Empirical Evidence on the Relationship between Mobile Termination Rates and Firms’ Profit

Abstract

The comprehensive theoretical literature on mobile termination rates (MTRs) is inconclusive on how the level of MTRs affects overall consumer charges and firms' profit. In a theoretical model, well suited for econometric implementation, we show that where consumers buy a bundle with included usage, as we now observe in the market, the level of MTRs has no impact on retail prices and firms' profit. We use a panel data set from saturated European markets and find that an identical change in MTRs does not have a significant impact on firms' profit.

Testing the waterbed effect for India’s telecom industry

“…Their empirical analysis did not support the hypothesis. This was recently revisited by Andersson et al (2016). They reassessed the impact of termination rate regulation on firm profitability using a panel data set of 26 mobile operators in 9 saturated European countries for the period 2003-2006.…”