DIRECTORS' REPORT

To

The Members of Spice Communications Ltd.

Your Directors have pleasure in presenting the Fourteenth Annual Report on the business and operations of the Company, together with the Audited Statement of Accounts for the period ended on 31st March, 2009.

CHANGE OF FINANCIAL YEAR

Your Directors wish to apprise you that in order to consistency in the maintenance of books of accounts and tax records, the financial year of your Company has been changed from "Jan-Dec" cycle to "April-March" cycle. Thus, the current financial period of the Company had since been extended to fifteen months period that has ended on 31st March, 2009. Hereafter, the Company shall follow a financial year cycle of April to March every year. Accordingly, the figures for the current period represent the operations for the extended period of 15 months ending 31st March, 2009.

The Revenues from Services and from Income from other sources, for the current period were Rs 15,855 mn as against Rs 9,905 mn for the previous year ended 31st December, 2007. The Operating Profit for the period ended 31st March, 2009 was Rs 2,962 mn against Rs 2,555 mn for the previous year. During the current period, further 128 telecom towers were sold for a consideration of Rs 588 mn, giving rise to profit on sale of Passive Infrastructure of Rs 221 mn. During the previous financial year, the profit on sale of Passive Infrastructure from 747 telecom towers was Rs 4,393 mn. As a result, the Profit before Interest, Depreciation & Amortisation, for the current period was Rs 3,183 mn against Rs 6,947 mn for the previous year.

During the current period, miscellaneous expenditure to the extent not written off, amounting to Rs 596 mn was fully charged to the P&L Account.

The loss before tax, after providing for impairment in the values of the overlapping licenses of Rs 4,845 mn was Rs 10,196 mn for the current period. The loss after tax for the current period is Rs 10,152 mn.

The subscriber base increased to 4.1 mn as on 31st March, 2009 from 3.8 mn as on 31st December, 2007, registering a growth of 8% during the period.

CHANGE OF MANAGEMENT

During the period under review, MCorpGlobal Communications Private Limited ("MCPL") (the erstwhile promoter of the Company) had entered into a Share Purchase agreement with Idea Cellular Limited (Idea), one of the present promoter of the Company, inter alia for sale of its entire shareholding consisting of 281,489,350 equity shares of the Company.

Pursuant to the said agreement, Idea along with persons acting in concert, viz., Axiata Group Berhad (formerly known as TM International Berhad), TMI Mauritius Ltd., TMI India Ltd. and Green Acre Agro Services Private Limited had made an open offer to acquire upto 20% equity held by members of the Public in terms of relevant provisions of the SEBI Takeover Code. Post the closure of the Public offer, the shareholding of Idea in the Company stands at 41.09%. The shareholding of TMI India

Ltd. stands at 49%. Green Acres Agro Services Private Limited acquired 8.81% shares under the said public offer.

AMALGAMATION WITH IDEA

Your directors wish to inform that your Company, as one of the signatories to a Merger Co-operation Agreement, inter alia, between Axiata Group Berhad (formerly known as TM International Berhad) and Idea, has consented for the amalgamation of the Company with Idea, subject to the completion of necessary formalities under the relevant provisions of the Companies Act, 1956 and other regulatory requirements.

Your Company has since filed an application with the Hon'ble High Court of Delhi at New Delhi, for its approval to the said amalgamation of the Company with Idea and the same is under process.

Your Directors believe that the amalgamation would achieve economies of scale, and other operational synergies which would result in the optimization of operation and capital expenditure and lead to increased competitive strength, cost reduction and efficiencies, productivity gains by pooling the financial, managerial and technical resources, personnel capabilities, skill expertise and technologies of both the Companies.

It is further advised that as a result of the amalgamation, Idea shall issue and allot new equity shares to each shareholder of the Company, in the ratio of 49 equity shares in Idea of Rs 10/-each credited as fully paid up, for every 100 equity shares of Rs 10/- each fully paid, held of such equity shareholder in the Company on a record date to be fixed in this respect.

DEMERGER OF UNIFIED ACCESS SERVICES LICENSES (UASLs) IN RESPECT OF DELHI, HARYANA, MAHARASHTRA AND ANDHRA PRADESH SERVICE AREAS

As you are aware, Idea has acquired a 41.09% stake in your Company, to be followed, subject to approvals, by the amalgamation of your Company with Idea. Your Company holds UASLs dated 29th February, 2008 for the service areas of Andhra Pradesh, Maharashtra, Haryana and dated 3rd March, 2008 for the service area of Delhi. In light of the Idea merger developments, your Company sought to de-merge these overlapping licenses to a third party for a consideration, which, net of costs, would accrue to the shareholders of the Company (other than Idea). The Company entered into an agreement to this effect and filed the application under Sections 391 to 394 of the Companies Act, 1956, with the Delhi High Court. However, the Company has presently, sought deferment from the Court for holding the shareholders and creditors meetings, due to the absence of policy clarity. Further action and completion of the de-merger process is contingent upon obtaining clarity and also upon satisfactory conclusion of other necessary conditions.

LISTING ON NATIONAL STOCK EXCHANGE OF INDIA

During the period under review, Equity Shares of the Company were also listed at National Stock Exchange of India Limited ("NSE") on 16th June, 2008, with a view to provide more liquidity for shareholders. The Annual Listing Fees for the year 2009-10 have been paid to Bombay Stock Exchange ("BSE") and NSE.

USE OF IPO PROCEEDS

The Company has placed the statement containing the uses/ application of funds raised through the IPO before the Audit Committee. The proceeds of the public issue have been utilized according to the objects stated in the offer document and reported on quarterly basis as a part of financial results published pursuant to Clause 41 of the Listing Agreement.

TERM DEPOSITS

During the period under review, the Company has not accepted any Deposits from the public within the meaning of Section 58 A of the Companies Act, 1956.

SUBSIDIARY

There has been no operation in Carlos Towers Limited, the subsidiary of the Company, during the period under review. A statement under Section 212 of the Companies Act, 1956, concerning the subsidiary Company is attached to this report.

DIRECTORS

During the period under review, Mr. Bhupender Kumar Modi, Mr. Dilip Modi, Mr. Hetal Gandhi, Mr. Krishan Lai Chugh, Mr. D. R. Mehta and Mr. Mahesh Prasad, resigned from the Board of Directors.

Mr. Ashish Dwivedi, Mr. M.R. Prasanna, Mr. G.P Gupta and Mr. Baldev Raj Gupta were appointed as additional directors of the Company, to hold office up to the date of ensuing Annual General Meeting. These additional directors are eligible for appointment as directors of the Company at the ensuing Annual General Meeting.

At the ensuing Annual General Meeting, Mr. Yusof Annuar Yaacob, director of the Company, retires by rotation, and being eligible, offers himself for re-appointment.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 217(2AA) of the Companies Act, 1956, with respect to Directors' Responsibility Statement, and subject to the disclosures in the Annual Accounts, the Board of Directors hereby confirm that:

(i) in the preparation of the annual accounts, the applicable accounting standards had been followed alongwith proper explanation relating to material departures, if any;

(ii) 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 as at the end of financial period ended 31st March, 2009, and of the profit of the Company for the period ended 31st March, 2009 ;

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

(iv) the Directors had prepared the Annual Accounts on a going concern basis.

AUDITORS

M/s BSR & Co., Chartered Accountants, the Statutory Auditors of the Company, retire at the conclusion of the ensuing Annual General Meeting. The Directors of the Company, in their meeting held on 17th June, 2009, have recommended appointment of M/s Delloite Haskins and Sells, Chartered Accountants, as the Statutory Auditors of the Company to hold office from the conclusion of the ensuing Annual General Meeting until the conclusion of the next Annual General Meeting.

The Company has received letter from M/s Delloite Haskins and Sells, Chartered Accountants, to the effect that their appointment if made, would be within the prescribed limits under Section 224 (1B) of the Companies Act, 1956 and that they are not disqualified for such appointment.

AUDITORS' REPORT & NOTES TO ACCOUNTS

The Auditors' Report and the Notes to the Accounts are self-explanatory. The Information and Explanations on reservations / qualifications in the Auditors' Report pursuant to Section 217(3) of the Companies Act, 1956, are as under:

CORPORATE GOVERNANCE & COMPLIANCE CERTIFICATE

A detailed report on Corporate Governance, which forms an integral part of the Directors' Report, is given in Annexure A. A certificate confirming compliance to the conditions of Corporate Governance from a practicing Company Secretary, as stipulated under Clause 49 of the Listing Agreement, is annexed to the Corporate Governance Report.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

As required under Clause 49 of the Listing Agreement entered into with the Stock Exchanges, the Management Discussion and Analysis Report is given as Annexure B and forms an integral part of the Directors' Report.

ADDITIONAL INFORMATION

The additional information required under Section 217(1)(e) of the Companies Act 1956, read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 with respect to Conservation of Energy, Technology Absorption and Foreign Exchange Earnings/Outgo is annexed hereto marked as Annexure C and forms an integral part of this report.

PERSONNEL

The Statement of particulars of employees, as per Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended, forms part of this report, and is marked as Annexure D.

ACKNOWLEDGEMENT

Your Directors wish to place on record their appreciation of the co-operation received from government authorities, the Department of Telecommunications (DoT), financial institutions, bankers, customers, vendors and shareholders. Your directors also wish to place on record their deep sense of appreciation for the contribution made by the employees of the Company for their unstinted efforts in the progress of the Company at all levels.

For and on behalf of the Board of Spice Communications Ltd.

Ashish Dwivedi

Director

B.R Gupta

Director

Place : Mumbai

Date : 17th June, 2009