COMPETITION AND MERGER ACTIVITY IN THE US TELECOMMUNICATIONS INDUSTRY

In this article we examine the U.S. telecommunications industry during a period of rapid deregulation to determine the effects of a deregulatory shock on industry competition and merger activity. We show that merger activity exhibits a clear wave-like pattern, regardless of the listing status of the participants. Increased competition and IPO activity following deregulation increased cash-flow volatility and probability of exit while the introduction of new technology increased dispersion of economic efficiency across the industry. These changes resulted in a significant increase in merger activity. Competition also played an important role in shaping ''who buys whom?''