Discussion Papers

Dieter Elixmann, Anette Metzler, Ralf G. Schäfer

Kapitalmarktinduzierte Veränderungen von Unternehmensstrategien und Marktstrukturen im TK-Markt
Nr. 251 / März 2004

Summary

The strategies of players in the worldwide telecommunications markets have undergone deep changes in the past 10 years. Apparent drivers in this context have been the liberalisation of markets and the corporatisation and Initial Public Offering (IPO) of the then national incumbents. The present study focuses on another potential driving force of developments in the telecoms market. The central issue is which influence the conditions and expectations in the capital market (especially those analysts and investment bank(er)s) have had between the mid 90s and the year 2002 regarding the strategic actions of telecoms players quoted at the stock exchange. The study at first focuses empirically on the dynamics on the worldwide capital markets in this period and highlights the enormous change of significance the telecoms market has experienced. The core issue of the study is then investigated on the basis of four strategic trends ("guidelines of positioning"): (1) Merger of incumbents, (2) Demergers of business parts and IPOs, (3) Specialisation on a specific market segment (mobile and Internet) and (4) Entry into the UMTS-technology. The economic rationale of these strategic trends is analysed from the perspective both of the companies involved and of the capital market.

Our analysis shows that strategies in the telecoms market have been essentially driven by the capital market. This is especially true of the strategic trends (2), (3) and (4). The impact of the capital market mainly rests on the following factors. Firstly, the capital market has expressed direct claims regarding the strategic behaviour of telecoms companies e.g. with respect to bidding for UMTS licences. Secondly, an indirect impact has stemmed from the expectations regarding the future developments in specific segments of the telecoms market (e.g. demand for Internet services). Thirdly, shares have been strongly promoted as a new vehicle of financing. This has facilitated external growth via M&As as well as equity financing of investments at the stock exchange in particular in times where the actual share performance was usually better than the expected one. Fourthly, an essential driver of the ever increasing performance in particular of companies from the area of telecoms and Internet has been based upon the notion of "new economy". Strategies in the telecoms market fifthly have been impacted by a severe change in evaluating corporate performance. Indeed, traditional indicators have been replaced by those resting on ebitda, turnover, subscriber numbers or company specific utilization features like e.g. page views. Sixthly, with respect both to recommendations made in the capital market and the actual portfolio decisions of investment banks and fund managers there has been a "bandwagon-effect", i.e. it became more and more necessary to participate in the "new successful" business models not the least to secure in this way rewarding mandates in advisory services. [Only German language version available.]

Diskussion Paper is available for download.

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