We present a reasonably complete account of an improved adaptive delta modulation (ADM) system called hybrid companding delta modulation (HCDM). The HCDM system that is far superior to continuously variable slope DM (CVSD) or constant factor DM (CFDM) is advantageous, particularly for speech coding. It employs both syllabic and instantaneous companding schemes. Performance analysis of the system has been done and verified by computer simulation. In getting the mathematical formula for HCDM granular noise, a new method based on amplitude distribution is proposed. Optimization of the system parameter values by simulation is also discussed. In addition, an efficient method of hardware implementation is considered.