India’s federal investigators questioned Anil Ambani, the billionaire chairman of Reliance Communications Ltd., for about two hours yesterday amid a widening probe into the award of mobile-phone licenses in 2008.
Ambani “met Central Bureau of Investigation officials to clarify ongoing issues, relating to telecom matters for the years 2001 to 2010,” an e-mailed statement from his group spokesman Gaurav Wahi said. “No summons of any kind have been issued by CBI” to Ambani.
The move by federal officials follows the arrests this month of former telecommunications minister Andimuthu Raja, his personal secretary and an ex-bureaucrat after the nation’s chief auditor said the sale of permits at below-market prices may have potentially cost the exchequer $31 billion. The questioning may further undermine investor confidence in Ambani, 51, who presides over the two worst performing stocks of the past year.
“Reliance Communications sends a lot of letters to shareholders to say everything is fine, but my feeling is that everything is not alright,” said Vienna-based Juergen Maier, who manages a 250 million euro ($337 million) India equity fund at Raiffeisen Capital Management. “It’s not the first time it’s been questioned and this confirms the image investors have.”
Reliance Communications, the worst performer in the 30-stock Sensitive Index in the past year with a 40 percent slide, fell 1.9 percent to 99.6 rupees in Mumbai yesterday.
Ambani is the second executive to be quizzed by the CBI in as many days after Sanjay Chandra, managing director of Unitech Ltd., India’s second-biggest developer, said Feb. 15 his company is fully cooperating with the investigation.
The bureau has argued in court that Raja conspired to benefit companies including Swan Telecom Ltd., now known as Etisalat DB Telecom India Ltd., and Unitech by violating guidelines in the license sale. India’s chief auditor said in November second-generation airwaves were sold for an “unbelievably low” $2.7 billion when they may have been worth at least 10 times more.
“All the nine telecom companies that received the licenses are being questioned,” Chandra said in an e-mailed statement on Feb. 15.
The CBI sought information from Ambani amid allegations that his group received favors from Raja and over the role of Reliance Telecom Ltd., a unit of Reliance Communications, in Swan Telecom, the Press Trust of India reported yesterday, citing investigators it didn’t identify.
The statement from Ambani’s group said no official or affiliate held shares in Swan Telecom at the time it won a phone license and no employee benefitted from the award.
Reliance Telecom “held only 9.9 percent of the equity share capital of Swan Telecom at the time of filing the relevant license application in March 2007,” Reliance Communications said in an e-mailed statement on Feb. 13.
“There would be a significant impact on the group only if something concrete is unearthed,” said D.K. Aggarwal, who manages about $100 million as chairman of SMC Wealth Management Services Ltd. in New Delhi. “The group has taken a hit as far as sentiment is concerned though the developments aren’t going to have a material impact.”
The CBI arrested Shahid Balwa, vice chairman of Etisalat DB Telecom Pvt., formerly Swan, on Feb. 8, a week after detaining Raja in the phone probe.
Balwa, who is also the managing director of DB Realty Ltd. was “wrongly implicated,” according to a company statement on Feb. 9. Raja’s lawyer, Ramesh Gupta, said the former minister was cooperating with investigators and shouldn’t be kept in custody.
Ambani is also chairman of Reliance Capital Ltd., which owns an 18 percent stake in Bloomberg UTV, an Indian television channel. Bloomberg LP, the parent of Bloomberg News, owns part of the Indian venture.
Prime Minister Manmohan Singh, whose government has been buffeted by a string of corruption scandals, vowed to punish those guilty of fraud, in a meeting with a group of television editors in New Delhi yesterday.
“I wish to assure you and I wish to assure the country as a whole that our government is dead serious in bringing to book all the wrongdoers, regardless of the positions they may occupy,” Singh said.
An atmosphere dominated by claims of wrongdoing by his ministers had hurt the image of India overseas, he acknowledged, adding the compulsions of coalition played a role in how he allocated cabinet portfolios. Raja is a leading member of the ruling party from the southern state of Tamil Nadu, a key partner in Singh’s ruling alliance.
“The scam is huge and tarnishing the image of India,” said Taina Erajuuri, who helps manage the equivalent of $1.2 billion of emerging-market stocks, including Indian shares, at Helsinki-based FIM Asset Management Ltd. “The government is trying to show the world they are doing something, and they are going after the top guys.” Erajuuri’s funds own no shares in Ambani’s companies.
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