1. The Public Incumbent’s Defeat in Mobile Competition : Sequencing of Telecom Reform Yuntsai Chou Associate Professor Yuan Ze University ITS Europe Conference 9.18.2008

3. Market Share of BT vs. CHT

5. Interplay Between the Timing of Privatization and Competition Case 4 Privatized incumbent competing against entrants (lower expected returns from the private monopoly) Case 2 Private monopoly (higher expected returns from monopoly, and privatization is more likely to be successful) Privatized firm Case 3 Public incumbent competing against private entrants (lowest expected returns from the private monopoly due to competition and x-inefficiency) Case 1 Public monopoly State-owned enterprise Competitive market No competition

9. Econometric Results 0.0206 3 0.0463 2 Handset subsidies providing customers with instant incentives 0.0435 1 Changes in CHT’s handset subsidies (%) 0.4290 5 0.4038 4 Advertisement NOT providing customers with instant incentives 0.2558 3 Changes in CHT’s advertising expense (%) -.0100 5 -.0092 4 Customers waiting to compare CHT’s rate plans with those of the rivals -.0079 3 Changes in CHT’s monthly fee (%) Implication Estimated Coefficient Time Lag (month) Independent Variables

12. the Non-linear Effects of Handset Subsidies -3.21% -0.72% 0.15% Jan. 1998 Oct. 1999 Jun. 2000 Dec. 2001 1. CHT started its handset discount promotion (Oct. 1999) 2. CHT’s market share stopped falling and then turned to positive (Jun. 2000) 0.242803 Adjusted R-squared 0.301049 R-squared 0.0042 3.163616 0.014655 0.046361 *** (Handset subsidies)² 0.0041 -3.169960 6.159430 -19.5251 *** Handset subsidies 0.0037 3.218429 646.9945 2082.306 *** Constant P-value t-value SD Mean Variable