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Monopoly Unveiled: Telecom Breakups in the US and Mexico

Author

Listed:
  • Fausto Hern'andez Trillo
  • C. Vladimir Rodr'iguez-Caballero
  • Daniel Ventosa-Santaul`aria

Abstract

This paper posits the decline in market capitalization following a monopoly breakup serves as a means to gauge how financial markets assess market power. Our research, which employs univariate structural time series models to estimate the firm's value without the breakup and juxtapose it with actual post-divestiture values, reveals a staggering drop in AT&T's value by 65% and AMX's by 32% from their pre-breakup levels. These findings underscore the contemporary valuation of monopoly rents as perceived by financial markets, highlighting the significant impact of monopoly breakup on market capitalization and the need for a deeper understanding of these dynamics.

Suggested Citation

  • Fausto Hern'andez Trillo & C. Vladimir Rodr'iguez-Caballero & Daniel Ventosa-Santaul`aria, 2024. "Monopoly Unveiled: Telecom Breakups in the US and Mexico," Papers 2407.09695, arXiv.org.
    • Handle: RePEc:arx:papers:2407.09695
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    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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