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Reliance Communications Falls to a Record Low on Phone Probe

Indian Billionaire Anil Ambani
Indian billionaire Anil Ambani. Photographer: Adeel Halim/Bloomberg

Reliance Communications Ltd., the flagship company of Indian billionaire Anil Ambani, fell to a record in Mumbai trading and led stocks of other group companies lower after investigators widened a phone-license probe.

Reliance Communications declined 7.5 percent to 71.75 rupees at the 3:30 p.m. close of trading in Mumbai, the lowest level since it began trading in 2006. Reliance Capital Ltd. dropped 12 percent to 315.15 rupees, while Reliance Infrastructure Ltd. lost 7.4 percent to 373.45 rupees, the lowest in 8 years.

The Central Bureau of Investigation is examining if Ambani’s Reliance Telecom Ltd. benefited from the sale of mobile-phone permits to ineligible companies. The agency said in court yesterday that it will extend the probe after three Ambani group officials, who were arrested in April, retracted earlier statements recorded during the case, according to K.K. Venugopal, a lawyer representing the CBI.

“This is going to continue until things get clearer -- until there are chargesheets and legal cases,” said K.K. Mital, fund manager at Globe Capital Market Ltd. in New Delhi. “The markets are going to keep reacting.”

Investigators are probing the role of Reliance Telecom, a Reliance Communications unit, in the transfer of Swan Telecom Pvt. to Mauritius-based Delphi Investments Ltd., Venugopal said.

Reliance ADA Group Managing Director Gautam Doshi and Senior Vice Presidents Hari Nair and Surendra Pipara were among nine people charged in April and subsequently arrested by the CBI in connection with the probe of a government sale of wireless permits to ineligible companies.

Auditor’s Report

Reliance denied Venugopal’s comments.

There’s been no change in stance “by any of the Reliance executives,” spokesman Daljeet Singh said in a statement today. Neither Reliance Telecom nor Reliance ADA Group “are beneficiaries of any telecom license issued in January 2008.”

The Comptroller and Auditor General of India said in a report submitted to parliament on Nov. 16 that applications from companies including Swan Telecom should have been rejected because they were ineligible. Swan Telecom suppressed information and submitted false documents in its license application, the auditor said.

Department of Telecommunications rules stipulate that an operator can’t own 10 percent or more in another operator that provides services in the same telecom zone.

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,” the company said in an e-mailed statement Feb. 13.

“As per the provisions of the Companies Act 1956, the preference share capital held by Reliance Telecom in Swan Telecom is not to be included for purposes of determining shareholding levels,” the company said.

Reliance Telecom is a wholly owned unit of Reliance Communications, India’s second-largest mobile-phone carrier.

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