How Impactful Is Telecom Efficiency to Company Stock Value?

Abstract

Objective – The telecom industry is one of the optimistic industries that is still growing. In South East Asia, between 2008-2017, the number of subscribers increased 10.07% annually, and revenue for the industry grew 6.08% annually. However, Net Profit Margin, EBITDA, and EBIT value during the same period declined at the time revenue amount was increasing. One of the visible health factors and part of the valuation factor is stock value. Hence the research question of this study is: What is the impact and significance of telecom operators’ efficiency to stock value?

Methodology/Technique – In this study, efficiency will be measured and analyzed using Stochastic Frontier Approach (SFA) method. By using same method, the impact of efficiency to stock value will be measured, as well as the significance level.

Finding – The results of this research show that from 14 telecom operators observed, TLKM (Indonesia) obtained the highest efficiency score (0.984) whereas StarHub (Malaysia) had the lowest efficiency score (0.405). TLKM (Indonesia) and AIS (Thailand) had a similar efficiency score given the fact that the behaviour of the subscribers is similar and they have the same country characteristic.

Novelty – All of the input and output variables have a positive impact on the efficiency parameter except Total Asset which has negative impact on the efficiency score. By using further analysis of the t-Ratio between the variables and efficiency, it can be seen that stock value is impacted by the efficiency parameters but this impact is not significant (t-Ratio 1.35).

Type of Paper - Empirical.

Keywords: Efficiency; Telecom Operators; Stock Value; Indonesia

JEL Classification: G14, G32, G39