Capital and Operational Expenditures and Financial Performance : Evidence from Global Mobile Network Operators

Sammanfattning

Mobile networks have evolved remarkably over the years to become an essential foundation for many technologies used daily by billions of people across the globe. This continuous evolution requires massive investments by mobile network operators in spectrum, towers, and equipment with the arrival of each new generation of mobile technology. However, revenue growth remains limited and profitability has declined across the industry. This thesis conducts a quantitative analysis using panel data from the top 50 mobile network operators worldwide to examine the relationship between financial performance and capital and operational expenditures over the primary 4G and 5G deployment and investment period (2010–2024). The findings show two sides. When operators are compared against each other, capital and operational expenditures show no significant relationship with total shareholder return. Shareholder returns were driven by market-wide events, most notably the COVID-19 pandemic in 2020 and the interest rate hikes in 2022, rather than by operators’ investments. However, when each operator is compared against itsown historical investment pattern, capital expenditure has a positive and significant relationship withshareholder return, meaning that when an operator invests more capital than it usually does, it generates higher shareholder return. The pattern is reversed for operating profitability. Operators that investmore on average have higher EBITDA margins, but increasing investment within a single operator is not associated with increasing operational profitability in the same year. Overall, these findings suggest that the market has already priced in the long-term differences between high-investing and low-investing operators, but reacts to year-on-year investment decisions by operators. Operating margins, on the other hand, reflect differences between operators that built up over many years of investment, rather than short-term changes in spending. Future work should investigate the market-wide factors that impact shareholder value creation in thetelecom industry, and why year-on-year changes in investment move stock returns but not operating marginsin the same year. Other factors to explore are market competition, regulation, and pricing strategies, and their respective impacts on the profitability of mobile network operators.