Reliance Communication's Affiliate Company May Get Nod For Gsm

[Arun 795]

LiveMint, India

August 30, 2007

A day after the country’s telecom regulator made recommendations that, on the face of it, were somewhat of a setback to mobile phone companies using the so-called CDMA standard, it appears that one such player, Reliance Communications Ltd (RCom), the country’s second largest wireless telecom firm, may actually be well on its way to enter the fast-growing GSM cellular business.

That’s because Swan Telecom Pvt. Ltd, a company in which RCom has invested more than Rs.1,000 crore, mostly through quasi-debt, appears to be one of the leading candidates for the grant of government GSM licences.

A firm by the exact same name had applied for GSM spectrum “several months ago”, according to a telecom industry insider who closely tracks regulatory affairs in the sector, and is therefore likely to be awarded licences in the next round of allocation if the government goes along with the recommendations of the regulator, the Telecom Regulatory Authority of India, or Trai.

Anil Ambani-controlled RCom lists Swan Telecom as one of its “long term” investments in the company’s annual report for fiscal 2007. Early Thursday, one RCom official, speaking on the condition that he wouldn’t be named, said the company is indeed close to acquiring GSM spectrum. “We are second or third in all the circles for GSM spectrum,” the official said.

Late Thursday evening, a spokesperson for RCom said he couldn’t immediately comment whether both Swan Telecoms were one and the same. Mint couldn’t independently ascertain the identity of Swan Telecom.

On Wednesday, Trai had suggested that mobile phone firms be allowed to roll out services using any technology—either CDMA, or code division multiple access, or the popular GSM standard, whose networks have three out of four cellular customers in India—provided they queue up and pay for wireless spectrum.

Since there are more than 100 applicants awaiting frequency allocation from the government, it was initially seen as a recommendation that went against CDMA firms, such as RCom and Tata Teleservices Ltd, which were keen to also offer GSM services.

If Swan is backed by RCom, that would give the phone company near front-of-the-queue status. A department of telecommunications official said Swan Telecom was indeed in the running, but refused to give details on when it applied for spectrum or ownership of the firm. The official is not permitted to speak to the press.

According to RCom’s annual report for 2006-07, the company directly owns shares worth Rs10.79 crore in Swan Telecom and had bought preference shares worth Rs992 crore in the investee firm. The extent of the Reliance-Anil Dhirubhai Ambani Group firm’s shareholding in Swan Telecom or the date of the investments weren’t disclosed.

One consultant who tracks the telecom sector said, if true, routing RCom’s licence application through Swan Telecom was “perfectly legal”. Under current rules, a CDMA or GSM operator cannot directly, or through a “subsidiary”, apply for a licence or for spectrum to provide service using the other technology.

Already in the “spectrum queue” are operators such as Aircel Cellular Ltd, Vodafone Essar Ltd and Idea Cellular Ltd. The trio was granted licences in December. Since then, only one licence has been granted—to Aircel in Kolkata. Swan Telecom and Spice Communications are among several others still awaiting licences.

They have been in the waiting list for several months now because, under the current allocation methodology, most of the expected 20MHz of spectrum to be released by the defence forces will be absorbed by the existing players.