AFFLUENCE

Vodafone Mobile Services Limited

DIRECTORS REPORT

To,

The Members

Vodafone Mobile Services Limited

Your Directors have pleasure in presenting the Annual Report together with the Audited Financial Statements of the Company for the financial year ended 31 March 2016.

1. FINANCIAL PERFORMANCE:

The Financial performance of the Company for the year 2015-16 is summarized as under:

All Amounts are in Rs. Million

Particulars

Year ended

Year ended

31-Mar-16

31-Mar-15

Revenue from operations

400,805

42,992

PBIDTA

102,159

9,996

Depreciation and Amortization

65,819

6,997

Finance charges

48,440

5,345

(Loss) / Profit before exceptional item and tax

-12,100

-2,346

Exceptional items

9,399

965

(Loss) / Profit before tax

-21,499

-3,311

Profit / ( Loss) after tax

8,033

-2,300

Earnings per share (in Rupees)

12.82

-11.52

Performance in brief:

During the financial year ended 31 March 2015, the company was operating telecommunication services only in Delhi service area. During the period under review i.e. for the financial year ended 31 March 2016, its subsidiary and certain fellow subsidiaries of the Company have amalgamated with the Company and accordingly the above figures are for operations of the Company for the whole of India excluding Mumbai service area. The details of amalgamation are provided in the following pages of the Report.

The year ended March 2016 has been a tough year, in challenging circumstances. The revenue upside was primarily due to significant data usage, fixed line and visitor revenues. Data revenue was 48.1% higher due to 91.5% higher usage. The company has made significant investment in the brand by improving the network and upgrading the customer touch point.

The Companys customer base grew to 189.3 million subscribers with a growth rate of 7.9% on a year on year basis. Your Company continues to be one of the leading operator, having a revenue market share of 21.5% (Includes fixed line revenue of all operators) in current financial year in a very competitive multi-player market.

Capital expenditure:

During the year 2015-16, the Company has further expanded its network to increase its coverage and networks continue to perform better against acceptable thresholds for the major performance parameters. The Company has added 6,625 more 2G cell sites, 19,978 3G cell sites and 5,200 4G sites to enhance its network coverage, closing with a total of 132,258 2G cell sites, 49,947 3G cell sites and 5,200 4G sites as of 31 March 2016. During the year the company has spent Rs. 71,202 million on capital expenditure.

Amalgamation under Scheme 1:

a) Scheme I - Amalgamation of VDL, VSL, VEL VCL with the Company

Vodafone Digilink Limited (VDL), Vodafone South Limited (VSL), Vodafone East Limited (VEL), Vodafone Cellular Limited (VCL) (collectively the Transferor Companies) and Vodafone Mobile Services Limited i.e. the Company (referred to as VMSL or the Transferee Company), filed applications for sanctioning a Scheme of Amalgamation (the "Scheme") under Section 391 to 394 of the Companies Act 1956 with effect from April 1, 2011 (the Appointed Date).

The Scheme was sanctioned by the High Courts of Delhi, Calcutta and Madras, subject to approval from the Department of Telecommunication (DoT) as required in accordance with the licensing conditions.

The Scheme was approved by the Department of Telecommunication (DoT) on December 10, 2015 and has become effective on December 11, 2015, being the date on which the certified copy of the order of the respective High Courts together with the approval of the DoT were filed with the Registrar of Companies.

As a condition for granting its approval to amalgamation, DoT raised demands for payment of various fees such as One Time spectrum fee, Spectrum Usage charges, payable by Transferor entities. In response to DoT demands, VMSL and the above mentioned Transferor Companies filed an appeal against the DoTs demands with the Telecom Disputes Settlement & Appellate Tribunal (TDSAT). The Honble TDSAT, based on the undertaking directed the DoT to provisionally allow the merger and transfer of licences

However, DoT filed an appeal in the Honble Supreme Court of India against the interim Order of the TDSAT and the Honble Supreme Court, vide its Interim Order dated 23 November 2015 directed the DoT to grant the approval forthwith upon the Company depositing an amount of Rs. 20,000 million.

Accordingly on deposit of amount of Rs. 20,000 million by VMSL, the DoT issued a letter dated 10 December 2015 and based on the said letter, the Transferor Companies and VMSL filed the requisite documents and forms with the respective Registrar of Companies and the amalgamation became effective from 11 December 2015.

In accordance with the Scheme, the amalgamation has been accounted for by using the Pooling of Interest Method as prescribed in Accounting Standard 14 (AS 14) Accounting for Amalgamations referred to in Section 211(3C) of the Companies Act, 1956. Accordingly all the assets, liabilities and reserves of VDL, VSL, VEL and VCL, have been recorded at their carrying amounts as at the Appointed Date in the books of VMSL, after cancellation of intercompany balances.

AS 14 require that the difference between the amount recorded as share capital issued and the amount of share capital of the transferor company should be adjusted in reserves. In accordance with and as permitted by the Scheme, the Board of Directors of VMSL have opted to debit the difference between the value of share capital issued to the shareholders of the Transferor Companies and the Share Capital of Transferor Companies as at April 1, 2015 aggregating to Rs. 1,436 million to the General Reserve.

Amalgamation under Scheme 2:

b) Scheme I - Amalgamation of VSPL and VWL with the Company

Vodafone West Limited (VWL), Vodafone Spacetel Limited (VSpL), (collectively the Transferor Companies) and Vodafone Mobile Services Limited i.e. the Company (referred to as VMSL or the Transferee Company), filed applications for sanctioning a Scheme of Amalgamation (the "Scheme") under Section 391 to 394 of the Companies Act 1956 with effect from April 1, 2012 (the Appointed Date). The Scheme was sanctioned by the Honble High Court of Delhi vide Orders dated 03rd July 2014 and by the Honble High Court of Gujarat vide its Orders dated 18th -19th February, 2015 & 15th April, 2015 subject to necessary approvals from the Department of Telecommunications (DoT), Ministry of Communications & Information Technology.

As condition for granting its approval to amalgamation, DoT raised demands for payment of various fees such as One Time spectrum fee, Spectrum Usage charges, payable by Transferor entities. In response to said DoT demands, VMSL and the above mentioned Transferor Companies filed an appeal against the said DoTs demands with the Telecom Disputes Settlement & Appellate Tribunal (TDSAT).

Honble TDSAT, vide its Interim Order directed VMSL to deposit Rs. 4,500 million and also directed the DoT to approve the merger orders forthwith upon receipt of money.

VMSL deposited the amount of Rs. 4,500 million with the DoT and the DoT issued a letter dated 05 February 2016 approving the amalgamation of Vodafone Spacetel Limited and Vodafone West Limited with and into VMSL. Based on approval which the Transferor Companies and VMSL filed the requisite documents and forms with the respective Registrar of Companies and the amalgamation became effective from 11 February 2016.

The Transferor (VMSL) is wholly owned subsidiary of the Company. The Transferee Companies were direct/indirect wholly owned subsidiaries of the Company and provided telecommunication services in various circles which are now part of Transferor Company.

Pursuant to the amalgamation, VMSL has allotted 42,71,26,394 equity shares to the Company as per the above Schemes and consequently investment of the Company in VMSL stands increased by these number of shares..

AS 14 require that the difference between the amount recorded as share capital issued and the amount of share capital of the transferor company should be adjusted in reserves. In accordance with and as permitted by the Scheme, the Board of Directors of VMSL have opted to credit the difference between the value of share capital issued to the shareholders of the Transferor Companies and the Share Capital of Transferor Companies as at April 1, 2015 aggregating to Rs. 2,829 million to the General Reserve. This amount of General reserve is not available for dividend.

Outlook for Financial Year 2016-17

Industry growth is expected to be driven by data usage and traffic growth through customer addition. With respect to smart phone penetration, the industry will continue to witness surge in smartphones leading to increase in data usage however with yield erosion. However revenue is challenged by changes in regulations like additional 0.5% Krishi Kalyan cess, Service tax increase from 14.5% to 15.0%.

Revenue growth for Vodafone in FY17 is expected to be through driving customer value management, strengthening network and providing superior customer experience. Data uptake expected to increase on account of evolving 4G ecosystem and increase in coverage, growth in smartphone penetration and high bandwidth consuming applications, video streaming and downloads. However the pressure on data realization expected to continue.

Competitive LTE coverage in 9 circles and strong 3G coverage in 16markets accounting for 91% of total revenue. Emphasis would be given on making Customer Experience simple & effortless and drive the My Vodafone app as the primary interface for customers. Drive brand affinity through insightful network & product propositions.

Dividend:

With a view to augment resources, the Directors do not recommend any dividend for the Financial Year ended 31 March 2016.

Transfer to Reserves:

During the financial year under review, pursuant to amalgamation the Company has created general reserve amounting to Rs 1,393 million.

Fixed Deposits:

The Company has not accepted fixed deposits falling within the ambit of Section 73 of the Companies Act, 2013 and The Companies (Acceptance of Deposits) Rules, 2014 and as such, no amount of principal or interest is outstanding.

Particulars of Loans, Guarantees or Investments:

The particulars of loans given, guarantees provided or investments made under Section 186 during the year under review form part of the Notes to Financial Statements as provided in this Annual report.

Share Capital

The Company has issued equity shares of Rs. 10/- each as consideration in accordance with the scheme of amalgamation, the details of which has been provided herein above.

Particulars of contracts or arrangements with related parties:

Particulars of contracts or arrangements with related parties which are at arms length referred to in Section 188 (1) of the Companies Act, 2013, in the prescribed Form AOC-2 pursuant to Section 134 (3) (h) of the Act and Rule 8 (2) of the Companies (Accounts) Rules, 2014 is attached as ANNEXURE-A to this Report.

During the financial year under review, pursuant to section 177 of the Companies Act, 2013 all Related Party Transactions (RPTs) were placed before Audit Committee for its review and approval and the requisite approvals thereof, wherever necessary, were obtained as per provisions of the Companies Act 2013. RPT policy of the Company was amended on 04 August 2016 in order to include provisions of the Act as well as applicable Rules amended from time to time, pertaining to the criteria for making the omnibus approval and other provisions of the Act as a part of the said policy and also to define the threshold of Material related party transactions and related provisions thereof.

Material changes and commitments affecting the financial position of the Company between the end of financial year and date of the Report:

There have been no material changes and commitments affecting the financial position of the company between the end of financial year and the date of the Report.

2. BUSINESS OPERATIONS:

Spectrum and Licence:

Certain circles in the Company during the previous year have won spectrum in service areas of Gujarat, Haryana, Rajasthan, Uttar Pradesh East (UP East), Kerala, Maharashtra (excluding Mumbai), Orissa, Rest of Bengal, Assam /North East, Karnataka and Uttar Pradesh West (UP West) as per the results announced by DoT on March 26, 2015.  During the year the UASL for the service areas Haryana, Rajasthan, UP East and Kerala was expired on December 12, 2015 and for Gujarat and Maharashtra (excluding Mumbai) on December 19, 2015. The new spectrum so obtained has been capitalized in the books as per the details mentioned below.

The spectrum holding of the Company

Circle

Holding as of Mar-16

900 MHz

1800 MHz

2100 MHz

AP

-

6.8

-

Assam

-

6.9

5

Bihar

-

6.9

-

Chennai

6.2

1

5

Delhi

5

8

5

Gujarat

6

7.8

5

Haryana

6.2

4.9

5

HP

-

5.65

-

JK

-

6.9

-

KAR

-

13

5

Kerala

6.4

9.25

5

Kolkata

7

8

5

Maharashtra

5

1.25

5

MP

-

6.9

-

NE

-

6.9

5

Orissa

5

6.9

-

Punjab

-

8.05

-

Raj

6.4

0.8

5

TN

-

-

-

UP (East)

5.6

6.45

5

UP (West)

6.2

2.5

5

WB

6.6

4.3

5

Total

71.6

129.15

70

In accordance with the terms of the NIA, the Company has opted for the deferred payment option and accordingly following accounting has been done:

Intangible assets (Spectrum) amounting to Rs. 263,104 million is including interest there on amounting to Rs.13,547; intangible assets under development, and Rs. 9,128 million including interest therein amounting to Rs. 624 million and the related Deferment payment Liability amounting to Rs. 189,888 million.

Spectrum acquired is amortised within a period of 20 years from the date of LOI / date of renewal of license as applicable.

Subsidiary Companys Performance:

Vodafone Technology Solutions Limited (Wholly owned subsidiary): The Company is yet to commence operations. Accordingly, the Company does not have any revenue from operations. During the year under review, the Company has incurred a loss before and after tax of Rs. 0.6 million (previous year loss Rs. 1.2 million) which has been carried forward to the Balance Sheet.

1. HUMAN RESOURCE MANAGEMENT:

Annual rewards review:

In FY 2015-16, the management continued to emphasize on the need for setting clear performance goals and development plans, for each employee, for the year ahead, and review their performance through the mid-year and annual Performance Dialogues with their line manager. They had elements of regular assessment through the year, both quantitative as well as of qualitative/leadership aspects. Performance was further assessed through a process that distinguishes relative contribution among relevant peer groups.

Complementing the organizational focus on a performance driven, productive & adaptable organization is the Total Rewards strategy. It aims to attract and retain talent, while clearly ensuring strong differentiators for the Company and Individual performance levels. At Vodafone, we are committed to provide market competitive total rewards to our employees basis employee performance, potential and position criticality. We are committed to providing holistic development, rich experiences and professional growth to our people. We endeavour to create a distinct differentiator in the Indian Talent market through a smart segmented approach differentiated by band, function / skill-set and strategic priorities for the year.

Total Rewards at Vodafone includes more than just Total Target Cash (or cash compensation). To help employees understand all the pay and benefits, Vodafone would be publishing a Personalized Total Reward Statement for all its employees in 2016. This statement not only gives a brief summary of the employees Total Target Cash but also provides cost of benefits extended to employees over and above cash compensation.

Our annual Global Short Term Incentive Plan (GSTIP) is designed to drive a performance culture in the organization through higher variable pay for superior performance while ensuring alignment with key business priorities. Similarly, our Frontline sales incentive plans have been designed to provide significant value and enhancement opportunities for our front line teams. Our revenue generators enjoy challenging assignments that are on offer, and we ensure that we recognize their stretch and delivery of superior business results. At senior levels, Global Long Term Retention & Incentives (GLTR/I) are delivered through restricted stocks, which provide long-term accretion opportunities, which are also performance and potential differentiated.

Particulars of employees:

A statement containing names of every employee employed throughout the financial year and in receipt of remuneration of Rs. 1.02 Crore or more or employed for part of the year and in receipt of Rs. 8.50 lakh or more a month, under Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is enclosed as ANNEXURE B to the Boards Report.

2. CORPORATE GOVERNANCE:

The Company believes in adopting the 'best practices' that are followed in the area of Corporate Governance. The Company emphasises the need for full transparency and accountability in all its transactions, in order to protect the interests of its stakeholders. For the Company, Corporate Governance is a mechanism that ethically drives business and operations of the Company that is committed to values aimed at enhancing the organisations brand and reputation. This is ensured by taking ethical business decisions and conducting the business with a firm commitment to values, while meeting stakeholders expectations. Some elements related to Corporate Governance are stated herein below:

Board Diversity:

We, at Vodafone recognise and appreciate the importance of a diversified Board which is able to leverage differences in thought, knowledge, perspective, experience, gender in order to maintain competitive advantage. The Company firmly believes that diverse Board is important to achieve effective corporate governance and sustained commercial success of the Company. The diversity in the Board of the Company can be accentuated with the fact that it comprise of appropriately qualified distinguished people with broad range of experience and expertise relevant to business of the Company. The diversity in Board helps make good use of differences in the skills, regional and industry experience, background, race, gender and other distinctions amongst Directors. All Board appointments are made on merit, in the context of the skills, experience, independence, knowledge and integrity which the Board as a whole requires to be effective.

Board composition: The Board of Directors of your company comprises of:

1. Ajay Khanna

Independent director

2. Sonu Bhasin

Independent Woman director

3. Naveen Chopra

Non-Executive Director

4. Bhuvanesh Pratap Singh

Non-Executive Director (Resigned w.e.f. 19 May 2016)

5. Arvind Agarwal

Non-Executive Director

Number of meetings of the Board:

During the financial year under review, the Board of Directors met 7 (seven) times i.e. on 11 June 2015, 09 July 2015, 21 August 2015, 02 December 2015, 11 December 2015, 11 February 2016, and 28 March 2016. Details of meetings attended by each Director are provided separately as Annexure - C.

Declaration of Independence given by Independent Directors:

Independent directors (IDs) appointed by Company provided Declaration of Independence pursuant to section 149(7) at first meeting of board in which he/ she participated as director confirming that they met the criteria of independence as provided in section 149(6) of the Act for the financial year 2015-16. The IDs have also provided the declaration of Independence pursuant to section 149(7) for the financial year 2016-17.

Policy on Directors Appointment and Remuneration:

The Board has, on the recommendation of the Nomination & Remuneration Committee framed a policy for selection and appointment of Directors, Key Managerial Personnel and other employees and their remuneration. The said policy covers directors appointment and remuneration including criteria for determining qualifications, positive attributes, independence of directors and other matter provided in Section 178(3) of the Companies Act 2013 as adopted by the Board and amended from time to time is appended as ANNEXURE D to this Report.

Board Evaluation:

The Board has initiated and completed the formal evaluation process for its own performance and of its Committees and individual directors, including independent directors, pursuant to Section 134 (3) (p) of the Companies Act, 2013 and Rule 8(4) of the Companies (Accounts) Rules, 2014. This was conducted based on the framework adopted by the Board and the outcome thereof were approved and noted by the Board.

Details of Directors, KMPs appointed or resigned during the year:

Changes in Directors:

During the year under review, Dinesh Sharma resigned as Directors w.e.f. 27 January 2016. Mr. Bhuvanesh Pratap Singh, Non-Executive Director of the Company vacated office as per the provisions of section 167(1)(b) of the Act and subsequently has resigned as director of the Company w.e.f. May 19 2016.

Apart from the above, there are no other changes amongst the Board of Directors of the Company during the financial year 2015-16.

Changes in Key Managerial Personnel:

During the year under review, Piyush Kakkad resigned as Chief Financial Officer of the Company w.e.f. 16 March 2016 and Vineet Ganeriwala was appointed as the Chief Financial Officer of the Company w.e.f. 28 March 2016 on the recommendation of the Nomination and Remuneration Committee.

Other than the above, there have been no changes during the financial year under review.

Independent Directors meeting

In compliance with Schedule IV to the Companies Act, 2013, the independent directors held their separate meeting without the attendance of non-independent directors and members of management on 15 March 2016 to assess the quality, quantity and timeliness of flow of information between the Company Management and the Board that is necessary for the Board to effectively and reasonably perform their duties and again met on 30 May 2016, without the attendance of non-independent directors and members of management, to inter alia: i) review the performance of non-independent directors and the Board as a whole; and ii) review the performance of the Chairperson of the Company, taking into account the views of executive directors and non-executive directors. All independent directors were present at the meeting. The independent directors present at the meeting deliberated on the above and expressed their satisfaction.

Committees of the Board:

The Company has 3 (three) Committees viz: (i) Audit committee, (ii) Nomination & Remuneration Committee and (iii) Corporate Social Responsibility Committee. These Committees are constituted in conformity with the provisions of the Companies Act 2013. Details of Committee meetings and attendance by each Director are provided separately as Annexure C. A brief note on each such committee is set out below:

Name of the Committee: Audit Committee

Members:

1. Ajay Khanna Chairperson

2. Sonu Bhasin

3. Suresh Bagrodia (up to 30 June 2015)

4. Dinesh Sharma (from 30 June 2015 up to 7 September 2015)

5. Arvind Agarwal (from 7 September 2015)

Key Highlights of Duties and Responsibilities:

The Committee review and discuss the procedure, process and certification of companys financial statements, disclosures and reports. It also reviews independence, objectivity and effectiveness of external auditors and effectiveness of Internal Audit and to oversee its plans, scope and observations of audit.

The Committee identify, regulate, oversee, scrutinise the Related Party Transactions of the Company as per the Related Party Transaction Policy adopted by the Company.

The Committee also review and approve proposals in respect of valuations of the assets/ undertakings of the Company and monitor end use of funds, as and when required.

The Committee oversees Vigil Mechanism of the Company and reviews the Internal financial control mechanism.

Name of the Committee: Nomination & Remuneration Committee

Members:

1. Naveen Chopra Chairperson

2. Ajay Khanna

3. Sonu Bhasin

4. Suresh Bagrodia (up to 31 July 2015)

5. Arvind Agarwal (from 11 August 2015)

Key Highlights of Duties and Responsibilities:

As per the terms of Reference of the Nomination and Remuneration policy of the Committee the role and duties of the Committee is to identify persons qualified to become directors/ senior management appointees and recommend their appointment to the Board

Formulate policy for criteria for appointment of personnel, remuneration aspects and performance benchmarks and reviews the policy relating to remuneration schemes pertaining to employees w.r.t. appraisals and rewards.

Name of the Committee: Corporate Social Responsibility Committee

Members:

1. Naveen Chopra Chairperson

2. Ajay Khanna

3. Suresh Bagrodia ( up to 31 July 2015)

4. Arvind Agarwal (from 11 August 2015)

Key Highlights of Duties and Responsibilities:

Formulate and recommend to the Board, CSR Policy indicating CSR activities to be undertaken;

Ensure CSR projects or programs or activities undertaken or to be undertaken by the Vodafone India Group falling within the scope of the law

To monitor mechanism for implementation of the CSR projects or programs or activities undertaken or to be undertaken by Vodafone India Group and supervise these projects or programs.

Ensure that the CSR expenditure shall include all expenditure including contribution to the Corpus for CSR projects or programs or activities undertaken or to be undertaken by Vodafone India Group but does not include any expenditure on an item not in conformity with the activities specified in Schedule VII of the Act

Directors Responsibility Statement:

The financial statements are prepared in accordance with the Generally Accepted Accounting Principles (GAAP) under the historical cost convention on accrual basis except for certain financial instruments, which are measured in fair values. GAAP comprises mandatory accounting standards as prescribed under section 133 of the Companies Act, 2013 (the Act), read with Rule 7 of the Companies (Accounts) Rules 2014, the provisions of the Act (to the extent notified). There are no material departures from the prescribed accounting standards in adoption of these standards.

To the best of their knowledge and belief and according to the information and explanations obtained by them, your Directors make the following statements in terms of Section 134(3)(c) of the Companies Act, 2013:

1. in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

2. the directors had selected such accounting policies and applied them consistently and made judgments 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 and loss of the company for that period;

3. the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

4. the directors had prepared the annual accounts on a going concern basis.

5. the directors, had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively

6. the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

5. AUDITORS:

Statutory Auditor:

At the Annual General Meeting (AGM) of the Company held on 12 September 2014, M/s. Lovelock & Lewes, Chartered Accountants (Firm Registration No. 301056E) were appointed as the auditors of the Company to hold office till the conclusion of the AGM to be held in year 2020.

Pursuant to Section 139 of the Companies Act 2013, read with the Companies (Audit and Auditors) Rules, 2014, the appointment of M/s. Lovelock & Lewes, as the Auditors of the Company for the financial year 2015-16 was ratified by the members at the AGM held on 24 September 2015.

Pursuant to the aforementioned provisions, the appointment of M/s. Lovelock & Lewes, as the Auditors of the Company for the financial year 2016-17 is placed for ratification by members of the Company.

The members are requested to ratify the appointment of M/s. Lovelock & Lewes, Chartered Accountants (Firm Registration No. 301056E) as statutory auditors of the Company and to fix their remuneration for the year 2016-17.

The statutory audit report does not contain any qualification, reservation or adverse remark or disclaimer made by statutory auditor.

Cost Auditor:

During the year under review, pursuant to the provisions of section 148 of the Companies Act, 2013 and Companies (Cost Records and Audit) Rules, 2014, the services rendered by the Company were covered for maintenance of cost records and accordingly the Board, pursuant to the recommendation of the Audit Committee, has appointed M/s Sanjay Gupta & Associates, Cost Accountants (Firm Registration No. 000212), as the Cost Auditors of the Company to conduct audit of Cost Accounting Records for the Financial Year 2014-15. The Cost Auditors have submitted their report for the financial year ending 31 March 2015.

Further, the Board, pursuant to the recommendation of the Audit Committee, has appointed the said M/s Sanjay Gupta & Associates, Cost Accountants, as the Cost Auditors of the Company to conduct audit of Cost Accounting Records for the Financial Year 2016-17.

As per Section 148 of the Companies Act, 2013 read with the Companies (Audit and Auditors) Rules, 2014, the remuneration payable to the Cost Auditors is required to be ratified by the Shareholders. The Board recommends the same for the approval by the Shareholders at the ensuing Annual General Meeting of the Company.

Secretarial Auditor:

Sanjay Grover & Associates, a firm of practising Company Secretaries (CP No. 3850) were appointed to conduct Secretarial Audit of the Company for the financial year 2014-15 pursuant to Section 204 of the Companies Act 2013 and Rules made thereunder.

Secretarial Audit Report of the Company for FY 2015-16 is attached as ANNEXURE E to this Report. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark.

The Board has appointed Sanjay Grover & Associates, a firm of practising Company Secretaries to conduct Secretarial Audit of the Company for the financial year 2016-17 pursuant to Section 204 of the Companies Act 2013 and Rules made thereunder.

Extract of Annual Return:

The Extract of Annual Return in Form MGT-9 pursuant to Section 92(3) of the Companies Act, 2013 and Rule 12 of the Companies (Management and Administration) Rules, 2014 is attached as ANNEXURE-F to this Report.

6. INTERNAL FINANCIAL CONTROL:

The Company has laid down internal financial controls with reference to its financial statements, which enables preparation of financial statements for external purposes in accordance with Indian Generally Accepted Accounting Principles. These include both manual controls and IT applications including the ERP application in which the transactions are approved and recorded. Based on the testing of the design and implementation thereof during the year, such internal financial controls are assessed to be adequate.

7. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO:

The information on conservation of energy, technology absorption and foreign exchange earnings and outgo stipulated under Section 134(3)(m) of the Companies Act, 2013 read with Rule, 8 of Companies (Accounts) Rules, 2014, is annexed herewith as ANNEXURE G

8. RISK MANAGEMENT FRAMEWORK:

Your Company, being part of Vodafone India group, has and follows the comprehensive Risk Management framework. It encompasses Operational Risk and Enterprise Risk management and mitigation process. The Company also has robust compliance management process to ensure compliance of applicable laws.

In Operational Risk Management broadly comprises of Security Risk Management covering issues around Fraud, Business Continuity, Anti-Money Laundering, Physical & Technology security, LI & Data Disclosure, DoT / TERM Cell Compliances and investigation related matters. The process to manage these risks are as under:

Risk Assessment / Identification

Risk Classification

Risk Monitoring / Investigation

Risk Remediation / Mitigation

Risk Reporting

The Enterprise Risk Management (ERM) program is aimed at forecasting, analysing, monitoring and mitigating strategic, operational and other risks arising from the external environment that may inhibit our ability to run and grow our business in a sustainable manner.

9. CORPORATE SOCIAL RESPONSIBILITY:

The Company as a responsible corporate believes in contributing to society to create shared value and is committed to fulfilling its obligations to society through the power of mobile technology and to addressing some of Indias most pressing challenges relating to education, health, equality and access. Through initiatives in empowerment, Vodafone aims to bring gender equality, support creation of job opportunities & employment for women, create access for the specially-abled and the disadvantaged sections of our society.

The details about policy developed, contents of policy and policy implemented by the company on Corporate Social Responsibility initiatives taken during the year under review and report thereon pursuant to Section 134(3)(o) and Section 135 of the Act is attached as ANNEXURE H to this Report.

The CSR policy of the Company is also available on the website of the Company www.vodafone.in

10. ORDERS PASSED BY REGULATOR OR COURTS OR TRIBUNALS:

First Scheme of Amalgamation: A scheme of amalgamation involving:

1. Vodafone Digilink Limited (CIN - U64201DL1997PLC088088);

2. Vodafone South Limited (CIN - U74899DL1995PLC074451);

3. Vodafone East Limited (CIN - U32204WB1992PLC079998); and

4. Vodafone Cellular Limited (CIN U64202TZ1995PLC007674) (all Transferor Companies)

with and in to the Company was approved by the respective Honble High Courts of Calcutta, Madras and Delhi vide their Orders dated 22 March 2013, 5 June 2013 and 1 April 2014 read with 22 April 2014 respectively subject to approval from the Department of Telecommunication (DoT) as required in accordance with the licensing conditions.

Subsequently the Company filed application with the DoT and after several exchange of communications by the Company with the DoT and in view of DoTs demands, VMSL and the Transferor Companies named hereinabove, filed an appeal against the said DoTs demands with the Telecom Disputes Settlement & Appellate Tribunal (TDSAT). The Honble TDSAT, vide its Interim Order dated 19 October 2015 directed the DoT to provisionally allow the merger and transfer of licences sought by the Petitioners without insisting, at that stage, on payment of the impugned demands, provided the Petitioners submit an Undertaking both before the Honble TDSAT and the DoT that the Petitioners would pay the demands made by the Government subject to the final results of the said Petition and depending upon the outcome of the proceedings before the Tribunal / High Courts / Supreme Court.

The Company had on 30 October 2015 submitted the said Joint Undertaking and requested the DoT to issue its approval to the amalgamation. The DoT filed an appeal in the Honble Supreme Court of India against the interim Order of the TDSAT and the Honble Supreme Court, passed an Interim Order dated 23 November 2015 directing the DoT to grant the approval forthwith upon the Company depositing an amount of Rs. 2000 Crore.

The Company deposited the said amount of Rs. 2000 Crore with the DoT and the DoT has issued a letter dated 10 December 2015 based on which the Transferor Companies and the Company filed the requisite documents and forms with the respective Registrar of Companies and the amalgamation became effective from 11 December 2015.

Second Scheme of Amalgamation: A scheme of amalgamation involving:

1. Vodafone Spacetel Limited (CIN - U72200DL1997PLC085764)

2. Vodafone West Limited (CIN - U32100GJ1995PLC035282) (the Transferor Companies)

with and in to the Company was approved by the Honble High Court of Delhi vide Orders dated 03rd July 2014 and by the Honble High Court of Gujarat vide its Orders dated 18th -19th February, 2015 & 15th April, 2015 subject to necessary approvals from the Department of Telecommunications (DoT), Ministry of Communications & Information Technology.

Subsequently the Company filed application with the DoT and after exchange of communications by the Company with the DoT and in view of DoTs demands, the Company and the Transferor Companies filed an appeal against the said DoTs demands with the Telecom Disputes Settlement & Appellate Tribunal (TDSAT). Following the interim order passed by the Supreme Court in the earlier scheme of amalgamation, The Honble TDSAT, vide its Interim Order directed the Company to deposit Rs. 450 Crore and also directed the DoT to approve the merger orders forthwith upon receipt of money.

The Company deposited the amount of Rs. 450 Crore with the DoT and the DoT issued a letter dated 05 February 2016 approving the amalgamation of Vodafone Spacetel Limited and Vodafone West Limited with and into the Company based on which the Transferor Companies and the Company filed the requisite documents and forms with the respective Registrar of Companies and the amalgamation became effective from 11 February 2016.

Scheme of Arrangement:

In accordance with the scheme of arrangement approved by the Delhi High Court on March 29, 2011, PI assets with book values aggregating to Rs. 1,688 as at April 1, 2009, the appointed date, were transferred to Vodafone Infrastructure limited, a fellow subsidiary for nil consideration and were debited to the Statement of Profit and Loss for the year ended March 31, 2011 and the accounting entries relating to the PI activities in the interregnum were reversed.

The Income Tax authorities have filed an appeal before the Division Bench of the Delhi High Court challenging the approval of the demerger scheme. Based on management assessment, no impact of the said appeal is currently considered on the accompanying financial statements.

Apart from the above, there are no significant material orders passed by regulators or courts or tribunals impacting the going concern status and companys operations in future

11. DISCLOSURES UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION & REDRESSAL) ACT, 2013

The Company has in place an Anti-Sexual Harassment Policy in line with the requirements of The Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013. Internal Complaints Committee (ICC) has been set up to redress complaints received regarding sexual harassment. All employees are covered under this policy. During the financial year under review, 18 complaints were received and 13 were disposed of.

12. VIGIL MECHANISM:

Pursuant to Section 177(9) of the Companies Act, 2013 and Rule 7 of the Companies (Meetings of Board and its Powers) Rules, 2014 the Company has in place a Vigil Mechanism by the name of Speak-up Policy. The Policy comprehensively provides an opportunity for any employee/ Director of the Company to raise any issue concerning breaches of law or any act resulting in financial or reputation loss and misuse of office or suspected or actual fraud. The Policy provides for a mechanism to report such concerns to the Audit Committee Chairman through specified channels. The Policy is periodically communicated to the employees. The Speak-up Policy complies with the requirements of Vigil mechanism as stipulated under Section 177 of the Companies Act, 2013. The details of establishment of the Speak up Policy/Vigil mechanism have been disclosed on the website of the Company.

ACKNOWLEDGEMENT:

The Board place on record their appreciations of the whole hearted and sincere co-operation received by the Company during the year from the employees, customers/ clients, bankers and various Government authorities at all levels.

For and on behalf of the Board of Directors

Of Vodafone Mobile Services Limited

Naveen Chopra

Arvind Agarwal

Director

Director

(DIN : 05307614)

(DIN : 02175753)

Date: 04 August 2016

Place: Mumbai

ANNEXURE A

FORM AOC-2

(Pursuant to clause (h) of sub-section (3)of section 134 of the Act and Rule 8(2) of the Companies (Accounts) Rules, 2014)

Details of transactions which are not at arm's length

Nature of Contract

Name of Related Party

Nature of Relationship

Nature of contracts/ arrangements/ transactions

Duration of the contracts / arrangements/ transactions

Salient terms of the contracts or arrangements or transactions including the value, if any

Value in Rs.

Justification for entering into such contracts or arrangements or transactions

date(s) of approval by the Board

Amount paid as advances, if any:

Date on which the special resolution was passed in general meeting as required under first proviso to section 188

NIL

Nature of Contract

Name of Related Party

Nature of Relationship

Duration of Contract

Salient Terms

Amount in Rs.

Purchase of services

Indus Towers Limited

Entity where Immediate Holding Company has significant influence

Ongoing

Rental and Energy Billing. The transaction is as per MSA agreement and on similar terms and rates as other passive infrastructure providers, the same is treated as arms length transaction.

49,314 ,173,692

For and on behalf of the Board of Directors

Of Vodafone Mobile Services Limited

Naveen Chopra

Arvind Agarwal

Director

Director

(DIN : 05307614)

(DIN : 02175753)

Date: 04 August 2016

Place: Mumbai

Sr. No.

Name

Designation

Gross Remuneration Received

Nature of Employ-ment

Educational Qualification

Exp in years

Date of employ-ment

Age in Yrs

Last Employment held by Employee

%age of Equity Shares Held within the meaning of clause (iii) of sub-rule (2) of Rule 5

Whether Relative of Director / Manager, If yes, provide name of such Director / Manager

1.

Sandeep Talwar

DM - Ent Service Assurance

34,540,727

Permanent

BE, PG Dip, MS

13

17-Jan-08

34

Everest Business Consulting

NIL

No

2.

Apoorva Mehrotra

BH - Delhi

21,272,474

Permanent

B. A. / PG

21

02-Jan-03

46

Vodafone South Limited

NIL

No

3.

Jayesh Gadia

BH Gujarat

19,261,228

Permanent

B.Com, MBA

29

22-Jul-96

51

Vodafone Digilink Limited

NIL

No

4.

Anand Nripendra Sahai

BH Kolkata & WB

18,842,400

Permanent

B.A., MBA

11

06-Aug-07

48

Time International

NIL

No

5.

Rajshekhar Metgud

BH Bihar

17,705,843

Permanent

BE, PG Dip.

33

10-May-99

51

Blue Star Ltd.

NIL

No

6.

Ashish Chandra

BH Maharashtra

17,501,415

Permanent

B.E., MBA

22

07-Apr-08

42

Vodafone Spacetel Limited

NIL

No

7.

S. Murali

BH Tamil Nadu

15,598,216

Permanent

B.Com, MBA

28

24-Sep-01

51

Blow Plast Ltd.

NIL

No

8.

Pushpinder Singh Gujral

BH Punjab, HP, J&K

13,693,351

Permanent

B.E., MMS

24

17-Feb-07

46

Philips Electronics India Ltd

NIL

No

9.

Manish Kumar

BH Madhya Pradesh

13,205,899

Permanent

B.Sc. PG Dip.

4

09-Dec-10

45

N.A.

NIL

No

10.

Joy Rajan Cheruvathoor

SVP - M2M & Market Alliances

12,375,822

Permanent

B.E., MMS

28

18/10/2007

53

VSNL

NIL

No

11.

Amit Bedi

BH Rajasthan

11,761,077

Permanent

B.Sc. MBA

12

03-Nov-04

47

Star India

NIL

No

12.

Rohit Tandon

BH Andhra Pradesh

11,574,196

Permanent

B.E., PG Dip.

13

01-Dec-04

43

TTSL

NIL

No

13.

Abhijit Kishor

BH Kerala

10,895,323

Permanent

B.A., PG Dip.

21

23-Mar-15

43

TATA Teleservices Ltd

NIL

No

14.

Deepak Saluja

BH Odisha

10,854,936

Permanent

B.E., MMS

26

08-Oct-14

47

Sab Miller India Ltd.

NIL

No

Sr. No.

Name

Designation

Gross Remuneration Received

Nature of Employment

Educational Qualification

Exp in years

Date of employ-ment

Age in Yrs

Last Employment held by Employee

%age of Equity Shares Held within meaning of clause (iii) of sub-rule (2) of Rule 5

Whether Relative of Director / Manager, If yes, provide name of such Director / Manager

1.

Nipun Shah

BH Uttar Pradesh East

12,778,681

Permanent

B. Tech., MBA

24

06-Nov-95

44

TATA Teleservices Ltd.

NIL

No

2.

Alok Verma

BH Assam & North East

11,947,673

Permanent

B.E., MBA

21

21-May-15

42

Aircel Limited

NIL

No

3.

Amit Kapur

BH Karnataka

10,762,603

Permanent

Graduate, PG Dip

17

04-Jan-16

40

PepsiCo India Holdings Pvt. Ltd,

NIL

No

4.

Vivek Jain

VP - Sales & Marketing

9,146,161

Permanent

B.Sc. PG Dip.

14

29-Feb-16

43

Suntory Beverages & Food Asia SGB

NIL

No

5.

Pranav Nehru

AVP - Sales & Marketing

7,822,533

Permanent

Graduate, PG Dip

15

24-Nov-15

39

SAMSUNG ELECTRONICS

NIL

No

6.

Girish Holla S

AVP - Customer Exp & Innovation

7,629,552

Permanent

Diploma

19

01-Nov-02

43

BPL Cellular Ltd

NIL

No

7.

Rohit Chugh

AVP - Sales & Marketing

7,012,850

Permanent

BE, PG Dip.

15

25-May-15

42

Coca Cola

NIL

No

8.

Gautam Borah

GM - Customer Service

6,412,696

Permanent

BE, PG Dip

22

01-May-15

50

Vodafone India Limited

NIL

No

9.

Sukanta Das

GM Sales

6,377,107

Permanent

Graduate, PG Dip

14

15-May-15

40

CEAT Ltd.

NIL

No

10.

Angira Satyendra Kumar Agrawal

VP Vodafone Business Services

6,321,530

Permanent

BE, PG Dip.

20

03-Dec-15

45

PERSISTENT SYSTEMS

NIL

No

Notes :

1. Gross remuneration comprises of salary, allowances, monetary value of perquisites and the Company's contribution to Provident and Superannuation Funds.

2. Experience includes number of years service both within the Company and elsewhere, wherever applicable.

3. Remuneration mentioned above is inclusive of retirement/separation benefits paid during the year and is not indicative of any regular remuneration structure of employees of the Company.

For and on behalf of the Board of Directors

Of Vodafone Mobile Services Limited

Naveen Chopra

Arvind Agarwal

Director

Director

(DIN : 05307614)

(DIN : 02175753)

Date: 04 August 2016

Place: Mumbai

Annexure - C

Vodafone Mobile Services Limited

The details as required to be given as per Standard 9 of the Secretarial Standards 1 on Board Meetings.

Dates of Board and Committee meetings held during the financial year 2015-16 and attendance of each director at such meetings

Board Meeting Dates

11 June 2015, 09 July 2015, 21 August 2015, 02 December 2015, 11 December 2015, 11 February 2016, and 28 March 2016

Audit Committee Meeting Dates

11 June 2015, 09 July 2015, 21 August 2015, 02 December 2015 and 28 March 2016

CSR Committee Meeting Dates

11-Jun-15

NRC Committee Meeting Dates

11 June 2015 and 28 March 2016

Sl. No.

Name of the Director

Board Meetings attended

Audit Committee Meetings attended

NRC Committee Meetings attended

CSR Committee Meetings attended

1

Naveen Chopra

2

NA

2

1

2

Suresh Bagrodia (resigned w.e.f. 31/07/2015)

0

0

0

0

3

Dinesh Sharma (resigned w.e.f. 27/01/2016)

2

1

NA

NA

4

Arvind Agarwal (appointed w.e.f. 11/08/2015)

5

2

1

0

5

Bhuvanesh Pratap Singh

0

NA

NA

NA

6

Ajay Khanna

6

4

1

1

7

Sonu Bhasin

6

4

2

NA

For and on behalf of the Board of Directors

Of Vodafone Mobile Services Limited

Naveen Chopra

Arvind Agarwal

Director

Director

(DIN : 05307614)

(DIN : 02175753)

Date: 04 August 2016

Place: Mumbai

ANNEXURE - D

VODAFONE MOBILE SERVICES LIMITED

Nomination and Remuneration Policy

1 Purpose

This policy augments the guiding principles on directors, Key Managerial Personnel (KMPs) and other employees' appointment and remuneration including criteria for determining qualifications, positive attributes and independence of directors. This policy on nomination and remuneration of Directors, Key Managerial Personnel (KMPs) and other employees has been formulated in terms of the provisions of the Companies Act, 2013 to achieve fair, reasonable and modern practices in line with the generally accepted industry practice.

2 Definition

'Act' means Companies Act 2013 and Rules, Regulations framed thereunder including circulars, clarifications issued from time to time.

'Board' means Board of Directors of the Company.

'Directors' means members of Board of Directors of the Company.

'Committee' means Nomination and Remuneration Committee of the Company as constituted or reconstituted by the Board, in accordance with the Act.

'Company' means Vodafone Mobile Services Limited.

'Independent Director' means a Director referred to in Section 149(6) of the Act.

'Key Managerial Personnel (KMP)' means-

i) the Managing Director or the Chief Executive Officer or the manager and in their absence, a Whole-time Director;

ii) the Company Secretary; and

iii) the Chief Financial Officer

Senior Management means personnel of the company who are members of its core management team excluding Board of Directors comprising all members of management one level below the Executive Directors, including the functional heads which is Executive Committee Members.

Unless the context otherwise requires, words and expressions used in this policy and not defined herein but defined in the Companies Act, 2013 and Listing Agreement as may be amended from time to time shall have the meaning respectively assigned to them therein.

3 Policy Scope

This Policy is divided into three parts:

Part A - Appointment and nomination of Directors, KMPs or Senior Management level

Part B - Remuneration of Directors

Part C - Applicability of Policy to other employees including KMPs

PART A - APPOINTMENT AND NOMINATION

Appointment criteria and qualifications

1 The Committee shall identify and ascertain the integrity, qualification, expertise and experience of the person for appointment as Director, KMP or senior management level and recommend to the Board his / her appointment.

2 A person to be appointed as Director, KMP or Senior Management level should possess adequate qualification, expertise and experience for the position he / she is considered for appointment.

3 A person, to be appointed as Director, should possess impeccable reputation for integrity, deep expertise and insights in sectors / areas relevant to the Company, ability to contribute to the Company's growth, complementary skills in relation to the other Board members.

4 The Company shall not appoint or continue the employment of any person as Managing Director / Executive Director who has attained the age of 58 years and shall not appoint Independent Director who has attained the age of 75 years.

5 A whole-time KMP of the Company shall not hold office in more than one company except in its subsidiary company at the same time. However, a whole-time KMP can be appointed as a Director in any company, with the permission of the Board of Directors of the Company.

Term or Tenure

1 Managing Director / Whole-time Director

The Company shall appoint or re-appoint any person as its Managing Director and CEO or Whole-time Director for a term not exceeding five years at a time. No re-appointment shall be made earlier than one year before the expiry of term.

2 Independent Director

An Independent Director shall hold office for a term up to five consecutive years on the Board of the Company and will be eligible for re-appointment on passing of a special resolution by the Company and disclosure of such appointment in the Board's report.

No Independent Director shall hold office for more than two consecutive terms, but such Independent Director shall be eligible for appointment after expiry of three years of ceasing to become an Independent Director. Provided that an Independent Director shall not, during the said period of three years, be appointed in or be associated with the Company in any other capacity, either directly or indirectly. However, if a person who has already served as an Independent Director for five years or more in the Company as on April 1, 2014 or such other date as may be determined by the Committee as per regulatory requirement, he / she shall be eligible for appointment for one more term of five years only.

At the time of appointment of Independent Director, it should be ensured that number of Boards on which such Independent Director serves is restricted to seven listed companies as an Independent Director and three listed companies as an Independent Director in case such person is serving as a Whole-time (Executive) Director of a listed company.

Removal

Due to reasons for any disqualification mentioned in the Act or under any other applicable Act, rules and regulations, the Committee may recommend, to the Board with reasons recorded in writing, removal of a Director or KMP subject to the provisions and compliance of the said Act, rules and regulations.

Retirement

The Whole-time Directors, KMP and Senior Management personnel shall retire as per the applicable provisions of the Companies Act, 2013 and the prevailing policy of the Company. The Board will have the discretion to retain the Whole-time Directors, KMP and Senior Management personnel in the same position / remuneration or otherwise, even after attaining the retirement age, for the benefit of the Company.

PART B - REMUNERATION AND REIMBURSEMENTS

This policy outlines Director's entitlement to receive Remuneration, Commission, fees or any other benefit. The remuneration to other employees including Key Managerial Personnel of the Company will be covered under the Company's Employee Policy as stated in PART C.

Sitting Fees

Independent as well as Non-Executive Directors of the Company who are not nominated by promoters will be paid a sitting fee of up to Rs. 1,00,000/- per Board or Committee Meeting attended by them as may be deemed fit by the Board from time to time.

Commission

The Director of the Company may be eligible for receiving profit related commission as per the provisions of Companies Act, 2013.

Remuneration

The Directors of the Company may be paid remuneration in accordance with the provisions of Companies Act, 2013 and other regulatory approvals wherever required.

The Remuneration to be paid will be arrived at after benchmarking with the industry practice and market trend.

Insurance Premium

In case the Company takes an Insurance on behalf of its Managing Director, Whole-Time Director, Director, Manager, Chief Executive Officer, Chief Financial Officer or Company Secretary for indemnifying any of them against any liability in respect of any negligence, default, misfeasance, breach of duty or breach of trust for which they may be guilty in relation to the Company, the premium paid on such insurance shall not be treated as part of the remuneration payable to any such personnel.

Overriding Effect

This policy and accompanying procedures supersede any other document that describes provisions related to payment of remuneration to the Directors.

Recovery of Excess Remuneration

The Company reserves the right to recover excess remuneration paid to any Director during the year or during any previous year. The Company may also waive off the recovery of excess remuneration paid to any Director if deemed fit as per the law.

Disclosure of Remuneration

The Company will endeavour not to disclose any information related to remuneration/ commission/ fees paid to any Director unless such information need to be provided in compliance with any Act, Rules, Regulation or court order or under any Statutory requirement.

Reimbursement of Expenses

The Directors will be entitled to receive travel, accommodation & other incidental expenses, handsets and telephone expenses as per the Directors' Expense Policy.

PART C - REMUNERATON POLICY FOR KMPs AND OTHER EMPLOYEES

(ANNUAL REWARDS REVIEW)

Company being subsidiary of Vodafone Plc., has adopted and follows the Global Policy on remuneration for its all employees including KMPs. The said Policy is known by Total Reward policy.This Policy Standard sets out the overall approach to Total Reward for Vodafone people globally. The standard covers:

o Base Pay;

o Short Term Incentives; and

o Long Term Incentives

Total reward is structured around pay in line with performance and providing the opportunity to reward strong corporate and individual talent. Base pay should be set at levels that recognise an individual's market value (i.e. level of skill and experience, demand for skill, as well as performance in role). The incentive plans form the main tools for incentivising above average performance.

Short Term Incentive is a global bonus plan designed to incentivise and drive exceptional performance in alignment with business, strategic and operational goals as well as with individual performance targets. The bonus opportunity may increase with band.

Long term incentive is to reward exceptional performance, to recognise and retain high potential talent and to drive alignment with shareholder interests. The plans will be operated on a consistent basis throughout Vodafone, managed centrally by the Group Reward team.

For and on behalf of the Board of Directors

Of Vodafone Mobile Services Limited

Naveen Chopra

Arvind Agarwal

Director

Director

(DIN : 05307614)

(DIN : 02175753)

Date: 04 August 2016

Place: Mumbai

ANNEXURE - G

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION,

FOREIGN EXCHANGE EARNINGS AND OUTGO:

A. Conservation Energy:

In FY16, we continued our commitment towards energy conservation and implemented various initiatives some of which are listed below:

(i) Steps taken / impact on conservation of energy:

Vodafone believes in a sustainable business model and works in a responsible manner to protect and nurture the environment and the community at large. Therefore conservation of energy has been an important priority at Vodafone where we strive to be a leader in conservation of energy and impact the society at large in a positive way. We have introduced various energy-efficient measures like e-waste management and reduced paper usage by popularising e-bills. We make dedicated efforts to conserve energy by every possible means and reduce wastage at our areas of operations.

Network Energy Efficiency:

1 Conversion of Indoor sites to Outdoor: The Company strengthened its focus with partner tower companies to convert more than 13,706 sites to outdoor resulting into elimination of use air-conditioners hence reducing energy consumption of these sites by about approximately 30%. This innovative practice was first developed by Vodafone in the past which is now being accelerated across the industry by other players in the market.

2 New Sites Deployment on Sharing Basis: More than 63% of sites deployed in FY16 were shared sites as part of the mandated initiative to reduce carbon emissions and energy consumption. This has led to a reduction in energy consumption as compared to standalone sites.

3 Outdoor sites as a mandatory requirement: 91% of the new sites are deployed as outdoor sites eliminating the need for air conditioning thus reducing the energy consumption.

4 Energy efficiency through New Technology: As part of our modernization initiatives, we have introduced the more efficient SRAN equipment at 11,163 sites

5 Energy saving features: We also continued with our active equipment energy saving initiatives like TRX shutdown during low traffic period.

(ii) Steps taken by the company for utilising alternate sources of energy:

Green Network:Vodafone has pioneered rollout of several initiatives aimed at energy conservation during the year:

1 Green sites: Vodafone India has been working closely with infra partner tower companies to convert more of the company's sites to green sites. We were able to add 4,941 more sites in Green sites category taking total count to 26,795 Deployment of hybrid battery technology and close monitoring of sites has led to complete diesel free operations at these sites.

2 Solar Powered Sites: The Company continued harnessing solar energy by adding 43 new solar solutions at off grid sites thereby increasing the total solar site count of 500.

Green IT

Apart from Network operations, Vodafone India has also made conscious efforts to make its IT operations greener and more efficient. This has been made possible by adopting sustainable practices and new technologies as listed below.

1 Cloud Computing & Virtualization: Vodafone India has setup multiple, interconnected, high capacity servers to provide a huge resource pool and centralized management through Cloud computing enabling the delivery of IaaS (Infrastructure as a Service). This Cloud computing initiative has resulted in reduction of hardware footprint & energy consumption as well as optimal utilization of resources. 65 applications are currently hosted in Vodafone India's cloud environment. The overall virtualization (standalone & cloud) footprint has increased by 6% (YoY) and stands at 39% at end of March'16.

2 Database re-engineering and Optimization: VIL has continued with the defragmentation, re-indexing and optimization of the recycle bin, which has led to 486 Terra Bytes of storage capacity reduction and 34 KW/H of power consumption reduction thereby reducing CO2 emissions by 340 tons per annum. In addition to this VIL has re-engineered the UPSS (Unified Prepaid Support System), onto an alternate technology known as Exadata, which requires lesser hardware and reduces energy consumption. This technology has facilitated 25 times data compression which has resulted in reduction of about 15KW/H power usage thereby leading to a carbon footprint reduction of approx. 160 tons per annum.

3 Electronic Billing: Vodafone constantly attempts to reduce the usage of paper, resulting in physical copies of bills and receipts. This is done through the deployment of best-in-class digital assets and use of our user-friendly payment options. We promote electronic billing to our customers and create awareness on its impact on environment.

4 Video Conferencing: To reduce GHG (Green House Gases) emissions, the Company actively promotes the use of Video Conferencing (VC) as an alternative to travelling for meetings both inter and intra city, especially for internal purposes. During FY15, company has increased the number of VC sessions significantly, leading to a substantial reduction of CO2 emissions.

5 Power Policy: The Company has established an internal Power Policy which uses tools that optimizes power consumption offering maximum performance when the user needs it and saving power during inactive periods. Effective implementation has led power saving and consequentially resulting in reduced CO2 emissions.

(iii) Capital Investment on energy conservation equipment:

NIL

B. Technology Absorption

(i) The efforts made towards technology absorption:

The Indian market has been experiencing explosive growth in mobile broadband services, fuelled by affordable smartphone devices and a plethora of applications that are influencing social lifestyles. This is driving a continuous requirement for additional capacity and spectrum, in order to provide a best-in class user experience to subscribers. Unprecedented loading of the network with scarce spectrum, limited infrastructure, and right-of-way challenges for fibre layout has caused the Company to seek non-traditional ways for densification and optimisation of its networks. The Company has embraced new technologies to overcome these challenges.

Vodafone deployed 3G in 6 new markets in FY16. Along with 3G, the 2G network in these markets was also modernized. These markets now operate on all IP architecture. This has led to our network performance in these markets being significantly better in all aspects of voice and data.

New site integration process has been greatly simplified with standardized templates running and being managed at SNOC level. This has greatly facilitated large scale of site integrations which were required, especially in the last two quarters of FY15-16.

We have been at forefront of introducing technologies such as SON (Self Optimizing Network) and other Geo-analytical tools in real time to ensure enhancement of customer experience and network optimization. With SON deployed in major markets the neighbour addition process is completely automated for 3G, requiring no manual intervention. With SON running in >73k cells in the network, optimization process has been simplified.

Apart from that, we have also been able to offer seamless connectivity solutions to our customers through the deployment of Wi-Fi and Small Cell technologies at strategic locations, leading to an improved data experience for our customers.

As part of our operating model, we also partner with some of the leading Technology companies of the world which helps in implementing new technologies to manage our operations.

Innovative products like Vodafone Red and My Vodafone App have been immensely successful and rapidly adopted by customers, across the country. The Vodafone M-pesa App and My Vodafone App have the highest ratings and retention rates amongst similar other apps.

In FY16, we went live with our first cable landing station. This shall enable us to offer better and faster services to our Enterprise customers.

(ii) The benefits derived from technology absorption

Re-farming of the 1800 MHz 2G spectrum in M&G, Gujarat and UPE was done seamlessly without their being any impact on the customers. 1800 MHz spectrum was refarmed in Delhi, Kolkata, Kerala and Karnataka which has enabled us to start offering LTE services to our customers in these circles.

With the help of latest technology, we have transformed our network in an environment-friendly manner by deploying 'green' base stations, reducing power consumption and footprint, converting a majority of units into outdoor units, and eliminating the need for air-conditioning. These steps have resulted in significant reduction in our carbon footprint.

Through a strategic combination of in-house and outsourced operating model, Vodafone has been successful in delivering one of the most advanced networks to its customers. Strong on ground execution and Governance has further enabled us to optimize performance and gain cost efficiencies while keeping pace with huge volume growth. Our focus on creating a resilient network architecture has ensured that we have been amongst the leading operators to quickly restore network services for our customers in case of natural disasters. In the recent floods in Chennai, Vodafone was one of the first operators to restore services with our services being available within 2 hours.

Vodafone has also executed India's first and largest database migration program amongst Telcos. 170+ million customers were migrated to the new systems with no impact on the customer. The current setup offers a geo redundant network architecture which enables us to offer high availability services to our customers.

We modernized and upgraded our IN platform in 6 circles of UPE, UPW, Punjab, Haryana, HP and M&G in FY16. This upgrade shall help us provide the latest Technology offerings to our customers.

The implementation of world's second largest Self Optimizing Network (SON) solution has enabled automated network optimization of our complex multi-technology, multi-vendor network. It allows dynamic configuration of the network for seamless handovers in 4G, 3G and 2G formats, thus improving customer experience. Real time balancing of network load across congested and non-congested sites has reduced overloading, thereby improving throughput and preventing blocks in the network. Real-time optimization has improved network utilization, making the available spectrum and network capacity more efficient.

On the 4G sites, Remote Electric Tilt (RET) antennae and 8 port antennae (wherever required and feasible) have been deployed. These deployments have led to improvements in the network quality along with a reduced time for response as now the antennae can be adjusted remotely without the need for visiting the sites. With no manual intervention, these deployments have drastically reduced the issues arising due to manual errors.

Vodafone has pioneered customer demand-centric network planning and densification by obtaining visibility of the network consumption on a grid level. It has helped in the introduction of new sites, in the corridors of high consumption, thus improving efficiency.

(iii) In case of imported technology(imported during the last three years reckoned from the beginning of the financial year):

(a)

The details of technology Imported

The Company has not imported any technology in the given period, only telecom equipment was imported

(b)

The year of import

N.A.

(c)

Whether the technology been fully Absorbed

N.A.

(d)

If not fully absorbed, areas where absorption has not taken place and the reasons thereof

N.A.

(e)

The expenditure incurred on Research and Development

NIL

C. Foreign exchange earnings and outgo

The details of foreign exchange earnings and outgo as stipulated under Section 134(3)(m) of the Companies Act, 2013 read with Rule, 8 of Companies (Accounts) Rules, 2014, is set out below:

Particulars

Rs. In million

Foreign Exchange earnings

15,455

CIF Value of Imports

25,503

Expenditure in foreign currency

24,228

For and on behalf of the Board of Directors

Of Vodafone Mobile Services Limited

Naveen Chopra

Arvind Agarwal

Director

Director

(DIN : 05307614)

(DIN : 02175753)

Date: 04 August 2016

Place: Mumbai