Thread by @tapak7

#vodaidea is a delight to analyse from two perspectives: 1) #gametheory and 2) Soro's #reflexivity theory

some thoughts...

Competition would like Vodaidea gone. But Vodaidea has bought itself a couple of yrs of survival from AGR verdict as they will be able to raise enough funds to last a couple of years by convincing board that 'as ARPU's rise things will get better'

To kill Vodaidea competition needs to keep ARPUs low for 2 more years. But competition itself doesn't make enough money at these ARPUs. So will they want to self inflict pain for 2 more yrs?

Remember every 50 increase in ARPU adds about ~ 14000 cr of annual revenue for Vodaidea, ~ 15000 cr for Airtel and ~ 18000 cr for Jio. (gross rev before paying annual license fee / SUCs to govt).

This is revenue competition desperately needs but if ARPUs do go up by that much, the additional revenue may buy Vodaidea a further year or two of survival. So every tariff increase keeps Vodaidea's life!

Competition is in a catch 22 wrt Vodaidea

Then of course there are the complications of govt thinking on 5G. Govt also may not want a pvt duopoly but govt also wants funds and may push for early 5g auctions. stress for vodaidea but stress also for airtel!

Reflexivity: We've recently seen how the crazy increase in Tesla's price inspite of weak fundamentals has allowed them to raise 5 bn $ at v low dilution

If market believes Vodaidea will survive, the share price will go up. as it goes up the company can raise funds at lower dilution. as it raises funds, market gets more confidence, and the more it's share price goes up. This can be a virtuous feedback loop.

The very belief that Vodaidea will survive can lead to its survival.

On the other hand, if market doesn't believe that it will survive, share price will remain low, dilution will be heavy for any decent fund raise & the pessimistic market won't let the share price rise

Soro's reflexivity is very much about this - how the belief that something should happen will make that happen!

will be interesting to watch which belief will win in Vodaidea's case.

Maybe competition might think that they can keep nibbling away subscribers from Vodaidea on operating quality basis - a slow bleed 4 vodaidea, rather than try giving it a balance sheet blow by keeping ARPUs low & self inflicting pain. tariff increases are around the corner...