Vi gets AGR relief but ₹1.17T spectrum debt mountain looms
What's the story
The Indian government has handed Vodafone Idea (Vi) a critical financial breather by freezing its massive ₹87,695 crore Adjusted Gross Revenue (AGR) dues as of December 31, 2025. Instead of a crushing immediate payout, the Department of Telecommunications (DoT) has allowed Vi to pay just ₹124 crore annually until 2031, providing the company with much-needed liquidity to sustain its daily operations. However, Vi is facing a major hurdle in the form of its spectrum debt.
Financial burden
Spectrum debt repayment schedule
According to IIFL's Balaji Subramanian, the AGR liabilities were only around 40% of Vodafone Idea's total pending dues to the government. The remaining pertains to their spectrum debt, equal to nearly ₹1.17 trillion. Unlike the frozen AGR dues, these spectrum payments are set to escalate sharply. Vi is expected to pay ₹6,000 crore next year, followed by ₹15,000 crore in FY28, and a massive ₹25,000-26,000 crore annually from FY29 onwards, creating a significant long-term cash crunch.
Investor involvement
Potential solutions for Vodafone Idea's financial woes
To manage these looming spectrum bills, Subramanian suggested Vi may need to convert more debt into equity. The government is already the largest shareholder with a 49% stake. If fresh investors infuse "equity" (cash) into the company, the government may further dilute its position or convert more spectrum dues into shares. This strategy keeps the company from defaulting but relies heavily on attracting new global investors willing to bet on Vi's turnaround.
The catch
Shareholder dilution remains a worry
While equity conversion saves Vi from bankruptcy, it comes with a major catch: shareholder dilution. Creating millions of new shares to pay the government means existing investors will own a much smaller piece of the company. Subramanian warns that for "meaningful equity value" to be created, the company must use this breathing space to grow its business and upgrade its network. If the company doesn't grow fast enough, the increased number of shares could keep the stock price suppressed.
Survival
Road to 5G and survival path
The government's relief package is designed to help Vi secure bank funding for its 5G rollout, which has lagged behind rivals Jio and Airtel. By clarifying the payment timeline, the government has made Vi a "safer" bet for lenders. However, the survival of the telco depends on a perfect execution: successful fundraising, aggressive network expansion, and a steady increase in revenue per user (ARPU) to eventually meet those massive ₹26,000 crore annual bills from FY29.