Anil Ambani faces parliament panel in telecoms graft probe

Anil Ambani, chairman of Reliance ADA group, will appear on Tuesday to answer a parliamentary panel investigating the 2G scam that has rocked the country's political and business establishment.

Ambani's testimony comes days after police indicted officials and a unit of his group for

conspiracy, cheating and other offences during a flawed 2008 telecoms licence grant process that may have lost India up to $39 billion in revenue.

The scandal is the largest of the many corruption cases to have emerged in Prime Minister Manmohan Singh's second term. It has badly damaged the government's credibility.

Reliance Telecom, a unit of Reliance Communications, and three Reliance ADA officials are accused by police of conspiring to set up Swan Telecom as a front company to gain valuable radio spectrum. Indian rules prohibit an existing licence holder from owning more than 10 percent in another operator in the same market.

Ambani, one of India's highest profile businessmen, was to be questioned a day after tycoon Ratan Tata appeared before the same Public Accounts Committee.

While the committee's recommendations are not binding on the government, the spectacle of some India's biggest business names being questioned is almost unheard of in a country where leading tycoons have long been seen as untouchable.

"It is very significant that important corporate captains are being asked to explain their role," political analyst Paranjoy Guha Thakurta said.

"Whether it is going to lead to a very significant and dramatic change in the way that it shifts the nexus between big business and politics is an altogether different question."

The parliament committee, which scrutinises government accounts, is headed by Murli Manohar Joshi, an independent minded lawmaker from the main opposition Bharatiya Janata Party (BJP).

Police on Saturday charged former telecoms minister Andimuthu Raja, three officials and a unit of Reliance ADA group and the Indian joint venture partners of Norway's Telenor and of UAE's Etisalat in the case.

All the accused have denied any wrongdoing. Etisalat and Telenor have said the events described in the charges occurred before they made entered India.

The telecoms ministry is considering whether to cancel several licences issued during that period, potentially jeopardising billions of dollars in investment that operators have made in the world's second-largest mobile market by users.

Such worries prompted the Norwegian prime minister write to Singh seeking "fair treatment" for Telenor. The corruption charges have weighed on the stock market, with the benchmark Mumbai index ending the March quarter as the world's worst performer.

The scandal saw the main opposition Bharatiya Janata Party (BJP) all-but shutting down an entire session of parliament demanding a special cross-party panel investigate the charges. The government agreed to the demand, and that panel is carrying out parallel hearings.

The Supreme Court, which is monitoring the police investigation, had reprimanded Singh for not acting quickly enough against telecoms minister and had ordered police to go after the rich and powerful involved in the case.

"We have a large number of people who think themselves to be above the law. You must catch all of them. Merely because a person is in the Forbes list of millionaires and billionaires does not matter," the court said in February.

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Reliance Comm shares set to gain as MTN talks end

NEW DELHI: Reliance Communications' shares are expected to rise on Monday after it called off tie-up talks with South Africa's MTN Group, avoiding a potential head-on legal clash between members of its founding Ambani family.

But analysts said stock market volatility ahead of a government confidence vote on Tuesday would dictate the movement of shares of India's second-largest mobile operator, controlled by the younger of the feuding billionaire Ambani brothers, Anil.

Reliance Communications and MTN, sub-Saharan Africa's biggest mobile phone group, ended their exclusive talks late on Friday, aimed at creating a global top-10 telecoms group, saying they could not reach a deal due to certain legal and regulatory issues.

"A deal is not happening, that will be bit of a relief for the shareholders," said Ambareesh Baliga, vice president at Karvy Stock Broking. "The stock should rise on Monday. But political issues will keep the market volatile."

The deal which would have created a company valued at $66 billion had been complicated by a claim of right of first refusal on Reliance Communication's shares by the older Ambani, Mukesh, who runs Reliance Industries and had started arbitration proceedings last week.

Reliance Communication's stock has fallen 24 percent since late May when the talks with MTN were first announced, with the bulk of the decline coming after the first refusal claim. The shares ended up 4 percent on Friday, before the exclusive talks were called off, with analysts split on whether a deal could be struck before the exclusivity lapsed on July 21. Stock markets are however expected to focus keenly on political uncertainty.

The government faces a vote of confidence on Tuesday after its communist allies withdrew support over a nuclear deal with the United States. A regional party has stepped in to replace the communists but analysts say the vote is still too close to call.

MTN'S SUITORS

A deal with MTN would have created an emerging markets telecoms giant with operations in about two dozen countries and around 120 million subscribers. The failure to reach a deal with Reliance came after India's leading mobile operator Bharti Airtel decided in late May to end talks with MTN.

Bharti said it had called off the talks after MTN proposed a new structure that would have seen the Indian group becoming a unit of the South African-based group.

In an email at the weekend, a Reliance Communications spokesman said Anil Ambani investment vehicle AAA Com, which holds 63.4 percent in Reliance Communications, reserved the right to claim "direct and consequential damages" from Reliance Industries.

This is not the first clash between the estranged Ambani siblings, who split their late father Dhirubhai Ambani's business empire in 2006 after a public feud.

Reliance Communications has nearly 50 million subscribers in India, the world's fastest-growing mobile market and the largest after China. "Now investors will look at the fundamentals. There should not be any further pressure on the stock," said Neeraj Dewan, director at fund manager Quantum Securities.

Falling shares, Ambani feud could scupper MTN deal

Reliance Communications Ltd has only days to reach an agreement for a tie-up with South Africa's MTN Group, but falling shares and a face-off between the Ambani brothers could scuttle a deal. Reliance Communications, controlled by Anil Ambani, is currently in exclusive talks with MTN to create a global 10 telecom company but this agreement ends on July 8.

However, in mid-June Reliance Industries, run by older brother Mukesh Ambani, claimed first right of refusal on India's No. 2 mobile operator, based on a deal signed when their late father's business was being split between the brothers. The bitter rivalry between India's two richest men has shown no sign of letting up. In an e-mail statement on Thursday Reliance Industries said it had invoked a dispute resolution agreement to settle the differences and invited Reliance Communications to participate, but this was immediately dismissed by a Reliance Communications spokesman.

"RIL has invoked the provisions of dispute resolution contained in the Non-Competition Agreement dated January 12, 2006, and has invited RCOM to participate in the process of mutual conciliation prior to the commencement of formal arbitration," India's most valuable listed company said. "This is only a sign of RIL's increasing desperation and frustration," a Reliance Communications spokesman said.

MTN, sub-Saharan Africa's top mobile operator, has about 68 million subscribers in nearly two dozen countries. Reliance Communications, the second largest mobile operator in India, has 48 million subscribers. "The tiff has almost certainly scuppered the deal," said Emeka Obiodu, a senior mobile technologies specialist at London-based research firm Global Insight.

"As long as there is any uncertainty about the legal validity of a deal, it is unlikely MTN will go through with it. And there is no point in extending talks if the situation will not change." Shares in Reliance Communications have shed a third of their value since the company said in May the firms were considering a potential combination. The company's shares fell 6.9 percent on Thursday.

Reliance Communications said last month the claim by Reliance Industries would not delay its talks with MTN. But traders in Mumbai earlier this week said concerns that Mukesh may throw a spanner into the works had helped push down the share price. The lower valuation of Reliance Communications, which now has a market worth of about $18 billion, down from nearly $27 billion when it first said it was in talks, could spoil the share swap that the two firms were reported to be discussing.

Media reports and a source close to the development had indicated the two firms were aiming at a reverse takeover, with a share swap that would give the Anil Dhirubhai Ambani Group the largest shareholding in MTN, and making Reliance Communications a subsidiary of MTN, sub-Saharan Africa's top mobile operator. "Ambani may also need more cash, now that valuation has fallen, and that will be difficult in this market," Shah said, adding the deal had a "50-55 percent chance" of going through.

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