Vodafone India - iPhone activation could not be done?

I completed my iPhone 4S contract with AT&T USA and now moved to India. I got a Vodafone sim card since I was originally using the carrier, and tried to use it on my iPhone. When I did so, the phone started up and asked for language selection, country selection and then went to a screen that said "Activating Your iPhone". It does not go past this screen at all. It fails to activate it.
I called up AT&T and also Apple Support. They say there is nothing on their end at all. Vodafone customer care representatives are not familiar with iPhone, but based on my discussion with AT&T and Apple support, I guess that this has something to do from Vodafone India's side. Any help here is appreciated. I do not wish to jail break my phone for any reason.

Did you get the phone unlocked by AT&T before you left for India? If not, then it will only work with an AT&T SIM. AT&T will unlock the phone for current or former customers who have completed the terms of their contract, or who have paid the early termination fee, or who purchase a no commitment phone and can provide proof of purchase.
I don't see anywhere in your description of events that the phone is unlocked... In fact, it appears that the phone is still under contract.

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