Privatizing Monopolies in Developing Countries: The Real Effects of Exclusivity Periods in Telecommunications
AbstractWhen reforming their network utility industries, many developing countries give the newly-privatized incumbent exclusive rights to serve a particular market. These "exclusivity periods" are especially common in telecommunications. Research to date has explored the effects of privatization, competition, and to a lesser extent, regulation. We know very little, however, about the effects of the details of privatization transactions themselves and, in particular, how exclusivity periods matter. I use an original, new dataset to explore the costs and benefits of this approach to privatization. I find that exclusivity periods are associated with significant increases in the firm's sale price. The increased revenues to the government come with a cost, however. Exclusivity periods are correlated with a significant decrease in the incumbent's investment in the telecommunications network, payphones, mobile telephone penetration, and international calling.
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Bibliographic InfoPaper provided by Regulation2point0 in its series Working paper with number 284.
Date of creation: Aug 2003
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