The telecommunications industry is definitely one of the most technologically innovative and continuously changing sectors of the world economy. The rapid pace of technology innovation allows heterogeneous technologies to coexist, converge, and compete while emerging technologies are continually introduced. Several external factors including deregulation, privatization, technological change and globalization have forced the telecommunications market to become more dynamic. Convergence within industries, including fixed-mobile convergence and convergence between the telecommunications industry and others, such as the broadcasting and Internet industry has significantly accelerated the radical change of the telecommunications industry. Because of its complexity and sophistication, it might be impossible to fully draw the whole picture including the structures consisting of the constituent units, relations between them, and their behaviors surrounding the telecommunications industry. This dissertation, however, attempts to examine some important issues which have not yet been studied, to gain a broader understanding of the telecommunications industry. This dissertation is comprised of three essays.
The first essay is related to relationships between existing and emerging telecommunications technologies while the second essay addresses the cost structure of the telecommunications industry. The final essay is related to the most general but most important behaviors of telecommunications firms- mergers and acquisitions. Although this dissertation may not provide a full understanding of the telecommunications industry, it will outline meaningful implications to researchers as well as to business players and policy makers. The first essay systematically examines the portable Internet service (PIS) as a promising emerging technology, focusing on its role in rectifying the service inadequacies in current mobile broadband technologies. PIS is an emerging wireless technology designed to provide high-speed mobile Internet services. As this technology is characterized by portability, mobility, high speed, and multimedia communication, it is expected to fill the gaps in existing mobile broadband technologies. This paper proposes PIS as a gap-filling technology, which actually contributes to the growth of the telecommunications market by overcoming limitations in the existing technologies and/or filling consumers' unmet requirements. Through this evaluation, we will empirically confirm the role of PIS by examining consumer preference and estimating future demand.
This paper first examines the preference for mobile broadband technologies and found that PIS might be regarded as a suitable technology for a mobile broadband service. This paper then estimates the future demand for PIS and the findings show that the potential market size of PIS, considering the competitive relationship with 3G and WLAN, is still adequate for a new telecommunications market. The results indicate that PIS technology is expected to expand mobile broadband services without a full-scale substitution of existing communication technologies, consistent with the concept of a gap-filling technology. Therefore, this paper proposes that PIS will not only help consumers to enjoy a more complete portfolio of telecommunications services, it will also enable service operators to generate more revenue. Accordingly, policy makers should establish and implement appropriate and timely policies to encourage the role of PIS.
The second essay proposes a new method to estimate the longrun average cost (LRAC) curve of telecommunications firms, by estimating economic value added (EVA) and total cost, and subsequently applying this method to obtain the LRAC curve of the Korean Mobile Network Operators (MNOs). Compared with traditional methods, the proposed model subsumes all the cost items, tangible or intangible and utilizing this new estimation method may be more appropriate than the traditional methods in estimating a firm’s total cost and the LRAC curve because the EVA estimated from the new method emphasizes not only historical accounting performance, but also reflects the future cash flow of the firm in the long run.
The proposed method is then applied to the Korean MNOs. The empirical results show that the Korean MNOs have U-shaped LRAC curves and the minimum efficient scale (MES) lies between 15 and 20 million subscribers, although the results cannot be generalized because of a lack of data. They also indicate that the dominant and the second MNO currently realize full economies of scale while the third MNO does not. The estimated LRAC curves of Korean MNOs imply that cost efficiency and consumer welfare might not decrease even without asymmetric regulation if the first and second MNO still have the capacity to absorb the subscribers of the third MNO. Considering that the efficient size of the first and the second MNO is in the range between fifteen and twenty million subscribers, their LRAC levels are expected to show only a slight change after they absorb the subscribers of the third MNO and thus cost efficiency might be improved at the industry level. Consumer welfare is also expected to increase because price would be reduced even though the dominant and the second MNO establish the price at the level of maintaining their excess profits. Therefore, this paper suggests that so-called asymmetric regulation in the Korean mobile telecommunications industry should be revised because it might not promote but impede both competition among MNOs and full realization of scale economies in the industry.
The last essay empirically investigates whether acquiring telecommunications firms manage their earnings, by means of discretionary accruals, prior to the announcement of stock for stock mergers. In the telecommunications industry, mergers and acquisitions are an important mechanism for telecommunications firms to respond to various external environmental factors and to maintain their competitiveness, thus it should be recognized as not only a feasible alternative but as an essential corporate strategy within the telecommunications industry. As most large deals in the telecommunications industry have been paid in terms of stock rather than cash, the examination of earnings management by the acquiring firms in the periods prior to the stock for stock mergers and acquisitions is a considerably important research subject, but previous studies are still insufficient to fully investigate those behaviors of acquiring firms in the telecommunications industry.
This paper then analyzes unexpected accounting accruals, as a proxy of earnings management, from a sample of 47 acquiring telecommunication firms completing stock for stock takeovers during the period 1996-2005 and found that acquiring telecommunications firms manage earnings upward prior to stock for stock takeovers. However, this paper finds no evidence of a significant inverse relation between the unexpected accrual measure and the abnormal return over the days around the stock for stock merger announcements in the telecommunications industry. This paper expects that telecommunications firms might continuously attempt to manage their earnings as one of their financial strategies prior to the stock for stock mergers for the efficient acquisition, since the mergers and acquisitions in the telecommunications industry are expected to accelerate in order to respond to the convergence between the telecommunications, broadcasting and Internet industry. In addition, if they know that earnings management does not have an impact on their market value, they might recognize those behaviors as an essential process to prepare for takeovers.
타 산업과 달리 통신 산업은 장비 산업의 하나로 높은 고정비용이 요구 되면서 기업 합병 및 인수가 자연스럽게 이루어져 왔다. 특히 최근에는 통신 시장의 저성장으로 산업내 경쟁이 심화되고, 유무선 통합, 방통 융합 현상이 이루어지면서 방송 및 인터넷 사업과의 산업간 경쟁이 발생하는 등 통신 산업을 아우르는 변화 요인에 대응하기 위한 전략으로 전보다 기업 합병 및 인수가 적극 이루어질 것으로 예상되고 있다. 즉, 통신 산업에서의 기업 합병 및 인수는 통신 산업을 이해하기 위한 중요한 요소 중 하나이며, 따라서 타산업과는 다르게 연구되어야 할 필요성이 있다. 특히, 통신 산업내에서 현금 거래 보다는 주식교환 형태의 기업 합병 및 인수 비중이 높음을 감안할 때, 인수하는 통신 기업이 인수 이전에 이익을 조정하여 주가를 높이고자 시도할 가능성이 있으므로 이에 대한 연구가 필요함에도 불구하고 기존의 연구들은 기업 합병 및 인수의 원인이나 이후 발생되는 결과에 초점을 맞추고 있거나 또는 전 산업을 대상으로 이익 조정 여부를 살펴보고자 하였다. 이에 본 연구에서는 통신 시장이 가장 발전되어 있으면서 기업 합병 및 인수가 가장 많이 이루어지고 있는 미국 시장을 대상으로 하여 인수 기업이 인수 이전에 이익 조정을 하고 있는지를 실증적으로 살펴보고자 하였다. 그 결과, 미국 내 통신법 개정이 이루어진 1996 년 이후 주식교환 형태로 기업을 인수한 통신 기업들이 인수 공시 이전 2 분기 및 3 분기에 기업 이익을 조정하는 것으로 나타났다. 한편, 본 논문은 인수 기업 및 인수 대상 기업 모두 통신 시장 내 존재할 경우 통신 산업의 고유한 특성이 반영되나 인수 대상 기업이 기타 다른 산업에 포함될 경우에는 타 산업에서 이루어지는 기업 합병 및 인수와 다르지 않을 것이라는 가정 아래 두 경우에서 인수 기업의 이익 조정이 다른 양상을 보이는지를 살펴보았으나, 유의한 차이가 발생하지 않은 것으로 나타났다. 마지막으로, 인수 기업의 이익 조정이 인수 기업의 시장 가치를 하락시키는 요인이 되는지를 살펴본 결과 기존 논문에서의 주장과는 다르게 이익 조정과 시장 가치 하락과는 통계적으로 유의한 상관관계가 존재하지 않는 것으로 나타났다. 따라서, 향후 통신 시장 내 산업간 융합 현상이 심화될 경우 기업의 합병 및 인수가 확산될 것으로 예상되기 때문에 이 경우 재무전략의 하나로 인수 기업들의 인수 전 이익 조정이 발생할 수 있을 것으로 전망된다. 특히, 기업의 이익 조정이 기업 가치 하락에 영향을 주지 않음을 감안할 때, 기업들의 인수 이전 이익 조정이 필수적으로 이루어질 가능성이 높은 것으로 예상된다.
