India’s third-largest telecom operator Vodafone Idea (Vi) has secured a 10-year breather on adjusted gross revenue (AGR) payments from the Department of Telecommunications (DoT).
Photograph: Anushree Fadnavis/Reuters
This is expected to ease pressure on its balance sheet and enable the company to raise bank debt for capital expenditure.
The relief is critical for Vi as it seeks funding to expand its 4G and 5G networks to remain competitive in the Indian market.
Under the revised terms, the government has asked Vi to pay a maximum of Rs 124 crore annually for six years starting March 2026, followed by Rs 100 crore annually for four years beginning March 2032, according to disclosures made by the company to the BSE on Friday.
During this period, Vi’s AGR liabilities will be reassessed and finalised by a government-appointed committee.
Payments on the reassessed dues will commence from March 2036 on an annual basis and continue until March 2041.
Vi’s AGR dues currently stand at Rs 87,695 crore as of December 31, 2025.
The government’s move is likely to prompt rival Bharti Airtel to approach the courts, according to industry executives, as the country’s second-largest carrier has sought similar relief on its AGR obligations.
Bharti Airtel’s AGR dues are estimated to exceed Rs 40,000 crore, and the Sunil Mittal-promoted group had previously asked the government to convert these liabilities into equity.
Airtel has already paid about Rs 18,000 crore towards AGR dues.
Queries sent to Bharti Airtel did not receive a response as of Friday evening.
People familiar with the matter said Vi’s reassessed dues are likely to be lower than the frozen amount of Rs 87,695 crore as of December 2025.
The government has begun a circle-level review of AGR liabilities across the country for the period from 2006-07 to 2018-19, covering principal, interest, penalties and interest on penalties.
The review also includes dues of Idea Cellular and Vodafone India, among other subsidiaries, prior to their merger in 2018 to form Vodafone Idea, the sources added.
“Such a decisive government action, with possible upside but zero downside from reassessment, would enable Vi to raise bank funding that’s necessary for carrying out survival capex.
“A favourable Supreme Court verdict had already enabled Vi to raise Rs 3,300 crore through non-convertible debentures recently,” said Vivekanand Subbaraman, research analyst at Ambit Capital.
Sector watchers said the relief could also pave the way for a strategic investor to enter Vi, allowing the government to dilute its current 48.9 per cent stake.
This, in turn, could create room for converting additional spectrum dues into equity.
“With negligible AGR payments till FY35, Vi’s fundraising prospects improve meaningfully.
“Any equity infusion by a strategic investor will also dilute government stake, creating headroom for conversion of a portion of the Rs 1.2 trillion spectrum debt into government equity (without breaching the 49 per cent mark),” said analysts at IIFL Capital in a note following Vi’s disclosure on Friday.
The carrier still has dues from spectrum bought in previous auctions — totalling Rs 1.2 trillion.
Based on Vi’s results, as of September 2025, it was supposed to pay Rs 16,428 crore as AGR instalment by March 2026.
That amount will now come down to Rs 124 crore.
Analysts at Citi Research said the move could fast-track completion of Vi’s planned Rs 25,000 crore bank debt raise and potentially enable another equity round later.
“Besides meaningfully lifting concerns on Vi’s ability to service government dues and therefore on its ability to continue as a going concern, these steps should also enable the company to revive its network investments,” they said.
The Rs 1.2 trillion spectrum debt because of spectrum bought in previous auctions will continue to drag down financials, experts added, underscoring the need for tariff hikes.
As of September 2025, Vi had to pay Rs 2,558 crore as deferred payment obligations for the spectrum by June 2026.
According to IIFL, Vi’s spectrum payments are set to rise each year — to Rs 4,400 crore in FY27, Rs 15,600 crore in FY28 and Rs 25,700 crore in FY29.
Analysts added that the relief granted to Vi could also provide momentum to Indus Towers, the shared tower infrastructure provider to major telecoms operators, to resume dividend payouts to shareholders this year, possibly by the end of FY26.
