RCOM-ETISALAT IN RS 10K-CR DEAL

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THE ministry of company affairs has absolved Reliance Communications from charges of violating telecom licence terms, after its investigations failed to establish that India’s No. 2 mobile phone operator owned a substantial stake in smaller telecom firm Swan Telecom.

"We will not pursue any case against Reliance Communications as there is no such evidence,” said an official with the ministry, asking not to be named.

The department of telecom had earlier this year asked the ministry to look into allegations that Reliance Communications, the flagship company of Anil Ambani group, owned a stake in Swan, which was recently renamed Etisalat DB Telecom.

The clean chit to Reliance Communications comes even as the company signed a 10-year tower-sharing deal worth Rs 10,000 crore with Etisalat DB Telecom, in which UAE-based telecom firm Etisalat holds 45% state.

Existing regulations specify that a telecom company cannot hold more than 10% stake in another operator that offers services in the same area. Swan Telecom was amongst the six companies which were granted telecom licences last year.

The MMCA had asked the registrar of companies (RoC) to probe the charges against Reliance Communications. The RoC is learnt to have submitted its report on the 21st of May. On further examination, the MCA has ruled out any action against Reliance Communications, putting to rest all speculation on the issue.

The issue dates back to January when the DoT granted Swan a licence to operate services on a GSM platform. Several members of Parliament wrote to Prime Minister Manmohan Singh, seeking a probe into the ownership of the telecom company.

The Prime Minister’s Office then asked the DoT to examine this issue and the Department in turn referred the matter to the ministry of company affairs. Reliance ADA group maintained that it had only a 9.9% stake in Swan held through its subsidiary Reliance Telecom and that it had exited Swan before it was awarded a mobile license. While the remaining stake in Swan was held by Tiger Traders, members of Parliament had alleged that some of the directors on board of Tiger were ADA-group employees. Besides, RCOM in 2007 had subscribed to Rs 992 crore worth redeemable preference shares issued by Swan.

Etisalat, which had picked up a 45% stake in Swan for $900 million last year, is the second telco to come under the ministry’s scrutiny. MCA is also probing if the Ruia family-promoted Essar Group violated telecom regulations with regard to its shareholding in Loop Telecom.

Meanwhile, the deal with Reliance Communications will allow Etisalat to use the towers and other related infrastructure of RCOM, as it rolls out mobile operations across the country.
"This agreement presents large cost-optimisation benefits with an asset-light model, improvement in capital productivity and enhances RCOM group revenues by Rs 10,000 crore,” the companies said in a joint statement. RCOM has hived off its entire infrastructure into a separate company called Reliance Telecom Infrastructure Ltd (RTIL).

RTIL has about 50,000 towers spread across the 22 telecom circles of the country. RTIL is amongst the large infrastructure firms in the country after Indus Towers, the largest independent tower company in the world with over 103,000 units.

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