Network Investment as Drivers of Mobile Subscription – A Firm‑level Analysis

Abstract

Globally, Mobile Network Operators (MNOs) incur considerable capital investments towards the acquisition of spectrum, deployment of mobile networks, and marketing and advertising of their mobile services to potential mobile subscribers. The extant literature, which is mainly conceptual, suggests that such capital investments impact the individual mobile subscriber base of MNOs. However, the extant literature lacks in quantitative explanation of such impacts. We address this lacuna by proposing an empirical framework using a novel panel dataset of the four largest MNOs of India, during the years 2009–2017. We fnd that capital investments in the spectrum (both contemporaneous and lagged) and mobile networks (lagged) positively impact the mobile subscriber base of MNOs in India. We observe that a “triggering efect,” such as the market rollout of 4G (fourth generation) services, leads to an initial slump in the mobile subscriber base of MNOs, which is counterintuitive and signifes the importance of early network-preparedness on the part of MNOs. We also fnd that, in the event of the aforementioned market triggers, MNOs’ frm-size and potential to invest in the spectrum, in addition to network-preparedness, are crucial for its survival.