It seems Reliance Jio would have a rough start with the planned all Indian broadband service. As Comptroller and Auditor General of India (CAG) has suggested to Department of Telecommunications (DOT) to cancel the nationwide broadband spectrum held by Infotel Broadband Services, now a Reliance Industries company, which operates Reliance Jio, for allegedly rigging the auction and violating rules.
According to a draft report sent by CAG to DOT for comments said “the DoT failed to recognize the tell-tale sign of rigging of the auction right from beginning of the auction” in which a small ISP, Infotel Broadband Services Pvt Ltd (IBSPL) emerged winner of pan-India broadband spectrum by paying 5,000 times of its net worth. RIL, which acquired IBSPL within hours of it winning the spectrum and later renamed it Reliance Jio.”
IBSPL ranked only 150th in the list of Indian ISPs and has got a net worth of Rs 2.5 crore. It submitted an earnest money deposit of Rs 252.50 crore through the covert and overt assistance of third party / private bank, bid for Rs 12,847.77 crore (5000 times of its net worth) for pan-India broadband spectrum and then sold the company to Reliance on the day of completion of the auction. These indicates IBSPL’s collusion and sharing of the confidential information with a third party in violation of auction conditions/rules.
According to CAG, “due to inclusion of inadequate eligibility criterion for participation in the auction, the promoters of the IBSPL enriched themselves and made unfair gain.”
DOT in its response to CAG said that, “there was no eligibility criterion with respect to minimum net worth or paid up capital for participation in the auction. Neither the top management of the DoT nor the important committees could detect these tell tale signs of collusion and sharing of confidential information by the biggest bidder, a tiny ISP”
CAG rejected DoT response that the eligibility criterion for participation in the auction was finalized after due diligence and on sector regulator Trai’s recommendations saying it was department’s responsibility to ensure that only serious ISPs participated in the auction.
On the other hand RIL spokesperson said “the auction for the BWA spectrum was one of the most competitive auction in the Indian telecom history which fetched final bid price more than six times the reserve price for the pan-India broadband spectrum. This was despite no visible evidence of any eco-system for the BWA spectrum at the time of auction. Any allegations of so-called collusion, sharing the confidential information or rigging the auction are bizarre and completely rejected.”
The CAG estimated that decision of government to allow internet service providers licence holder having BWA spectrum to provide voice services against payment of Rs 1,658 crore resulted in undue advantage worth Rs 22,842 crore to RJio.
CAG suggested that “India government should get the matter investigated even at this juncture, fix responsibilities on the bidders, which violated the auction conditions/rules prescribed and cancel the allotment of the BWA spectrum along with exemplary punishment on the colluding firms.”