The promoters of Aircel Maxis Communications Berhad find themselves in a difficult situation now, having managed to take advantage in various ways in the past. The earlier Government at the Centre had been blind to the firm’s wrongdoings
In a desperate plea recently, Aircel urged the Supreme Court to not pass the proposed order cancelling its licences and selling its spectrum, saying that no case had been filed against the company and that it has not been heard. The telecom services provider risks cancellation of its licences because the largest shareholder, Ananda Krishnan, (47.09 per cent) in Maxis Communications Berhad and its former director Ralph Marshall or its representatives, haven’t appeared in the Special Court within two weeks. The Supreme Court had on January 6, in connection with a case filed by the Central Bureau of Investigation against former Minister for Telecommunications Dayanidhi Maran and others in 2014, asked them to appear before the lower court. They have been evading court summons for more than two years.
On January 23, a State Bank of India-led 12-bank consortium of lenders had also filed a plea in the apex court, seeking to be included in the proceedings involving Aircel, on grounds of having substantial exposure to the company. The CBI had earlier issued warrants against Krishnan and Marshall, besides companies Maxis Communications Berhad and Astro All Asia Networks. They were named in an October 2014 chargesheet against Maran, who allegedly coerced Aircel promoter C Sivasankaran to sell his stake to Maxis in 2006 as part of a quid pro quo in the form of alleged bribes. Maran has denied the charges.
Aircel said the allegation that its assets were being liquidated and funds moved out of India was false. Aircel claimed that Maxis has invested Rs 32,000 crore in the company. The telcom firm has also raised debt, which stood at Rs 16,821 crore as of December 2016, secured by assets and shares of the company. Aircel claimed that the company was not owned by any individual directly or indirectly and that the apex court was being misled. The company said Global Communications Services Holdings ltd. (GCSHl), a Mauritius-based arm of Maxis, owned 73.99 per cent in Aircel, while 26 per cent was held by Sindya Securities and Investments Pvt ltd (SSIPl).
Aircel’s claim does not appear to be borne out of facts available in the public domain. Aircel was acquired in January-March 2006 by Maxis. In January 2006, the Aircel group had CMTS/ UAS licences in nine telecom circles. It had also applied for licences in seven more circles in April 2004 and February 2005. As per the Comptroller and Auditor-General’s (CAG) Report 19 of 2010, the Department of Telecommunications, under Maran, had inordinately delayed issuance of telecom licences in 2004-07, though they were required to be processed in 30 days. After acquisition by Maxis, Aircel was given 14 more licences in December 2006, making it a pan-India player.
Documents available on the Ministry of Corporate Affairs website show that Sindya Securities & Investment Pvt ltd (Sindya), the purported serious resident Indian promoter of the Aircel, was established with a paid up capital of one lakh rupees in January 2006 by Reddy couple- Suneeta Reddy and P Dwarkanath Reddy. As per the Department of Telecommunications (DoT)’s guidelines 2005, Sindya required to hold at least 10 per cent equity to enable Maxis owned Aircel to acquire a telecom license in India. Sindya borrowed Rs 40 crore as inter-corporate loan from HDFC Bank in March 2006 to invest Rs 34.16 crore in its subsidiary, Deccan Digital Network Private ltd (DDNPl), to acquire 74.3 per cent stake in a tie-up with another newly established company, South Asia Communications Pvt ltd (SACPl), a 100 per cent subsidiary of GCHCl, Mauritius — which was in turn a 100 per cent subsidiary of Maxis Communications Berhad, Malaysia.
The subsidiary of Sindya, DDNPl with the equity of Rs 46 crore, invested Rs 1671.41 crore, with the help of its partner GCHCl’s subsidiary, SACPl, in the form of redeemable non convertible preference shares of Rs 1634.46 crore, to acquire a 35 per cent equity in Aircel on March 21, 2006, whereas, the remaining 65 per cent equity was taken by the GCHCl, Mauritius, directly in two tranches — the first 26 per cent on January 6, 2006, at the price of Rs 1261.40 crore; and the second 39 per cent on 21 March 2006 at the cost of Rs 1868.19 crore. Thus, 100 per cent shares of Aircel were purchased for Rs 4,769 crore by GCHCl and DDNPl. Accordingly Maxis declared before the Malaysian Stock Exchange in March 2006 that it had 99.3 per cent stakes in Aircel ltd and “this effectively gives the Group (Maxis) 99.3 per cent economic returns from the investment in Aircel”.
Further, as per Sindya’s consolidated financial statements, the so-called serious resident Indian promoter, for the year 2014 -15, the company did not have any fixed or intangible asset, any inventory, any employee on its roll or any revenue from the operations as on March 31, 2015 — even after nine years of operations.
As per C&AG’s audit Report 4 of 2016, the Aircel group of companies had 2x9.8 MHz spectrum in the Tamil Nadu circle, 2x8.6 MHz in Chennai circle, 2x6.2 MHz in Assam and 2x4.4 MHz spectrum in the remaining 20 circles as of March 31, 2010. In the 2010 auction, Aircel had acquired 3G spectrum (2100 MHz) in 13 circles and BWA/4G spectrum (2300 MHz) in eight circles. In the 2014 auction, it acquired additional spectrum in 1800 MHz in six circles. In the 2015 auction, it was able to acquire 10MHz in Tamil Nadu, including Chennai circle, at Rs 2,250 crore. In the 2016 auction, it acquired nine blocks (1.8 MHz) in 1800 MHz in Bihar circle at Rs 111.60 crore. As the valuation of the spectrum in 1800/2100 MHz band has gone up over the years, the spectrum available with the company appeared to be adequate in comparison to its debt. Meanwhile, Aircel has sold its BWA/4G spectrum to Airtel in 2016, though it did not commission its service and meet the stipulated roll out obligations by August 2015.
The promoters of Aircel Maxis Communications Berhad, find themselves in a difficult situation now, having managed to take advantage in various ways in the past. They had invested Rs 4,769 crore in January-March 2006 in Aircel, yet their foreign direct investment (FDI) proposal was approved by the then Finance Minister, who had the powers to approve FDI of Rs 600 crore only. Though they had effectively 99.3 per cent stakes in Aircel, as per their own filing with the Malaysian Stock exchange in March 2006 in violation of the then permissible limit of 74 per cent for FDI in the telecom sector, the DoT did not raise a red flag. Even when Aircel did not apparently have any serious resident Indian promoter with 10 per cent equity share in the company, the telecomd department overlooked this basic pre-requisite for a telecom licence in case of Aircel.
(The writer is a former Director General, Audit, in CAG)