RCom, Unitech tumble on 2G licences probe worry

Shares of mobile operator Reliance Communications and Unitech fell sharply after a government panel highlighted irregularities in 2G spectrum allocation.

Reliance Communications (down 8.25% to Rs 148.45) and Unitech (down 6.05% to Rs 69.85), slumped.



Investors are concerned that there could be an investigation in how companies like Unitech and Reliance Communications obtained spectrum. Real estate firm Unitech has a telecoms joint venture with Norway's Telenor.

The Comptroller of Auditor General (CAG) has said that the 2G spectrum allocation scam cost the exchequer Rs 1,76,000 crore. According to CAG, 85 of the 122 companies that were allotted 2G spectrum licence did not have the requisite paid-up capital to qualify for the bidding.

The scandal had prompted the resignation of Telecom Minister Andimuthu Raja.

Prominent companies named in the CAG report included Unitech Infrastructure, Unitech Builders & Estates, Azare Properties, Hudson Properties, Nahan Properties, Adonis Project, Aska Projects, Volga Properties (all belonging to the same group), Shipping Stop Dotcom (presently Loop Telecom), Allianz Infratech (merged with Etisalat DB Telecom), Datacom Solutions (presently Videocon Telecommunications), S Tel, Swan Telecom Private (presently Etisalat DB Telecom).

About its findings on Swan Telecom, CAG said, "It would appear that Swan Telecom while applying for a Unified Access System (UAS) licence in 13 service areas was acting as a front company on behalf of Reliance Telecom and their application was in effect against the intent and spirit of UAS licensing guidelines,".

The report pointed to Reliance Communications' backing of Swan which was favoured for allocation of spectrum in the Punjab circle by keeping out Idea Cellular, which was placed second on the priority list.

In the Maharashtra circle, too, DoT favoured Swan Telecom over Spice Communications. In both the cases, Spice Telecom's proposed merger with Idea Cellular was cited as the reason for granting the licence to Swan. By doing so, DoT flouted its own first-come-first-served policy.

The report said that undue UAS benefits were provided to three companies -- Reliance Communications (in 20 service areas), Shyam Telelink (in Rajasthan) and HFCL Infotel (in the Punjab circle).

Anil Dhirubhai Ambani group, however, questioned the government auditor's report that states Swan Telecom was a "front company" for Reliance Communications, saying it had no shareholding in the firm that got a licence in 2008.

A Reliance Communications (RCom) statement said, the company has always been in full compliance with all applicable laws, rules and regulations.