How Vodafone Idea Will Service Its ₹2 tn AGR and Spectrum Dues After Govt's Relief | Explained

In a major relief to the indebted telecom operator Vodafone Idea, the Centre has granted it another five-year moratorium to pay its adjusted gross revenue (AGR) dues. During this period, any further interest or penalties on these dues have been frozen. While no official announcement has been made by either the Union government or Vodafone Idea, reports say the relief is expected to take effect from December 31.

A copy of Wednesday’s Cabinet decision shared with a few reporters shows that the Centre is freezing ₹87,695 crore in AGR dues of the company until FY32. Vodafone Idea was expected to start paying these dues from March 2026, when an earlier moratorium provided by the government ends. But that is not all.

The Cabinet has also decided to appoint a committee under the Department of Telecommunications (DoT) to reassess the AGR obligations, with its decision to be “binding on both parties”.

Meanwhile, Vodafone Idea will have to pay AGR dues pertaining to FY18 and FY19 between FY26 and FY31. Notably, the Supreme Court decision in 2019 that mandated repayment of AGR dues had calculated liabilities only up to FY17, as dues for the subsequent two years had not been added. Reports claim Vodafone Idea’s liabilities for that period are in the range of ₹700–800 crore.

However, these liabilities are only a fraction of the total dues the company owes the government. According to its second-quarter report for FY26, deferred payment obligations for spectrum and AGR together stood at ₹2,01,409 crore.

Point to note: AGR is the revenue base used to determine licence fees and spectrum usage charges for telecom operators. The current issue stems from a decade-long legal dispute over the definition of AGR, which culminated in a 2019 Supreme Court ruling imposing large penalties along with past dues on telecom operators.

What it means for Vi's Payment Timeline

Before the Cabinet move, the company was mandated to start paying AGR instalments of ₹16,428 crore from March 2026 until FY31. In addition, it had plans to pay another ₹2,558 crore in spectrum dues starting September 2026 through FY44.

Now, reports say these annual instalments will come down substantially.

According to The Economic Times, from FY27 to FY31, the company will pay about ₹114 crore every year. This will be followed by payments of around ₹100 crore a year for another four years, up to FY35.

From FY32, when most AGR repayments begin, instalments will not be uniform because Vodafone Idea will still be servicing spectrum dues, the newspaper reported, citing government officials. The company will pay about ₹100 crore a year from FY32 to FY36, with the remaining AGR dues to be paid between FY36 and FY41.

By FY36, most of Vodafone Idea’s spectrum auction dues would have been paid, and the government expects the company’s financial position to improve. Overall, spectrum payments will continue until FY44.

Another caveat is the expected decisions of the new committee formed by the government. Reports citing officials say the committee will be appointed within the next four to six months and will take a few more months to carry out a detailed reassessment of the ₹87,695 crore AGR dues.

The exercise will involve reassessment at each telecom circle level, according to a Mint report citing officials. This would include examining the history of subsidiaries linked to Vodafone Idea before the merger of the Aditya Birla Group’s Idea and Vodafone Group’s Indian unit, along with the licences they had secured. Both Economic Times and Mint reports say the final amount is expected to be much lower than the current figure.

Why Relief was Provided to Vi

The Cabinet decision came against the backdrop of a Supreme Court ruling in late 2026, which allowed the government to reassess Vodafone Idea’s AGR liabilities in light of its 20 crore subscriber base and thousands of employees. The company had warned that it would not be able to operate beyond 2026 without relief.

At the same time, the Government of India holds nearly 49% stake in Vodafone Idea following earlier relief packages. In 2023, the government acquired a 33% stake by converting statutory dues of over ₹16,000 crore into equity. Earlier this year, it became Vodafone Idea’s largest shareholder in March after converting ₹36,950 crore of dues into equity, raising its holding to nearly 49%.

These stake increases are part of the government’s 2021 policy aimed at preventing excessive monopolisation of the telecom sector. At present, the sector is largely dominated by two private players — Reliance Jio and Bharti Airtel.

“The telecom sector is a critical infrastructure sector with strong linkages to economic growth, employment generation and the expansion of Digital India… The telecom sector is also highly concentrated, and the government would, in the interest of consumers and competition, like to have multiple players in such critical sectors. Therefore, the survival of M/s VIL as a viable player is critical for the telecom sector,” the Cabinet decision noted.

What it means for Vodafone Idea, its investors

On Wednesday evening, Vodafone Idea informed stock exchanges that it had not yet received any communication regarding the reported Cabinet decision. However, investors reacted positively to the news. The stock had fallen as much as 11% on Wednesday but recovered about 8% the following day.

Analysts say investors were initially disappointed as the package did not immediately reduce the total dues.

“Contrary to the street’s expectations of at least a 50% waiver, no waiver on the pending AGR-linked dues was provided by the Cabinet,” brokerage firm Emkay Global said in a note dated January 1.

It added that while the relief package addresses AGR dues, Vodafone Idea still has ₹1.2 trillion in deferred payment obligations towards spectrum, with significant payments scheduled between FY26 and FY44.

“The current EBITDA is insufficient to meet capital expenditure or spectrum debt repayment requirements. The company will need additional relief or funding to address these challenges,” Emkay Global said.

In another positive decision on Wednesday, Vodafone Group has agreed to provide ₹5,836 crore to support Vi’s financial position and cash flows. Of the total amount, ₹2,307 crore will be infused as cash over the next 12 months, while the remaining ₹3,529 crore will be raised through the phased sale of equity shares held by Vodafone Group shareholders, with the proceeds to be passed on to the company.

The funding is linked to the Contingent Liability Adjustment Mechanism (CLAM) put in place during the Vodafone India–Idea Cellular merger, under which the promoters had agreed to settle certain legal, tax and regulatory liabilities relating to the pre-merger period.

The revised agreement finalises these obligations and provides clarity on the amount and timing of funds, with 328 crore Vodafone Idea shares held by Vodafone Group shareholders pledged for five years and available for sale in phases based on Vodafone Idea’s funding requirements. The British Firms has already written off its investment in Vi.

Analysts, however, noted that without an external investor, sustaining the company will remain difficult.

“What needs to happen is that Vodafone Idea requires a large, long-term investor who can inject a significant amount of equity,” Piyush Panday, Senior Vice President (lead analyst) – institutional equities at Centrum India, told Outlook Business on Wednesday.

He added that this is especially important as the company is competing with much larger players that have stronger balance sheets, greater market share, and more pricing power. “Support is necessary to help the company stabilise,” he said.