Differences have emerged between the ministries of IT and communications and law and justice on whether or not Swan Telecom, now known as Etisalat DB, was a front company for Reliance Telecom.
While the law ministry’s view was that Swan Telecom was not an “associate of Reliance Telecom and Reliance Communic-ation,” the telecom ministry has disagreed with the interpretation.
In fact, it has now sent for the law ministry’s approval a show cause notice which is to be issued to Etisalat DB for termination of its 13 UAS licences.
A note prepared by the telecom ministry, and accessed by this newspaper, states: “As far as the relationship of Reliance Telecom Limited with Reliance Communi-cation is concerned, RCL is a holding company of RTL. At the time of application, RCL was holding 100 per cent equity stake in RTL. Therefore, these two companies, RTL and RCL, can be termed as associate.”
The note adds: “In the matter CAG as well as CBI have concluded that M/s Swan Telecom Pvt. Ltd while applying for the UAS licences in the above said 13 service areas was acting as a front company on behalf of M/s Reliance Telecom Ltd (RTL) / M/s Reliance Communications Ltd (RCL) and their application was against the intent and spirit of the UAS Licensing Guidelines dated 14.12.2005.”
Earlier, when the ministry had sought the law ministry’s view on the definition of an “associate company”, the law ministry had stated: “For Company B to be treated as an associate of Company A there must be either a holding and subsidiary relationship between the two companies and there must be more than 50 per cent shareholding in both companies by the common parent holding shares in either of the two companies. In the absence of these facts, one company cannot be said to be an associate of the other company.”
The note adds: “It is a common mistake to confuse a mere association with a definition of an associate company. They may have common interests, business strategies. In the telecom sector several firms enter into business arrangements. To that extent they certainly have an association, but by no means can they be termed as being associates of one another on that ground.”