 March 2001.
6 Figures in italics are for the previous year.
(ii) Rs. 4,398 thousands being cost of flats in Co-operative Societies under formation.
(iii) Rs. 335,181 thousands for flats at Mumbai and Rs. 10,030 thousands for office
space at New Delhi in respect of which agreements have not been executed.
 SCHEDULES FORMING PART OF THE BALANCE SHEET
SCHEDULE - 5 Number of shares As at As at
31 March, 2006 31 March, 2005
INVESTMENTS Rupees ‘000 Rupees ‘000
I. TRADE INVESTMENTS (At Cost)
A. Fully paid Equity Shares (Unquoted)
(a) Tata Teleservices Ltd. 952,812,000 10,113,180 8,358,000
(117,012,000 equity shares of Rs 10 each subscribed
during the year)
(Refer Note B4, Schedule 20)
(b) New ICO Global Communications (Holdings) Limited 180,373 65 65
(Class A common stock of US$ 0.01 each)
(c) United Telecom Limited - Joint Venture 3,732,400 233,275 233,275
(Equity shares of NRS 100)
(Refer Note B5, Schedule 20)
B. Investment in Subsidiary Companies (Unquoted)
(a) VSNL Lanka Limited 15,179,358 82,382 73,396
(1,586,159 equity shares of LKR 10 each subscribed
during the year)
(b) VSNL Singapore Pte Limited
(i) 35,000,000 equity shares of US$ 1 each subscribed
during the year 40,000,000 1,747,873 226,170

(ii) 24,205,250 10% cumulative convertible redeemable

Preference Shares of US$1 each subscribed
during the year 24,205,250 1,083,052 —
(Refer Note B23, Subnote (3), Schedule 20)
(c) VSNL America Inc. 3,000 13,125 13,125
(3,000 equity shares of US$ 0.01 each)
(d) VSNL Bermuda Limited — — 525
(During the year 1,200,000 equity shares of US$ 0.01
sold to VSNL Singapore Pte Limited)
(e) VSNL SNOSPV Pte. Ltd. 401,655 16,786 —
(401,655 equity shares of US$ 1.00 each subscribed
during the year)
(Refer Note B11, Schedule 20)
(f ) VSNL Broadband Ltd (formerly known as Tata Power
Broadband Company Limited) 70,000,000 2,020,937 —
(70,000,000 equity shares of Rs. 10 each acquired
during the year)
(Refer Note B12, Schedule 20)
15,310,675 8,904,556

47
VIDESH SANCHAR NIGAM LIMITED
Twentieth Annual Report 2005-2006

SCHEDULE - 5 No of Units As at As at
31 March, 2006 31 March, 2005
INVESTMENTS (Contd.) Rupees ‘000 Rupees ‘000
II. OTHERS
INVESTMENTS IN MUTUAL FUNDS (Unquoted)
(a) Liquid Dividend Plan (including dividend reinvestment)
Birla Cash Plus-Daily Dividend 10,119,643 101,394 —
DSP Merrill Lynch Liquid Fund-Daily Dividend 395,563 395,642 —
Principal Cash Management Fund- Liquid Option
Institutional Premium Plan- Dividend Reinvestment Plan — — 200,073
Prudential ICICI Sweep Cash Option Daily Dividend 13,557,797 135,578 —
Standard Chartered Liquidity Manager-Plus-Daily Dividend 450,186 450,211 —
TATA Liquidity Management Fund-Daily Dividend 558,906 560,138 —
UTI Liquid Cash Plan Institutional Daily Income Option — — 105,144
UTI Money Market Fund-Daily dividend option 38,094,837 663,813 —
(b) Fixed Maturity Plan
ABN AMRO Fixed Term Plan Series 2 Quarterly Plan A Dividend 30,000,000 300,000 —
ABN AMRO Fixed Term Series-Regular Growth 10,000,000 100,000 —
Birla FMP Quarterly Series 3- Plan A Dividend payout — — 239,851
Birla FTP-Quarterly Series 1 Dividend Payout 30,000,000 300,000 —
Birla FTP-Quarterly Series 2 Dividend Payout 30,000,000 300,000 —
Chola FMP- Series 2 (Quarterly Plan-I)-Dividend 20,000,000 200,000 —
Chola FMP-Series 2 (Quarterly Plan II)-Dividend 20,000,000 200,000 —
Chola FMP-Series 3 (Quarterly Plan I)-Dividend 20,000,000 200,000 —
Deutsche Fixed Term Fund Series 8-Dividend Option 20,000,000 200,000 —
DSP Merrill Lynch -Fixed Term Plan-Series 1B Dividend 301,224 301,225 —
DSP Merrill Lynch-Fixed Term Plan -Series 2-Dividend 30,195,924 301,960 —
HDFC Fixed Investment Plan- June2004 — — 250,031
HDFC FMP 3M March06 10,000,000 100,000 —
HSBC Fixed Term Series-3-Dividend 30,124,644 301,246 —
HSBC Fixed Term Series-7-Dividend 30,177,059 301,771 —
JM Fixed Maturity Plan QSA 5- Dividend — — 252,192
Kotak FMP Series 20-Dividend 20,000,000 200,000 —
Kotak FMP Series 23 -Dividend 10,000,000 100,000 —
Kotak FMP Series XV-Dividend 25,275,700 252,758 —
Kotak FMP Series XVIII-Dividend 30,000,000 300,000 —
Principal Deposit Fund (FMP-3) 91 Days-
Dividend Reinvestment Plan — — 201,654
Principal Deposit Fund (FMP-3-20) 91 Days Plan 40,255,495 402,556 —
Principal Pnb Fixed Maturity Plan 91 Days SeriesII 30,147,799 301,479 —
Prudential ICICI FMP- Quarterly Dividend Series — — 150,000
Prudential ICICI FMP-Yearly Series XXIV Dividend 30,107,619 301,077 —
Prudential ICICI FMP-Yearly Series XXV Dividend 60,808,800 608,088 —
SBI Magnum Debt Fund Series 180 Days
(December 04) Dividend Option — — 201,672
SBI Magnum Debt Fund Series 180 Days
(November 04) Dividend Option — — 150,666
Standard Chartered Fixed Maturity- 4th Plan Dividend 20,077,000 200,770 —
Standard Chartered Fixed Maturity-3 rd Plan Dividend 30,165,000 301,650 —
Sundaram Fixed Term Plan Series 1 Feb 06
(100 days)-Dividend Plan 20,000,000 200,000 —
TATA Fixed Horizon Fund-Series 2B Option
(18 Months) Growth 10,000,000 100,000 —

48
SCHEDULE - 5 No of Units As at As at
31 March, 2006 31 March, 2005
INVESTMENTS (Contd.) Rupees ‘000 Rupees ‘000
TATA Fixed Horizon Fund Series 2 Plan A
(13 Months)-Growth 10,000,000 100,000 —
TATA Fixed Horizon Fund Series 3 Scheme 2 B
(18 Months)-Growth 10,000,000 100,000 —
TATA Fixed Horizon Fund Series 3 Scheme D
(13 Months)-Growth 10,000,000 100,000 —
TATA Fixed Horizon Fund Series 3 Scheme F
(18 Months)-Growth 10,000,000 100,000 —
TATA Fixed Horizon Fund Series 5 Scheme B
(6 Months)-Dividend 30,136,030 301,362 —
TATA Fixed Horizon Fund Yearly Growth (August 04) — — 100,000
TATA Fixed Horizon Fund Yearly Growth (November 04) — — 50,000
TATA Fixed Horizon Fund Yearly Growth (September 04) — — 500,000
UTI Fixed Maturity Plan - Qfmp (SeriesIX) Dividend Plan — — 200,000
UTI Fixed Maturity Plan - Qfmp (SeriesVIII) Dividend Plan — — 300,000
UTI-Fixed Maturity Plan (QFMP/0206/11) Dividend Plan 30,000,000 300,000 —
(c) Income Plan
JM equity and derivative fund — — 200,000
9,682,718 3,101,283
24,993,393 12,005,839
Notes :
(1) Book Value of unquoted investments 24,993,393 12,005,839
(2) All investments other than investments in Mutual Funds are long-term investments
(3) Current Investment bought and sold during the year

Scheme Name Face Value No. of Units Purchase Cost

In Rs. Rs. in ‘000

Birla FMP- Series 2- Quarterly- Dividend Payout 10 39,968,425 400,000

DSP ML Quarterly Fixed Maturity Plan Dividend Reinvestment 10 50,641,021 506,411
Grindlays Fixed Maturity Plan-Quarterly Dividend Reinvestment 10 25,000,000 250,000
Grindlays Fixed Maturity Plan Quarterly Series 18- Dividend 10 20,000,000 200,000
ING Vysya Quarterly Fixed Maturity Plan Series IV- Dividend 10 45,000,000 450,000
JM Fixed Maturity Fund QSE 7- Dividend Option 10 20,238,808 202,388
JM Fixed Maturity Fund QSA5- Dividend Option 10 80,282 803
JM Fixed Maturity Plan QSF 6- Dividend Option 10 20,000,000 200,000
JM Fixed Maturity Fund- QSG7- Dividend Option 10 20,000,000 200,000
Kotak FMP Series XII Dividend 10 50,580,686 505,810
Principal Fixed Maturity Plan Quarterly 10 68,764 688
Prudential ICICI FMP Quarterly Series XXV- Dividend 10 165,126 1,651
SBI Magnum Debt Fund Series II - Monthly Dividend Reinvestment 10 145,440 1,473
SBI Magnum Debt Fund Series I - Monthly Dividend Reinvestment 10 221,676 2,253
UTI Fixed Maturity Plan- QFMP 1105/ II 10 40,000,000 400,000
UTI Fixed Maturity Plan- QFMP 1205/ II 10 50,000,000 500,000
JM Floater Short term plan Fortnightly Dividend Reinvestment 10 94,795,864 954,147

49
VIDESH SANCHAR NIGAM LIMITED
Twentieth Annual Report 2005-2006

SCHEDULE 5 (3): Current Investment bought and sold during the year (Contd.)

Scheme Name Face Value No. of Units Purchase Cost

In Rs. Rs. in ‘000
Deutsche Floating Rate Fund - Weekly Dividend Reinvestment 10 8,830,561 90,707
Grindlays Floating Rate Fund “Plan C” Daily Dividend Reinvestment 10 14,124,962 141,255
Kotak Floater Long Term- Weekly Dividend Reinvestment 10 6,082,993 60,863
Prudential ICICI Long Term Floating Rate Plan B Dividend 10 59,246,179 595,542
TATA Floater Fund Dividend Reinvestment 10 20,070,451 200,705
TATA Floating Rate Short Term Institutional Plan- Daily Dividend Reinvestment 10 50,801,425 508,552
UTI Floating Rate Fund Short Term Plan Daily Dividend Reinvestment 10 196,245,982 1,975,266
Birla Cash Plus Institutional Premium Plan Daily Dividend Reinvestment 10 261,777,929 2,622,884
Birla Sunlife Cash Manager Institutional Plan- Daily Dividend Reinvestment 10 152,375,909 1,523,987
DSP ML Liquidity Institutional Plan Daily Dividend Reinvestment 1000 3,740,658 3,741,406
Deutsche Insta Cash Plus- IP- Daily Dividend Reinvestment 10 149,887,680 1,501,800
Grindlays Cash Fund SIP “Plan C” Daily Dividend Reinvestment 10 231,032,836 2,310,333
Grindlays Liquidity Manager- Daily Dividend Reinvestment 10 218,330,652 2,183,515
HDFC Cash Management Fund- Savings Daily Dividend Reinvestment 10 16,454,791 175,020
HDFC Cash Management Savings Plus- Weekly Dividend Reinvestment 10 17,790,074 178,209
ING Vysya Liquid Institutional Premium Plan Daily Dividend Reinvestment 10 571,952,243 5,720,673
JM High Liquidity- Super Institutional Plan Daily Dividend Reinvestment 10 215,994,355 2,163,507
Kotak Liquid Institutional Premium Plan- Daily Dividend Reinvestment 10 76,232,633 932,180
Kotak Liquid Institutional Premium Plan Growth 10 29,968,832 400,000
Principal Cash Management LO Institutional Premium Plan
Daily Dividend Reinvestment 10 295,909,851 2,959,292
Prudential Liquid Super Institutional Plan- Daily Dividend Reinvestment 10 21,443,498 254,137
Prudential Liquid Institutional Premium Plan- Daily Dividend Reinvestment 10 278,848,282 3,097,869
Prudential ICICI Liquid Sweep Daily Dividend Reinvestment 10 15,000,000 150,000
Sundaram Liquid Super Institutional Plan- Daily Dividend Reinvestment 10 139,587,332 1,409,176
TATA Liquid Super High Investment Plan- Daily Dividend Reinvestment 1000 5,705,326 6,358,591
Templeton India Treasury Management Account Institutional Plan-
Daily Dividend Reinvestment 1000 262,522 262,531
UTI Liquid Cash Plan Institutional - Daily Income Option 1000 9,555,971 9,704,430
UTI Liquid Cash Fund Institutional Plan- Growth 1000 459,772 500,000
UTI Liquid Cash Fund Institutional Plan Daily Dividend Reinvestment 1000 1,056,708 1,073,412
UTI Money Market Fund Daily Dividend Reinvestment 10 70,577,652 1,229,835
Birla Bond Plus- Institutional- Fortnightly Dividend Reinvestment 10 5,823,218 60,960
Deutsche Short Maturity Fund- Weekly Dividend Reinvestment 10 18,938,290 194,094
Kotak Short Term Bond Fund- Monthly Dividend 10 6,126,834 61,633
Principal Short term Income Plan- Weekly Dividend 10 27,962,081 305,704
Prudential ICICI Short Term Plan Inst Plan- Fortnightly Dividend 10 47,131,572 514,823
TATA Short Term Bond Fund- Dividend 10 106,162,234 1,157,784
Templeton Short Term Income Plan- Weekly Dividend Reinvestment 1000 132,078 144,009
Templeton Short Term Income Fund Institutional Plan Weekly Dividend 1000 144,941 144,942
Templeton Short Term Income Fund Institutional Plan Weekly Dividend 1000 121,757 121,758
Templeton Short Term Income Plan- Weekly Dividend Reinvestment 1000 110,952 120,932

50
 SCHEDULES FORMING PART OF THE BALANCE SHEET
As at As at
31 March, 2006 31 March, 2005
SCHEDULE - 6 Rupees ‘000 Rupees ‘000
INVENTORIES
Equipment for resale 10,174 26,334
Less: Provision for obsolescence (85) (9,926)
10,089 16,408
Consumable stores and spares 27,930 3,243
38,019 19,651

SCHEDULE - 7
SUNDRY DEBTORS
(a) Over six months (Unsecured)
Considered good 705,867 411,495
Considered doubtful 1,249,820 1,310,532
1,955,687 1,722,027
Less: Provision for doubtful debts (1,249,820) (1,310,532)
705,867 411,495
(b) Other debts (unsecured)
Considered good 6,669,843 4,729,078
7,375,710 5,140,573
Note:
(1) Includes amounts due from subsidiaries of Rs. 1,572,655 thousands (2005: Rs. 229,075 thousands)

SCHEDULE - 8
CASH AND BANK BALANCES
(a) Cash in hand 440 890
(b) Cheques in hand 1,635,070 28,620
(c) Remittances in transit 630,265 —
(d) Current accounts with Scheduled Banks 190,831 193,071
(e) Deposit accounts with Scheduled Banks 112,209 13,868,662
2,568,815 14,091,243
Note:
(1) Deposit accounts include Rs. Nil (2005: Rs. 5,972,069 thousands) representing unutilised monies from GDR issue

SCHEDULE - 9
OTHER CURRENT ASSETS
(a) Interest receivable 91,192 151,307
(b) Service tax recoverable 306,076 279,453
(c) Pension contributions recoverable from Government of India
(net of provision of Rs. 537,086 thousands; 2005: Rs. 472,866 thousands)
(Refer note B6, Schedule 20) 74,424 74,424
(d) NLD licence fees reimbursement recoverable from Government of India 511,158 245,608
(e) Others 175 2,017
983,025 752,809
Note:
(1) Interest receivable includes interest due from subsidiaries of Rs. 54,986 thousands (2005: Rs. 25,588 thousands)

51
VIDESH SANCHAR NIGAM LIMITED
Twentieth Annual Report 2005-2006

SCHEDULES FORMING PART OF THE BALANCE SHEET

As at As at
SCHEDULE - 10 31 March, 2006 31 March, 2005
LOANS AND ADVANCES Rupees ‘000 Rupees ‘000
(a) Unsecured - Considered good
(i) Staff advances (note 1) 113,157 135,171
(ii) Deposits with public bodies 49,417 40,953
(iii) Other deposits 124,612 71,904
(iv) Other loans and advances (note 2) 829,158 754,228
(v) Prepaid expenditure 265,481 270,225
(vi) Advance payment of tax (net of provision for tax) 8,929,226 11,512,412
(vii) Advance against equity investments in subsidiaries — 226,237
(viii) Loans to subsidiaries 2,752,481 1,881,735
13,063,532 14,892,865
(b) Unsecured - Considered doubtful
Other loans and advances 73,786 73,786
Less: Provision for doubtful advances (73,786) (73,786)
13,063,532 14,892,865
Notes:
(1) Staff Advances includes loans due by an officer of the Company Rs. 151 thousands (2005:Rs. 176 thousands)
(Maximum amount outstanding during the year Rs. 176 thousands (2005: Rs. 199 thousands))
(2) Other loans and advances includes amounts due from subsidiaries of Rs.378,522 thousands (2005: Rs. 242,174 thousands)
SCHEDULE - 11
CURRENT LIABILITIES
(a) Sundry Creditors:
(i) Creditors for interconnect charges 4,431,513 3,504,086
(ii) Others (note 3) 4,905,910 5,721,507
(b) Unearned income and deferred revenues 3,212,198 2,972,834
(c) Liability towards Investors Education and Protection Fund under Section 205C
of the Companies Act 1956 (not due): Unpaid dividend 11,906 11,772
(d) Government of India Current Account 205,747 210,393
(e) Other liabilities (note 4) 2,894,595 2,114,629
(f ) Interest accrued but not due on short term foreign currency loans from banks 12,955 —
15,674,824 14,535,221
Notes:
(1) Rs.173 thousands dues to Indochem Industries,
a small scale industrial undertaking, for more than 30 days
(2) Dividends are not outstanding for a period exceeding seven years.
(3) Sundry creditors includes Rs. 140,250 thousands payable on purchase of
ISP business of Seven Star Dot Com Pvt. Ltd. (Refer Note B13, Schedule 20)
(4) Includes Rs. 248,849 thousands overdrawn book bank balance
(2005:Rs. 74,556 thousands)
(5) Sundry creditors includes Rs. 77,699 thousands
(2005: Rs. 525 thousands) due to subsidiaries

SCHEDULE - 12
PROVISIONS
(a) Provisions for employee benefits 917,365 701,893
(b) Provision for proposed dividend 1,282,500 1,710,000
(c) Tax on dividend 179,871 239,828
(d) Provision for contingencies (Refer Note B22, Schedule 20) 186,476 40,737
2,566,212 2,692,458

52
 SCHEDULES FORMING PART OF THE PROFIT AND LOSS ACCOUNT
Year ended Year ended
SCHEDULE - 13 31 March, 2006 31 March, 2005
REVENUES FROM TELECOMMUNICATION SERVICES Rupees ‘000 Rupees ‘000
(a) Telephone 21,638,671 18,784,022
(b) Leased channel 7,618,766 7,191,914
(c) Frame relay 1,639,859 1,382,652
(d) Internet 6,258,623 4,953,008
(e) Other traffic revenues 653,606 718,795
37,809,525 33,030,391

SCHEDULE-14
OTHER INCOME
(a) Dividend income from current investments 406,515 278,419
(b) Dividend income from long term investments — 6,331
(c) Profit on sale of of current investments (net) 76,554 9,026
(d) Profit on sale of fixed assets (net) — 11,111
(e) Rent 102,226 48,786
(f ) Exchange gain (net) 70,872 —
(g) Provisions no longer required written back 344,039 13,761
(h) Other 334,022 152,439
1,334,228 519,873
SCHEDULE-15
INTEREST INCOME
(a) Interest income-
i. Bank deposits 275,235 520,800
(Tax deducted at source Rs.58,603 thousands,
2005:Rs.93,487 thousands)
ii. Other loans and advances 114,067 34,138
(Tax deducted at source Rs.12,742 thousands
2005:Rs.1,648 thousands)
389,302 554,938
Note:
(1) Interest income includes Rs. 106,157 thousands (2005: Rs. 25,588 thousands) from subsidiaries. Tax deducted at
source on such income is Rs. 11,446 thousands (2005: Nil)

SCHEDULE - 16
SALARIES AND RELATED COSTS
(a) Salaries and bonus 1,677,249 1,165,971
(b) Contributions to provident,gratuity and other funds 156,028 56,217
(c) Staff welfare expenses 257,314 190,620
2,090,591 1,412,808

53
VIDESH SANCHAR NIGAM LIMITED
Twentieth Annual Report 2005-2006

SCHEDULES FORMING PART OF THE PROFIT AND LOSS ACCOUNT

Year ended Year ended
SCHEDULE-17 31 March, 2006 31 March, 2005
NETWORK COSTS Rupees ‘000 Rupees ‘000
(a) Rent of satellite channels 882,408 1,084,800
(b) Rent of landlines 279,345 1,193,634
(c) Administrative lease charges 117,606 95,389
(d) Royalty and licence fee to Department of Telecommunications 2,037,868 2,112,526
(e) Charges for use of transmission facilities
(i) Telephone [net of excess provision written back Rs. 82,400 thousands 15,192,527 14,064,532
(2005: Rs.118,489 thousands)]
(ii) Leased channel 664,936 137,286
(iii) Frame relay 377,990 196,101
(iv) Internet 836,470 856,555
(v) Others 569,524 290,070
20,958,674 20,030,893

SCHEDULE - 18
OPERATING AND OTHER EXPENSES
(a) Consumption of stores 19,517 16,507
(b) Light and power 369,235 335,325
(c) Repairs and Maintenance:
(i) Buildings 121,553 54,300
(ii) Plant and Machinery 1,594,333 1,074,857
(iii) Others 156,444 90,212
(d) Bad debts written off 175,506 526,909
(e) Provision for doubtful debts written back (60,712) (582,138)
(f ) Provision for doubtful advances - 35,677
(g) Rent 176,976 123,204
(h) Rates and taxes 98,294 83,673
(i) Travelling expenses 246,274 149,601
(j) Telephone and telex 118,159 67,268
(k) Printing, postage and stationery 35,924 27,511
(l) Security expenses 11,227 56,939
(m) Computer software and maintenance 40,295 56,591
(n) Legal and professional fees 496,428 323,046
(o) Advertising and publicity 1,095,010 642,537
(p) Commissions 200,791 77,244
(q) Water charges 10,104 10,774
(r) Insurance 53,070 38,735
(s) Donations 27,867 1,029
(t) Loss on sale of fixed assets (net) 21,131 —
(u) Exchange loss (net) — 151,617
(v) Services rendered by third parties 683,170 227,533
(w) Other expenses 311,143 306,709
6,001,739 3,895,660
SCHEDULE - 19
PRIOR PERIOD ADJUSTMENTS (NET)
INCOME:
Revenues from telecommunication services 67,005 —
EXPENSES:
Charges for use of transmission facilities, written back (186,904) —
Repairs and maintenance 8,157 —
Other expenses 2,738 —
(109,004) —

Note : Figures in brackets are credits

54
 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS
SCHEDULE 20
SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS
A. SIGNIFICANT ACCOUNTING POLICIES
1. Basis of preparation
The financial statements are prepared under the historical cost convention, in accordance with the accounting
standards issued by the Institute of Chartered Accountants of India and in accordance with the applicable
requirements of the Companies Act, 1956.
2. Use of estimates
The preparation of financial statements requires the management of the Company to make estimates and assumptions
that affect the reported balances of assets and liabilities and disclosures relating to the contingent liabilities as at
the date of the financial statements and reported amounts of income and expenses during the period. Examples of
such estimates include provisions for doubtful debts and advances, employee retirement benefit obligations, provision
for income taxes, impairment of assets and useful lives of fixed assets.
3. Fixed assets
a) Fixed assets are stated at cost less accumulated depreciation. Cost includes freight, duties, taxes and all incidental
expenses incurred to bring the assets to their present location and condition.
b) Fixed assets received as gifts from other Foreign Telecom Administrations are capitalised and credited to capital
reserve on the basis of notional cost (cost assessed by customs authorities). Cost includes freight, insurance and
customs duty.
c) Intangible assets in the nature of Indefeasible Rights of Use (IRUs) for international and domestic
telecommunication circuits are recorded as fixed assets. IRU agreements transfer substantially all the risks and
rewards of ownership.
d) Jointly owned assets are capitalised in proportion to the Company’s ownership interest in such assets.
e) Consideration for purchase of business in excess of the value of net assets acquired is recognised as goodwill.
f ) Assets acquired pursuant to an agreement for exchange of similar assets are recorded at the net book value of
the asset given up, with an adjustment for any balancing receipt or payment of cash or other consideration.
4. Depreciation
Depreciation is provided on straight line basis (SLM), at the rates and in the manner prescribed in Schedule XIV to
the Companies Act, 1956 except as follows:
Assets Rates of depreciation/ period of amortisation
i) Plant and Machinery
a. Land cables 6.33 %
b. Earth station and switches 7.92 %
c. Other networking equipment 11.88 %
d. Overhead fibre cables 19.00 %
ii) Goodwill 60 months
iii) Indefeasible Rights of Use (IRU’s) Life of IRU or period of agreement, whichever is lower
iv) Leasehold land Over the lease period
5. Operating lease
Lease arrangements where the risk and rewards incident to ownership of an asset substantially vests with the lessor
are classified as operating lease.
Rental income and rental expense on assets given or obtained under operating lease arrangements are recognised
on a straight - line basis over the term of the lease.
The initial direct costs relating to operating leases are recorded as expense as they are incurred.

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SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.)

6. Impairment
At each balance sheet date, the Company reviews the carrying amounts of its fixed assets to determine whether
there is any indication that those assets suffered an impairment loss. If any such indication exists, the recoverable
amount of the asset is estimated in order to determine the extent of the impairment loss. Recoverable amount is the
higher of an asset’s net selling price and value in use. In assessing the value in use, the estimated future cash flows
expected from the continuing use of the asset and from its ultimate disposal are discounted to their present values
using a pre-determined discount rate that reflects the current market assessments of the time value of money and
risks specific to the asset.
7. Investments
Long-term investments are valued at cost less provision for diminution in value. Provision for diminution in the value
is made to recognise a decline, which is other than temporary. Current investments comprising investments in
mutual funds are stated at the lower of cost or fair value, determined on an individual investment basis.
8. Inventories
Inventories are valued at the lower of cost and net realisable value. Cost is determined on a weighted average basis.
9. Retirement Benefits
a) Provision for unutilised leave due to employees, gratuity and pension contribution are actuarially determined
as at the balance sheet date.
b) Contributions to Employees’ Provident Fund and other defined contribution plans are recognised in the profit
and loss account in the period when such contributions are made.
10. Revenue recognition
a) Revenues from telephony services are recognised at the end of each month based upon minutes of incoming
or outgoing traffic completed in such month. Substantial portion of revenues are on account of recoveries from
Foreign Telecommunication Administrations for incoming traffic and recovery from domestic carriers for delivery
of calls on foreign networks.
b) Revenues from data services are recognised over the lease period based on contracted fee schedules.
c) Revenues from internet services are recognised based on usage.
d) Dividend from investments is recognized when the right to receive payment is established and no significant
uncertainty as to measurability or collectibility exists.
e) Transactions relating to exchange or swapping of capacities, which results in little or no consideration, represent
the exchange of productive assets not held for sale in the ordinary course of business. Such exchanges do not
result in the culmination of the earnings process and hence the Company does not recognize any revenue for
these types of transactions.
11. Taxation
Current tax expense is determined in accordance with the provisions of the Income Tax Act, 1961. Deferred tax
assets and liabilities are measured using the tax rates, which have been enacted or substantively enacted at the
balance sheet date. Deferred tax assets and liabilities are recognised for future tax consequences attributable to
timing differences between the taxable and accounting income.
Deferred tax assets in respect of unabsorbed depreciation and carry forward tax losses are recognised if there is
virtual certainty that there will be sufficient future taxable income available to realise such losses. Deferred tax assets
in respect of other timing differences are recognised if there is a reasonable certainty that sufficient future taxable
income will be available to realise such assets.
12. Foreign currency transactions
a) Foreign currency transactions are converted into Indian Rupees at rates of exchange approximating those
prevailing at the transaction date. Foreign currency monetary assets and liabilities are translated to Indian

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 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.)
Rupees at the closing rate prevailing on the balance sheet date. Exchange differences, other than on foreign
currency liabilities to purchase fixed assets from countries outside India are recognised in the profit and loss
account. Exchange differences on translation of foreign currency liabilities incurred to purchase fixed assets
from countries outside India are adjusted in the cost of such assets.
b) Premium or discount on forward contracts is amortised over the life of such contracts and is recognised in the
profit and loss account, except in respect of forward contracts taken for liabilities for fixed assets where such
amortisation is adjusted in the carrying cost of fixed assets. Forward contracts outstanding as at the balance
sheet date are stated at exchange rate prevailing at the reporting date and any gains or losses are recognised in
the profit and loss account. Profit or loss arising on cancellation or renewal of forward exchange contract is
recognised in the profit and loss account in the period of such cancellation or renewal, except in case of a
forward contract relating to liabilities for purchase of fixed assets from countries outside India, in which case
such profit or loss is adjusted to the carrying cost of such fixed assets.

B. NOTES TO ACCOUNTS
1. The Company was incorporated on 19 March, 1986. The Government of India vide its Order No. G 25015/6/86-OC
dated 27 March, 1986, transferred all the assets and liabilities of the OCS (part of the Department of
Telecommunications, Ministry of Communications) as appearing in the Balance Sheet as at 31 March, 1986 to the
Company with effect from 1 April,1986. As per the letter no. G-25015/6/86-OC dated 23 October, 2001 of Government
of India, Department of Telecommunications, there was no requirement to register a formal transfer deed or deed of
sale in the matter of such transfer of assets.
2. Capital reserve includes Rs. 2,052,161 thousands (2005:Rs. 2,052,161 thousands) in respect of foreign exchange
gains on unutilised proceeds from Global Depository Receipts credited to Capital Reserve in a previous year.
3. The Board of Directors recommended a dividend of Rs. 4.5 (2005: Rs. 6.0 including Rs. 1.5 special dividend) per share
for the year ended 31 March, 2006.
4. The Company has an investment of Rs. 10,113,180 thousands in Tata Teleservices Ltd.(“TTSL”) representing an equity
interest of 16.14 percent in the issued and paid-up capital of TTSL. TTSL has accumulated losses, which have
significantly eroded its net worth. In the opinion of the management, having regard to the long gestation period
inevitable to the nature of its business, there is no permanent diminution in value of the investment.
During the current financial year, TTSL issued equity shares to certain other investors at a price that is higher than
the carrying value of the equity shares in the books of the Company.
5. The Company has an investment of Rs. 233,275 thousands in United Telecom Ltd. Nepal (“UTL”) representing an
equity interest of 26.66 percent in the issued and paid-up capital of UTL. UTL has accumulated losses, which have
significantly eroded its net worth. In the opinion of the management, having regard to the long gestation period
inevitable to the nature of its business and future business projections, there is no permanent diminution in value of
the investment.
6. As at 1 April, 2004 proportionate share of pension obligation and payments to erstwhile OCS employees of Rs.547,290
thousands were recoverable from the Government of India (“the Government”). Pursuant to discussions with the
Government, the Company had made a provision of Rs. 472,866 thousands in the year ended 31 March, 2005.
In the current year, consequent to an actuarial valuation, the pension obligation towards the erstwhile OCS employees
has increased by Rs. 64,220 thousands. Pending resolution of the matter and recovery of this amount from the
Government, the Company has provided for the additional amount recoverable in the Profit and Loss account.
7. During the year, a consortium owned, high-capacity fibre-optic submarine cable system, SEA-ME-WE 4, was
commissioned. The SEA-ME-WE 4 cable system links France to Singapore with Mumbai, India as one of its landing
points. As part of the consortium, the Company has capitalised an amount of Rs.1,689,728 thousands as contribution
towards the construction of the cable system.

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SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.)

8. During the year the Company has charged to the Profit and Loss account a sum of Rs.612,127 thousands towards
write off of certain fixed assets having a gross value and accumulated depreciation of Rs. 1,594,407 thousands and
Rs. 982,280 thousands respectively. In the opinion of the management, these assets do not have future economic
use consequent to technological changes and product related advancements.

9. On 30 June, 2005 the Company, through its wholly owned subsidiary VSNL Singapore Pte. Limited (“VSPL”), completed
the acquisition of Tyco Global Network (“TGN”) through the purchase of certain net assets and shares of certain
companies formed by Tyco International Ltd (“Tyco”) pursuant to the Stock and Asset Purchase Agreement dated 1
November, 2004, for a total purchase consideration of Rs. 6,143,243 thousands ($137.7 million).

10. On 13 February, 2006, the Company through its wholly owned subsidiary VSPL, completed its acquisition of Teleglobe
by acquiring 100% of the common shares of Teleglobe pursuant to the Agreement and Plan of Amalgamation dated
25 July, 2005, amongst Teleglobe, the Company and VSNL Telecommunications (Bermuda) Ltd - a wholly-owned
subsidiary of VSPL for a total purchase consideration of Rs.8,186,336 thousands ($183.5 million).

11. The Company has incorporated a wholly owned subsidiary, VSNL SNO SPV Pte. Ltd.(“SNOSPV”), which has invested 47
percent in the issued and paid-up share capital of SEPCO Communications Pty. Ltd.(“SEPCO”).

SEPCO is an investment company which has acquired 51 percent controlling stake in the issued and paid-up share
capital of SNO Telecommunications (Pty.) Ltd. (“SNO”), the licensed second network operator in South Africa.

12. On 31 October, 2005, the Company completed its acquisition of VSNL Broadband Ltd. (“VBL”) (formerly Tata Power
Broadband Ltd.) by purchasing 100% of the common shares of VBL for a cash consideration of Rs.2,020,937 thousands.

13. On 1 March, 2006, the Company purchased the internet service provider (ISP) business of Seven Star Dot Com Pvt.
Ltd. (“Seven Star”) under a slump sale agreement. The Company acquired net assets of Rs. 8,795 thousands for a
purchase consideration of Rs. 170,683 thousands. Consequently, an amount of Rs. 161,888 thousands has been
recognised as goodwill and included under Fixed Assets.
The valuation of fixed assets amounting to Rs. 13,543 thousands acquired under the slump sale agreement has been
determined by the management based on an independent valuation. Legal formalities relating to transfer of assets
and contracts in the name of the Company are pending completion.

14. Cash and cash equivalents represent:-

As at As at
31 March, 2006 31 March, 2005
Rupees ‘000 Rupees ‘000
Cash and Cheques on hand and balances held with scheduled banks 1,826,341 222,581
Remittances in transit 630,265 -
Deposit accounts held with scheduled banks 112,209 13,868,662
2,568,815 14,091,243
Deposits with original maturity over three months (111,709) (11,862,391)
Current Account / Deposits held for unpaid dividends (11,808) (6,271)
Cash and cash equivalents 2,445,298 2,222,581

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 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.)
15. Deferred tax liability:
As at As at
31 March, 2006 31 March, 2005
Rupees ‘000 Rupees ‘000
Deferred tax liability
Difference between accounting and tax depreciation 1,816,193 1,857,787
Deferred tax assets
Provision for doubtful debts 420,689 441,125
Expenditure on Voluntary retirement schemes 138,634 210,369
Expenditure incurred on NLD license fees (Refer Note (a) below) 265,737 -
Unearned income and deferred revenues 181,781 177,169
Others 58,426 32,328
1,065,267 860,991
Net deferred tax liability 750,926 996,796

Note:
a. In March 2002, the Company paid a one time entry fee of Rs. 1,000,000 thousands to the Department of
Telecommunications for providing National Long Distance (“NLD”) service. The Company commenced its NLD
operations with effect from September 2002. Owing to uncertainty relating to the allowability of the one time
entry fee paid under Sec 35 ABB of the Income Tax Act, 1961, the Company did not consider the deduction in
the provision for tax and consequently did not set up a deferred tax asset. During the current year the Company
has setup a deferred tax asset of Rs. 265,737 thousands consequent to the deduction being allowed in its
income tax assessment for A.Y. 2003-2004.

16. Included in operating and other expenses:

Year ended Year ended
31 March, 2006 31 March, 2005
Rupees ‘000 Rupees ‘000
Auditors’ remuneration and expenses
(i) Audit fees 8,250 5,500
(ii) Tax audit fees 1,500 1,000
(iii) Other professional services 2,635 1,648
(iv) Service tax 1,263 727
Auditors’ remuneration excludes fees of Rs. 4,840 thousands (2005: Rs.2,000 thousands) payable/paid for professional
services to a firm of chartered accountants in which some partners of the firm of statutory auditors are partners.
17. Managerial Remuneration
a) Managerial Remuneration for whole time director and non-executive directors.
The above is inclusive of :
Year ended Year ended
31 March, 2006 31 March, 2005
Rupees ‘000 Rupees ‘000
(i) Salaries 4,067 3,305
(ii) Contribution to provident and other funds 418 551
(iii) Estimated monetary value of perquisites 375 1,392
(iv) Commission 5,273 2,500
(v) Non-executive directors’ sitting fees 580 615
10,713 8,363

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SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.)

b) Computation of Net Profit in accordance with Section 309(5) of the Companies Act,1956
Year ended Year ended
31 March, 2006 31 March, 2005
Rupees ‘000 Rupees ‘000
Profit before taxes as per profit and loss account 6,867,173 10,539,823
Add:
Managerial Remuneration 10,713 8,363
Provision for doubtful advances - 35,677
6,877,886 10,583,863
Less:
Capital profit on sale of investments - 5,514,486
Provision for doubtful debts written back (net) 60,712 582,138
Net profit as per Section 309(5) of the Companies Act, 1956 6,817,174 4,487,239

c) Commission
(i) Whole-time Director 2,500 2,500
(ii) Non-executive Directors 2,773 -
Note:
The commission payable to whole time director and non-executive directors aggregating to Rs. 5,273 thousands is
subject to approval of the shareholders.
18. Earnings per Share

Rupees in 000’s,
except Number of Shares and
Earnings per share data
Year ended Year ended
31 March, 2006 31 March, 2005

Profit before taxes and exceptional items 7,543,520 6,325,386

Income tax expense on profit excluding exceptional items 2,299,411 2,238,229
Profit after tax excluding exceptional items 5,244,109 4,087,157
Exceptional (expense)/ income (net) (676,347) 4,214,437
Income tax benefit/(expense) on exceptional items 227,658 (737,920)

Net Profit after tax and exceptional items 4,795,420 7,563,674

Number of Shares 285,000,000 285,000,000

Earnings per share excluding exceptional items Rs.18.40 Rs.14.34
Earnings per share including exceptional items Rs.16.83 Rs.26.54

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 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.)
19. Business Segments
In the year ended 31 March, 2006, as a result of changes in the form and content of segment information provided
to and used by the Management to allocate resources and assess performance and change in the organisational
structure, the Company has reviewed and revised its reportable segments.
The reportable segments in the current year are “Wholesale Voice”, “Enterprise and Carrier Data” and “Others”. The
composition of the reportable segments is as follows
- Wholesale Voice: includes International and National Voice services.
- Enterprise and Carrier Data: includes corporate data transmission services like IPLC, Frame Relay, ILL and
NPLC.
- Others: includes Internet, GPSS, Telex, Telegraph, TV up-linking, Transponder lease and other services.
In the previous year, “Telephony and related services” which included international and national voice and data
services and internet was considered as a reportable segment and other services including transponder lease,
television uplinking, gateway packet switching services and video conferencing facilities were reported under “Other
Services”.
Year ended 31 March, 2006
Rupees ‘000
Wholesale Enterprise and
Voice Carrier Data Others Total

Revenues 21,626,466 12,617,977 3,565,082 37,809,525

Segment Profits 4,599,952 10,258,602 862,111 15,720,665
Unallocated expenses (net) 8,286,149
Prior Period Income (net) 109,004
Profit before taxes and exceptional items 7,543,520
Exceptional Items (676,347)

Profit before taxes 6,867,173

Income Taxes 2,071,753

Profit after taxes 4,795,420

Year ended 31 March, 2005
Rupees ‘000
Wholesale Enterprise and
Voice Carrier Data Others Total
Revenues 18,764,997 11,170,435 3,094,959 33,030,391

Segment Profits 3,095,514 8,738,441 639,468 12,473,423

Unallocated expenses (net) 6,148,037

Profit before taxes and exceptional items 6,325,386
Exceptional Items 4,214,437
Profit before taxes 10,539,823
Income Taxes 2,976,149

Profit after taxes 7,563,674

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SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.)

i). Revenues and expenses, which are directly identifiable to segments, are attributed to the relevant segment.
Expenses on rent of satellite channels and landlines, and royalty and license fee are allocated on the basis of
usage. Segment result is segment revenues less segment expenses. Certain costs, including depreciation which
are not allocable to segments have been classified as “unallocable expense”.
ii). Telecommunication services are provided utilizing the Company’s assets which do not generally make a
distinction between the types of services. As a result, fixed assets are used interchangeably between segments.
In the absence of a meaningful basis to allocate assets and liabilities between segments, no allocation has been
made.
iii). Segment information for the year ended 31 March, 2005 has been presented in accordance with the basis of
segmentation adopted for the current year for comparative purposes.

Geographical Segment:
Segment revenues by
Geographical Market
Year ended
31 March, 2006
Rupees ‘000
India 20,870,790
United States of America 4,833,240
United Kingdom 3,242,811
United Arab Emirates 2,600,211
Others 6,262,473
37,809,525

Segment revenues by
Geographical Market
Year ended
31 March, 2005
Rupees ‘000
India 19,075,781
United States of America 3,804,508
United Arab Emirates 2,633,825
Saudi Arabia 1,026,045
Others 6,490,232
33,030,391

For the year ended 31 March, 2006 and 31 March, 2005, revenues from customers, comprise mainly revenues from
Wholesale Voice and Enterprise and Carrier data segments under the revised segments.

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 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.)
20. Related Party Disclosures

(a) List of related parties and relationship:

I. Investing party
• Panatone Finvest Limited
II. Subsidiaries (Held directly)
• VSNL Broadband Limited
• VSNL America Inc.
• VSNL Lanka Ltd.
• VSNL Singapore Pte. Ltd.
• VSNL SNOSPV Pte. Ltd
III. Other Subsidiaries (Held indirectly)
• VSNL UK Ltd
• VSNL Netherlands BV
• VSNL Bermuda Ltd
• VSNL Japan K.K
• VSNL Telecommunications (Bermuda) Ltd.
• VSNL Hong Kong Ltd
• ITXC Global Japan YK
• ITXC IP Holdings S.a.r.l
• Teleglobe America Inc
• Teleglobe Asia Data Transport Pte. Ltd
• Teleglobe Asia Pte. Ltd
• Teleglobe Bermuda Ltd.
• Teleglobe Canada ULC
• Teleglobe France International S.A.S
• Teleglobe International Belgium S.P.R.L
• Teleglobe International Hong Kong Ltd
• Teleglobe International Ltd
• Teleglobe International Luxembourg S.a.r.l
• Teleglobe Italy S.r.l
• Teleglobe Netherlands B.V
• Teleglobe Spain Communications S.L

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VIDESH SANCHAR NIGAM LIMITED
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SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.)

• TLGB International Germany GmbH
• TLGB Luxembourg Holdings S.a.r.l
• TLGB Netherlands Holdings B.V
• VSNL (Portugal) Unipessoal Limitada
• VSNL Belgium BVBA
• VSNL France SAS
• VSNL International (Nordics) AS
• VSNL International (Global) Corp.
• VSNL International (Guam) Llc
• VSNL International (Portugal) Instalacao e Manutencao de Redes LDA
• VSNL International (US) Inc
• VSNL International Australia Pty. Ltd
• VSNL International GBRM Ltd
• VSNL International IPCO LLC
• VSNL International Puerto Rico Inc
• VSNL International (ITXC) Corp.
• VSNL International(Poland) Sp. Zo.o
• VSNL Spain Srl
• VSNL Telecommunications(UK) Inc
• VSNL(Germany) GMBH
• ITXC Global UK Ltd.
• ITXC Global Zagreb d.o.o
• Enhanced Services Inc
• ITXC (UK)Ltd.
• ITXC Global HongKong Ltd.
IV. Joint Venture
• United Telecom Limited
V. Joint Venture of wholly owned subsidiary
• SEPCO Communications Pty. Ltd.
• SNO Telecommunications (Pty) Ltd. (Subsidiary of SEPCO)
VI. Key Managerial Personnel
• N.Srinath - Executive Director

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 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.)
(b) Related party transactions
(Rupees ‘000)
Transactions Investing Subsidiaries Key Joint Joint Venture of
Company Managerial Venture wholly owned
Personnel subsidiary
Dividend paid 694,433 — — — —
577,125 — — — —
Revenues from
telecommunication services 3,127,525 — 19,887 —
345,254 — 11,949 —
Network cost 416,076 — 9,995 —
60,837 — 180 —
Purchase of fixed assets
(includes purchase from
VSNL Broadband Ltd. Rs. 8,454) 10,036 — — —
3,509 — — —
Sale of fixed assets 106 — — —
727,132 — — —
Sale of Investment in
subsidiary to VSPL 525 — — —
— — — —
Services rendered 12,780 — — —
6,869 — — —
Services received 5,968 — — —
— — — —
Equity capital contributions
(includes contribution in
VSPL Rs. 1,521,703) 1,530,689 — — —
386,839 — — —
Preference capital contribution in VSPL 1,083,052 — — —
— — — —
Interest Income 106,157 — — —
25,588 — — —
Loans given(includes loans given
to VSPL Rs.15,650,743) 15,767,648 — — —
1,885,244 — — —
Loans repaid(includes loans
repaid by VSPL Rs.12,904,302) 13,592,502 — — —
3,509 — — —
Advances given 1,269,814 — — 33,554
441,086 — — —
Managerial remuneration — 7,360 — —
— 7,748 — —
Balances:
Receivables 1,627,641 — 16,111 —
237,956 — 9,297 —
Payables 77,699 2,500 — —
525 2,500 — —
Loans given 2,752,481 — — —
1,907,323 — — —
Advances receivable 378,522 — — 33,554
459,529 — — —
Deferred Revenue 423,935 — — —
— — — —
Guarantee on behalf of subsidiaries 10,160,045 — — —
98,656 — — —
Letter of Comfort on behalf of VSPL 8,029,800 — — —
— — — —
Note: Figures in italic are in respect of the previous year

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VIDESH SANCHAR NIGAM LIMITED
Twentieth Annual Report 2005-2006

(c ) Disclosure in respect of material transactions with related parties

Year ended Year ended
31 March, 2006 31 March, 2005
Rupees ‘000 Rupees ‘000
Revenues from telecommunication services
VSNL UK Ltd. 1,225,296 86,061
VSNL America Inc. 1,112,191 -
VSNL Singapore Pte. Ltd. 449,472 109,826
Network cost
VSNL Singapore Pte. Ltd. 313,722 18,235
VSNL Lanka Ltd. 51,820 41,344
Interest Income
VSNL Singapore Pte. Ltd. 74,176 15,378
VSNL Bermuda Ltd. 20,983 9,084
VSNL America Inc. 10,998 1,126

21. Operating lease arrangements:

(a) As lessee :
Year ended Year ended
31 March, 2006 31 March, 2005
Rupees ‘000 Rupees ‘000
Minimum lease payments under operating leases
recognized as expense in the year 882,408 1,232,160

At the balance sheet date, minimum lease payments under non- cancellable operating leases fall due as follows:
Year ended Year ended
31 March, 2006 31 March, 2005
Rupees ‘000 Rupees ‘000
Due not later than one year 518,117 713,384
Due later than one year but not later
than five years 714,936 903,041
Later than five years 45,198 92,885

1,278,251 1,709,310

Operating lease payments represent rentals payable by the Company for certain buildings and satellite channels.

66
 (b) As lessor:
(i) The Company has leased under operating lease arrangements certain IRU’s with gross carrying amount and
accumulated depreciation of Rs. 874,174 thousands and Rs. 57,787 thousands respectively as at 31 March, 2006.
Depreciation expense of Rs. 43,389 thousands (2005: Rs. 14,397 thousands) in respect of these assets has been
recognised in the profit and loss account for the year ended 31 March, 2006.
In respect of the above, rental income of Rs.42,470 thousands (2005: Rs. 18,150 thousands) has been recognised
in the profit and loss account for the year ended 31 March, 2006.
Future lease rental receipts will be recognised in the profit and loss account of subsequent years as follows:

Year ended Year ended

31 March, 2006 31 March, 2005
Rupees ‘000 Rupees ‘000

Not later than one year 68,303 36,370

Later than one year but not later than five years 273,212 145,480
Later than five years 622,420 345,550
963,935 527,400

(ii) The Company has leased certain premises under operating lease arrangements. Future lease rental income in
respect of these leases will be recognised in the profit and loss account of subsequent years as follows:
Year ended Year ended
31 March, 2006 31 March, 2005
Rupees ‘000 Rupees ‘000
Not later than one year 46,873 50,058
Later than one year but not later than five years 12,357 34,804
Later than five years 325 -
59,555 84,862

Lease rental income of Rs. 64,777 thousands (2005: Rs. 32,419 thousands) in respect of the above leases have been
recognised in the profit and loss account for the year ended 31 March, 2006.
22. Provision for Contingencies:
Asset Retirement
Obligation (“ARO”) Others Total
Rupees ‘000 Rupees ‘000 Rupees ‘000

Balance as on 1 April, 2005 40,737 - 40,737

Provision made during the year 19,934 125,805 145,739
Provision written back during the year - - -

Balance as on 31 March, 2006 60,671 125,805 186,476

Notes:
1) Provision for ARO has been made in respect of under-sea cables and switches owned by the Company.
2) Contingent liabilities as at 1 April, 2005, included approximately Rs. 172,000 thousands relating to an escalation
claim by a creditor. During the year, consequent to an arbitration award the Management has provided Rs. 90,000
thousands towards such liability.
3) Rs. 35,805 thousands has been provided in respect of a carrier claim, which is under dispute.

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23. Contingent Liabilities and capital commitments

A. Contingent Liabilities
As at As at
31 March, 2006 31 March, 2005
Rupees ‘000 Rupees ‘000
Letters of Credit 207,989 292,532
Guarantees 2,550,452 3,683,246
Guarantees given on behalf of subsidiaries 10,160,045 -
i. Claims for taxes on income (Refer Note 1 )
(a) Income tax disputes where the department is
in appeal against the Company 1,935,518 1,694,521
(b) Income tax disputes where the Company has
a favourable decision in other assessment year
for the same issue 78,248 1,860,194
(c ) Income tax disputes other than the above 9,257,720 9,593,879
ii. Claims for other taxes 211,961 229,135
iii. Other claims 3,974,458 381,738

Notes:

(1) Significant claims by the revenue authorities in respect of income tax matters are in respect of:

(a) expenditure on licence fees for the Assessment Year 1995-96 disallowed by the revenue authorities. The
Company’s appeal was allowed at the Tribunal stage, and the matter is now pending before the High Court. The
Company has obtained favourable decisions in other assessment years, which have not been contested by the
revenue authorities, and the Company is of the view that the claims will eventually be decided in its favour.

(b) deductions claimed under Section 80 IA of the Income Tax Act,1961 from Assessment years 1996-97 onwards
have been disallowed by the revenue authorities. The Company has contested the disallowance and has preferred
appeals.

(c) reimbursement by the Department of Telecommunications (DoT) of income tax paid by the Company on the
DoT levy during 1994-95, that was taxed by the revenue authorities. The Commissioner of Income Tax (Appeals)
has upheld the disallowance. The Company is in appeal with the Income Tax Appellate Tribunal.

(2) A claim of Rs.66,915,000 thousands (US $ 1,500 million) have been made against the Company by a strategic
business alliance associate for breach of contract relating to access and sale of bandwidth capacity on the Company’s
TGN network acquired during the year. The claim has been made in the US Federal District Court for the Southern
District of New York. The Company has filed its reply to the complaint denying all liability and believes that the
probability of the claim succeeding is remote.

(3) During the year, the Company issued Letters of Comfort for credit facility agreements, aggregating to Rs. 8,029,800
thousands (USD $ 180 million) availed by VSPL from different banks to finance the acquisition of TGN and for its
working capital requirements. The Company has undertaken to the lenders of VSPL that it shall retain management
control in VSPL so long as amounts are due to the lenders.

B. Capital commitments

Estimated amount of contracts remaining to be executed on capital account and not provided for Rs.1,307,914
thousands (2005 Rs. 5,365,977 thousands).

68
24. Value of Imports on C.I.F. basis
As at As at
31 March, 2006 31 March, 2005
Rupees ‘000 Rupees ‘000
Stores and spares 111,490 52,869
Capital goods 1,639,867 5,966,872
25. Expenditure in foreign currencies
As at As at
31 March, 2006 31 March, 2005
Rupees ‘000 Rupees ‘000
i. Charges for use of transmission facilities 5,941,900 5,465,237
ii. Rent of satellite channels 882,408 1,219,098
iii. Administrative lease charges 117,080 88,809
iv. Repairs and maintenance 589,208 646,429
v. Advertisement 1,263 1,740
vi. Legal and professional fees 349,476 66,516
vii. Travel expenditure 41,206 24,744
viii. Others 35,541 35,040

7,958,082 7,547,613

26. Earnings in foreign currencies

As at As at
31 March, 2006 31 March, 2005
Rupees ‘000 Rupees ‘000
i. Revenues from telecommunications services 16,938,734 13,954,610
ii. Profit on sale of long-term investments - 5,514,486
iii. Interest income 106,157 26,495
iv. Other income 75,175 23,286

17,120,066 19,518,877

27. Value of imported and indigenous stores/spares consumed

Year ended Year ended

31 March, 2006 31 March, 2005
Rupees ‘000 Rupees ‘000
Value % Value %
Imported 111,805 90.00 571 3.00
Indigenous 12,283 10.00 18,159 97.00

124,088 100.00 18,730 100.00

69
VIDESH SANCHAR NIGAM LIMITED
Twentieth Annual Report 2005-2006

28. UTL is a Joint Venture between the Company, Mahanagar Telephone Nigam Limited, Telecommunications Consultant
India Limited and Nepal Ventures Private Limited. The Company has 26.66 percent equity ownership in UTL. UTL
operates basic telephony services in Nepal based on Wireless-in-local loop technology.
The Company’s share in income, expenses, assets and liabilities of UTL for the year ended 31 March, 2006 are as
follows:
As at As at
31 March, 2006 31 March, 2005
Rupees ‘000 Rupees ‘000
Income 71,846 54,613
Expenses 137,565 118,656
As at As at
31 March, 2006 31 March, 2005
Rupees ‘000 Rupees ‘000

Assets 328,837 380,497

Liabilities 248,573 239,977

Contingent liability in respect of claims of taxes and duties Rs. Nil (2005: Rs.28,283 thousands).

29. Net Dividend remitted to non-resident shareholders in foreign currency

The Company has not remitted any amount in foreign currencies on account of dividends during the year and does
not have information as to the extent to which remittances, if any, in foreign currencies on account of dividends
have been made by/on behalf of non – resident shareholders. The particulars of final dividends for the year ended
31 March, 2005 paid to non – resident shareholders, for which dividends were declared during the year, are as under:
As at As at
31 March, 2006 31 March, 2005
Rupees ‘000 Rupees ‘000
i. Number of non-resident shareholders 383 293
ii. Number of shares held by them 41,265,837 38,042,841
iii. Year to which dividend relates 2004-2005 2003-2004
iv. Amount remitted net of tax (in Rupees 000s) 247,595 171,192
30. Subsequent Events
(i) On 8 May, 2006, the Company signed a Share Purchase Agreement (SPA) to acquire Direct Internet Limited
(‘‘DIL’’)and its wholly-owned subsidiary, Primus Telecommunications India Limited (‘‘PTIL’’) for a total purchase
consideration of Rs. 942,351 thousands. The acquisition was completed on 23 June, 2006.
(ii) On 24 May, 2006, an Arbitration Tribunal of the International Chamber of Commerce (ICC), International Court of
Arbitration issued a ruling on certain issues in a matter initiated by FLAG Telecom Group Limited (FLAG) in
December 2004. FLAG also claimed damages to compensate it for the loss of revenue and/or market. The
Tribunal by majority decision has ordered the Company to grant FLAG access to the Mumbai cable landing
station of the FEA cable system for various purposes. The Tribunal has retained jurisdiction to determine the
financial consequences, if any, of its findings. The Company is not in a position to make a reliable estimate of the
obligation.
31. Previous year’s figures have been regrouped and reclassified wherever necessary.

70
Balance Sheet Abstract and Company’s General Business Profile in terms of Part IV of Schedule VI to the Companies
Act, 1956.
I. Registration Details
Registration No. 3 9 2 6 6 State Code 1 1 (REFER CODE LIST)
Balance Sheet Date 3 1 0 3 2 0 0 6
Date Month Year
II. Capital Raised during the year (Amount in Rs. Thousands)
Public Issue Right Issue
N I L N I L
Bonus Shares Private Placement
N I L N I L
III. Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousands)
Total Liabilities Total Assets
8 0 5 8 6 1 3 4 8 0 5 8 6 1 3 4
Source of Funds
Paid-up Capital Reserves & Surplus
2 8 5 0 0 0 0 5 7 7 6 1 6 7 1
Secured Loans Unsecured Loans
N I L 9 8 2 5 0 1
Deferred Tax Liability
7 5 0 9 2 6
Application of Funds
Net Fixed Assets Investments
3 1 5 6 3 6 4 0 2 4 9 9 3 3 9 3

*Net Current Assets Misc. Expenditure

5 7 8 8 0 6 5 N I L
Accumulated Losses
N I L
IV. Performance of Company (Amount in Rs. Thousands)
Turnover Total Expenditure
4 0 0 9 7 2 7 3 3 2 5 5 3 7 5 3
+ - Profit/Loss Before Tax + - Profit/Loss After Tax
+ 6 8 6 7 1 7 3 + 4 7 9 5 4 2 0
(Please tick appropriate box + for Profit, - for Loss)
Earning per Share in Rs. Dividend%
1 6 . 8 3 4 5

71
VIDESH SANCHAR NIGAM LIMITED
Twentieth Annual Report 2005-2006

V. Generic Names of Three Principal Products/Services of Company (as per monetary terms)
Item Code No. (ITC Code)
Product Description I N T E R N A T I O N A L T E L E C O M
M U N I C A T I O N S S E R V I C E S
Item Code No. (ITC Code)
Product
Description
Item Code No. (ITC Code)
Product
Description

* Note : For ITC code of products please refer to the publication Indian Trade Classification based on harmonized commodity
description and coding system by Ministry of Commerce, Directorate General of Commercial Intelligence & Statistics,
Calcutta - 700 001
ANNEXURE I
Code List 1 : State Codes

State Code State Name State Code State Name

01 Andhra Pradesh 02 Assam
03 Bihar 04 Gujarat
05 Haryana 06 Himachal Pradesh
07 Jammu & Kashmir 08 Karnataka
09 Kerala 10 Madhya Pradesh
11 Maharashtra 12 Manipur
13 Meghalaya 14 Nagaland
15 Orissa 16 Punjab
17 Rajasthan 18 Tamil Nadu
20 Uttar Pradesh 21 West Bengal
22 Sikkim 23 Arunachal Pradesh
24 Goa 52 Andaman Islands
53 Chandigarh 54 Dadra Islands
55 Delhi 56 Daman & Diu
57 Lakshwadeep 58 Mizoram
59 Pondicherry

For and on behalf of the Board of directors

Videsh Sanchar Nigam Limited

SUBODH BHARGAVA N. SRINATH

Chairman Executive Director

RAJIV DHAR SATISH RANADE

Chief Financial Officer Company Secretary & Chief Legal Officer
MUMBAI
DATED: 26th JUNE, 2006

72
 Statement pursuant to Sec 212(8) of the Companies Act, 1956, relating to subsidiary companies
Sr. Name of Subsidiary Company Reporting Exchange Share Capital Reserves Total Assets Total Investment Total Profit before Provision for Profit after Propsed
No. Currency Rate Liabilities Details Turnover Taxation Taxation Taxation Dividend
(except
in case of
investment
in the
subsidiaries)

1 VSNL Broadband Ltd. INR 1.00 700,000,000 209,891,549 1,817,853,495 907,961,946 52,659,652 191,789,674 85,246,591 7,573,915 77,672,676 -

2 VSNL America Inc. USD 44.61 13,383,000 (407,417,513) 616,621,678 1,010,656,191 - 1,231,893,753 (346,106,276) 371,713 (345,734,563) -

3 VSNL Lanka Ltd LKR 0.44 82,382,486 76,257,244 251,269,555 92,629,825 - 427,659,432 73,151,783 55,499 73,096,284 -

4 VSNL Singapore Pte Ltd. USD 44.61 1,784,400,000 (148,239,916) 10,987,123,169 9,350,963,085 - 1,128,725,719 39,705,971 - 39,705,971 -

5 VSNL SNOSPV Pte. Ltd USD 44.61 16,785,578 (27,600,087) 18,055,063 28,869,572 3,355 - (28,732,338) - (28,732,338) -

6 VSNL Netherlands BV * USD 44.61 905,314,457 (436,632,097) 11,096,863,297 10,628,180,937 - - (15,512,832) - (15,512,832) -

7 VSNL Telecommunications(Bermuda) Ltd. * USD 44.61 2,354,542,814 (4,807,052,885) 10,765,011,092 13,217,521,163 - - 92,730,723 - 92,730,723 -

8 ITXC Global Japan YK USD 44.61 3,575,516 (1,429,490) 4,167,911 2,021,884 - - 980,354 - 980,354 -

9 ITXC IP Holdings S.a.r.l USD 44.61 - (6,908,087) 1,065,518,237 1,072,426,324 - - (6,829,341) - (6,829,341) -

10 Teleglobe America Inc USD 44.61 9,112,843,167 (494,739,165) 19,579,927,505 10,961,823,503 - 2,273,592,180 (102,667,990) - (102,667,990) -

11 Teleglobe Asia Data Transport Pte. Ltd USD 44.61 2,624,118 (3,417,146) (16,488,808) (15,695,780) - - 1,511,092 - 1,511,092 -

12 Teleglobe Asia Pte. Ltd USD 44.61 52 (274,639) 73,325 347,912 - - 618 - 618 -

13 Teleglobe Bermuda Ltd. USD 44.61 3,857,590,642 937,858,067 5,462,065,425 666,616,715 - 20,642,363 (6,665,144) - (6,665,144) -

14 Teleglobe Canada ULC USD 44.61 380,077,200 (2,942,898,221) 8,170,701,858 10,733,522,880 25,276,377 1,616,284,658 (209,899,421) - (209,899,421) -

15 Teleglobe France International S.A.S USD 44.61 1,945,914 (81,058,057) 223,881,653 302,993,797 - 41,094,943 (13,478,240) - (13,478,240) -

16 Teleglobe International Belgium S.P.R.L USD 44.61 1,020,187 1,900,686 32,455,641 29,534,769 - - (1,372,205) - (1,372,205) -

17 Teleglobe International HongKong Ltd USD 44.61 17,142,824 19,279,718 209,788,880 173,366,337 - 23,275,366 (8,150,739) - (8,150,739) -

18 Teleglobe International Ltd USD 44.61 429,014,569 (198,661,236) 1,609,520,452 1,379,167,119 - 618,044,212 (8,876,867) - (8,876,867) -

19 Teleglobe International Luxembourg S.a.r.l USD 44.61 702,431 (96,693,984) 426,753,661 522,745,214 - - (5,606,323) - (5,606,323) -

20 Teleglobe Italy S.r.l USD 44.61 725,637 4,476,379 355,917,487 350,715,470 - 100,455,017 737,748 - 737,748 -

21 Teleglobe Netherlands B.V USD 44.61 32,394,310 (92,162,837) 458,902,975 518,671,502 - - (3,723,233) - (3,723,233) -

22 Teleglobe Spain Communications S.L USD 44.61 20,746,327 (129,079,907) 343,487,805 451,821,385 - 148,976,760 2,035,919 - 2,035,919 -

23 TLGB International Germany GmbH USD 44.61 54,531,087 (77,113,190) 807,006,902 829,589,005 - 168,611,455 1,890,593 - 1,890,593 -

24 TLGB Luxembourg Holdings S.ar.l USD 44.61 4,315,007,576 (774,019,108) 9,227,889,790 5,686,901,321 - - (155,707,827) - (155,707,827) -

25 TLGB Netherlands Holdings B.V USD 44.61 9,206,876,203 (4,024,009) 9,241,025,957 38,173,763 - 22,663,774 (341,969) - (341,969) -

26 VSNL (Portugal) Unipessoal Limitada USD 44.61 57,130,443 (466,493) 41,065,957 (15,597,993) - - (462,136) - (462,136) -

27 VSNL Belgium BVBA USD 44.61 103,895,746 (104,372,907) 3,138,031 3,615,192 - - (469,284) - (469,284) -

28 VSNL Bermuda Ltd USD 44.61 535,320 (468,406,561) 1,276,933,917 1,744,805,158 - - (468,402,852) - (468,402,852) -

29 VSNL France SAS USD 44.61 100,018,890 (82,853,852) 167,784,526 150,619,488 - - (82,227,670) - (82,227,670) -

30 VSNL HongKong Ltd USD 44.61 6 (80,069,583) (45,942,092) 34,127,485 - 52,906,115 (80,069,583) - (80,069,583) -

73
74
Statement pursuant to Sec 212(8) of the Companies Act, 1956, relating to subsidiary companies (Contd.)
Sr. Name of Subsidiary Company Reporting Exchange Share Capital Reserves Total Assets Total Investment Total Profit before Provision for Profit after Propsed
No. Currency Rate Liabilities Details Turnover Taxation Taxation Taxation Dividend
(except
in case of
investment
in the
subsidiaries)

31 VSNL International ( Nordics) AS USD 44.61 668,869 (22,735,908) 24,874,472 46,941,511 - 1,657,059 (3,254,881) - (3,254,881) -

32 VSNL International (Global) Corp. USD 44.61 126,269,676 16,161,861 143,414,277 982,741 - - 4,340,799 - 4,340,799 -

33 VSNL International (Guam) Llc USD 44.61 - (41,950,690) (12,096,976) 29,853,714 - - (42,084,085) - (42,084,085) -

34 VSNL International (Portugal) Instalacao e

Manutencao de Redes LDA USD 44.61 3,139,321,946 (3,043,776,675) 277,864,400 182,319,129 - 4,246,655 96,081,717 - 96,081,717 -
VIDESH SANCHAR NIGAM LIMITED

35 VSNL International (US) Inc USD 44.61 1,338 (1,255,222,785) 10,917,785,769 12,173,007,216 - 1,448,660,533 (1,255,222,785) - (1,255,222,785) -

36 VSNL International Australia Pty. Ltd USD 44.61 15,925,770 (30,133,116) (4,134,469) 10,072,877 - 4,779,203 (3,032,617) 12,291 (3,020,325) -

37 VSNL International GBRM Ltd USD 44.61 473,356,710 1,073,823,639 1,567,673,325 20,492,976 - 231,775,910 159,187,934 - 159,187,934 -
Twentieth Annual Report 2005-2006

38 VSNL International IPCO LLC USD 44.61 1,115,250,000 64,906,710 1,180,156,710 - - - 4,436,337 - 4,436,337 -

39 VSNL International Puerto Rico Inc USD 44.61 4,461 (11,996,879) (8,761,462) 3,230,956 - - (1,995,531) - (1,995,531) -

40 VSNL International(ITXC) Corp. USD 44.61 1,199,783,720 - 1,199,783,720 - - - - - - -

41 VSNL International(Poland) Sp. Zo.o USD 44.61 - 159,161 353,413 194,252 - - (471,402) - (471,402) -

42 VSNL Japan K.K USD 44.61 147,296,867 (177,166,535) 924,029,621 953,899,289 - (118,133,994) (45,878,164) (8,041) (45,886,205) -

43 VSNL Spain Srl USD 44.61 111,174,543 (366,862,856) 294,288,806 549,977,119 - (3,589,174) (363,330,677) - (363,330,677) -

44 VSNL Telecommunications(UK) Inc USD 44.61 504,336,125 (517,667,908) 863,306,899 876,638,683 - 84,562,267 (523,679,273) - (523,679,273) -

45 VSNL UK Ltd USD 44.61 78 (154,183,300) 420,788,054 574,971,277 - 1,439,042,093 (86,540,846) - (86,540,846) -

46 VSNL(Germany) GMBH USD 44.61 1,337,218,350 (1,375,158,936) 5,646,828 43,587,414 - 4,434,957 (28,612,055) - (28,612,055) -

47 Enhanced Services Inc USD 44.61 - - - - - - - - - -

48 ITXC (UK)Ltd. USD 44.61 - - - - - - - - - -

49 ITXC Global HongKong Ltd. USD 44.61 - - - - - - - - - -

50 ITXC Global UK Ltd. USD 44.61 - - - - - - - - - -

51 ITXC Global Zagreb d.o.o USD 44.61 - - - - - - - - - -

52 ITXC International LLC USD 44.61 - - - - - - - - - -

Companies from serial number 47 to 52 are under liquidation.

* In respect of acquisitions made by the Company, the fair value of assets and liabilities are reported in respective holding entities for these acquisition, pending the purchase price allocation amongst entities in the group.

For and on behalf of the Board of directors

SUBODH BHARGAVA N. SRINATH RAJIV DHAR SATISH RANADE

Chairman Executive Director Chief Financial Officer Company Secretary & Chief Legal Officer
MUMBAI
DATED: 26 June, 2006
CONSOLIDATED ACCOUNTS
2005-06

75
VIDESH SANCHAR NIGAM LIMITED
Twentieth Annual Report 2005-2006

76
 AUDITORS’ REPORT ON CONSOLIDATED FINANCIAL STATEMENTS
TO THE MEMBERS OF VIDESH SANCHAR NIGAM LIMITED
1. We have audited the attached consolidated balance
sheet of Videsh Sanchar Nigam Limited (‘the
Company’), and its subsidiaries (collectively referred
as ‘the VSNL Group’) as at 31 March, 2006 and also
the consolidated profit and loss account and the
4.
consolidated cash flow statement for the year ended
on that date annexed thereto. These financial
statements are the responsibility of the Company’s
management and have been prepared by the
management on the basis of separate financial
statements and other financial information regarding
components. Our responsibility is to express an
opinion on these financial statements based on our
audit.
2. We conducted our audit in accordance with the
auditing standards generally accepted in India. Those
Standards require that we plan and perform the audit
to obtain reasonable assurance about whether the
financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the
financial statements. An audit also includes assessing
the accounting principles used and significant
estimates made by the management, as well as
evaluating the overall financial statement
presentation. We believe that our audit provides a
reasonable basis for our opinion.
3. (a) We did not audit the financial statements of
certain subsidiaries, whose financial statements
reflect total assets of Rs.44,275,145 thousands as
at 31 March, 2006, total revenues of Rs. 11,234,273
thousands and net cash flows amounting to Rs.
1,932,626 thousands for the year then ended.
These financial statements and other financial
information have been audited by other auditors
whose reports have been furnished to us, and
our opinion is based solely on the report of other
auditors.
(b) The financial statements of a subsidiary and joint
venture which represents total assets of Rs.
332,419 thousands as at 31 March, 2006, total
revenues of Rs.71,906 thousands and net cash
outflows amounting to Rs.12,751 thousands for
the year then ended have been incorporated in
the consolidated financial statements on the
basis of unaudited financial statements as
provided by the management of that subsidiary
and joint venture.
Subject to our remark in paragraph 3 (b) above:
(a) We report that the consolidated financial
statements have been prepared by the
Company’s management in accordance with the
requirements of the Accounting Standard (AS)
21, Consolidated Financial Statements,
Accounting for Investments in Associates in
Consolidated Financial Statements and
Accounting Standard (AS) 27, Financial Reporting
of Interests in Joint Ventures issued by the
Institute of Chartered Accountants of India.
(b) Based on our audit and on consideration of
reports of other auditors on separate financial
statements and on the other financial information
of the components, and to the best of our
information and according to the explanations
given to us, we are of the opinion that the
attached consolidated financial statements give
a true and fair view in conformity with the
accounting principles generally accepted in India:
(i) in the case of the consolidated balance
sheet, of the state of affairs of the VSNL
Group as at 31 March, 2006;
(ii) in the case of consolidated profit and loss
account, of the profit for the year ended on
that date; and
(iii) in the case of the consolidated cash flow
statement, of the cash flows for the year
ended on that date.
For S. B. BILLIMORIA & CO.
Chartered Accountants
N. VENKATRAM
Partner
Membership No. 71387
Mumbai, 26 June, 2006
77
VIDESH SANCHAR NIGAM LIMITED
Twentieth Annual Report 2005-2006

CONSOLIDATED BALANCE SHEET AS AT 31 MARCH, 2006

As at
Schedule 31 March, 2005
Rupees ‘000 Rupees ‘000
FUNDS EMPLOYED:
1 SHARE CAPITAL 1 2,850,000 2,850,000
2 RESERVES AND SURPLUS 2 51,151,964 51,894,856
3 TOTAL SHAREHOLDERS’ FUNDS 54,001,964 54,744,856
4 SECURED LOANS 3 775,959 169,371
5 UNSECURED LOANS 4 18,905,503 -
6 OBLIGATIONS UNDER FINANCE LEASE 745,318 -
7 DEFERRED TAX LIABILITY (NET) 753,509 996,796
(Refer note B14, Schedule 22)
75,182,253 55,911,023
APPLICATION OF FUNDS:
8 FIXED ASSETS: 5
(a) Gross Block 71,934,540 33,338,956
(b) Less: Depreciation 12,515,766 8,484,629
(c) Net Block 59,418,774 24,854,327
(d) Capital work-in-progress 4,035,962 6,118,741
63,454,736 30,973,068
9 GOODWILL (ON CONSOLIDATION) 1,188,718 -
(Refer note B10, Schedule 22)
10 INVESTMENTS 6 17,862,468 9,447,917
11 A. CURRENT ASSETS
(a) Inventories 7 96,194 74,043
(b) Sundry Debtors 8 14,994,422 5,103,725
(c) Cash and Bank Balances 9 4,873,854 14,291,087
(d) Other Current Assets 10 1,196,643 767,915
21,161,113 20,236,770
B. LOANS AND ADVANCES 11 11,918,803 12,727,566
33,079,916 32,964,336
12 Less: CURRENT LIABILITIES AND PROVISIONS
(A) Current Liabilities 12 37,201,951 14,780,853
(B) Provisions 13 3,201,634 2,693,445
40,403,585 17,474,298
13 NET CURRENT (LIABILITIES) / ASSETS [(11) less (12)] (7,323,669) 15,490,038
TOTAL ASSETS (NET) 75,182,253 55,911,023
SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS 22

As per our report attached For and on behalf of the Board

For S.B. BILLIMORIA & CO.
Chartered Accountants

N. VENKATRAM SUBODH BHARGAVA N. SRINATH

Partner Chairman Executive Director

RAJIV DHAR SATISH RANADE

Chief Financial Officer Company Secretary & Chief Legal Officer
MUMBAI MUMBAI
DATED: 26 June, 2006 DATED: 26 June, 2006

78
CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 MARCH, 2006
Schedule Year ended
31 March, 2005
Rupees ‘000 Rupees ‘000
INCOME:
1 REVENUES FROM TELECOMMUNICATION SERVICES 14 45,624,243 33,083,061
2 OTHER INCOME 15 1,467,753 522,241
3 INTEREST INCOME 16 317,522 529,517
4 INTEREST ON INCOME TAX REFUNDS 564,218 -
5 TOTAL INCOME 47,973,736 34,134,819
EXPENDITURE:
6 SALARIES AND RELATED COSTS 17 3,796,450 1,600,647
7 NETWORK COSTS 18 25,806,670 20,082,817
8 OPERATING AND OTHER EXPENSES 19 9,770,955 4,060,140
9 INTEREST EXPENSE 20 398,393 12,280
10 DEPRECIATION 4,858,323 2,533,347
Less: TRANSFER FROM CAPITAL RESERVE (1,846) (1,859)
11 PRIOR PERIOD ADJUSTMENT (NET) 21 (109,004) -
12 TOTAL EXPENDITURE 44,519,941 28,287,372
PROFIT BEFORE TAXES AND EXCEPTIONAL ITEMS 3,453,795 5,847,447
13 EXCEPTIONAL ITEMS:
(a) Profit from sale of long term
investment, net of licence fee - 4,687,303
(b) Provision for recoverable pension
obligation (Refer note B6, Schedule 22) (64,220) (472,866)
(c) Fixed Assets written off (Refer note B7, Schedule 22) (612,127) -
PROFIT BEFORE TAXES 2,777,448 10,061,884
14 TAXES
(a) CURRENT TAX (2,282,580) (2,050,519)
(b) DEFERRED TAX 245,870 (925,630)
(c) FRINGE BENEFIT TAX (42,673) -
PROFIT AFTER TAXES 698,065 7,085,735
15 BALANCE BROUGHT FORWARD FROM PREVIOUS YEAR 9,330,126 4,953,872
16 AMOUNT AVAILABLE FOR APPROPRIATIONS 10,028,191 12,039,607
17 APPROPRIATIONS :
(a) PROPOSED DIVIDEND (Refer note B4, Schedule 22) 1,282,500 1,710,000
(b) TAX ON DIVIDEND 179,871 243,114
(c) GENERAL RESERVE 479,542 756,367
BALANCE CARRIED TO BALANCE SHEET 8,086,278 9,330,126
EARNINGS PER SHARE (EPS)
18 Basic/Diluted earnings per share, excluding
exceptional items (Rs.) (Refer note B15, Schedule 22) 4.02 12.66
19 Basic/Diluted earnings per share, including exceptional
items (Rs.)(Refer note B15, Schedule 22) 2.45 24.86
SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS 22

As per our report attached For and on behalf of the Board

For S.B. BILLIMORIA & CO.
Chartered Accountants

N. VENKATRAM SUBODH BHARGAVA N. SRINATH

Partner Chairman Executive Director

RAJIV DHAR SATISH RANADE

Chief Financial Officer Company Secretary & Chief Legal Officer
MUMBAI MUMBAI
DATED: 26 June, 2006 DATED: 26 June, 2006

79
VIDESH SANCHAR NIGAM LIMITED
Twentieth Annual Report 2005-2006

CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 MARCH, 2006
Year ended
31 March, 2005
(Rupees in ‘000) (Rupees in ‘000)
1. CASH FLOWS FROM OPERATING ACTIVITIES
PROFIT BEFORE TAXES AND EXCEPTIONAL ITEMS 3,453,795 5,847,447
Adjustments for:
Depreciation 4,858,323 2,533,347
Transfer from capital reserve (1,846) (1,859)
(Profit)/Loss on sale of fixed assets (35,869) 17,828
Interest income (317,522) (529,517)
Interest expense on bank loans 395,741 11,867
Fixed assets written down - 38,618
Interest on income tax refunds (564,218) -
Dividend income/profit on sale of current investments (483,999) (287,445)
Valuation loss on current investments - 149
Dividend income from long-term investments - (6,331)
OPERATING PROFIT BEFORE WORKING CAPITAL CHANGES 7,304,405 7,624,104
Inventories (20,321) 1,755
Sundry debtors (1,956,481) (1,597,015)
Other current assets, loans and advances (779,308) 201,476
Current liabilities and provisions 4,171,712 698,351
Cash generated from operations 8,720,007 6,928,671
Income tax refunds/ (paid) 245,981 (3,756,979)
Interest on income tax refunds 564,218 -
NET CASH FROM OPERATING ACTIVITIES 9,530,206 3,171,692
2. CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (10,631,463) (12,716,343)
Purchase of long-term investments (1,755,180) (2,354,000)
(Purchase)/Sale (net of mutual funds dividend reinvested) of current investments (net) (6,177,522) 8,570,651
Business acquisitions, net of cash (13,326,495) -
Proceeds from sale of fixed assets 127,444 714,478
Proceeds from sale of long-term investment (net of licence fees) - 7,789,383
Dividend income on long-term investments - 6,331
Dividend income on current investments 44,423 56,831
Fixed deposits (net) 11,555,755 (1,706,406)
Interest received 399,417 580,255
NET CASH (USED IN)/FROM INVESTING ACTIVITIES (19,763,621) 941,180
3. CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured loans (net) 6,588 62,202
Proceeds from/ repayment of unsecured loans (net) 14,444,503 (630,000)
Finance lease repayment (42,851) -
Dividends paid including dividend tax (1,949,694) (1,450,549)
Interest paid (215,372) (11,867)
CASH FLOW FROM/ (USED IN) FINANCING ACTIVITIES 12,243,174 (2,030,214)
NET INCREASE IN CASH AND CASH EQUIVALENTS 2,009,759 2,082,658
CASH AND CASH EQUIVALENTS AS AT 1 APRIL, 2005 2,393,252 305,588
(Refer note B13 Schedule 22)
Effect of exchange on cash and cash equivalents (1,412) 5,006
CASH AND CASH EQUIVALENTS AS AT 31 MARCH, 2006 4,401,599 2,393,252
(Refer note B13, Schedule 22)
Note :
Figures in brackets represent outflows.
As per our report attached For and on behalf of the Board
For S.B. BILLIMORIA & CO.
Chartered Accountants

N. VENKATRAM SUBODH BHARGAVA N. SRINATH

Partner Chairman Executive Director

RAJIV DHAR SATISH RANADE

Chief Financial Officer Company Secretary & Chief Legal Officer
MUMBAI MUMBAI
DATED: 26 June, 2006 DATED: 26 June, 2006

80
 SCHEDULES FORMING PART OF THE CONSOLIDATED BALANCE SHEET
As at As at
31 March, 2006 31 March, 2005
Rupees ‘000 Rupees ‘000
SCHEDULE - 1
SHARE CAPITAL
AUTHORISED :
300,000,000 (2005: 300,000,000) Equity Shares of Rs.10 each 3,000,000 3,000,000
ISSUED, SUBSCRIBED AND PAID UP
285,000,000 (2005: 285,000,000) Equity Shares of Rs.10 each, fully paid up 2,850,000 2,850,000
SCHEDULE - 2
RESERVES AND SURPLUS
(a) Capital Reserve 2,058,052 2,059,898
(b) Securities Premium 8,348,834 8,348,834
(c) General Reserve 32,642,195 32,162,653
(d) Profit and Loss Account 8,086,278 9,330,126
51,135,359 51,901,511
(e) Exchange Translation Reserve (net) 16,605 (6,655)
51,151,964 51,894,856
Notes:
1. Depreciation on gifted assets of Rs. 1,846 thousands (2005: 1,859 thousands) has been transferred from capital
reserve to the profit and loss account for the year ended 31 March, 2006
2. Capital reserve includes Rs. 2,052,161 thousands (2005: 2,052,161 thousands) in respect of foreign exchange gains
on unutilised proceeds from Global Depository Receipts credited to capital reserve in a previous year
3. As at 31 March, 2006 Rs. 479,542 thousands (2005: Rs 756,367 thousands) has been transferred from the profit and
loss account to general reserve
SCHEDULE - 3
SECURED LOANS
From Banks
Term-Loan from Hongkong and Shanghai Banking Corporation Limited 600,000 -
(Secured by hypothecation of moveable properties both present and future)
Term-Loan from Punjab National Bank (Refer note 1) 167,160 160,902
Term-Loan from Everest Bank Limited (Refer note 1) 8,799 8,469
775,959 169,371
Note:
1. Secured against Plant and Machinery of Joint Venture
SCHEDULE - 4
UNSECURED LOANS
From Banks 18,880,299 -
From Others 25,204 -
18,905,503 -
Note:
1. Loans repayable within one year Rs. 9,066,099 thousands (2005: Nil)

81
82
SCHEDULES FORMING PART OF THE CONSOLIDATED BALANCE SHEET
SCHEDULE - 5 (Rupees ‘000)
Sr. FIXED ASSETS GROSS BLOCK ACCUMULATED DEPRECIATION / AMORTISATION NET BLOCK
No 1 April, 2005 Additions Deductions/ 31 March, 1 April, Depreciation/ Deductions/ 31 March, 31 March, 31 March,
Adjustments 2006 2005 Amortisation Adjustments 2006 2006 2005
expense
1 TANGIBLE FIXED ASSETS
(a) LAND 782,327 634,686 (45,636) 1,371,377 36,308 8,287 - 44,595 1,326,782 746,019
782,327 - - 782,327 28,022 8,286 - 36,308 746,019
(b) LEASEHOLD IMPROVEMENTS - 776,053 - 776,053 - 47,709 226 47,935 728,118 -
- - - - - - - - -
(c) BUILDINGS 2,576,599 1,203,110 (268) 3,779,441 330,405 84,581 195 415,181 3,364,260 2,246,194
2,576,781 4,059 (4,241) 2,576,599 290,371 40,871 (837) 330,405 2,246,194
(d) PLANT AND MACHINERY 26,650,898 29,942,809 (1,619,203) 54,974,504 6,863,479 3,958,382 (794,280) 10,027,581 44,946,923 19,787,419
17,372,365 10,013,123 (734,590) 26,650,898 4,921,112 1,946,561 (4,194) 6,863,479 19,787,419
(e) FURNITURE AND FIXTURES 435,933 164,041 (1,066) 598,908 124,359 55,361 581 180,301 418,607 311,574
328,677 116,436 (9,180) 435,933 100,749 28,952 (5,342) 124,359 311,574
(f) OFFICE EQUIPMENTS 366,863 129,037 (5,168) 490,732 106,938 21,214 (1,459) 126,693 364,039 259,925
308,894 60,086 (2,117) 366,863 90,462 17,409 (933) 106,938 259,925
VIDESH SANCHAR NIGAM LIMITED

(g) COMPUTERS 1,539,025 688,960 (32,391) 2,195,594 793,985 307,775 (32,261) 1,069,499 1,126,095 745,040
1,407,050 150,245 (18,270) 1,539,025 509,728 288,393 (4,136) 793,985 745,040
(h) MOTOR VEHICLES 17,797 2,915 (887) 19,825 11,260 1,286 (516) 12,030 7,795 6,537
18,197 - (400) 17,797 9,607 1,972 (319) 11,260 6,537
(i) GOODWILL 969,514 5,648,777 - 6,618,291 217,895 344,274 189 562,358 6,055,933 751,619
1,019,514 - (50,000) 969,514 16,992 200,903 - 217,895 751,619
Twentieth Annual Report 2005-2006

2 INTANGIBLE ASSETS
(a) SOFTWARE - 677,618 - 677,618 - 26,061 123 26,184 651,434 -
- - - - - - - -
(b) DISTRIBUTION RIGHTS - 106,549 - 106,549 - 3,393 16 3,409 103,140 -
- - - - - - - -
(c) LICENCE FEES - 325,648 - 325,648 - - - - 325,648
- - - - - - - -
TOTAL 33,338,956 40,300,203 (1,704,619) 71,934,540 8,484,629 4,858,323 (827,186) 12,515,766 59,418,774 24,854,327
23,813,805 10,343,949 (818,798) 33,338,956 5,967,043 2,533,347 (15,761) 8,484,629 24,854,327
3 CAPITAL WORK IN PROGRESS
(Including advances for capital expenditure 4,035,962
Rs. 37,821 thousands (2005: 687,124 thousands)) 6,118,741
GRAND TOTAL 63,454,736
30,973,068

NOTES:
1 Land includes Rs. 638,340 thousands under lease. This includes: 3 Gross Block of fixed assets includes interest capitalised of Rs. 4,461 thousands (2005: Nil)
(i) Rs. 2,558 thousands in respect of which conveyance is not done. 4 Plant and machinery includes the net block of Indefeasible Rights of Use (IRUs) for domestic and
international telecommunication circuits Rs. 12,218,822 thousands (2005: Rs 3,460,548 thousands).
(ii) Leasehold Land in Srinagar in respect of which lease deed is not available.
5 Deduction/adjustments for the year ended 31 March 2004, included reduction in cost of gross block
(iii) Rs. 12,079 thousands in respect of which lease agreement has not been executed/ registered.
and corresponding reduction in accumulated depreciation aggregating Rs. 15,577,519 thousands and
(iv) Rs. 1,640 thousands identified as Surplus Land. Rs. 6,013,426 thousands respectively. The net reduction in carrying cost aggregating Rs. 9,564,093
2 Gross block of buildings include: thousands was debited to Securities Premium Account in accordance with the terms of the approval of
the shareholders and the High Court of Judicature at Bombay.
(i) Rs. 77,888 thousands for leasehold office space.
6 Figures in italics are for the previous year.
(ii) Rs. 4,398 thousands being cost of flats in Co-operative Societies under formation.
(iii) Rs. 335,181 thousands for flats at Mumbai and Rs. 10,030 thousands for office space at New Delhi
in respect of which agreements have not been executed.
 SCHEDULES FORMING PART OF THE CONSOLIDATED BALANCE SHEET
As at As at
31 March, 2006 31 March, 2005
Rupees ‘000 Rupees ‘000
SCHEDULE - 6
INVESTMENTS
I. TRADE INVESTMENTS - LONG TERM (At Cost)
A. Fully Paid Equity Shares (Unquoted)
(a) Tata Teleservices Ltd. 8,101,749 6,346,569
(Refer note B5, Schedule 22)
(b) New ICO Global Communications (Holdings) Limited 65 65
(c) Wmode inc. 25,276 -
8,127,090 6,346,634
B. Current Investments (Unquoted)
Investments In Mutual Funds 9,735,378 3,101,283
17,862,468 9,447,917

SCHEDULE - 7
INVENTORIES
Equipments for resale 66,554 80,726
Less: Provision for obsolescence (85) (9,926)
66,469 70,800
Consumable stores and spares (at cost) 29,725 3,243
96,194 74,043

SCHEDULE - 8
SUNDRY DEBTORS
(a) Over six months (unsecured)
Considered good 3,092,860 411,495
Considered doubtful 2,185,545 1,314,693
5,278,405 1,726,188
Less: Provision for doubtful debts (2,185,545) (1,314,693)
3,092,860 411,495
(b) Other debts (unsecured)
Considered good 11,901,562 4,692,230
14,994,422 5,103,725

SCHEDULE - 9
CASH AND BANK BALANCES
(a) Cash in hand 1,200 1,120
(b) Cheques in hand 1,639,166 28,620
(c) Remittances in transit 630,265 -
(d) Current accounts with banks 2,083,594 321,769
(e) Deposit accounts with banks 519,629 13,939,578
4,873,854 14,291,087

Note:
i) Deposit accounts include Rs.NIL (2005: Rs. 5,972,069 thousands) representing unutilised monies from GDR issue.

83
VIDESH SANCHAR NIGAM LIMITED
Twentieth Annual Report 2005-2006

SCHEDULES FORMING PART OF THE CONSOLIDATED BALANCE SHEET

As at As at
31 March, 2006 31 March, 2005
Rupees ‘000 Rupees ‘000
SCHEDULE - 10
OTHER CURRENT ASSETS
(a) Interest receivable 43,825 125,720
(b) Service tax recoverable 306,076 294,020
(c) Pension contributions recoverable from Government of India (net of provision of
Rs. 537,086 thousands; 2005: Rs. 472,866 thousands) (Refer note B6, Schedule 22) 74,424 74,424
(d) Licence fees paid recoverable from Government of India 531,158 245,606
(e) Others 241,160 28,145
1,196,643 767,915
SCHEDULE - 11
LOANS AND ADVANCES
(a) Unsecured - Considered good
(i) Staff advances 125,895 135,308
(ii) Deposits with public bodies and others 433,794 116,319
(iii) Other loans and advances 448,371 672,765
(iv) Prepaid expenditure 1,968,785 289,982
(v) Advance payment of tax (net of provision for tax) 8,941,958 11,513,192
11,918,803 12,727,566
(b) Unsecured - Considered doubtful
Other loans and advances 73,786 73,786
Less: Provision for doubtful advances (73,786) (73,786)
11,918,803 12,727,566
SCHEDULE - 12
CURRENT LIABILITIES
(a) Sundry Creditors:
(i) Creditors for interconnect charges 14,164,788 3,595,601
(ii) Others (note 2) 8,148,334 5,779,497
(b) Unearned income and deferred revenues 10,627,095 2,996,878
(c) Investor Education and Protection Fund - unpaid dividend 11,906 11,772
(d) Government of India current account 205,747 210,393
(e) Other liabilities (note 1) 3,863,712 2,186,712
(f ) Interest accrued but not due on loans taken from banks 180,369 -
37,201,951 14,780,853

Notes:
(1) Includes Rs.249,120 thousands overdrawn
book bank balance (2005: Rs.74,556 thousands)
(2) Sundry creditors includes Rs. 140,250 thousands payable on purchase of
ISP business of Seven Star Dot Com Pvt. Ltd. (Refer note B11, Schedule 22)

SCHEDULE - 13
PROVISIONS
(a) Provisions for employee benefits 1,408,037 702,880
(b) Provision for proposed dividend 1,282,500 1,710,000
(c) Tax on dividend 179,871 239,828
(d) Provision for contingencies (Refer note B20, Schedule 22) 331,226 40,737
3,201,634 2,693,445

84
 SCHEDULES FORMING PART OF THE CONSOLIDATED PROFIT AND LOSS ACCOUNT
Year ended Year ended
31 March, 2006 31 March, 2005
Rupees ‘000 Rupees ‘000
SCHEDULE - 14
REVENUES FROM TELECOMMUNICATION SERVICES
(a) Telephone 26,171,865 18,852,517
(b) Leased channel 9,203,174 7,124,052
(c) Frame relay 1,642,046 1,382,652
(d) Internet 6,941,524 5,005,044
(e) Other traffic revenues 1,665,634 718,796
45,624,243 33,083,061

SCHEDULE-15
OTHER INCOME
(a) Dividend income from current investments 406,674 278,419
(b) Dividend income from long-term investments - 6,331
(c) Profit on sale of current investments (net) 77,325 9,026
(d) Profit on sale of fixed assets (net) (Refer note B12, Schedule 22) 35,869 -
(e) Rent 103,476 48,786
(f ) Exchange gain (net) 89,031 -
(g) Provisions no longer required written back 344,039 -
(h) Other 411,339 179,679
1,467,753 522,241

SCHEDULE-16
INTEREST INCOME
(a) Interest income-
i. Bank deposits 308,340 520,800
(Tax deducted at source Rs.58,603 thousands;
2005:Rs.93,487 thousands)
ii. Other loans and advances 9,182 8,717
(Tax deducted at source Rs.1,296 thousands;
2005:Rs.1,648 thousands)
317,522 529,517

SCHEDULE - 17
SALARIES AND RELATED COSTS
(a) Salaries and bonus 3,326,560 1,339,059
(b) Contribution to provident, gratuity and other funds 167,513 69,473
(c) Staff welfare expenses 302,377 192,115
3,796,450 1,600,647

85
VIDESH SANCHAR NIGAM LIMITED
Twentieth Annual Report 2005-2006

SCHEDULES FORMING PART OF THE CONSOLIDATED PROFIT AND LOSS ACCOUNT

Year ended Year ended
31 March, 2006 31 March, 2005
Rupees ‘000 Rupees ‘000
SCHEDULE-18
NETWORK COSTS
(a) Rent of satellite channels 883,014 1,084,971
(b) Rent of landlines 301,968 1,195,195
(c) Administrative lease charges 117,606 95,389
(d) Royalty and licence fee to Department of Telecommunications 2,048,389 2,118,149
(e) Charges for use of transmission facilities
(i) Telephone (net of excess provision written back
Rs 82,400 thousands; 2005: Rs. 118,489 thousands) 19,066,500 14,070,670
(ii) Leased channel 1,523,237 167,227
(iii) Frame relay 377,990 -
(iv) Internet 836,848 856,549
(v) Others 651,118 494,667
25,806,670 20,082,817
SCHEDULE - 19
OPERATING AND OTHER EXPENSES
(a) Consumption of stores 19,526 16,507
(b) Light and power 623,440 336,343
(c) Repairs and Maintenance:
(i) Buildings 222,563 54,300
(ii) Plant and Machinery 2,543,671 1,082,085
(iii) Others 169,259 91,161
(d) Bad Debts written off 300,335 526,909
(e) Provision for doubtful debts written back (58,935) (577,943)
(f ) Provision for doubtful advances - 35,677
(g) Rent 942,595 142,106
(h) Rates and taxes 285,498 83,737
(i) Travelling expenses 380,293 172,436
(j) Telephone and telex 170,125 73,153
(k) Printing, postage and stationery 225,861 29,090
(l) Security expenses 22,659 57,569
(m) Computer software and maintenance 79,229 57,798
(n) Legal and professional fees 625,454 350,362
(o) Advertising and publicity 1,160,284 650,504
(p) Commissions 212,352 77,244
(q) Insurance 118,666 41,946
(r) Donations 65,415 1,039
(s) Loss on sale of fixed assets (net) - 17,828
(t) Exchange loss (net) - 152,980
(u) Services rendered by third parties 1,091,659 228,682
(v) Other expenses 571,006 358,627
9,770,955 4,060,140

86
 SCHEDULES FORMING PART OF THE CONSOLIDATED PROFIT AND LOSS ACCOUNT
Year ended Year ended
31 March, 2006 31 March, 2005
Rupees ‘000 Rupees ‘000
SCHEDULE - 20
INTEREST EXPENSE
Interest on:
- Bank loans 395,741 11,867
- Others 2,652 413
398,393 12,280
SCHEDULE - 21
PRIOR PERIOD ADJUSTMENTS (NET)
INCOME:
Revenues from telecommunication services 67,005 -
EXPENSES:
Charges for use of transmission facilities (186,904) -
Repairs and maintenance 8,157 -
Other expenses 2,738 -
(109,004) -
Note: Figures in brackets are credits

87
VIDESH SANCHAR NIGAM LIMITED
Twentieth Annual Report 2005-2006

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS

SCHEDULE 22
A. SIGNIFICANT ACCOUNTING POLICIES
1. Basis of preparation
The consolidated financial statements of Videsh Sanchar Nigam Limited (the Company), its subsidiary companies
and joint ventures (“the Group”) have been prepared under the historical cost convention, in accordance with the
accounting standards issued by the Institute of Chartered Accountants of India.
Comparative figures do not include the figures of new entities consolidated during the year namely Teleglobe and
its subsidiaries, VSNL Broadband Ltd. (“VBL”), VSNL SNOSPV Pte. Ltd. (“SNOSPV”), SEPCO Communications Pty. Ltd.
(“SEPCO”) and its subsidiary and companies formed by Tyco International Ltd. (“Tyco”) for takeover of the Tyco Global
Network (“TGN”) business by the Company. Consequently, the corresponding figures for the previous year are not
comparable with the figures for the year ended and as at 31 March, 2006.
2. Principles of consolidation
The financial statements of the subsidiary companies used in the consolidation are drawn up to the same reporting
date as of the Company.
The consolidated financial statements have been prepared on the following basis:
i) The financial statements of the Company and its subsidiary companies have been combined on a line-by-line
basis by adding together like items of assets, liabilities, income and expenses. Inter-company balances and
transactions, and unrealised profits or losses have been fully eliminated.
ii) The consolidated financial statements include the interest in joint ventures which has been accounted as per
the ‘proportionate consolidation’ method as per Accounting Standard 27-‘Financial Reporting of Interests in
Joint Ventures’. Unrealised profits and losses have been eliminated to the extent of the Company’s share in the
joint ventures.
iii) The excess of cost to the Company of its investment in a subsidiary company over its share of the equity of the
subsidiary company at the date on which the investment in the subsidiary company is made is recognized as
‘Goodwill’ being an asset in the consolidated financial statements. Alternatively, where the share of equity in the
subsidiary companies as on date of investment, is in excess of cost of investment of the Company, it is recognised
as `Capital Reserve’ and shown under the head `Reserves and Surplus’, in the consolidated financial statements.
iv) Minority interest in the net assets of consolidated subsidiaries consists of the amount of equity attributable to
the minority shareholders at the dates on which investments are made by the Company in the subsidiary
companies and further movements in their share in the equity, subsequent to the dates of investments.
3. Use of estimates
The preparation of financial statements requires the management of the Company to make estimates and assumptions
that affect the reported balances of assets and liabilities and disclosures relating to the contingent liabilities as at
the date of the financial statements and reported amounts of income and expenses during the period. Examples of
such estimates include allocation of purchase price on acquisition, provisions for doubtful debts and advances,
employee retirement benefit obligations, provision for income taxes, provision for cable restoration, impairment of
assets, asset retirement obligation and useful lives of fixed assets.
4. Fixed assets
a) Fixed assets are stated at cost less accumulated depreciation. Cost includes freight, duties, taxes, salaries and
employee benefits directly related to the construction or development of the asset, interest costs incurred to
finance construction and all incidental expenses incurred to bring the assets to their present location and
condition.

88
 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.)
b) Fixed assets received as gifts from other Foreign Telecom Administrations are capitalised and credited to capital
reserve on the basis of notional cost (cost assessed by customs authorities). Cost includes freight, insurance and
customs duty.
c) Intangible assets in the nature of Indefeasible Rights of Use (IRUs) for international and domestic
telecommunication circuits are recorded as fixed assets. IRU agreements transfer substantially all the risks and
rewards of ownership.
d) Jointly owned assets are capitalised in proportion to the Company’s ownership interest in such assets.
e) Consideration for purchase of business in excess of the value of net assets acquired is recognised as goodwill.
f) Internally developed computer software, distribution rights and licence fees have been classified as intangible
assets.
g) Assets acquired pursuant to an agreement for exchange of similar assets are recorded at the net book value of
the asset given up, with an adjustment for any balancing receipt or payment of cash or other consideration.
5. Depreciation
Depreciation is charged over the periods set out below so as to write-off the cost of the asset on a straight line basis
over the estimated useful lives, at the following rates:
a) Leasehold land Lease period
b) Leasehold improvements Lease period
c) Buildings 1.64% to 4.00%
d) Plant and Machinery
(i) Indefeasible Rights of Use (IRU’s) life of IRU or period of agreement, whichever is lower
(ii) Other plant and machinery 4.75% to 33.33%
e) Furniture and fixtures 6.33% to 25.00%
f) Office equipment 4.75% to 25.00%
g) Computers 15.83% to 33.33%
h) Motor vehicles 9.50% to 20.00%
i) Goodwill on purchase of business 60 months
j) Intangibles
(i) Internally developed computer software 20.00% to 33.33%
(ii) Distribution rights 25.00%
(iii) License fees 4.00%
6. Leases
Lease arrangements where the risk and rewards incident to ownership of an asset substantially vests with the lessor
are classified as operating lease.
Rental income and rental expense on assets given or obtained under operating lease arrangements are recognised
on a straight - line basis over the term of the relevant lease.
The initial direct costs relating to operating leases are recorded as expense as they are incurred.
Assets given under finance lease are recognised at an amount equal to the net investment in the lease and the
finance income is based on a constant rate of return on the outstanding net investment.
Assets acquired under lease where the Company has substantially all the risks and rewards of ownership are classified
as finance lease. Such leases are capitalised at the inception of the lease at lower of the fair value or the present
value of the minimum lease payments and a liability is created for an equivalent amount. Each lease rental paid is
allocated between the liability and the interest cost so as to obtain a constant periodic rate of interest on the
outstanding liability for each year.

89
VIDESH SANCHAR NIGAM LIMITED
Twentieth Annual Report 2005-2006

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.)

7. Impairment
At each balance sheet date, the Company reviews the carrying amounts of its fixed assets to determine whether
there is any indication that those assets suffered an impairment loss. If any such indication exists, the recoverable
amount of the asset is estimated in order to determine the extent of the impairment loss. Recoverable amount is the
higher of an asset’s net selling price and value in use. In assessing the value in use, the estimated future cash flows
expected from the continuing use of the asset and from its ultimate disposal are discounted to their present values
using a pre-determined discount rate that reflects the current market assessments of the time value of money and
risks specific to the asset.
8. Asset Retirement Obligation (“ARO”)
The Company’s ARO relate to the removal of cable systems and switches when they will be retired. Provision is
recognised based on management’s best estimate of the eventual costs that relate to such obligation and is adjusted
to the cost of such assets.
9. Investments
Long-term investments are valued at cost less provision for diminution in value. Provision for diminution in the value
is made to recognise a decline, which is other than temporary. Current investments comprising investments in
mutual funds are stated at the lower of cost or fair value, determined on an individual investment basis.
10. Inventories
Inventories are valued at the lower of cost and net realisable value. Cost is determined on a weighted average basis.
11. Retirement Benefits
a) Provision for unutilised leave due to employees, gratuity and pension contribution are actuarially determined
as at the balance sheet date.
b) Contributions to Employees’ Provident Fund, other defined contribution plans and overseas pension plans are
recognised in the profit and loss account in the period when such contributions are made.
12. Revenue recognition
a) Revenues from telephony services are recognised at the end of each month based upon minutes of incoming
or outgoing traffic completed in such month. Substantial portion of revenues are on account of recoveries from
Foreign Telecommunication Administrations for incoming traffic and recovery from domestic carriers for delivery
of calls on foreign networks.
b) Revenues from data services are recognised over the lease period based on contracted fee schedules.
c) Revenues from right to use of fibre capacity provided based on IRU are recognised over the period of such
arrangements.
d) Revenues from internet services are recognised based on usage.
e) Dividend from investments is recognized when the right to receive payment is established and no significant
uncertainty as to measurability or collectibility exists.
f) Transactions relating to exchange or swapping of capacities, and which results in little or no consideration,
represent the exchange of productive assets not held for sale in the ordinary course of business and, as such, do
not result in the culmination of the earnings process and hence the Company does not recognize any revenue
for these types of transactions.
g) Transactions with providers of telecommunication services such as buying, selling, swapping and / or exchange
of traffic are accounted for as non-monetary transactions, depending upon the terms of the agreements entered
into with such telecommunication service providers.

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13. Taxation
Current income tax expense comprises taxes on income from operations in India and foreign tax jurisdictions.
Income tax payable in India is determined in accordance with the provisions of the Income Tax Act, 1961.Tax
expense relating to overseas operations is determined in accordance with tax laws applicable in countries where
such operations are domiciled.
Deferred tax expense or benefit is recognised on timing differences being the difference between taxable income
and accounting income that originate in one period and are capable of reversal in one or more subsequent periods.
Deferred tax assets and liabilities are measured using the tax rates and tax laws that have been enacted or
substantively enacted by the balance sheet date.
Deferred tax assets in respect of unabsorbed depreciation and carry forward tax losses are recognised only to the
extent that there is virtual certainty that there will be sufficient future taxable income available to realise these
assets. All other deferred tax assets in respect of other timing differences are recognised if there is a reasonable
certainty that sufficient future taxable income will be available to realise such assets.

14. Foreign currency transactions

a) Foreign currency transactions are converted at rates of exchange approximating those prevailing at the
transaction date. Foreign currency monetary assets and liabilities are translated at the exchange rate prevailing
on the balance sheet date. Exchange differences, other than on foreign currency liabilities to purchase fixed
assets from countries outside India are recognised in the profit and loss account. Exchange differences on
translation of foreign currency liabilities incurred to purchase fixed assets from countries outside India are
adjusted in the cost of such assets.
b) Premium or discount on forward contracts is amortised over the life of such contracts and is recognised in the
profit and loss account, except in respect of forward contracts taken for liabilities for fixed assets where such
amortisation is adjusted in the carrying cost of fixed assets. Forward contracts outstanding as at the balance
sheet date are stated at exchange rate prevailing at the reporting date and any gains or losses are recognised in
the profit and loss account. Profit or loss arising on cancellation or renewal of forward exchange contract is
recognised in the profit and loss account in the period of such cancellation or renewal, except in case of a
forward contract relating to liabilities for purchase of fixed assets from countries outside India, in which case
such profit or loss is adjusted to the carrying cost of such fixed assets.
c) For the purpose of consolidation of foreign subsidiaries and joint ventures, income and expenses are translated
at average rates and the assets and liabilities are stated at closing rate. The net impact of such change is
disclosed under exchange translation reserve.

B. NOTES TO ACCOUNTS
1. Particulars of subsidiaries and joint ventures :
Country of Incorporation Percentage of voting
power
Subsidiaries (held directly)
VSNL Broadband Ltd. India 100.00
VSNL Lanka Ltd. Sri Lanka 100.00
VSNL America Inc. United States of America 100.00
VSNL Singapore Pte Ltd. Singapore 100.00
VSNL SNOSPV Pte. Ltd. Singapore 100.00

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Country of Incorporation Percentage of voting
power
Subsidiaries (held indirectly)
VSNL Telecommunications(Bermuda) Ltd. Bermuda 100.00
VSNL UK Ltd. United Kingdom 100.00
VSNL Bermuda Ltd. Bermuda 100.00
VSNL Netherlands BV Netherlands 100.00
VSNL Hong Kong Ltd. Hong Kong 100.00
Enhanced Services Inc. United States of America 100.00
ITXC (UK)Ltd. United Kingdom 100.00
ITXC Global Hong Kong Ltd. Hong Kong 100.00
ITXC Global Japan YK Japan 100.00
ITXC Global UK Ltd. United Kingdom 100.00
ITXC Global Zagreb d.o.o Croatia 100.00
ITXC IP Holdings S.a.r.l Luxembourg 100.00
Teleglobe America Inc. United States of America 100.00
Teleglobe Asia Data Transport Pte. Ltd. Singapore 100.00
Teleglobe Asia Pte. Ltd. Singapore 100.00
Teleglobe Bermuda Ltd. Bermuda 100.00
Teleglobe Canada ULC Canada 100.00
Teleglobe France International S.A.S France 100.00
Teleglobe International Belgium S.P.R.L Belgium 100.00
Teleglobe International Hong Kong Ltd. Hong Kong 100.00
Teleglobe International Ltd. United Kingdom 100.00
Teleglobe International Luxembourg S.a.r.l. Luxembourg 100.00
Teleglobe Italy S.r.l. Italy 100.00
Teleglobe Netherlands B.V Netherlands 100.00
Teleglobe Spain Communications S.L Spain 100.00
TLGB International Germany GmbH Germany 100.00
TLGB Luxembourg Holdings S.a.r.L Luxembourg 100.00
TLGB Netherlands Holdings B.V Netherlands 100.00
VSNL (Portugal) Unipessoal Limitada Portugal 100.00
VSNL Belgium BVBA Belgium 100.00
VSNL France SAS France 100.00
VSNL International (Nordics) AS Norway 100.00
VSNL International (Global) Corp. United States of America 100.00
VSNL International (Guam) Llc Guam 100.00
VSNL International (Portugal) Instalacao e
Manutencao de Redes LDA Portugal 100.00

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VSNL International (US) Inc. United States of America 100.00

VSNL International Australia Pty. Ltd. Australia 100.00
VSNL International GBRM Ltd. Bermuda 100.00
VSNL International IPCO LLC United States of America 100.00
VSNL International Puerto Rico Inc. Puerto Rico 100.00
VSNL International(ITXC) Corp. United States of America 100.00
VSNL International(Poland) Sp. Zo.o Poland 100.00
VSNL Japan K.K Japan 100.00
VSNL Spain Srl Spain 100.00
VSNL Telecommunications(UK) Inc. United Kingdom 100.00
VSNL(Germany) GMBH Germany 100.00
Joint Ventures
United Telecom Ltd. Nepal 26.66
SEPCO Communications Pty. Ltd. South Africa 47.00
and its subsidiary
2. The contributions of the significant subsidiaries and joint ventures acquired / formed during the year is as under:
Rupees ‘000
Name of Subsidiary Revenue Net Profit/(Loss) Net Assets
(post acquisition) (post acquisition)
VSNL Singapore Pte. Ltd. and its subsidiaries 10,801,448 (4,079,329) (1,544,491)
VSNL Broadband Ltd. 200,269 77,673 909,892
VSNL SNOSPV Pte. Ltd. 61 (28,732) (10,815)
SEPCO Communications Pty. Ltd 756 (28,548) (29,366)

3. The Company was incorporated on 19 March, 1986. The Government of India vide its Order No. G 25015/6/86-OC
dated 27 March,1986 transferred all the assets and liabilities of the OCS (part of the Department of
Telecommunications, Ministry of Communications) as appearing in the Balance Sheet as at 31 March, 1986 to the
Company with effect from 1 April,1986. As per the letter no. G-25015/6/86-OC dated 23 October, 2001 of Government
of India, Department of Telecommunications, there was no requirement to register a formal transfer deed or deed of
sale in the matter of such transfer of assets.

4. The Board of Directors of the Company recommended a dividend of Rs. 4.5 (2005: Rs. 6.0 including Rs. 1.5 special
dividend) per share to its shareholders for the year ended 31 March, 2006 based on the financial results of the
Company.

5. The Company has an investment of Rs. 8,101,749 thousands in Tata Teleservices Ltd.(“TTSL”) representing an equity
interest of 16.14 percent in the issued and paid-up capital of TTSL. TTSL has accumulated losses, which have
significantly eroded its net worth. In the opinion of the management, having regard to the long gestation period
inevitable to the nature of its business, there is no permanent diminution in value of the investment.

During the current financial year, TTSL issued equity shares to certain other investors at a price that is higher than
the carrying value of the equity shares in the books of the Company.

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6. As at 1 April, 2004 proportionate share of pension obligation and payments to erstwhile OCS employees of Rs.547,290
thousands were recoverable from the Government of India (“the Government”). Pursuant to discussions with the
Government, the Company had made a provision of Rs. 472,866 thousands in the year ended 31 March, 2005.

In the current year, consequent to an actuarial valuation, the pension obligation towards the erstwhile OCS employees
has increased by Rs. 64,220 thousands. Pending resolution of the matter and recovery of this amount from the
Government, the Company has provided for the additional amount recoverable in the Profit and Loss account.

7. During the year the Company has charged to the Profit and Loss account a sum of Rs.612,127 thousands towards
write off of certain fixed assets having a gross value and accumulated depreciation of Rs. 1,594,407 thousands and
Rs. 982,280 thousands respectively. In the opinion of the management, these assets do not have future economic
use consequent to technological changes and product related advancements.

8. On 30 June, 2005 the Company, through its wholly owned subsidiary VSNL Singapore Pte. Limited (“VSPL”), completed
the acquisition of TGN through the purchase of certain net assets and shares of certain companies formed by Tyco
pursuant to the Stock and Asset Purchase Agreement dated 1 November, 2004. The Company acquired net assets of
Rs. 6,143,243 thousands ($ 137.7 million), for a total purchase consideration of Rs. 6,143,243 thousands ($137.7
million).

9. On 13 February, 2006, the Company through its wholly owned subsidiary VSPL, completed its acquisition of Teleglobe
by acquiring 100% of the common shares of Teleglobe pursuant to the Agreement and Plan of Amalgamation dated
25 July, 2005, amongst Teleglobe, the Company and VSNL Telecommunications (Bermuda) Ltd - a wholly-owned
subsidiary of VSPL. The Company acquired net assets of Rs. 2,699,447 thousands($ 60.5 million), for a total purchase
consideration of Rs.8,186,336 thousands ($183.5 million). Consequently, an amount of Rs. 5,486,889 thousands
($123.0 million) has been recognised as goodwill and included under fixed assets.

The amalgamation has been accounted for under the Purchase Method as prescribed by Accounting Standard (AS-
14) issued by the The Institute of Chartered Accountants of India. Accordingly, the assets and liabilities have been
taken over based on the allocation of consideration to individual identifiable assets and liabilities of Teleglobe on
the basis of their fair values at the date of amalgamation.

10. On 31 October, 2005, the Company completed its acquisition of VBL (formerly Tata Power Broadband Ltd.) by
purchasing 100% of the common shares of VBL. The Company acquired net assets of Rs. 832,219 thousands for a
cash consideration of Rs.2,020,937 thousands. Consequently, Rs. 1,188,718 thousands has been recognised as goodwill
on consolidation.

11. On 1 March, 2006, the Company purchased the internet service provider (ISP) business of Seven Star Dot Com Pvt.
Ltd. (“Seven Star”) under a slump sale agreement. The Company acquired net assets of Rs. 8,795 thousands for a
purchase consideration of Rs. 170,683 thousands. Consequently, an amount of Rs. 161,888 thousands has been
recognised as goodwill and included under fixed assets.

The valuation of fixed assets amounting to Rs. 13,543 thousands acquired under the slump sale agreement has been
determined by the management based on an independent valuation. Legal formalities relating to transfer of assets
and contracts in the name of the Company are pending completion.

12. Profit on sale of fixed asset includes sale of a portion of land by an overseas subsidiary in the Group for Rs. 120,447
thousands resulting in a gain of Rs. 53,532 thousands.

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13. Cash and cash equivalents represent:-
As at As at
31 March, 2006 31 March, 2005
Rupees ‘000 Rupees ‘000
Cash and Cheques on hand and balances held with banks 3,723,960 351,509
Remittances in transit 630,265 -
Deposit accounts held with banks 519,629 13,939,578
4,873,854 14,291,087
Deposits with original maturity over three months (334,957) (11,890,712)
Current Account / Deposits held for unpaid dividends (11,808) (6,271)
Deposit accounts held as margin money (125,490) (852)
Cash and cash equivalents 4,401,599 2,393,252

14. Deferred tax liability:

As at As at
31 March, 2006 31 March, 2005
Rupees ‘000 Rupees ‘000
Deferred tax liability
Difference between accounting and tax depreciation 1,818,776 1,857,787
1,818,776 1,857,787
Deferred tax assets
Provision for doubtful debts 420,689 441,125
Expenditure on voluntary retirement schemes 138,634 210,369
Expenditure incurred on NLD license fees ( Refer note below ) 265,737 -
Unearned income / deferred revenues 181,781 177,169
Others 58,426 32,328
1,065,267 860,991
Net deferred tax liability 753,509 996,796

Note:
In March 2002, the Company paid a one time entry fee of Rs. 1,000,000 thousands to the Department of
Telecommunications for providing National Long Distance (“NLD”) service. The Company commenced its NLD
operations with effect from September 2002. Owing to uncertainty relating to the allowability of the one time entry
fee paid under Sec 35 ABB of the Income Tax Act, 1961, the Company did not consider the deduction in the provision
for tax and consequently did not set up a deferred tax asset. During the current year, the Company has set up a
deferred tax asset of Rs. 265,737 thousands consequent to the deduction being allowed in its income tax assessment

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for A.Y. 2003-2004.

15. Earnings per Share
Rupees ‘000,
except Number of Shares and Earnings
per share data
Year ended Year ended
31 March, 2006 31 March, 2005
Profit before taxes and exceptional items 3,453,795 5,847,447
Income tax expense on profit excluding exceptional items 2,307,041 2,238,229
Profit after tax excluding exceptional items 1,146,754 3,609,218
Exceptional (expense)/ income (net) (676,347) 4,214,437
Income tax benefit/(expense) on exceptional items 227,658 (737,920)
Net Profit after tax and exceptional items 698,065 7,085,735
Number of Shares 285,000,000 285,000,000
Earnings per share excluding exceptional items Rs. 4.02 Rs.12.66
Earnings per share including exceptional items Rs. 2.45 Rs.24.86

16. Business Segments

In the year ended 31 March, 2006, as a result of changes in the form and content of segment information provided
to and used by the Management to allocate resources and assess performance and change in the organisational
structure, the Company has reviewed and revised its reportable segments.
The reportable segments in the current year are “Wholesale Voice”, “Enterprise and Carrier Data” and “Others”. The
composition of the reportable segments is as follows
- Wholesale Voice: includes International and National Voice services.
- Enterprise and Carrier Data: includes corporate data transmission services like IPLC, Frame Relay, ILL and NPLC.
- Others: includes Internet, GPSS, Telex, Telegraph, TV up-linking, Transponder lease, Global Roaming and other
services.
In the previous year, “Telephony and related services” which included international and national voice and data
services and internet was considered as a reportable segment and other services including transponder lease,
television uplinking, gateway packet switching services and video conferencing facilities were reported under “Other
Services”.
Year ended 31 March, 2006
Rupees ‘000
Wholesale Voice Enterprise and Others Total
Carrier Data
Revenues 26,152,432 14,707,511 4,764,300 45,624,243
Segment Results 6,029,849 11,626,517 2,441,612 20,097,978
Unallocated expenses (net) 16,753,187
Prior Period Income (net) 109,004

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Profit before taxes and exceptional items 3,453,795

Exceptional Items (676,347)
Profit before taxes 2,777,448
Income Taxes 2,079,383
Profit after taxes 698,065

Year ended 31 March, 2005

Rupees ‘000
Wholesale Enterprise and
Voice Carrier Data Others Total
Revenues 18,833,494 11,154,609 3,094,958 33,083,061

Segment Results 3,312,531 8,666,434 1,159,758 13,138,723

Unallocated expenses (net) 7,291,276

Profit before taxes and exceptional items 5,847,447
Exceptional Items 4,214,437
Profit before taxes 10,061,884
Income Taxes 2,976,149
Profit after taxes 7,085,735

i) Revenues and expenses, which are directly identifiable to segments, are attributed to the relevant segment. Expenses
on rent of satellite channels and landlines, and royalty and license fee are allocated on the basis of usage. Segment
result is segment revenues less segment expenses. Certain costs, including depreciation which are not allocable to
segments have been classified as “unallocable expense”.

ii) Telecommunication services are provided utilizing the Company’s assets which do not generally make a distinction
between the types of services. As a result, fixed assets are used interchangeably between segments. In the absence
of a meaningful basis to allocate assets and liabilities between segments, no allocation has been made.

iii) Segment information for the year ended 31 March, 2005 has been presented in accordance with the basis of
segmentation adopted for the current year.

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Geographical Segment:
Segment revenues by
Geographical Market
Year ended
31 March, 2006
Rupees ‘000
India 21,272,409
United States of America 7,197,088
United Kingdom 3,459,780
United Arab Emirates 26,07,832
Others 11,087,134
45,624,243

Segment revenues by
Geographical Market
Year ended
31 March, 2005
Rupees ‘000
India 19,078,700
United States of America 3,812,001
United Arab Emirates 2,633,825
Saudi Arabia 1,026,045
Others 6,532,490
33,083,061

For the year ended 31 March, 2006 and 31 March, 2005, revenues from customers comprise mainly revenues from
Wholesale Voice and Enterprise and Carrier data segments under the revised segments.
17. Related Party Disclosures
(a) List of related parties and relationship:
I. Investing party
· Panatone Finvest Limited
II. Key Managerial Personnel
· N.Srinath - Executive Director
· Vinod Kumar - Executive Director (VSPL)
III. Joint Ventures
· United Telecom Ltd.
· SEPCO Communications Pty. Ltd.
· SNO Telecommunications Pty. Ltd. (“SNO”) – subsidiary of SEPCO
IV. Company owned by Executive Director of subsidiary.
· Panther Technology Partners Pvt. Ltd.

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(b) Related party transactions

Rupees ‘000
Investing Key Company owned Joint
Company Managerial by Executive Ventures
Personnel Director of
subsidiary
Transactions:
Revenues from telecommunication services 14,585
8,763
Network Cost 7,330
132
Loans given to SEPCO 9,650
-
Managerial remuneration - 23,318
- 24,021
Dividend paid 694,433 -
577,125 -
Commissions 56,610

Balances:
Loans Given 9,650
-
Advances given to SEPCO 17,784
-
Receivables 11,816
6,818
Payables - 2,500 56,878
- 2,500 -
Note: Figures in italics are in respect of the previous year

18. Operating lease arrangements:

(a) As lessee:
Year ended Year ended
31 March, 2006 31 March, 2005
Rupees ‘000 Rupees ‘000
Minimum lease payments under operating leases recognized as
expense in the year 2,014,608 1,242,295

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At the balance sheet date, minimum lease payments under non- cancellable operating leases fall due as follows:

Year ended Year ended

31 March, 2006 31 March, 2005
Rupees ‘000 Rupees ‘000
Due not later than one year 2,673,092 721,221
Due later than one year but not later than five years 6,668,899 923,759
Later than five years 6,498,704 92,885
15,840,695 1,737,865

Operating lease payments represent rentals payable by the Company for certain buildings, satellite channels, office
equipments, computer equipments and certain circuit capacities.
The minimum future lease payments have not been reduced by minimum operating sublease rentals of Rs. 192,001
thousands due in the future under non-cancellable subleases for certain buildings, which primarily commenced in
January 2002 and extend until 31 July, 2011. Rs. 36,000 thousands was recognised in the current year as minimum
sublease rental against the same.
(b) As lessor:
(i) The Company has leased under operating lease arrangements certain IRUs with gross carrying amount and
accumulated depreciation of Rs. 874,174 thousands and Rs. 57,787 thousands respectively as at 31 March, 2006.
Depreciation expense of Rs. 43,389 thousands (2005: Rs. 14,397 thousands)recognised in respect of these assets
has been recognised in the profit and loss account for the year ended 31 March, 2006.
In respect of the above rental income of Rs.42,470 thousands (2005: Rs. 18,150 thousands) has been recognised
in the profit and loss account for the year ended 31 March, 2006.
Future lease rental receipts will be recognised in the profit and loss account of subsequent years as follows:
Year ended Year ended
31 March, 2006 31 March, 2005
Rupees ‘000 Rupees ‘000
Not later than one year 68,303 36,370
Later than one year but not later than five years 273,212 145,480
Later than five years 622,420 345,550
963,935 527,400

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(ii) The Company has leased certain premises under operating lease arrangements. Future lease rental income in
respect of these leases will be recognised in the profit and loss account of subsequent years as follows:
Year ended Year ended
31 March, 2006 31 March, 2005
Rupees ‘000 Rupees ‘000
Not later than one year 46,873 50,058
Later than one year but not later than five years 12,357 34,804
Later than five years 325 -

59,555 84,862

Lease rental income of Rs. 64,777 thousands (2005: Rs. 32,419 thousands) in respect of the above leases have been
recognised in the profit and loss account for the year ended 31 March, 2006.

19. Finance Lease arrangements:

(a) As Lessee
As on 31 March, 2006, the following are included in the total fixed assets.
Gross carrying Accumulated Net carrying
amount Depreciation amount
Rupees ‘000 Rupees ‘000 Rupees ‘000
Building 18,414 661 17,753
Plant and Machinery 169,573 5,473 164,100
Furniture and Fixtures 42,177 543 41,634
Computers 53,364 2,419 50,945

283,528 9,096 274,432

Minimum lease payments and the corresponding present value are as follows:
Minimum lease Present Value Difference representing
payments (“MLP”) of MLP Interest
Rupees ‘000 Rupees ‘000 Rupees ‘000
Not later than one year 164,994 148,893 16,101
Later than one year but not later
than five years 164,892 153,853 11,039
Later than five years - - -
329,886 302,746 27,140

As there was no finance lease in the previous year, there are no corresponding amounts for the previous year.

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20. Provision for Contingencies:

ARO Others Total
Rupees ‘000 Rupees ‘000 Rupees ‘000
Balance as on 1 April, 2005 40,737 - 40,737
Provision made during the year 164,684 125,805 290,489
Provision written back during the year - - -
Balance as on 31 March, 2006 205,421 125,805 331,226

Notes:
1) Contingent liabilities as at 1 April, 2005, included approximately Rs. 172,000 thousands relating to an escalation
claim by a creditor. During the year, consequent to an arbitration award the Management has provided Rs. 90,000
thousands towards such liability.
2) Rs. 35,805 thousands has been provided in respect of a carrier claim, which is under dispute.

21. Contingent Liabilities and Capital Commitments

Contingent Liabilities:
As at As at
31 March, 2006 March, 2005
Rupees ‘000 31 Rupees ‘000
Letters of Credit 303,410 292,532
Guarantees 2,550,452 3,694,051
i. Claims for taxes on income (Refer note 1)
(a) Income tax disputes where the department is in appeal
against the Company 1,935,518 1,694,521
(b) Income tax disputes where the Company has
a favourable decision in other assessment year for the same issue 78,248 1,860,194
(c ) Income tax disputes other than the above 9,257,720 9,593,879
ii. Claims for other taxes 211,961 237,448
iii. Other claims 3,974,458 401,708
Notes:
(1) Significant claims by the revenue authorities in respect of income tax matters are in respect of:
(a) expenditure on licence fees for the Assessment Year 1995-96 disallowed by the revenue authorities. The
Company’s appeal was allowed at the Tribunal stage, and the matter is now pending before the High Court. The
Company has obtained favourable decisions in other assessment years, which have not been contested by the
revenue authorities, and the Company is of the view that the claims will eventually be decided in its favour.
(b) deductions claimed under Section 80 IA of the Income Tax Act from Assessment years 1996-97 onwards have
been disallowed by the revenue authorities. The Company has contested the disallowance and has preferred
appeals.
(c) reimbursement by the Department of Telecommunications (DoT) of income tax paid by the Company on the
DoT levy during 1994-95, that was taxed by the revenue authorities. The Commissioner of Income Tax (Appeals)
has upheld the disallowance. The Company is in appeal with the Income Tax Appellate Tribunal.

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(2) A claim of Rs.66,915,000 thousands (US $ 1,500 million) have been made against the Company by a strategic
business alliance associate for breach of contract relating to access and sale of bandwidth capacity on the Company’s
TGN network acquired during the year. The claim has been made in the US Federal District Court for the Southern
District of New York. The Company has filed its answer to the complaint denying all liability and believes that the
probability of the claim succeeding is remote.
(3) As part of its normal ongoing review of ITXC Corp.’s (“ITXC”) operations in connection with the post-merger integration
of Teleglobe, a predecessor in interest to VSNL Telecommunications (Bermuda) Ltd, and ITXC , Teleglobe had identified
potential instances of non-compliance with the United States Foreign Corrupt Practices Act (“FCPA”) relating to
ITXC’s operations in certain African countries prior to its merger with Teleglobe, consummated on 31 May, 2004.
Teleglobe voluntarily notified the SEC and the U.S. Department of Justice (the “DOJ”) of the matter, and the Company
has been co-operating fully with the SEC and the DOJ. The Company cannot predict the extent to which the SEC, the
DOJ or any other governmental authorities will pursue administrative, civil or criminal proceedings, the imposition
of fines or penalties or other remedies or sanctions. The Company has not identified, and does not believe it is likely
that, any material adjustment to its financial statements is or will be required in connection with the results of this
investigation, although it is possible that a monetary penalty, if any, may be material to its results of operations in the
period in which it is imposed.
(4) The subsidiaries of the Company in various geographies are routinely party to suits for collection, commercial
disputes, claims from customers and/or suppliers over reconciliation of payments for voice minutes, circuits, internet
bandwidth and/or access to the public switched telephone network, leased equipment, and claims from estates of
bankrupt companies alleging that the Company and / or its subsidiaries received preferential payments from such
companies prior to their bankruptcy filings. While management currently believes that resolving such suits and
claims, individually or in aggregate, will not have a material adverse impact on the Company’s consolidated financial
position, the FCPA investigation noted above is subject to inherent uncertainties and management’s view of this
matter may change in the future. If an unfavorable final outcome were to occur, such an outcome could have a
material adverse impact on the Company’s consolidated financial position and results of operations for the period in
which the effect becomes reasonably estimable.
Capital commitments
Estimated amount of contracts remaining to be executed on capital account and not provided for Rs. 2,764,862
thousands (2005 : Rs. 5,541,991 thousands).
22. UTL is a Joint Venture between the Company, Mahanagar Telephone Nigam Limited, Telecommunications Consultant
India Limited and Nepal Ventures Private Limited. The Company has 26.66 percent equity ownership in UTL. UTL
operates basic telephony services in Nepal based on Wireless-in-local loop technology.
The Company’s share (unaudited) in income, expenses, assets and liabilities based on the uniform accounting policy
adopted by the Company for the year ended 31 March, 2006 and 31 March, 2005 are as follows:

As at As at
31 March, 2006 31 March, 2005
FUNDS EMPLOYED Rupees ‘000 Rupees ‘000
1 Share Capital 233,275 233,275
2 Reserves and Surplus (167,483) (92,755)
3 Secured Loan 175,956 169,371
4 Unsecured Loan 53,787 -
295,535 309,891

103
VIDESH SANCHAR NIGAM LIMITED
Twentieth Annual Report 2005-2006

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.)

As at As at
31 March, 2006 31 March, 2005
Rupees ‘000 Rupees ‘000
APPLICATION OF FUNDS
5 Fixed Assets
(a) Gross Block 294,623 288,620
(b) Less: Accumulated Depreciation 153,050 97,201
(c) Net Block 141,573 191,419
6 A. Current Assets
(a) Inventories 50,391 54,393
(b) Sundry Debtors 49,111 27,343
(c) Cash and Bank Balances 35,468 48,218
(d) Other Current Assets 18,952 38,661
153,922 168,615
B. Loans and Advances 18,870 20,463
172,792 189,078
7 Less: Current Liabilities 18,830 70,606
8 Net Current Assets 153,962 118,472
Total Assets (Net) 295,535 309,891

Year ended Year ended

31 March, 2006 31 March, 2005
INCOME Rupees ‘000 Rupees ‘000
1 Traffic Revenue 70,253 39,711
2 Other Income - 14,483
3 Interest Income 1,593 419
Total Income 71,846 54,613

EXPENDITURE
4 Salaries and Related Costs 2,376 2,025
5 Network Costs 28,804 9,401
6 Operating and Other Expenses 50,988 35,381
7 Interest Expense 17,798 11,501
8 Depreciation 52,070 60,350

Total Expenditure 152,036 118,658

CONTINGENT LIABILITIES
(i) Claims for other Taxes - 8,313
(ii) Other Claims - 19,970

- 28,283

104
 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.)

23. During the year, the Company has incorporated a wholly owned subsidiary, SNOSPV, which has invested 47 percent
in the issued and paid-up share capital of SEPCO.
SEPCO is an investment company which has acquired 51 percent controlling stake in the issued and paid-up share
capital of SNO Telecommunications (Pty.) Ltd. (“SNO”), the licensed second network operator in South Africa.
The Company’s share (unaudited) in income, expenses, assets and liabilities based on the uniform accounting policy
adopted by the Company for the year ended 31 March, 2006 are as follows:
As at
31 March, 2006
FUNDS EMPLOYED Rupees ‘000
1 Share Capital 3
Reserves and Surplus (29,370)
3 Unsecured Loan 33,605

4,238

APPLICATION OF FUNDS
4 Fixed Assets
(a) Gross Block 325,673
(b) Less: Accumulated Depreciation 1

(c) Net Block 325,672

5 A. Current Assets
(a) Cash and Bank Balances 24,607
24,607
B. Loans and Advances 1,913

26,520
6 Less: Current Liabilities 347,954
7 Net Current Liabilities (321,434)

Total Assets (Net) 4,238

105
VIDESH SANCHAR NIGAM LIMITED
Twentieth Annual Report 2005-2006

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (Contd.)

Year ended
31 March, 2006
INCOME Rupees ‘000
1 Interest Income 756

Total Income 756

EXPENDITURE
2 Salaries and Related Costs 1,719
3 Operating and Other Expenses 27,583
4 Depreciation 1
Total Expenditure 29,303

24. Subsequent Events

(i) On 8 May, 2006, the Company signed a Share Purchase Agreement (SPA) to acquire Direct Internet Limited (DIL)
and its wholly-owned subsidiary, Primus Telecommunications India Limited (PTIL) for a total purchase
consideration of Rs. 942,351 thousands. The acquisition was completed on 23 June, 2006.
(ii) On 24 May, 2006, an Arbitration Tribunal of the International Chamber of Commerce (ICC), International Court of
Arbitration issued a ruling on certain issues in a matter initiated by FLAG Telecom Group Limited (FLAG) in
December 2004. FLAG also claimed damages to compensate it for the loss of revenue and/or market. The
Tribunal by majority decision has ordered the Company to grant FLAG access to the Mumbai cable landing
station of the FEA cable system for various purposes. The Tribunal has retained jurisdiction to determine the
financial consequences, if any, of its findings. The Company is not in a position to make a reliable estimate of the
obligation.
25. Previous year’s figures have been regrouped and reclassified wherever necessary.

106
 BOARD OF DIRECTORS
Mr. Subodh Bhargava
Born in Agra in 1942, Mr. Subodh Bhargava holds a degree
in Mechanical Engineering from the University of Roorkee.
He started his career with Balmer Lawrie & Co., Calcutta
before joining the Eicher Group of Companies in Delhi in
1975. On March 31, 2000, he retired as the group chairman
and chief executive and is now the Chairman Emaritus,
Eicher Group.
He is the past President of the Confederation of Indian
Industry (CII) and the Association of Indian Automobile
Manufacturers; and the Vice President of the Tractor
Manufacturers Association. Over several years, he was
therefore a key spokesperson for Indian industry,
contributing to and influencing government policy while
simultaneously working with industry to evolve new
responses to the changing environment.
He was a member of the Insurance Tariff Advisory
Committee, the Economic Development Board of the
government of Rajasthan He was also the Chairman of the
National Accreditation Board for Certifying Bodies (NABCB)
under the aegis of the Quality Council of India (QCI).
Mr. Bhargava has been closely associated with technical and
management education in India. He was the chairman of
the Board of Apprenticeship Training and Member of the
Mr. N. Srinath
N Srinath, Executive Director, graduated as a Mechanical
Engineer from IIT (Madras) and went on to do a Post
Graduate Diploma in Management from IIM (Calcutta),
specialising in marketing and systems. Joining the Tata
Administrative Services (TAS) in 1986, he has held positions
in project management, sales and marketing and corporate
functions in different Tata companies over the past 20 years.
He has been responsible for setting up new projects and
managing businesses in high-technology areas like Process
Automation and Control, Information Technology, Internet
and Telecommunications.
On completing his probation with the TAS in 1987, he was
made Project Executive in Tata Honeywell responsible for
acquiring the necessary project approvals and initial
funding. He then moved to Tata Industries as Executive
Assistant to the Chairman, an assignment he handled till
mid-1992. In that period he was also part of the team that
set up Tata Information Systems (later Tata IBM and then
IBM India).
In June 1992 he moved to Tata Information Systems Limited
and over the next six years, handled various assignments in
sales and marketing. He has been responsible for both back
Board of Governors of the University of Roorkee , the Indian
Institute of Foreign Trade, New Delhi; and the
Entrepreneurship Development Institute of India,
Ahmedabad.
He was also a member of the senior panel of the All India
Council for Technical Education (AICTE) set up for a
comprehensive evaluation of research in engineering and
technology; and on the committee set up by the Ministry
of Human Resource Department, Government of India for
policy perspectives for management education in India.
He is currently on the Board of the Centre for Policy Research
and IIM, Indore ; Trustee, Bhartiya Yuva Shakti Trust; Executive
Trustee, National Centre for Promoting Employment for
Disabled Persons; Chairman Trustee Charity Aid Foundation.
He is also on the Boards of Governors of other institutions
for graduate engineering and bachelors and master’s
degree programmes in business management.
He has been conferred with the first IIT Roorkee
Distinguished Alumnus Award in 2005 by Indian Institute
of Technology, Roorkee.
Mr Bhargava is the Chairman of Videsh Sanchar Nigam Ltd (
VSNL ) and also Wartsila India Ltd and Director on the
respective Boards of several Indian Corporates.
office sales support functions as well as direct customer sales
into various end-user enterprise segments such as Process
Manufacturing, Banking and Financial Services, Petroleum
and Distribution. He was, since 1995, also concurrently the
Regional Manager for the operations of the company in the
Western Region.
In March 1998, he returned as General Manager (Projects)
to Tata Industries and worked with Tata Teleservices helping
to set up the company and its operations for fixed line
telecommunications services in Andhra Pradesh. He oversaw
the market launch of services by the company in March 1999
and in April he moved to Hyderabad as Chief Operating
Officer of Tata Teleservices responsible for Sales & Marketing,
Customer Service, Network and IT.
In late 2000 he took over as Chief Executive Officer of Tata
Internet Services, a new company set up to meet the
requirements of both retail and corporate customers for
Internet services. The company successfully launched and
grew its offerings in the market and also managed various
customer portals that it had developed.
In February 2002, when the Tata group acquired VSNL, he
107
VIDESH SANCHAR NIGAM LIMITED
Twentieth Annual Report 2005-2006
was appointed as Director (Operations). With effect from 1
October, 2004 when the term of the then Managing director
expired, he was entrusted with the powers of the Managing
director and was redesignated as Executive director with
effect from 1 April, 2005. Since February, 2003, the Company
has transformed from being predominantly a monopoly,
International wholesale voice services provider in India to a
global telecommunications company operating in multiple
businesses in over 30 countries. VSNL today, is the leading
international wholesale voice provider globally, is building
on its leadership position in India to be a major player in
Mr. Ishaat Hussain
Mr Ishaat Hussain joined the Board of Tata Sons as an
Executive Director on 1.7.99, and is Finance Director of Tata
Sons Ltd. with effect from 28.7.2000. Prior to joining Tata
Sons he was the Senior Vice President and Executive Director
– Finance in Tata Steel for almost 10 years.
Born on September 2, 1947, Mr Hussain completed his
schooling from The Doon School in 1963 to join St. Stephens
College Delhi to do his graduation in Economics. A Chartered
Accountant from England and Wales, Mr Hussain attended
the Advanced Management Programme at the Harvard
Business School. He joined the Board of The Indian Tube
Company (a Tata Steel associate company) in 1981.
Mr. Kishor A. Chaukar
Mr. Kishor A. Chaukar (58), currently the Managing Director
of Tata Industries Limited ( TIL), is a post-graduate in
Management from the Indian Institute of Management at
Ahmedabad.
TIL is one of the two principal holding companies of the Tata
Group, India’s largest and best-known conglomerate. TIL acts
as the diversification and new projects-promotion arm of
the Group, and spearheads the entry of the Group in the
emerging high-tech and sunrise sectors of the economy.
In his capacity as Managing Director of TIL, Mr. Chaukar is
responsible for enhancing the value and the interest of TlL
in TIL divisions and in companies where TIL has made
investments. One of the tasks performed in the quest for
this value enhancement is to provide strategic direction to
these companies.
Mr. Chaukar is a member of the Group Corporate Centre,
which is engaged in strategy formulation at the House of
Tata. He is on the Board of various companies like Tata
108
the enterprise and carrier data services market globally, is
one of the largest submarine cable bandwidth providers
globally, is a Tier 1 ISP and is expanding its retail presence in
the broadband market in India. The company has also made
investments in Nepal and Sri Lanka and has recently been
chosen to be the strategic partner to manage the Second
National Operator license in South Africa.
Recently, Mr. Srinath was chosen as the ‘Telecom CEO of the
Year’ by the leading publishing group, Telecom Asia in the
2006 edition of their awards.
Thereafter, he moved to Tata Steel in 1983 after Indian Tube
was merged with Tata Steel.
Besides being on Board of Tata Sons Limited, he is the
Chairman of Voltas Limited. He is also on the Boards of
several Tata Companies viz. Tata Steel, Tata Industries, Tata
Teleservices, Titan Industries Limited.
Mr. Hussain is a member on the Primary Markets Advisory
Committee of the Securities Exchange Board of India. In April
2005, he has been appointed a Member of the Board of
Trade.
Teleservices Limited, Idea Cellular Limited, Videsh Sanchar
Nigam Limited, Tata Autocomp Systems Limited, Tata
Investment Corporation Limited, among others. He also
oversees the functions of the Department of Economics &
Statistics (DES) and the Tata Credit Card.
Mr. Chaukar is the Chairman of Tata Council for Community
Initiatives (TCCI) – the nodal agency of the Group on all
matters related to social development, environmental
management, bio-diversity restoration and conservation of
wild life.
Mr. Chaukar was previously the Managing Director of ICICI
Securities & Finance Company Limited (July 1993 to October
1998), and a member of the Board of Directors of ICICI
Limited from February 9, 1995 to October 15, 1998). His other
experiences include stints in Bhartiya Agro Industries
Foundation, a Public Trust engaged in rural development
on a no-profit no-loss basis and based in Pune, Maharashtra,
and Godrej Soaps Limited.
Mr. Pankaj Agrawala
Mr. Agrawala was born on October 16, 1955. Since May 2002,
he has been the joint secretary to the GoI, Department of IT,
Ministry of Communications and IT. Mr. Agrawala is in-charge
of e-infrastructure in the Department of IT and in that
capacity represents India in the Government Advisory
Committee of Internet Corporation for Assigned Names &
Numbers (ICANN). He is a vice chairman of GAC. Mr. Agrawala
also serves on the Board of Telecom Infrastructure
Manufacturing Company, ITI and National internet Exchange
of India.
Mr Agrawala belongs to the 1978 batch of the IAS (Uttar
Pradesh cadre). He holds a masters degrees in Public
Administration, Development Economics and History and
was a Mason Fellow at the Kennedy School of Government,
Harvard University, USA.
Mr. Agrawala has held various important U.P government
positions. He has worked on various field organizations
in districts and divisions of Uttar Pradesh. He has
been associated with rural development for nearly
Dr. Mukund Rajan
Dr. Rajan was born in Chennai on April 5, 1968. He completed
his B.Tech from the Indian Institute of Technology, Delhi in
1989, and served in his final year as General Secretary of the
Student Affairs Council. He received a Rhodes Scholarship
to study at Oxford University, where he completed a Masters
and Doctorate in International Relations. His doctoral
dissertation was published by Oxford University Press, and
is titled “Global Environmental Politics - India and the North-
South Politics of Global Environmental Issues.”
Mr. N. Parameswaran
Mr. Parameswaran was born on November 15, 1955. Since
July 1998, he has been the Deputy Director General in the
Department of Telecom, Government of India. He holds B.Sc.
Engineering degree in Electronics and Telecommunications
Engineering from College of Engineering Trivandrum,
Master of Technology in Electrical Engineering from IIT
(Bombay) and Post Graduate Diploma in Business
Management from All India Management Association, New
Delhi.
Mr. Parameswaran belongs to the Indian
Telecommunications Service (1978) and has been with the
Department of Telecommunications since January 1980. For
the last ten years he has beenI involved in Telecom Licensing
and Regulations. He has played a key role in the liberalization
of the Telecom Sector in India. Recently, he was on a two-
12 years of his service.
He took over as director of the then Ministry of Urban
Development, GoI in August 1991, and as director, Housing
Division, Ministry of Urban Affairs and Employment, GoI in
July 1994. He was a member of the Indian delegation to the
Habitat II City Summit, Istanbul. He then worked in the
Administrative Training Institute, Nainital in the
Decentralised Training for Urban Development Project, an
Indo-Dutch collaboration with the Institute for Housing and
Urban Development, Rotterdam.
From July 1998 to May 2002, he was secretary to the U.P
government, in various departments, including the
Department of Planning; the Department of Banking and
Private Capital Investments; the Department of Externally
Aided Projects, where he was responsible for five World Bank
projects; the department of IT and Electronics, when India’s
first private-sector IT university was set up; and the
department of Small Scale Industries and Export Promotion.
Dr. Rajan joined the Tata Group through the Tata
Administrative Service ( TAS) in January 1995. He was
assigned to the office of Mr. Ratan Tata, Chairman, Tata Sons
Limited, in 1996. Dr. Rajan’s current designation is Vice
President, Tata Sons Limited, and he continues to support
Mr. Tata as a member of his office. He also serves on the
boards of several Tata companies, including Tata Teleservices
Limited, Piem Hotels Limited, Videsh Sanchar Nigam Limited
andVSNL Singapore Pte. Limited.
year deputation as the Executive Director of the Information
& Communication Technologies Authority, Mauritius,
wherein he set up the Authority and facilitated the
liberalization of the ICT sector. He has held various positions
in DOT and MTNL where he was actively involved in the
implementation of IT solutions and New Services.
He has worked as an International Telecommunications
Union (ITU) expert in Africa, presented papers and chaired
sessions in the ITU / Asia Pacific Telecommunity (APT)
seminars/Forums. He was part of a number of Ministerial
delegations for bilateral meetings. He has made
presentations in Road shows held in a number of countries
to attract foreign investment.
He is also Director in the Board of HTL Limited.
109
VIDESH SANCHAR NIGAM LIMITED
Twentieth Annual Report 2005-2006
Mr. P.V. Kalyanasundaram
Mr. P.V. Kalyanasundaram was born on February 25, 1958.
He received a Bachelor of Arts degree in history, from the
New College, Chennai in 1977, followed by a Bachelor of
Law degree from Madras Law College in 1982.
An advocate by profession, Mr. Kalyanasundaram is a legal
advisor for Pallavan Transport Corporation, Chennai, a
government of Tamil Nadu undertaking, as well as a legal
advisor to the Chennai Metropolitan Water Supply and
Sewerage Board. He is also a trustee of the Jawaharlal Nehru
Port Trust, Mumbai, and a member of the Censor Board,
Chennai as well as the Presidency Club, Chennai.
Dr. V.R.S Sampath
Dr. V.R.S Sampath received a Bachelor of Arts degree in
History from the Presidency College in 1976, followed by a
Bachelor of Law degree from Madras Law College in 1980, a
Master of Law degree in 1987 and a PH.D in 1997, all from
the University of Madras. He also holds a Master of Arts
degree in History from the Madurai Kamaraj University
(1985).
Dr. Sampath also holds a Diploma in Tourism and has
completed a large number of specialised training
programmes and courses, notably in human rights and
social work. He was awarded an honorary D.Litt for his
contribution to global peace efforts by the World Peace
Academy, Chicago, USA in 1994. He has published numerous
research papers and traveled widely internationally,
including on study tours. He has also published eight books
on subjects such as travel, law and society.
Mr. Amal Ganguli
Mr. Amal Ganguli, 65, is a fellow member of the Institute of
Chartered Accountants of India and the Institute of
Chartered Accountants of England and Wales and a member
of the New Delhi chapter of the Institute of Internal Auditors,
Florida, U.S.A. He was the Chairman and Senior Partner of
Pricewaterhouse Coopers (PWC), India till his retirement on
31st March, 2003. Besides his qualifications in the area of
accounting and auditing, Mr. Ganguli is a fellow of the British
Institute of Management and alumnus of IMI, Geneva.
Mr. Ganguli, trained in the UK to become a Chartered
Accountant. He was econded as a Partner to PWC, UK/USA
for a year in 1972-73. During his career spanning over 40
years, Mr. Ganguli’s range of work included International Tax
advice and planing, cross border investments, Corporate
mergers and re-organisation, financial evaluation of projects,
management, operational and statutory audit and
consulting projects funded by International funding
agencies. In the course of his professional career, he has dealt
with a variety of clients including US AID, World Bank, ADB,
110
Mr. Kalyanasundaram has played a leading role in various
public activities. As the managing trustee of the Green Peace
World Charitable Trust, Chennai, he took an active part in
the various welfare measures organized by the trust. These
include organizing free eye camps to treat poor people.
Between 2000 and 2004, Mr. Kalyanasundaram was the
chairman and trustee, Pachayappa’s Trust, Chennai. In that
position, he managed several educational institutions,
including seven colleges and six schools, and looked after
immovable properties worth Rs. 10,000 million belonging
to the trust. He was also instrumental in conducting several
educational seminars and courses in various institutions.
Dr. Sampath is currently an empanelled advocate to both
Canara Bank and Indian Overseas Bank, and a legal advisor
to the Construction Industry Development Board of the
Government of Malaysia. He started his career as a junior
advocate for the Aiyer and Dalia law firm in 1981 and has
since served as a legal advisor to the Tamil Nadu Industrial
Development Corporation.
Dr. Sampath has served on various government committees
including the advisory committees of the Central Board of
Film Certification and the All India Radio, both of the
government of India, Chennai. He is the chairman of various
non-governmental organisations in Chennai including the
Inter-University Cultural Service, the Madras Development
Society, the India International Tourism Centre, the Indian
Institute for Aids Prevention, the International Centre for
Human Rights and the Madras Educational .
NTPC, Alcatel, GE, Hindustan Lever, STC, Hewlett Packard and
IBM.
Mr. Ganguli is a member of the Board of Directors of several
Companies such as Hughes Escorts Communications
Limited, Flextronics Software Systems Limited, Tube
Investments of India Limited, Gillette India Limited, HCL
Technologies Limited, Samtel Colour Limited, Samcor Glass
Ltd., New Delhi Television Limited and Century Textiles and
Industries Ltd. Mr. Ganguli is a member of Audit Committees
of Hughes Escorts Communications Ltd., HCL Technologies
Ltd., Gillette India Limited, Samtel Colour Limited, Samcor
Glass Limited and Century Textiles and Industries Ltd. He is
chairman of the Audit Committee of Flextronics Software
Systems Limited and a member of Remuneration
Committees of Tube Investments of India Limited and
Gillette India Limited. He is also a member of Share Transfer
and Shareholders’/Investors’ Grievance Committee of
Century Textiles and Industries Ltd.
 Registered office : Videsh Sanchar Bhavan, M.G. Road, Mumbai - 400 001.

TWENTIETH ANNUAL GENERAL MEETING - 13 SEPTEMBER, 2006 AT 1100 HRS.

ATTENDANCE SLIP
I, Mr/Mrs./Miss................................................................................................. LF/Client ID. No ........................................................... hereby
record my presence at the 20th Annual General Meeting of Videsh Sanchar Nigam Limited at the M. C. Ghia Hall,
Kalaghoda, Mumbai - 400 023.

...............................
Signature of the Shareholder or Proxy

Notes: 1. Please fill this Attendance Slip and hand it over at the entrance of the hall.
2. SHAREHOLDERS ARE REQUESTED TO BRING THEIR COPIES OF THE NOTICE DOCUMENT WITH THEM.

Registered office : Videsh Sanchar Bhavan, M.G. Road, Mumbai - 400 001.

PROXY
I/We ...........................................................................................................................(LF/Client ID. No...................................)
(Address).............................................................................................................being a Member/Members of Videsh Sanchar
Nigam Limited, do hereby appoint ........................................................................................ of ......................................or/failing
him ...................................................................................................................of ........................................as my/our proxy in my/our
absence to attend and vote for me/us on my/our behalf at the 20th Annual General Meeting of the Company to

be held at 1100 Hrs on Wednesday, the 13 September, 2006, and at any adjournment thereof.

IN WITNESS whereof I/We have set my/our hand/hands this...................day of..........................2006.

Please affix
1.00 Re.
Revenue
Stamp
(Signature of the Shareholder across the stamp)
Note : 1. A member entitled to attend and vote is entitled to appoint a proxy to attend and vote instead of himself,
and a proxy need not be a Member.
2. A One Rupee Revenue Stamp should be fixed to this and it should then be signed by the Member.


3. The instrument appointing the proxy and the power of attorney or other authority, if any, under which it
is signed, or a copy of that power of authority duly certified by a notary or other proper authority, shall be
deposited at the Registered Office of the Company not later than forty-eight hours before the time for
the holding of the Meeting, in default, the instrument of proxy shall not be treated as valid.
 SM

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