Shattered telecom tower with financial charts symbolizing monopoly breakup.

Telecom Breakups: How Monopoly Losses Impact Market Value?

Nico Varela in Business & Economy December 2025 • 4 min read.

"A deep dive into the financial impacts of telecom monopoly breakups in the US and Mexico, revealing surprising market reactions and lessons for today's investors."

At the heart of market power is a company's ability to control prices, distancing them from competitive levels. Assessing an industry's competitiveness involves evaluating return rates and price-cost margins. For decades, experts have strived to measure market power by observing how performance shifts with market structures.

This research offers a fresh look at how financial markets value market power, drawing on Faccio's 2006 methods to estimate the financial impact of political connections. By examining the drop in company value after a monopoly breakup, this study analyzes stock performance of significant cases, like AT&T and Mexico’s Telmex (AMX), before and after their separations.

Quantifying the loss in value presents a challenge: accurately projecting a firm’s worth absent the breakup, which allows for a direct comparison to its actual value. This paper navigates this challenge, providing crucial insights into market dynamics.

Why Market Capitalization Matters After a Monopoly Ends

Shattered telecom tower with financial charts symbolizing monopoly breakup.

This study uses a univariate structural time series model to dynamically represent market capitalization. By breaking down market capitalization into components like level, slope, cycle, and seasonal variations, the model assumes an additive integration within a state space form (SS). Utilizing Kalman Filter and Smoothing (KFS) algorithms, this approach enables maximum likelihood estimation of the structural framework’s unknown parameters.

The findings indicate a notable decrease in companies' stock prices following the end of a monopoly. The study reveals significant value losses: approximately 65% for AT&T and 32% for AMX, underscoring the financial market's valuation of previously held market power.

Section 2: A review of relevant academic works.
Section 3: A summary of the telecommunications industry,
Section 4: Introduces the model and discusses results.
Section 5: Summarizes and concludes the findings.

Classic economics suggests assessing a company's worth reflects market expectations for future earnings. If capital markets digest every bit of info concerning the firm’s future profitability, market value then mirrors the predicted rate of return on investment.

Final Thoughts: What Breakups Tell Us About Market Value

In conclusion, this paper offers a detailed examination of how telecom industry breakups affect company value in the US and Mexico. The research highlights the importance of understanding financial markets and their evaluation of market power. Discrepancies in value losses between AT&T and AMX invite further study into market conditions and regulatory environments.

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This article is based on research published under:

DOI-LINK: https://doi.org/10.48550/arXiv.2407.09695,

Title: Monopoly Unveiled: Telecom Breakups In The Us And Mexico

Subject: q-fin.gn econ.gn q-fin.ec

Authors: Fausto Hernández Trillo, C. Vladimir Rodríguez-Caballero, Daniel Ventosa-Santaulària

Published: 12-07-2024

Everything You Need To Know

What specific financial impacts were observed in the market following the breakups of telecom monopolies, and what companies were primarily analyzed?

The study specifically examined the financial impacts of telecom monopoly breakups in the US and Mexico. The primary companies analyzed in this context were AT&T in the US and Telmex (AMX) in Mexico. The research focused on the changes in market capitalization and stock performance of these companies before and after their respective separations, providing insights into how financial markets value market power.

How is market power defined, and what methods were used to assess it in the context of telecom companies like AT&T and Telmex?

Market power, in this context, is defined as a company's ability to control prices, distancing them from competitive levels. Assessing market power involves evaluating return rates and price-cost margins. The research drew on Faccio's 2006 methods to estimate the financial impact of political connections. By examining the drop in company value after a monopoly breakup, the study analyzed stock performance of significant cases, like AT&T and Mexico’s Telmex (AMX), before and after their separations, to assess this power.

What methodology was employed to analyze the market capitalization of companies like AT&T and Telmex post-breakup, and what were the key findings regarding value loss?

The study utilized a univariate structural time series model to represent market capitalization dynamically. This model broke down market capitalization into components such as level, slope, cycle, and seasonal variations, assuming an additive integration within a state space form (SS). Using Kalman Filter and Smoothing (KFS) algorithms, the research enabled the estimation of the structural framework's unknown parameters. The findings indicated a notable decrease in companies' stock prices following the end of a monopoly, with approximately 65% value loss for AT&T and 32% for AMX. This underscores the financial market's valuation of previously held market power.

Why is understanding market capitalization crucial when analyzing the impact of telecom breakups, and how does it relate to market power?

Market capitalization serves as an indicator of perceived market power. Its analysis allows for understanding how financial markets value a company's ability to control prices. The study's use of market capitalization changes post-breakup highlights how the loss of monopoly power is reflected in a company's valuation. The decline in market capitalization, such as observed in AT&T and AMX, directly indicates a reduction in the perceived market power that the companies previously held.

What do the discrepancies in value losses between AT&T and AMX after their breakups suggest about the broader implications for investors and regulatory policies?

The differing value losses observed between AT&T (65%) and AMX (32%) after their breakups invite further study into market conditions and regulatory environments. These discrepancies highlight that the impact of breakups is not uniform and can vary based on specific market dynamics and regulatory frameworks. For investors, this implies the need to consider the specific context when evaluating the risks and opportunities associated with telecom companies post-breakup. For regulatory bodies, it underscores the importance of understanding how different policy approaches influence market outcomes and company valuations. It also emphasizes that market expectations for future earnings are reflected in market values.