Etisalat unit under scrutiny

Indian authorities are questioning Etisalat's US$900m telecommunications licence.

MUMBAI // India's anti-corruption department is set to intensify its investigation into Etisalat's Indian venture, raising questions over the UAE company's telecommunications licence less than a year after it paid US$900 million (Dh3.3 billion) for a 45 per cent stake. The inquiry by the Central Vigilance Commission (CVC) revolves around Swan Telecom, the company Etisalat bought into in India nine months ago. Swan was then renamed and rebranded to Etisalat DB.

"The CVC's technical examiner is looking into the files of Swan," said CVC commissioner Pratyush Sinha. "We found that the allocation of 2G spectrum to private companies, including Swan, on a first-come, first-serve basis was not transparent." Etisalat DB has refused to be dragged into the controversy. An Etisalat DB spokesperson said: "Etisalat DB is not aware of this and we cannot comment on the matter."

The CVC is investigating allegations that Swan was secretly controlled by Reliance Communications, India's second-largest mobile phone company, when it received its licence in January last year. If the allegations are found to be true, Reliance would have violated the law barring one company from owning more than 10 per cent in two companies with telecoms licences. This would mean the licence received by Swan, and now part-owned by Etisalat, should not have been awarded.

Swan had been linked to Reliance, which holds a licence of its own, in the run-up to the bidding. Reliance last year said it owned a 9.9 per cent stake in Swan when the licence application was made. But it said it sold the stake to a Mauritius-based fund, Delhi Investments, before Swan was awarded the licence. This has been disputed by some politicians, who alleged Reliance owned a greater stake. The CVC has given India's Department of Telecoms until Saturday to submit the findings of an investigation it ordered into the controversy in April.

The nine licences awarded by A Raja, India's telecoms minister, have become a national scandal that refuses to die down. Only last month Arun Jaitley, the leader of the opposition, branded the awards "a monumental scam" and led a walkout from parliament. Some estimate that Mr Raja's decision to award rather than auction licences last year cost the government more than $4bn in lost licence fees. Swan paid less than $350m for its licence, and nine months later sold a 45 per cent stake to Etisalat for $900m, even though it had yet to make any investments in infrastructure.

Unitech, an Indian property firm, made a similar deal, selling a 60 per cent stake to Norway's Telenor for $1.3bn. Reliance last month renewed its links to Etisalat DB, when Reliance Infrastructure, a sister company, signed a $2.2bn deal to provide infrastructure. [e-mail]