Measuring efficiency of mobile industry in the Middle East using data envelopment analysis

Abstract

Purpose-Telecommunications, today, is considered an essential catalyst for economic growth. It has entered a new age of development and increased competition wi th established players. The purpose of this study is to use a sophisticated model to measure the efficiency and productivity of 16 mobile operators in the Middle East market during 2011. Design/methodology/approach-To measure relative efficiency, the study applies the partial factor productivity (PFP) and three data envelopment analysis (DEA) models, the CCR, BCC, and A&P models. The efficiency scores obtained from the PFP and the DEA are then compared with four financial indicators of the mobile operators under study. Findings-The inconclusive results of the PFP affirmed the need to apply the DEA methodology to obtain one single efficiency ratio for each mobile operator. The DEA results showed that 7 of the mobile operators under study were fully efficient and 9 were operating inefficiently during 2011 mainly due to scale inefficiency. The comparison revealed that there was no relation between the levels of efficiency of the mobile operators and their four financial ratios. Research limitations/implications -The limitations of this study are the drawback of the DEA technique and the difficulty in obtai ning mobile operators' data in the Middle East region. Practical implications - Considering the challenges mobile operators in the Middle East and globally are facing, it is becoming crucial for them to operate in the most efficient manner to generate the highest revenue possible. Since, as shown in this study, the mobile operators' financial ratios do not reflect efficiency, the operators' managements and regulators should apply a model, similar to the proposed DEA model in this study, for efficiency measurement. Original ity/value -This study is the first academic work to measure the performance of mobile operators in terms of productivity and efficiency in the Middle East.