Restructuring in Telecommunications and its Market Impacts: An Event-Study Analysis

The aim of the study is to present a detailed assessment of the major strategic changes in the telecommunications industry and their impact on market returns. Using a global sample of major telecom companies, significant events related to restructuring were identified and then assessed in terms of their favorable or unfavorable impacts. Based on the methodology of event-study analysis with GARCH specification, the impact of events was tested after incorporating dummy variables of different lengths (7, 15 and 20). Simultaneously, subsequent to a regression, Cumulative Abnormal Returns (CAR) were calculated within a variable event window of 7, 15 and 20 Days. Market returns were studied starting from 1996 until 2008. The results show interesting patterns in terms of how the market views restructuring in the business model of telecom companies, organizational structure, alliances and mergers, and technological platform changes. Countries differ significantly in how they view telecoms restructuring and what changes are considered beneficial by investor and which ones are not.