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Rs 1-lakh crore fraud by 'old 2G operators': RCom

Last updated on: February 14, 2011 09:43 IST

Rs 1-lakh crore fraud by 'old 2G operators': RCom

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BS Reporter in Mumbai


Reliance Communications has accused "old 2G operators" of causing over Rs 1 lakh crore (Rs 1 trillion) in losses to the exchequer through "fraudulent means".

Though it did not name any operator, the so-called old 2G operators are Bharti Airtel, Vodafone and Idea Cellular.

Syed Safawi, president (wireless business) of Reliance Communications, said in a statement that the old 2G operators, "By active and fraudulent misrepresentation and concealment of material facts from the government, have unscrupulously caused the national exchequer staggering losses of over Rs 1 lakh crore during 2001 to 2010." Safawi demanded a Central Bureau of Investigation probe into these alleged irregularities.

He said spectrum was hoarded illegally in excess of 6.2 MHz in active connivance with certain DoT officials, and has been extensively documented and commented upon in successive reports, which form part of the ongoing investigations by the CBI, under Supreme Court monitoring.

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Image: R-ADAG chairman Anil Ambani.
Photographs: Reuters
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The loss of revenue to the government on account of holding excess spectrum beyond 6.2 MHz alone is around Rs 55,000 crore (Rs 550 billion), Safawi claimed.

RCom also said that old 2G operators obtained an extension and doubled their licence period from the stipulated 10 years to an unprecedented 20 years with no payment of additional fees.

"Based on fraudulently obtained benefits, these old 2G operators immediately sold stakes in their companies to foreigners, and encashed thousands of crores (billions) of rupees (in) illegal profits, in (an) identical manner, as has been adversely commented upon in the CAG (comptroller & auditor general) report of 2010, in relation to stake sales for 2G licences issued in 2008," Safawi said in a media conference call.

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Syed SafawiThe Telecom Regulatory Authority of India had also pointed out that some operators were holding 2G spectrum in the "superior" 900 MHz band. It has proposed that airwaves in this band be priced at 1.5 times the cost of spectrum in the 1,800 MHz band, for which the regulator recommended a six-fold jump in price last week.

On the report by CAG that Reliance Telecom held 10.17 per cent in Swan Telecom, breaching government rules, Safawi said the company had held only 9.9 per cent of the equity share capital of Swan at the time of filing the relevant licence application in March 2007.

This shareholding was fully disclosed at inception, and this information has always been in the public domain, said Safawi.

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Safawi said according to legal advice, the company had not disclosed the preference share capital held by Reliance Telecom in Swan, as it is not included for the purposes of determining shareholding levels, under the provisions of the Companies Act, 1956.

RCom also said neither the company nor Reliance ADA Group individuals held shares in Swan at the time a 2G licence was granted to it in January 2008, or at any time thereafter.

It also said there had been no monetary gain directly or indirectly, nor was it a beneficiary of the grant of a licence to Swan.

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The CBI's questioning of some executives is not specific to the company, and around 50 executives of several operators are under investigation, the company said.

"Hari Nair of our group was company secretary of Swan Telecom for a few months while Reliance Telecom held equity stake in the company, but that shareholding was sold, and he ceased to hold that post, well before a licence was granted ," said Safawi.

CBI questioning its executives, says RCom

Anil Ambani-controlled Reliance Communications has that said some of its executives were being questioned by the Central Bureau of Investigation over the Rs 1.7 lakh crore (Rs 1.76 trillion) 2G scam.

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Image: (Inset) Shahid Balwa of DB Realty.
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"As part of its ongoing investigations pursuant to the Supreme Court's orders, CBI is reportedly examining a large number of telecom companies and their officials over the past several weeks, in relation to various matters relating to the years 2001 to 2008. As part of this process, CBI has also examined a few officials of the Reliance ADA Group, and we are fully cooperating with the authorities in this regard," the company said in a statement.

The statement comes just a couple of days after the company denied rumours in the market that it was being probed by the government's investigation wings. The group had seen more than Rs 11,500 crore (Rs 115 billion) wiped off its overall market value because of the market buzz.

After the sharp fall in the share price, the group filed a complaint with the market regulator urging a probe into the alleged illegal trading in its groups' stocks and claimed it was being targeted by rivals, who were spreading baseless sensational charges against it.

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Meanwhile, media reports said Shahid Balwa, managing director, DB Realty, had admitted to his company's links with Reliance Telecom (RTL). Balwa is also the vice-president of Etisalat DB, formerly known as Swan Telecom. The latter is being closely scrutinised by investigative agencies after the Comptroller and Auditor General report said Swan had received undue favours from former telecom minister A Raja, who was arrested recently.

When CBI was contacted by Business Standard, the official spokesperson declined to comment. "The investigation is under progress. Hence, any comment would be detrimental to the case," he said. 

According to reports, Balwa said, in 2008 DB Realty had decided to pursue the opportunity in the telecom sector as a lead partner. Reliance Telecom was supposed to hold a minority stake with a commitment to share passive infrastructure.

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Image: Anil Ambani.
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Reliance Telecom sold its share to Delphi Investment, a Mauritius-based company, Balwa reportedly admitted to CBI. Swan sold 45 per cent stake at Rs 4,200 crore (Rs 42 billion) in its company which it had acquired by paying a licence fee of Rs 1,537 crore (Rs 15.37 billion).

Balwa's reported admission is in tune with the allegations made by CAG earlier, which had stated that Swan was acting as a front company on behalf of RTL, a unit of RCom.

According to government policy, a telecom operator should have less than 10 per cent stake in another telecom company. By holding 10.71 per cent in Swan Telecom, ADAG had broken this rule, according to CAG.

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Earlier, RCom had refuted these charges. "Our group had no shareholding in Swan Telecom at the time of grant of licence to them or any time thereafter, and that issue is accordingly not relevant to our company.

RCom has always been in full compliance with all applicable laws, rules and regulations, and there has been no violation of our licence conditions at any stage on account of cross-holdings in excess of 10 per cent," the statement had said.

Vivek Goenka, MD of DB Realty, did not respond to calls and text messages. UAE-based Etisalat said they would respond tomorrow as it is a holiday for the company.

Four people, including former telecom minister A Raja, Siddharth Behura, R K Chandolia  and Shahid Balwa have been arrested till now with regard to the 2G scam.


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