The Public Incumbent's Defeat in Mobile Competition: Implications for the Sequencing of Telecommunications Reform

Liu, Chorng-Jian; Chou, Yuntsai; Wu, Shyang-Hu; Shih, Yi-Shin

doi:10.2139/ssrn.978707

Cited by 1 publication

(2 citation statements)

References 16 publications

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“…6 market power of the incumbent(s). The paper of Chorng-Jian Liu and al. (2009) does highlight a dilemma in telecommunication reforms, in that a not-yet-privatized incumbent under market competition can no longer dominate the market but is turned into an inefficient operation.…”

Section: Introductionmentioning

confidence: 99%

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Privatization, Reforms and Firm’s Performance in Mobile Telecommunication Industry

Karamti¹,

Kammoun²

2011

Recent Developments in Mobile Communications - A Multidisciplinary Approach

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Although there has been much empirical research on the effects of privatization, competition and regulation on the telecommunications sector, very little empirical work was interested in studying these effects on mobile telecommunication sector. This chapter studies the effects of telecommunication reforms (privatization, competition and regulation) on mobile operator's performance in the OCDE area. 2. The dilemma of privatization Many economists, policy makers and corporate managers have long believed that private firms are more efficient than public ones. Privatization, defined as the sale of (total or partial) previously state-owned enterprises to private owners, is, so, assumed to increase the firm's efficiency and profitability because, on the one hand, the change in ownership structure shifts the privatized firm's objectives and the managers' incentives away from those imposed by politicians. The managers are then subordinate to them on monitoring and discipline of profit oriented investors. On the other hand, privatization may very well deter market competition since the incumbent is able to engage in anti-competitive behaviors. The public incumbent, instead, due to political oversight may suffer from inefficient operation in competing with the rivals. As a result, since the late of 1980s, several countries have undergone partial or full privatization of their utility sectors, especially telecommunications. In fact, until recently, in most countries, telecommunications service providers were state owned, state operated, and often monopolistic. The telecommunications sector was viewed as the quintessential public utility. Economies of scale, combined with political sensitivity, created large entry barriers and externalities. Since the 1980s, policy makers gradually began to recognize that telecommunications systems are an essential infrastructure for economic development. As the economy broadens and becomes critically dependent on vastly expanded flows of information, telecommunications acquires strategic importance for economic growth and development. Besides, rapid technological innovations in the past three decades have significantly reduced economies of scale and scope in this sector, attenuating the economic rationale for a state-owned natural monopoly in the Telecommunications sector. The solution was privatization which aims to break the monopoly and improve the efficiency and performance of the telecommunication industry. Theoretically, privatization affects the firm's performance through multiple channels. It might cause firms to operate more productively because managers are subjected to the pressures of the financial markets and to the monitoring and discipline of profit-oriented investors. In addition, the change in ownership structure of privatized firms shifts the firm's objectives and managers' incentives away from those that are imposed on them by politicians, toward those that aim to maximize efficiency, profitability, and shareholders' wealth. By going public, firms would have many entrepr...

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Section: Introductionmentioning

confidence: 99%

“…They were interested in measuring the competitive pressure faced by the privatized companies, so they refer only to operators not owned by the incumbents. The paper of Chorng-Jian Liu and al. (2009) explores the factors that hamstrung Chunghwa Telecom in competition against its rival entrants.…”

mentioning

confidence: 99%

Privatization, Reforms and Firm’s Performance in Mobile Telecommunication Industry

Karamti¹,

Kammoun²

2011

Recent Developments in Mobile Communications - A Multidisciplinary Approach

View full text Add to dashboard Cite

show abstract

The Public Incumbent's Defeat in Mobile Competition: Implications for the Sequencing of Telecommunications Reform

Cited by 1 publication

References 16 publications

Privatization, Reforms and Firm’s Performance in Mobile Telecommunication Industry

Privatization, Reforms and Firm’s Performance in Mobile Telecommunication Industry

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