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Swan Telecom acted as front for Reliance Telecom: CAG

Last Updated: Wednesday, November 17, 2010 - 00:26

New Delhi: Highlighting irregularities in
2G spectrum allocation, the CAG has said Swan Telecom, one of
the companies that got the licence, appeared to act as a
"front company" on behalf of Anil Ambani-led Reliance Telecom
and doubted the latter`s "intention".

In its report tabled in Parliament, the CAG said the
Swan Telecom`s application was "in effect against the intent
and spirit" of the Unified Access Service Licencing (UASL)
guidelines as it was among those beneficiaries which
"suppressed facts, disclosed incomplete information and
submitted fictitious documents" to the Department of Telecom.
The audit by CAG found that the e-mail ID of the
corporate as well as registered office of Swan Telecom Pvt Ltd
in its application dated March 2, 2007 was shown as, the report said, adding the same
e-mail ID was also given for the correspondence address and
the authorised contact person of the applicant company.

The CAG said the Company Secretary Hari Nair had given a
certificate while applying for a UAS licence for J&K service
area in January 2007 that the Tigers Traders Private Limited
held the shares of Swan (then Swan Capital Private Limited) as
trustees of Indian Telecom Infrastructure Fund and these
corporate beneficiaries are not part of Reliance ADA Group and
neither Anil Ambani nor his family or Reliance ADA Group
companies holds any shares in these companies.

However, "the total equity/stakes of Reliance Telecom
Ltd (RTL) in Swan Telecom was of Rs 1002.79 crore against
equity holding of Rs 98.22 crore by the majority share-holder
Tigers Traders Pvt Ltd", the CAG said, adding it "raises
doubts about the intention of the RTL and the control it would
exercise in a new company incorporated barely few months ago",
the audit report said.

"Hence, the application of such company to enter telecom
sector goes against the intent and spirit behind the UAS
guidelines," the CAG said, while noting that the `substantial
equity` was defined as equity of 10 per cent or more.

"Thus, it would appear that Swan Telecom Pvt Ltd, while
applying for the UAS licences in 13 service areas, was acting
as a front company on behalf of RTL and their application was,
in effect, against the intent and spirit of the UAS licensing
guidelines," the report observed.

It noted that it was "evident" that at the time of
applying for UAS licence, the equity stakes of Reliance
Telecom Ltd in Swan Telecom Pvt Ltd was 10.71 per cent.

"Since Reliance Telecom Ltd was operating in all the
service areas for which Swan Telecom Ltd had applied for UASL,
the application of Swan Telecom Pvt Ltd was not in conformity
with the UASL guidelines and hence was not eligible to be
considered," the CAG said.


First Published: Wednesday, November 17, 2010 - 00:26
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