Merging for Market Leadership: A Case Study of Mobilink and Jazz

Abstract

In this paper, the consequences of the huge merger of Mobilink and Warid Telecom under the brand of Jazz is analyzed in the real world. The initial agreement was struck in order to cut down on their profits, tough price wars and the enormous expenses of establishing the network infrastructure afresh in Pakistan. This study analyses official figures of the Pakistan Telecommunication Authority (PTA) for the period 2013-14 to 2018-19 on the key metrics of overall mobile users, overall market share, 3G/4G subscribers, and mobile data market share, both before and after the merger. The impact of the deal is determined by conducting independent samples t-tests, trend regressions and a Difference-in-Differences (DiD) analysis side-by-side between Jazz and its competitors. The figures indicate that this was a big deal for mobile Internet. The average 3G/4G users increased by astounding 322.22%, from 4.48 million to 18.94 million, after the merger (p = 0.025). This massive increase, along with data market share growth, seems to validate the Synergy and Efficiency theories, and demonstrates that their network configurations were indeed synergistic. But when it came to overall market control, the deal didn't change much. The overall mobile market share for jazz remained virtually unchanged, with a minor shift from 37.47% to 37.13% (p = 0.323) as the other networks quickly drove back into the game with rival pricing, promotions and other tactics aimed at their turf. In addition, the regression models demonstrate that after controlling for the country's natural growth and year-to-year technological advancements the direct impact of the merger vanishes. There was an increasing number of users, but not because of the business deal, as Pakistan is going through a general digital boom. Ultimately, the Mobilink-Warid deal proved to be a great defensive ploy to grow the business, reduce the duplication of infrastructure costs and promote mobile broadband, but it was not a monopoly move in a rapidly expanding market, the study concludes. Finally, the paper provides some practical guidelines for telecom executives on how to make data services more profitable, and for regulators on how to ensure fair frequency distribution.