Discussion Papers

Dieter Elixmann, Ernst-Olav Ruhle, Thomas Schnöring

Internationalization of Telco Carriers in Mobile Markets - An Evaluation of Motives and Driving Forces
Nr. 130 / Juni 1994

Summary

International activities of telecommunications operators and the internationalization of telecommunications markets have increased considerably during the last decade. The traditional structure in the provision of telecommunications services underwent numerous changes. Today, formerly national and monopolistic markets have been opened up to competition, including the possibility of entry by foreign suppliers. In many countries the mobile telephony segment has taken the leading position in the liberalization process. The topic of this paper, therefore, is the explanation of the numerous entry attempts of TOs in foreign cellular markets.

Market entries as well as entry attempts into foreign cellular markets are generally organized in the form of Foreign Direct Investment (FDI). Therefore, an adoption of Dunning's so-called "eclectic theory" or the "O-I-L-paradigm" to these real world phenomena seems to be appropriate. Under this approach, FDI is caharcterized by the existence of three factors. These factors are ownership specific advantages, internalization incentive advantages and location specific advantages. While internalization incentive advantages can be discussed only in qualitative terms, the analysis of ownership and location specific advantages has been undertaken on an empirical, quantative basis. The analysis is partial, i.e. it is discussed whether a factor - derived from theoretical considerations and empirically converted - is of influence in the explanation of internationalization efforts. However, it is not taken account of the possibility that each factor may contribute differently to the explanation.

Summing up, our analysis yields that there are seven key factors influencing the internationalization process of carriers in mobile markets. These factors are (1) experience gained in the home market from the provision of cellular services, (2) experience with the technology in mobile telephony to be adopted abroad (3) successful previous entry into foreign markets, (4) the introduction of competition in the home market, (5) the geographical adjacency of target countries, (6) the bidding procedure a country utilizes when selecting new entrants to its mobile markets, and (7) the market attractiveness of target countries. It can be concluded that these points have a substantial impact on the internationalization efforts of carriers in mobile telephony, while factors like size, "psychic distance" between home and target countries, and the market structure abroad do not contribute to the explanation of internationalization in cellular markets.

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