BHARTI TELECOM LIMITED ANNUAL REPORT 2004-2005 CHAIRMAN'S REPORT Dear Shareholders, The GDP in India is steadily climbing up while our mobile penetration remains at only 5%. Incomes in India are rising consumer spending is on the upswing and the demographic reflect a resurgent middle-class. In March 2005 India closed at 52 million mobile subscribers while China crossed 349 million. The massive growth in Indian telecommunication is yet to come. The industry was delighted to receive Government's approval on the much- awaited increase in the FDI cap in the sector from 49% to 74%. This should result in the industry's ability to raise more funds from the international market and roll out networks in rural India. The duties and levies on the Indian telecom sector are one of the highest in the world. The multiplicity of these levies further adds to the predicament of operators. As per TRAI's findings, the total levies on the telecom sector including license fee, service tax and spectrum charges would be at around 21% of Annual Gross Revenue in 2005-06. The incidence of duties and levies is higher even when compared to other Asian countries. The industry is looking forward to a positive decision from the Government and is committed to pass on (in it's entirety) the benefits that may arise by way of reduction of levies. The year 2004-05 will be remembered as a year in which Bharti Tele-Ventures Limited ('BTVL'), in which your company has made investments, established itself as a Leader-Innovator in the telecom sector in India. It was a year when it faced big challenges like a sensitive regulatory environment & hyper competition. I am pleases to share that BTVL emerged stronger than ever before making a difference to the Indian economy, earning global recognitions along the way. It was a year when BTVL continued its focus on customer needs, strengthened its management teams ant emerged a clear leader in the market. Bharti Tele-Ventures Limited is today the largest mobile service provider in India, both in terms of revenues as well as subscribers. In March, BTVL became the first telecom company to complete an all India footprint covering all 23 telecom circles of India. BTVL rolled out a world class GSM network in thousand of towns, cities and villages. While the competitive environment remained hyperactive, BTVL, with it's strong brand, extensive spread of networks and it's extensive distribution chain, continued to consolidate & grow its market share. In the Enterprise service business, BTVL made significant strides, including the acquisition of Comsat Max. The introduction of DSL on fixed line phones has been widely accepted, delighting customers and accelerating the broadband boom in the country. BTVL's results for the financial year ended March 31, 2005 were once again impressive in the backdrop of some of the fastest drop in tariffs seen in the industry. Today customers in India enjoy the lowest tariffs anywhere in the world. The total revenues of BTVL grew by an impressive 61% from the previous year to cross the Rs. 80,000 Mn mark with net profit at Rs.12,116 Mn, posting a 108% increase over the previous year. Total mobile subscriber base grew to 12.7 million in May 2005, up from 8.0 million in the previous year. The impressive results that BTVL has delivered would not have been possible without the yeoman contribution of all employees, channel partners, outsource partners who are working day and night to execute and deliver the vision of the company (that reads 'to be globally admired for telecom services that delight customers'). I am sure all of you will join me in complimenting them for putting in extraordinary work to achieve wonderful results. The management team remains committed to serving all stakeholders' interest without compromising the values that have defined our success over the years. As I look at the year 2005-2006, I sincerely believe that our best years are ahead of us. Sunil Bharti Mittal Chairman