Vodafone Idea warns of shutdown after 2026 without government support
| 2025-05-17
Vodafone Idea has warned that it may be forced to shut down operations after the 2025–26 financial year unless it receives immediate relief from the Indian government on its outstanding dues.
Vodafone Idea seeks relief on AGR dues, warns of shutdown post-2026 without aid. Supreme Court to hear plea amid rising pressure on India’s telecom sector.
Vodafone Idea has warned that it may be forced to shut down operations after the 2025–26 financial year unless it receives immediate relief from the Indian government on its outstanding dues.
Vodafone Idea Limited (Vi), one of India’s three major telecom operators, has told the Department of Telecommunications that it cannot sustain operations beyond March 2026 without assistance in clearing its Adjusted Gross Revenue (AGR) liabilities. In a letter dated 17 April 2025, Vi Chief Executive Akshaya Moondra warned that ongoing funding talks with banks are contingent on regulatory intervention.
The warning has been followed by a fresh petition filed with India’s Supreme Court, where the company has sought relief on AGR dues exceeding Rs 58,000 crore (approximately US$7 billion). The court is scheduled to hear the case on 19 May.
Petition Highlights Financial Peril
In its Supreme Court filing dated 13 May, Vi argued that without access to bank funding, it cannot meet an Rs 18,000 crore instalment due in March 2026. The company added that without this financial support, “it will not be able to operate beyond FY 2025–26.”
The AGR dispute stems from a 2019 Supreme Court ruling which broadened the definition of telecom revenues on which levies are calculated. As a result, telecom firms were required to pay dues based not only on core telecom services but also on non-core income such as rent and interest.
Vi has proposed that the Indian government consider only the principal amount due up to FY 2018–19—Rs 17,213 crore—as final, waive interest and penalties, and allow the remaining Rs 7,852 crore to be paid interest-free over 20 years, starting from FY 2030–31.
Consequences of Inaction
The company has stated that unless its relief proposal is accepted, the fallout could be far-reaching. More than 200 million mobile subscribers may be affected, with services disrupted and users forced to migrate to other providers. Vi also warned that up to 30,000 jobs could be lost and that previous investments—including the government’s 49% stake in the company—could be rendered worthless.
There are also wider economic implications. A shutdown would reduce India’s telecom market to a duopoly dominated by Reliance Jio and Bharti Airtel, potentially weakening competition, affecting consumer pricing, and undermining future government revenue from spectrum auctions.
Government Role and Past Interventions
In 2023, the Indian government became the largest shareholder in Vodafone Idea after converting ₹16,133 crore of the company’s deferred dues into equity. This was part of a broader relief package launched in 2021 to stabilise the telecom sector, which included deferred payments, moratoriums on interest, and the option for companies to convert debt into equity.
Following this conversion, Vodafone Group and the Aditya Birla Group—the company’s principal promoters—saw their stakes fall to roughly 17% and 18% respectively. Despite holding a 33.1% stake, the government declared its position to be that of a “public shareholder” with no role in the firm’s daily management.
However, Vi’s financial condition has continued to deteriorate. The company posted mounting quarterly losses and continues to lose market share to its rivals. Efforts to attract fresh investment or loans have reportedly stalled amid unresolved regulatory and funding uncertainties.
Telecom Sector at a Crossroads
Industry analysts warn that a collapse of Vodafone Idea could have lasting consequences for India’s digital infrastructure. Fewer service providers may limit innovation, customer choice, and price competition. Additionally, large-scale job losses and loan defaults could ripple through the economy, affecting banks already exposed to the telecom sector.
The case is seen as a key test of India’s long-standing commitment to maintaining a three-player telecom market. Observers say the Supreme Court’s decision on 19 May will be critical not only for Vodafone Idea’s survival but also for preserving competitive balance in one of the world’s largest telecom markets.
AGR Dues and India’s Telecom Policy
Adjusted Gross Revenue (AGR) is a mechanism through which Indian telecom operators pay a share of their revenue to the government. Disputes over what constitutes revenue culminated in a 2019 Supreme Court ruling that dramatically increased liabilities for older operators such as Vodafone Idea and Bharti Airtel.
The Indian government has since moved to soften the impact through relief packages. However, the financial strain from AGR liabilities continues to weigh heavily on operators. Vodafone Idea, in particular, has struggled to raise capital, upgrade infrastructure, and compete in an increasingly data-driven market dominated by newer, financially stronger players.
With another critical hearing just days away, the fate of one of India’s oldest telecom providers may now rest with the country’s highest court—and the government’s willingness to intervene decisively.
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