Swan Telecom acted as front for Reliance: CAG

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 guidelines as it was among those beneficiaries which 'suppressed facts, disclosed incomplete information and submitted fictitious documents' to the department of telecommunication.

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 hari.nair@relianceada.com, 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 in Swan Telecom was of Rs 1002.79 crore (Rs 10.02 billion) against equity holding of Rs 98.22 crore (Rs 982.2 million) 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.