As the government weighs relief for Vodafone Idea’s adjusted gross revenue (AGR) dues, the question is whether it will be enough to keep the telecom operator afloat. Experts suggest that even if the government halves Vodafone Idea’s AGR dues, the relief may only buy time, not ensure survival.
Mint examines what relief the government is considering for Vodafone Idea, why AGR recalculation alone may not be enough, how high tariffs would need to rise for the company to remain viable, and whether India’s telecom market can sustain repeated price hikes without losing subscribers or competition.
What financial relief is the government considering for Vodafone Idea?
In October, the Supreme Court allowed the government to reassess Vodafone Idea’s adjusted gross revenue (AGR) dues, which stood at ₹83,400 crore as of end of March 2025. The ruling came as a breather for the company, which has flagged concerns about its ability to survive beyond the current financial year without government support.
AGR is the revenue base used to calculate licence fees and spectrum usage charges payable to the government. Following the Supreme Court order, the department of telecommunications (DoT) has begun the process of recalculating Vodafone Idea’s AGR dues.
Government officials and analysts suggest that this reassessment could halve the company’s AGR liability to around ₹40,000 crore. In addition, the government is considering extending a moratorium on repayments for the cash-strapped operator.
Clarity on the relief is expected soon, as Vodafone Idea would otherwise need to begin annual instalment payments of nearly ₹18,000 crore from March 2026.
Will the AGR relief suffice for Vodafone Idea?
No. The proposed AGR relief may help Vodafone Idea stay afloat in the near term, but it does little to address the company’s larger debt burden.
Of the roughly ₹2 trillion in total government dues, about ₹1.17 trillion relates to spectrum payments rather than AGR. According to brokerage firm Ambit Capital, Vodafone Idea will face deferred spectrum payments of ₹17,400 crore in FY28. Even assuming a 15% tariff hike across the industry in the January–March period, the company is unlikely to generate sufficient cash to meet this obligation.
“We expect Vi (Vodafone Idea) to continue raising equity/debt for funding its capex,” the brokerage said in a note dated 24 December.
Earlier this month, Vodafone Idea raised ₹3,300 crore through secured non-convertible debentures, or NCDs, thorugh its subsidiary Vodafone Idea Telecom Infrastructure Ltd, or VITIL. The proceeds will be utilized by VTIL to repay past obligations to Vodafone Idea.
Crucially, Vodafone Idea’s spectrum payment obligations from FY28 onwards are projected to exceed its expected cash Ebitda of ₹13,800 crore in that year and in subsequent years, highlighting why AGR relief alone does not change the company’s long-term viability.
What does Vodafone Idea need to survive?
Analysts say Vodafone Idea would need sustained tariff hikes to lift its average revenue per user (Arpu) to about ₹300 from the current ₹167.
“Even if we assume a four-year moratorium on AGR payments and the overall AGR liabilities being revised 50% lower, Vi will need an Arpu of ₹300 in FY30 to survive. This is possible only if the telecom industry tariff repair continues,” Ambit Capital said.
Beyond tariff increases, the company would also require significant equity infusion. A fresh equity raise would dilute the government’s current 49% stake, potentially allowing for further conversion of dues into equity if required, according to analysts and industry experts.
In a note dated 11 November, Emkay Global Financial Services said Vodafone Idea’s leverage remains high even after excluding AGR dues, and that the government may need to consider measures to reduce spectrum debt. The brokerage added that further capital infusion and restructuring of spectrum and AGR liabilities are critical for the company’s long-term sustainability.
Vodafone Idea also needs to expand network coverage to arrest subscriber churn. While the company has begun work on this front, it requires bank funding to execute its plans. It has previously outlined a capital expenditure programme of ₹50,000–55,000 crore over the next three years.
“We have strengthened our network by adding a significant number of towers across the country, enhancing coverage and capacity for more robust connectivity and a superior network experience,” Vodafone Idea chief executive officer Abhijit Kishore said in a letter to its users Thursday. Kishore said the company has launched 5G in 29 cities and commenced the next phase of 5G expansion and 4G network improvement.
Can telecom operators raise tariffs at short intervals?
Tariff hikes remain a sensitive issue, given that voice and data services are considered essential by consumers. Historically, such increases have depended on actions by industry leaders, particularly Reliance Jio.
In December 2019, Jio initiated a tariff hike by introducing interconnect usage charge top-up vouchers, which was followed by industry-wide price increases of 30-50%. Two years later, Bharti Airtel led a 20-21% hike, with Jio and Vodafone Idea following suit. In July 2024, Jio again took the lead on tariff hikes.
“We expect a 15% tariff hike in 4QFY26 to be led by Jio,” Ambit Capital analysts said.
The brokerage expects tariff hikes of 12-15% roughly once every two years, along with metering of 5G data and the introduction of new plans offering more generous data allowances. However, Vodafone Idea is currently not in a position to lead such increases, as doing so risks accelerating subscriber churn if competitors do not follow.
While telecom operators are free to set tariffs based on market competition, the regulator monitors all changes and requires providers to file revised tariffs after implementation, allowing intervention in cases of unfair or anti-competitive pricing.
Why is avoiding a duopoly in telecom important?
Experts believe that preventing a duopoly is critical for the sector. A market dominated by just two players could result in higher tariffs, fewer choices for consumers, and weaker competition.
The survival of a third private operator—Vodafone Idea—is therefore seen as essential to maintaining competitive balance. Analysts point to recent disruptions in the aviation sector, where operational challenges at IndiGo, the country’s largest airline, prompted the government to approve two new airlines.
According to Ambit Capital, given the telecom sector’s critical importance, comparable to aviation, the recent experience in aviation may push the government to move more urgently on relief measures, ensuring that Vodafone Idea remains a credible third private-sector player.