Vodafone's ₹30,000 Crore Spectrum Dues Land up in the Supreme Court—for the Umpteenth Time

Centre, as majority shareholder, finds itself in a policy paradox. It cannot directly manage Vi or infuse further capital, yet it faces enormous financial and political consequences if Vi collapses.

By Karan Bir Singh Sidhu
Retired IAS Officer, Punjab Cadre; Former Special Chief Secretary, Punjab Government; MA (Economics), University of Manchester (UK). Writes on public policy, telecom regulation, fiscal governance, and legal affairs.

Vodafone's ₹30,000 Crore Spectrum Dues Case in Supreme Court on Monday

Vodafone-Idea Seeks Relief Yet Again

Vodafone Idea Limited (Vi) has once again approached the Supreme Court of India, this time seeking a waiver of approximately ₹30,000 crore in Adjusted Gross Revenue (AGR) dues. A hearing is scheduled for May 19, 2025. The beleaguered telecom operator has warned that it may be forced to cease operations beyond FY 2025–26 unless it receives timely support from the Central Government. This petition marks the latest chapter in a decades-long saga of legal, financial, and regulatory conflict between telecom service providers and the Department of Telecommunications (DoT), with a conclusive resolution to this imbroglio still nowhere in sight.

A Legacy of Ambiguity and Regulatory Oversight

At the core of this battle lies the contentious definition of Adjusted Gross Revenue (AGR)—a term used to calculate the statutory levies that telecom operators must pay the Government by way of spectrum usage charges and license fees. The AGR framework originated with the New Telecom Policy of 1999 (NTP-99), which shifted the industry from a fixed license fee regime to a revenue-sharing model aimed at fostering growth and easing financial burdens. However, a fundamental and unresolved disagreement over what constitutes AGR quickly surfaced.

The Department of Telecommunications (DoT) has consistently maintained that AGR should encompass all forms of revenue—whether derived from core telecom operations or not—including income from interest, dividends, asset sales, and other non-telecom activities. In contrast, telecom companies argue that AGR should strictly be limited to revenue earned from core telecom services. This divergence in interpretation laid the foundation for a long-standing legal dispute that has played out in multiple judicial forums since 2005.

What is particularly disconcerting is the evident vagueness and ambiguity in the original drafting and articulation of the AGR definition—a lack of clarity that has proven to be both costly and corrosive. Yet, curiously, no real accountability has been assigned to the relevant bureaucracies of the Telecom Ministry or the Finance Ministry, nor to the statutory bodies like the Telecom Regulatory Authority of India (TRAI) and the erstwhile Telecom Commission. Even the legal officers who vetted the contracts and endorsed the policy framework must share in this institutional opacity, despite being fully aware that the wording of the definition could easily give rise to complex interpretational disputes. That such definitional confusion was allowed to persist—despite the clear risk of litigation and liabilities running into tens of thousands of crores—remains one of the most glaring instances of systemic regulatory failure in India's telecom history.

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Notional Losses vs Real Impact: How Bureaucratic Paralysis Outpaced the 2G Scam's Alleged "Daylight Robbery"

The 2G spectrum allocation controversy (2008–2011) came to be symbolised by a notional loss of ₹1.76 lakh crore—a figure derived by the Comptroller and Auditor General (CAG) based on 3G auction benchmarks. However, a deeper assessment reveals that the true cost to the Indian telecom sector arose not from pricing anomalies alone, but from sustained policy paralysis, procedural overreach, and litigation fallout that crippled spectrum reforms and market confidence for over a decade. The notional loss—premised on applying high 3G spectrum prices to earlier 2G allocations—failed to account for the lower data capacity of 2G bands, their focus on non-metro circles, and skewed auction dynamics where Delhi and Mumbai alone contributed 40% of the total value.

In contrast, real losses mounted from 2012 onwards. Spectrum auctions floundered, with over 75% of airwaves going unsold in 2012 and entire bands like 700 MHz drawing zero bids in 2016, due to artificially inflated reserve prices set to preempt audit objections. Operators—fearing regulatory retaliation—overbid for spectrum in successive rounds, leading to unsustainable debt burdens (₹6 lakh crore by 2020), while ongoing litigation stemming from the 2G verdict resulted in the cancellation of 122 licenses and legal expenses exceeding ₹1,000 crore. Meanwhile, over ₹12,500 crore in annual licence fee revenues were lost due to operator exits. Ironically, the CAG’s theoretical ₹1.76 lakh crore figure—later dismissed by courts—triggered a risk-averse culture among bureaucrats, who prioritised audit insulation over policy pragmatism. This entrenched inertia helped Reliance Jio, a new entrant, corner over 60% of industry revenues by 2024 through regulatory arbitrage, while legacy players like Vodafone Idea were pushed to the brink of collapse.

In the final analysis, the real "heist" was not the so-called daylight robbery of spectrum underpricing, but the long-term erosion of a once-vibrant telecom ecosystem. Between 2010 and 2023, India's telecom market value plummeted from $70 billion to $12.5 billion, and the Government’s revenue share from operators shrank from 30% to a mere 3%—a systemic collapse far graver than any notional loss.

Timeline of Legal and Regulatory Wrangling

• 2005: The Cellular Operators Association of India (COAI) challenged the DoT’s wide interpretation of AGR.

• 2015: The Telecom Disputes Settlement and Appellate Tribunal (TDSAT) ruled in favour of telecom companies, stating that only core telecom revenues should be included.

• October 2019: The Supreme Court overturned the TDSAT ruling, backing the DoT’s broader AGR definition. This led to a demand of ₹1.47 lakh crore from telecom firms—₹92,642 crore in license fees and ₹55,054 crore in spectrum usage charges.

• July 2021: The Supreme Court dismissed telcos’ petitions to rectify alleged errors in AGR calculations.

• January 2025: The Court rejected further review petitions.

• March 2025: The DoT shelved its proposal to waive AGR dues, pulling back from a potential relief package.

• May 2025: Vodafone Idea filed its latest plea for a waiver of ₹30,000 crore.

Companies Under the AGR Lens

The 2019 ruling affected several major and minor players:

• Vodafone Idea (Vi) was hardest hit, with DoT estimating dues at ₹58,000 crore. Vi contends that its liability is actually ₹21,500 crore. CEO Akshaya Moondra has clearly stated that without government relief, the company will not survive beyond FY 2025–26. The latest plea focuses on waiving the interest, penalties, and interest on penalties, which account for around 75% of the total dues. Notably, the Government of India holds a 48.99% stake in Vi after converting dues into equity.

• Bharti Airtel disputes the government’s demand of ₹43,980 crore, claiming actual dues closer to ₹13,000 crore. Although its review petitions were dismissed by the Supreme Court in January 2025, Airtel has remained financially stable enough to manage the burden.

• Reliance Jio emerged largely unscathed as it does not carry legacy dues—having entered the telecom space much later.

• Tata Teleservices, which no longer operates in the retail mobility space, faced dues amounting to ₹14,000 crore and now only provides enterprise services.

Beyond the telecom players, nearly 2,000 non-telecom entities also found themselves entangled. These included both private and public sector companies. While the Government later exempted public sector undertakings such as ONGC and PowerGrid, private firms like Gujarat Narmada Valley Fertilizers Company (GNFC), Railtel, and Sify Tech continued to face dues. GNFC alone accounts for nearly 40% of the AGR liabilities outside telecom.

Financial Fallout and Industry Response

The 2019 judgment triggered deep financial distress across the sector. The cumulative unpaid dues of ₹1.47 lakh crore caused telecom stocks to crash and intensified the push for industry consolidation. Smaller players either exited or were absorbed.

To stem the bleeding, the Government offered some relief: temporary moratoriums and the option to repay dues in staggered instalments starting in 2026. A broader AGR waiver proposal—worth over ₹82,000 crore—was considered but later dropped in March 2025.

Meanwhile, telecom operators undertook debt restructuring, operational cost cuts, and pushed for policy changes. A key industry demand has been the redefinition of AGR to exclude non-telecom revenues, but no consensus has emerged.

Mukul Rohatgi to Argue for Vodafone in Supreme Court

Representing Vodafone Idea before the Supreme Court is senior advocate Mukul Rohatgi, who has sought an urgent hearing. Rohatgi argued that Vi’s financial position is "precarious" and that the company urgently requires relief to survive. The case is slated to be heard by Chief Justice B. R. Gavai and Justice Augustine George Masih on Monday, May 19th, 2025.

Vi has argued that without waiver of the ₹30,000 crore sought, it will not be in a position to pay the ₹18,000 crore installment due in March 2026. The company has also highlighted its inability to secure bank funding due to regulatory overhang. The government’s 49% stake, Vi contends, makes it a quasi-partner—adding a layer of urgency and complexity to the matter.

In the wake of this development, Vi's stock saw a brief surge of 4% on May 15, 2025, touching ₹7.25. However, it still trades 35% below its Follow-on Public Offer (FPO) price of ₹11.

Starlink and the Emerging Competitive Threat

Adding another dimension to Vi's challenges is the recent entry of Elon Musk’s Starlink, which has formed partnerships with both Reliance Jio and Bharti Airtel. In March 2025, Jio and Airtel independently announced tie-ups with SpaceX to bring high-speed satellite internet across India. These agreements promise coverage in underserved rural areas, leapfrogging the need for traditional infrastructure.

Starlink services will be delivered through Jio and Airtel’s existing distribution networks, with installation support and customer onboarding included. The move has been hailed as transformative and is expected to bridge India’s digital divide in record time.

Vi, in contrast, has only initiated exploratory talks with Starlink and other satellite internet providers. It is significantly behind in 5G rollout and overall network investment. This widening gap threatens to accelerate customer attrition from Vi, especially in rural zones where it once hoped to consolidate.

Who Controls Vodafone Idea?

Despite the Government of India becoming the largest single shareholder in Vodafone Idea with a 48.99% stake—following the conversion of spectrum and AGR dues into equity—the operational and management control of the company continues to rest with its original promoter groups: Vodafone Group Plc (UK) and the Aditya Birla Group. In April 2025, the shareholders’ agreement was amended to lower the qualifying threshold for promoter control, ensuring that the two groups retain significant governance rights even with reduced equity. Vodafone Group now holds approximately 16%, while the Aditya Birla Group retains about 9.5%. Together, they maintain the authority to appoint directors and manage executive functions. This arrangement underscores a paradox: while the government owns the largest share, it does not participate in daily operations or capital infusion, nor does it seek to govern Vi under public sector rules.

Strategic Options Before Vodafone Idea

Vodafone Idea's potential pathways hinge on balancing government interests as a 48.99% stakeholder with the broader objective of telecom sector stability. The company and government now face four possible strategic options:

1. Insolvency Proceedings via NCLT: This is seen as the most probable outcome if relief is denied. Vi has warned that it may approach the National Company Law Tribunal (NCLT), as banks are unwilling to provide loans despite a ₹26,000 crore promoter equity infusion. A collapse would wipe out the government's ₹36,950 crore equity and make the recovery of ₹1.18 lakh crore in spectrum dues highly unlikely. As early as 2019, Vodafone’s global CEO Nick Read had raised alarms over possible liquidation under regulatory duress.

2. Debt Resolution through Government Intervention: Vi is seeking a Supreme Court waiver of ₹30,000 crore in penalties and interest. A favourable ruling could unlock bank financing and extend operational viability. Though AGR payments were earlier deferred till 2025, upcoming installments of ₹18,000 crore per year from 2026 remain unsustainable without fresh capital. However, Communications Minister Jyotiraditya Scindia has firmly ruled out any further equity conversions, affirming, “What is due to the government is due… players must pay.”

3. Merger with BSNL: Though floated in policy circles, a merger with BSNL is considered unviable. Such a union could create a 30 crore-user entity, but the government has cited BSNL/MTNL’s ₹1.1 lakh crore liabilities, cultural mismatch, and legal hurdles involving listed entities as reasons to oppose the plan. Minister Scindia has categorically dismissed the merger idea, emphasizing BSNL’s focus on indigenous 5G development.

4. Strategic Shutdown: In the event that insolvency proceedings fail, Vi may consider a controlled wind-down of operations. TRAI’s portability framework could facilitate subscriber transfers to Jio and Airtel. However, such a consolidation into a two-player private market would severely undermine the Digital India vision and severely restrict consumer choice.

The Centre, as majority shareholder, finds itself in a policy paradox. It cannot directly manage Vi or infuse capital without breaching public sector norms, yet it faces enormous financial and political consequences if Vi collapses—ranging from subscriber distress and job losses to banking sector exposure.

Conclusion: Supreme Test for Sectoral Survival

Vodafone Idea's survival now hinges critically on the outcome of the Supreme Court hearing on May 19, 2025. A waiver of penalties and interest could unlock bank funding and ensure operational continuity, thereby preserving a three-player private telecom ecosystem. In the absence of relief, insolvency appears imminent—jeopardizing the government’s equity stake and paving the way for a duopolistic market dominated by Jio and Airtel. A merger with BSNL remains politically unpalatable, while an outright shutdown would destabilize India’s digital economy and send shockwaves through banks with significant exposure. The decision now rests with the judiciary—whether to salvage a key telecom operator or preside over its regulatory demise.

POST_SCRIPT: Petition Dismissed

🚨 Supreme Court Dismisses AGR Waiver Pleas, Telecom Giants Stagger Under Financial Strain

In a decisive blow to the beleaguered telecom sector, the Supreme Court on Monday (May 19, 2025) dismissed as "misconceived" the pleas filed by Vodafone Idea, Bharti Airtel, and Tata Teleservices, seeking waivers on Adjusted Gross Revenue (AGR) dues collectively exceeding ₹80,000 crore. Vodafone Idea’s bid for relief of ₹45,457 crore and Airtel’s plea for ₹34,745 crore were summarily rejected, reaffirming the finality of the Court’s 2019 judgment on AGR liabilities. Following the verdict, shares of the affected telecom companies slumped sharply in intra-day trading, reflecting market apprehension over their already precarious financial health. With the ten-year staggered payment window fast approaching its critical midpoint, the rejection compounds pressure on operators to raise funds, service debt, and maintain network investments amid fierce competition. The ruling marks yet another chapter in the prolonged AGR saga, signalling limited judicial tolerance for attempts to revisit settled liabilities under the pretext of financial distress.