Reliance Jio Infocomm got undue advantage of Rs. 3,367.29 crores after the Department of Telecom (DoT) allowed it to provide voice calling facility under the new licensing regime, official auditor CAG said on Friday.
Mukesh Ambani led Reliance Industries Ltd in 2010 acquired Infotel Broadband which had won pan-India wireless access spectrum in auctions. The Broadband Wireless Access (BWA) spectrum can be used for 4G services.
“Reliance Jio Infocomm Limited (formerly, M/s Infotel)… paid UL entry fee of Rs. 15 crores and additional migration fee of Rs. 1,658 crores in August 2013. This migration, allowed at prices discovered in 2001, resulted in undue advantage of Rs. 3,367.29 crores to M/s Reliance Jio Infocomm,” CAG said in a report tabled in Parliament.
As per the BWA auction rules, companies were permitted to use their spectrum to provide services that are allowed under the licence held by them.
Infotel Broadband was granted only the Internet service provider (ISP) licence which did not provide for voice calling facility.
CAG said the auction rules “suffered from deficiencies like absence of financial parameters in the eligibility criteria for bidders, absence of lock-in-provision, disparity in scope of usage of BWA spectrum, lack of intermediate milestones in roll out targets etc.”
The auditor said that Infotel had outbid most of the telecom operators, who could have provided voice services in addition to data, in the BWA spectrum auction held in 2010.
Infotel requested for network codes after the auction which would have enabled them to provide voice services beyond the scope of their ISP licence, it said.
Department of Telecom (DoT) in 2013 allowed migration of ISP licensees with BWA spectrum to UL (Unified Licence) which would enable them to provide mobile voice service using BWA spectrum, on payment of additional fee equal to the difference between the entry fee for a telecom licence and entry fee of national ISP permit.
This was apart from the entry fee as applicable for migration of ISP licensee to UL, CAG said.
“The decision to grant permission to an ISP licensee with BWA spectrum to operate in the voice telephony space also helped the ISP to circumvent the restrictions imposed by their licence at the time of auction, which were known to the ISP at the time of bidding for BWA spectrum. RJIL was the first to take benefit of this scheme,” the auditor said.
CAG added that while allowing voice telephony service on BWA spectrum, DoT had not prescribed the matching Spectrum Usage Charges (SUC) with what was being paid by the main telecom operators who were providing voice telephony.
While full fledged telecom operators were paying 3 to 5 percent depending on the quantum of spectrum held by them, BWA spectrum winners were asked to pay just 1 percent of its AGR (adjusted gross revenue) as per the auction rule.
“This relaxation would result in significant loss of revenue to the government over 20 year licence period, since the BWA spectrum had potential to provide voice services also in addition to data services,” CAG said.
These deficiencies led to lack of efficient use of spectrum, hoarding of spectrum in view of absence of roll out of BWA services and non-realisation of the expected revenue share in the form of SUC even after more than four years of allocation, the auditor said.
A Reliance Jio Infocomm spokesperson in an emailed statement responding to the CAG report said, “No favour has ever been given. We have always conducted our business as per the prevailing laws and have abided by the rules and regulations prescribed by the Department of Telecom (DoT) and other regulatory authorities. We have acquired all our spectrum at market prices through open and transparent bidding processes, the conditions for which were same for all bidders. Further, the DoT rules for procuring the relevant licence for services using BWA spectrum too were the same for all successful bidders.”