European Telecommunications Industry Research Articles

The Coronavirus Pandemic (COVID-19) and Cooperative-Intelligent Transport Systems

Cooperative-intelligent transport systems (C-ITS) are a solution for the manifold challenges of traffic as well as a major competitive stepping stone for the European automotive and tele-communication industry. However, against the backdrop of far-reaching COVID-19 impacts, the management of such complex C-ITS megaprojects needs to be adapted. Insights from most recent research contributions on megaproject management and the unexpected have shown that fostering a common sense of action, intense and efficient communication, and a strong organizational culture can help C-ITS projects to cope with the unprecedented situation. The institutional role model has proven to be an effective implementation framework for employing such project management methods in the C-ITS context. By combining different strands of research in an analysis of the intersection between recent C-ITS findings and theory on megaproject management and the unexpected, this article contributes to a holistic understanding of the impact of COVID-19 on C-ITS.

Static or Dynamic Efficiency: Horizontal Merger Effects in the Wireless Telecommunications Industry

This paper studies five mergers in the European wireless telecommunication industry and analyzes their impact on prices and capital expenditures of both merging carriers and their rivals. We find substantial heterogeneity in the relationship between increases in concentration and carriers’ prices. The specifics of each merger case clearly matter. Moreover, we find a positive correlation between the price and the investment effect; when the prices after a merger increase (decrease), the investments increase (decrease) too. Thus, we document a trade-off between static and dynamic efficiency of mergers.

Flexibility in the European telecommunications industry

PurposeThe purpose of this paper is to expose the necessity of introducing some degree of flexibility in the definition of wholesale access price of FTTx, in the EU competition regulatory framework, and incorporating new regulatory actions to boost investment substitutability to ensure that NRAs accomplish dynamic and/or static efficiency targets.Design/methodology/approachGiven the European historical context, the current preponderance of cable and the strong heterogeneity in NGA networks rollout across Europe, a policy-oriented analysis defines a set of recommendations useful for member states whose NGA networks market is in a more advanced state of development.FindingsFlexibility is necessary in jurisdictions holding a highly competitive NGA wholesale market at the three previously described levels to avoid that strong dynamic efficiency is passed-through into excessive retail prices which may decrease static efficiency in greater proportion, thereby generating a deadweight loss.Originality/valueThe novel measures pointed out are part of the on-going debate concerning the revision of the European regulatory framework for NGA networks.

Against All Odds: Adapting to Technological and Market Change in the EU Telecommunication Sector

Literature in strategic management highlights many cases of incumbent’s failure, a scenario that verifies when established companies lose their dominant position consequently to a shock of various nature. The European telecommunication industry offers us a quasi-experimental setting that gives a challenging opportunity to analyze a framework where incumbents did not fail, despite potentially disruptive shocks occurred. We claim that dynamic capabilities played a major role here. Telco operators created, maintained, modified and adjusted dynamic capabilities in conjunction with two events: the liberalization of the industry and the advent of over the tops. Our results, which are empirically grounded in 18,367 pages of archival material and 60 in-depth semi-structured interviews conducted to different managers of four former telco monopolists, show support for a theoretical mechanism according to which firms continuously create, adjust, and use dynamic capabilities to survive changes. More specifically, when a shock occurs, firms use previously accumulated dynamic capabilities and, at the same time, develop new ones. Newly generated dynamic capabilities, then, are reshaped and adjusted though various organizational processes, such as acquisitions and employees’ renewal, and become ready to be used consequently to a future shock. Thus, our results show that dynamic capabilities are essential to cope with external shocks, but at the same time these shocks also foster the development of new dynamic capabilities.

Market leadership, technological progress and relative performance in the mobile telecommunications industry

In network industries a large installed customer base is considered a key strategic asset that leads to a sustainable competitive advantage. This paper argues that market leaders should be able to demonstrate relative performance advantages vis-à-vis their competitors. Furthermore, we examine the moderating role of technological progress as a significant environmental factor that could alter the market leadership-relative performance relationship. The two-stage procedure proposed by Simar and Wilson (2007) is used to estimate relative performance determinants in the European mobile telecommunication industry. In the first stage, Data Envelopment Analysis (DEA) technique is used to measure performance, and in the second stage we empirically test our hypotheses by bootstrapping the DEA estimates with a truncated regression. Our results provide evidence that leaders enjoy performance advantages. The findings also reveal that the leader's relative performance is compromised in the event of technological progress.

State-invested enterprises in the European telecommunications industry: Are they competitive players?

The present paper provides an overview of the main companies operating in European telecommunication industry over the decade 2006-2015, with a specific focus on their ownership structure. Following Christiansen and Kim (2014), State-invested telecom companies are classified into State-owned (SOEs) and partially State-owned (PSOEs) enterprises. The aim of the analysis is to investigate the current involvement of European Governments in the telecommunications sector after the deep process of privatisation started in the ‘80s and to understand whether the type of ownership is connected with companies’ economic performance. It turns out that European States still have an important role in the telecommunications industry, mainly through minority but significant participations into previously publicly held incumbents. Moreover, from the analysis of balance sheet data it turns out that State-Invested companies have achieved an economic performance which is comparable, if not superior, to that of private enterprises in terms of profitability. However, some gaps seem to persist as far as labour productivity and investment levels are concerned.

Static or Dynamic Efficiency: Horizontal Merger Effects in the Wireless Telecommunications Industry

This paper studies five mergers in the European wireless telecommunication industry and analyzes their impact on prices and capital expenditures of both merging carriers and their rivals. We find substantial heterogeneity in the relationship between increases in concentration and carriers’ prices. The specifics of each merger case clearly matter. Moreover, we find a positive correlation between the price and the investment effects; when the prices after merger increase (decrease), the investments increase (decrease) too. Thus, we document a trade-off between static and dynamic efficiencies of mergers.

Institutions and Inequality in Liberalizing Markets

This paper examines cross-national differences in the development of sectoral collective bargaining in the European telecommunications industry following comparable changes in market regulations. The authors seek to explain why centralized, coordinated bargaining institutions were established in Austria and Sweden, both within incumbent telecommunications firms and at the sector level, while Germany and Denmark experienced decentralization and disorganization of bargaining at both levels. The authors argue that these outcomes resulted from differences in institutional loopholes employers were able to exploit to avoid centralized bargaining and past union structures that influenced patterns of interunion cooperation. These two explanatory factors were interrelated: the presence or absence of institutional loopholes affected the basis for cooperation between unions, while labor cooperation was an important power resource unions could draw on to close emerging loopholes. Findings demonstrate the importance of sector-level political dynamics for the construction or erosion of solidaristic bargaining structures under pressure from market liberalization.

Corporate Political Strategies Related to Decisions of European Competition Commission on Regulatory Issues in the European Telecommunications Industry

The European regulatory institution has the tasks to protect fair competition and equal opportunities for all companies in the European telecommunications industry and to protect the welfare of the consumers. This regulator is responsible for the adherence of telecommunications companies to competition rules. It can oblige companies to change their behavior and follow the new rules of the game, and it can also sanction telecommunications companies which have abused their market power. These telecommunications companies can decide to comply with the decision or they can response actively to the decision of a sanction. These decisions and responses are part of their corporate political strategies. This study aims to explore and provide more conclusive empirical evidence with regard to the corporate political strategies used by telecommunications companies to influence issues and decisions in their political and regulatory environment. This study analyzes how five large former state owned companies in the European telecommunications industry responded to the decisions of the European regulator, the European Competition Commission, on regulatory issues. The evidence shows that when the European regulator decided to sanction the companies with a fine for a regulatory issue, the companies responded with a recalcitrant corporate political strategy. However, when the regulator obliged the companies to adapt or change their behavior, then the companies responded with a responsive corporate political strategy.

Productivity change and its determinants among leading mobile operators in Europe

The European mobile telecommunications industry has seen increased competition and market saturation in recent years, so improving productivity will become crucially important for mobile operators in the near future. This study adopts a bootstrap Malmquist index approach to estimate productivity change among a sample of 23 of Europe's leading mobile operators over the 2008 to 2009 period. Using a second-stage regression, this article also analyses the determinants of productivity changes in terms of regulation, competition and ownership structure. The results show that mobile companies operating in countries that have recently joined the EU have a positive association with productivity change, in contrast to their counterparts in South-East Europe. Concerning market competition, the leading mobile operators that experience higher productivity changes operate in more concentrated markets. The results also indicate that international mobile operators perform better in terms of productivity change than their national equivalents. Finally, some of the implications of the findings for mobile operators’ management and policymakers are provided.

The Inefficiency of Perfect Competition in the Electronic Communications Industry

Telecommunications industry requires a high and steady level of investments in successive generations of equipments to cope with the exponential growth of traffic volumes. This paper argues that in this context, only imperfections of competition provide market players with the necessary margins to finance the renewal of equipments at the frequency needed to minimize the overall industry cost. A nearsighted policy which would push down the industry profits hoping to reduce prices would be counterproductive as it would have the opposite effect: if profits are reduced below the level needed to sustain the optimal level of investments, production costs would increase, having a negative impact over market prices. Policy should therefore target an optimal competition intensity allowing enough profits to finance this optimal level of investments. The constant reduction of margins in the European telecommunications industry raises an alert for European policy makers: they should be seriously concerned about not overpassing the optimal level of competition.

Do switching costs mediate the relationship between entry timing and performance?

AbstractThe purpose of this paper is to test the effectiveness of switching costs as an isolating mechanism in the context of the first‐mover advantage theory. Whereas both the literature on switching costs and on pioneering propose this as a mechanism through which firms could obtain sustainable competitive advantage, other authors offer a rationale for thinking that this is not the case. We test our hypotheses in the context of the European mobile telecommunications industry. This is a sector that has been characterized by high rates of growth in the number of subscribers, which could reduce the effectiveness of switching costs from being effective as an isolating mechanism. Our results show that switching costs are an important tool through which first‐mover advantages materialize. Copyright © 2011 John Wiley & Sons, Ltd.

Competitive behavior in the European mobile telecommunications industry: Pioneers vs. followers

This paper studies the relationship between competitive strategy and improvement in the competitive position of pioneers and followers in the mobile telecommunications industry. The analysis uses a panel of data comprising all the actions of European firms operating in the digital mobile telecommunications industry with GSM 900 and/or DCS 1800 networks. The results show that competitors gain market share when they follow competitive strategies that are different from those of other firms. The paper also finds that price reduction actions represent the best approach for followers, while differentiation actions are the most effective strategy for pioneers.

First come, first served: How market and non-market actions influence pioneer market share

This study examines the relationship between the erosion of first-mover advantages and the competitive behavior of pioneer and follower firms in a service industry—in this case, the European mobile telecommunications industry. The research analyzes the role of market actions related to innovation, pricing and promotion, and non-market actions related to judicial issues. The study finds that first movers enjoy a sustainable market share advantage in this service industry, but that this advantage depends on the type of actions taken by pioneers and followers. Specifically, followers that take more market actions than the pioneer are not able to erode the first-mover's advantage. However, followers taking more non-market actions – such as litigation and complaints – are successful at taking market share from the pioneer.

The internal limits to firms' nonmarket activities

AbstractIt is well documented that firms develop nonmarket strategies to try to shape public policy changes to their advantage. But are there no limits to this? This paper argues that there is in fact an important limitation, internal to the firm, which comes from the necessity for firms to integrate market and nonmarket activities. Because the two types of activities are not always complements but sometimes substitutes, firms end up giving up part of their nonmarket activities to avoid restricting the development of their market strategies. This argument is tested in the context of the European telecommunications industry. Results suggest that there is reasonable ground for optimism regarding the potentially negative influence that firms' nonmarket activities might play in a democracy.

Strategic focus of incumbents in the European telecommunications industry: The cases of BT, Deutsche Telekom and KPN

This study investigates the internal and external strategic choices that telecommunications firms, operating in a dynamic network environment, make to adapt to changes and to respond quickly in order to create or to sustain their competitive advantage. In particular, in the European telecommunications industry incumbent firms have faced important challenges from new technologies, liberalization and the convergence of markets. The leading European telecommunications companies initially focused on new markets and new businesses, emphasizing their plans to become major players in relevant markets. However, after the telecommunications euphoria companies were more restrained due to their huge burden of debt and their market value. Through refocusing or restructuring, these companies have tried to streamline their businesses in order to restore their value and to improve their competitiveness. Insight into the specific strategic actions of traditional telecommunications companies in Europe to the recent developments in the industry is provided from the analysis of three leading traditional telecommunications companies: BT, Deutsche Telekom and KPN.

The erosion of pioneer advantage in the European mobile telecommunications industry

This paper studies first-mover advantage in the mobile telecommunications services industry. There are very few empirical studies of pioneer advantage in service industries, possibly because of the difficulty of building competitive advantages in an industry where innovations cannot be protected and competitive actions can be easily imitated. The empirical research was carried out using data from a sample of European mobile telecommunications firms from 1993 to 2005. The findings indicate that an order of entry advantage does exist, but that this advantage diminishes with time in competition. Regarding the impact of the main sources of pioneering advantages, the results show that it is harder for follower firms to erode first-mover advantages when the pioneer has prior experience in the industry and when there are two pioneers instead of one. Lastly, number portability between different operators was found to damage the competitive position of the pioneer firms.

The Market Impact of Strategic Alliance Announcements in the European Telecommunication Industry

Purpose: This paper analyzes the impact of 130 strategic alliance announcements involving European telecommunications firms on capital markets over the period 2003-2005. Methodology/Approach: We use the event study methodology. We define the event as the public announcement of an alliance initiative by a firm in the media. Specifically, the data was collected from alliance-related news items posted in the Press Release pages in corporate websites. Findings: Our findings indicate that investors appreciate the importance of alliance initiatives by European telecommunications firms, and this is reflected in their effect on the volatility of share prices surrounding announcement date. In view of the null effect of alliances on returns, however, it would seem that the expectations generated in the market are mixed. Comparison of our results with the evidence for the US market reveals a smaller reaction in European markets which could be explained by both differences in the legislative, economic and social environment and the specific features of the firms operating in the two markets. Research limitations/implications: It would be interesting establish whether the market effect of alliances changes if the differing characteristics of the firms involved are taken into account, or if alliances are more tightly defined (international or national, number of partners ). Moreover, further comparative studies between high- and low-tech sectors are needed. Originality/value of paper: The view of the capital markets is of particular interest to the telecommunications industry, because firms rely heavily on them for funding. Understanding how the capital markets view and value alliances is therefore critical to strategic management and communication. Moreover, this study extends previous research in the telecommunications industry by examining European firms.

Third generation new entrants in the European mobile telecommunications industry

This paper focuses on new entrants within the European mobile telecommunications industry. More particularly, the paper identifies those new entrants that emerged from the third-generation (3G) licensing process across Europe before examining how they have fared. Four operators seeking to become new entrants across a range of countries are identified, although only one of them—Hutchison Whampoa trading as ‘3’—is considered to be fully active as a 3G new entrant. It is argued that the success of Hutchison Whampoa to date has been patchy, and that a supportive parent company has significantly contributed to its ability to remain active.

After the “Bubble”: Valuation of Telecommunications Companies by Financial Analysts

AbstractIn this article, we present the results of a series of interviews given by financial analysts specializing in the European telecommunications industry. Our objective is to gain an insight into their approaches to analysis and valuation (information sources, valuation methods, determinants of recommendations, etc.). We also consider whether analysts' approaches have changed since the “high‐tech bubble”. We find that today they rely much more on the discounted cash flow analysis method than at the end of the 1990s, when valuation was largely based on multiples. In line with this, analysts have changed their focus from revenue‐oriented measures towards an assessment of profitability and cash flow generation. Further, analysts claim to have become more diligent and more critical in their analysis.