Do telecom carrier takeovers create value? Longitudinal analysis of U.S. telecom carrier takeovers from 1996 to 2005. (June 2018)

• Record Type: Journal Article
• Authors: Ryu, Min Ho; Yang, Shuying; Kim, Seongcheol
• Is Part Of: Telecommunications policy. Volume 42:Number 5(2018)
• Page Start: 395
• Page End: 408
• Publication Date: 2018-06
• Subjects: Mergers and acquisitions -- U.S telecom carriers -- Shareholders' wealth -- Longitudinal financial performance; Telecommunication -- Periodicals; Télécommunications -- Périodiques; 384
• DOI: 10.1016/j.telpol.2018.02.005
• Languages: English
• ISSNs: 0308-5961

Abstract

Abstract: Takeovers by telecommunications carriers have surged during between 1996 and 2005, stimulated by the Telecommunications Act of 1996. In this study, we hypothesize and test the short-term and long-term performance of telecommunications carrier mergers and acquisitions (M&As) between 1996 and 2005 according to three main categories (strategic types, bidder characteristics, and payment methods). For short-term performance, this study investigates abnormal market returns of bidding firms after M&A announcements and our study shows that telecommunications carrier M&A announcements do result in a significant increase in shareholder wealth in the short run. However, from a long-term perspective, which has been investigated in terms of the survival rate and the operating performance after M&As, the telcos experience a statistically significant decrease of up to 10%. The results also show that though strategic type, bidder characteristics, and payment method play an important role in the value creation of M&As in the short term, only the bidder size matters in the success of M&As over a long period of time. Highlights: There has been a surge in takeovers by telecommunication carriers during 1996–2005. Our study has conducts longitudinal analysis on this M&A frenzy period. M&A announcements do result in a significant increase in shareholder wealth in the short run. The overall long-term wealth effect for M&As in the telecommunications industry was negative. Only the bidder size matters in the success of M&As over a long period of time.