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Do telecom carrier takeovers create value? Longitudinal analysis of U.S. telecom carrier takeovers from 1996 to 2005

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  • Ryu, Min Ho
  • Yang, Shuying
  • Kim, Seongcheol

Abstract

Takeovers by telecommunications carriers have surged during between 1996 and 2005, stimulated by the Telecommunications Act of 1996. In this study, we hypothesize and test the short-term and long-term performance of telecommunications carrier mergers and acquisitions (M&As) between 1996 and 2005 according to three main categories (strategic types, bidder characteristics, and payment methods). For short-term performance, this study investigates abnormal market returns of bidding firms after M&A announcements and our study shows that telecommunications carrier M&A announcements do result in a significant increase in shareholder wealth in the short run. However, from a long-term perspective, which has been investigated in terms of the survival rate and the operating performance after M&As, the telcos experience a statistically significant decrease of up to 10%. The results also show that though strategic type, bidder characteristics, and payment method play an important role in the value creation of M&As in the short term, only the bidder size matters in the success of M&As over a long period of time.

Suggested Citation

  • Ryu, Min Ho & Yang, Shuying & Kim, Seongcheol, 2018. "Do telecom carrier takeovers create value? Longitudinal analysis of U.S. telecom carrier takeovers from 1996 to 2005," Telecommunications Policy, Elsevier, vol. 42(5), pages 395-408.
    • Handle: RePEc:eee:telpol:v:42:y:2018:i:5:p:395-408
    DOI: 10.1016/j.telpol.2018.02.005
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