Life of Vi: Inside the unprecedented pivot that saved the telco

Yet, in a twist that would have seemed impossible even a few months ago, India’s government has not only become the single largest shareholder in Vi—with a 48.9% stake—but has persuaded the Supreme Court to permit something it had once explicitly prohibited: the recomputation of AGR dues up to March 2017.

The story of how this happened begins not with the latest Supreme Court orders but back in October 2019, when the court upheld the department of telecommunications’ (DoT) interpretation of AGR, shocking the industry with demands far higher than what companies had provisioned.

A short history

What was this interpretation?

The telecom policy of 1999 introduced the concept of revenue sharing between telcos and the government. The government’s share would include licence fees and spectrum usage charges. The system was arrived at as telcos couldn’t pay the high spectrum charges upfront.

However, the calculation to arrive at the AGR, or the revenue-based metric, became a source of legal confrontation for over a decade. Apart from the income earned from core telecom services such as call and data revenue, the DoT included other income—interest earned, tower rentals, dividends and sale of assets—while calculating the AGR. The government’s contention was that this additional revenue was sourced from its telecom licence.

Private telecom companies, however, argued that the government should calculate revenue primarily from telecom services and not include other income.

After the court’s order, liabilities ballooned. DoT pegged Vi’s dues at ₹58,254 crore—almost triple the company’s internal estimate of ₹21,533 crore—while Bharti Airtel’s dues were set at ₹60,778 crore, according to data from the government. Airtel’s amount includes AGR dues from its merger with Telenor, Tata Teleservices Ltd and Tata Teleservices (Maharashtra) Ltd.

The sector was stunned. In December of that year, Kumar Mangalam Birla, chairman of the Aditya Birla Group, bluntly admitted that the company could not survive such a shock: “If we are not getting anything, then I think it is the end of the story for Vodafone Idea… We will shut shop," he declared publicly, giving voice to an existential crisis that regulators, investors and policymakers had long feared would one day come to pass.

The implications of a Vi collapse were profound. Its 200 million subscribers would have been forced to migrate to either Reliance Jio or Bharti Airtel, further concentrating a market that had already shrunk from 13 players in 2014 to three private operators and one state-run firm now. A duopoly loomed, an outcome that risked higher tariffs, diminished consumer choice, depressed spectrum auction revenues and political backlash.

Within the government, particularly inside the ministry of communications and the DoT, there was palpable discomfort with that scenario. As one former senior official, who didn’t want to be identified, recalled, “There were many reasons for the government to extend relief. First is its bid to save its ₹53,000-crore investment. Second is the need for a three-player private sector with a government player".

It was a rare case in which commercial interest and public-interest arguments converged.

Breathing room

Even after Vi and Airtel paid partial AGR dues— ₹7,854 crore and ₹18,004 crore, respectively—in 2020, their balance sheets were strained. Meanwhile, Reliance Jio’s aggressive growth and Airtel’s steady investment streak widened the competitive gulf. Subscriber loss mounted at Vi, with customer flight accelerating in urban circles. Something had to give.

In 2021, the government approved a sweeping revival package for telecom. It offered a four-year moratorium on AGR and spectrum payments, and allowed companies to convert interest on deferred dues into equity. Besides the interest amount, the government also kept the option open to convert the due amount, pertaining to the deferred payment, into equity at the end of the moratorium period.

The move was meant to provide immediate cash-flow relief while giving operators breathing room to raise capital.

Vi opted for the interest-to-equity conversion, which resulted in the government taking a 33.44% stake in February 2023 after converting ₹16,133 crore of interest into equity. It was an unprecedented development: the sovereign becoming a significant shareholder in a private telco.

But even that did not stabilize the company. Despite a ₹7,000-crore promoter infusion between March 2022 and May 2024, Vi could not attract the large-scale international investment it needed. Its 5G rollout lagged badly behind Jio and Airtel, and capex constraints were visibly eroding its competitive relevance. The only way to meaningfully modernize the network would have been to raise upwards of ₹50,000 crore over the next few years—an impossible task without prior clarity on the mountain of AGR dues.

Thus, in April this year, the government executed another dramatic step: it converted an additional ₹36,950 crore of spectrum dues into equity, raising its stake to 48.9%—ahead of both promoter groups, Vodafone Group and the Aditya Birla Group. This made the Centre the single largest shareholder in Vi, turning the 2019 crisis on its head. The same state that had fought for decades to enforce AGR dues was now financially invested in the company’s survival.

In a telling detail, the government did not take any board seat. The Securities and Exchange Board of India (Sebi), India’s market regulator, in granting an exemption from mandatory open-offer obligations, stated that the government had “no intent to participate in management or the board" and that its stake was purely to protect broader public interest and industry stability. This preserved promoter control and avoided pushing Vi into the category of a public sector undertaking (PSU). The government has publicly reiterated that it does not wish to exceed 50% ownership, thereby sidestepping the slew of legal and administrative obligations that come with majority shareholding.

Twist in the tale

Yet, Vi’s position remained precarious. Its annual operating cash flow was around ₹8,400-9,200 crore—nowhere near enough to meet the ₹18,000 crore in yearly instalments that would resume in March 2026 when the moratorium ended.

A senior Vi executive, speaking anonymously, put it plainly: while interest and penalty waivers were possible, the only meaningful route was for the government to rework the AGR principal itself. “There was no other concession that could be given as it would not have been legally tenable to reduce fees or charges selectively," he said.

But the roadblock was formidable. A 2019 Supreme Court judgement had explicitly barred any recomputation of AGR dues up to 2016-17. How, then, could the government reduce a number carved in judicial stone?

This is where an underreported twist emerges. According to executives and legal experts familiar with the process, the real shift occurred quietly inside DoT and the solicitor general’s chambers. Neeraj Mittal, the telecom secretary, with support from solicitor general Tushar Mehta—who had argued earlier AGR cases—examined whether a fresh departmental demand could create a limited legal reopening.

What followed was procedural manoeuvring. In August 2025, DoT issued a new AGR demand of ₹9,450 crore till 2018-19. The amount includes ₹5,606 crore for 2016-17, the very period that the Supreme Court had previously closed off for revision. As expected, Vi challenged the demand before the apex court.

This was deliberate. The government was, in effect, giving the court a narrow window to reconsider a part of AGR calculations.

“The court could have easily dismissed the government’s demand, but the state ownership of Vi appears to have made all the difference this time," said a senior Reliance Jio executive on condition of anonymity. And indeed, in October, the court permitted the government to reassess the additional demand. Days later, it went further, allowing the DoT to recompute all AGR dues up to March 2017.

This was not a general legal precedent. The bench limited the relief to the “changed circumstances"—the government’s large equity stake, the public interest in the stability of telecom services, and the financial survival of a major operator. As legal precedents go, it was narrow, contextual and exceptional. But for Vi, it was transformative.

Queries emailed on 19 November to DoT, the telecom secretary’s office, the department of investment and public asset management, the Prime Minister’s Office, Vodafone Idea’s promoters and the solicitor general did not elicit any response.

New maths

The question now is what form the relief will take. Telecom policy expert Parag Kar lays out the options. One framework is to re-evaluate the principal AGR amount. Another is to waive interest and penalties while stretching the remainder over 20 years at 8% interest.

According to Kar’s estimates, if interest and penalties are waived, Vi’s AGR principal would drop from ₹17,213 crore to ₹9,363 crore, cutting its annual instalments to ₹954 crore, a figure the company can realistically pay from operating earnings.

Bharti Airtel stands to gain too. Gopal Vittal, its managing director and vice chairman, told analysts that the 2019 AGR judgement had been a “body blow" to the sector and that the court’s earlier insistence on even accepting calculation errors was deeply disappointing. Airtel’s recalculated dues could fall to just ₹2,229 crore, spread over 20 years, or even entitle it to a refund of ₹11,800 crore under some interpretations. Thus, while Vi benefits most visibly, the entire sector may find new stability.

Everyone wins

What would a stronger Vi mean for the market? Analysts argue that it would be a significant boost to competition.

Prashant Singhal, EY India’s telecom practice head, says the most mature telecom markets globally have a three-player market structure. He cites the US, Germany, and the UK as examples. A stronger third player would help increase the addressable market for ecosystem players—tower, fibre networks, and backhaul companies.

Vivekanand Subbaraman, an analyst with Ambit Capital, points to a global parallel: “Telecom equipment suppliers like Ericsson are already increasing their investments in India as they see a more competitive market ahead. A recent example is the US market, where T-Mobile has grown strongly after finding a strong investor in Deutsche Telekom."

A new PSU?

But to capitalize on this potential, Vi needs capital. Large amounts of it. Vi has guided for ₹50,000-55,000 crore of capex in the near term, contingent on bank funding, which itself requires clarity on AGR.

An immediate resolution would unlock ₹25,000 crore of pending bank debt, enabling partial network expansion. JPMorgan notes that Vi expects to close 2025-26 with ₹7,500-8,000 crore of capex even without major funding, but from 2026-27 onwards, new capital is indispensable.

IIFL’s Balaji Subramanian is cautiously optimistic. “A meaningful AGR reduction, new capital investors, converting more vendor dues into equity and a tariff hike must all come together if Vi has to strengthen its market presence," he argued.

But he warns that to demonstrate value to investors, Vi must increase its Arpu (average revenue per user) without losing subscribers and compete vigorously against two financially powerful rivals. “It is quite a tall order," he admits.

There is also the persistent question of whether Vi risks becoming a PSU. The government insists it has no such intention and has deliberately avoided taking board seats or majority control. Sebi’s exemption order underscores this: the government is a passive investor, not a controlling shareholder. Unless this stance shifts, Vi will remain a private sector company with a uniquely structured ownership.

There is also the persistent question of whether Vi risks becoming a PSU. The government insists it has no such intention and has deliberately avoided taking board seats or majority control.

“As Vi will require more capital for its capex plans, there is a good likelihood of a new investor coming in. The new capital could well dilute the government’s holding," says Ambit’s Subbaraman.

Functional pivot

What emerges from this entire episode is a portrait of a state that has chosen pragmatism over rigidity. In 2019 and 2020, the government pushed aggressively to enforce AGR dues. In 2025, the same state—now a major shareholder—engineered a narrow legal window to reassess them. The pivot was not ideological but functional: enforcing the original dues would have sunk an operator in which the state had invested tens of thousands of crores, weakened competition, hurt consumers and eroded fiscal prospects.

The Supreme Court’s decision gives Vi time, but not a guarantee. The company must still raise capital, modernize its network, retain customers and gradually rebuild market share. The government must ensure that it remains a neutral referee despite being a major shareholder. Rivals, especially Airtel, will seek parity in relief. And investors will judge whether this intervention marks the beginning of a genuine revival or merely delays a duopoly.

The coming years will determine whether Vi uses this extraordinary reprieve to re-establish itself as a strong third force—or whether this becomes the final chapter in India’s long struggle to maintain balance in its most vital network infrastructure.