The Influence of North and South Separation of China Telecom on China Telecom Industry: Quantitative Analysis

New China Telecom and China Netcom were founded on May 16th 2002, in order to break China Telecom's monopoly in local service access and thus form multiple and all-round competitive market. The paper studies the influence which the event produced on 74 telecommunications organizations' stock price and performance. The methodology is the event study. The results of empirically implementing the approach indicate that the event produced unfavorable influence on China telecommunications, which is inconsistent with the original aim. In fact, the division of primary China Telecom changed the national monopoly into the south-north area monopoly. In other words, there hasn't formed the effective competitive system in China telecommunications. China telecommunications should take both scale efficiency and economic efficiency into account in the process of reformation. When introducing the competition, the government can enforce the regulation by implementing the incentive regulation.